Ethiopian institute of Architecture,

Building Construction and

City Development, EiABC

Addis Ababa University

Introduction to Management

By- Biniyam B.
CHAPTER ONE:
MANAGEMENT OVERVIEW
 DEFINITIONS

 How do you define Management?

 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.
 A common view of the term management is
that management is getting things done
through others.

 Yet another view, quite apart from the

traditional view, asserts that the job of
management is to support employee's efforts
to be fully productive members of the
organizations and citizens of the community.
 Management is a set of activities (including
planning and decision making, organizing,
leading, and controlling) directed at an
organization’s resources (human, financial,
physical, and information) with the aim of
achieving organizational goals in an efficient
and effective manner.
 Organizations: A group of people working
together in a structured and coordinated
fashion to achieve a set of goals.
 Goal: A desired future condition that the

organization seeks to achieve.

 Management: The process of using

organizational resources to achieve the

organization’s goals by...
 Planning, Organizing, Leading, and
Controlling
 Discussion Question

 What do think of the terms efficiency and

effectiveness?
ORGANIZATIONAL PERFORMANCE

 Organizational Performance: measures how

efficiently and effectively managers use
resources to satisfy customers and achieve goals.

 Efficiency: A measure of how well resources are

used to achieve a goal.
 Maximizing the organization’s productivity by wise
utilization of scarce resources.
 It is spending less & acquiring more by minimizing
cost
 it is concerned with cost reduction
 it is doing things right
 Usually, managers must try to minimize the input of
resources to attain the same goal.
 Effectiveness: A measure of the
appropriateness of the goals chosen (are
these the right goals?) and the degree to
which they are achieved.
 it is providing the right product for the
right person or customer
 it is doing the right things

 Determine the success of the organization

b/c it is doing the right things

 Organizations are more effective when managers
choose the correct goals and then achieve them.
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.
 To motivate employees by providing financial
and non-financial incentives that increase the
willingness and efficiency of the employees.
 Management brings optimum use of the
available resources together
 Management reduces the wastage of human,

material and financial resources.

 Management improves relations between

individuals, groups, departments and

between different levels of management.
 Management improves life of workers by

providing conducive working environment

and conditions.
MANAGERIAL FUNCTIONS
 The five managerial functions are

1. Planning

5.Controllin 2.Organizin
g g

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 G.Manager

the organization structure that

Finance Production Marketing
allows working together and Head Head Head

achieve organizational goals.

 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
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 into
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 Informational
Decisional Role
Role Role
• Figurehead • Monitor Role • Entrepreneurial
Role • Disseminator Role
• Leadership Role Role • Disturbance
• Liaison Role • Spokesperson Handler Role
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.
CONT…
2.3. Spokes person role
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.
 The managerial activities that require

conceptual skill includes decision making,

planning, and organizing.
 Conceptual skill is more important for the top

level managers.

Thus, technical skill deals with things,

human skill concerns people, and conceptual
skill has to do with ideas.
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
at the specific time, place and condition
tactfully, creatively and wisely.
Issues can be resolved using instinct and exp
erience.
 Management is an art because managers

apply Judgment, decision making, and

motivation.
UNIVERSALITY OF MANAGEMENT
 Although the problems, other organizational
constraints and nature of different organizations
vary widely, the functions performed by each
manager are nearly the same. (be it in a profit
making or non-profit making, government or
private, small or big and multinational)

 Management is important for any organization or

entity regardless of objective(s) for which it is
established

 Any person who holds managerial position in an

organization performs the five functions of
management.
END OF CHAPTER ONE
CHAPTER TWO: EMERGENCE 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:
CONT’D
 Social- refers to those aspects of a culture that guide
and influence relationship among people.
 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
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”
o 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 into 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 (delay in

performance) .
 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/ excessively cooperate with the
workers
4. Scientifically select, train and develop
workers
 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 increase
efficiency
2. Authority and responsibility: Autority =
Resp.
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
8. Remuneration of staff/personnel: fair
compensation to do good work
9. Scalar chain/chain of command: clear-cut chain
of command from top to bottom.
10. Order- things should exist in the right place at
the right time.
11. Equity-everyone should be treated justly and
fair.
12. Stability of tenure of personnel: reduce labour
turnover.
13. Initiative- managers should not decide every
thing/ allow the freedom to propose ideas
14. 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.
 Bureaucracy is founded on legal or rational

authority which is based on law, procedures,

rules, and so on.
 He Analysed Bureaucracy as the most logical

and rational structure for large organizations.

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.
 Their 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
 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.

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
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

97
 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’

98
 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

99
 Cont…
C. Budget

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

100
 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.

101
 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.

102
 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

103
 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,
111
 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

112
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.

 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

Legal
Functional
Council Au.

Production Marketing
Department Department

Quality Advertisin Sale

Manufact.
C. g
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
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
L 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 -Most people hate -People like work
assumes work - People don’t avoid
-Most are lazy work
-People avoid work if
possible
Need for direction - People should - People are self
directed and closely directed
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

 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.

 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
needs employee can buy basic necessities.
 Providing quality work life, making work
• Safety Needs environment smart, keep in pension plans,
purchasing protection clothes (gloves)

 Allowing employees to strengthen informal

groups and to communicate each other at work
• Social Needs place

 Increasing responsibilities to workers and

• Esteem Needs appreciating them on their performances

 Training employees whose challenging duties and

making environment smooth for employees 18–
• Self 179
Actualization
3.2. ERG Theory- by Clayton Alderfer

Growth

Relatedness

Existence
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
Responsibility level of
Work itself
Personal
satisfaction.
growth

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

183
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
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