ARSI UNIVERSITY

SCHOOL OF BUSINESS AND ECONOMICS

DEPARTMENT OF MANAGEMENT
CHAPTER ONE: MANAGEMENT
OVERVIEW
 DEFINITIONS
- No single and universal definition for the term
management.
- F.W.Taylor

Management is the art of knowing what you want to do

and doing it in the best and cheapest way.
- Stanly

Management is the process of decision making and

control over the action of human being for purpose of
attaining the predetermined goals.
CONT…
- H. Fayol
Management is a process of planning, organizing,
commanding, coordinating, and controlling.
- Boone and Kurtz

Management is the use of people and other resources to

accomplish organizational objectives.
CHARACTERISTICS OF MANAGEMENT
- It is goal oriented
- It is a group activity
- It is a social process
- It is a dynamic function
- It is a system of authority
- It is intangible
- It is a profession
SIGNIFICANCE OF MANAGEMENT
- It help to identify companies goals or objectives.
- It facilitate accomplishment of goals by planning
resources and by directing and controlling activities.
- It establish sound organizational structure by clearly
defining authority and responsibility.
- To formulate and implement organizational policies.
- Coordination of factors of production.
MANAGERIAL FUNCTIONS
 The five managerial functions are

1. Planning

5.Controlling 2.Organizing

4. Leading 3. Staffing
PLANNING
1. Planning
- The first function of all managers
- It is concerned with determining the objectives of an
organization and the means of achieving them.
- It is a function that determine in advance
. What should be done.
. How it should be done.
. When it is to be done.
PLANNING (CONT…)
- Planning requires ability to foresee, visualize, and to
look ahead purposefully.
- Plans can be classified as
- Long range
- Intermediate range
- Short range
ORGANIZING
2. Organizing
- It is the function in which the managers develop

the organization structure that G.Manager

allows working together and Finance Production Marketing

achieve organizational goals. Head Head Head

- It involves grouping similar activities in one

department .
- It also involves clearly stating authority and

responsibility.
STAFFING
3. Staffing
- It deals with filling the position in the

organizational structure.
- It involves

. Transferring employees
. Promotion
. Lay off
. Recruiting and selecting
LEADING
4. Leading/Directing
- It is the process of influencing, motivating, and

directing of employees to achieve organizational goals.

- Managers need to understand

. Individual and group behavior

. Techniques of communication
. Techniques of motivation (---?)
. Effective style of leadership(---?)
- The outcome of the leading function is high level

of motivation and commitment by the employees.

CONTROLLING
5. Controlling
- It is the process of comparing actual performance

with the sated standard.

- The aim of controlling is to take corrective action if the
performance is lower than the plan.
- The outcome of the controlling function is the accurate
measurement of performance.
LEVELS OF MANAGEMENT
- One of the best ways to study the activities of
management is classifying them in to different levels.
- Organizations’ level of management varies with

the size of the organization.

- Management level commonly classified in to

three.
LEVELS OF MANAGEMENT

Top Level Managers

Middle Level Managers

Low Level/Operating
Level/First Line managers
CONT…
Top Level Managers
- Manage the overall activity of the organization.

- Establish policies, strategies, long term plans, and make

major decisions.
- Represent the organization (deal with external bodies)

- They are few in number.

- Their title includes Board of Directors, Executive

Committee, Chief Executive, President, and General
Manager.
CONT…
Middle Level Managers
- They are specialists (their activity limited to a

particular area of operation)

- They act as intermediary between top and

operating level managers.

- Develop medium range plans

- They supervise first line managers.

- Their title includes Department Managers,

Division Managers, and Operation Manager.

CONT…
Operating Level Management
- Plan daily and weekly activities (short range plans)

- They manage only non managers.

- Their typical title includes Section Chief, Office

Manager, Foreman, and Supervisor.
 Managers can also be classified based on the scope of
activities they mange.
- Functional Managers
- General Managers
1. Functional Managers have specialized skills in single
area of operation such as accounting, marketing, and
production.
2. General Managers are responsible for overall operation.
- They coordinate two or more departments.
MANAGERIAL ROLES
 All managers must play some role and must have some
skills to be effective.
 Henery Mintzberg identified ten managerial roles by
closely observing the day to day activities of a group of
CEOs and divided them in to three.
MANAGERIAL ROLES

Interpersonal Role Informational Role Decisional Role

• Figurehead Role • Monitor Role • Entrepreneurial

• Leadership Role • Disseminator Role Role
• Liaison Role • Spokesperson Role • Disturbance
Handler Role
• Resource allocator
• Negotiator Role
CONT…
1. Interpersonal Role- Involves dealing with other
people and it arise from managers formal authority.
1.1. Figurehead role
- Managers act as representatives of the

organization.
- Managers represent the organization at

ceremonial and symbolic

functions like making speech,
signing documents, attending
ribbon cutting ceremonies.
CONT…
1.2. Leadership Role
- Managers influence behavior and activities of

their followers in order to accomplish organizational

objectives.
- Leadership role involves hiring, training,

motivating…
CONT…
1.3. Liaison Role
- It refers to dealing with people outside like

customers, government officials, and suppliers.

- It also includes dealing with people inside the

organization like people in different departments.

- Coordinating activities.
CONT…
2. Informational Role
- It involves processing of information.

- It involves receiving and communicating information.

2.1. Monitor Role

- Involves gathering and screening information.

2.2. Disseminator Role

- Involves distributing the screened information.
 2.3. Spokes person role
CONT… When managers transmit the
information to outside of
the organization or to
outside of the unit.
CONT…
3. Decisional Role
3.1. Entrepreneurial Role
- Managers initiate changes to improve

organizational performance.
- Managers mostly use this role at the time they

- initiate new project

- test a new market
- test a new business
CONT…
3.2. Disturbance handler role
-Managers play this role when they deal with problems like---?

- Conflict between workers

- Breaking contract
- Labor strikes
- bankruptcy
CONT…
3.3. Resource Allocator
- Managers play this role when they distribute resources
like
- Human Resource
- Time…
3.4. Negotiator Role
- When managers negotiate or deal with other

organization or with in they are playing negotiator role.

MANAGERIAL SKILLS
 Managerial Skills and their Relative Importance
- Skill is an ability to perform a particular task. As

the job of managers is complex it needs

multidimensional skills.
- The three managerial skills are

1. Technical Skills
2. Human Relation/ Interpersonal Skills
3. Conceptual skills
CONT…

1. Technical Skills
- It is the ability to use specific knowledge,
technique, methods or resources in specialized field.
- It is acquired through education
- Formal
- Informal
- It is very important for first line managers
CONT…
2. Human Relation/ Interpersonal Skills
- It is the manager’s ability to work with other

people and to work effectively as a group member.

- It includes the managers ability to

- Resolve Conflict
- Communicate effectively
- Motivate
- Facilitate
- Coordinate
CONT…
3. Conceptual skills
- Managers need the mental capacity to understand the
overall working of the organization.
- It involves the managers information processing,
thinking, and planning abilities.
- The managerial activities that require

conceptual skill includes decision making, planning, and

organizing.
- Conceptual skill is more important for the top

level managers.
SKILLS NEEDED BY MANAGERS

Top

Middle

1st Line

Technical Human Conceptual

IS MANAGEMENT A SCIENCE OR ART?
 Science is a systematized knowledge derived from
observation, study, and experimentation carried on in
order to determine the natures and principles of the
subject under study.
 Management is a science because it is based on
principles which are derived from the detailed study and
observation of - Organization
- Authority
- Communication
- Motivation
 Art is the application of knowledge and skills to the
specific time, place and condition tactfully, creatively
and wisely.
 Management is an art because managers apply
Judgment, decision making, and motivation.
END OF CHAPTER ONE
CHAPTER TWO: EMERGENCY AND
DEVELOPMENT OF MANAGEMENT THOUGHT
 Management in Antiquity and Pioneer Contributors
- Management is as old as human civilization. That is
since the day when people first attempted to accomplish
goals by working together in a group.
- Management thought has been shaped over a period of
centuries by three major factors
- Social- refers to those aspects of a culture
that guide and influence relationship
among people.
CONT’D
- Economical- pertain to the availability,
production and distribution of resources in a
society.
- Political- refers to the influence of legal and political
institution on people and organization.
 From the examples that show management was effectively
used in ancient time
- Egyptian civilization- the pyramid
- Romans(4 area,13 dioces,100 province)
- Greece- uniform method of doing tasks
- Ethiopia
EARLY MANAGEMENT PIONEERS
(CONTRIBUTORS)
 Although the management practice go back several
thousand years, development of management as field of
knowledge is recent; it starts with the industrial
revolution(in the early 1800 s)
PRE-CLASICAL CONTRIBUTORS
1. Robert Owen (1771-1858)
 He was a British industrialist and owner-manager of
cotton mills in Scotland. At that time working and
living conditions for employees were very poor.
Workers were treated as tools and machine.
 From the changes that he made
- Reduced working hrs from 13 to 10 and half
hrs/day.
- Set minimum hiring age 10 years.
- Provided meal, housing, and shopping facilities for
employees.
- Improved working condition in the factory
 For his contribution Robert Owen called “father of
modern personnel”.
2. Charles Babbage (1792-1871)
 He built the first practical mechanical calculator and a
prototype of modern computers because of this he is
called “The father of modern computing”.
 From the contributions of Babbage to management
- The use of mathematics to efficiently use facilities
and materials.
- Economies of scale in manufacturing.
- Profit sharing system(bonus for suggestion and part of
wage that depends on the company profit)
- Division of labor(improve the skill of workers and
reduce training costs)
- Importance of good relationship between management
and workers.
3. Adam Smith
 He contributed to the development of management
thought by writing about division of labor in his book
“The wealth of nation”.
 He indicated that specialization could increase
efficiency by
- Minimizing the loss of time
- Increasing speed
- helping invention of machinery
1. CLASSICAL MANAGEMENT THEORY
 Classical management theory emerged during the
industrial revolution.
 The classical viewpoint is a perspective on management
that emphasize finding ways to manage work and
organizations more efficiently.
 It is made up of three different approaches:
- Scientific Management
- Administrative Management(classical organization
theory)
- Bureaucratic Management.
1.1. SCIENTIFIC MANAGEMENT THEORY
 This theory emphasize on the scientific study of work
methods in order to improve worker efficiency.
 The major contributor of scientific management is Fredric W.
Taylor (father of scientific management)
 Additional contributors:

- Frank and Lillian Gilbreth

- Henry Gantt
FREDERICK W.TAYLOR (1856-1915)
 Taylor is also known as “the father of scientific
management”
 Taylor was a foreman in Midvale steel company. He
studied the companies problem and found out that
- Management had no clear concept of worker-
management responsibility.
- No effective work standards were applied
- No incentive was used to improve labor’s
performance
- Managerial decisions were made based on
intuition, rule of thumb.
- High level of soldiering(delay in performance) fearing
turnoff and wrong pay system.
 To solve the above mentioned problems Taylor put as a
solution
1. Timed each element of the work and standardized
how much each worker has to produce given the required
resource per day or per month.
2. Introduced “piece rate pay system” (differential rate
system)
 From the studies Taylor conducted
1. Time and Motion Study
- The objective of this study was to standardize

activities(to determine full days work)

The steps - divide the task in to motions
- eliminate unnecessary motion
- select the best way to do the job
- timing each motion (with out allowance
for delay)
- understand how many unit to produce
per day.
2. Uniform method of routine task
Objective: to adjust work with worker
- Intended to make uniform the conditions under which
the standards could be set and met.
3. Functional Foremanship study
Objective:To scientifically select the best worker for a
given job based on his skill and potential for learning.
 Which man for which work
4. Individual Incentive
Objective: to determine the appropriate wage or salary
 This study helped him to find a solution for the problem
of soldiering.
 After conducting the above study he wrote a book called
“ principle of scientific management”. The five
principles included are
1. Replace the rule of thumb method by scientific method
2. Work for maximum output instead of restricted output
3. Heartily cooperate with the workers
4. Scientifically select, train and develop workers
5. Equal division of work and responsibility between
worker and managers.
 FRANK AND LILIAN GILBRETHS
 Frank Gilbreth (father of motion study)
 Lilian Gilbreths (first lady of management)

 They are contemporaries of Taylor and part of the original scientific

management pioneers
 They work on the elimination of waste and the discovery of ‘one
best way’ of doing work.
 Identified 18 on the job motions and called them therbligs.

 He decreases the movements from 18 to 5 at the same time he

decrease the production time by 2 and half.
HENRY L. GANTT
 He developed a graphical method of scheduling work, which
helps to increase workers output.
 The chart called Gant chart.

 The chart helps for planning and controlling work.

CONTRIBUTIONS OF SCIENTIFIC
MANAGEMENT THEORY
 Specialization increase productivity
 The efficiency techniques- Time and motion study

 Made us to recognize the importance of scientifically

selecting and developing workers.
WEAKNESSES OF SCIENTIFIC
MANAGEMENT
1. It misread the human element
 It equated people with machine(Time and motion
study)
 It saw no other motivator other than money

2. It was relevant to solve only the problem of lower level

managers (not considered the whole organization)
3. Its application was not smooth
1.2. CLASSICAL ORGANIZATION(ADMINISTRATIVE
MANAGEMENT) THEORY
 This theory focused on the management of the entire organization unlike the
scientific management theory which focuses on production.
 Henri Fayol was the first to develop this theory.
 He is the one who identified

1. The major types of activities involved in an industry or a business as:

 Technical
 commercial
 Security
 Financial
 Accounting
 Managerial

2. Management as a separate field of study

3. General management principles
FAYOL’S 14 PRINCIPLES OF
MANAGEMENT
1. Division of labor- specialization
2. Authority and responsibility
3. Discipline-respect rules and regulations of an
organization
4. Unity of command- one superior
5. Unity of direction- one set of objectives
6. Subordination of individual interest to the general
interest- give priority for organizational goal
7. Centralization- amount of authority concentrated at the
top
 Remuneration of staff/personnel
 Scalar chain/chain of command- defines the path of
communication.
 Order- things should exist in the right place at the right
time.
 Equity-managers should be friendly and fair.

 Stability of tenure of personnel

 Initiative- managers should not decide every thing.

 Esprit de corps- In union there is strength.

CONTRIBUTIONS OF CLASSICAL
ORGANIZATION THEORY
 The position Fayol took in distinguishing management
as a discipline is worth studying
 The 14 basic management principles

 The five element of administration, which with minor

modification today are called functions of management.
LIMITATIONS OF CLASSICAL
ORGANIZATION THEORY
 Some of the principles are rigid.
Example
 Chain of command
 Unity of command

 The 14 principles are applicable in a relatively stable and

predictable environment hence they have less
applicability in the today’s turbulent environment.
 The principles are to general for today's complex
organization.
1.3. BUREAUCRATIC THEORY
 Max Weber introduces most of the concepts in this
theory.
 Taylor and Fayol: concerned for solving practical
managerials problems.
 Max Weber: concerned for the more fundamental issues
of how organizations are designed and structured.
CHARACTERISTICS OF BUREAUCRACY
1. Division of labor
2. Managerial hierarchy/chain of command
3. Clear authority and responsibility.
4. Formal rules and other methods
5. Mgmt separate from ownership
BENEFITS OF BUREAUCRACY
 Specialization
 Overlapping duties can easily be avoided

 Hiring and promotion are based on merits and excellence

 Organization continues despite the manager

 Consistent employee behavior

WEAKNESS OF BUREAUCRACY
 There is too much paper work and red tapes.
 Resistance to new ideas and change

 Disregards the informal organization or the social

environment
2. BEHAVIORAL MANAGEMENT THEORY
 It is a study of observable and verifiable human behavior in
organizations by using scientific methods.
 Abraham Maslow, Douglas Macgregor & Elton Mayo were
the well known contributors of this theory.
 Of these Elton Mayo was the most prominent one.

 Focus on human dimensions of organization.

 Objective: to identify factors that affect productivity of

employees.
HAWTHORNE STUDY
 The study had four phases:
Phase one: Illumination experiment
 To study the effect of illumination on out put
 Finding: no strong relationship b/n output and light

Phase two: the relay assembly test room experiment

 To study the effect of rest period on productivity

 Finding: Productivity is not affected by physical change.

 CONT’D
Phase three: the massive interview program
 To identify factors that affect employees productivity.

 Over 20,000 employees were involved

 Finding: peers had an effect on individuals performance

Phase four: the Bank wiring observation room study

 To study the effect of work piece incentives(economic
incentives) on performance
 Finding: incentives are less important in determining
out put.
FINDINGS OF HAWTHORNE
EXPERIMENT
 Physical working condition did not affect productivity
 There are other factors that affect productivity. thus are social
and psychological nature
 Informal groups were important in organizational work
environment.
 Leadership that can understand individual and group behavior
were necessary
 Hawthorne effect: when people know that they are being
watched, they will act differently than when they are not
aware of being observed.
CONTRIBUTIONS OF BEHAVIORAL
MANAGEMENT THEORY
 Change the management thinking: managers realize the
importance of people and realize workers as valuable
resources.
 Found out that the satisfaction of social and
psychological needs could result in more performance of
workers.
LIMITATIONS OF BEHAVIORAL
MANAGEMENT THEORY
 The complexity of individual behavior makes the
predication of that behavior difficult.
 There style was unethical as they used human being as
experimental units in laboratory.
3. MODERN THEORY OF MANAGEMENT
 Different from the classical and behavioral management
theories, the modern approaches to management
considers the external environment.
3.1. System Approach
 A system is an interrelated and interdependent set of
elements functioning as a whole to achieve a common
goal.
 Organizational system has four major components

Input- resources that help to produce goods or

service.
Transformation process- ability to convert input to output
Output- the product or the service.
Feedback-information about results and organizational
status.
TYPES OF SYSTEM
 There are two types of systems
 Open system- there is continual interaction with the
environment.
 From the characteristics of open system

- Negative Entropy- ability to bring a new

energy in the form of input and feedback.
- Synergy- “the whole is greater than the sum of
it’s parts”.
- Steady state- balanced input and output.
 Closed system- few or no interaction with the
environment.

3.2. Contingency/Situational theory

 This theory states that, there is no single plan, universal
principle, organizational structure, leadership style that
will fit all situations.
3.3. Quantitative/management science approach
 It uses mathematical and statistical techniques,
mathematical programming, modeling, and computer
science to solve complex operational and strategic
issues.
 It involves applying scientific approach for decision
making.
END OF CHAPTER TWO
Chapter Three
planning
“ If you don’t plan, you are planning for failure”
CHAPTER THREE: PLANNING
 Planning is the management of the organization's future in an
uncertain environment.
 Planning is the process by which managers set objectives,
assess the future and develop courses of action to accomplish
these objectives.
 Planning answers six basic questions in regard to any
intended activity (objective).
- what
- when
- where
- who
- how and
- how much
NATURE OF PLANNING
 It is goal oriented.
 Primacy of planning.

 Pervasiveness/ universality of planning.

 Planning and information are deeply related.

 Planning is a continuous process.

 Planning is the means to an end.

 Plans are arranged in a hierarchy.

Corporate
plans
Departmental/
divisional
plans

Unit plans
IMPORTANCE OF PLANNING
 It provides direction for an organization by specifying
objectives.
 It helps to accomplish the objective.

 It helps to reduce uncertain.

 It provides guideline for decision making.

 It provides basis for controlling or it facilitates

controlling.
 It promote efficiency.
ORGANIZATIONAL OBJECTIVES/GOALS
 The term objective or goal indicate an end result to be
sought and accomplished.

 Are goal and objective similar?

 Goals describe future expected outcomes or states. They

provide programmatic directions.
 Objectives are realistic, specific, measurable, and time
limited.
THE PLANNING PROCESS
 Planning can be considered as a serious of sequential
steps.
1. Establishing objective/setting organizational goals. It
has three steps.
- Assessing the present situation
- Anticipating future conditions
- Setting the objectives
2. Developing premises- investigating the company’s
environment.
- Internal Environment
- External Environment through PEST
3. Determining alternative courses of action
- Roads(actions) to achieve the objective.

- Try to create as many roads as possible

4. Evaluating alternative courses of action

- Evaluating the cost and benefit

5. Selecting a course of action

- Adapting the plan.
6. Formulating derivative plans(supportive plans)
7. Budgeting plans.
8. Implementing the plan.
Implementing involves determining
- what resource will be used
- who will be involved
- how the plan will be evaluated
9. Controlling and evaluating the results
TYPES OF PLAN
Factor Type
Time -Short-range
-Intermediate
-Long-range
How repeatedly used -Single use plan(program, project,
budget)
-Standing plans(policies, procedure,
rules)
Breadth/Scope - Strategic
- Tactical
- Operational
1. TIME DIMENSION

 Planning can be divided in to three based on the length

of time a plan covers.
1. Long-range plan- covers five year or more.
2. Medium-range/ intermediate plan- covers between one
and five years.
3. Short-range plan- covers one year or less.
 2. USE DIMENSION
This classification is based on their usage(how
repeatedly/frequently a given plan is used)
2.1. Single use plans
 Are developed to achieve specific purposes and dissolved
when these have been accomplished.
 They are developed for relatively unique and non-repetitive
situation.
A. Program
B. Project
C. Budget

88
 cont….
A. Program specifies the objectives, major steps necessary to
achieve these objectives, individuals or departments responsible
for each step, the order of the various steps, and resources to be
employed.

A program is characterized as:

 A one-time organizational goal.
 May take several years to complete.
 Large in scope and complex in nature
 May use standing plans and other single use plans to be effective.
Example: Building a new headquarters’

89
 Cont…
B. Projects
- It is a single use plan that is a component of a program or that
is on a smaller scale than a program.
characteristics of project
 It is a plan for attaining a one-time organizational goal.

 Smaller in scope and complexity than a program; shorter

time duration.
 Often one part of a large program

 Example: renovate the office

 Setting up the company's internet

90
 Cont…
C. Budget

statements of expected results expressed in numerical terms

Budgets are statements of financial resources set aside for specific
activities in a given period of time.
It is a device to accomplish a program or a project.
 It can be considered as a part in a program or a project

91
 2.2. STANDING PLANS
 Standing plans- are plans that provide an ongoing guidance for
performing recurring activates.
 It is formulated to be used again and again.
 Standing plans allow managers to save time.
 Standing plans become valuable under relatively stable situations.
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.

92
 TYPES OF STANDING PLANS
A. Policies
B. Procedures
C. Rules
A. Policies
 It is a general guidelines for decision making.
 It provides boundaries or limits within which decisions are made.
 While organization's goal decide 'what to do' policies deal with 'how
to do'.

Example : Not to accept returned merchandise.

93
 B. Procedure
 Procedures are statements that detail the exact manner in which
certain activities must be accomplished.
 It provides a detailed step by step instruction as to what should be
done.
 Procedure is narrower in scope than policies.

Example,
1. Procedure for withdraw money from bank.
2. the procedure for handling orders.
3. Purchasing procedure in an organization

94
 C. Rule

o Rules specify actions that must be taken or must not be

taken with respect to a situation.
 Rules allow no discretion or judgment.

 Rules are the most explicitly stated(clearly stated) of

standing plans
 Rules demand strict compliance

Example-No smoking
SIMILARITIES OF POLICY, PROCEDURE
AND RULE
 They are directives to guide people’s behavior to the
desired end.
 All are plans to be followed in the future.

DIFFERENCES OF POLICY, PROCEDURE, AND RULE

o Policy is guide to thinking.

o Procedures and rules are guides to action.

o Policy render freedom to make a judgment.

o Rules and procedures render no freedom.

 Rules guide action without specifying a time sequence.
 Procedures specify a time sequence.

 Although procedures may incorporate rules, rules do not

incorporate procedures.
SCOPE/BREADTH DIMENSION
 Scope refers to comprehensiveness (detail) of the plan.
 Based on scope plans divided in to three

A. Strategic planning
 It is a process of developing organizational objectives.

 Mostly strategic plans are long range.

 It is expressed in relatively general terms.

 It is top level managers responsibility.

B. Tactical plan
 Tactical plans support implementation of strategic plan
and achievement of strategic goals.
 Tactical plans have shorter time frame and narrower in
scope.
 Middle level managers are responsible to develop
tactical plans.
C. Operational Plan
 Concerned with the day to day operation of the
organization.
 Made by lower level managers.
 It is detailed plan.
 Have short time frame.
CHARACTERISTICS OF GOOD PLAN
 Objectivity
 Futurity

 Flexibility

 Stability

 Comprehensiveness/clear

 Contingency planning/ alternative plan

 3.5 decision making
3.5.1. Meaning
• Decision making is a rational choice or selection of one
alternative from among a set of alternatives.
• All managerial functions involve decision making, but the critical
decision making is during planning.

Features of decision making:

1. is a process of selection and the aim is to select the best

alternative.
2. is aimed at achieving certain goals.
3. involves the evaluation of available alternatives,

102
 Decision making process

These choices are made based on the following six-step

1. Identifying the problem

2. Develop alternatives
3. Evaluate the alternatives
4. Select the best alternative
5. Implementing

103
1. Identifying the problem

 Problems are prerequisites for decision.

 From the indicators of problems

 Deviations from past performance- a sudden change

in the past performance indicates that a problem has
developed.
Example- a decline in sales.
 Deviation from plan- when results do not meet
planned objectives.
 Out side criticism
 Decision makers face three types of problems
 Crisis problem is a serious difficulty requiring
immediate action.
 Non-crisis problem is a problem that requires a
solution but not immediate.
 Opportunity problem is a situation that involves new
ideas that could be used rather than difficulties that
must be resolved.
STAGES IN PROBLEM IDENTIFICATION
 Scanning stage- monitoring the environmental change.
 Categorization stage- classifying the situation as a
problem and no problem.
 Diagnosis stage- specifying both the nature and the
causes of the problem.
2. DEVELOPING ALTERNATIVES
 List as many alternative solutions to the problem as you
can.

3. EVALUATING ALTERNATIVE
 Analyze the advantage and disadvantage of each
alternative.

4. CHOOSING AN ALTERNATIVE
 Choosing the alternative with few disadvantage and
more advantage.
5. IMPLEMENTING AND MONITORING
THE CHOSEN SOLUTION
 Implementing is putting the selected solution in to
action.
 Monitoring is necessary to ensure the problem is solved.
DECISION MAKING CONDITIONS
 Based on the information the decision makers have there
are three decision making conditions.
1. Decision making under certainty
o In this case the decision maker has complete
knowledge (perfect information) of consequences of
every decision choice (alternative).
o The probability of making poor decision is very low.
2. Decision making under risk
 The decision maker has less than complete knowledge.
 The decision maker is in the dilemma of choosing the
best alternative solution.
 There is a probability of making poor decision.
3. Decision making under uncertainty
 The decision maker has no information about the
outcome of each course of actions.
TYPES OF DECISIONS
1. Programmed decisions
 They are made in routine, repetitive, and well
structured situations through the use of predetermined
decision rules, procedure, and policies.
 Most of the decisions of first line managers are
programmed decisions.
2. Non programmed decisions
 To solve non routine and novel (strange or new
problems)
 Because of their newness they involve significant
amount of uncertainty.
 Non programmed decisions are mostly made by top level
managers.
Example- acquiring another firm.

Why do managers make poor decision?

 From the causes of poor decision
 Lack of adequate time.

 Failure to define goals clearly.

 Using unreliable source of information.

 Fear of consequence.

 Focus on symptoms rather than causes.

 Reliance on hunch and intuition.

END OF CHAPTER THREE
CHAPTER FOUR: ORGANIZING AND
STAFFING FUNCTION
Meaning of Organizing
o It is a process of deciding how best to group
organizational elements (human and non-human
(physical resources) .
 The organizing process leads to the creation of
organization structure, which defines how tasks are
divided and resources deployed.
IMPORTANCE OF ORGANIZING
 Organizing promotes collaboration . Thus, it improves
communication within the organization.
 Organizing sets clear-cut lines of authority and
responsibility
 Organizing improves the directing and controlling
functions of managers.
 Organizing develops maximum use of time, human, and
material resources.
TYPES OF ORGANIZATIONS
1. Formal organization
 The formal organization represents the classification of
activities within the enterprise, indicates who reports to
whom.

Characteristics of formal organization

 It is properly planned
 It is based on delegated authority
 It is deliberately impersonal

 Organizational charts are usually drawn

 Unity of command is normally maintained

 The responsibility and accountability at all levels of
organization is clearly defined.
2. Informal organization
 It is an organization which establishes the relationship
on the basis of the likes and dislikes of officers without
considering the rules, regulations and procedures.
CHARACTERISTICS OF INFORMAL ORGANIZATION

 arises voluntarily.
 It is a social structure formed to meet personal needs.
 has no place in the organization chart
 can be found on all levels of organization
 The rules and traditions are not written but are
commonly followed.
 Develops from habits, conduct, and behavior of
social groups.
 Informal organization is one of the parts of total
organization
MAJOR ELEMENTS OF ORGANIZING
FUNCTION
DIVISION OF LABOR
 Division of labor refers to the process of dividing the
total task of a unit to successively smaller jobs.
 overall task must be split into its component jobs and
apportioned among the people involved
 All jobs are specialized to some degree, since every one
cannot do everything, but some jobs are considerably
more specialized than other.
 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
DEPARTMENTALIZATION
 Departmentalization is a means of dividing the large and
complex organization into smaller, flexible
administrative unit.
 Department is a distinct area division or branch of an
organization over which a manager has authority for the
performance of specified activities.
 The five common ways of departmentalization are
functional, territorial, product, service and customer.
1. Functional Departmentalization- groups together those
jobs involving the same or similar activities.
 It is common in smaller organizations.

Advantage
- Each department can be staffed by experts in that
functional area.
- Facilitates supervision.

- Easy to coordinate activities in each department.

Disadvantage(for larger organizations)
- Slow decision making because of excessive
bureaucracy.
- Employees may concentrate too narrowly (only in their
unit.
2. Product Departmentalization- involves grouping and
arranging activities around products or product groups.
 Mostly used by large business organizations.
Advantage
- All activities associated with one product can easily be
integrated.
- Enhanced speed of decision making.

- Performance of each product group can easily be

assessed.
Disadvantages
- Managers in each department may focus only on their
product.
- Administrative cost rises(each department must have its
own functional specialists).
3. Customer departmentalization- the organization
structure its activities to respond to and interact with
specific customers or customer groups.
Advantage
- Give attention for unique customers or customer groups.

Disadvantage
- Requires large administrative staff to integrate the
activities of the various departments.
4. Location departmentalization- groups jobs on the basis
of defined geographic sites or areas.
Advantage
 It enables the organization to respond easily to unique
customer and environmental characteristics in the
various regions.
Disadvantage
 Larger administrative staff may be required.
5. Matrix departmentalization
 combination of functional and product
departmentalization
 more flexible
DELEGATION OF AUTHORITY
Authority
 It is the formal and legitimate right of a manager to make
decision issue order, and allocate resources to achieve
organizational desired out come.
 It is the formal right of a superior to command and
compel his subordinates to perform a certain act.
 level of authority varies with levels of management

 It carries with it the burden of responsibility

Delegation of Authority
 It is the downward pushing of authority from superiors
to subordinates to make decision within their area of
responsibilities.
 use to transfer authority and responsibility to positions
below them.

 Why do managers delegate their authority?

REASONS FOR DELEGATION
 Enables the manager to get more work done.
 Ease the managers burden.

 Some times the subordinates may have more expertise.

 It helps to develop the subordinates.

 Why do managers refuse to delegate

authority?
PROBLEMS IN DELEGATION
 Fear of loss of power.
 “I can do it better myself”

 Managers may not have confidence on the

subordinates.
 Fear of being exposed-fearing the subordinates will do
better than the managers themselves.
 Some subordinates are reluctant to accept delegation.
(fear of fail)
CENTRALIZATION AND
DECENTRALIZATION
Centralization-is the extent to which power and authority
are systematically retained by top managers.
If an organization is centralized
o Decision-making power remains at the top

o 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.
When decentralization is greater:
 The greater is the number of decisions made at lower
level of the organization.
 The less a subordinate has to refer to his/her manager
prior to a decision.
AUTHORITY RELATIONS IN ORGANIZATION
(LINE, STAFF, FUNCTIONAL)
 Authority is the legitimate right to make decision.
 There are three types of authority

1. line authority
 It is an exercise of direct command over the subordinate.

 It directly contribute to achieving the organizations

goals.
Eg. Department head
2. Staff authority
 It is the authority to give advise , assistance and help.

 Have no direct supervisory control over subordinates.

 Staff help in gathering and analyzing data

Eg. R&D advisor. Legal advisor

3. Functional authority
 It is the right given to an individual or a department to
control specified process or practices undertaken by persons
in other departments.
Eg. The finance manager command to the marketing manager.
Staff authority
General Manager Functional Au.
Legal
Council

Production Department Marketing Department

Manufact. Quality C. Advertising Sale

CONFLICT BETWEEN STAFF AND LINE MANAGERS

From the reasons of conflict between staff and line

managers.
 Threats to Authority

 Dependence on knowledge

 Staff managers may exceed their authority

 Demographic factor

 What are the solutions for the above problems?

The solutions for the conflict
 Understanding authority relationship

Line Authority- making decision

Staff Authority- assist and counsel
 Line managers should listen to what the staff manager
advice.
 The information of staff managers should be complete.

 Keeping the staff informed.

SPAN OF MANAGEMENT/ SPAN OF
CONTROL
 Span of management refers to the number of subordinates who report
directly to a manager.
 It can be – Wide

_ Narrow
1. Narrow span of management-
superior controls fewer number
of subordinates.
Characteristics
 Tall organizational structure
 More communication between
superiors and subordinates.
 Centralized authority
 Managers are underutilized and
their subordinates are over controlled
Advantage
 Easy communication between subordinates and
superiors.
 Easy to coordinate and to control activities.

Disadvantage
 Superiors too much involved in the subordinates activity.

 Excessive distance between top and lower level

managers.
 High cost due to many levels.
2. Wide Span
Characteristics
 Many subordinates report to a superior.

 Flat organization with fewer

managerial levels.
 Decentralized authority.

Advantage
 Superior delegation.

Disadvantage
 Superior may loss control.

 Overloaded superiors may become decision bottleneck.

 Requires exceptional quality of managers.

Centralization Narrower span more
levels of management
Factors Determining Span of Management
 Ability of the manager

 Subordinates motivation, commitment, and ability

 The type of the subordinates work

 Managers personality(need to share power)

 Economic factor
ORGANIZATIONAL STRUCTURE
 Organizational structure: is the arrangement of people
and tasks to accomplish organizational goals.
 One aid to visualize organization structure is the
organization chart.
 Organizational chart: It is a line diagram that depicts
the broad outlines of an organization’s structure.
THE ORGANIZATION CHART CAN
TELL US:
1. Who reports to whom (chain of command)
2. The number of managerial levels
3. The span of control.
4. Channel of official communication
5. How the organization is structured by function,
territory,…
6. The work being done in each job
7. The hierarchy of decision-making
8. Type of authority relationships line authority, staff
authority, and functional authority.
STAFFING
The staffing function follows the function of planning and
organizing

 Staffing is filling and keeping field positions in the

organizational structure through the right man power
 Staffing is the executive function of recruiting,
selecting, training, developing, promoting, and retiring
subordinates.
 Manpower planning- is the process of forecasting the
number and type of personnel.
 Recruitment- is the process of searching for prospective
employees.
 Selection- involves screening or evaluation of
applicants.
 Orientation- is a socializing process by which new
employee is provided with information about work
environment and operating realities.
 Training and development-
Training: It is the process of increasing the knowledge and
skills of an employee for doing a particular job
Development: It refers to the growth of an individual in all
respects - physically, intellectually, and socially
 Performance appraisal
END OF CHAPTER FOUR
CHAPTER FIVE: THE
DIRECTING/LEADING
FUNCTION
 Leadership is the process of influencing a group or
individual to set a goal or achieve a goal.

 How leaders influence others? (why do people accept the

influence of a leader?)
SOURCES OF POWER
 There are five major sources of power
1. Legitimate power- derived from persons official
position.
2. Reward power- derived from persons ability to give
reward and different kinds of benefits.
3. Coercive power- derived from persons ability to
punish.
4. Expert power- derived from the followers belief that
the superior possesses outstanding skills, knowledge,
and expertise in certain area.
5. Referent power/ charismatic power- derived from being
admired and liked by others.
AUTHORITY VERSUS POWER

Power
Authority
• Positional • Personal
• Narrower • Broader
• Change with the • Some power change
position with position
• Can be delegated (legitimate, reward,
coercive) some don’t
change(expert,
referent)
• Some power can’t be
delegated(Expert,
referent)
LEADERSHIP THEORIES
1. Trait Theory
 Originated from “great man theory” (Leader are born
not made)
 It states that leaders are taller, good appearance, more
self confident…
2. Behavioral Theories
 Studies behaviors that made leaders effective.
 States that leaders have no distinguishing traits.
 Two studies included
A. University of Michigan Studies
- In this study it is concluded that there are two types of
leadership styles.
- Job centered- interested on performance of
work.
- Employee centered- interested in welfare of the
subordinate.
B. Ohio State Studies
- Identified two kinds of leaders behavior
- Initiating structure behavior- the ability of leader to
establish well defined pattern and channel of
communication and develop ways of getting the job
done.
- Consideration- the ability of the leader to respect the
subordinates idea and two way communication.

High
Most efficient
Consideration Leadership style

Worst Leadership
Style
Low Initiating structure High
3. Contingency/ Situational Leadership Theories
 It states that successful leadership depends on the
relationship between the organizational situation and the
leader’s style.
  Theory X and Y assumptions (Douglas MC Gregor)

Theory X Theory Y
The manager assumes -Most people hate work -People like work
-Most are lazy - People don’t avoid work
-People avoid work if
possible
Need for direction - People should directed - People are self directed
and closely controlled
Motivation -Coercion (negative - Gives rewards
motivation)
LEADERSHIP STYLES
 Three types of leadership based on the degree to which
managers share decision making authority with
subordinates:
1. Autocratic Leadership style
Characteristics
 manager does not share decision-making authority
 Managers tend to be heavily work – centred,

 placing most of their emphasis on task accomplishment

little on the human elements.
 Managers’ emphasis on close control
 Managers’ willingness to delegate a very little decision-
making authority.
 No flow of information from subordinates

 Sensitivity of managers about their authority.

 Leader’s assumption that payment is a just reward for

working
2. Democratic Leadership style
Characteristics
 Leaders shares decision –making authority with
subordinates.
 Leaders who have high concern for both people and
work practice it.
 Leaders are not much sensitive about their authority

 participate employees in decision making

 Leaders Appreciate suggestions from subordinates

 Leaders Exercise broad supervision

 Leaders Motivate subordinates with rewards

3. Laissez-faire (free-rein style)
 It is leadership approach in which a manager develops a
frame work for subordinates in which they can act and leave
decision making authority to the subordinates and remain for
consultation.
 It is employed by managers who are basically uninvolved in
the operations of the unit.
 This type of leadership is mostly applied in organizations
with highly skilled and well-trained professional.
4.Situational leadership style
 It is leadership approach in which managers utilize the
combination of the above style depending on the
situation in external environment.
MOTIVATION
 Motivation- is an inner desire to satisfy an unsatisfied
need.
 It is an internal force that energize behaviour and gives
direction to behaviour.

Can we measure motivation ?

MOTIVATION CYCLE

Need
Deficiency

Need Goal Directed

Satisfaction Behavior

 How do you relate motivation and satisfaction?

 How do you relate motivation and performance?
THEORIES OF MOTIVATION
1. Carrot and stick approach
 “ give carrot for donkey to make go quick and bit
with stick if it refuses to move fast having eaten the
carrot”.
 In an organization, it means that pay adequate money to
your employees to motivate them or to make them
work; if they fail to perform fairly, punish them to work
in front of the worker
Failures of this approach
 Carrot can be obtained without differentiation in
performance.
 Stick gives rise to defensive behavior.
CONT…
2. Money as a motivator
 Money can be used as a motivator in the following
conditions.
- For people who are in low living Standard
- If the amount of money is very significant
- When the payment is differentiated for different
levels of performance.
3. The need hierarchy approach

- Maslow’s need hierarchy

-ERG Theory
3.1. Maslow’s Need Hierarchy
 Maslow proposed that motivation is the result of needs
and a human need can be arranged in a hierarchy.
 According to Maslow human need form a five levels of
hierarchy.

Self actualization

Esteem

Social/Love

Safety/Security

Physiological
 Maslow believes a satisfied need is not a motivator.
 physiological needs- includes basic needs such as need
for food, cloth, shelter, sex etc.
 Safety needs- are needs to avoid financial and physical
problems.
 Social needs- are needs for friendship, affiliation,
attraction etc.
 Esteem needs-are needs for self respect, recognitions etc.

 Self-actualization needs- need of accomplishing

something.
HOW MANAGERS FULFIL NEEDS TO THE EMPLOYEES?

Types of need Ways of fulfilling the need

• Physiological  Paying adequate wage and salaries so that employee can
needs buy basic necessities.
 Providing quality work life, making work environment
• Safety Needs smart, keep in pension plans, purchasing protection
clothes (gloves)

 Allowing employees to strengthen informal groups and

• Social Needs
to communicate each other at work place

 Increasing responsibilities to workers and appreciating

• Esteem Needs them on their performances

 Training employees whose challenging duties and 18–

• Self Actualization making environment smooth for employees 170
3.2. ERG Theory- by Clayton Alderfer

Self
actualization
Growth

Esteem
Relatedness
Social/Love

Safety/Security

Existence
Physiological
DIFFERENCE BETWEEN MASLOW’S
NEED HIERARCHY AND ERG
 ERG states more than one levels of need can cause
motivation at the same time.
 ERG has Frustration-Regression element(if needs remain
unsatisfied the individual become frustrated and regress
to the lower level needs again) which do not exist in
Maslow’s need hierarchy.
4. HERZBERG’S TWO FACTOR THEORY
 There are two factors
1. Motivator factors- accounts for high level of
motivation.
-Includes factors like nature of the work, work
difficulty, achievement, recognition, responsibility, work
itself, personal growth
2. Hygiene factors- are factors that can cause
dissatisfaction; even these hygiene factors are
addressed people may not be motivated
- Includes factors like salary, job security, working
condition, company policies, quality of interpersonal
relationship among peers, supervisors, subordinates,
etc.
 TWO FACTOR MOTIVATION THEORY
Area of Satisfaction
Motivators
Nature of the
work, work
Exhibit 19.4
difficulty
Achievement Motivators
Recognition influence level
Responsibility of satisfaction.
Work itself
Personal growth

Area of Dissatisfaction
Hygiene
Factors
Working conditions Hygiene factors
Pay and security influence level of
Company policies dissatisfaction
Supervisors
Interpersonal
relationships

174
COMMUNICATION IN ORGANIZATION
 Communication is the process of transmitting
information among two or more people.
 Two types of communication

1. Formal Communication- intentionally designed by the

organization.
 There are three types of formal communication.

- Vertical
- Horizontal
- Diagonal
2. Informal Communication(Grapevine)
 Created not deliberately by the informal group.
END OF CHAPTER FIVE
CHAPTER SIX:
THE CONTROLLING FUNCTION
 Controlling is the process in which management
evaluates performance using predetermined standards
and in light of the results makes a decision regarding
corrective action.
 Controlling is directly related to planning. The
controlling process ensures that plans are being
implemented properly.
 Controlling is important in order to confirm the degree
to which organization is efficient in using its resources
and to ensure the degree to which organization is
successful in attaining its objectives.
THE PURPOSE OF CONTROLLING
From the major importance of controlling
 Adapting to the environmental change

 Limiting the accumulation of error

 Minimizing costs
THE PROCESS OF CONTROLLING
 There are four process in controlling:
1. Establishing performance standards
2. Measuring actual performance
3. Comparing measured performance against
established standards.
4. Taking corrective action.
1. Establishing performance standards
 Standard is any established rule or basis of comparison
used to measure capacity, quantity, content, value, cost,
quality, or, performance.
 Standard is pre-determined amount of desired
performance which use as the basis for measurement.
2. Measuring actual performance
 After standards are established, managers must
measure actual performance to determine variation
from standards.
 In measuring performance emphasis should be placed on
its quantitative as well as qualitative aspects.
 From the methods of measuring performance personal
observation, statistical reports, oral reports and written
reports can be used to measure performance.
3. Comparing measured performance against established
standards.
 Comparison of actual performance with the set
standards leads to identification of deviations needing
attention .
 If there is significant deviation, managers should analyze
the real causes of deviations to take actions.
 Nevertheless, every deviation from the plan doesn’t
require corrective action.
4. Taking corrective action
 Once the underlying causes of deviations have been
identified, the next step is to take corrective actions.
 The corrective action helps to avoid repetition of the
problem or defect.
TYPES OF CONTROLLING
 Controlling will be successful, if implemented at the
right stage.
 Supervisors can implement controlling at three stages:

- Before the process begins (feed forward)

- During the process (concurrent) or
- After it ceases (feedback)
1. Feed forward Controlling (preventive controlling)
 It focus on operation before it begins.

 It allow managers to anticipate problems before they

arise.
Example
- Carefully screening job applicants and using several
effective interviews.
- Regular maintenance

- working closely with suppliers

2. Concurrent controlling
 Are controls that give managers immediate feedback.

 Are controls that apply to process as the processes are

happening.
3. Feedback Controlling
 are controls that focus on the results of operations.
They are after the fact or post performance controls.

 are controls that give managers information about

customers’ reaction to goods and services so that
corrective actions can be taken if necessary.
 In a feedback control, managers measure actual
performance against the standard and take corrective
actions if there is any unfavorable variation.

 The actions have no use for present or already done

activities rather for future activities.

Example
- Timely (weekly, monthly, quarterly, annual) controls.
CHARACTERISTICS OF EFFECTIVE CONTROL SYSTEMS

Characteristics of effective control systems include:

 Accuracy- information that is received from control
system should be accurate or real.

 Timely- the information being transferred must be

provided on time to allow managers to obtain full
benefits from the data.

 Economical- the cost of control system must be weighed

against its benefits.
 Focus on critical points- a manager does not have time to
control every aspect of operations.

 Acceptability- people must agree that controls are

necessary.
 THE
END