PRINCIPLES OF MANAGEMENT

DR. BABASAHEB AMBEDKAR OPEN UNIVERSITY

AHMEDABAD
Editorial Panel

Author : Dr. Jayraj Pandya

Director
K. S. School of Business Management,
Gujarat University
Ahmedabad

Editor : Dr. Mehal Pandya

Associate Professor
B. K. School of Professional and
Management Studies
Gujarat University, Ahmedabad

Language Editor : Dr. Vasant K. Joshi

Associate Professor,
G. B. Shah Commerce College
Ahmedabad.

ISBN 978-81-947108-3-7

Edition : 2020

Copyright © 2020 Knowledge Management and Research

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 PREFACE
We have put in lots of hard work to make this book as user-
friendly as possible, but we have not sacrificed quality. Experts
were involved in preparing the materials. However, concepts are
explained in easy language for you. We haveincluded may tables
and examplesfor easy understanding.

We sincerely hope this book will help you in every way you
expect. All the best for your studies from our team!
 PRINCIPLES OF MANAGEMENT
Contents

BLOCK 1 : INTRODUCTION TO MANAGEMENT

Unit 1 Nature and Functions of Management

Definition, Nature-Features of Management, Management

Functions, Management as a Process, Importance of

Management, Management and Administration.

Unit 2 More on Management

Functional Areas of Management, Managerial Skills,

Roles of a Manager, Levels of Management, Management

as a Science, an Art and as a Profession.

Unit 3 History of Management

Schools of Management Thought, Classical Approaches:

Systematic Management, Scientific Management,

Administrative Management, Human Relations

Movement and Contemporary Approaches:Quantitative

Management, Organizational Behaviour, Systems Theory,

Contingency Theory
 Dr. Babasaheb Ambedkar BBAATR-103
Open University Ahmedabad

Principles of Management
BLOCK 1 : INTRODUCTION TO MANAGEMENT

UNIT 1 NATURE AND FUNCTIONS OF MANAGEMENT

UNIT 2 MORE ON MANAGEMENT

UNIT 3 HISTORY OF MANAGEMENT

 INTRODUCTION TO MANAGEMENT
Block Introduction :

Any organization needs proper management to run it smoothly. This term

management means a manager has to manage the people, i.e. – manager has to
take work from other people and other resources. This word resources covers
– money, material, machines, methods and market. If these resources are used
properly, an organization can get results and achieve its goals.

To know this management and its different resources, a student of

management has to understand main functions of mangers. These important
manager’s functions are: Planning, Organizing, Directing and Controlling. This
Principles of Management study material mainly focuses on this four important
functions. Apart from this functions it has also covered the areas like how different
management practioners have developed different theories and various principles
given by them in different time, which is termed in this material as “School of
Management Thought”. Two more topics are also explained – social responsibility
of business and strategic management – to give additional knowledge for future
management students.

After going through this block 1, you will understand very basic area of
management, namely – understanding of management term and its functions and
process, how management is an art, science and profession, difference between
management and administration. Apart from these basic topics you will also come
to know about different ideologies of different time of management, which is
known as school of management thought.

Block Objectives :
After learning this block, you will be able to understand :
• Basics about management

• Different school of management thought

Block Structure :

Unit 1 : Nature and Functions of Management

Unit 2 : More on Management

Unit 3 : History of Management

 Unit
NATURE AND FUNCTIONS OF MANAGEMENT
1

: UNIT STRUCTURE :
1.1 Learning Objectives
1.2 Introduction
1.3 Definition of Management
1.4 Nature - Features of Management
1.5 Management Functions
1.6 Management as a Process
1.7 Importance of Management
1.8 Management and Administration
1.9 Let us Sum Up
1.10 Answers to Check Your Progress
1.11 Glossary
1.12 Assignment
1.13 Activities
1.14 Case Study
1.15 Further Readings
1.0 Learning Objectives
After learning this unit, you will be able to understand:
• Nature and Functions of Management
• Management and Administration
1.1 Introduction
Organizations have variety of goals for which they usually directs their energies
and resources to achieve these goals. Organizations possess human as well as
non-human resources, i.e. – plan, equipment, land, money etc. They are put to
use in the fulfilment of goals. Management is the force that unifies these resources
in the service of organizational goals. It is a process of with and through people.
Management is needed wherever people work together in an organization. The
managerial functions which includes planning,organizing, directing and controlling
by a person who is capable of managing organizing efforts, whether it is a busi-
ness organization, religious organization, military organization or a social. These
functions are performed at all levels in an organization, regardless of its type or
size. The service of management are essential in all types of endeavours.
In this unit, you will learn various definitions of management, its features, functions
and process of management and difference between management and adminis-
tration.

1
 INTRODUCTION TO 1.2 Definitions of Management
MANAGEMENT
To know the foundation of management, it is very important to know the definition
of management. Definition of any concept will give you proper understanding of
that concept or term.
There are many definitions of management, because of many reasons, they are as
under:
• Management is a very vast and extensive subject. Therefore, it is not pos-
sible to cover different aspects or angles of the term management in one
definition.
• Management is concerned with human beings, who is highly unpredictable
in terms of behaviour.
• Management is a very young developing discipline, where whose concepts
are very dynamic.
So, now we have few definitions of management from different management ex-
perts with its simple explanations.

Figure 1.1 – Resources of Management

Let us understand various definitions of management.
1. Management is the accomplishment of results through the efforts of other
people. – Lawrence A. Appley
This definition has focused on two aspects. One is that, when you do man-
agement, it must reach to its results and second, should also be done with
the help of other people.
2. Management is the art of getting things through and with the people in for-
mally organized groups. – Koontz Harold
Here, Koonts has shown two features. They are: management is an art and
people must be organized in a group.
3. Management is a process of planning, organizing, actuating and controlling
to determine and accomplish the objectives by the people and resources. -
George Terry.Terry has mentioned about different functions, i.e. – planning,
organizing, actuating and controlling and through these functions of manage-
ment, one can achieve its organizational goals.
2
4. Management is the process by which mangers create, direct, maintain and NATURE AND
operate purposive organizations through systematic, coordinated and co- FUNCTIONS OF
operative human efforts. – McFarland MANAGEMENT
This definition coveys that the role of manager is to create, direct and oper-
ate the organization – which always have some purpose/s and it should be
achieved in a systematic manner.
5. Management is the coordination of all resources through the process of
planning, organizing, directing and controlling in order to attain stated ob-
jectives. – Sisk.
Coordination is one of the main activity in the management is pinpointed here, in
the definition of Sisk.
Apart from these, some authorities have stated that management is deci-
sion-making, rule-making and rule-enforcing body. According to Moore, man-
agement is decision-making. Appley said management is the development of
people, not the direction of things.
In essence, it can be concluded that management is nothing but an art of
getting work from other people for its different functions like planning, organizing,
directing and controlling. Here it is said that decision-making, coordination and
systematic way of working will make the path of success more easy for the orga-
nization.
Check Your Progress 1
1. Management is the accomplishment of results through the efforts of other
people.
a. Lawrence A. Appley c. George Terry
b. Koontz Harold d. Peter Drucker
2. Management is a process of planning, organizing, actuating and controlling
to determine and accomplish the objectives by the people and resources.
a. George Terry c. Peter Drucker
b. Koontz Harold d. Lawrence A. Appley
3. Management is decision-making.
a. Koontz Harold c. Peter Drucker
b. Moore d. George Terry
1.3 Nature - Features of Management
Management is related to getting human and physical resources in order to achieve
organizational goals.
This nature of management can be explained by the following features based on
early discussion of management definitions, which can also be called as charac-
teristics of management, mentioned below:
1. Management is goal oriented:
The purpose of management in any organization is to achieve the desired goals.
These goals should also be achieved through efficiency, i.e. - using best
resources, minimum time and wastage of material. If a sales executive in a
3
 INTRODUCTION TO company is told to sell 200 units of laptop in each month, at the end of the
MANAGEMENT year, his sell must reach to 2400 units. If he can not achieve, he has to
identify the reasons not to achieve his targets/goals.

Figure 1.2 Management is Goal Oriented.

2. Management integrates human, physical and financial resources:
Any organization need different type of resources to achieve its goal. These
resources are in different forms. It can be people – who is the foundation of
any organization, finance – life blood of any business or physical resources
means technology and other machineries. At present, information and com-
puter technology are also very important resources for any organization. So
combination of all these resources can be helpful to make the organization
successful in practice.
3. Management is a continuous activity:
Management is continuous or on going activity. All functions of management
– planning, organizing, directing or controlling are performed on continuous
basis. One activity of management will stop, other will start, but it never
happens that everything will stop at one time. A manager is doing planning
for its production for next season and on other side an advertising depart-
ment might be working for new advertisement of that product. So, in es-
sence, it can be said that different activities of management continuously
goes on.
4. Management is all pervasive:
Management is a universal phenomenon. Management is required in finan-
cial planning for personal life and in doing job also. Management is required
in business and non-business activity also. It is required in India as well as in
other countries like Japan, New Zealand or United Kingdom also. Under-
standing of Fundamentals of Management is required to run an educational
organization or even to run a hospital also, so management is inevitable in
the world.
5. Management is a group activity:
Management is never done by an individual. To have management, any
organization needs more people, that is group. People work as an indi-
vidual for the job what they are assigned to, but to achieve organiza-
tional goals, it needs team or group of people. Group work or activity
can make the organization goals accomplished.

4
6. Management is a dynamic function: NATURE AND
George Bernad Show has said “Those who cannot change their minds, can FUNCTIONS OF
not change anything.” This quotation is very much applicable in business MANAGEMENT
life. There are two types of environment, one is internal – people, machin-
ery etc. and another is external – it includes – government policy, competi-
tors etc.. People of Management has to do continuously keep a watch on
both the environment and do changes for the success of their organizational
success. Here, if organization would do changes, it would grow or else, it
would die.
7. Management principles are relative, not absolute:
This feature indicate that management principles should be applied accord-
ing to the need of the organization. Each organization is different from the
other one. The difference may exist because of time, place, socio-cultural
factors etc. However, individuals working within the same organization may
also differ. Thus, a particular management principle has different strengths
in different conditions. Therefore, principles of management should be ap-
plied in the light of prevailing conditions of both internal and external envi-
ronment of the organization.
8. Management is a science, art and profession:
There is a controversy whether management is a science or an art. How-
ever, management is both a science and an art, because it has many prin-
ciples like science and it needs skill like an art. Management is also called
profession by many management practitioners, while many have suggested
that it has not achieved the status of a profession.
9. Management is decision-making:
Management process needs decision-making at every levels. Decision-mak-
ing basically involves selecting the most appropriate alternative out of the
several alternatives available. If there is only one alternative, the question of
decision making does not arise. The quality of the alternative that a manager
selects determines the organization’s performance and journey of success.
So being a manager, one has to take quality decisions, by taking various
factors in mind and give better future to the organization.
In essence, nature of management suggests that:
• Management is goal oriented activity;
• It is multidisciplinary and pervasive function;
• It is a dynamic activity;
• It is a combination of science, art and profession;
• It is a dynamic activity, where its principles are relative, not absolute;
• And organization with good management has to achieve its goals with the
best use of available resources and quality decisions.
Check Your Progress 2

5
 INTRODUCTION TO True or False:
MANAGEMENT 1. Management is not connected with decision-making:
a. True;
b. False
2. Management is a goal oriented:
a. True;
b. False
3. Management is a group activity:
a. True;
b. False
4. Management is not a continuous activity:
a. True:
b. False
5. Management is a science, an art and a profession:
a. True;
b. False
1.4 Functions of Management
Function is nothing but the activity of a person in the work. When we connect the
word function with management, it becomes management functions. In any orga-
nization, there are various departments, like – production, finance, marketing, hu-
man resource and in all these departments, which management functionsare per-
formed by managers? That is discussed here.
Luther Gulick, an American political scientist, was an expert on public administra-
tion, has given the functions of chief executive in the acronym POSDCORB. In
POSDCORB, each letter stands for Planning, Organizing, Staffing, Directing, Co-
ordinating, Reporting and Budgeting. Koontz and O’donnelhave given five func-
tions of management, they are Planning, Organizing, Staffing, Directing and Con-
trolling. Here, functions of management are discussed based on the functions given
by Koontz and O’donnel.

Figure 1.3 Functions of Management

1. Planning: Planning is the first activity in the area of functions of management.
6
 Planning is nothing but deciding how the entire work will done. It is first NATURE AND
function, because a manager has to be clear in the beginning of the work, FUNCTIONS OF
that how the entire project or activity or task will be done in future. This MANAGEMENT
clarity will help to managers as well as his subordinates or junior how to
proceed in the entire work process. According to Koontz, “Planning is
deciding in advance - what to do, when to do & how to do. It bridges the
gap from where we are & where we want to be”. So planning is a system-
atic thinking about ways and means for future goals and objectives of the
organization.
Planning is required in every type of organization and in every type of work.
It needs good use of intellectual capacity and it is a primary or main func-
tion of management.
2. Organizing: Organizing is deciding where different types of decisions will
be made, who will do what work or task and who will work under whom.
Organizing not only related with people, but also related with the distribu-
tion of physical, financial, information and other resources of the organiza-
tion. Organizing process covers the following tasks :
• List of activities
• Grouping of activities
• Assignment of duties and responsibilities
• Delegating authority and creation of responsibility
• Coordinating authority and responsibility relationship
3. Staffing: Staffing is process of hiring best people for the organization and
allotting a specific work based on their skill to perform it. It covers pro-
curement, development. Compensation, integration and maintenance of
people in the organization to achieve individual, organizational and social
goals. Staffing function is also known as human resources management.
Staffing function includes:
• Good manpower planning
• Recruitment, Selection and Placement processes
• Training and Development activities
• Compensation planning
• Performance Appraisal
• Promotions and Transfer
4. Directing: Next logical step after planning, organizing and staffing is direct-
ing. The willing and effective cooperation of employees for the attainment
of organizational goals is possible through direction. Directing is dealing
with relationship or communication between people to influence, super-
vise, motivate subordinates to achieve the organizational goals. Direction
has mainly four elements:
• Supervision: It is the overseeing the work of subordinates by theirsupervisor
to check that whether work is done in a proper way or not to achieve the
objectives of the organization.
7
 INTRODUCTION TO • Motivation: Motivation is inspiring the employees to do the work with great
MANAGEMENT enthusiasm. Here different types of monetary or non-monetary rewards
like promotion or company car is offered as a part of motivation.
• Leadership: It is the function to guide, direct and influencing the employees
by a manager to achieve the desired goals.
• Communication: It is the process of exchanging different types of informa-
tion, ideas, instructions, opinions among members of the organization, which
creates a better understanding between different levels of people in the
organization.
5. Controlling: Controlling is observing and checking the progress of goal
achievement and taking necessary action, when goal is not achieved. This
function is used to check the progress of organizational goals and all type of
resources – human, finance, machineries etc. Koontz and O’donell explained
that “Controlling is the measurement & correction of performance activities
of subordinates in order to make sure that the enterprise objectives and
plans desired to obtain them as being accomplished”. This controlling func-
tion needs to follow these steps:
1. Establishing the standards
2. Measuring the actual performance
3. Comparison of actual performance with standards and identify the devia-
tions
4. Taking corrective action for deviations
Check Your Progress 3
1. _____________ is deciding in advance, what to do, when to do and how
to do.
a. Planning c. Directing
b. Organizing d. Controlling
2. _______________ is inspiring the employees to do the work with great
enthusiasm.
a. Directing c. Leading
b. Motivating d. Communicating
1.5 Process of Management
As a process, management refers to a series of inter-related functions.
It is the process by which management creates, operates and directs purpo-
sive organization through systematic, coordinated and cooperative efforts.
According to George R. Terry, “Management is a distinct process consisting
of planning, organizing, actuating and controlling, performed to determine
and accomplish the objectives by use of people and resources.” As a process,
management consists of three aspects:
1. Management as a social process: Since the human resource is a most
key resource among the other resources, so management is concerned with
developing better relationship among people. It is the very important re-

8
 sponsibility of a manager to develop productive and useful interaction among NATURE AND
employees for achieving desired goals. FUNCTIONS OF
2. Management is an integrated process: Management needs to work with all MANAGEMENT
resources – human, physical, financial and information and functions to be
linked. To work in practice, all four functions do not work in a sequence or
in isolation, but they are interrelated to each other – planning, organizing,
staffing, directing and controlling, so it can be said management is an inte-
grated process.
3. Management is a continuous process: It is a never ending process. Man-
agement is concerned with constantly identifying the problem and solving
them by taking adequate steps. It is an on-going process, never stops.

Figure 1. 4 – Process of Management

Check Tour Progress 4
1. With reference to a statement – “Management is a continuous process.”
Management refers to a series of –
a. Inter-related functions
b. Related functions
c. Independent functions
d. None of the above
2. “Management is a distinct process consisting of planning, organizing, actu-
ating and controlling, performed to determine and accomplish the objec-
tives by use of people and resources.” – definition is given by -
a. George Terry
b. Peter Drucker
c. Koontz
d. None of the above
1.6 Importance of Management
Why management matters ? There are many reasons which indicate why man-
agement is very important in study and practice. They are explained here:

9
 INTRODUCTION TO 1. Optimum utilization of resources:Management always tries to do best
MANAGEMENT use of their resources – i.e. – human, financial, physical, information and
information technology. This activity would help and contribute in three
ways:
1. It is very helpful in the situation of scarcity of resources
2. It reduces the waste of time, money, energy and other resources, when
it will be planned and executed properly.
3. It contributes in achieving individual, group and organizational goals.
In addition to that, those organization who have expert and professional
people, can make lot of differences in their resource utilization because of
their talent. So good management plays a vital role in best use of limited
resources for a company to achieve its goals.
2. Establishes Sound Organization –Good management produces no over-
lapping of efforts (smooth and coordinated functions). To establish a sound
organizational structure, there is a need to allot the work according to the
ability of a person. In a planned organization structure, people become
clear for - who is accountable to whom, who can give instructions to whom,
who are superiors & who are subordinates. Management fills up various
positions with right persons, having right skills, training and qualification. All
jobs should be cleared to everyone, all these efforts ultimately results into a
sound organization.
3. Development of Resources:Management develops various resources.
This is true with human as well as non-human factors. Lawrence Appley
has emphasized that, effective management does development of
people. However, most of the researchers for resource development
are carried out in an organized way and management is involved in
these organized activities. Thus, through the development of resources,
management improves the quality of lives of people in the society.
4. Integrating various Interest Groups:In the direction of organized
efforts, there are various groups – like – shareholders, employees, sup-
pliers, customers, government etc. – all these put pressure on each
other to bring better output and quality performance. As a result of
these combined efforts, all groups are able to get better reward in their
respective area and it gives better satisfaction to them and multiplies
the activity with better efforts for future.
5. It Incorporate Innovations: Today, changes are taking place at very
high speed in technology, structure and even in society. These all changes
pushes to all organizations to become more active and efficient. Busi-
ness organizations have become primitive to modern and modern to
ultra-modern. 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.
6. Stability in the Society: Management provides stability in the society by
changing and modifying the resources in accordance with the changing en-

10
 vironment of the society. In the modern era, more emphasis is on new NATURE AND
inventions for the betterment of human beings. These inventions make old FUNCTIONS OF
systems and factors obsolete and inefficient. Management provides inte- MANAGEMENT
gration between traditions and new inventories and safeguards society from
the unfavourable impact of these inventions, so that continuity with quality
and need base development in social process is maintained.
Check Your Progress 5
1. Management tries to make effective utilization of various __________.
a. Resources c. Men
b. Materials d. Method
2. _____________ emphasized that, effective management does the devel-
opment of people.
a. Peter Drucker c. George Terry
b. Lawrence Appley d. Koontz H.
1.7 Management and Administration
Different writers and thinkers of management have given different views about the
concepts of management and administration. In total, there are three different
views, which are explained here.
According to first view of management thinkers:
Points of
Administration Management
Differentiation
1. Meaning It involves policy It involves executing the
making, formulation of plans and strategies and
vision, mission, carrying out various
objectives and activities determined by
strategies. the administration.
2. Who are the Administration is the Management is the work
role player ?
function of top of lower level of
management. management.
3. Activity It decides the It directs and controls the
organizational subordinates.
structure and prepares
the plan.

Second view is advocated by E. F. L. Brech, who says that Management is a

comprehensive and integrated term.It includes planning, organizing, directing and
controlling.It can be classified further into two categories: 1.Administrative Man-
agement 2. Operative Management.

11
 INTRODUCTION TO Points of Administrative Operative
MANAGEMENT Differentiation Management Management
1. Levels of Administrative Operative
organization management represents management
the top level management. represents the lower
level management.
2. Perform Administrative It performs the
management performs the functions of
functions of formulation execution, directing
of vision, mission and and controlling.
strategies.
3. Who are It includes board of It involves the
involved ? directors, managing people of middle
director, general level and lower
managers and chief level managers.
managers.

Third view about management and administration is given by Peter F. Drucker:

Points of
Administration Management
differentiation
Example It is applicable to non-profit Management is
organization like government concerned with
organizations, hospitals, business and profit
educational organization, making organizations,
church, military, temple – who e.g. – any business
are basically service oriented. organization.

Measurement Administration is measured by Management is

efficiency in rendering measured by the
services. efficiency in profit-
sharing.
Definition Governance of non-profit Governance of
organization is called business organization
administration. is termed as
management.

Check Your Progress 6

1. According to __________, management is divided into two categories:
Administrative and operative management.
a. Peter Drucker c. Fayol

12
 b. Brech d. None of these. NATURE AND
2. According to Peter Drucker, management is measured by the FUNCTIONS OF
_________________________. MANAGEMENT
a. Efficiency in profit sharing
c. Cost reduction
b. Rendering services
d. Combination of all the three alternates.
1.8 Let Us Sum Up
In this unit, you have learned about the concept of management through its
various definitions, functions of management, importance of management
and difference between management and administration.
According to Sisk, “Management is the coordination of all resources through
the process of planning, organizing, directing and controlling in order to
attain stated objectives.” So, management is a process, where different re-
sources are used to achieve its desired objectives.
There are mainly four functions of management, namely – Planning, Orga-
nizing, Directing and Controlling. Luther Gulik has given an acronym of
“POSDCORB”. All this functions are interrelated to each other and work as
a process.
In this unit, importance of management is also explained and difference be-
tween management and administration is discussed. There are three different
viewpoints for management and administration differences.
1.9 Answers to Check Your Progress
Check Your Progress 1
1 – a, 2 – c, 3 - b
Check Your Progress 2
1 –b, 2 – a, 3 – a
Check Your Progress 3
1 – a, 2 – b
Check Your Progress 4
1 – b, 2 – b
Check Your Progress 5
1 – a, 2 – a
Check Your Progress 6
1 – b, 2 – a
1.10 Glossary
Management : It is a process of planning, organizing, actuating and controlling
to determine and accomplish the objectives by the people and resources.
- George Terry
Administration : Governance of non-profit organization is called administration.
13
 INTRODUCTION TO – Peter Drucker
MANAGEMENT Administration involves policy making, formulation of vision, mission, objectives
and strategies.
1.11 Assignment
What do you understand by the term management ? Which are three different
views about the difference between management and administration ?
1.12 Activities
Visit the organization and try to observe which type of functions are per-
formed by different managers and make a note of it.
1.13 Case Study
Visit a business organization of your choice and study the nature- features of
that organization. List out minimum 10 features based on your study.
1.14 Further Readings
1. Principles of Management, B. S. Moshal, Galgotia Publications
2. Management Text and Cases, VSP Rao and V. Hari Krishana, Pub-
lished by Anurag Jain for Excel Books
3. Principles of Management, Second Edition, P. C. Tripathi and P. N.
Readdy, Tata McGraw Hill Publishing Company
4. Essentials of Management, Harold Koontz and Heinz Weihrich, Tata
McGraw Hill

14
 Unit MORE ON MANAGEMENT
2

: UNIT STRUCTURE :
2.0 Learning Objectives
2.1 Introduction
2.2 Functional Areas of Management
2.3 Managerial Skills
2.4 Roles of a Manager
2.5 Levels of Management
2.6 Management as a Science and an Art
2.6.1 Management as a Science
2.6.2 Management as an Art
2.6.3 Management as a Profession
2.0 Learning Objectives
After learning this unit, you will be able to understand:
• Functional Areas of Management
• Managerial Skills
• Roles of a Manager
• Levels of Management
• Management as a Science, an Art and a Profession
2.1 Introduction
In previous unit 1, you learnt about management functions like – planning,
organizing, staffing, directing and controlling. Apart from that you have learnt
management from process angle and importance of management. You have
also learnt the differences of management and administration from three dif-
ferent viewpoints.
Further, in this unit 2, you will learn about which are the functional areas of
management. You will learn about skills required for a manager and different
roles performed by a manager in the organization. This unit will teach you
the levels of management and idea about how management is an art, science
and profession.
2.2 Functional Areas of Management
Functional areas of management mean the sum total of all those activities
which are performed in an organisation to achieve the objectives of the
organisation. Here the employees who work, they have similar skills and
expertise. This people normally are able to look the company from their
functional area’s angle, not able to see the total picture of the company.

15
 INTRODUCTION TO Any organization has mainly four functional areas: Finance, Human Resource, Pro-
MANAGEMENT duction (Also known as Operations) and Marketing. Somewhere strategy and
technology-equipment, research-development are also considered as functional
areas of management. As said earlier, these mangers usually looks after the area
from they belong. As against this, there is a word called “General Manager” view
the total company in integrated and comprehensive way. They are able to see the
company in totality as well as in the form of functional perspective.
2.3 Managerial Skills
Skill is an ability to do something. To achieve the results of an organization, em-
ployees need various types of skills - i.e. – they need ability to perform a particular
task. Management skills are certain qualities or abilities that a manager should
possess in order to complete a particular task or work in an organization.
Skills are of different types, a broad ideafor type of skills is given below:
Category 1: Hard skill and Soft skill
Category 2: Technical, Human and Conceptual skill
Category 3: Leadership, Communication, Problem Solving and Decision-Mak-
ing
Now, let us have a brief understanding about these various skills one by one:
1. Hard Skill: Hard skills are very specific abilities required in a job, which can
be demonstrated and measured. It can be developed through education,
practice and repetition.It refers to a person’s knowledge and occupational
skills, which is always required in any job to perform successfully. E.g. –
Proficiency in any language, tally software, machine operation, typing speed,
a degree or certificate
2. Soft Skill: Soft skills are those non job-specific personality traits and
behaviour of people, which are difficult to measure. Its not an area of
knowledge, but the behaviour, a manager display in a specific situation.
E.g. – communication, creativity, positivity, emotional maturity, adapt-
ability and interpersonal skills.
3. Technical Skill: Technical skill is the knowledge and proficiency in a
specific field. Technical skills are not restricted upto machines, produc-
tion tools or other equipment, but they will also be required to increase
sales, design different types of products and services, market the prod-
ucts and services, etc. It is connected more with first line mangers or
the employees who work at lower level in management. This skill falls
in the category of hard skill.
4. Human Skill: It is also known as people skill or interpersonal skill.
Human skill is the area of knowledge of people and ability to work with
different types of people. Among many resources of an organization,
people is the most important element for achieving organizational goals,
but it is very difficult to understand and predict people. Hence, people
skill is very critical and also important skill of management. It is re-
quired at all levels of management. This is one type of soft skill.
5. Conceptual Skill: Conceptual skills is the ability to visualize for future, work
on abstract concepts and transform them in workable idea and execute it
16
 constructively. With the help of conceptual skill a manager can bring changes MORE ON
in the organization, can design strategies and innovative planning. It is more MANAGEMENT
required at higher levels in management. This is again one type of soft skill.
6. Leadership Skill: Leadership skill is organizing and motivating people to
reach the desired goals.It includes visionary thinking, innovative ideas, ma-
ture and fast decision making, powerful communication, and many such
other qualities. Any manager must have these type of skill set, because
whatever is the level of management, he is a leader.
7. Communication Skill: In the words of William Scott: “It is a process which
involves the transmission and accurate replication of ideas ensured by feed-
back for the purpose of eliciting actions which will accomplish organisational
goals”. So, here communicationskill of a manager means he must be able to
express his ideas properly, so employees can understand with clarity, so
motivated and it results into action in time.
8. Problem-solving Skill: It means to identify the problem and solving it with
the balance of creative and logical efforts to make the situation normal.
Proper listening, analysis, research and creativity can play a very important
role for becoming better in problem solving skill.
Apart from these above mentioned skills, there are many other skills like Select-
ing and developing the right people, motivating people, managing discipline and
dealing with conflicts and many more also considered as important managerial
skills in present era.
2.4 Roles of a Manager
All of us play different type of roles in our life. At home you might be a brother or
a sister, a son or a daughter, with someone you might be a friend, and in a school
or college, you are a student, so we play many roles during our life.
Here, it’s a talk about the role in a job or in an organization, which means that
what is expected from an individual in a specific job. In 1989, a book was written
by Henry Mintzberg, titled as “Mintzberg on Management: Inside our Strange
World of Organizations” have mentioned 10 different roles of a successful man-
ager. These ten roles are explained here in brief, which are divided into three
categories, they are:
1) Interpersonal Role
2) Informational Role
3) Decisional Role
Now, you will have an overview of all the three categories, with its sub-catego-
ries:
1) Interpersonal Role
Interpersonal roles means a manager is involved with people within and
outside the organization in dealing of work. These roles are of three types:
Figurehead, Leader and Liaison.
a. Figurehead Role : In this type of role, manager becomes symbolic head

17
 INTRODUCTION TO and performs a number of routine duties of a social or legal in nature. E.g. –
MANAGEMENT Greeting visitors, taking an important customer to a lunch and signing legal
documents.
b. Leader Role : As a leader, he has to select and train best employees,
motivate them and doing their performance appraisal. E.g. – Announc-
ing awards in sales department for best performance in his territory.
c. Liaison Role : In liaising role, manager has to develop and maintain
network with outside people for information. E.g. – Meeting formally
or informally CEO of other company.
2) Information Role:
Informational role means receiving, collecting and disseminating infor-
mation for the organization, which has three sub-types within it: Moni-
tor, Disseminator and Spokesman.
a. Monitor Role : In monitor role, manager has to try to find out and
receive variety of internal and external information for thorough under-
standing of business environment. E.g. – Reading annual reports of other
company or read research journals for market update.
b. Disseminator Role : As a disseminator role player, a manager has to
provide collected information of outside world to employees of the or-
ganization, which is useful to them. E.g. – Sending an email of neces-
sary information to staff members or conducting a staff information
meeting
c. Spokesman Role : In a spokesman role, a manager provides important
information is provided to the outside world. E.g. – Launching of a
new product announcement in media, Inform to Chamber of Commerce
or government bodies for the necessary information.
3) Decisional Role: Exchange of information from different sources is re-
quired for quality decisions in the organization, but better performance
and goal achievement will be based on, timely and qualitative decisions
taken by managers. This decisional roles have four sub-categories: En-
trepreneur, Disturbance handler, Resource allocator and Negotiator.
a. Entrepreneur Role : In this role, manager has to be in search of new
initiatives and innovative projects and develop it for bringing changes
and development in the organization for future. E.g. – Review sessions
to develop a new project
b. Disturbance Hander Role : Manager has to face and solve any critical
situation or unexpected disturbances of the organization in the role of
a disturbance handler. E.g. – Managing a strike of a workers for their
demand of salary increment.
c. Resource Allocator Role : As a resource allocator, manager has to de-
cide who will get resources and how many resources they will get. E. g. –
Budgeting, Time scheduling etc.
d. Negotiator Role : Negotiator role is the responsibility for representing the
organization for the work of negotiation. E.g. –Deal in the negotiation for
18
 taking a big project loan from private bank. MORE ON
Check Your Progress 1 MANAGEMENT
1. There are mainly four functional areas of management.
a. True
b. False
2. Soft skills are very specific abilities required in a job, which can be demon-
strated and measured.
a. True
b. False
3. Problem Solving skill means to identify the problem and solving it with the
balance of creative and logical efforts to make the situation normal.
a. True
b. False
4. In a negotiator role, manager has to decide who will get resources and how
many resources they get.
a. True
b. False
2.5 Levels of Management
Management includes all the levels of an organization or a company. Management
is classified by managers at different levels, i.e. – top level, middle level and lower
level managers.
Here, manager is a new term and we have also used this term even before in this
material, so it is now right time to study the term manager. A manager is someone
who works with and through other people by coordinating their work activities in
order to achieve organizational goals. It is not that managers work for their per-
sonal achievement, but they help other people and achieve the goals of organiza-
tion.
Now, let us talk about different levels of management, which is performed by
managers in the organization:
1) Top Level Managers:
Titles like managing director, president, vice president, general managers of
the company fall in this category of top level of management.
Top level managers are responsible to bring change, by showing a long term
vision and mission for the companies. They are responsible to develop asense
of commitment among the employees of the organization. Top level manag-
ers have to develop a positive organizational culture through values, beliefs, tradi-
tion, language and action. This managers have to do continuous study of their
business environment, i.e. – customer demand, competitor’s plan, economic, so-
cial and political changes etc.
On the basis of regular watch on internal and external environment of the busi-
ness, they design policies and strategies of corporate level in the company and

19
 INTRODUCTION TO they also lead, motivate and coordinate activities of the middle level managers.
MANAGEMENT 2) Middle Level Managers:
Titles like plant manager, project leader, regional manager, divisional manager and
functional department head – like, production manager, marketing manager, fi-
nance manager, human resource manager and research and development man-
ager come in this middle level management category.
Middle level managers plans and execute the goals, objectives and strategies of
their departments consistent with top management’s goal’s and planning. To achieve
departmental goals, they are also responsible for allocation of resources. They
should also monitor and manage the performance of the department and manag-
ers who report to them. Middle level managers implement changes and strategies
generated by top managers andin addition to this, middle level managers lead,
motivate and coordinate with lower level managers.
3) First line managers:
This level is known as lower level managers or first level or junior level managers
or shift managers or This people are also called “supervisors”.
First job of first line manager is to manage the performance of entry level employ-
ees. They are responsible to teach and train entry level employees about how to
do their jobs. First line managers have to prepare detailed schedule and operating
plans based on middle level management plans. They also lead, direct and moti-
vate the activities of operating employees.
Pyramid of Level of Management :
All these three levels of management can also be shown in pictorial form. In tradi-
tionally structured organization, levels of management is shown in a pyramid form,
which is shown in figure 1.3. On the top of pyramid – top management level
comes, which is always minimum in number. After top level, on second position in
hierarchy, middle level management is there and at the bottom, first line managers
come in the hierarchy. Normally number of employees at first line level are maxi-
mum and below that non-managerial employees are shown, who are workers or
floor people in any organization.

20
 MORE ON
MANAGEMENT

Figure 1.5 Levels of Management

Check Your Progress 2
1. Titles like managing director, president, vice president, general managers
are used for which level of manager ?
a. Top Level c. First Line Level
b. Middle Level d. None of the above
2. First line managers are also known as…
a. Junior Level Managers c. Senior Level Mangers
b. Higher Authority d. Second Line Managers
2.6 Management as a Science, an Art and a Profession
2.6.1 Management as a Science
To know whether management is a science or not, one has to study thefeatures of
science and then it should be checked with management, so a conclusion can be
made that management is a science or not.
Science is characterized by the following features:
1. Universally acceptable principles: Synonym for universal is worldwide, it
means science principles are applicable to all situations, all time and all
places. Similarly management also consists of many theories, principles
and models, which can be applied universally.
E.g. – Principle of Unity of Direction – It means there should be one leader
and one plan, so all members of the department should work for the com-
mon goal, with the same plan to achieve shared objective.
This principle is applicable to all organizations – business or non-business.
2. Experimentation and observation: Scientific principles are resulted from
scientificinvestigation and research, it means they are based on logic.
Similarly management principles are also based on scientific inquiry and

21
 INTRODUCTION TO observation. They are developed on the basis of experiments and practical
MANAGEMENT experience with a large number of people.
E.g. – It is observed that fair remuneration to employees helps in creating an
environment of job satisfaction in the organization.
3. Cause and effect relationship: Principle of science lay down cause and
effectrelationship between various variables, for e.g. when metals are
heated, they expand. The same is correct in management.
E.g. – It is a general observation that when employees are treated and
paid well, it improves their work efficiency, which increases the pro-
ductivity of the organization. As against that, if employees are not
treated and paid well, it would reduce efficiency and productivity. Thus,
both the situations shows cause and effect relationship in management.
4. Test of Validity and Predictability: Validity of scientific principles can
be tested at any time or any number of time. Likewise, future events
can be tested with reasonable accuracy by using scientific principles.
In the same manner, principles of management can be tested for their
validity.
E. g. – Principle of unity of command can be tested for its validity. In
one case, a manager should get order from one boss only and in other
case, he can get order from more than one boss.
Thus, different principles of science – namely:
1. Universally acceptable principles;
2. Experimentation and observation;
3. Cause and effect relationship; and
4. Test of Validity and Predictability
are true in case of management also.However, management ultimately
deals with human being, which are always difficult to predict, so it can
be concluded that management is an inexact science and not exact like
science.
2.6.2 Management as an Art
Art is characterized by following features:
1. Practical Knowledge: Every art requires practical knowledge, there-
fore it is very important to know practical applications of theoretical
principles. For example, to become a good actor, a person should have
a knowledge of the art and various types of acting etc. to use them in
theatre.
Similarly a manager should also know how to apply various principles
and theories in real situations in his capacity as a manager, instead of
just relying on his educational qualifications.
2. Personal skill: All the theoretical base may be the same for each artist,
each one has his own style and mode of interpretation. For example,
there are several actors, but Amitabh Bachan is known for his style and

22
 image, because of his personal skill. MORE ON
Similarly, management as an art is also personalized. Every manager has MANAGEMENT
his own way of managing the things, based on his knowledge, experience
and personality. That is why some managers are highly effective and some
are not.
3. Creativity: Every artist has an element of creativity. That is why they aim to
produce something, that has never existed before. This requires a combi-
nation of intelligence and imagination.
Management is also creative in nature, since it combines human and non-
human resources in a useful way to achieve desired results.
4. Perfection through practice: Every artists gets perfection through more
and more practice.
Similarly managers learn through an art of trial and error initially, but
application of management principles over the years makes them per-
fect in the job of managing.
5. Goal oriented: Every art is result oriented, as it seeks to achieve con-
crete results. Management is also directed towards its predetermined
goals. Managers use different resources like man, material, machin-
ery, money to promote growth in the organization.
So, management can be said as an art because it has features like an art – i.e.
- it needs practical knowledge, demands creativity, gets perfection through
practice and it’s a goal oriented.
2.6.3 Management as a Profession
Now to understand whether management is a profession or not, let us check
the attributes of profession:
1. Specialized knowledge: A profession must have systematic body of
knowledge that can be used for the development of professionals.Every
professional must make necessary efforts to get expertise in the prin-
ciples and techniques. Similarly, a manager should havedevotion and
involvement to acquire expertise in the field of management.
2. Formal education and training: There are many institutions and bodiesto
impart formal education and training. For e.g. – ICAI, ICSI etc. but a
degree of management is not mandatory by law, thoughit is always an
added advantage.
3. Social obligation: Profession is a source of livelihood, but profession-
als are primarily motivated by the desire to serve the society. Work of
professionals are influenced by social norms and values. Similarly, a
manager is not responsible to his reporting authority but also to soci-
ety. Therefore he is expected to offer quality service at a reasonable
price to the society.
4. Code of Conduct: Members of the association have to follow the code
of conduct. Code of conduct means what is acceptable and what is not
acceptable behaviour. This code of conduct is designed by the concerned

23
 INTRODUCTION TO body for self-disciplined habit among its members. The people who do not
MANAGEMENT follow these code of conduct are punished and their membership can be
withdrawn. The All IndiaManagement Association has prescribed a code
of conduct for managers but it has no right to take legal action against any
manager who violets it.
5. Representative Association: For the regulation of any profession, the exist
stance of a representative body is must. For e.g., The Institute of Char-
tered Accountants of India establishes and administers standards of com-
petence for auditors.
However, AIMA does not have any legal power to regulate the activities manag-
ers.
Here is the list of code of conduct mentioned by AIMA:
• Formal education to degree level;
• Existence and strengthening of professional organization;
• Development of professional literature;
• Increase research activity to support the discipline;
• New knowledge to deal with issues of technical development
After referring the write up on management as a profession, it can be said
that management fulfils several essentials of profession, but management is
not a complete profession, it is a developing profession because…
• It does not restrict the entry in management jobs;
• No minimum qualifications are prescribed for managers;
• No management association has right to grant a certificate of practice to
managers;
• Competent education and training facilities do bot exist.
Check Your Progress 3
1. Cause and effect relationship is a characteristic of management as a sci-
ence.
a. True
b. False
2. Creativity is a feature of management is an science.
a. True
b. False
3. Every art requires practical knowledge, therefore it is very important to
know practical applications of theoretical principles.
a. True
b. False
4. Management is a perfect profession.
a. True
b. False
2.7 Let Us Sum Up
In this unit, we started with functional areas of management, they are: Human
24 Resource, Finance, Production and Marketing. They are the major areas of ac-
tivities in any type organization. MORE ON
It is the skill – ability to perform a particular task is required to a make any MANAGEMENT
organization very successful. There are many type of skills – like, soft skill,
hard skull, conceptual skill, interpersonal skill, technical skill etc.
Every manager has to play different types roles in the organization. Mintzberg
has identified mainly three types of role. They are interpersonal, informa-
tional and decisional roles, which are sub divided in 10 sub-categories.
Any organization has three types of levels – top, middle and first line. Top
level management deals to create culture, bring change and design strategy.
Middle level management prepares departmental plans and execute organi-
zational strategy. First line or junior management does scheduling and teach-
ing-training of entry level employees of the organization.
Management is the combination of art, science and profession, but in case of
science it is inexact science, because it deals with human beings. Manage-
ment is also a profession, but it is in developing stage or in other words, it is
emerging as a developing profession.
2.8 Answers to Check Your Progress
Check Your Progress 1
1 – a, 2 – b, 3 –a, 4 - b
Check Your Progress 2
1 – a, 2 – a
Check Your Progress 3
1 – a, 2 – b, 3 – a, 4 - b
2.9 Glossary
Skills : Skill is an ability to do something.
Role : Role means what is expected from an individual in a job.
Manager : A manager is someone who works with and through other people
by coordinating their work activities in order to achieve organizational goals.
2.10 Assignment
What are the different type of levels ? Differentiate the responsibility of people
at different levels.
2.11 Activities
1. What do you mean skill ? Explain various type of skills.
2. How management is art, science and profession? Discuss.
2.12 Case Study
Meet different people who are working in business organization and ask
them what are various types of roles sperformed by them? List out such type
of 10 different roles performed by them.
2.13 Further Readings
1. Principles of Management, B. S. Moshal, Galgotia Publications
2. Management Text and Cases, VSP Rao and V. Hari Krishana, Published
25
 INTRODUCTION TO by Anurag Jain for Excel Books
MANAGEMENT 3. Principles of Management, Second Edition, P. C. Tripathi and P. N. Readdy,
Tata McGraw Hill Publishing Company
4. Essentials of Management, Harold Koontz and Heinz Weihrich, Tata
McGraw Hill

26
 Unit HISTORY OF MANAGEMENT
3

: UNIT STRUCTURE :
3.0 Learning Objectives
3.1 Introduction
3.2 History of Management
3.3 Classical Approaches
3.3.1 Systematic Management
3.3.2 Scientific Management
3.3.3 Administrative Management
3.3.4 Human Relations Movement
3.4 Contemporary Approaches
3.4.1 Quantitative Management
3.4.1 Organizational Behaviour
3.4.2 SystemsTheory
3.4.3 ContingencyTheory
3.5 Let Us Sum Up
3.6 Answers to Check Your Progress
3.7 Glossary
3.8 Assignment
3.9 Activities
3.10 Case Study
3.0 Learning Objectives
After learning this unit 3, you will be able to understand:
• History of Management
• The Classical School
• Behavioural School
• Management School
• Contingency and System Approach
3.1 Introduction
In the previous unit 2, you have learnt about skills of manager, roles of man-
ager, levels of management and how management is an art, a science and a
profession.
In this unit, you will study about history of management. You will get the
idea about different thinkers of management. It will know what is classical
school and about scientific management and administration theory. After this
background, you will know behavioural school and management science. At
27
 INTRODUCTION TO last in two significant contemporary approaches are explained, i.e. – system
MANAGEMENT theory and contemporary theory.
3.2 History of Management
Simple meaning of the word History - it is a record of significant past events
in sequence. Here also we will try to study history, but about management
history. Reasons behind the study of management history are:
• To getthe idea about how today’s organizations are evolved;
• To learn about the mistakes done in past and do necessary correction in
future;
• To understand how different theories are developed.
In case of study of management history here, most important reason is third
one, i.e. – to understand how different management theories are developed.
This history of management is also known as Evolution of Management
Thought or Bateman and Snell have called it “Revolution of Management.”
If we look back in the history, around 1100 B.C. the Chinese practiced the
four management functions – planning, organizing, leading and controlling.
Between 350 B.C. and 400 B.C., the Greeks recognized management as a
separate art and advocated a scientific approach to work. Before the birth of
Christ, the romans decentralized the management of their huge empire and
many such development had taken place in those days.
Two historical management concepts
There are two important concepts required to be understood as a part of
early management concepts in history. They are: Division of labour and Econo-
mies of scale.
Division of labour means divide the jobs into small part and do it as a repeti-
tive activity. This can give lots of economic advantage for the organization.
This concept was argued by Adam Smith in his book The Wealth of Nations
in 1776.
Economies of scale means when total volume of production increases, aver-
age cost of a product reduces. This concept came in picture at the time of
industrial revolution, where industrial revolution means - advent of machine
power, mass production and efficient transportation.
Check Your Progress 1
True or False
1. Division of labour means divide the jobs into small part and do it as a
repetitive activity.
2. Economies of scale means when total volume of production increases,
average cost of a product reduces.
3. The concept of division of labour, was mentioned in the book titles as
“The Wealth of Nations” in 1776 by Adam Smith.
After understanding two important concepts of early management, let us know
the evolution of management thought. This historical viewpoint of manage-

28
ment is divided into two parts: 1. Classical Approaches 2. Contemporary Ap- HISTORY OF
proaches, now let us understand both one by one. MANAGEMENT
3.3 Classical Approach
In classical approach, major contribution has come from systematic approach,
scientific management, administrative management, human relations, and
bureaucracy. In contingency approach, quantitative management, organiza-
tional behaviour, systems theory and contingency theory and theory Z are
the part of it.
Now first let us discuss classical approaches:
3.3.1 Systematic Management
In 19th century, most of the business in manufacturing industry were suffer-
ing from poor coordination among subordinates and different level manage-
ment problems disturbing to manufacturing process. In this situation, sys-
tematic management mainly focused on internal operations, like - economi-
cal operations, adequate staffing, maintenance of inventories to meet con-
sumer demand and organizational control. These goals were achieved through:
• Clear definition of duties and responsibilities;
• Standardized techniques for performing these duties;
• Specific means for gathering, handling, transmitting and analysing in-
formation;
• Cost accounting, wage and production control systems to facilitate
internal coordination and communication.
3.3.2 Scientific Management
Systematic management failed to lead to widespread production efficiency.
To work in this direction, a second approach was introduced by an engineer
named Frederick W. Taylor, also known as father of scientific management.
This scientific approach has focused on scientific way to analyse work and
determine how to complete production tasks efficiently.
Taylor identified four principles of scientific management:
1. Analyse the work using scientific methods to determine ‘one best way’
to complete production tasks;
2. Management should scientifically select, train, teach and develop each
worker so the right person has the right job;
3. Heartily cooperate with the workers and assure that all work is in har-
mony with principles of science;
4. Divide the work and responsibility equally between workers and man-
agement and management should take that work, which is more suit-
able to them than workers.
To implement these four principles, he used time and motion study and dif-
ferential piece rate system to make his principles successful.
Here time and motion study means observe various motions at the work-
place, identify the necessary and unnecessary movement to carry out the

29
 INTRODUCTION TO work; eliminate unnecessary movements; observe the time required for the neces-
MANAGEMENT sary work with stop watch; develop shorter and few movements and standardize
the motion and time, whereas differential pay rate system means those employees
who produce less than the standard production receive low piece rate and those
who produce above the standard production receive higher piece rate.
Apart from F. W. Taylor, four more people have contributed in the era of scientific
management, that is presented in brief:
1) Robert Owen: He was a manager of different cotton textile mills and he was
the first person to pay attention to labour welfare. He suggested a change in
the attitude of industrialists towards workers.
2) Charles Babbage: Hewas amathematician from Cambridge University. He
advocated for maths and machines for the solution for factory problems. He
said good management which guides workers and direct and control ma-
chines – is very crucial for success. In fact, Babbage prepared the founda-
tion for scientific management.
3) Henry Gantt: He has worked with F. W. Taylor on many projects. He had
modified Taylor’s incentive plan. He also introduced bonus for supervisors
with certain conditions. He is also known for his Gantt Chart - it provides a
graphic schedule for the planning and controlling of work, and recording
progress towards stages of a project.
4) The Gilbreths: Frank and Lillian Gilbreth – a team of husband and wife have
jointly work for fatigue and motion study. According to them, a worker
should do present job, prepare for his/her next highest job and train a suc-
cessor, all at the same time.
3.3.3 Administrative Management
Limitations of scientific management has led to thedevelopment of administrative
management. Henry Fayol is the major contributor for administrative manage-
ment. When Taylor wrote a book, he also wrote but focused areas were different.
Taylor has more focused on first line managers and scientific method, whereas
Fayol has wrote about all management. Fayol wrote from his personal experi-
ence, because he was a director of a large French coal-mining firm.
Fayol said that management practice is very different from other accounting, fi-
nance, production, distribution and other typical business functions. He believed
that management activity is required in all human efforts, like – business, govern-
ment, and even in home and he has given 14 fundamental rules as a fundamental
rules of management. They are:
1) Division of work:A person with specialization in work,can perform more
efficiently.
2) Authority: To get the work done from others. Managers need author-
ity, it means they must have right to take decision and give order.
3) Discipline: Employees must obey and respect rules of the organization,
or else should punish violations.
4) Unity of Command: Every employee must receive order from one superior
only, otherwise it can create confusion and conflict among people.
30
5) Unity of Direction: Organization should have a single plan of action to guide HISTORY OF
managers and workers to achieve organizational objectives. MANAGEMENT
6) Subordination of Individual Interest to General Interest: Interest of the or-
ganization should have dominance and priority, not interest of an individual
or a group.
7) Remuneration: There should be a systematic and fair remuneration pattern
for employees and employers.
8) Centralization: Decreasing the role of subordinates in decision making is
centralization and increasing their role is centralization. Fayol said that de-
termine relative importance of superior and subordinates roles – needs to
balance the authority between them.
9) Scalar Chain: The line of authority from top management to the lowest
ranks is the scalar chain, which must be followed in communication
and work.
10) Order: People and material should be at the right place and right time
for smooth functioning and wastage of material in the organization.
11) Equity: Managers should be kind and fair to their subordinates.
12) Stability of tenure of personnel: An organization must take steps to
obtain as much stability in its management and workforce as possible.
13) Initiative: Employees should be encouragedto contribute new ideas
and experiences in work assigned to them.
14) Esprit de corps: Promoting team spirit will build harmony and unity
within the organizations.
Other than Henry Fayol, Max Weber has also contributed for administrative
management, specifically for the area known as “bureaucracy – which em-
phasizes on a strictly defined hierarchy governed by clearly defined regula-
tions and line of authority.
Check Your Progress 2
1. Who is known for Gantt Chart ?
a. Henry Fayol c. Henry Gantt
b. F. W. Taylor d. Frank Gilbreath
2. Analyse the work using scientific methods to determine ‘one best way’
to complete production tasks – This principle is given by –
a. Robert Owen c. Charles Babbage
b. F. W. Taylor d. William Ouchi
3. Who is known as father of scientific management ?
a. Robert Owen c. Charles Babbage
b. F. W. Taylor d. William Ouchi
4. A person with specialization in work, can perform more efficiently. – this
principle given by Henry Fayol is called –

31
 INTRODUCTION TO a. Initiative c. Order
MANAGEMENT b. Division of Work d. Authority
5. The line of authority from top management to the lowest ranks is –
a. Discipline c. Remuneration
b. Scalar Chain d. Equity
3.3.4 Human Relations Movement
Mary Parker Follet and Chester Barnard developed the theories on the basic
framework of classical school and introduced new ideas to human relations
and organization structure.
Mary Parker Follet: Mary believed that distinction between superiors and
subordinates hindered natural partnership. She developed a model of
behavioural model of organizational control. She advocated for power with
rather than power over and said that group power should be valued over
individual power and workers of all levels should integrate to reach organiza-
tional goals.
Like Mary, Chester Barnard also initiated for human relations movement. He
said people work together to achieve organizational goals, as an individual he
can not accomplish it and at the same time he must satisfy his personal goals.
He also stressed the use of informal groups effectively.
Human Relations Movement
Base of human relations approach is that workers should be treated as human
beings, not like other factor of production. According to Elton mayo and his
colleagues pointed out that the methods of scientific management are not
adequate and do not contribute to individual and organizational goals, who
were the major contributors for this movement. He is considered as father of
human relations approach.
Hawthorne Experiments: Hawthorne experiments were done in four phases
to do the systematic analysis of human factor at Hawthorne Plant of Western
Electric Company USA, so based on the name of the company, it is called
Hawthorne experiments.
At the end of four experiments at Hawthrone, Elton Mayo concluded:
• Behaviour and attitudes are closely related;
• Group influences significantly affect individual behaviour;
• Group standards establishes standard for individual output;
• Money is a less important factor in deciding output, but group stan-
dards, group attitudes and security makes significant difference.
Earlier we have discussed various classical approaches, now it is an area of
contingency approaches – which include, quantitative management, organi-
zational behaviour, system theory and the contingency theory.

32
3.4 Contingency Approaches HISTORY OF
3.4.1 Quantitative Management MANAGEMENT

Quantitative management emphasizes on the application of quantitative analysis

to management decisions and problems. This approach can be helpful to man-
agement by developing formal mathematical models of the problem. Techniques
like statistical decision theory, linear programming, forecasting, break-even analysis,
network modelling is the contribution of quantitative management. They are ap-
plied in different functional areas of management like production, quality control,
distribution, finance, research and development etc.
3.4.2 Organizational Behaviour
During 1950’s a transition took place in human relations approach. People have
felt that some other factors than satisfaction of economic and social needs matter.
In that time organizational behaviour perspective has emerged, which was a study
of management activities that promote employee effectiveness through an under-
standing of the complex nature of individual, group and organizational processes.
Here a significant contribution is known of Douglas McGregor of Theory X and
Theory Y. According to McGregor, theory X managers assume that workers are
very lazy and irresponsible and require constant supervision and external motiva-
tion to achieve organizational goals and theory Y mangers assume that employees
want to work and can direct and control themselves. He advocated theory Y
perspective, suggesting that managers who encourage participation and allow
opportunities for individual challenge and initiative would achieve better perfor-
mance.
3.4.3 Systems Theory
Basically, an organization is a managed system, that changes inputs (raw materi-
als, people and other resources) into outputs(the goods and services that com-
prise its products). Here, the word system is a connection of its interdependent
elements or factors that work together to achieve the aim of system. This system
is made up of many sub-systems, like its functions like marketing, finance, pro-
duction, HR etc.
Apart from these functional areas, there are many other factors - individuals,
groups, attitudes, motives, formal structure, interactions, goals, status, and
authority also affect the system. The term interdependent is very important
here, because if purchase department will not purchase sufficient quantity,
than production department will not be able to produce as per plan, Hence, it
can be said that different activity of organization system is interlinked and
interdependent. A change in one sub-system can affect total system. There-
fore sub-systems work together towards synergy (a harmony of forces) in
order to accomplish organisational goals that couldn’t have been accom-
plished by any one sub-system alone, which is also presented in the form of A
+ B = C, here, A and B are sub-systems and alone they are less than the sum
of them. i.e. – C.
So, management thinkers have understood the value of every individual part
of organization, including its sub-system through this system theory. In system,

33
 INTRODUCTION TO impact of one part on another should also be predicted, before putting it into
MANAGEMENT action. In system approach, organization must take into consideration its external
environment, because it also affects in many ways to theorganization work and
decisions. So if manger will coordinate the work activities of the various parts of
the organization and see that all the interdependent parts of the organization are
working together, organizational goal can be achieved properly. Some important
terms connected with system theory are:
1. Open v/s Close System: An open systems interacts with other systems through
the free passing of information, whereas closed systems operate on their
own with little or no influence from the outside world.
2. Entropy:Entropy can be defined as the measure of disorder, uncertainty and
consumed energy in a system or in the Universe.
3. Synergy: Synergy means that the whole is greater the sum of its parts. For
e.g. A + B = C, where sum of C is always greater than A and B. According
to system theory, it is the advantage of joining two sub-systems and get
more outcome.
4. Subsystem: Each part of a bigger system is a sub-system.
3.4.4 Contingency Theory
Building on system theory ideas, the contingency perspective disapprove univer-
sal principles of management by stating that a variety of factors, both internal and
external may affect the organization. Thus, there is no “one best way” to manage
and organize, because circumstances vary.
E.g. – a universal strategy to offer a low cost product can not be successful in the
market, where customers are not cost conscious.
Situational characteristics are called contingencies. These contingencies include:
1. External environment;
2. Internal strength and weaknesses of the organization;
3. The values, goals, skills and attitudes of managers and workers;
4. Type of tasks, resources, and technologies the organization uses.
With an eye of these contingencies, a manager may categorise the situation and
then choose the proper competitive strategy, organization structure, or manage-
ment process for the circumstances.
Check Your Progress 3
1. In which work, experiments were done in four phases to do the systematic
analysis of human factor at one Plant of Western Electric Company USA?
a. Regular Experiments c. Crucial Experiments
b. Hawthorne Experiments d. Gantt Experiments
2. In organizational behaviour, theory X and Y is developed by whom?
a. Douglas McGregor c. Elton Mayo
b. Abraham Maslow d. F. W. Parker

34
3.5 Let Us Sum Up HISTORY OF
In this unit 3, you have learnt history of management or in other words, school of MANAGEMENT
management thought. Mainly there are two approaches in schools of manage-
ment: Classical Approaches and 2. Contemporary Approaches.
Main focus in case of scientific management is on identifying one best way, select-
ing and training people in a scientific way and sharing of work among both work-
ers and management, i.e. work which can not be done by workers should be
done by management.
Henry Fayol has given 14 different principles for general administration of the
organization. These principles are suggested for the betterment of the whole or-
ganization, where scientific management more focuses on scientific work, mainly
from manufacturing angle only.
Behavioural school has come out with idea to consider people as human beings
rather than machine. Hawthorne experiments in four phases have shown signifi-
cant insight and concluded that other than money, some other factors play the role
for higher performance. Informal groups and group dynamics can influence a lot
on the employee’s performance.
At last two contemporary approaches – system and contingency theory are ex-
plained. System approach focuses on different sub-systems of the organization,
because all sub-system in total make one system,which are interdependent. Con-
tingency theory disapprove the one best approach and says that what is best
fitted in a particular situation is the right approach, so manager should identify the
correct approach based on situation rather than one best way always.
3.6 Answers to Check Your Progress
Check Your Progress 1
1 – True, 2 – True, 3 – True
Check Your Progress 2
1 – c, 2 – b, 3 – b, 4. – b, 5 - b
Check Your Progress 3
1 – b, 2 – a
3.7 Glossary
1. Economies of scale : It means when total volume of production increases,
average cost of a product reduces.
2. Discipline : Employees must obey and respect rules of the organization.
3. Initiative: Employees should be encouraged to contribute new ideas and
experiences in work assigned to them.
4. Open System : An open systems interacts with other systems through the
free passing of information.
3.8 Assignment
Identify various schools of management thought. Explain scientificapproach of
management.

35
 INTRODUCTION TO 3.9 Activities
MANAGEMENT
List out 14 different principles given by Henry Fayol and visit managers of two
different companies and ask them, how many of 14 principles are practiced in
their organization.
3.10 Case Study
Meet two or three company executives and ask them what school of thought,
they apply in their organization.
3.11 Further Readings
1. Principles of Management, B. S. Moshal, Galgotia Publications
2. Management Text and Cases, VSP Rao and V. Hari Krishana, Pub-
lished by Anurag Jain for Excel Books
3. Principles of Management, Second Edition, P. C. Tripathi and P. N.
Readdy, Tata McGraw Hill Publishing Company
4. Essentials of Management, Harold Koontz and Heinz Weihrich, Tata
McGraw Hill
5. Management – Competing in the New Era, Bateman and Snell, Tata
McGraw Hill 5th Edition.

36
BLOCK SUMMARY

In this block, there are 3 units in total. Unit 1 is totally focusing on

meaning and functions of management. Other than management functions, it
has also shown features, process of management, importance and difference
between management and administration.
Unit 2 is covering other related areas of management. These areas are
skills of management, roles of a manager, levels of management, and how
management is an art, science and profession.
Unit 3 is focusing on history of management. This history mainly di-
vided into two parts: Classical School and Contemporary School. Under
these two heads, different management schools with its contribution are ex-
plained.
All the units are explained in student centric language, necessary pic-
tures and examples to help and make the subject interesting for students.

37
 INTRODUCTION TO BLOCKASSIGNMENT
MANAGEMENT
Short Answer Questions
1. Features of Management.
2. Management Process
3. Levels of Management.
4. Information Roles
5. Taylor’s scientific management
6. System Approach
Long Answer Questions
1. Define management and discuss various functions of management.
2. How management is an art and science ? Explain.
3. Write a detailed note on 14 principles of general administration given
by Henry Fayol.
Enrolment No.:
1. How many hours did you need for studying the unitse

Un it N o. 1 2 3

Nos of Hr s

2. Please give your reactions to the following items based on your reading
of the block:

3. Any Other Comments

………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
38
PRINCIPLES OF MANAGEMENT

DR. BABASAHEB AMBEDKAR OPEN UNIVERSITY

AHMEDABAD
Editorial Panel

Author : Dr. Jayraj Pandya

Director
K. S. School of Business Management,
Gujarat University
Ahmedabad

Editor : Dr. Mehal Pandya

Associate Professor
B. K. School of Professional and
Management Studies
Gujarat University, Ahmedabad

Language Editor : Dr. Vasant K. Joshi

Associate Professor,
G. B. Shah Commerce College
Ahmedabad.

ISBN 978-81-947108-3-7

Edition : 2020

Copyright © 2020 Knowledge Management and Research

Organisation.
lized in any form or by a means, electronic or mechanical,
including photo copying, recording or by any information storage
or retrieval system without written permission from us.

Acknowledgment
Every attempt has been made to trace the copyright holders of
material reproduced in this book. Should an infringement have
occurred, we apologize for the same and will be pleased to make
necessary correction/amendment in future edition of this book.
The content is developed by taking reference of online and print
publications that are mentioned in Bibliography. The content
developed represents the breadth of research excellence in this
multidisciplinary academic field. Some of the information,
illustrations and examples are taken “as is” and as available in the
references mentioned in Bibliography for academic purpose and
better understanding by learner.’
ROLE OF SELF INSTRUCTIONAL MATERIAL
IN DISTANCE LEARNING
The need to plan effective instruction is imperative for a
successful distance teaching repertoire. This is due to the fact that
the instructional designer, the tutor, the author (s) and the
student are often separated by distance and may never meet in
person. This is an increasingly common scenario in distance
education instruction. As much as possible, teaching by distance
should stimulate the student’s intellectual involvement and contain
all the necessary learning instructional activities that are capable
of guiding the student through the course objectives. Therefore,
the course / self-instructional material are completely equipped
with everything that the syllabus prescribes.

To ensure effective instruction, a number of instructional

design ideas are used and these help students to acquire knowledge,
intellectual skills, motor skills and necessary attitudinal changes.
In this respect, students’ assessment and course evaluation are
incorporated in the text.

The nature of instructional activities used in distance

education self- instructional materials depends on the domain of
learning that they reinforce in the text, that is, the cognitive,
psychomotor and affective. These are further interpreted in the
acquisition of knowledge, intellectual skills and motor skills.
Students may be encouraged to gain, apply and communicate
(orally or in writing) the knowledge acquired. Intellectual- skills
objectives may be met by designing instructions that make use of
students’ prior knowledge and experiences in the discourse as the
foundation on which newly acquired knowledge is built.

The provision of exercises in the form of assignments,

projects and tutorial feedback is necessary. Instructional activities
that teach motor skills need to be graphically demonstrated and
the correct practices provided during tutorials. Instructional
activities for inculcating change in attitude and behavior should
create interest and demonstrate need and benefits gained by
adopting the required change. Information on the adoption and
procedures for practice of new attitudes may then be introduced.

Teaching and learning at a distance eliminates interactive

communication cues, such as pauses, intonation and gestures,
associated with the face-to-face method of teaching. This is
particularly so with the exclusive use of print media. Instructional
activities built into the instructional repertoire provide this missing
interaction between the student and the teacher. Therefore, the
use of instructional activities to affect better distance teaching is
not optional, but mandatory.

Our team of successful writers and authors has tried to

reduce this.

Divide and to bring this Self Instructional Material as the best

teaching and communication tool. Instructional activities are
varied in order to assess the different facets of the domains of
learning.

Distance education teaching repertoire involves extensive use

of self- instructional materials, be they print or otherwise. These
materials are designed to achieve certain pre-determined learning
outcomes, namely goals and objectives that are contained in an
instructional plan. Since the teaching process is affected over a
distance, there is need to ensure that students actively participate
in their learning by performing specific tasks that help them to
understand the relevant concepts. Therefore, a set of exercises is
built into the teaching repertoire in order to link what students
and tutors do in the framework of the course outline. These could
be in the form of students’ assignments, a research project or a
science practical exercise. Examples of instructional activities in
distance education are too numerous to list. Instructional activities,
when used in this context, help to motivate students, guide and
measure students’ performance (continuous assessment)
 PREFACE
We have put in lots of hard work to make this book as user-
friendly as possible, but we have not sacrificed quality. Experts
were involved in preparing the materials. However, concepts are
explained in easy language for you. We haveincluded may tables
and examplesfor easy understanding.

We sincerely hope this book will help you in every way you
expect. All the best for your studies from our team!
 PRINCIPLES OF MANAGEMENT
Contents

BLOCK 2 : PLANNING, DECISION-MAKING, ORGANIZATION AND

STAFFING

Unit 1 Planning

Planning – Meaning and Definition, Features, Steps in

Planning Process, Approaches, Principles, Importance,

Advantages and Disadvantages of Planning, Types of

Plans, Types of Planning, Management by Objectives.

Unit 2 Decision–Making

Decision-making- Meaning, Characteristics, Decision-

Making Process, Guidelines for Making Effective Decision,

Types of Decisions.

Unit 3 Organization and Organization Structure

Organizing Process : Meaning and Definition,

Characteristics, Process, Need and Importance,

Principles, Span of Management.

Organization Chart : Types, Contents, Uses, Limitations,

Factors Affecting Organizational Chart, Organizational

Structure – Line Organization, Line and Staff, Functional,

Project, Matrix and Virtual.

Informal Organization : Meaning, Characteristics,

Importance, Limitations, Difference between Formal

and Informal Organization

Unit 4 Staffing

Staffing – Meaning, Nature, Importance, Staffing Process

– Manpower Planning, Recruitment, Selection,

Orientation and Placement, Training, Remuneration,

Performance Appraisal, Promotion and Transfer.

 Dr. Babasaheb Ambedkar BBAATR-103
Open University Ahmedabad

Principles of Management
BLOCK 2 : PLANNING, DECISION–MAKING, ORGANIZING
AND STAFFING

UNIT 1 PLANNING

UNIT 2 DECISION MAKING

UNIT 3 ORGANIZING AND ORGANIZATION STRUCTURE

UNIT 4 STAFFING
 PLANNING, DECISION-MAKING,
ORGANIZING AND STAFFING
Block Introduction :
Planning has number of characteristics such as goal-oriented, futuristic,
intellectual process, choice and decision making and serves as the main function
of the management. Organising is a process of finding and grouping work that
needs to be performed, define and can establish relation. It involves integrating,
coordinating and mobilizing the activities of members of group for seeking common
goals. Managerial function of staffing involves manning the organisation structure
by proper and effective selection, appraisal and development of personnel to fill
the roles assigned to employers/workforce.
In this block student will be explained with basic of plan and its action in
planning with more on single use plan and standing plan. The idea about organising
and planning with certain principles along with various functions of an organisation
are highlighted. The block will give knowledge about nature, role and importance
of staffing with process and rules associated with manpower recruitment and
planning are well explained.
After this block, students of management will be able to know and gather
knowledge about how the staffing is important for progress of a company and
what measures should be taken to increase productivity with similar staff.

Block Objectives :
After learning this block, you will be able to understand :
• Different types of planning.
• The Principles of organising and planning.
• The Process of staffing and its importance.
• About manpower recruitment and planning.
• The characteristics of planning.
• The Principles of Organising.
• About organisation structure.
• The Basic of functional structure.
• Features of Divisional Organisation Structure.
• Necessity of Matrix Organisation Structure.
• Knowledge of Staffing and Recruitment.
• Basic of Manpower Planning.
• Need of Placement and Orientation.
• Variation in Remuneration.
• Basic about Promotion.

Block Structure :
Unit 1 : Planning
Unit 2 : Decision Making
Unit 3 : Organizing and Organization Structure
Unit 4 : Staffing
 Unit
PLANNING
1

: UNIT STRUCTURE :
1.0 Learning Objectives
1.1 Introduction
1.2 Strategic Planning
1.2.1 Meaning and Definitions of Planning
1.2.2 Features of Planning
1.2.3 Steps of Planning Process
1.2.4 Importance of Planning
1.2.5 Advantages and Disadvantages of Planning
1.2.6 Principles of Planning
1.2.7 Approaches to Planning
1.2.8 Types of Plans
1.2.9 Management by Objectives
1.3 Let Us Sum Up
1.4 Answers to Check Your Progress
1.5 Glossary
1.6 Assignment
1.7 Activities
1.8 Case Study
1.9 Further Readings
1.0 Learning Objectives
After learning this unit, you will be able to understand:
• Strategic Planning
• Features of Planning
• Steps in Planning Process
• Importance of Planning
• Advantages and Disadvantages of Planning
• Principles of Planning
• Approaches to Planning
• Types of Plans
• Management by Objective
1.1 Introduction
In the previous block 1, you studied about basics of management, like –
meaning and functions of management, importance of management, skills of man-
1
 PLANNING, ager, roles of manager etc. In history of management, you learnt different school of
DECISION-MAKING, management thought. In history, you learnt, classical approaches, namely Taylor’s
ORGANIZING AND scientific management, Fayol’s principles of management etc. Contemporary ap-
STAFFING proaches covered system and contingency approach.
In this unit, you will learn about planning. Planning is a very primary activity
among different functions of management. You will learn features, process, impor-
tance and advantages of planning. You will also come to know principles, ap-
proaches and types of planning also.
1.2 STRETAGIC PLANNING

Fig 1.1 Planning

In 1983, a chemistry student Ranganathan set out to sell shampoos with Rs 15,000
in his pocket. It was a market with 200 odd companies, dominated by the „big
daddy? Hindustan Lever Ltd.
From the beginning, Ranganathan knew that many people outside the great Indian
middle-class could not afford to spend sixty rupees on shampoo, but they could
definitely afford a Re.1 sachet. After clearly visualising this gap, he treated the
„Chik? sachet and began selling the same on bicycle. To boost up the sales, he
came out with another brilliant idea: „Return five shampoo sachets and get one
Chik sachet free.’ The idea clicked in frugal rural households of Tamil Nadu. Vol-
umes tripled, the revenues took care of distribution and the brand name stuck.
The liberalisation measures of 1990s helped him grab every opportunity to ex-
pand his market to every nook and corner of India. He began advertising first on
regional satellite channels and consolidated his brands - Chik, Nyle (herbal sham-
poo), and the ever popular Fairever fairness cream - in the southern markets
before launching them nationally.
Now, CavinKare Group (a synonym of beauty and grace in Tamil literature) has
crossed a turnover of 8819 million INR in 2009-2010 with employee strength of
1520, on an all India network of 1300 Stockists catering to about 25 lakh outlets
nationally.
In a market dominated by multinationals, Ranganathan created his own space
through careful, elaborate planning of what prompts buyers to go after aproduct.
2
In a capital-hungry, labour-surplus market, he found the answer. Find a novel PLANNING
cost-effective product and position it in such a way that cannot be easily chal-
lenged. This simple chemistry student has already taught some great marketing
lessons to multinationals and has proved that even small firms can grow and pros-
per in a tough environment if they are able to exploit their unique ideas (strengths)
through proactive thinking and careful planning.
Today, CavinKare, having established a firm foothold in the national market, is
increasing its popularity in the international arena. A dedicated Research and De-
velopment centre, equipped with the latest equipment and technologies, con-
stantly supports the various divisions of this company in their endeavour. The
Company, which primarily relied on contract manufacturing for many years, has
now set up its own world-class plant at Haridwar to cater to the demand of both
domestic and international market.
Planning: Deciding in advance what to do, how to do it, when to do it and who is
to do it.
1.2.1 Meaning and Definition of Planning
Successful managers try to visualise the problems before they turn into
emergencies. As pointed out by Terry, “successful managers deal with fore-
seen problems and unsuccessful manager?s struggle with unforeseen prob-
lems. The difference lies in planning.”
Managers charged with responsibility of achieving definite targets do
not wait for future. They make the future. To introduce the original action by
removing present difficulties, anticipating future problems, changing the goals
to suit the internal and external changes, experiment with creative ideas and
take the initiative, attempting „to shape the future and create a more desir-
able environment.

Fig 1.2 Planning and Forecasting

A plan is a forecast for accomplishment. It is a predetermined course of action. It
is today?s projection for tomorrow?s activity. In other words, to plan is to pro-
duce a scheme for future action, to bring about specified results at a specified cost
3
 PLANNING, in a specified period. Management thinkers have defined the term in two ways:
DECISION-MAKING, Based on futurity:
ORGANIZING AND
• Planning is a trap laid down to capture the future. (Allen)
STAFFING
• Planning is deciding in advance what is to be done in future. (Koontz).
• Planning is informed anticipation of future. (Haimann)
• Planning is „anticipatory? decision-making. (R.L, Ackoff)
Based on thinking:
• Planning is a thinking process, an organised foresight, a vision based on fact
and experience that is required for intelligent action. (Alford and Beatt)
• Planning is deciding in advance what to do, how to do it, when to do it and
who is to do it. (Koontz and O?Donnell)
A plan is a specific, documented intention consisting of an objective and an action
statement. The objective portion is the end and the action statements represent
means to that end. Stated another way, objectives give management targets to
shoot at, whereas action statements provide the arrows for hitting the targets.
Properly conceived plans tell what, where and how something is to be done.
1.2.2 Features of Planning
Planning has a number of characteristics:
• Planning is goal-oriented.
o Planning is made to achieve the desired objective of business.
o Goals established should be generally accepted.
o Planning locates action which leads to goals quickly and economically.
o Planning shows a sense of direction to various activities.
• Planning is looking ahead.
o It is done for future.
o It requires peeping in future, analyzing it and predicting it.
o It is based on forecasting.
o It is a synthesis of forecast.
o It is a mental predisposition for things to happen in future.
• Planning is an intellectual process.
o It is a mental exercise which includes lucrative thinking, judgment and imagi-
nation.
o It involves not mere guesswork but rotational thinking.
o It depends on goals, facts and considered estimates.
• Planning involves choice and informed decision-making.
o It basically involves selecting from various alternatives.
o It is not applicable in single course of action as it attains no choice.
o The decision-making involves an integral part of planning.
o It gives more options to managers to select the best as per needs.

4
o It basically involves selecting from various alternatives. PLANNING
o It is not applicable in single course of action as it attains no choice.
o The decision-making involves an integral part of planning.
o It gives more options to managers to select the best as per needs.
Planning is the primary function of management. / Primacy of Planning
o It lays the foundation for other functions of management.
o It serves as guide for organizing, staffing, directing and controlling.
o It carries complete functions of management inside a framework.
o It is the main function of management.
• Planning is a continuous process.
o It serves as never-ending process due to dynamic business environment.
o It is prepared for particular time and is subject to revaluation and review.
o It will remain continuous till enterprise issues get completed.
• Planning is all-pervasive.
o It is needed at every level of management and everywhere in enterprise.
o It varies with scope of work.
o Top level involves in planning, middle level involves in departmental plans while
lower level will implement the same plan.
• Planning is designed for efficiency.
o It leads to complete objectives at lowest cost.
o It avoids wastage of resources and ensures good use of resources.
o It is worth or useless till it results in value of cost which occurs.
o It results in saving time, effort and money.
o It leads to correct use of men, money, materials, methods and machines .
Planning is Flexible.
o It should give enough room to cope with changes occurs with customer
demand, competition, government policies, etc.
o The original plan should keep on updating if any circumstance for change
occurs.
1.2.3 Steps in Planning Process
Steps in Planning Function
Planning function of management involves the following steps:
• Establishment of objectives
o The objective of planning is basically a straight approach.
o Planning should begin with setting up of goals and objectives.
o The objectives should carry a base for doing various activities with certain
direction of efforts.
o An objective will stress on managers attention on particular result to get
executed.
5
 PLANNING, o Another idea of objectives is to show clear, precise and straight meaning.
DECISION-MAKING,
o Objectives should be explained with clear quantitative terms.
ORGANIZING AND
STAFFING o The goals of objectives should be explained clearly in qualitative terms.
o Objective should be practical, clear, adaptable, workable and achievable.
• Establishment of Planning Premises
o It is an assumption of events which could happen in future.
o It is the start of planning process.
o It relates to finding a trend which deflects from real plans.
o It locates the hindrances which appear in business at particular course of
operations.
o It concerns with taking particular steps which broadly avoids hindrances.
o It can be internal or external which covers capital investment policy, man-
agement labour relations and socio- economic and economical changes.
o In this you can control internal premises where as external premises cannot
be controlled.
Choice of alternative course of action
o In case of forecasts and premises, various alternative actions can be con-
sidered.
o It can be calculated based on pros and cons under light of resources present
and need of organisation.
o It examines merits, demerits and consequences of every alternative before
making any selection.
o Once objective and scientific evaluation is done, then the correct option is
selected.
o Planners with the help of quantitative techniques will be able to verify the
stability of such alternative.
Formulation of derivative plans
o It is the secondary plans that are responsible for giving any help to achieve-
ment of main plan.
o This plan moves from the main plan which will support and speed up the
success of the main plans.
o It covers policies, procedures, rules, programme, budgets, schedules, etc.
o It shows time schedule as well as series of achieving different tasks.
Securing Co-operation
o Once the plan has designed, then it is advisable to take people into confi-
dence who are linked with it.
The idea of taking subordinates into confidence as get motivation and the organisation
receives valuable suggestions with the idea to enhance it further.
6
Follow up/Appraisal of plans PLANNING
o Once the action is decided, now it will be put into practice.
o After implementation of particular plan, it is advisable to judge its perfor-
mance.
o The judgment is based on feedback or information from various depart-
ments or concerned people.
o With this, the management can take correct deviations or can modify the
plan.
o All these make a link among planning and controlling function.
1.2.4 Importance of Planning
• Planning facilitates management by objectives.
o Planning starts with finding of an objective.
o It shows the reason for starting different activities.
o With this, the objective becomes clear and particular.
o With planning, an employee will be more focused towards objectives and
goals.
o There will be no path, if there is no planning.
Planning minimizes uncertainties.
o In business, there occur lots of uncertainties.
o Because of such uncertainties, there occurs risk factor in every business.
o With planning, the uncertainties can be lowered as it anticipates any future
occurrences.
o Since future cannot be predicted 100%, so with the help of planning, the
management will come to know about future activities.
Planning facilitates co-ordination.
o It is seen that planning moves around organisational goals.
o In this, all activities are aimed at common goals.
o There is a combined effort all the way in an enterprise in departments and
groups.
o It keeps away from replication of efforts which results in good co-ordina-
tion.
o It solves the problems related to work performance which aims as altering
the same.
Planning improves employee’s morale.
o With planning, an atmosphere of order and discipline originates that takes it
as a serious aspect.
o Through planning employees will come to know what is required from them
which results in obtaining conformity.

7
 PLANNING, • Planning helps in achieving economy.
DECISION-MAKING, o Good planning results in safer economy as it leads to allocation of resources.
ORGANIZING AND
o It makes admissible for correct use of resources for economic operations.
STAFFING
o There will no wastage of resources if choosing correct use will can add to
objectives of an enterprise.
Planning facilitates controlling.
o With planning it is possible to go ahead with fixed planned goals and stan-
dards of presentation.
o The basic of controlling is provided.
o An effective system of controlling is impossible without presence of good
thought plans.
• Planning provides competitive edge.
o Planning uses change in work methods, quality, quantity designs, extension
of work, redefining of goals, etc.
o The forecasting will secure the future of an enterprise and at the same time
calculate the future motives of competitors.
• Planning encourages innovations.
o With planning process, managers will be able to suggest ways and different
means in order to improve performance.
o It is a decision making function which caters creative thinking and imagina-
tion which shows innovative methods and growth operations of an enter-
prise.
Check Your Progress 1
True or False:
1. Planning is the primary function of management.
a. True
b. False
2. Planning does not facilitate controlling.
a. True
b. False
3. Establishment of objectives is the first step of planning process.
a. True
b. False
1.2.5 Advantages and Disadvantages of Planning
Advantages
• Planning forces the manager to generate a blueprint of line of action for
doing objectives.
• With planning, there exists order and reasonableness in an organisation.
• It encourages the employees to deliver best which led to earning of reward.

8
• This will develop healthy attitude in work, which further boost the morale PLANNING
and efficiency of employees.
• It lead to pre-determined goals that will helped to compare actual perfor-
mance.
• It is seen that planning and controlling are opposite sides of a coin.
• With planning, best use of resources, good quality production and aggres-
sive strength of enterprise can be enhanced.
Disadvantages
• With planning the administration becomes inflexible.
• It requires advance policies, procedures and programmes.
• It is restricted to individual freedom.
• It is restricted to individual interests not for an enterprise.
• Due to collection of information, it is a time consuming process.
It does not work at time of emergency or crisis when faster decisions are needed.
• Planning depends on thought which is not accurate as a result of future
stability.
• Planning is not cost effective as lot of time and money spends on col-
lection, analysis and evaluation of information.
1.2.6 Principles of Planning
To be useful, planning should try to incorporate some of the time-tested and
inter-related principles, beautifully summed up by Koontz thus:
1. Principle of contribution to objectives: Every plan should help in
the achievement of organisational objectives.
2. Principle of primacy of planning: Planning precedes all other mana-
gerial functions. It is the first and the foremost function to be followed
in the process of management.
3. Principle of pervasiveness of planning: Planning is an all-pervasive func-
tion. It is important to all managers regardless of their level in the organisation.
4. Principle of flexibility: By flexibility of a plan, we need to highlight its
ability to switch gears, change direction to adapt to changing situations with-
out unnecessary cost (ability to vary product mix, shift marketing effort
geographically, raise additional funds on favorable terms, reshuffle and re-
locate personnel quickly, change organisation structure etc. are all included
in this exercise).
5. Principle of periodicity: Plans should be integrated and interconnected in
such a way as to achieve the stated objectives economically and efficiently.
A manager should review events and expectations regularly, refine and re-
draw the plan and keep it on track.
6. Principle of planning premises: Every plan is based on carefully consid-
ered assumptions, known as planning premises. “The more the individuals
charged with planning, understand and agree “to utilize consistent planning
premises, the more coordinated enterprise planning will be.
9
 PLANNING, 7. Principle of limiting factor: While choosing an appropriate course of ac-
DECISION-MAKING, tion among different alternatives, the limiting or critical factor (such as money,
ORGANIZING AND manpower, machinery, materials, management) should be recognized and
STAFFING given due weightage. When ignored, the critical factor would seriously af-
fect the process of planning and make it impossible to achieve goals.
1.2.7 Approaches of Planning
Managers follow various approaches to planning based on the extent of participa-
tion, authority, delegation and competency level of managers working at various
levels, namely:
1. Top-down approach: In most family-owned enterprises, authority and re-
sponsibility for planning is centralized at the top. The top management de-
fines the mission, lays down strategies, and specific action plans to achieve
the stated goals and then pass on to the people working at lower level.
2. Bottom-up approach: Thinking and doing aspects in the planning process
are two sides of the same coin. Hence, if lower level managers are drawn
into the preparation and implementation of plans, their loyalty and commit-
ment would go up automatically.
3. Composite approach: In this approach, a middle path is chosen to facili-
tate the smooth implementation of the plans. Here the top management of-
fers guidelines, sees boundaries and encourage the middle and lower level
executives to come out with tentative plan.
4. Team approach: In this, the job of planning is assigned to a team of man-
agers having requisite experience in various functional areas. They prepare
the draft plans, taking internal as well as external factors into account. The
tentative plans are forwarded to the top management for approval.
Check Your Progress 2
1. The top management defines the mission, lays down strategies, and specific
plans to achieve the stated goals and then pass on to the people working at
lower level is known as ______________________.
a. Top-down approach c. Composite approach
b. Bottom-up approach d. Team approach
2. Every plan is based on carefully considered assumptions, is known as the
principle of _____________________________ .
a. Limiting Factor c. Primacy of planning
b. Planning Premises d. Periodicity
3. Planning forces the manager to generate a ____________ of line of action
for achieving objectives.
a. Scale c. Blueprint
b. Attitude d. None of these
1.2.8 Types of Plans
In block 1, you have studied functions of management, in which planning was the
primary activity or function. This planning types can be understood from many
perspectives. They are five such type of plans, they are shown below:
10
 PLANNING

Figure 1.3 Types of Plans

Types of Plans:
1. Hierarchical Plans:
Here, the word hierarchy means different levels of management, so in or-
ganization three levels plan are there. There are: Strategic, Administrative
and Operational Plans. All these levels are interdependent and support each
other to achieve organizational goals.
• Strategic Plans: At the top, strategic plans are there, it define and design the
long term vision, mission and value statement for the organization. In strate-
gic plans, it is planned that how this vision and mission will be integrated in
its general and task environment.
• Administrative Plans: After strategic plans, administrative layer is at middle
level. In this level, various resources are distributed to internal units and
functional areas of management. They also coordinate with all subdivisions
of the organization. They become a link between vision development and
vision implementation.
• Operational Plans: Operational plans is at bottom in hierarchical plans. This
is also known as technical core. It plans for day today operation, actual
execution of vision, mission and divisional level work is done at this level.
2. Frequency of Use Plans: These plans are based on its usage rate, it
means whether they are repetitive in nature or used for only single time.
A. Standing Plans: This plans are concerned with those activities which are
repetitive in nature. Standing plans include mission, strategies, policies, rules
and procedure.
• Mission – Unique aim which is created to achieve the vision of the organi-
zation;
• Policy – General guideline or statement which is formulated by the organi-
zation for the guidance of its personnel;

11
 PLANNING, • Rules – It is a statement about what is permissible and what is not permis-
DECISION-MAKING, sible in the organization;
ORGANIZING AND • Procedure – It is an instruction about how to complete a particular task.
STAFFING
B. Single Use Plans: These plans have single use in practice. In such plan,
organization develops a very specific – SOP, is known as Standard
Operating Procedure. They are:
• Objective: A specific result that an organization has to achieve within a
time frame and with available resources;
• Strategy: A plan of action designed to achieve a long term goal by
relating strengths and weaknesses of an organization with opportuni-
ties and threats out of the changing environment;
• Programme: A programme is a collection of organizational resources
that is geared to accomplish a certain major goal or set of goals;
• Project: A complex set of policies, procedures, rules and budgets de-
signed to meet specific situations and all other needful actions required
for implementing a given course of action;
• Budget: A budget is a formal statement of estimated income and ex-
penses based on future plans and objectives in numerical terms.
3. Time Frame Plans: These type of plans are mainly linked with time
line of completion in the organization.
• Short range plans: They are for several hours to a year. They are more
specific and with detail in nature.
• Medium range plans: They are normally from one to five years.
• Long range plans: They are normally for more than five years. They are
more directional, less with details and more informal in nature.
4. Organizational Scope Plans: These type of plans are basically connected
with the scope of it, broad to very narrow plans. Business plan are normally
very broad, whereas tactical plans are very narrow in scope. They are as
under:
• Business Plan: Focus on company’s business and its competitive market;
• Functional / Unit Level Plans: Here, focus is on the day-to-day operations
of lower-level organization units; like - marketing, human resources, ac-
counting, and operations plans (production);
• Tactical Plan: Division-level or unit-level plans designed to help an organi-
zation accomplish its strategic plans.
5. Contingency Plan: Contingency plan is alternative courses of action that
are to be implemented if events disrupt a planned course of action. This type
plan is called Plan B. it is more in use, when natural disaster, terrorist attack,
boycotts or mahamari like coronavirus of 2020 at a Global level takes place
in the society or country.
1.2.9 Management by Objectives
The concept of Management by Objectives was introduced by management guru
Peter Drucker in his book The Practice of Management in 1954. This concept
12
is used as strategic management model and somewhere it is known as a perfor- PLANNING
mance management approach. It is an approach to improve the performance by
clearly defining objectives that are agreed to both management and its employ-
ees.
MBO develops motivation, commitment and communication among employees,
because individual objectives are decided after their consultation. Success of MBO
is based on the support of top management, clarity of objectives and trained
managers who can execute it.
There are total 5 steps in MBO process, they are:
1) Determine or revise the organizational objectives of the entire company;
2) Translate the organizational objectives to employees;
3) Stimulating participation of employees in deciding individual objectives;
4) Monitoring the progress of employees;
5) Evaluate and reward employee progress.
Check Your Progress 3
True or False:
1. Strategic plans are always at the bottom in the Hierarchical plans.
a. True
b. False
2. Rule is a statement about what is permissible and what is not permissible in
the organization.
a. True
b. False
3. Medium level plans are from hours to a year.
a. True
b. False
4. In the book titled as “The Practice of Management” in 1954, Peter Drucker
has introduced the concept of Management by Objectives.
a. True
b. False
1.3 Let Us Sum Up
In this unit we have learnt, that a plan is a forecast for accomplishment which is a
predetermined course of action which produces a scheme for future action in
order to bring specified results at particular cost in a period.
It is seen that planning has a number of characteristics such as goal-oriented,
futuristic, intellectual process, choice and decision making and serves as the main
function of the management.
It is analysed that planning is a continuous all pervasive, flexible and designed for
efficiency process which involves different steps in establishing objectives. In these
managers have certain approaches such as Top-down, Bottom-up, Composite
and Team approach.
13
 PLANNING, It is studied that there exists two types of Plans which is Single Use Plans having
DECISION-MAKING, Objective, Strategy, Programme, Budget and second is Standing Plans having
ORGANIZING AND Policies, Procedure, Method and Rules.
STAFFING Planning helps an organisation to give it a direction, provide a unifying framework,
economic and reduces uncertainty. It facilitates decision making, encourages in-
novation, and improves work morale and facilities control.
1.4 Answers to Check Your Progress
Check Your Progress 1
1 – a, 2 – b, 3 - a
Check Your Progress 2
1 – a, 2 – b, 3 – c
Check Your Progress 3
1 – b, 2 – a, 3 – b , 4 – a.
1.5 Glossary
1. Planning : Planning is deciding in advance what to do, when to do, and
how to do it. It bridges the gap from where we are and where we want to
be. - Peter Drucker
1.6 Assignment
Define planning. What are the steps involved in planning?
1.7 Activities
Explain approaches to planning. What are the principles of planning?
1.8 Case Study
Are you a good planner? Planning is an important skill for manager using a hypo-
thetical situation and the information given below analyse yourself as a good plan-
ner. Prepare a brief report for the same.
Planning and Forecasting
Banks plan loan rate freeze to cash in on festival demand
MUMBAI : Several banks, which were earlier planning to raise their home loan
rates in October, were considering deferring such plans, keeping in mind the holi-
day season ahead when demand for such loans is expected to soar.
After the Reserve Bank of India revised its policy rates in mid-September, several
banks said they would consider increasing their lending rates in October when the
base rate, on which loans are priced, came up for review.
However, on festivals most banks see a huge demand in personal, car and home
loans, as it is considered as an auspicious time for purchasing homes or other
assets. Discounts are offered in the form of a waiver in processing fees and lower
rates for a limited period.
“Banks may not hike home rates immediately since sales are expected to pick up
soon after the PitrPakshais over,” said Oriental Bank of Commerce CMD T.Y.
Prabhu. During PitrPaksha, which is related to post-death rites performed by

14
Hindus, many people consider it inauspicious and choose not to take any major PLANNING
investment decisions.
Although the festival season was close, banks were under pressure to raise lend-
ing rates in October as their cost of funds have gone up by 50 to 100 basis points
during the last quarter. Interest rates on bulk deposits and certificate of deposits
had crossed 8% for one year compared with 7% a few months ago. Mr. Prabhu
said if banks are under pressure to raise lending rates, they may raise the base
rate but simultaneously narrow the spread between the base rate and home loan
rates. Banks have pegged their base rate in the range of 7.50% to 8%.
The special home loan scheme of India?s largest bank, State Bank of India, is due
to close on September 30, but its officials say the bank is most likely to extend the
scheme for another quarter to woo customers in the festive season. SBI offers a
fixed rate of interest of 8% in the first year, 9% in the second and third year, after
which the loan is priced on a floating rate basis.
Punjab National Bank, the second-largest bank, too has come out with a festive
offer on home loans marked by a fixed rate of interest of 8.5% for the first three
years and subsequently linked to prevailing floating rates.
Last week, Corporation Bank introduced a special home loan and vehicle loan
scheme, known as grand festival offer, wherein for loans up to ‘30 lakh, thelender
will offer it at base rate of 7.75% in the first year and 50 bps above the base rate
for second and 8.25% in the third year. The bank will charge 0.25% more if the
loan is above ‘30 lakh. “So far, demand for home loan has not been very encour-
aging, although we are better than the peers. But with this offer, we expect to
deploy ‘1,000 crore,” said S.M. Swati, General Manager-In-Charge of Retail
Lending at Corporation Bank.
1.9 Further Readings
1. Principles of Management, B. S. Moshal, Galgotia Publications
2. Management Text and Cases, VSP Rao and V. Hari Krishana, Published
by Anurag Jain for Excel Books
3. Principles of Management, Second Edition, P. C. Tripathi and P. N. Readdy,
Tata McGraw Hill Publishing Company
4. Essentials of Management, Harold Koontz and Heinz Weihrich, Tata
McGraw Hill
5. Management Theory and Practice (Text and Cases), P. Subba Rao, 2nd
Revised Edition, Himalaya Publishing House

15
 PLANNING,
DECISION-MAKING, Unit DECISION MAKING
ORGANIZING AND
2
STAFFING

: UNIT STRUCTURE :
2.0 Learning Objectives
2.1 Introduction
2.2 Decision Making - Pepsi – Cola’s Dilemma
2.2.1 Meaning of Decision Making
2.2.2 Characteristics of Decision-Making
2.2.3 The Decision-Making Process
2.2.4 Guidelines for Making Effective Decision
2.2.5 Types of Decision
2.3 Let Us Sum Up
2.4 Answers to Check Your Progress
2.5 Glossary
2.6 Assignments
2.7 Activities
2.8 Case Study
2.9 Further Readings
2.0 Learning Objectives
After learning this unit, you will be able to understand:
• Decision Making Meaning and Characteristics
• Decision Making Process
• Guideline for Effective Decision Making
• Types of Decisions
2.1 Introduction
In the previous Unit 1, you have studied different areas connected with planning.
Features of planning, planning process, importance of planning, advantages and
disadvantages of planning, principles of planning, and types of plans. Apart from
these topics one performance base planning method – MBO – Management by
Objectives also you have learnt.
In this Unit 2, you will learn about decision making. Decision making is one of the
very important aspect of any organization. It will cover the topics of decision
making meaning and characteristics, decision making process, guidelines of deci-
sion making and types of decision making.
2.2 Decision Making - Pepsi – Cola’s Dilemma
Many years ago, several reports surfaced stating that syringes and hypodermic
needles had been found in Pepsi cans. It was a difficult problem for Pepsi-Cola?s
16
executives. Could needles have been put in Pepsi at the canning plants or were the DECISION MAKING
reports a hoax?
The information was unclear and fast changing, time was running out and the ex-
ecutives had to find a solution quickly. Recalling the product meant danger for the
company. However, there was no evidence produced against the company as yet.
A recall would have been very costly and the company would have lost the trust of
customers. The executives, after carefully analyzing the facts, believed syringes
could not go into un-opened cans of Pepsi. Instead of going for a recall, the ex-
ecutives went on a massive public relations and education campaign.
Nationwide ad campaigns explained, “How implausible it was that syringes could
have been put into Pepsi cans at the plants.” They also assured consumers that
there had been no injuries and not a single confirmed case of a needle found in an
unopened can of Pepsi had been reported. By responding quickly and openly to
public fears, Pepsi weathered the syringe-scare crisis with little damage.
Pepsi managers made the right decision, believing, based on careful internal analy-
sis, that needle could not possibly have been put into can of Pepsi at the plants.
However, it was a decision that could have backfired, if the company would have
been unable to convince consumers that Pepsi products were truly safe.
2.2.1 Meaning of Decision Making
Decision-making can be regarded as the mental process (cognitive process) re-
sulting in the selection of a course of action among several available alternatives. It
is found that all decision making process will generate a final choice where the
output can be seen as an opinion.
Precisely, decision making relates to the study of finding and selecting various
alternatives which depends on values and choice of a decision maker. Further,
decision making shows an option that is taken care where the manager should not
simply locate many such options whereas can also select:
• Highest possibility of success
• Excellent match of goals, desires, lifestyle with values.
In the decision making process, an uncertainty will be lower and doubt related to
alternatives will make a good choice.

Fig 1.4 Decision Making

The above explanation focuses on the information gathering functions which re-
sults in making decision. In such cases, the uncertainty will be lowered instead of
eliminated. Under such circumstances, less decision are made with complete con-

17
 PLANNING, firmation as entire knowledge of all alternatives is rarely feasible. Soall decision
DECISION-MAKING, uses certain level of risk. If there is no uncertainty, you do not have a decision; you
ORGANIZING AND have an algorithm- a set of steps or a recipe that is followed to bring about a fixed
STAFFING result.
2.2.2 Characteristics of Decision-Making
The important characteristics of decision-making may be listed thus:
• Goal-oriented: Decision-making is a goal-oriented process. Decisions are
usually made to achieve some purpose or goal. The intention is to move
towards some desired state.
• Alternative: A decision should be viewed as „a point reached in a stream
of action.? It is characterized by two activities- search and choice. The
manager searches for opportunities, to arrive at decisions and for alterna-
tive solutions, so that action may take place. Selecting an alternative and
abiding by it leads to decision making. Thus, an alternative is found fit to
solve a particular problem. When no alternatives exist, the manager does
not need to arrive at a decision. When uncertainty concerning a particular
outcome is confronted, the manager has no choice but to put on his deci-
sion making hat.
Analytical-Intellectual: Decision-making is not only an intellectual process but
also an intuitive one. It involves conscious and unconscious aspects. Part of it can
be learned, but part of it depends upon the personal characteristics of the deci-
sion maker.
Dynamic Process: Decision-making is characterized as a process, rather than
as one static entity. It is a process of using inputs effectively in the solution of
selected problems and the creation of outputs that have utility. Moreover, it is a
process concerned with „identifying worthwhile things to do? in a dynamic set-
ting.
Pervasive Function: Decision-making permeates all management and covers
every part of an enterprise. Decision-making is the crux of a manager?s job.
Everything that the manager does is backed by the power of decision – making.
Continuous Activity: The life of a manager is a perpetual choice-making activ-
ity. He decides things on a continual and regular basis. It is not a one shot deal.
Commitment of Time, Effort and Money: Decision-making implies commit-
ment of time, effort and money. The commitment may be short term or long-term,
depending on the type of decision (e.g. strategic, tactical or operating). Once a
decision is made, the organisation moves in a specific direction in order to achieve
the goals.
Human and Social Process: Decision-making is a human and social process
involving intellectual abilities, intuition and judgment. The human as well as social
impacts of a decision are usually taken into account while making the choice from
several alternatives.
For example, in a labor-surplus, capital-hungry country like India, managers can-
not suddenly shut down plants, lop off divisions and decide to lay off thousands of
workers in the face of intense competition.
18
Integral Part of Planning: As Koontz indicated, „decision making is the core of DECISION MAKING
planning.? Both are intellectual processes, demanding discretion and judgment.
Both aim at achieving goals. Both are situational in nature. Both involve choice
among-alternative courses of action. Both are based on forecasts and assump-
tions and about future risk and uncertainty.
Check Your Progress 1 -
1. Decision making can be regarded as the mental process resulting in the
selection of a course of an action among several available alternatives.
a. True
b. False
2. Decision making is characterized as a dynamic process, rather than as a
static entity.
a. True
b. False
2.2.3 The Decision-Making Process
Making a good decision is a difficult exercise. It is the product of deliberation,
evaluation and thought. To make good decisions, managers should invariably fol-
low a sequential set of steps as shown in this figure.

Fig 1.5 Decision making process

1. Awareness of the problem
The first step in the decision-making process is recognizing the problem. The man-
ager must become aware that a problem exists and that it is important enough for
managerial action. Problems generally arise because of disparity between what is
and what should be. To identify the gaps between the current and desired state of
affairs, managers should look for problems that need solving. They must look for
opportunities to make decisions. The existence of a problem thus steps up the
need for decision making.
In order to recognize problems, a manager is expected to monitor the decision-
making environment, understand the possible causes and try to define the real
problem carefully.
2. Diagnose and state the problem
A successful manager must have the ability to weed out the wheat from the chaff
before deciding on a specific course of action. Once aware of a problem, he must
state the real problem. He must try to solve the problem, not just note down the
symptoms. Quite often, managers waste time developing solutions to the wrong
19
 PLANNING, problem. This is because opportunities and problems in the environment do not
DECISION-MAKING, surface so easily.
ORGANIZING AND Some questions that you need to ask include:
STAFFING
• What is the problem? What is the difference between what is and what
should be?
• Which problems should be solved?
• What is the real cause of the problem?
To avoid the danger of prescribing a wrong medicine for the organisation, the
manager should consider the decision environment properly. For example, a high
employee turnover in an organisation may be due to low salaries, poor working
conditions, tight supervision, poor scheduling, dissatisfaction with the jobs etc.
The manager should analyse all these causes thoroughly before defining the real
problem, an attitude survey may be undertaken to find out why employees are
leaving the organisation.
3. Develop the alternative
Quite often, executives try to take up the first feasible option. The statement of the
problem in clear, measurable terms enables executives to develop alternatives.
The ability to develop alternatives is as important as making a right decision among
alternatives. Ingenuity, research and creative imagination are required to make
sure that the best alternatives are considered before a course of action is selected.
4. Evaluate the alternatives
In this step, the decision maker tries to outline the advantages and disadvantages
of each alternative. The consequences of each alternative would also be consid-
ered. Sometimes, the alternatives developed may meet internal demands but may
fail to meet environmental conditions. In such cases, a manager may be forced to
make a „less than optimal-decision?.
The primary objective of evaluation is not to find out one magic solution but to
find out a workable solution that would help to eliminate the problem for good.
The attempt is made chiefly to limit the alternatives to a manageable and economi-
cally feasible number.
5. Select the best alternative
In this step, the decision maker selects the alternative that will maximise the results
in terms of existing objectives.
Fortunately, Peter Drucker has offered the following criteria for making the right
choice among available alternatives:
• The risk: The manager has to weigh the risks of each course of action
against the expected gains.
Economy of effort: The alternative that will give the greatest output for
the least inputs in terms of material and human resources is obviously the
best one.
• Timing: If the situation has great urgency, the best alternative is the one
that the decision maker finds fit.

20
• Limitation of resources: Physical, financial and human resources impose DECISION MAKING
a limit on the choice of selection. If adequate resources are not currently
available, the decision should be deferred.
6. Implement and verify the decision
After making a decision, the manager must implement it. He must see whether it
has worked out or not in practicality. In other words, he must seek feedback
regarding the effectiveness of the implemented solutions.
2.2.4 Guidelines for Making Effective Decision
This can be done if following factors are taken into consideration:
• Categorical Interpretation: At the very outset, it may be emphasized that
logical decisions can be made if the real problem is interpreted and identi-
fied with in depth study and observation.
• Application of Limiting Factor: In choosing from among alternatives, the
more a manager recognizes and solves for those factors, which are limiting
and critical to the attainment of desired objectives, the more clearly and
accurately he can select the most desirable alternative.
• Adequate Information: Information is the lifeblood of an organisation be-
cause all decisions are based on this. The more the quantity of reliable
information, higher is the validity of decision.
• Considering Others’ Views: While making a decision, it is desirable that
all alternatives are considered before arriving at a decision.
• Timeliness: A decision, to be effective, must be made at proper time. A
delay in decision-making may result into loss of opportunities in this fast-
changing environment.
Check Your Progress 2
1. First step in the decision making process is _________________ .
a. Awareness of the problem
b. Diagnose and State the Problem
c. Develop the alternatives
d. Evaluate the alternatives
2. _____________ is the lifeblood of an organization because all decisions
are based on this.
a. Alternatives
b. Information
c. Finance
d. Efforts
3. A decision, to be effective, must be made at proper __________ .
a. Place
b. Fund
c. Time
d. None of the above
21
 PLANNING, 2.2.5 Types of Decision
DECISION-MAKING, There are different type of decisions – strategic, tactical and operational; major
ORGANIZING AND and minor decisions, programmed and non-programmed decisions, simple and
STAFFING complex decisions, long run and short run decisions and individual and group
decisions.
1. Strategic, Tactical and Operational decisions
Strategic decisions are important which affect objectives, organisational goals
and other important policy matters. These decisions affect the whole organization
or major part of it. Any strategic decisions are non-repetitive in nature and needs
careful analysis and evaluation of many alternatives. They are often complex
andmultidimensional. Strategic decisions involve large sums of money, has long
term impact and usually taken by senior management.
Tactical decisions are about how to manage performance to achieve strategy.
They are in clear boundaries. They may involve significant resources, have me-
dium-term implications and taken by middle level managers.
Operational decisions are decisions related to routine activities follow rules of
the organization. These decisions are supportive in nature and needs less analysis
and concentration. They do not change or guide the direction of the organization.
Operational decisions needs less resources, short term applications and taken by
first line managers.
2. Major and Minor decisions
Other name of major decisions is important decisions. They affect the whole
organization and all various departments of the organization and are not repetitive
in nature.
Minor decisions are unimportant decisions. Normally affect concerned depart-
ments only and taken by lower level of management.
3. Programmed and Non-programmed decisions
Decisions based on company’s budget or policy etc. are programmed decisions.
They are made in response to repetitive or routine problems and situations. E.g. –
Pay money back for wrong delivery – procedure and policy will decide – it is a
programmed decision.
Non- repetitive, peculiar, complex, most important and unstructured problem
decisions are non-programmed decisions. Downsizing the organization or shut
down one office or branch are non-programmed decisions. They do not occur
again and again in organization.
4. Simple and Complex decisions
When very less number of factors are going to affect the decision, it is called
simple decision. E.g.- sanctioning a leave to an employee for long time with fam-
ily, may consider how much work is there in that time and who will manage it, -
will be a simple decision.
When many variables affect the decisions, like growth of population, cost of liv-
ing, market growth – is known as complex decision. Like company is planning to
increase wages of workers, it will be affected by employee productivity, trade
union influence, government policy etc…. than it’s a complex decision.
22
5. Long run decisions and short run decisions DECISION MAKING
Decisions affect long term plans and activities are called long term decisions. E.g.
– New product launch, New retail outlet, joint venture
Decisions affect short term plans and activities are called short term decisions.
E.g. – Discount Sale, sources of finance for working capital.
6. Individual Vs. Group decisions
When an individual manager or employee take decision is called individual deci-
sions. These decisions are routine, simple, repetitive and programmed decisions.
When a group take a decision, it is called group decision. E. g. team or committee
decisions, non-programmed decisions, complex and strategic decisions.
Check Your Progress 3
1. Tactical decisions are important which affect objectives, organisational goals
and other important policy matters.
a. True
b. False
2. Operational decisions are decisions related to routine activities follow rules
of the organization.
a. True
b. False
3. Other name for minor decisions is important decisions.
a. True
b. False
4. When very less number of factors are going to affect the decision, it is
called simple decision.
a. True
b. False
5. New product launch is an example of short term decision.
a. True
b. False
2.4 Let Us Sum Up
In this unit, you have learnt that decision-making is a mental process resulting in
the selection of a course of action among several available alternatives. In decision
making uncertainty will give lower choice and doubt related to objectives will
make a good choice.
Decision-making has various characteristics connected like – goal, alternative,
analysis, dynamic process, pervasiveness, continuity, demands time, efforts and
money, integral part of planning and it human and social process.
Decision-making process has six different steps in its process: Awareness of the
problem, dispose and state the problem, developing the alternatives, evaluate the
alternatives, select the best alternative and lastly implement and verify the deci-
sion.
23
 PLANNING, There are some important guidelines, which should also kept in mind for taking
DECISION-MAKING, effective decisions. Unit has also covered different type of decisions, like - – stra-
ORGANIZING AND tegic, tactical and operational; major and minor decisions, programmed and non-
STAFFING programmed decisions, simple and complex decisions, long run and short run
decisions and individual and group decisions.
2.5 Answers to Check Your Progress
Check Your Progress 1
1–a,2–a
Check Your Progress 2
1 – a, 2 – b, 3 – c
Check Your Progress 3
1 – b, 2 – a, 3 – b , 4 – a, 5 – b
2.6 Glossary
Decision-making : It is a mental process resulting in the selection of a course of
action among several available alternatives.
2.7 Assignment
Define decision-making. What are the steps involved in it? Discuss.
2.8 Activities
Meet two different type of managers or owners of business and ask them 1 or 2
examples of decisions connected with different type of decisions.
2.9 Case Study
In a small factory, the workers are very lazy and do not do their allotted jobs in the
given time. The manager calls the supervisor and questions about weak perfor-
mance of workers. The supervisor says the workers are bored with their jobs and
salary dissatisfaction is another reason. Manager is disturbed, not able to decide
what he should do?
This is what type of decision and here, what decision a manager should take?
Think and answer.
2.10 Further Readings
1. Principles of Management, B. S. Moshal, Galgotia Publications
2. Management Text and Cases, VSP Rao and V. Hari Krishana, Published
by Anurag Jain for Excel Books
3. Principles of Management, Second Edition, P. C. Tripathi and P. N. Readdy,
Tata McGraw Hill Publishing Company
4. Essentials of Management, Harold Koontz and Heinz Weihrich, Tata
McGraw Hill
5. Management Theory and Practice (Text and Cases), P. Subba Rao, 2nd
Revised Edition, Himalaya Publishing House

24
 Unit ORGANIZING AND ORGANIZATION STRUCTURE
3

: UNIT STRUCTURE :
3.0 Learning Objectives
3.1 Introduction
3.2 Organising Process
3.2.1 Meaning and Definition of Organising
3.2.2 Characteristics of Organising
3.2.3 Process of Organising
3.2.4 Need and Importance of Organising
3.2.5 Principles of Organising
3.2.6 Span of Management
3.3 Organizational Chart
3.3.1 Types of Organisational Chart
3.3.2 Contents of Chart
3.3.3 Uses
3.3.4 Limitations
3.3.5 Factors Affecting Organisational Chart
3.4 Organisation Structure
3.4.1 Classification of Organisational Structure
3.4.2 Line Organisation Structure
3.4.3 Line and Staff Organisation Structure
3.4.4 Functional Organisation Structure
3.4.5 Divisional Organisation Structure
3.4.6 Project Organisation Structure
3.4.7 Matrix Organisation Structure
3.4.8 Virtual Organisation
3.5 Informal Organisation
3.5.1 Meaning
3.5.2 Characteristics
3.5.3 Importance
3.5.4 Limitations
3.5.5 Difference between Formal and Informal Organisation
3.6 Let Us Sum Up
3.7 Answers for Check Your Progress
3.8 Glossary
25
 PLANNING, 3.9 Assignment
DECISION-MAKING, 3.10 Activities
ORGANIZING AND
3.11 Case Study
STAFFING
3.12 Further Readings
1.0 Learning Objectives
After learning this unit, you will be able to understand:
• TheOrganising Process
• Need and importance of Organising Structure
• Principles of organising
• Organisational Chart and factors affecting it
• Classification of organisational structure
3.1 Introduction
In the previous unit, you studied planning and forecasting, features, steps and
approaches for planning process, importance and principles of planning. Fur-
ther, you studied the types of plans, decision-making, its characteristics, steps
and guidelines for effective decision-making with adequate examples. Both
the cases employed effective and timely planning and decision-making.
In this unit, you are going to study organisation as a process of management.
You will study organisational principles organisational chart and organisational
structures, namely line, line and staff, functional, divisional, project, matrix
and virtual organisational structures.
3.2 Organising Process
Organising is the management function where in organisational resources are
allocated and responsibilities are delegated in order to accomplish long-term
organisational goals. It ensures efficient use of organisational resources. It is
related with building up of a framework or structure of various interrelated
parts. We can say that organising is a process consisting of a series of steps by
which managers create a network of authority responsibility relationship. It
helps people to work together (relate to one another) for a common objec-
tive.
3.2.1 Meaning and Definition of Organising
Where two or more persons work together for achieving a common goal,
their activities have to be organised. Organising is a process of integrating,
coordinating and mobilising the activities of members of a group for seeking
common goals. It implies establishment of working relationships, which is
done by assigning activities and delegating authority.
A few definitions of organisation are given below:
“Organising is a process of identifying and grouping the work to be per-
formed, defining and delegating responsibility and authority and establishing
a pattern of relationship for the purpose of enabling people to work most
effectively together in accomplishing objectives”.-Alien

26
“As a process of combining the work which individuals or a group have to per- ORGANIZING AND
form with the facilities necessary for its execution, that the duties so performed ORGANIZATION
provides the best channel for the efficient, systematic, positive and coordinated STRUCTURE
application of available efforts.”-Oliver
“Organising involves the establishment of an internal structure of roles, by identi-
fying and listing the activities required to achieve the purpose of a enterprise, the
grouping of these activities, the assignment of such group of activities to manager,
the delegation of authority to carry out and provision for coordination of authority
relationship horizontally and vertically in the organisation structure.”-Koontz and
O?Donnell
It is evident that the term organisation has been used as a process and as a struc-
ture. Organising a process involves many stages. When the stages are completed,
a formal structure comes into existence, known as organisational structure.
3.2.2 Characteristics of Organising
• Organising is one of the basic and important elements or functions of man-
agement. To get things done by others, a manager has to organise their
activities
• It is a goal-oriented process. It is only to achieve certain goals that the
process of organising is conducted. The structure of an organisation is
designed so as to facilitate performance of large number of activities.
• Theorganising process primarily deals with group efforts, which are
made to achieve common goals.
• Organising is based on the principle of division of work and
specialisation.
• It involves the processes of differentiation or division of activities and
integration of activities by grouping them.
• The process of organising aims at interrelating, mobilising and coordi-
nating the activities of employees.
• It establishes authority relationship of superior and subordinate among
the employees by assigning the activities and delegating adequate au-
thority to them.
• It has two basic components or dimensions, namely authority struc-
ture, which is created by delegation of authority from top to lower
level and the activity structure, which is created by dividing activities
into jobs and tasks, grouping them and then assigning them to the
various department or individuals.
3.2.3 Process of Organising
Organising as a process can be described as follows:
• Identification of Activities: At the first stage of organising, the man-
ager identifies those activities, which are necessary for achieving com-
mon goals. The common goals of organisation provide the basis for
determining and identifying the activities.

27
 PLANNING, • Division of Activities: Once the activities have been identified, they are
DECISION-MAKING, divided and subdivided into jobs and small tasks known as elements of
ORGANIZING AND activities.
STAFFING • Grouping of Activities: After division into small elements known as tasks,
the closely related ones having similarity may be grouped to form a depart-
ment.
• Assignment of Group Activities: Once activities are classified into groups,
they are assigned to the specific department or an individual.
• Granting Necessary Authority: Groups of activities are assigned to vari-
ous departments and individual employee?s demands to grant adequate
authority to them are considered.
• Coordinating the Functioning of Various Departments: In the process
of organising, attempts are made to coordinate each small element or task
with departmental activities. Further, the functioning of each department is
coordinated to achieve common goals.
After completing the above-mentioned stages involved in the process of
organising, it results in the creation of a structure known as organisational
structure.
3.2.4 Need and Importance of Organising
The need and importance of organising and organisational structure can be
understood on the basis of following points:
• Sound organisational structure facilitates effective management.
• The whole process of organising helps in co-ordinating various jobs in the
department or division and by relating them to departmental work.
• Logical and clear-cut division of work and delegation of authority among
the various members leads to many benefits.
• The sub-processes, differentiation and integration may directly affect
operating results of the enterprise. If both the processes are conducted
in a proper manner, overall organisational efficiency tends to increase.
• Creation of organisational structure also necessitates delegation of au-
thority among various managerial positions. Decentralisedorganisational
structure encourages prompt decision-making and efficient control.
• Theorganisational structure provides the basis and framework to the
manager, which enables him to cope with the changing environment.
• The structure of an organisation facilitates formal communication
through line of authority, established from top to lower levels.
• Creation of staff units in the activity structure of the organisation broaden
the span of control of the manager and help him in discharging his
responsibility in a more efficient manner.
• Organising virtually means order and discipline both in respect of work-
ing behaviour of the employees and their role and relationship.
• Highly de-centralised structure of an organisation may have a strong
influence on development of managers as delegation of authority to
28
 lower level managers provides opportunity to them for making decisions ORGANIZING AND
and exercising administrative authority. ORGANIZATION
3.2.5 Principles of Organising STRUCTURE
Introduction of organisation refers to those well-established and accepted gen-
eral statements, which are used in the process of organising to prepare a
soundorganisationl structure. These principles serve as general guidelines
for managers for evolving sound and more effective pattern of relationship in
designing the organisation. Most of these principles have classical flavour;
early management writers, including F. W.Taylor, HenriFayol, Lyndall, Urwick
and others have developed them. With the passage of time, these principles
have been refined and extended by many modem management scientists to
make them more efficacious and relevant in the modem context. Some of
these principles are outlined below.
1. Principle of Division of Labour: This is the basic principle of
organising, which represents division of work and activities into small
tasks and jobs necessary for achieving a set of objectives.
2. Principle of Functional Definition: In order to discharge assumed
responsibility by completing the job assigned to the employee, he has
to perform many functions. According to this principle, the functions
to be performed by an individual employee or by a department must be
well-defined.
3. Principle of Sealer Chain: This principle is known as sealer chain or
line of authority or chain of command. It states that there exists an
unbroken line of authority or sealer chain from the top to the lowest
level.
4. Principle of Span of Control: This principle refers to the number of
subordinates to be placed under the command of the manager so that
he can manage their work efficiently.
5. Principle of Unity of Command: The principle of unity of command
implies oneness of command and single source of authority over a sub-
ordinate.
6. Principle of Objective: The organisation and each of its components
or sub-systems should be directed towards the accomplishment of pre-
determined objectives.
7. Principle of Balance: According to this principle, all techniques and
principles applied to particular structure of the organisation must be
properly balanced to ensure that one principle does not contradict with
another or benefits of one are not countered by the benefits of the
other.
8. Principle of Flexibility: It suggests that the structure of an organisation
should be designed to permit growth and diversification.
9. Principle of Absoluteness of Responsibility: According to this prin-
ciple, responsibility once assumed by the manager cannot be shifted to
subordinates.
29
 PLANNING, 10. Principle of Delegation by Result Expected: For creating the structure
DECISION-MAKING, of an organisation, authority should be delegated in such a way as to clarify
ORGANIZING AND performance expectations in terms of cost, volume, time and efforts.
STAFFING 11. Principle of Parity between Authority and Responsibility: The prin-
ciple suggests that there should be complete balance or parity between
authority and responsibility; only that much authority should be del-
egated which is needed for carrying out the assigned job.
12. Principle of Efficiency: According to this principle, the organisational
structure should be designed in such a way as to facilitate efficient ac-
complishment of objectives.
13. Principle of Continuity: The principle of continuity states that while
designing the structure of the organisation, due care should be taken to
maintain continuity in respect of its existence and functioning.
14. Principle of Cooperation: According-to this principle, an organisation
is considered as teamwork aimed at achieving objectives. Therefore, all
members should perform the assigned work in co-operation with each
other.
3.2.6 Span of Management
Span of management is a way in which many people in an organisation are
controlled and managed by single officer. It can be further called as:
• span of management
• span of authority
• span of supervision
• span of authority
• span of responsibility
• levels of organisation
Such principle depends upon principle of relationship. In this number of mem-
bers can be more or less as per nature of work done by subordinate or abilityof
supervision. In working domain with one head, nearly about four to five sub-
ordinates tends to work.
Check your progress 1
1. This is the basic principle of organising, which represents division of
work and activities into small tasks and jobs necessary for achieving a
set of objectives.
a. Principle of division of labour.
b. Principle of Efficiency.
c. Principle of Cooperation.
d. Principle of Continuity.
2. This principle states that while designing the structure of the
organisation, due care should be taken to maintain continuity in respect
of its existence and functioning.

30
 a. Principle of Continuity. ORGANIZING AND
b. Principle of Efficiency. ORGANIZATION
c. Principle of Cooperation. STRUCTURE

d. Principle of direction.
3.3 Organisational Chart
An organisational chart (often called organisation chart/ org chart/ organigram/
organogram) is a diagram that shows the structure of an organisation and the
relationships and relative ranks of its parts and positions/jobs. The term is
also used for similar diagrams, for example ones showing the different ele-
ments of a field of knowledge or a group of languages.
An organisational chart of a company usually shows the managers and sub-
workers who make up an organisation. It also shows the relationships be-
tween directors: managing director, chief executive officer and various de-
partments. In many large companies, the organisation chart can be large and
incredibly complicated and is therefore sometimes dissected into smaller charts
for each individual department within the organisation.
The following is an example of a simple hierarchical organisational chart. In
this chart, a ‘line relationship’ (or line of command in military relationships)
exists between the Manager and the two Supervisors. These two colonels
are directly responsible to the General. Similarly, a ‘lateral relationship’ in
this chart exists between “Private A” and “Private B”, who both work on
level and both report to the “Sergeant B”.
Various shapes such as rectangles, squares, triangles, circles, etc. can be used
to indicate different roles. Colour can be used for shaping the borders and
connection lines to indicate differences in authority and responsibility and
formal, advisory and informal links between people. A department or posi-
tion yet to be created or currently vacant might be shown as a shape with a
dotted outline. Importance of the position may be shown both with a change
in size of the shape in addition to its vertical placement on the chart.

Fig 3.1 A sample Organisational Chart

31
 PLANNING, Dale has considered organisational chart “as a diagram of formal authority struc-
DECISION-MAKING, ture.” But this definition virtually ignores the horizontal dimension of an organisation.
ORGANIZING AND Terry has forwarded a more suitable definition of organisational charts. In his words,
STAFFING “organisational chart is a diagrammatical form which shows important sets of an
organisation, including the major functions and their respective relationship and
the relative authority of each employee, who is in charge of each respective func-
tion.”
3.3.1 Types of Organisational Charts
The structure of an organisation can be graphically presented in the following manner:
• Vertical chart:

Fig. 3.2 A Vertical organisation chart

This is the conservative way of preparing the organisational chart. It indicates the
position of chief executive on the top, to which succeeding managerial positions
are attached. As the chain of command action goes down, at every following
stage, contents of authority tend to decrease. Vertical charts take the shape of a
pyramid with fewer managerial positions on the higher side and more positions on
the lower sides.

32
 Horizontal chart: ORGANIZING AND
Organisation of Forest Department ORGANIZATION
STRUCTURE

Fig 3.3 Horizontal organisational chart

There is just a slight distinction between vertical and horizontal charts. Firstly, the
pyramid line remains in horizontal position in place of the vertical position. Sec-
ond, the line of authority begins from left to right in the horizontal chart. The
position of chief executive lies on acute left side and as it moves to right side, it
represents lower level of managerial chain of command. Since horizontal charts
do not serve any extra purpose except complicating the diagram, they are less
common in practice.

33
 PLANNING,  Circular chart:
DECISION-MAKING,
ORGANIZING AND
STAFFING

Fig 3.4 Circular organisational chart

The circular chart or concentric chart indicates the top managerial position at the
centre and other middle and lower managerial positions revolve from centre in
concentric circles. As beside top position, the lowest managerial position lies on
the outermost circle. Circular charts plainly show scope of each manager?s re-
sponsibility and authority and remove status implications which are inbuilt from
top to lower levels. It takes less space for presenting different managerial posi-
tions. But it is plagued with a weakness; it is very difficult to draw it and it officially
creates a lot of confusion regarding managerial positions.
3.3.2 Contents of Chart
The detail of content present in organisational chart includes:
• Governance
• Operating Rules of an organisation
• Distribution of work
Governance
It is the basic element in an organisational structure where initially some person or
group takes decisions in it
Operation rules of an organisation
It carries certain rule by which an organisation works. There are certain rules
which are open while others are implied and understood.

34
Distribution of work ORGANIZING AND
In an organisation, the distribution of work can be formal or informal, temporary ORGANIZATION
or enduring with certain division of labor. There are four tasks which is main for STRUCTURE
any group:
• Envisioning desired changes.
• Transforming the community.
• Planning for integration.
• Supporting efforts of working so to promote change.
3.3.3 Uses
Organisation charts can be of use to an organisation in:
• Building and designing organisation structure to fulfill business objectives.
• Guiding employees about the knowledge related to their rights and respon-
sibilities.
• Dividing the functions of a company, enterprise or department.
• Show relationships which appear among organisation staff members.
• Judging the officers workload.
• Locating unrelated persons having no relationship.
• Determining employee position based on competency.
• Clarity inside an organisation.
• Improving employee performance.
• Understanding and coordinating of organisation.
• Determining promotion channels.
3.3.3 Limitations
The organisational chart has certain limitations such as:
In this not every communication channel is formal.
It is difficult to keep track of changes which are responsible in maintaining an
organisational chart.
3.3.4 Factors Affecting Organisational Chart
Various factors determine the effectiveness of an organisation structure. These
are organisation?s environment, strategy, technology, size and people.
• Environment: An organisation is a system, which works within a
broader framework of an environment. Though the boundary between
the organisation and its environment cannot be exact and definite, for
all practical purposes, such boundary can be identified. The organisation
interacts continuously with its environment. It is affected by environ-
ment and it affects the environment. In this interaction, the environ-
ment determines the various organisational processes including its struc-
ture. The environmental system concept regards the organisation as a
part of the environment- the environmental system.

35
 PLANNING, • Strategy: There is a close relationship between an organisation?s strategy
DECISION-MAKING, and its structure. The understanding of this relationship is important so that
ORGANIZING AND in implementing the strategy, the organisation structure is designed accord-
STAFFING ing to the needs of the strategy. The relationship between strategy and struc-
ture can be thought in terms of utilising structure for strategy implementation
because structure is a means to an end and not an end in itself.
• Technology: Technology is another factor affecting organisation structure.
Though technology is one of the components of organisational environment,
it should be studied separately because technology directly affects the task
structure. Before analysing the impact of technology on the organisational
functioning, it is imperative to understand the nature of technology as rel-
evant to the organisations.
• Size: The issue of organisational size has been a compelling one in
organisational analysis, though most organisation theorists have hardly
visualised size as an important factor. This is so because of diverse
research findings on the relationship between an organisation?s size and
its structure.
• Theoretical proposition suggests that size of an organisation influences
its coordination, direction, control and reporting systems and, hence,
the organisation structure. When an organisation is small, interaction is
confined to a relatively small group, communication is simpler, less in-
formation is required for decision-making and there is less need for
formal structure.
• People: The organisational structure is the result of conscious actions
on the part of people engaged in the organisation. As such, the form of
organisation structure is expected to reflect the thinking and way of
working of its framers and participants. The form of organisation is a
major source of satisfaction or dissatisfaction for the people. More-
over, the structure is the result of the personality of its framers.
Thus to arrive at appropriate structure, the forces in people may be
analysed. Such analysis may be in two ways: people in superior capacity and
people in subordinate capacity.
Check your progress 2
1. A _____________ is a diagram that shows the structure of an
organisation and the relationships and relative ranks of its parts and
positions/jobs.
a. Organisational Chart.
b. Chart.
c. Diagram.
d. Organisational Diagram
2. ___________indicates the top managerial position at the centre and other
middle and lower managerial positions revolve from centre in concentric
circles.

36
 a. Circular Chart. ORGANIZING AND
b. Vertical Chart. ORGANIZATION
c. Horizontal Chart. STRUCTURE

d. None of the above.

3.4 Organisation Structure
The structure of an organisation is a network of authority and responsibility
assumed by and delegated to the employees. Organisational structure de-
fines the pattern of formal relationship between superiors and subordinates.
It may also be regarded as a network of role, relationship, assigned work and
delegated authority to employees. It provides the basis on which the manag-
ers and non-managerial employees perform the job assigned to them.
The structure of the organisation has two components or dimensions, namely
authority structure, which comes into existence by delegating authority from
top to lower levels and activity structure, which is created by dividing activi-
ties, grouping them and assigning them to the various departments or indi-
viduals. It has a pyramid shape.
3.4.1 Classification of Organisational Structure
Various activities are grouped together to create departments and units and
their relationships in the organisation is thus prescribed. On the basis of this,
the organisational structure is classified. Thus, there are seven types of
organisation structure:
• Line
• Line and staff
• Functional
• Divisional
• Project
• Matrix
• Free-form (virtual organisation
Each of these emphasises different arrangements of organisational activities.
Some of these are designed on mechanistic pattern, for example, line, line
and staff structures; some are designed on organic or dynamic pattern, for
example, matrix and free-form structures. Others have a combination of both
mechanistic and organic patterns in varying degrees. Further, some of the
structures are basic, for example, functional, divisional, etc. some emerge
because of overlays denoting superimposition of one element over another,
for example, matrix structure. Besides the basic organisation structure
organisations may create committees taking personnel from different depart-
ments where the processes are quite different as compared to a department.
3.4.2 Line Organisation Structure
It is the oldest organisational structure which is commonly related as scalar, mili-
tary or vertical structure. With this concept, it is narrated that in any organisation
or hierarchy which is obtained from scalar process, there exists one top head that

37
 PLANNING, will run and command the structure. Moreover it is clear that executives in an
DECISION-MAKING, organisation will also have power to delegate work and holds responsible for
ORGANIZING AND output.
STAFFING

Fig 3.5 Line Organisation Structure

It is found that a line organisation can be arranged as:
1. Pure Line Organisation: In this, similar work is carried out at particular
level. Here every group of activities is an independent unit which works for
an allocated activity without the help of others.
2. Departmental Line Organisation: In this, complete work is shared
among various departments as per the commonness of activities. Here
each department is kept under individual departmental head. The idea
of this is to get specific control, power and liability.
Characteristics of Line Organisation:
Line organisation structure has following characteristics:
• Lines of influence and instructions are vertical, i.e. they flow from the
top to the bottom.
• The unity of command is maintained in a straight and constant line. It
implies that each junior receives instructions from his immediate supe-
rior alone and is responsible to him only.
• All people at the same level of organisation are self-governing. It im-
plies that all the departmental heads are highest in their respective areas and
self-regulating and are responsible to the chief executive. This applies to all
other positions also.
• This structure specifies responsibility and authority for all the positions lim-
iting the area of action by a particular position holder.
38
Merits of Line Organisation ORGANIZING AND
Line organisation structure has following merits or advantages. ORGANIZATION
1. Simplicity: This organisation is quite simple in both understanding and im- STRUCTURE
plementation.
2. Discipline: Since each position is subject to control by its immediate su-
perior position, often the maintenance of discipline is easy.

3. Prompt Decision: Most of the decisions in such organisations are taken

by the superiors concerned. This makes the decision-making process
easier and less time-consuming.
4. Orderly Communication: Line organisation follows scalar chain
method of communication.
5. Easy Supervision and Control: The line organisation provides for
easy supervision and control because each subordinate is controlled by
a single superior.
6. Economical: The line organisation is quite economical because it does
not use staff specialists whose appointment is a costly affair specially
for small organisations.
7. Overall Development of the Managers: Various functions of man-
agers lead to the overall development of the managers concerned.
Demerits of Line Organisation
Line organisations offer many problems and limitations, which are as fol-
lows:
1. Lack of Specialisation: The line organisation does not offer scope for
specialisation. A manager has to perform a variety of functions, which
may not necessarily be closely interrelated.
2. Absence of Conceptual Thinking: The managers in this system do
not find time for conceptual thinking so essential for organisational
growth and development because they remain quite busy in their day-
to-day managerial problems.
3. Autocratic Approach: The line organisation is based upon autocratic
approach of authority being direct, demands high level of obedience on
the part of the subordinates.
4. Problems of Coordination: Coordination among various activities and
the departments is achieved through horizontal relationship, whereas
the line organisation stresses only on vertical relationship. Thus, there
is acute problem of coordination, particularly in a large organisation.
3.4.3 Line and Staff Organisation Structure
This structure relates to certain arrangement where staff experts advise their line
managers to carry out particular task. On increasing work of an executive, its
performance will effect and service of specialists cannot able to give as of re-
stricted capabilities. This type of advice is required to deliver to line managers by

39
 PLANNING, staffs personal which are normally specialists in their own fields. The staffpositions
DECISION-MAKING, or departments are of purely advisory nature. They have the right to rec-ommend,
ORGANIZING AND but have no authority to enforce their preference on other departments.
STAFFING

Fig 3.6 Line and Staff Organisation Structure

Merits of Line and Staff Organisation
As against line organisation structure, line and staff structure offers the following
advantages:
1. Planned Specialisation: The line and staff structure is based upon the
principle of specialisation. The line managers are responsible for opera-
tions contributing directly to the achievement of organisational objec-
tives whereas staff people are there to provide expert advice on the
matters of their concerns.
2. Quality Decisions: The quality of the decision derived is superior as
the decision is the product of careful thought and systematic analysis.
3. Prospect for Personal Growth: The system of organising offers ample
prospect for efficient personnel to grow in the organisation.
Demerits of Line and Staff Organisation
The line and staff structure suffers from some limitations, which particularly
become acute when it is not implemented properly. Following are some basic
problems and limitations:
1. Lack of Well-defined Authority: It becomes difficult to differentiate clearly
between line and staff because, in actual practice, the authority is often dif-
fused.
2. Line and Staff Conflicts: The main problem of line and staff structure is
the conflicts between line and staff managers. Such conflicts may be be-

40
 cause of various reasons and sometimes the organisational conflicts may be ORGANIZING AND
taken as personal conflicts resulting in interpersonal problems. ORGANIZATION
3.4.4 Functional Organisation Structure STRUCTURE
Functional organisation structure is the most widely used in the medium and large
organisations having a limited number of products. This structure emerges from
the idea that the organisation must perform certain functions in order to carry on
its operations.
Functional structure is created by grouping the activities on the basis of functions
required for the achievement of organisational objectives. For this purpose, all the
functions required are classified into basic, secondary and supporting functions
according to their nature and importance. The basic or major functions are essen-
tial for the organisation.
For example, in a manufacturing organisation, production and marketing are ba-
sic functions. When departments are created based on basic functions and a
manager feels that his span of management is too wide to manage effectively,
which invariably happens in large organisations, several departments are created
on the basis of dividing a basic function into sub-functions.
Marketing may be subdivided into marketing research, advertising, sales and so
on.
Characteristics of Functional Organisation
Authority relationships in functional structure may be in the form of line/ staff and
functional. In fact, the concept of functional authority is very appropriate for func-
tional structure. Thus, functional structure is characterised by the following:
• Specialisation by functions
• Emphasis on sub-goals
• Pyramidal growth of the organisation
• Line and staff division
• Functional authority relationships among various departments
• Limited span of management and tall structure
The organisation chart of functional structure is presented in Figure 2.7:

41
 PLANNING,
DECISION-MAKING,
ORGANIZING AND
STAFFING

Fig 3.7 Functional Organisation Structure

Problems in Functional Structure
The functional structure is not suitable to an organisation, which takes up diversi-
fication. New activity may be quite different from the activities being performed by
the organisation.
Thus, diversification cannot be managed properly within the context of functional
structure. At least at some level, there may be violation of functional structure.
In such a situation, functional structure presents following problems:
• Responsibility for ultimate performance cannot be fixed in the functional
structure because no one is responsible for product cost and profit. Each
department focuses on its contribution to the product, but not the entire
product.
• Functional structure essentially generates slow decision-making process
because the problem requiring a decision has to go to various departments
as all of them have something to say on the matter.
• Functional structure lacks responsiveness necessary to cope up with new
and rapidly changing work requirements.
• Functional structure offers usually line and staff conflict and interdepart-
mental conflict. The heightened degree of such a conflict becomes detri-
mental to organisational efficiency.
3.4.5 Divisional Organisation Structure
The second basic structural form employed by organisations is the divisional struc-
ture. In India, many companies have diversified into unrelated businesses and have
found functional structure quite unsuitable for them. For example, companies like
D.C.M. Limited, Voltas Limited, Century Spinning Mills, Gwalior Rayon, etc.,
have adopted the divisional structure.
Divisional structure, also called profit decentralization by Newman and others is
built around business units. In this form, the organisation is divided into several

42
autonomous units. Each unit is headed by a manager who is responsible for the ORGANIZING AND
organisation?s investment in facilities, capital and people as well as for unit?s ORGANIZATION
development and performance. STRUCTURE
Divisional structure is similar to dividing an organisation into several smaller
organisations but it is not quite the same, since each smaller organisation is
not completely independent. Each unit is not a separate legal entity; it is still
part of the organisation. Each unit is directly accountable to the organisation.
Basis of Divisional Organisation
There are different bases on which various divisions in an organisation can
be created. The two traditional bases are product and territory.
Product Divisional Organisation: In this form, each major product or prod-
uct line is organised as a separate unit. Each unit has its own functional
structure for various activities necessary for the product. Multi-product
organisations use this as basis for divisional organisation. This is appropriate
specially when each product is relatively complex and large amount of capi-
tal is required for each product. The product requires different type of efforts
as compared to others in terms of marketing and/or production.
For example, Century Mills has separate divisions for textiles, cement and
shipping. Reliance Industries Limited has six product divisions: textiles,
polyster, fibre intermediates, polymers, chemical and oil and gas. Each divi-
sion caters to different customers and has different types of competition.
Territorial Divisional Organisation: Under this form, location of regional
offices is standalone units having its own functional departments which work
under certain policies and guidelines given by corporate management. This is
useful for those organisations whose activities are geographically spread such
as banking, transport, insurance, etc.
For example, Life Insurance Corporation of India runs its life insurance busi-
ness on the basis of territorial divisional organisation in which the entire
geographical area of the country has been divided into five zones- eastern,
central, northern, southern and western. Each zone has further been divided
into appropriate number of divisions, e.g. north-zone into four divisions lo-
cated at Jallandhar, Chandigarh, New Delhi and Ajmer.
Each division has a number of branches at different places covered by the
division concerned.

43
 PLANNING,
DECISION-MAKING,
ORGANIZING AND
STAFFING

Fig 3.8 Divisional Organisation Structure

Problems in Division Structure
There are certain disadvantages and problems of divisional structure. Some of
these problems are inherent in the system while others emerge because of wrong
approach of management. Following are the major shortcomings of divisional struc-
ture.
• Divisional structure is quite costly because all the facilities have to be ar-
ranged for each division.
Since there is lack of emphasis of functional specialisation, many professionals do
not feel satisfied with this structure.
• Often there is a lack of managerial personnel when a new division is opened
because managers working within a division cannot work with same effi-
ciency in other division, as they must have acquired the technical compe-
tence of that division.
• Control system is a major problem of the divisional organisation.
Many of these problems can be overcome through sharp focus on tasks and re-
sponsibilities of corporate and divisional management, measurement of perfor-
mance of divisions, long-term policy for performance and incentives, creating more
autonomy and decentralization of authority and the explicit strategies for both the
organisations as a whole and its various divisions.
3.4.6 Project Organisation Structure
Major reforms in the traditional functional structure have come from a group
of related structures such as project management. The basic idea behind this
structure is that since environment changes very rapidly, the organisation must
take up various activities on project basis, i.e. adding the required ones and
deleting the unnecessary ones. Thus, the organisation can be organic-adap-
tive one.
The project work can be managed in two forms of organisation: pure project
organisation and matrix organisation.
The pure project organisation is suitable for taking small number of larger
projects with long duration so that a separate division can be created for each
project.
44
Project organisation appears like divisional structure except that in the latter, vari- ORGANIZING AND
ous divisions are created on permanent basis while in the former, they are created ORGANIZATION
only for the lifetime of a project. When a particular project is completed, the STRUCTURE
concerned division may disappear. However, since a project may continue for
quite long time, a project may become a sort of permanent.
For example, Middleton observes, “A project organisation can also be the begin-
ning of an organisation cycle. The project may become a long term or permanent
effort that eventually becomes a programme or branch organisation.
The latter, in turn, may become separated from the parent organisation and be
established as a full-fledged division, functionally organised.”
The establishment of project organisation calls for appointment of a project man-
ager who is responsible for the completion of the project. He coordinates the
activities of the project. He prescribes what is to be done, when it is to be done
and how much resources are required. The functional personnel are drawn from
various functional departments and functional managers decide who in their de-
partment will perform the task and how it will be done. Thus, project manager is
a unifying and focal point for the project activities.

Fig 3.9 Project Organisation Structure

A project manager really does not have vertical authority on the personnel
drawn from various functional departments unlike a divisional manager who has
line authority over the people working in various functional departments assigned
to his division. In the absence of any vertical authority, the project manager must
convince the functional people so that they help him to complete the project within
time.
Problems in Project Organisation
In fact, many of the flexibilities of project organisation may turn into problems if
arrangement is not made for overcoming these problems. A project manager has
to face unusual problems resulting from the project management. Following prob-
lems are usually experienced in project organisation.
• Project organisation creates feelings of insecurity and uncertainty among
people in the organisation.
People are not able to identify themselves with any particular department
in the organisation because they do not have permanent tenure with any
project.

45
 PLANNING, • There is lack of clarity among members about their role in the organisation.
DECISION-MAKING, • Often project manager faces numerous problems because he has to carry
ORGANIZING AND responsibility without authority.
STAFFING
These problems are real and a challenge lies before the project manager. If he
believes in traditional system of organisation, he may not be able to work. He
has to change the total philosophy of managing.
3.4.7 Matrix Organisation Structure
Matrix organisation structure is essentially a violation of unity of command
and therefore, all the classical concepts related to the principle of unity of
command are violated. Matrix structure is the realisation of two-dimensional
structure, which emanates directly from two dimensions of authority. Two
complementary structures- pure project structure and functional structure-
are merged to create the matrix structure.
Thus, matrix structure not only employs a multiple command but also related
support mechanism and associated organisational culture and behaviour. Thus,
it shows many organisational overlaps, not only in terms of command system
but also in terms of complete organisational processes and behaviour.
Design of Matrix Structure
In the matrix organisation structure, a project manager is appointed to coor-
dinate the activities of the project. Personnel are drawn from their respective
functional departments. Upon completion of the project, these people may
return to their original departments for further assignment.
Thus, each functional staff has two bosses- his administrative head and his
project manager. During his assignment to a project, he works under the
coordinative command of the project manager and he may be called upon by
his permanent superior to perform certain services needed in the project.
Thus, a subordinate in matrix structure may receive instructions from two
bosses.
Therefore, he must coordinate the instructions received from two or even
more bosses. Similarly, matrix superior has to share the facilities with others.
He reports in a direct line to the up, but does not have a complete line of
command below.

46
 ORGANIZING AND
ORGANIZATION
STRUCTURE

Fig 3.10 Matrix Organisation Structure

Problems in Matrix Structure
The matrix structure has many problems in practice because of its flexibility. The
major problems of matrix structure are as follows and managers should take
adequate precautions to overcome these.
• There is always power struggle in matrix structure.
• Matrix structure can develop anarchy if not managed properly.
• This structure may not work very well when there is economic crunch.
If matrix organisation is not followed properly, there is delay in decision-
making.
• At the initial level, matrix structure becomes quite costly because of top
heavy management.
A perusal of the various problems suggests that many of these problems arise
because of faulty implementation of matrix structure. If it is implemented
with proper perspective, many problems will disappear. As it has been pointed
out in the beginning, the matrix is not merely a structure but it includes sys-
tems, culture and behaviour, which must be in accordance with matrix phi-
losophy.
3.4.8 Virtual Organisation
The concept of virtual organisation or corporation along with virtual team
and office has entered management field very recently. The literal meaning of
virtual organisation is having the efficacy without the material part, unreal
but capable of being considered as real for the purpose. Based on this con-
cept, virtual corporation has been defined as “ a temporary alliance between
two or more or-ganisations that band together to undertake a specified ven-
ture.” Recently, in telecommunication sector in India, many virtual
organisations have been created to provide different services.

47
 PLANNING,
DECISION-MAKING,
ORGANIZING AND
STAFFING

Fig 3.11 Virtual Organisation

Characteristics of Virtual Organisation
Business Week has identified five basic features of a virtual organisation, which
are as follows:
1. Technology: Informational networks will provide far-flung companies and
entrepreneurs to link up work together from start to finish. The partnerships
will be based on electronic contracts to keep the lawyers away and speed
the linkups.
2. Opportunism: Partnerships will be less permanent, less formal and more
opportunistic. Companies will bond together to meet a specific market op-
portunity and, more often than not, fall apart once the need evaporates.
3. Excellence: Because each partner brings its core competence to the ef-
fort, it may be possible to create a best-of-everything organisation. Every
function and process could be world class- something that no single com-
pany could achieve.
4. Trust: These relationships make companies far more reliant on each other
and require far more trust than even before. They will share a sense of co-
destiny, meaning that the fate of each partner is dependent on other.
5. No Borders: The new corporate model redefines the traditional bound-
aries of the company. More cooperation among competitors, suppliers
and customers makes it harder to determine where one company ends
and another begins.
Reasons for Virtual Organisation
The basic reason behind creating a virtual organisation is to generate synergy
through temporary alliances. Creating synergy is the process of putting two
or more elements together to achieve a sum total greater than the sum total of
individual elements separately. This effect can be described as 2 + 2 = 5 ef-
fect. The synergistic effect is generated in virtual organisation because of the comple-
mentarily of competences of different partners. Some companies can do some-

48
thing very well but struggle with most others. Other companies can do very well in ORGANIZING AND
those areas in which the first group of companies feels handicapped. If both these ORGANIZATION
types of companies put their efforts jointly to undertake any project, their com- STRUCTURE
bined strengths could lead much better results than what individual companies
could have achieved separatel
Check your progress 3
1. Identify the organisation structure
a. Matrix
b. Rectangle
c. Triangle
d. square
2. Simplicity is the part of merits of the line organisation.
a. True
b. False
3.5 Informal Organisation
3.5.1 Meaning
Informal organisation endures as a relationship which survives between people in
an organisation as per their attitudes, emotions, prejudices, likes and dislikes etc.
Such type of relation does not exist as per the standards and processing rules
which occurs in a formal organisation. Normally, it is seen that a large formal
groups will give rise to small informal groups that are not planned earlier but will
originate automatically in an organisation.
3.5.2 Characteristics
The characteristics of an informal organisation are:
• An informal organisation is flexible and unplanned depending on its struc-
ture.
• It carries no defined relationship.
• It carries two or more than two people.
• There exists a natural relationship.
• It carries volunteerised membership.
• In this, there is no compulsion of groups as people have right to join any
numbers of groups at the same time.
3.5.3 Importance
The importance of informal organisation in terms of Employees is:
• Sense of Belonging
• Safety valve for emotional problems
• Aid on the Job
• Innovation and Originality
• Important Channel of Communication
• Social Control
49
 PLANNING, 3.5.4 Limitations
DECISION-MAKING, • In an informal organisation, people sometimes conveyed wrong things to
ORGANIZING AND other person that result in horrible results.
STAFFING
• In such type of organisation, the changes are resisted and stress occurs
when olden procedures are adopted.
• With negative thinking of leaders, the personal interest satisfies group
interests then such organisation tends to function against formal
organisational goals that could be dangerous.
• In this, when role in a group differs from formal goals then under such
members conflict occurs in formal and informal roles.
3.5.5 Difference between Formal and Informal Organisation
Formal organisation Informal organisation
It has defined objective that will save It does not have objectives but inspires
organisation and make it stable. of friendship, fame, respect, unity.
It is established with particular process. It appears spontaneously.

In this the members are bound together In this the member has duty, authority
with authority relation. and responsibility.

It can be shown in an organisational It cannot be shown in an organisational

chart. chart.

In this the work for achieving In this the work for achieving
organisational goal are identified. organisational goal are not identified.
Check your progress 4
1. __________is an example of informal communication in an organisation?
a. Organisation chart c. Gossip
b. Matrix structure d. Company circulars
3.6 Let Us Sum Up
In this unit we have learnt, that organising is a process of finding and group-
ing work that needs to be performed, define and can establish relation. It
involves integrating, coordinating and mobilizing the activities of members of
group for seeking common goals.
It is studied that with organising, you can create formal organisational struc-
ture of role, relationship, position and authority. The good organisational
structure will contribute more on survival and success of an enterprise. It can
be viewed as mechanism, device or indispensable means to achieve objec-
tives.
There are several Principles of Organising such as Principle of Division of
Labour, Principle of Functional Definition, Principle of Sealer Chain, Prin-
ciple of Span of Control, Principle of Unity of Command, Principle of Objec-
tive, Principle of Balance, Principle of Flexibility, Principle of Absoluteness
of Responsibility, Principle of Delegation by Result Expected, Principle of
Parity between Authorityand Responsibility, Principle of Efficiency, Principle of
Continuity and Principle of Cooperation.

50
It is studied that an organisational chart is a diagram of official positions of an ORGANIZING AND
organisation and formal line of authority. It is a graphic and systematic description ORGANIZATION
of formal structure of an organisation. The structure of an organisation carries STRUCTURE
vertical chart, horizontal chart and circular chart.
An organisational structure is a pattern of formal relationship between superiors
and subordinates which is also regarded as network of role, relationship, as-
signed work and delegated authority to employees. Design of organisation struc-
ture is considered a matter of choice among a large number of alternatives.
It is seen that a line organisation structure is a scalar, military or vertical organisation
which is an oldest form that believes on ruling with single head who commands it.
As seen, a line and staff organisation is a pattern where staff specialists advise line
managers to perform their duties. In case of execution work increases, the per-
formance needs services of specialists which himself cannot be done.
In a functional structure, a grouping activities takes places on basis of functions
required for achieving organisational objectives. The idea of this is the functions
are classified as basic, secondary and supporting functions as per nature and
importance.
3.7 Answers for Check Your Progress
Check your progress 1
Answers: (1-a), (2-a)
Check your progress 2
Answers: (1-a), (2-a)
Check your progress 3
Answers: (1-a), (2-a)
Check your progress 4
Answers: (1-c)
3.8 Glossary
1. Organisation - Two more persons engaged in a systematic effort to pro-
duce goods or services.
2. Organisation chart - A graphic representation of organisational struc-
ture.
3.9 Assignment
What is Organising? What do you understand by Organisational Struc-
ture?
3.10 Activities
1. Explain characteristics, need and importance of organisational structure.
2. Organisational structure provides the framework for undertaking manage-
rial functions. Discuss.
3. What are organisational Charts? Explain their types and factors affecting
organisational charts

51
 PLANNING, 3.11 Case Study
DECISION-MAKING,
Visit an organization and inquire about what type of organization struc-
ORGANIZING AND
ture do they have and draw a chart and explain it.
STAFFING
3.12 Further Readings
1. Principles of Management, B.S. Moshal, Galgotia Publications.
2. Management Text and Cases, VSP Rao and V. Hari Krishna, published
by Anurag Jain for Excel books.
3. Principles of Management, Edition 2, P. C. Tripathi and P. N. Reddy,
Tata McGraw Hill Publishing Company.
4. Essentials of Management, Harold Koontz and Heinz Weihrich, Tata
McGraw Hil.

52
 Unit
STAFFING
4

: UNIT STRUCTURE :
4.0 Learning Objectives
4.1 Introduction
4.2 Staffing
4.2.1 Meaning of Staffing
4.2.2 Nature of Staffing
4.2.3 Importance of Staffing
4.2.4 Staffing Process-Steps involved in Staffing
4.3 Manpower Planning
4.4 Recruitment
4.5 Selection
4.6 Orientation and Placement
4.7 Training
4.8 Remuneration of Employees
4.9 Performance Appraisal
4.10 Promotion and Transfer
4.11 Let Us Sum Up
4.12 Answers for Check Your Progress
4.13 Glossary
4.14 Assignment
4.15 Activities
4.16 Case Study
4.17 Further Readings
4.0 Learning Objectives
After learning this unit, you will be able to understand:
• The Meaning, nature, importance and steps involved in Staffing.
• Manpower Planning.
• Selection and Recruitment.
• Orientation and Placement.
• Remuneration of Employees.
• Performance Appraisal.
• Promotion and Transfer.
4.1 Introduction
In the previous unit, you studied about organising and organisational struc-
53
 PLANNING, ture. You also studied about organisational principles organisational chart and various
DECISION-MAKING, organisational structures, namely, Line, Line and Staff, Functional, Divisional,
ORGANIZING AND Project, Matrix and Virtual organisational structures.
STAFFING Further, you will learn about another important function of Management; Staffing.
Staffing includes managing Manpower in an organisation. It involves identification
of requirement of personnel, their recruitment, selection, training, development,
appraisal, promotion, transfer, compensation, etc. in an organisation.
4.2 Staffing
Staffing includes a broad scope of activities. The word “hiring” is sometimes used
interchangeably with “staffing”. However, staffing is much broader in scope than
hiring. Hiring might be thought more specifically as the selection phase of the over-
all process of staffing. Similarly, “recruiting” is sometimes used for “staffing”. Again,
many people believe that “recruiting” refers more specifically to the sourcing and
advertising phases of the overall process of staffing. Let us see what staffing ex-
actly entails.
4.2.1 Meaning of Staffing
The term staffing may be defined as the managerial function of hiring and develop-
ing the required personnel to fill in various positions in an organisation. This func-
tion involves the determination of the size and categories of staff requirement. It is
also concerned with employing the right type of people and developing their skills
through training. The staffing function focuses on maintaining and improving the
manpower in an organisation.

Fig 4.1 Managerial aspects

According to Theo Haimann, “Staffing pertains to recruitment, selection, devel-
opment and compensation of subordinates.”
The managerial function of staffing involves manning the organisation structure
through proper and effective selection, appraisal and development of the person-
nel to fill the roles assigned to the employers/workforce.

54
4.2.2 Nature of Staffing STAFFING
The managerial function of staffing is of a continuous nature. The managers have
to give attention to the staffing needs of the organisation. The staffing policy of the
organisation has to be developed on the basis of long term requirements of the
organisation.

Fig 4.2 Staffing

Nature of Staffing can be explained by the following characteristics:
• Staffing is an important managerial function: Staffing function is the
most important managerial act along with planning, organising, directing
and controlling. The operations of these four functions depend upon the
manpower, which is available through staffing function.
• Staffing is a pervasive activity: As staffing function is carried out by all
mangers and in all types of concerns where business activities are carried
out.
• Staffing is a continuous activity: This is because staffing function con-
tinues throughout the life of an organisation due to the transfers and pro-
motions that take place.
• The basis of staffing function is efficient management of person-
nel: Human resources can be efficiently managed by a system or proper
procedure, that is, recruitment, selection, placement, training and de-
velopment, providing remuneration, etc.
• Staffing helps in placing right men at the right job: It can be done
effectively through proper recruitment procedures and then finally
selecting the most suitable candidate as per the job requirements.
Staffing is performed by all managers depending upon the nature of business,
size of the company, qualifications and skills of managers, etc. In small com-
panies, the top management generally performs this function. In medium and
small-scale enterprise, it is performed especially by the personnel depart-
ment of that concern.

55
 PLANNING,
DECISION-MAKING,
ORGANIZING AND
STAFFING

Fig 4.3 Concept of Staffing

4.2.3 Importance of Staffing
Importance of staffing can be explained with the help of the followings:
• Key to other managerial functions: It is seen that function of staffing is
closely related to managerial business areas which influences direction and
control in organisation.
• Building healthy human relationships: It builds required man-power
relationships in an organisation. With smooth human relation, excellent
coordination and communication takes place.
• Human resources development: For any business establishment,
hardworking and skilled man-power is always welcomed which serves
as an asset of business concern.
• Long Term effect: The performance of the company depends upon the
effective decision making quality. It is noted that skilled, laborious and
well-motivated people becomes an asset to an organisation.
• Potential contribution: The idea about staff selection depends upon
the ability of effective employees which can manage future challenges
which is needed by an organisation.

56
 STAFFING

Fig 4.4 Staffing Process of a firm

4.2.4 Staffing Process-Steps involved in Staffing
Following are the steps involved in staffing:
• Manpower requirements: It is seen that the first step towards staffing is
planning of good manpower which will match the need of particular work.
• Recruitment: As per the demand from the organisation, the applications
of concerned workers are entertained as per invitations by company to the
desired candidate.
• Selection: After receiving applications from candidates, they are scanned
as per suitability of position and candidature.
• Orientation and Placement: After offering the job to the candidate, the
initial work is to made the candidate familiar with working style and envi-
ronment.
• Training and Development: Training is part of incentives which is given
to worker so as to frame and grow as per the concern. It involves working
capability and scope.
• Remuneration: It is a sort of compensation which is paid by the concern

57
 PLANNING, to the new joiners. It depends on nature of job skilled or unskilled, physical
DECISION-MAKING, or mental, etc.
ORGANIZING AND • Performance Evaluation: Performance evaluation is a method which will
STAFFING show candidate record such as behaviour, attitudes and progress. It in-
volves regular assessment based on reports from different departments.
• Promotion and transfer: It involves transfer in job sector and level which
depends on past performance of the candidate. It is non- monetary incen-
tive.
Check your progress 1
1. ________is part of incentives served to workers so as to develop and
grow within the concern.
a. Training. c. Remuneration.
b. Development. d. Selection.
2. __________is a kind of compensation giving monetarily to employees
based on work performances.
a. Remuneration. c. Selection.
b. training. d. Training.
4.3 Manpower Planning
It is termed as Human Resource Planning which concerns with the matching
of correct number and correct kind of people at correct place at correct time
with correct things that will suit to get organisational goals.
Human Resource Planning has an important place in the arena of industrial-
ization. Human Resource Planning should take on a systems approach and
should be carried out as a set procedure.

Fig 4.5 Manpower planning

58
Steps in Manpower Planning: STAFFING
Following are the steps for manpower planning:
Analysing the current manpower inventory: Before a manager makes fore-
cast of future manpower, the current manpower status has to be analysed.
For this, the following things have to be noted:
o Type of organisation
o Number of departments
o Number and quantity of such departments
o Employees in these work units
Based on this information, the manager analyses the needs of each department
and then moves on to future forecasting.
• Making future manpower forecasts: Once the factors affecting the fu-
ture manpower forecasts are known, planning can be done for the future
manpower requirements in several work units.
The Manpower forecasting techniques commonly employed by the organisations
are as follows:
o Expert Forecasts: This includes informal decisions, formal expert sur-
veys and Delphi technique.
o Trend Analysis: Manpower needs can be projected through extrapo-
lation (projecting past trends), indexation (using base year as basis)
and statistical analysis (central tendency measure).
o Workload Analysis: It is dependent upon the nature of workload in a
department, in a branch or in a division.
o Work Force Analysis: Whenever production and time period has to
be analysed, due allowances have to be made for getting net man-
power requirements.
o Other methods: Several Mathematical models, with the aid of com-
puters, are used to forecast manpower needs, like budget and planning
analysis, regression and new venture analysis.
o Developing employment programmes: Once the current inventory
is compared with future forecasts, the employment programmes can
be framed and developed accordingly, which will include recruitment,
selection procedures and placement plans.
o Design training programmes: These will be based upon extent of
diversification, expansion plans, development programmes, etc. Training
programmes depend upon the extent of improvement in technology
and advancement to take place. It is also done to improve upon the
skills, capabilities and knowledge of the workers.

59
 PLANNING, Check your progress 2
DECISION-MAKING, 1. Man Power Planning is also called
ORGANIZING AND
a. Human Resource Planning.
STAFFING
b. Resource Planning.
c. Human Planning.
d. Personnel Planning.
2. It is dependent upon the nature of workload in a department, in a branch or
in a division
a. Workload analysis.
b. Workforce analysis.
c. Trend analysis.
d. None of the above.
4.4 Recruitment
“Recruitment is the process of searching the candidates for employment and stimu-
lating them to apply for jobs in the organisation.” Recruitment is the activity that
links the employers and the job seekers.
According to Dale Yoder of Stanford University, recruitment can be defined as:
“It is the process to discover sources of manpower to meet the requirement of
staffing schedule and to employ effective measures for attracting that manpower in
adequate numbers to facilitate effective selection of an efficient working force”.

Fig 4.6 Recruitment

“Recruitment of candidates is the function preceding the selection which helps to
create a pool of perspective employees for the organisation so that the manage-
ment can select the right candidate for the right job from this pool. The main
objective of the recruitment process is to expedite the selection process”.
• Recruitment Process
Recruitment process is the first step towards creating the competitive strength and
the strategic advantage for the organisations. Recruitment process involves a sys-

60
tematic procedure from sourcing the candidates to arranging and conducting the STAFFING
interviews and requires many resources and time.
o Identify vacancy.
o Prepare job description and person specification.
o Advertise the vacancy.
o Manage the response.
o Short-list candidates.
o Arrange interviews.
o Conduct interview and decision-making analysis activities.
• Factors Affecting Recruitment
The internal forces or factors are the factors that can be controlled by the
organisation. In addition, the external factors are those factors, which can-
not be 81 controlled by the organisation implementing recruitment
programmes and procedures by filling up vacancies with best qualified people.
Internal Factors Affecting Recruitment
The internal forces i.e. the factors that can be controlled by the organisation
are:
o Recruitment Policy
o Human Resource Planning
o Size of the firm
o Cost
o Growth and Expansion
External Factors Affecting Recruitment
The external forces are the forces, which cannot be controlled by the
organisation. The major external forces are:
o Supply and Demand
o Labour Market
o Unemployment rate
o Competitors
Types and Sources of Recruitment
Recruitment is of two types:
1. Internal Recruitment
It is a recruitment, which takes place within the concern or organisation.
Internal sources of recruitment are readily available to an organisation.
Internal recruitment may lead to increase in employee?s productivity as their
motivation level increases. It also saves time, money and efforts. But a draw-
back of internal recruitment is that it restricts the organisation from inviting
new blood. In addition, not all the manpower requirements can be met through
internal recruitment. Hiring from outside has to be done.

61
 PLANNING, There are primarily three internal sources for recruitment:
DECISION-MAKING, • Transfers
ORGANIZING AND
• Promotions
STAFFING
• Re-employment of ex-employees
2. External Recruitment
External sources of recruitment have to be solicited from outside the organisation.
External sources are external to a concern. However, it involves lot of time and
money. The external sources of recruitment include:
o Employment at Factory Level
o Advertisement
o Employment Exchanges
o Employment Agencies
o Educational Institutions
o Recommendations
o Labour Contractors
Check your progress 3
1. It is the process of searching the candidates for employment and stimulating
them to apply for jobs in the organisation
a. Recruitment.
b. Selection.
c. Training.
d. Development.
2. It is type of recruitment which has to be solicited from outside the organisation.
a. External Recruitment.
b. Internal Recruitment.
c. Inside Recruitment.
d. None of the above.
4.5 Selection
Selection is the process of putting right men on right job. It is a procedure of
matching organisational requirements with the skills and qualifications of
people. Effective selection can be done only when there is effective matching.
On selecting appropriate candidate for particular job, the organisation will
receive quality performance and more output. It saves time and increases
productivity with less wastage. While selecting a good candidature, a screen-
ing of candidate is done at the time of selection procedure.

62
 STAFFING

Fig 4.7 Selection

It is seen that a selection is different from recruitment since both are related with
employment process. With recruitment, the motivation exists with several candi-
dates applying for particular job profile. On the other hand, selection exists as
reverse process which is not correct as it detained candidates.
Distinction between Recruitment and Selection
• Recruitment precedes selection in staffing process. Selection involves choos-
ing the best candidate with best abilities, skills and knowledge for the re-
quired job.
Table Distinction between Recruitment and Selection
Sr.
Basis Recruitment Selection
No.
It is an activity of It is a process of
establishing contact
picking up more
1. Meaning between employerscompetent and
and applicants. suitable employees.
It encourages large It attempts at
2. Objective number of candidates rejecting unsuitable
for a job. candidates.
It is a simple process.It is a complicated
3. Process
process.
The candidates do not Many hurdles have
4. Hurdles have to cross many to be crossed.
hurdles.
It is a positive It is a negative
5. Approach
approach. approach.
It precedes selection. It follows
6. Sequence
recruitment.
It is an economical It is an expensive
7. Economy method. method.
Time Less time is required. More time is
8. Consuming required.

63
 PLANNING, Employee Selection Process
DECISION-MAKING, The employee selection process takes place in the following order:
ORGANIZING AND
• Preliminary Interviews
STAFFING
• Application blanks
• Written Tests
• Employment Interviews
• Medical examination
• Appointment Letter
Check your progress 4
1. It is the process of putting right men on right job.
a. Selection.
b. Recruitment.
c. Training.
d. Development.
2. It is an activity of establishing contact between employers and applicants.
a. Recruitment.
b. Selection.
c. Training.
d. Development
4.6 Orientation and Placement
Once the candidates are selected for the required job, they have to be fitted as per
the qualifications. Placement is said to be the process of fitting the selected person
at the right job or place, i.e. fitting square pegs in square holes and round pegs in
round holes. Once he is selected for the job, he is given the activities he has to
perform and told about his duties. The freshly appointed candidates are then given
orientation in order to familiarize and introduce the company to him. Generally, the
information given during the orientation programme includes:
• Employee?s layout
• Type of organisational structure
• Departmental goals
• Organisational layout
• General rules and regulations
• Standing Orders
• Grievance system or procedure
In short, during orientation, employees are made aware about the mission and
vision of the organisation, the nature of operation of the organisation, policies and
programmes of the organisation.
The main aim of conducting orientation is to build up confidence, the morale and
trust of the employee in the new organisation, so that he becomes a productive

64
and an efficient employee of the organisation and contributes to the organisational STAFFING
success.

Fig 4.8 Orientation

The nature of the orientation program varies with the organisational size, i.e.,
smaller the organisation the more informal is the orientation and larger the
organisation more formalized is the orientation programme.
Proper placement of employees will lower the chances of employee?s absentee-
ism. The employees will be more satisfied and contended with their work.
Check your progress 5
1. ________is the process of adjusting selected person at correct job.
a. Placement. c. Training.
b. Selection. d. Development.
4.7 Training
Training of employees takes place after orientation takes place. Training is the
process of enhancing the skills, capabilities and knowledge of employees for do-
ing a particular job. Training process moulds the thinking of employees and leads
to quality performance of employees. It is a continuous and never ending in na-
ture.

65
 PLANNING,
DECISION-MAKING,
ORGANIZING AND
STAFFING

Fig 4.9 Training

Importance of Training
Training is crucial for organisational development and success. It is fruitful to both
employers and employees of an organisation. An employee will become more
efficient and productive if he is trained well. Training is given on four basic grounds:
• New candidates who join an organisation are given training. This training
familiarizes them with the organisational mission, vision, rules and regula-
tions and the working conditions.
• The existing employees are trained to refresh and enhance their knowledge.
• If any updating and amendments take place in technology, training is given
to cope up with those changes, e.g. purchasing new equipment, changes in
technique of production, computer impartment. The employees are trained
about use of new equipment and work methods.
• When promotion and career growth becomes important, training is given so
that employees are prepared to share the responsibilities of the higher level
job.
Benefits of Training
The benefits of training can be summed up as:
• Improves morale of employees
• Less supervision is required
• Fewer accidents occur
• Chances of promotion
• Increased productivity
Ways/Methods of Training
Training is generally imparted in two ways:
1. On job training:
On the job training methods are those which are given to the employees

66
 within the everyday working of a concern. It is a simple and cost-effective STAFFING
training method. The in proficient as well as semi- proficient employees can
be well trained by using such training method. The employees are trained in
actual working scenario. The motto of such training is “learning by doing.”
Instances of such on-job training methods are job-rotation, coaching, tem-
porary promotions

Fig 4.10 On job Training

2. Off job training
Off the job training methods are those in which training is provided away
from the actual working condition. It is generally used in case of new em-
ployees. Instances of off the job training methods are workshops, semi-
nars, conferences, etc. Such method is costly and is effective if and only if
large number of employees have to be trained within a short time period.
Off the Job training is also called as vestibule training, i.e. the employees are
trained in a separate area (may be a hall, entrance, reception area, etc.,
known as a vestibule) where the actual working conditions are duplicated.

67
 PLANNING,
DECISION-MAKING,
ORGANIZING AND
STAFFING

Fig 4.11 Off the job training

Check your progress 6
1. Training in which training is provided away from the actual working condi-
tion.
a. Off the job training.
b. On the job training.
c. Internal training.
d. External training.
4.8 Remuneration of Employees
In job, remuneration refers to as reward or compensation which is distributed to
an employee based on their working capability and performance. It shows basic
attraction to an employee in order to work professionally and successfully.
In job, a salary serves as an important source of income for employees with which
the standard of their living depends. Different salaries are there for different levels
in an organisation.

68
 STAFFING

Fig 4.12 Remuneration

So it is seen that the amount and remuneration serves as an important aspect for
both management and employees.
Methods of Employee Remuneration
1. Time Rate Method
In this, remuneration is linked directly with amount of time devoted by em-
ployee on particular work. The amount of payment can be hourly,
daily,weekly or monthly irrespective of their output. This of course is
the simplest method of remuneration where there appears minimum
wastage of resources and low accidental charges.
It is the best way to generate quality output and is favourable for new
employees. It gives motivation to employee?s unity as employees of a
particular group/cadre get equal salaries.
2. Piece Rate Method
This method relates with method of compensation where remunera-
tion is paid on basis of pieces generated or produced by an employee.
In this, the determination of employee cost/unit is not hard as their
salary varies with output. Since the salary here depends on employee
output, so this method helps in improving the morale of employees.
With this type of method, the work efficiency increases.
Check your progress 7
1. Under _________, remuneration is linked with time devoted by em-
ployee on particular work.
a. Time Rate System.
b. Piece Rate System.
c. Volume Rate System.
d. None of the above.

69
 PLANNING, 2. _________is a method of compensation where remuneration is paid on
DECISION-MAKING, basis of units produced.
ORGANIZING AND a. Piece vs Rate System.
STAFFING
b. Time Rate System.
c. Volume Rate System.
d. None of the above.
4.9 Performance Appraisal
A performance appraisal, employee appraisal, performance review or career de-
velopment discussion is an approach where a job performance of an employee is
calculated by its immediate manager or supervisor.

Fig 4.13 Performance Appraisal

A performance appraisal is a part of building and managing career development. It
is the process of obtaining, analyzing and recording information about the relative
worth of an employee to the organisation.
Performance appraisal is an analysis of an employee’s recent successes and fail-
ures, personal strengths and weaknesses and suitability for promotion or further
training. It is also the judgment of an employee’s performance in a job based on
considerations other than productivity alone.
Aims of Performance Appraisal
Generally, the idea of performance appraisal is to:
• show employees feedback based on their workability
• find the employee training requirements
• layout the criteria applied in order to give organisational rewards
• design the ground for personnel issues such as salary increases, promo-
tions, disciplinary actions, bonuses, etc.
• give an opportunity for organisational diagnosis and development
70
• make possible communication among employee and administration STAFFING
• confirm the techniques involved in selection and human resource policies to
match federal requirements
• enhance performance by way of counseling, coaching and working
Advantages of Performance Appraisal
The performance appraisal has following advantages:
• Promotion: It will help supervisors to think about promotions for particu-
lar employee based on his/her capability.
• Compensation: It helps in listed out compensation packages for employ-
ees based on their performance result.
• Employees’ development: It will find out the strengths and weaknesses
of employees for correct types of training.
• Selection validation: It helps an employer to know about the efficiency
and importance of selection process by knowing its strengths and weak-
nesses.
• Communication: It helps to build an effective communication model among
employees and employers.
• Motivation: In this, the performance appraisal will work as motivation
tool.
Check your progress 8
1. It is a part of building and managing career development.
a. Performance Appraisal.
b. Promotion.
c. Transfer.
d. Compensation.
4.10 Promotion and Transfer
Promotion is said to be an incentive in which the worker is shifted to a higher job
with higher salary and demanding bigger responsibilities.
Transfer is a case of shifting the workers and transferring them to different work
units and branches of the same organisation.

71
 PLANNING,
DECISION-MAKING,
ORGANIZING AND
STAFFING

Fig 4.14 Promotion

Promotion
A few companies do have a clear-cut policy while certain organisations issue
circulars as and when they need. Many companies develop policies over a
period through settlements and agreements with the workers/unions. In pro-
moting employees, consideration should be given for establishment of the
horizontal or vertical promotion. The desirability of securing assistants who
complement rather than supplement their superiors is the major point in a
successive plan, which is an integral part of manpower planning.
According to Dale Yoder, it is a “movement to a position in which responsi-
bilities and presumably the prestige are increased. Promotion involves an in-
crease in rank ordinarily; promotion is regarded as a change that results in
higher earnings, but increased earnings are essential in a promotion.” This
definition talks of both vertical and horizontal promotions.
According to Scott and Clothier, “A promotion is the transfer of an employee
to a job which pays more money or one that carries some preferred status.”
Therefore, a promotion may be defined as: “an upward advancement of an
employee in an organisation to another job, which commands better pay/
wages, better status/prestige and higher opportunities/challenges, responsi-
bility and authority, better working environment, hours of work and facilities
and a higher rank.”
Purposes of Promotion
• To motivate employees to higher productivity.
• To attract and retain the services of qualified and competent people.
• To recognize and reward the efficiency of an employee.
• To increase the effectiveness of the employee and of the organisation.
• To fill up higher vacancies from within the organisation.

72
• To build loyalty, morale and a sense of belongingness in the employee. STAFFING
• To impress upon others that opportunities are available to them also in the
organisation, if they perform well.
Types of Promotion
• Horizontal Promotion: Promotion involves an increase in responsibilities
and pay and a change in designation. However, the employee concerned
does not transgress the job classification, e.g. a lower division clerk is pro-
moted as an upper division clerk. This type of promotion is referred to an
upgrading of the position of an employee.
• Vertical Promotion: A promotion is vertical when a canteen employee is
promoted to an unskilled job. The concerned employee naturally trans-
gresses the job classification.
• Dry Promotions: Dry promotion refers to increase in responsibilities and
status only.
Transfer

Fig 4.15 Transfer

Pigors and Meyers: Consider transfer as “the movement of an employee from
one job to another on the same occupational level and at about the same level
of wages or salary” No appreciable change in task or responsibility is ex-
pected.
Scott and others define transfer as “the movement of an employee from one
job to another. It may involve a promotion, demotion or no change in job
status other than moving from one job to another.”
A transfer may be defined as a change in job within the organisation where
the new job is equal to the old in terms of pay, status and responsibilities:
T.N. Chhabra
A lateral shift causing movement of individuals from one position to another
usually without involving any marked change in duties, responsibilities, skills
needed or compensation: C.B.Gupta

73
 PLANNING, Need and Purpose of Transfer
DECISION-MAKING, • To meet organisation needs: Companies may transfer employees due to:
ORGANIZING AND
o Change in volume of production
STAFFING
o Change in technology
o Change in production schedule
o Change in product line
o Change in organisation structure
To satisfy the employee needs: Employees may request their transfer due to:
o Dislike of boss or fellow workers
o Lack of opportunities for future advancement
o Personal problems
• To better utilize employees:
o The employee maybe transferred because the management feels that his
capabilities would be better utilized elsewhere.
o An employee who is not performing satisfactorily may be more suitable in
another job.
• To make the employee more versatile: The employees may be trans-
ferred to different jobs to:
o Widen their knowledge and skills
o Reduce monotony and as a method of training
• To adjust the workforce: Workers are transferred from the surplus
department or plant where there is shortage of staff.
• To provide relief: It gives relief to the employees who are overbur-
dened or doing risk work for long period.
• To punish employees:
o Employees indulging in undesirable activities may be transferred to re-
mote places or to some other jobs.
o It is in the form of disciplinary action.
o Transfers are made because permanent stay may cause frauds, bribery,
etc.
Types of Transfers
Transfers may be classified into five types:
1. Production transfer
2. Shift transfer
3. Replacement transfer
4. Remedial transfer
5. Versatility transfer
1. Production transfer: Such transfers are made when there is a need of
manpower in one department and surplus manpower in the other. Such trans-
fers help to stabilise employment.
74
2. Shift transfer: Employees may be shifted from one shift to another for STAFFING
personal reasons, e.g. marriage, infant care, old parents.
3. Replacement Transfer: It is used when all operations are declining and
to retain long-service employees as long as possible. The long-standing
employee replaces a new employee and thereby gets relief from the heavy
pressure of work.
4. Remedial Transfer: Such transfers are made to rectify mistakes in selec-
tion and placement. These transfers are affected at the request of the em-
ployees and are, therefore, called personal transfer.
5. Versatility Transfer: It is affected to make employees versatile and com-
petent in more than one skill. It helps to reduce boredom and monotony.
Benefits of Promotion and Transfer
• Useful in productivity and effectiveness of the organisation
• Greater job satisfaction to employees
• Stabilisation of fluctuating work needs
• Improved employee skills
• Remedy for faulty placement
• Improved labor relations
Check your progress 9
1. It is used when all operations are declining and to retain long-service em-
ployees as long as possible. The long-standing employee replaces a new
employee and thereby gets relief from the heavy pressure of work.
a. Replacement Transfer.
b. Shift Transfer.
c. Production Transfer.
d. Remedial Transfer.
2. It is affected to make employees versatile and competent in more than one
skill. It helps to reduce boredom and monotony.
a. Versatility Transfer.
b. Remedial Transfer.
c. Production Transfer.
d. Shift Transfer.
4.11 Let Us Sum Up
In this unit we have learnt that the managerial function of staffing involves manning
the organisation structure by proper and effective selection, appraisal and devel-
opment of personnel to fill the roles assigned to employers/workforce.
It is seen that the nature of staffing carries certain characteristics such as it serves
as an important managerial function, pervasive activity, continuous activity, basis
of staffing function relates to efficient management of personnel and helping to
place right men at right job.

75
 PLANNING, It is studied that importance of staffing relates to basic managerial functions, build-
DECISION-MAKING, ing healthy human relationships, human resources development, long term effect
ORGANIZING AND and potential contribution.
STAFFING It is studied that manpower planning is a Human Resource Planning having in-
volved in placing right number and right kind of people at right place at right time,
to do right things as per their caliber.
In companies, recruitment serves as a process of searching candidates for em-
ployment and stimulating them to apply for jobs in an organisation. It is an activity
that links the employers and the job seekers.
As seen, placement is said to be process of fitting the selected person at the right
job or place, i.e. fitting square pegs in square holes and round pegs in round holes.
Once he is fitted into the job, he is given the activities he has to perform and told
about his duties. The freshly appointed candidates are then given orientation in
order to familiarize and introduce the company to him.
Training is the process of enhancing the skills, capabilities and knowledge of em-
ployees for doing a particular job. Training process moulds the thinking of em-
ployees and leads to quality performance of employees. It is continuous and never
ending in nature.
Employee Remuneration refers to the reward or compensation given to the em-
ployees for their work performances. Remuneration provides basic attraction to
an employee to perform job efficiently and effectively. Remuneration leads to em-
ployee motivation.
4.12 Answers for Check Your Progress
Check your progress 1
Answers: (1-a), (2-a)
Check your progress 2
Answers: (1-a), (2-a)
Check your progress 3
Answers: (1-a),
Check your progress 4
Answers: (1-a), (2-a)
Check your progress 5
Answers: (1-a), (2-a)
Check your progress 6
Answers: (1-a)
Check your progress 7
Answers: (1-a), (2-a)
Check your progress 8
Answers: (1-a), (2-a)
Check your progress 9
Answers: (1-a)
76
4.13 Glossary STAFFING
1. Staffing - The process by which organisations meet their human resource
needs, including forecasting future requirements, recruiting and selecting
candidates and orienting new employees.
4.14 Assignment
What is staffing? What are the characteristics and steps involved in staffing
process?
4.15 Activities
1. Differentiate between recruitment and selection. What is the difference be-
tween promotion and transfer?
2. Why is manpower planning required in an organisation?
3. Distinguish between training and orientation. Elaborate on the ways/meth-
ods of training.
4.16 Case Study
What innovative ideas can you implement for avoiding absenteeism in your
firm?
4.17 Further Readings
1. Principles of Management, B.S. Moshal, Galgotia Publications.
2. Management Text and Cases, VSP Rao and V. Hari Krishna, published by
Anurag Jain for Excel books.
3. Principles of Management, Edition 2, P. C. Tripathi and P. N. Reddy, Tata
McGraw Hill Publishing Company.
4. Essentials of Management, Harold Koontz and Heinz Weihrich, Tata
McGraw Hill.

77
 PLANNING, BLOCK SUMMARY
DECISION-MAKING,
In this block, students will be given with an idea about Planning and Decision
ORGANIZING AND
Making with necessary features involved in organising and organisational
STAFFING
structure with emphasize on various recruitment and staffing processes. These
are important in areas of principles of management where every effort was
made to provide proper and accurate knowledge that is required for student
or any user with simple and concise explanation.
The block detailed about basic of plan and planning with use of different
plans. The information about organising and planning with certain principles
along with various functions are shown with illustrations. The block gives
complete information about nature, role and importance of staffing along
with manpower recruitment and planning process which can be required by
the students in an organisation.
After this block, students of management will able to know and gather knowl-
edge about how the staffing which is nowadays an important tool to work in
an organisation. Various process and procedures are highlighted for students
interest which could of help to them in near future.

78
BLOCK ASSIGNMENT STAFFING

Short Answer Questions

1. Decision-making process.
2. Guidelines for making effective decisions.
3. Types and sources of recruitment.
4. Types of transfers.
5. Importance of staffing.
6. Performance appraisal.

Long Answer Questions

1. What is Decision-Making? Give its characteristics.
2. What is “on the job” and “off the job training”?
3. Explain types of promotions and types of transfers.

79
 PLANNING, Enrolment No.:
DECISION-MAKING,
ORGANIZING AND 1. How many hours did you need for studying the unitse
STAFFING
Unit No. 1 2 3 4

Nos of Hrs

2. Please give your reactions to the following items based on your reading of
the block:

3. Any Other Comments

………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………

80
PRINCIPLES OF MANAGEMENT

DR. BABASAHEB AMBEDKAR OPEN UNIVERSITY

AHMEDABAD
Editorial Panel

Author : Dr. Jayraj Pandya

Director
K. S. School of Business Management,
Gujarat University
Ahmedabad

Editor : Dr. Mehal Pandya

Associate Professor
B. K. School of Professional and
Management Studies
Gujarat University, Ahmedabad

Language Editor : Dr. Vasant K. Joshi

Associate Professor,
G. B. Shah Commerce College
Ahmedabad.

ISBN 978-81-947108-3-7

Edition : 2020

Copyright © 2020 Knowledge Management and Research

Organisation.
lized in any form or by a means, electronic or mechanical,
including photo copying, recording or by any information storage
or retrieval system without written permission from us.

Acknowledgment
Every attempt has been made to trace the copyright holders of
material reproduced in this book. Should an infringement have
occurred, we apologize for the same and will be pleased to make
necessary correction/amendment in future edition of this book.
The content is developed by taking reference of online and print
publications that are mentioned in Bibliography. The content
developed represents the breadth of research excellence in this
multidisciplinary academic field. Some of the information,
illustrations and examples are taken “as is” and as available in the
references mentioned in Bibliography for academic purpose and
better understanding by learner.’
ROLE OF SELF INSTRUCTIONAL MATERIAL
IN DISTANCE LEARNING
The need to plan effective instruction is imperative for a
successful distance teaching repertoire. This is due to the fact that
the instructional designer, the tutor, the author (s) and the
student are often separated by distance and may never meet in
person. This is an increasingly common scenario in distance
education instruction. As much as possible, teaching by distance
should stimulate the student’s intellectual involvement and contain
all the necessary learning instructional activities that are capable
of guiding the student through the course objectives. Therefore,
the course / self-instructional material are completely equipped
with everything that the syllabus prescribes.

To ensure effective instruction, a number of instructional

design ideas are used and these help students to acquire knowledge,
intellectual skills, motor skills and necessary attitudinal changes.
In this respect, students’ assessment and course evaluation are
incorporated in the text.

The nature of instructional activities used in distance

education self- instructional materials depends on the domain of
learning that they reinforce in the text, that is, the cognitive,
psychomotor and affective. These are further interpreted in the
acquisition of knowledge, intellectual skills and motor skills.
Students may be encouraged to gain, apply and communicate
(orally or in writing) the knowledge acquired. Intellectual- skills
objectives may be met by designing instructions that make use of
students’ prior knowledge and experiences in the discourse as the
foundation on which newly acquired knowledge is built.

The provision of exercises in the form of assignments,

projects and tutorial feedback is necessary. Instructional activities
that teach motor skills need to be graphically demonstrated and
the correct practices provided during tutorials. Instructional
activities for inculcating change in attitude and behavior should
create interest and demonstrate need and benefits gained by
adopting the required change. Information on the adoption and
procedures for practice of new attitudes may then be introduced.

Teaching and learning at a distance eliminates interactive

communication cues, such as pauses, intonation and gestures,
associated with the face-to-face method of teaching. This is
particularly so with the exclusive use of print media. Instructional
activities built into the instructional repertoire provide this missing
interaction between the student and the teacher. Therefore, the
use of instructional activities to affect better distance teaching is
not optional, but mandatory.

Our team of successful writers and authors has tried to

reduce this.

Divide and to bring this Self Instructional Material as the best

teaching and communication tool. Instructional activities are
varied in order to assess the different facets of the domains of
learning.

Distance education teaching repertoire involves extensive use

of self- instructional materials, be they print or otherwise. These
materials are designed to achieve certain pre-determined learning
outcomes, namely goals and objectives that are contained in an
instructional plan. Since the teaching process is affected over a
distance, there is need to ensure that students actively participate
in their learning by performing specific tasks that help them to
understand the relevant concepts. Therefore, a set of exercises is
built into the teaching repertoire in order to link what students
and tutors do in the framework of the course outline. These could
be in the form of students’ assignments, a research project or a
science practical exercise. Examples of instructional activities in
distance education are too numerous to list. Instructional activities,
when used in this context, help to motivate students, guide and
measure students’ performance (continuous assessment)
 PREFACE
We have put in lots of hard work to make this book as user-
friendly as possible, but we have not sacrificed quality. Experts
were involved in preparing the materials. However, concepts are
explained in easy language for you. We haveincluded may tables
and examplesfor easy understanding.

We sincerely hope this book will help you in every way you
expect. All the best for your studies from our team!
 PRINCIPLES OF MANAGEMENT
Contents

BLOCK 3 : DIRECTION, SUPERVISION, CONTROLLING AND

CO-ORDINATING

Unit 1 Direction and Supervision

Direction : Definition, Nature, Need and Importance,

Principles of Directing.

Supervision : Role and Functions of a Supervisor,

Effective Supervision, Direction and Supervision.

Unit 2 Controlling

Controlling – Meaning, Features, Importance, Control

Process, Characteristics of an Effective Control System,

Types of Control.

Unit 3 Co–Ordination

Co-ordination – Characteristics, Essentials, Types and

Techniques, Principles, Obstacles and Needs.

 Dr. Babasaheb Ambedkar BBAATR-103
Open University Ahmedabad

Principles of Management
BLOCK 3 : DIRECTION, SUPERVISION CONTROLLING AND
CO-ORDINATION

UNIT 1 DIRECTION AND SUPERVISION

UNIT 2 CONTROLLING

UNIT 3 CO-ORDINATION
 DIRECTION, SUPERVISION,
CONTROLLING AND CO-ORDINATING
Block Introduction :
Directions, supervision, Co-ordination and controlling are considered to be
one of the most important functions of management. A management aims in getting
things done through others. Therefore directions have to be given to the workforce
and once the direction has been given to the work force the next comes the
supervision i.e. whether the workforce is working as per the directions or not.
Lastly the controlling function comes. It is the responsibility of the management
to measure the level of achievement of desired goals and if deviations are there
then to find out the reasons for that and take necessary steps so that such
deviations may not arise again in future.
In this block we will learn and study about the concept of directing and its
features and principles. The basic of supervisor and his duties along with
knowledge of supervision is also explained. The idea about process controlling and
its features along with merits and demerits will be explained. The understanding
about Co-ordination and its process will be detailed.
After students able to read this block, will find themselves suitable to handle
situation if arises in case of supervision and Co-ordination activities between
workers and management. The features of Co-ordination and control will help
them to get knowledge about related concept that appears in day to day life.

Block Objectives :
After learning this block, you will be able to understand :
• The Concept about managerial functions.
• The Features involved in directing.
• Basic about supervision.
• Principles involved in Co-ordination.
• Features about directing and its necessity.
• Role of supervisor.
• Knowledge about controlling.
• Qualities of good system.
• Purpose and need of Co-ordination.

Block Structure :
Unit 1 : Direction and Supervision
Unit 2 : Controlling
Unit 3 : Co-ordination
 Unit
DIRECTION AND SUPERVISION
1

: UNIT STRUCTURE :
1.0 Learning Objectives
1.1 Introduction
1.2 Direction
1.2.1 Definition of Directing
1.2.2 Nature of Directing
1.2.3 Need and Importance of Directing
1.2.4 Principles of Directing
1.3 Supervision
1.3.1 Role of a Supervisor
1.3.2 Functions of a Supervisor
1.3.3 Effective Supervision
1.4 Direction and Supervision
1.5 Let Us Sum Up
1.6 Answers for Check Your Progress
1.7 Glossary
1.8 Assignment
1.9 Activities
1.10 Case Study
1.11 Further Readings
1.0 Learning Objectives
After learning this unit, you will be able to understand:
 Nature and need of Directing.
 Importance and principles of Directing.
 Supervision.
 Role and functions of a Supervisor.
1.1 Introduction
In the previous unit, you learned about Staffing. It is one of the most important
functions of management. It includes managing manpower in an organisation in-
volving the identification of requirement of personnel, their recruitment, selection,
training, development, appraisal, promotion, transfer, compensation, etc. in an
organisation.

1
 DIRECTION,
SUPERVISION,
CONTROLLING AND
CO-ORDINATING

Fig 1.1 Introductions

In this unit, you will learn about direction. Every manager, to get things done by
subordinates, has to direct them. The directing is considered as an initiating func-
tion. Here you will study about direction and supervision. Motivation, Leadership
and Communication are discussed in the next chapter.
1.2 Direction
In the process of management, the planning organising and staffing are not enough.
These are to be supported by effective directing and efficient controlling. Every
manager must direct his subordinates, to get things done. The directing is consid-
ered as an initiating function.
Organisation is the sum-total of human and non-human resources. These resources
should be handled in a certain way to get the desired results. Through direction,
the management conveys and motivates individuals in the organisation to function
in the desired way to get organisational objectives. Without direction, other mana-
gerial activities like planning, organising, and staffing become ineffective.

Fig 1.2 Directing and Supervising

Here the manager will direct, instruct, guide and oversee the presentation of every
workers so as to obtain already defined goals. It is the main part of the manage-
ment process which is responsible for planning, organising, staffing.
Direction carries human factors that explain guidance to workers in order to do
work. In case of management direction refers to activities that are created to uplift

2
subordinates in order to work efficiently and professionally. DIRECTION AND SU-
1.2.1 Definition of Directing PERVISION
In the words of UrwickandBrech, “directing is the guidance, the inspiration, the
leadership of those men and women that constitutes the real core of the responsi-
bility of management.”
Thus directing involves, issuing orders and instructions, overseeing of the subor-
dinates and supervising the work being performed by them.
According to Haiman, “Directing consists of a process or technique by which
instruction can be issued and operations can be carried out as originally
planned.” Broadly, the process of directing involves the following elements:
• Issuing orders and instructions to the subordinates regarding the work
being performed by them.
• Guiding, counselling and educating the subordinates and telling them
the way of doing the given job.
• Supervising the work being performed by them on the regular basis to
ensure that they have been working according to the plan.
• Maintaining and inspiring the subordinates for following given orders
and instructions and working in the given direction.
1.2.2 Nature of Directing
There are certain characteristics related to directing which are:
1. Pervasive Function: As directing is essential at every levels in an
organisation, so it is the duty of the manager to give related guidance
and to boost his subordinates.
2. Continuous Activity: In an organisation, direction serves as continu-
ous activity throughout life in an organisation.
3. Human Factor: It is seen that directing is associated with subordi-
nates and as human factor. As both are complex and unpredictable,
hence direction serves as an important part.
4. Creative Activity: With direction, you can alter any plans into perfor-
mance as in the absence of this; people will become stationary and
physical resources results in no meaning.
5. Executive Function: As seen, direction is done with all managers and
executives at certain levels without working of an enterprise.
6. Delegate Function: It is a function which is related to direction that
deals with human beings.
1.2.3 Need and Importance of Directing
Directing may be considered as a core of managing process. The perfor-
mances of various activities in organisation revolve around it. In spite of
sound planning, a suitable organisational structure, effective staffing and ef-
ficient controlling, the desired results may not be obtained without proper
directing. It is only through directing process, the organisational actions are
initiated for achieving it objectives.
In detail, the importance of directing can be understood on the basis of the
following factors.
3
 DIRECTION, 1. Directing helps in achieving Co-ordination: The Co-ordination is con-
SUPERVISION, sidered as a by-product of effective directing. In the process of directing,
CONTROLLING AND every manager integrates the activities of subordinates through supervision,
CO-ORDINATING guidance and counselling for achieving organisational goals.
2. It is a means of motivation: To accomplish the-objectives of organisation,
it is necessary to motivate the employees working there. They are moti-
vated to work willingly and efficiently, through the process of directing. The
superior who directs the activities of subordinates inspires them to follow
given orders and instructions whole-heartedly.
3. Directing supplements other managerial functions: In the process of
managing, the manager has to perform many management functions such as
planning organising, staffing and controlling etc. To produce desired results
from all these functions, the directing function is crucial. Through directing,
other managerial functions are initiated and actuated. Moreover, without
effective directing, the managerial functions remain less effective.
4. Directing helps in coping with changing environment: The changing
environment of business may force organisation to initiate change in its func-
tioning, structure or goals. Such changes can be introduced and managed
effectively with the help of directing. Through directing, the manager pro-
vides dynamic leadership and free and frank communication with subordi-
nates as to convince them regarding the positive side of change. They may
be taken into confidence and persuaded for accepting the change and giv-
ing their full cooperation for implementing it.
5. Directing facilitates order and discipline among employees: Disci-
plined human force is needed for the smooth functioning and the suc-
cess of the organisation. Through the process of directing orders and
instructions are given to the subordinates and they are inspired and
motivated to follow them. The main purpose of directing is to get things
done by subordinates. By supervising, guiding, educating and oversee-
ing the activities of subordinates, they are made to work in a disci-
plined manner.
1.2.4 Principles of Directing
In order to make directing more effective and meaningful, certain principles
are followed. Some important principles of directing are as follows:
1. Harmony of objectives: The organisation is a collective entity of the
people. It involves the interest of various groups of the people such as
owners, employees, customers, financiers, society, etc.
According to this principle, to secure maximum prosperity for the
organisation and to serve the interest of other groups in a better way,
these conflicting objectives must be synchronized so that they strengthen
and promote each other. In this regard, P.W.Taylor has painted out that an
effective direction depends on the harmony of objectives.
Interestingly enough, Henri Fayol has also stated that the employees of
organisation should sacrifice their personal interest for achieving the ob-

4
 jectives of organisation, because their personal interest may be served bet- DIRECTION AND SU-
ter only if common goal of organisation are achieved efficiently. PERVISION
2. Unity of command: According to this principle while directing subordi-
nates, every subordinate should get all orders and instructions regarding the
work only from one superior. An application of this principle implies unified
direction of subordinates? activities by one superior. In doing so, discipline
can be maintained among them their activities can be controlled effectively
and dual command is avoided.
3. Direct supervision: Directing becomes more effective if it is accompa-
nied by personal interest and personal touch of the superior. The superior
maintains direct contact with subordinates, looks into their needs and re-
quirement, helps them in performing their job and solve their difficulties
promptly. The subordinates feel happy and satisfied and contribute more
for the accomplishment of organisational goals.
4. Participative leadership: It is interesting to observe that participative lead-
ership on the part of superior helps in making directing more effective. If the
superior respects and listens to the views of subordinates, they become
more loyal and sincere and give more cooperation to him. According to this
principle to encourage the performance levels, subordinates should be taken
into confidence and must be consulted at least on the matters that are re-
lated to them before making decision by the superior.
5. Follow up: Issuing orders and instructions is the chief task of direction. In
order to make directing, more effective it is necessary to take up some
follow up actions by the superior. He should motivate subordinates to fol-
low given directives and work accordingly. He must oversee the working of
subordinates, check their performance and guide them to follow suitable
course of action for doing the Job.
6. Unity of direction: To make the whole process of directing more mean-
ingful it is necessary to follow the principle of unity of direction.
According to this principle, there should be one head and one plan for
a group of activities, which are similar and have same objective. For
example, all activities related to production should have one plan i.e.
the production plan and this plan should be implemented under the
command of production manager. By adopting this principle, duplica-
tion and repetition of activities will be reduced and benefits of
specializationmay be secured.
Check your progress 1
1. According to this principle, there should be one head and one plan for a
group of activities, which are similar and have same objective.
a. Unity of direction.
b. Unity of command.

5
 DIRECTION, c. Direct Supervision.
SUPERVISION, d. Participative Leadership.
CONTROLLING AND
2. According to this principle while directing subordinates, every subordinate
CO-ORDINATING
should get all orders and instructions regarding the work only from one
superior.
a. Unity of Command.
b. Unity of direction.
c. Direct Supervision.
d. Participative Leadership.
1.3 Supervision
Supervision means the act of watching over the work or tasks of another who may
lack full knowledge of the concept at hand. Supervision does not mean control of
another but guidance in a work, professional or personal context.
There are several interpretations of the term “supervision,” but typically, supervi-
sion is the activity carried out by supervisors to oversee the productivity and
progress of employees who report directly to the supervisors. For example, first-
level supervisors supervise entry-level employees. Depending on the size of the
organization, middle managers supervise first-level supervisors; chiefexecutives
supervise middle-managers, etc. Supervision is a management activity and super-
visors have a management role in the organisation.
Occasionally, writers will interchange “leadership” and “supervision.” Both activi-
ties are closely related. Supervision requires leadership. Leadership does not nec-
essarily have to involve supervision.
1.3.1 Role of a Supervisor
Supervisor serves as an important role in an organisation. In an organisation, the
role of supervisor is to monitor the employees working. The work of supervision
is carried out at companies, factories where supervisor will monitor products. It is
found that a supervisor is part of management team which will serves as position
of first line managers. First line manager is a person who will work for many
functions that will help in meeting the productivity. With this reason, a supervisor is
only called as manager that has important role at execution level.
A supervisor plays multiple roles at one time:
1. As a Planner: A supervisor serves as a planner as he/she has to plan for
daily working schedules in an establishment. In planning, he bifurcates
the work among different workers as per their abilities.
2. As a Manager: Since supervisor is part of management team, so ultimately
to operate the working he was called as operative manager.
3. As a Guide and Leader: A supervisor guides the people working under
him with necessary plan to be performed daily.
4. As a Mediator: A supervisor is a person who will communicate and work
in between the management and workers. He serves as a coordinator among
management as well as workers.

6
5. As an Inspector: An important function of supervisor is to monitor, regu- DIRECTION AND SU-
late rules for workers, time scheduling and carried out performance for PERVISION
workers on daily basis. In the other way it serves as an inspector by in-
specting rule, work, production and worker progress.
6. As a Counsellor: A supervisor sometimes plays the role of a counsellor
when he/she involves in workers problems. At that time he has to really
become a person that can make the worker satisfied with responses.
1.3.2 Functions of a Supervisor
To manage the function related to workers and progress, supervisor plays an
important role. Being the part of management team, the supervisor works
closely with concerned manager to do various functions involved. The idea
behind performance of certain functions is to take care about stability and
soundness to an organisation with the idea of achieving profits with more
productivity. With this, supervisor concerns with following functions:
1. Planning and Organising: Supervisor?s plans for day-to-day work
and performs schedule for workers by showing and helping them about
the nature of work.
2. Provision of working conditions: As seen, supervisor serves as an
important function by doing physical settings in an organisation by
arranging physical resources at correct place.
3. Leadership and Guidance: As studied, supervisor is a sort of leaders
for workers who handle all workers problems. He guides workers
through target and production scheduling through instructions and
guidelines.
4. Motivation: A supervisor is important management personnel that link
him with workers to pursue any work and to provide incentives to
workers at various levels.
5. Controlling: The main aspect of supervisor is to:
• Takes care about the performance of workers against certain time
schedule
• Ensure and check the work progress
• Locate for any deflection in making solutions
• Involved in self-problem solving solution thereby reporting it to top
management
6. Linking Pin: It is work of supervisor to handle and take care of every
solution that exists among management and workers. The work of com-
municating and passing of relevant information to workers with the de-
mand of management is the core concept which supervisor handles.
7. Grievance Handling: The supervisor can handle the grievances of the
workers effectively. For this, he has to do the following things :
• He must be in direct touch with workers.
• He should win the confidence of the workers by solving their problems.

7
 DIRECTION, • He should tackle worker problems on humanitarian grounds.
SUPERVISION, • If he cannot tackle them independently, he can take the help and advice of
CONTROLLING AND the management to solve it.
CO-ORDINATING
8. Reporting: A supervisor has an important role to report about the cost,
quality and any such output, which can be responsible for increasing
productivity.
9. Introducing new work methods: The supervisor needs to be updated
and conscious related to new development and amendments regarding
the production and market trends. So, the work of supervisor is to
invent latest technique which saves production time and involves less
workers wastage which could result in:
• Higher productivity
• High morale of workers
• Satisfying working condition
• Improving human relations
• Higher profits
• High stability
10. Enforcing Discipline: A supervisor can undertake many steps to main-
tain discipline in the concern by continuous checking and necessary
measures such as strictness in orders and instructions, keeping an ac-
count of general discipline of factory, implementing penalties and pun-
ishments for the indiscipline workers. All these above steps help in
improving the overall discipline of the factory.
1.3.3 Effective Supervision
Effectiveness of a supervisor is judged on the basis of how he is contributing
to his organisation by his work. Thus, he and his effectiveness can be mea-
sured in terms of his qualities, his supervisory process and the result of his
actions. All these are to be related to the contributions to the achievement of
organisational objectives. Following are some of the elements of effective
supervisory practices:
1. Leadership: It is an act influencing activities related to individual or
groups so as to attain goals in a particular manner. With this, an indi-
vidual or group be able to share willingly to achieve goals.
2. Closeness of Supervision: It is the degree of closeness where the super-
vision varies from close-supervision to free-supervision. The quality of good
supervisors is to monitor and supervise with less close supervision. It is seen
that a close supervision will result in low morale and motivation as it stops
the satisfaction as per the strongly feelings of subordinates.
3. Employee-orientation or Human Relations: It is studied that both em-
ployees and work are taken care with the help of two styles such as em-
ployee-oriented and production-oriented. It is seen that in employee ori-
ented style, there exists great stress in interaction of employee?s jobs where
as in production oriented style, the production and technical aspects de-
8
 pends on jobs and employees. DIRECTION AND SU-
Thus, effective supervision is employee-oriented which creates a feeling in PERVISION
the minds of subordinates that their interests are taken into consideration in
organisational practices. High producing workers are also of this opinion
that they prefer employee-oriented technique because supervisors take per-
sonal interest in them, which motivates the workers. In this atmosphere, the
various problems being faced by workers can be discussed with the super-
visors concerned in order to find out their optimal solution.
4. Group Cohesiveness: the belongingness to high-producing group enhances
the members? regard for dignity of their own job. The amount of dignity
assigned by group members to their own jobs is highly associated with
group cohesiveness. An effective supervisor attempts for maintaining group
cohesiveness by infusing confidence and trust in employees.
5. Delegation: Appropriate delegation leads to high productivity, in the
organisation. Effective supervision implies adequate delegation. A su-
pervisor should not make any decision, which his subordinates can make.
This not only develops confidence in the subordinates but also moti-
vates them for better performance, besides saving a superior?s time to
concentrate for other work.
6. Other Factors: It is found that there are certain factors apart from
discussed above where supervision serves as an effective trend. In this,
the subordinates will feel that the supervisor which can set superiors
and satisfy their needs in terms of promotion, recognition and work-
centred will get more benefits.
Check your progress 2
1. A supervisor?s multiple roles at one time is________.
a. As a Planner
b. As a Guide and Leader
c. As a Mediator
d. All of the above
2. __________ are the elements of effective supervisory practices.
a. Closeness of Supervision
b. Employee-orientation or Human Relations
c. Group Cohesiveness
d. All of the above
1.4 Direction and Supervision
Sometimes, confusion arises between direction and supervision. The basic rea-
son for such confusion is the context in which the term supervision is used. There-
fore, two terms- direction and supervision- differ in terms of context and content.
The term supervision is used in two ways.
First, it is used as an element of direction and, therefore, every manager in the
organisation performs the function of supervision irrespective of his level in mana-

9
 DIRECTION, gerial hierarchy. In this context, supervision involves guiding the efforts of others to
SUPERVISION, achieve the stated objectives.
CONTROLLING AND For example, Terry and Franklin have defined supervision as, “guiding and direct-
CO-ORDINATING ing efforts of employees and other resources to accomplish stated work outputs.”
Thus, the scope of supervision is much more limited as compared to that of direc-
tion, which includes motivating and leading employees and communicating with
them, besides guiding them.
Second, the term supervision is used to denote the functions performed by super-
visors- a class of personnel between management and operatives. Whensupervision
is used in this context, it includes all supervisory functions, which include planning
organising, staffing, directing and controlling with varying emphasis on different
functions. In this context, Newman and Warren have defined supervision as the
day-to-day relationship between an executive and his immediate assistant and
covers training, direction, motivation, Co-ordination, maintenance of discipline,
etc.
Thus, it becomes much wider than directing particularly at supervisory level.
Check your progress 3
1. Which among the following explained supervision as, guiding and directing
efforts of employees with several different resources to complete stated
work outputs?
a. Terry and Franklin.
b. Peter.F.Drucker.
c. George.R.Terry.
d. None of the above
2. ___________________defined supervision as daily interaction among ex-
ecutive and immediate assistant in terms of training, direction, motivation,
Co-ordination, maintenance of discipline.
a. Newman and Warren.
b. George.R.Terry.
c. Peter.F.Drucker. d. Terry and Franklin
1.5 Let us Sum Up
In this unit we have learnt that directing serves as managerial function that is mainly
related with influencing, guiding, supervising and inspiring of subordinates in a will
planned manner.
It is studied that the process of directing will cover issuing of orders and instruc-
tions along with guidance, counselling, adequate knowledge tosubordinates, work
supervision and thereby maintaining and inspiring subordinates.
It is found that there are several important principles of directing which will include
harmony of objective, unity of command, direct supervision, participative leader-
ship, follow up and unity of direction.
The broad meaning of supervision is the style of watching over the work or tasks
of another who lacks in knowledge of concept at hand. It does not effect on the
10
control of another but will able to guide in work, professional or personal. DIRECTION AND SU-
The scope of supervision is limited to that of direction having motivating and PERVISION
leading employees along with communication among them in spite of giving
guidance to them.
1.6 Answers for Check Your Progress
Check your progress 1
Answers: (1-a), (2-a)
Check your progress 2
Answers: (1-d), (2-d)
Check your progress 3
Answers: (1-a), (2-a)
1.7 Glossary
1. Directing : It is the guidance, the inspiration, the leadership of those
men and women that constitutes the real core of the responsibility of
management. - Urwich and Brech
2. Supervision : It means the art of watching over the work or tasks of
another ho may lack full knowledge of the concept at hand.
1.8 Assignment
Discuss the role of supervisor in making the company production double.
What steps are taken by him to do so?
1.9 Activities
What do you understand by Supervision? How is it different from Direction?
1.10 Case Study
Based on your observations at workplace or at any organization, explain the
difference between Direction and Supervision in your own words.
1.11 Further Readings
1. Principles of Management, B.S. Moshal, Galgotia Publications.
2. Management Text and Cases, VSP Rao and V. Hari Krishna, published by
Anurag Jain for Excel books.
3. Principles of Management, Edition 2, P. C. Tripathi and P. N. Reddy, Tata
McGraw Hill Publishing Company.
4. Essentials of Management, Harold Koontz and Heinz Weihrich, Tata
McGraw Hill.

11
 DIRECTION, : UNIT STRUCTURE :
SUPERVISION,
2.0 Learning Objectives
CONTROLLING AND
CO-ORDINATING 2.1 Introduction
2.2 Controlling
2.2.1 Meaning of Controlling
2.2.2 Features of Controlling
2.2.3 Importance of Control
2.2.4 The Control Process
2.2.5 Characteristics of an Effective Control System
2.2.6 Types of Control
2.3 Planning and Controlling
2.4 Let Us Sum Up
2.5 Answers to Check Your Progress

12
 Unit CONTROLLING
2

2.6 Glossary
2.7 Assignment
2.8 Case Study
2.9 Further Readings
2.0 Learning Objectives
After learning this unit 3, you will be able to understand:
• Meaning, Features, Importance and Process of Controlling;
• Characteristics of Effective Control System;
• Types of Plan
2.1 Introduction
In this unit, you are going to study and learn about the basic of controlling and its
necessary factors. Controlling basically is employed as measurement of success
that is against the standards as well as correction of variation if exist, in order to
make sure about success of an organizational goals. The basic of controlling ap-
pears as to make sure about all occurring in conformities along with certain stan-
dards and principles. A well-organized system of control will rather help in pre-
dicting variations which come just before when it actually takes place.
2.2 Controlling
Controlling is the process of comparing actual performance with standards and
taking necessary corrective action. The focus of the control system may include
feed forward-control to prevent problems; concurrent control to monitor on-
going activities and feedback control to evaluate last-performance. While incor-
porating controls at various levels, employee reactions must, also kept in mind.
Raghuveer’s Dilemma
Raghuveer Desai is the supervisor of an engineering firm in Pune. The morale in
his office was quite low, recently. The workers went back to a 9- 5 work sched-
ule after being on flexi time for nearly two years.
When the directive came down allowing Raghuveer to place his office on flexi
time, he spelled out the rules carefully to his people. All the employees were to
work during the core period from 10 a.m. to 2 p.m. However, they could workthe
rest of the eight-hour day at any time between 6a.m. and 6p.m. Raghuveer be-
lieved his workers were honest and well-motivated, so he did not bother to setup
any system of control.
Everything went along well for a long time. The morale was high and all the work
seemed to be done. In November, 2010 the chief factory manager found that
Raghuveer?s workers were averaging seven hours a day. Two employees had
been working only during the core period for more than two months. When

13
 DIRECTION, Raghuveer?s departmental head received the factory manager?s report, he told
SUPERVISION, Raghuveer to return-the office to regular working hours. Raghuveer was upset
CONTROLLING AND and disappointed with his people. He had trusted them and felt they had let him
CO-ORDINATING down.
What did Raghuveer fail to understand about the controlling process?
Control is the process of comparing actual performance with established stan-
dards for taking action to correct deviations.
Planning organising, coordinating and directing are only preparatory steps
for getting the work done; it is only through the process of control that man-
agement is able to maintain the “equilibrium between ends and means, output
an effort.”
It is the process by which managers assure that resources are obtained and
used effectively and efficiently in the accomplishment of the organisation?s
objectives (Robin Anthony), a properly designed system of control alerts
managers of the existence of potential problems and allows them to take
corrective actions, when necessary.
The basic purpose of a well-designed control system ensures that results are
achieved according to plan. Control is not just score keeping. It is not just
plotting the course and getting locations report. It is, rather, steering the ship.
2.2.1 Meaning of Controlling
Controlling means implementation of a decision method and the use of feed-
back so that the goals and specific strategic plans of the firm are optimally
obtained. To do this, managers study accounting and other reports and com-
pare them to the plans set earlier. These comparisons may show where opera-
tions are not proceeding as planned and who is responsible for what. The
feedback that management receives may suggest the need to re-plan, to set
new strategies or to reshape the organisational structure.

Fig 2.1 Controlling

Controlling consists of verifying whether everything occurs in conformities with the
plans adopted, instructions issued and principles established. Controlling ensures
that there is effective and efficient utilization of organisational resources so as to
14
achieve the planned goals. Controlling measures the deviation of actual perfor- CONTROLLING
mance from the standard performance discovers the causes of such deviations
and helps in taking corrective actions.
According to Brech, “Controlling is a systematic exercise which is called as a
process of checking actual performance against the standards or plans with a
view to ensure adequate progress and also recording such experience as is gained
as a contribution to possible future needs.”
According to Donnell, “Just as a navigator continually takes reading to ensure
whether he is relative to a planned action, so should a business manager continu-
ally take reading to assure himself that his enterprise is on right course”.
Controlling has got two basic purposes:
• It facilitates Co-ordination
• It helps in planning
2.2.2 Features of Controlling
A careful exam of the above definitions reveals the following features of control-
ling.
1. Control is a Positive Force: The primary object of control is to find
where failures are occurring, who is responsible for them and what
should be done about them. It is thus a positive force, aimed at secur-
ing performance. Just like a thermostat in a refrigerator control auto-
matically begins to operate whenever deviations occur. It is a construc-
tive activity designed to check deviations and improve performance.
2. Controls Continuous Process: It is not a one-step action plan. As
pointed by the navigator continually takes readings to ascertain where
he is, relative to a planned course, so should the business manager
continually take readings to assure him that his enterprise or depart-
ment is on course.”
3. Control is Forward Looking: Control involves a post-mortem examina-
tion of past events; it is often viewed negatively, as a policing or watchdog
kind of job. The whole exercised of looking back is meant to improve
performance in future, as past cannot be controlled.
4. Control Process is Universal: Control is a primary function of every
manager. It has to be undertaken at every level. Managers at every level
have to check deviations from standards; set things right quickly and keep
the business on course. The, process of management is incomplete without
controlling.
5. Control Process is Dynamic: Control is not static; it is dynamic in the
sense, it is amenable to change and hence, highly flexible. Between the
times a goal is established and the time it is reached, many things can hap-
pen in the organisation and its environment to disrupt movement toward the
goal or even to change goal itself. “A properly designed control system can
help managers anticipate, monitor and respond to changing circumstances.”
6. Control is Goal-Oriented: Control guides activities (along desired lines)

15
 DIRECTION, towards predetermined goals. The primary focus is on achieving results,
SUPERVISION, checking deviations, if any and initiating timely remedial steps. Control, thus,
CONTROLLING AND is not an end in itself but only a means to achieve predetermined goals.
CO-ORDINATING 7. Delegation is the Key to Control: A manager gets authority to use re-
sources and achieve results through delegation. Without such authority, a
manager may not be in a position to take effective rectification steps in time.
In addition, it should be remembered here, to put activities along right paths;
a manager requires enough authority so that he can control anything and
everything under his jurisdiction.
8. Control is based on Planning: A system or control presupposes the ex-
istence of certain standards. The plans provide the standards of perfor-
mance, which serve as the basis of control. Thus, planning and control are
closely related to each other. Once plans are made, control is unnecessary
to measure the progress of work. Planning is useful only when there is effec-
tive control. Planning without control is meaningless.
2.2.3 Importance of Control
Control is an essential part of every organisation. The management process is
incomplete and sometimes, meaningless without control function. Targets
remain on paper, people tend to use resources recklessly and managers find
everything chaotic. The absence of control could be very costly and unpro-
ductive.
A good system of control, however, puts an end to all of these and offers the
following advantages:

1. Achievement of Goals: Controlling is a goal-oriented process. It keeps

activities on the right track. Whenever things go off the rails, remedial steps
are undertaken immediately. Every attempt is made to confirm events, to set
targets and thereby achieve results efficiently and effectively.
2. Execution and Revision of Plans: It is through controlling that appropri-
ate steps are taken to ensure that each plan is implemented in a predeter-
mined way. Controlling measures progress, uncovers deviations, indicates
corrective steps and thus, keeps everything on track. Of course, when con-
ditions change dramatically, controlling helps to review, revise and update
the plan. It offers valuable feedback information, reveals shortcomings in
plans and thereby helps in preparing other plans for future use.
3. Brings Order and Discipline: In an organisation, while pursuing goals
managers and their subordinates often commit mistakes. For example, prob-
lems are diagnosed incorrectly, lesser quality inputs are ordered, wrong prod-
ucts are introduced, and poor designs are followed. A control system helps
check such tendencies before they turn into serious problems. It has a healthy
impact on the behaviour of subordinates. They become cautious while dis-
charging their duties since they are aware (that their actions are observed at
every stage)
4. Facilitates Decentralisation of Authority: When managers delegate work
16
 to lower levels, they must also ensure that the subordinates do not deviate CONTROLLING
from a predetermined course of action. A system of control ensures this by
forcing subordinates to conform to plans. The feedback information helps
managers check whether actions taken at lower levels are in line with what
has been planned or not. It helps to measure progress, check deviations
and adjust operations from time to time.
5. Promotes Co-ordination: Control facilitates Co-ordination between dif-
ferent departments and divisions by providing them unity of direction. Indi-
viduals and their activities are tied to a set of common objectives. Such a
unified focus ensures accomplishment of results, efficiently and effectively.
6. Cope with Uncertainty and Change: The environment in which
organisations operate is complex and ever changing. New products
emerge, innovations come up and new regulations are passed and so
on. The organisation needs to keep a watchful eye on such develop-
ments and respond intelligently. A control system helps in checking
whether the diversified product lines are giving healthy margins, the
sales from each region are improving, the products are accepted in the
market place or not. Constant monitoring of key areas helps manage-
ment encash opportunities that are thrown open from time to time.
Timely actions can also be initiated to prevent mistakes from becoming
serious threats.

Check Your Progress 1

1. Controlling means implementation of a decision method and the use of feed-
back so that the goals and specific strategic plans of the firm are optimally
obtained.
a. True
b. False
2. Controlling has two basic purposes: 1. It facilitates Co-ordination and 2. It
helps in planning.
a. True
b. False
3. Control is backword looking.
a. True
b. False
4. Control is based on organizing.
a. True
b. False
2.2.4 The Control Process
The process of control involves the following steps:

17
 DIRECTION,
SUPERVISION,
CONTROLLING AND
CO-ORDINATING

Fig 2.2 Control Process

1. Establishment of Standards: The first step in the control process is es-
tablishing standards. Standards are the targets against which subse-
quent performances will be compared. They are, by definition, simply
criteria of performance. They serve as the benchmarks because they
specify acceptable levels of performance.
It is found that laying of standards for every operation is an unpreventable
work which is performed by the management such as:
• In the initial phase of setting standards, it is the work of an executive to
study about various characteristics related to work.

• It is the work of executive to consider simple flexible and normally accept-

ing levels of good performance in case of work characteristics.
• On differing with amount of work related to operations, it is seen that the
characteristics differs along with standards.
• It is found that there are set standards that depends on characteristics of
particular task.
2. Measurement of actual performance: Another step in control process
is measurement of actual performance where actual performance of em-
ployees is measured in terms of fixed standards as per his job. Also, mea-
suring performance of a personnel manager at the same time is difficult.
To make the checking process effective, the manager has to concentrate on
three key aspects of measurement, viz., completeness, objectivity and re-
sponsiveness.
Completeness: Complete measures provide an opportunity for the manager to
concentrate on all aspects of the job instead of neglecting unmeasured tasks in
favour of measured ones.
• Objectivity: Objective measures avoid bias that is essentially found in sub-
jective assessment of task and people.
• Responsiveness: Responsive measures support the belief that effort and
performance lead to improvement in the systems of control.
18
These three types of measurement are equally important for all jobs in organisations. CONTROLLING

Fig 2.3 Measurement, Feedback and Adjustment during Performance

3. Comparison of actual performance with standard: The comparing step
determines the degree of variation between actual performance and the
standard. Some variation in performance can be expected in all activities. It
is, therefore, important to determine the acceptable range of variation. De-
viations in excess of this range become significant and receive manager?s
attention. All such deviations may be due to errors in planning, defective
implementation or careless performance of the operatives. As a matter of
fact, only major or exceptional deviations should be communicated to top
management in the form of reports. This is known as „management by ex-
ception?
4. Taking corrective action: The last and final step in the control process is
taking corrective action, when required. Corrective steps are initiated by
managers with a view to rectify the defects in actual performance. If actual
performance for example- falls short of standards due to non-availability of
materials, managers try to procure these materials and thus set things in
order. If it is due to poor results shown by employees, it could be rectified
through the introduction of attractive incentive plans. Thus, a corrective
action may involve a change in methods, rules, procedures, etc. Some-
times, variations might occur due to unrealistic standards. That is, the goal
may be too high or too low. In such cases, managers try to set things in
order by revising the standards altogether.
Corrective action, as mentioned above, includes the change in strategy,
structure, compensation practices, training programmes, redesign of jobs,
replacement of personnel, re-establishment of budgets or standards, etc.
Check Your Progress 2
1. To make the checking process effective, the manager has to concentrate
on three key aspects of measurement: 1. Completeness 2. Objectivity 3.
___________ .
19
 DIRECTION, a. responsiveness
SUPERVISION, b. standards
CONTROLLING AND
c. change
CO-ORDINATING
d. authority
2. If actual performance falls short of standards due to non-availability of ma-
terials, managers try to produce these materials and thus set things
in order. – is the example of which step of controlling pro-
cess__________________________
a. Measurement of actual performance
b. Taking corrective action
c. Establishment of standards
d. Comparison of actual performance with standards
2.2.5 Characteristics of an Effective Control System
Effective control systems have certain characteristics. For a control system
to be effective, it must be:
1. Accurate: Information on performance must be accurate. Evaluating
the accuracy of the information they receive is one of the most impor-
tant control tasks that managers face.
2. Timely: Information must be collected, routed and evaluated quickly if
action is to be taken in time to produce improvements.
3. Objective and Comprehensible: The information in a control system should
be understandable and be seen as objective by the individuals who use it. A
difficult-to understand control system will cause unnecessary mistakes and
confusion or frustration among employees.
4. Focused on Strategic Control Points: The control system should be fo-
cused on those areas where deviations from the standards are most likely to
take place or where deviations would lead to the greatest harm.
5. Economically Realistic: The cost of implementing a control system should
be less than or at most equal to, the benefits derived from the control sys-
tem.
6. Organisational Realistic: The control system has to be compatible with
organisational realities and all standards for performance must be realistic.
7. Coordinated with the Organisation’s Work Flow: Control information
needs to be coordinated with the flow of work through the organisation for
two reasons: (1) each step in the work process may affect the success or
failure of the entire operation, (2) the control information must get to all the
people who need to receive it.
8. Flexible: Controls must have flexibility built into them so that the organisations
can react quickly to overcome adverse changes or to take advantage of
new opportunities.
9. Prescriptive and Operational: Control systems ought to indicate, upon
the detection of the deviation from standards, what corrective action should
20
 be taken. CONTROLLING
10. Accepted by Organisation Members: For a control system to be ac-
cepted by organisation members, the controls must be related to meaning-
ful and accepted goals.
These characteristics can be applied to controls at all levels of the
organisation.
2.2.6 Types of Control
Management can implement controls before an activity commences, while
the activity is going on or after the activity has been completed. The three
respective types of control based on timing are feed forward, concurrent and
feedback.
1. Feed forward Control: Feed forward control focuses on the regula-
tion of inputs (human, material and financial resources that flow into
the organisation) to ensure that they meet the standards necessary for
the transformation process.
Feed forward controls are desirable because they allow management
to prevent problems rather than having to cure them later. Unfortu-
nately, these controls require timely and accurate information that is often
difficult to develop. Feed forward control also is sometimes called prelimi-
nary control, pre-control, preventive control or steering control.
However, some authors use term “steering control” to separate the types
of control. These types of controls are designed to detect deviation some
standard or goal to allow correction to be made before a particular se-
quence of actions is completed.
2. Concurrent Control: Concurrent control takes place while an activity is
in progress. It involves the regulation of on-going activities that are part of
transformation process to ensure that they conform to organisational stan-
dards. Concurrent control is designed to ensure that employee work ac-
tivities produce the correct results.
Since concurrent control involves regulating on-going tasks, it requires a
thorough understanding of the specific tasks involved and their relationship
to the desired product.
Concurrent control sometimes is called screening or yes-no control, be-
cause it often involves checkpoints at which determinations are made about
whether to continue progress, take corrective action or stop work alto-
gether on products or services.
3. Feedback Control: This type of control focuses on the outputs of the
organisation after transformation is complete. Sometimes called post ac-
tion or output control, fulfils a number of important functions. For one
thing, itoften is used when feed forward and concurrent controls are not
feasible or are too costly.
Sometimes, feedback is the only viable type of control available. More-
over, feedback has two advantages over feed forward and concurrent
control. First, feedback provides managers with meaningful information

21
 DIRECTION, on how effective its planning effort was. If feedback indicates little variance
SUPERVISION, between standard and actual performance, this is evidence that planning
CONTROLLING AND was generally on target.
CO-ORDINATING If the deviation is great, a manager can use this information when formulat-
ing new plans to make them more effective. Second, feedback control can
enhance employee?s motivation.
The major drawback of this type of control is that, the time the manager
has the information and if there is significant problem the damage is already done.
But for many activities, feedback control fulfils a number of important functions.
Check Your Progress 3
1. Information on performance must be ________________ .
a. accurate
b. important
c. detail
d. wrong
2. The control system has to be compatible with organizational ___________
.
a. ideals
b. realities
c. future
d. inner side
3. The information in a control system should be ____________ .
a. beautiful
b. reasonable
c. understandable
d. digestible
4. ______________ control takes place while an activity is in progress.
a. Concurrent
b. Immediate
c. Fast
d. None of these
2.3 Let Us Sum Up
According to Brech, “Controlling is a systematic exercise which is called as a
process of checking actual performance against the standards or plans with a view
to ensure adequate progress and also recording such experience as is gained as a
contribution to possible future needs.”
Controlling has features like it is a positive force, continuous process, it is forward
looking, it is dynamic, goal-oriented and delegation is the key to control and it
based on planning. Unit has also explained importance of controlling.
Control process consists of four steps: Establishment of standards, measurement

22
of actual performance, comparison of actual performance with standard and tak- CONTROLLING
ing corrective action.
2.5 Answers to Check Your Progress
Check Your Progress 1
1 – a, 2 – a, 3 – b, 4 - b
Check Your Progress 2
1 – a, 2 – b
Check Your Progress 3
1 – a, 2 – b, 3 – c, 4 – a.
2.6 Glossary
Controlling – It is concerned with monitoring employees activities, keeping the
organization on track towards its goals and making correction is required.
2.7 Assignment
What is controlling? Why is it so important for an organization and managers to
implement proper controlling system?
2.8 Case Study
Veer Dairy Sweets is a renowned name for quality sweets since 1970. Hemu is
the owner of Veer Dairy Sweets was worried as the sales had declined during the
last six months. When he inquired to the Sales Manager, the Sales Manager re-
ported that there were some complaints about the quality of sweets. Therefore
Hemu ordered for sample checking of sweets.
Identify the step taken by Hemu that is related to the process of controlling.
2.9 Further Readings
1. Principles of Management, B.S. Moshal, Galgotia Publications.
2. Management Text and Cases, VSP Raoand V. Hari Krishna, published by
Anurag Jain for Excel books.
3. Principles of Management, Edition 2, P. C. Tripathi and P. N. Reddy, Tata
McGraw Hill Publishing Company.
4. Essentials of Management, Harold Koontz and Heinz Weihrich, Tata
McGraw Hill.

23
 DIRECTION, : UNIT STRUCTURE :
SUPERVISION,
3.0 Learning Objectives
CONTROLLING AND
CO-ORDINATING 3.1 Introduction
3.2 Co-ordination
3.2.1 Characteristics of Co-ordination
3.2.2 Essentials of Co-ordination
3.2.3 Types of Co-ordination
3.2.4 Techniques of Co-ordination
3.2.5 Principles of Co-ordination
3.2.6 Obstacles in Co-ordination
3.2.7 Need of Co-ordination
3.3 Let Us Sum Up
3.4 Answers to Check Your Progress
3.5 Glossary
3.6 Assignment
3.7 Activities
3.8 Case Study

24
 Unit CO-ORDINATION
3

3.9 Further Readings

3.0 Learning Objectives –
• Concept of Co-ordination
• Characteristics of Co-ordination
• Essentials of Co-ordination
• Types of Co-ordination
• Techniques of Co-ordination
• Principles of Co-ordination
• Obstacles and Need of Co-ordination
3.1 Introduction
• In the previous unit, you have learnt about controlling, its meaning, features,
process and importance. You have also studied characteristics of effective
control system and types of control.
• In this unit, you will learn the concept, characteristics, essentials of co-
ordination. You will also come to know techniques, principles, ob-
stacles and needs of coordination. In fact, co-ordination is very prime
function, when a manager has to work for any activity of management
in practice.
3.2 Co-ordination
The concept of Co-ordination is viewed as one of the important functions of
management. With specialised jobs, it does not enable an organisation to attain
the desired result. With units, Co-ordination becomes necessary.
Co-ordination is the management of interdependence in work situations; it is the
orderly synchronization or fitting together of the inter-dependent efforts of indi-
viduals, in order to attain a common goal. For example, in movie making, in order
to get classic movie, all the efforts of team must be well coordinated, right from
the spot boy to the director of movie.

25
 DIRECTION,
SUPERVISION,
CONTROLLING AND
CO-ORDINATING

Fig 2.4 Co-ordination

Similarly, in a contemporary enterprise, which consists of a number of depart-
ments, such as production, purchase, sales, finance and personnel, etc., there is
need for all of them to properly time their mutually supporting activities and to ably
reunite the sub–divided work.
Lack of proper Co-ordination results in inefficient operations and waste of time.
To coordinate is to keep expenditure proportionate to financial resources, equip-
ment and tools to production needs, stocks to rate of consumption, sales to pro-
duction and so on. It is to build the house neither too small nor too big, adapt the
tool to its use the road to the vehicle, the safety precautions to the risks. It is to
delegate the secondary to second place after the principles. It is in a word to
accord things and actions their rightful proportions and to adapt means to ends.
Following are the characteristics of Co-ordination.
3.2.1 Characteristics of Co-ordination
1. Co-ordination Integrates Group Effort:
The need for Co-ordination is felt when group effort is needed for the ac-
complishment of an objective. In short, it can be said that Co-ordination is
related to group effort and not individual effort. The question of Co-ordina-
tion does not arise, if the job is done by one person only.
2. Co-ordination Ensures Unity of Action:
The nature of Co-ordination is of creating unity in action. It means during
coordinating process an effort is made to create unity among the various
activities of an organisation. For example, the purchase and sales depart-
ments have tocoordinate their efforts so that supply of goods takes place
according to purchase orders.
3. Co-ordination is a Continuous Process:
It is not a job which can be performed once and for all, but its need is felt at
every step. Many activities are performed in a business. Sometimes or the
other, if any one of the activities goes on fluctuating either for more or less
than required, the whole organisational balance is disrupted. Thus, a close
watch has to be kept on all the activities to maintain the balance.

26
4. Co-ordination is an All-pervasive Function: CO-ORDINATION
Pervasiveness refers to that truth which is applicable to all spheres (busi-
ness and non-business organisations) and places uniformly. The nature of
Co-ordination is pervasive. Like making of timetable in an educational in-
stitution is an apt example of establishing Co-ordination.
In the game of cricket, the placement of players at pre-determined posi-
tions is nothing but Co-ordination. In the same manner, to synchronise the
activities of different departments, like purchase, sales, production, finance,
etc. in a business organisation is Co-ordination.
5. Co-ordination is the Responsibility of All Managers:
Co-ordination is needed at all the three, i.e., top, middle and lower mana-
gerial levels. Different activities performed at all the levels are equally im-
portant. Thus it is the responsibility of all the managers that they make ef-
forts to establish Co-ordination. That is why, it could not be said that Co-
ordination is of more importance to any one particular managerial level or a
manager.
6. Co-ordination is a Deliberate Function:
Co-ordination is never established by itself but it is a deliberate effort. Only
cooperation does not suffice but Co-ordination is also needed. For ex-
ample, a teacher aspires to teach effectively (this is cooperation) but the
timetable is not prepared in the school (this is lack of Co-ordination).
In this situation, classes cannot be arranged for. Here, the effort made by
the teacher is meaningless, in the absence of Co-ordination. On the other
hand, in the absence of cooperation and Co-ordination it dissatisfies the
employees. Thus, both are required at a given point of time.
3.2.2 Essentials of Co-ordination
Co-ordination is the unification, integration, synchronization of the efforts of group
members so as to provide unity of action in the pursuit of common goals. It is a
hidden force, which binds all the other functions of management.

Management seeks to achieve Co-ordination through its basic functions of plan-

ning organising, staffing, directing and controlling. That is why Co-ordination is
not a separate function of management because achieving of harmony between
individuals efforts towards achievement of group goals is a key to success of
management. Co-ordination is the essence of management and is implicit and
inherent in all functions of management.
A manager can be compared to an orchestra conductor since both of them have
to create rhythm and unity in the activities of group members. Co-ordination is an
integral element or ingredient of all the managerial functions as discussed below:
1. Co-ordination through Planning: Planning facilitates Co-ordination by
integrating the various plans through mutual discussion, exchange of ideas,
e.g. Co-ordination between finance budget and purchases budget.
2. Co-ordination through Organising: Mooney considers Co-ordination

27
 DIRECTION, as the very essence of organising. In fact, when a manager groups and as-
SUPERVISION, signs various activities to subordinates and when he creates department’s
CONTROLLING AND Co-ordination uppermost in his mind.
CO-ORDINATING 3. Co-ordination through Staffing: A manager should bear in mind that the
right number of personnel in various positions with right type of education
and skills are taken which will ensure right men on the right job.
4. Co-ordination through Directing: The purpose of giving orders, instruc-
tions and guidance to the subordinates is served only when there is a har-
mony between superiors and subordinates.
5. Co-ordination through Controlling: Manager ensures that there should
be Co-ordination between actual performance and standard performance
to achieve organisational goals.
From above discussion, we can very much affirm that Co-ordination is the very
much lifeline of management. It is required in every function and at each and every
stage and therefore it cannot be separated.
Check Your Progress 1
1. The nature of co-ordination is of creating unity of action.
a. True
b. False
2. Co-ordination is required only at top level of management.
a. True
b. False
3. Only cooperation is not sufficient, but co-ordination is also needed.
a. True
b. False
4. Making a timetable in any educational organization is an example of coop-
eration.
a. True
b. False
5. Managers ensure that there should be co-ordination between actual perfor-
mance and standard performance to achieve organizational goals.
a. True
b. False
3.2.3 Types of Co-ordination
Co-ordination can be broadly classified into one of the following four types:
1. Internal Co-ordination: Co-ordination among the employees of the same
department or section, among workers and managers at different levels,
among branch offices, plants and departments and sections is called inter-
nal Co-ordination.
2. External Co-ordination: Co-ordination with customers, suppliers, gov-

28
 ernment and outsiders with whom the enterprise has business connections CO-ORDINATION
is called external Co-ordination.
3. Vertical Co-ordination: Vertical Co-ordination is what exists in a depart-
ment where the departmental head is called upon to coordinate the activi-
ties of all those placed below him.
4. Horizontal Co-ordination: Horizontal Co-ordination takes place side-
ways. It exists between different departments such as production, sales,
purchasing, finance, personnel etc.
3.2.4 Techniques of Co-ordination
The following are some important techniques of Co-ordination.
1. Hierarchy: The oldest as well as the simplest device for achieving,
Co-ordination is hierarchy or chain of command. By putting interde-
pendent units under one, boss, some Co-ordination among their ac-
tivities in ensured.
2. Rules, Procedures and Policies: The specification of rules, proce-
dures and policies is another common device to co-ordinate sub units
in the performance of their repetitive activities. Standard policies, pro-
cedures and rules are laid down to cover all possible situations.
3. Planning: Planning ensures Co-ordination efforts. Under planning, tar-
gets of each department do connect with the targets of all other de-
partments. For example, by fixing the target of 10,000 units of addi-
tional production and sale for the production and sales departments
respectively, the head of the organisation can be fairly sure that the
work of the two departments would be Co-ordination since their tar-
get so demand.
4. Committees: Participative, committee or group decision-making is
another common coordinating device. This device greatly eases the
rigidity of the hierarchical structure, promotes effective communication and
understanding of ideas, encourages the acceptance of the commitment to
policies and makes their implementation more effective.
5. Induction: Inducting the new employee into the new social setting of his
work is also a coordinating mechanism. This device familiarizes the new
employee with the organisations rules and regulations its dominant norms
of behaviour, values and beliefs and integrates his personal goals with the
organisational goals.
6. Indoctrination: Indoctrinating organisational members with the goals and
mission of the organisation. A device used commonly in religious and mili-
tary organisations is still another Co-ordination device.
7. Incentives: Another mechanism entails providing interdependent units with
an incentive to collaborate, such as a profit-sharing plan. Ardent advo-
cates of profits–sharing claim that it promotes team spirit and better coop-
eration between employers and workers, between superiors and subordi-
nates and between workers and workers.

29
 DIRECTION, 8. Liaison Departments: In some cases where there is a large volume of
SUPERVISION, contact between two departments, a liaison department evolves to
CONTROLLING AND handle the transaction. This typically occurs between sales and pro-
CO-ORDINATING duction departments. For example, a packaging company that is pro-
cessing a particular large order to containers might have liaison de-
partment to make sure that the production department is meeting the
client?s specification and that the delivery will take place one time.
9. Workflow: A workflow is the sequence of steps by which the
organisation acquires inputs, transforms them into outputs and exports
these to the environment. It is largely shaped by technological eco-
nomic and social consideration and helps in Co-ordination.
Check Your Progress 2
1. Co-ordination with customers, suppliers, government and outsiders is
called _______________ .
a. External co-ordination
b. Vertical co-ordination
c. Horizontal co-ordination
d. Internal co-ordination
2. ___________________ co-ordination takes place sideways.
a. Vertical
b. Horizontal
c. Internal
d. External
3. ___________________ co-ordination is what exist is a department where
the departmental head is called upon to co-ordinate the activities of all
those placed below him.
a. External
b. Internal
c. Vertical
d. Horizontal
3.2.5 Principles of Co-ordination
In applying techniques for achieving effective Co-ordination in the organisation,
managers have to observe certain principles. Observance of these principles fa-
cilitates the application of various techniques of Co-ordination. Mary Parker Follett,
one of the classical management thinkers, has suggested four basic principles of
Co-ordination: direct contact, Co-ordination at early stages, continuity and dyna-
mism. To these, two more principles in the form of timing and reciprocal relation-
ship were added. Let us see how these principles work and aid to effective Co-

30
ordination. CO-ORDINATION
1. Principle of Direct Contact: Principle of direct contact states that Co-
ordination can be achieved by direct contact among people whose activi-
ties are to be coordinated. Such a contact can be established through the
provision of effective communication system. Direct contact helps in bringing
agreement on work methods, actions and achievement of ultimate objec-
tives. It helps to wither away the controversies and misunderstandings
among organisational members as well as external parties. Principle of
direct contact is based on the theme that Co-ordination is better achieved
through mutual understanding and not by force order or coercion.
2. Co-ordination at the Early Stages: Co-ordination can better be achieved
if it is attempted at the early of stage of work cycle that is at the planning
stage. At the stage of planning such as objective setting, strategy and policy
formulation, etc., Co-ordination can be sought from organisational mem-
bers. This may be done through their participation in decision-making pro-
cess. When members are involved in decision-making process, they realise
how their work performance affects other members in the organisation.
This happens because participative decision-making enables members to
commit and agree on various issues. Conflict and in congruency are re-
duced which are major hurdles for effective Co-ordination.
3. Principle of Continuity: The principle of continuity states that Co-ordi-
nation should be treated as a continuous process; it should be taken on
regular basis. Co-ordination should be treated as never-ceasing and never-
ending exercise of all managers and in all functions. Follett has stated that
Co-ordination emerges with the organisation and ends with it.

4. Principle of Dynamism: Principle of dynamism states that Co-ordination

does not work on the basis of rigid and fixed basis but on dynamic basis.
Dynamism is required because changes occur in external factors, which
necessitate changes in the organisation and its processes including Co-
ordination. When organisational changes take place, many old organisational
practices do not remain workable. This is true for Co-ordination too.
5. Principle of Timing: The principle of timing involves that various
organisational units and members should synchronise the timing of their
work performance. One member of the organisation facilitates the work-
ing of another if he synchronises the timing of his work with the working of
another. For example, in an assembly work, the different stages of the
work are interrelated in such a way that a subsequent stage can be
undertakenonly when the earlier stage has been completed. In such a case,
Co-ordination of timing at different stages is important.
6. Principle of Reciprocal Relationship: Reciprocal relationship exists be-
tween two or more parties in which each party affects the functioning of
others and in turn is affected by others. In the organisational context, vari-
ous departments may have reciprocal relationship though the amount of
reciprocity may not be equal in the reciprocal relationship, if a department
31
 DIRECTION, is affected by some functions of another department but the former does
SUPERVISION, not have control over these functions, the problem of Co-ordination arises.
CONTROLLING AND In this situation, the functions and the way of performing such functions are
CO-ORDINATING altered in such a way that these affect others positively. For example, the
level of production in production department may be decided in consulta-
tion with marketing department so that optimum level of production is main-
tained.
3.2.6 Obstacles in Coordination
Though co-ordination is essential, large business enterprises due to their large
number of departments, like - production, purchase, sales, finance, personnel
etc. find it difficult to execute co-ordination. These departments of large en-
terprises find it hard to collaborate with each other due to the differences in
their attitudes and working styles. Paul R. Lawrence has identified such ob-
stacles of co-ordination in the form of various differences, they are as under:
• Differences in orientation towards particular goals
Members of different departments develop their own views about how best
to advance the interest of the organisation. For sales people the product vari-
ety may take precedence over product quality.
• Differences in time orientation
Some members of an organisation such as production managers will be more
concerned with problems that have to be solved immediately or within a short
period of time. Others, like members of research and development team, may
be preoccupied with problems that may take years to solve.
• Differences in interpersonal orientation
In some organisations, activities such as production, there may be more formal
ways of communicating and decision making. In other activities such as R &D, the
style of communication and decision may be informal. Everyone may been cour-
age to have a say and to discuss his ideas with others.
Differences in formality of Structure
Each unit in the organization may have different methods and standards for evalu-
ating progress towards objectives and for rewarding employees. In a production
department for e.g. where quantity and quality are rigidly controlled the evaluation
and reward process might be quite formal. Employees will be judged quickly on
how they will need or exceed well defined performance criterion.
3.2.7 Need for Coordination
The extent of Co-ordination needed in an organisation depends on the nature of
tasks and degree of interdependence of people in various units performing them.
When these tasks require or can benefit from communication between units, then
a high degree of Co-ordination is the best. When information exchange is less,
important work may be completed with less interaction between units. Also a high
degree of Co-ordination is likely to be beneficial for work that is non-routine and
unpredictable. The need for Co-ordination arises because of the following fac-
tors.

32
1. Division of labour: When managers divide work into specialized func- CO-ORDINATION
tions or departments at the same time create the need for the Co-
ordinator of these activities. Generally, the greater the division of labour,
the greater is the need for Co-ordination. If two people in one unit do
all the work of an organization, it is clear that there is little need for
Co-ordination. But if the work has been divided into ten units with
hundred employees, the need for Co-ordination is much greater. Co-
ordination ensures proper synchronization between activities of differ-
ent units? and avoids interruptions in operations due to reasons such as
delay to introduce Co-ordination into the plan at a later stage when the
damage has already been done.
2. Direct interpersonal horizontal relationship: Co-ordination can be
secured effortlessly and effectively by direct interpersonal horizontal
relationship. Such a direct personal communication brings about agree-
ment on methods, actions and ultimate achievements and removes mis-
understandings and conflicts. These will involve a system in formal
communication embracing all ranks and status.
3. Continuity: Co-ordination must be regarded as a continuous process
and must be carried out at all times. It starts from planning and runs
through the functions of organizing directing and controlling.
4. Efforts of Managers: One should not be under the wrong impression
that Co-ordination can be achieved merely by giving an order. Co-
ordination is something, which cannot be ordered. On the contrary, it
must be brought into by the efforts of the managers by integrating all efforts,
ideas and interests to some common purpose.
5. Dynamism: Co-ordination should not be rigid. Its essence lies in constant
experimentation with all phases of organization and operations. Good Co-
ordination will remove the critical points as they arise. Excellent Co-ordina-
tion will anticipate them and prevent their occurrence. The maintenance and
operations department of an airline company provide an example of this
kind of relationship. Obviously, this close interrelationship leads to the stron-
gest need for Co-ordination.
Check Your Progress 3 –
1. Co-ordination with customers, suppliers, government and outsiders with
whom the enterprise has business connections is called ___________ .
a. external co-ordination
b. internal co-ordination
c. vertical co-ordination
d. horizontal co-ordination
2. When managers divide work into specialized functions or departments, at
the same time create the need for the coordinator for these activities, these
activities are called ________________ .
a. division of labour

33
 DIRECTION, b. division of work
SUPERVISION, c. division of skills
CONTROLLING AND
d. division of progress
CO-ORDINATING
3.3 Let Us Sum Up
Co-ordination is one of the performance changing function in any organization,
because if various functions of management are not co-ordinated properly, results
will not be achieved.
Co-ordination means orderly synchronization or fighting together of the inter-
dependent efforts of individuals, in order to attain organizational goals.
This unit of co-ordination has covered what are characteristics, essentials, types,
and techniques of co-ordination. It has also explained what are the obstacles in
co-ordination and why there is a need of co-ordination.
3.4 Answers to Check Your Progress
Check Your Progress 1
1 – a, 2 – b, 3 – a, 4 – b, 5 – a
Check Your Progress 2
1 – a, 2 – b, 3 - c
Check Your Progress 3
1 – a, 2 – a

3.5 Glossary
Co-ordination : It is the orderly synchronization or fitting together of the inter-
dependent efforts of individuals, in order to attain a common goal.
3.6 Assignment
What is co-ordinating? What are the important techniques of co-ordination?
3.7 Activities
What do you understand by Co-ordination? What are the essential types and
techniques of co-ordination? Discuss in your group.
3.8 Case Study
Drive Inc. is a company which deals with car rental facility. There are various
departments in the company like – Human Resources, Finance, Marketing, Re-
search and Development and Operations. The higher level management of the
company tries its best to synchronize the activities of various departments in the
best possible manner. The result is the increased efficiency and attainment of goals.
Identify the concept of management highlighted above. Write two benefits high-
lighted in the case.
3.9 Further Readings
1. Principles of Management, B. S. Moshal, Galgotia Publications
2. Management Text and Cases, VSP Rao and V. Hari Krishana, Published

34
 by Anurag Jain for Excel Books CO-ORDINATION
3. Principles of Management, Second Edition, P. C. Tripathi and P. N. Readdy,
Tata McGraw Hill Publishing Company
4. Essentials of Management, Harold Koontz and Heinz Weihrich, Tata
McGraw Hill
5. Management Theory and Practice (Text and Cases), P. Subba Rao, 2nd
Revised Edition, Himalaya Publishing House

35
 DIRECTION, BLOCK SUMMARY
SUPERVISION,
CONTROLLING AND
CO-ORDINATING In this block we have learned about the directions, supervision, Co-ordina-
tion and controlling activities that are required and performed in an organiza-
tion. The concept about important functions of management is also high-
lighted for reference of students which will be of great use to them. The
understanding of direction and Co-ordination activities will therefore explained
with the result that the user may require implementing such activities in their
domains.

The benefit of reading this block is that the student will be aware about vari-
ous qualities that a supervisor should carry in order to improve the produc-
tivity of the product for the company. The unit will explained about necessary
features that exists while knowing certain rules and criteria?s that a supervi-
sor show know about Co-ordination activities that exists among workers and
management. The responsibility of management in terms of achieving the
desired goals is well detailed for future use.

36
BLOCK ASSIGNMENT

Short Answer Questions

1. Control Process
2. Effective control system
3. Types of Control

4. Guidelines for Effective Supervision

5. Functions of a Supervisor

Long Answer Questions

1. What is Direction? Discuss the nature and principles of Directing.

2. Explain the process of controlling.
3. Explain Co-ordination and discuss its process.

37
 DIRECTION, Enrolment No.:
SUPERVISION,
CONTROLLING AND 1. How many hours did you need for studying the unitse
CO-ORDINATING
Un it N o. 1 2 3

Nos of Hr s

2. Please give your reactions to the following items based on your reading of
the block:

3. Any Other Comments

………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………

38
PRINCIPLES OF MANAGEMENT

DR. BABASAHEB AMBEDKAR OPEN UNIVERSITY

AHMEDABAD
Editorial Panel

Author : Dr. Jayraj Pandya

Director
K. S. School of Business Management,
Gujarat University
Ahmedabad

Editor : Dr. Mehal Pandya

Associate Professor
B. K. School of Professional and
Management Studies
Gujarat University, Ahmedabad

Language Editor : Dr. Vasant K. Joshi

Associate Professor,
G. B. Shah Commerce College
Ahmedabad.

ISBN 978-81-947108-3-7

Edition : 2020

Copyright © 2020 Knowledge Management and Research

Organisation.
lized in any form or by a means, electronic or mechanical,
including photo copying, recording or by any information storage
or retrieval system without written permission from us.

Acknowledgment
Every attempt has been made to trace the copyright holders of
material reproduced in this book. Should an infringement have
occurred, we apologize for the same and will be pleased to make
necessary correction/amendment in future edition of this book.
The content is developed by taking reference of online and print
publications that are mentioned in Bibliography. The content
developed represents the breadth of research excellence in this
multidisciplinary academic field. Some of the information,
illustrations and examples are taken “as is” and as available in the
references mentioned in Bibliography for academic purpose and
better understanding by learner.’
ROLE OF SELF INSTRUCTIONAL MATERIAL
IN DISTANCE LEARNING
The need to plan effective instruction is imperative for a
successful distance teaching repertoire. This is due to the fact that
the instructional designer, the tutor, the author (s) and the
student are often separated by distance and may never meet in
person. This is an increasingly common scenario in distance
education instruction. As much as possible, teaching by distance
should stimulate the student’s intellectual involvement and contain
all the necessary learning instructional activities that are capable
of guiding the student through the course objectives. Therefore,
the course / self-instructional material are completely equipped
with everything that the syllabus prescribes.

To ensure effective instruction, a number of instructional

design ideas are used and these help students to acquire knowledge,
intellectual skills, motor skills and necessary attitudinal changes.
In this respect, students’ assessment and course evaluation are
incorporated in the text.

The nature of instructional activities used in distance

education self- instructional materials depends on the domain of
learning that they reinforce in the text, that is, the cognitive,
psychomotor and affective. These are further interpreted in the
acquisition of knowledge, intellectual skills and motor skills.
Students may be encouraged to gain, apply and communicate
(orally or in writing) the knowledge acquired. Intellectual- skills
objectives may be met by designing instructions that make use of
students’ prior knowledge and experiences in the discourse as the
foundation on which newly acquired knowledge is built.

The provision of exercises in the form of assignments,

projects and tutorial feedback is necessary. Instructional activities
that teach motor skills need to be graphically demonstrated and
the correct practices provided during tutorials. Instructional
activities for inculcating change in attitude and behavior should
create interest and demonstrate need and benefits gained by
adopting the required change. Information on the adoption and
procedures for practice of new attitudes may then be introduced.

Teaching and learning at a distance eliminates interactive

communication cues, such as pauses, intonation and gestures,
associated with the face-to-face method of teaching. This is
particularly so with the exclusive use of print media. Instructional
activities built into the instructional repertoire provide this missing
interaction between the student and the teacher. Therefore, the
use of instructional activities to affect better distance teaching is
not optional, but mandatory.

Our team of successful writers and authors has tried to

reduce this.

Divide and to bring this Self Instructional Material as the best

teaching and communication tool. Instructional activities are
varied in order to assess the different facets of the domains of
learning.

Distance education teaching repertoire involves extensive use

of self- instructional materials, be they print or otherwise. These
materials are designed to achieve certain pre-determined learning
outcomes, namely goals and objectives that are contained in an
instructional plan. Since the teaching process is affected over a
distance, there is need to ensure that students actively participate
in their learning by performing specific tasks that help them to
understand the relevant concepts. Therefore, a set of exercises is
built into the teaching repertoire in order to link what students
and tutors do in the framework of the course outline. These could
be in the form of students’ assignments, a research project or a
science practical exercise. Examples of instructional activities in
distance education are too numerous to list. Instructional activities,
when used in this context, help to motivate students, guide and
measure students’ performance (continuous assessment)
 PREFACE
We have put in lots of hard work to make this book as user-
friendly as possible, but we have not sacrificed quality. Experts
were involved in preparing the materials. However, concepts are
explained in easy language for you. We haveincluded may tables
and examplesfor easy understanding.

We sincerely hope this book will help you in every way you
expect. All the best for your studies from our team!
 PRINCIPLES OF MANAGEMENT
Contents

BLOCK 4 : MORE ON MANAGEMENT

Unit 1 Motivation and Leadership

Motivation : Concept, Theories – Classical and Modern,

Importance, Financial and Non-Financial Motivation,

Positive and Negative Motivation, Group Motivation.

Leadership : Definition, Meaning, Factors, Theories,

Principles and Leadership Styles.

Unit 2 Communication

Communication : Definition, Meaning, Nature,

Communication Process, Types and Barriers to

Communication.

Unit 3 Social Responsibilies of Business

Social Responsibility – Meaning, Definition, Features,

Scope, Social Responsibly of a Manager, Interested

Group – Shareholders, Workers, Customers, Creditors,

Suppliers, Government, Society. Indian Business and

Social Responsibility.

Unit 4 Strategic Management

Meaning, Definition, Elements, Scope and Dimensions,

Process, Importance, Strategic Decisions and SWOT

Analysis.
 Dr. Babasaheb Ambedkar BBAATR-103
Open University Ahmedabad

Principles of Management
BLOCK 4 : MORE ON MANAGEMENT

UNIT 1 MOTIVATION AND LEADERSHIP

UNIT 2 COMMUNICATION

UNIT 3 SOCIAL RESPONSIBILITIES OF BUSINESS

UNIT 4 STRATEGIC MANAGEMENT

 MORE ON MANAGEMENT
Block Introduction :
Motivation refers to the degree of readiness of an organism to pursue some
designated goals and implies the determination of the nature and locus of force
inducing degree of readiness. The socio-economic obligation of every business is
to observe that no action that is economically charged has an adverse effect on
the public welfare. This includes obligations to promote employment opportunities,
to maintain competition, to curb inflation, etc. Strategic management can also be
defined as a bundle of decisions and acts which a manager undertakes and which
decides the result of the firm?s performance.
The block covers the important aspects about motivation, social responsibility
of business and strategic management. The details and features about fundamental
study of the strategic management along with Indian Businesses and Social
Responsibility are well explained. The block will give knowledge on types of
communication with social and economic barriers which could be of great help
to students wile transferring information within an organisation.
After completing this block, student will be able to get sufficient information
on motivations with views from several writers that will made them to distinguish
easily about financial and non-financial motivations. The knowledge about
communication tools with appropriate use will be of great use for new users. The
feature about management and its associated features will help the students to
know about the strategic working in an organisation.

Block Objectives :
After learning this block, you will be able to understand :
• Features about Motivation theory
• Theory of Maslow?s hierarchy
• Concept of ERG Motivation theory
• Understanding the Two-Factor Theory
• Characteristics of X and Y theory
• Basic of Financial and Non-financial Motivation
• Need of Leadership
• Factors affecting Leadership
• Early leadership theories
• Various Principles of Leadership
• Outline about Leadership Styles
• Nature of Communication
• Detailed about the types of Communication
• Idea about Social Responsibility
• Brief about Social Responsibilities of Managers
• Feature of Strategic management
• Outline about SWOT analysis

Block Structure :
Unit 1 : Motivation
Unit 2 : Communication
Unit 3 : Social Responsibilies of Business
Unit 4 : Strategic Management
 Unit
MOTIVATION AND LEADERSHIP
1

: UNIT STRUCTURE :
1.0 Learning Objectives
1.1 Introduction
1.2 Concept of Motivation
1.2.1 Meaning and Definition of Motivation
1.2.2 Theories of Motivation
1.2.3 Importance of Motivation
1.2.4 Financial and Non-Financial Motivation
1.2.5 Positive and Negative Motivation
1.2.6 Group Motivation
1.3 Leadership
1.3.1 Definition of Motivation and Leadership
1.3.2 Factors of Leadership
1.3.3 Theories of Leadership
1.3.4 Principles of Leadership
1.3.5 Leadership Styles
1.4 Let Us Sum Up
1.5 Answer to Check Your Progress
1.6 Glossary
1.7 Assignment
1.8 Activities
1.9 Case Study
1.10 Further Readings
1.0 Learning Objectives
After learning this unit 4, you will be able to understand:
• Meaning and Definition of Motivation.
• Nature and Importance of Motivation
• Theories of Motivation
• Financial, Non-Financial, Positive and Negative Motivation
• Definition, factors, theories, principles and styles of leadership
1.1 Introduction
In the previous unit, you learnt about direction. Direction has the following ele-
ments: Supervision, Motivation, Leadership and Communication. You have al-
ready learnt about supervision earlier in the book. Motivation, Leadership and
Communication are discussed in this unit.
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 MORE ON Motivation is to give reason, incentive, enthusiasm or interest that causes a spe-
MANAGEMENT cific action or certain behaviour. Motivation is present in every life function. Simple
acts such as eating are motivated by hunger. Education is motivated by a keen
desire for knowledge. Motivators can include anything from reward to coercion.
Leadership has been described as the “process of social influence in which one
person can enlist the aid and support of others in the accomplishment of a com-
mon task”. Let us discuss them in detail in this unit.
1.2 Concept of Motivation
Generally, motivation refers to the state within an individual that drives his behaviour
towards some goals. It comes from the need or state of deprivation or „sense of
not having in simple terms „lacking? which compels the individuals to act, not to
act or to behave in a particular manner. Thus, the basis of motivation may be basic
needs like hunger and thirst or may be social and psychological needs of
belongingness and achievement, self-development, etc.

Fig 1.1 Directing to Motivate Factory Workers

1.2.1 Meaning and Definition of Motivation
The term motivation has been defined by management authors as “a general inspi-
rational process which gets the members of the team to pull their weight effec-
tively, to give their loyalty to the group, to carry out properly the tasks that they
accepted and generally to play an effective part in the job that the group has
undertaken”-Brech.
“Any emotion or desire which so conditions one?s will that the individual is pro-
pelled in to action.”Stanley Vence.
“The complex of forces starting and keeping a person at work in an organisation”:
Robert?sEncyclopaedia of Management
Nature of Motivation
On the basis of the above definitions, the following observations can be made
regarding motivation:

1. Motivation is an inner psychological force, which activates and compels the

2
 person to behave in a particular manner. MOTIVATION AND
2. Motivation process is influenced by personality traits learning abilities, per- LEADERSHIP
ception and competence of an individual.
3. Highly motivated employee works more efficiently and his level of produc-
tion lends to be higher than others.
4. Motivation originates from the wants of an individual. It is a tension of
lacking something in his mind, which forces him to work more effi-
ciently.
5. Motivation is also a process of stimulating energy of an individual for
achieving set goal.
6. Motivation also plays a crucial role in determining the level of perfor-
mance. Highly motivated employee will get higher satisfaction, which
may lead to higher efficiency.
7. Motivating force and its degree may differ from individual to indi-
vidual depending on his personality, needs, competence and other fac-
tors.
8. The process of motivation helps the manager in analysing and under-
standing human behaviour and finding out that how an individual can
be inspired to produce desirable working behaviour.
9. Motivation may be positive as well as negative. Positive motivation
includes incentives, rewards and other benefits while negative motiva-
tion implies some punishment, fear, use of force, etc.
10. The process of motivation contributes to and boosts up the morale of
the employees. Further, high degree of motivation may lead to high
morale.
1.2.2 Theories of Motivation
No organisation can succeed without highly motivated and committed team
of employees. It is only through them that all other physical resources, like
land, building capital, machine, etc. are going to be used for the accomplish-
ment of predetermined goals. Due to the enormous effect of motivational
factors on the working behavior and level of performance of the employee,
lot of research work has been done and because of that, many theories of
motivation have been developed.
Few important and well-known theories are explained below:
1. Maslow’s hierarchy of needs theory
This theory of motivation has received more attention from the managers
than any other theory. Abraham Maslow, an eminent US psychologist, has
classified human needs in a logical convenient way that has an important
implication for managers. In this theory, he has pointed out and explained
how needs influence human behaviour. Maslow viewed human motivation as
a hierarchy of five needs ranging from most basic physiological needs to the
highest needs for self-actualisation.

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 MORE ON
MANAGEMENT

Fig 1.2 Maslow’s Need Hierarchy

Physiological needs: These are most basic needs including food, shelter, and
clothing. These needs are most powerful motivators, as individual cannot
survive without them. Physiological needs must be satisfied to some level or
these should be partially satisfied, before the individual moves to satisfy other
higher category needs. Maslow observed that man lives by bread alone, when
there is no bread.
• Safety needs: After the satisfaction of physical needs to a relative ex-
tent, one feels concerned about safety from future uncertainty, enemies
and other threats. These are essentially needs of self-preservation. At
this stage, an individual begins to think for future and makes efforts to
provide for rainy days. It is concluded by Maslow that, employees
need sufficient wage to feed, to take shelter, to protect them and their
families and a safe working environment before attempting to satisfy
other needs of the higher order.
• Social needs: After having secured satisfaction for physical needs and
safety and protection for future, one focuses next on satisfying needs
of love and affection, which are known as social needs. Social needs
include the need to love and be loved and the need to belong and be
identified with a group. Though this needs in strongly felt by an indi-
vidual is respect of family, it also affects work environment. As for the
first two levels of need, relative satisfaction of social needs gives rise
to next higher-level need.
• Esteem needs: Employees in the organisation who perceive themselves
as worthwhile are said to have esteem needs. Self-respect is a key to
such needs. Much of our self-respect comes from being accepted and
respected by others but esteem needs will emerge only when other
lower category of needs are satisfied to a relative extent. Esteem needs
include need for self-respect and appreciation from others, status and
prestige in the society, etc.
• Self-actualization needs: At the top of Maslow?s hierarchy of needs,
there lies the need of self-actualisation. It is an open-ended need, be-
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 cause it relates to the need to become more and more what one is to MOTIVATION AND
become everything that one is capable of becoming. It includes need LEADERSHIP
for realisationone?sfull potentials of development, maturity and au-
tonomy. On the relative satisfaction of this need, an individual be-
comes growth-oriented. Self-directed, detached and creative but in
organisation he hardly achieves self-realisation. However, the creativ-
ity of an individual in producing new and practical ideas, in bringing
about productivity and innovation and in reducing cost that might sat-
isfy some of the needs of self-actualisation.
Limitations and Criticism
Though Maslow’s hierarchy makes sense intuitively, little evidence supports
its strict hierarchy. Actually, recent research challenges the order that the
needs are imposed by Maslow’s pyramid. As an example, in some cultures,
social needs are placed more fundamentally than any others. Further, Maslow’s
hierarchy fails to explain the “starving artist” scenario, in which the aesthetic
neglects their physical needs to pursuit of aesthetic or spiritual goals. Addi-
tionally, little evidence suggests that people satisfy exclusively one motivat-
ing need at a time, other than situations where needs conflict.
While scientific support fails to reinforce Maslow’s hierarchy, his theory is
very popular, being the introductory motivation theory for many students
and managers worldwide. To handle a number of contemporary issues in the
Needs Hierarchy, Clayton Alderfer devised the ERG theory, a consistent needs-
based model that aligns more accurately with scientific research.
2. ERG Theory of Motivation
Clayton Alderfer has developed this theory on the same line as Maslow?s
need hierarchy. Rather it is considered as reformulation or refinement of
Maslow?s need theory. This theory states that people attempt to meet a hier-
archy of existence, relatedness and growth need efforts to seek one level of
needs are defeated individual would regress to lower the level of needs.

Fig 1.3 ERG Theory

Alderfer classified needs into three categories:
• Existence needs - including basic needs and some other factors such
as fringe benefits in the work place.
• Relatedness needs - are by and large resembling with social needs
mainly include need for interpersonal relations; and

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 MORE ON • Growth needs - reflect many aspects of need of achievement and self-
MANAGEMENT actualisation including need for personal creativity and influence.
Although ERG theory is also based on need hierarchy, it differs from Maslow?s
need hierarchy on two grounds.
Alderfer stated that needs at more than one level may arise at a time as against
the Maslow?s assumption that at a time only one category need arises.
Secondly, in a more significant way, Alderfer stressed that when higher cat-
egory of needs are not fulfilled lower level needs will return even though they
were already satisfied to a reasonable extent. In addition, Alderfer strongly
felt that people move up and down the hierarchy of needs from situation to
situation.
Both these theories of needs do provide useful inside into human needs, which
greatly influence his working behaviour. The conclusions derived fromthese
theories may be used by the manager while thinking over and selecting suit-
able incentives to motivate the employees.
3. Herzberg’s Two-Factor Theory
Herzberg’s Two-Factor Theory was invented by Frederick Herzberg’s which
is a type of motivation theory based on content motivation. It is a theory
which motivates individual by means of finding and satisfying of individual
requirements, desires and further works to satisfy individual expectations.
According to Frederick Herzberg, who studied at clinical psychology in Pitts-
burgh, believed that the theory is related to work which motivates several
employees. The theory was published Motivation to Work during the year
1959.

Fig 1.4 Herzberg’s two-factor theory

This theory is based upon notion that motivation can be split into hygiene
factors and motivation factors. He concluded that there were two types of
motivation:
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• Hygiene factor MOTIVATION AND
• Motivation Factors LEADERSHIP
Hygiene factor shows dissatisfaction level which is the real creators of job satis-
faction which covers:
• Supervision
• Interpersonal relations
• Physical working conditions
• Salary
Motivation Factors will cover motivation aspect in case of Job which includes:
• Achievement
• Advancement
• Recognition
• Responsibility
Such factors are basically the requirements that will avoid nasty goings-on and
uneasiness while motivational scale is the requirement for personal development.
4. Theory X and Theory Y
It is seen that a US scientist McGregor who invent an approach which will handle
and encouraged certain assumptions which are based on human behaviour. He
worked on the theory of X and Y that believes on assumptions laid down by
human behaviour. Though he was a great critic of classical approach of manage-
ment, even then his theory X is related to philosophy of traditional management,
assumptions about employees and the way to manage them. Theory Y is based
on humanistic assumptions about employees and describes the approaches to
manage and motivate them.

Fig 1.5 Theory X and theory Y

Theory X describes that:
1. An average employee in the organisation is lazy, dull and self-centred, re-

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 MORE ON sists change and does not want to share responsibility.
MANAGEMENT 2. He has limited number of needs, mostly physical needs, and to some extent,
security needs.
3. An average employee lacks responsibility and has little ambitions.
4. Thus, the responsibility of getting things done by others for achieving
organisational goals lies on the managers and the managers must use
coercive measures to control the workers and they must be threatened
and punished as to get them to work.
5. To get the things done by the employees, McGregor suggested a rigid,
bureaucratic and rule based organisation.
6. Narrow span of management, one way communication, close supervi-
sion, more concentration on monetary incentives and centralisation of
managerial authority should be followed.
7. It was also thought necessary to guide, direct and control the employ-
ees in a strict manner.
Theory Y describes the following:
1. Work is as natural as play or rest for the workers.
2. An average employee or worker likes work, and is capable of assuming
responsibilities and accepting challenges.
3. This class of workers are ambitious, achievement-oriented and capable
of exercising self-control.
4. They have wide range of needs, both economic and non-economic.
5. They have potentials and they can learn to assume responsibility. They
have imagination and creativity that can be applied to work.
6. In view of these assumptions, the role of management is to develop
potentials and help the employees to use it for achieving common ob-
jectives.
7. Organisational structure should be marked by open communication,
flexibility, informal relation and de-centralisation of authority.
8. The approach of management should include participative management,
supportive supervisory style, self-direction and control, opportunity for
creativity and innovativeness and package of both monetary and non-
monetary incentives
5. Achievement Motivation Theory or McClelland’s Theory of Need
This theory has a particular reference to industrial organisation, as the achieve-
ment motive has to do a lot with the success and failure of these organisations.
David McClelland and his associates like John Atkinson and others in Harvard
University, USA, have developed this theory of motivation. The main ele-
ments of this theory are need for achievement, power and affiliation. This
theory assumes that some people are much more achievement-oriented and
open minded than others. Therefore, they get job satisfaction and derive special
kind of pleasure in achieving an objective successfully or performing challenging

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job rather than receiving monetary and other rewards. MOTIVATION AND
The balance between these drives varies from individual to individual. For ex- LEADERSHIP
ample, one individual might have a strong need of affiliation while another might
have a strong need for achievement. The people with a high need of achievement
would like to take responsibility for solving problems, they tend to set moderately
difficult targets for themselves and take calculated task to meet these targets.
Achievement-oriented individuals seek satisfaction in doing things better and in
assuming important personal responsibility for solving the problems but the people
with low achievement needs tend to perform either poorly or average in the same
situation.

Fig 1.6 Achievement Motivation Theory

Like the need of achievement, the need for power to control or dominate people
and events is also considered one of the important motivational factors. Such
individuals, if given a position marked by higher authority and power, tend to
perform better as compared to other positions having less power. Similarly, some
other individual may derive satisfaction from better friendly interpersonal relations
in work setting. They can be motivated by providing atmosphere of support and
friendship and social affiliation. This need is more like a social need, which has
been described earlier.
1.2.3 Importance of Motivation
Importance of motivation in management may be judged based on the following
factors.
Effective use of resources: In business, all physical resources are to be used
through human force. Effective and efficient use of these resources depends
on the ability and reading of work force. If this work force is inspired to
work efficiently, they use the resources properly and strive to yield good
results.
Higher efficiency: Motivation is directly related to the level of efficiency. Highly
motivated employees make full use of their energy and other abilities that raise the
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 MORE ON existing level of efficiency. They produce more as compared to other employees.
MANAGEMENT Accomplishment of organisational goals: As stated earlier, the process of
motivation helps in shaping the working behaviour of the employees and
making it desirable for achieving objectives. Highly motivated employees
would make goal directed efforts. They are more committed and cooperative
for seeking organisational goals.
Reduced labour turnover and absenteeism: Highly motivated employees
are the most important and valuable assets of the organisation. They are more
loyal and sincere therefore they remain punctual and regular in their work
schedule and prefer to stay on the job for longer periods. These factors help
in reducing absenteeism and labour turnover.
Healthy industrial relation: Motivation forms the base of good industrial
relation. The employees who lack motivation will be unproductive and be
unwilling to obey any rules. This might cause unrest amongst them. How-
ever, if they are inspired to work they will work efficiently and maintain dis-
cipline
Improved corporate image: Motivation also helps in improving an image of
organisation. If employees are motivated, they produce more, they maintain
self-discipline and productive internal environment in the organisation, which
ultimately gives better impression to the outsiders dealing with an organisation
and its image is enhanced.
1.2.4 Financial and Non-Financial Motivation
1. Financial motivation - means motivating employees by paying them
in terms of money. Alternatively, we can say that any amount paid to an
employee for motivation is financial motivation. In reality, despite the
views of Herzberg that monetary methods of motivation have little value,
firms still use money as a major incentive. There are a variety of pay-
ment systems that a business could use to motivate its employees:
• Wages and Salaries
• Piece-rate
• Monetary Fringe Benefits
• Performance-related pay
• Profit-sharing
• Share ownership
2. Non-Financial Motivation - is the process for retaining and develop-
ing people in organisations when times are tough. Non-financial moti-
vation means motivating employees through non-financial means. Af-
ter recruiting and training people, it is important that a company is able
to retain them so that they prove beneficial for the company. This is
because these employees will have relevant experience in due course of
time. In order to ensure that such experienced employees continue to work
for the company, they have to be motivated by means other than money. In
fact, there are many effective methods for non-financial employees’ moti-

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 vation. Effective Methods for non- financial motivation are: MOTIVATION AND
• Job Enrichment LEADERSHIP
• Fostering Teamwork
• Empowerment
• Fringe Benefits
• Training
• Seminar
1.2.5 Positive and Negative Motivation
As we know, motivation is concerned with inspiring a person to work in order to
get the best results. This can be of two types:
Positive Motivation: Motivation actually means positive motivation in real sense.
Positive motivation is done by providing positive incentives to an employee. The
examples of positive motivations include promotion, praise, recognition, perks
and allowances.
Negative Motivation: The idea about negative motivation results from reverse
incentives who involves in correcting mistakes or faults of employees. The ex-
amples of negative motivation include demotion, transfer, fines and penalties.
The ultimate aim of both positive and negative motivation is to encourage an
employee to perform well though their techniques are totally different.
Whereas one approaches people to work in the best possible style providing
better financial and non- financial incentives, the other tries to encourage
them by cutting their wages and other facilities and services with the belief
that people will correct themselves and work out of fear.
1.2.6 Group Motivation
Group morale reflects the general esprit de corps of a collective group of
personality. Group morale is everyone?s concern and should be taken into
consideration by the management, and also continually practiced, because it
is never ultimately achieved and is constantly changing.
Just as a good morale is important in the military as it improves unit cohe-
sion, in the same way the positive group morale helps n boosting unit cohe-
sion within a setup. Without good morale, a force will be more likely to give
up and surrender. Morale is usually assessed at a collective, rather than an
individual level. Esprit de corps is considered to be an important part of a
fighting unit. In the same way a good morale is needed in any organization to
carry out its functions effectively in order to achieve the organisational goals.
Group motivation involves motivating a team of people to work in a particu-
lar manner so that the organisational objectives may be achieved.
Check Your Progress 1
1. ____________ theory assumes that some people are much more achieve-
ment oriented and open minded than others.
a. Achievement

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 MORE ON b. Theory Y
MANAGEMENT c. Maslow’s
d. None of these
2. ____________ motivation means motivating employees by paying them in
terms of money.
a. Non-financial
b. Financial
c. Negative
d. Non-financial
3. ____________ motivation includes demotion, transfer, fines and penal-
ties.
a. Financial
b. Non-financial
c. Negative
d. Positive
1.3 Leadership
Good leaders? are made not born. If you have the desire and willpower, you can
become an effective leader. Good leaders develop through a never-ending pro-
cess of self-study, education, training and experience.
There are certain ways and methods that can be employed to inspire workers that
they put in their best effort and achieve their own and the organisational goals.
There are certain things that you must know and do but these things are not inher-
ited, instead they are acquired with consistent effort and toil. Good leaders are
continually working and studying to improve their leadership skills; they are not
resting on their laurels.
1.3.1 Definition and Meaning of Leadership
Leadership is a process by which a person influences others to accomplish an
objective and directs the organization in a way that makes it more cohesive
and coherent.

Fig 1.7 Leadership

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 “Leadership is a process of giving purpose (meaningful direction) to collec- MOTIVATION AND
tive effort and causing willing effort to be expended to achieve purpose.” LEADERSHIP
(Jacobs and Jaques)
 “Leadership is the process of influencing the activities of an individual or a
group in efforts toward goal achievement in a given situation.” (Hersey and
Blanchard)
 “Leadership is an attempt at influencing the activities of followers through
the communication process and toward the attainment of some goal or
goals.” (Donelly)
 “Leadership is defined as the process of influencing the activities of an
organised group toward goal achievement.” (Rauch and Behling)
1.3.2 Factors of Leadership
There are four major factors in leadership:

Fig 1.8 Factors of leadership

1. Leader: A leader should possess a sound knowledge of himself, the
extent of his potential and how he can utilise this potential in the best
possible manner. He must have the capacity to motivate his followers
and gain their complete confidence. These followers should never doubt
their leader’s capability.
2. Followers: People differ in personality, so they cannot be handled in the
same manner. An efficient leader is one who considers this. For example, a
new employee would need more guidance. A person who is a manager
needs different type of motivation than one who is a supervisor. A leader
should be well aware of the needs of his people, so that he would have a
different approach for individual requirements. This consolidates the bond
between the leader and his followers.
3. Communication: A good leader guides his followers through communica-
tion, especially non-verbal. If he speaks and lacks conviction or his tone
does not match his body language, then he will not be taken seriously. There-
fore, his manner of communication matters a lot.
4. Situation: A leader encounters different types of unpleasant situations ev-

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 MORE ON ery day. Moreover, no two situations area like or have the same solutions.
MANAGEMENT An efficient leader uses his judgment and experience to tackle these situa-
tions and make decisions. For instance, if an employee is a habitual late
comer, but an efficient worker, then the leader needs to consider very care-
fully what action should he take in order to make him punctual without
demotivating him.
Various forces will affect these four factors. Examples of forces are your
relationship with your seniors, the skill of your followers, the informal lead-
ers within your organisation and how your organisation is organised.
1.3.3 Theories of Leadership
The appearance of leadership motivates during beginning of 20th century which
focuses on qualities that differentiates among leaders and followers. There are
eight major types of theories:
1. Great Man Theories: This theory believes that the volume of leadership
capacity is based on inheritancy. In this theory, the great leaders are posed
as daring, mythic and give rise to leadership as required.
2. Trait Theories: Trait theory believes that people inherit many features and
traits which can be suitable for great leadership. This theory feels that cer-
tain personality features are shared among by great leaders.
3. Contingency Theories: It is a leadership theory which focuses on desired
variables which are based on environment that find out which style of lead-
ership is best fitted for particular situation. In this theory the success is based
on the amount of variables which will have leadership style, qualities of fol-
lowers and characteristics of the situation.
4. Situational Theories: This theory allows the leaders to select the best
course of action which depends on situational variables.
5. Behavioural Theories: It depends on the fact that great leaders are
created and not born. The idea of this leadership theory is to enlight the
actions of leaders which are not concerned with mental or internal states.
6. Participative Theories: Such theory suggests that an ideal leadership
style depends upon input of others. In this the leaders give confidence
while contributions from various group members thereby assuring members
to be committed for decision making process.
7. Management Theories: Management theories (also known as transac-
tional theories) focus on the role of supervision organisation and group per-
formance. This theory bases leadership on a system of rewards and punish-
ments.
8. Relationship Theories: It is a transformational theory which explains about
connections which originates among leaders and followers. In this, the lead-
ers are motivated and will make the people inspired by way of helping cer-
tain group members by finding higher good of task.
1.3.4 Principles of Leadership
Following are the basic principles of Leadership:

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 Know yourself and seek self-improvement: Learning is a never-ending MOTIVATION AND
process. A leader should always strive to look at his areas of improvement LEADERSHIP
and work hard to minimise them without any prejudice. These can be ac-
complished through self-study, formal classes, reflection and interacting with
others.
 Be technically proficient: A leader must be knowledgeable and efficient
in his work. He must be also aware of the job responsibilities given to
various employees.
 Seek responsibility and take responsibility for your actions: After
delegating work, a leader should be able to guide his team towards
achieving the ultimate objective. When things go wrong, they always
do eventually — do not blame others. Instead of brooding over what
could have been done, a leader searches for what should be done.
 Make sound and timely decisions: Use good problem solving, deci-
sion making and planning tools.
 Set the example: Be a good role model for your employees. They
must not only hear what they are expected to do, but also see. “We
must become the change we want to see” - Mahatma Gandhi.
 Know your people and look out for their well-being: If a leader
genuinely cares for his people, they will certainly reciprocate.
 Keep your workers informed: Know how to communicate with not
only them, but also seniors and other key people.
 Develop a sense of responsibility in your workers: This will ensure
an increase in the efficiency of the employees. They will develop a
positive attitude towards work.
 Ensure that tasks are understood, supervised and accomplished:
Communication is the key to this responsibility.
 Train as a team: - Although many so-called leaders call their
organisation, department, section, etc. a team; they are not really teams.
They are just a group of people doing their jobs.
 Use full capabilities of your organisation: A capable leader has the
ability to bring out the latent potential of his people. This will definitely help
the whole organisation to progress.
1.3.5 Leadership Styles
Leadership style is the manner and approach of providing direction, implementing
plans and motivating people. Kurt Lewin (1939) led a group of researchers to
identify different styles of leadership. This early study has been very influential and
established three major leadership styles. The three major styles of leadership
are:
 Authoritarian or autocratic
 Participative or democratic

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 MORE ON  Delegated or free reign
MANAGEMENT Although good leaders use all three styles, with one of them normally dominant,
bad leaders tend to stick with one style.
Authoritarian (autocratic)

Fig 1.9 Authoritarian leadership

This style is used when leaders tell their employees what they want done and how
they want it accomplished, without getting the advice of their followers. Some of
the appropriate conditions to use it include the times when you have all the infor-
mation to solve the problem, you are short on time and your employees are well
motivated.
Some people tend to think of this style as a vehicle for yelling, using demeaning
language and leading by threats and abusing their power. This is not the authoritar-
ian style, rather it is an abusive, unprofessional style called “bossing people around.”
It has no place in a leader’s repertoire.
The authoritarian style should normally only be used on rare occasions. If you
have the time and want to gain more commitment and motivation from your em-
ployees, then you should use the participative style.
Participative (democratic)

16
 MOTIVATION AND
LEADERSHIP

Fig 1.10 Participative Leadership

This style involves the leader including one or more employees in the decision
making process (determining what to do and how to do it). However, the leader
maintains the final decision making authority. Using this style is not a sign of weak-
ness; rather it is a sign of strength that your employees will respect.
This is normally used when you have part of the information and your employees
have other parts. Note that a leader is not expected to know everything - this is
why you employ knowledgeable and skillful employees. Using this style is of
mutual benefit - it allows them to become part of the team and allows you to make
better decisions. 25
Delegative (free reign)

Fig 1.11 Delegative leadership

In this style, the leader allows the employees to make the decisions. However, the
leader is still responsible for the decisions that are made. This is used when em-
ployees are able to analyse the situation and determine what needs to be done
and how to do it. A single person cannot do everything, so the leader must set

17
 MORE ON priorities and delegate certain tasks.
MANAGEMENT This is not a style to use so that the leader can blame others when things go wrong,
rather this is a style to be used when he fully trust and confidence in the people
below him. The leader should not be afraid to use it, however, use it wisely.
Check Your Progress 2
1. ____________ style is used when leaders tell their employees what they
want done and how they want it accomplished, without getting the ad-
vice of their followers.
a. Autocratic b. Participative
c. Delegated d. Free rein
2. ____________ style involves the leader including one or more employ-
ees in the decision making process (determining what to do and how to
do it). However, the leader maintains the final decision making authority.
a. Autocratic b. Participative
c. Free rein d. Delegated
3. ___________ theory believes that the volume of leadership capacity is
based on inheritance.
a. Trait b. Contingency
c. Great man d. Situational
1.4 Let Us Sum Up
In this unit we have learnt that motivation is a general inspirational process
which gets the members of team to pull their weight effectively, to give their
loyalty to the group, to carry out properly the tasks that they accepted and
generally to play an effective part in the job that the group has undertaken.
It is studied that according to Abraham Maslow, classification of human needs
in a logical convenient way is an important implication for managers.
As per Clayton Alderfer, the theory states that people attempt to meet a hier-
archy of existence, relatedness and growth to seek one level of needs that
would regress to lower level.
The Frederick Herzberg's motivation theory attempts to explain factors that
motivated an individual to go through by identifying and satisfying individual
needs, desires and aims to pursue.
The X and Y theory by Douglas McGregor, developed an approach which
manages and motivates on various assumptions that are related to human
behaviour.
There exist two types of motivations: Positive and Negative Motivation, where
positive motivation inspires the people to put in their best efforts to increase
efficiency while in negative motivation, the idea is to control negative efforts of
work and creates sense of fear for worker.
It is studied that leadership relates to process where a person influences others to
accomplish an objective and directs the organisation in a way that makes it more
cohesive and coherent.
18
1.5 Answer to Check Your Progress – Modified MOTIVATION AND
LEADERSHIP
Check Your Progress 1
1 – a, 2 – b, 3 - c
Check Your Progress 2
1 – b, 2 – b, 3 – c
1.6 Glossary
1. Motivation - It is an inspiration given to the team members in a company
by praising or giving incentives.
2. Hierarchy - It is a tree like structure which shows various levels in an
organisation.
3. Financial motivation - It is related to motivating an employee by pay-
ing him money.
4. Non-financial motivation - It is related to motivating an employee by
way of non-financial means.
1.7 Assignment
What are the meaning, definition and nature of Motivation? Explain impor-
tance of motivation.
1.8 Activities
Define Leadership. What are the four factors of leadership? Explain prin-
ciples of leadership.
1.9 Case Study
‘Things That Motivate Me’ Task
Circle the numbers of the six items from the following list that you believeare
most important in motivating you to do your best work. Then rank the six
selected items, with the most important item 1, the second most important
item 2 and so on.
1. _________Having steady employment
2. _________Being respected as a person
3. __________Having adequate rest periods or coffee breaks
4. __________Receiving good pay
5. __________Working in good physical conditions
6. __________Having a chance to turn out quality work
7. __________Getting along well with others on the job
8. __________Having a job close to home
9. ___________ having a chance for promotion
10. __________Having an opportunity to do interesting work
11. __________Receiving pensions and other security
12. __________Not having to work too hard
13. __________Knowing what is going on in the organisation
19
 MORE ON 14.___________Feeling my job is important.
MANAGEMENT 15.___________Having an employee council
16.___________Having a written job description
17.___________Being told by my boss when I do a good job
18.___________Getting a performance rating
19. ___________Attending staff meetings
20.____________Agreeing with the organisation.s objectives
21. _________Having an opportunity for self-development and improvement
22.____________Having fair vacation arrangements
23. ____________Knowing I will be disciplined if I do a bad job.
1.10 Further Readings
1. Principles of Management, B. S. Moshal, Galgotia Publications
2. Management Text and Cases, VSP Rao and V. Hari Krishana, Published by
Anurag Jain for Excel Books
3. Principles of Management, Second Edition, P. C. Tripathi and P. N. Readdy,
Tata McGraw Hill Publishing Company
4. Essentials of Management, Harold Koontz and Heinz Weihrich, Tata McGraw
Hill
5. Management Theory and Practice (Text and Cases), P. Subba Rao, 2nd Re-
vised Edition, Himalaya Publishing House

20
 Unit COMMUNICATION
2

: UNIT STRUCTURE :
2.0 Learning Objectives
2.1 Introduction
2.2 Concept of Communication
2.2.1 Definition of Communication
2.2.2 Meaning of Communication
2.2.3 Nature of Communication
2.2.4 Functions of Communication
2.2.5 Communication Process
2.2.6 Types of Communication
2.2.7 Communication Channels
2.3 Let Us Sum Up
2.4 Answer to Check Your Progress
2.5 Glossary
2.6 Assignment
2.7 Activities
2.8 Case Study
2.9 Further Readings
2.0 Learning Objectives
After learning this unit, you will be able to understand:
• Communication meaning and definition
• Nature and Functions of Communication
• Communication Process
• Types and Channels of Communication
• Barriers to Communication
2.1 Introduction
In the previous unit 1, you have learnt various motivation theories and lead-
ership styles, which are the part of the function- called directing. Same direc-
tion has one more ingredient is communication.
In this unit 2, you will understand that concept of communication. Related
with communication, you will learn the topics like communication process,
its nature and functions. You will also get an idea of types and channels of
communication. All these areas are very important, because in professional
life, good communication matters a lot.

21
 MORE ON 2.2 Communication
MANAGEMENT
Communication is a two way process in which there is an exchange and progres-
sion of thoughts, ideas, knowledge and information towards a mutually accepted
goal or direction. Here are some definitions by experts:
2.2.1 Definition of Communication
The American Society of Training Directors states, „The interchange of thought or
information to bring about mutual understanding and confidence or global human
relation..
Brown: 'Communication is the transmission and interchange of facts, ideas, feel-
ings or course of action..
Alien Louis A.: “Communication is the sum of all the things one person does when
he wants to create understanding in the mind of another. It involves a systematic
and continuous process of telling, listening and understanding.”
Ordway Tead: „Communicating is a composite of information given and received,
of a learning experience in which certain attitudes, knowledge and skills change,
carving with them alterations of behaviour, of listening effort by all involved, of a
sympathetic fresh examination of issues by the communicator himself, of a sensi-
tive interacting points of view, leading to a higher level of shared understanding
and common intention..
2.2.2 Meaning of Communication
Communication is a process whereby information is enclosed in a package and is
channelled and imparted by a sender to a receiver via some medium. The receiver
then decodes the message and gives the sender a feedback. All forms of commu-
nication require a sender, a message and an intended recipient; however, the re-
ceiver need not be present or aware of the sender's intent to communicate at the
time of communication in order for the act of communication to occur.
Communication requires that all parties have an area of communicative common-
ality. There are auditory means, such as speech, song and tone of voice and there
are nonverbal means, such as body language, sign language, paralanguage, touch,
eye contact, through media, i.e., pictures, graphics and sound and writing.
2.2.3 Nature of Communication
The important characteristics of communication can be explained as follows:
 It is a 2-way process.
 Communication process happens between or among two or more parties.
(sender and receiver)
 Communication involves exchange of ideas, feelings, information, thoughts
and knowledge.
 Communication involves mutuality of understanding between the sender and
receiver.
 There are two types of communication, i.e. verbal and non-verbal communi-
cation.
Further, below mentioned are the points, which must be considered for effective
22
communication: COMMUNICATION
1. Completeness: The communication must be complete. It should convey all
facts required by the audience. The senders of the message must take into
consideration the receiver.s mind set and convey the message accordingly.
2. Conciseness: Conciseness means wordiness, i.e. communicating what you
want to convey in least possible words without forgoing the other C.s of
communication. Conciseness is a necessity for effective communication.
3. Consideration: Consideration implies ¡§stepping into the shoes of others¡¨.
Effective communication must take the audience into consideration, i.e. the
audience.s viewpoints, background, mind-set, education level, etc. It is an
attempt to envisage your audience, their requirements, emotions as well as
problems. Ensure that the self-respect of the audience is maintained and their
emotions are not at harm. Modify your words in message to suit the audience.s
needs while making your message complete.
4. Clarity: Clarity implies emphasizing on a specific message or goal at a time,
rather than trying to achieve too much at once.
5. Courtesy: Courtesy in message implies the message should show the sender.s
expression as well as should respect the receiver. The sender of the message
should be sincerely polite, judicious, reflective and enthusiastic.
6. Correctness: Correctness in communication implies that there are no gram-
matical errors in communication.
2.2.4 Functions of Communication
World cannot live without communication. Same is applicable to any type of
organization. It is omnipresent activity among members of the organization.
In common any organization have the following functions of communica-
tion:
1. Knowledge and information is transferred from one person to another
person;
2. Direction and motivation among people comes through motivation;
3. Employees attitude and behaviour are moulded, influenced and changed
positively or negatively by communication;
4. It also maintain social relations and gives entertainment to the people in
the organization.
Check Your Progress 1
1. Communication is the transmission and interchange of facts, ideas, fig-
ures or course of action.
a. True
b. False
2. Correctness of communication implies that there may be grammatical errors
in communication.
a. True
b. False
23
 MORE ON 3. Direction and motivation among people comes through motivation – is one
MANAGEMENT function of communication.
a. Ture
b. False
2.2.5 Communication Process
The main components of communication process are as follows:

Fig 1.12 Communication process

1. Context: Communication is affected by the context in which it takes place.
This context may be physical, social, chronological or cultural. Every com-
munication proceeds with context. The sender chooses the message to com-
municate within a context.
2. Sender / Encoder: Sender / Encoder is a person who sends the message.
A sender makes use of symbols (words or graphic or visual aids) to convey
the message and produce the required response.
3. Message: Message is a key idea that the sender wants to communicate. It
is a sign that elicits the response of recipient. Communication process be-
gins with deciding about the message to be conveyed.
4. Medium: Medium is a means used to exchange / transmit the message.
The sender must choose an appropriate medium for transmitting the
message else the message might not be conveyed to the desired recipi-
ents.
5. Recipient / Decoder: Recipient / Decoder are a person for whom the
message is intended / aimed / targeted.
6. Feedback: Feedback is the main component of communication pro-
cess as it permits the sender to analyse the efficacy of the message.
2.2.6 Types of Communication
We can divide communication under three categories:
1. Oral/ verbal Communication
• Words

24
 • Articulation COMMUNICATION
2. Written Communication
• Reports
• Illustrations
• Memos
• Telegrams
• Facsimiles (FAX)
• E-mails
• Tenders
• Letters
• Others
3. Non- verbal
• Body language
• Signs and symbols
• Territory /Zone
• Object language.

Fig 1.13 Types of Communication

1. Verbal/Oral Communication: Anything spoken by mouth is oral com-
munication. Whatever is uttered from the mouth contains words and
manner of pronouncing words. The manner of pronouncing words is
called as articulation. Words both connote and denote meaning.
2. Written Communication: Written communication takes on a number of
forms. It is the most formal of all types of communication. Its manner and
style may change according to typical manner of company. It is also bound
by the dictates of the organisation.

25
 MORE ON 3. Non Verbal Communication: This is an important part of communication.
MANAGEMENT The medium of communication other than oral and written communication is
non-verbal communications. Non-verbal communication includes the way
an individual positions himself holds his hands, tilts his head, etc. A receiver
observes non-verbal communication 55% of the time. Effective and simul-
taneous use of oral and non-verbal communication is the most effective
method of communication. Non-verbal communication may include the ges-
tures, postures, signs, etc.
2.2.7 Communication Channels
Communication channel is nothing but different stations through which com-
munication reaches to an individual or group in the organization for nec-
essary work. In present era, there is a need to have very fast information than
before. If it is too fast or if it is useless information, can become very expen-
sive for the organization. So, to perform any managerial functions of the
organization needs information with quality, in proper way and at right time.
Let us know how these information or knowledge is transmitted. Any
type of information or knowledge can be transmitted through various chan-
nels. It is shown below:

Figure 1.14 Communication Channels

Now these channels, let us understand one by one:
Vertical Communication: The communication which takes place from top
to bottom or bottom to top can be termed as vertical communication. There
are two types of communication; 1. Downward Communication and 2. Hori-
zontal Communication
1) Downward Communication: It flows from top to bottom level commu-
nication in organizational hierarchy. This type of flow is more found in
authoritarian atmosphere. This downward flow is from superior to subordi-
nate.
Main advantages:

26
• It is helpful to send information about policy, objectives etc.; COMMUNICATION
• It can also be helpful for introducing and implementing programmes;
• It facilitates to improve quality of response.
2) Upward Communication: It flows from bottom to top level communication
in organizational hierarchy. This type of communication is more found in
open communication atmosphere. It is necessary to offer suggestions, make
complaints, counselling, opinion survey, exist interview, to discuss in meet-
ings and participate in decision-,making.
Main advantages:
• Provides scope for two-way communication;
• Gives a chance to collect immediate feedback;
• To provide scope for employee satisfaction.
• 2. Horizontal Communication: In the organizational hierarchy, when two
employees at the same level communicate, it is called horizontal communi-
cation. E.g. – When two departmental head communicate to each other, it
becomes horizontal communication. This communication is necessary be-
cause all units and departments in any organization are interdependent.
• This communication helps in managing task coordination among peers, pro-
vides emotional and social support, strengthen the relationship among peers
and makes the flow of information fast.
• 3. Diagonal Communication: When two or more employees of different
departments communicate to each other, it is called diagonal communica-
tion. It allows the communicator to communicate the message to the exact
person for whom it is made. E.g. – When a manager – quality control asks
a sales manager that whether the high quality products have reached to the
market or not – is an appropriate example of diagonal communication.
• This communication is very helpful, when fast flow of communication is
needed, otherwise it violates the rule of unity of command.
2.2.8 Barriers to Communication
Following are the main communication barriers:
1. Perceptual Differences: This normally explains how an individual will
understand the world around him. Normally, everyone wants to have a
message which could be of use to him. It is found that the message which is
not relevant is not accepted.
2. Language Differences: The linguistic differences will also focus on break-
down of communication aspect. Same word may mean different to differ-
ent individuals. As an example, consider a word “value.”

27
 MORE ON • What is the value of this laptop?
MANAGEMENT
• I value our relation.
• What is the value of learning technical skills?
“Value” has a different meaning in different sentences.
3. Information Overload: It is seen that there is a lot of information that is
surrounded across the managers which can be controlled, misinterpreted or
forgotten.
4. Inattention: Many times we simply do both actions hearing and listening.
To have an effective communication, continuous or repetition of messages
should be avoided.
5. Time Pressures: Often in organisation, the targets have to be achieved
within a specified time period, the failure of which has adverse conse-
quences. In a haste to meet deadlines, the formal channels of communi-
cation are shortened or messages are partially given, i.e., not completely
transferred.
6. Distraction/Noise: The idea of communication here is that it gets af-
fected through noise. The cause of physical distractions such as bad
lightning, uncomfortable sleeping, unhygienic atmosphere also affects
communication.
7. Emotions: Basically an emotion is for particular state of time that is
also a concern of affecting communication. On conclusion of commu-
nicator, if the receiver feels that it is angry, he/she will not interprets the
information sent that could be bad as it is reverse in situation when
communicator is happy.
8. Complexity in Organisational Structure: If there are many levels in
an organisation, there are more chances of communication getting de-
stroyed.
Check Your Progress 2
1. Communication is affected by the context in which it takes place.
a. True
b. False
2. Signs, symbols and object language are the examples of non-verbal com-
munication.
a. True
b. False
3. In the organizational hierarchy, when two employees at the same level com-

28
 municate, it is called horizontal communication. COMMUNICATION
a. True
b. False
2.3 Let Us Sum Up
Communication is the interchange of thought or information to bring about mutual
understanding and confidence or global human relation. –American Society Training
Director.
This communication has several steps in its process: context, sender, message,
medium, recipient and feedback. There are various types of communication: Oral,
Written and Non-Verbal.
Unit has also covered the points for effective communication like – completeness,
conciseness, consideration, clarity, courtesy and correctness. This unit has talked
about functions, barriers and channels of communication.
2.4 Answer to Check Your Progress
Check Your Progress 1
1 – a, 2 – b, 3 - a
Check Your Progress 2
1 – a, 2 – a, 3 – a
2.5 Glossary
Communication : It is the transfer of information from the sender to receiver or
vice versa.
2.6 Assignment
What do you understand by the term communication? Explain various elements
of communication process.
2.7 Activities
Sit at one place and observe the body language as a type of communication either
in office or in a bank or where a meeting is going on. Make your notes of learning
on non-verbal communication.
2.8 Case Study
List out communication barriers and then write one or two examples connected
with business world to understand the communication barriers in practice.
2.9 Further Reading
1. Principles of Management, B. S. Moshal, Galgotia Publications

29
 MORE ON 2. Management Text and Cases, VSP Rao and V. Hari Krishana, Published
MANAGEMENT by Anurag Jain for Excel Books
3. Principles of Management, Second Edition, P. C. Tripathi and P. N. Readdy,
Tata McGraw Hill Publishing Company
4. Essentials of Management, Harold Koontz and Heinz Weihrich, Tata
McGraw Hill
5. Management Theory and Practice (Text and Cases), P. Subba Rao, 2nd
Revised Edition, Himalaya Publishing House

30
 Unit
SOCIAL RESPONSIBILITIES OF BUSINESS
3

: UNIT STRUCTURE :
3.0 Learning Objectives
3.1 Introduction
3.2 Social Responsibility
3.2.1 Meaning of Social Responsibility
3.2.2 Definition of Social Responsibility
3.2.3 Features of Social Responsibility
3.2.4 Scope of Social Responsibility
3.3 Social Responsibility of Managers
3.3.1 Benefits of Manager’s Social Responsibility
3.3.2 Limitations to Manager’s Social Responsibility
3.4 The Interested Groups
3.4.1 Share Holders
3.4.2 Workers
3.4.3 Customers
3.4.4 Creditors, Suppliers and Others
3.4.5 Government
3.4.6 Society
3.5 Indian Businesses and Social Responsibility
3.6 Let Us Sum Up
3.7 Answers for Check Your Progress
3.8 Glossary
3.9 Assignment
3.10 Activities
3.11 Case Study
3.12 Further Readings
3.0 Learning Objectives
After learning this unit, you will be able to understand:
• The Meaning and Definition of Social Responsibility.
• Features and Scope of Social Responsibility.
• Benefits and limitation to Social Responsibility of Managers.
• The Interest Groups, viz., Share Holders, Workers, Customers, Creditors,
suppliers and Others, Government and Society.
• Indian Businesses and Social Responsibility.
31
 MORE ON 3.1 Introduction
MANAGEMENT
In the previous unit, you studied controlling. Controlling is the process of compar-
ing actual performance with standards and taking necessary corrective action.
You also studied co-ordination, which represents core of management and its
purpose is to achieve the common objective. Conflict is a process in which an
effort is purposefully made by one person or unit to block another that results in
frustrating the attainment of other?s goals or the furthering of his or her interests.
Further, you are going to study about social responsibilities of a business towards
various parties. These parties are consumers, community, workers, employees,
shareholders, other businesses and government and so on. The business has its
obligations towards all of them.
3.2 Social Responsibility
Social responsibility is a doctrine that claims that an entity, whether it is state,
government, corporation, organisation or individual, has a responsibility to
society. Many people, particularly libertarians, assert that there is no “social
responsibility” to do anything. They argue that social responsibility only ex-
ists to the extent that an individual or business should not initiate physical
force, threat of force or fraud against another.

Fig 3.1 Social Responsibility of Business

In his famous article, “The Social Responsibility of Business is to Increase
Profits,” Nobel Economist, Milton Friedman asserts that business has no so-
cial responsibility other than to increase profits and refrain from engaging in
deception and fraud. He maintains that when business seeks to maximize
profits, it almost always incidentally does what is good for society.
Friedman does not argue that business should not help the community but
that it may indeed be in the long-run self-interest of a business to “devote
resources to providing amenities to the community...” in order to “generate
goodwill” and thereby increase profits.
3.2.1 Meaning of Social Responsibility
32
Social responsibility is an imprecise idea and hence is defined in various ways. SOCIAL
Adolph Berlehasdefined social responsibility as the manager?s responsive- RESPONSIBILITIES
ness to public consensus. This means that social responsibilities are bound to OF BUSINESS
differ and would not remain the same for all countries at the same time.
These would be determined in each case by the customs, religions, tradi-
tions, level of industrialization and a host of other norms and standards about
which there is a public consensus at any given time in a given society.
According to Keith Davis, the term social responsibility refers to two types
of business obligations:
• The socio-economic obligation
• The socio-human obligation
The socio-human obligation of every business is to nurture and develop hu-
man values (such as morale, cooperation, motivation and self-realization in
work. Every business firm is part of a total economic and political system
and not an island without foreign relations. It is at the centre of a network of
relationships to persons, groups and things. The businessman should, there-
fore, consider the impact of his actions on all to which he is related. Business
should be carried out in such a manner that it proves to be a boon, packed
with benefits for his employees, investors, consumers, the government and
the general public. His task is to mediate among these interests, to ensure
that each gets a square deal and that nobody?s interests are unduly sacrificed
to those of others.
3.2.2 Definition of Social Responsibility (SR)
From conceptual point of view, SR has been defined by Davis as follows:
“Social responsibilities refer to the businessman?s decisions and actions taken
to reasons at least partially beyond the firm?s direct economic or technical
interest.”
This is a broad definition of SR and prescribes actions not related to the
interests of the organisation. Andrews have suggested still broader view when
he says that:
“By social responsibility, we mean the intelligent and objective concern for
the welfare of society that restrains individual and corporate behaviour from
ulti-mately destructive activities, no matter how immediately profitable and
leads in the direction of positive contributions to human betterment, vari-
ously as the latter may be defined.”
Both of these definitions prescribe some actions by managers for the better-
ment of the society but do not prescribe the actions precisely. Therefore,
most business managers prefer words other than SR because these words to
them can note a fixed obligation. They prefer such synonyms as social con-
cern, social programmes, social challenge, social commitment or concern
with public problems.
However, the term SR has been widely recognised and its operational defini-
tion may be as follows:
Social responsibility contends that management is responsible to the organisation
33
 MORE ON itself and to all the interest groups with which it interacts. Otherinterest groups
MANAGEMENT such as workers, customers, creditors, suppliers, government and society in gen-
eral are placed essentially equal with shareholders.
3.2.3 Features of Social Responsibility
Based on this definition, following features of SR can be identified:
1. The SR contains three types of behaviour- positive, neutral and negative.
The negative and neutral aspects of behaviour areas important as positive.
2. Every person in the society has a social obligation to fulfil. However, the
emphasis is on social responsibility of management as a group because it is
in a position to use the resources of the society in the way it likes. There-
fore, it must be conscious about its SR.
3. SR involves fulfilling obligations to various parties concerned with the func-
tioning of an organisation. Some of these parties are concerned directly.
Others may be concerned indirectly.
4. The standards fixed for fulfilling obligations to various parties are to be de-
cided according to social norms and expectations. Therefore, these obliga-
tions may vary from society to society.
3.2.4 Scope of Social Responsibility
Social responsibility and business ethics together tell what a business organisation
should do. The issue of responsibilities of business towards society merits consid-
eration in all phases of business growth.
The scope of social responsibility is wide and can be considered in terms of differ-
ent factors. Some people consider social responsibility in terms of employees,
customers and shareholders.

Fig 3.2 Scope of Social responsibility

Thus, the business organisations, depending on their nature and size, can extend
social responsiveness to the problems of the local community and the nation at

34
large. SOCIAL
Business organisations can classify social responsibility in terms of relatedness to RESPONSIBILITIES
their own activities or otherwise. OF BUSINESS
Check your progress 1
1. Adolph Berlehas defined social responsibility as the manager?s respon-
siveness to public consensus.
a. True
b. False
2. Social responsibility contends that management is responsible to the
organisation itself and to all the interest groups with which it interacts.
a. True
b. False
3.3 Social Responsibility of Managers
Social responsibility (SR) of managers particularly in business organisations
has, of late, been one of the most talked about and widely supported sub-
jects. Traditionally business? basic objective has been defined in terms of
profit maximisation. The first break came in the 1930s when the view was
advanced and accepted that managers of large companies must make deci-
sions, which maintain an equitable balance among the shareholders, employ-
ees, customers, suppliers and public. Managers were considered trustees for
these interests. Such a view was later developed as the social responsibility.

Fig 3.3 Social responsibility of Managers

The phrase social responsibility is widely used in the literature of sociology,
anthropology, economics, politics and business management. However,
conceptu-ally as well as in practice also, this has been a volatile, vague and
confused area. Conceptually, people are not very clear what the exact meaning of
SR is and what they are expected to do under this. From practical point of view,

35
 MORE ON the response from business has gone on providing a spectrum ranging from mere
MANAGEMENT verbal sympathy to multi-lakh rupees concrete programmes in our country.
3.3.1 Benefits of Manager’s Social Responsibility
Social responsibility is defined as the obligation and commitment of managers to
take steps for protecting and improving society?s welfare along with protecting
their own interest. The managers must have social responsibility because of the
following reasons:
Organisational Resources: An organisation has a diverse pool of resources in
form of men, money, competencies and functional expertise. When an organisation
has these resources, it is in better position to work for societal goals.
• Precautionary measure: If an organisation lingers on dealing with the so-
cial issues now, it would land up putting out social fires so that no time is left
for realizing its goal of producing goods and services. Practically, it is more
cost-efficient to deal with the social issues before they turn into disaster
consuming a large part of managements time.
• Moral Obligation: The acceptance of a managers? social responsibility
has been identified as a morally appropriate position. It is the moral respon-
sibility of the organisation to assist solving or removing the social problems.
• Efficient and Effective Employees: Recruiting employees becomes easier
for socially responsible organisation. Employees? are attracted to contrib-
ute for more socially responsible organisations. For instance, tobacco com-
panies have difficulty recruiting employees with best skills and competen-
cies.
• Better Organisational Environment: The organisation that is most re-
sponsive to the betterment of social quality of life will consequently has a
better society in which it can perform its business operations. Employee
hiring would be easier and employee would be of a superior quality. There
would be low rate of employee turnover and absenteeism. Because of all
the social improvements, there will be low crime rate; consequently, less
money would be spent in form of taxes and for protection of land. Thus, an
improved society will create a better business environment.
3.3.2 Limitations to Manager’s Social Responsibility
A manager?s social responsibility is not free from some criticisms, such as:
• High Social Overhead Cost: The cost on social responsibility is a social
cost, which will not instantly benefit the organisation. The cost of social
responsibility can lower the organizational efficiency and effect to compete
in the corporate world.
• Cost to Society: The costs of social responsibility are transferred on to the
society and the society must bear with them.
• Lack of Social Skills and Competencies: The managers are best at man-
aging business matters but they may not have required skills for solving so-
cial issues.
• Profit Maximization: The main objective of many organisations is profit

36
 maximization. In such a scenario, the manager?s decisions are controlled SOCIAL
by their desire to maximize profits for the organisations shareholders while RESPONSIBILITIES
reasonably following the law and social custom. Social responsibility can OF BUSINESS
promote the development of groups and expand supporting industries.
Check your progress 2
1. __________employees becomes easier for socially responsible
organisation.
a. Recruiting
b. Resources
2. An organisation has a diverse pool of __________in form of men,
money, competencies and functional expertise.
a. Resources
b. Recruiting
3.4 The Interested Groups
SR requires the identification of various interest groups, which may affect
the functioning of a business organisation and may be affected by its func-
tioning. Normally various groups associated with a business organisation are
shareholders, workers, customers, creditors, suppliers, government and so-
ciety in general. Themanagement owes responsibility towards all these groups.
Therefore, the management should show a standardised norm of behaviour.
However, the standard norm of behaviour may not be universal. We are more
concerned with Indian situation while prescribing the norms of behaviour in
respect of fulfilling obligations to various interest groups. Various norms
have been suggested through seminars and conferences in our country and
our attempt is to present an integrated view.
3.4.1 Share Holders
The first responsibility of management is to protect the interest of sharehold-
ers. The interests of majority of shareholders and large minority of share-
holders are generally well protected through either direct participation in the
management actions or they have real power to intervene, if necessary. How-
ever, large numbers of minority shareholders are not in such a position. There-
fore, management is expected to use the resources provided by them effec-
tively and to protect their interests. They should be informed about the func-
tioning of the organisation adequately and timely. Though the provisions of
the Companies Act provide safeguard to the investment made by sharehold-
ers, whether minority or otherwise, management can find loopholes in these.
Therefore, management has a responsibility to provide proper safeguard to the
money invested by shareholders.
3.4.2 Workers
Workers have a direct interest in an organisation because by working there, they
satisfy their needs. The traditional economic concept of organisational functioning
does not give workers their proper share in the distribution of income. The own-
ers and managers have too much power under the economic state of affairs.

37
 MORE ON Thus, it is the management?s responsibility to protect the interest of workers in the
MANAGEMENT organisation. The management can do this in the following ways:
1. The management should treat workers as another wheel of the cart.
2. The management should develop administrative process in such a way that
promotes cooperative endeavour between employers and employees.
3. The management should adopt a progressive labour policy based on rec-
ognition of genuine trade union rights- participation of workers in manage-
ment, creating a sense of belongingness, improving their working and living
conditions.
4. The management should pay fair and reasonable wages and other financial
benefits to workers.
3.4.3 Customers
A customer may broadly be defined as a person who has a favourable impression
of a company and its products and services. Thus, a person may be categorised
as customer even though he may not have committed the act of buying; he may be
only a potential customer. Management owes a primary obligation to give a fair
deal to customers. This can be done in the following ways:
1. Customers should be charged a fair and reasonable price.
2. The supply of goods and services should be of uniform standard and of
reasonable quality.
3. The distribution of goods and services should be widespread so that
customers do not face any problems in procuring them.
4. Management should not indulge in profiteering, hoarding or creating
artificial scarcity.
5. Management should not lure customers by false, misleading and exag-
gerated advertisements.
3.4.4 Creditors, Suppliers and Others
Creditors, suppliers and other groups affect the organisation in various ways.
Therefore, management is responsible to fulfil its obligations to them. This
can be done in the following ways:
1. Management should create healthy and cooperative inter-business re-
lationship between different businesses.
2. Management should provide accurate and relevant information to creditors
and suppliers.
3. Payments of price of materials, interest on borrowings, other charges should
be prompt.
3.4.5 Government
The Government is very closely related with the business system of the country. It
provides various facilities for the development of business. No doubt, the govern-
ment exercises controls over business, but these controls are meant for overall
development of business. The management can discharge its obligation to govern-
ment in the following ways:

38
1. The Management should be law-abiding. SOCIAL
2. The management should pay taxes and other dues fully, timely and hon- RESPONSIBILITIES
estly. OF BUSINESS
3. It should not corrupt public servants and democratic process.
4. It should not buy political favour by any means.
3.4.6 Society
Organisations exist within a social system and get facilities from the system. There-
fore, they owe obligations to the society as a whole. It is the obligation of man-
agement to protect the interest of society because management process is deter-
mining the life in the society. In this context, management should have in the fol-
lowing ways.
1. Management should maintain fair business policies and practices.
2. It should set up socially desirable standards of living and avoid ostentation
and wasteful expenditure.
3. It should play proper role in civic affairs.
4. It should provide and promote general amenities and help in creating better
living conditions in general.
Check your progress 3
1. A _________may broadly be defined as a person who has a favourable
impression of a company and its products and services.
a. Customers.
b. Suppliers.
c. Government
d. Society
2. The first responsibility of management is to protect the interest of
_____________
a. Shareholders.
b. Creditors.
c. Suppliers.
d. Government
3.5 Indian Businesses and Social Responsibility
The idea of social responsibility is very old in our country. The concept of parting
with a portion of one?s surplus wealth for the good of society has prevailed through
ages in India.
The business community occupied a significant place in ancient Indian Society.
Merchants were treated with respect because of their services towards society.
Merchants provided reliefs in times of famine or epidemics, built and maintained
temples, dharamshalas, bathing ghats and installed tube wells and sank wells for
providing drinking water facilities.
They also built hospitals, educational institutions and art museums for the benefit

39
 MORE ON of society. During the freedom struggle period, many businessmen had made po-
MANAGEMENT litical donations for the purpose and had contributed to many of the social and
cultural causes associated with the movement such as revival of Indian art and
culture.
Many of India?s leading businessmen such as GD Birla, Jamnalal Bajaj, Lala Shri
Ram and Ambalal Sarabhai and others came under the influence of Mahatma
Gandhi and his Theory of Trusteeship of Wealth was well accepted. They contrib-
uted liberally for his programmes for removal of untouchables, women?s emanci-
pation, rural reconstruction, building institutions and infrastructural facilities.
Even after independence, the nation looked to the business community and they
responded both by creating more wealth and utilizing part of it for social causes.
They built institutes of scientific and technological research as well as art academ-
ics and institutes for the study of Indian history and culture.
Many of the best Indian Institutions in several fields such as Tata Institute of Fun-
damental Research, The Birla Institute of Technology, J. K. Institute of Sociology
and Human Relations, Shri Modi Eye Hospital and Ophthalmic Research, Dr.
B.P. Godrej Centre, AMM MurugappaChetiar Research Centre, Shri Ram Col-
lage of Commerce and many others.
The social responsibility of business is a contentious subject. It extends far beyond
voluntary and philanthropic social activity and revolves around ethical rather than
legislative behaviour.
Business depends upon the society for its input resources such as manpower ma-
terials and natural resources like water, air and light. Business also needs
society to buy goods and its production and provide money. In short, the
business thrives on society for its very survival, sustenance and encourage-
ment.
In India, a large number of companies like TISCO, DCM, Mafatlal Group,
Hindustan Steel Ltd., Escorts Ltd., Godrej, Kirloskars, Alembic, etc. have
provided a place of importance to social action programmes. Social respon-
sibility is seen as an important check to business and a large percentage of
managers allot a high place for social responsibilities with converse of profit.
However, the process of social pledge in India is somewhat different. It takes the
form of various following initiatives:
• Developing social trusts
• Following anti-pollution measures
• Adopting villages for achieving all-round progress and development
• Building family planning clinics for the promotion of workers and residents
• Allocating a fixed percentage of profit to train unemployed engineer, tech-
nicians
• Community development activities like:
o Provision of drinking water facilities
o Conducting social audit on a voluntary basis

40
 o Providing medical, recreational facilities SOCIAL
o Conducting tournaments to promote sports talent RESPONSIBILITIES
o Undertaking consumer education campaigns OF BUSINESS

o Avoiding unethical, deceptive advertising

1. Bajaj Auto: The Company has been running a Samaj Seva Kendra at
Akurdi near Pune since 1975 with 900 families as members. The Kendra
aims at improving the quality of life of its members (education, health
care, vocational training etc.). The company also runs the Janki Devi
Bajaj Gram VikasSanstha near Pune. The Sanstha?s aim is to promote
rural development (water management, procuring vital agricultural
inputs, feed and vaccination for livestock, sanitation, etc.).
2. Larsen and Toubro: The Company spends about fifty million annu-
ally on social projects. In healthcare, it sponsors efforts directed to-
wards birth control, mother and child care organises camps to check
for tuberculosis, leprosy and special surgery camps along the lines of
the Life Line Express - the world?s first ever hospital on rails. L&T
also helps the local populace to source seeds, improve soil quality and
encourages dairy and poultry development in and around the areas of
its work. Finally, as part of its environment enhancement schemes, it
assists in afforestation and promoting biogas plants and smokeless
chulhas.
3. Shriram Investments: The Shriram Group formed a trust in 1992 to
carry out its social projects. It runs 5 schools for over 2,000 children.
The group runs a home for orphans. The group offers work sheds
along with capital and management support to women in Thanjavur
who make incense sticks and candles. In 1995, the group had launched
the Shriram Rural Development Project in Kanchipuram district of
Tamilnadu with a view to reduce in debtedness and offer credit to
rural population at concessional rites.
4. Tata Steel: Tata Steel has been a pioneer in employee welfare in the
country and has acted as a beacon for labour lawmakers. Tata Steel
adopted several welfare measures for employees, decades before they
were incorporated in the country?s laws. These include an eight-hour work-
ing day, leave with pay, maternity benefit and leave, workers? provident
fund and paying gratuity on retirement.
Beyond employee welfare, Tata Steel has been involved in social projects
that include environmental conservation activities, education, vocational
training and healthcare for the underprivileged, revival of traditional arts
and crafts and sports development.
The company has been running a community development and social wel-
fare department since 1958 that takes care of the educational and voca-
tional training needs of the underprivileged in and around Jamshedpur.
The department acts as catalytic enabler rather than doer, so that the hutment
dwellers become more responsible citizens and participate in improving

41
 MORE ON their own quality of life.
MANAGEMENT The company established a tribal cultural centre to persevere tribal cus-
toms, arts and habits. It organises an annual fair at Jamshedpur, which
services as a marketing platform for traditional, handicraft-. It has also
set up link roads, irrigation facilities, and sports activities for the ben-
efit of society at large. It has begun the planting of new trees over a
period of 1000 days since June 1997 (also in other locations now).
5. Otis Elevator Co India: Otis focuses on socially responsive activities
by improving the lot of the mentally retarded or “special people.” World-
wide, Otis has been involved in promoting sports for these special
people. As part of this initiative, Otis India sponsored 350 special;
athletes from Maharashtra for the World Special Olympics in 1995.
Since then, Otis employees of all ranks have been involved in fund
raising for this cause, on a voluntary basis. Through these fund-raising
efforts, company employees have been able to help equip special schools
with items like fans, music systems, sewing machines, wheelchairs,
hearing aids, learning aids, books, etc. Regular medical camps are also
undertaken at an orphan home for the mentally retarded. Not only
that, many company employees are motivated enough to take out time
to repair and paint furniture for such schools and participate in various
celebrations with the special children. The work put in by Otis India?s
Team Otis in this regard, helped it bag the Special Partnership Award
for 1596 and 1997 from the Otis organisation that is judged by Special
Olympics International, Washington, USA.
Check your progress 4
1. Social responsibility is seen as an important check to business and a large
percentage of ___________allot a high place for social responsibilities
with converse of ___________
a. Managers, Profit
b. Supervisors, Loss
3.6 Let Us Sum Up
In this unit we have studied that according to Keith Davis, the meaning of social
responsibility refers to two types of business obligations that can be socio-eco-
nomic and socio-human obligations
It is seen that social responsibility of managers in terms of business organisations is
one of most talked about and widely supported subjects where managers of large
companies decides about maintaining equitable balance among shareholders, em-
ployees, customers, suppliers and public.
The concept of social responsibility is parting with portion of one?s surplus wealth

42
for good of society that prevails through ages. It is a business community which SOCIAL
occupies significant place in ancient society. RESPONSIBILITIES
3.7 Answers for Check Your Progress OF BUSINESS
Check your progress 1
Answers: (1-a), (2-a)
Check your progress 2
Answers: (1-a), (2-a)
Check your progress 3
Answers: (1-a), (2-a)
Check your progress 4
Answers: (1-a)
3.8 Glossary
1. Motivation - Any influence that brings out, directs or maintains goal di-
rected behavior.
2. Mission - The organisation?s purpose or fundamental reason for exist-
ence of work in order to improve worker efficiency.
3. Social Responsibility - It refers to the businessman decisions and actions
taken to reason at least particularly beyond firms direct economic or tech-
nical interest.
3.9 Assignment
Define social responsibility. Give its meaning and features. What is the scope of
social responsibility?
3.10 Activities
What are the social responsibilities of a manager? What are the benefits and
limitations to manager?s social responsibility?
3.11 Case Study
1. Consider yourself as entrepreneur and say how you will fulfil the social
responsibility of your business.
2. Conduct a survey at your nearby industry and prepare a report on social
responsibility of concern.
3.12 Further Readings
1. Principles of Management, B.S. Moshal, Galgotia Publications.
2. Management Text and Cases, VSP Raoand V. Hari Krishna, published by
Anurag Jain for Excel books.
3. Principles of Management, Edition 2, P. C. Tripathi and P. N. Reddy, Tata
McGraw Hill Publishing Company.
4. Essentials of Management, Harold Koontz and Heinz Weihrich, Tata
McGraw Hill.

43
 MORE ON : UNIT STRUCTURE :
MANAGEMENT
4.0 Learning Objectives
4.1 Introduction
4.2 Strategic Management
4.2.1 Definition and Meaning of Strategic Management
4.2.2 Elements of Strategic Management
4.2.3 Scope and Dimension of Strategic Management
4.2.4 Strategic Management Process
4.2.5 Importance of Strategic Management
4.3 Strategic Decision
4.3.1 Characteristics/Features of Strategic Decisions
4.3.2 Strategic Decisions, Administrative Decisions and Operational
Decisions
4.4 SWOT
4.4.1 SWOT Analysis
4.4.2 Advantages of SWOT Analysis
4.4.3 Limitations of SWOT Analysis
4.5 BCG Matrix
4.5.1 BCG Matrix Analysis

44
 Unit
STRATEGIC MANAGEMENT
4

4.5.2 Limitations of BCG Matrix

4.6 Let Us Sum Up
4.7 Answers for Check Your Progress
4.8 Glossary
4.9 Assignment
4.10 Activities
4.11 Case Study
4.12 Further Readings
4.0 Learning Objectives
After learning this unit, you will be able to understand:
• The Scope, Dimensions and Importance of Strategic Management.
• Strategic Management Process.
• Meaning and features of Strategic Decision.
• Difference between Strategic, Administrative and Operational Decisions.
• SWOT Analysis, Advantages and limitations of SWOT Analysis.
• BCG Matrix analysis and its limitations.
4.1 Introduction
In the previous unit, you read about social responsibility of business towards
various interest groups. Management has a responsibility towards these groups
and has to fulfill this responsibility at its best for proper functioning and growth in
the future.
Now, in this last unit, you will read about strategic management. Strategic Man-
agement is systematic analysis of the factors associated with customers and com-
petitors (the external environment) and the organization itself (the internal envi-
ronment) to provide the basis for rethinking the current management practices. Its
objective is to achieve better alignment of corporate policies and strategic priori-
ties. Then you will also study SWOT and BCG Matrix Analysis.
4.2 Strategic Management
Strategic Management is all about identification and description of the strategies
that managers can carry to achieve better performance and a competitive advan-
tage for their organisation. An organisation is said to have competitive advantage
if its profitability is higher than the average profitability for all companies in its
industry.
The manager must have a thorough knowledge and analysis of the general and
competitive organisational environment to take right decisions. They should con-
duct a SWOT Analysis (Strengths, Weaknesses, Opportunities and Threats),
i.e., they should make best possible utilization of strengths, minimize
theorganisational weaknesses, make use of arising opportunities from the busi-
45
 MORE ON ness environment and should not ignore the threats.
MANAGEMENT Strategic management is nothing but planning for both predictable as well as un-
feasible contingencies. It is applicable to both small as well as large
organisations as even the smallest organisation face competition and, by for-
mulating and implementing appropriate strategies, they can attain sustainable
competitive advantage.

Fig 4.1 Strategic Management

Strategic Management is a way in which strategists set the objectives and proceed
about attaining them. It deals with making and implementing decisions about future
direction of an organisation. It helps us to identify the direction in which an
organisation is moving.
Strategic management is a continuous process that evaluates and controls the busi-
ness and the industries in which an organisation is involved, evaluates its competi-
tors and sets goals and strategies to meet all existing and potential competitors and
then re-evaluates strategies on a regular basis to determine how they are imple-
mented and whether it was successful or does it needs replacement.
Strategic Management gives a broader perspective to the employees of an
organisation and they can better understand how their job fits into the entire
organisational plan and how it is co-related to other organisational members. It is
nothing but the art of managing employees in a manner, which maximizes the ability
of achieving business objectives. The employees become more trustworthy, more
committed and more satisfied as they can co-relate themselves very well with
each organisational task. They can understand the reaction of environmental changes
on the organisation and the probable response of the organisation with the help of
strategic management. Thus, the employees can judge the impact of suchchanges
on their own job and can effectively face the changes. The managers and employ-
ees must do appropriate things in appropriate manner. They need to be both ef-
fective as well as efficient.
One of the major roles of strategic management is to incorporate various func-
tional areas of the organisation completely, as well as, to ensure these functional
areas harmonize and get together well. Another role of strategic management is to
46
keep a continuous eye on the goals and objectives of the organisation. STRATEGIC
4.2.1 Definition and Meaning of Strategic Management MANAGEMENT
The term strategic management is used to refer to the entire scope of strategic-
decision making activity in an organisation. Strategic management as a concept
has evolved over time and will continue to evolve. As a result, there are a variety
of meanings and interpretations depending on the author and sources. For ex-
ample, some scholars and practitioners the term strategic planning connote the
total strategic management activities. Moreover, sometimes managers use the terms
strategic management, strategic planning and long-range planning interchange-
able. Finally, some of the phrases are used interchangeably with strategic man-
agement are strategy and policy formulation and business policy.
The following statements offer a number of workable definitions of strategic man-
agement:
“Strategic management is the process of managing the pursuit of organisational
mission while managing the relationship of the organisation to its environ-
ment.” (James M. Higgins)
“Strategic management is defined as the set of decisions and actions resulting in
the formulation and implementation of strategies designed to achieve the objec-
tives of the organisation.”(John A. Pearce II and Richard B. Robinson, Jr.)
“Strategic management is the process of examining both present and future envi-
ronments, formulating the organisation’s objectives and making, implementing and
controlling decisions focused on achieving these objectives in the present and
future environments.” (Garry D. Smith, Danny R. Arnold, Bobby G. Bizzell)
“Strategic management is a continuous process that involves attempts to match or
fit the organisation with its changing environment in the most advantageous way
possible.”(Lester A. Digman).
4.2.2 Elements of Strategic Management
Strategic management, as minimum, includes strategic planning and strategic con-
trol. Strategic planning describes the periodic activities undertaken by organisations
to cope with changes in their external environments (Lester A. Digman).
Strategic planning consists of formulating strategies from which overall plans for
implementing the strategy are developed. Further, strategic planning involves for-
mulating and evaluating alternative strategies, selecting a strategy and developing
detailed plans for putting the strategy into practice. Strategic control consists of
ensuring that the chosen strategy is being implemented properly and that it is
producing the desired results.
Based on Robert Anthony’s framework, three types of planning and control are
required by organisations:
Strategic Planning and Control: This is the process of deciding on changes in
organisational objectives, in the resources to be used in attaining these objectives,
in policies governing the acquisition and use of these resources and in the means
(strategies) of attaining the objectives. Strategic planning and control involve ac-
tions that change the character or direction of the organisation.

47
 MORE ON • Management Planning and Control: This entails the process of ensur-
MANAGEMENT ing that resources are obtained and used efficiently in the accomplishment
of the organisation’s objectives. Management planning and control is car-
ried on within the framework established by strategic planning and is analo-
gous to operating control.
• Technical Planning and Control: This is the process of ensuring efficient
acquisition and use of resources, with respect to those activities for which
the optimum relationship between outputs and resources can be accurately
estimated (e.g. financial, accounting and quality controls).
Another important term in the study of strategic management is long-range
planning. Long-range planning, planning for events beyond the current year,
is not synonymous with strategic management (or strategic planning).Notall
long-range planning is strategic. Certain strategic actions and reactions can
be relatively short range and may include more than just planning aspects.
It is perfectly reasonable to have long-range operating or technical plans
that are not strategic. However, it should be noted that most strategic deci-
sions have long-term ramifications.
4.2.3 Scope and Dimension of Strategic Management
Strategic management focuses on the total enterprise. It involves the planning,
directing organising and controlling of the strategy-related decisions and actions of
the business.
Scope of Strategic Management
J. Constable has defined the area addressed by strategic management as “the
management processes and decisions which determine the long-term structure
and activities of the organisation.” This definition incorporates five key themes:
• Management process: Management processes relate to how strategies
are created and changed.
• Management decisions: The decisions must relate clearly to a solution of
perceived problems (how to avoid a threat, how to capitalize on an oppor-
tunity).
• Time scales: The strategic time horizon is long. However, for a company
in real trouble, it can be very short.
• Structure of the organisation: An organisation is managed by people
within a structure. The decisions resulting from the way that managers work
together within the structure can result in strategic change.
• Activities of the organisation: This is a potentially limitless area of study
and we normally shall centre upon all activities which affect the organisation.
These all five themes are fundamental to the study of the strategic management
field.
Dimensions of Strategic Management
Strategic management process involves the entire range of decisions. Typically,
strategic issues have six identifiable dimensions:
• Strategic issues require top-management decisions.
48
Strategic issues involve the allocation of large amounts of company resources. STRATEGIC
• Strategic issues are likely to have significant impact on the long-term pros- MANAGEMENT
perity of the firm.
• Strategic issues are future oriented.
• Strategic issues usually have major multifunctional or multi business conse-
quences.
• Strategic issues necessitate consideration of factors in the firm’s external
environment
4.2.4 Strategic Management Process
The basic of strategic management process is to explain about organisational
strategy. It involves strategies that are processed by managers to make certain
choices which make the organisation to get better performance. It is a regular
process which shoots up the business or industries where an organisation is present
by appraising its competitors by regular goals for current or future competitors. It
contains following four steps:
1. Environmental Scanning: It is a method of gathering, scrutinizing and
showing information which could be utilised for strategic purposes by find-
ing internal and external factors which can influence an organisation.
2. Strategy Formulation: It is a part of action which plans for correct course
of action in order to achieve organisational objectives and purpose. With
this, the managers will prepare a corporate, business or functional policies.
3. Strategy Implementation: It is a way by which a work strategy intends
an organisation to make particular plan into action.
4. Strategy Evaluation: This is the last process involved in strategy man-
agement process where main strategy calculations are done by appraising
internal and external factors which may be grass roots of current strategies.

Fig 4.2 Components of Strategic Management Process

It is an on-going process which should realized every component to interact with
other components.
4.2.5 Importance of Strategic Management
A number of reasons are given by authors to as why organisations should engage
in strategic management. Many research studies show both financial and nonfi-
nancial benefits which can be derived from a strategic-management approach to
decision making.
Financial Benefits
The question, “why should an organisation engage in strategic management?”

49
 MORE ON must be answered by looking at the relationship between strategic management
MANAGEMENT and performance.
Research performed by Eastlack and McDonald (1970), Thune and House (1970),
Ansoffetal (1971), Karger and Malik (1975) and Hofer and Schendel(1978) in-
dicates that formalized strategic management (strategic planning) does result in
superior performance by organisations. Each of these studies was able to provide
conceiving evidence of the profitability of strategy formulation and implementa-
tion. The formalized strategic management process does make a difference in the
recorded measurements of profits, sales and return on assets. Organisations that
adopt a strategic management approach can expect that the new system will lead
to improved financial performance.
Nonfinancial Benefits
Regardless of the profitability of strategic management, several behavioural ef-
fects can be expected to improve the welfare of the firm. Yoo and Digman empha-
size that strategic management is needed to cope with and manage uncertainty in
decision-making. They present several benefits of strategic management:
• It provides a way to anticipate future problems and opportunities.
• It provides employees with clear objectives and directions for the future of
the organisation.
• It results in more effective and better performance compared to non-stra-
tegic management organisations.
• It increases employee satisfaction and motivation.
• It results in faster and better decision making.
• It results in cost savings.
Check your progress 1
1. _________refers to process of collecting, scrutinizing and providing infor-
mation for strategic purposes.
a. Environmental Scanning.
b. Scanning.
c. Environmental.
d. None of the above.
2. ________is a process of deciding best course of action for doing
organisational objectives and hence fulfilling organisational purpose.
a. Strategy Formulation.
b. Strategy Implementation.
c. Strategy Evaluation.
d. Strategy.
4.3 Strategic Decisions
Strategic decisions are the decisions that are concerned with whole environment
in which the firm operates the entire resources and the people who form the com-
pany and the interface between the two.

50
4.3.1 Characteristics/Features of Strategic Decisions STRATEGIC
1. Strategic decisions have major resource propositions for an organisation. MANAGEMENT
These decisions may be concerned with possessing new resources
organising others or reallocating others.
2. Strategic decisions deal with harmonizing organisational resource capabili-
ties with the threats and opportunities.
3. Strategic decisions deal with the range of organisational activities. It is all
about what they want the organisation to be like.
4. Strategic decisions involve a change of major kind since an organisation
operates in ever-changing environment.
5. Strategic decisions are complex in nature.
6. Strategic decisions are at the top most level, are uncertain as they deal with
the future and involve a lot of risk.
Strategic decisions are different from administrative and operational decisions.
Administrative decisions are routine decisions, which help or rather facilitate stra-
tegic decisions or operational decisions. Operational decisions are technical deci-
sions, which help execution of strategic decisions. To reduce cost is a strategic
decision achieved through operational decision of reducing the number of em-
ployees and how we carry out these reductions will be administrative decision.
4.3.2 Strategic Decisions, Administrative Decisions and Operational De-
cisions
The differences between Strategic, Administrative and Operational decisions can
be summarised as follows:-
Table Differences between Strategic, Administrative and Operational de-
cisions

51
 MORE ON Strategic
Strategic Administrative Operational
MANAGEMENT Management
Decisions Decisions Decisions
S. No.
Strategic Administrative Operational
decisions are decisions are taken decisions are not
01.
long-term daily. frequently taken.
decisions.
These are These are short- These are
considered where term based medium-period
02. the future decisions. based decisions.
planning is
concerned.
Strategic These are taken These are taken
decisions are according to in accordance
taken in strategic and with strategic and
03. accordance with operational administrative
organisational decisions. decision.
mission and
vision.
These are related These are related These are related
to overall counter to working of to production.
04.
planning of all employees in an
organisations. organisation.
These deal with These are in These are related
organisational welfare of to production and
05. growth. employees factory growth.
working in an
organisation.
Check Your Progress 2
1. ____________decision is long-term decision.
a. Strategic.
b. Administrative.
c. Operational.
d. Routine.
2. ___________decision is taken daily.
a. Administrative.
b. Strategic.
c. Operational.
d. Routine.
4.4 SWOT
The meaning of SWOT is Strengths, Weaknesses, Opportunities and Threats.
They are considered as internal factors that has certain control. From the above
explanation of SWOT, where Opportunities (O) and Threats (T) are known as
external factors on which there is no control.
4.4.1 SWOT Analysis
Basically it is seen that SWOT Analysis is applied in case of audit and analysis of
overall strategic position of a concern. It is a powerful tool which focus is on
finding strategies which could create firm specific business model which could be
best viewed as organisational resources. This tool, views all positive and negative
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factors that can be inside or outside the firm which plays an important role in STRATEGIC
success of an MANAGEMENT
organisation.

Fig 4.3 SWOT analysis

1. Strengths
It is an important quality which allows meeting organisation operations. It is
the base on which the success of an organisation depends. It can be tan-
gible or intangible. The important examples of organisational strengths in-
clude big financial resources, broad product line, no debt, committed em-
ployees, etc.
2. Weaknesses
It is another quality which keeps away from completing operation and achiev-
ing full possibilities. These are factors that do not meet the requiredstandards
and can be depreciating machinery, insufficient research and development
facilities etc. This quality can be controlled by minimizing or by eliminating.
It can be seen that in order to conquer on old machinery, the new machin-
eries are purchased.
3. Opportunities
Such type of quality is present inside our environment in which it works.
Such quality will come up when an organisation takes the advantage of
certain conditions in an environment in order to plan and work on certain
strategies which makes us more profitable.
2. Threats
It appears when conditions in an external environment will put on risk in
terms of dependability and productivity of an organisational business. The
common example of threat will include turbulence among employees, on-
going technology change and more competition with over capacity, etc.
4.4.2 Advantages of SWOT Analysis
There are certain advantages of SWOT Analysis:
• Source of information for strategic planning.

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 MORE ON • Constructs organisation’s strengths.
MANAGEMENT • Reverse its weaknesses.
• Maximize response to opportunities.
• Overcome organisation’s threats.
• Locating core competencies of firm.
• Setting of objectives for strategic planning.
SWOT Analysis Framework

Fig 4.4 SWOT Analysis

4.4.3 Limitations of SWOT Analysis
There are certain limitations about SWOT Analysis such as:
• Price increase
• Inputs/raw materials
• Government legislation
• Economic environment
• Locating new market for product which has no overseas market due to
import restrictions
Apart from these, there are certain internal limitations of SWOT analysis which
are:
Insufficient research and development facilities.
• Faulty products due to poor quality control.
• Poor industrial relations.
• Lack of skilled and efficient labour.
Check your progress 3
1. ____________are the qualities that enable us to accomplish the
organisation?s mission.
a. Strengths.
b. Weakness.
c. Opportunities.
d. Threats.
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2. _____________arise when conditions in external environment jeopar- STRATEGIC
dize the reliability and profitability of the organisation?s business. MANAGEMENT
a. Threats.
b. Strengths.
c. Weakness.
d. Opportunities.
4.5 BCG Matrix
Boston Consulting Group (BCG) Matrix is a four celled matrix (a 2 * 2 matrix)
developed by BCG, USA. It is the most renowned corporate portfolio analysis
tool. It provides a graphic representation for an organisation to examine different
businesses in its portfolio on the basis of their related market share and industry
growth rates. It is a two dimensional analysis on management of SBU?s (Strate-
gic Business Units). In other words, it is a comparative analysis of business po-
tential and the evaluation of environment.
4.5.1 BCG Matrix Analysis
According to this matrix, business could be classified as high or low according to
their industry growth rate and relative market share.
Relative Market Share = SRI: Sales this year leading competitors sales this year
Market Growth Rate = Industry sales this year — Industry Sales last year
Consider the four cells of matrix as shown in fig 3.4 where stars, cash cows,
question marks and dogs are located. Each of these cells represents a particular
type of business.

Fig 4.5 BCG Matrix Analysis

1. Stars: In this matrix, stars shows business units that carries big market
shares in fast upcoming industry. Instead of generating cash as of fast growing
market, the stars need heavy investment so as to meet their lead. In this the
SBU?s placed in cell attract since they are located in robust industry.

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 MORE ON 2. Cash Cows: The Cash Cows shows business units with big market shares
MANAGEMENT so as to become mature in a slow growing industry. They needs small in-
vestment and can obtain cash which are used for investment in other busi-
ness units.
3. Question Marks: These units have less market shares and requires great
big amount in order to maintain market share. They are normally new prod-
ucts and services that having great commercial aspects.
4. Dogs: These show weak symptoms of market shares in a low growth mar-
ket. Such type of units neither obtains cash nor needs big amount of cash.
Because of less market share, such business units face lots of cash loss.
Such type of business establishment have weaker market share as of more
costs with lack of quality and poor marketing.
4.5.2 Limitations of BCG Matrix
It is seen a BCG Matrix will generate a framework where resources are allotted
for different business units which made possible in order to compare certain busi-
ness units instantaneously. They have certain limitations such as:
• They arranged business as low and high whereas medium also.
• It does not explain about the clearly of market model.
• As studied high market share not always tends to more profits as extra cost
is also involved.
• Towards profitability, factors such as growth rate and market share are not
the only indicators.
• It is found that many times dogs might help certain business in achieving
many advantages as they can get more than cash cows.
Check your progress 4
1. ____________represent business units having large market share in a fast
growing industry.
a. Stars.
b. Cash Cows.
c. Dogs.
d. Question Marks.
2. ____________represent businesses having weak market shares in low-
growth markets.
a. Dogs.
b. Cash Cows.
c. Stars.
d. Question Marks.
4.6 Let Us Sum Up
In this unit we have learnt that an organisation is said to achieve competitive ad-
vantage if its profitability is more than average profitability for all companies in its
industry.

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It is studied that strategic management serves as a bunch of decisions and acts STRATEGIC
that a manager undertakes and which decides the result of the firm?s perfor- MANAGEMENT
mance.
It is seen that as per Robert Anthony’s framework approach, there exists three
types of planning and control which are required by organisations such as Strate-
gic planning and control, Management planning and control and Technical plan-
ning and control.
It is detailed that there are five fundamental themes involved in study of strategic
management field such as management process, management decisions, time scales
and structure of organisation and activities of organisation.
The definition of SWOT is Strengths, Weaknesses, Opportunities and Threats
that are considered as internal factors having certain control. It is a renowned
tool for audit and analysis of the overall strategic position of the business and
its environment.
4.7 Answers for Check Your Progress
Check your progress 1
Answers: (1-a), (2-a)
Check your progress 2
Answers: (1-a), (2-a)
Check your progress 3
Answers: (1-a), (2-a)
Check your progress 4
Answers: (1-a), (2-a)
4.8 Glossary
1. SWOT - It is applied in case of audit and analysis of overall strategic posi-
tion of a concern.
2. Strategic management - It is a bunch of decisions and acts where a man-
ager undertakes and decides the result of firm?s performance.
4.9 Assignment
What do you understand by strategic management?
4.10 Activities
Explain the elements, scope and dimensions of strategic management.
4.11 Case Study
1. How can SWOT analysis be useful in business practice? Connect with two
managers and collect the information of how do they use SWOT analysis in
practice.
4.12 Further Readings
1. Principlesof Management, B.S. Moshal, Galgotia Publications.
2. Management Text and Cases, VSP Raoand V. Hari Krishna, published by

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 MORE ON Anurag Jain for Excel books.
MANAGEMENT 3. Principles of Management, Edition 2, P. C. Tripathi and P. N. Reddy, Tata
McGraw Hill Publishing Company.
4. Essentials of Management, Harold Koontz and Heinz Weihrich, Tata
McGraw Hill.

58
BLOCK SUMMARY

The block detailed about features and scope of motivation, social responsi-
bility of business and highlight important factors that exists in strategic man-
agement in an organisation. The detailed illustration regarding the Indian
Businesses and Social Responsibility are explained with examples. The stu-
dent will get adequate knowledge after reading this block on various types of
communication which could be of great help while working in an organisation.
The whole idea of this block is to train the students with practical and theo-
retical aspects on theories that are based on management and its structural
features. To make the topics easy and understand to the readers, efforts have
been made to give complete illustration with focus on direct explanation.

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 MORE ON BLOCK ASSIGNMENT
MANAGEMENT
Short Answer Questions
1. Explain about Financial and Non-Financial Motivation?
2. Highlight important features of Positive and Negative Motivation?
3. Explain the different types of Types of Communication?
4. What are the various Leadership Styles?
5. Write few advantages about Theories of Leadership?

Long Answer Questions

1. What do you understand by communication? Define Communication
and give its characteristics.
2. Explain Herberg?s Two Factor Theory and ERG Theory of Motiva-
tion.
3. “The business thrives on society for its very survival, sustenance and
encouragement.” Elucidate.
4. What is strategic decision?
5. Explain features of strategic decision.
6. How is strategic decision different from administrative and operational
decision.

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Enrolment No.:
1. How many hours did you need for studying the unitse

Unit No. 1 2 3 4

Nos of Hrs

2. Please give your reactions to the following items based on your reading
of the block:

3. Any Other Comments

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