Business Management – Notes

UNIT- I
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Syllabus – Introduction to Management &Organization, Critical Analysis of Management Theories, Management &
Society, Ethical Issues in Management, Social Responsibilities of Business & Corporate Governance.
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DEFINITION OF MANAGEMENT

According to Koontz and Weihrich - “Management is the process of designing and maintaining an environment in
which individuals, working together in groups, efficiently accomplish selected aims.”

According to F. W. Taylor - “Management is an art of knowing what is to be done and seeing that it is done in the
best possible manner.”

According to Henri Fayol- “ Management is to forecast, to plan, to organize, to command, to co-ordinate, and control
activities of others.”

In other words Management is the process that optimizes human material and financial resources of the organization
for effective achievement of its goal.

FEATURES OF MANAGEMENT

(i) An activity : It is an activity of getting things done through others. It involves coordinated efforts of a group of
people towards a common end in highly structured Organizations like Reliance or Infosys

(ii) A process : Management gets things done through others by the management process. It helps to achieve Organi-
zational goals through functions of management.

(iii) Required for all organizations : Both business and non-business organizations (such as Government or service
organizations, irrespective of their size; large or small) need effective management to achieve their objectives.

(iv) Required at all organizational levels : Management is required at all the levels — top, middle and lower levels of
the organization, though degree of management is different at different levels.

(v) Goal-oriented : Success of an organization is measured by achievement of its goals and management plays signifi-
cant role in goal achievement. Since organizations are deliberately created structures, they exist for a purpose or goal.
Objectives are the desired state of results that all organizational members agree to achieve through coordinated efforts.

(vi) Intangible : Management cannot be seen or felt. The result of management can be observed by comparing a well-
managed organization with a poorly managed organization. The difference in results can be attributed to management
concepts.

(vii) Dynamic : The changing business scenario requires innovations, research and development in the business sector
and, thus, highlights the changing role that management plays in this environment. Effective management is situation-
al i.e., managers assess the facts and circumstances of each situation and use a managerial approach that best applies
in the situation to attain the individual and organizational goals.

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(viii) A discipline : Though management seeks ideas and concepts from other fields of study, such as psychology, be-
havioral sciences, sociology etc., yet it is a complete discipline in itself. Managers acquire specific managerial skills,
knowledge and fundamentals to practice management.

(ix) Management and society : Though management is a separate discipline which aims to accomplish pre-determined
organizational goals, yet its impact on society cannot be overlooked. Management is governed by social values, cul-
ture and beliefs. It is a function that transforms the society. It preserves the society and promotes its interests.

(x) Group effort: Management as a function, activity or a process is not undertaken by a single person. It is the coor-
dinated effort of a group of people that envisions future of the organization, sets its goals, makes plans and policies,
implements them and controls its working through an effective feedback mechanism.

OBJECTIVES OF MANAGEMENT:

(i) Helps organization achieve its objectives:

Management helps in managing the organizations to achieve their objectives at minimum cost. It enables managers to
work efficiently, that is, achieve maximum output at minimum cost. It also aims to coordinate the organizational re-
sources (physical, financial and human) so that human knowledge and expertise can be geared towards optimum utili-
zation of non-human resources.

(ii) Promotes effectiveness:

Efficiency means ‘doing things right’ and effectiveness means ‘doing the right things’. It means choosing the most
appropriate organizational objectives out of multiple objectives. Lack of effectiveness or choosing wrong objectives
will result in inefficiency, howsoever hard managers may work. Management, thus, helps to find out the right things to
do and to concentrate on those things efficiently.

(iii) Develops the ability of managers:

Managers should not only be skilled in problem-solving, they should be equally skilled in problem-finding. They
should anticipate problems before they arise. They should take advantage of opportunities to make their Organizations
competitive. Management develops analytical abilities of managers (problem solving) and the ability to find problems
and exploit gainful business opportunities.

(iv) Human welfare:

Management helps in knowing the needs of employees and satisfies them through suitable motivators.

(v) Social welfare:

Organizations operate in the larger social system. The performance of business organizations largely affects the wel-
fare of society and through it, the welfare of the nation. Management develops business organizations as socially ac-
ceptable institutions which give gainful employment to people.

(vi) Interaction with environment:

Business operates in the larger environment that consists of economic and non-economic variables. Firms secure in-
puts from the environment, transform them into outputs and give them back to the environment. They survive if they
adapt their plans to the environmental requirements and change their operations according to changes in the environ-
ment. Management helps firms to successfully frame and alter their policies to profitably interact with the larger envi-
ronment.

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 IMPORTANCE OF MANAGEMENT

Management plays important role in shaping the culture of organization. The performance and survival of organiza-
tion depends on its management.

According to Peter F. Drucker, “Management is the specific organ of the modern institution. It is the organ on the
performance of which the performance and the survival of the institution depends.”

The importance of management is as follows:

(i) Achievement of organizational goals:

Management helps to effectively design the goals and frame plans to achieve them efficiently.

(ii) Optimum utilization of organizational resources:

Management helps the organization utilize its scarce resources (human, physical and financial resources) efficiently.
Human resources are the people with their talent, skill, knowledge, experience and abilities for effective conversion of
inputs into outputs. Material or physical resources are the raw material or plant and machinery for producing goods
and services.

(iii) Develop analytical and conceptual ability of managers:

Management helps to analyses the organizational problems, link them with other organizational matters and arrive at
solutions geared towards organizational goals.

(iv) Balance between multiple goals:

At a point of time, managers face multiple goals. Deciding about what is more important so that scarce organizational
resources can be optimally allocated to different organizational goals, is facilitated through management.

(v) Economic and social development:

Drucker asserts that “developing countries are not underdeveloped, they are undermanaged.” If knowledge of man-
agement is transferred from developed to developing countries, developing countries will develop their entrepreneurial
ability, managerial excellence, rate of savings, capital formation and, thus, economic and social development.

(vi) Coordination between individual and organizational goals:

Effective management coordinates individual goals with formal goals of the organization. It motivates employees to
put their best efforts to contribute to organizational goals and through it, achieve their personal goals.

(vii) Face competition:

Management helps to face tough competition in the contemporary business environment. Effectively managed firms
outperform those which are not effectively managed and, thus, capture bigger share of the market.

(viii) Social upliftment:

Management promotes social development by generating and directing human energies towards the needs of the socie-
ty such as health care, education, clean environment etc.

(ix) Reform Government and society:

Management teaches respect for individual values, tradition and social culture. “It will increasingly stand for the quali-
ty of life of a society as much as for its standard of living.”

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(x) Social innovation:

The social and economic development is more a result of social innovation than technical innovation. The needs of our
society, educare, health care, clean environment, entrepreneurship, productivity etc. are fulfilled through able and
skilled managers.

INTRODUCTION TO ORGANIZATIONS

According to Mooney and Reiley - “Organization is defined as the form of human association for attaining common
objectives.”

According to Talcott Parsons: - “Organization is defined as a social unit which is deliberately constructed and recon-
structed to seek specific goals.”

According to AmitaiEtzioni: “Organization has three characteristics :-

(i) Division of labour,

(ii) Presence of one or more power centres, and
(iii) Substitution of personnel.

According to Max Weber - “Organization is defined as a corporate group. A corporate group is a social relation which
is either closed or limits the admission of outsiders by rules… its order is enforced by the actions of specific individu-
als whose regular function this is.”

FEATURES OF ORGANIZATION

1. Composition of Interrelated Individuals:

Organization is a composition or aggregation of interrelated individuals. The organizations are not merely a number of
individuals collected at random but they are composed of individuals who are interrelated. The identifiable interrelated
group of individuals determines the boundary of the organization. It shows the Organization as a separate entity from
the other elements in its environment.

2. Deliberate and Conscious Creation and Recreation:

Organization is a social unit which is deliberately constructed or reconstructed. It is a system of consciously coordi-
nated activities of two or more persons. This feature differentiates the Organization from the other social units. Unlike
other social units, members enter in the Organization through a contract and can be shunted out also if their perfor-
mance is not satisfactory. Thus, the relationship is purely of a contractual nature. Recreation of groups can be made by
the Organization through promotions, demotions or transfers of people in the Organization.

3. Achievement of Common Objectives:

An Organization is a conscious and purposive creation. It is a means towards the achievement of common enterprise
objectives. The objectives of various segments lead to the achievement of major business objectives. The Organiza-
tional structure should build around common and clear cut objectives. This will help in the proper accomplishment of
objectives.

4. Division of Work:

Organization includes breaking up the entire work into different segments. Different segments of work are then as-
signed to different persons for their efficient accomplishment. This brings in division of labor. It is not that one person

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cannot carry out many functions but specialization in different activities is necessary to improve one’s efficiency. Or-
ganization helps in dividing the work into related activities so that they are assigned to different individuals.

5. Coordination:

Coordination of various activities is as essential as their division. It helps in integrating and harmonizing various activ-
ities. Coordination also avoids duplications and delays. In-fact, various functions in an Organization depend upon one
another and the performance of one influences the other. Unless all of them are properly coordinated, the performance
of all segments is adversely affected.

6. Co-operative Relationship:

An Organization creates co-operative relationship among various members of the group. An Organization cannot be
constituted by one person. It requires at least two or more persons; Organization is a system which helps in creating
meaningful relationships among people. The relationship should be both vertical and horizontal among members of
various departments. The structure should be designed that it motivates people to perform their part of work together.

7. Well Defined Authority Responsibility Relationship:

An Organization consists of various positions arranged in a hierarchy with well defined authority and responsibility.
There is always a central authority from which a chain of authority relationship stretches throughout the Organization.
The hierarchy of positions defines the lines of communication and pattern of relationships.

8. Group Behavior:

An Organization is a composition of people. The success of an Organization depends upon the behavior of the people
and the group. Individual groups and structures are the basis of group behavior. Relationships on a person to person
level and subordinate to subordinate as well as with the superior are established in a group. Formal and informal Or-
ganizations help in developing proper behavior of a group.

9. Performance:

The whole Organization is greater than the sum of its parts. The organization’s main aim is to achieve the goals and
objectives through effective performance which is possible with human resource development. Organizational devel-
opment programmes maximize work motivations and creativity. Job enlargement, job enrichment and job satisfaction
also come under Organizational performance. Specialization in particular helps in the effective performance of the job.

NATURE OF ORGANIZATION

(1) Organization as a Process:

As a process, Organization is an executive function. it becomes a managerial function involving the following activi-
ties:

(i) Determining activities necessary for the accomplishment of the business objectives,
(ii) Division of work,
(iii) Grouping of inter-related activities,
(iv) Assigning duties to persons with requisite competence,
(v) Delegating authority, and
(vi) Co-ordinating the efforts of different persons and groups.

When we consider Organization as a process, it becomes the function of every manager. Organizing is a continuous
process and goes on throughout the life-time of an enterprise. Whenever there is a change in the circumstances or ma-

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terial change in situation, new type of activities spring up. So, there is a need for constant review and re-assignment of
duties. Right persons have to be recruited and necessary training imparted to make them competent to handle the jobs.
The process of Organization thus, involves dividing the work in a rational way and integrating the activities with work
situations and personnel. It also represents humanistic view of the enterprise since it is the people who are uppermost
in the process of integration of activities. Continuous review and adjustment makes it dynamic as well.

(2) Organization as a structure (or, framework of relationships):

As a structure, Organization is a network of internal authority and responsibility relationships. It is the framework of
relationships of persons operating at various levels to accomplish common objectives. An Organization structure is a
systematic combination of people, functions and physical facilities.

It constitutes a formal structure with definite authority and clear responsibility. It has to be first designed for determin-
ing the channel of communication and flow of authority and responsibility. For this, different types of analysis have to
be done. Peter F Drucker suggests following three types of analysis:

(i) Activities analysis

(ii) Decision analysis

(iii) Relations analysis

A hierarchy has to be built-up i.e., a hierarchy of positions with clearly defined authority and responsibility. The ac-
countability of each functionary has to be specified. Therefore, it has to be put into practice. In a way, Organization
can be called a system as well.

FEATURES AND CHARACTERISTICS OF ORGANIZATION STRUCTURE

1. It facilitates co-ordination of Organizational activities and tasks.

2. It states the pattern of formal relationships and duties among people at different positions in the Organization.

3. It elaborates the hierarchical relationship among different levels of management within the Organization.

4. It facilitates the implementation of policies, practices, procedures, standards evaluation systems etc. that guide the
activities and relationship among people in the Organization.

5. It states the activities and tasks assigned to different departments and people in the Organization.

Advantages of Organization Structure:

Merits of having a well-designed organization structure are as follows:

1. The activities of the individuals and the groups will become more rational, stable and predictable.

2. An orderly hierarchy in which people are related in a meaningful sequence will result. Individual responsibility will
be known clearly and the authority to act would be defined.

3. Individuals will be selected on the basis of ability to perform expected tasks. Simplification and specialization of
job assignment is possible in more effective way.

4. Directional and operational goals and procedures will be determined clearly and energies devoted to their achieve-
ment.

5. Available resources will be utilized in the most effective way.

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6. Such an Organization may make the treatment of the individual workers more democratic because patronage and
favoritism are reduced.

7. Workers will benefit from planned superior subordinate- relationships in which each work receives essential sup-
port and direction.

Demerits of Organization Structure:

Disadvantages of having an Organization structure are as follows:

1. Individual creativity and originality may be stifled by the rather rigid determination of duties and responsibilities.

2. Workers may become less willing to assume duties that are not formally a part of their original assignment.

3. Very often the fixed relationships and lines of authority seem inflexible and difficult to adjust to meet changing
needs.

4. They produce anxiety in individual workers by pressing too heavily for routine and conformity.

5. They become too costly in terms of time and human dignity in order to implement Organizational rules and regula-
tions.

6. Inter-personal communication may be slowed or stopped as a result of strict adherence to formal lines of communi-
cation.

CRITICAL ANALYSIS OF MANAGEMENT THEORIES

Management theories are the set of general rules that guide the managers to manage an organization. Theories are an
explanation to assist employees to effectively relate to the business goals and implement effective means to achieve
the same.

Important Management Theories:

There are Four important management theories which are stated below -

1. Frederick Taylor – Theory of Scientific Management.

2. Henri Fayol – Administrative Management Theory.
3. Max Weber - Bureaucratic Theory of Management.
4. Elton Mayo – Behavioral Theory of Management (Hawthorne Effect).

1. Frederick Taylor – Theory of Scientific Management.

Frederick Winslow Taylor (1856-1915) is called as the father of Scientific Management. His experience from the bot-
tom-most level in the organization gave him an opportunity to know at first the problems of the workers. Taylor’s
principal concern was that of increasing efficiency in production, not only to lower costs and raise profits but also to
make possible increased pay for workers through their higher productivity.

“Scientific management means knowing exactly what you want men to do and seeing that they do it in the best and the
cheapest way”. - F.W. Taylor

PRINCIPLES OF SCIENTIFIC MANAGEMENT

1. Science, not Rule of Thumb:

This principle requires development and application of scientific methods. Taylor advocated that the traditional rule of
thumb’ methods should be replaced with the scientific methods.

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2. Scientific Selection, Training and Development of Workers : The procedure for selection of workers should be
designed scientifically. The errors committed at the time of selection may prove o be very costly later on. If we do not
have right workers on the right job, the efficiency of the Organization will be reduced.

3. Harmony, not Discord (Conflict):

There should be harmony (not conflict) between the management and the workers. This requires change of mental atti-
tudes of the workers and the management towards each other. Taylor called it mental revolution.

4. Cooperation, not Individualism:

Scientific management is based on cooperation between management and workers, as also between workers them-
selves. Management can earn higher profits if the workers perform their jobs efficiently and thus ensure better quality,
lower costs and larger sales.

5. Maximum, not Restricted Output:

Both the management and workers should try to achieve maximum output in place of restricted output. This will be
beneficial to both the parties. Maximum output will result in higher wages for the workers and greater profit for the
management.

6. Equal Division of Responsibility between Management and Workers:

There must be equal division of responsibility between the managers and the workers. The management should as-
sume responsibility for the work for which it is better suited.

OBJECTIVES OF SCIENTIFIC MANAGEMENT

(а) Higher Productivity: Increase in the rate of production by use of standardized tools, equipment’s, methods and
training of the workers.

(b) Cost Reduction: Reduction in the cost of production by rational planning and regulation, and cost control tech-
niques.

(c) Elimination of Wastes: Elimination of wastes in the use of resources and methods of manufacturing.

(d) Quality Control: Improvement in the quality of output by research, quality control inspection devices.

(e) Right Men for Right Work: Placement of right persons on the right jobs through scientific selection and training
of workers.

(f) Incentive Wages: Relating wage payments to the efficiency of the workers, i.e., giving wages at the higher rates to
the efficient workers.

FEATURES OF SCIENTIFIC MANAGEMENT

(i) It is a systematic approach to handle management problems.

(ii) It implies scientific techniques in method of work, recruitment, selection and training of workers.

(iii) It rejects the age old method of rule of thumb’ or ‘hit or miss approach.

(iv) It attempts to discover the best method of doing the work at the lowest cost.

(v) It attempts to develop each worker to his greatest efficiency.

(vi) It involves a complete change in the mental attitude of the workers as well as of the management.

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2. Henri Fayol – Administrative Management Theory.

According to Administrative theory of Management, the five basic elements of management are:

Planning : Planning is forecasting the future and making a structural plan of action and determining the goals and ob-
jectives of the action, Fayol considers planning as most essential function.

Organizing : Organizing is the creation of an organizational structure which brings human resources and non - human
resources together to work together

Commanding : The process of giving direction and orders by the superior to the subordinate is known as command-
ing.

Coordinating: There are various divisions in an organization. So, coordinating is the process of bringing the action of
all the divisions and departments and integrating their efforts for the fulfillment of organizational goals .

Controlling : Controlling means comparing the actual performance of the organization with the desired performance
level and checking if there is the need for improvement and when a deviation is found implementing the necessary
changes to improve the performance.

H. Fayol observed the organization from a manager’s point of view. So he identified six major activities in which in-
dustrial activities can be divided. They are:

Technical activities : This activity is related to the production or manufacturing of goods and services. Commercial
activities. This activity is concerned with the marketing dealing with sales, purchase, and distribution of goods and
services.

Financial activities: This activity is related to the creation of necessary capital and its optimum use for development
and growth.

Accounting activities: This activity is related to the recording of transactions and then preparing the financial state-
ments.

Managerial activities: This activity is considered with the elements of management which are planning, organizing,
commanding, coordinating and controlling.

Security activities: This activity is related to the protection of people and property in an organization by providing
safe working condition, insurance policies etc.

MANAGERIAL SKILLS AND QUALITIES

Fayol has focused on the role of a manager. He believes that anyone cannot be a manager. A manager needs some
skills and qualities to manage people and resources in an organization. The six managerial skills are:

Physical qualities: This quality is concerned with the good health, well-maintained dress and outlook and high energy
level of the manager.

Mental qualities: To become a good manager they must possess the quality to learn and understand, judge and adapt
to the problems and should have the mental energy to focus.

Educational qualities: To become a sound manager, one needs to have a general understanding of the subject matter
of the basic functioning of the organization.

Moral qualities: To become a good manager, one needs to have high energy level, willingness to take responsibili-
ties, loyal to action, tactful and feeling of dignity.

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Technical qualities: One needs to have technical knowledge regarding what are the procedures to carry out the action
in an organization.

Experience: Experience comes with years of practice of an action. So a good manager needs years of experience to
work smoothly and efficiently.

PRINCIPLES OF ADMINISTRATIVE MANAGEMENT

Division of work:

This principle implies that the overall action of management should be divided into a compact job and employees
should be allocated certain jobs viewing their interest and skills.

Authority and Responsibility:

Authority is the right to give the command and make decisions. Responsibility is the obligation of an employee to per-
form a certain designated task and be accountable to the supervisor. There should be a balance between authority and
responsibility.

Discipline:

An employee should be obedient and respectful to the authority and the established rules and regulation of the organi-
zation. Clarity of Rules, Reward-Punishment system, good supervision etc. are some ways to maintain discipline. Uni-
ty of Command:

Unity of Direction:

According to this principle, there should be only one manager under the guidance and plan of which the groups having
same goals and objectives should move forward. This principle suggests that one department, section, the division
should only get instruction from one head.

Subordination of individual interest to general interest:

There are two types of interests. One is interest of the individuals and the other is organizational interest. So this prin-
ciple suggests that there must be harmony between these two interests. Organizational interest must be given more
priority as doing good for the organization will bring rewards for the individuals.

Remuneration of Personnel:

There must be monetary as well as non-monetary remuneration to the employees based on their performance level.
Fayol focuses more on non-monetary remuneration in which he believes will create bonding between the employee
and the organization. So the remuneration must be fair, reasonable and satisfactory.

Centralization:

This principle implies that the top most level of authority should be centralized to the top level management. There
should be delegation of power to the subordinate but the power to make the important decisions in the organization
should remain with the top level management.

Scalar Chain:

There should be a chain of superiors ranging from the top level of management to the lower level management based
on the hierarchy level. The head of an organization is in the top of the chain. The communication flows from the top to
the bottom through this chain of authority of superiors.

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Order :

This principle states that every material and manpower should be given a proper place in the organization. The right
man for the right job is essential in the smooth running of an organization.

Equity :

This principle implies that all the members of the organization should be treated equally. There should be no biases
and there should be an environment of kindness and justice.

Stability of tenure:

Any employee can work to the fullest if they have secured job. So an employee must be provided with job security
which will help them to be efficient. This will also benefit the organization as it lowers the labor turnover and reduces
cost of recruiting and training new employees.

Initiative :

Initiative is the level of freedom that an organization should provide to the employee to carry out the plans without
forcing them or ordering them. This is related to creation of interest and willingness in the employees by motivating
and satisfying the employees.

Esprit de Corps :

This principle implies that “union is strength” and team spirit. So the organization must integrate all its actions to-
wards a single goal and objective. If the action is not unified then they cannot achieve their desired objectives. So
there must be unified team contribution in harmony and cooperation which is always greater than the aggregate of in-
dividual performances.

3. Max Weber - Bureaucratic Theory of Management.

Bureaucratic Theory was developed by a German Sociologist and political economist Max Weber (1864-1920). Ac-
cording to him, bureaucracy is the most efficient form of Organization. The Organization has a well-defined line of
authority. It has clear rules and regulations which are strictly followed.

According to Max Weber, there are three types of power in an Organization :-

Traditional Power,
Charismatic Power, and
Bureaucratic Power Or Legal Power.

FEATURES OF BUREAUCRATIC ORGANIZATION

 There is a high degree of Division of Labour and Specialisation.
 There is a well defined Hierarchy of Authority.
 It follows the principle of Rationality, Objectively and Consistency.
 There are Formal and Impersonal relations among the member of the Organization.
 Interpersonal relations are based on positions and not on personalities.
 There are well defined Rules and Regulations. There rules cover all the duties and rights of the employees.
 There are well defined Methods for all types of work.
 Selection and Promotion is based on Technical qualifications.
 Only Bureaucratic or legal power is given importance.

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 CRITICISM OF BUREAUCRATIC ORGANIZATION

Bureaucratic Organization is a very rigid type of Organization. It does not give importance to human relations. It is
suitable for government Organizations. It is also suitable for Organizations where change is very slow. It is appropri-
ate for static Organizations.

Bureaucratic Organization is criticized because of the following reasons :-

 Too much emphasis on rules and regulations. The rules and regulations are rigid and inflexible.
 No importance is given to informal groups. Nowadays, informal groups play an important role in all business
Organizations.
 Bureaucracy involves a lot of paper work. This results in lot of wastage of time, effort and money.
 There will be unnecessary delay in decision-making due to formalities and rules.
 Bureaucratic model may be suitable for government Organizations. But it is not suitable for business Organi-
zations because business Organizations believe in quick decision making and flexibility in procedures.
 Too much importance is given to the technical qualifications of the employees for promotion and transfers.
Dedication and commitment of the employee is not considered.
 There is difficulty in coordination and communication.
 There is limited scope for Human Resource (HR).

4. Elton Mayo – Behavioral Theory of Management (Hawthorne Effect).

In 1927, a group of researchers led by Elton Mayo and Fritz Roethlisberger of the Harvard Business School were in-
vited to join in the studies at the Hawthorne Works of Western Electric Company, Chicago. The experiment lasted up
to 1932. The Hawthorne Experiment brought out that the productivity of the employees is not the function of only
physical conditions of work and money wages paid to them. Productivity of employees depends heavily upon the sat-
isfaction of the employees in their work situation. Mayo’s idea was that logical factors were far less important than
emotional factors in determining productivity efficiency. Furthermore, of all the human factors influencing employee
behavior, the most powerful were those emanating from the worker’s participation in social groups. The Hawthorne
experiment consists of four parts. These parts are briefly described below:-

1. Illumination Experiment.
2. Relay Assembly Test Room Experiment.
3. Interviewing Programme.
4. Bank Wiring Test Room Experiment.

1. Illumination Experiment:

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

2. Relay Assembly Test Room Experiment:

This phase aimed at knowing not only the impact of illumination on production but also other factors like length of the
working day, rest hours, and other physical conditions. In this experiment, a small homogeneous work-group of six
girls was constituted. These girls were friendly to each other and were asked to work in a very informal atmosphere

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under the supervision of a researcher. Productivity and morale increased considerably during the period of the experi-
ment. Productivity went on increasing and stabilized at a high level even when all the improvements were taken away
and the pre-test conditions were reintroduced. The researchers concluded that socio-psychological factors such as feel-
ing of being important, recognition, attention, participation, cohesive work-group, and non-directive supervision held
the key for higher productivity.

3. Mass Interview Programme:

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

4. Bank Wiring Test Room Experiment:

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

Each individual was restricting output.

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

Individual output remained fairly constant over a period of time.

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

Effect of Monotony and Fatigue on Productivity

Using a study group other experiments were conducted to examine what effect of monotony and fatigue on productivi-
ty and how to control those using variables such as rest breaks, work hours and incentives.

At normal conditions the work week was of 48 hours, including Saturdays, with no rest pauses. On the first experi-
ment workers were put on piece-work salary where they were paid on each part they produced, as a result the output
increased. On the second experiment the workers were given 2 rest pauses of 5 minutes each for 5 weeks and again
output went up. The third experiment further increased the pauses to 10 min and the output went up sharply. For the
fourth experiments a 6, 5 min breaks were given and output fell slightly as the workers complained that the work
rhythm was broken. On the fifth experiments conditions for experiment three were repeated but this time a free hot
meal was given by the company and output wen up again.at the sixth experiment, workers were dismissed at 4.30p.m.
Instead of 5.00p.m were an output increase was recorded.

The seventh experiment had the same results as experiments six even though the workers were dismissed at 4.00 p.m.
on the eighth and final experiment, all improvements were taken away and workers returned to their original working
conditions. Surprisingly, results concluded that output was the highest ever recorded!

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Contributions of the Hawthorne Experiment to Management

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

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

 The employer can be motivated by psychological and social wants because his behavior is also influenced by
feelings, emotions and attitudes. Thus economic incentives are not the only method to motivate people.
 Management must learn to develop co-operative attitudes and not rely merely on command.
 Participation becomes an important instrument in human relations movement. In order to achieve participa-
tion, effective two-way communication network is essential.
 Productivity is linked with employee satisfaction in any business organization. Therefore management must
take greater interest in employee satisfaction.

MANAGEMENT & SOCIETY

Every human being is social in nature. Human beings come together and constitute a society. A society can be under-
stood as a “web of social relations”.

In a society people perform various tasks. Organizing is a process by which tasks are allocated to various people. Thus
Organization is essentially a part of the society. Every Organization exists within the society itself. An Organization is
essentially influenced by the society.

Management and Society:

Management is a life giving element of an Organization. Perhaps no Organization can survive without performing the
functions of management. The functions of management include: planning, organising, decision making, staffing, co-
ordinating and controlling-all these functions are to be performed by keeping in mind the society.The impact of socie-
ty on Organization and management can be analysed, as follows:

1. Goals of the Organization:

Every Organization comes into existence to achieve specific goals. Such goal must be framed by considering the need
of the society.

2. Managerial decisions:
The decisions made by managers are obviously influenced by society. The styles of decision making process and the
approach adopted are guided by the policies and norms of the society.

3. Human relations:
Maintenance of cordial human relations is an important task of any Organization. The ability of a manager to maintain
sound human relations depend on his cultural background, family background, socialization process etc.

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Thus we can find that various, aspects of society such as values, norms, attitudes, family background, cultural herit-
age, influence the Organization.

Indian Society and Organization:

Indian society is a complex entity. It has a rich social, cultural, economic and political heritage. Various elements of
Indian society exerts influence on Indian management practices. They can be analysed as follows:

1. Impact on behavior:
Aspects of social heritage such as culture, socialization and family background of employees determine their behavior
in the Organization. Human beings are considered the most valuable assets of any Organization. The behavior of hu-
man beings in the organization determine various aspects of management such as communication, interpersonal rela-
tions etc.

2. Impact on practices and policies of the Organization:

Management policies are devised on the basis of social aspects. For instance most Organizations in India follow holi-
days for important festivals such as Deepavali, Dussehrra, Christmas, Ramzan etc.

3. Cultural Symbols and rituals:

In most of the Organizations rituals and cultural symbol are followed. For instance, in most Organizations the im-
portant events such as seminars and conferences or other functions are inaugurated by lighting a lamp. Important fes-
tivals like Ayudhapooja are celebrated in business Organizations.

4. Control techniques:
The control techniques adopted for regulation of behavior of employees in an Organization is highly influenced by the
practices and policies of society, particularly HR practices of the organization particularly disciplinary action. Particu-
lar disciplinary action are based on social policies and guidelines. Social norms often determine the control tech-
niques.

5. Group dynamics:
Social change exerts influence on group dynamics. It refers to various forces which operate within a group. Formation
of informal groups is unavoidable in any formal Organization. Whenever social change occurs it affects the interac-
tions within the formal as well as informal group. For example: Communal cashes may affect the interrelations among
a trade union.

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6. Industrial democracy:
India has a rich political heritage. Democracy is adopted as a form of government in India. Democratic ideas are also
adopted in the Organizational context. Workers’ participation in management is recognized by all Organizations. Var-
ious schemes like collective bargaining, peaceful negotiations have been adopted by business Organizations.
Thus in brief it can be stated that every component of Indian society such as—cultural, economic, religious, political
—directly influence the functioning of an Organization. In fact no Indian Organization can survive without under-
standing the structure of Indian society.

ETHICAL ISSUES IN MANAGEMENT

An Ethical Issue is an identifiable problem, situation or opportunity that requires a person to choose from among sev-
eral actions that may be evaluate as right or wrong, ethical or unethical. in business, such a choice generally involves
comparing monetary profit against what may be appropriate conduct, i.e. financial vs non- financial implications.

ETHICAL PROBLEMS/ ISSUES FACED BY MANAGERS

1. Conflicts of interest

2. Managing people

3. Work Force Diversity

4. Effective communication

5. Managing for ethical conduct in modern times

6. Shaping the organization's ethical climate

7. Workplace-Safety Issues

8. Legal Liability

9. Image Problems

10. Adherence to Law

11. Business Formation

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12. Issues of Cyber Ethics

 Privacy
 Property Issues
 Security Concerns
 Responsibility of Accuracy
 Accessibility, Censorship, and Filtering

13. Workplace Violence

ETHICAL ISSUES IN VARIOUS AREAS OF MANAGEMENT

IN ACCOUNTING :-

1.Window dressing, misleading financial analysis.

2. Insider trading, securities fraud leading to manipulation of the financial markets.

3. Bribery, over billing of expenses, facilitation payments.

4. Fake reimbursements.

5. Misappropriation of assets - the use of company assets for any other purpose than company interests in the practice
of the profession.

IN PRODUCTION :-

1. There are ethical problems arising out of use of new technologies that are harmful to health, safety and environ-
ment. This includes technological advancements like genetically modified food, radiations from mobile phones, medi-
cal equipment etc.

2. Defective services and products or products those are innately deleterious like alcohol, tobacco, fast motor vehi-
cles, warfare, chemical manufacturing etc.

3. Animal testing and their rights or use of economically or socially deprived people for testing or experimentation
is another area of production ethics.

4. Ethics of transactions between the organization and the environment that lead to pollution, global warming, in-
crease in water toxicity and diminishing natural resources.

IN HUMAN RESOURCE MANAGEMENT (HRM) :-

1. Employment Issues

2. Issues related to Cash and Incentive Plans

3. Issues related to Discriminations of the employees

4. Issues related to Performance Appraisal

5. Issues related to Privacy

6. Issues related to Safety and Health

7. Issues related to Restructuring and Layoffs

8. Other issues like using forced labor, child labor, Longer working hours, Increasing work stress, Sexual harassment.

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 CORPORATE SOCIAL RESPONSIBILITY (CSR)

The term "CORPORATE SOCIAL RESPONSIBILITY" can be defined as "A company’s sense of responsibility
towards the community and environment (both ecological and social) in which it operates.

Companies can express their Corporate citizenship-

 Through their waste and pollution reduction processes,

 By contributing educational and social programs and
 By earning adequate returns on the employed resources.

In other words, CSR is the continuing commitment by business to behave ethically and contribute to economic devel-
opment while improving the quality of the life of the workforce and their families as well as of the local community
and society at large.

NEED FOR SOCIAL RESPONSIBILITY OF A BUSINESS ENTERPRISE

1. Iron Law of Responsibility: Society gives business its charter to exist and that charter can be amended or revoked
at any time if it fails to live up to society’s expectations. Therefore, if a business intends to retain its existing social
role and social power, it must respond to society’s needs constructively. This is called as Iron Law of Responsibility.
In the long-run, those enterprises who do not use power in a manner that society considers responsible, will tend to
lose it.

2. Conversion of Resistances into Resources: If the innovative ability of a business is turned to social problems,
many resistances problems) can be transformed into resources and the functional capacity of resources can be in-
creased many times.

3. Wealth creation: Social responsibility becomes an integral part of the wealth creation process – which if managed
properly should enhance the competitiveness of business and maximize the value if wealth creation to society.

4. Effective use of Resources and Power: Businesses command power over the productive resources of a communi-
ty. They are obliged to use those resources for the common good of society. They should realise that the power to
command resources has been delegated to them by the society to generate more wealth for tits betterment. They must
honor social obligations while exercising the delegated economic power.

5. Long-Term business Interest: a better society would produce a better environment in which the business may gain
long-term profit maximization. A firm which sensitive to community needs would, in its own self-interest, like to have
a better community to conduct its business. To achieve that, it would implement special programs for social welfare.

6. Better Public Image: Each Firm must enhance its public image to secure more customers, better employees and
higher profit. Acceptance of social responsibility goals lead to improved public image.

7. Avoiding Government Intervention: Regulation and control are costly to business, both in terms of energy and
money and restrict its flexibility of decision – making. Failure of businessmen to assume social responsibilities invites
Government to intervene and regulate or control their activities. The prudent course for business is to understand the
limit of its power and to use that power responsibly, thereby avoiding Government intervention.

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 ADVANTAGES / BENEFITS OF CSR TO CORPORATE ENTITIES

1. Improved Financial Performance: Socially responsible business practices are linked to positive financial perfor-
mance. Improved financial results are attributed to stable socio- political – legal environment, enhanced competitive
advantage through better corporate reputation and brand image, improved employee recruitment, retention and moti-
vation, motivation, improved stakeholder relations and a more secure environment to operate in.

2.Operating Cost Reduction: CSR initiatives can help to reduce operating costs. Improving environmental perfor-
mance e.g. reducing emissions of gases that contribute to global climate change or reducing use of a agrochemicals,
can lower costs.

3. Brand Image and Reputation: A company considered socially responsible can benefit both from its enhanced
reputation with the public as well as its reputation within the business community, increasing the company’ ability to
attract and trading partners.

4. Increased Sales & Customer Loyalty: Businesses must first satisfy customers’ key buying criteria, i.e. price, qual-
ity, availability, safety and convenience. However, studies show an increasing consumer desire to buy (or not buy)
based on other values-based criteria, such as “sweatshop –free” and “child – labor- free” clothing, lower environmen-
tal impact, and absence of genetically – modified materials or ingredients.

5. Productivity and Quality: Improved working conditions, reduced environmental impacts or increased employee
involvement in decision – making, lead to – (a) increased productivity, and (b) reduced error/ defective rate in a Com-
pany.

6. Ability to attract and retain employees: Companies perceived to have strong CSR commitments find it easier to
recruit and retain employees, resulting in a reduction in turnover and associated recruitment and training costs.

ACTIVITIES PERFORMED BY COMPANIES UNDER CSR SCHEME

Activities which may be included by companies in their Corporate Social Responsibility Policies Activities relating
to:—

(i) Eradicating extreme hunger and poverty;

(ii) Promotion of education;
(iii) Promoting gender equality and empowering women;
(iv) Reducing child mortality and improving maternal health;
(v) Combating human immunodeficiency virus, acquired immune deficiency syndrome, malaria and other
diseases;
(vi) Ensuring environmental sustainability;
(vii) Employment enhancing vocational skills;
(viii) Social business projects;

COMPANIES COVERED UNDER CSR

Any Private or Public Company having a -

 Net worth of Rs. 500 Crore or more or,

 Turnover of Rs. 1000 Crore or more or,
 Net profit of Rs. 5 Crore or more in any of the 3 preceding Financial years.

Will have to spend a Minimum of 2% of their Average Net profit of immediately Preceding Three years

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 ARGUMENTS IN FAVOUR OF CSR

The following arguments favor corporate social responsibility:

1. Protect the interests of stakeholders :

Labor force is united into unions which demand protection of their rights from business enterprises. To get the support
of workers, it has become necessary for Organizations to discharge responsibility towards their employees.

Caveat emptor (‘let the buyer beware’), no more holds true. Consumer today is the kingpin around whom all market-
ing activities revolve. Consumer does not buy what is offered to him. He buys what he wants.

2. Long-run survival :

Business Organizations are powerful institutions of the society. Their acceptance by the society will be denied if they
ignore social problems. To avoid self-destruction in the long-run, business enterprises assume social responsibility.

3. Self-enlightenment :

With increase in the level of education and understanding of businesses that they are the creations of society, they are
motivated to work for the cause of social good. Managers create public expectations by voluntarily setting and follow-
ing standards of moral and social responsibility.

They ensure paying taxes to the Government, dividends to shareholders, fair wages to workers, quality goods to con-
sumers and so on. Rather than legislative interference being the cause of social responsibility, firms assume social re-
sponsibility on their own.

4. Avoids government regulation :

Non-conformance to social norms may attract legislative restrictions. Government directly influences the Organiza-
tions through regulations that dictate what they should do and what not. Various agencies monitor business activities.

5. Resources :

Business Organizations have enormous resources which can be partly used for solving social problems. Businesses are
the creation of society and must work in the best interest of society, both economically and socially.

6. Professionalization :

Management is moving towards professionalism which is contributing to social orientation of business. Increasing
professionalism is causing managers to have formal management education and qualifications. Managers specialize in
planning, organizing, leading and controlling through their knowledge and subscribe to the code of ethics established
by a recognized body.

ARGUMENTS AGAINST CSR :

Corporate social responsibility is limited on the following grounds:

1. Business is an economic activity:

It is argued by the opponents of social responsibility that basic function of a business enterprise is to look into eco-
nomic viability of its operations. It is for the Government to look after interests of the society. The prime responsibil-
ity of assuming social responsibility should, therefore, be of the Government and not of the business enterprises.

2. Quantification of social benefits:What measures social responsibility and to what extent should a business enter-
prise be engaged in it, what amount of resources should be committed to the social values, whose interest should hold

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priority over others (shareholders should be preferred over suppliers or vice versa) and numerous other questions are
open to subjective considerations, which make social responsibility a difficult task to be assumed.

3. Cost-benefit analysis:

Any social-benefit programme where initial costs exceed the benefits may not be taken up by enterprises even in the
short-run.

4. Lack of skill and competence: Professionally qualified managers may not have the aptitude to solve the social
problems.

5. Transfer of social costs :

Costs related to social programmes are adjusted by the business concerns in the following ways:

(a) High prices:

The costs are passed to consumers by increasing prices of goods and services.
(b) Low wages:
If managers maintain the level of prices, the social costs may be reflected in reduction of wages.
(c) Low profits:
If wages are stabilized, profits would be reduced, which will lower dividends to the shareholders. Low profits will re-
duce managers’ desire to further engage in corporate social responsibility

6. Sub-optimal utilization of resources:

If scarce resources are utilized for social goals, this would violate the very purpose of existence of an Organization.

CORPORATE GOVERNANCE

According to J.Wolfensohn, “Corporate Governance is about promoting corporate fairness, transparency, and ac-
countability.”

Corporate Governance can be defined as “the formal system of accountability and control for ethical and socially
responsible organizational decisions and use of resources”

Corporate Governance is concerned with holding the balance between economic and social goals and between indi-
vidual and communal goals..

In other words, Corporate Governance deals with promoting corporate fairness, transparency and accountability. It is
concerned with structures and processes for decision – making, accountability, control and behaviour at the top level
of organizations. It influences how the objectives of an organization are set and achieved, how risk is monitored and
assessed and how performance is optimized.

FEATURES OF GOOD CORPORATE GOVERNANCE

A Good Corporate Governance should be –

 Efficient and effective (i.e. doing the right things and doing things and doing things right)
 In tune with the applicable legal requirements.
 Transparent as regards decisions and actions.4. Accountable to stakeholders.
 Consensus– oriented and participatory in decision –making, i.e. promote acceptability of decisions rather then
forcing them on the parties concerned.
 Equitable and inclusive.
 Responsive and adaptive to environmental change.

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 OBJECTIVES OF CORPORATE GOVERNANCE

 To align corporate goals of its stakeholders (society, shareholders, etc.)

 Corporate governance a way of Life rather than a Code
 To strengthen corporate functioning and discourage mismanagement
 To achieve corporate goals by making investment in profitable investment outlets.
 To specify responsibility of the B.O.D and managers in order to ensure good corporate performance.

NEED FOR CORPORATE GOVERNANCE

Corporate Governance is needed to create a corporate culture of Transparency, accountability and disclosure. It refers
to compliance with all the moral & ethical values, legal framework and voluntary adopted practices. This enhances
customer satisfaction, shareholder value and wealth.

Corporate Performance: Improved governance structures and processes help ensure quality decision-making, en-
courage effective succession planning for senior management and enhance the long-term prosperity of companies,
independent of the type of company and its sources of finance. This can be linked with improved corporate perfor-
mance- either in terms of share price or profitability.

Enhanced Investor Trust: Investors consider corporate Governance as important as financial performance when
evaluating companies for investment. Investors who are provided with high levels of disclosure & transparency are
likely to invest openly in those companies. The consulting firm McKinsey surveyed and determined that global insti-
tutional investors are prepared to pay a premium of upto 40 percent for shares in companies with superior corporate
governance practices.

Better Access to Global Market: Good corporate governance systems attracts investment from global investors,
which subsequently leads to greater efficiencies in the financial sector.

Combating Corruption: Companies that are transparent, and have sound system that provide full disclosure of ac-
counting and auditing procedures, allow transparency in all business transactions, provide environment where corrup-
tion will certainly fade out. Corporate Governance enables a corporation to compete more efficiently and prevent
fraud and malpractices within the organization.

Easy Finance from Institutions : Several structural changes like increased role of financial intermediaries and insti-
tutional investors, size of the enterprises, investment choices available to investors, increased competition, and in-
creased risk exposure have made monitoring the use of capital more complex thereby increasing the need of Good
Corporate Governance. Evidence indicates that well-governed companies receive higher market valuations. The credit
worthiness of a company can be trusted on the basis of corporate governance practiced in the company.

Enhancing Enterprise Valuation: Improved management accountability and operational transparency fulfill inves-
tors’ expectations and confidence on management and corporations, and return, increase the value of corporations.

IMPORTANCE OF CORPORATE GOVERNANCE

 It shapes the growth and future of capital markets of the economy

 It helps in raising funds from capitals markets
 It links company’s management with its financial reporting system.
 It improves efficiency and effectiveness of the enterprise and wealth of the economy
 It improves international image of the corporate sector and enables home companies to raise global
 It help management to take innovative decisions for effective functioning of the enterprise

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 PRINCIPLES / PILLARS OF CORPORATE GOVERNANCE

TRANSPARENCY

The Code requires that the CEO and management meet different information and transparency needs of the owners,
the board of directors, the independent auditors, the supervisory board, the stakeholders, and the public at large.

ACCOUNTABILITY

The following agents of corporate governance-

Board of directors,
CEO and management,
Independent auditors
Fiscal council should account for their results and activities to those bodies that elected them.

INDEPENDENCE

For ethical reasons, corporate governance seems to be independent, strong and non participatory body where all deci-
sion making is based on business and not personal biases

FAIRNESS
Relations between all agents of corporate governance and the different types of owners must be based on fair treat-
ment of all the parties involved.

ETHICS

Good corporate governance is to comply with the law. In addition every company should have a statement of values
and a code of ethics. The key issue of ethics is the avoidance of conflict of interests

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 UNIT II
---------------------------------------------------------------------------------------------------------------------------------------------
Syllabus– Essentials of Planning, Types of Managerial Plans, Management By Objectives, Decision Making- Its Im-
portance, Process and Types.
----------------------------------------------------------------------------------------------------------------------------------------------
Planning is the most basic and primary function of management. It is the pre-decided outline of the activities to be
conducted in the organization.

According to M.E Hurley, “PLANNING is deciding in advance what is to be done. It involves the selection of objec-
tives, policies, procedures and programs from among alternatives.”

ESSENTIALS OF PLANNING

A Sound Plan has the following features –

1. Integration :A Good plan should integrate the short term requirements of the firm with its long term require-
ments. Plan must be oriented towards the achievement of overall organizational goals.

2. Market Research – Planners must conduct a thorough market research before framing plans. “What potential
customers say they are going to do and what they end up doing may be two different things”. Plans should
therefore, forecast the market requirements through a well conducted market research.

3. Economy / Financial Constraints – A Plan which relied too heavily on financial resources may turn out to
be a failure if revenues (as expected) do not arise. Once, the budgetary balance is disturbed subsequent opera-
tions may get upset as plan is aa sequence of cause and effect relationship.
<

4. Consistent – Plans should be consistent in terms of adaptability to environmental factors and organizational
resources. They should be followed for a fairly long period of time. It is important that the plans are accepta-
ble to those who frame them and also to those who implement them.

5. Flexible- Though, Consistent plans should adjust (flexible) to the environmental changes. The fact that plans
are made to achieve a goal in future and future being uncertain, managers should review the plans from time
to time and make necessary changes in accordance with the requirement of the environment.

IMPORTANCE / SIGNIFICANCE OF PLANNING

1. PLANNING PROVIDES DIRECTION:

Planning is concerned with pre-determined course of action. It provides the directions to the efforts of employees.
Planning makes clear what employees have to do, how to do, etc. By stating in advance how work has to be done,
planning provides direction for action. Employees know in advance in which direction they have to work.

2. PLANNING REDUCES THE RISK OF UNCERTAINTIES:

Organizations have to face many uncertainties and unexpected situations every day. Planning helps the manager to
face the uncertainty because planners try to foresee the future by making some assumptions regarding future keeping
in mind their past experiences and scanning of business environments. The plans are made to overcome such uncer-
tainties. The plans also include unexpected risks such as fire or some other calamities in the Organization.

3. PLANNING REDUCES OVER LAPPING AND WASTEFUL ACTIVITIES:

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The Organizational plans are made keeping in mind the requirements of all the departments. The departmental plans
are derived from main Organizational plan. As a result there will be co-ordination in different departments. On the
other hand, if the managers, non-managers and all the employees are following course of action according to plan then
there will be integration in the activities. Plans ensure clarity of thoughts and action and work can be carried out
smoothly.

4. PLANNING PROMOTES INNOVATIVE IDEAS:

Planning requires high thinking and it is an intellectual process. So, there is a great scope of finding better ideas, better
methods and procedures to perform a particular job. Planning process forces managers to think differently and assume
the future conditions. So, it makes the managers innovative and creative.

5. PLANNING FACILITATES DECISION MAKING:

Planning helps the managers to take various decisions. As in planning goals are set in advance and predictions are
made for future. These predictions and goals help the manager to take fast decisions.

6. PLANNING ESTABLISHES STANDARD FOR CONTROLLING:

Controlling means comparison between planned and actual output and if there is variation between both then find out
the reasons for such deviations and taking measures to match the actual output with the planned. But in case there is
no planned output then controlling manager will have no base to compare whether the actual output is adequate or not.

LIMITATIONS / DISADVANTAGES OF PLANNING

1. Limitation of forecasts: Planning is based on forecasts and if realizable information data are not available for mak-
ing forecasts, planning is sure to lose much of its value.

2. Rigidity: Planning implies strict adherence to predetermined policies, procedures and programmes. This restricts
individual's freedom, initiative and desire for creativity.

3. Time-consuming: Planning is time-consuming and may delay action in certain cases. But to make plans realistic, it
is necessary that sufficient time should be given to the planning process.

4. Costly : Planning is an expensive exercise as a lot of money has to be spent for preparing estimates, collecting in-
formation and facts for analysis, etc.

5. Influence of external factors : Sometimes, because of the influence of external factors like government control,
natural calamities, break-out of war, changes in political and economic situations, etc., which are beyond the control
of the planners, the effectiveness of planning becomes limited.

6. Limited scope: The scope of planning is said to be limited in the case of Organizations with rapidly changing situa-
tions. It is claimed that for industries producing fashionable articles or for those engaged in the publication of text-
books, working on a day-to-day basis is more economical than on a planned basis.

7. People's resistance: Planning may sometimes generate people's resistance to it. In old established Organizations,
managers are often frustrated in instituting a new plan simply by the unwillingness or inability of people to accept it.

8. Failure of people in planning:Sometimes, the persons involved in the planning process fail to formulate correct
plans. Some of the reasons for failure are lack of commitment to planning, failure to formulate sound strategies, lack
of clearly-defined objectives, tendencies to overlook planning premises, not having a clear idea of the scope of plans,
lack of support from top management, lack of effective control technique, lack of delegation of authority etc.

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 TYPES OF MANAGERIALS PLANS

ON THE BASIS OF NATURE:-

Operational Plan: Operational plans are the plans which are formulated by the lower level management for short
term period of up to one year. It is concerned with the day to day operations of the organization. It is detailed and spe-
cific. It is usually based on past experiences. It usually covers functional aspects such as production, finance, Human
Resources etc.

Tactical Plan: Tactical plan is the plan which is concerned with the integration of various organizational units and
ensures implementation of strategic plans on day to day basis. It involves how the resources of an organization should
be used in order to achieve the strategic goals. The tactical plan is also known as coordinative or functional plan.

Strategic Plan: Strategic plan is the plan which is formulated by the top level management for a long period of time
of five years or more. They decide the major goals and policies to achieve the goals. It takes in a note of all the exter-
nal factors and risks involved and makes a long-term policy of the organization. It involves the determination of
strengths and weaknesses, external risks, mission, and control system to implement plans.

ON THE BASIS OF MANAGERIAL LEVEL:-

Top level Plans : Plans which are formulated by general managers and directors are called top-level plans. Under
these plans, the objectives, budget, policies etc. for the whole organization are laid down. These plans are mostly long
term plans.

Middle -level Plans : Managerial hierarchy at the middle level includes the departmental managers. A corporate has
many departments like purchase department, sales department, finance department, personnel department etc. The
plans formulated by the departmental managers are called middle-level plans.

Lower level Plans : These plans are prepared by the foreman or the supervisors. They take the existence of the actual
workplace and the problems connected with it. They are formulated for a short period of time and called short term
plans.

ON THE BASIS OF TIME:-

Long Term Plan: Long-term plan is the long-term process that business owners use to reach their business mission
and vision. It determines the path for business owners to reach their goals. It also reinforces and makes corrections to
the goals as the plan progresses.

Intermediate Plan: Intermediate planning covers 6 months to 2 years. It outlines how the strategic plan will be pur-
sued. In business, intermediate plans are most often used for campaigns.

Short-term Plan: Short-term plan involves pans for a few weeks or at most a year. It allocates resources for the day-
to-day business development and management within the strategic plan. Short-term plans outline objectives necessary
to meet intermediate plans and the strategic planning process.

ON THE BASIS OF USE:-

Single Plan: These plans are connected with some special problems. These plans end the moment of the problems to
be solved. They are not used, once after their use. They are further re-created whenever required.

Standing Plan : These plans are formulated once and they are repeatedly used. These plans continuously guide the
managers. That is why it is said that a standing plan is a standing guide to solving the problems. These plans include
mission, policies, objective, rules and strategy

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 MANAGEMENT BY OBJECTIVES – MBO’s

According to George Odiome, “MBO is a process whereby superior and subordinate managers of an Organization
jointly define its common goals, define each individual's major areas of responsibility in terms Of results expected of
him and use these measures as guides for operating the unit and assessing the contribution of each of its members."

According to John Humble, “MBO is a dynamic system which seeks to integrate the company's needs to clarify and
achieve its profits and growth goals with the manager's need to contribute and develop himself. It is a demanding and
rewarding style of managing a business."

FEATURES OF MANAGEMENT BY OBJECTIVES MBO :-

Superior -subordinate participation : MBO requires the superior and the subordinate to recognize that the develop-
ment of objectives is a joint project/activity. They must be jointly agree and write out their duties and areas of respon-
sibility in their respective jobs.

Joint goal-setting : MBO emphasizes joint goal-setting that are tangible, verifiable and measurable. The subordinate
in consultation with his superior sets his own short-term goals. However, it is examined both by the superior and the
subordinate that goals are realistic and attainable.

Makes way to attain maximum result : MBO is a systematic and rational technique that allows management to at-
tain maximum results from available resources by focusing on attainable goals. It permits lot of freedom to subordi-
nate to make creative decisions on his own. This motivates subordinates and ensures good performance from them.

Support from superior : When the subordinate makes efforts to achieve his goals, superior's helping hand is always
available. The superior acts as a coach and provides his valuable advice and guidance to the subordinate. This is how
MBO facilitates effective communication between superior and subordinates for achieving the objectives/targets set.

STEPS INVOLVED IN MBO’s :-

GOAL SETTING : The first phase in the MBO process is to define the organizational objectives. These are deter-
mined by the top management and usually in consultation with other managers. Once these goals are established, they
should be made known to all the members. In setting objectives, it is necessary to identify "Key-Result Areas' (KRA).

MANAGER-SUBORDINATE INVOLVEMENT : After the organizational goals are defined, the subordinates
work with the managers to determine their individual goals. In this way, everyone gets involved in the goal setting.
Matching goals and resources: Management must ensure that the subordinates are provided with necessary tools and
materials to achieve these goals. Allocation of resources should also be done in consultation with the subordinates.

IMPLEMENTATION OF PLAN : After objectives are established and resources are allocated, the subordinates can
implement the plan. If any guidance or clarification is required, they can contact their superiors.

REVIEW AND APPRAISAL OF PERFORMANCE : This step involves periodic review of progress between
manager and the subordinates. Such reviews would determine if the progress is satisfactory or the subordinate is fac-
ing some problems. Performance appraisal at these reviews should be conducted, based on fair and measurable stand-
ards.

ADVANTAGES OF MBO’s :-

DEVELOPS RESULT-ORIENTED PHILOSOPHY: MBO is a result-oriented philosophy. It does not favor man-
agement by crisis. Managers are expected to develop specific individual and group goals, develop appropriate action-

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plans, properly allocate resources and establish control standards. It provides opportunities and motivation to staff to
develop and make positive contribution in achieving the goals of an Organization.

FORMULATION OF DEARER GOALS : Goal-setting is typically an annual feature. MBO produces goals that
identify desired/expected results. Goals are made verifiable and measurable which encourage high level of perfor-
mance. They highlight problem areas and are limited in number. The meeting is of minds between the superior and the
subordinates. Participation encourages commitment. This facilitates rapid progress of an Organization.

FACILITATES OBJECTIVE APPRAISAL : NIBO provides a basis for evaluating a person's performance since
goals are jointly set by superior and subordinates. The individual is given adequate freedom to appraise his own activi-
ties. Individuals are trained to exercise discipline and self control. Management by self-control replaces management
by domination in the MBO process. Appraisal becomes more objective and impartial.

RAISES EMPLOYEE MORALE : Participative decision-making and two-way communication encourage the sub-
ordinate to communicate freely and honestly. Participation, clearer goals and improved communication will go a long
way in improving morale of employees.

FACILITATES EFFECTIVE PLANNING : MBO programmes sharpen the planning process in an Organization. It
compels managers to think of planning by results. Developing action plans, providing resources for goal attainment
and discussing and removing obstacles demand careful planning. In brief, MBO provides better management and bet-
ter results.

ACTS AS MOTIVATIONAL FORCE : MBO gives an individual or group, opportunity to use imagination and cre-
ativity to accomplish the mission. Managers devote time for planning results. Both appraiser and appraise are commit-
ted to the same objective. Since MBO aims at providing clear targets and their order of priority, employees are moti-
vated.

FACILITATES EFFECTIVE CONTROL : Continuous monitoring is an essential feature of MBO. This is useful
for achieving better results. Actual performance can be measured against the standards laid down for measurement of
performance and deviations are corrected in time. A clear set of verifiable goals provides an outstanding guarantee for
exercising better control.

FACILITATES PERSONAL LEADERSHIP : MBO helps individual manager to develop personal leadership and
skills useful for efficient management of activities of a business unit. Such a manager enjoys better chances to climb
promotional ladder than a non-MBO type.

LIMITATIONS OF MANAGEMENT BY OBJECTIVES MBO :-

TIME-CONSUMING : MBO is time-consuming process. Objectives, at all levels of the Organization, are set care-
fully after considering pros and cons which consumes lot of time. The superiors are required to hold frequent meetings
in order to acquaint subordinates with the new system. The formal, periodic progress and final review sessions also
consume time.

REWARD-PUNISHMENT APPROACH : MBO is pressure-oriented programme. It is based on reward-punishment

psychology. It tries to indiscriminately force improvement on all employees. At times, it may penalize the people
whose performance remains below the goal. This puts mental pressure on staff. Reward is provided only for superior
performance.

INCREASES PAPER-WORK : MBO programmes introduce ocean of paper-work such as training manuals, news-
letters, instruction booklets, questionnaires, performance data and report into the Organization. Managers need infor-
mation feedback, in order to know what is exactly going on in the Organization.

CREATES ORGANIZATIONAL PROBLEMS : MBO is far from a panacea for all organizational problems. Often
MBO creates more problems than it can solve. An incident of tug-of-war is not uncommon. The subordinates try to set

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the lowest possible targets and superior the highest. When objectives cannot be restricted in number, it leads to ob-
scure priorities and creates a sense of fear among subordinates. Added to this, the programme is used as a 'whip' to
control employee performance.

DEVELOPS CONFLICTING OBJECTIVES : Sometimes, an individual's goal may come in conflict with those of
another e.g., marketing manager's goal for high sales turnover may find no support from the production manager's goal
for production with least cost. Under such circumstances, individuals follow paths that are best in their own interest
but which are detrimental to the company.

PROBLEM OF CO-ORDINATION : Considerable difficulties may be encountered while coordinating objectives of

the Organization with those of the individual and the department. Managers may face problems of measuring objec-
tives when the objectives are not clear and realistic.

LACKS DURABILITY : The first few go-around of MBO are motivating. Later it tends to become old hat. The
marginal benefits often decrease with each cycle. Moreover, the programme is deceptively simple. New opportunities
are lost because individuals adhere too rigidly to established goals.

PROBLEMS RELATED TO GOAL-SETTING : MBO can function successfully provided measurable objectives
are jointly set and it is agreed upon by all. Problems arise when: (a) verifiable goals are difficult to set (b) goals are
inflexible and rigid (c) goals tend to take precedence over the people who use it (d) greater emphasis on quantifiable
and easily measurable results instead of important results and (e) over-emphasis on short-term goals at the cost of
long-term goals.

LACK OF APPRECIATION : Lack of appreciation of MBO is observed at different levels of the Organization. This
may be due to the failure of the top management to communicate the philosophy of MBO to entire staff and all de-
partments. Similarly, managers may not delegate adequately to their subordinates or managers may not motivate their
subordinates properly. This creates new difficulties in the execution of MBO programme.

DECISION MAKING & ITS IMPORTANCE

According to George R.Terry "Decision-making is the selection, based on some criteria from two or more possible
alternatives”.

According to J.L. Massie "A decision can be defined as a course of action consciously chosen from available alterna-
tives for the purpose of the desired result"

According to Trewatha& Newport, "Decision-making involves the selection of a course of action from among two
or more possible alternatives in order to arrive at a solution for a given problem".

In other words, DECISION MAKING is the process of choosing a specific course of action from various alternatives
to solve the organizational problems or difficulties.

IMPORTANCE OF DECISION MAKING IN MANAGEMENT

1. Better Utilisation of Resources

Decision making helps to utilize the available resources for achieving the objectives of the Organization. The available
resources are the 6 M’s, i.e. Men, Money, Materials, Machines, Methods and Markets.

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2.Facing Problems and Challenges

Decision making helps the Organization to face and tackle new problems and challenges. Quick and correct decisions
help to solve problems and to accept new challenges.

3. Business Growth

Quick and correct decision making results in better utilization of the resources. It helps the Organization to face new
problems and challenges. It also helps to achieve its objectives. All this results in quick business growth. However,
wrong, slow or no decisions can result in losses and industrial sickness.

4. Achieving Objectives

Rational decisions help the Organization to achieve all its objectives quickly. This is because rational decisions are
made after analyzing and evaluating all the alternatives.

5.Increases Efficiency

Rational decisions help to increase efficiency. Efficiency is the relation between returns and cost. If the returns are
high and the cost is low, then there is efficiency and vice versa. Rational decisions result in higher returns at low cost.

6. Facilitate Innovation

Rational decisions facilitate innovation. This is because it helps to develop new ideas, new products, new process, etc.
This results in innovation. Innovation gives a competitive advantage to the Organization.

7. Motivates Employees

Rational decision results in motivation for the employees. This is because the employees are motivated to implement
rational decisions. When the rational decisions are implemented the Organization makes high profits. Therefore, it can
give financial and non-financial benefits to the employees.

PROCESS / STEPS OF DECISION MAKING – BY RICKY W. GRIFFIN

IDENTIFICATION OF PROBLEM : The initial stage of the decision-making process is to identify the exact prob-
lem. The problem may occur due to the gap between thinking and do the process. The reason of problems may be in-
ternal or external. Decision makers should identify the correct problems before taking any decision. It is not an easy
job or task. Therefore, he/she may use his own knowledge, skills, experience and collect information from internal and
external sources. It is believed that identification of the correct problem is almost half part of the decision-making pro-
cess.

ANALYSIS OF PROBLEM : After identification of the correct problem decision maker should analyze the problem
systematically and scientifically in terms of cost, time, legality, organizational resources, and short-term as well as the
long-term impact of the problem. While analyzing the problem he/she may use various financial, accounting and sta-
tistical tools or techniques.

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DEVELOPING AN ALTERNATIVE COURSE OF ACTION : As we know that a problem has multiple solutions.
Therefore, the decision maker should develop the various possible alternatives for a better decision. While developing
the alternative course of action he/she may use their own knowledge, skills, experiences and technical support from
the professional planner and experts as well.

EVALUATING ALTERNATIVE COURSE OF ACTION : After developing various possible alternatives, the de-
cision maker should evaluate all alternatives one by one for a better decision. In this step he/she should try to search
the answers to the following questions:

 Whether the alternative is feasible in terms of cost, time, legality and other organizational resources or not?
 Whether the alternative is satisfactory to solve the organizational problems or not ?
 Whether the features of alternatives are matched with the objectives of the business or not ?

SELECTING THE BEST ALTERNATIVE : After analyzing the various alternatives, the decision maker has to
select the best alternative among the various alternative by considering the short-term as well as long-term impact. For
this purpose, he/she may use his/her knowledge, skills and experiences. He/she may also concern with other stake-
holders for a better decision.

IMPLEMENTATION OF DECISION : After selecting the best alternative, the manager or superior should convert
decision into action. For this purpose, he/she should communicate with their subordinate and manage the various addi-
tional resources for the implementation of the organizational decision.

REVIEW OF DECISION : The last step of the decision-making process is to get response or feedback from other
stakeholders of the organization. If the response is positive then the decision-making process is successfully complet-
ed. If the response is negative then he/she must go through the first step to take a new organizational decision.

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 UNIT- III

--------------------------------------------------------------------------------------------------------------------------------------------
Syllabus– Nature of Organising, Different types of Organizational Structures, Authority-Responsibility, Relation-
ship, Organizational Climate & Culture, Reinventing Organizations.
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ORGANISING & ITS NATURE

According to Theo Haimann, "Organising is the process of defining and grouping the activities of the enterprise and
establishing the authority relationships among them."

According to Louis Allen, "Organising is the process of identifying and grouping the work to be performed, defining
and delegating responsibility and authority and establishing relationships for the purpose of enabling people to work
most effectively together in accomplishing objectives."

DIFFERENT TYPES OF ORGANIZATIONAL STRUCTURES

(A) CLASSICAL ORGANIZATIONAL FORMATS:

These formats view Organization “as a process of construction in which a great number of small work units are built
into jobs, departments, divisions and finally a whole institution.” — Keith Davis

I. Line Organization

In line Organization, decision-making power vests with top managers. They have the ultimate responsibility for at-
tainment of Organizational goals. Decisions are taken by superiors and communicated to subordinates who further
communicate them to their subordinates. In this way, information flows from top to bottom in a line.

This gives rise to line authority. The line authority is also known as direct operative authority; it is the right of superi-
ors to exercise authority over subordinates. Military Organization is a typical example of line authority where a single
head commands and issues orders. Managers in line authority are known as line managers. Flow of authority in a line
is depicted as follows:

Activities covered under line management vary with the nature of Organization. For a manufacturing company, the
production, finance and sales departments form line departments, and purchase, personnel, R&D and legal functions
constitute the staff departments.

In a legal consultancy firm or a Research and Development Organization, the legal functions and R & D departments
from the line departments. Also, while production department is a line department for manufacturing Organization,
purchase and accounts department form line departments for production department.

The line Organization chart for a manufacturing company appears as follows:

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II. Line and Staff Organization:

Organization which has both line and staff positions or authority is called line and staff Organization. While line au-
thority gets the work done by exercising direct authority, staff authority assists the line positions in doing their work.
Thus, line authority is directly related to getting the work done and staff is indirectly related to it.

Line and staff positions:

Line position is enjoyed by virtue of position in the Organizational hierarchy and staff position is enjoyed by virtue of
specialised knowledge and skills to deal with specific problem areas. Line manager is responsible for attainment of
Organizational goals through co-ordination of individual and Organizational activities.

In a small and simple group of people (Organizations), one person can achieve this objective but in large organiza-
tions, the complexities and problems increase and, therefore, one person cannot take the responsibility of achieving the
goals alone. In fact, he does not even have the skills to solve problems of all the functional areas..

Line managers exercise direct authority over subordinates and staff authority is auxiliary, advisory or supportive in
nature which helps line managers concentrate on important and strategic Organizational matters, besides smoothly
carrying out the line activities.

In the Organization chart, line authority is shown by simple lines and staff authority is shown by broken lines:

III. Functional Organization:

This form of Organization structure emerges as the Organization grows in size. New departments are added and de-
partmental activities become specialised. Specialisation creates sub- departments and it no longer remains feasible for

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top managers to control the activities of all the departments. Managers become specialised in their tasks and focus on
activities related to their departmental tasks for the entire Organization.

Functional authority is “the right that is delegated to an individual or a department to control specified processes, prac-
tices, policies, or other matters relating to activities undertaken by persons in other departments”. Authority over peo-
ple of other departments is exercised not only by the line managers but also by managers of other departments.

One person, thus, receives orders from two or more functional heads and the principle of unity of command is violat-
ed. The authority that functional managers exercise is known as functional authority and this Organization is called
functional Organization. Functional authority can be exercised by departmental managers (line managers) and staff
specialists.

Functional Authority on the Organization Chart:

Functional authority can be exercised in both line Organizations and line and staff Organizations. (The figure depicts
functional authority exercised by the department of finance. Similar authority can be exercised by other departments
also).

The manager of consumer goods receives orders not only from the General Manager, Production (line manager) but
also from General Managers of marketing, finance and personnel (functional managers).

The figure shows functional authority exercised by R & D manager (staff specialist) over different functional areas.
Similar authority can be exercised by accounting manager also.

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(B) MODERN OR CONTEMPORARY ORGANIZATIONAL FORMATS:

Classical formats of Organization support division of work, specialisation and departmentation. They ignore the im-
portance of horizontal relationships amongst people. Inter-relationships and social values is an important part of task
relationships which cannot be ignored while framing the Organization structure.

While basic design of the Organization structure comes from the classical format, modern formats emphasize on a
more flexible and environment-friendly structure. The popular forms of contemporary Organizational formats re pro-
ject Organization, matrix Organization, committee Organization and networking Organization.

These Organizational formats are explained below:

I. Project Organization:

Project Organization is structured to accomplish specific projects within specified constraints of time, money and
quality. A bridge, dam or fly-over are constructed as project Organizations. Once the objective is formed, work force
is gathered and authority-responsibility structure is designed by giving the project manager authority over the activi-
ties of group members.

Project manager can be the head of a functional department. General Manager of production department, for example,
can also be the project manager for a project. Responsibility of group members varies with structure of the Organiza-
tion, some remain attached with the project till its completion, while others leave and join the Organization. The pecu-
liar feature of this form of Organization is that once the project is over, the Organization is dissolved and group mem-
bers seek jobs on other projects.

Richard M. Hodgetts defines a project Organization as “the gathering of the best available talent to accomplish a spe-
cific and complex undertaking within time, cost and/or quality parameters, followed by the disbanding of the team
upon completion of the undertaking.”

According to John M. Stewart, a project team should be:

o Definable in terms of a specific goal,

o Unique and unfamiliar to the existing Organization,
o Complex with regard to interdependence of activities,
o Critical as regards probable gain or loss, and
o Temporary as regards the need of the Organization.

II. Matrix Organization:

Matrix Organization is a hybrid structure, a combination of functional and pure project structure. Group members of
the project are also accountable to their functional heads. Employees are assigned to the project by functional heads
till the completion of the project.

Employees, thus, have dual accountability in this form of Organization structure:

1. They are accountable to the functional heads in the vertical chain of command. The functional head is their line su-
perior.

2. They are accountable to the project manager who exercises project authority over them. This accountability is
shown by horizontal lines in the matrix Organization chart.

Every employee reports to two managers; one, the permanent manager with whom he is in line relationship and the
other, the project manager with whom he is in horizontal relationship. The basic principle of unity of command is vio-
lated in this type of Organization structure. This is also called a ‘multiple command system’.

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It is “an Organization structure that establishes dual channels of authority, performance, responsibility, evaluation and
control.”

According to Bartol and Martin, “a matrix structure is a type of departmentalisation that superimposes a horizontal set
of divisional reporting relationships onto a hierarchical functional structure”.

“It is an Organizational structure that assigns specialists from different functional departments to work on one or more
projects being led by project managers.”

III. Committee Organization:

‘One plus one makes eleven,’ or Two heads are better than one’ is the basis of making committees. Since top manag-
ers cannot deal with every problem, committees are formed which consist of people from different departments who
collectively arrive at solutions to the problems which have been brought to it. Committee is a group of members to
whom some matter is committed. It discusses only those matters which have been brought to it for deliberation within
strictly defined area of jurisdiction. It cannot take decisions on matters which have not been forwarded to it.

Committee is “a group of persons to whom, as a group, some matter is committed.” Committees are made in all types
of Organizations, whether business or non-business, like Government, schools, colleges, banks, financial institutions
etc. Committees can be made at any level of the Organization and its members can come from any functional area. A
person can also be a member of more than one committee at the same point of time.

The committee:

1. Can make final decision on the matter delegated to it, or

2. Cannot make or recommend a decision but only deliberate on the matter and submit the information for decision-
making to the managers.

IV. Networking Organization:

Network Organization is a structural arrangement that combines elements of function, product and geographic de-
signs, while relying on a network arrangement to link subsidiaries across the nation or the world. This Organizational
format helps the companies take advantage of economies of scale at the global level along with catering to local cus-
tomer demands.

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This structure links subsidiaries of a company that are spread worldwide. Some subsidiaries specialise in manufactur-
ing while others in sales. All of them are, however, linked with headquarters. Some are closely controlled by head-
quarters while others are more autonomous. The structure is, thus, a combination of geographic, functional and prod-
uct elements.

It is “a temporary network of independent companies — suppliers, customers, even erstwhile rivals — linked by in-
formation technology to share skills, costs and access to one another’s markets. It will have neither central office nor
Organization chart. It will have no hierarchy, no vertical integration.”

In a networking Organization, the firm develops relationships with suppliers, distributors and other business operators
who specialise in their areas (sub-units) to achieve efficiency in its business. These sub-units are close to the market
and, therefore, have better customer appeal regarding the local market. This specialisation is transferred by them to the
parent Organization.

A simple network Organization structure appears as follows:

Diagrammatic Representation of Network Organization Structure:

This Organization structure is complex and changes with changing locations of sub-units.

However, a typical network structure appears like this:

This network structure shows that an Indian company has operations spread over a number of countries and produces
single/multiple products through sub-units spread in different countries. Some of these units are controlled by the
headquarters in India while others have independent management.

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 AUTHORITY – RESPONSIBILITY RELATIONSHIP

According to Henri Fayol,"Authority is the right to give orders and the power to exact obedience."

According to Mooney and Reily,"Authority is the principle at the root of Organization and so important that it is im-
possible to conceive of an Organization at all unless some person or persons are in a position to require action of oth-
ers."

In other words, Authority is the right to carry out the assigned tasks (responsibilities). It is the power to issue direc-
tions, allocate resources, make decisions, command people etc. In simple terms Authority, is the right of a person to
give instructions to subordinates.

Types of Authority in Management

 Line Authority
 Staff Authority
 Functional Authority

1. Line Authority

The work of an employee is directed with the help of line authority. It takes the form of employer-employee relation-
ship that moves from top to bottom. Certain decisions are made by the line manager without consulting any other per-
son. In some cases line managers are differentiated from the staff managers by using the word “line”. The manager
whose functions are linked directly with the achievement of organizational objectives is called line manager in simpler
terms.

2. Staff Authority

Staff authority is possessed by the staff managers. The objectives of the organization determine the line & staff nature
of the functions of any manager. When the size of organization becomes larger & larger, the line mangers feel that
they cannot complete their jobs by the existing skills, experience & knowledge which are not updated accordingly.
Therefore staff authority is generated for the staff whose main purpose is to assist, support, advice & decrease the
work burden of the line managers.

3. Functional Authority

Functional authority that is also known as functional control, and is included in the area of line & staff aspects
of HRM as it is the special authority that is exercised by the personnel manager in coordinating the personnel activi-
ties. The HR manager here performs his functions as right arm of the supreme executive.

Difference between AUTHORITY & RESPONSIBILITY

BASIS FOR
AUTHORITY RESPONSIBILITY
COMPARISON

Meaning Authority refers to the power or right, Responsibility denotes duty or obliga-
attached to a particular job or designa- tion to undertake or accomplish a task
tion, to give orders, enforce rules, make successfully, assigned by the senior or
decisions and exact compliance. established by one's own commitment
or circumstances.

What is it? Legal right to issue orders. Corollary of authority.

Results from Formal positon in an organization Superior-subordinate relationship

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 BASIS FOR
AUTHORITY RESPONSIBILITY
COMPARISON

Task of manager Delegation of authority Assumption of responsibility

Requires Ability to give orders. Ability to follow orders.

Flow Downward Upward

Objective To make decisions and implement it. To execute duties, assigned by superior.

Duration Continues for long period. Ends, as soon as the task is accom-
plished.

RESPONSIBILITY

According to Davis, "Responsibility is an obligation of individual to perform assigned duties to the best of his ability
under the direction of his executive leader."

McFarland defines responsibility as "the duties and activities assigned to a position or an executive".

According to Theo Heimann- "Responsibility is the obligation of a subordinate to perform the duty or required by his
superior."

In other words, It is the obligation to carry out duties and achieve goals related to a position.

CHARACTERISTICS OF RESPONSIBILITY

 The essence of responsibility is the obligation of a subordinate to perform the duty assigned.
 It always originates from the superior-subordinate relationship.
 Normally, responsibility moves upwards, whereas authority flows downwards.
 Responsibility is in the form of a continuing obligation.
 Responsibility cannot be delegated.
 The person accepting responsibility is accountable for the performance of assigned duties.
 It is hard to conceive responsibility without authority.

FORMS OF RESPONSIBILITY

Responsibility can take two forms –

1. Operating Responsibility – It is the obligation of the person to perform the assigned tasks.
2. Ultimate Responsibility– It is the final obligation of the manager who ensures that the task is done efficiently
by the employees.

According, to Mc Farland, "Accountability is the obligation of an individual to report formally to his superior about
the work he has done to discharge the responsibility."

When authority is delegated to a subordinate, the person is accountable to the superior for performance in relation to
assigned duties. If the subordinate does a poor job, the superior cannot evade the responsibility by stating that poor
performance is the fault of the subordinate. A superior is normally responsible for all actions of groups under his su-

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pervision even if there are several layers down in the hierarchy. Simply stated, accountability means that the subordi-
nate should explain the factors responsible for non-performance or lack of performance.

AUTHORITY, RESPONSIBILITY AND ACCOUNTABILITY ARE INTER-RELATED

They need proper consideration while introducing delegation of authority within an Organization. In the process of
delegation, the superior transfers his duties/responsibilities to his subordinate and also give necessary authority for
performing the responsibilities assigned. At the same time, the superior is accountable for the performance of his sub-
ordinate.

ORGANIZATIONAL CLIMATE & CULTURE

ORGANIZATION CULTURE

The word culture has been derived from the latin word “COLORE” which means to build on, to cultivate, to foster.

There are many views on culture. One view of culture focuses on set of values attributes of a given group and the rela-
tion of the Individual to culture and individual acquisitions of those values & attributes.

Organization culture refers to the beliefs and principles of a particular organization. The culture followed by the or-
ganization has a deep impact on the employees and their relationship amongst themselves.

Organizational culture is a system of shared value and beliefs held by organizational members that unite the members
of an organization and determine how they act. Culture indicates a common perception held by the members of an or-
ganization and it governs how its members should behave.

Since the concept of organizational culture is frequently used to describe the internal environment of major corpora-
tions therefore it is also known as corporate culture. Every organization contains different values, rituals, symbols,
myths etc. These shared values are very important for the success of an organization because behaviour of individual
is greatly influenced by these values which ultimately influence the organizational effectiveness. Here we should note
that culture may have positive or negative impact on the effectiveness of organization depending upon the nature of
culture i.e. whether the culture supports the organizational goals or not.

FEATURES OF ORGANIZATIONAL CULTURE

1 Shared Meaning – It represents common understanding, opinions and perceptions held by Organizational members
developed over a period of time depending upon what people have observed and experienced in the Organization. It
arises out of implicit understanding of Organization’s values and beliefs.

2 Values and Norms- All the members have clear understanding of values and norms of the Organization. Everyone
knows what is to be done, when is to be done, and where it is to be done. These values arise through repeated behav-
iour practiced over a long period of time.

3 Behavioural Consistency – It promoted behavioural consistency amongst members. All behave in the same manner
reducing interpersonal conflicts and tensions.

4 Descriptive – It describes how how employees perceive an Organization and view it as an independent identity,
whether they like it or not.

5 Organizational Philosophy – It clearly defines Organizational philosophy in terms of policies regarding how to
deal with customers, employees and other parties.

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6 Clear Guidelines – Guidelines that governs Organizational functioning are clearly laid as rules which must be uni-
formly followed by all members.

7 Sense of Belongingness – Organization culture creates the sense of oneness and belongingness amongst members,
Members view themselves as a part of Organization.

FACTORS DETERMINING ORGANIZATIONAL CULTURE

“Culture= Values + Attitude + Behaviours”

There are 6 Factor affecting organizational culture:

a. Attitude of top management

b. Socialization of the organization
c. Adherence of important values
d. Selection and placement of employee
e. Performance evaluation and rewards
f. Recognition and promotion

1) Attitude of top Management : As we know top management run the business and manage the organization based
on certain set of values, philosophy, and policy. Their attitude and polices are getting reflected in the decisions they
take and systems and procedure, rules and regulations set for the employees.

2) Socialization of the organization : It is the procedure of new employee familiar with the culture of organization

A) Entrance – every new employee has their own values, belief and attitudes. Initially they match with organi
zational culture.
B) Struggle – here organization culture and individual culture enter into conflicts.
C) Change – here individual try to change and modify their culture to match with organization culture.

3) Adherence of important values : if organization has good values in it’s policy, such as, social welfare, human up
liftmen etc. then employee in that organization also develop that kind of values and put in their best by strictly follow-
ing rules and regulations.

4) Selection and placement of employee : Employee should be selected based on qualifications as well as by exam-
ining their values, belief and attitudes.

5) Performance evaluation and rewards : if employee efforts are properly evaluated and than suitably rewarded
then good conductive culture can prevail in the organization.

6) Recognition and Promotion :Recognizing good and exceptional performance and achievement of the employees
and then rewarding them through proper promotions.

ORGANIZATIONAL CLIMATE

According to Forehand and Gilmer, “Climate consists of a set of characteristics that describe an Organization, dis-
tinguish it from other Organizations are relatively enduring over time and influence the behaviour of people in it.”

According to Campbell, “Organizational climate can be defined as a set of attributes specific to a particular Organiza-
tion that may be induced from the way that Organization deals with its members and its environment. For the individ-
ual members within the Organization, climate takes the form of a set of attitudes and experiences which describe the
Organization in terms of both static characteristics (such as degree of autonomy) and behaviour outcome and out-
come- outcome contingencies.”

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 DIFFERENCE ORGANIZATIONCLIMATE :

1. Concept:

Organization climate reflects current atmosphere of the Organization in which the employees work. It provides oppor-
tunities to perform jobs according to the skills and a reward system which serves as motivators for employees (finan-
cial and non-financial).

Employees take advantage of the motivators to satisfy their needs. For example, financial motivators satisfy their
physiological needs and non-financial incentives satisfy psychological needs.

2. Evolution:

Organization climate evolves according to needs of the Organization to adapt to the internal and external environment.
It gives a feel of current atmosphere of the Organization. Organization culture evolves over years. An Organization
earns goodwill and reputation through its culture. It gives a feel of the Organization itself.

3. Manipulation:

Organization climate can be manipulated and changed according to needs of the environment (internal and external). It
can change according to behaviour of its employees. Organization culture cannot be easily manipulated and changed.
As it takes years to develop Organization culture, changes are introduced only if felt absolutely necessary. Members
have to change their behaviour according to Organization culture.

4. Focus:

Organization climate focuses on current work practices of the Organization. These practices are defined within the
values and norms of the Organization. However, the values and norms are defined by Organization culture.

5. Perspective:

Organization culture is a broader framework that determines its climate. Organization climate is short-term perspec-
tive that defines its day-to-day functioning.

Organization climate defines employees’ feelings about what the Organization is and Organization culture defines
what the Organization is as perceived by those who deal with the Organization.

A company known for its quality represents its culture and employer-employee relations in the company represents its
climate.

CHARACTERISTICS OF ORGANIZATIONAL CLIMATE

1. General Perception :

Organizational climate is a general expression of what the Organization is. It is the summary perception which people
have about the Organization. It conveys the impressions people have of the Organizational internal environment with-
in which they work.

2. Abstract and Intangible Concept :

Organizational climate is a qualitative concept. It is very difficult to explain the components of Organizational climate
in quantitative or measurable units.

3. Unique and District Identity :

Organizational climate gives a distinct identity to the Organization. It explains how one Organization is different from
other Organizations.

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4. Enduring Quality :

Organizational climate built up over a period of time. It represents a relatively enduring quality of the internal envi-
ronment that is experienced by the Organizational members.

5. Multi-Dimensional Concept :

Organizational climate is a multi- dimensional concept. The various dimensions of the Organizational climate are in-
dividual autonomy, authority structure, leadership style, pattern of communication, degree of conflicts and cooperation
etc.

DIMENSIONS OF ORGANIZATIONAL CLIMATE :

The important dimensions or components which collectively represent the climate of an Organization are as discussed
below :

1. Dominant Orientation :

Dominant orientation of the Organization is an important determinant of climate and it is the major concern of its
members. If the dominant orientation is to adhere to established rules and regulations, the climate is characterised by
control. If the orientation is to produce excellence the climate will be characterised by achievement.

2. Inter-Personal Relationships :

The interpersonal relationships in the Organizations are reflected in the way informal groups are formed and operated.
The informal groups may benefit the Organization also, but in some cases it may displace the goals of the Organiza-
tion.

3. Conflict Management :

In the Organization, there can always be inter-group as well as intra group conflicts. The Organizational climate will
depend upon how effectively these conflicts are managed. If they are managed effectively, there will be an atmosphere
of cooperation in the Organization. If they are not managed properly there will be an atmosphere of distrust and non-
cooperation.

4. Individual Autonomy :

If the individual employees are given sufficient freedom to work and exercises authority, it will result in efficiency in
operations. The autonomy will lighten the burden of higher level executives.

5. Organizational Control System :

The control system of the Organization can be either rigid or flexible. Rigid control will lead to impersonal or bureau-
cratic atmosphere in the Organization. There will be minimum scope for self regulation.

6. Organizational Structure :

The Organizational structure serves the basis of inter personal relations between superiors and subordinates. It clarifies
as to who is responsible to whom and who is to direct whom. If there is centralisation of authority, the participation in
decision making by the subordinates will be very less. On the other hand, if there is decentralisation of authority, there
will be an atmosphere of participative decision making.

7. Task Oriented or Relations Oriented Management :

The dominant style of managers will also affect the Organizational climate. Task oriented approach means that the
leadership style will be autocratic. The employees will have to show results or face the punishment. The employee
morale will be low in the long run.

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8. Rewards and Punishments :

The system of rewards and punishments is also an important component of Organizational climate if the reward sys-
tem is directly related to performance and productivity, there will be an atmosphere of competition among the em-
ployees.

9. Communication:

The communication system of the Organization will also affect the Organizational climate. The flow of information,
its direction, its dispersement and its type are all important determinants. Proper communication system means that the
subordinates are in a position to express their ideas, suggestions and reactions, otherwise they will feel frustrated.

10. Risk Taking:

How members respond to risks and whose help is sought in situations involving risks are important in any Organiza-
tion. If individuals feel free to try out new ideas without any fear they will not hesitate in taking risks. Such an atmos-
phere will be conducive to innovative ideas.

DIFFERENCE BETWEEN ORGANIZATION CULTURE AND ORGANIZATIONAL CLIMATE

ON THE BASIS OF ORGANIZATIONAL CULTURE ORGANIZATIONAL CLIMATE

Concept It evolves over a number of years. It reflects current atmosphere of the Organiza-
tion
Perspective It is broader framework that deter- It is short term that defines its day to day func-
mines Organization climate. tioning.
Evolution It evolves a number of years to earn It evolves according to needs of the Organiza-
goodwill and reputation. tion to adapt to current environmental forces.
Manipulation It cannot be easily changed and ma- It can be manipulated and changed according
nipulated. Changes are introduced if to the needs of the environment.
absolutely necessary.
Focus It Focuses on values and norms of the It focuses on current work practices of the Or-
Organization. ganization.

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 UNIT- IV

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Syllabus– Directing & Motivating, Leadership, Approaches & Leadership Styles, Communication Process,
Organizational Communication Channels, Barriers & Masseurs
----------------------------------------------------------------------------------------------------------------------------------------------

According to Pearce and Robinson, “Directing is a managerial function that involves the responsibility of managers
for communicating to others what their roles are in achieving the company plan.”

According to Terry and Franklin“Directing is getting all the members of the group to want and to strive to achieve
objectives of the enterprise and of the members because the members want to achieve these objectives.”

NATURE OF DIRECTING

1. Process of action :

Direction initiates action at top level of the Organization and flows down the hierarchy. It follows that subordinates
have to be directed by their superiors only.

2. On-going process :

Directing is not an intermittent function of management. It is a process of continuously guiding the behaviour of oth-
ers.

3. Not supported by rules :

Since the behaviour of people cannot be predicted through mathematical or statistical tools, the function of directing is
based on behavioural sciences. It is not supported by rules or regulations.

4. Directing is situational:

Managers influence the behaviour of employees according to situation. The directions change from situation to situa-
tion. Factors like environment, nature of workers, group behaviour, attitude towards work etc. affect directing.

5. Behavioural science :

Since directing deals with human behaviour, managers study different aspects of human psychology to understand
how to influence their behaviour.

6. Understand group behaviour :

No person can work alone. While working in the Organization, he becomes part of the informal groups (formed on the
basis of common interests of individuals). The behaviour of a person is different as an individual and as member of the
group. It is, therefore, essential that managers understand the nature of group behaviour in order to direct effectively.

7. Participative :

Direction initiates action on the part of employees. To ensure greater participation of workers in carrying out the Or-
ganizational activities, they should take part in the meetings to discuss various direction policies.

8. Pervasive :

Managers at all levels in all functional areas direct their subordinates. Top managers guide middle and lower level
managers who further direct supervisors and workers. It is performed at every level of management.

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 IMPORTANCE OF DIRECTING

1. Initiates action :

Direction initiates action that motivates people to convert the resources into productive outputs. It gives substance to
managerial functions of planning, organising, staffing and controlling. People learn to manage the resources in the
most effective way that results in their optimum utilisation.

2. Creates a sound work environment :

If directions are issued in consultation with employees (participative), it creates an environment of understanding
where people work to their maximum potential, willingly and enthusiastically to contribute towards Organizational
goals.

3. Develops managers :

Managers who are personally motivated to work can also direct others to work. Managers develop their skills and
competence to direct others to follow. If managers and employees work in harmony, it promotes skills of the employ-
ees and develops managers to assume responsibilities of higher levels in the Organization.

4. Behavioural satisfaction :

Since direction involves human behaviour and psychology, employees feel behaviourally satisfied and personally in-
spired to achieve Organizational goals.

5. Increase in productivity :

Personally satisfied employees contribute towards output and efficiency of the Organization.

Direction gets maximum out of subordinates by exploiting their potential and increasing their capabilities to work.

6. Achieves coordination :

Directing aims at continuous supervision of activities. It achieves coordination by ensuring that people work towards
planned activities in a coordinated manner. It integrates the actions of employees that increases their understanding of
mutual interdependence and their collective effort to achieve the Organizational goals. It also helps to harmonies indi-
vidual goals with Organizational goals.

7. Facilitates control :

Coordination brings actual performance in conformity with planned performance. The controlling function is, thus,
facilitated through effective direction.

8. Facilitates change :

Direction helps in introducing change in the Organization structure and adapting the Organization structure to external
environment. Organization operates in the society as an open system and has to accept social changes for its survival
and growth. People are not easily receptive to changes. Direction helps in changing attitude of people towards change
and accepts it as a way of life.

9. Facilitates growth :

Organization open to change is responsive to growth. Direction harmonizes physical, financial and human resources,
balances various parts of the Organization and creates commitment amongst people to raise their standards of perfor-
mance.

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 PRINCIPLES OF DIRECTING

1. Appropriate selection of employees :

Direction is related to the function of staffing. While selecting employees, managers should ensure that people can
adjust to the Organization structure and willingly carry out the directions of the superiors. Chances of demotions and
separations should be reduced to as low as possible. It is easy to direct people who are committed to their task and see
Organizational goals as a means to achieve the individual goals.

2. Participation :

Since direction influences the behaviour of others, managers follow the principle of participation (while preparing the
directives). If those who carry out the directions participate in making policies regarded directions (motivational plans,
leadership styles, communication pattern), direction function will be able to accomplish its purpose effectively.

3. Communication :

To make direction effective, managers ensure two-way flow of communication between them and the employees. Em-
ployees should be allowed to express their feelings to superiors. An effective system of communication ensures pass-
ing of orders and instructions by superiors which are smoothly carried by subordinates and expressing problems and
grievances by subordinates to superiors which are solved by the superiors. Direction function aims at maximising the
interest of not only self but also others in the Organization.

4. Counselling and guidance :

When employees face problems in carrying out their tasks, managers provide them the necessary counselling and
guidance. This makes direction effective as employees can approach the superiors for counselling whenever required.
It is important that subordinates carry out the instructions the way they are intended by the superiors. There should be
complete understanding of communication between the superiors and subordinates. Doubts and queries of subordi-
nates should be cleared by superiors through proper guidance and counselling.

5. Unity of command :

The basic principle that makes direction effective is one boss for one subordinate i.e., all directions, orders and in-
structions should come from one boss. If subordinate receives instructions from more than one superior, he may not be
able to carry out the instructions of any of them. This will create confusion and conflicts to the dissatisfaction of both,
the superiors and subordinates.

6. Unity of direction :

One plan or related set of activities should have one head. All activities related to marketing must be headed by the
marketing manager and those related to personnel should be headed by the personnel manager. This avoids duplication
of actions and instructions and results in optimum use of scarce resources.

7. Synthesis of conflicting objectives :

Every group of people, whether owners, managers, or workers has personal interest as supreme while carrying out the
Organizational activities. This can lead to conflicting interests which may hamper the Organizational growth. Effec-
tive directions, motivation, guidance and counselling make people understand that their goals are subordinate to Or-
ganizational goals.

8. Direct supervision:Direct supervision of employees helps them know deviations in their performance and ways to
remove them. This also maintains direct contact between superiors and subordinates and increases interest in their
work and confidence and loyalty in their supervisors.

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9. Contribution:

Direction aims at getting maximum contribution from employees by exploiting their talent to the best. If employees
have the potential to contribute more than their present performance, direction helps in enhancing the contribution to-
wards Organizational objectives.

10. Use of informal Organization:

Though directions are issued in a formal Organization structure, managers should make use of informal Organization
also to speed up the process of direction. Information travels faster amongst informal groups and directions can be
effectively carried out because people can freely interact with each other.

11. Follow-up:

Managers should receive constant feedback on their directions to know whether or not employees are working accord-
ing to their directions. If employees have problems, they should solve their problems and if need arises, even revise
the directions.

COMPONENTS OF DIRECTING

Every person in the hierarchy directs his subordinates and receives directions from superiors.The process of direction,
thus, flows from top to bottom. Direction does not merely involve issuing orders and instructions. It is the process of
inspiring people through active interaction and, thus, includes three important elements -

1. Motivation :

Motivation is the force that drives a person to action. In the context of business, it means inspiring workers to perform
tasks that lead to goal accomplishment. Subordinates follow instructions, if they are able and willing to do so. Motiva-
tion creates willingness to perform tasks that lead to accomplishment of goals.

2. Leadership :

People are guided to contribute to Organizational goals with zeal and confidence. “Zeal is ardour, earnestness and in-
tensity in the execution of work; confidence reflects experience and technical ability.” The ability of people to influ-
ence the behaviour of others is known as leadership. Leaders exploit human potential and transform it into output.

3. Communication :

Communication is exchange of ideas, messages and information between two or more persons, through a medium, in a
manner that the sender and receiver understand the message in the common sense, that is, develop common under-
standing of the message.

MOTIVATION

According to Gibson– “ Motivation may be defined as state of individuals perspective which represents the strength
of his or her propensity to exert effort towards some particular behaviour.”

According to Dubrin- “Motivation refers to expenditure of efforts towards a goal”

According to Steers and Porters– “Motivation is the force that energises behaviour, gives direction to behaviour and
underlies the tendency to persist.”

According to William G. Scout“Motivation means a process of stimulating people to action to accomplish desired
goals”.

According to Mc Farland“Motivation refers to the way in which urges, drives, desires, aspirations, strivings or needs
direct, control and explain the behaviour of human beings.”

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 TYPES OF MOTIVATION

According to Burack and Smith“An incentive scheme is a plan or programme to motivate individuals for good per-
formance. An incentive is most frequently built on monetary rewards (incentive pay or a monetary bonus) but may
also include a variety of non-monetary rewards and prizes.”

In the narrow sense, incentives include only monetary rewards. In the Organizational context, incentives are used in
both monetary and non-monetary terms. Motivation reflects wants and desires; motivators are the rewards that satisfy
these wants. Motivators change need perception of employees and direct their behaviour towards Organizational
goals.

THE CARROT AND STICK APPROACH :

The ‘CARROT’refers to rewards. Rewards may be financial or non-financial.

Conversely, the ‘STICK’refers to penalties and punishments. The fear of loss of job, transfer to the other office, de-
motion, cut in salary and other disincentives act as strong motivators that influence behaviour in the desired direction.
Use of this approach is regulated as follows:

 Rewards are for good performance.

 Penalties are for poor performance.
 Penalties should be used in extreme cases. They should not act as deterrents for good performance.
 Penalties should convert poor performance into positive performance.
 Rewards and penalties should be used together. A judicious mix of rewards and penalties can have positive ef-
fect on motivation of employees.

1. FINANCIAL MOTIVATORS :

Financial rewards are in the form of money. Money has great value in satisfying numerous needs of a person. Money
plays important role in the lives of people. At the foremost, their primary or physiological needs can be satisfied
through money. To some extent, even the higher-order needs of ego, esteem and recognition are satisfied through
money.

 They are normally used to satisfy employees’ lower-order needs.

 They are generally used to satisfy needs of employees working at lower-levels of management.
 They are tangible and directly influence individual and Organizational performance.

Cost of additional efforts > monetary rewards = motivators can be non-financial in nature
Cost of additional efforts < monetary rewards = motivators are usually financial

2. NON-FINANCIAL MOTIVATORS:

The simple motivational tools of early years which focus on only financial benefits prove to be an ineffective method
of motivation beyond physiological and safety needs because of the unique aspects of an employee’s job. The non-
financial incentives become an important component of the motivation mix of a company.

(i) Goodwill:Employees of a reputed firm feel motivated to contribute towards its goals and plans.

(ii) Work environment:A healthy and friendly environment where managers and employees work as a team is moti-
vating for workers to contribute towards Organizational goals.

(iii) Participation:Managers should encourage participation of subordinates in Organizational matters. Though the
ultimate decision-making power vests with the managers, participation of those who are directly affected by the deci-
sions of managers promotes loyalty and commitment amongst employees towards Organizational goals.

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(iv) Quality of working life:Improvement in the quality of life through job enlargement and job enrichment can be
motivating for employees to positively contribute towards Organizational productivity.

(v) Setting of goals:If employees are allowed to set their goals, they will be motivated to attain them. Goal-setting is a
non-financial motivator that motivates and guides human behaviour.

(vi) Challenging jobs:Allowing workers (with higher-order needs) to take challenging and innovative projects moti-
vates them to perform their jobs faster and better.

(vii) Development of individuals:Managers should allow subordinates to use imagination and creativity in their area
of expertise and convert their weaknesses into strengths. Subordinates who exploit opportunities for personal growth
contribute towards Organizational growth also.

(viii) Effective feedback system:An effective and quick system of feedback enables employees to compare their per-
formance with the targeted performance. This motivates them to correct deviations and avoid their recurrence in fu-
ture.

(ix) Promotions:It is human psychology to improve his status and be different from others. People aspire for higher
positions. Opportunities for promotion to higher posts offer strong motivation to people. Though promotions depend
on prosperity and policies of the company, normally, promotions honour the internal people who are able and experi-
enced.

IMPORTANCE OF MOTIVATION

1. Helps in Satisfying Needs of the Employees :

Motivation helps in satisfying the needs of the employees. Thus, they are inspired to contribute their maximum efforts
for achieving Organizational goals. A satisfied employee can always turnout expected performance.

2. Changes the Negative Attitude to Positive Attitude :

Motivation changes the negative attitude of employee to positive attitude for the attainment of Organizational goals.
For example, if a worker is not rewarded properly he may develop negative attitude towards his work. By giving suit-
able reward, positive encouragement and praise, his negative attitude can be changed into positive one.

3. Reduces Labour Turnover :

Good motivation helps in retaining the talented employees in the Organization. It reduces the rate of labour turnover
and hence saves the cost of new recruitment and training.

4. Increase in efficiency :

Through sound motivational system, the rate of absenteeism in an Organization is reduced. Generally in an Organiza-
tion, the workers are absent due to bad working conditions, poor relations with supervisor or colleagues, inadequate
rewards etc. All these deficiencies are covered by motivation.

5. Helps in Introducing Changes :

Through motivation, new techniques etc. can easily be introduced in an Organization without much resistance from
the employees. Motivated employees know that such changes will bring in additional reward to them too.

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 LEADERSHIP

According to HAROLD KOONTZ"Leadership is the art of influencing people so that they will strive willingly and
enthusiastically towards the achievement of group goals."

According to FRED LUTHANS "The behaviour of a leader influences the work performance and satisfaction of his
subordinates"

According to STOGDILL "Leadership is the situation and maintenance of structure in expectation and interaction"

ROLES OF A LEADER IN AN ORGANIZATION

Required at all levels- Leadership is a function which is important at all levels of management. In the top level, it is
important for getting co-operation in formulation of plans and policies. In the middle and lower level, it is required for
interpretation and execution of plans and programmes framed by the top management. Leadership can be exercised
through guidance and counselling of the subordinates at the time of execution of plans.

Representative of the organization- A leader, i.e., a manager is said to be the representative of the enterprise. He has
to represent the concern at seminars, conferences, general meetings, etc. His role is to communicate the rationale of
the enterprise to outside public. He is also representative of the own department which he leads.

Integrates and reconciles the personal goals with organizational goals- A leader through leadership traits helps in
reconciling/ integrating the personal goals of the employees with the organizational goals. He is trying to co-ordinate
the efforts of people towards a common purpose and thereby achieves objectives. This can be done only if he can in-
fluence and get willing co-operation and urge to accomplish the objectives.

He solicits support- A leader is a manager and besides that he is a person who entertains and invites support and co-
operation of subordinates. This he can do by his personality, intelligence, maturity and experience which can provide
him positive result. In this regard, a leader has to invite suggestions and if possible implement them into plans and
programmes of enterprise. This way, he can solicit full support of employees which results in willingness to work and
thereby effectiveness in running of a concern.

As a friend, philosopher and guide- A leader must possess the three dimensional traits in him. He can be a friend by
sharing the feelings, opinions and desires with the employees. He can be a philosopher by utilizing his intelligence and
experience and thereby guiding the employees as and when time requires. He can be a guide by supervising and com-
municating the employees the plans and policies of top management and secure their co-operation to achieve the goals
of a concern. At times he can also play the role of a counsellor by counselling and a problem-solving approach. He can
listen to the problems of the employees and try to solve them.

QUALITIES OF A LEADER

A leader has got multidimensional traits in him which makes him appealing and effective in behaviour. The following
are the requisites to be present in a good leader:

Physical appearance - A leader must have a pleasing appearance. Physique and health are very important for a good
leader.

Vision and foresight- A leader cannot maintain influence unless he exhibits that he is forward looking. He has to vis-
ualize situations and thereby has to frame logical programmes.

Intelligence - A leader should be intelligent enough to examine problems and difficult situations. He should be analyt-
ical who weighs pros and cons and then summarizes the situation. Therefore, a positive bent of mind and mature out-
look is very important.

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Communicative skills - A leader must be able to communicate the policies and procedures clearly, precisely and ef-
fectively. This can be helpful in persuasion and stimulation.

Objective - A leader has to be having a fair outlook which is free from bias and which does not reflects his willing-
ness towards a particular individual. He should develop his own opinion and should base his judgement on facts and
logic.

Knowledge of work - A leader should be very precisely knowing the nature of work of his subordinates because it is
then he can win the trust and confidence of his subordinates.

Sense of responsibility - Responsibility and accountability towards an individual’s work is very important to bring a
sense of influence. A leader must have a sense of responsibility towards organizational goals because only then he can
get maximum of capabilities exploited in a real sense. For this, he has to motivate himself and arouse and urge to give
best of his abilities. Only then he can motivate the subordinates to the best.

Self-confidence and will-power - Confidence in himself is important to earn the confidence of the subordinates. He
should be trustworthy and should handle the situations with full will power.

Humanist - This trait to be present in a leader is essential because he deals with human beings and is in personal con-
tact with them. He has to handle the personal problems of his subordinates with great care and attention. Therefore,
treating the human beings on humanitarian grounds is essential for building a congenial environment.

Empathy - It is an old adage “Stepping into the shoes of others”. This is very important because fair judgement and
objectivity comes only then. A leader should understand the problems and complaints of employees and should also
have a complete view of the needs and aspirations of the employees. This helps in improving human relations and per-
sonal contacts with the employees.

IMPORTANCE OF LEADERSHIP

Leadership is an important function of management which helps to maximize efficiency and to achieve organizational
goals. The following points justify the importance of leadership in a concern.

Initiates action- Leader is a person who starts the work by communicating the policies and plans to the subordinates
from where the work actually starts.

Motivation- A leader proves to be playing an incentive role in the concern’s working. He motivates the employees
with economic and non-economic rewards and thereby gets the work from the subordinates.

Providing guidance- A leader has to not only supervise but also play a guiding role for the subordinates. Guidance
here means instructing the subordinates the way they have to perform their work effectively and efficiently.

Creating confidence- Confidence is an important factor which can be achieved through expressing the work efforts to
the subordinates, explaining them clearly their role and giving them guidelines to achieve the goals effectively. It is
also important to hear the employees with regards to their complaints and problems.

Building morale- Morale denotes willing co-operation of the employees towards their work and getting them into
confidence and winning their trust. A leader can be a morale booster by achieving full co-operation so that they per-
form with best of their abilities as they work to achieve goals.

Builds work environment- Management is getting things done from people. An efficient work environment helps in
sound and stable growth. Therefore, human relations should be kept into mind by a leader. He should have personal
contacts with employees and should listen to their problems and solve them. He should treat employees on humanitar-
ian terms.

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Co-ordination- Co-ordination can be achieved through reconciling personal interests with organizational goals. This
synchronization can be achieved through proper and effective co-ordination which should be primary motive of a
leader.

LEADERSHIP STYLES

The Leadership Styles are the behavioural patterns that a leader adopt to influence the behaviour of his followers, i.e.
the way he gives directions to his subordinates and motivates them to accomplish the given objectives.

The leadership styles can either be classified on the basis of behavioural approach or situational approach. These ap-
proaches are comprised of several theories and models which are explained below:

(A) BASED ON BEHAVIORAL APPROACH

Power Orientation : The power orientation refers to the “degree of authority” that a leader adopts to influence the
behaviour of his subordinates. Based on this, the leadership styles can be further classified as:

 Autocratic / Authoritative Leadership

 Democratic Style / Participative Leadership
 Free Rein / Laissez-Faire

1. Autocratic or Authoritative Style:

It is also known as leader centered style. Under this style of leadership there is complete centralisation of authority in
the leader i.e., authority is centered in the leader himself He has all the powers to take decisions. He designs the work-
load of his employees and exercise tight control over them. The subordinates are bound to follow his order and direc-
tions.

Advantages

 Autocratic leadership style permits quick decision-making.

 It provides strong motivation and satisfaction to the leaders who dictate terms.
 This style may yield better results when great speed is required.

Disadvantages

 It leads to frustration, low moral and conflict among subordinates,

 Subordinates tend to shirk responsibility and initiative.

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2. Democratic Style:

Under this style, a leader decentralises and delegates high authority to his subordinates. He makes a final decision only
after consultation with the subordinates. Two way communication channel is used. While delegating a lot of authori-
ties to subordinates, he defines the limits within which people can function. Democratic leaders have a high concern
for both people and work.

Advantages

 Exchange of ideas among subordinates and leader improves job satisfaction and morale of the subordinates.
 Human values get their due recognition which develops positive attitude and reduces resistance to change.
 Labour absenteeism and labour turnover are reduced.
 The quality of decision is improved.

Disadvantages

 Democratic style of leadership is time consuming and may result in delays in decision-making.
 It is less effective if participation from the subordinates is for name sake.
 Consulting others while making decisions go against the capability of the leader to take decisions.


3. Free Rein or Laissez Fair style:

Under this style, a manager gives complete freedom to his subordinates. The entire decision-making authority is en-
trusted to them. There is least intervention by the leader and so the group operates entirely on its own. There is free
flow of communication. In this style manager does not use power but maintains contact with them. Subordinates have
to exercise self - control. This style helps subordinates to develop independent personality.

Advantages

 Positive effect on job satisfaction and moral of subordinates.

 It gives chance to take initiative to the subordinates.
 Maximum possible scope for development of subordinates.

Disadvantages

 Under this style of leadership, there is no leadership at all.

 Subordinates do not get the guidance and support of the leader.
 Subordinates may move in different directions and may work at cross purpose which may create problem for
the Organization.

Free rein style of leadership may be appropriate when the subordinates are well trained, highly knowledgeable, self-
motivated and ready to assume responsibility.

Leadership as a continuum : This model is given by Tannenbaum and Schmidt, who believed that there are several
leadership styles that range between two extremes of autocratic and free-rein, which are shown below:

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Employee-Production Orientation : Several types of research were conducted to study the leadership behaviour that
gets affected by the several characteristics that are related to each other. It was found that employee orientation and
production orientation play an important role in determining the leadership style. The employee orientation is based on
the premise that an employee is an important part of the group and is in parallel to the democratic leadership style.
Whereas the production Orientation focuses on the production and technical aspects of the job and the employees are
considered as the tools for accomplishing the jobs. Thus, the production orientation is parallel to the autocratic leader-
ship style.

Likert’s Management System: Rensis Likert along with his associates studied the patterns and behaviour of manag-
ers to identify the leadership styles and defined four systems of management. These four systems are: Exploitative
Authoritative, Benevolent Authoritative, consultative system and participative system.

Managerial Grid : The managerial grid is the tool designed by Blake and Mouton to determine the leadership style.
According to them, the leadership style gets influenced by both the task-oriented and relation-oriented behaviour in
varying degrees.

Three Dimensional Grid: The three-dimensional grid is also called as a 3-D leadership model given by W.J. Reddin.
Reddin included the effectiveness dimension along with the task-oriented and relationship-oriented dimensions to
study how a leader behaves in a given situation and a specific environment. To know more about this grid, click on the
link below:

(B) BASED ON SITUATIONAL APPROACH

Fiedler’s Contingency Model : This theory is given by Fred Fiedler, who, along with his associates identified the
situational variables and their relationship to determine the leadership styles. Thus, this model is comprised of three
elements, leadership styles, situational variables and the interrelationship between these two.

Hursey and Blanchard’s Situational Model : According to this model, the leader has to adopt the leadership style
that matches up with the subordinate’s maturity i.e. his willingness to direct his behaviour towards the goal.

Path-Goal Model: The Path-Goal Model is given by Robert House, who, along with his associates tried to predict the
effectiveness of leadership styles in varied situations. He believed that the foremost function of any leader is to define
the goals to the subordinates clearly and assist them in finding the best path to accomplish that goal.

Thus, a manager behaviour and the situational demands give rise to several leadership styles as discussed above.

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 UNIT – V
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Syllabus– Process of Control and Control Types, Essentials of Effective Control, Co-ordination, Recent Trends and
Issues in Management
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CONTROL

According to Theo Haimann,“Controlling is the process of checking whether or not proper progress is being made
towards the objectives and goals and acting if necessary, to correct any deviation”.

According to Koontz &O’Donell“Controlling is the measurement & correction of performance activities of subordi-
nates in order to make sure that the enterprise objectives and plans desired to obtain them as being accomplished”.

In other words, It is a process of comparing the actual performance with the set standards of the company to ensure
that activities are performed according to the plans and if not then taking corrective action.

PROCESS OF CONTROLLING

1. Setting Performance Standards:

The first step in the process of controlling is concerned with setting performance standards. These standards are the
basis for measuring the actual performance. Thus, standards act as a lighthouse that warns & guides the ships at sea.
Standards are the benchmarks towards which efforts of entire Organization are directed. These standards can be ex-
pressed both in quantitative and qualitative terms.

Examples of Quantitative Standards :

 Revenue to be earned.
 Units to be produced and sold.
 Cost to be incurred.
 Time to be spent in performing a task.
 Amount of inventories to be maintained etc.

Examples of Qualitative Standards :

 Improving motivation level of employees.

 Improving labour relations.
 Improving quality of products.
 Improving goodwill etc.

In order to facilitate easy comparison of actual performance with the standards, a manager should try to set these
standards in quantitative terms as far as possible. However, in case of qualitative standards, effort should be made to
define these standards in such a way that comparison becomes easily understandable.

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2. Measurement of Actual Performance :

Once the standards have been determined, the next step is to measure the actual performance. The various techniques
for measuring are sample checking, performance reports, personal observation etc. However, in order to facilitate easy
comparison, the performance should be measured on same basis that the standards have.

Following are some of the ways for measuring performance :

 Superior prepares a report regarding the performance of an employee.

 Various ratios like gross profit ratio, debtor turnover ratio, return on investment, current ratio etc. are calculat-
ed at periodic intervals to measure company’s performance.
 Progress made in areas like marketing can be measured by considering the number of units, increase in market
share etc.
 In small Organizations, each unit produced can be checked personally to ensure the quality standards.
 In large Organization, the technique of sample checking is used. Under this technique, some pieces are
checked at random for quality specifications.

3. Comparing Actual Performance with Standards :

This step involves comparing the actual performance with standards laid down in order to find the deviations. For ex-
ample, performance of a salesman in terms of unit sold in a week can be easily measured against the standard output
for the week.

4. Analysing Deviations :

Some deviations are possible in all the activities. However, the deviation in the important areas of business needs to be
corrected more urgently as compared to deviation in insignificant areas. Management should use critical point control
and management by exception in such areas.

(a) Critical Point Control

Since it is neither easy nor economical to check each and every activity in an Organization, the control should focus
on Key Result Areas (KRAs) which act as the critical points. The KRAs are very essential for the success of an Or-
ganization. Therefore, the entire Organization has to suffer if anything goes wrong at these points. For example, in a
manufacturing Organization, an increase of 7% in labour cost is more troublesome than an 18% increase in stationary
expenses.

(b) Management by Exception

Management by exception or control by exception is an important principle of management control. According to this
principle, an attempt to control everything results in controlling nothing. Thus only the important deviations which
exceed the prescribed limit should be brought to the notice of management. Thus, if plans provide for 3% increase in
labour cost, deviations beyond 3% alone should be brought to the notice of the management.

5. Taking Corrective Action :

The last step in the process of controlling involves taking corrective action. If the deviations are within acceptable lim-
its, no corrective measure is required. However, if the deviations exceed acceptable limits, they should be immediately
brought to the notice of the management for taking corrective measures, especially in the important areas.

Following are some of the examples of corrective action:

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 Causes of Deviation Corrective action to be taken

(i) Obsolete Machinery Technological Upgradation of machinery

(ii) Defective Process manufacturing pro- Change the specification standards for the
cess.

(iii) Defective Material used. Change the quality standards for material

(iv) Defective physical conditions of work. Improvement in physical conditions of work.

(v) Defective machinery. Repair the existing machine or purchase new machine if
it cannot be repaired.

TYPES OF CONTROL

There are three types of control in an Organization which are mentioned below –

 Feed-Forward
 Concurrent (Preventive)
 Feedback Controls.

Feed Forward Controls : are future-directed — they attempt to detect and anticipate problems or deviations from the
standards in advance of their occurrence (at various points throughout the processes). They are in-process controls and
are much more active, aggressive in nature, allowing corrective action to be taken in advance of the problem.

Feed forward controls thus anticipate problems and permit action to be taken before a problem actually arises.

Concurrent (Prevention) Control : Concurrent control, also called steering control because it allows people to act on
a process or activity while it is proceeding, not after it is proceeding, nor after it is completed. Corrections and adjust-
ments can be made as and when the need a rises. Such controls focus on establishing conditions that will make it diffi-
cult or impossible for deviations from norms to occur.

Feedback Controls :Feedback control is future-oriented. It is historical in nature and is also known as post-action
control. The implication is that the measured activity has already occurred, and it is impossible to go back and correct
performance to bring it up to standard. Rather, corrections must occur after the act.Such post-action controls focus on
the end results of the process.

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 FEATURES OF CONTROLLING FUNCTION

Following are the characteristics of controlling function of management-

1) Controlling is an end function- A function which comes once the performances are made in conformities
with plans.

2) Controlling is a pervasive function- which means it is performed by managers at all levels and in all type of
concerns.

3) Controlling is forward looking- because effective control is not possible without past being controlled. Con-
trolling always look to future so that follow-up can be made whenever required.

4) Controlling is a dynamic process- since controlling requires taking reviewable methods, changes have to be
made wherever possible.

5) Controlling is related with planning- Planning and Controlling are two inseparable functions of manage-
ment. Without planning, controlling is a meaningless exercise and without controlling, planning is useless.
Planning presupposes controlling and controlling succeeds planning.

ESSENTIALS OF EFFECTIVE CONTROL

1. Integration with Planning: First, to be effective, control systems should be integrated with planning. The first step
in planning is establishing goals and developing strategy. This leads to the second step in planning (developing action
plans and functional strategies). The standards set for control purposes also play a role in determining action plans and
functional strategies.

2. Flexibility:Another characteristic of an effective control system is flexibility. This means that the control system
itself must be flexible enough to accommodate change.

3. Acceptance by Members of the Organisation: The effectiveness and efficiency of controls largely depend on the
acceptance by the members of the organisation.Doing the right thing and doing things right both require people; con-
trols are unlikely to work unless people want them. If controls are to be accepted, it is important that people clearly
understand the purpose of the system and feel that they have an important stake in it, more so when new systems are
established.

4. Focus on Critical Activities: The proper activities should be controlled. When people recognise that certain specif-
ic areas will be monitored and compared to some standard, their behaviour is likely to be channelled toward the stand-
ards set.Critical control areas (points) include all the areas of an organisation’s operations that directly affect the suc-

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cess ofits key operations such as sales, revenue, expenses, inventory levels, personnel turnover, safety for people and
other assets, etc.

5. Timeliness :Another characteristic of an effective control system is that it provides performance information in a
timely way. Timeliness does not necessarily mean maintaining a time schedule for exercising control. It simply means
exercise of control mechanisms (or technique) as and when required.

6. Economic Feasibility :Control benefits should outweigh costs. In other words, control should be cost-effective.
Thus the costs of the control system have to be weighed against the benefits it can return.

Costs of control include the following factors:

 Monitoring and processing systems — such as computers and cash registers;

 Personnel to operate the system—such as inventory controllers, inspectors and accountants—as well as super-
visors and line personnel and furnishing detailed information to them — such as cost, scrap, production, and
personnel reports. The resources that will have to be spent may not return an equal or larger amount so as to
justify control in some cases.

7. Accuracy :Information must be accurate if it is to be useful. This point is directly related to our discussion of feed
forward controls, used in diagnosing a deviation. Since control systems are important indicators of progress and are
the basis for corrective reactions, care has to be taken to ensure that control measurements are accurate.

8. Ease of Understanding: The control process should be simple so that it can be easily understood and applied.
Complexity often means lack of understanding. Controls often become complex because various persons are responsi-
ble for creating, implementing and interpreting them.

CO-ORDINATION

According to Mooney and Reelay, “Co-ordination is orderly arrangement of group efforts to provide unity of action
in the pursuit of common goals”.

According to Charles Worth, “Co-ordination is the integration of several parts into an orderly hole to achieve the
purpose of understanding”.

According to Pearce and Robinson, “Coordination is “integration of the activities of individuals and units into a
concerted effort that works towards a common aim.”

In other words, Co-ordination means to integrate (bring together) all the activities of an organization. It is done for
achieving the goals of the organization. There must be proper co-ordination throughout the organization

IMPORTANCE OF CO-ORDINATION

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1. Co-ordination encourages team spirit :There exists many conflicts and rivalries between individuals, depart-
ments, between a line and staff, etc. Similarly, conflicts are also between individual objectives and organizational ob-
jectives. Coordination arranges the work and the objectives in such a way that there are minimum conflicts and rival-
ries. It encourages the employees to work as a team and achieve the common objectives of the organization. This in-
creases the team spirit of the employees.

2. Co-ordination gives proper direction :There are many departments in the organization. Each department performs
different activities. Coordination integrates (bring together) these activities for achieving the common goals or objec-
tives of the organization. Thus, coordination gives proper direction to all the departments of the organization.

3. Co-ordination facilitates motivation :Coordination gives complete freedom to the employees. It encourages the
employees to show initiative. It also gives them many financial and non-financial incentives. Therefore, the employees
get job satisfaction, and they are motivated to perform better.

4. Co-ordination makes optimum utilization of resources : Coordination helps to bring together the human and ma-
terial resources of the organization. It helps to make optimum utilization of resources. These resources are used to
achieve the objectives of the organization. Coordination also minimizes the wastage of resources in the organization.

5. Co-ordination helps to achieve objectives quickly :Coordination helps to minimize the conflicts, rivalries,
wastages, delays and other organizational problems. It ensures smooth working of the organization. Therefore, with
the help of coordination an organization can achieve its objectives easily and quickly.

6. Co-ordination improves relations in the organization :The Top Level Managers coordinates the activities of the
Middle Level Managers and develop good relations with them. Similarly, the Middle Level Managers coordinate the
activities of the Lower Level Managers and develop good relations with them. Also, the Lower Level Managers coor-
dinate the activities of the workers and develop good relations with them. Thus, coordination, overall improves the
relations in the organization.

7. Co-ordination leads to higher efficiency :Efficiency is the relationship between Returns and Cost. There will be
higher efficiency when the returns are more and the cost is less. Since coordination leads to optimum utilization of
resources it results in more returns and low cost. Thus, coordination leads to higher efficiency.

8. Co-ordination improves goodwill of the organization :Coordination helps an organization to sell high quality
goods and services at lower prices. This improves the goodwill of the organization and helps it earn a good name and
image in the market and corporate world.

FEATURES/ NATURE OF COORDINATION

1. GROUP EFFORT

Coordination integrates the efforts of individuals and departments to make them work as a group. The group works to
maximise group goals as well as organisational goals. It ensures that individuals work as a group to promote their in-
dividual and organisational goals.

2. UNITY OF ACTION

Every individual and department has his own perspective or way of achieving the organisational goals. Coordination
ensures unity of action amongst individual and departmental activities. It ensures that activities of each individual,
group and department are headed towards the common goal. All activities should be performed within the framework
of policies, procedures etc.

3. COMMON GOAL

Each individual and department strives to maximise its goal. Maximisation of departmental goals at the cost of organi-
sational goals can be harmful for the organisation. Coordination maintains balance amongst individual, departmental

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and organisational goals. It ensures that resources and tasks are assigned to individuals and departments in a manner
that working of one department promotes the working of other departments.

4. CONTINUOUS PROCESS

Coordination is not a one-time attempt to integrate the individual goals. It is a continuous process that keeps going as
long as the organisation survives.

5. MANAGERIAL RESPONSIBILITY

Co-ordination is the responsibility of every manager at every level for every operative function (production, finance,
personnel and sales). All managers continuously coordinate the efforts of people of their respective departments.

6. ESSENCE OF MANAGEMENT

Coordination is not a separate function of management. It is required for every managerial function. Managers coordi-
nate human and non-human resources, internal and external organisational environment, while carrying out the mana-
gerial functions of planning, organising, staffing, directing and controlling. Coordination is, thus, the ‘essence of man-
agement.’

7. SYNTHESIS OF EFFORTS

Coordination integrates and synthesizes the efforts of people of all departments at all levels towards common organi-
sational goals. It also synthesizes the organisational resources (physical, human and financial) to collectively contrib-
ute to organisational goals.

8. NECESSARY OBLIGATION

Coordination is not something that managers may or may not strive for. All managers (also non-managers) must direct
their efforts towards a common goal, considering this as their necessary obligation. It is an inevitable area of manage-
ment.

9. DELIBERATE EFFORT

Coordination is not a spontaneous effort of managers. Managers make deliberate efforts to coordinate the depart-
mental activities.

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