Introduction to Management Course: MGMT 201

College of
Finance and Management
Studies
Department of Management

Introduction to Management-Module

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Introduction to Management Course: MGMT 201

Batu, Oromiyaa
June, 2020

Table of Contents
Course overview……………………………………………………….………………………
I
1. Module introduction.............................................................................................II
CHAPTER ONE.......................................................................................................1
1. FUNDAMENTALS OF MANAGEMENT..............................................................1
1.2 Concept and definition of Management..........................................................1
1.3 Significance of Management...........................................................................5
1.4 Levels of Management and types of Management.........................................8
1.5 Managerial roles and Skills..........................................................................10
CHAPTER TWO......................................................................................................18
DEVELOPMENTOFMANAGEMENT THOUGHT............................................................18
2.1 An over view................................................................................................18
2.2. Rational of studying management thought..................................................18
23 Practices in management............................................................................19
24 Evolvement of Theories in Management.........................................................20
2.5 FORERUNNNERS TO SCIENTIFIC MANAGEMENT.............................................22
2.6.1 Early Contributors to Scientific Management..............................................22
2.7 THE ERA OF CLASSICAL MANAGEMENT..........................................................23
2.8THE HUMAN-RELATION MOVEMENT................................................................35
2.9The Hawthorne Study.....................................................................................36
2.10 THE MODERN ERA......................................................................................39
CHAPTER THREE...................................................................................................45
3.THE PLANNING FUNCTION....................................................................................45
3.1 Concepts and need for planning....................................................................45
3.2 Types of plans................................................................................................50
CHAPTER FOUR.....................................................................................................65

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Introduction to Management Course: MGMT 201
4. THE DECISION MAKING.....................................................................................65
4.1 Meaning of decision making..........................................................................65
4.2 Rational decision making process..................................................................65
4.3........................................................................................................................68
CHAPTER FIVE......................................................................................................72
5. THE ORGANIZING FUNCTION............................................................................72
5.1 Concept of organizing and organization........................................................73
5.2 Formal and informal organization..................................................................74
5.3. Organization chart........................................................................................77
5.4 Departmentalization: Meaning and Bases.....................................................79
5.5 Span of management.....................................................................................84
5.6. Authority and power: Source of power..........................................................85
5.7. Line and staff authority.................................................................................88
5.8. Delegation, centralization and decentralization............................................88
CHAPTER SIX........................................................................................................96
6. STATFING AN ORGANIZATION...........................................................................96
6.1 The procurement function.............................................................................97
CHAPTER SEVEN.................................................................................................114
7. THE LEADING/DIRECTING FUNCTION.................................................................114
7.1 Meaning and the need for leadership..........................................................115
7.2 Concept and meanings of Leadership theories............................................117
7.3. Concept and meaning of Leadership styles................................................120
7.4 Motivation....................................................................................................121
7.5 Concept and meaning of Communication....................................................141
CHAPTER EIGHT..................................................................................................145
8. THE CONTROLLING FUNCTION........................................................................145
8.1 Meaning and need for control......................................................................145
8.2 Control process...........................................................................................146
8.3 Types of Control...........................................................................................147
8.4 Techniques of control...................................................................................148
8.5 Effective control system..............................................................................149
Reference ………………………………………………………………………………………… 151

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Introduction to Management Course: MGMT 201

1.Module introduction
Dear students, this material is prepared with a due considerate so as to enhance your
understanding about the changing trends and crucial issues in management. With
regard to this, this module is sorted from different types of relevant management
books to assure the quality of the material as well as to equip you with an in-depth
understanding about the gradual evolution of management discipline.

Moreover, this module contains eight chapters; under chapter one you will be
introduced with the general an overview of management, in chapter two you will
discover basic concepts about early contributors to management thought, in chapter
three you will discover the planning function of management, under chapter four you
will be introduced with the decision making, under chapter five you will be introduced
with the organizing function of management, under chapter six you will be introduced
with the staffing function of management, under chapter seven you will be introduced
with leading function of management, and finally under chapter eight you will be
introduced with the controlling function of management.

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Introduction to Management Course: MGMT 201

CHAPTER ONE
1. FUNDAMENTALS OF MANAGEMENT
An overview of Management

We often come across the word management referring to people who run enterprises
organized as either sole-trading or partnership firms. These organizations are either
owner-manager or managed by professional managers. But in the current situation
require professionally trained people to manage the business. The extent of success
these managers achieve depends on their knowledge of management theory and its
skillful application. In the transition from owner-managed enterprises to professional-
managed enterprises, profit is no longer the sole indicator of success. The
management is obliged to put up performance in areas which are concerns of groups
other than owners. Hence, students should be familiar with the concepts and action
needed to make successful managers.

Learning Objectives
By the end of this chapter, you should be able to:
 Understand the meaning and concepts of management

 Identify the different managerial skills and hierarchy

 Identify and describe the five functions of management and explain how they
are applied in practice

 Discussed whether management is an art or a science

 Demonstrate that management concepts have universal applications

 Differentiate the major differences between managerial functions and

managerial roles

1.2 Concept and definition of Management

Management is essential at all levels of an organization. But the word management
has been given different interpretations. It is used as a noun, a process, and a
separate discipline.

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Introduction to Management Course: MGMT 201
1.1.1 Management as a noun
In general and popular usage, management refers to a distinct group of people
who direct the activities of other people and material resources toward the
attainment of predetermined goals. Giving a Broader meaning to it, one can look
at management as a resource, a system of authority, and a class of elite.
1.1.2 Management as an economic resource: The economist's view of
management is that it is a factor of production just like entrepreneurship, capital
and labor. The managerial resource, to a large extent, determines organizational
effectiveness and efficiency. Hence in a dynamic environment managerial
development is more important and its use must be more intensive.

1.1.3 Management as a system of authority: Management is a system of

authority in the sense that it consists of a team of managers who are
responsible for making decisions and supervising the work of others. Managers
at different levels possess varying degree of authority. Higher level managers
manage managers at middle levels. Middle and lower level managers supervise
and control their subordinate managers and workers.

1.1.4 Management as a class of elite: Sociologists view management as a class

and status system. Increasing complexity of management in the modern
complex organization has led to managers being regarded as a distinct class in
society, who possess knowledge and skill of higher order. Access to managerial
positions is based on achievement criteria, rather than on ascriptive criteria (i.e.
on family and social origins). This development is viewed by some as managerial
revolution in which the managerial class threatens to become autonomous
groups with increasing amount of power. Others view this development not with
alarm because increase in power of managers attracts more of them, which
prevents managerial autocracy.

1.1.5 Management as a process

Interpreted as a process, Management consists of a series of inter-related
managerial activities classified into various functions with a systematic
approach, so as to integrate physical and human resource into an effective
operating unit. Management is thus, regarded as the process by which a co-
operative group directs action towards common goals.

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1.1.6 Management as a discipline
Another connotation of management is that it is a separate discipline having a
systematized body of knowledge which managers use in performing their jobs.
As a separate field of study, management includes the principles and practice of
general management as well as of the various functions of management. It has
developed its own techniques and approaches. The theoretical foundations of
management have evolved on the basis of experience, observation and
scientific investigations.

However, management as a discipline has along history; there are no common

agreements among its experts and practitioners about its precise definitions. Various
management schools or scholars defined management from their perspective and
experiences. The most common definition of management that have been defined by
different schools of thought are;
1. Process School: The process School defines management in terms of functions
undertaken by the manager in an integrated way to achieve organizational purposes.
According to Henri Fayol, to manage is to forecast and plan, to organize, to command,
to coordinate and to control. All other definitions of management related to this school
are marginal additions, deletions, or elaborations of the functions listed out in the
above definition.
2. Human Relations School: This school emphasizes the human aspect of
organization and conceives it as a social system. It is a social system because
managerial actions are principally concerned with relations between people. In fact,
management is concerned with development of people and not the direction of things.
The essence of this school is well reflected in the definition of Lawrence Appley to
whom management is the accomplishment of results through the efforts of other
people.
3. Decision School: The Decision School defines management as rule-making and
rule-enforcing body. In fact the life of a manager is a perpetual choice making activity
and whatever a manager does, he does through his decisions. Moreover, decision
making power provides a dynamic force for managers to transform the resource of
business organization into a productive and cooperative concern.
4. System and Contingency School: According to this school, organizations like
any living organism must adapt themselves to their environments for survival and

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Introduction to Management Course: MGMT 201
growth. Thus, management involves designing organizations adaptable to changing
markets, technology and other critical environmental factors. The systems theory of
organizations are organic and open systems consisting of interacting and
interdependent parts and having a variety of goals. Managers are supposed to
maintain balance among the conflicting objectives, goals and activities of members of
the organization. He must achieve results efficiently and effectively. According
Contingency School there is no best way to design organizations and manage them.
Managers should design organizations, define goals and formulate policies and
strategies in accordance with the prevailing environmental conditions.
Different schools of thought defined management differently due to three reasons: 1.
Difference in perspectives of management and organization theories, 2. shifts in
emphasis in the study of the organization from economic and technical aspects to
conceptual and human aspects, and 3. focus on internal and external environments of
the organization.

In general, the following are some of the common and most widely used definitions of
management given by different scholars of management.
 Management is the art of getting things done through/ with people in a formally
organized group.
 Management is set of activities (including planning & decision making,
organizing, leading and controlling) directed at an organization’s resources
(human, finance, physical and information) with the aim of achieving
organizational goals in an effective and efficient manner.
 Management is the art of knowing what you want to do in the best and
cheapest way.
 Management is the process of planning, organizing, staffing, directing/ leading
and controlling the use of resources effectively and economically to attain
objectives.
 Management is the art of securing maximum results with minimum efforts so as
to secure maximum happiness and prosperity for employer and employee; and
to give best services to the public.
 Management is the process of working with/ through others to effectively
achieve the organizations objectives by efficiently utilizing scarce resources of
the organization in this changing environment.
 Management is the process of designing and maintaining an environment in
which individuals, working together in groups, effectively accomplish selected
aims.

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Introduction to Management Course: MGMT 201
1.3 Significance of Management
Management is one of the most important human activities. It is essential to ensure
the coordination of individual efforts where people are working in group to accomplish
activities those could not be achieved by individual effort.
Ever since people began forming groups to accomplish aims they couldn’t achieve as
individuals, managing has become essential to ensure the coordination of individuals’
effort. As society has come to rely increasingly on group effort, and as many organized
groups have become large, the task of managers has been rising in importance. The
basic purpose of management is to ensure that organizational goals are achieved in
an effective and efficient manner.
Organizations and Managers
For better or worse, our society is strongly influenced by managers and their
organizations. Organizations play major roles in our lives. They influence our behavior.
Every scientific and technological development is the result of organizations, and the
achievements of the organizations are the achievements of their managers.
Therefore, understanding how organizations operate and how they are managed is
important.
Any organizations are established to accomplish certain defined objectives. This is
possible when resources are properly combined and effectively managed. Defining
organization is relatively simple but the concept of management is more elusive.
Organization is a group of people working together in a structured and coordinated
fashion to achieve clearly stated, and commonly held sets of goals or objective; or a
group of people associated for such as business, politics, religious, athletic, social and
other purposes. It requires human beings to interact or communicate, and it is where
each member do part of jobs to meet objectives.
Organizations create surplus. This surplus in business organizations termed as profit,
where as in non-profit organizations is satisfaction of the needs.
All organizations use resources from their environment. The basic resources are:
human resources (managerial talent and labor), financial resources (the capital used
by the organization to finance both ongoing and long term operations), physical
resources (raw materials; offices and production facilities, and equipments), and
information (usable data needed to make effective decisions).
These resources are generally obtained from the organization’s environment.

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Introduction to Management Course: MGMT 201
Managers are responsible for combining and coordinating these various resources to
achieve organization’s goals and are chiefly concerned with efficient combination of
resources and obtaining results through people.
A manager is someone whose primary responsibility is to carry out the management
process. He is in particular who plans & makes decisions, organizes, leads & controls
humane, financial, physical and information resources. To obtain results managers
should provide healthy working atmosphere, manage resources effectively and
efficiently, treat human beings as mature, creative and innovative creature rather
than passive and lifeless machine.
Organization/ enterprises succeed if there is competent leadership/ manager.
Competent manager turn the losing concerns (organization) while incompetent
managers could hasten its closure.
Management is essential whenever and wherever human efforts are to be undertaken
collectively to achieve specific goals. No group activity can succeed with out
management.
Efficiency/ Efficient mean using resources wisely in a cost-effective way and it is
concerned with the relationship between input and output i.e. the achievement of
ends with the least amount of resources. Where as effectiveness/ effective means
making the right decision and successfully implementing them, i.e. the achievement
of objectives or getting things done right.
1.3. Managerial function an overview
We have already discussed that management is a process. It comprises different
stages. These stages in the process are known as the functions of management. Each
of these functions are described below:
(a) Planning
Planning is deciding in advance what is to be done, when it is to be done, how it is to
be done and why it is to be done. It emphasizes the fact that if one knows where he is
going; he is more likely to get there. Planning involves (i) problem-solving and (ii)
decision-making. Whenever there is a problem, the manager should know what
alternatives are there to solve it. Out of the alternative courses of action he has to
choose the most suitable one. This process of making choice is known as decision
making. Planning requires decisions to be made on what should be done, how it
should be done, who will do it, where it will be done, and why it is to be done. The
essential part of the planning consists of setting goals and programmers of activities.
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Introduction to Management Course: MGMT 201
(b) Organizing
After plans have been drawn, the management has to organize the activities.
Managers determine what activities are necessary to achieve the objectives and how
these activities should be divided among the departments and employees. The
performance of any activity requires different type of work. Suppose the manager of a
sugar mill decides to produce 100 tons of sugar. This is his objectives. Now to achieve
this, he has to divide the activities and operations into certain departments. The
production work is given to the production department; finance department is
assigned the work of arranging funds; personnel department is to procure people with
required skills and the sales department is to take care of sales. The organizing
function of management involves creating departments and defining the duties and
responsibilities of people in different positions within each department.
(c) Staffing
Staffing is concerned with employing people for the various activities to be performed.
The objectives of staffing is to ensure that right type of people have been recruited for
different positions. It includes the function of recruitment, selection, and placement of
employees.
(d) Directing
The directing function of management includes guiding the subordinates, supervising
their performance, communicating information and motivating. A manager should be
a good leader.
He should be able to instruct and guide his subordinates in the work assigned to them.
He should keep a watch on the performance of his subordinates and help them out
whenever they come across any difficulty. The communication system, i.e, exchange
of information should take place in clearly understandable words and without delay.
Information should flow from managers to workers and from workers to managers at
the right time. Managers should also understand the needs of subordinates and
accordingly inspire them in their work.
(e) Controlling
This function of management consists of the steps taken to ensure that the
performance of work is in accordance with the plans. Controlling means measuring the
actual performance with the planned one. If differences are noticed, corrective steps
are taken which may include revision of plans, improvement in the division of work
and providing better guidance.
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(f) Co-ordination
We have discussed each of the five vital functions of management separately. But it is
important to note that all the activities should contribute to the achievement of the
objectives of the business as a whole. The heads of different departments should not
treat each other as competitors but should work as organs of one body. As the proper
functioning of every organ of a human body is important for a healthy body, the work
of every department is important for the organization as a whole. Managers should,
therefore, see that everybody in the organization understands its objectives and works
in co-operation with others to achieve these objectives. This function of management
is called co-ordination. It consists of harmonizing group effort so as to achieve
common objective.

1.4 Levels of Management and types of Management

We have already stated how managers jointly perform the various functions. Different
managers perform different types of duties. Some managers decide about the
objectives of the
Business as a whole: some managers perform functions to achieve these and some of
the managers are concerned with the supervision of day- to- day activities of workers.
Managers performing different types of duties, May thus are divided in to three
categories:
 Top level Managers
 Middle level management
 Lower level management

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POSITION FUNCTIONS

Board of directors
and chief TOP Defining the objectives and
executives LEVEL formulating the policies.

Departmental Identifying the depart- mental

heads and guiding the lower
managers obobjectives and
MIDDLE level towards the
LEVEL achievement of
these

Supervisors
and foremen LOWER Carrying out
LEVEL The operations
and their
supervisions

WORKERS

.
.

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Introduction to Management Course: MGMT 201

The diagram show that the top level management includes the board of directors
and the chief executives . the chief executives may have , the designation of
chairman, managing directors, president oe General Manager. This level determines
the objectives of the Business as a whole and lays down policies to achieve theses
objectives (Making of policy means providing guide lines for action and decision). The
top management also exercises an overall control over the organization. The middle
level Management includes heads of various departments e.g. production, sales, and
other departmental managers some times senior departmental heads are in the top
level management. The objectives of the business as a whole are translated in to
departmental objectives for the middle level Management. The heads of departments
then issue instructions to subordinates so as to achieve these objectives. Middle level
managers are particularly concerned with the activities of their respective
departments.

1.5 Managerial roles and Skills

Regardless of level or area within an organization, all managers must play certain
roles and exhibit certain skills to be successful. A person doing certain things meets
certain needs in the organization, and has certain responsibilities.
Managerial roles
In previous section we tried to explain the function of Management these are the broad
areas of activities that represent the ends for which management is practiced where as
managerial roles represent specific tasks that managers under take to ultimately
accomplish the functions of planning, organizing, staffing, leading and controlling. They are
organized set of activities belonging to an identifiable job that give more realism and
systematize managerial functions.

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Introduction to Management Course: MGMT 201
Mintzberg identified ten roles of managers and categorized them in to three groups:
 they are
1. Interpersonal roles
2. Informational role and
3. Decisional role
Interpersonal roles -refers to activities that involve interacting with others.
o External or internal to the organization
o At higher or lower levels
 arise directly from manager’s formal authority and classified into as
1. Figurehead role
o representing the organization as the ceremonial and symbolic functions,
acting as public official for the organization. or performing ceremonial
duties important for the organization’s image and success. e.g.
 taking visitors to dinner; attending ribbon-cutting ceremonies;
 the mayor who presents a key of a city to a local hero.
 the supervisor who attends the wedding of the mechanic operator.
 the sales manager who takes important customer to lunch; and the
like.
o is the most basic and the simplest of other roles.
2. Leadership role
o is directing and coordinating the activities of subordinates to accomplish
objectives.
o include some aspects like

 creating a vision that employees can identify with.

 doing with staff:- hiring, training, promoting.
 motivating subordinates to meet organizational needs.

3. Liaison role
o Relationship made outside the areas of command or interacting/ dealing
with managers, people/ peers outside the organization. It helps to seek
support from people who can affect the organization’s success.

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Introduction to Management Course: MGMT 201
Managers are asked to serve as figurehead, leader and liaison. Figurehead and liaison
roles give access to great deal of important information to managers.
Informational roles
Informational roles is the processing of information, and flow naturally from the
interpersonal roles
It is an activity that focuses on obtaining and disseminating data important for the
decisions that managers need to make.
It is The process of carrying out this role places a manager at a strategic point to
gather and disseminate information. Effective managers build networks of contacts for
sharing information, i.e. managers emerge as the nerve system centers of their
organization.
 are classified as
1. Monitor role
o It involves actively seeking out, receiving and securing information that
may be of value. Here managers, just as radar, scan their environment. It
is like a nerve center.
o managers seek information to detect problems or opportunities, build
general knowledge about the work situation, make necessary changes
o Information comes from
 Formal mechanisms, such as report, news medias, public forecasts
etc…
 Informal conversations with both organization’s members and those
external to the organization.
Much information received is oral (from hearsay, gossip, formal meeting). Hence
managers must evaluate and decide whether to use this information.

2. Disseminator role
It is transmitting or providing relevant information back to others in the workplaces.
i.e. sharing/ sending information found from internal and external sources to others
both internal and external to the organization.
3. Spokesperson role
It focuses on external communication. It is representing an organization to outside
party on the behalf of members of the organization, or transmitting information about

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Introduction to Management Course: MGMT 201
the work group to others especially outside the organization. e.g. to public, press,
customer group, etc…
Manager is a person who speaks for his organization to people outside the
organization.
Decisional/ decision making roles
Decisional roles are related making decision and the most important of the three
categories of roles, which activities are dealing with the allocation of resources to
reach organizational objectives.
Manager’s informational role typically leads to decisional roles. Managers use
information to make decision to commit their organization to new actions or
objectives.
Decisional roles are classified into:
1. Entrepreneurial role
o Making change that is important for the improvement and betterment of
the organization, i.e. acting as designer and initiator of change with in the
group to improve organization’s position.
o Managers play this role when they initiate new project; launch a survey;
test new market; or enter a new business; etc…
2. Disturbance handler role
o Making decisions or taking corrective actions in response to situations that
are beyond their control, or dealing with problems and changes beyond
manager’s immediate control.
o type of problems/ disturbances include strikes, bankruptcy, breaking of
contracts, etc…
Disturbances may arise when poor manager ignores the situation until it becomes a
crisis. If disturbance occurs, solution must be found.

3. Resource-allocator role
It is critical role. It refers to the allocation of resources. It is is both protecting and
using organizations assets/ money, material, HR equipment, data reputation, time/.
Managers decide how resources are distributed, and with whom they will work most
closely.
4. Negotiator Role
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Introduction to Management Course: MGMT 201
It refers to mediating internal conflicts and negotiating with others for the advantage
of the unit. It focuses on reaching an agreement with others outside the work group
on work related issues or materials or agreement with other units within the
organization. Manager enters into negotiations with other groups or organization as a
representative of the organization. They meet and discuss their differences with
individuals or groups for the purpose of reaching an agreement. Negotiations are an
integral part of a manager’s job. It closely linked to resource allocator role.
Managerial skills
At all levels, Managers require three types of skills. They are:

1. Technical Skills
2. Human Skill

3. Conceptual Skills

1. Technical Skill: It is the ability of a manager to use the equipments, methods

and techniques involved in performing specific tasks. Technical skill is required
more at the lower level of management I.e. at the supervisory level. At higher
levels, the technical skill is less important as managers can rely upon others for
technical information.

2. Human Skill: The ability of a manager to work with, understand, and motivate
people in the organization is known as human skill. It also involves the ability to
build effective work teams. The human aspect of management requires
individual as well as group relations to be maintained and developed for
achieving maximum efficiency. Human skills are important at all levels of
management. For instance, first line managers must:

 Provide on going feedback to employees

 Resolve interpersonal and performance problems

 Motivate subordinates to change and improve performance

 Oversee the other activities in involved in managing individuals and group

performance

Middle managers and top managers also use human skills equally in their respective
level of responsibility.

3. Conceptual Skill: This consists of the manager's ability to coordinate all

organizational activities and varied interests involved in it. It involves viewing

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Introduction to Management Course: MGMT 201
the organization in its totality and understanding the inter-dependence of its
individual parts. Of all the skills, this conceptual skill is the most difficult skill to
acquire. Conceptual skill is very important for top management in formulating
long-range plans, broad policies and relating the business enterprise to the
industry and economy.

Human skill Conceptual skill

Middle First
Line

First Technical
Skill

1.6 Universality of Management

Many professionals in the field of management agree that “management is universal”.
These proponents argue the universality of management by stating that the functions
of managers are really the same weather the organizations are private or public, profit
making or non profit, manufacturing and service giving, small firms or industrial giants
The basic principles and concepts of management are universally applicable to all
types of organization.
The main points which characterizes the universality of management:
 All managers operate in organization with specific objectives

 All managers must plan, organize, lead, and control in order to achieve
these organizational objectives

 The functions of planning, organizing, leading and controlling are similar in

all organizations regardless of the types of ownership.

 The vital force of management is needed to integrate scarce resources in

optimum productive relationships

 Management, in all organizations, helps to achieve organizational

objectives.

1.7 Nature of management: Is it a science or an art?

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Introduction to Management Course: MGMT 201
We have discussed the various interpretations of the term ‘Management’. When a
manager performs his functions or takes decisions, the systematized body of
knowledge helps him to apply one or more principles or methods in the course of his
activities. Adoption of principles and methods already known to him during his
education and training may be regarded as the application of science in management.
In this sense management is a science.

Science is defined as a body of systematized Knowledge accumulated

through study and accepted to understand the general truth. It uses
operational definitions, careful observations, systematic data collections and
analysis, and accurate measurement carried on to determine the nature and
principles of the subject under study.

However, there may be situations in the day-to-day activities where a manager may
not find it useful to apply the known methods and principles. He may have to
understand the nature of the situation and of the problem and then act or take a
decision after careful thinking of the nature of the situation. He has to apply his skill
and judgment rather than simply use the methods and principles known to him. In this
sense, management may be regarded as an art. Managers sometimes may apply
methods and principles in their day-do-day activities as well as use their mind and skill
where necessary. Therefore, management may be regarded as both a science as well
as an art.

Art is a system of doing a particular working in the best way in a

specific time, place, and condition tactfully, wisely, and creativity.

Summary:

The term management has different meanings and concepts by different authors.
There are no common agreements among different scholars, where as the most

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Introduction to Management Course: MGMT 201
common definition of management emanated from the managerial roles and function
perspectives.
Hence, management is a science as well as an art, because it is characterized by
making conclusion based on actual facts and verities knowledge through because
effect relationships.
In order to used common sense, personal feelings, beliefs, impulses, etc. It tries to
make adjustments based on the possibilities through trial and error method.
In order to make managerial decision it requires communication; conceptual and
technical skills. Based on different levels of management.
Activities 1
1. What does Management mean to you?
2. Describe your functions and roles in your department and compare your answer
with the roles and functions of management in your module
3. Why management has no precise definitions?
4. Can you describe the three managerial skills? Identify the skills that possess in
your organization in different levels of Management
5. Why management is an Art as well as a science?

6. Briefly describe the five functions of Management

 Planning_________________________________________
 Organizing______________________________________
 Staffing_____________________________________________
 Directing____________________________________________
 Controlling___________________________________________

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Check list
√ Before you move on to the self check exercise below, make sure that you have
achieved your objectives setout four this unit. Put a tick mark (√) in the boxes only on
the texts you can perform.
 Understand the meaning and concepts of management

 Identify the different managerial skills and hierarchy

 Identify and describe the five functions of management and

explain how they are applied in practice

 Discussed whether management is an art or a science

 Demonstrate that management concepts have universal applications

 Differentiate the major differences between managerial functions and

managerial roles

CHAPTER TWO
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THE DEVELOPMENTOFMANAGEMENT THOUGHT

Learning objectives
Dear learners, after successful completion of this chapter, students will be able to:
 Explain the rationale of studying management thought
 Understand and investigate ideas about practices in management
 Describe the evolvement of theories in management
 Demonstrate an understanding of the system approach to management
 Explain the major components of a system theory

2.1 An over view

The purpose of this chapter is to give a brief account about the evolution of
management. Management as a theory is the result of 20th c, but as practice is as
old as human civilization. In fact the practice of management started early
ever since people began to perform a task which they could not accomplish
had they been alone. Thus, even though it is too young as recognized discipline,
in practice it is as old as human civilization. More over, the knowledge about
management came from the field of management and other fields.

2.2. National of studying management thought

Basically, a primary reason which force people to discover and state the
emergence of certain discipline is to know where that discipline is originated ,
where it is today and finally helps to estimate where does that discipline will reach
at in the future . Hence , management is not exceptional as such , thus studying
the historical evolution of management thought will support to build a
comprehensive know ledge of the past management by integrating with afore
coming knowledge , skill and innovation so as to tackle a multi faceted and
dynamic complex problems in management.
The contribution of management theory to the practice of management
 To provide a constant (stable) focus for understanding what we experience. A
theory provides criteria for determining what is relevant.
 To communicate efficiently; it enable us to move in to more and more complex
relationships with other people.

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 To keep learning about our world; if we are aware of theory, we are better able
to ask ourselves if there are alternative ways of looking at the world.
 To understand the basic process of management; as a manager to decide what
must to do for the function; the theories and principles of management make it
easier for us to understand underlying processes and, on that basis, decide what
we must to do function most effectively as managers. Without theories all we
have are intuition, hunches, and hope-all of which are of limited use in to days
increasingly complex organizations.

Management theories, used to build organizations guide them to ward their goals.
As a manager, we have many ways of looking at organizations; their activities,
performance, and satisfaction of employees. For example; a management theory
that emphasizes the importance of good work environment may be more useful in
dealing with a high employee turn over rate than with production delays. Because,
there is no single universally accepted management theory, we must be familiar
with each of the major theories that currently coexist.

2.2 Practices in management

Management as practice was used from ancient times. The practice of management
can be traced back thousands of years. Ancient civilizations used management
techniques like planning, organizing & controlling to build their large empires &
settlements. Historically, there were many evidences indicating the existence of
management in early human carriers. Some of the evidences are:
 Sumerians (5000 B.C.)
o Used written rules and regulations for governance
 Egyptians (4000-1600 B.C.)
The Egyptians used the management functions of planning, organizing, and
controlling when they constructed the great pyramids.
 Babylonians (1800 B.C)
o Used extensive sets of laws and policies for governance
 Hebrews (1941 B.C)
o Moses Exodus indiçâtes some management concepts.
 Chinese (1100 – 500 B.C)
o Used extensive organization structure for governance and the arts
 Greece (400 B.C)
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Introduction to Management Course: MGMT 201
o Used different governing systems for cities and states

 India (321 B.C)

o Kavtilya addresses organization & management of trade & commerce; law
& court; social customs; marriage; taxation; etc.
 Romans (284 B.C)
o The Roman Catholic Church is an organization with a formal structure and
hierarchy that existed long before the term<<management>> comes in
to common usage.
o They also developed a well-defined organizational structure that greatly
facilitated communication and control. All the above mentioned activities
are a manifestation of management practices in ancient time.

2.3 Evolvement of Theories in Management

What is theory?
It is a coherent group of assumptions put forth to explain the relation between
two or more observable facts. It is a principle or set of principles that explains
the relationship between two or more observable facts or events. It is a
conceptual frame work that explains existing observations and predicts new
ones. It is a conceptual frame work for organizing knowledge and providing a
blue print for action.

Management as a discipline was not given a serious attention for several centuries.
For this reason, the study of management was not fully undertaken as a recognized
discipline until the mid 19 th century. Management as a field of study was 19 th C
development, in response to industrial revolution in Europe and America.
Until the mid of 18th C, management practices remained stable, but with the
introduction of industrial revolution, there were a series of inventions & innovations
which resulted in change in economic system, and management would be expected
on progress.
In the early stages, management study was not developed as expected because of:
 Low esteems given to business in society (existence of undermining).
 Different approaches of economists, political scientists, sociologists. & others
towards business organizations
 Treatment of management as an art, not as a science
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 Attitudes (mind sets) of successful managers are born not made, i.e. management
can not be transferred to others through training.
Therefore, the study of management (how managers achieve their results) is
predominantly a 20th C phenomenon.
In the 20th C, situations changed that requires systematic study of management due
to:
 The development of capitalism & emergence of industries
o forced organizations/industries to be efficient.
 The complexity of organizations, i.e. society became complex due to:
Increasing size of organizations, High degree of division of labor &
specialization, Increase in government regulations & controls, Scarcity of
resources, Saturation of markets , Organization of workers (trade unions),
Pressure of various conflicting interest groups in society, Technological
inventions & innovations, etc.
These complexities had increased the demand for efficient management, and have
resulted in the divorce of ownership & management. And these forces have been vital
for the development of systematic management principles, concepts etc.
To handle and tackle these complex situations, managers of the time started to
study & developed the scientific approaches to management.

Principles of Management
A principle is a basic truth or law which governs the whole activities while
undertaking certain actions. Developing principles of management is more
complicated than developing scientific principles. It is unlikely that researchers
would find identical companies to study.
Because controlled management experiments are so difficult to Cary out; most
management principles are developed through observation and deduction. Deduction
is the process of drawing a general conclusion from specific examples.
For example:-A researcher may observe that employees in 15 companies work more
efficiently when their supervisors treat them well. In this case, the researcher may
deduce that a pleasant work environment contributes to productivity. This conclusion
might then become a management principle.

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Management principles are more likely to change than physical principles. They also
are likely to be interpreted differently by different people. For this reason
management principles are best viewed as guides to action rather than rigid laws.
A manager follows management principles most of the time. If, however, a principle
clearly does not apply to a specific situation, an experienced manager will not use it.
An important part of being a manager is recognizing when a principle should be
followed and when it should not. Being able to change and adapt, particularly during
times of uncertainty is an important management skill.

2.4 FORERUNNNERS TO SCIENTIFIC MANAGEMENT

2.4.1 Early Contributors to Scientific Management

Management as a filed of study was 19th c. development, in response to industrial

revolution in Europe and America. The development of management thought as we
know it is relatively modern concept. The age of industrialization in the 19thcentury
and the subsequent emergency of large corporate organizations called for new
approaches to management. In the 20 thcentury the development of capitalism and
emergency of industries, a complexity of organizations due to increasing size of
organizations, technological inventions and innovations increased the demand for
efficient management, and have resulted in divorce of ownership and management.
To handle these complex situations, managers of the time started to study and have
scientific approaches to management. The work of early contributors to managements
is discussed below.

2.4.2. Times of Robert Owen and the Management era

Robert Owen (1771-1858), a British industrialist and reformer, was one of the first
managers to recognize the importance of an organization’s human recourse. Until his
era, factory workers were generally viewed in much the same way that machinery and
equipment were. Owen believed that workers deserved respect and dignity. He
implemented better working conditions, higher minimum working age for children,
meals for employees, and reduced work hours. He assumed that giving more attention
to workers would payoff in increased out put.

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2.4.3. Early Works and contribution of Charles Babbage

Charles Babbage (1792-1871), an English mathematician, focused his attention on

efficiencies of production. He placed great faith in the division of labor and advocated
the application of mathematics to problems such as the efficient use of facilities and
materials. In a sense, his work was a forerunner to both the classical and quantitative
management perspectives. Nor did Babbage overlook the human element. He
understood that a harmonious relationship between management and labor could
serve to benefit both, and he favored such devices as profit-sharing plans. In many
ways, Babbage was an originator of modern management theory and practice. Owen
was primary interested in employee welfare, where as Charles Babbage focused his
attention on efficiencies of production.

2.4.4. Other influential early thinkers and practitioners in Management

Several disciples and colleagues of Taylor helped to promote scientific management.

Among them, Carl Barth was the one who was known as the most orthodox of Taylor’s
followers. He worked with Taylor at Bethlehem steel company and followed him as
consultant when Taylor left Bethlehem. However, Barth did not alter or add to
scientific management to any significant degree; rather, rather he worked to
popularize the idea of Taylor.

2.5 THE ERA OF CLASSICAL MANAGEMENT

The classical approach to management resulted from the first significant,
concentrated effort to develop a body of management thought. The classical approach
to management was originally propounded by the gentle thinkers and pioneers of
management practitioners. Basically, the classical approach to management
recommends that managers continually strive to increase organizational efficiency
which was purposely aimed at increasing productivity. The classical approach to
management can be seen from two basically similar but logically different
perspectives.
The first perspective emphasized on studying and analyzing the practice of lower level
management, which was commonly termed as “scientific management approach”
(developed by Fredrick W. Taylor. During this era (scientific management) the main
intention of the organizations was scud to wards finding ways through which to obtain
the maximum possible productivity. The concept of scientific management consists

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primarily the work of Fredrick W. Taylor, Frank and Lillian Gilberth and Henry L. Gantt.
These individuals studied mainly the work (jobs) of workers at lower level of the
organization (at the operation at level) of the organizations.
The 2nd perspective concerned with a comprehensive investigation and analysis of
management concentrated more on the management of the organization i.e., the
management of the organization or functions of management as a whole this
approach was primarily advocated by Henry Fayol (1841-1925 )

2.51. Scientific Management Theory

At the turn of the 20th C, business was expanding and creating deluxe products and
new markets, but labor was in short supply (there was no sufficient skill man power,
which could support and sustain the dramatically advanced human needs in a
remarkably turbulent business environment mostly after industrial revolution of the
western world.
As a possible remedy to over come these problems, two solutions were available: in
one case either to substitute capital for labor or else the use of man power sufficiently
as another option. For surprise , due to the costly nature and other constraints,
scientific management kept attention and concentrated on the second solution, that is
the use or deployment of human power in a proper manner to achieve efficiency
and productivity which were a hot debate of that time.
Lower level management was the main focus of analysis, primarily as special target
through which to find one best way to perform a task; that means it assesses how task
situations can be structured to get the highest productivity from workers. The process
of finding this “one best way” has become known as the scientific method of
management (in short, scientific management). Although the techniques of scientific
management could conceivably be applicable to all levels of management, the study
of scientific management was firmly confined at lower level organization. The
development of specialized tasks and the departments with in organizations had come
with the rapid change in industrial growth and the creation of big business. Thus, one
person no longer performed every task but specialized in performing only a few tasks.

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2.5.2. PRINCIPLES OF SCIENTIFIC MANAGEMENT

Frederick Winslow Taylor (1856 – 1915)

Under Taylor's management system, factories are managed through scientific
methods rather than by use of the empirical "rule of thumb" so widely prevalent in the
days of the late nineteenth century when F. W. Taylor devised his system and
published "Scientific Management" in 1911.
The main elements of the Scientific Management are: "Time studies Functional or
specialized supervision Standardization of tools and implements Standardization of
work methods Separate Planning function Management by exception principle. The
use of "slide-rules and similar time-saving devices" ,Instruction cards for workmen,
Task allocation and large bonus for successful performance ,The use of the 'differential
rate, Mnemonic systems for classifying products and implements A routing system, A
modern costing system etc. " Taylor called these elements "merely the elements or
details of the mechanisms of management."
The main elements of the Scientific Management are: "Time studies Functional or
specialized supervision Standardization of tools and implements Standardization of
work methods Separate Planning function Management by exception principle .The
use of "slide-rules and similar time-saving devices" ,Instruction cards for workmen,
Task allocation and large bonus for successful performance ,The use of the 'differential
rate, Mnemonic systems for classifying products and implements A routing system, A
modern costing system etc. " Taylor called these elements "merely the elements or
details of the mechanisms of management"
Perhaps the key idea of scientific management and the one which has drawn the most
criticism was the concept of task allocation. Task allocation is the concept that
breaking task into smaller and smaller tasks allows the determination of the optimum
solution to the task. "The man in the planning room, whose specialty is planning
ahead, invariably finds that the work can be done more economically by subdivision of
the labor; each act of each mechanic, for example, should be preceded by various
preparatory acts done by other men."
The main argument against Taylor is this reductionist approach to work, dehumanizes
the worker. The allocation of work "specifying not only what is to be done but how it is
to be done and the exact time allowed for doing it" is seen as leaving no scope for the

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individual worker to excel or think. This argument is mainly due to later writing rather
than Taylor's work as Taylor stated "The task is always so regulated that the man who
is well suited to his job will thrive while working at this rate during a long term of years
and grow happier and more prosperous, instead of being overworked." Taylor's
concept of motivation left something to be desired when compared to later ideas. His
methods of motivation started and finished at monetary incentives. While critical of
the then prevailing distinction of "us "and "them" between the workforce and
employers he tried to find a common ground between the working and managing
classes.
Frederick Winslow Taylor, an American engineer, was the founder of the scientific
management school of thought. He spent the greater part of his life working on the
problems of achieving greater efficiency on the shop-floor worker himself and later as
a manager. His career began as an apprentice in engineering. He later moved to the
Midvale Steel Company and the course of 11 years he rose from labor to shop
superintendent. In 1889 he left Midvale to join the Bethlehem Steel Company, where
he consolidated his ideas and conducted some of his most famous experiments in
improving labor productivity.
As stated earlier, at the beginning of the 20 th century skilled labor was in short supply,
especially in the U.S. To expand productivity, ways had to be found to increase the
efficiency of workers. In an effort to address these problems, Taylor build the body of
principles that know constitute the essence of scientific management.
The real trouble, Taylor decided on reflection, was that no one knew how much work it
was reasonable to expect a man to do. Either employers gauged a “fair day’s work”
by a general impression gained from observation or, as in his case, by actually
working on some of the jobs themselves – or they had a record of the shortest time in
which certain jobs had ever been performed. And there was plenty of room for
argument about either standard.
Taylor based his managerial system on production-line time studies. Instead of relying
on traditional work methods, Taylor analyzed and timed steel workers’ movements on
a series of jobs. With time study as his base, Taylor broke each job down into its
components (“elements”) and designed the quickest and best methods of operation
for each part of the job. He thereby established how much workers should be able to
do with the equipment and materials at hand. Taylor also encouraged employers to
pay more productive workers at higher rates than others. The increased rate was
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carefully calculated and based on the greater profit that would result from increased
production. Thus, workers were encouraged to surpass their previous performance
standards and earn more pay. Taylor called his plan the differential rate system.
Under this system, a man received on piece rate if he produced the standard number
of pieces and another rate if he surpassed the standard, and in the latter case, the
higher rate would be applied to all the pieces he produced, not merely to those over
the standard.
Management, Taylor said, could well afford to pay the higher rates because of the
economies achieved through better methods and the elimination of slowdowns.
Taylor also called for a drastic reorganization of supervision. His system embodied two
new concepts: (1) separation of planning and doing and (2) functional foremanship.
When Taylor first entered industry, it was customary for each man to plan his own
work, generally following a pattern he had learned by watching others when he was an
apprentice. The order, in which the operations were performed, for example, was
entirely up to the man insofar as it was not dictated by the nature of the job; so was
the selection of the tools. The foreman or gang boss simply told the worker what jobs
to perform, not how to do them-except, possibly, in the case of new work.
Taylor’s plan also supplemented the gang boss with a number of functional foremen,
each of whom was a specialist in one type of work – for example, in the use of a lathe
or a grinder. The specialists occupied a “planning room,” and each gave orders to the
workmen on his specialty. Thus, if the gang boss assigned a worker to a job that called
for several different operations, the man would be told how to proceed by seven or
eight other bosses.
But the essence of scientific management, Taylor believed, lay in none other than
what he called “mental revolution”. If workmen were paid handsome amounts for
producing more and were shown how to do so, they would cease their slowdowns.
Since management would be enjoying the fruits of increased productivity, it would be
happy to pay the higher wages. Interests of management and labor would be
identical, and there would be no reason for strife between them. Neither side would be
interested in getting the larger percentage of the pie because both would profit so
much more by working together to increase its size. This would automatically mean
bigger slices for both, and relative shares would be unimportant.
He believed that workers, who met the higher standards, need not fear of layoffs
because their companies benefited from the increase in productivity. The higher
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payments would continue because they were “scientifically correct” rates set at a
level that was best for the company and for the worker. At the same time, mo one
would be hurt by the differential system. Workers who fell below the standard in
productivity would find other work “in a day or two,” as he put it, because of the
existing labor shortage.
By 1893, Taylor decided he could best put his ideas into effect as a private consulting
management engineer. He was soon able to report impressive improvements in
productivity, quality, worker morale, and sages while working with one client Simonds
Rolling Machine Company. In one operation, Simonde employed 120 women workers
to inspect bicycle ball bearings. The work was tedious, the hours were long, and there
seemed little reason to believe improvements could be made. Taylor proved
otherwise. First, he studied and timed the movements of the best workers. Then he
trained the rest in the methods of their more effective co-workers and transferred or
lay off the poorest performers. He also introduced rest periods during the workday,
along with his differential pay rate system and other improvements. The results were
impressive: expenses went down while productivity, quality, earnings, and worker
morale went up.
Although Taylor’s methods led to dramatic increases in productivity and to higher pay
in a number of instances, workers and unions began to oppose his approach. Like the
workers at Midvale, they feared that working harder or faster would exhaust whatever
work was available and bring about layoffs. The fact that workers had been laid off at
Simonds and in other organizations using Taylor’s methods encouraged this fear. As
Taylor’s ideas spread, opposition to them continued to grow. Increasing numbers of
workers became convinced that they would lose their jobs if Taylor’s methods were
adopted.
By 1912, resistance to Taylorism had caused a strike at the Watertown Arsenal in USA,
and hostile members of the US congress called on Taylor to explain his ideas and
techniques. Both in his testimony and in his two books, Shop Management and The
Principle of Scientific Management, Taylor outlined his philosophy. It rested, he
said, on four basic principles:
1. The development of a true science of management, so that the best method for
performing each task could be determined.
2. The scientific selection of the workers, so that each worker would be given
responsibility for the task for which he or she is best suited.
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3. The scientific education and development of the worker.
4. Intimate, friendly co-operation between management and labor.

Taylor also contended that in order for these principles to succeed, “a complete
mental revolution” on the part of management and labor was required. Rather than
quarrel over whatever profits there were, they should both try to increase production
and profits to be shared. In short, Taylor believed that management and labor had a
common interest in increasing productivity. And increasing productivity is the
explanation for the development of western economy.
Followers of Taylor
Henry L. Gantt
Gantt was a contemporary and colleague of Taylor’s at the Bethlehem Steel Company,
and he strongly supported the ideas of scientific management propounded by Taylor.
He also emphasized the concept of mutuality of interests between management and
workers. He stressed the need to appreciate that “in all problems of management, the
human element is the most important”.
Gantt made improvement in Taylor’s incentive system, and developed what is known
as the “task and bonus plan”. This is the foundation of many incentive plans in out
times. Under this incentive plan, the worker is paid a guaranteed daily wage whether
or not he completes the standard work. But if he completes four hour’s work in three
hours or less, he is paid for four hours.
Gantt is perhaps best known for his development of graphic methods of describing
plans and making possible better managerial control. He emphasized the importance
of time, as well as cost, in planning and controlling work. This led eventually to the
famous Gantt Chart – a chart used for planning and following up work progress against
time. The Gantt chart is regarded by some social historians as the most important
social invention of the twentieth century.
Frank and Lillian Gilbreth
Frank and Lillian Gilbreth, a husband and wife team, have been regarded as important
contributors to scientific management. Frank Gilbreth became interested in motion
study and reduced the number of movements in bricklaying from eighteen to five. This
increased the productivity of bricklayers from 120 to 250 bricks per hour. Frank
emphasized the need of developing or discovering the “one best way of doing a given
task”, whereas Lillian concerned herself with the human aspects of management. The

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Gilbreths held that the most important cause of workers dissatisfaction was the lack of
management’s interest in them. They emphasized that management should
understand their needs and personality.
Frank Gilbreth also invented a flow chart which showed the progress of an entire
operation through time and various tasks involved in it. Every operation is broken
down into tasks which enable the identification and elimination of unnecessary
motions.

2.5.3 Importance of scientific Management

The importance of scientific management becomes evident when considering the
effect it has in the workplace. The study has discussed how scientific management has
been used to solve the problem of wasted human effort. Scientific management, in its
attempt to promote efficiency in the workplace, becomes important to offer the
greatest amount of service to the organization in the least amount of time while
expending the least amount of resources. This study has showed that scientific
management identifies the importance of performance evaluation in that it brings
about the discovery of the most productive methods of personnel operation.
Scientific management was showed supporting the study of motions, positions, and
task for classification to expedite the process of production. The study has reported
the importance of using scientific management in training individuals to perform
efficiently as opposed to searching for individuals who are already experienced. The
discussion has included that the principle of scientific management to hire managers
who can direct subordinates efficiently and effectively while establishing rapport is
critical to the organization. Scientific management has been depicted as increasing
positive relationships between management and subordinate personnel, which implies
that scientific management sets the foundation for Total Quality Management.
Scientific management shows the importance of educating personnel and paying them
well to encourage efficiency and increasing retention. Focus was drawn to the
importance of hierarchy for the best approach of developing and implementing policy,
having competent leaders to guide subordinates.

2.5.4. Classical organizational Theory

Another body of ideas developed at the same time as scientific management. These
ideas focused on the problems faced by top managers of large corporations. Since this

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branch of the classical approach focused on the management of organizations while
scientific management focused on the management of work, it was labeled classical
organization theory. Its two major purposes were to (1) develop basic principles that
could guide the design, creation, and maintenance of large corporations and (2)
identify the basic functions of managing organizations.
Engineers were the prime contributors to scientific management; practicing
executives were the major contributors to classical organization theory. As with
scientific management, there were many contributors to the classical organization
theory. Henri Fayol is singled out for discussion, however, because this ideas reflect
classical organization theory.
Henri Fayol (1841 – 1925)
Henri Fayol, the celebrated French industrialist and theorist, began his working life as
a young mining engineer at the age of 19. He spent his entire working life with the
same company, rising to Managing Director at the age of 47 and only retiring after his
77th birthday. Under his leadership the company prospered despite its near-bankrupt
state when he took over.
He published a book entitled Administration Industrielle et Generale in 1916 and that
brought to light the distillation of his lifetime’s experience of managerial work.
The works of Taylor and Fayol are essentially complementary. They both realized that
the problem of human resources and their management at all levels is the key to
business success. Both applied scientific method to this problem. Taylor worked
primarily on the operative level, from the bottom of the organizational hierarchy
upward. Fayol concentrated on the Managing Director (his term) and worked
downward. Fayol was perhaps the first individual to discuss management as a process
with specific functions that all managers must perform. He proposed planning,
organizing, commanding and controlling as the four management functions.
Fayol found that activities of an industrial undertaking could be divided into six
groups: (1) technical (production). (2) Commercial (buying, selling, and exchanging),
(3) financial (search for, and optimum use of, capital), (4) security (protection of
property and persons), (5) accounting (including statistics), and (6) managerial
(planning, organization, command, coordination, and control). Pointing out that these
activities exist in business of every size, Fayol observed that the first five were well
known, and consequently he devoted most of book to an analysis of the sixth.

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Fayol developed fourteen managerial principles for which he became known. He
stated that principles of management are flexible, not absolute, and must be usable
regardless of changing and special conditions.
In concluding discussion of his principles of management, Fayol observed that he had
made no attempt to be exhaustive but had tried only to describe the most occasions
to use. The fourteen general principles of management developed by Fayol are
presented below.
Fayol’s General Principles of Management
i) Division of Work. This is the specialization that economists consider
necessary for efficiency in the use of labor. Fayol applies the principle to all
kinds of work, managerial as well as technical.
ii) Authority and responsibility. Here Fayol finds authority and responsibility
to be related, with the latter arising from the former. When authority is
exercised, responsibility arises. He sees authority as a combination of official
factors, driven from the manager’s position, and personal factors,
“compounded of intelligence, experience, morale worth, past service, etc.”
iii) Discipline. “Seeing discipline as respect for agreements which are directed
at achieving obedience, application, energy, and the outward marks of
respect” Fayol declares that discipline requires good superiors at all levels.
Discipline is absolutely essential for the smooth running of business and
without discipline no enterprise could prosper.
iv) Unity of Command. This means that employees should receive orders from
one superior only.
v) Unity of Direction. According to this principle, each group of activities with
the same objective must have one head and one plan. As distinguished from
the fourth principle, it relates to the organization of the “body corporate”
rather than to personnel.
vi) Subordination of Individual to General Interest. This is self-explanatory;
when the two are found to differ, management must reconcile them.
vii) Remuneration. Remuneration and methods of payment should be fair and
afford the maximum possible satisfaction to employees and employer.
viii) Centralization. Without using the term ‘centralization of authority,’ Fayol
refers to the extent to which authority is concentrated or dispersed.

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Individual circumstances will determine the degree that will “give the best
overall yield.”
ix) Scalar Chain (line of authority). The scalar chain is the chain of command
ranging from the highest to the lowest ranks. In short, it is line of authority.
Adhering to the chain of command help implement unity of direction, but
sometimes the chain is too long, and better communication and better
decisions can result from two or more department heads solving problem
directly rather than referring them up the chain until a common superior is
reached.
x) Order. Both equipment and people must be well chosen, well placed, and
well organized fro a smooth-running of organization. For material things; “a
place for every thin and everything in its place.” For people “a place for
everybody and everybody in his place.
xi) Equity. Kindness and justice will encourage employees to work well and be
loyal.
xii) Stability of Tenure of Personnel. Changes in employee assignments will
be necessary, but if they occur too frequently, they can damage morale and
efficiency.
xiii) Initiative. Thinking out a plan and carrying it out successfully can be deeply
satisfying. Managers should encourage employees to do this as much as
possible.
xiv) Esprit de crops. This is the principle that “in union there is strength,” as
well as an extension of the principle of Unity of command, emphasizing the
need for teamwork and the importance of communication in obtaining it.

2.5.5. Bureaucratic Management Theory

The advocates of the bureaucratic theory contributed yet a third, widely divergent
stream of thought – a concern for how the overall structure of an organization
influences managerial effectiveness. The chief advocate of the bureaucratic
organization was Max Weber (1846 – 1920).
A wealthy German intellectual, Max Weber described what he believed was the
ideal or pure form of organization. Weber’s “pure form” of organization is
characterized by rationality and impersonality. The part of rationally structured
organizations are designed and coordinated to achieve specific ends. Rationality
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implies goal directedness. Impersonality implies objectivity in interpersonal
relations. Human resource decisions in bureaucracies were to be strictly impartial –
based on qualifications and work demands rather than on a caste system or the
personal preferences of decision makers.
The building blocks of organizations are clearly defined offices (positions) organized
into a hierarchy with a fixed chain of command. Weber’s ideal bureaucratic
organization was designed for efficiency, predictability, and the ‘reign of rules.” To
Weber the rational structuring of organizations was a reaction against the
unwarranted influence of political control and the power of charismatic
personalities of royalty.
Bureaucracy is characterized by:
 Hierarchy,
 Impersonality,
 Written rules of conduct,
 Promotion base don achievement,
 Specialized division of labor, and
 Efficiency

According to Weber, bureaucracies are goal-oriented organizations designed

according to rational principles in order to efficiently attain their goals. Offices are
ranked in a hierarchical order, with information flowing up the chain of command,
directives flowing down. Operations of the organizations are characterized by
impersonal rules that explicitly state duties, responsibilities, standardized procedures
and conduct of, office holders. Offices are highly specialized. Appointments to these
offices are made according to specialized qualifications rather than ascribed criteria.
All of these ideal characteristics have one goal, to promote the efficient attainment of
the organization’s goals.
The major advantage of bureaucracy is that, precision, speed, unambiguity,
knowledge of the files, continuity, discretion, unity, strict subordination, reduction of
friction, and of material and personal costs is raised to the optimum point. Its major
disadvantages lie in red-tape (excessive procedure), rigidity, and neglect of human
factor.

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2.5.6. Total appraisal of the classical Theories

The greatest contribution of the classical approach was that it identified management
as an important element of organized society. Management has increased in
importance. The facts that management skills must be applied in schools,
government, and hospitals, as well as business firms, are stressed. Advocates of the
classical approach believed that management, like law, medicine, and other
occupations, should be practiced according to principles that managers can learn.
The identification of management functions such as planning, organizing, and
controlling provided the basis for training new managers. The manner in which the
management functions are presented often differs, depending upon who is presenting
them. But any listing of management functions acknowledges that managers are
concerned with what the organization is doing, how it is done, and whether it was
done.
The contributions of the classical approach, however, go beyond the important work of
identifying the field of management and its process and functions. Many management
techniques used today are direct outgrowth of the classical approach. For example,
time and motion analysis, work simplification, incentive wage systems, production
scheduling, personnel testing, and budgeting are all techniques derived from the
classical approach.
One major criticism of the classical approach is that the majority of its insights are too
simplistic for today’s complex organizations. Critics argue that the scientific
management and classical organization theory are more appropriate for the past,
when the environments of most organizations were very stable and predictable. The
changing environment, changing worker expectations, and changing expectations of
society today are tremendous.

2.6 THE HUMAN-RELATION MOVEMENT

The term human-relation refers to the manner in which managers interact with
subordinates. To develop good relations, followers of this approach believed,
managers must know why their subordinates behave as they do and what
psychological and social factors influence. While scientific management concentrated
on the physical environment of the job, human relations concentrated on the social
environment.
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The very significant contribution to the human-relations school of thought came form
professor Elton Mayo, an Australian by birth and a Psychologist by training. He has
been described as the founder of the human-relations movement, whose advocates
have stressed the need for managerial strategies to ensure that concern of people at
work is given the highest priority. Appropriately, the title of Mayo’s first work was “The
First Inquiry.”

2.6.1. Behavioral school

Other individuals who were university trained in social sciences such as psychology,
sociology, and anthropology began to study people at work. They had advanced
training in applying the scientific approach to the study of human behavior. These
individuals have become known as behavioral scientists and their approach is
considered to be distinct from the human relations approach.
The individuals in the behavioral science branch of the behavioral approach believe
that man is much more complex than the “economic man” descriptions of the
classical approach and the “social man” description of the human relations approach.
The emphasis of the behavioral science approach concentrates more on the nature of
the work itself, and the degree to which it can fulfill the human need to use skills and
abilities. Behavioral scientists believe that an individual is motivated to work for many
reasons in addition to making money and forming social relationships. They also
focused on communication, motivation leadership areas.

2.62. The Hawthorne Study

The Hawthorne Studies made one of the early important contributions to the human-
relations approach. These were studies conducted at the Hawthorne plant of the
Western Electric Company in Chicago, USA, between 1927 and 1932, in a number of
different stages. These were as follows:
First stage (1924 – 1927):- This was conducted by the company’s own staff under
the direction of Messrs Pennock and Dickson. This stage was concerned with the
effects of lighting on output. Two groups of comparable performance were isolated
from the rest and located in separate parts of the plant. One group, the control group,
had a consistent level of lighting; the other group, the experimental group, had its
lighting varied. To the surprise of the researchers, the output of both groups
increased. Even when lighting for the experimental group was reduced to a very low

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level, they still produced more! At this point pennock sought the help of Mayo and his
Harvard University colleagues.
Stage Two (1927 – 1929):- This stage became known as the Relay Assembly Test
Room. The objective was to make a closer and more detailed study of the effects of
differing physical conditions on productivity. At this stage there was no deliberate
intention to analyze social relationships and employees attitudes. Six women workers
in the relay Assembly section were segregated from the rest in a room of their own.
By discussing with the women, changes in rest periods, and lunch times were made in
timing and length. Productivity increased whether the conditions were made better or
worse. Later studies concluded that altered the working week. Once again output
increased regardless of the changes. By the end of stage two the researchers realized
they had not just been studying the relationship between physical working conditions,
fatigue, monotony and output, but had been entering into a study of employee
attitudes and values. The women’s reaction to the changes, i.e., increased output
regardless of whether conditions improved or worsened, has come to be known as
“the Hawthorne Effect’. That is to say the women were responding not so much to the
changes as to the fact they were the center of attention – a special group.
Stage Three (1928 – 1930):- Before the relay assembly test had come to an end,
the company had decided to implement an interview program designed to ascertain
employee attitudes towards working conditions, their supervision and their jobs. The
interviews were conducted by selected supervisors, first on structured bases and later
on unstructured bases. Before the program was suspended, about 20,000 employees
were interviewed, and the pool of material amassed was used to improve several
aspects of working conditions and supervision. It also becomes clear from the
responses that relationships with people were an important factor in the attitudes of
employees.
Stage four (1932):- This was known as the Bank Wiring Observation Room. In this
stage fourteen men on Bank Wiring were removed to a separate observation room,
where, a part from a few differences, their principal working conditions was the same
as those in the main wiring area. The aim was to observe a group working under more
or less normal conditions over a period of six months or so. The group was soon
developing its won rules and behavior-it restricted production in accordance with its
own norms; it short circuited the company wage incentive scheme and in general
protected its own sectional interests against those of the company. The supervisors
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concerned were powerless to prevent this situation. The group had clearly developed
its own unofficial organization, run in such a way that it was able to protect itself from
outside influences whilst controlling its internal life too.
Final Stage (1936):- This final stage was based on lessons learned from the earlier
studies. Its focus was firmly on employee relations and took the form of personnel
counseling. The counselors encouraged employees to discuss their problems at work,
and the results led to improvements in personal adjustment, employee-supervisor
relations and employee management relations.
The main conclusions to be drawn from these studies are:-
i. Individual workers cannot be rated in isolation, but must be seen as members
of a group;
ii. The need to belong to a group and have status within it is more important
than monetary incentives or good physical working conditions;
iii. Informal (unofficial) groups at work exercise a strong influence over the
behavior of workers;
iv. Supervisors and managers need to be aware of these social needs and cater
for them if workers are to collaborate with the official organization rather
than work against it.

What the Hawthorne studies dramatized was that humans are social-that business
operations are a matter not merely of machinery and methods but also of gearing
these with the social system to develop a complete socio technical system. These
experiments led to the recognition that managers operate in a social system. It should
not be inferred from this that prior to the Hawthorne experiments successful
managers did not recognize the importance of the human factor, or that management
theorists overlook it but what the work of Mayo and his associates did underscore was
the need for a greater and deeper understanding of the social and behavioral aspects
of management.
Summary: in fact, during the classical period the primary motives of the organizations
were fulfilled, however, the issue of workers security and satisfaction were the two
over looked concepts .Hence, through the genuine efforts deployed by prominent
human relationists, the facts over looked during the classical period were taken into
consideration .It is at this time that another logic which state ;man is social animal
thus , more than monetary incentive, workers motivation to perform their task at

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desired standard, is influenced by several factors including group norms in
experienced in the job environment .

2.7 THE MODERN ERA

Modern management theories indicate further refinement, extension, and synthesis of
all the classical and the Human relation approaches to management. Classical
approach satisfied the basic economic needs of the organization and the society. The
Human relation approach is trying to satisfy personal security, and social needs of
workers. Both approaches must be suitably integrated to emphasize the need not only
for recognition of human values but also for recognition of productivity
simultaneously. Modern management must have the twin primary objectives of
productivity (classical approach) and satisfaction (human relation approach). Under
the modern management theory, we have the following streams.
i. The Systems Approach and
ii. The Contingency Approach

2.7.1. Systems Approach

The systems theory approach to organization and management appeared around

1960, and soon acquired a dominant position in management literature and practice.
Its early contributors include Ludwing Von Bertalanffy, Lawrence J. Henderson, W.G.
Scott, Daniel Katz, Robert L. Kahnm etc. they viewed organization as an organic and
open system, which is composed of interacting and interdependent parts, called
subsystems. From the systems perspective, management involves managing and
solving problems in each part of the organization but doing so with the understanding
that actions taken in one part of the organization affect other parts of the
organization. For example, implementing a solution to a problem in the production
department of a company will likely affect other aspects of the company such as
marketing, finance, and personnel. Each part is tightly linked to other organization
parts; no single part of an organization exists and operates in isolation from the
others. Thus, in solving problems, managers must view the organization as dynamic
whole any try to anticipate the unintended as well as the intended impacts of their
decisions.

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The systems approach to management views the elements of an organization as
interconnected. The approach also views the organization as linked to its
environment. Organizational effectiveness, even survival, depends on the
organization’s interaction with its environment.
Systems have the following features:
System: - A set of interrelated parts that work together to achieve an objective. A
company, a university, and the human body are examples of systems.
Subsystem: - A set of related parts that work together to achieve an objective as one
component of a large system. For example, the human body’s circulatory system,
nervous’ system, respiratory system, etc. are subsystems of the human body.
Open and Closed Systems: - Two extremes on a continuum, open systems interact
freely with their environments, closed systems interact much less. A large, publicly
held, internally flexible organization would be a relatively open system, as
demonstrated by its many interactions with stockholders, governments, customer,
and others. These are intra-subsystem interactions, inter-subsystem interactions, and
interactions with super systems.
Input-Transformation-Output Model: - An open system receives inputs from its
environments (such as money, material, personnel, and technology) which it
transforms into outputs (such as goods and services) in interaction with environmental
variables (market conditions, world affairs, and so forth). This is shown in Figure 5.1

Inputs Transformation Outputs

Human Resource Organizational Environmental Products
Money Variables Variables Services
Materials Methods Economic Conditions Profits
Knowledge Processes Actions of Competition Education
Energy Objectives Union Activity Energy
Policies
Decisions

Management know-how and

technology transforms inputs
An organization, according to the systems view, is:
i. A subsystem of its broader environment;
Feedback

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ii. Goal oriented: people with a purpose of maximization of profits and
shareholders’ wealth, survival
iii. of organizational unit, supply of goods and services to the consuming public,
meeting the society’s expectation, etc.;
iv. A technical subsystem using knowledge, techniques, equipment and facilities;
and

A structural subsystem, people working together to interrelated activities: - A steady

state is the dynamic equilibrium, homeostasis, or balance an organization maintains
(with suppliers and customers, for example) to maintain health, and prosperity.
System Boundary: - In closed systems the boundaries (lines of demarcation)
between an organization and its environment are difficult to penetrate (for example,
the boundaries of a secretive, bureaucratically structured, closely held corporation).
Steady State: - A steady state is the dynamic equilibrium, homeostasis, or balance
an organization maintains (with suppliers and customers, for example) to maintain
health, and prosperity.
System Goals: - Organizations have a variety of goals. The supreme goal of an
organization is survival. All other goals depend on the achievement of this one goal.
Another goal, which is intimately correlated with survival goal, is the goal of
adaptation and integration with environment. Generally speaking, organizations, like
other systems, also seek growth. Growth is a sign of development, promise, and
opportunity.
Feedback: - Every business system has an inherent feedback mechanism that
provides various types of useful information to management. Management makes use
of this information in controlling the performance at different stages of work.
Feedback is also helpful in improving the quality of the products being manufactured,
and services rendered by an organizational unit. See Figure 2-1.
Psycho-social system: - A business organization is a psycho-social system in the
sense that people working in a firm develop social relationships and they constantly
interact with one another.
Creativity: - Business system is creative in the sense that it fruitfully converts the
available resources into useful products. Business system creates various forms of
utility and hence adds value to the inputs.

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Interdependence: - Various subsystems of a business system are interdependent
and interacting. Different departments are linked together in one way or other to
achieve specified goals. Interdependence exists between different firms and industries
also in addition to interdependence between different departments with a firm.

2.8.2. The Contingency Theory Approach

Contingency theory has been developed mainly in the 1970s. it builds on the major
premises of the systems theory that organizations are organic and open systems, and
there is a relationship of interdependence between an organization and its
environment, as well as within and between its subsystems. The contingency theorists
aim at integrating theory with practice in a systems framework.
When an organization behaves in response to forces in its environment, its behavior is
said to be contingent on the forces. Hence, a ‘contingency’ approach is an approach
where the behavior of one sub-unit is dependent on its environmental relationship to
other units or sub units that have some control over the consequences desired by the
sub-unit. Thus, behavior within an organization is contingent on situations, and if a
manager wants to change the behavior of any part of the organization, he or she must
attempt to change that part of its environment that is influencing it.
Contingency approach emphasizes that there is no one best way to design
organizations and manage them. Management is situational, and managers should
design organizations, define objectives, and formulate strategies, policies, and plans
in accordance with the prevailing environmental conditions. Secondly, managerial
policies and practices, to be effective must respond to changes in the environment.
Thirdly, since management’s success significantly depends on its ability to cope with
its environment, it should sharpen its diagnostic skill so as to anticipate and
comprehend environmental changes. Forth, managers should have adequate human
relations skills to accommodate change, and abilities to manage transition, as well as
stabilize change. Finally, it should use the contingency model in designing the
organization, developing its information and communication system, adopting its
effective leadership styles and formulating suitable objectives, strategies, policies and
practices. Thus, contingency theory provides a method of analysis as well as a way of
integrating organization with its environment.

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Summary
This chapter focused on different management thoughts.
Management as most social sciences, has no generally accepted theory. The present
position of management has evolved over along period of over along period of time.
Generally, group the developmental process of management in to four major stages.
1. Management idea in antigay the includes Sumerians Biblical evidence, the
ancient Egypt baby lonians etc.
2. The classical management throes
3. Behavioral school of management, and f
4. Modern management approaches
The classical management thought comp such he management, Administrative
(classical organization.) theories and max where (Bureaucralic) theory is.
There schools of thoughts gave much emphasis how to increase efficiency and
production of the work force by exampling the problems of lower level managers and
on the problems of top managers as well as the structure of the organization.
Behavioral management theory deals with the application of behavioral science and
sociology. This theory, emphasized the human dimension of management, where as,
modern management theory. Begins from the draw backs of the previous theories,
they assumed that the whole is explained in terms of its parts.

Self Check exercise

1. Discuss the main tenet of classical, management, behavioral and modern
management theories.
2. Discuss the different and similarities among each school of thought.
 Scientific management
 Classical Administrative theory
 Behavioral school of though
 Modern theory
3. Argue modern theory based on your perspective (Support or against)
4. What you draw a lesson from system theory
5. Which theories are more applicable in public sector? Why?
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 Introduction to Management Course: MGMT 201

Check list
Before you move on to the self check exercise below, make sure that you have
achieved your objectives setout four this unit. Put a tick mark (√) in the boxes only
on the text you can perform.
 Explain the rationale of studying management thought
 Understand and investigate ideas about practices in management
 Describe the evolvement of theories in management
 Demonstrate an understanding of the system approach to management
 Explain the major components of a system theory

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CHAPTER THREE
3. THE PLANNING FUNCTION
Objectives of the chapter
 To enable students understand the basic concept and the need for planning
 To enable students understand the types of plans
 To enable students understand the planning process
 To know what organizational objectives mean
 To understand the planning technique

3.1 Concepts and need for planning

What is planning?
All managers share in the execution of the management functions – planning,
organizing, staffing, directing & controlling. An organization can succeed in effective
utilization of its resources when its management decides its objectives & methods of
achieving them.
Planning Terminology
Basic planning terminology from general to specific are:
Vision: is nonspecific, directional and motivational guidance for the entire
organization. Top managers normally provide a vision for the business.
Mission or purpose: is an organization's reason for being to exist. It is concerned
with scope of the business and what distinguishes this business from similar
businesses. It defines the basic task of an organization. Mission reflects the culture
and values of top management.
Goals: refine the mission and address key issues within the organization such as
market standing, innovation, productivity, physical and financial resources,
profitability, management and worker performance and efficiency. They are expected
to be general, observable, challenging, and untimed.
Objectives: are the ends towards which activity is aimed. They are specific
statements of anticipated results that further define the organization's goals. They are
expected to be SMART (Specific, Measurable, Attainable, Rewarding, and Timed).

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Strategies are the means of achieving the aim of an enterprise. They are major plans
that commit large amounts of the organization's resources to proposed actions,
designed to achieve its major objectives and goals.
 An organization's strategies define the business the firm is in, the criteria for
entering the business, and the basic actions the organization will follow in
conducting its business (Higgins, Page 229.)
Tactics are the most specific and narrow plans, describe who, what, when, where and
how activities will take place to accomplish a goal.

Definition
Planning is an essential, critical and complex managerial function. It is the primary
and the most fundamental function of management. Nothing can be performed
without planning. Planning doesn’t occur in vacuum. Each manager has to plan. The
plans of managers are influenced i.e. affect or affected by the plans of other
managers. i.e. there are vertical and horizontal influences.
Planning is the process of determining how the organization can get where it wants to
go; outlining the activities that are necessary to achieve organization’s goals.
Planning involves determination of objectives/ goals; establishment of overall
strategy; formulation of programs; maps the courses of action for their attainment;
development of schedules, timing of action & assignment of responsibilities for their
implementation.
Planning is a process of setting organizational objectives and choosing in advance the
most suitable means for achieving those objectives. Planning concerned with ends
(what is to be done) and with means (how it is to be done). Planning already
determines what and how to do, what actions to be taken to accomplish
predetermined objectives, how long it will take and where it will take.
Planning is constructive reviewing of the future needs so that present situations can
be adjusted in the view of the established goal. (Gorge R. Terry).
In the business world, organizations should achieve their objectives. In order to
achieve objectives, the organizations should plan. Planning process produces the plan.
Plan is a blueprint for action & prescribes activities necessary for an organization to
realize its goals.
Understanding of planning process requires knowing the relationship between goals,
plans & controls as shown below.
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Goals Plans Controls

Goals represent the designed position of an organization that is sought to be

achieved; Plans establish the means for achieving the organization goals; and through
planning managers outline the activities necessary to insure that the goals of the
organization are achieved; and Controls monitor the extent to which goals have been
achieved and ensure that the organization is moving in the direction suggested by its
plans. Goals are the outcomes of planning and benchmarks for controls. They are
taken from the plan. Goals, plans & controls are inextricably intertwined & must be
well integrated so as to make the planning process successful.

Planning answers six basic questions in regard to any intended activity.

 The ‘what’ or what to do - the goal that we want to achieve. It may be long term
or short term.
 The ‘when’ or when to do - is the question of timing. Each long term goal may
have a series of short term goals that must be achieved before the long term can
be achieved.
 The ‘where’ or where to do - the place at which the plan is put into practice.
 The ‘who’ or who does it - the individual/ unit supposed to undertake specific
tasks. It asks which specific people will perform specific tasks.
 The ‘how’ or how it is done or by whom it is done - the strategy/ method for
achieving the goal. It describes what specific steps are to be taken and in what kind
of sequence.
 The ‘how much’ or how much is required to do - concerns with the
expenditure of resources that are determined to be essential to reach goals.
Planning is the process of preparing for change & the dynamics of the environment.
Planning bridges the gap from where we are, to where we want to go.
Need for planning
Why managers need to plan?
“Failing to plan is planning to fail”
Planning is important for every organization irrespective of its size, objectives, and
location. Organizational tasks can’t be performed with out plans. Planning is critical

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managerial function that forms the basis for other managerial functions. Without
planning business decisions would become inconsistent, random & ad hoc choices,
and this may lead to failure of entire organization. i.e. “Failing to plan is planning to
fail”
Planning is important for several reasons. It provides direction for an organization by
specifying objectives; It reduces risk and uncertainty for the future; It allows
organizational members to concentrate on common organizational objectives; It
provides the criteria for decision making; It provides basis for control or facilitates
control; it helps organizations to succeed or reach their objectives; it promotes
efficient utilization of resources; it enables an organization to use opportunities and
face challenges; and it contributes to the performance of other managerial functions.
Planning is exercised for several reasons or advantages. Among them the most one
are
1. to minimize risk & uncertainly.
2. for better coordination
3. to focus attention on organizational goals
4. to facilitate control
5. to promote foreword thinking
Minimizes risk & uncertainty
Planning process require information and provides for managers & organizations a
more rational & fact-based procedures for making decision. It allows managers not to
suffer from risks of random & uninformed decisions. Planning can't make managers to
carry out their activities without risk. Risk is an inherent part of decisions that
operates in a dynamic environment.
Better co-ordination or lead to success
Planning provides a foundation for the co-ordination of broad range of organizational
activities. A plan helps to define the responsibilities of multiple work groups & to co-
ordinate their activities. Without co-ordination mechanisms, it would be difficult to
direct the efforts of organizational members and groups towards the common
organizational goals.
Focuses attention on organizational goals
Planning helps managers to focus their attention on organization’s goals & activities.
And it forces the whole organization to embrace identical goals & elaborate in
achieving them. Without plans each individual or group will function in its own
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interest; and activities performed in this way are not important one to achieve
organizational goals.
Planning promotes efficiency & effectiveness of the organizations performance; and
also enables managers to outline in advance an orderly sequence of steps for
realization of organizational goals and avoid unnecessary duplication & overlap of
activities.

Facilitate control
In planning, managers set goals & develop plans to accomplish these goals. And these
goals & plans then become standards or benchmarks against which performance can
be measured. The function of control is to ensure activities confirm to the plan; and
control can be exercised if there are plans. Controlling is possible when there is a
benchmark (plan or goal) against which actual performance is compared.
Promote forward thinking
Planning forces managers to think ahead; consider resource needs; potential
opportunities to be exploited and threats from which the organization is protected in
the future. This enables organizations to prepare for better performance in the future.
Where does planning start?
Organizations should plan. Planning is carried out at the various levels of the
organization. There are two basic approaches to planning, namely the top - down
approach and the bottom - up approach.
1. The top - down approach
It is the planning efforts that begin at the top level managers. Top level managers
determine the direction of the organization and establish a master plan to achieve
over all goals. The master plan provides direction within which departments & work
groups develop their plans.
2. The bottom - up approach
It is the planning that is initiated at the lowest level of the organizational hierarchy. In
this approach, the managers and employees at the operational level began the
planning process, finally the top levels bring together all the plans of the organizations
work groups to develop a cohesive & well integrated master plan, then this
establishes the over all direction of the organization.

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These planning modes/ approaches are not mutually exclusive. By being flexible,
mangers can capitalize on the benefits of both approaches. The current trend is
towards integrating the aspects of both top down & bottom up planning approaches.

Requirements of planning
All organizations want smooth transition from present to the future. Planning
represents the way in which decision makers attempt to build bridge into the future.
For several reasons, planning is not given the attention that it requires. But Planning
requires time; knowledge, commitment; forecasts; thought and paper-work.

3.2 Types of plans

Plans can be classified on different bases or dimensions. The most important ones are:
1. Repetitiveness (frequency of use)
2. Time dimension/ horizon (duration) &
3. Scope/ breadth dimension.
Classification of plan based on repetitiveness
Based on repetitiveness, plans are classified into two, as Standing plans and Single
use plans.
1. Standing plans
Standing plans are plans that are used again & again; followed each time; and
designed to deal with organizational issues or problems that recur frequently. They
can limit employees' flexibility & make it difficult to respond to the needs of the
customers. By using standing plans management handles repetitive problems.
Standing plans include mission or purpose; goals/ objectives, strategy; policy;
procedure; method and rule.
 Purpose or mission
They are used interchangeably. Purpose or mission indicates the basic function or task
of an enterprise. Every organization to be meaningful should have a purpose/mission.
E.g. the purpose of a university is teaching & research.
 Goals or objectives:
Objectives or goals are the end points towards which all management functions
aimed.

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 Strategies:
Strategies are ways or means to achieve the established objectives. They are major
courses of action that the organization plans to take in order to achieve objectives.
Every objective at least must have one strategy to accomplish every objective.

 Policies:
Policies are general statements or understandings that guide or channel thinking and
action in decision making. They govern how certain organizational situations will be
addressed. They provide guideline to managers who must make decisions about
circumstances that occurs frequently within the organization.
Policies exist at all levels of the organization ranging from major company policy to
minor policies applicable to the smallest segments of the organization.
Policies are guides to decision making, they must allow discretion or room for
exercising power & be flexible to handle situations. If there is no room for flexibility,
the guideline is rule that tells the Dos & the don't Dos. The degree of flexibility can be
narrow or broad depending on the position and authority of the manager in the
organization. The narrower the room of flexibility, the lower is the authority, and the
broader is the room for flexibility, the higher is the position/authority in the
organization.
 Procedures:
Procedures outline chronological sequences of required actions/ activities. They are
sequentially arranged rules or actions that need to be done in orderly manner to
complete recurring tasks.
Procedures are guides to action rather than to thinking and they detail the exact
manner in which certain activities must be accomplished.
Procedures found in every parts of the organization. Like plans, they exist in a
hierarchy. They help the implementation of policies. Procedures are more specific &
action oriented than policies. They are designed to give explicit instructions on how to
complete a recurring task. e.g. the university handout book.
 Methods:

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Methods are more detailed than procedures. Procedure shows a series of steps to be
taken where as a method is only concerned with a single operation, with one
particular step, and tells exactly how this particular step is to be performed.
 Rules:
Rules are the simplest and strictest type of standing plan found in organizations. They
provide detail & specific regulations for action, and reflect managerial decisions that
certain actions must or must not be done. Rules are different from policies &
procedures. Rules also serve as guidelines, but allow no discretion in their application;
allow no deviation from the stated course of action. A procedure might be looked upon
as of rules but a rule may or may not be a part of procedure. e.g. “No smoking” is a
rule unrelated to any procedure.
Rules are already decided measures that are applied in response to a certain action.
And they are pre-decided actions by top level managers. Employees don't have right
to modify or change rules by themselves.
Rules, procedures & methods, by their nature, are designed to repress thinking; we
should use them only when we don’t want people in an organization to use their
discretion.

2. Single – use plans

Single – use plans are developed to address a specific organizational situation.
They are used up only once but not over & over again as the standing plans. They are
not used up again once the objective is accomplished.
Single – use plans are commonly three types, namely programs; projects and budgets.
 Programs:
Programs are a relatively broad set of activities designed to accomplish a particular
set of goals. They are complex and encompass goals, policies, procedures, rules, task
assignments, steps to be taken, resources to be employed, and other elements
necessary to carry out a given course of action; they are supported by budgets.
Programs may be of various size & duration.
 Projects
Projects are a part of a general program and direct the efforts of individuals or work
groups towards the achievement of well defined goals. They are typically less
comprehensive & narrower in focus than programs; and usually have predetermined
target dates for completion. Project is a subset of a specific program. It is a smaller

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portion of a program. Projects are connected with a major program but a project can
be handled by itself.
 Budgets
Budget is the plan required in numerical terms. It is referred as a numerated/
numberized program.
Budget is a fundamental planning instrument in companies that deals with the future
allocation and utilization of various resources to different organizational activities over
a given time period.
Budget can be expressed in financial terms; labor units; products/ unit of product;
machine hours or in any other numerically measured term. Budget is necessary for
control; and serves as a benchmark for controlling.
Budgets are 3 types.
 Variable or flexible budget - budgets that vary according to the organization’s
level of output.
 program budget - when an organization & its departments identify goals,
develop detailed programs to meet the goals estimate the cost of each
program. To prepare effective program budget, a manager must do some fairly
detailed & through planning.
 Zero – base budget - the programs started from the scratch or “base zero.
Programs are the most comprehensive, projects have the narrower scope and often
undertaken as a part of a program. Budgets are developed to support programs &
projects.
Classification of plans based on time
All planning deals with the future; and the future are measured in time. All the kinds of
plans are interrelated and one is the derivative of the other. Plans in terms of time
periods are classified into three as long term/ range; intermediate range and short
range.

 Long – range planning:

Long – range planning has longer time horizon; and usually concerned with the future
direction of the organization but not concerned with the immediate future but with
distant future. The time usually ranges from 5-10 years, but the time length is a
relative term that depends on the size & the nature of the organization.
 Intermediate – range planning
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Intermediate – range planning ranges between long & sort range planning; and they
are usually developed for 1-5 years, but the time dimension can also vary depending
on the size & nature of the organization.
 Short – range planning
Short – range planning are not developed separately. They are also taken as
operational plans derived from the long ranging or intermediate plans. The time
length is commonly taken as less than 1 year.

What is long or short range in most cases depends on the size of the organization &
the type of business of the organizations.
Classification based on scope/ breadth
Planning that is strategic in nature; focuses on changing the competitive position and
the overall performance of the organization is the long term.
Based on scope, plans are classified into 3 categories as Strategic plan; Tactical plan
& Operational plan.
 Strategic planning
Strategic plan is a general plan outlining decisions of resources allocation, priorities,
and action/ steps necessary to reach strategic goals. Strategic planning is a process of
analyzing & deciding the organs mission; objective; strategy (major courses of action)
and the major resource allocations.
It is developed by top level managers; mostly long – range in its time horizon;
expressed in relatively general, non-specific terms & a type of planning that provides
a general direction to the organization.
Strategic planning is the process by which the organization's strategies are
determined. In the process, three basic questions are answered:
1. Where are we now?
2. Where do we want to be?
3. How do we get there?
The "where are we now?" question is answered through the first three steps of the
strategy formulation process:
1. Perform internal and external environmental analyses,
2. Review vision, mission and objectives, and
3. Determine SWOT: Strengths, Weaknesses, Opportunities and Threats.

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SWOT analysis is very crucial. Going on to strategy choices without a comprehensive
SWOT analysis is risky. Strengths and weaknesses come from the internal
environment of the firm. Strengths can be exploited, built upon and made key to
accomplishment of mission and objectives. Strengths reflect past accomplishments in
production, financial, marketing and human resource management. Weaknesses are
internal characteristics that have the potential to limit accomplishment of mission and
objectives. Weaknesses may be so important that they need to be addressed before
any further strategic planning steps are taken. Opportunities and threats are
uncontrollable by management because they are external to the firm. Opportunities
provide the firm the possibility of a major improvement. Threats may stand in the way
of a firm reaching its mission and objectives.
 Tactical planning
Tactical plan is a plan aimed at achieving tactical goals and developed to implement
specific parts of strategic plan. It refers to the process of developing action plans
through which strategies are executed. It is concerned with shorter time frame &
narrower scopes than strategic planning. Departmental/devisional managers in
organizations are often involved in tactical planning. The strategic planning & tactical
plan are highly interrelated.
 Operational planning
Operational plans focuses on carrying out technical plans to achieve operational goals.
Operational planning is mainly short range; more specific & detailed. It is made at
operational level & concerned with day- to day; week – to - week activities of the
organizations.
 Contingency planning
Contingency planning is an approach that has become very popular in today's rapidly
changing business envelopment. It is the determination of alternative courses of
action to be taken if the original plans are disrupted or become inappropriate due to
the changing circumstances. It is proactive in nature & the management tries to
anticipate changes in the environment and prepares to cope with the future events. It
is necessary at each level of management and for strategic, tactical, and operational
plantings.
It is the development of two or more plans based on different conditions. The plan to
be implemented is determined by the specific prevailing situation.
The planning process
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The planning process indicates the major steps taken in planning. And generally there
are 10 steps in planning process.
Step 1: Understanding the existing situation
Awareness to the external environment to the organization is great important in
planning to identify opportunities (O) & threats (T) and identify strength (S) &
weaknesses (W) of an organization.
To understand external environment organizations should analyze economic situations
(competition, prices, demand, supply, etc.); Political situations (government policies,
taxation, peace & stability, etc.); Socio – cultural situations: (culture of the society,
direction in change of the culture, attitude of the society towards different products,
etc.); Environmental situations and Technological situations. In addition to external
environment, understanding the internal environment is also essential, i.e. different
types of resources an organization possesses. Therefore managers must look at O and
T as well as S &Ws, and understand what problems they wish to solved & why, and
know what they expect to gain.
Setting realistic objectives depends on this awareness. Planning requires a realistic
diagnosis of the opportunity situation.
Step 2: Forecasting
Forecasting is assumption what the future looks like. To decide where one wants to
go, it is necessary to have information about what the future looks like. Planning is
deciding what is to be done in the future. The future is full of uncertainties; the
manager must make certain assumptions about it in order to plan properly. These
assumptions are based on forecasts of the future.
Step 3: Establishing objectives
Objectives established for the entire enterprise and then for each subordinate work
unit. They specify the expected results and indicate the end points what is to be done,
where the primary emphasis to be located, & what is to be accomplished by the
network of strategies, policies, procedures, rules, budgets, & programs.
Organizational objectives give direction to the major plans, by reflecting these
objectives departmental objectives defined, departmental objectives intern control
objectives of subordinate departments, etc. down the line. The objectives of lesser
departments will be more accurate if the subdivisions managers understand the over
all organizational objectives and the derivative goals.
Step 4: Determining the alternative courses of action
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Determining the alternative courses of action is searching for & examining alternative
course of action (strategies), especially for those not immediately apparent. The more
common problem is not finding alternatives but reducing the number of alternatives. It
is seeking out alternative courses and examining their strong & weak points.
Step 5: Evaluating alternative courses of action
Evaluating alternative courses of action is assessing the alternatives by weighing
them in light of premises and goals.

Step 6: Selecting a course of action

Selecting a course of action is the point at which the plan is adopted. It is the real
point of decision making.
Step 7: Formulating derivative plans
Derivative plans are those support the basic or main plan.
Step 8: Numberizing plans by budgeting
After decisions are made & plans are set, the final step is giving them meaning.
Budgeting is to numberize plans by converting them into budgets. The organization’s
budget represents the sum total of income & expenses. If done well, budgets become
a means of adding together various plans & also set important standards against
which planning progress can be measures.
Step 9: Implementing the plan
After selecting optimum alternative, the manager has to develop an action plan to
implement it. The manager must decide these issues
o Who will do what
o By what date will the tasks be initiated & completed
o What resources will be available for the process (human & material)
o How will the plan be evaluated
o What reporting procedures are to be used
o What type & degree of authority will be granted to achieve these ends
Step 10: Controlling & evaluating the results
Once the plan is implemented, the manager must monitor the progress, i.e. evaluate
the reported results, and make any modifications necessary. Plans have to be
modified because the environment is constantly changing. Modification is needed
because plans are not quite perfect when they are implemented.

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Organizational Objectives
Types of objectives in organizations
Objectives can be separated in to two categories: Organizational and individual.
Organizational objectives are the formal targets of the organization and are set to
help the organization accomplish its purpose. They concern such areas as
organizational efficiency, productivity, and profit maximization.
Individual objectives, which also exist within organizations, are the personal goals
each organization member would like to reach through activity within the
organization. These

Objectives might include high salary, personal growth and development, peer
recognition, and societal recognition.
A manager problem arises when organizational objectives and individual objectives
are not compatible. For example, a professor may have an individual goal of working
at a university primarily to gain peer recognition. Perhaps she pursues this recognition
primarily by channeling most of her energies it to research. This professor’s individual
objective could make a significant contribution to the attainment of organizational
objectives if she were at a university whose organizational objectives emphasized
research. Her individual objective might contribute little or nothing to organizational
goal attainment, however, if she were employed at a teaching oriented university.
Rather than improving her general teaching ability and the quality of her courses, as
the university goals would suggest, she would be secluded in the library writing
research articles.

Goals and objectives commonly used interchangeably. They are closely related to
planning. Goals and objectives represent the end point towards which all management
functions are aimed. And also they are the desired future outcomes/ state end results.
i.e. they represent not only the end point of planning but also the end towards which
organizing, staffing, leading and controlling are aimed.
They 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
network of strategies, policies, procedures, rules, budgets and programs.

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Goals and objectives are the important ends towards which organizational and
individual activities are directed
Purposes of goals
Goals serve four important purposes.
1. To provide guideline and direction
 They provide guidance and a unified direction for people in the organization.
They can help everyone understand where the organization is going and why
getting there is important

2. To facilitate planning
 Goal setting practices strongly affect other aspects of planning; and good
planning facilitates future goal setting. Goal settings & developing plans to
reach the goals should be seen as complimentary activities.
3. To inspire motivation and commitment
 Goals can serve as sources of motivation to employees of the organization. They
motivate peoples to work harder if attaining the goal is likely to result in
rewards.
4. To promote evaluation and control
 Goals provide an effective mechanism for evaluation and control. This means
that performances can be assessed in the future in terms of how successfully
today’s goals are accomplished.
The Difference between goals and objectives
Although goals and objectives commonly used interchangeably, they are
differentiated as follows.
 Goals are the refinements of an organization’s mission where as objectives state
end-results and they are more specific and need to be supported by sub-
objectives.
 Goals are broad where as objectives are narrow.
 Goals are general intentions; where as objectives are precise.
 Goals are intangible; where as objectives are tangible.
 Goals are abstract; where as objectives are concrete.
 Goals can't be validated as is; where as objectives can be validated.
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 Goals can be likened to a mission and to complete the mission one has to
complete certain tasks.
 Objectives make up a goal and they are SMART (specific; measurable;
attainable/ achievable; relevant and time bound)
Example:
Goal: To speak English fluently
Objective: Take two college English courses in three months.
Objective: Work with a language tutor once a week

Hierarchy of objectives/ goals

Organizations establish different kinds of goals. Goals vary by level, area, and time
frames. Goals/ Objectives form a hierarchy reaching from corporate purpose & mission
down to individual goals as well as networks within an organization. Hierarchy of
objectives is a series of objectives linked to one another.

Top level

Middle level

Lower level

(Mission/ purpose; overall objectives; more specific overall objectives; division

objectives; department/ unit objectives individual)
Fig: The relationships of objectives and organizational hierarchy
Overall objectives need to be supported by sub-objectives. Each higher level objective
is supported by one or more lower level ones. Managers at different level are
concerned with different kinds of objectives.

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o The top levels very much involve in determining the purpose/ mission & the
overall objectives of the firm as well as the more specific overall objectives in
the KRAs.
o Middle levels are involved in setting of KRA objectives, division & department
objectives.
o Lower levels primarily concerned in setting objectives of department & units as
well as of their subordinates.
o Individual objectives consisting of performances & development of goals.
Managers at the top level should set objectives for their performance &
development.
Key result areas (KRAs) are areas where performances are essential for the success
of the organization. They are operative objectives
Organizations can use to set objectives top–down approach or bottom–up approach. In
top–down approach the upper–level managers determine the objectives for
subordinates where as in bottom–up approach the subordinates initiated the setting of
objectives for their position and present them to their superiors.
Both approaches are important, but the emphasis should depend on the situation, i.e.
the size of the organization; the organizational culture; the leadership style and the
urgency of the plan.
Management by objectives (MBO)
Definitions & applications of MBO differ widely. Some think it as an appraisal tool;
others see it as motivational technique; and others consider it as planning &
controlling device.
MBO is a system of managing or a special planning technique. It is a comprehensive
managerial system that integrate many key managerial activities in a systematic
manner and that consciously directed toward the efficient & effective achievement of
organizational & individual objectives. MBO is the philosophy of management and an
approach to planning. It emphasizes that the management and the subordinates work
together in identifying and setting up of objectives and make plans together in order
to achieve these objectives. And also it is based on the assumption that involvement
leads to commitment
MBO begins when employees with their managers establish a set of goals that serves
as a basis for the development of their work plan. Ones mutually agreeable goals are
determined criteria for assessing work performance are identified. Next/ then
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employees formulate & implement the action plans necessary to achieve their goals &
review their progress with their managers periodically. At the end, the performance of
the employees is compared with the goals established at the beginning of the period.
Performance rewards should be based on the goals achieved.
MBO programs provide a foundation for a more integrated & system oriented
approach to planning and enhances communication between employees & their
managers. And MBO approach leads to a more participatory work environment and
employees have a voice & can have inputs into their jobs how it should be designed
and what their performance targets should be.
Planning techniques
Forecasting is one of the tools for planning and decision making. To plan, managers
must make assumptions about future events. Forecasting is the process of developing
assumptions or premises about the future that managers/ planners can use in
planning and decision making.

Forecasting techniques
To carry out various kinds of forecasting, managers use different techniques. The
common models are the quantitative forecasting techniques and the qualitative
forecasting techniques

 The quantitative forecasting techniques

They use mathematical analysis. The most quantitative techniques are Time-series
analysis and casual modeling.
 Time-series analysis
Time-series is analysis forecasting technique that extends past information into the
future through calculation of a best fit line. Time –series analysis assumes that the
past is the past is a good predictor of the future; it is most useful when the manager
has a lot of historical data are available, trends are stable, and patterns are apparent.
 Casual modeling
Casual modeling is a group of different techniques that determine casual relationships
between different variables. The common casual modeling forecasting techniques are
regression modes; econometric models and economic indicators.
Regression models are equations that use one set of variable to predict another
variable, i.e.

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Econometric models are casual models that predict major economic shifts and the
potential impact of those shifts on the organization.
Economic indicators are a key population statistic or indexes that reflect the economic
well-being of a population.
The qualitative forecasting techniques
Organizations also use several qualitative techniques to develop their forecasts. The
qualitative forecasting techniques are one of the several techniques that rely on
individual or group judgments or opinions rather than on mathematical analysis. Some
of the widely used qualitative approaches to forecasting are
 The Delphi method/ procedure
o A mechanism for managing group decision making activities; can also be
used to develop forecast.

 The jury-of-executive/ expert-opinion approach

o involves using the basic Delphi process with members of top
management. In this instant top management serves as a collection of
experts asked to make prediction about something.
 The sales-force-composition method
o is the pooling of the predictions and opinions of experienced salespeople.
Their experience enables to forecast quite accurately what various
customers will do.
 The customer evaluation/expectation
Involves a survey of customers as to their future needs. It is collecting data from
costumers of the organization. The customers provide estimate of their future needs
for the goods and services that the organization supplies, and then the managers
combine, interpret and act on their information.

Summary
Planning is an essential, critical and complex managerial function. It is the primary
and the most fundamental function of management. Nothing can be performed
without planning. Planning doesn’t occur in vacuum. Each manager has to plan. The

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plans of managers are influenced i.e. affect or affected by the plans of other
managers. i.e. there are vertical and horizontal influences.
Planning is the process of determining how the organization can get where it wants to
go; outlining the activities that are necessary to achieve organization’s goals.
Planning involves determination of objectives/ goals; establishment of overall
strategy; formulation of programs; maps the courses of action for their attainment;
development of schedules, timing of action & assignment of responsibilities for their
implementation.
Planning is a process of setting organizational objectives and choosing in advance the
most suitable means for achieving those objectives. Planning concerned with ends
(what is to be done) and with means (how it is to be done). Planning already
determines what and how to do, what actions to be taken to accomplish
predetermined objectives, how long it will take and where it will take.
Planning is important for every organization irrespective of its size, objectives, and
location. Organizational tasks can’t be performed with out plans. Planning is critical
managerial function that forms the basis for other managerial functions. Without
planning business decisions would become inconsistent, random & ad hoc choices,
and this may lead to failure of entire organization. i.e. “Failing to plan is planning to
fail”

Self check exercises

1. Explain the reasons or advantages of planning.
2. Discuss classification of plan based on repetitiveness.
3. Differentiate long – range planning and intermediate – range planning.
4. Discuss classification of plan based on scope.
5. Describe contingency planning.
6. Discuss briefly the planning process.
7. Explain the types of objectives in organizations.
8. What are the purposes of goals?
9. Discuss some of the differences between goals and objectives.
10. Describe management by objectives (MBO).
11. What are the widely used qualitative approaches to forecasting?

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Check list
√ Before you move on to the self check exercise below, make sure that
you have achieved your objectives setout four this unit. Put a tick mark (√) in the
boxes only on the text you can perform.
 Understand the basic concept and the need for planning
 Understand the types of plans
 Understand the planning process
 What organizational objectives mean
 Understand the planning technique

CHAPTER THREE
3.THE DECISION MAKING
Objectives of the chapter
 To enable students understand the basic concept of decision making
 To enable students understand the types of decision making
 To know the rational decision making process

3.1 Meaning and Definition of decision making

. What is decision making?
Decision making is defined as a rational choice among alternatives. “If there is no
option, there is no choice & no decision.” In decision making, manager is making
judgments – reaching conclusion- from a list of known activities. Decision making is
universal. It is the main part of all managers job. A management makes decisions
constantly while performing management functions. Decision making is not a
separate, isolated function of management, but the common core to other functions.
Managers at all levels are engaged in decision making and make big & small decisions
daily. They make decisions while

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 Planning a budget
 Organizing a work schedule
 Interviewing a prospective employee
 Watching a worker on the assembly line
 Making adjustment to projects, etc.
3.2 Rational decision making process
Decision making is a process which an important part of a manager’s job. It is
necessary to find anything that can improve the quality of decision making. The
effective measure is to follow conscious, rational decision making process. The
decision making process are logical & simple and all are essential to the process.
Decision making process has seven (7) steps.
Step 1. Define the problem
Defining the problem is the critical step. There is a particular problem you have to
solve. The accurate definition of a problem affects all steps that follow. If the problem
is inaccurately defined, every step in the decision making process will be based on
that incorrect point.
The good method for manager to define the problem is to focus on the problem but
not on the symptoms. This is accomplished by asking the right question & developing
a sound questioning process.
As to Peter Drucker, “The most common source of mistake in management decision is
the emphasis on finding the right answers rather than the right questions.”
Finding a solution to the problem will be greatly aided by its proper identification. The
consequence of not properly defining the problems is wasted time & energy.
Step 2. Identify the limiting or critical factors
Once the problem is defined, the manager needs to develop the limiting or critical
factors of the problem.
Limiting factors are the constraints those rule out certain alternative solutions. The
common limitations are time, resources, personnel, money, facilities, and equipment.
They narrow down the range of possible alternatives.
Step 3. Develop potential alternatives
At this point, it is necessary to look for, develop & list as many possible alternative
solutions to the problem as you can. These alternatives should eliminate, correct, or
neutralize the problem. Doing nothing about a problem sometimes is the proper
alternative at least until the situation has been thoroughly analyzed. Occasionally, just
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the passing of time provides a cure. Censorship/ restriction limits the number of
alternatives developed. Alternatives should be separate solutions to the problems. In
developing alternatives, the goal has to be creative and wide-ranging as possible.
Sources for alternatives include:
o Experience
o Persons (whose opinions & judgments are respected)
o The practice of successful manager
o Group opinions through the use of task forces & committee
o The use of outside sources, including managers in other
organizations.

Step 4. Analyze the alternatives

This step is to decide the relative merits and demerits of each of the alternatives. If
the alternatives conflict with critical (limiting) factors, they must be automatically
discarded. Depending on the type of problem, the potential solutions developed. The
manager might need to make a more through analysis by applying specific decision
making aids.

Step5. Select the best alternative

Here all the alternatives are listed along with their corresponding advantages and
disadvantages.
To select the alternatives, you must find a solution that appears to offer the fewest
serious disadvantages & the most advantages. Take care not to solve one problem &
create another with your choice.
Step 6. Implement the solution
Managers are paid to make decisions and to get results from these decisions. A
decision has to be put into effect. Everyone involved with it must know what s/he must
do; how to do it; why & when.
A good alternative that half–heartedly applied by uncommitted person will often
create problems. Like plans, decisions need effective implementation to yield the

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desired results. People must be sold on their roles & must know exactly what they
must do & why. Programs, procedures, rules or policies must be thoughtfully put into
effect.
Step 7. Establish a control & evaluation system.
This is the final stage of decision – making process. Ongoing actions need to be
monitored. It should provide feedback on
 how well the decision was implemented
 what results are positive & negative , and
 what adjustments are necessary to get the results that were wanted & when the
solution was chosen.
If a manager uses this decision making process, the probability for success in decision
would be improved, because it provides a step–by–step roadmap for the manager to
move logically through decision making.

3.3 Types of decisions

Manager in organizations may be separated by their background; lifestyle & distance,
they all sooner or later must share common experience of decision making. They all
face situations involving several alternatives & an evaluation of the outcome.
Types of decisions are
1. Programmed decisions
Programmed decisions are decision managers make in response to repetitive &
routing problems. If a particular situation occurs often, managers will develop a
routine procedure for handling it.
Most management faces a great number of programmed decisions in their daily
operations. Programmed decisions should be made with out expending unnecessary
time & effort. In most organizations, programmed decisions are handled through
policies; in some management scientists have developed mathematical models.
2. Non – programmed decisions
Non – programmed decisions are decisions made for novel and unstructured
problems. When a problem hasn’t arisen in exactly the same manner before, or is
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complex or extremely important, it requires a non programmed decision. Non
programmed decisions are more complicated. They require the expenditure of lots of
money, worth of resources every year. Very little is known about this type of decision
making. They are usually handled by general problem solving processes, judgments,
intuitions, and creativity.
These two types/ classifications of decisions are broad. It is important to differentiate
between them clearly.

Types of decisions & level of management

The nature of the problem how frequently it occurs, and the degree of certainty
surrounding it should dictate at what level of management the decision should be
taken/ made.
Problems that arise infrequently & having a great deal of uncertainty surrounding
them are often strategic in nature and should be the concern of top management.
Problems that arise frequently & have fairly certain outcomes should be the concern
of lower level management. Middle managers in most organizations concentrate on
programmed decisions.

Top Non
programmed

Unstructured

Structured
Programmed

Lower

Organizational Hierarchy Nature of problems

Nature of decision making
Fig: The relationship between levels of managers & kinds of decision

The decision making environment

As there are different kinds of decisions, there are also different conditions in which
decisions must be made. The manager must be aware of the environment in which
s/he makes decisions. Decision making like other management functions doesn’t take
place in vacuum. There are factors in the environment that affect the process & the

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decision maker. In some situations one manager can have perfect knowledge/
understanding of what to do & what the consequence of the action will be; where as in
others has no such knowledge or have few clues.
Decisions are made under the conditions of certainty, risk & uncertainty. These
different decision making environments/ circumstances require different responses
from a manager.

Decision making conditions/ environments

Certainty Risk Uncertainty

Level of ambiguity & chance of making bad decision

Lower moderate higher

Fig: The decision making condition

1. Decision making under conditions of certainty

This situation means the manager has what is known as perfect knowledge, i.e. the
manager had had this decision before; the alternatives are known; and the
consequences of each alternative are fully understood. It can mean a manager can
rely on standing plans; the decisions will be made routinely.
2. Decision making under conditions of risk
This situation provides a more difficult decision making environment than the
certainty situation. In this situation, the manager knows what the problem is; what the
alternative are; but doesn’t know how each alternative will work out even though s/he
knows the odds (probabilities) of possible outcomes. The manager is faced with
dilemma of choosing the best alternative available.
3. decision making under conditions of uncertainty
This is the most difficult situation for managers. It is like being a pioneer/ breaking
new ground. In this situation, the manager is not able to determine the exact odds
(probabilities) of the potential alternatives available. S/he may be dealing with too
many variables, or perhaps there are too many unknown facts. The management is

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unable to accurately predict the probable results of choosing anyone of the
alternatives. Reliance on experience, judgment & other people’s experience can assist
the manager in assessing the value of the alternatives.

Summary
Decision making is a rational choice among alternatives. “If there is no option, there is
no choice & no decision.” In decision making, manager is making judgments –
reaching conclusion- from a list of known activities. Decision making is universal. It is
the main part of all managers job. A management makes decisions constantly while
performing management functions. Decision making is not a separate, isolated
function of management, but the common core to other functions.
Decisions can be programmed or non – programmed; Programmed decisions are
decision managers make in response to repetitive & routing problems. If a particular
situation occurs often, managers will develop a routine procedure for handling it.
Where as non – programmed decisions are decisions made for novel and unstructured
problems. When a problem hasn’t arisen in exactly the same manner before, or is
complex or extremely important, it requires a non programmed decision. Non
programmed decisions are more complicated. They require the expenditure of lots of
money, worth of resources every year.

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Self check exercises

1. Define decision making.
2. Discuss briefly decision making process.
3. Describe the type of decision making.
4. In decision making under conditions of certainty, which type of decision making is
applied?
5. In what situation/condition is the manager knows what the problem is; what the
alternative are; but doesn’t know how each alternatives will work out during decision
making?

Check list
Before you move on to the self check exercise below, make sure that you have
achieved your objectives setout four this unit. Put a tick mark (√) in the boxes only
on the text you can perform.
 Understand the basic concept of decision making
 Understand the types of decision making
 Know the rational decision making process

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CHAPTER FIVE

4. THE ORGANIZING FUNCTION

Objectives of the chapter
 To enable students understand the basic concept of organizing and organization
 To help students to understand the existence of informal organization in the
formal organization
 To enable students understand the main bases for departmentalization/
grouping jobs
 To know what span of management mean
 To explain the sources of power
 To differentiate line and staff authority
 To know the difference between centralization and decentralization
 To enable students understand the meaning of Groups and Committees in an
organization

5.1 Concept of organizing and organization

An overview of organizing
Grouping the work of organization and assigning workers to carry out the work with
the provision of appropriate authority are undertaken in the organizing function. In
organizing, managers must match the work, the workers, and the resources necessary
to carry out the work. Organizing are boldly exploring new approaches to designing
work, linking jobs, and coordinating activities. And these approaches fundamentally
changing the ways jobs, businesses & relationship between businesses are structured.
No single organizational structure can be effective in all situations. A structure suitable
to one organization may be ineffective to another because two different organizations
cannot have the same people, resources or objectives. Organizations should
continuously adapt the challenges of competition. Organizations those do not revise
their structures periodically with the ongoing global competition will face extinction/
death.
Organization is used in two different ways. One denotes the process of organization;
and the other denotes the result of the process called organizational structure. There
fore organization refers to the result of the organizing process.

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As to the first sense organization is the process of defining and grouping activities and
establishing the authority relationship among them.
In performing organizing functions, the manager differentiates and integrates
activities of an organization. Differentiation means the process of departmentalization
or segmentation of activities on the basis of some homogeneity, or segmentation of
the organizational system into subsystems. Where as integration is the process of
achieving unity of effort among different departments, or various subsystems while
achieving the stated goals. Therefore, organizing consists of dividing work among
groups/ individuals and providing coordination between individual and group activities.
Definition of organizing
Organizing is the process of establishing orderly uses for all resources in the
organization.
Organizing is the process of identification, classification and grouping of tasks that are
necessary to achieve objectives and assigning of work to individuals and designing
hierarchy of decision making relationship.
Organizing is a managerial function; it leads to the creation of the formal organization
and results in an organization structure.
The main objectives of organizing are
 Determining what kind of activities should be performed to materialize
objectives
 Classifying those activities and grouping them based on certain criteria
 Assigning the work to individuals and delegating authority
 Creating hierarchy of decision making

5.2 Formal and informal organization

Organizations can be classified into formal and informal types.
Formal organization
Formal organization is an organization that is deliberately and rationally designed and
approved by management through organizing process to achieve organizational goals/
objectives. It is planned structure of an organization which is deliberately created to
attain desired objectives. It is a system with well-defined jobs, definite authority,
responsibility, and accountability.
Common characteristics of formal organization are
1. Consciously designed

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 Formal organization are purposefully designed and established to attain
certain end results.
2. Based on delegated authority
 In a formal organization each employee has delimited authority; therefore
there is superior-subordinate relationship.
3. Organizational chart is drawn
 Organizational chart shows jobs & departments, and it is the most tangible
depiction/ picture of an organizational structure.
4. Deliberately impersonal
 Positions in an organization are not personal properties. They are always
open to some one who fit the position. People who meet the requirements
of the job can fulfill the position.

Informal organization
Informal organization refers to people in-group associations, but these associations
are not specified in the structure of the formal organization. They are not included or
established deliberately/ officially in the formal organization channel but formed
adjacent to the formal organization. They always exist in the formal organization;
nothing can destroy them; they can not be avoided. They are natural grouping of
people in the work situation based on their behavioral patterns; interests; beliefs;
objectives; etc..
No conscious attempt is made to create it. Informal organization may affect formal
organizations positively or negatively. Managers should recognize that it exists in a
formal organization; and should try to use it for the benefit of the formal organization.
Reasons for the formation of informal organization are
1. Mutual benefit
 Members of an organization have their own personal interests that tied them to
their colleagues so as to meet these interests. Hence the communality of
people’s interest in the formal organizations leads to the formation of informal
organization.
2. Friendship

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 Members of an organization establish friendship among themselves due to
different reasons. This friendship among the members paves the way for the
formation of informal organization.
3. The need to fulfill social needs
 A need to be the member of a society put the workers in the organization
together. Therefore, one of the mechanisms through which people in the
organization meet their social needs is being the member of informal
organization.
4. Physical work condition
 People working in the same unit are closely related. Hence, working in proximity
or together is one of the reasons for the formation of informal organization.
5. Administrative practice
 Some managers encourage while others suppress the formation of informal
organization. Thus the type of management entertained by managers is the
result for the establishment of informal organization.

Characteristics of informal organization

1. Group norms
This is the core behavior among the workers in the informal organization. There are
agreements/ rules and regulations which may not be written that govern the
behavior of members. The members act accordingly with out showing any
deviation.
2. Group cohesiveness
Members of the informal organizations basically have strong relationships. The
more the group sticks together the more they will be successful in attaining the
objectives.
3. Group leadership
Members in the informal organization select someone who is most active among
the others as a leader, and such people are conventional leaders.
4. Communication network

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It is also called grapevine. It is the network outside the formal communication
channel established by the organization;.
5. Lifespan and purpose
Informal organizations have short life span in comparison with formal organization.
Therefore they cease to exist when the members meet their interests and re-
established when another need arises.
6. Existence of a number of informal organizations in a formal organization
The divergent nature of people’s interest, their feeling, tradition, attitude, etc, lead
to the formation of different informal organizations in a big formal organization
7. Informal organizations gradually can develop into formal organization
Informal organizations gradually can be emerged as formal organization.
Advantages and disadvantages of informal organizations
Advantages
1. They are additional assets for the formal organization.
If informal organizations are properly associated to the formal organization,
they are additional assets for the formal organization because they may
come up with innovative ideas to promote the work of the organizations.
2. They could be useful channels of communication.
In the informal organization, information can be easily and rapidly reach the
members of the organization through their informal ways of communication.
3. They provide satisfaction and stability in the organization
When workers are given opportunity to establish the informal organizations,
they entertain their idea that leads them to be satisfied and stable in the
organization.
4. Their existence alerts managers to plan and act accordingly than otherwise.
A manager becomes watchful more than any other time when there are
informal organizations to check whether they are out of line or not. And if the
activities seem against the interest of the formal organization, necessary
measures are taken to normalize or reverse the condition.
5. They inform managers sensitive issues that would be embarrassing if
formally released.
Some information may destruct the normal organizational climate if formally
released. In such cases, informal organizations informally disseminate the

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information to the group’s endurance and then the manager also becomes
aware of the consequences if formally communicated.
Disadvantages
1. Resistance to change
There is often a tendency to resist changes.
2. Role conflict
Bothe types of organizations have their own objectives. These objectives will
not be the same and this may arise role conflict in the organization.
3. Rumor
Managers may not equally release information to the members of the
organization. When there is too much secrecy or ambiguous situations
informal organizations disseminate distorted information.
4. Conformity
Some leaders of informal organizations may have hidden agenda or promote
destructive actions, hence such leaders may use the members as an
instrumental to create challenge to the leaders of formal organization.

5.3. Organization chart

The organizing process leads to the creation of organization structure, which defines
how tasks are divided and resources deployed. Organization structure is defined as
(1) the set of formal tasks assigned to individuals and departments; (2) formal
reporting relationships, including lines of authority, decision responsibility, number of
hierarchical levels, and span of managers’ control; and (3) the design of systems to
ensure effective coordination of employees across departments.

The set of formal tasks and formal reporting relationships provides a framework for
vertical control of the organization. The characteristics of vertical structure are
portrayed in the organization chart, which is the visual representation of an
organization’s structure.

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Example: Organization chart for a soda Bottling Plant

President

Vice Director Vice Director

President Human President Marketing
Accounting Resources Production

Information Benefits Maintenance Mountain

Center Administrator supervisor Region Sales

Financial Industrial Quality Mid-state Sales

Analyst relations Control
Manager Manager

Chief Bottling Plant Western Sales

Accountant Super-
intendent

Accounts Bottling
Payable Supervisors

Payroll Clerk

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5.4 Departmentalization: Meaning and Bases

Departmentalization is the process of grouping/ combining jobs into groups or
manageable units. A manager must have basis for combining jobs. The main bases for
departmentalization are function; location or Geography; product; customer and
process.
Hence the types of departmentalization are
1. Functional departmentalization
2. Geographic departmentalization
3. Product departmentalization
4. Customer departmentalization
5. Process departmentalization and
6. Multiple departmentalization
Functional departmentalization
The common form where activities are grouped based on similarity in function or
content. It is grouping jobs according to the functions of an organization. It is common
for business firms. Within each department individuals perform specialized jobs.

General Manager

Marketing Production Finance Personnel R&D

Fig: Functional departmentalization for business firm

 Advantages
o It promotes specialization and organizational efficiency.
o Avoid overlap performing basic businesses
o It provides unity of direction. Among members of the department, there is
job interrelation.

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o It facilitates staffing and training. If there are highly qualified staffs in a
department, other workers will be initiated or encouraged to fill the
position.
o It promotes communication within departments.
o Create strong team sprit among people working in one department.
 Disadvantages
o It has problems of horizontal coordination, i.e. Lack of understanding of
interrelationship and dependency between all functions
o The tendency of “empire building”. Unhealthy competition will occur
between/ among departments.
o It frustrates the development of managerial talents from the organization
as a whole to top managerial position. There is a tendency for the
manager who comes to the position of organization’s to favor the workers
in his department.
o focuses on departmental problems and objectives; and ignores
organizational issues and objectives, i.e. Narrows the understanding of
employees about the organization at large
o Create communication barrier among people with different specialization
o Department managers can not develop general managerial skills to take
up higher managerial position
o Lack of generalism and internal destructive competition among different
departments reduces the success of the entire organization

Geographic departmentalization
It is also called location departmentalization or departmentalization by territory. It is
grouping of jobs on the bases of geographic areas. It is established when a company
has different branches that are geographically dispersed. The operations are similar
from region to region

General Manager

Region one Region two Region three

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 Advantages
o It helps in exploiting local advantages.
o It provides a training ground for new managers, i.e. to place managers out
of territory and then asses their progress.
o It enables the firm to develop local market areas and adjust quickly to
local customers’ needs
o It helps the company to reach close to raw materials.
o It saves a substantial amount of transport costs.
o It provides chance to local people employment opportunity.
o Create customers goodwill and awareness of local feeling and desire.
o Facilitate decision making
o It can provide a high level of service as employees know the local culture
and language.
 Disadvantage
o Difficulties in maintaining consistent adherence to company policy and
practices
o Duplication of effort
o The necessity of having a relatively large number of managers
o It poses serious problems of coordination and control.
o It may create gaps between head offices and branch offices.
o It is costly to host many geographically dispersed departments.
A company uses territory as basis for departmentalization often needs a large head
quarter’s staffs to control dispersed operation.
Product based departmentalization
It is grouping on the bases of products (goods/ services). Such kind of
departmentalization is best to large and multiple product organizations.

General Manager

Shoe Dep’t Clothing Dep’t Cosmetic Dep’t

 Advantages

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o Allows workers to identify with a particular product and develop team
sprit.
o It results in high product visibility.
o It facilitates innovation; and also enhances specialization of production.
o Stem from the need to create relatively independent division
o Each division has its appropriate personnel
 Disadvantages
o Employees’ insecurity during time of turmoil.
o Pressure for highly qualified managerial resources.
o It results in poor coordination across the product lines.
o Duplication of efforts among divisions
Customer based departmentalization
It is grouping of tasks based on the type of customers served. Customers are the key
to the way activities are grouped. Such forms of departmentalization are more
common in banking, book publishing and food industry.

General Manager

Women shoe Men shoe Kids shoe

 Advantages
o Customers’ interest and priority is respected;
o Helps to meet customers’ special needs by setting up separate
departments
o Indicate the willingness to understand the business of its clients
o Workers are identified with a particular group of customers that create
team sprit
 Disadvantages
o It is almost impossible to consider all the customers, their interests, habits
and customs.
o In the period of no or little demand for goods and services of an
organization, some sections may not be profitable.

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o There is a problem of duplication of resources
o Creates difficulty in coordination between departments
o High competition among departments may deter the overall
organizational performance
o Requires manager and staff specialists similar with the customers’
situation
o Differentiation among the various customer groups might be difficult
Departmentalization by process
It is appropriate when departmentalization by production is inflow. Under it activities
are grouped on the basis of various manufacturing process.

General Manager

Drilling Grinding Welding Assembling Finishing

Fig: departmentalization by process

Advantages
o It is appropriate for organizing certain types of work.
o It helps to group production facilities.
o It puts full responsibility of completing each stage of the job.
Disadvantages
o Failure in one of the process may adversely affect the whole job.
o Due to sub specialization a worker has, he can not be shifted to another
department, i.e. it restricts flexibility.
Multiple bases for departmentalization
It is the combination of two or more departments discussed above. It helps to divide
work exhaustively. It is also a way of combining jobs into departments. E.g. matrix
organizations
Matrix organization
They are also called grid organizations or project/ product management. They are
combining functional and project or product patterns of departmentalization in the

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same organization. They are common in engineering and R& D, and also in product-
marketing organization.
Typical problems of matrix organizations are
 Conflict exists between functional and project managers due to competition for
limited resources
 Role conflict, role ambiguity and role overload may result
 Imbalance of authority and power, and may result inefficiencies
 Managers protect themselves against blame by putting everything in writing
which increases administration cost because of potential conflicts
 Requires many time-consuming meetings
Guidelines to make matrix management effective are
1. Define the objectives of the task/ project clearly
2. Clarify the roles, responsibilities and authority of managers and team members
3. Ensure influence based on knowledge and information rather than rank
4. Balance the power of functional and project managers
5. Select experienced manager who can provide leadership
6. Undertake organization and team development
7. Install appropriate cost, time and quality control that report deviations from
standards in timely manner
8. Reward project managers and team members fairly

5.5 Span of management

Manager can not supervise unlimited number of employees. There should be a limited
capacity to control the work of different subordinates.
The manager’s ability to supervise a large number of subordinates is constrained by
knowledge, experience, tine, energy, etc.. To overcome this limitation, every manager
has to delegate work to subordinates.
Span of management/ control refers to the number of subordinates that single
manager can effectively supervise or should have to direct. There is no correct
number for the span of control or there is no exact formula to determine the span of
control. It varies from one situation to another.
As a general rule
 The more complex a subordinate’s job, the fewer will be the manager’s number
of subordinates.

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 The more routine the work of subordinates, the grater will be the number of
subordinates that can be effectively directed and controlled.
Because of these general rule organizations have a narrow span of control at the top
and wider span at the lower levels. i.e. as one goes up the hierarchy, the fewer will be
the number of subordinates. A well trained person/ subordinate follows directions and
routines; master tasks; requires less supervisory of time and energy.
Factors those influence spans of control of a manager are
1. The ability & the experience of a manager;
2. the complexity & variety of the subordinates’ work
3. the qualification of the manager and subordinates;
4. growth in competence and experience in personnel
5. The company’s philosophy towards centralization or centralization in decision
making.
If the manager has
 Too many people to supervise, the subordinates will be frustrated by their ability
to get immediate assistance from their boss; time & other resources could be
wasted; plans, decisions& actions be delayed or made without proper control or
safeguard.
 Too few people to supervise, the subordinates could become overloaded or over
supervised; and frustrated & dissatisfied.
 The more capable & experienced the subordinates, the more that can be
effectively supervised by one competent manager; the less time is needed to
train & acclimate; the more there is to devote to producing output.

5.6. Authority and power: Source of power

Authority
All managers in an organization have authority. They have different authorities based
on the management position they occupy. Authority is described as institutional
power. It is the right to act, or to give order/ command, or deploy resources in an
organization. It is the power derived from the rights that comes with position.
Authority represents legitimate exercise of power in the organization structure. With
out authority a manager can not perform tasks with confidence and show results.
Essential features of authority

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 It is the relationship between two individuals - one superior and the other
subordinate.
 It is the right to act.
 It is the power to make decisions and seeing that they are carried out.
 It is used to achieve organizational goals.
Power
Power is the ability to affect the behavior of others or power is the ability to exert
influence on others, or the ability to do something.
In an organizational setting, there are different sources of power. Some of them are
1. Legitimate power
Legitimate power is Power granted through organizational hierarchy. i.e. power
due to position. All managers have legitimate power over their subordinates. A
manager can assign subordinates tasks, and subordinate who refuses to do them
can be reprimanded or even fired. Such outcomes stem from the manager’s
legitimate power as defined and vested in her or him by the organization.
Legitimate power then is authority. All managers have legitimate power over their
subordinates. The mere possession of legitimate power, however, does not by itself
make someone a leader. Some subordinates only follow orders that are strictly
within the letter of organizational rules and policies. If asked to do something not in
their job description, they refuse or do a poor job. So, the manager of such
employees is exercising authority but not leadership.
2. Reward power
Reward power is the Power to give /withhold rewards. Rewards that a manager
may control include salary increases, bonuses, praise, recognition, and interesting
job assignments. In general, the greater the number of rewards a manager controls
and the more important the rewards are to subordinates, the greater is the
manager’s reward power. If the subordinate sees as valuable only the formally
organizational rewards provided by the manager, then the manager is not a leader.
But if the subordinate wants and appreciates the manager’s informal rewards, then
the manager is exercising leadership
3. Coercive Power
Coercive Power is a Power to force compliance via psychological, emotional or
physical threat. In the past physical coercion in organizations was relatively
common. In most organizations today, however, coercion is limited to verbal
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reprimands, written reprimands, disciplinary layoffs, demotion and termination. The
more punitive the elements under a manager’s control and the more important they
are to subordinates, the more coercive power the manager possesses. On the other
hand, the more a manager uses coercive power, the more likely he is to provoke
resentment and hostility and the less likely he is to be seen as a leader.
4. Reference power
Reference power is the power based on identification, imitation or charisma i.e.
followers may react favorably because they identify in some way with a leader, who
may be like them in personality, background, or attitudes. In other situations,
followers might choose to imitate a leader with referent power by wearing the same
clothes, working the same hours, or espousing the same management philosophy.
Thus, a manager might have referent power, but it is more likely to be associated
with leadership.
5. Expert power
Expert power is the power derived from information & expertise. It is the power
resulting from a leader’s special knowledge or skill regarding the tasks performed by
followers. When the leader is a true expert, subordinates go along with
recommendations because of his/her superior knowledge. Leaders at supervisory
levels often have experience in the production process that gains them promotion.
At top management levels, however, leaders may lack expert power because
subordinates know more about technical details than they do.
The relationship between power and authority
Authority is the power that has been legitimized by the organization. Where as power
is ability to exert influence on others, or the ability to do something. Like authority,
power is institutionalized and impersonal.
In organizations, it is necessary to keep a balance between power and authority. In
some cases a manager may have the authority (the right to do something), but may
lack the power (ability to do something) and vice versa. Failure to associate power and
authority at all organization levels may lead to disastrous consequence.
‘Power with out authority may be abused and authority without power is totally
meaningless.’

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5.7. Line and staff authority
The process of accomplishing organizational objectives through people entails the
establishment of relationship among the members of the organization and different
hierarchies of the management. This results the presence of the two distinct types of
authority in business organization.
Line authority
Line authority is the relationship between superior and subordinates. It is directed
supervisory relationship. It enables the manager to tell subordinates what to do. It is
represented by the chain of command. It flows downward in an organization. A
manager supervising employees or other managers has line authority.
Staff authority
Staff authority is the right to give advice. It is advisory in nature. Thus the people in
the staff position assist and advise the line manager. People in theses positions have
the authority to offer advice and recommendations. e.g. legal service; public Relation
service. It is an advisory authority for manager. Advisory authority doesn’t provide any
basis for direct control over subordinates or activities of other departments.

5.8. Delegation, centralization and decentralization

Delegation
Every manager must delegate duties to subordinates since management means
getting work done through others. Effective managers normally delegate as many
operation tasks as possible to subordinates and concentrate their efforts on core
managerial tasks.
Delegation is authorizing subordinates to act in a certain manner independently. It is a
concept describing the passing of formal authority to another person or passing
authority downward to subordinates. It helps to facilitate work being accomplished. It
is delivering to another the right to act; to make decision; to requisition resources; and
to perform other tasks in order to fulfill jobs responsibility. Delegation is a two side
relationship, i.e. the assigner and assignee. It is an act of trust; an expression of
confidence; requires necessary skills & strength, and requisite application and
dedication to duties.
Delegation occurs for two purposes
1. When managers are absent from their jobs - Subordinates act on behalf and
exercise authority.

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2. To develop subordinates and facilitate decision making process
Process of delegation
Steps for delegation are
1. Assignments of tasks - Kinds of tasks to be performed by subordinate are
identified and assigned to the subordinate
2. Delegation of authority - A subordinate to carry out the activity, the necessary
authority should be given by the manager. A guideline for authority is that “no
more no less”. i.e. It has to be adequate to complete the task.
3. Acceptance of responsibility - When subordinates are assigned with duties and
delegated authority, then they will be responsible or obliged to perform the
tasks to the maximum ability they can perform.
4. Creation of accountability - When subordinates are assigned for certain tasks
and are delegated a certain authority, and then they will be accountable for the
actions taken.
Accountability
Accountability is just having an answer to somebody; answer for the actions taken
with regard to the tasks assigned and authority delegated. Accountability means
taking the consequence - either credit or blame. If one accepts assignments and
authority, s/he is answerable for the actions taken. A manager is accountable for the
use of his/her authority and performance, and the performances and actions of
subordinates.
The process of delegation produces clear understanding on the part of manager and
of the subordinates.
 The manager should take time to think thoroughly what is being assigned and to
confer authority necessary to achieve results.
 The subordinate accepting the assignment, obliged (responsible) to perform and
is accountable for the results.
To delegate a manager must be able to consider the following issues.
1. Analyze how the manager spends his/ her time.
 This enables to list out the duties that the manager undertakes.
2. Determine the tasks that can be assigned.
 All duties of the manager cannot be delegated. The manager should identify
which of the duties should be delegated while doing so, and the manager
should consider the ability of the subordinates.
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3. Decide which task can be handled by whom among the subordinates.
4. Delegate the authority and create the responsibility.
5. Control whether the delegated subordinates are performing the tasks to the
expected standard or not.
In delegation, managers are required to think the principle of parity that states
“authority and responsibility must coincide”; i.e. responsibility created should be
equivalent to the authority granted.
 If employees are assigned tasks without authority, they can not perform
tasks as expected because the necessary authority is not granted for them.
Therefore, this creates frustration and anxiety.
 If employees are delegated more authority than the expected responsibility
they discharge, they will interfere on the job of others and hinder others job.
Both centralization and decentralization refers to the nature of authority within an
organization structure. Centralization and decentralization are merely the results of
circumstances. Absolute centralization or absolute decentralization is impossible in
practice; it is a matter of the degree along a con
Centralization
Centralization is a systematic and consistent reservation of authority at central point
within the organization. It is the concentration of authority for decision making within
the hands of one or few.
In centralization
 There is little delegation of authority
 Rules, power & discretion are concentrated at the top level
 Control & decision making reside at the top level of management
The more highly centralized the organization, the more control and decision making
will be exercised at the top.
Centralization is essential in case of small organizations to survive in a highly
competitive world. The larger the size of the organization, the more consent is the
need for decentralization.
Special circumstances forcing managers to reserve/ keep authority and centralize
decision making power are
1. To facilitate personal leadership

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Centralization generally works well in the early stages of organizational growth.
Dynamic and talented leader can derive advantages in a small firm in the form of
quick decisions, enterprising & imaginative action, and highly flexible.
2. To provide for integration
Under centralization the organization moves as a unit. It keeps all parts of the
organization moving together harmoniously toward a common goal. It assures
uniformity of standards and policies among organizational units. The manager acts
like a unifying force and provides direction to the activities. Duplication of effort and
activity are also avoided.
3. To handle emergencies
Centralization is highly suitable in the time of emergency because it helps to mobilize
resources and information quickly. Centralization of decision making ensures prompt
action necessary to meet the emergencies.
Centralization makes
 difficult for managers to process the bundles of data in time and take decision in an
appropriate manner
 the manager burdened with a great amount of detailed & exhaustive work
 managers to work painfully long hours
 forces top management to posses a broad view they may have beyond their
capacity
 the vast amount of power given to a few people may be abused
 the organization is highly vulnerable to what happens to its dynamic and talented
top management people
Centralization floods communication lines to a few individuals at the top of the
organization. As a result the speed of communication upward and decision processes
are slow. Centralization kills the initiative; self reliance and judgment of lower level
personnel.
Decentralization
Decentralization is a systematic effort to delegate all authority to the lowest levels
except that which can be exercised at central point. It is pushing down of authority
and power of decision making to the lower levels of organization. The essence of
decentralization is the transfer of authority from a higher level to the lower level.
Nowadays decentralization has become to be the fundamental principle of democratic
management.
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Some guidelines to identify the degree of decentralization in a company
1. The greater the number of decisions made at the lower level of management,
the more the company is decentralized.
2. The more important decisions are made at the lower level, the greater is the
decentralization.
3. The more flexible the interpretation of the company policy at the lower levels,
the greater the degree of decentralization.
4. The more widely dispersed the operations of the company geographically, the
greater the degree of decentralization.
5. The less the subordinate has to refer to his/her manager prior to decision, the
greater the decentralization.
Advantages and disadvantages of decentralization
Decentralization is extremely beneficial but also dangerous unless it is carefully
constructed and constantly monitored.
Advantages
 It reduces the work load on overburdened manager.
 It brings the decision making process closer to the scene of the action.
 It facilitates product diversification. i.e. treats each product lines as separate
and important.
 It gives individuals an opportunity to learn by doing.
 It facilitates effective control. i.e. often results in improved controls &
performance measurements.
 It ensures participative management.
Disadvantages
 Conflict
o Decentralization puts increased pressure on each heads to realize profit at any
cost. To meet this each deviate or veer away form corporate objective. i.e.
leads to competition that may ultimately result in bitter individual rivalries.
 Cost or duplication
o Decentralization results in duplication of staff effort. To be independent each
division should have access to purchasing, personnel, etc. hence each carry a
large group of specialists at numerous cost.

Groups and committees

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Groups
A group is any numbers of people who (1) interact with one another, (2) are
psychologically aware of one another, and (3) perceive themselves to be a group.
Kinds of groups in organization
Groups that exist in organizations typically are divided into two basic types:
Formal and informal.
 Formal group is a group that exists in an organization by virtue of
management decree to perform tasks that enhance the attainment of
organizational objectives. Organizations actually are made up of a number
of formal groups that exist at various organizational levels.
Formal groups commonly are divided in to command groups and task groups.
Command groups are formal groups that are outlined on the chain of command
on an organization chart. They typically handle the more routine organizational
activities.
Task groups are formal groups of organization members who interact with one
another to accomplish most of the organization’s non routine tasks. Although task
groups commonly are considered to be made up of members on the same
organizational level, they can consist of people from different levels of the
organizational hierarchy.
Committees
A committee is a group of individuals that has been charged with performing
some type of activity.. Committees are a more traditional formal group that can
be established in organizations. It usually is classified as a task group. From
managerial viewpoint, the major reasons for establishing committees are (1) to
allow organization members to exchange ideas, (2) to generate suggestions and
recommendations that can be offered to other organizational units, (3) to develop
new ideas for solving existing organizational problems, and (4) to assist in the
development of organizational policies. Committees typically exist within all
organizations and at all organizational levels. However, the larger the
organization, the greater the probability that committees will be used within that
organization on a regular basis.
 Informal groups
Informal groups, the second major kind of group that can exist within an
organization, are groups that develop naturally as people interact. An informal is
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defined as a collection of individuals whose common work experiences result in
the development of a system of interpersonal relations that extend beyond those
established by management.
Informal groups generally are divided into two types: interest groups and
friendship groups.
Interest groups are informal groups that gain and maintain membership
primarily because of a special concern each member possesses about a specific
issue. An example is a group of workers pressing management for better pay or
working conditions. Once the interest or concern that causes an informal group to
form has been eliminated, the group needs to disband.
As its name implies, friendship groups are informal groups that form in
organizations because of the personal affiliation members have with one another.
Personal factors such as personal interests, race, gender, and religion serve as
foundations for friendship groups. As with interest groups, the membership of
friendship groups tends to change over time. Here, however, group membership
changes as friendships dissolve or new friendships are made.

Summary
Grouping the work of organization and assigning workers to carry out the work with

the provision of appropriate authority are undertaken in the organizing function. In

organizing, managers must match the work, the workers, and the resources necessary

to carry out the work. Organizing are boldly exploring new approaches to designing

work, linking jobs, and coordinating activities. And these approaches fundamentally

changing the ways jobs, businesses & relationship between businesses are structured.

No single organizational structure can be effective in all situations. A structure suitable

to one organization may be ineffective to another because two different organizations

cannot have the same people, resources or objectives. Organizations should

continuously adapt the challenges of competition. Organizations those do not revise

their structures periodically with the ongoing global competition will face extinction/

death.

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Organization is used in two different ways. One denotes the process of organization;

and the other denotes the result of the process called organizational structure. There

fore organization refers to the result of the organizing process.

Organizing is the process of establishing orderly uses for all resources in the

organization.

It is the process of identification, classification and grouping of tasks that are

necessary to achieve objectives and assigning of work to individuals and designing

hierarchy of decision making relationship. This process results in organizational

structure which portrayed in the organization chart.

Departmentalization is the process of grouping/ combining jobs into groups or

manageable units. A manager must have basis for combining jobs. The main bases for

departmentalization are function; location or Geography; product; customer and

process.

Self check exercises

1. Differentiate between organizing and organization

2. Discus the difference between formal and informal organization

3. Explain the main bases for departmentalization

4. Identify those factors influence spans of control of a manager

5. What are the sources of power?

6. Differentiate between line and staff authority

7. What are the steps for delegation?

8. Describe centralization.

9. Discuss the advantages and disadvantages of decentralization.

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Check list

√ Before you move on to the self check exercise below, make sure that you
have achieved your objectives setout four this unit. Put a tick mark (√) in the
boxes only on the text you can perform.
 Understand the basic concept of organizing and organization
 Understand the existence of informal organization in the formal organization
 Understand the main bases for departmentalization/ grouping jobs
 Know what span of management mean
 Explain the sources of power
 Differentiate line and staff authority
 Know the difference between centralization and decentralization
 Understand the meaning of Groups and Committees in an organization

CHAPTER SIX
6. STATFING AN ORGANIZATION
Learning objectives
At the end of this part, students should be able to:
 Define staffing as part of the over all management process
 Recognize the staffing process
 Explain what human resource planning is
 Know the importance of manpower inventor(auditing) in human resource
planning
 Define recruitment as one part in staffing process
 Understand concepts like, selection, orientation and induction, Training and
development, performance appraisal, transfer and separation in staffing
process.

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6.1 The procurement function
After jobs are identified, grouped & organizational structure is created, then comes
the other managerial task staffing.
Organizations possess and utilize different kinds of resources to achieve their
objectives. These resources can be; materials, capital, machineries, money
information and men. Among these resources human resources is the most important
one. It is impossible for organizations to accomplish their objectives and utilize other
resources. Without HR other resources remain futile and organizations are said to be
lifeless without HR. Human resources have the ability to develop and improve their
abilities and skills. As Robert Owen said human resources are the most important
resources of an organization, which deserve special treatment, respect and dignity
The managerial function of staffing is defined as filling and keeping filled position in
the organization structure through identifying work force requirement, inventorying
the people available, recruiting, selection, Placing, promoting, appraising,
compensating, training and developing both candidate and comment job holders to
accomplish their tasks effectively and efficiently.
6.1.1. Staffing Processes
Staffing process incorporates the different series of activities/steps that one should
follow during staffing function.

The staffing process

Staffing involves a series of steps. They are
1. HR planning (manpower planning)
2. Recruitment and selection
3. Placement & Employment decision
4. Induction & Orientation (Socialization)
5. Training and development
6. Compensation & performance appraisal (PA)
7. Separation, Promotion, Transfer & Layoffs
1. Human Resource planning/Man power planning
It is the process by which management determines how an organization should move
from its current manpower position to its desired manpower position. One can also
define human resource planning as the process of determining the need of the
provision of adequate human resources to the job in the organization. It is designed to
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ensure that the personnel need of the organization will be constantly and
appropriately met. Through planning management strives to have the right number
and the right kind of people at the right place, at the right time, to do things which
would result in achievement of maximum long term benefit for both the individual and
the organization. It is accomplished through analysis of:
 Internal factors such as current and expected skill needs, vacancies, and
departmental expansions and reductions.
 External environmental factors such as the labor market, the government
regulation, the labor union etc.
As a result of this analysis, plans are developed for executing the other steps in the
starting process. This helps an organization to determine the need of employees for
short term or for long term. The activities generally seen in human resource planning
are,
 Forecasting about the future manpower requirements.
 Making an inventory of the present manpower and also finding out to what extent
they are effectively deployed.
 Anticipating future manpower problems by comparing the forecasted requirements
with that of the current manpower assessments.
 Planning the necessary programs and procedures to overcome the problems
identified. The planning can be done for programs concerning, requirements,
recruitment, selection, training, development, promotions, companions etc.
Why human resource planning is needed?
 To carry out the work of the organization, skilled and qualified manpower is
needed. A good human resource plan would help the management in recruiting
and selecting the best available personnel to carry out the activities of the
organization effectively and efficiently.
 People leave organizations for a number of reasons like retirement, transfer,
better opportunities in other organizations and it is the duty of the human
resource department to replace them.
 A good human Resource plan would go a long way in trying to predict when the
vacancies would be created and when the recruitment and selection should be
carved out.
 Labor turn over and absenteeism seem among workers are also factors which
make human resource planning important.
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 In order to meet the requirements of expansions and diversification programs of
the organization human resource is important.
 The present situation of fast paced change in technology and changing needs of
the work force has also necessitated creation of an effective human resource
plan to cope up with future uncertainties.
 Human resource planning will help the management in identifying the areas
where there are surplus personnel. These surplus personnel can be transferred
to other departments or can be assigned some other duties.
Model of human resource Planning
Basically a human resource plan consists of the following five phases or steps.
 Determining future human resource requirement
 Determine future human resource availability
 Conducting external and internal environmental scanning
 The Concealing requirements and availabilities
 Action planning
After developing the model of human resource planning the manager will try to audit
the human content of the organization to decide on the quality and quantity of
workers that might stay with the Organization for the future plan. Following the
human resource audit the manager is also responsible to conduct job analysis to
determine the vacant position available in the organization.
2. Recruitment and selection
Recruitment
This is the second stage in procurement process of any personnel department, the
first being human resource planning. The recruitment process acts as a bridge
between the prospective employees and the organization. Recruiting is the
discovering of potential applicants for actual or anticipated organizational vacancies.
Hence the main purpose of recruitment is to identify sources of manpower so as to
satisfy the man power requirement of the organization. It can be considered as the
most important function of the personnel department. Unless and until the
organization attracts the best and the brightest professionals it would not succeed.
Even the best personnel policies, the best devised plans and the latest technology
cannot be harnessed properly if the manpower is of low quality. The process of
recruitment is considered to be both positive as well as negative. Positive because,
stimulates people to apply for the vacancies created in the organization and negative
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because, it screens out or rejects the majority of applicants who don not match the
broad job requirements. So, during recruitment the potential candidates will be pooled
together through the advertisement of vacancies on mass media. The vacancy to be
announced to the candidates should incorporate at least the two statements.
1. The job description statements and
2. The job specification statement
Job description- is the written record of duties, responsibilities and requirements of a
particular job. It gives information of about the title, locations, duties, working
conditions and hazards. It is the description of job quality characteristics.
Job Specification -It is a statement giving the requirements of personnel who should
be made responsible for a given job. It gives information regarding the characteristics,
qualities (physical, psychological and demographic), qualifications, experience, etc, of
the worker who is most suitable to carry out the activities mentioned in the job
description. So it is a statement specifying the characteristics of the worker occupying
the position.

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

1. Internal Recruitment (Recruitment from with in)

This involves recruitment from with in the organization; it could be through promotion,
demotion or lateral transfer. The employees who already are a part of the organization
are given an opportunity for filling up vacant positions. Here, not only the existing
employees but also ex employees of the organization who left the organization for
various reasons belong to the internal source of recruitment.
The advantages of these sources are:-
 Employees have high moral because they are sure of getting relations for the
hard work they put in to the organization growth.
 The old employees can be better evaluated than out sides

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 Since the organization gives preference to existing employees in filling up
vacancies, ob security is more and also the opportunity for advancement is
higher which enhances employee loyalty towards the organization.
 Minimum time needs to be spent on training since the employees are already
used to the organization policies, procedures and philosophy.
 Employees selected from the internal sources are generally more reliable
because they have more loyalty to the organization than a new comer.
 Recruiting from the internal sources is much cheaper than the external source.
The disadvantages are:
 Too much dependence on the internal sources will lead to inbreeding and
discourages people with fresh ideas, more qualification and more creativity
room will not entering the organization
2. External source of Recruitment
Here the potential candidates are totally coming from the external environment i.e.
Out side the organizations and generally these sources are new entrants or fresh
products, the educated, but unemployed section of the society, employees of other
organizations, retired persons, etc.
The advantages of external sources are:
 The management need not compromise in their recruitment; they can get the
best professionals available in the market with the required experience, skill,
education etc.
 Recruitment can be done which might include all sections of the society
 Fresh blood can be pumped in to the organization personnel who are creative
and who are specialists can be attracted.
The disadvantages can be:
 Adequate time and money needs to be spent on training and induction
 Chances of brain drain or the employees being recruited by other organizations
increase
 The whole process of external recruitment is more expensive than internal
Methods of recruitment
Direct method recruitment:- The recruiters are sent directly to the colleges,
universities, educational institutions, and contact the graduating students and select
the best among them. The recruiters also contact the prospective employees directly,
the recruiters may hold conference and seminars for the prospective employees and
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encourage them to apply for vacancies, and the recruiters may participate in job
exhibitions or job fairs to attract prospective employees.

Indirect method: - In this method the organization encourage prospective

employees to apply for vacancies through advertisements in newspapers, magazines,
journal etc. Generally the advertisements for top-level position are given in national
newspapers and for lower level and workers advertisements are given in regional
newspapers. The advertisements could be detailed (name of the organization, type of
the job, salary and other benefits etc)or bind (only the type of job and p.o.box
number).

Third party method: - There are many private employment agencies which carry
out the recruitment process of an organization for a fee. Governments also have
employment exchange which provide organizations with man power. Placement
services of colleges and universities, trade unions etc, are also part of the third party
method of recruitment.
Selection
Selection is the procedure, which is concerned with securing and extracting relevant
information about an applicant. The objective of the selection process is to help the
organization in determining whether the applicant has the required qualifications for a
specific job or position and in hiring the best candidate among all the applicants.
Selection process
To select the best workers who best fit to the position from the potential candidates,
there are various stages that one should follow. There are:-
1. Application blank:- The applicants are made to fill up a predesigned
application form which tries to extract detailed information about the applicant’s
personal information (name, age, sex, family background etc) educational
qualifications, training programs, undergone, work experience, salary expected,
future career plans, self assessment of previous work, reasons for leaving the
current or previous employer etc, or the applicant is asked to submit his/her bio-
data instead of filling up the form. This information is used by the interviewer at
the time of final interview and is filled in the employee record if the applicant is
selected.

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2. Preliminary interview: - This is generally done by a junior executive of the
human resource department where in the general information about the
company and the job/po0sition is given and brief information about the
applicants, educational and professional qualifications and obtained.
Observation is also made of the general physical feature and physical fitness of
the applicant.
3. Final Interview: - Interview is the most widely used selection tool. It is a
complex process in which the interviewer tries to form an opinion about the
interviewee’s personality, intelligence, technical competence, interests,
attitudes etc. through face-to-face interaction. It is an attempt to secure
maximum amount of information from the candidate concerning his/her
suitability for the job under consideration. This technique can also be used for
purposes other than selection like, in performance appraisal, in grievance
handling, in disciplinary action, for counseling and other general problem
solving.
The basic objectives of interviews would be as under
 To properly judge an applicants qualifications and characteristics
 To give the applicant important and relevant information about the job and the
organization
 To establish a good rapport with all the candidates attending the interview
 To promote the good will of an applicant towards the organization, immaterial of
the out come to the selection process
 To help the management in grievance handling in conduction of disciplinary
actions and in interactions with the workers union
 To observe the applicants, appearance personality, confidence level etc.
 To solve the problems arising out of the various interactions seen inside the
organization
Types of interviews
Patterned or structured interview:-
This is a very common type of interview in which the focus is on asking structured
predetermined questions in a strict sequence. There is little or no deviation of the
sequence of questions and most of them are job/skill oriented.
Non-directive or free interview:-

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These interviews are unstructured and un planed. The basic aim of this type of
interview is to judge the real nature of the applicant. General, unstructured questions
are asked and the candidate is given adequate time to answer in detail. The
discussions in the interview may be regarding various subjects unrelated to the job
under consideration.
Depth or Action interview
This interview is semi structured, where structured questions are asked in intervals of
unstructured questions or conversations. It is a combination of the patterned and free
interview styles. The aim of this interview is to obtain detailed information about both
the personal as well as the professional life of the interviewee.
Group or Discussion interview:-
The interview is held for more than one candidate and the role of the interviewer
becomes that of the observer, where in he tries to identify the persons with the
required qualities for the concerned job. The group of candidates is given a topic or a
problem for discussion and the observers identify the persons who are having good
leadership skills, who influence the discussion, who are good analyzers, who have
good communication skills etc. and select the ones most suitable for the given job.
Panel or board interview
It is an interview in which the number of interviewer would be many and the
interviewee will be one. The panel (board) consists of expertise of different areas.
Stress interview
It is in which the interviewer pretends to be hostile & provokes the candidate by
asking questions rapidly by criticism & trying to annoy him. It is conducted to find out
the reaction of the candidate under pressures & also to observe the presence of the
mind of the candidate when he is angry or confused.
Physical examination
It is checking the physical fitness of the candidates
Medical examination of the candidate before employment is a necessary step in the
selection process. To prevent the existing employees from the communicable
diseases & unwarranted claims in the form of medical & insurance expenses
Also needed to identify the disabilities/ handicaps the candidates have so as to help
the management in allocation of the jobs.
This step is necessary for 3 vital reasons: to assure that the applicant is fit to work in
the organization, to assure that the candidate is physically fit for placement in a
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particular job, to provide base against which later physical examination may be
compared. (- is important in the disability claims that may occur during the job
assignments).
Reference letters/ Reference check & background investigation
Verification of information obtained from the candidates application form & selection
interview. After a candidate has passed successfully all the above stages in the
process of selection, a reference check is made where in the HR manager gets in
touch with the current or previous employer of the candidate and find out relevant
details. This is done to see whether the candidate has furnished correct details & also
to cross check the suitability of the candidate for the given position. Include: letter of
recommendation; references; testimonials, etc… from the former employers so that it
is possible to know the competence of the candidates.
Final selection & communication (Job offering)
After getting a positive reference, a final list of selected candidates is made & this
information is passed on to the candidates, the concerned line managers & other
people.
3. Decision making and Placement
The candidates who have been selected should be given placement letters that state
their employment and specific positions, and other employment related matters.
4. Induction & Orientation (Socialization)
When the candidate is selected and offered a job, it is necessary to introduce the new
employee to the organizations philosophy, rules, policies, etc…..then the new
employee begins his work. He should be assimilated to the job & organizational
environment.
Induction & orientation have to do with familiarizing the new employee with the
organization. They can be done by oral communication and physical observation,
written media like manuals, guidelines and others.
The employee will be given information on the organizations history, products,
operations, policies & rules, services available, opportunities & other issues.
Induction & orientation are the two important tasks to be accomplished to ensure
smooth organizational membership of a new employee. They are assimilation &
socialization of a new employee.
Induction- Refers to the process of familiarizing a new employee with the overall
organizational environment through the provision of adequate information to bring
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about change in new employee’s expectation, behavior, and attitude in order to
assure the best match with organizational interest. It involves providing information
about the organization’s history, purpose, operations, products/services and his
contribution to the organization and needs & benefits for the new entry. It is done
through the interaction of the employee, the immediate supervisors & personnel.
Orientation-It is designed to enable new employee to familiarize with working
environment through the provision of adequate information. It involves discussion
between a manager & employee regarding the job assignment including specific
location, rules and procedures of the work as well as the materials, equipments
needed to do the job.
The purposes of induction & orientation
 Reduce the start-up cost - enable a new employee to meet performance
standards sooner.
 Reduce anxiety - employee fear of failure on the job can be avoided, and he
develops self confidence.
 Decrease turn over - provision of all kinds of information during the entry time
make new employee stable in the organization.
 Save time to supervision - reduce the time of a supervisor to supervise and
observe the performance of an employee.
5. Training and development
Having qualified and well trained personnel, to perform various jobs is a very basic
necessity for any organization. Training becomes necessary because of changing
technology, up production of skills and knowledge of the workers, the need to increase
the productivity of the workers etc, so as to retain the competitive edge. Training and
development seem to indicate the same meaning but a detailed examination would
real some differences. Training is a process of leaving a sequence of programmed
behavior, which help the trainees in improving their job performance and better apply
their knowledge where as development covers not only performance improvement
activities but also those, which enhance personality, gain better attitudes, values and
behavior.
The scope of development is wider than training. To understand the difference
between training and development more clearly we need to look at their impact on
the learning dimensions.
Training
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Training becomes necessary because of the changing technology, up-production of
skills & knowledge of workers, the need to increase the productivity of the workers,
etc.
Training is any process by which the aptitudes, skills and abilities of employees to
perform specific jobs are increased. It is the act of increasing the knowledge & skills of
employee for doing a particular job; and a process of learning a sequence of
programmed behavior which help the trainees in improving their job performance and
better apply their knowledge.
Training is designed to improve a person’s skills to do the current job at high level
from the first day they start working. To ensure improvement in person’s skills &
knowledge to perform the work through training, effective training system should be
designed.
Objectives of Training
 To make the workers perfect in their work
 Proper training would help the worker in producing quality product
 Training will help the management in developing personnel for future expansion
or diversifications
 A good and well-planed training program will help in improved performance
 Proper training will help the worker in adopting safe work procedures
 Proper training will help the worker in adopting safe work procedures
 Training will help the worker in avoiding them from being obsolete

Importance of training
It is important that the employee be indicated into training programs to improve their
knowledge, skills and future performance. The need for proper training is increased by
the following considerations.
 Increased productivity
 Improvement in employee moral
 Availability for the future personnel needs of the organization
 Improvement in health and safety
 Reduced supervision
 Personal growth
 Organizational stability
Steps in designing effective training

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1. Need assessment-assess the needs for training based an organizational
analysis, person analysis & task analysis.
2. Assessment of employee readiness-Consider whether employees are motivated
to learn.
3. Creation of learning environment -Lay a foundation for successful training by
creating the conditions under which employee will learn best.
4. Ensuring transfer of training -Ensure that employee will be able to apply what
they have learned to their jobs.
5. Selection of training methods-Consider the possible training methods & select
those that will be most appropriate.
6. Evaluation of the training program-Evaluate the outcome of the training
program.
Methods of training
Organizations can use training methods that they believe appropriate to satisfy their
training needs & accomplish objectives. The commonly used training methods are
classified into:
 On-the- job training
 Off- the-job training
 Vestibule/ Simulated training

On-the-job-training:- In this type of training, an employee is put on the work floor

directly and is assigned to a superior to an experienced co-worker who teaches/guides
him in how to do the work practically. These methods are parts of the every day job
activity of the organization. This is the most common method of training, because it is
practical it is practical oriented, less expensive and the focus is on the job. The various
techniques used under this method are, coaching (understudy) apprenticeship, where
the super visor or an experienced worker gives personal and in-depth guidance to an
employee or subordinate.
Off the job-training- This type of training is given to the trainees away from the
work floor and is not the every day activity of the organization. The trainees are
imparted theoretical knowledge in a classroom or a training center and the most
popular kind of off the-job training methods are lectures, conferences, group
discussions, case studied, role-play, programmed instructions, etc.

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Vestibule/Simulated training: - This is a combination of on the job training
methods. In this method identical machines and equipment, which are used on the
work floor, are installed in a training center and also an effort id made to implicate
work atmosphere found on the actual work floor. This method tries to give the trainees
a chance of getting trained in a situation that is as close to the original work situation
as possible. Here the work environment is almost similar to the actual environment,
but is not the rest environment. Eg. Training given for a pilot.
6. Performance Appraisal and Compensation
Performance appraisal is a process of evaluating an employee’s performance of the
job assigned. Performance appraisal is a step which tells the management how
effective their processes of recruitment, selection, and training are. It basically
involves the estimation of the value, excellence and quality of the personnel of the
organization. Performance appraisal is also called as merit ratings, employee
evaluation, progress report, staff assessment etc.
Objectives of performance Appraisal
 It helps the management in maintaining the inventory of man power along with
their quality and worth for the organization
 A good performance appraisal helps the management in identifying and meeting
the training need of the employee
 It helps the management in deciding about salary increments, incentives and in
deciding who should get promotions, transfers and demotions.
Performance Appraisal Process
The steps to be followed during the evaluation of workers performance are:-
 Establishing performance standards:- performance standards are
developed at the time of developing job descriptions and job specifications.
These standard should be clear, precise, and objective oriented.
 Communication of standards to employees:- Performance standards should
be fcommunicated to all the concerned employees, because unless and until the
employees are aware of the standards, they will not be in a position to meet
them.
 Measurement of the actual performance:- In this third stage the actual
performance of the employees is noted and the information about the
employees performance is collected through personal observation, written
report, oral report etc.
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 Comparison of the actual performance with that of the standard:- An
objective and impartial comparison of the actual performance with the standard
perfomance is carried out short falls, if any of the employees are identified and
deviations, if any, are noted down. This comparison is also used to identify the
most promising employees who have the potential for growth and
=advancement.
 Communication of the results: - These results are communicated to the
concerned employees and discussions are held with them to identify their
strengths and weaknesses and also to identify the difficulties in carrying out
their activities. Objective discussions and accurate information about the
performance will help the employee in bettering his performance.
 Corrective actions: - If there are any short falls in the performance of the
employees the management along with the concerned employees should
identify the reasons of the short falls. After the reasons are properly identified,
the ways and means of overcoming these difficulties are devised and
implemented.
Compensation
People work in organizations for the sole purpose of earning enough money to live
comfortably and satisfy alls their needs. Wage and salary administration is the
establishment and implementation of sound policies and practices of employee
compensation. Compensation is just the reward for the work done by an employee
and it should be balanced so as to keep the parties, the employer and the employee
happy and satisfied. Compensation includes the money paid as reimbursement.
Factors affecting compensation policies of the organization
 Organizational ability to Pay:- The organization should have enough funds to
pay enough salary or wage to the employee.
 Supply and demand of labor:- If the supply of labor is more than the
requirement then the management can pay less wages and salaries to its
employee and reverse in case of less supply
 Prevailing market rate: - The going wage rate or salary in the industry also
influences the wage and salary policy of the organization. An organization
cannot give less salary/wage than the average salary of the industry.
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 Productivity: - The level of productivity of the workers also has an impact on
the kind of wage/salaries they get; more productive workers get more salaries.
 Bargaining Power of the worker’s unions:- Powerful worker’s union
generally have a lot of influence on kinds of wages and salaries given by the
organization
 Job requirement: - Some jobs are more hazardous and dangerous than others
and the employees understating them would get more pay than others who are
in relatively safer positions.
 Managerial attitude: - The top management has a lot of influence on the
wage and salary administration because they can choose whether to pay the
industry average salary, above or below the average salary, the kind of working
conditions to be provided to the employees, the length of work hour etc.
Types of incentives
Intrinsic rewards: - These are rewards which a worker receives for himself and are
totally dependent on the kind of work done by him. These individual incentives could
be in the form of participation in decision-making , job freedom, more responsibility,
more interesting work assignment, opportunity for personal growth etc.
Extrinsic rewards: - These incentives are meant for all the employees of the
organization and they can be follows.
 Direct compensation: - These incentives are given to all employees of the
organization and basically are monetary in nature and the payment is made
immediately like salaries or wages paid to the employees , over time earning’s,
holding premiums, performance bonus, profit-sharing, stock options etc.
 Indirect Compensation:-These incentives are realized at a later period of
time, generally once in a year or at the time of retirement like group insurance
schemes, contribution for provident fund services etc.

The time and mode to payment

There are two basic methods of payment:
 payment by time and
 payment by output

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The relative advantages of each of the two basic methods of payment; by time or by
out put are summarized in terms of the circumstances or situations under which each
is preferable:-
1. Payment on a time basis is more satisfactory when
 Units of out put are not distinguishable and measurable
 Employees have little control over the quantity of out put or there is no clear-cut
relation between effort and out put, as on some machine-paced jobs.
 Work delays are frequent and beyond employees’ control
 Supervision is good, and supervisors know that constituter’s a fair day’s work
2. Payment on the basis of out put is more satisfactory when:-
 Units of out put are measurable
 A clear relation exists between employee effort and quantity of out put
 The job is standardized, the flow of work is regular, and break downs are few or if
many consistent
 Quality considerations are somewhat less important than quantity of out put
 Supervision is unsatisfactory, or supervisors cannot devote enough attention to
individual performance
 Competitive conditions and lost control make it imperative that labor costs per
unit be definite and fixed in advance, as in the shoe and clothing industries
7. Separation, Promotions, Transfers and Layoffs
Separation
Separation refers to the discontinuation of the relation between employee & the
employer. It is the final HRM function. Like other functions it requires preparation &
planning.
Separation can be initiated by
 the employers like - mandatory retirement; dismissal; layoff
 the employees like - resignation; voluntary retirement; quit
 the agreement - when the contract ends; or they can also be caused by things
outside the will of both the employer & the employee (accidents, death)
Causes for separation
Causes for separation of employee from the organization mainly are retirement;
layoff; dismissal; permanent; disability; resignation; quit; outplacement; …
Promotion

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Promotion is the advancement of an employee to a better job. Characteristics of '
better job' to which an employee seeks promotion are greater responsibilities, more
prestige or status, greater skill, and specially increased rate of pay or salary, better
hours or better locations or working conditions. If the job doesn’t involve greater skill
or responsibilities & high pay, it should not be considered as promotion. Upgrading
refers to a practice related to promotion, but it amounts to a small scale advance in
status. It is the movement of an employee to a more responsible job within the same
occupational unit and with a corresponding increase in pay. Both upgrading &
promotion are ways of recognizing & developing the abilities of employees within the
organization instead of filling skilled and responsible positions from outside. They
should be distinguished from transfer.
Transfer
Transfer is the movement of an employee from one job to another on the same
occupational level of wage/ salary. No appreciable increase or decrease in duties and
responsibilities involved but there may be a change in their specific nature and in
working conditions. Some transfers entail a decrease in job duties and especially in
pay, and called downgrading or bumping. It is more frequently used to protect
employment opportunities for employees displaced from higher rated jobs. It is
moving to less desirable jobs.
Layoff
Layoff occurs when there is lack of business or budget curtailment/ shortage. It is
forced reduction of the number of employees. It is the most frequent type of
separation of employees from the employed workforce.
Layoff is unlike quits, retirements or deaths, it doesn’t necessarily involve a
permanent separation from the payroll. Laid-off employees normally expect to be
rehired by their employer when conditions improve.
Quits-Quit refers to the voluntary movement of the worker from the organization such
as health problem resignation.

Summary
It is necessary to forecast human resource needs based on the firm′s future strategic
goals. Organization may have to retain employees, hire new employees, or reduce
the work force. One of the key human resource decisions is staffing-deciding whom to
hire. Once employees are hired, it is important to provide them with tools to succeed.
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The orientation program can ease the entry of employees into the company so that
they become fully functioning in the shortest time possible. Training provides
employees with specific skills to enhance their job performance. Career development
offers long-term growth so that employees can use their abilities to the maximum
during their employment with the organization.
Self check exercises
1. What does staffing means
2. Describe the sources of recruitment
3. Discuss the different types of training
4. Explain performance appraisal
5. Explain the difference between training and development
6. List and discuss the importance of training
7. Discuss the importance of socialization
√ Check list
Before you move on to the self check exercise below, make sure that you have
achieved your objectives setout four this unit. Put a tick mark (√) in the boxes only
on the text you can perform.
 Define staffing as part of the over all management process
 Recognize the staffing process
 Explain what human resource planning is
 Know the importance of manpower inventor(auditing) in human resource
planning
 Define recruitment as one part in staffing process
 Understand concepts like, selection, orientation and induction,
Training and development, performance appraisal, transfer and separation in
staffing process.

CHAPTER SEVEN
7. THE LEADING/DIRECTING FUNCTION
Lesson Objectives

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After completing this chapter students should be able to:
 Explain what leading function of manager is?
 Identify and discuss different theories of leadership
 Discuss different leadership styles
 Define the term motivation
 Trace the different theories of motivation
 Identify the need levels in Maslow’s hierarchy
 Explain Aldfer’s ERG theory
 Contrast the different theories of motivation
 Identify the weakness and strengths of different theories of motivation
 Discuss the importance of communication on effective leadership

7.1 Meaning and the need for leadership

People are the most important source in an organization. To achieve organizational
objectives HR should be directed towards the accomplishment of goals. Hence, the
successful achievement of organizational objectives is greatly the manifestation of the
managers’ ability to lead employees.
Planning, organizing & staffing are simply the preparation for doing the work and the
actual work starts when managers start performing the directing function.
Different authors define leading in different ways, but the general ideas of each
definition give the same messages. Therefore, directing is simply defined as the
process of influencing people so that they will contribute to the organization & group
goals or actuating organizational members to work efficiently & effectively for the
attainment of organizational goals /objectives. Influencing means motivating people to
contribute their maximum efforts for the achievement of organizational goals; but it
does not to mean coercing/ forcing, imposing sanctions or pushing people at the
behind.
Directing is a management function performed by the top level management. It is
aimed at getting the members of the organization to move in the direction that will
achieve organizational objectives. And it is also the interpersonal aspect of
management which deals with influencing, guiding, supervising & motivating the
subordinates for the accomplishment of the predetermined objectives. It is a
challenging function of management because it deals with human elements of the
organization.

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Directing is the process of integrating the people with the organization, so as to obtain
their willingness and enthusiastic co-operation for the achievement of its goals. It
requires the integration of organizational & individual goals. It is the heart of
managerial functions because it is involves with initiating actions.
Elements of directing
Employees as individual or group members, contribute their efforts & abilities to
achieve organizational goals which can result in advancement towards their own
individual or group goals.
There are three elements of directing that helps managers to influence people
contribute willingly for the achievement of organization goal. These are:-
 Leadership
 Motivation and
 Communication
Leadership
To lead is to guide, direct, conduct & proceed. Leaders act to help a group to achieve
objectives with the maximum application of their capabilities. Success of a business
concern is dependent upon the ability of its leadership, leadership exists in any types
of organization whenever and in whatever situation. If someone tries to influence the
behavior of another individual or a group, there is leadership in an organization,
wherever an individual has subordinates, he may act as a leader. The efforts of
subordinates (followers) are to be channeled in the right direction. As leaders, they
are not only the responsible for the attainment of goals of the organization.
It is believed that leaders are born and not made at the same time; a few people also
believe the leaders are not born but made. But generally, leaders are born and also
made.
Need or Importance of Leadership
Perfect organization structure-An organization structure cannot provide for all
kinds of relationships. That is why, informal relation ships are made to exist within the
framework of formal organization structure. But the organization structure is complete
or perfect with the help of effective leadership.
Directing group activities-The personal conduct and behavior of a leader can direct
others to achieve organization goals. The main responsibility of a leader is to get the
work hard and effectively without leadership. A leader alone can consolidate the
efforts and direct them towards the goal.
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Technological, economical and social changes-There is frequent change in
technology, economic and social structure in the present computer world. So, the
organization should change its operation and style. This is possible only with the help
of effective leadership. If the changes do not take place the organization cannot
survive.
Better Utilization of man power -A leader treats with equal importance plans
policies and programs of an organization. The plans, policies and programs do not
work themselves. There is a need for a leader. The leader implements the plans,
policies and programs to utilize the available manpower effectively and get highest
production with minimum cost.
Avoiding imbalances-An organization grows in size and complexity with the
imbalances. Complexity arises due to the introduction of new functions. The reason is
that the introduction of new functions resulted in increased levels of management. So,
there is a problem of command, Co-ordination and control. A leader can tackle these
problems and maintain balances.
Source of motivation-Simply, the existence of leadership does not motivate the
workers. The leadership style should be utilized to motivate the workers according to
the situations prevailing. The achievement of goals is doubtful in the absence of
leadership.
Reconciliation of goals-An organization has it own goals. The employees of the
organization have their own goals; they are working mainly for achieving their goals
instead of achieving organizational goals. An effective leadership can reconcile the
goals of organizations and employees. It is necessary for the success of an
organization.
Developing good human relations-Human relations represent the relations
between the leader and the followers (subordinates). An efficient leader can develop
the skill of the followers and promote self-confidence apart from motivation. Next, the
leader creates. Opportunity to show their abilities and induces the followers to work to
wards the accomplishment of goals. In this way, the leader promotes the co-operative
attitude of workers and maintains better relations with them.
Promoting the spirit of Co-ordination-A dynamic leader can co-ordination the
activities of the subordinate. In an organization, workers in group so, there is a need
for co-ordination among the group member, A leader promotes the spirit of co-
ordination among the workers.
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Fulfilling social responsibilities-Social responsibilities refer to the high standard of
living to workers, higher productivity and income to the organization, more revenue to
the government, reasonable price to consumers and fair return on investment to the
investors. These could be achieved with the help of effective leadership. Only efficient
leader can get work done and fulfill social responsibilities.

7.2 Concept and meanings of Leadership theories

Leadership is a complex interpersonal process of influencing behavior, and it is crucial
ingredient in organizational effectiveness. The systematic study of personal
characteristics & traits of leaders is important to discover the characteristics that
distinguish the most effective managers from least effective ones. There are three
leadership theories:
 Trait theory
 Behavioral theory, and
 Situational theory
Trait theory

According to this theory, leadership is largely a matter of personality, a function of

specific traits. Leaders differ from followers with respect to some key traits, which
remain unchangeable across time.
Trait theory attempts to insolate the attributes of successful & unsuccessful leaders
that help select leaders for organization. But it failed to consider how different
situations demand different characteristics, styles & skills. It describes leaders on the
basis of what leaders are. It examines successful leadership from the stand point of
individual’s personal characteristics’ even as intelligence, initiative, self-assurance,
etc... According to this theory there exists some basic trait or set of traits that
differentiate leaders form non-leaders, leaders are different from other people. If they
were not different, we wouldn’t be interested in them; Leadership is to be found in the
characteristics of leadership.
Behavioral theory
Behavioral theory in contrast to trait theory, attempts to describe leadership in terms
of what leaders do. According to this approach leadership is the result of effective role
behavior; what matters a lot is not person’s traits rather his acts.
Situational theory

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There is no one-best way to lead. The best way to lead varies with the forces that exist
in specific situations. Effective leader must be flexible enough to adapt to differences
among subordinates & situations.
Qualities of Leadership
A leader should have some leadership qualities in order to provide effective
leadership.
The important qualities of a leader are discussed below
1. Physical appearance and strength

The leader has to put in hard work physically. He should have a capacity to work for
long hours than others. It proves the diligence of the leader to his followers easily.
2. Mental vigor

The leader is also strong mentally. It means that the leader is expected to withstand
strain in finishing the work properly.
3. Emotional Stability

The leader should not be moved by emotion or sentiment. He should analyze the
problem rationally and take a decision without bias. The leader should not have short
temper. Besides, he should show firmness in his decision and not show despair or
indecision on his face.
4. Sense of judgment

A leader should know to human psychology. He should understand the behavior,

needs, thoughts, motives etc. of his followers. This will help him to take a strategic
decision and get it recognized by his followers. Besides, he can set right his actions.
5. Good will

A leader should be able to understand the feelings of others. He takes decision on the
basis of expectations of his followers. If he does do so, he will not win the good will of
his followers.
6. Motivation

A leader should know the motivation techniques and how to use them. If a person is
forced to do his job under the threat of getting punishment, he will not perform his job
more than the expectations of his leader.

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7. Communication skill

Whatever the information needed to workers, it should pass through the leader. So,
the leader should communicate the information to the workers, now the leader is
acting as an effective speaker and write. If the leader has communication skills he will
direct his followers effectively.
8. Guiding ability

The leader acts as a teacher to new workers. So the leader helps his followers to learn
their work. He should train the workers by work and deed to complete the job
effectively.
9. Sociability

An able leader can easily mingle with the workers. The workers should be encouraged
to discuss their problems and difficulties with their boss. The leader should also meet
the workers frequently. The leader should show his keen interest to develop the ability
of workers.
10. Technical knowledge
A leader should possess a through knowledge of the theory and practice of his job.
Besides, he should know the current developments in his job along with technical
knowledge; for example, a computers department manager should know all the latest
developments in computers.

These are some qualities of a leader. Besides, he should be honest, sincere and fair.
Others mostly like sincere, fair and honest people and their leadership is accepted by
one and all.
11. Be honest, sincere and fair
A leader should also be honest, sincere and fair. Others mostly like sincere, fair and
honest people and their leadership is accepted by one or all.

7.3. Concept and meaning of Leadership styles

Leadership style is the behavior exhibited by a leader during influencing subordinates
to accomplish organizational objectives. It implies the ways in which the leaders
exercise leadership; the ways in which the functions of leadership are carried out, and
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of the work. Leadership style describes how a leader has relationship with his group
some of the leadership styles are discussed below.
Autocratic leadership style
Autocratic leadership style centralizes power & decision making for him & exercises
complete control over the subordinates. In autocratic situations frustrations, low moral
& conflict develop easily.
Under this leadership style, the leaders have full power or authority to take a decision.
The leaders create a work situation under which the subordinates are expected to
work they will work no more or less than the instruction of the leader. So, the leaders
have full responsibility.
The followers are not aware of organization goals besides; the followers fell insecure
and are afraid of the authority of the leaders. The reason is that these leaders have
the desire to wield loving more powers.
The leader uses his power for the interest of his group and motivates his followers.
Then the productivity is increased and the followers get full satisfaction from their job.
Democratic/ Participative leadership Style
Participative leadership style initiates decision sharing & practices leadership by
consultation. It improves job satisfaction & moral of the employees. It is just opposite
to autocratic style. The authority is decentralized. So the followers are permitted to
take decisions under this style. The decisions are taken whole-heartedly; the reason is
that the superior has consolation with his subordinates before taking a decision. The
subordinates know the goals of the organization, so, they after fruitful ideas during
discussion.
Laisez- fair or free –rein leadership
Lasses fair or Free –rein leadership style is a complete delegation of authority to
subordinates so that they must plan, motivate & control and be responsible for their
own actions. The free- rein manager avoids power & relinquishes the leadership
positions.

7.4 Motivation
Motivation refers to the forces within a person that affect his or her direction,
intensity, and persistence of voluntary behaviour. Motivated employees are willing to
exert a particular level of effort (intensity), for a certain amount of time (persistence),
toward a particular goal (direction). Technically, the term motivation can be traced to

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the Latin word mover, which means “to move.” This meaning is evident in the
following comprehensive definition:
Motivation is a process that starts with a physiological or psychological deficiency or
need that activates behaviour or a drive that is aimed at a goal or incentive.
Importance of motivation
The importance of motivation is briefly explained below

1. Maximum utilization of factors of production

Workers perform the work sincerely through the inspiration of motivation. This
creates the possibility of maximum utilization of factors of production, viz,
labour, capital.
2. Willingness to work
Motivation influences the willingness of people to work. A man is technically,
mentally and physically fit to perform the work but he may not be willing to
work, motivation creates a willingness on the part of workers to do the work in a
better way.
3. Reduced absenteeism
Financial incentives shames coerce the workers to work more. Financial
incentive scheme is framed in such a way that monetary benefits are given on
the basis of number of hours engaged. This reduces absenteeism.
4. Reduced labor turn over
Motivation has both financial and non financial intensive schemes. This helps to
retain the existing laborers. The enterprise can plan its activities on long-term
basis with the help of reduced labor turn over.
5. Availability of right personnel
Financial and non financial incentives not only retain the existing employees but
also attract the employees from out side the enterprise. In other words right
people are attracted from outside to work for the enterprise.
6. Building of good labor relations
Motivation helps to solve the labor problems of absenteeism, labor turn over,
indiscipline and grievances. This ensures building of good labour relations.
7. Increase in the efficiency and out put
Both workers and management have got benefits from motivational plans. On
the one hand, wages of the workers increase corresponding to the increase of
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out put and efficiency. On the other hand, the productivity of the organizations
and its profits increases due to consolidated efforts of the motivated people.
8. Sense of belonging
A proper motivation scheme promotes closer rapport between enterprise and
workers. The workers begin to feel that the enterprise belongs to them and
consider its interests as their own. Thus there is no difference between workers
and enterprise.
9. Basis of cooperation
Efficiency and output are increased through co-operation. The cooperation could
not be obtained with out motivation, so motivation is a basis of co-operation.
10. Helps in realizing organizational goals.
Organization goals are achieved quickly through motivation. Motivated
employees have a feeling of total involvement in the performance of
organization task. Employees may work whole heartedly for the realization of
organizational goals.
11. Improvement up on skill and knowledge
Employees have promised efficient job performance or completion. Hence the
employees may improve upon their skill and knowledge require for the job.

7.4.1. The Concept of Motivation

Understanding the concept of motivation lies in the meaning and relationships among
needs, drives, and incentives. Needs set up drives aimed at incentives. In a systems
sense, motivation consists of these three interacting and interdependent elements:

1. Needs:
Needs are
created
whenever
there is a

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physiological or psychological imbalance. For example, a need exists when
cells in the body are deprived of food and water or when the personality is
deprived of other people who serve as friends or companions. Although
psychological needs may be based on a deficiency, sometimes they are not. For
example, an individual with a strong need to get ahead may have a history of
consistent success.
2.Drives. With a few exceptions, drives, or motives (the two terms are often used
interchangeably), are set up to alleviate needs. A physiological drive can be simply
defined as a deficiency with direction. Physiological and psychological drives are
action oriented and provide an energizing thrust toward reaching an incentive.
They are at the very heart of the motivational process. The examples of the needs
for food and water are translated into the hunger and thirst drives, and the need
for friends becomes a drive for affiliation.
3.Incentives. At the end of the motivation cycle is the incentive, defined as
anything that will alleviate a need and reduce a drive. Thus, attaining an incentive
will tend to restore physiological or psychological balance and will reduce or cut off
the drive. Eating food, drinking water, and obtaining friends will tend to restore the
balance and reduce the corresponding drives. Food, water, and friends are the
incentives in these examples.
These dimensions of the basic motivation process serve as a point of departure for the
content and process theories of work motivation. After discussion of primary, general, and
secondary motives, those work-motivation theories, more directly related to the study and
application of organizational behavior and human resource management are examined.
Primary motives. Such motives are variously called physiological, biological, unlearned,
or primary. Two criteria must be met in order to be included in the primary classification:
It must be unlearned, and it must be physiologically based. These include hunger,
thirst, sleep, avoidance of pain, sex, and maternal concern. Although the precedence of
primary motives is implied in some motivation theories, there are many situations in
which general and secondary motives predominate over primary motives.
General motives. There are a number of motives that lie in the grey area between
the primary and secondary classifications. To be included in the general category, a
motive must be unlearned but not physiologically based. Where as the primary
needs seek to reduce the tension or stimulation. Thus, these needs are sometimes
called “stimulus motives.” The motives of curiosity, manipulation, activity, and
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affection seem to best meet these criteria for this classification. General motives are
more relevant to organisational behaviour than are primary motives.
Secondary motives. The secondary drives are questionably the most important to
the study of human behaviour in organisations. As human society develops
economically and becomes more complex, the primary drives, and to a lesser degree
the general drives, gives way to the learned secondary drives in motivating behaviour.
Secondary motives are closely tied to the learning concepts. In particular, the learning
principle of reinforcement is conceptually related to motivation. The relationship is
obvious when reinforcement is divided into primary and secondary categories and is
portrayed as incentives.
A motive must be learned in order to be included in the secondary
classification. Need for power, achievement, affiliation, security and status are
important secondary needs.
WORK-MOTIVATION APPROACHES (THEORIES)
In order to understand organizational behavior; the basic motives must be recognized
and studied. However these serve as only background foundation for the more directly
relevant work-motivation approaches. Figure below graphically summarizes 3 major
approaches:

7.4.2. EARLY THEORIES OF MOTIVATION

The early theories motivation evolved through three different eras ; the
traditional approach , the human relation n approach and the human recourse
approach .
The traditional approach: - the traditional approach to employee motivation is
represented explicitly by the work of Fredrick W. Taylor who suggested the use of an
incentive pays system. Taylor believed that management knows more clearly
about the job being performed than the worker and he assumed economic gain
was every ones primary motivation .Other assumption of traditional approach
were the fact that work is inherently unpleasant for most people and that the
money employees earn is more important than the nature of the job they are
performing .People could expected to perform any kind of job if they were paid
enough .
The human relations approach:- the human relation approach grew out of the
work at western electric of Elton mayo and his associates .The human relationists
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emphasized the role of social processes in the work place. Their basic assumptions
were that employees want to feel useful and important ,employees have strong
social needs and that these needs are more important than money in motivating
employees . Advocates of the human relations approach advise managers to make
workers feel important and allow them a modicum of self direction and self control
in carrying out routine activities .The human relationists believed that the illusion of
contribution and participation enhanced motivation.

7.4.3. CONTEMPORARY THEORIES OF MOTIVATION

Although it is recognised that work-motivation theories are generally categorised into

content and process approaches, equity and procedural justice theories have emerged in
recent years and command most of the attention.
7.4.3.1. THE CONTENT THEORIES OF MOTIVATION

The content theories of work motivation attempt to determine what that is motivate
people at work. The content theorists are concerned with identifying the needs/drives
that people have and how these need/drives are prioritized. They are concerned with
the types of incentives or goals that people strive to attain in order to be satisfied and
perform well. Content theories do not necessarily predict work motivation or behavior,
but are still important to understand what motivates people at work. They explain the
dynamics of employee needs; why people have different needs at different times;
understanding which we can discover what motives them

MASLOW’S NEEDS HIERARCHY THEORY

Abraham H. Maslow suggested that people have a complex set of exceptionally strong
needs, which can be arranged in a hierarchy. Underlying this hierarchy are the following
basic assumptions:
 A satisfied need does not motivate. However, when one need is satisfied, another
need emerges to take its place, so people are always striving to satisfy some need.
 The needs network for most people is very complex, with a number of needs
affecting the behavior of each person at any one time.
 Lower level needs must be satisfied, in general, before higher level needs are activated
sufficiently to drive behavior.
 There are more ways to satisfy higher level needs than lower level needs.
This theory postulates five needs categories: physiological, security, affiliation, esteem,
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and self-actualization. Figure above shows these five needs categories, arranged in
Maslow's hierarchy.
Physiological Needs
The needs for food, water, air, and shelter are all physiological needs and constitute
the lowest level in Maslow's hierarchy. People concentrate on satisfying these needs before
turning to higher order needs. Managers should understand that, to the extent that
employees are motivated by physiological needs, their concerns do not center on the
work they are doing. They will accept any job that serves to meet their needs. Managers
who focus on physiological needs in attempting to motivate subordinates assume that
people work primarily for money and are primarily concerned with comfort, avoidance of
fatigue, and the like. These managers try to motivate employees by offering wage
increases, better working conditions, more leisure time, longer breaks, and better fringe
benefits.
Security Needs
The needs for safety, stability, and absence of pain, threat, or illness are all security
needs. Like physiological needs, unsatisfied security needs cause people to be
preoccupied with satisfying them. People who are motivated primarily by security needs
value their jobs mainly as a defense against the loss of basic need satisfactions.
Managers who feel that security needs are most important to their employees focus on
them by emphasizing rules and regulations, job security, and fringe benefits. Managers
whose subordinates have strong security needs will not encourage innovation in solving
problems and will not reward risk taking. The employees, in turn, will strictly follow rules
and regulations.
Affiliation Needs
The needs for friendship, love, and a feeling of belonging are all affiliation needs. When
physiological and security needs have been satisfied, affiliation needs emerge and
motivate people. Managers must realize that, when affiliation needs are the primary source
of motivation, people value their work as an opportunity for finding and establishing
warm and friendly interpersonal relationships. Managers who believe that their
subordinates are striving primarily to satisfy these needs are likely to act in a more
supportive and permissive way, emphasizing employee acceptance by co-workers,
extracurricular activities (such as organized sports programs and company picnics), and
group norms.
Esteem Needs
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Both personal feelings of achievement and self-worth and recognition or respect from
others meet esteem needs. People with esteem needs want others to accept them for
what they are and to perceive them as competent and able. Managers who focus on esteem
needs in their attempts to motivate employees tend to emphasize public rewards and
recognition for services. Acknowledgment of the work's difficulty and the skills
required for doing it successfully characterizes the managers' recognition of employees.
These managers may use lapel pins, articles in the company paper, achievement lists on
the bulletin board, and the like to promote their employees' pride in their work.
Self-Actualization Needs
Self-fulfillment is the meeting of self-actualization needs. People who strive for self-
actualization experience acceptance of themselves and others and increased problem-
solving ability. Managers who emphasize self-actualization may involve employees in
designing jobs, make special assignments that capitalize on employees' unique skills, or
provide leeway to employee groups in planning and implementing work procedures.
Managerial Implications
 Research has found that top managers generally are more able to satisfy their esteem
and self-actualization needs than are lower level managers
 Line managers perceive greater fulfillment of security, affiliation, esteem, and self-
actualization needs than do staff managers. The largest differences between line and
staff managers occur in meeting esteem and self-actualization needs.
 Top managers tend to have more challenging jobs and an opportunity for self-
actualization. Lower level managers, on the other hand, tend to have more routine jobs,
which makes satisfying higher level needs more difficult. Employees who have little or no
control over their work (such as assembly-line workers) may not even experience
higher level needs in relation to their jobs.
 Fulfillment of needs differs according to the job a person performs, a person's age or
race, the size of the company, and the cultural background of the employee. Young
workers (25 or younger) have greater deficiencies in meeting esteem and self-
actualization needs than do older workers (36 or older).
 At lower levels of management, managers of small companies are less deficient in
meeting their needs than are managers who work for larger companies.; however
managers at upper levels in large companies are more satisfied than their counterparts
in small companies.

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ALDERFER’S ERG THEORY

Clay Alderfer agrees with Maslow that individuals have a hierarchy of needs. But instead of
the five categories of needs suggested by Maslow, Alderfer's ERG Theory holds that the
individual has three sets of basic needs: existence, relatedness, and growth. Alderfer
describes them as follows:
 Existence needs, or material needs, which are satisfied by food, air, water, pay, fringe
benefits, and working conditions.
 Relatedness needs, or needs for establishing and maintaining interpersonal
relationships with co-workers, superiors, subordinates, friends, and family.
 Growth needs, or needs that are expressed by an individual's attempt to find
opportunities for unique personal development by making creative or productive
contributions at work.
The arrangement of these categories of needs is similar to Maslow’s. Existence (E) needs
are similar to Maslow's physiological and safety needs; relatedness (R) needs are similar to
Maslow's affiliation needs; and growth (G) needs are similar to Maslow's esteem and self-
actualization needs.
However, the two theories differ in their views of how way people satisfy the different sets
of needs. Maslow states that unfilled needs are motivators and that the next higher level
need is not activated until the preceding lower level need is satisfied. Thus a person
progresses up the needs hierarchy as each set of lower level needs is satisfied. In
contrast, ERG theory suggests that in addition to this fulfillment-progression process,
a frustration-regression process is at work at the same time. That is, if a person is
continually frustrated in attempts to satisfy growth needs, relatedness needs will re-emerge
as a major motivating force. The individual will return to satisfying this lower level need
instead of attempting to satisfy growth needs, and frustration will lead to regression.
Managerial Implications
The ERG theory states that individuals will be motivated to engage in behavior to satisfy
one of the three sets of needs. Thus Alderfer's ERG theory provides an important insight
for managers. If a manager observes that a subordinate's growth needs are blocked,
perhaps because the job doesn't permit satisfaction of these needs or the company
lacks the resources to satisfy them, the manager should attempt to redirect the
subordinate's behavior toward satisfying relatedness or existence needs.
Because it is relatively new, very few research studies have tested the ERG theory of
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motivation. However, several studies support the concept of the three sets of needs in the
ERG theory, rather than the five categories of needs in Maslow s hierarchy. Some of the
most interesting findings are:
 Individuals with parents who have more education had greater growth needs than
did individuals with parents who have less education.
 Men had higher strength of existence needs and lower strength of relatedness
needs than did women.
 Blacks showed significantly greater strength of existence needs than did whites.

HERZBERG’S MOTIVATION-HYGIENE THEORY

The motivator-hygiene theory is one of the most controversial theories of

motivation, probably because of two unique features. First, the theory stresses that
some job factors lead to satisfaction, whereas others can only prevent dissatisfaction.
Second, it states that job satisfaction and dissatisfaction do not exist on a single
continuum.
Frederick Herzberg and his associates examined the relationship between job
satisfaction and productivity in a group of accountants and engineers. Through the use
of semi structured interviews, they accumulated data on various factors that these
employees said had an effect on their feelings about their jobs. Two different sets of
factors emerged: motivators and hygiene’s.
Motivator and Hygiene Factors
The first set of factors, motivator factors, includes the work itself, recognition,
advancement, and responsibility. They are associated with an individual's positive
feelings about the job and are related to the content of the job itself. These positive
feelings, in turn, are associated with the individuals' experiences of achievement,
recognition, and responsibility in the past. They are predicated on lasting rather than
temporary achievement in the work setting.
The second set of factors, hygiene factors, includes company policy and
administration, technical supervision, salary, working conditions, and interpersonal
relations. They are associated with an individual's negative feelings about the job and
are related to the context or environment in which the job is performed. That is, these
are extrinsic factors, or factors external to the job. In contrast, motivators are
intrinsic factors, or internal factors directly related the job.
Viewed somewhat differently, extrinsic outcomes are largely determined by the company
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(for example, salary, policies and rules, and fringe benefits). They serve as rewards for
high performance only if the organization recognizes high performance. On the other
hand, intrinsic outcomes (for example, a feeling of accomplishment after successful
task performance) are largely internal to the individual. The organization's policies
have only an indirect impact on them. Thus by defining exceptional performance, an
organization may be able to influence individuals to feel that they have performed their
tasks exceptionally well.
This theory also states that satisfaction and dissatisfaction are not a single continuum
but are on a separate and distinct continuum, as indicated in the figure above. Thus the
concept is that a person can be satisfied and dissatisfied at the same time. Hygiene
factors, such as working conditions and salary, cannot increase or decrease job
satisfaction; they can only affect the amount of job dissatisfaction.
Relation to Maslow's Need Hierarchy.
Herzberg's theory is closely related to Maslow's need hierarchy. The hygiene factors are
preventive and environmental in nature , and they are roughly equivalent to Maslow's
lower-level needs . These hygiene factors prevent dissatisfaction, but they do not lead to
satisfaction. In effect, they bring motivation up to a theoretical zero level and are a neces-
sary "floor" to prevent dissatisfaction, and they serve as a takeoff point for motivation. By
themselves, the hygiene factors do not motivate. Only the motivators motivate em-
ployees on the job. They are roughly equivalent to Maslow's higher-level needs. Ac-
cording to Herzberg's theory, an individual must have a job with a challenging content
in order to be truly motivated.
Contribution to Work Motivation.
Herzberg's two-factor theory casts a new light on the content of work motivation. Up
to this point, management had generally concentrated on the hygiene factors. When
faced with a morale problem, the typical solution was higher pay, more fringe
benefits, and better working conditions. However, as has been pointed out, this
simplistic solution did not really work. Management are often perplexed because they
are paying high wages and salaries, have an excellent fringe-benefit package, and
provide great working conditions, but their employees are still not motivated.
Herzberg's theory offers an explanation for this problem. By concentrating only on
the hygiene factors, management are not motivating their personnel.
There are probably very few workers or associates who do not feel that they deserved
the raise they received. On the other hand, there are many dissatisfied associates and
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managers who feel they did not get a large enough raise. This simple observation
points out that the hygiene factors seem to be important in preventing dissatisfaction
but do not lead to satisfaction. Herzberg would be the first to say that the hygiene fac-
tors are absolutely necessary to maintain the human resources of an organization. How-
ever, as in the Maslow sense, once "the belly is full" of hygiene factors, which is the
case in most modern organizations, dangling any more in front of employees will not
motivate them. According to Herzberg's theory, only a challenging job that has the op-
portunities for achievement, recognition, responsibility, advancement, and growth will
motivate personnel.
McClelland’s LEARNED NEEDS THEORY
McClelland has proposed a theory of motivation that is closely associated with
learning concepts. He believes that many needs are acquired from the culture. Three of
these learned needs are the need for achievement (n Ach), the need for affiliation (n
Aff), and the need for power (n Pow).
McClelland contends that when a need is strong in a person, its effect is to motivate the
person to use behavior that leads to its satisfaction. For example, having a high n Ach
encourages an individual to set challenging goals, to work hard to achieve the goals,
and to use the skills and abilities needed to achieve them.
Based on research results, McClelland developed a descriptive set of factors that
reflect a high need for achievement. These are:
1. The person likes to take responsibility for solving problems.
2. The person tends to set moderate achievement goals & is inclined to take
calculated risks.
3. The person desires feedback on performance.
The need for affiliation reflects a desire to interact socially with people. A person with a
high need for affiliation is concerned about the quality of important personal
relationships, and thus, social relationships take precedence over task
accomplishment. A person with a high need for power, meanwhile, concentrates on
obtaining and exercising power and authority. He or she is concerned with influencing
others and winning arguments. Power has two possible orientations according to
McClelland. It can be negative in that the person exercising it emphasizes dominance
and submission. Or power can be positive in that it reflects persuasive and
inspirational behavior.
The main theme of McClelland's theory is that these needs are learned through coping
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with one's environment. Since needs are learned, behavior, which is rewarded, tends
to recur at a higher frequency. Managers who are rewarded for achievement behavior
learn to take moderate risks and to achieve goals. Similarly, a high need for affiliation or
power can be traced to a history of receiving rewards for sociable, dominant, or
inspirational behavior. As a result of the learning process, individuals develop unique
configurations of needs that affect their behavior and performance.
7.4.3.2. PROCESS THEORIES OF MOTIVATION

The process theories of motivation are concerned with answering the questions of how
individual behavior is energized, directed, maintained, and stopped. In other words,
they are more concerned with the cognitive antecedents that go into motivation or
effort, and, more important, with the way they relate to one another.
VROOM’S EXPECTANCY THEORY OF MOTIVATION
Vroom defines motivation as a process governing choices among alternative forms of
voluntary activity.
In his view, most behaviors are considered to be under the voluntary control of the
person & consequently are motivated. It is necessary to define the terms of the theory
and explain how they operate.
First-level & Second-level Outcomes: First-level outcomes resulting from behavior
are those associated with doing the job itself and include productivity, absenteeism,
turnover, and quality of productivity.
The second-level outcomes are those events (rewards or punishments) that the first-
level outcomes are likely to produce, such as merit pay increases, group acceptance
or rejection, promotion, and termination.
Valence
Valence means the strength of an individual’s preference for a particular outcome.
Outcomes is positively valet when it is preferred and negatively valet when it is not
preferred or is avoided. An outcome has a valence of zero when the individual is
indifferent to attaining or not attaining it.
Instrumentality
Another major input into the valence is the instrumentality of the first-level outcome
in obtaining a desired second-level outcome. Instrumentality is the perception by an
individual that first level outcomes (performance) are associated with second-level
outcomes (rewards/punishment). Instrumentality can be negative, suggesting that

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attaining a second-level outcome is less likely if a first-level outcome has occurred, or
positive, suggesting that the second-level outcome is more likely if the first-level
outcome has been obtained.
Expectancy
The belief that a particular level of effort will be followed by a particular level of
performance is called expectancy. In other words, it refers to the individual’s belief
regarding the likelihood or subjective probability that a particular behavior will be
followed by a particular outcome. Expectancy can take values ranging from 0,
indicating no chance that an outcome will occur after the behavior or act, to +1,
indicating perceived certainty that a particular outcome will follow a behavior or act.
Expectancy relates efforts to first-level outcomes, whereas instrumentality relates
first-level outcomes and second-level outcomes. In other words, expectancy in
Vroom’s theory is probability (ranging from 0 to +1) that a particular action or effort
will lead to a particular first-level outcome. Instrumentality refers to the degree to
which a first-level outcome will lead to a desired second-level outcome. In summary,
the strength of the motivation to perform a certain act will depend on the algebraic
sum of the products of the valences for the outcomes (which include instrumentality)
times the expectancies.
Managerial Implications
While there are still problems with expectancy theory, it has some direct implications
for motivating employees. These implications can be grouped into six suggestions for
managerial action.
 First, managers should try to determine the outcomes that each employee values.
They can do so by (1) using a questionnaire; (2) observing employee reactions to
different rewards; and (3) asking employees about their career goals and the kinds
of rewards they want. However, managers must understand that employees can
and do change their minds about desired outcomes. The effective manager
correctly diagnoses these changes and also does not assume that all employees
are alike.
 Second, managers should determine the kinds of performance they desire. They
must define good performance and adequate performance in terms that are
observable and measurable, so that subordinates can understand what managers
desire of them.
 Third, managers should make sure that desired levels of performance can be
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attained. Motivation is determined not only by expectancy, but also by instrumen-
tality. This means that the levels of performance set by managers as the points at
which employees receive desired outcomes must be attainable. If employees feel
that the level of performance necessary to get a reward is higher than they can
reasonably achieve, their motivation to perform will be low.
 Fourth, managers should directly link the specific performance they desire to the
outcomes desired by employees. If an employee has achieved the desired level of
performance and wants a promotion, the manager should promote that person as
soon as possible. If a high level of motivation is to be created and maintained, it is
extremely important for employees to clearly see the reward process at work in a
timely manner. Concrete acts must accompany statements of intent in linking
performance to rewards. Managers should not forget that it is an individual's
perceptions—not reality— that determines motivation. It does not matter, for
example, whether a manager feels that subordinates' pay is related to their
motivation. Employees will be motivated by pay raises only if they see the
relationship. Too often, managers misunderstand the behavior of their subordinates
because they tend to rely on their own perceptions of the situation and forget that
their subordinates' perceptions may be different.
 Fifth, managers should analyze the situation for conflicts. Having set up positive
expectancies for employees, managers must look at the entire situation to see
whether other factors conflict with the desired behaviors (for example, the informal
work group or the organization's formal reward system). Motivation will be high only
when employees see many rewards and few negative outcomes associated with
good performance.
 And sixth, managers should make sure that changes in outcomes or rewards are
large enough to motivate significant behavior. Trivial rewards may result in minimal
efforts, if any, to improve performance. Rewards must be large enough to motivate
individuals to make the effort required to significantly change performance.

THE PORTER-LAWLER MODEL OF MOTIVATION

Although satisfactions make an input into Vroom’s concept of valence and although the
outcomes have performance implications, it was not until Porter and Lawler refined and
extended Vroom’s model (for example, the relationships are expressed diagrammatically
rather than mathematically, there are more variables, and the cognitive process of perception

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plays a central role) that the relationship between satisfaction and performance was dealt
with directly by a motivation model..

Porter and Lawler start with the premise that motivation (effort or force) does not equal
satisfaction or performance. Motivation, satisfaction, and performance are all separate
variables and relate in ways different from what was traditionally assumed.
As shown in the figure above, the value of the expected reward to the individual combines
with the individual’s perception of the effort involved in attaining the reward and the
probability of achieving it to produce a certain level of effort. This effort combines with the
individual’s abilities and traits and the way he or she sees the task to yield a specific
performance level. This resulting level of performance leads to intrinsic rewards (or negative
consequences if the performance level is lower than expected) that are inherent in the task
accomplishment and perhaps to extrinsic rewards. The individual has his or her own idea
about the appropriateness of the total set of rewards received, which when measured against
the rewards actually received, results in the level of satisfaction experienced by the individual.
The individual’s experience will then be applied to his or her future assessments of the values
of rewards for further task accomplishment.

Implications for practice.

Porter and Lawler recommend that practicing managers go beyond traditional attitude
measurement and attempt to measure variables such as the values of possible rewards,
the perceptions of effort-reward probabilities, and role perceptions. These variables, of
course, can help managers better understand what goes into employee effort and per-
formance. Giving attention to the consequences of performance, Porter and Lawler also
recommend that organizations critically re-evaluate their current reward policies. They
stress that management should make a concentrated effort to measure how closely levels
of satisfaction are related to levels of performance, and recently a practitioner-oriented
article emphasized that the accuracy of role perceptions may be the missing link in
improving employee performance. The inference here is that employees need to better
focus their efforts on high-impact behaviors and activities that result in higher
performance. However, both studies and comprehensive analyses continue to point out the
complex impact that the cognitive process has in relation to rewards and other outcomes
in organizations.
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Implication For Managers Implication For Organizations

1. Determine the rewards valued by each 1. Organizations usually get

subordinate what they reward, not
2. Determine the performance you desire what they want
3. Make the attainable performance level 2. The job itself can be
available made intrinsically
4. Link rewards to performance rewarding
5. Analyze what factors might counteract the 3. The immediate
effectiveness of the reward supervisor has an
6. Make sure the reward is adequate important role in the
motivation process
J.STACY ADAM’S EQUITY THEORY
Equity theory refers to an individual’s subjective judgements about the fairness of the
reward she or he got, relative to the inputs (which may include many factors such as
effort, experience, education, and so on), in comparison with the rewards of others.

The essence of equity (which also means "fairness") theory is that employees compare
their efforts and rewards with those of others in similar work situations. This theory of
motivation is based on the assumption that individuals are motivated by a desire to be
equitably treated at work. The individual works in exchange for rewards from the
organization. Four important terms in this theory are:
1. Person. The individual for whom equity or inequity is perceived
2. Comparison other. Any group or persons used by Person as a referent regarding
the ratio of inputs and outcomes
3. Inputs. The individual characteristics brought by Person to the job. These may be
achieved (e.g., skills, experience, learning) or ascribed (e.g., age, sex, race)
Out comes. What Person received from the job (e.g., recognition, fringe benefits, pay)
Equity occurs when employees perceive that the ratios of their inputs (efforts) to their
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outputs (rewards) are equivalent to the ratios of other employees. Inequity exists
when these ratios are not equivalent; an individual’s own ratio of inputs to outcomes
could be greater than, or less than, that of others.

Consequences of Inequity
Employees are motivated to reduce or eliminate their feelings of inequity by
correcting the inequitable situation. There are six possible ways to reduce feelings
of inequity. Notice, however, that the strategy used depends on the persons past
experience as well as whether they are under or over rewarded.
1. Changing inputs—under rewarded workers tend to reduce their effort and
performance if these outcomes don't affect their paycheck. Overpaid workers
sometimes (but not very often) increase their inputs by working harder and
producing more.
2. Changing outcomes—People with under reward inequity might ask for
more desired outcomes, such as a pay increase. If this does not work, some
are motivated to join a labor union and demand these changes at the
bargaining table. Others misuse sick leave for more paid time off. At the
extreme, some people steal company property or use facilities for personal
use as ways to increase their outcomes.

3. Changing perceptions—Employees may distort inputs and outcomes to

restore equity feelings. Over rewarded employees typically follow this
strategy because it's easier to increase their perceived inputs (seniority,
knowledge, etc.) than to ask for less pay!
4. Leaving the field—some people try to reduce inequity feelings by getting
away from the inequitable situation. Thus, equity theory explains some
instances of employee turnover and job transfer. This also explains why an
under rewarded employee might take more time off work even though he or
she is not paid for this absenteeism.
5. Acting on the comparison other—Equity is sometimes restored by chang-
ing the comparison others inputs or outcomes. If you feel over rewarded, you
might encourage the referent to work at a more leisurely pace. If you feel
under rewarded, you might subtly suggest that the overpaid co-worker
should be doing a larger share of the workload.
6. Changing the comparison other—If we can't seem to alter the outcome/
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input ratio through other means, we might eventually replace the com-
parison other with someone having a more compatible outcome/input ratio.
As was mentioned earlier, we sometimes rely on a generalized comparison
other, so feelings of inequity may be reduced fairly easily by adjusting the
features of this composite referent.
Managerial Implications
 Managers should treat employees equitably. When individuals believe that they are
not being treated fairly, they will try to correct the situation and reduce tension by
means of one or more of the six types actions discussed above.
 People make decisions concerning equity only after they compare their inputs and
outcomes with those of comparable employees. These others may be employees of
the same organization or of other organization. The latter presents a major problem
for managers.
 Women, and members of minority groups, have argued for pay based on
comparable worth. Comparable worth means that individuals holding jobs that
require similar qualifications and involve similar level of effort should receive equal
pay.
The equity theory development goes beyond expectancy theory as a cognitive
explanation of work motivation and serves as a departure for more specialized areas
of current interest such as procedural justice.
Procedural Justice
Equity theory focuses on fairly distributing outcomes to create an atmosphere of high,
intense positive motivation. The concept of procedural justice states that people
when reacting to organizational decisions and processes that affect them are
influenced by procedures used to establish the outcomes. That is, employees are
concerned with the fairness of the decision-making procedures, or what is referred to
as procedural justice. This focus on procedural justice is in contrast to distributive
justice, which is the basis of equity theory.
Procedural justice has been shown to have a positive impact on a number of affective
and behavioral reactions. These reactions include: Organizational commitment, Intent to
stay with organization, Organizational citizenship, Trust in supervisor, Satisfaction
with decision outcome, Work effort, Performance
Positive consequences of procedural justice have been found in important organizational
decision contexts including pay allocation, personnel selection, and performance
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appraisal. Since procedural justice can provide benefits to organizations, an important
issue involves the types of decision-making procedures that people consider to be fair.
People are more inclined to interpret decisions to be fair when they have a voice in the
decision, there is consistency in decision making and the process and procedures conform
to ethical and moral values.
Two explanations have emerged regarding why procedural justice works. Self-interest
theory proposes that people want fair procedures because such fairness enables them to
obtain desired extrinsic outcomes. Although a manager may decide not to promote a
person, if the process has been fair it will be accepted.
Group value theory suggests that people value fairness as a means of realizing such
desired intrinsic outcomes as self-esteem. People have a strong sense of affiliation with
groups to which they belong. Fair group procedures are considered to be a sign of
respect and an indication that they are valued members of the group. This results in
feeling a sense of self-esteem.
Treating employees and customers fairly, respectfully, and in a timely manner is a worthy
managerial approach. First, managers must understand the importance of procedural
justice. Second, managers can achieve good performance results when procedural justice
is widely practiced for decision making. Finally, employee perceptions are extremely
critical in identifying procedural justice. Determining these perceptions requires strong
interpersonal and observation skills on the part of m

THE RELATIONSHIP BETWEEN EQUITY THEORY AND PROCEDURAL JUSTICE

Recent theory development specifies that equity theory can be extended into what is now
commonly known as procedural justice. Equity theory explains conditions under which
decision outcomes (pay levels, pay raises, promotions) are perceived as being fair or
unfair. Persons engaged in this type of thinking examine the results as opposed to how
those results were achieved. Equity theory is based on a perception of distributive justice,
which is an individual's cognitive evaluation regarding whether or not the amounts and
allocations of rewards in a social setting are fair. In simple terms, distributive justice is
one's belief that everyone should "get what they deserve." Culturally, the Judeo-Christian
ethic is based, in part, on the notion that divine rewards accrue to those who lead good
lives and behave appropriately, even while here are on earth. This reflects the distributive
justice and equity perspectives.
Procedural justice is concerned with the fairness of the procedure used to make a
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decision. For example, a pay raise may be based on a sales representative selling more
units of, for example, automobiles or houses. Some coworkers may consider this procedure
to be unfair, believing management should instead base pay raises on dollar volume. This
conclusion may be reached because selling 10 houses or cars for a low amount of money
each contributes very little to company profits and are, at the same time, easier to sell.
Selling high-priced cars or houses may take much longer to finalize, but the profits gained
for the company are also higher. In this case it is not the outcome in dispute, which is the
amount of the pay received. Instead, it is the perceived justice (fairness) of the procedure
used to reach the outcome.
Procedural justice can raise issues of equality as opposed to equity. Equality means that in
a promotion situation, males and females and all races would have equal opportunities to
be selected, and that the criteria used would not discriminate. Equity would mean that the
actual choice was fair, and that the criteria were correctly applied and therefore the most-
qualified individual was promoted. The accompanying Managing Diversity and Ethics in
Action box gives examples of how this is playing out in society at large. Both equity theory
and procedural justice can be combined into organizational justice, which suggests that
the process and the outcomes of organizational decisions regarding the distribution of
resources should be properly carried out. Organizational justice can help explain why
employees retaliate against both inequitable outcomes and inappropriate processes.
Retaliation in the form of theft, sabotage, forged time cards, and even violence toward an
employer can be explained using the principles of organizational justice.

7.5 Concept and meaning of Communication

Communication is one of the most important skills managers need for effective
accomplishment of management functions. It is when managers effectively
communicate with the external and internal stakeholders that the organizations can
achieve their objectives.
Communication is the exchange of facts, ideas, opinions or emotions by two or more
people. It is the transfer of information from the sender to the receiver with the
information being understood by the receiver. It is the act of influencing & inducing
others to interpret an idea.
Every management function involves communication. Therefore, understanding &
proper use of communication are essential to successful management. Managers at

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any level should know elements of communication, methods of communication,
barriers of communication & ways overcoming them.
Importance of Communication
Communication is the means by which people are linked together in an organization to
achieve a common purpose. The importance of communication is:
1. An aid to managerial performance
A manager can take appropriate decisions with the help of communication. The
manager may solve the problems with out much difficulty. The manager can get
things done by subordinates through communication. He can impart the objectives of
organization to the subordinates through communication.
2. Achieving coordination
Co-ordination among employees working on the basis of division of work obtained
through communication. There is a need for coordination among such workers to
attain organization’s goals. The coordination is obtained through communication.
3. Helps in smooth working
Communication helps the worker to know the real situation prevailing in an
organization. Subsequently workers perform their duties with out any delay, which
leads to the smooth function of an organization.
4. Increase managerial efficiency
Out of the total time available to the manager, the manager nearly spends 80% of his
time in transmitting the information to others regarding the business targets, rules,
programs, policies etc. Communication helps the manager discharge his duties
systematically and facilitates him to increase his efficiency.
5. Helps in decision making
Good communication system provides all the necessary information which enables the
manager to take quality decisions in the proper time.
Objectives of communication
Communication enables organizations to give & receive information (advice, order,
suggestions, persuasion, education, warning, motivation, etc.). it is impossible to
speak about organization without speaking about communication. Communication is
indispensable in every managerial function.

Formal and Informal communication

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Formal communication follows the hierarchy of authority and chain of command of the
organization. For example, technical information, decision-making process, procedural
policies and rules as set forth in company manuals might be downward, upward or
horizontal.
Down ward communication: - It starts with top management and flows down
through management level to line workers and non-supervisory personnel. Its major
purpose is to advise, inform, direct, instruct and evaluate subordinates and to provide
organizational members with information about organizational goals and objectives.
Upward communication:- Is transmission of information formally from the lower or
bottom level of the organization to the top levels of the organization its function is to
supply information to the upper level about what is happening at the lower levels. It
includes progress reports, suggestion and request for aid or decision:
Lateral/Horizontal Communicational:-this is a type of formal communication
between people at different units having the same status in organizational structures.
It is a communication between and among members of work group, different
departments, one work group and another. Its main function is to provide a direct
channel for organizational coordination and problem solving. It helps to avoid a much
flower procedure of communication through a common superior. It also enables
organizational members to form relationships with their peers.

Summary
Directing is the process of influencing workers behavior so that they contribute their
best to the accomplishment organizational objectives. The three elements of directing
are leadership, motivation, and communication. Motivation is an internal driving force
that pushes workers toward their action; leadership is the art of influencing workers
behavior in the direction that achieves organizational objectives; and communication
is the process of transfer of information from the sender to the receiver with the
information being understood by the receiver.

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Self check exercises

1. Differentiate between the major types of leadership theories.
2. Do you agree that managers and leaders are different kinds of people? Why
3. Explain the importance of communication
4. List and explain the different leadership styles
5. Describe the process of motivation
Check list

√
you have achieved
Before you move on to the self check exercise below, make sure that
your objectives setout four this unit. Put a tick mark (√) in
the boxes only on the text you can perform.
 Explain leading function of manager
 Identify and discuss different theories of leadership
 Discuss different leadership styles
 Define the term motivation
 Trace the different theories of motivation
 Identify the need levels in Maslow’s hierarchy
 Discuss the importance of communication on effective leadership

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CHAPTER EIGHT
8. THE CONTROLLING FUNCTION
8.1 Meaning and need for control
Objective of the chapter
Dear students at the end of this chapter you should be able to:
 Define controlling
 Describe the process of controlling
 Explain the importance of controlling
 Identify and describe the types of controlling
Organizational resources are limited. Their acquisition & use are critical to the survival
of the organization. Controlling is the last management function and it affects or is
affected by the other managerial functions. Planning, organizing, staffing & directing
must be monitored to maintain their effectiveness & efficiency. Efficiency and
effectiveness are the measures of performance. Managers review performances of
employees daily, weekly, and monthly to determine actual performances. Control is
the process of monitoring, evaluating, comparing performance to standards and
taking corrective action, if needed. In other words, control involves measurement and
regulation. It is the means by which management assures that desired objectives are
being achieved. Control is closely associated with the management function of
planning. People often refer to«planning and control» in one phrase, as if the two were
almost one function. Control complements planning because it is the means by which
management assesses whether or not plans are being appropriately carried out.
Corrective actions get the organization back on track and help managers achieve their
intended goals. Control is the process of monitoring activities to ensure that they are
being accomplished as planned and of correcting any significant deviations.
The purpose of controlling is to determine whether people & the various parts of an
organization are on target, achieving the progress towards the planned objectives.
Planning and controlling are highly interrelated in a sense that it is the planned
objective that is supervises and it is usually the objective, when developed clearly that
is used as a bench mark for controlling. Controlling attempts to prevent failure reduce
the degree of failure and learn from previous failure and are able to function properly.
Management control is a systematic effort to design information feedback systems, to
set performance standards with planning objectives, to compare actual performances
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with those predetermined standards, to determine whether there are any deviations
and to measure their significance, and to take corrective action accordingly required
to assure that all organizational resources are being used in the most effective &
efficient way in achieving organizational objectives.

8.2 Control process

Feedback provides information on the progress of the various levels of plan or
individual performance to management. In undertaking managerial controlling there
are a series of activities that need to be performed.
The initial view of control process reveals that it composed of a cycle of steps includes
following:
1. Establishing Standards
2. Measuring Performance and compare it against standards
3. Taking corrective action
1. Establishing Standards
Standards are the bench marks against which performance is compared. Standards
can take a variety of forms and be derived from a variety of sources. For example,
standards could take the form of goals or could consist of professional guidelines or
legal or financial procedure. Standards can also be derived from the practice of
benchmarking, examining the performance of other organizations. No mater how
standards are derived and whatever types they are, they form the requirements of the
job. The standards are the criteria against which performance will be compared. A
critical issue is how the standards are developed. It can be relatively easy and quick to
take a top- down approach and unilaterally develop standards; this approach may not
work well in practice. A participative approach to creating standards takes longer but
yields standards that are understood by every one. When employees participate in
creating standards, they are likely to be more committed to the standards and will
work harder to achieve the desired results.
2. Measuring Performance and compare it against standards
It is measuring the performance & determining whether the performance is in line with
the set of standards. It is comparison between ‘what is’ & ‘what should be’. It is
discovering the deviation.
3. Taking corrective action

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The final step in the control process is taking corrective action. When deviations from
a standard are meaningful gaps in performance, a manager should take action. If
corrective action is appropriate but is not taken, the control process becomes simply a
measurement exercise. Corrective actions need to be directed at the cause(s) of the
deficiencies but not to aspects of the performance system that are not the cause of
the problem. The cause of performance deficiencies need to be carefully identified so
that corrective action can be effective and lead to improvement. Taking action without
first carefully determining the cause of the deficiency can easily lead to workers
questioning the quality of management and can erode respect for the manager.
Determining precise action to be taken depends on three things.
1. the standard
2. accuracy of the measurements that determine the existence of deviation &
3. the diagnosis of the person or device investigating the causes of deviation.
Corrective action can be prescribed by management in advance through policies,
procedure & practices. It is sometimes automatic.

8.3 Types of Control

Work performed by an organization & their employees has
 a starting point (Where inputs takes place)
 a period of performance (where inputs are processed) &
 a final product (out put)
Based on the nature of work and work flow, various types of control have been
developed. There are three basic types of control that managers can exercise:
1. Prevention control
It is sometimes called pre-action control. Prevention control is designed to prevent
problems before they occur. It is established to prevent problems from occurring
rather than to fix them after they happen. It is also represented by rules and
procedures that are to be followed so that ethical and performance problems are
minimized.
2. Feed forward/Concurrent control
Concurrent control takes place as the work process is being carried out. A
knowledgeable manager observes the work process and quickly corrects problems as
they occur. The focus of control is on the ongoing activities in feed forward control.

3. Feedback control
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It is some times called post-action control. Feedback control occurs after a process
has been completed. Feedback control uses data from past performance to improve
future performance. Timelines is a serious concern with feedback. The longer
feedback is delayed, the less useful it becomes. In feedback control the focus is on the
end results.

8.4 Techniques of control

Formal and outcome-focused control techniques regulate performance by applying
standards or guidelines to the outcomes of a process.
Market control-Market control is the use of indicators of market values as standards
for regulating performance. For example, an organization may use profits as the
means for evaluating the performance of a business unit. Poor profit levels may result
in corrective actions, from various improvement efforts to closing or selling the unit.
Financial controls –Financial control use various monetary measures to regulate
performance. While market controls rely on external measures of the value of
products or services, financial controls focus on internal monetary values, largely
regarding revenues and expenses in the organization. A business unit could, for
example, be doing very well in terms of the market value of its products or services,
but may not be in a good financial health internally.
Budgetary control- Budgets used to specify amounts to be expended for various
activities or events. Budgets are frequently stated in monetary terms, but they can
take other forms. A production budget might specify the number of units to be
produced and a labor budget might specify the number of hours of labor that will be
available along with dollar amounts. Normally, budgets are stated in monetary terms.
Whatever the unit of measurement, budgets provide quantitative measures. These
measures provide the yardstick by which performance can be judged. Further,
budgeting allows management to control and allocate its resources. Without
budgetary control, the best of business ventures can easily run into financial trouble
and even bankruptcy.
Financial statements – In addition to budgets, financial statements are also tools
that are used to asses and control the financial health of the organization. Two of the
most commonly used are balance sheets and profit and loss statements.

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8.5 Effective control system

An effective control system requires the following essentials.
1. Control must be understandable.
 Individuals must understand what the control system is attempting to do.
2. Control must be flexible.
 Standards and plans on which controls are based frequently need modification
or revision when underlying circumstances change. Flexibility makes control
workable and effective when there are changes in plans and in unforeseen
circumstances.
3. Control must be economical.
 Controls should be worth in its costs.
4. Control must be objective.
 Effective control system calls for objectives, accurate, suitable and definite
standards or plans.
5. Control should recognize the importance of time element.
 Timeliness is very important factor that can not be ignored in controlling.
6. Control system should provide useful and understandable information.
 Effective control system provides information to the right people who can use
them in correcting deviations and fostering growth.
7. Control should be forward-looking.
 Effective control system is always aiming at the future. Control aids in further
planning.
8. Control should be selective.
 Management should also concentrate on certain control points as to who is
responsible for what execution of plans and for any deviations for them.
9. Control should reflect the organization structure and needs.
Organizational structure clarifies the roles of people in organization and the
control system reflects as to who is responsible for what execution of plans
and for any deviations for them.
10. Control should lead to corrective action.
 Only discovering deviations in the performance of operations is not enough.
Effective control system must lead to appropriate and corrective action.

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Summary
Controlling is the process of comparing performance to standards and taking
corrective actions that might be needed to remove deficiencies. The control process
includes: establishing standards; measuring Performance and compare it against
standards; and taking corrective action. Control complement planning, because it is
the means by which management can assess whether plans are being carried out
effectively.
Self check exercises
1. Define controlling
2. Explain the difference between planning and controlling
3. Discuss the control process
4. List and explain the types of control
5. Discuss the techniques of control

√ Check list
Before you move on to the self check exercise below, make sure that you have
achieved your objectives setout four this unit. Put a tick mark (√) in the boxes
only on the text you can perform.
 Define controlling
 Describe the process of controlling
 Explain the importance of controlling
 Identify and describe the types of controlling

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References:
 C.B Gubta “Business organization and management” solution change &sons,
New Definition.
 David R.Hampton, ”contemporary management”, Mc Graw Hill inc, New York,
 Derek S. pugh and David L., “Writers on organization” penguin Books Ltd. USA
 Ernest Dale. “Management, theory and approaches” MC Graw Hill/inc”, New
York
 Fred Lathans, “introduction to management, A contingency approach” McGraw
Hill, New York.
 St. Mary’s University College, “introduction to management” st, mary, A.A.

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Self test question

Part I. Multiple choice types
Choose the best answer form the given alternatives.
1. The determination in advance the number and quality people to be employed is
A. Development C. Human resource planning
B. Employment decision D. Placement E. None
2. The process of seeking and att4racting a pool of people from which qualified
candidates for job vacancies can be chosen is known as
A. Selection C. Placement
B. Recruitment D. Induction E. socialization
3. The types of interview which the interviewer pretends to be hostile and provokes the
candidates by asking questions frapidl7y by criticism and trying to annoy him is
A. Depth interview C. Action interview
B. Group interview D. Stress interview E. None
4. Which one of the following is disadvantages of internal sources of recruitment
A. Enhance employees moral
B. Easy to evaluate existing employee than new one
C. Minimum time be spent on training
D. Promotions are limited to seniority
E. None
5. All of the following express the purpose of induction and orientation, except
A. Reduce the start-up C. Wastes time to supervision
B. Reduce anxiety D. Decrease turnover E. All
6. In designing effective training an organization should consider whether
employees are motivated to learn. This statement best explains.
A. Need assessment
B. Assessment of employee readiness
C. Selection of training methods
D. Creation of learning environment
E. Ensuring transfer of training

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7. The process of familiarizing a new employee with the over all organizational
environment is known as
A. Orientation C. Placement
B. Induction D. Decision making E. None
8. Debre Markos University formulated a plan to connect all colleges and
departments through network in order to facilitate the teaching learning
process. This type of planning is
A. Program B/ Contingency plan C/ long range plan D/ project E/ all
9. Which one of the following activities is an organizing function?
C. Determining the kinds of activities that should be performed
D. Filling the organizational structure with necessary Human resource
E. Deciding in advance about the short and long run objectives of an
organization
F. Influencing people to do their job
G. All of the above
10. Which type of leadership is appropriate for Addis Ababa City Government Fire
Extinguisher and Emergency authority.
A. Democratic (participative)
B. Laissez-faire
C. Autocratic
D. Theory “x” and theory “y”
11. What are the merits for the Mangers to understand the management
thoughts of system approach?
A. To integrate organization with its context or environment
B. To arrange positions according to level of authority, power and responsibility
C. To understand the interaction of people
D. To view elements of organization as interconnected and organizations as linked
to its environment
E. All

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12. Management can be both “science” and an “art”. Why scholars concluded
that management is as “an art” this is because….
A. It is characterized by making conclusions based on actual facts and verifies
knowledge thought cause-effect relationship.
B. Management principles firmly based on observed phenomena, systematic study
and analysis of data.
C. Managers make decisions and solve problems on the basis of intuition,
experience, intrinsic and personal insights.
D. Managers use mathematical and statistical models to make decisions.
E. All
13.Human resource department of DMU announced for the position of lab assistant,
the
position required BA in IT or computer science, this requirement is
A. Job analysis
B. Job specification C. Job description D. Skill inventory E. All except “D”
14. Which of the following statements is false about authority and power
A. Authority is the duty of managers that has been legitimatized by the
organization
B. Authority with out power is meaningless
C. Functional authority is the right to control activities in other departments
D. The power always derived from position
E. A and D F. None of the above
15. What types of departmentalization is appropriate when the organization clients have
different needs and the organization seeks to provide to their specific requirements?
A. Product departmentation
B. Customer departmentation
C. Geographic depatmentation
D. Process depatmentation
16. Many individuals are influenced by a person because of his personality or
behavioral
style, the charisma of the person is the basis of…
A. Expert power D. Coercive power
B. Reward power E. Referent power
C. Legitimate power
17. Which of the following is incorrect about motivation?
A. Motivation plays a central role in shaping behavior
B. Motivation is concerned with the direction of function or management

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C. Motivation enables a manager to influence peoples to perform their work
willingly
D. Motivation involves a complex combination individual needs, derives, tension
and discomforts
E. Motivation is the only factor that determines performance F. All
18. Which types of control is more appropriate for manufacturing industries?
A. Feed forward control
B. Prevention control
C. Feed back control
D. All
19. The external public relation of DMU assist and advice the president of the university, this
type of authority is
A. Functional authority
B. Line authority
C. Staff authority
D. All
20. If a manager needs to manage small numbers of immediate subordinates and to
have tall organizational structure, this type of span of management is
A. Span of control
B. Narrow span of management
C. Wide span of management
D. All
21. Which one of the following is true about the difference training and development.
A. Development refers to teaching lower or technical employees how to do their
present jobs
B. Training refuse to teaching managers and professional the skills needed for both
present and future needs
C. Training helps to provide adequate knowledge to employees beyond the current
requirements of the job
D. Training improves the specific skill, knowledge, and attitude needed by individuals to
perform the present job.
E. All except D
22. During the period of final examination students have frustrated and studied exhaustively,
thus what types of motivation that the students forced to study.
A. Positive motivation C. Negative Motivation
B. Extrinsic Motivation D. intrinsic Motivation E None of the
above
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Part II/Matching type

Instruction-Below you have the five managerial functions and their different activities,
each managerial function which are listed in Column “A” have two correct activities
(listed in the column B) being used as an answer for each managerial functions in
column “A” with their corresponding activities in column “B”

Column A Column B
_____1. Planning A. training and development
_____2. Organizing B. establishing goals
_____3. Staffing C. influencing people
_____4. Directing D. Grouping activities
_____5. Controlling E. Setting standards
F.Motivating employees
G. assessment of environment
H. transfer and promotion
I. assignment of jobs to employee
J. taking correcting action

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ANSWER

1. C 12. C
2. B 13. D
3. D 14. E
4. D 15. B
5. C 16. E
6. B 17. E
7. B 18. A
8. D 19. C
9. A 20. B
10. C 21. D
11.D 22. C

MATCHING
1. B, G
2. D, I
3. A, H
4. C, F
5. E, J

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 Course overview
 Course title: Introduction to management
 Course number: MGMT 201
 Course credit: 3 credit Hours
 Course objectives
After completions of this course students will be able to:
 Understand the concept of management theories and practices
 Apply management concepts and theories in his/her working areas
 Relate different organizational problems with management concepts and
theories and give solution
Grading
Attendance and participation……………………… 10%
Participation Individual assignment ………………. 30%
Final exam ………………………………………… 60%

 Model of delivery/teaching methods

Dear students here in the module there are eight chapters. As you observe from the
module you are expected to read each chapter, understand the concept and do self
check exercises and activities carefully that are provided at the end of each chapters.
And do self test questions which are provided at the end of the module, and
assignments; which are weighted a total mark of 30%. During summer season when
you come to the university future programs will be arranged and accordingly final
exams will be given.

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Debre Markos University

College of business and Economics
Department of Management
Assignment for the course Introduction to
Management
Maximum Weight-30%
1. Evaluate motivational mechanisms on your or a given organization

2. Write the difference between Taylor’s and Fayal’s approaches to management.

3. Discuss the different types of performance appraisal methods

4. Discuss the systems approach to management

5. Explain the different types of plan

6. Visit a given organization and write clearly its staffing process. You should

incorporate the vision, mission, and address of the organization.

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