DEPARTMENT OF COMPUTER SCIENCE

Semester VII

GE3751 – PRINCIPLES OF MANAGEMENT

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UNITI – INTRODUCTION TO MANAGEMENT AND

ORGANIZATIONS

Topics List

1. Definition of Management
2. Management – A Science or Art
3. Manager vs Entrepreneur
4. Types of Managers
5. Managerial Roles and Skills
6. Evolution of Management and Scientific Human Relations, Systems, and Contingency
Approaches
7. Types of Business Organization
a. Sole Proprietorship
b. Partnership
c. Company – Public and Private Sector Enterprises
8. Organization Culture and Environment
9. Current Trends and Issues in Management

1. DEFINITIONS OF MANAGEMENT

Management is defined in different context by different authors. The main contexts are
Management as an Art of getting things done from others
Mary Parker Follett the pioneer of Organizational Behaviour defines Management as
follows:
“Management is the art of getting things done through others.” Follett describes management
as an art of directing the activities of other persons for reaching enterprise goals. It also suggests
that a manager carries only a directing function.
Harold Koontz:

Management is the art of getting things done through and with people in formally organized
groups.” Koontz has emphasized that management is getting the work done with the co-
operation of people working in the organization

Management as a process

Henry Fayol, a renowned management thinker viewed management as process of five functions
such as planning, organizing, commanding, coordinating and controlling.

James L. Lundy: “Management is principally the task of planning, coordinating, motivating

and controlling the efforts of others towards a specific objective

Management as an Art and Science of Decision-Making and Leadership

Donald J. Clough describes “Management is the art and science of decision-making and
leadership.”
Rose Moore “Management means decision-making.” Decision-making cannot be the only
function of management even though it is very important.

2. MANAGEMENT A SCIENCE OR ART

The term management is used in various senses. Some consider it as an activity, some treat
it as a group, some call it a discipline, whereas some look at it as a process. Management as
an activity is getting things done through others. Management as a group is all those who
manage. Management as a discipline is a body of knowledge, and as a process is what
managers do. We define management as the process of getting things done through and with
people to achieve a common goal effectively and efficiently. The nature of management can
be analysed in the terms of science, arts, and profession.

How Management can be defined as an art?

The art of managing is a personal creative attribute of the manager, which is more often than
not, enriched by education, training, experience The art of managing involves the conception
of a vision of an orderly whole created from chaotic parts and the communication and
achievement of this vision, Managing is the “art of arts” because it organizes and uses human
talent.

Elements of art in management

 Practical Knowledge,

 Personal Skill,

 Creativity,

 Perfection through practice,

 Goal-Oriented.

Practical Knowledge: Art requires practical knowledge, learning of theory is not sufficient. Art applies

theory to the field. Art teaches the practical application of theoretical principles Similarly; A person may

have a degree that says he knows what a manager does but it doesn’t know how to apply management

knowledge in real-life situations he will not be regarded as manager.

Personal Skill: A manager will not depend on his theoretical knowledge or solution alone. he
or she must have some qualities that make him or her unique.

Creativity: An Artist’s work is not limited to his practical knowledge. He thinks outside the
box and creates things extraordinary Management is also creative like any other art.
Management is all about finding a new way to be well different from others.

Perfection through practice

Every artist becomes better through item and practice. they learn from their mistakes.
Similarly, managers become more expert as he spends more time in management thought.

Goal-Oriented: Art is result-oriented. Management works are also a goal or result-

oriented. Management takes steps for the attainment of the goal.

How Management is a Science

Science is obtaining information about a particular object by a systematic pattern of

observation, study, practice, experiments, and investigation.

The management process also follows the same pattern. Gathering data and facts, analysing
them and making a decision based on analysis, are the basic functions of the management.
Management follows a systematic method to find a possible solution for a problem. The science
underlying managing is indeed inexact or a soft science at best.It is not as “Science” as physical
sciences such as chemistry or biology which deal with non-human entities.The inclusion of the
human element in managing makes this discipline not only complex but also debatable as pure
science.

Elements of Science in Managing

 Concepts

 Methods and principles

 Theories

 Organized knowledge

 Practice

 The essence of science is the application of the scientific method to the development of

knowledge that proceeds through the stages discussed below:

Concepts: The scientific approach requires a clear “concepts” of mental images of anything
formed by generalization from particulars. Managing has concepts to deal with situations.

Methods and principles “Scientific method” involves the determination of facts through
observation. This leads to the development of “principles” which have value in predicting what
will happen in similar circumstances. Similarly, management requires observation and sets
standards or principles according to it.

Theories: Any branch of science has theories. A ‘theory” is a systematic grouping of

interdependent concepts and principles that give a framework to, or ties together, a significant
area of knowledge.

Organized knowledge: Science is organized knowledge. If we compare, management at the

present day is a distinct field of organized knowledge.

Concepts, methods, principles, theories, etc. are now the core of management.
Practice: The theories of managing are the results of practice, and the role of such theories is
to provide a systematic grouping of interdependent concepts and principles that furnish a
framework to, or ties together significant pertinent management knowledge.

3. MANAGER VS ENTREPRENEUR

Motive: The main motive of an entrepreneur is to start a venture by setting up an enterprise.

He understands the venture for his personal gratification, whereas main motive of a manager
is to render his services in an enterprise already set up by someone else

Status: An entrepreneur is the owner of the enterprise but a manager is the an employee in the
enterprise owned by the entrepreneur. A Manager is paid in form of remuneration

Risk Bearing: An entrepreneur being the owner of the enterprise assumes all risks and
uncertainty involved in running the enterprise, extent.

Rewards: The reward an entrepreneur gets for bearing risks involved in the enterprise is profit
which is highly uncertain, whereas A manager gets salary as reward for the services rendered
by him in the enterprise. Salary of a manager is certain and fixed

Innovation: Entrepreneur himself thinks over what and how to produce goods to meet the
changing demands of the customers. Hence, he acts as an innovator also called a ‘change agent.
But what a manager does is simply to execute the plans prepared by the entrepreneur. Thus, a
manager simply translates the entrepreneur’s ideas into practice.

Qualifications: An entrepreneur needs to possess qualities and qualifications like high

achievement motive, originality in thinking, foresight, risk -bearing ability and so on, On the
contrary, a manager needs to possess distinct qualifications in terms of sound knowledge in
management theory and practice

Focus: An entrepreneur focuses on primarily with necessary components to start a business,

whereas a manager’s primary focus is on sustainability, and has to focus on what can be done
within the framework.

4. TYPES OF MANAGERS

Based on the Line and authority the manager are classified into

The four most common types of managers are top-level managers, middle managers, first-line
managers, and team leaders. These roles vary not only in their day-to-day responsibilities, but also in
their broader function in the organization and the types of employees they manage.
Top-Level Managers

Top-level managers are those who represent the highest level of executive management. Top-
level managers often have the word “chief” in their job titles, such as chief executive officer,
chief financial officer, and so on.

These managers help sustain the company’s growth and execute plans over the long term. They
make major business decisions — such as launching a new product or restructuring
departments — with the goal of seeing the company thrive, not just in the moment but into the
future. Additional duties of top-level managers might include facilitating strategic partnerships
with other companies or deciding to take a company public.

Middle Managers

Middle managers usually report to the top-level managers, yet they still have a lot of autonomy
to make decisions within their area or department of the company. These managers often have
job titles that include the word “director.” They may also be department heads.

Middle managers tend to function as points of contact between first-line managers and top-
level management, ensuring that the two groups maintain productive two-way communication.
Middle managers may help develop or implement plans to help top-level managers address
obstacles or achieve certain business goals. Additional core duties can include mentoring
lower-level managers and helping them prepare for career advancement.

First-Line Managers

This role represents an entry-level position for management professionals. First-line managers
work directly with non-management employees and project team members. Their overarching
role is to supervise employee productivity and hold employees accountable for achieving
company goals.

Generally, first-line managers handle internal work only. In other words, they are not
responsible for larger-scale business decisions, like whether to take the company public,
rebrand, or partner with another business. However, the first-line manager’s core
responsibilities can include communicating concerns to middle managers, acting as liaisons for
addressing employee needs.
Team Leaders

Team leaders are managers who specialize in a particular task, product, or project. Their role
is to oversee all the logistics of their assignment, which may include completing a project on
time, onboarding new employees, and assigning specific tasks to various team members.

Based on Leadership Style Based on leadership style, leaders are categorized into

 Autocratic Leadership Style

 Democratic Leadership Style

 Laissez-faire Leadership Style

Autocratic Leadership Style: This style is also known as the leader-centred style. Under this
style, the leader keeps all the authority centred in his hands and the employees have to perform
the work exactly as per his orders. If any employee is careless in his work performance, he is
punished.

The leader does not decentralise his authority for the fear of losing his importance.
Consequently, the responsibility of the success or failure of management remains with the
manager

Characteristics
Following are the characteristics of the autocratic leadership style:

Centralised Authority: In this style, a manager is not prepared to share his authority and
responsibility with others. Consequently, all the authority of work performance remains
centralised.

Single-man Decisions: In this style of leadership, the manager himself takes all the decisions.
He takes it for granted that he does not need any other individual.

Wrong Belief regarding Employees: The manager is a victim of the thinking that the
employees do not work when motivated by love and they require hard control. Impelled by this
thought, managers take the help of the centralised leadership style.

Only Downward Communication: The thinking and suggestions of the employees are
meaningless in this style of leadership. Therefore, the communication is only downward which
means that the managers only tell them their ideas but do not listen to the employees’ ideas
Advantages
The autocratic leadership style has the following advantages:

Quick and Clear Decisions: Because of the centralised authority all the decisions are taken
by a single individual and hence there is no unnecessary delay and the decisions are
comparatively clear.

Satisfactory Work: Since the work performance of the employees is under strict control, the
quantity and quality of the work happen to be satisfactory.

Necessary for Less Educated Employees: This style is very useful for the less educated and
persons of less understanding. They have no capability of taking decisions because of little
education. The employees of this category can only work and not take decisions.

Disadvantages
This style has the following disadvantages:

Lack of Motivation: This style does motivate the managers but it lowers the morale of the
employees. This is natural because working in an environment of fear does lower their morale.

Agitation by Employees: Since the employees are not given any participation in taking
decisions, they are turned into machines working like machines incapable of doing anything of
their own. Similarly, managers can make the employees do as they wish. The employees
consider such a leadership style as uninteresting and oppose it.
Democratic Leadership Style
This style is also known as group-centred leadership style. These days this leadership style is
very much in vogue. Under this style, decisions regarding different works are not taken by the
manager alone but they are taken in consultation with the employees. This leadership style is
based on decentralisation. The manager respects the suggestions made by his subordinates, and
also makes efforts to fulfill their necessities

Cooperative Relations: The chief characteristic of this style is the existence of cooperative
relations among the managers and the employees. Participation in the management decisions
gives the employees a feeling of self-respect, as a result of which the employees are always
ready to be cooperative in every way.
Belief in Employees: The managers inherently believe that the employees by nature want to
work, do their work with interest, accept their responsibility and try to perform their work in a
good manner. This faith of the managers in the employees increases their morale.
Open Communication: This style encourages open communication among the managers and
the employees. Open communication means both ways communication, meaning thereby that
apart from saying their own thoughts the managers receive the suggestions of the employees
with pleasure.
Advantages
Democratic leadership style has the following advantages:

High Morale: Under this style, the enthusiasm of the managers and the employees is sky-high.
Both consider each other their well-wishers.
Creation of More Efficiency and Productivity: Since the employees are participants in the
decision making, they give full cooperation in implementing them. In this way their efficiency
increases.
Availability of Sufficient Time for Constructive Work: Under this leadership style, the
workload of the managers gets decreased. By using their spare time constructively they make
the development and expansion of the enterprise possible.

Disadvantages
Following are the disadvantages of the democratic leadership style:

Requirement of Educated Subordinates: The chief characteristic of this leadership style is

that the subordinates are made partners in taking decisions, so much so that some little affairs
are left to them. Such cooperation can be expected only from the educated employees.
Delay in Decisions: It is clear that while taking decisions the subordinates are always
consulted. This makes it a long process.
Lack of Responsibility in Managers: Sometimes the managers try to evade responsibility by
observing that the decisions were taken by the subordinates because they were made partners
in taking some important decisions. Thus, they must be held responsible
Laissez-faire or Free-rein Leadership Style: This leadership style is also described as
Individual- centered style. In this style, the manager or the leader takes little interest in
managerial functions and the subordinates are left on their own.

Characteristics

Full Faith in Subordinates: A prominent characteristic of this style is that the managers

consider their subordinates capable, active and responsible individuals and have full faith in

them.

Independent Decision-making System: In this style, the management-related decisions are

taken by the subordinates instead of the managers. They can, however, consult the managers.

Decentralisation of Authority: This style is based on the principle of decentralisation. It

means that the managers widely distribute their authority to enable every individual to

determine his objective and make his plans accordingly. The managers only perform the

function of coordination, direction and general control.

Self-directed, Supervisory and Controlled: After having once explained the objectives, the

only job of the manager is to interfere only in adverse situations. The supervision and control

is done by the employees themselves.

Advantages
Development of Self-confidence in Subordinates: When all the authority in their work

performance is given to the employees, they become habituated in taking decisions which

creates self-confidence in them. They start doing better work in future.

High-level Motivation: When the manager gives the subordinates all the authority by showing

full confidence in them they start considering themselves an important part of the concern.
In this way they start feeling that they are not a part of the enterprise but are the enterprise

itself. With the onset of this feeling there is nothing left in their motivation.
Helpful in Development and Extension of the Enterprise: The development and extension

of an enterprise where this leadership style is adopted is at its climax. The reason for this is the

time available with the managers to find out the possibilities of development and extension.

Disadvantages
This leadership style has the following disadvantages:

Difficulty in Cooperation: Since there is no close supervision and control by the managers

everybody starts functioning independently. Some employees with opposite point of view

become a hurdle in the attainment of objectives of other people.

Such people do not work themselves, nor can they see others work. It becomes difficult for the

manager to establish coordination among such employees.

Lack of Importance of Managerial Post: In this leadership style, the post of a manager is

rendered less important because he does not make any plan, or take any decision or exercise

any control.

Suitable only for Highly Educated Employees: This style is useful only when every

employee is fully educated so that the work can be assigned to him with full confidence. This

leadership style is not suitable for leading uneducated or semi-educated people.

5. MANAGER ROLES AND SKILLS

Following are the managerial skills

Technical Skill: It is knowledge of and proficiency in activities involving methods, processes,
and procedures. Thus, it involves working with tools and specific techniques. For examples,
mechanics work with tools, and their supervisor should have the ability to teach them how to
use these tools. Similarly, accountants apply specific techniques in doing their job.
Human Skill: It is the ability to work with people; it is cooperative efforts; it is teamwork; it
is the creation of an environment in which people feel secure and free express their opinions.
Conceptual Skill: It is the ability to see the ‘big picture’ to recognize significant elements in
a situation, and to understand the relationships among the elements.
Design Skill: It is the ability to solve problems in ways that will benefit the enterprise. To be
effective, particularly at upper organizational levels, managers must be able to do more than
see a problem. They must have, in addition, the skill of a good design engineer in working out
a practical solution to a problem

All managers typically perform the following roles

 Interpersonal Roles
 Informational Roles
 Decision Roles

Interpersonal Roles

Figurehead: Represents the company in a symbolic way

Leader: Guides and m : otivates employees to achieve organizational goals

Liaison: Acts as a go-between among individuals inside and outside the organization

 The figure head role (performing ceremonial and social duties as the organisation’s
representative

 The leader role and the liaison role (communicating particularly with outsiders)

Informational Roles

Monitor: Seeks out and gathers information relevant to the organization

Disseminator: Provides information where it is needed in the organization

Spokesperson: Transmits information to people outside the organization

 The recipient role (receiving information about the operation of an enterprise)

 The disseminator role (passing information to subordinates) and

 The spokesperson role (transmitting information to those outside the organisation).

Decision Roles

 The entrepreneurial Role: Searches out new opportunities and brings to business

 The disturbance handler Role.: Handles unexpected events and crises

 Resource allocator: Designates the use of financial, human, and other organizational
resources

 Negotiator: Represents the company at negotiating processes

6. EVOLUTION OF MANAGEMENT AND VARIOUS APPROACHES IN

MANAGEMENT

The three approaches to the evolution of management. The approaches are:

1. The Classical Approach

2. The Behavioural Approach

3. The Quantitative Approach.

The Classical Approach:
Crux of the Approach: people are motivated by economic incentives and that they will
rationally consider opportunities that provide for them the greatest economic gain. The classical
school can be broken down into three historical philosophies of management

These are

 Scientific management,

 Administrative management approach, and

 Bureaucratic model.

Scientific Management Approach

Crux: The use of method of science for solving management problems was thought of. The
scientific management concept was first developed by F.W. Taylor in between 1895 and 1911.

F.W. Taylor is being called as the father of scientific, management. In 1878 he joined as a
labourer at Midvale steel company in the USA. From that position he progressed to become
Chief Engineer in 1884. He published papers on “piece rate system”, “the art of cutting
metals” and “shop management”. He published a book on “The Principles of
Management” in 1911.
F.W. Taylor discovered the application of method of science for solving industrial problems

Application of scientific methods means adopting the following procedures to solve

problems:
a. Observation,

b. Measurement,

c. Experimental comparison, and

d. Formulation of procedure.

Establishing the Standard of Performance: Taylor said that production time for each job
should be found out scientifically. For this he invented time study techniques. Here the job is
broken into elements. Each element is termed separately, and the total time for the job is found
out. This will help to plan the daily work of each worker.
Harmony and Not Discord: Taylor said that the employer and employee should have
complete understanding. The interest of employer and employees should be same.
Maximum Output and Not Restricted Output: Taylor evolved methods of getting more
production from the workers. He said that workers must be encouraged for higher production.
This was done by giving incentive wages for higher producers. He introduced differential piece
rate system for this purpose. The workers who produced above the standard level were paid a
higher piece rate. Those whose production was lower were paid a lower piece rate.
Specialisation-Separation of Physical and Mental Activity: Taylor said that the workers
must be relieved of the mental activities so he separated the mental activity from physical
activity. Physical activities are carried out by the people inside the shop. Mental activities are
carried out by the people in the office. He evolved the functional organisation structure.

Training and Development of Workers: Taylor insisted that the workers should be given
proper training before they are put in the production line. He said that the selection of workers
should be done scientifically. Right person should be employed for the right job.

Administrative Management Approach: Scientific management focused primarily on the

efficiency of production, but administrative management focused on formal organisation
structure and the delineation of the basic process of general management. This approach is also
known as functional or process approach and is based primarily on the ideas of Henry Fayol
(1841-1925).

 Henry Fayol is recognised as the first person to systematize the administrative approach

activities into six groups, all of which are closely dependent on one another such as

 Technical,

 Financial,

 Commercial,

 Accounting, and

 Managerial.

He broke down the managerial function into five steps including planning, organizing,

commanding, coordinating and controlling. Further, he developed fourteen management

principles that have been widely circulated as guide for management thought.
These are
(i) Division of work,

(ii) Authority,

(iii) Discipline,

(iv) Unity of command,

(v) Unity of direction,

(vi) Subordination of individual interest to the common goal,

(vii) Remuneration of staff,

(viii) Centralisation,

(ix) Scalar chain,

(x) Order,

(xi) Equity,

(xii) Stability of staff,

(xiii) Initiative, and

(xiv) Esprit de corps.

Division of Work: Accordingly, a work is given only a particular work to do. Hence, he can

become a specialist and this specialisation will bring a better efficiency and maximum output.

Authority: It is the right to direct to get the work done. This authority is given to execute

responsibilities entrusted and the responsibility is the accountability of authority.

Discipline: Discipline is defined by H. Fayol as “outward mark of respect for employment

agreements and organisational rules.” These should be enforced fairly and judiciously.
Unity of Command: An employee should receive orders from only one supervisor. If this is

not followed, confusion and conflict will emerge.

Unity of Direction: Fayol states this principle that “there should be one head and one plan for

a group of activities.” For example the production department should have only one production

manager. Without unity of direction, unity of command cannot function.

Subordination of Individual Interest to the Common Goal: While every employee is

working with his individual interest, there will be an organisational interest. So, the individual

interest should be integrated with the organisational interest. The employees should give

importance first to the general interest/common goal than his individual interest.

Remuneration of Staff: Remuneration is the payment for services provided by the employees.

Since the remuneration and additional incentives inspires employees to provide their maximum

effort to the organisation, the amount of payment and methods of payment should be chosen

carefully and should be fairly paid.

Centralisation: If the top-level person has the full power, it will be called as centralization.

By contrast, if the power is delegated to the subordinates, it will be called as decentralisation.

Fayol believed that while some authority should be given to the subordinates to make decisions,

all major policy decisions should be made at the top management level.

Scalar Chain: It means “Line of authority”. According to this principle, communication that

is, orders and instructions should be sent from the top management to the lowest level in the

organisation through the line of authority.

Order: This principle indicates the arrangement of resources, which may be physical, and

human order means. “A place for everything and everything in its place.” This can be done
properly by developing precise knowledge of the human requirements and the resources of the

concern and having a constant balance between their requirements and their resources.

Equity: Equity means a combination of fairness, kindliness and justice. Managers should be

both fair and friendly to the subordinates.

It is not that only the chief executive ought to apply equity in his dealings with the subordinates.

Rather, it is the duty of the chief executive himself to ensure that managers at all levels apply
equity in their dealings with their subordinates. It will help in soliciting loyalty and devotion

from subordinates.

Stability Off Staff: Higher labour turnover indicates bad management and bad results and its

should be minimized. Tenure and long term commitment therefore should be encouraged. It is

better to have one manager of average ability than to have very efficient managers who merely

come and go.

Initiative: The power of thinking, and executing is called initiative. It is the capacity to decide

what needs to be done. Therefore, subordinates should be encouraged. At times, they will come

forward with new ideas and effective plans.

Esprit do Corps: This is the French word which means feeling of harmony and union among

people in the organisation. So, the employees should work as a team. There is strength in unity.

Bureaucratic Model

 The third major pillar in the development of classical organisation was provided by
Max Weber’s bureaucratic model.

 The basic characteristics of a bureaucratic organisation are as follows:

 A division of labour based on functional specialization.

 A well-defined hierarchy of authority.

 A system of rules concerning the rights and duties of positional incumbents.

 A system of procedures for dealing with work situations.

 Impersonality of interpersonal relations.

 Selection and promotion of employees based on technical competence.

A Division of Labour Based On Functional Specialisation: A maximum possible division

of labour makes it possible to utilize all links of the organisation experts who are fully
responsible for the effective fulfillment of their duties.
A Well-Defined Hierarchy of Authority: Each lower official is under the control and
supervision of higher one. Every subordinate is accountable to his superior for his own
decisions and actions and the decisions and actions of his subordinates in turn.
A System of Rules Concerning the Rights and Duties of Positional Incumbents: The rules
regarding the rights and duties of employees should be clear-cut. The responsibility of each
employee in the organisation should be clearly defined and assigned and strictly adhered.
A System of Procedures for Dealing with Situations: These procedures must be time-tested
and equally applicable under similar situations of work.
Impersonality of Interpersonal Relations: Rewards should be based on efficiency rather than
nepotism or family connections. The functioning of the organisation based on rational and
objective standards, excludes the prejudices. This unbiased approach predictably leads to
optimum efficiency.
Selection and Promotion of Employees Based on Technical Competence: The employees
must be protected against arbitrary dismissal. The system of promotion should correspond to
seniority or merit or both.
This would help produce staunch loyalty to the organisation.

2. The Behavioural Approach:

The behavioural approach on the human relations approach is based upon the premise of

increase in production and managerial efficiency through an understanding of the people.

The human relations approach of management involves with the human behaviour and focused

attention on the human beings in the organisation. The growth and popularity of this approach

is attributable to Elton Mayo (1880- 1949) and his Hawthorne experiments.

The Hawthorne experiments were carried out at the Hawthorne plant of the western electric
company. These experiments were carried out by Elton Mayo and the staff of the Harvard

Business School, main researchers were Elton Mayo, White Head, Roethlisberger and Dickson.

The first of Mayo’s four studies took place at a Philadelphia textile mill.

The problem he investigated was excessive labour turnover in a department where work was

particularly monotonous and fatiguing. The workers tended to sink into a dejected, disconsolate

mood soon after being assigned there eventually they would lose their tempers for no apparent

reason and impulsively quit. At first Mayo thought the reason for the worker’s behaviour must

be physical fatigue.
So, he instituted a series of rest periods, during the workday. In course of trying to schedule

these periods in the most efficient manner, management experimented with allowing the

workers to do the scheduling themselves. The effect was dramatic. Turnover fell sharly to about

the same level as that for the rest of the plant, productivity shot upward and the melancholy

moods disappeared.

Similar results were obtained at the Hawthorne plant of the western electric company. Mayo’s

another studies made at the Bank hiring room and at an aircraft factory. Hence the Mayo’s

study showed that the role played by social needs is more responsive to the social forces

operating at work than the economic rewards.

3. The Quantitative Approach:

This approach involves the application of modern quantitative or mathematical techniques for

solving managerial problems. These quantitative tools and methodologies are designed to add

in decision-making relating to operations and production.

According to Lindsay, these techniques assist the management for improving their

decisions by:
(i) Increasing the number of alternatives that can be considered.

(ii) Assisting in faster decision-making based upon objective analysis of available information.

(iii) Helping management in evaluating the risks and results of different courses of action.

(iv) Helping to bring into optimum balance the many diverse elements of a modern enterprise.

The technique generally involves the following 4 steps:

(i) A mathematical model is constructed with variables reflecting the important factors in the

situation to be analysed.

(ii) The decision rules are established and some standards are set for the purpose of comparing

the relative merits of possible courses of actions.

(iii) The empirical data is gathered which would relate parameters in the goal utility.
(iv) The mathematical calculations are executed so as to find a course of action that will

maximize the objective function or the goal utility.

The following are some of the areas where these techniques are extensively used:
(i) Linear programming.

(ii) Queuing theory.

(iii) Inventory modelling.

(iv) Regression analysis.

(v) Simulation.

(vi) Preventive Control and replacement problems.

(vii) Competitive problems and problems of Game Theory.

The major features of this approach are as follows:

a. Rational decision-making.

b. Mathematical models.

c. Computer applications.

d. Evaluation criteria.

7. TYPES OF BUSINESS ORGANIZATION

SOLE PROPREITORSHIP Sole proprietorship is that form of business organisation; which

is owned and operated, at the initiative and risk of only one individual-called the sole proprietor

(1) “The sole proprietorship is an informal type of business owned by one person.” —James L.

Lundy.
(2) “The individual proprietorship is the form of business organisation, at the head of which

stands an individual as one who is responsible, who directs its operations and who alone runs

the risk of failure.

Features of Sole-Proprietorship:
 There is individual ownership, in sole-proprietorship. One man alone-called the sole-

proprietor is the owner of all assets and resources of business.

 The sole proprietor is solely responsible for the management of his business enterprise.

The sole proprietor may engage the services of professional managers; yet it is he who is

responsible for regulating the decisions and actions of hired managers.

 The sole proprietor is solely responsible for arranging finances for his business. He has to

contribute capital from his own sources. He may also borrow money from friends, relatives

and others-at his personal risk. Because of limited financial capacity of one individual (in

majority of cases, of course), the size of one-man business is usually limited.

 In one man business (i.e. sole proprietorship), there is independent decision-making by the

sole proprietor. He need not consult with others; while taking decisions for his own

business.

 The liability of sole proprietor is unlimited, i.e. his personal properties may be utilized for

payment of business debts; in case assets of business are insufficient to pay business

liabilities, in full.

 Secrecy of business affairs can be easily maintained. The sole proprietor need not disclose

secrets of his business to anyone.

 In fact, sole proprietorship is the exclusive form of business organisation, in which

complete secrecy of business affairs is possible.

 There is no sharing of profits, in sole proprietorship. All the profits of business belong

only to the sole proprietor. However, even all the losses of business fall on him exclusively
 Advantages of Sole-Proprietorship:

(i) Easy to Start: Sole-proprietorship is easy to start. What is required to start the business is
just a decision of the sole-proprietor in this regard. No legal and procedural formalities are
required to be complied with for starting the sole-proprietary business.
(ii) Maximum Incentive to Work: In sole proprietorship, there is maximum incentive to work
for the sole-proprietor.
Such incentive is usually due to the following factors:
1. Liability of the sole proprietor is unlimited.

2. There is no sharing of profits with anyone.

(iii) Independent Decision-Making, Facilitating Flexibility of Operations: In sole

proprietorship, there is independent decision-making, by the sole proprietor. He is under no
obligation to consult with anyone while taking decisions pertaining to his own business. As
such, sole proprietorship has the advantage of flexibility of business operations i.e. according
to circumstances; the sole proprietor can effect changes in the operational life of business – to
take maximum advantage of favourable business opportunities.
(iv) Maintenance of the Secrecy of Business Affairs Possible: Sole proprietorship is the
exclusive form of business organisation, in which complete secrecy of business affairs is
possible. The sole proprietor need not disclose his business secrets to anyone- howsoever close
to him. Capitalizing on his position, he may make soaring profits-keeping business secrets
absolutely confidential.
(v) Personal Attention to Customers:
The sole proprietor can pay personal attention to his customers; and develop good customer
relations. That is why, for businesses where personal attention to customers is necessary; sole
proprietary form of business organisation is most suitable e.g. tailoring business, hair-cutting
saloons etc.
(vi) Freedom from Governmental Control: A sole-proprietary business is practically free
from Governmental control and regulations. There is nothing like a ‘Sole Proprietary Business
Act’, in our country.
(vii) Self-Employment: Starting a sole-proprietary business immediately generates “self-
employment” for the sole proprietor. This is a social advantage of sole proprietorship.
(viii) Development of Self-Confidence: Sole-proprietary form of business organisation
promotes the development of self-confidence, in the sole proprietor; because it is the sole
proprietor alone, who is responsible for all decision-making of business and for doing
everything for the successful operational life of his business. This again, is a social advantage
of sole proprietorship.

Limitations of Sole-Proprietorship
(i) Limited Finances: In an average case (exceptions apart), the financial capacity of the sole-
proprietor is limited. There is a limit to his capital contribution; and a limit to borrowing from
others. That is why; a sole proprietor cannot start a very large-scale business enterprise.
(ii) Managerial Limit: Management limit is, perhaps, the biggest limitation of sole
proprietorship. Whether on his own or with the help of hired managers, a sole proprietor cannot
manage an unduly large business-because of the principle of span of management. According
to span of management principle, no person can control the actions of a very large number of
subordinates effectively, i.e. there is a limit to effect management.

(iii) Unlimited Liability:

The liability of the sole-proprietor is unlimited i.e. his personal properties may be utilized for
payment of business debts; in case assets of business are insufficient to pay business liabilities,
in full. This is, in fact, a very big limitation of sole- proprietorship.
(iv) Uncertain Life: The life of a sole-proprietary business is wholly uncertain. Serious
disease, incapacity to work caused by disablement etc. may seriously affect business
functioning and even lead to business closure.
(v) Hasty and Imbalanced Decisions: The negative aspect of independent decision-making
by the sole proprietor is that may-a times, the decisions taken by him are of a hasty and
imbalanced nature. Such decisions may lead to severe losses in the sole proprietary business;
which would fall exclusively on the sole proprietor.
(vi) Conservative Approach: There is lack of bold decision making by the sole proprietor.
Due to the fact of unlimited liability, the sole proprietor is very cautions and follows ages old
methods of running the business. As a result, his business may not be able to keep pace with
new developments; which is a serious disadvantage of the sole-proprietary business in an
environment characterized by advanced technology and intensely increasing competitive
conditions.

PARTNERSHIP

The Indian Partnership Act, 1932, Section 4, defined partnership as “the relation between
persons who have agreed to share the profits of business carried on by all or any of them acting
for all”. The Uniform Partnership Act of the USA defined a partnership “as an association of
two or more persons to carry on as co-owners a business for profit”

Features of Partnership

1. More Persons: As against proprietorship, there should be at least two persons subject to a
maximum of ten persons for banking business and twenty for non-banking business to form a
partnership firm.

2. Profit and Loss Sharing: There is an agreement among the partners to share the profits
earned and losses incurred in partnership business.
3. Contractual Relationship: Partnership is formed by an agreement-oral or written-among
the partners.
4. Existence of Lawful Business: Partnership is formed to carry on some lawful business and
share its profits or losses. If the purpose is to carry some charitable works, for example, it is
not regarded as partnership.
5. Utmost Good Faith and Honesty: A partnership business solely rests on utmost good faith
and trust among the partners.
6. Unlimited Liability: Like proprietorship, each partner has unlimited liability in the firm.
This means that if the assets of the partnership firm fall short to meet the firm’s obligations,
the partners’ private assets will also be used for the purpose.
7. Restrictions on Transfer of Share: No partner can transfer his share to any outside person
without seeking the consent of all other partners.
8. Principal-Agent Relationship: The partnership firm may be carried on by all partners or
any of them acting for all. While dealing with firm’s transactions, each partner is entitled to
represent the firm and other partners. In this way, a partner is an agent of the firm and of the
other partners.
Advantages
As an ownership form of business, partnership offers the following advantages:
1. Easy Formation: Partnership is a contractual agreement between the partners to run an
enterprise. Hence, it is relatively ease to form. Legal formalities associated with formation are
minimal. Though, the registration of a partnership is desirable, but not obligatory.
2. More Capital Available:
We have just seen that sole proprietorship suffers from the limitation of limited funds.
Partnership overcomes this problem, to a great extent, because now there are more than one
person who provide funds to the enterprise. It also increases the borrowing capacity of the firm.
Moreover, the lending institutions also perceive less risk in granting credit to a partnership than
to a proprietorship because the risk of loss is spread over a number of partners rather than only
one. .

3. Combined Talent, Judgement and Skill: As there are more than one owners in partnership,
all the partners are involved in decision making. Usually, partners are pooled from different
specialised areas to complement each other. For example, if there are three partners, one partner
might be a specialist in production, another in finance and the third in marketing. This gives
the firm an advantage of collective expertise for taking better decisions. Thus, the old maxim
of “two heads being better than one” aptly applies to partnership.

4. Diffusion of Risk: You have just seen that the entire losses are borne by the sole proprietor
only but in case of partnership, the losses of the firm are shared by all the partners as per their
agreed profit-sharing ratios. Thus, the share of loss in case of each partner will be less than that
in case of proprietorship.
Disadvantages
In spite of above advantages, there are certain drawbacks also associated with the partnership
form of business organisation.

1. Unlimited Liability: In partnership firm, the liability of partners is unlimited. Just as in

proprietorship, the partners’ personal assets may be at risk if the business cannot pay its debts.
2. Divided Authority: Sometimes the earlier stated maxim of two heads better than one may
turn into “too many cooks spoil the broth.” Each partner can discharge his responsibilities in
his concerned individual area. But, in case of areas like policy formulation for the whole
enterprise, there are chances for conflicts between the partners. Disagreements between the
partners over enterprise matters have destroyed many a partnership.
3. Lack of Continuity: Death or withdrawal of one partner causes the partnership to come to
an end. So, there remains uncertainty in continuity of partnership.
4. Risk of Implied Authority: Each partner is an agent for the partnership business. Hence,
the decisions made by him bind all the partners. At times, an incompetent partner may lend the
firm into difficulties by taking wrong decisions. Risk involved in decisions taken by one partner
is to be borne by other partners also. Choosing a business partner is, therefore, much like
choosing a marriage mate life partner

JOINT STOCK COMPANIES

Public Sector Enterprises

Public enterprises are autonomous or semi-autonomous corporations and companies

established, owned and controlled by the state and engaged in industrial and commercial
activities.

Characteristics of Public Enterprises:

Financed by Government: Public enterprises are financed by the government. They are either
owned by the government or majority shares are held by the government. In some undertakings
private investments are also allowed but the dominant role is played by the government only.

Government Management: Public enterprises are managed by the government. In some cases
government has started enterprises under its own departments. In other cases, government
nominates persons to manage the undertakings. Even autonomous bodies are directly and
indirectly controlled by the government departments.
Financial Independence: Though investments in government undertakings are done by the
government, they become financially independent. They are not dependent on the government
for their day- to-day needs. These enterprises arrange and manage their own finances. An
element of profitability is also considered while pricing their products. It has helped the
enterprises to finance their growth themselves.

Public Services: The primary aim of state enterprises is to provide service to the society. These
enterprises are started with a service motive. A private entrepreneur will start a concern only if
possibilities of earning profits exist but this is not the purpose of public enterprises.

Useful for Various Sectors: State enterprises do not serve a particular section of the society
but they are useful for everybody. They serve all sectors of the economy.

Direct Channels for Using Foreign Money: Most of the government-to-government aid is
utilised through public enterprises. Financial and technical assistance received from
industrially advanced countries is used in public enterprises.

Helpful in Implementing Government Plans: Economic policies and plans of the

government are implemented through public enterprises

PRIVATE ENTERPRISES

The private sector is the segment of the economy consisting of entities seeking to generate
profit. Companies in the private sector face relatively little regulation from the state and
compete for consumers' money

The private sector is critical in the development of both urban and economic infrastructure. Not
only does the private sector contribute to the nation’s income, but it also serves as the primary
source of employment. Understanding the private sector may assist you in steering your private
company and, ultimately, your community toward the greatest possible rewards. The private
sector is primarily responsible for determining whether metropolitan areas develop in a
sustainable manner, whether poverty is reduced, and whether conflicts such as unemployment,
instability, and exclusion take place
Key Features of Private Sector

Profit Motive: Private sector enterprises are primarily concerned with producing a profit,

which is their primary goal. Companies in the private sector often generate higher profits than

their counterparts in the public sector because they operate within the boundaries of the

country’s legislation and compliance requirements. Profits also serve as a reward for the risk

taken and the required return on investment (return on capital).

Private Ownership and Control: Private entrepreneurs are in charge of owning, controlling,

and managing the private sector, according to the law. The management might be carried out

by a single individual or by a group of people in various capacities. An entity that is owned by

one individual is known as a sole proprietorship in the private sector. Alternately, a group of

people can pool their resources to form a corporation in the form of a cooperative society,

partnership, or joint-stock company.

No state participation: Organizations in the private sector are less vulnerable to influence

from the government. When it comes to ownership and control of a private-sector enterprise,

neither the state nor the federal governments are involved.

Independent Management: The management of the private sector is entirely dependent on

the actions of its owners. In the event of a sole proprietorship, the manager is in charge of all

business decisions and represents the company in legal proceedings on its behalf. The

management of a joint-stock corporation, on the other hand, is delegated to a board of directors,

which is comprised of shareholders who have been elected to serve on the board.
Private Finance: A company’s owners or shareholders provide the capital that it needs to

operate. There are many different ways for different sorts of private sector enterprises to get

financing. An individual provides capital to a sole proprietorship, and partners contribute

capital in the case of a limited liability company. A joint-stock corporation, on the other hand,

raises capital through the issuance of stock and debt securities (a type of long-term debt).

Another method through which the private sector raises money is through the request of loans

for both long- and short-term demands or cash.When it comes to financial support from the

government, private sector enterprises receive very little, unless they are huge and significant

for the country in question. The financial health of the private sector has an impact on the ability

of companies to raise additional funds from the market. Companies with stronger financials

have a better ability to raise additional funds from the market.

Work culture of Employees: Competitive work culture in the private sector is defined by

performance-based career progression and higher compensation. Companies in the private

sector aim to provide their employees with the greatest possible working environment in order

to preserve a competitive advantage over their competitors in the private sector.

8.ORGANIZATION CULTURE AND DEVELOPMENT

Meaning of Organisational Culture:

To understand the meaning of organisational culture, we must first understand the meaning of
culture. “Culture is the set of important understandings that members of a community share in
common.” It consists of a basic set of values, ideas, perceptions, preferences, concept of
morality, code of conduct etc. which create a distinctiveness among human groups.

When we talk about culture, we typically refer to the pattern of development reflected in a
society’s system of knowledge, ideology, values, laws, social norms and day to day rituals.
Depending upon the pattern and stage of development, culture differs from society to society.
Moreover, culture is passed on from generation to generation.
In simple words we can say that “culture is a combination of factors that are learned through
our interaction with the environment during our developmental and growth years.” After
understanding the meaning of culture, we will now attempt to define organisational culture.

Characteristics of Organisational Culture:

The following characteristics help us to understand the nature of organisational culture better.

When we mix and match these characteristics, we get to the basis of culture:

1. Individual Autonomy: The degree of responsibility, freedom and opportunities of

exercising initiative that individuals have in the organisation.

2. Structure: The degree to which the organisation creates clear objectives and performance
expectations. It also includes the degree of direct supervision that is used to control employee
behaviour.

3. Management Support: The degree to which, managers provide clear communication,

assistance; warmth and support to their subordinates.

4. Identity: The degree to which, members identify with the organisation as a whole rather
than with their particular work group or field of professional expertise.

5. Performance Reward System: The degree to which reward system in the organisation like
increase in salary, promotions etc. is based on employee performance rather than on seniority,
favouritism and so on.

6. Conflict Tolerance: The degree of conflict present in relationships between colleagues and
work groups as well as the degree to which employees are encouraged to air conflict and
criticisms openly.

7. Risk Tolerance: The degree to which, employees are encouraged to be innovative,

aggressive and risk taking.
8. Communication Patterns: The degree to which, organisational communications are
restricted to the formal hierarchy of authority
.
9. Outcome Orientation: The degree to which, management focuses on results or outcomes
rather than on the techniques and processes used to achieve these outcomes.

10. People Orientation: The degree to which, management decisions take into consideration
the impact of outcomes on people within the organisation. When we appraise the organisation
on the basis of the above characteristics, we get a complete picture of the organization’s culture.
This picture becomes the basis of shared norms, beliefs and understanding that members have
about the organisation, how things are done in it and how the members are supposed to behave.

Cultural Typology:
Goffee and Jones have identified four distinct cultural types. They argue that these four culture
types are based on two dimensions which they call sociability and solidarity. Sociability refers
to high concerns for people i.e. it is people oriented and focuses on processes rather than on
outcomes. The second dimension i.e. solidarity is however task oriented.

These two dimensions create four distinct cultural types:

1. Networked Culture: Networked culture is high on sociability and low on solidarity. Which
means that the organisation treats, its members in a quite friendly manner and there is open
sharing of information. However, this culture type may lead to poor performance as the focus
is on the people rather than on tasks.
2. Mercenary Culture It is low on sociability and high on solidarity. The organisations with
mercenary culture are task oriented and believe in competition. The people are highly focussed
and goal oriented but, this type of culture may at times lead to frustration and stress among
poor performers.
3. Fragmented Culture Fragmented culture is low on both sociability and solidarity. There is
little or no identification with the organisation. It is the individual members’ commitment,
productivity and quality of work which is of utmost importance. This type of culture however
suffers from lack of collegiality.
4. Communal Culture It is high on both sociability and solidarity. The organisations with
communal culture value both people and tasks. Work accomplishment is from committed
people, and there is a relationship of trust and respect.
Changing Organisational Culture:
The following conditions must be present only then a cultural change can take place:
1. Dramatic Crisis: Any dramatic crisis in the organisation like a major financial setback, loss
of a major customer, or a technological breakthrough by a competitor may force the
management to look into the relevance of the existing culture.
2. New Top Leadership: If some top executives leave the organisation and new leadership
takes over, they may provide an alternative set of key values or a new culture. This new
leadership may be more capable of responding to the crisis.
3. Young and Small Organisation: When the organisation is new and its size is small, it will
be easier for the management to change the culture.
4. Weak Culture: Weak cultures are more amenable to change than strong ones. The higher
the agreement among the members on the organisational values, the more difficult it will be to
change.

9.CURRENT ISSUES AND TRENDS IN MANAGEMENT

Recent Trends in Management are:

1. Workforce Diversity
2. Outsourcing
3. Knowledge Management
4. Learning Organization
5. Time Management
6. Business Process Reengineering
7. Conflict Management
8. Stress Management
9. Participative management
10. Green Management
One of the main recent trends in management is workforce diversity. It is the involvement of
heterogeneous types of employees in the organization who represents their age, gender, and
ethnicity. Due to changes in population dimensions, improved workforce, social pressure, and
increased globalization diversity is constantly increasing.

The world’s increasing globalization requires more interaction among people from
diverse cultures, beliefs, and backgrounds. People no longer live and work in an insular
marketplace, they are now part of the worldwide economy with competition coming from
nearly every continent. Due to these reasons, profit and non-profit organizations need more
diversity to become more creative and open to change.

Managing diversity in the workplace has become an important issue for management today.
An efficient manager has to manage a diverse workforce from both an individual and
organizational approach. May from an individual approach he has to develop a better
environment like understanding, empathy, tolerance, and willingness to communicate with his
employees. And, from an organizational approach may he has to develop policies, training,
practices, and good culture in the organization.

Outsourcing means getting resources from outside. It is the process of providing some parts
of jobs to other organizations to bring quality and get the benefit of specialization.

It is an important means of reducing costs and improving quality. If an organization performs

every activity by itself, it may not be able to perform the activity efficiently and the quality of
product or service may also be inferior. Thus, organizations have to identify certain areas that
can be outsourced to minimize the cost of operation and increase the quality of products.

Knowledge Management Knowledge management is the process that helps organizations

identify, select, organize, disseminate, and transfer important information and expertise for
organizational prosperity. It emphasizes that knowledge can be turned into business ideas and
used for the success of the organization. The effective management of knowledge enables
management for effective and efficient problem-solving, dynamic learning, strategic
planning, and decision-making.

It focuses on identifying knowledge, explicating it in such a way that it can be shared formally,
and showing its value through reuse. For organizational success, knowledge, as a form of
capital, must be exchangeable among persons and must be able to grow. And, for problem-
solving, knowledge, must be captured, so that knowledge management can
promote organizational learning, and lead to further knowledge creation.
Learning Organization Learning organization involves institutions where there is the
provision of continuous learning to adapt to the changing environment of businesses. You
know, the business environment is an ever-changing process. So, to bring new concepts into
the business, the innovation of new ideas, models, design, structure, and technology is essential.
A business organization performing at the highest level today will not remain the same in the
future if there is no provision for learning.

For better learning in the organization, all employees should share information, ideas,
knowledge, and work as a team. To cope with the changing environment and new technology,
business organizations need to have qualified employees with learning capabilities.

Time Management Time management is prioritizing activities for using time effectively. It is
used for scheduling time. Time is a unique and most important resource and if it is wasted, it
can never be recovered.

Time management may help employees who are suffering from a lack of planning, sort out
their priorities, etc. It is about balancing different aspects of life which makes the goal
achievable. But remember time is always limited.

Business Process Reengineering (BPR) Business process reengineering is a new trend in the
management field. It purports that the way work is done should be fundamentally and radically
changed so that every effort of the firm is driven to achieve customer satisfaction and thereby
greater performance and profitability.

Reengineering is about radical change. It does not mean slight and incremental changes,
leaving the basic structure as it was. It means starting from “Scratch”.

Reengineering involves redefining the process. It is essential in a condition when the current
effort is insufficient for the organizations to satisfy their customers.

Conflict Management Conflict refers to all kinds of opposition or antagonistic interaction

between or among individuals and groups. It exists when one party has hampered or is about
to hamper the accomplishment of goals.

The manager should identify the reasons for conflicts and solve them through proper ways such
as skill encouragement, handling constructive conflict, and resolving dysfunctional conflicts.
Stress Management Stress refers to the body’s psychological, physiological, and emotional
response to any demand. Stress occurs when the pressure is greater than the resources. Large
workloads, long work hours, fewer resources, and less job security are the major causes of
stress for employees.

Stress management is concerned with taking some steps to minimize work stress among
working staff. Steps may include changing lifestyle, changing in thinking, and changing in
behaviour.

Participative Management It means involving subordinates in the decision-making process

with their immediate superiors. Here, both the manager and the subordinates are involved in
the decision-making process. It increases the value of the employees by considering them as
part of the management.

Participative management empowers subordinates who know the actual problems and can
contribute to better decision-making. It is necessary to consult employees of different inter-
dependent departments to bring uniformity in their performance.

Green Management One of the new trends in management is green management which
focuses on environmental conservation for the sustainable development of business activities.
It focuses on promotions of green technology that presents the most viable way of meeting with
the new green-related activities.

In today’s business environment managers have to take a step to protect and preserve the
natural environment. To save natural resources most of the large organizations are using
renewable energy sources, adopting new technology that reduces energy consumption,
preserves forests, and conserves water for future use.
 DEPARTMENT OF COMPUTER SCIENCE

Semester VII

GE3751 – PRINCIPLES OF MANAGEMENT

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UNITII– PLANNING

Topics List

1. Nature and Purpose of Planning

2. Planning Process
3. Types of Planning
4. Objectives
5. Policies
6. Planning Premises
7. Strategic Management
8. Planning Tools and Techniques
9. Decision Making Steps and Process

1. NATURE AND PURPOSE OF PLANNING

Every enterprise which strives to survive and grow must place heavy emphasis upon planning. A planner
foresees opportunities and devises ways and means to take advantage from them.

INTRODUCTION TO PLANNING: In designing an environment for the effective performance of

individuals working together in a group, a manager's most essential task is to see that everyone understands
the group's mission and objectives and the methods for attaining them. If group effort is to be effective, people
must know what they are expected to accomplish. This is the function of planning. It is the most basic of all
the managerial functions.
 Planning involves selecting missions and objectives and deciding on the actions to achieve them;
it requires decision-making, i.e., choosing a course of action from among alternatives. Plans thus
provide a rational approach to achieving preselected objectives.

Planning bridges the gap from where we are to where we want to go. It is also important to point
out that planning and controlling are inseparable-the Siamese twins of management (See figure
below). Any attempt to control without plans is meaningless, since there is no way for people to
tell whether they are going where they want to go (the result of the task of control) unless they first
know where they want to go (part of the task of planning). Plans thus furnish the standards of
control.

Definitions
Geogre Terry: Planning is the selecting and relating of facts and the making and using of assumptions
regarding the future in the visualization and formulation of proposed activities believed necessary to achieve
desired results.” According to Terry planning is based on certain assumptions which are required to formulate
policies of the business. The purpose of planning is to achieve business objectives.
Hart: “The determination in advance of a line of action by which certain results are to be achieved.” Planning
is the deciding of a course required for reaching organisational goals. The line of action is decided in advance
so that actual execution becomes easy later on.

Purpose of Planning
1. Planning contributes to Objectives: Planning starts with the determination of objectives. We cannot think
of planning in absence of objective. After setting up of the objectives, planning decides the methods,
procedures and steps to be taken for achievement of set objectives. Planners also help and bring changes in the
plan if things are not moving in the direction of objectives.
For example, if an organisation has the objective of manufacturing 1500 washing machines and in one month
only 80 washing machines are manufactured, then changes are made in the plan to achieve the final objective.

2. Planning is Primary function of management: Planning is the primary or first function to be performed
by every manager. No other function can be executed by the manager without performing planning function
because objectives are set up in planning and other functions depend on the objectives only.
For example, in organizing function, managers assign authority and responsibility to the employees and level
of authority and responsibility depends upon objectives of the company. Similarly, in staffing the employees
are appointed. The number and type of employees again depends on the objectives of the company. So planning
always proceeds and remains at no. 1 as compared to other functions.

3. Pervasive: Planning is required at all levels of the management. It is not a function restricted to top level
managers only but planning is done by managers at every level. Formation of major plan and framing of overall
policies is the task of top-level managers whereas departmental managers form plan for their respective
departments. And lower-level managers make plans to support the overall objectives and to carry on day-to-
day activities.
4. Planning is futuristic/Forward looking: Planning always means looking ahead or planning is a futuristic
function. Planning is never done for the past. All the managers try to make predictions and assumptions for
future and these predictions are made on the basis of past experiences of the manager and with the regular and
intelligent scanning of the general environment.
5. Planning is continuous Planning is a never ending or continuous process because after making plans also
one has to be in touch with the changes in changing environment and in the selection of one best way. So, after
making plans also planners keep making changes in the plans according to the requirement of the company.
For example, if the plan is made during the boom period and during its execution there is depression period
then planners have to make changes according to the conditions prevailing.
6. Planning involves decision making: The planning function is needed only when different alternatives are
available and we have to select most suitable alternative. We cannot imagine planning in absence of choice
because in planning function managers evaluate various alternatives and select the most appropriate. But if
there is one alternative available then there is no requirement of planning.
For example, to import the technology if the licence is only with STC (State Trading Co-operation) then
companies have no choice but to import the technology through STC only. But if there is 4-5 import agencies
included in this task then the planners have to evaluate terms and conditions of all the agencies and select the
most suitable from the company’s point of view.

7. Planning is a mental exercise: It is mental exercise. Planning is a mental process which requires higher
thinking that is why it is kept separate from operational activities by Taylor. In planning assumptions and
predictions regarding future are made by scanning the environment properly. This activity requires higher level
of intelligence. Secondly, in planning various alternatives are evaluated and the most suitable is selected which
again requires higher level of intelligence. So, it is right to call planning an intellectual process.

2. PLANNING PROCESS

Planning involves a number of steps ranging from determining the objectives to follow-up action as detailed
below.The main steps that are taken in planning process are as follows:
1. Establishing Objectives: Establishing the objectives is the first step in planning. Plans are prepared with a
view to achieve certain goals. Hence, establishing the objectives is an important step in the process of planning.
Plans should reflect the enterprise’s objectives. Objectives should clearly define as to what is to be achieved
by policies, procedures, rules, strategies, budgets and programmes. Plan must make sure that every activity
undertaken contributes to the achievement of objectives.

The objectives fixed must clearly indicate what is to be achieved, where action should take place, who is to
perform it, how it is to be undertaken and when it is to be accomplished. That is, managers should be able to
restate the objectives of the firm in definite and clear terms that will motivate examination and evaluation of
performance against targeted performance in the plan. Objectives should be measurable.

2. Determining Planning Premises : This is the second step in planning. Premises include actual forecast
data, policies and plans of the enterprise. Planning involves looking into the future which necessitates the
enterprise to know, how future conditions will affect its activities. Thus, forecasting is an important step in
planning. There are two types of forecasting namely,

 Prediction of general economic conditions.

 Prediction of market conditions for a specific product or service dealt with by the enterprise.

Keeping the general economic conditions in mind, a study of the industry is made. Then the manager proceeds
to make a study of his company’s share of the market. Forecasting will reveal those areas where control is
lacking. Planning will be reliable when the forecast methods are accurate. Hence, the success of the planning
depends very much upon the forecasts.

3. Determining Alternative Courses: Determining alternative courses is the third step in the planning process.
The planner should study all the alternatives, consider the strong and weak points of them and finally select
the most promising ones.

4. Evaluating Alternative Courses : Alternative courses so selected should be evaluated in the light of
premises and goals. Evaluation involves the study of performance of various actions. Various factors such as
profitability, investment requirements, etc., of such alternatives should be weighed against each other. Each
alternative should be closely studied to determine its suitability.

Many other factors such are uncertain future trend, problems faced financially, future uncertainties render the
evaluation process, complex and difficult. Usually, alternative plans are evaluated against factors such as cost,
risks, benefits, organizational facilities, etc. Computer based mathematical plans and techniques can also be
utilized to identify best course of action.
5. Selecting the Best Course: After having evaluated the various alternatives, the most suitable alternative is
selected. With this, the plan can be considered to have been adopted. It is exactly the point at which decisions
are made. Sometimes, in the best interests of the enterprise, several alternative courses can be adopted.

6. Formulating Derivative Plans: Planning is not complete as soon as the best course is selected. The main
plan should be supported by a number of derivative plans. Within the framework of a basic plan, derivative
plans are formulated in each functional area. Segregation of master plan into departmental, sectional and
individual plans, helps to understand the real nature of future uncertainties. To make the planning process more
effective, it should also provide for a feedback mechanism. These plans are meant for the implementation of
the main plan.

7. Implementation of Plans

Implementation of plans is the final step in the process of planning. This involves putting the plans into action
so as to achieve the business objectives Implementation of plans requires establishment of policies, procedures,
standards, budgets, etc.

3. TYPES OF PLANNING

Planning can be classified on the basis of following dimensions:

On the Basis of Content
I. Corporate Planning:
Planning can be undertaken at various levels of the organisation. It may be for the whole organisation or a part
of it. When it is done for the whole enterprise, it is known as corporate planning. It lays down the basic goals,
strategies and policies for enterprise as a whole. Corporate planning integrates various functional plans and
also provides for future contingencies.

The resources of the organisation (micro aspect) are matched to the opportunities and threats in the external
environment (macro aspect). Corporate planning is normally at the top-level management. Hussey defined
corporate planning as, “Corporate planning includes the setting of objectives, organising the work, people and
systems to enable those objectives to be attained, motivating through the planning process and through the
plans, measuring performance and so controlling progress of the plan and developing people through better
decision making, clearer objectives, more involvement and awareness of progress.”
Hussey has given a broad definition of corporate planning. It covers various functions of management besides
defining planning. Corporate planning is related to total planning activity and not to various managerial
functions.

Corporate planning is original and is the starting point of planning process. Corporate planning is not
synonymous to long term planning even though it is related to future activities of the organisation. Long term
planning is not possible without the backing of short-term plans. So corporate planning should not be tied to a
specific period. Normally, corporate planning is divided into strategic planning or long-range planning and
operational, tactical or short range planning.

II Strategic Planning
Strategic planning is the process of planning as to how to achieve organisational objectives with the available

resources and is undertaken by the central management of the business. It is an exercise by the top management

to fix the objectives of the organisation and then plan to achieve them. An assessment of available resources

is made at the top and then things are planned for a time period of upto 10 years. It basically deals with the

total assessment of the organisation, strengths, capabilities and weaknesses and an objective evaluation of

environment is made for future pursuits.

Features of Strategic Planning

The basic features of strategic planning are described as follows:

(i) The basic mission and goals of the organisation, nature of business and the nature of customers are clearly

stated.

(ii) Strategic planning is a long term planning.

(iii) It provides cohesiveness in company’s policies and activities over a long period.

(iv) The more the functions of an organisation affected by plans the more the strategic these are.

(v) It is concerned both with the formulation of goals and the selection of the means by which they are to be

attained.

(vi) Since it determines basic policies and programmes, it is a top management activity.

(vii) It is designed to improve organisation’s relations with environment.

(viii) It is comprehensive and unified plan for the deployment of scarce organisational resources.

(ix) It sets the direction of organisation’s activities for the attainment of goals.

Need for Strategic Planning

Strategic planning is required for the following reasons:

1. Impact of External Factors: There are a number of factors which affect the operations of the business.

These factors include international environment, political and government policies, economic trends,

technological and social changes. Strategic planning must have provisions for the impact of these situations.

2. Proper use of Resources: The natural resources are becoming scarce and human resources are changing

every day. Strategic planning is needed for procuring these resources and allocating them properly. The

traditional work force is giving way to more educated workers. The computers have taken over the routine

jobs. The proper use of various resources requires a proper planning on the part of top management.

3. Ensuring Success: An explosion in information technology has increased the knowledge and better methods

of planning. Since strategic planning helps in achieving success, there is a need to undertake it in most of the

companies.

III. Operational Planning:

Operational planning is also known as tactical or short- term planning normally covering one year or so.
Operational planning involves the conversion of strategic plans into detailed and specific action plans. These
plans are designed to sustain the organisation in its current products and existing markets. Operational planning
is done at the middle or lower level of management.

These plans are to support strategic plans whenever some difficulty is faced in its implementation. Any changes
in internal organisation or external environment have to be met through tactical plans. For example, there is a
sudden change in prices of products, difficulty in procuring raw materials, unexpected moves by competitors,
tactical plans will help in meeting such unforeseen situations.

The success of tactical plans depends upon the speed and flexibility with which management acts to meet
sudden situations. Operational planning is mainly concerned with the efficient use of resources already
allocated and with the development of a control mechanism to ensure efficient implementation of the action
so that business objectives are achieved.
On the basis of time period
 Long term planning
o Time frame beyond five years. Long term Plans: >5yrs
o It specifies what the organization wants to become in long run.
o It involves great deal of uncertainty.
o Higher management levels focus on longer time horizons.
o Cover a longer time
o May include a variety of different types of training
 Some examples Long term Plans:
 An annual plan, including Fast Start and basic training
 Makeup training sessions
 Den chief training
 Regular monthly roundtables
 Supplemental training
 Personal coaching
 Self-study
 We should not overlook the importance of long-range plans in providing a total leadership
growth and development program for leaders.

 Intermediate term/ Midterm planning

o Time frame between two and five years. Medium Term Plans: >1 yr but <5yrs
o It is designed to implement long term plans.

 Short term planning

o Time frame of one year or less. Short term Plans: Upto one year
o It provide basis for day to day operations.
o Meet a particular objective in the near future
o Cover a limited area of training
o Answer the question: Are we doing things, right?
o Should fit well within and contribute to long-range plans
 4. OBJECTIVES

Objectives: Objectives were defined earlier as the important ends toward which organizational and
individual activities are directed. Since writers and practitioners make no clear distinction between
the terms goal and objectives, they are used interchangeably in this book. Within the context of the
discussion, it will become dear whether the objectives are long term or short term, broad or specific.
The emphasis is on verifiable objectives, which means at the end of the period it should be possible
to determine whether or not the objective has been achieved. The goal of every manager is to create
a surplus or profit. Clear and verifiable objectives facilitate measurement of the surplus as well as
the effectiveness and efficiency of managerial actions.

Hierarchy of objectives

Objectives form a hierarchy, ranging from the broad aim to specific individual objectives. The
zenith of the hierarchy is the purpose or mission, which has two dimensions.
1. Social purpose: Contributing to the welfare of people by providing goods and services at a
reasonable price.
2. Mission or purpose of the business: To furnish convenient, low-cost transportation for the
average person. The stated mission might be to produce, market, and service automobiles. The
distinction between purpose and mission is a fine one, and therefore many writers and practitioners
do not differentiate between the two terms. At any rate, these aims are in turn translated into general
objectives and strategies, such as designing, producing, and marketing reliable, low-cost, fuel-
efficient automobiles.
3. Specific objectives: Objectives in the key result areas. These are the areas in which
performance is essential for the success of the enterprise. Although
there is no complete agreement on what the key result areas of a
business should be-and they may differ between enterprises.
Objectives state end results, and overall objectives need to be supported by sub objectives. Thus,
objectives form a hierarchy as well as a network. Moreover, organizations and managers have
multiple goals that are sometimes incompatible and may lead to conflicts within the organization,
within the group, and even within individuals. A manager may have to choose between short- term
and long-term performance, and personal interests may have to be subordinated to organizational
objectives.

Examples of Non-Verifiable and Verifiable objectives

Non-Verifiable Objective

 To make a reasonable profit

 To improve communication
 To improve productivity of the production department
 To develop better managers
 To install a computer system

Verifiable objective
 To achieve a return on investment of 12% at the end of the current fiscal year
 To issue a two-page monthly newsletter beginning July 1, 2005, involving not more than 40
working hours of preparation time (after the first issue)
 To increase production output by 5% by December 31 without additional costs while
maintaining the current quality level
 To design and conduct a 40-hour in-house program on the "fundamentals of
management," to be completed by October 1, involving not more than 200
working hours of the management development staff and with at least 90% of
the 100 managers passing the exam (specified)
 To install a computerized control system in the production department by
December 31, 2005, requiring not more than 500 working hours of systems
analysis and operating with not more than 10% downtime during the first three
months or 2% thereafter.

Advantages of Objectives
 Clear definition of objectives encourages unified planning.
 Objectives provide motivation to people in the organization.
 When the work is goal-oriented, unproductive tasks can be avoided.
 Objectives provide standards which aid in the control of human efforts in an organization.
 Objectives serve to identify the organization and to link it to the groups
upon which itsexistence depends.
 Objectives act as a sound basis for developing administrative controls.
 Objectives contribute to the management process: they influence the
purpose of the organization, policies, personnel, leadership as well as
managerial control.

Process of Setting Objectives

Objectives are required to be set in every area which directly and vitally effects the
survival and prosperity of the business. In the setting of objectives, the following
points should be borne in mind.
• Objectives are required to be set by management in every area which directly
and vitally affects the survival and prosperity of the business.
• The objectives to be set in various areas have to be identified.
• While setting the objectives, the past performance must be reviewed, since
past performanceindicates what the organization will be able to accomplish in
future.
• The objectives should be set in realistic terms i.e., the objectives to
be set should bereasonable and capable of attainment.
• Objectives must be consistent with one and other.
• Objectives must be set in clear-cut terms.

5.POLICIES

A policy in Management is a general statement which is formulated by an organization for the

guidance of its personnel. The objectives are first formulated and then policies are planned to

COURSE FACULTY: MS. M. DEEPA, ASSISTANT PROFESSOR, MBA

achieve them. Policies are a mode of thought and the principles underlying the activities of an
organization or an institution.

Policies acting as principles provide rules of action for achieving organization’s specific
objectives. The coordinating links in the organization are provided by policies. They govern
and guide the actions of an organization’s overall performance and its objectives in the various
areas of operation-production, finance, marketing and personnel.

Features of a Policy

The above discussion reveals the following features of a policy:

(i) A policy is a standing plan which provides answers to recurring problems of a similar nature.

It provides answers/guidelines to the members of an organization for deciding the future course

of action. A policy provides and explains what a member should do rather than what he is

doing.

(ii) A policy limits an area within which a decision is to be taken for the achievement of

organizational goals. It avoids repeated analysis of situations and allow delegation of powers

and still retaining control over actions.

(iii) Policies are models of thought and principles underlying the activities of an organization.

They guide the behaviour and decisions of the executive.

(iv) Policies are framed by all managers in the organization. There is a need for giving

guidelines for future course of action at every level of management. However, the importance

of policy differs according to the level of management. At higher level of management

important policies are decided while at lower level some less important or minor policies are

required.

Purpose of Policies:
Policies are regarded as important for realizing the objectives of the organization. They also
ensure co-ordination of efforts and activities in the enterprise.

The policies are formulated for the following purposes:

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1. The main purpose of policies is to ensure that there is no deviation from the planned course
of action. The framework is set within which everybody is expected to work. Policies ensure
that the broad guides for action are adhered to.

2. Since policies chalk out a framework for each and every person, it ensures proper delegation
of authority also. A manager knows the extent of authority required by a subordinate to
undertake the work allotted to him. Policies serve the purpose of delegating adequate authority
downwards.

3. Policies allow the scope for interpretation. The main aspects are given in a policy but the
actual mode of implementation is decided by the concerned person.

4. Policies are helpful for future planning also. The impact and influence of policies help in
thinking about the future.

5. Policies also ensure consistency of action. The guidelines are similar for everybody and
actions must conform to the broad outlines.

Considerations in Policy Formulation:

1. Organizational Goals:
The policies are formed to achieve organizational goals. The goals are the targets which are to

be achieved and policies devise ways of reaching them. Policies should assist by basing them

on relevant facts and figures and not on mere guess work.

2. Proper Participation:
Policies should be framed by the participation of persons at various levels of management. If

policies are framed at top level without knowing the views of those for whom these are meant

then there is likelihood that policies may not achieve the desired results. To ensure successful

implementation of policies, there is a need for joint participation at the time of formulating

them.

3. Reflect Business Environment:

The policies should be based on the internal and external environment. The situation prevailing

inside and outside will provide a realistic base for policies. The policies should have the

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flexibility for adjustment if there is a change in business environment. Any type of rigidity

followed in policies will defeat their purpose.

4. Consistency:
Various policies of an enterprise should conform to each other. There should be no

inconsistency among various policies. If there is inconsistency among policies then these will

not be implemented. It must be ensured that policies are related to enterprise objectives and do

not give conflicting guidelines.

5. Proper Communication:
The policies should be properly communicated to each level of management. If the policies are

not properly known by those who are to implement them then there will be no use of such

policies. Sometimes policies may not be well understood, there may be some doubt in the minds

of persons, it will be the duty of management to clarify them and provide proper clarification.

6. In Writing:
The policies should always be in writing. This will ensure their proper and correct

implementation. If the policies are not in writing then a dispute may arise about their contents

and purpose. The language of policies should also be simple so that it is well understood by

concerned persons.

Process of Policy Formulation:

Policy formulation is an important aspect of planning. The smooth
working of an organization requires the formulation of policies. A
well thought exercise is essential to formulate sound policies.

Following process should be followed for formulating a

policy:
1. Defining Policy Area:
The area for which a policy is to be framed should be defined. The objectives and needs of the
organization should be kept in mind while specifying the policy area. While framing a
marketing policy, the marketing expectations and thrust areas should be kept in mind. The
scope of the policy will depend upon the area which it is supposed to cover. So first thing in
policy framing is to decide the area which it will cover.

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2. Identifying Policy Alternatives:
The second step in policy formulation is the identification of policy alternatives. The
alternatives should be decided on the basis of an analysis of external and internal environment.
The internal environment will tell about the strengths and weaknesses of the organization while
external environment will reveal opportunities and level of competition. Every alternative must
ensure that the objective of the policy will be achieved.

3. Evaluating Alternatives:
All the alternatives are evolved in the light of organizational objectives. It should be analysed
as to what contribution these alternatives will make in helping the organization for achieving
its objectives. The factors like cost, benefits, resource requirement of each alternative should
be properly assessed. The effect of various alternatives on the environment of the organization
should also be analyzed.

4. Selection of a Policy:
After proper evaluation, most appropriate alternative is selected. The selection of a policy is a
long-term commitment. In case the alternatives do not look satisfactory then efforts should be
made to develop other alternatives.

5. Trial Run of a Policy:

The policy should be implemented on a trial basis. It should be assessed if the policy is
achieving the desired objectives. There may be suggestions during the test run, these should be
used to modify the policy. Ultimately the policy should achieve the desired results otherwise a
new policy alternative should be thought of.

6. Implementing Policy:
If the policy is finally alright it should be implemented. The policy should be explained to those
who are to implement it. There should be a proper discussion about the implications and impact
of various clauses or provisions of the policy. Proper communication of the purpose and
objective of the policy will help it in its implementation.

6.PLANNING PREMISES

Classification of Planning Premises

Planning premises, in the context of business management may be classified in several

ways.
From the standpoint of the existence of assumptions and predictions, both inside and
outside the business enterprise, the planning premises may be classified as:

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(i) Internal and External Premises:
The important internal premises which are internal to the enterprise are the resources and
abilities of the enterprise in the form of men, machines, money and methods, competence of
the management personnel and skills of the labour force; commitment to certain plans, wage
incentive schemes; the sales forecasts of the enterprise and so on.

(ii) External premises are based on factors that prevail outside the enterprise:
In other words, external premises are those assumptions that centre round the various types of
marketing, viz. the product market, materials market, the capital market, the labour market and
so on.

The important external factors which act as important determinants of all such markets are—
(i) the political stability; (ii) sociological factors; (iii) business and economic environment ;
(iv) cultural factors ; (v) population growth ; (vi) government policies and regulations ; (vii)
trade cycles ; and (viii) technological changes and the like.

2. From the standpoint of the possibility of measuring such premises quantitatively, we

can classify planning premises into:
(i) Tangible; and (ii) Intangible planning premises.

Tangible planning premises are those which can be measured quantitatively in one way or the
other, whereas Intangible planning premises defy quantitative measurements because of their
qualitative character.

3. From the Standpoint of the Various Forces and Factors:

We can classify the premises as (i) constant factors and (ii) variable factors.

Constant factors are ignored in planning because they behave in the similar way/fashion,
irrespective of the course of action adopted. Variable factors on the other hand, have a
significant bearing on the sources of planning. Accordingly planning premises is expected to
have a wide coverage so as to encompass all the variable factors.

Generally internal premises are associated with constant factors which are definite, known and
well understood. For instance, the capacity of men and machines and the amount of capital
investment are completely controllable factors and they fall within the powers of management.

COURSE FACULTY: MS. M. DEEPA, ASSISTANT PROFESSOR, MBA

Their variations are dependent upon the decisions of the management. As such, no prediction
or forecast is necessary to ascertain their position, in the years to come. Sales volume of the
business unit can be partly controlled by the activities of the management.

We also come across many other factors which lie beyond the controlling powers of
management. The managerial personnel can only look into the future to assess their variations
in the years to come.

In other words, forecasting gives the managers an idea or knowledge of their variations. But
no forecasting is required in the case of constant factors, even though they are included on the
list of planning premises. That is why it is claimed that the scope of premising is larger than
the scope of forecasting.

4. From the Standpoint of the Possibility of Exercising Control over the Planning
Premises, they may be classified into three types, viz:
(i) Fully controllable premises

(ii) Partly controllable premises

(iii) Absolutely non-controllable premises

(i) Fully controllable premises: refer to the assumptions about those factors pertaining to the

enterprise like the products; rules etc. which the company management is expected to follow

over the future period and the ways in which these are likely to affect the plans of the enterprise.

These factors are known as controllable premises, because these are subject to the decision of

the management.

(ii) Partly controllable premises: include assumptions about those factors which are only

partially controllable through suitable management policies and decisions, but cannot be fully

controlled by the management.

For instance, industry demands the share of the firm in the market, union-management relations

or factors which must be considered partially as being given and partially as being subjected to

decision-making on the part of the management. The plans for any business enterprise will

naturally have to be based on proper assumptions with regard to these factors.

(iii) Absolutely non-controllable premises: refer to the assumptions about the economy, the
political situations, strikes, wars, natural calamities, new discoveries and inventions,

COURSE FACULTY: MS. M. DEEPA, ASSISTANT PROFESSOR, MBA

emergency, legislation and other similar events during the coming years, which cannot be

predicted and controlled at all by the management, although they can upset all well-thought out

calculations on many occasions.

These cannot be influenced and controlled through management policy and decisions.

Although a management cannot do anything about these factors, it must take them into account

while planning for expansion of the existing capacity. It should not forget the fact that the

efficacy of the present command policy is becoming increasingly restricted and should think

of appropriate alternative changes promptly. If such factors are not considered, the plans will

remain as mere wishes.

7. STRATEGIC MANAGEMENT

strategy of an organisation or sub-unit of the larger organisation is a conceptualisation

expressed or implied by the organisation’s leader of:
(a) The long-term objectives or purposes of the organisation;
(b) The broad constraints and policies either self-imposed by the leader or accepted by him
from his superiors that currently restrict the scope of the organisation’s activities; and
(c) The current set of plans and near-term goals that have been adopted in the expectation of
contributing to the achievement of the organisation objectives.
Strategic planning or strategy formulation can be understood in terms of a decision framework
given by Herbert A. Simon. According to him, strategic planning may be characterised in terms
of three phases – Intelligence, Design and Choice.
Intelligence activity aims at doing brainstorming in identification of problems after
environmental analysis and diagnosis. Design activity aims at structuring of criteria to make
selections. Choice activity leads to finally making the selection.

1. Formal Structured Approach:

Under this approach, systematic procedures and planning programmes are set since it is formal
and structured approach; planners are making the best use of different types of planning system.
Such as – strategic, long-range or corporate planning, depending on the variables of the
situation.
This being the first approach, in the process of strategic decision making, it is classified
into a three-tier process:

COURSE FACULTY: MS. M. DEEPA, ASSISTANT PROFESSOR, MBA

i. Diagnostic Phase – It is devoted to identify the company’s aims and objectives.
ii. Directions Phase – In this stage, necessary direction are given adhering to the strategies and
the preferential choice as laid down in the alternative strategies.
iii. Implementation Phase – Lastly, the process deals with the implementation of the action plan
so as to achieve the goal.

2. Entrepreneurial Approach:
Under this approach, every attempt is made to exploit the available opportunities in the best
interest of the company. The strategist anticipates opportunities and based on this assumption,
he takes strategic decisions after carefully diagnosing them to his best capacity. With such a
necessary precaution; he will select the course of action best suited to get maximum benefits.
He, being responsible for good or bad results, should analyse the probable consequences of the
decisions taken. This approach is by nature of self-interest and self-oriented and, hence, is
commonly adopted by individual entrepreneurs and small business houses. It is seldom
practiced in the corporate sector.
3. Incremental Approach:
Also known as muddling through Approach. The management under this types of approach is
least interested to have strategies one after the other as a regular process but prefers to have
one strategy or an alternative only when it is compelled by unavoidable circumstances. The
main aim of the management is to settle the issues of negotiation with different groups
concerned in the organisation.

Even when alternatives are suggested, the management will see that they are simple. Easily
understandable and important from the point of view of employees so that changes made will
prove non- disruptive. The whole emphasis under this approach is laid on negotiated settlement
and hence whatever strategic decisions seldom taken are for remedial nature.

This type of approach is largely adopted by public companies which are generally supposed to
work under social and political pressure and deal with the human behaviour that goes on
changing with the passage of time.
4. Initiative-Anticipatory Approach:
This approach is largely built up on forecasting the future by the promoter or chief executive,
who accordingly makes the strategic decisions. The success of this approach depends upon the
promoter’s intuition, experience, judgment and methods absorbed by him to deal with a variety
of strategic problems.
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It is a promoter’s personal approach and he is responsible to do and undo business strategies in
the organization he is handling such an approach is generally adopted in the promotional stage
of the company.

5. Adoptive Approach:
Under this approach, strategic decisions are taken on the basis of how a change in the
environment is going to have impact at a given time. Hence, no decision can be for a
considerably long time as environment under which the company operates is likely to change.
So, in order to keep pace with the changing environment, the strategy decisions must be
reviewed with reference to the current positions of the company, its objectives and
effectiveness of the existing strategy. When the management finds that the situation is unstable,
risky and the future is gloomy, it may adopt contingency planning instead of adopting long-
term strategies, which may not fit in the changing situations.
So, in an uncertain environment, the whole emphasis is on adoptive approach to face the
changes effectively. Taking the nature into consideration it may also be called as integrated
approach, varying from situation to situation. In this way, under the adoptive approach, there
will be different approaches to strategic decision making.

Strategic Components and Contents of Marketing Plan: Executive Summary, Situation

Analysis, Opportunity Analysis, Objectives and More…
In professionally managed companies, marketing planning is a formal exercise undertaken on
an annual basis. There is no uniformity in the contents of marketing plans of different firms.
Generally, marketing plans have the following contents:
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i. Executive summary – This is an overall bird’s eye view of the marketing plan. It tells the
focus of the plan and is generally targeted to the top management.
ii. Situation analysis – This component presents data on sales, costs, profits, the market,
competition and the macro environment.
iii. Opportunity analysis – Here the marketer identifies the major opportunities/threats and
strengths/weaknesses.
iv. Objectives – The marketer must decide on the plan’s financial and marketing objectives.
v. Marketing strategy – The marketer now outlines the broad marketing strategy.
vi. Action programmes – The marketing plan must specify the broad marketing programmes
for achieving the business objectives.

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vii. Projected profit and loss account – Action plans allow the marketer to build a supporting
budget. The budget becomes the basis for developing plans for material procurement,
manpower planning and production scheduling.
viii. Control systems – In order to ensure that performance is as per planned schedule, it is
necessary to evolve control systems which can help management take corrective mid-course
action.

1. Use:
Once a strategic marketing plan is in place, the company can use the plan as a guide in
conducting its daily business as well as making short-term and long-term decisions.
Implementation of the strategic marketing plan typically leads companies to the tactical
marketing portion of conducting business.
The strategic marketing plan transitions into the company’s plan for product and service
development; the communication plan on how the company intends on promoting the business
offerings; developing the sales plan; and finally putting together the customer service plan on
how the company intends on interacting with current and potential customers.
2. Benefits:
The primary benefit of a strategic marketing plan is that it puts a written guide in place for a
business to follow to reach its goals and objectives. The second major advantage of strategic
marketing planning is that is allows the business to create and utilize consistent messaging
internally and externally.
Consistent messaging in marketing creates efficient companies because employees and
customers understand what the company offers and how the company offers it. They work
toward a common goal. Efficient companies typically see an increase in revenues and market
share, while it sees a decrease in expenses. Ultimately, it all leads to an increase in company
profitability.
3. Time Frame:
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Strategic marketing planning is not a one-time action, but rather an ongoing process. Typically,
a company creates a strategic marketing plan that covers short-term (one year) and long-term
(two year, three year and five year plans) periods. When a strategic marketing plan is put in
place, the company uses it as a guide for six months to one year at a time.
The company then evaluates the strategic plan by measuring the results of the marketing
programs the plan put in place. After evaluating the strategic marketing plan on a six- month

COURSE FACULTY: MS. M. DEEPA, ASSISTANT PROFESSOR, MBA

or one-year basis, the company may tweak the plan to improve efforts that didn’t go as planned
or to mimic the results of plans that achieved success.
4. Considerations:
Effective strategic marketing planning requires companies to conduct a great deal of research
and to really get to know its target market. Companies need to fully get to know who the target
market is, how they think and feel, what they do, how old they are, where they live, what their
hobbies are and more.
Companies need to be able to live, think, breathe and feel like their target market to develop
products and services that fit the needs of the target market. Companies need to remember that
product and service development needs to have an existing marketing to sell, rather than
developing products and services, and then seeking out a target market in which to sell it.

As you think about strategic directions, consider the following:

i. What are distinctive areas of expertise?
ii. What business should you be in over the next three to five years or long term?
iii. What types of categories of customers will you serve?
iv. What customer functions are you likely to satisfy as you see the market evolve?
v. What technologies will you see to satisfy customer/market needs?
vi. What changes are taking place in the markets, consumer behavior, competition,
environment, culture and the economy?
The point of this exercise is that the responsibility for defining a strategic direction no longer
belongs only to the upper management. Managers from various departments like marketing,
product development, manufacturing, finance and sales, contribute to the overall strategic
direction of a business by asking, “What business should I be in for my individual product?”
The major work in this area of strategic thinking is attributed to Theodore Levitt, of the Harvard
Business School, in his classic article, “Marketing Myopia”. Using the railroad as a prime
example, Levitt shows how the railway system declined in use as technology advanced,
because managers defined their product too narrowly. He explains that to continue growing,
companies must determine customer’s needs and wants and not rely simply on the longevity
of their products.
According to Levitt, a myopic view is based on the following four beliefs that begin in a
manager’s mind and permeate in an organization that may be explained as:
(i) Growth is guaranteed by an expanding and affluent population;
(ii) There is no competitive substitute for the company’s major products;
(iii) Excessive belief in mass production and rapidly declining units coats as output rises; and

COURSE FACULTY: MS. M. DEEPA, ASSISTANT PROFESSOR, MBA

(iv) Preoccupation with a product that lends itself to experimentation, manufacturing cost
improvement.
The strategic marketing planning process for an organization. Looking out the window toward
inevitable changes, not into a mirror that reflects existing patterns, is the distinguishing
characteristics of a market-driven, rather than a product driven, organization. A strategic
direction for one of Dow Chemical’s agriculture herbicide products formally reads: “Chemical
control of brush on right-of-way.” This product driven orientation was too “myopic” and came
across more as a product definition than a strategic vision.
When revised to reflect a border market driven focus that would drive future product and
market development, it reads: Provide high-quality products and services to meet vegetation
management goals on right-of-way, industrial, municipality and aquatic/wetland sites at a
profit. Products and services may include chemical, mechanical, application, distribution,
consultation and establishment of desirable vegetation.
It may be analyzed as how expansive the statement is and how it defines potential and
product/markets development. In other words, it summarizes a vision. In another example,
Becton Dickinson, a health care firm, originally described the strategic direction for one of its
hypodermic needles as, “Our strategic direction is to be the leading manufacturer of
hypodermic products for the health care field.”
Here, too, this narrow focus of good intentions was broadened to provide a forward-looking
orientation. The revamped statement reads as- Our strategic direction is to meet the needs of
consumers and health care providers for drug-delivery devices by offering a full line of
hypodermic products and products systems.
Our leadership position will be maintained through acquisition to provide alternative
administration and monitoring systems. Guided by such a statement, managers could expand
their vision and direct the product line into innovative product systems, technologies, and
ultimately expand their holds on existing markets and launch into new markets.
Planning is the approach to making decisions concerning systematic allocation of resources. It
is worth emphasizing that planning is a process, not an event. It is organic and ongoing and it
is a key element of the overall management process. Planning is a way of defining your own
future and if you don’t like what you see, you are able to change your plan. With the above in
mind, it is possible to define a strategic plan as a formal written document of what you intend
your firm to become, the vision of its future position and value.
A strategic plan is a detailed, specific declaration of your intentions with regard to customers,
competitors, suppliers, investors, equipment, location, employees and the future of your firm.
It is a way of getting commitment from management, key employees and other key persons
associated with your firm.

COURSE FACULTY: MS. M. DEEPA, ASSISTANT PROFESSOR, MBA

Strategic planning is systematic means of making the firm successful through the discipline of
strategic thinking and vision used as a framework for all other decisions in the firm. Strategic
planning requires an honest evaluation of the company’s current situation and where it has been
in the past.
Finally, strategic planning demands the commitment of the owner/CEO for it to be successful.
It requires commitment of resources, both financial and personnel, for its development. It
demands complete follow up. A plan that is not carried out due to lack of leadership or the
required tools needed for completion is a total failure and a waste of time and money.
The four critical planning steps for managers to observe in this process area are as
follows:
Step 1- Strategic Directions:
Define the scope of company, business unit, or product line. Establishing a strategic direction
forces you to think of unit’s competencies, the customers want to be served over the next three
to five years, the technologies you will need, and the environment and competition you will
face. Westinghouse redefined its strategic directions from a defense contractor to a provider of
products and services for the total surveillance business.
Step 2- Objectives and Goals:
As illustrated in the auto parts and the electric utility cases, indicate the performance
expectations such as sales, profits and other quantitative objectives. Also list non-quantitative
objectives, including upgrading distribution channels, building specialty products, upgrading
field services, and launching new or upgrading old products.
Step 3- Growth Strategies:
Select strategies to reach objectives. These relate to product positioning, product quality,
distribution, pricing, packaging, value-added services, and customer/technical services.
Step 4- Business Portfolio:
Develop a product and market portfolio strategy that defines the following:
i. Existing products into existing markets.
ii. Existing products into new markets (Westinghouse focused on law enforcement markets).
iii. New products into existing markets.
iv. New products into new markets.
The strategy to market the product can be processed in many ways such that you can position
the existing products into existing markets and the process is identified as- (i) market
penetration. You can also view the existing products for new markets, which you can define as
(ii) market development. Also look at introducing new products into existing markets, a process
known as (iii) product development. Finally look at new products for new markets, expressed
as (iv) diversification. To use the grid, list products and markets in each of the quadrants.

COURSE FACULTY: MS. M. DEEPA, ASSISTANT PROFESSOR, MBA

The listing will then serve as a guideline for product-market growth for long term. Review of
the strategic portion of the strategic marketing plan makes it apparent that you can no longer
think narrowly about a product.

8. PLANNING TOOLS AND TECHNIQUE

Techniques of Forecasting
There are various methods of forecasting. However, no method can be suggested as universally
applicable. In fact, most of the forecasts are done by combining various methods.

1. Historical Analogy Method:

Under this method, forecast in regard to a particular situation is based on some analogous
conditions elsewhere in the past. The economic situation of a country can be predicted by
making comparison with the advanced countries at a particular stage through which the country
is presently passing.

Similarly, it has been observed that if anything is invented in some part of the world, this is
adopted in other countries after a gap of a certain time. Thus, based on analogy, a general
forecast can be made about the nature of events in the economic system of the country. It is
often suggested that social analogies have helped in indicating the trends of changes in the
norms of business behaviour in terms of life.

Likewise, changes in the norms of business behaviour in terms of attitude of the workers
against inequality, find similarities in various countries at various stages of the history of
industrial growth. Thus, this method gives a broad indication about the future events of general
nature.

2. Survey Method:
Surveys can be conducted to gather information on the intentions of the concerned people. For
example, information may be collected through surveys about the probable expenditure of
consumers on various items. Both quantitative and qualitative information may be collected by
this method.

On the basis of such surveys, demand for various products can be projected. Survey method is
suitable for forecasting demand—both of existing and new products. To limit the cost and time,
the survey may be restricted to a sample from the prospective consumers.

COURSE FACULTY: MS. M. DEEPA, ASSISTANT PROFESSOR, MBA

3. Opinion Poll:
Opinion poll is conducted to assess the opinion of the experienced persons and experts in the
particular field whose views carry a lot of weight. For example, opinion polls are very popular
to predict the outcome of elections in many countries including India. Similarly, an opinion
poll of the sales representatives, wholesalers or marketing experts may be helpful in
formulating demand projections.

If opinion polls give widely divergent views, the experts may be called for discussion and
explanation of why they are holding a particular view. They may be asked to comment on the
views of the others, to revise their views in the context of the opposite views, and consensus
may emerge. Then, it becomes the estimate of future events.

4. Business Barometers:
A barometer is used to measure the atmospheric pressure. In the same way, index numbers are
used to measure the state of an economy between two or more periods. These index numbers
are the device to study the trends, seasonal fluctuations, cyclical movements, and irregular
fluctuations.

These index numbers, when used in combination with one another, provide indications as to
the direction in which the economy is proceeding. Thus, with the business activity index
numbers, it becomes easy to forecast the future course of action.

However, it should be kept in mind that business barometers have their own limitations and
they are not sure road to success. All types of business do not follow the general trend but
different index numbers have to be prepared for different activities, etc.

5. Time Series Analysis:

Time series analysis involves decomposition of historical series into its various components,
viz. trend, seasonal variances, cyclical variations, and random variances. When the various
components of a time series are separated, the variation of a particular situation, the subject
under study, can be known over the period of time and projection can be made about the future.

A trend can be known over the period of time which may be true for the future also. However,
time series analysis should be used as a basis for forecasting when data are available for a long
period of time and tendencies disclosed by the trend and seasonal factors are fairly clear and
stable.

COURSE FACULTY: MS. M. DEEPA, ASSISTANT PROFESSOR, MBA

6. Regression Analysis:
Regression analysis is meant to disclose the relative movements of two or more inter-related
series. It is used to estimate the changes in one variable as a result of specified changes in other
variable or variables. In economic and business situations, a number of factors affect a business
activity simultaneously.

Regression analysis helps in isolating the effects of such factors to a great extent. For example,
if we know that there is a positive relationship between advertising expenditure and volume of
sales or between sales and profit, it is possible to have estimate of the sales on the basis of
advertising, or of the profit on the basis of projected sales, provided other things remain the
same.

7. Input-Output Analysis:
According to this method, a forecast of output is based on given input if relationship between
input and output is known. Similarly, input requirement can be forecast on the basis of final
output with a given input-output relationship. The basis of this technique is that the various
sectors of economy are interrelated and such inter-relationships are well-established.

For example, coal requirement of the country can be predicted on the basis of its usage rate in
various sectors like industry, transport, household, etc. and how the various sectors behave in
future. This technique yields sector-wise forecasts and is extensively used in forecasting
business events as the data required for its application are easily obtained.

9.DECISION MAKING STEPS AND PROCESS

To diagnose the problem

The first step in decision-making is to understand the exact problem.Just as a disease cannot
be cured without proper diagnosis, so also no decision-making is possible unless the problem
is properly diagnosed or known.

It is told that a disease is half cured if it is correctly diagnosed. Similarly, if the problem is
correctly understood, its solution will be easier.For example, when a company is faced with
declining profits, it shows the symptom and not the disease.

The managers may decide to solve the problem through intensive sales effort. But if the real
problem lies elsewhere which may need change or product lines, or reduction of price and
improvement of quality, the intensified sales effort will not bring the desired result.

COURSE FACULTY: MS. M. DEEPA, ASSISTANT PROFESSOR, MBA

So, correct assessment of the real problem is essential for decision-making. Diagnosing the real
problem implies knowing the gap between what is and what ought to be, identifying the reasons
for the gap, and understanding the problem in relation to higher objectives of the organisation.

2. To analyse the problem

After correct diagnosis of the problem, the next task is to analyse the problem. This means
splitting up of the problem into its different elements based on collection of facts, data and
relevant information. For instance, if there is a declining trend in sales, it should analyse its
extent in regard to market, price, product line, etc.

So, all possible facts and data relating to the situation must be gathered to find out the revealing
circumstances that may help the decision-maker to gain an insight into the problem. The whole
approach of analysis of the problem should be based around the limiting or critical factors
within minimum possible time and efforts.

3. To search for alternative solution:

After ascertaining and analysing the problem, different possible alternatives are to be found
out for its solution. A problem can be solved in several ways. However, all the ways cannot be
equally satisfying. Further, if there is only one way of solving a problem, no question of
decision-making arises.

That particular way is to be accepted. Therefore, the decision-maker must try to find out the
various alternatives available in order to get the most satisfactory result of a decision.

However, it should be borne in mind that it may not be possible to consider all alternatives,
because information about all alternatives may not be available, or some of the alternatives
cannot be considered for selection due to the obvious limitation of the decision-maker. While
determining alternatives, the concept of limiting factor should be applied.

A limiting factor is one that stand in the way of accomplishing a desired objective. If these
factors are identified, the managers will confine their search for alternatives to those which will
overcome the limiting factors. For instance, if an enterprise has limitation in raising sizable
finances, it cannot consider the projects involving high investment.

4. To evaluate the alternative:

After the various alternatives are identified, the decision-maker will go for evaluating them to
find out how each alternative may contribute towards the objectives supposed to be achieved

COURSE FACULTY: MS. M. DEEPA, ASSISTANT PROFESSOR, MBA

by implementing the decision. In evaluating an alternative both tangible and intangible factors
have to be taken into account.

Tangible factors are those which can be quantified because they are quite obvious like the cost
per unit, investment required, output to be received, etc. Such factors can be measured easily.
As against these, intangible factors are mostly qualitative and cannot be measured in terms of
quantity.

For example, in a plant location, various non-economic factors like psychological problem
arising out of displacement of persons from the plant site, ecological balance, etc. have to be
considered which cannot be quantified

5. To select the best alternative:

The evaluation of various alternatives presents a clear picture as to how each one of them
contributes to the objectives under question. A comparison is made among the likely outcomes
of various alternatives and the best one is chosen. Choice aspect of decision-making is related
to deciding the most acceptable alternative which gives the greatest number of wanted
consequences to fit with the organisational objectives.

A manager with sound knowledge, long experience and considerable ability may choose the
best course of action easily. When there is any confusion, some criteria may be useful for
picking up the best solution.

These criteria are:

(i) Degree of risk against the expected gains;

(ii) Economy of effort;

(iii) Timing, and

(iv) Availability of resources.

6. To make the decision effective:

Once the alternative is selected, it is put into action. Truly speaking, the actual process of
decision-making ends with the choice of the best alternative through which the objectives can
be achieved. However, decision-making, being a continuous and on-going process, must ensure
that the objectives have been achieved by the chosen alternative. Unless this is done, the
managers will never know what result their choice has contributed.

COURSE FACULTY: MS. M. DEEPA, ASSISTANT PROFESSOR, MBA

The decision, in order to be implemented must be communicated to the employees concerned
in clear and simple language and their acceptance of the decision must be secured. All decisions
affect the employees and their work. It is, therefore, necessary to secure their willing support
and whole-hearted participation.

7. To follow-up the decision:

When the decision is put into action, it brings certain results. If a good decision is taken and
implemented properly, its results should correspond with the objectives. So, results of the
decision indicate whether decision-making and its implementation are proper. But all decisions
cannot be said to be perfect and flawless.

Decisions are not always based on facts, some guesswork may be necessary for this purpose.
Moreover, there is the human limitation associated with each decision-making process. In order
to provide safeguards against incorrect, bad and inappropriate decisions, it is desirable to
introduce a system of follow-up in the light of feedback received from the results.

This provides the scope of rectifying the wrong decisions and modifying similar future
decisions to tune them up with environmental changes. It is clear from the above discussion
that decision-making is not a simple affair. Its formulation and effectiveness depend upon a
number of factors stated above.

COURSE FACULTY: MS. M. DEEPA, ASSISTANT PROFESSOR, MBA

 DEPARTMENT INFORMATION TECHNOLOGY

Semester VII

GE3751 – PRINCIPLES OF MANAGEMENT

**************************************************************************

UNIT III – ORGANIZING

Topics List

1. Nature and Purpose – Formal and Informal Organizations

2. Organization Chart, Organization Structure & Types
3. Line and Staff Authority
4. Departmentalization
5. Delegation of Authority
6. Centralization and Decentralization
7. Job Design
8. Human Resource Management
9. HR Planning, Recruitment & Selection
10. Training & Development
11. Performance Management
12. Career Planning & Management

**************************************************************************

1. NATURE AND PURPOSE – FORMAL AND INFORMAL

ORGANIZATIONS

DEFINITION: According to Koontz and O'Donnell, "Organization involves the grouping of

activities necessary to accomplish goals and plans, the assignment of these activities to
appropriate departments and the provision of authority, delegation and co-ordination.
"Organization involves division of work among people whose efforts must be co-ordinated to
achieve specific objectives and to implement pre-determined strategies.
NATURE OR CHARACTERISTICS OF ORGANIZING
Division of Work: Division of work is the basis of an organization. In other words, there
can be no organization without division of work. Under division of work the entire work of
business is divided into many departments. The work of every department is further sub-
divided into sub-works.
Coordination: Under organizing different persons are assigned different works but the aim of
all these persons happens to be the some - the attainment of the objectives of the enterprise.
Organization ensures that the work of all the persons depends on each other’s work even though
it happens to be different. The work of one person starts from where the work of another person
ends. The non-completion of the work of one person affects the work of everybody. Therefore,
everybody completes his work in time and does not hinder the work of others.
Plurality of Persons: Organization is a group of many persons who assemble to fulfill
a common purpose. A single individual cannot create an organization.
Common Objectives: There are various parts of an organization with different functions
to perform but all move in the direction of achieving a general objective.
Well-defined Authority and Responsibility: Under organization a chain is
established between different posts right from the top to the bottom. It is clearly specified as to
what will be the authority and responsibility of every post.
Organization is a Structure of Relationship: Relationship between persons working
on different posts in the organization is decided. In other words, it is decided as to who will be
the superior and who will be the subordinate. Leaving the top level post and the lowest level
post everybody is somebody's superior and somebody's subordinate.
Organization is a Universal Process: Organization is needed both in business and non-
business organizations. Not only this, organization will be needed where two or mom than two
people work jointly. Therefore, organization has the quality of universality.

FORMAL AND INFORMAL ORGANIZATION

Formal Organisation:
Nature of Formal Organization: When the managers are carrying on organising process then

as a result of organising process an organisational structure is created to achieve systematic

working and efficient utilization of resources. This type of structure is known as formal

organisational structure.

Formal organisational structure clearly spells out the job to be performed by each individual,

the authority, responsibility assigned to every individual, the superior- subordinate relationship
and the designation of every individual in the organisation. This structure is created

intentionally by the managers for achievement of organisational goal.

FEATURES OF FORMAL ORGANISATION

 The formal organisational structure is created intentionally by the process of organising.

 The purpose of formal organisation structure is achievement of organisational goal.

 In formal organisational structure everyone is assigned a specific job, fixed authority or

decision-making power.

 Formal organisational structure results in creation of superior-subordinate relations and a

scalar chain of communication in the organisation.

ADVANTAGES OF FORMAL ORGANISATION

Systematic Working: Formal organisation structure results in systematic and smooth

functioning of an organisation.
Achievement of Organisational Objectives: Formal organisational structure is established to
achieve organisational objectives.
No Overlapping of Work: In formal organisation structure work is systematically divided
among various departments and employees. So there is no chance of duplication or overlapping
of work.
Co-ordination: Formal organisational structure results in coordinating the activities of various
departments.
Creation of Chain of Command: Formal organisational structure clearly defines superior
subordinate relationship, i.e., who reports to whom.
More Emphasis on Work: Formal organisational structure lays more emphasis on work than
interpersonal relations.

DISADVANTAGES OF FORMAL ORGANISATION

Delay in Action: While following scalar chain and chain of command actions get delayed in

formal structure.

Ignores Social Needs of Employees: Formal organisational structure does not give

importance to psychological and social need of employees which may lead to demotivation of

employees.
Emphasis on Work Only: Formal organisational structure gives importance to work only; it

ignores human relations, creativity, talents, etc.

INFORMAL ORGANISATION
 In the formal organisational structure individuals are assigned various job positions.

 While working at those job positions, the individuals interact with each other and develop

some social and friendly groups in the organisation.

 This network of social and friendly groups forms another structure in the organisation

which is called informal organisational structure.

 The informal organisational structure gets created automatically and the main purpose of

such structure is getting psychological satisfaction.

 The existence of informal structure depends upon the formal structure because people

working at different job positions interact with each other to form informal structure and

the job positions are created in formal structure.

 So, if there is no formal structure, there will be no job position, there will be no people

working at job positions and there will be no informal structure.

FEATURES OF INFORMAL ORGANISATION

 Informal organisational structure gets created automatically without any intended efforts of
managers.

 Informal organisational structure is formed by the employees to get psychological

satisfaction.

 Informal organisational structure does not follow any fixed path of flow of authority or
communication.

 Source of information cannot be known under informal structure as any person can
communicate with anyone in the organisation.

 The existence of informal organisational structure depends on the formal organisation

structure.

ADVANTAGES OF INFORMAL ORGANISATION:

Fast Communication: Informal structure does not follow scalar chain so there can be faster

spread of communication.

Fulfils Social Needs: Informal communication gives due importance to psychological and
social need of employees which motivate the employees.
Correct Feedback: Through informal structure the top level managers can know the real

feedback of employees on various policies and plans.

DISADVANTAGES OF INFORMAL ORGANISATION

Spread of Rumours: According to a survey 70% of information spread through informal

organisational structure are rumours which may mislead the employees.
No Systematic Working: Informal structure does not form a structure for smooth working of
an organisation.
May Bring Negative Results: If informal organisation opposes the policies and changes of
management, then it becomes very difficult to implement them in organisation.
More Emphasis to Individual Interest: Informal structure gives more importance to
satisfaction of individual interest as compared to organisational interest.

2. ORGANIZATION CHART, STRUCTURE AND TYPES

Organizational Structure: The formal arrangement of jobs within an organization

Organizational Chart: The visual representation of organization’s structure

TYPES OF ORGANIZATION STRUCTURES

HIERARCHICAL STRUCTURE: The hierarchical model is the most popular organizational

chart type. There are a few models that are derived from this model. In a hierarchical
organization structure, employees are grouped with every employee having one clear
supervisor. The grouping is done based on a few factors; hence many models are derived from
this. Below are a few of those factors

Function – employees are grouped according to the function they provide. The below image
shows a functional organizational chart with finance, technical, HR, and admin groups.

Geography – employees are grouped based on their region. For example, in the USA
employees might be grouped according to the state. If it’s a global company the grouping could
be done accordingly.

Product – If a company is producing multiple products or offering different services it can be

grouped according to the product or service.
 A functional organizational chart, a variation of the hierarchical model

Pros and Cons of hierarchical structure

Pros

 Helps establish a clear line of authority and reporting within the organization
 Clarifies employee roles and responsibilities
 Establishes a clear career path for employees which can in turn keep them motivated
 Allows employees to be in-depth specialists as they are more likely to have niche
positions

Cons

 Slow decision-making due to the complicated chains of command

 A disconnect of lower-level employees from those of the top-level management
 Inconsistencies in communication due to the vertical and horizontal levels between teams
 Restricted information due to the very little downward flow of information to the lower-
level employees
MATRIX STRUCTURE : In a Matrix organizational structure, the reporting relationships are
set up as a grid, or matrix, rather than in the traditional hierarchy. It is a type of
organizational management in which people with similar skills are pooled for work
assignments, resulting in more than one manager to report
Pros and Cons of Matrix Structure
Pros

 Helps eliminate traditional siloed communications barriers

 Improved decision-making due to the availability of two chains of command
 Allows employees to use their skills in different roles
 Better use of resources which leads to increased efficiency

Cons

 May result in confusion regarding roles, responsibilities, and priorities

 Conflict of power between the project manager and the functional manager
 Blurred lines of accountability
 Large overhead costs due to employing several managers

A Matrix Structure Organizational Structure

HORIZONTAL STRUCTURE: This is an organizational chart type mostly adopted by small

companies and start-ups in their early stage. It’s almost impossible to use this model for larger
companies with many projects and employees.

The most important thing about this structure is that many levels of middle management are
eliminated. This enables employees to make decisions quickly and independently. Thus,
a well-trained workforce can be more productive by directly getting involved in the decision-
making process. This works well for small companies because work and effort in a small
company are relatively transparent.

Pros and Cons of Horizontal Structure

Pros

 Fosters better communication and collaboration between team members

 More autonomy and responsibility to employees
 More transparency due to limited bureaucracy
 Because the chain of command is shorter, it allows for faster decision-making

Cons

 Lack of opportunities for employee progression

 Risk of power struggles arising due to the lack of a formal system
 Employees may have a lower sense of accountability because they have one lead
 Risk of confusion because employees don’t have a clear supervisor

Horizontal Organizational Structure

NETWORK STRUCTURE: Network organizational structure helps visualize both internal

and external relationships between managers and top-level management. They are not only less
hierarchical but are also more decentralized and more flexible than other structures.

The idea behind the network structure is based on social networks. Its structure relies on open
communication and reliable partners; both internal and external. The network structure is
viewed as agiler than other structures because it has few tires, more control, and a bottom flow
of decision making.
Using a Network organizational structure is sometimes a disadvantage because of its
complexity. The below example of a network org chart shows the rapid communication
between entities.

Pros and cons of Network Structure

Pros

 Promotes healthy competition, innovation, and collaboration

 Allows organizations to adapt quickly to changes in their environment
 Paves way for an environment that fosters healthy competition, innovation, and
collaboration
 Smaller, streamlined teams help save costs and contribute to improved efficiency

Cons

 Due to teams being independent and small, large-scale tasks may prove difficult to
accomplish
 Without immediate supervision, network organizations may struggle with control over
employees
 Can create an environment where employees compete in an unhealthy manner with each
other to perform tasks
 When work is outsourced, secret information about the organization may get breached

DIVISIONAL STRUCTURE: Divisional types of organizational charts have their own

division which corresponds to either products or geographies. Each division contains
the necessary resources and functions needed to support the product line and
geography.

Another form of divisional org chart structure is the multi-divisional structure. It’s
also known as M-form. It is a legit structure in which one parent company owns
several subsidiary companies, each of which uses the parent company’s brand and
name

The main advantage of the divisional structure is the independent operational flow,
that failure of one company does not threaten the existence of the others.

Pros and Cons of Divisional Structure

Pros

 Makes it much easier to assign responsibility for actions and results

 Works well in markets where there is high competition as local managers can quickly
respond to changes in local conditions
 Tends to yield faster responses to local market conditions
 Helps build a culture that contributes both to higher morale and a better knowledge of the
division’s portfolio
Cons

 Multiple divisions add more overhead costs to the organization

 When several functional areas are spread among many divisions, it might lead to
inefficiencies
 With skills being compartmentalized by division, it can be difficult to transfer skills or best
practices across the organization
 Since each division may have its own strategic goal, it might not always align with the
overall company strategy.

Divisional Structure Chart

LINE ORGANIZATIONAL STRUCTURE: Line organizational structure is one of the

simplest types of organizational structures. Its authority flows from top to bottom. Unlike
other structures, specialized and supportive services do not take place in these organizations.
The chain of command and each department head has control over their departments. The self-
contained department structure can be seen as its main characteristic.

Pros and Cons of Line Organizational Structure

Pros

 It is the simplest method of administration and is easy to understand and manage

 Since it’s easy to add or remove levels of management, this approach can be beneficial
to companies that are constantly growing and changing
 Since the decision-making authority is concentrated at the top, it allows for faster
decisions
 Ensures that everyone is well-aligned with formalized rules and procedures within a
line organization
Cons

 Being overly reliant on-line officials may become an issue in instances where they
aren’t available
 Line organizational structures are rigid and inflexible, as such they maintain discipline
so rigorously that they can rarely change
 Might create a culture of favoritism based on relationships or friendship
 Since the department manager is concerned only with the activities of his own
department, employees are only skilled in tasks of their own department

Line Structure Chart

3. LINE AND STAFF AUTHORITY

Line authority entitles a manager to direct the work of an employee. It is the employer–
employee authority relationship that extends from the top of the organization to the lowest
echelon, according to the chain of command. As a link in the chain of command, a manager
with line authority has the right to direct the work of employees and to make certain decisions
without consulting anyone. Of course, in the chain of command, every manager is also subject
to the authority or direction of his or her superior.

Keep in mind that sometimes the term line is used to differentiate line managers from staff
managers. In this context, line refers to managers whose organizational function contributes
directly to the achievement of organizational objectives. In a manufacturing firm, line managers
are typically in the production and sales functions, whereas managers in human resources and
payroll are considered staff managers with staff authority. Whether a manager’s function is
classified as line or staff depends on the organization’s objectives.

For example, at Staff Builders, a supplier of temporary employees, interviewers have a line
function. Similarly, at the payroll firm of ADP, payroll is a line function As organizations get
larger and more complex, line managers find that they do not have The time, expertise, or
resources to get their jobs done effectively. In response, they create staff authority functions
to support, assist, advise, and generally reduce some of their in-formational burdens.

Staff Authority: Positions with some authority that have been created to support, assist, and
advise those holding line authority. For instance, a hospital administrator who cannot
effectively handle the purchasing of all the supplies the hospital needs create a purchasing
department, which is a staff function. Of course, the head of the purchasing department has line
authority over the purchasing agents who work for him. The hospital administrator might also
find that she is overburdened and needs an assistant, a position that would be classified as a
staff position.

Line Authority
 Staff Authority

4. DEPARTMENTALIZATION

The basis by which jobs are grouped together. How jobs are grouped together is called as
“Departmentalization”. It means of dividing the large and complex organisation into small
administrative units. Grouping of activities and personnel into manageable units facilitates
administrative control.

Need and Importance of Departmentalization

Advantages of Specialisation: Departmentation enables an enterprise to avail of the benefits

of specialisation. When every department looks after one major function, the enterprise is
developed and efficiency of operations is increased.

Feeling of Autonomy: Normally departments are created in the enterprise with certain degree
of autonomy and freedom. The manager in charge of a department can take independent
decisions within the overall framework of the organisation

Expansion: One manager can supervise and direct only a few subordinates. Grouping of
activities and personnel into departmentation makes it possible for the enterprise to expand and
grow.

Fixation of Responsibility: Departmentation enables each person to know the specific role he
is to play in the total organisation. The responsibility for results can be defined more clearly,
precisely and accurately

Facility in Appraisal: Appraisal of managerial performance becomes easier when specific

tasks are assigned to departmental personnel. Managerial performance can be measured when
the areas of activities are specified and the standards of performance are fixed.
Upliftment of Managerial Skill: Departmentation helps in the development of managerial
skill. Development is possible due to two factors. Firstly, the managers focus their attention on
some specific problems which provide them effective on-the-job training. Secondly,
managerial need for further training can be identified easily because the managers’ role is
prescribed and training can provide them opportunity to work better in their area of spe-
cialisation.

COMMON FORMS OF DEPARTMENTIZATION

The more commonly used bases are

 Function
 Product
 Territory
 Process
 Customer

DEPARTMENTATION BY FUNCTIONS: The enterprise may be divided into departments

on the basis of functions like production, purchasing, sales, financing, personnel etc. This is
the most popular basis of departmentation.

ADVANTAGES AND DISADVANTAGES OF DEPARTMENTATION BY FUNCTION

Advantages
 It is the most logical and natural form of departmentation.

 It ensures the performance of all activities necessary for achieving the organisational

objectives.

 It provides occupational specialisation which makes optimum utilization of man-power

and facilitates delegation of authority.

 It enables the top managers to exercise effective control over a limited number of
functions and eliminates duplication of activities.

 It simplifies training because the managers are to be experts only in a narrow range of

skills.

Disadvantages
 There may be conflicts between departments.

 The scope for management development is limited. Functional managers do not get

training for top management positions. The responsibility for results cannot be fixed on

any one functional head.

 There is too much emphasis on specialisation and there may be difficulties in coordinating

the activities of different departments.

 There may be inflexibility and complexity of operations.
DEPARTMENTATION BY PRODUCTS: In product departmentation, every major product
is organised as a separate department. Each department looks after the production, sales and
financing of one product. Product departmentation is useful when the expansion, diversifica-
tion, manufacturing and marketing characteristics of each product are primarily significant.

It is generally used when the production line is complex and diverse requiring specialised

knowledge and huge capital is required for plant, equipment and other facilities such as in

automobile and electronic industries.

ADVANTAGES AND DISADVANTAGES OF DEPARTMENTATION BY

PRODUCTS

ADVANTAGES
 Product departmentation focuses individual attention to each product line which fa-

cilitates the expansion and diversification of the products.

 It ensures full use of specialised production facilities. Personal skill and specialised

knowledge of the production managers can be fully utilised.

 The production managers can be held accountable for the profitability of each product.

Each product division is semi-autonomous and contains different functions.

 The performance of each product division and its contribution to total results can be

easily evaluated.

 It is more flexible and adaptable to change.

DISADVANTAGES

 It creates the problem of effective control over the product divisions by the top
managers

 Each production manager asserts his autonomy disregarding the interests of the
organisation.

 The advantages of centralisation of certain activities like financing, and accounting

are not available.

 There is duplication of physical facilities and functions. Each product division main-
tains its own specialised personnel due to which operating costs may be high.
  There may be under-utilisation of plant capacity when the demand for a particular
product is not adequate.

DEPARTMENTATION BY TERRITORY: Territorial or geographical departmentation is

especially useful to large-scale enterprises whose activities are widely dispersed. Banks, insu-
rance companies, transport companies, distribution agencies etc. are some examples of such
enterprises.

It is obviously not possible for one functional manager to manage efficiently such widely
spread activities. This makes it necessary to appoint regional managers for different regions.

ADVANTAGES OF DEPARTMENTATION BY TERRITORY

 Every regional manager can specialise himself in the peculiar problems of his region.

 It facilitates the expansion of business to various regions.

 It helps in achieving the benefits of local operations. The local managers are more
familiar with the local customs, preferences, styles, fashion, etc. The enterprise can gain
intimate knowledge of the conditions in the local markets.

 It results in savings in freight, rents, and labour costs. It also saves time.

 There is better co-ordination of activities in a locality through setting up regional

divisions.

 It provides adequate autonomy to each regional manager and opportunity to train him
as he looks after the entire operation of a unit.

DISADVANTAGES OF DEPARTMENTATION BY TERRITORY

 There is the problem of communication.

 It requires more managers with general managerial abilities. Such managers may not
be always available.

 There may be conflict between the regional managers.

 Co-ordination and control of different branches from the head office become less
effective.

 Owing to duplication of physical facilities, costs of operation are usually high.

DEPARTMENTATION BY CUSTOMERS: In such method of departmentation, the

activities are grouped according to the type of customers. For example, a large cloth store may
be divided into wholesale, retail, and export divisions.

ADVANTAGES AND DISADVANTAGES OF CUSTOMER DEPARMENTATION

ADVANTAGES
 Special attention can be given to the tastes and preferences of each type of customer.

 Different types of customers can be satisfied, easily through specialised staff. Customers’

satisfaction enhances the goodwill and sale of the enterprise.

 The benefits of specialisation can be gained.

 The enterprise may acquire intimate knowledge of the needs of each category of customers.

DISADVANTAGES
 Co-ordination between sales and other functions becomes difficult because this method can

be followed only in marketing division.

 There may be under-utilisation of facilities and manpower in some departments,

particularly during the period of low demand.

 It may lead to duplication of activities and heavy overheads,

 The managers of customer departments may put pressures for special benefits and facilities.

DEPARTMENTATION BY PROCESS OR EQUIPMENT: In such type or departmentation

the activities are grouped on the basis of production processes Involved or equipment used.
This is generally used in manufacturing and distribution enterprises and at lower levels of
organisation.

ADVANTAGES AND DISADVANTAGES OF PROCESS DEPARMENTATION

ADVANTAGES
 The basic object of such departmentation is to achieve efficiency and economy of
operations. The processes are set in such a way that a series of operations is feasible making
operations economic. Efficiency can be achieved if departments are created for each
process as each one has its peculiarities.

 It provides the advantages of specialisation required at each level of the total processes.
The maintenance of plant can be done in better way and manpower can be utilised
effectively.

DISADVANTAGES
In such departmentation, there may be difficulty in coordinating the different process-
departments, because the work of each process depends fully on the preceding process. So,
there are chances of conflicts among the managers looking after the different processes. It
cannot be used where manufacturing activity does not involve distinct processes.

FACTORS CONSIDERED IN DEPARTMENTATION

Specialisation: The activities of an organisation should be grouped in such a way that it leads
to specialisation of work. Specialisation helps to improve efficiency and ensure economy of
operations.
Co-ordination: Quite different activities may be grouped together under one executive
because they need to be co-ordinated. So, the basis of departmentation should ensure that the
dissimilar activities are put together in one department.

Control: Departmentation should be such that it facilitates the measurement of performance

and adoption of timely corrective action. It should enable the managers to hold the employees
accountable for results.

Proper Attention: All the activities which contribute to the achievement of subordinate
results should be given adequate attention. This will ensure that all necessary activities are
performed and there is no unnecessary duplication of activities.

Economy: Creation of departments involves extra cost of additional space, equipment and
personnel. So, the pattern and number of departments should be so decided that maximum
possible economy is achieved in the utilisation of physical facilities and personnel.

Local Condition: While forming departments adequate attention to the local conditions
should be given. This is more important to the organisation which operates in different
geographical areas. Departmentation should be adjusted according to the available resources.

Human Consideration: Departmentation should also consider the human aspect in the
organisation. So, along with the technical factors discussed above, departments should be
created based on availability of personnel, their attitude, aspiration and value systems,
informal work groups, cultural patterns, etc.

5. DELEGATION OF AUTHORITY
It is an important managerial practice of getting things done through others by sharing authority

with them. In any typical organisation, the policy and strategic decisions are taken by Board of

Directors and actual implementation of these is entrusted to the Chief Executive. However, the

chief executive alone cannot do the entire work. He cannot even supervise the work of all

individuals working in different departments. He can pass on some portions of his authority to

different departmental managers and commit them to specific tasks of supervision and

operation. This is called as “Delegation of Authority”.

Delegation of Authority involves three steps

STEP-I: ASSIGNMENT OF WORK

 The first step in delegation is the assignment of work or duty to the subordinate i.e.,

delegation of authority.

 The superior asks his subordinate to perform a particular task in a given period of time.
 It is the description of role assigned to the subordinate. Duties in terms of functions or tasks

to be performed constitute the basis of delegation process.

STEP – II: GRANTING OF AUTHORITY

 Process of delegation the second element of the delegating authority to the subordinate so
that the assigned task is accomplished.
 The delegation of responsibility without authority is meaningless. The subordinate can
only accomplish the work when he has authority required for completing that task.
 Authority is derived from responsibility

STEP – III: CREATION OF ACCOUNTABILITY

 Accountability is the obligation of a subordinate to perform the duty assigned to him.

 The delegation creates an obligation on the subordinate to accomplish the task assigned

to him by the superior.

 When a work is assigned and authority is delegated then the accountability is the by-

product of this process.

 The authority is transferred so that a particular work is completed as desired

IMPORTANCE OF DELEGATION

 Delegation leads to better decisions.

 Delegation relieves the manager from heavy work load.

 Delegation helps to improve the motivation and morale of subordinates.

 Delegation speeds up decision making.

 Delegation facilitates training of subordinates.

 Delegation creates a formal organisation structure

6. CENTRALIZATION AND DECENTRALIZATION

Meaning and Definitions Centralisation implies that a majority of the decisions having to do

with the work being performed are not made by those doing the work but at a point high.

According to Louis A. Allen, “Centralisation is the systematic and consistent reservation of

authority at central points within the organisation.”

Centralisation of authority has following implications

(a) Reservation of decision-making power at the top level.
(b) Reservation of operating authority with the middle level managers.

(c) Operations at lower levels are closely regulated by the top level.

ADVANTAGES OF CENTRALISATION

It Promotes Personal Leadership: In case of small enterprises, personal leadership is an

important factor for the success. Similarly, businesses in early stages have operations relatively
on a small scale therefore top manager can concentrate entire authority with himself.

Helps in Achieving Uniformity of Action: Where a company wishes all operative units to
perform certain functions in the same manner and at the same time, there must be centralisation
of appropriate decision-making.

To Provide for Integration: Centralised control enables organisation in keeping all the parts
of the enterprise moving harmoniously towards a common objective.

To Handle Emergencies: In uncertain business conditions, centralisation of decision-making

is essential as there are chances that emergency conditions may develop to endanger the very
existence of the company.

To Overcome Duplication: Centralisation of various functions at the top level avoids

duplication of equipment and efforts and thus leads to economy in operations.

LIMITATIONS OF CENTRALISATION
 It can delay decision-making process as decision-making is not allowed at the lower levels.

 It leads to increases the burden on the top managers and hampers the growth of lower-level

managers.

 It reduces motivation and morale of the lower level executives.

 Success and growth of the enterprise becomes dependent on the capability of top executives

 The chances of misuse of authority by the top executives increases.

DECENTRALISATION
Meaning and Definitions
Most of the time, decentralisation is confused with delegation. But, decentralisation means
much more than simple delegation. According to McFarland, decentralisation is a situation in
which ultimate authority to command and ultimate responsibility for results is localised as far
down in the organisation as efficient management of the organisation permits.

Factors Responsible for Decentralisation

 When top management does not want to devote much time in communication, it takes
recourse of decentralisation.
 Decentralisation is necessary to introduce flexibility in operation during growth and
expansion phase of organisation.
 Organisation can exploit the benefit of technological advancements through
decentralisation of its activities.
 When decision are required to be taken on the spot, decentralisation becomes necessity.
 When the activities are physically located at different places, decentralisation is urgently
required for timely and successful completion of the work.

ADVANTAGES OF DECENTRALISATION
 The top management gets relief from routine work and can focus on matters of strategic

importance.

 Radical improvement is noticed in work performance as the decisions are taken from close

quarters after correct and timely judgement.

 High degrees of morale and motivation is established among the subordinates that

contribute to their efficiency level in a positive manner.

 Chances of risk gets minimized as the decision making power gets distributed among the

top, middle and lower level of management.

 Diversified product lines may be nurtured as their present status, future potentials, etc. may

be determined readily by the top officials along with middle level and lower level managers.

DISADVANTAGES OF DECENTRALISATION
 It often becomes a problem to coordinate the diversified goals and activities of various

decision-making bodies.

 Decentralisation of authority calls for duplication of work, procedures and equipment

which tends to become costly.

 In case of emergency situations that calls for quick decisions, decentralisation of

authority becomes an obstacle.

 The lower and middle level managers might take decisions on matters which are beyond

their scope of operation. This leads the top managers to situations that go beyond their
control.

7. JOB DESIGN

Job design is the process of organizing work into the tasks required to perform a specific
job. It involves the conscious efforts to organize tasks, duties and responsibilities into a
unit of work to achieve certain objectives.

The jobs should be designed in such a way that it motivates the employees to execute it in
the best possible manner. Job design is the logical sequence of the process of job analysis
and involves conscious efforts to organize tasks, duties and responsibilities into a unit of
work so as to business objectives. Job design is the logical sequence to job analysis.
GOALS OF JOB DESIGNING

 Facilitating the interest of employees towards the job and enhancing their satisfaction
 Increasing employee motivation and productivity
 Enhancing employees’ skills by identifying their training needs
 Covering the modern needs of employee participation
 Ensuring safer working environment
 Making the communication process clear and effective in the organization
 Improving the quality of working life of employees
 Eliminating the unnecessary levels of supervision, checking, and control
 Establishing high-level standards for customer service
 Minimizing cost by reducing wastage.

Objectives of Job Designing

Quality: The ability of staff to produce high-quality products and services can be affected
by job design. This includes avoiding errors in the short term, but also includes designing
jobs which encourage staff to improve that job

Speed: Sometimes speed of response is the dominant objective to be achieved in job

design. For example, the way in which the jobs of emergency service personnel are
organised

Dependability: Dependable supply of goods and services is usually influenced, in some

way, by job design. For example, in the postal services, working arrangements,
multiskilling, accurate use of sorting equipment etc plays a vital role

Flexibility: Job design can affect the ability of the operation to change the nature of its
activities. New product or service flexibility, mix flexibility, volume flexibility and
delivery flexibility are all dependent to some extent on job design.

Cost: All the elements of job design described above will have an effect on the
productivity, and therefore, the cost of the job. Productivity in this context means the ratio
of output to labour input

Health and Safety: Whatever else a job design achieves, it must not endanger the well-
being of the person who does the job, other staff of the operation, the customers who might
be present in the operation, or those who use any products made by the operation.

Quality of Working Life: The design of any job should take into account its effect on bob
security, intrinsic interest, and variety, opportunities for development, stress level and
attitude of the person performing the job.

FACTORS AFFECTING JOB DESIGNING

1. ORGANIZATIONAL FACTORS
Organizational factors that affect job design can be work nature or characteristics, work
flow, organizational practices and ergonomics.

(a)Work Nature: There are various elements of a job and job design is required to classify
various tasks into a job or a coherent set of jobs. The various tasks may be planning,
executing, monitoring, controlling etc. and all these are to be taken into consideration
while designing a job.

(b) Ergonomics: Ergonomics aims at designing jobs in such a way that the physical
abilities and individual traits of employees are taken into consideration so as to ensure
efficiency and productivity.

(c) Workflow: Product and service type often determines the sequence of work flow. A
balance is required between various product or service processes and a job design ensures
this.

(d) Culture: Organizational culture determines the way tasks are carried out at the work
places. Practices are methods or standards laid out for carrying out a certain task. These
practices often affect the job design especially when the practices are not aligned to t he
interests of the union.

2. ENVIRONMENTAL FACTORS
Environmental factors affect the job design to a considerable extent. These factors include
both the internal as well as external factors. They include factor like employee skills and
abilities, their availability, and their socioeconomic and cultural prospects.

(a) Employee availability and abilities- Employee skills, abilities and time of availability
play a crucial role while designing the jobs. The above-mentioned factors of employees
who will actually perform the job are taken into consideration. Designing a job that is
more demanding and above their skill set will lead to decreased productivity and employee
satisfaction.

(b) Socio economic and cultural expectations- Jobs are nowadays becoming more
employee centered rather than process centered. They are therefore designed keeping the
employees into consideration. In addition the literacy level among the employees is also
on the rise. They now demand jobs that are to their linking and competency and which
they can perform the best.

BEHAVIOURAL FACTORS
Behavioural factors or human factors are those that pertain to the human need and that
need to be satisfied for ensuring productivity at workplace. They include the elements like
autonomy, diversity, feedback, etc.

8. HUMAN RESOURCE MANAGEMENT - HR PLANNING,

RECRUITMENT & SELECTION

Ensuring that the organization has the right number and kinds of capable people in the right
places and right times.
Meaning: E.W. Vetter viewed human resource planning as “a process by which an
organisation should move from its current manpower position to its desired manpower
position. Through planning, management strives to have the right number and right kind
of people at the right places at the right time, doing things which result in both the
organisation and the individual receiving maximum long-run benefit.

IMPORTANCE OF HUMAN RESOURCE PLANNING

Assessing Future Personnel Needs: Whether it is surplus labour or labour shortage, it

gives a picture of defective planning or absence of planning in an organization. A number
of organizations, especially public sector units (PSUs) in India are facing the problem of
surplus labour. It is the result of surplus labour that the companies later on offer schemes
like Voluntary Retirement Scheme (VRS) to eliminate surplus staff.

Foundation for Other HRM Functions: HRP is the first step in all HRM functions. So,
HRP provides the essential information needed for the other HRM functions like
recruitment, selection, training and development, promotion, etc

Coping with Change: Changes in the business environment like competition, technology,
government guidelines, global market, etc. bring changes in the nature of the job. This
means changes in the demand of personnel, content of job, qualification and experience
needed. HRP helps the organization in adjusting to new changes.

Investment Perspective: As a result of change in the mindset of management, investment

in human resources is viewed as a better concept in the long run success of the enterprise.
Human assets can increase in value as opposed to physical assets. Thus, HRP is considered
important for the proper planning of future employees.

Expansion and Diversification Plans: During the expansion and diversification drives,
more employees at various levels are needed. Through proper HRP, an organization comes
to know about the exact requirement of personnel in future plans.

Employee Turnover Every organization suffers from the small turnover of labour,
sometime or the other. This is high among young graduates in the private sector. This
necessitates again doing manpower planning for further recruiting and hiring.

Conformity with Government Guidelines In order to protect the weaker sections of the
society, the Indian Government has prescribed some norms for organizations to follow.
For example, reservations for SC/ST, BC, physically handicapped, ex-servicemen, etc. in
the jobs. While planning for fresh candidates, HR manager takes into consideration all the
Government guidelines.

International Expansion Strategies: International expansion strategies of an

organization depend upon HRP. Under International Human Resource Manage ment
(IHRM), HRP becomes more challenging. An organization may want to fill the foreign
subsidiary’s key positions from its home country employees or from host-country or from
a third country. All this demands very effective HRP.

Having Highly Talented Manpower Inventory: Due to changing business environment,

jobs have become more challenging and there is an increasing need for dynamic and
ambitious employees to fill the positions. Efficient HRP is needed for attracting and
retaining well qualified, highly skilled and talented employees.
 9. FACTORS INFLUENCING HUMAN RESOURCES PLANNING

External Factors:
Government Policies: Policies of the government like labour policy, industrial relations
policy, policy towards reserving certain jobs for different communities and sons-of the
soil, etc. affect the HRP.

Level of Economic Development: Level of economic development determines the level

of HRD in the country and thereby the supply of human resources in the future in the
country.

Business Environment: External business environmental factors influence the volume

and mix of production and thereby the future demand for human resources.

Level of Technology: Level of technology determines the kind of human resources

required.

International Factors – International factors like the demand for resources and supply of
human resources in various countries.

Outsourcing – Availability of outsourcing facilities with required skills and knowledge

of people reduces the dependency on HRP and vice-versa.

Internal Factors

Company Policies and Strategies: Company policies and strategies relating to expansion,
diversification, alliances, etc. determines the human resource demand in terms of quality
and quantity.

Human Resource Policies: Human resources policies of the company regarding quality
of human resource, compensation level, quality of work-life, etc., influences human
resource plan.

Job Analysis: Fundamentally, human resource plan is based on job analysis. Job
description and job specification determines the kind of employees required.

Time Horizons: Companies with stable competitive environment can plan for the long run
whereas the firms with unstable competitive environment can plan for only short - term
range.

Type and Quality of Information: Any planning process needs qualitative and accurate
information. This is more so with human resource plan; strategic, organisational and
specific information.

Company’s Production Operations Policy: Company’s policy regarding how much to

produce and how much to buy from outside to prepare a final product influence the number
and kind of people required.

Trade Unions: Influence of trade unions regarding number of working hours per week,
recruitment sources, etc., affect the HRP.
 RECRUITMENT

Recruitment is the processes of finding the apt candidates and inducing them to apply for
the job in an organisation. The recruitment should be a sound one.

OBJECTIVES OF RECRUITMENT

 To attract people with multi-dimensional skills and experiences those suit the present
and future organisational strategies,

 To induct outsiders with a new perspective to lead the company,

 To infuse fresh blood at all levels of the organisation,

 To develop an organisational culture that attracts competent people to the company,

 To search or head hunt/head pouch people whose skills fit the company’s values,

 To devise methodologies for assessing psychological traits,

 To seek out non-conventional development grounds of talent,

 To search for talent globally and not just within the company,

 To design entry pay that competes on quality but not on quantum,

 To anticipate and find people for positions that does not exist yet.

Purpose of recruitment

 To determine the present and future requirements of the organization in conjunction

with the personnel planning and job analysis activities.
 To enhance the pool of potential job aspirants with minimal cost.
 To enhance the success rate of the selection process by reducing the number of, under-
qualified or overqualified job applicants.
 To effectively reduce the probability of job applicants, once recruited and selected,
will leave the organization only after a short period of time.
 To meet the organization’s legal and social obligations regarding the composition of
its workforce.
 To start identifying and preparing potential job applicants who will be appropriate
candidates.
 To increase organizational and individual effectiveness in the short and long-term.
 To evaluate the effectiveness of various recruiting techniques and sources for all types
of job applicants.
 To support and form the basis of the manpower retention plan of the organization.
 To form the basis of the manpower development process by hiring the future talents.

FEATURES OF RECRUITMENT

Some of the essential features of recruitment are:

 Recruitment is a searching and attracting function – It is mainly concerned with

searching and attracting the potential candidates towards organization.
 Recruitment is not a selection – Recruitment involves searching the potential
candidates and attracting them towards organization to apply for the job. But selection
involves choosing suitable candidate among those who have applied for job.
 It is a process – Recruitment is a process of series of activities like recruitment policy,
sources of recruitment, technique of tapping those sources and evaluation of those
sources etc.
 It is a linking activity – Recruitment brings together those who have a job (employer)
and those who search a job (employees)
 It is a pervasive function – This function needs to be performed by all organizations
which need human resources.
 It is one of the functions of personnel management – It is an important function of
personnel management as it helps in acquiring different number and types of persons
for continued functioning of an organization.

SOURCES OF RECRUITMENT
There are two sources of recruitment namely
 Internal Sources
 External Sources
INTERNAL SOURCES Whenever a job falls vacant, it can be filled up by giving a
promotion to the present employee of the company. It is based on the promotion policy
followed by the company. In certain cases, a same cadre staff member is deputed to the
job by the company. This is called a transfer.

Advantages
 It increases the morale among the staff members of the company.
 Giving promotion keeps the employee happy.
 It attracts efficient staff members.
 The training expenses may be reduced, to some extent.
 A person who has got a promotion, inspires the staff members to acquire a thorough
knowledge of his job.
 Internal promotion helps the staff members to derive job satisfaction.
 A promoted staff member may make use of his past experience in the new post.
 It increases the security of the job of the staff member.
 A new responsibility can be entrusted safely to the promoted staff members on the
basis of contents of Service Register.
 It ensures the continuity of job to the staff members and stability of the organisation.
 It induces the staff members to work hard to get promotion.
 The expenses for advertisement, recruitment, test and interview are avoided.
Disadvantages
  If the higher post is filled internally, the company will not be able to get fresh and
original ideas and initiative from the staff members.
 The outsiders do not have a scope to show their ability in the performance of the
work.
 An under-qualified person may be appointed in the higher post.
 If the promotion is guaranteed to the internal staff members after the expiry of a
specific period, the concerned staff member does not care to work efficiently.
EXTERNAL SOURCES
There are various external sources of recruitment.
1. Advertisement: When a company wants to inform the public that it has a vacancy, it
puts up an advertisement. The details of the job and the qualification of the candidates are
briefly given. The company may receive the applications in response to the advertisement.
After that, interview will be conducted.
In certain cases, the walk in interview method may be adopted by the company. In the
walk-in-interview method, the applications are received from the candidates. The date and
time and place of the interview are mentioned in the advertisement.
2. Recommendations: Here, recommendation means appointment of a person on getting
a recommendation letter from a person reliable and well-known to the company.
3. Gate Applicants: The educated unemployed youth may contact the company to get
employment. These candidates may not have any recommendations. Even t he company
might not have issued any advertisement for the post. The candidate personally approaches
the appointing authority of the company. If such candidate is found fit for any one of the
posts which are vacant at that time, the candidate is appointed.
4. Employment Exchange: The job seekers register their names with their qualifications
with the employment exchange. The company can get a list of candidates who have
requisite qualifications to fit in a job. Out of the listed candidates, any one of them can be
selected.
5. Personnel Consultant: Private consultant is a separate specified agency doing the
function of recruitment of the personnel on behalf of the company. In other words, the
functions of personnel department of any company are performed by the personnel
consultants.
6. Educational Institutions – Campus Interview: Universities, colleges and institutions
are formed to offer specific courses. The educational institutions make an arrangement for
campus interview. The business concerns come to the campus of educational institutions
to recruit the students for various posts. The selected students are requested to join the
post after completing the course.
7. Waiting List: The business concern prepares a waiting list of candidates who have
already been interviewed. But, they are not appointed for lack of vacancy. Whenever a
vacancy arises, the vacancy may be filled up by the company out of the waiting list.
8. Unsolicited Applicants: Unsolicited applications means the application received
through mail from the candidate. The application brings the information regarding the
name and address of the candidate, his age, educational qualification, experience, area of
interest, etc.
9. Jobbers and Contractors: The casual vacancy may be filled up by the company
through the jobbers and contractors. Normally, unskilled candidates are appointed in this
way. They are available at short notice and for a less salary.
10. Field Trips:A company may send a group of experts to the towns and the cities where
the various kinds of candidates required by the company are available. In this case, a prior
advertisement may be issued in newspapers. The advertisement contains information
regarding the date, venue and time of the interview. The interview is conducted in differ ent
places. This is procedure followed to recruit the candidates under field trips.
 SELECTION
Meaning: Finding the interested candidates who have submitted their profiles for a
particular job is the process of recruitment, and choosing the best and most suitable
candidates among them is the process of selection
Selection Process involves 7 steps
Step1: Preliminary Interview: It is the first step in selection. Initial screening is done in
this step and all the undesirable applicants are weeded out. This interview is generally
conducted by lower level executives. It is a very important step as it shifts out all the
unqualified, not desirable applicants and the HR manager can then concentrate on the other
applicants without wasting time.

Step 2: Screening of Applicants: These days application forms of almost all organizations
can be downloaded from the website or may even be provided on request. The form asks
for basic things like educational qualifications, experience, age etc.
Once the filled application is brought to the screening committee, it checks the details and
calls the candidate for selection test. The purpose of this screening test is also to read out
the hot suitable candidates as spending time on them means waste of money.

Step 3: Employment Tests: Employment tests are device to check the areal knowledge of
candidates for the respective jobs. These tests are very specific as they enable the
management to bring out right type of people for the jobs.

The following tests are given to candidate in most cases:

(a) Intelligence Tests: They test the mental ability of candidates. These tests measure the
learning ability of candidates in understanding questions and their power to take quick
decision on crucial points. People who are able to quickly answer to these questions are
found to be skilful and can be offered training to improve skills for the job in organization.

(b) Aptitude Tests: They test an individual’s capacity to learn a particular skill. There are
mainly two types of aptitude tests. Cognitive tests which measure intellectual, mental
aptitudes. The second one is called motor tests which check the hand – eye coordination
of employees.

(c) Proficiency Tests: These tests are also called performance or occupational tests. They
determine the skills and knowledge acquired by an individual through experience and on
the job training.

Step 4: Selection Interview: Interview is an examination of the candidate where he sits face
to face with the selection body and answers to their information given by the candidate
about his abilities and the requirements of the jobs.
Interview gives the recruiter an opportunity to:

(a) Assess subjective aspects of the candidate.

(b) Know about his enthusiasm and intelligence.
(c) Ask questions which were not a part of his application.
(d) Obtain as much information from him as possible about his economic, social and
cultural background.
(e) Give facts about the policies, procedures, culture of the company so that he feels good
about joining it.

Step 5. Checking of References: Once the candidates interview is over, the reference he
had mentioned are checked by the personnel department. His old employers may be asked
some quick questions on phone about the candidate’s behavior with co-workers,
management etc. Further his/her regularity at work and his character can also be inquired
about from other references.

Step 6. Medical Examination: After a candidate has been approved for the job, his physical
fitness is examined through medical specialists of the company. If the report says that he
or she is medically fit for the job they are then finally selected. In case there is a problem
with the fitness, the candidates are given reasons for rejection.

Step 7. Final Selection/Hiring: The line managers are then asked to give final decision
after all technical and medical tests are cleared by the candidate. A true understand ing
between the line manager and the HR manager facilitates good selection. Therefore, the
two together take final decision and intimate it to the candidate. The HR department may
immediately send appointment letter to the selected person or after some time as the time
schedule says.
10.TRAINING AND DEVELOPMENT
Training and development make employees more productive and effective. It is actively
and intimately related to all the personnel or managerial activities. It is an integral part of
the whole management program with all its many activities functionally inter-related.
Training and development is also important for any organization that wants to take
advantage of changes, techniques and improvements.

Optimum Utilization of Human Resources: Human resources need to be polished and

trained to enhance their potential. Training and development of employees helps to make
the best use of the employee’s overall worth to the organization.

Creating a Highly Skilled, Motivated and Enthusiastic Workforce: The existing

workforce is trained to increase their productivity, and motivated to contribute their best
towards the organization. The employees will be more confident about themselves and
enthusiastic about their job. They will adapt to technological changes and innovations
more readily.

Increase Productivity: Knowledge about usage of sophisticated machinery and new

technology is imparted to employees which will enable them to use the equipment more
efficiently and thereby increase productivity.

Build Team Spirit Training often takes place in groups where the trainees are encouraged
to interact with each other and discuss organizational issues. This helps to create team
spirit among the employees.

Healthy Work Environment: Training and development programmes help to modify the
thought and behaviour process of the employees in such a way that is conducive to building
a healthy work environment.
Personal Growth of Employees: Development programmes provide opportunities to the
employees to enhance their skills and knowledge and help them to achieve better career
growth.

Promote Learning Culture: The employees are encouraged to continuously learn new
concepts and update their talents. This helps to promote a learning culture within the
organization which would greatly help in its future sustenance and growth.

Improve Employee Morale: When employees are trained to become better performers,
they feel a sense of accomplishment. They realize that they are effectively contributing
towards organizational goals and thus get a morale boost.

Better Managerial Skills: Training and development programmes inspire the employees
to think, plan, solve problems and take important decisions. This hones up their managerial
skills.

Reduce Employee Turnover: A well trained employee will take more interest in his job
and will be a more efficient worker. He will get more job satisfaction. People who love
their jobs are more loyal towards the organization.

11. PERFORMANCE MANAGEMENT

Performance Management is creating systems, processes and practices that manage and
leverage performance of individuals, teams, work units and consequently of the whole
organization in a continuous and sustainable manner. ‘Managing’ performance is about
planning performance
OBJECTIVES AND BENEFITS OF PERFORMANCE MANAGEMENT
Performance management system has the following objectives

 Develop clear job descriptions.

 Select appropriate people with an appropriate selection process.
 Negotiate requirements and accomplishment-based performance standards, outcomes,
and measures.
 Provide effective orientation, education, and training.
 Provide on-going coaching and feedback.
 Conduct quarterly performance development discussions.
 Design effective compensation and recognition systems that reward people for their
contributions.
 Provide promotional/career development opportunities for staff.
 Assist with exit interviews to understand WHY valued employees leave the
organisation.

Objectives of Performance Management Systems (PMS)

 Develop clear job descriptions (JDs).

 Select appropriate people with an appropriate selection process.
 Negotiate requirements and accomplishment-based performance standards, outcomes
and measures.
 Provide effective orientation, education and training.
 Provide on-going coaching and feedback.
 Conduct quarterly performance development discussions.
 Design effective compensation and recognition systems that reward people for their
contributions.
 Provide promotional/career development opportunities for staff.
 Assist with exit interviews to understand WHY valued employees leave the
organization.

TYPES OF PERFORMANCE MANAGEMENT SYSTEMS

Three types of performance Management

Traditional Performance Management: Performance management in natural work groups

usually operates according to the traditional performance management model in which the
focus is on the work performance of an individual and his or her contributions to the mission
of the organization, as observed and assessed by the evaluating manager.

While the evaluating manager may solicit the input and involvement of the employee in each

step in the process, authority and ultimate responsibility remains with the HR manager or the
HR head of the organization.

Performance Management in Self-Managed Teams: Performance management in self-

managed work team is managed by the team itself. This empowerment varies from organization
to organization, or even from department to department, and also depends upon the readiness
of the team members to assume those responsibilities.

A fully empowered mature self-managed team would decide their own jobs, set performance

standards, give feedback to members about work progress, performance and team skills,

appraise their own performance, and identify and support the training and development needs

of the members.

Performance Management in Cross Functional Teams: A cross-functional team typically

operates without formal supervision, though it may have a team leader. Members usually report
to evaluating managers in their concerned departments.

STEPS IN PERFORMANCE MANAGEMENT

Step 1: Scanning of Business Environment: Every business is carried in an atmosphere or

surrounding. That is called business environment. There are internal and internal factors of it.
The internal environmental factors are within control of the management whereas the external
factors like social, cultural, economic, legal, political, technology and competition, etc., are
beyond control of management. These factors are uncontrollable and out of reach of
management to control. They change, very rapidly and create a lot of uncertainty.
Step 2: Setting up of Mission & Goals: Every organisation has been established with an
objective in the business. The mission shows the objective of existence in the business. To
achieve the objectives the certain goals or targets are to be fulfilled. The goals are to be decided
for everyone concerned. The goals can be for individuals, team, section, department and
organisation as a whole.

Step 3: Developing Job Description and Job Specification: To fulfil the goal requirement
the certain tasks are to be decided. What jobs are to be performed and how these will be
performed. First of all the jobs profile is to be prepared. The work, jobs and tasks are to be
ascertained. The decision is to be taken regarding the major work, its components, level of
responsibility, reporting system, location of the jobs and sub-jobs, etc.

Step 4: Fixing Performance Standard: For accomplishment of the goals the jobs are to be
performed. Now, what level of performance is expected from the employees is to be discussed.
For fixing the performance standard the comprehensive discussion should be there among
managers, supervisors, employees, experts in-house and consultants. The performance
standard should be feasible to achieve. These should not be very low or high. The performance
of slow, fast performer may not be suitable for everyone

Step 5: Action or Execution of Plan: After planning of performance management the next
step is action or execution of the plan. If the plan is good and not implemented properly the
result will be poor and poor plan implemented strongly then many irregularities can overcome.
This stage is very important. In execution stage, the actions are to be taken simultaneously with
work.

Step 6: Performance Assessment: The next phase will be performance assessment or

appraisal. After planning and execution of the plan it becomes necessary to see whether the job
is performed as per the planning and guideline. The performance is to be reviewed. If it is not
done then the employees and managers will not take interest in the whole process of
performance management. The performance will be assessed during the work, mid of the year
and finally at the end of the year. It is a difficult work to be done properly.

The following jobs are to be done in the assessment of performance

Observation: Under planning the works have been assigned to the employees. The employees

have been communicated, guided, motivated and feedback taken time-to-time from them.

Further, it is to be seen whether they are doing the work as per expectation and goals set. The

managers and supervisors will observe the working on day-to-day basis.

Mid-Year Assessment: The performance review takes place twice during the year. During the

midyear review, performance is reviewed almost after six months. It is to be done without
writing down the comments in the assessment report. At this stage no documentation is required
formally. During the review the work done by the person, difficulties faced during the work,

competencies shown, discipline, type of behaviour expressed and level of commitment given

should be recorded.

Year-End Assessment: On completion of the year the performance assessment is to be carried

out. In every organisation the appraisal practice is adopted. This brings the success, failure and

obstacles faced during the year to the knowledge of managers and employees. All work-related

aspects are considered for evaluation of the performance. The performance appraisal is

generally done by supervisors, self, peers, juniors and all who are directly or indirectly attached

to the employees relating to the work.

Documentation of Assessment: In performance assessment stage the final activity is to be

performed is documentation. This activity is very important. In this the assessors have to fill

up the assessment form. It should sign and if needed should be sealed. The rating of the

performance is to be kept confidential. Proper care should be taken so that the documents

should not be tempered or altered by anybody

12. CAREER PLANNING AND MANAGEMENT

DEFINITIONS
1. A career may be defined as ‘a sequence of jobs that constitute what a person does for a

living’.

2. According to Schermerborn, Hunt, and Osborn, ‘Career planning is a process of

systematically matching career goals and individual capabilities with opportunities for their

fulfillment’.

3. Career planning is the process of enhancing an employee’s future value.

4. A career plan is an individual’s choice of occupation, organization and career path.

Career planning encourages individuals to explore and gather information, which enables them

to synthesize, gain competencies, make decisions, set goals and take action. It is a crucial phase

of human resource development that helps the employees in making strategy for work-life
balance.
FEATURES OF CAREER PLANNING AND CAREER DEVELOPMENT
 It is an ongoing process.

 It helps individuals develop skills required to fulfill different career roles.

 It strengthens work-related activities in the organization.

 It defines life, career, abilities, and interests of the employees.

 It can also give professional directions, as they relate to career goals.

OBJECTIVES OF CAREER PLANNING

The major objectives of career planning are as follows:

 To identify positive characteristics of the employees.

 To develop awareness about each employee’s uniqueness.

 To respect feelings of other employees.

 To attract talented employees to the organization.

 To train employees towards team-building skills.

 To create healthy ways of dealing with conflicts, emotions, and stress.

BENEFITS OF CAREER PLANNING

 Career planning ensures a constant supply of promotable employees.

 It helps in improving the loyalty of employees.

 Career planning encourages an employee’s growth and development.

 It discourages the negative attitude of superiors who are interested in suppressing the
growth of the subordinates.

 It ensures that senior management knows about the calibre and capacity of the employees

who can move upwards.

 It can always create a team of employees prepared enough to meet any contingency.

 Career planning reduces labour turnover.

 Every organization prepares succession planning towards which career planning is the

first step.
 DEPARTMENT OF COMPUTER SCIENCE

Semester VII

GE3751–PRINCIPLES OF MANAGEMENT

**************************************************************************

UNITIV–DIRECTING

Topics List

1. Foundation of Individual and Group Behaviour

2. Motivation
3. Motivation Theories
4. Motivational Techniques
5. Job Satisfaction
6. Job enrichment
7. Leadership ,Types and theories of leadership
8. Communication , Process, Barrier and effective communication
9. Communication and IT
************************************************************************

1. FOUNDATION OF INDIVIDUAL AND GROUP BEHAVIOUR

Foundations of Individual Behaviour

 Attitude
 Personality
 Perception
 Learning
 Motivation
Attitude

 The feeling’s and beliefs are directed towards other people, objects or ideas. When a person

says, “I like my Job”. It shows that he has a positive attitude towards his job.

 Attitudes often result in and affect the behavior or action of the people. Attitudes can lead to

intended behavior if there are no external interventions.

 Attitudes constitute a psychological phenomenon which cannot be directly observed.

However, an attitude can be observed indirectly by observing its consequences. For example,

if a person is very regular in his job, we may infer that he likes his job very much.

Components of Attitudes

1. Informational or Cognitive Component:

2. Emotional or Affective Component
3. Behavioural Component

Personality
personality A relatively stable set of characteristics that influence an individual’s behavior.
Managers should learn as much as possible about personality in order to understand and better
relate to their employees, which is why we devote much attention to the subject of personality in
this text. Although researchers have identified hundreds of personality characteristics, we have
selected a few with particularly strong influences on individual behavior in organizations. Core
self-evaluation (CSE) involves a broad set of personality traits that articulates an individual’s
concept of himself or herself.24 CSE is concerned with people’s locus of control, self-esteem,
generalized self-efficacy, and emotional stability. It predicts both goal-directed behavior and
performance, even in non-U.S. cultures (e.g., Japan).25 All these aspects of CSE will be
examined shortly. In addition to the traits associated with CSE, we will consider the personality
traits of self-monitoring and positive/negative affect.

Perception
“Perception is the process through which the information from outside environment is selected,
received, organised and interpreted to make it meaningful to you. This input of meaningful
information results in decisions and actions.”

Perception refers to the interpretation of sensory data. In other words, sensation involves
detecting the presence of a stimulus whereas perception involves understanding what the
stimulus means. For example, when we see something, the visual stimulus is the light energy
reflected from the external world and the eye becomes the sensor. This visual image of the
external thing becomes perception when it is interpreted in the visual cortex of the brain

Importance of Perception

 Perception is very important in understanding the human behaviour, because every

person perceives the world and approaches the life problems differently- Whatever we
see or feel is not necessarily the same as it really is
 If people behave on the basis of their perception, we can predict their behaviour in the
 changed circumstances by understanding their present perception of the environment.
 With the help of perception, the needs of various people can be determined, because
people’s perception is influenced by their needs.

Learning
According to E.R. Hilgard, “Learning is a relatively permanent change in behaviour that occurs as a result
of a prior experience.”

According to W.Mc Gehee, “Learning has taken place if an individual behaves, reacts, responds

as a result of experience in a manner different from the way he formerly behaved.”

Nature of Learning
 1. Change in Behaviour:
2. Change in Behaviour must be Relatively Permanent:
3. Change Must Be Based on Some Experience, Practice or Training:
4. Reinforcement:
5. Learning is Reflected in Behaviour

Motivation
Meaning Motivation is an important factor which encourages persons to give their best
performance and help in reaching enterprise goals.
Nature of Motivation

From definitions given earlier the following inferences can be derived:

1. Motivation is an inner feeling which energizes a person to work more.

2. The emotions or desires of a person prompt him for doing a particular work.

3. There are unsatisfied needs of a person which disturb his equilibrium.

4. A person moves to fulfill his unsatisfied needs by conditioning his energies.

5. There are dormant energies in a person which are activated by channelizing them into actions.

Meaning of Group Behaviour:

Individuals form groups. They live in groups. They move in groups. They work in groups.

Groups are important. They influence work and work behaviour. They cannot be ignored. They

exert significant influence on the organisation.

Reasons for Group

 Management of modern organisations is making concerted efforts to introduce industrial

democracy at workplace.
 The tasks in modern industries are becoming more complex, tedious and monotonous. To
change these conditions and make the environment at workplace more lively,

 To make participative management more effective and relieve executives of petty

responsibilities employees are given these responsibilities to carry on successfully and
effectively

 Groups of all kinds and types are used by inviting their cooperation in all matters related to

production as well as with human relations to make the organisation effective.

 There are several works which an individual cannot perform. To complete such tasks, group

efforts are required for its completion, e.g. building of a ship, making of a movie,

construction of a fly-over, a complex etc.

 All these require coordinated and unified efforts of many individuals i.e. groups. A group can

do the work which cannot be performed by an individual or beyond his capabilities.

 A group can make better judgment as compared to an individual.

 While accomplishing tasks group can use creative instinct and innovative ideas than a single

individual.

 When group is working, all the benefits of division of labour accrue.

 Individuals in a group communicate with each other and discuss work performance and

suggestions to make it better and excellent.

 Group efforts substantially affect individual, his attitude and behaviour.

 Group has the ability to satisfy the needs of its members. In a group an individual member

feels secured and he can directly get technical and work related assistance.
Group Effectiveness:

Group is a social setting that offers knowledge, hard work and opportunities. The group

influences individual member’s attitude and behaviour. A group’s effectiveness brings about

organizational effectiveness

They include

 Productivity

 Attendance

 Job Satisfaction

 Attitude

 Employee Well-being

 Learning

 Retention

2. MOTIVATION AND MOTIVATIONAL THEORIES

Motivation is an important factor which encourages persons to give their best performance and

help in reaching enterprise goals. A strong positive motivation will enable the increased output

of employees but a negative motivation will reduce their performance. A key element in

personnel management is motivation.

According to Likert, “It is the core of management which shows that every human being gives

him a sense of worth in face-to face groups which are most important to him….A supervisor

should strive to treat individuals with dignity and a recognition of their personal worth.”
Definitions:
Motivation has been variously defined by scholars.

Berelson and Steiner:

“A motive is an inner state that energizes, activates, or moves and directs or channels behaviour

goals.”

Lillis:
“It is the stimulation of any emotion or desire operating upon one’s will and promoting or

driving it to action.”

1. Maslow’s Need Hierarchy Theory:

It is probably safe to say that the most well-known theory of motivation is Maslow’s need

hierarchy theory Maslow’s theory is based on the human needs. Drawing chiefly on his clinical

experience, he classified all human needs into a hierarchical manner from the lower to the higher

order.

In essence, he believed that once a given level of need is satisfied, it no longer serves to motivate

man. Then, the next higher level of need has to be activated in order to motivate the man.

Maslow identified five levels in his need hierarchy as shown in figure

These are now discussed one by one:

1. Physiological Needs: These needs are basic to human life and, hence, include food, clothing,
shelter, air, water and necessities of life. These needs relate to the survival and maintenance of
human life. They exert tremendous influence on human behaviour. These needs are to be met
first at least partly before higher level needs emerge. Once physiological needs are satisfied, they
no longer motivate the man.
2. Safety Needs: After satisfying the physiological needs, the next needs felt are called safety
and security needs. These needs find expression in such desires as economic security and
protection from physical dangers. Meeting these needs requires more money and, hence, the
individual is prompted to work more. Like physiological needs, these become inactive once they
are satisfied.

3. Social Needs: Man is a social being. He is, therefore, interested in social interaction,
companionship, belongingness, etc. It is this socialising and belongingness why individuals
prefer to work in groups and especially older people go to work.

4. Esteem Needs: These needs refer to self-esteem and self-respect. They include such needs
which indicate self-confidence, achievement, competence, knowledge and independence. The
fulfillment of esteem needs leads to self-confidence, strength and capability of being useful in
the organization. However, inability to fulfill these needs results in feeling like inferiority,
weakness and helplessness.

5. Self-Actualization Needs: This level represents the culmination of all the lower, intermediate,
and higher needs of human beings. In other words, the final step under the need hierarchy model
is the need for self-actualization. This refers to fulfillment.

The term self-actualization was coined by Kurt Goldstein and means to become actualized in

what one is potentially good at. In effect, self- actualization is the person’s motivation to

transform perception of self into reality.

According to Maslow, the human needs follow a definite sequence of domination. The second

need does not arise until the first is reasonably satisfied, and the third need does not emerge until

the first two needs have been reasonably satisfied and it goes on. The other side of the need

hierarchy is that human needs are unlimited. However, Maslow’s need hierarchy-theory is not

without its detractors.

2. Herzberg’s Motivation Hygiene Theory: The psychologist Frederick Herzberg extended the
work of Maslow and propsed a new motivation theory popularly known as Herzberg’s
Motivation Hygiene (Two-Factor) Theory. Herzberg conducted a widely reported motivational
study on 200 accountants and engineers employed by firms in and around Western Pennsylvania.

He asked these people to describe two important incidents at their jobs:

(1) When did you feel particularly good about your job, and

(2) When did you feel exceptionally bad about your job? He used the critical incident method of

obtaining data.

The responses when analysed were found quite interesting and fairly consistent. The replies

respondents gave when they felt good about their jobs were significantly different from the

replies given when they felt bad. Reported good feelings were generally associated with job

satisfaction, whereas bad feeling with job dissatisfaction. Herzberg labelled the job satisfiers

motivators, and he called job dissatisfies hygiene or maintenance factors. Taken together, the
motivators and hygiene factors have become known as Herzberg’s two-factor theory of

motivation

Herzberg’s motivational and hygiene factors have been shown in the Table 17.1

According to Herzberg, the opposite of satisfaction is not dissatisfaction. The underlying reason,

he says, is that removal of dissatisfying characteristics from a job does not necessarily make the
job satisfying. He believes in the existence of a dual continuum. The opposite of ‘satisfaction’ is

‘no satisfaction’ and the opposite of ‘dissatisfaction’ is ‘no dissatisatisfaction’.

According to Herzberg, today’s motivators are tomorrow’s hygiene because the latter stop

influencing the behaviour of persons when they get them. Accordingly, one’s hygiene may be the

motivator of another.

3. McClelland’s Need Theory:

Another well-known need-based theory of motivation, as opposed to hierarchy of needs of

satisfaction-dissatisfaction, is the theory developed by McClelland and his associates’.

McClelland developed his theory based on Henry Murray’s developed long list of motives and

manifest needs used in his early studies of personality. McClelland’s need-theory is closely

associated with learning theory, because he believed that needs are learned or acquired by the

kinds of events people experienced in their environment and culture.

He found that people who acquire a particular need behave differently from those who do not

have. His theory focuses on Murray’s three needs; achievement, power and affiliation. In the

literature, these three needs are abbreviated “n Ach”, “n Pow”, and “n Aff” respectively’.

They are defined as follows:

Need for Achievement:

This is the drive to excel, to achieve in relation to a set of standard, and to strive to succeed. In

other words, need for achievement is a behaviour directed toward competition with a standard of

excellence. McClelland found that people with a high need for achievement perform better than

those with a moderate or low need for achievement, and noted regional / national differences in

achievement motivation.

Through his research, McClelland identified the following three characteristics of high-

need achievers:
1. High-need achievers have a strong desire to assume personal responsibility for performing a

task for finding a solution to a problem.

2. High-need achievers tend to set moderately difficult goals and take calculated risks.

3. High-need achievers have a strong desire for performance feedback.

Need for Power: The need for power is concerned with making an impact on others, the desire
to influence others, the urge to change people, and the desire to make a difference in life. People
with a high need for power are people who like to be in control of people and events. This results
in ultimate satisfaction to man.

People who have a high need for power are characterized by:
1. A desire to influence and direct somebody else.

2. A desire to exercise control over others.

3. A concern for maintaining leader-follower relations.

Need for Affiliation:

The need for affiliation is defined as a desire to establish and maintain friendly and warm

relations with other people’. The need for affiliation, in many ways, is similar to Maslow’s social

needs.

The people with high need for affiliation have these characteristics:
1. They have a strong desire for acceptance and approval from others.

2. They tend to conform to the wishes of those people whose friendship and companionship they

value.

3. They value the feelings of others.

Figure 17.2 is a summary chart of the three need theories of motivation just discussed. The chart

shows the parallel relationship between the needs in each of the theories. Maslow refers to

higher- lower order needs, whereas Herzberg refers to motivation and hygiene factors.

4. McGregor’s Participation Theory:

Douglas McGregor formulated two distinct views of human being based on participation of

workers. The first basically negative, labeled Theory X, and the other basically positive, labled

Theory Y.

Theory X is based on the following assumptions:

1. People are by nature indolent. That is, they like to work as little as possible.

2. People lack ambition, dislike responsibility, and prefer to be directed by others.

3. People are inherently self-centered and indifferent to organisational needs and goals.

4. People are generally gullible and not very sharp and bright.

On the contrary, Theory Y assumes that:

1. People are not by nature passive or resistant to organisational goals.

2. They want to assume responsibility.

3. They want their organisation to succeed.

4. People are capable of directing their own behaviour.

5. They have need for achievement.

What McGregor tried to dramatise through his theory X and Y is to outline the extremes to draw

the fencing within which the organisational man is usually seen to behave. The fact remains that

no organisational man would actually belong either to theory X or theory Y. In reality, he/she

shares the traits of both. What actually happens is that man swings from one set or properties to

the other with changes in his mood and motives in changing .environment.

5. Urwick’s Theory Z:
Much after the propositions of theories X and Y by McGregor, the three theorists Urwick,

Rangnekar, and Ouchi-propounded the third theory lebeled as Z theory.

The two propositions in Urwicks’s theory are that:

(i) Each individual should know the organisational goals precisely and the amount of

contribution through his efforts towards these goals.

(ii) Each individual should also know that the relation of organisational goals is going to satisfy

his/her needs positively.

In Urwick’s view, the above two make people ready to behave positively to accomplish both

organisational and individual goals.

However, Ouchi’s Theory Z has attracted the lot of attention of management practitioners as well

as researchers. It must be noted that Z does not stand for anything, is merely the last alphabet in

the English Language.

Theory Z is based on the following four postulates:

1. Strong Bond between Organisation and Employees
2. Employee Participation and Involvement

3. No Formal Organisation Structure

4. Human Resource Development

Ouchi’s Theory Z represents the adoption of Japanese management practices (group decision

making, social cohesion, job security, holistic concern for employees, etc.)by the American

companies. In India, Maruti-Suzuki, Hero-Honda, etc., apply the postulates of theory Z.

6. Argyris’s Theory:
Argyris has developed his motivation theory based on proposition how management practices

affect the individual behaviour and growth In his view, the seven changes taking place in an

individual personality make him/her a mature one. In other words, personality of individual

develops

Argyris views that immaturity exists in individuals mainly because of organisational setting and

management practices such as task specialisation, chain of command, unity of direction, and

span of management. In order to make individuals grow mature, he proposes gradual shift from

the existing pyramidal organisation structure to humanistic system; from existing management

system to the more flexible and participative management.

He states that such situation will satisfy not only their physiological and safety needs, but also

will motivate them to make ready to make more use of their physiological and safety needs. But
also will motivate them to make ready to make more use of their potential in accomplishing

organisational goals.

7. Vroom’s Expectancy Theory:

One of the most widely accepted explanations of motivation is offered by Victor Vroom in his

Expectancy Theory” It is a cognitive process theory of motivation. The theory is founded on the

basic notions that people will be motivated to exert a high level of effort when they believe there

are relationships between the effort they put forth, the performance they achieve, and the

outcomes/ rewards they receive.

The relationships between notions of effort, performance, and reward are depicted in Figure

Thus, the key constructs in the expectancy theory of motivation are:

1. Valence: Valence, according to Vroom, means the value or strength one places on a
particular outcome or reward.

2. Expectancy: It relates efforts to performance.

3. Instrumentality: By instrumentality, Vroom means, the belief that performance is

related to rewards.

Thus, Vroom’s motivation can also be expressed in the form of an equation as follows:

Motivation = Valence x Expectancy x Instrumentality

Being the model multiplicative in nature, all the three variables must have high positive values to

imply motivated performance choice. If any one of the variables approaches to zero level, the

possibility of the so motivated performance also touches zero level.

 3. MOTIVATIONAL TECHNIQUES

1. Financial Motivation:

Financial motivation techniques are the incentives directly or indirectly related with money.

Money is the most effective and important source of motivation. Money possesses purchasing

power; hence it can be used to satisfy various wants, necessaries, comforts and luxuries. It can

satisfy the status and prestige needs also by purchasing the commodities and services attached

with prestige.

There are many commodities symbolic of status can be purchased with the help of money. In

recent times some behavioural researchers’ findings reveal that money is not considered a prime

motivator. Salary and wages, bonus, leaves with pay, medical and housing facilities, profit

sharing, vehicle allowances etc. are some of the examples of financial motivators. The

importance of this type of motivation depends upon certain factors such as standard of living and

overall economic conditions.

When there is low standard of living, money becomes all the more important for a person. But as
the standard of living goes up and economic conditions improve the importance of money as a
motivator decreases. The managers drawing handsome salaries do not consider money as a
motivator. For them prestige, status, delegation of authority, enrichment of jobs, appraisal,
qualitative working conditions etc. serve as motivator. If monetary reward is more, then only it
will increase the performance otherwise not; employees prefer to stick to leisure than to work

2. Non-Financial Motivation:

As the name suggests money has no role to play in this kind of motivation. Non-financial

incentives are psychological in nature. They provide psychological satisfaction to the employees.

Status, respect, prestige, participation, job enrichment, recognition, safety of job, responsibility,

competition is some of the instances of non financial motivators. These incentives satisfy socio-

psychological needs. A short resume of various non-financial motivators are as under.

(i) Status:
Egoistic needs are satisfied by raising status. Organisations by providing sophisticated
furniture’s, excellent interior decoration in the office and places of work, telephone, computers
and now internet facilities to their executives etc. make deliberate efforts to provide higher status
to their executives and employees

(ii) Participation:

Employees’ participation in decision-making process serves as incentive because it satisfies the

self esteem of the employees. They develop sense of belonging to the organisation and work with

a high morale. They involve themselves not only physically but also mentally in the affairs of the

organization

(iii) Job Enrichment:

In order to motivate the employee further the improvements in job are to be made by enriching it

i.e. making it more challenging and interesting. Job enrichment refers to up gradation of

responsibility and makes it challenging. Job is made challenging. It means it provides employee

a chance to get recognition, responsibility, growth and advancement

iv) Job Enlargement:

Job enrichment refers to a process of adding more tasks and making it more complex so that it

seems more appealing which satisfy higher order needs of the employee. It provides varied tasks

to perform. It is an effort to improve quality of work at the workplace.

(v) Delegation of Authority:

Authority is the right to command and seek performance from the subordinates. Delegation of

authority is essential for effecting performance.

(vi) Job Security:

Job security serves as a motivator for many employees. Those who want to continue in the same

job and in the same organisation they are worried about its security. Job security to them is a

means for economic and social security. They feel at ease if security of job is confirmed.

(vii) Job Rotation:

Job rotation refers to shifting of employee from one job to another. The object of job rotation is

to remove monotony and boredom and free the employee from them. The job rotation takes place

at the same level. This keeps the interest of the employee live and to diversify the activities.

viii) Job Loading:

It refers to make the job more interesting through increase in work at the same level or increasing

the responsibility.

4.JOB SATISFACTION

The term job satisfaction, attitudes and industrial morale are often used synonymously. An

attitude may contribute to job satisfaction. Similarly job satisfaction may also contribute to

morale.

Factors in Job Satisfaction:

The job satisfaction factors maybe of following types:

(i) The characteristics of the individual.

(ii) The characteristics of the job.

1. The money or adequate earnings is the first ranked incentive for Indian workers.

2. These studies reveal that wages, job security, opportunities for advancement, comfortable

working conditions and suitable type of work are some of the factors that are considered as

the most desired factors in their job

3. The Indian worker is extremely hard pressed for money due to ever rising cost of living.
4. Money not only satisfies the basic psychological requirements but the continued supply of

money insures the satisfaction of the higher order psychological needs.

5. Still higher order needs of status can also be satisfied by money because the money is often

considered as an index of status.

6. Ganguli predicts, “At present and in the foreseeable future for Indian workers in general

income (i.e. wages) and security of service are going to be two most important incentives”.

7. Job satisfaction is the result of various attitudes such as dynamic behaviour and action

potential.

8. The relative importance of job factors for Indian workers, fit well in the need hierarchy

theory of Mosloz.

9. The workers rank adequate earnings/ wages and job security higher in importance and as

these needs are satisfied he goes for a higher level in the need hierarchy such as need a for

opportunity regarding advancement, comfortable working conditions, adequate personal

benefits and so on.

5.JOB ENRICHMENT

Meaning:

Fredrick Herzberg gave greater emphasis on job enrichment in his two factor theory. He assumed

that in order to motivate personnel, the job must be designed to provide opportunities for

achievement, recognition, responsibility, advancement and growth.

It simply means, adding a few more motivators to a job to make it more rewarding.
A job is enriched when the nature of the job is made more exciting, challenging and creative or
gives the job holder more decision making, planning and controlling powers
Characteristics of an Enriched Job:

According to Herzberg, an enriched job has eight characteristics.

There characteristics are as explained below:

1. Direct Feed Back: There should be a direct feed back of the employees performance.
Employees should be able to get immediate knowledge of the results they are achieving. The job
evaluation can be inbuilt in the job or provided by a supervisor.
2. Client Relationships: When an employee serves a client or customer directly, he has an
enriched job. The client can be outside the organization or inside.
3. New Learning: An enriched job allows the employee to learn more. He should feel that he is
growing mentally. An employee, who is doing some intellectual work, is having an enriched job.

4. Scheduling Own Work: Freedom to schedule one’s own work contributes to enrichment.
Deciding when to tackle which assignment is an example of self scheduling. Employees who
perform Creative work have more opportunity to schedule their assignments as compared to
employees performing routine jobs.
5. Unique Experience: An enriched job has some unique qualities or features as compared to the
other jobs.
6. Control Over Resources: One approach to job enrichment is that each employee should have
control over his own resources and expenses.
7. Direct Communication Authority: An employee holding the enriched job will be allowed to
communicate directly with people who use his output.
8. Personal Accountability: An enriched job holds the incumbent responsible for the results. He
receives praise for good work and blame for poor work.

From the above features of job enrichment we conclude that the management should take

the following measures to enrich the job:

(i) Give sufficient freedom to the employees in deciding about work methods, pace, sequence

etc.

(ii) Increase responsibility.

(iii) Encourage participation.

Advantages of Job Enrichment:

Job enrichment is a very useful technique to motivate employees.

The advantages of job enrichment are as follows:

(i) In the routine jobs, the employees find their jobs very boring and monotonous. The number of

such employees is generally considerable. The frustration of these employees can be removed by

making the job interesting with the help of job enrichment.

(ii) Job enrichment helps in reducing the rates of employee turnover and absenteeism.

(iii) Job enrichment motivates the employees intrinsically by giving them opportunities for
growth advancement and self realization.

(iv) Task enforcement is made easy with the help of job enrichment and the skills of workers are

increased.

(v) The enriched jobs give more job satisfaction to the employees.

(vi) Job enrichment is advantageous to the organization as there is qualitative as well as

quantitative improvement in output and there is higher satisfaction of the workers,

(vii) Employees tend to be more creative when they work in an enriching context of complex and

challenging jobs.

Limitations of Job Enrichment:

As job enrichment is based on the two factor theory given by Herzberg, the same criticism of the

two factor theory applies to it also. Some problems arise when job enrichment is actually applied

in practice

The limitations of job enrichment are as follows:

1. The first basic problem is that majority of workers do not want the type of changes which are

introduced by job enrichment. They do not really want challenging jobs, as the basic human

tendency is to shirk responsibility. Workers put wages and job security above all.

2. Job enrichment is basically limited to the unskilled and semiskilled jobs. Jobs of highly skilled

professionals already contain many challenging elements. As such there is no scope of applying

job enrichment in their cases.

3. Technology may not permit the enrichment of all the jobs. With specialized machinery, tasks

and processes, it may not be possible to make the jobs very meaningful.

4. Job enrichment is a highly costly affair. In most of the cases, the cost involved is more than

the gains in productivity.

5. Sometimes, the employees may prefer to have job enrichment but may not have the necessary

capabilities and qualifications to meet the new challenges.

6. In the short run, job enrichment may have negative effects. After an increase in job

responsibility, it is not unusual for organizations to experience a drop in productivity, as workers

become accustomed to the new systems. In the long run, however, there will be increased

productivity.

7. People being bored in their jobs, it is likely, therefore, that after a period of time they will

become bored in their enriched jobs also. Thus, enrichment may become static after some time

and additional enrichment will be required.

6. LEADERSHIP

Meaning:

Leadership is an important element of the directing function of management. Wherever, there is

an organized group of people working towards a common goal, some type of leadership becomes
essential.
Definition
1. Koontz and O’Donnell, Leadership is the ability of a manager to induce subordinates to work
with confidence and zeal.

2. Dubin, R.Leadership is the exercise of authority and making of decisions.

Nature and Characteristics of Leadership:

An analysis of the definitions cited above reveals the following important characteristics
of leadership:

1. Leadership is a personal quality.

2. It exists only with followers. If there are no followers, there is no leadership?

3. It is the willingness of people to follow that makes person a leader.

4. Leadership is a process of influence. A leader must be able to influence the behaviour, attitude
and beliefs of his subordinates.

5. It exists only for the realization of common goals.

6. It involves readiness to accept complete responsibility in all situations.

7. Leadership is the function of stimulating the followers to strive willingly to attain

organizational objectives.

8. Leadership styles do change under different circumstances.

9. Leadership is neither bossism nor synonymous with; management.

Formal and informal Leaders:

1. From the view point of official recognition from top management, leaders may be classified
as formal and informal leaders.

2. A formal leader is one who is formally appointed or elected to direct and control the
activities of the subordinates.
3. He is a person created by the formal structure, enjoys organizational authority and is
accountable to those who have elected him in a formal way.

4. The formal leader has a two-fold responsibility.

5. On the one hand, he has to fulfill the demands of the organization, while on the other he is
also supposed to help, guide and direct his subordinates in satisfying their needs and
aspirations.

Informal leaders are not formally recognized. They derive authority from the people who are
under their influence.

In any organization we can always find some persons who command respect and who are
approached to help, guide and protect the informal leaders have only one task to perform, i.e., to
help their followers in achieving their individual and group goals.

Informal leaders are created to satisfy those needs which are not satisfied by the formal leaders.

Leadership Functions:

Following are the important functions of a leader:

1. Setting Goals:A leader is expected to perform creative function of laying out goals and
policies to persuade the subordinates to work with zeal and confidence.

2. Organizing:The second function of a leader is to create and shape the organization on

scientific lines by assigning roles appropriate to individual abilities with the view to make its
various components to operate sensitively towards the achievement of enterprise goals.

3. Initiating Action:The next function of a leader is to take the initiative in all matters of interest
to the group. He should not depend upon others for decision and judgment. He should float new
ideas and his decisions should reflect original thinking.

4. Co-Ordination: A leader has to reconcile the interests of the individual members of the group
with that of the organization. He has to ensure voluntary co-operation from the group in realizing
the common objectives.
5. Direction and Motivation: It is the primary function of a leader to guide and direct his group
and motivate people to do their best in the achievement of desired goals, he should build up
confidence and zeal in the work group.

6. Link between Management and Workers: A leader works as a necessary link between the
management and the workers. He interprets the policies and programmes of the management to
his subordinates and represents the subordinates’ interests before the management. He can prove
effective only when he can act as the true guardian of the interests of his subordinates

Qualities of a Good Leader:

1. Good personality.

2. Emotional stability.

3. Sound education and professional competence.

4. Initiatives and creative thinking.

5. Sense of purpose and responsibility.

6. Ability to guide and teach.

7. Good understanding and sound judgment.

8. Communicating skill.

9. Sociable.

10. Objective and flexible approach.

11. Honesty and integrity of character.

12. Self confidence, diligence and industry.

7. TYPES AND THEORIES OF LEADERSHIP

Types of Leadership:
The Personnel Research Board of the Ohio University has classified leadership into five types as

Bureaucrat, Autocrat, Diplomat, Expert, and Quarterback.

1. Bureaucrat: He is the leader who follows rules and regulations and engages himself in
pleasing his superiors and deliberately avoids his subordinates.
2. Autocrat: He issues directives and wants obedience. Subordinates oppose his attitudes.

3. Diplomat: A most opportunistic type of leadership. He exploits people. People do not trust

him.

4. Expert: He is more concerned about his area of specialization. He is fair to his subordinates
and treats them on par.
5. Quarter-back: He does not make any difference between him and subordinates. This attitude
brings him more enemies from superior ranks.

In addition to the above types, leadership may be classified into the following types:

Functional: As the name suggests the leadership is according to functions e.g. a leader is an

expert in some area then his advice is accepted by all.

Personal: Some leaders possess attractive personality and have personal contacts with people.

The supervisor directs and motivates people through their personal contacts.

Impersonal: Leaders have no personal contacts. This type of leadership is similar to bureaucrat

type who leads people through instructions given to his subordinates.

Formal and Informal: When formal authority vested in the executive is exercised to influence

behaviour of people, the leadership is said to be formal. Official position of the authority plays a

vital role in this type. Some executives establish better relationship with their subordinates to

extract most benefits

Positive and Negative Leadership: Positive leadership adopts positive attitudes towards

subordinates. It takes them into confidence, issues orders and interprets them, recognizes the

talents among subordinates and delegates authority for proper implementation of his orders. It

extracts optimum from his subordinates

Theories of Leadership
Trait Theory of Leadership:Trait theory of leadership highlights the personality traits of a
successful leader. It is the oldest theory of leadership. According to theory the personal traits or
characteristics of a leader makes him different from the followers. The researchers have taken
great pains to find out various traits of leadership

The following are the traits identified by them:

1. Good Physiques: Good health, vitality, energetic, enthusiast, endurance, forcefulness,

masculinity.

2. Creativity and Intelligence: Problem solving talents, sound judgment, teaching ability,

rational attitude, scientific outlook, self understanding, decision making prowess, better

education, risk taking, hard work.

3. Moral Traits: Moral power, will power, sense of integrity, fairness, tolerance. All above

qualities can be developed in a leader. These are not the inborn qualities hence leaders can be

made through training, development and education.

Situational Theory of Leadership:

 Leadership is relative to particular situation. According to the exponents of this theory the

leadership changes from group to group and from situation to situation.

 Leadership assumes different dimensions in different situations. The leadership is exercised

in a specific situation, consisting of people and a given environment.

 The leadership depends upon the executive’s ability to lead. The leadership is also relative to

group, task, goal, organisational structures, and population characteristics of group.

Behavioural Theories:
 Limitations of trait theory diverted the focus of attention of researchers to the behavioural

aspect of the leadership.

 The emphasis was given on the behaviour of leaders than their personality traits.

 According to behavioural approach the actions of the leader in attaining goals are important

Fiedler’s Contingency Model

Fred Fiedler and his associates have given contingency theory of leadership. According to the

theory the effectiveness of leadership depends upon three variables, leader’s position power,
leader-member relations and task structure.

Path-Goal Model

 Path goal theory of leadership is developed by Robert House. It is highly respected model

for studying leadership.

 The theory tries to predict effectiveness of leadership in various situations.

 According to the theory the leader has to specify goals for the employees and clear the paths

leading to the accomplishment of goals by providing essential support and guidance and

rewards.

Composite Leadership:

 After looking at so many different leadership styles and theories one has to think whether a

theory alone is perfect and a particular theory can be adopted for leading human resources at

work.

 The answer is probably No. None of the theories explained above are perfect.

8.COMMUNICATION , PROCESS, BARRIER AND EFFECTIVE COMMUNICATION

Communication may be defined as a process concerning exchange of facts or ideas between
persons holding different positions in an organisation to achieve mutual harmony. The
communication process is dynamic in nature rather than a static phenomenon.

Communication Process

Seven major elements of communication process are: (1) sender (2) ideas (3) encoding (4)
communication channel (5) receiver (6) decoding and (7) feedback.

(1) Sender: The person who intends to convey the message with the intention of passing
information and ideas to others is known as sender or communicator.

(2) Ideas: This is the subject matter of the communication. This may be an opinion, attitude,
feelings, views, orders, or suggestions.

(3) Encoding: Since the subject matter of communication is theoretical and intangible, its further
passing requires use of certain symbols such as words, actions or pictures etc. Conversion of
subject matter into these symbols is the process of encoding.

(4) Communication Channel: The person who is interested in communicating has to choose the
channel for sending the required information, ideas etc. This information is transmitted to the
receiver through certain channels which may be either formal or informal.

(5) Receiver: Receiver is the person who receives the message or for whom the message is
meant for. It is the receiver who tries to understand the message in the best possible manner in
achieving the desired objectives.

(6) Decoding: The person who receives the message or symbol from the communicator tries to
convert the same in such a way so that he may extract its meaning to his complete understanding.

(7) Feedback:Feedback is the process of ensuring that the receiver has received the message and
understood in the same sense as sender meant it.

Barriers in Communication

1. Physical Barriers: A communication is a two-way process, distance between the sender and
the receiver of the message is an important barrier to communication. Noise and environmental
factors also block communication.
2. Personal Barriers: Personal factors like difference in judgment, social values, inferiority
complex, bias, attitude, pressure of time, inability to communicate, etc. widen the psychological
distance between the communication and the communicate. Credibility gap, i.e., inconsistency
between what one says and what one does, also acts as a barrier to communication.

3. Semantic or Language Barriers: Semantic is the science of meaning. The same words and
symbols carry different meanings to different people. Difficulties in communication arise when
the sender and the receiver of the message use words or symbols in different senses. The
meaning intended by the sender may be quite different from the meaning followed by the
receiver.

4. Status Barriers (Superior-Subordinate Relationship): Status or position in the hierarchy of

an organization is one of the fundamental barriers that obstruct free flow of information. A
superior may give only selected information to his subordinates so as to maintain status
differences. Subordinates, usually, tend to convey only those things which the superiors would
appreciate. This creates distortion in upward communication.

5. Organizational Structure Barriers: Effective communication largely depends upon sound

organizational structure. If the structure is complex involving several layers of management, the
breakdown or distortion in communication will arise. It is an established fact that every layer
cuts off a bit of information. In the words of W.C. Bennis, “Communication gets distorted
particularly as it goes up the hierarchy.”

6. Barriers Due to Inadequate Attention: Inadequate attention to the message makes

communication less effective and the message is likely to be misunderstood. Inattention may
arise because of over business of the communicate or because of the message being contrary to
his expectations and beliefs. The simple failure to read notices, minutes and reports is also a
common feature.

7. Premature Evaluation: Some people have the tendency to form a judgement before listening
to the entire message. This is known as premature evaluation. “half-listening is like racing you
engine with the gears in neutral. You use gasoline but you get nowhere.” Premature evaluation
distorts understandings and acts as a barrier to effective communication.

8. Emotional Attitude: Barriers may also arise due to emotional attitude because when emotions
are strong, it is difficult to know the frame of mind of other person or group. Emotional attitudes
of both, the communicator as well as the communicate, obstruct free flow of transmission and
understanding of messages.

9. Resistance to Change: It is a general tendency of human beings to stick to old and customary
patterns of life. They may resist change to maintain status quo. Thus, when new ideas are being
communicated to introduce a change, it is likely to be overlooked or even opposed. This
resistance to change creates an important obstacle to effective communication.

10. Barriers Due to Lack of Mutual Trust: Communication means sharing of ideas in
common. “When we communicate, we are trying to establish commonness.” Thus, one will
freely transfer information and understanding with another only when there is mutual trust
between the two. When there is a lack of mutual trust between the communicator and the
communicate, the message is not followed. Credibility gaps, i.e., inconsistency in saying and
doing, also cause lack of mutual trust which acts as a basic obstacle to effective communication.

Effective communication
Effective communication is a good business and very essential for the success of an organization.
Communication takes place when one person transfers information and understanding to another
person.

An effective communication is one which is followed by the receiver of the message and his
reaction or response is known to the sender. It is a two-way process. It may not be possible to
achieve perfect communication.

1. Clarity and Completeness : In order to communicate effectively, it is very essential to know

the ‘audience’ for whom the message is meant. The message to be conveyed must be absolutely
clear in the mind of the communicator because if you do not understand an idea, you can never
express it to someone.

2. Proper Language: To avoid semantic barriers, the message should be expressed in simple,
brief and clear language. The words or symbols selected for conveying the message must be
appropriate to the reference and understanding of the receiver.

3. Sound Organization Structure: To make communication effective, the organizational

structure must be sound and appropriate to the needs of the organization. Attempt must be made
to shorten the distances to be travelled for conveying information.
4. Orientation of Employees: The employees should be oriented to understand the objectives,
rules, policies, authority relationships and operations of enterprise. It will help to understand
each other, minimize conflicts and distortion of messages.

5. Emphatic Listening and Avoid Premature Evaluation: To communicate effectively, one

should be a good listener. Superiors should develop the habit of patient listening and avoid
premature evaluation of communication from their subordinates. This will encourage free flow
of upward communication.

6. Motivation and Mutual Confidence: The message to be communicated should be so

designed as to motivate the receiver to influence his behaviour to take the desired action. A sense
of mutual trust and confidence must be generated to promote free flow of information.

7. Consistent Behaviour: To avoid credibility gap. management must ensure that their actions
and deeds are in accordance with their communication.

8. Use of Grapevine: Grapevine or the informal channels of communication help to improve

managerial decisions and make communication more effective. Thus, formal channels of
communication must be supplemented with the use of grapevine.

9. Feedback: Communication is not complete unless the response or reaction of the receiver of
the message is obtained by the communicator. The effectiveness of communication can be
judged from the feedback. Therefore, feedback must be encouraged and analyzed.

10. Gestures and Tone: The way you say something is also very important along with the
message for gestures such as a twinkle of an eye, a smile or a handshake, etc., convey sometimes
more meaning than even words spoken or written. Thus, one should have appropriate facial
expression, tone, gestures and mood, etc. to make communication effective.

9. COMMUNICATION AND IT
1. The information technology is all set to play an all pervasive role in human resource
management. Today we are in information technology (IT) era. Every organization will be
affected by it.

2. Many organization have already started use of it. Information technology facilitates storing
and regaining huge information quickly

3. with the help of hardware and software networks and workstations at lesser costs.
4. The global expansion of trade and commerce has facilitated the companies to go global
needing a communicating network to fulfill their needs.

5. IT network enables to communicate with persons in any part of the world.

6. In this way it helps to have an access to any information for making quick decisions.

7. Human resources can be utilized in the best possible manner with the help of information
technology to have the competitive edge by increasing operational efficiency of human
resources and speedily increasing the productivity.

8. The next century will be dominated by the use of information technology.

9. The advanced knowledge is made accessible today itself. IT will be a boon for human
resource management.

10. A large amount of information relating to job analysis, job design, job specification and
description, performance evaluation, job evaluation, salary structure, salary and allowances
of each employee and executive, their increments with date, time of retirements leave
records, the expertise, knowledge obtained by employees and what not can be stored,
combined

A brief resume of the various systems of information technology is given below:

1. Internet:Internet or net is a worldwide collection of computers and computer network

for exchanging information.

A computer network comprises a group of computers connected together facilitating to

communicate with each other by sending messages and sharing information through computer

files. Network consists of small computers and large systems used by corporate bodies, e.g.

universities, colleges, libraries, government organizations, business houses; industrial and

commercial organizations are the networks that are part of internet.Internet is quite large and

many networks are connected to it.

Many computers are connected with these networks. Internet is made up of thousands of separate

networks each of which is connected to a backbone that moves data from one network to
another.The networks are owned by major internet service providers (ISPs). The backbone is

formed by the networks. Each backbone must agree to share information with another backbone.

The backbone is connected to local area network. In this way internet makes a sea of information

accessible to those using it through their computers.The presence of internet has opened the gates

to the rest of the world for the Indian companies. It will have remarkable influence on the

business and industry. The fullest potentials of internet are yet to be utilized in India because it is

yet to be affordable. It will definitely change the face of the business in India. Organizations will

have to be ready to cope up with the changes that are ahead.

2. E-mail:Electronic mail or E-Mail is the most popular and widely used service on the internet.
Messages can be transmitted on the internet by anyone throughout the world. Any personal
message or the one stored in a text file can be transmitted through E- mail. Electronic mailing
lists make people to meet and discuss over the internet. Computer programs and graphics can
also be transmitted through E-mail. This is a widely used medium of communication.

3. Usenet:It is a system of newsgroup. Individual articles can be distributed throughout the

internet.

4. Talk Facility:Under this system a computer is connected with the other through net and using
it to type messages. It supports the talk also however some do not support the talk.

5. Internet Relay Chat:Under this system more than two computers can be connected together
and can be used more heavily than the talk facility. This system facilitates participation in public
discussion with many people over the internet.

The use of information technology will bring about many changes in the human resource
functions. One should understand that information technology is the tool to help in making
management effective. It is not an end in itself. Proper use of this tool will reduce administrative
burden and improve efficiency.