The Nature of Management

Management
“Management is an art of getting things done through and with the
people in formally organized groups. It is an art of creating an
environment in which people can perform and individuals can co-
operate towards attainment of group goals”. Of course, these goals
may vary from one enterprise to another.
“Management is an art of knowing what to do, when to do and see that
it is done in the best and cheapest way”.
 Management is a continuous, lively and fast developing science.
Management is needed to convert the disorganized resources of men,
machines, materials and methods into a useful and effective
enterprise. Management is a pipeline, the inputs are fed at the end
and they are proceeded through management functions and
ultimately we get the end results or outputs in the form of goods,
services, productivity, information and satisfaction.
Management has been defined by different authors in a number of ways. A number of
definitions advanced by various experts take a similar partial view of management.
• According to Koontz, "Management is the art of getting things done through and with
people in formally organized groups.“
• According to Lawrence, "Management is the development of people “
• According to Stanley, "Management is simply the process of decision making and
control over the actions of human being for the express purpose of attaining
predetermined goals.
• According to Theo haimann, "Management is the function of getting things done
through people and directing the efforts of individuals towards a common objective.“
• According to Brech, "Management is concerned with seeing that job gets done: it tasks
all centre on planning and guiding the operations that are going on in the enterprise.
 Taking these approaches into consideration, management may be
defined as follows :
“Management is a social process of planning, organizing, staffing,
directing, coordinating and controlling for the determination and
achivement of organizational objectives in a dynamic
enviroment.”
Efficiency and Effectiveness
It is the responsibility of management to create such conditions which are conducive to
maximum efforts so that people are able to perform their task efficiently and effectively.
Efficiency - getting the most output from the least amount of inputs
“doing things right”
concerned with means
Achieving the objectives in time

Effectiveness - completing activities so that organizational goals are attained

“doing the right things”
concerned with ends
Achieving the objectives on time
Efficiency and Effectiveness

Means Ends
Efficiency Effectiveness

Goals

Goal Attainment
Resource Usage

Low High
Waste Attainment
The Functions of Management
The management process comprises the following six fundamental
functions:
1. Planning
2. Organizing
3. Staffing
4. Directing
5. Coordinating
6. Controlling
1. Planning
It involves deciding in advance what to do, when to do it, where to do it, how to do it
and who is to do it and how the results are to be evaluated.

Planning is a process of seeking answer to some of the following particular questions:

(i) What is to be done?
(ii) Why it is to be done?
(iii) How the work will be done?
(iv) Who will do the work?
(v) When the work will be done?
(vi) Where the work will be done?
Thus, planning is the systematic thinking about the ways and the means
for the accomplishment of predetermined objectives. Planning
involves:
a) Determination of long and short-range objectives.
b) Development of strategies and courses of action to be followed for
the achievement of these objectives, and
c) Formulation of policies, procedures, and rules, etc.., for the
implementation of strategies and plans.
2. Organizing
Organization or organizing is an important managerial activity by which
managers bring together the manpower and material resources for the
achievement of objectives of the enterprises. Organizing involves following
sub-functions:
a) Identification of activities required for the achievement of objectives and
implementations of plans.
b) Grouping of activities so as to create self-contained jobs.
c) Assignment of jobs to employees.
d) Delegation of authority so as to enable them to perform their jobs and to
command the resources needed for their performance
e) Establishment of a network of coordinating relationships.
3.Staffing
The next logical step in the management process is to procure suitable
personnel for manning the jobs. Since the efficiency of an organization
significantly depends on the quality of its personnel. it comprises of
several functions:
a) Manpower planning involving determination of the number and the
kind of personnel required.
b) Recruitment for attracting suitable number of potential employees to
seek jobs in the enterprise concerned
c) Selection of the most suitable persons for the job under consideration.
d) Placement , induction and orientation.
4. Directing
Direction and leadership is an important function of management. As the process of
management is concerned with getting work done through and with people, they
require continuous encouragement to work effectively. According to Terry,
"Directing means moving to action and supplying simulative power to group of
persons. "So management guides and leads them continuously. It imparts
instructions to them, communicates them orders, rules and decisions, motivates,
provides leadership and guidance, supervises their work and behavior, inspires
them towards improved performance. The function of directing thus involves the
following sub functions:
a) Communication
b) Motivation
c) Leadership
5. Coordinating
The process of co-ordination involves synchronizing individual actions
with the goals of the enterprise. Today, organizations have grown in
size and in character. A large number of people work there in. So co-
ordination has become very necessary. In the words of koonty and O
Donnell. "The best co-ordination occurs when individuals see how
their jobs contribute to the dominant goals of the enterprise. It is thus
the process of tying together all the organizational decisions,
operations, activities and efforts so as to achieve unity of action for
the accomplishment of organizational objectives.
6. Controlling
The next function of management is controlling. In the words of Henry Fayol,
"In an undertaking control consists in verifying whether every thing occurs in
conformity with the plan adapted, the instructions issued and principles
issued." Thus, the control is a measuring and corrective device. It measures
performance against goals and plans. Where as planning guides the
management in the timely use of resources to accomplish specific goals, the
control ensures the effective planning.
Thus controlling involves following sub-functions:
a) Measurement of performance against predetermined goals
b) Identification of deviation from these goals
c) Corrective action to rectify deviations.
Principles of Management
Fayol developed theory of management. According to him managerial excellence is a technical
ability and can be acquired. He developed theories and principles of management which are
universally accepted and make him universalistic. He was pioneer of the formal education in
management. Fayol's principles of management meet the requirements of modern management.
1. Authority and Responsibility are related
Authority and responsibility go together or co-existing. Both authority and responsibility are
the two sides of a coin. In this way, if anybody is made responsible for any job, he should also
have the concerned authority. Fayol's principle of management in this regard is that an
efficient manager makes best possible use of his authority and does not escape from the
responsibility. In other awards when the authority is exercised the responsibility is
automatically generated.
2. Unity of Command
A sub-ordinate should receive orders and be accountable to one and only one boss at a
time. He should not receive instructions from more than one person .
3. Unity of direction
This means that all managerial activities which relate a distinct group with the same objective should be
directed by ‘one head one plan’. Acc. To fayol, there should be “one head one plan for a group of activities
having the same objective.” It however does not mean that all decisions should be made at the top. It
only means that all related activities should be directed by one person.
4. Scalar chain
The chain of superiors and subordinates running
throughout the organization from top to bottom.
All those working in an organization are linked with
each other in superior-subordinate relationships.
Fayol says that, where necessary gangplanks
should be thrown to prevent the scalar chain of
command from blocking the smooth and efficient
functioning of the organization.
5.Division of Work
According to Henry Fayol under division of work, "The worker always on the
same post, the manager always concerned with the same matters, acquire an
ability, sureness and accuracy which increases their output. Work of all kinds
must be divided & subdivided and allotted to various persons according to their
expertise in a particular area.

6. Discipline
Discipline means sincerity, obedience, respect of authority & observance of
rules and regulations of the enterprise. Subordinate should respect their
superiors and obey their order. A well disciplined working force is essential for
improving the quality and quantity of the production.
7. Subordination of individual interests to general interests
The interest of the business enterprise ought to come before the
interests of the individual workers. In other words, principle of
management state that employees should surrender their personnel
interest before the general interest of the enterprise
8. Fair Remuneration to employees
According to Fayol wage-rates and method of their payment should
be fair, proper and satisfactory. differentials in remuneration should
be based on job Differentials, in terms of qualities of employee,
application, responsibility, working conditions and difficulty of the job.
9. Centralization and Decentralization
There should be one central point in the organisation which exercises
overall direction and control of all the parts. But the degree of
centralization of authority should vary according to the needs of
situation. According to Fayol there should be centralization in small
units and proper decentralization in big organisation.
10. Order:
According to Fayol there should be proper, systematic and orderly
arrangement of physical and social factors, such as land, raw
materials, tools and equipments and employees respectively. In other
words right person on the right job and everything in its proper place.
11. Equity
The principle of equality should be followed and applicable at every level of
management. There should not be any discrimination. The management
should be kind, honest and impartial with the employees. In other words,
kindness and justice should be exercised by management in dealing with
their subordinates. This will create loyalty and devotion among the
employees.
12. Stability of Tenure of personnel
Principle of stability is linked with long tenure of personnel in the
organization. Stability of job creates a sense of belongingness among
workers who with this feeling are encouraged to improve the quality and
quantity of work.
13. Initiative
Under this principle, the successful management provides an
opportunity to its employees to suggest their new ideas, experiences
and more convenient methods of work. The employees, who has
been working on the specific job since long discover now, better
alternative approach and technique of work.
14. Spirit of Co-operation (Espirit de corps)
In order to achieve the best possible results, individual and group
effort are to be effectively integrated and coordinated.
Levels of Management

Figure 1.3
1-24
Levels of management

Top
Management
President, CEO,
Executive
Vice Presidents

Middle Management
Plant Managers, Division Managers,
Department Managers

First-Line Management
Foreman, Supervisors, Office Managers

Non- Managerial Employees

Top Level of Management
It consists of board of directors, chief executive or managing director. It devotes more time on
planning and coordinating functions
The role of the top management can be summarized as follows -
• Top management lays down the objectives and broad policies of the enterprise.
• It issues necessary instructions for preparation of department budgets, procedures, schedules
etc.
• It prepares strategic plans & policies for the enterprise.
• It appoints the executive for middle level i.e. departmental managers.
• It controls & coordinates the activities of all the departments.
• It is also responsible for maintaining a contact with the outside world.
• It provides guidance and direction.
• The top management is also responsible towards the shareholders for the performance of the
enterprise.
Middle Level of Management

The branch managers and departmental managers constitute middle level. They devote
more time to organizational and directional functions. Their role can be emphasized as –
• They execute the plans of the organization in accordance with the policies and directives
of the top management.
• They make plans for the sub-units of the organization.
• They participate in employment & training of lower level management.
• They interpret and explain policies from top level to lower level.
• They are responsible for coordinating the activities within the division or department.
• It also sends important reports and other important data to top level management.
• They evaluate performance of junior managers.
• They are also responsible for inspiring lower level managers towards better performance.
Lower Level of Management

Lower level is also known as operative level of management. It consists of supervisors, foreman, section
officers, superintendent etc. They are concerned with direction and controlling function of management.
• They guide and instruct workers for day to day activities.
• They are responsible for the quality as well as quantity of production.
• They communicate workers problems, suggestions, and recommendatory appeals etc to the higher level
and higher level goals and objectives to the workers.
• They help to solve the grievances of the workers.
• They are responsible for providing training to the workers.
• They arrange necessary materials, machines, tools etc for getting the things done.
• They prepare periodical reports about the performance of the workers.
• They ensure discipline in the enterprise.
• They motivate workers.
• They are the image builders of the enterprise because they are in direct contact with the workers.
Relative Amount of Time That Managers Spend on the Four Managerial
Functions

Figure 1.4 1-29

Roles of Management
Organization
Organizations are groups of people, with ideas and resources, working toward
common goals.
OR
A systematic arrangement of people brought together to accomplish some specific
purpose is called organization.

Characteristics of Organization

Deliberate
Distinct Purpose
Structure

People
Manager
A manager is someone whose primary responsibility is to carry out the
management process within an organization to achieve the organizational goals.
Managerial skills

Managerial Skills

Primary Skills Secondary Skills

• Conceptual Skill • Design Skill
• Technical Skill • Communication Skill
• Human Skill • Leadership Skill
Managerial skills Cont’d
Conceptual skills:
• This refers to the ability to think and conceptualize abstract situations.
These abilities are required for making complex decisions.
In short it is:
• The mental capacity to develop plans, strategies and vision

Human or interpersonal skills:

• This includes the ability to understand other people and interact
effectively with them. The human skills are also important in creation of
an environment in which people feel secure and free to express their
opinions.
In short it is:
• The ability to work with other people in teams
Managerial skills Cont’d
Technical skills:
• These skills include the knowledge, abilities of and proficiency in
activities involving methods, processes and procedures in the relevant
fields as accounting, engineering, manufacturing etc.
Or in short:
• The ability to use the knowledge or techniques of a particular discipline
to attain ends

Design skills:
• These skills enable a manager to handle and solve any kind of
unforeseen or actual problems, that may crop up in the organization.
Such problems could arise due to internal factors or external factors
and/or both.
In short it is:
• The problem solving skill
Managerial skills Cont’d
Communication skills:
• The abilities of exchanging ideas and information effectively. To
understand others and let others understand comprehensively.

Leadership skills
• The abilities to influence other people to achieve the common goal.
Skill distribution at various management
levels
Roles of manager
In 1960, Henry Mintzberg conducted a study to understand about the managerial roles.
He identified 10 managerial roles that are common to all managers. These 10
managerial roles are grouped under: Interpersonal, decisional, and informational
roles.

Roles of Manager

Decisional Informational
Interpersonal
• Entrepreneur
• Figurehead • Monitor
• Disturbance handler
• Leader • Disseminator
• Resource allocator
• Liaison • Spokesperson
• Negotiator
Roles of manager Cont’d
A: Inter-personal Role

1. Figurehead: Represents the company on social occasions. Attending the flag hosting ceremony, receiving
visitors or taking visitors for dinner etc.

2. Leader: In the role of a leader, the manager motivates, encourages, and builds enthusiasm among the
employees. Training subordinates to work under pressure, forms part of the responsibilities of a manager.

3. Liaison: Consists of relating to others outside the group or organization. Serves as a link between people,
groups or organization. The negotiation of prices with the suppliers regarding raw materials is an example for
the role of liaison.
Roles of manager Cont’d
B: Decisional Role:

1. Entrepreneur: Act as an initiator and designer and encourage changes and innovation, identify new
ideas, delegate idea and responsibility to others.

2. Disturbance handler: Take corrective action during disputes or crises; resolves conflicts among
subordinates; adapt to environmental crisis.

3. Resource allocator: Decides distribution of resources among various individuals and groups in the
organization.

4. Negotiator: Negotiates with subordinates, groups or organizations- both internal and external.
Represents department during negotiation of union contracts, sales, purchases, budgets; represent
departmental interests
Roles of manager Cont’d
C: Informational role:

1. Monitor: Seek and receive information; scan periodicals and reports; maintain
personal contact with stakeholders.
2. Disseminator: Forward information to organization members via memos, reports,
and phone calls.

3. Spokesperson: Transmits information to the people who are external to the

organization, i.e., government, media etc. For instance, a manager addresses a
press conference announcing a new product launch or other major deal.
Stakeholders
• Not to be confused with Shareholders.

• Shareholders own a share in the company.

• Stakeholder is anyone with an interest in the business activity.

Stakeholders
• Internal Stakeholders:
Employees
Managers
Shareholders
• External Stakeholders:
Suppliers
Customers
Government
Special Interest Groups
Banks and creditors, pressure groups
Stakeholders
• Internal Stakeholders:
Employees
Managers
Shareholders
• External Stakeholders:
Suppliers
Customers
Government
Special Interest Groups
Banks and creditors, pressure groups
BUSINESS ENVIRONMENT
• The environment of any organization is “ the aggregate of all
conditions, events and influences that surround and affect it.”
• In other words , business environment is individual and organisation
that exists outside the business and have influence direct and indirect
to the business.
• Internal & External environment
• Micro & Macro business environment
Micro Environment
The micro environment is also known as the task environment and
operating environment because the micro environmental forces have
a direct bearing on the operations of the firm.
Suppliers
Customer
Marketing Intermediaries
financers
Public (media and citizens)
Macro Environment
Macro environment is also known as General environment and remote
environment. Macro factors are generally more uncontrollable than
micro environment factors.

Social
Political

Macro
Environment Technological
Legal

Economic
Social Environment
A set of customs,beliefs,behaviour and practices that exists within a population.
Companies often include an examination of socio-cultural environment before entering their
target markets.
1.Demographic factors
2.Attitude of people
3.Social responsibilities
4.Religion
5.Taste & Preference
6.Education
7.Family
8.Natural & Technological factors
9.Income & Lifestyle
1.Language : Sometimes a firm faces language problems like ford faced when they
intorduced their truck brand named ‘fiera’ which means ugly old woman in spanish.

2.Taste & Preference : Taste & preference of a consumer also affects a product’s
demand, so companies have to modify their product accordingly.

3. Dressing & Lifestyle: These factors also impact the demand for a product.

4.Religion : Religious aspects also play a important role in creating & deteriorating the
demand for a product
 A company which benefited due to socio cultural
environment

 McDonalds made segment according to the

demographic in Indian socities.
McDonalds made their food according to religions
in India.
McDonalds believed in Total Quality Management.
They offer food at affordable and convenience
rates which gives direct benefit to them.
Legal Environment
• This refers to the set of laws and regulations which influence the business organisations. The
important legislations that concern the business
• 1.Companies act ,1956
• 2.Foreign exchange management act ,1999
• 3.Bureau of Indian standards act ,1986
• 4.Consumer protection act ,1986
• 5.Environment protection act
• 6.Prevention of foof adulteration act, 1956
• 7.Minimum wages act,1948
• 8.Right to information act,2005
• 9.Indian income tax act,1961
•
Economic Environment
The economic conditions of a country –for example, the nature of the
economy, the stage of development of the economy, economic
resources, the level of income, the distribution of income and assets,
etc.- are among the very important determinants of business
strategies.
political environment
The political environment of a country is influenced by the political
organizations such as philosophy of political parties, ideology of
government or party in power, nature and extent of bureaucracy
influence of primary groups etc.
Taxation policy
Swachh Bharat Abhiyan
No polythene bags
Nestle Maggie
Technological environment
The business in a country is greatly influenced by the technological
development. The technology adopted by the industries determines
the type and quality of goods and services to be produced and the
type and quality of plant and equipment to be used.
Importance Of Business Environment
• Firm to identify Opportunities and getting the first mover advantage. E.g. Maruti for small cars.

• Firms to identify threats and early warning signals. E.g.. Multinational entering Indian market.

• Continuous learning: Environmental analysis makes the tasks of managers easier in dealing
with business challenges.

• Meeting competition: It helps the firms to analyse the competitors strategies and formulate
their own strategies accordingly.

• Identifying firms strengths and weaknesses.

Objectives of Business
One of the basic functions of management is to identify and define the objectives
of business. It is the basis of all managerial functions. Without objectives,
management will very much like Alice in Wonderland. The following dialogue
between Alice and the cat is reproduced here from this classic fiction by Lewis
Carrol, to focus on the importance of objectives.
“Would you tell me, please which way I ought to go from here?”,Asked Alice
“ That depends a good deal on where you want to go”, said the cat
“I don’t much care where I go,” said Alice,
“Then it doesn’t matter which way you go”, said the cat.

A management which does not define its objectives would not know where it
wants to go, and become a victim of confusion and indecisiveness in determining
what functions, activities and tasks should be performed by its employees.
The concept and Nature of objectives
Objectives are broad statements of the values which an organization
aims at attaining in the future. In the case of business enterprises,
objectives generally relates to profit, market standing, employee
development, technological leadership, and so forth.
Objectives must be SMART.
Purpose, Mission, objectives and Goals
Purpose: Refers to the basic intention in the establishment of an organization.
E.g. The purpose of establishing a hospital may be to provide medical care to
patients, to safeguard the health of the community, or to provide practical
training to medical students, or a combination of all these purposes.
Mission: A broadly stated definition of the organization’s basic business scope and
operations that distinguishes it from similar types of organizations.
Objectives: They are more specific than purpose and have a time dimension.
objectives refer to the values that a organization seeks to attain in the future.
Goals: These constitute elements of objectives, and are more specific. Objectives
are broken down into goals for the attainment by its various components
divisions, departments, sections and individuals.
Purposes of goals and plans
• Legitimacy. An organization mission describes what
the organization stands for and its reason for
existence. It symbolizes legitimacy to external
audiences such as investors, suppliers, and customers.
• Source of motivation and commitment. Goals and
plans facilitate employees’ identification with the
organization and help motivate them by reducing
uncertainty and clarifying what they should
accomplish.

Goal provides the “why” of an organization

or subunit’s existence, a plan tells the “how”.
• Guides to action. Goals and plans provide a sense of
direction. They focus attention on specific targets and
direct employee efforts toward important outcomes.
• Standard of performance. Because goals define
desired outcomes for the organization, they also serve
as performance criteria.
Example:

Mission Statement for Mail Boxes Etc.

Our Mission

Making Business Easier Worldwide Through Our Service and

Distribution Network, Delivering Personalized and Convenient
Business Solutions With World-Class Customers Service.

Our Core Values

Caring Honesty Fairness Commitment

Integrity Trust Respect Accountability

Examples of Mission & Vision
• Southwest Airlines:
• Mission: To provide high quality service at a lower price
in the airline industry.
• Vision: Opening air travel to a wider group of leisure
travelers while infusing the organization with a sense of
fun.
• Apple Computer:
• Mission: To bring the best personal computing products
and support to consumers around the world.
• Vision: One person, one computer.
Vision Statement
• Futuristic view regarding the ideal state or
conditions that the organizations aspires
to change or create.
McDonald’s Vision Statement:
“Where the world buys more
McDonald’s than any other
fast food”
Mission Statement
• A statement of the business’s core aims,
phrased in a way to motivate
employees and stimulate interest
by outside groups.

McDonald’s Mission Statement:

“McDonald’s aims to be the world’s best quick
service restaurant experience. Being the best
means providing outstanding quality, service,
cleanliness and value so that we make every
customer in every restaurant smile.”
Difference of Vision vs Mission
• Vision statement describes the future if the mission is accomplished.

• Mission statement outlines the purpose of the organization.

What we do
For whom we do it
What is the benefit
 External Message
Legitimacy for:
investors,
suppliers,
customers,
Mission community
Stateme
nt

Strategic
Goals/Plans
Senior Management Internal Message
(organization as a legitimacy,
whole) motivation,
guides,
rationale,
Tactical Goals/Plans standards
Middle Management
(major divisions, functions)

Operational Goals/Plans
Lower Management
(departments, individuals)
Goals and plans
• Strategic goals. Broad statements of where the organization wants to
be in the future; pertain to the organization as a whole rather than to
specific divisions or departments.

• Strategic plans. The actions steps by which an organization intends to

attain strategic goals.
• Tactical goals. Goals that define the outcomes that
major divisions and departments must achieve in
order for the organization to reach its over-all goals.

• Tactical plans. Plans designed to help execute major

strategic plans and to accomplish a specific part of the
company’s strategy.
• Operational goals. Specific, measurable results
expected from departments, work groups, and
individuals within the organization.

• Operational plans. Plans developed at the

organization’s lower levels that specify action steps
toward achieving operational goals and that support
tactical planning activities.
 MISSION

Manufacture both standard and custom metal products for various applications in the
machine tool industry

STRATEGIC GOALS

President
12% return on investment; 5% growth
No employee layoff; Excellent service to customer

TACTICAL GOALS

Finance V.P. Production V.P.

Keep outstanding accounts below $500,000 Manufacture 1,200,000 products at average cost of $19
Keep borrowing below $2 million Increase manufacturing productivity by 2%
Provide monthly budget statements for departments Resolve employee grievances within 3 working days
Have delinquent accounts of no more than 2% of
total

OPERATIONAL GOALS

Accounts Receivable Manager Supervisor – Automatic Machines

Issue invoices within 5 days of sale Produce 150,000 standard units at average cost of $16
Check new customers’ credit within 1 working day Have machine downtime of less than 7%
Allow no account to be overdue more than 5 months Respond to employee grievances within 24 hours
Call delinquent accounts weekly
Types of objectives
Survival
Growth
Profit
Efficiency and Productivity
Innovation
Employee development
Social Responsibility
Survival
Survival objective is essential for any business in that no survival means no today and no future.
Circumstances for a business to consider survival to be important can be seen in the following table:
Growth
Growth objective may refer to the goal of a business to become larger,
stronger or more competitive. Possible reasons for a business to regard
growth as an objective:
1. To survive, no growth may mean ‘final death’.
2. To introduce new products in order to meet customer changing needs.
3. To reduce risks of business: In fierce competition, if a business can not
become strong enough, it is more likely to be eaten up by other stronger
competitors.
4. To have low costs and more profits on a larger scale (economy of scale).
5. To make employees, managers, and owners all feel happy and secure…
Profit
One of the basic and most important objectives of a business is to make profit.
1. Major motivating force for investors to contribute to its capital resources
by buying its stocks.
2. Creditors lend money to an enterprise which earns good profit.
3. Any enhancement in salaries, wages and perquisites of employees can
come only out of profits.
4. A growth company needs substantial internal financing for diversification,
expansion in production capacity and so forth.
5. Profits provide the most important quantitive measure of the operating
efficiency of an enterprise.
Efficiency & Productivity
Efficiency & Productivity are closely interrelated objectives. Efficiency
means economy in the utilization of resources. Productivity is the
measurement of efficiency.
Innovation
Innovation is needed in technology, methods and processes of
production in order to keep a pace with scientific and technological
inventions.
Rapid changes in production technology, information systems, social
expectations from business and customers needs make it imperative
for business enterprises to innovate continually.
Employee Development
• Most precious, provides long term edge over its competitors
• Creating a socio-technical environment which not only permits them
but also encourages them to utilize and develop their abilities and
competence.
• Give them responsibility , authority and resources for the
performance of their functions.
• Environment of tolerance of mistakes
Social Responsibility
• The obligation of any business to protect and serve public interest is
known as social responsibility of business.
 Possible reasons for a businesses to pursue image and
social responsibility as its objectives

Possible Reasons Brief Explanations

Many laws have been passed to protect workers’
1) Government legislation health and safety, reduce discrimination against
disabled workers and protect the environment.
Increasing competition has become a challenge for
modern businesses. If customers think badly of a
2) Competitive pressure business, then the business is finished. The
business’s market share will be taken over by other
companies.
Good image may mean more sales and more profit.
A company can benefit a lot if it has a good relation
3) Benefits for the business with its suppliers. Reliable supply of raw materials
is key to production.
Paying attention to image and social responsibility
4) Sustainable development is key to long term development.
Balancing the objectives
Management By Objective(MBO)
Description of an accountant’s job:
My job is to establish and produce management accounting records of
the company and the preparation of budgets and financial statements
in accordance with the company policies and the company act.
My job is to produce management accounting data that will aid
decision making at all levels of management.
Management by Objectives (MBO)
• Is a method whereby managers and employees
define goals for every department, project, and
person and use them to monitor subsequent
performance.
4 major activities:

1. Set goals
2. Develop action plans
3. Review progress
4. Appraise overall performance
Step 1: Set Goals Step 2: Develop Action Plans

• Corporate Strategic Goals

• Departmental Goals
• Individual Goals Action Plans

Review Progress

Step 3: Review Progress

Take Corrective Action

Appraise Performance

Step 4: Appraise Overall Performance

Goal Setting
• Organizational objectives: Tentative

• Divisional, Departmental, Sectional & individual objectives: tentative

• Organizational objectives: Modified & Finalized

• Divisional, Departmental, Sectional & individual objectives: Modified

& Finalized
 Benefits of MBO Problems with MBO

1. Manager and employee efforts 1. Constant change prevents MBO from

are focused on activities that taking hold.
will lead to goal attainment.

2. Performance can be improved at 2. An environment of poor employer-

all company levels. employee relations reduces MBO
effectiveness.

3. Employees are motivated. 3. Strategic goals may be displaced by

operational goals.

4. Departmental and individual 4. Mechanistic organizations and values

goals are aligned with company that discourage participation can
goals. harm the MBO process.

5. Too much paperwork saps MBO

energy.
Social Responsibilities of Business

As we know, every business operates within a society. It uses the resources of the society and depends on the society for its functioning. This creates an obligation on the part of business to
look after the welfare of society. So all the activities of the business should be such that they will not harm, rather they will protect and contribute to the interests of the society. Social
responsibility of business refers to all such duties and obligations of business directed towards the welfare of society. These duties can be a part of the routine functions of carrying on business
activity or they may be an additional function of carrying out welfare activity.

Let us take an example. A drug-manufacturing firm undertakes extensive research and thus, produces drugs which are qualitatively superior. It also provides scholarships or fellowships to
the family members of its employees for studying abroad. We find, in both the cases, the drug-manufacturing firm is carrying out its social responsibility. In case of the former, it is a part of its
routine business function while in the latter case it is a welfare function.

Why should business be socially responsible?

Social responsibility is a voluntary effort on the part of business to take various steps to satisfy the expectation of the different interest groups. As you have already learnt, the interest groups
may be owners, investors, employees, consumers, government and society or community.

Public Image - The activities of business towards the welfare of the society earn goodwill and reputation for the business. The earnings of business also depend upon the public image of its
activities. People prefer to buy products of a company that engages itself in various social welfare programmes. Again, good public image also attracts honest and competent employees to
work with such employers.

Government Regulation - To avoid government regulations businessmen should discharge their duties voluntarily. For example, if any business firm pollutes the environment it will naturally
come under strict government regulation, which may ultimately force the firm to close down its business. Instead, the business firm should engage itself in maintaining a pollution free
environment.

Survival and Growth -Every business is a part of the society. So for its survival and growth, support from the society is very much essential. Business utilizes the available resources like
power, water, land, roads, etc. of the society. So it should be the responsibility of every business to spend a part of its profit for the welfare of the society.

Employee satisfaction - Besides getting good salary and working in a healthy atmosphere, employees also expect other facilities like proper accommodation, transportation, education and
UNIT 2

The Nature and Purpose of planning

“Successful managers deal with foreseen problems and unsuccessful managers struggle with unforeseen problems”….Terry
SYSTEM APPROACH TO MANAGEMENT
EXTERNAL ENVIRONMENT
Inputs
Goal inputs of claimants 1.Human
2.Capital
1. Employees 5. Governments Managerial Knowledge, 3.Managerial
2. Consumers 6. Community Goals of claimants and use 4.Technological
3. Suppliers 7. Other of inputs(
4. Stock holders

PLANNING (Part 2)
External

EXTERNAL ENVIRONMENT
Facilitated by
communication variables &

EXTERNAL ENVIRONMENT
Organizing (Part 3)
that also link the information
organization with 1. Opportunities
Reenergizing the external 2. Constraints
Staffing (Part 4) 3. Other
the system environment
(Part 1 & 7.
Domestic and
Leading (Part 5) internal
environment)

Controlling (Part 6)

Outputs
1. Products 4. Satisfaction
To produce outputs 2. Services 5.Goal Integration
3. Profits 6. Other

EXTERNAL ENVIRONMENT
91
Planning
Defined in two directions by management thinkers.
• Based on futurity
• As an intellectual function
• Based on futurity:
• “Planning is a trap laid down to capture the future” (Allen)
• “Deciding in advance what is to be done in future” (Koontz)
• “Informed anticipation of future”( Haimann)
• Anticipatory decision making” (R L Ackoff)

92
• As an intelligence function:
• “Planning is a thinking process, an organized foresight,
a vision based on fact and experience that is required
for intelligent action”( Alford & Beatty)
• “Deciding in advance what to do, how to do it, when to
do it and who has to do it” ( Koontz & O’ Donnell)

Planning thus involves looking into the future, anticipating it, and attempting
to influence it through anticipatory decisions, so that the desired goals are
achieved with maximum possible efficiency and effectiveness. Outcome of
planning is a plan, which is a document that specifies the course of action
the organization will take.

93
Planning- A bridge

Planning Where we want to

Where we are
be

94
Elements of Planning are:
1. What will be done- what are the objectives in the short and in the long run.
2. What resources will be required-this involves estimation of the available and
potential resources, estimation of resources required for the achievement of
objectives, and filling the gap between the two, if any.
3. How it will be done-it involves two things: (i) determination of tasks, activities,
projects, programs, etc (ii) formulation of strategies, policies, procedures,
methods, standards and budgets for the above purpose.
4. Who will do it- it involves assignment of responsibilities to various managers by
breaking down of the total enterprise objectives into segmental objectives
resulting into divisional, departmental, sectional and individual objectives.
5. When it will be done-It involves determination of the timing and sequence.
Importance of Planning
• Provides direction
• Creates a unifying frame work
• Leads to economical utilization of resources
• Reduces the risks of uncertainty
• Facilitates decision making
• Encourages Innovation & Creativity
• Facilitates control

96
Types of Plans

• Long range Vs Short range

• Strategic Vs Operational

• Proactive Vs Reactive

• Standing Vs Single Use

97
 Long range Vs Short range
Long range plan Point of Short range plan
distinction

Covers many years & Meaning Covers less than one year
affects many departments and is more specific &
of an organization detail
5 yrs or more Time Up to one year

Organizations linkage Primary Linkage with various

with external factors focus parts of an organization
Mission ,long term goals Deals with Current operations of
and strategies organization
Top management Prepared Lower level executives
by

98
Long Range Planning
Product diversification
Management development
Research and Development
Cultivation of new markets
Increasing the market share
Reducing the cost of capital by modifying the capital structure
Expansion of plant capacity
 Strategic Vs Operational
Strategic Plan Operational Plan

Decides major goals and policies Decides the detailed use of

of organization resources for achieving each goal
Done at top level of management Done at lower level of
management

Long term Short term

Based on long term forecasts and Based on the past performance

is more uncertain and is less uncertain
Less detailed More detailed as it involves day-
to-day operations
100
Proactive Vs Reactive
• Proactive Planning:
• Managers challenge the future, anticipating future
contingencies and get ready with alternative routes for
unforeseen circumstances
• Reactive Planning:
• Organizations react to events as and when they arise

101
Standing Vs Single Use

• Standing Plans • Single Use plans

• Developed for activities • Developed to carry out
that recur regularly a course of action that
over a period of time is not likely to be
repeated in future
• Ex:
• Objectives, Policies, • Ex:
Procedures, Methods, • Programmes,
Rules Schedules, Projects,
Budgets

102
 SINGLE-USE PLANS
Program
• Plans for attaining a one-time organizational goal
• Major undertaking that may take several years to complete

• Large in scope; may be associated with several projects

Examples:
• Building a new headquarters
• Converting all paper files to digital

Project
• Also a set of plans for attaining a one-time goal
• Smaller in scope and complexity than a program; shorter time
horizon
• Often one part of a larger program
Examples:
• Renovating the office
• Setting up a company intranet
 STANDING PLANS
Policy
• Broad in scope – a general guide to action
• Based on organization’s overall goals/strategic plan
• Defines boundaries within which to make decisions
Examples:
• Drug-free workplace policies

Rule
• Narrow in scope
• Describes how a specific action is to be performed
• May apply to specific setting
Example:
• No-smoking rule in areas of plant where hazardous materials are stored
Procedure
• Sometimes called a standard operating procedure (SOP)
• Defines a precise series of steps to attain certain goals
Examples:
• Procedures for issuing refunds
• Procedures for handling employee grievances
The Planning Process
• Forecasting
• Determination of objectives
• Determination of means for
attainment the objectives (Strategies,
policies, procedures, schedules, methods,
standards and budgets)
• Determination of resources required
(Financial resources, equipment & facilities,
Materials, supplies & services and manpower)

105
 Forecasting
It involves careful study of past data & present
scenario. Intelligent and informed estimating or
predicting the future internal and external
environment of the enterprise.
Purpose:
To estimate the occurrence, timing or magnitude of future events.
These Forecasts relate to various aspects of business,
particularly general economic conditions, sales, technology,
population growth and structure, social norms and values,
political and legal conditions and so forth.
Types of forecasting:
1. Economic Forecasting
2. Sales Forecasting
3. Technological Forecasting
15
Economic Forecasting
Mainly relates to the estimates of employment, growth in national
income and its distribution and price level. Three methods may be
used to estimate the impact of economic forecasts for the company’s
future business:
• Lead and lag method
• Overshoot method
• Weighing of opposite factors
A forecast in economic changes is related with the industry’s demand,
latter with the demand for the company’s product.
Lead and Lag method: In order to estimate the effect of future
economic forecasts on the company’s business, the past relationship
of general economic conditions with the conditions of business is
ascertained.
Overshoot method: Based on the assumption whenever business
activity rises above “normal”, a recession is bound to set in.
Weighing of opposite factors: Listing of factors for and against
expansion or contraction of general economic activity.
Sales Forecasting
• Jury of Executive Opinion method
• Sales Force composite Estimates
• Polling
• Mathematical projection
• Market Research
Technological Forecasting
• Graphic Charting method: Used by chemical, aerospace & computer
industries to forecast future technological developments by plotting past
developments on a logarithmic scale and extrapolating it.
• Delphi method: A panel of experts, usually both from inside and outside
is selected. These experts are individually asked to forecast future
developments in specified areas.
• Goal oriented Forecast: A goal is first determined and technological
requirements for attaining the goal are identified.
• Matrix method: A matrix is prepared with technological developments,
product functions and time factors shown on each of its three
dimension.
 Unit 3
MANAGEMENT OF HUMAN AT WORK
Human Resource Management/ Staffing
• Human resource management (HRM) is concerned with getting,
training, motivating, and keeping competent employees.
• Staffing is the managerial function of recruitment, selection, training,
developing, promotion and compensation of personnel.
• Staffing may be defined as the process of hiring and developing the
required personnel to fill in the various positions in the organization.
It involves estimating the number and type of personnel required,
recruiting and developing them, maintaining and improving their
competence and performance.
Importance of Staffing
• Staffing helps in discovering and obtaining competent employees.
• It facilitates higher productive performance by appointing right man
for right job.
• It reduces the cost of personnel by avoiding wastage of human
resources.
• It provides continuous survival and growth of the business through
development of employees.
Staffing Process

Manpower
Recruitment Selection Orientation
Planning

Training and Performance Competent High-Performing Workers

Development Appraisals

Compensation Safety and

and Benefits Health
Manpower Planning
 first step of the staffing function.
forecasting and determining the future manpower needs of the organization.
quantitative and qualitative measurement of work force required by the
organization
Recruitment
Recruitment is a positive process of searching for prospective
employees and stimulating them to apply for the vacant positions in
the organization.
It is the process of creating the application pool.
It is the process to attract maximum number of applicants so as to have
more options for the selection.
Sources of Recruitment
Internal External
Sources Sources

Campus
Promotions recruitments

Transfers Advertisements

Employment
Ex employees
agencies

Employee
Referrals

Employment
exchange

Casual caller
Selection
• Selection is the process of choosing the most suitable person for the
current position or for future position from within the organization or
from outside the organization.
• The selection of managers is one of the most critical steps in the
entire process of managing.
Selection Process
• Receiving and screening the application
• Informing candidates
• Preliminary Screening
• Administering Tests (Achievement Test, Aptitude test, Trade Test,
Interest Test and Intelligence Test etc)
• Checking References
Placement & Orientation
• Placement takes place by putting right man on the right job.
• Once screening takes place, the appointed candidates are made
familiar to the work units and work environment through the
orientation programmes.
Training & Development
• Training is the process of enhancing the skills, capabilities and
knowledge of employees for doing a particular job
• Development is a continuous process. It is fox for refreshing
information knowledge and skills of the executives. In the case of
development, off the job methods are used. It provides wider them
capable to face organizational problems and challenges is a bold
manner.
Compensation
• Employee Remuneration refers to the reward or compensation given
to the employees for their work performances.
UNIT 3
ORGANIZING
• Organizing
• The process by which managers establish functional relationships among
employees to achieve goals.
• Organizational Structure
The formal system of task and reporting relationships that controls,
coordinates, and motivates employees so that they cooperate and
work together to achieve an organization’s goals
• Organizational design
• The process by which managers create a specific type of organizational
structure and culture so that a company can operate in the most efficient and
effective way
An Organization Chart
The Organization Chart – What it Shows
Organization charts convey five major points about an organization’s structure:

1. Activities of the organization: the chart as a whole indicates the range of activities in which
the organization is involved.
2. Subdivisions of the organization: each box represents a subdivision of the organization
responsible for a portion of the work.
3. Type of work performed: the label in each box indicates the department’s area of
responsibility.
4. Levels of management: the chart shows the management hierarchy; all persons who report
to the same individual are on the same management level, or horizontal level on the chart.
5. Lines of Authority: the lines that connect the boxes show the official lines of authority and
channels of communication for the organization.
The Organization Chart – What it Doesn’t
Show
There are a number of things the organization chart does not show about the firm:

1. Degree of responsibility and authority of individuals;

2. Degree of decentralization that exists;
3. Staff and line functions;
4. Position status or importance;
5. Lines of actual communication;
6. Relationships among members; and
7. The ‘informal’ organization.
Organization Structures
Organization structures differ from one another in the way
responsibility-authority and interactional relationships are established
among jobs, personnel and physical factors.
1. Line organization
2. Line and staff organization
3. Divisional structure
4. Committee Structure
5. Project Structure
6. Matrix Structure
1.Line Organization
-Characterized by direct vertical authority-responsibility- accountability
relationships which connects jobs and positions at each level with those
above and below it.
- Creates a network of hierarchy of inter relationships throughout the
organization based on chain of command.
- Results from primary functional differentiation by the creation of pr.
Departments or divisions.
- In this structure, all employees have tasks, activities and goals assigned to
them by their line superiors, who delegate to them appropriate authority to
make decisions and take actions for task performance, each subordinate is
accountable to his superior for his performance.
Line Organization Chart
Board of
Directors

President

VP - VP -
VP - Finance
Operations Marketing

Region 1 Region 2 Region 3

Advantages of line structure
• Simplicity and clarity
• Relationships among jobs and position holders are clearly defined,
line structure has the advantage of speed with which instructions,
orders, assignments and performance reports flow from downward
and upward.
• Consistent with principles of unity of command and unity of
directions
Disadvantages of line structure
• Absence of staff specialists- As the organization grows and job
become complex, requiring varied kinds of abilities and skills for
effective performance, line managers, find it difficult to cope fully
with their job, and need the advice, guidance and support of staff
specialists such as costing experts, personnel specialists, quality
control, safety, purchasing and a number of other staff personnel.
Line and staff Structure
- Staff units are result of secondary functional differentiation. eg:
personnel , quality control, purchasing, accounting, security. Etc.
- Functional specialists who provide advice, guidance, service and
support to line managers in the effective performance of their
functions.
- The staff specialists stand mainly advisory relationship with line
managers. They have no command authority over them.
Line & Staff Organization Chart
Advantages
• Line managers receive specialized advice and services from staff
specialists. Eg: personnel manager helps the production manager in
hiring, training and disciplining the employees. He also renders him
advice on matters like employee motivation and morale, effectives
communication relating human fator with technical aspects.
Disadvantages
• Line and staff structures make the organizational relationships
complex and complicate the problem of coordination, communication
and control.
• The staff specialists also tend to infringe the unity of command.
Divisional structures
 A divisional organizational structure is one in which a set of
relatively autonomous units, or divisions, are governed by a central
corporate office but where each operating division has its own
functional specialists who provide products or services different
from those of other divisions
 This expedites decision making in response to varied competitive
environments
 The division usually is given profit responsibility
Divisional Organization Structure
Committee Structure
• A committee is a group of people who have been formally assigned
some task or some problem for their decision and implementation.
• In modern business enterprise there is a widespread use of
committee in all areas of mgmt.
• In short, committee is that type of organization that takes decisions
collectively for the business.
• This type is not only useful in business but also has been found to be
more useful in social institutions, public undertakings, religious and
political institutions.
Committees are created in almost all organizations, on a
permanent(standing committees) or ad hoc basis.
The primary function of committees is to make or suggest decisions on
problem requiring an integration of needs of various departments or
divisions.
Generally speaking, permanent committees are policy making and
decision making bodies such as the executive committee, the finance
committee, the purchase committee, etc.
Ad hoc committees concern themselves with specific problems and are
dibanded after performing the specific functions assigned to them.
 Top executive Committee

Production Committee Sales Committee Administrative

Committee

Publicity Sales
Purchase Factory
Committee
Committee Committee Committee
Secretary Accountant

Clerks Workers Clerks Salesmen Clerks Clerks

Merits:
1) Better decision making.
2) Democratic.
3) Co-ordination.
4) Decentralization of Authority.
5) Reduced work burden.
6) Improvement in Relations.
7) Research is encouraged.
Demerits:
1) Delay in decision making.
2) No individual responsible.
“When it is responsibility of everybody, it is of nobody.”
3) Groupism or internal conflicts.
Project Structure
Unity of command, vertical distribution of authority and specialization of
tasks have been found unsuitable for managing organizations facing
volatile environments.
Firms dealing in multiple products, facing changing technologies, major
uncertainties in the market, and having need for innovation are moving
towards project management.
The emphasis is on horizontal relationships and creation of teams for
the achievement of specific goals.
Project managers are drawn from various functional areas of the
enterprise, formed into a team of specialists for the performance of total
task of the project and its execution until its completion.
Matrix structure
• An organization in which specialists from functional departments are
assigned to work on one or more projects led by a project manager
• In matrix organizations authority flows vertically within functional
departments, while authority of project managers flows horizontally
crossing vertical lines. This two way flow of authority creates a grid or
matrix of authority flows.
Span of Control
An executive can effectively manage only a limited number of
subordinates, it leads to creation of levels. The no. of subordinates an
executive can manage effectively is called his “ span of management”
or “span of control”.
Wider span of management with fewer levels of authority results into a
flat organization.
Narrow spans with larger number of levels in the hierarchy lead to a tall
structure.
Span of Control
Span of Control - Illustration
Factors affecting Span of Management
• Competence of managers
• Nature of work
• Competence of subordinates
• Organizational level
Tall Organizations
• Tall structures have many levels of authority and narrow spans of
control.
Merits
 better communication amongst superiors and subordinates.
 Control on subordinates can be tightened
Limitations
 Decision-making is primarily centralized. This restricts employees’
creative and innovative abilities.
 As hierarchy levels increase, communication gets difficult
creating delays in the time being taken to implement decisions.
 Communications can also become distorted as it is repeated
through the firm.
 Can become expensive
Tall Organizations
Flat Organizations
Flat structures have fewer levels and wide spans of control.
• Merits
decision-making is decentralized
Structure results in quick communications
• Limitations
lead to overworked managers.
 difficult to co-ordinate the activities of subordinates
 Difficulty in controlling
Flat Organizations
Delegation of Authority
• Delegation of authority is not only giving tasks to employees but also
empowering them to make commitments, use resources, and take
whatever actions are necessary to carry out those tasks.
• Delegation gives a responsibility, or obligation, to employees to carry
out assigned tasks satisfactorily.
• The principle of accountability means that subordinates who accept
an assignment and the authority to carry it out are answerable to a
superior for the outcome.
• The process of delegation establishes a pattern of relationships and
accountability between superior and subordinates.
 • Centralization and
decentralization refer to the
Centralization degree to which authority is
Centralization delegated in a business.
• Complete centralization means
that employees have no
Decentralization
Decentralization authority to make decisions.
• Complete decentralization
(delegation) means employees
have all the authority to make
decisions.
Centralization and Decentralization
Centralization
The degree to which decision-making is concentrated at
a single point in the organizations.
organizations in which top managers make all the decisions and lower-
level employees simply carry out those orders.
Decentralization
organizations in which decision-making is pushed down
to the managers who are closest to the action.
Factors that influence the amount of
centralization
More Centralization
 Environment is stable.
Lower-level managers are not as capable or experienced at making
decisions as upper-level managers.
Lower-level managers do not want to have a say in decisions.
Decisions are significant.
Organization is facing a crisis or the risk of company failure.
Effective implementation of company strategies depends on managers
retaining say over what happens
Factors that influence the amount of
decentralization
More decentralization
 Environment is complex, uncertain.
 Lower-level managers are capable and experienced at making decisions.
 Lower-level managers want a voice in decisions.
 Decisions are relatively minor.
Company is geographically dispersed.
Effective implementation of company strategies depends on managers having
involvement and flexibility to make decisions.
Organizational structures within purchasing

Centralized purchasing organizational structure (example)

Organizational structures within purchasing

Decentralized purchasing organizational structure (example)

Formal organisations
Schein defines a formal organisation as….

… the planned, co-ordination of the activities of a

number of people for the achievement of some
common, explicit purpose or goal, through the
division of labour & function, & through a hierarchy
of authority & responsibility
Formal organisations

Formal organisations are:

• Deliberately planned and created

• Concerned with the co-ordination of activities
• Hierarchically structured with stated objectives
• Based on certain principles such as the specification
of tasks and defined relationships of authority &
responsibility
 The formal & informal organisation

.
The formal organisation
• Organisation charts • Production efficiency

• Spans of control • Policies & procedures

• Job definitions &

descriptions
The informal organisation
Groups within a formal organization in which personal relationships are guided
by norms, rituals, and sentiments that are not part of the formal organization
 These groups form norms to control work behavior
Informal groups form to meet the needs of the people that are
ignored by the formal organization
Formal groups tend to be impersonal so these informal groups offer
personal attention
The informal organisation

The informal organisation arises from:

• the interaction of people working in the organisation

• their psychological and social needs
• the development of groups with their own relationships
and norms of behaviour, irrespective of those defined
within the formal structure
The informal organisation
• Personal animosities & • Prestige & power structures
friendships
• Emotional feelings, needs &
• Grapevines desires

• Group norms & sentiments • Effective relationships

• Informal leaders • Personal & group goals

Advantages & Disadvantages of Informal
Organization
Advantages Disadvantages
• Sense of belonging • Resistance to change
• Safety valve for emotional problems • Suboptimisation of
• Breeding ground for innovation and organizational goals to group
originality goals
• Important channel of
communication
• Rumour
• Social control • Group-think philosophy
• Gives the manager feedback about
employees and their work
experiences
 Comparing formal & informal Table 4.2

organisations

Source: Adapted from J. L. Gray and F. A. Starke, Organizational Behavior: Concepts and Applications, Fourth edition, Merrill
Publishing Company, an imprint of Macmillan Publishing Company (1988), p.432. Reproduced with permission from Pearson
Education Inc., Upper Saddle River, NJ.
 Table 4.2
Comparing formal & informal organisations

Source: Adapted from J. L. Gray and F. A. Starke, Organizational Behavior: Concepts and Applications, Fourth edition, Merrill
Publishing Company, an imprint of Macmillan Publishing Company (1988), p.432. Reproduced with permission from Pearson
Education Inc., Upper Saddle River, NJ.
 Table 4.2
Comparing formal & informal organisations

Source: Adapted from J. L. Gray and F. A. Starke, Organizational Behavior: Concepts and Applications, Fourth edition, Merrill
Publishing Company, an imprint of Macmillan Publishing Company (1988), p.432. Reproduced with permission from Pearson
Education Inc., Upper Saddle River, NJ.
DIRECTING
UNIT 4
Directing
Directing is the process of integrating the people with the organization
so as to obtain their willing and zealous cooperation for achievement of
its goals.
Schein called directing is a psychological contract as it fulfills both
individual and organizational needs.
This requires integration of organizational goals with individual and
group goals.
Employees as individuals and as group members will contribute their
abilities and efforts for the achievement of organizational goals to the
extend that they perceive that it simultaneously results in advancement
towards their own individual and group efforts.
When an individual joins an organization, he brings with him a variety
of needs including needs for making his living, gaining prestige,
position and power, socializing, developing his abilities and become
what he is capable of being, etc.
On the other hand , organization has a variety of needs of its own,
including needs for tasks performance, goal achievement, change and
growth.
Definitions of Direction
In the words of Koontz and O'Donnell, "Direction is a complex
function that includes all those activities which are designed to
encourage subordinates to work effectively and efficiently in both
short and long term.“
In the words of Ernest Dale, "Direction is telling people what to do
and seeing that they do it to the best of their ability. It mistakes are
corrected, providing on-the-job instructions and, of course, issuing
orders.“
Characteristics / Nature / Elements /
Essential of Direction
Direction has the following characteristics as its inherent nature:
 Management Function: direction is a managerial function performed by all the managers or
supervisors at all the levels of an enterprise.
 Guiding Process: Direction is not limited to the issuing of orders as well as instructions but it also
includes the process of guiding and inspiring subordinates.
 Continuous Activity: Direction is the continuous activity. It start from planning function throughout
and there is no end to it and directing function continues at all the levels of the management process
till the end.
 Flow of Direction: The flow of direction in an organization initiates from the top level to the bottom
level.
 Direction has Wide Dimensions: Direction has wide dimensions. It is not concerned with only issue of
orders and instructions to the subordinates. It also includes communication, motivation and
supervision of subordinates.
 Readily Acceptable: Direction should be such which is readily acceptable to the subordinates. It
should be both oral and written keeping in view the time factor and the capability of subordinates.
Components of Directing
• Communication
• Motivation
• Leadership
COMMUNICATION

Interchange of ideas, information, feelings and emotions among two or

more persons in a way that they share a common understanding
about it.
Functions of Communication
Control
 Formal and informal communications act to control individuals’ behaviors in
organizations.
Motivation
 Communications clarify for employees what is to done, how well they have done it,
and what can be done to improve performance.
Emotional Expression
 Social interaction in the form of work group communications provides a way for
employees to express themselves.
Information
 Individuals and work groups need information to make decisions or to do their work.
Importance of Communication
• Effectiveness of a manager indeed depends on his ability to
communicate effectively with his superiors, subordinates, peers and
external agencies such as customers, bankers, suppliers, union,
government, and so forth.
• His ability to make sound decisions depends on the availability of
relevant, accurate and timely information.
• In order to provide guidance and direction to his subordinates,
motivate them.
The Interpersonal Communication Process
Interpersonal Communication
Message
Idea, information, feelings, attitudes
Encoding
Formalizing of ideas & giving it a concrete shape so that it can be expressed in
words, pictures, graphs, diagrams or even gestures.
Channel
The medium through which the message travels
Decoding
The receiver’s retranslation of the message
Noise
Disturbances that interfere with communications
Interpersonal Communication Methods
• Face-to-face • E-mail
• Telephone • Computer conferencing
• Group meetings • Voice mail
• Formal presentations • Teleconferences
• Memos • Videoconferences
• Traditional Mail
• Fax machines
• Employee publications
• Bulletin boards
• Audio- and videotapes
Barriers to Effective Interpersonal
Communication
• Filtering
The deliberate manipulation of information to make it
appear more favorable to the receiver.
• Emotions
Disregarding rational and objective thinking processes and
substituting emotional judgments when interpreting
messages.
• Information Overload
Being confronted with a quantity of information that
exceeds an individual’s capacity to process it.
• Defensiveness
When threatened, reacting in a way that reduces the
ability to achieve mutual understanding.
• Language
The different meanings of and specialized ways (jargon) in
which senders use words can cause receivers to
misinterpret their messages.
• National Culture
Culture influences the form, formality, openness, patterns
and use of information in communications.
Overcoming the Barriers to Effective
Interpersonal Communications

• Use Feedback
• Simplify Language
• Listen Actively
• Constrain Emotions
• Watch Nonverbal Cues
Types of Organizational Communication
• Formal Communication
Communication that follows the official chain of command or is part of the
communication required to do one’s job.
• Informal Communication
Communication that is not defined by the organization’s hierarchy.
Permits employees to satisfy their need for social interaction.
Can improve an organization’s performance by creating faster and more effective
channels of communication.
Communication Flows

D
U o
p w
w n
a Lateral w
r a
d r
r d
d nal r
o
i ag d
D
Direction of Communication Flow
• Downward
Communications that flow from managers to employees to inform, direct,
coordinate, and evaluate employees.
• Upward
Communications that flow from employees up to managers to keep them
aware of employee needs and how things can be improved to create a
climate of trust and respect.
Direction of Communication Flow (cont’d)
• Lateral (Horizontal) Communication
Communication that takes place among employees on the
same level in the organization to save time and facilitate
coordination.
• Diagonal Communication
Communication that cuts across both work areas and
organizational levels in the interest of efficiency and
speed.
The Grapevine
• An informal organizational communication network that is active in
almost every organization.
Provides a channel for issues not suitable for formal communication channels.
The impact of information passed along the grapevine can be countered by
open and honest communication with employees.
MOTIVATION
Motivation is a psychological process that causes
the arousal, direction, and persistence of voluntary actions that are
goal directed.
Why know about motivation?
Help you understand your behavior and the behavior of others
Can help a manager build and manage a “system of motivation.”
Offers conceptual tools for analyzing motivation problems in organizations
Needs
• Unfulfilled physiological and psychological desires of an individual.
• Explain workplace behavior and attitudes.
• Create tensions that influence attitudes and behavior.
• Good managers and leaders facilitate employee need satisfaction.
Types of needs
• Physical needs
• Satisfaction of basic physical processes
• Need for food, air, water
• Psychological needs
• Focus on emotional and mental satisfaction
• Example: the need for social interaction or to achieve difficult goals
• Need for affiliation, belongingness, power, prestige, knowledge, competence,
recognition, achievement and so forth.
 The Need Satisfaction Process

Need
Deficiency

Search for
Goal
Potential Need-
Attainment or
Satisfying
Frustration
Goal

Perception of
Potential Need-
Attempt to
Satisfying
Attain Goal Goal
Theories of Motivation theory
Theories of motivation falls in two categories:
1. Content theory
2. Process theory

Content theories of motivation focuses on motives or set of motives underlying human

behavior .Important content theories are:
• The need hierarchy theory
• The two-factor theory
Process theories deal with broad classes of variables that apply to motivation at work. They
are concerned with the process of energization of behavior. Chief process theory :
• The path-goal or expectancy theory
Hierarchy of needs theory

• Developed by Abraham Maslow.

• Lower-order and higher-order needs affect workplace behavior and attitudes.
• Lower-order needs:
• Physiological, safety, and social needs.
• Desires for physical and social well being.
• Higher-order needs:
• Esteem and self-actualization needs.
• Desire for psychological growth and development.
• Physiological: Includes hunger, thirst, shelter ,etc…
• Safety: Includes security and protection from physical and emotional
harm
• Social: Includes affection, belongingness, acceptance, and friendship
• Esteem: Includes internal esteem factors such as self-respect, autonomy,
and achievement; and external esteem factors such as status, recognition
and attention
• Self-actualization: The drive to become what one is capable of
becoming; includes growth, achieving one’s potential, and self-fulfillment
Hierarchy of needs theory
• Deficit principle
• A satisfied need is not a motivator of behavior.

• Progression principle
• A need at one level does not become activated until the next lower-level need is satisfied
Maslow’s Hierarchy of Needs Theory
Lower-order needs: satisfied externally
Higher-order needs: satisfied internally

Self-
actualization
Esteem

Social

Safety

Physiological
Figure 14.1 Opportunities for satisfaction in Maslow’s hierarchy of human needs.
Herzberg’s Two-Factor theory
• Based on interviews with 203 engineers and accountants
• Individuals were asked to reveal two separate job-related events in
which their work satisfaction had improved or declined
• Findings suggested that there were two completely separate sets of
factors, one leads to feelings of satisfaction, the other leads to
dissatisfaction
Examples of Motivator and Hygiene Factors
Motivator Factors Hygiene Factors
(Sources of Job Satisfaction (Sources of Job Dissatisfaction;
and Motivation) Neutral to Motivation)

Challenge of the work itself Physical working conditions

Responsibility Company policies
Recognition Quality of supervision
Achievement Coworker relationships
Job advancement and Salary
professional growth Status
Job security
Benefits, including work habits
and time management

EXHIBIT 6-2
• Motivator Factors: Pertained to the content of the job; e.g. career advancement,
recognition, achievement, sense of responsibility
• When present, motivator factors will lead directly to employees’
feelings of satisfaction, while when not present, they were said to lead
to feelings of “no satisfaction” or a neutral state
• Hygiene Factors: Stemmed from the context in which the job was
performed, e.g. job security, company policies, interpersonal relations,
working conditions
• When not present, hygiene factors lead to dissatisfaction of employees,
while even if present they were said to be incapable of motivating
workers to feel satisfied in their jobs
 Expectancy Theory

Developed by Victor Vroom, expectancy

theory defines motivation as a process
governing choices among alternative forms of
voluntary activity. It explains why people
choose one behavior in preference of another.
The components of expectancy theory are
instrumentalities, valences, and expectancies.
Motivation depends on how much we want something
and how likely we are to get it
• Elements
 Effort to Performance Expectancy (E) is the probability that effort will
lead to performance.
 Performance to Outcome Expectancy (I) is the perception that
performance leads to an outcome.
 Outcome is the consequence or reward for performance.
 Valence (V) is how much a particular outcome is valued.
 Expectancy Instrumentality Valence

(how well the (how well the (the value that

Motivational person believes person believes the person
= X X
Force he or she can that performance attaches to the
perform the will lead to outcome)
task) certain outcomes)
 M=ExIxV
• For motivated behavior to occur:
• Effort-to-performance must be greater than 0
• Performance-to-outcome must be greater than 0
• Sum of valences must be greater than 0*
* One or more valences may be negative!
 Expectancy Model of
Motivation
Effort
Effort Performance Reward

Perceived effort– Perceived Perceived

performance performance– value of reward
probability reward probability
“If I work hard, “What rewards “What rewards
will I get the job will I get when do I value?”
done?” the job is well done?”
 Instrumentality
E P Expectancy or P O Theory Valence

What is the probability What is the probability What value do I place

that I can perform at that my good performance on the potential
the required level will lead to outcomes? outcomes?
if I try?

Effort Performance Outcomes

Leadership
Is the art of influencing others to direct their wills, abilities and efforts
to the achievement of leader’s goals.
Leadership focuses “people” aspect of management and is based on
the assumption that organizational effectiveness significantly depends
on their motivation, effort and abilities.
Trait approach to leadership
This approach was based on hypothesis that Leaders are “born,” not made
Assumed that a basic set of personal traits that differentiated leaders from non leaders could be used to identify
leaders and as a tool for predicting who would become leaders.

Distinguishing qualities that are found in successful leaders:

• Physical characteristics
Appearance, height, age
• Personality traits
Extroversion, persistence, self-assurance, decisiveness
• Intelligence traits
Knowledge, ability, judgment
• Social characteristics
Tact, diplomacy, sociability, fluency
• Task-related traits
Achivement, drive, initiative, persistence, etc.
• Study of leadership traits has led to the identification of such a large number of traits that it
is difficult to list them and rather impossible to find all the traits in even one effective leader.
It is also not known what unique combination of traits makes a leader effective and in what
proportion these traits should be possessed.
• The trait approach was unsuccessful in establishing empirical relationships between
traits and persons regarded as leaders
Approaches based on the use of Authority
Three types of leaders were identified on this basis of how leaders used their authority in social situations:
Autocratic
• Leader makes decisions without reference to anyone else
• High degree of dependency on the leader
• Can create de-motivation and alienation of staff
Democratic
• Encourages decision making
• May help motivation and involvement
• Workers feel ownership of the firm and its ideas
• Improves the sharing of ideas and experiences within the business
• Can delay decision making
Laissez-Faire
• Let it be’ – the leadership responsibilities are shared by all
• Can be very useful in businesses where creative ideas are important
• Can be highly motivational, as people have control over their working life
• Can make coordination and decision making
• time-consuming and lacking in overall direction
• Relies on good team work
• Relies on good interpersonal relations
The Managerial Grid Approach
• Developed by Blake and Mouton focuses on various blend of
leadership styles.
• 81 possible combinations of leadership styles are possible with
varying mixes of concerns for people and production.
Path-Goal Theory (Evans & House)
Employee will work to their maximum capacity and make their optimum contribution
to the achievement of organizational goals only when they perceive that their own
need satisfaction is dependent on their effective performance.
• The primary functions of a leader are:
• To make valued or desired rewards available in the workplace
• To clarify for the subordinate the kinds of behavior that will lead to goal accomplishment
or rewards
• Leader Behaviors:
• Directive leader behavior
• Supportive leader behavior
• Participative leader behavior
• Achievement-oriented leader behavior
The Path-Goal Framework (Evans & House)
The Path-Goal Framework (Evans & House)
Leadership as a Continuum
• Situational Models of Leader Behavior Assume that:
• Appropriate leader behavior varies from one situation to another.
• Key situational factors that are interacting to determine appropriate leader behavior can
be identified.
• Leadership Continuum (Tannenbaum and Schmidt)I
Identified seven styles of leadership on a continuum, hypothesizing that the
effectiveness of one or the other leadership styles vary on the dimensions of area
of freedom for managers and area of freedom for non-managers (subordinates).
In other words, they wary from high degree of leader centered behavior to a high
degree of subordinate-centerdness.
Tannenbaum and Schmidt’s Leadership Continuum
Situational Approaches to Leadership
(Fiedler)
• Contingency (LPC) Theory (Fiedler)
• The appropriate style of leadership varies with situational favorableness (from the
leader’s viewpoint).
• Least preferred coworker (LPC)
• The measuring scale that asks leaders to describe the person with whom they are least able
to work well.
• High LPC scale scores indicate a relationship orientation; low LPC scores indicate a task
orientation on the part of the leader.
• Contingency variables determining situational favorableness:
• Leader-member relations
• Task structure
• Position Power
The Contingency (LPC) Theory of Leadership
(Fiedler)
UNIT 5
CONTROLLING
CONCEPT & NATURE OF CONTROL:- According to Henry Fayol ,”Control consists in verifying
whether everything occurs in conformity with the plan adopted, the instructions issued &
principles established”. Control helps to point out weaknesses & errors in order to rectify or to
correct them & to prevent recurrence. It works on everything – things, people, actions.
Control is a systematic effort by management to compare the performance with
predetermined standards in order to determine whether the performance is in line with those
standards & presumably in order to take any remedial action required to see that human &
other resources are being used in most effective & efficient way possible in achieving
corporate objectives.
The modern concept of control system helps in providing historical record of what has
happened to the business as a whole, but also pinpoints the reasons why it has happened &
provides data that enable the chief executive or the department head to take corrective steps
if he finds he is on the wrong track. Thus, managerial function of control uses measurement of
actual performance, comparing it with the standards set by plans & correction of deviations to
ensure attainment of objectives according to plans.
FEATURES OF CONTROL:- Managerial control has the following characteristics:-
1. MANGERIAL FUNCTIONS:- Control is an important function of every manager who is
performing other managerial functions like planning, organizing, staffing & directing. It is,
in fact, a follow-up action to other functions of management. Managers at all levels have
to perform this function to contribute to the achievement of organizational objectives.
2. FORWARD LOOKING:- Control is linked with future & so is forward looking. A manager
can take corrective action only in regard to future operations. Control is usually
preventive as presence of controls tend to minimize wastages, losses & deviations from
standards.
3. CONTINUOUS PROCESS:- Just like other functions of management, control is also a
continuous activity. It involves constant analysis of standards, policies, procedures, etc. It
also suggests corrective actions in various processes. It does not stop anywhere. A
manager has to perform this function continuously along with other functions. In
continuous process control is a never ending process.
4. DYNAMIC PROCESS:- Control is a dynamic process. It is flexible & not rigid. Control results
in corrective actions which may lead to change in the performance of other functions of
management. Since management is handling a business entity or unit which keeps on
changing, managerial control is also dynamic. Management will be failing in its duty if its
approach is not dynamic.
5. CORRECTIVE ACTION:- The purpose of control is achieved only when corrective action is
taken on the basis of feedback information. It is the action which adjusts performance to
predetermined standards whenever deviations occur. A good system of control facilitates
timely action so that there is minimum waste of time & energy.
RELATIONSHIP BETWEEN CONTORL & PLANNING
1. PLANNING & CONTROL ARE CLOSELY RELATED:- Once a plan becomes functioning &
operational, control is necessary to measure progress, to uncover deviations from plans &
to indicate corrective action. Planning may involve simple measures such as minor
changes in techniques of leading. In other cases, control may result in setting new goals,
forming new plans, changing the organization structure, improving staffing & making
major changes in the techniques of directing & leading. The control cycle is an endless
sequence or never ending sequence of establishing standards,
observing performance with standards & taking correct action to ensure the achievement of
objectives.
Control is always based on planning. It is also true that in a running enterprise planning
depends upon controlling. Every manager uses certain standards for measuring & appraising
performance which are laid down by planning. The control process, in turn may reveal or tell
about the deficiency of plans & may lead to re-study the plan. It may also lead to setting new
goals, improving staffing & making changes in the techniques of supervision, motivation &
leadership.

PLANNING PERFORMANCE CONTROL

RELATIONSHIP BETWEEN PLANNING & CONTROL

2. PLANNING WITHOUT CONTROL IS MENAINGLESS & CONTROL WITHOUT PLANNING IS
BLIND:- Planning is an empty exercise without controlling. A good plan will not bring any
concrete result if the management is lacking in controlling. Planning finds the goals &
determines the ways of achieving them. It is control which ensures attainment of goals by
evaluating performance & taking corrective action. Control presupposes the existence of
standards with which the actual performance is compared. If the standards with which actual
performance are not set in advance, the manager will have no idea of “what is control”.
Thus, planning must be done before the actual operation. The experience gained in
controlling will help to improve the process of planning.
CONTROL Vs CONTROLS:- Controls refer to measurements, information & other means of
control whereas control is a process that guides activity towards some predetermined
goals. Thus, control pertains to end whereas controls pertain to means. Peter Drucker has
identified the following 4 points of distinction between controls & control:-
1. Controls refer to measurements & information & control refer to goals or direction.
2. Controls pertains to means & control to an end.
3. Controls deal with facts & past events, but control deals with expectations or future.
4. Controls are analytical in the sense that they are concerned with what was & what is. But
control, on the other hand, is normative & concerned with what ought to be.
STEPS IN CONTROLLING

Various steps in control process which are necessary in its relationship

to planning :
 Establishment of control standards.
 Measurement of performance.
 Comparison between performance and standards and the
 communication.
 Correction of deviation from the standards.
1. ESTABLISHMENT OF CONTROL
STANDARDS
Plans - goals, objectives, targets to be achieved. Actual
results are measured against them.
• Precision :
Great precision – Standards are set in quantities.
E.g. Physical – Volume of products, man hour.
Monetary – Costs, revenues, investment.
Less precision – Standards are in qualitative terms.
E.g. Human relations.
• It is also important to decide the level of achievement which
will be regarded as good or satisfactory.
• Desired level of performance - reasonable , feasible, some
amount of flexibility , stated in terms of range (maximum and
minimum).
2. MEASUREMENT OF
PERFORMANCE
Involves measuring the performance in the work in terms of
control standards.
• Methods of measuring performance :
Quantitative – Physical and monetary terms, easily and
precisely measurable.
E.g. Production units, sales, volume, profits etc.
Qualitative – Intangible, cannot be measured precisely.
E.g. Human relations etc.
Techniques – Psychological tests, opinion surveys.
• Measurement must be (i) clear, simple and rational, (ii)
relevant, (iii) direct attention and efforts, (iv) reliable, self
announcing, and understandable without complicated
interpretation or philosophical discussions.
3. COMPARING ACTUAL AND
STANDARD PERFORMANCE
Steps :
Finding out the extent of deviations.
Identifying the causes of such deviations.
• Accurate standards and accurate measurement of actual
performance are very important for clear revelation of
variations.
• Required standards achieved :
No further managerial action is necessary.
Control process is complete.
• Required standards not achieved :
Extent of variation may differ from case to case, depends
upon the type of activity.
Strict compliance with standards or permissible limit of
variation.
E.g. Engineering products – a very minute variation may be
significant.
• When the deviation between standard and actual
performance is beyond the prescribed limit, an analysis is
made of the causes of such deviation.
• Controllable factors – Person concerned will take necessary
corrective action.
• Uncontrollable factors – Person concerned cannot be held
responsible.
• Communication of data to the person who can take corrective
action.
4. CORRECTION OF DEVIATIONS
Organization is not a self – regulating system.
• Actions should be taken to maintain the desired degree of
control in the system or operation.
• Control actions :
Review of plans and goals and change therein on the basis
of such review.
Change in the assignment of tasks.
Change in existing techniques of direction.
Change in the organization structure.
Provision for new facilities.
IMPORTANCE OF CONTROL:- Control is an important function of management. Without
control, a manager cannot complete his job of managing. All other functions are the
preparatory steps for getting the work done & controlling is concerned with making sure
that there is proper execution of these functions. Control is necessary whenever a
manager assigns duties & delegates authority to the subordinates. He must exercise
control over the actions of his subordinates so as to ensure that the delegated authority
is used properly. The advantages of control are as follows:-
1. Control brings order in the organization. Absence of control is dangerous for the
organization. Control ensure business operations in the desired direction.
2. It helps in improving the performance of subordinates.
3. It helps in process of delegation. Authority can be safely transferred if effective controls
exist in the organization.
4. It brings about better utilization of resources – human & material, & thus increases
productivity & profit, & contributes to the progress of business.
5. Control increases the effectiveness of planning. In fact, controlling & planning go hand in
hand. Control is the only means to ensure that the plans are being implemented. Control
points out the shortcomings of not only planning, but also other functions of
management such as organizing, staffing & directing.
6. Control provides the basis for future action. It will reduce the chances of mistakes being
repeated in future by suggesting preventive steps.
LIMITATIONS OF CONTROL:- Following are the limitations of control process:-
1. Measurable standards are essential to control; but many aspects of business, e.g.,
employee morale & public relations cannot be expressed in quantitative terms.
2. Control may stifle the initiative of subordinates & dampen their spirit.
3. The success of control depends on personal responsibility. But this cannot be fixed in all
cases.
4. Control is an expensive process because sufficient attention has to be paid to observe the
performance of the subordinates. This requires an expenditure of a lot of time & effort.
5. The effectiveness of controls depends on their acceptance by the subordinates. They may
resist controls if they feel that these will reduce their freedom. Control also loses its
importance when it is not possible to fix the accountability of the subordinates.
6. An enterprise cannot control the external factors such as government policy,
technological changes, fashion changes, etc.