INTRODUCTION TO MANAGEMENT

PART ONE – INTRODUCTION

CHAPTER I: MANAGEMENT AN OVERVIEW

1) Meaning And Definition Of Management

There are several definitions of Management; but they all are fundamentally the same. Among the
many, some are:

a) Management is the process of coordinating all resources through the five major functions of
planning, organizing, staffing, directing /leading and controlling to achieve organizational
goals/desired objectives. That is, it is the process of achieving organizational goals through
engaging in the five major functions of planning, organizing, staffing, directing/leading and
controlling.

In the above definition there are three key concepts

i) Coordination of all resources – managers should coordinate the resources of an
organization. These resources may be human or non human.
ii) The five managerial functions – To coordinate the resources of an organization a
manager should employ/use the five managerial functions.
iii) Objectives – are the reason for the establishment of organizations and management is
useful for achieving these goals. Managing/management is concerned with productivity:
effectiveness and efficiency. There are points to be meet, targets to be shot or places to
be reached. All organizations establish a variety of goals and direct their energies and
resources to achieve them.
- Profit oriented business → ROI goals
- Hospital → Patient care
- Educational institution → Teaching, research & community service.

All organizations also have resources that can be used to meet these objectives. Such resources can
be classified into: human and non-human, and management is the force that unifies these resources.
It is the process of bringing them together and coordinating them to help accomplish organizational
goals.

b) Management is the art of getting things done through other people by making the atmosphere
conducive for others. It is the process of getting things done through others, and this process
puts emphasis on both the objectives to be attained and the people who will be pursuing them.
→ an effective manager focuses on both work and people.
→ the job of every manager is to achieve organizational goals through the combined efforts
of people.

c) Management is the utilization of scientifically derived principles to examine and improve

collective efforts or production.
- Management applies to any kind of organization, to managers at all organizational
levels.
- Without management, virtually no business could survive.
- Management increases the values of our resources.

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d) Management is the process of achieving organizational goals through engaging in the five major
functions of planning, organizing, leading, staffing and controlling. This definition recognizes
that:
- Management is an ongoing activity
- Entails reaching important goals, and
- Involves knowing how to perform the five major functions of
management.

Managers – are those persons in the position of authority who make decisions to commit (use) their
resources and the resources of others towards the achievement of organizational
objectives.
* Everybody is the manager of his/her time, energy and talents.

Organization – is a group of two or more people brought together to achieve common stated
objectives.
Organization – two or more persons engaged in a systematic effort to produce goods and/or
services.

2) Managerial Functions
Regardless of the type of firm and the organizational level, all managers perform certain basic
functions. These managerial functions are Planning, organizing, staffing, directing/leading/ and
controlling.

i. PLANNING: is making decisions today about future actions. It involves selecting missions and
objectives and the actions to achieve them; it requires decision-making, which is, choosing future
courses of action from among alternatives. No real plan exists until a decision – a commitment of
human or material resources – has been made. Before a decision is made, all we have is a planning
study, an analysis or a proposal, but not a real plan.

 Planning bridges the gap between where we are to where we want to be in a desired future.
 Planning identifies goals and alternatives. It maps out courses of action that will commit
individuals, departments and the entire organization for days, months and years to come.
 Planning is the first managerial function that all managers engaged in because it lays the
groundwork for other managerial functions. Even other managerial functions have to be
planned.

- ii. ORGANIZING: is concerned with assembling the resources necessary to achieve

organizations’ objectives and establishing the activity authority relationship.
 It is the management function that focuses on allocating and arranging human and non-human
resources so that plans can be carried out successfully. Resources are allocated on the basis of
major company goals.
 Planning has established the goals of the company and how they are to be achieved; organizing
develops the structure to reach these goals.

It is through organizing function that managers determine which tasks are to be done, how tasks can
best be combined into specific jobs, and how jobs can be grouped into various units that make up
the structure of the organization. It involves creating job positions with assigned duties and
responsibilities, arranging positions into hierarchy by establishing authority–reporting relationship,
determining the number of subordinates each manger should supervise, determining the number of

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hierarchical levels etc and thereby create an organization. Organizing is not done once and then
forgotten. As the objectives of the company change, they will influence the structure of managerial
and organizational relationship.

iii. STAFFING: As it has been pointed out, organizing involves creating job positions with
assigned duties and responsibilities. Staffing involves filling and keeping filled the positions in the
organization structure. It is concerned with locating prospective employees to fill the jobs created
by the organizing process. It basically deals with inventorying the people available, announcing
vacancies, accepting, identifying the potential candidates for the job, recruiting, selecting, placing,
orienting, training and promoting both candidates and existing employees.
Staffing is concerned with human resource of the organization.

iv. Directing/LEADING: has been termed as motivating, influencing, guiding, stimulating,

actuating or directing. It is aimed at getting the members of an organization move in the direction
that will achieve its objectives. Leading/leadership is the heart and soul of management. It involves
influencing others to engage in the work behavior necessary to reach organizational goals; i.e., it is
influencing people so that they will contribute to organization and group goals; it has to do
predominantly with the human/interpersonal aspect of management.

Leading is the most complex managerial function because it deals with complex human behavior;
and because most problems in organizations arise from people, their desire and behavior. It includes
communicating with others, helping to outline a vision of what can be accomplished, providing
direction, and motivating organization members to put forth the substantial effort required.

v. CONTROLLING: is the measuring and correcting of activities of subordinates to ensure that

events conform to plans. It deals with establishing standards, measuring performances against
established standards and dealing with deviations from established standards.

 Controlling is the process through which mangers assure that actual activities conform to
planned activities.
 It is checking current performances against predetermined standards contained in the plan.
Control activities generally relate to the measurement of achievement.

3) Significance Of Management
Why do we study management?

There are different reasons to study management. These are:

 It is important for personal life.
 Managers are universal: managers work in all types of organizations, at all levels, and in all
functional areas. These managers are responsible fo0r the success or failure of the
organizations.
 Societies depend on organizations/institutions for the provision of goods and
services. These institutions are guided by the decision of few individuals /one or
two/ designated as Managers.
 It affects the accomplishment of social, economic, political and organizational goals.
Management is the force that determines whether business organizations and social
institutions will serve us or waste our talents and resources.

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  Ever since people began forming groups to accomplish aims they could not
achieve as individuals, managing has been essential to ensure the coordination of
individual efforts.
 People currently trained by management get themselves in managerial positions and earn
their livelihood, and the most common path to become successful manager involves a
combination of education and experience.
 Management is needed to coordinate and direct the efforts of individuals, groups and the
entire organization to achieve desired objectives. Management is responsible for the success
or failure of an organization. That is, when an organization fails it is because of poor
management, and when an organization succeeds it is because of good management.
Whenever and wherever there is a group work having stated objectives, management is
needed to direct and coordinate their efforts. Without management effort will be wasted.

4) Levels Of Management
Is management the same throughout an organization? Yes and No
Yes: because all managers perform the five managerial functions.
No: because despite the fact that they perform all managerial functions, they perform it with
different emphasis and scope.

Managers all perform the same management functions but with different emphases because of their
position in the organization. Although all managers may perform the same basic duties and play
similar roles, the nature and scope of their activities differ. These differences are the base for the
classification of managers.

Managers can be divided based on two criteria. These are:

1) Levels of management (vertical difference)
2) Scope of responsibilities (horizontal difference)

I. Types of Managers based on levels of management

An important determinant of a manager’s job is hierarchical level. Levels refer to hierarchical
arrangement of managerial positions or persons in an organization. The number of managerial
levels in an organization depends on the size of the organization. In most organizations, however,
there are three distinct levels. How these levels are distinguished? What functions are performed at
each level? And the reporting relationships are some of the issues to be addressed.

Based on levels of management or hierarchy we do have three types of managers. A manager’s

assigned duties and the authority needed to fulfill those duties are what determine management
level.

i. Top Level Managers

Top-level managers are managers who are at the top of the organizational hierarchy and are
responsible for the entire organization. They are usually few in number and include the
organization’s most important managers - the CEO or the president and his/her immediate
subordinates usually called vice-presidents. But the actual title may vary from organization to
organization. They are few in number because of the nature of the work they perform and economic
problem. They deal with the big picture, not with the nitty gritty. They are responsible for the
overall management of the organization. They establish company wide objectives or goals &
organizational policies. Furthermore, top management:

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 - Develop overall structure of the organization.
- Direct the organization in accordance with the environment.
- Develop policy in areas of Equal Employment Opportunity & employee
development.
- Represent the organization in community affairs, business deals, and government
negotiations.
- Spent much of their time in planning and dealing with middle level managers and
other subordinates.
- Work long hours and spend much of their time in meetings and on telephone.
- Are persons who are responsible for making decisions and formulating policies that
affect all aspects of the firm’s operations.
- Provide overall leadership of the organization towards accomplishment of its
objectives.

 They are responsible for the organization because objectives are established and policies are
formulated at the top.
 Top-level managers take the credit or blame for organizational success and failures respectively.

ii. Middle Level Managers

Middle level managers occupy a position in an organization that is above first-line management and
below top management. They interpret and implement top management directives and forward
messages to and from first-line management.

- Regardless of their title, their subordinates are managers.

- Often coordinate and supervise the activities of lower level managers.
- Receive broad/overall strategies from top managers and translate it into specific objectives
and plans for First-Line Mangers/operating managers.
- Are responsible for the proper implementation of policies and strategies defined by top level
managers. They interpret and implement top management directives and forward messages
to and from first-line management.
- Their principal responsibility is to direct the activity that implement the policies of the
organization.
E.g. Academic deans, Division Head, Plant managers, Army captain

iii. First Level Managers/Supervisory Level managers

- Are those at the operating level or at the last level of management.
- Their subordinates are non managers.
- They are responsible for overseeing and coordinating the work of operating employees.
- Assign operating employees to specific tasks.
- Are managers on which management depends for the execution of its plan since their job is
to deal with employees who actually produce the organization’s goods and services to
fulfill the plan.
- Are directly responsible for the production of goods and services.
- Motivate subordinates to change or improve their performance.
- Serve as a bridge between managers and non-managers.
- Spent much of their time in leading and little in planning.
- Are in charge of carrying out the day to day activities within the various departments to
ensure that short term goals are met.
E.g. Department Heads, supervisory personnel, Sales managers, Loan officers, Foreman.

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 - Are often neither fish nor fowl – neither management nor labor because they feel great deal
of empathy for their subordinates (which stems from close personal contact and the fact
that most supervisors have come up from the ranks of labor) and they are there to reflect
the company’s point of view to their subordinates. And that is why First-Line Mangers are
called “People in the Middle”.

All managers carry out managerial functions. However, the time spent for each function varies
according to their managerial hierarchy. Top-level managers spend more time on planning and
organizing than lower-level managers. Leading, on the other hand, takes a great deal of time for
first-line managers. The difference in time spent on staffing and controlling varies only slightly for
managers at various levels.

Controlling
Top Planning

Organizing

Staffing

Directing
Middle

First-line

Organizational Hierarchy Time spent on carrying out managerial functions

Fig. 1.1 The relative importance of the managerial functions at different levels
II. Types of Managers based on scope of responsibility
Based on the scope of responsibility/activities they manage, managers are divided into two:

i. Functional Managers
Functional managers are managers who are responsible for a department that performs a single
functional task and has employees with similar training and skills.

Supervise employees (managers + workers) with specialized skills in specific areas of operations
such as accounting, payroll, finance, marketing, production, or sales etc. They are responsible for
only one organizational activity; i.e. their responsibility is limited to their
specialization/specification.

ii. General Managers

General Managers are managers who are responsible for several departments that perform different
functions. They are responsible for the entire operations of the organization without being specific.

Oversee a complex unit, such as a company, a subsidiary, or an independent operating division.

S/he will be responsible for all activities of that unit, such as its production, marketing, sales and
finance.

A small company may have only one general manager – its president or executive vice president –
but a large organization may have several, each at the head of a relatively independent division.

5) Managerial Roles

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Role is an organized set of behaviors that is associated with a particular office or position. It is a
pattern of behavior expected by others from a person occupying a certain position in an
organizational hierarchy.
A role is any one of several behaviors a manager displays as s/he functions in the organization

When a manager tries to carryout the management functions, s/he must behave in a certain way – to
fill certain role. Managerial roles represent specific tasks that managers undertake to ultimately
accomplish the five managerial functions. Factors which affect managerial roles are: manager’s
formal job description, and the values & expectations of other managers, subordinates and peers.

Henry Mintzberg identified 10 managerial roles which are in turn grouped into three categories:
Interpersonal, Informational and Decisional Roles.

I. Interpersonal Roles involve developing and maintaining positive relationships with significant
others in the organization. It is communication oriented. It includes:

i. Figurehead Role: managers perform symbolic duties of a legal or social nature. The
manager is the head of his work unit, be it division, section or department. Because of this “lead
person” position the manager represents his work unit at ceremonial or symbolic functions.

The top level managers represent the company legally and socially to those outside of the
organization. The superior represents the work group to higher management and higher
management to the work group.

E.g. Signing documents, presiding at a ceremonial event, greeting visitors, attending a

subordinate’s weeding, taking a customer to lunch, university president hands out a diploma for
graduates – in all these cases the manager is representing his/her organization.

ii. Leadership Role: The manager is the environment creator – s/he makes the environment
conducive for work by improving working conditions, reducing conflicts, providing feedback
for performance and encouraging growth. (Virtually all managerial operations involving
subordinates are examples for a leadership role). The leader builds relationship and
communicates with employees, motivates & coaches them. As a leader, the manager is
responsible for hiring, training, motivating and encouraging employees/subordinates.
→ The leadership role is evident in the interpersonal relationship between manager and his/her
subordinates.

iii. Liaison Role/Coordinator role: The liaison maintains a network of contacts outside the
work unit to obtain information. The manager serves as a link between the organization and the
informants who provide favors and information. S/he fulfills this role through community
service, conferences, social events, etc, participation is meetings with representatives of other
divisions.

Refers to dealing with the member of the organization superiors, subordinates, peer level
managers in other departments, staff specialists and outside contacts such as clients.

The top management uses this role to gain favors and information, while the superiors use it to
maintain the routine flow of work.

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II. Informational Roles focuses on the transmission of important information to and from
internal and external sources. It involves the following activities:

i. Monitor role: is also called information gathering role. This role refers to seeking, receiving,
screening and getting information. The manager is constantly monitoring the environment to
determine what is going on. The monitor seeks internal and external information about issues
that can affect the organization. S/he seeks and receives wide variety of special information to
develop through understanding of the organization and the environment.

Information is gathered from news reports, trade publications, magazines, clients, associates,
and a host of similar sources, attending seminars & exhibitions.

ii. Disseminator Role: what does the manager do with the information collected? As the
disseminator, the manager passes on to subordinates some of the information that would not
ordinarily be accessible to them. After the information has been gathered (by monitor role), it
has to be disseminated to superiors, subordinates, peers and other concerned clients. The types
of information to be forwarded to members could be facts, opinions, interpretations, and
influences.

iii. Spokesperson/representative Role: the spokesperson transmits information about the

organization to outsiders. The manger is the person who speaks for her/his work unit to people
outside the work unit.

One aspect of this role is to keep superiors well informed and a second aspect is to communicate
outside the organization like press, government agencies, customers and labor unions. Although
the roles of spokesperson and figurehead are similar, there is one basic difference between them.
When a manager acts as a figurehead, the manager’s presence is as a symbol of the
organization, whereas, in the spokesman role, the manager carries information and
communicates it to others in a formal sense.

Thus, the manager seeks information in the monitor role, communicates it internally in the
disseminator role and transmits it externally in the spokesperson role. The three informational
roles, then, combine to provide important information required in the decisional roles.

III. Decisional Roles: involve making significant decisions that affect the organization.

i. Entrepreneur Role: (initiator of change) the manager acting as an entrepreneur recognizes

problems and opportunities and initiates actions that will move the organization in the desired
direction. In the role of entrepreneur, the manager tries to improve the unit. Often s/he creates
new projects, change organizational structure, and institutes other important programs for
improving the company’s performance. The entrepreneur acts as an initiator, designer, and
encourager of change and innovation.

ii. Disturbance Handler Role: solution seeking role. In the role of disturbance handler, the
manager responds to situations over which s/he has little control, i.e. that are beyond his/her
control and expectation such as conflict between people or groups, strikes, breachment of
contract or unexpected events outside the organization that may affect the firm’s
performance. The disturbance handler is responsible for taking corrective action when the
organization faces important, unexpected difficulties.

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 iii. Resource Allocator Role: deciding on the allocation of the organization’s physical, financial
and human resources. As a resource allocator, the manager is responsible for deciding how
and to whom the resources of the organization and the manager’s own time will be
allocated. This involves assigning work to subordinates, scheduling meetings, approving
budgets, deciding on pay increases, making purchasing decisions and other matters related
to the firm’s human, financial, and material resources. The resource allocator distributes
resources of all types, including time, funding (finance), equipment and human resources.

iv. The Negotiator Role: representing the organization in all important/major negotiations.
Managers spend a great deal of their time as negotiators, because only they have the
information and authority that negotiators require.

E.g. negotiations to buy firms, to get credit, with government, with suppliers, etc.

The Ten Managerial Roles

Category Role Activity
Interpersonal Figurehead Perform ceremonial and symbolic duties such as
greeting visitors, signing legal documents
Leader Direct and motivate subordinates; training,
counseling, and communicating with
subordinates.
Liaison Maintain information links both inside and outside
organization; use mail, phone calls, meetings.
Informational Monitor Seek and receive information, scan periodicals
and reports, maintain personal contacts.
Disseminator Forward information to other organization
members; send memos and reports, make phone
calls.
Spokesperson Transmit information to outsiders through
speeches, reports, memos.
Decisional Entrepreneur Initiate improvement projects; identify new ideas,
delegate ideas, delegate responsibility to others.
Disturbance Take corrective action during disputes or crises;
handler resolve conflicts among subordinates; adapt to
environmental crises.
Resource Decide who gets resources; scheduling, budgeting,
allocator setting priorities
Negotiator Represent department during negotiation of union
contracts, sales, purchases, budgets; represent
departmental interests.

6) Managerial Skills And Their Relative Importance

A manager’s job is diverse and complex and it requires a range of skills. Skills are specific abilities
that result from knowledge, information, practice, and aptitude.

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 Effective managers are essential to the performance of all organizations, whether they have the
ability to plan, organize, staff, lead and control business operations effectively can determine a
firm’s ultimate success or failure.
 Management success depends both on: a fundamental understanding of the principles of
management and the application of technical, human and conceptual skills.
 Modern businesses are dynamic and complex, and competition in the market place is fierce.
Consequently, managers must be highly skilled to succeed. The skills managers need can be
classified as:
o Technical skill
o Human Relations skill
o Conceptual skill

1. Technical Skills – involve process or technique, knowledge and proficiency. It is the ability to
use the tools, procedures, or techniques of a specialized field. It includes mastery of the methods,
techniques, and equipment involved in specific functions, such as engineering, manufacturing, or
finance. Technical skill also includes specialized knowledge, analytical ability, and the competent
use of tools and techniques to solve problems in that specific discipline.

- Is specialized knowledge and ability that can be applied to specific tasks.

- Is a skill that reflects both an understanding of and a proficiency in a specialized field.
- Technical skills are most important at the lower levels of management. It becomes less
important as we move up the chain of command because when they supervise the others
(workers), they have to show how to do the work.
E.g. A surgeon, an engineer, a musician, a quality controller or an accountant all have
technical skill in their respective areas.

2.Human Relations /Interpersonal Skill – the ability to interact effectively with people. It is the
ability to work with, understand and motivate other people, either as individuals or as groups.
Managers need enough of human relationships skill to be able to participate effectively and lead
groups. These skills are demonstrated in the way a manager relates to other people, including the
way s/he motivates, facilitates, coordinates, leads, communicates, and resolves conflicts. A manager
with human skills allows subordinates to express themselves without fear of ridicule and encourages
participation. A manager with human skills likes other people and is liked by them. This skill is a
reflection of the manager’s leadership ability.

Managers who lack human skills often are abrupt, critical, and unsympathetic toward others. The
results are often abrupt, critical, and unsympathetic response from workers to management.

Because all work is done when people work together, human relation skills are equally important at
all levels of management.

3. Conceptual skills – involve the formulation of ideas. It refers to the ability to see the big
picture – to view the organization from a broad perspective and to see the interrelations among its
components. It includes recognizing how the various jobs in an organization depend on one another
and how a change in any one part affects all the others. It also involves the manager’s ability to
understand how a change in any given part can affect the whole organization, ability to understand
abstract relationships, solve problems creatively, and develop ideas.

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Conceptual skills are more important in strategic (long range) planning; therefore, they are more
important to top-executives than middle managers and supervisors.

Although all three of these skills are essential to effective management, their relative importance to
specific manager depends on his/her rank in the organization. Technical skill is of greatest
importance at supervisory level; it becomes less important as we move up the chain of command.
Even though human skill is equally important at every level of the organization, it is probably most
important at the lower level, where the greatest number of management–subordinate interactions is
likely to take place.

On the Other hand, the importance of conceptual skill increases as we rise in the rank of
management. The higher the manager is in the hierarchy, the more s/he will be involved in the
broad, long term decisions that affect large parts of the organization. For top management, which is
responsible for the entire organization, conceptual skill is probably the most important skill of all.

 Technical skill deals with things, human skill concerns people and conceptual skill has to do
with ideas.

Top
Technical Skills

Conceptual
Human Skills

Skills
Middle

First-line

Managerial Levels Managerial Skills

Fig. 1.2 Variation of skills necessary at different management levels

4. Management: Science or Art?

Science is characterized by making conclusions based on actual facts and verifies knowledge
through cause-effect relationship. It can be generally learnt, thought, and researched to know the
universal truth. Managers can work better by using the organized knowledge about management,
and it is this knowledge that constitutes a science.

Art is characterized by using common sense, personal feeling, beliefs, impulses, etc.
Management/Managing, like all other practices-music composition, engineering, accountancy or
baseball- is an art. It is know-how, skill or how to accomplish the desired objectives with
insufficient data and information or when there is limited use of secondary sources of information.
It is doing things in the light of realities of a situation. Thus, management as a practice is an art; the
organized knowledge underlying the practice may be referred to as a science. In this sense/context
science and art are not mutually exclusive but are complementary.

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Therefore, management in actual sense is neither an art nor science, but it requires both to be
successful, i.e., it is not pure art because it uses scientific methods e.g. computer and it is not pure
science because it uses intuition, judgment, and creativity. Management is one of the most creative
arts as it requires a vast knowledge and the innovative skills to apply. Managers should develop new
ideas, techniques and strategies and be able to communicate them effectively in the work
environment. They should be able to make decisions even when there is shortage of data. This leads
us to the conclusion that ‘the art of management begins where the science of management stops’.
This underlines the importance of making managerial decisions in the absence of sufficient data and
information by using the decision maker’s common sense.

5. Universality Of Management
Regardless of title, position, or management level, all managers do the same job. They execute the
five managerial functions and work through and with others to set and achieve organizational goals.
Managers are the same whether the organization is private or public, profit making or non-profit
making, manufacturing or service giving, and industrial or small firms. Hence, management is
universal for the following reasons.
1. All managers perform the five managerial functions even if with different emphasis.
2. It is applicable for all human efforts; be it business, non-business, governmental, private. It is
useful from individual to institutional efforts.
3. Management utilizes scientifically derived operational principles.
4. All managers operate in organizations with specific objectives.
5. Management, in all organizations, helps to achieve organizational objectives.

In sum, management theories and principles have universal application in all kinds of organized
and purposeful activity and at all levels of management.

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 CHAPTER TWO

THE PLANNING FUNCTION

I. MEANING, NATURE AND IMPORTANCE OF PLANNING

The Meaning of Planning

o Planning – is the dynamic process of making decisions today about future actions; and it is
a selection or choice among alternatives as to: What missions or objectives be achieved,
What actions should be taken, What organizational positions be assigned, How the end can
be achieved, When to achieve it, Who is to do it, Where to do it. It bridges the gap between
where we are now and where we want to be.

o Planning - is preparing today for tomorrow; it is the activity that allows managers to
determine what they want and how to get it: They set goals and decide how to reach them.
Planning focuses on the future: what is to be accomplished and how.
Answers six basic questions in regard to any intended activity:

 What (the goal or goals).

 When (the time frame in which it will be accomplished)
 Where (the place or places where the plans or planning will reach its
conclusion).
 Who (which people will perform the tasks).
 How (the specific steps or methods to reach the goals).
 What resources (resources necessary to reach the goals).

o Planning is a process of deciding what to do and how to do it before action is required.

Planning involves selecting missions and objectives and the actions to achieve to them; it requires
decision-making, that is, choosing from among alternative future courses of actions. Managers who
develop plans but do not commit themselves to action are simply wasting time. The outcome of the
planning function is a plan, a written document that specifies the courses of action a firm will take.

Nature of Planning
Discussing the following points can highlight the nature of planning.

1.The contribution of planning to purpose and objectives

Every organization is established (exists) for the accomplishment of group purpose or objective. So,
the purpose of any plan and its derivatives or supporting plans is to facilitate the accomplishment of
organizational objectives.

2. The primacy of planning

All the five managerial functions - planning, organizing, staffing, directing and controlling- are
designed to support the accomplishment of organizational objectives. However, planning precedes
the execution of all other managerial functions, because all other managerial functions must be

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planned if they are to be effective. This does not mean that planning is the most important of all
other managerial functions, because to be important or useful all other functions have to accompany
it.

Although in practice all the functions mesh as a system of action, planning is unique in that it
involves establishing the objectives necessary for all group effort. The entire gist of initiating,
exercising, and activating the managerial functions of organizing, staffing, directing and controlling
is to bring the objectives formulated during planning into fruition. In fact, the concept of especially
control would be unthinkable without planning because any attempt to control without plans is
meaningless, since there is no way for people to tell whether they are going where they want to go
(the result of the task of control) unless they first know where they want to go (part of task of
planning). Plans thus furnish the standards of control. Since planning and controlling are so much
inseparable, they are treated as the Siamese twins of management.

3. The pervasiveness /Universality of planning

Planning is a function of all managers, although the character and breadth of planning varies with
each manager’s authority and with the nature of policies and plans outlined by superiors. That is, all
managers-from presidents to first-level supervisors plan. Even for personal life we plan. “It is
difficult to call a person a manager if he or she doesn't plan “Koontz

4. Planning and information

Basically no plan exists without information. To plan managers have to gather relevant information
from around the environment. Information is one of the valuable resources for planning to exist.

5. Planning is a continuous process

Planning deals with the future and the future is full of uncertainties. Hence, planning is subject to
revision. It needs frequent revision in response to changes in the internal and external environments
of the organization. Therefore, so for as the organization is in operation, planning is in continuous
process. The more continuous the planning is, the higher its efficiency is.

6. Planning is a means to an end

Planning is not an end by itself. It is a means to an end (meeting objectives). Planning is an
instrument that pushes people towards the achievement of objectives.

7. Plans are arranged in a hierarchy

Plans are first set for the entire organization. The corporate plan then provides the framework for
the formulation of divisional, departmental, and sectional goals. Each of these organizational
components sets its plans, programs, projects, budgets, resource requirements, etc.

As shown in the figure below, unit plans are summed up to form sectional plans and these in turn
form departmental plans. Finally, the different divisional plans when summarized at corporate level,
form corporate plan.
Fig. Hierarchy of plans
Corporate/Strategic plans

Departmental/divisional plans
Sectional plans

Operational plans

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The Importance of Planning

1. It provides direction and sense of purpose

It is through planning that we can establish our objectives. Plans focus attention on sepicifc targets
and direct employees effort toward important outcomes. Once organizations known what they can
do and can't do over the future, they began to set objectives based on their capacity and the order of
activities needed to accomplish their objectives. It provides direction and a common sense of
purpose. This shared purpose enables both employees and managers to coordinate, unite, and guide
their actions.

2. It reduces uncertainties and anticipates the future/ preparing for change

Planning is based on systematic and careful forecasts of future states of the economy, markets,
technology, etc to reduce uncertainties to the extent they occur according to expectation. Thus, it is
while planning that the manager should consider the potential areas for changes in the future; rather
than merely reacting to it. Managers should cope with changes in their own organizations and
functions in their environment through planning. Anticipating and preparing for possible future
changes enables managers to control their environment. In so doing, planning answers “what-if”
questions. In planning, managers develop several "what if" questions in order to reduce the risk of
unpredictable future, so far as we plan for the future. By asking what if questions managers develop
alternatives.

3. It provides basis for controlling

Standards /controlling mechanisms/ are developed during planning. It specifies what is to be
accomplished and provides a standard for measuring progress.

4. If forces managers see the organization as a system

While planning managers have to consider parts because the plan of one part (department) affects
the operation of the whole organization so far as parts of an organization are interdependent.

5. It promotes efficiency
Planning provides the opportunity for a greater utilization of the available organizational resources -
because in planning we determine how many resources are necessary to reach the goals, and how to
use these resources.

6. It provides the base for cooperative and coordinated efforts

Management exists because the work of individuals and groups in organizations must be
coordinated, and planning is one important technique for achieving coordinated effort. Planning
provides the basis for organized and coordinated effort by defining the objectives of the
organization and the means for their achievement.

7. Developing managers
The act of planning involves high level of intellectual activity. Those who plan must be able to deal
with abstract and uncertain ideas and information. Planners must think systematically about the
present and the future. Through planning, the future state of the organization can be improved if its
managers take an active role in moving the organization toward that future. Planning then implies
that managers should be proactive and make things happen rather than reactive and let things

15
happen. Through act of planning, managers not only develop their ability to think futuristically but,
to the extent that their plans are effective, their motivation to plan is reinforced. Also, the act of
planning sharpens manager's ability to think as they consider abstract ideas and possibilities for the
future. Thus, both the result and the act of planning benefit both the organization and its managers.

8. It provides guideline for decision making

Decision sin an organization will be made in alignment with the plans and in accordance with
desired outcomes. Managers make decisions on problems of recurring nature based on strategies
and policies of the organization. Through specifying the actions necessary to accomplish the goals
of the organization, planning serves as a framework for decision-making. It forces managers to
make analytical thinking and evaluate alternatives through improved decisions.

Limitations of Planning
a. Planning is risky
This is because of uncertainties in the future and absence of accurate and adequate data.

b. It is a difficult and complicated task

Planning involves complex and interdependent decisions. Thus requires patience and commitment
from those who are involved in the planning process. In addition to this, rapid changes in
technology and customers’ tastes and preferences will also make planning difficult and
exceptionally complex.

c. It is expensive and time consuming

Planning requires financial, physical, human, and time resources. The collection of the necessary
data from various sources, the analysis, organizing and interpreting data consume time and requires
a huge amount of financial outlay.

d. It is affected by external factors

External factors can put strain on the success of planning. These factors could be external
impositions, government intervention, natural calamities, import-export policies, taxation and labor
laws that can limit the success of planning.

II. ORGANIZATIONAL OBJECTIVES

 Objectives are the important ends of planning toward which organizing, staffing, leading and
controlling are aimed.
 Objectives are the important ends toward which organizational and individual efforts or
activities are directed.
 Objectives are essential starting points in planning because they provide direction for all
other managerial activities.
 While enterprise objectives are the basic plan of the firm, department may also have its own
objectives. Its objectives naturally contribute to the attainment of enterprise objectives, but
the two sets of objectives may be entirely different.
E.g. Objective of Business – To make a certain profit by producing a given line of home
entertainment equipment.
Objective of manufacturing department - To produce the required number of TV sets of
given design and quality at a given cost.

These two objectives are consistent, but they differ in that the manufacturing department alone
cannot ensure accomplishing the company’s objectives.

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Goals and objectives can be used interchangeably.

 Mission/Purpose - denotes the reason for the existence of an organization.

- denotes the organizations fundamental reason for existence.
Purpose and mission can be used interchangeably.

 Target – identifies specific qualitative or quantitative ends (points).

In short Mission/ purposes, objective, goals/ Targets differ in scope.

Purpose/missions  objective  Targets/goals

Nature of Objectives
1.Goals are predetermined or stated in advance.
2.Goals describe future desired results toward which present efforts are directed.
3. Goals should be specific and measurable. If possible, goals should be expressed in
quantitative terms.
4. Goals should have defined time period. They should specify the time period over which goals
will be achieved and measured. However, the long-range objectives should provide the direction
for short-range objectives.
5. Objectives should be continually adjusted in light of environmental changes. However, too
frequent changes and adjustments may cause confusion and disruption of plans, strategies,
policies, budgets, etc.
6. Goals should be challenging but realistic. If a goal is too difficult employees may give up. If
too easy, and routine type they may not feel motivated. Therefore, goals should be set within the
existing resource base and not beyond the department’s time, equipment, labor, and financial
resources. This gives workers job satisfaction and a great desire to work hard. A difficult job is
something beyond the resource capacity of the organization and the individual employee. It ends
up with failure to achieve the stated goals.
7. Objectives have hierarchy
In planning, broader and more comprehensive objective with long time frame will be formulated
at the very top. These top-level objectives must successfully be broken down to more specific
and shortsighted sub-objectives because moving the organization to goal attainment calls for
achieving these sub-objectives which are the means by which objectives are attained. Each level
of objective stand as ends relative to the levels below it and as a means relative to the level above
it.

In short, like all management activities objectives have hierarchy. It ranges from the broadest
organizational objectives to specific /individual objectives. Organizations typically have three
levels of goals: strategic, tactical, and operational.

Strategic goals - are broadly defined targets or future end results set by top-level management.
Such goals typically address issues relating to the organization as a whole rather than specific
divisions or departments and may sometimes be stated in fairly general terms. Strategic goals are
sometimes called official goals because they are formally stated by top management.

Tactical goals - are targets or future end results usually set by middle management for specific
departments or units. Goals at this level spell out what must be done by various departments to
achieve the results outlined in the strategic goals. Tactical goals tend to be stated in more
measurable terms than is sometimes true of strategic goals.

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 Operational goals - are targets or future end results set by lower management that address
specific, measurable outcomes required from lower levels.

The three levels of goals can be thought of as forming a hierarchy of goals. With a hierarchy,
goals at each level need to be synchronized so that efforts at the various levels are channeled
ultimately toward achieving the major goals of the organization. In this way, the various levels of
goals form a means-end chain, in which the goals at the operational level (means) must be
achieved in order to reach the goals at the tactical level (end). Likewise, the goals at the tactical
level (means) must be reached in order to achieve the goals at the strategic level (end).
8. Multiplicity of objectives
Even though there is only one broad and overall organizational objective, there are other multiple (many)
objectives that are under the umbrella of the overall plan which are directed to attain the overall plan. It
would have been relatively easy to achieve an objective and its sub-objective had an organization had only
a single basic objective. But in reality organizations do have a multitude of objectives and any attempt to
disregard this fact can invite failure to organizations.

E.g. Organizational (Broad) objective: profit maximization

Satisfaction of customers
Other objectives Research & development
Employee development

9. Integrating character
In order to achieve the broad organizational objective there should be harmony or integration
among objectives.
Multiple Objectives  Integration  Network of objectives

10. Network of objectives

Objectives of an organization form network, that is, objectives are interrelated and interdependent.
The union of the individual objectives to form an overall objective makes network of objectives. If
there were no network of objectives, it would be very difficult to achieve organizational objectives
because people with their individual objective will pursue their activity as right and coordination
can never be possible.

11. Primacy of objectives

Objectives are primary to organization because they are the very reason for the existence of an
organization.

Benefits of Objectives
i.Objectives provide basis for the performance of all managerial functions. They serve as a
benchmark for the formulation of plan, policies, strategies, rules, budgets, procedures, etc.
Organizing exists when there are objectives and courses of action required for implementing plans,
organizing signifies the need for staffing by creating jobs and positions and coordinating all
organizational efforts to desired results.

ii.Objectives provide guidelines for action. They help clarify expectations. When goals are set,
organization members are more likely to have a clear idea of the major outcomes that they are
expected to achieve. Without goals, organization members can all be working very hard but may

18
 collectively accomplish very little as if they were rowers independently rowing the same boat in
different directions and together making very little progress. Goals direct and channel employees’
efforts by describing future desired results. They provide focus and direction for employees by
prescribing what ‘should be’ done. And, they also help to allocate resources and tell employee how
and where to direct their strongest efforts. Goals are basic for cooperative and organized effort.

iii.Objectives can limit employee activities. They serve to prescribe what ‘should be done’ and ‘what
should not be done’ by the employees.

iv.Objectives provide a unique identity for organizations. Organizations have unique characteristics.
They have their own values and identities that help one to differentiate them from others in the
industry.

v. An organization’s goal can serve as a source of employee motivation. It helps to uplift their morale.
By presenting a challenge, goals tell what characterizes success and how to achieve it.
Accomplishment of organizational goals provides employees a sense of achievement and
satisfaction. The added motivation develops from meeting goals, feeling a sense of accomplishment,
and receiving recognition and other rewards for reaching targeted outcomes. On the other hand,
managing employees based on the accomplishment of objectives rather than on the tasks and
activities of every worker (management by objectives-MBO) can serve as an incentive to
employees.

vi. Objectives provide performance standards and bases for control. Control is the function of
measuring, comparing and evaluating performance against predetermined standards. Thus, control
will be meaningless in the absence of standards provided by objectives.

How Goals Facilitate Performance

In order to make use of goals, managers need to understand just how goals can facilitate
performance. Goals facilitate performance if they have the following components: goal content,
goal commitment, work behavior, and feedback.

Goal Content: Goals that are effective in channeling effort toward achievement at the
strategic, tactical, and operational levels have a content that reflects five major characteristics.
Goals should be challenging, attainable, specific and measurable, time limited, and relevant.

Goal commitment: A critical element in using goals effectively is getting

individuals and/or work groups to be committed to the goals they must carry out. Goal
commitment is one's attachment to, or determination to reach, a goal. Without commitment, setting
specific, challenging goals will have little impact on performance. Research indicates that five
major factors positively influence goal commitment: supervisory authority, peer and group pressure,
public display of commitment, expectations of success, and incentives and rewards.

Work Behavior: Given goals and commitment, how does the goal-setting process
ultimately influence behavior? Research so far suggests that goal content and goal commitment
affect an individual's actual work behavior by influencing four work behavior factors: direction,
effort, persistence and planning.
Direction: Goals provide direction by channeling attention and action toward activities related to
those goals, rather than to other activities. Thus goals to which we are committed can help us make
better choices about the activities that we will undertake.

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Effort: In addition to channeling activities, goals to which we are committed boost effort by
mobilizing energy. As indicated by the research on goal setting, individuals are likely to put forth
more effort when goals are difficult than when they are easy.
Persistence: Persistence involves maintaining direction and effort on behalf of a goal until it is
reached, a requirement that may involve an extended period of time. Commitment to goals makes it
more likely that we will persist in attempting to reach them.
Planning: In addition to the relatively direct efforts on direction, effort and persistence, goals also
have an important indirect effect on work behavior by influencing planning. Goal setting affects
planning because individuals who have committed themselves to achieving difficult goals are likely
to develop plans or methods that can be used to attain those goals. With easy goals, however, little
planning may be necessary.

Feedback: feedback to employees as to their performance will let them know if they have
worker as to the expectation. By comparing their performance with the set goals, managers should
give feedback on employees’ performance that will help them evaluate themselves and direct their
effort towards achievement.

III. The Planning Process

Like other managerial activities planning has its own processes or series of steps. These steps are
interrelated and there is no rigid boundary between or among these steps, and one is the base for the
other.

1. Establishing objectives
As objectives provide the direction for all other managerial functions, especially planning, objective
setting is an important first step in the planning process. Objectives specify the expected results and
indicate the end points of what is to be done, where the primary emphasis is t be placed, and what is
to be accomplished by the network of strategies, policies, procedures, rules, budgets, and programs.
They provide the direction necessary for achievement and without them there is little to keep a
manager from simply wandering in all directions. Objectives are then, the ‘guiding light’ for the
entire management process.

Objective setting is a three steps process, which involves assessing the present situation,
anticipating future conditions, and then setting the objectives. It is only after the managers have at
least the rudimentary knowledge about their capabilities and available opportunities that objective
setting does make sense.

Organizations do not have one set of objectives, which each manager attempts to achieve. Rather,
setting objectives involves establishing objectives for the entire organization, each subordinate work
unit, and the long range as well as the short range. The hierarchy of objectives starts at the top of the
organization with overall organizational objectives and proceeds downwards with narrower and
more specific objectives for each level managers, derived from the objectives at the level

Objectives developed by organizational levels and peer managers should be compatible with one
another. Top-level management should set the stage for goal setting by lower level management,
thereby ensuring maximum use of resources. Enterprise objectives give direction to the major plans
which define the objective of every major department. Major department objectives, in turn, control
the objectives of subordinate departments and so down the line.

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2. Developing premises
Planning premises are assumptions about the environment within which the plan is to be carried out.
Once objectives are established managers have to investigate the company's environment to know
factors that facilitate or block the attainment of these objectives. This involves examining the
external and internal factors which affect the performance of the organization: the external
environment (for Treats and Opportunities) through PEST analysis and internal environment (for
Strengths and Weaknesses) through Self-Audit.

 Strengths are internal competencies possessed by the organization in comparison with the
competitors. These include structure and policies of the organization, location, financial
soundness, knowledge of personnel, qualities of facilities, and so on.
 Weaknesses are attributes of the organization which tend to decrease its competence in
comparison to its competitors.
 Threat is reasonably probable events which if it were to occur, would produce significant
damage to the organization.
 Opportunity is a combination of circumstances, time, and place which if accompanied by a
certain course of action on the part of the organization, is likely to produce significant benefits.

The key element of planning at this stage is forecasting. It is based on the forecasts made in
different areas that premises are made.

Because the future is so complex, it would not be profitable or realistic to make assumptions about
every detail of the future environment of a plan. Therefore, premises are, as a practical matter,
limited to assumptions that are critical, or strategic, to a plan, that is, those that most influence its
operation.

3. Determining alternative courses of actions

Alternatives are courses of actions that are available to a manager to reach a goal. In developing
alternatives, a manager should try to create as many roads to the objective as possible. Usually the
most common problem is not finding alternatives but reducing number of alternatives so that the
most promising may be analyzed.

4. Evaluating alternative courses of action

Having sought out alternative courses, managers evaluate the benefits, costs and effects of
alternative courses in light of their weight to goals and premises. Because there are so many
alternative courses in most situations and there are numerous variables and limitations to be
considered, evaluation can be exceedingly difficult. This is a step in planning process that
operations research and mathematical as well as computing techniques have their primary
application to the field of management.

5. Selecting a course of action

This is the point at which the plan to be adopted is chosen or selected. It is the real point of
decision-making. The analysis of each alternative’s disadvantages, benefits, costs and effects should
result in determining one course of action that appears better than the others. If no one alternative
emerges as clearly the best, consideration should be given to combining parts or the entire content
of two or more alternatives. Whatever the course chosen, it should be one that gives you the most
advantages and the fewest serious disadvantages.

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6. Formulating derivative plans
At step 5 planning is ended. Formulating derivative plans means formulating other plans based on
one major plan.

7. Numberizing plans by budgeting

Numberizing plans is converting them into budgets. Plans will have meaning when they are
changed into numbers. Budgeting is the means of adding various plans together and set important
standards against which planning process can be measured.

8. Implementing the plan

After the optimum alternative has been selected, the manager needs to develop an action plan to
implement it. This is a step where by the entire organization will be in motion or real operation. All
the planning in the world will not help an organization realize objectives if plans cannot be
implemented. Implementation involves determining who will be involved, what resources will be
assigned, how the plan will be evaluated, and the reporting procedure.

9. Controlling and evaluating the results

Once the plan is implemented, the manager must monitor the progress that is being made, evaluate
the reported results, and make any modifications necessary. The environment that a plan is
constructed in is constantly changing, so the plans may have to be modified. Or modification may
be needed because a plan was not quite “perfect” when it was implemented. Hence, managers need
to make certain that the plan is going according to expectations and making necessary adjustments.

IV. Types of Plans

Plans can be classified on different bases or dimensions. These are:
- Scope/breadth dimension,
- Time dimension, and
- Use/repetitiveness

i. Scope/Breadth Dimension
Scope refers to the comprehensiveness of the plan, or it refers to the level of management where
plans are formulated. This dimension creates hierarchy of plans. Based on scope/breadth we can
classify plans into: Strategic, Tactical and Operational.

Strategic Plan: is organization wide plan that is formulated or developed by top-level management
in consultation with the board of directors and middle level management. It applies to the entire
organization.
- Looks ahead over the next two, three, five or more years.
- Develops the direction for the entire organization.
- Is primarily concerned with solving long-term problems associated with external environmental
influences.
- Establishes overall objectives and positions for an organization in terms of its environment.

The following are distinguishing characteristics of strategic plan.

1. It requires looking outside the organization for threats and opportunities.
2. It requires looking inside the organization for strengths and weaknesses
3. It takes a longer view, i.e. it covers a relatively long time horizon > 5 years.
4. It tends to be top management responsibility, but it reflects a mentality useful at all
levels.

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 5. It is expressed in relatively general non-specific terms.

Strategic plans address such questions as:

- What business are we in?
- What business should we be in?
- Where will we be in ten years if we continue doing what we are now doing?
The difference between a firm would like to be (where we want to be) and where it will be if it does
nothing is called the Planning gap. Strategic planning is primarily concerned with closing that gap.
 The success or failure of an organization depends up on the success or failure of strategic plans.
It makes premises for tactical plans.

Tactical Plan: refers to the implementation of activities and the allocation of resources necessary
for the achievement of the organization’s objectives.
- is an intermediate plan that helps to reduce long range planning into intermediate one by
increasing the amount of specificity and making the actions goal oriented. Tactical plans are
specific and more goal oriented than strategic plans. Middle level management in consultation
with lower level management develops them.
- Tactical plans are the means charted to support the implementation of the strategic plans and
achievement of tactical goals. They are concerned with shorter time frames and cover a
narrower scope (narrower range of activities).
- Structures a firm’s resources to achieve maximum performance.
- Concerned with what the lower level units within each division must do, how they must do it,
and who will have the responsibilities for doing it.
- Tactical plans make premises for operational plans.
- is narrower in scope than strategic plan and wider than operation plan; but more detailed than
strategic plan and less detailed than operational plan
E.g. what is the best pricing policy?
Which city or town is suitable for marketing our products?

Operational Plan: is concerned with the day to day activities of the organization and is made at the
lower level management in consultation with middle level management. Operational plans spell out
specifically what must be accomplished to achieve specific/operational goals. It is concerned with
the efficient, day-to-day use of resources allocated to a department manager’s area of responsibility.
- Operational plans have relatively short time frame (< 1 yr). It is the most detailed (more specific)
and narrowest plan compared to the above two; because it is to be implemented day-to-day.

E.g. –What production technique is best?

- What materials are needed for operation?

 Unless operational goals are achieved in organizations, tactical and strategic plans will not be
successful and goals at those levels will not be achieved.

ii. Time Dimension

Time dimension refers to the time periods for which the planning is intended. Based on the length
of time a plan covers, we do have three types of plans: Long-range (five years or more), medium-
range (between one and five years) and short-range plans (one year or less).

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  Time dimension and scope dimension are the same except the former is about the length of
time that the plan covers and the later about the level of management where the plan is
formulated.

All strategic plans are long-range plans.

All tactical plans are medium-range plans.
All operational plans are short-range plans.

iii. Use Dimension

Use dimension refers to the extent to which plans will be used on a recurring basis, i.e. based on
how repeatedly/frequently a given plan is used. Based on this dimension we do have two types of
plans: standing plans and single use plans.

Standing Plans: are plans that provide an ongoing guidance for performing recurring activities.
- They are plans which are formulated to be used again and again for the day-to-day operation of
the organization. That is, repetitive situations or actions require the development of such plans.
They become necessary when the same kinds of actions are to be taken over and over again.
Standing plans become valuable under relatively stable situations.
Once established, standing plans allow managers to conserve time used for planning and decision-
making because similar situations are handled in a predetermined, consistent manner.
E.g. A bank can more easily approve or reject loan requests if criteria are established in advance to
evaluate credit ratings, collateral assets, and related applicant information.
The major types of standing plans are policies, rules and procedures.

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 a. Policies: is a general guide that specifies the broad parameters within which organization
members are expected to operate in pursuit of organizational goals.
- Policies are general statements or understandings which guide or channel thinking and actions in
decision-making to achieve organizational objectives.
Not all policies are “statements”, they are often merely implied from the actions of managers.

Policies have the following characteristics:

1.Policies define an area within which a decision is to be made and ensure that the decision will
be consistent with and contribute to an objective.
2.Policies help to decide issues before they become problems; make it unnecessary to analyze the
same situation every time it comes up and unify other plans.
3.Policies tell us what to do in a general sort of way.
4.Policies provide discretion within limits since they are guides to decision-making. Policy is a
means of encouraging discretion and initiative, but within limits. The amount of freedom will
naturally depend up on the policy and in turn will reflect position and authority in the
organization.
5.Policies must be flexible.

 Policies are usually established formally and deliberately by top managers of the organization.
They can also emerge informally and at lower levels in the organization from a seemingly
consistent set of decisions on the same subject made over a period of time.

Policies are established at the top because:

a. They feel it will improve the effectiveness of an organization.
b. They want some aspect of the organization to reflect their personal values (E.g.
Dress codes)
c. They need to clear up some conflict or confusion that has occurred at a lower level in
the organization.
Examples of policy:
1. Except for token gifts of purely nominal or advertising value, no employee shall accept any gift
from any supplier at any time.
2. Hiring university trained engineers
3. To promote from within
4. We accept returned merchandise

b. Rules: spell out specific required action or non-actions, i.e., actions that must be or must not be
taken, allowing no discretion, in a given situation.
E.g. No smoking, cheating is prohibited.
 A rule is an ongoing, specific plan for controlling human behavior and conduct at work.
 The purpose of policies is to guide decision-making by marking off areas in which managers
can use their discretion. Although rules also serve as guides, they allow no discretion in their
application.
 Rules are the most explicit of standing plans and are not guides for thinking or decision-making.
Rather, they are substitutes for them. The only choice a rule leaves is whether or not to apply it
to a particular set of circumstances.

c. Procedures: are statements that detail the exact manner in which certain activities must be
accomplished. They put the precise order of activities to be carried out to do a task and thus,
procedures are chronological sequences of required actions. They provide detailed step-by-step

25
instructions as to what should be done. Procedures prescribe exactly what actions are to be taken in
a specific situation and specify the chronological sequence of activities. For example, material
procurement, university admission, bidding, etc.

When we compare the above three, policies, procedures and rules, we can understand that all are
alike in the sense that they are directives to guide people’s behavior to the desired ends and they are
plans which are to be followed in the future. Conversely, procedures and rules are different from
policies in that the formers are guides to actions while the latter are guides to thinking. So,
procedures and rules render no freedom and hence should be used when we want to discourage
initiative or repress thinking. But, policies must permit freedom within limits and hence are used
when people’s involvement, participation or initiative is desired.

Though both rules and procedures repress thinking, they are different. Unlike procedures, rules (1)
guide actions without specifying a time sequence (2) spell out that a certain action must or must not
be taken. Procedures, however, specify a time sequence. In fact a procedure may be looked upon as
a sequence of rules. A rule, however, may or may not be part of a procedure.

Single use plans: are plans aimed at achieving a specific goal that, once reached, will most likely
not recur in the future and dissolved when these have been accomplished.
- Are designed to accomplish a specific objective usually in a relatively shorter period of time and
it is non repetitive.
- They are detailed courses of action that probably will not be repeated in the same form in the
future.
The major types of single use plans are programs, projects, and budgets.
E.g. A firm planning to build a new warehouse-location, construction costs, labor availability,
zoning restrictions.

a. Programs: is a comprehensive plan that coordinates a complex set of activities related to a major
non-recurring goal.
- Are a complex of goals, policies, procedures, rules, task assignments, steps to be taken,
resources to be employed and other elements necessary to carryout a given course of action
- Single use plans may use standing plans and other single use plans to be effective.

Single use plan = Standing plans + Single use plans

 A program may be as large in scope as placing a person on the moon or as comparatively

small as improving the reading level of fourth grade students in a school district. Whatever its
scope, it will specify many activities and allocations of resources within an overall scheme that
may include such other single use plans as projects and budgets.
* A program may be repeated with modification but not as it is.

b. Projects: is a plan that coordinates a set of limited scope activities that do not need to be divided
into several major projects in order to reach a major non-recurring goal.
- Projects are the smaller and separate portions of programs. Each project has limited scope
and distinct directives concerning assignments and time. Each project will become the
responsibility of designated personnel who will be given specific resources and deadlines.
E.g. Building a warehouse can be taken as a program. In the warehouse example, typical projects
might include the preparation of layout drawings, a report on labor availability, and
recommendations for transferring stock from existing facilities to the new installation.

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 c. Budgets: are statements of expected results expressed in numerical terms.
- Are statements of financial resources set aside for specific activities in a given period of
time.
- Budget is a single use plan that commits resources to an activity over a given period. It may be
expressed in Birr, labor hours, units of product, machine hrs, or any other numerically
measurable term.
- It may be referred to as a “numberize” program.
Budgets are also control devices. However, making a budget is clearly planning.

Characteristics of a Good Plan

Every sound business plan must have these characteristics:
 Objectivity
Planning should, first all, be based on objective thinking. It should be factual, logical and
realistic. It should be directed to achieving organizational goals rather than personal objectives.
 Futurity
Since a plan is a forecast of some future action, it must have the quality of futurity; otherwise, it
has little value as a basis for future action. If a plan is to be effective, it must foresee with
reasonable accuracy the nature of future events affecting the industry and the firm. The inability
to foresee future events, a human limitation that we cannot overcome, is the weak link in
planning process.
 Flexibility
Because no one can foresee the future, plans must have flexibility. They must adjust smoothly
and quickly to changing conditions without seriously losing their effectiveness. The more
difficult it is to predict the future, the more flexible the plans must be.
 Stability
 Stability is related to flexibility. A stable plan will not have to be abandoned because of long-
term changes in the company’s situation. It may be affected by long-range developments, but it
should not be changed materially from day to day.
 Comprehensive
 A plan must be comprehensive enough to provide adequate guidance, but not so detailed as to
be unduly restrictive. It should cover everything required of people, but not in such detail that it
inhibits initiative.
 Simplicity and clarity
 Although a good plan must be comprehensive, it should also be simple. A simple plan seeks to
attain its objective with the fewest components, forces, effects and relationships. A plan should
not be ambiguous. Lack of clarity makes understanding and implementation difficult.
 Contingency planning is the development of alternative plans for use in the event that
environmental conditions evolve differently than anticipated, rendering original plans unwise or
unfeasible.
 Planning staff- is a small group of individuals who assist top-level managers in developing the
various components of the planning process.

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 DECISION-MAKING
Meaning:

- Decision-making is a rational choice or selection of one alternative from among a set of

alternatives; i.e. it is the act of choosing one alternative from among a set of alternatives.
- Decision-making is the management function that consists of choosing one course of action from
all the available alternatives.

Decision-making is part of every aspect of the manager’s duties, which include planning,
organizing, staffing, leading and controlling, i.e. decision-making is universal. In all managerial
functions decision-making is involved. All managerial functions have to be decided. For example,
managers can formulate planning objectives only after making decisions about the organization’s
basic mission. Even though in all managerial functions decision-making is involved, the critical
decision-making is during planning because planning identifies the objectives of the organization;
i.e. decision must be made to identify the objectives/missions of an organization. In the planning
process, managers decide such matters as what goals or opportunities their organization will pursue,
what resources will be used, who will perform each required task etc. The entire planning process
involves managers in a continual series of decision-making situations.

Decision-making has three elements (parts)

1. When managers make decisions; they are choosing or selecting from among alternatives.
2. When managers make decisions, they have available alternatives. When there are no
alternatives, there is no decision-making, rather it become mandatory.
3. When managers make decisions, they have purpose in mind. The purpose in mind is
organizational objectives.

THE DECISION-MAKING PROCESS

Decisions are organizational responses to problems. Every decision is the outcome of a dynamic
process that is influenced by multitude of forces. So decision-making has its own processes / series
of steps. The process is a sequential process rather then a series of steps.

1. Identifying problems
A necessary condition for a decision to exist is a problem - the discrepancy between an actual and
desired state; a gap between where one is and where one wants to be. If problems do not exist, there
will be no need for decisions; i.e. problems are prerequisites for decisions. How critical a problem
for the organization is measured by the gap between levels of performance specified in the
organization’s goals and objectives and the level of performance attained; i.e. it is measured by the
gap between level of performance specified (standards set) and level of performance attained. The
problem is very critical when the gap between the standard set and actual performance attained is
very high. To locate problems, managers rely on several different indicators:
- Deviations from past performance. A sudden change in some established pattern of performance
often indicates that a problem has developed. When employee turnover increases, sales decline,
selling expenses increase, or more defective units are produced, a problem usually exists.
- Deviation from plan. When results do not meet planned objectives, a problem is likely. For
example, a new product fails to meet its market share objective, profit levels are lower than
planned, the production department is exceeding its budgets. These occurrences signal that some
plan is off course.
- Out side criticism. The actions of outsiders may indicate problems. Customers may be
dissatisfied with a new product or with their delivery schedules; a labor union may present a

28
 grievance; investment firms may not recommend the organization as a good investment
opportunity; alumni may withdraw their support from an athletic program.

Decision makers face three types of problems:

 A crisis problem is a serious difficulty requiring immediate action. An example of a crisis is a
severe cash flow deficiency that has a high potential of evolving into serious losses, and a
customer protest against the quality of a product.
 A non-crisis problem is an issue that requires resolutions but does not simultaneously have the
importance and immediacy characteristics of a crisis. Many of the decisions that managers make
center on non-crisis problems. Example of such problems is a factory that needs to be brought into
conformity with new state antipollution standards during the next three years and an employee
who frequently is late for work.
 An opportunity problem is a situation that offers strong potential for significant organizational
gain if appropriate actions are taken. Opportunities typically involve new ideas and novel
directions that could be used, rather than difficulties that must be resolved. Non-innovative
managers tend to focus on problems rather than opportunities.

Confusions are common in problem definition because the events or issues that attract the
manager’s attention may be symptoms of another more fundamental and pervasive difficulty than
the problem itself. That is, there may exist confusion on the identification of a problem and its
symptoms. The accurate definition of a problem affects all the steps that follow. Managers once
they have identified problems, they have to try to diagnose the cause of the problem. Causes unlike
symptoms are seldom apparent.

This step has three general stages: scanning, categorization, and diagnosis.
1) Scanning stage: involves monitoring the work situation for changing circumstances that
may signal the emergence of a problem. At this point the manager may be only vaguely
aware that an environmental change could lead to a problem or that an existing situation
constitutes a problem.
2) Categorization stage: entails attempting to understand and verify signs that there is some
type of discrepancy between the current state and the desired state. At this point the manager
attempts to categorize the situation as a problem and a no problem, even though it may be
difficult to specify the exact nature of the problem, if one exists.
3) Diagnosis stage: involves gathering additional information and specifying both the nature
and the causes of the problem. Without appropriate diagnosis, it is difficult to experience
success in the rest of the decision-making process. At the diagnosis stage, the problem
should be stated in terms of the discrepancy between current conditions and what is desired;
the cause of the discrepancy should be specified.

2. Developing Alternatives
Before a decision is made feasible alternatives should be developed. This is a search process in
which relevant internal and external environment of the organization are investigated to provide
information that can be developed into possible alternatives. At this point it is necessary to list as
many possible alternatives solutions to the problem as you can. No major decision should be made
until several alternative solutions have been developed. Decision-making at this stage requires
finding creative and imaginative alternatives using full mental faculty. The manager needs help in
this situation through brainstorming or Delphi technique.

3. Evaluating Alternatives

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Once managers have developed a set of alternatives, they must evaluate them to see how effective
each would be. Each alternative must be judged in light of the goals and resources of the
organization and how well the alternative will help solve the problem. In addition, each alternative
must be judged in terms of its consequences for the organization. Will any problems arise when a
particular course of action is followed? Such factors as worker’s willingness…

4. Choosing an Alternative
Based on the evaluation made managers select the best alternative. In trying to select an alternative
or combination of alternatives, managers find a solution that appears to offer the fewest serious
disadvantages and the most advantages. The purpose of selecting an alternative is to solve the
problem so as to achieve a predetermined objective. Managers should take care not to solve one
problem and create another with their choice.

A decision is not an end by itself but only a means to an end. This means the factors that lead to
implementation and follow –up should follow solution selection.

5. Implementing and Monitoring the Chosen Solution

For the entire decision-making process to be successful, considerable thought must be given to
implementing and monitoring the chosen solution. It is possible to make a "good' decision in terms
of the first five steps and still have the process fail because of difficulties at this final step.

Implementing the Solution: A decision that is not implemented is little more than an abstraction.
In other words, any decision must be effectively implemented to achieve the objectives for which it
was made. Implementing a decision involves more than giving orders. Resources must be acquired
and allocated. Decisions are not ends by themselves they are means to an end; so proper
implementation is necessary to achieve that end.

Monitoring the solution: Monitoring is necessary to ensure that things are progressing as planned
and that the problem that triggered the decision process has been resolved. Effective management
involves periodic measurements of results. Actual results are compared with planned results (the
objective); if deviations exist, changes must be made. Here again we see the importance of
measurable objectives. If such objectives do not exist, then there is no way to judge performance. If
actual results do not much planned results, then the changes must be made in the solution chosen, in
its implementation, or in the original objective if it deemed unattainable. The various actions taken
to implement a decision must be monitored. The more important the problem, the greater the effort
that needs to be expended on appropriate follow up mechanisms. Are things working according to
plan? What is happening in the internal and external environments as a result of the decision? Are
subordinates performing according to expectations? ……. must be closely monitored.

Decision-Making Conditions

When managers make decisions, the amount of information available to them or the degree of
knowledge they have about the likelihood of the occurrence of each alternative vary from managers
to managers or/and from situation to situation. To put it in other way, decisions are made under
three basic conditions. These are condition of certainty, condition of risk, and condition of
uncertainty.

1.Decision-making under Certainty

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When managers know with certainty what their alternatives are and what conditions are associated
with each alternative, a state of certainty exists. Decisions under certainty are those in which the
external conditions are identified and very predictable; i.e. we are reasonably sure what will happen
when we make a decision. The information is available and is considered to be reliable, and we
know the cause and effect relationships. In decision-making under certainty there is a little
ambiguity and relatively low chance of making poor/bad decisions. Decision-making under
certainty seldom occurs, however, because external conditions seldom are perfectly predictable and
because it is impossible to try to account for all possible influences on any given outcome it is very
rare.

2.Decision-making under Risk

A more common decision-making situation is under risk. Under the state of risk, the availability of
each alternative, the likelihood of its occurrence and its potential payoffs and costs are associated
with probability estimates; i.e. decisions under risk are those in which probabilities can be assigned
to the expected outcomes of each alternative. In a risk situation, managers may have factual
information, but it may be incomplete. There is moderate ambiguity and moderate chance of
making bad decision. E.g. tossing a coin, metrology

3.Decision-making under Uncertainty

Under this condition the decision maker does not know what all the alternatives are, what the
probability of each will occur is or what consequences each is likely to have. This uncertainty
comes from the dynamism of contemporary organizations and their environment. Big multi-national
corporations assume these kinds of decisions. Decision-making under uncertainty is the most
ambiguous and there is high chance of making poor decisions. In decision-making under
uncertainty, probabilities cannot be assigned to surrounding conditions such as competition,
government regulations, technological advances, the over all economy, etc. Uncertainty is
associated with the consequences of alternatives, not the alternatives themselves. The decision-
making is like being a pioneer. Reliance on experience, judgment, and other people's experiences
can assist the manager is assessing the value of alternatives. E.g. Innovation of new machine,
journey of discoverers.

Types of Decisions

Decisions can be classified in to: programmed and non programmed.

1. Programmed Decisions

Programmed decisions are those made in routine, repetitive, well-structured situations through the
use of predetermined decision rules. The decision rules may be based on habit, computational
techniques, or established policies and procedures. Such rules usually stem from prior experience or
technical knowledge about what works in the particular type of situation. Most of the decisions
made by first line managers and many of those made by middle managers are the programmed type,
but very few of the decisions made by top-level managers are the programmed type. Managers can
usually handle programmed decisions through rules, procedures, and policies.

E.g. Establishing a re-order point, Decide if students meet graduation requirements, Determination
of employee pay rates

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2. Non-programmed Decisions

Non-programmed decisions are used to solve non-recurring, novel, and unstructured problems. No
well-established procedure exists for handling them, because it has not occurred before managers do
not have experience to draw up on, or problems are complex or completely new. Because of their
nature non-programmed decisions usually involve significant amounts of uncertainty. They are
treated through farsightedness. Most of the highly significant decisions that managers make fall into
the non-programmed category. Non-programmed decisions are commonly found at the middle and
top levels of management and are often related to an organization’s policy-making activities.

E.g. To add a product to the existing product line, to reorganize a company, to acquire another firm

Types of Managerial Decisions

Type of Type of Procedures Examples
decisions problem
Programmed Repetitive, Rules, standard Business: processing payroll vouchers
routine operating College: processing admission applicants
procedures, Hospital: preparing patient for surgery.
policies Government: using state owned motor vehicle.
Non- Complex, Creative Business: introducing a new product.
programmed novel problem College: constructing new classroom facilities
solving Hospital: reacting to regional disease epidemic
Government: solving spiraling inflation
problem

In reality most decisions fall between the two; i.e. a continuum of decision situations exists ranging
from those that are highly structured to those that are unstructured. Situations between the two
extremes are partially structured. As the name suggests, in a partially structured situation, only a
part is well structured. Typically, although the manager has a great deal of data available, the final
choice is not obvious. Many intangibles are involved in the final choice. Therefore, the manager
must base the ultimate decision on the data and supplementary factors, using judgment and
experience.
E.g. A hospital wishing to improve patient care may adjust its patient-staff ratio (programmable
situation), reorganize its staff (a non programmable situation).

Continuum of Decision situations

WELL STRUCTURED PARTIALLY ILL-STRUCTURED

(PROGRAMMED) STRUCTURED (NON PROGRAMMED)
1. Specification of 1. Only a part of 1. Decision procedure
decision procedure decision process can not be completely
agreed in advance can be completely structured in advance
of resolution. specified and of resolution.
structured.
2. Little managerial 2. Manager makes 2. Individuals resolve
involvement at time final resolution each situation on the
of each resolution from structured basis of experience
portion of his/her and judgment.

32
 experience and from
intuition.
3. Repeated resolutions 3. Different managers may 3. Different managers may
with same data yield agree on certain data reach different conclusions.
same results.

Why Do Managers Make Poor Decisions?

All managers recognize the importance of making sound decisions. Yet most managers readily
admit having made poor decisions that hurt their company or their own effectiveness. Why do
managers make mistakes? Why don’t decision always result in achieving some desired goal?
Making the wrong decision can result from any one of these decision-making errors:
 Lack of adequate time
Waiting until the last minute to make a decision often prevents considering all alternatives.
It also hampers thorough analyses of the alternatives.
 Failure to define goals
Objectives cannot be attained unless they are clearly defined. They should be explicitly
stated so that the manager can see the relationship between a decision and a desired result.
 Using unreliable sources of information
A decision is only as good as the information on which it is based. Poor sources of
information always result in poor decisions.

 Fear of consequences
Managers often are reluctant to make bold, comprehensive decisions because they fear
disastrous results. A “play it safe” attitude sometimes limits a manager’s effectiveness.
 Focusing on symptoms rather than causes
Addressing the symptoms of a problem will not solve it. Taking aspirin for a toothache may
provide temporary relief, but if an abscess causes the pain, the problem will persist. Business
managers too often foul on the results of problems instead of the causes.
 Reliance on Hunch and Intuition
Intuition, judgment and ‘feel’ are important assets to the decision maker. But a manager who
permits intuition to outweigh scientific evidence is likely to make a poor decision.

Some times a manager’s decision is not exactly “poor”, but it still doesn’t produce optimal results.
Less than optimal decisions can have three causes:
1. Bounded rationality imposes limits on a decision, such as that it should be economical
or logistically practical. This limit serves as a screening device, eliminating some of the
alternatives. The manager must choose from the options that have filtered through the
restrictions. The overall optimal decision may no longer be a valid option when using
this method. The decision maker simply selects the best alternative, given various
specifications that must be met.
2. Sub optimization is a manager’s tendency to operate solely in the interests of his/her
department rather than in the interests of the company as a whole. In making a decision,
the department manager cannot be so self-centered as to ignore the effects of the action
on other areas. The key is to improve the company’s performance, not just the
performance of one department.

3. Unforeseen changes in the business environment also cause less than optimal
decisions.

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 CHAPTER THREE

THE ORGANIZING FUNCTION

In planning, managers set their objectives and determine exactly what to do to attain these
objectives. Of course, no one person can implement all the plans of a modern organization or one
person can not do everything necessary to meet the goals set forth in those plans. Planning,
consequently, requires organizing the efforts of many people. It forces us to address several basic
questions:
 What specific tasks are required to implement our plans?
 How many organizational positions are needed to perform all the required tasks?
 How should these positions be grouped?
 How many layers of management (Organizational levels) are needed to coordinate them?
 How many people should a manager supervise directly?

The answers to these and other questions enable us to create an organizational arrangement, a
structure, for putting plans into action.

Organizing - is a management function that involves arranging human and non-human (physical)
resources to help attain organizational objectives. It is the management function that establishes
relationship between activity and authority. The end result of an organizing process is an
organization.

Organization - is the total system of social and cultural relationship among peoples who are joined
together to achieve some specific common objectives. It is a whole consisting of unified parts (a
system) acting in harmony to execute tasks to achieve goals effectively and efficiently.

The Organizing Process

The organizing process has the following steps.
1. Identification of objectives
This is to understand clearly the objectives of the organization, i.e. to reconsider the objectives
established during planning and identify the specific objectives to be pursued.
2. Identification of the specific activities needed to accomplish objectives
Knowing the objectives clearly makes the identification of activities needed clear and simple. Here
we ask what work activities are necessary to accomplish the identified organizational objectives.
Creating a list of tasks to be accomplished begins if we identify clearly what objective is to be
accomplished or met. This identification of specific activities needed is called division of labor.
3. Grouping of activities necessary to attain objectives
The series number of activities listed and/or identified must be grouped together. That is, this
involves grouping together of activities in accordance with similarities (homogeneity) of the
activities, interdependence, job characteristics or any other grouping criteria, and this result in
departments and the process is called Departmentation. Groping of similar activities is based on the
concept of division of labor and specialization.
4. Assigning group of activities (work) and delegate the appropriate authority
Management has identified activities necessary to achieve objectives, has classified and grouped
these activities into major operational areas and has selected a departmental structure. The activities
now must be assigned to individuals who are simultaneously given the appropriate authority to
accomplish task.

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5. Provision for coordination/Design a hierarchy of relationships
This step requires the determination of both vertical and horizontal operating relationships of the
organization as a whole. The vertical structuring of the organization results in a decision-making
hierarchy showing who is in charge of each task, of each specialty area, and the organization as a
whole. Levels of management are established from bottom to top in the organization. These levels
create the chain of command, or hierarchy of decision-making levels, in the company.

The horizontal structuring has two important effects.

i. It defines the working relationships between operating departments
ii. It makes the final decision on the span of control (the number of subordinates under the direction
of each manager).
The result of this step is a complete organization structure. This structure is shown visually by an
organization chart.

Importance of Organizing
a. Organizing promotes collaboration and negotiation among individuals in a group. Thus, it
improves communication within the organization.
b. Organizing sets clear-cut lines of authority and responsibility for each individuals or
department’s. It helps employees to know their responsibilities and concentrate on the key tasks at
hand. It specifies who is responsible for what.
c. Organizing improves the directing and controlling functions of managers. It enables management
to effectively control the work and workers.
d. Organizing develops maximum use of time, human, and material resources. It also enables
for proper work assignment for individuals in pursuit of common goal.
e. Organizing enables the organization to maintain its activities coordinated so that the efforts of
managers and employees can be well integrated and directed towards an end; i.e. to accomplish
organizational goal.

Types of Organizations
These are two types of organizations: Formal and informal

Formal organization - is the intentional, deliberate or rational structures of roles in a formally

organized enterprise. It is characterized by well-defined authority - reporting relationships, job titles,
policies, procedures, specific job duties and a host of other factors necessary to accomplish its
respective goals.
It is represented by a printed chart that appears in organizational manuals and other formal company
documents called organization chart. Organization chart is a diagram of formal relationship which
shows how departments are tied together along the principal lines of authority. Formal organization
has consciously designed durable and inflexible structure. Formal organization may have legal
personality.

Informal organization - is a network of personal and social relationships that arises spontaneously
as people associate with one another in a work environment. It is an unofficial network of personal
and social relations developed as a result of association or working together. E.g. the Chess group,
the Morning Coffee group, the Bowling team, etc. It operates outside formal authority relationships.
It doesn’t have legal personality. Informal organization develops within the formal organization. It is
composed of all the informal groupings of people with in a formal organization (it is not only the
domain of workers; managers form informal groups that cut across departmental lines). Informal
organization has a structure which is loosely designed, highly flexible and spontaneous. In such an

35
organization, the pattern of information flow, the exact nature of relationships among the members,
and the goals of the organization are unspecified. However, to identify the existence of informal
organizations and their composition we can use two tools: a Sociogram and an Interaction Chart.

A Sociogram is a diagram of group attraction. The Sociogram is developed through a process

asking members whom they like or dislike and with whom they wish to work or not to work. It is
based on the belief that group interactions are the result of people's feelings of like and dislike for
another.

An Interaction Chart is a diagram that shows the informal interactions people have with one
another. For any specific person, the chart can show with whom the person spends the most time and
with whom the person communicates informally.

Members in most informal organizations change with time, i.e. when people highly vary in income
level, educational background, status, etc they tend to leave the original group and join the new one.
Members are bonded together through the need for one another’s company and the fact that they find
their memberships beneficial to them in one way or another, i.e. mutual benefit is the bondage
between or among members.

The informal organization presents a challenge for a manager because it consists of actual operating
relationships not prescribed by the formal organization and, therefore, not shown on the company’s
organizational chart.

Types of Groups in the Informal Organization

The informal organization is often looked at as groups of people. Informal groups may be described
as horizontal, vertical, or mixed. These titles indicate whether the group members come from the
same or different levels of formal organization.

Horizontal Groups:
 Include persons whose positions are on the same level of the organization i.e. they are groups that
are formed by peers.
 The groups can consist of all the members in the same work areas or membership developed
across departmental lines.
 Members may be all management or non-management personnel.
 Horizontal groups are the common kind of informal groups by virtue of the ease of accessibility.
 Membership in a horizontal group is usually mutually beneficial to individuals - “You help me
and I will help you”. People in the same or related work areas often share the same problems,
interests, and concerns.

Vertical Groups:
 Include people on different levels of the formal organization’s hierarchy.
 These people always come together within the same department (work areas).
 A vertical group can consist of a supervisor and one or more of his/her employees. It may also be
formed through skip - level relationships - a top-level manager may associate with a first level
manager.
 Their relationships can be the result of outside interests or various employment relationships.

Mixed Group:

36
 It is a combination of two or more persons whose positions are on different levels of the formal
organization and in different work areas.
E.g. A Vice-President may develop a close relationship with the director of computer services in
order to get preferential treatment.
A production manager may cultivate an informal, social relationship with the director of
maintenance for the same reason.
 Mixed groups often form because of common bonds outside work.

Why people form informal groups?

Informal groups are formed for different reasons
1. Need for satisfaction
People have needs that in some cases are not met through the formal organization. The opportunity
to fulfill security, affiliation, esteem, and sometimes self-actualization needs can encourage people
to look out and join others in an informal group. They provide the opportunity to satisfy needs.
2. Proximity and interaction
A common reason people join groups is that they work near one another. This can be either through
working in close proximity physically or because of frequent interaction. Horizontal informal groups
are prime examples of this.
3. Similarity
People may join informal groups because they are attracted to other people who are similar to
themselves. Several persons with the same attitudes or beliefs may join one group. Other factors or
similarity can be personality, race, sex, economic position, age, educational background etc.

* In informal group/organization one is not limited to one informal organization because there may
exist still unsatisfied needs by involving in one/two informal organization.

Why informal groups exist?

Informal groups remain in existence because they serve four major functions:
1. They maintain the social and cultural values of the group members.
Individuals in the group are likely to share the same beliefs and values as a result of background,
education, or cultural heritage. The many areas about which the group may have beliefs are
reinforced and maintained by the group environment. Such belief areas are, for example, the work
ethic.
2. They provide group members the opportunity for status fulfillment and social interaction.
Individuals can receive what the formal organization cannot or has not chosen to provide. “I am just
another figure” feeling (identity crisis) may be avoided by informal group. E.g. an individual whose
post is a technician may assume a position of head for a volleyball team.
3. They provide information for their members
The informal group develops its own system and channels of communication parallel to
management’s formal channels. The ability to acquire access to information for members is a major
function of informal groups. Crucial information can be obtained through informal communications.
4. They influence the work environment
Informal groups regulate or influence the behavior, dress, or work standards of their members
through positive means-acceptance, support, and affiliation or through negative methods – threats of
ostracizing non-complying members. The informal group can also regulate or influence the actions
of management and other informal groups.

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 The Impact of Informal Organization on the Formal Organization
The groups that compose the informal organization can affect the formal organization negatively and
positively.

The Negative Impacts

i. Resistance to change: The informal organization can resist change. In an effort to protect its
values and beliefs, the informal group can place roadblocks in the path to any modifications in the
work environment. The informal group shows its resistance through hampering its implementation.

ii. Conflict: The informal group can create two “masters” for an employee. In an attempt to satisfy
the informal group, the employee may come in conflict with the formal organization.
E.g. The Company may allow 10 minutes for coffee break; however, the informal group may extend
it to 30 minutes for the employee’s social satisfaction. There, the employee’s social satisfaction is in
conflict with the employer’s need for productivity.

iii. Rumor: The informal communication system - the grapevine - can create and process false
information or rumors. The creation of rumors can upset the balance of the work environment.

iv. Pressure to conform: The norms that the informal groups develop act as a strong inducement
toward conformity. The more cohesive the group, the more accepted are the behavioral standards.
Non-conforming in the person’s reference group can result in gentle verbal reminders from the group
but can escheat to harassment - ostracism

The Positive Impacts

Despite the possibility of these problems, informal groups do have the potential to be helpful to
managers.
i. Makes the total system effective: If the informal organization blends well with the formal system,
the organization can function more effectively. The ability of the informal group to provide
flexibility and instantaneous reactions will polish the plans and procedures developed through the
formal organization.

ii. Provides support to management: The informal organization can provide support to the
individual manager. It can fill in gaps in the manger’s knowledge through advice or through
performing the work, for example, budgeting and scheduling. By performing effectively and
positively, it can build a cooperative environment. This, in turn, can mean more delegation to the
employees and less time spent by the manager controlling employee behavior.

iii. Provides a useful communication channel: The informal organization provides employees with
the opportunity for social information, for discussing their work, and for understanding what is
happening in the work environment.

iv. Encourages better management: Managers should be aware of the power of the informal
organization in what is actually a check and balance system. Planned changes should be made with
an awareness of the ability of the informal group to make the plan successful or unsuccessful.

v. Provides stability in the environment: The informal organization can provide acceptance and
belonging. This feeling of being wanted by the group can encourage employees to remain into
environment, thus reducing turnover. Additionally, the informal organization provides a place for a

38
person to vent frustrations. Being able to discuss them in a supportive environment may receive
emotional pressures.

Major Elements of the Organizing Function

Division of Labor
When joint accomplishment of a grand task is the goal of many people, this overall task must be split
into its component jobs and apportioned among the people involved. It is only after these jobs are
correctly done that the grand task can be achieved. The degree to which the grand task of the
organization is broken down and divided into smaller component parts is referred to as division of
labor. Division of labor is performed in light of organizational objectives. It begins by determining
(sub tasks) called jobs that are necessary to accomplish the identified objectives. These sub tasks
could include ongoing tasks which are part of the regular routine for running any business such as
hiring and record keeping or tasks unique to the nature of the business; such as assembling,
machining, storing, inspecting, selling, advertising, computer programming.

After determining the sub-tasks, sub-tasks will be defined by enumerating the activities that each
individual sub-tasks would entail in terms of what the incipient sub task performer is expected to do.
This is called job description. Job description is an account of activities what the sub-task performer
is expected to perform and the associated authority and responsibility relationships among jobs. The
sub-task assigned to the sub task performer is called job. Thus by doing so individuals specialize in
doing part of the task rather than the entire task, i.e. division of labor in effect is the assignment of
various portion of a particular task among organizational members.

In short, division of labor involves:

 Breaking down a task into its most basic elements
 Training workers in performing specific duties
 Sequencing activities so that one person's efforts build on another's

Advantages of Division of Labor

3. It enables a person performing a task to become highly proficient in a relatively short time; as a
result efficiency and productivity increases.
4. Decreased transfer time. It saves the time that is always lost in changing from one job to
another.
5. Less wastage of materials in the learning process including time.
6. Ease of supervision. When employees are performing similar simplified tasks it will require the
superior to have a narrow range of skills to effectively oversee subordinates.
7. Training is more easier with specialization and takes shorter period. Plus, it decreases training
cost.

Disadvantages of Division of Labor

8. Boredom and fatigue caused by monotonous, repetitive tasks because the work becomes less
challenging.
9. Specialization would result in workers' having limited knowledge.
10. Creates communication barriers. Specialists develop their own language and customs, which
can hamper communication across departments.
11. Specialization sometimes causes workers to think more in terms of their department or
function instead of the company. Becoming engrossed in their own tasks, they lose sight of the
company's mission.

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12. Specialization leads to time-oriented confusion. Production department, for instance, are
commonly short-run oriented; research and development departments are concerned with the long
term. Consequently, production departments typically evaluate their performance in the short run,
where as R&D efforts may so unrecognized for several years.
13. Different specialties often formulate rules, policies, and procedures that conflict with those of
other operational units.

Departmentation: Meaning and Bases

Departmentation - All organizations, regardless of their size or mission, divide their overall
operations into sub-activities and then combine these sub-activities into working groups. This
process of grouping specialized activities in a logical manner is called Departmentation.
Department - is a distinct area, division, or branch of an organization over which a manager has
authority for the performance of specified activities. It is a unit formulated as a result of the
Departmentation process.
The physical and mental limitations of individual managers to effectively oversee and coordinate
activities beyond a given limit partly justify the need for departmentation.
Departmentation is not an end in it self but is simply a method of arranging activities to facilitate the
accomplishment of objectives.

Bases for Departmentation

Since organizations are different in their activities, objectives and areas in which they operate, there
are different bases for departmentation. The most common bases are function, territory, product,
customer, and process

I. Departmentation by Function
It is the grouping together of activities in accordance with the functions of an enterprise - on the
basis of similarity of expertise, skills or work activities. In other words, jobs that call for certain
skills or the use of similar working methods will be put together. It is probably the most common
base for departmentation and is present in almost every enterprise at some level in the organization
structure. It asks the question “what does the enterprise/organization do” what kind of activities. E.g.
Human resources, production, marketing, finance, etc.

It is the responsibility of top management to identify the activities needed for the attainment of
organizational goals and then groups these activities into distinctive units, each one dealing with
functionally similar activities and then assign them to people who can perform them efficiently and
effectively.

Advantages:
1. It is a logical reflection of functions.
2. It maintains power and prestige of major functions of the organizations. Assigns responsibility of
each function to the head of that function by providing individual status and prestige to major
functional areas.
3. It follows principle of occupational specialization, thereby promoting efficiency in the utilization
of people. Simplifies to fill vacant positions.
4. It simplifies training. Train functional specialists by indicating special abilities required.
5. Provides unity of command for closely related activities.
6. Managers have an easier time coordinating and planning because all the jobs that report to them
are similar in content.

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7. Promotes specialization and operational efficiency. Because closely related activities and
employees are grouped together, functional departmentation permits effective economies of scale.

Disadvantages
1. De-emphasis of overall company objectives - narrow minuends may develop. Identification with
the department and its objective is often stronger than identification with the organization and its
objectives.
2. Over specializes and narrow viewpoints of key personnel.
3. Reduce coordination and communication between (among) functions.
4. Decisions are concentrated at the top management, creating delay.
5. Limits development of general managers.
II. Departmentation by Territory/ Geography
 Groups activities on the basis of geographic region or territory.
 Is common in enterprises that operate over wide geographic areas i.e. it is attractive to large-scale
firms or other enterprises whose activities are physically or geographically dispersed. The logic is
that all activities in a particular area or region should be assigned to a manager. This individual
would be in charge of all operations in that geographic area.
 Can be used by business, government, NGOs, or other enterprises.

Geographic departmentalization works best when different laws, currencies, languages and traditions
exist and have a direct impact on the ways in which business activities must be conducted.

Advantages
1. Places emphasis on local markets and problems; better face to face communication with local
interests or allows the company to address needs or characteristics of consumers that are particular to
that area.
2. Encourages local participation in decision-making
3. Improves coordination of activities in a region
4. Takes advantage of economies of local operations
5. Furnishes measurable training ground for general managers. Managers are responsible for the
activities in that geographic area. Decision concerning that region will be made of that level and not
forwarded up the chain of command.
6. Encourages decentralized decision-making.

Disadvantages
1. Requires more persons with general manager abilities
2. Duplicates staffs, services, or effort.
3. Tends to make maintenance of economical central services difficult and may require services
such as personnel or purchasing at the regional level
4. Increases problem of top management control

III. Departmentation by Product (Line)

It is the grouping and arrangement of activities around products or product groups. Departmentation
by product should be considered when attention, energy and efforts need to be focused on an
organization’s particular products. This can be true if each product requires a unique strategy or
product process or distribution system or capital sources.
 This approach works well for an enterprise which engaged in very different types of products.
E.g. Textile products - Nylon products, woolen products, silk products, cotton products
Petroleum refining - kerosene, diesel,

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Electronics - Radios, TVs, Computers

Advantages
1. Places attention and effort on product line
2. Facilitates use of specialized skill, capital facilities and knowledge
3. Permits growth and diversity of products and services
4. Places responsibility for profits at the division level
5. Furnishes measurable training ground for general managers

Disadvantages
1. Requires more persons with general manager abilities
2. Tends to make maintenance of economical central services difficult - duplication of business
functions within each product line. Each needs marketing, personnel, finance, and production
operations, which may be so specialized they are unable to serve more than one product line or
division.
3. Presents increased problem of top management control

IV. Departmentation by Customer

It is a grouping of activities around customers. This grouping reflects a primary interest in
customers. Customers are the key to the way activities are grouped when each of the different things
an enterprise does for them is managed by one department head. This makes economic sense when
the customers are distinct enough in their demands, preferences, and needs. It helps organizations
meet the special and widely varying needs of customers. It can be used in medical institutions such
as hospitals and clinics - emergency services, out patient services, inpatient services, x-rays; retail
stores- men's clothing, women's clothing, children's clothing.

Advantages
1. Encourages concentration on customer needs
2. Gives customers the felling that they have an understanding supplier
3. Develops expertness in customer area

Disadvantages
1. May be difficult to coordinate operation between competing customer demands
2. Requires managers and experts in customers’ problems
3. Customer groups may not always be clearly defined
4. The possibility of underemployment of facilities and labor specialized workers in customer
groups

V. Departmentation by Process
Manufacturing firms often group activities around a process or type of equipment. This is when
special skill is needed to operate different machines. Making plywood, for example, involves several
sequential process: poling (removing bark from logs); sawing logs in to 8’ lengths, heating; veneer
stripping and stamping veneer sheets in to 4' segments; drying and grading according to quality;
gluing plies together; finishing and bundling.

Advantages
1. Achieves economic advantage
2. Uses specialized technology

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3. Simplifies training

Disadvantages
1. Coordination of departments is difficult
2. Responsibility for profit is at the top
3. Is unsuitable for developing general mangers

VI. Departmentation on Combined Base

It is a base in which multiple bases are used at different organizational levels of a particular
organization.

Delegation of Authority
Authority - is the right to commit resources (that is, to make decisions that commit an organization’s
resources), or the legal (legitimate) right to give orders (to tell someone to do or not to do
something)
- is the right to make decisions, carry out actions, and direct others in matters related to the duties
and goals of a position

-is the formal right of a superior to command and compel his subordinates to perform a certain act.
All managers in an organization have authority. It provides the means of command.

Generally, level of authority varies with levels of management. Higher-level managers have greater
authority, with ultimate power resting at the top. Authority decreases all the way to the bottom of
the chart, where positions have little or none. Authority is vested in a manager because of the
position he/she occupies in the organization, that is why we say, “authority comes with the
territory.”

When an organization gives one of its members authority, or the legitimate right to use power over
others, it carries with it the burden of responsibility. Responsibility means being held accountable for
attainment of the organization’s goal. Authority is derived from the person’s official position in the
organization. The person who occupies the position has its formal authority as long as he/she
remains in the position. As the job changes in scope and complexity, so should the amount and kind
of formal authority possessed. Even though a manager has formal or legitimate authority, it is wise
to remember that the willingness of employees to accept the legitimate authority is a key to effective
management. Chester Bernard called this Acceptance Theory of Authority.

Delegation of Authority - is the downward pushing of authority from superiors to subordinates to

make decision within their area of responsibilities. It is the process of allocating tasks to
subordinates, giving them adequate authority to carry out those assignments, and making them
obligated to complete the tasks satisfactory. Delegation is a concept describing the passing of formal
authority to another person. It is the assignment of part of a manager’s work to others, along with
both the responsibility and authority necessary to achieve expected results.

Delegation is necessary for an organization to exist. Just no one person in an enterprise can do all the
tasks necessary for accomplishing a group purpose, so is it impossible, as an enterprise grows, for
one person exercise all the authority for making decisions.

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In delegating authority a manager doesn’t surrender his power because he does not permanently
dispose of it; delegated authority can always be regained. This is called recovery of delegated
authority. Reorganization inevitably involves some recovery and redelegation of authority. In a
shuffle in an organization, rights are recovered by the responsive head of the firm or a department
and then redelegated to managers of new or modified departments.

The Process of Delegation

Delegation of authority has the following steps:
1. Assignment of tasks
Specific tasks or duties that are to be undertaken are identified by the manager for assignment to the
subordinate. The subordinate is then approached with the assignment (task).
2. Delegation of authority
In order for the subordinate to complete the duties or tasks, the authority necessary to do them
should be delegated by the manager to the subordinate. A guideline for authority is that it be
adequate to complete the task - no more and no less.
3. Acceptance of responsibility
Dispensability is the obligation to carryout one’s assigned duties to the best of one’s ability. It is the
obligation created when someone accepts task assignments together with the appropriate authority.
Responsibility is not delegated by a manager to an employee, but the employee becomes obligated
when the assignment is accepted. The employee is the receiver of the assigned duties and the
delegated authority; these confer responsibility as well.
4. Creation of accountability
Accountability is having to answer to someone for your results or actions. It means taking the
consequences - either credit or blame. It is the requirement to provide satisfactory reasons for
significant deviations from duties or expected results. When the subordinate accepts the assignment
and the authority, s/he will be held accountable or answerable for actions taken. A manager is
accountable for the use of his/her authority and performance. The manager is also accountable for
the performance and actions of subordinates.

The manager should take the time to think through what is being assigned and to confer the authority
necessary to achieve results. The subordinate, in accepting the assignment becomes obligated
(responsible) to perform, knowing that s/he is accountable (answerable) for the results.

Importance of Delegation
1. It relieves the manager from his/her heavy workload: Delegation frees a manager from some time
consuming duties that can be adequately handled by subordinates and lets the manager devote more
time to problems requiring his/her full attention (lets the manager concentrate on strategic issues).
Enables managers to perform higher level work.
2. It leads to better decisions: Since subordinates are closer to real “firing line” activities and
problems than superiors, they have more realistic information and better understanding. The
realistic information that subordinates have may lead them to make better decisions.
3. It speedup decision-making: Decisions made by lower level managers usually are timelier than
those that go through several layers of management.
4. It helps subordinates to train and builds moral: Subordinate managers can reach their full
potential only if given the chance to make decisions and to assume responsibility for them.
5. It encourages the development of professional managers: Had there not been any delegation,
professional managers wouldn’t have been produced.

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6. It helps to create the organization structure: If there were no delegation of authority is an
organization, there would exist only the president/CEO/ top-level manager. And an individual cannot
create an organization.

Centralization and Decentralization

The terms centralization and decentralization refer to a philosophy of organization and management
that focuses on either the selective concentration (centralization) or the dispersal (decentralization)
of authority within an organization structure. Centralization or decentralization is a relative concept
when applied to organizations. They are tendencies of delegation of authority.
Centralization - is the extent to which power and authority are systematically retained by top
managers.
If an organization is centralized:
- Decision-making power remains at the top
- The participation of lower-level managers in decision-making is very low

Decentralization - is the extent to which power and authority are systematically dispersed /
delegated throughout the organization to middle and lower level managers. It is the tendency to
disperse decision-making authority in an organized structure.
 In a decentralized organization decision-making power is pushed downwards and lower-level
managers actively participate in decision-making process. That is, they are not only called for
implementation but also for decision-making.

Centralization and decentralization are not opposites rather they are tendencies/proportions in
delegation of authority. If they were opposites, there could be absolute centralization or absolute
decentralization, but there is no absolute centralization or absolute decentralization. There could be
absolute centralization of authority in one person. But that implies no subordinate managers and
therefore no structured organization. Some decentralization exists in all organization, on the other
hand, there cannot be absolute decentralization, for if managers should delegate all their authority,
their status as mangers would cease, their position would be eliminated, and there would, again, be
no organization. Centralization and decentralization are tendencies; they are qualities like “hot” and
“cold”.

 Centralization and decentralization form a continuum with many possible degrees of delegation of
power and authority in between.

When decentralization is greater:

 The greater is the number of decisions made at lower level of the organization
 The more functions are affected by decisions made at lower levels
 The less a subordinate has to refer to his/her manager prior to a decision and the less checking
required as decisions are made at the lower level.

Factors Determining Delegation

Managers cannot ordinarily be for or against decentralization of authority. They may prefer to
delegate authority, or they may like to make all the decisions. Some factors that affect the degree of
centralization or decentralization- delegation of authority- are:

1. The history and culture of the organization: Whether authority will be decentralized frequently
depends upon the way the business (organization) has been built. Those enterprises that, in the

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main, expand from within show a marked tendency to keep authority centralized. On the other hand,
enterprises that result from mergers and consolidations are likely to show, at least first, a definite
tendency to retain decentralized authority. In other words, organizations which were centralized or
decentralized at their establishment tend to centralize and decentralize authority to repeat what they
have done before. When centralized organization is changed into decentralization and the vice versa
people feel discomfort.

2. The nature of the decision: The costlier and the riskier the decision is, the more centralized the
authority will be. Cost may be reckoned directly in birr and cents or in such intangibles as the
company’s reputation, its competitive position or employee morale. The fact that the cost of mistake
affects the decentralization isn’t necessarily based on the assumption that top managers make fewer
mistakes than subordinates. They may make fewer mistakes, since they are probably better trained
and in possession of more facts, but the controlling reason is the weight of responsibility.
Delegating authority is not delegating responsibility; therefore, managers typically prefer not to
delegate authority for crucial decisions.

3. Availability and ability of managers (Lower level managers): A real shortage of managers would
limit decentralization of authority, since in order to delegate, superiors must have quantified
managers to whom to give authority. In addition to the availability of lower level managers, the
quality of the existing lower level managers (subordinates) has impact on centralization or
decentralization. Hence, the competency to carry out and exercise the delegated authority has some
effects. Some managers lack confidence in their subordinate or fear the consequences or criticism of
having subordinates make bad decisions.

4. Management philosophy: The willingness of managers to delegate authority and limit the degree
of decentralization or the desire to do the job by herself/himself. The character and philosophy of top
executives have an important influence on the extent to which authority is decentralized. Sometimes
top managers are despotic, tolerating no interference with the authority they jealously hoard. At
other times, top managers keep authority not merry to gratify a desire for status or power but because
they simply cannot give up the activities and authorities they enjoyed.

5. Size and character of the organization: The larger the organization, the more decisions to be
made, and the more places in which they must be made, the more difficult it is to coordinate them.
These complexities of organization may require policy questions to be passed up the line and
discussed not only with many managers in the chain of command but also with many managers at
each level, since horizontal agreement may be as necessary as vertical clearance.
Slow decisions - show because of the number of specialists and managers who must be consulted -
are costly. To minimize the cost, authority should be decentralized wherever feasible. Also
important in determining size is the character of a unit. For decentralization to be thoroughly
effective, a unit must possess a certain economic and managerial self-sufficiency.

6. Geographic dispersion of operations: Geographic dispersion of operations makes decentralization

more necessary because top executives frequently find it impossible to keep abreast of the details of
what is going on at various locations. Moreover, managers on site may be in a better position to
assess local situations and make appropriate decisions.

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7. Environmental uncertainty: Environmental uncertainty tends to produce a need for more
decentralization. In this case, the fast pace of change interferes with top management’s ability to
assess situations with the speed necessary to make timely decisions.

Problems in Effective Delegation

Despite of the advantages, many managers are reluctant to delegate authority and many subordinates
are reluctant to accept it. Both these barriers hinder effective delegation.

Reluctance to delegate/Problems from Managers

There are a number of reasons that managers commonly offer to explain why they do not delegate.
Some are:
1. Fear of loss of power - Some manager fear when they delegate authority because they expect that
they will be substituted/replaced by their subordinates if subordinates have got the experience and
skill of decision-making.

2. “I can do it better myself” fallacy: Some managers have an inflated worth of themselves and
think that they do everything better than their subordinates.

3. Lack of confidence in subordinates: The perception of managers that my subordinates just are not
capable enough. When managers delegate authority to their subordinates they do also delegate
responsibility. That is, managers are accountable for the actions of their subordinates and may fear
the blame if subordinates fail, if subordinates lack knowledge and skill.

4. Fear of being exposed: Some managers fear that their subordinates do too good job as compared
with themselves i.e. feel threatened that competent subordinates may perform too well and possibly
make the manager look poor by comparison.

5. Difficulty in briefing: Many times managers are reluctant to delegate authority if they conclude
that the time for briefing is more than the time for decision-making or if they believe they lack the
time to train subordinates. “It takes too much time to explain what I want done”.

Reluctance to Accept Delegation/problems from subordinates

1. Fear of failure and criticism: Subordinates who fear criticism or dissemble for mistake are
frequently reactant to accept delegation. The solution for this problem can be teaching subordinates
when they make mistakes than criticizing or dismissing.

2. Subordinate may believe that the delegation increases the risk of making mistakes but doesn’t
provide adequate rewards for assuming greater responsibility: Lack of incentive or reward for
assuming a greater workload. Accepting delegation frequently means that they will have to work
harder under greater pressure. Without appropriate compensation subordinates may be unwilling to
do so.

3. Lack of adequate information and resources: If subordinate managers think that they don’t have
enough factual information on which to base a decision or other resources necessary to carryout the
assigned duties, they tend to decline/reject accepting authority delegated.

4. If subordinates are already overworked

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5. Lack of self-confidence
6. Believing / Thinking that decision-making is the boss’s job.

Overcoming the barriers in effective delegation

The most basic prerequisite to effective delegation is the willingness of managers to give their
subordinates real freedom to accomplish delegated tasks. Managers have to accept the fact that there
are usually several ways to solve a problem and that subordinates may legitimately choose a path
differently from their own. And, subordinates will make errors in carrying out their tasks. But they
must be allowed to develop their own solutions to problems and learn from their mistakes. The
solution to subordinates mistake is not for the manager to delegate less, but to train or otherwise
support subordinate more.

Improved communication between managers and subordinates will increase mutual understanding
and thus help to make delegation more effective. Managers who know the abilities of their
subordinates can more realistically decide which tasks can be delegated to whom. Subordinates who
are encouraged to use their abilities and who feel their managers will “back them up” will in turn be
more accepting of responsibility

Authority Relations in Organization (Line,

Staff, Functional)
In an organization different types of authority are created by the relationships between individuals
and between departments. There are three types of authority.

i. Line Authority
Line authority defines the relationship between superior and subordinate. It is a direct supervisory
relationship. It exists in all organizations as an uninterrupted score or series of steps.

In line authority a superior exercises direct command over a subordinate. Line authority is
represented by the standard chain of command that starts with the most superiors and extends down
through the various levels in the hierarchy to the point where basic activities of the organization are
carried out.

ii. Staff Authority - is advisory in nature.

The function of people in a pure staff capacity is to give advice, expertise, technical assistance, and
support to help line managers to work more effectively in accomplishing objectives. Advisory
authority doesn’t provide any basis for direct control over the subordinates or activities of other
departments with whom they consult (Within the staff manager’s own department, s/he exercises
line authority over the department’s subordinates).
E.g. Personnel, research and development, legal, plant maintenance, compost quality control, etc.

 Staff authority is advisory and normally flows upward.

Line and Staff Departments: line and staff authority are concepts that describe the authority
granted to managers. Line and staff departments have different roles or positions within the
organization structure. Line departments, headed by line managers, are the departments established
to meet the major objectives of the organization. Departments normally designated as line

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departments include production, marketing, and finance. In functioning with employees and
departments under their control, line managers exercise line authority.

Staff departments provide assistance to the line departments and to each other. They can be viewed
as making money indirectly for the company through advice, service and assistance. Staff
departments are created on the basis of the special needs of the organization. As an organization
develops, its need for expert, timely, ongoing advice becomes critical. Examples could be legal,
personnel, computer service, etc.

iii. Functional Authority

It is the right which is delegated to an individual or a department to control specified process,
practices, or provinces or other matters relating to activities undertaken by persons in other
departments. If the principle of unity of command were followed without exception, authority over
these activities would be exercised only by their line superiors, but numerous reasons - including a
lack of specialized knowledge, lack of abilities to supervise processes, and danger of diverse
interpretations of policies - explain why they occasionally are not allowed to exercise this authority.
It is delegated by their common superior to a staff specialist or to a manager in another department.

Functional authority is not restricted to managers of a particular type of department. It may be

exercised by line, derive or staff department heads, more often the latter two, because they are
usually composed of specialists whose knowledge becomes the basis for functional controls.
Example:
1. The Finance Manager can give direct command to the marketing manager of the same level
about financial affairs.
2. The Legal Advisor can give direct command to others concerning the legal affairs of the
organization.
3. The Personnel Manager can give direct command to others regarding recruitment,
selection, performance appraisal systems

Benefits of Staff
1. Staff managers provide advice for line managers, i.e. the advice of well-qualified specialists in
various areas of an organization’s operations can scarcely be overestimated, especially as operations
become more complex.
2. These specialists may be allowed to the time to think, to gather data, and analyze, when their
superiors, busy managing operations, cannot do so.
 As problems become more complex, staff analysis and advice becomes an urgent necessity.

Conflict between Staff and Line Managers

For several reasons there is a conflict between line and staff managers. Some are:
1. Demographic factor: There is a general premise that staff mangers are younger, well educated,
firmly attached to their profession than their organization and want more money, power and prestige.
The older line officers dislike or receiving what they regarded as instructions from someone so much
younger than themselves.
2. Threats to Authority: Line managers consider staff managers as potential threats to their
authority, particularly if staff managers exercise functional authority.

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3. Dependence on knowledge: Line managers feel discomfort and get frustrated when they
progressively depend on the advice of staff managers; i.e. they fell that they are less important to the
organization.
4. Staff managers may exceed their authority and attempt to give direct command to the line
managers.
5. Staff managers may attempt to take credit for ideas implemented by line managers; conversely,
line managers may not acknowledge the role of staff managers.
6. Staff departments are organizationally placed in a relatively high position to top management.

Resolving Conflict

The line - staff problem is not only one of the most difficult that organizations face but also the
source of an extra ordinarily large amount of inefficiency, solving this problem requires great
managerial skill, careful attention to principles and patient teaching of personal. Some ways of
resolving the conflict include:
1. Understanding authority relationships: Managers must understand the nature of authority
relationships if they want to solve the problems of line and staff. Line means making decisions and
acting on them. Staff relationship, on the other hand, implies the right to assist and counsel. In short
the line may “tell”, but the staff must “sell” (its recommendations).
2. Making line listen to staff: Although line-staff friction may stem from ineptness or
overzealousness on the part of staff people, trouble also arises when line executives too carefully
guard their authority and resent the very assistance they need. Line manager should be encouraged or
required to consult with staff. Enterprises would do well to adopt the practice of compulsory staff
assistance where in the line must listen to staff.
3. Keeping staff informed: Common criticisms of staff are that specialists operate in a vacuum, fail
to appreciate the complexity of the line manager’s job, or overlook important facts in making
recommendations. Specialists should take care that their recommendations deal only with part of a
problem. Many critics arise because staff assistants are not kept informed on matters in their field.
Even the best assistant cannot advise properly in such cases. If line managers fail to inform their
staff of decisions affecting its work or if they don’t pave the way through announcements and
requests for cooperation - for staff to obtain the requisite information on specific problems the staff
cannot function as intended.
4. Requiring completed staff work: Completed staff work implies presentation of a recommendation
based up on full consideration of a problem, clearance with persons importantly affected,
suggestions about avoiding any difficulties involved, and often, preparation of the paper work -
letters, directives, job descriptions, job specifications so that a manager can accept or reject a
proposal without further study, long conferences, or unnecessary work.
5. Clear areas of responsibility and accountability for results.

Span of Management

Meaning: The term span of management is also referred to as a span of control, span of supervision,
span of authority or span of responsibility.
Span of management - refers to the number of subordinates who report directly to a manger, or the
number of subordinates who will be directly supervised by a manager.
This varies from one situation to another. There is no magical number for the span of control. There
are various factors affecting the span of management. Based on the number of subordinates who

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should report to a manager or the number of subordinates that a superior should supervise, we can
have Wide span of management and Narrow span of management.

i. Narrow Span of Management

This means superior controls few numbers of subordinates or few subordinates report to a superior.
When there is narrow span of management in an organization, we get:
 Tall organization structure with many levels of supervision between top management and the
lowest organizational level.
 More communication between superiors and subordinates.
 Managers are underutilized and their subordinates are over controlled.
 More trained managerial personnel and centralized authority.

Advantages
1. Close supervision and control
2. Fast communication between subordinates and superiors.
3. Easy to coordinate and control activities.

Disadvantages
1. Superiors tend to get too involved in the subordinates work
2. The problem of setting more trained managerial personnel
3. Excessive distance between lowest level and top level management. This kills intuitive for top-
level positions.
4. High costs due to many levels

ii. Wide Span of Management

This means many subordinates report to a superior or a superior supervises many subordinates.
If the span of management is wide, we get:
 A flat organization structure with fewer management levels between top and lower level
 Many number of subordinates and decentralized authority
 Managers are overstrained and their subordinates receive too little guidance and control
 Fewer hierarchal level

Advantages
1. Superiors are forced to delegate
2. It initiates the development of clear polices

Disadvantages
1. Tendency of overloaded superiors to become decision bottle necks
2. Danger of superior’s loss of control
3. Require exceptional quality of mangers

Span of Control Vs Levels of Management: If one wants to reduce the number of hierarchical levels
in an organization, the only way to do so without reducing the number of employees at the bottom is
to increase spans of control.

Relationship of centralization to span of control

The company’s philosophy of centralization or decentralization in decision-making can influence the
span of control of subordinate managers. A philosophy of decentralized decision-making generally

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means that the span of management should be wider for each manager. This is so because decision-
making is forced down to subordinates, thus feeling up a manager’s time commitments. This
situation also generally means fewer level of management in an organization.

Conversely, a philosophy of centralized decision-making should result in a narrower span of control

and more levels of management. If it is the philosophy of the company to have managers make the
majority of decisions, the mangers will closely supervise their subordinates and delegate little.
Contacts with subordinates should increase in number and in length, thus narrowing the span of
control.

Factors Determining an Effective Span of Management

The principle of span of a management states that there is no any specific number of subordinates to
be supervised by a manager. Rather, it states, there are factors that affect the span of management.
Some are:
1. Ability of the manger: The ability of the manager (supervisor) who is responsible for supervising
subordinates affects the span of a management. If the manager is well trained and highly capable,
receives assistance in performing her/his supervisory activities, doesn’t have many additional non-
supervisory activities to perform, and if that manager defines tasks and responsibilities to
subordinates clearly, the appropriate span can be relatively broad (wide).
2. Manager’s personality: if managers strongly need to share power, they may prefer a wider span
of control. Some managers develop reputation as empire builders and attempt to increase their spans.
3. The abilities of subordinates: The amount of training, experience, and ability that subordinates
have is directly related to a manager’s span of control. Knowledgeable subordinates who work well
on their own require less supervision than inexperienced, poorly trained workers do. Well - trained
subordinates require not only less of their manager’s time but also fewer contracts with them.
4. Motivation and commitment: motivated employees take initiative and responsibility, utilize and
develop their skills committed to their job, devote more time and effort and needs less of their
supervisor’s time.
5. Need for autonomy: subordinates with high need for autonomy prefer to make decisions by
themselves (wider span) and vise versa is true for those who take every problem to their superior for
decision-making.
6. Type of work - Routines and simplicity of work. Managers supervising people with simple and
repetitive jobs are able to manage more immediate subordinates than are those who supervise people
with complex, non-repetitive tasks.
7. Geographic dispersion of subordinates: Normally, there is an inverse relationship between a
manager’s span of control and the geographic dispersion of his/her subordinates. For example, a
sales manager whose sales people are scattered over a wide geographic region cannot supervise as
many subordinates as a manager can whose subordinates are in one building. This is especially true
when the manger and subordinates must meet on a regular basis.

8. The availability of information and control systems: If there are sophisticated information and
control systems, well-defined policies and plans, the manager can supervise many subordinates and
hence the span will be wide.
9. Levels of management: The size of the most effective span differs by organizational level.
 At the top level of management the span is wide, because
 The communication and conceptual skill that top level managers have.
 The nature of their work they deal with: general/broad policy control rather than direct
supervision.
 Their subordinates are relatively skillful.

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 At the middle level of management the span is narrow, because they involve in policy supervision
and much more direct, personal contract with subordinates than top-level managers.
 At the lower level of management the span is wide, because as managers of operating employees,
supervisors frequently supervise work that is not complex and that rarely requires policy decisions.
Instead, they will usually rely on rules and procedures to help them solve the daily problems that
arise.
7. Economic Factor: Narrow spans of management require not only more supervisors (and their
services) but also the added expense of executive offices, secretaries and fringe benefits. However,
the wide spans of a management require few supervisors with their accessories. So, organizations
should take cost into consideration.

There are two major reasons why the choice of appropriate span is important.
(1) Span of management affects the efficient utilization of managers and the effective
performance of their subordinates. Too wide a span may mean that managers are overextending
themselves and that their subordinates are receiving too little guidance or control. Too narrow a span
of management may mean that managers are under utilized.
(2) There is a relationship between span of management throughout the organization and the
organization structure. A narrow span of management results in a "tall" organizational structure with
many supervisory levels between top management and the lowest level. A wide span for the same
number of employees means fewer management levels between the top and bottom.

The concept of an "optimal" span of management is the one that is neither too broad nor too narrow.
The concept of an optimal span of management suggested that spans could be too broad or too
narrow in specific instances.

The wider the span of management, the less direct supervision there is; the narrower the span, the
greater the number of managers and, therefore, the higher the cost in salaries.

Organizational Structure
Meaning
 Organization structure is the structural framework for carrying out the functions of planning,
decision-making, controlling, communication, motivation, etc.
 Organization structure is the formal pattern of interactions and coordination designed by a manager
to link the tasks of individuals and groups in achieving organizational goals. The word “formal” in
this content refers to the fact that organization structures typically are created by management for
specific purposes related to achieving organizational goals, and, hence, are official, or formal
outcomes of the organizing function.
 Organization structure is the arrangement and interrelationship of the component parts, and
positions of an organization.

The process of developing an organization structure is sometimes referred to as organization design.

The formal structure of an organization is of two-dimensional: The horizontal dimension and vertical
dimension.
The horizontal dimension identifies departments, units, and divisions on the same level of a
management. Whereas the vertical dimension refers to the authority relationships between superiors
and subordinates and it also identifies who is responsible and accountable for whom.
One aid to visualizing organization structure is the organization charts.

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 Organizational Chart
 It is the means through which we depict the organization structure. Organization chart is a line
diagram that depicts the broad outlines of an organization’s structure. It shows the flow of authority,
responsibility, and communication among the various departments which are located at different
levels of the hierarchy. An organization chart is a visual representation of the way in which an entire
organization and each of its components fit together

Organization charts vary in detail, but they typically show in visual form the various major positions
or departments in the organization, the way the various positions are grouped into specific units,
reporting relationships from lower to higher levels, and official channels for communicating
information.

Because organization charts facilitate understanding the overall structure of organizations, many
organizations have found them useful. Such charts are particularly helpful in providing a visual map
of the chain of command.

The organization chart can tell us:

- Who reports to whom (chain of command)
- The number of managerial levels
- How many subordinates work for each manager (the span of control)
- Channel of official communication through the solid lines that connect each job (box)
- How the organization is structured-by function, territory, customer, etc.
- The work being done in each job- the labels on the boxes
- The hierarchy of decision making- where a decision maker for a problem is located
- How current the present organization is (if a date is on the chart)
- Type of authority relationships- line authority, staff authority, and functional authority

President

V-P V-P
Marketing Production

GM GM GM GM GM
Sales Advertising Research Manufacturin Quality

Division Division Manager Manager

Sales Sales Product Consumer
Manager Manager Research Research

Example of an organization structure Manager Manager Manager

Operations Manufacturi Shipping
 In addition, the chart is a trouble-shooting tool. It can help managers locate duplications and conflicts as a
result of awkward arrangements. What the chart does not show are the degree of authority, the informal
communication channels (grapevine), and the informal relationships.

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 CHAPTER FOUR
THE STAFFING FUNCTION

MEANING AND NATURE OF STAFFING

Staffing is the executive function of recruiting, selecting, training, developing, promoting, and
retiring subordinates. It is the responsibility of every manager. The benefits of staffing are:
 Staffing helps in discovering and obtaining competent personnel for various jobs
 Staffing makes for higher performance by putting the right man on the right job.
 Staffing ensures the continuous survival and growth of the enterprise through the
development of successive managers.
 Staffing helps to ensure optimum utilization of human resources
o Avoids over manning
o Avoids shortage of manpower in advance
 Staffing improves job satisfaction and morale of employees through objective assessment
and fair rewarding of their contributions.
Generally, the purpose of staffing function is to ensure that the right number and the right type of
people are working on the right jobs at the right time and right place.

ACTIVITIES IN STAFFING FUNCTION

The major activities in the staffing function include:

1. Manpower planning.
2. Recruitment
3. Selection
4. Placement
5. Induction/ orientation
6. Training and development
7. Performance appraisal

Manpower planning /human resource planning/

Manpower refers to the quantity and quality of workforce. Manpower planning is the process of
forecasting the number and type of personnel whom the organization will have to hire, train, and
promote in a particular period in order to achieve its objectives. It involves determining objectives,
policies, programs, and procedures in relation to human resources. It refers to planning for the
future personnel needs of the organization.

Manpower planning process

The process of manpower planning consists of the following steps:

1. Forecasting manpower requirements: This refers to anticipation of the requirements of
manpower for a particular future period of time in terms of the number, type and quality of
people. Three stages are involved in projecting future manpower needs.
A. Determine replacement of lost manpower. Based on past experience, the human
resource manager should calculate the rate of loss of manpower due to leave,
retirements, quits, transfers, deaths, discharges etc.
B. Determine the need for new manpower. Based on workload analysis,' the manager
needs to determine the new manpower required.

55
 C. Determine the abilities/ skills required for the efficient performance. Job
specifications and job descriptions are prepared to determine job requirements and the
quality of needed personnel. Job description is an organized, written and factual
statement of job contents in the form of duties and responsibilities of a particular job.
Job specification is a formal statement of minimum acceptable human qualities required
for the successful performance of a job.
2. Preparing manpower inventory/manpower audit. It refers to the analysis and assessment of the
current human resources in terms of the size and quality of personnel available.
3. Identifying man power gaps: In order to identify the manpower gap, the existing number of
personnel and their skills are compared with the forecasted manpower requirement
4. Formulate manpower Plans: This involves developing appropriate and detailed policies,
programs and strategies for recruitment, selection, training, promotion, retirement, and
replacement.

Example
Production budget......................................................................................... 100,000 tons
Standard man hours / ton……………………………………………….. 50 hours
Productive hours per worker in the year........................................................ 2,000 hrs
Allowance for absenteeism and turnover...................................................... 500 workers
Existing manpower……………………………………………………..… 2,200 workers

Determine the new manpower

Solution
Total planned hours = 100,000 x 50 = 5,000,000
Number of workers required = 5,000,000/2000 = 2500 workers
Number of workers required ............................................2500
Add: allowance for absenteeism and turnover ................. 500
Total requirement ......................................................... ...3000
Less: existing manpower.............................................. ...2200
New workers ................................................................ …800 workers

Recruitment

It is the process of searching for prospective employees and stimulates them to apply for jobs
in the organization. The purpose of recruitment is to attract potential employees with the
necessary characteristics and in the proper quantity for the jobs available. It is generally viewed
as a positive process. The sources of recruitment include:
1. Internal sources

These consist of transfers and promotions of present employees. A transfer refers to the shifting of
an employee from one job to another without a drastic change in the responsibilities and status of
the employee. On the other hand, promotion involves shifting an employee to a higher position
carrying higher responsibilities, higher status and more pay. Transfer is a horizontal shifting while
promotion is a vertical shifting.
Advantages
o Improve employees' motivation, loyalty and security and morale
o Less expensive (no induction training)
o Simplifies the process of selection and placement

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 o Lower level employees are encouraged to look forward to higher ranks.
o Develops better employee-employer relationships
Disadvantages
o Involves danger of in breeding by stopping infusion of new blood into the organization
o Reduces the area of choice
o Limits the pool of talents
o Does not provide an equal opportunity to all people to compete for jobs
o Encourages favoritism and nepotism
o Encourages complacency

2. External sources

Where all vacancies cannot be filled from within, external sources are used to fill the positions. The
advantage of extern sources is that it provides wide choice and brings new blood to the
organization. However, it is not without limitation. The major limitation is that it is expensive and
time consuming.
The various external sources of recruitment are:
a. Advertisements
b. Employment agencies
c. Educational institutions
d. Recommendations by other people
e. Causal callers
f. Direct recruitment

Selection

Selection involves screening or evaluation of applicants to identify those who are best suited to
perform the jobs. It divides the candidates in to two categories.
1. Those who will be employed
2. Those who will not be employed
Selection is described as a negative process. The proper selection of employees will go a long
way towards building a stable work force and eventually reducing labor costs. When selected
personnel are suitable to the job requirements, their efficiency and productivity will be high.
Such personnel will have job satisfaction and high morale. Rates of absenteeism and labor
turnover will be low.

Steps in selection procedure

In order to achieve the purpose of selection, a well-planned and suitable selection procedure is
required. This procedure involves the following steps:
1. Application Blank: It is a brief written resume of the name, age, address, education,
occupation, interests, experiences etc of the candidates. It provides basic information about the
prospective employee, which is helpful at the time of interview. It reflects the candidate's
personality and his/her desire for the job. First inference about the candidate can be made.
2. Employment test: It is designed to measure selected aspects of the candidate's personality and
to predict how well the applicant is likely to perform the job (the fitness of a person to a job)
Some of the employment tests include:
a. Intelligence test: It is used to measure the mental capacity of an applicant in terms of his
memory, reasoning ability, power of understanding, verbal comprehension, word fluency

57
 etc.
b. Aptitude test: Aptitude refers to the latent ability or the capacity of individuals for
learning the skills required performing the job. Aptitude test is used to measure an
individual potential for development.
c. Personality test: It measures the temperament, maturity, initiative, judgment, emotional
balance and other personality traits of an individual. It helps in weeding out candidates
who may not be able to go along with other people.
d. Proficiency test: It is designed to measure the level of knowledge, proficiency or skill
already acquired by an individual in a particular job. It is also called performance, ability,
achievement, or trade test.
e. Interest test: It is designed to identify the likes and dislikes of the applicant for different
jobs.
3. Employment interview
4. Physical / medical examination
5. Checking references
6. Final approval

Placement
Placement is the process which involves putting or posting the selected candidates on appropriate
jobs. It involves assigning specific jobs and work places to the selected candidates. In placement,
employees are assigned to jobs that are most suitable to them. New employee is given a particular
job to perform on the basis of his/her abilities, aptitude, skills etc. The purpose of placement is to
match the worker and the job, or to place right man on the right job. The advantages of correct
placement are:
o Placement improves job satisfaction and productivity
o Placement reduces labor turnover
o Placement reduces absenteeism

Induction/ orientation
When an employee is hired, two processes are started. These are induction and orientation.
Although the terms "induction" and "orientation" are used interchangeably, in some cases, there is a
difference between the two.

Induction: - is a socializing process by which the organization seeks to make an individual its agent
for the achievement of its objectives and the individuals seeks to make the organization an agency
for the achievement of his personal goals. The purpose of induction is to provide the new employee
with the necessary information about the company i.e
o The duties and benefits of employment
o Company history
o Company products/services
o Organization structure
o General company policies
o Location of departments and employee facilities
o Personnel policies and practices

Orientation
Orientation is a socializing process by which new employee is provided with information about
work environment and operating realities. Specifically, orientation involves:
o Rules, regulations and daily routines

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 o Grievance procedures
o Safety, measures
o Standing orders
o Employee activities, benefits and services
Generally, if induction and orientation programs are not undertaken formally, the new employee
may form wrong impression. Thus, first impression is the last impression.

Who orients new employees?

Different persons may be involved in orientation of new employees. The most common are:
1. Human resource manager
2. Operating manager
3. Union officials
4. Public relation officer
5. Experienced co-worker
In medium sized and large organizations, both operating manager and human resource manger run
the orientation. However, in small organization, operating manger performs all orientations.

Means of orientation and induction

o Lectures
o Discussions
o Handbooks
o Manuals
o Pamphlets

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Advantages of orientation and induction

1. To reduce the start-up costs for new employees: Recruiting new employee involves additional
costs because new employee is not as efficient as the experienced employee. This inefficiency is
considered to be start-up cost. An effective orientation program can reduce this inefficiency, and
in turn, reduces start up costs.
2. To reduce the amount of anxiety and hosing a new employee experiences: Anxiety refers to
fear of failure on the job. The new employee may develop the fear that he/she will not
perform the job properly. This fear could be aggravated when old employees hose the new
employee. Effective orientation can alert the new employee to hosing and reduces anxiety.
3. To reduce employee turnover: An employee who developed fear about his/her inefficiency may
decide to quit his/her job. In the absence of orientation this problem may recur. In order to avoid
such problem, the organization needs to have a good orientation program.
4. To develop realistic job expectations: The job expectation of new employee may be too high or
too low. The two extremes are very dangerous. Orientation enables the new employee to
incorporate the job and its work values in to his/ her self-image.
5. To develop positive attitudes toward the employer: The new employee may have negative
attitude toward his/her employer before joining the organization. This negative attitude can be
changed to positive attitude through effective orientation.
6. To develop job satisfaction: A new employee is satisfied if he/she knows very well what is
expected of him/her, how to perform it, and what reward is available for good performance.
With out orientation a new employee may not have the chance to know these things. Thus,
orientation can playa great role of this regard.

Training and development

Very often the terms "training" and "development" are considered as synonymous. Really speaking,
there is a difference between the two.
Training: It is the process of increasing the knowledge and skills of an employee for doing a
particular job. It implies imparting technical knowledge, manipulative skills, problem solving
ability and positive attitude. The purpose of training is to enable the employees to get acquainted
with their present/prospective jobs and also to increase their knowledge and skills and to modify
their attitude. Training is not a one-stop process, but continues throughout the career of an
individual. TraL.1'1ing is job-oriented (job-centered).
Development: It refers to the growth of an individual in all respects - physically, intellectually, and
socially. Development is career bound. Development of individuals is the consequence of training.
In other words, training is the cause whereas development is the consequence.

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Types of training
Training may of several types. Some of them are:
1. Orientation training. It seeks to adjust newly appointed employees to the work
environment
2. Job training. It refers to the training provided with a view to increase the knowledge and
skills of an employee for improving performance on the job.
3. Safety training. It is intended to provide training to minimize accidents and damages to
machinery. It involves instruction in the use of safety devices and in safety consciousness
4. Promotional training. It involves training of existing employees to enable them to perform
higher level jobs (Positions)
5. Refresher training - It involves training given to employees in the use of new methods and
techniques. This type of training is given when existing techniques become obsolete due to
development of better techniques
6. Remedial training. It is designed to correct the mistakes and shortcomings in the behavior
and performance of employees.

Methods of training

1. On-the-job Training (OJT)

Under this method, the worker is trained by his immediate supervisor or by an experienced
employee in a real work situation. The trainee is told (explained) the method of handling tools,
operating the machines etc.
Some of the advantages of OJT are:
o The trainee learns in the actual job environment
o Supervisor takes an active part in the training program
o The training is relatively cheaper and convenient
The disadvantages of OJT are:
o Training involves some interference in the normal work routine
o No uniformity in training because every supervisory is a different training unit
o Very time-consuming
o Tendency to ignore principles and theory in favor of immediate results
o Inappropriate for a large number of people at the same time
On the job training is considered to be the most effective and the oldest method of training the
operative personnel. One best example of OJT is job rotation.

2. Apprenticeship Training
It refers to giving instruction, both on and off the job, in the practical and theoretical aspects of the
work required in a highly skilled occupation. Its weakness is that the trade union fails to take into
consideration individual differences in learning time because of the trade union that determines the
time that the person serves as apprentice. Apprenticeship program contains both on-the-job and
classroom training. The theoretical aspect of the job is learnt in the classroom, but its skills will be
learnt on the job. Wages of apprentices are less than experienced q. employees.

3. Vestibule Training
Vestibule Training is a training in which the trainee learns the job in an environment that simulates
the real working environment as closely as possible. The limitations of vestibule training are:
 It is expensive
 Trainee may face adjustment problem.
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4. off- the -Job Training

Off- the -job training includes all over training other than apprenticeship, vestibule training, and on-
the job training. It can be done in organizational classrooms, vocational schools or else where. Off-
the job training may be conducted using confidence/Discussion, programmed instruction, case
method & simulation. Programmed instruction is used if the objective of training is knowledge
acquisition. On the other hand, case method of training is used if the intention is to improve the
problem-solving skills. Conference approach requires the trainer to give a lecture and involve the
trainee in a discussion of materials to be learned. Programmed instruction is a technique for
instructing without the intervention (presence) of human instructors.

CHAPTER FIVE
THE DIRECTING / LEADING FUNCTION

1. MEANING AND THE NEED FOR LEADERSHIP

MEANING:

Leadership can be defined in different ways according to different writers. Some are:
1. Leadership is the process of influencing others toward the achievement of organizational
objectives. This definition recognizes that leadership is typically an on going activity, is oriented
toward having an impact on the behaviors of others, and is ultimately focused on realizing the
specific aims of the organization.

2. Leadership is the process of influencing a group or individual to set a goal or achieve a goal. It
is a process involving the leader, the led (group or individual), and a practical goal or a situation. It is
behavioral in nature and involves personal interaction.

3. Leadership is the art or process of influencing people so that they will strive willingly and
enthusiastically toward the achievement of organizational or group goals.

4. Leadership is the ability to secure desirable actions from a group of followers voluntarily
without the use of coercion or force.

As we can see from the above definitions, leadership has three ingredients: leader, led (follower) and
goal (situation) – organizational Environment.

Leader- the one with the ability/capacity to understand others’ motivation and to inspire them with
the ability to create a climate for motivation.
Follower (led) - the individuals being led or influenced
Environment- the working environment in which the leader interacts with the followers.

Leading is the management function aimed at setting the members of an organization move in the
direction that will achieve its objectives. Directing builds a climate, provides leadership and arranges
the opportunity for motivation. Leading is not deriving or pushing from behind; it is placing oneself
before the group and facilitating progress and inspires followers to accomplish organizational
(group) objectives.

Leadership versus Management

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Management is a broad subject that encompasses activities such as planning, organizing, staffing,
directing, and controlling. Leadership, on the other hand, focuses almost exclusively on the ‘people’
aspects of getting a job done-inspiring, motivating, directing, and gaining commitment to
organizational activities and goals. Leadership accompanies and complements the management
functions. In short, management influences brain, while leadership encourages the heart and the
spirit.

THE NEED FOR LEADERSHIP

The need for leadership can be explained by the fact that organizations will never be successful
unless they have effective and efficient leaders. The effectiveness and efficiency of leaders is
nothing but to create conducive environment in the organization. Whatever amount of capital
invested and technology an organization has, without effective leadership the organization will not
be successful.

The importance of the directing function in the organization can be presented as follows:
 Directing initiates actions by giving directives and guidance to employees.
 Directing integrates employees’ effort by coordinating actions of the members and leading
toward the objectives.
 Directing attempts to get the maximum output of individuals by providing ways to fully utilize
the potentials and capabilities of employees.
 Directing facilitates changes by incorporating (adopting) environmental and internal changes into
the organization
 Directing provides stability by balancing the different parts of the organization so that it exists
for a long period and its parts work in a harmonious ways.

The directing function enables subordinates to contribute their best to attain the goal of the
organization. Thus, managers should try to integrate both organizational and individual objectives in
order to get the work done by subordinates. Managers must be good leaders (by providing effective
leadership) to guide, counsel, and influence subordinates so as to win their confidence and
acceptance.

How leaders influence others?

Why do people accept the influence of a leader? One major reason is that leaders have power. Power
is the capacity to affect the behavior of others, in other words, power is the ability of individuals or
groups to induce or influence the beliefs or actions of other persons or groups. It is a resource or
patronage an individual has at his/her disposal to stage-manage others towards a wanted behavior.
Having power can increase the effectiveness of a manager by enabling the manager to influence
people to what is wanted. Leaders in organizations typically rely on some or all of five major types
of power: legitimate, reward, coercive, expert and referent.

1. Legitimate power/position power refers to the power a leader possesses as a result of

occupying a particular position or role in the organization, i.e. it is a power that stems from a
position’s placement in the managerial hierarchy. It corresponds to authority. Legitimate power
exists when a subordinate or the influenced acknowledges that the influencer has a “right” or is
lawfully entitled to influence within certain bounds. It is related to the position, rather than to the
person personality, so it is clearly a function of the leader's position in the organization and is
completely independent of any of the leader's personal characteristics. Thus, the higher a manager is
in the organizational hierarchy, the greater is the “perceived power” thought by subordinates.
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2. Reward Power refers to the leader's capacity to give or withhold rewards for followers. It is
based on the capacity to control and provide valued rewards to others. Rewards that may be under
the control of individual manager include salary increases /pay raises, bonus, interesting projects,
promotion recommendations, a better office, support for training programs, assignments with high
responsibility in the organization, recognition, positive feedback etc. Purchasing agents, with little
position power; might be able to exercise considerable influence by their ability to expedite or delay
a much-needed spare part. Or University professors have considerable reward power; they can grant
or withhold high grades. The greater a manager’s control over valued rewards, the greater the
manager's reward power and the more power to influence.

3. Coercive Power is a power based on fear. It is the negative side of reward power. Coercive
power is the ability to coerce or punish the influencees/followers when they do not engage in desired
behaviors. Forms of coercion or punishment include criticisms, terminations, reprimands,
suspensions, warning letters that go into an individual’s personnel file, negative performance
appraisals, demotions and withheld pay raises; (punishment may range from loss of a minor
privilege to loss of one's job). Coercive power is usually used to maintain a minimum standard
performance or conformity among subordinates. The greater the freedom to punish others, the
greater a manager’s coercive power. And the more coercive power a manager uses, the more
resentment and opposition s/he faces from subordinates.

4. Expert Power refers to power that a leader possesses as a result of his or her knowledge and
expertise regarding the tasks to be performed by subordinates. It is power based on the possession of
expertise, knowledge, skill or information. To the extent that a leader possesses expertise and
information that is needed or desired by others, the leader has expert power. Physicians, lawyers, and
university professors may have considerable influence on others because they are respected for their
special knowledge. A manger who is capable of achieving an important methodological break
through that no other companies dreamed of and a secretary who knows how to unreveal or reveal
bureaucratic red tape all have expert power over any one who needs that information.

5. Referent Power / Charismatic Power is power that results from being admired, personally
identified with or liked by others. When we admire people, want to be like them, or feel friendship
toward them, we more willingly follow their directions and exhibit loyalty toward them. For
example, a Movie Star, a Great Athlete, a Great Football Player, a Musician or a Military Hero
might possess considerable referent power.

 The strength of referent power is directly related to such factors as the amount of prestige and
admiration the influence confers up on the influencer.
 The more that a leader is able to cultivate the liking, identification, and admiration of others, the
greater the referent power.
 The more power a leader has at his/her disposal, the more likely that s/he will be successful in
influencing followers to do the work assigned to them except coercive power.

Although all five types of power are potential means of influencing others, in actual usage they may
engender somewhat different levels of subordinate motivation. Subordinates can react to a leader’s
direction with commitment, compliance, or resistance. With commitment, employees respond
enthusiastically and exert a high level of effort toward organizational goals. With compliance,
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employees exert at least minimal efforts to complete directives but are likely to deliver average,
rather than stellar, performance. With resistance, employees may appear to comply but actually do
the absolute minimum, possibly even attempting to sabotage the attainment of organizational goals.

Types of outcome
Source of Basis for power Commitment Compliance Resistance
Leader
influences
Referent power Admiration and Likely* Possible Possible
liking by others. If request is If request is If request is
believed to be perceived to be something that
important to leader unimportant to will harm leader
leader
Expert power Possession of Likely* Possible Possible
valued expertise If request is If request is If leader is
persuasive and persuasive but arrogant and
subordinates share subordinates are insulting or
leader’s task goals apathetic about task subordinates
goal oppose task
goals
Legitimate Hierarchical Possible Likely* Possible
power position and If request is polite If request or order is If arrogant
authority and very seen as legitimate demands are
appropriate made or request
does not appear
proper
Reward power Capacity to Possible Likely* Possible
provide valued If used in a subtle, If used in a If used in a
rewards very personal way mechanical, manipulative,
impersonal way arrogant way
Coercive power Ability to punish Very unlikely Possible Likely*
If used in a helpful, If used in a
non punitive way hostile or
manipulative
way
* Indicates most common outcome
Major sources of leader power and likely subordinate reactions

Authority versus Power

Authority Power
1. It is positional – it will be there 1. It is personal-it exists because
when the incumbent leaves. of the person.
2. Narrower – it is one type of power 2. Broader
3. It changes with changes in position. 3. Some types of power do not change
(Expert, referent) but some change
legitimate, reward, coercive.
4. Authority is delegated to an individual 4. Not all power types can be delegated
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by superiors. (Expert and referent).

2. LEADERSHIP THEORIES
A. Trait Theory
Traits are distinctive internal/personal qualities or characteristics of an individual, such as physical
(height, weight, appearance, health, etc), personal (self-confidence, dominance, adaptable,
extroversion/sociability, originality etc) and mental (intelligence, creativity, knowledge, technical
competence etc). A leader trait is a physical or personality characteristic that can be used to
differentiate leaders from followers.

Trait theory attempts to find traits that make a leader. That is, it is a theory, the old approach, which
focused on identifying the personal traits that differentiated leaders from followers. Trait theory
originated from an ancient theory called “Great Man” theory that assumes that “leaders are born not
made”-a belief dating back to the ancient Greeks and Romans.

The idea in trait theory was to see whether certain traits would predict the individuals who would
emerge (be identified by members of the group) as leaders.
In searching for measurable leadership traits, researchers took two approaches:
1) They attempted to compare the traits of those who emerged as leaders with the traits of those who
did not.
2) They attempted to compare the traits of effective leaders with those of ineffective leaders.

Studies that were conducted on the first category have failed to distinguish/uncover any traits that
clearly and consistently distinguish leaders from followers. Leaders as a group have been found to be
somewhat taller, brighter, more extroverted, persistent and more self-confident than non-leaders.
However, millions of people have these traits, but most of them obviously will never attain a
leadership position. In addition, many established leaders did not and do not have these traits.
(Napoleon, for example, was quite short, and Lincoln was moody and introverted.) Interestingly
enough, studies have also found that people who are too intelligent compared with other group
members do not emerge as leaders-perhaps because they are too different or too far removed from the
group.

Studies that were conducted on the second category have generally failed to isolate traits that are
strongly associated with successful leadership.

Generally, the efforts to identify universal leadership traits ran into difficulties for the following
reasons:
1) Not all leaders possess all the traits and many non-leaders may possess most of the traits.
2) It gives no guidance as to the magnitude of each trait for a person to be a leader.
3) No agreement has been reached as to what their relationships are to the actual instances of
leadership.
4) Traits tend to be a chicken-and-egg proposition i.e. successful leaders may display traits such as
good vocabulary, education and self-confidence after they have assumed leadership positions.

B. Behavioral Theories
When it became evident that effective leaders did not seem to have any distinguishing traits or
characteristics, researchers tried to isolate the behaviors that made leaders effective. In other words,
rather than try to figure out what effective leaders were, researchers tried to determine what effective
leaders did, how they delegated tasks, how they communicated with and tried to motivate their
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subordinates, how they carried out their tasks, and so no. This tries to answer the questions “What do
effective leaders do? What ineffective leaders don't do? How do subordinate react emotionally and
behaviorally (performance) to what the leader does?"

Two major dimensions of leader behavior emerged from this body of research; one deals with how
leaders get the job done and the other deals with how leaders treat and interact with their
subordinates.

i. The University of Michigan Studies

Through interviewing leaders and followers, researchers at the University of Michigan identified
two distinct styles of leadership, referred to as .job-centered and employee - centered.
The job-centered leader practices close supervision on the subordinates’ performance. This leader
relies on coercion, reward, and legitimate power to influence the behavior and performance of
followers.
The employee-centered leader believes in delegating authority and supporting followers in
satisfying their needs by creating a supportive work environment. The employee centered leader is
concerned with followers', their personal advancement, growth and achievement.
ii. The Ohio State Studies
These studies isolated two leadership factors, referred to as initiating structure and consideration.
Initiating structure involves behavior in which the leader organizes and defines the relationship in
the group, tends to establish well-defined patterns and channels of communication, and spells out
ways of getting the job done.
Consideration involves behavior indicating sensitiveness to subordinates, respect their ideas and
feelings, establishes mutual trust and friendship between the leader and the followers.

In short, the behavioral theory attempted to identify effective leader behaviors that would work in
every situation. But researchers found that leader behaviors that worked best in one situation were not
often as effective in other situations.

C. The Contingency /Situational Leadership Theory

Situational leadership theory grows out of an attempt to explain the inconsistent findings about traits
and styles /behaviors. Situational theory proposes that the effectiveness of a particular style of leader
behavior depends on the situation. As situations change, different styles become appropriate. This
directly changes the idea of one best style of leadership. In other words, the contingency/situational
theory holds that appropriate leader traits or behaviors are contingent or dependent on relevant
situational characteristics. More specifically, the contingency leadership theory states that, leadership
is the result of the interaction of:
a. Leaders: behavior and competence
b. Followers: behavior and competence
c. Situations: situational variables such as job characteristics, organizational policies, leaders
member relations (the extent to which a leader has the support of group members), position power
(the amount of power that the organization gives the leader to accomplish necessary tasks).

Theory X and Theory Y Assumptions about People

A manager’s philosophy about work and the people who perform the work will influence his/her
approach to leadership. Douglas McGregor has hypothesized two sets of assumptions about people
that serve as a philosophical base for leadership action. These are Theory X and Theory Y
Assumptions.

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Theory X – pessimistic and negative

A manager basing an operating philosophy on Theory X would impose a directive leadership style on
the individual or work group s/he is supervising. Coercion, negative motivation, and refusal to allow
employee participate in decision-making would probably be the actions of the manager.
Why? Because the manager assumes:
 The average human being has an inherent dislike of work and will avoid it if s/he can-workers are
lazy.
 Because of this dislike, most people must be coerced, controlled, directed, and threatened with
punishment to get them to put forth adequate effort toward the achievement of organizational
objectives.
 The average human being prefers to be directed, wishes to avoid responsibility, has relatively
little ambition and wants security above all.

McGregor’s Theory X view of human nature holds that the dislike of work is so great that even the
promise of rewards will not overcome it. “People will accept the rewards and demand continually
higher ones, but these alone will not produce the necessary effort. Only the threat of punishment will
do the trick.

Theory Y- adopts a developmental approach/ modern + positive set of assumptions

A manager with Theory Y assumption will prepare him/herself to work with people as individuals, to
involve people in the process of decision-making, to openly encourage people to seek responsibility
and to work with people achieve their goals.
Why? Because the manager assumes:
o The average human being does not inherently dislike work; the physical and mental effort
involved is as natural as play or rest.
o External control and threat of punishment are not the only means for bringing about effort
toward organizational objectives. A person will exercise self-direction and self control in the
service of objectives to which s/he is committed.
o People generally become committed to organizational objectives if they are rewarded for
doing so.
o The average human being learns, under proper conditions, not only to accept, but also they
seek responsibility.
o Many people have a relatively high degree of imagination, ingenuity, and creativity in the
solution of organizational problems.
o The average person’s intellectual potential is only partially utilized under the conditions of
modern industrial life.

The assumptions in Theory Y have remarkably different implications for managers than do those of
Theory X. Instead of blaming poor performance on basic human nature, Theory Y places squarely on
management the responsibility for tapping the reservoir of creativity, hard work, and imagination.
The worker’s performance is limited only by management’s ability to use human resources
effectively. Theory Y also has implications for decision-making. Because it recognizes worker’s
intellectual potential, this philosophy suggests that organizational goals are best achieved if workers
have voice in decisions. Participatory decisions making is especially important as it relates to a
person’s job. In addition, Theory Y vie of human nature implies that a manager’s role is not to
manipulate workers; rather, it is to create an atmosphere in which workers can use their commitment
and involvement to satisfy their personal needs as well as those of the organization.

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3. LEADERSHIP STYLES
The focus on finding leadership style (behavior patterns of leaders) is on the relationship between
leaders’ action and the reaction of subordinates emotionally and behaviorally. A manager’s leadership
style is composed of three parts:
i. How the manager chooses to motivate subordinates
Motivation approach
Positive Negative
Responsibility Threats
Recognition Coercion
Praise Fines
Security Suspensions
Monetary Rewards Termination
ii. His/her decision-making style: the degree of decision-making authority the manager grants to
subordinates.
iii. His/her areas of emphasis (orientation) in the work environment: Task orientation, employee
orientation

Based on the above points there are three types of leadership styles: Autocratic, Democratic, and
Laissez-faire.

1. Authoritarian/Autocratic Leadership Style

It is closely associated with the classical approach to management. The manager who follows this
style is dogmatic and leads by the ability to withhold or give rewards and punishment, i.e. motivation
is through incentives and fear. In this style, decision-making is solely by the manager, in other words,
the leader retains all authority and responsibility. In the extreme case, the manager makes the decision
and announces it to the work group. There is no opportunity for input into the decision-making
process by the subordinates and communication is primarily downward. Variations of this approach
find the manager making the decision and then “Selling” it to employees or making the decision and
allowing the group the opportunity to ask questions. The autocratic leader is task-oriented and places
little value on showing consideration to subordinations as a leadership technique. The Autocratic
manager uses Theory X assumption as his philosophical base for leadership.

There are situations where managers are compelled/forced to use this leadership style. Some are:
a. When there is a need to influence subordinates in favor of organizational objectives which has
an effect on individuals.
b. When subordinates are new, they need to be directed.
c. When the situation calls for unilateral decision-making – perhaps there is no enough time for
quality input from subordinates or the subordinates may lack information.

Limitations
- Employees’/subordinates’ ideas will not be used to solve organizational problems, which in
some cases subordinates may have better ideas than the superior about a particular problem.
- Subordinates would be demotivated, i.e. It may suppress individual initiative
- Poor implementation of decisions

2. Democratic/Participative Leadership Style

In this leadership style, the manager involves subordinates in making organizational decisions, shares
problems with them and shares authority to reach a decision. Subordinates take part in the decision-
making process through consultation. The leader delegates a great deal of authority while retaining
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ultimate responsibility. Active two-way communication (upward and downward) exists. The
democrat leader uses Theory Y assumption as his/her philosophical base for leadership.

Limitations
1. Subordinates may be too involved to influence the manager even when there is no need.
2. The manager may not be able to influence the subordinates to the extent needed.

However, the major advantage of this leadership style is that, it enhances personal commitment
through participation.

The advantages of democratic leadership style are the disadvantages of the autocratic leadership
style after we make them opposite.

3. Laissez-Faire/Free-Rein Leadership Style

In this leadership style, leaders generally give the group complete freedom, provide the necessary
materials, participate only to answer questions, and avoid decision-making whenever possible. The
leader either sets limits and the followers work out their own problems, or the individuals set their
own goals. In this style, leaders depend largely on subordinates to set their own goals and the means
of achieving them, and they see their role as one of aiding the operations of followers by furnishing
them information and acting primarily as a contact with the groups external environment, i.e. the
leader’s role is to serve as a logistics specialist or representative of the group to outside groups. The
leader denies responsibility and abdicates authority to the group.

The application of Laissez-Faire style can be found with individuals or groups that the manager views
as being knowledgeable, independent, or motivated. Additionally, if the work group is composed of
high achievers, or is highly research oriented, this style has potential benefits. Primarily horizontal
communication among peers exists.

Limitations
- Group may drift aimlessly in the absence of direction from leader.
- It may make things out of control.

Advantages
- It gives quite freedom for subordinates
- It gives much responsibility and self guidance for subordinates
- It permits self-starters to do things as they see fit without leader

4. Situational Leadership style

The situational leadership style states that for a manager to be democrat, autocratic or laissez-faire,
situations force him/her.

4. MOTIVATION
The Concept of Motivation
The term motivation derived from the Latin word movere meaning “to move.” In the present context,
motivation represents “those psychological processes that cause arousal, direction, and persistence of
voluntary actions that are goal oriented. Managers need to understand these psychological processes
if they are to successfully guide employees toward accomplishing organizational objectives.
 Motivation is an internal force that energizes behavior, gives direction to behavior, and
underlies the tendency to persist. This definition of motivation recognizes that in order to achieve
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goals, individuals must be sufficiently stimulated and energetic, must have a clear focus or end in
mind, and must be willing and able to commit their energy for a long enough period of time to realize
their aim. Since the leading function of management involves influencing others to work toward
organizational goals, motivation is an important aspect of that function.

Because motivation is an internal force, we cannot measure the motivation of others directly. Instead,
we typically infer whether or not other individuals are motivated by watching their behavior. As
managers analyze their workforces, they can always see some people who outperform others of equal
skill. A closer look might reveal instances in which a person with outstanding talents is consistently
outperformed by someone having lesser talents. Why? These latter employees appear willing to exert
more effort, to try harder, to accomplish their goals, often these hard workers are described by their
bosses as “motivated employees.” Motivated individuals work hard, persist and are goal oriented.

Motivators
Motivators are things, which induce an individual to perform. While motivation reflects wants,
motivators are the identified rewards, or incentives that sharpen the derive to satisfy these wants.
They are also the means by which conflicting needs may be reconciled or one need heightened so that
it will be given priority over another. A motivator is something that influences an individual’s
behavior. It makes a difference in what a person will do.

The Motivation Cycle

The starting point in this cycle is a need or a deficiency or a state of felt deprivation an individual
experiences at a particular time. This deficiency causes tension (physiological or psychological in
balance), which will be modified by one’s culture and personality to cause certain wants leading
/motivating the individual to some kind of goal directed behavior. This leads to satisfaction and one
cycle of motivation will be completed.

The Motivation Process

1
Need deficiency

3 2 Goal Directed behavior

Need

From this we can understand that deficiency triggers a drive for need satisfaction, which causes an
individual to take a certain course of action that will alleviate a need and reduce a drive. The need for
food for example will result in hunger and hunger will drive or motivate the individual to take action
(eating food), which will achieve the goal. This goal attainment will restore the physiological or
psychological balance and reduce or cutoff the drive for food.

Motivation Vs Satisfaction
Motivation refers to the drive and effort to satisfy a want or a goal. Satisfaction refers to the
contentment experienced when a want is satisfied. In other words, motivation implies a drive toward
an outcome, and satisfaction is the outcome already experienced.

Motivation Results Satisfaction

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Motivation and Performance

All too often, motivation and performance are assumed to be one and the same. This faulty
assumption can lead to poor managerial decisions. The following formula for performance helps put
motivation into proper perspective:
Performance = Ability x Motivation x Environmental conditions
Thus, we see motivation is a necessary but insufficient contributor to job performance. The
multiplication sign is used to emphasize how a weakness in one factor can negate the other. The
above relationship between performance and motivation clearly shows us that managers should hire
individuals who have the ability to do what is required. After that, the management challenge is
providing environmental conditions that nurture and support individual motivation to work toward
organizational goals. Keeping other variables constant, motivation and performance have neither
positive nor negative relationship. As motivation increases, job performance increases, reaches its
maximum and the decreases.
Optimal/maximum
-------
* After the optimal point
Performance

further motivation brings

about anxiety, tenseness,
fretfulness, and the
anxiety eventually
decreases performance.

Motivation

Theories of Motivation
A. Carrot and Stick Approach
This metaphor relates the use of rewards and penalties in order to induce desired human behavior. It
comes from the old story that to make a donkey move one must put a carrot in front of it and if it does
not move beat it with stick from behind.

Despite all the researches and theories of motivation that have come to the fore in recent years,
reward and punishment are still recognized/considered by strong motivators. For centuries, however,
they were too often thought of as the only forces that could motivate people.

Carrot - money in the form of pay or bonuses.

Stick – fear such as fear of loss of job, loss of income, reduction of bonuses demotion or some other
penalty.

Failures of carrot and stick approach

1.Carrot can be obtained by any member of the organization without differentiation in
performance – through such practices as salary increases and promotion by seniority, automatic
“merit” increases, and executive bonuses not based on individual manager performance. It is as
simple as this: If a person put a donkey in a pen full of carrots and then stood outside with a
carrot, would the donkey be encouraged to come out of the pen?
2.Stick in the form of fear is not the best kind of motivating factor. It often gives rise to defensive
or refectory behavior, such as union organization, poor quality work, executive indifference,
failure of a manager to take any risk in decision-making, or even dishonesty.

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B. Money as a Motivator
Even if under the carrot and stick approach money as a sole motivator has been criticized, it is used as
a motivator (motivating factor) but not the only one. Money can be used as a motivator under the
following conditions.
- For people who have low-level standards of living and who badly need it for their life.
- When the amount is so significant that the organization uses it for competitive purposes.
- When the payment is so differentiated that even at equal position discriminatory payment is
made for people with different levels of performance.

C. Maslow’s Need Hierarchy

One of the most widely mentioned theories of motivation is the hierarchy of needs theory put forth by
psychologist Abraham Maslow. Maslow proposed that motivation is a function of needs, and he also
proposed that human needs are arranged hierarchically (in a form of hierarchy). The hierarchy of
needs is based on four premises:

1. Only an unsatisfied need can influence behavior; a satisfied need is not a motivator. What
motivates a person is what s/he does not have but not what s/he has.
2. A person’s needs are arranged in a priority order of importance. Thus, the priorities
(hierarchy) go from the most basic needs to the most complex.
3. As the person’s needs are met on one level, the person advances to the next level of needs.
S/he will focus on the first level need until it is minimally satisfied before moving to the
next level.
4. If satisfaction is not maintained for a once-satisfied need, it will become a priority need
again.

Based on the above premises, Maslow proposed that human needs form a five-level hierarchy.
1. Physiological Needs
These are the basic needs for sustaining human life itself, such as food, water, air, shelter, sleep, etc.
Maslow took the position that until these needs are satisfied to the degree necessary to maintain life,
other needs will not motivate people. In other words, As Maslow points out, a person lacking food,
love and esteem wants food more than he/she wants acceptance or prestige. These other needs would
be unimportant. In the working environment, management tries to satisfy these needs primarily
through salary and by eliminating threats to physical safety.

2. Safety /Security Needs

When physiological needs are satisfied, safety needs become a priority as a motivator. Safety needs
include freedom from fear and anxiety, job security, desires for retirement and insurance programs
and so on. As with physiological needs, management attempts to satisfy safety needs primarily
through salary.

3. Social/ Love/ Affiliation Needs

Once we feel reasonably safe and secure, we turn our attention to relationships with others in
order to fulfill our belongingness needs, which involve the desire to affiliate with and be accepted by
others i.e. the need for friendship, companionship, and a place in a group. Love needs include both
giving and receiving. These needs are met by frequent interaction with fellow workers and acceptance
by others.

4. Esteem Needs

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Esteem needs include the desire for both self-esteem (self respect) and public esteem, and recognition
by others. These needs take two different forms. First, we have a need for competency, confidence
and independence. We also want the prestige, status, recognition and appreciation that others bestow
on us. Satisfying esteem needs produces self-worth-pride, self-confidence, and true sense of
importance; not satisfying them produces feelings of inability and inadequacy- feeling of inferiority,
weakness and helplessness. Esteem needs can be met in an organization through recognition by peers
and superiors of the person’s work, by acquiring organizational titles and by the accomplishment of
work projects.

5. Self-Actualization/Realization Needs
Refers to the need for fulfillment, the desire to become what one is capable of becoming-to maximize
one’s potential and to accomplish something. For the athlete, it may be breaking a world’s record; for
the research scientist, it may be finding a cure for HIV/AIDS; and for the physical therapist, it may be
the satisfaction of helping a child walk or laugh for the first time. In other words, these needs differ
greatly from person to person.

Maslow’s theory suggested that people must satisfy lower-level (physiological needs) before working
toward higher-level needs. Only when physiological, security, and social needs have been more or
less satisfied do people seek esteem. This theory also suggests that if a lower-level need is suddenly
reactivated, the individual will try to satisfy that need rather than higher-level needs.

Maslow’s hierarchy, although intuitively appealing and frequently used in management training, has
not found widespread support from management researchers. Beyond the first two basic needs,
people vary in their need emphasis. Some may seek social-need satisfaction, while others may
emphasize esteem needs or self-actualization needs. Thus, each individual may respond differently to
organizational characteristics. Moreover, the steps in Maslow’s hierarchy may not be necessarily
experienced in a sequential manner. People may have more than one need at the same time. Situations
detect which needs are most important at a given point in time.

D. Herzberg’s Two Factor Theory

Herzberg developed a theory known as the two-factor theory of motivation. The initial framework for
the two-factor was derived from interviews with accountants and engineers using what is known as
the critical-incident method. The accountants and engineers were asked to provide interviewers with
examples of time they felt exceptionally good or exceptionally bad about their jobs or job related
issues that made them feel good or bad.

According to the analysis, although an unpleasant work environment might be a reason given for job
dissatisfaction, a pleasant work environment is rarely cited as a reason for job satisfaction. This
suggested that job satisfaction and job dissatisfaction are not simple opposites. Traditionally,
managers viewed job satisfaction and job dissatisfaction as opposite ends. In contrast, Herzberg's
findings suggested the opposite of satisfaction is not dissatisfaction, but rather ‘no satisfaction’.
Herzberg believed that two entirely separate sets of factors contribute to an employee’s behavior at
work.

Herzberg labeled the factors that produced job satisfaction as motivators. His analysis indicated these
factors are directly related to job content. The absence of motivational factors may not result in
dissatisfaction, but their presence is likely to motivate employees to excel. When motivators are
absent, workers are neutral toward work, but when motivators are present, workers are highly
motivated and satisfied. Herzberg labeled the factors that led to job dissatisfaction as hygienes and
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found they are related more to the work setting, or job context, than to job content. These factors do
not necessarily motivate employees to excel, but their absence may be a potential source of
dissatisfaction, low morale, and high turnover. When hygiene factors are poor, work is dissatisfying.
However, good hygiene factors simply remove the dissatisfaction; they do not by themselves cause
people to become highly satisfied and motivated in their work.

Herzberg's Motivators and Hygiene's

Motivators Leading to Job Hygienes Leading to
satisfaction Dissatisfaction
• Achievement • Policies and administration
• Recognition • Supervision
• Work it self • Relations with peers
• Responsibility • Working Condition
• Advancement • Pay
• Personal growth • Job Security
Thus, to the degree that motivators are present in a job, satisfaction will occur, when absent,
motivators do not lead to dissatisfaction. And, to the degree that hygienes are absent from a job,
dissatisfaction will occur, when present hygienes prevent dissatisfaction but do not lead to
satisfaction.

5. Communication in Organizations
Communication is the process of transmitting information among two or more people. It is the glue
that holds organizations together. Communication assists organizational member to accomplish both
individual and organizational goals, implement and respond to organizational change, coordinate
organizational activities, and engage in virtually all organizational relevant behaviors. It would be
extremely difficult to find an aspect of a manager's job that does not involve communication. In other
words communication is unavoidable in an organization's functioning. By its very nature a manager's
job requires communication. The success of every manager and every organization depends on
communication because in any undertaking involving two or more persons, it is essential for the
coordination of individual activities.

Formal and Informal Communications

Formal communication
This is a communication, which is intentionally designed by the organization. Information flows
through the formally established channel and is concerned with work related matters. Formal
communication includes; Downward communications, Upward communication, Horizontal
communication, and Diagonal communication.

Vertical communication is communication that involves a message exchange between two or more
levels of the organization hierarchy. Vertical communication can involve a manager and a
subordinate or can involve several layers of the hierarchy. It includes downward and upward
communications.

Downward communication occurs when information is transmitted from higher to lower levels in an
organization. Downward communication starts with top management and flows down through the
management levels to line workers and non-supervisory personnel. The major purposes of downward
communication are to provide organization members with information about organizational goals and
policies. The kinds of media used for downward communication include instructions, speeches,
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meetings, the telephone, grapevine, memoranda, letters, handbooks, pamphlets, policy statements,
procedures, etc.

Upward communication – in such situations, the communicator is at a lower level in the organization
than the receiver. In other words, information flows from the subordinates to the superior. The main
function of upward communication is to supply information to the upper levels about what is
happening at lower levels. It includes the flow of opinions, ideas, complaints, progress reports,
suggestions, explanations, and requests for aid or decisions and other kinds of information from
subordinates up to managers. Typical means for upward communication besides the chain of
command are suggestion systems, appeal and grievance procedures, complaint systems, counseling
sessions, group meetings, etc.

Horizontal communication is lateral message exchange either within work unit boundaries,
involving peers who report to the same supervisor, or across work unit boundaries, involving
individuals who report to different supervisors. It takes place among departments or people on the
same level of hierarchy. It is useful to coordinate activities. Horizontal communication can take
many forms, including meetings, reports, memos, telephone conversations, and face-to-face
discussions between individuals.

Diagonal communication involves the flow of information among departments or individuals on

different levels of the hierarchy. This occurs often in the case of line and staff departments, in which
the staff has functional authority. It is also common to find diagonal communication among line
departments, again in which one of them has functional authority. The use of diagonal channel would
minimize the time and effort expended by the organization (upward and then horizontal).

Informal Communication
It is a communication, which is not deliberately designed by the organization. It is rather created by
informal groups in order to satisfy their need to interact and share information among themselves.
In the informal communication, information flows in unstructured and unpredictable ways. In other
words, it is a structure less network. Informal communication channel is commonly termed as
grapevine because of its structure less direction of flow. Normally the information which flow in
grave vine is considered to be secret or confidential.

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CHAPTER SIX

THE CONTROLLING FUNCTION

MEANING
 Controlling is the process through which managers assure that actual activities conform to
planned activities.
 Controlling is the process of regulating organizational activities so that actual performance
conforms to expected organizational standards and goals.
 It is checking current performance against predetermined standards contained in the plans.

IMPORTANCE OF CONTROLLING
All the good planning efforts and brilliant ideas in the world do little good if a firm has no system
of managing control. Control, therefore, is an essential part of effective organizational
management. Specifically, control helps an organization adapt to changing conditions, limit
magnification of errors and provide the means to monitor performance.

Adapting to changing conditions: in today’s dynamic and unpredictable business environment,

control plays a crucial role than ever. A properly designed control system allows managers to
effectively anticipate, monitor, and respond to often constantly changing conditions.

Limiting the magnification of errors: generally, a small error or mistake does not adversely affect
organizational operation. However, a small error/mistake left uncorrected (perhaps one undetected
as a result of a lack of control) may be magnified with the progress of time, eventually harming
the whole organization.

Another purpose of controlling is to determine whether people and the various parts of an
organization are on target, achieving the progress toward their objectives that they planned to
achieve. Planning chooses goals and maps out the necessary strategy and tactics. Controlling
attempts to prevent failure (and to promote success) by providing the means to monitor the
performances of individuals, departments, divisions, and the entire organization.

The controlling process is closely associated with the other three functions of management:
planning, organizing and leading. It builds most directly on the planning function by providing
the means for monitoring and making adjustment in performance so that plan can be realized.
Still, controlling also supports the organizing and leading functions by helping ensure those
resources are channeled toward organizational objectives. A combination of well-planned
objectives, strong organization, capable direction and motivation has little probability of success
unless there exists an adequate system of control. Planning, organizing, staffing and directing
must be monitored to maintain their effectiveness and efficiency.

THE CONTROLLING PROCESS

Although control systems must be tailored to specific situations, such systems generally follow
the same basic process. The controlling process has five major steps.

1. Determine Areas to Control

The first major step in the control process is determining the major areas to control, i.e. identify
critical control points. Critical control points include all the areas of an organization's operations
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that directly affect the success of its key operations, areas where failures can not be tolerated, and
costs in time and money are greatest. Managers must make choices because it is expensive and
virtually impossible to control every aspect of an organization’s activities. In addition, employees
often resent having their every move controlled. Managers usually base their major controls on
the organizational goals and objectives developed during the planning process.

2. Establishing Standards
Standards are units of measurements established by management to serve as benchmarks for
comparing performance levels. They spell out specific criteria for evaluating performance and
related employee behaviors. The exact nature of the standards to be used depends on what is
being monitored.

Standards, if possible, must be

Specific and quantitative as much as possible.
Flexible to adopt the changes that may occur over the future.
Challenging and should aim for improvement over past performance.

Generally, standards serve three major purposes related to employee behavior. For one thing,
standards enable employees to understand what is expected and how their work will be evaluated.
This helps employees do an effective job. For another, standards provide a basis for detecting job
difficulties related to personal limitations of organization members. Such limitation can be based
on a lack of ability, training, or experience or on any other job-related deficiency that prevents an
individual from performing properly on the job. Timely identification of deficiencies makes it
possible to take corrective action before the difficulties become serious and possibly irresolvable.
Finally, standards help reduce the potential negative effects of goal incongruence. Goal
incongruence is a condition in which there are major incompatibilities between goals of an
organization member and those of the organization. Such incompatibilities can occur for a variety
of reasons, such as lack of support for organizational objectives (e.g. an employee views the job
as temporary and attempts to do the minimum), and often result in behaviors that are incompatible
with reaching organizational goals. One common manifestation of goal incongruence is employee
theft, which includes wasting an organization's resources, as well as taking equipment, materials
and money.

There are three types of standards: performance standards, corollary standards and standards of
conduct.
Performance standards deal with quality, quantity, cost and time.
Corollary standards support a given level of performance. These include minimum personnel
requirements and adequate physical resources, such as when a company knows it will need at
least five hundred workers and well-equipped factory to produce a certain number of terminals.

Standards of conduct are moral and ethical criteria that shape the behavioral climate of the work
place. They originate from law, custom and religious beliefs.

Examples of standards: Producing 800,000 units per year, increasing market share by 20%,
cutting costs by 15%, answering all customer complaints within 24 hours.

3. Measuring Actual Performance

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Once standards are determined, the next step is measuring performance. For a given standard, a
manager must decide both how to1 measure actual performance and how often2 to do so.

4. Comparing Performance against Standards

This is a step where comparison is made between the “what is” and the “what should be.”
Managers often base their comparisons on information provided in reports (oral and written) that
summarize planned versus actual results, and by working around work areas and observing
conditions, a practice sometimes referred to as Management by Wondering Around (MBWA).
The purpose of comparing actual performance against intended performance is, of course, to
determine if corrective action is needed.

Consequently, the comparison result may show that the actual performance exceeds (positive
deviation), meets (zero deviation), or falls below (negative deviation) expectations (standards).
Accordingly, if performance fulfills expectations (meets standards), no control problem exists.
However, if performance exceeds or fails to meet expectations, further investigation is required to
determine the cause. Performance that exceeds expectations may mean either superior talent or
inappropriately set standards. Performance that fails to meet expectation may likely mean
inappropriately set standards, poor talent or improper use of resources. The key question in both
cases will be, “How much variation from standards is acceptable before action is taken?” The
answer to this question will lead to the development of ranges defining upper and lower limits.
And performance outside of acceptable range servers as a red flag calling for taking the necessary
corrective action.

The managerial principle of exception states that control is enhanced by concentrating on

exceptions, or significant deviations from the expected result or standard. Therefore, in comparing
performance with standards managers need to direct attention to the exception, and by doing so,
managers can save time and effort.

5. Taking Corrective Action (on time)

The corrective action to be taken depends up on the type of deviation that exists. When
performance exactly meets (deviation of zero) or exceeds (positive deviation) the standards set,
usually no corrective action is necessary. However, managers do need to consider recognizing the
positive performance. The type of recognition given can vary from a verbal “well done” for a
routine achievement to more substantial rewards, such as bonuses, training opportunities, or pay
raises, for major achievements or consistently good work. Yet, favorable deviations should be
examined to understand such success. When standards are not meet, managers must carefully
assess the reason why and take corrective action. During this evaluation, managers often
personally check the standards and the related performance measures to determine whether these
are still realistic. Sometimes, managers may conclude that the standards are, in fact,
inappropriate-usually because of changing conditions-and that corrective action to meet standards
is therefore not desirable. More often, though, corrective actions are needed to reach standards.
The standards may have been based on historical data which may be inappropriate to current

1 The means of measuring performance will depend on the standards that have been set.
2 The period of measurement generally depends upon the importance of the goal to the
organization, how quickly the situation is likely to change, and the difficulty and expense of
rectifying a problem if one were to occur.
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conditions. In such instances, the past is a poor basis on which to predict the future. Similarly, the
use of comparative standards may prove to be problematic since no two organizations are alike.

In taking corrective actions, managers must carefully avoid two types of errors: taking corrective
action when no action is warranted and failing to take corrective action when it is clearly needed.

TYPES OF CONTROLLING
In addition to determining the areas they want to control, managers need to consider the types of
controls that they wish to use. Based on the time period in which control is applied in relation to
the operation being performed, or the stage of productive cycle in which controlling is carried out,
there are three basic types of controls: preventive, concurrent, and feedback. Thus, an
organization’s performance can be monitored and controlled at three points: before, during, or
after an activity is completed.

1. Preventive/Steering/ Preliminary / Input Control

Preventive control focuses on the regulation of inputs to ensure that they meet the standards
necessary for the transformation process. It attempts to monitor the quality and/or quantity of
resources (financial, physical, human and information) before they become part of the system.
Preventive control is future oriented and takes place before the operation begins. It focuses on
prevention in order to preclude later serious difficulties in the production process - its aim is to
prevent problems before they arise. Nevertheless, since preventive control can’t cover every
possible contingency, other type of controls may also be needed.

E.g. Entrance exams for colleges and universities, policies, rules, procedures, proper selection and
training of employees, inspecting raw materials, the implementation of induction and orientation
programs-save trial and error cost, frustration of employee. Preventive control comes from an old
saying “A gram of prevention is worth a kg of cure.”

2. Concurrent/Screening/ Yes-No/Checking Control

Concurrent control involves the regulation of ongoing activities that are part of the
transformational process to ensure that they conform to organizational standards. It is designed to
detect and anticipate deviations from standards at various points throughout the processes, i.e. the
controlling is carried out during the actual transformation process. The emphasis here is on
identifying difficulties in the productive process that could result in faulty outputs.

Because concurrent controls involve the monitoring of ongoing activities, they are the only controls that
can cope with contingencies (unexpected events) that cannot be anticipated. When contingencies arise
involving activities in a transformation process, a yes/no decision is required. That is, decision must be
made whether to continue as before or follow an alternative course, or take corrective action, or stop work
altogether. In this way, concurrent controls allow adjustments to be made while work is being done.

E.g. On the job training, on the spot observation, exams, tests, quizzes

3. Feedback/Post-Action/ Output Control

As the name indicates post action control focuses on the end results of the process. It is regulation
exercised after the product (goods or services) has been completed in order to ensure that the final output
meets organizational goals and standards. The information derived is not used for corrective action on a
project because it has been completed.
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The feedback control provides information for a manager to examine and apply to future activities that are
similar to the present one. That is why it is called “historical results guide future actions.” The purpose of
feedback control is to help prevent mistakes in the future and also it can be used as a base for reward; and
in cases where other (preliminary & concurrent) controls are too costly.

E.g. Performance evaluation, financial statement analysis, final exams

Fig 6.2 Major Control Types by Timing

Controls Controls Control

INPUTS TRANSFORMATION OUTPUTS

Preventive Control Concurrent Control Feedback Control

Cybernetic and Non-cybernetic Controls

A basic control process can be either cybernetic or non-cybernetic, depending on the degree to which
human discretion is part of the system. A cybernetic control system is a self-regulating control system
that, once it is put into operation, can automatically monitor the situation and take corrective action when
necessary. E.g. computerized inventory system, a heating system controlled by a thermostat

A non-cybernetic control system is a control system that relies on human discretion as a basic part of its
process.

CHARACTERISTICS OF AN EFFECTIVE CONTROL SYSTEM

Controls may have many different characteristics, but some of the most important are:

Future–Oriented
To be effective, control systems need to help regulate future events, rather than fix blame for past events.
A well designed control system focuses on letting managers know how work is progressing toward unit
objectives, pinpointing unforeseen opportunities that might be developed – all aids to future action

Multidimensional
In most cases, control systems need to be multidimensional in order to capture the major relevant
performance factors, such as, quality, quantity, overhead, etc.

Economically Realistic/ Cost Effective

The cost of implementing a control system should be less, or at most, equal to the benefits derived from
the control system. The benefits received from controls should off-set their expenses.

Accurate
Since control systems provide the basis for future actions, accuracy is vital. Control data that are
inaccurate may be worse than no control at all, since managers may make poor decisions on the basis of
faulty data they believe to be accurate. An inaccurate data from a control system can cause the
organization to take action that will either fail to correct a problem or create a problem when none
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existent. Evaluating the accuracy of the information they receive is one of the most important control tasks
that managers face.

Acceptable to Organization Members

Control systems operate best when they are accepted by the organization members who are affected by
them. Otherwise, members may take actions to override and undermine controls; i.e. controls will not
work unless people want them to. Too many, arbitrary, too few and too rigid controls often cause the
satisfaction and motivation of employees to decline.

Timely
Control systems are designed to provide data on the state of a given production cycle or process as of a
specific time. In order for managers and employees to respond promptly to irregularities, control systems
must provide relevant information soon enough to allow corrective action before there are serious
repercussions or consequences.

Reliability and Validity

Controls not only must be dependable (reliable), but also must measure what they intend to measure (must
be valid). When controls can’t be relied on and are invalid, they are unlikely to be trusted and can lead to
very bad consequences.

Monitor able
Another desirable characteristic of control system is that they can be monitored to ensure that they are
performing as expected. One way of checking a control system is to deliberately insert an imperfection,
such as a defective part, and then observe how long it takes the system to detect and report it to the correct
individual.

Organizationally Realistic
The control system has to be compatible with organizational realities. All standards for performance must
be realistic. Status differences between individuals have to be recognized. Individuals have to be able to
see a relationship between performance levels they are asked to achieve and rewards that will follow.

Flexible
Just as organizations must be flexible to respond rapidly to changing environments, control systems need
to be flexible enough to meet new or revised requirements. Accordingly, they should be designed so that
they can be changed quickly to measure and report new information and track new endeavors.

Focus on Critical Control Points

Critical control points include all the areas of an organization’s operations that directly affect the success
of its key operations. The focus should be on those areas where failures cannot be tolerated and where that
costs in time and money are the greatest.

Easy to Understand
Complexity often means lack of understanding. The simpler the control, the easier it will be to understand
and apply. Controls often become complex because more than one person is responsible for creating,
implementing or interpreting them.

Emphasis on Exception

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A good system of control should work on the exception principle, so that only important deviations are
brought to the attention of management. In other words management does not have to bother with
activities that are running smoothly. This will ensure that managerial attention is directed towards error
and not towards conformity. This would eliminate unnecessary and uneconomic supervision, marginally
beneficial reporting and waste of managerial time.

Overcontrol versus Undercontrol

Since excessive amount of control can make the occurrence of dysfunctional aspects of control systems
more likely, managers need to avoid overcontrol. Overcontrol is the limiting of individual job autonomy to
such a point that it seriously inhibits effective job performance. At the same time, managers need to avoid
going too far in the other direction, which results in a situation of undercontrol. Undercontrol is the
granting of autonomy to an employee to such a point that the organization loses its ability to direct the
individual's efforts toward achieving organizational goals.

Determining the appropriate amount of control that should exist in organizations is a significant
management decision. With the appropriate amount of control, a manager can be reasonably certain that
no major unpleasant surprises will occur and that employees will achieve organizational goals.

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