CHAPTER- ONE

FUNDAMENTALS OF MANAGEMENT

1.1. Definition of Management

As far as the definition of management is concerned, it is rich in definition. Hence, there is no

one universally accepted definition of management. This is because,

(i) Management as a discipline is recent in origin: management as a field of study is too

young, to develop.

(ii) Management is so broad that it is difficult to encompass all of its aspects in a single
definition.
(iii) There are different approaches to management, definitions change as the environment
changes. Organizational environment change because of changes in political,
economic, social, ethical, factors.
Management has been given various but mutually supportive definitions by different authors and
scholars. Among others the following are several of them are:

1) According to F.W. Taylor, "Management is the art of knowing what you want to do... in the
best and cheapest way."
2) According to H. Koontz and his co-author, "Management is the process of designing and
maintaining an environment in which individuals are working together in-group accomplish
efficiently selected aims."
3) According to Terry and Franklin, "Management is a distinct process consisting of activities
of planning, organizing, actuating, and controlling, performed to determine and accomplish
stated objectives with the use of human beings and other resources.
4) According to Henery Fayol; "to manage is to forecast and plan, to organize, to command, to
coordinate, and to control.
5) According to Mery Parker Fellott; "the art getting things done through the efforts of other
people."
6) According to Kinard, "Management is the process of maximizing the potential of an
organization's people and co-coordinating their efforts to attain predetermined goals.

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7) Management is defined as the process of planning, organizing, leading and controlling the
efforts of organization members and of using all other organizational resources to achieve
stated organizational goals.

From the various definitions of management, we can derive the following important points.
a) Management refers to the managerial functions of planning, organizing, staffing,
leading and controlling.
b) Management co-ordinates both human and non human resources (land, labor, capital)
for the accomplishment of objectives.
c) Management is applied to all types of organization
- Profit or not for profit
- Large, medium or small organization
- Manufacturing or service giving, etc.
d) Management deals with creating a comfortable internal environment, with a great
consideration of the external environment.
For the sake of convenience, we can define management as a distinct process consisting of
managerial functions of planning, organizing, staffing, directing/leading, and controlling so
as to design and maintain a conducive environment in order to achieve common group goals
and organizational objectives efficiently and effectively.
From this definition, we have the following points that characterize management:
a) Management is a continuous process-whenever there is a group endeavor/effort, the
need for management arises.
b) Management is viewed in terms of the managerial function a manager does.
c) Management deals with the coordination of both human and non-human
resources/physical resources.
d) Management is applied wherever there is an organization with an objective to be
achieved.
e) Since an organization exists in an open system, management creates a favorable
environment in order to achieve organizational goals.
f) The target of managerial process is to achieve organizational objective-reason for their
existence.

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 1.2. Significance of Management

 Management is applied in any organization (large, small in size, or service or manufacturing

or for-profit or not-for-profit) and its functions are practiced in any level of management.
 Any organization is established to achieve objectives, and management is important for
any organization to achieve its pre-stated objectives efficiently and effectively.
 The main task of management is guidance in the utilization of material and human
resources in the best possible manner. Without the involvement of management,
resources might be misutilized and wasted. Through the optimum utilization of resources,
it to ensure that the objectives are attained.
 Management does not signify proprietorship/ownership. Managers work for the
attainment of organizational goals and objectives.
 Management functions are discharged by individuals not by machines such a computers.
However, it can be aided by such instruments as computers.
 Since the significance of management is to direct, to guide and to control, it has to have
authority. Authority is the power to compel others to work and behave in particular
manner.
 The manager has to lead a team of workers. He/she must be capable of inspiring,
motivating and winning their confidence.
 It has grown as a body of discipline taking the help of so many social sciences like
sociology, psychology, economics, etc.

1.3. Managerial Functions an Overview

Regardless of the type, size and objective of the firm, all managers have certain basic
functions. These are planning, organizing, staffing, leading/directing/, and controlling. The
nature and scope of these functions differ from manager to manager and from firm to firm.

Planning
It is a decision making process which involves selection of missions and objectives and choose
the best course of action to achieve them from among alternatives. It is an intellectual task,

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which bridges the gap between the present and future conditions of the organization. (From
where we are to where we want to be in a desired future).

Planning is a decision making process that determines what to be done, how it is to be done, why
it is done, when it is to be done, and by whom it is to be done.

The first step in planning is determination of the objective of an organization. And then
objectives are established for the sub units of the organization- its departments, divisions, etc.
Once the objectives are determined, programs are established for achieving them in a systematic
manner.

Top level managers set plans for the entire company; while lower level managers prepare plans
for their immediate areas of responsibility. Planning doesn't occur in a vacuum. It is done in light
of budgetary constraints, personnel requirements, competition, and other factors.

Planning, as a managerial function, is the process of integrating the future activities of an

organization, and requires the ability to foresee, visualize, and look ahead purpose fully.
Organizing:
It is a managerial activity that involves establishing an intentional structure of roles for
people to fill in an organization. In other words, it is the process of creating an environment
for human performance depending on the objectives set. In short, organizing is the process of
determining the role by which an individual plays and the individual roles are related and
integrated to achieve the common organizational goal. Organizing, thus involves:

 identification of activities to achieve the predetermined objective;

 grouping these activities into working units;
 assignment of responsibility to each unit with corresponding authority; and
 The creation of intentional organizational relationship so as to enhance coordination.

Staffing:
It is the process of filling and keeping filled the positions in the organization structure. This
is done by identifying work force requirements, inventorying the people available, recruiting,

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 selecting, placing, promoting, compensating, training and developing both candidates and
current job holders to accomplish their tasks effectively and efficiently.

Leading:
It is influencing, motivating and directing people so that they will contribute to organization
and group goals; it has to do predominantly with the interpersonal aspect of managing. To be
effective leaders, managers need to understand individual and group behavior, techniques of
motivation, and effective styles of leadership. Mangers must develop relationships that
ensure adequate communication with their subordinates. Leading also includes managing
personal conflict, helping employees, deal with changing conditions, and in some cases
disciplining employees. Leadership requires good interpersonal skills.

Controlling
It is the measuring and correcting of activities of subordinates, to ensure that events conform
to plans. It also involves taking corrective measures (actions) if negative deviations exist.

The controlling function involves the following steps:

 Establishing standards of performance:
 Measuring actual performance and comparing it against the plan the goal /the established
standard;
 Taking corrective measures if there are devotions. (Taking corrective actions when standards
are not met or in anticipation that they may not be met.)
Actual results may differ from desired results in any area, but the three that require the most
attention are product quality, worker performance, and cost control.

1.4. Levels of Management and Types of Managers

Managers can be classified into two ways,

1. by their level in the organization – so called first line, middle and top managers and
2. by the range of organizational activities for which they are responsible – so called
Functional and general managers.
(1) First line Managers- Managers who are responsible for the work of operating employees
only and do not supervise other managers; they are the first or lowest levels of managers in

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 the organizational hierarchy. These pest people are managers at the firing line where most
concrete organizational tasks are performed.

It includes office managers, superintendents, foreman, chief clerks, supervisors, etc. First
level management is often called "supervisors". They are mainly concerned with:
i) Planning of day to day work.
ii) Assignment of jobs
iii) Keeping a watch on workers performance.
iv) Sending reports and statements to superiors
v) Maintaining close and personal contacts with workers and evaluation of
their work.
(2) Middle level Managers: these are managers who direct the activities of lower level
managers and sometimes extends to supervision of operating employees. Their principal
responsibilities are to direct the activities that implement their organization's policies and
to balance the demands of their superiors with the capacities of their subordinates. The
titles include Department heads, deputy department heads, branch managers, work
managers, etc.
(3) Top Managers:- composed of a comparatively small group of executives and they are
responsible for the overall management an organization.
 They establish operating policies and guide the organization's interactions with
environment. Typical titles include CEO, president, senior vice president, etc.
 Responsibility of planning and executing broad policy decisions.

Functional and General Managers

The other major classification of managers depends on the scope of the activities they manage.
1. Functional Managers: - these are managers who are responsible for only one organizational
activity, such as production, marketing, sales, or finance. The people and activities headed by
a functional manager are engaged in a common set of activities.
2. General Managers: - these managers, on the other hand, oversee a complex unit, such as a
company, a subsidiary, or an independent operating division. He or she is responsible for all
the activities of that unit, such as its production, marketing, sales, and finance. Managers who

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 are responsible for managing the entire operations of a more complex unit or division which
may have two or more functional units.
1.5. Managerial Roles and Skills
1.5.1. Managerial Roles:
Managerial functions are general administrative duties that need to be carried out in all
productive organizations. Managerial roles are specific categories of behavior/managerial
behavior. Managerial functions involve "desired out comes". These outcomes are achieved
through the performance of managerial roles (actual behavior). In other words, Roles are the
means and functions are the ends of the manager's job.

Henry Mintzberg identified ten different but interrelated organized sets of behavior, or roles.
These ten roles can be separated into three categories /general groupings.
1. Interpersonal roles: three managerial roles are enacted when the manager engages in
interpersonal relationship. They are:
a. Figure head role:- this role is played by managers who are required to perform duties of
ceremonial and symbolic in nature such as signing documents, receiving visitors, etc.
- e.g. When the president of a college hands out diplomas at commencement.
b. Leader role: - managers play this role through hiring, training, motivating and
disciplining employees to get the job done properly.
c. Liaison role: - managers play this role by contacting people outside the group, ^ by
serving as a link in a horizontal (as well as vertical) chain of communication.
- e.g. the sales manager who gains information from the personnel manager with in the
same company. Internal liaison.
- The sales manager who has contact with other sales executive through a making trade
association. – External liaison.
2. Informational roles: - All managers, to some degree, will receive and collect information
from organizations and institutions outside his or her own. Managers play:
a. Monitor/Nerve Center Role:- as a monitor /nerve center, the manager tries to keep
informed about what is happening in the organization or group. Managers serve as a focal
point for non-routine information; they receive all types of information from news reports,
trade publications, magazines, clients, etc.

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b. Disseminator role: - the information a manager gathers as a monitor must be gleaned and
transmitted to appropriate members of the organization. As a disseminator, a manager sends
out side information into the organization and internal information from one subordinate to
another. /Transmitting selected information to subordinates.
c. Spokes person role: - it is the role of a manager in transmitting selected information to
outsiders. It is played by a manager whenever he/she represents the organization or its
position to other groups, including their, government agencies, customer, and trade
organizations.
3. Decisional Roles: - Both interpersonal and informational roles are really includes to the
decisional role. It involves decision-making. The manager plays this role as:
a. Entrepreneur: managers as an entrepreneur initiate and oversee new projects that will
improve their organization's performance. (Designing and initiating changes within the
organization.
b. Disturbance handler: - taking corrective actions in none routine situations/the manager
deals with situations our which he or she has little control. These may involve conflict
between people or groups or unexpected events outside the company may affect he firm's
operations.
c. Resource allocates: - managers play this role when they are in a position to decide exactly who
should get what resources. (These resources include time, money, people-people, physical
resources)
d. Negotiator: - participating in negotiating sessions with other parties (e.g. vendors and
unions) to make sure the organizations interests are adequately represented. Managers
perform this role, in which they discuss and bargain with other units to gain advantages for
their own unit.
1.5.2. Skills of Management
A skill is a person's or an individual's ability to do or perform a certain thing expertly or
intellectually. Similarly, managerial skills are skills of a manageability of a manager to
perform his duties and responsibilities expertly. These skills help managers to perform their
activity in efficient and effective way/manner for the achievement of the objective of the
organization.

These managerial skills can be classified as:

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 (i) Technical skills
(ii) Human skills
(iii) Conceptual skills
1. Technical skills: These skills are the abilities of a manager that are necessary to carry out a
specific task. It involves the ability to use specialized knowledge and expertise with work
related tools, procedures, and techniques. Technical knowledge is of great importance at
lower levels where the organization's goods and services are produced. Examples include:
- Writing computer programs
- Completing accounting statements
- Analyzing marketing statistics
- Drafting a design for a certain building etc…
Technical skills are usually obtained through training programs that an organization may offer its
managers, or employees, or may be obtained by way of a college degree.
2. Human Skill: the ability to work with, motivate, direct individuals or groups in the
organization whether they are subordinates, pears, or superiors and the ability to resolve
conflict. Because, all tasks in an organization are done with people, these skills are equally
important to all levels of management. This skill includes:-
- Effective communication (writing and speaking);
- Creation of positive attitude toward others and the work setting;
- Development of co-operation among group members; and
- Motivation of subordinates.
3. Conceptual skill: - the ability of a manager "to see" the big picture of the organization /to
view the organization from a broad perspective. It is the ability of a manager to see the
organizational system in its totality, how its different parts are interrelated and how they
affect each other. A manager needs conceptual skills to recognize the interrelationships of
various situational factors, and; therefore, make decisions that will be in the best interests of
the organization. They are most important in strategic (long range) planning; therefore, it is
top level managers/executives who require more conceptual skill than middle level managers
and supervisors.

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 Top Strategic Planning
Level and
Management Decision Making

Conceptual Skill

Technical Skill
Middle Coordination and Planning for

Human Skill
Management Implementation
First Line Management
/supervisors. Implementation

Fig. 1.1 Managerial levels, required skills, and primary responsibilities.

1.6. Universality of Management

Management is universal in the sense that

 Basic applications of management in any organizations are the same whether it is small or
complex, business or non-business. The managerial functions exist in every organization
regardless of the size and the type of the organization. This is because any organization has
an objective to be achieved and goal achievement requires planning, organizing, staffing
leading and controlling. (The army general, the bishop of the church, the financial manager
use the same management principles to achieve objectives.)
 The concept of universality of management is also applicable to all levels of management
within an organization; it is not confined to a particular level. Although the scope of authority
held, responsibility assigned and the types of problems dealt vary from one level to another,
as managers all obtain results by establishing an environment for effective group endeavor.
 Managers can be transferred from one organization to another and the higher the
management level the less will be the operating non-managerial job components and the
more "pure" will be the managerial jobs and the easier the transferability of managers.

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1.7. Is Management an art, Science, or profession?
Science: - It is an organized/systematized body of knowledge constituting concepts, theories and
principles concerning a particular field of study. Especially, it is knowledge obtained from
observation, test and experimentation of facts; and it is universally true; and applied in any
country, organization, etc. Besides, it exploits mathematical models.
When we say it is a systematized body of knowledge, it is in the sense that relationship between
variables and their limitation have been ascertained and underlying principles have been
discovered. These facts are again verified through continuous observation. Finally, certain
relationships and principles are developed which are fundamental truths that help to reflect or
explain reality.

The principles developed after a detailed observation acts as a universally applicable foundation.
As science, management is a systematized body of knowledge representing a core of principles
or fundamental truths that tend to be true in most managerial situations. This systematized body
of knowledge of management helps the practicing manager to make decisions rationally and
objectively rather than rule of thumb, hunch, or institution, what they did in the part.
 As an emerging science, management has certain basic principles, which are universally
applicable in any organization regardless of its size, mature and objective. Effective
managers use the scientific approach in making decisions.
 However, management is not considered as an exact science as chemistry, physics etc. It is
an Inexact Science. This is because, it deals with people/human behavior in which change is
the fashion rather than the exception. It is to say that human behavior is even changing and
unpredictable.
To conclude, management is categorized as science for the following reasons:
 Its principles are systematized body of knowledge
 Its principles are universally applicable
 They are based on scientific inquiry, observation, test and experiment
 They explain the cause and effect relationships among/between various variables.
 Their validity can be verifiable and can serve as a reliable basis for predicting future
events.

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Art:
Art is a skill or know-how, which can be modified to accomplish a desired concrete result. It
is doing things in light of the prevailing realities of a situation. It is concerned with the
application of know-how and skill to the specific time, place and condition tactfully,
creatively and wisely.

 Art is a personal creative power plus skill in performance

 Art is based on subjective judgment, feelings, intuition, etc.
 Art helps to create new ideas and effective methods to use from the underlying
knowledge and skill. Management as an art.
 Is know-how or doing things in the realities of the situation
 Art in management has a great role in creating new idea, innovation, initiating and
implementing the skills or know-how in relation with the resources and goals of the
organization.
 Calls for subjective judgment, intuition where time pressures force rapid-fire decisions,
often based on incomplete and unverifiable data.

To conclude, management as a creative art

1. It required a skill or a practical know-how of the principles and techniques of management in
order to perform a specific job efficiently and effectively.
2. It depends on the personal skill and effective use of one's knowledge and proficiency to
ensure maximum result at minimum cost.
3. It follows result oriented course of action – or depends on specific objective to be achieved.
4. Management calls for creative ability – to introduce new ideas, new products, new
techniques to yield higher returns to an organization (higher surplus)
5. Continuous practice of management theories and principles results in better performance.
N.B. The science and art of management practice are not mutually exclusive but are
complementary. If science teaches one to know, art teaches one to do. So managers have to
know and do things to perform their activities efficiently and effectively to be successful.

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Management as a Profession
A profession is a vocation requiring,
1. body of specialized knowledge and Technical proficiency
2. formal training / standardized education and training
3. social Responsibility
4. code of conduct/professional Ethics

1) Body of specialized knowledge and Technical proficiency

If an organization needs to have rational and scientific decision making ability, managers
have to be specialized on a systematic body of management. And also management requires
technical proficiency is special fields such as production, marketing, finance, human resource
management, etc. To ensure all these, management requires intellectual preparation or
graduate study.

2) Formal/standardized Education and Training:

A certain field of study to be a profession, it requires formal training and education. This
holds true for management. There are universities, colleges, and educational institutions
specialized that provide formal teaching of management concepts, theories and principles.

3) Social Responsibility:
Any organization has an objective whether to make surplus, or provide efficient services to the
society, and the like. And also a manager of an organization is responsible to lead the
organization and its members. Besides, managers have to take into account the obligation to
serve the society (mission) and strict adherence to the prescribed moral, social, and legal
conduct; because their existence depend on the service they give to the society in general.

4) Code of Conduct:
Any discipline to be a profession, it is subjected to the fulfillment of strict standards, rules and
regulations providing the norm of honesty, integrity, and professional morality to be adhered by
the members.

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CHAPTER TWO - THE PLANNING FUNCTION

2.1. Concepts and Need for planning

Every human activity is undertaken with their to achieve something following planning. Since
man is gifted with the power of reasoning, he rarely does anything without weighing the
consequences of his action.
- The head of a family plans his expenditure
- The housewife plans here daily chores,
- The students plan their studies
- Teachers plan their teaching work, etc
In the field of business, the need for planning is all the greater. This is because of ever-growing
competition, frequent fluctuations in demand, discovery of new products. The new ways in
which these can be used, and a worldwide scarcity of resources.
Planning is an activity, which is performed before any action is taken. The action we take is
based on the plan. Thus, it is anticipatory decision making a process and improves performance.
Planning allows integrated, consistent and purposeful action.
Planning is the primary function of management. The chief function of management is to attain
the objectives of the enterprise. For this, it is to plan not only in the beginning but throughout the
operations. Planning involves deciding a best course of action from among a number of
alternatives which would help the enterprise to achieve its objectives most expeditiously &
economically.
2.1.1 What is planning?
Planning has as many definitions ad management, be which many authors gave to it. However,
these definitions are mutually supportive or complementary to each other. Several of the
definitions are:
 Determining specified objectives & how to accomplish them.

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 The process by which managers set objectives, assess the future, & develop courses of action
to accomplish these objectives.
 The process of preparing for change coping with uncertainty by formulation future courses of
action.
 Planning is deciding in advance what to do, how to do it, when to do it, and who is to do it.
Thus, it is clear from the various definitions given above that planning involves two things.
i) Determining the aims and objectives
ii) Selecting on the bases of past experience, present facts and circumstances and future
possibilities, the best course of action to realize the planning objective.
Planning involves selecting missions and objectives and the actions to achieve the; it requires
decision making, i.e., choosing future course of action from among alter natives. Planning is
determining in advance what is to be accomplished and how it is to be accomplished. Because
planning paves the way for all downstream management functions, by serving as a bridge
between the present & the future, it is regarded as the primary function of management.

2.1.2. Nature/Characteristics of Planning

(i) The Primacy of planning
The primacy of planning means that the function of planning precedes all other managerial
functions. Since the other management functions are performed to facilitate the achievement of
goals that are set in facilitate the achievement of goals that are set in planning process, planning
logically precedes all other managerial functions.
Although in practice all the managerial functions inter-match as a single system of action,
planning is unique in that it establishes the objective necessary for all group effort. And, of
course, all the other managerial functions must be planned if they are to be effective. That is, the
managerial functions are inseparable; especially, planning and controlling are often referred as
the Siamese twins. This is because, controlling, by definition, is the comparison of actual
performance with the planned. It is the planned performance, which is controlled.
(ii) Pervasiveness of planning
Planning is pervasive/universal in the sense that:

(a) It is the function of all managers regardless of the level they belong, the time spent on
planning the significance, the characteristic, etc.

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(b) Planning exists in all organizations regardless of their type and size.
iii) Contribution to purpose & objective
This implies that the purpose of any plan and all its supportive & derivative plans is to facilitate
the accomplishment and the achievement of the purposes and the objectives of the organization.
Managerial planning seeks to achieve a consistent, coordinated structure of operations focused
on desired ends. Without planning, actions much become merely random activity, producing
nothing but chaos.
IV) Planning is directed towards efficiency
The efficiency of a plan is measured by its contribution to purpose & objectives, offset by the
costs and other unsought factors required to formulate & operate it. Plans are efficient if they
achieve their purpose at reasonable costs, when cost is measured not only in terms of time,
money, or production but also in the degree of individual & group satisfaction.
v) It concerns future activity
Since planning is deciding currently about the future, it involves forecasting and decision
making. The essence of planning is looking ahead & is concerned with deciding in the present
what is to be done in the future.
vi) It has dynamic aspects (it is flexible & continuous)
A manager plans on the basis of some assumptions, which may not come true in the future.
Therefore, he had to go on revising, modifying and adjusting plans in the light of the prevailing
realities/circumstances. Thus, planning is not only the primary function of management, but it is
also a continuous function of management. Planning is flexible as it is based on future conditions
which are always dynamic.
In sum, every business plan must have the following characteristics: objectivity, futurity,
flexibility, stability, comprehensiveness, clarity & simplicity.
2.1.3. Importance/purpose of planning
i) To offset uncertainty:-
Future is always full of uncertainties and charges which make planning a necessity because
planning foresees the future and makes provisions for it thereby giving an added strength to the
organization for continuous growth and steady prosperity.
ii) To focus attention on objectives:-

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Because, all planning efforts are directed towards achieving enterprise objectives, the very act of
planning focuses attention on these objectives. Well considered overall plans unify
interdepartmental activities.
iii) To gain economical operation:
Planning minimizes costs because of its emphasis on efficient operation and consistency. It
substitutes joint directed effort for uncoordinated piecemeal activity, even flow of work for
uneven flow, and deliberate decisions for snap judgments.
iv) To facilitate control
Planning and controlling are inseparable, and commonly referred to as the Siamese twins. This is
because; unplanned action cannot be controlled, for control involves keeping activities on course
by correcting deviations from plans. Any attempt to control without a plan would be
meaningless, since there is no way for people whether they are going where they want to go (the
task of control), unless they first know where they want to go (the task of planning), plans thus
furnish the standards of control.
Generally, a coordinated sense of action, managerial perspective, improved decision making,
increased efficiency, improve control & performance are also benefits of planning.

2.2. Types of plans

Planning can be classified in different ways in different basis:-the following are the important
ones.
 Repetitiveness
 Time dimension
 Scope/breadth

1. Duration /Time dimension

Some plans are in effect for short periods, where as others stretch decades into the future. An
important component of any plan is the planning horizon: i.e., the length of time the plan
specifies for activities to be implemented / the time that elapses between the formulation and
the execution of a planned activity. Hence, there are three planning horizons that can be
identified for classifying plans.
i) Short range plans:- a plan for a year or less one year

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 e.g. Annual plan of sales, revenue, production material requirement, operating expenses
budget.
ii) Intermediate range plans:- plan between a year and five years. P5 years
e.g. Development of new products, modernization of facilities.
iii) Long range plans:- Plan for five or more years. it is concerned with not the immediate
future, but the distant future.

e.g. Long term leases on production or ware house facilities

2. Scope dimension
Planning can be classified in to two based on the scope or breadth of activities they represent.
a. Strategic Plans: These plans are comprehensive in scope & reflect long-term needs &
direction of the organization. Strategic plans/top management plans include the development of
overall company objectives. They are primarily concerned with solving long-term problems
associated with external, environmental influences. They establish the mission of the
organization. Strategic planning is a process that involves the assessment of market conditions,
customer needs, competitive strengths and weakness; sociopolitical, legal and economic
conditions; technological developments and the availability of resources that lead to the specific
opportunities or threats facing the organization
 Strategic plans include:-Mission/purpose, Objectives, Strategies etc.
b. Operational /Tactical plans:-
These are plans used to implement strategic plans. These plans are more limited in scope &
address those activities & resources required to implement strategic plans. These tactical plans
deal more with the allocation of resources & scheduling of actual work activities than with the
selection of strategies.
3. Based on their use (Repetitiveness) dimension these plans can be classified in to
(i) Single use plans
(ii) Standing plans
Standing Plans- are used to guide activities that occur over a period of time. These are plans that
are designed to be used again and again.
Standing plans exist in the form of

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a) Policies
b) Procedures/ Standard operating procedures
c) Rules & Regulations
a) Policies:- these are standing plans in that they are general statements or understandings which
guide or channel thinking in decision making.
 Policies define an area with in which a decision is to be made and ensure that the
decision will be consistent with, and contribute to, an objective.
 They allow some discretion / freedom
 Policies help decide issues before they become problems. E.g. hiring policy- "All
employees of the organizations must have a college degree/diploma, Purchasing
policy
Procedures:- are standing plans that establish a required method of handling future activities.
 They are guides to action rather than thinking
 are plans that describe a series of action to be taken in a given situation.
 Their essence is chronological sequence for a required action.
 Companies have hundreds of procedures for example, telling how to perform a job.
e.g. – Many companies have a policy of a least partially reimbursing their employees for
educational expenses. When this occurs the employee will have to follow a set procedure
in order to be reimbursed.
 He/she may have to fill a form
 attach a copy of his/her grades
 take both documents to personnel for processing
 Wait for the check in the mail.
Rules and Regulations:- are plans that describe exactly how one particular situation is to be
handled.
 are statements of actions that must be taken or not taken
 rules are must restricting device
 There is no room for flexibility
Single Use Plans

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 Single use plans are plans that are used once, and then discarded. This type of plans is
designed to meet the needs of a unique or single situation; such as for special project or task.
These plans are formulated to achieve a specific goal & usually with In a shorter period of
time. Non- repetitive unique situations call for the formulation of single use plans. They are
also called one-time plans. under these plans, we have
 Program (project)
 Budget
A. Program:- Programs are a complex of goals, policies, procedures, rules, task assignments,
steps to be taken, resources to be employed and other elements necessary to
carryout a given course of action; they are ordinarily supported by budgets.
 A program is a comprehensive plan that includes future use of different resources
in an integrated pattern and establishes a sequence of required actions, time
schedules for each in order to achieve stated objectives.
Budgets:- are statements of expected results or resources set aside for specific activities
expressed in numerical or quantitative terms.
 They are primary devices to control organization activities and are thus important
components of programs and projects.
 It is referred to as a "Numberized" plan /program
 It is a single use plan that specifics allocation of financial resources required to
support specific activities within a given time period.
 Budgets are important devices for controlling activities by setting limits on the
amount of expenditures.
 A budget may be expressed either in financial terms or in terms of labor hrs, units
of products, machine hours, in any other numerically measurable term.
2.3. Planning process
The following are the steps that serve as a general model, which can be applied, with some
modification, to the planning processes of any organization. (Whether it be large or small, profit
making or not-for-profit.
1. Identifying and defining the real problem
An awareness of opportunities in the external environment as well as with in the organization is
the real starting point for planning. We should take a preliminary look at possible future

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opportunities and see them clearly and completely, know where we stand in the light of our
strengths and weakness, understand what problems we wish to solve and why, and know what
we expect to gain. Our setting of realistic objectives depends on this awareness planning requires
realistic diagnosis of the opportunity situation.
2. Establish clear-cut objectives
The next step in the planning process is to set objectives to the entire organization and to each
work unit, not only for long-term but also for the short range.
Objectives specify the expected results and indicate the end point of what is to be done, where
the primary emphasis is to be placed, and what is to be accomplished by the net work of
strategies, policies, procedures, rules, budgets, and programs.
3. Establishing the planning Premise
Premises are assumptions providing a background against which estimated events affecting the
plan will take place. They are assumptions about the environment in which the plan is to be
carried out knowledge of the organizations goods and existing condition provides a framework
for defining which aspects of the environment will have the greatest influence on the
organizations ability to achieve its objectives. The purpose of environmental analysis is to
identify ways to respond to changes in economic, technological, social /cultural & political/ and
legal environments having indirect influence to the organizations plans, and for changes direct
influences which have extended on the organizations market, industry, suppliers, competitors, or
key resources and skills. Here, great consideration should be made to the assumptions regarding
the future. Therefore, the assumption and the constraints under which plans are to operate should
be clearly brought about/established.
4. Identify Alternative Courses of Action
The fourth step in planning process is to find alternative course of action. We may have a
number of alternatives and finding alternatives is not common problem, but reducing the number
of alternatives so that selecting the most promising may be analyzed which requires the
assessment of their probable consequences. Thus, the planner must usually make preliminary
examination to discover the most fruitful possibilities.
5. Evaluating Alternative Courses
After identifying the alternatives, the next logical step is to evaluate each and every alternative
by weighing them against in the light of the premises and goals. One course may appear to be

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profitable but require a large each out lay with a slow pay back; another may look less profitable
but involves less risk; still another may better suit the company's long range objectives but it is
difficult to adapt it, etc. Therefore, make an adjustment for the forecast plan if any; see if the
cost, speed, and quality requirements are satisfied and if mechanization expedites the work for
the achievement of desired objectives in terms of each possible course of action.
6. Selecting a course of action /best Alternative
After evaluating each alternative based in the goals and premises, the next step is to decide or
select the best course of action that will help efficiently achieve the organization objectives.
When we decide, we have to make sure that the plan possesses flexibility to adjust to varying
conditions, acceptance of the plan by operating personnel as well as the existing capacity of the
firm and need for new equipment, space personnel, training and supervision.
7. Formulating Derivative Plans
An arrangement of detailed sequence and timing should be made for the proposed plan. At the
point when a decision is made, planning is seldom complete and certain arrangements should be
made that support the basic plan of action chosen, that is, identification of the derivative plans
that support the major plan of action.
8. Numberizing Plans by Budgeting
After decisions are made and plans are set, the final step is to give them meaning that is to
numberize plans by converting them to budgets, this helps to establish verifiable targets of
achievement, to facilitate control and hear. The planner should be able to arrange for sufficient
reports and records over a reasonable period to be collected to inform proper management
members and measure results as well as what remedial action could be proposed if results
indicate weakness when plans are in action.
2.4. Objectives (reading assignment)
The setting of organizational objectives begins with the definition of mission. A mission is the
organization's reason for existence. It describes the organization's values, aspirations and reason
for being. A well-defined mission is the basis for development of all subsequent objectives and
plans. A mission statement - mission in writing - is used to guide managers, work units, and
individual employees throughout the organization: For instance, "to become the nation's most
profitable producer of children's shoes."

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 Once the organization's mission is articulated managers can begin developing specific
mission related objectives at every managerial level to reflect the responsibilities applicable to
each.
What is an Objective?
An objective is an end result upon which the existence of an organization depends. It is the
desired outcome organizations hope to attain eventually. An objective provides a standard for the
measurement of success. An objective helps determine technologies required and set the basis for
specialization of effort, authority pattern, communication and decision net- works and other
structural relationships.
Managers are directly concerned with organizational objectives. Top managers generally
establish broad organizational objectives that help, relate the organization to its environment.
Managers, then, translate these broad objectives into operational objectives and provide means of
control to measure the extent of accomplishment. They must continually deal with goal conflicts
and find a means of satisfying the interests of many internal and external individuals and groups.

Classification of Objectives
Objectives may be classified as strategic, tactical and operational or long-term, intermediate and
short-term. This classification is made based on the levels of decision making authority and time
the objectives cover.
Hierarchy of Objectives
Strategic Objectives
Strategic objectives are broad statements describing where the organization wants to be in the
future. They pertain to the organization as a whole rather than a specific department or division.
They focus on such issues as profitability, market positioning and managerial performance and
attitude and public responsibility.
Example: -to achieve a 10% net profit
- to improve market share 15-20% over next three years.
The top-level management has the responsibility and authority to make strategic objectives.
Tactical Objectives
Tactical objectives are set by the middle management level. These objectives define the
outcomes that major departments and divisions must achieve in order for the organization to

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reach overall objectives. For example, a company may have a tactical objective of
"communicating in writing with clients and customers via, newsletter once a month." This
tactical objective is one part of achieving the strategic objective and of communicating
effectively with clients and employees.
Operational Objectives
Operational objectives are specified and measurable results expected from departments, first-
level managers, work groups and individuals within an organization. Examples:- Setting daily,
weekly and monthly sales targets for each product category, Process 200 sales applications each
week, Reduce overtime by 10% next month.
Time Frame Objectives
Time frame objectives imply that an organization's activities are guided by different objectives
depending on the duration of the action being planned.
Long-term Objectives These objectives extend up to 5 years. They must be accomplished to
ensure the long-term survival of the organization.
Intermediate Objectives These objectives cover a time period between the short-term objectives
and long-term objectives- probably 1-3 years.
Short-term Objectives These objectives can be accomplished in less than a year.
Characteristics of Sound Objectives
Specific and Measurable
Not all objectives can be expressed in numeric terms, but they should be quantified when
possible. Specific outcomes are easier to focus on than general ones, and performance can be
more easily measurable when the task is defined
Example:
- increasing profit by 5%
- decreasing scrap by 1%
- Increasing average teacher effectiveness ratings from 3.5 to 3.7.
Challenging but Realistic
Objectives should be challenging but not unreasonably difficult, i, e, objectives should be
challenging but attainable, given the resources and skills available. The best objectives require
people to search their abilities. On the other hand, when objectives are unrealistic, they set

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employees up for failure and lead to decreasing employee morale causing demotivation.
However, if objectives are too easy, employees may not feel motivated.
Cover Key Result Areas
Objectives cannot be set for every aspect of employee behavior or organizational performance; if
they were, their sheer number would render them meaningless. Instead, managers should identify
a few key result areas. Key result areas are those activities that contribute most to company
performance.
Example: focus on key results-sales, profits, production, or quality-that affect overall
performance.

Defined Time Period:

Objectives should specify the time period over which they will be achieved. A time period is a
deadline specifying the date on which objective attainment will be measured. The period should
be realistic and productive. Short-term objectives should complement long-term objectives. For
example strategic sales objectives could be established on a three-year time horizon with a 100,
000 targets in year one, 150,000 in year two and 200,000 in year three.
Linked to Reward
The ultimate impact of objectives depends on the extent to which salary increases, promotions
and awards are on objective achievement. People who attain goals should be rewarded. Rewards
given meaning and significance to objectives and help commit employees to achieve objectives.
However, attainment of objectives may fail due to variables outside of the control of the
employees. Still reward may be appropriate if the employee partially achieved objectives under
difficult circumstances.
Conflicts among Objectives

The process of setting objectives must incorporate and integrate the interest of the forces in the
internal and external environment. The form and weight to be given to any particular interest
group illustrates precisely the nature of management’s dilemma. Some of the most common
objective setting trade-offs faced by managers in business organizations are:

1. Short - term profits versus long - term growth.

2. Profit margin versus competitive position.
3. Direct sales effort versus development effort.
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4. Greater penetration of present markets versus developing new markets.
5. Achieving long-term growth through related businesses versus achieving it through unrelated
businesses.
6. Profit objectives versus nonprofit objectives (that is, social responsibilities).
7. Growth versus stability.
8. Low-risk environment versus high-risk environment.
Management must consider the expectations of the diverse groups on when the company’s
ultimate success depends. For example, present and potential customers hold ultimate power
over the company. If they are not happy with the price and quality of company’s product, they
withdraw their support (stop buying), and the company fails because of lack of funds. Suppliers
can disrupt the flow of materials to express disagreement with the company’s activities.
Government agencies have the power to enforce the company’s compliance with regulations.
The existence of these interests and their power to affect the objectives of the company must be
recognized by managers.

Studies of objectives that business managers set for their organizations confirm the difficulty of
balancing the concern of interest groups. These studies also suggest that the more companies
consistently emphasize profit – seeking activities that maximize the stockholders’ wealth. This
is not to say that successful companies seek only profit-oriented objectives but rather that such
objectives are dominant.

The satisfaction of human participants within companies another concern of managers – in

setting company objectives. Creating greater human satisfaction is a means for obtaining better
organizational effectiveness. On the other hand, many practices that are developed to increase
organizational effectiveness may create human dissatisfaction. For instance, a high degree of
task specialization may lead to technical efficiency but may also create employee boredom and
apathy.

Thus, organizational and human participant goals may be both compatible and incompatible.
Without minimum degree of compatibility organizations could not exist. But total agreement is
impossible and conflicts do exist. For these reason, managers should develop objectives that can
minimize the conflict between its organizational goals and human participant (employee) goals.

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The existence of multiple objectives differentiated by functions is also another source of conflict.
Organizations have multiple objectives resulted from the interaction and negotiation among
different organizational units. For example, in a company, the sales department’s goal may be
increase sales, the production department’s objective may be more efficient production, and the
research department’s goal may be the development of new products, the Finance department’s
goal may be reducing financial outflows. Maximizing the performance of one functional
department may lead to scarifying the goals of another department. This in turn affects the
rationality of goal structure of the company. Therefore, managers have to implement these
objectives according the priority of their importance. Besides, managers at different level of
positions should subject their objectives to the overall objectives of the organization. This is to
say that each objective of each functional unit is subjected to the overall objectives of the
organization.

Priority of Objectives

The phrase priority of objectives implies that at a given time, accomplishing one objective is
more important than accomplishing others. For example, to a firm having difficulty in meeting
payrolls and due date on accountants, the objective of maintaining cash balance may be more
important than achieving minimum profitability. Priority of objectives also reflects the relative
importance of certain objectives regardless of time. For example, survival of the organization is
a necessary condition for the relation of all other objectives.

Managers always face alternative objectives that must be evaluated and ranked and they must
establish priorities if they want to allocate resources in a rational way. Managers of non-business
organizations are particularly concerned with the ranking of seemingly interdependent
objectives. For example, a university president must determine the relative importance of
teaching, research and service. Because determining objective and priorities is a judgmental
decision, it is difficult process.

Measurement of Objectives

Objectives must be understandable and acceptable to those who will help to achieve them. In
fact, many people believe that specific, measurable objectives, increase the performance of both
employees and organizations and that difficult objectives, if accepted by employees, result in
better performance than do easier objectives. In practice, effective managerial performance

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requires establishing objectives in every area that contributes to overall organizational
performance. Management expert Peter Drucker has stated that objectives should be established
in at least eight areas of organizational performance: (1) market standing, (2) innovations, (3)
productivity, (4) physical and financial resources,(5) profitability, 6) manager performance and
responsibility, (7) worker performance and attitude, and (8) social responsibility. This
classification in no way implies relative importance, nor is it the only classification system
available.

Drucker has observed that "the real difficulty lies indeed not in determining what
objectives we need, but in deciding how to set them.." This involves determining what should be
measured in each area and how it should be measured. Immediately, one can recognize the
difficulty of measuring performance in certain areas. For example, how can a manager measure
employee attitudes and social responsibility? The more abstract the objective, the more difficult
it is to measure performance.

Nevertheless, effective planning requires measurement of objectives. a variety of measurements

exist to quantify objectives in the eight areas that Drucker suggests.

Profitability Objectives

Profitability objectives include the ratios of (1) profits to sales, (2) profits to total assets, and (3)
profits to capital (net worth). The tendency in recent years has been to emphasize the ratio of
profits to sales as an important measure of profitability. Both quantities in this ratio are taken
from the income statement, which management generally regards as a better test of performance
than the balance sheet.

However, other managers believe that the true test of profitability must combine the income
statement and the balance sheet. These managers would use either the profit-to-total-asset ratio
or the profit-to-net-worth ratio. Which of these two measures is preferred depends on whether
the source of capital is an important consideration. The profit-to-total-asset ratio measurer
management's use of all resources, regardless of origin (that is creditors or owners). The profit-
to-net-worth ratio measures how management used the owner's contribution.

The measures are not mutually exclusive. All three ratios are profitability objectives because
each measures and therefore evaluates different yet important aspects of profitability.

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The purposes of profit are to measure efficiency, recover one cost element of being in business
(return on invested capital), and provide funds for future expansion and innovation. The
minimum profitability is that which ensures the continuous stream of capital into the
organization, given the inherent risk of the industry in which the organization operates.

Marketing Objectives

Marketing objectives measure performance relating to products, markets, distribution, and

customer service objectives. They focus on the prospects for long-run profitability. Thus, well-
managed organizations measure performance in such areas as market share, sales volume,
number of outlets carrying the product, and number of new products developed.

Productivity Objectives

Productivity is measured with ratios of output to input. Other factors being equal, the higher the
ratio, the more efficient is the use of inputs.

Drucker has long proposed that the ratios of value added to sales and to profit are the superior
measures of productivity. He believes that a business's objective should be to increase these
ratios and that department in the firm should be evaluated on the basis of these increases. The
argument for value

added is that it measures the increase in value of the purchased materials due to the combined
efforts of the firm, since value added is equal to the difference between the purchase price and
the market value of materials and supplies. In this way, the efficiency of the firm's efforts is
measured directly. This measure of productivity also could be used for comparisons among the
individual departments in the firm.

Physical and Financial Objectives

Physical and financial objectives reflect the firm's capacity to acquire resources sufficient to
achieve its objectives. Measurement of physical and financial objectives is comparatively easy
since numerous accounting measures can be used. Liquidity measures such as the current ratio,
working capital turnover, acid-test ratio, debt-to-equity ratio, and accounts receivable and
inventory turnover can be used in establishing objectives and evaluating performance in financial
planning.

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 Table 3.1 Selected Measures of Objectives

Management must Objective Possible Measures

decide Which profitability 1. Ratio of profit to sales.

measures to use to 2. Ratio of profit to total assets.

indicate whether 3. Ratio of profit to capital.

objectives are

being achieved. Marketing 1. Market share.

2. Sales volume.

3. Rate of new product development.

4. Number of outlets.

Productivity 1. Ratio of output to labor costs.

2.Ratio of output to capital costs.

3. Ratio of value added to sales.

4. Ratio of value added to profit.

Physical and 1. Current ratio.

Financial 2. Working capital turnover.

3. Ratio of debt to equity.

4. Accounts receivable turnover.

5. Inventory turnover.

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CHAPTER THREE- DESCISION MAKING

3.1. Meaning of decision making

Decision Making: is defined as the process of selecting or choosing based on some criteria, the
best course of action from number alternatives. Because managers are continually
confronted with opportunities and problems, they must constantly analyze the effect of
different decisions on their organizations and select the alternative that will move the firm
toward its stated objectives. It is defined as a rational choice among alternatives. There have
to be options to choose from; if there are not, there is no choice possible and no decision.

3.2. Rational decision making process

The steps in decision making process include the following:
1. Ascertain the need for a decision/Identify the problem:
The decision making process begins by determining a problem exists; that is, there is an
unsatisfactory condition.
2. Establish decision criteria:
Once the need for a decision has been determined, there comes a need to establish decision
criteria which requires identifying those characteristics that are important in making the
decision.
3. Allocate weights to criteria
the identified criteria should be weighted based on their importance and arranged in priority.
This is because some are obviously more important than others and we need to weight each
criterion to reflect its importance in the decision.
4. Develop Alternatives

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 This involves developing a list of the alternative that may be viable in dealing with the stated
problem.
5. Evaluate Alternatives
Once the alternatives are enumerated. The decision maker must critically evaluate each one
and identify the strong and weak points when compared against the criteria and the weights
established. In evaluating each alternative, we not only consider things that can be measured
in numerical terms such as time and various types of fixed & operating costs, but also
consider intangible or qualitative factors such as the quality of labor relations, the risk of
technological change or the international political climate.
6. Select the Best Alternative
After we evaluate the alternatives, the next logical step is to select the best alternative that
suits to solve our decision problem. In selecting the best alternative, factors such as risk,
economy of efforts, timing and limiting factors should be considered adequately.
7. Putting Decision Into Action
After selecting the best alternative, we implement or put it into action. This requires
communication of decisions to subordinates, getting acceptance of the decisions, and getting
support and cooperation for converting the decision in to effective action. The decision
should be effective at proper time and in proper way to make the action effective to achieve
desired objectives.
8. Following up Decisions
Having implemented the decision, the manager should compare the results of that course of
action with the desired outcome, if necessary, take corrective action. Since decisions are
made based on forecasts about the future, the best decision that we select may not suit
absolutely to achieve our objectives. Therefore, managers should adjust, modify or take any
other correctives if necessary.
3.3. Types decisions making
Types of Decisions: Several authors believe that there are two types of decisions: programmed &
non-programmed decisions.
Programmed decisions: are the kinds that managers face time and again. These decisions are
"programmable" because of a specific procedure can be worked out to resolve them based on
experience in similar situations.

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 Once a standard procedure has been established, it can be used to treat all like situations.
 They usually involve an organization's every day operational and administrative activities
 They are primarily found at the middle and lower levels of management.
 Data used in making a programmed decision usually are complete and well defined.
 Participants know the details and agree on how to resolve the problem.

Non-programmed Decisions: are used to solve nonrecurring problems.

 No well-established procedure exists for handling them, primarily because managers do not
have experience to draw upon.
 In contrast to programmed decisions, available data are usually incomplete.
 Non programmable decisions are commonly found at the middle and top levels of
management and often is related to an organization's policy-making activities such as
whether to add a product to the existing product line, to reorganize the company, or to
acquire another firm, are examples
3.4. Decision making situations
1. Decisions under certainty:- decisions made in which the external conditions are identified
and very predictable /when ever there is complete data & information/
2. Decisions under risk:- those decisions in which probabilities can be assigned to the expected
outcomes of each alternative
3. Decisions under uncertainty: - it is a case where neither there is complete data not
probabilities can be assigned to the surrounding conditions. Some conditions that are
uncontrollable by management include competition, government regulations, technological
advances, the overall economy, and the social and cultural tendencies of society.

CHAPTER FOUR - THE ORGANIZING FUNCTION

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 1.1. Concept of organizing and organization

Meaning and Definition:

The management process starts from planning; i.e., in planning-objectives that are going to be
achieved are identified / established and courses of action have been determined. Then, the
manager continues his activities by giving practical shape to the activities/works to be performed
identifying the roles where by workers are supposed to play, and making known to the group
what their duties and responsibilities are therefore, to design and maintain such systems of roles
is the managerial function of organizing.

To begin with the definition of organizing, there is no universally accepted definition of

organizing. Different authors gave various but supplementary definitions. Among others the
following are a few:
- It is the establishing of effective behavioral relationships among persons so that they may
work together efficiently and gain personal satisfaction in doing selected tasks under given
environmental conditions for the purpose of achieving some goals and objectives.
- It is one of the functions of management, the one concerned with choosing what tasks are to
be done, who is to do them, how the tasks are to be grouped, who is to report to whom and
where decisions are to be made.
- It is the grouping of activities necessary to attain objectives, the assignment of each
grouping to a manager with authority to supervise it, and the provision of co-ordination
vertically and horizontally in the enterprise structure.
- It defines the part, which each member of an enterprise is expected to perform and the relation
between such members to the end that their consorted endeavor shall be most effective to the
purpose of the enterprise.
- Organizing is the part of managing that involves establishing an intentional structure of
roles for people to fill in an organization.

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Hence, it is a function of identifying, classifying, grouping, and assigning various activities and
prescribing authority relationships to create an organism or structure capable of accomplishing
predetermined objectives.
Organizing involves,
i) The identification and classification of required activities necessary to attain objectives.
ii) The grouping of activities necessary to attain objectives.
iii) The assignment of each grouping to a manager with authority necessary to supervise it.
iv) The provision for co-ordination horizontally and vertically in the organizational structure.

1.2. Formal and Informal Organization

Formal Organization: The organizing function results in an intentional formal organization

structure of roles in a legally and formally organized enterprise.
 It is an organization, which is established with intentional structure of roles in a formally
organized enterprise. It is one, which is drafted by top management. It is the organization
structure, which defines everything clearly, and explicitly. It is consciously, deliberately, and
rationally designed by management to achieve predetermined objectives.
Thus, formal organization has the following important points:

 It is consciously brought in to existence for the achievement of predetermined objectives.

 Authority and responsibility are clearly defined.
 The line of communication is also formalized (It is shown in organization charts)
 The relationship of the superior and the subordinate is fixed. (it is deliberately impersonal it
is bureaucratic in nature and operated by the rules & regulations; personal issues are not
entertained.)
 It exists in a written form.
Informal Organization:

- It is a network of personal and social relations not established or required by the formal
organization but arising spontaneously as people associate with one another.

- It is undocumented and officially unrecognized relationship between members of an

organization that inevitably emerges out of the personal & group needs of employees. It is an

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 organization, which consists of small social groups and friendly associations with in the
formal organization. It is genuine that whenever formal organizations are formed, informal
social groups are created within its framework. Such groups are created on the basis of
similarity of status, interests, beliefs, attitudes, back grounds, etc.

Such small groups are results of the need of people for social interaction, & for friendly
associations. They affect the formal organization positively or negatively, however,
management neither creates nor abolishes them. Therefore, managers should learn how to
live with it, how to influence it, and how to direct its energy and initiative towards
constructive channels.

Managers, to deal with informal organizations the following general suggestions are helpful:

- Managers accept and understand the informal organizations

- Consider possible effects on informal organizations when they take any action.
- Integrate, as far as possible, the interests of informal groups with those of the formal
organization.

1.3. Organizational Structure & Charts

Organizational Structure:- can be defined as the arrangement and interrelationship of the

component parts and positions of a company. It is the established pattern of relationships
among different components or parts of the organization. There are different forms of
organizational structure: - line / military, functional organization line & staff.

Organizational Charts:- are diagrams of the organizational structure, showing the

functions, departments, or positions of the organization and how they are related.

Organizational Manual:- is the description of the organizational chart, and is designed to

promote, understanding of the basic organizational structure by means of descriptions of the
various jobs that may be listed only by title on the charts.

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 1.4. Departmentalization: Meaning and Bases
Departmentation is a part of the organizing process. In the context of management, it means
dividing and grouping the activities and employees of an enterprise into various departments.
All organizations divide their overall operations in to sub activities and combine these sub
activities in to working groups. This grouping process of specialized activities in a logical
manner is called Departmentation. It implies the division of the total work of an enterprise into
individual functions and sub functions. Then, either on the basis of similarity of work, or
efficiency, these various functions or sub-function are grouped together into work units. The
work units so formed may b called departments, divisions, units, or any other name.
It results:
 In division of work
 In organizational units to be manageable size and
 Utilization of managerial ability based on specialization to secure maximum results.
The basic need of departmentation arises from the limitation on the number of subordinates that
can be directly managed by a superior. If there is no departmentation, it would seriously put
limitations on the size of the organization.
The Bases of Departmentation
The most common bases of departmentation used by organizations are:
 Functional Departmentation
 Product Departmentation
 Geographic / Territorial Departmentation
 Customer Departmentation
 Process Departmentation
 Matrix /project/ and task force
1. Functional Departmentation:
Functions refer to the various responsibility areas of an organizational component. It is the
process of grouping the organization's activities in to units in logical manner on the basis of
essential functions that must be performed to attain organizational objectives/goals.

These functions include marketing, finance, operations, manufacturing personnel, engineering

etc.

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 CEO/President
General Manager

Marketing Finance Manufacturing Personnel

Advantages:- It is logical, scientific and time-tested method because it groups like or similar
activities together which facilitates specialization. (efficiency is fostered through specialization.)
- It makes supervision easier, since each manager is an expert in only a narrow range of skills.
- Tight control of all functional units is assured, because the top managers are responsible for the
end results.
- It simplifies training.
Disadvantage:
- People in a functional department may lose sight of the overall operations of the business; it
in turn invites employees to de-emphasize the overall company objective.
- Workers may develop highly specialized skills, but not general managerial abilities.
Consequently, functional Departmentation is not an ideal training ground for top level
managers.
- Although there is strong relationship between within a function, co-ordination between
functions is reduced.
- Sometimes conflict develops among departments as each unit competes for resources.
- The geographic area served; or the type of product or product line produced may require a
different type of Departmentation.
- Responsibility for profit is at the top.

2. Product Departmentation
It is the grouping of activities on the basis of product or product line. It is adopted by (commonly
used by) manufacturers who produce and sell a number of product lines made up of several
different items; such as drug, food, clothing, machines, automobiles. etc.

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e.g. Product Departmentation of an automobile management enterprise.
General Manager

Car Division Truck Division Bus. Division

Production Marketing

Finance Personnel

Advantage:
- It enables the enterprise to focus attention effort on product lines, making it easier for to
management to see the efficiency and effectiveness of production determining which product
is profitable or not.
- It improves co-ordination between functions relating to a particular product.
- Furnishes measurable training ground for general managers.
- Facilitates use of specialized capital, facilities, skills and knowledge.
Disadvantages:
- Requires more persons with general manager abilities.
- There is an ever-present danger of duplication of activities.

- It presents increased problem of top management control.

3. Departmentation by Geographical Area/Territory

It is often referred to as area or territorial Departmentation, and it groups business activities on

the basis of geographic region or territory, enabling a firm to adapt to local customs and laws and
to survey customer more quickly. It is especially attractive to large-scale firms or other
enterprises whose activities are physically or geographically dispersed.

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 President

Western Region Southern Region Central Region Eastern Region

Engineering Production Accounting Sales

Advantages:
- Results in great saving in time and money. The enterprise can benefit from lower freight,
lower rents and lower labor costs. Thus, it takes advantages of economics of local operations
(places emphasis on local markets and operations)
- Places responsibility at lower level (There will be quick decision.)
- Places measurable training ground for general managers.
- Better face to face communication with local interests.
Disadvantages:
- Requires more persons with general manager abilities /it is costly to implement./
- Duplication of effort
- Increase problem of top management control (This is because of having flat span of
management.)
Sometimes, the decision to set up geographic departments is based on economic
considerations; such as, transportation costs for raw materials, for distribution, etc.
4. Customer Departmentation:
It is the grouping of enterprise activities based on customers' interests. Companies that must
provide special services to different groups set up departments by types of customers, using
customer departmentation. For example, a manufacturer may have both an industrial products
division for its industrial customers and consumer products division for other consumers. An
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 airlines company may make departments its selling departments for travelling agencies,
government passengers, tourists and other customers. Normally, setting up departments by
customers is not a primary form of departmentation. It is used instead within some other
framework.

General
Manager

Production Marketing Finance Personnel

Whole Sale Retail Installment Export

Advantages:
- Encourages concentration on customer needs
- Giving customers feeling that they have an understanding supplier
- Develops expertise in customer area.
Disadvantage:
- May be difficult to coordinate operations between competing customer demands.
- Requires managers and staff expert in customer's problems
 It may result in under utilization of resources in some departments.
- Customer groups may not always be clearly defined.
 There may be duplication of activities.

2. Process or Equipment Departmentation

It is the grouping of enterprise activities according to the products' manufacturing process.
This method of departmentation is logical and used when the machines or equipment used
require special skill for operating and are of large capacity which eliminate organizational

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 diving or have technical facilities which strongly suggest a concentrated location. For
example, a textile factory. may be classified in to Spinning, Walling, processing, etc.

- Economic and
- Technological considerations are the foremost reasons for adopting process departmentation.
- It is mostly found in production departments.
President

Production
Manager

Spinning Dyeing Weaving Processing

Advantage: Disadvantage:
- Achieves economic advantage - Coordination of departments is difficult
- Uses specialized knowledge - Responsibility for profit is at the top
- Simplifies training - It is unsuitable for developing general managers
- Sues specialized technology

6. Matrix Departmentation
- It is an organizational arrangement that developed because of the need for quick completion
of highly technical projects that required significant contributions by two or more functional
groups.
- It begins with functional stricture and then another structure organized by product or by
client /customer or by project is overlaid upon the original structure.

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- The result is that employees are assigned to a basic functional department and, at the same
time, they are assigned to work on a particular product/project or for a particular
customer/client.
- The essence of matrix organization normally is the combining of functional and product
departmentation in the same organization structure.

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 President

Production
Manager

Marketing Production Engineering Finance

Project A Marketing Production Engineering

Manager Specialist-1 Specialist-1 Specialist-1

Project B Marketing Production Engineering

Specialist-2
Manager Specialist-2 Specialist-2

Advantage Disadvantage

 Since there are a number of managers, there are  Conflict in organization authority exists (it lends
more channels of information it self to power struggle.
 It is oriented toward end results. (The project  Possibility of disunity of command exists
objectives are clear.)  It also /results in higher over head costs because
 Professional identification is maintained. more managerial positions are created.
 Resources are used efficiently because workers  Requires manager effective in human relations.
are assigned to different projects as needed and
groups or projects can share equipment.

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 4.5. Span of Management
Span of Management /span of control/- refers to the number of subordinates that a single
manager can directly, immediately and effectively supervise. It is related to the levels. We can
have wide span, which is associated with few organizational levels; and a narrow span which
results in many levels.

Organizations with wide span

Advantage: Disadvantage:
 Supervisors are forced to delegate  Tendency of overloaded superiors to become
 Clear policies must be made decision bottlenecks.
 Subordinates must be carefully selected  Dangers of superior's loses of control
 Requires exceptional quality of managers.

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Organizations with narrow span

Advantages: Disadvantage:
 Close supervision  Superiors tend to get too much involved in subordinate's work
 Close control  Many levels of management
 Fast communication between  High costs due to many levels
subordinates and superiors  Excessive distance between lowest level and top level.

4.6. Authority
Authority is the right to command subordinates action. It is defined as the legitimate power a
manager possesses to act and make decisions in caring out responsibilities. Responsibility is the
obligation of the manager to carry out assigned duties. There are three forms of authority are
called line, staff and functional authority
4.6.1. Line and staff authority
The concept of line and staff is related to authority and positions/functions.

Line and staff authority

This is the relationship between different types of authority exercised by managers of an

organization. These three forms of authority are called line, staff and functional authority.

Line authority: the authority of those managers directly responsible, throughout the
organization chain of command, for achieving organizational goals. It enables a manager to

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 tell subordinates what to do. This authority is represented by the chain of command, which
links superiors and subordinates from top to bottom in an organization. Both line and staff
managers have line authority over their subordinates.

Staff authority: The authority of those groups of individuals who provide line managers with
advice and services. People in staff positions assist and advise line managers. They relieve
some of the line managers' burdens by giving them the information they need to make
operational decisions. People in these positions have the authority to offer advice and make
recommendations; they have staff authority.

Functional Authority: The authority of staff department members to control the activities of
workers of other departments that are related to specific staff responsibilities. This authority
is exercised over people or activities in other departments. Usually limited in scope and
duration; it is exercised one level below the person wholes it.

Line and staff positions/functions:

To classify a position as line or staff, it is related to the degree to which the function in
question contributes to the direct achievement of organizational objectives. The line
functions contribute directly to accomplishing to firm's objectives, while staff functions
facilitate the accomplishment of the major organizational objectives.

- The line functions of an organization are those functions that contribute directly to the
creation and distribution of the goods or services of the organization.
- People with line positions are responsible for physically producing the product or service and
for selling it.
- Staffs people advice and assist line people. That is the only reason these positions exist.
- All staff positions are advisory, staff people may make recommendations, but line managers
retain formal authority and decide what to do with a staff person's advice.

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 President Legal
Service

Research
Development Finance Management Marketing Personnel

Training & Employee Health

Development Safety Section
Designing Production

Production
Workers

4.7. Delegation, centralization and decentralization

Delegation:

Because of human limitation, a single person can't do all tasks necessary for accomplishing a
group purpose. By the same taken, as enterprises grow, it is difficult for one person to
exercise all the authority for making decisions. To solve these problems managers share their
authority and responsibility to their subordinates which is delegation.

Managers get things done through other people. Since top managers cannot personally
oversee all the activities of an organization, they delegate authority to their subordinate

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 managers. It is this delegation of authority that gives subordinate managers the means with
which to act.

Definition: It is the act of assigning formal authority and responsibility for completion of
specific activities to a subordinate.

 Delegation is the assignment to another person of authority and responsibility to carry out
specific activities.
 Delegation is the process of allocating tasks to subordinates giving them adequate authority
to carry out those assignments and making obligated to complete the tasks satisfactorily.
 To delegate means to entrust authority to a deputy so as to enable him to accomplish the
tasks assigned to him.
The Importance of Delegation:

 It frees a manager from some time-consuming duties that can be adequately handled by
subordinates and lets the manager devote more time to problems requiring his/her full
attention.
 Decisions made by lower level managers are more timely than those that go through scalar
layers of management.
 Subordinate managers can reach their full potential of and only if they are given the chance
to make decisions and to assume responsibility for them.
Delegation process involves;

1. The allocation of duties:-

Duties are the tasks and activities that a supervisor desires to have someone else do. Before
authority can be delegated, the duties over which the authority rests must be allocated to a
subordinate.

2. The delegation of authority:-

The essence of the delegation process is empowering another person to act for the manager.
This is a passing of formal rights to act on behalf of another.

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3. The assignment of responsibility:-
When authority is delegated, we must assign responsibility. That is, when one is given
"rights", one must also be assigned a corresponding "obligation" to perform. To allocate
authority without responsibility creates opportunities for abuse, and of course, no one should
be held responsible for what he/she has no authority.

4. The creation of accountability:-

To complete the delegation process, the manager must create accountability; that is,
subordinates must be held answerable to properly carryout their duties. They must accept
credit or blame for their action. So while responsibility represents a subordinate's obligation
to carryout what is assigned, accountability is the obligation to his or her superior to carry out
the assignment in a satisfactory manner. Subordinates are responsible for the completion of
tasks assigned to them and are accountable to their superiors for the satisfactory performance
of that work.

Decentralization vs. centralization

Decentralization is the opposite of centralization. In a centralized set up, decision making

authority is concentrated in a few hands at the top. Contrary to this, is a decentralized
organization, there is dispersal of decision making authority.

It is the tendency to disperse decision-making authority in an organized structure. It is a

fundamental aspect of delegation, i.e., to the extent authority is not delegated, it is
centralized.

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CHAPTER FIVE - STAFFING AN ORGANIZATION

The managerial function of staffing is defined as filling and keeping filled positions in the
organizational structure through identifying work-force requirement, inventorying the people
available recruiting, selecting, placing, promoting, appraising, compensating the training
and/or developing both candidates and current job holders to accomplish their tasks
effectively and efficiently.

5.1. The procurement function

The procurement function is concerned with determining and obtaining the proper kind of
personnel both in quality and quantity. It specifically deals with:
a) The determination of human resource requirements both in quality and quantity,
b) Their recruitment, selection and placement
5.1.1. Human resource planning
Human Resource Management is very important for the survival and prosperity of an organization.
Procurement of right kind and right number of employees is the first operative function of Human
Resource Management. Before selecting the right man for the right job, it becomes necessary to
determine the quality and quantity of people required in the organization. This is the primary
function of Human Resource Planning.
Human resource planning determines the human resources required by the organization to
achieve its strategic goals.
Human Resource Planning is concerned with the planning the future manpower requirement in
the organization. HR manager ensures that the company has the right type of people in the right
number at the right time and place, which are trained and motivated to do the right kind of work
at the right time. Obviously, human resource planning primarily makes appropriate projections
for future manpower needs of the organization envisages plan for developing the manpower to
suit the changing needs of the organization from time to time, and foresees how to monitor and
evaluate the future performance. It also includes the replacement plans and managerial
succession plans.
Human Resource planning is the process by which a management determines how an
organization should move from its current manpower position to its desired manpower position.

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Through planning a management strives to have the right number and the right kinds of people at
the right places, at the right time, to do things which result in both the organization and the
individual receiving the maximum long-range benefit.
As defined by Bulla and Scott (1994) it is ‘the process for ensuring that the human resource
requirements of an organization are identified and plans are made for satisfying those
requirements’.

“Human Resource Planning is a process of forecasting an organisation’s future demand for

human resource and supply of right type of people in right numbers” – J.Chennly.K

Coleman has defined Human Resource Planning as ―the process of determining manpower
requirements and the means for meeting those requirements in order to carry out the integrated
plan of the organization..
Steps [procedures] in human resource planning
Human resource planning refers to a process by which companies ensure that they have the
right number and kinds of people at the right place, at the right time; capable of performing
different jobs efficiently. Planning the use of human resources is an important function in
every organization. A rational estimate to various categories of personnel in the organization
is an important aspect of human resource planning. HRP involves the following steps:
1. Analysis of Organizational Plans and Objectives: Human resource planning is a part of
overall plan of organization. Plans concerning technology, production, marketing, finance,
expansion and diversification give an idea about the volume of future work activity. Each
plan can further be analyzed into sub-plans and detailed programmes. It is also necessary to
decide the time horizon for which human resource plans are to be prepared. The future
organization structure and job design should be made clear and changes in the organization
structure should be examined so as to anticipate its manpower requirements.
2. Forecasting Demand for Human Resources: Human resource planning starts with the
estimation of the number and type of personnel required at different levels and in different
departments. The main steps involved in HRP process are (a) to determine and to identify
present and prospective needs of human resource, (b) to discover and recruit the required
number of persons. (c) to select the right number and type from the available people. (d) to
hire and place in the positions for which they are qualified, (e) to provide information to the

52 | P a g e
 selected people about the nature of work assigned to them, (f) to Promote or to transfer as per
the needs and the performance of employees, (g) to denote if the employees are disinterested
or their performance is not up to the mark, (h) to terminate if they are not needed or their
performance is below standard and shows no hopes of improvement. It is the most crucial
and critical area of HRD. These HRD managers must pay attention to place right man to the
right job through recruitment selection Training and Placement of employees. This calls for
the adoption of a systematic procedure to complete recruitment and selection.
3. Forecasting Supply of Human Resources: One of the important areas of human
resources planning is to deal with allocation of persons to different departments depending
upon the work-load and requirements of the departments. While allocating manpower to
different departments, care has to be taken to consider appointments based on promotions
and transfers. Allocation of human resource should be so planned that available manpower
is put to full use to ensure smooth functioning of all departments.
4. Estimating Manpower Gaps: Net human resource requirements or manpower gaps can
be identified by comparing demand and supply forecasts. Such comparison will reveal either
deficit or surplus of human resources in future. Deficits suggest the number of persons to be
recruited from outside whereas surplus implies redundant to be redeployed or terminated.
Similarly, gaps may occur in terms of knowledge, skills and aptitudes. Employees deficient
in qualifications can be trained whereas employees with higher skills may be given more
enriched jobs.
5. Matching Demand and Supply : It is one of the objectives of human resource planning to
assess the demand for and supply of human resources and match both to know shortages and
surpluses on both the side in kind and in number. This will enable the human resource
department to know overstaffing or understaffing. Once the manpower gaps are identified,
plans are prepared to bridge these gaps. Plans to meet the surplus manpower may be
redeployment in other departments and retrenchment in consultation, with the trade unions.
People may be persuaded to quit through voluntarily retirement. Deficit can be met through
recruitment, selection, transfer, promotion, and training plans. Realistic plans for the
procurement and development of manpower should be made after considering the macro and
micro environment which affect the manpower objectives of the organization.

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 5.1.2. Recruitment:
It is the process of reaching out and attempting to attract potential candidates who are
capable of and interested in filling available positions of an organization. It is concerned with
developing a pool of job candidates, in line with the human resource plan. It is an
intermediary activity between manpower planning on the one hand, and selection of
employees on the other hand.

An important part of the recruiting process is developing a written statement of the content
and the location (on the organization chart) of each job. This statement is called the job
description or position description. This statement lists the title, duties and responsibilities for
that position. Once this position /job description has been established/determined and
accompanying hiring or job specification, which defines the background, experience, and
personal characteristics an individual must have in order to perform effectively in the
position, is developed

 Sources of Recruitment:
Sources of supply are the places, agencies, and institutions to which recruiters go to seek
potential candidates that will fill the vacant positions or the job needed. These sources of
supply are generally categorized in to two.

(i) Internal Recruitment / recruitment from within: this involves recruitment within the
organization; it could be through promotion lateral transfer, demotion or any there from.

Transfer:
It is a shift of a person from one job, organization level, or location to another. The transfer
may be a promotion, demotion, or a shift to another same level position /lateral transfer./

Promotion: refers to a shift for advancement of an employee to a higher job with more
employment and prestige, higher status, and higher responsibility. The possibility of
advancement often serves as a major incentive for superior performance, and promotions are
the most significant way to recognize such superior performance. Therefore, it is externally
important that promotions be fair i.e., based on merit and free from favoritism.

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 Demotion: refers to a shift of an employee to a lower position in the hierarchy due to
inefficiency, and incompetence to fulfill assigned tasks.

Lateral transfer: refers to the movement of an employee from one job or position to another
without involving any significant change in the employment and status

(ii)External /outside/ recruitment: It involves recruitment outside the organization. The major
alternative sources are:

a. Direct application
b. Employee referrals /word of mouth/
c. Advertising
d. Educational institutions
e. Private/public employment agency
f. Other sources such as professional associations
5.1.3. Selection:
 It can be defined as the process of determining from among applicants WHICH ONE FILLS
BEST for the job description and specification which is offered to the job within the
organization. It involves evaluating and choosing among job candidates. The role of
recruiting is to locate job candidates; the role of selection is the evaluate each candidate and
the pick the best one for the position available. Application forms, resumes, interviews,
employment & skill tests, and reference checks are the most commonly used aids in the
selection process.
 Selection is the mutual process whereby the organization decides whether or not to make a
job offer and the candidate decides on the acceptability of the offer.

5.1.4. Orientation and socialization /induction/

It is designed to provide a new employee with the information he/she needs in order to
function comfortably and effectively in the organization. Typically, socialization will convey
three types of information.

(i) General information about the daily work routine;

(ii) a review of the organizations history, purpose, operations, and products or services, and
how the employee's job contributes to the organizations needs, and

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(iii) a detailed presentation, perhaps in a brochure, of organizations policies, work rules, and
employee benefits..

5.2. Training and development function

Training refers to instruction provided for a current job. It has a narrow focus and should
provide skills that will benefit the organization rather quickly. The financial benefits to the
organization will usually occur quickly. Development, on the other hand, has a broader scope
and may not be focused on either the present or future job but more on the organization’s long-
term needs. The payoff is less direct and can only be measured in the long term.
Training is the act of increasing the knowledge and skill of an employee for doing a particular
job.
Training is a short-term process utilizing a systematic and organized procedure by which non-
managerial personnel learn technical knowledge and skill. The purpose of training is to bring
about improvement in the performance of work. It includes the learning of such techniques as
are required for the better performance of definite tasks.
For our purposes, we will differentiate between employee training and employee development for
one particular reason: although both are similar in learning methods, their time frames differ.
Training is more present-day oriented; it focuses on individuals’ current jobs, enhancing those
specific skills and abilities to immediately perform their jobs. For example, suppose you enter the
job market during your senior year of college, pursuing a job as a marketing representative.
Despite your degree in marketing, you will need some training. Specifically, you’ll need to learn
the company’s policies and practices, product information, and other pertinent selling practices.
This, by definitions, is job-specific training, or training designed to make you more effective in
your current job.
Employee development, on the other hand, generally focuses on future jobs in the organization. as
your job and career progress, you will need new skills and abilities. For example, if you become a
sales territory manager, the skills you need to perform that job may be quite different from those
you used to sell products. Now you must supervise sales representatives and develop a broad-
based knowledge of marketing and specific management competencies in communication skills,
evaluating employee performance, and discipline problem individuals. As you are groomed for

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positions of greater responsibility, employee development efforts can help prepare you for that
day.

Organizing human resources is a dynamic activity. Job demands change, which requires altering
and updating an employee's skills. Therefore, managers are involved in deciding when their
subordinates may be in need of training. Thus, training is a process designed to maintain or
improve current job performance; development is a process designed to develop skills necessary
for future work activities.

Training Methods:

There are two different types of training techniques.

(i) On-the-job training

(ii) Off-the-job training

(i) On-the-job training: involves learning methods and techniques by actually doing a job
(performing the work) and increasing the levels of skills of the employee. The employee
usually learns under the supervision of the in mediate boss or co-worker who has greater
knowledge and skills about the job. It is widely used, because it is economic and convenient;
and no special facilities, equipment and training places are required and the employee
produces and contributes to the organizational objective and at the same time he learns job
rotation and job instruction methods are few of the techniques used in on the job training. It
is convenient for small number of trainees. Some of its disadvantages are: - it creates
disinterest of employees, employees have dual responsibility, & it is not convenient for large
number of employees.
(ii) Off-the-job training: This technique involves participation of employees in a series of
events removed from the actual performance of the organization and the work situation.
5.3. Maintenance and utilization

Procured and trained/developed employees should be maintained and utilized utmost. This
requires adequate and equitable remuneration of personnel, the creation of opportunities for
progress, and a mechanism of evaluating their contribution. Compensation and performance

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 appraisal are at the heart of the maintenance and utilization function of human resources
management.

5.3.1. Compensation

Compensation is adequate and equitable remuneration of personnel for their contributions to

the achievement of organizational objectives. From an employee’s point of view, pay is a
necessity in life, it is the means by which employees provide for their own and their families,
needs, it is a contributing factor to their efforts as what they are paid indicates their worth,
etc. for the employer, compensation constitutes the lion’s share of costs (about 50%), is the
major means of attracting and retaining employees, it can provide an image to the
organization, etc.

Methods of payment

Employee’s salaries can be computed based on

a) the time they worked, e.g. salaries

b) the output they produced(piece rate system) or

c) a combination of both.

5.3.2. Fringe Benefits (supplementary compensation)

These are extra benefits given to an employee in addition to salary or wages. Fringe Benefits
constitute a significant portion of the employee pay (sometimes up to 40% of pay roll
expenses) .Fringe Benefits broadly classified these are two type

a) Time-off pay—these are payments for the time not worked and include, paid vacations,
paid holidays, paid sick leave, and others.

b) Non-pay benefits-these are not paid in cash but include expenditures on items such as
medical services, transportation, insurance, cafeteria services, education, child care
facilities, and others.

5.3.3. Performance Appraisal

It is the process used to determine whether an employee is performing according to what is
designed or intended. It helps to formally evaluate the adequacy of recruitment and selection
and suggests whether or not the employee will need to be replaced, or trained.

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 The many purposes of performance appraisal can be summarized in the following key points:

 Performance appraisal should lead directly to increased productivity.

 It helps in salary administration
 It plays a vital role in determining an employee for promotion.
 Appraisals are used as a vehicle for bringing about employee development because the
results of the performance evaluation can serve as a basis for coaching and counseling.
 Performance appraisal results are used extensively in human resource research.

5.4. Separation
Separation: This refers to those factors that bring the termination or ceasing of the
relationship between the organization and the employee. Separations can be initiated by
employers like mandatory retirement, dismissal, and layoff; by the employees like
resignation, voluntary retirement, and quits.

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 CHAPTER SIX
THE LEADING FUNCTION

6.1. Meaning and the need for leadership

Leading according to Kooth and Weihrich, is the process of influencing people so that they will
contribute to organization and group goals. It is influencing people so that they will work
willingly and enthusiastically toward the achievement of organizational goals ultimate
objectives. When we say influencing, it does not mean that coercing/forcing, imposing,
suctioning or pushing people behind. It means rather-motivating people so that they contribute
their maximum effort for the achievement of organizational goal.

Leading/Directing is that part of management function which actuates the organization members
to work efficiently and effectively for the attainment of organizational objectives. Planning,
organizing, and staffing are merely preparations for doing the work, and the work actually starts
when managers start performing the directing function. Directing is the interpersonal aspect of
management, which deals directly with influencing, guiding, supervising, and motivating the
subordinates for the accomplishment of the per determined objectives.

Directing is a challenging function of management, because it deals with the human element of
the organization, which represents a complex of forces about whom not much is known. A
person's beliefs, hopes, ambitions, behavior, satisfaction, and interaction with other persons are
all involved in the directing process.

Leadership is the process of influencing individuals and groups to set and achieve goals. It is an
act of influencing and motivating people to perform certain tasks to achieve organizational
objectives. Thus, an effective leader is expected to have adequate knowledge of human
behavior, including the ability to persuade and motivate people and communicate with them
properly.
a) "The art or process of influencing people so that they will strive willingly and
enthusiastically towards the achievement of group goals."
b) "Leadership is the ability to secure desirable actions from a group of followers voluntarily
without the use of coercion."

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c) "The process of directing & inspiring workers to perform the task related activities of the
group."
People should be encouraged to develop not only willingness to work, but also willingness to
work with zeal and confidence.
In short leadership involves,
 Influencing and interacting with people to attain goals.
 Related to a particular situation at a given point of time and a specific set of
circumstances.
 By accepting the willingness, followers will make the leadership process possible.

6.2. Concepts and meanings of Leadership theories

1. The trait theory of leadership:-

Traits are inborn and inherent personal qualities of individuals. This theory believes leaders
possess certain specific inborn traits, which are inherited rather than acquired. It has a root from
"the great man theory" dating back to the ancient Greeks & Romans time, holds that leaders are
born not made.

The trait theory studies focused on the personal traits of leaders and attempted to identify a
set of individual characteristics that distinguished leases from followers' also successful leaders
from unsuccessful ones. In general the trait theory hasn't been a fruitful approach to explain
leadership.
2. The behavioral theory of leadership:-
The behavioral theory of leadership focused on what leaders do rather than their traits. Studies
showed that one set of traits/leadership style might not be equally appropriate in all situations.
This theory suggested that there were two distinct types of leadership which are known as task-
oriented /production centered/ and employee oriented /people centered.

3. The situational /contingency/ theory of leadership:

According to this theory, leadership is strongly affected by a situation from which a leader
emerges and in which he/she works. It's a function of the leader, the followers and the situation.

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It attempts to discover that the one unique set of leadership traits were largely unsuccessful.
Modern management theorists are more prone to the belief that leadership is more complex; that
is it can't be represented by one set of traits or by single set of behavior, thus effective leadership
behavior depends on the environment or the situation.

6.3. Concept and meaning of Leadership Styles

Managers in an organization shall relatively be consistent in the way they try to influence others
behavior. The manager who dominates subordinates in one situation is not likely to use a high
degree of consideration and participation in another. This behavioral pattern of leaders is known
as leadership style.

It can be defined as the various patterns of behavior favored by leaders during the process of
directing and influencing workers, which is determined by leaders personality, experience and
value system, nature of followers and environment.
There are three important leadership styles
a) Autocratic
b) Democratic /participate/
c) Laissez-faire /free rein/
a). Autocratic style - "I" approach,
Is a leadership approach in which a manager does not share decision making authority with
subordinates? Autocratic managers may ask for subordinates' ideas & feedback about the
decision, but the input does not usually change the decision unless it indicates that something
vital has been overlooked.

Under certain conditions, the autocratic style is appropriate. eg. During crisis & when
subordinates are trainees and when there is act of insubordination.
It is also effective when managers face issues that they are best equipped to solve, create
solutions, whose implementation does not depend on others & desire to communicate through
orders & instructions

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This leadership style is closely associated with the classical approach to management and it is
characterized by the following behavioral patterns of leaders.

 The leader doesn't seek any opinions from subordinates, holds conflicts and with less
creativity.
 Exercises rigid control and close supervision, relies on punishments.
 Subordinates typically react by doing only what's expected and by suppressing their
frustration.
 The autocratic leader is task-oriented, gives little value on showing consideration to
subordinates.
 Depends on one way communication downward only.
b). Participate (democratic) style - "We" approach
It is a leadership approach in which a manager shares decision making authority with
subordinates. It involves others and lets them bring their unique viewpoints, talents &
experiences to bear on an issue.
Before subordinates are made to participate in the decision making process:
a. mutual trust & respect must exist between them & managers
b. subordinates must be willing & trained to be competent to solve problems
c. managers should give time & be patient to make subordinates participate.
However, limits on subordinates' participation must be clearly spelled out before hand there
should be no misunderstanding about who holds authority to do what.
This leadership style is characterized by the following behavioral patterns of the leader.

 Allows the group members to participate in decision making process, proposed actions and
encourages participation at all levels.
 The leader will develop two way communications and promote team sphere.
The democratic leader explains to the group members like reasons for personal decisions when
necessary and objectively communicates criticism and praise to subordinates.
c). Free-rein style -"They" approach
It empowers individuals or groups to function on their own, without direct involvement from the
managers to whom they report. The style relies heavily on delegation of authority, and works

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best when the parties have expert power, when participants have and know how to use the tools
& techniques needed for their tasks.

Free-rein leadership works particularly well with managers & experienced professionals in
engineering, design, research & sales. Such people generally resist other kinds of supervision.
In most organizations managers must be able to use the decision making style that circumstances
dictate. Because people & circumstance constantly change & because subordinates must be
prepared to the change, an effective manager switches from one leadership style to another as
appropriate.
The following are the behavioral patterns of laissez-faire leader.

 Laissez-faire leaders make a few attempts to increase productivity, to develop their attempts
or to meet subordinates psychological needs.
 Use their power very little, if a tall, giving subordinates a high degree of independence in
their operation.
 These leaders maintain hands off policy where each subordinate work is clearly defined.
 Such leaders depend on subordinates to set their own goals and the means of achieving them,
and they see their role as one of aiding the operations of followers by furnishing them
information and acting primarily as a contact with the groups’ external environment.
The laissez-faire leader has little or no self-confidence in his/her leadership ability, sets and goals
for the group and minimizes communication and group interaction.

6.4. MOTIVATION

- Motivation refers to the forces to a person that arouse enthusiasm and persistence to pursue a
certain course of action. It means stimulating people to action through incentives or
inducements

The study of motivation helps managers understand what prompts people to initiate action,
what influences their choice of action, and why they persist in that action over time.
- People have basic needs such as for food, achievements or monetary gain that translate into
an internal tension that motivates specific behaviors with which to fulfill the need. To the
extent that the behavior is successful, the person is rewarded in the sense that the need is

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 satisfied. The reward also informs the person that the behavior was appropriate and can be
used again in the future.

Rewards are of two types

a. Intrinsic reward - the satisfaction a person receives in the process of performing a

particular action. The completion of a complex task may bestow a pleasant
feeling of accomplishment, or solving a problem that benefits others may fulfill a
personal mission.
b. Extrinsic rewards - given by another person, typically the manager, and include
promotion and pay increases.
6.4.1. THEORIES OF MOTIVATION

The following are some of the basic theories of motivation:

1. The carrot and stick approach

The carrot and the stick metaphor relates to the use of rewards and penalties in order to
induce desired behavior. It comes from the old story that to make a donkey move one must
put a carrot in front of him or jab him with a stick from behind. Carrot represents rewards
(money, bonus, salary increase, promotion etc.) while stick implies penalty, punishment, fear
of loss of job, demotion, etc.

2. Hierarchy of Needs Theory (Abrham Maslow)

It proposes that humans are motivated by multiple needs and that these needs exist in hierarchy
order:
1. Physiological needs - the need for food, water air & sex
2. Safety needs - the need for security & safety
3. Belongingness/Social needs - the need for friendship, interaction and love
4. Esteem needs - the need for respect & recognition
5. Self-actualization needs - the ability to reach one's potentials.

Self actualization
Need

Esteem need
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Social Need

Security Need
 This theory is based on

1. Only an unsatisfied need can influence behavior; a satisfied need is not a

motivator.
2. A person's needs are arranged in a priority order of importance. The hierarchy
goes from the most basic needs to the best complex.
3. A person will at least minimally satisfy each level of need before feeling the need
at the next level.
4. If need satisfaction is not maintained at any level, the unsatisfied need will
become a priority once again. For example, for a person who is presently feeling
social needs, safety will become a priority once again if he or she is fired.
3. The two-Factor Theory (Herzberg 1975)

The findings of the two factor theory suggested that the work characteristics associated with
dissatisfaction are quite different from those pertaining to satisfaction which prompted the notion
that two factors influence work motivation. These factors are hygiene factors and motivation
factors.

Hygiene factors (salary, job security, working conditions, status; Company policies; quality of
technical supervision and quality of interpersonal, relationships among peers, supervisors, and
subordinates) are the primary elements involved in job dissatisfaction. When present in
sufficient quality, they have no effect; when absent, they can lead to job dissatisfaction.
Motivation factors (achievement, recognition, responsibility, advancement, the work itself, and
possibility of growth) are the primary elements involved in job satisfaction. When present, they
can stimulate personal and psychological growth.

6.5. Concept and meaning of communication

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Communication is the tool in which we exercise to influence others, bring about changes in the
attitudes and views of our associates, motivate them, establish and maintain relations with them.
Without communication there would be no interaction between persons.

 "Communication is the transfer of information from one person /sender/ to another person
/receiver/ to achieve goals."
 "It's a process consisting of a sender transmitting a message through media to a receiver who
respond"

Importance of Effective Communication

Effective communication is important to managers for three primary reasons.
 Communication provides a common thread for the management processes of planning,
organizing, leading, and controlling.
 Effective communications skills can enable managers to draw on the vast array of talents
available in the multicultural world of organizations.
 Managers spend a great deal of time by communicating face-to face, electronic or telephone
communication with employees, supervisors, suppliers or customers.
The Communication Process
Communication takes place in the relationship between a sender and a receiver. It can flow in
one direction and ends there.

A model of the communication process:

Transmit Receive
Message Message

Sender Enco Channel RECEIVER

ding
SENDER
(Source) Decoding

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 Noise

Feed back
Receive Transmit

a) Sender: The sender/source of message initiates the communication. In an organization the

sender will be a person with information, needs or desires and a purpose for communicating
them to one or more other people.
b) Receiver: The person whose senses perceive the sender's message. There may be a large
number of receivers, as when a memo is addressed to all members of an organization or there
may be just one, as when one discusses something privately with a colleague.
c) Encoding: It takes place when the sender translates the information to be transmitted into a
series of symbols.
d) Decoding: The process by which, the receiver interprets the message and translates it into
meaningful information. It's a two-step process.
e) Channel: The formal medium of communication between a sender and a receiver.
f) Noise: Any factor that disturbs confuses or interferes with communication. Noise can arise
along what is called the communications channel or method of transmission.
g) Message: The encoded information sent by the sender to the receiver.
h) Feed back: It's the response of the receiver to the sender, also passes through the same
process.
Communication can be
i) Formal Communication
a) Downward communication Messages from higher authority levels to lower levels.

b) Upward communication  Messages from subordinates to supervisors and to higher

levels.

c) Horizontal communication  That flows between persons of equal status in the

organization.

d) Vertical communication  May be downward or up word communication.

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ii) Informal Communication

* Grapevine.

CHAPTER SEVEN- THE CONTROLLING FUNCTIONS

7.1. Meaning and need for control

In the series of managerial functions, planning is the first function and controlling is the last.
Success in business is very often proportionate to the astuteness of its planning and the skill with
which it is controlled. Plans can be effectively achieved in most organizations only with good
controls, and planning is always pre-requisite for controlling. Planning seeks to set goals and
programs and control seek to secure performance in accordance with plans.

Definition
a) According to Kountze and O’Donnell,, "The managerial function of control is the
measurement and correction of the performance of activities of subordinates in order to make
sure that enterprise objectives and the plans devised to attain them are being accomplished.
It's thus the function of every manager, from the chief executive to the Forman."
b) "Controlling is the process by which management sees if what did happen was what was
supposed to happen. If not, necessary adjustments are made." Moore.

7.2. Control process

In controlling process there are three steps,
1. Setting standards
2. Measurement of performance

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 3. Taking corrective action
1) Setting Standards:
Standards may be tangible or intangible. Greater emphasis should be laid on tangible standards.
The standards in tangible terms may be in terms of output, costs, profit, time persons available
for training etc. intangible terms standards may be for the results to be expected from a training
program, employee morale, advertising campaign, etc.
Organizations create standards to help measure and monitor both productivity and quality
efforts. People and processes are governed by qualitative and quantitative standards. An
organization uses these standards to teach, train, and evaluate organizational performance.
2) Measurement of Performance and comparing it against standards
An organization measures actual performance of people and processes to ascertain if they are
functioning according to plans and expectations. After it has been measured it will be compared
against the established standards.
3) Taking Corrective Actions
As soon as the deviations are reported, it is the duty of the manager concerned to take steps to
correct the past action or at least to bring similar action closer to the standards in future. When
significant deviations from established standards occur, the organization must determine the
cause by identifying the nature and scope of the problem
7.3. Types of control
Controlling can be feed forward, concurrent or feedback controls.
1. Feed forward controls are preventive in nature. They are created to screen out possible
causes of problems. Procedures and training can be preventive as well as remedial.
2. Concurrent controls monitor ongoing operations as they occur in real time, allowing for
instant reactions and the spotting of trends.
3. Feedback controls are after action controls. Inspecting output after an operation has been
performed and soliciting customer feedback are examples of after-action control.
All the three types of controls are important to managers and their organizations. When designed
and used properly, they can prevent, identify, and correct deviations from established standards.

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