PRINCIPLES OF MANAGEMENT BTTM 102

CONTENTS
PRINCIPLES OF MANAGEMENT (BTTM 102)
S. No. Unit Details Page
No.
Block 1: Theories of Management
Unit 1 Management - Nature, Definition, Characteristics and 1-9
Importance
Unit 2 Evolution of Science and Art of Management and the 10-33
Core Management Thoughts
Unit 3 Schools of Management: Administrative, Scientific, 34-72
Behavioral, Open Systems, Contingency and Systems :
Theory to Practice
Unit 4 Functions of Management and Skills of a Professional 73-99
Manager
Block 2: Planning and Organizing
Unit 5 Planning: Concept, Process and Types of Planning 100-118
Unit 6 Organizational Structures and Departmentation 119-141
Unit 7 Delegation and Decentralization 142-166
Unit 8 Span of Control and Types of Organization 167-181
Unit 9 Decision Making 182-199
Block 3: Staffing and Directing
Unit 10 Staffing : Nature, purpose and Process 200-214
Unit 11 Meaning, Principles and Significance of Directing 215-227
Unit 12 Leadership – Theories and Typologies 228-239
Unit 13 Motivation: Meaning, Definition and Theories 240-247
Unit 14 Processes of Communication: Typologies, Significance 248-264
and Barriers
Block 4: Coordination and Control
Unit 15 Characteristics, Importance and Effective Process of 265-277
Coordination
Unit 16 Controlling: Essence and Techniques 278-288

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UNIT 1: MANAGEMENT- NATURE, DEFINITION,
CHARACTERISTICS AND IMPORTANCE
Structure
1.0 Introduction
1.1 Objectives
1.2 Meaning of Management
1.3 Definitions of Management
1.4 Nature or Characteristics of Management
1.5 Importance of Management
1.6 Summary
1.7 Self-Assessment Questions
1.8 Further Readings

1.0 Introduction
It is the management which plans, organises, coordinates and controls
the affairs of an organisation. Every organisation makes use of money,
machinery and manpower. Management is required to assemble and coordinate
these resources in the best possible manner for the achievement of the
objectives of the organisation.

1.1 Objectives
The following objectives are reviewed:-
• To understand the Conceptual Framework of Management.
• To understand the Importance of Management.

1.2 Meaning of Management

The word ‘management’ can be styled as: Management (i.e.,
management tactfully). Why manage men tactfully? This is with view to get the
things done. In order to manage men tactfully, one has to understand the highly
unpredictable and uncertain human nature. Owing to this management is very
complicated and challenging activity.
The term ‘management’ can be defined in several ways. As a noun or a
body of individuals, management refers to all those persons who are concerned
with getting things done from others. The Prime Minister of a country is as much
a manager as the Managing Director of a company and the commander of an

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army. The Board of Directors, the Managing Director, the General Manager down
to the fist line supervisor are included in management. As a subject of study or a
Discipline, management implies that branch of knowledge which is concerned
with the study of the principles and practices of Management. As a process,
management refers to the functions which are performed by managers to make
productive use of material and human resources so as to achieve the desired
objectives. Thus, the functions of planning, organising, staffing, directing,
coordinating and controlling lie under the process of management. There are few
who describe it as a technique of leadership and decision making or a means of
coordinating, while some others have interpreted management as an economic
resource, a factor of production or a system of authority.
Though used in different senses, the term management as a process is
most popular. Thus, management may be defined as the sum total of all those
activities which are undertaken to plan, organise, direct and control the efforts of
others to serve the interests of all. It involves the coordination of human efforts
and physical resources towards the achievement of organisational, individual and
social objectives.

1.3 Definitions of management

The term management has been defined differently by different writers.
Few of the important definitions of management classified on the basis of their
concept are discussed below:
(A) Functional concept as a process, management is what a manager performs.
“Management is that function of an enterprise which concerns itself with the
direction and control of the various activities to attain the business objectives”
- William Spriegel
“Management is the planning, organising command, coordination and control of
the technical, financial security and accounting activities.”
- Louis A. Allen
“Management is the process by which a corporative group directs action towards
a common goal”. -Joseph Messie
“Management is a distinct process consisting of planning, organising, activating
and controlling performed to determine and accomplish the objectives by the use
of human beings and other resources.”

- George R. Terry

“To manage is to forecast and plan, to organise, to command, to coordinate and

to control.”
- Henry Fayol
Management is a social process entailing responsibility for the effective and
economical planning and regulation of the operations of an enterprise in fulfilling
of a given purpose or task, such responsibility involves:

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(a) Judgment and decision in determining plans and in using data to control
performance and progress against plans; and (b) The guidance, integration,
motivation and supervision of the personnel composing the enterprise and
carrying out its operations. - E.F.L. Brech
(b)Human relation concept management as a technique of getting things done.
1.“Management is the art of directing and inspiring people.”
-J.D. Mooney, and A.C. Railey
2.“Management is getting things done through the efforts of other people”.
-Lawrence A. Appley
3. “Management consists of getting things done through others. Manager is one
who accomplishes the objectives by directing the efforts of others.”
- S. George
4. “Management is the art of getting things done through and with people
informally organized groups. It is the art of creating an environment in which
people can perform as individuals and yet co-operate towards attainment of
group goals. It is an art of removing blocks to such performance, a way of
optimizing efficiency in reaching goals.”
-Horald Koontz
(c) Leadership and decision making concept management as an art and science
of decision making and leadership.
1. “Management is the art and science of decision making and leadership”.
- Donald J. Clough
2. “Management is the art and science of preparing organising and directing
human efforts to control the forces and utilise the material of a nature for the
benefit of men”.
- American Society of Mechanical Engineers
3. “Management is the function of executive leadership anywhere.”
- Ralph, C. Davis
4. “Management means decision making” - Ross Moore
5. “Management is simply the process of decision making and control over the
action of human beings for the express purposes of attaining predetermined
goals”.
- Stanley Vance
6. “Management may be defined as “a technique by means of which the
purposes and objectives of a particular human group are determined, clarified
and effectuated.”

- Dean Elmore Peterson and E. Grosvenor Plowman

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(d) Productivity concept management as a technique of increasing productivity.
1. “Management is the art of knowing what you want to do.......in the cheapest
way.” - F.W. Taylor
2. “Management may be defined as the art of securing maximum results with a
minimum of effort so as to secure maximum prosperity and happiness for both
employer and employee and give the public the best possible service.”
- John F. Mee
(e) Integration concept management as the coordinator of human and material
resources.
1. “Management is the force that integrates men and physical plant into an
effective operating unit.”
- Keith and Gubellini
2. “Management is the total task of welding into a single working force men,
money, machinery, materials and methods.”
- Mrityunjoy Banerjee
3. “Management is ....., a cooperation of the human and material resources
essentially in the effective and efficient attainment of objectives.”
- Robert, L.Trewatha and M. Gene Newport
4. “Management consists in guiding human and physical resources into a
dynamic, hard hitting organisation unit that attains its objectives to the
satisfaction of those served and with a high degree of morale and sense of
attainment on the part of those rendering the service.”
- Lawrence, A. Appley
5. “Management entails the coordination of human and material resources
towards the achievement or organisational objectives as well as the organisation
of the productive functions essential for achieving stated or accepted economic
goals.”
- Barry M. Richman
6. “Business management is human activity which directs and controls the
organisation and operation of a business enterprise. Management is centred in
the administrators or managers of the firm who integrate men, material and
money into an effective limit.”
- Wheeler
An analysis of the above definitions makes it clear that management has
been viewed in different senses laying stress on different aspects of
management. The classification of definitions is neither rigid nor specified. This
has been done keeping in view the main thrust of definitions. Thus, there can be
overlapping in this classification. It may not be appropriate to define management
in terms of only one aspect. For instance, when one says management is what

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manager performs, the social and human aspects of management are not
considered. Similarly, the definition, “management is management of people and
not things,” is also incomplete and it gives more weight to the contribution of
workers and under estimates the contribution of other factors of production.
As the process of decision making and leadership, management seeks to
achieve optimum use of human and material resources. But management is
much wider than simply taking executing decisions. It involves integration of
individual effort into team work.
Management as the coordinator of human and material resources is the
most appropriate concept of management. Optimum utilisation of available
resources is impossible without proper integration and coordination. It identifies
the functions which a manager has to perform. But it is essential to keep in view
the social and human obligations of management while describing the functions
or process of management.
To conclude, we can say that various definitions of management do not
run contrary to one another. Management is the sum total of all those activities
that (i) determine objectives, plans, policies and programmes; (ii) secure men,
material, machinery cheaply (iii) put all these resources into operations through
sound organisation. (iv) direct and motivate the men at work. (v) supervise and
control their performance and (vi) provide maximum prosperity and happiness for
both employer and employees and public at large.

Activity - 1.1
Q. Explain the definition given by Lawrence A. Appley.
Ans. ...........................................................................................................
...........................................................................................................
...........................................................................................................
...........................................................................................................

1.4 Nature or characteristics of management

An analysis of the definitions discussed earlier reveals certain features of
management. We now embark upon such features/ characteristics which
illustrate the nature of management. Such features are as follows:
(1) It is a process. As a process management involves those techniques by
which the managers coordinate the activities of other people. Stanely Vance has
stated five basic ingredients in the management process (i) decision on a course
of action; (ii) obtaining the necessary physical means; (iii) enlisting others to
assist in the performance of requisite tasks; (iv) seeing that the job is properly
accomplished and (v) the apportioning the product of the joint venture.

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In studying management as a process, various managerial activities are
taken as a basis for defining management. Management is the planning,
organizing, staffing, directing and controlling the activities of people working in a
group in order to achieve the objectives of the group.
(2) It is a social process. Management is a social process because
management functions are basically concerned with relations among the people.
It is called a social process since the efforts of human beings have to be directed,
coordinated and regulated by management. Moreover, management has a social
obligation, to make optimum utilisation of scarce resources for the benefit of the
community as a whole. The human factor is inseparable from management. “It is
the pervasiveness of this human element that gives management its special
character as a social process.” — Brech
(3) Group effort. Management always refers to group efforts and does not
apply to an individual. Appley calls it “efforts of other people” while Harold Koontz
speaks of “informally organized groups”. Sir Charles Renold refers it as, “agency
of a community”. Massie calls it” cooperative group”, management of an
enterprise can be easily and effectively attained by a group rather than an
individual.
(4) Attainment of pre-determined objectives. Group efforts in management are
always directed towards the achievement of some pre-determined objectives.
These objectives are the final goals of an enterprise towards which all
management activities have to be oriented. According to Theo Haimann:
“Effective management is always management by objective”. “Effective
management is extremely difficult to attain without definite objectives.” (Terry)
“Management must set objectives. Without objectives management would be
difficult, if not impossible”. — Hynes and Massie
(5) It is a distinct entity. “Management is a separate and distinct entity. It is
quite different from the various functional activities and the techniques and
procedures which are generally considered as belonging to the field of
management”. The chief function of the manager is not to do but to get things
done through others. For performing his functions effectively a manager requires,
knowledge, skill and practice. It is necessary to make a distinction between
managerial skill and skill required for specialised jobs. Specialised knowledge
and technical skill are essential for successful solution of any problem but
basically such knowledge is not considered necessary for efficient management.
A manager is expected to be a generalist and not a specialist.
(6) It is a system of authority. Decision making and organizing functions
cannot be performed unless management is construed as a system of authority
which implies hierarchy of command and control. Since management is a
process of directing men to perform a task, authority to accomplish the work from
others is implied in the very concept of management. In every enterprise there
are built up levels of authority to decide, direct and control the business
operations. Authority is considered to be basis for performance of managerial
functions. Authority is considered to be basis for performance and power to get
them executed. “In a very real sense, management in a rule-making and rule-

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enforcing body, and within itself it is bound together by a web of relationship
between superiors and subordinates.”
(7) Universality of management. Perhaps there is no more important area of
human activity than managing which is a universal application. Fayol was the
man who contributed certain principles of management which apply more or less
in every situation. He observed, “Be it a case of Commerce, Politics, Religion,
War.......in every concern there is management functions, to be performed.”
(8) It is needed at all levels. An important feature of management is that it
applies to all levels of an organisation. The lowest level supervisor has also to
perform the function of decision making just like the high level executives. The
only difference is of the nature of task and scope of authority.
(9) It is discipline. Management today has its organised body of knowledge,
principles and techniques. It is taught in colleges and universities like other
disciplines such as Economics, Sociology, Psychology, Political Science, etc.
Thus, the term management is also used to describe a field of learning.
Management is fast developing as a discipline and its scope and status is bound
to increase in the times to come.
(10) It is an integrative process. The essence of management is integration of
human and other resources in a manner that it leads to effective performance. All
these resources are made available to those who manage. Managers apply
knowledge experience and principles for getting the results. In other sense, it
seeks to harmonise the individual goals with organisational goals.
(11) It is an art as well as a science. Management is both a science and an art.
It has elements of art and has characteristics of science. It is considered to be a
science as it has developed certain principles, laws, generalisations which are
more or less universal in nature and are applicable wherever the efforts of a
group are to be coordinated. It is regarded as an art because managing requires
certain skills which are the personal possession of the managers.
(12) It is a profession. Management is now recognised as a profession as it
possesses all the attributes of profession. It has a specialised body of
knowledge, principles and techniques and that can be taught and transferred. It
follows a scientific approach, involves special skills and tools and adheres to a
code of ethics.

1.5 Importance of Management

Management has been important to the daily lives of people in groups since
long. Therefore, a question is raised that if the management has been so
important for human lives, why it has assumed added importance In the present-
day society. The possible answer of this question can be traced in the context of
emergence of large-sized organisations. The management of these organizations
has become much more complex than what it used to earlier. Along with the size,
another dimension which has added to the complexity of managing is the
changing nature of society and its various constituents. Therefore, the issue
before the present-day managers is how to take care of these changes so that
organisations achieve their objectives. Thus, management has become crucial

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not only for the organizations but for the society too. Even classical writers on
management have recognised its importance long back. For example, Urwick
has commented that:

"No ideology, no ism, or political theory can win greater output with less efforts
from a given complex of human and material resources, only sound
management. And it is on such greater output that a higher standard of life, more
leisure, more amenities for all must necessarily be found."

The Importance of management may be traced in the following contexts:

1. Effective utilization of resources: Management tries to make effective

utilization of various resources. The resources are scarce in nature and to meet
the demand of their society, their contribution should be maximum for the general
interests of the society. Management not only decides in which particular
alternative a particular resource should be used, but also takes actions to utilise it
in that particular alternative in the best way.

2. Development of Resources: Management develops various resources. This is

true with human as well as non-human factors. Lawrence Appley has
emphasized that management is the development of people. However, most of
the researches for resource development are carried on in an organised way and
management is involved in these organised activities. Thus, through the
development of resources, management improves the quality of lives of people in
the society.

3. To incorporate innovations: Today, changes are occurring at a very fast rate in

both, technology and social process and structure. These changes need to be
incorporated to keep the organisations alive and efficient Business organizations
are moving from primitive to sophistication. Therefore, they require high degree
of specialization, high level of competence, and complex technology. All these
require efficient management so that organizations work in the most efficient
way.

4. Integrating various interest groups: In the organized efforts, there are various
interest groups and they put pressure over other groups for maximum share in
the combined output. For example, in the case of a business organization, there
are various pressure groups such as shareholders, employees, government, etc.
These interest groups have pressure on an organization. In a more advanced
and complex society, more such pressure is on the organization. Management
has to balance these pressures from various interest groups.

5. Stability in the Society: Management provides stability in the society by

changing and modifying the resources in accordance within the changing
environment of the society. In the modern age, more emphasis is on new
inventions for the betterment of human beings. These inventions make old
systems and factors mostly obsolete and inefficient. Management provides
integration between traditions and new inventions, and safeguards society from
the unfavourable impact of these inventions so that continuity in social process is
maintained.

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1.6 Summary
Management is universal or to say that management principles are
universal implies that all formal organizations, irrespective of their nature, need
management. The basic functions that a manager performs are the same
whether it is political Organisation, an educational institute, a religious
Organisation, a cultural body, an urban centre or a business enterprise. When
describing management as universal, we refer to the widespread practice of
management in all types of organizations. One cannot bring group of people
together regardless of the nature of the work, and expect them to accomplish
objectives unless their efforts are co-ordinated. Among other things plans must
be outlined, tasks identified, authority relationships specified lines of
communications established and leadership exercised. Management, therefore,
is required before any organisation can expect to be effective. Managers are
decision makers who plan, organise, lead and control regardless of the nature of
organisation.

1.7 Self-Assessment Questions

A. Very short Answer Question.

Ques.1 Explain the term management.

Ques.2 Define management as an art.

B. Short Answer Questions.

Ques.1 Explain management as a Process

C. Long Answer Questions.

Ques. 1 Explain the characteristics of Management.

1.8 Further Readings

1. LM Prasad : Principles and Practice of Management (Sultan Chand & Sons)
2. George R Teery :Principes of Management (Richard D Irwin Inc)
3. Harold Koontz and Heizweihrich : Essentials of Management (Mcgraw Hill
series in Management)

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UNIT 2: EVOLUTION OF SCIENCE AND ART OF
MANAGEMENT AND THE CORE MANAGEMENT
THOUGHTS
Structure
2.0 Introduction
2.1 Objective
2.2 Evolution of Science and Art of Management
2.2.1 Management as Science or Art
2.2.2 Management as Science
2.2.3 Management as Art
2.2.4 Management: Both Science and Art
2.3 Evolution of Management thought
2.4 Classical Theories of Management
2.4.1 Bureaucratic Model
2.4.2 Scientific Management
2.4.3 Elements and Tools of Scientific Management.
2.4.4 Principles of Scientific Management.
2.4.5 Fayol’s Administration.
2.4.6 General Principles of Management.
2.4.7 Comparison of Taylor and Fayol.
2.5 Summary
2.6 Self-Assessment Questions.
2.7 Further Readings

2.0 Introduction
The situation started changing with the beginning of the 20th century; specially
the World War I created the situation where people started thinking of solution to
the problem of how limited resources could be applied in better way. The World
War II added further problem to this end. Growing competition and complexity of
managing large business organisation further provided impetus to developing
systematic management concepts and principles. In recent years, there has been

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worldwide rivalry for markets, power and progress. The increasingly severe
competition has come from such factors as:
(i) technological innovations and their dissemination in business,
(ii) growing technological obsolescence,
(iii) increase in capital investment,
(iv) freedom at national and international markets,
(v) increasing buyer’ sovereignty in the markets. Besides the growing
competition in business, the complexity of managing business also has
increased due to
(i) increasing size of business organisations,
(ii) high degree of division of labour and specialisation,
(iii) increased government regulations and controls to make business more
socially-oriented,
(iv) organised union activities to put pressures on management , pressure of
various conflicting interest groups to meet their demands from the organisations.
Both these factors—growing competition and complexity in managing
business—have demanded the efficiency in management process which can
come not merely by trial and error methods but by developing and applying
sound management concepts and principles.
These factors emerged gradually which attracted the attention of a wide variety
of intellectuals—economists, sociologists, psychologists anthropologists,
mathematicians, and management practitioners—to study the organisations and
processes through which these organizations could be made more effective.
Each of these groups of intellectuals viewed the organisations and the processes
therein in a particular way and made recommendations accordingly.

2.1 Objectives
The following objectives are reviewed:-
• To understand the reasons for developing management thought over the
period of time.
• To identify various thoughts and approaches in management and their
applicability in the present context.

2.2 Evolution of Science and Art of Management

2.2.1 Management as Science or Art
The controversy with regard to the nature of management as to whether it is
a science or an art is very old. This controversy however, is not very much in the
air though the controversy is yet to be settled. Specification of exact nature of
management as science or art or both is necessary to specify the process of

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learning of management. It is to be noted that the learning process in science
differs from that of art. Learning of science basically involves the assimilation of
principles while learning of art involves its continuous practice.

Much of the controversy of management as science or art is on account

of the fact that the earlier captains of industry and managers have used intuition,
commonsense, and experience in managing organizations. They were not
trained professional managers, although they were very brilliant and had
developed commonsense through which they managed well. Commonsense and
science differ in the following ways:

1. Commonsense is vague as compared to scientific knowledge.

2. Flagrant inconsistency often appears in commonsense whereas logical

consistency is the basic of science.

3. Science systematically seeks to explain the events with which it deals;

commonsense ignores the need for explanation.

4. The scientific method deliberately exposes claims to the critical evaluation of

experimental analysis; commonsense method falls to test conclusions in any
scientific fashion.

Science is based on logical consistency, systematic explanation, critical

evaluation and experimental analysis. Thus, science can be defined as follows:
"Science is a body of systematized knowledge accumulated and accepted with
reference to the understanding of general truths concerning a particular
phenomenon, subject, or object of study."

Thus, science is a systematized body of knowledge. The process of

scientific theory construction and confirmation can be viewed as involving the
following steps:

1. The formulation of a problem or complex of problems based on observation;

2. The construction of theory to provide answers to the problem or problems

based on inductions from observations:

3. The deduction of specific hypotheses from the theory;

4. The recasting of the hypotheses in terms of specific measures and the

operations required to test the hypotheses:

5. The devising of actual situation to test the theorem; and

6. The actual testing in which confirmation does or does not occur.

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2.2.2 Management as science
Judging from the above features of formulation of theory in science,
management cannot be regarded as science because it is only half-way. It may
be called 'inexact sciences' or 'pseudo-science'. Perhaps this is true for all social
sciences of which management is a branch. Management is not as exact as
natural or physical sciences are. This phenomenon can be explained as follows:

1. Science may be viewed in terms of its structure, its goals, and its methods. In
terms of its structure, it is a number of scientific disciplines: physics, biology,
psychology, economics, management and many others. Each of these sciences
attempts to provide a set of internally consistent hypotheses, principles, laws,
and theories dealing with an aspect of total knowledge. To the extent a science is
mature. Such internal consistency may be attained but there are many young
sciences like management that only approximate this state.

2. One of the most important rules of science is that concepts have to be

defined clearly in terms of the procedures involved in their measurement. One
has to know exactly what one is talking about while using a particular term.
Meanings have to be clear and unambiguous to avoid confusion and erroneous
classification. However, in management, various terms are not used in the same
way and giving same meaning. Even the major terms like management and
organization are used in different ways. The reason for this phenomenon is
quite simple. Since the second decade of the last century, a number of
disciplines have claimed to contribute to human knowledge of managing. These
disciplines have been immature to be a science. The consequence has been
almost unfathomable confusion over the various terms, a confusion in which
ambivalence in using the various terms has played a conspicuous part.

3. In Science, observations must be controlled so that causation may be imputed

correctly. The most common method of eliminating a given factor as possible
cause of an event is to hold it constant-to keep it from varying so that It cannot
operate as a source of change. This is a difficult rule to follow, especially in
studying organisational phenomena. Various research studies in management
have suffered because of the bias of researchers. In many studies, for example,
a variable that was thought to be irrelevant was found to exert a causal
influence However, the effort to identify factors that must be controlled and to
develop procedures to accomplish this is a continuing one. To the extent that this
effort is successful, reliability of perception and reasoning, and hence valid
explanation, is possible.

4. Theories in science are in terms that permit empirical confirmation. Scientific

statements are testable and the tests are capable of repetition with some result.
Furthermore, explanatory statements are logically consistent with other
explanatory statements that have been frequently confirmed. Thus, rationality of
total scientific system is maintained. However, this does not happen in
management exactly. Many of the management principles lack empirical
evidences and are not testable. Further, these principles do not give similar
results under varying conditions and, therefore, lack universal application. No
doubt, attempts are being made to evolve principles in management on the basis

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of scientific observations which may have universal application but still the
process is in an evolutionary stage. Until such principles are not evolved
management cannot be called a science in its true sense.

The various factors analysed above suggest that management is not a pure
science but it can be simply called 'inexact science'. This is so because
management also makes use of scientific methods in evolving principles
Therefore, it bears partial characteristics of science. In fact many people have
suggested that with greater use of mathematics and statistics in management,
the direction is towards more and more use of true science in management.

2.2.3 Management as Art

Management can be regarded as art also. The meaning of art is related with the
bringing of a desired result through the application of skills. Whereas under
science, one learns the 'why' of a phenomenon, under art, one learns the 'how' of
it. Art is 'thus' concerned with the understanding of how particular work can be
accomplished, that is, art has to do applying knowledge or science or expertness
in performance.

This is especially important in management because in many instances, much

creativity and adroitness in applying the managerial efforts are necessary to
achieve the desired results. Furthermore, the adequate consideration of people
involved in managerial action is vital and adds to the concept of art of managing.

Science and art are complementary fields of endeavour; they are not mutually
exclusive. The medical doctor requires the knowledge of science of chemistry,
biology, and anatomy. But excellence in absorbing these funds of knowledge
does not make him an excellent physician. He has to apply his wealth of
knowledge expertly, and his skill in perceiving how and when to use his
knowledge is essential to his success in preventing and controlling diseases of
mankind. Therefore, knowledge is not the sole qualification. Management is an
art can be seen from the following facts:

1. The process of management does involve the use of know-how and skills like
any other art such as music, painting, sculpture, etc.

2. The process of management is directed to achieve certain concrete results as

other fields of art do.

3. Management is creative like any other art. Creativity is a major dimension in

managerial success. It creates new situations for further improvement.

4. Management is personalized meaning thereby that there is no 'one best way of

managing. Every person in his profession has individual approach and technique
in solving the problems. The success of managerial task is related with the
personality of the person apart from the character and quality of general body of
knowledge

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2.2.4 Management: Both Science and Art
Thus, to be a successful manager, a person requires the knowledge of
management principles and also the skills of how the knowledge can be utilised.
Absence of either will result in inefficiency. A comparison between science and
art suggest that a manager requires both aspects of management to be
successful.

It can be seen that management uses both scientific knowledge and art in
managing an organization. As the science of management increases so should
the art of management. A balance between the two is needed. Neither should be
overweighed or slighted. Some feel that further gains in science of management
will restrict art more and more. This is true to a limited extent only. The fact
remains that to be useful, knowledge of science must be applied, that is, art must
be present. Therefore, the old saying that 'knowledge is power' is partially true.
The correct saying should be 'applied knowledge is power'. People having
abundant knowledge may have little use if they do not know how to use
knowledge. This is particularly true for management which is a situational
phenomenon.

2.3 Evolution of Management Thought

The management thought or theory in the current economic situation
(1980 onwards) can best be understood in the light of its historical growth
particularly since 1900. Similarly, the future of management thought can be
anticipated by knowledge of the past as well as understanding of the present. We
deal with the evolution of management theory and concepts and then we will
have a firm grasp over the current thoughts on management, viz. systems
approach and contingency approach to organisation and management.
The evolution of management thought may be divided into three broad stages :
(A) The classical theory of management comprising three streams : (i)
Bureaucracy; (ii) Scientific Management; and (iii) Process Management
Theory describing the process of management. Weber introduced
bureaucracy around 1900. F.W. Taylor introduced scientific management
around 1910. H. Fayol inaugurated process management (functional or
administrative management) around 1910.
(B) The neo-classical theory covered two streams dealing with human
factor, viz. (i) Human Relations; and (ii) Behavioural Sciences Approach.
E. Mayo and Roethisberger pioneered human relations movement around
1930. Maslow, McGregor, and others launched behavioural sciences
movement around 1940. (Refinement of human relations movement).
(C) The Modern Management theories again comprised three streams
of thought; (i) Technical and quantitative sciences offering quantitative
decision-making through operations research and with the help of computer
and information system; (ii) Systems approach to organisation and
management, and (iii) Contingency approach to organisation and
management.

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Fig. Schools of Management Thought/Approach

The following Management Theories are described below in this lesson:
A. Classical Theory of Management / Organisation
1. Bureaucracy
2. Scientific Management
3. Management Process.
B. Neo-classical Approaches
1. Human Relations/ Behaviour,
2. Behavioural and Social Sciences.
C. Modern Streams of Management Thought.
1. Management Science (Quantitative Approach).
2. Systems Approach.
3. 7-S Approach.
4. Operational Approach.
5. Managerial Roles Approach.
6. Contingency Approach.

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D. Management Thought: Indian Wisdom (Value-Oriented Holistic
Approach)
Let us term our approach to Management Thought in the 21st century as Eastern
Insight expressed in Japanese Management also.
Quantitative approach to management, sometimes called operations research or
management science, was developed during World War II by Blackett,
Churchman and others and it was applied in business management around
1950. Systems approach was introduced by Bertanlanffy, Boulding and others
around 1960. Contingency approach was introduced by Joan Woodward.
Fiedley, P. Lawrenc, J. Lorsh and others around 1970 and it seems better suited
to lead management out of the so-called management theory jungle. In fact,
contingency approach was pioneered by Pigors and Myers in personnel
management particularly even before 1970. Today, contingency approach
integrates admirably all prior management thoughts and we now recognise that
an organisation is an open adaptable system and it has three sub-systems. viz:
(i) Human or social system dealing with human resources, (ii) Transformation or
technical system for processing inputs into outputs, and (iii) Management or
administrative system in charge of managing technical and social systems. In the
21st century we hope that in the Management World, enlightened Management
in India and abroad would introduce Indian Wisdom (Value-oriented Holistic
Approach for Effective Management, so that Management can solve all problems
arising out of absence of human and ethical values, e.g., Corruption, Exploitation,
Pollution, etc., and enterprises would restore their bright image.

2.4 Classical theories of management

At about 1900, a set of principles and concepts about organisation and
management, now called as classical theory, began to be extensively developed.
Even at present the influence of classical theory of organisations is quite
remarkable. The existence of complex and large organisations even today can
be accounted appreciably through classical concepts of management thought.
Under classical theory of management, an organisation is the structure of the
relationships, objectives, roles, activities and other factors when persons work
together. This point of view regarding an organisation is expressed fully by three
streams of the classical theory, viz: (i) Bureaucracy; (ii) Scientific Management;
and (iii) Process Management. We have mechanistic structure of an organisation
and it is considered as a closed system. Let us describe the three streams of
classical theory of management.
Features of Management in the Classical Period : (1) It was closely
associated with the industrial revolution and the rise of large-scale enterprise
which demanded the development of new forms of organisation and
management practices. (2) Traditional or classical organisation and management
theory is based upon contributions from a number of sources, including scientific
management, administrative management theory, the bureaucratic model, micro
economics and public administration. (3) Management thought is focussed on (a)
job content, (b) structure, (c) division of labour, (d) tasks of management (e)
standardisation, simplification and specialisation. (f) Scientific approach towards

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organisation and management, (g) primary incentives based on the economic
and physiological needs of the workers.
Traditional theory was based on three pillars: (1) bureaucratic model. (2)
Scientific management and (3) administrative or process management theory.
We will describe, in brief, these three pillars.
2.4.1 Bureaucratic Model (Max-Weber— 1864-1920)
The first pillar or thread in the classical organisation and management theory was
systematically provided by Max Weber (1864-1920) a German Sociologist. He
offered bureaucratic model for management of any large and complex
organisation in any branch of human activity. He considered bureaucracy as the
most efficient form for a complex organization.
Elements of Bureaucracy: The elements of bureaucracy are vital parts of modern
business, governmental, educational and other complex organisations. These
elements are: (i) Hierarchy of authority involving superior—subordinate
relationship and chain of command;

TOP MANAGEMENT
VERTICAL SPECIALIATION

MIDDLE MIDDLE
MANAGEMENT MANAGEMENT

SUPERVISORY SUPERVISORY
MANAGEMENT MANAGEMENT

HORIZONTAL SPECIALISATION
Fig. The Bureaucratic Structure
(ii) Clear-cut division of work, based upon competence and functional
specialization. An ordered hierarchy takes the advantage of specialisation; (iii) A
system of rules, regulations and procedures. A bureaucrat seeks rationality
routine, objectivity and consistency for his organisation. Behaviour is subject to
systematic discipline and control; (iv) A rule by law leads to impersonality of
interpersonal or mutual relations. Interpersonal relations are based on positions
and not on personalities. We have mechanical and impersonal behaviour; (v) A
system of work procedures involving standardisation of methods; (vi) Selection
and promotion of employees based upon managerial and/or technical
competence; and (vii) Authority and power rest in the office. Bureaucracy
recognises only legal power and authority given to each office or position in the
organisation. The power does not belong to an individual. It is a part of the office.

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Assessment of Bureaucracy
Bureaucracy provided a rigid machine model of an organisation. It could not
account for humanistic model of an organisation which could recognise
importance of human, interpersonal or mutual relations in an organisation.
Bureaucratic organisation may be preferred where change is not anticipated or
where rate of change is slow and it can be predicted. In a stable or static
organisation (considered as closed system) bureaucracy can work and may be
preferred. It is usual in government and in many stable large businesses. But in a
dynamic business organisation (considered as on open system) we cannot use
bureaucracy. There are many glaring disadvantages in bureaucratic
organisations: rigidity, impersonal and mechanical or dehumanised environment,
higher cost of controls, tendency to forget ultimate goals of the organisation, self-
prepetuation and empire building, difficulty of co-ordination and communication,
blind faith in rules, regulations and procedures. Above all, bureaucracy cannot
offer satisfaction of higher level wants of employees and to that extent it fails
miserably to exploit fully the human potential. It offers limited scope for the
development of human resources or for management development. Many of the
problems of bureaucracy probably would be reduced if the individual needs and
characteristics of all people are remembered and are duly considered in making
managerial decisions. In other words, we must humanize bureaucracy.
Note: (1) The term bureaucracy is currently used in two ways : (a) technically, as
by Weber, and (b) popularly, to characterize the red tape and inefficiencies of
governmental administration. (2) Bureaucracy seems to naturally and logically
evolve as organizations become larger and more complex.
2.4.2 Scientific Management (F.W. Taylor)
F.W. Taylor (1856-1915) eventually become acclaimed as “the Father of
Scientific Management.” He provided a base upon which much of our current
thinking about management is firmly established. He published his famous book
‘The Principles of Scientific Management in 1911.
Taylor, Gilbreth, (Frank and his wife, Lillian), Gantt and others launched what
they called scientific management. According to these experts it was not proper
to just find a way of doing something. A manager has to find the one right way.
They used time and motion study for developing a right way. According to them
analysis, planning and control of work should be separated from the execution of
work and management should be responsible for detailed analysis, investigation
and planning of work in advance whereas workers should be responsible for the
performance of the work as per plans.
Scientific management revolutionised the entire shop or plant management. It led
to the development of time and motion study, and it refined wage incentive plans.
It provided necessary foundation for industrial engineering. If we take a broad
view of Taylorism or scientific management, the contributions of Taylor and his
eminent followers were truly outstanding and many features of their contributions
have proved to be enduring and classical. The basic theme of Taylor was that
managers should study work scientifically in order to identify “one best way” to
get the job done. Taylor codified his ideas in terms of certain principles which

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were very popular. The essence of positive view of scientific management was
described by Taylor as follows :
(i) All jobs can be observed and analyzed in order to determine the one best
way of accomplishing them. Management must use scientific, rather than the rule
of thumb approach. (ii) The best man for the job can be scientifically selected and
trained. (iii) You can insure that the one best way is followed by paying the man
on incentive basis tying his wage or salary to how much he produces. (iv) Put a
manager in charge of analyzing, planning, preparing and inspecting work. The
worker simply carries out the directions and instructions issued by the manager.
(v) Harmonious organization can be obtained by assigning the appropriate man
to each set of operations. This will prevent any discord. (vi) Management has to
choose the best means of economical production. Specialization of workers is
essential to increase efficiency of production. (vii) Co-operation between labour
and management can be achieved. This will ensure maximum output, in place of
restricted output by workers. (viii) A striving for enterprise and the development
of each man to his greatest efficiency and prosperity must be accomplished. (ix)
Workers must be inspired or trained to use the scientific methods developed
through time and motion study. (x) Management must organize in such a way
that it can properly manage and carry out its duties. Frank and Lillian Gilbreth,
Henry Gantt, George Berth, Edward Felen, etc. Scientific management was
concerned essentially with improving the operational efficiency at the shop floor
level. Taylor has defined scientific management as follows :
“Scientific management is concerned with knowing exactly what you want
men to do and then see in that they do it in the best and cheapest way.”
Since Taylor has put the emphasis on solving managerial problems in a scientific
way, often, he is called as father of scientific management and his contributions
as the principles of scientific management. Though his contributions have
become traditional in present day context, still the label scientific management is
used for his contributions. It does not mean that present-day management
thoughts and practices are not scientific. In fact, management as a science has
been taken much later than the contributions of Taylor.
Taylor joined Midvale Steel Company in U.S.A. as a worker and later on became
supervisor. During this period, he continued his studies and eventually completed
his M.E. (Master of Engineering). Subsequently, he joined Bethlehem Steel
Company. At both these places, he carried experiments about how to increase
the efficiency of people. Even after his retirement, he continued to develop
scientific management. On the basis of his experiments, he published many
papers and books and all his contributions were compiled in his book ‘Scientific
Management’. Taylor’s contributions can be described in two parts: elements and
tools of scientific management and principles of scientific management.

2.4.3 Elements and Tools of Scientific Management :

Taylor conducted various experiments at his work places to find out how
human beings could be made more efficient by standardizing the work and better

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method of doing the work. These experiments have provided the following
features of scientific management.
1. Separation of Planning and Doing. Taylor emphasized the separation of
planning aspect from actual doing of the work. Before Taylor’s scientific
management, a worker used to plan about how he had to work and what
instruments were necessary for that. The worker was put under the supervision
of a supervisor commonly known as gang boss. Thus, supervisor’s job was
merely to see how the workers were performing. This was creating a lot of
problems, and Taylor emphasized that planning should be left to the supervisor
and the worker should emphasize only operational work.
2. Functional Foremanship. Separation of planning from doing resulted into
development of supervision system which could take planning work adequately
besides keeping supervision on workers. For this purpose, Taylor evolved the
concept of functional foremanship based on specialization of functions. In this
system, eight persons are involved to direct the activities of workers. Out of
these, four persons are concerned with planning : (i) route clerk, (ii) instruction
card clerk, (iii) time and cost clerk, (iv) disciplinarian. The remaining four persons
are concerned with doing aspect of the work. These are : (i) speed boss, (ii)
inspector, (iii) maintenance foreman, and (iv) gang boss. All of them give
directions to workers on different aspects of work. This is against unity of
command principle as shown in Figure 2.3.
3. Job Analysis. Job analysis is undertaken to find out the one best way of
doing the thing. The best way of doing a job is one which requires the least
movements, consequently less time and cost. The best way of doing the thing
can be determined by taking up time-motion-fatigue studies. (i) Time study
involves the determination of time a movement takes to complete.

Fig : Functional foremanship

The movement which takes minimum time is the best one. This helps in fixing the
fair work for a period. (ii) Motion study involves the study of movements in parts
which are involved in doing a job and thereby eliminating the wasteful
movements and performing only necessary movements. Elimination of

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unnecessary movements in doing work reduces time taken in performing a work
and also the fatigue of workers. (iii) Fatigue study shows the amount and
frequency of rest required in completing the work. After a certain period of time,
workers feel fatigue and cannot work with full capacity. Therefore, they require
rest in between. When the rest is allowed, they start working with full capacity.
Thus, job analysis, as given by Taylor, suggests the fair amount of a day’s work
requiring certain movements and rest periods to complete it.
4. Standardization. As far as possible, standardization should be maintained
in respect of instruments and tools, period of work, amount of work, working
conditions, cost of production, etc. These things should be fixed in advance on
the basis of job analysis and various elements of costs that go in performing a
work.
5. Scientific Selection and Training of Workers. Taylor has suggested that
workers should be selected on scientific basis taking into account their education,
work experience, aptitude, physical strength, etc. A worker should be given work
for which he is physically and technically most suitable. Apart from selection,
proper emphasis should be given on the training of workers which makes them
more efficient and effective.
6. Financial Incentives. Financial incentives can motivate workers to put in
their maximum efforts. If provisions exist to earn higher wages by putting in extra
effort, workers will be motivated to earn more. Taylor himself applied the concept
of differential piece rate system which was highly motivating. According to this
scheme, a worker who completes the normal work gets wages at higher rate per
piece and one who does not complete gets at lower rate. Thus, there is
considerable difference in wages between those who complete the work and
those who do not complete. To make the differential piece rate system work,
Taylor has suggested that wages should be based on individual performance and
not on the position which he occupies. Further, the wage rate should be fixed on
accurate knowledge and not on estimates.
7. Economy. While applying scientific management, not only scientific and
technical aspects should be considered but adequate consideration should be
given to economy and profit. For this purpose, techniques of cost estimates and
control should be adopted. The economy and profit can be achieved by making
the resources more productive as well as by eliminating the wastages. ‘Taylor
has clarified by giving examples of how resources are wasted by not following
scientific management.
8. Mental Revolution. Scientific management depends on the mutual co-
operation between management and workers. For this co-operation, there should
be mental change in both parties from conflict to co-operation. Taylor feels that
this is the most important feature of scientific management because in its
absence, no principle of scientific management can be applied. In this regard,
Taylor has observed as follows :
“Scientific management is not any efficiency device, nor a device of any
kind for securing efficiency; nor is it bunch or group of efficiency devices. It is not
a new system of figuring costs; it is not a new scheme of paying men; it is not a

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piecework system; it is not bonus system; it is not a premium system; it is no
scheme of paying men......It is not divided foremanship or functional foremanship;
it is not any of the devices which the average man calls to mind when scientific
management is spoken of..... Now, in its essence, scientific management
involves a complete mental revolution on the part of the working men engaged in
any particular establishment or industry—a complete mental revolution on the
part of these men as to their duties toward their work, toward their fellowmen,
and toward their employers. And it involves the equally complete mental
revolution on the part of those on the management’s side—the foreman, the
superintendent, the owner of the business, the board of directors—a complete
mental revolution on their part as to their duties towards their fellow workers in
the management, towards their workmen and towards all of their daily problems.”
2.4.4 Principles of Scientific Management:
Taylor has given certain basic principles of scientific management. The
fundamental principles that Taylor saw underlying the scientific management
may be given below:
1.Replacing Rule of Thumb with Science. Taylor has emphasized that in
scientific management, organized knowledge should be applied which will
replace rule of thumb. While the use of scientific method denotes precision in
determining any aspect of work, rule of thumb emphasizes estimation. Since
exactness of various aspects of work like day’s fair work, standardization in work,
differential piece rate for payment, etc., is the basic core of scientific
management, it is essential that all these are measured precisely and should not
be based on mere estimates. This approach can be adopted in all aspects of
managing.
2.Harmony in Group Action. Taylor has emphasized that attempts should be
made to obtain harmony in group action rather than discord. Group harmony
suggests that there should be mutual give and take situation and proper
understanding so that group as a whole contributes to the maximum.
3.Co-operation. Scientific management involves achieving co-operation rather
than chaotic individualism. Scientific management is based on mutual
confidence, co-operation and goodwill. Co-operation between management and
workers can be developed through mutual understanding and a change in
thinking. Taylor has suggested “substitution of war for peace, hearty and
brotherly co-operation for contentment and strife, replacement of suspicious
watchfulness with mutual confidence, of becoming friends instead of enemies. It
is along this line, I say that scientific management must be developed.”
4.Maximum Output. Scientific management involves continuous increase in
production and productivity instead of restricted production either by
management or by worker. Taylor hated inefficiency and deliberate curtailment of
production. His concern was with the large size of the cake. In his opinion, “there
is hardly any worse crime to my mind than that of deliberately restricting output.”
He decried quarrel over production but welcomed quarrel over distribution,
provided the product to be distributed had outgrown the size. Therefore, he
advised the management and workers to “turn their attention towards increasing

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the size of the surplus until the size of the surplus becomes so large that it is
necessary to quarrel over how it shall be divided.”
5.Development of Workers. In scientific management, all workers should be
developed to the fullest extent possible for their own and for the company’s
highest prosperity. Development of workers requires their scientific selection and
providing them training at the workplace. Training should be provided to workers
to keep them fully fit according to the requirement of new methods of working
which may be different from the non-scientific methods.
Followers of Scientific Management
Other persons who worked to develop scientific management were Carl
George Berth, Henry Gantt, Frank and Lillian Gilbreth, and Edward Felene to
mention a few important. Berth worked with Taylor and later developed many
mathematical techniques and formulae that made it possible to put Taylor’s ideas
into practice. Gantt developed graphic methods of depicting plans and making
possible better managerial control. He emphasized the importance of time as
well as cost in planning and controlling work. This eventually led to the developed
of famous Gantt Chart which is in wide use today and was the forerunner of such
modern technique as PERT (Programme Evaluation and Review Technique).
Frank and Lillian Gibreth, a team of husband and wife, also tried to find out ‘one
best way of doing’ under the given set of realities. They also tried to look at the
problems of workers from social and psychological point of view. Felene invited
Gilbreth to apply scientific management to manage his departmental store. The
major areas of concern were employee training and evaluation and human
element in business. Later, he created Twentieth Century Fund, a famous
research organization still in existence.
Critical Analysis of Scientific Management
Scientific management created awareness about increasing operational
efficiency at the shop floor level by adopting systematic methods as against the
rule of thumb which was prevalent at that time. However, from the point of view
of the development of theoretical framework, the principles of scientific
management were more concerned with problems at the operating levels and did
not emphasize management of an organization from the manager’s point of view.
Therefore, it was more relevant from engineering point of view rather than
management point of view. In fact, one author has later suggested that Taylor
can be regarded as the father of industrial engineering rather than the father of
scientific management. Similarly, persons advocating scientific management
have emphasized physiological variables affecting human behaviour at
workplace, both in terms of work efficiency and methods of motivating the
workers. As such, the scientific management is more relevant to mechanization
and automation—technical aspect of efficiency—than the broader aspects of
management of an organization.
Apart from the theoretical considerations, Taylor’s scientific management
was opposed by trade unions, industrialists, and general public. The opposition
was so grave that Taylor had to defend his scientific management before a
special US Congressional Committee in 1912. The introduction of scientific

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management led to the agitation by trade unions in different production units. The
major reasons for the opposition of scientific management were as follows:
1. There were many of the followers of Taylor who took aggressive
mechanical view of production and sidelined human aspect at he
workplace. This created aggressive attitudes among workers.
2. The work used to be performed under close and strict supervision based
on authoritarian approach. Workers were not allowed to raise their voice
even for genuine grievances.
3. There was lack of scientific standardization of work and whatever
standards used to be set by the management, the workers had to follow
strictly. Such standards often used to raise production norm without
taking into consideration the factors affecting such a norm.
4. The most crucial element which was under contention was the differential
piece rate system. The workers, even the efficient ones, and their unions,
opposed this system on the plea that it was a new method of exploiting
workers by the industrialists. It may be mentioned that trade unions were
quite popular at that time.
2.4.5 Fayol’s Administrative Management:
Perhaps the real father of modern operational management theory is the French
industrialist Henry Fayol. His contributions are generally termed as operational
management or administrative management. Fayol’s contributions were first
published in book form titled ‘Administration Industrielle at Generale’ in French
language, in 1916. However, the book was not made available outside France
and was not translated unit 1929. Its English version was published in 1949 in
the United States of America. Therefore, in the early period, Fayol’s contributions
could not make much impact on the development of management thought.
However, after the publication of his book in English, he got prominence in the
field of management very quickly.
Fayol looked at the problems of managing an organization from top management
point of view. He has used the term ‘administration’ instead of ‘management’
emphasizing that there is unity of science of administration. For him,
administration was a common activity and administrative doctrine was universally
applicable. From administrative point of view, he placed commerce, industry,
religion, philanthropy and the State on equal footing. His administrative science
can be applied equally well to public and private affairs. Therefore, management
is a universal phenomenon. However, he has emphasized that principles of
management are flexible and not absolute and are usable regardless of changing
and special conditions.
Fayol found that activities of an industrial organization could be divided into six
groups:
1. Technical (relating to production);
2. Commercial (buying, selling and exchange);
3. Financial (search for capital and its optimum use);

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4. Security (protection of property and person);
5. Accounting (including statistics); and
6. Managerial (planning, organization, command, coordination, and control).
Pointing out that these activities exist in business of every size, Fayol
observed that the first five were, well known, consequently he devoted most of
his book to analyse the sixth one, that is, managerial activity. Fayol has divided
approach of studying management into three parts: (i) managerial qualities and
training, (ii) general principles of management, and (iii) elements of management.
Managerial Qualities and Training
Fayol was the first person to identify the qualities required in a manager.
According to him, there are six types of qualities that a manager requires. These
are as follows:
1. Physical (health, vigour, and address);
2. Mental (ability to understand and learn, judgement, mental vigour, and
capability);
3. Moral (energy, firmness, initiative, loyalty, tact, and dignity);
4. Educational (general acquaintance with matters not belonging exclusively to
the function performed);
5. Technical (peculiar to the function being performed); and
6. Experience (arising from the work).
Fayol has observed that the most important ability for a worker is
technical; the relative importance of managerial ability increases as one goes up
the scalar chain, with insight becoming the most important ability for top level
executives. On the basis of this conclusion, Fayol recognised a widespread need
for principles of management and for management teaching. He held that
managerial ability should be acquired first in school and later in the workshop. In
order to acquire managerial knowledge, he developed principles of management
to be taught in academic institutions.
2.4.6 General Principles of Management:
Fayol has given fourteen principles of management. He has made
distinction between management principles and management elements. While
management principle is a fundamental truth and establishes cause-effect
relationship, management element denotes the function performed by a
manager. While giving the management principles, Fayol has emphasized two
things: (i) The list of management principles is not exhaustive but suggestive and
has discussed only those principles which he followed on most occasion. (ii)
Principles of management are not rigid but flexible. According to him, “there is
nothing rigid or absolute in management affairs; it is all a question of proportion.
Therefore, principles are flexible and capable of being adopted to every need. It
is a matter of knowing how to make use of them which is a difficult art requiring
intelligence, experience, and proportion.” Various principles of management are
as follows:

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1.Division of Work. Fayol has advocated division of work to take the advantage
of specialization. According to him, “specialization belongs to natural order. The
workers always work on the same part, the managers concerned always with the
same matters, acquire in ability, sureness, and accuracy which increase their
output. Each change of work brings in it training and adaptation which reduces
output........yet division of work has its limits which experience and a sense of
proportion teach us may not be exceeded”. This division of work can be applied
at all levels of the organization.
2.Authority and Responsibility. The authority and responsibility are related
with the latter the corollary of the former and arising from it. Fayol finds authority
a continuation of official and personal factors. Official authority is derived from
the manager’s position and personal authority is derived from personal qualities
such as intelligence, experience, moral worth, past services, etc. Responsibility
arises out of assignment of activity. In order to discharge the responsibility
properly, there should be parity of authority and responsibility.
3.Discipline. All the personnel serving in an organization should be disciplined.
Discipline is obedience, application, energy, behaviour, and outward mark of
respect shown by employees. Discipline may be of two types: self-imposed
discipline and command discipline. Self-imposed discipline springs from within
the individual and is in the nature of spontaneous response to a skilful leader.
Command discipline stems from a recognized authority and utilises deterrents to
secure compliance with a desired action, which is expressed by established
customs, rules and regulations. The ultimate strength of command discipline lies
in its certainty of application. Such a discipline can be obtained by sanctions in
the forms of remuneration, warnings, suspension, demotion, dismissal, etc.
However, while applying such sanctions, people and attendant circumstances
must be taken into account. This can be learned by experience and tact of the
managers.
4.Unit of Command. Unity of command means that a person should get orders
and instructions from only one superior. The more completely an individual has a
reporting relationship to a single superior, the less is the problem of conflict in
instructions and the greater is the feeling of personal responsibility for results.
This is contrary to Taylor’s functional foremanship. On this conflicting view, Fayol
suggested that, “I do not think that a shop can be well run in flagrant violation of
this (unity of command). Nevertheless, Taylor successfully managed large-scale
concerns. I imagine that, in practice, Taylor was also able to reconcile
functionalism with the principle of unity of command but this is the supposition
whose accuracy I am not in a position to verify. Fayol has considered unity of
command as an important aspect in managing an organization. He says that
“should it (unit of command) be violated, authority is undermined, discipline is in
jeopardy, order disturbed, and stability threatened. This rule seems fundamental
to me and so I have put it to the rank of a principle.”
5.Unity of Direction. According to this principle, each group of activities with the
same objective must have one head and one plan. Unity of direction is different
from unity of command in the sense that the former is concerned with functioning
of the organization in respect of its grouping of activities or planning while the
latter is concerned with personnel at all levels in the organization in terms of

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reporting relationship. Unity of direction provides better coordination among
various activities to be undertaken by an organization.
6.Subordination of Individual to General Interest. Comman interest is above
the individual interest. Individual interest must be subordinate to general interest
when there is conflict between the two. However, factors like ambition, laziness,
weakness, etc., tend to reduce the importance of general interest. Therefore,
superiors should set an example in fairness and goodness. The agreement
between the employers and the employees should be fair and there should be
constant vigilance and supervision.
7.Remuneration of Personnel. Remuneration of employees should be fair and
provide maximum possible satisfaction to employees and employers. Fayol did
not favour profit-sharing plan for workers but advocated it for managers. He was
also in favour of non-financial benefits though these were possible only in the
case of large-scale organizations.
8.Centralization. Everything which goes to increase the importance of
subordinate’s role is decentralization; everything which goes to reduce it is
‘centralization of authority’, Fayol refers the extent to which authority is
centralized or decentralized. Centralization and decentralization are the question
of proportion. In small firms, centralization is the natural order, but in large firms,
a series of intermediaries is required. ‘Share of authority and initiative left to
intermediaries depends on the personal character of the manager, his moral
worth, the reliability of his subordinates, and also on the conditions or the
business. Since both absolute and relative values of managers and employees
are constantly changing, it is desirable that the degree of centralization or
decentralization may itself vary constantly.
9.Scalar Chain. There should be a scalar chain of authority and of
communication ranging from the highest to the lowest. It suggests that each
communication going up or coming down must flow through each position in the
line of authority. It can be short-circuited only in special circumstances when its
rigid following would be detrimental to the organization. For this purpose, Fayol
has suggested ‘gang plank’ which is used to prevent the scalar chain from
bogging down action. His scalar chain and gang plank can be presented as
follows:

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In the above figure , A is the top man having immediate subordinates B and L.
In turn B and L are having immediate subordinates C and M. This continues to
the level of G and Q. Ordinarily, the communication must flow from A to B to C to
D and so on while coming from the top to down. Similarly, it must flow from G to
F to E and so and while going up. It means if any communication is going from F
to P, it will flow from F to A via E, D, C and B and coming down to P via L, M, N
and O. Fayol suggests that this scalar chain system takes time, and therefore,
can be substituted by gang plank’ (dotted line) without weakening the chain of
command.’ In order to maintain authority, it is desirable that superiors of F and P
authorize them to deal directly provided each informs his superiors of any action
taken. Fayol suggested that this system allows F and P to deal in a few hours
with some questions or other which via the scalar chain would pass through
twenty transmissions, inconvenience people, involve masses of paper, lose
weeks or months to get to a conclusion less satisfactory than the one which
could have been obtained by direct contact.
10. Order. This is a principle relating to the arrangement of things and people. In
material order, there should be a place for everything and everything should be in
its place. Similarly, in social order, there should be the right man in the right
place. This kind of order demands precise knowledge of the human requirements
and resources of the organization and a constant balance between these
requirements and resources. Normally, bigger the size of the organization, more
difficult this balance is.
11.Equity. Equity is the combination of justice and kindness. Equity in treatment
and behaviour is liked by everyone and it brings loyalty in the organization. The
application of equity requires good sense, experience, and good nature of
soliciting loyalty and devotion from subordinates.
12.Stability of Tenure. No employee should be removed within short time.
There should be reasonable security of jobs. Stability of tenure is essential to get
an employee accustomed to new work and succeeding in doing it well.
Unnecessary turnover is both cause and effect of bad management.
13.Initiative. Within the limits of authority and discipline, managers should
encourage their employees for taking initiative. Initiative is concerned with
thinking out and execution of a plan. Initiative increases zeal and energy on the
part of human beings.
14.Espirit de Corps. This is the principle of ‘union is strength’ and extension of
unity of command for establishing team work. The manager should encourage
esprit de corps among his employees. The erring employees should be set right
by oral directions and not by demanding written explanations. Written
explanations complicate the matters.

Elements of Management
Fayol holds that management should be viewed as a process consisting
of five elements. He has regarded these elements as functions of management.
These are planning, organization, commanding, coordination, and controlling. He

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has regarded planning as the most important managerial function and failure to
plan properly leads to hesitation, false steps, and untimely changes in directions
which cause weakness in the organization. Creation of organization structure and
commanding function is necessary to execute plans. Coordination is necessary
to make sure that everyone is working together, and control looks whether
everything is proceeding according to plan. Fayol holds the view that these
functions are required at all levels of management and in all types of
organizations.
The contributions of Fayol have made the real beginning of development
of management as a separate field of study. He wrote as the practical man of
business reflecting on his long managerial career and setting down the principles
he had observed. His principles of management hold good even today, though
pronounced long back. It was unfortunate that his contributions were not known
to scholars in U.S.A., otherwise the development of management would have
been much faster. In fact, many of the things were developed in management on
the lines of Fayol much after his contributions.
2.4.7 Contributions of Taylor and Fayol: A Comparison :
At this stage, it may be worthwhile to compare the contributions of both
Taylor and Fayol as both of them have made attempts to the development of
management principles in somewhat more systematic way. Both were
contemporary though from different countries. When we compare the
contributions of Taylor and Fayol, we find that both are complementary to each
other and have somewhat similarity. Even Fayol commented in 1925 that his
contributions and those of Taylor are complementary to each other. There is
some similarity as well as dissimilarity in the contributions of both.

2.4.7. (a) Similarity.

Both Taylor and Fayol have seen and analyzed the problems of managing
from practioners’ point of view. Therefore, there must be some similarity between
the two. The similarity exists on the following lines :
1. Both have attempted to overcome managerial problems in systematic
may.
2. Both have developed some principles which can be applied in solving
managerial problems.
3. Both have emphasized that management actions can be effective if these
are based on sound principles.
4. Both of them have emphasized that managerial qualities are acquirable
and can be acquired through training. Therefore, organizations should
make attempts to develop these.
5. Both have emphasized harmonious relationships between management
and workers for the achievement of organisational objectives.

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2.4.7 (b) Dissimilarity.
There is more dissimilarity between the approaches of Taylor and Fayol as
compared to similarity. This is because of the fact that Taylor has concentrated
on the shop floor efficiency while Fayol has concentrated on higher managerial
levels. The dissimilarity between the two is presented in Table 2.1.

TABLE 2.1: Dissimilarity between contributions of Taylor and Fayol

Basis of difference Taylor Fayol
1. Perspective Shop floor level Higher management level
2. Focus Efficiency through work simply- Overall efficiency by ob-

fiction and standardization serving certain principles

3. Orientation Production and engineering Managerial functions

4. Results Scientific observation and Personal experiences

tran-measurement slated into universal truths

5. Overall contributions Basis for accomplishment on Systematic theory of man-

the production line. agement.

Other Administrative Theorists

Besides Fayol, contributions have come from other administrative
theorists, notable among them being Max Weber, Sheldon, Mooney, Reiley,
Urwick, etc. Weber who analyzed the functioning of church, government, military,
and business organizations believed that bureaucratic structure is the most
efficient form of structure for all types of organizations. It is the most rational
means of carrying out imperative control over human beings. He has given five
features of bureaucracy: specialization, hierarchy of authority, rules,
impersonality, and trained personnel.8
Oliver Sheldon has added the concept of ethics and social responsibility
to the scientific study of management. His normative approach was able to
develop for the first time to view management both a science and a philosophy.
Mooney and Reiley both executives at General Motors. U.S.A. emphasized basic
principles of organization. These principles are: coordination principle, scalar
principle, functional principle, and staff phase of functionalism.10
They have also emphasized that all organizations, irrespective of the field
of their operation, have common features requiring these principles. They all
require coordinate and have a system of hierarchy, and clearly defined duties
and responsibilities for each job. Urwick, though not strictly an original thinker,
has integrated the various views into a unified whole.11 Apart from these people,
contributions have come from Gullick, Sloan, Merriam, Stene and Dale.

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Activity
Q. Make a comparison between the management thoughts developed by
Fayol and Taylor.
Ans............................................................................................................
...........................................................................................................
...........................................................................................................
...........................................................................................................

2.5 Summary
Before the systematic study of management which started close to 19th
century, contributions in the field came from a variety of sources. For example,
the concept of organization and administration existed in Egypt in 1300 B.C.
Confucius’s parables included suggestions for proper public administration and
admonitions to choose honest, unselfish, and capable public officers long before
Chirst Kautilya has offered sound principles of state administration in 320 B.C.
Roman catholic church introduced the concept of staff personnel in church
administration which was further carried on by military organizations. The
cameralists, a group of German and Austrian public administrators and
intellectuals, emphasized systematic administration as a source of strengths
during 16th to 18th centuries. These contributions provided some insights about
how resources could be utilized more effectively. However, these contributions
were outside the field of business and other economic organizations.
In the field of business organizations, some stray contributions have
come from Robert Owen, James Watt, Charles Babbage, and Henry Town. While
Owen emphasized personnel aspects in management and advocated a number
of benefits to employees, others concentrated on developing concepts relating to
effective utilization of resources at the shop floor level. Their contributions came
bit by bit and in haphazard manner and have failed to stimulate to study
management as a distinct discipline. However, their ideas created awareness
about managerial problems. By the end of 19th century, a stage was set for
taking systematic study of management and the beginning was made by Taylor
in the early part of 20th century which took the shape of scientific management.

2.6 Self-assessment questions

A. Very Short Answer Questions.
Ques. 1 Define scientific management.

2. Explain Functional foremanship.

B. Short Answer Questions.
Ques. 1 Explain different principles of scientific management.

2. Evaluate upon the following.

(i) Unity of command (ii) unity of direction. (iii) Espirit de corps

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C. Long Answer Questions.
Ques. 1 Evaluate upon the principles of management given by Henry
Fayol.

2.7 Further Readings

1. LM Prasad : Principles and Practice of Management (Sultan Chand
& Sons)
2. George R Terry : Principles of Management (Richard D Irwin Inc)
3. Harold Koontz and Heizweihrich : Essentials of Management
(Mcgraw Hill series in Management)
4. Peter F Drucker : Frontiers of Management (Heinemann London)
5. Peter F Drucker : Managing for future (Tata Mcgraw Hill)
6. J.S. Chandan : Management theory and Practice (Vikas Publishing
House Pvt Ltd.)

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UNIT 3: SCHOOLS OF MANAGEMENT:
ADMINISTRATIVE, SCIENTIFIC, BEHAVIORAL,
OPEN SYSTEMS, CONTINGENCY AND SYSTEMS:
THEORY TO PRACTICE
Structure:
3.0 INTRODUCTION
3.1 Objective
3.2 Neo-Classical Theory
3.2.1 Behavioural Approach
3.2.2 Hawthorne Experiments and
3.2.3 Implications of Hawthorne Experiments
3.2.4 Criticism of Hawthorne Experiments.
3.3. Other Approaches to Management
3.3.1 Social Systems Approach
3.3.2 Decision Theory Approach
3.3.3 Contributions of Peter Drucker
3.3.4 Management Science Approach
3.3.5 Human Behaviour Approach
3.3.6 Systems Approach
3.3.7 Contingency or Situational Approach
3.3.8 Mckinsey’s 7-S Approach
3.3.9 The Operational Approach
3.3.10 The Managerial Roles Approach.
3.4 Characteristics of Modern Management Thought
3.5 Management Though in the Light of Indian other and insight.
3.6 Summary
3.7 Self Assessment Questions.
3.8 Further Readings

3.0 Introduction
Classical theory was job oriented and it focused its attention on scientific
job analysis. Neoclassical theory focuses its attention on the worker and it is
employee-oriented. Now we have a shift in managerial style from product-centred
in a modern plant. Plant layout, machinery, tools etc., must offer employee
convenience and facilities. Neoclassical theory is built upon the success of

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classical theory. The pillars of classical approach—order, rationality, structure
etc.,—have been modified by the neoclassical movement.

3.1 Objectives
The following objectives are reviewed in this lesson
• to establish a relationship between Human relations and Hawthorne
experiments.
• to conceptually analyse behavioural approach.
• to evaluate upon different approaches to management.
• to conceptually establish their inter-disciplinary approach among other areas
of management.

3.2 Neo-classical Theory

3.2.1 Behavioural Approach
Neo-classical theory is called human relations and behavioural science
movement. It is built on the base of classical theory. It modified, improved and
extended the classical theory. Classical theory concentrated on job content and
management of physical resources. Neo-classical theory gave greater emphasis
to man behind the machine and stressed the importance of individual as well as
group relationships in the plant or workplace. The behavioural science approach
to management is the core of psychology and sociology in the understanding of
individual as well as group behaviour in an organisation. It advocated the
importance of human values in business. Original goals and values may be
followed too excessively that this itself becomes end for the organisation. Over
the period, people are provided incentives on such behaviour. For example, rules
are means for achieving organisational goals but following of rules may become
the objective of the organisation and organisational objectives may become
secondary. People may be judged on the basis of observance of rules and not
results. For example, in government organisations, the performance may be
judged on the basis of whether expenditure has been incurred on the lines of
rules and regulations. Thus, expenditure becomes the criterion of performance
measurement and not the results achieved through expenditure.
(a) Unintended Consequences. In bureaucratic structure, there may be
many consequences which have not been visualised but which emerge because
of the system. Such unintended consequences may be of following nature :
1. There may be trained incapacity in the organisation. Trained incapacity
relates to a phenomenon where a person is trained at the matter from a
single point of view. Thus, he does not see beyond his training and tries
to correlate the matter with total situation on the basis of his training. This
happens because of excessive specialisation.
2. There is conflict between professionals and bureaucrats. The basic
reason of conflict is the difference in orientation of professionals and

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bureaucrats. Professionals try to work according to their discipline for
efficiency while bureaucrats try to emphasise rules and regulations.
3. Often there is conflict between organisation and individuals. There are
many characteristics of bureaucratic organisation which work against
human nature. For example, human beings work better when there is
comparatively free environment but bureaucratic organisation puts more
restrictions through rules and regulations. Thus, people try to avoid these
rules and regulations.
(b) Inhuman Organisation. Perhaps the most important criticism of
bureaucracy has come from behavioural scientists who have emphasised on
human bahaviour in the organisation. According to them, bureaucratic structure
is inhuman and works like machine in which there is no importance of human
beings. For example, Argyris holds the view that individual moves from
immaturity to maturity and over the period he matures, while bureaucratic
organisation is designed to suit immature personality. A mature personality
requires less control, innovation in behaviour, and flexibility in working. The
design of bureaucratic structure is against these features. Thus, bureaucracy
works against the basic nature of human behaviour.
A pioneering criticism of bureaucracy comes from organisational
psychologist, Warren Bennis. He sees the model as overly mechanical and no
longer useful. The flaws and dysfunctions of the bureaucratic organisation are
extensive but the main are as follows :
1. It is inhumane and denies man’s needs.
2. It is incompatible with the development of a mature personality.
3. It promotes conformity.
4. It does not consider the informal organisation and interpersonal
difficulties.
5. The hierarchy interferes with communication.
6. Innovation and new knowledge are stifled.
7. It is ineffective in a turbulent environment.
These criticisms are representative of the lack of human aspect of
bureaucracy. The thrust of these criticisms is that bureaucratic structure makes
inadequate assumptions about the real nature of human beings and does not
address itself to the interaction of people within the organisation.
(c) Closed-System Perspective. Bureaucratic organisation has closed-
system perspective. Though a social organisation cannot be a totally closed
system but it may lean towards closed system in its working. A closed system is
self-contained and self maintaining. It is generally rigid and static. It ignores
external conditions and makes no allowances for adapting to changes in the
environment. In other words, It is viewed as operating within a vacuum. Specific
characteristics of closed-system social organisation include predictability,
rationality, optimisation, internal efficiency, and certainty. Since behaviour is

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assumed to be functional and all outcomes predictable, those activities that take
place in the environment—that is changes in social, political and economic and
other factors—can be ignored.
Bureaucratic structure can work well when environment is highly static
and predictable. However, the nature of environment for large organisations of
today is highly dynamic and heterogeneous. In dynamic environment, more
interaction between organisation and environment is required. There is high need
for information monitoring and processing. Thus, an open-system perspective is
more suitable for the management of modern-day organisations while
bureaucratic structure has closed-system perspective.
3.2.2. Hawthorne Experiments and Human Relations
Many of the findings of earlier writers, particularly of scientific
management, which focused attention on the mechanical and physiological
variables of organisational functioning, were tested in the field to increase the
efficiency of the organisations. Surprisingly, positive aspects of these variables
could not evoke positive response in work behaviour, and researchers tried to
investigate the reasons for human behaviour at work. They discovered that the
real cause of human behaviour was something more than mere physiological
variables. Such findings generated a new phenomenon about the human
behaviour and focused attention on the human beings in the organisations. As
such, this new approach has been called ‘human relations approach of
management’.
Even in the writings of classical approach, notably, Taylor, Fayol, Henry
Gantt, Follet, Urwick, and others, the human element in the organisation was
recognised, but they emphasised it very little. The human relations approach was
born out of a reaction to classical approach and during the last seven decades, a
lot of literature on human relations has been developed. The essence of the
human relations contributions is contained in two points: (i) organisational
situation should be viewed in social terms as well as in economic and technical
terms, and (ii) the social process of group behaviour can be understood in terms
of clinical method analogous to the doctor’s diagnosis of the human organism.
Among human relations approach, there are many contributions and many more
researches are being carried on. For the first time, an intensive and systematic
analysis of human factor in organisations was made in the form of Hawthorne
experiments. There will be relatively lengthy discussion of the results and
implications of the Hawthorne studies because of their historical importance to
the behavioural approach to the analysis of management problems.
The Hawthorne plant of the General Electric Company, Chicago, was
manufacturing telephone system bell. It employed about 30,000 employees at
the time of experiments. Although in respect of material benefits to the workers,
this was the most progressive company with pension and sickness benefits and
other recreational facilities, there was great deal of dissatisfaction among the
workers and productivity was not upto the mark. After the utter failure of an
investigation conducted by efficiency experts, in 1924, the company asked for the
assistance from the National Academy of Sciences to investigate the problems of
low productivity.

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In order to investigate the real causes behind this phenomenon, a team
was constituted led by Elton Mayo (psychologist) Whitehead and Roethlisberger
(sociologists), and company representative, William Dickson. The researchers
originally set out to study the relationship between productivity and physical
working conditions. They conducted various researches in four phases with each
phase attempting to answer the question raised at the previous phase. The four
phases were as follows:
1. Experiments to determine the effects of changes in illumination on
productivity, illumination experiments (1924-27),
2. experiments to determine the effects of changes in hours and other
working conditions on productivity, relay assembly test room experiments,
1927-28;
3. conducting plant-wide interviews to determine worker attitudes and
sentiments, mass interviewing programme, 1928-30; and
4. Determination and analysis of social organisation at work, bank wiring
observation room experiments, 1931-32.
1.Illumination Experiments
Illumination experiments were undertaken to find out how varying levels
of illumination (amount of light at the workplace, a physical factor) affected the
productivity. The hypothesis was that with higher illumination, productivity would
increase. In the first series of experiments, a group of workers was chosen and
placed in two separate groups. One group was exposed to varying intensities of
illumination. Since this group was subjected to experimental changes, it was
termed as experimental group. Another group, called as control group, continued
to work under constant intensities of illumination. The researchers found that as
they increased the illumination in the experimental group, both groups increased
production. When the intensity of illumination was decreased, the production
continued to increase in both the groups. The production in the experimental
group decreased only when the illumination was decreased to the level of
moonlight. The decrease was due to light falling much below the normal level.
Thus, it was concluded that illumination did not have any effect on productivity
but something else was interfering with the productivity. At that time, it was
concluded that human factor was important in determining productivity but which
aspect was affecting it was not sure. Therefore, another phase of experiments
was undertaken.
2.Relay Assembly Test Room Experiments
Relay assembly test room experiments were designed to determine the
effect of changes in various job conditions on group productivity as the
illumination experiments could not establish relationship between intensity of
illumination and production. For this purpose, the researchers set up a relay
assembly test room and two girls were chosen. These girls were asked to choose
four more girls as coworkers. The work related to the assembly of telephone
relays. Each relay consisted of a number of parts which girls assembled into
finished products. Output depended on the speed and continuity with which girls

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worked. The experiments started with introducing numerous changes in
sequence with duration of each change ranging from four to twelve weeks. An
observer was associated with girls to supervise their work. Before each change
was introduced, the girls were consulted. They were given opportunity to express
their viewpoints and concerns to the supervisor. In some cases, they were
allowed to take decisions on matters concerning them. Following were the
changes and resultant outcomes:
1. The incentive system was changed so that each girl’s extra pay was
based on the other five rather than output of larger group, say, 100
workers or so. The productivity increased as compared to before.
2. Two five-minute rests—one in morning session and other in evening
session—were introduced which were increased to ten minutes. The
productivity increased.
3. The rest period was reduced to five minutes but frequency was increased.
The productivity decreased slightly and the girls complained that frequent
rest intervals affected the rhythm of the work.
4. The number of rest was reduced to two of ten minutes each, but in the
morning, coffee or soup was served along with sandwich and in the
evening, snack was provided. The productivity increased.
5. Changes in working hours and workday were introduced, such as cutting
an hour off the end of the day and eliminating Saturday work. The girls
were allowed to leave at 4.30 p.m. instead of usual 5.00 p.m. and later at
4.00 p.m. Productivity increased.
As each change was introduced, absenteeism decreased, morale increased and
less supervision was required. It was assumed that these positive factors were
there because of the various factors being adjusted and making them more
positive. At this time, the researchers decided to revert back to original position,
that is no rest and other benefits. Surprisingly, productivity increased further
instead of going down. This development caused a considerable amount of
redirection in thinking and the result implied that productivity increased not
because of positive changes in physical factors but because of a change in the
girl’s attitudes towards work and their work group. They developed a feeling of
stability and sense of belongingness. Since there was more freedom of work,
they developed a sense of responsibility and self-discipline. The relationship
between supervisor and workers became close and friendly.
3.Mass Interviewing Programme
During the course of experiments, about 20,000 interviews were
conducted between 1928 and 1930 to determine employees attitudes towards
company, supervision, insurance plans, promotion, and wages. Initially these
interviews were conducted by means of direct questioning such as do you like
your supervisor? or is he in your opinion fair or does he have favourites? etc.
since this method had disadvantage of either stimulating antagonism or the over-
simplified ‘yes’ or ‘no’ responses which could not get to the root of the problem,
the method was changed to non-directive interviewing where interviewer was

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asked to listen to instead of talking, arguing or advising. The interview
programme gave valuable insights about the human behaviour in the company.
Some of the major findings of the programme were as follows:
1. A complaint is not necessarily an objective recital of facts; it is a symptom
of personal disturbance the cause of which may be deep seated.
2. Objects, persons, and events are carries of social meanings. They
become related to employee satisfaction or dissatisfaction only as the
employee comes to view them from his personal situation.
3. The personal situation of the worker is a configuration, composed of a
personal preference involving sentiments, desires and interests of the
person and the social reference constituting the person’s social past and
his present interpersonal relations.
4. The position or status of a worker in the company is a reference from
which the worker assigns meaning and value to the events, objects and
features of his environments such as hours of work, wages, etc.
5. The social organisation of the company represents a system of values
from which the worker derives satisfaction or dissatisfaction according to
the perception of his social status and the expected social rewards.
6. The social demands of the worker are influenced by social experience in
groups both inside and outside the work plant.
During the course of interviews, it was discovered that workers’ behaviour
was being influenced by group behaviour. However, this conclusion was not very
satisfactory and, therefore, researchers decided to conduct another series of
experiments. As such, the detailed study of a shop situation was started to find
out the behaviour of workers in small groups.
4.Bank Wiring Observation Room Experiments
There experiments were carried on between November 1931 and May
1932 with a view to analyses the functioning of small group and its impact on
individual behaviour. A group of fourteen male workers was employed in the
bank wiring room: nine wiremen, three soldermen and two inspectors. The work
involved attaching wire to switches for certain equipment used in telephone
exchange. Hourly wage rate for the personnel was based on average output of
each worker while bonus was to be determined on the basis of average group
output. The hypothesis was that in order to earn more, workers would produce
more and in order to take the advantages of group bonus, they would help each
other to produce more.. However, this hypothesis did not hold valid. Workers
decided the target for themselves which was lower than the company’s target, for
example group’s target for a day was connecting 6600 terminals against 7300
terminals set by the company. The workers gave following reasons for the
restricted output :
(a) Fear of Unemployment. The basis reasoning of workers was that if there
would be more production per head, some of the workers would be put out of
employment.

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(b) Fear of Raising the Standards. Most workers were convinced that once
they had reached the standard rate of production, management would raise the
standard of production reasoning that it must be easy to attain.
(c) Protection of Slower Workers. The workers were friendly on the job as
well as off the job. They appreciated the fact that they had family responsibility
that required them to remain in the job. Since slower workers were likely to be
retrenched, the faster workers protected them by not overproducing.
(d) Satisfaction on the Part of Management. According to workers,
management seemed to accept the lower production rate as no one was being
fired or even reprimanded for restricted output.
The workers in the group set certain norms of behaviour including
personal conduct. The workers whose behaviour was in conformity with both
output norm and social norm were most preferred. This study suggested that
informal relationships are an important factor in determining the human
behaviour. During the course of experiments, workers were counselled for good
human relations in the company’s plant. The counselling was in regard to
personal adjustment, supervision, employee relations, and management-
employee relations. The supervisors tended to understand and accept the
problems of workers, and managements tried to sense their feelings which were
helpful in formulating the action for resolving management-employee conflicts.
3.2.3. Implications of Hawthorne Experiments
Hawthorne experiments have opened a new chapter in management by
suggesting management through good human relations. Human relations
involves motivating people in organisation in order to develop teamwork which
effectively fulfills their needs and achieves organisational goals. Hawthorne
experiments have tried to unearth those factors which are important for
motivating people at workplace. The major findings of the experiments can be
presented below :
1.Social Factors in Output. An organisation is basically influenced by social
factors. In fact, Elton Mayo, one of the researchers engaged in Hawthorne
experiments, has described an organisation as “a social system, a system of
cliques, informal status system, rituals and a mixture of logical, non-logical
behaviour.” Thus, an organisation is not merely a formal structure of functions in
which production is determined by the official prescription but the production
norm is set by social norms. Since people are social beings, their social
characteristics determine the output and efficiency in the organisation. Economic
rewards and productivity do not necessarily go together. Many non-economic
rewards and sanctions affect the behaviour of workers and modify the impact of
economic rewards. While motivating workers, these factors should be taken into
account.
2.Group Influence. Workers being social beings, they create groups which may
be different from their official group. In fact, groups are formed to overcome the
shortcomings of formal relationships. The group determines the norm of
behaviour of members. If a person resists a particular norm of group behaviour,
he tries to change the group norm because any deviation from the group norm

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will make him unacceptable to the group. Thus, management cannot deal with
workers as individuals but as members of work group subject to the influence of
the group.
3.Conflicts. The informal relations of workers create groups, and there may be
conflict between organisation and groups so created. The conflict may be
because of incompatible objectives of the two. However, groups may help to
achieve organisational objectives by overcoming the restraining aspect of the
formal relations which produce hindrance in productivity. Conflict may also arise
because of maladjustment of workers and organisation. As the individual moves
through the time and space within the organisation, there constantly arises the
need for adjustment of the individual to the total structure. In the absence of such
adjustment, either individual progresses upward at a rapid pace or the
organisation structure itself may change over the time while the individual
remains standstill. In either event, the change takes place in the position of the
individual with respect to organisation structure hence, adjustment is required.
4.Leadership. Leadership is important for directing group behaviour, and this is
one of the most important aspects of managerial functions. However, leadership
cannot come only from a formally-appointed superior as held by earlier thinkers.
There may be informal leader as shown by bank wiring experiments. In some
areas, informal leader is more important in directing group behaviour because of
his identity with group objective. However, a superior is more acceptable as a
leader if his style is in accordance with human relations approach that is the
superior should identify himself with the workers.
5.Supervision. Supervisory climate is an important aspect in determining
efficiency and output. Friendly to the workers, attentive, genuinely concerned
supervision affects the productivity favourably. For example, in the bank wiring
room experiment, an entirely different supervisory climate—more friendly to the
workers and less use of authority in issuing orders—existed which helped in
productivity, while in regular departments, supervisors were concerned with
maintaining order and control which produced inhibiting atmosphere and resulted
in lower productivity.
6.Communication. The experiments show that communication is an important
aspect of organisation. Through communication, workers can be explained the
rationality of a particular action, participation of workers can be sought in
decision-making concerning the matter of their importance, problems faced by
them can be identified and attempts can be made to remove these. A better
understanding between management and workers can be developed by
identifying their attitudes opinions and methods of working and taking suitable
actions on these.

3.2.4 Criticisms of Hawthorne Experiments

Though Hawthorne experiments have opened a new chapter in
management by emphasising the importance of social factors in output, it is not
without fault. The experiments have been widely criticised by some behavioural
scientists because of lack of scientific objectivity used in arriving at various a
conclusions. Some critics feel that there was bias and preconception on the part

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of the Harvard researchers. One writer developed a detailed comparison
between the conclusions drawn by the researchers and the evidence presented,
and found that their conclusions were almost entirely unsupported. He asked the
question, “how it was possible for studies so nearly devoid of scientific merit, and
conclusions so little supported by evidence, to gain so influential and respected a
place within scientific disciplines and to hold this place for so long. Following
other criticisms have also been made against the Hawthorne experiments:
1. The Hawthorne researchers did not give sufficient attention to the
attitudes that people bring with them to the workplace. They did not recognize
such forces as class consciousness, the role of unions, and other extra-plant
forces on attitudes of workers.
2. The Hawthorne plant was not a typical plant because it was a thoroughly
unpleasant place to work. Therefore, the results could not be valid for others.
3. The Hawthorne studies look upon the worker as a means to an end, and
not an end himself. They assume acceptance of management’s goals and
look on the worker as someone to be manipulated by management.
In spite of these shortcomings, Hawthorne experiments will be known for
discovering the importance of human factor in managing an organisation. The
experiments have stimulated many researchers to study the human problems in
management.
(a) Neo-Classical Approach : Advocates of human relations and behavioural
science approach to management are primarily interested in the following areas
of management : (1) Organisation as a social system; (2) Employee motivation
through non-monetary incentives; (3) Democratic leadership; (4) Two-way
communication; (5) Employee development; (6) Group psychology and attitudes;
(7) Human importance in man-machine system. Let us deal with these areas in
brief.
1. The business organisation is not just a techno-economic system.
Basically it is a social system. It is a social organism.
2. The employee can also be motivated by many social and psychological
wants and not solely by economic incentives because his behaviour is also
influenced by feelings, emotions and attitudes. Logical factors (more money)
are less important than emotional factors in determining production efficiency.
The scientific management would ridicule this.
3. Democratic rather than authoritarian leadership is essential in order to
honour demands. Management must learn to develop co-operative attitudes
and not rely merely on command. Matured employees dislike command.
4. Effective two-way communication network is essential to establish
common flow of understanding in any organisation and then only organisation
can attain its goals. Hence, participation becomes an important instrument
under neoclassical approach.
5. Management must take greater interest in employee development and
workers satisfaction as there is a very close connection between morale and

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productivity. In other words, productivity and satisfaction go together hand-in-
hand in any business.
6. Informal group and informal organisation must be recognised. Group
psychology plays an important role in any enterprise. We must rely more on
group efforts. Teamwork is the key to productivity. Management is responsible
for team work.
7. Management must develop social skills in addition to technical skills. The
neoclassical theory tried to solve the man machine equation by emphasising
that man is a living entity and he is far more important than the inanimate
machine. Hence, key to higher productivity lies not in technological
development alone but in reality it lies in the employee morale. Where morale
is high, output is also high. Man-to-Man relationships, team spirit, group
harmony should be given top preference by management.
Job structure, job design should receive secondary importance. Job
enrichment is given greater importance. Employees also expect greater
empowerment in planning and implementation (motivation, communication, co-
ordination), functions of management should receive more importance than the
techniques of planning and control.

3.3 Other Approaches to Management

3.3.1 Social Systems Approach

Social systems approach of management has extended the implications
of human relations approach further. This approach was introduced by Vilfredo
Pareto, a sociologist. His ideas were later developed by Chester Barnard who
synthesised the concept of social systems approach. According to this approach
an organisation is essentially a cultural system composed of people who work in
cooperation. As such for achieving organisational goals, a cooperative system
can be developed by understanding the behaviour of people in groups. The
major features of this approach are as follows :
1. Organisation is a social system, a system of cultural relationships.
2. Relationships exist among the external as well as internal environment of
the organisation.
3. Cooperation among group members is necessary for the achievement of
organisational objectives.
4. For effective management, efforts should be made for establishing
harmony between the goals of the organisation and the various groups
therein.
Contributions of Barnard
The contributions of Chester Barnard to management, particularly social
systems approach, are overwhelming. His book ‘The Functions of the Executive,’
is regarded as the most influential book on the management during the pre-
modern management era. His analysis of management is truly a social systems

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approach since, in order to comprehend and analyse the functions of executives,
he has looked for their major tasks in the system in which they operate. In
determining the tasks of executives, he has analysed the nature of co-operative
social system, as he found non-logical factors also influencing human behaviour
in the organisation. This is a marked departure from the earlier approach. The
major contributions of Barnard can be presented as follows:
1. Concept of Organisation. Barnard suggests that classical concept of
organisation does not fully explain the features of an organisation. He has
defined formal organisation as a system of consciously coordinated activities of
two or more persons. In his opinion, an organisation exists when the following
three conditions are fulfilled: (i) there are persons able to communicate with each
other; (ii) they are willing to contribute to the action; and (iii) they attempt to
accomplish a common purpose.
2. Formal and Informal Organisations. Organisations can be divided into two
parts : formal and informal. The formal organisation has consciously coordinated
interactions which have a deliberate and common purpose. On the other hand,
the informal organisation refers to those social interactions which do not have
consciously coordinated joint purpose. The informal organisation exists to
overcome the problems of formal organisation. In fact, Barnard has suggested
that executives should encourage the development of informal organisation to
serve as a means of communication, to bring cohesion in the organisation, and to
protect the individual from dominance and onslaught of the organisation. Both the
formal and the informal organisations depend on each other and there is
continuous interaction between the two. Therefore, in managing an organisation,
the manager should take into account both types of organisation.
3. Elements of Organisation. According to Barnard, there are four elements
of a formal organisation. These are : (i) a system of functionalisation so that
people can specialise, that is, departmentation; (ii) a system of effective and
efficient incentives so as to induce people to contribute to group action; (iii) a
system of power which will lead group members to accept the decisions of the
executives; and (iv) a system of logical decision-making.
4. Authority. Barnard does not agree with the classical view that authority
transcends from the top to down. He has given a new concept of authority which
is termed as ‘acceptance theory of authority’ or ‘bottom-up authority.’ In his
opinion a person does not obey an order because it has been given by a superior
but he will accept a communication as being authoritative only when four
conditions are met simultaneously: (i) he can understand the communication; (ii)
he believes that it is not inconsistent with the organisational purpose; (iii) he
believes it to be compatible with his personal interest as a whole; and (iv) he is
mentally and physically able to comply with it.
5. Functions of the Executive. Barnard has identified three types of functions
which an executive performs in a formal organisation. These are : (i)
maintenance of organisational communication through a system of organisation,
that is through formal interactions; (ii) the securing of essential services from
individuals in the organisation so as to achieve organisational purpose; and (iii)
the formulation and definition of organisational purpose.

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6. Motivation. Apart from financial incentives which have their own
limitations in motivating the people, Barnard has suggested a number of non-
financial techniques for motivating people. Prominent among these are:
opportunity of power and distinction, pride of workmanship, pleasant
organisation, participation, mutual supporting personal attitudes, and feeling of
belongingness.
7. Executive Effectiveness. To make the executive effective requires a high
order of responsible leadership. While co-operation is the creative process,
leadership is the indispensable fulminator of its forces. Leadership is the most
strategic factor in securing cooperation from the people. Executive leadership
demands high calibre, technological competence, and technical and social skills.
The executive leadership should not have preconceived notions and false
ideologies. It should be above personal predilections and prejudices. The
leadership is likely to commit the following four types of errors: (i) the
oversimplification of the economy of organisation life; (ii) disregarding the reality
of informal organisation and its necessity; (iii) an inversion of emphasis upon the
objective and subjective aspects of authority; and (iv) a confusion of morality
with responsibility. Therefore, executive should take adequate care to overcome
these problems.
8. Organisational Equilibrium. Organisational equilibrium refers to the
matching of individual efforts and organisational efforts to satisfy individuals. The
co-operation of individuals with the organisation brings forth new activities. The
organisation must afford satisfaction to individuals comprising it. This is required
to maintain equilibrium in the organisation. This equilibrium is not static but
dynamic. Demands and aspirations of individuals change and the organisation
has to cope with the dynamic situation. The equilibrium of the organisation
depends on the individuals working in it, other organisations and the society as a
whole. Thus, the organisation has to take into account the changes in the
society. The organisational equilibrium can be perceived not only through logical
appraisal but through analysis and intuition. Thus, many non-logical factors also
enter into organisational analysis. Therefore, the reasons for an action should not
only be logical but must also appeal to those attitudes, predilections, prejudices,
emotions, and mental background that cover action.
The above contributions of Barnard show how he was concerned for the
development of the organisation through social systems. His contributions are
regarded quite high in management. This is evident by the ideas expressed by
William Wolf about the book written by Barnard. “The book is a sociology of
management. Its style of writing was purposely pitched at a high level of
discourse. Barnard was writing for social scientists, not for practitioners. He
believed that the field of management was lacking in concepts and was clouded
by ambiguous and even erroneous thinking. In a sense, he hoped that the
functions would set things right and guide the social scientists to more realistic
studies of organisation and management.”
3.3.2 Decision Theory Approach
Decision theory approach looks at the basic problem of management
around decision-making-the selection of a suitable course of action out of the

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given alternatives. Major contribution in this approach has come from Simon.
Other contributors are March, Cyert, Forrester, etc. The major emphasis of this
approach is that decision-making is the job of every manager. The manager is a
decision-maker and organisation is a decision-making unit. Therefore, the basic
problem in managing is to make rational decision. From this point of view,
decision theory approach has the following features.
1. Management is essentially decision-making.
2. The members of the organisation are decision-makers and problem-
solvers.
3. Organisation can be treated as a combination of various decision centres.
The level and importance of organisational members are determined on
the basis of importance of decisions which they make.
4. Quality of decision affects the organisational effectiveness.
5. All factors affecting decision-making are the subject-matter of study of
management. Besides processes and the techniques involved in
decision-making, other factors affecting the decisions are information
systems, social and psychological aspects of decision-makers. Thus, it
covers the entire range of human activities in organisation as well as the
macro conditions with in which the organisation works.
Contributions of Herbert Simon
Herbert Simon, a Noble prize winner in Economics, has made significant
contributions in the field of management particularly administrative behaviour and
decision making. His contributions cover both social systems and decision theory
approaches, more particularly the latter. Simon examined the principles of
management given by Urwick and Gullick and found them contradictory and
ambiguous. He described these principles as ‘myths’, ‘slogans’; and ‘homely
proverbs’. Simon looked at organisational problems in totality of socio-
psychological context and viewed that decision making takes place in this
context. His major contributions to management are summarised below:
1. Concept of Organisation. Simon has described an organisation as a
complex network of decisional processes, all pointed towards their influence
upon the behaviour of the operatives. He has viewed the organisation containing
distribution and allocation of decision-making functions. According to him,
physiology of the organisation is to be found in the process whereby organisation
influences the decisions of its members, supplying these decisions with their
devices. Thus, the best way to analyse an organisation is to find out where and
by whom decisions are made.
2. Decision-making. Perhaps the greatest contribution of Simon is in the
field of decision-making. Decision-making is the core of management and
management is synonymous with decision-making. This is why he has been
referred to as decision theorist. According to him, the decision process can be
broken into a series of three sequential steps. These are : (i) intelligent activity:
the initial phase of searching the environment for conditions calling for decisions;
(ii) design activity: the phase of inventing, developing, and analysing possible

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course of action to take place; and (iii) choice activity: the final phase of actual
choice selecting a particular course of action from those available.
3. Bounded Rationality. Simon is of the view that man is not completely
rational. He has criticised the theories which are based on the assumptions of
complete rationality. He has advocated the principle of bounded rationality.
Accordingly, managers do not go for maximum satisfaction out of a decision but
are satisfied with good enough satisfaction from a decision. Managers cannot
maximise on account of various limitations and constraints. A decision is rational
if for achieving the desired ends, appropriate means are adopted. However, it is
not easy to separate the ends from the means because of ends-means chain.
This ends-means chain is seldom and integrated or completely integrated one.
The relationship between organisational activities and ultimate objectives is also
not clear. Moreover, a simple ends-means chain analysis may not help in
reaching accurate conclusion because what is an end at one point of time or at
one level of organisation might be a means at the other time or at other level of
the organisation.
4. Administrative Man. Simon has given the concept of administrative man
as the model of decision-making. The model is based on the following
assumptions: (i) Administrative man adopts satisficing approach in decision-
making rather than the maximising approach of economic man. (ii) He perceives
the world as a simplified model of real world. Thus, he remains content with
simplification. (iii) He can make his choice without first determining all possible
alternatives and without ascertaining that these are in fact all the alternatives. (iv)
He is able to make decisions with relatively simple rule of thumb, or tricks of
trade, or force of habit. The administrative man model describes the decision-
making process of managers truly than alternative theory of economic man.
5. Organisational Communication. Simon has emphasised the role of
communication in organisation. According to him, there are three stages in the
communication process: initiation, transmittal, and receipt of information. There
may be blockade of communication at any of these three stages. In order to
overcome the problem of communication, he has emphasised the role of informal
communication and has attached less importance to the formal network of
authority.

3.3.3 Contributions of Peter Drucker

Among the contemporary management thinkers, Peter Drucker outshines
all. He has varied experience and background which include psychology,
sociology, law and journalism. Through his consultancy assignments, he has
developed solutions to number of managerial problems.
Therefore, his contributions cover various approaches of management.
He has written many books and papers. The more important books are The
Practice of Management (1954), Managing by Results (1964), The Effective
Executive (1967), The Age of Discontinuity (1969), Management: Tasks,
Responsibilities and Practices (1974), and Management Challenges for 21st
Century (1999), The main contributions of Drucker can be presented as follows:

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1. Nature of Management. Drucker is against bureaucratic management and
has emphasised management with creative and innovative characteristics. The
basic objective of management is to lead towards innovation. The concept of
innovation is quite broad. It may include development of new ideas, combining of
old and new ideas, adaptation of ideas from other fields or even to act as a
catalyst and encouraging others to carry out innovation. He has treated
management as a discipline as well as profession. As a discipline, management
has its own tools, skills, techniques, and approaches. However, management is
more a practice rather than a science. Thus, Drucker may be placed in ‘empirical
school of management’. While taking management as a profession, Drucker
does not advocate to treat management as a strict profession but only a liberal
profession which places more emphasis that managers should not only have
skills and techniques but should have right perspective putting the things into
practice. They should be good practitioners so that they can understand the
social and cultural requirements of various organisations and countries.
2. Management Functions. According to Drucker, management is the organ
of its institution. It has no functions in itself, and no existence in itself. He sees
management through its tasks. Accordingly, there are three basic functions of a
manager which he must perform to enable the institution to make its contributions
for (i) the specific purpose and mission of the institution, whether business,
hospital or university; (ii) making work productive and the worker achieving; and
(iii) managing social impacts and social responsibilities. All these three functions
are performed simultaneously within the same managerial action. A manager has
to act as administrator where he has to improve upon what already exists and is
already known. He has to act as entrepreneur in redirecting the resources from
areas of low or diminishing results to areas of high or increasing results. Thus, a
manager has to perform several functions: setting of objectives, decision-making,
organising, and motivating. Drucker has attached great importance to the
objective setting function and has specified eight areas where clear objective
setting is required. These are : market standing, innovation, productivity, physical
and financial resources, profitability, managerial performance and development,
worker performance and attitude, and public responsibility.
3. Organisation Structure. Drucker has decried bureaucratic structure
because of its too many dysfunctional effects. Therefore, it should be replaced.
He has emphasised three basic characteristics of an effective organisation
structure. These are : (i) enterprise should be organised for performance; (ii) it
should contain the least possible number of managerial levels ; and (iii) it must
make possible the training and testing of tomorrow’s top managers—giving
responsibility to a manager while still he is young. He has identified three basic
aspects in organising: activity analysis, decision analysis, and relation analysis.
An activity analysis shows what work has to be performed, what kind of work
should be put together, and what emphasis is to be given to each activity in the
organisation structure. Decision analysis takes into account the four aspects of a
decision : the degree of futurity in the decision, the impact of a decision over
other functions, number of qualitative factors that enter into it, and whether the
decision is periodically recurrent or rare. Such an analysis will determine the level
at which the decision can be made. Relation analysis helps in defining the
structure and also to give guidance in manning the structure.

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4. Federalism. Drucker has advocated the concept of federalism.
Federalism refers to centralised control in decentralised structure. Decentralised
structure goes far beyond the delegation of authority. It creates a new
constitution and new ordering principle. He has emphasised the close links
between the decisions adopted by the top management on the one hand and by
the autonomous unit on the other. This is just like a relationship between federal
government and state governments. In a federal organisation, local
managements should also participate in the decisions that set the limits of their
own authority. Federalism has certain positive values over other methods of
organising. These are as follows: (i) it sets the top management free to devote
itself to its proper functions; (ii) it defines the functions and responsibilities of the
operating people; (iii) it creates a yardstick to measure their success and
effectiveness in operating jobs; and (iv) it helps to resolve the problem of
continuity through giving the managers of various units education in top
management problems and functions while in an operating position.
5. Management by Objectives. Management by objectives (MBO) is
regarded as one of the most important contributions of Drucker to the discipline
of management. He introduced this concept in 1954. MBO has further been
modified by Schleh which has been termed as ‘management by results’. MBO
includes method of planning, setting standards, performance appraisal, and
motivation. According to Drucker, MBO is not only a technique of management
but it is a philosophy of managing. It transforms the basic assumptions of
managing from exercising control to self-control. Therefore, in order to practise
MBO, the organisation must change itself. MBO has become such a popular way
of managing that today it is regarded as the most modern management
approach. In fact, it has revolutionalised the management process.
6. Organisational Changes. Drucker has visualised rapid changes in the
society because of rapid technological development. Though he is not resistant
to change, he feels concerned for the rapid changes and their impact on human
life. Normally, some changes can be absorbed by the organisations but not the
rapid changes. Since rapid changes are occurring in the society, human beings
should develop philosophy to face the changes and take them as challenges for
making the society better. This can be done by developing dynamic
organisations which are able to absorb changes much faster than static ones.
Drucker’s contributions have made tremendous impact on the
management practices. His contributions have been recognised even by the
management thinkers of Socialist Bloc. For example, Vishiani, a USSR
management thinker, writes about Drucker as follows : “Drucker shows a certain
foresightedness and understanding of the development prospects of modern
production when he opposes the view that worker is no more than an appendage
of machine. Moved by the desire to strengthen the position of capitalism, he
endeavours to give due consideration also to some objective treads in production
management. Drucker, therefore, tells the industrialists not to fear a limited
participation of the workers in the management of production processes. He
warns them that if they do not abandon that fear, the consequences may be fatal
to them.” Drucker is perhaps the only Western management thinker who has
attracted so much attention of the communist world.

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3.3.4 Management Science Approach
Management science approach, also known as mathematical or
quantitative measurement approach, visualises management as a logical entity,
the action of which can be expressed in terms of mathematical symbols,
relationships and measurement data. The primary focus of this approach is the
mathematical model. Through this device, managerial and other problems can be
expressed in basic relationships and, where a given goal is sought, the model
can be expressed in terms which optimise that goal. This approach draws many
things from the decision theory approach and, in fact, provides many techniques
for rational decision-making. The major features of this approach are as follows:
1. Management is regarded as the problem-solving mechanism with the
help of mathematical tools and techniques.
2. Management problems can be described in terms of mathematical
symbols and data. Thus every managerial activity can be quantified.
3. This approach covers decision-making, systems analysis and some
aspects of human bahaviour.
4. Operations research, mathematical tools, simulation, models, etc., are the
basic methodologies to solve managerial problems.
Management science approach is a fast developing one in analysing and
understanding management. This has contributed significantly in developing
orderly thinking in management which has provided exactness in management
discipline. Various mathematical tools like sampling, linear programming, game
theory, time series analysis, simulation, waiting line theory, etc., have provided
more exactness in solving managerial problems. However, it is very difficult to
call it a separate school of management because it does not provide the answer
for the total managerial problems. Moreover, many managerial activities are not
really capable of being quantified because of involvement of human beings who
are governed by many irrational factors also.

3.3.5 Human Behaviour approach

Human behaviour approach is the outcome of the thoughts developed by
behavioural scientists who have looked at the organisation as collectivity of
people for certain specified objectives. Since management involves getting things
done by people, the study of management must revolve around human
behaviour. The approach, also known as ‘leadership’ ‘behavioural science’ or
human resource approach brings to bear the existing and newly-developed
theories and methods of the relevant behavioural sciences upon the study of
human behaviour. In contrast to human relations approach which assumes that
happy workers are productive workers, human behaviour approach has been
goal and efficiency-oriented and considers the understanding of human
behaviour to be the major means to that end. The human behaviour approach
emphasises human resources in an organisation more as compared to physical
and financial resources. Since this approach studies human behaviour ranging
from personality dynamics of individuals at one extreme to the relations of culture

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at the other, this can be divided into two groups: interpersonal behaviour
approach and group behaviour approach. Writers on interpersonal behaviour
approach are heavily oriented towards individual psychology while writers on
group behaviour approach rely on social psychology and emphasise on
organisational behaviour.
Among the many individual and social psychologists who have
contributed to management are Maslow (need hierarchy), Herzberg (motivation-
hygiene theory and job enrichment), McGregor (theory X and Y), Likert
(management systems and linking pin model), Argyris (immaturity-maturity
theory, integration of individual and organisational goals, and pattern of A B
analysis), Blake and Mouton (managerial grid), Sayles (interpersonal behaviour),
Bennis (organisational development), Fiedler (contingency model of leadership
styles), Tannenbaum and others (continuum approach of leadership). Besides,
notable contributions have come from those who have expanded a particular
concept formulated earlier to make it more practicable. They include Leavitt,
Stogdill, Vroom, Reddin, etc.
Apart from psychologists who have concentrated more on individual
behaviour in organisation, significant contributions have come from sociologists
who have studied human behaviour in group and have emphasised on group
behaviour. No table among them are Homans (human group), Bakke (fusion
process), Lewin (group dynamics), Katz and Kahn (social psychology of
organisations). Some others have attempted to integrate the various views such
as Debin, Dalton, Selznick, etc.
Major conclusions of the contributions made by behaviouralists can be
presented as follows :
1. People do not dislike work. If they have helped to establish objectives,
they will want to achieve them. In fact, job itself is a source of motivation
and satisfaction to employees.
2. Most people can exercise a great deal of self-direction, self-control and
creativity than are required in their current job. Therefore, there remains
untapped potential among them.
3. The manager’s basic job is to use the untapped human potential in the
service of the organisation.
4. The manager should create a healthy environment wherein all
subordinates can contribute to the best of their capacity. The environment
should provide a healthy, safe, comfortable and convenient place to work.
5. The manager should provide for self-direction by subordinates and they
must be encouraged to participate fully in all important matters.
6. Operating efficiency can be improved by expanding subordinate
influence, self direction and self-control.
7. Work satisfaction may improve as a ‘by-product’ of subordinates making
full use of their potential.

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3.3.6 Systems Approach to Management
The systems approach to management and organisation indicates a new
stream of management thought under modern theory of management. Since
1950, we have a period of refinement, extension and synthesis of management
thought and practice. While the behavioural and quantitative schools were
developing new concepts and techniques of management, a new direction in
management thought appeared which is usually called as the systems approach.
Basically it took up where the process management school left off in attempting
of unify management theory. It stresses the inter-relatedness and
interdependence of all activities within an organisation. It includes operations
research, behavioural sciences social technical systems, management
information systems and industrial dynamics.
Industrial engineering time and motion study, operations research (called
management science) and systems analysis have refined and streamlined
scientific management. Similarly, we have parallel growth and refinement in
personnel management and industrial relations. The human relations approach is
itself now refined and we have adopted more objective and value based
approach to understand persons in organisations. This was due to increasing use
of psychology, sociology, psychiatry in the investigation of human behaviour in
organisations. The greatest influence upon current management thought is, of
course, due to adoption of systems approach to our organisations and
management.
The systems approach was developed only after 1950. It is the recent
contribution to management thought. It was stimulated by the development of
operations research. Modern theory considers an organisation as an open
adaptive system which has to adjust to changes in its environment. An
organisation is now defined as a structured process in which individuals interact
(act and react) for attaining objectives. Classical theory defined organisation as
the structure of relationship, powers, objectives, roles, activities, communications
and others factors that exist when persons work together. It represented only
mechanistic structure. Modern definition also incorporates humanistic approach.
Neoclassical theory defined organisation as a group of people with a common
objective and it emphasised the humanistic approach.
(a) What is a System?
The word system is derived from Greek word meaning to bring together
or to combine. A system is a set of inter-connected and inter-related elements or
component parts which operate together to achieve certain goals. When relating
systems to organisations, a system is an established arrangement of
components which leads to the accomplishment of particular objectives as per
plan.
This definition has three significant parts: (1) Every system is goal-
oriented and it must have a purpose or objective to be attained. The objective
provides the basis for evaluating functions performed within the system. (2) In
designing the system we must establish the necessary arrangement of
components. This is nothing but organising function of management. (3) Inputs of

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information, material and energy are allocated for processing as per plan so that
the outputs can achieve the objective of the system viz., productivity and
satisfaction.

Plans Inputs Outputs

1. Objectives 1. Information 1. Information

2. Policies 2. Energy 2. Energy
3. Procedures 3. Materials 3. Products
4. Programme 4. Services
5. Schedules 5. Satisfaction
6. Methods

Goals & Plans Resources Saleable products

Services

Fig. 3.1 The Design of a Basic System

Note : (1) Generally there are three basic inputs that enter the process or of the
system viz., information (technology) energy (motive power) and materials to be
transformed into goods. (2) If the output is service, materials are not included in
the inputs. (3) If we have manufacturing company, output is goods or materials. If
we have a consulting firm, output is information or advice. If we have a power
generating company, output is energy. (4) The feature which define and
delineate a system forms its boundary. The system is inside the boundary; the
environment is outside the boundary.
(b)Systems Approach Applied to an Organisation.

When systems approach is applied to an organisation, we have the

following features of an organisation as an open adaptive system: (1) It is a
subsystem of its broader environment. (2) It is goal-oriented people with a
purpose. (3) It is a technical subsystem— using knowledge, techniques,
equipment and facilities. (4) It is a structural subsystem—people working
together on interrelated activities. (5) It is a psychosocial system— people in
social relationship. (6) It is co-ordinated by a managerial subsystem creating,
planning organising, motivating, communicating and controlling the overall efforts
directed towards set goals.
Elements of environment include persons, physical resources, climate,
economic and market conditions, attitudes, competition, and laws. The
environment offers both opportunities and risks. Management overcomes risks
and exploits opportunities.

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AN ORGANISATION AS AN OPEN ADAPTIVE SYSTEM

(SIMPLE FEEDBACK IN A CONTROL SYSTEM)

Fig. 3.2 An Organisation as an Open Adaptive System.

Dotted circle points out Environment Area.
Note : (1) Modern theory regards an organisation as an open-system consisting
of five basic parts or elements: (a) Input. (b) Process of transformation, (c)
Output. (d) Feedback in a control system and (e) Environment. (2) The
organisation and its environment are interdependent. (3) It is an open system
which adapts to changing needs of the environment through a process of
feedback—an perhaps systems approach has attracted the maximum attention
of thinkers in management particularly in the present era. Though this approach
is of comparatively recent origin, starting late 1950, it has assumed considerable
importance in analysing the phenomena of management. It is an integrating
approach which considers management in its totality based on empirical data.
The basic idea of systems approach is that any object must rely on a method of
analysis involving simultaneous variations of mutually dependent variables. This
happens when systems approach is applied in management.
(c) Features of a System
A system is an assemblage of things connected or interrelated so as to
form a complex unity; a whole composed of parts and sub-parts in orderly
arrangement according to some scheme or plan. This has been defined as “an
organised or complex whole; an assemblage or combination of things or parts
forming a complex unitary whole.” On the basis of this definition, various features
of a system can be identified.
1. A system is basically a combination of parts, subsystems. Each part may have
various sub-parts. When a subsystem is considered as a system without

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reference to the system of which it is a part, it has the same features of a system.
Thus, a hierarchy of systems and subsystems can be arranged. For example, the
universe is a system of heavenly bodies which includes many subsytems of stars
called galaxies. Within a galaxy, there is solar system. When we consider galaxy
as a system, solar system may become a subsystem but we can also consider
solar system consisting of so many planets. In the same way, an organisation is
a system of mutually dependent parts, each of which may include many
subsystems.
2. Parts and sub-parts of a system are mutually related to each other, some
more, some less; some directly, some indirectly. This relationship is not natural,
given, or unalterable in a social system. The relationship is in
the context of the whole. Any change in one part may affect other parts also.
Therefore, how various parts are given relationship is important for the
functioning of the system.
3. A system is not merely the totality of parts and subparts but their arrangement
is more important. The whole becomes greater than the total of individual parts
because of the type of arrangement made in these parts and subparts. Thus, a
system is an interdependent framework in which various parts are arranged.
4. A system can be identified because it has a boundary. In the case of physical
system, this boundary is quite visible and, therefore, the system can be identified
easily. However, in the case of a social system, the boundary is not visible
because it is not like a line or wall that functions to preserve or to define what is
inside. Instead, the boundary maintains proper relationship between the system
and its environment—objects lying outside the system. Identification of this
boundary in the case of human organisation facilitates the management of a
system by differentiating those which can be controlled because they are the
parts of the system and those which cannot be controlled because they are
outside the system.
5. The boundary of a system classifies it into two parts: closed system and open
system. All living organisms are open systems while all non-living systems are
closed systems. The major differences between the two will be identified shortly.
6. System transforms inputs into outputs. This transformation process is essential
for the survival of the system. There are three aspects involved in this
transformation process: inputs, mediator, outputs. Inputs are taken from the
environment, transformed into outputs, and given back to the environment.
Various inputs may be in the form of information, money, materials, human
resources, etc. Outputs may be in the form of goods and services. The total
relationship may be called as input-output process and system works as
mediator in this process. However, in this process, system restores some of the
inputs taken from the environment. Restoring the inputs taken from the
environment helps the system maintain its structure and avoid decay and death.
Thus, the system can grow over the period of time. For example, a business
organisation survives and grows over the period of time by earning profit in the
process of transforming inputs into outputs. Profit is essential for the organisation
of survive.

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(d) Open and Closed Systems
The boundary of a system classifies it into two parts: closed system and
open system. All living organisms are open system while all non-living systems
are closed system. The major differences between the two are as follows :
1. Closed systems are those that have no interaction with environment, that is,
no outside system impinges on them or for which no outside systems are to be
considered. Open systems are those that ineract with their environment, that is,
they have systems with which they relate, exchange, and communicate.
2. Closed systems are self-contained and self-maintaining as they do not interact
with the environment. Open systems interact with their environment and in this in
interaction, they import energy and export output. Because of this interaction,
closed system are rigid and static but open systems are dynamic and flexible as
they are subject to change by environment forces.
3. Closed systems are generally mechanical, for example, an automatic watch.
Therefore, once they are set, they work. However, open systems are affected by
environmental factors and they have to be adjusted according to environment.
Thus, they require restructuring because of change in environment.
4. Closed systems are like close loop while open systems are characterised by
negative entropy. They import more energy than is expended or consumed.
Thus, they can grow over the period of time. When this relationship is reversed,
the open systems decline.
5. Open systems have feedback mechanism that helps them to maintain
homoeostatic, a kind of equilibrium. Homoeostatic is a process through which a
system regulates itself around a stable state. For example, human body works on
the principle of homoeostatic. It maintains its temperature relatively at a constant
level despite variations in the environmental temperature. Similarly thermostat
maintains this equilibrium. However, organisational equilibrium is not static. It
being a dynamic system, gets feedback to maintain dynamic equilibrium. In
closed systems, there is no such feedback mechanism.
The distinction between closed and open systems is there but really no
system is a closed one but has some properties of open systems. The
classification of various systems into closed and open is not very proper.
Therefore, it is more appropriate to think of systems in terms of the degree to
which they are open or closed rather than using a dichotomy of open-close.
(e) Features of Management as System
Under the systems approach, management is regarded as a system. It
draws heavily from systems concepts. When systems concepts are applied to
management, it is taken in the following ways :
1. Management as a Social System.
Management can be considered as a system. Therefore, management has all
the characteristics of a system as discussed above. However, management is a
social system and unlike biological or mechanical systems, it has the
characteristics of social systems. This concept of social system is quite different

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from co-operative social system as discussed earlier. Management as a system
consists of many subsystems which are integrated to constitute an entity.
2. Management as Open System.
Management, like any other social system, is an open system. It interacts with its
environment. Out of this interaction, it takes various resources, allocates and
combines these resources to produce desirable outputs which are exported to
the environment. Thus, management works as input-output mediator. These
features of management suggest that it is not free to decide the things on its own
but due weightage has to be given to the environmental factors affecting the
management of an organisation. Consideration is required at the levels of taking
inputs, transforming them into outputs, and exporting the outputs to the
environment.
3. Adaptive.
Organisation being an open system, its survival and growth in a dynamic
environment demands an adaptive system which can continuously adjust to
changing environment. Management tends to achieve environmental constancy
by bringing the external world under control, or bringing internal modification of
organisational functioning to meet the needs of the changing world. Since there
is a provision of feedback mechanism, management can evaluate its
performance and take corrective actions. In fact, the basic role of management is
considered in terms of its adaptability to environment.
4. Dynamic.
Management as a system is dynamic. It suggests that management attempts at
achieving equilibrium in the organisation. However, this equilibrium is not static
as happens in mechanical systems. Management moves towards growth and
expansion by preserving some of the energy. Managerial effectiveness depends
on this energy exchange. Therefore, it is not only the internal processing process
that determines the effectiveness of management but also how it interacts with
the changing environment in terms of taking inputs and giving outputs also
determines its effectiveness.
5. Probabilistic.
Management is probabilistic and not deterministic. A deterministic model always
specifies the use of model in a condition with predetermined results. Therefore,
the outcome of an action can be predicted accurately. For example, is one wants
to get the total of 250 and 500, he can press the button of a calculator and gets
750. This is possible because the outcome is certain. In the case of probabilistic
model, the outcome can be assigned only probability and not certainty. For
example, if a coin is tossed, the probability of getting a head is 0.5. But one
cannot say with certainty that there will be 50 heads out of tossing of a coin 100
times. Management being probabilistic points out only the probability and never
the certainty of the performance and consequent results. Management has to
function in the face of many dynamic variables and there cannot be absolute
predictability of these variables. For example, we make forecast of future events

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but the forecast is relevant to a certain degree only and not to the level of
certainty. This is what management takes into account.
6. Multilevel and Multidimensional.
Systems approach of management points out the multilevel and multidimensional
features of management. It has both macro and micro approach. At macro level,
it can be applied to supras system, say, a business system as a whole. At micro
level, it can be applied to an organisation. Even it can be applied to a
suprasystem of an organisation. However, it has the same characteristics at all
these levels : subsystem level, system level, and subsystem level. Thus, both
parts and whole are equally important in managing.
7. Multivariable.
Management is multivariable and involves taking into account many variables
simultaneously. This feature of management suggests that there is no simple
cause-effect phenomenon, rather an event may be the result of so many
variables which themselves are interrelated and interdependent. This
interrelatedness and interdependence makes managing quite a complex
process. Thus, it realises the complexity of management.
8. An Integrated Approach.
Systems approach of management takes an integrated view of managing. It
identifies the reason for a phenomenon in its wider context taking into account
the total factors affecting the phenomenon. In other approaches, a particular
phenomenon has been explained in terms of a single factor or cluster of factors.
Management tries to integrate the various factors to find out the reasons behind
a phenomenon. It emphasises on how the management of one subsystem of the
organisation should be taken in relation with others because other subsystems
become environment for the give system. Thus, the problem in one subsystem
should not be traced into the subsystem only but in a much wider context. This is
true for the management of whole organisation also.
(f) Implications of Systems Approach
Systems approach of management provides an integrated approach of
managing. This considers management in its totality. The integrative approach of
managing can be best understood by quoting Churchman on the systems
approach of management. He writes as follows:
‘‘There is a story often told in logic text about a group of blind men who
were assigned the task of discovering an elephant. Each blind man was located
at a different part of the body. A horrendous argument arose in which each
claimed to have a complete understanding of the total elephantine system. What
is interesting about this story is not so much the fate of the blind men but the
magnificent role that the teller had given himself, namely, the ability to see the
whole elephant and consequently the ridiculous behaviour of the blind system
describers. The story is in fact a piece of arrogance. It assumes that a very
logically astute man always gets on the top of a situation, so to speak, and looks
at the foolishness of the people who are incapable of seeing the whole.”

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The quotation aptly describes how management problems should be
seen in an organisation, that is, by taking the totality of the organisation and not a
part of it. This implies that there should be integration of various forces affecting
management. We have entered a period that forces us to find out more accurate
answers to the questions involving the wholeness of an operation. This age of
synthesis forces management to think out in new and different ways, as
suggested by the systems approach. In this, view, the whole is not merely a
combination of its different parts but more than that. This more can be achieved
by combining the various parts in a particular way.
Systems approach possesses the conceptual level of managerial analysis
much higher than any other approach. It discards the simplistic approach of
managerial analysis and suggests that management of an organisation must be
consistent with the demands of organisational environment and the needs of its
members. It provides a framework through which organisation-environment
interaction can be analysed and facilitates decision-making, since the system
within which managers make decisions can be provided as a more explicit
framework, and decision-making is easier to handle.
(g) Limitations of Systems Approach
Though systems approach possesses conceptual framework of much
higher order as compared to other approaches, it may be emphasised that this in
no way is the unified theory of management. Systems approach came in a big
way in managerial analysis and raised the hope of becoming a general and
unified theory of management. A general and unified theory can be applied to all
types of organisations, presenting their comprehensive analysis so that those
who want to study organisations from different angles can derive knowledge.
This was exactly expected of systems approach. However, this promise could not
be fulfilled because systems approach suffers from two limitations.
1. Abstract Approach.
It is often suggested that systems approach is too abstract to be of much use to
practising managers. It merely indicates that various parts of the organisation are
interrelated. Similarly, an organisation is a social system and, therefore, is related
with other organisations in the society. This is true and significant for managing.
But it fails to spell out precisely relationships among these. Therefore, its
contribution to managing is limited. For example, it is one thing to say that
economic forces trigger social, technical and psychological changes in the
organisation. But this is not enough for managing a organisation. What is
required is a statement of what economic forces initiate what social,
technological and psychological changes.
2. Lack of Universality.
Systems approach of management lacks universality and its precepts cannot be
applied to all organisations. For example, systems approach provides modern
structural forms, cybernetic system for control and communication. These
systems are suitable for large and complex organisations but are not suitable for
small organisations. Since most modern organisations are large and complex, it
is argued that systems approach is applicable in general. This may be true but

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the role of a theory is not to prescribe actions for a particular category of
organisations, rather, the theory should specify the relationships among different
variables which can be applied to all organisations. If systems approach is seen
in this perspective, some people believe that the approach is as incomplete as
any other. In fact, they argue that this approach does not offer anything new. The
managers have been doing their jobs seeing the problems as a network of
interrelated elements with interaction between environments inside and outside
of their organisations. Looking into these shortcomings of systems approach,
researchers have tried to modify the systems approach. This attempt had led to
the emergence of a separate, though related, approach, situational or
contingency approach.
3.3.7. Contingency or Situational Approach
Contingency or situational approach is an important addition to the
paradigm of modern management theory and approach. In one way, this is an
extension of systems approach. The basic idea of contingency approach is that
there cannot be a particular management action which will be suitable for all
situations. Rather, an appropriate action is one which is designed on the basis of
external environment and internal states and needs. Contingency theorists
suggest that systems approach does not adequately spell out the precise
relationship between organisation and its environment. Contingency approach
tries to fill this gap by suggesting what should be done in response to an event in
the environment.
Some researchers distinguish between contingency and situational
approaches by suggesting that situational management implies that what a
manager does depends on a given situation. Contingency approach, on the other
hand, suggests an active interrelationship between the variables in a situation
and the managerial actions devised. Thus, contingency approach takes into
account not only given situations but also the influence of given solutions on
behaviour patterns of an organisation. Despite these differences and emphasis
on varying factors, themes of both the approaches are common. In fact, some
authors believe that the term contingency is misleading and they should have
used the term situational. Nevertheless, both terms are used interchangeably.
The basic theme of contingency view can be presented by quoting Tosi and
Hammer. They say that: “When a subsystem in a organisation behaves in
response to another system or subsystem, we say that response is contingent on
environment. Hence, a contingency approach is an approach where the
behaviour of one subunit is dependent on its environmental relationship to other
units or subunits that have control over the consequences desired by that
subunit.”
Judged in the light of this statement, contingency approach has the following
features :
1. Management action is contingent on certain action outside the system or
subsystem as the case may be.
2. Organisational action should be based on the behaviour of action outside
the system so that organisation should be integrated with the environment.

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3. Because of the specific organisation-environment relationship, no action can
be universal. It varies from situation to situation.
(a) Relationship between Systems and Contingency Approaches
Contingency approach has emerged out of the systems approach.
Contingency theorists have accepted the basic tenets of systems approach. They
accept the basic features of organisation-environment relationship and dynamic
nature of organisation. However, they feel that systems approach is too abstract
to apply for managerial action. This can be overcome by modifying systems
framework and translating it into operational framework. Therefore, both
approaches are related but they differ in certain context. A comparison between
the two can be presented as follows :
1. Model of Human Being.
The range of activities of human beings is different under two approaches.
Systems usually employs a richer model of human beings than contingency
approach. The former takes into account the full range of human behaviour in the
organisation while contingency approach, by and large, is interested in structural
adaptation of organisation to its task environment. Therefore, contingency
theorists talk mostly in terms of structural change in the organisation in response
to a change in the environment.
2. Organisational Variables.
Systems approach is very broad in considering the organisational variables. It
tries to cover personal, social, technical, structural and environmental variables.
Therefore, managing involves establishing relationships among these variables
and considering them in taking any action. Contingency approach, on the other
hand, concentrates on structural adaptation of organisation. This approach tends
to predict the ultimate outcome of a disturbance of the organisational equilibrium
by a change in the task environment.
3. Evolution.
Major contributors in systems approach have been social psychologists while
sociologists have contributed to contingency approach. Contingency approach
has been built up over systems approach. Therefore, it is possible that both
approaches may merge or profoundly influence each other. In fact, there are
signs of convergence of two approaches. This is likely to continue and system
approach may specify situations under which a particular type of organisation
can function well. In fact, equifinality character of open system suggests that
different strategies can be adopted by an organisation facing a particular
problem. Similarly, contingency approach may provide the process by which the
organisation may adapt to its task environment. Both these efforts are quite
similar.
(b) Implications of Contingency Approach
Contingency approach is an important addition to the paradigm of modern
theory of management. It is the sophisticated approach to understand the
increasing complexity of organisations. It emphasises the multivariate nature of

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organisations and attempts to understand how organisations operate under
varying conditions. The approach is directed towards suggesting organisational
designs and managerial actions most appropriate to specific situations. The
major implications of contingency approach are as follows:
1.Management is entirely situational and there is nothing like universal principles
of management or one best way of doing a particular thing. What managers do
depends on the circumstances and environment. Lorsch and Lawrence have
described the implication of situational management as follows:
“Underlying this new approach (contingency approach) is the idea that the
internal functioning of organisations must be consistent with the demands of the
organisation task, technology, or external environment, and the needs of its
members if the organisation is to be effective. Rather than searching for the
panacea of the one best way to organise under all conditions, investigators have
more and more tended to examine the functioning of organisations in relation to
the needs of their particular members and the external pressures facing them.
Besically, this approach seems to be leading to the development of a
‘contingency theory of organisation with the appropriate internal states and
processes of the organisation contingent upon external requirements and
member needs.”
2. The approach suggests suitable alternatives for those managerial actions
which are generally contingent upon external and internal environment such as
organisational design, strategy formulation, decision systems, influence systems,
leadership, and organisational improvement. In all these cases, action
alternatives cannot be arranged in advance but have to be identified and
adjusted according to the situations in which decisions in respect of these have
to be made.
3. Contingency approach suggests that since organisation interacts with its
environment, neither the organisation nor any of its subsystems is free to take
absolute action. Rather, it has to modify and adjust the actions subject to various
forces like social, political, technical, and economic. Besides, the actions should
be according to the needs of internal state of the organisation or its subsytems.
Thus, the basic problem of managing is to align the internal state with the
external state.
(c) Limitations of Contingency Approach
In spite of the various contributions, contingency approach has not been
acknowledged as a unified theory of management because it suffers from some
limitations. These limitations are of the following nature:
1. Inadequate Literature.
Contingency approach suffers from inadequacy of literature. Therefore, it has
not adequately spelled out various types of actions which can be taken under
different situations. It is not sufficient to say that ‘managerial action depends on
the situation.’ The approach should provide ‘if this is the situation, this action can
be taken’. Unless this is done, the approach cannot offer much assistance to the

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practice of management. No doubt, researches have been conducted in this
direction but, by and large, they have not satisfied the needs of managers.
2.Complex.
The suggestion of the approach is very simple, that is, managers should do
according to the needs of the situation. However, when put into practice this
becomes very complex. Determination of situation in which managerial action is
to be taken involves analysis of a large number of variables with multifarious
dimensions. Therefore, there is a possibility that managers, who are always short
of time, may ignore the thorough analysis of all these variables and may resort to
short-cut and easier way.
3. Difficult Empirical Testing.
Contingency approach, being complex, presents problems in testing the precepts
of the theory. For empirical testing of a theory, it is necessary that some
methodology is available. No doubt, methodology is available but because of the
involvement of too many factors, testing becomes difficult. For example,
contingency theory suggests that greater the degree of congruence between
various parts of organisational components, the more effective will be
organisational behaviour at various levels. This lacks the empirical validity and
hence cannot be adopted to managerial actions.
4. Reactive not Proactive.
Contingency approach is basically reactive in nature. It merely suggests what
managers can do in a given situation. For a given organisation, suprasystem
constitutes environment and management can be applied to suprasystem also.
Therefore, managers are responsible to manage the environment in such a way
that they avoid the undesriable aspects of environment. Since the managers are
quite powerful in the society, they must be in a position to provide a sense of
direction and guidance through innovative and creative efforts specially in coping
with the environmental changes.
No doubt, these limitations are valid, but the situation remains that at micro
level, managers have to manage according to contingency approach. They
should not ignore the importance of taking actions according to the needs of the
situations. For analysing the situations, they will have to use their highest skills.
3.3.8 Mckinsey’s 7-S Approach
Mckinsey developed 7-S framework for management :
1. Strategy, i.e., systematic allocation of resources to realise strategic goals.
2. Structure, e.g., organisation structure.
3. Systems, e.g., information system, control system.
4. Style, e.g., managerial style.
5. Staff. e.g., staffing.
6. Shared values, e.g., human values in humanising an organisation.
7. Skills, e.g., professional skills, strategy skills.

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It is a simple, easy to remember framework. Practicing managers and
teachers like it. But managerial functions of planning-action-control cycle covers
them and the cycle is followed in management books.
3.3.9 The Operational Approach
It emphasises typical operations involved in management e.g., line and
staff, departmentation. It draws on all other managerial approaches. It has
practical application to managing. However, it is based mostly on management
process approach. It is almost similar to functional approach.
3.3.10 The Managerial Roles Approach
Prof. Mintzberg describes ten roles played by a manager. These are
grouped into three categories. (A) Interpersonal roles covers the first three roles:
Figurehead role, leader role and liaison role. The next three as informational
roles cover receiver, giver and transmitter of information. The final four are
termed as decisional roles such as entrepreneurial, handler of disturbances,
allocator of resources and negotiator debating with third parties and workers
unions.
A key point about the role of managers is, of course, the capability or
adaptability of manager to many different uses in addition to those mentioned
above. Much will depend upon your job and the circumstances. The specialist
manager must also possess the quality of versatility.
Really speaking, the roles described by Mintzberg are evidences of all well-
known managerial functions, e.g., interpersonal role is a leading function,
allocation of resources is a planning function. We have many other roles played
by a manager in addition to those ten roles, e.g., acting as a trouble shooter,
innovator, recruiter, etc.
In interpersonal relations, particularly, manager must remember that he as
a human being deals with other human beings. Here, human values, ethical and
moral, play a very important role. He must constantly think of values.

3.4 Characteristics of Modern Management Thought

1.The Systems Approach:
An organisation as a system has five basic parts: (1) input, (2) process, (3)
output, (4) feedback, and (5) environment. It draws upon the environment for
inputs (resources). Management allocates and combines these resources or
inputs to produce certain desirable outputs. The success of these outputs can be
judged by means of feedback. If necessary, we have to modify our mix of inputs
to produce outputs as per changing demands and changing environment.
2. Dynamic :
We have a dynamic process of interaction occurring within the structure of an
organisation. The equilibrium of a organisation and its structure is itself dynamic
or changing. The classical theory assumed static equilibrium.

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3. Multilevel and Multidimensional:
Systems approach points out wheels within wheels or complex multilevel and
multidimensional character. We have both a micro and a macro approach. A
company is micro (little world) within a business system. It is macro (the great
world) with respect to its own internal units. Within a company as a system we
have: (1) production subsystem, (2) finance subsystem, (3) marketing
subsystem, (4) personnel subsystem. All parts or components are interrelated.
Both parts as well as the whole are equally important. At all levels, organisations
interact in many ways.
4. Multimotivated:
Classical theory assumed a single objective, for instance, profit. Systems
approach recognises that there may be several motivations behind our actions
and behaviour. Management has to compromise and integrate these multiple
diverse objectives e.g., economic objectives and social objectives, i.e.,
productivity and satisfactions (shareholders, employees, customers, community
and society).
5. Multidisciplinary:
Systems approach integrates and uses with profit ideas emerging from different
schools of thought. Management freely draws concepts and techniques from
many fields of study such as psychology, social psychology, sociology, ecology,
economics, mathematics, operations research, systems analysis, etc.
6. Multivariable:
It is assumed that there is no simple cause-effect phenomenon. An event may be
the result of so many factors which themselves are interrelated and
interdependent. Some factors are controllable, some uncontrollable. Intelligent
planning and control are necessary to face these variable factors. We do not live
in a vacuum or in a system unaffected by outside influences. We live in a
dynamic and complex (macro cosm) the great world system.
7. Adaptive:
The survival and growth of an organisation in a dynamic environment demands
an adaptive system which can continuously adjust to changing conditions. A
viable organisation and its environment are in a dynamic equilibrium. An
organisation is an open system adapting itself through the process of feedback.
We have human or machine controller to provide necessary corrections on the
basis of feedback of information in order to achieve desired results.
8. Probabilistic:
Management principles point out only the probability and never the certainty of
performance and the consequent results. We have to face so many variables
simultaneously. How can we have absolute predictability of events? Our
forecasts are mere tendencies. Of course, Intelligent forecasting and planning
can reduce the degree of uncertainty to a considerable extent, projects and
information decision systems in future. A mechanistic or bureaucratic approach
to management is appropriate when: (1) Environment is unchanging; (2)

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Emphasis is on efficiency, (3) Emphasis is on routine jobs, many rules and
procedures. An organic or behavioural managerial approach is preferred when:
(1) We have fast changing environmental, (2) We want flexibility, (3) Emphasis is
on less specialised jobs, fewer rules, procedures, etc. and (4) Employees can
exercise self-control and self-discipline. Systems approach/leads to holism.

3.5 Management Thought In The Light Of Indian Ethos And Insight

Western management thought could not produce the true holistic and
integrative principles for management philosophy. Indian ancient wisdom
provides value-based holistic approach to link our ancient culture and modern
management so that we can have a new and authentic philosophy of
management.
The essential link is found in holism starting with the course of subjective
management, a new movement in management thinking and practice, a
movement that will make ‘the managerial revolution’ of 21st century.
The holistic or integrative principle is a goal that unites all the different
aspects of business into ONE common social, economic and ecological goal.
Business organisation based on objective terms (conveniently ignoring subjective
terms) was concerned exclusively with what is preyas of socially desired in
contrast with what is socially and ecologically desirable or needed, i.e., Sreyas
(which is conveniently ignored).
Under holism, we have to develop unity and harmony between : (1) spirit
and science, (2) values and skills, (3) subject and object, (4) left-brain skills and
right-brain skills (5) subjective and object, (6) Management of self and
management of other people for getting things done through and with them. (7)
man and machine, (8) economic development and human/ecological
development, (9) profit motive and social responsibility, (10) individual benefit
and public benefit, (11) internal development and external development, (12)
quality of life i.e., standard of life and quantity of life or standard of living. We
want enriched quality of life for all. Wealth is not merely for rising consumption. It
is essentially a means for public good.
Under the Western management thought according to current accepted
definition, business is created by society as its instrument of wealth and welfare,
functioning for socially desired goals, through result-oriented means, in short-
term success and continuous conflict between individuals and businesses.
Under Indian ethos and insight business was created by society as an
instrument of wealth for welfare, to attain socially desirable or needed goals (i.e.,
shreyas and not preyas goals), through ethically worthy means (i.e., value-driven
means and value-driven goals), resulting in a generation of healthy, wholesome
individuals who carry human and ethical values and positive impulses in their
community.
If management adopts value-oriented holistic management as per ancient
Indian insight, the practice of management will surely acquire a new look or
appearance. Developing Macro Vision is the practical need of the day. The times
are rapidly changing. It will no longer be a purely objective exercise to achieve

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only external results even at the cost of internal disharmony and unrest. On the
other hand, it will give equal emphasis on subjective and objective aspects of
development of individual, organisations and society. Indian insight wants
individuals (managers and workers) to emerge as important positive, wholesome,
harmonious individuals with a sense of growing towards their own total fulfillment.
In this way, managers will be able to create a healthy, wholesome, harmonious
and happy community, of which the managers themselves will be satisfied
members. We can have both increasing standard of life and also increasing
standard of living for all members of the society and the nation. We shall assure
enriched quality of life and also enriched material prosperity. Individuals,
organisation and society all will have sustained economic growth without
ecological damages, e.g., pollution of environment.
The Indian wisdom insists on concepts such as yajna spirit (sacrificing
individual desires in favour of social benefits), sreyas (preferring long-term
benefits over short-term preyas gains), sharing in joy and a sense of cosmic
harmony. Here, business is regarded as a means for the evolution of human
society towards its own perfection, with all its activities being supplementary to
and justifiable only in terms of perfection. Means and ends both will honour
human and ethical values.
In spite of many streams of management thought in the West, we have still
the unstable state of management theory. We need a modern synthesis to pull
together ideas from all stream of thought. Indian Insight can bring about
synthesis through holistic approach and reconcile all dualities. Holistic approach
alone can give us the Macro Vision of Life as ONE expressing MANY diverse
Forms. Let us develop the Vision of Unity in Diversity.
Eastern Insight can introduce integration or synthesis in management
theory and practice. Let us Eastern Wisdom with the Western Management
techniques.
Chart 3.1

EVOLUTION OF ORGANISATION AND MANAGEMENT THEORY

Traditional Theory Modifications Emerging View or

Systems Approach
Taylor Mayo (Hawthrone Studies) Views on organisation as:

Scientific Management Human Relations 1. Open, adaptive system

(Efficient Task Performance) Maslow, MacGregor, etc.; in a broader environment.

Weber Behavioural sciences

Bureaucratic Model (Psychological, cultural 2. Goal oriented; including

(Authority and Structure) and sociological issues) 3. A technical subsystem

Fayol Quantitative decisionmaking 4. A structural sub system

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Administrative or pro- —Management sciences 5. A psycho-social sub-

cess Management (OR) (Economic-technical system and coordinated

Rationality) by

Theory (Universal Man- 6. A managerial system.

agement Principles). (socio-economic and

technological system)

1900-1930 1930-1960 1960-onwards

Two broad modification in traditional theory were introduced: (1)

behavioural sciences (psychologists, sociologists and aunthropologists)
emphasized psycho-social system and the human aspects of management; (2)
Management sciences emphasised the economic-technical system and
quantification, mathematical models and the application of computer technology.
Behavioural sciences have a humanistic approach while management sciences
and traditional school of management do not have direct interest in human
factors or value. Behavioural sciences are gaining unique importance in the
evolution of good organisational behaviour through appropriate humanised
organisation structure, man-machine organisation motivation, job structure work
environment, democratic participative leadership.
Under this systems approach we have integration of: (1) classical school,
(2) behavioural sciences, (3) management science, and (4) decision-making
school of management thought. Structure and ongoing process are given equal
importance.
Internal and external environment shall determine structure and process of
organisation and management. Thus we have wide acceptance for systems
based contingency approach to management.
Chart 3.2 CLASSICAL VERSUS HUMANISTIC DESIGNS

Mechanistic or Classical Design Organic or Humanistic Design

1. Closed systems view of organ- 1. Open and adaptable systems

isolations — all variables under view of organisation existing in

management control — static a dynamic environment.

environment.
2. Full division of work leading 2. Moderate division of work lead-

to job specialisation and ing to job enlargement, job

standardisation. enrichment.
3. Higher degree of centralisation. 3. Higher degree of decentrali-

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sation.
4. Authority and command lead- 4. Authority, subject to acceptance

ing to bureaucratic, authoritari- from subordinates, leading to

an and autocratic management. democratic participative manage-

ment — decisions by consensus.

5. Tight hierarchical structure 5. Loose project organisation and

with chain of command, and management by consultation and

management by command. participation.

6. Vertical communication down- 6. Multidirectional and free comm-

ward more dominant. unication, Inter/Intra Network.

7. Negative environment for deve- 7. Positive environment for deve

lopment of human resources lopment of human resources due

due to limited decentralisation. to adequate decentralisation.

8. Organisation could satisfy only 8. Ample scope for motivation

maintenance of economic needs. needs-higher level wants.

9. Relatively tight and close con- 9. Increasing reliance on manage-

trol over subordinates. ment by objectives (self-control)

10. Rigid policies, procedures, 10. Flexible policies, procedures,

rules and methods — leading methods leading to humanistic

to mechanistic organisation. and flexible organisation.

11. Formal organisation dominat- 11. Integration of formal and informal

ing due to autocratic approach. organisation due to democratic

approach.
12. Threatening and performance 12. Supportive and development

oriented job environment. oriented job environment.

13. Production centred approach of 13. Customer-employee oriented

management. management approach.

14. Theory X approach of 14. Theory Y approach of

leadership. leadership.

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Modern management theory has adopted systems-based contingency
approach to organisation and management.
Organisation/management structure, processes and technology in a firm
constitute the internal environment forces. Social, economic, technological
(research and development) legal and political variable constitute the external
environment of the firm.
Concepts of management and organisation are influenced by internal and
external environment of a firm.
Situation, circumstances, and environment factors determine appropriate
techniques of organisation and management. Hence, no universal functions and
principles of management and organisation.
(1) In a certain environment linear programming, inventory, models,
brakemen analysis can be effectively used to compute the optimal
action/outcome.
(2) In an environment of risk, the general rule is to maximise expected
(likely) outcome. In risk situations PERT and other tools such as
statistical quality control could help in making the decision.
(3) In an uncertain environment, decision-making needs intuitive skills,
drawing on experience and creative abilities as well as power of
judgement.

3.6 Summary
Classical approach satisfied the basic economic needs of the
organisation and society. Now neoclassical approach is trying to satisfy personal
security and social needs of workers. Both approaches must be suitably
integrated to emphasise the need not only for recognition of human values but
also for recognition of productivity simultaneously. Modern management must
have the twin primary objectives, viz., productivity (classical approach) and
satisfaction (neoclassical approach).
Decision-making under uncertainty is a real challenge to management.
Uncertainty is almost inherent in business. All strategic decisions in planning
involve element of uncertainty. Higher management is responsible for such
unprogrammed decisions. Computer and OR tools cannot secure unprogrammed
decisions.

3.7 Self - Assessment Questions

A.Very Short Answer Questions
Q. 1. Define neo-classical Theory.
Q. 2. Explain the concept of Behavioural Approach.
Q. 3. Define a system.
Q. 4. Conceptually define management science approach.

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B.Short Answer Questions
Q. 1. Explain the Hawthrone Experiments.
Q. 2. Evaluate Decision Theory Approach.
Q. 3. Discuss the contributions of Peter Drucker in the field of
management.
C.Long Answer Questions
Q. 1. Explain the Implications of Hawthorne’ Experiments.
Q. 2. Discuss the criticism of Hawthorne Experiments.
Q. 3. Comment on systems and contingency approach.
Q. 4. Compare and contrast the classical new-classical and modern
approach towards organisations.

3.8 Further Readings

1. LM Prasad : Principles and Practice of Management (Sultan Chand & Sons)
2. George R Teery : Principes of Management (Richard D Irwin Inc)
3. Harold Koontz and Heizweihrich : Essentials of Management (Mcgraw Hill
series in Management)
4. Peter F Drucker : Frontiers of Management (Heinemann London)
5. Peter F Drucker : Managing for future (Tata Mcgraw Hill)

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UNIT 4: FUNCTIONS OF MANAGEMENT AND
SKILLS OF A PROFESSIONAL MANAGER
Structure
4.1 Introduction

4.2 Objectives

4.3 Tasks of a Professional Manager

4.3.1 Providing purposeful direction

4.3.2 Managing survival and growth

4.3.3 Maintaining relations with various society segments

4.3.4 Meeting the challenge of increasing competition

4.3.5 Managing for innovation

4.3.6 Building human organization

4.3.7 Maintaining balance between creativity and conformity

4.3.8 Postponing managerial obsolescence

4.3.9 Meeting the challenge of change

4.3.10 Coping with growing public criticism and political opposition

4.3.11 Coping with increasing levels of aspiration

4.3.3 Maintaining firm’s efficiency in terms of profit generation

4.4 Roles Performed By A Professional Manager

4.4.1 The Roles

4.4.2 Applying the Model

4.5 Responsibility Of A Professional Manager

4.5.1 Responsibility towards the Society

4.5.2 Responsibility towards the Government

4.5.3 Responsibility towards the Union

4.5.4 Responsibility towards the Industry and Competition

4.5.5 Responsibility towards the Distributers and Retailers

4.5.6 Responsibility towards the Suppliers

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4.5.7 Responsibility towards the Employees

4.5.8 Responsibility towards the Customers

4.5.9 Responsibility towards the Shareholders

4.6 Summary

4.7 Glossary

4.8 References/Suggested Readings

4.9 Question Bank

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4.1 Introduction
There is a lot of confusion over the much widely used terms, professional
management and professional managers. Some researchers contend there is
nothing like professional management. Management is a discipline. There are
practitioners of this discipline who practice management as a profession and thus
are professional managers. Just as there are doctors and lawyers by profession
similarly there are professional managers. As doctors practice medicine,
managers practice management. The only difference between professional
managers and other professionals is that, while the latter must possess a formal
degree in their discipline, a professional manager need not have a formal degree
or education in management. He or she may have learnt the necessary skills and
gained competence from one’s own experience. The second characteristic of a
professional manager is that his or her primary concern is the organisation or the
company with which one works. This may be in the private or public sector or in a
multinational company. A professional manager always has the company’s
overall perspective in mind and all the actions are guided by the company’s
objectives irrespective of the managerial level one is working at. The third most
important characteristic of a professional manager is that he or she is responsible
for performance. Managing involves collecting and utilising resources (money,
men, materials and machines) in the most optimal manner for achievement of
some pre-determined objectives or results. It is the professional manager’s
responsibility to utilise resources to produce the required results. Responsibility
and performance are really the key words in defining a manager’s role.
Performance implies action, and action necessitates taking specific steps and
doing certain tasks.

4.2 Objectives:
 To understand the term “management professional”

 To develop familiarity with various tasks of a professional manager, and

 To develop familiarity with various roles of a professional manager, and

 To know what exactly are the tasks which a manager has to undertake in
the course of managing an organisation.

 To understand the various responsibilities of a professional manager.

Let us first take up the various tasks which a manager is expected to do to

produce results.

4.3 Tasks of a Professional Manager

4.3.1 Providing purposeful direction

A manager can be compared to the captain of a ship who has first to set the
course to reach the destination and then steer the ship along the course.

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Similarly, a manager has to, first of all, set objectives which the firm must
achieve.

Objectives provide the direction in which the firm must move. Having decided
upon the objectives, the manager must constantly monitor the progress and
activities of the firm to ensure that it is moving in the desired direction. This is the
first and foremost task of every manager.

If you are a part of the top management team then you will be very actively
involved in this task through the process of defining the mission and objectives
for the entire organisation. If you are a manager reporting to the top manager, it
is your task to see that the actions of the people who work for you in your
department or division are in the desired direction. It is your task as a manager to
prevent all such actions which take your company away from the direction set by
the top management.

All actions and decisions must be evaluated on the basis of their contribution
towards achievement of the company’s objectives. However, this should not give
you the idea that objectives or direction once set will hold good for all times to
come or that any movement away from the current line or production or activity is
always undesirable. The key point is that all movements and actions must be
consistent with achievement of the objectives.

To ensure consistency it is important that the manager carefully thinks through

each alternative course of action and evaluates its potential to contribute towards
attainment of objectives.

4.3.2 Managing survival and growth

“Survival of the fittest” is the law of the jungle which is equally applicable to the
competitive market place where firms struggle and fight for survival. Ensuring
survival of the firm is a critical task of the manager. But that alone is not enough.
The manager has also to actively seek growth. No matter how big or powerful a
firm may be today, it is sure to be left behind in the race by newer, healthier and
more efficient firms if it is does not pursue growth .

Two sets of factors impinge upon the firm’s survival and growth:

i) The first is the set of factors which are internal to the firm and are largely
controllable. These internal factors are choice of technology, efficiency of labour,
competence of managerial staff, company image, emphasis on customer care,
financial resources, etc.

ii) The second set of factors influencing the firm’s ability to ensure survival and
growth are those which are external to the firm and over which it has little or no
control. These external, environmental factors refer to government policy, laws
and regulations, changing customer tastes, attitudes and values, increasing
competition or even natural calamities. For example tourism to India was
adversely effected because of the epidemic in Surat and many tourism firms
suffered heavy losses because of cancellations.

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4.3.3 Maintaining firm’s efficiency in terms of profit generation
Efficiency is the ratio of output to the input. A manager has not only to perform
and produce results, but to do so in the most efficient manner possible. To
produce results a manager requires inputs in the form of money, men, materials
and machines. The more output that the manager can produce with the same
input, the greater will be the profit generated. Profit is the surplus or difference
the manager can generate between the value of inputs and outputs.

Profit is essential for the survival and growth of any business. A manager may
decide to forego some profit today for the profits which are being sought for
tomorrow but in the long run one must understand that no business can survive if
it does not make profits. Business activity is undertaken to satisfy a need of the
society in a manner which yields profits. A business is not a philanthropic or
charitable activity which is run merely to provide some goods and services
irrespective of whether it is making a profit.

Profit generated can be used for expansion, upgrading of technology, growth or

paying dividends. Profits are one of the cheapest sources of financing growth, as
they involve no interest liability, nor putting the freedom at stake by having
representatives of financial institutions sit on your board of directors. Profit gives
you the cushion to take risk, think big and venture into relatively unknown areas.

A profitable firm can turn unprofitable because of obsolete technology, inability to

meet high fixed cost structures, high levels of wastage, or simply because the
product or service is no longer in demand by customers.

4.3.4 Meeting the challenge of increasing competition

In today’s fast changing world, one of the very critical tasks of every manager is
to anticipate and prepare for the increasing competition. Competition is
increasing in terms of more competitors, more products and services, wider
variety of products, better quality of products and a customer who is, today,
better informed and more aware than ever before. The increasing reach and
popularity of electronic media as a means of information has also contributed to
the increasing competition. The manager today has more potential customers to
sell to and easy access to these customers. Yet the market is crowded with many
competitors wooing the same customers.

Till a decade ago, the Times of India group of newspapers and magazines
reigned supreme in magazine market with its ‘Illustrated Weekly of India’ being
the only Indian family magazine and ‘Filmfare’ the only notable film magazine.
The former could be found in most homes which had a minimum level of literacy
and affluence. And ‘Filmfare’ was the only magazine for people interested in
films. The introduction of ‘India Today’ and ‘Stardust’ brought about a radical
change starting in a modest fashion. ‘India Today’ is probably the most widely
read general interest magazine while ‘Stardust’ has blazed its own unique trend-
setting trail of popularity. In the wake of the success of these two magazines,
many other magazines followed, such as general interest magazines, film
magazines, women’s magazines, children’s magazines, special interest

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magazines, etc. All these new magazines have better reading content, more
colour, better layout and are very glossy and attractive to look at. Unable to
match these new magazines the circulation of the ‘Illustrated Weekly of India’
and ‘Filmfare’ slumped. However, in the last years these two magazines have
been attempting to regain the lost ground and have succeeded to some
measure. But they can certainly never again enjoy the leading position which
they once did.

In developed countries the concept of competition is very closely linked to that of

obsolescence. Companies keep introducing successively new tourism products
with minor variations, and persuading the customers to discard their old travel
habits for newer ones.

4.3.5 Managing for innovation

Innovation is finding new, different and better ways of doing existing tasks. In the
context of business, innovation has to be defined in terms of the additional value
it imparts to the existing products or services. Value is not expressed in terms of
increased cost or price but in terms of the difference it makes to the customer.

A television manufacturing company, after years of painstaking effort, introduced

a circuit with a neat and clean layout which was extremely easy to service. The
company spent large amounts of money promoting this new circuit and its
improved servicing but the customers were not impressed and sales did not pick
up as per expectation. Customers were not convinced because they could not
really perceive the difference and importance of the circuit since its impact on
performance was very marginal. The marketing consultant to the company
recommended that instead of using plywood the company should use
transparent plastic back-covers for the chassis. This would allow the customers
to see the circuit and decide for themselves the truth of the company’s claim.
This is an innovation because it makes a vital difference to the customers who
can see and understand for themselves the improvement.

Very often it is the customer who provides the source of innovation. For example
a study conducted by Eric Von Hippel and James Utter back on the source of
innovation in the scientific instruments business revealed that more than 75 per
cent of ideas for innovations came from users. Same is true in the tourism sector
as many tourists have their own ideas about a holiday and accordingly itineraries
are prepared or services are provided.

To plan and manage for innovation is an on-going task. The first thing the
manager must do is to maintain close contact and relation with customers. The
firm’s frontline managers provide the most direct link for the company with its
customers. The task of the manager is to train them to keep their eyes and ears
open for any type of information, ideas, suggestions, complaints, criticisms, and
feed it back to the company. An extensive innovation study conducted by
Christopher Freeman has concluded that successful companies pay a great deal
of attention to the market. Successful firms innovate in response to market
needs, involve potential users in the development of the innovation, and
understand users’ needs.

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The manager can also maintain a link between customers and the company.
Proctor and Gamble, one of America’s largest consumer goods company, put on
its packaging a telephone number at which the customers could call at
company’s expense and give any information regarding the product. In 1979 this
company received 40,000 telephone calls, each of which was followed through,
and was a major source of ideas for innovation and improvements. Similarly
many tour operators, hotels and airlines seek feedback from their customers by
asking them to fill feedback forms or suggestion forms.

Keeping track of competitor’s activities and moves can also be a source of

innovation as can improvements in technology. To qualify as innovative, the
technology must be market and customer-oriented. In most cases, innovation as
finally introduced in the market was never originally intended to be so. You can
appreciate the truth of this statement better when you know that xerography was
originally aimed at a small segment of the lithography (a special type of printing
process) market, it was never intended to be used in making mass copies.
Transistors, which, prior to the development of integrated circuits, were used in
manufacture of television, radio, etc., were originally developed for military use.
As a manager you should keep a close watch on the improvements taking place
in technology and try to find a customer-oriented application for them. The use of
computers in reservations and putting up web sites on internet for destination
promotion are examples in this regard.

The manager who has his or her finger on the pulse of the market can quickly
find out under the surface changes and shifts taking place and accordingly
modify the product or service to match the customer requirement. It is not the
absolute amount of money and effort which a firm invests in research and
development but its ability to quickly adapt and place in the market the improved
product, which accounts for its innovativeness. This calls for flexibility in
organisational structure to accommodate the necessary changes. In the final
analysis, it is that manager who inculcates and nurtures curiosity and an open
mind, and combines it with market feedback, who will emerge as winner in the
race in which innovation is at a premium.

4.3.6 Building human organisation

Humans are by far the most critical resource of an organisation. No amount of
money, materials, and machines can produce results by themselves. Machines
can be programmed to take over routine, repetitive jobs but only a human brain
can design the machines and again you need humans to manage them.

“Surround yourself with the best people you can find, delegate authority, and
don’t interfere.” was the advice given by U.S. President, Ronald Reagan to
practising managers (FORTUNE, September 15, 1986). Certainly useful advice
except for the drawback that good people, leave alone the best, are so difficult to
find. ‘I just can’t seem to find the right people’ is an often heard lament from
many a manager. It is indeed a paradoxical situation that we have so much
unemployment on the one hand and on the other it is genuinely difficult to find
the right sort of people. A small consulting firm’s experience is that an
advertisement for sales representatives in a national newspaper fetches anything

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upto four hundred applications and you are lucky if you are able to pick up even
two or three good people.

This only reinforces the fact that a good worker is a valuable asset to any
company. And, every manager must constantly be on the look out for people with
potential and attract them to join the company. A manager with a competent
team has already won half the targets. Note that we use the word team, and not
individuals. However, competent or brilliant individuals may be, if they cannot
work together with each other they are of not much use to a company. It is up to
the manager to mesh individuals into a well-knit team which should be built on
the principles of divisions of labour, specialisation of work and mutual give and
take.

Realising the importance of creating a team spirit and teamwork for achieving the
organisational objectives, progressive companies are trying to build this up in
every possible way. However, the right team spirit will be created when there is
clear demarcation in areas of functioning and responsibilities among the team
members.

Hiring good people is still a relatively simple task as compared to the task of
retaining them. People may join a company because of its favourable image but
will stay on only if they find appreciation for, and satisfaction from, their work.

To retain talented people, the manager should provide a comfortable working

environment which is conducive to work. More important than the physical
environment is the degree of freedom which a worker enjoys in making decisions
within the defined parameters of his or her job. When a worker knows that it is his
or her responsibility to produce results and he or she is accountable for them,
best efforts would be put in. On the other hand, if the worker is always ordered to
do every single act, and nothing is left for him or her to decide, whatever little
potential exists in him or her will be killed. A worker should be able to take pride
in the work, derive satisfaction from saying ‘This is my achievement’. To ensure
that work does not degenerate into a boring and meaningless affair, repetitive or
dull tasks should be interspersed with tasks which call for some element of
creativity. In practice this may be difficult, but the manager must at least give
some thought to how best he or she can make work meaningful. Rotating jobs
within the same department at the same level may be one way of making work
more interesting and provide opportunity to the worker to demonstrate his or her
professional and technical skills.

The manager must also understand that each individual is unique and the degree
of expertise at handling various aspects of works varies from person to person.
As an effective manager, your attempt should be to pinpoint your subordinates’
strengths and give them work in which their skill can be utilised to the maximum.
In areas where they feel inadequate, provide them support.

Recognising, appreciating and nurturing your subordinates’ talents will bring you
rewards in terms of improved results and loyalty. However, two other key
concepts, communication and motivation must also be remembered in the
regard. A manager who encourages open, direct and frank communication is

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always able to tackle issues much before they become problems and also takes
advantage of the creative ideas of employees. Opportunity to communicate
directly with the top manager enhances the sense of self-esteem of workers and
helps create in them a sense of belonging, a feeling that what they think and feel
is important to their organisation.

Every individual’s behaviour is initiated because of some needs, drives and

desires and is directed towards achievement of goals. These needs and drives
motivate a person to action. The manager’s attempt should be to influence these
needs, desires or motives towards the achievement of the organisational goals.
The more such motivational factors a manager can incorporate in the work
content, environment of work and rewards of work, the more willingly will people
put in hard work. Money, power, status, recognition, etc. are all powerful
motivators which a manager can use.

Every manager is a leader in the sense that he or she has to influence

subordinates to work willingly for achieving the organisational objectives and
inspire them to put in their best effort. The only way a manager can be
acknowledged as a leader is by continually demonstrating his or her leadership
abilities. If the manager always gives due importance to the welfare and interests
of employees, makes objective decisions that benefit everyone, he or she will be
rewarded by the confidence and trust of employees. The beginning is always
made from the top, the beginning of rot or excellence, that is up to you to choose.
Whichever you choose remember that it is a very important choice, because
once the momentum builds up it is difficult to stop and reverse the process.

An effective leader must be a person with a vision who can think and plan ahead,
and also have persuasion to carry along all the people.

4.3.7 Maintaining balance between creativity and conformity

Developing a new idea, concept, product or service can be very creative,
challenging, and exciting. But, that is only one part of the story. The other part of
the story, and usually the more difficult part, is to translate this idea into a
successful business. This requires detailed planning and organising of finance,
marketing, administration, etc. While new product development involves a high
degree of creativity, its transformation into a successful business reality involves
carrying out relatively more and more repetitive tasks. Designing a new tour
package can be very challenging and satisfying work but selling it in tourism
markets could be routine yet at the same time a job done well.

A manager is lucky if elements of both creativity and conformity can be found in

the same individual. Usually this is not the case, and most organisations have
separate Product Development Groups or Research and Development Division.
Creativity can flourish best when allowed full freedom with minimum rules and
regulations. Thus most firms allow the product development groups to function in
a relatively freer atmosphere. An advertising agency known for the excellent
advertisements it produces, allows its creative people, the copy-writers and art-
director, the freedom to come into office and leave whenever they please. As

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long as the work is completed within the deadline, management allows its
creative people a great degree of freedom.

In contrast to creative success for which definite output or results cannot be pre-
determined, business success requires achievement of specific, usually
quantifiable targets. In business the best results are usually obtained within the
conformity of company policies and rules. However, this is not to say that
managing for business results is boring and requires no creativity. On the
contrary, succeeding in today’s cut-throat competitive world calls for creativity in
all the functional aspects of managing be it finance, marketing, advertising, public
relations or human relations.

To succeed, an organisation needs both creative people and people who can
produce business results. The manager must encourage both kinds of persons in
the organisation. A new product idea gives a company a rare opportunity to
emerge out of the humdrum of competition to the top, but the transformation of
opportunity into reality depends on the people performing the business
operations.

4.3.8 Postponing managerial obsolescence

Managers and executives, after 40 to 45 years of work experience, often find
themselves having reached a plateau where, on the one hand, the prospect of
enhanced status, increased pay and perks are no longer motivators enough to
work hard; and on the other, they find they are unable to relate to the latest
managerial knowledge and skills and feel totally lost. In both cases, these
managers cease to be productive and become a drag on the organisation in
terms of their heavy cost and inability to make meaningful contribution. This is
the problem of managerial obsolescence that is when managers become
unproductive, or out of date, or both. In the situation where lack of motivation
seems to be the cause, the solution lies in redesigning their job content to make
it more meaningful. For example, an aerospace company designates its senior
engineering managers as consultants to its groups of young engineers, thus
providing the right outlet for their rich experience.

Training programmes aim to provide or improve knowledge and skills which can
help the manager improve his or her performance on the job. Many companies
regularly sponsor their senior managers to attend such training programmes.
Other companies invite experts to their own company premises to conduct these
programmes and workshops. Training programmes, refresher courses, and basic
courses in functional areas are the solution for managers facing knowledge
obsolescence.

These training programmes are not restricted to senior managers alone. In fact,
younger managers can also benefit from these programmes, especially those
which provide knowledge of other functional areas such as production for non-
production managers. Also beneficial for the young managers are workshops
aimed at training them for the top level management posts.

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4.3.9 Meeting the challenge of change
One of the important tasks which every manager has to perform is that of a
change-agent. The social, political, economic, technical and cultural environment
in which the firm operates is always changing. The company must keep pace
with these developments and change accordingly. Similarly, within the
organisation, new types of production technology may be introduced, the existing
product lines may be phased out, formal procedures and techniques for planning,
resource allocation, job appraisal, etc. may be introduced. All these imply a
change. Used to the old system or method of doing a particular job, many a times
people perceive change as a threat to their security. Moreover, change implies
learning afresh the new methods or processes and most people resist making
this extra effort.

For example, the marketing department of a television company always

complained of the low quality circuit in the black and white TV and held it
responsible for its poor sales performance. However, when an improved circuit
was introduced, the marketing department tried its best to convince the top
management against this change saying that the old circuit was now performing
in a satisfactory manner. The real reason however, was that the marketing
department would now be under pressure to show results as it would have no
scapegoat to blame for its lack of results. The engineer responsible for providing
after sales service opposed the new circuit since it meant putting an effort to
learn the new way of servicing it.

There will always be change. It is the manager’s task to ensure that the change
is introduced and incorporated in a smooth manner with the least disturbance
and resistance. Sharing information about the impending change, educating the
people about the benefits resulting from changes, and building favourable
opinion of the key people in the organisation by involving them with the change
process itself go a long way in making the manager’s task easy. The ideal way to
introduce change in the minds of a few people, and then let the idea grow and
build till the people themselves come round to asking for the change. This is the
way the Japanese make decisions by consensus. However, it is not always
possible to introduce change by having consensus. There may be limitations of
time or money, or pressure of competition which may make the consensus
method impractical.

The two areas which are witnessing dramatic changes in technology are
production and information handling.

In the area of production, technological sophistication has reached the level

where the entire production plants are fully automated and programmed to run
with the minimum human intervention. For instance, at Nissan’s Zama plant,
where Nissan cars are manufactured, the final assembly line operations are fully
automated and controlled by robots. These robots have totally replaced men in
such jobs in which the former can be programmed to perform round the clock
without any fatigue or loss of efficiency. Robots are also being used in
manufacturing which requires handling of bulky and dangerous materials. All
these changes in production techniques have forced managers to find ways and

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means of relocating the workers rendered redundant. Simply laying off is not
always the best solution as it can involve a very high compensation cost.
Moreover, in many countries because of the government’s political ideology or
cultural values (as in Japan where the concept of employment with a company is
lifelong), laying off workers is not permissible.

The use of computers in business has totally changed the way the managers
make decisions. Managers today not only have access to more updated
information but also better information which can improve quality of their
decisions. Moreover, with electronic date processing managers can use complex
statistical and mathematical models and tools to study the possible impacts of
their decisions. All this helps lessen the degree of risk by reducing the level of
uncertainty. However, access to more information places the onus on the
manager to define what relevant information he or she needs and also ensure
that the benefit derived from the information which is received is greater than the
cost incurred in collecting and processing it.

4.3.10 Coping with growing public criticism and political opposition

Large business groups are often the target of political and public criticism
because of their apparent power and clout arising out of concentration of
economic power. By Indian standards this economic power may seem great but
is very small by international standards. The criticism is not always evoked by
facts but because of ideological, political or personal reasons. But sometimes the
criticism may be founded on facts. For example environmental laws are often
floated by resort developers particularly in coastal areas or in the hills.

The best way to avoid political and public criticism is to keep all activities
absolutely legal and above board. Secondly, the manager should keep a low
profile of his or her company to avoid drawing unnecessary attention to the firm’s
activities. And finally, the manger should feed correct information to the media
and political parties to ensure that they view the firm in the right perspective.

4.3.11 Coping with increasing levels of aspiration

Improvement in information technology is resulting in an increasing trend towards
democratisation of the society. People in one part of the world know more about
people and events in other parts of the world. Similarly, people belonging to one
socio-economic segment of society know more than ever before the life styles of
people in higher socio-economic segments. Exposed to a better quality of life and
a better life style, people from the lower economic segments, especially the
younger people, aspire for the same kind of life style.

A manager must bear this fact in mind while dealing with blue-collar workers
because there is bound to be a vast gap between their levels of aspirations and
reality. If the manager is ignorant and insensitive to this gap, the workers’
resentment and frustration is bound to spill over in ways which can prove
disruptive and destructive to the firm’s working.

You, as the manager, must understand the nature of aspiration of your workers
and try to fulfil them, as far as possible, within the framework of the company and

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the workers job. Giving more autonomy, responsibility, money, status and
enhancing the worker’s sense of self-esteem through participation in
management decisions can channelise his or her latent or potential resentment
towards more productive ends.

4.3.14 Maintaining relations with various society segments

A firm fulfils a need or needs of the society. It exists within the society and has a
two way interaction with it. It seeks inputs in the form of money, men, materials,
machines and technology from the society and processes them to produce goods
and services for consumption by the society. In course of this interaction the
manager has to deal with various society segments, such as the labour market
from which it recruits its people, suppliers of machines and technology, banks
and financial institutions who supply money, the government which defines the
scope and parameters within which the company has to operate, the retail outlets
or agencies which stock and sell the products and the customers who buy the
product. This is by no means an exhaustive list, but just an indicative listing of the
various types of society segments with which you have to maintain relations.

In fulfilling the needs of the society and interacting with various society segments
a firm creates impacts. Some of these impacts are intended while others are not.
When a firm advertises through newspapers and magazines it is creating an
awareness for its products. This awareness is an intended impact. However,
when the magazines and newspapers carry editorial articles about the company
and its products, it may create an impact which was never intended by the firm.
Since some of these unintended impacts may be unfavourable to the company’s
image or spread information which is incorrect or inaccurate, the manager’s
attempt should always be to minimise these negative impacts.

4.4 Roles Performed by a Professional Manager

Given the wide range of diverse tasks which a manager is called upon to perform
it is essential that the manager be a thinker, a doer and a people-oriented
person all rolled into one. However, it is rare that you find a manager who has
the ideal combination of all three dimensions in equal parts. To be effective you
must recognise your strong dimension and look for an opening where your
strength can be best utilised. Put simply, you're constantly switching roles as
tasks, situations, and expectations change.Management expert and professor,
Henry Mintzberg, recognized this. He argued that there are ten primary roles or
behaviors that can be used to categorize a manager's different functions.

4.4.1 The Roles

Mintzberg published his Ten Management Roles in his book, "Mintzberg on
Management: Inside our Strange World of Organizations," in 1990. The ten roles
are:

1. Figurehead.
2. Leader.

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3. Liaison.
4. Monitor.
5. Disseminator.
6. Spokesperson.
7. Entrepreneur.
8. Disturbance Handler.
9. Resource Allocator.
10. Negotiator.

The 10 roles are then divided up into three categories, as follows:

CATEGORY ROLE

A) Interpersonal 1) Figurehead
2) Leader
3) Liaison

B) Informational 4) Monitor
5) Disseminator
6) Spokesperson

C) Decisional 7) Entrepreneur
8) Disturbance Handler
9) Resource Allocator
10) Negotiator

Let's look at each of the ten roles in greater detail.

a) Interpersonal Category

The roles in this category involve providing information and ideas.

1. Figurehead - As a manager, you have social, ceremonial and legal

responsibilities. You're expected to be a source of inspiration. People look
up to you as a person with authority, and as a figurehead.

2. Leader - This is where you provide leadership for your team, your
department or perhaps your entire organization; and it's where you
manage the performance and responsibilities of everyone in the group.

3. Liaison - Managers must communicate with internal and external

contacts. You need to be able to network effectively on behalf of your
organization.

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b) Informational Category

The roles in this category involve processing information.

4. Monitor - In this role, you regularly seek out information related to your
organization and industry, looking for relevant changes in the
environment. You also monitor your team, in terms of both their
productivity, and their well-being.

5. Disseminator - This is where you communicate potentially useful

information to your colleagues and your team.

6. Spokesperson - Managers represent and speak for their organization. In

this role you're responsible for transmitting information about your
organization and its goals to the people outside it.

c) Decisional Category

The roles in this category involve using information.

7. Entrepreneur - As a manager, you create and control change within the

organization. This means solving problems, generating new ideas, and
implementing them.

8. Disturbance Handler - When an organization or team hits an

unexpected roadblock, it's the manager who must take charge. You also
need to help mediate disputes within it.

9. Resource Allocator - You'll also need to determine where organizational

resources are best applied. This involves allocating funding, as well as
assigning staff and other organizational resources.

10. Negotiator - You may be needed to take part in, and direct, important
negotiations within your team, department, or organization.

4.4.2 Applying the Model

You can use Mintzberg's 10 Management Roles model as a frame of reference
when you're thinking about developing your own skills and knowledge. (This
includes developing yourself in areas that you consciously or unconsciously shy
away from.)

First, examine how much time you currently spend on each role. Do you spend
most of your day leading? Managing conflict? Disseminating information? This
will help you decide which areas to work on first.

Next, get a piece of paper and write out all ten roles. Score yourself from 1-5 on
each one, with 1 being "Very skilled" to 5 being "Not skilled at all."

Once you've identified your weak areas, use the following resources to start
improving your abilities in each role.

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 Figurehead

Figureheads represent their teams. If you need to improve or build confidence in

this area, start with your image, behavior, and reputation. Cultivate humility and
empathy, learn how to set a good example at work, and think about how to be
a good role model.

 Leader

This is the role you probably spend most of your time fulfilling. To improve here,
start by taking our quiz, How Good Are Your Leadership Skills? This will give
you a thorough understanding of your current abilities.

Next, learn how to be an authentic leader, so your team will respect you. Also,
focus on improving your emotional intelligence - this is an important skill for
being an effective leader.

 Liaison

To improve your liaison skills, work on your professional

networking techniques. You may also like to take our Bite-Sized Training course
on Networking Skills.

 Monitor

To improve here, learn how to gather information effectively and overcome

information overload. Also, use effective reading strategies, so that you can
process material quickly and thoroughly, and learn how to keep up-to-date with
industry news.

 Disseminator

To be a good disseminator you need to know how to share information and

outside views effectively, which means that good communication skills are vital.

Learn how to share organizational information with Team Briefings. Next, focus
on improving your writing skills. You might also want to take
our communication skills quiz, to find out where else you can improve.

 Spokesperson

To be effective in this role, make sure that you know how to represent your
organization at a conference. You may also want to read our articles
on delivering great presentations and working with the media (if applicable to
your role).

 Entrepreneur

To improve here, build on your change management skills, and learn what not
to do when implementing change in your organization. You'll also need to work
on your problem solving and creativity skills, so that you can come up with
new ideas, and implement them successfully.

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 Disturbance Handler

In this role, you need to excel at conflict resolution and know how to handle
team conflict. It's also helpful to be able to manage emotion in your team.

 Resource Allocator

To improve as a resource allocator, learn how to manage a budget, cut costs,

and prioritize, so that you can make the best use of your resources. You can
also use VRIO Analysis to learn how to get the best results from the resources
available to you.

 Negotiator

Improve your negotiation skills by learning about Win-Win Negotiation and

Distributive Bargaining.

Mintzberg's 10 Management Roles model can be applied by using it as a frame

of reference when you want to develop your management skills. Work on the
roles that you fulfill most often as a priority, but remember that you won't
necessarily fulfill every role as part of your job.

4.5 Responsibility of a Professional Manager

As a part of our talk on role of manager we have already talked on so many
important factors and role. Those are belonging to society segment like
professional management, manager role, quality management, product
management etc… Today we are going to talk on another factor which is also
play a important role between the company and consumer and that is the
professional manager.
Your responsibilities a manager arise out of the various social interactions in
which your firm is engaged in the pursuit of its business. You may be directly
involved in these as in the case of interactions with employees, shareholders,
customers, etc. where the interaction is based on a fair and obvious exchange of
money, goods and services. The interaction can also be indirect as in case of
interaction with society where both the firm and society impinge upon and affect
each other in hundreds of different ways. For example a blinds company hires
professional manager to bridge for selling of their roman shades and vertical
blinds products with the customer. That manager is supposed to keep relation
between their clients and company.
A firm which wants to maintain a positive image in the society must assume and
discharge with utmost sincerity its social responsibility. Gone are the days when
firms confined themselves solely to running their business without a thought for
the society in which they existed. Today every firm, big or small, is expected to
make its contribution towards a better quality of life for the entire society. Big
companies are having their own philanthropy or trust to help needy people.

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4.5.1 Responsibility towards the Society
Managers have much to learn by emulating the example of Indian
Petrochemicals Corporation Limited (IPCL), a government undertaking, which is
playing a very positive and active role in fulfilling its social responsibility.

A truly responsible manager not only takes steps to prevent or minimize any
negative impact of his firm’s operations on the society, but also takes the
initiative in playing a more positive role towards society. Tata Steel’s attempts at
educating people about leprosy through advertisements in newspapers and
magazines is an example of the useful and constructive role firms can play in
creating a more harmonious society. Many companies have founded educational
institutions and free medical facilities for the benefit of society at large.
Irrespective of the motivation behind such acts, the result is a tangible benefit for
use by all society members.

In times of calamities such as earthquakes and floods, many companies finance

teams of doctors and rescue workers for relief work. In our aim towards a
peaceful and prosperous society we need business firms who are willing to step
out of the narrow confines of their offices into the larger arena of society and take
bold decisive actions to create a better quality of life for all of us

The pattern and extent of rainfall is changing, leading to frequent droughts in

widespread areas. Rare species of animals, birds and plants have become
extinct in the wake of the destruction of their natural habitat. People are deprived
of their traditional means of livelihood and the rich cultural heritage is destroyed
forever.
All this does not imply that there should be no factories, industry or no economic
development. Certainly we need development, economic as well as ecological
and environmental. The solution lies in matching economic development with
development of the environment. When a firm puts up its factory it must also
install a plant for treating and disposing of its industrial waste. When timber
merchant cuts 15 trees he must plant at least that many new saplings. Offices
who want to use roller shades and woven wood shades and other blinds it looks
good if they plan that many new plants in their areas. Nature’s resources are
limited. When we consume them faster than they can be replenished or provided
anew, it is our responsibility to ensure that our children inherit a world which is
healthy, green and safe for all living creatures.
It is your responsibility as a manager to make sure that the operations of your
firm do not in any way obstruct, disturb, disrupt or destroy physical structures
(historical buildings, monuments), the flora and fauna, and animal and human
life. Apart from the specific society segments with whom the firm interacts in the
course of conducting its business, the manager also has responsibility towards
his surroundings and the people living in the vicinity of his factory and office.
Firms behave irresponsibly when they pollute their physical environment by
releasing harmful smoke and gas into the atmosphere, discharging toxic effluents
into nearby rivers, lakes or seas, and dumping their waste matter in surrounding
lands. All these have a detrimental effect on the environment and affect the
health of the people by polluting the air they breathe, the water they drink and the

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food they eat. The Bhopal tragedy where poisonous gas leaking from the factory
of Union Carbide caused the death of thousands of innocent people is and
example of the extent of damage which can be caused if proper precautions are
not taken.
The government is only now realizing the irreparable harm which firms, in pursuit
of their business, are causing to the environment and the ecological balance.
Vast forests have been indiscriminately felled by firms in their narrow, single-
minded pursuit of profit. This has created and imbalance in the ecology of the
area. Floods have become a recurrent feature in areas which had never been
known to be flood-prone.

4.5.2 Responsibility towards the Government

It is wholly the responsibility of the manager to ensure that the constitution and
operations of the firm are within the legal framework as specified by the
government. This legal framework may vary, depending upon the nature of
ownership of firm (proprietory, partnership, private limited, joint stock, Indian or
foreign, etc.), size of the firm, and specific industry within which the firm operates.
The government has laid down specific industry within which the firm operates.
The government has laid down specific rules, guidelines and norms which
impinge upon the firm right from the stage of its inception.
For Blinds Company who manufactures roller shades, there are specific rules
and guidelines and norms from government than forterm life insurance agents.
The governments’ rules and regulations, norms are made for different types of
business and different type of size of industry. It changes with the type, size and
category change.
There be as a responsible manager you must ensure that your company is
operating well within the legal framework and is fulfilling all its obligations towards
the government. Whether it is a matter of posting a copy of the company balance
sheet to the Registrar of Companies or setting up a joint venture in a foreign
country, the actions must not violate the laws and regulations.
The second area of discharging your responsibility towards the government is in
the matter of paying regularly and fairly all taxes, dues and duties. The recent
raids on large industrial groups are an attempt on the part of the government to
unearth unpaid taxes and undeclared assets. A manager who acts in a
responsible manner will be ensuring that his firm never has to face such a
situation. The manager must strive to make firm a model corporate citizen.

4.5.3 Responsibility towards the Union

The union will always bargain with you for the maximum benefit. As a manager
you should not try to block this bargaining process but aid it by providing the
union with the correct facts and figures about costs and profits and thus aim for a
realistic, workable agreement which suits both the parties.
Besides providing the correct information you should attempt to involve the union
in the process of managing the firm. You can do this by inviting representatives
of the union to sit on the management board. This is known as participative

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management. The chairman of Japan’s Matsushita Electric Company often
makes this little speech to his workers about participative management:
“Don’t think I run this company. Each of you has a part to play in its
management. We need the ideas, skill and knowledge of everyone to make a
reservoir of wisdom for more efficient operation, better product and service
quality, and effective management. We have a good future if we can work
that way.”
The basic requirement for encouraging participative management is the
manager’s positive attitude and creation of an atmosphere which encourages
free and frank exchange of views among employees and management.
Your first responsibility towards your employees’ union is to acknowledge it as a
friend rather than as a foe of the firm. Most problems with unions arise because
of the assumption of the managers that unions have no constructive contribution
to make but are interested only in playing a negative role. As a responsible
manager you must understand and appreciate the fact that the management and
union have a great degree of mutual dependence and the union cannot further its
interests at the cost of the firm’s interests and vice versa.
A responsible manager always advises their union member to go with term life
insurance. Only a relationship based on mutual trust and cooperation will best
serve the interests of the firm and the union. Window blinds and Roller
Shades companies who are having big team size need to have good and smooth
relation between manager and union.
The union represents the collective strength of all the individual workers. In
dealing with the union the manager must recognize and acknowledge the
bargaining power of the union arising out of its collective strength. The union will
always bargain with you for the maximum benefit. As a manager you should not
try to block this bargaining process but aid it by providing the union with the
correct facts and figures about costs and profits and thus aim for a realistic,
workable agreement which suits both the parties.

4.5.4 Responsibility towards the Industry and Competition

Healthy competition encourages firms to improve their performance and nurtures
progress and it is the responsibility of each firm to ensure that the competition it
indulges in is fair and ethical. Resorting to unfair practices, trying to push out
other firms on the basis of political influence or financial strength may yield some
short-term gains but will eventually tarnish the image of the entire industry. All
you actions must be guided by concern for the stability and prosperity of the
industry.
Other firms within the industry are your competitors in the market place but are
your associates when you have to lobby for or represent and an industry and not
as individual firms. Most industries have their own associations at the local,
regional, national and international level. The objectives of organizing such
bodies are to protect and promote the interests of the industry, seek concessions
from government and represent against any discrimination, and provide a forum

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for sharing and disseminating information on the latest technological and market
trends.
As a manager it is your responsibility to register your firm as a member of your
industry association and comply with all its rules and regulations. The information
which you provide to your association must be correct so that the association can
improved technology you may consider sharing it with other fellow firms.
All industry associations are voluntary bodies formed with the idea of providing
support to individual firms within the industry. The onus of successfully managing
the association is on all managers of individual firm members. You must be
always willing to step forward and take an active responsibility in the association.
It may impinge on your already tight schedule but it is good to remember that the
interests of your firm are best served when the interests of the industry as a
whole are served.

4.5.5 Responsibility towards the Distributers and Retailers

The company had to absorb the increased cost of the heavier carton, but it was
more than compensated by the fact that return of stock sharply declined and the
distributors had no more cause for complaints. A television marketing company
provides service engineers to all its outstation distributors for testing each TV
before it is dispatched onwards for dale. This adds an extra cost but ensures that
the distributors and retailers receive sets which are trouble-free.
The distributors and retailers who sell your products are in it for business and
they must earn a fair return. Apart from the fixed percentage which you provide to
your dealers, target based incentives, commissions and rewards will motivate
your dealers to push your products harder. Providing support to the dealers by
way of extending credit, sharing promotion cost, after sales service and help for
decorating the showroom also form part of your responsibility. You must also
nurture and maintain cordial relationship with all your dealers. Many companies
hold regular dealer meets in an attempt to build up dealer relations for better
corporate gains.

Distributors and retailers are the link between the firm and the actual customers
who consume the product. In your capacity as a manager you are responsible for
ensuring regular supplies to your distributors. Persistent delays in processing and
supplying distributor’s order can lead to a situation where the distributor
eventually loses interest in your product and switches over to a competitor firm.
Timely supplies have their relevance provided they are as per the order
specification. Supplying spoons instead of forks, simply because forks are out of
stock in the factory, is not a responsible way of dealing with your distributors.

The products that you supply to the distributor must be checked for quality to
ensure that second grade or inferior quality goods are not shipped. Outer
packaging of the product should protect it from damage in transit, because the
dealer will return all spoilt and damaged stock which will eventually reflect
negatively in your profits. A company manufacturing and marketing plastic bottles
switched over from 5-ply to 7-ply cardboard carton when it started receiving

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complaints that the bottles were being dented and crushed out of shape in
transit.

4.5.6 Responsibility towards the Suppliers

The manager’s responsibility towards suppliers of funds, i.e. banks and other
financial institutions is that not only he has to make the interest payments, but
make the repayment on time as per the agreed repayment schedules.

By doing so the firm is not only helping the bank but also helping itself because
the health of the bank will determine the health of the firm and vice versa. An
added dimension of responsibility towards the banks is that the manger must
provide accurate and complete information about the various facets of its
business when applying for financial assistance. This will help the bank in
assessing the risk and return potential of your project and determine the amount
of loan it can sanction.

Advertising agencies supply creative inputs used in promoting your company’s

products. Since their services are not of a very tangible nature, most firms have
the tendency to postpone or delay making their payment. As a responsible
manager you must check against this tendency. Advertising agencies after all,
run a business, like any other, and are your suppliers, and a payment delay from
your end puts undue pressure on them and affects the efficiency of their
operations.

Responsibility towards your suppliers emanates from the fact that their survival
and growth (partly or wholly) is dependent upon your survival and growth.
Suppliers provide you the raw materials, components and parts necessary for the
production of your products. You are dependent upon your suppliers for regular,
timely supplies of the specified quality at the agreed price. The suppliers in turn
depend on you for providing correct design specification, adequate time for
production, fixation of a fair price and prompt and timely payments. This two-way
relationship works best when it is based on the realization of mutual dependence
and one party does not try to pressurize the other for its own benefit.

Escorts Limited and Hero Cycles are examples of how firms can play a
responsible role in nurturing the growth of suppliers. As these firms have grown
form success to success so have their suppliers. A full-fledged bicycle ancillary
industry has been established in and around Ludhiana in response to the needs
of Hero Cycles and other cycle manufactures. In some cases firms may even
provide the seed capital and other necessary infrastructural support to an
individual to start and ancillary industry. There are numerous examples where
these small ancillary industries have grown to be as successful and large as the
firms to which they were originally supplying.

4.5.7 Responsibility towards the Employees

The thoughts of J.R.D. Tata, Chairman of Tata Steel, expressed in 1943 in a

proposal for the creation of a personal Department in the company are

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noteworthy. “What are the main causes of our difficulties with our workmen? In
many respects we have treated our employees exceptionally well. Our rates of
pay and bonuses; our hours of work and conditions of service; the
accommodation, amenities and medical care we have provided for them and
their families, etc., exceeded what any other company in India had done for its
employees. Normally, therefore, it would be reasonable to expect that our
employees would be appreciative of the liberal treatment and generous term of
employment they get at Jamshedpur. If, instead they are frequently discontented
and mistrustful, and hostile towards us, I think we must assume that the fault lies
with us and not win with them. It is, therefore, up to us to find out where we have
been at fault and them formulate the necessary corrective.”

Your responsibility as a manager is also to ensure that all dealings with the
employees are fair. Whether it is determining the profit linked bonus that is being
calculated or the provident fund of a retired employee which has to be paid, you
must ensure that the employees are not cheated, harassed or humiliated.

The fact that we still have child labor, bonded labor, workers suffering from
debilitating diseases because of unhealthy, unsafe working environments speaks
volumes for our collective failure to discharge managerial responsibility towards
our employees.

Today we continue our discussion on responsibility towards employees.

Instrumentation Limited, Tata Iron Steel Company and Hindustan Machine Tools
have developed beautiful townships in Kota, Jamshedpur and Bangalore
respectively with the best possible facilities and amenities for the benefit of their
employees. Where the company is situated in a remote, undeveloped area,
provision of housing and other facilities is necessary to attract and retain the
required work-force. But in many other cases, development of such amenities is
a reflection of the growing realization by companies that employees are not
simply another resource for production, but are beings with emotions, desires,
aspirations and have a life outside the factory too. Only a happy, satisfied human
being can be a productive worker. Many firms extend their mantle of
responsibility to include the employees’ families too. They contribute towards
education and marriage of their employees’ children.

Speaking about the importance of human level personal contact with employees
J.R.D. Tata laments: “One of the inherent drawbacks of modern industry, with its
large and concentrated labor forces, is the difficulty of maintaining personal touch
between management and employees. As a result, many petty grievances,
negligible individually but substantial in the aggregate, which might have been
eliminated by a friendly word or timely action, are allowed to build up a sense of
discontent and frustration among the workers.”

Your employees are your must important resource. Their hard work, ingenuity,
loyalty and dedication are critical contributions to the success of your firm. In
return, you have to ensure that you are giving them a fair deal in term of wages
and salaries, and compliance with the statutory obligation of provident fund,
gratuity, insurance, bounce, etc. The wages and salaries which you give must, of

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course, be in accordance with other firms within your industry. Result or
productivity linked bonus and incentives are a way to ensure that your employees
can share in the growth and prosperity of the firm.

Apart firm wages, provision of a safe, healthy environment which is conductive to

work is your responsibility. These must be proper and adequate facilities such as
canteen bathrooms, first-aid room, etc. The extent and importance of these
facilities will vary from one organization to another. In an administrative office
with 30 employees; you do not require a full-fledge first-aid room. A small first-aid
box with minimum accessories will suffice. In contrast, in a factory where the
incidence of accidents is bound to be higher, a proper first-aid or emergency
room with a doctor is an essential requirement. Realizing the importance of a
comfortable working environment, many progressive companies have canteens
which provide transportation for employees at their own cost

4.5.8 Responsibility towards the Shareholders

The manager has to ensure that the shareholders are able to earn profit on their
capital. Shareholders invest their hard earned savings in your firm with the hope
that they will be able to earn more on it than if they keep the money in a bank.
Money invested by a shareholder is representative of the faith they have in your
competence and ability as a manager to put their money to good use and give
them a satisfactory return. The onus is on you to make your firm profitable and
provide regular dividends to your shareholders.

By virtue of the capital invested in your firm, shareholders are owners of your
firm. As a manager you have to keep them regularly informed about all important
decisions, activities and results. The balance-sheet and the annual general
meeting are the usual yearly forums for such information sharing. You have to
ensure that the information provided in reports and balance-sheet is correct and
authentic, and dose not in any way mislead the shareholders. During the annual
general meeting or any other such meeting with shareholders you must
encourage them to ask questions about working of the firm and also provide
ideas for improvement, and not threaten or intimidate them in any manner.

Stockholders are granted special privileges depending on the class of stock,

including the right to vote (usually one vote per share owned, but sometimes this
is not the case) on matters such as elections to the board of directors, the right to
propose shareholder resolutions, the right to share in distributions of the
company’s income, the right to purchase new shares issued by the company,
and the right to a company’s assets during a liquidation of the company.

Except in the case of a proprietorship firm where the capital is fully contributed by
the proprietor, in all other companies, capital is collected from a variety of
sources. The sources may be friends and relatives of the owners, financial
institution and, in case of public limited companies, individual members of the
public. All those people who contribute capital to firm are known as its
shareholders.

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The prime responsibility of the manager is to ensure the security of the
shareholders’ capital. The manager must ensure that the firm does not become
bankrupt or it is faced with a situation where the shareholders’ capital is
endangered. In other words, the manager must, at least, ensure the survival of
the firm.

4.5.9 Responsibility towards the Customers

As a manager the concern person himself also responsible for ensuring that the
dealers of retailers through whom they sell their product provide the correct
information about the product to the customers, charge the correct price, sell the
correct weight or amount (if your product sold loose) and provide the proper after
sales support. A dealer who cheats on any one of these accounts is spoiling the
image of your product and company and you should discard such dealers
immediately.

Often firms, in their anxiety to make a success of a new product, make very tall
claims about the potential benefits of their product. Such a promotional effort may
create a short-term effect but can never provide a long-term stability. In India,
there is a tendency on the part of many firms to bolster the image of their
products by making claims far from the truth primarily because many customers
are not in a position to challenge such claims either through a voluntary or legal
framework. In the absence of pressure form consumers, it becomes the
responsibility of the manager to promote the products only on the basis of real
and not imaginary benefits.

Finally, there are always some product or service concepts the consumption of
which is viewed to be unethical. For instance a private medical clinic promoting
the concept of determining the sex of a foetus, knowing full well that there is a
distinct preference for a male child in most families, is certainly promoting an
unethical service. Therefore, in terms of responsibility towards customer, the
management of a firm should always, aim at marketing the right product, at the
right price and of the right quality.

It is the responsibility of the manager to provide the right match between quality
and price. This relationship of quality and price is very important. Japan’s
economic recovery and rise to the position of world’s number one position in
electronics and automobiles is the result of its winning combination of best quality
which competitors can’t match and at process which competitors can’t match and
at process which competitors can’t beat.

Products manufactured by reputed companies carry stickers saying ‘checked for

quality control’, ’tested’, ‘O.K.’. Over a period of time the customer starts
associating certain level or connotation of quality with particular companies and
their brand names. If, however, your products do not enjoy this kind of quality
association, you can have the quality ascertained by government bodies such as
the Indian Standards Institution which puts its ISI mark of approval on your
product after testing for adherence to minimum quality standards. Getting such
certifications will go a long way in building the customer’s confidence in your
products.

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Having ensured the desired quality of your product, and foxed a reasonable price
for it, your next responsibility is to ensure that your product is easily and
conveniently available to your customers. Unless you happen to be marketing a
product in which your company enjoys a monopoly and no substitute is easily
available, persistent non-availability of your product will lead your customers to
switch over to the best available substitute

4.6 Summary
To sum up, the specific tasks which a manager has to perform flow out of his or
her job description. The tasks may vary depending upon the managerial level,
function and industry to which the manager belongs. In this Unit we have
discussed an exhaustive list of tasks which every manager has to perform. It is
possible that you may not be performing all the tasks described here but
confining yourself to only a few. Also, some tasks may be of greater importance
than others.

4.7 Glossary
 Mission : Mission of a firm defines the very purpose and justification for a
firm’s existence. It is always described in terms of the benefits which a firm
provide to the customer and not in any physical terms. in any physical terms.

 Multinational corporations: Commercial organisation with manufacturing

and marketing facilities in or company more than one country.

 Obsolescence : The process of becoming obsolete, i.e. going out of use, or

going out of date.

 Public sector : A commercial organisation owned and managed by the state.

 Top management : That level of managers which is concerned with defining

the mission and objectives of the firm, and designing strategy to achieve
them

4.8 References/Suggested Readings

 Koontz, H. and Wehrich , H., Management-A Global Perspective, 14.,
TMH

 Pareek, U., Organizational Processes, Oxford and IBH, New Delhi.

 Robbins, S. P., Management, 8th ed., New Jersey, Englewood Cliffs,

Prentice Hall Inc.

 Robbins, S. P., Organizational Behavior, 9th ed., Prentice Hall of India.

 Robbins S.P, Seema Sanghi, Organizational Behavior, 11th ed, Pearson

Education.

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 Stoner, et. al., Management, 6th ed., Prentice Hall of India.

 Tayal, G. L., Management, Sultan Chand and Sons, New Delhi.

 Paul Hersey, Kenneth H.Blanchard, Management of Organisational

behavior, 8th ed., Pearson Edu.

4.9 Question Bank

1. What do you understand by the term “professional”. How is it applicable in the
terms of management?

2. What are the different tasks undertaken by a professional manager.

3. What roles need to be fulfilled by a professional manager? How they differ

from the tasks performed by them.

4. Enlist the various responsibilities endowed by a professional manager.

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UNIT 5: PLANNING- CONCEPT, PROCESS AND
TYPES OF PLANNING
Structure
5.1 Introduction

5.2 Objectives

5.3 Planning

5.3.1 Planning Concept, Meaning and Definitions

5.3.2 Features of Planning
5.3.3 Planning Process
5.3.4 Advantages/importance of Planning
5.3.5 Types of Planning
5.3.6 Barriers and Measures to Effective Planning
5.3.7 Planning as Forecasting- Comparison and Importance
5.3.8 Planning as Strategy and Business Policy
5.4 Conclusion
5.5 References
5.6 Progress Review
5.7 Exercise

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5.1 Introduction
Planning is the primary function of management. It focuses on the future
course of action. It specifies the objectives to be achieved in future and selects
the alternative course of action to reach defined objectives. It also involves many
activities like analyzing and decision making about technical, personnel, financial,
and other elements essential to implement predetermined course of action. Thus,
planning is mental and paper activities which look ahead for drawing the future
course of action.

In other words, planning is intellectual process which is concerned with deciding

in advance what, when, why, how, and who shall do the work. Generally,
manager defines goals and takes necessary steps to ensure that these goals can
be achieved in efficient manner. Planning reflects vision, foresight and wisdom.
Thus, it is the blue print of action and operation.

5.2 Objectives
The objectives of this unit are:

 To understand the concept of Planning

 To understand the managerial process of Planning
 To introduces the various types of planning and
 To develop insight into the concept of planning and forecasting

5.3 Planning
5.3.1 Planning – Concept, Meaning and Definition
The basic management functions are classified as planning, organizing,
staffing, directing and controlling. All these functions are basically made to
achieve the objectives of any organisation. For achieving these objectives
organisations has to plan accordingly. Planning thus, means having a view of the
future and deciding in advance where organisations would like to be and what is
to be done in order to reach there. Planning starts with the definition of the
objectives and the formulation of the specific goals or targets to be achieved.
Goals are derived from the analysis of existing situation of an organisation and
once defined provide a sense of direction to all managerial activities. In order to
achieve the goals, specific plans are drawn up. A plan is a commitment to a
particular course of action believed necessary to achieve specific results. For
example, Government of India prepares Five-Year plans which consist of various
actions to be taken, results to be achieved and resources to be used. These are
plans. The plans are prepared through the process of planning which comprised
of various activities to be achieved in the near future by the organisations.

In simple words, planning is deciding in advance what is to be done, when

where, how and by whom it is to be done. Planning bridges the gap from where
we are to where we want to go. It includes the selection of objectives, policies,
procedures and programmes from among alternatives. A plan is a predetermined

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course of action to achieve a specified goal. It is an intellectual process
characterized by thinking before doing. It is an attempt on the part of manager to
anticipate the future in order to achieve better performance. Planning is the
primary function of management.

Meaning and Definitions of Planning

Different authors have given different definitions of planning from time to time.
The main definitions of planning are as follows:

 According to Alford and Beatt, "Planning is the thinking process, the

organized foresight, the vision based on fact and experience that is
required for intelligent action."
 According to Theo Haimann, "Planning is deciding in advance what is to
be done. When a manager plans, he projects a course of action for
further attempting to achieve a consistent co-ordinate structure of
operations aimed at the desired results.
 According to Billy E. Goetz, "Planning is fundamentally choosing and a
planning problem arises when an alternative course of action is
discovered."
 According to Koontz and O' Donnell, "Planning is an intellectual process,
conscious determination of course of action, the basing of decision on
purpose, facts and considered estimates."
 According to Allen, "A plan is a trap laid to capture the future."
 According to Terry “ Planning is the selection and relating of facts and
making and using of assumptions regarding the future in the
visualizations and formalization of proposed activities believed necessary
to achieve desired result.”
 According to McFarland “Planning may be broadly defined as a concept
of executive action that embodies the skills of anticipating, influencing and
controlling the nature and direction of change.”
Thus, from the above definitions, we may come into conclusion that planning is
predetermination of objectives and intellectual course of action to be taken to
achieved defined goal effectively and on time. Generally, planning involves the
following elements;

1. Establishment of organizational objectives and policies.

2. Identification of alternative courses of action and programs
3. Selecting the best course of action and programme.

5.3.2 Features of Planning

From the above definitions, following features can be identified:

1. Planning is the process rather than behaviour at a given point of time.

This process determines the future course of actions.
2. Planning is primarily concerned with looking into future. It requires
forecasting of future situation in which the organisations has to function.

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Therefore, correct forecasting of future situation leads to correct decisions
about future course of actions.
3. Planning involves selection of suitable course of actions. This means that
there are several alternatives for achieving a particular objective or set of
objectives. However, all of them are not equally feasible and suitable for
the organisation.
4. Planning is undertaken at all the levels of the organisation because all
levels of management are concerned with the determination of future
course of actions. However, its role increases at successively higher
levels of management. Moreover, planning at different levels may be
different in the context that at the top management level, manager are
concerned about the totality of the organisation and tries to relate it with
the environment while managers at lower levels may be involved in
internal planning.
5. Planning is flexible as commitment is based on future conditions which
are always dynamic. As such, an adjustment is needed between the
various factors and planning.
6. Planning is a pervasive and continuous managerial function involving
complex processes of perception, analysis, conceptual thought,
communication, decisions and actions. The very pervasiveness of these
planning elements makes it difficult to identify and observe them in detail.

5.3.3 Planning Process

Planning process involves the following steps:

1. Being aware of opportunities

Although it precedes actual planning and is therefore not strictly a part of the
planning process, an awareness of opportunities in the external environment as
well as within the organisation is the real starting point for planning. All managers
should take a preliminary look at possible future opportunities and see them
clearly and completely, know where their company stands in light of its strengths
and weaknesses, understand what problems it has to solve and why, and know
what it can expect to gain. Settling realistic objectives depends on this
awareness. Planning requires a realistic diagnosis of the opportunity situation.

2. Establishing objectives

The second step in planning is to establish objectives for the entire organisation
and then for each subordinate work unit. This is to be done for the long term as
well as for the short range. Objectives specify the expected results and indicate
the end points of what is to be done, where the primary emphasis is to be placed
and what is to be accompanied by the network of strategies, police, procedure,
rules, budgets and programs.

3. Developing Premises

The next logical step in planning is to establish, circulate and obtain agreement
to utilize critical planning premises such as forecasts, applicable basic policies

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and existing company plans. Premises are assumptions about the environment in
which the plan is to be carried out. It is important for all the managers involved in
planning to agree on the premises. In fact, the major principle of planning
premises is the more thoroughly individuals charged with planning understand
and agree to utilize consistent planning premises, the more coordinated
organisation planning will be.

4. Determining Alternative Courses

The next step in the planning process is to search for and examine alternative
courses of action, especially those not immediately apparent. There is seldom a
plan for which reasonable alternatives do not exist and quite often an alternative
that is not obvious proves to be the best.

The more common problem is not finding alternatives but reducing the number of
alternatives so that the most promising may be analysed. Even with
mathematical techniques and the computer, there is a limit to the number of
alternatives that can be thoroughly examined. The planners must usually make a
preliminary examination to discover the most fruitful possibilities.

5. Evaluating Alternative Courses

The next step after seeking out alternative courses and examining their strong
and weak points is to evaluate the alternatives by weighing them in light of
premises and goals. One course may appear to be the most profitable but may
require large cash outlay and have a slow payback, another may look less
profitability but may involve less risk, and still another may better suit the
company’s long range objectives. There are so many alternative courses in most
situations and so many variables and limitations to be considered that evaluation
can be exceedingly difficult.

6. Selecting a course

At this point, plan is adopted and is considered to be real point of decision

making. Occasionally, an analysis and evaluation of alternatives courses will
disclose that two or more advisable and the manager may decide to follow
several courses rather than the one best course.

7. Formulating Derivative Plans

After decision has been made, planning is seldom complete and a seventh step
is indicated. Derivatives plans are almost invariably required to support the basic
plan.

8. Quantifying Plan by Budgeting

After decisions are made and plans are set, the final step in giving them
meaning, as was indicated in the discussion on types of plans, is to quantify them
by converting them into budgets. The overall budget of an organisation
represents the sum total of income and expenses, with resultant profit or surplus
and the budgets of major balance sheet items such as cash and capital

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expenditures. Each department or program of a business or some other
organisation can have its own budget, usually of expenses and capital
expenditure, which tie into the overall budget. If done well, budgets become a
means of adding the various plans and set important standards against which
planning process can be measured.

5.3.4 Advantages / Importance of Planning

Planning is the foundation of the organization. It is the primary function of
management which clearly defines the organizational objectives and line of
action. The quality of planning is important for successful operation of the
organization. The following points clarify the importance of planning in the
organization:

Advantages of Planning

 Goal Focus
 Minimize Uncertainty
 Improve efficiency
 Innovation and Creativity
 Facilitates to Control
 Better Coordination
 Ensures Commitment
 Aid to Business Success
 Brings Systematization
i. Goal Focus: Planning helps to focus the attention of the managers and
subordinates towards organizational objectives. It predetermines the objectives
and defines line of action to complete the work. Management of any organization
is formed to attain defined objectives. Thus, good management is the
management by objectives. Planning facilitates to make management by
objectives. It serves as the blue print of the course of action and eliminates the
unnecessary and useless activities. It focuses to priorities and facilitates to take
right decision at the right time.

ii. Minimize uncertainties: Planning is one of the important tools to

forecast and anticipate future uncertainties and risks. The management has to
work in an environment which is uncertain and ever changing. The change in
environment may occur due to economic, social, political and technological
changes. Planning helps an enterprise to make study about future challenges
and uncertainties which may arise in the future course of action. Thus, it helps
management to face future which greater strength and confidence. The
systematic and practical planning provides guidelines to the management to
complete the work in efficient manner.

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iii. Improve efficiency: One of the parts of planning is to select a best
course of action by evaluating many alternatives. While selecting a course of
action, the benefit of the organization is taken into consideration. It also provides
guidelines and procedures to complete the work. It also helps for the optimum
utilization of resources, avoiding wasteful efforts and money and minimizing
wastage. Besides, it also avoids the concept of trial and error or hit and misses
and defines a clear line of action. The selection of best cause of action, definition
of clear line of action ad optimum utilization of resources contribute to improve
overall working efficiency of the organization.

iv. Facilitates to control: Planning is the basis of control. It defines

the minimum standard of work to be achieved and time to complete the job. It is
helpful to compare the actual performance achieved with that of predetermined
or standard fixed. The manager evaluates the actual achievement of work
interval of time. This is helpful to identify the deviation, if any, between actual and
planned performances. In case any deviation is there, the management can take
necessary steps so that defined work can be completed in given time. Thus,
planning makes control meaningful and effective.

v. Innovation and creativity: Planning encourages innovative thought and

creative action among the managers. An effective planning encourages
managers to think about new knowledge, idea, procedures, technique and
strategy for the completion of work. It also helps to create new modified course of
action. This is essential for the growth and expansion of working areas of the
business. It contributes to motivate and develop moral among the employees. It
is also helpful to maintain up-to-date position in business operation and face
business complexity. Thus, planning is the base of management. The managers
innovate and create new strategy to complete the predetermined work in this
ever-changing environment.

VI Better Coordination: Planning plays an important role to facilitate better

coordination among all the authorities and units of the organization. It clearly
defines in advance what, when, and by whom the work should be done. For this
purpose, it clarifies the authority and responsibility of each and every employee
from top level of the organization. This is helpful to harmonize the relationship
between all employees and develop feeling of team spirit or group work among
them. In absence of proper planning of interrelated units, it is difficult to
accomplish goal and there is possibility of wastage of resources. Thus, planning
is the primary instrument to facilitate better coordination in the organization.

Vii Ensure Commitment: Planning ensures commitment of the

management towards organizational goal. It set the feelings of responsibility of
managers. It facilitates to convert individual goals to organizational objectives. It
clearly defines authority and responsibility of each and every authority. No one
can avoid or divert his responsibility to others. Planning also develops the sense
of team spirit and group work.

Viii Aid to Business System : Planning is the initial tool to business

success. It plays a key role for the successful operation of the business. It helps
to select the best course of action among many alternatives and defines clear

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line of action. Besides, it brings unity in action, minimizes cost and effort and
coordinates among all the members of the organization. Ultimately, it helps to
develop working efficiency and to achieve predetermined goals in an effective
way. Thus, planning is the best for the successful operation of business activities.
It is known as the key to business activities.

Ix Brings Systemization: Planning contributes to develop a system and

uniformity in organizational performance. It clearly defines authority and
responsibility of each and every employee from upper to subordinate levels. It
integrates and unites all the possible efforts of the organization. It avoids random
activity and the concept of trial and error. It provides order rationality to the
organization. It brings maturity in decision and makes simplification on its
implementation. It brings coordination to complete the work in systematic and
efficient manner and ultimately helps to minimize time and cost.

Therefore, planning is essential function for the successful

completion of organizational performances so that it can adjust itself in this
competitive and ever changing environment of the society. It plays an important
role to maintain unity in action and coordination among all the units and
employees, improve productivity, maintain effective control and develop overall
working efficiency of the business.

5.3.5 Types of Planning

There are number of ways by which an organisation can undergo the process of
planning although the steps remain the same. The various types of Planning are
as following:

1. Corporate planning

The term ‘corporate planning’ denotes planning activities at the top level, also
known as corporate level, which cover the entire organisational activities. The
basic focus of corporate planning is to determine the long-term objectives of the
organisation as a whole, and then to generate plans to achieve theses objectives
bearing in mind the probable changes in environment. Because of long-term
orientation involved and strategic aspects covered in corporate planning, it is also
used as synonymous to long-term planning or strategic planning. According to
David hussey corporate planning may includes the setting of objectives,
organizing the work, people and systems to enable those objectives to be
attained, motivating through the planning process and through the plans,
measuring performance and so controlling progress of the plan and developing
people through better decision making, clearer objectives, more involvement and
awareness of progress.

2. Functional planning

As against corporate planning which is integrative, functional planning is

segmental and it is undertaken for each major function of the organisation like
production/operation, marketing, finance, human resource etc. at the second
level, functional planning is undertaken for sub-functions within each major

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function. A basic feature of functional planning is that it is derived out of
corporate planning and therefore, it should contribute to the latter. This
contribution is achieved by integrating and coordinating functional planning with
corporate planning.

3. Strategic planning

Strategic planning sets the long-term direction of the organisation in which it

wants to proceed in future. Anthony has defined Strategic planning is the process
of deciding on objectives of the organisation, on changes on these objectives, on
the resources used to attain these objectives and on the policies that are to
govern the acquisition, use and disposition of these resources.

4. Operational planning

Operational planning also known as tactical or short term planning, usually

covers one year or so. It is aimed at substituting the organisation in its production
and distribution of current products and services to the existing markets. Thus,
operational planning may be defined as the process of deciding the most
effective use of the resources already allocated and to develop a control
mechanism to assure effective implementation of the actions so that
organisational objectives are achieved.

5. Long term planning

Long term planning is of strategic nature and involves more than one-year period
extending to twenty years or so. However, the more common long term period is
3 to 5 years. The long term plans usually encompass all the functional areas of
the business and are affected within the existing and long term framework of
economic, social and technological factors. Long-term plans also involve the
analysis of environmental factors, particularly with respect to how the
organisation relates to its competition and environment. Sometimes, basic
changes in organisation structure and activities become the real output of such
plans.

6. Short term planning

Short term planning, also known as operational or tactical planning, usually

covers one year. These are aimed at sustaining organisation in its production
and distribution of current products or services to the existing markets. These
plans directly affect functional groups- production, marketing, finance etc. within
its time dimensions.

7. Proactive planning

Proactive planning involves designing suitable courses of action in anticipation of

likely changes in the relevant environment. Organisations that use proactive
planning use broad planning approaches, broad environmental scanning,
decentralized control and reserve some resources to be utilized for their future
use. These organisations do not wait for environment to change but take actions

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in advance of environmental change. Most of the successful organisations,
generally, adopt proactive approach in planning.

8. Reactive planning

In reactive planning, organisations responses come after the environmental

changes have taken place. After the changes take place, these organisations
start planning. In such a situation, the organisations lose opportunities to those
organisations which adopt proactive approach because by the time, reactors are
ready with their plans, the contextual variables of planning show further changes.
Therefore, their plans do not remain valid in the changed situations. This
approach of planning is useful in an environment which is fairly stable over a long
period of time.

9. Formal planning

Formal planning is in the form of well structured process involving different steps.
Generally, large organisations undertake planning in formal way in which they
create separate corporate planning cell placed at sufficiently high in the
organisation. Generally, such cells are staffed by people with different
backgrounds like engineers, statisticians, economists etc., depending on the
nature of organization’s business. These cells monitor the external environment
on continuous basis. When any event in the environment shows some change,
the cells go for the detailed study of the impact of the event and suggest suitable
measures to take the advantages of the changing environment. The planning
process that is adopted is rational, systematic, well-documented and regular.

10. Informal planning

As against formal planning, informal planning is undertaken, generally by smaller

organisations. The planning process is based on managers’ memory of events,
intuitions and gut-feelings rather than based on systematic evaluation of
environmental happenings. Usually, the corporate planning affairs are not
entrusted to any single cell or department but become the part of managers’
regular activities. Since, the environment for smaller organisations is not
complex; they do reasonably well with informal planning process.

5.3.6 Barriers and Measures to Effective Planning

Barriers

Planning as a management function is essential to every manager and every

organisation but there are some practical problems in proper planning. The major
barriers to effective planning are as follows:

1. Difficulty of accurate premising

Planning exercise is under taken under certain assumptions of future events
which are determined by a large number of factors in the environment. Thus, a
limiting factor in planning is the difficulty of formulating accurate premises. Since

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the future cannot be known with accuracy, premising is subject to a margin of
error. Though this margin of error can be minimized by making suitable
forecasting of future events.

2. Problems of Rapid Change

Another problem which is related to the external environment is the rapid change
which takes place in the environment. In a complex and rapidly changing
environment, complications that make planning extremely difficult often magnify
the succession of new problems. The problem of change is more complex in long
range planning then in short range planning. Present conditions tend to weigh
heavily in planning, and by overshadowing future needs may some times result in
error of judgement. In rapidly changing conditions planning activities taken in one
period may not be relevant for other period because the conditions in two periods
are quite different.

3. Internal Inflexibilities
Managers while going through the planning process have to work in a set of
given variables. These variables often provide less flexibility in planning which is
needed to cope up with the changes in future events. Such inflexibilities may be
either internal to the organisation or may lie outside. The major internal
inflexibilities are psychological, policies and procedures, and capital investment.

4. External Inflexibilities
Besides the internal inflexibilities, managers are confronted with much external
inflexibility and they do not have control over these. For example managers have
little or no control over social, social, economic, technological and political forces.
Whether these changes quickly or slowly, they do stand in the way of effective
planning. Three environmental factors generate inflexibilities for an organisational
planning are- political climate, trade unions and technological changes.

5. Time and cost factors

Planning process is quite a costly and time-consuming process. The various
steps of planning may go as possible because there is no limit of precision in
planning tools. Managers can spend unlimited amounts of time in forecasting,
evaluating alternative, developing supporting plans or attending other aspects of
planning, if they do not have limitations of time and money. Planning process
suffers because of time and cost factors. Time is a limiting factor for every
manager in the organisation. If managers are busy in preparing elaborate reports
and instructions beyond certain level, they are risking their effectiveness.
Excessive time spent on securing information and trying to fit all of it into a
compact plan is dysfunctional in the organisation.

6. Failure of People in planning

Apart from the above factors, something, people involved in planning process fail
to formulate correct plans. There are many reasons why people fail in planning at
the formulation level as well as implementation level. Some of the major reasons
for failure are lack of commitment to planning, failure to formulate sound
strategies, lack of clear and meaningful objectives, tendency to overlook planning

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premises, failure to see the scope of plan, failure to see planning as a rational
approach, excessive reliance on the past experience, lack of top management
support, lack of delegation of authority, lack of adequate control techniques etc.
These personnel factors are responsible for either inadequate planning or wrong
planning in the organisation.

Measures

Following are the measures to be taken to make planning effective:

1. Establishing climate for planning

Managers should create a climate where every person in the organisation takes
planning action. Every superior manager should remove obstacles to planning
and present facilities for planning. This can be done by setting goals, establishing
and communicating planning premises, involving all managers in planning
process, reviewing subordinates’ plans and their performance and ensuring that
mangers have appropriate staff assistance and information.

2. Initiative at top level

Planning to be effective must originate at top level. It must be supported by top
management. In fact, in any organisation, the role of top management in planning
is quite unique and important. It is the top management which is responsible for
the success or failure of any organisational process and planning is no exception.
For planning process, basic goals from which plans stem must be organisation
wide and therefore goals must be set at the top management level.

3. Participation in planning process

No doubt, top management can initiate planning process by providing goals and
planning premises, effective planning can take place by the participation of
subordinate managers. The best planning is likely to be done when managers
are given opportunities to contribute to plans affecting areas over which they
have authority. Participation in planning affecting managers areas of authority at
all levels through their being informed, contributing suggestions and being
consulted leads to their commitment, loyalty to planning and enthusiasm to
implement the plan.

4. Communication of planning elements

Many planning efforts fail because managers do not really understand their goals
and other planning premises which affect their planning efforts. Similarly, lack of
proper understanding of organisational policies and strategies affects planning,
particularly at the lower levels. In order to avoid this impediment, it is highly
desirable that these aspects of planning are communicated properly.

5. Integration of long-term and short-term plans

To be effective, it is necessary that both long-term and short-term plans are fully
integrated in which short-term plans should be taken as contributing to long-term
plans. If managers emphasis only short-term plans can best be integrated if the
later is prepared in the light of the former. Similarly, if the long-term plans are

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prepared keeping in view what the organisation can implement by way of its
short-term plans, coordination between the two can be achieved.

6. An open system approach

Planning can be made effective by taking it as an open system approach. It
suggests that managers must take into account interactions with their total
environment in every aspect of planning. Objectives, a starting point in planning,
should be set taking into account the various environmental forces. Planning
premises represent a clear recognition that plans cannot be constructed in the
vacuum of an internal system. The interfaces and interactions of plans with every
element of the conditions and recognised in the planning process. Therefore, it
should not be taken as simple process, but the process of many interactions and
influences.

5.3.7 Planning as Forecasting – Comparison and Importance

Forecasting is the process of estimating the relevant events of future,
based on the analysis of their past and present behaviour. The future cannot be
probed unless one knows how the events have occurred in the past and how
they are occurring presently. Thus, the past and present analysis of events
provides information about their future occurrence. Since, forecasting may
requires the use of various statistical techniques; some persons equate this
analysis with statistical analysis.

According, to Neter and Wasserman, “Business forecasting refers to the

statistical analysis of the past and current movement in the given time series so
as to obtain clues about the future pattern of those movements.”

On the basis of the given definition following features of forecasting can be

identified:

1. Forecasting relates to future events. This is needed for planning process

because it devises future course of action.
2. Forecasting defines the probability of happening of future events. Therefore,
happening of future events can be precise only to a certain extent.
3. Forecasting is made by analysis the past and present relent events that is
taking those factors which are relevant for the functioning of an organisation.
4. The analysis of various factors may require the use of various statistical tools
and techniques. However, personal observations can also help in the
process.

Importance of Forecasting
Every decision in the organisation is based on some sort of forecasting. It helps
management in the following ways:

1. Promotion of organisation:
An organisation is established in order to achieve certain objective which can be
achieved by performance of certain activities. What activities should be

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performed depends on the expected outcome of these activities. Since expected
outcome depends on future events and the way in which an activity is being
performed, forecasting of future events and the way in which an activity is being
performed, forecasting of future events is of direct relevance in achieving an
objective.

2. Key to planning
Forecasting is an essential ingredient of planning. It is key to planning process.
Planning decides the future course of action. However, these future courses of
action doesnot take place in vacuum but in certain circumstances in conditions.
Unless the manager knows this condition, they cannot go for effective planning or
even planning at all. Forecasting generates the planning process. It provides the
knowledge of planning premises with in which manager can analyze their
strengths and weaknesses and can take appropriate actions in advance before
actually they are put out of market. Forecasting provides the knowledge about
the nature of future conditions.

3. Coordination and control

Forecasting provides the way for effective coordination and control, though
indirectly. Forecasting requires information about various external and internal
factors. The information is collected from various internal sources besides the
external sources. Thus, almost all units of the organisation are involved in this
process which provides interactive opportunities for better unity and coordination
in the planning process. Similarly, Forecasting can provide relevant information
for exercising control. The managers can know their weaknesses in Forecasting
process and they can take suitable actions to overcome these.

4. Success in organisation
All business organisations are characterised by risk and have to work within the
ups and downs of the industry. In fact, profit is the reward for bearing risk and
working under uncertainties. The risk depends on the future happening and
Forecasting provides help to overcome the problems of uncertainty. Though
forecasting does not check the future happenings, it provides clues about those
and indicates when the alternative action should be taken. Managers can save
their business and face the unfortunate happenings if they know in advance what
is going to happen. The business can be saved from the impact of trade cycles.
A manger can just work like a navigator. A navigator cannot control the sea tides
and other disturbances but he can take his ship at the right path and can save it
from these disturbances if he knows them in advance.

Comparison between Planning and Forecasting

Planning and forecasting can be equated as both of these deals with the future
phenomena. However, both are different and clear-cut difference can be drawn
between the two. The difference lies basically in the scope of two processes.
Planning is more comprehensive which includes many sub-processes and
elements in order to arrive at decisions. Such, decisions may be in terms of what
is to be done, how to be done, and when to be done. Commitment of actions is

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the basic ingredients of planning. Forecasting, on the other hand, involves the
estimation of future events and provides parameters to the planning. Forecasting
process may also involve many sub-processes and elements but these are used
to project what will happen in future. This may not require any commitment of
action but may help in planning the future course of action. In fact, forecasting is
one of the major ingredients of planning process because planning involves
determination of future course of action in the light of forecast made.

Since, planning involves making comprehensive decisions in the organisation

which will determine where the organisation would like to go, a large number of
persons are involved in planning process, though major decisions are made at
the top level. Forecasting is normally taken at middle or lower level. The work
may be entrusted to staff positions which may help in arriving at planning
decisions. Forecasting does not involve decision making but helps decision
making by providing clue about what is likely to happen in future. Therefore,
forecasting activity can be taken by those persons who may not affect whole of
the organisation or its major portion by their decisions.

5.3.8 Planning as Strategy and Business Policy

Strategy is meant to fill in the need of organizations for a sense of dynamic
direction, focus and cohesiveness .Objectives alone do not fill in the need of
organization. Strategy provides an integrated framework for the top management
to search for evaluation of opportunities, to perceive and meet threats and crises
to make full use of resources to make major decision.

Strategy may be defined as long range blueprint of an organization’s desired

image, direction and destination what it wants to be, what it wants to do and
where it wants to go.

The concept of strategy is ancient. The word itself comes from the Greek
Strategeia, which means the art or science of being general. The connection that
managers today make between business and strategy is a relatively recent one.
Only since World War II has emerged that strategic planning and acting on those
plans constitute a separate management process- the process we call Strategic
management.

Strategic management provides a disciplined way for managers to make sense

of the environment in which their organization operates, and then to act.

Stages in formulation of strategy

A number of framework have been developed for identification the major
strategic alternatives that organization should consider when choosing their
business – level strategies.

The several stages involved in formulating a strategy .

1. Determination of corporation vision, mission, and purpose

2. External environmental appraisal

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3. Internal environmental appraisal
4. Gap analysis
5. Strategic search
6. SWOT analysis

5.4 Conclusion
Planning consists of several individual plans. Objectives are goals or aims which
management wishes the organisation to achieve. In the traditional approach,
objectives are the basic components of plans and a programme is a precise plan
which helps to chalk out the dimensions of policies, rules, procedures, methods,
schedules, standards which are formed to accomplish the basic objectives or
goals. Hence, plans should be based on clearly defined objectives which must be
simple, rational, comprehensive, and flexible, balanced and must be free from
biases.

5.5 Reference
1. Harold Koontz & Heinz Weihrich, Essentials of Management : An
International Perspective, Tata McGraw-hill publishing company limited,
New Delhi, 2009.
2. Prasad, L.M., Principles and Practice of Management, Sultan Chand &
Sons, 2008
3. Stephen P Robbins, “Fundamentals of Management: Essential Concepts
and Applications”, 5th Edition, Pearson Education., 2005
4. Maria L. Nathan, “What is organisational vision? Ask Chief Executives”,
Academy of Management Executive, February 1996, p.82.
5. Michael Treacy and Fred Wiersema, The discipline of market leaders:
Choose your customers, narrow your focus, dominate the market, New
York: Addison-Wesley, 1995
6. Michael Hammer and James Champy, “Reengineering the corporation”,
New York: Harper Business, 1993
7. Ford S. worthy, “Mr. Clean charts a new course at general Dynamics”,
Fortune, April 28, 1986, pp. 70-76.
8. Peter F. Drucker, “The Practice of Management”, New York: Harper and
Brothers, 1954, p.63.
9. Heinz Weihrich, “Management Excellence: Productivity through MBO”, New
York: McGraw-Hill, 1985.
10. Koontz, Harold and Weijrich, Heinz : Essentials of Management : an Indian
perspective., TMG
11. Saksena, S. C., “Principles and Practice of Management”, Sahitya Bhawan
Publisher Agra, Edn. 1998.

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5.6 Progress Review:
Objectives and Fill in the blanks:

1. ____________ is the process involves the determination of future course

of actions.

2. Planning process is __________ as commitment is based on future

conditions which are always________.

3. One of the major elements of planning process is

a. developing leadership qualities

b. selecting right personnel

c. perception of opportunities

d. designing organisation structure

4. Pervasiveness of planning indicates that planning

a. extends throughout the organisation

b. is a top management function

c. is the first element of managerial process

d. is future-oriented activity

5. Strategic planning differs from operational planning as strategic planning

focuses on

a. future course of action

b. long-term perspective

c. short-term perspective

d. single-use plans

6. Tactical planning is also known as

a. Strategic planning

b. operational planning

c. corporate planning

d. proactive planning

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7. Which one of the following is a feature of good plan?

a. Consistency

b. Highly ambitious targets

c. formulated by all persons

d. rigid targets

8. Which one of the following element is not a limitation to effective planning?

a. rapid environmental changes

b. inadequate appreciation of planning

c. organisational inflexibility

d. social responsibility

Keys
1. Planning
2. Flexible, Dynamic
3. d
4. b
5. b
6. a
7. d
8. c

5.7 Exercises
1. What is the concept of planning as an element of management process?
Discuss its role in present- day business organisations.
2. What are the various steps of planning process? Explain in detail.
3. Discuss the importance of planning in the day to day business
organisations.
4. Discuss the nature of planning as a rational process and as an open
system approach. How can be planning considered as pervasive?
5. How is long-term planning differing from that of short-term planning? How
can be both coordinated?
6. What are the various factors that act as barrier to effective planning?

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7. What are the essential features of a good plan? How can planning be
made effective?
8. How can various organisational plans be arranged in a hierarchy? How
do standing plans differ from single-use plans?

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UNIT 6: ORGANIZATIONAL STRUCTURES AND
DEPARTMENTATION
Structure
6.1 Introduction To Organizational Structures And Departmentation
6.2 Organizational Structure
6.2.1. Organizational Structure: Conceptual Framework
6.2.2. Types of Organization Structure
6.2,3. Factors Affecting Organization Structure
6.2.4. Elements of Organization Structure
6.3 Departmentation
6.3.1 Departmentation: concept, meaning and definition
6.3.2 Need and Importance of Departmentation
6.3.3 Forms of departmentation
6.3.4 Factors effecting departmentation
6.4 Conclusion
6.5 References
6.6 Progress Review
6.7 Exercises

6.1 Introduction to Organizational Structures and

Departmentation
Organization is the foundation upon which the whole structure of
management is built. Organization is related with developing a frame work where
the total work is divided into manageable components in order to facilitate the
achievement of objectives or goals. Thus, organization is the structure or
mechanism that enables living things to work together. In a static sense, an
organization is a structure or machinery manned by group of individuals who are
working together towards a common goal. Simultaneously, in dynamism an ideal
organization is a reality which can be achieved through the active cooperation of
all the members of an organization and also by following the principles of
departmentation , wherein, departmentation is aprocess of defining the activities
and authority of jobs. The total task of the organization is broken down into small
activities and combining the divided task into groups and departments on certain
basis viz. functional, territorial or any other.An organization conceived and
developed on the above lines will reward its leaders and well as its members
(Personnel). Not only will the objectives be achieved more easily, and
conveniently, but the physical operation of the organization will also be greatly
enhanced. The well-known industrialist of U.S.A. late Andrew Canrnegi, when

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sold his famous 'United State Steel Corporation', showed his confidence in
organization by uttering the following words, "Take away our factories, take away
our trade, our avenues of transportation, our money, leave nothing but our
organization, and in four years, we shall re-established ourselves." Since ages
and in every walk of life, organization has been playing a vital role of relationship,
as a group of persons and as a system.

6.2 Organizational Structure

6.2.1 Organizational Structure: Conceptual Framework
An organizational structure consists of activities such as task allocation,
coordination and supervision, which are directed towards the achievement of
organizational aims. The structure of an organization will determine the modes in
which it operates and performs. Organizational structure allows the expressed
allocation of responsibilities for different functions and processes to different
entities such as the branch, department, workgroup and individual.
Organizational structure affects organizational action in two big ways. First, it
provides the foundation on which standard operating procedures and routines
rest. Second, it determines which individuals get to participate in which decision-
making processes, and thus to what extent their views shape the organization’s
actions.

The set organizational structure may not coincide with facts, evolving in
operational action. Such divergence decreases performance, when growing.
E.g., a wrong organizational structure may hamper cooperation and thus hinder
the completion of orders in due time and within limits of resources and budgets.
Organizational structures shall be adaptive to process requirements, aiming to
optimize the ratio of effort and input to output. Organizational structures
developed from the ancient times of hunters and collectors in tribal organizations
through highly royal and clerical power structures to industrial structures and
today's post-industrial structures.

As pointed out by Mohr, the early theorists of organizational structure,

Taylor, Fayol, and Weber "saw the importance of structure for effectiveness and
efficiency and assumed without the slightest question that whatever structure
was needed, people could fashion accordingly. Organizational structure was
considered a matter of choice... When in the 1930s, the rebellion began that
came to be known as human relations theory, there was still not a denial of the
idea of structure as an artifact, but rather an advocacy of the creation of a
different sort of structure, one in which the needs, knowledge, and opinions of
employees might be given greater recognition." However, a different view arose
in the 1960s, suggesting that the organizational structure is "an externally caused
phenomenon, an outcome rather than an artifact." In the 21st century,
organizational theorists such as Lim, Griffiths, and Sambrook (2010) are once
again proposing that organizational structure development is very much
dependent on the expression of the strategies and behavior of the management
and the workers as constrained by the power distribution between them, and
influenced by their environment and the outcome.

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In the words of Kast and Rosenzweig, "structure is the established pattern
of relationships among the component parts of the organization". In this sense,
Organization structure refers to the network of relationships among individuals
and positions in an Organization.

Structure is thus an integral component of the organization. Nystrom and

Starbuck (1981) have defined structure as the arrangement and interrelationship
of component parts and positions in an organization. It provides guidelines on:

 division of work into activities;

 linkage between different functions;
 hierarchy;
 authority structure;
 authority relationships; and
 coordination with the environment.

Organizational structure may differ within the same organization according to the
particular requirements. Structure in an organization has three components
(Robbins, 1989):
 Complexity, referring to the degree to which activities within the
organization are differentiated. This differentiation has three dimensions:
 horizontal differentiation refers to the degree of differentiation between units
based on the orientation of members, the nature of tasks they perform and
their education and training,
 vertical differentiation is characterized by the number of hierarchical levels in
the organization, and
 spatial differentiation is the degree to which the location of the organization's
offices, facilities and personnel are geographically distributed;
 Formalization refers to the extent to which jobs within the organization are
specialized. The degree of formalization can vary widely between and
within organizations;
 Centralization refers to the degree to which decision making is
concentrated at one point in the organization.

Designing organizational structures

Some important considerations in designing an effective organizational structure
are:
 Clarity The structure of the organization should be such that there is no
confusion about people's goals, tasks, style of functioning, reporting
relationship and sources of information.
 Understanding The structure of an organization should provide people with
a clear picture of how their work fits into the organization.
 De-centralization The design of an organization should compel discussions
and decisions at the lowest possible level.
 Stability and Adaptability while the organizational structure should be
adaptable to environmental changes, it should remain steady during
unfavourable conditions.

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Organization Chart

Organization structure of a company can be shown in a chart. Such chart

indicates how different departments are interlinked on the basis of authority and
responsibility. It is a simple diagrammatic method of describing an Organization
structure. It indicates how the departments are linked together on the basis of
authority and responsibility. Such Organization chart provides information of the
Organization structure at a glance. Organization chart is like a blue print of a
building. It indicates the number and types of departments, superior-subordinate
relationship, chain of command and communication.

According to George Terry, Organization chart is "a diagrammatical form which

shows important aspects of an Organization, including the major functions and
their respective relationships, the channels of supervision and the relative
authority of each employee who is in-charge of each respective function". The
following two diagrams are the examples two types of organization charts;

Organizational Chart 1:

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Organizational Chart 2:

President

Production
Sales Controller
Manager
Manager
Assistant
Sales
Manager

Branch A Branch B
Manager Manager

Sales Sales
Representatives Representatives

6.2.2 Types of Organization Structure

Organization structure is defined as "The logical arrangement of task and

the network of relationships and roles among the various positions established to
carry out the activities necessary to achieve the predetermined objectives of
business". Internal Organization structure constitutes the arteries and veins
through which the blood of work flows in the body of Organization.

Internal Organization structures can be broadly classified into the following

types/forms:

1. Line Organization structure.

2. Functional Organization structure.
3. Line and staff Organization structure.
4. Product Organization structure.
5. Committee and Matrix Organization structure.

1. Line Organization Structure

Line Organization (also called Military/Scalar Organization) is the oldest and the
simplest form of internal Organization structure. It was first developed by the
Roman army and later adopted by armies all over the world. Factory owners also

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used line Organization structure in its purest form in the nineteenth century in
England.

In the line Organization, the line of authority moves directly from the top
level to the lowest level in a step-by-step manner. It is straight and vertical. The
top-level management takes all major decisions and issues directions for actual
execution. The general manager, for example, issues order to various
departmental managers. Thereafter, the departmental manager issues
instructions to works manager. The works manager will issue instructions to
foreman. In this manner, the orders and instructions will be issued to the workers
working at the lowest level. Thus authority moves downward and also step-by-
step. The responsibility, on the other hand, moves in the upward direction.

Line Organization structure is given in the following chart:

2. Functional Organization Structure

F.W.Taylor, founder of scientific management, conceived the functional

Organization structure. According to him, it is unscientific to overload a foramen

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with the entire responsibility of running a department. He introduced a system of
functional foremanship in his Organization. In his functional foremanship, there
will be eight specialists' foremen who will be required to guide, direct and control
the work. Workers at the plant level will have to follow the instructions of all these
eight specialists called bosses.

In the functional Organization suggested by F.W.Taylor, the job of management

is divided according to specialization. As a result, functional departments are
created. For example, the personnel department will look after the recruitment,
selection, training, wage payment, etc. of all persons of the Organization. Similar
will be the position of other departments like production, sales, etc. The scope of
work of the department is limited but the area of authority is unlimited.

In the functional Organization structure, there will be separation of planning of

work and execution of the plan prepared. The basis of division is the function and
naturally the Organization structure created will be called "Functional
Organization".

In the functional foremanship, there will be eight specialists/functional heads

called bosses. Out of eight bosses, four bosses will be at the planning level and
the remaining four will be at the slop floor level.

Foremen at Planning Level (Planning Dept.)

1. Time and Cost Clerk: He is concerned with preparing standard time for the
completion of certain piece of work and compiling the cost of that work.
2. Instruction Card Clerk: He lays down the exact method of doing the work. He
specifies the tools to be used for conducting the production and also gives
other instructions on the instruction cards prepared by him.
3. Route Clerk: The route clerk lays down the exact route through which each
and every piece of work should move through various stages till completion.
He decides the production schedule and the sequence of steps by which the
production process is to move.
4. Shop Disciplinarian: He is concerned with the discipline, insubordination,
violation of rules of discipline and absenteeism. All cases relating to these
matters will be managed by the shop disciplinarian.

Foremen at Shop Floor Level (Shop Floor)

1. Gang Boss: He assembles and sets up various machines; and tools for a
particular piece of work. He is in-charge of assembling line of production.
2. Speed Boss: He is concerned with the speeding of machines used for
production. He keeps proper speed of the machines and see that workers
complete the production work as per the schedule time.
3. Repair Boss: The repair boss looks after the proper maintenance of machines,
tools and equipments required during the production process.
4. Inspector: The inspector controls quality of the products by keeping adequate
check/control when the production work is in progress.

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The functional Organization structure is given in the following chart:-

3. Line and Staff Organization Structure

In the line and staff Organization, line executives and staff (specialists) are
combined together. The line executives are 'doers' whereas staff refers to
experts and act as 'thinkers'. The following chart shows line and staff
Organization structure:

The line executives are concerned with the execution of plans and Policies. They
do their best to achieve the organizational objectives. The staff concentrates their
attention on research and planning activities. They are experts and conduct
advisory functions.

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Staff specialists are regarded as 'thinkers" while execution function is given to
line executives who are "doers". The staff is supportive to line. The staff
specialists offer guidance and cooperation to line executives for achieving
organizational objectives. This reduces the burden of functions on the line
executives and raises overall efficiency of the Organization. For avoiding the
conflicts between line and staff, there should be clear demarcation between the
line and staff functions. This avoids overlapping of functions and possible
conflicts. In short, the line and staff functions are different but are supportive and
can give positive results if adjusted properly i.e. by avoiding the conflicts. They
suggest/recommend but have no power to command the line executive.
However, their advice is normally accepted because of their status in the
Organization.

According to Louis Allen, "Line refers to those positions and elements of the
Organization, which have the responsibility and authority and are accountable for
accomplishment of primary objectives. Staff elements are those which have
responsibility and authority for providing advice and service to the line in
attainment of objectives".

4. Product Organization Structure

This form of organization structure is adopted by large companies producing a
wide range of products. Here, the activities are grouped on the basis of the
individual products manufactured by the company. Thus, one finds autonomous
“little companies within the company” adopting this type of organization structure.
As such, within each of these little independent units, we find all important
functions viz. production, marketing, finance and human resources. . One of the
advantages of the product organization is that it enables diversification of the
products to take place with minimal effort. Another advantage is that it can cope
better with technological change by grouping people with expertise and their
specialized equipment in one major unit. The main disadvantage of the product
organization is that each product division may promote its own product group in a
way that creates problems to other product divisions of the company. The
following figure shows an example of a Product-based Organization Structure.

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5. Committee and Matrix Organization structure.
1. Committees or juries

These consist of a group of peers who decide as a group, perhaps by voting. The
difference between a jury and a committee is that the members of the committee
are usually assigned to perform or lead further actions after the group comes to a
decision, whereas members of a jury come to a decision. In common law
countries, legal juries render decisions of guilt, liability and quantify damages;
juries are also used in athletic contests, book awards and similar activities.
Sometimes a selection committee functions like a jury. In the Middle Ages, juries
in continental Europe were used to determine the law according to consensus
amongst local notables. Committees are often the most reliable way to make
decisions.

2. Matrix Organization - Meaning

Matrix Organization was introduced in USA in the early 1960's. It was used to
solve management problems in the Aerospace industry. Matrix Organization is a
combination of two or more organization structures for example, functional
organization and Project Organization. Further, the organization is divided into
different functions, e.g. Purchase, Production, R & D, etc. Each function has a
Functional (Departmental) Manager, e.g. Purchase Manager, Production
Manager, etc. The organization is also divided on the basis of projects e.g.
Project A, Project B, etc. Each project has a Project Manager e.g. Project A
Manager, Project B Manager, etc. The employee has to work under two
authorities (bosses). The authority of the Functional Manager flows downwards
while the authority of the Project Manager flows across (side wards). So, the
authority flows downwards and across. Therefore, it is called "Matrix
Organization".

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An example of matrix organization is shown in the following diagram:-

6.2.3 Factors Determining Organization Structure

An organization structure is the body of policies and rules that allows an
organization to arrange its chain of command and communication while
allocating rights and responsibilities, according to the Business Dictionary.
Several factors should be considered in determining an appropriate
organizational structure.

1. Size and Organizational Structure

The bigger the organization, the more complex is its structure. If the company is
small, such as a three-person tax company, the design is generally simple. A
small company does not have to undergo a formal structure; it can operate solely
on the desires of the principals and the needs of the company. Policies and
guidelines may be present only to provide the boundaries in which employees
make decisions.

Larger organizations depend more on authority delegation and formal work

responsibility, because a bigger company is harder to manage. Work duties tend
to be specific to certain employees, and work procedures are based on rules and
policies. The communication system is arranged so it flows from management to
subordinates. Larger organizations are structured to enhance efficiency and
specialization.

2. Life Cycle and Organizational Structure

An organization undergoes the stages of birth, youth, midlife and maturity. During
birth, the company is in its blossoming phase and without a formal design. During
the youth phase, the company is attempting to expand, with the needs of the
customers becoming the focus. In the midlife phase, the company has developed

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a formal design with a chain of command. In the maturity stage, the organization
is more focused on maintaining the stability it has developed.

3. Market Strategy and Organizational Structure

The organization must determine the technique it will use to market its product. It
may invent a new product, or enhance one that is already on the market.
Regardless of the method used, it must include a strategy that assists the
company in attaining its goals.

4. Environment/Technology and Organizational Structure

Stable environments are settings that remain the same for long periods of time,
such as manufacturers of stationary supplies. In a dynamic environment, the
company may change frequently to match its clients’ needs. For example, an
electronics manufacturer may need to update or change its technology often to
keep up with consumers’ changing desires.

Through the use of technology, companies are able to operate more efficiently
and at lower costs. By using tools, equipment and strategy, technology helps
workers accomplish their core tasks at a quicker pace. If a company has the
appropriate organizational structure blended with the right technology, it can
attain organizational success.

6.2.4 Elements Of Organization Structure

Organization as a structure, implies a number of elements. There are six
elements that mangers need to address when they design their organization’s
structure. These are :- a) Work specialization. b) Departmentalization. c) Chain of
command. d) Span of control. e) Centralization & Decentralization. f)
Formalization

1. Work Specialization: - refers to the degree to which tasks in the organization

are subdivided into separate jobs. The essence of work specialization is that,
rather than an entire job being done by one individual, it is broken down into a
number of steps, with each step being completed by a separate individual.

In work specialization:

 the entire job is broken down into steps, each step completed by a separate
individual
 individual workers specialize in doing part of an activity
 involves repetitive performance of a few skills
 can be viewed as a means to make the most efficient use of employee's
skills
 some task requires highly developed skills
 others can be performed by the untrained

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Division of labor
 makes efficient use of employees skills
 increases employee's skills through repetition
 less between-job downtime increases productivity
 specialized training is more efficient
 allows the use of specialized equipment

2. Departmentalization: After reviewing the plans, usually the first step in the
organizing process is departmentalization. Once jobs have been classified
through work specialization, they are grouped so those common tasks can be
coordinated. Departmentalization is the basis on which work or individuals are
grouped into manageable units. There are five traditional methods for grouping
work activities, these are; Departmentalization by function, Departmentalization
by product, Departmentalization by geographical regions, Departmentalization
by process, Departmentalization by customer

3. Chain of Command: It is the unbroken line of authority that connects each

level of management with the next level. The chain of command helps
organizations function smoothly by making two things clear: who is responsible
for each task, and who has the authority to make official decisions. In
organizations, employees are assigned:
 Responsibility along with the Accountability associated with it.
 Managers ensure tasks are accomplished by exercising authority together
with the its appropriate Delegation. Possible chain-of-command systems
include Line organization and Line & staff organization.
According to its proponent Henri Fayol (1841-1925), the more clear cut the chain
of command, the more effective the decision making process and greater the
efficiency. Military forces are an example of straight chain of command that
extends in unbroken line from the top boss to lower ranks.

4. Span of Control: The Span of Control in an organization is defined as the

number of employees reporting directly to one supervisor. Traditionally, the Span
of Control has been defined as a number between 4 and 7 subordinates under
one manager. The Span of Control is a concept which developed during the 19’th
Century for the organization of large European armies into smaller and smaller
subunits. I.e. one could have 7 soldiers in one Platoon with 1 leader, 7 platoons
with one higher-ranking leader, etc. to form a large army which was relatively
easy for one General at the top to manage under conditions of combat.

Concept
 Wider spans of management increase organizational efficiency
Narrow Span Drawbacks
 expense of additional layers of management
 increased complexity of vertical communication
 encouragement of overly tight supervision and discouragement of
employee autonomy

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5. Centralization and Decentralization: Centralization refers to the degree to
which decision making is concentrated at a single point in the organization. The
concept includes only formal authority that is, the rights inherent to one’s
position. In contrast, the actually given the discretion to make decision, the more
decentralization there is. An organization characterized by centralization is an
inherently different structural entity from one that is an inherently different
structural entity from one that is decentralized. In a decentralized organization,
action can be taken more quickly to solve problem, more people provide input
into decisions and employees are less likely to feel alienated from those who
make the decisions that affect their work lives. Consistent with recent
management efforts to make organization more flexible and responsive, there
has been a marked trend toward decentralizing decision making. In large
companies, lower-level managers are closer to “the action” and typically have
more detailed knowledge about problems than do top management.

6. Formalization: Formalization refers to the degree to which job within the

organization are standardized. If a job is highly formalized then the job incumbent
has a minimum amount of discretion over what is to be done, when it is to be
done and how it is to be done. Employees can be expected always to handle the
same input in exactly same way, resulting in a consistent and uniform output.
There are explicitly job description lots of organizational rules, and dearly defined
procedures covering work processes in organizations in which there is high
formalization. Where formalization is low, job behaviors are relatively non-
programmed and employees have a great deal of freedom to exercise discretion
in their work. Because an individual’s discretion on the job is inversely related to
the amount of behavior in that job that is preprogrammed by the organization, the
greater the standardization and the less input the employee has into how his or
her work is to be done. Standardization not his/her work is to be done.
Standardization not only eliminates the possibility of employees engaging in
alternative behaviors, but it even removes the need for employees to consider
alternatives.

6.3. Departmentation
6.3.1 Departmentation: Concept, Meaning and Definition
Manner or practice in which related individual tasks and their allocation to work
groups is combined, to form a specialized functional area that is distinct from
other functional areas in an organization. Grouping related functions into
manageable units to achieve the objectives of the enterprise in the most efficient
and effective manner is departmentalization. As per Luthans,
Departmentalization is a process of horizontal clustering of different types of
functions and activities on any one level of the hierarchy. It is closely related to
the classical bureaucratic principle of specialization (Luthans, 1986).
Departmentalization is conventionally based on purpose, product, process,
function, personal things and place (Gullick and Urwick, 1937).

According to Professors Pearce and Robinson, "Departmentalization is the

grouping of jobs, processes, and In departmentalization, similar activities are

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grouped together to form various departments. For example, all the activities
relating to accounts are grouped together to make the accounts department.
Similarly, we have purchase department, production department, sales
department, finance department, human resource (HR) department, etc.

So, departmentalization is the process of dividing the organization into different

departments. It is the process by which an organization expands horizontally.
There are many bases or types of departmentalization. A department consists of,
head of department, specific functions and staff. The head of department (HOD)
is responsible to the CEO of the organization for the functions of his
department.The concept of departmentalization is depicted in the following
diagram.

6.3.2 Need and Importance of Departmentalization

The need and importance of the departmentalization arise out of the benefits or
advantages of departmentalization, which are listed as follows:

1. Specialization

In departmentalization, each department performs a different function. For

example, Finance department looks after finance, marketing department looks
after sales, etc. This results in specialization. Specialization leads to speed,
accuracy, efficiency and improvement in quality and quantity of work.

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2. Growth and expansion

There are many different departments in the organization. Therefore, the

organization can easily grow and expand. Without departmentalization, the
organization cannot grow and expand. It will remain small and static.

3. Fixing responsibility

Departmentalization helps to fix the responsibility of a specific job on a particular

department. If there is a mistake in the accounts, then the accounts department
will be held responsible. Similarly, if there is a mistake in the product, the
production department will be held liable, and so on.

4. Better customer service

Departmentalization results in a better customer service. The customers get

quick and efficient service. Many organizations do geographic and customer
departmentalization..

5. Performance appraisal

In departmentalization, a specific job is given to a particular person or

department. Therefore, it is very easy to do the performance appraisal. That is,
the performance of a person or department can be easily measured.

6. Management development

Training given to managers is called management development.

Departmentalization facilitates management development. This is because the
junior or trainee managers can be sent to different departments to get an On-the-
Job-training. They are allowed to take part in planning, decision making,
implementation of strategies, etc. This results in management development.

7. Optimum utilization of resources

Departmentalization facilitates optimum utilization of resources. The men,

money, materials, machines, methods and markets are put to maximum use.
There are many organizations that use time departmentalization. Here, there are
working shifts like morning shift, evening shift, night shift, etc. This results in
optimum utilization of resources.

8. Facilitates better control

In departmentalization, the organization is divided into small manageable
departments. These departments can be easily supervised and controlled.
Hence, departmentalization also facilitates a better control.

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6.3.4 Forms of Departmentation
A variety of means can be utilized for this purpose. The primary forms of
departmentalization are by function, process, product, market, customer,
geographic area, and even matrix (also called project organization). In many
organizations, a combination of these forms is used departmentalization the
grouping of related functions into manageable units to achieve the objectives of
thexenterprise in the most efficient and effective manner.
There are five common forms of departmentalization:

1. Functional Departmentalization. As shown in the following figure, it groups

jobs by functions performed. It can be used in all kinds of organizations; it
depends on the goals each of them wants to achieve. Functional
Departmentalization example

Different aspects on this type of departmentalization:

Positive Aspects Negative Aspects

o Efficiencies from putting together o Poor communication across
similar specialties and people with functional areas
common skills, knowledge, and o Limited view of organizational
orientations goals
o Coordination within functional area
o In-depth specialization

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2. Product Departmentalization. It groups jobs by product line. Each
manager is responsible of an area within the organization depending of
his/her specialization. Product Departmentalization example

Different aspects on this type of departmentalization:

Positive Aspects Negative Aspects

o Allows specialization in particular o Duplication of functions
products and services o Limited view of organizational goals
o Managers can become experts in
their industry
o Closer to customers

3. Geographical Departmentalization. It groups jobs on the basis of territory

or geography. Geographical Departmentalization example

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Different aspects on this type of departmentalization:

Positive Aspects Negative Aspects

o More effective and efficient handling o Duplication of functions
of specific regional issues that arise o Can feel isolated from other
o Serve needs of unique geographic organizational areas
markets better

4. Process Departmentalization. It groups on the basis of product or customer

flow. Process Departmentalization example

Different aspects on this type of departmentalization:

Positive Aspects Negative Aspects

1. More efficient flow of work 2. Can only be used with
activities certain types of products

5. Customer Departmentalization. It groups jobs on the basis of common

customers. Customer Departmentalization example

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Different aspects on this type of departmentalization:

Positive Aspects Negative Aspects

1. Customers' needs and 2. Duplication of functions
problems can be met by 3. Limited view of organizational
specialists goals

6.3.5 Factors Effecting Departmentation

There are several factors that influence how departments are created.
Management must appreciate the need for coordination among closely related
works such as manufacturing, and marketing, purchasing and accounting, quality
control and assembly, sales customer billing, employment and training, shipping
and receiving. As a result heads two or more closely related operations may be
placed n the same physical location and possibly report to same supervisor.
However, in the light of fast changing business environment, there is a strong
relationship between internal and external environment that prevails within and
outside the organizations. As a result the sustenance of the organizations
especially in context of profitability highlights some of the most common factors
that must be kept in mind before following the process of departmentalization ,
these include :
A. Strategy
An organization’s structure is a means to help management achieve its
objectives. Objectives derive from the organization’s overall strategy.
Departmentalization should follow strategy. Most current strategy frameworks
focus on three strategy dimensions—innovation, cost minimization, and
imitation—and the structural design must works best with each.
B. Organization Size

There is considerable evidence to support that an organization’s size significantly

affects its structure and departmentalization. Large organizations—employing
2,000 or more people—tend to have more specialization, more
departmentalization, more vertical levels, and more rules and regulations than do
small organizations. The impact of size becomes less important as an
organization expands. Once an organization has around 2,000 employees, it’s
already fairly mechanistic. An additional 500 employees will not have much
impact. However, adding 500 employees to a 300-employee firm is likely to result
in a mechanistic structure.

C. Technology :

The term refers to how an organization transfers its inputs into outputs.
Every organization has at least one technology for converting financial, human,
and physical resources into products or services. The relationships between
technology and structure helps us to understand that :

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Routine tasks are associated with taller and more departmentalized structures,
wherein Routineness is associated with the presence of formalized
documentation.
Moreover, there is an interesting relationship between technology and
centralization: Routine technologies seem to be associated with a centralized
structure, Non-routine technologies, which rely more heavily on the knowledge
of specialists, would be characterized by delegated decision authority.
A more generalizable conclusion is that the technology-centralization relationship
is moderated by the degree of formalization. Formal regulations and centralized
decision making are both control mechanisms and substitutable: Routine
technologies associate with centralized control if there is a minimum of rules and
regulations; whereas if formalization is high, routine technology can be
accompanied by decentralization.

D. Environment

Departmentalization is affected by its environment because of environmental

uncertainty:
Some organizations face static environments—few forces in their environment
are changing., whereas other organizations face very dynamic environments—
rapidly changing government regulations affecting their business, new
competitors, difficulties in acquiring raw materials, etc. Moreover, Static
environments create significantly less uncertainty for managers than do dynamic
ones. One way to reduce environmental uncertainty is through adjustments in the
organization’s structure.

There are three key dimensions to organizational environment—capacity,

volatility, and complexity. Some general conclusions based on the three-
dimensional definition of environment are:

 The more scarce, dynamic, and complex the environment, the more
organic a structure should be.

 The more abundant, stable, and simple the environment, the more the
mechanistic structure will be preferred.

6.4 Conclusion:
Organizations are economic and social entities in which a number of
persons perform multifarious tasks in order to attain common goals.
Organizations are effective instruments which help individuals in accomplishing
their personal together with organizational objectives. The role of the manager
involves continually balancing the needs of the task and the needs of the
individual and the whole team. A manager works with groups and individuals
towards goals within the constraints of the organization and the external
environment. Managers make decisions, allocate resources and coordinate the
activities of others to achieve goals.

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One common thread comes through in all of the theoretical and practical issues
regarding functions to be performed and the skills required of a manager - the
importance of managing people that leads to an ideal organization which in
reality necessitates the active cooperation of all the members of an organization
following the principles of departmentation, wherein, departmentation is aprocess
of defining the activities and Work teams. This can only succeed and survive if
companies together with formal organization structure adopt open lines of
communication and establish relationships between employees and between
employees and managers that are based on guidelines, ethics and trust.

6.5 References
 Stephans, P. Robins, Organizational behavior, Prentice Hall, 2001
 Bartol, K M; Martin, D C; Tein, M H and Matthews, G W (2001). Management: a
Pacific Rim focus 3rd edition. Roseville , NSW: McGraw-Hill Book Company.
 Prasad, L.M., Principles and Practice of Management, Sultan Chand & Sons,
2008
 Allen Miller, How to Manage Human Resource in Organizations, Xulon Press,
US, 2007
 Heinz Weihrich, Mark V Cannice Management :” Global and Entrteprenieural
Perspective, Tata McGraw-Hill Education, 2010.
 Gary. Desller, Management fundamentals: A Framework, Reston, Publishing
Co, 2007
 Harold Koontz & Heinz Weihrich, Essentials of Management : An International
Perspective, TATA MCGRAW-HILL PUBLISHING COMPANY LIMITED, New
Delhi, 2009.
 Koontz, Harold and Weijrich, Heinz : Essentials of Management : an Indian
perspective., TMG
 Weihrich Heinz and Koontz, Harold : Management : a global perspective. TMG
 Druker, P.F., Management: Tasks, Responsibilities, Practices, Transaction
Publishers, 2007
 Durbin, “Essentials of Management” 7th Edition, Cengage Learning India Pvt.
Ltd.
 http://www.freemba.in/articlesread.php?artcode=647&substcode=37&stcode=7
 http://www.ifm.eng.cam.ac.uk/mcn/pdf_files/part5_5.pdf

6.6 Progress Review

1. A small business with low departmentalization, wide spans of control,
centralized authority, and limited formalization can be said to possess a
________________ structure.
2. As the number of employees in an organization grows, structure tends to
become more ______________.

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3. A simple organizational structure is characterized by ______________.
4. Matrix structure mixes characteristics of functional departmentalization
and _______________.
5. ______________is the form of departmentalization that groups similar jobs and
activities into departments.
7. A manufacturing company has divided its departments into pattern
making, fabric cutting, and fabric coloring. What type of
departmentalization is this?
Keys
1. Simple
2. Sspecialized
3. Wide spans of control
4. Product departmentalization
5. A functional structure
6. Process Departmentalization
7. Matrix

6.7 Excercise
1. What do you understand by organization structure? Discuss its various types.
2. While discussing the classification of organizational structures, explain
how line organization is different to staff organization.
3. “Organization as a structure, that implies a number of elements, that top
management need to address when they design their organization’s
structure.”. Examine the statement with support of suitable examples.
4. While discussing the meaning of departmentalization, explain its types along with
suitable examples.
5. Highlight various factors must be considered before clustering of different
types of functions in to various departments.

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UNIT 7: DELEGATIONS &DECENTRALIZATION
Structure
7.1 Introduction
7.2 Delegation of authority
7.3 Delegation
7.3.1 Delegation : concept, meaning and definition
7.3.2 Delegation of authority as a process
7.3.3 Characteristics, importance and typology of delegation
7.3.4 Obstacles / barriers to effective delegation
7.3.5 Principles and elements of delegation
7.3.6 Authority and responsibility in delegation – relationship and
differences
7.4 Decentralization
7.4.1 Decentralization: concept , meaning and definition
7.4.2 Centralization versus decentralization
7.4.3 Implications of decentralization
7.4.4 Benefits and limitations of decentralization
7.4.5 Importance of decentralization Factors for determining effective
decentralization
7.5 Delegation and decentralization: relationship matrix
7.6 Conclusion
7.7 References
7.8 Progress review
7.9 Exercises

7.1 Introduction
Management is an activity process composed of some basic functions, for
getting the objective of any enterprise accomplished through the efforts of its
personnel. Wherever and whenever objectives are to be achieved through
organized and co-operative Endeavour, management becomes essential for
directing and unifying the group efforts towards a common purpose. Therefore, in

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this era of competitive business environment, Organizations have tended to
move away from old hierarchical, top-down structures to ones in which
employees are empowered to make decisions and think for themselves, that
involves handing out responsibility to individuals in an organization to make
decisions rather than everyone having to be told what to do by top managers in a
hierarchical way. This concept of delegation is coupled with the decentralization
process whereby instead of all decisions being made at the centre (e.g. Head
Office) of an organization, they are made throughout the organization. In the
modern business world big companies have to accept the paradox that to stay
big they have to act small.

In this new way of viewing the organization, self-contained teams are responsible
for a specific part of the business or for a particular project. They work to targets
set by central management. They take advice and assistance as necessary from
the specialist departments such as Research and Development, Finance,
Personnel and Public Relations - although sometimes they may have their own
specialists. They also take goods and services from outside suppliers when
these are judged to be more cost-effective. Occasionally, central management,
or one of its teams, may decide to subcontract an entire project to an outside
supplier.

7.2 Objectives
After reading this Unit, you should be able to:

1. Understand meaning , concept and definition of delegation and

decentralization
2. Explain delegation as a process, its importance and typology
3. Principles and elements of delegation as also the understanding of
barriers in effective delegation.
4. Explain the conceptual framework of the decentralization and implications
and factors involved in determining effective decentralization
5. Make a comparative interpretation of decentralization versus
centralization

7.3 Delegation
7.3.1 Delegation: Concept, Meaning and Definition

Delegation of authority is one vital organizational process. It is inevitable

along with the expansion and growth of a business enterprise. Delegation means
assigning of certain responsibilities along with the necessary authority by a
superior to his subordinate managers. Delegation does not mean surrender of
authority by the higher level manager. It only means transfer of certain
responsibilities to subordinates and giving them the necessary authority, which is
necessary to discharge the responsibility properly. Delegation is quite common in
all aspects of life including business. Even in the college, the principal delegates
some of his authority to the vice-principal.

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In delegation, an attempt is being made to have meaningful participation and
cooperation from the subordinates for achieving certain well-defined results. Due
to delegation, the routine responsibilities of the superior are reduced. As a result,
he concentrates on more urgent and important matters. Secondly, due to
delegation, subordinate becomes responsible for certain functions transferred to
him. Delegation is a tool, which a superior manager uses for sharing his work
with the subordinates and thereby raising his efficiency.

Delegation is not a process of abdication. The person who delegates does not
divorce himself from the responsibility and authority with which he is entrusted.
He remains accountable for the overall performance and also for the
performance of his subordinates. Delegation is needed when the volume of work
to be done is in excess of an individual's physical and mental capacity.

In fact, Delegation means grant or conferment of authority by a superior to a

subordinate for the accomplishment of a particular assignment. According to F.C.
Moore, "Delegation means assigning work to the others and giving them
authority to do so." According to O. S. Miner, "Delegation takes place when one
person gives another the right to perform work on his behalf and in his name and
the second person accepts a corresponding duty or obligation to do that is
required of him." To quote Theo Himann, “Delegation of authority merely means
granting of authority to subordinates to operate within prescribed limits.”
Similarly, Koontz and O’ Donnel say that, “authority is delegated when enterprise
discretion is vested in a subordinate by a superior.” According to Louis Allen,
"Delegation is the dynamics of management, it is the process a manager follows
in dividing the work assigned to him so that he performs that part which only he,
because of his unique organizational placement, can perform effectively, and so
that he can get others to help him with what remains."
In the words of Terry, "Delegation means conferring authority from one executive
or organization unit to another." It implies that delegation is not only devolution
from higher to lower level and it can be from lower to a higher authority or
between equal authorities. Delegation thus can be downward, upward or
sideward.
According to Terry, Delegation may be classified as (a) Downward: when a
higher authority delegates to the lower authority as a sales manager delegates to
a salesman (b) Upward: when a lower authority delegates to a higher authority as
the shareholders delegate their authority to the Board of Directors, and (c)
'Sideward' when delegation is at an equal level as in a case of a person
delegating to his peers in the organization. Therefore, delegation can be defined
as the entrustment of a part of work or responsibility and authority to another and
the creation of accountability for performance.
According to Mooney, delegation means conferring of specified authority by a
higher to lower authority. It is devolution of authority by a person to his agent or
subordinate, subject to his right of supervision and control, It implies that legally
delegated authority still belongs to the Delegator are the person who delegates,
but in practice its exercise is allowed to the subordinate or the agent. Albert K.
Wickesberg, too, in the same spirit observes: "The act or process of delegation is

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the assigning to subordinates of specified tasks of the organization and the
granting to one or more persons the authority necessary for directing
satisfactorily the activities and duties so assigned." However, writers like George
R. Terry do not agree with this interpretation of delegation. They hold that
delegation is not essentially a devolution of authority from higher to a lower
authority or from superior to a subordinate.

In simple words, Delegation involves sharing of either managerial work or

operating work between a manager and his subordinates. Delegation of authority
is the process by which a superior can share his/ her duties with the immediate
subordinates who in turn delegate the authority to their subordinates and the
process is continued up to an operating level of employees. Delegation is a win-
win approach when done properly, however, that doesn't mean-that delegator
can just delegate anything. Delegator has to always keep in mind that the task
provides a great opportunity for other members to develop their personal skills?
Delegating a job effectively is the most important factor in delegation. Therefore,
Organization involves the dividing up of job in an enterprise which leads to the
creation of departments. The creation of departments causes delegation of
authority. Modern organizations have grown in size and complexities, and this
has necessitated the division of an organization into different segments. Such
division is undertaken with an intention to execute the policies of an Organization
most effectively. Mere division of the Organization does not serve the purpose,
as the various departmental heads and subordinates require authority to perform
the tasks assigned to them efficiently. Such process of parting with authority is
known as Delegation. It is necessary to delegate the authority because a single
person cannot do everything himself. Therefore, the superiors have to part with
part of the authority that they possess.

The "secret" of effective delegation is to define:

 the task
 the accountability requirement
 the responsibility being given
 the authority being given.

 Definition of the Task. The task should constitute a "whole," that is, a
project for the individual to undertake. It should be worthwhile and relate to
the overall mission of the organization. The purpose of delegation is two-fold:
to accomplish the task and to develop the employee. Both are important.
Some aspects of good task definition are:

 clearly defined outcome(s), e.g., what is the deliverable?

 clear statement of the time frame, e.g., when is the deliverable due?
 specification of the monitoring procedures to be used, e.g., when will
review meetings be scheduled? or when are interim reports due?
 indication of how the outcome will be used, e.g., will the result be
implemented immediately or will it be sent for higher level? or is it to be
used as input to a decision; if so, when will the decision be made?

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 Accountability Requirement. The manager should specify what the task
parameters are so that the delegate realizes the limits of his/her authority and
will not make unilateral decisions prejudicial to the organization. The delegate
should also learn the manager's expectations for periodic monitoring. The
monitoring itself may be delegated, e.g., the individual may be asked to
produce regular written reports.
 Responsibility Delegation. The manager remains accountable for the
outcome(s) of the task but must confer on the delegatee the power to make
decisions needed to ensure success of the project. Once the boundaries of
responsibility are clearly defined, the delegatee should be allowed to do the
work without any interference. In delegating a task, the following should be
made clear (preferably in writing):

 the overall goal of which the task being delegated is a part

 the precise outcome(s) required
 how far the delegatee can interpret events and the extent to which his/her
actions must conform to set rules
 the nature of circumstances that will require authorization by a higher
level person
 how (and at what intervals) accountability monitoring will take place
 Authority given. Possibly the most frequent complaint made against
managers is that they give responsibility without authority, that is, they ask an
employee to undertake a task without giving him/her the necessary resources
to succeed. At the initiation of the delegation, the manager should transfer to
the delegatee the following:

 the financial resources needed. A major task (think of it as a project)

should carry its own budget and the delegatee should have the power to
spend money as required by the task without requesting permission from
a superior. Because financial accountability remains with the manager, it
may be necessary to have periodic reviews of the financial situation to be
sure that funds are being spent appropriately and that the amount
allocated was sufficient for the task. Typically the reviews take the form of
an accounting report submitted on a regular basis.
 the material resources needed, e.g., materials, facilities, technical aids.
If resources are to be shared with others, the priority of the particular
project should be clarified at the outset. Is the delegatee to wait in a
queue for a shared resource? If so, has the time lag been built into the
time frame for the project?
 technical support in the form of secretarial or technical assistance. If
these support services are shared, the level of priority for the project
and/or the number of hours of secretarial or technical help should be
specified.
 political power in the form of the authority to require other personnel to
participate in the task as the delegator specifies. This enables the
delegatee to form committees, to delegate sub-tasks, to sign his/her own
letters, to represent the manager to outside agencies. It is poor delegation
to review and sign letters prepared by the delegatee or to brief him/her on
what to say at meetings with outside agencies.

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Follow up to a Delegated Task. Good managers use delegation as a way to
develop their staff. Feedback on the task is an important responsibility of the
manager. This can take place in the following ways:

 public acknowledgement of the work done, e.g., a statement to other

people in the organization through a in-house publication or by an
announcement at a staff meeting.
 personal thanks for having done the work
 praise for aspects of the work that were particularly well done.
 constructive feedback to improve certain aspects in the next similar task.
 a note in the employee's personnel file.

Objectives of Delegation of Authority: A brief review of the related literature

indicates the following objectives of the delegation

 To reduce the excessive burden on the superiors i.e., executives and

managers functioning at different levels.
 To provide opportunities of growth and self development to junior
executives.
 To create a team of experienced and matured managers for the
Organization. It acts as a technique of management and human resource
development.
 To improve individual as well as overall efficiency of the Organization.

7.3.2 Delegation of authority as a Process

Delegation process involves four distinct stages. The process of delegation

moves through these stages. The following figure shows the stages in the
process of delegation of authority.

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Four Stages in Process of Delegation of Authority are:

(A) Assignment of duties to subordinates: Before delegating, the delegator

has to decide precisely the duties which are to be delegated to the subordinate or
a group of subordinates. The authority is delegated accordingly and the
subordinate is told what is expected from him. The usual practice is to list the
functions to be performed by the subordinate. If necessary, targets to be
achieved by the subordinate are also spelt out. Subordinates may be assigned
tasks either in terms of activities or results. The manager (delegator) must
communicate clearly his expectations. Competent and responsible employees
may be given general guidelines about what needs to be accomplished. Their
less competent and responsible counter-parts need more specific guidelines. In
brief, in the first stage of delegation process, duties are assigned to the
subordinate.

(B) Transfer of authority to perform the duty : In the second stage of

delegation process, the authority is granted by the delegator to his subordinate
(delegate). Authority must be delegated strictly to perform the assigned duty. The
performance of duties suffers serious setback when required authority is not
delegated along with the duty. In brief, the transfer of authority should be
adequate considering the duties assigned to the subordinate.

(C) Acceptance of the assignment: In this third stage of delegation process,

the subordinate/delegate has to accept or reject the task assigned to him in the
first stage along with the authority given in the second stage. If the delegates
refuse, the delegator has to make fresh plan of delegation or may consider some
other subordinate who is capable and is willing to accept the assignment. On the
other hand, the process of delegation will move to the fourth and the last stage, if
the first delegates accept the assignment of work accompanying the authority.

(D) Creation of Obligation / Accountability / Responsibility : The fourth stage

in the, delegation of authority is the creation of obligation on the part of the
subordinate to perform duties assigned to him in a satisfactory manner by using
the authority given. When subordinate accepts a task and the authority is given,
an obligation is created. He has to perform the assigned task by using the
authority granted to him. A subordinate is also responsible/accountable for
completing the assigned work. He is held answerable to a superior for the
satisfactory performance of that work assigned. The delegator has to help his
subordinate as and when necessary as he is responsible to his
superior/Organization.

7.3.3 Characteristics, Importance and Typology of Delegation

Characteristics of Delegation has the following characteristics

1. Delegation is the authorization to a manager to act in a certain way

independently. The degree of delegation puts a manager to act within the
limits prescribed by his superior. Moreover, within the limits he is not free to

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act arbitrarily but subject to provisions of Organizational policy, rules and
regulation.
2. Delegation has a dual characteristic. A superior delegates authority to
subordinates, however a superior at the same time still retains authority. As
Terry has observed, 'it is something like imparting knowledge. You share with
others who then possess the knowledge, but you still retain the knowledge
too.
3. Authority once delegated can be enhanced, reduced or withdrawn depending
upon the requirement. The changes in organization structure, Organization
climate, policy, procedure, and method require modifications in delegation of
authority. Since, authority is delegated to an individual, the authority can be
recovered back fully in the case of his exit from the Organization.
4. A manager cannot delegate authority which he himself does not process.
Moreover, he does not delegate the entire authority to his subordinates
because if he delegates all his authority he cannot work.
5. Delegation may be specific or general. Similarly, it can be written or
unwritten. Delegation is specific when course of action for specific objectives
are specified; it is general when these are not specified, though objectives
are specified.

Importance of Delegation

Delegation of authority is a process in which the authority and powers are divided
and shared amongst the subordinates. When the work of a manager gets beyond
his capacity, there should be some system of sharing the work. This is how
delegation of authority becomes an important tool in organization function.
Through delegation, a manager, in fact, is multiplying himself by
dividing/multiplying his work with the subordinates. The importance of delegation
can be justified by -

1. Through delegation, a manager is able to divide the work and allocate it to

the subordinates. This helps in reducing his work load so that he can work on
important areas such as - planning, business analysis etc.
2. With the reduction of load on superior, he can concentrate his energy on
important and critical issues of concern. This way he is able to bring
effectiveness in his work as well in the work unit. This effectively helps a
manager to prove his ability and skills in the best manner.
3. Delegation of authority is the ground on which the superior-subordinate
relationship stands. An organization functions as the authority flows from top
level to bottom. This in fact shows that through delegation, the superior-
subordinate relationship become meaningful. The flow of authority is from top
to bottom which is a way of achieving results.
4. Delegation of authority in a way gives enough room and space to the
subordinates to flourish their abilities and skill. Through delegating powers,
the subordinates get a feeling of importance. They get motivated to work and
this motivation provides appropriate results to a concern. Job satisfaction is
an important criterion to bring stability and soundness in the relationship
between superior and subordinates. Delegation also helps in breaking the
monotony of the subordinates so that they can be more creative and efficient.

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Delegation of authority is not only helpful to the subordinates but it also helps
the managers to develop their talents and skills. Since the manager get
enough time through delegation to concentrate on important issues, their
decision-making gets strong and in a way they can flourish the talents which
are required in a manager. Through granting powers and getting the work
done, helps the manager to attain communication skills, supervision and
guidance, effective motivation and the leadership traits are flourished.
Therefore it is only through delegation, a manager can be tested on his traits.
5. Delegation of authority is help to both superior and subordinates. This, in a
way, gives stability to a concern’s working. With effective results, a concern
can think of creating more departments and divisions flow working. This will
require creation of more managers which can be fulfilled by shifting the
experienced, skilled managers to these positions. This helps in both virtual as
well as horizontal growth which is very important for a concern’s stability.

Therefore, from the above points, we can justify that delegation is not just a
process but it is a way by which manager multiples himself and is able to bring
stability, ability and soundness to a concern.

Typology of Delegation

Delegation may be of the following types:

1. General or Specific Delegation. In general delegation, the subordinate is

granted authority to perform all the functions in his department or division.
However, the subordinate exercises this authority under the overall guidance and
control of the superior. Under specific delegation, a person is given authority
regarding specific function or functions. For example, a sales person may be
given the authority to collect payments from debtors. Thus, specific delegation is
functional in nature. Specific delegation is precise and the subordinate clearly
understands what he is expected to do. But it may create inflexibility in the
Organization.

2. Formal or Informal Delegation. When authority is delegated as per the

Organization structure, it is called formal delegation. Such delegation is effective
because it leaves no option to the subordinate but to obey the commands of the
superior. For example, a sales person may be granted authority to grant discount
up to 5 per cent on the list price to customers buying goods worth Rs. 5,000 or
more. Informal delegation takes place when an individual or a group agrees to
work under the direction of an informal leader. Need for informal delegation
arises due to procedural delays and red tape. When people want to short circuit
the formal procedures so as to perform the task quickly, they resort to informal
delegation.

3. Written or Oral Delegation. Delegation made by written orders and instructions

is known as written delegation. Unwritten or oral delegation is based in custom
and conventions.

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4. Downward and Sideward Delegation. Downward delegation occurs when a
superior assigns duties and grants authority to his immediate subordinate. This is
the most common type of delegation. Sideward delegation takes place when a
subordinate assigns some of his duties and authority to another subordinate of
the same rank

7.3.4 Obstacles /Barriers to Effective Delegation:

The obstacles from the perspective of delegator and delegate are as:

(A) Obstacles / Barriers on the Part of Manager / Superior / Delegator

1. Unwillingness of the manager to delegate authority: Some

superiors/managers tend to think that they can do the job better when they
themselves handle the job. The attitude that 'I can do it better myself' on the part
of superior acts as an obstacle to delegation. Some managers (superiors) who
are autocratic and power worshippers feel that delegation will lead to reduction of
their influence in the Organization. A manager may feel that if he has a
competent subordinate and if he delegates authority to the subordinate, quite
likely he will outshine him (manager) and may be promoted.

2. Fear of competition: A manager may feel that if he has a competent

subordinate and if he delegates authority to the subordinate, quite likely he will
outshine him. Fear of subordinate's excellence may come in the way of
delegation.

3. Lack of confidence in subordinates: A manager may hesitate to delegate

authority, if he feels that his subordinate is not competent to deal with the
problem and take decisions. Even fear of losing control over the subordinates
acts as an obstacle to delegation. In addition, fear of being exposed due to
personal shortcomings may act as an obstacle in the process of delegation.

4. Lack of ability to direct: Sometimes, a manager may experience difficulty in

directing the efforts of his subordinates because of his inability to identify and
communicate the essential features of his long-range plans and programmes.

5. Absence of controls that warn of coming troubles : An Organization might

not have developed the controlling techniques to know in advance the serious
problems lying ahead. It may happen due to concentration of power in the hands
of few people. As a result, manager may resist delegation.

6. Conservative and cautious temperament of the manager: If a manager has

a conservative and over-cautious approach, there will be psychological barrier in
the way of delegation. A manager avoids delegation as he feels that something
may go wrong even when the instructions given are clear and the subordinates
are reliable.

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7. Desire to dominate subordinates: Managers (Superiors) normally, have a
desire to dominate the subordinates functioning under their control. They feel that
their domination will reduce if the powers are delegated to subordinates. They
also feel that due to delegation, the subordinates will know their managerial
deficiencies. In order to maintain their superior status and in order to dominate
the subordinates, they avoid delegation itself.

(B) Obstacles / Barriers on the Part of Subordinates

1. Too much dependence on the manager for decisions: Some subordinates

avoid responsibility even when the superior/manager is prepared to delegate
authority. They want the manager to tackle problems and take decisions. A
subordinate who is not confident about his performance/ability will certainly try to
shirk responsibility even though his superior is prepared to delegate functions
and authority.

2. Fear of criticism: Subordinates express unwillingness to accept delegated

authority because of the fear of criticism in the case of mistakes. They fear that
they may be criticized by others if they commit mistakes. Such subordinates have
the following feeling in their mind, "Why should I stick my neck out for my boss?"

3. Lack of information: A subordinate may hesitate to accept a new

assignment, when he knows that necessary information to perform the job is not
likely to be made available to him. He is reluctant to accept delegated functions
and authority as he feels that he will not be able to perform well due to
inadequate information available.

4. Absence of positive incentives: Positive incentives like recognition of work

and rewards go a long way in building up the morale of subordinates. In the
absence of such incentives in the form of recognition, appreciation or monetary
benefit, a subordinate may not be prepared to accept delegation of authority.

5. Absence of self-confidence: A subordinate may lack self-confidence about

his ability to take quick and correct decisions. He may not like to accept new
challenging functions as he lacks self-confidence. Thus, lack of self-confidence
on the part of subordinates is one obstacle which comes in the way of delegation
of authority.

6. Difficulty in decision-making: A subordinate may not have the skill and the
expertise to take quick and correct decisions. He prefers to go to his superior
(boss) and ask for his guidance or opinion. Such psychology acts as a cause for
non-acceptance of delegation. A subordinate avoids delegation due to such
mental tension or inferiority complex.

7. Poor superior-subordinate relations: Absence of cordial relations in

between the superior and the subordinates hampers the process of delegation of
authority. The attitude of the superior towards subordinate may not be friendly
but hostile. There may be undue interference in the work assigned to the

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subordinate. Even the good work of subordinate may not be appreciated by the
superior. Such situation creates unfavorable attitude of subordinate towards
delegation. He avoids delegation as and when offered.

8. Undue interference by superior: A superior should not interfere in the duties

delegated to the subordinate. He may offer guidance as and when asked for.
Some superiors interfere in the work of his subordinate and try to control him
often and again. In the absence of legitimate freedom, the subordinate becomes
uneasy and prefers to remain away from the process of delegation.

9. Fear of being exposed: Some subordinates may have inferiority complex.

They feel that they have limited capacity to accept the challenges which are
bound to come out to delegation. They feel that their inability to deal with new
problems will be exposed due to delegation. This fear acts as an obstacle to
delegation.

7.3.5 Principles and Elements of Delegation

Principles of Delegation

There are a few guidelines in form of principles which can be a help to the
manager to process of delegation. The principles of delegation are as follows: -

1. Principle of result excepted- suggests that every manager before

delegating the powers to the subordinate should be able to clearly define
the goals as well as results expected from them. The goals and targets
should be completely and clearly defined and the standards of
performance should also be notified clearly. For example, a marketing
manager explains the salesmen regarding the units of sale to take place
in a particular day, say ten units a day have to be the target sales. While
a marketing manger provides these guidelines of sales, mentioning the
target sales is very important so that the salesman can perform his duty
efficiently with a clear set of mind.
2. Principle of Parity of Authority and Responsibility- According to this
principle, the manager should keep a balance between authority and
responsibility. Both of them should go hand in hand. According to this
principle, if a subordinate is given a responsibility to perform a task, then
at the same time he should be given enough independence and power to
carry out that task effectively. This principle also does not provide
excessive authority to the subordinate which at times can be misused by
him. The authority should be given in such a way which matches the task
given to him. Therefore, there should be no degree of disparity between
the two.
3. Principle of absolute responsibility- This says that the authority can be
delegated but responsibility cannot be delegated by managers to his
subordinates which means responsibility is fixed. The manager at every
level, no matter what is his authority, is always responsible to his superior

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for carrying out his task by delegating the powers. It does not means that
he can escape from his responsibility. He will always remain responsible
till the completion of task. Every superior is responsible for the acts of
their subordinates and are accountable to their superior therefore the
superiors cannot pass the blame to the subordinates even if he has
delegated certain powers to subordinates example if the production
manager has been given a work and the machine breaks down. If
repairmen is not able to get repair work done, production manager will be
responsible to CEO if their production is not completed.
4. Principle of Authority level- This principle suggests that a manager
should exercise his authority within the jurisdiction / framework given. The
manager should be forced to consult their superiors with those matters of
which the authority is not given that means before a manager takes any
important decision, he should make sure that he has the authority to do
that on the other hand, subordinate should also not frequently go with
regards to their complaints as well as suggestions to their superior if they
are not asked to do. This principle emphasizes on the degree of authority
and the level upto which it has to be maintained.

Elements of Delegation

1. Authority - in context of a business organization, authority can be

defined as the power and right of a person to use and allocate the
resources efficiently, to take decisions and to give orders so as to achieve
the organizational objectives. Authority must be well- defined. All people
who have the authority should know what is the scope of their authority is
and they shouldn’t misutilize it. Authority is the right to give commands,
orders and get the things done. The top level management has greatest
authority. Authority always flows from top to bottom. It explains how a
superior gets work done from his subordinate by clearly explaining what is
expected of him and how he should go about it. Authority should be
accompanied with an equal amount of responsibility. Delegating the
authority to someone else doesn’t imply escaping from accountability.
Accountability still rest with the person having the utmost authority
2. Responsibility - is the duty of the person to complete the task assigned
to him. A person who is given the responsibility should ensure that he
accomplishes the tasks assigned to him. If the tasks for which he was
held responsible are not completed, then he should not give explanations
or excuses. Responsibility without adequate authority leads to discontent
and dissatisfaction among the person. Responsibility flows from bottom to
top. The middle level and lower level management holds more
responsibility. The person held responsible for a job is answerable for it. If
he performs the tasks assigned as expected, he is bound for praises.
While if he doesn’t accomplish tasks assigned as expected, then also he
is answerable for that.
3. Accountability - means giving explanations for any variance in the actual
performance from the expectations set. Accountability can not be
delegated. For example, if ’A’ is given a task with sufficient authority, and
’A’ delegates this task to B and asks him to ensure that task is done well,

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responsibility rest with ’B’, but accountability still rest with ’A’. The top
level management is most accountable. Being accountable means being
innovative as the person will think beyond his scope of job. Accountability,
in short, means being answerable for the end result. Accountability can’t
be escaped. It arises from responsibility.

7.3.6 Authority and Responsibility in Delegation – Relationship and

Differences

Authority is the legal right of person or superior to command his

subordinates while accountability is the obligation of individual to carry out his
duties as per standards of performance Authority flows from the superiors to
subordinates, in which orders and instructions are given to subordinates to
complete the task. It is only through authority, a manager exercises control. In a
way through exercising the control the superior is demanding accountability from
subordinates. If the marketing manager directs the sales supervisor for 50 units
of sale to be undertaken in a month. If the above standards are not
accomplished, it is the marketing manager who will be accountable to the chief
executive officer. Therefore, we can say that authority flows from top to bottom
and responsibility flows from bottom to top. Accountability is a result of
responsibility and responsibility is result of authority. Therefore, for every
authority an equal accountability is attached. The following table shows the basic
difference between authority and responsibility

Authority Responsibility
It is the legal right of a person or a It is the obligation of subordinate to
superior to command his perform the work assigned to him.
subordinates.
Authority is attached to the position
Responsibility arises out of superior-
of a superior in concern. subordinate relationship in which
subordinate agrees to carry out duty
given to him.
Authority can be delegated by a Responsibility cannot be shifted and
superior to a subordinate is absolute
It flows from top to bottom. It flows from bottom to top.

7.4 Decentralization
7.4.1 Decentralization: Concept meaning & definition
Decentralization in some form is present in every Organizational structure
where there is delegation of authority. Since delegation is an essential process of
Organization, it may be said that some degree of decentralization of authority is
to be found in all Organizational structures. By that we should not consider
decentralization and delegation is identical concepts. Delegation of authority
means delegation of the power to issue instructions to subordinate for

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performance of assigned work. Some degree of power of decision-making may
or may not go with the same. But it is essentially a process confined between
one individual and another and may not extend over all functions and to all levels
of authority. If delegation is practiced systematically in all function and divisions
of the company and for a wide range of authorities and responsibilities, we
should say the company is highly decentralized.

Again, decentralization of authority should not be confused with physical

decentralization or dispersal of location of activities. Physical decentralization
may or may not be decentralization of authority. In fact the two may move in the
opposite direction. There may be greater decentralization of authority with a high
degree of centralization of activities or vice versa. Decentralization of authority is
more likely to be found in widely dispersed operations.

Some degree of decentralization is present in all Organizational structures. The

degree of decentralization may vary in different concerns. The opposite of
decentralization, that is absolute centralization of authority in the hands of top
management, is rarely seen. In fact neither complete decentralization nor
absolute centralization is possible to achieve in any Organizational structure. An
admixture of the two in varying proportions is more feasible and practical. When
the structure leans more towards centralization it is called centralized structure,
and when it leans the other way it is called a decentralized structure. The degree
of centralization and decentralization will depend upon the amount of authority
delegated to the lowest level. According to Allen, “Decentralization refers to the
systematic effort to delegate to the lowest level of authority except that which can
be controlled and exercised at central points. Some of the most popular and
commonly accepted definitions include : Henry Fayol, that says, "Everything
that goes to increase the importance of the subordinate’s role is decentralization,
everything that goes to reduce it is centralization." Further, according to Louis
Allen, "decentralization refers to the systematic effort to delegate to the lowest
levels all authority except that which can only be exercised at central point." This
definition makes it clear that even in decentralization, delegation to the lowest
levels is not complete as the basic functions in the management process are
centralized.

7.4.2 Centralization vs. Decentralization

Centralization is the process where the authority and power of an
organization is in the hands of only a few. This power includes activities such as
planning, decision-making and delegating authority. The top management takes
all the important decisions if an organization is centralized. These decisions are
then enforced on the lower tiers of the organization. This kind of a trend is usually
followed in company where the Head of the organization has a particular future
for the organization in mind, and wants to control it as much as possible to reach
those goals. However, these days a centralized distribution of power is rare.

As organizations grow bigger these days, the power is distributed at different

levels to be able run the organization more efficiently. This is called
decentralization. Thus, decentralization can be defined as the delegation of

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authority at all levels of an organization. In a decentralized organization, a lot of
the decision-making is delegated to the lower levels of the organizational
structure. Due to the shared decision-making, the chances of being able to make
improvements increases. A decentralized structure follows a bottom-to-top
approach. Thus, if the lowest tier faces an issue, they are in a better position to
suggest improvements and, with a few approvals, can apply changes. This
allows the application of changes and improvement with minimal delay. It is
obvious that the top management will not have all the required information and
firsthand experience to deal with the issues that crop up on the field. Such issues
are better solved by those directly dealing with the issue rather than waiting for
decisions from top management.

Advantages of Decentralization over Centralization

Decentralization is favoured over centralization for many reasons. Some of these

are given below.

1. Relieves the top management from dealing with mundane issues, so that
they can concentrate on the daunting tasks that are faced by an
organization.
2. Since many of the decisions have to be made by lower level managers,
this not only gives them a chance to display their decision-making skills,
but also gives them the experience they would have missed in a
centralized organization.
3. The increased responsibilities of the lower level managers, increases their
enthusiasm for work and acts as a motivator.
4. Decentralization has more scope for diversification.
5. Makes an organization flexible to minor changes.

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6. Decision-making at lower levels for certain problems is better, as the lower
level managers have a more in-depth knowledge of the situation, and can
hence handle it better.

Advantages of Centralization over Decentralization

Even though centralization is not preferred anymore, it did have a few

advantages.

1. Singular point of control, which helps make bigger decisions easier, as

the top level managers have a better picture of the organization as a
whole and are better equipped to make important decisions as
compared to a lower level manager.
2. The implementation of an idea, process or policies is easier in a
company that has a strong central direction as compared to a
decentralized organization.
3. Due to a single vision of the head of the company, the organization
can work towards a single goal, which would not be possible in a
decentralized organization due to individual manager goals.
4. Centralization allows corporate decision makers respond better and
faster in urgent situations which require quick decisions.

7.4.3 Implications of Decentralization

There are fewer burdens on the Chief Executive as in the case of centralization.
1. In decentralization, the subordinates get a chance to decide and act
independently which develops skills and capabilities. This way the
organization is able to process reserve of talents in it.
2. In decentralization, diversification and horizontal can be easily implanted.
3. In decentralization, concern diversification of activities can place effectively
since there is more scope for creating new departments. Therefore,
diversification growth is of a degree.
4. In decentralization structure, operations can be coordinated at divisional level
which is not possible in the centralization set up.
5. In the case of decentralization structure, there is greater motivation and
morale of the employees since they get more independence to act and
decide.
6. In a decentralization structure, co-ordination to some extent is difficult to
maintain as there are lot many department divisions and authority is
delegated to maximum possible extent, i.e., to the bottom most level
delegation reaches. Centralization and decentralization are the categories by
which the pattern of authority relationships became clear. The degree of
centralization and de-centralization can be affected by many factors like
nature of operation, volume of profits, number of departments, size of a
concern, etc. The larger the size of a concern, a decentralization set up is
suitable in it.

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7.4.4 Benefits and Limitations of Decentralization

Benefits of Decentralization

The following benefits are said to accrue from decentralization of authority

1. Reduction of burden on top executive : In a centralized structure the top

executive alone has to bear the entire burden of decision-making. This
reduces his capacity to concentrate on overall planning and policy-making
function which he alone can do. Decentralization of authority results in
dispersal of the function of decision-making to all levels of the Organization.
Since executives at lower levels of administration share the burden of
decision making, the top executive is relieved of much of his burden and is
free to concentrate on major issues. This is all the more important in the case
of an enterprise with expanding size.
2. Improvement of morale and motivation : Decentralization promotes the
improvement of morale and motivation of subordinates which is reflected in
better performance. Delegation of greater authority and power of decision-
making associated with more freedom of action promotes development of
initiative and sense of the local mangers. With greater opportunity of
communication and leadership, the local managers can foster team spirit and
group-cohesion among his subordinates which again helps in improving their
morale and motivation.
3. Development of managerial qualities of executive : In a centralized set up
the departmental managers and executives do not get the opportunity to
develop their qualities for overall managerial positions. They merely function
as specialists in their narrow spheres. In a decentralized structure, the
greater power and freedom of action enjoyed by them and the greater scope
for initiative and responsibility give them an opportunity to develop talents
required for overall managerial positions.
4. Facilities for diversification: Decentralization helps in diversification of
activities or product line. In a centralized set-up with concentration of
authority in one or a few hand, it is difficult to carry out diversification of
activities by opening up new lines of manufacture or marketing. The tendency
for a centralized set-up, likely a centralized sales department, is to stick to the
old established product or distribution lines rather than exploiting potentialities
of new but growing fields.
5. Better co-ordination of operations: Decentralization ensures better co-
ordination of activities or operations. In a centralized set-up co-ordination
takes place at the topmost level and because of the lengthy channel of
communication, co-ordination is hampered. But in a decentralized set-up
operations can be co-ordinated at the unit or divisional level which is much
better.
6. Ensures effective control: In a decentralized set-up, establishment of
standards and measurement of performance of operations at the divisional
level are easier and enable management to exercise more effective control
over operations. Results can be compared with standards more quickly and
prompt decisions can be taken to correct shortfalls in performance.

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Limitations of Decentralization

1. Although decentralization has many distinct advantages which account

for its popularity with large and expanding enterprises, nevertheless there
are serious limitations to its application to all cases and in all situations.
The limitations are briefly enumerated below:
2. The operating cost of decentralized organization is high. Setting up of
more or less self-sufficient and autonomous divisional units involves
duplication of functions and equipments which increases the cost of
operations. Only large enterprises can afford such high costs.
3. In order to set up a decentralized organization it is necessary that the
enterprise should have operations spread over a wide region and
involving several products so that these may be divided for adopting
divisional structure. However, all enterprises or operations do not lend to
such divisibility.
4. The wide dispersal of authority under a decentralized set-up creates
problems of co-ordination among the various divisions.
5. Decentralized set-up requires that sufficient number of competent
executives who can be entrusted with the authority for decision-making
will be available for manning the division. Such competent executives
capable and willing to assume such heavy responsibility are not always
available.
6. Where uniform of action is essential or the same policy has to be followed
uniformly by all the divisions, as in a public utility, decentralization is not
possible as the divisional units cannot be granted such autonomy as is
found in a decentralized set-up.

7.4.5 Importance of Decentralization

The importance of decentralization is listed as under:

1. Decentralization helps to improve the quality of decisions/decision-

making at the top level management: Decentralization of authority among
other executives at all levels in the Organization relieves the top executive of the
excessive burden saving his valuable time, which he can devote to more
important and long-term problems. This is bound to improve the quality of his
decisions regarding such problems.

2. Decentralization facilitates diversification of activities: It is a matter of

common experience that an Organization with departmentation on the basis of
products facilitates diversification of products or market even when the authority
is centralized. Decentralization takes this process a step further. Managers of
semi-autonomous product divisions are able to utilize their skills and experienced
judgment. This has a bearing on their products and the market. The enterprise
also attains maximum possible growth. Decentralization is beneficial when new
product lines or new activities are introduced in an Organization. Such policy
creates self sufficient units under overall co-ordination of top level management.

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3. Decentralization encourages development of managerial personnel: Most
companies find lack of managerial talent as a limiting factor in their growth. A
company cannot expand effectively beyond the scope and abilities of its
managerial personnel. Capable managers, however, can be developed only by
giving managerial jobs to suitable persons and delegating them the authority to
make important decisions. Such wide exposure gives them opportunity to grow
and to have self development for higher positions. The more talented and
capable persons will learn and improve and qualify themselves for higher
managerial positions. Only a decentralized Organization can offer such
opportunities to future managers without involving additional expenditure. A
decentralized Organization also allows its managers adequate freedom to try
new ideas, methods or techniques. In brief, decentralization creates a team of
competent managers at the disposal of the company.

4. Decentralization improves motivation: Research conducted by social

scientists has proved that the Organization structure itself exercises some
influence on the motivation of the people working within it. An Organization
structure which facilitates delegation, communication and participation also
provides greater motivation to its managers for higher productivity. Decentralized
Organization structure is most favorable for raising the morale and motivation of
subordinates which is visible through better work performance.

5. Decentralization makes decision-making quicker and better: Since

decisions do not have to be referred up through the hierarchy, quicker and better
decisions at lower levels can be taken. Divisional heads are motivated to make
such decisions that will create the maximum profit because they are held
responsible for the effect of their decisions on profits. Thus decentralization
facilitates quick and result-oriented decisions by concerned persons.

6. Decentralization provides opportunity to learn by doing: Decentralization

provides a positive climate where there is freedom to make decisions, freedom to
use judgment and freedom to act. It gives practical training to middle level
managers and facilitates management development at the enterprise level.

7.4.6 Factors for determining effective decentralization:

Factors important for ensuring effective decentralization are:
1. Size of Organization: - Decentralization depends upon size of organization.
Larger the size of organization more the number of decision making areas will be
there. So it will not be possible for single head to make all the decisions alone.
Also the decision making process will be slow as communication process will be
very long. Therefore need of decentralization would be more important.
2. History of organization:- Decentralization depends upon how the
organization developed over the period of time. Normally those organizations
which expand under the direction of owner-founder show resistance to
decentralization.

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3. Management philosophy: The character of top leader of organization
influence the extent of authority is centralized or decentralized.
4. Availability of mangers: - The shortage of quality manager also influences
the extent of authority to be decentralized. If good mangers are available then
there is more possibility of decentralization of work.
5. Costliness of decision: - The costliness of decisions in most important factor
that effect the decentralization process. Decisions involving heavy costs or
investment will be with top management like decision making for purchasing
capital goods, land or machinery will be with top management and purchase of
normal routine goods like daily stationary furniture will be made by department.
6. Rate of change in organization: - The rate of change in organization also
affects the decentralization decision. If the organization is fast developing and it
is facing problems of expansion there is more chances of decentralization of
authority for reducing burden from top management.
7. Nature of activities: - The nature f operation s also determine the extent of
decentralization i.e. whether the operation of organization are concentrated at
one place or region or dispersed over different areas. If activities are dispersed in
different territories then decentralization is must.

7.5 Delegation and decentralization: Relationship Matrix

Delegation and decentralization of authority are closely related.
Decentralization is an expansion of delegation of authority .While in
delegation authority is transferred on one to one basis from the superior
to subordinate; decentralization of authority is b r o a d e r i n s c o p e a n d
i n v o l v e s t h e t r a n s f e r o f a u t h o r i t y i n t h e organization context from top
to lower levels of management in the hierarchy. Thus the greater amount
of authority delegated throughout the organization, the more
decentralized the organization is. The following table explains the relationship
matrix that exists between delegation and decentralization

Basis Delegation Decentralization

Right to take decisions is
Managers delegate some of
shared by top management
Meaning their function and authority
and other level of
to their subordinates.
management.
Scope of delegation is
limited as superior Scope is wide as the decision
Scope delegates the powers to the making is shared by the
subordinates on individual subordinates also.
bases.
Responsibility remains of
Responsibility is also
Responsibility the managers and cannot
delegated to subordinates.
be delegated

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Freedom is not given to the
Freedom to work can be
subordinates as they have
Freedom of maintained by subordinates
to work as per the
Work as they are free to take
instructions of their
decision and to implement it.
superiors.
It is an important decision of
Nature It is a routine function
an enterprise.
Decentralization becomes
Delegation is important in all more important in large
Need on concerns whether big or concerns and it depends
purpose small. No enterprises can upon the decision made by
work without delegation. the enterprise, it is not
compulsory.
It is a systematic act which
Grant of The authority is granted by
takes place at all levels and
Authority one individual to another.
at all functions in a concern.
Grant of Responsibility cannot be Authority with responsibility is
Responsibility delegated delegated to subordinates.
Degree of delegation varies Decentralization is total by
from concern to concern nature. It spreads throughout
Degree
and department to the organization i.e. at all
department. levels and all functions
It is an outcome which
Delegation is a process
explains relationship between
Process which explains superior
top management and all other
subordinates relationship
departments.
Delegation is essential of all Decentralization is a
Essentiality
kinds of concerns decisions function by nature.
Decentralization is an
Delegation is essential for optional policy at the
Significance
creating the organization discretion of top
management.
It is considered as a general
Delegated authority can be policy of top management
Withdrawal
taken back. and is applicable to all
departments.
Freedom of Very little freedom to the
Considerable freedom
Action subordinates

In nutshell, Decentralization can be called as extension of delegation. When

delegation of authority is done to the fullest possible extent, it gives use to
decentralization.

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7.6 Conclusion
Decentralization in some form is present in every Organizational structure where
there is delegation of authority. Since delegation is an essential process of
Organization, it may be said that some degree of decentralization of authority is
to be found in all Organizational structures.

Therefore, Delegation and decentralization are the most important issues in the
successful applications of management in any Organization. Delegation of
authority means giving work to others and giving them the authority to do this
work. Delegate means to hand over or give. In Decentralization, the authority is
distributed to all the levels of management. Moreover, Delegation is the cause of
decentralization, whereas, Decentralization is the effect (i.e. a result) of
delegation.

The need of delegation and decentralization is evident, for all Organizations. It

helps in division of work and reduction of complexity in the working of
Organizational procedures. It helps in saving more time for policy formulation and
planning. It has an educative value and provides an opportunity to the
subordinates to shoulder the responsibilities with volunteerism and efficiency. It
brings flexibility in the working of an Organization. It makes the administration of
an Organization efficient by raising the morale of its employees.

In fact, decentralization is the policy of delegating decision making authority

down to the lower levels in an organization, relatively away from and lower in a
central authority. A decentralized organization shows fewer tiers in the
organizational structure, wider span of control, and a bottom-to-top flow of
decision-making and flow of ideas. In a more decentralized organization, the top
executives delegate much of their decision-making authority to lower tiers of the
organizational structure. As a correlation, the organization is likely to run on less
rigid policies and wider spans of control among each officer of the organization.
The wider spans of control also reduce the number of tiers within the
organization, giving its structure a flat appearance. One advantage of this
structure, if the correct controls are in place, will be the bottom-to-top flow of
information, allowing decisions by officials of the organization to be well informed
about lower tier operations.

7.7 References:
1. Harold Koontz & Heinz Weihrich, Essentials of Management : An
International Perspective, TATA MCGRAW-HILL PUBLISHING COMPANY
LIMITED, New Delhi, 2009.
2. Gary Dessler, Organization and management: A contingency approach,
Prentice-Hall, 1976
3. Koontz, Harold and Weijrich, Heinz : Essentials of Management : an Indian
perspective., TMG
4. Weihrich Heinz and Koontz, Harold: Management: a global perspective.
TMG

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5. Druker, P.F., Management: Tasks, Responsibilities, Practices, Transaction
Publishers, 2007
6. Samuel C.C., Certo,S., Tervis, Certo, Modern management,
Pearson/Prentice Hall, 2006
7. Stephen P Robbins, “Fundamentals of Management: Essential Concepts
and Applications”, 5th Edition, Pearson Education., 2005
8. R. Sivarethinamohan and P. Aranganathan, “Principles of Management”, 1st
Edition, CBA/Tata McGraw -Hill Publishing Company Ltd., 2005.
9. JamesA F Stoner ,Edward Freeman and Gilbert, “Management”, 6th Edition,
Pearson Education, 1995./ Prentice Hall of India Pvt. Ltd., 2007.
10. Durbin, “Essentials of Management” 7th Edition, Cengage Learning India
Pvt. Ltd.
11. Prasad, L.M., Principles and Practice of Management, Sultan Chand &
Sons, 2008
12. Bansal, B.B., Rao, P.C.K., Preface to Management, Paragan Book, New
Delhi, 2006.
13. http://www.expertmanage.com/index.php?option=com_content&view=article
&id=112&Itemid=75
14. http://www.managementstudyguide.com/delegation_decentralization.htm
15. http://freemba.in/substream.php?stcode=9&stname=Office_Management.

7.8 Progress Review: Objectives and Fill in the blanks

1. The goal of delegation is______________________________________.
2. _________ is the process of getting results accomplished through others.
3. Process of Delegation of Authority has ______ number of stages.
4. In what type of organization is decision-making authority spread throughout
the organization?
a) Centralized organization
b) Decentralized organization
c) Participative organization
d) Top-down organization
5. Which of the following is NOT an advantage of decentralization?
a) Allows top managers to focus on strategic issues
b) Potential duplication of resources
c) Allows for development of managerial expertise
d) Managers can react quickly to local information

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6. Which of the following is not a elements og delegation
a) Authority
b) Responsibility
c) Accountability
d) Power

Keys:

1. Workload distribution
2. Delegation
3. Four
4. (b)
5. (b)
6. (d)

7.9 Exercises

1. What is delegation? Explain it process

2. How is delegation important for an organization?
3. Distinguish between different types of delegation.
4. Explain any three principles of delegation.
5. What are the hindrances to delegation?
6. What do you understand by decentralization, how is it different to
centralization.
7. Highlight the factors that determine effective decentralization.
8. Discuss the relationship matrix that exists between delegation and
decentralization.

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UNIT 8 SPAN OF CONTROL AND TYPES OF
ORGANIZATION
Structure
8.1 Introduction
8.2 Objective
8.3 Span of Control
8.3.1 Span of Control: Concept, meaning and definition
8.3.2 Determination of Span of Control
8.3.3 Factors Affecting Span of Control
8.3.4 Types of Span of Control
8.4 Types of Organization
8.4.1 Organization: Meaning and Definition
8.4.2 Types of Organization
8.5 Conclusion
8.6 References
8.7 Progress Review
8.8 Exercise

8.1 Introduction

Span of control or span of management is a dimension of organizational

design measured by the number of subordinates that report directly to a given
manager. This concept affects organization design in a variety of ways, including
speed of communication flow, employee motivation, reporting relationships, and
administrative overhead. Span of management has been part of the historical
discussion regarding the most appropriate design and structure of
organizations.Span of control plays an important role in organizations and has
implications for organizational structure, how decisions are made, and the
interactions between supervisors and subordinates. Traditionally, span of control
is defined and measured as the number of direct subordinates a manager
supervises. Since all managers “manage” at least one subordinate, span of
control applies to managers at all levels throughout the organization.

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8.2 Objectives
The objectives of this unit are:

 To understand the concept of Span of Control

 To understand the factors affecting span of Control
 To explain the various types of Span of Control
 To discuss the concept of Organization and its typology.

8.3 Span of Control

8.3.1 Span of Control: Concept Meaning and Definition

The concept of Span of Control was developed, introduced and

popularized by British Army General Sir Ian Standish Monteith Hamilton (1853-
1947) through his 1921 published book titled "The soul and body of an army." Sir
Ian Hamilton's concept of Span of control was supported and later expanded by
management experts like V.A. Graicunas and Lyndall F. Urwick.

The term Span of Control is made of two words, viz., "Span" and "Control".

Span's literary meaning says, it is the distance between the tip of a thumb and
small finger when palm of hand is fully stretched out. However, in terms of
management and administration, it means the maximum extend or the number of
people that can be reached by.

Control in literary means an ability to instruct, check, adjust or manipulate

something as per once's preferred requirement, choice or expectation. However,
in terms of management and administration, it refers to an authoritative power to
direct, order or restrain.

Span of Control in management and administration thus refers to the total

number of people (here, subordinates or employees working under) whom a
manager or an administrator can effectively control and supervise.

According to Louis Allen,"Span of control refers to the number of people that a

manager can supervise."

According to Prof. Dimock, "The span of control is the number and range of
direct, habitual communication contacts between the Chief Executive of an
enterprise and his principal fellow officers."

So, span of control means the number of subordinates whom a superior

(manager or administrator) can effectively supervise. Every superior can
supervise a limited number of subordinates (employees). Therefore, every
superior should be assigned or given an authority to handle only few
subordinates.

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According to most management experts, at the top level of management, the
span of control should not be more than 1:6 while at the lower level of
management, the span of control should not be more than 1:20. This means, the
superior at the top level should not have more than 6 subordinates under his
control. Similarly, the superior at the lower level should not have more than 20
subordinates under his control. However, these are only theoretical figures. In
practice, the span of control depends on many factors such as nature of work,
ability of superior, ability of subordinates, etc.

Span of Control is also referred by many other names. It is often known as 'Span
of Supervision' or 'Span of Management' or 'Span of Attention'. However, the
management literature show that span of control, span of management or span
of supervision are used to denote the same concept of number of subordinates
which should be put under one superior. Span of control refers to the number of
subordinates who can be managed effectively by a superior. The number of
subordinates who report to a superior has two important applications.

1. It helps in determining the complexity of individual manager’s jobs.

2. It determines the shape or configuration of the organisations, the fewer the
number of people reporting to the superior, the larger the number of
managers required. Therefore, the number of subordinates reporting to a
superior should be fixed which in any case cannot go beyond a certain limit.
The grouping of activities to create various departments presents another
problem, that is, how many individuals should be placed under one superior.
This problem is related to the horizontal dimension of an organization structure.

Span of control refers to the number of subordinates who can be controlled

effectively by a superior. The number of subordinates who report to a superior
has two important implications. First, it is influential in determining the complexity
of individual manager’s jobs. Second, the span of management determines the
shape or configuration of the organization: the fewer the number of people
reporting to the superior, the larger the number of managers required. Therefore,
the number of subordinates reporting to a superior should be fixed which is any
case cannot go beyond a certain limit. However, Soujanen has suggested that
Span of control is a traditional concept and is not valid because the coordination
and control can be achieved through formal and informal group activity. The
replacement of old system of individual control by control through management
team has changed the whole system of communication and contact in the
organization which has affected attention paid to the way executive controls in
the command sense. However Soujanen’s contention that modern social
science concepts have modified the concept of traditional span of management
drew a sharp reaction from Urwick. He brought an article in response and
suggested that the contention of soujanen was wrong and span of control
principle held valid.

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8.3.2 Determination of Span of Control
No doubt, management thinkers agree that Span of control principle holds
true but they do not agree about the number of subordinates that can be put
under one superior. The classical approach to the span of control has dealt with
generalization embodying specific number of subordinates for effective span.
The classical writers have suggested between three to eight subordinates as
ideal depending on the levels of management with lower the level of
management, higher the number of subordinates based on mathematical
calculation. He has analyzed superior-subordinate relationships and developed
mathematical formulae. Graicunas has identified three types of superior
subordinate’s relationships: direct single relationships, direct group relationships,
and cross relationships.

1. Direct Single Relationships: Direct single relationships arise from the direct
individual contacts of the superior with his subordinates. Thus, if there are three
subordinates A, B, C under one superior X, there will be three direct single
relationships.

2. Direct Group Relationship: Direct group relationships arisen between the

superior and his subordinates in all possible combinations. Thus, the superior
may consult his subordinates with one or more providing assistance. With three
subordinates, there will be none such relationships like A with B, A with C, and so
on with the superior associated with all groups.

3. Cross Relationships: Cross relationships arise because of mutual

interaction of subordinates working under the common superior such as A and B,
A and C, B and A, and so on. The relationship is quite different between A and B
than B and A from management point of view because the type of interaction will
be different in both the cases. There are six such relationships with three
subordinates.

Graicunas has given formulae to find out various relationships with varying
number of subordinates. With number of subordinates being n, the number of
various relationships will be as follows:

Direct single relationships = n

Direct group relationships = n{2(n-1)-1}

Cross relationships = n(n-1)

Total relationships = n[ 2/2n+n-1]

This formula suggests that while the number of subordinates increases in

arithmetical progression, the number of relationships increases increases in
geometrical progression as shown in table 1

According to Graiunas, most ideal span for a manager is six subordinates

involving 222 relationships. No doubt, Graicunas has given a mathematical
treatment of the problem of fixing the span for managers, showing how the

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problem of managing subordinates increases with the increase in the number of
subordinates; his contribution suffers from a basic limitation. All the relationships
are not equally important from management point of view and, therefore, these
cannot increase the complexity of managing. Moreover, Graicunas has not
considered many other possible relationships particularly in cross relationships.
Therefore, span based on mere number of relationships cannot be fixed.

Table 2: Relationships with variable number of subordinates

________________________________________________________________
Number of subordinates Number of relationships

1 1
2 6
3 18
4 44
5 100
6 222
8 1, 080
10 5, 210
12 24, 708
18 23, 59, 602
The recognition that potential management effectiveness is limited as the
number of subordinate’s increases has led others to propose definite limits on the
span of management. For example, Davis distinguishes between two categories
of span of control, an executive span and an operative span, Executive span
includes the middge and top management positions in an organization. The
span for these managers should vary from three to nine, depending on the nature
of managers’ job and responsibilities and the rate of growth of the organization.
The operative span applies to the lowest level of management and it can be
effective with as many as 30 subordinates. Similarly, Urwick has proposed span
for top management as four but it may be between eight and twelve for
supervisory management. Thus, span of management has been suggested
differently by various writers. Further, differences also exist for different levels of
management.Therefore, it is desirable to identify those factors which affect the
span of management.

8.3.3 Factors Affecting Span of Control

The basic idea behind limiting the span of management is to enable a
manager to manage and control his subordinates effectively. As such the
important determinant for specifying the span of management is the manager’s
ability, in turn, is affected by several factors. Therefore, such factors are quite
important in determining the suitable span of control. Following are such factors:

1. Capacity of Superior
Each manager has different ability and capacity in respect of such factors as
leadership, communication, decision making, control etc. affecting management
of subordinates. Managers having more capacity in respect of these factors
personality factors of the manager also determine has span of management. For

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example, any empire builder may like to have wider span as compared to a
submissive manager.

2. Capacity of Subordinates
Capacity of subordinates also affects the degree of span of management.
Efficient and trained subordinates may discharge their functions more efficiently
without much held of their superior. They may just need broad guidelines and
rest of the things can be performed by them. In such cases, they require lesser
time from their superior who will be in a position to manage larger number of
subordinates. Similarly, if there is no frequent changes in subordinates, span
can be wider.

3. Nature of Work
Nature of work affects degree of span of management because different
subordinates are performing similar functions, they require less attention of their
superiors. If subordinates are performing similar functions, they require less
attention of their superior and span can be wider. For example, a study
discloses that mean span of management in the case of supervisors supervising
similar work was 16 as against only 6.7 for those supervising different works.
Similarly, rate of change in the work also affects the span of management. For
example, Woodward’s study suggests that in the case of mass production and
assembly line technology, the span is highest. Similarly, in unit and batch
production, span is higher than process production.

4. Degree of Decentralization
Degree of centralization or decentralization affects span of management by
affecting the degree of involvement of the superior in decision-making process.
Thus, higher is the degree of decentralization; higher is the degree of span. If a
manager clearly delegates his authority and defines it fully, he requires less time
to devote to manage his subordinates because most of the actions will be taken
by the subordinates on their own. In the case of centralization of authority or
ambiguity in delegation of authority, the subordinates would require considerable
consultation, clarification, and instructions from their superior. This will require
more time on the part of the superior and his span will be narrow.

5. Degree of Planning
Higher is the degree of plans, particularly standing plans clearly providing rules,
procedures, methods, etc., in doing the work; higher would be the degree of span
of management. In such cases, the subordinates can take actions on their own.
On the other hand, if they have to draw their own plans, they may not know what
exactly they have to do and they may require more time for guidelines and
consultation. In a situation, where the production foremen were performing
repetitive work with well-formulated standing plans, span average between 60-
70.

6. Communication Techniques
The pattern of communication, its means, and media affect the time requirement
in managing subordinates and consequently span of management. If

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communication is mostly face to face, it requires more time on the part of both
superior and subordinates. On the other hand, communication with staff
assistant and through the use of modern communication tools like electronic
devices will save lot of time and span can be increased.

7. Use of Staff Assistance

Use of staff assistant in reducing the work load of managers enables them to
manage more number of subordinates. Many of the managerial functions can be
discharged by these staff personnel on behalf of the managers. They can collect
information, process communication, and issue orders and instructions on behalf
of their superior. This process saves time of managers and the degree of span
can be increased.

8. Supervision from Others

It is not very uncommon that a subordinate receive supervision from several
other personnel besides his direct superior. In such a case, the work load of
direct superior. In such a case, the work load of direct superior is reduced and
he can supervise more number of subordinates.

The trend is changing towards getting supervision from many persons. For
example, Udell has found that it is not uncommon that men in the organizations
receive 50 percent or more of their supervision from someone else than their own
immediate superior. He has found that where people were getting supervision
from others also besides from their own superior, the average span was 17.6 as
compared to 9.7 for those not getting supervision from others.

The analysis of various factors affecting span of management suggests that

there cannot be any fixed number of subordinates under one superior. Rather,
the span should be decided taking the various factors into account. Therefore,
the span of management may vary in the same organization for different levels of
management and functions, and also in different organizations for similar
functions and level of management.

Various research studies have suggested the actual span of management

followed under various situations. On the basis of review of such studies, House
and Miner conclude that:

1. Under most circumstances, the optimal span is likely to be in the range of 5

and 10.
2. The larger spans, say 8 to 10, are most appropriate at the highest policy-
making levels of the organization where greater resources for diversified
problem solving appear to be needed;
3. The breadth of effective spans of first-line supervisors is contingent on the
technology of the organization; and
4. In prescribing the span of control for specific situations, considerations are
given to a host of local factors such as desirability of high group
cohesiveness, the performance demands of the task, the degree of stress in
the environment, task interdependencies, and the need of the members’
satisfaction, and the leadership skills available to the organization.

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8.3.4 Types of Span of Control

Span of control is a span of supervision which depicts the number of employees

that can be handled and controlled effectively by a single manager. According to
this principle, a manager should be able to handle what number of employees
under him should be decided. This decision can be taken by choosing either from
a wide or narrow span. There are two types of span of control:-

A. Narrow span of control- According to this span, the work and authority is
divided amongst many subordinates and a manager doesn't supervises and
control a very big group of people under him. The manager according to a
narrow span supervises a selected number of employees at one time. The
features are:-
i. Work which requires tight control and supervision, for example,
handicrafts, ivory work, etc. which requires craftsmanship, there
narrow span is more helpful.
ii. Co-ordination is difficult to be achieved.
iii. Communication gaps can come.
iv. Messages can be distorted.
v. Specialization work can be achieved.

An example of a narrow span of control is shown in the diagram below:

The advantages of a narrow span of control are:

 A narrow span of control allows a manager to communicate quickly with

the employees under them and control them more easily
 Feedback of ideas from the workers will be more effective
 It requires a higher level of management skill to control a greater number
of employees, so there is less management skill required

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B. Wide span of control- It is one in which a manager can supervise and
control effectively a large group of persons at one time. According to this
span, one manager can effectively and efficiently handle a large number of
subordinates at one time.

The features of this span are:-

i. Less overhead cost of supervision
ii. Prompt response from the employees
iii. Better communication
iv. Better supervision
v. Better co-ordination
vi. Suitable for repetitive jobs

An example of a wide span of control is shown in the diagram below:

The advantages of wide span of control are:

 There are less layers of management to pass a message through, so the
message reaches more employees faster
 It costs less money to run a wider span of control because a business
does not need to employ as many managers

8.4 Organization
8.4.1 Organization: Meaning and Definition

Organization is one important element of the management process. It is

next to planning. In management, organization is both the process as well as the
end-product of that process which is referred to as organization structure. Such
structure acts as the foundation on which the whole super-structure of

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management is built. Sound organization structure is essential for the conduct of
business activities in an efficient manner. It is within the framework of the
organization that the whole management process takes place. The success of
the management process will be determined by the soundness of the
organization structure. Organizing involves integration of resources in order to
accomplish the objectives.

Different authors have defined organization in different ways. The main

definitions of organization are as follows:

According to keith Davis, "Organization may be defined as a group of individuals,

large of small, that is cooperating under the direction of executive leadership in
accomplishment of certain common object."

According to Chester I. Barnard, "Organization is a system of co-operative

activities of two or more persons."

According to Louis A. Allen, "Organization is the process of identifying and

grouping the work to be performed, defining and delegating responsibility and
authority, and establishing relationship for the purpose of enabling people to work
most effectively together in accomplishing objectives."

According to Mooney and Railey, "Organization is the form of every human

association for the attainment of a common purpose."

Organization has been defined by E. F. L. Breach as "a system of structural

interpersonal relationships. In it, individuals are differentiated in terms of
authority, status and roles with the result that personal interaction is prescribed,
and anticipated reactions between individuals tend to occur while ambiguity and
spontaneity are decreased".

Thus, Organization involves the following aspects:-

a. Identifying the activities required to achieve organizational objectives.

b. Grouping up of these activities into workable units (Departmentation).
c. Assigning duties and responsibilities to subordinates in order to achieve
the tasks assigned.
d. Delegating authority necessary and useful for the accomplishment of
tasks assigned.
e. Establishing superior-subordinate relationship.
f. Providing a system of co-ordination for integrating the activities of
individuals and departments.

On the basis of the above discussed definitions it can be concluded that;

organizing means arranging the ways and means for the execution of business
plan; it is the creation of administrative set-up for the execution of the plan; It
suggests the framework within which the management functions; Organization
provides mechanism for integrated and co-operative action by two or more

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persons with a view to implementing any plan; Organization facilitates efficient
administration, direction and control. It avoids wastage of raw materials and
human efforts. Therefore, every management has to establish its own
organization structure for efficient conduct of business activities

There are different structures which can be given to an organization. They

include line, functional and so on. An organization deals with a number of
elements which defines the relationships between the members of a group. It is
concerned with the channels of communication and lines of authority. It also
defines the degree of authority and responsibility of each person in the
organization. In short, organization clarifies relationships and provides a
framework within which all managerial actions take place.

8.4.2 Types of Organisation

An organisation is a social group which distributes tasks for a collective
goal. The word itself is derived from the Greek word organon, itself derived from
the better-known word ergon - as we know `organ` - and it means a compartment
for a particular job. There are a variety of types of organisations, including:
corporations, governments, non-governmental organisations, international
organisations, armed forces, charities, not-for-profit corporations, partnerships,
cooperatives, and universities. A hybrid organisation is a body that operates in
both the public sector and the private sector, simultaneously fulfilling public
duties and developing commercial market activities. As a result the hybrid
organization becomes a mixture of a government and a corporate organisation.

In the social sciences, organisations are the object of analysis for a number of
disciplines, such as sociology, economics, political science, psychology,
management, and organisational communication. The broader analysis of
organisations is commonly referred to as organisational structure, organisational
studies, organisational behavior, or organisation analysis. A number of different
perspectives exist, some of which are compatible:

 From a process-related perspective, an organization is viewed as an

entity is being (re-) organized, and the focus is on the organization as a
set of tasks or actions.
 From a functional perspective, the focus is on how entities like
businesses or state authorities are used.
 From an institutional perspective, an organization is viewed as a
purposeful structure within a social context.

The study of organizations includes a focus on optimizing organizational

structure. According to management science, most human organizations fall
roughly into four types:

A. Pyramids or hierarchies
B. Committees or juries
C. Matrix organizations
D. Ecologies

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A. PYRAMIDS OR HIERARCHIES

A hierarchy exemplifies an arrangement with a leader who leads other individual

members of the organization. This arrangement is often associated with
bureaucracy.

These structures are formed on the basis that there are enough people under the
leader to give him support. Just as one would imagine a real pyramid, if there are
not enough stone blocks to hold up the higher ones, gravity would irrevocably
bring down the monumental structure. So one can imagine that if the leader does
not have the support of his subordinates, the entire structure will collapse.
Hierarchies were satirized in The Peter Principle (1969), a book that introduced
hierarchiology and the saying that "in a hierarchy every employee tends to rise to
his level of incompetence."

B. COMMITTEES OR JURIES

These consist of a group of peers who decide as a group, perhaps by voting. The
difference between a jury and a committee is that the members of the committee
are usually assigned to perform or lead further actions after the group comes to a
decision, whereas members of a jury come to a decision. In common law
countries, legal juries render decisions of guilt, liability and quantify damages;
juries are also used in athletic contests, book awards and similar activities.
Sometimes a selection committee functions like a jury. In the Middle Ages, juries
in continental Europe were used to determine the law according to consensus
amongst local notables.

Committees are often the most reliable way to make decisions. Condorcet's jury
theorem proved that if the average member votes better than a roll of dice, then
adding more members increases the number of majorities that can come to a
correct vote (however correctness is defined). The problem is that if the average
member is subsequently worse than a roll of dice, the committee's decisions
grow worse, not better: Staffing is crucial.

Parliamentary procedure, such as Robert's Rules of Order, helps prevent

committees from engaging in lengthy discussions without reaching decisions.

C. MATRIX ORGANIZATION

This organizational type assigns each worker two bosses in two different
hierarchies. One hierarchy is "functional" and assures that each type of expert in
the organization is well-trained, and measured by a boss who is super-expert in
the same field. The other direction is "executive" and tries to get projects
completed using the experts. Projects might be organized by products, regions,
customer types, or some other schema.

As an example, a company might have an individual with overall responsibility for

Products X and Y, and another individual with overall responsibility for

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Engineering, Quality Control etc. Therefore, subordinates responsible for quality
control of project X will have two reporting lines.

D. ECOLOGIES

This organisation has intense competition. Bad parts of the organisation starve.
Good ones get more work. Everybody is paid for what they actually do, and runs
a tiny business that has to show a profit, or they are fired. Companies who utilize
this organisation type reflect a rather one-sided view of what goes on in ecology.
It is also the case that a natural ecosystem has a natural border - ecoregions do
not in general compete with one another in any way, but are very autonomous.
The pharmaceutical company GlaxoSmithKline talks about functioning as this
type of organization.

8.5 Conclusion

Thus, span of control means the number of subordinates whom a superior

(manager or administrator) can effectively supervise. Every superior can
supervise a limited number of subordinates (employees). Therefore, every
superior should be assigned or given an authority to handle only few
subordinates. According to most management experts, at the top level of
management, the span of control should not be more than 1:6 while at the lower
level of management, the span of control should not be more than 1:20. This
means, the superior at the top level should not have more than 6 subordinates
under his control. Similarly, the superior at the lower level should not have more
than 20 subordinates under his control. However, these are only theoretical
figures. In practice, the span of control depends on many factors such as nature
of work, ability of superior, ability of subordinates, etc.

The framework, typically hierarchical, within which an organization arranges its

lines of authority and communications, and allocates rights and duties.
Organizational structure determines the manner and extent to which roles,
power, and responsibilities are delegated, controlled, and coordinated, and how
information flows between levels of management. An structure depends entirely
on the organization's objectives and the strategy chosen to achieve them. In a
centralized structure, the decision making power is concentrated in the top layer
of the management and tight control is exercised over departments and divisions.
In a decentralized structure, the decision making power is distributed and the
departments and divisions have varying degrees of autonomy. An organizational
chart illustrates the organizational structure.

8.6 References
 Harold Koontz & Heinz Weihrich, Essentials of Management : An
International Perspective, Tata McGraw-hill publishing company limited,
New Delhi, 2009.
 Prasad, L.M., Principles and Practice of Management, Sultan Chand &
Sons, 2008

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 Druker, P.F., Management: Tasks, Responsibilities, Practices,
Transaction Publishers, 2007
 Samuel C.C., Certo,S., Tervis, Certo, Modern management,
Pearson/Prentice Hall, 2006
 Bansal, B.B., Rao, P.C.K., Preface to Management, Paragan Book, New
Delhi, 2006.
 R. Sivarethinamohan and P. Aranganathan, “Principles of Management”,
1st Edition, CBA/Tata McGraw -Hill Publishing Company Ltd., 2005.
 Gary Dessler, Organization and management: A contingency approach,
Prentice-Hall, 1976
 Koontz, Harold and Weijrich, Heinz : Essentials of Management : an
Indian perspective., TMG
 Weihrich Heinz and Koontz, Harold : Management : a global perspective.
TMG
 Stephen P Robbins, “Fundamentals of Management: Essential Concepts
and Applications”, 5th Edition, Pearson Education., 2005
 Durbin, “Essentials of Management” 7th Edition, Cengage Learning India
Pvt. Ltd.
 Alfred D. Chandler, Strategy and Structure, Cambridge, Mass: The MIT
press, 1962.
 R. Carzo and J. N. Yanouzas. “Efects of flat and tall organisation
structure”, Administrative Science Quarterly, June 1969, pp. 178-91.

8.7 Progress review:

Objectives and Fill in the blanks:

1. _____________________ refers to the number of subordinates who can

be managed effectively by a superior.
2. __________is the pattern in which various parts or components is
interrelated or interconnected.
3. Membership in an ___________ organisation is voluntary.
4. Which one of the following is not an approach for organisational design?
a. Result approach
b. Process approach
c. Authentic approach
d. Decision approach
5. In which respect, does formal organisation differ from that of informal
organisation?
a. Structuring
b. Production process
c. Financial Process
d. Marketing Process
6. Which one of the following factor does not influence span of control?
a. Technology
b. Nature of subordinates
c. Communication techniques
d. Conflict between superior and subordinate

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7. Narrow span of control results
a. Flat structure
b. Tall structure
c. Mechanistic structure
d. Organic structure
Keys

1. Span of control
2. Structure
3. Informal
4. d
5. a
6. a
7. b

8.8 Exercise
1. What do you mean by Span of Control? As a manager, do you prefer wide or
narrow span?

2. What are the factors which determine the appropriate span of Control?

3. How do you differentiate between wide and narrow span of Control?

4. What do you understand by organisation structure? How does basic structure

of an organisation differ from its operating mechanism?

5. “Organisation structure refers to the differentiation and integration of activities,

authority, roles and relationships”. Explain.

6. What are the various types of Organisations? Explain in detail with the help of
an example.

7. What do you understand by matrix type of organisation structure?

8. What are the limitations of line and functional structure organisation?

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UNIT 9: DECISION MAKING
Structure
9.1 Introduction
9.2 Objective
9.3 Decision Making
9.3.1 Decision Making: Concept, meaning and definition
9.3.2 Characteristics of Decision Making
9.3.3 Types of Decisions
9.3.4 Problem Analysis Vs Decision Making
9.3.5 Effective Decision Criteria
9.3.6 Steps in Decision Making
9.3.7 Approaches to Decision Making
9.3.8 Decision Making Strategies
9.4 Conclusion
9.5 References
9.6 Progress Review
9.7 Exercise

9.1 Introduction
Decision making is defined as the selection of a course of action from
among alternatives; it is at the core of planning. A plan cannot be said to exist
unless a decision-a commitment of resources, direction or reputation has been
made. Managers sometimes see decision making as their central job because
they must constantly choose what is to be done, who is to do it and when, where
and occasionally even how it will be done. Decision making is, however, only a
step in planning. Even when it is done quickly and with little thought or when it
influence action for only a few minutes, it is part of planning. It is also part of
everyone’s daily life. A course of action can seldom be judged alone because
virtually every decision must be geared to other plans.

Decision making is both managerial function and organisational process. It

is managerial function because it is a functional responsibility of every manager.
It is organisational process because many decisions transcend the individual
managers and become the product of groups, teams, committees etc. In fact,
more important decisions are made by group of managers rather by managers
individually. Therefore, managers should develop decision making skills and
acquaint themselves with the dynamics of decision making because of the
following reasons:

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1. Managers spend a great deal of their time in making decisions. In order to
develop their decision-making skills, it is necessary that they know how to
make effective decisions.
2. Managers are evaluated on the basis of quality of their decision making. To
improve the quality of decisions, they should know how quality of decision
making can be improved.

Human performance in decision terms has been the subject of active research
from several perspectives. From a psychological perspective, it is necessary to
examine individual decisions in the context of a set of needs, preferences an
individual has and values they seek. From a cognitive perspective, the decision
making process must be regarded as a continuous process integrated in the
interaction with the environment. From a normative perspective, the analysis of
individual decisions is concerned with the logic of decision making and rationality
and the invariant choice it leads to. Yet, at another level, it might be regarded as
a problem solving activity which is terminated when a satisfactory solution is
reached. Therefore, decision making is a reasoning or emotional process which
can be rational or irrational, can be based on explicit assumptions or tacit
assumptions.

One must keep in mind that most decisions are made unconsciously. Jim
Nightingale, Author of Think Smart-Act Smart, states that "we simply decide
without thinking much about the decision process." In a controlled environment,
such as a classroom, instructors encourage students to weigh pros and cons
before making a decision. However in the real world, most of our decisions are
made unconsciously in our mind because frankly, it would take too much time to
sit down and list the pros and cons of each decision we must make on a daily
basis.

Logical decision making is an important part of all science-based professions,

where specialists apply their knowledge in a given area to making informed
decisions. For example, medical decision making often involves making a
diagnosis and selecting an appropriate treatment. Some research using
naturalistic methods shows, however, that in situations with higher time pressure,
higher stakes, or increased ambiguities, experts use intuitive decision making
rather than structured approaches, following a recognition primed decision
approach to fit a set of indicators into the expert's experience and immediately
arrive at a satisfactory course of action without weighing alternatives. Recent
robust decision efforts have formally integrated uncertainty into the decision
making process. However, Decision Analysis, recognized and included
uncertainties with a structured and rationally justifiable method of decision
making since its conception in 1964.

A major part of decision making involves the analysis of a finite set of alternatives
described in terms of some evaluative criteria. These criteria may be benefit or
cost in nature. Then the problem might be to rank these alternatives in terms of
how attractive they are to the decision maker(s) when all the criteria are
considered simultaneously. Another goal might be to just find the best alternative

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or to determine the relative total priority of each alternative (for instance, if
alternatives represent projects competing for funds) when all the criteria are
considered simultaneously. Solving such problems is the focus of multi-criteria
decision analysis (MCDA) also known as multi-criteria decision making (MCDM).
This area of decision making, although it is very old and has attracted the interest
of many researchers and practitioners, is still highly debated as there are many
MCDA / MCDM methods which may yield very different results when they are
applied on exactly the same data. This leads to the formulation of a decision
making paradox

9.2 Objectives
After reading this Unit, you should be able to:

 Understand meaning, concept and definition of decision making.

 Explain characteristics and typology of decision making.

 Discuss Decision Making Process, and steps involved therein.

 Explain the approached applied in decision making.

9.3 Decision Making

9.3.1 Concept of Decision and Decision Making
The word ‘decision’ has been derived from the Latin word ‘decidere’ which
means a cutting away or a cutting off, or in a practical sense. Thus, a decision
involves a cut of alternatives between those that are desirable and those that are
not desirable. The decision is a king of choice of a desirable alternative.

According to Lopez “a decision represents a judgment, a final resolution of a

conflict of needs, means or goals and a commitment to action made in face of
uncertainty, complexity and even irrationally.” Thus, decision making is a process
to arrive at a decision, the process by which an individual or organisation selects
one position or action from several alternatives.

According to Shull et al, “decision making is a conscious human process

involving both individual and social phenomenon based upon factual and value
premises which concludes with a choice of one behavioral activity from among
one or more alternatives with the intention of moving toward some desired state
of affairs.”

According to Allen, management decision making is “The work of a manger

performs to arrive at conclusion and judgment.”

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

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

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R.S. Davar “Decision making may be defined as the selection based on some
criteria of one behaviour alternative from two or possible alternatives. To decide
means ‘to cut-off’ or in a practical content, to come to a conclusion.”

Decision-making is a complex and mental exercise. A decision represents a

judgement, a final word, and resolution of conflicts or a commitment to act in
certain manner in the given set of circumstances. Three aspects of human
behaviour are involved in decision making:

1. Cognition, activities of the mind associated with knowledge

2. Conation, the action of the mind implied by such words as willing, desire
and aversion, and
3. Affection, the aspect of the mind associated with emotions, feeling, mood
and temperament.

9.3.2 Characteristics of Decision Making

Following characteristics of decision making can be accessed from the
above definition:

1. An Intellectual activity: The process of decision making is basically a

human and intellectual activity. It is a mental exercise which considers and
evaluates all the alternatives for achieving certain objectives.

2. A Process of selection: A decision is basically a process of choice making.

It chooses the best alternative from various alternative course of action. If
there is one alternative only, no decision making is required.

3. Integral planning activity: Decision making is an integral part of planning.

Every planner has to make a choice of appropriate solutions or alternatives in
a situation of availability of options.

4. An element of commitment: A decision is a resolution or commitment of

mind to act in a certain manner in the given circumstances. Decisions made
by the mangers involve commitment of the organisation for adopting a
specific course of action and utilizing resources in a particular manner.

5. Purposive or goal oriented activity: Decision making is a purposive or goal

oriented activity because it is directed towards the achievement of goals and
objectives.

6. Result oriented: Decisions are vehicles for carrying managerial workload.

No decision can be taken without any purpose. A decision is taken to realize
certain objectives. Decision making is an end process preceded by
deliberations and reasoning.

7. Time dimension: All decisions should be taken as far as possible

immediately and according to circumstances. The time sequence is complete
with the implementation of the decision and evaluation of the results in the
future.

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8. Flexible approach: Decision making requires giving freedom to the
managers for making use of their experience, skill and judgment. Infact,
policies which are a guide to decision making are made flexible.

9. Based on rational thinking: Decision making is based upon rational

thinking. It is always objectives in nature as decisions are made to facilities
the attainment of well defined objectives. Infact, it involves rationality because
through decisions an endeavour is made to attain better results. Hence, it is
basically a human process which is complex in nature.

10. Positive and Negative effect: Although every decision is usually positive
but sometimes certain decisions may be negative. For example,
retrenchment, demotion, dismissal of employees, reduction in scale of
operation, introduction of change, closing down of some units, withdrawing
products from the market etc. are some of the decisions made by the
managers which may have a negative effect for a short period of time.
Hence, decision making is at the core of heart of an organisation. It is a vital and
indispensable process of the organisation since it governs different management
activities which involves the setting of definite objectives, involves the preparation
of different plans, determines organisational structures, motivates personnel and
introduces innovations. It is an important function of management and without the
involvement of the process of decision making it appears as if an organisation is
without its internal structure similar to the nature of human being without the
skeleton.

9.3.3 Types of Decisions

There are different types of decisions. According to Peter Drucker, there
are four basic criteria which determine the nature of a decision and the level of
authority that should decide. These are:

1. The future time involved

2. The qualitative factors entering into a decision
3. Whether a decision is rare or routine and repetitive in nature, and
4. Whether the impact of a decision is on other functions, areas or on the
business as a whole.
Some of the important managerial decisions are as follows:

1. Programmed Decisions and Non-Programmed Decisions

Programmed decisions involve situations that have occurred often enough to

enable decision rules to be developed and applied in the future. Programmed
decisions are used for dealing with recurring organizational problems, whether
complex or uncomplicated. If a problem occurs repetitively and routinely, and a
specific approach can be worked out for handling it, then it may be a candidate
for programmed decision making. Examples of programmed decisions are
inventory of a given product to be maintained, salary range of a newly hired
employee, and handling of customer complaints. Poorly defined and largely
unstructured, and have important consequences for the organization. Non

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programmed decisions deal with unusual or exceptional problems. If a problem
has not come up often enough to be covered by a policy or is so important that it
deserves special treatment, it must be handled as a non-programmed decision.

2. Routine Decisions and Strategic Decisions

Routine decisions are made repetitively following certain established rules,
procedures and policies. They do not require collection of new data and can be
taken without many deliberations. Such decisions are taken generally by the
executives at the middle and lower management levels. Strategic or basic
decisions, on the other hand, are more important and are generally taken by the
top management of organizations. They relate to policy matters and so require a
thorough fact finding and analysis of the possible alternatives. Launching a new
programmes, location of a new plant, installation of a computer system are
examples of strategic decisions.

3. Policy Decisions and Operative Decisions

Policy decisions are of vital importance and are taken by the top
management.They effect the entire organization. But operating decisions are
taken by the lower management in order to put into action the policy decisions.
For instance, the bonus issue is a policy matter which is to be decided by the top
management and calculation of bonus is an operating decision which is taken at
the lower levels.

For example-The Nike organization grew out of an idea Philip knight expressed
in a graduate school paper he wrote in 1962 while he was getting his M.B.A. at
Stanford. In 1964, he and bill Boverman, Knights former track coach from the
University of Oregon, started and athletic shoe company called Blue Ribbon
Sports, to evoke the image of a winner. That year they sold 1,300 pairs of
running shoes at local track meets from the trunk of a car. In the meantime,
Knight also worked as a C.P.A. and an accounting professor until 1969, when he
decided to devote himself full time to Blue Ribbon sports. Then, in 1972, Blue
Ribbon sports become Nike, named after the mythological goddess of victory. To
keep up with the changing marketplace, Nike managers have already started
diversifying. In 1992, Nike opened retail outlets in which apparel, shoes, and Nike
paraphernalia are sold. Nike managers attribute a $ 100 million increase in gross
profits in 1992 to its retail sales division, which operates 30 Nike owned outlets
for factory seconds and the two Nike Town stores, A far cry from the company’s
humble. Beginnings with shoes being sold from the trunk of a car. The stores
promote the growth of the Nike apparel business, which is experiencing much
faster growth than the athletic shoe business.

4. Organisational Decisions and Personal Decisions

Organizational decisions are made to advance the interest of the organization.
When an executive acts formally in his expected role in an organization he
makes organizational decisions making become organizations official decisions
making power is delegated to others also and calls for decisions at subordinate
levels supporting it. They thus touch off chain of behavior throughout the
organization. Personal decisions are made by an executive as an individual and

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not as a part of an organization. An executive who charges jobs or organization
is making a personal decision. Decisions to many to buy a house, to purchase a
car are examples of personal decisions. Such decisions life of an executive but
may affect the personal life of an executive but may affect the organization
sometimes directly or indirectly.

5. Individual and Group Decisions

When a decision is taken by an individual in the organization, it is known as
individual decision. These are concerned mainly with routine problems for which
broad policies are available. Such decisions are generally taken in small
organizations and in those organizations where autocratic style of management
prevails. Group decisions are those taken by a group of persons constituted for
the purpose. Decisions taken by the board of directors or a committee are
examples of group decisions. Group decision making generally results in more
realistic and well balanced decisions and encourages participative decision
making.

9.3.4 Problem Analysis vs. Decision Making

It is important to differentiate between problem analysis and decision making.

The concepts are completely separate from one another. Problem analysis must
be done first, and then the information gathered in that process may be used
towards decision making.

Problem Analysis

 Analyze performance, what should the results be against what they

actually are
 Problems are merely deviations from performance standards
 Problem must be precisely identified and described
 Problems are caused by some change from a distinctive feature
 Something can always be used to distinguish between what has and
hasn't been effected by a cause
 Causes to problems can be deducted from relevant changes found in
analyzing the problem
 Most likely cause to a problem is the one that exactly explains all the
facts.

Decision Making

 Objectives must first be established

 Objectives must be classified and placed in order of importance
 Alternative actions must be developed
 The alternative must be evaluated against all the objectives
 The alternative that is able to achieve all the objectives is the tentative
decision
 The tentative decision is evaluated for more possible consequences

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 The decisive actions are taken, and additional actions are taken to prevent
any adverse consequences from becoming problems and starting both
systems (problem analysis and decision making) all over again
 There are steps that are generally followed that result in a decision model
that can be used to determine an optimal production plan.
 In a situation featuring conflict, role-playing is helpful for predicting decisions
to be made by involved parties.

Decision Planning

Making a decision without planning is fairly common, but does not often end well.
Planning allows for decisions to be made comfortably and in a smart way.
Planning makes decision making a lot more simpler than it is. Decision will get
four benefits out of planning:

1. Planning give chance to the establishment of independent goals. It is a

conscious and directed series of choices.

2. Planning provides a standard of measurement. It is is a measurement of

whether you are going towards or further away from your goal.

3. Planning converts values to action. One should think twice about the plan and
decide what will help advance your plan best.

4. Planning allows to limited resources to be committed in an orderly way. Always

govern the use of what is limited to you (e.g money, time, etc.)

9.3.5 Effective Decision Criteria

B.S.Rajpurohit has pointed out the following criteria for evaluating an
effective decision:

1. Economic Criterion: As the primary objective of a business is to make

adequate profit, every decision should have an economic justification.
2. Timeliness: Timeliness is an important element in a successful decision.
One should be alert in observing the trend of events and ready to make use
of opportunity. The time sequence is complete with the implementation of
the decision and evaluation of results in the future.
3. Goal-Oriented: Organisations are goal-oriented units and therefore, any
organisational process, including decision making should be goal directed
to enable the organisation to meet its objectives.
4. Authenticity: Since, such decisions are in keeping with the systematic
plan, they get the stamp of authenticity, permanency and such decisions
acquire nature of permanency as chances of effecting any changes or
modifications in them with a short span of time before remote.

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5. Action-Oriented: Decisions are action-oriented and are directed towards
relevant and controllable aspects of the environment. Decisions are totally
pragmatic in nature and their value is dependent on the success of the
actions that follows. Decisions to be effective must be to the point, sound,
accurate and appropriate. Such decisions in due course gain the status of
precedents.
6. Authority and Sanction: The decision maker is invested with an authority
to make decisions which are acceptable by the company. the subject and
its scope should fall clearly in the executive’s legitimate authority.
7. Legal Criterion: As a business institution works within the framework and
protection of law a decision should not, directly or indirectly, undetermined
the spirit of law.
8. Experience: The element of experience as a basis for decision-making is
very important. Past experience of the decision maker, indicative of
decisions made in particular situations, varied types of people involved and
general areas affected by the decisions, weighs considerably with the
decision maker and helps in reaching accurate decisions.
9. Adequate Information: The element of facts, as basis for decision-making
supported as it is with factual data having relevancy to the given situation
has been recognised as the most methodical, efficient and effective basis
for reaching decisions.
10. Categorical Interpretation: At the very outset, it may be emphasized that
logical decision can be made if the real problem is interpreted and identified
with study and observation.
11. Efficiency in Implementation: An effective decision should provide the
way in which it can be implemented. Therefore, decision making should
take into account all the possible factors not only in terms of external
context but also in internal context so that a decision can be implemented
properly.
12. Considering others’ view: While making decision it is desirable that all
alternatives are considered before arriving at a decision. Therefore, if
various views on the same point are taken into consideration and given
adequate weight, they will contribute to the quality of decisions.

9.3.6 Steps in Decision Making

Managers are constantly called upon to make decisions in order to solve

problems. Decision making and problem solving are ongoing processes of
evaluating situations or problems, considering alternatives, making choices, and
following them up with the necessary actions. Sometimes the decision-making
process is extremely short, and mental reflection is essentially instantaneous. In
other situations, the process can drag on for weeks or even months. The entire
decision-making process is dependent upon the right information being available
to the right people at the right times.

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The decision-making process involves the following steps:

1. Define the problem.

2. Identify limiting factors.

3. Develop potential alternatives.

4. Analyze the alternatives.

5. Select the best alternative.

6. Implement the decision.

7. Establish a control and evaluation system.

Define the problem: The decision-making process begins when a manager

identifies the real problem. The accurate definition of the problem affects all the
steps that follow; if the problem is inaccurately defined, every step in the
decision-making process will be based on an incorrect starting point. One way
that a manager can help determines the true problem in a situation is by
identifying the problem separately from its symptoms.

The most obviously troubling situations found in an organization can usually be

identified as symptoms of underlying problems. (See Table 1 for some examples
of symptoms.) These symptoms all indicate that something is wrong with an
organization, but they don't identify root causes. A successful manager doesn't
just attack symptoms; he works to uncover the factors that cause these
symptoms.

TABLE 1 Symptoms and Their Real Causes

Symptoms Underlying Problem

Low profits and/or declining Poor market research
sales
High costs Poor design process; poorly trained employees
Low morale Lack of communication between management
and subordinates
High employee turnover Rate of pay too low; job design not suitable
High rate of absenteeism Employees believe that they are not valued

Identify limiting factors:

All managers want to make the best decisions. To do so, managers need to have
the ideal resources — information, time, personnel, equipment, and supplies —
and identify any limiting factors. Realistically, managers operate in an
environment that normally doesn't provide ideal resources. For example, they

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may lack the proper budget or may not have the most accurate information or
any extra time. So, they must choose to satisfy — to make the best decision
possible with the information, resources, and time available.

Develop potential alternatives: Time pressures frequently cause a manager to

move forward after considering only the first or most obvious answers. However,
successful problem solving requires thorough examination of the challenge, and
a quick answer may not result in a permanent solution. Thus, a manager should
think through and investigate several alternative solutions to a single problem
before making a quick decision.

One of the best known methods for developing alternatives is through

brainstorming, where a group works together to generate ideas and alternative
solutions. The assumption behind brainstorming is that the group dynamic
stimulates thinking — one person's ideas, no matter how outrageous, can
generate ideas from the others in the group. Ideally, this spawning of ideas is
contagious, and before long, lots of suggestions and ideas flow. Brainstorming
usually requires 30 minutes to an hour. The following specific rules should be
followed during brainstorming sessions:

 Concentrate on the problem at hand- This rule keeps the discussion very
specific and avoids the group's tendency to address the events leading up
to the current problem.
 Entertain all ideas- In fact, the more ideas that comes up, the better. In
other words, there are no bad ideas. Encouragement of the group to freely
offer all thoughts on the subject is important. Participants should be
encouraged to present ideas no matter how ridiculous they seem, because
such ideas may spark a creative thought on the part of someone else.
 Refrain from allowing members to evaluate others' ideas on the spot- All
judgments should be deferred until all thoughts are presented, and the
group concurs on the best ideas.

Although brainstorming is the most common technique to develop alternative

solutions, managers can use several other ways to help develop solutions. Here
are some examples:

 Nominal group technique - This method involves the use of a highly

structured meeting, complete with an agenda, and restricts discussion or
interpersonal communication during the decision-making process. This
technique is useful because it ensures that every group member has equal
input in the decision-making process. It also avoids some of the pitfalls, such
as pressure to conform, group dominance, hostility, and conflict, that can
plague a more interactive, spontaneous, unstructured forum such as
brainstorming.

 Delphi technique - With this technique, participants never meet, but a group
leader uses written questionnaires to conduct the decision making.

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No matter what technique is used, group decision making has clear advantages
and disadvantages when compared with individual decision making. The
following are among the advantages:

 Groups provide a broader perspective.

 Employees are more likely to be satisfied and to support the final decision.

 Opportunities for discussion help to answer questions and reduce

uncertainties for the decision makers.

These points are among the disadvantages:

 This method can be more time-consuming than one individual making the
decision on his own.
 The decision reached could be a compromise rather than the optimal
solution.
 Individuals become guilty of groupthink — the tendency of members of a
group to conform to the prevailing opinions of the group.
 Groups may have difficulty performing tasks because the group, rather
than a single individual, makes the decision, resulting in confusion when it
comes time to implement and evaluate the decision.

The results of dozens of individual-versus-group performance studies indicate

that groups not only tend to make better decisions than a person acting alone,
but also that groups tend to inspire star performers to even higher levels of
productivity.

So, are two (or more) heads better than one? The answer depends on several
factors, such as the nature of the task, the abilities of the group members, and
the form of interaction. Because a manager often has a choice between making a
decision independently or including others in the decision making, she needs to
understand the advantages and disadvantages of group decision making.

Analyze the alternatives: The purpose of this step is to decide the relative
merits of each idea. Managers must identify the advantages and disadvantages
of each alternative solution before making a final decision.

Evaluating the alternatives can be done in numerous ways. Here are a few
possibilities:

 Determine the pros and cons of each alternative.

 Perform a cost-benefit analysis for each alternative.
 Weight each factor important in the decision, ranking each alternative
relative to its ability to meet each factor, and then multiply by a probability
factor to provide a final value for each alternative.

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Regardless of the method used, a manager needs to evaluate each alternative in
terms of its

 Feasibility — Can it be done?

 Effectiveness — How well does it resolve the problem situation?
 Consequences — What will be its costs (financial and non-financial) to the
organization?

Select the best alternative: After a manager has analyzed all the alternatives,
she must decide on the best one. The best alternative is the one that produces
the most advantages and the fewest serious disadvantages. Sometimes, the
selection process can be fairly straightforward, such as the alternative with the
most pros and fewest cons. Other times, the optimal solution is a combination of
several alternatives. Sometimes, though, the best alternative may not be
obvious. That's when a manager must decide which alternative is the most
feasible and effective, coupled with which carries the lowest costs to the
organization. (See the preceding section.) Probability estimates, where analysis
of each alternative's chances of success takes place, often come into play at this
point in the decision-making process. In those cases, a manager simply selects
the alternative with the highest probability of success.

Implement the decision: Managers are paid to make decisions, but they are
also paid to get results from these decisions. Positive results must follow
decisions. Everyone involved with the decision must know his or her role in
ensuring a successful outcome. To make certain that employees understand
their roles, managers must thoughtfully devise programs, procedures, rules, or
policies to help aid them in the problem-solving process.

Establish a control and evaluation system : Ongoing actions need to be

monitored. An evaluation system should provide feedback on how well the
decision is being implemented, what the results are, and what adjustments are
necessary to get the results that were intended when the solution was chosen.

In order for a manager to evaluate his decision, he needs to gather information to

determine its effectiveness. Was the original problem resolved? If not, is he
closer to the desired situation than he was at the beginning of the decision-
making process?

If a manager's plan hasn't resolved the problem, he needs to figure out what
went wrong. A manager may accomplish this by asking the following questions:

 Was the wrong alternative selected? If so, one of the other alternatives
generated in the decision-making process may be a wiser choice.

 Was the correct alternative selected, but implemented improperly? If so,

a manager should focus attention solely on the implementation step to ensure
that the chosen alternative is implemented successfully.

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9.3.7 Approaches to Decision Making

There are two major approaches to decision making in an organization, the

authoritarian method in which an executive figure makes a decision for the group
and the group method in which the group decides what to do.

1. Authoritarian
The manager makes the decision based on the knowledge he can gather. He
then must explain the decision to the group and gain their acceptance of it. In
some studies, the time breakdown for a typical operating decision is something
like this: make decision, 5 min.; explain decision, 30 min.; gain acceptance, 30
min.

2. Group
The group shares ideas and analyses, and agrees upon a decision to implement.
Studies show that the group often has values, feelings, and reactions quite
different from those the manager supposes they have. No one knows the group
and its tastes and preferences as well as the group itself. And, interestingly, the
time breakdown is something like this: group makes decision, 30 min.; explain
decision, 0 min.; gain acceptance, 0 min.
Clearly, just from an efficiency standpoint, group decision making is
better. More than this, it has been shown many times that people prefer to
implement the ideas they themselves think of. They will work harder and more
energetically to implement their own idea than they would to implement an idea
imposed on them by others. We all have a love for our own ideas and solutions,
and we will always work harder on a solution supported by our own vision and
our own ego than we will on a solution we have little creative involvement with.
There are two types of group decision making sessions. First is free discussion in
which the problem is simply put on the table for the group to talk about. For
example, Joe has been offered a job change from shift supervisor to
maintenance foreman. Should he take the job?
The other kind of group decision making is developmental discussion or
structured discussion. Here the problem is broken down into steps, smaller parts
with specific goals. For example, instead of asking generally whether Joe should
take the job, the group works on sub questions: What are Joe's skills? What skills
does the new job require? How does Joe rate on each of the skills required?
Notice that these questions seek specific information rather than more general
impressionistic opinions.
Developmental discussion (1) insures systematic coverage of a topic and (2)
insures that all members of the group are talking about the same aspect of the
problem at the same time.

9.3.8 Decision Making Strategies

As you know, there are often many solutions to a given problem, and the
decision maker's task is to choose one of them. The task of choosing can be as
simple or as complex as the importance of the decision warrants, and the
number and quality of alternatives can also be adjusted according to importance,

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time, and resources and so on. There are several strategies used for choosing.
Among them are the following:

1. Optimizing
This is the strategy of choosing the best possible solution to the problem,
discovering as many alternatives as possible and choosing the very best. How
thoroughly optimizing can be done is dependent on
a. Importance of the problem
b. Time available for solving it
c. Cost involved with alternative solutions
d. Availability of resources, knowledge
e. Personal psychology, values
Note that the collection of complete information and the consideration of all
alternatives is seldom possible for most major decisions, so that limitations must
be placed on alternatives.

2. Satisficing
In this strategy, the first satisfactory alternative is chosen rather than the best
alternative. If you are very hungry, you might choose to stop at the first decent
looking restaurant in the next town rather than attempting to choose the best
restaurant from among all (the optimizing strategy). The word satisficing was
coined by combining satisfactory and sufficient. For many small decisions, such
as where to park, what to drink, which pen to use, which tie to wear, and so on,
the satisficing strategy is perfect.

3. Maximax
This stands for "maximize the maximums." This strategy focuses on evaluating
and then choosing the alternatives based on their maximum possible payoff. This
is sometimes described as the strategy of the optimist, because favorable
outcomes and high potentials are the areas of concern. It is a good strategy for
use when risk taking is most acceptable, when the go-for-broke philosophy is
reigning freely.

4. Maximin
This stands for "maximize the minimums." In this strategy, that of the pessimist,
the worst possible outcome of each decision is considered and the decision with
the highest minimum is chosen. The Maximin orientation is good when the
consequences of a failed decision are particularly harmful or undesirable.
Maximin concentrates on the salvage value of a decision, or of the guaranteed
return of the decision. It's the philosophy behind the saying, "A bird in the hand is
worth two in the bush."

9.4. Conclusion

Thus, Decision making is the study of identifying and choosing

alternatives based on the values and preferences of the decision maker. Making
a decision implies that there are alternative choices to be considered, and in
such a case we want not only to identify as many of these alternatives as

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possible but to choose the one that (1) has the highest probability of success or
effectiveness and (2) best fits with our goals, desires, lifestyle, values, and so on.
Decision making is the process of sufficiently reducing uncertainty and doubt
about alternatives to allow a reasonable choice to be made from among them.
This definition stresses the information-gathering function of decision making. It
should be noted here that uncertainty is reduced rather than eliminated. Very few
decisions are made with absolute certainty because complete knowledge about
all the alternatives is seldom possible. Thus, every decision involves a certain
amount of risk. If there is no uncertainty, you do not have a decision; you have an
algorithm--a set of steps or a recipe that is followed to bring about a fixed result.

Problem solving and decision-making are important skills for business and life.
Problem-solving often involves decision-making, and decision-making is
especially important for management and leadership. There are processes and
techniques to improve decision-making and the quality of decisions. Decision-
making is more natural to certain personalities, so these people should focus
more on improving the quality of their decisions. People that are less natural
decision-makers are often able to make quality assessments, but then need to be
more decisive in acting upon the assessments made. Problem-solving and
decision-making are closely linked, and each requires creativity in identifying and
developing options, for which the brainstorming technique is particularly useful.

9.5 References
1. Harold Koontz & Heinz Weihrich, Essentials of Management : An
International Perspective, Tata McGraw-hill publishing company limited,
New Delhi, 2009.
2. Daniel Kahneman, Amos Tversky (2000). Choice, Values, Frames. The
Cambridge University Press.
3. Triantaphyllou, E. (2000). Multi-Criteria Decision Making: A Comparative
Study. Dordrecht, The Netherlands: Kluwer Academic Publishers (now
Springer). pp. 320.
4. Kepner, Charles H.; Tregoe, Benjamin B. (1965). The Rational Manager: A
Systematic Approach to Problem Solving and Decision-Making. McGraw-
Hill.
5. Monahan, G. (2000). Management Decision Making. Cambridge:
Cambridge University Press. pp. 33–40.
6. J. Scott Armstrong (2001). "Role Playing: A Method to Forecast Decisions".
Kluwer Academic Publishers.
7. Batley, Richard; Daly, Andrew (October 2006). "On the equivalence
between elimination-by-aspects and generalised extreme value models of
choice behaviour". Journal of Mathematical Psychology 50 (5): pp. 456-467.
8. Tversky, Amos (July 1972). "Elimination by aspects: A theory of choice".
Psychological Review 79 (4): pp. 281-299.

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9. Tversky, Amos; Sattath, Shmuel (November 1979). "Preference trees".
Psychological Review 86 (6): pp. 542-573.
10. Postmes, T (2001). "Quality of decision making and group norms.". Journal
of Personality and Social Psychology 80 (6): pp. 918-930.
11. Blackhart, G. C.; Kline, J. P. (2005). "Individual differences in anterior EEG
asymmetry between high and low defensive individuals during a
rumination/distraction task". Personality and Individual Differences 39 (2):
pp. 427–437.
12. Drake, R. A. (1993). "Processing persuasive arguments: 2. Discounting of
truth and relevance as a function of agreement and manipulated activation
asymmetry". Journal of Research in Personality 27 (2): pp. 184–196.
13. Chua, E. F.; Rand-Giovannetti, E.; Schacter, D. L.; Albert, M.; Sperling, R.
A. (2004). "Dissociating confidence and accuracy: Functional magnetic
resonance imaging shows origins of the subjective memory experience".
Journal of Cognitive Neuroscience 16 (7): pp. 1131–1142.
14. Nasir Naqvi, et al. "The Role of Emotion in Decision Making: A Cognitive
Neuroscience Perspective", Current Directions in Psychological Science.

9.6. Progress Review

Objectives and Fill in the blanks:

1. Managers are evaluated on the basis of quality of their ______________ .

2. _______ decisions are routine and repetitive and are made within the
framework of organisational policies and rules.
3. Every decision is the outcome of a __________ process which is
influenced by multiple forces.
4. Which one of the following is not a programmed decision?
a. Promotion decision
b. Demotion decision
c. Launching new product
d. Setting sales quota
5. Which one of the following is important in effective decision making?
a. Application of limiting factors
b. Hard decision
c. Pleasing decision
d. Implied decision

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6. Which one of the following is a qualitative technique of decision making?
a. Brainstorming
b. Decision Tree
c. Delphi technique
d. Consensus mapping
Keys

1. Decision making
2. Programmed
3. Dynamic
4. d
5. a
6. a

9.7 Exercises
1. What do you understand by decision making process?
2. What are the essential characteristics of a good decision?
3. How does individual decision differ from that of group decision? What are
their positive and negative aspects?
4. What is the role of creativity in decision making?
5. What are the various steps in decision making process? Explain in detail.
6. What are the major features of strategic and tactical decision?
7. What are the basic elements of decision making process? Explain in
detail.
8. What are the limiting factors of decision making process?

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UNIT 10 STAFFING: NATURE, PURPOSE AND
PROCESS
Structure
10.1 Introduction
10.2 Objectives
10.3 Staffing
10.4 Human resource planning
10.4.1 Concept of human resources planning
10.4.2 Objectives of human resource planning
10.5 Recruitment
10.5.1 Recruitment process
10.6 Selection
10.6.1 The selection process
10.6.2 Selection tests
10.6.3 Types of tests
10.6.4 Limitations of selection tests
10.7 Placement
10.8 Orientation
10.8.1 The importance of proper induction
10.9 Summary
10.10 Glossary
10.11 Answers to check your progress exercise
10.12 Reference / bibliography
10.13 Suggested readings
10.14 Terminal and model questions

10.1 Introduction
In the previous units you have gained knowledge about the planning,
Organization. The present Unit starts with a discussion on various aspects
related to staffing and explains further Recruitment, Selection, Placement and
Inductions in the hospitality organisations.

A proper planning is required for developing and utilizing the human resources
and also for recognizing the need and use of the same. Human resource
planning broadly forms the action plan for developing the human resources by
taking stock of the infrastructure present and required. The planning process is

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very vital since unlike the material resources, human resources have the
unpredictability and the mental powers of human nature to consider. You will also
learn about the human resources planning and various stages of selecting
people till they are assigned to a particular job. In this Unit we have attempted to
explain what is meant by selecting people on their merit and how this is done.

10.2 Objectives
After reading this Unit, you will be able to:

• Meaning of Staffing

• Concept of human resources planning,

• Sources of Recruitment, Selection Process

• Concept of Placement and Induction.

10.3 Staffing
Men, material and money are regarded as three important factors of production.
Men constitute the organization at all levels and
regarded as the only dynamic factor of production. It is
not very difficult to handle material resources, but
without the efficient use of human resources,
management can never accomplish the end objectives
of the undertaking. Even in those industries where
automatic have been introduced, labour is still
regarded as a dominant factor for increasing
productivity. Koontz and O’Donnell defines staffing as
“the executive function which involves the recruitment, selection, compensating,
training, promotion and retirement of subordinate mangers”

It is clear from the above paragraph that men play a vital role in every business.
The success of any organizations depends upon the caliber and motivation of its
employees. The staffing function of management refers to the systematic
approach to the problem of selecting, training, motivating and retaining personnel
in any organization. It is concerned with recruitment and development of
managers and their maintenance in high spirit. Staffing entails manpower
planning for recruiting and training personnel. It also calls for the satisfaction of
employees through the provision of individual motivation and the introduction of
self control on the part of such personnel. Thus staffing function includes the
process by which the right person is placed in a right place in the organization.
The administration of human resources involves matching the job and people
through preparation of specifications necessary for positions, appraising the
performance of personnel, training & retaining of people to fit the needs of the
organizational positions, and developing methods by which people will respond
with maximum effort and increased satisfaction. Since successful performance by
individuals largely determines success of the structure, staffing function of
manager deserves sufficient care and attention of the management.

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10.4 Human Resource Planning
Human Resource planning may be defined as a strategy for the
acquisition, utilisation, improvement and preservation of the human
resources of an enterprise. It is the activity of the management which is
aimed at co-ordinating the requirements for and the availability of different
types of employees. This involves ensuring that the firm has enough of the right
kind of people at the right time and also adjusting the requirements to the
available supply. The same can be applicable at a macro level say HRP for an
industry like tourism or a government planning at the national level. The major
activities of Human Resource planning include:

1) Forecasting future manpower requirements either in terms of mathematical

projections of trends in the economy and developments in the industry or of
judgemental estimates based upon specific future plans of the company.
2) Inventorying present manpower resources and analysing the degree to which
these resources are employed optimally.
3) Anticipating manpower problems by projecting present resources into the
future and comparing them with the forecast of requirements to determine their
adequacy, both quantitatively and qualitatively.
4) Planning the necessary programmes of recruitment, selection, training,
development, motivation and compensation so that future manpower
requirements will be met.

10.4.1. Concept of Human Resources Planning

Planning is a process of preparing a set of decisions for action in the future.
Human Resources planning may then be interpreted as a process of preparing a
set of decisions on human resources development for action by human
resources in future. The actions required on the part of human resources are
exogenous to human resources planning and they are primarily of two types:

• Availing the employment opportunities generated by the technologies in

vogue in the process of economic development, and
• evolving new technologies to aid the process of economic development.
Given the pattern of growth in population, labour force and hence the human
resources; there are three types of investments which have the potential to
contribute to human resources development. They are investments in:

• health and nutrition,

• social and economic equity, and
• education.
The first two types of investment can only contribute to the accumulation of
human beings in terms of health, physical capacity to work and socio-economic
status. As an economic asset – human capital, i.e., a mature human being is
similar to unimproved land that has been protected from destruction by fire and
erosion. It is the education and training, directed towards development of skills in

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human beings that change the future asset value, productivity and earning power
of human beings. This is the human capital approach to human resources
planning which attaches prime importance to investment in education training
and retraining as a means of human resources development. In a broader sense,
thus, human resources planning and educational planning are almost
synonymous.

10.4.2. Objectives of Human Resource Planning

The objectives of human resource planning are mainly:

a) To ensure optimum use of human resources currently employed.

b) To assess or forecast future skill requirements.

c) To provide control measures to ensure that necessary resources are

available as and when required.

d) A number of specific reasons for attaching importance of manpower

planning and forecasting exercise are to:

• link manpower planning with organisational planning,

• determine recruitment levels,
• anticipate redundancies,
• determine optimum training levels,
• provide a basis for management development programmes,
• cost the manpower in new projects,
• assist productivity bargaining,
• assess future accommodation requirements,
• study the cost of overheads and value of service functions,
• have a competitive edge over other service providers, and
• decide whether certain activities need to be subcontracted, etc.
These objectives are relevant for any type of tourism firm though as per its
specific requirements the firm may add more to it, like, meeting the increasing
demands of tourists, providing right service at the right moment or meet the
demand of changing trends and fashions in tourism.

10.5 Recruitment
Increasing complexity and size of most organizations has resulted in multiple
layers of bureaucracy. All organizations and establishments have realized the
increasing costs of manpower. Recent researchers have developed a
perspective of strategic human resources management.
Recruitment is essentially a process to discover and identify sources to obtain
employees and to employ effective measures for contacting those employees,
which will be forming an efficient workforce. It will suffice to understand that the
recruitment programme involves five different elements, which include; a
recruiting organization, process of recruitment, a forecast of man-power
requirements, the development of man-power sources and techniques for

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utilizing these sources.It is a vital function of personnel administration and is an
essential pre-requisite for the effectiveness and success of an organisation.
Recruitment policy states the objectives, and provides a framework for
implementation of recruitment programme in the form of procedures. A
recruitment policy may include several issues such as promotion or transfer from
within the organisation (as quotas are usually fixed in government and public
sector organisations as also quotas for certain minority groups and relatives of
employees). While the system is a function related to the personnel function, in
principle recruitment should remain a line-responsibility, who should have the
final say in the acceptance of a particular recruit, though, in consultation with the
staff or personnel department.

The man-power managers have to constantly review and improve the methods of
recruitment in view of the changing times and demand as understood in other
organisations. A sound recruitment programme necessarily involves appraisal of
each source and the techniques from the stand point of relative quality of
personnel which it has provided.

The valuation procedures should consist of existing employees in terms of their

jobs – success, evaluation of sources from which good and poor employees,
were recruited and the methods used in assessing the relative values. Today
hospitality organisations, whether big or small, ought to spell out a clear
recruitment policy within their organisations. Adhoc measures like employing
people on world of mouth recommendations, obliging some body, etc., are not
good for organisational growth.

10.5.1. Recruitment Process

Before you think of inviting people to apply for a job you have to decide
what types of persons are to be invited and what their characteristics should be.
This calls for fixing the ‘job specifications’. Job specifications are based on job
description which is dependent upon the nature and requirements of a job. Thus,
job specification will be different for each job. We shall explain below the various
elements of job specification.

 Physical Specifications: For certain jobs some special physical features may
be required. For example, the Airline crews are required to a certain height
corresponding body weight with 6/6 vision. The particular physical abilities and
skills necessary for a given job have to be specified. These may refer to height,
weight, finger dexterity, voice, poise, hand and foot coordination, age-range, etc.
 Mental Specifications: These include intelligence, memory, judgement,
ability to plan, ability to estimate, to read, to write, to think and concentrate,
scientific faculties, arithmetical abilities, etc. Different jobs require different
degrees of such abilities and the more important ones should be specified. For
example the Marketing Manager of your company should have knowledge of
brochure production, distribution channels, tourist profiles, etc.
 Emotional and Social Specifications: These include characteristics which
will affect the employees working with others, like personal appearance,
manners, emotional stability, aggressiveness or submissiveness, extroversion or

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introversion, leadership, cooperativeness, initiative and drive, skills in dealing
with others, social adaptability, etc. For example Counter Personnel in travel
agencies and airlines are required to have pleasant and charming personality;
hotel stewards should have the adaptability of service with smile and so on.
 Behavioural Specifications: Certain management personnel at higher levels
of management are expected to behave in a particular manner. These are not
formally listed but have to be kept in mind during the process of recruitment,
selection and placement.

10.5.2. Sources of Manpower Supply

There are two categories of sources of supply of manpower – Internal

and External.
• Internal Sources: These include personnel already on the pay-roll of the
organisation as also those who were once on the pay-roll of the company but
who plan to return, or whom the company would like to rehire. These include
those who quit voluntarily or those on production lay-offs.

• External Sources: These sources lie outside the organisation. These include
college students, the new entrants, the unemployed with a wider range of skills
and abilities, the retired experienced persons, and others who are looking for
jobs. This also includes those whom you hire from outside for specific jobs like
guides, tour escorts, etc.

A policy of preferring people from within is advantageous as, mostly it

improves the morale of the employees, fosters loyalty among them towards the
organisation and inspires greater effort among organisation members. Secondly,
this also helps employers as they are in a better position to evaluate those
already with them and these people require no induction to the organisation and
its members. This knowledge increases the likelihood that they will succeed, and
finally, it is less expensive to recruit or promote from within than to hire from
outside the organisation.

The policy of preferring internal candidates, however, suffers from some

disadvantages. It may lead to inbreeding, discouraging new blood from entering
an organisation. If promotion is based on seniority, the real capable hands may
be left out, thus reducing the chance that fresh viewpoint will enter the
organisation and will limit the pool of available talent and it may encourage
complacency among employers who assume seniority ensures promotion.

Likewise, there are good and bad points about external sources. These sources
provide a wide market and the best selection considering skill, training and
education. It also helps to bring new ideas into the organisation. Moreover, this
source never ‘dries up’. In respect of people selected under this system,
however, one has to take chances with the selected persons regarding their
loyalty and desire to continue with the organisation. The organisation has to
make larger investments in their training and induction.

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You will realise that dependence on just one of the sources is not in the interest
of an organisation. It must depend on both in a ratio to be fixed considering
various factors. Some of these factors are described below:

1) Effect of the policy on the attitude and actions of all employees:

Employees, no doubt, feel more secure and identify their own long-term interest
with that of the organisation when they can anticipate first chance at job
opportunities. The general application of the ‘promotion from within’
policy may encourage mediocre performance. The point to be considered
here by the organisation is, how important is the loyalty of the employees
to it, balancing the risk of mediocre performance.
2) The level of specialisation required of employees: The
principal source in many organisations may be the ranks of the present
employees who have received specialised training.
3) The degree of emphasis on participation by employees at all levels: New
employees from outside, with no experience in the firm, may not know enough
about its service or product or processes to participate effectively, for some time
at least.
4) The need for and availability of originality and initiative within the
organisation: If the organisation feels that it is training its people for these
qualities it may prefer its own people; if not, new people with different ideas may
be taken from outside.
5) Acceptance of seniority principle: The policy of promotion from within will
succeed only if management and employees accept the seniority principle with or
without suitable modifications for promotion. If it is not accepted, selection may
better be done on an open basis.

10.6 Selection
Selection is the process of securing relevant information about an
applicant to evaluate his or her qualifications, experience and other qualities with
a view of matching these with the requirements of a job. It is essentially a
process of picking out the best suited person for the organisation’s requirements.

10.6.1. The Selection Process

The selection process involves choosing the best suitable applicant and rejection
of unsuitable or less suitable applicants. This may be done at any of the
successive hurdles which an applicant must cross. These hurdles act as screens
designed to eliminate an unqualified applicant at any point in the process. This
technique is known as the ‘successive hurdles technique’.

Personnel Management expert Yoder, calls these hurdles ‘go, no-go’ gauges.
Those who qualify a hurdle go to the next one; those who do not qualify are
dropped out. Not all selection processes, however, include these hurdles. The
complexity of the process usually increases with the level and responsibility of

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the position to be filled. Moreover, these hurdles need not necessarily be placed
in the same order. Their arrangement may differ from organisation to
organisation.

1) Initial Screening or Preliminary Interviews: This is a sorting process in

which prospective applicants are given the necessary information about the
nature of the job and also, necessary information is elicited from the candidates
about their education, experience, skill, salary expected, etc. If the candidate is
found to be suitable, he or she is selected for further process and, if not, he or
she is eliminated. This is initial screening and can be done across the counter in
the organisation’s employment offices. This is done by a junior executive in the
personnel department. Due care should be taken so that suitable candidates are
not turned down in a hurry. Since this provides personal contact for an individual
with the company, the interviewers should be courteous, kind, receptive and
informal. When a candidate is found suitable, an application form is given to fill in
and submit.

2) Application Scrutiny: You might have seen that sometimes applications are
asked on a plain sheet. This is done where no application forms are designed.
The applicant is asked to give details about age, marital status, educational
qualifications, work experience and references. Different types of application
forms may be used organisation for different types of employees, e.g. one for
managers, the other for supervisors and a third for other employees. Some forms
are simple, general and easily answerable, while others may require elaborate,
complex and detailed information. Reference to nationality, race, caste, religion
and place of birth has been regarded as evidence of discriminatory attitudes and
should be avoided. An application form should be designed to serve as a highly
effective preliminary screening device, particularly, when applications are
received in direct response to an advertisement and without any preliminary
interview.
The application can be used in two ways: (i) to find out on the basis of
information contained therein as to the chances of success of the candidate in
the job for which he or she is applying, and (ii) to provide a starting point for the
interview. It is often possible to reject candidates on the basis of scrutiny of the
applications as they are found to be lacking in educational standards, experience
or some other relevant eligibility and traits.

10.6.2. Selection Tests

A test is a sample of an aspect of an individual’s behaviour, performance
or attitude. It can also be a systematic procedure for comparing the behaviour of
two or more persons. The basic assumption underlying the use of tests in
personnel selection is that individuals are different in their job-related abilities and
skills and that these skills can be adequately and accurately measured. Tests
seek to eliminate the possibility of prejudice on the part of the interviewer or
supervisor. Potential ability only governs the selection decisions. The other major
advantage is that the tests may uncover qualifications and talents that would not
be detected by interviews or by listing of education and job experience.

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10.6.3. Types of Tests
The various tests used in selection can be put in to four categories: (a)
Achievement or Intelligence Tests, (b) Aptitude or Potential Ability Tests,
(c) Personality Tests, and (d) Interest Tests.

a) Achievement or Intelligence Tests: These tests are also called ‘proficiency

tests’. They measure the skill or knowledge which is acquired as a result of a
training programme and on the job experience. They measure what the applicant
can do. These tests are of two types:
i) Test for Measuring Job Knowledge: These are known as ‘Trade Tests’.
These are administered to determine knowledge of typing, shorthand and in
operating calculators, and so on. These are primarily oral tests consisting of a
series of questions which are believed to be satisfactorily answered only by those
who know and thoroughly understand the trade or occupation. Oral tests may be
supplemented by written, picture and performance types.

ii) Work Sample Tests: These measure the proficiency with which equipment
can be handled by the candidate. This is done by giving him or her a piece of
work to judge how efficiently one does it. For example, a tour executive would be
provided with an itinerary to do a complete costing of the tour.

b) Aptitude or Potential Ability Tests: These tests measure the latent ability of
a candidate to learn a new job or skill. Through these tests you can detect
peculiarity or defects in a person’s sensory or intellectual capacity. These focus
attention on particular types of talent such as learning, reasoning and mechanical
or musical aptitude. ‘Instruments’ used are variously described as tests of
‘intelligence’, ‘mental ability’, ‘mental alertness’, or simply as ‘personnel tests’.
These are of three types:
i) Mental Tests: These measure the overall intellectual ability or the intelligence
quotient (I.Q.) of a person and enable us to know whether he or she has the
mental capacity to deal with new problems. These determine an employee’s
fluency in language, memory, induction, reasoning, speed of perception, and
spatial visualisation.

ii) Mechanical Aptitude Tests: These measure the capacity of a person to learn
a particular type of mechanical work. These are useful when apprentices,
mechanists, mechanics, maintenance workers, and mechanical technicians are
to be selected.

iii) Psychomotor or Skill Tests: These measure a person’s ability to do a

specific job. These are administered to determine mental dexterity or motor
ability and similar attributes involving muscular movement, control and
coordination. These are primarily used in the selection of workers who have to
perform semi-skilled and repetitive jobs, like assembly work, packing, testing,
and inspection and so on.

c) Personality Tests: These discover clues to an individual’s value system, his

or her emotional reactions, maturity and the characteristic mood. These tests

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help in assessing a person’s motivation, his or her ability to adjust to the stresses
of everyday life and the capacity for inter-personal relations and for projecting an
impressive image of himself or herself. They are expressed in terms of the
relative significance of such traits of a person as self-confidence, ambition, tact,
emotional control, optimism, decisiveness, sociability, conformity, objectivity,
patience, fear, distrust, initiative, judgement, dominance, impulsiveness,
sympathy, integrity, and stability. These tests are given to predict potential
performance and success for supervisory or managerial jobs. The personality
tests are basically of three types:

i) Objective Tests: These measure neurotic tendencies, self-sufficiency,

dominance, submission and self-confidence.

ii) Projective Tests: In these tests, a candidate is asked to project his or her
own interpretation onto certain standard stimuli. The way in which one responds
to these stimuli depends on his or her own values, motives and personality.

iii) Situation Tests: These measure an applicant’s reaction when he or she is

placed in a peculiar situation, the ability to undergo stress and the demonstration
of ingenuity under pressure. These tests usually relate to a leaderless group
situation, in which some problems are posed to a group and its members are
asked to reach some conclusions without the help of a leader.

d) Interest Tests: These tests are designed to discover a person’s areas of

interest and to identify the kind of work that will satisfy him or her. The interest
tests are used for vocational guidance, and are assessed in the form of answers
to a well-prepared questionnaire.

10.6.4. Limitations of Selection Tests

From the basic description of tests described above, one should not conclude
that a hundred per cent prediction of an individual’s on-the-job success can be
made through these tests. These tests, at best reveal that candidates, who have
scored above the predetermined cut-off points, are likely to be more successful
than those who have scored below the cut-off point.

Tests are useful when the number of applicants is large. The tests will serve no
useful purpose if they are not properly constructed or selected or
administered.

Although written tests designed to define a candidate’s interests, aptitudes and

intelligence have long been a staple of employment screening; their use has
declined over past 25 years. Many tests have proved to be discriminatory in their
design and results, and it has been difficult to establish their job relatedness
when they have been subjected to judicial review. Moreover, tourism being a
service industry, the interpersonal relationship is more important and it can be
judged only in the interview. Many big organizations in tourism first conduct tests
and then a series of interviews to choose the right candidate as a trainee. Thus,
using both the methods effectively.

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Check Your Progress- I
1) Write a short note on the different objectives of Human Resource Planning.
……………………………………………………………………………………………
……………………………………………………………………………………………
……………………………………………………………………………………………
……………………………………………………………………………………………

2) Write in short about the various sources of manpower supply.

……………………………………………………………………………………………
……………………………………………………………………………………………
……………………………………………………………………………………………
……………………………………………………………………………………………

10.7 Placement
Placement or actual posting of an employee to a specific job has an
experimental element in it, for most employees it is a decisive step. The
department head/supervisor should be able to accept him or her as there is
sufficient reason to think that the new recruit can do what the job demands, (job
requirements) imposes (in working conditions, strain etc.), and offers (in the form
of pay, job-satisfaction status, companionship with fellow workers, and promotion
prospects) etc. Though it is very difficult to match all these factors, yet both the
personnel department, and the line-staff have to co-operate to achieve it.

For reasons of the new employees’ compatibility and his or her acceptance by
the line, he or she is usually put on probation for a specified period during which
he or she is on trial. It may vary from few weeks or months, and sometimes a
year or two as in government. However, in case during this trial period he or she
is not found acceptable to the line department, he or she may again be
interviewed by the personnel department to explore the possibilities of fitting him
or her into another job, which may be more suited to his or her qualifications,
aptitudes, or previous experience. Such a second placement is sometimes
known as “differential placement’’, which is becoming more relevant in this
country also due to rising costs of recruitment and selection, changing
employee’s attitudes, with the spread of higher and better education, and fast
developing higher standards of living.

10.8 Orientation
As soon as an employee is recruited the first step relates to induction or
orientation programmes. Attempts are made to introduce him or her to the job,
other fellow workers and surroundings. Induction or orientation may be defined
as a process of guiding and counseling the employee to familiarize him or
her with the organisation and the job situation. This exerts a marked
influence on the job tenure and effectiveness.

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The induction process accomplishes several objectives including formation of a
favourable impression of the organization, attitude development, the feeling of
belonging, facilitation of learning and team work with other employees. It
minimizes employee grievances, frustration and turnover as also helps in the
attainment of numerous training objectives.

The induction programme clarifies the terms and conditions of employment,

communicates specific job requirements to the employees and provides
confidence in the company as well as in their own ability to accomplish the work
assigned to them effectively.

As regards the contents of the induction programme, it embraces a wide range of

items usually embodied in the employee handbook or manual. The contents of
the induction programme should be determined in the form of checklist specifying
the topics to be covered. Attempts should be made to follow-up and assess the
programme by interviewing the new employees as a measure to correct the gaps
in the knowledge and attitude of the employees.
Explicitly, induction is a line responsibility supported with staff advice and
guidance. The Supervisor, foreman or manager should be trained in the induction
process, and care has to be taken that he or she does not entirely delegate this
crucial responsibility to fellow workers. The Personnel Department should be
made responsible for training the managers, supervisors, or foremen in this
respect, and evaluating the programme periodically. Several induction methods
can be used depending upon the needs of the organization. It may, however be
noted that specific methods are effective for specific category of employees
which should be determined through intensive research programmes. Several
methods of training can be effectively employed for inducting new employees.

10.8.1. The Importance of Proper Induction

The term “induction’’ means installation or initiation. The new recruit is

installed into a position or job, and initiated into the team that makes up the work-
force of the organisation. Induction is the process of introducing new recruits to
an organisation and explaining their role within it. Induction processes are mainly
followed keeping in mind the following points:
• Induction to the firm, its system and its people, and

• Introduction to the department and actual job/work and its requirements.

It usually begins with a guided tour of the building etc. Induction is important
because impressions gained by new employees during this period can influence
their perception of the organisation for many years to come. Also, good induction
procedures help employees fit into strange and initially uncomfortable
environment quickly and without fuss. Newcomers invariably join the organisation
wanting to succeed. They wish to do a good job, to be accepted by their
colleagues, and generally to become part of the organisation. Induction
procedures should help recruits achieve these objectives.

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It may be regarded as a positive step, as distinguished from the negative
weeding out unsuitable candidates during selection. Placement means the
assignment of specific jobs to individuals, and their adoption or assimilation in the
working team or family. As a matter of fact, induction is the process by which
effective placement is accomplished.

The process of initiation may be informal, as it generally is in smaller

organizations; while in larger organizations it includes a series of steps by which
a new recruit is aided in fitting into the organization, becoming acquainted with
supervisors and fellow employees, and achieving a personal adjustment to
working relationships. The first week/months involve extensive and difficult
problems of personal adjustment, especially for new employees. The whole
situation with its time-keeping schedules, new supervisors, informal social
systems, hostile group behaviours, social structures, work-load, internal cliques
and possible favoritism and vested interests is likely to be very different from
earlier experience; and therefore it is a difficult one. Policy on induction and
placement simply proposes that new recruits shall be made to feel and develop
themselves as a part of the organization as early as possible. It may involve
several steps:

a) Apart from a guided tour of the premises, it would need formal/informal

introduction to supervisors, fellow workers, adopting right methods of
performing the job assigned, etc.
b) It may require vocational guidance; for the particular job or trade, or skill or
profession, due to either change of job or technology, or environment, to
facilitate his absorption into the organization.
c) The guidance process requires carefully balancing of interests and
aptitudes of individuals against long-term prospective job-requirements.
Those who are made responsible for providing such guidance need the
same skills in assessing aptitudes, interests, and related traits that make up
human personalities required for effective selection.

Check Your Progress - II

1) Write in short about the placement.
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2) Write a short note on the importance of inductions in the organizations.

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10.9. Summary
This Unit has attempted to help you understand the staffing process & to
follow the process of selection in an organization right from the conception of an
idea that a suitable person is to be put on a given job to the point of ultimately
selecting the most suitable person for it, putting him or her at ease and making
him or her feel at home with fellow employees, supervisor and the organization
as a whole. Besides, The Unit also explained the importance and need for proper
and systematic induction of a new employee in the organization. It also outlined
the process of selection and recruitment along with the placement to the
newcomers.

10.10. Glossary
 Recruitment: Recruitment is the process of identifying the prospective
employees, stimulating and encouraging them to apply for a particular job or
jobs in an organization.
 Human Resource Planning: It is defined as a strategy for the acquisition,
utilization, improvement and preservation of the human resources of an
enterprise.
 Selection: Selection is the process of examining the applicants with regard to
their suitability for the given job or jobs, and choosing the best from the
suitable candidates and rejecting the others.
 Placement: Placement is the determination of the job for which a selected
candidate is best suited and assigning that job to him or her.
 Induction: Induction is introducing an employee to the job and to the
organization.

10.11. Answers to Check Your Progress Exercise

Check Your Progress - I
1) Read Section 10.4.2
2) Read Section 10.5.2

Check Your Progress – II

1) Read Section 10.8.1

2) Read Section 10.7

10.12. Reference / Bibliography

1. Koontz, O’ Donnell, C. and Weihrich, 1982. Essentials of Management. Tata
Mc - Graw Hill: New Delhi.

2. Study Material of I.G.N.O.U. (MTM) from Unit 2 & 3 of MTM-03 course & Unit 1
of MTM-02 course.

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3. Drucker, Peter F.1975/81.Management Tasks, Responsibilities & Practices,
Allied Publishers Pvt. Ltd. New Delhi

4. Gupta R.S., Sharma B.D., Bhalla N.S.,2010.Principles and Practices of

Management, Kalyani Publishers, New Delhi.

10.13. Suggested Readings

1. Myres and Myres, 1982. Managing by Communication: An Organizational
Approach. Mc - Graw International: Tokyo
2. Stoner, J.A.F.1982.Management. Prentice Hall: New Delhi.
3. Drucker, Peter F.1985.Practices of Management, Heinamann: London
4. Likert, R.1961.New Patterns of Management. Mc - Graw Hill: New York.

10.14. Terminal and Model Questions

1. Describe the selection process and different selection tests used in
recruiting employees in hospitality business?
2. Elaborate the meaning and process of recruitment for the hotels?
3. Write a detailed essay on the human resource planning?

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UNIT 11: MEANING, PRINCIPLES AND
SIGNIFICANCE OF DIRECTING
Structure
11.0 Introduction

11.1 Principles of direction

11.1.1. Principles relating to the purpose of directing

11.1.2. Principles relating to direction process.

11.2 Human Factor and Directing

11.3 Managerial Models

11.4 Theories of Motivation

11.4.1 Maslow’s theory of Human motivation
11.4.2 Herzberg’s theory of Motivation
11.4.3 Theory X & Y of Douglas Mcgregor
11.4.4 Expectancy theory of V.H.Vroom
11.4.5 Carrot & stick approach of motivation
11.4.6 Equity theory of motivation
11.5 Job enrichment
11.6 Motivational Pattern in Indian Organizations
11.7 Summary
11.8 Key Words
11.9 Check Your Progress
11.10 Clues to Answers
11.11 Bibliography

11.0 Introduction
Direction is the process of instructing, guiding, counseling, motivating, and
leading the human resources to achieve organizational objectives. Direction is
also labeled as activating, though infrequently by some. For example, Newman
and warren have defined directing in the form of activating as follows:

“Activating deals with the steps a manager takes to get subordinates and others
to carry out plans”

Most of other authors have preferred to use the term direction. For example,
Haimann has defined direction as follows:

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“Direction consists of the process and techniques utilizing in issuing instruction
and making certain that operations are carried out as planned”

However, direction is not merely issuing orders and instructions by a superior to

his subordinates but it includes the process of guiding and inspiring them. Thus,
there are three main aspects of direction: motivation, leadership, and
communication. From this point of view, direction has the following features:

1. Direction is an important managerial function. Through direction,

management initiates actions in the organization.
2. Direction function is performed at every level of management. It is
performed in the context of superior-subordinate relationship and every
manager in the organization performs his duties both as a superior and a
subordinate.
3. Direction is a continues throughout the life of the organization. A manager
needs to give order to his subordinates, motivate them, lead them and
guide them on continuous basis.
4. Direction initiates at the top level in the organization and follows to bottom
through the hierarchy. It emphasizes that a subordinate is to be directed
by his own superior only.
5. Direction has dual objectives. On the one hand, it aims at getting things
done by subordinates and, on the other, to provide superior opportunities
for some more important work which their subordinates cannot do.

11.1 Principles of direction

Direction is one of the most complex functions of the management as it
deals with people whose nature itself is quite complex and unpredictable. Good
and effective direction in the context of the people of diverse nature is really an
art which can be learned and perfected through long-term experience, However,
managers can be follow some principles while directing their subordinates. These
principles can be divided into two parts (1) principles relating to the purpose of
direction, and (2) principles relating to the direction process.

11.1.1. Principles relating to the purpose of directing

The basic purpose of direction is to get organizational objectives fulfilled through
the integrated efforts of the subordinates. In this context, following principles are
important:

a) Principle of maximum individual contribution: Organizational objectives

are achieved at maximum level when every individual in the organisastion
contributes maximum towards this end. Management should adopt that direction
technique which enables subordinates to contribute maximum.
b) Principle of harmony of objectives: Individuals join the organisation to
achieve certain objectives, that is, they want to satisfy their physiological
andpsychological needs while working in the organisation. At the same time ,
organisation has its own objectives, that is, maximization of profit in a business
concern. Management, through appropriate direction techniques, should try to
intergrate both organizational and individual objectives. Common interst must

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prevail over indireduce the importantance of general interests. The impact of
these factors can be minimized through appropriate direction.
c) Principle of efficiency of direction: An effective direction tries to get work
accomplished by subordinates without affecting their need satisfaction adversely.
To provide adequate satisfaction to subordinates, it is necessary to develop
correct direction techniques, effective communication system, leadership, etc.

11.1.2. Principles relating to direction process

Direction process is related with those factors which make a particular direction
technique effective and efficient. Following principles in this case are important:

a) Principle of unity of command : According to this principle, a person in the

organisation should get orders and instructions from one superior only and he
should be responsible to that superior only. Dual command, that is, getting
orders from more than one superior, creates conflict, confusion, disorder and
instability in the organisation. Direction should follow this principle.
b) Principle of appropriateness of direction technique: There are three
direction techniques----authoritarian, consultative, and free-rein. Each
technique has its own relative strength. Moreover, each technique can be
used in different cases depending upon the nature of superior and
subordinates and the situational variables. Thus, that particular technique can
be used which is the most appropriate at a particular time.
c) Principle of managerial communication: In the organisation, the success
depends upon effective communication between superior and his
subordinates. A superior, through downward communication, passes to his
subordinates orders, ideas about work, etc and through upward
communication from his subordinates, he knows how his subordinates are
working. Thus, effective communication both ways make direction effective.
d) Principle of comprehension: Conveys to subordinates what they have to
do, how to do, and when to do. Thus, understanding and comprehending of
what has been conveyed by superior is important for subordinates as correct
understanding enables them to get clear situation and avoid unnecessary
queries and explanation from superior.
e) Principle of use of informal organization: Formal organisation structure
prescribes the official relationships among individuals. Besides, people
working together develop certain relationships know as informal group or
organisation. Through this informal group, information travels very quickly,
through some times the information may be wrong. Management should try to
understand, spot, and make use of such informal organisation for making
direction most effective.
f) Principle of leadership: Leadership is the process of influencing individuals
in the organisation for goal achievement. When subordinates function
efficiently, organisation goals are achieved. The subordinates are influenced
through the exercise of authority and exercise of leadership. However, the
former course of action has a serious limitation of affecting the morale of
subordinates adversely. Thus , managers need to become leaders so that
they can influence the activities of their subordinates without dissatisfying
them.

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g) Principle of follow through: Direction is a continuous managerial process.
Mere giving an order is not sufficient but management should find out
whether the subordinates are working accordingly, what difficulties they are
facing and in the light of these, if need be, the order can be modified or
replaced.

11.2 Human Factor and Directing

Considering the importance of directing in management process,
managers should make it effective. It can be successful and effective only when
managers understand the nature of human beings and various models which can
be adopted to match the nature. However, there is no uniformity of assumptions
about the nature of human beings because man is very complex to deal with.
Historically, the assumptions about people in the organizations have largely
reflected philosophical positions on the nature of man and have served as the
justification for the particular actions. Whole of the managerial actions have
depended on such assumptions. However such assumptions have shown great
variations and unanimity has eduded. For example, various man models describe
man as rational, social, self-actualizing, or complex. These models make
different as assumptions about the nature of human beings.

11.3 Managerial Models

Managerial models have been developed from time to time. Two such
models are quite helpful in devising actions for managing people in the
organizations: David’s organizational behavior model and Miles’s managerial
model. These models have proposed managerial actions to be taken according
to the nature of human behaviour.

Behavioural Model: Keith’s Davis identified three models of organizational

behavior autocratic model, custodial model, and supportive model. Later, he
added a fourth model – collegial model. He has summarized these models as
presented in table

AUTOCRATIC CUSTODIAL SUPPORTIVE COLLEGIAL

Depends on Power Economic Leadership Partnership

resource

Managerial Authority Money Support Teamwork

orientation

Employee Obedience Security Job Responsible

Performance Behaviour
Orientation

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Employee Depends on Depends on Participation Self
Psychological Boss organization discipline
Result:

Employee Substance Maintenance Higher – order Self –

needs met actualization

Performance Minimum Passive Awakened Moderate

Result Cooperation drives enthusiasm

Models of Organizational Behaviour

a) Autocratic Model: In the autocratic model managerial orientation is towards

power. Manager’s see authority as the only means to get the things done, and
employees are expected to follow orders. The result is high dependence on boss.
This dependence is possible because employees live on the substances level.
The organizational process is mostly formalized, the authority is dedicated by
right of command over people to whom it applies. The management decides
what is the best action for the employees.
b) Custodial Model: In the custodial model, the managerial orientation is
towards the use of money to pay for employee benefit. The model depends on
the economic resources of the organization and its ability to pay for the benefits.
While the employees hope to obtain security, at the same time they became
highly dependent on the organization. An organizational dependence reduce
personal dependence on boss. The employees are able to satisfy their security
needs or in the context of Herzberg’s theory only maintenance factors. These
maintenance factors provide security but failed to provide strong motivation.
c) Supportive Model: The supportive model of organizational behavior depends
on managerial leadership rather than on the use of power or money. The aim of
managers is to support employees in their achievement of results. The focus is
primarily on participation and involvement of employees in managerial decision –
making process. The model is based on principles of supportive relationship.
d) Collegial Model: The collegial model is further development of supportive
model. This model is based on the team concept in which each employees
develop high degree of understanding towards others and shares common goals.
Control is basically self-disciplined by the team members. The organizational
climate is quite conducive to self-fulfillment and self-actualization. This model is
best suitable for managing professionals, normally in unprogrammed task that
require behavioural flexibility.

11.4 Theories of Motivation

11.4.1 Maslow’s Theory of Human Motivation
Abraham Maslow, a famous social scientist & a psychologist, developed a theory
of motivation which is based on the hierarchy of needs. According to him there

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are five kinds of needs viz.,physiological, safety, esteem & self actualization as
explained below in the chart.
1. Physiological Needs – Physiological needs (e.g. food, shelter, clothing,
water, air, sleep, etc.) refer to those needs which are so essential. The
survival of human beings would be in danger if these needs are not
satisfied. These needs are biological in nature & keep the body fit. There is
a famous saying that a man can live on bread alone if there is no butter.
2. Safety Needs – After the physiological needs are satisfied to a reasonable
degree, the safety needs take the place. E.g. security of job, pension for
old age, insurance plan, compensation for lay off or retrenchment.. In
choosing a job, security needs play an important role.
3. Social Needs – Social needs include need for love, affection, friendship,
acceptance by group, etc. A man is a social being & he has a need to love
& to be loved. Workers form informal groups for having a meaningful
relationship with others. Management should not object to such groups
except when they are detrimental to the organization.
4. Esteem Needs – These needs are concerned with one’s self esteem such
as self respect, self confidence, status, recognition, approval, appreciation,
etc. The satisfaction of these needs produce s a feeling of self confidence
among the employees. The employees should be praised for good work
done since it amounts to recognition. Of their work.
5. Self Actualisation Needs – These needs include need for self
development, self actualization, self advancement, desire to take an
increased responsibilities etc. Not many employees try to satisfy these
needs but an employee who wants to develop, will feel restlessness till he
satisfies their need. According to Maslow, this need might be phrased as
the desire to become more & more what one is, to become everything that
one is capable of becoming.
Maslow’s motivation theory emphasizes three basic ingredients:
 A man is a social animal & he always desires for more & more. His needs
are of many types.
 There is a hierarchy of these needs. i.e. these needs are arranged in a
series of preference. After the lower level needs are satisfied, the needs of
the higher level take their place. A man whose stomach is full becomes
conscious of the other needs.
 A satisfied need can never work as a motivator. Only those needs which
are not satisfied act as a motivator for influencing the human behaviour.

11.4.2 Herzberg’s Theory of Motivation

Frederick Herzberg developed the two factor theory popularly known as
Motivational Hygiene Theory. It was based on the contents of interviews
conducted on 200 engineers & accountants. He found that there are two sets of
needs viz:

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1. Hygiene or environmental factors – These factors such as interpersonal
relations with supervisors, salary, security, working conditions, status, do not
motivate although they result in job satisfaction. Thus the absence of
extrinsic actors causes dissatisfaction among the employees. They absence
of extrinsic factors causes dissatisfaction among employees. They are called
Extrinsic factors because they areconsidered outside the work being
performed. Traditionally, the management used to perceive these factors as
motivators.
2. Motivational Factors – These factors are intrinsic factors because they are
real indicators of job satisfaction & primarily exist where the work being
carried out. These factors include recognition, opportunity for growth,
increased responsibility, challenging work, potential for personal growth.
In brief Herzberg’s theory lays down that:
 The absence of first set of factors lead to dissatisfaction although they are
not motivational factors. These are referred as extrinsic as they come from
the external environment of the person.
 The second set of factors are important as they provide satisfaction to
employees & are termed as motivational factors as intrinsic factors.
 Herzberg’s approach to motivation is based upon the fact that the country is
rich & affluent.
 According to this theory, Money is not a motivational factor as it has been
included in the Hygiene factors. This theory cannot be applied to poor or
developing countries where money is still regarded as a greatest motivator.
Comparison of Maslow’s Theory & Herzberg’s Theory
 There is a great similarity between Maslow & Herzberg models as both
stress on different needs of individuals.
 The needs of individuals at a higher level of hierarchy of Maslow have
been referred as motivators by Herzberg.
Thus herzberg two factor theory is nothing but an addition to Maslow theory of
motivation.
Dissimilarities
 Maslow formulated his model on the basis of experience whereas
Herzberg developed his theory on the basis of empirical studies.
 Maslow takes into account all needs of individuals whereas Herzberg
looks at only those needs which are concerned with the environment.
 Maslow considers lower level needs such as pay, safety, working
conditions, etc., as motivators whereas Herzberg considers these only as
hygiene factors & not motivators.
 Maslow theory is applicable to all types of employees whereas Herzberg’s
theory is mainly applicable to professional persons.

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11.4.3 Theory X & Y of Douglas McGregor
Douglas McGregor has given two theories of human behaviour in his book
‘Human Side of Enterprise’
A) Theory X Assumptions: Theory X is based upon the conventional
approach to management which is based on the following assumptions:
 The ordinary man is not interested in work & he is lazy, passive & tries to
avoid the work.
 In the absence of direction & control, members of the organization will not
work out relations among their positions.
 The individual & organizational goals are different.
 Average man is devoid of self discipline & self control & wishes to avoid
responsibility.
 Average man tends to submit himself to the control & direction of others.
 The members of the organization prefer security.
These are all negative assumptions about human beings. It treats labour as a
commodity which can be hired & fired anytime. This theory advocates autocratic
management & suggests carrot & stick technique for human motivation. Thus
under theory X, we have conservative style of management.

B) Theory Y Assumptions: Theory Y assumes the postitive traits about human

beings which are explained below:
 The average human being does not dislike the work. Work is, in fact, a
source of satisfaction & an employee will perform it voluntarily or consider
it a source of punishment in which case he will try to avoid it.
 Man will exercise self control & self direction.
 Commitment to enterprise objectives is a result of rewards associated
with their achievement. People select goals for themselves when they find
that their efforts are being rewarded.
 The average individuals not only accept responsibility but seek it.
Avoidance of responsibility is not inherent in the characterisitcis of human
beings.
 The capacity to exercise a relatively high degree of imagination,
ingenuity, & creativity in the solution of organizational problems is widely
distributed in the population.
 Under conditions of modern industrial life the intellectual potentialities of
people are only partially utilized. Human beings have unlimited
potentialities.
Thus theory Y stresses on the satisfaction of needs of human beings. It leads to
a preoccupation with the nature of relationships with creating an environment

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which will encourage commitment to organizational objectives & which will
provide opportunities for the maximum exercise of initiative, ingenuity & self
direction in achieving them.
Thus theory X & Y represent diametrically opposite views about the behaviour of
human beings. Theory X lays stress on direction & control of members of the
organization from the top whereas theory Y relies heavily on self direction & self
control. When employees are unskilled, illiterate, ignorant & poor, theory X will be
favoured. On the other hand, where employees are literate & well informed
theory Y will be applicable.

11.4.4 Expectancy Theory of V.H.Vroom

V.H.Vroom criticized two factor theory of Herzberg & proposed Expectancy
Theory of motivation. His theory lays stress on the fact that employees have
certain built in expectation from the jobs they perform. Thus
Motivation (force) = Valence (attitude/strength) X Expectancy
Valence refers to strength of an individual’s preference for a particular outcome.
It can be positive or negative. Expectancy refers to the probability that a
particular action will lead to the outcome. Thus activity, motive reward are the
three components of the total chain. If a person finds that his effort will result in
accomplishing a task & that will further result into reward, he is motivated. Thus
an employee may work very hard to achieve the goals of the enterprise for a
reward which may be in the form of promotion or more pay.
Thus the theory
 Recognizes individual differences in motivation
 Seems more realistic in approach
 Lays stress on harmony of objectives, i.e., individual goals are not
different from organizational goals.
 Is completely consistent with the system of management by objectives.

11.4.5 Carrot & Stick Approach of Motivation

There is an old story of a donkey before whom a carrot was placed &
there was a man with a stick in his hand at the back. If the donkey moves, carrot
is the reward & if it does not stick is the punishment. Thus people are motivated
to work in the hope of getting carrots viz., more pay, promotion etc. In order to
refrain them from an undesirable behaviour, punishments are imposed. However,
the mixture of carrot & stick should be judiciously used.

11.4.6 Equity Theory of Motivation

A worker always compares his performance with his co workers. If one
worker is slow & less active, he may make his fellow workers also like him. This
theory suggests that all employees should be treated equally but only those
employees should get promotion who show better performance. This acts as a
motivator for all employees to show better performance.

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Theory Z
F.L.Urwick has advocated theory Z which lays stress on the behaviour of
employees for achieving organizational goals. According to Urwick, each
individual should know the organizational goals & he should be confident that the
accomplishment of these goals will affect his needs positively. Urwick’s theory Z
lays down four essentials:
 Sound bond between organization & employees.
 Participation of employees in decision making.
 No formal structure of organization, just like a basketball team which
plays well without formal reporting.
 Co ordination of human beings.
Thus theory Z suggests complete change or transformation of motivational
aspects of employees.

11.5 Job Enrichment

The concept has been derived from Herzberg’s two factor theory of motivation in
which he has suggested that job content is one of the basic factors of motivation.
If the job is designed in such a manner that it becomes more interesting &
challenging to the job performer & provides him opportunities for achievement,
recognition, responsibility, advancement & growth, the job itself becomes a
source of motivation to the individual. This is done through job enrichment which
has been defined as follows:
Job enrichment is concerned with designing jobs that include a greater variety of
work content; require a higher level of knowledge & skill; give workers more
autonomy & responsibility in terms of planning, directing & controlling their own
performance; & provide the opportunity for personal growth & a meaningful work
experience.

11.6 Motivational Pattern in Indian Organizations

Various research studies have been conducted in Indian context to find out
what motivates people for better performance. These researches are concerned
mostly to find out applicability or non applicability of these theories in Indian
environment. This is so because motivation is a complex problem problem as
shown by various theories & is determined by both individual & organizational
factors. As such, it is not necessary that many of the theories developed in
economically advanced countries may apply to Indian situations because ours is
basically a developing country & situational variables may be quite different as
compared to advanced countries.
When we take human beings in organizations for analyzing motivational pattern,
we identify two groups of individuals – managers & workers. While there are
some common problems in terms of their need fulfillment & satisfaction
associated with them as human beings, workers tend to identify themselves

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distinctly. This is so because management enjoys certain authority in the
organization to make & implement the decisions, while workers are devoid of
such authority. Management actions, to a very great extent, affect the interest &
need satisfaction of the workers. Further, family & social background, level of
education & competence, aspiration & growth avenues in the organizations
create distinction between the expectations of managers & workers while working
in the organization. Some of the studies have focused their attention on
motivation of managers while others have analyzed motivation of workers.
The results of the various studies on the motivational pattern of managers &
workers are quiet different & even contrasting. This situation may be because of
the differences in:
 Research design used for the studies
 Organizational characteristics from where the samples have been drawn
 Perhaps the timing of various studies. Therefore, definite conclusions
cannot be drawn regarding the adoption of motivational strategy based on
the results of these studies. Notwithstanding, some broad conclusions
may emerge & trends can be located in regard to relative importance of
various job factors. These can be summarized as follows:
1. Financial benefits, job security & promotion are not motivating factors for
management groups whereas these can be motivators for the workers.
2. Recognition of work emerges as one of the most important factors for
motivating people – both managers & workers. This fact, however, must be
seen in the context of the first conclusions, that is, what is the outcome of the
recognition of good work.
3. Factors contributing to dissatisfaction are the lack of explicit company policy
& administration, lack of opportunity for growth.
4. Top level managers value achievement & self actualization while middle level
managers value advancement, type of work & feeling of worthwhile
accomplishments. These factors are however not so important for workers.

11.7 Summary
Now the question is: will it be possible to design a motivation policy for an
organistion based on the results of these studies? The answer may be affirmative
but certain precautions have to be kept in mind, such as the organizational
correlates – nature, size, age & location; & groups of people involved – top
management, middle management, lower management & workers. Thus, if two
groups of variables – organizational & individual can be combined properly, a
suitable motivation policy may emerge. When both these are combined &
motivational pattern analysed, the results may be more significant & applicable in
a particular situation. Naturally, homogenously in motivation pattern cannot
expected for all the people & for all the organizations. Various conclusions
emerging from the results of the different studies may be only guiding factors.
Three points should, however, be given adequate consideration while designing
motivational policy based on these results.

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 The human motivation is not inherent or stable rather it is flexible & may
be changed or modified by situational variables.
 The amount of an incentive that is offered to individual for satisfying his
motives should be adequate. This is important because sometimes the
presence of motivating factors fails to produce any effective result,
particularly when its amount is too small.
 Since human beings differ in their ability & approach, they cannot be
motivated to an equal extent. Some people, if motivated beyond certain
extent, may feel frustration & the outcome may be negative.

11.8 Key Words

 Concept of direction
 Directing and Human behavior
 Importance of direction
 Managerial models
 Principles of direction
 Job Enrichment
 Theories of Motivation

11.9 Check Your Progress

Q-1) Define direction and explain the features of direction
Q-2) Explain two principles of direction
Q-3) Explain the Maslow’s Theory of motivation

11.10 Clues to Answers

See Sec. 11.0
See Sec.11.1
See Sec. 11.4.1

11.11 Bibliography
 L.M.Prasad Principles and Practice of Management S.Chand & Sons,
2004
 R.S.Gupta, B.D.Sharma, & N.S.Bhalla Principles and Practice of
Management Kalyani Publishers, 2006

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Model Question Paper
1. How would you define motivation
2. Explain the meaning and significance of motivation
3. Explain theory X and Y of Douglas McGregor
4. Briefly explain the any two theories of motivation
5. What are self- actualization needs
6. Define job enrichment
7. Draw the managerial model and explain it
8. What are the motivational pattern in Indian organization
9. What is custodial model
10. What is equity theory of motivation

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UNIT12: LEADERSHIP– THEORIES AND
TYPOLOGIES
Structure
12.1 Introduction
12.2 Objectives
12.3 Meaning and Definition of Leadership
12.4 Characteristics of Leadership
12.5 Functions of Leaders
12.6 Importance of Leadership
12.7 Leadership Styles
12.8 Leadership Theories
12.9. Summary
12.10. Glossary

12.1 Introduction
In the previous units you have acquired knowledge about the Directing and
Staffing for the tourism business mangers. The present unit aims to provide you
in-depth knowledge about the meaning, role functions and styles of leadership.

In giving the input on leadership styles and influence process to you, our main
aim is to understand and improve your style of functioning as a leader. To start,
with, you must have clear ideas as to what is meant by leadership. Leadership is
the activity of influencing people to strive willingly for group objectives. As you
can see, this process is a function of the leader, the followers and the situation.
In any situation where you are trying to influence the behaviour of another
individual or group, leadership is operating. Thus each one of us tries leadership
at one time or the other, whether our activities are centered around a business,
educational institution, hospital, political organization, Government organization
or a family. As part of this process, one who attempts to influence the behaviour
of others becomes a potential leader and the persons he or she is attempting to
influence are the potential followers. This may happen irrespective of the fact that
the leader may be their boss or a colleague (associate) or a subordinate or a
friend or a relative. In other words through a style of functioning he or she
influences attitudes and expectations, which in turn encourage or discourage the
follower's activity or achievement, enhance or diminish the follower's commitment
to the work, etc.

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In our day-to-day life, we come across instances of how people are influenced by
the activities or words of a person who is trying to lead them. We always make
judgments about the leaders in our own office. In our mind, we make a difference
between a good leader and a bad one, by judging the style or way of functioning
and the influence on others. Hence, in understanding the phenomenon of
leadership, we must first understand the various styles of the leaders.

12.2 Objectives
The objectives of this unit are to:
 Introduce you to leadership and its characteristics,
 Functions of the leaders in the hospitality organizations,
 Familiarize you with various theories and styles of leadership, and
 Create awareness that leadership is a process of shared influence on the
work group.

12.3 Meaning and Definition of Leadership

Leadership is one of the means of direction and represents the part of
manager's activities by which he guides and influences the behaviour of his
subordinates and the group towards the accomplishment of some specified
goals. Leadership is a great quality that can create and convert anything.
Leadership is the ability to influence the actions of an individual or a group
for the achievement of goals in a given situation. Some of the important
definitions of leadership are given below:-

"Leadership is the ability of a manager to induce subordinates to accomplish their

goals with zeal and confidence"
- Koontz and O'Donnell

‘'Leadership is the lifting of man's visions to higher sights, the raising of man's
performance to higher standard, the building of man's personality beyond its
normal. limitations"
- Peter F. Drucker

"Leadership is the ability to secure desirable actions from a group of followers

voluntarily without the use of coercion."
- Alford and Beatty

"Leadership can be defined as the process by which an executive imaginatively

directs, guides and influences the work of other in choosing and attaining
specified goals by mediating between the individual and the organization in such
a manner that both will obtain maximum satisfaction."
- Theo Haiman

Simply stated, leadership is the process of influencing the people

towards accomplishment of organization goals. It is the manager's ability to
induce subordinates to accomplish their goals with zeal and confidence.

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12.4 Characteristics of Leadership
From the above definitions following characteristics of leadership can be
drawn:
1. Leadership is a personal quality of behaviour and character in a man
which helps in exercising personal influence on individuals.
2. Leadership helps others in attaining specific goals to the maximum
satisfaction of the leader.
3. Leadership is a continuous process.
4. Leadership establishes relationship between the individual and group
around some common interest.
5. Leadership is exercised in a particular situation. The variation in
situation also affects the effectiveness of leadership.
6. Leadership is the process of guiding, directing and influencing the
people to do their best for the attainment of specified goals.

12.5 Functions of Leaders

Leading is an activity on the part of the managers to get something done by
others, willingly and not by compulsion. The functions of a leader can be
detailed as follows:
1. Taking the initiative: The first and foremost job of a leader is to take
the lead in all activities. He should not depend upon others for
guidance and direction to do any work. He himself should be present
in the field, lay down the goals, commence its implementation and see
that the goals are achieved as per the predetermined targets.
2. Representing the enterprise: Since a leader is the true
representative of the entire organization, he should represent the
enterprise and its objectives not only to those serving in it but also to
the others in the outside world.
3. Interpreting: A leader is expected to give reasons for his every order.
It is a delicate task of the leader. He has to give instructions in such a
way that they are clear to all concerned. If the instructions are
irrational, they are bound to be ineffective.
4. Guiding and directing the organization: It is the primary function of
the leader to guide and direct the organization. He has to issue the
necessary orders and instructions and see that they are
communicated properly. He should guide and advice people and
direct their behavior for the achievement of organizational goals.
5. Encouraging team work: Without team work, a leader cannot
succeed in his task of accomplishing organizational goals. Thus, a
leader must try to win the confidence of his subordinates.

12.6 Importance of Leadership

One of the important roles of the manager is the informational role wherein a
manager seeks information from his or her peers, subordinates and others about
anything relating to their jobs and responsibilities. He or she is at the same time a

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disseminator of information about his or her job and the organization to those
who are concerned with it. As such a considerable part of managerial time is
devoted to receiving or disseminating information i.e. in communication, inside or
outside the organization. The top and middle level managers typically devote 60
to 80 per cent of their total working hours to communicating. In service
organizations like hotels, restaurants, travel agencies, etc. communication is a
vital managerial requirement as the production and consumption of the service,
in most of the cases, takes place simultaneously. According to Peter Drucker,
good communication is the foundation for sound management. The managerial
functions of planning, organizing, directing and controlling depend on
communication in an enterprise. For planning to be realistic, it is essential that it
is based on sound information which is not possible without a good system of
communication existing in an enterprise. The latest developments in the market,
if not communicated to the planners, would make their future plans totally
meaningless. Adaptation to external environment on which rests the survival of
the business may not be possible without good communication. Again in order to
reach the objectives, it is necessary that leadership is exercised, decisions made,
efforts coordinated, people motivated and operations controlled. Each of these
functions involves interaction with the people in the organization and leads to
communication. The most important aspect of organizational life for a manager is
communication, and his or her success will depend upon how effectively he or
she can communicate with others in the organization. In other words, how
successfully he or she can put the ideas across to those who work with him or
her and thereby, persuade others to work in the direction of the achievements of
goals of the organization.

12.7 Leadership Styles

The word style is the way in which the leader influences followers. Let us have a
look at the various studies that help us to understand the leadership styles.

12.7.1. Hawthorne Studies: Mayo and Roethlisberger

They did a series of studies from 1924 to 1932 in an electricity company, at

Illinois, in USA. These studies are known as Hawthorne Studies.

One phase of these studies aimed at finding out if changes in illumination, rest
period and lunch breaks can affect the productivity of the workers. It was found to
the surprise of the researchers that less light, shorter and fewer rest periods and
shorter lunch breaks resulted in an increase in productivity. And once all these
changes were eliminated and the normal working conditions were resumed, it
was also seen that the worker's productivity and the feeling of being together
went up. The increase in productivity was attributed to the attitude of workers
towards each other and their feeling of togetherness. In addition, attention paid to
the workers by the researches made them feel important which resulted in
improvement in their work performance. This is known as Hawthorne effect.
These findings made Mayo and Roethlisberger conclude that a leader has not
only to plan, decide, organize, lead and control but also consider the human
element. This includes social needs of being together and being recognized for

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the work interaction of the group members with each other and their well being. A
good leader ought to keep the above aspects in his or her style of working with
people and supervising their work.

12.7.2. Theory X and Y: McGregor (1960)

They categorized leadership styles into two broad categories having two different
beliefs and assumptions about subordinates. He called these Theory X and
Theory Y.

The Theory X style of leaders believes that most people dislike work and will
avoid it wherever possible. Such leaders feel they themselves are a small but
important group, who want to lead and take responsibility, but a large majority of
people want to be directed and avoid responsibility. Therefore, this style of
leadership exercises strong controls and direction and wherever necessary
punish people if they do not do the work. If people do the work as desired, they
may even get monetary or other rewards.

Theory Y leaders assume that people will work hard and assume responsibility if
they can satisfy their personal needs and the objectives or goals of their
organization. Such leaders do not sharply distinguish between the leaders and
the followers in contrast to Theory X style. They feel that people control
themselves within rather than being controlled by others from outside such as a
leader or a manager or a supervisor.

An effective leader needs to examine carefully his/her ideas about the motivation
and behaviour of subordinates and others, as well as the situation, before
adopting a particular style of leadership.

12.7.3. Iowa Leadership Studies

In 1939 Lippitt and White under the direction of Lewin, did a study on three
different styles of leadership in the task performance of ten-year old boys in three
groups. The authoritarian leader of the group was very directive. He did not allow
any participation. He was concerned about the task and told the followers what to
do and how to do it. He was friendly while praising the performance of the
individual member and was impersonal while criticizing the individual member. In
the other group, the democratic leader encouraged discussion with the group and
allowed participation in making decision. He shared his leadership
responsibilities with his followers and involved them in the planning and
execution of the tasks. The Laissez-faire leader of the third group gave complete
freedom to the group and did not provide any leadership. He did not establish
any policies or procedures to do the task. Each member was let alone. No one
attempted to influence the other.
The researchers selected boys of the same intelligence level. Each group did the
same task of making paper masks or model air - planes or murals or soap
cravings. The room used by the three groups remained the same. The three
group leaders assumed different styles as they shifted every six weeks from
group to group. The researchers under the direction of Lewin, who did several

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studies on group, were trying to see how different styles of leadership could
change the satisfaction, frustration -aggression levels of the individuals. One
definite finding was that nineteen out of twenty boys liked the democratic
leadership style. That kind of a leader never tried to boss over them, yet they had
plenty to do. The only boy who liked authoritarian style kind of leadership
happened to be the son of an army officer. It was also observed that seven out of
ten boys preferred the laissez- faire leader to the autocratic one as they preferred
confusion and disorder to strictness and rigidity present in the autocratic style.
Boys under the latter style exhibited more of aggressive, hostile and indifferent
behaviour as compared to their counterparts under other styles of leadership.
They either showed hostility or cracked jokes about hostility towards others.
Others belonging to the democratic style of leadership showed less aggressive
and more indifferent behaviour when brought under the autocratic style of leader.
Even under the laissez-faire style of the leader, boys committed more
aggressive acts than the ones under the democratic style.

Of course, a study on ten year old boys in making paper masks or soap carving,
etc. cannot be compared to leader behaviour of adults with complex jobs. But like
the studies of Mayo and Roethlisberger, the studies by Lewin, Lippitt and
White are a pioneering effort in understanding leadership styles from the point of
scientific methodology. They also throw light on how different styles of leadership
can produce different complex reactions from the same or similar groups.

12.7.4. Michigan Studies on Leadership Styles

Likert (1961) at University of Michigan Survey Research Centre identified two

major styles of leadership orientations− employee orientation and production
orientation. The employee oriented style of the leader emphasises the
relationship aspect of the jobs of the individual. Such a leader takes interest in
every one and accepts the individuality and personal needs of the individual. He
or she has complete confidence and trust in all matters in his or her
subordinates. His or her subordinates feel free to discuss things about their jobs
with their superior. He or she always asks subordinates for ideas and opinions
and always tries to make constructive use of them.

The production oriented style of the leader emphasizes production and technical
aspects of the job. He or she looks at subordinates or employees as tools to
accomplish the goals of the organization. Work, working condition and work
methods are tried to be understood better in this style of the leadership
orientation. Likert related these orientations to the performance of the
employees. He showed that the employee oriented style brought high-producing
performance compared to production-oriented style. Of course, the satisfaction of
employees was not directly related to productivity in Likert’s study.

12.7.5. Scientific Manager’s Style

Taylor (1911) emphasised the importance of having management and labour

work in harmony to maximise profits. The basis of his scientific management was
technological in nature. It was felt that the best way to increase output was to

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improve the techniques or methods used by workers. Therefore, profit can be
maximised by using a systematic and scientifically based approach to the study
of jobs. Though, Taylor was not trained as a manager, he relied on scientific
study of time and movement spent and used for a job to improve the
performance of the worker. According to the scientific managerial style,
management of a work organisation must be divorced from human affairs and
emotions and people have to adjust to the management and not management to
the people. Once jobs are recognised with efficiency in mind, the economic self-
interest of the workers could be satisfied through various incentive work plans
such as piece rate system of payment, etc. The leader is assumed to be the most
competent individual in planning and organising the work of subordinates
according to Taylor’s principle of scientific management.
Various studies reflecting different styles of functioning of a leader have been
stated above, which highlight how the leader simultaneously pays attention to
the:

a) task to be accomplished by the group, and

b) needs and expectations of the group and its individual members.
Exactly how the leader goes about attending to these two functions is a matter of
his or her leadership style. Many theories have been suggested by the
researchers regarding which leadership style is most effective. Even the above
two functions can have different descriptions for different leaders. But in course
of time every leader develops a particular style which reflects his or her own
ideas and perspectives on the relative importance of task and people. However,
the effectiveness of the leadership style is also dependent on the environment
and organisational structure of the organisation. We should now consider in what
ways we can enrich the understanding of various styles of leadership by making
ourselves familiar with some important theories of leadership.

Check Your Progress- I

1) Write note on the characteristics of leadership.
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2) Write short note on the Scientific Manager’s Style of leadership.

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12.8 Leadership Theories
In this Section we discuss certain theories related to leadership.

12.8.1. Trait Theory

This theory as described by Kelly (1974) attempts to classify what personal
characteristics such as physical, personality and mental, are associated with
leadership success. Trait theory relies on research that relates various traits to
the success of a leader. A lengthy list of traits has been made to describe an
effective leader in terms of certain characteristics. A board classification of six
categories of traits is given below:

1. Physical characteristics of the leader, such as age, height, weight.

2. Background characteristics i.e. education, social status, mobility and
experience.
3. Intelligence i.e. ability, judgement, knowledge.
4. Personality i.e. aggressiveness, alertness, dominance, decisiveness,
enthusiasm, extroversion independence, self-confidence, authoritarianism.
5. Task-oriented characteristics i.e. achievement need, responsibility,
initiative, persistence.
6. Social characteristics i.e. supervisory ability, cooperativeness, popularity,
prestige, tact, diplomacy.
These characteristics according to some people are considered valid indicators
of successful leaders, but if you compare leaders by various physical personality
and intelligence traits, you may find very little agreement on these. Some findings
point out to the fact that leaders are intelligent individuals. But they do not
provide any clue as to the whether leaders are brighter than their followers or are
as close to them in intelligence. Again, some of the personality traits are
overlapping with each other. Therefore, you need to be cautious in stating,
personality or any other characteristic as a cause of successful leadership. You
must ask the questions: Who is a successful leader? Is he or she far superior
physically? Is he or she far brighter? Is he or she more mature as a person? Is
he or she more motivated to achieve his or her goal? Does he or she have more
consideration for his or her followers? etc.

Some of the traits may describe a successful leader but predicting successful
leaders on the basis of traits alone is not a correct approach. The followers have
a significant effect on the job accomplished by the leader. Trait theory completely
ignores the followers and the situations that also help a leader to be successful.
Secondly, we should also weigh in our own mind, which of the objectives,
‘confident’ or ‘independent’ or ‘intelligent’ is relatively more important in becoming
a successful leader. You may observe one or all the above traits as important in
a successful leader whereas your friend may feel that an enthusiastic, aggressive
and authoritarian person is a good leader. To be more objective, traits of the
person as well as demand of the situation together determine the effectiveness of
the leader.

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12.8.2. Group and Exchange Theories of Leadership
These theories as reported by Hollandder and Julian (1969) state that
the leader provides more benefits or regards than burden or costs for followers
who help him or her achieve the goal of the organisation. There must be a
positive exchange between the leader and followers in order for group goals to
be accomplished. The leader can give rewards to his or her followers in the form
of praise or pay increase or promotion for accomplishment of the group goal or
task. This has positive impact on attitudes, satisfaction and performance of the
followers. In return, they respect the leader and give due regard for his or her
status and esteem and believe in his or her heightened influence. As you are
already aware, a leader emphasises initiating structural change when followers
do not perform very well. He or she increases his or her emphasis on
consideration when the followers do a good job. In return, the perception of his or
her followers of his or her being an effective leader increases. Hence the leader
and the followers mutually affect each other.

12.8.3. Social Learning Theories

This theory by Bandura (1977) states that there is a continuous reciprocal
interaction between person, environment and behaviour .

Person and environment function in conjunction with the behaviour itself and
reciprocally interact to determine behaviour. A person, through his or her actions,
produces the environmental conditions that affect his or her behaviour in a
reciprocal fashion. The experience generated by behaviour also partly
determines what a person becomes and can do. This in turn affects subsequent
behaviour. The theory is called social learning theory because, individuals
learn in an environment in the process of interacting with each other which is a
social process. You will appreciate the application of this theory in understanding
the behaviour of a leader and the continuous reciprocal interaction between the
person (leader’s cognitions) and environment (including subordinates and their
needs, experiences, objectives in the organization, abilities, skills, energy
performance, etc. known as contingencies that regulate their behaviour).Thus a
social learning approach to leadership.

The three aspects of this theory of leadership assume that the leader knows how
his or her behaviour is controlled by various needs, situations and experiences
that one undergoes. The leader and the subordinates jointly attempt to discover
ways in which they can manage their individual behaviour to produce mutually
satisfying as well as organisationally productive outcomes. In this approach, the
leader and subordinates have a negotiable and interactive relationship. They are
continuously aware of how they can modify or influence each other’s behaviour
by giving the rewards or holding back the performance respectively.

12.8.4. Path-goal Leadership Theory

Theory by House (1971) states that the leader smooth out the path
towards goals and provides rewards for achieving them. As a leader, you should
understand the needs of the people and their desire to work or behave in a way

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that accomplishes goals that satisfy those needs. This theory is based on a
situation of the above kind. If you know the need of the person and his or her
desire to work and he or she is able to accomplish the work, you can reward to
make him or her feel happy and satisfied. In essence, you are doing three things;
One, you are motivating the members of the group by clarifying the path to
personal rewards that result from attaining personal goals. You have thus ‘fixed’
him or her on the job and made him or her see that his or her performance can
lead to positive or negative rewards. Two, you have already made the path-goal
clear to the member and also told him or her about what the job-requires. You
need not say too many things about the job to him or her as this may decrease
the interest in the work and deter performance. Three, you must offer the reward
to the member of the group who actually accomplishes the task. Your rewards
may be a praise or increase in the pay or promotion of the member to a higher
position. Your judgement about the desirability of the member to a higher position
is crucial. Your judgement about the desirability of the member’s effort and the
goal helps you to decide whether a reward can be given.
It is very important for the leader to know every member as a person, in order to
use a style to get the best out of the member. For example, a task-oriented
leader is preferred by a highly achievement-oriented member, whereas a person-
oriented leader is preferred by a person who needs a good deal of affiliation with
others.

Similarly it does good for the leader to know each situation to adjust his or her
style of functioning for better results. With a clear task on hand, members feel
satisfied if the leader is supporting them. They may not show a lot of output, but
they are satisfied. On the other hand with a less clear or more vague task on
hand, members show more output, if the leader directs them to work better. The
member in this situation may not be very satisfied.

In most of the Indian work settings, it is usually observed that members are quite
dependent on the leader or the superior. They also are quite conscious of their
status, but have very little commitment to work. Singh (1980) suggests that the
leader who is task-oriented and nurtures the dependence of members on him is
most effective in dealing with such members. He or she can get the work done in
his nurturant task style from the members of group. To a great extent, he knows
characteristics of the members’ work group, which he utilises in making the
leadership style-oriented, effective and getting the work done.

From the above discussion, it is clear that a leader is a person who has ability to
persuade others to get the work done. You must have seen a person having the
title of a leader. He or she may by very popular, but may not have the ability of
leadership.

Many leaders try to become popular by agreeing with everyone, thus avoiding
any kind of conflict. Their influence on the subordinate or members of the work
group may not be very lasting. There are leaders, who by virtue of their ability to
exercise authority and power show better influence on members. It is therefore
necessary for you to understand the authority of a leader and his or her sources
of power, which help him or her to exercise influence on the subordinates.

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Check Your Progress- II
1) Describe the trait theory of leadership.
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2) What do you understand from Group and Exchange Theory of

Leadership?
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12.9. Summary
In this Unit you have been exposed to leadership as a process of
influence on others to work willingly for group objectives. You have also come
across different leadership styles, such as Human relations style, theory X and Y
style, Authoritarian, Democratic and Laissez-faire style, Employee-oriented,
Production-orientation styles, and Scientific Managerial styles. Styles have been
related to various theories of leadership such as Trait theory, Group and
Exchange theory, Social Learning theory, Contingency Theory and Path-goal
theory.

12.10. Glossary
 Authoritarian Style: The assumption that the power of leaders derived from
the position they occupy and that people are innately lazy and unreliable.
 Contingency Theory: A theory that considers an organisation’s objective,
environment and leadership skills, as interacting and affecting the
effectiveness of a leader.
 Group and Exchange Theories of Leadership: These theories state that
the leader provides more benefits and rewards burdens or costs for followers
who help him achieve the goal of the organisation.
 Hawthorne Effect: When worker’s behaviour changes and productivity
increases because the workers become aware of their importance.

12.11. Answers to check your progress exercise

Check Your Progress - I
1) Refer Section 12.7.5.
2) Read Section 12.4.
Check Your Progress - II
1) Read Section 12.8.1.
2) Read Section 12.8.2.

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12.12. Reference / Bibliography
1. Study Material of I.G.N.O.U. (MTM) from Unit 15 – Leadership Styles and
Influence Process of MTM-01 course.
2. Drucker, Peter F.1975/81.Management Tasks, Responsibilities & Practices,
Allied Publishers Pvt. Ltd. New Delhi
3. Gupta R.S., Sharma B.D., Bhalla N.S.,2010.Principles and practices of
Management, Kalyani Publishers, New Delhi.
4. Koontz, O’ Donnell, C. and Weihrich, 1982. Essentials of Management. Tata
Mc - Graw Hill: New Delhi.

12.13. Suggested Readings

 Fielder, F.E.1967. A Theory of Leadership Effectiveness. Mc Graw Hill:
New York
 Stoner, J.A.F.1982.Management. Prentice Hall: New Delhi.
 Drucker, Peter F.1985.Practices of Management, Heinamann: London
 Bass, B.M.1960.Leadership, Psychology and Organizational Behaviour.
Harper & Brother: New York

12.14. Terminal and Model Questions

 Elaborate the prime functions of leaders in the hospitality trade?
 Write an essay on the chief leadership theories?
 Write a detailed essay on the Michigan Studies on Leadership Styles?

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UNIT13: MOTIVATIONS- MEANING, DEFINITION
AND THEORIES
Structure
13.1 Introduction
13.2 Objective
13.3 The Motivation Process
13.4 Theories of Motivation
13.5 Suggested Readings
13.6 Terminal and Model Questions
13.7 References / Bibliography

13.1 Introduction
We have already studied about the motivation theories in Unit 11 also, in this unit
we will study about the different processes of motivation & theories of motivation.
People differ by nature, not only in their ability to perform a specific task but also
in their will to do so. People with less ability but stronger will are able to perform
better than people with superior ability and lack of will. Hard work is crucial to
success and achievement. This belief was underscored by Albert Einstein when
he said that “genius is 10% inspiration and 90% perspiration”. This will is known
as motivation.
The force of motivation is a dynamic force setting a person into motion or action.
The word motivation is derived from motive that is defined as an active form of
desire, craving or need that must be satisfied. All motives are directed towards
goals. New needs and desires affect or change your behavior that then becomes
goal oriented. For example, if you do not want to work overtime, it is likely that a
particular time, you may need more money (desire) so you may change your
behavior, work overtime (goal oriented behavior) and satisfy your needs.

Definitions
Stephen P. Robbins defines motivation as “The willingness to exert high levels of
effort towards organizational goals, conditioned by the effort’s ability to satisfy
some individual need.”
Motivation can also be defined as a condition that is initiated by a psychological
deficiency or need in an individual, which causes the individual to behave in a
certain manner in order to achieve a particular goal or incentive.

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13.2 Learning Objectives
By the end of this chapter the student will be able to:
a) Frame the context for understanding the concept of motivation,
particularly who and what motivates employees.
b) Provide an overview of the different theories of motivation.
c) Identify the extrinsic and intrinsic factors that impact motivation
d) Assess misconceptions about motivation; and
e) Suggest strategies to enhance employee motivation.

13.3 The Motivation Process

Physiological/ Individual behaves Achieves a

Psychological in a certain particular goal
deficiency (NEED) manner (DRIVE) (INCENTIVE)

Fig 13.1 Motivation Process

Needs – A physiological or psychological imbalance leads to the creation of a
need. For example, the need for food or water arises when a person is hungry or
thirsty. Similarly, people who are deprived of the company of other people may
look for friends or companions.
However, psychological needs may sometimes arise without any deficiency or
imbalance. For instance, a person who has a strong need to progress may move
from success to success. Even if a person has several extraordinary
achievements to his credit, he may still feel the need to achieve more. For
example, many millionaires strive to make more and more money, even though
they are considered rich by several standards.
Drives – Drives or motives propels individuals to attain their goals or satisfy their
needs. A physiological drive is a condition which causes a person to work in a
particular direction. Both physiological and psychological drives push an
individual towards achieving a certain goal or accomplishing a certain task. For
example, the need for food and water is transformed into the drives of hunger
and thirst, and the need to achieve manifests itself as the achievement drive.
Incentives – Anything that can mitigate a need and decrease the intensity of a
drive is called an incentive. When a person obtains the incentive, the strength of
that derive is reduced and physiological and psychological balance is restored.
For example, eating food, drinking water, or finding friends reduces the
corresponding drives and helps in achieving balance. Here food, water and
friends are the incentives.

13.4 Theories of Motivation

Psychologists have studied human motivation extensively and have derived a
variety of theories about what motivates people.

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Content Theories
The content theories have been developed to explain the nature of motivation in
terms of types of need that people experience. The basic idea underlying such
theories is that people have certain fundamental needs, both physiological and
psychological in nature. Thus the nature of needs establishes the nature of
motivation that results in a specific behavior aimed at reaching the goal of
satisfying such needs.
a) Maslow’s Hierarchy of Needs
Abraham Maslow (1908 – 1970) along with Frederick Herzberg (1923) introduced
the Neo-Human Relations School in the 1950’s, which focused on the
psychological needs of employees. Maslow put forward a theory that there are
five levels of human needs which employees need to have fulfilled at work.
All of the needs are structured into a hierarchy (see below) and only once a lower
level of need has been fully met, would a worker be motivated by the opportunity
of having the next need up in the hierarchy satisfied. For example a person who
is dying of hunger will be motivated to achieve a basic wage in order to buy food
before worrying about having a secure job contract or the respect of others.
A business should therefore offer different incentives to workers in order to help
them fulfill each need in turn and progress up the hierarchy (see below).
Managers should also recognize that workers are not all motivated in the same
way and do not all move up the hierarchy at the same pace. They may therefore
have to offer a slightly different set of incentives from worker to worker.
Maslow identified five levels in the need hierarchy which are as follows:
 Physiological Needs – The most basic level in the hierarchy, the
physiological needs, generally corresponds to the unlearned primary needs.
The needs for hunger, thirst, sleep are some examples. According to the
theory, once these basic needs are satisfied, they no longer motivate. For
example, a starving person will strive to obtain a carrot that is within reach.
However, after eating his or fill of carrots, the person will not strive to obtain
another one and will be motivated only by the next higher level of needs.
 Safety Needs – This second level of needs is roughly equivalent to the
security need. Maslow stressed emotional as well as physical safety. The
whole organization may become a safety seeking mechanism. Same as
above, once these needs are satisfied, they no longer motivate.
 Social needs – It corresponds to the affection and affiliation needs. These
include needs for belonging, love and affection. Maslow considered these
needs to be less basic than physiological and security needs. Relationships
such as friendships, romantic attachments and families help fulfill this need
for companionship and acceptance, as does involvement in social,
community or religious groups.
 Esteem Needs - After the first three needs have been satisfied, esteem
needs becomes increasingly important. These include the need for things
that reflect on self-esteem, personal worth, social recognition and
accomplishment. Maslow carefully pointed out that the esteem level contains
both self esteem and esteem from others.

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Fig 13.2 Maslow’s Hierarchy of Needs

b) McGregor’s Theory X and Y
Douglas McGregor, an American social psychologist, proposed his famous X-Y
theory in his 1960 book 'The Human Side of Enterprise'. Theory X and theory Y
are still referred to commonly in the field of management and motivation, and
whilst more recent studies have questioned the rigidity of the model, McGregor’s
X-Y Theory remains a valid basic principle from which to develop positive
management style and techniques. McGregor's XY Theory remains central to
organizational development, and to improving organizational culture.
McGregor's X-Y theory is a salutary and simple reminder of the natural rules for
managing people, which under the pressure of day-to-day business are all too
easily forgotten.
McGregor's ideas suggest that there are two fundamental approaches to
managing people. Many managers tend towards theory X, and generally get poor
results. Enlightened managers use theory Y, which produces better performance
and results, and allows people to grow and develop.
Theory X assumptions:
 Employees inherently do not like work and whenever possible, will
attempt to avoid it.
 Because employees dislike work, they have to be forced, coerced or
threatened with punishment to achieve goals.
 Employees avoid responsibilities and do not work till formal directions are
issued.
 Most workers place a greater importance on security over all other factors
and display little ambition.
The management implications for Theory X workers were that, to achieve
organizational objectives, a business would need to impose a management
system of coercion, control and punishment.

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Theory Y assumptions:
 Work is natural to most people and they enjoy the physical or mental
effort involved in working, similar to work and play.
 People do exercise self-control and self-direction and if they are
committed to those goals.
 Average human beings are willing to take responsibility and exercise
imagination, ingenuity and creativity in solving the problems of the
organization.
 Many individuals seek leadership roles in preference to the security of
being led.
Managers who hold Theory Y assumptions treat their workers as responsible
persons and give them more latitude in performing their tasks. Communication is
multidirectional and managers interact frequently with employees.
c) Herzberg's two-factor theory
Frederick Herzberg extended the work of Maslow and developed a specific
content theory of work motivation. He felt that a person’s relation to his work is a
basic one and that his attitude towards work will determine his organization
related behavior. People who are satisfied with their jobs will be more dedicated
to their work and will perform it well as compared to those who are dissatisfied
with their jobs. In his two-factor theory, Herzberg identifies two sets of factors
that impact motivation in the workplace:
 Hygiene Factors: include salary, job security, working conditions,
organizational policies, and technical quality of supervision. Although these
factors do not motivate employees, they can cause dissatisfaction if they
are missing. Something as simple as adding music to the office place or
implementing a no-smoking policy can make people less dissatisfied with
these aspects of their work. However, these improvements in hygiene
factors do not necessarily increase satisfaction.
 Satisfiers or Motivational Factors: These factors are related to the nature
of work and are intrinsic to the job itself. They have a positive influence on
morale, satisfaction, efficiency and higher productivity. For example,
managers can find out what people really do in their jobs and make
improvements, thus increasing job satisfaction and performance.
Some of these factors are:
Job Itself, Recognition, Achievement, Responsibility, Growth and
Advancement.
Following Herzberg's two-factor theory, managers need to ensure that hygiene
factors are adequate and then build satisfiers into jobs.
Process Theories
The content models attempt to identify what motivates people at work. The
process theories, on the other hand, are more concerned with the cognitive

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antecedents that go into motivation or efforts and with the way they relate to one
another. They implicitly assume that satisfaction leads to improved performance
and that dissatisfaction detracts from performance.
a) Vroom Expectancy Theory: Like the needs-goal theory, motivation strength
is determined by the perceived value of the result of performing a behavior and
the perceived probability that the behavior performed will cause the result to
materialize. As both of these factors increase, so does motivation strength, or the
desire to perform the behavior. People tend to perform the behaviors that
maximize their rewards over the long term.
b) Porter-Lawler Theory: Lyman W. Porter and Edward E. Lawler developed a
more complete version of motivation depending upon expectancy theory. It starts
with the premise that motivation (effort or force) does not equal satisfaction and
performance.

Fig 13.3 Porter - Lawler Theory

Actual performance in a job is primarily determined by the effort spent. But it is
also affected by the person’s ability to do the job and also by individual’s
perception of what the required task is. So performance is the responsible factor
that leads to intrinsic as well as extrinsic rewards. These rewards, along with the
equity of individual lead to satisfaction. Hence, satisfaction of the individual
depends upon the fairness of the reward.

Contemporary Theories
a) McClelland's acquired needs theory
David McClelland's acquired needs theory recognizes that everyone prioritizes
needs differently. He also believes that individuals are not born with these needs,

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but that they are actually learned through life experiences. McClelland identifies
three specific needs:
 Need for achievement is the drive to excel.
 Need for power is the desire to cause others to behave in a way that they
would not have behaved otherwise.
 Need for affiliation is the desire for friendly, close interpersonal
relationships and conflict avoidance.
McClelland associates each need with a distinct set of work preferences, and
managers can help tailor the environment to meet these needs.
High achievers differentiate themselves from others by their desires to do things
better. These individuals are strongly motivated by job situations with personal
responsibility, feedback, and an intermediate degree of risk.
In addition, high achievers often exhibit the following behaviors:
 Seek personal responsibility for finding solutions to problems
 Want rapid feedback on their performances so that they can tell easily
whether they are improving or not
 Set moderately challenging goals and perform best when they perceive
their probability of success as 50-50
An individual with a high need of power is likely to follow a path of continued
promotion over time. Individuals with a high need of power often demonstrate the
following behaviors:
 Enjoy being in charge
 Want to influence others
 Prefer to be placed into competitive and status-oriented situations
 Tend to be more concerned with prestige and gaining influence over others
than with effective performance
People with the need for affiliation seek companionship, social approval, and
satisfying interpersonal relationships. People needing affiliation display the
following behaviors:
 Take a special interest in work that provides companionship and social
approval
 Strive for friendship
 Prefer cooperative situations rather than competitive ones
 Desire relationships involving a high degree of mutual understanding

13.5 Suggested Readings

Mintzberg, Henry, “The Nature of Managerial Work”, Harper & Row
Chandan, J.S. “Organisational Behavior”, Vikas Publishing House Pvt. Ltd.

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13.6 Terminal and Model Questions
1. Explain Maslow’s Need Theory and under what circumstances would it justify
a different need priority.
2. How is Aldefer’s ERG theory similar to Maslow’s Need theory?

13.7 References/Bibliography
1. Luthans, Fred. “Organisational Behavior”, Eight Edition, ISBN 0-07-115605-4
2. Dwivedi, R.S. “Human Relations and Organisational Behavior”, Oxford and
IBH Publishing, India, 1987.
3. Douglas McGregor, The Human Side of Enterprise, McGraw Hill, 1960
4. Bhattacharya, Dipak Kumar. “Organisational Behavior”
5. Chandan.J.S. “Management Theory and Practice”, Vikas Publishing, New
Delhi, (1987).
6. Tripathi, P C and Reddy, P N: “Principles of Management”
7. Hersey, Paul and Kenneth H. Blanchard. “Management of Organisational
Behavior”. Prentice Hall, (1988).
8. Jago, Arthur G. “Leadership: Perspectives in Theory and Research.”
Management Science, March 1982.
9. Raman, Meenakshi and Singh, Prakash: “Business Communications”
10.Chhabra, T.N.: “Business Communication Concepts and Skills”
11. Robbins, Stephen P “Organisational Behavior”, 9th Edition, Prentice Hall of
India Pvt. Ltd, 2001.
12. Pareek, Uday “Understanding Organisational Behavior”, 2nd Edition, Oxford
University Press

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UNIT 14: PROCESSES OF COMMUNICATION-
TYPOLOGIES, SIGNIFICANCE & BARRIERS
Structure
14.1 Introduction
14.2 Objectives
14.3 Characteristics of Communication
14.4 Importance of Communication
14.5 Communication Process
14.6 Verbal and Non-Verbal Communication
14.7 Channels of Communication
14.8 Barriers to Effective Communication
14.9 Making Communication Effective
14.10. Summary

14.1 Introduction
In the previous units you have gained knowledge about the Directing,
Motivations and Leadership for the hospitality business mangers. The present
unit aims to provide you in-depth knowledge about the meaning, need and
importance of communication.

Communication refers to sharing of ideas, facts, opinions, information and

understanding. Simply stated, communication can be said to be passing of
information and understanding from one person to another. It will be seen that
there are at least three elements involved here, the sender at one end, the
receiver at the other, and in between is the message or information that is to be
passed on from one end to other. The information is passed from the sender to
the receiver, and the knowledge of its effects is passed from the receiver to the
sender in the form of a feedback. Whether the effect produced is the desired one
will depend upon how well the receiver understands the meaning of the
information. Communication can, therefore, be aptly said to be the transmission
of meaning. In this Unit we discuss the various aspects related to communication
that have a bearing on managerial functions for the hospitality business
organizations.

14.2 Objectives
After going through this Unit you will be able to:

 Apprehend the relevance of communication for managerial jobs,

 understand various types of communications, and
 learn about the skills to manage communication.

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14.3 Characteristics of Communication
Communication is considered to have the following characteristics:

1. It involves more than one person.

2. It deals with the transaction of facts.
3. Medias of communication may be numerous.
4. Since a business organization has continuity, the process of communication
is also a continuous process.
5. The effectiveness of communication largely depends upon the proper
understanding of what is being communicated and what is being received
and then responded.
6. It involves both information and understanding.
7. It includes all means by which meaning is conveyed from one person to
another.
8. It is the basis for action and cooperation.
9. It travels up and down and also from side to side.
10. Its primary purpose is to motivate a response.
11. A further attribute of communication is its universality in the organizations.

14.4 Importance of Communication

One of the important roles of the manager is the informational role wherein
a manager seeks information from his or her peers, subordinates and others
about anything relating to their jobs and responsibilities. He or she is at the same
time a disseminator of information about his or her job and the organization to
those who are concerned with it. As such a considerable part of managerial time
is devoted to receiving or disseminating information i.e. in communication, inside
or outside the organization. The top and middle level managers typically devote
60 to 80 per cent of their total working hours to communicating. In service
organizations like hotels, restaurants, travel agencies, etc. communication is a
vital managerial requirement as the production and consumption of the service,
in most of the cases, takes place simultaneously. According to Peter Drucker,
good communication is the foundation for sound management. The managerial
functions of planning, organizing, directing and controlling depend on
communication in an enterprise. For planning to be realistic, it is essential that it
is based on sound information which is not possible without a good system of
communication existing in an enterprise. The latest developments in the market,
if not communicated to the planners, would make their future plans totally
meaningless. Adaptation to external environment on which rests the survival of
the business may not be possible without good communication. Again in order to
reach the objectives, it is necessary that leadership is exercised, decisions made,
efforts coordinated, people motivated and operations controlled. Each of these
functions involves interaction with the people in the organization and leads to
communication. The most important aspect of organizational life for a manager is
communication, and his or her success will depend upon how effectively he or
she can communicate with others in the organization. In other words, how
successfully he or she can put the ideas across to those who work with him or
her and thereby, persuade others to work in the direction of the achievements of
goals of the organization.

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14.5 Communication Process

The simplest model of the communication process can be:

Sender Message Receiver

Sender’s Understanding
Thought Encoding Channel Decoding by Receiver

NOISE

Receiving Decoding Channel Encoding Response

Purpose Transmission

FEEDBACK
Figure 14.5.1: Model of Communication Process

We shall briefly see what the various elements of this model mean.
 Source: In this model the first element is the source of the communication
from where the communication originates. The source or sender can be a
person, a number of persons, or even a machine like a satellite or computer. The
sender initiates communication because he or she has some need, thought, idea
or information that he or she wishes to convey to the other person, persons or
machine. If, for example, an accidental fire has broken out in a part of Hotel, the
security officer (source) will need to convey the message immediately to the
guests (receiver). Fire alarm (machine) will do the same in place of the security
officer.
 Encoding Message: The next element in the process is that of encoding the
information to be transmitted. Encoding enables the thoughts to be put in the
form of symbols. Normally language provides the symbols that are used in the
transmission of thoughts to another person. However, language is not the only
means to convey the thoughts, needs or information. There are non-verbal
means, e.g., gestures, which provide another form through which thoughts can
be transmitted. The more complex the ideas, needs or information to be
communicated, the more complex becomes the process of encoding them. While
an involuntary shriek may adequately convey the degree of alarm felt by the
victim, even a carefully worded statement or letter may fail to convey the
essential purpose of communication. This can happen if the language or symbols
used convey different meanings to the sender and the receiver. This is one
reason that Phonetic Codes and abbreviations are used cautiously while
communicating in the tourism industry.
 Channel: The next element in the process of communication is the channel
through which the communication is transmitted. It is the link that joins the

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sender and the receiver. The most commonly used channels are sight and
sound. In the organizational environment, the channel could take the form of
face-to-face conversation, written memos, telephonic exchanges, group
meetings, computerized Local Area Network (LAN), etc. Outside the
organization, the channels could be letters or circulars, magazines, radio
programmes or TV shows teleconferencing, satellite communications, Wide Area
Network (WAN), etc. For communication to be effective the channel used should
be appropriate for the message as well as the receiver. For an urgent message
telegram, telephone or e-mail would be the appropriate channel. Again, the
channel chosen would be influenced by the consideration as to whom the
message is being directed.
 Decoding: Decoding and understanding the message constitute the last two
elements in the process of communicating from sender to receiver. The receiver
in the first instance receives the message and decodes it, that is to say,
interprets and translates it into thoughts, understanding and desired response. A
successful communication occurs when the receiver decodes the message and
attaches a meaning to it which very nearly approximates the idea, thoughts or
information the sender wished to transmit.
Decoding and understanding are affected by several factors. For
example, a receiver cannot decode a message which is in an unknown
language. This applies to symbols also. The same symbol may carry a different
meaning to the receiver. Again, the receiver's past experience, as well as
expectations colour the meaning that is attached to the message. All this tends to
bring about a divergence between the 'intended' meaning and 'perceived'
meaning. To avoid this, it is necessary to develop greater degree of homogeneity
between the sender and the receiver as both of them have their own fields of
experience. The field of experience constitutes an individual's attitudes,
experience, knowledge, environment, and socio-cultural background. The greater
the overlap of the source and receiver's fields of experience, the greater the
probability of successful communication. In other words, they have things in
common that facilitate better communication. An individual engaged in
communication with another person of a significantly different educational or
cultural background will have to put in greater effort to ensure successful
communication. The greater the overlap of the two persons' fields of experience,
the higher is the probability of successful communication.
 Feedback: Response and feedback complete the two-way process of
communication. It is through the feedback that the source (sender) comes to
know if the message was correctly received and understood. In case it is found
that the message has been received incorrectly, it is possible to make
corrections subsequently but for this the response has to be timely.
Sender's efforts to communicate are aimed at eliciting the desired
response. However, a communication may result in producing any of the three
outcomes: a desired change may occur, an undesired change may occur or
no change may take place. We consider communication as successful only
when it produces the desired response.
 Noise: Surrounding the entire spectrum of communication is the noise that
affects the accuracy and fidelity of the message communicated. Noise is any
factor that disturbs, confuses or otherwise interferes with communication.
It can arise at any stage in the communication process. The sender may not be

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able to encode the message properly or may not be properly audible. The
message may get distorted by other sounds in the environment. The receiver
may not hear the message, or comprehend it in a manner not entirely intended
by the sender of the message. The channel also may create interference by
'filtering', i.e. allowing some information to pass through and disallowing others.
In any case, there is so much of noise or interference in the entire process that
there is every possibility of the communication being distorted. We will see later
in this Unit why distortion takes place and what can be done to minimize the
distortion of communication.

14.6 Verbal and Non-Verbal Communication

A communication in which words are used can be called verbal

communication. Communication over long distance takes place usually through
verbal communication. As an adjunct to this is the non-verbal communication
which refers to the use of 'body language' in communicating ideas from the
sender to the receiver. Non-verbal communication most often takes place
unconsciously, and it may either fortify and supplement the verbal
communication or may at times negate the very purpose of verbal
communication. Let us examine each of these one by one.

The main characteristics of verbal communication is the use of words, either

written or spoken.

Written communication includes personal letters, memoranda, policy and

procedure manuals, and notices placed on the notice boards.

Examples of oral communications are conferences, committee meetings,

telephone conversation, loudspeaker announcements, etc. Both written and oral
communications have their advantages and disadvantages.

14.6.1. Written Communication:

A written communication has the advantage of being easily verified and of being
more precisely defined if there arises a need for subsequent correction. Spoken
messages cannot always be verified so easily. Secondly, because a written
communication is likely to be a permanent record, we are more particular in
making it precise and accurate.

Thirdly, lengthy and complicated messages are better understood if they are put
in writing. It would be difficult to understand and retain a lengthy message if it
were only in oral form. Together with these advantages, written communications
have some drawbacks also. Some of these are:

 Firstly, it is a slower method of communication if we consider the total

amount of time involved from the formulation of idea by the sender to the
understanding of the idea by the receiver. A written communication
competes with all other written material that reaches the desk of an
executive. As such there can be a gap between the time when a

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communication reaches the manager's desk and the time when he or she
reads it. Moreover, if clarifications are needed because the message is not
clear to the receiver, further delay would take place. However, with the
advent of electronic media such delays have been considerably reduced.
 Secondly, despite the fact that a greater degree of preciseness is aimed at
while preparing a written communication, there is always a possibility of
ambiguity or lack of clarity creeping in leading to misunderstanding on the
part of the receiver. Clarifications naturally mean delay.
 Lastly, over-reliance on written communication can lead to too much of
paper-work in the organization. This not only consumes time, money and
energy, but also indicates a lack of trust among the employees of the
organization. It has been observed that when trust is low and suspicions are
high in an organization, an over-reliance on written communication is likely
to occur.

14.6.2. Oral Communication:

Although an organization cannot function without written communications of

various kinds, yet by far the greater percentage of information is communicated
orally. It has been observed that managers spend 60 to 80 per cent of their work
time in oral communication. Oral communication has the merit of being more
rapid. Generally, the spoken word is a quicker and less complicated way of
getting one's ideas across another person. Again, it offers the potential of two-
way information flow, and therefore less possibility of misunderstanding the
communication. The creation of a less formal atmosphere and generation of
fellow feelings are the additional advantages brought about through oral
communication.

However, the oral communication is not entirely free from defects. It is less
effective as a means of presenting complicated and lengthy data. It is also
subject to misinterpretation and the effects of barriers arising from interpersonal
relationships.

Can you determine which of the two, oral or written; is a better means of
communication? You will see that the choice between the two is, generally
speaking, determined by the situation. However, the use of both together will
very often strengthen and reinforce a message.

Take your own case. The material in your hand is the written communication
which will be fortified subsequently through oral communication in the counselling
sessions or educational TV programmes. The two together, we hope, will further
increase your understanding of the concepts and application of management.

14.6.3. Selection of words for communication

You have read earlier that communication refers to the transmission of

meaning from the sender to the receiver. Such transmission takes place through
the use of symbols, whether verbal or non-verbal. In verbal communication the
symbol is a word. In order that the transmission of meaning takes place it is

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important that the particular symbol (word) used must create within the mind of
the receiver the same image which was in the mind of the sender of the
communication. It is only then that the basic purpose of communication which is
to influence the behaviour of the receiver, will be achieved. It has been found that
words do not necessarily have commonly understood meanings. The abstract
words like "participation" or "democracy" or "satisfactory" suffer from the difficulty
that different people are likely to attach different meanings to these words. The
greater the use of such abstract words, the bigger the difficulty in bringing about
an understanding of the message and a change in behaviour through
communication.

14.6.4. Use of Body Language

In determining the effectiveness of communication, in the sense of effecting a

change in behaviour, nonverbal communication has an important role to play.
Experts in the field of human communication have found that, in a typical
message between two persons, only about 7 per cent of the meaning or content
of the message is carried by the actual words being used. Another 38 per cent of
the message is carried by one's tone of voice (which includes pacing, timing,
pauses, accents). The major part of 55 per cent of the content of the message is
in non-verbal form, in other words, in the form of our physical attitude going along
with our verbal message. The physical attitude is also referred to as body
language.
Non-verbal communication can take place with our actions or with our body
gestures. For example, a manager who pounds his fist on the table while
announcing that from now on participative management will be practised in his
organization creates a credibility gap between what he says and what he
practises. A manager who says that he believes in an open door policy for all his
employees but is busy with his own files while an employee is giving him certain
suggestions towards improvement in work environment, is making non-verbal
communication quite in conflict with his verbal communication. In such situations
the non-verbal message is the stronger one and the verbal message will cease to
be effective.

Body gestures that "communicate" may relate to your handshake, your smile,
your eye-contact, your posture while standing or sitting, your facial expression
while listening, the shrug of your shoulders, indeed, the movement of any part of
your body. You must, therefore, be watchful of your body language so that it
does not contradict your verbal message. This is indeed difficult because the
body language is so involuntary that we are not even aware of it.

Some of the non-verbal actions which assist communication include:

 Maintaining eye-contact,
 Occasionally nodding the head in agreement,
 Smiling and showing animation,
 Leaning towards the speaker, and
 Speaking at a moderate rate, in a quiet tone.

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Some of the non-verbal actions that impede the communication are:

 Looking away or turning away from the speaker,

 Sneering or using other contemptuous gestures,
 Closing your eyes,
 Using an unpleasant tone of voice, and
 Speaking too slow or too fast.

As managers in the tourism & hospitality you have to see that your subordinates
are well trained in this art of non-verbal communication as it helps a lot towards
customer care. Travel agency, Airlines, Restaurant staff, banquet workers, front
office personnel, drivers, etc., all ought to be efficient in this regard.

Check Your Progress- I

1) Discuss the importance of communication in the hospitality industry.

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2) Describe the Communication Process.

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14.7 Channels of Communication

An organization structure provides channels for the flow of information in
which the decisions of the organization will be based. As such and organisation
can be described as the network of communication channels. These channels
can be either intentionally designed, or they may develop of their own accord.
When a channel is internationally prescribed for the flow of communication in the
organization, we call it a formal channel, and the communication passing through
that channel as formal communication. On the other hand, when communication
takes place through channels not intentionally designed, in other words, outside
the formal channels, such channels are referred to as informal channels, and the
communication as informal communication.

14.7.1. Formal

An organisation chart shows the direction of formal communication flow in

an organisation. It identifies the various transmitters and receivers, and the
channels through which they must communicate. The authority relationships
indicate the direction of communication flow in an organisation. A formal
communication takes place between a superior and subordinate in the form of

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instructions and directions. Such a flow takes place in the downward direction.
Another formal communication takes place between subordinate and superior
when reporting on performance is made by the subordinate. Since the
subordinate initiates communication to the superior, the flow is upward. We call
this upward communication. The upward communication can take the form of
progress reports, tour reports, occupancy status, budget reports, profit and loss
statements, requests for grants, etc.

Again formal communication may take place between one division of an

organisation and another. This could be either lateral or diagonal. There is
substantial formal communication between production foreman and maintenance
foreman, between production manager and quality control manager, between
tours division and ticketing division or between front office and housekeeping.
Formal communication may pass across organisational levels also: for example,
communication between line and staffunits takes place very frequently across
organizational levels. Such communication helps tremendously in the
coordination of activity.

Finally, formal communication may also arise between the organization and
outside parties, e.g., suppliers, customers, Government, etc. This may happen
when the management is required to provide information on certain aspects of
working of organization. Communication of this kind is usually one-way.

14.7.2. Informal
Communication that takes place without following the formal lines of
communication is said to be informal communication. This channel is not created
by management and is usually not under the control of management. An informal
system of communication is generally referred to as the 'grapevine' because it
spreads throughout the organization with its branches going out in all directions
in utter disregard of the levels of authority and linking members of the
organization in any direction.

The informal communication arises as a result of employee needs for information

which are not met by the formal channels. It has been observed that problems
relating to work and unfavourable reactions to various organizational practices
are transmitted through information communication. Since the channels are
flexible and establish contacts at personal levels among members of the
organization at different hierarchical levels, the grapevine spreads information
faster than the formal system of communication. About 10 to 40 per cent of
employees receive information (or misinformation) about the organization and its
members through informal channels of communication.

In contrast to the formal communication which moves on slowly from one person
at one hierarchical level to another at the next hierarchical level, the grapevine
transmits information from one person to a group of persons much more rapidly
in a cluster chain management. Each individual passes the information to several
others, some of whom repeat the message to others. Some of those who receive
the message may not pass on the information to others but the information may

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lead to a change in their thinking on the subject and may sometimes affect their
behaviour as well.

Though it has been found that informal communication carries accurate

information about three-fourths of time, yet there are strong possibilities of its
communications being distorted. This happens because of the process of
'filtering' whereby each member of the cluster chain acting as a kind of filter
passes on only that part of communication which he or she regards as important.
The receiver is left to fill in the gaps and complete the story according to his or
her own imagination. This naturally leads to a great distortion of the real situation
and may at times cause serious problems in the organization.

In order to do this, what the manager can do is to identify the members of the
organization who usually seek and spread information. It is possible that different
individuals are active at different times but usually it will be found that some
individuals tend to be more active carriers of information than the others. After
identifying such people a manager can use them as sounding boards. If it is
discovered that misleading rumors are circulating, it may be a desirable policy on
the part of the manager to release the official information in order to clarify the
situation. At times management may even find the informal communication
channel more useful in transmitting information through the formal channel. A
common method of using informal communication is by 'planned leaks', or
strategically planned 'just between you and me' remarks, which would obviously
reach all parts of the organization much more quickly than any kind of
communication through formal channels.

14.8 Barriers to Effective Communication

Communication has been defined as the transmission of meaning or
understanding. Yet by far, most of the communication in organizations or
between persons fails to satisfy this criterion. Communication quite often fails to
convey the meaning or develop an understanding of the communication sufficient
enough to bring about a change in the behaviour of the recipient. According to
Peter Drucker: "We have more attempts at communications today, that is, more
attempts to talk to others, and a surfeit of communication media…. yet
communication has proved as elusive as the Unicorn. The noise level has gone
up so fast that no one can really listen any more to all that babble about
communications. But clearly there is less and less of communicating. The
communication gap within institutions and between groups in society has been
widening steadily- to the point where it threatens to become an unbridgeable gulf
of total misunderstanding." (Management Tasks, Responsibilities and Practices
p.481).

One of the biggest dangers in communication is to assume that communication

has taken place. Most of us indeed make a great effort in formulating ideas, and
finding appropriate words for communicating them to others. In organizations,
too, much money and energy is used to develop a system of communication.
And yet, if you try to assess how far the system has led to effective
communication in terms of the desired response, you will be surprised at the

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results. There is a fifty-fifty chance of the communication not being understood to
the degree you would be satisfied with. This has been proved by a number of
experiments undertaken and observations made by communication specialists.

It is not only important that a communication be sent, it is much more important

that it be understood. When an understanding of the communication does not
take place, we can hardly expect a desired change in the behaviour of the
receiver. What causes a failure of communication?

The failure in communication arises because of certain blockages or barriers

between the sender and the receiver. In order to make a communication
effective, it must be ensured that these barriers are removed. In the paragraphs
that follow, we shall discuss the various reasons which either prevent the
communication from reaching the receiver or distort it in such a manner that it
ends up either as non-communication or as miscommunication. Since a manager
has to use communication as a means of getting the work done through his or
her subordinates, he or she must ensure that barriers are minimized and
effective communication takes place. The barriers that interfere with the
understanding of the communication are of three kinds: 1) Semantic, 2)
Psychological, and 3) Organizational, and we shall discuss them one by one.

14.8.1. Semantic Barriers

Most of the difficulties in communication arise because the same word or symbol
means different things to different individuals. Perhaps you remember what
happened to Shiny Abraham at the 1986 Asian Games at Seoul. Despite coming
first by a very wide margin in the 800 m. race, she was disqualified and lost her
gold medal for having crossed the track at the place where she should not have
gone. According to her she mistook the symbol, i.e., the colour of the flag.
Whereas in our country the red flag indicates danger, in South Korea white flag is
used for the same purpose. Misinterpreting the white flag which had been put up
at that point, she crossed the track at the wrong place and suffered a setback.

Words, which are in reality symbols representing a thing, an action or a feeling,

can have several meanings. As explained earlier, words which represent
concrete things, e.g., car or house, tend to be understood in the same way, while
abstract words like merit, effectiveness or responsibility, tend to be interpreted by
different persons in different ways. Difficulty in understanding may arise even in
the case of ordinary words which have different contextual meanings. Lately such
difficulties are being experienced increasingly by people working in international
development field.

Semantic difficulty may arise because of unfamiliarity with words. For example,
because of a word of some foreign language of which the receiver has no
knowledge. A technical word may not create such a problem - it may be beyond
the ability of the receiver to understand it. In order to make it effective, a
communication must be put into words which are appropriate to the environment
and mental framework of the receiver. This ensures the communication to be
grasped properly and implemented effectively.

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Semantic barrier may further be created by body language being inconsistent
with the verbal communication. A manager who praises the honesty and sincerity
of his or her subordinate in a sarcastic tone creates doubts in the minds of the
subordinate as to the course of action he or she should adopt in a given situation
in future. The same kind of barrier is created by a divergence between the verbal
language and the action language of the superiors. When action and language
are used jointly the actions often have more powerful influence on other's actions
than words do. A management may, for example, profess its belief in being
guided solely by the merit of employees while making promotions. Yet if
employees observe that in actual practice promotions are made on
considerations other than merit, the management's professed policy is bound to
be affected by a semantic barrier - it is not likely to communicate anything, only
the actions will communicate and what they communicate will be contrary to what
had been said in so many words.

14.8.2. Psychological Barriers

Psychological barriers are the prime barriers in interpersonal
communication. The meaning that is ascribed in a message depends upon the
emotional or psychological status of both the parties concerned. As such the
psychological barriers may be set up either by the receiver or the sender of the
message.
You have already seen that the effectiveness of any communication depends
upon the prescription of the right meaning of the message on the part of the
receiver. However, the perception of meaning is very much affected by the
mental frame of the receiver at the time the message is received. Emotions
which dominate our mind at the time, e.g., anger, anxiety, fear, happiness, etc.,
will affect our interpretation of the message. The phrases 'viewing with coloured
glasses' or 'seeing with jaundiced eyes' explain vividly how our inner feelings
may vitiate our perception of the message or the situation. Past experience of the
receiver in such situations would also lead to the same effect. The same thing
may happen when different individuals interpret the same event or situation. For
example, take the case of a supervisor watching a group of employees resting
and gossiping on the lawns. How will this situation be perceived? To the
supervisor who believes that employees are basically lazy, the situation
communicates to him or her that they are playing truant with their work, and
therefore should be given more work to do and disciplined. To the supervisor
who believes that the workers are self-motivated and are sincere workers, the
situation communicates that they are enjoying a well-earned rest. To the
supervisor who is personally insecure, the situation communicates that they are
conspiring against him.
To the receiver's mind a communication gets tied up with the personality of the
source. This is what some people call the halo effect. Thus if we receive a
message from a person we admire, we are more likely to agree with it and act
accordingly. On the other hand, our immediate reaction will be one of
disagreement with a message that has been received from a person we do not
like or trust. Because of this our perception of the meaning of the communication
is coloured by our own value judgements about the source of the communication.

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A receiver of the communication suffers from another problem which
psychologists refer to as cognitive dissonance. Since an individual tends to be
fed with too much of information from different sources, which is commonly the
case in an organisational setting, he or she becomes selective in receiving and
responding to the communication. The receiver is most likely to 'hear' only those
messages that conform to his or her own beliefs, attitudes and judgement.
Communications that conflict with his or her viewpoint tend to be ignored. Often
the 'other' point of view may not only be ignored, it might indeed be regarded as
unfriendly or even hostile. If this happens frequently, subordinates may start
questioning whether their superior really wants to hear the 'bad' news, i.e.,
opinions contrary to his or her own. As a consequence, much of the
unfavourable news in an organisation would never get reported to higher levels
until the problem has assumed the form of a crisis.

One common phenomenon with all communications is the effect of filtering. This
effect is produced when the communication passes through a large number of
persons. Each individual through whom the information is passed interprets facts
differently, judges from one's own point of view what is important or relevant, and
passes it on with his or her own interpretations. The result is that the original
communication gets altered in the process. The process of filtering involves a
biased choice of what is communicated on the part of either the sender or the
receiver. Thus filtering refers to the process of 'selective telling'. Organizations
are particularly prone to the effect of filtering. In large organizations where there
are several levels through which a communication must pass, filtering takes
place at each level. In order to save the time of the busy executive and to save
him or her from information overload, it is common in organizations for
subordinates to prepare notes or abstracts of the communication before passing
it on to the superior. The higher an information has to travel the higher is the
degree of abstraction, with the possibility that significant pieces of information
may be entirely missed or their significance diluted or distorted. The larger the
number of filtering points in an organization, the greater are the chances of
distortion. This may happen even outside an organization when communication
is passed on verbally from one to another, as in a grapevine.

14.8.3. Organizational Barriers

Organizations provide a formal framework through which communication
is designed to flow. The structuring of the flow itself tends to act as a barrier
against free flow of communication between persons and levels in the
organization. Rules may prescribe how communications are to move from one
level to another in upward or downward directions. Not only is there a possibility
of delay in the communication reaching its destination, but also there is every
possibility of communication getting distorted through the process of filtering
described in the previous paragraphs. It has been found that when information
was channeled through different levels of organization, it became altered as
people interpreted facts differently. In an organizational setting this can be a very
big problem since senior level executives who work through others have
subordinates. A critical information that has lost its criticality because of the
actions of the intervening levels may jeopardize the position of the manager as
well as the organization itself.

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It has been observed that the upward communication is particularly subject to the
influence of filtering in large organizations. Upward communication serves
essentially two purposes in an organization. First, it helps in coordinating and
controlling the activities of the organization. Second, it enables the superior to
appraise the performance of subordinates. While the former does not create any
problems, the latter has behavioural implications. It is human nature to show
one's performance in a better light than what it actually is. This tendency of an
individual naturally brings about a filtering through conscious or unconscious
altering, withholding or interpreting facts to be transmitted upward.

Dependency syndrome of the subordinate heightens the tendency to filter

information. In a super-subordinate relationship, the subordinate is, generally
speaking, dependent on the superior for his or her advancement. Studies show
that the greater the dependency of the subordinate on superiors for the
satisfaction of personal needs, the more is the tendency to filter information of an
unfavourable kind. It has been found that subordinates are generally unwilling to
communicate unfavourable information when they feel that their superior has the
power to punish them in some way. Only positive aspects of performance are
likely to be communicated upwards.

Another barrier in organisational setting is created by the superior-subordinate

relationship itself which develops a distance between the two. People are more
comfortable with persons similar status as their own. Communication with
persons of higher or lower status is likely to be formal and reticent rather than
informal and free. The distance between the superior and subordinate and the
difficulty in free communication between them tends to be heightened through
status symbols which might be used to show the hierarchical status of the person
concerned. Status symbols within an organization may be in the form of separate
parking space, separate bathrooms, separate refreshment rooms, cabins with
stylized furniture, carpets, etc. Such symbols accentuate the distance between
the different hierarchical levels and tend to widen the communication gap.
Perhaps you may have read that among the several characteristics of Japanese
style of management is the removal of status symbols. For example, under the
Japanese system there are no separate cabins for managers, uniforms for
workers and managers are the same, they eat the same menu in the same
cafeteria. All these are intended to reduce the distance between the workers and
the managers, and bring about a better understanding of the problems of the
organization which is the chief objective of the organizational communication.

As a manager you will be continuously required to make use of your

communication abilities in the performance of your job. Since your success as a
manager will be judged in terms of the results that you produce, the effectiveness
of your communication is, therefore, of prime importance to you. We shall explain
to you next, what you can do to make your communication effective.

14.9 Making Communication Effective

In order to make your inter-personal communication more effective, the
following are some the points that you should bear in mind.

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1. Use direct, simple language and avoid words which can have
ambiguous meanings: Keep the receiver (audience) in mind while choosing the
words and phrases. Your communication will be effective if the words you use
are appropriate for the level of receivers for whom the communication is aimed
at.
2. Use face-to-face communication: Face-to-face communication allows
more accurate feedback to be achieved through two-way communication.
Generally speaking, people express themselves more freely while talking rather
than through writing. Face-to-face communication permits a manager to see and
understand the non-verbal signs also.
3. Use feedback: Feedback enables the sender to judge whether his or her
ideas have been received in the manner as they were originally intended. Most
often it is assumed that communication has taken place because a notice has
been put on the notice board, or an order issued. You must devise ways to
separate fact from distortion.
4. Listen with understanding: The biggest block to interpersonal
communication is said to be the inability to listen intelligently, understandingly
and skillfully to another person. We tend to confuse listening with hearing, which
is a physical process. Listening actually is much more than hearing as it involves
understanding. Real communication takes place when the listener truly hears
and understands the position and intent of the speaker. Most managers are,
however, poor listeners. Apart from other reasons for poor listening performance,
the main reason is the discrepancy in the speeds of speaking and of listening.
While an average person can speak at the rate of 150 words per minute, one can
listen and think at the rate of 1,000 words per minute. The difference obviously
leaves idle time for the mind to wander about and lose some part of the message
that is sought to be conveyed. In order to be a successful manager you must
attempt to develop your listening ability by utilising your idle time in projecting
yourself into the mind of the other party and understanding the factual and
emotional content of the message. This should be done without making any
attempt at criticizing, approving or disapproving it until after you have fully heard
and understood the remarks. The empathetic listening, as it is called, vastly
improves the understanding of both the parties, bringing in its wake improved
interpersonal relation in the organization.
5. Create constructive environment for express of ideas: If you can create
a climate in which people can be confident that what they say will be listened to
with sympathy and considered constructively, you can be sure of a successful
and creative communication. This is, however, possible only in an environment of
trust which has to be generated by management through its policies and actions.
6. Be careful about your non-verbal communication: Because you hold a
status higher than your subordinates, your gestures are observed and 'felt' by
your subordinates. Your body language, therefore, must be supportive of your
communication through words. One of the powerful means of communication is
your actions which speak louder than words. If you expect your communication to
be effective, ensure that your actions are consistent with your words.
7. Develop and use organizational structures which minimize the chances
of filtering the communication: Decentralization of authority and broadening of
span of control can be attempted to reduce the levels in the organization and
minimize the authority filters.

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Check Your Progress - II

1) How would you make personal communication effective?

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2) Write a short note on the barriers of effective communication?

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14.10. Summary
Communication is the transfer of information from one person to another.
Successful communication is much more than mere transfer of information - it is
the transfer of meaning and understanding between two persons.
Communication has paved the way for modem civilization and good
communication is the foundation for sound management. No managerial activity
is possible without communication of some kind, and the major part of a
manager's working time is devoted to communicating. Communication is
accomplished through a process in which the sender encodes an idea which is
transmitted through a channel to a receiver who decodes the message and gains
an understanding of the idea of the sender. The reverse process of feedback
also follows the same pattern. During the entire process, interference is created
by 'noise' which can lead to distortion of the communication.

Communication takes place either orally or in writing. It could be just one-way or

two-way, which allows the sender and receiver to interact with each other. A two-
way communication is regarded well as it brings about understanding through
clarity of the message. In an organization, communication may take place in
several directions - upward, downward, lateral and diagonal. Words either written
or oral convey a very small part of the communication : most of it is transmitted
through non-verbal gestures. A manager ought to be careful lest the non-verbal
gestures contradict his or her verbal message.

Interference in communication is caused by semantic, psychological and

organizational barriers. In order to achieve effectiveness in communication,
managers should consciously try to lower these barriers. Having effective
communication skills is the basic qualifications for any managerial job in
hospitality.

14.11. Glossary
 Communication: The process of transmitting or receiving abstractions
such as ideas or beliefs thought he use of symbols and language.
 Communication Barriers: Physical, psychological and organizational
hindrances resulting into ineffective communication.

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 Communication Networks: Patterns of channels of communication.
 Grapevine: A very powerful informal communication channel.

14.12. ANSWERS TO CHECK YOUR PROGRESS EXERCISE

Check Your Progress - I
1) Write your answer taking into the consideration Section l4.4.
2) Read Section l4.5.

Check Your Progress - II

1) Read Section l4.9.

2) Read Section l4.8.

14.13. REFERENCE / BIBLIOGRAPHY

1. Baskin & Arnoff, 1980. Interpersonal Communication In Organisations.Good
Year Publishing: Santa Monika.

2. Study Material of I.G.N.O.U. (MTM) from Unit 11 – Managerial Communication

of MTM-01 course.

3. Drucker, Peter F.1975/81.Management Tasks, Responsibilities & Practices,

Allied Publishers Pvt. Ltd. New Delhi

4. Gupta R.S., Sharma B.D., Bhalla N.S.,2010.Principles and practices of

Management, Kalyani Publishers, New Delhi.

14.14. Terminal and Model Questions

1. Write a descriptive note on the various channels of communications?

2. Elaborate the merits and demerits of verbal and non verbal communications
for the hospitality organizations?

3. Write a detailed essay on the points to be kept in the mind to make

communication effective?

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UNIT 15: CHARACTERISTICS, IMPORTANCE &
EFFECTIVE PROCESS OF COORDINATION
Structure
15.0 Introduction
15.1 Objectives
15.2 Definition of Management
15.3 Functions of Management
15.4 Nature of Management Functions
15.5 Functions Of Various Management Levels
15.6 Co-Ordination and Co-Operation
15.7 Need for Co-Ordination
15.8 Techniques Of Effective Co-Ordination
15.9 Questions
15.10 Summary
15.11 Exercises
15.12 Bibliography

15.0 Introduction
Management is a process of taking managerial decision and putting them into
action. It determines the objectives of the organization and takes steps to
achieve them. It is concerned with motivation of the employees. Management is
the brain of any organization because it takes decision, makes policies, rules and
regulations.
Management deals with five factors of production viz: MEN, MACHINE, MONEY,
MATERIALS and METHODS. The success of a management depends upon how
nicely these limited factors have been used. The optimum use of these resources
defines company's prosperity.
Management is universal in the modern industrial world. Every organization
requires taking of decisions, co-ordination of activities, handling of people and
evaluation of performance of those directed towards attainment of objectives.
The old master-servant relationship between the manager and the managed has
undergone a great change. Today people have higher expectations from their
jobs. Modern management helps in achieving these.

15.1 Objectives
 Understand the basics of management.
 Explain the different approaches to management and the standard cycle
of the management process.
 Identify the nature of, management in the terms of it being art or science.
 importance of co-ordination in an organization

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15.2 Definition of Management
Modern business is complex and complicated. It not only requires high
degree of technical & professional ability but also managerial abilities. It requires
efficient & effective- management to tackle the complex business. We have seen
in Chapter 1 that the general approach of studying management is to treat it as a
process, and a process is the systematic handling of activities. Management as a
process comprises various functions which should be performed to get the things
done. However, what these functions are, there is divergence of opinions. The
basic reasons for this diversity are as follows:

1. There is no complete agreement among the authors-both academicians and

practitioners-about what functions are performed by managers.
2. Various terms and functions have not been defined with sufficient degree of
precision and it is often difficult to know what a writer means by a given con-
cept.
3. Various terms and functions have been derived based on managerial experi-
ences rather than from systematic researches. Naturally, observations of
one manager may differ from others.
Because of the factors noted above, different writers have defined in
different ways ‘what managers do’. These different ways may be grouped in two
categories:

1. Functions approach or management functions.

2. Role approach or management role.

15.3 Functions of Management

The classical analysis, which is the basis for management analysis, takes
various functions which managers at all levels of the organization perform in
order to achieve organizational objectives. A function is a group of similar
activities. However, what functions are undertaken by managers in organizations,
there is divergence of views. The list of management functions varies from author
to author with the number of functions varying from three to eight. Table presents
the management functions identified by various writers.

TABLE: Management functions

Writers Management functions

1. Henry Fayol Planning, organizing, commanding, coordinating, controlling.
2. Luther Gulick POSDCORB- planning, organizing, staffing, directing,
coordinating, reporting, and budgeting.
3. Lyndall Urwick Planning, organising, commanding, coordinating, commu-
nicating, forecasting, and investigating.
4. Ralph Davis Planning, organizing, controlling.
5. E.F.L Brech Planning, organizing, motivating, coordinating, controlling.
6. Koontz & O’Donnell Planning, organizing, staffing, leading (directing), controlling

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Besides the above functions, various authors have presented other
classifications of management functions which are presented in a combined from
in table

Table: Combined list of management functions

Planning Commanding

Formulating purpose Activating

Decision making Securing efforts

Innovating Communicating

Organizing Controlling

Staffing Investigating

Appraising Evaluating

Directing Coordinating

Leading Representing

Motivating Administering

The list is very long. However, this can be shortened by combining some
functions into one. For example, directing may include leading, motivating,
communicating, commanding, activating and securing efforts. Similarly, planning
may include formulating purpose, innovating; investigating may fall under
planning and controlling and so on. Taking the classification of management
functions in this way, unanimity prevails in respect of three functions, viz.,
planning, organizing and controlling. However, to get the things done by others
requires some sort of directing human behaviour to purposeful activities.
Therefore, directing can be considered like the above three functions. Some
authors have carved out a fifth function as staffing by splitting the social aspect of
organizing. However, this has acquired great importance in the context of the
manager;s responsibility for getting human resources in the organization. Thus,
managerial functions may broadly be grouped into planning, organizing, staffing,
directing and controlling. Some authors add coordinating in this list but this is not
a separate function of management and it can be treated as essence of
management since the basic objective of all managerial functions is to achieve
coordination in organized efforts. A detailed discussion of each of these functions
will take place in separate parts; here a brief discussion is given about what each
function includes.

15.3.1 Planning
Planning is the conscious determination of future course of action. This
involves why an action, what action, how to take action, and when to take action.
Thus, planning includes determination of specific objectives, determining projects
and programmes, setting policies and strategies, setting rules and procedures,

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and preparing budgets. Based on the futurity involved in the planning process,
plans may be prepared for long-term period, usually five years or more,
intermediate-term usually 2-5 years, or short-term period usually for one year.
Plans for these three periods are coordinated and a longer-term plan provides
basis for shorter-term plan.

15.3.2 Organizing
Organizing is the process of dividing work into convenient tasks or duties,
grouping of such duties in the form of positions, grouping of various positions into
departments and sections, assigning duties to individual positions, and
delegating authority to each position so that the work is carried out as planned.
Organizing function can be viewed as a bridge connecting the conceptual idea
developed in creating and planning to the specific means for accomplishing these
ideas. Organizing function contributes to the efficiency of the organization by
ensuring that all necessary activities will be performed and objectives are
achieved.

15.3.3. Staffing
Staffing involves manning the various positions created by the organizing
process. It includes preparing inventory of personnel available and identifying the
gap between manpower required and available, identifying the sources from
where people will be selected, selecting people, training and developing them,
fixing financial compensation, appraising them periodically, etc. There is a
controversy whether staffing function is to be performed by all managers in the
organization or it is to be handled by personnel department which looks after the
personal matters enumerated above. The controversy can be settled because
staffing function is too complicated and time-consuming. To make it convenient,
some processes of staffing are completed by personnel department. In doing so,
it facilitates the performance of staffing function by managers in the organization.
For example, managers are required to appraise the performance of their
subordinates. Personnel department can facilitate this function by prescribing
and supplying the proforma for this appraisal so that there is uniformity in
appraisal system throughout the organization. Similar support can be provided by
personnel department in other aspects of staffing.

15.3.4 Directing
When people are available in the organization, they must know what they
are expected to do in the organization. Superior managers fulfil this requirement
by communicating to subordinates about their expected behaviour. Once sub-
ordinates are oriented, the superiors have continuous responsibility of guiding
and leading them for better work performance and motivating them to work with
zeal and enthusiasm. Thus, directing includes communicating, motivating and
leading

15.3.5. Controlling
Controlling involves identification of actual results, comparison of actual
results with expected results as set by planning process, identification of

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deviation between the two, if any, and taking of corrective action so that actual
results match with expected results. It brings to light all bottlenecks in work
performance and operates as straight pointer to the needs of the situation.

15.4 Nature of Management Functions

Nature of management functions can be identified in terms of their being
universal, their iterative characteristics, sequential arrangement and relative
importance.

1. Management functions are universal in. the sense that a manager has to
perform all these functions in the organization irrespective of his level or type
of organization. Acting in their managerial capacity, chief executives,
departmental heads, foremen, supervisors, etc., all do the same thing.
Similarly, whether it is business organization or non-business organization,
the managerial functions are involved.
2. Management functions have iterative quality, that is, they are contained
within each other. For example, planning, organizing, directing and
controlling may occur within staffing function. Similarly, organizing may
involve planning, directing and controlling. We hear planning and controlling
of organizational design (a part of organizing process). Thus, all
management functions can be thought of as sub-functions of each other,
3. Although management process suggests a sequential arrangement of
functions, it is not always possible in the performance of managerial
functions strictly in a sequence. Sequential concept may be true for initiating
managerial functions in a new organization, to begin with. For an on-going
organization, it is not necessary to insist on a special time sequence for the
various functions of management process.
This process may start from any point, not necessarily from planning, and
end at any point. Moreover, several functions may be performed at the same
time. For example, while giving direction through communication to subordi-
nate, a superior manager also appraises (staffing function) his subordinate
as how carefully he is grasping the ideas.

4. Since there are many managerial functions, often a question arises: which
management function is more important so that managers devote more time
to that. This question is quite vital but it cannot be pointed out categorically
that a particular management function is more important than others. In fact,
no function is more important but the mix of the functions varies from task to
task and from level to level of management. Therefore, the relative
importance of management functions can be identified in the context of
management levels. This analysis will bring the clue for training and
developing the managers at various levels for the performance of specific
managerial functions.
Before we trace out the relative importance of different functions at
various levels of management, it may be worthwhile to identify the roles that
managers perform in the organizations.

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15.5 Functions of Various Management Levels
We have seen earlier that five management functions - planning,
organizing, staffing, directing, and controlling - are performed by every manager
in an organization. However, the relative importance of these functions varies
along the managerial levels. People of an organization are arranged in a
hierarchy and they all have the relationship of superior-subordinate, except the
person at the top-most position who is superior alone and person at the lowest
level who is subordinate alone. Thus, there will be as many levels in the
organization as the number of superiors in a line of command. From this point of
view, there can be many levels. From analysis point of view, some of the levels
can be merged into one on the basis of nature of functions performed and
authority enjoyed. However, there is no unanimity over the broad category of
management levels. For example, Keith Davis has classified various levels of
management as trusteeship management, departmental management, middle
management and supervisory management. Litterer has a different type of clas-
sification when he classifies the management levels into institutional (trusteeship)
level, general management (facilitating) level, and departmental management
(integrating) level. The last category includes foremen and other supervisory
personnel. Brech has classified management levels into three categories: top
management, middle management and supervisory level.6 m fact, this
classification is more suitable from analysis point of view/hence taken for further
discussion. Various positions of an organisation can be put under three levels as
shown in Figure.

Management

Top Management Middle Management Supervisory

Management

Board of directors Departmental heads Senior supervisors

Chairman Divisional heads Intermediate supervisors

Chief executive Sectional heads Front-line supervisors

Figure: Levels of Management

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15.5.1 Top Management
Top management of an organisation consists of board of directors,
chairman and chief executive officer. Generally, chairman and chief executive
officer positions are combined into one. At other times, chairman remains part-
time in the organisation. At top management level, environment of the
organisation is evaluated and basic goals of the organisation are established to
fit the environmental appraisal, resources available at the disposal of the
organisation, and needs of the organizational members.

Top management integrates the functions of the whole organisation. It is

responsible for overall management and performs all such functions which are
necessary for this. These functions may be grouped into three categories: overall
management, overall operations, and overall relationship. Overall management
includes determination of organizational goals and objectives, overall planning,
organizing, staffing directing and controlling. Through these functions, it tries to
integrate the organisation with the environment, .balance interests of various
groups, and is responsible for overall results. In overall operation, it translates
organizational plans into action, creates environment for work performance, and
coordinates departmental heads. In overall relationship, it requires maintaining
relationship with elements in organization’s environment like government, trade
associations, suppliers, financial institutions, etc.

Within the top level management, functions of board of directors and chief
executive differ because board is constituted by persons taken from outside the
organisation also while chief executive is a regular employee of the organisation.

15.5.2 Functions of Board of Directors:

A board is elected by the owners (shareholders) and is responsible to
them as their agent for managing the affairs of the organisation. Board has
authority to manage subject to the limitations imposed by the Memorandum of
Association and Articles of Association of the company as well as the provisions
of the Companies Act. There are numerous areas of responsibility which are
generally recognized as constituting the functions and power of the board of
directors. These responsibilities and functions may differ on the basis of board
composition and its relationship with the company so far as management is
concerned. Some companies emphasize only on the legal aspects of board
functions while in many cases, the board really participates in the management
of the company.

Various functions of board of directors can be divided into six categories:

(i) trusteeship function, implying that board must use the property of the
company; (ii) determination of basic objectives and policies of the organisation;
(Hi) selection of top executives and determination of overall organisation
structure; (iv) approval of financial matters like approval of budget, appropriation
of corporate earnings, etc.; (v) checks and controls over top managers; and (vi)
legal functions as provided under the provisions of the Companies Act which
include liabilities towards outsiders, towards the company and criminal liabilities.

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15.5.3 Functions of Chief Executive:
Chief executive is a person whose responsibility is to make major
decisions for the organisation as a whole because he is responsible for overall
management. In an organisation, there may be chief executive alone, or there
may be multiple chief executives sharing the responsibility of overall
management particularly in very large organizations. Where the system of
multiple chief executives is followed, they act in the following capacity
irrespective of their actual titles in the organisation.

Chief executive alone

Multiple chief executive
Chief executive—Chief operating officer.
Chief executive—chief operating officer—Chief staff officer
Executive group

15.6 Co-Ordination and Co-Operation

Co-ordination is much more than mere co-operation. Co-operation
indicates merely the willingness of individuals to help each other. Co-operation is
essential for the achievement of co-ordination but it cannot be substituted for co-
ordination. Co-ordination is a much wider term than co-operation. Co-ordination
makes possible a total accomplishment in excess of the sum of individual parts.
Co-ordination is co-operation plus integration. Co-operation is the result of
voluntary attitude of the participants. Co-ordination, on the other hand does not
come about unless it is deliberately planned by the management. It consists of
co-operation plus something i.e. elements of time, quantity and direction.

The members of a group may be willing to help each other but unless
they supplement each other's efforts, group efforts cannot be successful. G.R.
Terry has nicely explained the distinction between co-ordination and co-operation
with the help of following illustration. A boy wishing to take an early morning train
at 4 a.m. set his alarm clock at 15 a.m. before going to bed. His father, knowing
of his son's desire to take the early morning train, went to his bedroom and
turned the alarm by half an hour to 2.30 a.m. so that his son may not miss his

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train. His mother also did the same thing and set the clock at 2 a.m. As a result,
the son got up two hours earlier and lost the much needed sleep by one hour.
There has been co-operation between son and his parents, but there was no co-
ordination. Co-operation can be the result of voluntary attitudes but co-ordination
is generally created through deliberate action on the part of management. The
above illustration shows co-operation among the actions of the son, father and
mother, but there is lack of co-ordination among them.

Distinction between co-ordination and co-operation

Basis of
Co-ordination Co-operation
Difference
1 Meaning It is a proper method of group It is a collective and
efforts to provide unity of voluntary action of group of
action to achieve the goals of persons towards the
the enterprise. common goal.
2 Nature It is the result of conscious It happens through voluntary
efforts on the part of the efforts of the individuals.
management.
3 Scope Its scope is broader than co- It is an important element of
operation. the co-ordination.
4 Purpose Its purpose is to attain the goals Its main purpose is mutual
of the enterprise efficiently and help.
economically by group efforts.
5 Performance It is accomplished in the various It is sought by the people
functions of management working together by their
through the deliberate efforts voluntary actions.
made by the executives.

15.7 Need for Co-Ordination

The importance of co-ordination lies in the point that it is one word in
which all management functions can be summarized. When the group efforts are
co-coordinated, it results in greater effort than the sum total of individual and
isolated efforts. It gives fillip to the morale of the employees and provides them
job satisfaction. Co-ordination is an end result of all efforts, activities and forces
(internal as well as external) to the enterprise. Inside the enterprise, it combines
various resources i.e., men, money, material, etc. to achieve the objectives of the
enterprise. Outside the enterprise, it is needed to create an environment
favourable to the enterprise by giving due consideration to the regulation of the
Government, technological advances and the wants and desires of the
consumers, workers and owners.

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15.7.1. Specialization
An organisation is dividend into various departments and each
department is headed by a specialist. Each specialist tries to over emphasis his
role. Co-ordination of diverse activities of various departments is of utmost
importance otherwise there may be utter confusion and chaos.
15.7.2 Conflicting individual and organisation goals
It is very important for every enterprise to bring about co-ordination
between organisation goals and individual goals. If an individual is diverting from
the path of organisation goals, he may be told immediately to mend his ways and
try to achieve the objectives of the organisation.
15.7.3 Line and staff structure
The creation of line and staff structure in an organisation also creates
problems of co- ordination. The staff officers may confuse their authority with line
officers. Thus, co-ordination is necessary between line and staff officers for
achieving the goals of enterprise.
15.7.4 Personality politics
In every enterprise rival groups of people can be formed. There is a need
of bringing about co- ordination among the rival groups which sometimes try to
sabotage the co-ordination process.
15.7.5 Different outlook
Each individual in an organisation is a complex and unique personality.
Individuals assess and interpret organisation goals' from their own view points.
Hence, management has to co-ordinate the activities of these individuals
15.7.6 Co-ordination is necessary for increasing efficiency
Co-ordination ensures a proper tempo for the whole organisation. A co-
ordinated group effort helps to make an optimum use of all the resources. It,
therefore, increases the efficiency.

15.8 Techniques of Effective Co-Ordination

Co-ordination implies the synchronization of all the activities of the
business so as to achieve the pre-determined goals. According to Louis Alien, “A
manager, in managing, must co- ordinate the work for which he is accountable by
balancing, timing and integrating”.

The following are the techniques of co-ordination :

1) Defining clearly authority and responsibility.

2) Formulation of clear cut policies and procedures.
3) Mutual communication
4) Existence of community of interest.
5) Effective leadership
6) Effective control

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7) Voluntary co-operation
8) Sound organisation structure
9) Organisation manuals
10) Balancing, timing and integrating
15.8.1 Defining clearly authority and responsibility
In an organisation there are several vertical and horizontal authority
relationships. Authority flows from top to the bottom. Confusion regarding
authority increases the problems of co-ordination manifold because responsibility
can be fixed only when the authority and its source is clearly demarcated.
15.8.2 Formulation of clear cut Policies and Procedures
Co-ordination becomes very easy if there are clear cut and well defined
policies and procedures. It will ensure unity of action. The subjective handling of
the problems is completely ruled out when set policies and procedures have
been established.
15.8.3 Mutual Communication
Effective communication is essential for co-ordination. Direct
communication helps to resolve the individual and departmental difference.
Various types of communication include departmental news, reports bulletin,
group or committee meetings etc. Through discussion, mutual exchange of ideas
takes place and it helps in bringing harmony among the different departments of
an enterprise.
15.8.4 Existence of Community of Interest
In order to have an effective co-ordination, it is essential that there should be a
common understanding of the main objectives of the organisation. Every member
of the organisation must consider his individual interests subordinate to the
interests of the organisation.
15.8.5 Effective Leaderships
A good leader creates confidence among his subordinates and effectively
resolves differences, if any, of the people working under him. Effective leadership
is sure to promote co-ordination at all levels beginning from the planning stage to
the implementation stage.
15.8.6 Effective Control
When an integrated control system is in existence, it automatically
ensures coordinated group efforts. With the help of control charts, the
management can immediately come to know the degree to which the various
activities have been coordinated. For example, effective control can be exercised
if a system of Budgetary Control is followed. In the light of the ‘key factor’, the
priority of the budgets is decided. Generally all activities move around sales and
sales budget is prepared first of all. All other budgets depend on this budget.
Effective control is exercised through these budgets so as to ensure a
coordinated functioning of the organisation as a whole.

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15.8.7 Voluntary Co-operation
Voluntary co-operation facilitates co-ordination. If all the members of the
organisation work as a team, the results can automatically follow. For example, a
well composed football team or a hockey team produces better results than a
team which though playing co-operatively, play uncoordinated. Whenever
conditions are ideal, the management should try to secure voluntary co-operation
from .the members of the organisation.

15.8.8 Sound Organisation Structure

It is very essential for co- ordination that there should be sound
organisation structure. There should be organisation charts, job descriptions,
work manuals etc, as these help to a great extent in securing co- ordination.
Generally we find a conflict between line and staff positions. A sound
organisation structure helps in securing co- ordination.

15.8.9 Organisation manuals :

Organisation manuals are drawn by large scale organisation for the
organisation as a whole and then for different departments and sections. These
manuals lay down the general philosophy of the organisation and serve as a
guide to the understanding of the business and appreciation of the role of each
section or department.

15.8.10 Appointment of Liaison Officers :

Certain organizations also appoint liaison officers who act to serve as a.
link between two individuals or departments and co-ordinate the activities of
different individuals.

15.9 Questions
1) Define co-ordination. Discuss features and objectives of co-ordination.
2) What are the elements of Co-ordination? Explain the need and
importance of co-ordination.
3) What do you understand by Co-ordination? Discuss the techniques to
achieve co-ordination.
4) Describe the reasons for achieving co-ordination between Co-ordination
and Co-operation.
5) Co-ordination is the essence of management. Comment.
6) Explain the importance and principles of Co-ordination.
7) Write short notes on the following :
I. Features/Characteristics of Co-ordination
II. Elements of Co-ordination.
III. Objectives of Co-ordination.
IV. Need for Co-ordination.
V. Techniques of Co-ordination.
VI. Vertical and horizontal Co-ordination.
VII. Distinguish between co-ordination and co-operations.
VIII. Co-ordination is the essence of management.

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15.10 Summary
 Management is creating an internal environment at work place where
people working together in groups can perform effectively & efficiently
towards the achievement of the group goals.
 Management is social, inexact & soft science. This is because other
sciences deal with inactive elements while management deals with
human element.
 Management process includes Planning, organizing, Staffing, Directing &
Controlling.

15.11 Exercises
 Define Management & explain the features.
 Explain in brief purpose & scope of management.
 Is Management Art or Science? Discuss.

15.12 Bibliography
 Management by Peter Drucker
 Principles t& Practices of Management by L.M.Prasad

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UNIT 16: CONTROLLING - ESSENCE AND
TECHNIQUES
Structure
16.1 Introduction
16.2 Objectives
16.3 Nature & Objectives of Control
16.4 Importance of Control
16.5 Essential elements & process of control
16.6 Types of Control
16.7 Principles of an Effective Control System
16.8 Methods of Control
16.9 Summary

16.1 Introduction
In the previous units you have gained knowledge about the Directing,
Motivations, Leadership and communication. A present Unit start with a
discussion on various aspects related to control and then goes on to discuss the
principles of controlling. We hope you will be able to apply them in relation to
tourism management and operations.

Tourism management as well as tourism operations require extra-ordinary care

in order to satisfy the tourists. This means that the operations not only have to be
managed well but they require certain other necessary inputs. Keeping this in
view, we introduce to you in this Unit management function of controlling.
Whether it is a tour operator, a travel agency, a hotel, a government tourism
organisation or any other firm operating in the tourism sector, it has to devise
certain methods for controlling not only to earn profits for the firm but also to
provide better services to the customers.

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16.2 Objectives
After reading this Unit, you will be able to:

• Understand the nature and purpose of control,

• examine the prerequisites and characteristics of control,

• describe the control process,

• analyse the methods and managerial strategies of control,

16.3 Nature & Objectives of Control

The characteristics of control are discussed below which reflect its
nature:
1. Important Management Function: Control is an indispensable
function of management. It is a follow up action taken to achieve the
efficiency of other managerial functions. Control is affected by other functions
and in turn it affects the other functions of management. Every manager
has to exercise control irrespective of the level of his authority and the
nature of job.
2. Continuous Process: Control is continuous or regular process.
Management has to be continuously vigilant to ensure that the enterprise
is following a right path. Management must continuously review and
improve upon the actual performance in order to achieve the predetermined
objectives.
3. Mechanism: It is a mechanism according to which something or
somebody is directed to follow the predetermined course. In a business
enterprise it is the job of a manager to control performance of work and
workers placed under his charge.
4. Dynamic Process: Control is not static but flexible. A control system
can be effective only when it goes on changing according to the needs and
conditions of the enterprise, It includes not only a review of the
performance but adjustment of plans too.
5. Forward-Looking: Control is forward looking because one can control
further happenings and not the past. It seeks to improve future events
through past experience. A control system is formulated to minimize
wastage, losses and undesirable deviations from the fixed standards.
Control also helps in innovations and improvements in the set standards.
6. Action-Oriented: The essence of control is the corrective action that
brings plans and performance close to each other. The whole exercise of
managerial process is taken to arrive at organizational objectives set by the
planning process. For this purpose, actions and further actions are
necessary; each time there may be correction and change in the actions
depending upon the information provided by control procedure.
7. Co-ordinate-integrated System: A control system is a co-ordinate-
integrated system. This stresses that data collected for one purpose may

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differ from those with another purpose. These data should be reconciled
with one another. In this sense, control system is a single system but it is
better to think of it as a set of interlocking sub-systems.

The various objectives of controlling are discussed below:

1. To find out what is happening or what has actually happened in the

enterprise;
2. To assure that the work is performed according to the
predetermined standards, and the desired results are achieved;
3. To increase the efficiency of operations by minimizing Irrelevant and
wasteful actions;
4. To decide the corrective actions, if any, needed for the attainment of
goals with a minimum of time, effort and expense; and
5. To co-ordinate different activities and effort.

16.4 Importance of Control

Managerial control is essential to efficient management. It helps

the managers to measure actual performance and guide it towards the
achievement of predetermined goals. It is important activity in any
business enterprise. Just as road signals are necessary at a busy road
crossing to ensure accident free and smooth flow of traffic, management
control devices are necessary in an organization for the attainment of its
goals. According to Terry, ''Effective controlling assists in the efforts to
regulate tire planned performance to assure that performance takes place
as planned”. The various reasons for the need and importance of
control are given below:
1. Efficient Execution: Control is an important pre-requisite for an
effective and efficient implementation of the pre-determined plans. It
assists in determining variations, pinpointing the factors responsible
for them and taking remedial measures.
2. Helps Delegation: Control can be meaningful only when it is
preceded by proper delegation of authority and duties. Thus, it
promotes delegation of authority to the employees at lower levels. In
this way they develop a sense of involvement in the working of an
organization.
3. Aid to Decentralization: The modern trend of business organizations
is towards decentralization which calls for a systematic attempt for
controlling. Under decentralization, the authority of decision making is
dispersed throughout the organization. Management must keep
control in its hands to know whether the authority is being used
properly. Without adequate controls, decentralization cannot succeed.
4. Assist Co-ordination: The size of modern business enterprises is
increasing. A huge amount of capital and large number at people are
employed in them. This creates the problem of adequate control as
there are many divisions producing and distributing different products.

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In order to co-ordinate their activities, an efficient system of control is
required.
5. Simplifies Supervision: Control simplifies supervision by pinpointing
significant deviations. It keeps the employees under check and brings
discipline among them. A good system of control detects the weak
points very quickly. This helps the expansion of span of control at all
levels.
6. Aids to Efficiency: Basically, control is concerned with ensuring that
all the important factors in the enterprise move along the right lines
and at the right pace. This assists in promoting all round efficiency.
7. Boosts Morale: Control techniques help in finding the deviations and
identifying the factors responsible for the same. This boosts the
morale of the employees because they know the work for which they
are to be held responsible.

16.5 Essential Elements & Process of Control

Control is the process of assuring the efficient accomplishment of enterprise
objectives. In the turbulent environment faced by management, control is
necessary to anticipate problems, measure performance against standards, take
corrective actions for deviations from plans and if necessary, modify plans. The
term control may have some negative connotations for some. But, in the
management process, it is a facilitating function aiding the organisation to
accomplish the set objectives.

The primary responsibility for exercising control rests with every manager
charged with the execution of plans. As Henry Fayol said, “In an undertaking,
control consists in verifying whether everything occurs in conformity with
the plans adopted, the instructions issued and principles established. Its
object is to point out weaknesses and errors in order to rectify them and
prevent recurrence. It operates on everything, things, people, actions”. It is
wrong to assume that only top management has the responsibility for control and
that there is little need for control at lower levels of management. While the
scope for control may vary to some extent depending upon the position of an
employee in the hierarchy, all those who have responsibility for the execution of
plans need to exercise control too.

Control is closely linked with other functions of management because

control may be influenced by other functions and may influence other
functions too, often it is said 'planning is the basis, action is the essence,
delegation is the key and information is the guide for control'. This shows
that the following elements are essential to the operation of the control
system:
1. Planning: Planning and control are closely linked with each other,
Planning without control is meaningless and control without planning is
blind. Planning provides the basis for control. Control brings to light all
bottlenecks to work performance and operates as a straight pointer to the
needs of the situation. It is, thus closely related to the planning function of
the manager. Control is the result of particular plans, goals or politics.

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Thus, planning offers and affects control. Properly conceived plans
become important elements in bringing effective control.
2. Action: Control implies what actions can be taken to correct the
variation that may occur between standards and actual results.
Certainly, it should assume the role of a fire brigade who moves into
action only when the fire actually breaks out. But deviations may occur
in spite of the best of guidance from the manager. In such a situation,
the manager should be quick to act. He should be quick not only in
identifying deviations, but also in rectifying them. Thus, control means
action to correct variations or actions to prevent such deviations in
future.
3. Delegation of Authority: Delegation of authority merely means
granting of authority/power to subordinates to operate within
prescribed limits. Control implies authority to get performance and detect
deviations and also to take the necessary corrective action. A manager
cannot exercise control without adequate authority. He has to control
the operations which are exercised by taking action and action may be
taken within the limits of the authority. The best policy of delegation is
the matching of responsibility and authority. It suggests that a manager
must have corresponding authority as compared to his responsibility.
4. Information: For effective control, there must be a prompt flow of
information to the manager. Every manager in the organization must
have adequate information about his performance, standards, and how
he is contributing to the achievement of organizational objectives. The
system of communication to the manager is called "feedback". An
effective feedback helps the manager to know where and when
deviation from any plan has taken place. He can then initiate prompt
corrective action. Promptness in reporting is vital to quick remedial
action.
The control process involves the following three steps:

1. Establishing Standards: Standards mean criteria of performance. They can

be based on past performance, managerial judgement or scientific analysis. They
are used to measure performance and judge success or failure. Standards may
be of many kinds and include verifiable goals set in qualitative or quantitative
terms. An organisation can establish standards in such areas as :
• Profitability
• Productivity
• Market Share
• Worker Performance
• Quality
• Innovation
• Customer Care
• Social Responsibility, etc.

2. Measuring of Performance: Essentially, it is a comparison between “what is”

and “what should be” the performance. Ideally, measurement should be done on

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a forward-looking basis to predict probable deviations from standards rather than
merely be used as a post mortem exercise. To the extent prediction becomes
possible; control becomes effective because appropriate actions can be taken
well in advance of their actual occurrence.
3. Reinforcing Success/Correcting Deviations: When plans and organisation
structures are clear, it is easy to reinforce success and avoid failures. When
deviations are noticed or apprehended based on warning signs, the reasons can
be analysed and appropriate corrective actions taken promptly.

Check Your Progress - I

1) Write a short note on the objectives of controlling.

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2) Write in short about the process of controlling.

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16.6 Types of Control

There are two types of control: (a) Direct Control (b) Indirect Control

(a) Direct Control: The control such as cost control, quality control and
budgetary control are termed as direct control. The control is called direct
as results can be directly compared.
(b) Indirect Control: It refers to establishing a system of control
mechanism whereby the control is automatically maintained.
Controls can also be classified as physical control and financial control.
(i) Physical Control: The physical control seeks to control quality and
quantity. Output may be fixed per day or per man in terms of quantity.
Quality standards may be fixed such as hardness of steel or fastness
of colour etc.
(ii) Financial Control: Such a control is expressed in terms of monetary
value such as cost per unit of output or per unit of labour or sale price
per unit etc.
Sometimes physical as well as financial controls may be jointly applied as
in the case of budgetary control. Physical as well as financial standards
are fixed in advance and actual performance is compared with the
standards.
Other Classification: Control can also be classified on the various
activities of the business enterprise such as policy control, inventory
control etc.

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16.7 Principles of an effective control system

An ideal system of control is that which makes the controlling function

easy, effective and smooth. The following are the essentials or basic
requirements or principles of an ideal control system:

1. Suitability: The control system should be appropriate to the needs,

kind of activity and circumstances of an enterprise. Control is executed
through managerial position. The flow of information concerning current
performance should correspond with the organizational structure
employed. So that deviations may be reported according to job positions
at different levels of the organization.
2. Simplicity: To be effective, control system must be clear, easy to
understand and operate. Unless the control system is understood properly
by those responsible for its implementation 1t cannot succeed. A complex
system will not only create hurdles in the performance of activities, but it
will also not bring the results expected of it.
3. Objectivity: The fixation of standards, measurement of performance
and corrective action must be objective and impersonal. Subjective and
arbitrary control cannot be effective. It is essential that the standards to
judge the actual performance are clear, definite and stated in numerical
terms.
4. Economical: The systems of control must be worth their costs.
They must justify the expenses involved. The cost of control system
should not exceed the possible savings from its use. The complicated
control system should be avoided to keep a check on the costs of
control. It, therefore, becomes essential to concentrate the control system on
factors which are important to keep the costs down and make the
system economical.
5. Flexibility: The system of control must be flexible, i.e., workable
even if the plans have to be changed. A good control system must
keep pace with the continuously changing pattern of a dynamic
business world. It must be responsive to changing conditions. Control
system should be flexible so that it can be adjusted to any modification or
alteration in a plan.
6. Quick Reporting: Time is an important element in enforcing a
control system. Subordinates should inform their superiors quickly with
actual results and all deviations from standards. Delays in reporting of
information will make control ineffective. Promptness is also needed in
initiating the corrective action. Quick reporting helps in the timely
disposal of deviations.
7. Suggestive: A control system should not only measure performance
and detect deviations; it should suggest remedial measures as well. In
other words, good control system should be self-correcting. In fact, a
control system can be effective only when it is considered as part of the
internal working and not as a mechanism, operating from outside.
8. Forward-looking: The control system should be directed towards
future. In fact, the control system can at times be so devised as to

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anticipate possible deviations or problems. It should be preventive and
not merely corrective Ideal control is spontaneous. Cash forecasts and
cash control is an example where a financial manager can forecast the
future cash needs and provide for in advance.
9. Individual Responsibility: Control can be effective when it focuses
on individuals rather than on jobs or works.
10. Strategic Point Control: All deviations from standards are not of
equal importance. Hence, to control all deviations is not desirable.
Therefore, the control system should focus on key, critical or strategic
points which require management attention. Effective and efficient
control is control by exception. Uncontrollable deviations need not be
given much care and thought.
11. Self – Control: Different departments may be asked to control
themselves. If a department can have its own control system, much of
the detailed controls can be handled within the department. These sub-
systems of self control can then be tied together for an overall control
system.
12. Feedback: It means information on previous performance. For
effective control, regular flow of information regarding the actual
performance is necessary. Feedback can be supplied through personal
contact, observation or reports. Automatic feedback assists in taking
corrective action at the right time or in adjusting future operations.

16.8 Methods of Control

Aurthur Bedeian discusses nine methods of control and classifies them into
three categories based on their frequency of use:

1) Constantly Used Control Methods: Self-control, group control and policies,

procedures and rules.
2) Periodically Used Control Methods: Management Information Systems,
External Audits and Budgets.
3) Occasionally Used Control Methods: Special reports, personal observation
and project control. The nine methods of control mentioned above are briefly
discussed hereunder.

1) Constantly Used Control Methods:

i. Self- Control: Managers need to exercise more self-control to minimise the
need for other control methods and making control in the organisation acceptable
and effective. Self-control means giving a fair day’s work for a fair day’s pay,
reporting to work on time, discharging duties and responsibility properly and
respecting the rights of others in the organisation. Respect for self-control in an
organisation can be a motivating factor. A sense of appreciation for self-control
can be promoted among employees through training in behaviour modification.
ii. Group Control: Work groups are a source of control. Group-defined norms
exert greater influence in organisations than the norms that managements may
choose to set unilaterally and thrust on groups. Group norms and group control

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can aid or hinder formal authority. Organisations would do well to develop and
use group control processes to reinforce formal authority. While in some
organisations group control processes helped increase output and improve
quality, in others they resulted in restricting output. For group norms to contribute
to organisational goals, there should be a climate of trust and openness, a
culture of cooperation than confrontation. Quality circle, quality of work life
programmes and work redesign experiments being taken up in some
organisations are examples that point to organisational thrust towards reinforcing
group control processes for achieving organisational goals through integration of
members’ interests with those of the organisation.
iii.Policies/Procedures/Rules: These are essentially bureaucratic control
mechanisms referred to in the discussion on control strategies. They reflect past
managerial experience and include a variety of aspects concerning how to make
certain decisions, deal with resources, etc. If the policies, procedures and rules
are properly formulated, clearly communicated and implemented consistently
throughout the organisation, they can be effective in controlling individual and
work group behaviour.

2) Periodically Used Controls Methods:

i. Management Information Systems: A Management Information System is
a mechanism designed to collect, combine, compare, analyse and
disseminate data in the form of information. As such, management
information systems link the various decision-making centres within an
enterprise and serves a useful function in providing feedback for control
purposes.
ii. External Audits: The annual financial audit by an outside accounting firm is
one form of external audit, mainly of the finances of an organisation.
Forward looking progressive private companies have in the past
sought to have a social audit, not for evaluating financial performance,
but to find out whether and how well they have been discharging their
social obligations.
iii. Budgets: Budgets are plans that deal with the future allocation and
utilisation of various resources to different enterprise activities over a given
period of time. Budgets help establish plans and also serve as the basis for
measuring or evaluating the standards of performance. Budgetary control is
a good example of bureaucratic control strategy.
3) Occasionally Used Control Methods:

i. Special Reports: These have a special role. Special reports can be

commissioned by an organisation when its normal control systems point to
the need for detailed investigation or study of a particular operational aspect.
When major policy decisions of strategic importance are taken, special
reports may be commissioned. These include situations where the
organisations find the need for overcoming the existing difficulties,
modernisation, expansion, diversification, merger, acquisition etc. Special
reports vary in content and style depending upon the purpose. They could
be prepared internally by managers in the organisation or by consultants or
outside institutions. Special reports are a valuable method for controlling in

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turbulent environments, warranting changes in products and markets,
technology and production processes, organisational structure, etc.
ii. Personal Observation: Managers can know what is happening in an
organisation by relying on information provided by others as also by finding
out for themselves. Firsthand knowledge has to be critical to be effective.
iii. Project Controls: Various methods have been developed for controlling
specific enterprise projects. The best example is the network analysis using
the PERT tool. PERT is an acronym for Programme Evaluation and Review
Technique. It is a diagram showing the inter-relationships between the events
and activities that comprise a project. It is a detailed, easy-to-communicate
means for determining current status of a project, stimulate alternative plans
and schedules and controlling activities.

Check Your Progress - II

1) Write a short note on various types of control systems.

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2) Describe the Constantly Used Control Methods.

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16.9. Summary
We have observed that control is the process of assuring the efficient
accomplishment of enterprise objectives. It is the primary responsibility of
everyone who has responsibility for execution of plans. Controls should be based
on plans and there is need for a structure to know where the responsibility lies.
Controls should be appropriate, strategic, acceptable, objective and cost-
effective.

The control process involves three steps: establishing standards, measuring

performance and reinforcing success or correct deviations. Controls can be
constant, periodic or occasional. As a matter of policy organisations may prefer
control to the centralised or dispersed and delegated, formal or informal and
direct or indirect. Large organisations need delegation, certain amount of
formulisation and direct control systems. The unit further explained principles
of an ideal control system and methods of control.

16.10. Glossary
 Centralisation: Centralisation of authority at higher levels of management.
 Controlling: The managerial function of measuring and correcting
performance of activities of subordinates in order to assure that enterprise
objectives and plans are being accomplished.

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 Coordination: Linking or relating various parts and activities of an
organisation to one another.
 Direct Control : The concept that the most direct of all controls is to assure
high-quality managers on the premise that qualified managers make fewer
mistakes requiring other (or indirect) controls, perceive and anticipate
problems, and initiate appropriate actions to avoid or correct for deviations.
 Feedback: An informational input in a system transmitting messages of
system operation to indicate whether the system is operating as planned.
Information on operations is relayed to the responsible persons for
evaluation.

16.11. Reference / Bibliography

1. Koontz, O’ Donnell, C. and Weihrich, 1982. Essentials of Management. Tata
Mc - Graw Hill: New Delhi.

2. Study Material of I.G.N.O.U. (MTM) from Unit 13 – Controlling, Delegation and

Interdepartment Coordination of MTM-01 course.

3. Drucker, Peter F.1975/81.Management Tasks, Responsibilities & Practices,

Allied Publishers Pvt. Ltd. New Delhi

4. Gupta R.S., Sharma B.D., Bhalla N.S.,2010.Principles and Practices of

Management, Kalyani Publishers, New Delhi.

16.12. Terminal and Model Questions

1. Explain the Methods of control in detail with special reference to
hospitality trade?
2. Elaborate the importance and essential elements of controlling?
3. Write a detailed essay on the characteristics of controlling?

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