B.B.A. 1st Sem.

Subject- Business Management

SYLLABUS
BBA. I YEAR
Subject – Business Management

Unit Contents

UNIT – I Management in Indian Culture and Tradition, Definition and Meaning of Management,
Functions and Responsibilities of Management, Role of manager, Principles of
Management. School & Thoughts of Management.
UNIT – II Planning: Process, Types and Significance, Planning vs. Forecasting Objective,
Strategies and Policies, MBO. Decision Making: Process & Significance, Planning for Start-
ups'.

UNIT – III Organization: Nature and Purpose of organization. Importance and process of
Organization. Departmentalization, Organizational structures: types and relevance, Line
and Staff relationship.
UNIT – IV Authority- Delegation, Decentralization - Difference between Authority and power-
Responsibility, Recruitment- Sources, Selection, Training, Direction -Nature and
Purpose. Leadership: Meaning, Importance, Types of Leadership, Leadership

UNIT – V Styles, Motivation: Types & significance, Maslow's Need Hierarchy, 5 Theory X&Y of
Motivation. An overview of Strategic Management, SWOT Analysis, Strategic Analysis,
Alternative-Choice & Evaluation. Future Management- Challenges and Skills

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Business Management
UNIT–I

Introduction of Management.

Every human being has several needs and desires. But no individual can satisfy all his wants. Therefore,
people work together to meet their mutual needs which they cannot fulfil individually. Moreover, man is a
social being as he likes to live together with other people. It is by working and living together in organised
groups and institutions that people satisfy their economic and social needs. As a result there are several
types of groups, eg., family, school, government, army, a business firm, a cricket team and the like. Such
formal groups can achieve their goals effectively only when the efforts of the people working in these
groups are properly coordinated and controlled. The task of getting results through others by coordinating
their efforts is known as management. Just as the mind coordinates and regulates all the activities of a
person, management coordinates and regulates the activities of various members of an organisation.

Management is getting things done with effectiveness and efficiency. It is designing and maintaining an
environment in which individuals working together accomplish selected aims efficiently.

Management is the first of the modern institutions to shape the society. It pays a vital role in modern
world. It regulates man’s productive energies. It organizes factors of production. Peter Drucker observes
that without the leadership of management, a country’s resources of production remain resources and
never becomes production. Management converts a mob into an organization, and human efforts into
performance. ‘Management’ is the catalyst which makes possible rapid economic and social development in
freedom and with human dignity.

MEANING OF MANAGEMENT

As the term ‘management’ is used in several contexts, it has different meanings to different people.
Management has three different meanings:

1. As a Noun

When used as a noun, management refers to all those who have both responsibility and authority to
manage an organization and who are responsible for the work of others at all levels. W.J. Reddin states that
“a manager is a person occupying a position in a formal organization who is responsible for the work of at
least one other and who has formal authority over that person. Persons, whose work he is responsible for,
are his subordinates.”

2. As a Process

Management is also tasks, activities and functions. As a process, management refers to what
management does, i.e., the function performed by management ‘Managing’ is considered as a process which
may include a variety of functions, principles, techniques, skills and other measures of accomplishing the
work and activities of organization. Management as a process implies a series of actions or elements. These
are planning, organization, staffing, directing, co-ordination etc.

3. As a Discipline

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Sometimes, the word ‘management’ is used to connote the body of knowledge and practice. In this sense,
it becomes a separate subject, a field of learning, and an organized, formal discipline. It is young discipline.

DEFINITION OF MANAGEMENT

Management is the coordination of all resources through the process of planning, organising, directing
and controlling in order to attain stated objectives. —Henry L. Sisk.

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

To manage is to forecast and to plan, to organise to command, to coordinate and to control—Henry

Fayol

Management is a distinct process consisting of planning, organising, actuating and controlling performed
to determine and accomplish the objectives by the use of people and resources- George R. Terry

Management is guiding human and physical resources into dynamic organisational units which attain
their objectives to the satisfaction of those served and with a high degree of morale and sense of attainment
on the part of those rendering service. —American Management Association

Management is a multipurpose organ that manage a business and manages Managers and manages
workers and work. —Peter Drucker

NATURE OF MANAGEMENT

To understand the basic nature of management, it must be analyzed in terms of art and science, in
relation to administration, and as a profession, in terms of managerial skills and style of managers.

Management as a Science

Science means a systematic body of knowledge pertaining to a specific field of study. It contains general
principles and facts which explains a phenomenon. These principles establish cause-and-effect relationship
between two or more factors. These principles and theories help to explain past events and may be used to
predict the outcome of actions. Scientific methods of observations, and experiments are used to develop
principles of science. The principles of science have universal application and validity.

Thus, the essential features of science are as follows:

(i) Basic facts or general principles capable of universal application

(ii) Developed through scientific enquiry or experiments
(iii) Establish cause and effect relationships between various factors.
(iv) Their Validity can be verified and they serve as reliable guide for predicting future events.

Let us now examine as to what extent management satisfies the above conditions:

(i) Systematic body of knowledge: Management has a systematic body of knowledge consisting of general
principles and techniques. These help to explain events and serve as guidelines for managers in different
types of organisations.

(ii) Universal principles: Scientific principles represent basic facts about a particular field enquiry. These
are objective and represent best thinking on the subject. These principles may be applied in all situations
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 B.B.A. 1st Sem. Subject- Business Management

and at all times. Exceptions, if any, can be logically explained. For example, the Law of Gravitation states
that if you throw an object in the air it will fall on the ground due to the gravitational force of the earth. This
law can be applied in all countries and at all points of time. It is as applicable to a football as it is to an apple
falling from tree. Management contains sound fundamental principles which can be universally applied. For
instance, the principle of unity of command states that at a time one employee should be answerable to
only one boss. This principle can be applied in all types of organisation-business or non-business. However,
principles of management are not exactly like those of physics or chemistry. They are flexible and need to
be modified in different situations.

(iii) Scientific enquiry and experiments: Scientific principles are derived through scientific investigation
and reasoning. It means that there is an objective or unbiased assessment of the problem situation and the
action chosen to solve it can be explained logically. Scientific principles do not reflect the opinion of an
individual or of a religious guru. Rather these can be scientifically proved at any time. They are critically
tested. For example, the principle that the earth revolves around the sun has been scientifically proved.
Management principles are also based on scientific enquiry and investigation. These have been developed
through experiments and practical experience of a large number of managers. For example, it has been
observed that wherever one employee has two or more bosses simultaneously, confusion and indiscipline
are likely to arise, with regard to following the instructions.

(iv) Cause and effect relationship: Principles of science lay down cause and effect relationship between
related factors. For example, when water is heated up to 100oC, it starts boiling and turns into vapor.
Similarly, the principles of management establish cause and effect relationship between different variables.
For instance lack of balance between authority and responsibility will cause management to become
ineffective.

(v) Tests of validity and predictability: Validity of scientific principles can be tested at any time and any
number of times. Every time the test will give the same result. Moreover, the future events can be predicted
with reasonable accuracy by using scientific principles. For example, the Law of Gravitation can be tested
by throwing various things in the air and every time the object will fall on the ground. Principles of
management can also be tested for their validity. For example, the principle of unity of command can be
tested by comparing two persons, one having a single boss and other having two bosses. The performance
of the first person will be higher than that of the second.

Thus, management is undoubtedly a science. It contains a systematic body of knowledge in the form of
general principles which enjoy universal applicability. However, management is not as exact a science—
Physics, Chemistry, Biology and other Physical sciences. This is because management deals with people and
it is very difficult to predict accurately the behavior of living human beings. Management principles are
universal but they cannot be expected to give exactly the same results in every situation. That is why
management is known as a soft science. Management is a social science. It is still growing, with the growing
needs of human organisations.

Management as an Art

Art implies the application of knowledge and skills to bring about the desired results. The essential
elements of arts are:

(i) Practical knowledge

(ii) Personal skill
(iii) Result oriented approach
(iv) Creativity
(v) Improvement through continuous practice

Let us judge how far management fulfils these requirements:

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(i) Practical knowledge: Every art signifies practical knowledge. Anartist not only learn the theory but
also its application in practice. For example, a person may have adequate technical knowledge of painting
but he cannot become a good painter unless he knows how to make use of the brush and colours. Similarly,
a person cannot become a successful manager simply by reading the theory and getting a degree or
diploma in management. He must also learn to apply his knowledge in solving managerial problems in
practical life. A manager is judged not just by his technical knowledge but by his efficiency in applying this
knowledge.

(ii) Personal skill: Every artist has his own style and approach to hisjob. The success of different artists
differ even when all of them possess the same technical knowledge or qualifications. This is due to the level
of their personal skills. For example, there are several qualified singers but Lata Mangeshkar has achieved
the highest degree of success. Similarly, management is personalised. Every manager has his individual
approach and style in solving managerial problems. The success of a manager depends on his personality in
addition to his technical knowledge.

(iii) Result-oriented approach: Arts seeks to achieve concrete results.The process of management is also
directed towards the accomplishment of desirable goals. Every manager applies certain knowledge and
skills to achieve the desired results. He uses men, money, materials and machinery to promote the growth
of the organisation.

(iv) Creativity: Art is basically creative and an artist aims at producing something that had not existed
before. Therefore, every piece of art requires imagination and intelligence to create. Like any other art,
management is creative. A manager effectively com-bines and coordinates the factors of production to
create goods and services. Moulding the attitudes and behaviour of people at work, towards the
achievement of the desired goals is an art of the highest order.

(v) Improvement through people: Practice makes one perfect.Every artist becomes more and more
efficient through constant practice. A dancer, for example, learns to perform better by continuously
practicing a dance. Similarly, manager gains experience through regular practice and becomes more
effective.

Thus, “management is both a science as well as an art”. It is a science because it has an organised body of
knowledge consisting of certain universal facts. It is known as an art because it involves creating results
through practical application of knowledge and skills. How-ever, art and science are complementary to
each other. They are not mutually exclusive. Science teaches one to know and art to do. Art without science
has no guide and science without art is knowledge wasted.

For example, a person cannot be a good surgeon unless he has scientific knowledge of human anatomy
and the practical skill of applying that knowledge in conducting an operation.

Similarly, a successful manager must know the principles of management and also acquire the skill of
applying those principles for solving managerial problems in different situations. Knowledge of principles
and theory is essential, but practical application is required to make this knowledge fruitful. One cannot
become an effective manager simply by learning management principles by heart. Science (theory) and art
(practice) are both essential for the success of management.

CHARACTERISTICS OF MANAGEMENT

An analysis of the definition of management indicates the following features of management:

1. Managementisgoal-oriented

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Management is not an end in itself.It is a means to achieve certain goals. Management has no justification
to exist without goals. Management goals are called group goals or organisational goals. The basic goal of
management is to ensure efficiency and economy in the utilisation of human, physical and financial
resources. The success of management is measured by the extent to which the established goals one
achieved. Thus, management is purposeful.

2. Managementisan Activity

Management is a process of organized activity. It is concerned with the efficient use of resources of
production. This process is made up of some interrelated elements-planning, organizing, leading and
controlling. Terry says, “Management is not people, it is an activity.” Those who perform this activity are
designated as ‘Managers’.

3. Management is Multidimensional : Asingle activity of business includes three main acts.

 Management of work- planning, organizing, controlling.

 Management of people- staffing, directing
 Management of operations- production, sales, purchase

4.Management is a continuous Process

Management is a dynamic and an on-going process. The cycle of management continues to operate so
long as there is organised action for the achievement of group goals.

5. Management is Intangible

Management is an unseen or invisible force. It cannot be seen but its presence can be felt everywhere in
the form of results. However, the managers who perform the functions of management are very much
tangible and visible.

6. Management is multidisciplinary

Management has to deal with human behaviour under dynamic conditions. Therefore, it depends upon
wide knowledge derived from several disciplines like engineering, sociology, psychology, economics,
anthropology, etc. The vast body of knowledge in management draws heavily upon other fields of study.

7.It is Dynamic

Management is not a static activity. It adapts itself to the new changes in society. It also introduces
innovation in its style and techniques. It accepts environmental changes.

8.Hierarchical Nature

Management has several positions, ranks, authority and hierarchies flowing from top to bottom across
all levels in the organization. It has top, middle and bottom levels with superiors and subordinates.
Management contains a chain of authority and command with attached responsibility. This is known as the
managerial hierarchical system of authority.

9.Group Activity

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It is concerned with the efforts of a group. It works in ‘cooperative group’. Managers are vital to joint
activity. Management is essential wherever people work together for a common cause. Management plans,
organizes, go-ordinates, directs and controls the group efforts, not the individual efforts.

10. Management is Universal

Management is needed in all types of organized activities and in all types of organizations. In fact, it is
present in all walks of life. Fayol writes, “Be it a case of commerce, industry, politics, religion, war or
philanthropy, in every concern there is a management functions to be performed.” Also, the techniques and
tools of management are universally applicable.

11. Separate Identity

Management represents a separate class of managerial personnel who are quite different from the
identity of workers and capitalists. It is a class of administrators and planners. Managers need not to be
owners. In modern industrial society Labour, Management and Capital are different entities.

12. It Involves Decision-making

Making decision is a real identity of a manager. He is a planner and thinker. He decides the course of
action, strategies, policies and programmes. Drucker states, “Whatever a manager does, he does through
making decisions.” Thus, management is always a decision-making process,

13. Pervasive at all Levels

Managerial activity pervades all levels of the organization. It is required at top, middle and supervisory
levels for getting things done through others. Every manager, whether he works at top or low level,
performs the same managerial tasks to do his role.

14. Management is a Social Process

Management is done by people, through people and for people. It is a social process because it is
concerned with interpersonal relations. Human factor is the most important element in management.
According to Appley, “Management is the development of people not the direction of things. A good
manager is a leader not a boss. It is the pervasiveness of human element which gives management its
special character as a social process”.

15. Management is an Integrative Force

The essence of management lies in the coordination of individual efforts in to a team. Management
reconciles the individual goals with organisational goals. As unifying force, management creates a whole
that is more than the sum of individual parts. It integrates human and other resources.

FUNCTIONS OF MANAGEMENT

Management functions are the activities that a manager must perform as a result of the position held in
the organization. The best way to analyses the management process is in terms of what a manager does.
Generally the basic functions of management are: planning, organizing, staffing, directing and controlling.
As managing is a dynamic and challenging activity, it includes three kinds of functions and tasks which are
common to all managerial jobs. The list of management functions can be presented as follows:

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 B.B.A. 1st Sem. Subject- Business Management

I. Basic Functions

1. Planning
2. Organizing
3. Staffing
4. Directing
5. Controlling

II. Dynamic Functions

1. Co-ordinating
2. Decision Making
3. Representation
4. Innovation
5. Administration

BASIC FUNCTIONS

1. Planning
Planning is one of the most important functions because it sets the pattern for the other activities to
follow. Planning function for the new era is more broadly described as delivering strategic value. It is a
primary and crucial function which determines how to achieve an objective-deciding what is to be done
and when to do it. It is looking ahead and preparing for the future.

2. Organizing
Organizing is the process by which the structure and allocation of jobs are determined. To organize a
business is to provide it with everything useful to its functioning.

3. Staffing
Staffing is the process of planning, recruiting, developing, compensating and maintaining human
resources in an organization. In staffing, a manager recruits and selects suitable personnel for manning the
jobs.

4. Directing
The fourth basic function of management is directing. This is also termed leading or actuating. While
planning tells us what to do and organizing tells us how to do directing tells us why the employees should
want to do it. Directing is concerned with guiding and leading people. It consists of supervising and
motivating the subordinates towards the achievement of set goals.
(i) Communication
(ii) Command
(iii) Motivation
(iv) Leadership
(v) Supervision
(vi) Controlling
5. Controlling
Controlling is evaluating the performance and applying corrective measures so that the
performance takes place according to plans. It is reviewing the performance of the employees in
the light of the targets and goals.

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DYNAMIC FUNCTIONS

1. Co-ordinating: To co-ordinate is to harmonize all the activities, decisions and efforts of an

organization so as to achieve the unity of action. It is blending the efforts of all employees for and efficient
running of an organization.
2. Decision Making: decision making is the process by which a course of action is consciously
chosen from available alternatives. Decision making is inherent in every managerial function.
3. Representation: the manager’s job also includes representing his organization in dealings with
outside group-government officials, unions, civic groups, financial institutions, customers, suppliers, and
the general
4. Innovation: innovation means developing new ideas, new products, new quality or devising new
methods of work. In other words, the real manger is always an innovator. Innovation is the specific function
of entrepreneurial managers, the means by which they exploit change as an opportunity.
5. Administration: this is a new task of manager which is described by peter F. drucker he says,
“The manger has to administer. He has to manage and improve what already exists and is already known.
He has to redirect resources from areas of low or diminishing results to areas of high or increasing results.
He has to slough off yesterday and to render obsolete what already exists. He has to create tomorrow.

CHALLENGING FUNCTIONS

1. Management of Work: In an organization, work must be performed. For example, in a factory, the
product must be manufactured; in a retail store, the customer’s need must be satisfied.
2. Management of People: Recently a lot of attention has been given to the ‘human factor’ in
managing the business. Human forces are employed, they need to be unified, coordinated, welded into a
team effort and directed towards a given purpose. In this lies the challenging task of management.
3. Management of Operations: Every organization has some products or service that it must supply
in order to exist. Through operations process, these products are manufactured. To manage these
operations, managers ensure the flow of input materials, labour, technology and equipment’s regularly.
This is inextricably interwoven with their daily task.
4. Management of Change: Change is an inevitable feature of organizational life every organization
operates under the conditions of continuous change. Good mangers exhibit a rational response tochanging
environment. Mangers who undertake appropriate changes at the right time achieve success.

5. Management of Time: It can be noted that ‘time dimension’ is ever-present is every management
problem, every decision and every action. Thus, mangers must make efforts to administer thethings within
time. They must be conscious of the time element.
6. Strategy Formulation and Action: In this age of competitive environment, managers have to take
decisions and actions that determine the long-run performance of a company. To maintain the lead in fast-
paced industry and global markets, strategy formulation and implementation has become an important
function of mangers.
7. Making Work Productive and the Worker Achieving: According to drucker, the next task of
managers is to make work productive and the worker achieving. He says that business enterprise has only
one true resource: man. Manager gets his work done by making human resources productive.
8. Managing Social Impacts and Social Responsibilities: The another challenging task of managers,
according to drunker, is managing social impacts and the social responsibilities of the enterprise. Drucker
says that none of our institutions exist.

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Unit-2
PLANNING

MEANING OF PLANNNING:
Planning may be defined as deciding in advance what to be done in future. It is the process of thinking
before doing. It involves determination of goals as well as the activities required to be undertaken to
achieve the goals. In the planning process managers anticipate the future and accordingly decide what
activities must be undertaken. Planning deciding in advance – What to do, How to do, When and by whom.

DEFINITION OF PLANNING:
According to James Lundy: “Planning means the determination of what is to be done, how it is to be
done, who is to do it, and how results are evaluated.”
According to Henry Feyol: “Planning is deciding the best alternatives among others to perform different
managerial operation in order to achieve the predetermined goals.”

NATURE OF PLANNING:
1. PLANNING IS GOAL ORIENTED: Organization is set up with a general purpose in view. Specific goals
are set out in the plans along with the activities to be achieving the goals. Thus, planning is purposeful.
Planning has no meaning unless it contributes to the achievement of predetermined organizational goals.
2. PLANNING IS A PRIMARY FUNCTION: Planning lays down the base for other functions of
management. All other functions are performed within the framework of plans drawn. Thus, planning
precedes other function. The other functions of management are interrelated and equally important.
However, planning provides the base of all the other functions.
3. PLANNING IS PERVASIVE: Planning is required at all levels of management as well as in all
departments of the organization. It is neither an exclusive function of top management nor of any particular
department, the scope of planning differs at different level and among different departments.
4. PLANNING IS FLEXIBLE: Plans are drawn on the basis of forecasts. Since the future is uncertain,
planning must cope with change in future condition. Activities planned with certain assumptions about the
future may not come true.
5. PLANNING IS CONTINUOUS: Plans are prepared for the specific period of time, may be for month, a
quarter, or a year. At the end of that period there is need for a new plan to be drawn on the basis of new
requirements and future conditions. Hence planning is never ending activity. It is a continuous process.
6. PLANNING IS FUTURISTIC: Planning essentially involves looking ahead and future. The purpose of
planning is to meet future event effectively to the best advantage of an organization. Through forecasting
future events and conditions are anticipated and plans are drawn accordingly.

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7. PLANNING INVOLVES CHOICE: Planning essentially involves choice from among various alternatives
and activities. If there is one possible goal or only one possible course of action, there is no need for
planning because there is no choice.
8. PLANNING IS A MENTAL EXERCISE: Planning requires application of the mind involving foresight,
intelligent imagination and sound judgment. It is basically an intellectual activity of thinking rather than
doing, because planning determines the action to be taken.
OBJECTIVE OF PLANNING:
1. REDUSE UNCERTAINTY: Future is uncertain. Planning may convert the uncertainty into certainty.
This is possible to some extent by, planning which is reducing uncertainty.
2. BRING CO0OPERATION AND CO-ORDINATION: Planning can bring co-operation and co-ordination
among various sectors of the organization. The rivalries and conflicts among departments could be avoided
through planning.
3. ECONOMY IN OPERATION: As already pointed out, planning selected best alternative among various
alternatives this will lead to the best utilization of recourses. The objectives of the organization are
achieved easily.
4. ANTICIPATE THE UNPREDICTABLE CONTINGENCIES: Some events could not be predictable. These
events are termed as contingencies. These events may affect the smooth functioning of an enterprise.
5. ACHIVING THE PRE-DETERMINED GOALS: Planning activities are aimed at achieving the objectives
of the enterprise. The timely achievements of objectives are possible only effective planning.
6. REDUCE COMPETITION: The existence of competition enables the enterprise to get a chance for
growth. At the same time, stiff competition should be avoided. It is possible, to reduce competition through
planning
TYPES OF PLANS:

1. STANDING OR REPEATED USE PLAN:- These plans are prepared by managers at different levels.
They are intended for repeated use and are designed to deal with recurring problems. When a particular
and familiar problem arises, a standing plan provides a ready guide to action. They form one of the
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 B.B.A. 1st Sem. Subject- Business Management

important means for building predictable patterns of behaviour in a business firm. When a group of people
live together or work together, they must be able to anticipate each other’s action. This is especially
necessary for interdependent activities which require such ability to anticipate.It includes:
a. OBJECTIVE: Effective management implies management by objective. Objectives are goal established
to guide of the enterprise. So, all planning work must spell out in clear terms the objectives to be realized
from proposed business activities.
b. POLICIES: Planning also requires laying down of policies for the easy realization of the objectives of
business. Policies provide a standing answer to recurring questions and problems. They are basic guides to
action.
c. PROCEDURES AND METHODS: Objectives and policies will lose much of their significance, if the
planning is cannot lay down the procedure and methods for work performance. Procedures will indicate
and outline a series of task for a specific course of action. Method is the manner of work performance and
follows the set procedures.
d. RULES: A rule specifies necessary course of action in respect of a situation. It acts as a guide and is in
the nature of a decision made by the management. This decision lays down what is to be done and what is
not to be done In a particular situation. The rules prescribe a definite and rigid course of action without any
scope for deviation or discretion entails penalty.
e. STRATEGY: They are device formulated from the competitive standpoint by being fully informed
somehow about the planning secrets of the competitors. They are a kind business spying and are applied as
Types of Plans Standing or Repeated use Single Use or Operating Contingency Plans the situation demands.
So, the success of the plan requires that it should be strategy oriented.
2. SINGLE - USE OR OPERATING PLANS: Standing plan established a structure of customary behaviour
for the desired results. They are highly useful devices for managerial decision-making. However, besides
these standing plans, a manager can resort to single- use plans to decide in advance the action to be taken
to meet a particular problem or a problems arising within a given period. Once the problem is over or met
or the time is passed, a new plan is devised for the next period or problem. This type of planning is called
single-use plans.It includes:
a. PROGRAMMES: Programmes are precise plans of action followed in proper sequence in accordance
with objectives, policies and procedures. Thus, a programme lays down the principle steps to be
undertaken to accomplish an objective and sets an approximate time for its fulfillment. A programme may
accordingly be a major or a minor one, a long-term one or a medium or short-term one. It is included in a
single-use plan because it will not be used in the same form once its task is over.
b. BUDGETS: Budget estimates the men, money, material and equipment, in numerical terms, required
for the implementation of plans and programmes. It covers a particular period and when the period is over,
a fresh budget comes into being. Budget, thus, is the main instrument of a single-use plan.

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c. PROJECTS: A project is particular job that need to be done in connection with a general programme.
So, a single step in a programme is set up a project. A period has a distinct object and a clear cut
termination. So, it is include In a single-use plan. The task of management is made easier by setting up the
work in a project.
3. CONTINGENCY PLANS: Contingency plans as the name suggest are the plans which are formulated in
some contingency. The plan is short term and time is deciding factor in the implementation of this plan.
These are most important and prior in nature. Decision taken during this is generally non- programmed but
some time programmed decisions are also taken. Organizations usually plan in advance to face any
contingency to avoid chance to bear losses. These plans are extremely risky in nature. EXAMPLE: In most
organization contingency fund and contingency stock of inventory are maintained in advance in order to
face any contingency in a near future. Sometimes government makes some plans to control the market
price of the commodity in contingency like natural calamities like earthquake, flooding etc. And manmade
contingencies like strikes, wars, and riots etc.

PLANNING PROCESS:
1. PERCEPTION OF OPPORTUNITIES: Perception of opportunities is not strictly a planning process.
However, this awareness is very important for planning process because it leads to formulation of plans by
providing clue whether opportunities exist for taking up particular plans. From this point of view, it can be
considered as the beginning of planning process. Perception of opportunities and the ability to see them
clearly and completely, knowledge of where the organization stands in the light of its strengths and
weaknesses, an understanding of why the organization wants to solve uncertainty, and a vision of what it
expects to gain.
2. ESTABLISHING OBJECTIVES: At this stage, major organizational and unit objectives are set.
Objectives specify the results expected and indicate the end points of what is to be done, where the primary
emphasis is to be placed, and what is to be accomplished by the various types of plans.
3. PLANNING PREMISES: After determination of organizational goals, the next step is establishing the
planning premise that is the condition under which planning assumptions – the expected environmental
and internal condition. Thus planning premises are external and internal. External premises includes total
factor in task environment like political, social, technological, competitors plans and actions, government
policies, etc. Internal factors include organizations policies, resources of various types and the ability of the
organization to withstand the environmental pressure.
4. IDENTIFICATION OF ALTERNATIVES: Based on the organizational objectives and planning
premises, various alternatives can be identified. The concepts of various alternatives suggest that a
particular objective can be achieved through various actions. EXAMPLE: If an organization has set its
objectives to grow further, it can be achieved in several ways like expanding in the same field of business or

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product line, diversifying in other areas, joining hands with other organizations, or taking over another
organization and so on.
5. EVALUATION OF ALTERNATIVES: Various alternatives which are considered in terms of preliminary
criteria may be taken for detailed evaluation. At this stage, an attempt is made do evaluated how each
alternative contributes to the organizational objectives in the light of its resources and constraints.
6. CHOICE OF ALTERNATIVE: After the evaluation of various alternatives, the fit one is selected.
Sometimes evaluation shows that more than one alternative is equally good. In such a case, a planner may
choose more than one alternative. There is another reason for choosing more than one alternative.
Alternative course of action is to be undertaken in future which is not constant. A course of action chosen
keeping in view the various planning premises may not be the best one if there is change in planning
premises. Therefore, planner must be ready with the alternative, normally knows as contingency plan,
which can be implemented in changed situations.
7. FORMULATION OF SUPPORTING PLANS: After formulating the basic plan, various plans derived so
as to support the main plan. In an organization there can be various derivative plans like planning for
buying equipments, buying raw materials, recruiting and training personnel, developing new product, etc.
these derivative plans are formulated out of the main plan and therefore, they support it.
8. ESTABLISHING SEQUENCE OF ACTIVITIES: After formulating basic and derivative plans, the
sequence of activities is determined so that plans are put into action. Based on plans at various levels, it can
be decided who will do what and at what time. Budgets for various periods can be prepared to give plans
more concrete meaning for implementation.
LIMITATIONS OF PLANNING:
1. RIGIDITY: The existence of a plan puts managerial activities in a rigid framework. Programmes are
carried out according to the plan and deviations are considered to be highly undesirable. This attitude
makes managers and employees inflexible in their operations.
2. MISDIRECTION: Planning may be used by a particular individual and groups to serve their own
interest. Attempts are made by them to influence setting of objectives, formulation of plans and programs
to suit their limited aims and objects, ignoring the interest of the organization. As a result planning may not
serve any useful purpose.
3. TIME CONSUMING: Planning is a time consuming process. It requires collection of information, its
analysis and interpretation. The process may take consideration time. Thus, planning is not practicable
during emergencies and crisis when quick decisions are needed.
4. LACK OF ACCURATE INFORMATION: Planning is concerned with future activity and hence, its
quality will be determined by the quality of forecast of future events. As no manager can predict completely
and accurately the events of future, the planning may pose problems in operation. This problem is further
increased by inaccurate planning premises.

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5. PROBLEMS OF CHANGE: The problem of change is often complex in long-range planning. Present
conditions tend to weigh heavily in planning and overshadowing future needs, may sometimes result in
error of Perception of Opportunities Establishing Objectives Planning Premises Identification of
Alternatives Evaluation of Alternatives Choice of Alternatives Formulation of Supporting Plans Establishing
Sequence of Activities Prof. Komal Kumbhar Page 8 Swaraj Institute of Management Principle and Practices
of Management judgments. Such factors as technology, consumer tastes and desires, business conditions
and many others change rapidly and often unpredictably. In such conditions, planning activities taken in
one period may not be relevant for another period because the conditions in the two periods may be quite
different.
6. INTERNAL INFLEXIBILITIES: Managers while going through the planning process have to work in a
set of given variables. These variables often provides less flexibility in planning which is needed to cope up
with the change in future events.
a. PSYCHOLOGICAL INFLEXIBILITIES: Psychological inflexibility is in the form of resistance to change.
Managers and employees in the organization may develop patterns of through and behavior that are hard
to change. They look more in terms of present rather than future.
b. POLICY AND PROCEDURAL INFLEXIBILTY: Another internal inflexibility emerges because of
organizational policies and procedure. Once these are established, they are difficult to change. Though
these policies, procedures, and rules are meant to facilitate managerial action by providing guidelines, they
often tend to be too exacting and numerous that they leave very little scope for managerial initiative and
flexibility.
c. CAPITAL INVESTMENT: In most cases, once funds are invested in fixed assets, the ability to switch
future course of action becomes rather limited, and investments itself becomes a planning premises. During
the entire life of the fixed assets, this inflexibility continuous unless the organization can reasonably
liquidate its investment or change its course of action, or unless it can afford to write off the investment.
7. EXTERNAL INFLEXIBILITIES: Besides the internal inflexibilities, managers are confronted with much
external inflexibility and they do not have these. EXAMPLE: Managers have little or no control over social
economic, technological and political forces. Whether these change quickly or slowly, they do stand in the
way of effective planning.
a. POLITICAL CLIMATE: Every organization, to a greater or lesser degree, is faced with the inflexibility
of the political climate existing at any given time. Attitudes of government towards business, taxation
policy, regulation of business etc. generate constraints on the organizational planning process. Government
being major supplier or certain raw materials, finance institution through financial institution may affect
the business organization considerably.
b. TRADE UNION: The existence of trade union, particularly those organized at the national level, tends
to restrict freedom of planning. Apart from wages and other associated benefits, they affect the planning

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process by putting limitations and the work that can be undertaken by the organization. They set up the
work rule and productivity. To that extent, managers are not free to make decisions of their choice.
c. TECHNOLOGICAL CHANGES: The rate and nature of technology changes also present very definite
limitations upon planning. An organization is engaged in its process with a given technology. When there is
a change in technology, it has to face numerous problem resulting into higher cost of production and less
competitive competence in the market. However, the organization cannot change its technology so
frequently. Thus, higher rate of technology changes more would be the problem of long- range planning.
Forecasting:
Forecasting is process of using past and present data and analysis of trends for predictions of the
future. It helps the organization to cope with the future uncertainties. It is more advanced term of
prediction.Forecasting is done with certain assumption based on the experience of management, their
knowledge, and judgment. An error in assumptions may result in forecasting error.
Steps in forecasting:
 Analyzing and understanding the problem
 Developing strong foundation
 Collecting and analyzing relevant data
 Estimating future events.
 Finding reason for poor performance.
 Continuous follow up

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Decision Making
Meaning:
Decision making may be reviewed as the process of selecting a course of action from among
several alternatives in order to accomplish a desired result. The purpose of decision making is to direct
human behaviour and commitment towards a future goal. If there are no alternatives, if no choice is to
be made, if there is no other way‐out, then there would be not need for decision making. It involves commit
ting the organisation and its resources to a particular choice of course of action thoug-
ht to be sufficient and capable of achieving some predetermined objective.
Managers at all level in the organisation make decision and solve problems. In fact, decision‐making is
the process of reducing the gap between the existing situation and the desired situation through solving
problems and making use of opportunities. A decision is a course of action consciously selected from
available alternatives, with a view to achieving a desired goal. It is an outcome of the judgement and
represents a choice and commitment to the same. It is a final resolution of a conflict of needs, means or
goals made are the face of uncertainty, complexity and multiplicity. A decision is conclusion reached
after consideration it occurs when one option is selected to the exclusion of others – it is rendering of
judgement.
Definition:-

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George Terry : -Decision making is the selection based on some criteria from two or more alternatives.
Heinz Weihrick and Harold Koontz :-
Decision making is defined as the selection of a course of action among alternatives, it is the care of
planning.
Nature Or Characteristics of Decision Making :-
The nature of decision‐making may be clearly understood by its following characteristics features:
1. Decision making is an intellectual process, which involves imagination, reasoning, evaluation and
judgement.
2. It is a selection process in which best or most suitable course of action is finalized from among several
available alternatives. Such selected alternative provides utmost help in the achievement of
organizational goals. The problems for which there is only one selection are most decision problems.
3. Decision making is a goal oriented process. Decisions are made to attain certain goals. A decision is
rated good to be extent it helps in the accomplishment of objectives.
4. It is a focal point at which plans, policies, objectives, procedures, etc., are translated into concrete
actions.
5. Decision making is a continuous process persuading all organizational activity, at all levels and in the
whole universe. It is a systematic process and an interactive activity.
6. Decision making involves commitment of resources, direction or reputation of the enterprise.
7. Decision making is always related to place, situation and time. It may be decision not act in the given
circumstances.
8. After decision making it is necessary and significant to communicate its results (decisions) for their
successful execution.
9. The effectiveness of decision‐making process is enhanced by participation.
Importance of decision‐making :
1. Implementation of managerial
function: Without decision‐making different managerial function such as planning, organizing, directing, co
ntrolling, staffing
can’t be conducted. In other words, when an employee does, s/he does the work through decision‐making f
unction. Therefore, we can say that decision is important element to implement the managerial function.
2. Pervasiveness of decision‐making: the decision is made in all managerial
activities and in all functions of the organization. It must be taken by all staff.
Without decision‐making any kinds of function is not possible. So it is pervasive.
3. Evaluation of managerial performance: Decisions can evaluate managerial
performance. When decision is correct it is understood that the manager is
qualified, able and efficient. When the decision is wrong, it is understood that the
manager is disqualified. So decision‐making evaluate the managerial performance.
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4. Helpful in planning and policies: Any policy or plan is established through

decision making. Without decision making, no plans and policies are performed.
In the process of making plans, appropriate decisions must be made from so
many alternatives. Therefore, decision making is an important process which is helpful in planning.
5. Selecting the best alternatives: Decision making is the process of selecting
the best alternatives. It is necessary in every organization because there are
many alternatives. So decision makers evaluate various advantages and
disadvantages of every alternative and select the best alternative.
6. Successful operation of business: Every individual, departments and
organization make the decisions. In this competitive world; organization can
exist when the correct and appropriate decisions are made. Therefore, correct
decisions help in successful operation of business.

Types of decisions :

Strategic Decisions and Routine Decisions

As the name suggests, routine decisions are those that the manager makes in the daily functioning of the
organization, i.e. they are routine.Such decisions do not require a lot of evaluation, analysis or in-depth study.
In fact, high-level managers usually delegate these decisions to their subordinates.On the other hand, strategic
decisions are the important decisions of the firm. These are usually taken by upper and middle-level
management. They usually relate to the policies of the firm or the strategic plan for the future.Hence such

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decisions require analysis and careful study. Because strategic decisions taken at this level will affect the
routine decisions taken daily.

Programmed Decisions and Non-Programmed Decisions

Programmed decisions relate to those functions that are repetitive in nature. These decisions are dealt with
by following a specific standard procedure. These decisions are usually taken by lower management.For
example, granting leave to employees, purchasing spare parts etc are programmed decisions where a specific
procedure is followed.Non-programmed decisions arise out of unstructured problems, i.e. these are not
routine or daily occurrences. So there is no standard procedure or process to deal with such issues.Usually,
these decisions are important to the organization. Such decisions are left to upper management. For example,
opening a new branch office will be a non-programmed decision.

Policy Decisions and Operating Decisions

Tactical decisions pertaining to the policy and planning of the firm are known as policy decisions. Such
decisions are usually reserved for the firm’s top management officials. They have a long term impact on the
firm and require a great deal of analysis.Operating decisions are the decisions necessary to put the policy
decisions into action. These decisions help implement the plans and policies taken by the high-level
managers.Such decisions are usually taken by middle and lower management. Say the company announces a
bonus issue. This is a policy decision. However, the calculation and implementation of such bonus issue is an
operating decision.

Organizational Decisions and Personal Decisions

When an executive takes a decision in an official capacity, on behalf of the organization, this is
an organizational decision. Such decisions can be delegated to subordinates.However, if the executive takes a
decision in a personal capacity, that does not relate to the organization in any way this is a personal decision.
Obviously, these decisions cannot be delegated.

Individual Decisions and Group Decisions

When talking about types of decisions, let us see individual and group decisions. Any decision taken by an
individual in an official capacity it is an individual decision. Organizations that are smaller and have an
autocratic style of management rely on such decisions.Group decisions are taken by a group or a collective of
the firm’s employees and management. For example, decisions taken by the board of directors are a group
decision.

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Steps of decision making :

Problem Detection
The first and foremost step in good decision making is to identify the problem. This is the basic
requirement of every decision making process. Unless and until the business is able to recognise its
problems properly, it can’t handle them. If the business is not able to handle its problems timely and
properly, it can have adverse effects on business. So, it is very important that problems are identified by the
decision making process.

Understanding The Problem

The next step is to do properly diagnosis of problem. It involves properly understanding the nature of
the problem. Root causes of problems are identified for better understanding. Attempts are made to find
out why problem have occurred, who all are affected by it, what are its causes and what are its effects if not
handled timely.

Acquiring Information
After understanding the real causes and nature of problems, information is collected from different
sources. Information is collected both internally and externally from the organisation to properly study the
factors relating the problems.

This information gather is used for better understanding and find out the proper solution timely.
Business use tools like ‘Check Sheet’ for effective collection of relevant and useful information.

Establish Different Solutions

The next step is concerned with finding out the different possible ways of handling the problems. It aims
at creating possible solutions for particular problem. Once information is gathered, now the collected
information is properly studied to arrive at conclusion.

Here, ultimately solutions to the particular issues of organisation are developed from different
perspectives. Here creativity of peoples involved in decision making has an important role. It helps them in
developing numerous solutions. More are the solution developed; more are the chances of having good
decision making.

Analysing Alternatives
This involves properly evaluating each and every solution developed to handle the problems. All the
alternatives already established in previous step are analysed from different perspectives. Strong and weak
points of each and every solution developed is checked properly. It helps in easily judging the most

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effective alternative for managing problems. This is the most important and supportive step in good and
effective decision making process.

Choosing The Best Solution

In this step, best and the most convenient solution among large number of alternatives available is
shortlisted. Attempts are made to choose the one which can effectively handle the problem. It is the core of
good decision making.

If proper solution is not selected then it can have long term adverse effects. The solution that is best
suited in accordance with company needs and objectives are chosen. Methodologies used for evaluating
alternatives make it easy and convenient to choose the best alternative.

Applying The Decision

This step simply involves implementing the shortlisted alternatives. Decision is of no use if it is not
applied timely as it will lose its effectiveness. Once the best solution is determined using different
methodologies, it should be implied properly and timely. Everything should go as per your decisions taken
to arrive at effective conclusion.

Evaluate The Results

This is the last step in the process of decision making. It is here where the performance and effectiveness
of decisions made by are analysed. It checks the outcomes of the decision and whether it is able to solve the
problem properly or not.

Efforts are made to find out the shortcomings of decision in tackling the problems and then correcting
them. If decision is found inaccurate in handling the problem, then the different alternative is chosen and
implied.

Management by objectives (MBO)

Meaning and definition of Management by objectives (MBO) : The origins of MBO can be traced back
to 1954, when management expert Peter Drucker first introduced the term and the concept in his book,
entitled “The Practice of Management”. Basically, he described it as an environment where management
and employees join forces and work together to set and monitor the goals of the organization for a certain
period.

Management by objectives (MBO) is a strategic management model that aims to improve the
performance of an organization by clearly defining objectives that are agreed to by both management and
employees. According to the theory, having a say in goal setting and action plans encourages participation

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and commitment among employees, as well as aligning objectives across the organization. It refers to the
process of setting goals for the employees so that they know what they are supposed to do at the
workplace.Management by Objectives defines roles and responsibilities for the employees and help them
chalk out their future course of action in the organization.

Need for Management by Objectives (MBO) :-

 The Management by Objectives process helps the employees to understand their duties at the
workplace.

 KRAs are designed for each employee as per their interest, specialization and educational
qualification. The employees are clear as to what is expected out of them.

 Management by Objectives process leads to satisfied employees. It avoids job mismatch and
unnecessary confusions later on.

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

 Management by Objectives ensures effective communication amongst the employees. It leads to a

positive ambience at the workplace.

 Management by Objectives leads to well defined hierarchies at the workplace. It ensures transparency
at all levels. A supervisor of any organization would never directly interact with the Managing Director in
case of queries. He would first meet his reporting boss who would then pass on the message to his senior
and so on. Every one is clear about his position in the organization.

 The MBO Process leads to highly motivated and committed employees.

 The MBO Process sets a benchmark for every employee. The superiors set targets for each of the team
members, each employee is given a list of specific tasks.

Features of MBO :-

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1. Goal Orientation: MBO focuses on the determination of unit and individual goals in line with the
organizational goals. These goals define responsibilities of different parts of the organisation and help to
integrate the organisation with its parts and with its environment.MBO seeks to balance and blend the long
term objectives (profit, growth and survival of the firm with the personal objectives of key executives. It
requires that all corporate, departmental and personal goals will be clearly defined and integrated.

2. Participation: The MBO process is characterized by a high degree of participation of the concerned
people in goal setting and performance appraisal. Such participation provides the opportunity to influence
decisions and clarify job relationships with superiors, subordinates and peers. It also helps to improve the
motivation and morale of the people and results in role clarity. Participative decision-making is a
prerequisite of MBO. MBO requires all key personnel to contribute maximum to the overall objectives.

3. Key Result Areas: The emphasis in MBO is on performance improvement in the areas which are of
critical importance to the organisation as a whole. By identification of key result areas (KRAs), MBO
ensures that due attention is given to the priority areas which have significant impact on performance and
growth of the organization

4. Systems Approach: MBO is a systems approach of managing an organisation. It attempts to integrate

the individual with the organisation and the organisation with its environment. It seeks to ensure the
accomplishment of both personal and enterprise goals by creating goal congruence.

5. Optimization of Resources: The ultimate aim of MBO is to secure the optimum utilization of physical
and human resources of the organisation. MBO sets an evaluative mechanism through which the
contribution of each individual can be measured.

6. Simplicity and Dynamism: MBO is a non-specialist technique and it can be used by all types of
managers. At the same time it is capable of being adopted by both business and social welfare
organizations. MBO applies to every manager, whatever his function and level, and to any organisation,
large or small.

7. Operational: MBO is an operational process which helps to translate concepts into practice. MBO is
made operational through periodic reviews of performance which are future-oriented and which involve
self-control.

8. Multiple Accountability: Under MBO, accountability for results is not centralized at particular points.
Rather every member of the organisation is accountable for accomplishing the goals set for him. Multiple

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centers of accountability discourage ‘buck-passing’ and ‘credit-grabbing’. MBO establishes a system of

decentralized planning with centralized control.

9. Comprehensive: MBO is a ‘total approach’. It attaches equal importance to the economic and human
dimensions of an organisation. It combines attention to detailed micro-level, short range analysis within
the firm with emphasis on macro-level, long range integration with the environment.

Benefits of MBO :-

1. Better Managing: MBO results in improved and better managing. Better managing requires setting
goals for each and every activity and individual and ensuring that these are achieved. MBO not only helps in
setting objectives but also ensures balancing of objectives and resources. For establishing objectives there
is a need for better and result oriented planning. Management by objectives forces managers to think about
planning for results, rather than merely planning activities or work. Managers will devise ways and means
for achieving objectives. The objectives also act as controls and performance standards. So MBO is helpful
in improving management.

2. Clarifying Organisation: MBO helps in clarifying organisational roles and structures. Responsibility
and authority are assigned as per the requirements of the tasks assigned. There is no use of fixing
objectives without delegating requisite authority. The positions should be built around the key results
expected of people occupying them. Implementation of MBO will help in spotting the deficiencies in the
organisation.

3. Encouraging Personal Commitment: The main benefit of MBO is that it encourages personnel to
commit themselves for the achievement of specified objectives. In a normal course people are just doing the
work assigned to them. They follow the instructions given by the superiors and undertake their work as a
routine matter. In MBO the purpose of every person is clearly defined with his or her own consent. People
in the organisation have an opportunity to put their own ideas before superiors, discuss the pros and cons
of various suggestions and participate in setting the final objectives. When a person is a party for setting
objectives then he will make honest endeavor to achieve them. He will feel committed to reach the goals
decided with his consent. A feeling of commitment brings enthusiasm and helps in reaching the goals.

4. Developing Controls: MBO mechanism helps in devising effective controls. The need for setting
controls is the setting of standards and then finding out deviations if any. In MBO, verifiable goals are set
and the actual performance will help in finding out the deficiencies in results. Every person is clear about
what is expected from him and these standards act as clear cut controls. So controls can easily be devised
when MBO is followed.
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Drawbacks of MBO :-

1. Failure to Teach MBO Philosophy: The success of MBO will depend upon its proper understanding
by managers. When managers are clear about this concept only then they can explain to subordinates how
it works, why it is being done, what will be the expected results, how it will benefit participants, etc. This
philosophy is based on self direction and self control and aims to make managers professionals.

2. Failure to Give Guidelines to Goal setters: If the goal setters are not given proper guidelines for
deciding their objectives then MBO will not be a success. The managers who will guide in goal setting
should themselves understand the major policies of the company and the role to be played by their activity.
They should also know planning premises and assumptions for the future. Failure to understand these vital
aspects will prove fatal for this system.

3. Difficulty in Setting Goals: The main emphasis in MBO technique is on set ting objectives. The setting
of objectives is not a simple thing. It requires lot of information for arriving at the conclusions. The
objectives should be verifiable so that performance may be evaluated. Some objectives may not be
verifiable, precaution should be taken in defining such objectives. The objectives should not be set casually
otherwise MBO may prove liability for the business.

4. Emphasis on Short Term Objectives: In most of the MBO programs there is a tendency to set short-
term objectives. Managers are inclined to set goals for a year or less and their thrust is to give undue
importance to short term goals at the cost of long term goals. They should achieve short term goals in such
a way that they help in the achievement of long term goals also. There may be a possibility that short term
and long term objectives may be incompatible because of specific problems. So proper emphasis should be
given to both short term and long term objectives.

5. Danger of Inflexibility: There is a tendency to strict to the objectives even if there is a need for
modification. Normally objectives will cease to be meaningful if they are often changed, it will also be
foolish to strive for goals which have become obsolete due to revised corporate objectives or modified
policies.

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Process of MBO ;-

1. Define Organizational Goals- Goals are critical issues to organizational effectiveness, and they serve
a number of purposes. Organizations can also have several different kinds of goals, all of which must be
appropriately managed. And a number of different kinds of managers must be involved in setting goals. The
goals set by the superiors are preliminary, based on an analysis and judgment as to what can and what
should be accomplished by the organization within a certain period.

2. Define Employees Objectives-After making sure that employees’ managers have informed of
pertinent general objectives, strategies and planning premises, the manager can then proceed to work with
employees in setting their objectives. The manager asks what goals the employees believe they can
accomplish in what time period, and with what resources. They will then discuss some preliminary
thoughts about what goals seem feasible for the company or department.

3. Continuous Monitoring Performance and Progress- MBO process is not only essential for making
line managers in business organizations more effective but also equally important for monitoring the
performance and progress of employees. For monitoring performance and progress the followings are
required; i. Identifying ineffective programs by comparing performance with pre-established objectives, ii.
Using zero-based budgeting, iii. Applying MBO concepts for measuring individual and plans, iv. Preparing
long and short-range objectives and plans, v. Installing effective controls, and vi. Designing a sound
organizational structure with clear, responsibilities and decisionmaking authority at the appropriate level.

4. Performance Evaluation- Under this MBO process performance review is made by the participation
of the concerned managers.

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5. Providing Feedback- The filial ingredients in an MBO program are continuous feedback on
performance and goals that allow individuals to monitor and correct their own actions. This continuous
feedback is supplemented by periodic formal appraisal meetings in which superiors and subordinates can
review progress toward goals, which lead to further feedback.

6. Performance Appraisal- Performance appraisals are a regular review of employee performance

within organizations. It is done at the last stage of the MBO process.

Strategy

Meaning of Strategy:
The term strategy has been derived from Greek work “Strategies” which means general. So, the word
strategy means the art of general. Thus strategy may be defined as gamesmanship or an administrative
course of action designed to achieve success in the face of difficulties. It is the grand design or an overall
plan, which a company chooses in order to move or reach the mission and objectives.
Candler defined strategy as “the determination of basic long-term goals and objectives of an
enterprise, and the adoption of course of action and the allocation of resources necessary for
carrying out these goals.”

Features of Strategy:
The following feature can be identified based on the above definitions:
1. Strategy is a dynamic or relative concept as it is designed to meet the demands of a particular
situation. Every situation requires a different strategy. Strategies may have to be revised frequently
because of changes in the situation.

2. Strategies are a complex plan encompassing other plans in order to achieve organisational objectives.

3. Strategy is forward looking: It has to do orientation towards the future. Strategic action is required in
a new situation, nothing new requiring solutions can exist in the past so strategy is relevant only to future.
It may take advantages of the past analysis.

4. Strategy provides the direction in which human and physical resources will be allocated and deployed
for achieving organisational goals in the face of environmental pressure and constraints.

5. Strategy is the right combination of factors both external and internal. In relating an organisation to
its environment, management must also consider the internal factors too, particularly in terms of its
strengths and weakness, that is, what it can do and what it cannot do.

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6. Strategy may involve even contradictory action. Since, strategic action depends on environmental
variables, a manager may take an action today and may revise or reverse his steps tomorrow depending on
the situation.

Importance of Strategy:
1. Strategies provide the framework for plans by channeling operating decisions. If strategies are
developed carefully and understood properly by managers, there will be more consistent framework by
managers. Therefore, strategies help to ensure efficiency and consistency in the allocation and employment
of resources.

2. A business strategy sets the direction for the activities required to achieve the objectives of the
organisation. It is the catalyst and thrust of the business.

3. Strategy formulation is essential for the long-term survival and growth of an organisation.

4. It enables the enterprise to take advantage of environmental opportunities and to combat

environmental pressures. It provides useful framework for guiding, thinking and action.

Essentials of a Sound Strategy:

The basic guidelines of an effective strategy are as follows:
1. The strategy should be consistent with the objectives, policies and other strategies of the organisation.

2. The strategy should be workable. It must be able to meet the needs of the particular situation. It must
contribute to the progress of the organisation.

3. A sound strategy must be suitable to the environment of the business. A strategy, which is not
consistent with the environment, can put the organisation in danger.

4. The strategy should be designed in the light of available resources. A strategic decision involves
commitment of right amount of resources to the opportunity and reservation of sufficient resources for
unanticipated demands.

5. The risk involved in the strategy must be reasonable in view of its expected pay-offs. A high-risk
strategy may threaten the survival of the enterprise, if things go wrong.

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Types of Strategy:
Strategies may be classified into the following categories:
1. Stability strategy,

2. Growth strategy,

3. Retrenchment strategy, and

4. Combination strategy.

1. Stability Strategy:
Stability strategy implies, “to leave the well enough along”. If the environment is stable and the
organisation is doing well, then it is better to make no changes. This strategy is exercised most often and is
less risky as a course of action.
2. Growth Strategy:
Growth means expansion of the operations of the company and addition of new areas of operations.
Growth strategy can be very risky and involves forecasting and analysis of many factors that affect
expansion like resource availability and market availability. However, growth is necessary due to volatility
of business and industries. For the success of an organisation, growth must be properly planned and
controlled.

3. Retrenchment Strategy:
Retrenchment primarily means reduction in product, services and personnel. This strategy is many
times useful in the face of tough competition, scarcity of resources and re-organisation of the company to
reduce waste. Retrenchment strategy, though reflecting failure of the company to some degree becomes
highly necessary for the very survival of the company.

4. Combination Strategy:
Combination strategy means using a combination of other strategies and is primarily used by large
complex organisations who may want to cut back in some areas and expand in others. Also, in time of
financial difficulties, a company may employ entrenchment strategy and resort to growth strategy, if the
economic situation improves.

In order to make strategic planning effective, it is necessary to have the right people involved who would
objectively and intelligently look at all angles and all factors involved in the success of these plans and
strategies.

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Implementation of Strategies:
Implementation of strategy is the process through which a chosen strategy is put into action. It involves
the design and management of systems, it achieve the best integration of people, structure, processes and
resources in achieving organisational objectives.

Important factors in strategy implementation are given below:

1. Institutional of Strategy:
The first basic action that is required for putting a strategy into operation is its institutionalization. Since
strategy does not become either acceptance or effective by virtue of being well designed and clearly
announced, the successful implementation of strategy requires that the strategy framer act as its promoter
and defend.

Often strategy choice becomes a personal choice of the strategist because his personality variables
become an influential factor in strategy formulation.

2. Setting Proper Organisational Climate:

It is important in making strategy to work. Organisational climate refers to the characteristics of internal
environment, which conditions the corporation, the development of the individuals the extent of
commitment and dedication of people in the organisation and the efficiency with which the purpose is
translated into results.

Organisations whose strategy is implemented with matching climate are more effective than whose are
not. People are the instruments in implementing a particular strategy and organisational climate is
basically people-oriented.

3. Developing Appropriate Operating Plans:

Operating plans means action plans, operational programmes and decisions. If they are made to reflect
desired of organisational objectives by focusing attention on those factors, which are critical to the success
of the organisation as spelled out during the strategy formulation process.

4. Developing Appropriate Organisation Structure:

Organisation structure is the pattern in which parts of the organisation are interrelated or
interconnected. It prescribes relationships among various positions and activities. The organisation
structure should be designed according to the needs of the strategy for the implementing strategy.

The relationship between strategy and structure can be thought of in terms of utilizing structure for the
strategy implementation because structure is a means to an end, that is to provide facilities for
implementing strategy. Therefore both should be integrated.
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5. Periodic Review of Strategy:

There should be periodic review of strategy to find out whether the given strategy is relevant. This is
required because even the carefully developed strategies might cease to be suitable if events change,
knowledge becomes more clear, or it appears that the environment will not be as originally thought.

Thus strategies should be reviewed from time to time. Major strategies should be reviewed at least once
a year. In fact this is done by most of the organisations who believe in relating themselves with the
environments.

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 B.B.A. 1st Sem. Subject- Business Management

UNIT-III

Introduction
The term ‘organization’ is used in many ways. It means different things to different people. Currently,
the following uses of the term are popular:
 A group of people united by a common purpose.
 An entity, an ongoing business unit engaged in utilizing resources to create a result.
 A structure of relationships between various positions in an enterprise.
 A process by which employees, facilities and tasks are related to each other, with
a view to achieve specific goals.
The dynamic interpretation of the term organization as a process is used in this unit.

Organizing

After the objective of enterprise are determined and the plans and policies formulated for the
achievement of this objective. Next step is to organize. It means to make arrangement of the things,
which are required to achieve the plans.

Definition of Organization
Organization is a complete entity of management involved in arranging people; task and resources
creating inter relations between them with a purpose to achieve long term and short term goals.

“Organizing is the process of defining and grouping the activities of the enterprise and establishing
the authority relationships among them. In performing the organizing function the manager defines,
departmentalizes, and assigns activities so that they can be most effectively executed.”

“Organizing is the process through which managers identify what work needs to be done to
accomplish the goals laid out in the planning process, divide work among units and individuals, and
then coordinate the divided efforts so that the goals can be accomplished.”

According to Robins, “Organizing means determining what task are to be done, who is to do them,
how tasks are to be grouped, who is to do them, who reports to whom and where decisions are to be
made”.

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Characteristics & Elements of Organization

1. Group of Persons
2. Departmentalization
3. Hierarchy of Authority
4. Common goals
5. Division of Labor
6. Resources
7. Co-ordination of activities
8. Co-operative efforts
9. Communication

Organization can be of
two types : formal and
informal -

Point Formal Organization Information Organization

Origin and Deliberately created; reflects Arises spontaneously: reflects individual and
goals organizational goals: Basic purpose group
is goals: basic purpose is to improve human
to achieve organization relations.
goals.
Structure It has a definite structure and is Structure less: organization chart built around
reflected in an organization chart people.
built around group positions.
Integrating Formal organization is held Held together by feelings of friendship, mutual
mechanisms together by rules, regulations and help and trust, and so on; it has unwritten rules and
procedures is bound by group norms rather than
organizational goals.
Communication Formal organization depends on The informal organization designs its own
formal official channels of
communication popularly known as grapevine, for
communication to sell the ideas of both organizational and social communication
management to the organization; process; communication is a two-way traffic.
communication is a one-way
traffic.
Size Tends to be large in size, generally Tends to be small and manageable.
unwieldy and unmanageable.
Durability Tends to be permanent and stable. Characterized by instability.
Orientation It is more or less, an impersonal A highly flexible structure designed to satisfy
and arbitrary structure, to which social and psychological needs of individuals.
individuals must adjust.

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Significance of Organizing

1. The organizing defines every employee’s task, duties, responsibilities and goals
2. It establishes the authority, responsibility relationship for cooperative and coordinated
efforts.
3. It provides a framework of decision making
4. It creates a network of communication for the purpose of achieving the enterprise
objectives with optimum efficiency and effectiveness.
5. It facilitates administration
6. Facilitates growth diversification.

Process of Organizing

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 Identifying the work: We organize to achieve objectives. So, it is essential to identify

the total work necessary to achieve the goals. The work must be classified in a systematic way so
that each person in the organization gets a separate and distinct task. Work must be divided
and distributed because no one can handle the total work in an organization single handled.
 Grouping the work: Division of work creates the need for coordination. In order to
provide for a smooth flow of work all closely related and similar activities must be grouped together.
Thus, departments and divisions are crated under the direction of a manger.
 Establishing relationships: In order to secure compliance to organizational
directives, reporting relationships must be specified. Once formal relationships are established, it
would help individuals know what must be done, how it must be done, to whom the matters must be
referred and how particular jobs related to one another, etc.
 Delegating authority: Authority is the right to act, to issue orders and exact
obedience from others. Without authority, a manager may not be able to perform the tasks with
confidence and show results.
 Providing for coordination and control: The interrelationships between various
positions must be specified clearly. The activities and efforts of various individuals must be
coordinated. The performance must be measured, evaluated and controlled at frequent intervals. If
deviations occur, they must be spotted early and appropriate remedial steps taken immediately.

Principles of organizing
Peter Drucker advances the following principle for designing the organization. The principles are
as follows –

Perpetuation and
Direction of Decision Self- Renewal
Vision Making
Clarity

Economy Understand ing One’s Stabili ty & Adapt

Own Task and Common ability
Task

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1. Clarity - Every manager and every part of organization must know its place in the
system. He/She should know how he/she is related to other, what contribution he/she has to make to
enable others to perform and what contribution he/she should expect from others to perform his/her
own task. Clarity is needed in all kinds of organization. It only means that everyone must know its takes
authority, position etc. in the organization.
2. Economy - People should be encouraged to take initiative and responsibility, execute
judgment in taking decision and taking required actions. It requires minimum control and supervision
of sub-ordinates.
3. Direction of Vision – The pattern of interaction and communication should be design
so as to direct to employees vision towards goals rather than towards the task and activities. The vision
should be directed not only towards his/her own goal but also towards the goal of the enterprise.
4. Understanding One’s Own Task and Common Task - It should enable the employee
to understand the common task and the contribution. His task is expected to make the performance
against organization task. There should be communication, running through out the organization.
5. Decision - Making - The organizational structure should be design so as to permit
decision to be made at appropriate level. The decision should be made at that particular level itself. The
organization structure should strength the right decision at the right time.
6. Stability & Adaptability – Every organization needs a certain degree of stability. The
reasonable stability enables an organization to plan, introduce and accept the change. The stability
should not be related to rigidity, a balance between stability and change should be maintained, also the
organization structures inbuilt an ability to adopt a new situation in internal & external environment.
7. Perpetuation and Self-Renewal – In order to perpetuate the organization should be
capable of renewing itself continuously. The internal forces should be capable to introduce new things
and discard the old or useless things. It should provide motivation to its employees to learn and
develop use their existing capabilities for achieving the objectives. A self-renewing organization should
have quality of open mindedness and receptiveness of new ideas.

Organization Structures
Organization structure is the way work is divided among units of the organization. It is
concerned with the establishment of positions and authority relationships. It is the framework
within which managerial and operating tasks are performed.

“Organization structure is a set of formalized tasks assigned to individual and work units,
formal reporting relationships and the development of integration system.”

There are various Structures for the organization. As per the suitability of the organization
they have to select the appropriate structure for the organization:

1. Line Organization: Line organization is the oldest type of organization which is also
known as military organization. It is characterized by direct lines of authority flowing from top to
bottom levels of organizational hierarchy and the lines of responsibility and accountability flowing in a
opposite but equally direct manner. More specifically, in line organization lines of authority &
commands runs from top managers (Ex-Board of directors) to the lowest level of managers (Ex-
Supervisor) through the Process of Delegation & redelegation of authority & line of responsibility flows
vertically upward from bottom to top organization.
There are two types of line organization:

i. Pure line organization: All the individuals at any given level perform the same type
of work & are divided into groups only to enable effective control & supervision.

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Board of Directors

General Manager

Works Manager

Superintendent

Foreman

Workers

ii. Departmental line Organization: The business is broadly divided into departments
which are put under charge of various departmental heads. Each departmental head derives authority
from chief executive & has complete control over his own departments. All departmental heads enjoys
equal status, authority & their function independently. No departmental head can issue orders &
instruction to subordinate of any other department.

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General Manager

CEO

Finance Personnel Productio Marketin Sales

Manage & HR n g Manage
r Manager Manager Manager r

Spinning Weaving Dyeing

Foreme Forema Forema
n n n

Advantages of line organization

i. Simple to establish, understand & operate
ii. Speedy action
iii. Proper Discipline
iv. Fixation of Responsibility
v. It is less costly

Disadvantages of line organization

i. Overloading
ii. Lack of specialization
iii. Autocratic leadership
iv. Lack of stability
v. Inefficiency of Decision Making
vi. Not suitable for large enterprises
vii. Communication Gap.
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2. Functional Organization: It refers to the organizational in which activities are

classified into a number of functions such as Production, Marketing, Finance, HR etc. A functional
specialists directs the subordinates throughout the organization in the field of his Particular function
i.e. subordinates are accountable to different functional specialist for performance of different
functions. Functional authority is limited form of line authority given to functional experts over
employees in other departments.
For Ex-Finance Manager is given the authority to directly issued orders and instructions to branch
manager &
factory manager to ensure effective utilization of money.
BOD

CEO

Finance Personnel Productio Marketin Sales

Manage & HR n g Manage
r Manager Manager Manager r

Chief Plan Maintenan

Enginee superintende ce
r n Inspector

Foreme Foreme Foreme

n Color n n
Welding Repair

Workers

Advantages of functional organization

i. Specialization
ii. Efficiency
iii. Simplified staffing
iv. Growth & Development
v. One man control is replaced by joint control
vi. Relief to executives: It relief’s the top executives from the burden of operating and
they can focus on strategic planning
Disadvantages of Functional Organization
i. Complexity: It creates confusion and overlapping of authorities and it is difficult to fix
up the responsibility for the final results. “Passing the buck” is very common.
ii. Lack of Co-ordination: Conflicts between different staff specialist makes co-ordination
& co- operation difficult.
iii. Costly: hiring of experts calls for large salaries and so to the increased clerical work.
iv. Delay in decision making: Divided control tends to delay the action particularly when
more then one specialist is involved. Consulting the staff experts & coming on consensus calls for time
& delays in decision making.

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v. Overburdening of Operating Subordinates

vi. Indiscipline: due to no unity of command their exist dual subordinate leading to
conflicting orders & divided loyalty & other problems as to discipline.

3. Line & Staff Organization: Line organization involves complete centralization while
functional organization involves too much division of control. Line & staff organization is designed to
maintain a proper balance between centralization & division of control.
Line & Staff organization is one that has line managers with direct vertical relationships between
different levels in the organization in addition to the specialist responsible for advising and assisting
the line managers. Line managers are one who are responsible for making decisions & accomplishing
the objectives set for then. While staff means “support”& is intended to provide technical advice or service
to the manger their relation is purely advisory and they cannot issue instructions to subordinates
outside their own departments.

Suitability :

1.Suitable for medium to large enterprises.

2.Organization which can afford high investment.
3. Production of goods & services which required specialized knowledge.

Advantages of Line & Staff Organization

1. Better utilization of resource; Line executives can concentrate fully on execution of
work as the function of investigation & advise is taken over staff also departmental staff are not
overburden by technical details.
2. Sound & Efficient decision making
3. Planned specialization: As per the skill requisite activities are divided between line &
staff while line is focusing & advisory activities.
4. Better co-ordination: Co-ordination of information & activities gets easy.
5. Scope of growth & expansion
6. Easier to maintain discipline & control because it does not hamper unity command
like in functional organization.

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Disadvantages of Line & Staff Organization

1. Costly: Two separate time of execution line & staff

2. Time Consuming
3. Line & Staff Conflicts: Line manger may advice thinking it impractical while staff may
tender half baked ideas because it is not held responsibility.
4. Lack of understanding between line & staff is common.
5. Confusion: Relation between line & staff is not clear which makes authority &
responsibility relation very complex & people at lower level get confused who is to do what & how.
6. Overdependence: Line manger may depend too much on staff experts for ideas &
information as a result they may loose their own initiative, thinking & judgment.

4. Project Organization:

Project organization is a temporary structure designed to accomplish a specific task or project with the
help of specialist drawn from different functional departments within the organization. It consists of
number of horizontal & diagonal relationships to accomplish a specific project goal of a long duration.
When project is completed all members moves on to a new project or return back to their home
departments in the organization or may lead to parent organization. A project manager is given line
authority over the team members during the life of project.
Project manager is a person who is responsible for coordinating the activities of several departments &
completion of target within specified time, cost & quality framework.

Advantages of Project Organization

1. Specialist Services
2. Timely work
3. It increases the co-ordination between different departments.
4. Flexible Structure
5. There is set unity of command & direction.

Disadvantages of Project Organization:

1. Costly
2. There are lot of Physical, financial & human constraints.
3. There is divided loyalty or there is overburden of company job & Project work.
4. There are chances of conflicts.
5. There is chance of over specialization & it will lead to delay in decision making & work
will go beyond time & cost.
6. Project manager have very limited line authority

Suitability of Project Organization

1. Organization which deals with projects for definite goal & time period and when work
activity is interdependent.
2. When work is of temporary nature
3. When expected profit or loss can be measured.

5. Matrix & Grid Organization: It is a mixture of functional & project organization. Matrix or
grid organization is a hybrid organization which combines project structure with functional structure. It is
a permanent organization structure design to accomplish specific project (or to achieve specific result) by
using teams of specialists drawn from different functional departments within the organization & externals
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are also there. Functional managers are in charge of specialized resources such as production, quality
42
control, Marketing, Inventories & finance. Project manager is in charge if one or more
Subject- projects.
Business In a
Management
B.B.A. 1st Sem.
matrix organization the team members are accountable to both project manager as well as head of
functional department to which they are permanently assigned.

Suitability

1. When there is a complex rapidly changing environment in which needs to be flexible &
adaptable?
2. When there is a pressure for shared resources
3. Presence of intense external competition.
It is particularly suitable for aerospace, construction, industrial plans, Advertising, Hospital, College
project within the specified time & cost framework.

Advantages

1. Eficient use of human resources

2. Interdisciplinary cooperation
3. Enhanced communication both laterally and vertically
4. Customisation of organizational and customer needs
5. Training and team work

Disadvantages

1. Violatin of traditional organizational principles

2. Dual reporting relations and role ambiguity
3. Cannibalization- competition between scarce resources within the system
4. More meetings and discussions than action
5. Costly

6. Committee Organization: A committee is a group of two or more appointment,

nominated or elected persons to consider discussing, to decide recommend or report on some issue or
matters assigned to it. Committees differ in number of dimensions such as purpose, membership, decision
making authority or nature of work.
It can be:
i. Advisory or Executive committee
ii. Line or Staff committee
iii. Formal of Informal Committee
iv. Coordinating Committee
v. Standing Committee

Suitability

1. This kind of organization structure is commonly used in government organization where

they create specific committee to resolve social issues.
2. Where issues in question requires experts opinion & coming to a consensus.

Advantages
1. Experts Opinion
2. Broad Picture to the issue
3. Democratic way of decision groups
4. Representation of interested groups
5. Sharing
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(M.P.)
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 Disadvantages Subject- Business Management
B.B.A. 1 Sem.
st

1. Reports submitted by committee members are only recommendations or probable

solutions to the issue. Their implementation is subject to authority approval to whom report is submitted.
2. Waste of Money, Time & Energy.
3. No one supreme authority to decision making: All representatives are there & they all do
not have decision making authority.
4. Lack of Secrecy.
5. A Committee mostly consist of 3 men, 2 of whom are absent.

DIFFERENCE BETWEEN LINE ORGANISATION AND LINE AND STAFF

ORGANISATION

S.No. Line Organization Line and Staff Organization

1 This form of organization has lack of The decisions about organization are more strong
specialists. So decisions are not more because at the time of decision, the
correct. advice of expert is taken.
2 The authority is centralized. All decisions are The centralization of authority is comparatively
taken at top level. less, departmental management has also the
opportunity to take decisions.
3 This organization is fit for small enterprise. This organization is fit for bigger enterprises.
4 This organization has simplicity because It has complexity, there is no clear authority
there is clear authority line from top to below from top to below, many problems arises due to
and promotions happens easily. specialists.

DIFFERENCE BETWEEN FUNCTIONAL ORGANISATION AND LINE AND STAFF ORGANISATION

S.No. Functional Organization Line and Staff Organization
1 In functional organization, decisions are In line staff organization the decisions are taken
taken by specialists. by line officers, specialists give only advice.
2 In this organization full advantage of It this, the advantage of specilisation is not taken
specialization is taken. much due to not taking decision by
specialists.
3 In the organization the work in divided In this, the qualification of workers is not
according to qualification. considered at the time labour-division.
4 In this organization, there are separate The line of authority is predetermined. So co-
specialists for every work. So there is problem
ordination is easy.
of coordination.
5 In this organization, workers get In this organization, workers get instructions
instructions from different specialists. from a single officer.

DIFFERENCE BETWEEN LINE ORGANISATION AND FUNCTIONAL ORGANISATION

S.No. Basis of Line Organization Functional Organization
Difference
1 Simplicity This is the simplest form of This is the complex form of
organization. organization
2 Expenses This is less expensive. Much money is to be spent in this
organization.
3 Utility This is useful for small units. This is useful for big units.
4 Specialization This is not based on specialization. This is used on specialization.
5 Authority and In it, authority and responsibility In, it authority and responsibility lines
responsibility lines are up and down. are up and down and horizontal also.
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 6 Specialists
The services of specialists are not The services of specialists are taken
Subject- Business in
Management
B.B.A. 1st Sem.
taken in it. this organization.
7 Delegation In this, delegation is vertical. In, this delegation may be horizontal.
8 Planning and In this, planning and execution In this, planning and execution are
execution happens simultaneously. done separately.
9 Authority The authority lies only in hands of In, this authority is given to
line officers. specialists.
10 Headism In it, principle of single heads is In this organization, the principals of
implied. many heads is implied.

Delegation of Authority
Delegation is the mechanism through which organization work is distributed among its employees;
authority is distribute in them for the performance of assigned task and accountability is imposed on them
to perform adequately. A manager is responsible for doing a large variety of task and activities, which he
can’t do himself. Therefore he assigns some of his work to his subordinates. He helps with himself those
tasks, which are for goal attainment and transfer the less important work to his subordinates. After
assigning them the work he transfers to the subordinate adequate authority so as to enable them to make
decision and take actions required for the achievement of goals. The assignment objective of work and
delegation of authority creates on obligation on part of subordinate to perform adequate and efficiently.

Nature of Delegation

 Two-sided relationship
 Act of trust
 Freedom to think and act
 Dependency relationship
 A challenging task
 Forward-thinking principle

PROCESS OF DELEGATION
According to Management expert Newman, the delegation process is compared of four inter related
steps.

1. Assignment Of Duties – The process being with the assignment of task. The manager should analyse
the task involved in his job. He breaks the job into different activities and decides which part of it he bounds to
do himself and which part
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Nagar, boundsPress
to assign others.
Complex, Then(M.P.)
Indore he assigns the taskwww.rccmindore.com
Ph.: 4262100, depending upon the knowledge,
competence of the subordinates. After assigning the task he makes it clear at what result are expected from45the
subordinates st Subject- Business Management
B.B.A. 1 Sem.
2. Delegation Of Authority - The subordinate should have adequate authority according their job
responsibility so that they can perform their job effectively. As the job responsibility changes there should be
change in the extant of the delegated authority.
3. Creation Of Obligation – Along with the assignment of task and delegation of authority it is
necessary to have certain obligation or accountability from the subordinates for judicious use of authority and
effective performance. Reading to the attainment of the pre-determine goals.
4. Establishment Of Effective Control System – Fourth step is establishing an adequate control
system for evaluating the results of delegation. The managers have to evaluate the progress of subordinate time
to time to ensure that authority is utilized effectively and desired results are
achieved. The manager establishes control through feedback system that will provide him information on
subordinate activities and progress. He may gather information or may ask for written or oral reports form his
subordinates. This help in keeping a record of progress and problems sand enables him to take corrective
actions.

Principles of Effective Delegation.

1. Authority Should Be In Coordination With Responsibility – the authority should be closely
related to the responsibilities. There should be adequate coordination between authority and responsibility,
which will help to make the required decision and take appropriate action that are required of reflective job
performance.
2. Interfere Should Be Minimize – One’s the authority has been delegated to a subordinate to make
decisions he should be allowed to do so even if the superior feels that he can take a better decision himself. He
should resist the temptation of interfering the guiding the subordinate, one’s the authority is delegated. However
when there are complex problem the superior should help and guide the subordinate. He should make decision if
required.
3. Tolerance Of Mistake – Subordinates may make wrong decision sometime but if his decision is
strongly disapproved he will avoid taking decision and than start relaying on his superior for decision. If this
happens the subordinate will never learn to make decision and also the superior will be over burden. The minor
mistakes should be ignored whereas the superior should correct the serious mistake.
4. Adequate Control Should Be Established – It is necessary to establish proper control to ensure that
his subordinate exercise authority properly and achieve pre-determined goals. But this control should not be
exercised too frequently that it obstructs the subordinate performance & initiative.
5. Upward Delegation Should Not Be Allowed – Sometimes the subordinate are uncertain reluctant
to use authority. In such situations they follow the policy of awkward delegation. It means that they will refer
their problems to their superior rather than talking at their own level, this increase the burdenon superior
times therefore superior should not allow subordinate to delegate awkward and should insist that they
themselves take job related decisions.
Departmentalization
Definition: Departmentalization or Departmentation is a process wherein jobs/teams are combined
together into functional units called as departments on the basis of their area of specialization, to achieve the
goals of the organisation. So, in this way, the entire organization is divided into parts, i.e. departments which
comprise of a group of employees, who carry out activities of similar nature.

It determines the functions/activities which are to be housed together and coordinated at the same place.
Further, it groups the personnel, who will undertake the delegated functions/tasks.

In a corporate ladder, every level below the top is departmentalized, and each subsequent level is further
differentiated into departments.

The top-level executives, groups activities in various departments, such as production, marketing, finance,
human resource, research and development, etc. These departments are headed by senior executives, called as
managers of the respective department. The departmental managers can delegate tasks and duties to the
subordinates, and they are accountable to the chief executive for the performance of the department.

Objectives of Departmentalization
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 To specialize activities. 46
  To simplify the process and operations of the organization Subject- Business Management

B.B.A.To1stmaintain
Sem. control
Departmentalization of activities results in the increase in efficiency of the management and ultimately the
enterprise. It is helpful in fixing responsibilities and accountability.
Methods of Departmentalization
1. Departmentalization by Function: When the creation of department is on the basis of specified
functions, such as production, marketing, purchase, finance etc. In this method, all the activities related to a
function or which are of similar nature are combined in a single unit, to give proper directions to the entire
group in one go.
2. Departmentalization by Process: In departmentation by the process, the activities are grouped as per
the production processes. These departments require manpower and material so as to carryout operations.

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 3. Departmentalization by Product: When the activities related to product development
Subject- Businessand delivery are
Management
B.B.A.
combined 1st Sem.
into a particular division, it is called as product departmentalization. It is appropriate for large-scale
multi-product enterprises.

4. Departmentalization by Customer: The grouping of the organization according to the different classes
of customer or clients. It focuses on special customer needs.

4.5. Departmentalization by Territory: When the division is based on the geographical area, it is called as
territorial departmentalization. This is suitable for the organizations, that have widespread operations at
different locations.
5.6. Departmentalization by Project: In project departmentalization, the organizational activities are
classified by differentiated or special ventures or activities.
The choice of departmentalization basis is influenced by the factors such as the degree of specialization,
coordination, control, cost consideration, adequate attention to key areas, etc.

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B.B.A. 1st Sem. Subject- Business Management

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 UNIT-IV Subject- Business Management
B.B.A. 1st Sem.
RECRUITMENT
Recruitment is defined as “a process of searching for prospective employees & stimulating them to
apply for jobs in the organization.”
The function of recruitment precedes the selection function & its includes only finding, developing,
the sources of prospective employees & attracting them to apply for jobs in an organization,
whereas the selection is the process of finding out the most suitable candidate to the job out of the
candidates attracted (i.e. recruited)

Characteristics –
 Positive Process  Complex
 Group of Activities (Not a single task)  Linking Activity
 Pervasive

Need and Objectives of Recruitment –

a) Vacancies created due to transfer, promotion, retirement, termination, permanent disability
or death.
b) Vacancies created due to expansion, diversification, and growth of business.
c) The normal population growth, which requires increased goods and services to meet the
needs of the people.
d) A rising standard of living, which requires more of the same goods and services as well as
the creation of new wants to be satisfied.
e) An increase in the competitive advantage of certain concerns, enabling them to get more of
the available business than formerly.
f) An increase in business arising from an upswing during the recovery period of a business
cycle.

Process of Recruitment –
1) Recruitment process begins when the personnel department receives requisitions for
recruitment from any department of the company.
2) The next step is assessment of personnel requirement through job descriptions and ob
specifications.
3) Locating and developing the sources of required number and type of employees.
4) Identifying the prospective employees with particular combinations of skill, experience,
education, and other personal attribute.
5) Communicating the information about the organization, the job, the terms and conditions of
service, and the applicable laws and regulations.
6) Encouraging the identified candidates to apply for jobs in the organizations.
7) Evaluating the effectiveness of recruitment process.

Sources of Recruitment –
The sources of recruitment are broadly divided into –
a. Internal sources
b. External source

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 B.B.A. 1st Sem. Subject- Business Management
• Present permanent employees
Internal • Retrenched or Retired Employees
sources • Dependants of deceased, disabled, retire &
present employee

• Campus recruitment
• Private Employment Agencies/
Consultants
External • Public employment Exchanges
• Professional Associations
sources • Data banks
• Casual applicants
• Similar organization
• Trade unions

Internal sources –
Internal sources are the sources within an organizational pursuit, internal sources included –
1) Present permanent employees – Organization considers the candidates from this sources
for higher level jobs for ex. Promotion, transfers.
 Promotions – Most of the internal candidates would be submitted to take up higher
responsibilities & express their willingness to be engaged in the higher level jobs if
management gives them assurance that they will be promoted to the next higher level.
 Transfers – Employees will be stimulated to work in new sections or places if
management wishes to transfer to the places of their choice.
2) Retrenched or Retired Employees – Organization retrenches the employees due to layoff.
The organization takes the candidates for employment from the retrenched employee due
to obligation trade union pressure etc. sometimes the organization prefer to reemploy their
retires employees as a token of layoff to the organization.
3) Dependants of deceased, disabled, retire & present employee – Some organization with
a view to developing the commitment & loyalty of not only the employees but also his family
members & to build up image provide employment to the dependant(s) of deceased,
disabled & present employees.

Advantages of Internal Recruitment

 The internal recruitment is an excellent tool for the retention of employees, who are not
identified as key employees, top performers or high potentials
 The internal recruitment can be much quicker than the external recruitment
 The internal recruitment has a huge impact on loyalty and the engagement of employees
 The internal recruitment is cheap and helps to increase the productivity and performance of
the organization

Disadvantages of Internal Recruitment

45, Anurag Nagar, Behind Press Complex, Indore (M.P.) Ph.: 4262100, www.rccmindore.com
 The internal recruitment does not bring new and innovative ideas into the organization 51
  The organization has to define clear and strict rules for theSubject-
B.B.A. 1st Sem.
internal recruitment,
Business as the
Management
employees do focus on meeting their targets. They should not be allowed to change the
position too often
 Managers do not like to allow their employees change the position. They have to find the
replacement, and they have difficulties to meet their goals

External Sources
External sources are the sources which are outside the organization pursuit –

External sources include –

a. Campus recruitment
b. Private Employment Agencies/
Consultants
c. Public employment Exchanges
d. Professional Associations
e. Data banks
f. Casual applicants
g. Similar organization
h. Trade unions

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BBA. 1st Year Subject- Bussiness Management

Advantages of External Recruitment

 It can bring fresher skills and inputs to the table
 It promotes better competition
 It is a good way to get ideas from other businesses or industries

Disadvantages of External Recruitment

 It recruits candidates with limited understanding of your company
 It is time-consuming
 It comes with issues of maladjustment

Methods of Recruitment
1) Direct Methods
2) Indirect Methods
3) Third Party Methods

Indirect

Third
Direct
party

Methods of
Recruitment

SELECTION
Definition – Selection is the process of picking individuals who have relevant qualifications to
fill job in an organization. The basic purpose is to choose the individual who can most
successfully perform the job, from the pool of qualified candidates.
“Selection is the process by which candidates for employment are divided into two classes-
those who will be offered employment and those who will not.” – Dale Yoder

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BBA. 1st Year Subject- Bussiness Management

Characteristics of Selection –
1) Sorting process
2) Negative process
3) Sequence of hurdles
4) Based on standard pattern
5) Process of picking out best suited men.

The process
1) Receiving of Applications – Various job-seekers send their applications to the
employment office or Personnel Department of the company in response to the
advertisement made by it.
2) Scrutiny of Applications – All applications received are scrutinized by the Personnel
Department in order to eliminate those applicants who do not fulfill required
qualifications.
3) Screening/preliminary Interview – A preliminary interview is generally planned by
large organizations to cut the cost of selection by allowing only eligible to go through the
further stages in selection. A junior executive from the HR Department may conduct the
interview & take responses from applicants on important items determining the
suitability of an applicant for a job such as age, education, experience etc.

Hiring Decision Step

9
Reference Checks
Step 8
Medical Examination
StepInterview
Selection 7
Step 6
Selection Tests
Step 5Blank
Application
Step 4
Screening Interview
Step 3
Scrutiny of applications
Step 2
Reception of applications
Step 1

3. Application Blank – application blank or form is one of the most common methods
used to collect information on various aspects of the applicants’ academic, social
demographic, work related background and references.
4. Selection Testing – A test is a sample measurement of an individual’s job-related
abilities and skills. It provides a basis for comparing the behavior, performance and
attitudes of two or more persons. There are various types of test:
a. Intelligence Tests.

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BBA. 1st Year Subject- Bussiness Management

b. Aptitude Tests
c. Personality Tests
d. Achievement Tests
e. Simulation Tests
5. Selection Interview – Interview is the oral examination of candidates for
employment.
Types of Interviews
1) The non-directive interview – The recruiter asks question as they come to
mind.
2) The directive or structured interview – The recruiter uses a predetermined
set of questions that are clearly job related.
3) The situational interview – The interviewer attempts find how applicants
would respond to aggressive, embarrassing and insulting questions.
4) Stress interview – The interviewer attempts find how applicants would
respond to aggressive, embarrassing and insulting questions.
5) Panel Interview – The applicant meets with three to five interviewers who
take turns asking questions.
6. Medical Examination – Certain jobs require physical qualities like clear vision,
acute hearing, unusually high stamina, tolerance level etc. which are ensured through
medical examination.
7. Reference checks – Candidates are required to give the names of two or three
references in their application forms.
8. Hiring Decision – The line Manager concerned has to make the final decision-
whether to select or reject a candidate. After taking the final decision the
organization sends the offer letter to the successful candidates.

TRAINING
INTRODUCTION
Training is a specialized function of human resource management. Every organization needs to
have well defined trained people to perform the activities. As job have become more complex it
s necessary to raise the skills level of employees.

MEANING & DEFINITION OF TRAINING:-

It is true in many organizations that before an employee is fitted into a harmonious working
relationship with other employees, he is given adequate training. Training is the act of
increasing the knowledge & skills of an employee for performing a particular job. A trainee
learns new habits, refined skills and useful knowledge during the training that helps him
improve performance. It is a systematic procedure for transferring technical knowhow to the
employees.
According to Edwin B. Flippo. “Training is the act of increasing the knowledge & skills of an
employee for doing particular job.”

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BBA. 1st Year Subject- Bussiness Management

According to Dale B. Beach, training is “the organized procedure by which people learn
knowledge and skill for a definite purpose”.
Thus training refers to the teaching and learning activities directed at helping employees
acquire & apply the knowledge skills, abilities & attitudes needed by a particular job &
organization.

CHARACTERISTICS or NATURE OF TRAINING

1. Training is an act of increasing the knowledge, skills of an employee for doing a
particular job.
2. Training is a continuous process.
3. It involves changing of skills, knowledge, attitudes or social behavior.
4. It is learning process & experience.
5. It seeks relatively permanent change in an individual that will improve.
6. Training is an aid to self development.
7. Essential part of management development.
8. Focus attention on the current job and it is job specific & addresses particular
performance defeats or problems.
9. Concentrates on individual employees.
10. Training complement selection if well qualified candidates are selected, there will be
less need of training inside the organization.

NEEDS & OBJECTS OF TRAINING

Training is needed to serve the following purpose
1. Job requirements–Newly recruited employee require training so as to perform their
tasks effectively.
2. Promotion- Training is necessary to prepare existing employees for higher level jobs.
3. Transfers-Training is necessary to when a person moves from one job to another job.
After training the employee can change job quickly, improve his performance levels &
achieve career goals compatibly.
4. Technological changes-Technology is chaining very fast. New jobs require new skills.
No organization can miss the advantages of latest technology without well trained
employees.
5. Increasing competition-Due to economic liberalization & globalization the firms are
experiencing & expansion & diversification of business & products. The kin competition
has increased uncertainties & complexities in the market. Thus, in order to face such
challenges the firms has to improve their capabilities.
6. Organizational Viability – Trained employees are the valuable assets of a company. But
the skills of men become outdated due to fast changing conditions in the market and
economy. Over the passage of time, employees suffer from personal obsolescence. Their
knowledge becomes old. Hence, existing employees need refresher training to keep them
abreast of new knowledge.
7. Hiring Misfits – Today, public welfare, reservation policy or social responsibility have
made it necessary to employ those generally regarded as unemployables. The social goal

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BBA. 1st Year Subject- Bussiness Management

of equal employment opportunity has been accepted nationwide. Minority group

members have claim to be recruited. Something these persons may be misfits. But their
shortage of skills can be removed by ‘training’.

TYPES OF TRAINING OR APPROACHES OF TRAINING

1. Orientation Training – It is also known as pre job induction training. This training
provides new employees with information about company policies, history, procedure
pay & benefits, conditions of employment etc. This training adjusts newly appointed
employees to the work environment.
2. Skills training – This type of training is most common in organizations. The need for
training in basic skills such as reading, writing, computing, peaking, listing problem
solving, leading etc. is identified through assessment.
3. Refresher Training – Rapid changes in technology may force companies to go in for this
king of training organizing short term courses which incorporate the latest knowledge
developments in a particular field, the company may keep its employee up to date and
ready to take emerging challenges.
4. Cross functional training- Involves training employees to perform operations in areas
other than their assigned jobs. There are many approaches to cross functional training
job rotation can be used to provide a manager in one functional area with a broader
perspective than they would otherwise have departments can exchange personnel for a
certain period so that each employee how other departments are functioning.

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BBA. 1st Year Subject- Bussiness Management

5. Training for promotion- employees of high potential are selected & they are given
training before promotion. This training is provided when vacant posts are filled up by
internal recruitment i.e. by promotion.
6. Safety Training- This training is being provided to minimize accidents & damage to
machinery. It involves instruction in use of machinery & safety devices.
7. Apprentice Training- It is used to prepare employees for a variety of skilled
occupations & crafts for examples it is provided to tailor electrotyper, machinist,
printing pressman, designer etc.
8. Internship training- It refers to joint programme of training educational institutions &
business corporate selected students carry on regular school studies for period ranging
from 3 to 12 months & then work in the factory or office for a designed period of time.
9. Remedial Training- This training has the object to overcome the short coming in the
behavior and performance of old employees. Such employees are indentified and correct
work methods and procedures are taught to them.
10. Diversity Training- Considers all of the diverse dimension in the work place, such
gender, age, disability, lifestyle, culture education, idea etc. while designing a training
programme. It concentrates on awareness building & skills building.
11. Job Training- This training is a conducted with a well increase the knowledge & skills of
an employee for improving job performance.
12. Creative Training- Involves employees to think unconventionally, go out of the box &
give unexpected solutions.
Difference between Training & Development
Learning Dimension Training Development
Meant for Operatives Executives
Focus Current job Current and future job
Scope Individual employee Work group or organization
Goal Fix current skill deficit Prepare for future work
demands
Initiated by Management – External motivation The individual – Internal
motivation
Content Specific job related information General knowledge
Time-frame Immediate Long term

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BBA. 1st Year Subject- Bussiness Management

The Training Process:-

In order to achieve the objectives, an approximate training programme is necessary
The process is as follows-

Organization Training Prepare the

al objectives goals trainees

Developing
Training Selection of Overall
Training
Policy trainees evaluation
Package

Training Presenting
Responsibility Performance
needs the
of training Tryout
assessment operation

1. Organizational objectives: - An organization first assesses its objective. What business

are use in what product do we wish to provide to customers? These questions will
decide what skills, knowledge, attitudes & other personnel attributes are necessary for
employees.
2. Training Policy: - A training policy presents the commitment of top management to
employee training. It consists of rules & procedures concerning training. A training
policy is required to guide the design & implementation of training programme.
3. Responsibility of training:- Training is a joint process. It responsibility has to be
shared among the top management, personal department, the line supervisor & the
employees.
4. Training needs assessment:- It is the most important step in the process. It is from this
needs assessment not the entire training process will flow.

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BBA. 1st Year Subject- Bussiness Management

5. Selection of trainees: - It is necessary to decide who are to be trained new or old

employees.
6. Training goals: - The Training goals should ensure that the assessed needs will be
served.
7. Prepare the trainees: - The source of training depends to a great extent upon the
instructors or the resource persons.
8. Developing Training Package: - It involves deciding the content of training, designing
support materials & choosing appropriate training techniques.
9. Presenting the operation: - This is action phase of training. The instructor uses
explanation & demonstration for training.
10. Performance Tryout:- The trainee is asked questions in order to endure that he really
knows & understands the job. He is also asked to do the job several times.
11. Overall evaluation: - At the end of training, formal evaluation of the training
programme is necessary. This evaluation must be directly related.

IMPORTANCE
Training offers innumerable benefits to both employees and employers. It makes the employee
more productive and more useful to an organization. The importance of training can be studied
under the following heads:

Benefits to the business:

 Rained workers can work more efficiently. They use machines, tools and materials in a
proper way. Wastage is thus eliminated to a large extent.
 There will be fewer accidents. Training improves the knowledge of employees regarding the
use of machines and equipment. Hence, trained workers need not be put under close
supervision, as they know how to handle operations properly.
 Trained workers can show superior performance. They can turn out better performance.
They can turn our better quality goods by putting the materials, tools and equipment to
good use.
 Training makes employees more loyal to an organization. They will be less inclined to leave
the unit where there are growth opportunities.

Benefits to the employees:

 Training makes an employee more useful to firm. Hence, he will find employment more
easily.
 Training makes employees more efficient and effective. By combining materials, tools and
equipment in a right way, they can produce more with minimum effort.
 Training enables employees to secure promotions easily. They can realize their career goals
comfortably.
 Training helps an employee to move from one organization to another easily. He can be
more mobile and pursue career goals actively.
 Employees can avoid mistakes, accidents on the jo. They can handle jobs with confidence.

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BBA. 1st Year Subject- Bussiness Management

They will be more satisfied on their jobs. Their morale would be high.
 Thus, training can contribute to higher production, fewer mistakes, greater job satisfaction
and lower labour turnover.

AREAS OF TRAINING
The area of Training in which training is offered may be classified into the following categories.
1. Knowledge
Here the trainee learns about a set of rules and regulations about the job, the staff and the
products or services offered by the company. The aim is to make the employee fully aware
of what goes on inside and outside the company.
2. Technical Skills
The employee is taught a specific skill (e.g., operating a machine, handling computer etc.) so
that he can acquire that skill and contribute meaningfully.
3. Social Skills
The employee is made to learn about himself and others, and to develop a right mental
attitude towards the job, colleagues and the company. The principal focus is on teaching the
employee how to be a team member and get ahead.

TRAINING METHODS
Training methods are usually classified by the location of instruction. On the job training is
provided when the workers are taught relevant knowledge, skills and abilities at the actual
workplace; off-the-job training, on the other hand, requires that trainees learn at a location
other the real work sot. Some of the widely used training methods are listed below.

I) On-the-Job Training Methods

II) Classroom Approach, or Informational or Presentation Methods
III) Experiential or Hands-on Methods
IV) Self-Paced or Computer-Based Methods
I) ON THE JOB TRAINING METHODS:

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BBA. 1st Year Subject- Bussiness Management

1. On-the-Job Training (OJT)

This method places the employees in an actual work situation and makes them appear to
be immediately productive. It is learning by doing. Individuals are trained on the same
machines, while doing the same work expected of them. The employee learns in the
same environment where he will be working at his regular tasks.
2. Job Instruction Training
It is a form of OJT. Many jobs consist of a logical sequence of steps and are best taught
step-by-step. It is listing each job’s basic tasks along with key points, in order to provide
step-by-step training for employees. The steps show what is to be done. Key points show
how it is to be done and why.
3. Just-Do-It Training
This approach is a combination of Job Instruction Training and Japanese philosophy of
continuous improvement. This JDIT approach begins with instruction on basic principle
and then moves to the job where a need for improvement has been identified.
4. Coaching
Coaching is a kind of daily training and feedback given to employees by immediate
supervisors. It may be defined as an informal, unplanned training and development
activity provided by supervisors and peers. In coaching, the supervisor explains things
and answer questions; he throws light on why things are done the way they are; he
offers a model for trainees o copy; conducts lot of decision making meetings with
trainees; procedures are agreed upon and the trainee is given enough authority to make
decisions and even commit mistakes. Of course, coaching can be a taxing job in that the
coach may not possess requisite skills to guide the learner in a systematic way.
Sometimes, doing a full day’s work may be more important than putting the learner on
track.

5. Mentoring:

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BBA. 1st Year Subject- Bussiness Management

Mentoring is a relationship in which a senior manager in an organization assumes the

responsibility for grooming a junior person. Technical, interpersonal and political skills
are generally conveyed in such a relationship from the more experienced person. A
mentor I a teacher, spouse, counselor, developer of skills and intellect, host, guide,
exemplar and most importantly, supporter and facilitator in the realization of the vision
the young person (protégé) has about the kind of life he wants a an adult.
The main objective is to help employees attain physiological maturity and effectiveness
and get integrated with the organization. In a work situation, such mentoring can take
place at both formal and informal levels, depending on the prevailing work culture and
the commitment from the top management. Formal mentoring can be very faithful, if
management invests tie and money in such relationship building experiences.
6. Job Rotation:
This kind of training involves the moment of trainee from one job to another. This helps
him to have a general understanding of how the organization functions. The purpose of
the job rotation is to provide trainees with a larger organizational perspective and a
greater understanding of different functional area as well as a better sense of their own
career objectives and interest. Apart from relieving boredom, job rotation allows
trainees to build rapport with a wide range of individuals within the organization,
facilitating future cooperation among departments. The cross-trained personnel offer a
great amount of flexibility for organizations when transfers, promotions or replacements
become inevitable.

II) Classroom Approach, or Informational or Presentation Methods

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1. Vestibule training:
In this method, actual work conditions are simulated in a classroom. Material, files and
equipment – those that are used in actual job performance are also used in the training.
This type of training s commonly used for training personnel for clerical and semi-skilled
jobs. The duration of this training ranges from a few days to a few weeks. Theory can be
related to practice in this method.
2. Lecture method: The lecture is a traditional and direct method of instruction. The
instructor organizes the material and gives in to a group of trainees in the form of a talk.
To be effective, the lecture must motivate and create interest among the trainees. An
advantage of lecture method is that it is direct and can be used for a large group of
trainees. Thus, costs and time involved are reduced. The major limitation of the lecture
method is that it does not provide for transfer of training effectively.
3. Conference approach: In this method, the trainer delivers a lecture and involves the
trainee in a discussion so that his doubt the job gets clarified. When big organizations
use this method, the trainees uses audio-visual aids such as black boards, mockups and
slides; in some cases the lectures are videotaped or audio taped. Even the trainee’s
presentation can be taped for self confrontation and self assessment.
The conference is thus, group-centered approach where there is a classification of ideas,
communication of procedures and standards to the trainees. Those individuals who have
a general educational background and whatever specific skills are required such as
typing, shorthand, office equipment operation, filing, indexing, recording etc. may ne
provided with specific instructions to handle their respective jobs.
4. Apprenticeship Training
Most craft workers such as plumbers and carpenters are trained through formal
apprenticeship programmes. Apprentices are trainees who spend a prescribed amount
of time working with an experienced guide, coach or trainer. Assistantship and
internships are similar to apprenticeships because they also demand high levels of
participation from the trainee. An internship is a kind of on-the job training that usually
combines job training with classroom instruction in trade schools, colleges or
universities. Coaching, as explained above, is similar to apprenticeship because the coach
attempts to provide a model for the trainee to copy. One important disadvantage of the
apprenticeship methods is the uniform period of training offered to trainees. People
have different abilities and learn at varied rates. Those who learn fast may quite the
programme in frustration. Slow learners may need additional training time. It is also
likely that in these days of rapid changes in technology, old skills may get outdated
quickly. Trainees who spend years learning specific skills may find, upon completion of
their programmes, that the job skills they acquired are no longer appropriate
5. Internship
It is a joint programme of training in which educational institutions and business houses
cooperate. In this method, students are given practical training while they study.
Selected candidates carry on regular studies and they are also sent to factory of office
during their vacations to get practical knowledge of their job.
6. Programmed instruction:

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This method has become popular in recent years. The subject matter to be learned is
presented in a series of carefully planned sequential units. These units are arranged
from simple to more complex levels of instruction. The trainee goes through these units
by answering questions or filing the blanks. This method is thus, expensive and time-
consuming.

III) Experiential or Hands-on Methods

1. Case Method: The case is an actual situation which is written for discussion purposes.
Case presents an in-depth description of a particular problem an employee might
encounter on the job. Here, the trainee attempts to find and analyze the problem,
evaluate alternative courses of action, and decide what course of action would be most
satisfactory.
2. Role playing: It is defined as a method of human interaction that involves realistic
behavior in imaginary situations. This method of training involves action, doing and
practice. The participants play the role of certain characters, such as the production
manager, mechanical engineer, superintendents, maintenance engineers, quality control
inspectors, foreman, workers and the like. Method is mostly used for developing
interpersonal interactions and relations.
3. Management Games: This is group exercise in decision-making as regards an
administrative problem situation. It is similar to role playing. But while role playing
seeks to emphasize feelings and relationships between people, management games are
more concerned with administrative problems.
4. In-Basket Exercise: This method is designed around the “incoming mail” of a manager.
It involves simulation of a series of decisions a trainee might have to make in real life. A
variety of decision situations are presented to trainee. Like an executive, trainee is
presented with pack of papers and files in a tray containing administrative problems. He
is asked to take decisions within specified time limit. Thus, decisions taken by several
trainees are recorded and compared with one another. This method is useful in
identifying executive potential.
5. Sensitivity Training: The aim of this training is to develop awareness and sensitivity to
behavioral patterns of oneself and others. According to Flippo, the goals of this training
are: (1) increased openness with others, (2) Greater concern for other, (3) Increased
tolerance for individual differences, (4) enhanced listening skills (5) understanding of
group processes, and (6) increased trust and support.

IV) Self-Paced or Computer-Based Methods

1. Computer-Based Training (CBT)
2. Distance and Interest-Based Training
3. E-learning
4. Virtual Classroom

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UNIT-V

MOTIVATION
Motivation in simple terms can be understand as the set of forces which causes people to behave in
certain desired way. Motivation is an “urge” that drives us towards the road leading to our goal.

Every organization needs competent people for accomplishing its goals and objectives. But only
competence or skill of the people alone is not enough for fulfilling this purpose. There has to be a
willingness or desire or internal drive in the people to achieve the objectives and motivation means
process of creating zeal, confidence and to stimulate people to work in the desire direction which
leads to the achievements of organization as well as individuals goals and objectives.

DEFINITION OF MOTIVATION
The term motivation has been derived from Latin word “MOVERE” which means to move. Thus the
word motivation stands for movement.

“Motivation is the process that account for an individual is intensity, direction and persistence of
efforts towards attaining a goal.” [ROBBINS]

“Motivation is the willingness to exert high level of effort towards organizational goal, conditional by
the effort and ability to satisfy some individual needs.”

NATURE OF MOTIVATION
1. Motivation is an inner feeling which energizes a person to work more.
2. The emotions or desires of a person prompt him for doing a particular work.
3. There are unsatisfied needs of a person which disturb his equilibrium.
4. A person moves to fulfill his unsatisfied needs by conditioning his energies.
5. There are dormant energies in a person which are activated by channelizing them into
actions.

TYPES OF MOTIVATION
1. Positive Motivation: Positive motivation or incentive motivation is based on reward. The
workers are offered incentives for achieving the desired goals. The incentives may be in the
shape of more pay, promotion, recognition of work etc.
2. Negative Motivation: Negative or fear motivation is based on force or fear. Fear causes
employees to act in a certain way. In case, they do not act accordingly then they may be
punished with demotions or layoffs. The fear acts as a push mechanism.

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TECHNIQUES TO INCREASE MOTIVATION

1. Financial Motivator
2. Non-financial Motivator
a. Recognition
b. Participation
c. Status
d. Competition
e. Job Enrichment

IMPORTANCE OF MOTIVATION
1. Increase employee productivity.
2. Greater satisfaction
3. Enhances job involvement

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4. Reduce stress
5. Good human Relations
6. Reduces turnover and absenteeism
7. Reduces employee’s grievances.
8. Efficient utilization of physical and human resources.

THEORIES OF MOTIVATION
MASLOW’S NEED HIERARCHY MODEL THEORY
This theory has been developed by Prof. A.H. Maslow. According to which human beings have wants
and desires which influence their behaviour. Only unsatisfied needs influence behaviour, satisfied
needs cannot. The needs are arranged in order of importance from basic to the complex. Person
advances, to the next level of needs only after the lower level need is satisfied.
Basic five needs which are describes in this theory are:

1. Physiological needs: these are the basic needs related to the survival and maintenance of
human life. These are food, clothing, air, water, shelter and other biological needs which are
Primary in nature.
2. Safety needs: These needs include safety and protection from physical and emotional harm. It
includes job security, personal bodily security, security of source of income, provision of old
age, insurance against risk etc.
3. Social needs: It includes affection belongingness, acceptance and friendship. It focuses on
conversation, sociability, exchange of feelings and grievances, recognition, belongingness etc.
4. Esteem needs: These needs are also known egoistic needs. Needs includes self confidences
independence, achievement. Knowledge and success, attention, self respect, status etc.
5. Self-Actualization needs: The drive to become what one is capable of becoming or want to
achieve in their life. It is consider as primary mission of one’s life.
Maslow separated the five needs into a higher and lower order. Physiological and safety needs are
described as lower order needs. Social esteem and self –actualization are classified as higher order
needs. Higher order needs are satisfied internal and lower order needs are satisfied externally.

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THEORY X & THEORY Y

This is the participation model theory of motivation given by Douglas Mc Gregor. He argued that a
managers view about the nature of human beings (subordinates) is based on certain assumptions
which are grouped as theory x and theory y. Manager is required to mould their behaviour towards
employees according to these assumptions to motivate them to work.

THEORY X- In this theory autocratic managers assumes that employees are-

 Inherently lazy and avoid work.
 Avoids taking responsibility and power.
 Indifferent to organizations goals.
 Little ambitious, Prefer to security above all other factors.
So managers according to this theory needs to follow the traditional method of closely supervising
and establishing a comprehensive system of command and control along with a hierarchical structure
to supervise workers and to motive them to work.

THEORY Y- Managers with theory y orientation make following assumptions about their subordinates-
 Employees are ambitious, self-motivated anxious to accept greater responsibility.
 Exercise self control, self-direction autonomy and employment.
 Enjoy their mental and physical work duties.
 Desire to be creative and forward thinking at work place.
 Can be more efficient and productive if given freedom and participation to show their abilities
and to give their views.
So managers follow a supportive and participative method of motivating these employees by
providing them chance to explore themselves and their ability.

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Theory x assumes that lower order needs are the basic needs for which individuals are motivated to
satisfy and theory y assumes that individuals are also motivated to satisfy higher order needs of self-
esteem and self actualization along with lower order needs.

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HERZBERG’S TWO FACTOR THEORY

This theory was given by Herzberg (1959). This theory is also called as Motivation Hygiene model
theory. This theory constructed a two-dimensional paradigm of factors which affects people attitude
towards work. These two factors are Motivators and hygiene factors.

Motivators are intrinsic factors related with work (job) such as advancement recognition, responsibly
and achievement. Presence of these factors ensures job satisfaction internally.

Hygiene factors are the extrinsic factors related to work (job) such as company policy, supervision,
interpersonal relations, working conditions, salary etc.

Absence of hygiene factors can create job dissatisfaction, but their presence does not motivate or
create satisfaction.

So it is stated that motivators describe the person’s relationship with what she or he does related
with job performed where as hygiene factors describe a person’s relation in context to environment
in which she or he perform the job. Removing dissatisfying characteristics from a job does not
necessary make job satisfying. Job satisfaction factors are separate and distinct from job
dissatisfaction factors.

Presence of hygiene factors will not dissatisfied people but also cannot satisfy them. It is only the
motivators i.e. intrinsic factors which are associated with work derived from individuals itself can
satisfy and motivate individuals.

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ERG – THEORY
This theory of motivation was given by Alderfer (1972). This theory classifies needs into three
categories in hierarchical order.
1. The Existence Needs- These needs include all our basic material existence requirements. It
includes all the basic biological needs and shelter needs. They include Maslow’s Physiological
and safety needs.
2. The Relatedness Needs- These needs include the desire for having good and important
interpersonal relationships, social interrelation and good image in between others in external
environment. It includes Maslow’s social needs.
3. The Growth Needs- These needs include an intrinsic desire for personal growth development,
status, recognitions advancement, achievement etc. It includes Maslow’s esteem and self
actualization needs.

This theory differs from Maslow’s theory in following arguments:

1. Maslow’s said that needs are divided in 5 categories hierarchal from basic to complex and
only one need is been work on one time whereas Alderfer said that more than one need may
be operative at the same time.
2. ERG Theory does not assume the rigid hierarchy for the satisfaction of needs i.e. it is not
necessary that when one need is satisfied them only another need can be satisfied. Person

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can be working on growth, existence or relatedness needs at same time or on existence and
relatedness needs even if growth need is unsatisfied.

MC CLELLAND’S THEORY OF NEEDS

This theory was given David Mc Clelland (1961) which mainly focuses on three kinds of needs namely-

a. Need for achievement (NACH) - This need includes a drive to excel, advance and grow. It
includes desire of individual to achieve something different from others in a different manner
in relation to a set of standards.
b. Need for power (NPOW) - This need to have command and control to make other behaviour in
a way that they have never behaved otherwise to change the situation accordingly.
c. Need for affiliation (NAFF) - This included desire for being friendly and to have a close
interpersonal relations with others. People with this need want to have a good image &
relationship with others.
People with high need for achievement have a compelling drive to succeed. They strive to do
something better and more efficiently that it has been done before by others. This is called
achievement need. High achievers differentiate themselves from others by their desire of doing
things better and differently. They seek situations in which they can attain personal responsibilities
for finding solutions to problems. People with high need for power enjoy being “in-change” of any
situation. They strive to have influence over others and prefer to be placed into a competitive and
status-oriented situation. They believe to change the situations and thoughts of the people
accordingly by influencing them.
People with high need for affiliation strive for maintaining friendship. Prefer co-operative situations
and desire for a relationships that involve a high degree of mutual understanding.
Based on this theory following assumptions can be made-
a. Individuals with a high need to achieve prefer job situations with personal responsibility,
feedback and an intermediate degree of risk. In these situations high achievers will be
strongly motivated.

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b. A high need to achieve does not necessarily lead to being a good manner, especially in large
organizations. These people are interested in their personal development rather than
influencing others to do well.
c. The needs for affiliation and power are closely related to managerial success. A good
manager needs to be high in need of power, moderate in need of affiliation and low in need
of achievement.

VICTOR VROOM’S EXPECTANCY THEORY

It is given by victor vroom (1964) and is one of the most widely accepted explanations of motivation.
According to this theory motivation is based on people belief, goals and linkage between effort,
performance and reward and reward and individual goal satisfaction.

Determinants of motivation according to this theory are as follows-

Expectancy (Performance)- It is also called effort and performance determinant which shows the
extent to which a person believes that particular level of efforts will lead to expected level of
performance.

Instrumentality- It is called as performance determinant which shows that particular level of

performance will lead to a desired reward. Ex: - superior performance leads to promotion in job.
Superior performance is first level of outcome promotion is the second level out come.

Valence Reward value or Preferences- It refers to the value a person places on the rewards that he or
She excepts to receive from an organization. The value attached to reward is subjective and varies
from person to person. Ex: - A young and dynamic employee wants a promotion and value it. Similarly
a retiring employee may have high valence for re-employment.

These determinants are expressed through following formula-

Motivation = Expectancy (Performance) x Instrumentality x Valence.

Effort – Performance linkage

(How hard will have to work?)

Performance – Reward linkage

(What is the reward?)

Attractiveness
(How attractiveness is the reward?)

Values may range from

Expectancy → 0 to 01
Instrumentality → 0 to 01
Valence → -01 to 01

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GOAL – SETTING THEORY

Goals are targets which are to be achieved in future. Goals play an important role in influencing the
behaviour and motivational level of employee. This theory was given by Edwin Locke. He stated that

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when employees participate in goal setting they are more motivated that leads to efficient
performance, rewards and also personal satisfaction.

The four essential elements of goal setting model explained below:-

1. Goal Acceptance: It states that employees should accept the goals assigned to them. If
difficult goals are assigned to employees they may not feel attached to goals and this leads to
non-acceptance low motivation and performance on the part of employees. Managers should
follow participative approach in setting goals for subordinates.
2. Goal Specificity: goals should be specific, measurable, fixed and clear to the subordinates. It is
be understandable by them. This enables the worker to evaluate his/her performance and to
judge themselves.
3. Goal Challenge: goals must be feasible but challenging in nature. It should be competitive but
achievable. All the directions, efforts and resources required to achieve a goal must be
communicated and made available to subordinates.
4. Performance Feedback: Employees should be informed about how well they are doing and
how successful they are. Proper feedback can motivate them further. It encourages better
job performance and self generated feedback is a very powerful motivational tool.

REINFORCEMENT THEORY
Reinforcement theory is developed initially by the well-known psychologist B.F. Skinner. It is based on
behaviour and learning of an individual. This theory basically states that behaviour is determined by
its consequences i.e. positive or pleasant consequences leads to repetition of action and negative or
unpleasant consequences are not likely to be repeated again. Reinforcement also influences our
motivational level to door not to do certain things. Reinforcement is of four types:
a. Positive Reinforcement: It is the used of Rewards that stimulates the desired behaviour and
strengthen the probability of repetition of such behaviour in future. It includes reinforces such
as money, praise, promotion, recognitions etc.

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b. Negative Reinforcement: This strategy is also called “avoidance learning”. It implies use of
unpleasant rewards to avoid the undesirable behaviour of an individual. It includes warnings,
penalty alert counselling etc.
c. Extinction: To avoid the undesirable behaviour to extinguish it completely. It is to withdraw all
far of reinforcement to completely dissolve undesirable behavior.
d. Punishment: This tool is used when an unpleasant or undesirable behaviour needs to reduced
or eliminated. For ex: worker’s wages may be deducted if performance is not done.

Equity theory of motivation:

According to this theory, employees make comparisons of their job inputs and outcomes relative to
those of others. If, an individual perceives the input-outcome ratio to be equal to that of the input-
outcome ratios of others a state of equity exists.

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Person perceives the situation to be fair. If the ratio appears to be unequal, the individual experience
inequity. There are four referent comparisons that an employee can make to find out the ratio of
equity or inequity:
1) Self- Inside: An employee’s experiences in a different position inside his or her current
organization.
2) Self- outside: An employee’s experience in a situation or position outside his or her current
organization.
3) Other – inside: position of another individual or group of individuals inside the organization.
4) Other- outside: position of another individual or group of individuals outside the organization.

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When employee perceives inequity, they can make one of the following six choices of behavior:
a) Change their inputs: Increase or decrease their inputs. Ex- can work hard or work less hard.

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b) Changing outcomes: Person can request to ask his or her outcome. Ex- ask for salary, office,
recognition etc.
c) Changing perception of self: Can leave that situation and to focus on other. Ex- if a person
feels that he was not given proper rewards for the work he done and state of inequity is
existing in a person’s mind then person can focus on the other task where he got the equality
in terms of rewards or can get equal rewards.
d) Change the comparison person: To compare with a person who is equal to or less than the
person who is making comparison.
e) Changing the inputs outcomes of others: Ask other person to reduce his or her inputs to the
task or to reduce their outcomes. Distort the perception of others.
f) Leave the situation: Can transfer, change location, leave the job to avoid uncomfortable
feelings and inequity.

Motivating employees in an organization:

1) Recognizing individual differences: managers need to understand the different and
important needs of the individual employee and should try to connect it with the
organizational goals. This results into high level of involvement and motivation of
employees.
2) Use goals ad feedbacks: employees should have the specific and achievable goals.
Feedbacks should be provided regularly to inform the employees about their performance
in pursuit of those goals.
3) Include employees in decision making: participation of employees in the decision making
to choose their benefits, solving productivity and quality problems.
4) Link rewards to performance: rewards should be contingent on performance and
employee must perceive a clear linkage.
5) Maintain equity: rewards should be perceived as equal by the employees according to
their inputs to the job. This motivates the employees.
6) Motivating professionals: professionals likely to seek more intrinsic satisfaction than
extrinsic rewards. Proper intrinsic rewards like challenging jobs, problem solving
situations, growth and development should be provided to them.
7) Motivating low skilled and temporary workers: temporary workers can be motivated if
proper training an permanent job opportunity is provided to them an low skilled workers
will be motivated if proper work schedules, environment and higher pay package will be
provided.

Practical Application of Motivational Techniques

Management by Objectives (MBO)

Management by objectives emphasis participative set goals that are tangible, verifiable and
measurable. Four ingredients common to MBO programs are: Goal specificity, participative decision-
making, an explicit time period and performance feedback.

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a) Goal Specificity:The objectives in MBO should be concise statements of expected

accomplishments.
b) Participative decision making: The manager and employee jointly choose the goals and agree
on how they will be measured.
c) An explicit time period:Each objective has a specific time period in which it is to be completed.
d) Performance feedback: Continuous feedback on progress towards goals is provided so that
workers can monitor and correct their own actions.

Employee Recognition Programs

Employee recognition program consist of personal attention, expressing interest, approval and
appreciation for a job well done. They can take numerous forms. Employee Recognition Programs has
close link with Reinforcement Theory.

Employment Involvement
Employee involvement includes participative management, workplace democracy, and
empowerment and employee ownership. Employees’ involvement in the decision making would
positively affect them and by increasing their autonomy and control over their work lives, employees
will become more motivated, more committed to the organization, more productive and more
satisfied with their jobs.

Participative management
The logic behind participative management is:
a. Managers often do not know everything their employees do.
b. Better decisions
c. Increased commitment to decisions
d. Intrinsically rewarding employees make their jobs more interesting and meaningful.

The two common forms of participative management are:

a. Work councils- They are groups of nominated or elected employees who must be consulted
when management makes decisions.
b. Board representatives- They are employees who sit on a company’s board of directors and
represent the interests of the firm’s employees.

Quality circles (QC)

QC consists of a work group of eight to ten employees and supervisors who have a shared area of
responsibility. Key components of QC are (Robbins, 2003):
 They meet regularly on company time to discuss their quality problems, investigate causes of
the problems, recommend solutions, and take corrective actions.
 They take over the responsibility for solving quality problems and they generate and evaluate
their own feedback.

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 Management typically retains control over the final implementation decision.

Employee stock ownership plans (ESOPs):

In the typical ESOP, an employee stock ownership trust is created. Companies contribute either stock
or cash to buy stock for the trust and allocate the stock to employees. Employees usually cannot take
physical possession of their shares or sell them as long as they are still employed at the company.

LEADERSHIP
Leadership is an integral and important part of management and plays a very vital role in managerial
process.

Leadership is the ability to build up confidence and zeal among people and to create an urge in them
to be led. Leadership is the practice of influence that stimulates subordinates or followers to do their
best towards the achievement of desired goals.

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The ability to lead effectively is a key to better managerial performance. There is not magic formula
of becoming a good leader. Effective leaders are not created by simply attending a one-day
leadership workshop, yet it is not totally in their genes either. One can become an effective leader if a
person has willingness to invest the time and energy to develop all the “right-stuff”.

Leadership is the activity of influencing the behavior of people to work willingly and with
determination for the accomplishment of specific goals & objectives. A person who attempts to
influence the behavior of others become a potential leader and the people he is attempting to
influence are called as potential followers.

“Leadership is a ability to influence a group of people so that they strive willingly and enthusiastically
towards the achievement of goals.”
Elements of willingness is very important in the definition of leadership this elements differentiates
leadership (leaders) from the managers. Motivating and influencing people to move towards a
common goal are the elements of management but the “willingness” of the followers to be led,
highlights the special quality of leaders that puts them above the managers. Leadership is a function
of-
L = F (F x g x w x s)
L = leadership
F = Functional Relationship
G = Goal
W = Willingness of subordinates
S = Situation

NATURE OR CHARACTERISTICS OF LEADERSHIP

1. Personal Ability: Leadership is basically a person ability and skill. It is a personal power which
arises out of knowledge, expertise and personality. According to Koontz and others, it is the
ability induces subordinates to work with confidence and zeal towards the achievements of
organizational goals.
2. Followership. Leadership requires followers. It is inseparable from followers. Involves other
people, usually in the form of subordinates. It cannot exist without group of followers. Koontz
and D’Donnel say, “The essence of leadership is followership. It is the willingness of people to
follow that makes a person a leader.”
3. Influencing Behaviour: Leadership envisages “the power of influence.” It involves an attempt to
influence another group member.
4. Interpersonal Relationship: Leadership involves group behaviour. It is interaction between a
leader and one or more followers. It is a reciprocal relationship.
5. Mutual Goals: Leadership involves a community of interest between the leader and his followers.
It exists from the realization of common goals.
6. Its Essence is Performance. Leadership depends on doing. Most people agree that leadership is
not a personality trait, but doing something-guiding, directing, influencing or mobilizing actions.
Peter Drunker has rightly remarked, “Leadership has little to do with ‘leadership qualities’ and

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even less do with ‘charisma’. It is mundane, unromantic and boring. It is work. Its essence is
performance.”
7. Exemplary conduct: Leaders not only but also influence by their behaviour. They put example in
their actions before the subordinates. Urwick has rightly said, “It is not what a leader says, still
less what he writes, that influences subordinates. It is what he is. And they judge what he is by
what he does and what he behaves.”
8. Leadership is Situational: It assumes that leaders are the product of given situations. Leader
emerges out of situation. Leadership is dynamic art. The most effective way to lead is a dynamic
and flexible process that adapts to the particulars situation.
9. Assumption of Responsibility: The leader assumes full responsibility for all actions of his followers.
He remains responsible in all situations.
10. Importance of Communication: Leadership is established through the communication process.
Communication affects the behaviour and performance of followers. The inability to
communication is a serious deficiency in influencing people.
11. All Managers are not Leaders: Manager are appointed and have legitimate power that allows
them to reward and punish. In contrast, leaders may either be appointed or emerge from within
a group. Leaders can influence others to perform beyond me actions dictated by formal
authority. They have personal capabilities to influence others. However, not all leaders
necessarily hold managerial positions.
12. Leadership may be Formal or Informal: Managers who influence the behaviour of their assigned
group are the formal leaders of organizations. Their ability to influence is founded upon the
formal authority inherent in their positions. Within the organization, informal groups develop,
and within those groups informal leaders who influence the behaviour of other group members.
13. Four-faceted Concept: Leadership involves four elements - leader, followers, organization and the
environment (social, economic and political conditions.) These affect one another in determining
appropriate leadership behaviour. To Terry, it implies that “almost everyone can at times show
leadership behaviour.”
14. Process: Leadership is a process engaged in by certain individual. It is an ongoing activity in an
organization. Its outcome is some form of goal accomplishment.

In brief, some important functions of a leader are as follows:

1. Formulate Purpose: A leader defines institutional mission and role. He not only formulates the
purpose of the group, he also advances it. His approach is goal-oriented.
2. Inspire and Initiate Actions: A leader inspires individuals to make their optimum contribution to
organization goals. According to Urwick, the leader initiates all those measures necessary to keep
the undertaking healthy and progressive within a competitive economy.
3. Administer the Organization: To administer and undertaking, a leader performs the functions of
forecasting planning, organizing, direction, coordination and control.
4. Interpret Reasons: Leaders make sense of dynamic environment and interpret it to employees.
They redirect their efforts to adapt to changing conditions. Urwick says, “Leaders interpret the
reasons for everything to everybody.

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5. Represent the Institution. Representing his institution in dealings with outside groups:
government officials, suppliers, customers and the public in general is another function of a
leader.
6. Group Interaction: The leader facilitates interaction and exchange of idea among organization
members. This is done through communication system, which is maintains in the organization.
7. Goal Accomplishment: The leader persuades all subordinates to contribute to organizational goals
in accordance with their maximum capability and zeal.
8. Develop Teamwork: A good leader always attempts to gain an understanding of group dynamics
and to develop and nurture voluntary co-operation. He develops trust and friendliness by
bringing consistency and fairness in his actions.
9. Direct and Discipline the Employees: The leader gives necessary instructions and guidance to the
individuals in a formal way. He develops devoted and loyal followers and maintains obedience
through discipline.
10. Ordering of Internal Conflict: The leader seeks to maintain harmony among the members of the
organization. He tries to prevent his group breaking up into opposing factions.
11. Defend the Organization’s Integrity: The leader integrates the group with the organization. He
protects the ethical values, human ideals and working principles.
12. Maintain Stability. The leader also helps maintain the stability of an organization in a turbulent
environment. He assists in internal coordination and maintains a stable work force.

Distinction between Leadership and Management

Management Leadership
1 Management cannot function without formal Leadership can exit in both organized and unorganized
organization structure and roles. group.
2 A manager directs people though he use of But a leader may or may not have formal authority.
normal authority. He directs people through the use of informal and
personal power.
3 Management is a special kind of leadership in Leadership is a broader concept than management. It
which achievement of organizational goals is occurs any time one attempts to influence the
important. behaviour of others regardless of the reasons.
4 Management is related to the attainment of It may be for one’s goal or for those of others. It may
organizational goals. or may not be congruent with organizational goals.
5 A manager has to perform five functions of Leadership functions come under directing. A leader
management – planning, organizing, staffing directs followers by influencing their behaviour. Thus,
directing, and controlling from a functional angle, leadership is a part of
management but not all of it.
6 Management implies the existence superior- Leadership behaviour can occur anywhere. It does not
subordinate relationships. require manager-managed relationship.
7 Its authority arises out of a job position. Its power arises out of personal ability, knowledge,
expertise, performance or situations.
8 Managers are accountable for the job A leader is not accountable for the behaviour of
behaviour of their subordinates. followers.

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9 The manager administers. The leader innovates.

10 The manager is copy. He imitates. The leader is original. He originates.
11 The manager accepts the status quo. The leader challenges it.

Styles and Patterns of Leadership

a. Style based on attitude

1. Positive Leadership- In this style of leadership leader use positive rewards like recognition,
pride & Praise as well as extrinsic rewards like salary hike, promotion, increase of perks &
allowances to get the work done from people. Positive leader has a mindset that rewards will
make employees happy & satisfied and will motivate them to work effectively and efficiently

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as desired from them. People will always focus on improving their performance for getting
more rewards. This style of leadership leads to higher job satisfaction and performance.
2. Negative Leadership- In this style of leadership leaders use negative rewards like fear loss of
job, reprimand, demotion, fear of suspension, force, threats penalties or a few days off
without pay on people to get the work done from them. This style can help in getting good
results in many situations but it is not human in nature and creates a negative & non-
acceptable image of a leader in the mind of followers. It leads of more of bossism than
leadership.

b. Style based on use of Authority

c.

1. Autocratic style- This style of leadership is also known as authoritarian or directive style. This style
involves retention of full authority by the leader. Leader makes all the decisions without even
consulting and involving employees. In this style of leadership leader only gives order &
instructions to their subordinates for getting the work done and also expects from subordinates
to follow the orders and instructions. Leaders assume full responsibility for all the actions. There
are basically four types of autocratic leaders.
i. Pure Autocrat- Pure autocrat is a dictator and decides everything without consultation
from his subordinates. He uses negative motivation, criticism, penalties coercion etc to get
work done. This type of leader is ineffective in democratic organization & people remain
insecure and uninformed under him.

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ii. Benevolent Autocrat- This type of leaders centralizes decision making power in their hands
and used positive rewards and manipulative styles to get the work done from their
subordinates.
iii. Paternalistic Autocrat- Such leaders plays the role of father for their subordinates such
leaders provide benefits but do not respect their employees. They do not treat their
subordinates as mature & responsible. This style of leadership is considered as
unsuccessful in many work organizations.
iv. Incompetent Autocrat- Such leaders adopts an autocratic style of leadership just to hide
their incompetence before their subordinates. This style cannot be adopted for long time.

Advantages
i. This style of leadership leads to quick decision making as leaders does not need to consult
their group members.
ii. It allows the use of less competent subordinates.
iii. It provides security & structure to employees.
iv. It provides strong motivation to self-centered leaders.
v. It is useful to those subordinates who are not interested to assume responsibility.

Disadvantages
i. It creates fear & frustration & provides less freedom of work & self development to
employees.
ii. It gives adverse effect on productivity.
iii. It restricts the development of future leaders.
iv. It leads to defensive behavior from subordinates.

2. Democratic or Participative Style- A participative or democratic style of leadership is one in which

managers involve their subordinates in decision making. There is decentralization of authority by
leaders and they consult & encourage subordinates for participation in decision making process.
There is high regard for people and sufficient freedom is allowed to people to work. Participative
leaders are basically of three related types-
i. Consultative leaders- This type of leader takes the opinion from group before making a
decision but they do not have the obligation to accept the group’s thinking and these
leaders make it clear that they alone have final authority to make final decisions.
ii. Consensual leaders- this type of leaders encourage a group discussion on an issue and
then make a decision that reflects the general opinion (consensus) of all group members.
Consensual leaders delegate more authority to the group than consultative leaders.
iii. Democratic leaders- Democratic leaders delegate full authority to their subordinates for
decision making. They function as collectors of opinion and take a vote before making a
decision.

Advantages

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i. This leadership leads to qualitative decision making as number of people are encouraged to
express their ideas.
ii. A positive & human relationship is established between the leader and followers.
iii. It creates job satisfaction motivation and morale & also reduces employees’ grievances.
iv. It creates an environment of trust, confidence, mutual co-ordination & loyalty.
v. It improves talent, productivity employees and also increases their acceptances to
management ideas & actions.

Limitations
i. It leads to delay in decision making.
ii. This style works well if employees are skilled & well informed about organizational problems.
iii. This style can result into complete loss of leaders control over the employees.

3. Free-rein Style- This style of leadership is also called as laissez- faire. In this style of leadership
leaders abdicates from leadership position and depends mostly upon the group to establish its
own goals and to solve their own problems. Subordinates are given high degree of freedom in
their operations. They are their own trainees and source of motivation. Free rein leader avoids
power & responsibility and only provides information & represents the group to outsiders. This
type of leadership is effective only when the group members are highly knowledgeable,
independent, motivated and fully dedicated to the firm.

Advantages-
i. It helps in the personality development of subordinates.
ii. It gives the feeling of responsibility among group members
iii. It creates climate of work freedom & team spirit.

Disadvantages-
i. It may result in disorganized activities.
ii. It leads to absence of centralized authority which results in group conflict & loss of group
cohesiveness.
iii. Some leaders use this style to avoid responsibility.
iv. It leads to “non-leadership” and lack of control of leaders over employees.

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C) Style based on Behaviour of leader- This type of leadership focus on behavior of leader towards
the task as well as the people who are performing the task. A four combination style of leadership
can be based on behavior of leader.
i. High-task and Low-Relationship- This type of leadership leader has the main emphasis on the
accomplishment of tasks and spends very less time to maintain relations & to provide
psychological support to employees. This is more of work-oriented approach and is suitable
where the employees are in experiences with the work to be performed. This type of leaders
is not necessarily rude or discourteous.
ii. High-Task and High Relationship- In this type of leadership style a leader gives high emphasis
to both task accomplishment as well as Relationship building with employees. Leader spends
considerable time to get work done and provide psychological support to employees. This
leadership style is best in situations where people need an active & involved leader as well as
in case of lack of self-confidence, or technical in employees.
iii. High Relationship and Low Task- A leader using this type of leadership style gives much
encouragement & psychological support to employees but gives a minimum guidance about
the task accomplishment.
iv. Low Relationship and Low Task- These leaders have a free-rein leadership style and give very
little support, encouragement, praise as well as guidance to do work to employees. This style
can be followed where subordinates are highly skilled & mature.

D) Style based on assumptions about people- Here leadership style depends upon the assumption
which a leader has about his subordinates. This two way classification of leadership is based on
MC Gregor’s theory X & theory Y of motivation. This style is basically of two types-
i. Job-Centered Leadership- This is a task oriented style of leadership where by a leader focus
on getting work done effectively by employees. It is concerned with work designing,
production, planning, development of incentives, resource allocation to increase work
productivity. This type of leaders focus on making employee work and plan out for

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worker’s job tasks and job out comes. This style of leadership is suitable for theory X
leaders who distrust people and believe in close supervision.
ii. Employee- Centered Leadership- This is people where leaders treat subordinates as
person, avoids close supervision, and actively considers needs of employees and
encourages them to glow, develop. This leadership style is for theory y leaders who trust
their subordinates and encourage their participation and development.

E) Style based on decision making - Renises likert classified four styles of leadership-

System 1 System 2 System 3 System 4

Exploitive Benevolent Consultative Participative
Authoritative Authoritative Authoritative Authoritative

i. Exploitive Authoritative- He is highly autocratic, little trust on subordinates; limits decision-

making at the tap, avoid upward communication & motivate people through fear.
ii. Benevolent authoritarian- This kind of leader has a patronizing attitude towards
employees, invites new ideas from subordinates allow some delegation and motivate then
by rewards and some use of punishment.
iii. Consultative Authoritarian- Leaders have substantial but not complete trust in employees.
They invite ideas from subordinates, allow for decision making by subordinates in some
case but act consultatively in various matters.
iv. Participative authoritarian- Leaders have complete trust in decision-making of employees
in all matters. He involves high level participation of subordinates, set high performance of
goals & act a source of knowledge & guidance for subordinates. According to Likert those
who apply 4th style of leadership are more successful as leaders.

F) Style based on concern for production versus concern for people:

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Managerial Grid Style- This leadership style was given by Blake & Mouton. This grid classifies
leaders as having five dimensions- concern for people and concern for production. Grid shows
five combination of leadership style.
i. Impoverished Management- It has low concern for both people and production. The
leader has minimum involvement in his job and only act as a messenger for
communicating information from superiors to subordinates.
ii. Country club Management- Under this style a leader has no concern for production but
has only concern for people. He concentrates on warm human relations.
iii. Task Management- Under this style leads is highly concern for task management and little
or no concern for subordinates needs & motivation
iv. Team Management- Leaders has strong regard for both people and production. Team
leader’s leads to high morale and high efficiency.
v. Middle Road Management- Leader give medium concern for production and for people
and leader attains adequate level of performance by balancing efficiency with reasonable
goods human relations. Blake & Mouton suggests that the team leaders’ style (9, 9) is
most effective because it combines a high degree of concern for people as well as
production.

Theories of Leadership
Trait Theory

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Trait theory of leadership focus on the individual characteristics or set of trait or features which all
the successful leaders have and which make them distinct from their followers. The criteria for
becoming a leader depends on the set of features or personality traits which a person posses. A
broad category of traits of successful leaders are as under-
1. Physical characteristics such as age, weight, height.
2. Background characteristics such as education, social status, motivation and experience.
3. Intelligence- ability, judgment, knowledge.
4. Task-oriented characteristics-achievement needs responsibility, initiative and persistence.
5. Social characteristics-popularity, Prestige, tact, diplomacy acceptance of social responsibility.
6. Maturity, human relations attitude, fairness, adaptability and open-mindness.

Merits of Trait Theory

1. This theory focus on certain traits which a leader should have which make them differentiated
from non-leaders.
2. This theory relate to the influence of personality on one’s effectiveness.
3. This theory has certain practical implications. If proper leadership traits could be identified be
able to get good leaders. This theory differentiates leaders from non-leaders on the basis of
personality traits.

Limitations of Trait Theory

1. List of personality traits of successful as not specific.
2. This theory assumes that a leader is born and not trained.
3. Leadership effectiveness does not depend on personality of a leader alone.

Behavioural Theories
Behavioural theories give an emphasis on the behaviour of leaders rather than on the traits or
personality features of a leader. This approach differs from trait approach is two ways-
1. Emphasis is made on leaders’ behaviour instead of personal traits.

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2. Trait studies separate leaders from non-leaders where as behavioural studies where as
behavioural studies emphasize on impact of leaders behavioural on employees’ performance
& satisfaction. There are two important Behavioural theories-

a. OHIO STATE UNIVERSITY STUDIES- These studies were stated shortly after World War II. The
main objective of this study was to determine the major dimensions of leadership and to
investigate on employee performance & satisfaction. Two dimensions of leadership were
identified in this study to identify the behaviour of leaders-
i. The initiating Structure- It refers to leader behaviour that defines & organizes the group
tasks, assigns the task to employees and supervises their activities. Leader follows task-
oriented behaviour.
ii. Consideration- It refers to leaders’ behaviour characterized by friendliness, respect,
supportiveness, openers, trust and concern for welfare of people. This study states that
both consideration and initiating structure are not been seen as being placed
continuously. A leader can be high or low on both the dimensions or could be high on one
& low on other dimensions.

High High Relationship & low task High task & High
(Supporting Style) Relationship (Participation
People style)
Emphasis Low task & Low Relationship High task & Low
(Free-rein) Relationship (Autocratic)

Low Low High

Task Emphasis
Main findings of Ohio state studies are-

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1. Consideration was positively related to low absenteeism and grievance, but it was negatively
or neutrally related to performance.
2. Initiating structure was positively related to employee performance but was also associated
with such negative consequences as absenteeism and grievances as absenteeism and
grievances.
3. When both consideration & structure were high, performance and satisfaction was high but in
some cases high productivity was accompanied by absenteeism and grievances.

b. THE UNIVERSITY OF MICHIGAN STUDIES- These studies were conducted during same period as
at Ohio state and resulted in identical conclusions. Researchers at university of Michigan
distinguished between two dimensions of leadership.
1. Production centered- Where leader set rigid tasks, standards describe work methods &
closely supervise subordinates.
2. Employee centered- Where leaders encourage employee participation in goal setting &
work decisions, have respect and trust and ensure high performance from employee.
Michigan study’s findings were same like Ohio studies analysis that employee and work orientation
are two separate dimensions and that a leader can be either high or low one the dimension or both
and these dimensions cannot be placed continuously in leader.

Production Centered Employee Centered

Two styles developed by Michigan researchers were similar to Ohio state people.
Production centered → initiating structure. Employee centered → consideration.

Managerial Grid Theory- This leadership theory is given by Blake & Mouton. This grid classifies leaders
as having five dimensions- concern for people and concern for production. Grid shows five
combination of leadership style.
i. Impoverished Management- It has low concern for both people and production. The
leader has minimum involvement in his job and only act as a messenger for
communicating information from superiors to subordinates.
ii. Country club Management- Under this style a leader has no concern for production but
has only concern for people. He concentrates on warm human relations.
iii. Task Management- Under this style leads is highly concern for task management and little
or no concern for subordinates needs & motivation
iv. Team Management- Leaders has strong regard for both people and production. Team
leader’s leads to high morale and high efficiency.
v. Middle Road Management- Leader give medium concern for production and for people
and leader attains adequate level of performance by balancing efficiency with reasonable
goods human relations. Blake & Mouton suggests that the team leaders’ style (9, 9) is

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most effective because it combines a high degree of concern for people as well as
production.

9 (1, 9) (9,
8 Country club 9)
7 Team
6
5 Management
4
High
3
2
Concern
1 (5, 5)
for People Middle Road
0

Low
(1, 1)
Impoverished (9,
Management 1)
Task
Management
1 2 3 4 5 6 7 8
9
Low High
Concern for
Production

Evaluation of Behavioural Theory

Behaviour theories focus on what leader did, how they delegate task, communicate & motivate
subordinates and how they carry on their work. They focus that behaviour can be learnt and
individual having appropriate behaviour can become a effective leader.

Leader- member Exchange (LMX) Theory- This theory is also called vertical dyad model. This approach
also focuses on leader behaviours. A vertical dyad consists of two persons who are linked
hierarchically such as superior & a subordinate and a leader’s behaviour depends upon who is a
subordinate. According to LMX theory a leader form two groups-
1. In-GROUP- Consist of those subordinates or group members who are similar to the leader and
get greater responsibilities, more attention and more rewards. They work within the leaders
inner circle of communication.

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2. Out-Group- Consist of those members who are outside the circle and receive less attention
and fewer rewards. They are managed by formal rules & policies. In –group members are
more satisfied have lower turnover and have high organizational commitment & vice-versa.

Implication of the Theory

1. Leadership can be better understand by farming & examining dyads (Pair of relationship)
model by leader & member rather than focusing on average leadership style.
2. Theory focused that average leadership style (same or average behaviour of leader to all the
group members) is impractical & traditional in approach.
3. Theory focus that leader behave differently with in-group members & out group members.

Traditional
view
Leader LMX
view
Leader

In Group
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Subordinate Panel A
s

In this figure (Panel a) shows the traditional view of leaders & Subordinates where equality in
behaviour of leader to subordinate is shown. (Panel b) reflects the vertical dyad where in-group
members enjoy a better relationship with leader than out group members which can be shown b
differing distances as well as differences in equality of working relationship, influence, authority and
access to information.

Path-Goal Theory of Leadership- This approach to leadership was developed by Robert House. The
essence of this theory is that leader uses organizational structure, rewards, resources and support to
create a favorable work environment where subordinates can work to achieve organizational goals
and also clear the path for the goal achievement for subordinates. The theory is called as path goal
theory because its major concern is how the leader influence the subordinates perception regarding
their work goals, personal goals and path to achieve goals.
Theory suggests that a leader’s behaviour is motivating or satisfying to the degree that the behaviour
increases the goal attainment and clarifies the path to these goals. Path -goal theory is one of the
contingency models. The leader’s effectiveness, according to the path goal theory in influencing
rewards and expectancies depends on the characteristics of the environment and subordinates.

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In figure the ultimate effect of leadership behaviour on motivation and satisfaction is contingent
upon the characteristics of environment and of subordinates and follower perceptions about effort
reward linkage.
Evaluation of Theory- The path-goal theory deserves appreciation as the theory suggest that leader
should first assess the situation and then select a leadership behaviour appropriate to situation for
linking effort to performance expectancies performance to reward expectancies or valance to
outcome.
Example-situation leader follower outcomes

New work Tell the Clarity of High efforts

unit direction goals & high
farmed to do process satisfaction
work

The situational leadership Theory

This theory of leadership was developed by Paul Hersey & Kenneth Blenchard. This theory focusses
on ‘maturity’ of followers for deciding the appropriate leadership style. Theory focus on that
situational leadership requires adjusting the leader’s emphasis on task behaviour (guiding &
direction) and relationship behaviour (offering socio-emotional support) according to the maturity of
followers in performing their tasks. Maturity according to this theory means desire for achievement,
willingness to accept responsibility etc.
Herey and Blachard believe that the relation between leader and subordinates moves through four
phases like a life cycle as subordinates develop and mature. Leaders or managers need to change
their leadership styles with each phase.

Style of leader
High
High S4 S1 High task
relationship&
low task
  and high
relationship

Task Behaviour
Low High task & S2
S3 relationship low
and low task relationship 

Low

Low Task Behaviour High

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S1 = Telling
S2 = Selling
S3 = Participating
S4 = Delegation

1. In first stage in a figure i.e. at initial phase subordinates enter in a organization so manager
should follow the directive or task oriented approach to clear the goals, task, rules &
procedures in an organization to subordinates.
This style is also called as “Telling’ approach of leadership
2. In the second stage subordinates start learning their tasks but task-orientation still remains
essential as subordinates are not yet willing or able to accept full responsibility. Managers
become familiar with subordinates so that can follow employed oriented behaviour. This is
called as ‘selling’ or coaching approach to leadership.
3. In third phase subordinates involvement, ability and achievement motivation are increases so
managers is not required to be directive manager will trust subordinates. This is called as
‘participating’ style.
4. In fourth phase manager can reduce the amount of support & encouragement as
subordinates gradually become more confident, self-directing & experienced. Subordinates
are ‘on their own’ and no longer need to expect a directive relationship with their manager.
This is also called as ‘delegating style.

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SWOT is an acronym for Strengths, Weaknesses, Opportunities and Threats. By definition, Strengths (S)
and Weaknesses (W) are considered to be internal factors over which you have some measure of control.
Also, by definition, Opportunities (O) and Threats (T) are considered to be external factors over which you
have essentially no control.

SWOT Analysis is the most renowned tool for audit and analysis of the overall strategic position of the
business and its environment. Its key purpose is to identify the strategies that will create a firm specific
business model that will best align an organization’s resources and capabilities to the requirements of the
environment in which the firm operates.

In other words, it is the foundation for evaluating the internal potential and limitations and the probable/likely
opportunities and threats from the external environment. It views all positive and negative factors inside and
outside the firm that affect the success. A consistent study of the environment in which the firm operates helps
in forecasting/predicting the changing trends and also helps in including them in the decision-making process
of the organization.

An overview of the four factors (Strengths, Weaknesses, Opportunities and Threats) is given below-

1. Strengths - Strengths are the qualities that enable us to accomplish the organization’s mission. These
are the basis on which continued success can be made and continued/sustained.

Strengths can be either tangible or intangible. These are what you are well-versed in or what you have
expertise in, the traits and qualities your employees possess (individually and as a team) and the
distinct features that give your organization its consistency.

Strengths are the beneficial aspects of the organization or the capabilities of an organization, which
includes human competencies, process capabilities, financial resources, products and services,
customer goodwill and brand loyalty. Examples of organizational strengths are huge financial
resources, broad product line, no debt, committed employees, etc.

2. Weaknesses - Weaknesses are the qualities that prevent us from accomplishing our mission and
achieving our full potential. These weaknesses deteriorate influences on the organizational success
and growth. Weaknesses are the factors which do not meet the standards we feel they should meet.

Weaknesses in an organization may be depreciating machinery, insufficient research and

development facilities, narrow product range, poor decision-making, etc. Weaknesses are controllable.
They must be minimized and eliminated. For instance - to overcome obsolete machinery, new
machinery can be purchased. Other examples of organizational weaknesses are huge debts, high
employee turnover, complex decision making process, narrow product range, large wastage of raw
materials, etc.

3. Opportunities - Opportunities are presented by the environment within which our organization
operates. These arise when an organization can take benefit of conditions in its environment to plan
and execute strategies that enable it to become more profitable. Organizations can gain competitive
advantage by making use of opportunities.

Organization should be careful and recognize the opportunities and grasp them whenever they arise.
Selecting the targets that will best serve the clients while getting desired results is a difficult task.
Opportunities may arise from market, competition, industry/government and technology. Increasing
demand for telecommunications accompanied by deregulation is a great opportunity for new firms to
enter telecom sector and compete with existing firms for revenue.

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4. Threats - Threats arise when conditions in external environment jeopardize the reliability and
profitability of the organization’s business. They compound the vulnerability when they relate to the
weaknesses. Threats are uncontrollable. When a threat comes, the stability and survival can be at
stake. Examples of threats are - unrest among employees; ever changing technology; increasing
competition leading to excess capacity, price wars and reducing industry profits; etc.

Advantages of SWOT Analysis

SWOT Analysis is instrumental in strategy formulation and selection. It is a strong tool, but it involves a great
subjective element. It is best when used as a guide, and not as a prescription. Successful businesses build on
their strengths, correct their weakness and protect against internal weaknesses and external threats. They also
keep a watch on their overall business environment and recognize and exploit new opportunities faster than its
competitors.

SWOT Analysis helps in strategic planning in following manner-

a. It is a source of information for strategic planning.

b. Builds organization’s strengths.
c. Reverse its weaknesses.
d. Maximize its response to opportunities.
e. Overcome organization’s threats.
f. It helps in identifying core competencies of the firm.
g. It helps in setting of objectives for strategic planning.
h. It helps in knowing past, present and future so that by using past and current data, future plans can be
chalked out.

SWOT Analysis provide information that helps in synchronizing the firm’s resources and capabilities with the
competitive environment in which the firm operates.

SWOT ANALYSIS FRAMEWORK

Limitations of SWOT Analysis

SWOT Analysis is not free from its limitations. It may cause organizations to view circumstances as very
simple because of which the organizations might overlook certain key strategic contact which may occur.
Moreover, categorizing aspects as strengths, weaknesses, opportunities and threats might be very subjective
as there is great degree of uncertainty in market. SWOT Analysis does stress upon the significance of these
four aspects, but it does not tell how an organization can identify these aspects for itself.

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BBA. 1st Year Subject- Bussiness Management

There are certain limitations of SWOT Analysis which are not in control of management. These include-

a. Price increase;
b. Inputs/raw materials;
c. Government legislation;
d. Economic environment;
e. Searching a new market for the product which is not having overseas market due to import restrictions;
etc.

Internal limitations may include-

a. Insufficient research and development facilities;

b. Faulty products due to poor quality control;
c. Poor industrial relations;
d. Lack of skilled and efficient labour; etc

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