SUCC 304

UNDERGRADUATE COURSE
B.COM. - COMPUTER APPLICATION

THIRD YEAR
FIFTH SEMESTER

CORE ELECTIVE - II

PRINCIPLES OF MANAGEMENT

INSTITUTE OF DISTANCE EDUCATION

UNIVERSITY OF MADRAS
B.COM. COMPUTER APPLICATION CORE ELECTIVE- II
THIRD YEAR PRINCIPLES OF MANAGEMENT
FIFTH SEMESTER

WELCOME
Warm Greetings.

It is with a great pleasure to welcome you as a student of Institute of Distance Education,

University of Madras. It is a proud moment for the Institute of Distance education as you are
entering into a cafeteria system of learning process as envisaged by the University Grants
Commission. Yes, we have framed and introduced Choice Based Credit System(CBCS) in
Semester pattern from the academic year 2018-19. You are free to choose courses, as per the
Regulations, to attain the target of total number of credits set for each course and also each
degree programme. What is a credit? To earn one credit in a semester you have to spend 30
hours of learning process. Each course has a weightage in terms of credits. Credits are assigned
by taking into account of its level of subject content. For instance, if one particular course or
paper has 4 credits then you have to spend 120 hours of self-learning in a semester. You are
advised to plan the strategy to devote hours of self-study in the learning process. You will be
assessed periodically by means of tests, assignments and quizzes either in class room or
laboratory or field work. In the case of PG (UG), Continuous Internal Assessment for 20(25)
percentage and End Semester University Examination for 80 (75) percentage of the maximum
score for a course / paper. The theory paper in the end semester examination will bring out your
various skills: namely basic knowledge about subject, memory recall, application, analysis,
comprehension and descriptive writing. We will always have in mind while training you in
conducting experiments, analyzing the performance during laboratory work, and observing the
outcomes to bring out the truth from the experiment, and we measure these skills in the end
semester examination. You will be guided by well experienced faculty.

I invite you to join the CBCS in Semester System to gain rich knowledge leisurely at
your will and wish. Choose the right courses at right times so as to erect your flag of success.
We always encourage and enlighten to excel and empower. We are the cross bearers to make
you a torch bearer to have a bright future.

With best wishes from mind and heart,

DIRECTOR

(i)
B.COM. COMPUTER APPLICATION CORE ELECTIVE- II
THIRD YEAR PRINCIPLES OF MANAGEMENT
FIFTH SEMESTER

COURSE WRITER
Mrs. S. Bhuvaneswari Sivakumar
Assistant Professor
Department of Management Studies
Mohammed Sathak College of Arts and Science,
Sholinganallur, Chennai - 600 119.

EDITING

Dr. P. Hemavathy Dr. R. Panchalan

Assistant Professor in Commerce (T) Professor in Commerce
Institute of Distance Education Institute of Distance Education
University of Madras, University of Madras,
Chennai - 600 005. Chennai - 600 005.

© UNIVERSITY OF MADRAS, CHENNAI 600 005.

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 B.Com., DEGREE COURSE

THIRD YEAR

FIFTH SEMESTER

CORE ELECTIVE - II

PRINCIPLES OF MANAGEMENT

SYLLABUS

UNIT I: Introduction

Definition - Importance - Nature and Scope of Management - Process of Management - Role

and functions of Managers - Levels of Management - Scientific Management - Contributions
to Management by different Schools of thought.

UNIT II: Planning

Nature - Importance - Types of Planning - Steps in planning - Objectives of Planning - Policies

- Decision making Process - Types of Decisions.

UNIT III: Organisation

Meaning and Types of organisations - Principles - Formal and Informal organisation -

Organisation Structure - Span of Control - Departmentalization - Basis - Meaning and
Importance of Departmentalization - Policies - Meaning and Types - Procedures -
Forecasting.

UNIT IV: Authority and Responsibility

Authority - Definition - Sources - Limitations - Difference between Authority and

Responsibility - Delegation of Authority - Meaning - Principles and importance - Centralisation
Vs Decentralisation.

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UNIT V: Direction Co-ordination & Control

Direction - Nature - Purpose. Co-ordination - Need - Types and Techniques - Requisites for
Excellent Co-ordination. Controlling - Meaning - Importance - Control Process.

SUGGESTED READINGS:

1. Gupta, C.B. Management Theory & Practice, Sulthan Chand & Sons, New Delhi.

2. Prasad, L.M. Principles & Practice of Management, Sultan Chand & Sons, New Delhi.

3. Tripathi, P.C. & Reddy, P.N. Principles of Managements, Tata Mac. Graw Hill, New Delhi.

4. Weihrich and Koontz, Management - A Global Perspective.

5. N. Premavathy, Principles of Management, Sri Vishnu Publications, Chennai.

6. Jayasankar, J. Business Management , Margham Publication, Chennai.

7. Sundar, K. Principles of Management, Vijay Nicole Imprints Pvt. Ltd., Chennai.

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 B.Com., DEGREE COURSE

THIRD YEAR

FIFTH SEMESTER

CORE ELECTIVE - II

PRINCIPLES OF MANAGEMENT
SCHEME OF LESSONS

Sl.No. Title Page

1. Management - An Introduction 001

2. Role and Responsibilities of A Manager 020

3. Evolution and Development of Scientific Management 031

4. Planning 050

5. Objectives, Policies & Procedures 075

6. Decision Making 086

7. Organizing 100

8. Span of Control and Committee 135

9. Departmentalization - Formal and Informal Organization 144

10. Authority 164

11. Decentralization 173

12. Recruitment & Development 183

13. Training & Direction 193

14. Direction 223

15. Coordination 240

16. Controlling 259

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UNIT 1
MANAGEMENT- AN INTRODUCTION

Learning Objectives
After studying this unit, you should be able to:

 The meaning and application of the management principles

 understand the feature and nature of management discipline

 enumerate the need and importance of management

 highlight the difference of management and administration

Structure
1.1 Management: Introduction

1.2 Features of Principles of Management

1.3 Importance of Management

1.4 Definition of Management

1.5 Nature of Management

1.6 Objectives of Management

1.7 Scope of Management Process

1.8 Management as a Concept

1.9 Management as a Process

1.10 Management as a Discipline

1.11 Management as a Group

1.12 Management and Administration

1.13 Characterization of Management

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1.14 Characterization of Administration

1.15 Management Vs Administration

1.16 Management as Science, Art, or Profession

1.17 Summary

1.18 Key Words

1.19 Review Questions

1.1 Management: Introduction

Managing individual would be easy, whereas individuals managing along with the group,
say society, work place, public situations, individuals satisfy their individuals desires with others
performance, several types of groups like, family, school, government, army, an enterprise,
shop, mall, sports, etc., leads to management progress.

Management as a discipline is exercised by the individual managers by influencing the

past, present and predicting the future for the better productive activity which results in profits
or gains to the organizations. Theories of management focus on the concept of management
with an impact of historical context upon the development progressively.

Management studies are as long as there has been a need for decision making. Though
scientific management began and established itself in the early twentieth century, with references
to planning and organization are found in ancient Greek, Biblical literature, and in histories of
the Roman Empire. Imagine building ancient monuments such as the Great Pyramid, and
consider what that would have required in terms of planning, work allocation, organizing, directing
and decision making.

In the early twentieth century, the focus was on physical factors, viewed from industrial,
engineering and economic perspectives. Subsequently, the focus shifted to productivity, with
an emphasis on human factors. Managerial accounting and classical concepts of personnel
and finance management were emphasized.

Management has evolved and changed considerably over a period of time. It has
continuously adopted new theories and practices and replaced old ones so as to make
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management activity more efficient. The universal theory of management evolved in the early
twentieth century has been replaced by a number of contingency theories currently in trend.

1.2 Features of Principles of Management

1. Principles of Management are Universal

a. Management principles are applicable to all kinds of organizations - business & non
business.

b. They are applicable to all levels of management.

c. Every organization must make best possible use by the use of management principles.

d. Therefore, they are universal or all pervasive.

2. Principles of Management are Flexible

a. Management principles are dynamic guidelines and not static rules.

b. There is sufficient room for managerial discretion i.e. they can be modified as per the
requirements of the situation.

c. Modification & improvement is a continuous phenomenon in case of principles of

management.

3. Principles of Management have a Cause & Effect Relationship

a. Principles of management indicate cause and effect relationship between related variables.

b. They indicate what will be the consequence or result of certain actions. Therefore, if one
is known, the other can be traced.

4. Principles of Management - Aims at Influencing Human Behavior

a. Human behavior is complex and unpredictable.

b. Management principles are directed towards regulating human behavior so that people
can give their best to the organization.

c. Management is concerned with integrating efforts and harmonizing them towards a goal.

d. But in certain situations even these principles fail to understand human behavior.
4

5. Principles of Management are of Equal Importance

a. All management principles are equally important.

b. No particular principle has greater importance than the other.

c. They are all required together for the achievement of organizational goals.

1.3 Importance
Following are the main importance of the Principles of Management.

1. Improves Understanding

2. Direction for Training of Managers

3. Role of Management

4. Guide to Research in Management

1. Improves Understanding - From the knowledge of principles managers get indication

on how to manage an organization. The principles enable managers to decide what should
be done to accomplish given tasks and to handle situations which may arise in
management. These principles make managers more efficient.

2. Direction for Training of Managers - Principles of management provide understanding

of management process what managers would do to accomplish what. Thus, these are
helpful in identifying the areas of management in which existing & future managers should
be trained.

3. Role of Management - Management principles makes the role of managers to concrete.

Therefore these principles act as ready reference to the managers to check whether their
decisions are appropriate. Besides these principles define managerial activities in practical
terms. They tell what a manager is expected to do in specific situation.

4. Guide to Research in Management - The body of management principles indicate lines

along which research should be undertaken to make management practical and more
effective. The principles guide managers in decision making and action. The researchers
can examine whether the guidelines are useful or not. Anything which makes management
research more exact & pointed will help improve management practice.
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1.4 Definition
The difficulty in defining the term ‘management’ is that various personalities define the
term in their own aspects.

 The economists consider management as a resource like land, labour, capital, and
organization.

 The owner of the organization view as his asset for profit making in a systematic authority
and functions to achieve business goals.

 The sociologists consider managers as a part of the developing society.

AUTHOR DEFINITIONS

American Society of Management is the art and science of organizing and

Mechanical Engineers directing human efforts applied to control the forces and
utilize the materials of nature for the benefits of man.

American Management Management is guiding human and physical resources into

Association dynamic organizational units which attain their objectives to
the satisfaction of those served and with a high degree of
morale and sense of attainment on the part of those
rendering service.

Henry L. Sisk Management is the coordination of all resources through the

process of planning, organizing, directing and controlling in
order to attain stated objectives.

Peter Durcker Management is a multipurpose organ that manage a

business and manages Managers and manages Workers
and work.

F.W. Taylor Management is the art of knowing what you want to do and
seeing that it is done in the best and cheapest way.

Henry Fayol To manage is to forecast and to plan, to organize, to

command, to coordinate and to control.
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Harold Koontz and Management is the creation and maintenance of an internal

Cyrill O’Donnell environment in an enterprise where individuals, working in
groups, can perform efficiently and effectively toward the
attainment of group goals.

Ralph C. Davis Management is the function of executive leadership

anywhere.

E.F.L. Breach Management is concerned with seeing that the job gets
done; its tasks all center on planning and guiding the
operations that are going on in the enterprise.

Lawrence A. Appley Management consists in guiding human and physical

resources into dynamic, hard-hitting organization unit that
attains its objectives to the satisfaction of those served and
with s high degree of morale and sense of attainment on the
part of those rendering the service.

1.5 Nature
The nature of management process is responsible for achieving organizational objectives
through efficient and effective utilization of available resources. Efficient means doing things
right so that to minimize the error and wastage, and maximum utilization of the resources and
its output.

 Management is a Continuous progress: The task of a manager does not finish, it keep
on continuous even at the schedule of controlling for output, and one has to plan for the
input of the next progress, as management is continuous and dynamic progress.

 Work schedules are Objective based: though it is said profit maximizing is the sole
object of a business, but only profit cannot extent the activities of the business. Colonel
Urwick, “Earning of profit can’t be the objectives of a business any more than eating is
the objective of living.” It is an activity carried by the people, through the people, to the
people. Management is economic activity carried in context with social political and
cultural environment of the society.

 Individual along with organizational goal oriented: The managers cannot do everything
themselves. They must have the necessary ability and skills to get work accomplished
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through the efforts of others. They must motivate the subordinate for the accomplishment
of the tasks assigned to them. It is through motivation that managers can influence the
behavior of their subordinates.

 Progress with basic fundamental approach: Managing the human beings who has
several needs and wants. This is possible by joining the hands of each other at an
organized work place to accomplish the said objective by applying the tools of
management.

 Is dynamic and multidisciplinary oriented among universal knowledge: Management

is a field of study which is taught in universities and management institutions deals with
principles of various subject knowledge, like, science, anthropology, psychology, sociology,
quantitative, qualitative, and as well from various literature.

 Designed towards Social approach: Management deals with human beings, and a
managers has to coordinate, direct and control the activities of humans along with other
resources to achieve the individual and organizational objectives. Human resource differs
with the opinions of the others, customs, behavior, and societal approach.

 Concerned with interpersonal relations and Behavioral oriented: Management is

an inexact social science because it deals with human behavior. Human behavior is very
com­plex and unpredictable and in order to understand and influence it various principles
developed in other disciplines are being increasingly applied in the field of management.
These other disciplines like psycho-logy, sociology, anthropology, etc. deal with human
nature.

 Intangible in progressive nature: Management has been called the unseen force. Its
presence is evident by the results of its efforts- orderliness, informed employees, buoyant
spirit and higher output. Thus, feeling of management is results are apparently known.
People often comment on the effectiveness (or ineffectiveness) of management on the
basis of the end results although they cannot observe it during operations.

 It is an Art and Science in decision making situations: Management has an organized

body of knowledge consisting of distinct concepts, principles and techniques which have
wide application. So it is treated as a science. The application of these concepts, principles
and techniques requires specialized knowledge and skills on the part of the manager.
Since the skills acquire by manager are his personal possession, management is viewed
as an art. The skills can be learnt through training and experience.
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 Integrative in determination and the accomplishment of desired strategy: The

essence of management is integration of human and other resources in such a manner
that it leads to effective performance. All these resources are made available to those
who manage. Managers apply knowledge, experience and principles for getting the
results. It seeks to harmonize the individual goals with organizational goals

 Coordinates the activities of human, physical, machine and financial resource:

The management coordinates the total of all those activities which are undertaken to
plan, organize, direct and control the efforts of the others to serve the interests of all. It
involves the coordination of human efforts and physical resources towards the achievement
of organizational, individual and social objectives.

 Management is pervasive in nature as it requires either political, social, cultural or

business: It is a social process as it involves with the efforts of the human beings who
are to be directed, coordinated, controlled and the progress of the activities. According
to Brech, “It is the pervasiveness of this human element that gives management its
special character as a social process”.

 Organized and group activities involves: Management is an integral part of any group
activity. It is essential to undertake any organized activity. It involves the use of group
efforts in the pursuit of well-defined goals or objectives. It cannot exist independent of
the group or organization it manages.

 Relative, not absolute principles: Management principles are relative, not absolute,
and they should be applied according to the need of the organization. A particular
management principle has different strengths in different conditions. Therefore, principles
should be applied according to the prevailing conditions.

1.6 Objectives
The progress of management activity plays a vital role in the progress and prosperity of
business enterprise. The main objectives of management is to run the enterprise effortlessly
and efficiently though the objective of a business is profit making, but various ethics has to be
followed in a business.

 Optimum utilization of resources

 Growth and development of business

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 Better quality of goods manufactured

 Ensuring regular supply of goods

 Discipline and morale

 Mobilizing best talent

 Promotions of research and development

 Minimize the element of risk

 Improving performance

 Planning for future

1.7 Scope of Management Process

Management is considered as process because it involves a series of interrelated
functions. It consists of getting the objectives of an organization and taking steps to achieve
objectives.

Management is dynamic in nature and thus has many definitions depending upon the
disciplinary approach is adopted. An observed definition of management would emerge in the
context of specific managerial roles, which are undoubtedly influenced by a large number of
organizational variables.

Broadly in this field, management can be defined as a science or art for planning,
organizing, implementing, controlling and monitoring, and evaluating, in order to accomplish
tasks and organizational goals. These sub-activities compose the exclusive management
process. Management is an activity, a process and an integrative function, as a set of effective
practices by individuals or in group performance for a specific task.

1.8 Management as a Concept

Concept is an idea or image or a relative understanding about things, activity of a
person that emerges in the minds of an individuals.

Management is considered as an optimizing the use of available resources to accomplish

goals, as the managerial functions can be easily discerned. Manager’s plan, organizes the
resources, allocate staff, direct and control resources in an organized group effort to achieve
desired objectives. This approach has many aspects, but the key variables are resources,
objectives and efforts. The objectives may be organizational or individual.
10

The objectives of individual scientists in the organization, may be personnel to achieve

professional growth or recognition, and even a sense of organizational for the fulfillment of
being associated with the organization’s objectives. The role of management is to organize
and coordinate the available resources for the fulfillment of both individual and organizational
objectives in optimal manner.

Physical resources vary from organization to organization. In an organization, physical

resources are laboratory equipment and apparatus, plant, machinery and facilities. Human
resources management involves getting the persons best suited for particular tasks, and getting
the best out of them. Thus, management is responsible for utilizing the available skills to ensure
the most efficient use of all human resources. The task of a research manager is to ensure the
availability of technologically suitable and advanced apparatus and equipment, within the
available financial resources, and to ensure that they are well maintained.

1.9 Management as a Process

Management is considered as a process which includes all the activities say from framing
the objectives of the business enterprise, to the steps that ensures for the attainment of the
same. The process consists of all function of management which transforms resources that is
7m’s- men, materials, money, machines, methods, marketing and management into products
or semi-finished products or services to satisfy the consumer’s needs.
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From the above, it is obvious that management is basically an exercise in doing things
better. Hodge and Johnson (1970) defined management as, “the process of making decisions
and issuing commands on behalf of an organization’s membership groups, taking into
consideration the complex of objectives, limitations and standards underlying the production
and distribution of values, required to satisfy memberships’ needs.”

Management as a process consists of continuous decision making, necessitated by

variations in goals and also the fact that lack of complete knowledge creates risk and ambiguity
associated with decision making. Specific decisions are greatly influenced by the organizational
goals which have to be achieved. Management as a process is said to be continuous, integrating,
social, universal, and interactive process.

1.10 Management as a Discipline

Management has acquired the status of discipline or field of study. It is taught as a
specialized branch of knowledge in educational, management and technical institution. As a
field of study, the subject includes management concepts, principles, techniques and skills.
Management is multidisciplinary discipline. It is drawn heavily from anthropology, sociology,
psychology, etc.

The knowledge, skill, techniques and principles which managers use in managing are
broadly referred to as the field of management science. It is regarded as an art because the
performance of managerial function requires certain skills which are a personal possession of
a manager.

Management is recognized as a science because it has developed certain principles and

techniques which have more or less universal application. It consists of specific concepts,
principles, theories and practice which are taught to the students of management.

1.11 Management as a Group

Management has become a very common term. People use this term to denote a team
or group of managers who run an organization. Management of enterprise is represented by
the group of people which performs managerial functions for the accomplishment of its goals.
These people are individually known as Managers. In other words, a manager is a person who
performs the managerial functions of planning, organizing, staffing, directing and controlling
and is a member of the management team of the organization.
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1.12 Management and Administration

Management can be understood as the skill of getting the work done from others. It is
not exactly same as administration, which indicates to a process of effectively administering
the entire organization. The most important point that differs management from the administration
is that the former is concerned with directing or guiding the operations of the organization,
whereas the latter stresses on laying down the policies and establishing the objectives of the
organization. Broadly speaking, management takes into account the directing and controlling
functions of the organization, whereas administration is related to planning and organizing
function.

With the passage of time, the distinction between these two terms is getting blurred, as
management includes planning, policy formulation, and implementation as well, thus covering
the functions of administration. In this article, you will find all the substantial differences between
management and administration.

1.13 Characterization of Management

Management is defined as an act of managing people and their work, for achieving a
common goal by using the organization’s resources. It creates an environment under which
the manager and his subordinates can work together for the attainment of group objective. It is
a group of people who use their skills and talent in running the complete system of the
organization. It is an activity, a function, a process, a discipline and much more.

Difference between Management and Administration

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Planning, organizing, leading, motivating, controlling, coordination and decision making

are the major activities performed by the management. Management brings together 7M’s of
the organization, i.e. Men, Money, Material, Machines, Methods, Market and Management. It is
a result oriented activity, which focuses on achieving the desired output.

1.14 Characterization of Administration

The administration is a systematic process of administering the management of a business
organization, an educational institution like school or college, government office or any nonprofit
organization. The main function of administration is the formation of plans, policies, and
procedures, setting up of goals and objectives, enforcing rules and regulations, etc.

Administration lays down the fundamental framework of an organization, within which

the management of the organization functions.

The nature of administration is bureaucratic. It is a broader term as it involves forecasting,

planning, organizing and decision making functions at the highest level of the enterprise.
Administration represents the top layer of the management hierarchy of the organization. These
top level authorities are the either owners or business partners who invest their capital in
starting the business. They get their returns in the form of profits or as a dividend.

1.15 Management Vs Administration

BASIS FOR MANAGEMENT ADMINISTRATION

COMPARISON

Meaning An organized way of managing The process of administering an

people and things of a business organization by a group of people
organization is called the is known as the Administration.
Management.

Authority Middle and Lower Level Top level

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Role Executive Decisive

Concerned with Policy Implementation Policy Formulation

Area of operation It works under administration. It has full control over the activities
of the organization.

Applicable to Profit making organizations, Government offices, military,

i.e. business organizations. clubs, business enterprises,
hospitals, religious and
educational organizations.

Work Putting plans and policies Formulation of plans, framing

into actions. policies and setting objectives

Focus on Managing work Making best possible allocation of

limited resources.

Key person Manager Administrator

Represents Employees, who work for Owners, who get a return on the
remuneration capital invested by them.

Function Executive and Governing Legislative and Determinative

The major differences between management and administration are given below:

1. Management is a systematic way of managing people and things within the organization.
The administration is defined as an act of administering the whole organization by a
group of people.

2. Management is an activity of business and functional level, whereas Administration is a

high-level activity.

3. While management focuses on policy implementation, policy formulation is performed by

the administration.

4. Functions of administration include legislation and determination. Conversely, functions

of management are executive and governing.
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5. Administration takes all the important decisions of the organization while management
makes decisions under the boundaries set by the administration.

6. A group of persons, who are employees of the organization is collectively known as

management. On the other hand, administration represents the owners of the organization.

7. Management can be seen in the profit making organization like business enterprises.
Conversely, the Administration is found in government and military offices, clubs, hospitals,
religious organizations and all the non-profit making enterprises.

8. Management is all about plans and actions, but the administration is concerned with
framing policies and setting objectives.

9. Management plays an executive role in the organization. Unlike administration, the role is
decisive in nature.

10. The manager looks after the management of the organization, whereas administrator is
responsible for the administration of the organization.

11. Management focuses on managing people and their work. On the other hand,
administration focuses on making the best possible utilization of the organization’s
resources.

1.16 Management as Science, Art, or Profession

Management as a science

Management as a science, it has systematized body of knowledge, concept, logical

progress and principles. Management deals different problems and issues by using quantitative
models and decision making techniques and issues by using quantitative models and decision
making techniques to arrive at right decisions.

As a science management contains concepts, hypothesis, theories, experimentation all

verified and tested accordingly to clarify about cause and effect relationship between many
facts or events occurred.

 Management is systematic body of knowledge with theories, concepts, principles,

experiments and functions which are systematically and logically analyzed
16

 The theories related to management are applicable and used in all types of organization
irrespective of size, type, capital and so on. However, the usage and method may vary
according to the situation of organization and time.

 All the managerial knowledge and practices are developed through various observations
and experiments which are researched and experiment based

 Tests of management theories are applied in situational and judgmental cases which
help in prediction of future events.

 Management is not a pure science but a social science

 Management relates itself to cause and effect relationship. Results of modern management
are acceptable to all employees. Good and efficient management system enhances the
purity in organization.

Management as an art

Management includes the activities of planning, organizing, direction, decision making,

regulating and integration of all resources which requires special skill and art. According to
Mary Parker, “management is an art of getting things done through others. Management
enables a manager to get things done through employees.”

 Management performs non programmed and non-routine work using creativity and
innovations

 Management accomplishes any job within time and budget to achieve organizational
goals with ease.

 Managers apply their interest, ability and skills for solving contemporary issues through
decisions which ignite their creativity. They can use their skills in field of job performance,
solving exceptional issues, forming objectives etc.

 Managers must possess practical knowledge not only theoretical acquired from
experiences which helps in working according to situation

 Managerial activities are practices by using knowledge, ability and skill to solve the
problems.
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Management as a profession

In general sense, profession means occupation. Occupation is rendering service. Similarly

management is a distinct profession backed up by specialization. As a professional activity all
management efficient people should have academic qualification and personal qualification
from anybody. Here profession is not only an occupation of specialized skill but these skills
should be applicable in large scale and interest of society as a whole.

 Management is a separate discipline which includes research, observations and practice

 Management requires formal education and training with updates of professionalism.

 Professional managers must be joined in an association that follow rules and regulation
according to the objectives set.

 A professional association requires code of conduct to maintain self-discipline ethical

behavior. Violation of code must be punishable

 Organizations should be responsible towards society. An organization gets its birth in a

society, lives and grows in a society and finally liquidates or dissolves in a society. Thu,
an organization has responsibility towards members of society such as consumer,
investors, employees and shareholders.

Check Your Progress

1. Define Management?

2. Describe the scope of management process.

18

3. Comparison between Management Vs Administration.

1.17 Summary
Management as a discipline is exercised by the individual managers by influencing the
past, present and predicting the future for the better productive activity which results in profits
or gains to the organizations.

It is necessary to observe the organization work system and its frame work so as to
decide the management approach.Management studies are as long as there has been a need
for decision making.Management principles are applicable to all kinds of organizations - business
& non business.

Modification & improvement is a continuous phenomenon in case of principles of

management.Management principles are directed towards regulating human behavior so
that people can give their best to the organization.

Management is concerned with integrating efforts and harmonizing them towards a

goal.Principles of management provide understanding of management process what managers
would do to accomplish what. Thus, these are helpful in identifying the areas of management
in which existing & future managers should be trained.

The importance of management is to improve Understanding, Direction for Training of

Managers, Role of Management, and Guide to Research in Management.Efficient means
doing things right so that to minimize the error and wastage, and maximum utilization of the
resources and its output.

The main objectives of management is to run the enterprise effortlessly and efficiently
though the objective of a business is profit making, but various ethics has to be followed in a
business,Optimum utilization of resources, Growth and development of business, Better quality
of goods manufactured.

Management is considered as an optimizing the use of available resources to accomplish

goals, then the managerial functions can be easily discerned. Manager’s plan, organizes the
 19

resources, allocate staff, direct and control resources in an organized group effort to achieve
desired objectives.

Management can be understood as the skill of getting the work done from others. It is
not exactly same as administration, which alludes to a process of effectively administering
the entire organization.

As a science management contains concepts, hypothesis, theories, experimentation

all verified and tested accordingly to clarify about cause and effect relationship between
many facts or events occurred.

Management includes the activities of planning, organizing, direction, decision making,

regulating and integration of all resources which requires special skill and art.

Organizations should be responsible towards society. An organization gets its birth in a

society, lives and grows in a society and finally liquidates or dissolves in a society. Thus, an
organization has responsibility towards members of society such as consumer, investors,
employees and shareholders.

1.18 Key Words

 Management

 Administration

 Code of Conduct

 Economic Resource

 Goal-oriented

1.19 Review Questions

1. Explain the concept of management. And state the main function of management.

2. Elaborate the the nature of management.

3. “To manage is to forecast and plan, to organize, to command, to coordinate and to control”.
Discuss

4. Discuss the difference of management and administration.

5. Explain Management As Science, Art, or Profession.

6. Explain the scope of the management.

20

UNIT2
ROLE AND RESPONSIBILITIES OF
A MANAGER

Learning Objectives
After studying this unit, you should be able to:

 understand the job role of a manager

 elobarate the model of Henry Minitzberg and Robert K.Kalz

 highlight the role and levels of management

Structure
2.1 Introduction

2.2 Role and Functions of a Manager

2.3 Structural Functions

2.4 Pervasive Functions

2.5 Characteristics of a Manager

2.6 Levels of Management

2.7 Summary

2.8 Key Words

2.9 Review Questions

2.1 Introduction
A manager’s job is very crucial in an enterprise. The more complex the organization is,
the more crucial his role. The success of an organization will depend upon the caliber of a
manager in utilizing the resources for achieving enterprise objectives.
 21

Managers use specified decision making criteria or key variables to assess various
alternatives. That is decision making. In this process, decision making ties together with other
functions. Participative decision making is desirable to ensure smooth implementation.

2.2 Role and Functions of a Manager

In Henry Minitzberg’s opinion, every manager plays roles in three areas:

 Interpersonal relationships [as a figure head, leadership role, and liaison officer],

 Information processing [monitoring information, disseminating information, and

organization’s spokesman], and

 Decision making [as an entrepreneur, as a conflict handler, as a resource allocator, as

a negotiator].

Category Role Activity

Informational Monitor Seeks and receive information, scan papers and

reports, maintain interpersonal contracts

Disseminator Forward information to others, send memos, make

phone calls

Spokesperson Represent the unit to outsiders in speeches and

reports

Interpersonal Figurehead Perform ceremonial and symbolic duties, receive

visitors

Leader Direct and motivate subordinates, train, advise and

influence

Liason Maintain information links in and beyond the

organization

Decisional Entrepreneur Initiate new projects, spot opportunities, identify areas

of business development

Disturbance Take corrective action during crises, resolve

handler conflicts amongst staff, adapt to external changes
22

Resource Decide who gets resources, schedule, budget,

allocator set priorities

Negotiator Represent department during negotiations with

unions, suppliers, and generally defend interest.

Since management is coordination and integration of available resources to accomplish

specific goals, it can be viewed in terms of various managerial functions: planning, organizing,
monitoring and controlling, and evaluating - all functions which a manager performs. These
are the structural functions of a manager. In addition, a manager also directs leads, motivates,
communicates, delegates, prioritizes and systematizes the task to be achieved. These are
the pervasive functionsof a manager.

2.3 Structural Functions

Achievement of goals requires decisions and their implementation. Problems have to be
foreseen, identified and available the facts and data to be analyzed under appropriate
assumptions to generate alternatives. Changing situations give rise to new problems and delay
in implementation. Problem solving necessitates decision making in various forms. These are
then evaluated in the context of the specific decision to be made and within the overall framework
of the organization.

Decisions have to be implemented through action on the part of other people, and that
requires planning. The plan should:

 relate to the objectives;

 fix responsibilities to the individual as well to the group;

 specify procedures which must be followed;

 Give a blueprint for communicating the decision to all involved and concerned; and have
provision for participation.

Then follows implementation, and that requires organizing. This involves evolving a formal
structure to facilitate coordination and integration of resources for efficient accomplishment of
both long and short-term plans. Organizing begins with the concept of division of work over a
series of operating units, each being responsible for a particular element of implementation.

In the process of developing the total organization structure, consideration has to be

given to such issues as the degree of de-centralization, span of control, delegation, utilization
 23

of staff departments and chain of command. Relationships among the various operating units
have to be specified. These relationships may take many forms, including authority relationships.

Implementation has to be monitored and controlled. It has four phases, namely:

 Defining standards and objectives,

 Determining how performance is to be measured;

 Developing a reporting system, and

 Taking corrective action when and where needed.

Monitoring facilitates control, to ensure that events conform to plans. Thus, in this context
‘control’ is concerned with progress in implementation. Through effective monitoring and control,
a manager receives continuous feedback on exactly where the implementation stands at any
given time with respect to achieving the objectives. If objectives are not being achieved, or if
their accomplishment is behind schedule, the manager can use available information to identify
the areas that are causing problems and develop alternatives to overcome these problems.

Monitoring is concurrent evaluation. However, implementation has to be evaluated as a

whole upon conclusion. This provides:

 Useful information on the effectiveness of implementation and achievement of goals;

 A yardstick for measuring performance; and

 Feedback for future planning

2.4 Pervasive Functions

A manager has to perform several functions which saturate any organization. Research
managers give guidance and direction to subordinates under them regarding job requirements.
This involves defining the work and specific role of the scientists, determining and communicating
performance standards, and administering through specific policies and procedures. This is
also the leadership function. After developing an appreciation of the importance of human
motivation, a manager must be concerned about how the human element should be managed.
A manager should create a climate where the needs of the individual are integrated with the
needs of the organization. This means creating a climate in which the individuals can best
satisfy their goals by working toward the goals of the organization.
24

Although many factors are involved in creating a ‘result producing’, climate, communication
and participation are key concerns. One of the basic functions of the manager is to open up
better communication channels. It helps the members of the organization to develop mutual
trust and understanding, and to resolve conflicts. The extent and degree to which managers
work with their subordinates in a coaching and counseling capacity to help them accomplish
their specific job objectives - and thus perform at their best - determines how successful he will
be in their efforts at directing and leading. Delegation of authority and responsibility is essential
to make the subordinates responsible. In delegating authority, managers should see that it
goes as near to the point of action as possible.

Prioritizing is essential in the context of limited resources and time-related targets. It

facilitates systematization of the management process.

A manager’s job is varied and complex function associated with specific skills along with
their jobs. During the early 1970’s, Robert K.Kalz identifies three kinds of skills for
administrators. These are technical, human and conceptual skills. The fourth skill identifies
as the ability to design skills was added to it latter.

Technical skills- refer to the ability of an individual to carry out a specific activity. Technical
skills are necessary to a lot range for the first level managers. In order to do so, one needs to
acquire the knowledge of methods, processes and procedures. Engineers, computer specialists,
accountants and employees in manufacturing department all have the necessary technical
skills for their specified fields. Employees at this level needs to work with the tools and perform
the operational level of work.

Human skills – otherwise interpersonal skills refer to the ability of a person to work well
with other people in a group. Human skills are the dominant need in the creation of an
environment, in which people feel comfortable and are free to voice their opinions. These skills
aid employees during interaction with their supervisors, peers and people outside the work unit
such as suppliers and other stakeholders. It is the ability to lead, motivate and communicate
with people to accomplish certain objectives. These skills are most necessary to all levels of
the organization.

Conceptual skills – refer the ability to see the organization as a whole and it includes
recognizing how the various functions of the organization depend on one another. It also
makes the individuals aware how changes in one part of the organization affect the others. It
extends visualizing the relationship of the individual business to the industry, the community
 25

and the political, social and economic forces of the nation as a whole. Thus, the top- level
manager gains insight into improving the overall effectiveness of the organization.

Design skills – refer to the ability of a person to find solutions to problems that would
benefit the organization. Managers at upper organizational levels should be able to design
rational and feasible solutions by considering the various internal and external factors. Top
managers should not only recognize a problem but also suggest ways to overcome them by
their individual’s analytical skills and administrative skills.

First- level managers requires more technical skills in order to supervise operational
employees. They need to have good human skills for they need to interact with subordinates
on a regular basis. Though conceptual skills are usually a very little amount is required for the
managers at the supervisor level.

At the middle-level management more human skill and conceptual skills are required
that the technical knowledge need to be lesser.

At the top-level management, the conceptual, design, and interpersonal skill are
comparatively needed to be high, where less technical skills are applied.

2.5 Characteristics of a Manager

Since managers have multifarious activities, they have to have appropriate characteristics
to support performance. Mintzberg (1973) studied various activities of managers and identified
26

ten distinct managerial characteristics relating to interpersonal, informational and decision

making qualities. Since then a host of other desirable characteristics of a good manager have
been identified.

Characteristics of a Manager’s Personal and Professional

Professional Personal

 Professional excellence  Caring about people

 Analytical abilities  Commanding respect

 Diagnostic skills  Good judgment

 Planning skills  Drive and energy

 Resource allocation  Creative

 Leadership qualities  Oriented towards excellence

 Decision making capabilities

 Tolerance of uncertainty

 Delegation of authority and responsibility

 Negotiating skills

 Coordinating and liaison

 Human relations manager

 Managing conflicts

2.6 Levels of Management

Level of management refers to the categories or the managerial positions at a work
place. The level of management determines the amount of authority and status of the person
occupying the position at the level. These managerial positions divided into various categories
according to their amount of authority and status, they are known as the level of management.

Most organizations have three management levels:

 Low-level managers;
 27

 Middle-level managers; and

 Top-level managers.

These managers are classified in a hierarchy of authority, and perform different tasks.
In many organizations, the number of managers in every level resembles a pyramid.

Below, find the specifications of each level’s different responsibilities and their likely
job titles.

Top-level managers
 The board of directors, president, vice-president, and CEO are all examples of top-level
managers.

 These managers are responsible for controlling and overseeing the entire organization.
They develop goals, strategic plans, company policies, and make decisions on the direction
of the business.

 In addition, top-level managers play a significant role in the mobilization of outside

resources.

 Top-level managers are accountable to the shareholders and general public.

28

Middle-level managers

 General Managers, branch managers, and department managers are all examples of
middle-level managers. They are accountable to the top management for their
department’s function.

 Middle-level managers devote more time to organizational and directional functions

than top-level managers. Their roles can be emphasized as:

o Executing organizational plans in conformance with the company’s policies and

the objectives of the top management;

o Defining and discussing information and policies from top management to lower
management; and most importantly

o Inspiring and providing guidance to low-level managers towards better

performance.

Some of their functions are as follows:

 Designing and implementing effective group and intergroup work and information
systems;

 Defining and monitoring group-level performance indicators;

 Diagnosing and resolving problems within and among work groups;

 Designing and implementing reward systems supporting cooperative behavior.

Low-level managers

 Supervisors, section leads, and foremen are examples of low-level management titles.
These managers focus on controlling and directing.

 Low-level managers usually have the responsibility of:

o Assigning employees tasks;

o Guiding and supervising employees on day-to-day activities;

o Ensuring the quality and quantity of production;

o Making recommendations and suggestions; and

o Up channeling employee problems.

Also referred to as first-level managers, low-level managers are role models for employees.
These managers provide:
 29

 Basic supervision;

 Motivation;

 Career planning;

 Performance feedback; and

 Staff supervision.

Check Your Progress

1. State the role and activity of Managers?

2. Describe the four skill required for the managers.

3. Comparison between Manager’s Personal and Professional characteristics.

2.7 Summary
The more complex the organization is, the more crucial managers’ role. The success of
an organization will depend upon the caliber of a manager in utilizing the resources for achieving
enterprise objectives. Management is coordination and integration of available resources to
accomplish specific goals, it can be viewed in terms of various managerial functions: planning,
organizing, monitoring and controlling, and evaluating all functions which a manager performs.
These are the structural functions of a manager.
30

A manager also directs leads, motivates, communicates, delegates, prioritizes and

systematizes the task to be achieved. These are the pervasive functionsof a manager.Through
effective monitoring and control, a manager receives continuous feedback on exactly where
the implementation stands at any given time with respect to achieving the objectives.

If objectives are not being achieved, or if their accomplishment is behind schedule, the
manager can use available information to identify the areas that are causing problems and
develop alternatives to overcome these problems.

Delegation of authority and responsibility is essential to make the subordinates responsible.

In delegating authority, managers should see that it goes as near to the point of action as
possible.

Management refers to the categories or the managerial positions at a work place. The
level of management determines the amount of authority and status of the person occupying
the position at the level.

Managerial positions divided into various categories according to their amount of authority
and status, they are known as the level of management.

2.8 Key Words

 Perrasive Management

 Structural function

 Interpersonal relationships

2.9 Review Questions

1. “The more complex the organization is, the more crucial his role.” Explain the role of
manager in this statement.

2. Explain Henry Minitzberg’s opinion, every manager plays roles in three areas.

3. Identify Robert K.Kalz three kinds of skills for administrators.

4. Elaborate characteristics of a Manager’s Personal and Professional.

5. Explain the various level of management.

 31

UNIT 3
EVOLUTION AND DEVELOPMENT OF
SCIENTIFIC MANAGEMENT

Learning Objectives
After studying this unit, you should be able to:

 understand the theoretical frameworks of management thought

 highlight the evolution of management thought on those period and the scholars

 elaborate on the experiment of Hawthorne study

 enumerate the contingent management principles

Structure
3.1 Introduction

3.2 The Classical School

3.3 Scientific Management - 1880s

3.4 Administrative Management - 1940s

3.5 Management Principles Developed By Henri Fayol

3.6 Bureaucratic Management - 1920s

3.7 The Behavioral School

3.8 Human Relations - 1930’s

3.9 Behavioral Science - 1950’s

3.10 The Quantitative School

3.11 Management Science and Management Information Science

3.12 Production and Operations Management - 1940’s

32

3.13 Systems School

3.14 Contingency School

3.15 Contemporary “Schools” Of Management Thought

3.16 Total Quality Management

3.17 Learning Organization

3.18 Summary

3.19 Key Words

3.20 Review Questions

3.21 Answers to Check Your Progress

3.1 Introduction
The schools of management thought are theoretical frameworks for the study of
management. Each of the schools of management thought are based on somewhat different
assumptions about human beings and the organizations for which they work. Since the formal

Study of management began late in the 19th century, the study of management has
progressed through several stages as scholars and practitioners working in different eras focused
on what they believed to be important aspects of good management practice.

Over time, management thinkers have sought ways to organize and classify the large
information about management that has been collected and disseminated. These attempts at
classification have resulted in the identification of management schools.

Disagreement exists as to the exact number of management schools. Different writers

have identified as few as three and as many as twelve. Those discussed below include,

(1) The classical school

(2) The behavioral school

(3) The quantitative or management science school

(4) The systems school

(5) The contingency school

 33

The formal study of management is largely a twentieth-century phenomenon, and to

some degree the relatively large number of management schools of thought reflects a lack of
harmony among management scholars about basic questions of theory and practice.

3.2 The Classical School

(Managing workers and organizations more efficiently)

Scientific Management 1880s

Administrative Management 1940s

Bureaucratic Management 1920s

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

3.3 Scientific Management - 1880s

 In the late 19th century, management decisions were often random and workers often
worked at an intentionally slow pace. There was little in the way of systematic management
and workers and management were often in conflict.

 Scientific management was introduced in an attempt to create a mental revolution in the

workplace. It can be defined as the systematic study of work methods in order to improve
efficiency. Frederick W. Taylor was its main proponent. Other major contributors were
Frank Gilbreth, Lillian Gilbreth, and Henry Gantt.

 Scientific management has several major principles.

o First, it calls for the application of the scientific method to work in order to determine
the best method for accomplishing each task.

o Second, scientific management suggests that workers should be scientifically

selected based on their qualifications and trained to perform their jobs in the optimal
manner.
34

o Third, scientific management advocates genuine cooperation between workers

and management based on mutual self-interest.

o Finally, scientific management suggests that management should take complete

responsibility for planning the work and that workers’ primary responsibility should
be implementing management’s plans.

Other important characteristics of scientific management includes, scientific development

is difficult but results fair performance standards , the implementation of pay-for-performance,
and incentive plan based on work standards are all supportive.

Scientific management had a tremendous influence on management practice in the early

twentieth century. Although it does not represent a complete theory of management, it has
contributed to the study of management and organizations in many areas, including human
resource management and industrial engineering. Many of the code of belief about scientific
management are still valid today.

3.4 Administrative Management - 1940s

 Administrative management focuses on the management process and principles of
management. In contrast to scientific management, which deals largely with jobs and
work at the individual level of analysis, administrative management provides a more
general theory of management.

 Henri Fayol is the major contributor to this school of management thought. Fayol was
a management practitioner who brought his experience to bear on the subject of
management functions and principles.

 He argued that management was a universal process consisting of functions, which he

termed planning, organizing, commanding, coordinating, and controlling.Fayol
believed that all managers performed these functions and that the functions distinguished
management as a separate discipline of study apart from accounting, finance, and
production.

 Fayol also presented fourteen principles of management, which included maxims

related to the division of work, authority and responsibility, unity of command and direction,
centralization, subordinate initiative, and team spirit.
 35

 Although administrative management has been criticized as being rigid and inflexible
and the validity of the functional approach to management has been questioned, this
school of thought still influences management theory and practice.

 The functional approach to management is still the dominant way of organizing

management knowledge, and many of Fayol’s principles of management, when applied
with the flexibility that he advocated, are still considered relevant.

3.5 Management Principles Developed By Henri Fayol

1. Division of Work: Work should be divided among individuals and groups to ensure that
effort and attention are focused on special portions of the task. Fayol presented work
specialization as the best way to use the human resources of the organization.

2. Authority: The concepts of Authority and responsibility are closely related. Authority was
defined by Fayolas the right to give orders and the power to exact obedience. Responsibility
involves being accountable, and is therefore naturally associated with authority. Whoever
assumes authority also assumes responsibility.

3. Discipline: A successful organization requires the common effort of workers. Penalties

should be applied judiciously to encourage this common effort.

4. Unity of Command: Workers should receive orders from only one manager.

5. Unity of Direction: The entire organization should be moving towards a common objective
in a common direction.

6. Subordination of Individual Interests to the General Interests: The interests of one

person should not take priority over the interests of the organization as a whole.

7. Remuneration: Many variables, such as cost of living, supply of qualified personnel,

general business conditions, and success of the business, should be considered in
determining a worker’s rate of pay.

8. Centralization: Fayol defined centralization as lowering the importance of the subordinate

role. Decentralization is increasing the importance. The degree to which centralization or
decentralization should be adopted depends on the specific organization in which the
manager is working.
36

9. Scalar Chain: Managers in hierarchies are part of a chain like authority scale. Each
manager, from the first line supervisor to the president, possess certain amounts of
authority. The President possesses the most authority; the first line supervisor the least.
Lower level managers should always keep upper level managers informed of their work
activities. The existence of a scalar chain and adherence to it are necessary if the
organization is to be successful.

Scalar chain refers to the, ‘chain of superiors ranging from the ultimate authority to the
lowest ranks. As Fayol explained, this path shows a firm’s line of authority and the links
through which communications are transmitted from the top to the bottom of a firm and
back. To counter possible communication delays caused by the unity-of-command principle,
Fayol developed what is referred to as the “gang plank”. The gang plank allows
communications to cross lines of authority. Thus Foreman F, desiring to communicate a
message to Foreman P, could do so directly without reporting upward (F through E to A)
and having the message in turn transmitted downward to P. The gang plank permits
lateral communication through the shortest path and avoids overburdening a firm’s scalar
chain.

Fayol’s Gangplank
 37

10. Order: For the sake of efficiency and coordination, all materials and people related to a
specific kind of work should be treated as equally as possible.

11. Equity: All employees should be treated as equally as possible.

12. Stability of Tenure of Personnel: Retaining productive employees should always be a

high priority of management. Recruitment and Selection Costs, as well as increased
product-reject rates are usually associated with hiring new workers.

13. Initiative: Management should take steps to encourage worker initiative, which is defined
as new or additional work activity undertaken through self-direction.

14. Espirit De Corps: Management should encourage harmony and general good feelings
among employees.

3.6 Bureaucratic Management - 1920s

 Bureaucratic management focuses on the ideal form of organization. Max Weber was
the major contributor to bureaucratic management. Based on observation, Weber
concluded that many early organizations were inefficiently managed, with decisions based
on personal relationships and loyalty.

 He proposed that a form of organization, called a bureaucracy, characterized by division

of labor, hierarchy, formalized rules, impersonality, and the selection and promotion of
employees based on ability, would lead to more efficient management.Weber also
contended that managers’ authority in an organization should be based not on tradition
or charisma but on the position held by managers in the organizational hierarchy.

 Bureaucracy has come to stand for inflexibility and waste, but Weber did not advocate or
favor the excesses found in many bureaucratic organizations today. Weber’s ideas formed
the basis for modern organization theory and are still descriptive of some organizations.

3.7 The Behavioral School

(Understanding human behavior in the organization)

The behavioral school of management thought developed, in part, because of perceived

weaknesses in the assumptions of the classical school. The classical school emphasized
38

efficiency, process, and principles. Some felt that this emphasis disregarded important aspects
of organizational life, particularly as it related to human behavior. Thus, the behavioral school
focused on trying to understand the factors that affect human behavior at work.

Human Relations 1930s

Behavioral Science 1950s

3.8 Human Relations - 1930’s

 The Hawthorne Experiments began in 1924 and continued through the early 1930s. A
variety of researchers participated in the studies, including Clair Turner, Fritz J.
Roethlisberger, and Elton Mayo, whose respective books on the studies are perhaps
the best known.

 One of the major conclusions of the Hawthorne studies was that workers’ attitudes are
associated with productivity.

 Another was that the workplace is a social system and informal group influence could
exert a powerful effect on individual behavior.

 A third was that the style of supervision is an important factor in increasing workers’ job
satisfaction. The studies also found that organizations should take steps to assist
employees in adjusting to organizational life by fostering collaborative systems between
labor and management.

Such conclusions sparked increasing interest in the human element at work, the Hawthorne
studies are generally credited as the impetus for the human relations school.

 According to the human relations school, the manager should possess skills for diagnosing
the causes of human behavior at work, interpersonal communication, motivating and
leading workers. The focus became satisfying worker needs.

 If worker needs were satisfied, wisdom held the workers results to be more productive.
Thus, the human relations school focuses on issues of communication, leadership,
motivation, and group behavior.

 The individuals who contributed to the school are too numerous to mention, but some of
the best-known contributors include Mary Parker Follett, Chester Barnard, Abraham
 39

Maslow, Kurt Lewin, RenaisLikert, and Keith Davis. The human relations school of
thought still influences management theory and practice, as contemporary management
focuses much attention on human resource management, organizational behavior, and
applied psychology in the workplace.

Hawthorne Experiment:

Australian-born Elton Mayo (1880-1948) is best known for his role in the famous
Hawthorne studies at the Western electric company. In 1924, a group of researchers led by
Elton Mayo and Fritz Roethlisberger of the Harvard Business School were invited to join in the
studies at the Hawthorne Works of Western Electric Company, Chicago. The experiment lasted
up to 1932. The Hawthorne Experiments brought out that the productivity of the employees is
not the function of only physical conditions of work and money wages paid to them. Productivity
of employees depends heavily upon the satisfaction of the employees in their work situation.

Mayo’s idea was that logical factors were far less important than emotional factors in
determining productivity efficiency. Furthermore, of all the human factors influencing employee
behaviour, the most powerful were those emanating from the worker’s participation in social
groups. Thus, Mayo concluded that work arrangements in addition to meeting the objective
requirements of production must at the same time satisfy the employee’s subjective requirement
of social satisfaction at his work place. The Hawthorne experiment consists of four parts. These
parts are briefly described below:-

 Illumination Experiment

 Relay Assembly Test Room Experiment

 Interviewing Programme

 Bank Wiring Test Room Experiment

1. Illumination Experiment:

This experiment was conducted to establish relationship between output and illumination.
When the intensity of light was increased, the output also increased. The output showed an
upward trend even when the illumination was gradually brought down to the normal level.
Therefore, it was concluded that there is no consistent relationship between output of workers
and illumination in the factory. There must be some other factor which affected productivity.
40

2. Relay Assembly Test Room Experiment:

This phase aimed at knowing not only the impact of illumination on production but also
other factors like length of the working day, rest hours, and other physical conditions. In this
experiment, a small homogeneous work-group of six girls was constituted. These girls were
friendly to each other and were asked to work in a very informal atmosphere under the
supervision of a researcher. Productivity and morale increased considerably during the period
of the experiment. Productivity went on increasing and stabilized at a high level even when all
the improvements were taken away and the pre-test conditions were reintroduced. The
researchers concluded that socio-psychological factors such as feeling of being important,
recognition, attention, participation, cohesive work-group, and non-directive supervision held
the key for higher productivity.

3. Mass Interview Programme:

The objective of this programme was to make a systematic study of the employees’
attitudes which would reveal the meaning which their “working situation” has for them. The
researchers interviewed a large number of workers with regard to their opinions on work,
working conditions and supervision. Initially, a direct approach was used whereby interviews
asked questions considered important by managers and researchers. The researchers observed
that the replies of the workmen were guarded. Therefore, this approach was replaced by an
indirect technique, where the interviewer simply listened to what the workmen had to say. The
findings confirmed the importance of social factors at work in the total work environment.

4. Bank Wiring Test Room Experiment:

This experiment was conducted by Roethlisberger and Dickson with a view to develop
a new method of observation and obtaining more exact information about social groups within
a company and also finding out the causes which restrict output. The experiment was conducted
to study a group of workers under conditions which were as close as possible to normal. This
group comprised of 14 workers. After the experiment, the production records of this group
were compared with their earlier production records. It was observed that the group evolved its
own production norms for each individual worker, which was made lower than those set by the
management. Because of this, workers would produce only that much, thereby defeating the
incentive system. Those workers who tried to produce more than the group norms were isolated,
harassed or punished by the group. The findings of the study are:-
 41

 Each individual was restricting output.

 The group had its own “unofficial” standards of performance.

 Individual output remained fairly constant over a period of time.

 Informal groups play an important role in the working of an organization.

Contributions of the Hawthorne Experiment:

Elton Mayo and his associates conducted their studies in the Hawthorne plant of the
western electrical company, U.S.A., between 1927 and 1930. According to them, behavioural
science methods have many areas of application in management. The important features of
the Hawthorne Experiment are:-

 A business organization is basically a social system. It is not just a techno-economic

system.

 The employer can be motivated by psychological and social wants because his behaviour
is also influenced by feelings, emotions and attitudes. Thus economic incentives are not
the only method to motivate people.

 Management must learn to develop co-operative attitudes and not rely merely on
command.

 Participation becomes an important instrument in human relations movement. In order to

achieve participation, effective two-way communication network is essential.

 Productivity is linked with employee satisfaction in any business organization. Therefore

management must take greater interest in employee satisfaction.

 Group psychology plays an important role in any business organization. We must therefore
rely more on informal group effort.

 The neo-classical theory emphasizes that man is a living machine and he is far more
important than the inanimate machine. Hence, the key to higher productivity lies in
employee morale. High morale results in higher output.
42

3.9 Behavioral Science - 1950’s

 Behavioral science and the study of organizational behavior emerged in the 1950s and
1960s. The behavioral science school was a natural progression of the human relations
movement. It focused on applying conceptual and analytical tools to the problem of
understanding and predicting behavior in the workplace.

 However, the study of behavioral science and organizational behavior was also a result
of criticism of the human relations approach as simplistic and manipulative in its
assumptions about the relationship between worker attitudes and productivity. The study
of behavioral science in business schools was given increased credibility by the 1959
Gordon and Howell report on higher education, which emphasized the importance to
management practitioners of understanding human behavior.

 The behavioral science school has contributed to the study of management through its
focus on personality, attitudes, values, motivation, group behavior, leadership,
communication, and conflict, among other issues. Some of the major contributors to this
school include Douglas McGregor, Chris Argyris, Frederick Herzberg, RenaisLikert,
and Ralph Stogdill, although there are many others.

3.10 The Quantitative School

[Increasing quality of managerial decision making through the application of
mathematical and statistical methods]

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

Management Science 1940s

Operations Management 1940s

Management Information Systems 1950s—1970s

3.11 Management Science and Management

Information Science
 Management science (also called operations research) uses mathematical and statistical
approaches to solve management problems. It developed during World War II as
 43

strategists tried to apply scientific knowledge and methods to the complex problems of
war. Industry began to apply management science after the war. George Dantzig
developed linear programming, an algebraic method to determine the optimal allocation
of scarce resources. Other tools used in industry include inventory control theory, goal
programming, queuing models, and simulation.

 The advent of the computer made many management science tools and concepts more
practical for industry. Increasingly, management science and Management Information
Systems (MIS) are entangled. MIS focuses on providing needed information to managers
in a useful format and at the proper time. Decision support systems (DSS) attempt to
integrate decision models, data, and the decision maker into a system that supports
better management decisions.

3.12 Production and Operations Management - 1940’s

 This school focuses on the operation and control of the production process that transforms
resources into finished goods and services. It has its roots in scientific management but
became an identifiable area of management study after World War II. It uses many of the
tools of management science.

 Operations management emphasizes productivity and quality of both manufacturing and

service organizations. W. Edwards Deming exerted a tremendous influence in shaping
modern ideas about improving productivity and quality.

 Major areas of study within operations management include capacity planning, facilities
location, facilities layout, materials requirement planning, scheduling, purchasing and
inventory control, quality control, computer integrated manufacturing, just-in-time inventory
systems, and flexible manufacturing systems.

3.13 Systems School

[1950’s Understanding the organization as a system that transforms inputs into
outputs while in constant interaction with its’ environment]

 The systems school focuses on understanding the organization as an open system that
transforms inputs into outputs. This school is based on the work of a biologist, Ludwig
von Bertalanffy, who believed that a general systems model could be used to unite
44

science. Early contributors to this school included Kenneth Boulding, Richard Johnson,
Fremont Kast, and James Rosenzweig.

 The systems school began to have a strong impact on management thought in the 1960s
as a way of thinking about managing techniques that would allow managers to relate
different specialties and parts of the company to one another, as well as to external
environmental factors.

 The systems school focuses on the organization as a whole, its interaction with the
environment, and its need to achieve equilibrium. General systems theory received a
great deal of attention in the 1960s, but its influence on management thought has
diminished somewhat. It has been criticized as too abstract and too complex. However,
many of the ideas inherent in the systems school formed the basis for the contingency
school of management.

3.14 Contingency School

[1960’s - applying management principles and processes as dictated by the unique
characteristics of each situation]

 The contingency school focuses on applying management principles and processes as

dictated by the exclusive characteristics of each situation. It emphasizes that there is no
one best way to manage and that it depends on various situational factors, such as the
external environment, technology, organizational characteristics, characteristics of the
manager, and characteristics of the subordinates.

 Contingency theorists often implicitly or explicitly criticize the classical school for its
emphasis on the universality of management principles; however, most classical writers
recognized the need to consider aspects of the situation when applying management
principles.

 The contingency school originated in the 1960s. It has been applied primarily to
management issues such as organizational design, job design, motivation, and leadership
style.

o For example, optimal organizational structure has been theorized to depend upon
organizational size, technology, and environmental uncertainty; optimal leadership
 45

style, meanwhile, has been theorized to depend upon a variety of factors, including
task structure, position power, characteristics of the work group, characteristics of
individual subordinates, quality requirements, and problem structure, to name a
few.

 A few of the major contributors to this school of management thought include Joan
Woodward, Paul Lawrence, Jay Lorsch, and Fred Fiedler, among many others.

3.15 Contemporary “Schools” Of Management Thought

Management research and practice continues to evolve and new approaches to the
study of management and continue to be advanced. This section briefly reviews two
contemporary approaches, Total Quality Management (TQM) and the Learning Organization.
While neither of these management approaches offers a complete theory of management,
they do offer additional insights into the management field.

3.16 Total Quality Management

Total quality management (TQM) is a philosophy or approach to management that focuses
on managing the entire organization to deliver quality goods and services to customers. This
approach to management was implemented in Japan after World War II and was a major
factor in their economic renaissance. TQM has at least four major elements.

Employee involvement is essential in preventing quality problems before they occur.

A customer focus means that the organization must attempt to determine customer
needs and wants and deliver products and services that address them.

Benchmarking means that the organization is always seeking out other organizations
that perform a function or process more effectively and using them as a standard, or benchmark,
to judge their own performance. The organization will also attempt to adapt or improve the
processes used by other companies. Finally, a philosophy of continuous improvement means
that the organization is committed to incremental changes and improvements over time in all
areas of the organization.

TQM has been implemented by many companies worldwide and appears to have fostered
performance improvements in many organizations. Perhaps the best-known proponent of this
school of management was W. Edwards Deming.
46

3.17 Learning Organization

The contemporary organization faces extraordinary environmental and technological
change. Thus, one of the biggest challenges for organizations is to continuously change in a
way that meets the demands of this unstable competitive environment. The learning organization
can be defined as one in which all employees are involved in identifying and solving problems,
which allows the organization to continually increase its ability to grow, learn, and achieve its
purpose. The organizing principle of the learning organization is not efficiency, but problem
solving.

Three key aspects of the learning organization are a team-based structure, empowered
employees, and open information. Peter Senge is one of the best-known experts on learning
organizations.

Check Your Progress

1. Identify the management schools?

2. Describe scientific management’s major principles.

3. Explain Fayol’s Gangplank.

 47

Choose the Correct Answers

1. The five basic functions of management, planning, organizing, staffing, leading, and

controlling is:

a. Management process b. Planning process

c. Coordinating function d. Organization behaviour

2. A classical management approach that attempted to understand and explain how human
psychological and social processes interact with the formal aspects of the work situation

to influence performance is:

a. Human psychological approach b. Human relation

c. Both A and B d. None of the above

3. The Era of Scientific Management is:

a. 1830-1830 b. 1880-1930
c. 1930-1950 d. 1950-1980

4. Which is not a part of Robert Katz three managerial skills?

a. Communication b. Technical

c. Human d. Conceptual

5. The careful, scientific study of the job for the purpose of boosting productivity and job
satisfaction is:

a. Fair Day’s work b. Hawthorne experiment

c. Both A and B d. None of the above

6. A classical management approach that attempted to understand and explain how human
psychological and social processes interact with the formal aspects of the work situation

to influence performance is:

a. Human psychological approach b. Human relation

c. Both A and B d. None of the above

48

3.18 Summary

The schools of management thought are theoretical frameworks for the study of
management. Each of the schools of management thought are based on somewhat different
assumptions about human beings, their behaviour, culture and the organizations for which
they work.The formal study of management began late in the 19th century, the study of
management has progressed through several stages as scholars and practitioners working in
different eras focused on what they believed to be important aspects of good management
practice. The classical school is the oldest formal school of management thought. Its roots pre-
date the twentieth century. The classical school of thought generally concerns ways to manage
work and organizations more efficiently. Three areas of study that can be grouped under the
classical school are scientific management, administrative management, and bureaucratic
management. The behavioral school of management thought developed, in part, because of
perceived weaknesses in the assumptions of the classical school. The classical school
emphasized efficiency, process, and principles. Some felt that this emphasis disregarded
important aspects of organizational life, particularly as it related to human behavior. Thus, the
behavioral school focused on trying to understand the factors that affect human behavior at
work. The quantitative school focuses on improving decision making through the application of
quantitative techniques. Its roots can be traced back to scientific management. The systems
school focuses on understanding the organization as an open system that transforms inputs
into outputs. The contingency school focuses on applying management principles and processes
as dictated by the exclusive characteristics of each situation. It emphasizes that there is no one
best way to manage and that it depends on various situational factors, such as the external
environment, technology, organizational characteristics, characteristics of the manager, and
characteristics of the subordinates.

3.19 Key Words

 Bureaucratic Management

 Contingency

 Hawthorne experiment
 49

3.20 Review Questions

1. Explain in brief the various approaches to management.

2. Explain the evolution of management thought from the early pioneers to modern times.

3. Outline the major contributions of the Classical theory of Management.

4. Write an explanatory note on the Human Relations Approach to the study of management.

5. Write an explanatory note on Henri Fayol’s contribution to modern management.

6. “F.W. Taylor is said to be the father of Scientific Management and Henri Fayol, the father
of principles of Management.” Examine this statement.

7. What are the features of classical approach?

8. Discuss the system approach to the study of management.

3.21 Answers to Check Your Progress

Choose the Correct Answers

1. A 2. B 3.B 4.A 5.B 6.B

50

UNIT 4
PLANNING

Learning Objectives
After studying this unit, you should be able to:

 elaborate the nature and importance of planning

 highlight about the classification of the forms and types of planning

 narrate the basic principles, scope and need of planning

 understand the procedure for planning process and the steps to be followed

 discuss about the advantage and disadvantage of planning

Structure
4.1 Introduction

4.2 Definitions

4.3 Nature of Planning

4.4 Importance of Planning

4.5 Forms of Planning

4.6 Types of Plan

4.7 Principles of Planning

4.8 Steps in Planning

4.9 Advantages of Planning

4.10 Limitations of Planning

4.11 Management by Objectives

 51

4.12 Summary

4.13 Key Words

4.14 Review Questions

4.1 Introduction
Taking decisions are very must in everyone’s life, where the decision should not go wrong
will be the ultimate objective of all decision. This sound decision depends on sound planning.
These planning’s and decisions are based on the management on the basis of assumptions of
what is likely to happen in the future. Such assumptions are nothing but forecast about the
likely shape of events in future. The assumptions are not only based on experience, intuition
but also on systematic prediction of future events with the help of quantitative techniques.

A very primary function of any functions of management starts with planning at all levels
and situations. It deals with chalking out a future course of action & deciding in advance the
most appropriate course of actions for achievement of pre-determined goals. It is the process
by which managers establish goals and define the sequence of methods by how these goals
are to be attained.

It is determination of future course of action in advance so as to achieve the desired

results. It is concerned with thinking before doing and deciding in advance;

 What is to be done?

 How is to be done?

 When is it to be done and

 Who is to do it?

Management has to plan for long-range and short-range future direction by looking ahead
into the future, by estimating and evaluating the future behavior of the relevant progress in that
present environment and by determining the enterprise’s overall achievement to be achieved.

Planning is usually referred as a “projected course of action” or ‘anticipating decision

making’. It is through planning that a manager finds answers to the questions of what, how,
when and who.
52

Planning involves to determine various types, the quality and the quantity of physical and
other resources to be acquired from outside, to allocate these resources in an efficient manner
among competing claims and to make arrangements for systematic conversion of these
resources into useful outputs.

From the above descriptions it is very clear a plan should have two basic components:

 Goals

 Action statements

4.2 Definitions
G.R. Terry – If you do not know where you are going, no road will get you there. Without
the activities determined by planning, there would be nothing to organize, no one to actuate
and no need to control.”

Terry has defined planning in terms of future course of action i.e., “planning is the selection
and relating of facts and making and using of assumptions regarding the future in the visualization
and formalization of proposed activities believed necessary to achieve desired result.”

Alford and Beatty – “Planning is the thinking process, the organized foresight, the vision
based on facts and experience that is required for intelligent action.”

Theo Haimann – “Planning is the function that determines in advance what should be
done. It consists of selecting the enterprise objectives polices, programmes, procedures and
other means of achieving these objectives.”

Billy E Goetz – “Planning is fundamentally choosing and a planning problem arise only
when an alternative course of action is discovered.”

McFarland has defined Planning as ”a concept of executive action that embodies the
skills of anticipating, influencing and controlling the nature and direction of change.”

Peter Drucker defined as “Planning is the continuous process of making present

entrepreneurial decisions systematically and with best possible knowledge their futurity,
organizing systematically the efforts needed to carry out these decisions and measuring the
results of these decisions against the expectation through organized systematic feedback.”
 53

Koontz and O’Donnell, ”planning is deciding in advance what to do, how to do it, when
to do it, and who is to do it. Planning bridges the gap from where we are to here we want to go.”

ME. Hurley, “Planning is deciding in advance what is to be done. It involves the selection
of objectives, policies, procedures and programs from among alternatives.”

Killen, “Planning is the process of deciding in advance what is to be done, who is to do

it, how it is to be done and when it is to be done”.

4.3 Nature of Planning

1. Planning is primary function of management

2. Planning is a contribution towards set of objectives

3. Planning avoids haphazard actions

4. Planning minimizes uncertainties

5. Planning is pervasiveness

6. Planning brings economy in operations

7. Planning provides basis for control

8. Planning considers technology based development

54

9. Planning helps to proper utilization of the resources available.

10. Planning leads to decision making progress.

11. Planning is the routine of all managers and individuals

12. Planning is an intellectual and continuous process

13. Planning should be dynamic (flexible) in nature.

14. Planning secures efficiency and accuracy.

15. Planning links with dependent and independent factors

16. Planning involves forecasting and involves realistic

17. Planning is rational in process.

18. Planning’s are to communicated

19. Planning focuses on competing strategies

20. Planning involves cost benefit analysis.

21. Planning involves selection among alternatives.

22. Planning is forward-looking

23. Planning lead to economic progress

24. Planning facilitates control

25. Planning leads to what is next?

4.4 Importance of Planning

1. Planning focuses attention on objectives: Since all planning is directed towards
achieving enterprise objectives, the basic act of planning focuses attention on these
sequence of objectives. Laying down the clear objectives is the very first step in planning,
for the execution of plans will also be directed towards the achievement of organizational
goals.

2. It need to be simple and understandable: if a plan is expressed in a language which is

not understandable by the personnel of the concern or it is complicated, it may create
problems for those who are to actually put it into action.
 55

3. Ensures economical operations: Planning involves a lot of mental exercise which is

directed towards achieving efficient operation in the enterprise. It substitutes joint directed
effort for uncoordinated fragmentary activity, even flow of work function in an uneven
progress and deliberate decisions for snap judgements are necessary. This helps in better
utilization of resources and thus minimizing cost.

4. It should be comprehensive: A good plan should contain all that is necessary for the
attainment of the objectives of the organization. If an idle plan is prepared for the whole
organization it will be more useful as it can be seen that nothing is left from it.

5. Reduces uncertainty: Planning helps in reducing uncertainties of future because it involves

anticipation of future events. Effective planning is the result of deliberate thinking based
on facts and figures. It involves forecasting also. Planning gives an opportunities to a
manager to foresee various uncertainties which may be caused by changes in technology,
taste and fashion of the people, etc. Sufficient in made in the plans to offset these
uncertainties.

6. Encourages Innovation and Creativity: Planning is basically the deciding function of

management. It helps innovative and creative thinking among the managers because
many new ideas arise while working, the individuals think about the further progress and
plan accordingly.

7. Improves Motivation: Good planning system ensures participation of all managers which
improves their motivation. Planning serves as a good training device for future manager’s
skill and improves the motivation among the workers.

8. Improves Competitive strength: Effective planning results in competitive edge to the

enterprise over other enterprise that do not have planning or have ineffective planning.
This is due to the planning may involve expansion of capacity, change in work methods,
changes in quality, anticipation tastes and fashion of people and technology changes,
etc.

9. Facilitates control: Planning helps the managers in performing their function of control.
Planning and control are inseparable in the sense that unplanned action cannot be
controlled. Control involves keeping activities on the predetermined course of rectification
56

that are deviated from the actual plan. Planning helps control by furnishing standards of
control. It lays down objectives and standards of performance which are essential for the
performance of control function.

10. Facilitates coordination: Planning secures unity of direction towards the organizational
objectives. All the activities are directed towards the common goals. There is an integrated
effort throughout the enterprise. It will also help in avoiding duplication of efforts. Thus
this leads to a better coordination in the organization.

11. It should be balanced: It is necessary to ensure that there is a proper coordination

between different types of plans such as short-term and long term plans, plans of different
departments etc. A business enterprise usually has a number of departments like
marketing, production finance etc. Each department frames its own plans. It is for the
management to see that all these plans are well balanced.

12. It should be practicable: A plan is worth only if it is practically workable of realistic. It

should be formulated keeping in view the limitations of planning. Is a plan is good in
theory but bad in practice, it is of no use. Similarly, if the desired results are not achieved
by a plan, it leads to frustration at all levels in the organization.

4.5 Forms of Planning

The forms of planning may be classified into different categories on the following basis:
 57

(i) Nature of Planning : a. Formal planning.

b. Informal planning

(ii) Duration of planning : a. Short term planning.

b. Long term planning.

(iii) Levels of Management : a. Strategic planning.

b. Intermediate planning.

c. Operational planning.

(iv) Use : a. Standing plans

b. Single-use plans.

(i) Nature of Planning:

Planning based an nature as discussed below

a. Formal Planning:

Planning is formal when it is reduced to writing. When the numbers of actions are large
it is good to have a formal plan since it will help adequate control.

The term formal means official and recognized. Any planning can be done officially to be
followed or implemented. Formal planning is aims to determine and objectives of planning. It is
the action that determine in advance what should be done.

Advantages:
i. Proper Cooperation among employees

ii. Unity of Action

iii. Economy

iv. Proper coordination and control

v. Choosing the right objectives

vi. Future plan

58

b. Informal Planning:

An informal plan is one, which is not in writing, but it is conceived in the mind of the
manager. Informal planning will be effective when the number of actions is less and actions
have to be taken in short period.

(ii) Duration of Planning:

Planning categarized based on duration is discussed below

a. Short term Planning:

Short term planning is the planning which covers less than two years. It must be formulated
in a manner consistent with long-term plans. It is considered as tactical planning. Short-term
plans are concerned with immediate future; it takes into account the available resources only
and is concerned with the current operations of the business.

These may include plans concerning inventory planning and control, employee training,
work methods etc.

Advantages:
i. It can be easily adjustable.

ii. Changes can be made and incorporated.

iii. Easy to Gauge.

iv. Only little resources required.

Disadvantages:
i. Very short period-left over things will be more.

ii. Difficult to mobiles the resources.

iii. Communication cycle will not be completed.

b. Long-Term Planning:

Long-term planning usually converse a period of more than five years, mostly between
five and fifteen years. It deals with broader technological and competitive aspects of the
organization as well as allocation of resources over a relatively long time period. Long-term
planning is considered as strategic planning.
 59

Short-term planning covers the period of one year while long term planning covers 5-15
years. In between there may be medium-term plans. Usually, medium term plans are focusing
on between two and five years. These may include plan for purchase of materials, production,
labour, overhead expenses and so on.

Advantages:
i. Sufficient time to plan and implement.

ii. Effective control.

iii. Adjustment and changes may be made gradually.

iv. Periodic evaluation is possible.

v. Thrust areas can be identified easily.

vi. Weakness can be spotted and rectified then and there.

Disadvantages:
i. Prediction is difficult.

ii. Full of uncertainties.

iii. Objectives and Targets may not be achieved in full.

iv. More resources required.

(iii) Levels of Management:

Planningn classified based on the levels of management us discussed below

a. Strategic Planning:

The strategic planning is the process of determining overall objectives of the organization
and the policies and strategies adopted to achieve those objective. It is conducted by the top
management, which include chief executive officer, president, vice-presidents, General Manger
etc. It is a long range planning and may cover a time period of up to 10 years.

It basically deals with the total assessment of the organization’s capabilities, its strengths
and its weaknesses and an objective evaluation of the dynamic environment. The planning
also determines the direction the company will be taking in achieving these goals.
60

b. Intermediate Planning:

Intermediate planning cover time frames of about 6 months to 2 years and is contemplated
by middle management, which includes functional managers, department heads and product
line mangers. They also have the task of polishing the top management’s strategic plans.

The middle management will have a critical look at the resources available and they will
determine the most effective and efficient mix of human, financial and material factors. They
refine the broad strategic plans into more workable and realistic plans.

c. Operational Planning:
Operational planning deals with only current activities. It keeps the business running.
These plans are the responsibility of the lower management and are conducted by unit
supervisors, foremen etc. These are short-range plans covering a time span from one week to
one year.

These are more specific and they determine how a specific job is to be completed in the
best possible way. Most operational plans .ire divided into functional areas such as production,
finance, marketing, personnel etc.

Thus even though planning at all levels is important, since all levels are integrated into
one, the strategic planning requires closer observation since it establishes the direction of the
organization.

(iv) Use:

Based on usage the planningi is classified as :

a. Standing Plan:
Standing plan is one, which is designed to be used over and over again. Objectives,
policies procedures, methods, rules and strategies are included in standing plans. Its nature is
mechanical. It helps executives to reduce their workload. Standing plan is also called routine
plan. Standing or routine plan is generally long range.

b. Single Use Plan:

Single use plan is one, which sets a course of action for a particular set of circumstances
and is used up once the particular goal is achieved. They may include programme, budgets,
projects and schedules. It is also called specific planning. Single use plan is short range.
 61

Components of Planning / Planning Techniques

Planning consists of several individual plans or components of planning, which are usually
bound together.

(i) Forecasting

(ii) Objectives

(iii) Policies

(iv) Programmes

(v) Strategies

(vi) Schedules

(vii) Procedures

(viii) Rules

(ix) Budgets

i. Forecasting: Forecasting becomes an integral part of the planning process. It is a

prediction of future events and conditions. It, therefore, includes both the assessment of
the future and the provision for it. It helps to reduce the uncertainties that surround
management, decision making.

ii. Objectives : Objectives are the ends toward which activity is aimed, they are the results
to be achieved. They represent not only the end point of planning but also the end toward
which organizing, staffing, leading and controlling are aimed.

Organization can grow without any difficulty if it has well-defined objectives. These
objectives should be clearly defined and communicated throughout the organization. Such
objectives must be realistic.

iii. Policies : Koontz and O’Donnell defines ”policies are general statements or
undertakings which guide or channel thinking in decision making of
subordinates.” So, policies act as guides to thinking and action of subordinates in the
organizations. It should be clearly prescribed and understandable by all.
62

iv. Programmes : It refers to the course of action of work to be carried out in proper sequence
for the purpose of achieving specific objectives.

v. Strategies : Koontz and Heinz Weihrich defined strategies as ”a general programme

of action and deployment of resources to attain comprehensive objectives” or the
determination of the basic long-term objectives of an enterprise “and the adoption of
courses of action and allocation of resources necessary to achieve these goals. It is
specific type of plan for achieving organizational goals.

vi. Schedules : Fixing a time sequence for every operation is known as schedules. Normally
it forms part of programming a part of action plan.

vii. Procedures : Procedures are plans that establish a required method of handling future
activities. They are guides to action, rather than to thinking and they detail the exact
manner in which certain activities must be accomplished. They are chronological sequences
of required actions.

viii. Rules : Rules spell out specific required actions or non-actions, following no direction.
They are usually the simplest type of plan.

ix. Budgets : A budget is a statement of expected results expressed in numerical term. It

may be referred to as a numbered programme. A budget may be expressed either in
financial terms or in terms of labour-hours, units of product, machine hours, or any other
numerically measurable term. It helps the organization to control the action by comparing
budgetary and actual results

4.6 Types of Plan

Organizations should develop a better understanding of how to approach business
planning. The following sections expand on the topic and the four types of planning.

Why Plan?

“Planning is about managing resources and priorities in an organized way,” Berry says.
“Management is related to leadership, and it’s related to productivity.”

If companies improve how they plan, managing and leadership will also improve. The
following steps can help businesses plan better.
 63

 Devise a Plan: Write important details down and focus on strengths, what matters, what
people are most important to you and what you can do for them. This will help you
communicate your vision to your employees.

 Define Success: Defining long­term goals and be specific. Establish milestones for certain
goals and who will achieve the goals. Look at what drives your business; it may be
presentations, conversions, page views or something else. Then establish a review
schedule and re-examine your long-term goals as necessary.

 Put It in Motion: Track and analyze numbers to help you manage the work behind the
numbers. You’ll be better able to make changes or to develop new plans that will help
you manage better.

The 4 Types of Plans based on the level of management

1. Operational Planning

“Operational plans are about how things need to happen,” motivational leadership speaker
Mack Story said at LinkedIn. “Guidelines of how to accomplish the mission are set.”

This type of planning typically describes the day-to-day running of the company.
Operational plans are often described as single use plans or ongoing plans. Single use plans
64

are created for events and activities with a single occurrence (such as a single marketing
campaign). Ongoing plans include policies for approaching problems, rules for specific
regulations and procedures for a step-by-step process for accomplishing particular objectives.

2. Strategic Planning

“Strategic plans are all about why things need to happen,” Story said. “Its big picture,
long-term thinking. It starts at the highest level with defining a mission and casting a vision.”

Strategic planning includes a high-level overview of the entire business. It’s the foundational
basis of the organization and will dictate long-term decisions. The scope of strategic planning
can be anywhere from the next two years to the next 10 years. Important components of a
strategic plan are vision, mission and values.

3. Tactical Planning

“Tactical plans are about what is going to happen,” Story said. “Basically at the tactical
level, there are many focused, specific, and short-term plans, where the actual work is being
done, that support the high-level strategic plans.”

Tactical planning supports strategic planning. It includes tactics that the organization
plans to use to achieve what’s outlined in the strategic plan. Often, the scope is less than one
year and breaks down the strategic plan into actionable chunks. Tactical planning is different
from operational planning in that tactical plans ask specific questions about what needs to
happen to accomplish a strategic goal; operational plans ask how the organization will generally
do something to accomplish the company’s mission.

4. Contingency Planning

Contingency plans are made when something unexpected happens or when something
needs to be changed. Business experts sometimes refer to these plans as a special type of
planning.

Contingency planning can be helpful in circumstances that call for a change. Although
managers should anticipate changes when engaged in any of the primary types of planning,
contingency planning is essential in moments when changes can’t be foreseen. As the business
world becomes more complicated, contingency planning becomes more important to engage
in and understand.
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4.7 Principles of Planning

1. Principles of planning: Realization of organizational goals greatly depends upon effective
planning. Long term plans should be interwoven with medium term plans and which, in
turn, should be interrelated with short range planning in order to attain organizational
objectives more effectively and economically.

2. Principle of meaningful objectives: The objectives of the organization should be clear

and attainable. There should not be any ambiguity. If the goals of the organization are
clear and understandable, the plan undertaken would be easy to achieve the objectives.

3. Principle of limiting factors: Planning must take into consideration different limiting
factors like manpower, money, machines, materials, methods, and markets. Objectives
can be achieved by concentrating on them. Developing alternatives plans, strategies,
policies, procedures and standards also taken into consideration.

4. Principles of flexibility: Planning should be flexible and unforeseen contingencies must

be kept in mind. For example, an unexpected fall in demand for a product will require
changes in production plans as well as sales plans. Both the short term and long term
plans should have the elements of flexibility. The management should have flexibility in
planning.

5. Principle in rational process: a planner should have a sound judgement, prudent and
logical thinking while planning. He should possess the detailed information with regard to
the alternative plans in the light of the goals to be attained. The planner should have
rational thinking with an open mind for assuring the success of the project so planned.

6. Principle of communication: The plans finalized by the manager should be widely

communicated to the personnel at all levels of the management. They should also clearly
know about the basic objects, programmes, policies, procedures and rules they are going
to follow to achieve the plans.

7. Principle of adequate control techniques: Planning is the process of thinking while

the control is concerned with actual implementation of the plans. Targets are pre-set in
planning and actual performance is compared with these targets. If there is negative
variance, corrective measures are undertaken to make the planning effective and
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successful in future. Planning becomes ineffective and futile exercise without adequate
control measures.

8. Principles of competing strategies: Present age is the age of competition. Strategies

are the plans undertaken to compete with the plans of the rival. A business has to design
new strategy every time regarding design of the product, its quality, price, advertising and
marketing etc. The strategies are formulated by keeping in view the plans and policies
followed by the competitors.

9. Principle of cost benefits analysis: To see the effectiveness of a plan, cost benefits
analysis is undertaken. If cost of planning is more than the benefit derived from it, then
such a planning must benefits is immensely helpful in assessing the utility of the planning
exercise.

4.8 Steps in Planning

Planning is a complex process which requires high level of studies and analysis. To
create a plan there must be determination of objectives and outlining of the course of action to
achieve the goals. There is no set formula for planning. A planning process which is suitable for
one kind of organization may not be suitable for another type of organization. However, we can
take the following steps as the guideline to draw a plan:
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1. Analysis of the environment: Planning begins with the awareness of the opportunities
in the external environment and within the organization. For this SWOT analysis is most
suitable. Strength and weaknesses are the internal factors whereas opportunities and
threats are the environmental factors which are to be analyzed.

2. Setting the objectives: The second step of planning is to set objectives and goals for the
organization as a whole and for each department. Long term, as well as short-term plans,
are to be created. Objectives are specified to each and every manager and department
head. Objectives give direction to the major plans. So managers should have an opportunity
to contribute their ideas for setting their own objectives and of the organization.

3. Develop premises: Planning premises are the assumptions about the future on the basis
of which the plans will be ultimately formulated. Planning premises are the key to the
success of planning as they supply pertinent facts and information regarding the future
such as general economic conditions, production cost, and prices, probable competitive
behavior, governmental control etc. Forecasting is an essential part of premises.

4. Determine and evaluate alternatives: The fourth step is to search and identify the
alternative course of action. It suggests that a particular objective can be achieved through
numerous ways. But the most relevant alternatives must be listed down so that selection
is made easier. Once various alternatives are identified, they must be well analyzed with
their strong and weak points.
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5. Selection of Best Alternative: This is the point where the certain plan is adopted. When
the alternatives are determined most suitable alternative must be chosen out from the list
which can give maximum output with minimum risk.

6. Formulation of a derivative plan: Derivative plans are the backing plans which are very
essential. Once the basic plan has been formulated, it must be translated into day to day
operation of the organization. Middle and low-level managers must draw up the appropriate
plans, programs and budget for their sub-units.

7. Budget formulation: After decisions are made and plans are set the next step is giving
them sufficient funds to carry them out. Optimum budgeting must be done for every
course of action.

8. Implementation of a plan: Once the plans are set up, now the plans must be well informed
and shared with the employees and managers expecting full commitment and trust. Finally,
the plans must be carried out.

9. Follow up action: Obviously once a plan is carried out it generates certain output. The
progress must be well monitored and managers need to check the progress of their plans
so they can take necessary steps to improve the plans if needed.
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4.9 Advantages of Planning

1. Primacy of Planning : Even though there are other managerial functions such as
organizing, staffing, directing and controlling which helps to achieve the organizational
goals, planning precedes all other managerial functions. It establishes objectives necessary
for all group effort.

2. Helping to Management : Since the planning is a future course of action, mangers are
able to define their objectives and get direction. Also it creates a unity of purpose.

3. Effective Utilization of Resources : Proper planning helps to proper and effective

utilization of resources. Resources are identified for optimum utility through planning. So
waste or minimum waste of resources will not result and thereby idle time for workers and
downtime for machines will be reduced. This will lead to result in minimum cost of
operations.

4. Minimum Cost : Planning helps to minimize cost by providing greater utilization of the
available resources. All kinds of wastage of men, materials, money and machines are
prevented with the help of planning.

5. To help in Motivation : All employees of the organization can feel that we have taken this
plan, if the plans are communicated to them. In this case the sense of belonging of
employees increases and therefore they will be highly motivated.

6. To Offset Uncertainty and Change : There may be continuous change in the environment
and organization has to work in accelerating change. This change is reflected in both
tangible and intangible forms. Tangible changes are in the form of changes in technology,
market forces, and government regulations.

Intangible changes reflect in changes in attitudes, values, cultures etc. In order to cope
up with the requirements of such changes, organization must role ahead for its future
course of action, which is basically provided by planning process. Planning does not stop
changes in the environment, but gears the organization to take suitable actions so that it
is successful in achieving its objectives.

7. Help in Coordination : Proper planning is made by unifying all areas on departments of

the organization. It wills leads to coordinate and harmony among the departments is
achieved.
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8. Facilities Control : Planning provides performance standards and standards for measuring
the progress of the organizations. Therefore management can compare the actual
performance with the standards. Manager can control action by looking at different if any
deviation.

9. Facilitates Decision making : Planning provides a framework for decision making. Since
the planning provides for feedback, periodic evaluation, and indication for any deviation,
corrective action can be taken which leads to better decision making.

10. Encourage Innovation and Creativity : It brings about rationality in managerial approach
and improvement in executive thinking. D. F. Hussey said that, ”A good planning process
will provide avenues for individual participation will throw up more ideas about the
company and its environment, will encourage an atmosphere of frankness and
corporate self-criticism and will stimulate managers to achieve more.”

11. Improves Competitive Strength : Since the operations are planned in advance, company
can take its action concretely. It improves the competitive strength of the organization.

4.10 Limitations of Planning

1. Corporate Planning is not integrated into the Total Management System : The top
management fails to identify and associate properly the formal planning with the central
concept of the organization’s mission.

2. There is a Lack of Understanding of the Different Steps of the Planning Process :

The management may not be knowledgeable or skilled in understanding all steps of the
planning requirements.

3. Non-Availability of Correct Information and Data : Planning is made by having

information and data available. Generally correct information and data not available.

4. Management at Different Levels in the Organization has not Properly Contributed

to Planning Activities : Generally all strategic planning are made and conducted at top
management. So sometimes middle level and lower level of management, which are
closer to the operation, may not understand all aspects of planning. This will affect their
fullest contribution.
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5. Costly or Uneconomical : Planning is expensive. The cost of planning should not be in

excess of its contribution and managerial judgement is necessary to balance the expenses
of preparing the plans against the benefits derived from them.

6. Lack of contingency plans : Since budgets are made in advance, it may not possible to
exactly foresee the changes in the economy. Hence accurate judgement of future is very
difficult in this dynamic economy situation and same happens in others activities.

4.11 Management by Objectives

An effective management goes a long way in extracting the best out of employees and
make them work as a single unit towards a common goal. The term Management by
Objectives was coined by Peter Drucker in 1954.

What is Management by Objective?

The process of setting objectives in the organization to give a sense of direction to

the employees is called as Management by Objectives. It refers to the process of setting
goals for the employees so that they know what they are supposed to do at the workplace.
Management by Objectives defines roles and responsibilities for the employees and help them
chalk out their future course of action in the organization. Management by objectives guides
the employees to deliver their level best and achieve the targets within the stipulated time
frame.

Need for Management by Objectives (MBO)

The Management by Objectives process helps the employees to understand their duties
at the work-place. KRAs [Key Result Areas] are designed for each employee as per their
interest, specialization and educational qualification. The employees are clear as to what is
expected out of them.

Management by Objectives process leads to satisfied employees. It avoids job mismatch

and unnecessary confusions later on. Management by Objectives ensures effective
communication amongst the employees. It leads to a positive ambience at the workplace.

Employees in their own way contribute to the achievement of the goals and objectives of
the organization. Every employee has his own role at the workplace. Each one feels
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indispensable for the organization and eventually develops a feeling of loyalty towards the
organization. They tend to stick to the organization for a longer span of time and contribute
effectively. They enjoy at the workplace and do not treat work as a burden.

Management by Objectives leads to well defined hierarchies at the workplace. It ensures

transparency at all levels. A supervisor of any organization would never directly interact with
the Managing Director in case of queries. He would first meet his reporting boss who would
then pass on the message to his senior and so on. Everyone is clear about his position in the
organization.

The MBO Process leads to highly motivated and committed employees. The MBO Process
sets a benchmark for every employee. The superiors set targets for each of the team members.
Each employee is given a list of specific tasks.

Limitations of Management by objectives Process

It sometimes ignores the prevailing culture and working conditions of the organization.

More emphasis is being laid on targets and objectives. It just expects the employees to
achieve their targets and meet the objectives of the organization without bothering much about
the existing circumstances at the workplace. Employees are just expected to perform and
meet the deadlines. The MBO Process sometimes do treat individuals as mere machines.

The MBO process increases comparisons between individuals at the workplace.

Employees tend to depend on nasty politics and other unproductive tasks to outshine their
fellow workers. Employees do only what their superiors ask them to do. Their work lacks
innovation, creativity and sometimes also becomes monotonous.
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Check Your Progress

1. Explain Standing Plan.

2. Describe single use plan.

3. Compare formal and informal planning.

4.12 Summary

Sound decision depends on sound planning. These planning’s and decisions are based
on the management on the basis of assumptions of what is likely to happen in the future. Such
assumptions are nothing but forecast about the likely shape of events in future.

Primary function of management starts with planning at all levels and situations. It deals
with chalking out a future course of action & deciding in advance the most appropriate course
of actions for achievement of pre-determined goals.

It is the process by which managers establish goals and define the sequence of methods
by how these goals are to be attained.Planning involves a lot of mental exercise which is
directed towards achieving efficient operation in the enterprise. It substitutes joint directed
effort for uncoordinated fragmentary activity, even flow of work function in an uneven progress
and deliberate decisions for snap judgements are necessary. This helps in better utilization of
resources and thus minimizing cost.
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“Planning is about managing resources and priorities in an organized way,” Berry says.
“Management is related to leadership, and it’s related to productivity.”

Planning is a complex process which requires high level of studies and analysis. To
create a plan there must be determination of objectives and outlining of the course of action to
achieve the goals. There is no set formula for planning. A planning process which is suitable for
one kind of organization may not be suitable for another type of organization.

4.13 Key Words

 Decision Making

 Competitive strength

 Forecasting

 Policy

 Tactical Plans

4.14 Review Questions

1. What is planning? What are the essential of good planning?

2. Distinguish between;

a. Objectives and Policies

b. Procedures and Rules

c. Policy and Procedure

d. Policy and Rules

3. Define Budget. What are the characteristics and objective of budgets?

4. Differentiate between standing plans and single use plans.

5. ‘Planning is looking ahead whereas control is looking back’. Do you agree?

6. ‘Planning is primarily the process of decision making’. Discuss.

7. Explain the need of planning.

8. Elaborate the steps in planning

9. Explain the forms of planning.

10. State the advantages and disadvantage of planning

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UNIT 5
OBJECTIVES, POLICIES & PROCEDURES

Learning Objectives
After studying this unit, you should be able to:

 Understand about the forms of plans and their differences

 Highlight the application of the forms of plans

 Enumerate about the Policies that relate to decision making

 Disucss about the need of strategies. Procedures, methods, missions

 Describe the application of rules, programs, and budgets etc.

Structure
5.1 Introduction

5.2 Objectives

5.3 Policies

5.4 Strategies

5.5 Procedures and Methods

5.6 Rules

5.7 Programs

5.8 Nature of Program

5.9 Budgets

5.10 Purpose or Mission

5.11 Summary

5.12 Key Words

5.13 Review Questions

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5.1 Introduction
A plan can be described as the commitment of the organization to a particular course of
action in order to achieve the desired. This also means that several plans have to be followed
by the organization in order to achieve different objectives. Generally, it has been seen that
manages make the mistake of considering only the major programs as the plans.

However, there are several future courses of action that also need to be considered as
plans. Therefore, the starting of the production of a new product or the establishment of a new
factory also needs to be considered as plans. The classification of the plans can be made on
the basis of the origin, purpose, used on the type of plans. There are certain plans that are
present in the form of standing plans and at the same time, some other plans are single use
plans.

As the name suggests, the single use plans are only used on one occasion only and are
not used again. On the other hand, the standing plans can be used by the organization repeatedly,
on more than one occasion. Some of the examples of standing plans include the objectives,
policies, procedures and rules and strategies etc. therefore once they have been formulated,
the organization uses these plans for a long time and on more than one occasion.

But at the same time there are plans like budgets and programs that are only used on
one occasion and once they have been used, the organization is required to formulate these
plans all over again. Therefore, different types of plans can be described as follows:-

5.2 Objectives
Objectives or the goals of the organization are the ends towards which every activity of
the organization is aimed at. Therefore, goals or objectives are the results that the organization
tries to achieve. Objectives are considered as a prerequisite for planning. The managers cannot
make plans if they have not established the organizational goals first. While the objectives of
the enterprise are the basic plans of the firm, it is also possible that various departments of the
organization may also have their own objectives.

Therefore, even if the objectives of the departments are required to contribute to achieving
the objectives of the enterprise, but it is possible that the goals adopted by these two can be
totally different. For example, while the objective of the enterprise is to earn a particular amount
as profit but on the other hand, the goal of a particular department is to sell the products.
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 Objectives are the important ends toward which organizational and individual activities
are directed

 An objective is verifiable when at the end of the period one can determine whether or not
the objective has been achieved.

Non-verifiable objectives
1. To make a reasonable profit

2. To improve communication

3. To improve productivity of the production department

4. To install a latest technology

Example:

 To achieve return on investment 15% at the end of the year.

 To issue two page report daily.

 To increase 5% output b 31st December.

 The process to be computerized by this month.

5.3 Policies
Policies can be described as the general statements or understanding that provides
guidance to the managers in decision making. Policies are standing plans that guide the
management that is engaged in managerial operations. The policies of the organization also
prescribe the boundaries within which the managers have to make decisions and it also ensures
that all the decisions made by the managers are directed towards achieving the goals of the
organization.

At the same time, the policies also help in dealing with the issues before they take the
shape of problems. In this way, with the help of policies, the managers do not have to waste
their time in analyzing the same situation whenever it arises. Policies also allow the managers
to delegate authority within the permissible parameters and still the managers can retain control
on these activities. Therefore, it can be said that policies encourage initiative and discretion but
also ensure that they remain within the limits.
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Policies provide general guidelines for solving problems and making decision in pursuit
of specific entity goals. A policy’s main purpose is to ensure consistency and control across
entity operations and to avoid unnecessary repetition in decision making. Procedures derive
from and conform to policies but are more tactical, specific, concrete, and detailed than policies.
Procedures serve as a management control mechanism by standardizing daily operations to
ensure consistent processing of recurrent tasks. Procedures specify how recurring tasks are
to be executed and enumerate both the steps and sequence to be followed. Since they address
future scenarios, procedures are also a form of standing plans.

Types of Policies
Policies should:

o Integrate with policies at higher levels and policies governing related internal operations.

o Clarify the nature and scope of entity plans.

o Provide sufficient flexibility to anticipate and resolve problems associated with managing
the entity.

o Prevent repeated or duplicate analysis of management or operational issues.

o Avoid excessive operational detail.

o Permit managers to delegate authority while maintaining control.

o Be well-formulated, communicated, understood, updated, accepted, and used.

5.4 Strategies
Although earlier the word strategy was mainly used by formulating military action plans.
The term strategy was used in order to elaborate the plans that were made by keeping in view
the probable moves of the adversary. However these days, strategies are used by the managers
in the field of business operations also.

In this way, strategies can be described as the comprehensive and integrated plans that
are designed by the managers with a view to make sure that the organization achieves its
objectives. Therefore the managers decide the long-term goals of the organization and then
the required resources are allocated so that the desired results can be achieved.
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The purpose behind making strategies can be described as to portray a picture of the
type of enterprise that is being envisioned. However, the strategies do not try to provide the
programs that are required to achieve the objectives but they provide a framework that guides
the thinking of the managers and also their actions.

5.5 Procedures and Methods

Procedures: Procedures can be described as the details of action or the guidelines that
are given in order to achieve the objectives of the organization. The procedures provide details
regarding the ways in which the things have to be done by the organization. In this way, there
is no room for personal judgment in these cases. It is also important that the procedures
should help in implementing the policies of the organization.

The procedures should also decide the policy of accountability. Therefore, a procedure
can be described as a series of related tasks that have to be done in the chronological order
and it is also the established way in which a particular work has to be performed.

Procedures are more effective control tools if the entity consciously assesses their
relationship to its policy and operational systems. Procedures often extend to more than one
functional area or department. This increases their importance as controls. For example,
accounting, personnel, and purchasing procedures, among others, affect most entity
departments.

Procedures should:

 Provide sufficient flexibility to handle both daily operations and reasonably foreseeable
abnormal situations.

 Allocate and use resources efficiently and not cost more to develop and implement that
the risk(s) they seek to avoid.

 Be clearly understood, thoroughly delineated, and easily accessible in writing.

 Add value to the service or product delivered to internal or external customers.

 Exist at all entity levels

 Organize operation and control of the entity.

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 Reduce the need for managerial direction of routine matters.

 Improve efficiency by standardizing actions.
 Delineate and sequence task steps.
 Facilitate personnel training

There is a significant difference between procedures and policies. The procedures act as
a guide regarding the action while the policies guide the thinking of the managers. Policies are
the guidelines that help in taking decisions but the procedures provide the various methods
through which each stage of work has to be accompanied. While there is a scope of interpretation
in case of policies in order to see if a particular policy fits generation but there is no such scope
as the procedures are tailor-made.

Procedures offer certain advantages to the organization. First, the procedure provides
details regarding these sequences that need to be followed in order to complete a particular
task. It also allows the managers to keep updated if the work is going on according to the
plans. In this way, procedures can also be used as a control mechanism because when a
particular procedure has been adopted to do a particular work, it can be immediately noted if
there is any discrepancy in completing that work.

Procedures also help the managers in ensuring consistency as well as the uniformity of
performance. Therefore, when procedures have been established in the organization, the
managers can use these procedures again and again. With the help of standardization of
procedures, the requirement for decision making in similar situations by the managers can
also be reduced.

Therefore, whenever there is a need to perform a similar task, the same procedure can
be adopted by the managers to do that task. In this way the efficiency of the organization is
also increased.

Procedures also allow the managers to establish a particular sequence that has to be
followed for each work. In this way the managers can coordinate various activities of different
departments or the sections of the organization because in this case, all of them will be following
the same procedures.

But apart from the above mentioned advantages, procedures also have certain limitations.
The first such limitation is rigidity which arises as a result of following the procedures. As a
procedure has to be used continuously time and again, it may result in discouraging initiative
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and discovery within the organization. Procedures are also required to be reviewed constantly.
The reason is that a same procedure cannot be followed for long-term.

Therefore the changing situation requires that the procedures should be constantly
reviewed. In order to keep the procedures effective, they need to be updated so that they are
suitably adjusted in order to meet with the present situations.

5.6 Rules
Rules are the plans that provide the required course of action regarding a particular
situation. Therefore a rule can also be described as a decision that has to be made by the
management regarding what needs to be done in case of a particular situation. In this way, a
rule is always rigid and definite and it does not allow the subordinates to have any discretion or
deviation. As against the procedures, the rules do not provide for any chronological sequence
of the steps that have to be taken by the employees in order to achieve a particular objective.
However it is possible that in some cases a rule can be a part of the procedure. On the other
hand, there are certain rules that are not a part of procedure, for example the “no smoking rule”
in the factory. However a rule which requires that the payment has to be made within 21 days
can be a part of the procedure adopted by the management.

The rules provide the limits of behavior that is expected and acceptable within the
organization from all the members of the organization. The rules also allow the managers to
predict the behavior of the employees and how they will act in particular situation. The rules
also help the management in channeling the behavior of the employees in a particular direction.
Sometimes the employees of an organization resent the implementation of certain rules as
they believe that these rules may stifle their actions. However in these cases, the problem is
not with the rules but the problem is with the way in which these rules are presented to the
employees. At the same time, the management should also try to introduce the rules that are
very necessary and the need for implementing these rules should also be properly explained to
the workers.

5.7 Programs
Programs are the sequence of activities that have been designed with a view to implement
the policies and to achieve the goals of the organization. Therefore, programs are devised with
a view to deal with a particular situation. Programs can be described as a combination of
policies and procedures, rules, task assignments, budgets etc. that are designed for a particular
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purpose to perform a particular course of action. In this way, separate programs have to be
developed in order to accomplish different tasks. A single program cannot be used to achieve
several goals. In this way a program is a single use plan that is designed for non-repetitive and
new activities.

5.8 Nature of Program

The characteristics of programs can be described as follows:-

Programs are single use comprehensive plans. They are formulated with a view to achieve
particular purpose. Once the objective has been achieved, a particular program is not used
anymore. In order to formulate a program, sometimes several small plans may need to be
prepared. For example a program that has been developed with a view to increase the sales of
the company by 20% may require that several small plans also have to be created.

A program is developed with a view to achieve the goals of the organization.

Programs provide a time limit within which it has to be implemented. Therefore, there is
a strict timetable to finish the particular task. It is also important that a program ensures
coordinated efforts of planning. Programs offer several advantages to the organizations.

The main advantages of programs can be described as follows:-

Programs provide a course of action that has to be followed by the organization in order
to achieve its objectives. The details regarding the required actions have to be taken and a
strict timetable has to be followed. This helps in implementing the plans.

Programs also help the management in creating better coordination within the organization.
It ensures that the policies and procedures, budgets and rules etc. are in order which provide
better quality coordination in the organization.

But at the same time, there are certain limitations associated with programs; these are:-

In case the programs are not developed carefully, there is a risk that the programs may
fail. Therefore it is very important that the action that has to be taken and the procedure that
needs to be followed in a particular program should be selected by the managers very carefully.
In case there are lapses at any stage, it is likely that the programs may prove to be ineffective.
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Similarly, in case of programs there is always the risk that the coordination within the
organization can be inadequate. If the different elements of programs like the rules, policies,
procedures etc. are not balanced in a proper way, it is possible that the programs may not be
coordinated properly.

There are several sub-programs in case of the major programs. In such cases, all sub-
programs have to be successfully carried out so that the main program can be completed
successfully. If there is any error in implementing any of the sub-programs, the success of the
whole program can be endangered.

5.9 Budgets
Budgets are the monetary or the quantitative expression of the plans and policies that
have to be followed by the organization in future. Therefore the term budgeting is used in order
to describe the activity of preparing budgets and other procedures related with planning,
coordinating and controlling the business of the organization. A budget has been described as
a financial statement or a quantitative statement that is prepared before a particular period,
regarding the policy that has to be followed by the organization in order to achieve its objectives.

5.10 Purpose or Mission

The purpose or the mission of the organization identifies the basic task or the function of
the organization. It is very important that each and every organization should have its own
purpose because purpose makes the working of the organization meaningful.

The society also assigns a purpose or a mission to every organization. For example the
purpose of business organizations can be to produce and distribute products or services. On
the other hand, the purpose of the mission of public works department can be to construct
roads.

In this way, the purpose of the organization can be considered as a standing plan in case
of business organizations and it also defines the basic purpose of the organization which
allows the other actions to be designed by keeping in view the purpose of the organization. In
this way, the purpose of the organization comprises of the long-term vision regarding the future
of the organization and the reasons why the organization exists. The mission of the organization
indicates the activities that the organization is going to undertake at present and in future.
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Check Your Progress

1. Explain strategies.

2. Describe mission.

3. Compare objectives and policies.

5.11 Summary
A plan can be described as the commitment of the organization to a particular course of
action in order to achieve the desired. This also means that several plans have to be followed
by the organization in order to achieve different objectives.Objectives are the important ends
toward which organizational and individual activities are directed.An objective is verifiable when
at the end of the period one can determine whether or not the objective has been achieved.

Policies are standing plans that guide the management that is engaged in managerial
operations.

Strategy was mainly used by formulating military action plans. The term strategy was
used in order to elaborate the plans that were made by keeping in view the probable moves of
the adversary.

Procedures are more effective control tools if the entity consciously assesses their
relationship to its policy and operational systems. Procedures often extend to more than one
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functional area or department. This increases their importance as controls. For example,
accounting, personnel, and purchasing procedures, among others, affect most entity
departments.

Rules are the plans that provide the required course of action regarding a particular
situation. Therefore a rule can also be described as a decision that has to be made by the
management regarding what needs to be done in case of a particular situation.

Programs can be described as a combination of policies and procedures, rules, task

assignments, budgets etc. that are designed for a particular purpose to perform a particular
course of action. In this way, separate programs have to be developed in order to accomplish
different tasks.

Budgets are the monetary or the quantitative expression of the plans and policies that
have to be followed by the organization in future.

The mission of the organization identifies the basic task or the function of the organization.
It is very important that each and every organization should have its own purpose because
purpose makes the working of the organization meaningful.

5.12 Key Words

 Strategies

 Procedures

 Programs

 Forecasting

 Premise

5.13 Review Questions

1. Explain the forms of plans and their differences.

2. State the need of application and the forms of plans.

3. Explain verifiable and non-verifiable plans.

4. State policies that relate to decision making.

5. What is the need of strategies, Procedures, methods, missions?

6. State the application of rules, programs, and budgets.

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UNIT 6
DECISION MAKING

Learning Objectives
After studying this unit, you should be able to:
 highlight the importance of decision making in the life and work place
 elaborate the decision making as an aid for business intelligence
 enumerate factors of decision making
 describe the process, function and the steps involved stages in decision making
 discuss about the relationship between decision making and planning
 enumerate the need of information for taking prompt decisions
 highlight the Types, models and importance of decisions

Structure
6.1 Introduction

6.2 Definitions

6.3 Features or Characteristics of Decision Making

6.4 Relationship between Decision Making and Planning

6.5 Process of Decision Making

6.6 Information Based [Data-Driven] Decision Making

6.7 Challenges in the Decision Making Process

6.8 Types of Decision Making Processes

6.9 Models of the Decision Making Process

6.10 Importance of Decision Making

6.11 Summary

6.12 Key Words

6.13 Review Questions

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6.1 Introduction
Every actions of an individual is the result of the decision or choice made. Decision
making is an indispensable part of life. Infinite number of decisions are taken in individuals life,
as in business, the decision taken are the step forward for profit making. Decision is the integral
process in the business activities.

Decision making is the process of making choices, by identifying a decision, gathering

information, and assessing alternative resolutions. Using a step-by-step decision
making process will help you to make more deliberate, thoughtful decisions, by organizing
relevant information and defining alternatives.

A decision is a choice made between two or more available alternatives. Decision

making is a process of choosing the best alternative for reaching objectives decision making is
covered in the planning section of this text managers must also make decision when performing
the other three managerial function-organizing, influencing, and controlling- the subject requires
a separate chapters.

The decision making process, in a business progress, is a set of steps taken by managers
at the work place, to determine the planned path for business initiatives and to set specific
actions in progress. Business decisions are based on an analysis of objective facts, aided by
the use of Business Intelligence (BI) and analytics tools.

In any business situation there are multiple directions, to take a strategy or an initiative.
The variety of alternatives are to be weigh and the volume of decisions that must be made on
an ongoing basis, especially in large organizations makes the implementation of an effective
decision making process a crucial element of managing successful business operations.

Decision making is possible when there are two or more alternatives to solve a single
problem or difficulty. If there is only one alternative then there is no question of decision making.
It is believed that the management without a decision is a man without a backbone. Therefore,
decision making is a problem-solving approach by choosing a specific course of action among
various alternatives.

Managers make decision affecting the organization daily and communicate that decision
to other organizational members. Not at all managerial decision is equal significance to the
organization, some affect the large number of organization members, cost a great deal of
money to carry out, or have a long term effect on the organization.
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6.2 Definition
George R.Terry – “Decision making is the selection, based on some criteria from two or
more possible alternatives”.

J.L. Massie - “A decision can be defined as a course of action consciously chosen from
available alternatives for the purpose of the desired result”.

D. E. Mc. Farland, - “A decision is an act of choice, wherein an executive forms a

conclusion about what must be done in a given situation. A decision represents a course of
behaviour chosen from a number of possible alternatives.”

From these definitions, it is clear that decision making is concerned with selecting a
course of action from among alternatives to achieve a predetermined objectives. Following
features can be derived,

Decision making is a selection process and is concerned with selecting the best type of
alternatives.

 The decisions taken is aimed at achieving the organizational goals

 It is concerned with the detailed study of the available alternative for finding the best
possible alternatives.

 Decision making is a mental process. It is the outline of constant thoughtful consideration.

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 It leads to commitment. The commitment depends upon the nature of the decision whether
short term or long term.

6.3 Features or Characteristics of Decision Making

 Goal-oriented Process: Decision making is a goal-oriented process. It aims at achieving
certain specific goals of the organization.

 Selection Process:Decision making is a selection process in which best alternative

course of action.

 Art as well as Science: Decision making is considered both an art and a science.

 Responsibilities of Managers:Decision making is the responsibility of manager at

different levels of management.

 Positive as well as Negative:Decision making can be both positive and negative i.e. it
may be positive (to perform certain actives) or negative (not to perform certain actives).

 Future Course of Action: Decision are made for future course of action based on the
basis of past experiences and present conditions.

6.4 Relationship between Decision Making and Planning

Decision making is a must for all managerial and operative function. Decision
making in planning is as important as in organization, coordination and control, because in
each of these functions the manager has to choose from among a number of alternative courses
of action.

Chester I. Bernard, distinguish between two classes of acts, those which are the results
of deliberation, calculation and thought are decisions, and those which are unconscious,
automatic and responsive are subsidiary acts in decisions which are themselves automatic
and of which the process are usually unknown to the manager. Deciding and planning have
related meaning.

Planning and decision is concerned with a future course of action and involves choosing
among alternatives. Planning, as a whole with its component parts like objectives, policies and
procedures, is the outcome of decision making. Decision is the point where plans, policies and
objectives are translated into concrete actions. Planning leads to sound-decision making and
implies the selection among alternatives.
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Decision making is an important aspect of planning. Without decision making none of

the other function of management is possible ahead.

6.5 Process of Decision Making

There are many different decision making methodologies, but most share at least five
steps in common:

1. Identify a business problem: As a start, the problem is to be identified and defined

clearly. The problem can be explained as a question for and appropriate solution. The
manager should consider critical or strategic factors in defining the problem. These factors
are, in fact, obstacles in the way of finding proper solution. These are also known as
limiting factors. For eg. When a machine breakdown while functioning, due to improper
maintenance, then this is to be consider as limitations. So while selecting alternative or
probable solution to the problem, the more the decision making takes into account those
factors that are limiting.

2. Analyze and seek information about different possible decisions and their likely
effect: after defining the problem, the next procedure is a systematic analysis of the
available data. Sound decisions are based on proper collection, classification and analysis
of facts and figures. There are three principles relating to the analysis and classification
as explained below:

i. The further decision, its design of what time, the decision will be implied into action.

ii. The impact of decision on other functions and area of the business.

iii. The qualitative consideration which come into the picture.

3. Evaluate the alternatives and choose one of them: After defining and analyzing the
problem, it is necessary to develop alternative solutions. The main aim of developing
alternative solutions is to have the best possible decisions out of the available alternative
courses of action. In developing alternative solutions the manager comes across creative
or original solutions to the problems. In modern times, the techniques of operations
research and computer applications are immensely helpful in the development of alternative
course of action.
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After developing various alternatives, the manager has to select the best alternative. It is
not an easy task, the four best important points are;

i. Risk elements involved in each course of action against the expected gain.

ii. Economy of effort involved in each alternative, i.e. securing desired results with the
least efforts.

iii. Proper timing of the decision and action

iv. Final selection of decision is also affected by the limited resources available at our
disposal. Human resources are always limited and must have right person to carry
over the decisions. Their caliber, understanding, intelligence and skill will finally
determine what they can and cannot do.

4. Implement the decision in business operations: In this point manager has to put the
selected decision into action. For proper and effective execution of the decision, three
things are very important;

i. Proper and effective communication of decision to the subordinates. Decisions should

be communicated in clear, concise and understandable manner.

ii. Acceptance of decision by the subordinates is important. Group participation and

involvement of the employees will facilitate the smooth execution of decisions.

iii. Correct timing in the execution of decision minimizes the resistance to change.
Almost every decision introduces a change and people are hesitant to accept a
change. Implementation of the decision at the proper time plays an important role
in the execution of the decision.

5. Follow-up and Monitor the situation, gather data about the decision’s impact and
make changes if necessary: A follow up system ensure the achievement of the objectives.
It is exercised through control. Simply stated it is concerned with the process of checking
the proper implementation of decision. Follow up is indispensable so as to modify and
improve upon the decisions at the earliest opportunities.

Feedback provides the means of determining the effectiveness of the implemented

decision. If possible a mechanism should be built which would give periodic reports on
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the success of the implementation. The mechanism should also serve as an instrument
of “preventive maintenance”, so that the problems can be prevented before they occur.

6.6 Information Based [Data-Driven] Decision Making

Traditionally, decisions were made by business managers or corporate executives using
their intuitive understanding of the situation at hand. However, intuitive decision making has
several drawbacks. For example, a gut-feel approach makes it hard to justify decisions after
the fact and bases enterprise decision making on the experience and accumulated knowledge
of individuals, who can be vulnerable to cognitive biases that lead them to make bad decisions.

But, businesses today typically take more systematic and information based approaches
to the decision making process. This allows managers and executives to use techniques such
as cost-benefit analysis and predictive modeling to justify their decisions. It also enables lines
of business to build process automation protocols that can be applied to new situations as they
arise, avoiding the need for each one to be handled as a unique decision making event.

If designed properly, a systematic decision making model reduces the possibility that the
biases and blind spots of individuals will result in sub-optimal decisions. On the other hand,
data [information] isn’t infallible, which makes observing the business impact of decisions a
crucial step in case things go in the wrong direction. The potential for humans to choose the
wrong data or information also highlights the need for monitoring the analytics and decision
making stages, as opposed to blindly going where the data is pointing.

6.7 Challenges in the Decision Making Process

The quality of the decisions can make the difference between success and failure.
Balancing data-driven and gut-feel approaches to decision making is a difficult proposition.
Managers and executives may be doubtful about relying on data that goes against their intuition
in making decisions, or feel that their experience and knowledge is being discounted or ignored
completely. As a result, they may push back against the findings of BI and analytics tools
during the decision making process.

Getting everyone on board with business decisions can also be a challenge, particularly
if the decision making process isn’t transparent and decisions aren’t explained well to affected
parties in an organization. Then this calls for the development of a plan for communicating
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about decisions internally, plus a change management strategy to deal with the effects of
decisions on business operations.

Indecisiveness in decision making is the fear of its outcome can make some people timid
in taking a decisions. Post ponding the decision until the last moment, results the decision
making under pressure. Most of the decisions, particularly the non-programmed ones have to
be based upon a lot of information and factors, the procedure to identify, isolate and select the
useful information must be sound and dependable.

Making a decision is not the end process, rather than it is a beginning. Implementation
of the decision and the results obtained are the true barometer of the quality of the decision.
Duties must be assigned, deadlines must be set, evaluation process must be established and
contingency plans must be prepared in advance.

6.8 Types of Decision Making Processes

The decision maker design the rules and procedure so as to proceed with a systematic
decision making progress. For example, after gathering data about different alternatives, more
than one might seem similarly advantageous, or management might find itself lacking certain
information needed to make a decision with full confidence. This is a good use in case for
incorporating intuitive decision making into the process.

Programmed decision making ­ Programmed decisions are routine and repetitive, and
the organization typically develops specific ways to handle them. A standard procedure is
followed for tackling such problems. These decisions are taken generally by lower level
managers. A programmed decision might involve determining how product will be arranged on
the shelves of the supermarket. For this kind of routine, repetitive problem, standard-arrangement
decisions are typically made according to established management guidelines.

Non-programmed decision making – Non­programmed decision, in contrast is typically

on shot decision that are usually less structured than programmed decision. This type of
decision relate to difficult situation for which there is no easy solution. An example of the type
of non-programmed decision that more and more and more managers are having to make is
whether a supermarket should carry an additional type of bread. Some more examples are
opening of new branch of the organization or a large number of employees absenting from the
organization or introducing new product in the market, are the decisions which are normally
taken at the higher level.
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Routine decisions: Routine decisions are related to the general functioning of the
organization. They do not need of much of evaluation and analysis and can be taken quickly.
Ample power are generated to lower ranks to take these decisions within the broad policy
structure of the organization.

Strategic decision:This decisions affect objectives, organizational goals and other

important policy matters. These decisions usually involve huge investments or funds. These
are non-repetitive in nature and are taken after careful analysis and evaluation of many
alternatives. These decisions are taken at the higher level of management.

Policy decisions: Decisions pertaining to various policy matters of the organization are
policy decisions. These are taken by the top management and have long term impact on the
functioning of the concern. For example, decisions regarding location of plant, volume of
production and distribution policies, etc. are policy decisions.

Operative decisions: This decision relate to day-today functioning or operations of

business. Middle and lower level managers take these decisions. As example may be taken
to distinguish these decisions. Decisions concerning payment of bonus to employees is a
policy decision. On the other hand if bonus is to be given to the employees, calculation of
bonus in respect of each employee is an operating decisions.

Organizational decisions: when an individual takes decision in the official capacity, it is

known as organizational decision.

Personal decisions: If decision is taken by the executive in the personal capacity say
affecting one’s personnel life, then it is said to be personal decisions. Authority of taking
organizational decisions can be delegated, whereas personal decisions cannot be delegated.

Major decisions: decision pertaining to purchase of new factory premises is a major

decisions and taken by top management.

Minor decisions: Purchase of office stationery is a minor decision which can be taken
by office superintendent.

Individual decisions: When the decision is taken by single individual, it is known as

individual decisions. Usually routine type decisions are taken by individuals within the broad
policy framework of the organization.
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Group decisions: This is taken by group of individuals constituted in the form of a standing
committee. Generally very important and pertinent matters for the organization are referred to
this committee. The main aim is taking group decisions is the involvement of maximum number
of individuals in the process of decision making.

6.9 Models of the Decision Making Process

Models are the tools of the decision making process which help the managers to assess
the situations before they have happened by mimicking the real experiences and situation,
without the expense of developing the situation for real. Here the decision makers use simulation
to try to mimic the way that the firm or elements within the firm, will respond to changes in
operating characteristics sometimes mathematical techniques such as queuing theory or linear
programming are applied to mimic the real life situation. Models can be classified into various
categories;

1. Conceptual models

2. Iconic models

3. Analog models

4. Symbolic models

Conceptual models

Conceptual models are those formed through the competence of the individual,
experience, knowledge and intuition. They are further subdivided as;

 Descriptive models

 Verbal models

 Mental models

Iconic models

Iconic models are those that resemble what they represent, although the properties of an
iconic model may not be the same as those of the real system it represent. Iconic models
include physical and pictorial models.
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Analog models

Analog models are those that are built to act like real system, although they look different
from what they represent. These models employ one set of properties to represent some other
set of properties possessed by the real system. An artificial kidney dialysis machine that provides
life support is an example of an analog model.

Symbolic models

Symbolic models use symbols to designate the components of a system and relationship
among those components. They are abstract models in which symbols are substituted for
systems characteristics. They are of three types:

i. Graphical representation

ii. Schematic models, and

iii. Mathematical equations

6.10 Importance of Decision Making

Decision making is considered as the backbone for the business management because
without taking the right decision at right time, nothing can be performed. The further importance
of decision making can be discussed under the following points:

 Proper utilization of resources: Organization has various resources like man, money,
method, material, machine, market and information. All these resources are properly
utilized without any leakage and wastage with the help of right decision at right time. As
a result, an organization can operate at a minimum cost.

 Selecting the best alternative: As we know that the problem has multiple solutions.
Decision making is important to select the best alternative among various alternatives by
analyzing them one by one using various financial, statistical, and accounting tools/
technique.

 Evaluation of the managerial performance: Decision making is not only important to

select the best alternative but also essential for evaluating the performance of a manager.
The quality/success of manager largely depends upon the number of right decision that
he/she can take for the organizational success. Therefore, decision making is important
to judge the performance of top level of management.
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 Employee’s motivation: Decision making is important to motivate the employees within

an organization. It provides an overall framework of operation and guideline to the operating
level of staffs. It also provides different types of facilities and benefit on time. As a result,
employees are motivated to their job or work as per the organizational requirement.

 Indispensable element/ component: Decision making is indispensable element/

component for the organizational success because without taking the right decision at
right time, nothing can be performed as per the plan.

 Achievement of goal/ objectives: Decision making is important to achieve the

organizational goals/objectives within given time and budget. It searches the best
alternative, utilize the resources properly and satisfy the employees at the workplace. As
a result, organizational goal or objectives can be achieved as per the desired result.

 Pervasive function: Decision making is a pervasive function of managers aimed at

achieving organizational goals. Decisions are to be taken in all managerial functions
such as planning, organizing, motivating, directing and controlling and in all functional
areas such as production, marketing, finance, personnel and research and development.
It indicates that the decision making is spread over many areas of the organization.

Check Your Progress

1. Explain planning and decisions are related.

2. Discuss decision making is an art of science..

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3. Compare objectives and policies.

6.11 Summary

Decision making is an indispensable part of life. Decision making is the process

of making choices, by identifying a decision, gathering information, and assessing alternative
resolutions.

Using a step-by-step decision making process will help you to make more deliberate,
thoughtful decisions, by organizing relevant information and defining alternatives.Business
decisions are based on an analysis of objective facts, aided by the use of Business Intelligence
(BI) and analytics tools.

Decision making is possible when there are two or more alternatives to solve a single
problem or difficulty. If there is only one alternative then there is no question of decision making.
It is believed that the management without a decision is a man without a backbone.

Planning and decision is concerned with a future course of action and involves choosing
among alternatives. Planning, as a whole with its component parts like objectives, policies and
procedures, is the outcome of decision making.

Businesses today typically take more systematic and information based approaches to
the decision making process. This allows managers and executives to use techniques such as
cost-benefit analysis and predictive modeling to justify their decisions. It also enables lines of
business to build process automation protocols that can be applied to new situations as they
arise, avoiding the need for each one to be handled as a unique decision making event.

The quality of the decisions can make the difference between success and failure.
Balancing data-driven and gut-feel approaches to decision making is a difficult proposition.
 99

6.12 Key Words

 Brainstorming

 Intuition

 Optimizing

 Rationality

6.13 Review Questions

1. State the importance of decision making in the life and work place.

2. Explain the Decision making as an aid for business intelligence

3. List the factors of decision making.

4. Explain the scholars’ definitions of the decision making

5. State the process, function and the steps involved stages in decision making.

6. Explain the relationship between decision making and planning.

7. What is the need of information for taking prompt decisions?

8. Elaborate the types, and importance of decisions.

9. List out the challenges in decision making process.

10. Elaborate the models in the decision making process

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UNIT 7
ORGANIZING

Learning Objectives
After studying this unit, you should be able to:

 describe the Process and Types of organization structure

 elobarate on the Delegation of Authority

 highlight about the Centralization and decentralization

 explain about the Trends in corporate structure, strategy and culture

 discuss about the impact of technology on organizational design

 describe the forms of organization structure

 narrate the functional organization, need, application merits and demerits

 highlight about the Merits and demerits of line and staff organization

Structure
7.1 Introduction

7.2 Definitions

7.3 Organization

7.4 Importance

7.5 Process of Organizing

7.6 Types of Organizations

7.7 Delegation of Authority and Decentralization

7.8 Degree of Centralization

7.9 Decentralization

7.10 Interdepartmental Coordinator

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7.11 Modular Organizations

7.12 Virtual Organizations

7.13 Emerging Trends in Corporate Structure, Strategy and Culture

7.14 Diversity

7.15 Flexibility

7.16 Flat Organization

7.17 Networks

7.18 Impact of Technology on Organizational Design

7.19 Organizational Structure

7.20 Nature of Line Organization

7.21 Functional Organization

7.22 Line and Staff Organization

7.23 Summary

7.24 Key Words

7.25 Review Questions

7.1 Introduction
Organizing came into existence in the early stages of human evolution when person
began to cooperate and combine together to achieve common goals. Organizing as a function
of management involves division of work among people whose efforts must be coordinated to
achieve specific objectives and to implement pre-determined strategies. Organization is the
foundation upon which the whole structure of management is built. It is the backbone of
management.

A sound management is based on proper organizational structure which is concerned

with determining responsibility and assigning of authority to different superiors and establishing
proper inter-relationship among them for achieving the desired objectives. An organizing is
the mediator between the planned and achieving goals with the available resources.
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The management process is to organize the activities of the enterprise to execute the
plan and to attain the objectives of the enterprise. Organization is understood as a dynamic
process and a managerial activity which is necessary for bringing people together and tying
them together in the pursuit of common objectives. Organizing is the system of communication,
a means of problem solving and a means of facilitating decision making. In broad sense,
organizing is defined as a group of persons working together for a common purpose.

7.2 Definitions
Henry Fayol, “To organize a business is to provide it with everything useful to its functioning
– raw materials, tools, capital and personnel”.

Urwick, “Dividing up the activities which are necessary to any purpose and arranging
them in groups which are assigned to individuals”.

George R. Terry, “Organization is the establishing of effective Behaviourial relationship

among selected work person and work places in order for the group to work together effectively”.

Ralph c. Davis, “a group of people who are cooperating under the relationships for the
accomplishment of a common end”.

William Spriegal, “In its broadest sense, organization refers to the relationships between
the various factors present in a given endeavor. Factory organization concerns itself primarily
with the internal relationships within the factory, such as responsibilities of personnel,
arrangement and grouping of machines and material control. From the standpoint of the
enterprise as a whole, organization is the structure of relationship between the various factors
in an enterprise”.

M. A. Cameron, “It is the framework of duties and responsibilities through which an

undertaking works”.

Koontz and O’Donnell, “It is grouping of activities necessary to attain enterprise objectives
and the assignment of each grouping to a manager with authority necessary to supervise it”.

Louis A. Allen, “The process of identifying and grouping the work to be performed,
defining and delegating responsibilities and authority and establishing relationship for the
purpose of enabling people to work more effectively together in accomplishing objects”.
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Oliver Sheldon, “Organization is the process of so combining the work which individuals
or groups have to perform with the facilities necessary for its execution, that the duties so
formed provide the best channels for the efficient, systematic, positive and coordinated
application of the available efforts”.

Joseph L. Massie, “The structure and process by which a cooperative group of human
beings allocates its tasks among its members, identifies relationship, and integrates its activities
towards common objectives”.

7.3 Organization
Organization arises when two or more persons unite together to achieve some common
objectives. The characteristics of an organization are;

 It is a group of individuals which may be large or small.

 The group in the organization works under the executive leadership.

 It is a mechanism of management.

 It has some directing authority or power which controls the concerted efforts of the group.

 The division of labour, power and responsibilities are deliberately planned.

 It implies a structure of duties and responsibilities

 It established for accomplishment of common objectives.

 It is a functional concept.

7.4 Importance
The importance of organizing lies in the systematically evolved pattern of relationships
designed to set in motion the processes of managerial functions. An organization is not merely
a chart or lifeless structure. It comprises people and perform the important functions of direction,
coordination and control.

 It facilitates administration.

 It promotes growth and diversification.

 It fosters coordination

 It provides for the recent trends in technology and innovation.

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 It ensures an optimum use of all the resources.

 It stimulates independent, creative thinking and a spirit of initiative through well-defined

areas of work.

 It provides ample scope for training and development.

 It prevents the growth of laggards and other forms of corrupters.

7.5 Process of Organizing

The managerial functions of organizing, is to set objectives and policies framed, the
necessary infrastructure of organizing has to be built up. The concentration is on the activities
and functions, which are considered as the ‘building blocks’ of the organizational structure.

1. Clearly define objectives: In developing organizational structure the objectives are to

be clearly laid out. This helps in determining the type and basic characteristics of an
organization and its relational activities.

2. Determining activities: the nature of the activity and the size of the enterprise are to be
determined and balance while organizing. The function in a manufacturing organization
and a service organization varies and the structure differs.

3. Assigning duties: The individual groups of activities are then allotted to different
individuals according to their ability and aptitude. The responsibility of each individual /
job description should be defined clearly to avoid duplication and overlapping of effort.
Each person is given a specific job suited and made responsible for its execution.

4. Delegating authority: Every individual is given the authority necessary to perform the
assigned activities effectively. Here we mean authority as power to take decisions, issue
instructions, guiding the subordinates, supervise and control them. Authority delegated
to a person should commensurate with his responsibility. An individual cannot perform
his job without the necessary authority or power. Authority flows from top to bottom and
responsibility from bottom to top.

5. Coordinating activities: The activities and efforts of different individuals are then
synchronized. Such coordination is necessary to ensure effective performance of
specialized functions. Inter-relationship between different jobs and individuals are clearly
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defined so that everybody knows from whom one has to take orders and to whom he is
answerable.

6. Providing physical facilities and right environment: The success of an organization

depends upon the provision of proper physical facilities and right environment. Whereas
it is important to have right persons on right jobs, it is equally important to have right
working environment. This is necessary for the smooth running and the prosperity of the
enterprise.

7. Establishment of structural relationship for overall control: It is very essential to

establishment well defined clear-cut structural relationships among individuals and groups.
This will ensure overall control over the working of all departments and their coordinated
direction towards the achievement of pre-determined goals of business.

Thus it clear from the foregoing analysis that organization provides a structural framework
of duties and responsibilities. Organization is the process of establishing the terms of authority
and responsibility. It is not only establishes authority relationships but also provides a system
of communication.

The various processes of organization explained, are preformed through;

 Departmentation

 Delegation of authority and fixation of responsibilities

 Decentralization of authority subject to central control through centralization of decision

making.

7.6 Types of Organizations

Departmentalization: Organizes work and workers into separate units responsible
Functional for particular business functions or areas of expertise.
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Advantages

 Allows work done by highly qualified specialists

 Lowers costs by reducing duplication

 Makes communication and coordination easier

Disadvantages

 Cross-department coordination can be difficult

 May lead to slower decision making

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Product Departmentalization: Organizes work and workers into separate units

responsible for producing particular products or services.

Advantages

 Allows people to specialize in one area of expertise

 Makes it easier to assess performance

 Makes decision making faster

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Disadvantages

 Duplication

 Coordination across different product departments

Geographic Departmentalization: Organizes work and workers into separate units

responsible for doing business in particular geographic areas.

Advantages
 Helps companies respond to different markets

 Reduces costs by locating unique resources closer to customers

Disadvantages
 Duplication of resources

 Difficult to coordinate departments

Matrix Departmentalization: A hybrid structure in which two or more forms of

departmentalization are used together.

Because of these problems, many matrix structures evolve from a simple matrix, in which
managers in different parts of the matrix negotiate conflicts and resources directly, to a complex
matrix, in which specialized matrix managers and departments are added to the organizational
structure. In a complex matrix, managers from different parts of the matrix might report to the
same matrix manager, who helps them sort out conflicts and problems.
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Advantages

 Allows companies to efficiently manage large, complex tasks

 Gives much more diverse set of expertise and experience

Disadvantages

 Requires a high level of duplication

 Confusion and conflict between project bosses

 Requires much more management skill

Authority Relationships
1. Chain of command- the vertical line of authority that clarifies who reports to whom
throughout the organization
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2. Unity of command - workers should report to just one boss

3. Line authorityis the right to command immediate subordinates in the chain of command.

4. Staff authority is the right to advise but not command others who are not subordinates in
the chain of command.

5. A line functionis an activity that contributes directly to creating or selling the company’s
products. So, for example, activities that take place within the manufacturing and marketing
departments would be considered line functions.

6. A staff function,such as accounting, human resources, or legal services, does not

contribute directly to creating or selling the company’s products, but instead supports line
activities.

7.7 Delegation of Authority and Decentralization

Delegation of authority is the assignment of direct authority and responsibility to a
subordinate to complete tasks for which the manager is normally responsible.

When a manager delegate’s work, three transfers occur, as illustrated in Exhibit, First,
the manager transfers full responsibility for the assignment to the subordinate. The second
transfer that occurs with delegation is that the manager gives the subordinate full authority
over the budget, resources, and personnel needed to do the job.

To do the job effectively, subordinates must have the same tools and information at their
disposal that managers had when they were responsible for the same task. In other words, for
delegation to work, delegated authority must be commensurate with delegated responsibility.
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The third transfer that occurs with delegation is the transfer of accountability.

The subordinate now has the authority and responsibility to do the job and in return is
accountable for getting the job done. In other words, managers delegate their managerial
authority and responsibility to subordinates in exchange for results. Exhibit gives some tips on
how to be an effective delegator.

7.8 Degree of Centralization

 Centralization of authority

 Decentralization

 Standardization

 Centralization of authority is the location of most authority at the upper levels of the
organization. In a centralized organization, managers make most decisions, even the
relatively small ones.

7.9 Decentralization
Decentralization is the location of a significant amount of authority in the lower levels of
the organization. An organization is decentralized if it has a high degree of delegation at all
levels. In a decentralized organization, workers closest to problems are authorized to make the
decisions necessary to solve the problems on their own. Standardization is solving problems
by consistently applying the same rules, procedures, and processes.

Advantages of Decentralization

 Develops employee capabilities

 Faster decision making

 More satisfied employees and customers

 Better employee performance

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7.10 Interdepartmental Coordinator

Intra-organizational Processes

The collection of activities that take place within an organization to transform inputs into
outputs that customer’s value.

Inter-organizational Processes: A collection of activities that occur among companies

to transform inputs into outputs that customer’s value.
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7.11 Modular Organizations

Except for the core business activities that they can perform better, faster, and cheaper
than others, modular organizations outsource all remaining business activities to outside
companies, suppliers, specialists, or consultants. The term modular is used because the business
activities purchased from outside companies can be added and dropped as needed, much like
adding pieces to a three-dimensional puzzle.

Advantages

 Reduced costs
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Disadvantages
 Loss of control

 Noncore activities that are outsourced may become source of advantage

 Suppliers to whom work is outsourced can become competitors

7.12 Virtual Organizations

In contrast to modular organizations in which the inter-organizational process revolves
around a central company, a virtual organization is part of a network in which many companies
share skills, costs, capabilities, markets, and customers with each other.

Advantages

 Shared costs

 Fast and flexible

Disadvantages

 Difficult to control quality of work done by partners

 Requires tremendous managerial skills

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7.13 Emerging Trends in Corporate Structure,

Strategy and Culture
Organizations have entered a new era characterized by rapid, dramatic and turbulent
changes. The accelerated pace of change has transformed how work is performed by employees
in diverse organizations. Change has truly become an inherent and integral part of organizational
life.Several emerging trends are impacting organizational life.

Of these emerging trends, five will be examined: globalization, diversity, flexibility, flat,
and networks. These five emerging trends create tensions for organizational leaders and
employees as they go through waves of changes in their organizations.

Organizations operate in a global economy that is characterized by greater and more

intense competition, and at the same time, greater economic interdependence and collaboration.
More products and services are being consumed outside of their country of origin than ever
before as globalization brings about greater convergence in terms of consumer tastes and
preferences.

Globalization engenders conflicts within and between nations over domestic norms and
the social institutions that embody them. As the technology for manufactured goods becomes
standardized and diffused internationally, nations with very different sets of values, norms,
institutions, and collective preferences begin to compete head on in markets for similar goods.
Trade becomes contentious when it unleashes forces that undermine the norms implicit in
local or domestic workplace practices.

Trends Tensions

1. Globalization Global versus Local

2. Diversity Heterogeneity versus Homogeneity

3. Flexibility Flexibility versus Stability

4. Flat Centralization versus Decentralization

5. Networks Interdependence versus Independence

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7.14 Diversity
Globalization is impacting how organizations compete with each other. In combination
with changing demographics, globalization is causing a rapid increase in diversity in
organizations. Never before have people been required to work together with colleagues and
customers from so many different cultures and countries.

People of different ethnic and cultural backgrounds possess different attitudes, values,
and norms. Increasing cultural diversity in both public and private sector organizations focuses
attention on the distinctions between ethnic and cultural groups in their attitudes and performance
at work. This greater focus can result in the tension between finding similarities and accentuating
differences in the face of greater diversity in organizations.

7.15 Flexibility
Globalization and diversity trends are forcing organizations to become more flexible and
adaptable. To be able to function globally and to embrace diversity, leaders and employees in
organizations have to become more flexible and develop a wider repertoire of skills and strategies
in working with diverse groups of people in the workplace as well as in the marketplace.

Changes in business and operational processes need time to stabilize for employees to
learn the new processes, become familiar with them, and be able to operate effectively and
efficiently. Yet, competitive pressures can cause organizations to go through a series of changes
without giving employees adequate time for learning and training, and for the benefits of the
change to be fully realized in the organization.

7.16 Flat Organization

To maximize response time, organizations have been flattening their hierarchies and
structures, in addition to other initiatives such as downsizing and networking. Flat organizations
make decisions more quickly because each person is closer to the ultimate decision-makers.
There are fewer levels of management, and workers are empowered to make decisions. Decision
making becomes decentralized.

7.17 Networks
Organizations that flatten tend to encourage horizontal communication among workers.
Rather than working through the organizational hierarchy, it is often faster for workers who
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need to coordinate with each other simply to communicate directly. Such organizations are
highly networked.

7.18 Impact of Technology on Organizational Design

Mechanistic vs. Adoptive Structures

Organizations aren’t structured the same way. Top managers put a lot of thought into how
best to design the organization’s structure.

That ”best” design depends on four contingency variables are the organization’s
strategy, size, technology, and degree of environmental uncertainty.

A mechanistic organization is an organizational structure that is characterized by high

specialization, rigid departmentalization, narrow span of control, high formalization, a limited
information, network, and little participation in decision making by low-level employees.

An adoptive or otherwise an organic organization is structure that is highly adaptive

and flexible with little work specialization, minimal formalization and little direct supervision of
employees.

When is each design favored? It ”depends” on the contingency variables like strategy,
size, environmental uncertainty and structure

Technology also has been shown to affect an organization’s choice of structure.

Every organization uses some form of technology to transform inputs into outputs.

The study of structure and technology found that organizations adapted to their technology and
that three distinct technologies had increasing levels of complexity and sophistication.

1) Unit production is the production of items in units or small batches.

2) Mass production is large­batch manufacturing.

3) Process production is continuous­process production

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7.19 Organizational Structure

Traditionally, organizational structures have been based on some form of
departmentalization. Departmentalization is a method of subdividing work and workers into
separate organizational units that take responsibility for completing particular tasks.

Organization structure is a network of internal authority, responsibility relationships. It is

a framework of relationship of persons operating at various levels, to accomplish common
objectives. An organization structure is a systematic combination of people, functions and
physical facilities. It constitutes a formal structure with definite authority and clear responsibility.
The channel of communication and flow of authority and responsibility is the primary step to be
determined.

The main emphasis on the structure and its relationship is liable to its organizational
functions. The concept of organization is static and classical. Organization charts are prepared
depicting the relationship of different people at the work place.
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A hierarchy has to be built up and the position from top to bottom are clearly defined
along with the responsible authority. The accountability of each functionary has to be specified,
and so called the organization as a system.

In an organizational structure, both formal and informal organization take shape. The
formal is pre-planned one and defined by the executive action. The informal is a spontaneous
formation, being laid down by the common sentiments, interactions and other interrelated
attributes of the people in the organization.

Sony Corporation’s organizational chart

 Properly designed organization help improve teamwork and productivity a framework

within which the people can work together most effectively.

 Organization structure determines the location of decision making in the organization.

 Sound organization structure stimulates creative thinking and initiative among

organizational members by providing well defined patterns of authority.

 A sound organization structure facilitates growth at all levels of the enterprise.

 Organization structure provides the pattern of communication and coordination.

 The organization structure helps an individual’s to know-how, what the role is and how it
relates to other roles.

Forms or Types of Organizations Structure

The application of a particular form of structure depends upon the nature, scale and size
of the business. The organizational structure is primarily concerned with the allocation of
activities or tasks and delegation of authority. The following are the three different structure of
organizations;
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 Line Organization

 Functional Organization

 Line and Staff Organization

7.20 Line Organization

Line organization is the simplest and the oldest type of organization. It is also known as
scalar organization or military type of organization. J.M.Lundy, “It is characterized by direct
lines of authority flowing from the top to the bottom of the organizational hierarchy and lines of
responsibilities flowing in an opposite but equally direct manner.” Here superior delegates’
authority to another subordinate and so on, forming a line from the very top to the bottom of the
organization structure. The line of authority so established is referred as “line authority”. Under
this type of organization authority flows downward, responsibility moves upwards in a straight
line. Scalar principle and unity of command are strictly followed in line organization.

This form of organization resembles with the army or military administration. As the case
of military, commander-in-chief holds the top most position and has entire control over the
army of the country, which in turn is developed into main area commands under major-generals.
Each area has brigade under brigadier-generals, each brigade is fabricated into regiments
under its colonels, each regiment into battalions under major, and each battalion into companies
under captains, each company sub-divided under its lieutenants and so on drawn to corporal
with his squad.

Line organization is of two types;

 Simple or pure line organization

 Departmental line organization

Simple or pure line organization: Under this type of organization [at any level of
management] the activities of every executive are the same for the similar type of work and the
divisions primarily exist for the purpose of control and direction.

General Manager Production Manger supervisor I, II, III workers

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Departmental line organization: Under this type of organization, an organization is

divided into various departments headed by different departmental heads. All the departments
operate under the ultimate control of general manager. This orders flows directly from the
general manager to all the departmental heads who in turn pass on to their respective
subordinates.

Application of line organization: The line organization can be successfully followed

where;

 Scale of operations is limited or business is a small scale basis

 Work is simple and routine in nature

 Business is being done in continuous type of industries like oil refining, sugar, spinning
and weaving etc.

 The labour management problems are not complex and can be easily resolved

 Machinery is automatic and

 The workers are disciplined.

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Nature of Line Organization

 Orders and instruction flow from top to the bottom, whereas request and suggestions
move from bottom to top.

 The simple of unity of command is the most salient features of this type of organization.
This is in order to receive by the subordinates from one boss.

 The subordinated are accountable to their immediate superior.

 There are limited number of subordinate under one superior.

 Coordination can be easily achieved.

Advantages
1. Simplicity – very easy to operate and can be easily communicated to understand.

2. Fixed responsibility – duties and responsibilities are clearly defined for each individual.

With reference to the work assigned to him. As a result everybody knows to whom he is
responsible and who are responsible to him. Nobody can avoid responsibility.

3. Discipline – ensure better discipline in the organization, as singleness of responsibilities

facilities discipline and work completion under single supervision. The low level workers
are more loyal and responsible to one single boss than to many.

4. Flexibility – it is flexible in the sense that it is subject to quick adjustments to suit to

changing conditions. Wheeler explain, “It permits rapid and orderly decisions in meeting
problems at various levels of organization”. It is very adaptive in nature.

5. Coordination – it helps to achieve effective coordination. All the activities pertaining to

single department are controlled by one person.

6. Direct communication – As there will be direct communication between the superior

and the subordinates at different levels it would be helpful in achieving promptness in
performance.

7. Unity of command – every worker is accountable to one boss in the department under
this type of organization.

8. Economical – it is not complex and expensive in operation. It does not need any expert
and specialized personnel.
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9. Quick decisions – on the account of its simple operation and unified control and
responsibility, decision can be taken by one person.

10. Executive development - Under this organization head is fully responsible for every
activity in his department. He discharges his responsibilities in an efficient manner.

Disadvantages
1. Overloading – It trends to overload the existing executive with too many responsibilities.
The work may not be performed effectively on account of innumerable tasks before the
single executive.

2. Lack of specialization – Absence of managerial specialization is the major drawback of

this system. On account of many functions and complexities it is very difficult for a single
individual to control all the matters effectively. The executive may not be expert in all
aspects of managerial activities. The burden of responsibilities on the shoulders of the
managers can crush him under workload.

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

4. Lack of coordination – in reality it is very difficult to achieve proper coordination among

various departments operating in an organization. This is because each departmental
manger or head carries the functioning of his department. This leads to lack of uniformity
in operations among various departments.

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

6. Lack of communication from lower ranks – under line organization suggestions sent
by lower ranks. This leads to inadequacy of communication from subordinates to superiors
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7.21 Functional Organization

F.W. Taylor, who is better known as the father of scientific management developed the
concept of ‘Functional Organization’. Taylor’s concept of Functional Foremanship, is a system
comprising of eight different foreman discharging different functions. They are; Route Clerk,
Instruction Card Clerk, Time and Cost Clerk, shop disciplinarian, Gang Boss, repair Boss, and
Inspector. The first four bosses operate from Planning Department, whereas the next four
work as Executive Functional Bosses.

A functional organization structure is a hierarchical organization structure wherein people

are grouped as per their area of specialization. These people are supervised by a functional
manager with expertise in the same field. This expertise helps him effectively utilize the skills of
employees, which ultimately helps organizations in achieving its business objectives.

In this kind of organization structure, people are classified according to the function they
perform within the organization. The organizational chart for a functional organization structure
shows the president, vice president, finance department, sales department, customer service,
administration, etc.

Each department will have a department head who will be responsible for the performance
of his section. This helps the organization control the quality and uniformity of performance.
These different departments are sometimes referred to as “silos”. This means the system is
vertical and disconnected. The communication flows through the department heads to the top
management.

Here, all authority (i.e. budget allocation, resource allocation, decision making, etc.) stays
with the functional manager. Usually, the position of the project manager does not exist in this
type of organization structure. Even if this position exists, the role of the project manager will
be very limited and he will need permission from the functional manager to fulfil his requirements.
The project manager may have the title of a coordinator or an expediter. The functional
organization structure is suitable for an organization which has ongoing operations and produces
standard products or goods, such as manufacturing industries.
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Advantages of the Functional Organization Structure

The following are a few benefits of the functional organization structure:

 Employees are grouped by their knowledge and skills, which helps achieve the highest
degree of performance.

 Employees are very skilled. Efficiency is gained because they are experienced in the
same work and they perform very well.

 Their roles and responsibilities are fixed, which facilitates easy accountability for the
work.

 The hierarchy is very clear and employees don’t have to report to multiple supervisors.
Each employee reports to his or her functional manager, which reduces the number of
communication channels.

 There is no duplication of work because each department and each employee has a
fixed job responsibility.

 Employees feel secure, and therefore, they perform well without fear.

 Since there is a sense of job security, employees tend to be loyal to the organization.

 Employees have a clear career growth path.

 Cooperation and communication are excellent within the department.

Disadvantages of the Functional Organization Structure

The following are a few disadvantages of the functional organization structure:

 Employees may feel bored due to the monotonous, repetitive type of work and may lose
enthusiasm for the job.

 If the performance appraisal system is not managed properly, conflicts may arise. For
example, an employee may feel demoralized when a lower performing employee is
promoted.

 A highly-skilled employee costs more.

 The departments have a self-centered mentality. The functional manager pays more
attention to his department; he usually doesn’t care about other departments.
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 Communication is poor among the departments, which causes poor inter-department

coordination. This decreases flexibility and innovation. Moreover, there is a lack of
teamwork among different departments.

 Employees may have little concern and/or knowledge about events outside their
department. This causes obstacles in communication and cooperation.

 The functional structure is rigid, making adaptation to changes difficult and slow.

 Due to bureaucratic hierarchy, delays frequently occur in decision making.

 Generally, the functional manager makes decisions autocratically without consulting his
team members. This may not always work in favor of the organization.

 When the organization becomes larger, functional areas can become difficult to manage
due to their size. Each department may start behaving like a small company with its own
facilities, culture, and management style.

 Functional departments may be distracted by departmental goals, and focus on them

rather than the organizational goal.

The functional organization structure helps organizations run their business and earn a
profit. This type of structure suits organizations intended to produce some product or service
on a continuous basis. Here, employees feel secure, perform well, and tend to be highly
skilled. The project manager often doesn’t have any role in the functional organization, and
even if he exists, his role will be very limited.

7.22 Line and Staff Organization

Line and staff organization is a modification of line organization and it is more complex
than line organization. According to this administrative organization, specialized and supportive
activities are attached to the line of command by appointing staff supervisors and staff specialists
who are attached to the line authority. The power of command always remains with the line
executives and staff supervisors guide, advice and council the line executives. Personal
Secretary to the Managing Director is a staff official.
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Features of Line and Staff Organization

There are two types of staff :

 Staff Assistants- P.A. to Managing Director, Secretary to Marketing Manager.

 Staff Supervisor- Operation Control Manager, Quality Controller, PRO

 Line and Staff Organization is a compromise of line organization. It is more complex than
line concern.

 Division of work and specialization takes place in line and staff organization.

 The whole organization is divided into different functional areas to which staff specialists
are attached.

 Efficiency can be achieved through the features of specialization.

The staff position established as a measure of support for the line managers may take
the following forms:

1. Personal Staff: Here the staff official is attached as a personal assistant or adviser to
the line manager. For example, Assistant to managing director.

2. Specialized Staff: Such staff acts as the fountainhead of expertise in specialized areas
like R&D, personnel, accounting etc. For example, R&D Staff.
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3. General Staff: This category of staff consists of a set of experts in different areas who
are meant to advise and assist the top management on matters called for expertise. For
example: Financial advisor, technical advisor etc.

There are two lines of authority which flow at one time in a concern :

 Line Authority

 Staff Authority

 Power of command remains with the line executive and staff serves only as counselors.

Merits of Line and Staff Organization

1. Relief to line of executives- In a line and staff organization, the advice and counseling
which is provided to the line executives divides the work between the two. The line executive
can concentrate on the execution of plans and they get relieved of dividing their attention
to many areas.

2. Expert advice- The line and staff organization facilitates expert advice to the line executive
at the time of need. The planning and investigation which is related to different matters
can be done by the staff specialist and line officers can concentrate on execution of
plans.

3. Benefit of Specialization- Line and staff through division of whole concern into two types
of authority divides the enterprise into parts and functional areas. This way every officer
or official can concentrate in its own area.

4. Better coordination- Line and staff organization through specialization is able to provide
better decision making and concentration remains in few hands. This feature helps in
bringing coordination in work as every official is concentrating in their own area.

5. Benefits of Research and Development- Through the advice of specialized staff, the
line executives, and the line executives get time to execute plans by taking productive
decisions which are helpful for a concern. This gives a wide scope to the line executive to
bring innovations and go for research work in those areas. This is possible due to the
presence of staff specialists.
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6. Training- Due to the presence of staff specialists and their expert advice serves as ground
for training to line officials. Line executives can give due concentration to their decision
making. This in itself is a training ground for them.

7. Balanced decisions- The factor of specialization which is achieved by line staff helps in
bringing coordination. This relationship automatically ends up the line official to take better
and balanced decision.

8. Unity of action- Unity of action is a result of unified control. Control and its effectively
take place when coordination is present in the concern. In the line and staff authority all
the officials have got independence to make decisions. This serves as effective control in
the whole enterprise.

Demerits of Line and Staff Organization

1. Lack of understanding- In a line and staff organization, there are two authority flowing
at one time. This results in the confusion between the two. As a result, the workers are not
able to understand as to who is their commanding authority. Hence the problem of
understanding can be a hurdle in effective running.

2. Lack of sound advice- The line official get used to the expertise advice of the staff. At
times the staff specialist also provide wrong decisions which the line executive have to
consider. This can affect the efficient running of the enterprise.

3. Line and staff conflicts- Line and staff are two authorities which are flowing at the same
time. The factors of designations, status influence sentiments which are related to their
relation, can pose a distress on the minds of the employees. This leads to minimizing of
coordination which hampers a concern’s working.

4. Costly- In line and staff concern, the concerns have to maintain the high remuneration of
staff specialist. This proves to be costly for a concern with limited finance.

5. Assumption of authority- The power of concern is with the line official but the staff
dislikes it as they are the one more in mental work.

6. Staff steals the show- In a line and staff concern, the higher returns are considered to
be a product of staff advice and counseling. The line officials feel dissatisfied and a feeling
of distress enters a concern. The satisfaction of line officials is very important for effective
results.
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Committee Organization

Committee organization as a method of managerial control has very little practical

importance as it is organized by the senior member of the committee. This is used for the
purpose of discharging advisory function of the management relatively formal bodies with definite
structure.

According to Hicks, “A committee is a group of people who meet by plan to discuss or

make a decision for a particular subject”.

According to Louis A Allen, “A committee is a body of persons appointed or elected to

meet on an organized basis for the consideration of matters brought before it.”

A committee may formulate plan, policy, and decision or review the performance of certain
units. It may be the scope of their activities, committees have come to be recognized as an
important instrument in the modern business as well as non-business organizations.

Objectives of Committees
Committees are constituted to achieve one or more of the following objectives:

a. To have consultations with various persons to secure their view-points

b. To give participants to various groups of people

c. To secure cooperation of different departments

d. To coordinate the functioning of different departments and individuals by bringing about

unity of directions.

Types of Committees
1. Line committee: If a committee is vested with the authority and responsibility to decide
and whose decisions are implemented, it is known as line committee.

2. Staff committee: If a committee is appointed merely to counsel and advice, it is known

as a staff committee.

3. Formal committee: When a committee is constituted as a part of the organization structure

and has clear-cut jurisdiction, it is a formal committee.
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4. Informal committee: An informal committee is formed to advice on certain complicated

matters. It does not form part of the organization structure.

5. Coordinating committee: It is constituted to coordinate the functioning of different

departments.

6. Executive committee: It is a committee which has power to administer the affairs of the
business.

7. Standing committee: are formal committees that are of permanent character.

8. Ad hoc committee: They are temporary bodies. It is appointed to deal with some special
problem and stops functioning after its job are over.

Advantages or Merits of Committee

1. A committee is an effective method of bringing the collective knowledge and experience
of a number of persons. Therefore, many multi-dimensional and complex problems of
modern enterprises, which cannot be solved satisfactorily by individual managers, can be
solved by committees.

2. Committees offer scope for group deliberations and group judgment. Results obtained by
group deliberation and group judgment are likely to be better than those obtained by
individual judgment.

3. When it is necessary to integrate varying points of view, which cannot conveniently be

coordinated by individuals, the committee may be used to bring about coordination.

4. The management can give representation to the employees in various committees. This
will motivate the employees for better performance as they feel that they have a say in the
affairs of the organization.

5. A committee form of organization facilitates pooling of authority of individual managers

for making some type of decisions of an inter-departmental nature.

6. A committee form of organization tends to promote organizational cohesiveness. Group

endeavour, team spirit and collective responsibility are control to the philosophy of
committees.
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Disadvantages of Committee
1. If a manager has an opportunity to carry a problem to a committee, he may take it as a
means of avoiding decision making or to escape the consequences of an unpopular
decision.

2. Sometimes, a committee may not be able to take the needed decision because of the
conflicting views of the members.

3. Committees take more time in procedural matters before any decision is taken. In some
cases, slowness seriously handicaps the administration of the organization.

4. Committees are an expensive device both in terms of cost and time.

5. When the committee findings represent a compromise of different viewpoints, they may
be found to be weak and indecisive.

6. No member of a committee can be individually held responsible for the wrong decision
taken by the committee.

7. It is very difficult to maintain secrecy regarding the deliberations and the decisions taken
by a committee, especially when there are many members in the committee.

Check Your Progress

1. Explain departmentalization.

2. Discuss centralization.
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3. Explain modular organization.

4. Compare flat organization and tall organization.

7.23 Summary
Organizing as a function of management involves division of work among people whose
efforts must be coordinated to achieve specific objectives and to implement pre-determined
strategies. Organization is the foundation upon which the whole structure of management is
built. It is the backbone of management.

Organizing is the system of communication, a means of problem solving and a means of

facilitating decision making. In broad sense, organizing is defined as a group of persons working
together for a common purpose.

The managerial functions of organizing, is to set objectives and policies framed, the
necessary infrastructure of organizing has to be built up. The concentration is on the activities
and functions, which are considered as the ‘building blocks’ of the organizational structure

Organizations operate in a global economy that is characterized by greater and more

intense competition, and at the same time, greater economic interdependence and collaboration.
More products and services are being consumed outside of their country of origin than ever
before as globalization brings about greater convergence in terms of consumer tastes and
preferences.

Changes in business and operational processes need time to stabilize for employees to
learn the new processes, become familiar with them, and be able to operate effectively and
efficiently.
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Flat organizations make decisions more quickly because each person is closer to the
ultimate decision-makers. There are fewer levels of management, and workers are empowered
to make decisions. Decision making becomes decentralized.

Organization structure is a network of internal authority, responsibility relationships. It is

a framework of relationship of persons operating at various levels, to accomplish common
objectives. An organization structure is a systematic combination of people, functions and
physical facilities. It constitutes a formal structure with definite authority and clear responsibility.
The channel of communication and flow of authority and responsibility is the primary step to be
determined.

7.24 Key Words

 Delegation

 Decentralization

 Virtual organization

 Modular organization

7.25 Review Questions

1. Define organizing and its importance.

2. State the process and Types of organization structure.

3. Explain Delegation of Authority.

4. Differentiate Centralization and decentralization.

5. Explain the trends in corporate structure, strategy and culture

6. State the impact of technology on organizational design

7. State the forms of organization structure

8. Explain the Functional organization, need, application merits and demerits

9. List out the merits and demerits of line and staff organization.

10. Explain the process of organizing.

11. State the need for delegating the authority.

12. Explain the degree of centralization.

13. Explain flat organization.

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UNIT 8
SPAN OF CONTROL AND COMMITTEE

Learning Objectives
After studying this unit, you should be able to:

 highlight about the wide span of control and narrow span of control

 understand about the what is span of control and organizational Structure?

 elaborate about the direct reports that a manager can have

Structure
8.1 Introduction

8.2 Span of Management

8.3 Wide Spans of Control

8.4 Optimum Span

8.5 Characteristics of a Flat Organizational Structure (Wide Span of Control)

8.6 Characteristics of a Tall Organizational Structure (Narrow Span of Control)

8.7 Summary

8.8 Key Words

8.9 Review Questions

8.1 Introduction
Span of management or span of control are number of subordinates who report
directly to a specific manager. Managers should have neither too many nor too few
subordinates.

Research indicates that there no universally correct span of management for all
managers. Rather, spans of management can be narrower or broader depending on
the circumstances of each managerial job.
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a. Subordinates’ work is such that little interaction with others is required.

b. Managers and/or their subordinates are highly competent.

c. The work of subordinates is similar.

d. Problems are infrequent.

e. Subordinates are located within close physical proximity of one another.

f. Managers have few non­supervisory duties to perform.

g. Managers have additional help such as secretaries or assistants.

h. The work is challenging enough to motivate subordinates to do a good job.

8.2 Span of Management

Spans of management determine the number of hierarchical levels in an organization.

A ta ll str uct ure is o ne tha t has na rr ow spa ns of m ana gem en t a nd ma ny

hierarchical levels in an organization.

A flat structure is one that has broader spans of management and hierarchical levels
less andwide spans of control.

The number of hierarchical levels in an organization affects organizational effectiveness.

Tall organizations raise administrative overhead, slow communication and decision

making, make it more difficult to pinpoint responsibility for various tasks, and encourage the
formation of dull, routine jobs.

Downsizing is the process of signif icantly reducing the layers of middle

management, expanding the spans of control, and shrinking the size of the work force.
Restructuring is the process of making components of the organization through divestiture and
/ or acquisition. This process can be planned and implemented carefully. If it is process is
implemented rightly, then this may result in reduced costs, faster decision making, more
challenging jobs, fewer redundancies, and innovation. If it is poorly implemented, then may
result in loss of valuable employees, demoralized survivors, and an ultimate decline in
productivity.
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Restructuring is the process of making a major change in organization structure that

often involves reducing management levels and also possibly changing some major components
of the organization through divestiture or acquisition.

8.3 Wide Spans of Control

Advantages of narrow span of control are;

 A narrow span of control allows a manager to communicate quickly with the employees
under them and control them more easily

 Feedback of ideas from the Workers will be more effective

 It requires a higher level of management skill to control a greater number of employees,

so there is less management skill required.

Advantages of wide span of control are;

 There are less layers of management to pass a message through, so the message
reaches more employees faster.

 It costs less money to run a wider span of control because a business does not need to
employ as many managers

8.4 Optimum Span

Ideally in an organization, according to modern organizational experts is approximately

15 to 20 subordinates per supervisor or manager. However, some experts with a more traditional
focus believe that 5-6 subordinates per supervisor or manager is ideal.

What is Span of Control and Organizational Structure?

It is very important to understand span of control and organizational structure when

describing an organization. Simply, span of control refers to the number of subordinates under
the manager’s direct control. As an example, a manager with five direct reports has a span of
control of five. Too many or too few direct reports is a good way to view how efficient an
organization is as long as it looked at in the context of the company’s organizational structure.
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An Executive team structure with a ‘narrow’ Span of Control

How many direct reports can a manager have?

Is there an optimal number? What needs to be considered is the nature of the work that
subordinates are performing and how much attention each requires. For example a Call Center,
the span of control can be numbers over 100, while executive functions – with high degrees of
collaboration and interaction – could productively tolerate no more than three or four. So
the nature of the work being performed, and how much attention it requires should govern
the assignment of personnel to a manager, and not some industry ideal goal.

Call Center Organization showing a ‘wide’ Span of Control

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Expanding On the Concept of Span of Control

While we are addressing span of control, let’s also broaden our understanding to see it in
the context of the organizational structure levels of hierarchy.

Width: Organization structures can be described as wide (with larger span of control) or
narrow (with smaller span of control.)

Height: As there are levels of management, or hierarchy, an organization may be tall

(with many levels) or flat (with fewer levels.)

Flat organizations have a ‘wide’ span of control and Tall organizations have a ‘narrow’
span of control. While there are pros and cons with both tall and flat structures, a company’s
structure must be designed to suit the business (the customer and markets) and in a way that
fits with the workforce’s capability.

A Tall vs. Flat Organizational Structure

8.5 Characteristics of a Flat Organizational Structure

(Wide Span of Control)

Pros
 Encourages delegation - Managers must better delegate to handle larger numbers of
subordinates, and grant opportunities for subordinates to take on responsibilities
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 Agile - Improves communication speed and quality

 Reduces costs- More cost effective because of fewer levels, thus requiring fewer managers

 Helps prevent the workforce from disengaging by focusing on empowerment, autonomy

and self-direction

Cons

 High managerial workload comes with high Span of Control

 Role confusion more likely

 May cultivate distrust of management

8.6 Characteristics of a Tall Organizational Structure (Narrow Span of

Control)
Pros

 More rapid communication between small teams

 Groups are smaller and easier to control/manage

 There’s a greater degree of specialization and division of labor

 More and better opportunities for employee promotion

Cons

 Communication can take too long, hampering decision making

 Silos may develop and prevent cross-functional problem solving

 Employees may feel lost and powerless

The organization’s structure dictates the span of control you are going to assign to
managers. Whether you choose a ‘tall’ or ‘flat’ structure should depend on your business and
serving your customers and while each structure has it pros and cons the best way for you
to model and visualize the organization.

Graicunas’ Theory

Graicunas showed mathematically that a number of direct, group and cross relationships
existbetween a manager and his subordinates. The number of these relationships increase ith
theincrease in the number of the subordinates. He said that an executive having four
subordinatesunder him is required to deal with
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(i) 4 direct single relationships,

(ii) 12 cross relationships and

(iii) 28 group relationships, i.e., in all forty-four relationships.

He derived these on the basis ofthe following formula:

No. of direct relationships = n

No. of cross relationships = n [n – 1]

No. of group relationships = n [2n-1– 1]

Total No. of relationships = n [2n/2 + (n – 1) or n [2n- + n – 1]

Where n represents the number of subordinates.

The last formula reveals that possible relationships with variable number of subordinates
risevery rapidly as shown in the following table:
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Though, Graicunas gave mathematical formulae for finding out the number of relationships,
hisapproach suffers from various shortcomings, such as ignoring the importance of
relationships,frequency of relationships and the factors which determine the span. Moreover,
he left outcertain possible relationships, particularly in cross relationships. However, his theory
gives animportant indication that an executive must think twice before increasing his span
becauseincrease of one subordinate will increase relationships manifold. Graicunas suggested
that an executive can effectively manage 222 relationships which arise out of six subordinates.
However,he failed to list factors which govern the span of supervision in practice.

Check Your Progress

1. Explain span of management.

2. Discuss downsizing.

3. Explain optimum span.

8.7 Summary
Span of management or span of control is the number of subordinates who report
directly to a specific manager .A Tall structure is one that has narrow spans of
management and many hierarchical levels in an organization.
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A f la t st ru c tu r e i s on e t h at h a s b ro ad e r spa ns of m a na g em en t a n d f e w
hierarchical levels and wide spans of control.

Modern organizational experts is approximately 15 to 20 subordinates per supervisor or

manager. This principle state that no single executive should have more people working to him
for guidance and leadership than be can reasonably be expected to serve.

8.8 Key Words

 Downsizing

 Restructuring

 Optimum Span

 Specialization

8.9 Review Questions

1. Explain Wide span of control and narrow span of control.

2. What is Span of Control and Organizational Structure?

3. How many direct reports can a manager have?

4. Short notes on;

a. Downsizing

b. Restructuring

5. Explain the characteristics of Flat organization.

6. State the merits and demerits of tall organizational structure.

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LESSON 9
DEPARTMENTATION,
FORMAL AND INFORMAL ORGANISATION

Learning Objectives
After studying this unit, you should be able to :

 describe the need for Departmentation

 explain the process involved in Departmentation

 elaborate on the types of Departmentation.

 highlight about the formal and informal organization

Structure
9.1 Introduction

9.2 Need and Significance of Departmentation

9.3 Bases of Departmentation

9.4 Formal Organization

9.5 Informal Organization

9.6 Summary

9.7 Key Words

9.8 Review Questions

9.1 Introduction

The grouping of activities and people into departments makes organizational expansion
possible. There is no single best way to organize. Departments, however, differ with respect to
the basic patterns used to group activities. The nature of these patterns, developed out of logic
and practice and their relative merits will be discussed in detail. At any rate, the selection of
specific Departmentation pattern should be done so that organizational and individual objectives
can be achieved effectively and efficiently. Accomplishing this goal often requires mixing forms
of Departmentation.
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Departmentation is the process of grouping various activities into separate units of

departments. A department is a distinct section of the business establishment concerned with

a particular group of business activities of like nature. The actual number of departments in

which a business house can be divided depends upon the size of establishment and its nature.
A big business enterprise will, usually, have more departments as compared to a small one. In

the words of Allen, “Departmentation is a means of dividing a large and monolithic functional

organization into smaller, flexible administrative units”.

9.2 Need and Significance of Departmentation

It is established fact that there is a limitation on the number of personnel an enterprise or

a supervisor can directly control. This limitation of control restricts the size of the enterprise
unless it divides and groups its activities into departments. Departments comprise a framework

for an organization and enables it to expand indefinitely. Departmentation aims at (i) specialization

of activities for efficient performance; (ii) simplifying the task of management within a workable
span; and (iii) maintaining co-ordination and control of the various activities. The various

advantages of departmentation can be summed up as:

i. It increases the efficiency of the enterprise since various activities are grouped into workable
units.

ii. It renders the task of fixation of accountability for results very easy since activities are well

defined and responsibilities are clearly laid.

iii. It provides for fixation of standards for performance appraisal and thus ensures effective

control.

iv. It creates opportunities for the departmental heads to take initiative and thus develops

managerial facilities.

Process involved in Departmentation

The various steps involved in departmentation are:

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i. to identify task or duties;

ii. to analyse details of each task;

iii. to describe the functions or to group similar activities;

iv. to entrust the grouped activities to departmental heads; and

v. to define the authority and responsibility of departmental heads.

Dangers of Departmentation

Although departmentation is very essential for the efficient running and control of a
business, there are a few dangers of departmentation which should be taken care of while
assigning and grouping of activities:

i. Dividing the business house into various departments makes the co-ordination of various
activities very difficult. To achieve individual efficiency, one department may work against
the interest of another department thus reducing the overall efficiency and profitability of
the business as a whole.

ii. Departmentation creates difficulties of communication among various departments of the

organization and renders planning and control more difficult.

iii. Departmentation increases the levels of management which is more expensive and it
also increases the gap between the top management and the workers.

9.3 Bases of Departmentation

The activity analysis suggested by Drucker does provide a basis for grouping activities
into departments. Yet, there is no one best way to departmentalize and the choice of the method
of departmentation should be based on the needs of the enterprise, including its objectives,
strategies, policies, technology and environment. There are seven major bases of
departmentation: (i) function; (ii) product; (iii) process; (iv) customer; (v) territory; (vi) alpha-
numerical; and (vii) composite. The kinds of departmentation will be discussed here.
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Departmentation by Function

Departmentation based on distinct and major functions is one of the most common bases
of organizing. It results into the creation of units, each one of which deals with functionally
similar activities. Functions differ from organization to organization, and depend on its objectives,
nature of inputs and outputs, and work activities. Key functions in a manufacturing organization
are production, marketing and finance. It also needs a number of supportive functions including
industrial relations, purchasing, quality control, transportation, security, etc. Key functions in a
bank are deposit, lending, customer withdrawals, etc. It is top management’s responsibility to
identify the activities needed for the attainment of organizational goals, group these activities
into functions, and assign the functions to people who can perform them efficiently and effectively.
Activities grouped into functions should contribute to the achievement of functional objectives,
and functional objectives should together lead to the achievement of total enterprise objectives.
An organization chart showing functional departmentation is shown in Figure 6.1.

Figure 6.1
Functional Departmentation

General Manager

Marketing Finance
department department
Production Purchasing First
department department level

Industrial relations
Research & development Industrial engineering department
department department
Second
level
Manufacturing

Production planning

Foundry Lathe Stores Third

Quality control level
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Functions that are basic to the objectives of a company are given distinct departmental
status, these functions have been called “organic functions” as their performance and contribution
are vital for the survival of the enterprise. In manufacturing organizations, production, marketing
and finance belong to this category. Other functions called “secondary or staff functions” are
meant to provide support to organic functions. These functions including quality control,
personnel, public relations, etc., may be organized into separate departments, or created as
sub-departments of an organic department.

Downward functional differentiation creates vertical departmentation. In Fig. 6.1,

production, marketing, etc., are first level departments. Manufacturing, production planning
and production control are sub-departments of production department, and represent second
level differentiation. Further, foundry, lathe and stores are sub-departments of manufacturing
department and represent third level differentiation. This process of downward differentiation
continues until all the activities of the enterprise have been organized in homogeneous units.

Advantages

Functional departmentation confers certain distinct advantages to the company. These

have been discussed here:

i. Organisation of similar activities into distinct departments promotes specialization and

operational efficiency.
ii. It assigns responsibility for the efficient and effective performance of each function to the
head of that function.
iii. It reflects the basic functions involved in the performance of various activities leading to
the achievement of organizational objectives.
iv. It helps staffing and training by indicating the kind of special abilities needed by the
enterprise.
v. It provides a means of effective control and coordination. For example, when all the activities
involved in the marketing function are grouped together in the marketing department, the
departmental head is in a position to ensure that they are performed in a coordinated
manner leading to the achievement of desired results. He can also exercise effective
control as he is in supreme command of the whole set of marketing activities.

vi. It provides unity of direction to closely related activities.

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Disadvantages
Functional departmentation has the following disadvantages:

i. Functional departments cannot be assigned profit responsibility. It virtually remains the

responsibility of top management. It is not even possible to evaluate the performance of
functional departments like personnel, quality control, and public relations. Only production
and marketing functions lend themselves to objective, quantitative measurement.

ii. This kind of departmentation creates problems of horizontal coordination among various
functions. Each functional head tends to be concerned almost entirely with his own function,
which may at times be at the expense of other functions and the total enterprise.

iii. Inter-departmental conflicts, particularly between marketing and production, and staff and
line, are a common occurrence. These conflicts occur more frequently in organizations
structure on the basis of functional departmentation than in other kinds of organizations.

iv. Functional executives try to enhance the power and prestige of their function by resorting
to “empire building”. This is done through putting pressure for allocation of larger funds
and personnel than can be justified by its needs.

It inhibits the development of managers with abilities to occupy top management positions.
It often happens that when a functional head is promoted to the general management position,
he continues to look at the organization from the viewpoint of his functional specialty. This can
cause serious damage not only to organizational morale, but also to its profitability and growth.

Departmentation by Product

Product departmentation is found in companies which emphasize specialization on the

basis of its products. It is commonly found in multiproduct companies. All resources required
for the manufacturing and distribution of each product are grouped under separate product
departments or divisions. Generally, product departments co-exist with functional departments
both at the corporate level as well as product department level. As shown in Fig. 6.2, product
departmentation or divisionalization involves the creation of parallel organization structures.
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Figure 6.2
Product Departmentation

General Manager

Finance Marketing Research & Industrial Legal

development relations department

Foods division Textiles Detergents

division division

Industrial Production Marketing Accounting Legal

relations

Advantages
i. The most important advantage of product departmentation is that it permits specialization
of production facilities, technical skills and knowledge. For example, production and
marketing of textiles need different kinds of technology, marketing strategy and skills
than those of detergents.

ii. It puts full responsibility for efficient and effective operations on the head of the product
division. It is often treated as a “profit center” based on decentralized operations and
centralized control.

iii. It forces the development of managers who are capable of taking full responsibility for
operating semi-autonomous product divisions.

iv. Product departmentation or divisionalization is the way to overcome the diseconomies of

size, and to make possible the functioning of giant conglomerates engaged in the
production and marketing of a wide variety of products.

v. It permits effective coordination of unique activities related to a particular product. For

example, it may provide better cooperation between production and marketing. It also
makes it possible to relate the organization better with its environment.
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vi. It permits an organization greater flexibility and adaptability in responding to changes in

environment.

vii. Product departmentation functions on the basis of decentralized operations with centralized
controls. In two areas, particularly, finance and industrial relations, the corporate functional
departments exercise a great deal of control. Centralized financial control is needed in
order to obtain a better allocation of capital resources. Moreover, financial results provide
the most objective and measurable criteria for evaluating the performance of product
divisions. Industrial relations function is also kept centralized as the company has to
bargain with the national or industry-wide union. Moreover, major differences in personnel
policies in between divisions may create problems for the whole company. In all other
areas, product divisions have almost full operational autonomy although they are subject
to centralized control by corporate headquarters.

Disadvantages
i. The greatest disadvantage of divisionalization is that it tends to create a tendency in
divisional staff to become overly division-centred which may not be conducive from the
point of view of the company as whole. Divisions are parts of the company as a whole,
and concentrating on the part to the neglect of the interests of the whole may not serve
the interest of either parties.

ii. Product departmentation puts too much pressure on the need of high-quality managerial
resources.

iii. It tends to increase the over-head costs if the product division is not sufficiently big to
sustain the creation of staff departments at the divisional level.

iv. It makes it difficult to coordinate and control the functioning of a number of divisions.

Departmentation by Process or Activity

Departmentation by process may be suitable for companies where production operations

flow in a sequence from one stage to another. For instance, in an oil company, various processes
involved in operations are exploration, drilling, refining, transportation and distribution. There is
a distinctive sequence in these operations so that finished product of one department is the
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basic raw material for the department next in the sequential order. Figure 6.3 shows process
departmentation of the manufacturing departments of an integrated steel mill.

Figure 6.3
Departmentation by Process

Production division

Iron-ore Steel smelting Hot rolling Cold rolling Foundry

refining

Advantages
i. Process departmentation facilitates coordination by grouping production facilities needed
for the completion of each distinct phase in the flow of work.

ii. It provides for more effective utilization of specialized equipment and special skills.

iii. It puts full responsibility for the completion of each stage in the production process on the
head of process department.

iv. This type of departmentation is simple and widely used.

Disadvantages
i. It makes coordination more difficult. A breakdown in one process department may hinder
the working of all the other process departments which follow the former in sequential
work flow. Moreover, inefficient operations in one process department may adversely
affect other process departments.

ii. It causes too much focusing of vision of departmental personnel on their own department
with the result that it may create conflict among various departments.

iii. Profit responsibility cannot be assigned to process departments.

iv. It may cause duplication of general purpose equipment, and unless the size of various
process departments justifies its efficient utilization, it may result in wastage and inefficiency.
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Departmentation by Customer or Service

If a company has distinctly different customer groups, it may create departments on the
basis of customer differences. For example, railways have separate reservation and booking
arrangements for I and II class passengers. A company producing power meters has electricity
departments and private households as its major customers. Selling power meters to electricity
house needs lot of emphasis on liaison work, whereas, selling it to private households needs a
distribution network and service. A diagram of customer departmentation is shown in Figure 6.4.

Figure 6.4
Customer Departmentation

Marketing manager

Liaison sales officers Household sales

officers

Advantages
i. The greatest advantage of customer departmentation is that it can focus on the special
customer needs.

ii. It focuses on the need to employ personnel with special abilities required for meeting
different customer requirements.

Departmentation by Territory

Companies, having their operations or market in widely dispersed geographical locations,

may choose, to organize on territorial or geographical basis. Many a times, as companies grow
they organize their activities in branch plants, regional sales offices, warehouses, etc. It is
done to take advantage of the economics of location, and also for more aggressive marketing.
Multinational corporations are a typical example of territorial organization. Banks, insurance
companies and railways are generally organized on this basis. Banks generally have a number
of branches within a single urban region in pursuit of the policy of getting close to the customer.
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Figure 6.5
Territorial Departmentation

General Manager

Production Marketing Finance Industrial relations

Mumbai plant Lucknow Madras plant

plant

Advantages
i. Territorial organization permits the company to relate its operations more effectively with
unique local environment. In a vast country like India, there are vast regional differences
in social values and way of life, topography, transportation facilities, availability of raw
materials, etc. Widely dispersed corporations have to relate their strategies, polices and
practices to local laws, socio-cultural values, topography, climatic conditions, economic
conditions, customer needs, and so forth.

ii. It is more conducive for aggressive marketing. A pharmaceutical company located in

Bombay may find it difficult to reach its customers effectively, say, in Punjab or Kashmir.

iii. Companies dealing in bulky commodities like foodgrains have their warehouses located
in various geographical regions. For example, the Food Corporation of India, with its
suppliers and customers spread all over the country, will find it too uneconomical to have
all its warehouses in one location.

iv. Some enterprises like cement companies find it advantageous to disperse their operations
so as to get close to the source of raw materials. If such companies are to concentrate all
its production facilities in one place, the cost of transportation of raw materials as well as
finished product will be too high.
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v. It has all the advantages of divisionalisation as branch units can be organized as semi-
autonomous profit centers with full responsibility for efficient and effective operations
placed on branch or regional managers.

vi. It helps the company to train and produce a large number of managers with abilities to
function independently.

vii. Territorial marketing activities enable the company to focus on customer needs more
effectively. Efficiency is also increased by savings in traveling time and expenses.
Closeness to customers enables them to develop and adopt more effective marketing
strategies in accordance with the local tastes and preferences and enhance the
effectiveness of advertising and sales promotion policies, etc.

Disadvantages
i. Most of the disadvantages of territorial departmentation are the same as of product
departmentation. It requires organization of staff management, needs a larger number of
managers with general management abilities, results into duplication of production facilities,
creates problems of coordination and control, and may find regional managers overlooking
the overall company objectives and policies.

ii. When plants or marketing divisions are widely dispersed, it often hampers the efficient
utilization of centralized staff departments.

iii. Headquarters often get too concerned about the cost of providing regional production
facilities or staff services, and do not fully appreciate the unique needs of their regional
units.

iv. Attempts to enforce uniform personnel policies or accounting procedures in all the regional
units may tend to be contrary to local needs.

Alpha-numerical Departmentation

Alpha-numerical departmentation is often found at the lower levels of hierarchy in many

organizations. In an insurance company, servicing of insurance policies may be organized on
the basis of alphabetical order of the names of policy holders. In banks, ledger clerks may be
assigned work on the basis of account numbers or by alphabetical order of customers names.
Telephone companies assign work to telephone operators according to telephone numbers.
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Figure 6.6
Alpha Departmentation in an Insurance Company

Composite Departmentation

Although functional departmentation is most commonly used, it is often combined with

one or more types of departmentation. In divisionalized corporations, the departmentation is
both functional as well as product type, with functional departments found at the corporate
headquarters as well as at the divisional level. Steel companies are generally organized on
functional as well as process basis. There is no one best way to departmentalize. It depends
on the purpose and objective of the company, size of its operations, products, technology,
markets, environmental conditions, and so forth.

Electronic computers together with modern communication system have made it possible
to diminish the problems of coordination and control, resulting from geographical, product,
process and customer type of departmentation. Advances in the science of electronic
communications have made it possible to locate business units in conformity with the needs of
the organization. In a matter of few minutes, a sales report, financial report or production report
can be transmitted wherever needed so that decision may be based on timely information...
Plant proximity is no longer a prerequisite for reliable communication”.

The most important criterion in choosing the pattern of departmentation is efficiency in

operations, communication, coordination and control. The key decision is to choose one method
for the primary levels and combination of methods at the secondary levels which best facilitates
coordination and integration. Such a design may be called a composite structure.
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Figure 6.7
Composite Structure

General Manager

Finance Industrial relations Research & Legal Functional

development

Textiles Steel division Product

division

Ginning Spinning Weaving Dyeing Printing Process

Marketing woolen Marketing Marketing fine Customer

coarse and superfine

Marketing Marketing Territorial

South North

9.4 Formal Organization

The term formal organization, we mean a structure that comes into existence when two
or more people come together for a common purpose, and there is a legal & formal relationship
between them. The formation of such an organization is deliberate by the top level management.
The organization has its own set of rules, regulations, and policies expressed in writing

The basic objective of the establishment of an organization is the attainment of the

organization’s goal. For this purpose, work is assigned, and authorities are delegated to each
member and the concept of division of labour and specialization of workers are applied and so
the work is assigned on the basis of their capabilities. The job of each is fixed, and roles,
responsibilities, authority and accountability associated with the job is clearly defined.
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In addition to this, there exists a hierarchical structure, which determines a logical authority
relationship and follows a chain of command. The communication between two members is
only through planned channels.

Types of formal organization structure

 Line Organization

 Line and Staff Organization

 Functional Organization

 Project Management Organization

 Matrix Organization

9.5 Informal Organization

Definition

An informal organization is the social structure of the organization, as opposed to the

formal structure of an organization. It establishes how an organization functions from a practical
standpoint. The informal organization can work in concurrence with the formal organizational
structure, parallel with it, or against it.

An informal organization is formed within the formal organization; that is a system of

interpersonal relationships between individuals working in an enterprise, which forms as a result
of people meet, interact and associate with one another. The organization is created by the
members spontaneously, i.e. created out of socio-psychological needs and urge of people to
talk. The organization is featured by mutual aid, cooperation, and companionship among
members.

In an informal organization, there are no defined channels of communication, and so

members can interact with other members freely. They work together in their individual capacities
and not professional.

There is no defined set of rules and regulations that govern the relationship between
members. Instead, it is a set of social norms, connections, and interaction. The organization is
personal i.e. no rules and regulations are imposed on them, their opinions, feelings, and views
are given respect. However, it is temporary in nature, and it does not last long.
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The concept of an informal organization by comparing it to a formal organization. The

structure and operation of a formal organization is typically set forth in the official documents,
rules, and procedures of the organization (like a corporation’s articles of incorporation and
bylaws).

The roles, authority and responsibilities of each member of the organization are clearly
defined. For example, a limited liability company’s operating agreement outlines the scope of
authority and responsibilities of the managers of the company. A formal organization is cold,
sterile, and impersonal.

Now, let’s take a look at an informal organization. It’s primarily a social creature - made
up of the totality of social norms, relationships, and interactions that affect how an organization
works. While a formal organization is cold and impersonal, an informal organization is intensely
personal. It’s all about social interactions and relationships between the members.

Members of an informal organization can certainly hold official offices and have formal
duties, but they also bring their own values, personal interests and assumptions into the equation
of how they act. Members develop friendships, alliances, enemies, trusted sources of information,
and preferences on how tasks should be performed.

These social influences may cause a member of the informal organization to work in
conjunction with the organization, in parallel with it, or even against it. In some respects, you
can think of an informal organization as:

 An organization within the formal organization working with it

 An organization beside the formal organization working towards the same goals but not
necessarily together

 Or an organization working outside the formal organization and against it

The structure of an informal organization is usually quite different from its formal
counterpart. Its structure is usually fluid and rather flat. Decisions are often made collectively
rather than unilaterally by one leader. Cohesion is often established through trust and reciprocity
between members.

An informal organization is also able to be dynamic, responsive and adaptable to change,

because formal rules and hierarchy don’t pin it down.
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Formal organisation’ is deliberately and consciously created for the accomplishment of

the enterprise objectives. It provides for official relationships between the individuals. The
communication channel in a formal organization is also formal or official. It has well- established
rules and procedures.‘Informal organisation’, on the other hand, is the outcome of personal
and social relationships between the individuals in an organization. It is not consciously or
deliberately created. It develops spontaneously as a result of interactions between persons.
Friendship, identical tastes and preferences, languages affinity, personal admiration etc., are
some of the factors that lead to the formation of an informal organization. A salesman, for
example, who is supposed to get advice from the sales manager, may seek the help of the
production manager. He does due to his friendship with the production manager and not to
incur the displeasure of the sales manager who is his boss. In fact, the sales manager also
may not take it seriously and that is what informal organization is all about.

Merits of Informal Organization

The merits of informal organization are given below:

1. It facilitates better communication relationships between the member of an organization.

2. It helps to fulfill the social needs of the personnel in an organization.

3. It offers greater scope for co-operation in the work place.

4. The informal atmosphere in the work place will motivate the staff better.

5. The scope for conflicts may also become less in view of better personal relationships
between the staff.

Demerits of Informal Organization

1. Informal organization suffers from the following drawbacks:

2. It reduces the importance of hierarchy, ie., line of authority.

3. It is possible for anyone to establish contact with anyone else in informal organization.
This may affect the work atmosphere.

4. Superiors may lose their importance.

5. Informal organization promotes informal communication and as a result rumours may

spread.
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6. The employees may adopt a casual approach to work in an informal atmosphere. This
may affect the quality of work.

Key Differences between Formal and Informal Organization

The difference between formal and informal organization can be drawn clearly on the
following grounds:

1. Formal Organization is an organization in which job of each member is clearly defined,

whose authority, responsibility and accountability are fixed. Informal Organization is formed
within the formal organization as a network of interpersonal relationship when people
interact with each other.

2. Formal organization is created deliberately by top management. Conversely, informal

organization is formed spontaneously by members.

3. Formal organization is aimed at fulfilling organization’s objectives. As opposed to an

informal organization is created to satisfy their social and psychological needs.

4. Formal organization is permanent in nature; it continues for a long time. On the other
hand, informal organization is temporary in nature.

5. The formal organization follows official communication, i.e. the channels of communication
are pre-defined. Unlike informal organization, the communication flows in any direction.

6. In the formal organization, the rules and regulations are supposed to be followed by every
member. In contrast to informal communication, there are norms, values, and beliefs,
which work as a control mechanism.

7. In the formal organization, the focus is on the performance of work while in the case of an
informal organization, interpersonal communication is given more emphasis.

8. The size of a formal organization keeps on increasing, whereas the size of the informal
organization is small.

9. In a formal organization, all the members are bound by the hierarchical structure, but all
the members of an informal organization are equal.
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An informal organization is just opposite of a formal organization. The principal difference

between these two is that all the members of a formal organization follow a chain of command,
which is not in the case of an informal organization. Moreover, there exists a superior-subordinate
relationship (status relationship) in the former, whereas such relationship is absent in the latter
because all the members are equal (role relationship).

Check Your Progress

1. Explain formal organization.

2. Discuss informal organization.

3. What is Departmentation?

9.6 Summary
Departmentation represents the pattern of grouping activities. Similar activities intimately
related with a distinct function are grouped together to form departments. It aims at achieving
unity of direction, effective communication, co ordination and control. Departmentation should
be based on an analysis of activities to find out which of them belong together. Drucker suggest
that key activities should be identified and analyzed in term of the contribution they are expected
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to make. There are seven commonly used bases of Departmentation. i) Function ii) Product iii)
Process iv) Customer v) Territory vi) Alpha numerical and vii) Composite. In conclusion it may
be mentioned that there is no one best way to departmentalize. It depends on the objective of
the company, nature of product and technology, location of markets, environmental factors etc.
Formal organization, we mean a structure that comes into existence when two or more people
come together for a common purpose, and there is a legal & formal relationship between them.
The formation of such an organization is deliberate by the top level management.
The organization has its own set of rules, regulations, and policies expressed in writing.
An informal organization is the social structure of the organization, as opposed to the formal
structure of an organization. It establishes how an organization functions from a practical
standpoint. The informal organization can work in concurrence with the formal organizational
structure, parallel with it, or against it.

9.7 Key Words

 Departmentation

 Formal Organization

 Informal organization

 Functional Departmentation

 Composite Departmentation

9.8 Review questions

1. What is Departmentation? What are the bases of Departmentation?

2. Explain the need and importance of Departmentation.

3. Discuss the various bases of Departmentation and suggest a suitable scheme for
Departmentation of a large enterprise with a distribution network all over India.

4. Write notes on the following ;

a) Functional Departmentation b) Customer Departmentation

b) Composite Departmentation

5. Bring out the difference of formal and informal organization

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UNIT 10
AUTHORITY

Learning Objectives
After studying this unit, you should be able to:

 understand about the authority to perform work

 elaborate about the special skill of the individuals

 discuss about the nature, sources and types of authority

Structure
10.1 Introduction

10.2 Definitions

10.3 Nature

10.4 Types of Authority

10.5 Sources of Authority

10.6 Introduction - Delegation

10.7 Definitions

10.8 Elements of Delegation

10.9 Pre-Requisites of Delegation

10.10Need of Delegation

10.11 For Making Effective Delegation

10.12Summary

10.13Key Words

10.14Review Questions
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10.1 Introduction - Authority

Authority is the right granted to an employee to make possible, the performance of work
assigned. Power to procure or use raw materials, spend money, or ask for allotment of money,
to hire and fire people, etc. has to be assigned to individuals to whom the work is assigned.
For example, if the Plant manager assigns the Production Manager with the production of
particular type of goods and services, he will also grant him the authority to use materials,
money and machinery, hire works and so on. To fulfill the production schedule prescribed as
his duty.

Authority comes with special skills, greater knowledge, and vast experience, or perhaps
due to age and the type of education a person has achieved during his lifetime. For example,
the parents have the authority to make decisions for their children till they are not grown up
enough to make the decisions themselves. The senior-most people in an organization have
the authority to make decisions for the gain of the whole organization.

Delegation of authority is a process by which a manager assigns some of the tasks

within his work jurisdiction to his subordinate on a selective basis, allows him to exercise authority
on his behalf to accomplish the tasks and makes him accountable for performance. Delegation
of authority is at the core of the process of organizing and entails the establishment of superior-
subordinate relationships among the members of the organization. The manager to whom
authority is delegated by his superior is empowered to decide and do certain specify actions.

Authority is a formal title or position that gives someone the tools to influence other
people within their organization. A person in authority is often powerful, but power is not necessary
for authority. Authority is important for many hierarchical systems and organizations to operate
smoothly and quickly.

10.2 Definitions
Henri Fayol: “Authority is the right to give orders and the power to exact obedience”.

Louis A. Allen has defined authority as the rights entrusted to a position-holder to make
possible, the performance of the work assigned. Authority is basically a job of managing. A
manager must have adequate authority to get things done through the subordinates.
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10.3 Nature
The basic features are;

 Basis of getting things done

 Legitimacy

 Decision Making

 Implementation

 The right power to command and control the subordinates.

 It is granted to position-holder (or manager) for the achievement of organizational

objectives

 It may be exercised through persuasion or sanctions. If the subordinate does not obey,
or take the order, the superior has the right to take disciplinary action.

 We define ‘authority’ as the legal and formal right of the manager or supervisor or any of
the top level executives, of the organization to command subordinates, give those orders,
instructions and directions, and access obedience. The manager is entitled to make
decisions, concerning performance or non-performance of a task in a particular manner,
so as to accomplish organizational objectives. It comprises of some permissions and the
right to act for the organization in a particular area.

 Authority is derived by virtue of the position of an individual in the organization, and the
degree of authority is maximum at the top level and decreases consequently as we go
down the corporate hierarchy. Therefore, it flows from top to bottom, giving authority to
superior over the subordinate.

 One cannot occupy a superior position in an organization if he does not have any authority.
It is the authority; that distinguishes one position from that of another and vests the
power to the concerned individual, to order his subordinates and obtain necessary
compliance.

10.4 Types of Authority

• Formal or legal : Conferred by Law or statues or rules

• Technical or functional: Based on knowledge or skill. E.g.: - Consulting engineer, or a

leader or doctor, or financial advisor.
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• Operational: To get certain things done.

• Administrative: Certain permissions or rights and general administrations.

• Official Authority: The authority which gives the manager, power to command his
subordinates, by virtue of his designation in the organization.

• Personal Authority: It indicates the ability by which a person influences the behaviour of
other persons in an organization.

10.5 Sources of Authority

1. Formal Authority Theory: According to this theory, authority originates at the top of an
organization hierarchy and flows downward through the process of delegation. The ultimate
authority in a company lies with its owners or shareholders. The shareholders entrust the
management of the company to the Board of Directors and delegate to it most of their
authority. The Board of directors delegates authority to the Chief Executive and the Chief
Executive in turn to the departmental heads and so on.

Every manager in the organization has some authority because of is organizational position,
thus the authority is known as formal authority. Subordinates accept the authority of a
superior because of his formal position in the organization. A manager in the organization
has only that much of authority which is delegated to him by his superior.

2. Acceptance Theory: According to this theory, the authority is the power which is accepted
by others. Formal authority has no significance unless it is accepted by the subordinates.
The degree of effective authority possessed by a manager is measured by the willingness
of the subordinate who accepts it.

The acceptability of an order will depend upon relative consequences, both positive and
negative. Many order may be fully acceptable, many fully unacceptable and others only
partially acceptable. Barnard maintains that a subordinate will accept an order if

(i) he understands it well and

(ii) he believes it to be consistent with the organizational objectives and compatible

with his own interest.

3. Competence Theory: According to this theory, an individual derives authority because

of his personal competence. Urwickidentified formal authority as being conferred by
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organization, technical authority as being implicit in a special knowledge or skill, personal

authority as being conferred by seniority or popularity. Thus, a person may get his order
or advice accepted not because he is having any formal authority, but because of his
personal qualities. These qualities may be technical competence and social status in the
organization. For example, a person is expert in a particular field and other people go to
him for guidance, and follow his advice as if it were an order.

From the analysis of theories of authority, it can be concluded that acceptance and
competence theories suggest how and why an individual obeys the order of another. But
the importance of formal authority cannot be undermined. The formal authority should be
regarded as basic to managerial job and acceptance and competence authority as products
of leadership. In some organization like army and police, formal position is the most
important source of authority.

10.6 Delegation
Delegation of authority means the assignment if work to others and granting them the
requisite authority to accomplish the job assigned.

This enables the managers to distribute their load of work to others and concentrate on
more important functions which they can perform better because of their position in the
organization.

Delegation is the ability of a manager to share his burden with others. Many companies
fail in their specific business because of their lack of effective delegation. Delegation is not
telling the employees for an answer but to complete the task assigned.

Delegation is the process by which the manager assigns a portion of his total workload to
others. Effective delegation permits managers to tackle higher priority duties, while helping to
train and develop lower-level managers.

10.7 Definitions
Louis A Allen has defined delegation of authority, as a dynamic of management; it is the
process a manager follows in dividing the work assigned to him so that he performs that part
which only he, because of his unique organizational placement, can perform and so that he
can effectively get others to help him with what remains.”
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Dalton E. McFarland, “Delegation is that part of the organizing process by which an

executive, an administrator or a manager makes it possible for others to share the work of
carrying out of company’s purpose. It also includes the process of assigning duties,
responsibilities and authority to those to whom he expects to aid him in doing the work.

“Delegation consists of granting authority or right to decision making in certain defined

area and charging the subordinate with responsibility for carrying through an assigned task.”

Delegation is a process which enables a person to assign a work to others and delegate
them with adequate authority to do it.

10.8 Elements of Delegation

 Delegator assigns duties

 Delegator grants authority

 Delegator creates obligation

 Delegator retains accountability

10.9 Pre-Requisites of Delegation

1. Supervisor must understand the authority and responsibility of their own.

2. The supervisor must decide the portion of his authority that he wants to delegate

3. The supervisor should have thorough knowledge of the abilities of subordinates.

4. The supervisor must ensure that the subordinates have understood the delegated work
in the right direction

5. The delegator must understand the need, importance and value of delegation

6. The delegator must release the decision making powers.

7. There should be adequate communication network within the organization.

8. There should be clear definition of standard of accountability

10.10 Need of Delegation

• Limitations of one man’s ability and time

• Specialized and technological needs

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• Tendency to diversity and decentralize organization

• Employee motivation

• Opportunity for development

• Saving of time

• Basis of effective functioning

10.11 For Making Effective Delegation

• State plans, policies and goals clearly

• Define job assigned clearly in the light of what is expected.

• Select the proper man.

• Maintain open lines of communication

• Establish proper controls.

• Reward effective delegation

• Provide suitable training to the persons concerned.

• See that proper facilities, tools & equipment are provided to the persons concerned.

Check Your Progress

1. Explain authority.

2. Discuss delegation of authority.

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3. Explain legitimacy.

4. Name the types of authority.

5. Explain delegation.

10.12 Summary
Authority is the right granted to an employee to make possible, the performance of work
assigned. Power to procure or use raw materials, spend money, or ask for allotment of money,
to hire and fire people, etc. has to be assigned to individuals to whom the work is assigned

Authority comes with special skills, greater knowledge, and vast experience, or perhaps
due to age and the type of education a person has achieved during his lifetime.Authority is
derived by virtue of the position of an individual in the organization, and the degree of authority
is maximum at the top level and decreases consequently as we go down the corporate hierarchy.

Delegation of authority means the assignment if work to others and granting them the
requisite authority to accomplish the job assigned.The managers to distribute their load of
work to others and concentrate on more important functions which they can perform better
because of their position in the organization.
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Delegation is the ability of a manager to share his burden with others.”Delegation consists
of granting authority or right to decision making in certain defined area and charging the
subordinate with responsibility for carrying through an assigned task.”Delegation is a process
which enables a person to assign a work to others and delegate them with adequate authority
to do it.

10.13 Key Words

 Delegation

 Competence Theory

 Acceptance Theory

 Accountability

10.14 Review Questions

1. Explain the authority to perform work

2. Identify the special skill of the individuals.

3. Explain the Nature.

4. State the sources and types of authority

5. State the need of delegation.

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UNIT 11
DECENTRALIZATION

Learning Objectives
After studying this unit, you should be able to:

 highlight about the function of decentralization

 understand about the difference between authority, power, delegation and

decentralization

 discuss about the application of the decentralization

Structure
11.1 Introduction

11.2 Difference between Authority and Power

11.3 Definition of Authority

11.4 Responsibility

11.5 Definition of Responsibility

11.6 Differences between Authority and Responsibility

11. 7 Difference Delegation And Decentralization

11.8 Summary

11.9 Key Words

11.10 Review Questions

11. 1 Introduction
Decentralization is a philosophy of organization and management which involves both
selective delegation of authority as well as concentration of authority through the imposition of
policies and selective but adequate controls. Delegation is the managerial process through
with authority flows down the scalar chain; it is one of those good things that in practice, are
difficult for managers to get right.
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11.2 Difference between Authority and Power

Power and Authority

These two are used to make people respond in the manner directed. Power is referred to
as the capacity of an individual to influence the will or conduct of others. As against, authority
is termed as the right possessed by a person to give the command to others. Power and
authority are the ‘currency’ of any organization; they enable an individual or group to get things
done, through others.

Definition of Power

By the term power, we mean the personal capacity of an individual to influence others to
do or not to do an act. It is independent and informal in nature derived from charisma and
status. It is an acquired ability that comes from knowledge and expertise. It is the right to
control other’s actions, decisions and performances.

Power is not hierarchical, i.e. it can flow in any direction like it can flow from superior to
subordinate (downward) or junior to senior (upward), or between the persons working at the
same level, but different departments of the same organization (horizontal), or between the
persons working at different levels and departments of the same organization (diagonal). In
this way, it is not confined to any boundaries. Moreover, the element of politics is usually
attached to it.

11.3 Definition of Authority

Authority is legal and formal right to a person, who can take decisions, give orders and
commands to others to perform a particular task. It is conferred to high officials, to accomplish
organization’s objectives. It is hierarchical in nature; it flows downward, i.e. delegated from
superior to the subordinate.

In general, authority is exercised to get things done through others. It is attached to the
position, i.e. any person who gets the position enjoys the authority attached to it, the higher the
position, the higher would be his authority. As the authority lies in the designation, in the absence
of authority, the position offered to the person would be of no use. Moreover, it is restricted to
the organization only.
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1. Source of Power and Authority

Power is generally the product of personal traits like charisma and expertise. Power can
be learned and gained, and generally the more knowledgeable a person is in their field, the
more power they have. Similarly to charisma, power depends on the way others view a person;
if they do not consider you powerful, then you will lack power.

Authority is a title given from an outside source, such as an organization, a government,

or another person. While a person in authority may have personal traits that also make them
powerful, their authority is derived from their position, not from within themselves. A person can
be given authority while having very little personal power, although this is not considered strategic
for an organization.

2. Formality in Power and Authority

Power, compared to authority, is an informal method of influence. A person

or organization does not need to have any formal status within a hierarchy to become powerful.
For example, an employee with a high level of experience and technical expertise will often
become powerful and influential to their peers, managers, and clients, even if they do not hold
a managerial title.

Authority is a formal method of influence. Authority must be given within a hierarchical

structure, and cannot be assumed just because someone is powerful. A common example in
politics of the difference between authority and power comes from lobbying groups: while
lobbyists can gain a great deal of influence toward an agency, they do not have true authority
within that agency. Authority is vital within organizations to ensure that work is assigned
appropriately, that employees know who they can turn to for help, and that responsibility is
taken for mistakes.

3. Legitimacy of Power and Authority

Because power is not formalized, it is also not legitimate. An individual’s power within an
organization or system does not give them any special legal or political rights, like those of civil
servants who perform duties civilians cannot.

Authority is both formal and legitimate. The difference between formality and legitimacy
lies within legal rights and duties. A soldier or a member of the National Guard performs duties
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as part of their service that civilians do not typically have the legal right to perform; this comes
from the legitimacy of the authority given to the military. Importantly, an organization or
government must be interpreted by its clients as legitimate in order for it to truly have authority.
Illegitimate organizations could be warring factions or a government who came to power in a
coup d’etat. In these cases, the legitimacy of the organization depends solely on the trust and
perception of the public.

4. Ability to be Lost

Power can be lost, but it generally takes repeated mistakes or poor behavior for someone
to lose their power. Because power is built off of expertise and experience, making critical
errors, especially in politics or business, can make a powerful person lose their credibility. And
while power doesn’t require a good personality, it generally requires a level of charisma, so bad
personal behavior or treatment of coworkers can also strip someone of their influence.

Authority is easily lost. An organization can usually take away authority from someone by
removing them from the position, or by taking away anything in the position that gave them
formal power over others. For example, some government departments have moved managers
into positions with the same pay level but have taken away their leadership functions during
department restructuring. There are a few instances when someone’s position of authority is
institutionalized and very difficult to change – the British monarchy still have positions of authority
that are extremely difficult to alter, and removing a U.S. Supreme Court Justice is a highly
complicated and unpopular process.

5. Use of Violence in Power and Authority

People exercising their power often resort to violence or coercion to influence others.
This is especially true in politics, where rebel groups or existing governments attempt to violently
promote their cause or defeat opposition. While power is not inherently violent, because powerful
people often lack authority, violence becomes their preferred method of influence. For many
governments or political groups, methods of violence also appear cheaper and faster than
diplomacy or other forms of influence.

Legitimate authority by most political science standards is not violent, with the possible
exception of declared and symmetrical war. Authority is institutionalized and authoritative
positions should have duties or tools that allow people to influence others or complete their
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work without having to resort to violence. When an authority figure uses violence against
civilians or other non-authority figures, the situation becomes “asymmetrical” or unfair, and the
authority figure loses legitimacy.

6. Within System or Without

Power is perhaps easiest to gain within a specific field or organization, but it doesn’t need
to be confined to one system. A powerful person will often be recognized as powerful by new
people and across disciplines, such as a famous doctor or politician.

Authority doesn’t typically apply outside an organization or system, but the system can
be very large. A manager at a bank only has authority at their bank, for instance, but the
authority of a state trooper extends much further. However, outside the state or the U.S., the
state trooper no longer has any legal authority. Any recognition they receive is instead an
extension of their personal power.

11.4 Responsibility
Responsibility and authority are two things which go hand in hand. People who are in an
authoritarian position have more responsibilities which come with the power of authority.

Responsibility is the ability or duty to decide or act upon one’s own or somebody else’s
decisions without supervision. Responsibility involves accountability.

11.5 Definition of Responsibility

Responsibility is the obligation of an individual, whether a manager or any other employee

of the organization to carry out the task or duty assigned to him by the senior. The one who
accepts the tasks are held responsible for their performance, i.e. when an employee takes the
responsibility of an action, at the same time, he becomes responsible for its consequences
too.

The obligation is the kernel of responsibility. It is originated from the superior-subordinate

relationship, formed in an organization. Hence, the manager can get the tasks done from his
subordinates, by virtue of their relationship, as the subordinate is bound to perform the tasks
assigned.
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Responsibility, on the other hand, is another word for answerability. When one is
responsible for some action or has to take the responsibility for the consequences of actions,
taken either by themselves or by somebody else for whom they are responsible, this is
answerability or responsibility. The consequences could be good or bad, but the accountability
is taken by the person who is responsible.

Responsibility definitely involves doing certain duties and in a reasonable fashion.

Responsibility involves people being reasonable and having the duty to communicate to others
what needs to be done. It also involves the awareness of certain relationships one has with
others.

Difference between Authority and Responsibility

The following points are noteworthy so far as the difference between authority and
responsibility is concerned:

Authority is the legal right to give the command, order or instruction and compel the
subordinates to do a certain act.

On the other hand, Responsibility is the outcome of authority. It entails the obligation of
the subordinate, who has been assigned the duty by his superior.

1. The power or right, inherent to a particular job or position, to give orders, enforce rules,
make decisions and obtain conformity, is called authority. Duty or obligation to undertake
and complete a task satisfactorily, assigned by the senior or established by one’s own
commitment or circumstances is called responsibility.
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2. Authority refers to the legal right of the manager to give orders and expect obedience
from subordinates. On the other hand, responsibility is the corollary, i.e. result of the
authority.

3. The position of an individual in an organization determines his/her authority, i.e. the higher
the position of a person in the corporate ladder, the more is the authority and vice versa.
As against this, the superior-subordinate relationship forms the basis for responsibility.

4. While authority is delegated, by the superior to subordinates, responsibility is assumed,

i.e. it is inherent in the task assigned.

5. Authority needs the ability to give orders and instructions, whereas responsibility demands
the ability of compliance or obedience, to follow orders.

6. Authority flows downward, i.e. the extent of authority is greatest at the top level and
lowest at the low level. On the contrary, the responsibility exacts upward, i.e. from bottom
to top, the subordinate will be responsible to superior.

7. The purpose of the authority is to take decisions and execute them. Conversely,
responsibility aims at executing duties assigned by the superior.

8. Authority is inherent with the position, and so it continues for a long period. Unlike
responsibility, which is attached to the task assigned and hence it is short-lived, it ends as
soon as the task accomplishes successfully.

11.6 Differences between Authority and Responsibility

Authority Responsibility

It is the legal right of a person or a superior It is the obligation of subordinate to

to command his subordinates. perform the work assigned to him.

Authority is attached to the position of a Responsibility arises out of superior-

superior in concern. subordinate relationship in which
subordinate agrees to carry out duty given
to him

Authority can be delegated by a superior Responsibility cannot be shifted and is

to a subordinate absolute

It flows from top to bottom It flows from bottom to top.

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11.7 Difference Delegation and Decentralization

Basis Delegation Decentralization

Meaning Managers delegate some of Right to take decisions is shared by top

their function and authority to management and other level of
their subordinates. management.

Scope Scope of delegation is limited as Scope is wide as the decision making is

superior delegates the powers shared by the subordinates also.
to the subordinates on individual
bases.

Responsibility Responsibility remains of the Responsibility is also delegated to

managers and cannot be subordinates.
delegated

Freedom of Freedom is not given to the Freedom to work can be maintained by

Work subordinates as they have to subordinates as they are free to take
work as per the instructions of decision and to implement it.
their superiors.

Nature It is a routine function It is an important decision of an

enterprise.

Need on Delegation is important in all Decentralization becomes more

purpose concerns whether big or small. important in large concerns and it
No enterprises can work without depends upon the decision made by
delegation. the enterprise, it is not compulsory.

Grant of The authority is granted by one It is a systematic act which takes place
Authority individual to another. at all levels and at all functions in a
concern.

Grant of Responsibility cannot be Authority with responsibility is

Responsibility delegated delegated to subordinates.

Degree Degree of delegation varies Decentralization is total by nature. It

from concern to concern and spread throughout the organization i.e.
department to department. at all levels and all functions
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Process Delegation is a process which It is an outcome which explains

explains superior subordinates relationship between top management
relationship and all other departments.

Essentiality Delegation is essential of all Decentralization is a decisions function

kinds of concerns by nature.

Significance Delegation is essential for Decentralization is an optional policy at

creating the organization the discretion of top management.

Withdrawal Delegated authority can be It is considered as a general policy of

taken back. top management and is applicable to all
departments.

Freedom of Very little freedom to the Considerable freedom

Action subordinates

Check Your Progress

1. Explain authority and power.

2. Discuss delegation and decentralization.

3. Explain responsibility.
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11.8 Summary
Decentralization is a philosophy of organization and management which involves both
selective delegation of authority as well as concentration of authority through the imposition of
policies and selective but adequate controls.

Power is referred to as the capacity of an individual to influence the will or conduct of

others. As against, authority is termed as the right possessed by a person to give the command
to others.

Responsibility and authority are two things which go hand in hand. People who are in an
authoritarian position have more responsibilities which come with the power of authority.

Responsibility is the obligation of an individual.The power or right, inherent to a particular

job or position, to give orders, enforce rules, make decisions and obtain conformity, is called
authority.

11.9 Key Words

 Delegation

 Responsibility

 Power

 Authority

11.10 Review Questions

1. Explain the function of decentralization

2. State the difference between authority and power.

3. Elaborate the definition and the application of the decentralization.

4. Differentiate authority and responsibility.

5. Differentiate delegation and decentralization.

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UNIT 12
RECRUITMENT & SELECTION

Learning Objectives
After studying this unit, you should be able to:

 understand the meaning and application of recruitment and selection

 elaborate about the process of recruitment and selection process

 highlight about the sources of recruitment

Structure
12.1 Introduction - Recruitment

12.2 Sources of Recruitment

12.3 Selection

12.4 Employee Selection Process

12.5 Difference between Recruitment and Selection

12.6 Summary

12.7 Key Words

12.8 Review Questions

12.1 Introduction - Recruitment

Staffing emphasizes the recruitment and selection of the human resources for an
organization. Since staffing is a major and primary function of HR department, HR managers
and hiring managers should ensure equal employment opportunities Without any discrimination
based on caste, creed, race, sex and religion in staffing process, since it is constitutional and
mandatory in some countries like the USA, UK and India. It’s failure or contravenes shall invite
legal action against such organization which shall sometimes leads to huge finality or closure
depending upon the gravity of such contravenes. Equal employment opportunity principle is
not applicable where rule of reservation is applicable.
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Human resources planning and recruiting precede the actual selection of people for
positions in an organization. Recruitment is the process of inviting qualified applicants by way

of issuing notification in the newspapers, television media, online and on social networking

media so as to fill up job vacancies.

Recruitment involves searching for an attracting candidates to fill job vacancies in an

organization. Selection is a next stage of followed after recruitment process which involves

choosing the fit competent and qualified applicants for the job. Recruitment is the determining

the position and its vacancy with necessary qualification outlined, there arises the recruiting
process. This process could be done through a multiplicity of ways like campus recruitment,

On the Job recruitment etc.

During recruitment, it is important to have a large pool of qualified recruits (applicant).

However, after having recruited this large number of job applicants, organizations must weed

out the unqualified ones and then select the very best remaining candidate(s) for the job.

The overall aim of the recruitment and selection process should be to obtain at minimum
cost the number and quality of employees required to satisfy the human resource needs of the

company. The three stages of recruitment and selection dealt with:

1. Defining requirements - preparing job descriptions and specifications; deciding terms

and conditions of employment;

2. Attracting candidates - reviewing and evaluating alternative sources of applicants, inside

and outside the company, advertising, using agencies and consultants;

3. Selecting candidates - sifting applications, interviewing, testing, assessing candidates,

assessment centers, offering employment, obtaining references; preparing contracts of

employment.
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12.2 Sources of Recruitment

Recruitment is of two types

1. Internal Recruitment: In this, recruitment which takes place within the concern or
organization. Internal sources of recruitment are readily available to an organization. Internal
sources are primarily three; they are Transfers, promotions and Re-employment of ex-
employees.

Re-employment of ex-employees is one of the internal sources of recruitment in which

employees can be invited and appointed to fill vacancies in the concern. There are situations
when ex-employees provide unsolicited applications also.

Internal recruitment may lead to increase in employee’s productivity as their motivation

level increases. It also saves time, money and efforts. But a drawback of internal recruitment
is that it refines the organization from new blood. Also, not all the manpower requirements
can be met through internal recruitment. Hiring from outside has to be done.

Internal sources are primarily three:

a. Transfers

b. Promotions (through Internal Job Postings) and

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c. Re-employment of ex-employees - Re­employment of ex­employees is one of

the internal sources of recruitment in which employees can be invited and appointed
to fill vacancies in the concern. There are situations when ex-employees provide
unsolicited applications also.

2. External Recruitment: External sources of recruitment have to be solicited from outside

the organization. External sources are external to a concern. But it involves lot of time
and money. The external sources of recruitment include, Employment at factory gate,
advertisements, employment exchanges, employment agencies, educational institutes,
labour contractors, recommendations etc.

i. Employment at Factory Level: This a source of external recruitment in which the

applications for vacancies are presented on bulletin boards outside the Factory or
at the Gate. This kind of recruitment is applicable generally where factory workers
are to be appointed. There are people who keep on soliciting jobs from one place to
another. These applicants are called as unsolicited applicants. These types of workers
apply on their own for their job. For this kind of recruitment workers have a tendency
to shift from one factory to another and therefore they are called as “badli” workers.

ii. Advertisement: It is an external source which has got an important place in

recruitment procedure. The biggest advantage of advertisement is that it covers a
wide area of market and scattered applicants can get information from
advertisements. Medium used is Newspapers and Television.

iii. Employment Exchanges: There are certain Employment exchanges which are
run by government. Most of the government undertakings and concerns employ
people through such exchanges. Now-a-days recruitment in government agencies
has become compulsory through employment exchange.

iv. Employment Agencies: There are certain professional organizations which look
towards recruitment and employment of people, i.e. these private agencies run by
private individuals supply required manpower to needy concerns.

v. Educational Institutions: There are certain professional Institutions which serve

as an external source for recruiting fresh graduates from these institutes. This kind
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of recruitment done through such educational institutions is called as Campus

Recruitment. They have a special recruitment cell which helps in providing jobs to
fresh candidates.

vi. Recommendations: There are certain people who have experience in a particular
area. They enjoy goodwill and a stand in the company. There are certain vacancies
which are filled by recommendations of such people. The biggest drawback of this
source is that the company has to rely totally on such people which can later on
prove to be inefficient.

vii. Labour Contractors: These are the specialist people who supply manpower to the
Factory or Manufacturing plants. Through these contractors, workers are appointed
on contract basis, which is for a particular time period. Under conditions when these
contractors leave the organization, such people who are appointed have to also
leave the concern.

12.3 Selection
Selection of competent employees is one of the most important activities a firm can do.
Spending a few extra resources, to select a competent employee who might potentially save
the firm thousands times of resources, is that money well-spent.

There is a legal consideration involved in the selection of new employees. The fear of
wrongful termination lawsuits has caused many companies to become far more concerned
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about whom they hire. If a company is careful, thorough, and selective in its hiring practices, it
can reduce the instances when it will be necessary to terminate employees.

A well designed selection process will yield information about a candidate’s skills and
weaknesses. The Human Resource specialist must.

Recruitment involves searching for and attracting candidates to fill job vacancies. Selection
is a later stage of the recruitment process which involves choosing competent and qualified
applicants suited for the job. For example, applicant skills can be evaluated through application
forms, interviews, tests, and reference checks, letters of recommendation or reference, and
physical examinations. Clearly, some selection tools are more effective than others, but a
combination of tools is usually best.

12.4 Employee Selection Process

Employee Selection is the process of putting right men on right job. It is a procedure of
matching organizational requirements with the skills and qualifications of people. Effective
selection can be done only when there is effective matching. By selecting best candidate for
the required job, the organization will get quality performance of employees. Moreover,
organization will face less of absenteeism and employee turnover problems. By selecting right
candidate for the required job, organization will also save time and money. Proper screening of
candidates takes place during selection procedure. All the potential candidates who apply for
the given job are tested.

But selection must be differentiated from recruitment, though these are two phases of
employment process. Recruitment is considered to be a positive process as it motivates more
of candidates to apply for the job. It creates a pool of applicants. It is just sourcing of data.
While selection is a negative process as the inappropriate candidates are rejected here.
Recruitment precedes selection in staffing process. Selection involves choosing the best
candidate with best abilities, skills and knowledge for the required job.

The Employee selection Process takes place in following order­

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

2. Application blanks: The candidates who clear the preliminary interview are required to
fill application blank. It contains data record of the candidates such as details about age,
qualifications, reason for leaving previous job, experience, etc.

3. Written Tests: Various written tests conducted during selection procedure are aptitude
test, intelligence test, reasoning test, personality test, etc. These tests are used to
objectively assess the potential candidate. They should not be biased.

4. Employment Interviews: It is a one to one interaction between the interviewer and the
potential candidate. It is used to find whether the candidate is best suited for the required
job or not. But such interviews consume time and money both. Moreover the competencies
of the candidate cannot be judged. Such interviews may be biased at times. Such interviews
should be conducted properly. No distractions should be there in room. There should be
an honest communication between candidate and interviewer.

5. Medical examination: Medical tests are conducted to ensure physical fitness of the
potential employee. It will decrease chances of employee absenteeism.

6. Appointment Letter: A reference check is made about the candidate selected and then
finally he is appointed by giving a formal appointment letter.

12.5 Difference between Recruitment and Selection

BASIS RECRUITMENT SELECTION

Meaning It is an activity of establishing It is a process of picking up more

contact between employers competent and suitable employees.
and applicants.

Objective It encourages large number It attempts at rejecting unsuitable

of Candidates for a job. candidates.

Process It is a simple process. It is a complicated process.

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Hurdles The candidates have not to Many hurdles have to be crossed.

cross over many hurdles.

Approach It is a positive approach. It is a negative approach.

Sequence It precedes selection. It follows recruitment.

Economy It is an economical method. It is an expensive method.

Time Less time is required. More time is required.

Consuming

Check Your Progress

1. Explain staffing.

2. Discuss recruitment and selection.

3. Explain HRP.
 191

4. State internal sources of recruitment.

5. Explain promotions.

12.6 Summary
Staffing emphasizes the recruitment and selection of the human resources for an
organization,Human resources planning and recruiting precede the actual selection of people
for positions in an organization.

Recruitment is the process of inviting qualified applicants by way of issuing notification in

the newspapers, television media, online and on social networking media so as to fill up job
vacancies.Recruitment involves searching for an attracting candidate to fill job vacancies in an
organization.

Selection is a next stage of followed after recruitment process which involves choosing
the fit competent and qualified applicants for the job.Legal considerations involved in the selection
of new employees.

Recruitment is considered to be a positive process as it motivates more of candidates to

apply for the job. It creates a pool of applicants.Selection is a negative process as the
inappropriate candidates are rejected here. Recruitment precedes selection in staffing process.
Selection involves choosing the best candidate with best abilities, skills and knowledge for the
required job.
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12.7 Key Words

 Transfers

 Promotion

 Re-employment

 Advertisement

 Outsourcing

12.8 Review Questions

1. Explain the meaning and application of recruitment and selection.

2. Describe the process of recruitment and selection process.

3. List out the sources of recruitment.

4. State the difference between recruitment and selection.

5. Explain Labor Market.

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UNIT 13
TRAINING & DEVELOPMENT

Learning Objectives
After studying this unit, you should be able to:

 highlight about training and development elements, application and process

 training methods and techniques

 elaborate about various methods of executive development

Structure
13.1 Introduction

13.2 The Need for Training and Development

13.3 Factor Influence for Training

13.4 Objectives of Training

13.5 Training and Development is one of the Key HR Functions

13.6 Importance of Training Program

13.7 Scope of the Training

13.8 Training Methods and Techniques

13.9 Training Methods: On Job Training and Off the Job Training Methods

13.10 Development

13.11 Methods of Management – Executive Development

13.12 Summary

13.13 Key Words

13.14 Review Questions

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13.1 Introduction
In this fast developing modern world, technology development has a great impact on the
knowledge of employees. Training and development is vital part of the human resource
development. It is assuming ever important role in wake of the advancement of technology
which has resulted in ever increasing competition, rise in customer’s expectation of quality and
service and a subsequent need to lower costs. It also become more important globally in order
to prepare workers for new jobs. In this chapter, we will focus more on the emerging need of
training and development, its implications upon individuals and the employers.

Peter Drucker said that the fastest growing industry would be training and development
as a result of replacement of industrial workers with knowledge workers. In United States, for
example, according to one estimate technology is de-skilling 75 % of the population. This is
true for the developing nations and for those who are on the threshold of development. In
Japan for example, with increasing number of women joining traditionally male jobs, training is
required not only to impart necessary job skills but also for preparing them for the physically
demanding jobs. They are trained in everything from sexual harassment policies to the necessary
job skills.

Here the process of learning is categorized in three terms, they are, training, development
and education.

Training is an organized procedure for enhancing the knowledge and skill of an employee
by progressing a particular set of jobs continuously till the work attains its perfect, say practices
given for labours.

Development is a long term education process using education process using a systematic
and organized procedure by which managerial personnel learn conceptual and theoretical
knowledge for general progress. Mostly this type is applied for managerial position for taking
decision in certain occasions.

Education is concerned all about a systematic procedure of a beginner to study about a

particular discipline followed by an approved syllabus and is generally processed for the
certificated courses of at college level.

The word ‘training’ is used to develop workers wile ‘development’ is in relation to the
executives or managers of the enterprise. Management development actually refers to the
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process by which the executives acquire not only skills and competence to do their present
jobs, but to handle managerial activities.

13.2 The Need for Training and Development

Training is necessary both for existing and newly joined employees. It increased the
skills of the employee and as new machines, new tools, methods, and leads to the learning
situation. This results for the need of training programs.

Before we say that technology is responsible for increased need of training inputs to
employees, it is important to understand that there are other factors too that may consider
frequent accidents, low quality, higher production cost, employees feeling absence of pride in
job resulting in carelessness and gossip, or may be ignorance of objectives. So training is
necessary for the individual development and progress of the employee, which motivates him
to work for a certain organization apart from just money.

Management can identify training needs like;

1. If the employee’s performance is below the standard, training is immediately required.

2. Certain production problems indicates the need for training though it may be eithr of the
factors.

3. By conducting interviews and giving questionnaires, views of employees and executives

can conclude the type and the area of training to be given to the individual or the group of
individuals.

4. The expansion of business in future, installation of new plants, new technology etc., may
lead to the planning of manpower training in advance so that the new work constrains are
removed.

“Training is not something that is done once to new employees, it is used continuously in
every well-run establishment. Every time you get someone to do work the way you want it
done, you are training. Every time you give directions or discuss a procedure, you are training”,
said by R.C. Dooly. We also require training update employees of the market trends, the
change in the employment policies and other things.
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13.3 Factor Influence for Training

The following are the two biggest factors that contribute to the increased need to training
and development in organizations:

1. Change: The word change encapsulates almost everything. It is one of the biggest factors
that contribute to the need of training and development. There is in fact a direct relationship
between the two. Change leads to the need for training and development and training
and development leads to individual and organizational change, and the cycle goes on
and on. More specifically it is the technology that is driving the need; changing the way
how businesses function, compete and deliver.

2. Development: It is again one the strong reasons for training and development becoming
all the more important. Money is not the sole motivator at work and this is especially very
true for the 21st century. People who work with organizations seek more than just
employment out of their work; they look at holistic development of self. Spirituality and
self-awareness for example are gaining momentum world over. People seek happiness
at jobs which may not be possible unless an individual is aware of the self. At Ford, for
example, an individual can enroll himself / herself in a course on ‘self-awareness’, which
apparently seems inconsequential to ones performance at work but contributes to the
spiritual well-being of an individual which is all the more important.

The critical question however remains the implications and the contribution of training
and development to the bottom line of organizations performance. To assume a leadership
position in the market space, an organization will need to emphasize on the kind of programs
they use to improvise performance and productivity and not just how much they simply spend
on learning.

13.4 Objectives of training

i. Giving instructions to the employees in the enterprise culture pattern.

ii. Providing correct idea of the skills, knowledge and aptitudes necessary for undertaking
the required jobs efficiently.

iii. Developing the employee with a view to equipping him with the required potentials for his
future progress growth.
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iv. Facilitating the introduction of new methods, procedures and ideas.

v. Providing opportunities for succession with a view to securing enough number of

replacements to meet further progress.

vi. To increase worker’s efficiency

vii. To reduce risk in damage work system

viii. To handle machines properly and ensuring safety system.

ix. To develop effective work habits and methods of work procedure.

x. Instructing the employees towards better job adjustments and improve morale.

xi. Attracting fresh candidates

xii. Improving opportunities for promotion and add responsibilities.

13.5 Training and development is one of the key HR functions

Most organizations look at training and development as an integral part of the human
resource development activity. The turn of the century has seen increased focus on the same
in organizations globally. Many organizations have mandated training hours per year for
employees keeping in consideration the fact that technology is deskilling the employees at a
very fast rate.

Is it really that important to organizational survival or they can survive without the former?
Are training and development one and the same thing or are they different? Training may be
described as an Endeavour aimed to improve or develop additional competency or skills in an
employee on the job one currently holds in order to increase the performance or productivity.

Technically training involves change in attitude, skills or knowledge of a person with the
resultant improvement in the behavior. For training to be effective it has to be a planned activity
conducted after a thorough need analysis and target at certain competencies, most important
it is to be conducted in a learning atmosphere.

While designing the training program it has to be kept in mind that both the individual
goals and organizational goals are kept in mind. Although it may not be entirely possible to
ensure a sync, but competencies are chosen in a way that a win-win is created for the employee
and the organization.
198

Typically organizations prepare their training calendars at the beginning of the financial
year where training needs are identified for the employees. This need identification called as
‘training need analysis’ is a part of the performance appraisal process. After need analysis the
number of training hours, along with the training intervention are decided and the same is
spread strategically over the next year.

13.6 Importance of Training Program

As training is continuous and never ending process, an organization holds such a leading
assignment in this progress. It is must that the training program so selected should be in
advantageous position.

i. Leads to better performance of the employees in respond to quantity and quality of output.
Using an untrained person lead to mishaps at work.

ii. Economy in the cost incurred for training program leads to a systematic work flow.

iii. Handling machines and material in an effective and efficient manner.

iv. Supervision for trained employees is reduced

v. Training helps in reducing accidents and focus on safety measures.

vi. The basic advantage is to increase the skill in job flow.

vii. Training satisfies the need of employee’s efforts and high morale among themselves.

viii. Training reduced labour turnover and introduces stability and flexibility at the job process.

ix. Adjustments are made by transferring employees from one department to another.

x. Training leads to promotions

xi. It helps in standardizing the methods of performing the work resulting in elimination of
possible mistakes.

xii. Employees can show the performance with zero-error.

13.7 Scope of the Training

The scope of training depends upon the categories of employees to be trained. Prof.
Yoder, identifies the five group of people who needs continuous training
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i. Rank and file- employees who have no administrative or supervising work

ii. Supervisory employees- the first line foreman, supervisor and their immediate supervisors.

iii. Staff – specialized personnel such as technical and professional persons attached to the
line organization as advisors.

iv. Middle management – all the managerial personnel holding positions between line
supervisors and the top management.

v. Top executives – all executives who hold major responsibilities for overall planning and
control.

13.8 Training Methods and Techniques

Training methods pertain to the types of training that can be provided to employees to
sharpen their existing skills and learn new skills. The skills that they learn can be technical or
soft skills and for all categories of skills, some training methods are suggested here.

Training methods include many types of training tools and techniques and we shall discuss
some of the commonly employed tools and techniques. For instance, it is common for trainers
to use a variety of tools like visual and audio aids, study material, props and other enactment
of scene based material and finally, the experiential tools that include sports and exercise
equipment.

Training methods include the specific location based ones and would range from classroom
training done at the trainers’ location to the ones done on the office premises.

Further, the experiential training methods can include use of resorts and other nature
based locations so that employees can get the experience of learning through practice or the
act itself rather than through study material.

It needs to be remembered that the trainings conducted in the office premises often
involve employees taking breaks to check their work and hence might not be ideal from the
point of view of the organizations. However, provision can be done to locate the training rooms
away from the main buildings so that employees can be trained in a relaxed manner. For
instance, Infosys has training centers that are exclusively built for training and these centers
give the employees enough scope and time for learning new skills.
200

The next aspect of the training methods includes the use of visual and audio aids, study
material, props and equipment. Depending on the kind of training that is being imparted, there
can be a mechanism to use the appropriate tools and techniques based on the needs of the
trainers and the trainees. The use of the training material often indicates the thoroughness of
the training program and the amount of work that the trainers have put in to make the training
successful. Of course, if the training material is good, it also means that the employees would
benefit from the scope and depth of the material though they need to invest time and energy as
well.

13.9 Training Methods: On Job Training and Off the Job

Training Methods
A large variety of methods of training are used in business. Even within one organization
different methods are used for training different people. All the methods are divided into two
classifications for:

Training Methods [Two methods]

A. On-the-job Training Methods: B. Off-the-Job Training Methods:

1. Coaching 1. Lectures and Conferences

2. Mentoring 2. Vestibule Training

3. Job Rotation 3. Simulation Exercises

4. Job Instruction Technology 4. Sensitivity Training

5. Apprenticeship 5. Transactional Training

6. Understudy

A. On-the-job training Methods:

Under these methods new or inexperienced employees learn through observing peers or
managers performing the job and trying to imitate their behaviour. These methods do not cost
much and are less disruptive as employees are always on the job, training is given on the same
machines and experience would be on already approved standards, and above all the trainee
is learning while earning.
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Some of the commonly used methods are:

1. Coaching : Coaching is a one-to-one training. It helps in quickly identifying the weak

areas and tries to focus on them. It also offers the benefit of transferring theory learning
to practice. The biggest problem is that it perpetrates the existing practices and styles. In
India most of the scooter mechanics are trained only through this method.

2. Mentoring : The focus in this training is on the development of attitude. It is used for
managerial employees. Mentoring is always done by a senior inside person. It is also
one-to- one interaction, like coaching.

3. Job Rotation : It is the process of training employees by rotating them through a series
of related jobs. Rotation not only makes a person well acquainted with different jobs, but
it also alleviates boredom and allows to develop rapport with a number of people. Rotation
must be logical.

4. Job Instructional Technique (JIT) : It is a Step by step (structured) on the job training
method in which a suitable trainer (a) prepares a trainee with an overview of the job, its
purpose, and the results desired, (b) demonstrates the task or the skill to the trainee, (c)
allows the trainee to show the demonstration on his or her own, and (d) follows up to
provide feedback and help. The trainees are presented the learning material in written or
by learning machines through a series called ‘frames’. This method is a valuable tool for
all educators (teachers and trainers). It helps us:

a. To deliver step-by-step instruction

b. To know when the learner has learned

c. To be due diligent (in many work-place environments)

5. Apprenticeship : Apprenticeship is a system of training a new generation of practitioners

of a skill. This method of training is in vogue in those trades, crafts and technical fields in
which a long period is required for gaining proficiency. The trainees serve as apprentices
to experts for long periods. They have to work in direct association with and also under
the direct supervision of their masters.

The object of such training is to make the trainees all-round craftsmen. It is an expensive
method of training. Also, there is no guarantee that the trained worker will continue to
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work in the same organization after securing training. The apprentices are paid
remuneration according the apprenticeship agreements.

6. Understudy : In this method, a superior gives training to a subordinate as his understudy

like an assistant to a manager or director (in a film). The subordinate learns through
experience and observation by participating in handling day to day problems. Basic purpose
is to prepare subordinate for assuming the full responsibilities and duties.

Advantages
i. The workers learn the job in actual conditions rather than the artificial conditions. It
motivate employees to learn.

ii. It is less expensive and consumes less time.

iii. The training is under the supervision of supervisors who take keen interest in the training
programme.

iv. The trainee learns the application of rules and regulations while learning the job.

v. It takes less duration as skill can be acquired in short period without disturbing the
production.

Limitations
i. The training is highly disorganized and haphazard.

ii. The supervisor may not be in a position to devote time and hence faculty training may
take place.

iii. The experience trainers may not be available.

iv. There is lack of motivation on the part of the trainee to receive training.

B. Off-the-job Training Methods:

Off-the-job training methods are conducted in separate from the job environment, study
material is supplied, there is full concentration on learning rather than performing, and there is
freedom of expression. Important methods include:
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1. Lectures and Conferences : Lectures and conferences are the traditional and direct
method of instruction. Every training programme starts with lecture and conference. It’s a
verbal presentation for a large audience. However, the lectures have to be motivating and
creating interest among trainees. The speaker must have considerable depth in the subject.
In the colleges and universities, lectures and seminars are the most common methods
used for training.

2. Vestibule Training : Vestibule Training is a term for near-the-job training, as it offers

access to something new (learning). In vestibule training, the workers are trained in a
prototype environment on specific jobs in a special part of the plant.

An attempt is made to create working condition similar to the actual workshop conditions.
After training workers in such condition, the trained workers may be put on similar jobs in
the actual workshop.

This enables the workers to secure training in the best methods to work and to get rid of
initial nervousness. During the Second World War II, this method was used to train a
large number of workers in a short period of time. It may also be used as a preliminary to
on-the job training. Duration ranges from few days to few weeks. It prevents trainees to
commit costly mistakes on the actual machines.

3. Simulation Exercises : Simulation is any artificial environment exactly similar to the

actual situation. There are four basic simulation techniques used for imparting training:
management games, case study, role playing, and in-basket training.

(a) Management Games : Properly designed games help to ingrain thinking habits,
analytical, logical and reasoning capabilities, importance of team work, time
management, to make decisions lacking complete information, communication and
leadership capabilities. Use of management games can encourage novel, innovative
mechanisms for coping with stress.

Management games orient a candidate with practical applicability of the subject.

These games help to appreciate management concepts in a practical way. Different
games are used for training general managers and the middle management and
functional heads – executive Games and functional heads.
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(b) Case Study : Case studies are complex examples which give an insight into the
context of a problem as well as illustrating the main point. Case Studies are trainee
centered activities based on topics that demonstrate theoretical concepts in an
applied setting.

A case study allows the application of theoretical concepts to be demonstrated,

thus bridging the gap between theory and practice, encourage active learning,
provides an opportunity for the development of key skills such as communication,
group working and problem solving, and increases the trainees” enjoyment of the
topic and hence their desire to learn.

(c) Role Playing : Each trainee takes the role of a person affected by an issue and
studies the impacts of the issues on human life and/or the effects of human activities
on the world around us from the perspective of that person.

It emphasizes the “real- world” side of science and challenges students to deal with
complex problems with no single “right” answer and to use a variety of skills beyond
those employed in a typical research project.

In particular, role-playing presents the student a valuable opportunity to learn not

just the course content, but other perspectives on it. The steps involved in role
playing include defining objectives, choose context & roles, introducing the exercise,
trainee preparation/research, the role-play, concluding discussion, and assessment.
Types of role play may be multiple role play, single role play, role rotation, and
spontaneous role play.

(d) In-basket training : In-basket exercise, also known as in-tray training, consists of
a set of business papers which may include e-mail SMSs, reports, memos, and
other items. Now the trainer is asked to prioritize the decisions to be made
immediately and the ones that can be delayed.

4. Sensitivity Training : Sensitivity training is also known as laboratory or T-group training.

This training is about making people understand about themselves and others reasonably,
which is done by developing in them social sensitivity and behavioral flexibility. It is ability
of an individual to sense what others feel and think from their own point of view.
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It reveals information about his or her own personal qualities, concerns, emotional issues,
and things that he or she has in common with other members of the group. It is the ability
to behave suitably in light of understanding.

A group’s trainer refrains from acting as a group leader or lecturer, attempting instead to
clarify the group processes using incidents as examples to clarify general points or provide
feedback. The group action, overall, is the goal as well as the process.

Sensitivity training Program comprises three steps

5. Transactional Analysis : It provides trainees with a realistic and useful method for
analyzing and understanding the behavior of others. In every social interaction, there is a
motivation provided by one person and a reaction to that motivation given by another
person.

This motivation reaction relationship between two persons is known as a transaction.

Transactional analysis can be done by the ego (system of feelings accompanied by a
related set of behaviors states of an individual).

Child

It is a collection of recordings in the brain of an individual of behaviors, attitudes, and

impulses which come to him/her naturally from his/her own understanding as a child. The
characteristics of this ego are to be spontaneous, intense, unconfident, reliant, probing, anxious,
etc. Verbal clues that a person is operating from its child state are the use of words like “I
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guess”, “I suppose”, etc. and non-verbal clues like, giggling, coyness, silent, attention seeking
etc.

Parent

It is a collection of recordings in the brain of an individual of behaviors, attitudes, and

impulses imposed on her in her childhood from various sources such as, social, parents, friends,
etc.

The characteristics of this ego are to be overprotective, isolated, rigid, bossy, etc. Verbal
clues that a person is operating from its parent states are the use of words like, always, should,
never, etc and non-verbal clues such as, raising eyebrows, pointing an accusing finger at
somebody, etc.

Adult

It is a collection of reality testing, rational behaviour, decision making, etc. A person in

this ego state verifies, updates the reaction which she has received from the other two states.
It is a shift from the taught and felt concepts to tested concepts.

All of us show behaviour from one ego state which is responded to by the other person
from any of these three states.

Beyond the above said methods of training, the techniques of train while work, are the
training programs like;

1. Orientation or Induction Training: orientation takes a small amount of time from

productive activity, it repays the firm many times over in better personnel relations. Induction
is concerned with the problem of introducing or orienting a new employee to the
organization.
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2. Job Training: this training is given to the workers in the handling of machines, equipment
and materials. The workers become more proficient and delay is avoided in accumulation
of work. The methods for job training include on the job training and vestibule training
which are explained under methods of training.

3. Crafts Training: Training may be given to employees in different crafts by experienced

craftsman. The learning period id comparatively longer and the method followed for such
training is Apprenticeship training.

4. Training for promotion: some of the internal vacancy are filled up by internal recruitment
by promotion. The status and responsibilities increase by promotion. The employees
must be given training before they actually accept the promotion for performance.

5. Refresher Training: This courses are organized for existing employees for giving them
training in latest innovations and developments in the field of technology in collaboration
with educational institutions. In certain cases, this training precedes employment.
Refreshers courses are also called as Public Vocational School Training. Such training
also helps in refreshing the memory of employees.

13.10 Development
Many of time, training is confused with development, but both is different in certain respects
yet components of the same system. Development implies opportunities created to help
employees grow. It is more of long term or futuristic in nature as opposed to training, which
focus on the current job. It is not limited to the job avenues in the current organization but may
focus on other development aspects also.

For example, employees are expected to mandatorily attend training program on

presentation skills however they are also free to choose a course on ‘perspectives in leadership
through literature’. Whereas the presentation skills program helps them on job, the literature
based program may or may not help them directly.

Similarly many organizations choose certain employees preferentially for programs to

develop them for future positions. This is done on the basis of existing attitude, skills and
abilities, knowledge and performance of the employee. Most of the leadership programs tend
to be of this nature with a vision of creating and nurturing leaders for tomorrow.
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The major difference between training and development is that while training focuses
often on the current employee needs or competency gaps, development concerns itself with
preparing people for future assignments and responsibilities.

With technology creating more unskilled workers and with industrial workers being replaced
by knowledge workers, training and development is at the forefront of HRD. The onus is now
on the human development department to take a proactive leadership role in responding to
training and business needs.

Training is an expensive process not only in terms of the money spent on it but also the
time and the other resources spent on the same. The most important question therefore is
determining whether or not a need for training actually exists and whether the intervention will
contribute to the achievement of organizational goal directly or indirectly? The answer to the
above mentioned question lies in ‘training needs analysis’ which is the first step in the entire
process of training and development.

Training needs analysis is a systematic process of understanding training requirements.

It is conducted at three stages, at the level of organization, individual and the job, each of
which is called as the organizational, individual and job analysis. Once these analyses are
over, the results are collated to arrive upon the objectives of the training program.

Another view of the training need is that, it is the discrepancy between ‘what is’ and ‘what
should be’. Taking cues from this the world bank conducted a needs analysis and arrived upon
the conclusion that many of its units in eastern regions of Europe required transformation from
state owned business to self-sustaining organizations. A number of universities were then
contacted to develop the necessary modules and conduct the training upon the same.

Although each step in the entire training process is unique in its own, needs analysis is
special in that it lays the foundation for the kind of training required. The assessment gives
insight into what kind of intervention is required, knowledge or skill or both. In certain cases
where both of these are present and the performance is still missing then the problem may be
motivational in nature. It thus highlights the need and the appropriate intervention which is
essential to make the training effective.

A sound staffing policy calls for the introduction of a system of planned promotion in
every organization. The opportunities of employee’s development and promotions are to be
provided by any organization or else the manpower is ruined. Consideration of management
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development leads to the proficiency measurement at the managerial level which is probably
the most difficult area of performance appraisal. Management or executive development
includes ‘all those activities and programmes, when recognized and controlled, results in
substantial influence on changing the capacity of individuals for the future assignment’.

Hence management development involves a planned and systematic and continuous

process of learning and growth designed to induce behavioural change in individuals by
cultivating their mental abilities and inherent qualities through the acquisition, understanding
and use of new knowledge acquired, insights and skills as they are required for the effective
performance of the work of managing.

The learning process here involves the acquisition of fresh, additional knowledge on the
ground that there will be variations in behaviour on the part of the individuals in case adequate
training and education are given. Managers can definitely develop and achieve progress not
only by participating in formal courses of instruction planned and introduced by the organization,
but also through actual job experience in the organization.

It is the organization’s responsibilities to establish sufficient developmental opportunities

for its present as well as potential managers. Here, the concerned individuals must realize that
an equal, more vital, counterpart to the efforts of the organization, are those of the individuals
themselves. This is because self-development is a very important concept in the development
programme.

13.11 Methods of Management – Executive Development

Various method of management –executive development are being practiced, but the
two broad categories are;

i. On-the-job methods

ii. Off-the-job methods

On-the-job methods Off-the-job methods

Coaching Role play

Job-rotation Case-study

Special projects Problem solving

Committee assignments Conference

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Mentoring Multiple management

Job Instruction Techniques [JIT] Business games

Sensitive training

Special courses and committee assignment are

also included in off-the-job methods.

On-the-job methods

Coaching:

In coaching the trainee is placed under a senior manager who acts as an guide or coach
and teaches job knowledge and skill to the trainee. He instructs him what he wants him to do,
how it can be done etc., and helps him to correct errors and perform effectively. It is just as
track coaches who observe, analyze and attempt to improve the performance of their athletes.
This technique of development is quite rewarding. As the managers learn by doing. It also
creates the opportunities for high level interaction and rapid feedback on performance. But this
has a limitation also as we cannot expect that alt excellent managers will be effective coaches.
Thus, the effectiveness of this technique relies on the ability of the concerned ‘coach’.

According to a survey conducted by International Coach Federation (ICF), more than

4,000 companies are using coach for their executives. These coaches are experts most of the
time outside consultants.

A coach is the best training plan for the CEO’s because

1. It is one-to-one interaction

2. It can be done at the convenience of CEO

3. It can be done on phone, meetings, through e-mails, chat

4. It provides an opportunity to receive feedback from an expert

5. It helps in identifying weaknesses and focus on the area that needs improvement This
method best suits for the people at the top because if we see on emotional front, when a
person reaches the top, he gets lonely and it becomes difficult to find someone to talk to.
It helps in finding out the executive’s specific developmental needs. The needs can be
identified through 360 degree performance reviews.
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Job-rotation

This teaches current employees how to do various jobs over time. The employee will
rotate around to different jobs within the organization, performing various different tasks unrelated
to his original job.

Cookie uses job rotation for tasks that require a specific skill set, like chocolate mixing.
By learning different facets of the candy making process, the employees develop more skills.
This method is useful when employees call out sick or take vacations.

Cookie temporarily moved Melvin, an experienced candy cutter, over to the mixing
department to learn how to mix chocolate. Melvin worked alongside an experienced chocolate
mixer to learn the job. With Melvin well trained in mixology, Cookie knew that if necessary, she
could quickly and easily move him from candy cutting to chocolate mixing without disrupting
the factory’s output.

The advantages of this method are:

 Reduces employee boredom

 Increases skills

 Opens new opportunities to employees

 Hones in on employee interests

The disadvantages of this method are:

 Employee may not be satisfied with the new rotation

 Employee morale may decrease if employee is moved for a long period of time

 Can disrupt the workflow as employee learns new task or job

Special projects:

A special project is planned and assigned to a trainee. This is helpful in educating the
concern trainee by giving new idea about handling all the resources, well on time cost and
accounting systems, and to realize the organizational relationships with the accounting and
other departments. Here the trainee concerned is sure to acquire a knowledge of certain other
allied subjects also.
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Committee assignments:

It refers to the constitution of an adhoc committee to which a particular subject is assigned

for making a detailed discussions on various issues related to it and to make appropriate
recommendations based on such a study. The objectives and responsibilities pertaining to the
work of the organization will have been clearly assigned for the committee’s consideration.
The committee will have to make an in-depth study of the problem in order to give appropriate
suggestions to the department manager. It may get a chance to learn from others. Thus,
committee assignment serves as a very useful and important device to educate the executives
to acquire general background pertaining to the management of the organization and also to
change their attitudes and behaviour towards the sorting out of the problems chosen.

Mentoring:

Mentoring is an ongoing relationship that is developed between a senior and junior

employee. Mentoring provides guidance and clear understanding of how the organization goes
to achieve its vision and mission to the junior employee.

The meetings are not as structured and regular than in coaching. Executive mentoring is
generally done by someone inside the company. The executive can learn a lot from mentoring.
By dealing with diverse mentee’s, the executive is given the chance to grow professionally by
developing management skills and learning how to work with people with diverse background,
culture, and language and personality types.

Executives also have mentors. In cases where the executive is new to the organization,
a senior executive could be assigned as a mentor to assist the new executive settled into his
role. Mentoring is one of the important methods for preparing them to be future executives.
This method allows the mentor to determine what is required to improve mentee’s performance.
Once the mentor identifies the problem, weakness, and the area that needs to be worked
upon, the mentor can advise relevant training. The mentor can also provide opportunities to
work on special processes and projects that require use of proficiency.

Some key points on Mentoring

 Mentoring focus on attitude development.

 Conducted for management-level employees.

 Mentoring is done by someone inside the company.

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 It is one­to­one interaction.

 It helps in identifying weaknesses and focus on the area that needs improvement.

Job Instruction Technique(JIT)

Job Instruction Technique (JIT) uses a strategy with focus on knowledge (factual and
procedural), skills and attitudes development.

Procedure of Job Instruction Technique (JIT)

JIT consists of four steps:

 Plan – This step includes a written breakdown of the work to be done because the
trainer and the trainee must understand that documentation is must and important for the
familiarity of work. A trainer who is aware of the work well is likely to do many things and
in the process might miss few things. Therefore, a structured analysis and proper
documentation ensures that all the points are covered in the training program. The second
step is to find out what the trainee knows and what training should focus on.

Then, the next step is to create a comfortable atmosphere for the trainees’ i.e. proper
orientation program, availing the resources, familiarizing trainee with the training program,
etc.

 Present – In this step, trainer provides the synopsis of the job while presenting the
participants the different aspects of the work. When the trainer finished, the trainee
demonstrates how to do the job and why is that done in that specific manner. Trainee
actually demonstrates the procedure while emphasizing the key points and safety
instructions.

 Trial – This step actually a kind of rehearsal step, in which trainee tries to perform the
work and the trainer is able to provide instant feedback. In this step, the focus is on
improving the method of instruction because a trainer considers that any error if occurring
may be a function of training not the trainee. This step allows the trainee to see the after
effects of using an incorrect method. The trainer then helps the trainee by questioning
and guiding to identify the correct procedure.

 Follow-up – In this step, the trainer checks the trainee’s job frequently after the training
program is over to prevent bad work habits from developing.
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Off-the-job methods

Role play

During a role play, the trainees assume roles and act out situations connected to the
learning concepts. It is good for customer service and training. This method is also called ‘role-
reversal’, ‘socio-drama’ or ‘psycho-drama’. Here trainees act out a given role as they would in
a stage play. Two or more trainees are assigned roles in a given situation, which is explained to
the group. There are no written lines to be said and, naturally, no rehearsals. The role players
have to quickly respond to the situation that is ever changing and to react to it as they would in
the real one. It is a method of human interaction which involves realistic behaviour in an imaginary
or hypothetical situation. Role playing primarily involves employee-employer relationships, hiring,
firing, discussing a grievance problem, conducting a post appraisal interview, disciplining a
subordinate, or a salesman making presentation to a customer.

Case-study

Case Studies try to simulate decision-making situation that trainees may find at their
work place. It reflects the situations and complex problems faced by managers, staff, HR,
CEO, etc. The objective of the case study method is to get trainees to apply known concepts
and ideologies and ascertain new ones. The case study method emphasize on approach to
see a particular problem rather than a solution. Their solutions are not as important as the
understanding of advantages and disadvantages.

Procedure of the Case Study Method

1. The trainee is given with some written material, and the some complex situations of a real
or imaginary organization. A case study may range from 50 to 200 pages depending upon
the problem of the organization.

2. A series of questions usually appears at the end of the case study.

3. The longer case studies provide enough of the information to be examined while the
shorter ones require the trainee to explore and conduct research to gather appropriate
amount of information.

4. The trainee then makes certain judgment and opines about the case by identifying and
giving possible solutions to the problem.
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5. In between trainees are given time to digest the information. If there is enough time left,
they are also allowed to collect relevant information that supports their solution.

6. Once the individuals reach the solution of a problem, they meet in small groups to discuss
the options, solutions generated.

7. Then, the trainee meets with the trainer, who further discusses the case.

Case Study method focuses on:

 Building decision making skills

 Assessing and developing Knowledge, Skills and Attitudes (KSAs)

 Developing communication and interpersonal skills

 Developing management skills

 Developing procedural and strategic knowledge

Problem solving

The employees may ask the executives to attend special courses formally organized by
the enterprise with the help of experts from educational and / or professional institutions. The
enterprise may also sponsor the trainees to attain certain special courses conducted by the
professional management bodies. These programs are affordable only by large enterprises
with high prices for their trainees.

Conference

This refers to the holding of group meeting as per an organized plan in which the members
seek to develop knowledge and understanding by getting a considerable amount of oral
participation. Imparting training for persons in the positions of both conference member and
conference leader, this proves to be an effective training device. As a member of the conference,
an individual can learn from others by comparing his opinions, feelings and conclusions with
those of others. The learning activity can be smoothly progressed by building upon the idea
contributed by the other members of the conference.

Multiple management

A study of various organizational problems by permanent advisory committee of executives

set up by the enterprise. This will evaluate all such problems and makes appropriate
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recommendations to higher management, which retains the right to make final decisions.
Establishment of junior Board of Directors for executives training. It is vested with powers to
discuss any problem which the Senior Board constituted by the shareholders of the enterprise,
could be discussed.

Business games

Under this, scheme an atmosphere is created in which the participants play a dynamic
role. Usually management games consist of several teams which represent competing groups.
Each team consists of 2 to 6 persons.

Each team has to make discussion and to arrive at decisions concerning such as
production; pricing, research expenditure. The participants are assigned such roles as Managing
Director, General Manager etc. They make decisions affecting price level, production volume
and inventory levels etc. These business games are intended to teach trainees how to take
management decisions in an integrated manner. The results of their decisions are then compared
by a computer programme. The participants learn by analyzing problems and by making trial
and error method.

Sensitive training

Sensitivity training is about making people understand about themselves and others
reasonably, which is done by developing in them social sensitivity and behavioral flexibility.

 Social sensitivity in one word is empathy. It is ability of an individual to sense what others
feel and think from their own point of view.

 Behavioral flexibility is ability to behave suitably in light of understanding.

Procedure of Sensitivity Training

Sensitivity Training Program requires three steps:

1. Unfreezing the old values –It requires that the trainees become aware of the inadequacy
of the old values. This can be done when the trainee faces dilemma in which his old
values is not able to provide proper guidance. The first step consists of a small procedure:

a. An unstructured group of 10­15 people is formed.

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b. Unstructured group without any objective looks to the trainer for its guidance

c. But the trainer refuses to provide guidance and assume leadership

d. Soon, the trainees are motivated to resolve the uncertainty

e. Then, they try to form some hierarchy. Some try assume leadership role which may
not be liked by other trainees

f. Then, they started realizing that what they desire to do and realize the alternative
ways of dealing with the situation

2. Development of new values – With the trainer’s support, trainees begin to examine
their interpersonal behavior and giving each other feedback. The reasoning of the
feedbacks are discussed which motivates trainees to experiment with range of new
behaviors and values. This process constitutes the second step in the change process of
the development of these values.

3. Refreezing the new ones – This step depends upon how much opportunity the trainees
get to practice their new behaviors and values at their work place.

Equipment simulators

Equipment simulators are the mechanical devices that necessitate trainees to use some
actions, plans, measures, trials, movements, or decision processes they would use with
equipment back on the their respective work place.

This is the technique of working up a real thing, in which a situation is created and
attempt is to make to make it resembled to the actual situation. So a duplicate atmosphere but
like original sense is created. Trainees are assigned different roles in that situation.

The literature on socio-technical approaches to organizational development provides

guidelines for the design or redesign of tools. Human Resource professionals involved in propose
of simulators and their pre-testing should engage those who will be using the equipment and
their supervisors. Their input can help in reducing the potential resistance, errors in the equipment
and more importantly, it also increases the degree of reliability between the simulation and the
work setting.
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Equipment simulators can be used in giving training to:

1. Air Traffic Controllers

2. Taxi Drivers

3. Telephone Operators

4. Ship Navigators

5. Maintenance Workers

6. Product Development Engineers

7. Airline Pilots

8. Military Officers

In-Basket Technique

In this method, each team of trainees is given the different files of correspondence of the
business problems. These are also called business papers like memoranda, reports and
telephone messages and other general papers which come across the table of the manager.
The trainees are asked to study them, analyze them and make their comments on the file.

Procedure of the In-basket Technique

In this technique, trainee is given some information about the role to be played such as,
description, responsibilities, general context about the role.

 The trainee is then given the log of materials that make up the in-basket and asked to
respond to materials within a particular time period.

 After all the trainees complete in-basket, a discussion with the trainer takes place.

 In this discussion the trainee describes the justification for the decisions.

 The trainer then provides feedback, reinforcing decisions made suitably or encouraging
the trainee to increase alternatives for those made unsuitably.

This technique focuses on:

 Building decision making skills

 Assess and develops Knowledge, Skills and Attitudes (KSAs)

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 Develops of communication and interpersonal skills

 Develops procedural knowledge

 Develops strategic knowledge

Audio-Visual

Providing training by way of using Films, Televisions, Video, and Presentations etc. This
method of training has been using successfully in education institutions to train their students
in subjects to understand and assimilate easily and help them to remember forever. New
companies have come up for providing audio visual material for students in their concern
subjects. In the corporate sector, mainly in customer care centers employers are giving training
to their employees by using audio visuals material to teach how to receive, talk and behaviour
with the customer.

 Advantages – Wide range of realistic examples, quality control possible.

 Disadvantages – One-way communication, No feedback mechanism. No flexibility for

different audience

Executive development:

It is the whole of activities aimed at developing the skills and competencies of those that
(will) have executive positions in organizations. While “executive” and “manager” and “leader”
are often used interchangeably, “executive” is commonly used to signify the top 5% to 10% of
the organization. Similarly, “development” and “training” and”education” are often used as
synonyms, however “development” is generally seen as the most encompassing of the three in
terms of activities that build skills and competencies.

While it is typical to find organizations that have dedicated corporate training &
development people and processes, it is not always the case that an organization will have a
dedicated executive development set of activities. In some organizations (typically large multi-
nationals), there is a separate executive development team, in other organizations executive
development is handled as one of many activities by the larger corporate training group, and in
yet other scenarios there is no executive development activity to speak of.
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In contrast to other corporate training & development activities, which have as their core
purpose to build tactical skills for employees, executive development plays a different role for
the organization. Indeed some executive development is conducted for the purpose of building
tactical skills (sometimes referred to as “hard skills” such as business fundamentals- finance,
marketing, operations and also “soft skills” such as communication and team building), yet
executive development is also used to evaluate future potential future executives as well as a
mechanism for the CEO and the executive team to cascade their strategies, goals, and even
elements of the culture to the rest of the management team and ultimately the organization. In
the best of cases, executive development not only helps an organization execute its key
strategies, it can also help provide input to the strategy creation process. In this way, executive
development is much more strategic than typical corporate training & development which is
used for most employees of an organization.

While executive development continues to become enriched by many approaches, one

approach, adult development and its subfield Positive Adult Development is beginning to create
opportunities for what has been essentially reserved for academic research to become an
increasing part of executive practices.

Check Your Progress

1. Explain training.

2. Discuss the need for training.

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3. Explain development.

4. State executive development.

5. Explain education.

13.12 Summary

Training is also necessary for the individual development and progress of the employee,
which motivates in attitude, skills or knowledge of a person with the resultant him to work for a

certain organization apart from just money. Technically training involves change improvement

in the behavior.

Designing the training program it has to be kept in mind that both the individual goals and

organizational goals are kept in mind.Organizations prepare their training calendars at the

beginning of the financial year where training needs are identified for the employees. This
need identification called as ‘training need analysis’ is a part of the performance appraisal

process.
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Development implies opportunities created to help employees grow. It is more of long

term or futuristic in nature as opposed to training, which focus on the current job. It also is not

limited to the job avenues in the current organization but may focus on other development

aspects.

The major difference between training and development therefore is that while training
focuses often on the current employee needs or competency gaps, development concerns

itself with preparing people for future assignments and responsibilities.

Training needs analysis is a systematic process of understanding training requirements.

It is conducted at three stages, at the level of organization, individual and the job, each of

which is called as the organizational, individual and job analysis.

13.13 KeyWords
 Development

 Education

 Training

 Adhoc committee

13.14 Review Questions

1. State the importance and the benefits of training

2. Explain the objectives of training along with the principles and techniques of training.

3. Enumerate the methods of training and discuss each of them in detail.

4. What is the need of training and development programme?

5. Write the Difference between training and development.

6. How do you identify the training and development need for a clerical employee in an
organization?

7. Explain executive development program in an organization.

8. What type of training is needed for a fresh BBA student as a sales person?
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UNIT 14
DIRECTION

Learning Objectives
After studying this unit, you should be able to:

 Elaborate about the principles of direction

 hyghlite about the importance of direction

 describe about communication process

 discuss in detail about controlling

Structure
14.1 Introduction - Direction

14.2 Definitions

14.3 Skills Required For Managers

14.4 Purpose and Process

14. 5 Nature of Direction

14.6 Importance of Direction

14.7 Principles of Direction

14.8 Elements of Direction

14.9 Communication

14.10 Controlling

14.11 Summary

14.12 Key Words

14.13 Review Questions

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14.1 Introduction - Direction

Direction is that part of managerial function which actuates the organizational methods
to work efficiently for achievement of organizational purposes. It is considered life-spark of the
enterprise which sets it in motion the action of people because planning, organizing and staffing
are the mere preparations for doing the work.

Planning and organizing are foundation for an organization that provides directions to
initiates action towards achievement of the goals. Having appointed the work force, managers
ensure that they work to achieve the organizational standards of performance and in the course
of doing so, satisfy their personal wants and needs also. They act as catalysts for achieving
organizational and individual goals.

They act as agents who influence the behaviour of employees to achieve the organizational
goals and also ensure that organizational plans and policies satisfy the interests of the workforce.
Managers, thus, direct employees’ behaviour towards organizational and individual/group goals.

Directing is “a managerial function that involves the responsibility of managers for

communicating to others what their roles are in achieving the company plan.”

14.2 Definitions
Pearce and Robinson - It is “getting all the members of the group to want and to strive
to achieve objectives of the enterprise and of the members because the members want to
achieve these objectives.”

Terry and Franklin - It is important to create an environment in which people work as

active group members to achieve the organizational goals. Managers use behavioural sciences
to influence the behaviour of the work force. They remain in constant touch with the employees
to ascertain their needs and forces that drive them to work. The motivational factors (monetary
and non-monetary) that influence an individual to work are analyzed while directing them to
action.

Massie- “Directing concerns the total manner in which a manager influences the action
of subordinates. It is the final action of manager in getting others to act after all preparations
have been completed.”
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Koontz and O’Donnel - “Directing is the interpersonal aspect of managing by which

subordinates are led to understand and contribute effectively and efficiently to the attainment
of enterprise’s objectives.”

“Directing is the guidance, the inspiration, the leadership of those men and women that
constitute the real core of the responsibilities of management.”

Hersey and Blanchanrd, define management as “the process of working with and through
individuals and groups and other resources to accomplish organizational goals”.

Urwick and Breach, “Telling people what to do and seeing that they do it to the best of
their ability. It includes making assignment, explaining procedures, seeing that mistakes are
corrected, providing on the job instruction, and of course, issuing order.” Earnest Dale

“The heart of administration is the directing function which involves determining the course,
giving order and instructions, providing the dynamic leadership.”

Marshall E. Dimock, “Directing consists of the process and techniques utilizing in issuing
instructions and making certain that operations are carried out as originally planned.”

Haimann remarks from the above definitions, we can conclude that the directing function
of management is the heart of management process as it is concerned with initiating action. It
consists of all those activities which are concerned with influencing, guiding or supervising the
subordinates in their job. He also describes, “Nothing happens unless and until the business
automobile is put into gear and the accelerator pressed.”

14.3 Skills Required for Managers

Three important skills of managers that influence the behavior of others:

1. Diagnose: Managers must know the problem or the situation that needs direction.

2. Adapt: Managers adapt to the situation and understand it before directing others to act.

3. Communicate: Having understood, analyzed and changed their behavior according to

the situation, managers communicate the change in situation to other members so that
they understand and change their behavior accordingly.
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Thus, after people have assumed their positions in the organizational hierarchy and an
organization structure is created, direction ensures coordination in the work at various levels.
Every person in the hierarchy directs his subordinates and receives directions from superiors.

14.4 Purpose and Process

The process of direction, thus, flows from top to bottom. Direction does not merely involve
issuing orders and instructions. It is the process of inspiring people through active interaction
and, thus, includes three important elements.

1. Motivation : Motivation is the force that drives a person to action. In the context of
business, it means inspiring workers to perform tasks that lead to goal accomplishment.
Subordinates follow instructions, if they are able and willing to do so. Motivation creates
willingness to perform tasks that lead to accomplishment of goals.

2. Leadership : People are guided to contribute to organizational goals with zeal and
confidence. “Zeal is ardour, earnestness and intensity in the execution of work; confidence
reflects experience and technical ability.” The ability of people to influence the behavior of
others is known as leadership. Leaders exploit human potential and transform it into
output.

3. Communication : Communication is exchange of ideas, messages and information

between two or more persons, through a medium, in a manner that the sender and receiver
understand the message in the common sense, that is, develop common understanding
of the message.

14. 5 Nature of Direction

The following points highlight the nature of direction:

1. It is a Dynamic Function : Directing is a dynamic and continuing function. A manager

has to continuously direct, guide, motivate and lead his subordinates. With change in
plans and organizational relationships, he will have to change the methods and techniques
to direction.

2. Process of action : Direction initiates action at top level of the organization and flows
down the hierarchy. It follows that subordinates have to be directed by their superiors
only.
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3. On-going process : Directing is not an intermittent function of management. It is a

process of continuously guiding the behavior of others.

4. Not supported by rules : Since the behavior of people cannot be predicted through
mathematical or statistical tools, the function of directing is based on behavioral sciences.
It is not supported by rules or regulations.

5. Directing is situational : Managers influence the behavior of employees according to

situation. The directions change from situation to situation. Factors like environment,
nature of workers, group behavior, attitude towards work etc. affect directing.

6. It Provides Necessary Link between Various Managerial Functions : Directing links

the various managerial functions of planning, organizing, staffing and controlling. Without
directing the function of controlling will never arise and the other preparatory functions of
management will become meaningless.

7. Behavioral science : Since directing deals with human behavior, managers study different
aspects of human psychology to understand how to influence their behavior.

8. Understand group behavior : No person can work alone. While working in the
organization, he becomes part of the informal groups (formed on the basis of common
interests of individuals). The behavior of a person is different as an individual and as
member of the group. It is, therefore, essential that managers understand the nature of
group behavior in order to direct effectively.

9. Participative : Direction initiates action on the part of employees. To ensure greater

participation of workers in carrying out the organizational activities, they should take part
in the meetings to discuss various direction policies.

10. Pervasive : Managers at all levels in all functional areas direct their subordinates. Top
managers guide middle and lower level managers who further direct supervisors and
workers. It is performed at every level of management.

Every person in the organizational hierarchy is superior to some and subordinate to others
except those at the top and the bottom. Direction maintains and strengthens superior-
subordinate relationships and inspires everyone in the organization to have a common
vision, that is, contribution to organizational goals.
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11. It is a Universal Function : Directing is a universal function that is performed in all

organizations and at all the levels of management. All managers have to guide, motivate,
lead, supervise and communicate with their subordinates, although more time is spent on
directing at higher levels of management.

12. It is concerned with Human Relationships : The direction function of management

deals with relationship between people working in an organization. It creates co­operation
and harmony among the members of the group. It seeks to achieve orderly arrangement
of group effort to provide unity of action in the pursuit of common objectives.

14.6 Importance of Direction

Well executed direction function has the following merits:

1. Initiates action : Direction puts plans into action. Direction initiates action that motivates
people to convert the resources into productive outputs. It gives substance to managerial
functions of planning, organizing, staffing and controlling. People learn to manage the
resources in the most effective way that results in their optimum utilization.

2. Creates a sound work environment : If directions are issued in consultation with

employees (participative), it creates an environment of understanding where people work
to their maximum potential, willingly and enthusiastically to contribute towards
organizational goals.

3. Develops managers : Managers who are personally motivated to work can also direct
others to work. Managers develop their skills and competence to direct others to follow. If
managers and employees work in harmony, it promotes skills of the employees and
develops managers to assume responsibilities of higher levels in the organization.

Motivation, leadership and communication help in bringing people together. They exploit
employees’ talent to the fullest and also provide scope for their skill enhancement. This is
beneficial for both the employees and organization. Direction, thus, prepares future
managers.

4. Provides Stability : Effective leadership, supervision and motivation will help in the
smooth growth of an enterprise. A growing concern will provide stability to its activities.
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5. Motivation : Motivation is an important element of direction. Motivation is a factor which

encourages persons to give their best performance and help in achieving enterprise goals.
A strong positive motivation will enable the increased output of employees. A key element
in direction is motivation. It helps in getting willing co-operation of employees. Every
organization makes efforts that its employees contribute maximum for achieving enterprise
goals.

6. Behavioral satisfaction : Since direction involves human behavior and psychology,

employees feel behaviorally satisfied and personally inspired to achieve organizational
goals.

7. Improves Efficiency : A manager tries to get maximum work from his subordinates.
This will be possible only through motivation and leadership and these techniques are a
part of direction.

8. Increase in productivity : Personally satisfied employees contribute towards output

and efficiency of the organization. Direction gets maximum out of subordinates by exploiting
their potential and increasing their capabilities to work.

9. Achieves coordination : Directing aims at continuous supervision of activities. It achieves

coordination by ensuring that people work towards planned activities in a coordinated
manner. It integrates the actions of employees that increase their understanding of mutual
interdependence and their collective effort to achieve the organizational goals. It also
helps to harmonies individual goals with organizational goals.

10. Facilitates control : Coordination brings actual performance in conformity with planned
performance. The controlling function is, thus, facilitated through effective direction.

11. Facilitates change : Direction helps in introducing change in the organization structure
and adapting the organization structure to external environment. Organization operates
in the society as an open system and has to accept social changes for its survival and
growth. People are not easily receptive to changes. Direction helps in changing attitude
of people towards change and accepts it as a way of life.

12. Helpful in Implementing Changes : A business operates in a changing environment.

New situations develop every now and then. A proper system of motivation will help
employees in taking up new challenges.
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13. Facilitates growth : Organization open to change is responsive to growth. Direction

harmonizes physical, financial and human resources, balances various parts of the
organization and creates commitment amongst people to raise their standards of
performance.

14. Supervision : Direction involves giving instructions to employees for undertaking some
work. In order to see whether employees are doing the things as per targets or not there
is a need for supervision. In supervision all the activities of the employees are controlled
and efforts are made to ensure proper achievement of targets. In case the performance is
less than the targets then remedial steps are taken for improving the performance. So
supervision is an integral part of direction.

15. Coordination : Direction will be effective only when there is a proper coordination. In
direction, different persons are asked to perform specific tasks. In order to see that efforts
of every employee are in the direction of achieving organizational goals there is a need to
co-ordinate various activities. In the absence of coordination every person will go in his
own direction without bothering for the enterprise target. When various activities are co-
originated then overall enterprise objectives will be easily achieved.

14.7 Principles of Direction

Direction function deals with people. Understanding the behavior of people is a complex
phenomenon and directing them to contribute to organizational goals with a common vision is,
thus, a complex task.

However, the following principles help managers perform the complex function of
direction:

1. Harmony of Objectives : It is an essential function of management to make the people

realize the objectives of the group and direct their efforts towards the achievement of
their objectives. The interest of the group must always prevail over individual interest.
The principle implies harmony of personal interest and common interest. Effective direction
fosters the sense of belongingness among all subordinates in such a way that they always
identify themselves with the enterprise and tune their goals with those of the enterprise.
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2. Appropriate selection of employees : Direction is related to the function of staffing.

While selecting employees, managers should ensure that people can adjust to the
organization structure and willingly carry out the directions of the superiors. Chances of
demotions and separations should be reduced to as low as possible. It is easy to direct
people who are committed to their task and see organizational goals as a means to
achieve the individual goals.

3. Participation : Since direction influences the behaviour of others, managers follow the
principle of participation (while preparing the directives). If those who carry out the directions
participate in making policies regarded directions (motivational plans, leadership styles,
communication pattern), direction function will be able to accomplish its purpose effectively.

4. Communication : To make direction effective, managers ensure two-way flow of

communication between them and the employees. Employees should be allowed to express
their feelings to superiors. An effective system of communication ensures passing of
orders and instructions by superiors which are smoothly carried by subordinates and
expressing problems and grievances by subordinates to superiors which are solved by
the superiors. Direction function aims at maximizing the interest of not only self but also
others in the organization.

5. Counseling and guidance : When employees face problems in carrying out their tasks,
managers provide them the necessary counseling and guidance. This makes direction
effective as employees can approach the superiors for counseling whenever required. It
is important that subordinates carry out the instructions the way they are intended by the
superiors. There should be complete understanding of communication between the
superiors and subordinates. Doubts and queries of subordinates should be cleared by
superiors through proper guidance and counseling.

6. Unity of command : The basic principle that makes direction effective is one boss for
one subordinate i.e., all directions, orders and instructions should come from one boss. If
subordinate receives instructions from more than one superior, he may not be able to
carry out the instructions of any of them. This will create confusion and conflicts to the
dissatisfaction of both, the superiors and subordinates.
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However, in the contemporary business environment characterized by extreme

specialization, it may not always be possible to follow the principle of unity of command.
Functional organization, project organization, matrix organization have the system of dual
command and even multiple command.

The direction function should ensure that employees are able to maintain balance amongst
the instructions issued by bosses of different functional areas. Direction function cannot
be performed in an environment of restrictions. There are different techniques of direction
(authoritative, participative, free reign) which are followed depending upon the need of
the situation.

7. Unity of direction : One plan or related set of activities should have one head. All
activities related to marketing must be headed by the marketing manager and those
related to personnel should be headed by the personnel manager. This avoids duplication
of actions and instructions and results in optimum use of scarce resources.

8. Synthesis of conflicting objectives : Every group of people, whether owners, managers,

or workers has personal interest as supreme while carrying out the organizational activities.
This can lead to conflicting interests which may hamper the organizational growth. Effective
directions, motivation, guidance and counseling make people understand that their goals
are subordinate to organizational goals.

This enables different groups of people move towards the same direction. The conflicting
objectives are, thus, synthesized into a single plan, one objective, one direction and one
goal, that is, to maximize the organizational goals. If subordinates view organizational
interest as supreme, organization also takes care to look after the interest of subordinates.

9. Direct supervision : Direct supervision of employees helps them know deviations in

their performance and ways to remove them. This also maintains direct contact between
superiors and subordinates and increases interest in their work and confidence and loyalty
in their supervisors.

10. Participative or Democratic Management : The function of directing becomes more

effective if participative or democratic style of management is followed. According to this
principle, the superior must act according to the mutual consent and the decisions reached
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after consulting the subordinates. It provides necessary motivation to the workers by

ensuring their participation and acceptance of work methods.

11. Contribution : Direction aims at getting maximum contribution from employees by

exploiting their talent to the best. If employees have the potential to contribute more than
their present performance, direction helps in enhancing the contribution towards
organizational objectives.

12. Use of informal organization : Though directions are issued in a formal organization
structure, managers should make use of informal organization also to speed up the process
of direction. Information travels faster amongst informal groups and directions can be
effectively carried out because people can freely interact with each other.

13. Follow-up : Managers should receive constant feedback on their directions to know
whether or not employees are working according to their directions. If employees have
problems, they should solve their problems and if need arises, even revise the directions.

14.8 Elements of Direction

Direction is that inert-personnel aspect of management which deals directly with
influencing, guiding, supervising, motivating subordinate for the achievement of organizational
goals. Direction has following elements:

 Supervision

 Motivation

 Leadership

 Communication

Supervision implies overseeing the work of subordinates by their superiors. It is the act
of watching & directing work & workers.

Motivation means inspiring, stimulating or encouraging the sub­ordinates with zeal to

work. Positive, negative, monetary, non-monetary incentives may be used for this purpose.

Leadership may be defined as a process by which manager guides and influences the
work of subordinates in desired direction.
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Communications is the process of passing information, experience, opinion etc from

one person to another. It is a bridge of understanding.

14.9 Communication
The process of passing any information from one person to the other person with the aid
of some medium is termed as communication. The first party who sends the information is
called the sender and the second party who receives the information, decodes the information
and accordingly responds is called the receiver or the recipient. Thus in simpler terms
communication is simply a process where the sender sends the information to the receiver for
him to respond.

Sender———————————— Receiver

Information

One might have an unparalleled, incomparable concept or an idea with him but he would
never get the credit if he merely keeps it within himself. He has to pass on the idea to his fellow
workers. He has to communicate. Not only communicate but also effectively communicate.

The Communication process diagram:

(Sender)(Content - Can be some information, data, diagram, analysis, report)

(Information)“! ‘!(Feedback)

(Receiver)(Decodes the information, understands the information and responds)

The above chart goes a long way to explain the communication process.

Communication process is a simple process where a message is being transferred from

a sender to the receiver. The receiver after receiving the message understands the message
in the desired form and then acts accordingly.

14.10 Controlling
It implies measurement of accomplishment against the standards and correction of
deviation if any to ensure achievement of organizational goals. The purpose of controlling is to
ensure that everything occurs in conformities with the standards. An efficient system of control
helps to predict deviations before they actually occur.
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According to Theo Haimann, “Controlling is the process of checking whether or not

proper progress is being made towards the objectives and goals and acting if necessary, to
correct any deviation”.

According to Koontz &O’Donell “Controlling is the measurement & correction of

performance activities of subordinates in order to make sure that the enterprise objectives and
plans desired to obtain them as being accomplished”.

Therefore controlling has following steps:

i. Establishment of standard performance.

ii. Measurement of actual performance.

iii. Comparison of actual performance with the standards and

iv. Finding out deviation if any.

v. Corrective action.

Techniques of Directing

Directing is an important function carried out by top management. It is the order or

instruction to subordinate staff to perform a work or not to perform in a specific way. The
techniques of directing are: delegation, supervision, orders and instructions.

(i) Delegation : Delegation is an important mean of directing. The subordinates are assigned
tasks and given powers to recruit them. In delegation, a superior assigns some of his
work to the subordinates and gives them rights or powers. The subordinates are authorized
to undertake the assigned work. Delegation is a means of sharing authority with the
subordinates and providing them with an opportunity to learn. Delegation as a means of
directing may bring out some problems.

(a) It may be difficult to spell out exact tasks and assignments of the subordinates.
There may be some overlapping and uncertainties in job descript ions. The
subordinates should learn to adjust them in such situations.

(b) There may be some contradiction in assignment of task and delegation of authority.

(c) The subordinates may sometimes act beyond the assigned authority taking it as
implied from the superiors. The superiors will have to bear with such situations.
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(d) An indiscriminate delegation may create an imbalance in the organization since

every subordinate may not have the same capacity and maturity.

(e) If the delegation of authority is too rigid then it kills initiative and creativity.

(ii) Supervision : Supervision is a means to oversee the work performed by subordinates.

It should be ensured that work is performed as per the plans and guidelines. Every superior
has to supervise the work of his subordinates. At operative level supervision is the job of
a manager. A supervisor at the lower level remains in touch with the workers. He guides
them for doing the work, maintains discipline and work standards and solves the grievances
of workers. Supervision at different levels acts as a directing activity.

(iii) Issuing Orders and Instructions : The issuing of orders and instructions is essential to
undertake the work for achieving the organizational goals. No manager can get a work
done without issuing orders and instructions to subordinates. An order, instruction, directing
or command is a means of initiating, modifying or stopping an activity.

In the words of Koontz and O’Donnel has a directional technique, an instruction is

understood to be a charge (command) by a superior requiring a subordinate to act or
refrain from acting in a given circumstance.

According to this definition an instruction is always given by a superior to a subordinate

directing to undertake a work in a specified manner or prohibit him from some activity.
The orders and instructions are the primary tools of directing by means of which the
activities are started, altered, guided and terminated. While issuing an order a manager
should be clear in his mind what he wants the subordinates to do or not to do. The clarity
of orders will determine the level of performance of subordinates.

A good order has the following characteristics:

(a) The order should be clear and easily understood.

(b) The order should be complete in all respects. It should not create doubts in the minds of
subordinates.

(c) It should be compatible with the objectives of the organization.

(d) There should be specific instructions as to the time by which the order should be executed
or completed.
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(e) The order should be so conveyed that it stimulates ready acceptance.

(f) The order should preferably be in writing.

(g) The order should be conveyed through proper chain of command and it should also
contain the reasons for issuing it.

Check Your Progress

1. Explain direction.

2. Discuss the skills required for a manager.

3. Explain communication.

4. Explain motivation.
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5. Explain control.

14.11 Summary
Directing is “a managerial function that involves the responsibility of managers for
communicating to others what their roles are in achieving the company plan.””Directing is the
guidance, the inspiration, the leadership of those men and women that constitute the real core
of the responsibilities of management.”

Directing links the various managerial functions of planning, organizing, staffing and
controlling. Without directing the function of controlling will never arise and the other preparatory
functions of management will become meaningless.

The process of passing any information from one person to the other person with the aid
of some medium is termed as communication. Communication process is a simple process
where a message is being transferred from a sender to the receiver. The receiver after receiving
the message understands the message in the desired form and then acts accordingly.

Controllingimplies measurement of accomplishment against the standards and correction

of deviation if any to ensure achievement of organizational goals. The purpose of controlling is
to ensure that everything occurs in conformities with the standards. An efficient system of
control helps to predict deviations before they actually occur.

14.12 Key Words

 Endeavor

 Systematic

 Direction

 Diagnase
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14.13 Review Questions

1. Explain Communication.

2. Explain directing and state its need.

3. Explain the purpose and process of training and development program.

4. Explain the nature of direction.

5. List out the importance of direction.

6. Explain the principles of direction.

7. List out the elements of direction.

8. Define controlling.

9. Explain the techniques of Directing.

10. Explain the character of directing.

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UNIT 15
COORDINATION

Learning Objectives
After studying this unit, you should be able to:

 highlite about the linking activities of coordination

 elaborate on the division and subdivision of an organization through coordination

 discuss about the Dynamics and standards of performance

 enumerate about the Different approaches towards coordination

Structure
15.1 Introduction

15.2 Definitions

15.3 Elements of Coordination

15.4 Features / Nature of Coordination

15.5 Objectives of Coordination

15.6 Importance / Need for Coordination

15.7 Techniques and Requisites for Excellent Coordination

15.8 Principles of Coordination

15.9 Limitations in Achieving Coordination

15.10 Differences between Coordination and Co-Operation

15.11 Summary

15.12 Key Words

15.13 Review Questions

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15.1 Introduction
Coordination is “the process of linking the activities of various departments of the
organization,”

Coordination is possible if the purpose of other activities like organizing, division of work,
Departmentation, span of control, centralization and decentralization, delegation of authority
and organization structure performs optimally towards the progress of achieving organizational
goal. This is possible if departments of the organization are coordinated in a unified direction.

Coordination is concerned with unifying the actions of group of people for some common
purpose. It is the job of harmonizing the activities of different individuals or groups as also of
reconciling conflicting interests or approaches.

Once the activities of the organization are broken into smaller units which are re-grouped
into departments (on the basis of similarity of features), managers need to coordinate the
activities of these department, setting departmental goals and linking the performance of each
department with other so that all the departments collectively contribute towards the
organizational goals.

It is “the process of integrating the objectives and activities of the separate units
(departments or functional area) of an organization in order to achieve organizational goals
efficiently”.

15.2 Definitions
Pearce and Robinson - Coordination is “integration of the activities of individuals and
units into a concerted effort that works towards a common aim.”

Mooney and Reiley – describe coordination “the orderly arrangement of group effort to
provide unity of action in the pursuit of common purpose”

Spriegel defines it as “a process of so arranging group activities in relation to time, place

and effort that each item will take care of itself according to the need of the situation”.

J.D. Mooney - If there is no interdependence amongst organizational activities, there is

no need for coordination. This is known as systems approach to coordination. Coordination is
the most basic and fundamental principle of organization. It is “the orderly arrangement of
group effort to provide unity of action in the pursuit of a common purpose.”
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Fayol defines, “To co-ordinate is to harmonize all the activities of a concern so as to

facilitate its working and its success.” According to him in a well-coordinated company, the
following facts are to be observed:

i. Every department works in harmony with the rest.

ii. Divisions and subdivisions in each department are precisely informed as to the share
they must take in the communal task and the reciprocal aid they are to afford to one
another.

iii. The working schedule of the various departments and sub-divisions thereof constantly
attend to circumstances.

Coordination maintains unity of action amongst individuals and departments. Absence of

coordination will result in sub-optimal attainment of goals. In extreme situations, it may result in
losses and liquidation of companies.

Coordination harmonizes and balances conflicting opinions of individuals and departments,

promotes group effort and directs their movement in a unified direction — the organizational
goal. For example, if production department does not coordinate its activities with the sales
department, production may be more or less than the required sales.

Coordination involves the integration of various parts of organization. It is, in fact an

integrative process. All activities are planned to secure an orderly pattern of group effort for
the achievement of common objectives. In order to achieve goals of an enterprise, both physical
as well as mental coordination is necessary.

Production more than sales will result in piling of stock and blocking up funds in inventory
and production less than sales will result in loss of sales revenue and goodwill of the firm.
Coordination, thus, facilitates smooth running of a business.

Effective coordination is based on interdependence of organizational activities. It is based

on systems approach to management which acknowledges that different departments of the
organization are interdependent (input of one is the output of other).

It also assumes interdependence of organization’s internal and external environment.

The degree of coordination depends upon the degree of interdependence. More the
interdependence (internal or external), more is the need for coordination and vice versa.
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15.3 Elements of Coordination

 It is an orderly pattern of group efforts

 It is a continuous process

 It brings unity of action

 It has a common purpose viz. accomplishment of organizational objectives.

 It is managerial responsibility.

15.4 Features/Nature of Coordination

1. Group effort : Coordination integrates the efforts of individuals and departments to
make them work as a group. The group works to maximize group goals as well as
organizational goals. It ensures that individuals work as a group to promote their individual
and organizational goals.

2. Unity of action : Every individual and department has his own perspective or way of
achieving the organizational goals. Coordination ensures unity of action amongst individual
and departmental activities. It ensures that activities of each individual, group and
department are headed towards the common goal. All activities should be performed
within the framework of policies, procedures etc.

3. Common goal : Each individual and department strives to maximize its goal. Maximization
of departmental goals at the cost of organizational goals can be harmful for the organization.
Coordination maintains balance amongst individual, departmental and organizational goals.
It ensures that resources and tasks are assigned to individuals and departments in a
manner that working of one department promotes the working of other departments.

4. Responsibility : Responsibility for coordination rests with management and managers

at all levels must try to secure coordination of people working in a team. All individuals,
groups and departments should have a common purpose, that is, achieve the organizational
goals. Sales department, for example, may want to increase expenditure on advertisement
to increase sales. Finance department, however, may not release funds for advertisement
to control financial costs. Coordination harmonizes conflicting departmental goals towards
a common goal, that is, goal of the organization.
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5. Continuous process : Coordination is not a one-time attempt to integrate the individual

goals. It is a continuous process that keeps going as long as the organization survives.

6. Managerial responsibility : Coordination is the responsibility of every manager at every

level for every operative function (production, finance, personnel and sales). All managers
continuously coordinate the efforts of people of their respective departments.

7. Essence of management : Coordination is not a separate function of management. It is

required for every managerial function. Managers coordinate human and non-human

resources, internal and external organizational environment, while carrying out the

managerial functions of planning, organizing, staffing, directing and controlling.

Coordination is, thus, the ‘essence of management.’

8. Synthesis of efforts : Coordination integrates and synthesizes the efforts of people of all

departments at all levels towards common organizational goals. It also synthesizes the

organizational resources (physical, human and financial) to collectively contribute to

organizational goals.

9. Necessary obligation : Coordination is not something that managers may or may not
strive for. All managers (also non-managers) must direct their efforts towards a common

goal, considering this as their necessary obligation. It is an inevitable area of management.

10. Deliberate effort : Coordination is not a spontaneous effort of managers. Managers

make deliberate efforts to coordinate the departmental activities.

15.5 Objectives of Coordination

 Harmony of goals

 Connected departmental goals

 Total accomplishment

 Economy and efficiency

 Good social relations

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15.6 Importance/Need for Coordination

The need for coordination arises because individuals and departments have different
goals. They depend on each other for resources and information. Managers continuously
coordinate their activities to ensure that all individuals and departments use organizational
resources and information for successful attainment of organizational goals.

Coordination results in the following benefits:

1. Non-routine jobs : Non-routine jobs need constant flow of information, both vertical and
horizontal. Unless there is proper coordination amongst these jobs, they cannot be
performed efficiently. Coordination, thus, helps in effectively carrying out non-routine jobs.

2. Dynamic activities : Organizations operate in the dynamic environment. Environmental

changes have to be adopted by organizations for their survival and growth. Coordination
helps in integrating activities which constantly change according to changes in the
environment.

3. Standards of performance : When standards of performance against which actual

performance is to be measured are too high, managers coordinate the various business
activities to ensure that high performance standards are achieved.

4. Interdependence of specialized activities : When different units of the organization

are dependent on each other for resources or information, there is great need for
coordination amongst them. Greater the interdependence, greater is the need for
coordination. According to Thompson, there are three types of interdependence: pooled,
sequential and reciprocal interdependence.

In pooled interdependence, organizational performance depends upon pooled or combined

performance of all the departments. This happens when different divisions make different
products not dependent on each other.

The need for coordination is, therefore, minimum. In a diversified market, if a company
manufactures textiles and electronic items (for instance, Reliance Industries), the performance
of textile industry does not depend upon the performance of electronics industry and nor does
the performance of electronics industry depend upon that of textile industry but the overall
coordinated performance of both the industries affects the performance of Reliance Industries.
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If the need arises, financial and human resources can be transferred from one unit/
department to the other if it affects the overall performance of the industry. Losses in one
industry can be compensated by transferring funds from the profit-making industry to the loss-
making industry.

In sequential interdependence, performance of one unit depends upon that or another

(marketing department depends upon production department to make sales). This requires
coordination between production and sales departments.

In reciprocal interdependence, there is give and take relationship amongst units. If trucks
have to be loaded at the assembly station and unloaded at the warehouse, there is need for
pooled interdependence. The loaded trucks have to be unloaded at the warehouse and unloaded
trucks have to come back in time for re-loading at the assembly station.

If there is lack of coordination in the speed at which the trucks move, there will be huge
wastage of time which may even result in loss of orders in extreme situations. With increase in
degree of interdependence from pooled to reciprocal, the need for coordination also increases.

5. Specialization : Specialization leads to concentration on very narrow areas of job activity.

Individuals tend to overlook overall perspective of the job. This requires coordination to
direct all the activities towards a common goal.

6. Growing organization : In growing organizations, number of people and divisions become

so large that it becomes difficult for top managers to coordinate the activities performed
by all of them. Various techniques of coordination (rules, procedures, plans, goals, slack
resources etc.) help in unifying diverse and multiple organizational/departmental activities
towards the common goal.

Large organizations have large number of people with diverse perspectives. In

contemporary organizations, there is workforce diversity. People come from different nations,
cultures, educational background, needs, habits etc. In the first instance, people work so that
they satisfy their individual goals.

Coordination aims to integrate individual goals with organizational goals so that both are
satisfied. Satisfied employees work towards organizational goals with commitment, dedication
and loyalty than unsatisfied employees. Coordination integrates individual goals with group
goals and group goals with organizational goals.
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7. Promote group effort : In the absence of coordination, each individual and department
will carry out their objectives in a manner that they perceive as the best. People tend to
maximize their individual goals. This may, however, not be the best for the organization
as a whole.

Coordination helps in promoting group effort rather than individual effort for optimally
achieving the organizational goals. It harmonizes individual’s goals with organizational
goals and satisfies individual goals through satisfaction of organizational goals.

8. Unity of action : Organizations have diverse work force, thoughts, resources, goals,
activities and skills. Coordination helps to unify these diverse set of actions towards a
single goal and, thus, maximize their use.

9. Synergy : Coordination facilitates the sum total of output of group to increase by more
than the sum total of their individual output. It integrates work of different units and produces
synergistic effects by increasing the overall organizational output.

Coordination between functional departments; production finance, personnel and marketing

ensures optimum utilization of physical, financial and human resources. Production
department produces according to sales estimates, finance department releases funds
accordingly and human resource department recruits people according to needs of different
departments. Coordination ensures that facilities remain neither under-utilized nor over-
utilized.

10. Conflicting individual and organization goals : It is very important for every enterprise
to bring about coordination between organization goals and individual goals. If an individual
is diverting from the path of organization goals, one may be told immediately to mend the
ways and try to achieve the objectives of the organization.

11. Line and staff structure : The creation of line and staff structure in an organization also
creates problems of coordination. The staff officers may confuse their authority with line
officers. Thus, coordination is necessary between line and staff officers for achieving the
goals of enterprise.
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12. Personality outlook : In every enterprise rival groups of people can be formed. There
is a need of bringing about coordination among the rival groups which sometimes try to
sabotage the coordination process.

13. Different Outlook : Each outlook is an organization is complex and unique personality.
Individuals assess and interpret organization goals from their own view points. Hence,
management has to coordinate the activities of these individuals.

14. Coordination is necessary for increasing efficiency : Coordination ensures a proper

tempo for the whole organization. A coordinated group effort helps to make an optimum
use of all the resources so that to increase the efficiency.

15.7 Types of Coordination

Coordination can be of the following types:

1. Internal and External Coordination, and

2. Vertical and Horizontal Coordination.

1. Internal and External Coordination : Coordination between the activities of departments

and people working within the organization is known as internal coordination. Coordination
between activities of the organization with units outside the organization (Government,
customers, suppliers, competitors etc.) is known as external coordination.

Organizations are open system which continuously interacts with the environment through
the input-output conversion process. They receive inputs from the environment, process
them and give them back to the environment in the form of outputs. This cycle is repeated
after receiving feedback from the environment about the acceptability of their products.
This requires complete coordination between what environment expects from the
organization and what organization expects from the environment, failing which,
organizational survival can be in danger.

2. Vertical and Horizontal Coordination : Both these types of coordination are the forms
of internal coordination. Vertical coordination is achieved amongst activities of people
working at different levels. It coordinates the activities of top managers with those of
middle and lower level managers.
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It is “The linking of activities at the top of the organization with those at the middle and
lower levels in order to achieve organizational goals.” Vertical coordination can be achieved
through span of management, centralization, decentralization and delegation.

Horizontal coordination is achieved amongst activities of different departments working

at the same level. It is “the linking of activities across departments at similar levels. It links the
activities of four primary departments — production, finance, personnel and sales”.

The need for horizontal coordination arises when departments depend upon each other
for information or products. When information is transacted across departments, departmental
managers share their views on the same problem and arrive at innovative ideas and thoughts
to deal with the situation. According to Jay R. Galbraith, “the more organizations need to
process information in the course of producing their product or service, the more methods of
horizontal coordination they will need to use”.

Different methods of achieving horizontal coordination are slack resources,

information systems and lateral relations:

1. Slack resources means maintaining a cushion of resources like buffer time, money,
material, inventory, people etc. by each department.

2. Information systems facilitate exchange of information among units of the organization.

Computers have eased the work of transmitting information to different departments.
Information systems facilitate effective coordination amongst departments.

3. Lateral relations refers to relations between peer groups of different departments whose
interaction (through direct contact or liaison officer or work groups/teams) helps in arriving
at solution to the problem. Lateral relations allow the information to be exchanged across
the scalar chain rather than people placed at higher levels in the organizational hierarchy.
These relations are “coordination of efforts through communicating and problem solving
with peers in other departments or units, rather than referring most issues up the hierarchy
for resolution.”

Lateral relations can be maintained in the following ways:

(i) Direct contact : Mostly prevalent at middle and lower levels, people of different
departments directly communicate with each other to solve their organizational problems
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without involving the top managers. Coordination is, thus, achieved laterally without
following the chain of command.

(ii) Liaison roles : Rather than people of different departments solving their problems through
direct contact, the problems are solved by a person who maintains direct contact with
people of different departments. The person known as liaison officer, is a common link
between the units or departments.

Though he does not have formal authority over the groups, he facilitates the flow of
information and communication between them. He coordinates the efforts of diverse groups
by dealing directly with departments where problems have arisen.

(iii) Task forces : Where liaison officer cannot coordinate the activities of departments because
the inter-departmental dependence is complex or because coordination has to be achieved
amongst many departments, task forces are created to facilitate coordination.

A task force is a team of members from different departments (where the problem has
arisen) who form a group and share information with respect to the problems of their
respective departments. When solution to the problem is achieved, the task force is
dissolved and members go back to their respective positions. Coordination amongst
different departments is, thus, facilitated through task forces.

(iv) Committees : Committees are formed to look into specific organizational problems which
may be recurring in nature. A committee that looks into absenteeism, promotion and
transfer of employees achieves coordination with respect to labor force, keeping it satisfied
and committed towards organizational goals.

(v) Managerial integrators : They are the specifically appointed managers who coordinate
the products, projects or brands that involve inter-departmental dependence or interaction.
They are usually product managers, project managers or brand managers.

15.7 Techniques and Requisites for Excellent Coordination

Coordination implies the synchronization of all the activities of the business so as to
achieve the pre-determined goals.
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According to Louis Allen, “A manager, in managing, must coordinate the work for which
he is accountable by balancing, timing and integrating”.

The following are the basic technique of coordination;

i. Defining clearly the position authority and responsibility.

ii. Formulation of clear cut policies and procedures

iii. Sound planning

iv. Mutual and effective communication

v. Existence of community of interest

vi. Comprehensive policies and programs

vii. Effective leadership

viii. Effective control

ix. Chain of command

x. Voluntary cooperation

xi. Sound organization structure

xii. Organization manuals

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xiii. Balancing timing and integrating

xiv. Direct contact

xv. Group meeting

xvi. Strong Organization structure

xvii. Simplified organization

xviii. Formation of Committees

xix. Morale among the members

xx. Periodical staff meeting

xxi. Informal coordination

xxii. Liaison departments

15.8 Principles of Coordination

Principles refer to fundamental truths on which an action is based.

1. Unity of command : Unity of command means one boss for one subordinate. It will be
difficult to achieve coordination if one individual has to report to more than one boss.
Unity of command helps in coordinating the activities of individuals and departments.

2. Early beginning : It follows the principle of earlier the better. Managers should initiate
efforts to coordinate organizational activities right from the planning stage. If plans are
implemented without coordination in mind, it will become difficult to coordinate the
organizational activities at later stages.

Well begun is half done. Framing objectives and policies through participative decision
making are the strengths to achieve coordination. Participation allows members to know
the importance of everyone in the organization. It reduces conflicts, promotes commitment
and harmony to create an environment conducive for coordinated efforts directed towards
organizational goals.

3. Scalar chain : It refers to chain or link between top managers and lower managers. It is
the hierarchy of levels where information and instructions flow from top to bottom and
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suggestions and complaints flow from bottom to top. This chain facilitates coordination as
top managers pass orders and instructions down the chain, necessary for subordinates
to work efficiently.

Subordinates also pass upwards only those suggestions and complaints, which they feel
should be brought to the notice of top managers through middle level managers. Passing
of only necessary information facilitates coordination amongst various levels. Scalar chain,
thus, facilitates coordination.

4. Continuity : Coordination is a continuous process. It must be continuously carried out at

all levels in every department. It starts the moment an organization comes into existence
and continues till the organization exists. Coordination is not an option. It is the inevitable
force that binds organizational members and resources together and, thus, is the backbone
of organizational success.

5. Span of management : It refers to the number of subordinates that a manager can

manage effectively. It is important to place only as many subordinates under the direction
of one manager as can be effectively managed by him. It affects the manager’s ability to
coordinate the activities of subordinates working under him. Large number of subordinates
under one manager can make coordination difficult.

6. Direct contact : Direct or personal contact between managers and subordinates can
achieve better coordination than indirect or impersonal contact. Face-to-face interaction
amongst people of different levels or same level in different departments promotes
understanding of information and thoughts. This facilitates effective communication and
mutual understanding and through it, effective coordination.

7. Reciprocity : It refers to interdependence of activities. Production and sales department,

for example, are inter-dependent. The more one sells, the more one needs to produce.
The more one produces, the more one attempts to sell what is produced.

The nature and extent to which organizational activities are dependent on each other are
considered by managers when they initiate to coordinate the organizational activities.
More the inter-dependence amongst organizational activities, more is the need for
coordination amongst them.

8. Dynamism : There are no fixed and rigid rules for coordination. Changes in organizational
environment necessitate changes in the techniques of coordination. It is, thus, a dynamic
and not a static concept.
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15.9 Limitations in Achieving Coordination

There are some limitations also in achieving effective coordination.

1. Increased specialization : Though specialization helps to increase organizational

productivity, it also creates the problem of coordination. According to Paul R. Lawrence
and Jay W. Lorsch, “people in specialized units tend to develop their own sense of the
organization’s goals and how to pursue them.” Higher the degree of specialization,
therefore, more difficult it is to coordinate the activities.

2. High interdependence amongst units : Higher the degree of dependence of one unit
on the other, greater is the need for coordination and more difficult it is to coordinate.
Achieving coordination of units/activities with reciprocal interdependence is more complex
than for activities with pooled interdependence.

Pooled interdependence

Performance of one unit does not depend on the other, but overall performance of each
unit affects the performance of the organization as a whole. Thus, organizational performance
depends upon pooled or combined performance of each unit or department of the organization.

For example, an organization is structured on the basis of products. Each product division
has functional heads to look after activities related to its product. Success of one product
division does not depend upon the other, but the overall performance of the organization depends
upon how successfully each product division operates its activities.

Reciprocal interdependence

Where there is give and take relationship between different units, it is known as reciprocal
interdependence. Loading the trucks for shipment, unloaded trucks coming back for reloading
for further shipment is a two-way flow of activities between different units and a form of reciprocal
interdependence.

3. Different approach towards the same problem : If different departments look at the
same problem in different ways, there will be problem of coordinating their activities. If a
company wants to increase profits; production department may want to improve the quality
of goods, while sales department may want to improve advertisement to increase the
sale.
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Finance department may aim at cost control as the means of increasing the profits. Since
each department has different perception about the way organizational profits can be
increased, top managers find it difficult to coordinate conflicting opinions of different
functional heads.

4. Uncertainty about future : Howsoever skilled and competent may the managers be in
coordinating the activities of different units, changes in environmental factors can make
coordination difficult. Unprecedented changes can result in failure of plans making
coordination difficult. Internal uncertainties like strikes and lockouts also make coordination
difficult.

5. Lack of skill : Even in certain situations, where work flows smoothly, coordination becomes
a problem if managers do not have the knowledge, skill and competence to coordinate.
Coordination makes use of behavioral skills in dealing with people. Managers with autocratic
style of leading can face problems in coordinating the efforts of their work force.

6. Informal groups : Informal groups which are strongly bonded by forces of culture, social
values and ethics can affect the ability of highly skilled managers to coordinate
organizational activities.

15. 10 Differences between Coordination and Co-Operation

Basis Coordination Co-operation

Meaning It is a proper method of team effort It means mutual help willingly. It is a

to provide unity of action to achieve collective and voluntary action of group
the goals of the enterprise. It is an of persons towards the common goal.
orderly arrangement of group efforts
in pursuit of common goals.

Scope It is broader than co-operation which It is termed as a part of coordination,

includes as well because it happens through voluntary efforts of
harmonizes the group efforts. the individuals
It result of conscious efforts on the
part of the management.
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Process The function of coordination is The functions of co-operation are

performed by top management. prepared by persons at any level.

Purpose Its purpose is to attain the goals of Its main purpose is mutual help
the enterprise efficiently and
economically by group efforts.

Require- Coordination is required by Co-operation is emotional in nature

ments employees and departments at because it depends on the willingness
work irrespective of their work. of people working together.

Relation- It establishes formal and informal It establishes informal relationship.

ship relationships.

Freedom It is planned and entrusted by the It depends upon the sweet will of the
central authority & it is essential. individuals and therefore it is not
necessary.

Support It seeks wholehearted support Co-operation without coordination is

from various people working at fruitless & therefore it may lead to
various levels. unbalanced developments.

Perform- It is accomplished in the various It is sought by the people working

ance functions of management though together by their voluntary actions.
the deliberate efforts made by the
executives.

Check Your Progress

1. Explain coordination.

2. Discuss group effort.

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3. Explain difference between coordination and cooperation.

4. Explain synergy.

5. Explain line and staff structure.

15.11 Summary
Coordination is “the process of linking the activities of various departments of the
organization”, Coordination is “the process of integrating the objectives and activities of the
separate units (departments or functional area) of an organization in order to achieve
organizational goals efficiently”.

Coordination involves the integration of various parts of organization.Coordination is not

a one-time attempt to integrate the individual goals. It is a continuous process that keeps going
as long as the organization survives.

The need for coordination arises because individuals and departments have different
goals. They depend on each other for resources and information. Managers continuously
coordinate their activities to ensure that all individuals and departments use organizational
resources and information for successful attainment of organizational goals.
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15.12 Key Words

 Group effort

 Synergy

 Cooperation

 Synthesis of efforts

15.13 Review Questions

1. What is your understanding about coordination and state the techniques to achieve it?

2. Explain the principles and elements required for coordination progress.

3. Define coordination. Discuss features and objectives of coordination.

4. What are the elements of coordination and explain the need and its importance of the
same?

5. Is coordination necessary for the management function? Why?

6. Explain the types of coordination.

7. Differentiate coordination and cooperation.

8. State the linking activities of coordination.

9. Explain the division and subdivision of an organization through coordination.

10. State the dynamics and standards of performance

11. Explain different approaches towards coordination

12. Explain the features of coordination.

13. List out the importance and need of coordination.

14. State the different methods of achieving horizontal coordination are slack resources,
information systems and lateral relations.

15. Elaborate the principles of coordination.

16. State the limitation of achieving coordination.

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UNIT 16
CONTROLLING

Learning Objectives
After studying this unit, you should be able to:

 highlite about the standards of performance and check the actual performance

 enumerate about the control and follows the methods that helps management monitor
performance

 elaborate on the importance and Quality of control system

 disucss about the techniques applicable in controlling system

Structure
16.1 Introduction

16.2 Meaning

16.3 Definitions

16.4 Characteristic of Control

16.5 Qualities of Effective Control

16.6 Importance of Control

16.7 Major Steps in Control Process

16.8 Control Methods

16.9 Limitations

16.10 Three Types of Control

16.11 Controlling Techniques

16.12 Summary

16.13 Key Words

16.14 Review Questions

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16.1 Introduction
Control is an important function and a continuous process of management. It is the
process that measures current performance and guides it towards some predetermined
objectives. It involves setting up standards of individual and organizational performance,
checking actual performance against these standards to make sure that the objectives are
being achieved as originally anticipated in organization’s plans.

16.2 Meaning
Management control refers to setting of predetermined standards, comparing actual
performance with these standards and, if required, taking corrective actions to ensure the
achievement of organizational goals.

o A practice of monitoring performance and taking action to ensure desired results.

o It sees to it that the right things happen, in the right ways, and at the right time.

o Done well, it ensures that the overall directions of individuals and groups are consistent
with short and long range plans.

o It helps ensure that objectives and accomplishments are consistent with one another
throughout an organization.

o It helps maintain compliance with essential organizational rules and policies.

Often, controlling and management control are considered same. However, there is a
vast difference between them. Controlling is one of the managerial functions while management
control can be defined as a process which managers follow to perform the controlling function.

Controlling function is performed in all types of organizations whether commercial or

non- commercial and at all levels i.e. top, middle and supervisory levels of management. Thus,
it is a pervasive function. Controlling should not be considered as the last function of the
management.

16.3 Definitions
Koontz And O’Donnell - “Managerial control implies the measurement of accomplishment
against the standard and the correction of deviations to assure attainment of objectives according
to plans”.
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Dale Henning - “Control is the process of bringing about conformity of performance with
planned action.”

E F L Brechexplained that “Control is checking current performance against predetermined

standards contained in the plans, with the view to ensuring adequate progress and satisfactory
performance”.

George R. Terry, “Controlling is determining what is being accomplished, that is, evaluating
the performance and if necessary applying corrective measures so that the performance takes
place according to plans”.

Henry Fayol, “control consists in verifying whether everything occurs in conformity with
the plan adopted, the instructions issued and the principles established”.

16.4 Characteristics of Control

 Control is a continuous process

 Control is a management process

 Control is a pervasive function

 Control is embedded in each level of organizational hierarchy

 Control is forward looking

 Control reviews the past event

 Control is closely linked with planning

 Control is a tool for achieving organizational activities

 Control is Action-Oriented

 Control is an end process

 Control compares actual performance with planned performance*

 Control point out the error in the execution process

 Control minimizes cost

 Control is a dynamic process

 Control achieves the standard

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 Control saves time

 Control helps management monitor performance

 Control does not Curtail the Rights of Individuals

16.5 Qualities of Effective Control

16.6 Importance
1. Cybernetic Control System

 One that is self-contained in its performance monitoring and correction capabilities.

(thermostat)

 The control process practiced in organizations is not cybernetic, but it does follow
similar principles.

2. Establish objectives and standards

 Measure actual performance

 Compare results with objectives and standards.

 Take necessary action.

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 The control process begins with planning and the establishment of performance
objectives.

 Performance objectives are defined and the standards for measuring them are set.

 There are two types of standards:

o Output Standards - measures performance results in terms of quantity, quality,

cost, or time.

o Input Standards - measures work efforts that go into a performance task.

3. Measuring actual performance

 Measurements must be accurate enough to spot deviations or variances between

what really occurs and what is most desired.

 Without measurement, effective control is not possible

4. Compare results with objectives and standards

 The comparison of actual performance with desired performance establishes the

need for action.

 Ways of making such comparisons include:

o Historical / Relative / Engineering

o Benchmarking
5. Take necessary action

 Taking any action necessary to correct or improve things.

 Management-by-Exception focuses managerial attention on substantial differences

between actual and desired performance.

o Management-by Exception can save the managers time, energy, and other
resources, and concentrates efforts on areas showing the greatest need.

o There are two types of exceptions:

 Problems - below standard

 Opportunities - above standard

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6. Effective Controls

 The Best Controls in Organizations are

o Strategic and results oriented

o Understandable
o Encourage self-control
 The Best Controls in Organizations are

o Timely and exception oriented

o Positive in nature
o Fair and objective
o Flexible
7. Organizational Control Systems

 Management Processes

 Strategy and objectives

 Policies and procedures
 Selection and training
 Performance appraisal
 Job design and work structures
 Performance modeling, norms, and organization culture
 Compensation and Benefits

 Attract talented people and retain them.

 Motivate people to exert maximum effort in their work.
 Recognize the value of their performance contributions.
 Employee Discipline

 Discipline is defined as influencing behavior through reprimand.

 Progressive Discipline ties reprimand to the severity and frequency of the
employee’s infractions.

 Positive Discipline tries to involve people more positively and directly in making
decisions to improve their behavior.
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8. The “Hot Stove Rule”

The “Hot-Stove Rule” of Douglas McGregor gives a good illustration of how to impose
disciplinary action without generating resentment. This rule draws an analogy between
touching a hot stove, and undergoing discipline. When you touch a hot stove, your discipline
is immediate, with warning, consistent, and impersonal.These four characteristics, according
to McGregor, as applied to discipline are self­serving and may be explained as follows:

a) When you touch the hot stove, you burn your hand. The burn was immediate. Will you
blame the hot stove for burning your hand? Immediately, you understand the cause and
effect of the offense. The discipline was directed against the act not against anybody
else. You get angry with yourself, but you know it was your fault. You get angry with the
hot stove too, but not for long as you know it was not its fault. You learn your lesson
quickly.

b) You had warning as you knew the stove was red hot and you knew what would happen
to you if you touched it. You knew the rules and regulations previously issued to you by
the company prescribing the penalty for violation of any particular rule so you cannot
claim you were not given a previous warning.

c) The discipline was consistent. Every time you touch the hot stove you get burned.
Consistency in the administration of disciplinary action is essential. Excessive leniency as
well as too much harshness creates not only dissatisfaction but also resentment.

d) The discipline was impersonal. Whoever touches the hot stove gets burned, no matter
who he is. Furthermore, he gets burned not because of who he is, but because he touched
the hot stove. The discipline is directed against the act, not against the person. After
disciplinary action has been applied, the supervisor should take the normal attitude toward
the employee.

To be effective Discipline should be;

 Immediate

 Informative

 Focus on activity not personality

 Occur in a supportive setting

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 Consistent

 Support realistic rules

9. Information and Financial

 Activity-based costing - the true cost of all products and services.

 Economic value added - examine the value added by all activities.

 Understand the implication of key financial measures of (ratios) organizational

performance

10. Operational Management and Control

 Purchasing

 Economic Order Quantity

 Automatic reorder points
 Just-In-Time Scheduling
 Project Management

Program Evaluation and Review Technique (PERT) - Identifies and controls the many
separate events in complex projects.

 Statistical Quality Control

 Based on the establishment of upper and lower control limits, that can be graphically
and statistically monitored to ensure that products meet standards.

16.7 Major Steps in Control Process

There are three basic steps in a control process that include establishment of standards,
measurement of performance and comparing the performance with the standards and taking
corrective action.

1. Establishment of standards
i. This is the initial step in control process that establishes the standards of performance.

ii. A standard acts as a reference line or a basis of actual performance.

iii. Standards should be set accurately and in quantitative terms.

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iv. For example; Standards expressed in unclear or general terms such as “Costs should be
reduced” or “rejections should be reduced” are not specific as “cost should be reduced by
10 percent” or “rejections should be reduced to 0.5 percent”.

v. Standards are used as the criteria by which performance is measured in the control process.

vi. Since standards cannot be set for entire operations, each organization must first develop
its own list of key result areas for the purpose of control.

vii. Different standards of performance are developed for various operations at the planning
stage. Actually, planning is the basis of control.

viii. Standards are to be flexible in order to accommodate in changing business situations.

ix. In management practice, different types of standards used are physical standards such
as units of production per hour, cost standards, such as direct and indirect cost per unit,
revenue standards such as sales per customer, capital standards such as rate of return of
capital invested, and intangible standards such as competency of managers and
employees.

2. Measuring and comparing actual performance with standards

i. Next step in controlling process is to measure the actual performance of individuals,
group or units and compare it with the standards set.

ii. The quantitative measurement should be performed in cases where standards have been
set in numerical terms to make evaluation easy.

iii. In other cases, the performance should be measured in terms of qualitative factors such
as measuring performance of industrial relations manager.

iv. His performance should be measured in terms of attitude of workers, frequency of strikes
and morale of workers.

v. Personal observation technique is used to measure the performance such as in the case
of the subordinates being observed while they are engaged in work or by a study of
various summaries of figures, reports, charts and statements.

vi. Once the performance is measured, it should be compared with the standards to distinguish
deviations. Some deviations are enviable such as the output above the standard.
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vii. But some other variations are unwanted such as a variation in the delivery schedule
agreed upon with the customer. The measurement and comparison are done at various
stages in the total process and not at the end.

3. Taking corrective action:

i. The last step in controlling process is to take corrective action so that deviations may not
repeat and targeted objectives of the organization are met.

ii. This will involve taking certain decisions by the management like re-planning or redrawing
of goals or standards, reassignment or classification of duties.

iii. It may also require improving the process of selection and training of workers.

iv. This control function may necessitate change in all other managerial functions.

v. If the standards are not adequate and faulty, there is a need to establish again through
observations.

vi. A good control system assists the manager to assess the risks of committing errors.
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16.8 Control Methods

Control methods are generally categorized into two types that include past-oriented
controls and future oriented controls.

Past-oriented controls: Past­oriented control measure results after the process. These
are also identified as post action controls. They scrutinize activities occurred in the past for a
particular period. Examples of past-oriented controls are accounting records, school grade
reports etc. These controls are used to plan future behaviour through reviewing post errors or
successes. They can also be used for rewarding, disciplining, training or promoting individuals.

Future-oriented controls: These are also recognized as feed­forward controls or steering

controls. These controls are intended to assess results during the process, so that action can
be taken before the task is completed or the period is over. Examples of such controls are cash
flow and funds flow analysis, network planning which assist managers to observe that they will
have problems in such areas of cash or on time delivery unless they take prior action.

Organizations use both these types. Future-oriented controls are vital because the
information feedback in them is at the input side of the system, so that improvement can be
made before the system output is affected.

Past-oriented and future-oriented controls

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Current issues in control include;

 that manager has to monitor employee behavior,

 that manager has to control private lives of employees,

 Employers may be able to control employee behavior outside the work environment.

16.9 Limitations
 It is difficult in setting quantitative standards:

 Control system loses some of its effectiveness when standards cannot be defined in
quantitative terms.

 Employee confidence, job satisfaction and human behaviours are such areas where this
problem might arise.

 Restriction of controlling is little control on external factors.

 Generally an enterprise cannot control external factors such as government policies,

technological changes, and competition.

 Limits the resistance from employees.

 Control is often opposed by employees.

 They perceive it as restriction on their freedom.

 It is quite expensive as it involves a lot of expenditure, time and efforts.

 It can be said that controlling is performed by managers to monitor current performance

against pre-set standards contained in the plans in order to ensure good progress and
satisfactory performance.

 Controlling assists to maintain compliance with essential organizational rules and policies.
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16.10 Three Types of Control

TYPES OF CONTROL

 Preliminary [Input]

Sometimes called the feed-forward controls, they are accomplished before a work activity
begins.

They make sure that proper directions are set and that the right resources are available
to accomplish them.

 Concurrent [process]

Focus on what happens during the work process. Sometimes called steering controls,
they monitor ongoing operations and activities to make sure that things are being done
correctly.

 Post action [feedback – output]

Sometimes called feedback controls, they take place after an action is completed. They
focus on end results, as opposed to inputs and activities.
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Managers have two broad options with respect to control.

 They can rely on people to exercise self-control (internal) over their own behavior.

 Alternatively, managers can take direct action (external) to control the behavior of others.

 Internal Controls

Allows motivated individuals to exercise self-control in fulfilling job expectations.

The potential for self-control is enhanced when capable people have clear performance
objectives and proper resource support.

 External Controls

It occurs through personal supervision and the use of formal administrative systems.

 Performance appraisal systems, compensation and benefit systems, employee

discipline systems, and management-by-objectives.

16.11 Controlling Techniques

Control regulates the organizational activities and thus compares the actual performance
and expected organizational standards and goals. The result of deviation in performance
between the actual and expected performance, may be positive or negative, but it ensures to
adopt necessary corrective action. So that the negative deviation results in positive and the
positive deviation further results excellent.

There are various techniques of managerial control which can be classified into two
broad categories namely-

 Traditional techniques

 Modern techniques
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Traditional Techniques of Managerial Control

Traditional techniques are those which have been used by the companies for a long time
now. These include:
1. Personal observation
2. Statistical reports
3. Break-even analysis
4. Budgetary control

1. Personal Observation

This is the most traditional method of control. Personal observation is one of those
techniques which enables the manager to collect the information as first-hand information.

It also creates a phenomenon of psychological pressure on the employees to perform in

such a manner so as to achieve well their objectives as they are aware that they are being
observed personally on their job. However, it is a very time-consuming exercise & cannot
effectively be used for all kinds of jobs.

2. Statistical Reports

Statistical reports can be defined as an overall analysis of reports and data which is used
in the form of averages, percentage, ratios, correlation, etc., present useful information to the
managers regarding the performance of the organization in various areas.

This type of useful information when presented in the various forms like charts, graphs,
tables, etc., enables the managers to read them more easily & allow a comparison to be made
with performance in previous periods & also with the benchmarks.

3. Break-even Analysis

Breakeven analysis is a technique used by managers to study the relationship between

costs, volume & profits. It determines the overall picture of probable profit & losses at different
levels of activity while analyzing the overall position.

The sales volume at which there is no profit, no loss is known as the breakeven point.
There is no profit or no loss. Breakeven point can be calculated with the help of the following
formula:

Breakeven point = Fixed Costs/Selling price per unit – variable costs per unit
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4. Budgetary Control
Budgetary control can be defined as such technique of managerial control in which all
operations which are necessary to be performed are executed in such a manner so as to
perform and plan in advance in the form of budgets & actual results are compared with budgetary
standards.

Therefore, the budget can be defined as a quantitative statement prepared for a definite
future period of time for the purpose of obtaining a given objective. It is also a statement which
reflects the policy of that particular period. The common types of budgets used by an
organization.

Some of the types of budgets prepared by an organization are as follows,

 Sales budget: A statement of what an organization expects to sell in terms of quantity as
well as value
 Production budget: A statement of what an organization plans to produce in the budgeted
period
 Material budget: A statement of estimated quantity & cost of materials required for
production
 Cash budget: Anticipated cash inflows & outflows for the budgeted period
 Capital budget: Estimated spending on major long-term assets like a new factory or
major equipment

 Research & development budget: Estimated spending for the development or refinement

of products & processes.

Modern Techniques of Managerial Control

Modern techniques of controlling are those which are of recent origin & are comparatively

new in management literature. These techniques provide a refreshingly new thinking on the

ways in which various aspects of an organization can be controlled. These include:

1. Return on investment
2. Ratio analysis

3. Responsibility accounting

4. Management audit
5. PERT & CPM
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1. Return on Investment

Return on investment (ROI) can be defined as one of the important and useful techniques.
It provides the basics and guides for measuring whether or not invested capital has been used
effectively for generating a reasonable amount of return. ROI can be used to measure the
overall performance of an organization or of its individual departments or divisions. It can be
calculated as under-

Net income before or after tax may be used for making comparisons. Total investment
includes both working as well as fixed capital invested in the business.

2. Ratio Analysis

The most commonly used ratios used by organizations can be classified into the following
categories:

 Liquidity ratios

 Solvency ratios

 Profitability ratios

 Turnover ratios

3. Responsibility Accounting

Responsibility accounting can be defined as a system of accounting in which overall

involvement of different sections, divisions & departments of an organization are set up as
‘Responsibility centers’. The head of the center is responsible for achieving the target set for
his center. Responsibility centers may be of the following types:

 Cost center
 Revenue center
 Profit center
 Investment center

4. Management Audit

Management audit refers to a systematic appraisal of the overall performance of the

management of an organization. The purpose is to review the efficiency &n effectiveness of
management & to improve its performance in future periods.
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5. PERT & CPM

PERT (Programmed Evaluation & Review Technique) & CPM (Critical Path Method) are
important network techniques useful in planning & controlling. These techniques, therefore,
help in performing various functions of management like planning; scheduling & implementing
time-bound projects involving the performance of a variety of complex, diverse & interrelated
activities.

Therefore, these techniques are so interrelated and deal with such factors as time
scheduling & resources allocation for these activities.

Check Your Progress

1. Explain control.

2. Discuss cybernetic control system.

3. Explain difference between objectives and standards.

4. Explain Hot stove rule.

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5. Explain reactive and proactive.

16.12 Summary
Controlling is the process that measures current performance and guides it towards
some predetermined objectives. Controlling involves setting up standards of individual and
organizational performance, checking actual performance against these standards to make
sure that the objectives are being achieved as originally anticipated in organization’s plans.

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

Done well, it ensures that the overall directions of individuals and groups are consistent
with short and long range plans. It helps ensure that objectives and accomplishments are
consistent with one another throughout an organization. It helps maintain compliance with
essential organizational rules and policies.

Progressive Discipline ties reprimand to the severity and frequency of the employee’s
infractions. Positive Discipline tries to involve people more positively and directly in making
decisions to improve their behavior.

The control system should be appropriate to the nature and needs of the activity. The
techniques of control involve the feed forward control, concurrent control and the feed-back
process.

There are several techniques to establish the control system in an organization like CPM,
Gantt chart, PERT, etc. PERT (Programmed Evaluation & Review Technique) & CPM (Critical
Path Method) are important network techniques useful in planning & controlling. These
techniques, therefore, help in performing various functions of management like planning;
scheduling & implementing time-bound projects involving the performance of a variety of
complex, diverse & interrelated activities.
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16.13 Key Words

 Budgeting

 Control

 Feedback

 Hot Stove Rule

16.14 Review Questions

1. Describe the concept of managerial control. Explain the importance of control system.

2. “Planning is an empty exercise without controlling”. Comment.

3. Examine the features of controlling.

4. State the importance of controlling function in management system.

5. “Planning is the basis of control, essence of action, delegation of information and a key

as a guide”. Comment this statement.

6. State the methods of controlling.

7. Explain the process of controlling system.

8. Short notes on;

a. Feed-forward

b. Feedback

c. PERT &CPM

d. Budgetary control

9. Explain the techniques of controlling in the managerial system.

10. State the types of control system.

11. Explain the standards of performance and check the actual performance.

12. How to control and follows the methods that helps management monitor performance.

13. Explain the techniques applicable in controlling system.

14. “The essence of control is action”. Comment.

15. Establish the relationship between planning and controlling.

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Model Question Paper

BCOM - General Commerce
First Year – Second Semester
Paper - IV
PRINCIPLES OF MANAGEMENT
Time : 3 Hours Maximum : 75 Marks

Part A – (10x2 = 20 marks)

Answer any ten questions each in 50 words.

1. What do you mean by management?

2. What is planning?

3. Define communication.

4. What is formal organization?

5. Define Controlling.

6. What is directing?

7. What is supervision?

8. What do you mean by committee?

9. What is Departmentaliztaion?

10. What do you understand by leadership?

11. What is scalar chain?

12. What do you mean by training?

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Part B – (5x5 = 25 marks)

Answer any five questions each in 250 words

13. Explain the functions of management.

14. Describe the bases for departmentalization.

15. Enumerate the Fayol's 14 principles of management.

16. Briefly explain the importance of directing.

17. What are the difference between formal and informal organization?

18. Explain the need to control in the organization.

19. State the importance of decision making process.

Part C – (3x10 = 30 marks)

Answer any three questions each in 500 words

20. Explain the nature of planning and importance in the organizations?

21. Explain the merits and demerits of different sources of recruitment.

22. Describe the various training methods in the organiztaion.

23. Discuss the importance of coordination, in the model organization.

24. Explain the essential features of good control system.