DEPARTMENT OF

ELECTRONICS AND COMMUNICATION

ENGINEERING
IMPORTANCE OF MANAGEMENT

DEFINITION OF MANAGEMENT
 Management is a function of guidance and leadership control of efforts of a group or
individuals in order to achieve goals/objectives of an organization.
 Simplest definition is that it is defined as the art of getting things done through people
 Management can also be defined as the process consisting of planning, organizing, actuating,
and controlling performed to determine and accomplish the use of people and resources.
 It is systematic way of doing things.

MEANING
 Managing is one of the most important activities of human life.
 To accomplish aims that could not be achieved individually, people started forming groups.
 Managing has become essential to ensure the coordination of individual efforts.
 Management applies to all kinds of organizations and to managers at all organizational levels.
 Principles of management are now used not only for managing business but in all walks of life
viz., government, military, social and educational institutions.
 Essentially, management is same process in all forms of organization. But it may vary widely
in its complexity with size and level of organization. Management is the life giving element of
any organization.
Definitions suggested by some of the management experts are presented below:
According to Henri Fayol: "Management is conduct of affairs of business, moving towards its
objective through a continuous process of improvement and optimization of resources".

According to Koontz: "Management is the process of designing and maintaining an environment in

which individuals, working together in groups, efficiently accomplish selected aims".

According to Mary Parker Follett: "Management is the art of getting things done through people".

According to George R. Terry: "Management is a process consisting of planning, organizing,

actuating and controlling, performed to determine and accomplish the objectives by use of people and
resources".

According to ILO: "Management is the complex of continuously coordinated activity by means of

which any undertaking administration/public or private service conducts its business".

According to Lawrence A. Appley: "Management is guiding human and physical resources into a
dynamic, hard hitting organization until that attains its objectives to the satisfaction of those served and
with a high degree of morale and sense of attainment on the part of those rendering the service"

NATURE OF MANAGEMENT:
1. Multidisciplinary: Management is multidisciplinary. It draws freely ideas and concepts
from the disciplines like economics, sociology, psychology, statistics, operations
research etc. Management integrates the ideas taken from various disciplines and
presents newer concepts which can be put into practice. The integration of these ideas is
the major contribution of management.
2. Dynamic nature of principles: A principle is truth which establishes cause and effect
relationships of a function. Principles are developed by integration of ideas from various
disciplines supported by practical evidence. These principles are flexible and change with
the environment in which organization works. Continuous researches are being carried on
to establish new principles; many older principles are changed by new principles. There
is nothing permanent in management.
3. Relative not absolute principles: Management principles are relative and not absolute.
They must be applied according to the need of the organization. Each organization is
different from other. The principles of management should be applied in the light of
prevailing conditions.
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4. Universality of management: Management is universal phenomena. Though

universal yet management principles are not universally applicable but are to be modified
according to the needs of the situation.

CHARACTERISTICS OF MANAGEMENT:
1) Management is a continuous process: The process of management consists of planning,
organizing, directing and controlling the resources to ensure that resources are used to the
best advantages of the organization. A single function alone cannot produce the desired
results. Management involves continuous planning, organizing, directing and controlling.
2) Management is an art as well as science: Management is an art in the sense of
possessing managing skill by a person. Management is science because certain
principles, laws are developed which are applicable in place where group activities are
coordinated. This will be discussed in detail later in this chapter.
3) Management aims at achieving predetermined objectives: All organizations have
objectives that are laid down. Every managerial activity results in achievement of these
predetermined objectives.
4) Management is a factor of production: An enterprise produce goods or services using
resources like land, labour, capital, machines etc. These resources themselves cannot
realize the organizations goals. The goals are achieved when these are effectively
coordinated by the entrepreneur. In case of small enterprises an individual can do such
type of job where as in large enterprises the coordination job is done by management.
Therefore, management is a factor of production.

5) Management is decision-making: Decision-making is selecting the best among

alternative courses. Decision-making is an important function of a manager. Whatever a
manager does, he does it by making decisions. The success or failure of an organization
depends upon the quality of decision. Amanager must make a right decision at right time.
6) Universal application: The principles and concepts of management are applicable to
every type of industry. The practice of management is different from one organization to
another according to their nature.
7) Management is needed at all levels: The functions of management are common to all
levels of organization. The functions of planning, organizing, directing, controlling,
decision-making are performed by top level as well as lower level supervisors.
8) Management aims at maximum profit: The resources are properly utilized to maximize
profit. Maximizing the profit is the economic function of a manager.
9) Dynamic: Management is not static. Over a period of time new principles, concepts and
techniques are developed and adopted by management. Management is changed

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accordingly to the social change.

10) Management as a career: Today management is developed as a career focused on
specialization. Marketing management, finance management, personal management,
industrial management, production management, quality management are some of the
specializations in management. Specialists are appointed at various positions of the
organizational hierarchy. Hence management iscareer.
11) Management is a profession: Management is a profession because it possesses the
qualities of a profession. The knowledge is imported and transferred. The established
principles of management are applied in practice. This is discussed in detail later in this
chapter.
12) Management is a discipline: Discipline refers to the field of study having well defined
concepts and principles. Classifying management as disciplines implies that it is an
accumulated body of knowledge that can be learnt. Thus, management is a subject with
principles and concepts. The purpose of studying management is to learn how to apply
these principles and concepts at right circumstances, at the right time to produce desired
result.

FUNCTIONS OF MANAGEMENT
Though many authors have defined several functions of management,there are five
essential and well accepted functions of management. They are: Planning, Organising,
Staffing, Directing (leading) and Controlling.

1. PLANNING
Planning is an executive function that is referred to as decision making. It involves
missions and objectives and the actions to achieve them. This requires decision making, that is,
choosing future courses of action from available alternatives. This involves the following:
 Setting short and long term goals for organization.
 Selecting objectives, strategies and policies for accomplishing theplanned
goals.
 Deciding in advance what to do, how to do, who has to do, when todo and
where to do.
 Planning bridges the gap from where we are now to where we want bein
future.

2. ORGANIZING
Organizing is a part of management that involves in establishing an intentional structure of roles
for people to fill in an organization. To organize a business well, it is required to provide all the useful
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things for its proper functioning. They are raw materials, tools, capital and personnel. The purpose of
an organization structure is to help in creating an environment for human performance. This involves
in:
 Determination of activities required to achieve goals.
 Grouping these activities into department.
 Assigning such groups of activities to managers.
 Forming delegation of authority.
 Making provisions for coordination of activities.

3. STAFFING
Staffing is considered as an important function which makes provision for man power to fill
different positions. It involves in building the human organization by filling, and keep filling the staff.
This is done by identifying work- force requirements, taking inventory of people available, recruiting
new staff, selecting, placing, promoting, apprising, planning their career, training the staff to
accomplish their tasks effectively and efficiently. This involves in:
 Finding the right person for right job.
 Selecting the personnel.
 Placement, training and developing new skills required for present and future jobs.
 Creating new positions.
 Apprising the staff and planning their growth and promotions etc.

4. DIRECTING
After planning, organizing and staffing, the next important function of management is directing or
leading the people towards the defined objectives. Directing involves three sub-functions namely
communication, leadership and motivation. Communication is the process of passing information and
understanding from one person to another. Leadership is the process by which a manager guides and
influences the work of his subordinates. Motivation means arousing desire in the minds of employees of
an organization to perform their best. If properly motivated, the employees will put their best efforts
with dedication, loyalty and carry out the assigned task effectively. There are two types of motivations
viz., financial and non-financial. Financial motivations are in the form of salary, bonus, profit-sharing,
rewards etc. The common non-financial motivations are job security, promotions, recognition, praise,
felicitation etc.

5. CONTROLLING
Controlling is measuring and correcting of activities of subordinates to make sure that the work
is going on as per the plans. It measures performance against goals and plans, shows where short falls
or deviations exist and takes necessary corrective actions to achieve the goals. Controlling generally
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relates to the measurement of achievement. This involves three elements.

 Establishing standards of performance.
 Measuring performance and comparing with established standards.
 Taking necessary corrective action to meet the set standards.

With accomplishment of this function, the "Management Cyele" is said to be

complete.

ROLES OF MANAGER
Manager in any organization plays variety of roles responding to a particular situation. The three
important roles played by a manager are Interpersonal roles, Decision roles and Informational roles.
1. Interpersonal roles: These includes figurehead, leader and liaison roles.
 In figurehead role, the manager will perform some duties that are casual and informal ones like,
receiving and greeting visiting dignitaries, attending to social functions of employees,
entertaining customers by offering parties and lunches etc.
 As a leader, managers motivate, direct and encourage his subordinates. He also reconciles the
needs with the goals of the organization.
 In the role of liaison, the manager works like a liaison officer between top management and the
subordinate staff. He also develops contacts with outside people and collects useful information
for the well being of the organization.
2. Decision roles: There are four decision roles played by a manager. They are resource provider,
arbitrator, entrepreneur and negotiator.
 As a resource allocator, the manager divides the work, provides required resources and
facilities to carryout the allocated work and delegates required authority among his
subordinates. He decides who has to do what and who gets what.
 As a arbitrator, a manager works like a problem solver. He finds solutions of various un-
anticipated problems both within and outside the organization.
 As an entrepreneur, a manager continuously looks for new ideas and tries to improve the
organization by going along with changing work environment.
 He also acts as a negotiator negotiates with the employees and tries to resolve any internal
problems like trade agreements, strikes and grievances of employees.
3. Information roles: A manager plays as monitor, spokesman and disseminator.
 A manager monitors his environment and collects information through his personal contacts
with colleagues and subordinates.
 As a spokesman, he communicates the information/goals of organization to his staff, and the
progress of work to his superiors. He also communicates the performance of company to
shareholders and the rules and responsibilities to his subordinates.
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 As a disseminator, the manager passes some of the information directly to his subordinates and
to his bosses.

LEVELS OF MANAGEMENT
All managers perform almost the same functions of management - planning, organizing, directing
and controlling, there are levels among them. These are top management, middle management and first
line or supervisors.

 The top management consists of Chairman, Directors, Company Presidents, Vice- Presidents,
CEO's. These are the people who make policies for the company, set goals and targets. They
should possess conceptual and design skills.
 Middle management is essentially a vast and diverse group that include finance manager, sales
manager, marketing manager, personnel manager, departmental heads etc.
 The lower level managers are the supervisors and foremen. They are basically one step above
the workers The various levels and skilled required at different management levels are shown
below.

MANAGERIAL SKILLS
To be a successful manager, you’ll have to master a number of skills. To get an entry-level
position, you’ll have to be technically competent at the tasks you’re asked to perform. To advance, you’ll
need to develop strong interpersonal and conceptual skills. The relative importance of different skills
varies from job to job and organization to organization, but to some extent, you’ll need them all to forge a
managerial career. Throughout your career, you’ll also be expected to communicate ideas clearly, use
your time efficiently, and reach sound decisions.

1. Technical Skills
You’ll probably be hired for your first job based on your technical skills—the ones you need to
perform specific tasks—and you’ll use them extensively during your early career. If your college major is
accounting, you’ll use what you’ve learned to prepare financial statements. If you have a marketing

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degree and you join an ad agency, you’ll use what you know about promotion to prepare ad campaigns.
Technical skills will come in handy when you move up to a first-line managerial job and oversee the task
performance of subordinates. Technical skills, though developed through job training and work
experience, are generally acquired during the course of your formal education.
2. Interpersonal Skills
As you move up the corporate ladder, you’ll find that you can’t do everything yourself: you’ll
have to rely on other people to help you achieve the goals for which you’re responsible. That’s why
interpersonal skills—the ability to get along with and motivate other people—are critical for managers in
midlevel positions. These managers play a pivotal role because they report to toplevel managers while
overseeing the activities of first-line managers. Thus, they need strong working relationships with
individuals at all levels and in all areas. More than most other managers, they must use “people skills” to
foster teamwork, build trust, manage conflict, and encourage improvement.
3. Conceptual Skills
Managers at the top, who are responsible for deciding what’s good for the organization from the
broadest perspective, rely on conceptual skills—the ability to reason abstractly and analyze complex
situations. Senior executives are often called on to “think outside the box”—to arrive at creative solutions
to complex, sometimes ambiguous problems. They need both strong analytical abilities and strong
creative talents.

4. Communication Skills
Effective communication skills are crucial to just about everyone. At all levels of an organization,
you’ll often be judged on your ability to communicate, both orally and in writing. Whether you’re talking
informally or making a formal presentation, you must express yourself clearly and briefly. Talking too
loudly, confused, and using poor grammar reduce your ability to influence others, as does poor written
communication. Confusing and error-riddled documents, and they will reflect poorly on you.
5. Time-Management
Skills Managers face multiple demands on their time, and their days are usually filled with
interruptions. Ironically, some technologies that were supposed to save time, such as voicemail and e-
mail, have actually increased workloads. Unless you develop certain time-management skills, you risk
reaching the end of the day feeling that you’ve worked a lot but accomplished little. What can managers
do to ease the burden? Here are a few common-sense suggestions: Decision-Making Skills Every
manager is expected to make decisions, whether alone or as part of a team. Drawing on your decision-
making skills is often a process in which you must define a problem, analyze possible solutions, and
select the best outcome.

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MANAGEMENT AND ADMINISTRATION

There is lack of concurrence among management writers over the meaning and use of the words
management and administration.
 One group of management writers feels that administration involves "thinking". It is a top level
function that centers around the preparation of plans, rules, policies and objectives of an
organization. Where as management involves "doing" and is a lower level function, concerning
with execution and direction of policies and operations. Hence, administration is more important at
lower levels.
 Another group of management writers feels management as comprehensive general term that
includes administration. Management is regarded as comprehensive general function covering
entire process of planning, organizing, directing and controlling. Administration is regarded as a
branch of management that comprises of two functions - planning and controlling. According to
them, the function of management is divided into two categories - the upper level management
usually called as administrative management and the lower level management which is termed as
operative management.
 According to Peter Drucker, the basic difference between management and administration lies in
use of these terms in different fields. According to him, managing of business enterprises is called
management and managing non business organizations is called administration. Hence financial
performance plays key role in management. But in managing non business organizations like
educational institutions, government offices, military etc., administration is more priority than
financial decisions.
 Administration is the function in industry concerned with determination of the corporate policy, the
coordination of finance, production and distribution, the settlement of compass of the organization
under the ultimate control of the executives".
 "Management is the function in industry concerned with the execution of polity within the limits
setup by the administration and the employment of the organization for the particular objects set
before it". (Oliver Sheldon)
 "Administration is primarily the process and the agency used to establish the object or purpose
which an undertaking and its staff are to achieve, secondarily, administration has to plan and
stabilize the broad lines of principles which will govern action. These broad lines are in turn called
policies. Management is the process and the agency through which the execution of policy is
planned and supervised". (G.E. Milward)
 "Administration is that phase of business enterprise that concerns with overall determination of
institutional objectives and the policies necessary to be followed in achieving those objectives.
Administration predetermines the specific goals and lays down the broad areas within which those
goals are to be attained. Administration is a determinative function, management on the other hand

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is an executive function - which is primarily concerned with the carrying out of the broad policies
laid down by the administration. (William R. Spriegal)
 Thus administration is a "thinking" function and management is a "doing" function. According this
concept, managers get salary and administration staff get dividends.
 Administration determines the policies upon which the enterprise is to be conducted while the
function of management is to carry out the policies that are laid down by the administrative group.

The differences between administration and management are listed below:

MANAGEMENT AS A SCIENCE, ART AND PROFESSION

MANAGEMENT AS A SCIENCE
Managing, like any other practice - whether medicine, music composition, engineering,
accounting or even cricket - is an art. It is a know-how. It is doing things in the light of the realities of a
situation. Under 'art' one normally learns the "how" of a phenomenon. It is the art of getting things done
through others in dynamic and mostly non-repetitive situations.
Science is an organized knowledge. A discipline can be called scientific if its methods of inquiry
are systematic and practical, information can be accumulated and analysed and results are commutative
and communicable. The essential feature of any science is the application of scientific methods to the
development of knowledge. Being systematic means being orderly and unbiased. All the scientific
information collected first as raw data is finally arranged in order and analysed with the help of statistical
tools. Science is also cumulative in that what is discovered is added to that which has been found before.
We learn from past mistakes and go in right direction in future. On the basis of the above discussions of
science, it can be accepted that management is also a science.

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MANAGEMENT AS AN ART

MANAGEMENT AS A PROFESSION

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PLANNING
NATURE OF PLANNING
 Planning is the most basic function of management. It is referred to as "deciding in advance" as to what to
do, how to do, when to do and who has to do it etc.
 It is an intellectual process, which requires a manager to think before acting. It is nothing but thinking in
advance. As regarded by Koontz and O'Donnell, planning is a continuous process. A manager should
continuously watch the progress of the plans like a navigator who constantly checks where his ship is
going in the vast ocean. Planning involves selection of objectives and goals and determines the ways and
means of achieving them. Thus planning bridges the gap from where we are to where we want to be.
 A plan is to be rigid in the sense that it should not be modified or altered under the influence of local
disturbances. A plan should be flexible to change to adapt to the changing situating without undue cost.
This calls for flexibility in the areas like technology, market, finance, personnel and organization.
 Planning is vital at all levels of an organization. Top level managers are concerned with long range
planning involving 2 to 5 years, middle level managers are concerned with medium range planning
involving few months to one year and lower level managers are concerned with planning the activities of
daily or week or up to a month, where as a worker plans his day's work.
Nature of planning indicates essential quality or general characteristics of planning. Any planning involves four
essential qualities:
(i) It must contribute to accomplish purpose and objectives.
(ii) It must be considered as parent exercise in all processes.
(iii) It must spread through all management functions and
(iv) It must be efficient in such a manner so as to achieve the designed goals at the least cost. Planning
is non-static and is basically a discrete exercise. It is dynamic in nature. It is a blue print to which
the accomplishment must confirm.

IMPORTANCE OF PLANNING
Without planning, business decisions would become difficult. Planning is the beginning of all other
functions of management. Planning is important because:
(i) It overcomes uncertainty and change and minimizes risk.
(ii) It facilitates effective control.
(iii) It focuses attention and concentration only on the objectives of enterprise.
(iv) It makes economic operation and leads to success.
(v) It forms the bridge between the present and the future.

Uncertainty and minimize risk

In the today's complex organizations, decision making cannot be relied only upon intuition,
planning plays a vital role in decision making in such complex situations. Planning provides logical facts
and procedure to managers for making decisions. This logical decision making based on plans to
organization minimizes uncertainty and risk. In a developing country like India, with rapidly changing
social and economic conditions, planning helps the managers to cope up with uncertainty and risk.
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Effective Control
Planning sets goals, targets and means to accomplish these goals. These goals and plans become
standards or bench marks against which performance can be measured. Thus good plans help effective control
on the activities.
Focuses attention and concentration on the objectives of the enterprise
Planning helps the manager to focus their attention on the goals and activities of organization. This makes
the entire organization to walk towards the goals and create coordination in accomplishing the goals.
Economic operation and leads to success
Mere planning does not ensure success, but planning leads to success. This is because if the work is
planned in advance, there will be no confusions arising and things will happen as per plan and achieve goals.
This results in economical operation and reduces uncoated expenditure.
Bridge between present and future
Plans bridge gap between present and future. There is a vast gap between what we are today and what we
want to be in future. A proper and systematic plan forms the bridge between these two. Without plans, it is
very difficult to accomplish goals. Hence planning is very important for success of any organization.

TYPES OF PLANS
Based on nature of planning, the planning is classified as strategic planning (long range
planning) and tactical planning (short range planning). The strategic plans are done at top level of
management and are generally long term plans, where as tactical plans and done at lower levels and are
of short term in nature.
The differences between strategic and tactical planning are given below

For example, Tatas idea of marketing a car at a price of Rs. 1 lakh is a strategic plan. How to make that,
what resources are required, how and where to manufacture, how to assemble, etc., are tactical plans.

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Based on their use, plans are classified as single use plans and standing plans. Single use plans are
developed to achieve a specific end. After reaching that target, that plan becomes useless. On the other
hand, standing plans are designed for situations that often repeat. These plans can be used again and
again. Standing plans: These are the policies, procedures, rules and methods of any organization.
(i) Policies:
 As defined by Terry, "Policy is a verbal, written or implied overall guide, setting up
boundaries that supply the general limits and direction in which managerial action will take
place". Thus a policy is a general guideline for decision-making. They deal with "how to do"
the work. They only provide a framework within which decisions must be made by the
management in different areas of organization.
 There are several policies in different functions of any organization like personal policy,
promotion policy, marketing policy, purchase policy, pricing policy, training policy,
recruitment policy, distribution policy, payment policy, wages and incentives policy etc.
 The policies are classified
 on the basis of sources like original policies, appealed policies, implied policies and
externally imposed policies
 on the basis of functions like personnel policy, promotion policy, pricing policy,
distribution policy, investment policy etc.,
 on the basis of level of organization like: top level policy, departmental policy, shop
level policy etc.
(ii) Procedures:
 Procedures are the detailed guidelines that are used to carry out the policies.
 A procedure provides a detailed set of instructions for performing a sequence of actions
involved in doing a certain piece of work. Procedures are to be followed every time when that
activity is performed.
 Procedures may also exist for conducting meetings of board of directors, shareholders, issuing
raw materials from stores, packaging of finished goods, inspection etc.
The difference between policy and procedures are given below

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(iii) Rules:
 Rules are detailed and recorded instructions that a specific action must or must not be done
under the given instructions.
 Reporting time to office, lunch time, availing of leaves, use of LTC facility etc., are some of
the examples that follow rules.
 A rule is different from a policy or procedure. Since it does not give a guide to thinking, it is
not a policy. Since it is not a sequential procedure hence it is not a procedure.
(iv) Methods:
 A method is a prescribed way in which one step of a procedure is to be carried out. Thus a
method is a part of procedure.
 A procedure has a number of steps, each step may have number of methods to do it. Methods
help in increasing the effectiveness of a procedure.

STEPS IN PLANNING AND PLANNING PREMISES

The main steps involved in planning are as follows:
1. Being aware of opportunities: This is very first step and starting point for planning. Once we are
aware of opportunities, we can think of setting realistic objectives.
2. Establishing objectives: It is very important to establish objectives for the entire enterprise and the
objectives for each subordinate work units. That is, the major objectives are broken down into
departmental and individual objectives. It is a very crucial step in planning.
3. Developing planning premises: The third step in planning is to establish planning premises. It is
the process of creating assumptions about the future on the basis of which the plan will be ultimately
formulated. Planning premises are important for the success of planning as they reveal facts and
information relating to the future such as economic conditions, production costs competition,
availability of material, resources and capital, government policies, population trends etc. This tells
about which plan is to be carried out. There three types of planning premises:
i. Internal and external premises: Internal premises are premises within the organization.
Some of the examples are: policies, forecasts, investment, availability of equipment,
capability of work force, funds flow etc. External premises are premises outside the
organization. They include: Government policies, technological changes, business
environment, economic conditions, population, buying power, political stability,
sociological factors, demand etc.
ii. Tangible and intangible premises: Tangible premises are the measurable premises. For
example, population, investment, demand etc., are tangible premises. Intangible premises
are those which cannot be quantitatively measurable. Examples of this are: business
environment, economic conditions, technological change etc.
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iii. Controllable and uncontrollable premises: Some of the premises arecontrollable like,
technical man power, input technology, machinery, financial investment etc. Some other
premises like, strikes, non-availability of raw material, change in government policies,
socioeconomic changes, phase-shift in technology, wars etc., are uncontrollable by the
organization.
4. Determination of alternative course: Next step is to search and identify some alternative courses
of action. It is very rare that for a plan there will be no alternatives. In this step alternatives are
listed.
5. Evaluating the alternatives and selecting the best course of action: Once the alternatives are
found, then the next step is to evaluate them with respect to the premises and goals. A desired and
best suitable alternative is selected by comparative analysis with reference to cost, risk, and gain
etc., keeping in mind the goals and objectives.
6. Formulating derivative plan: In order to complete the task, the selected plan must be translated
into programs, working plans and financial requirements in the sub-units. These sub-derived plans
from main plan are termed as derivative plans.
7. Monitoring and controlling the plan: This is the last step in planning. Each activity of plan is
monitored on a continuous basis and if any deviation or shortfall is noticed, then the manager will
initiate suitable corrective action

HIERARCHY OF PLANS (STEPS)

The plans are generally arranged in a hierarchy within any organization. It starts at the top with objectives
and goals of an organization. The second level is strategies. As discussed earlier, there are two types of
strategies namely single use plans and standing plans. The third level is action plans.

 The top management sets the goals and objectives. These occupy the top priority. The goals or
objectives include long-term plans and strategies of an organization. For example, a company
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aims to improve their production by 20% during next 2 years. Such objectives are very broad
ideas and are achieved by strategies. Strategies are carried out by means of two types of plans
known as single-use-plans and standing plans.
 Single use plans are developed to achieve a specific goal after reaching the goal, the plan is
dissolved. Examples of single use plans are budgets, construction of a bridge, dam or a
shopping complex etc.
 Standing plans are developed for projects that happen again and again. Admission procedure in
a college, overhauling procedure of an aircraft, recruitment procedure of an organization etc.,
are some of the examples of standing plans.
 Action plans are the plans executed by the lower level organization. These are routine plans
executed by the foreman and supervisors of the shop.

LIMITATIONS OF PLANNING
1. Time Consuming
Planning involves the collection of data, analysis of data, forecasting, etc. All this consumes a lot of
precious time. Therefore, planning is a time-consuming activity.
2. Costly
Planning is the work of experts. They get paid very high salaries to make good plans. Companies spend
an enormous amount of money in collecting and analysing data. Therefore, planning is a costly affair.
3. Rigid
Most plans are very rigid. They don't change as per the changing environment. They neither get revised
nor modified. The non-flexibility of plans creates many problems for the organisation.
4. Gap between Plans and Achievement
The workers do not make any plans. The managers make plans. The workers only execute these plans. So
the workers are not entirely interested in achieving these plans. Therefore, there is a gap between plans and
achievement.
5. Problem for Technical Staff
The technical or creative staff do not like planning. They feel it is only paperwork. It is so, since, it limits
their creativity.
6. Resistance to Change
Planning brings many changes in the organisation. However, people do not like changes. So, they do not
give full cooperation. Without their cooperation, the plans cannot succeed.
7. Paperwork
Planning requires a lot of paperwork. The plans are made and again remade. Copies of finalised plans are
given to the top management and subordinates. There is also a need to prepare many reports.

8. Causes Frustration
Sometimes managers fail to achieve the planned targets despite putting their best efforts. This failure can
frustrate them and lower their level of motivation. It can cause the managers to lose their initiative.
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9. Dangers of Over-Targeting
Some managers do over-targeting. That is, they fix very high targets that are almost impossible to
achieve. Such over expectations cause many problems.
10. Dangers of Under-Targeting
Some managers do under-targeting. That is, they fix lower targets that are easy to achieve. Such under
expectations hinders the growth and performance of the organisation. The under targeting happens in the
government institutions.

11. Danger of Human Error

Plans depend on forecasts. Forecasting requires a lot of experience and judgement. If the manager has
less experience and is poor in judgement, then the predictions will be wrong. If the forecasts are wrong, it is
obvious that the plans will fail. Even experienced managers make errors while forecasting and planning. So,
there is a danger of human error.
12. Inter-Departmental Rivalries
Planning requires coordination and cooperation of all the departments. If there exist any inter-
departmental rivalries and disputes, then the plans will fail. For example, Production Department wants to
produce Product A, but the Marketing Department insists on selling Product B.

DECISION MAKING
Planning is an intellectual process, which requires a manager to think before acting. Through planning,
managers of any organization decide what to do, when to do, how to demand who has to do. Hence decision-
making is an integral part of planning. It is defined as "the process of choosing among alternatives".
Decision-making occurs at many stages of planning process. Decision-making and choosing the best
alternative is probably the most important activity of the planning process.
Decision-making is part of all the functions of the management. In planning, through decision-making,
objectives and goals are prepared. In organizing, the managers decide upon the choice of structure, type of
organization, work allocation, delegation of authority and responsibility etc. In directing, managers decide
the course of action, the instructions to be given, providing directions etc. In controlling the managers decide
on fixing the standards, how to control, what to control etc.

TYPES OF DECISIONS
Decisions are classified as follows:
(i) Pragmatic and non-pragmatic decisions
(ii) Individual and collective decisions
(iii) Minor and major decisions
(iv) Strategic and routine decisions
(v) Simple and complex decisions
(vi) Temporary (Adhoc) and permanent decisions etc.

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(i) Pragmatic decisions are those decisions taken within the purview of the policies, rules or procedures.
These are also called programmed or routine decisions or structured decisions. These types of
decisions are taken frequently and are repetitive in nature. Sanctioning an hour's permission, placing
purchase order etc., are some examples of pragmatic decisions. Non-pragmatic decisions are
otherwise called as strategic decisions or non programmed decisions or policy decisions. These
decisions involve heavy expenditure and are generally taken by top management.
(ii) Individual and collective decisions: Decisions may be taken by an individual or a group of
individuals. If the decisions are taken by single person, they are called individual decisions and if
taken by a committee or group of people, than they are called collective decisions.
 Individual decisions are taken where the problem is of routine nature, and definite rules and
procedures exist. Inter departmental decisions and important strategic decisions are generally
taken by a group.
 Group decision-making has advantages like increased acceptance, better communication and
better co-ordination. It has some disadvantages also like, delay in arriving at decision, groups
may be indecisive, and groups may compromise or dominate.
 To utilize the advantages of group decisions and avoid its disadvantages, two new techniques
are proposed known as 'Nominal group techniques' and Delphi Techniques.
 In nominal group technique, the members independently generate their idea and give in
writing. The ideas are summarised and discussed for clarity and evaluation. Finally each
member silently gives his rating and opinion about each idea through voting system. The one
with maximum vote is selected as the group's decision.
 In Delphi technique, persons who are physically dispersed and anonymous to one another are
asked to send their opinion on a topic through mail. A carefully designed questionnaire is
circulated for this purpose. The responses are summarized into a feedback report and sent back
to them with a second questionnaire. A final summary is developed on the basis of replies
received second time. 
(iii) Minor and major decisions: Minor decisions are those decisions related to day-to-day and
periodical occurrences. Purchase of stationary, granting leave and permissions etc., are some examples
of minor decisions. Major decisions are those decisions generally taken by top management. Some of
them are purchasing new machinery, employing new technology, hiring new people etc., are some of
the major decisions.
(iv) Strategic and routine decisions: Strategic decisions are similar to major decisions and are generally
taken by top management. Some examples are price increase/discount, change in product range etc.
Routine decisions are decisions related to day-to-day operations of an organization that are routine in
nature.
(v) Simple and complex decisions: A simple decision is one that is related to a problem with few number
of variables. When there are many variables, the decisions making will be complex.
(vi) Temporary and permanent decisions: Some decisions are to be taken depending on situation till the
solution is found. A decision is taken to meet an unexpected solutions are temporary in nature. These

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are generally taken by shop managers. Permanent decisions are taken on a permanent basis.

STEPS IN DECISION MAKING

(i) Recognition of problem: The first step in decision-making is the problem recognition. A problem may
exist either due to a deviation from the past experience, a deviation from the plan, people bringing
problems to the manager or problems arising from competition.
(ii) Deciding priorities among problem: The manager should identify the problems which he can solve,
the problems which he feels that his subordinates can solve and the problems which are to be referred to
the higher officers. With this decision, the manager is left with very few problems to solve.
(iii) Problem diagnosis: Correct diagnosis of the problem is very important for any manager. Managers
should follow systems approach in diagnosing a problem. He should make a thorough study of all the
sides of a problem coupled with organization before arriving at solution. If the diagnosis is made
correctly, then finding solution becomes easy.
(iv) Development of alternate solutions: After having diagnosed the problem, the next step is to find
alternate solutions. For every problem there will be some alternate solutions. It is very rare that there is
a problem with only unique solution. Alternatives do exist. Sometimes, in the absence of past history of
alternate solutions, the manager has to depend only on his own ability in finding alternatives.
(v) Studying and comparing the effect of alternatives: The alternative solutions are measured and
compared for their consequences. This involves a comparison of the quality and acceptability of these
alternatives.
(vi) Implementation of the decision into action: The next step is to convert the decision into action. This
requires the communications of the decisions to the concerned employees in clear and simple terms. If
there is any opposition or non-acceptance from the employees, steps should be taken to convince them
to accept the same.
(vii) Study of result: After having implementing the decision, the manager has to carry out the follow up
action. If the result is not satisfactory, the manager has to take necessary corrective action or modify his
decision.
During the process of decision-making, the managers face many difficulties. Some of them are:
1. Incomplete information
2. Non-conducive environment
3. Opposition by subordinates
4. Improper communication
5. Wrong timing
6. Statutory regulations
7. Government policies
8. External influence
9. Lack of support.

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REVIEW QUESTIONS
1. Define Management. List and explain the functions of Management?
2. What are nature and characteristics of Management?
3. Explain the scope of Management?
4. Differentiate between administration and management?
5. Write about roles of management?
6. What are different levels of management? Explain them?
7. Is management a science, art or profession? Explain.
8. Explain top Management. What are its roles and functions?
9. Discuss in brief the nature of management.
10. Explain early management approaches.
11. Explain the modern management approaches.
12. Explain briefly the contingency approach of management.
13. What are the objectives of scientific management?
14. What is planning? Explain the steps involved in planning.
15. State and explain importance and purpose of planning process.
16. What are the objectives of planning? Explain.
17. Briefly explain the types of planning.
18. What is nature and purpose of planning?
19. Differentiate between strategic and tactical planning.
20. Explain process of decision-making.
21. State and explain the steps in decision-making.
22. Explain the difficulties faced by manager in decision-making process.
23. Explain all the steps in rational Decision making with a neat diagram.
24. What are planning premises?
25. Explain hierarchy of plans.
26. What are different decisions taken by a manager?

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Module II
Organizing and Staffing: Organization-Meaning, Characteristics, Process of Organizing, Principles of Organizing,
Span of Management (meaning and importance only), Departmentalisation, Committees-Meaning, Types of
Committees; Centralization Vs Decentralization of Authority and Responsibility; Staffing-Need and Importance,
Recruitment and Selection Process
Directing and Controlling: Meaning and Requirements of Effective Direction, Giving Orders; Motivation-Nature
of Motivation, Motivation Theories (Maslow's Need-Hierarchy Theory and Herzberg's Two Factor Theory);
Communication - Meaning, Importance and Purposes of Communication; Leadership-Meaning, Characteristics,
Behavioural Approach of Leadership; Coordination-Meaning, Types, Techniques of Coordination; Controlling
Meaning, Need for Control System, Benefits of Control, Essentials of Effective Control System, Steps in Control
Process.

MEANING OF ORGANIZATION
 Organization is a process which integrates different type of activities to achieve organizational
goals and objectives, to achieve these goals there must be competent management providing them
all those factors to perform their job efficiently and effectively.
 Organization is nothing but is a process of integrating and coordinating the efforts of men and
material for the accomplishment of set objectives.
 Every thinker is of the opinion that an organization is a process. They further have added that this
process leads identification of work to be performed which for convenience sake should be
objectively grouped and defined. Then the work should be assigned to individuals according to their
aptitude, technical knowledge, skill and efficiency. For satisfactory working the individuals should
be given some right and authority.
 A mutual relationship between jobs (what to be done) duties (to be performed) and authority (to be
exercised) should be established. Organization is just like a tool in the hands of management. Net
results will be perfect if the tool is well designed and handed properly.

CHARACTERISTICS OF ORGANISATION
 Robbins defines Organization as ' a consciously coordinated social unit, composed of two or more
people, that functions as a relatively continuous basis to achieve common goals of set of goals.
 Agrawal defines organization as ' a goal oriented open system composed of people, structure and
technology.
From the above definitions, an organization has the following characteristics
1. It is an open system.
2. It is a goal oriented.
3. Organization consists of people.
4. Organization consists of technology, and
5. It has continuity

Organization is an open system:

 An open system means open to environment.
 Organization exists and functions in environment. Environment compels the organization to acquire
right type of people, technology and structure so that the goals to serve the environment can be
attained. The organization is thus greatly influence the environment.
 Usually the demands or wants of the people determines the strategies and goals of an organization.
What are the needs in the market and how an organization can bring new and needy products to the
market create an interaction between the organization and the environment.
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 Without interaction, organization cannot fulfill required products or services to the users groups.
This way, an organization is an open system, without which it cannot survive.

Organization is goal oriented:

 Without goal or set of goals, organization is useless. There is nothing for the organization to do.
Therefore, the major characteristic of any organization is its goal.
 Type of people or technology is adopted so that the set goal can be achieved.
 The goal gives line of action; acquire required type of people and uses type of technology so that
the goal is achieved in an anticipated time point.
 Without goal, organization cannot be formed.

Organization is a collection of people:

 People are the main performers in any organization.
 In other word, all the elements of any organization are the same except the people. Even with the
same age, qualification, experience and facilities, the output of the people may vary, simply because
the needs and wants of all people are not the same. What makes them work by heart and head is the
one that differentiate orgnizations from one to others.

Organization consists of technology:

 Technology is the means of doing works.
 There are various kinds of doing works. As an organization consists of more people, its
performance procedure should be of a fixed type so that each individual in the organization can
exercise them well. This is how technology initiates.
 Technology eases the work and shortens the time.
 Technology originates a certain policy necessary to keep organizational beliefs in doings of the
various people at different structural level. This saves the integrity of the people in achieving goals.

Organization has continuity:

 As the organization involves people, and the people generate different needs, they can leave the
organization or some may die too. This does not affect the organization to stop or decrease in size.
Hence, it is said that every organization has its own continuity.
 A good manager can leave but other better man can take over the charge of the organization.

THE ORGANIZATIONAL PROCESS

 Organizing, like planning, must be a carefully worked out and applied process. This process
involves determining what work is needed to accomplish the goal, assigning those tasks to
individuals, and arranging those individuals in a decision‐making framework (organizational
structure).
 The end result of the organizing process is an organization — a whole consisting of unified parts
acting in harmony to execute tasks to achieve goals, both effectively and efficiently.
 A properly implemented organizing process should result in a work environment where all team
members are aware of their responsibilities.
 If the organizing process is not conducted well, the results may yield confusion, frustration, loss of
efficiency, and limited effectiveness.

The stages or steps in the process of organization are explained below:

1. Fixing the objectives of the organization:
 At the top level, administrative management first fixes the common objectives of organisation.
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 At the middle level, executive management fix the departmental objectives.

 At the lower level, supervisory management fix the day-to-day objectives. All the objectives
of the organisation must be specific and realistic.

2. Finding activities must for achieving objectives:

 After fixing the objectives, the top-level management prepares a list of different activities (or
works) which are required to be carried out for achieving these objectives.
 This list is prepared at random without following any sequence or order. This is a very
important step because it helps to avoid duplication, overlapping and wastage of efforts.

3. Grouping the similar activities:

 All similar or related activities having a common purpose are grouped together to make
departments.
 For e.g. all activities or works which are directly or indirectly connected with purchasing are
grouped together to make the Purchase Department. So various departments such as Purchase,
Production, Marketing, Finance, etc. are made.
 The grouping of similar activities leads to division of labour and specialisation.
4. Defining responsibilities of each employee:
 The responsibilities (duties) of each employee are clearly defined. This will result in the
selection of a right person for the right post / job.
 Employee will know exactly what to do and what not to do. Therefore, it will result in
efficiency.

5. Delegating authority to employees:

 Each employee is delegated (surrender or given) authority.
 Without authority, the employees cannot carry out their responsibilities.
 Authority is the right to give orders and the power to get obedience.
 The authority given to an employee should be equal to the responsibility given to him.

6. Defining authority relationship:

 When two or more persons work together for a common goal, it becomes necessary to clearly
define the authority relationship between them.
 Each person should know who is his superior, from who he should take orders, and to whom
he will be answerable.
 Similarly, each superior should know what authority he has over his subordinates.
7. Providing employees all required resources:
 After defining the authority relationships, the employees are provided with all the material and
financial resources, which are required for achieving the objectives of the organisation.
 In this step, the employees actually start working for a common goal.

8. Coordinating efforts of all to achieve goals:

 This is the last stage or step in the process of organisation.
 Here, the efforts of all the individuals, groups, departments, etc. are brought together and
coordinated towards the common objectives of the organisation.

PRINCIPLES OF ORGANIZATION
 The success of a business organization can be ensured if the following basic principles are used. In
order to develop a sound and efficient organization structure, there is need to follow certain
principles.
 In the words of E.F.L. Brech, "If there is to be a systematic approach to the formulation of
organization structure, there ought to be a body of accepted principles".
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They are as follows:

(1) Objectives:
The objectives of the enterprise influence the organization structure and hence the objectives of the
enterprise should first be clearly defined. Then every part of the organization should be geared to the
achievement of these objectives.
(2) Specialisation:
Effective organization must promote specialisation. The activities of the enterprise should be divided
according to functions and assigned to persons according to their specialisation.
(3) Span of Control:
As there is a limit to the number of persons that can be supervised effectively by one boss, the span of
control should be minimum as far as possible, the minimum, that means an executive should be asked to
supervise a reasonable number of subordinates only, say six.
(4) Exception:
As the executives at the higher level have limited time, only exceptionally complex problems should be
referred to them and routine matters should be dealt with by the lower levels. This will enable the
executives at higher level to devote time to more important and crucial issues.
(5) Scalar principle:
This principle is sometimes known as the "chain of command". The line of authority from the chief
executive at the top to the front - line supervisor at the bottom, must be clearly defined.
(6) Unity of Command:
Each subordinate should have only one supervisor whose command he has to obey. Dual subordination
must be avoided, for it causes uneasiness, disorder, indiscipline and undermining of authority.
(7) Delegation:
Proper authority should be delegated at the lower level of organization also to carry out the work
effectively.
(8) Responsibility:
The superior should be responsible for the acts of his subordinates.
(9) Authority:
Authority is a tool by which a manager accomplishes the desired objectives, which should be clearly
defined.
(10) Efficiency:
The organization structure should help enterprise to function efficiently to accomplish the objectives at
lowest cost.
(11) Simplicity:
The organization structure should be simple and the levels should be as minimum as possible.
(12) Flexibility:
Should be flexible, adaptable to changing circumstances, permit expansion, replacement, without
dislocation and disruption of the basic design.
(13) Balance:
There should be a reasonable balance in the size of various departments, between centralization and
decentralization, between the principle of span of control and short chain of command and among all types
of factors such as human, technical and financial.
(14) Unity of direction :
Should be one objective and one plan for a group of activities having same objectives. Unity of direction
facilities unification and coordination of activities at various levels.
(15) Personal Ability:
As people constitute an organization, there is need for proper selection, placement and training of staff.
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Organisation structure must ensure optimum use of human resources and encourage management
development programme.

SPAN OF MANAGEMENT
Definition: The Span of Management refers to the number of subordinates who can be managed efficiently
by a superior. Simply, the manager having the group of subordinates who report him directly is called as
the span of management.
 Span of management is Span of control -the number of subordinates a supervisor has—is used as a
means of ensuring proper coordination and a sense of accountability among employees.
 It determines the number of levels of management an organization has as well as the number of
employees a manager can efficiently and effectively manage.
 In the execution of a task, hierarchical organizations usually have different levels of task processes.
Workers at various levels send reports on their progress to the next levels until the work is completed.
 In the past it was not uncommon to see average spans of one to four (one manager supervising four
employees). With the development of inexpensive information technology in the 1980s, corporate
leaders flattened many organizational structures and caused average spans to move closer to one to
ten. As this technology developed further and eased many middle-managerial tasks (such as
collecting, manipulating, and presenting operational information), upper management found they
could save money by hiring fewer middle managers.
 Research Studies of management have found that this number (span) is usually 4-8 subordinates at the
upper levels of organization and 8-15 or more at the lower levels. However this is not definite.

DEPARTMENTALISATION
Departmentalization is the process of grouping individuals into departments and grouping
departments into total organizations. Horizontal differentiation of tasks or activities into discrete segments
is called departmentalization.
There are several bases for departmentalization depending upon the nature and size of organization, goals,
strategies and environment.
1. Departmentalization based on Products
 This is more suitable for a large organization that manufactures a vast variety of products.
 Under this separate groups or departments are created and each department is controlled by a
manager who will be responsible for all the activities of that sub group.
 Each subgroup will have its own facilities required for manufacture, purchase, marketing and
accounting etc.
 This type is advantageous where variety of products are manufactured for example (i) Godrej,
that manufactures soaps, cosmetics, refrigerators, machines, furniture etc., (ii) HMT that
manufactures machines, watches, tractors, bearings etc. (iii) TATAs that make trucks, cars, steel,
machines etc.
Advantages
 Top management is relieved of operational task enabling them to concentrate more on common
goals.
 Performance of different product groups can be easily compared enabling the top management to
invest more and more in profitable product groups and exercise better control on non performers.
 Managers of individual products put better effort to improve his area compared to others.

Disadvantages
 This calls for duplication of staff and facilities.
 Separate work force are required in sales, marketing and finance, resulting in extra expenditure.
 More managers are required.
 May result in under utilization of facilities and equipment.
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2. Departmentalazation based on functions

 The departmentation is based on each major function of the organization.
 Depending on the nature of organization the various functions are as follows: Marketing,
Engineering, Production, Finance, Personnel, Purchase etc.
 Functional departmentation is most widely employed basis of organising activities - and is
present in almost every organization at some level in its structure.

Advantages
 It is logical reflection of functions.
 Maintains power and prestige of major functions.
 Follows principle of occupational specifications and thereby facilitates efficient utilization of
people.
 Simplifies training.
 Provides means of right control at top.

Disadvantages
 De-emphases overall company objectives.
 Leads to over specialization of people.
 Reduces coordination between functions.
 Slow adoption to changes in environment.
 Limits development of general managers.

3. Departmentalization based on time

 One of the oldest forms of generally used departmentalization at lower levels of an organization,
is grouping of activities on the basis of time.
 The use of shifts is common in some organizations due to economic or technological reasons.
 For service organizations like hospitals, fire department, security, steel mills, chemical plants,
round the clock work is essential. All these call for 3 shift working of organization. Then under
such circumstance, the departmentation is made on the basis of shifts as first shift, second shift
etc.

Advantages
 Service can be rendered, that goes beyond the normal 8 hours shift/day.
 Facilitates use of processes that cannot be stopped or interrupted.
 Expensive capital equipment can be better utilized.
 Provides part time jobs for people who are otherwise busy during day time (students going for
part time job etc.)
 Higher and continuous production per day.

Disadvantages
 Lacks good and efficient supervision during night shifts.
 Inconvenient for people to work in night shifts and more difficult during shift changes from day
to night.
 Lack of effective coordination and communication from people of one shift to next shift.
 Loss of product or service may increase owing to higher payment/ over time payment during
night shift.
4. Departmentalization based on Territory and Geography
 Departmentalization by Territory is common in organizations that operate over a wide
geographical area.
 The activities of an enterprise are divided into territories like, western region, northern region,
eastern region, southern region etc. They may be further divided into sub regions in main regions
like Karnataka region, Kerala region, Andhra Region, Tamil Nadu region within southern region
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etc. Territorial is especially attractive to large-scale firms or other enterprises whose activities are
physically or geographically spread over a large area.
 Banks, Railways and big manufacturing companies like petroleum companies (HP, Indian Oil
etc.), cosmetic companies are some of the examples of this.

Advantages
 Places responsibility at lower level.
 Places emphasis on local problems and markets.
 Ensures a better coordination within a region.
 Facilitates direct communication within a region.
 Better involvement of people to achieve higher targets.
 Provides a region-wise comparison of performance Takes advantage of economics of local
operations.

Disadvantages
 Requires more persons with General Manager abilities.
 Requires to maintain similar functional people at all regions.
 Difficult to control from top management.

5. Departmentation based on simple numbers

 This was one of the most widely used ancient methods of departmentalization.
 This is achieved by tolling of persons performing the same job and grouping them together under
one supervisor.
 This is not in common use now.

COMMITTEES
 Committee can be defined as a group of organizational members who discuss and develop
solutions to problems.
 It can be either line or staff and can be established on a standing (permanent) or an adhoc basis.
 In business enterprises, the board of directors constitutes the committee at the highest level. The
purpose of such committees is to discuss various problems and recommend solutions to the
management. It is generally found to co-exist with line and staff type of organization.
 The Board of Directors of a company is an example of a committee organization. This form of
organization is suitable for taking decisions on policy matters or laying down broad objective for
the enterprise.

TYPES OF COMMITTEES
1. Ad-Hoc committee
 The word ad-hoc is derived from the Latin language, which means ‘for a specific purpose’.
 An ad hoc committee is therefore a committee that is set up for the main purpose of performing a
specific task or dealing with a specific situation. Having completed the specific task and
submitted its report, the ad hoc committee is then dissolved.
 Majority of committees in business organizations and other places are ad hoc types.
 For example, an ad hoc committee could be formed by the management of an organization to
investigate into the causes of a particular problem bedeviling the organization. After the
completion of the task and submitting a report, the ad hoc committee is dissolved.
2. Executive committee
 This type of committee is made up of people occupying top positions in an organization who
have the powers to administer the day to day affairs of the organization.
 Executive committees are mainly made up of senior management personnel, and just like any
other committee in a business organization, the executive committee is given the mandate to
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perform special assignments or tasks.

3. Sub-committee
 A sub-committee is basically a subsidiary committee. This means that it is connected with a
larger committee that is more powerful and important than it.
 A sub-committee is said to be a child of a parent committee.
 A large committee can appoint one or more of its members to form another committee under it in
the name of a sub-committee.
 The large committee underneath which the sub-committee is formed is the parent committee.

4. Coordinating or Joint committee

 This is a type of committee that acts as a link between two committees and joins or coordinates
their actions together. Such a committee would normally be composed of representatives from the
other committees whose activities it is coordinating.
 Committees are very important in business organizations since they help in resolving problems
and also promotes the exchange of opinions among members for the betterment of the
organization.

Advantages:
1. Pooling of Opinions:
The members of committees come from different background and areas of expertise and have
different viewpoints and values. When persons with varied abilities sit together and discuss a
problem, various aspects of the case are highlighted and pros and cons are assessed. The pooled
opinion will help in taking a realistic view of the problem.

2. Better Co-Ordination:
Committee form of organization brings more co-ordination among different segments of the
organization when representatives of different departments sit together, they understand and
appreciate the difficulties faced by others. This type of frank discussions help on fixing the targets
of different departments and better co-ordination is achieved through this type of decision making.

3. Balancing of Views:
This type of organization helps in balancing the views expressed by different persons. There is a
tendency to over emphasize the aspects of one’s own department by ignoring the inter dependent
character of problems of different departments. A committee helps to bring out an agreed view of
the problem by taking into account divergent views expressed in such meetings.

4. Motivation:
The committees consist of managers as well as subordinates. The views of subordinates are given
recognition and importance. It gives them encouragement and makes them feel as an integral part of
decision making process. Such committees boost the morale of subordinates and motivate them to
improve their performance.

5. Dispersion of Power:
The concentration of power in few persons may lead to misuse of authority and wrong decisions.
By spreading powers among committee members this problem can be solved.

6. Better Acceptance of Decisions:

The decisions taken by committees are better accepted by subordinates. The decisions of an
individual may be autocratic whereas committees decide in wider perspective of organization. Since
various shades of people are represented in committees, these decisions are better accepted.

7. Better Communication:
It is a better forum for discussing matters of mutual interest and reaching certain conclusions.
These decisions can be properly communicated to subordinates through committee members. The
MODULE 2 Organizing and Staffing

members will transmit correct and authentic information and also convey the background of taking
those decisions.
8. Executive Training:
Committees provide a good forum for training executives. They learn the value of interaction,
group dynamics and human relations. They are exposed to various view points and learn the art of
reaching decisions and solving organizational problems.

WEAKNESS OF COMMITTEE FORM OF ORGANIZATION:

This form of organization suffers from the following weaknesses:
1. Delay:
 The main drawback of committee form of organization is delay in taking decisions.
 A number of persons express their view point in meetings and a lot of time it is taken on
reaching a decision.
 The fixing of committee meetings is also time consuming. An agenda is issued and a
convenience date is fixed for the meeting.
 The decision making process is very slow and many business opportunities may be lost due
to delayed decisions.

2. Compromise:
 Generally, efforts are made to reach consensus decisions.
 The view point of the majority is taken as a unanimous decision of the committee.
 The thinking of the minority may be valid but it may not be pursued for singled out.
 They may accept less than an optimal solution, because of a fear that if their solution proves
wrong then they will be blamed for it.

3. No Accountability:
 No individual accountability to be fixed if these decisions are bad.
 Every member of the committee tries to defend himself by saying that he solves a different
solution.
 If accountability is not fixed then it is the weakness of the organization.

4. Domination by Some Members:

 Some members try to dominate in the committee meetings. They try to thrust their view point on
others.
 The aggressiveness of some members helps them to take majority with them and minority view is
ignored. This type of decision making is not in the interest to the organization.

5. Strained Relations:
 Sometimes relations among committee members or with others become strained.
 If some members take divergent stands on certain issues, some may feel offended.
 In case some issue concerning other persons is discussed in a committee and members taking
stand not liked by those persons may offend them.
 The discussions in the meetings are generally leaked to other employees.
 Some unpleasant decisions may not be liked by those who are adversely affected. It affects
relations of employees not only on the job but at personal level also.

6. Lack of Effectiveness:
 The role of committees is not effective in all areas.
 The committees may be useful where grievance redressal or inter personal departmental matters
are concerned.
 Committees may not be effective where policies are to be framed and quick decisions are
required.
MODULE 2 Organizing and Staffing

 Individual initiative will be more effective in these cases. So committees have a limited role to
play.

GUIDELINES FOR COMMITTEE MEMBERS:

In order to make the working of committees effective, the members should follow these guidelines:

1. The members should ensure that the atmosphere at the meetings is cordial and informal.
2. The members should express their views clearly and logically and listen to the reactions calmly.
3. Disagreement should not be ignored. They should not compromise just for the sake of harmony.
Criticism should be directed on the issues and not on persons.
4. It should be ensured that chairman does not excessively dominate. His views should also be
treated in same way as that of others. His views should not be taken as final.
5. The disagreement in meeting should not be taken in personal level. The spirit of competition
should be avoided and co-operation should be enhanced.

All these guidelines will not only smoothen the working committees but will also make them an effective
instrument of the organization.

AUTHORITY
 It is the formal right given to an individual to command (the action of others).
 According to Koontz, it is the tool by which a manager is able to exercise discretion and to create
an environment for individual performance.
 An authority may be defined as the "right to act".
 It may also be referred to as the power to take necessary steps or decisions in order to achieve
organization's goals.
 An enterprise may have the best of plans, sound organization structure and efficient management,
yet nothing happens or is achieved.
 As nothing is done i.e., the 'act' is missing and it is the act that influences in the body structure.
 Thus, "Authority is the right to act" the most appropriate definition given to it

RESPONSIBILITY
 It is also called as Accountability or Answerability.
 It may be considered as the obligation of a subordinate to his superior to do a work assigned to
him.
 Each person who is given responsibility must recognise that the executive above him will hold
him responsible for the quality of his performance.
 Authority and responsibility exist together in a business organization. They represent the two
sides of the same coin while authority is right to command; responsibility is an obligation to
performance as someone with authority has directed.
 It accompanies the assignment of work to a subordinate and becomes increasingly important at
successive higher levels in the hierarchy.
 It is not merely a desire to cooperate or to advance group objectives but is a recognition of the
obligation to perform managerial functions.
 One major and important aspect of responsibility is that a manager can part with authority but not
with responsibility, which is an inherent property of his position in the organization.
 The terms "responsibility"' and "accountability" are often used dischargeable.
 Strictly speaking accountability is used to denote a special kind of responsibility. As employed in
military, an officer is said to be "accountable" for equipment, but responsible for the action of
troops reporting to him.

CENTRALISATION VS DECENTRALISATION
Concept of Centralization and Decentralization
 Organization authority is merely the degree of discretion conferred on people to make it possible
MODULE 2 Organizing and Staffing

for them to use their judgment by giving them power to use their own decisions and issue
instructions, how much authority should be concentrated or dispersed throughout the
organization.
 Decentralization is the tendency to disperse decision, making, authority in an organization
structure.
 It is a fundamental aspect of delegation, to the extent the authority is not delegated it is
centralized.
 There can be absolute centralization of authority in one person; this implies that no subordinate
managers, and therefore no structured organization.
 Some decentralized authority exists in all organizations. On the other hand there cannot be
absolute decentralization, for if managers, should delegate all their authority, their status as
managers would cease, their position will be eliminated and again there would be no organization
structure.
 Centralization and decentralization are qualities with various degrees in practice.
 When work of an executive increases so much in volume that he cannot hope to cope with it, he
has to divide it among his subordinates.
 In doing so he naturally expects that each subordinate will do the job as he himself would have
done. This process of dividing the job is referred to as 'delegation'.
 Delegation is simply a matter of entrusting part of the work operations or management to others.
"It is the ability to get results through others" - "It is the dynamics of management". It is a process
a manager follows in dividing the work assigned to him so that he performs that part which only
he, because of his unique organizational placement, can perform effectively, so that he can get
others to help him with what remains.
 The primary purpose of delegation is to make organization possible. Just as no one person in an
enterprise can do all the job necessary for accomplishing a group purpose, so it is impossible as
an enterprise grows for one person to exercise all the authority for making decisions.
 There is a limit to the number of persons that a manager can effectively supervise and for whom
they can make decisions. Once this limit has been passed, authority must be delegated to
subordinates, who will make decisions within the area of their assigned duties.

The process of Delegation

 Authority is delegated when superior gives a subordinate, discretion to make decisions. The
entire process of delegation involves:
 Determination of results expected (MBO)
 Assignment of tasks.
 Delegation of authority for accomplishing these tasks.
 Holding of people responsible for accomplishment of tasks.
In practice it is impossible to split this process, since expecting a person to accomplish goals without
the authority to achieve them is meaningless, as the delegation of authority without knowing for what
results it will be used.
Clarity of Delegation
 Delegation of authority can be specific or general, written or unwritten.
 If the delegation is unclear, a manager may not understand the nature of the duties or the
results expected.
 Specific written delegations of authority are extremely helpful both to the manager who
receives them and to the person who delegates.
 Sometimes, especially, in the upper levels of management, it is too difficult to make authority
delegation specific and the subordinate, robbed of flexibility, will be unable to develop in the
best way.

Recovery of Delegated Authority

 A manager who delegates authority, does not permanently dispose it off; delegated authority
can always be regained.
MODULE 2 Organizing and Staffing

 A shuffle in an organization means that rights are recovered by the responsible head of the
firm to a department and then re-delegated to new managers to modified departments, so that
head of a new department may receive the authority held by other managers.

DIFFICULTIES IN DELEGATION
Although delegation is apparently a simple process, but in practice certain difficulties do generally
crop up, hampering the process.
They are as follows:
i. On the part of the boss
 I can do it better myself feeling.
 Lack of ability to direct.
 Lack of confidence and trust in subordinates.
 Absence of control that warns of coming troubles.
 Conservative and canvas temperament.

ii. On part of the subordinates

 Over dependence on boss for decisions.
 Fear of criticism.
 Lack of information and resources to do a particular job effectively.
 Lack of self confidence.
 In adequate positive incentives.

PRINCIPLES OF DELEGATION
1. Receptiveness An underlying attribute of managers who will delegate authority is a willingness to
give other people's idea a choice.
2. Willingness to let go A manager who will effectively delegate authority, must be willing to release
the right to make decisions to subordinates.
3. Willingness to let others make mistakes As everyone makes mistakes, a subordinate must be
allowed to make them, and they must be considered upon investment in personal development.
4. Willingness to trust subordinates Trust is the basis of all coordination.
5. Willingness to establish and use broad controls To ensure themselves that the authority is being
used to support enterprise or department goals and plans.

STAFFING
 Staffing is defined as "filling and keeping filled, positions in the organization structure".
 It is also known as "human resource management".
 This includes identifying the requirement of work-force, taking inventory of people available,
recruiting, selecting, placing, promoting, appraising, planning the employee's careers, training them
to suit the job, developing the staff to carry out the defined job effectively and efficiently.

NATURE AND IMPORTANCE OF STAFFING

A business cannot be successfully run without the right kind of people. It is very important to fill
the jobs with suitable people who will carry out the job effectively. The staffing is very important
because of following reasons.
1. It helps in discovering talented and competent workers and developing them to move the
organization ladder.
2. Staffing is important to put the right person at right job which results in increased production.
3. It avoids sudden disruption of the production due to shortage of workers, since it plans and fills the
positions.
4. It maintains harmony and creates healthy atmosphere in any organization by planning the
promotions, training needs and additional skills required.
5. It plans the requirement of man power at various time and levels of a project and cater to it.
MODULE 2 Organizing and Staffing

Elements of staffing:
While carrying out the staffing function, the management should ensure that right people are
engaged for a job. The jobs cannot be changed to suit the people.
The main elements involved in staffing are:
1. Proper placement of people.
2. Rational recruitment and selection.
3. Proper positioning and fixation of salaries.
4. Providing necessary training for the people to carry out the job.
5. Good promotional policies and retirement scheme.

Functions of staffing:
Staffing plays a vital role in organization. It has key roles to play for the well being of any
organization.
The following are some of the functions of staffing.
1. Man power planning: The first function of staffing is to plan the requirement of man power in
various levels of organization to achieve the objectives of the organization. Man power planning
involvesshort term and long term. Short term is the immediate requirement of man power to reach the
targets where as long term planning involves the requirement of people for future proposed projects.
2. Development: Development means preparing the people of an organization to develop required
skills to perform their tasks. This involves training of people.
3. Fixing employment standards: The staffing defines and fixes the responsibilities of people. The
specification and qualifications of people to be put on a particular job are prepared.
4. Sources of selection: The staffing identifies and specifies sources of selection like internal or
external sources. A position may be filled by people from internal source available with in the
organization either by transfer or promotion. External sources may be considered for filling a position
from outside organizations.
5. Selection: After having identified the sources of selection, next function is selection process. People
are selected as perspecifications and qualifications set earlier and recruited. The selected people are
placed on the job.
6. Training: If required, the selected people are given necessary training to carry out the specific job.
7. Routine functions: In addition to the above functions, the staffing also involves in promotion,
transfer, punishment, motivation, welfare, coordination, retirement etc.

SELECTION
 Selection of personnel for the organization is one of the most important managerial responsibilities.
 According to the requisition, a primary selection is done for the suitable candidates, to be called for
the interview.
 The final selection is done by the executives in the case of higher posts and for lower posts
recruitment, the personnel officer is present in all selections and keeps an eye on the recruitment
activities with an aim:
 To find out whether the candidate can be suitable employee. For this, the candidate should
be clearly told about the nature of the job, terms and conditions.
 To know the suitability for the particular jobs, he can be cross questioned and thus the
suitability can be judged.
 If the selection of the worker, admitted to the firm is not working skillfully then the result
will be, either there will be a poor level of work or there will be a high rate of labour
turnover. Both will be harmful to the firm in the long run. Therefore every effort should be
made to make proper selection.

Techniques of selection
1. Application Banks
2. Preliminary or Initial Interview
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3. Interview
4. Group discussion
5. Employment tests.

1. Application Bank
 It is invariably used as one of the selection tools and can be helpful at the interview stage.
 It provides actual information needed for evaluating the candidate's suitably.
 It is also used as a basic record of his personnel data is about educational qualifications,
training, experience etc.
 Many large companies use such application forms which determine, whether the candidate
possesses the basic minimum requirement about the Qualifications, Knowledge and Skills or
not.
 Generally they seek information in the following areas:
 Personnel data such as age, sex, marital status.
 Family background, such as father's and mother'soccupation and earnings.
 Educational background including training.
 Employment record including details about previous employment if any and present
employment.
 Name and address of few persons usually other than relation to whom references can be
made.
 Membership of professional organization.
 Reason for seeking job in the organization.

2. Preliminary or Initial interview

 This interview is usually of short duration and is aimed at obtaining certain basic information
with a view of identifying the knowledge and other information not present in application.
 The candidate is asked about his educational skill, knowledge, job experience, minimum salary
acceptable etc. Sometimes he is also asked that why he is applying for job in that particular
organization.
 If the candidate seems to be possessing the basic minimum requirement for efficient
performance, he is given an application form to fill in.

3. Interview
 It is one of the least reliable and valid selection techniques. It relies upon a considerable extent
in accepting or rejecting a candidate.
 The interview is left with the inevitable personality variables and for this he has nothing to
depend upon except his subjective judgment.
 The interview may follow a structural pattern or an unstructural pattern.
i. In structural pattern or directive pattern:
 In structural pattern of Interviewing, a list of questions based on job specification is
prepared in advance.
 The interview may be occasionally separated from the prepared list of questions and
put other questions.
 The candidate is supposed only to answer the questions and the interviewer can learn a
lot about the candidate's ability and knowledge, but this technique imposes serious
limitation in drawing out his personality.
 It is not very effective.
ii. Unstructural or non-directive or unpatterned:
 It is one of the most effective interviewing technique.
 The interviewer, instead of asking too many questions initiates the candidate to create a
kind of permissive atmosphere in which the candidates talks usually quite revealingly
about his experiences, aspirations, fear, weakness etc.
 This kind of interview requires a high degree of interviewing skill and it can therefore
MODULE 2 Organizing and Staffing

be conducted by only trained interviewers.

 In some large organizations, the candidate has to go through a review of two or three
panel interviewers.
 After each panel interviewer some candidates are eliminated and only those candidates,
who succeed in the first interview are sent on to the second interviewing panel and so
on.

4. Group Discussion
 In this technique candidates are brought together in group of 6 or 8 persons for informal
discussion and the selectors observe them and evaluate them.
 There are two kinds of group discussions,
 a problem is given to a group to discuss and the individual member is free to choose
his own approach.
 each individual is given an initial position and supplied with supporting information to
defend his own position.

5. Employment tests
 Most of the large companies use one or other kind of employment tests. Before a company use
employment test it should take following points into account.
 Since the tests are aimed at predicting future success in a job situation, they should be
selected or designated on the basis of a sound job analysis programme.
 In deciding upon the test to be used as a selection tool, its specialty should be taken into
considerations.
 Tests should be valid. Before a test is selected for use as an employment, its validity
should be determined in relation to the specific job.
 Tests are only one of the techniques of selection. They are not fool proof and therefore instead
of using single test, often a batch of tests is used.
 A variety of tests are used as selection tools. The object of these scientific methods of
selection is to ensure that a person selected possesses those physical and mental qualities in
required degrees which are essential if he is to become an efficient and successful worker.
1. Intelligence Test:
 It is a measure of an individual's capacity of reasoning and verbal comprehension.
 It is used in the selection and classification of workers for almost every kind of job
from the unskilled to the highly skilled, administrative and professional jobs.
2. Vocations Aptitude Test:
 Physical strength and general intelligence are not enough to enable a person to
perform a task efficiently. Besides, he must posses the ability for the performance
of that job.
 Infact from the point of view of future achievements, a person of high natural
ability is likely to prove more successful than one who through training and
experience has gained more knowledge but possesses less natural ability.
 If this is correct, then it makes it necessary to find out whether the applicant
possesses the necessary vocational aptitude or not.

3. Analytical Test:
 In this method, a job is analysed in terms of key qualities or abilities as speed and
quality of observations, ability to keep one's head and not get confused when a
quick decision is called for.
 A test or a combination of tests are then taken which measure the degree to which
these abilities are present or lacking in the candidate.

4. Synthetic Test:
 In case of jobs which are complex and for which the analytical tests can't be
MODULE 2 Organizing and Staffing

performed, synthetic tests may be adopted.

 It presents the candidate a complex situation more or less similar to the one
normally present in actual task and his success or failure in the test is accepted as
the possession or absence of the required vocational aptitude.

RECRUITMENT
 It is an important step in the employment of labour.
 Haphazard recruitment of labour brings in a measure of chances and uncertainty in an industry and
may result in inefficiency and loss of production. This means that systematic steps should be taken
to ensure that right type of persons are available to the concern in right number.
 The numbers of workers required by a concern depends on
 The scale of production.
 The degree of mechanization.
 Following are the various sources from where the personnel may be recruited
 Applications introduced by friends and relatives
 Consulting agencies
 Campus recruitment
 Casual callers
 Through advertisement
 Field trip and college recruitment
 Employment exchange
 Labour contractors

Applications Introduced by friends and relatives:

 Often the employees introduce their relative's application to find a good job for them.
 Many companies prefer to take such candidates because their background can be known.
 In this way a good worker can bring a good worker.
 However this may lead to nepotism and favoritism.
Consulting agencies:
 A consulting agency is commonly utilised to find specialised executive personnel.
 It either helps the personnel department by supplementing its efforts or work on its behalf. In such a
situation, the agency must understand and estimate correctly the client's past experiences, history
and future projections.

Campus recruitment:
 As a large numbers of management institutes like IIM, XLRI, IIT etc., are engaged in giving the
professional training, many companies find it easier to pick up the best talent straight from the
institute to fill its managerial position.
 In fact these professional institutes have provided recruitment source to firms.

Casual callers:
 Sometimes on his own initiative, the applicant sends his application for the job.
 The personnel office keeps the record of applications and the suitable candidates can be selected
from the callers.

Through advertisements:
 Companies advertise in the newspaper for their vacancies.
 Generally the senior posts are filled by this method when they can't be filled by promotions.
 The advertisement gives a wide range of choice.
 It also depends upon the employers fame.
 If the name is not reputed one some of the good personnel do not apply.
MODULE 2 Organizing and Staffing

Field trips and college recruitment:

 This method is being used for private industrial firms.
 These firms send their selecting teams to respective colleges and universities, interview the
candidates who are nearing completion of their studies and make selection.
 This is no doubt very expensive and time consuming but has the advantage of choosing the cream
from the lot.

Employment exchange:
 The recruitment is also done through the employment exchange of the persons who are enrolled in
the exchange.
 The main function of the exchange are:
 To supply information about persons in need of jobs and about jobs that are available.
 To direct persons to factories where suitable jobs exist.
 To develop job specification.
 To procure information about current wage rate.
 To introduce selected employees with personnel department and policies of the company.
 To follow up the new recruits for initial adjustments.
 To look-after the employee canceling and operating the system seriously.
 To keep records of employees, hired, resigned, discharged and transferred.

Labour Contractors:
 The casual vacancies may be filled up by the company through labour contractors.
 Usually unskilled candidates are appointed in this manner.
MODULE 2 Organizing and Staffing

DIRECTING AND CONTROLLING

DIRECTING
MEANING AND NATURE OF DIRECTING
 Direction means issuing of orders, leading and motivating subordinates as they go about
executing orders.
 It is also defined as the process and techniques used for issuing instructions to carry out a job and
making sure that the operations are carried out as per the plan.
 Directing is the interpersonal aspect of managing by which subordinates are led to understand
and contribute effectively and efficiently to the attainment of enterprise objectives.
 The direction has two major activities namely
1. Giving orders to employees and
2. Leading and motivating them to accomplish the goals.

DEFINITION OF DIRECTION:
 "Directing is the interpersonal aspect of managing by which subordinates are led to understand
and contribute effectively to the attainment of enterprise objectives. (Harold D Koontz
&O’Donnell)
 "Directing consists of the processes and techniques utilized in issuing in-structions and making
certain that operations are carried on as originally planned". (Haimann)
 "Direction is telling people what to do and seeing that they do it to the best of their ability. It
includes making assignments, corresponding procedures, see-ing that mistakes are corrected,
providing on-the-job instruction and issuing orders". (Ernest Dole)
 "Directing is the guidance, the inspiration, the leadership of those men and women that constitute
the real core of the responsibilities of the management". (Urwick and Breach)

REQUIREMENTS OF DIRECTION:
The role of a manager is to understand the needs, motives and attitudes of his subordinates. He
should use appreciate strategies according to the people and situations.
The following are some of the principles of effective direction:
(i) Harmony of objectives:
 For an organization to function well, it the goals of company and goals of individuals are in
complete harmony.
 It is very uncommon for such a situation to exist in any organization. Individual goals may
differ from the goals of the organization.
 The manager should coordinate the individual goals to be in harmony with the goals of the
organization

(ii) Unit direction of command:

 This principle implies that an employee should receive orders and instructions only from
one supervisor or boss.
 Otherwise, there may be indiscipline and confusion leading to conflicting orders, divided
loyalties and reduced results.

(iii) Efficiency:
 If the superior consults with the subordinates in decision-making, then there would be a
sense of commitment. This makes the direction easy and improves the efficiency of
subordinates.

(iv) Direct supervision:

 Managers should have direct face-to-face contact with the subordinates.
 Personal touch with subordinates will ensure successful direction.
MODULE 2 Organizing and Staffing

(v) Effective communication:

 The supervisor must have good communication skills.
 He must clearly communicate the plans, goals, policies, responsibilities and the duties to the
subordinates.
 In communication, comprehension is more important than the content.

(vi) Effective control:

 The management should monitor the behavior and performance of subordinates to exercise
effective control over subordinates.

(vii) Follow-through:
 Direction is a continuous process. Having given the directions may not ensure carrying out
them. Hence a manager should follow-through the performance of his subordinates.
 Follow up is very important function of direction.

GIVING ORDERS
The order is a devise employed by a line manager in directing his immediate subordinates to start
an activity, stop it and modify it. A staff executive does not issue orders. To some men the matter of
giving orders and having them obeyed seems a very simple affair but the fact is that it is surrounded by
many difficulties.
Mary Parker Follett lays down the following principles which should be followed in giving orders:
1. The attitude necessary for the carrying out of an order should be prepared in advance. People will
obey an order only if it appeals to their habit patterns. Therefore, before giving orders, it should be
considered how to form the habits which will ensure their execution.
2. Face-to-face suggestions are preferable to longdistance orders.
3. An order should be depersonalized and made an integral part of a given situation so that the
question of someone giving and someone receiving does not come up. Thus the task of the manager
is to make the subordinates perceive the need of the hour so that the situation communicates its own
message to them.

Chester Barnard lays down four conditions which make an order acceptable. These are:
1. Order should be clear and complete;
2. Order should be compatible with the purpose of the organization;
3. Order should be compatible with the employee's personal interest; and
4. Order should be operationally feasible.

Orders may be communicated verbally or in writing. Written orders are appropriate when
1. the subject is important;
2. many details are involved; and
3. there is geographical distance between the ordergiver and the recipient.

A manager may follow four types of methods to ensure compliance to his orders:
1. Force
2. Paternalism
3. Bargain, and
4. Harmony of objectives.

 The formula followed in "force" is: "Do what I say or else ... ", meaning thereby that an
employee will be punished if he does not follow orders. The results are frustration, restriction of
output, sabotage, militant unionism, etc.
 The formula followed in "paternalism" is: "Do what I say because I am good to you." The
result here is that the employees develop a feeling of gratitude and indebtedness toward the
manager which they do not like. Further, paternalism operates in violation of the law of effect.
Instead of increased rewards following increased compliance, the paternalistic manager provides
MODULE 2 Organizing and Staffing

rewards first and expects the compliance to follow.

 The formula followed in "bargain" is: 'You do as I say in certain respects and I do as you say in
certain other respects.' The result of this method is that the manager's control is gradually
reduced. The formula followed in "harmony of objectives" is: "If we perform together each will
achieve his goal". This in fact is the best formula for ensuring compliance to order.

MOTIVATION
The success or failure of a business organization depends on the performance of people working for
it. Generally, performance is determined by three factors ability, knowledge and motivation which are all
related by a widely acknowledged formula:
Performance = (Ability + Knowledge) X Motivation
Among the three factors which affect performance, we can see the multiplying effect motivation has on
ability and knowledge in determining performance. Therefore motivation is a very important factor
because it deals with human behavior.
Motivation is nothing but the task of making someone to act in the desired manner. Some definitions of
motivation
i. Motivation is a general term applying to the entire class of drives, desires, needs, wishes and similar
forces that induces an individual or a group of people to work'. - Koontz and O'Donnell
ii. 'Motivation is the process of attempting to influence others to do your work through the possibility
of gain or reward'. - Edwin B. Flippo
iii. 'Motivation means a process of stimulating people to action to accomplish desired goals' – Scott
Motivation process can be shown through the diagram

NATURE OF MOTIVATION
Motivation is not an easily observed phenomenon. We observe an individual's actions and then
interpret his observed behavior in terms of underlying motivation. This sometimes leaves a wide margin
of error. Our interpretation does not necessarily reveal the individual's true motivation.
The following points reveal the complexities involved in understanding true motivation:
1. Individuals differ in their motives.
 The viewpoint (called -monistic approach") that there is only one "economic drive" which
determines behavior is untenable.
 The goals to which individuals aspire differ and so do their motives.
 This is well illustrated by an oft-quoted story:
There were three men cutting stones near a cathedral about threefourths completed. A stranger came
along and said to the first man, "My friend, what are you doing?" The first man replied, "Me, what
am I doing? I am working for 10 shillings a day." He went to the next man and put to him the same
question. The second man said, "Me, what am I doing? 1 am squaring this stone, see. I have to
make its edge absolutely straight." The stranger walked on to the third man and repeated the same
question. The third man replied. "Me, what am I doing? You see that cathedral up there. I am
helping to build that. Is not it great?" In this story the major source of satisfaction to the first man
was the wages he earned. The job itself contributed very little. But job itself was the outstanding
source of satisfaction to the second man. The third man viewed the completion of his group goal—
the building of the cathedral—as his primary source of satisfaction. This means that there is no
single motive that determines how all workers will react to the same job and, therefore, there can be
no single strategy that will keep motivation and productivity high for everyone everywhere. The
manager has to deal with human diversity.
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2. Sometimes the individual himself is unaware of his motive.

 Freud uncovered this phenomenon while analyzing his critical patients.
 He found that in many ways man is like an iceberg. Only a small part is conscious and
visible, the rest is beneath the surface. This belowthe-surface concept is unconscious
motive. The presence of this explains why man cannot always verbalize his motive to attain
certain goals or even tell what his goals are.
 An example can be drawn from the famous Hawthorne experiments. One girl-worker
complained to her counsellor about her foreman. Later on, it was found that the reason why
she disliked her foreman was that she had a step-father whom she feared and whose physical
appearance was very much like her foreman, with the result that she had unconsciously
transferred to her foreman the unfavorable characteristics of her step-father.

3. Motives change:
 Hierarchy of motives of each individual called "structure" is not fixed.
 It changes from time to time. An individual's primary motive today may not be primary
tomorrow, even though he may continue to behave in the same way.
 For example, a temporary worker may produce more in the beginning to become permanent.
When made permanent he may continue to produce more—this time to gain promotion, and
so on.

4. Motives are expressed differently.

 The ways in which motives are eventually translated into actions also vary considerably
between one individual and another.
 One individual with a strong security motive may play' it safe and avoid accepting
responsibility for fear of failing and being fired.
 Another individual with the same security motive may seek out responsibility for fear of
being fired for low performance.
 Even the same individual may express his motive differently at different times. Thus, an
employee who in the beginning works hard to get promotion may, when frustrated, indulge
in anti- management union activities for the same purpose.
 Different expressions completely mislead a manager because he does not know what the
employee's true motivation is.

5. Motives are complex.

 It is difficult to explain and predict the behavior of workers.
 The introduction of an apparently favorable motivational device may not necessarily
achieve the desired ends if it brings opposing motives into play.
 In a factory, when blue-green lighting was introduced to reduce eye strain, the output of
men workers increased but that of women workers decreased. On investigation it was found
that the latter disliked the change in lighting because they felt that the new type of lighting
had made them look 'simply ghastly'.

6. Multiple motives make the choice of goals difficult for an individual

We have been referring to examples of motivations as if they exist one at a time. This is hardly
the case. The fact is that multiple motivations operate simultaneously to influence an individual's
behavior. Furthermore, some of these motivations are incompatible with one another. This results in
the following three types of motivational conflicts which make the person's choice of goal difficult:
i. Approach approach conflict
 The person desires to do two things which he likes equally well, but it is possible to do only
one.
 For example, there is the person who has the choice of either remaining at his present place
of posting with the present salary, or going to a new place with a hike in salary. In such
situations, two different behaviors are aroused in him which block each other.
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ii. Avoidance avoidance conflict

 The person is forced to choose between two alternatives, both of which are considered
equally undesirable by him.
 For example, there is the person who, being dissatisfied with his present job, wants to
leave it but also wants to avoid unemployment.
iii. Approach avoidance conflict
 The person is attracted to the positive characteristics of his choice, but wants to avoid its
negative characteristics.
 For example, a person may be motivated to work overtime for extra pay but may not like
to be scolded by his wife for reaching home late.

MOTIVATION THEORIES
There is no shortage of motivation theories. We can classify them under three broad- heads:
1. Content theories: The content theories tell us what motivates an individual. They throw light on
the various needs and incentives which cause behavior.
2. Process theories: The process theories, on the other hand, answer the question how behavior is
caused.
3. Reinforcement theory: Reinforcement theory explains the ways in which behavior is learned,
shaped or modified.

THEORIES OF HUMAN MOTIVATION

There are several theories of motivation based on different structures of human needs and
expectations. Some of them are
1. Maslow's Hierarchy of Needs Theory
2. Herzberg's Motivation - Hygiene Theory

1. MASLOW'S HIERARCHY OF NEEDS THEORY

 Abraham Maslow's Need-Hierarchy theory, published in 1943, is one of the most popular
theories of motivation.
 According to him, the behavior of an individual is determined by his strongest need at a
particular moment.
 Needs that are not satisfied influence his behavior. But the needs once satisfied do not serve as a
motivator.
 According to Maslow, all human needs can be arranged in an order of priority.
 In other words, human needs have an hierarchy and they have to be satisfied from the lowest
level moving in the ascending order.
 Figure Shows Maslow's hierarchy of needs as five ascending levels.

I. Physiological Needs: Includes food, shelter, clothing, water, sleep, sex and other bodily needs.
The physiological needs are the basic needs in life. These are essential for everybody to remain
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alive. These needs motivate the person to work and earn sufficient amount of money to fulfill
them.
II. Safety Needs: Includes security and protection from physical, emotional and economical harm.
Once the physiological needs are satisfied, the safety needs or security needs become
predominant. Physical safety may be protection from fire and accidents. Economical security may
be in terms of job security, health and insurance programme, retirement plan etc., Emotional needs
may be the necessity to be happy and be free from mental disturbances.
III. Social Needs: Includes affection, belongingness, acceptance and friendship. Social needs come
into the picture when the primary needs are taken care of. Since man is a social animal, he has to
interact with the society, and live with respect in society. He desires to love and be loved; accept
others and be accepted; show affection and be shown affection an so on. Social needs make his
work enjoyable.
IV. Esteem Needs: Includes self-respect, autonomy, status, recognition, responsibility, attention,
achievement, prestige, etc., Esteem needs represent an individual's concern for feeling important
and be respected by others. These needs are primarily satisfied by the individuals themselves.
However, the management may create a proper climate to help individuals to fulfill these needs.
V. Self-Actualization Needs: Includes Self-advancement, self-fulfillment, self-development, self-
realization etc., Self-actualization is the highest level need in Maslow's hierarchy. It is the desire to
become what is one is capable of becoming. It is the desire to realize one's own potential. In an
organization, a person attempting to satisfy these needs seeks challenging work and looks for
opportunities for personal growth.
i. According to Maslow, if a lower level need is satisfied, a higher level need emerges. This goes on
till the highest level needs are satisfied. This theory of human motivation by Maslow has been a
landmark is the field of Management. However, it has been also criticized on the following
grounds:
(i) Needs of every person may not follow Maslow's hierarchy.
(ii) Most of the human needs are recurring and are never satisfied fully indeed.
(iii) Most of the needs co-exist and there is no such hierarchy whatsoever.
(iv) Boundaries between different levels of needs may be hazy and overlapping.
(v) Although behavior depends on need, or the lack of it, it may not be fully dependent.
(vi) The concept of self-actualization is theoretical and academic. No person can ever know
his maximum or best potentials

2. HERZBERG'S MOTIVATION-HYGIENE THEORY OR THE TWO-FACTOR THEORY

 The Motivation-Hygiene theory or the Two-Factor theory was proposed by Frederick
Herzberg in the year 1959.
 He carried out a survey on the experiences and feelings of a group of 200 engineers and
accountants working in a few industries in Pittsburgh, USA.
 He concluded that people had two categories of needs which are independent of each other
and affect behaviour in different ways.
 He said that satisfaction or dissatisfaction in work arise from these two different sets of
factors. They were: Hygiene factors and Motivators.

I. Hygiene-Factors
 He found that certain factors did not motivate the employee when present on the job but their
absence caused dissatisfaction.
 These factors were called Hygiene factors because they primarily prevented dissatisfaction just
like hygiene conditions prevent sickness. These factors are:
a. Company policy and administration
b. Supervision
c. Working conditions
d. Salary and status
e. Security in job and personal life
f. Interpersonal relationship with superiors, peers and sub-ordinates.
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 Herzberg said that the opposite of satisfaction was not dissatisfaction but 'No satisfaction' and
likewise the opposite of dissatisfaction was not satisfaction but it was No dissatisfaction'.
 Hygiene factors are also known as maintenance factors or Dissatisfiers and are necessary to
sustain a reasonable level of 'No dissatisfaction' among employees.

II. Motivators
 According to Herzberg, Motivational factors are essential to provide job satisfaction and to
maintain high job performance.
 Motivators act as stimuli to make people work hard voluntarily and be happy in the
organization.
 Motivators or `Satisfiers' include the following factors :
i. Challenging work
ii. Responsibility
iii. Recognition
iv. Promotion opportunities
v. Achievement
vi. Job content.
Herzberg said that these factors helped in increasing job satisfaction. However a decrease in these factors
would lead to satisfaction' and not dissatisfaction. Motivators generally help attaining higher output by the
employees.
Herzberg's Theory in a nut shell can be :
1. Hygiene Factors:
 When absent - increase dissatisfaction.
 When present - prevent dissatisfaction.
2. Motivators:
 When absent - prevent satisfaction.
 When present - increases satisfaction.

Criticisms of Herzberg's theory

(i) People may not be accurate in reporting their satisfying or dissatisfying experiences.
(ii) A factor that causes dissatisfaction is one person may bring satisfaction to another.
(iii) People are biased and they tend to credit themselves for successful events while blaming outside
events for their failures.
(iv) The theory does not measure the levels of satisfaction and dissatisfaction.

Comparison of Theories of Maslow and Herzberg

 Both theories concentrate on the factors which motivate employee's behavior to achieve higher
output. Which Maslow formulated the theory in terms of needs, Herzberg in terms of goals.
 While Maslow gave a hierarchy to his needs, Herzberg divided them into two groups but without
hierarchy.
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 While Maslow said that all needs are motivators, Herzberg said only higher order needs are
motivators.
 Actually the first three ascending levels of needs according to Maslow correspond to the Hygiene
factors of Herzberg and the last two higher levels of needs of Maslow correspond to Motivators
as per Herzberg

COMMUNICATION
MEANING
 Communication has been variously defined by a number of writers.
 According to Newman and summer, it is an exchange of facts, ideas, opinions or emotions by
two or more persons.
 Allen Louise defines it as the sum of all the things one person does when he wants to create
understanding in the minds of another.
 Simply stated, communication means the process of passing information and understanding from
one person to another.
 A proper understanding of information is one very important aspect of communication. If the
information is not understood by the receiver in the same meaning in which its sender wants him
to understand it, the purpose of communication is defeated.
 This may result in confusion, chaos and organizational inefficiency, leading to non-fulfillment of
business goals.
 In short, communication is not merely transmission of information from one person to another
but also correct interpretation and understanding of the information.
 It is not to get something off the mind of the person transmitting it, but to get something into the
mind and actions of the person receiving it.

IMPORTANCE OF COMMUNICATION
The importance of communication can be elaborated as under:
1. Communication is fundamental to accomplish work
 In any organization, a manager spends most of his time communicating i.e., reading, writing'
Speaking or listening.
 Communication is the means by which he persuades, informs, motivates and leads his
employees towards organizational goals through communication that there is a transmission
of information among employ
 It is without communication no work can get accomplished.
2. Communication facilities planning
 Planning, the most important function of management requires extensive communication
among the rank and file of the organization.
 Planning is done after inputs from key executives and other personnel.
3. Communication helps in decision-making
 Managers rely heavily on the quality and quantity of information that is available in order to
take decisions.
 It is communications which provides the right type of information to a manager and enables
him to consider the pros and cons thoroughly before taking a decision.
4. Communication is the basis of co-ordination
 If all the departments and divisions of an organization have to co-ordinate their efforts to
achieve the common goals, communication is highly essential.
 A good communication system is the basis of all inter-dependent activities.
 It is the foundation of all group activity.
 It is only through communication that people can attain a common view point and therefore
co-operate with each other to achieve organizational objectives.
 According to Hick, When communication stops, organized action comes to an end.
5. Communication improves relationships between employees.
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
Communication builds bridges of relationships between employees.

It binds individuals to a common purpose. A good communication system helps exchange of
facts. ideas, feelings and sentiments among the employees.
 Apart from work-related information.
 This results in in a better understanding among the employees which is what an organization
exactly wants.
6. Communication improves morale and motivation
 When manager listens carefully to employees grievances and take necessary action, it
improves morale and motivation of the workers.
 Without communication, it is impossible to understand others and make them understand.
 Good communication helps in addressing workers problems and therefore keeps their
morale and motivation high.
7. Communication is key to managerial-efficiency
 Good communication skills are a must for modern-day managers.
 The growth success or the growth of a manager largely depends on his communication
skills.

PURPOSES OF COMMUNICATION
Some important purposes which communication servers are as under:
1. Communication is needed in the recruitment process to persuade potential employees of the
merits of working for the enterprise. The recruits are told about the company's organization
structure, its policies and practices.
2. Communication is needed in the area of orientation to make people acquainted with peers,
superiors and with company's rules and regulations.
3. Communication is needed to enable employees to perform their functions effectively. Employees
need to know their job's relationship and importance to the overall operation. This knowledge
makes it easy for them to identify with the organizational mission. If a nurse in a hospital knows
why she is to follow certain procedures with a patient and how this relates to the total therapy
programme for him, it is much easier for her to develop an ideological commitment to the
hospital.
4. Communication is needed to acquaint the subordinates with the evaluation of their contribution
to enterprise activity. It is a matter of some motivational importance for the subordinates to know
from their superior how they stand and what the future may hold for them. This appraisal, if
intelligently carried out, boosts the subordinates' morale and helps them in building their career.
5. Communication is needed to teach employees about personal safety on the job. This is essential
to accidents, to lower compensation and legal costs and to decrease recruitment and training tor
replacements.
6. Communication is of vital importance in projecting the image of an enterprise in the society. The
amount of support which an enterprise receives from its social environment is affected by the
information which elite groups and the wider public have acquired about its goals, activities and
accomplishments. During the 1982 blowout at Bombay High, ONGC took care to keep the
country informed about the steps that were being taken to combat the crisis. Contrast this with
Union Carbide which did nothing to refurbish its image after the Bhopal Gas leak.
7. Communication helps the manager in his decision process. There is a spate of varied information
produced in an enterprise. The manager must make a choice of useful and essential information
which should reach him. The important question before him is 'what do I need to know?' It
should be remembered that no two successive managers of the same plant will give the same
answer to this question.
8. Communication helps in achieving coordination. In a large organization, working on the basis of
division of labour and specialization, there is need for coordination among its component parts.
This can be achieved only through communication. A good communication system is the basis of
all interdependent activities which we find being carried out in different departments of an
organization. By providing information to each unit about the relevant activities of others, a good
system of communication makes the interdependence of each unit acceptable to it. In the absence
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of communication, no unit would tolerate this interdependence. This will make coordination
difficult. In the words of March and Simon, "The greater the efficiency of communication within
the organization, the greater the tolerance of a unit for interdependence."
9. Communication promotes cooperation and industrial peace. Most of the disputes in an enterprise
take place because of either lack of communication or improper communication. Communication
helps the management to tell the subordinates about the objectives of the business and how they
can help in achieving them. Similarly, communication helps the subordinates in putting forth
their grievances, suggestions, etc. before the management. Thus communication helps in
promoting mutual understanding, cooperation and goodwill between the management and
workers.
10. Communication increases managerial efficiency. It is said that the world of modem management
is the world of communication and the success of a manager in the performance of his duties
depends on his ability to communicate. Administrators in business and industry reportedly spend
between 75 and 95 per cent of their time communicating (either sending or receiving messages.)
Naturally then, an effective system of communication is very essential for the efficiency of a
manager. Benjamin Balinsky has rightly remarked that, if there is any shortcut to executive
effectiveness, it is the mastery of the art of face to face communication.

In summary, it can be said that the purposes of communication are:

1. To provide the information and understanding necessary for group effort (i.e., the skill to work); and
2. To provide the attitudes necessary for motivation, cooperation and job satisfaction (i.e., the will to
work).

LEADERSHIP
MEANING
 Leadership is an important aspect of managing.
 Leadership is defined as "Influence, that is, the art or process of influencing people so that they
will strive willingly and enthusiastically towards the achievement of group goals". (Koontz and
Weih rich)
 In other words, people should be encouraged to develop not only willingness to work but also
willingness to work with zeal and confidence.
 "The will to do is triggered by leadership and lukewarm desires for achievements are transformed
into burning passion for successive accomplishment by the skilful use of leadership" (George R
Terry). "Leadership is the lifting of man's visions to higher sights, the raising of man's
performance to a higher standard, the building of man's personality be-yond its normal
limitation". (Peter Drucker)
 "Leadership is the ability to secure desirable actions from a group of followers voluntarily
without the use of coercion." (Alford and Beatty)
 "Leadership is the ability to persuade others to seek defined objectives enthusiastically. It is the
human factor which binds a group together and motivates it towards goals". (Keith Davis)

DIFFERENCE BETWEEN A LEADER AND A MANAGER

1. A person emerges as a leader. The question whether he will or will not emerge as leader always
depends on a number of situational factors. A manager, on the other hand, is always put into his
position by appointment.
2. A leader always has some personal power (i.e., ability to influence) that enables him to lead. He
may or may not have positional power (i.e., the right to command). A manager, on the other
hand, always has some positional power He may or may not have personal power. If he has also
personal power, then he will be that much more effective as a manager.
3. A leader focuses on people and generally seeks those very objectives which are the objectives of
his followers. Thus there is mutuality of objectives between the leader and his followers. A
manager, on the other hand, focuses on systems and structures and seeks those objectives which
his subordinates do not regard as their own. Thus there is clash of objectives.
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4. A leader generally looks at the horizon and not just the bottom line. He is innovative, challenges
the status quo and believes in doing right things. A manager, on the other hand, is generally
bureaucratic, accepts the status quo and believes in doing things right, according to the rules, to
cope with complexity. It should be noted that in today's changing business environment,
notwithstanding the above difference, even managers are in leadership roles.

CHARACTERISTICS OF LEADERSHIP
Some important characteristics of leadership are as follows.
1. Leadership implies the existence of followers
We appraise the quality of a person's leadership in practice by studying his followers. We ask: How
many and what kind of followers does he have? How strong is their commitment as a result of his
leadership? How long will their commitment last? By answering questions of this nature we get to know
the quality of leadership. We must not, however, forget that leaders within organizations are also
followers. The supervisor works for a branch head, who works for a division manager, who works for
the vicepresident of a department and so on. Thus, in formal organizations of several levels, a leader has
to be able to wear both hats gracefully, to be able to relate himself both upward and downward.
2. Leadership involves a community of interest between the leader and his followers
In other words, the objectives of both the leader and his men are one and the same. If the leader strives
for one purpose and his team of workers for some other purpose, it is no leadership. In the words of G.R.
Terry, "Leadership is the activity of influencing people to strive willingly for mutual objectives."
3. Leadership involves an unequal distribution of authority among leaders and group members
Leaders can direct some of the activities of group members; that is the group members are compelled or
are willing to obey most of the leader's directions. The group members cannot similarly direct the
leader's activities, though they will obviously affect those activities in a number of ways.
4. Leadership implies that leaders can influence their followers or subordinates in addition to
being able to give their followers or subordinates legitimate directions
In other words, leaders not only tell their subordinates what to do by way of command but also influence
by their behaviour and conduct. The use of command by leaders succeeds only in bringing about a
temporary behavioural change in the followers. Permanent attitudinal change in followers comes through
the use of influence only. According to Hersey and Blanchard6 leadership of the first type though
successful is not effective. The second type of leadership is both successful and effective.

LEADERSHIP STYLES
There are three widely used leadership styles or approaches: Trait approach, Behavioral approach,
Contingency approach.

Traits Approach
 Trait is basically a character and early notions about leadership dealt with personal abilities.
 It was believed that some people have leadership qualities by birth or god's gift.
 The traits that associate with leadership are identified as: mental and physical energy, emotional
stability, knowledge of human relations, empathy, objectivity, personal motivation,
communication skills, teaching ability, social skills, technical competence, friendliness and
affection, integrity and faith, intelligence etc.
 This approach has several drawbacks: It failed to identify right traits required for effective
leadership. It is difficult to associate the traits with jobs to be carried out.
 A leader who is successful in one area may be a failure in different area. Since these are
subjective, it is difficult to measure their effectiveness quantitatively.
 This approach implies that leadership is in-built quality and no training can make a person leader.

Behavioral approach
 Several studies have been made did not agree as to which traits are leadership traits or their
relationship to actual instances of leadership.
 It is found that most of these so called traits are really pattern of behavior. There are several
theories based on leadership behavior and styles. Some of them are:
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(i) Leadership based on the use of authority.

(ii) Likert's four systems of managing.
(iii) The managerial grid and
(iv) Leadership involving a variety of styles and level of use of power and influence.

 Style based on authority

Based on how the authority is used, the leaders are styled into 3 groups.
 The first is "autocratic leader" who commands and expects compliance, is dogmatic and
positive, and leads by the ability to withhold or give rewards and punishment.
 The second is "democratic or participative leader" who consults with subordinates on
proposed actions and decisions and encourages participation from them. This type of leaders
include the person who does not take action without the concurrence of subordinates and who
makes decisions but consults with subordinates before doing so.
 The third type is "free-rein" leader who uses his power very little and gives a high degree of
independence to his subordinates to carry out their work. Such leaders depend largely on
subordinates to set their own goals and the means to achieve. Figure below shows the flow of
influence in the three situations of leadership.

The flow of influence with three leadership style

ECE GNDEC BIDAR 29

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Contingency approach.
 The effective leader need to analyse the situation and find the most appropriate and best suited
style for a given environment.
 Contingency approaches have much meaning for managerial theory and practice.

CO-ORDINATION
MEANING
 Some definitions of the term 'co-ordination' would be: "Co-ordination refers to the orderly
arrangement of individual and group efforts to ensure unity of action in the realization of
common goals." - Mooney and Reiley
 "To co-ordinate means, to unite and correlate all activities." - Henry Fayol
 "Co-ordination means balancing and keeping the team together by ensuring a suitable allocation
of working activities to the various members, and seeing that these are performed with due
harmony among the members themselves" - E.F.L. Brech
 "Co-ordination in an organization by a manager is similar to directing an Orchestra by the
conductor. Just like a conductor directs his musicians to produce harmony and melody in music,
a manager co-ordinates the activities of a group to achieve harmonious and united actions" -
IGNOU Manual

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 All the above definitions give a combined good meaning co-ordination.

On the basis of these definitions, we can state the basic features of co-ordination, which are as under:
1. Co-ordination implies deliberate actions on the part of managers to bring about harmony and unity
of actions.
2. Co-ordination applies to group efforts, and not to individual effort. It involves the orderly
arrangement of group efforts.
3. Co-ordination does not result in a one-shot action. It is continuous action.
4. Co-ordination is all-pervasive. It has to happen along all verticals and horizontals of an
organization.
5. Co-ordination is necessary not only within the organization but also of the organization with the
outside environment.

TYPES OF COORDINATION
Coordination may be variously classified as internal or external, vertical or horizontal and
procedural or substantive.
 Internal or External Coordination
 Coordination among the employees of the same department or section, among workers and
managers at different levels, among branch offices, plants, departments and sections is called
internal coordination.
 Coordination with customers, suppliers, government and outsiders with whom the enterprise has
business connections is called external coordination.
 Vertical or Horizontal Coordination
 Vertical coordination is what exists within a department where the departmental head is called
upon to coordinate the activities of all those placed below him.
 Horizontal coordination takes place sideways. It exists between different departments such as
production, sales, purchasing, finance, personnel, etc.
 Procedural or Substantive Coordination
 By procedural coordination is meant the specification of the organization itself—that is, the
generalized description of the behaviors and relationships of the members of the organization.
Procedural coordination establishes the lines of authority, and outlines the sphere of activity and
authority of each member of the organization.
 Substantive coordination is concerned with the content of the organization’s activities.
 In an automobiles factory, an organization chart is an aspect of procedural coordination, while
blueprints for the engine block of the car being manufactured are an aspect of substantive
coordination

IMPORTANCE OF CO-ORDINATION
The importance of co-ordination can be understood though the following points:
1. Co-ordination increases efficiency Co-ordination helps minimizing wastages, overlapping and
duplication of work, misuse of resources etc., and the thus increases efficiency and economy in
the organization. Co-ordination enables an organization to use all its resources in a optimum
way.
2. Co-ordination improves human relations Co-ordination improves and maintains harmonious
relationship between individuals between individuals and the organization. With co-ordination,
members begin to work, understand and adjust with eacher, develop mutual trust and co-
operation and probably move closer to each other. All these help improve human relations.
3. Co-ordination resolves conflicts Conflicts in organizations arise usually because of differences
between organizational goals and individual goals. An individuals perception of an
organizational goal could be different to that of an another, which again leads to conflicts.
Coordination is the only means by which such conflicts can be avoided.
4. Co-ordination makes all departments focus together Different departments in an organizations
such as production, R & D, finance, marketing, accounts etc., have to jointly focus in order to
achieve but results. Without co-ordination, each department tends to look only at its needs and
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necessities, without caring for other departments. Co-ordination is the only way of making them
look for common cause.
5. Co-ordination helps sharing of resources In any organization, there is always a shortage of
resources such as manpower, finance, space, transportation etc. Co-ordination is the only way to
ensure the best distribution of resources among all individuals and departments of the
organization.
6. Co-ordination retains and attracts talent Good all-around co-ordination improves not only
harmonious relationships but also increases profit to an organization and to its employees.
Naturally talented youngsters are attracted to join such organizations. There are lists of best
employers in every country where people would love to work, and this does not necessarily
depend on pay packets alone. Co-ordination plays a great role if a company comes to be known
as a good employer.

TECHNIQUES OF CO-ORDINATION
A variety of techniques are used by managers to achieve co-ordination. The important ones are:
1. Co-ordination by plans and procedures If plans and procedures are highly structured and in
place, co-ordination becomes somewhat automatic. Apart from these, if the other types of plans
such as schedules, rules, budgets, policies etc., are stated in precise terms so as to avoid
confusion, it results in better co-ordination.
2. Co-ordination by sound and simple organization If the structure of an organization is sound and
simple, it leads to better co-ordination. If the authority, responsibility and accountability are
established in a clear-cut manner, it improves co-ordination.
3. Co-ordination by chain of command If it is very clear as to who should report to whom in an
organization, it helps co-ordination. Establishing a clear chain of command or a superior-
subordinate relationship goes a long way in ensuring co ordination.
4. Co-ordination by effective communication Effective communication plays a vital role in
achieving co-ordination. Communication facilitates proper understanding between individuals
and groups among whom co-ordination is to be achieved.
5. Co-ordination by committees Formation of committees to co-ordinate is a sound management
technique. Committees are made up of Knowledgeable, experienced and responsible persons
entrusted with discharging some functions collectively as a group. Creation of teams, task forces
and interdepartmental committees are some of the ways of achieving co-ordination.
6. Co-ordination by conference In large business organizations conferences are organized at regular
intervals to provide a platform for discussion to the various units which could be geographically
widespread. In such conferences top management and executives at lower levels exchange
views, identify problems and resolve it through discussion. Some companies have Open forums'
where any question raised by any employee should be answered by the appropriate man-
incharge. Such discussion forums and platforms pave the way for better co-ordination
throughout the organization.
7. Co-ordination by special co-ordinators If a manager in an organization has very less time to
address issues of co-ordination, he may hire an assistant or a 'Special coordinator' to do the job
for him. This man's job is to collect information regarding problems, analyze them, list various
alternatives available, and suggests steps to be taken to the manager.
8. Co-ordination through sound leadership Sound leadership of top management is the surest
means of achieving co-ordination. Good leaders may persuade and convince their subordinates
to place company interests above their personal interests. They may even inspire self-
coordination within a group.

CONTROLLING
Meaning
Some definitions of the term 'Control' with respect to an organization are:
 "Control is checking current performance against predetermined standards contained in the plans, in
order to ensure adequate progress and satisfactory performance". - E.F.L. Brech
 "Control consists in verifying whether everything occurs in conformity with the plans, instructions
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and principles established" - Henry Fayol

 "Control is the process of regulating organizational activities so that actual performance conforms
to expected organizational standards and goals." - NewMan
 From the above definitions, we can follow that controlling functions involves-
(i) developing appropriate standards
(ii) Compare on-going performance against those standards.
(iii) Take steps to ensure that corrective actions are taken when necessary.
 It should also to be noted here that a good controlling system is actually designed to keep things
from going wrong, and not just to correct them afterwards.
 It is more about "prevention is better than cure" than about "Crying over spilt milk"! It’s about
`preventive maintenance' rather than 'breakdown maintenance'.
 The general features of controlling functions are:
1. Controlling is a positive force.
2. Controlling is a dynamic and continuous process.
3. Controlling is goal-oriented.
4. Control is forward-looking
5. Control process is universal
6. Control is based on planning
7. Delegation is key to control.

NEED FOR CONTROL SYSTEM

A control system is needed for four purposes:
1. to measure progress;
2. to uncover deviations;
3. to indicate corrective action; and
4. to transmit corrective action to the operation.

1. To Measure Progress
 There is a close link between planning and controlling the organization’s operations.
 The control process continually measures progress towards goals.
 As Fayold so clearly recognized decades ago, "In an undertaking, control consists in
verifying whether everything occurs in conformity with the plan adopted, the instructions
issued and principles established".
 As the navigator continually takes readings to ascertain where he is relative to a planned
course, so does the manager take readings to see where his enterprise or department is on
the charted and predetermined course.
2. To Uncover Deviations
 Once a business organization is set into motion towards its specific objectives, events occur
that tend to pull it "off target".
 Major events which tend to pull an organization "off target" are as follows:
Change
 Change is an integral part of almost any organization’s environment.
 Markets shift, new products emerge, new materials are discovered and new regulations are
passed. The control function enables managers to detect changes that are affecting their
organization’s products or services.
 They can then move to cope with the threats or opportunities that these changes represent.
Complexity
 Today's vast and complex organizations, with geographically separated plants and
decentralized operations make control a necessity.
 Diversified product lines need to be watched closely to ensure that quality and profitability
are being maintained; sales in different retail outlets need to be recorded accurately and
analysed; the organisation's various markets—foreign and domestic— require close
monitoring.

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Mistakes
 Managers and their subordinates very often commit mistakes.
 For example, wrong parts are ordered, wrong pricing decisions are made, problems are
diagnosed incorrectly, and so on.
 A control system enables managers to catch these mistakes before they become serious.
Delegation
 when managers delegate authority to subordinates, their responsibility to their own superiors
is not reduced.
 The only way managers can determine if their subordinates are accomplishing the tasks that
have been delegated to them is by implementing a system of control.
 Without such a system, managers will not be able to check on their subordinates' progress,
and so not be able to take corrective action until after a failure has occurred.

3. To Indicate Corrective Action

 Controls are needed to indicate corrective actions.
 They may reveal, for example, that plans need to be redrawn or goals need to be modified or
there is need for reassignment or clarification of duties or for additional staffing or for
conforming to the way the work should be done.
4. To Transmit Corrective Action to the Operation
 Controls are needed to transmit corrective action to the operation while it is progressing so
that the transformation subsystem modifies its inputs or its production plan to reduce any
discrepancy or error and keeps the output "on course".
 The thermostat is a classic example of this operating principle. When the room temperature
drops below a desired level, the control mechanism in the transformation subsystem at once
transmits this information (called "feed forward") and the temperature begins to rise till it
reaches the selected level. Controlrelated information flows in most of our modern
organizations also follow the above-mentioned thermostat operating principle. They make
available to the transformation subsystem at all times the information about operating results
in various forms, such as electronic impulses, written or spoken words, reports, etc. to serve
as the basic input for comparison with the standards and for automatic decision-making. The
transformation subsystem thus takes the shape of a closed loop as shown in Fig. However,
the system is closed only in the short run. Human intervention is involved to adjust the
system periodically, according to a subjective impression of the environment. Thus, the
overall system is open, but we have closed loop control once the system is set.

BENEFITS OF CONTROL
A well-developed control system
 increases productivity
 reduces defects and mistakes,
 helps meet deadlines,
 facilitates communication,
 improves safety,
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 lowers cost, and

 gives the workers control over their environment.

ESSENTIALS OF EFFECTIVE CONTROL SYSTEM

The essentials of an effective control system are as follows.
 Suitable
 The control system should be appropriate to the nature and needs of the activity. Controls used in
the sales department will be different from those used in finance and personnel.
 Similarly, a machine-based method of production requires a control system which is different from
the system that is used in labor intensive methods of production.
 Hence, every concern should evolve such a control system as would serve its specific needs.
 Timely and Forward Looking
 Although an ideal control system, as in certain electric controls, should be able to detect deviations
before they occur, the same is not possible in personnel and marketing controls which always
include a time lag between the deviation and corrective action.
 In any case, the feedback system should be as short and quick as possible and the information
should reach the superior before it is too late to head off failures.
 Objective and Comprehensible
 The control system should be both objective and understandable.
 Objective controls specify the expected results in clear and definite terms and leave little room for
argument by the employees.
 They avoid red tape and provide employees with direct access to any additional information which
they may need to perform their task.
 Employees are not made to go up and down the hierarchy to get the information.
 When the precise purposes, for which the control system exists, are not understood it is difficult, if
not impossible, to establish criteria for its evaluation and review.
Flexible
 The control system should be flexible so that it can be adjusted to suit the needs of any change in
the basic nature of the inputs and/or the sizes, varieties or types of the same product or service.
 One way of introducing flexibility into a control system is to make the adjustments automatic.
 Both flexible budgets and standard costs, for example, provide a shifting standard for expenses, as
the volume of work goes up or down.
 A similar type of adjustment is in effect when the sales quotas are tied to general business activity.
In all such plans, the basis for shifting the control standard is built right into the system.
Economical
 Economy is another requirement of every control system.
 The benefit derived from a control system should be more than the cost involved in implementing
it. To spend a dollar to protect 99 cents is not control. It is waste.
 Eighty years ago this was clearly understood by the men who built Sears, Roebuck—the world's
biggest retail store.
 In the early days of the mail-order business, the money in incoming orders was not counted. The
orders were weighed, unopened. (These were, of course, the days when currency was still metallic.)
Sears, Roebuck had run enough tests to know what average weights correspond to overall amounts
of money—and this was sufficient control.
Prescriptive and Operational
 A control system in order to be effective and adequate must not only detect deviations from the
standards but should also provide for solutions to the problems that cause deviations.
 In other words, the system should be prescriptive and operational.
 It must disclose where failures are occurring, who is responsible for them, and what should be done
about them. It must focus more on action than on information.
Acceptable to Organization Members
 The system should be acceptable to organization members.
 When standards are set unilaterally by upper level managers, there is a danger that employees will
regard those standards as unreasonable or unrealistic.
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 They may then refuse to meet them. Status differences between individuals also have to be
recognized. Individuals who have to report deviations to someone they perceive as a lower level
staff member may stop taking the control system seriously.
Reveal Exceptions at Strategic Points
 A control system should be such as to reveal exceptions at strategic points. Small exceptions in
certain areas have greater significance than larger deviations in other areas.
 Five per cent deviation from the standard in office labor cost is more important than 20 per cent
deviation from the standard in cost of postage stamps. That we can quantify something is no reason
for measuring it. The question is "Is this what a manager's attention should be focused on?"
 Take steps to ensure that corrective actions are taken when necessary It should also to be noted here
that a good controlling system is actually designed to keep things from going wrong, and not just to
correct them afterwards. It is more about -prevention is better than cure" than about "Crying over
spilt milk"! Its about 'preventive maintenance' rather than 'breakdown maintenance'.

The general features of controlling functions are:

1. Controlling is a positive force.
2. Controlling is a dynamic and continuous process.
3. Controlling is goal-oriented.
4. Control is forward-looking
5. Control process is universal
6. Control is based on planning
7. Delegation is key to control.

STEPS IN CONTROLLING
The various steps that are involved in the process of controlling are as follows:
Step 1: Setting of standards
 The first step in the control process is to establish standards.
 Standards are the targets against which actual performance will be compared. Standards are nothing
but criteria of performance.
 They serve as benchmarks as they specify acceptable levels of performance.
 Control standards are broadly divided into two types.
(i) Quantitative standards: These are standards which can be quantified. Eg: Production level,
rejection level, labor-hours, speed of service, sales volume, profit, expenses etc.
(ii) Qualitative standards: These are standards which cannot be quantified i.e., they are
qualitative in nature. Eg: Employee morale, brand image, company image, goodwill,
industrial relations etc.
Step 2: Measurement of actual performance
 The second step in the control process is to measure actual performances of various individuals,
teams and departments in the background of established standards.
 Wherever quantitative measurement is applicable, it is easy to measure, while qualitative standards
are difficult to measure.
 Tests, surveys, employee appraisals, exit interviews, media reports, open forums etc., are some of
the ways employed to measure qualitative standards.
 To make any measurement process effective, the following three aspects have to keep in mind:
(i) Completion The actual performance measurement has to be complete in all respects. In
other words, all aspects of the job should be measured and not just the ones that are more
evident.
(ii) Objective Performances at work should be measured in an objective manner without fear,
favorer bias. Only then measurement can be effective.
(iii) Responsiveness: The management of any performance should support the belief that effort
and performance lead to improvement, both from the personal and organizational point of
view.
Step 3: Comparison of actual performance with standards
 The third step in the control process is to compare the actual performances with established
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standards and ascertaining the causes of deviation.

 The causes of deviation may be machine-dependent, processdependent, plan-dependent, manpower-
dependent etc.
 Whatever may the reason, deviation are thoroughly analyzed and properly presented. Statistical
methods are usually adopted to look at deviation from a broader perspective.
Step 4: Taking corrective measures
 The final step in the control process consists of taking remedial actions so that deviation may not
occur again in future.
 Corrective steps are initiated so that any defects in the actual performance may be rectified.
 Corrective actions may include the following activities.
(i) Change in methods, rules, procedures strategies etc.
(ii) Introduce training programs
(iii) Job redesign
(iv) Replacement of personnel
(v) Re-establishing budgets and standards
(vi) Better compensation packages to employees
(vii) Changing machinery and processes
(viii) Identifying recurring bottle necks and avoiding them
(ix) Trying to understand the competition better.
(x) Looking at raw material resources and suppliers.

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Module III
Social Responsibilities of Business: Meaning of Social Responsibility, Social Responsibilities of
Business towards Different Groups, Social Audit, Business Ethics and Corporate Governance
Entrepreneurship: Definition of Entrepreneur, Importance of Entrepreneurship, concepts of
Entrepreneurship, Characteristics of successful Entrepreneur, Classification of Entrepreneurs, Myths of
Entrepreneurship, Entrepreneurial Development models, Entrepreneurial development cycle, Problems
faced by Entrepreneurs and capacity building for Entrepreneurship

SOCIAL RESPONSIBILITY
DEFINITION of 'Social Responsibility'
 Social responsibility is the idea that businesses should balance profit-making
activities with activities that benefit society; it involves developing businesses with
a positive relationship to the society in which they operate.
 Social responsibility is a nebulous idea and hence is defined in various ways.
 Adolph Berle! has defined social responsibility as the manager's responsiveness to
public consensus. This means that there cannot be the same set of social
responsibilities applicable to all countries in all times. These would be determined
in each case by the customs, religions, traditions, level of industrialisation and a
host of other norms and standards about which there is a public consensus at any
given time in a given society.
 According to Keith Davis,' the term "social responsibility" refers to two types of
business obligations, viz., (a) the socio-economic obligation, and (b) the socio-
human obligation.
 The socio-economic obligation of every business is to see that the economic
consequences of its actions do not adversely affect public welfare. This includes
obligations to promote employment op-opportunities, to maintain competition, to
curb inflation, etc. The socio-human obligation of every business is to nurture and
develop human values (such as morale, cooperation, motivation and self-realization
in work).
 Every business firm is part of a total economic and political system and not an
island without foreign relations. It is at the centre of a network of relationships to
persons, groups and things. The businessman should, therefore, consider the impact
of his actions on all to which he is related. He should operate his business as a
trustee for the benefit of his employees, investors, consumers, the government and
the general public. His task is to mediate among these interests, to ensure that each
gets a square deal and that nobody's interests are unduly sacrificed to those of
others.

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SOCIAL RESPONSIBILITY OF BUSINESS TOWARDS DIFFERENT GROUPS:

Social responsibility of business refers to its obligation to take those decisions and
perform those actions which are desirable in terms of the objectives and values of our
society. Reality is that, despite differing arguments relating to social responsibility,
business enterprises are concerned with social responsibility because of the influence of
certain external forces.

Business enterprises have responsibility towards

1.Towards the Consumer and the Community
2. Towards Employees and Workers
3.Towards Shareholders and Other Businesses
4.Towards the government

A businessman's social responsibilities to each of these parties are briefly enumeratedbelow.

1. Towards the Consumer and the Community
 Production of cheap and better-quality goods and services by developing new skills,
innovations and techniques, by locating factories and markets at proper places and by
rationalizing the use of capital and labor.
 Levelling out seasonal variations in employment and production through accurate
forecasts, production scheduling and product diversification.

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 Deciding priorities of production in the country's interest and conserving natural

resources.
 Providing for social audit (see section below).
 Honoring contracts and following honest trade practices. Some important but dishonest trade
practices are: making misleading advisements calculated to deceive the purchaser:
misbranding of articles with respect to their material. impediments, quality, origin, etc.; selling
rebuilt or secondhand goods as new; procuring business or trade secrets of competitors
by espionage, bribery or other means: restraining freeand fair competition by entering into
combination agreements; using containers thatdo not give a correct idea of the weight and
quantity of a product; making false claims of being an "authorized dealer". "manufacturer"
or "importer" of certain goods; giving products misleading names so as to give them a value
which they do not possess; declaring oneself insolvent through questionable financial
manipulations.
 Making real consumer needs as the criterion for selecting messages to be given by product
advertisements. Nearly all current advertising seeks to create wants. Thus. people no
longer buy soap to make them clean. They buy the promise that it would make them
beautiful. Toothpaste is bought not to kill bacteria but to create white teeth. Cars are
bought for prestige rather than travel. Even foodstuffs such as oranges are bought for
vitality, not nutrition. This kind of advertising promotes over- consumption, forces
consumers to constantly compare themselves negatively with others, creates in them
dissatisfaction with the old and outmoded and makes them feel that without a particular
brand of a product they are losers.
 Preventing the creation of monopolies. Monopolies are bad in that they make the community
face high prices, short supply and inferior quality of goods. Inequalities of wealth distribution
are accentuated and the standards of public morality deteriorate as bribing the judges.
legislators and the government to gain favors becomes very common.
 Providing for after-sale servicing.
 Ensuring hygienic disposal of smoke and waste and voluntarily assisting in making the town
environment aesthetically satisfying.
 Achieving better public relations (that is, creating a more favorable attitude towards the
enterprise) by giving to the community, true, adequate and easily intelligible information
about its working.
 Supporting education, slum clearance and similar other programs.

Towards Employees and Workers

 A fair wage to the workers (and not merely one determined by market forces of supply
and demand), which is possible only when the businessman is willing to accept a
voluntary ceiling on his own profits.
 Just selection, training and promotion (without any discrimination on grounds of sex,
race, religion and physical appearance).
 Social security measures and good quality of work life.
 Good human relations (i.e., maintaining industrial peace, creating conditions for collective
bar-gaining, educating workers to produce their own leadership and participative
management).
 Freedom, self-respect and self-realization. A businessman should devote his knowledge

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and ability not only to making his worker's life more affluent, but also to making it more
satisfying and rewarding. There should he an awareness that the quality of man's life is as
important as the-quantity of his material wealth.
 Increase in productivity and efficiency by recognition of merit, by providing opportunities
for creative talent and incentives.
3. Towards Shareholders and Other Businesses
 Promoting good governance through internal accountability and transparency.
 Fairness in relations with competitors. Competition with rival businessmen should always
be fair and healthy, based on rules of ethics and fair play rather than on rules of warfare.
Businessmen sometimes treat their rivals as enemies and try to harm each other by
malicious propaganda, price-cutting, interference in production and distribution.

4. Towards the government

 Shunning active participation in and direct identification with any political party.
 Observing all the laws of land which may have the following objectives:
 To provide direction to the economic and business life of the community.
 To bring about harmony between the limited enterprise interest and the wider social
interest of the country.
 To provide safeguard against errant business practices.
 To compel business to play fair to all participants in the economy—employees,
shareholders, minority shareholders, etc.
 To prevent oppression or exploitation of the weaker partners in business, such as
employees, minority shareholders, etc.
 To enforce maximum production according to the priority of sectors and production lines
laid down by the government.
 To allocate limited resources according to social priorities and preferences.
 To enforce distributive justice, especially to weaker sections of the community.
 To implement rural uplift and secure balanced development of the country

SOCIAL AUDIT
A social audit is a systematic study and evaluation of the organization‘s social
performance as distinguished from its economic performance. The term "social
performance" refers to any organizational activity that effects the general welfare of
society.
BENEFITS
1. It supplies data for comparison with the organization‘s social policies and standards.
The management can determine how well it is living up to its socialobjectives.
2. It develops a sense of social awareness among all employees. In the process of
preparing reports and responding to evaluations, employees become more aware of the
social implications of their actions.
3. It provides data for comparing the effectiveness of different types of programmes.
4. It provides data about the cost of social programmes, so that the management can relate
this data to budgets, available resources, company objectives, etc.

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5. It provides information for effective response to external groups which make demands
on the organization.

LIMITATIONS
A social audit is a process audit rather than an audit of results. This means that a social
audit determines only what an organization is doing in social areas and not theamount of
social good that results from these activities. An audit of social results is not made
because:
1. They are difficult to measure. If. for example, following a company's S.C./S.T.
employment programme in a certain region. there is a fall in the violent crime rate by
4 per cent, it is difficult to measure how much of the benefit is caused by thisprogramme.
2. Their classification under "good" or "bad" is not universally accepted. In other words,
the same social result may be classed as "good" according to one opinion, and as "bad"
according to an-other.
3. Most of them occur outside the organisation, making it difficult for the organisation to
secure data from these outside sources.

Even though social results cannot be proved, an audit of what is being done is still
considered desirable, because it shows the amount of effort that a business is making in
area deemed beneficial to society. Further, if effort can be measured, then informed
judgements can be made about potential results.
Social audits can be made either by internal experts, outside consultants, or a combination
of the two. The internal auditor has the advantage of familiarity with thebusiness, but his
judgements may be influenced by company loyalties. An outside consultant has the
advantage of an outsider's view, but he lacks familiarity with organisational activities, so
he may overlook significant data. In any case, if audit information is to be released to the
public, the outside auditor has more credibility.
There is a difference of opinion on the issue whether social audit should be made public
by means of a social performance report or not. Some say that these reports aretoo vague
and inconcrete to satisfy the public and anyone can find reasons for criticising a firm's
performance, which can increase social conflict. But some others assert that these reports
contribute to public understanding for they replace rhetoricwith facts.
The Tata Iron and Steel Company is the first industrial organisation in India to have carried
out a social audit of its performance in 1979. The social audit was conducted by a
committee under the chairmanship of Justice S.P. Kotval, former Chief Justice of Mumbai
High Court. The committee's terms of reference were to examine and report whether, and the
extent to which the company had fulfilled the objectives contained in clause 3A of its
Articles regarding its social and moral responsibilities to the consumers, employees,
shareholders, society and the local community. The Committee in its report praised
TISCO's social welfare work and made a number of suggestions to improve its programmes.

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BUSINESS ETHICS AND CORPORATE GOVERNANCE

BUSINESS ETHICS
 Business ethics is the application of moral principles to business problems. However,
ethics extend beyond the question of legality and involve the goodness or badness of an
act. Therefore, an action may be legally right but ethically wrong.
For example, a small village community located twenty miles from the closest urban
shopping area has a single grocer's shop. The owner of the shop can charge any exorbitant
price for his product though legally but not ethically.
 Sexual harassment, discrimination in pay and promotion and the right to privacy are some
other issues specially relevant to the study of ethics.
 Sexual harassment in the workplace can be defined as unwelcome sexual advances, sexual
favor or other verbal or physical conduct of a sexual nature. Although the landmark
judgment of the Supreme Court in the case of Vishaka & others vs State of Rajasthan
makes it a mandatory duty of the employer to prevent this misconduct at the workplace, it
does not appear that the sensitivity of today's organisations has kept pace. The negative
aspects of sexual harassment are: costly lawsuits, decreased productivity, increased
absenteeism, lower morale and higher staff turnover.
 Discrimination against women in pay and promotion opportunities is also unethical,
which continues to exist despite there being the Equal Remuneration Act, 1976. One of
the most commonly cited reasons for the lack of promotions of women is the glass ceiling
effect a term used for artificial barriers based on attitudinal or organisational bias that
prevent qualified women from progressing in the organisation into senior management
level positions.
 Employees' right to privacy raises several questions, some of which are: "Can a company
refuse to hire smokers and/or make current smokers quit smoking"? and "Can a company
conduct drug tests on its prospective employees"?
 It should be remembered that the corporate "shield" which protects a company's
management from unlimited legal liability does not protect it against unlimited public
condemnation for its unethical and immoral actions. The credibility of a business depends
on its high business ethics and integrity.
How does a manager decide what is ethical or unethical? There are four important factors
which affect his decision.
 Government legislation.
 Business codes. (But being voluntary in nature these codes, though pointed towith
pride, are usually ignored in practice.)
 Pressure groups. (For example, in recent years Indian carpet industry has been
facing consumer boycott from the west for employing child labor.)
 Personal values of the manager himself. (But a manager with strong personal
values mostly finds himself in a dilemma when an unethical course of
actionbecomes his only choice to achieve the company's goal. This has prompted many
major business houses, to teach executives the importance of remaining true to their
convictions, whether rooted in organized religion or personal morality, amid the
conflicting demands and temptations they confront when taking decisions. New
approaches (e.g., asking participants to write their autobiographies, as if they are at the end

ECE GNDEC BIDAR 6

MODULE 3 Social Responsibilities of Business

of their lives) are being tried to make them inspiring decision-makers, with a sense of
morality. "Under-promiseover-deliver" is a much-revered motto at Infosys. The company
can excuse incompetence but not lack of ethics.)

CORPORATE GOVERNANCE
 The term "corporate governance" is used to denote the extent to which companies
run in an open and honest manner in the best interest of all stake- holders.
 The key elements of good corporate governance are transparency and
accountability projected through a code which incorporates a system of checks and
balances between all key players, viz., board of directors, auditors and stake-
holders.
 In Britain, following corporate scandals in the early 1990s, a committee was
appointed in 1991 under the chairmanship of Sir Adrian Cadbury to prepare a code
for best corporate governance.
 Major recommendations of this committee are as under:
 Non-executive directors whose most important role is to bring anindependent
judgement to bear on issues of strategy, performance, resources, etc. should be
picked through a formal selection process on merits.
 Companies should have remuneration committees consisting wholly or mainly
of non-executive directors which should recommend to the board executive
directors' emoluments.
 Companies should have audit committees consisting of minimum 3 non-
executive directors to report on any matter relating to financial management.
 Audit partners should be rotated and there should be fuller disclosure of non-
audit work.
This is a voluntary code and has only some moral pressure of the London Stock Exchange
requiring companies to mention in their annual report whether they are following the
code, and if not, why.

Benefits of Good Corporate Governance

I. It creates overall market confidence and long-term trust in the company.
2. It leads to an increase in company's share prices.
3. It ensures the integrity of company's financial reports.
4. It maximizes corporate security by acting as a whistle blower.
5. It limits the liability of top management by carefully articulating thedecision-
making process.
6. It improves strategic thinking at the top by inducting independent directorswho
bring a wealth of experience and a host of new ideas.

ECE GNDEC BIDAR 7

 ENTREPRENEURSHIP
ENTREPRENEUR
Meaning and evolution of concept:
 The term "Entrepreneur" is defined in variety of ways. It varies from country to
country, time to time and the level of economic development.
 The word "entrepreneur" is derived from the French verb "entreprendre" which
means "to undertake". In 16th century, the Frenchmen who organized and led
military expeditions were referred to as "entrepreneurs".
 In early 18th century, French economist Richard Cantillon used the word
entrepreneur to business. Since then the word entrepreneur is used to one who takes
the risk of stating new organization or business or introducing a new idea, product or
service to society.
 According to Joseph Schumpeter "An entrepreneur in an advanced economy, is an
individual who introduces something new in the economy a method of production
not yet tested by experience in the branch of manufacture concerned, a product with
which consumers are not yet familiar, a new source of raw materials or of new
markets and the life‖.
Accordingly to him the functions of an entrepreneurship are:

 Introduction of new product

 Introduction of new methods of production
 Development of new markets and finding fresh sources of raw materials and
 Making changes
 Cantillon defined entrepreneur as "The agent who buys factors of production at
certain prices in order to combine them into a product with a view to selling it at
uncertain prices in future".
To summaries, "an entrepreneur is the person who bears risk, unites various factors of
production, to explore the perceived opportunities in order to evoke demand, create wealth
and employment".

IMPORTANCE OF ENTREPRENEUR
 Entrepreneurship is the dynamic process of creating incremental wealth and
innovating things of value that have a bearing on the welfare of an entrepreneur. It
provides civilization with enormous amount of goods and services and enhances
the growth of social welfare. The man behind the entrepreneurship is an action
oriented and highly motivated individual who is ready to achieve goals.
 M. Kirzner (1973) observes entrepreneurs as; ―one who perceives what others
havenot seen and acts upon that perception‖.
Thus, entrepreneurs take the economy and the society that is the whole civilization to the
state of progress and prosperity.
Taking this into consideration we can describe the Significance or importance of entrepreneurs
which is stated below

1. Growth of Entrepreneurship
 Entrepreneurship the advent of new venture particularly small ventures in order to
materialize the innovative ideas of the entrepreneurs.
 Thus, the growth or establishment of small enterprises ii the specific contribution
of entrepreneurship in in every economy of the world.
 The statistics reveals that in USA economy nearly half a million small enterprise are
established every year. Our country is not an exception in this regard.

2. A Creation of job opportunities

 Entrepreneurship firms contributed a large share of new jobs. It provides entry-
level jobs so necessary fur training or gaining experience for unskilled workers.
 The small enterprises arc the only sector that generates large portion of total
employment every year.
 Entrepreneurial ventures prepare and supply experienced labor to the large
industries.

3. Innovation
 Entrepreneurship is the incubator of the innovation. Innovation creates
disequilibria in the present state of order.
 It goes beyond discovery and does implementation and commercialization, of
innovations. ―Leap frog‖ innovation, research, and development are being
contributed by entrepreneurship.
 Thus, entrepreneurship nurses innovation that provides new ventures, product,
technology , market, quality of good etc. to the economy that increase Gross
Domestic Products and standard of living of the people.

4. Impact on community development

 A community is better off if its employment base is diversified among many small
entrepreneurial firms.
 It promotes abundant retail facilities, a higher level of home ownership, fewer
slums, better, sanitation standards and higher expenditure of education, recreation
and religious activities. Thus, entrepreneurship leads to more stability and a higher
quality of community life.

5. Consequence of business failure

 The collapse of large industry almost has irresistible damage to the development of
state and to the state of economy and to the financial condition of the relevant
persons. The incumbents lost their jobs: suppliers and financial institutions face a
crisis of recovery.
 Customers are deprived from goods, services, and the government losses taxes.
This could not happen in the case of failure of entrepreneurship. There shall be no
measurable effect upon the economy and no political repercussions too.
6. Political and economic integration of outsiders
 Entrepreneurship is the most effective way of integrating those who feel disposed
and alienated into the economy.
 Minorities, migrants and women are safely integrated into entrepreneurship that
will help lo develop a well-composed plural society.

7. Spawns entrepreneurship
 Entrepreneurship is the nursing ground for new inexperienced adventurists. It is
the field where a person can start his/her idea of venture, which may be ended up
in a giant enterprise. All the large industrial ventures started as a small
entrepreneurial enterprise.
 Therefore, entrepreneurship provides wide spectrum of ventures and entrepreneurs
in every economy. The vast open arena of entrepreneurship thus, acts as incubator
to entrepreneurs.

8. Enhances standard of living

 Standard of living is a concept built on increasing amount of consumption of
variety of goods and services over a particular period by a household.
 So it depends on availability of diversified products in the market.
Entrepreneurship provides enormous kinds product of various natures by their
innovation.
 Besides, it increases the income of the people who are employed in the
entrepreneurial enterprises. That also capable employed persons to consumer more
goods and services. In effect entrepreneurship enhances the standard of living of
the people of a country.

9. Promotes research and development

 Entrepreneurship is innovation and hence the innovated ideas of goods and
services have to be tested by experimentation. Therefore, entrepreneurship
provides funds for research and development with universities and research
institutions. This promotes the general development of research and development
in the economy.
 Entrepreneurship is the pioneer zeal that provides events in our civilization. We are
indebted to it for having prosperity in every arena of human life- economic,
technological and cultural.

The above discussion in a nutshell enumerates that tremendous‘ contributions of

entrepreneurship.

CONCEPT OF ENTREPRENEURSHIP
 Entrepreneurship is a process undertaken by an entrepreneur to augment his
business interests.
 Some authors define it as "Entrepreneurship is the indivisible process flourishes.
 when the interlinked dimensions of individual psychological entrepreneurship.
entrepreneur traits. social encouragement. business opportunities. Government
policies, availability of resources and opportunities coverage towards the common
good. development of the society and economy".
 Entrepreneurship lies more in the ability to minimize the use of resources and to
put them to maximum advantage.
 Above all, entrepreneurship in today's context is the product of teamwork and the
ability to create, build and work as a team.
 Entrepreneurship is the process of identifying opportunities in the market place,
arranging the resources required to pursue these opportunities and inverting the
resources to exploit the opportunities for better gains.
 Higgins defined entrepreneurship as "the function of foreseeing investment and
production opportunities, organizing an enterprise to undertake a new production
process, raising capital. hiring labor, arranging the supply of raw materials, finding
site, introducing new technique, discovering new source of raw materials and
selecting top managers for day-to-day operation.
 Cole's definition for entrepreneurship is "the purposeful activity of an individual or
a group of associated individuals undertaken to initiate, maintain or organize profit
by production or distributing of economic goods and services".
 Risk bearing, innovating and resource organizing, achieving goal through
production of goods or services. All the above definitions highlight the risk
bearing, innovating and resource organizing, achieving goal through production of
goods or services.

CHARACTERISTICS OF SUCCESSFUL ENTREPRENEUR:

The process of entrepreneurship is a complex one having multidimensional
characteristics. The following are some of the commonly accepted characteristics
suggested by experts.

(i) Innovation
Entrepreneurship involves innovation of new things to effect dynamic changes and good
success in economy. It should create conditions for growth of the economy.

(II) Risk-taking
Risk is a inbuilt element of any business. Entrepreneurship should be risk bearing to cater
uncertainty of future.

(iii) Skillful management

Entrepreneurship brings together various functions of the management: planning,
organizing, staffing, directing, controlling and leading.
(Iv) Organization
It brings together various facilities of production for an efficient and economical use.
(v) Decision making
 Decision-making is a very vital characteristic of an entrepreneurship. Taking decisions at
all levels and stages of an entrepreneurship is a routine task.

(vi) Making the enterprise a success

Entrepreneurship is mainly an economic activity as it deals with creating and operating
an enterprise. It involves in satisfying the needs of customers with the help of production
and distribution of goods and services. This makes the enterprise a success.
(vii) Dynamism
Dynamism constitutes a potential contribution and revises the targets of the enterprise.
(viii) Leadership
Leadership is the basic quality of an entrepreneur and takes him forward.
(ix) Teambuilding: An entrepreneur should have an ability to build a team. A
team is group ofindividuals with a common purpose. The skills are:
⚫ Wanting to feel better
⚫ Identifying the problem and needs of the enterprise
⚫ Creating a vision
⚫ Setting goals for the group
⚫ Reviewing progress
(x) Achievement motivation: Entrepreneurs have a high need for achievement and
are guided bytheir inner self, motivating their behavior towards
accomplishment.
(xi) Problem solving: the ability to solve problem and not to avoid them. The six
steps are: Define a problem, Gather information, Identify various solutions, Evaluate
alternatives and select the best option, Take action, Evaluate the action taken.
(xii) Goal orientation: Goal setting is the achievement of targets and objectives for
successful performance of an entrepreneur.

(xiii) Commitment: The amount of willpower.

There are common qualities or skills found in successful entrepreneurs, expansion of the
word 'ENTREPRENEUR' gives a good idea of successful entrepreneurs.
E - Effective Communicator
N - Negotiating skills.
T - Total Commitment / Time management / Tactical / Team man
R - Risk-taking ability / Resourceful / Responsible
E - Emotional Stability / Ethical

P - Problem solving / Patience / Passion / Perseverance

R - Relations-Human & public / Realistic / Result-oriented
E - Energetic / Endurance
N - Networking ability.

E - Excellence in 'Economics'
U - Understands how to administer and organize / Unambiguous
R - Real innovator.

CLASSIFICATION OF ENTREPRENEURS
Entrepreneurs in business can be broadly classified based on criteria like - stages of
economic development, types of business, use of technology, area, age, gender and soon:

Among all the different types of entrepreneurs, we shall discuss the first type, as
described by Danhof, an American:
1. Innovative Entrepreneur
 An innovative entrepreneur is one who introduces a new product or a new technique or
a new market and can re-organize the enterprise if needed.
 They are generally aggressive in experimentation and seize opportunities. - They
are capable of converting attractive possibilities into practice.
 They raise money to start an enterprise, assemble the various factors, choose the
right employees and set the organization going. Innovative entrepreneurs are more
commonly found in developed countries.
 This is because such entrepreneurs can work only when a certain level of
development is already achieved.

2. Imitative Entrepreneur or Adoptive entrepreneur

 Imitative entrepreneurs are those who adopt or copy successful innovations created
by innovative entrepreneurs.
 They do not innovate the changes themselves, but only imitate techniques and
technology innovated by others.
 Imitative entrepreneurs are more commonly found in developing countries because
people there prefer to imitate products, technology, knowledge and skill already
available in more advanced countries.
 They are nevertheless important for the development of poor countries.

3. Fabian Entrepreneur
 Fabian Entrepreneurs are those who are very cautious and are skeptical aboutany
changes.
 they have neither the will to introduce any new changes nor the desire to
adopt new methods innovated by others, unless pushed to the wall.
 they are generally driven by custom, religion, tradition and past practices.
 they imitate or bring in changes only when it is a question of survival.

4. Drone Entrepreneurs
 Drone entrepreneurs are those who are highly resistant to changes.
 They refuse to adopt, imitate or make changes in production methods, comewhat
may.
 They choose to sink rather than imitate or bring in changes.
 They may even suffer from losses but prefer to stick to traditional ways.
 Such (old fashioned) entrepreneurs are found plenty in India.
 Ideal Jawa, a motorbike company based in Mysore is an example

MYTHS OF ENTREPRENEURSHIP
Entrepreneurship is a career which is gaining popularity worldwide but still isn‘t
very well understood which is why there are so many myths regarding this career option. A
lot of people believe these myths to be true which is why they don‘t pursue their ambition
of being an entrepreneur despite having a great idea. So, if you‘re still confused, don‘t worry,
we‘ve got the most common myths debunked for you.

1. Entrepreneurs are born, not mad

This is the most common myth that deters people from becoming entrepreneurs.
However, this is completely untrue. A normal person with an idea which solves a problem
the society is dealing with can become an entrepreneur if he works on certain skills. If one is
ready to develop on leadershipand managerial skills and isn‘t scared to take risks, one can
aim to become a successful entrepreneur.

2. All you need is money

This myth is not completely justified because you may have great investors
pumping in a lot of money into your venture but if you‘re idea doesn‘t appeal to the
people, they will not buy your product or service. Thus, money might be important but it
is more important to use the money wisely in places where it is required.

3. Entrepreneurs are usually college drop-outs

This is a common disbelieve because great people like Mark Zuckerberg, Mukesh
Ambani and Steve Jobs have managed to become successful entrepreneurs without a college
degree. However, a formal and educated background only helps an entrepreneur to
understand concepts and the business better. An entrepreneur becomes one because of his
idea and developed skills set and not his college degree.

4. You need an out of the box idea to start up

This is another myth about entrepreneurship which needs to be debunked. It is true
that you need an idea to develop on but the idea doesn‘t need to be a completely new or
innovative one. Running a restaurant, school or any kind of a business or adding value to
an already existing idea which solves problems of the society can also serve as a great
base for entrepreneurship.

5. Having no boss the best feeling

A lot of people consider entrepreneurship because they believe they will get to set
their own terms at work and lead a team. However, this might not be a favourable scenario for
every venture. With ideas like leadership coaches catching up, it is proved that even
entrepreneurs who lead a team require help from superiors in orderto succeed.

6. You need the perfect timing

People often comment saying that it is actually luck which will make you a successful
entrepreneur. They believe that it is important that the time is right and destiny is inyour
favour. However, the history of entrepreneurs has proved this to be absolute rubbish as
successful people like Reid Hoffman, the founder of LinkedIn, got success only later in their
life in spite of a brilliant idea.

7. Starting a business isn’t that difficult

A lot of entrepreneurs we see aren‘t college pass outs which has led to the common
belief that entrepreneurship isn‘t very difficult to achieve. Instead of attending rigorous
classes, they concentrated on developing a skills set and an idea which they‘ve grown only
due to their hard work. A typical entrepreneur fails many times before s/he can succeed and
defeating failure isn‘t everyone‘s cup of tea.

ENTREPRENEURIAL DEVELOPMENT MODELS

The models for the development of the entreneurship fall in the following categories:

1. Psychological models
2. Socilogicla Models
3. Integrated Models

1. Psychological models
 McClelland in 1961 has given a Signification of determinants of entreneurship.
 In this model he ascribes importance to the achievement motives which earlier
related ‗‘child rearing practices‖
 But D.G Winter in his model has ascribed it has intrinsic determinant of the
achievement motive
 Now change in motivation is seen primarily as a result of the ideological arousal of
the talent need for achievements among the adults. After identifying achievement
orientation as the key variables in the development of entreneurship.
 McClelland Suggest motivation-Training Programme as policy measure which will
make the entreneurs really willing and the eager to exploit the new opportunities
provided.
 Everett Hagen‘s theory of Social Change Lays emphasis on ―Creative Personality‖
as casual link in entrepreneurial behavior and ―Status withdrawal‖ as determinant
of creative Personality.
 Hagen elaborately explains the casual Sequence Entrepreneurial behavior. But his
model of Entrepreneurship fails to give any positive variable for the development
of the entrepreneurship ―status withdrawal‖ would occur in the natural
Evolutionary process of the society and not by any deliberate attempt.
 John Kunkel in 1965 considered Entrepreneurial supply by suggesting a
behaviorist model. His model Suggest that Entrepreneurial behavior is the function
of the surrounding of Social Structure, Both Past and the Present, and can really be
influenced by manipulating economic and social incentives.
 Kunels Model is based upon Experimental Psychology, which identifies
sociological variables as the determinant of Entrepreneurial supply.

2. Socilaogical Model
 Frank W Young‘s theory of Entrepreneurship is a theory of change based upon the
 society‘s in Corporation of relative sub- group. The relativenss of Sub group which
as a low status in a larger Society will lead to Entrepreneurial behavior, if the
group has better institutional resources than others in the Society at the same level.
 Young‘s model of entrepreneurship suggests the creation of supporting
institution in Society as the determinant of Entrepreneurship.

3. Integrated model
T.V Rao in 1975 ―Entrepreneurial disposition‖ has included the following factors
 Need for motive is the dynamic which for the prospective Entrepreneur, has
greatest possibility of achieving the goals if one performs those activities.
 Long term involvement is the goal either at thinking level or at the activity level, in
Entrepreneurial activity that is viewed as target to be fulfilled.
 Personal, Social and material resources which he thinks are related to entry and
Success in the area of Entrepreneurial activity
 Soci-political system to be perceived as suitable for establishment and
development his enterprise.

ENTREPRENEURIAL DEVELOPMENT CYCLE

 Entrepreneurs are not just born, they can be developed and trained to undertake
ventures. However, everybody does not have the potential to become an
entrepreneur. Entrepreneurial development is essentially an educational process
and an endeavor in human resource development. It is a process in which persons
are injected with motivational drives of achievement and situations especially in
business/enterprise undertakings.
 In many developing countries and especially in certain backward areas of these
countries, the socio-economic environment has not been conducive to the
emergence of entrepreneurial talents. It has been experienced that entrepreneurs
have originated from all strata of society, but entrepreneurial abilities/ talents have
remained latent and hence, a lot depends on activating these talents. It is, therefore,
necessary to identify, motivate, strengthen and support people possessing these
talents.
 In many developing countries and especially in certain backward areas of these
countries, the socio-economic environment has not been conducive to the
emergence of entrepreneurial talents. It has been experienced that entrepreneurs
have originated from all strata of society, but entrepreneurial abilities/ talents have
remained latent and hence, a lot depends on activating these talents. It is, therefore,
necessary to identify, motivate, strengthen and support people possessing these
talents.
 In order to accelerate formation of indigenous enterprises, imaginative
development programmes and policies backed up by sound institutional support
are necessary, as it has been recognised that, entrepreneurs do not respond
spontaneously to available business opportunities despite various inducements,
 schemes and programmes to promote and assist them. It is necessary to have an
effective mechanism, once they are identified.
 Entrepreneurship requires an environment in which an entrepreneur can learn and
discharge necessary functions. For an entrepreneurial development, intelligence,
motivation, knowledge, stimulation, sustained efforts, human factor, government
assistance and support and opportunity are the pre-requisites, as entrepreneurship
cannot grow in vacuum. The process of entrepreneurial development emphasis on
training, education, reorientation and creation of conducive and healthy
environment for the growth of enterprises.
 Entrepreneurship Development incorporates four basic issues':
1. The availability of material resources,
2. The selection of real entrepreneurs,
3. The formation of industrial units, and
4. The policy formulation for the development of the region(s).
 Entrepreneurial skills can be developed through inculcating entrepreneurial traits,
imparting the required knowledge, developing the technical, financial, marketing
and managerial skills, and building the entrepreneurial attitude. The process of
entrepreneurial development involves equipping a person with the information
necessary for enterprise building and sharpening his entrepreneurial skills.
 The objective of entrepreneurial development is to motivate a person for
entrepreneurial career and to make him capable of perceiving and exploiting
successfully, the opportunities for enterprise. Thus, it is regarded as a tool of
industrialization and a solution to unemployment problem. One trained
entrepreneur can guide other on how to start their own enterprises.
 The figure shows entrepreneurial development cycle" consisting of simulatory,
support and sustaining aspects for entrepreneurship development.
 Figure: Entrepreneurial development cycle

PROBLEMS FACED BY ENTREPRENEURS

 Entrepreneurs face a number of problems in the promotion of units and during
production, marketing, distribution, procurement of raw material, and availing of
incentives offered by the State government.
 The problems of entrepreneurs may be divided into two groups-external and
 internal. External problems are those, which result from factors beyond the control
of entrepreneurs while internal problems are those, which are not influenced by
external factors.
 The problems of industries, whether in the small sector or in organized sector are
almost identical. However, given that the organized industry is financially very
strong and its resources large, it can therefore, face its problems more effectively.
Owing to its weak financial structure, the resources of the small sector are limited.
 The large sector can employ trained and experienced managers, in the small
industry, its proprietor or partners or if the unit is a company, its director or
directors themselves have to take care of all the problems. The large sector can
influence its raw material suppliers, its customers and at times even the government
in framing its policies, but the small entrepreneur is helpless in this respect.

I. Internal Problems of Entrepreneurs

1. Planning
a) Technical feasibility
 Inadequate technical know-how.
 Locational disadvantage
 Outdated production process
b) Economic viability
 High cost of input.
 Break-even point too high
 Uneconomic size of project
 Choice of idea
 Feeble structure
 Faulty planning
 Poor project implementation
 Lack of strategies
 Lack of vision
 Inadequate connections
 Lack of motivation
 Underestimation of financial requirements
 Unduly large investment in fixed assets
 Overestimation of demand

2. Implementation
Cost over-runs resulting from delays in getting licenses, sanctions and so on and
inadequate mobilization of finance.

3. Production
a) Production management
 Inappropriate product mix
 Poor quality control
 Poor capacity utilization
 High cost of production
  Poor inventory maintenance and replacement
 Lack of timely and adequate modernization and so on
 High wastage
 Poor production

b) Labor management
 Excising high wage structure
 Inefficient handling of labor problems
 Excessive manpower
 Poor Labor productivity
 Poor labor relations
 Lack of trained skilled labor or technically competent personnel

c) Marketing Management
 Dependence on a single customer or a limited number of customers/single ora
limited number of products.
 Poor sales realization
 Defective pricing policy
 Booking of large orders at fixed prices in an inflationary market
 Weak market organization
 Lack of market feedback and market research
 Unscrupulous sale purchase practices

d) Financial management
 Poor resource management and financial planning
 Faulty costing
 Dividend policy
 General financial indiscipline and application of funds for unauthorized
purposes
 Deficiency of funds
 Over trading
 Unfavorable gearing or keeping adverse debt equity ratio
 Inadequate working capital
 Absence of cost consciousness
 Lack of effective collection machinery

e) Administrative management
 Over centralization
 Lack of professionalism
 Lack of feedback to management (management Information System)
 Lack of timely diversification
 Excessive expenditure on R&D

II. External Problems of Entrepreneurs

a) Infrastructure
 Location
  Power
 Water
 Post Office and so on
 Communication
 Non-availability or irregular supply of critical raw materials or other inputs
 Transport bottlenecks

b) Financial
 Capital
 Working capital
 Long term funds
 Recovery
 Marketing Taxation
 Raw material
 Industrial and financial regulations
 Inspections
 Technology
 Government policy Administrative hurdles
 Rampant corruption
 Lack of direction
 Competitive and volatile environment 

CAPACITY BUILDING FOR STRONG ENTREPRENEURSHIP

 To be a successful entrepreneur, individuals must build capacities in four key
strategic areas – Operational, Management, Financial Management, and Personal
capacities. Entrepreneur capacity building involves developing the combination of all
four capacity elements, to provide the ingredients for a great entrepreneurial success
soup.
 Some of these capacities are gained through experience throughout your career, while
others are learned through educational avenues. Some successful entrepreneurs are born
with strong personality traits, and some behaviors are strengthened through learned
responses in the business environment.
 Here are the four key categories of capacity building leading to the development of
successful entrepreneurs.

Operational Capacity Building

Having a brilliant understanding of an industry and business at ground level
builds operational capacity. This of course involves working in a variety of business
operations for a period of time prior to diving into entrepreneurship. This is where you
gain valuable insight into what makes businesses tick. Understanding the dynamics on
the floor, in the cubicles, in the field and out on the road, gives you the perspective on
how to lead, organize and plan for operations.

Management Capacity Building

Taking operational experience one more step, gaining management experience in
a field or business will be directly applicable to managing your own business. The
valuable experience you gain managing operations, resources and people will give you
the applicable tools for your own business. With a few years of management experience,
you will gain management capacity and an understanding of responsibilities and
accountabilities at that level… all precursors to managing your own company.

Financial Management Capacity Building

Through a combination of work experience and education, you need to be well-
grounded and versed in managing finances. You need to be able to accurately estimate
and build financial statements and to understand them. With gained skills, you will need
to be able to analyze financial statements, looking at trends andindicators and what those
all mean to your business. Financial reports provide key indicators and information on
the business‘ financial health…there is a wealth of information in the financial
statements. Other parties, partners and financial institutions will be looking at you and
your organization‘s ability to manage finances.

Personal Capacity Building

Of extreme importance, if you don‘t have some key personal, entrepreneurial
traits you may be closing up shop fast. Some people are born with strong traits while
other behaviors can be picked up along the development pathway. Demonstrating strong
traits and behaviors such as dedication, perseverance, ambition, determination, strong-
will, openness, honesty, transparency, fairness, etc may move you along the pathway to
become a successful entrepreneur.