MANAGEMENT COMPENDIUM – RBI GRADE B ~BRAJESH MOHAN

Introduction to Management
Management is defined as the process of managing resources to get optimal and desirable organizational
results. It is necessary to use all the available resources effectively and efficiently (Resources are in any
form, i.e., financial, information, human, and physical). Without management, there will be lots of confusion
and wastage. Management tells everyone about ‘what to do’, ‘when to do’, and ‘by whom it is to be done’.
The person who performs this activity is known as the manager.
According to George R. Terry, "Management is a distinct process consisting of planning, organising,
actuating and controlling, performed to determine and accomplish stated objectives by the use of human
beings and other resources".
According to Henry Fayol, "To manage is to forecast and to plan, to organise, to command, to coordinate
and to control".
According to Peter Drucker, "Management is a multi-purpose organ that manages business and manages
managers and manages workers and work".
Nature and Features of Management
1. Universally applicable: Management is the need of every organization irrespective of its nature,
size, and type. It is followed at all levels of the organization to get optimal results.
2. Goal-oriented: Management focuses on the utilization of resources effectively and efficiently to
achieve desirable goals. Every activity in the organization is conducted in the direction of
organizational goals.
3. Synergism of the efforts: Through management, every employee's efforts are unified in such a
manner that it gives better results. It makes coordination between activities and employees.
Management has the power to convert efforts of 1+1 into 11.
4. Intangible activity: Management can’t be seen, but it is felt through coordination, performance, and
results. Its absence is felt through confusion, mismanagement, wastage, etc.
5. Dynamic Process: Management has to coordinate with changes in the environment and needs of
the organization. It is dynamic in function as it involves various functions- Planning, Organizing,
Staffing, Directing, and Controlling.
6. Continuous process: Management is a continuous process as its functions are repeating in
nature. It starts with planning, followed by organizing, staffing, directing, and controlling. In
controlling when deviation arrives, planning again gets started.
7. People-oriented: Management is not just a system, or process. It works with people by
understanding, motivating, and leading them towards organizational goals.

Father of management: Peter F. Drucker

Father of general management: Henri Fayol
Father of scientific management: F.W. Taylor

Characteristics of Management
Management has various characteristics and some of them are as follows:
1. Management is a managerial process: Management is a process and not merely a body of
individuals. Those who perform this process are called managers. The managers exercise
leadership by assuming authority and direct others to act within the organisation. Management
process involves planning, organising, directing and unifying human efforts for the accomplishment
of given tasks.
2. Management is a social process: Management takes place through people. The importance of
human factor in management cannot be ignored. A manager's job is to get the things done with the
support and cooperation of subordinates. It is this human element which gives management its
special character.

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3. Management is action-based: Management is always for achieving certain objectives in terms of

sales, profit, etc. It is a result-oriented concept and not merely an abstract philosophy. It gives
importance to concrete performance through suitable actions. It is an action-based activity.
4. Management involves achieving results through the efforts of others: Management is the art of
getting the things done through others. Managers are expected to guide and motivate subordinates
and get the expected performance from them. Management acts as an activating factor.
5. Management is a group activity: Management is not an isolated individual activity, but it is a
collective activity or an activity of a group. It aims at using group efforts for achieving objectives.
Managers manage the groups and coordinate the activities of groups functioning in an organisation.
6. Management is intangible: Management is not directly visible, but its presence is noticed in the
form of concrete results. Management is intangible. It is like invisible spirit, which guides and
motivates people working in a business unit. Management is like government, which functions but is
not visible in physical form.
7. Management is aided, not replaced by computers: The computer is an extremely powerful tool of
management. It helps a manager to widen his vision. The computer supplies ocean of information
for important decision-making. The computer has unbelievable data processing and feedback
facilities. This has enabled the manager to conduct quick analysis towards making correct
decisions.
• A computer supports manager in his managerial work. However, it cannot replace managers
in business. They were required in the past, at present and also in future. Their existence is
absolutely essential in the management process.
8. Management is all pervasive: Management is comprehensive and covers all departments,
activities and employees. Managers operate at different levels, but their functions are identical. This
indicates that management is a universal and all-pervasive process.
9. Management is an art, science as well as a profession: Management is an art because certain
skills, essential for good management, are unique to individuals. Management is a science because
it has an organised body of knowledge. Management is also a profession because it is based on
advanced and cultivated knowledge.
10. Management aims at coordination of activities: Coordination is the essence of management. It
gives one clear direction to the whole organisation and brings unity and harmony in the whole
business unit. For such coordination, effective communication at all levels is essential.
11. Management is innovative: Management techniques are dynamic and innovative. They need to be
adjusted as per the requirements of the situations. Another manager need not repeat the decisions
of one manager. Similarly, a manager has to change his decisions under different situations.
12. Management has different operational levels: Every Organisation needs managers for managing
business activities. The manager's job is basically the same at all levels. The managers at the
higher levels have more important duties while managers at the lower levels have to perform routine
functions i.e., duties.
13. Management is different from ownership: Management is concerned with the management of
business activities. Managers are not the owners, but they manage the business on behalf of the
owners. Separation of ownership and management is a special feature of modem business
organisation.
14. Management has vast scope: The scope of management is quite comprehensive. It covers all
aspects of business. The principles of management guide managers while managing various
business activities.
15. Management is dynamic: Business is influenced by changes in economic, social, political
technological and human resource. Management adjusts itself to the changing atmosphere making
suitable forecasts and changes in the policies. Hence, management is treated as a dynamic activity.
16. Management aims at achieving predetermined objectives: Management is a meaningful activity.
All organisations are essentially groups of individuals formed for achieving common objectives. An
Organisation exists for the attainment of specific objectives.

Objectives of Management
Objectives of the management are classified into 3 categories-
1. Organizational/Economical objectives

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2. Social objectives
3. Personnel objectives
Let’s discuss them in brief.
1. Organizational/Economical Objectives

• Organizational objectives are set according to the goals of an organization. These objectives are set
up to ensure optimal utilization of the resources by keeping in mind the interests of various
stakeholders. It is further classified into 3 parts-
o Survival- It is the basic need of the organization. To survive in the competitive environment,
it is the priority of the organization to cover its costs.
o Profit- After survival, the company shifts towards the objective of earning profit. Without
profit, the company cannot survive for a longer period. It helps in facing uncertainty and
crisis and gives longevity to the company.
o Growth- The company’s growth is said when there is expansion and diversification in the
working or area of operation. It is measured as
▪ Increase in profit.
▪ Increase in the number of products.
▪ Increase in the number of branches.
▪ Increase in the area of operation.
2. Social objectives

• It is said that “The organization which cares about society, runs longer”, This means the
organization that works with the people, for the people, and the welfare of people will have positive
results in the long run. It is done in the following ways-
o Using eco-friendly methods of manufacturing goods.
o Supplying quality goods at reasonable prices.
o Follow ethics in their work.
o Conservation of natural resources and environment.
o Paying tax honestly.
3. Personal objectives
Personal objectives are concerned with the employees of the organization. Employees have various types
of expectations from the company. To survive longer, the company has to focus on the needs of the
employees. Some of these objectives/needs are as follows-

• Financial needs: Every employee expects fair remuneration for their work. The company has to
focus on this need as it affects the motivation and working of the employees.
• Social needs: The company must focus on the social and safety needs of the employees. They
need a safe working environment, friendly colleagues, and peer recognition.
• Growth needs: The company should conduct training and skill development programs from time to
time to enhance employee's skills and provide them with opportunities to grow. It fulfils their self-
esteem need.

Need of Management
Management is a distinct function performed to fix and achieve stated objectives by the use of
manpower and other factors of production. Following are the Needs of Management:
1. Direction, coordination, and control of group efforts: In business, many persons work together.
They need proper direction and guidance for raising their efficiency. In the absence of guidance,
people will work as per their desire and the orderly working of enterprise will not be possible.
Management is needed for planning business activities, for guiding employees in the right direction
and finally for coordinating their efforts for achieving best/most favourable results.
2. Orderly achievement of business objectives: Efficient management is needed in order to achieve
the objectives of business activity in an orderly and quick manner.

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3. Performance of basic managerial functions: Planning, Organising, Coordinating and Controlling

are the basic functions of management. Management is needed as these functions are performed
through the management process.
4. Effective communication at all levels: Management is needed for effective communication within
and outside the Organisation.
5. Motivation of employees: Management is needed for motivating employees and also for
coordinating their efforts so as to achieve business objectives quickly.
6. Success and stability of business enterprise: Efficient management is needed for success,
stability and prosperity of a business enterprise.
Modern business is highly competitive and needs efficient and capable management for survival and
growth. Management is needed as it occupies a unique position in the smooth functioning of a business
unit. This suggests the need of efficient management of business enterprises. Profitable/successful
business may not be possible without efficient management. In this sense, "No management, no business"
is true. Survival of a business unit in the present competitive world is possible only through efficient and
competent management.

Importance of Management
• It helps in Achieving Group Goals - It arranges the factors of production, assembles, and
organizes the resources, integrates the resources in effective manner to achieve goals. It directs
group efforts towards achievement of pre-determined goals.
o By defining objective of organization clearly there would be no wastage of time, money, and
effort. Management converts disorganized resources of men, machines, money etc. into
useful enterprise. These resources are coordinated, directed, and controlled in such a
manner that enterprise work towards attainment of goals.
• Optimum Utilization of Resources - Management utilizes all the physical & human resources
productively. This leads to efficacy in management.
o Management provides maximum utilization of scarce resources by selecting its best possible
alternate use in industry from out of various uses.
o It makes use of experts, professional and these services leads to use of their skills,
knowledge, and proper utilization and avoids wastage. If employees and machines are
producing its maximum there is no under employment of any resources.
• Reduces Costs - It gets maximum results through minimum input by proper planning and by using
minimum input & getting maximum output.
o Management uses physical, human, and financial resources in such a manner which results
in best combination. This helps in cost reduction.
• Establishes Sound Organization - No overlapping of efforts (smooth and coordinated functions).
To establish sound organizational structure is one of the objectives of management which is in tune
with objective of organization and for fulfilment of this, it establishes effective authority &
responsibility relationship i.e., who is accountable to whom, who can give instructions to whom, who
are superiors & who are subordinates.
o Management fills up various positions with right persons, having right skills, training and
qualification. All jobs should be cleared to everyone.
• Establishes Equilibrium - It enables the organization to survive in changing environment. It keeps
in touch with the changing environment.
o With the change is external environment, the initial co-ordination of organization must be
changed. So, it adapts organization to changing demand of market/changing needs of
societies. It is responsible for growth and survival of organization.
• Essentials for Prosperity of Society - Efficient management leads to better economical production
which helps in turn to increase the welfare of people. Good management makes a difficult task
easier by avoiding wastage of scarce resource.
o It improves standard of living. It increases the profit which is beneficial to business and
society will get maximum output at minimum cost by creating employment opportunities
which generate income in hands. Organization comes with new products and research
beneficial for society.

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Difference between Management and Administration

Management and administration are closely related concepts within an organisation, but they have distinct
roles and functions.

Basis Management Administration

Meaning Management encompasses the process of Administration involves overseeing an
strategically planning, organizing resources, organisation’s day-to-day operations,
coordinating efforts, directing activities, and ensuring they run smoothly by
maintaining control within an organization to implementing policies and decisions set by
achieve its intended goals and objectives. management.

Focus Management is primarily concerned with Administration focuses on establishing

planning, organizing, directing, and policies, guidelines, and procedures to
controlling resources to achieve ensure the smooth operation of the
organizational goals. organization.

Scope Management is a broader term that Administration is a narrower term, often

encompasses various functions such as associated with the implementation of
planning, organizing, staffing, leading, and policies, rules, and regulations set by the
controlling. management.

Key Manager is the key person in the case of Administrator is the key person in the case
Person management. of administration.
Decision- Managers make strategic decisions related Administrators make decisions related to
Making to setting goals, formulating plans, and implementing policies, procedures, and
allocating resources. guidelines set by the management.

Nature It is more dynamic, action-oriented, and It is more concerned with establishing a

focused on achieving objectives through stable framework, ensuring adherence to
efficient resource utilization. rules, and maintaining order within the
organization.

Time Managers focus on both short-term and Administrators tend to have a longer-term
Horizon long-term goals, with an emphasis on perspective, aiming to establish enduring
adapting to changing circumstances. structures and processes.

Function Management involves guiding, directing, and Administration involves establishing

leading employees toward achieving policies, rules, and regulations that guide
organizational goals. the actions of employees and ensure
organisational efficiency.

Role The role of management is executive in The role of administration is decisive in

nature. nature.

Functions of Management – Planning, Organising, Staffing, Directing and

Controlling
Management is the process of planning, organising, staffing, directing, and controlling the available
resources effectively and efficiently for achieving the goals of the organisation. These interrelated elements
of the management process are called functions of management. Functions of management are
differentiated into two parts managerial function (i.e., planning, organising, staffing, directing, and
controlling) and operative function (i.e., production, marketing, purchasing, financing, and personnel).
Managerial functions are common to all enterprises because it does not vary from one organisation to
another. For example, planning is common in all organisations. Whereas operative functions are not

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common, and they differ from one organisation to another. For example, production is not performed in a
retail store.

Functions of Management
There is no universally accepted list of management functions. Different experts have classified the
functions of management in different ways. Henri Fayol was one of the first theorists to define
functions of management in his 1916 book “Administration Industrielle et Generale”. Henri Fayol
identified 5 functions of management, which he labelled: planning, organizing, commanding, coordinating
and controlling. Henri Fayol theorized that these functions were universal, and that every manager
performed these functions in their daily work.

Planning
A plan is a future series of actions decided beforehand. it specifies the objective to be achieved in the
future and the steps required to achieve them. Planning is the most essential function of management. It is
concerned with thinking in advance about what to do and who is going to do it. It is concerned with the
certain determination of a future course of action to achieve the desired result. Planning bridges the gap
between the initial point to the destination to reach. Selection of objectives, policies, and procedures are
involved in planning. The essential elements of planning are decision-making and problem-solving.

• For example, in Ram’s organisation, the objective is the production and sale of shoes. He has to
decide quantities, variety, and colour, and then allocate resources for their purchase from different
suppliers. Planning cannot avoid or stop problems, but it can anticipate them and prepare
emergency plans to deal with them if and when they occur.
Organising
Organising is the management function of allotting duties, grouping various activities, establishing authority,
and allocating resources necessary to attain the specific plan. Once the plans are formulated, the
organising function reviews the activities and resources needed to be applied to the plan. It resolves the
activities and resources needed. Organising decides who will perform a particular task, and where and
when it will be done. It affects the grouping of the necessary tasks into departments or work units so that
they can be managed well. Therefore, there is an organisational hierarchy so that reporting is smooth within

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the organisation. The efficiency of operations and the effectiveness of results can be achieved only if there
is a proper organisational technique. The nature and type of organisation structure depend upon the size
and nature of the enterprise.

• For example, In Ram’s enterprise of shoes, there are many duties to be performed. So, he
allocates the duties within the organisation forming various groups to attain the plan. He decides
who will perform which task as preparation of accounts, making sales, record keeping, quality
control, and inventory control are the tasks to be performed. There is an organisational hierarchy so
that reporting is easy and there is a smooth flow within the enterprise.
Staffing
Staffing refers to the process of hiring and developing the required personnel to fill in various positions in
the organisation. It is that part of the management process, which is concerned with recruitment, selection,
placement, allocation, conservation, and development of human resources. It is a very important aspect of
management as it ensures that the organisation has the right number and right kind of people, with the right
qualification at the right places, at the right times and that they are performing the right thing. It is also
known as the human resource function.

• For example, when Ram is hiring personnel for his enterprise, he will recruit different people for
different tasks. He has to ensure that he is hiring the right people with the right qualification for the
right job. For this process, Ram will need an HR manager who will be performing this task for the
organisation. This will be a very important part of the management function for his organisation, as it
will affect his enterprise in many ways if he selects the wrong people for the job.
Directing
Directing is that component of the management process which ensures that the members of an
organisation work efficiently and effectively for achieving the desired objective. It involves leading,
influencing, instructing, guiding, and inspiring employees to perform and achieve the predetermined
objectives. The two important components of directing are motivation and leadership. Communicating
effectively and clearly with supervising employees at work is also a part of directing. It involves issuing
orders and instructions to subordinates, overseeing people at work, and creating a work environment
wherein the employees may perform to the best of their abilities. To bring out the best from the employees,
a manager needs to direct them through praise and humbly criticize them.

• For example, in Ram’s enterprise, the employees are having some doubts and difficulties. If the
supervisor guides his subordinates and clarifies their doubts in performing a task, it will help the
employees and the workers to perform the activities correctly and on time. When the employees are
motivated and supervised properly, it leads the organisation toward its goal.
Controlling
When the plans are put into operation from directing, it becomes essential to judge regularly whether the
actual results are consistent with the planned results. It monitors the organisational performance towards
the fulfilment of organisational goals. It enables the manager to detect errors and defects in the course of
work and to take corrective actions whenever needed. It also provides proper direction to work in
conformity with the plan of action or predetermined standards. Controlling serves the purpose of finding out
deficiencies in performance and rectifying them so that the organisation can prevent their recurrence.

• For example, Ram expected to sell 1,000 pairs of shoes per week. This is the standard against
which his actual performance will be judged at the end of the week. If his actual performance at the
end of the week falls short of the standard, reasons for the shortfall would be ascertained by his
superior. Corrective actions will be taken to help the workers so that Ram’s enterprise can achieve
the standard performance of 1,000 pairs of shoes in the future by controlling the deficiencies and
rectifying the mistake.

Level of Management

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There are three levels of management according to their authority and responsibility. They work in the
hierarchy to achieve desirable organizational objectives.

Top Level
Management

Middle Level
Management

Lower or Operational
Level Management

Let’s discuss them one by one in brief.

1. Top level management
Top-level management is the topmost position in the organization consisting of ownership groups like the
Board of Directors, CEO, GMs, etc.

• They decide the goal, strategy, and mission of the organization.

• They focus on the whole organization by covering each area of operation.
• They have to make major decisions in business like diversification, adopting new technology,
opening new plants, binding up operations, etc.
• They need conceptual skills to perform their task.
• They supervise, direct, guide, and coordinate the departments.
• They review the financing and operating results of the organization.
2. Middle level management
Middle-level management comprises departmental managers who are the intermediaries between the top
level and the lower level.

• They have to explain and interpret the decisions to lower-level management.

• They have the authority to frame departmental plans to align with organizational plans.
• They have to supervise, control, and direct the lower-level management to achieve their goals.
• They need human skills to perform their job.
3. Lower or Operational or Bottom-line management
Operational level management is the lowest position in the hierarchy of management, consisting of
supervisors.

• They are responsible for the outcome and implementation of the plan.
• They plan day-to-day targets and supervise workers accordingly.
• They evaluate operating performance and send reports & statements to middle-level management.
• They solve the grievances of workers and give suggestions to middle-level management.
• They need technical skills to perform their job.

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 MANAGEMENT COMPENDIUM – RBI GRADE B ~BRAJESH MOHAN

Skills of an Effective Manager

An effective manager must possess certain skills in the areas of planning, organising, leading, controlling
and decision-making in order to process activities that are presented to him from time to time.
In order to be effective, a manager must possess and continuously develop several essential skills. Robert
L. Katz has identified three basic types of skills - technical, human and conceptual - which he says are
needed by all managers.
o Technical skill: It is the ability to use the tools, procedures or techniques of a specialised field.
Technical skill is considered to be very crucial to the effectiveness of lower level managers because
they are in direct contact with employees performing work activities within the firm. For instance, the
success of a drilling supervisor of an oil rig depends a great deal on his technical knowledge of
drilling. However, as one moves to higher levels of management within the organisation, the
importance of technical skill diminishes because the manager has less direct contact with day-to-
day problems and activities. Thus, the president of an oil company does not need to know much of
the technical details of drilling for oil or how to refine it.
o Human skill: It is the ability to work with, understand and motivate other people. This skill is
essential at every level of management within the organisation, but it is particularly important at
lower levels of management where the supervisor has frequent contact with operating personnel.
o Conceptual skill: It is the mental ability to coordinate and integrate the organisation’s interests and
activities. It refers to the ability to see the ‘big picture’, to understand how a change in any given part
can affect the whole organisation.

Technical skill is the most important at the lower levels of management; it becomes less important as
we move up the chain of a command.
Example: A production supervisor in a manufacturing plant, for example, is likely to need more technical
skill than the company president, because he or she will have to deal with the day-to-day manufacturing
problems that arise. On the other hand, the importance of conceptual skill increases as we rise in the ranks
of management. The higher the manager is in the hierarchy, the more he or she will be involved in the
broad, long-term decisions that affect large parts of the organisation. For top management, which is
charged with the responsibility for overall performance, conceptual skill is probably the most important skill
of all. Human skill is very important at every level of the organisation. One reason this is so because to get
the work done through others; high technical or conceptual skills are not very valuable if they cannot be
used to inspire and influence other organisation members.

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 MANAGEMENT COMPENDIUM – RBI GRADE B ~BRAJESH MOHAN

Scope of Management
There is a lot of scope in management- Production, Marketing, Financial, and Human resource
management.
1. Production Management
Production management is engaged with the planning, organizing, directing, and controlling the production
activities.

• They ensure the manufactured products are of the right quality at the right time and cost.
• They direct factory work and operations.
• They need technical knowledge to perform their job.
2. Marketing Management
Marketing management has to analyse the market need and make sure to supply that to the end
consumers.

• They select the effective and efficient channel of distribution.

• They communicate with customers through advertisements, personal salesmen, and other sources.
• They suggest the changes to production department according to the demand of customers.
3. Financial Management
Financial management allocates the funds to the business at the right time at the right cost of capital.

• They manage funds for both- long-term and short-term projects.

• They ensure proper utilization of the fund.
• They have to maintain liquidity and make business profitable.
• They require skills in the financing and accounting field.
4. Human Resource Management
Human resource management are engaged with recruiting, selecting, and training of the employees.

• They ensure adequate manpower at the right time.

• They maintain the records of employees.
• They ensure fair remuneration given to employees.
• They have to make sure about the short-term and long-term needs of the employees like social
security, appraisal, promotion, etc.

Management: A science, art, or profession

To understand the nature of management, let’s understand the nature of management as science, art, as
well as professional.

Management as a science
1. Scientific body of knowledge: Similar to science, the manager needs a proper knowledge of the
principles and techniques of management for better working. There are systematic guidelines for
management in different types of organizations.
2. Universal applicability: Like science, management theory, and principle are applicable everywhere
irrespective of size, nature, and location. Management principles are universally proven and
acceptable which makes it similar to science.
3. Based on experiments: Every theory in science is based on multiple experiments and research.
Similarly, management practices and theory are also based on multiple experiments in various kinds
of organizations, research regarding the implementation, and results.
4. Cause and effect relationship: “Every action has its reaction”; this statement is not only applicable
in science but also in management. Every activity/decision of a manager affects the organization. If
management decides to manufacture 10,000 units this month, then the operational level team will
be engaged to achieve that goal.

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We can say that management is science, but other features of management are not involved in
science. Therefore, we can’t say that management is only a science.

Management as an art
1. Personal skill: Every individual has different skills that they use in art as well as management.
Managers use their skills to solve problems in the organization. They have to use their skills to
implement things in such a way as to get desirable results.
2. Result-oriented approach: In art, we use different approaches to reach a single result. Similarly,
management uses various approaches to achieve organizational goals. There is no fixed technique
to implement, every time manager has to use a different approach according to need and result.
3. Creativity: Management must use their creativity to solve problems and conduct activities. Many
times, managers have to implement creative ideas to get outcomes effectively and efficiently. Like
an artist like singers or painters did in their field.
4. Improvement through continuous practice: “Practice makes a man perfect”- this quote is famous
for its implementation and result. If a person continuously does something then with experience and
time, things get improved. Similarly, in management, the manager’s experience and continuous
implementation will improve overall performance and the manager’s skills.
We can say that management is an art, but other features of management are not involved in art.
Therefore, we can’t say that management is only an art.

Management as a profession
1. Well-defined body of knowledge: In a profession, there is well defined body that has a specific set
of knowledge and principles that must be known by the person. In management also, there is a set
of knowledge and principles which is required by a manager to conduct their task and solve the
problems.
2. Restricted entry: The profession has restricted entry by their institution. As for Chartered
Accountants, The Institute of Chartered Accountants of India restricted entry through examination.
Some institutes also offer management courses but there is no specific institution or minimum
eligibility for management.
3. Code of Conduct: Every profession has its code of conduct which is to be followed by all the
members. Violation of codes will result in a legal dispute. However, The All-India Management
Association also framed a code of conduct for management, but it is not legally sanctioned.
4. Representative professional association: Every profession has a statutory association or
institution that regulates the activities through standards. Like, The Institute of Chartered
Accountants of India is the statutory body that ensures the conduct of the independent audit. There
is the All-India Management Association that has formed standards for management, but it is not a
statutory association. These standards are not accepted as well as membership is not compulsory.
Hence, we can’t say that management is a profession. But we can say that management is both
science as well as art.

Evolution of management thought

The Practice of management is as old as human civilization. The ancient civilizations of Egypt (the great
pyramids), Greece (the leadership and war tactics of Alexander the Great) and Rome displayed marvellous
results of good management practices. The origin of management as a discipline was developed in the late
19th century.
Following are the different approaches of Management:
1. The Classical Approach
2. The Behavioural Approach
3. The Quantitative Approach
4. Systems Approach
5. Contingency Approach

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Note: In syllabus only Scientific, Administrative, Human Relations and Systems approach to management
have been mentioned so we will focus majorly on these only.

1. The Classical Approach

The classical theory represents the traditionally accepted views about organisations. In a way, it signifies
the beginning of the systematic study of organisations. That is why it is said to be the oldest school of
thought about organisations and their management. The classical theories concentrated on organisation
structure for the achievement of organisational goals and also developed certain principles of management.
The classical thought can be studied under three streams, namely:

• Administrative Management: Henri Fayol introduced principles of management, emphasizing

functions like planning, organizing, commanding, coordinating, and controlling. He also proposed
the 14 Principles of Management.
• Scientific Management: Frederick W. Taylor's Scientific Management focused on maximizing
efficiency through time and motion studies, standardization, and the systematic allocation of tasks.
• Bureaucratic Management: Max Weber's bureaucratic theory stressed the importance of clear
hierarchy, rules, and impersonal authority within organizations.
1.1. Administrative Management
As organizations grew and became more complex, the need for a systematic understanding of the overall
management process was felt. Managers became more concerned with the management of organizations
than with improving the efficiency of individual jobs. They tried to identify the functions of a manager with
emphasis on coordination of resources towards the achievement of stated objectives. This stream of the
classical approach is known as Administrative Theory or Functional Approach or Management Process
Approach. This school of thought is also known as the ‘universalist’ school because it believed that
management principles are applicable to all kinds of group activities.
Henri Fayol is regarded as the father of this thought, i.e., the father of general management. The Principles
of Management are the essential, underlying factors that form the foundations of successful
management. According to Henri Fayol in his book General and Industrial Management (1916), there
are fourteen ‘Principles of Management.

Who was Henri Fayol?

• Father of the general principle of management, Henry Fayol was a French industrialist. He joined
a French mining company in 1860 as an engineer and rose to the position of its managing
director in 1888. At that time, his company was at the stage of bank insolvency. With broad
administrative experience, ‘Fayol’ contributed a lot to his company. When he retired in the year

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1918, the company was in excellent condition. Henri Fayol recognized the need for principles
of management. He identified 14 Principles of Management.

Fayol’s 14 Principles of Management:

I. Division of work
According to this principle, work should be divided into small tasks/jobs; each performed by a specialist or
trained employee. Division of work leads to specialisation. This results in efficient and effective output.
According to Fayol, “Division of work intends to produce more and better work for the same effort.
Specialization is the most efficient way to use human effort.”

• For example, a bank has several operations, like collection and payment of cash, issue of cheque
books, etc. All those activities are divided and allocated to a different person in the bank. This
method of doing work also improves their efficiency and makes them experts in their field.
II. Authority and Responsibility: According to this principle, there should be a proper balance between
authority and responsibility. Authority is the duty, which a subordinate is expected to perform. Authority and
responsibility go hand in hand. Authority without responsibility leads to irresponsible behavior, while
responsibility without authority will make a person ineffective. According to Fayol, “Authority is the right to
give orders and obtain obedience, and responsibility is the corollary of authority. The two types of authority
are official authority, which is the authority to command, and personal authority, which is the authority of the
individual manager.”

• For example, if a foreman is given the responsibility to produce 50 units per day, then he must be
given the required authority to achieve this target. If he is not given authority to draw raw material
from the stores, then he cannot be blamed.
• For example, if a sales manager requires to offer a credit period of 60 days to negotiate a deal with
a buyer (to fetch the company net margin of Rs.25 lakh), he/she should not be given authority to
offer a credit period of 100 days. He/she may misuse his/her authority.

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III. Discipline
It refers to obedience to the rules and regulations of the organization. Discipline requires good supervision
at all levels of management. According to Fayol, good supervision at all levels, clear and fair rules,
and a built-in system of penalties will help to maintain discipline. It is a must for all levels of
management.

• For example, employees must be disciplined to work effectively and efficiently to meet their
promises of bonuses, increments, and promotions. Its smoothness systemizes the functioning of an
organization by providing better relations between management and employees.
• For example, suppose management and a labour union have entered into an agreement whereby
workers have agreed to work overtime without any additional payments to revive the company out
of loss. In return, the management has promised to increase wages when this mission is
accomplished. Here ‘discipline’ would mean that workers and management both honour their
commitments.
IV. Unity of Command
According to this principle, each subordinate should receive orders and be accountable to only the superior.
No person can serve several masters at the same time. If an employee gets orders from two superiors at
the same time, then the principle of unity of command is violated, and he will find it very difficult to decide
who he has to obey first. So, to avoid confusion, employees should receive an order from one superior.

• Consequences of violation:
o Authority is undermined;
o Discipline is in jeopardy;
o Order is disturbed and
o Stability is threatened.
• For example, there is a salesperson who is asked to clinch a deal with a buyer, and he is allowed
to give a 12% discount by the marketing manager. But the finance department tells him not to offer
more than a 6% discount. In this case, there is no unity of command, which will lead to confusion
and delay.

V. Unity of Direction
It implies that there should be one head and one person for proof of activities having the same objectives.
According to this principle, all the activities should be carried under the direction of one head, and there
should be effective coordination in all the activities. This principle ensures unity of action and avoids
unnecessary duplication of work.
• For example, if an organization has four departments for different activities, then each department
must be directed by one superior, and its employees should give their whole efforts to achieving the
plan of the organization. Each division should have its in charge, plans, and execution resources.
There should not be an unnecessary duplication of efforts and a waste of resources.

VI. Subordination of Individual Interest to General Interest

According to this principle, the interest of the organization as a whole must prevail over the interest of the
individual. It must be the interest of the organization that should be placed above the interest of employees.
It is the duty of the manager to reconcile them. If reconciliation is impossible, then general interest must
supersede individual interest. A manager must sacrifice his interest. Manager can achieve their objectives
when the organization recovers from financial crises.

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• For example, there is a company that wants maximum output from its employees by providing less
salaries. There are employees on the other hand who want to get the maximum salary while
working the least. In both situations, the interests of the company will supersede the interest of any
one individual. As the interests of the workers and stakeholders are more important than the
interests of any one person.

VII. Remuneration of Employees

According to this principle, remuneration should be fair and satisfactory to both employees and the
organization. This principle leads to harmonious relations in the organization. Fair remuneration should be
determined based on government rules related to wages, financial position of the organization, nature of
work, and cost of living. Employees should be paid reasonable wages for their service, which should
provide them with a moderate standard of living.

• For example, if an organisation earns higher profits, then it should share some of its parts with the
employees in the form of bonus.
VIII. Centralization and Decentralization
Centralization refers to the concentration of authority at the top level, and decentralization means
distribution at all levels of management. According to this principle, there should be a proper balance
between centralization and decentralization. The degree of centralization and decentralization depends on
various factors, such as experience of the employees, ability of subordinates, size of the organization, etc.
Too much centralization led to loss of control of top management. Therefore, an optimum balance should
be maintained according to the need of the organization.

• For example, Authority to take vital decisions must be given to the top management, whereas
authority related to operational activities must be given to the middle and lower level.

IX. Scalar Chain

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An organisation consists of superiors and subordinates. The formal lines of authority from highest to
lowest ranks are known as the ‘Scalar Chain’. According to Fayol, ‘organisations should have a chain of
authority and communication that runs from top to bottom and should be followed by managers and the
subordinates.’
We consider a situation where there is one head ‘A’ who has two lines of authority under him/her. One line
consists of B-C-D-E. Another line of authority under ‘A’ is L-M-N-O. if ‘E’ has to communicate with ‘O’, who
is at the same level of authority, he/she has to transverse the route E-D-C-B-A-L-M-N-O.

According to Fayol, this chain should be violated in the normal course of formal communication.
However, if there is an emergency then ‘F’ can directly contact ‘P’ through ‘Gang Plank’. There is a
shorter route that has been provided so that communication is not delayed in case of an emergency.

• Example: A worker cannot directly contact the CEO of the company. If at all he/she has to, then all
the formal levels, i.e., foreman, superintendent, manager, director, etc. must know about the matter.
However, in an emergency, it can be possible that a worker can contact the CEO directly.
• Another example, E wants to communicate with I for some important work. The message should
orderly move from E to D, then to C, B, A, and then down from A to F then to G, H and finally to I.
This will take lots of time so to avoid this delay in work, Fayol suggested the concept of Gang
Plank. In this concept ‘E’ can communicate directly with ‘I’ on an urgent matter, the gang plank
allows two employees of the same level to communicate directly with each but each must enforce to
its superior.
X. Order
According to this principle, there should be a proper place for everything and everyone. Henri Fayol
emphasized on two types of order: material order and social order. In material order, there must be a plan
for everything. It ensures fix a place for various material tools. Whereas in social order, there must be an
appointed place for every employee, which ensures a proper and fixed place/cabin for each employee.

• So basically ‘order’ means that – ‘a place for everything (everyone) and everything (everyone) on its
(his/her) place.” Essentially, it means orderliness.
• For example, there should be specific place for foremen in a factory so that the work can be done
easily.
XI. Equity
According to this principle, there should not be any discrimination amongst employees based on religion,
caste, language, or nationality. Equity ensures coordinated relations between superiors and subordinates. It
leads to the smooth and successful working of the enterprise. It improves satisfaction and motivation of the
employee, creating relation between manager and employees.

• For example, workers doing similar jobs in the same organization should be paid same wages
irrespective of their sex, caste, religion and language.

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XII. Stability of Personnel

According to this principle, there should be proper effort to achieve stability and continuity of employment.
Fayol said that employees should be kept in their position for a reasonable time to show result stability
creates a sense of belonging, and workers are encouraged to improve their quality of work. This will
increase the efficiency of employees, and it will also increase the reputation of the organization.
Unnecessary labor turnover creates an atmosphere of disbelief. Continuous changes in employees disturb
the working environment.

• Fayol suggests that labour turnover should be minimised to maintain organisational

efficiency.
• The stability of tenure of personnel is good for the business because of the following reasons:
o Any adhocism will create instability/insecurity among employees. They would tend to leave
the organisation.
o Recruitment, selection and training costs of new employees will be high.
o There will be poor output levels and customer service till new employees are appointed.
• For example, new employees must be given ample time to adapt to new culture and environment
of the workplace.
XIII. Initiative
According to this principle, workers should encourage and should be given an opportunity to take initiative
in making and executing the plan. Henri Fayol suggested that employees at all levels should be
encouraged to take initiative in work. It motivates employees to work better and to take more interest in the
organization.

• The initiative is a powerful motivator of human behaviour and a source of strength for the
organization. This increases the mental growth and feeling of belongingness in employees. It
increases the commitment of employees toward the organization. Lack of initiatives may create an
atmosphere of non-cooperation.
• For example, organizations must have an employee suggestion system so that they have feeling of
belongingness.
XIV. Esprit De Corps

• ‘Espirit de corps’ means unity is strength. According to Fayol, management should promote a
team spirit of unity and harmony among employees.
• A manager should replace ‘I’ with ‘We’ in all his/her conversations with workers to foster team
spirit.
o This will rise to a spirit of mutual trust and belongingness among team members. It will also
minimise the need for using penalties.
o Management should promote teamwork, especially in large organisations; otherwise, it will
result in a loss of coordination and hence the organisation will not be able to achieve its
objectives.

Critical Evaluation of Fayol’s Principles

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Fayol was the first to systematize the classical school. His theory retains much of its force till today. Many
of his concepts and principles are taken for granted by managers now. The principles of administrative
theory have the potential to comprehend and cope with the growing complexity of organisations to the
extent they seek to bring order, structure and certainty through rules, regulations, policies and practices.
Fayol’s theory has, however, been criticized on the following grounds:

• Too formal: Fayol’s theory is said to be very formal. However, in any specific and analytical study,
facts and observations have to be presented in a formal manner.
• Vague: Some of the concepts have not been properly defined. For example, the principle of division
of work does not tell how the task should be divided. Again, to say that an organisation needs
coordination is merely to state the obvious. In the words of Herbert Simon, “administrative theory
suffers from superficially, oversimplification and lack of realism”
• Inconsistency: Principles of the administrative theory were based on personal experience and
limited observations. They are generalizations and lack empirical evidence. They have not been
verified under controlled scientific conditions. Some of them are contradictory. For example, the
unity of command principle is incompatible with the division of work. The theory does not provide
guidance as to which principle should be given precedence over the other.
• Pro-management bias: Administrative theory does not pay adequate attention to workers. Workers
are treated as biological machines or inert instruments in the work process.
• Historical value: Fayol’s theory was relevant when organizations operated in a stable and
predictable environment. It seems less appropriate in the turbulent environment of today. For
example, present-day managers cannot depend entirely on formal authority and must use
persuasion to get the work done. Similarly, the theory views organizations as power centres and
does not recognize the role of a democratic form of organization.

1.2. Scientific Management

Scientific management implies the application of science to management. It means conducting business
activities according to standardised tools, methods and trained personnel in order to increase the output,
improve its quality and reduce costs and waste.
Frederick W. Taylor was the first person who insisted on the introduction of scientific methods in
management, and it was he who, along with his associates, made the first systematic study of
management. He launched a new movement in 1910 which is known as ‘Scientific Management’. That
is why Taylor is regarded as the father of scientific management.
According to Taylor, “Scientific Management is an art of knowing exactly what you want your men to do
and seeing that they do it in the best and cheapest way”. In Taylors view, if a work is analysed scientifically,
it will be possible to find one best way to do it.

Frederick Winslow Taylor (1856-1915)

F.W Taylor was an American mechanical engineer who started his career as a mechanic and rose to the
position of chief engineer in Bethlehem Steel Company, USA. He found that the main cause of
inefficiency and wastage in factories was ignorance on the part of both workers and management.
Traditional, unscientific and rule of thumb methods were used without finding facts and without
conducting experiments.
Taylor defined management as ”the art of knowing exactly what you want men to do and seeing that they
do it in the best and cheapest way.” He stated that the best management was a true science based upon
certain defined laws, rules, and principles. He was the first who laid emphasis on the importance of a
scientific approach to managing an enterprise instead of the hit and trial method. His philosophy and
ideas are given in his book,’ Principles of Scientific Management’. For his contribution, he is also
known as the Father of Scientific Management.

Principles of Scientific Management

I. Science not Rule of Thumb: Taylor focused on the scientific study and analysis of each and every
element of a work to replace the old rule of thumb method or hit and trial method. Rule of thumb is not

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based on science or exact measurement. Scientific method is based on cause and effect, whereas rule of
thumb was based solely on the discretion of managerial decisions. Taylor focused that managers should
scientifically analyze each and every component of work. According to him, even a small work, like loading
of iron pigs into boxcars can be scientifically done. Doing a work scientifically reduces wastage of time and
resources and helps to achieve the target effectively and efficiently.
II. Harmony, Not Discord: Taylor recognized the class conflict that existed between the workers and
managers. He emphasized that there should be no conflict between the workers and managers. Both of
them should realize the importance of each other and should work together for organizational goals. In
order to achieve this harmonious relation, he focused on ‘Mental Revolution’, which means that workers
and managers should transform their thinking. In such a situation, management aims at providing better
working environment for the employees, and sharing the gains of the company, etc., and workers should
avoid going on strikes and work hard to the best of their ability. This principle is clearly visible in the case of
Japanese work culture. There is complete openness between the workers and management. If workers are
not satisfied with the management, they wear a black badge and work for more than the normal working
hours.
III. Cooperation, Not Individualism: According to this, there should be cooperation between management
and workers instead of individualism. This principle is an extension of Principle ‘Harmony, Not Discord’.
Both management and workers should realize that they need each other. There should be cooperation
between them, and competition should be replaced by cooperation. For achieving this principle,
management should welcome the constructive ideas and suggestions of the workers. The workers should
be praised and rewarded for the suggestions given if their suggestions were helpful. Workers should be
taken into consideration while taking important decisions. On the other hand, workers should avoid
unreasonable demands and strikes and should work effectively and efficiently to achieve organizational
goals.

• According to Taylor, there should be an almost equal division of work and responsibility between
workers and management. Management should work almost side by side with the workers helping,
encouraging, and smoothing the way for them. This is called the ‘paternalistic style’ of management,
whereby the employer takes care of the needs of the employees.
IV. Development of workers to their greatest efficiency and prosperity: Taylor focused on the
efficiency of workers. According to him, every organization should follow the scientific method of selection
of workers, and each worker should be scientifically selected. Then they should be assigned work
according to their mental, physical and intellectual capabilities. To increase efficiency, training should be
provided. This increase in efficiency will be beneficial for both workers and management.

Techniques of Scientific Management:

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Techniques of scientific management mean the methods which help in the application of management. In
order to implement principles of scientific management. Taylor suggested the following techniques:
I. Functional Foremanship: Functional foremanship is an extension of the principle of ‘Division of work
and specialisation’ to the shop floor level of a factory. It is a technique which aims to improve the quality of
supervision on the shop floor by putting workers under eight specialist foremen.

• According to this technique, the work of supervision is divided into several specialized foremen.
Taylor believes that one foreman is not an expert in all aspects of work. Therefore, each worker
should be supervised by several foremen. Taylor suggested that 8 specialists out of these 4 will
be responsible for looking after the planning work, and the other four will be responsible to
supervise and executing of work.

Specialist of Planning Department and their Functions

• Route Clerk: This clerk specifies the sequences of completing a particular work, meaning thereby
the stages it shall have to pass before being finalised. He also decides the job to be done for the
day and where it is to be done.
• Instruction Card Clerk: This clerk prepares the instruction cards for the workers and hands them
over to the gang boss. These cards contain information about the nature of the work, procedure of
doing it, material to be used and the details about machinery.
• Time and Cost Clerk: This clerk decides as to when a particular work is to be started and finished,
meaning thereby as to what time the whole work will take. It is also decided at the same time at
what cost the product will be produced.
• Discipline Officer: The discipline officer ensures that every work is being performed in a disciplined
manner.
Specialist of Production Department and their Functions

• Gang Boss: He is expected to ensure that both the workers and the machines are fit enough for
production and that the material required for their use has been made available to them.
• Speed Boss: The main function of the speed boss is to ensure that all the workers are performing
their job at the required or expected speed.
• Repair Boss: The main function of the repair boss is to keep the machines and tools in working
condition.
• Inspector: He inspects the things produced and compares their quality with the standard prescribed
for them and tries to find out the difference. In case of unfavourable result, he initiates corrective
action.

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II. Standardization and simplification of work: Standardization means fixing standards for everything. To
attain standard production, the standard of performance is established for the workers. Standardization of
work means standard set for material, machine method, and condition of work. Simplification refers to
eliminating unnecessary varieties, sizes, and grades of the product. It aims at eliminating unnecessary
varieties, sizes and dimensions.

• Objectives of standardisation of work are:

o To reduce a given line or product to fixed types, sizes and characteristics.
o To establish standards of excellence and quality of materials.
o To establish standards of performance of workers and machines.
o To establish interchange ability of manufactured parts and products.
• Simplification of work aims at eliminating unnecessary diversity of products.
o It results in savings of the cost of labour, machines and tools.
o It implies reduced inventories, fuller utilisation of equipment and increasing turnover.
III. Work-study: Work-study means systematic and critical assessment of all the operational functions in
the organization. The main objective of the work-study is to improve efficiency by making optimum
utilization of resources.
1. Method Study: It is a concern with finding ‘one best way’ of doing a job. The main aim of this
technique is to improve work methods to minimize the cost of products and maximize the
satisfaction of customers.
2. Motion Study: This study refers to making a thorough analysis of various motions being performed
by a worker while he is doing a particular job. The main purpose of motion study is to detect and
eliminate unnecessary movement, and to find out the best method of doing a particular job.
3. Time Study: It is the technique that is used to determine the standard time taken by a worker. It
helps in determining how much work an employee should be able to do in a given period.
• For example, on the basis of several observations, it is determined that the standard time taken
by the worker to make one lunch box is 30 minutes. So, in one hour he/she will make 2 boxes.
Assuming that a worker works for 8 hours a day, he/she should make 16 lunch boxes per day.
Now, this is the standard task a worker has to perform. Wages can be decided accordingly.
4. Fatigue Study: It refers to determining the amount and frequency of rest intervals required in
completing a work. Taylor suggested that a person gets tired when he works continuously without a
break. So, he must be provided with a rest interval to regain his lost stamina.
IV. Differential price wage system: This is a system in which efficient and inefficient workers are paid at
different rates. According to Taylor, financial incentives act as a motivator. So, Taylor developed the
concept of a differential piece wage system. In this technique, incentives are directly linked with
productivity.
V. Mental Resolution: It means a total change in the attitude of workers and management towards one
another from competition to cooperation.

• It requires that management should create suitable working condition and solve all problems
scientifically.
• Similarly, workers should attend their jobs with utmost attention, devotion and carefulness. They
should not waste the resources of enterprise.
• Handsome remuneration should be provided to workers to boost up their moral.
• It will create a sense of belongingness among workers.
• They will be disciplined, loyal and sincere in fulfilling the task assigned to them.
• There will be more production and growth at a faster rate.
Critical Evaluation of Scientific Management
Taylor’s ideas caught the imagination of several individuals and organizations in the USA and Europe.
Scientific management led to a tremendous increase in productivity and wages. However, his scientific
approach to every aspect of management created suspicion in the minds of workers and trade unions.
They feared that working harder and faster might eventually lead to the exhaustion of all available jobs and
retrenchment.

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• Scientific management has been criticised on the following grounds:

o Mechanistic Approach: The main criticism is that scientific management ignores the human
element in production and is devoid of human touch. It treats workers as factors of
production and not as human beings. Too much emphasis is placed on technical aspects of
work ignoring the human side. Therefore, Taylor and his associates were ridiculed as
‘efficiency experts’ and ‘time study analysts’.
o Unrealistic Assumptions: Scientific management is based on the assumption that people
are rational and motivated by material gains. Taylor and his associates concentrated on the
physical and economic needs of people. Letter experience has revealed that financial gain is
not the only one thing that matters. Workers also want job satisfaction, participation and
recognition.
o Narrow View: Scientific Management is quite limited in scope. Taylor focused completely on
efficiency on the shop floor. As consequence management became the study of shop
management while the more general aspects were overlooked. Scientific management has
thus been described as a theory of industrial engineering. It does not deal with the
management of the total organisation.
o Impractical: Many ideas of Taylor are said to be infeasible in practice. For example,
planning cannot fully be separated from doing because these are two sides of the same job
and are not different jobs. Similarly, functional foremanship is likely to create problems
because it violates the principle of unity of command.
o The exploitation of Labour: In the name of increasing efficiency, workers were forced to
speed up affecting their physical and mental health. Specialisation and standardisation make
the jobs dull and monotonous.

Difference between Fayol and Taylor Theories of Management

Both the persons have contributed to development of science of management. Henri Fayol and F.W Taylor
made a great contribution to the field of management, which formed the basis of practice for future
managers.

Basis Henri Fayol F.W. Taylor

Personality Fayol was a practitioner. Taylor was a scientist.

Perspective Fayol developed the principles from Taylor developed these principles and
the point of view of the top level of techniques keeping in mind the lower
management. level.

Unity of Command Unity of Command is strictly Unity of Command was not followed,
followed. and emphasis was given on
functional foremanship.

Applicability Fayol’s principles are universally Taylor’s technique or principles are

applicable, as they are flexible. applied in specific situations, as they
are less flexible.

Basis of formation Fayol’s principles are based on Taylor’s principles or techniques are
personal experiences. based on experiments and
observation.

Focus The main focus is given on the The main focus is given on increasing
overall administration of the productivity of employees.
organization.

Expression Fayol’s principles are expressed as Taylor’s techniques are expressed as

general theory of administration. scientific management.

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Human Element Importance was given to human Less importance was given to human
element in principles, like equity, elements, and more importance was
initiative and stability of tenure. given on increasing production.

Emphasis Emphasis was given on principles Emphasis was given on

and theory of general standardization of work and tools.
administration, and on functions of
managers.

1.3. Bureaucratic Management Theory by Max Weber: Not in syllabus of RBI Grade B Exam,
2. The Behavioural Approach
The Behavioural Theory of Management, often referred to as Neo-Classical Management Theory, focuses
upon individual behaviour, motivations, and social interactions. It was a reaction to the shortcomings of
classical management theory that focused on individual productivity and through efficiency and
organizational structure. These approaches failed to adequately account for the human aspects of
organizational performance.
Behavioural approach heavily draws concepts from psychology and sociology to analyse various aspects of
organisational behaviour. The core elements of the behavioural science approach include motivation,
leadership, communication, group dynamics, and participative management. These aspects are
considered crucial in understanding and managing human behaviour within organisations. The neo
classicists modified the classical theory by emphasizing the fact that organisation is a social system, and
the human factor is the most important element within it.
They conducted some experiments (known as Hawthorne Experiments) and investigated informal
groupings, informal relationships, patterns of communication, patterns of informal leadership, etc. This led
to the development of the Human Relations Approach. Elton Mayo is generally recognized as the father
of the Human Relations School.
The basic tenets of Behavioural or human relations approach are as under:

• The business organisation is a social system.

• The behaviour of an individual is dominated by the informal group of which he is a member.
• An individual employee cannot be motivated by economic incentives alone. His social and
psychological needs must be satisfied to improve the level of management.
• In an organisation, it is ultimately a cooperative attitude and not the mere command which yields
results.
• Management must aim at developing social and leadership skills in addition to technical skills. It
must take interest in the welfare of workers.
• Morale and productivity go hand in hand in an organisation.
Behavioural Management Theory can be broken unto two major theories:

• Human Relations
• Behavioural Science

2.1. Human Relations Approach

The human relations approach is also known as New Classical approach. Elton Mayo termed it Clinical
approach. It attempts to explain the informal relations among employers and employees are concerned with
moral and psychological rather than legal aspects of an organization. The approach considers worker not
only one of the means of production system but as a human.
Human Relations approach emerged after 1920 to explain the informal aspect of an organization. It
emerged as a reaction to the Taylor‘s Scientific Management approach an offshoot of broad Classical
approach, which became popular in the beginning of the 20th century. As a result of the Scientific
Management approach whole human culture was influenced by material and mechanical environment. In
industries emphasis was on increasing production. Resultantly, labour became a commodity and human

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being cog in the wheel. Main problems before workers were low wages, more hours of work, unhealthy
working conditions and labour’s exploitation. Managers were ignoring psychological needs of labours and
social aspects of work. All these factors made workers apathetic towards their work. Besides, technological
advancement in industry increased the educational level and professional skills of the workers to a great
extent which made them more assertive about their rights and interests. Further, the class conflict and
Trade Union movement in U.S.A. coupled with Communist Revolution in Soviet Union became the catalyst
factors for the emergence and evolution of the Human Relations approach.
The basic features of human relations approach have been the result of various experiments conducted by
Elton Mayo and his colleagues in twenties and thirties of the last century focusing their attention on the
problems of industrial workers.
The first major research study which came to be known as ―The First Enquiry undertaken by Mayo was in
a textile mill in 1923 near Philadelphia. Under the then prevailing circumstances, the mill provided all the
facilities to the workers. It was well organized and considered to be a model organization. Despite this, it
faced some serious problems in one of the sections--the mule spinning--of the mill. The turnover of the
employees in this section was estimated to nearly 250 percent per annum as against 5 to 6 percent in other
sections. The management introduced several schemes by way of incentives to retain the workers but of no
avail. Finding no way out of this ticklish problem, the matter was referred to Harvard University which in turn
entrusted it to Elton Mayo.
Mayo studied the problem from various perspectives i.e., social, physical and psychological and started
experiments with the permission of the management. In the very beginning, he studied the problem of
physical fatigue. In order to overcome this problem, he introduced rest periods of ten minutes each in the
morning and afternoon for every worker of the mule section. Finding positive and encouraging results of
this exercise, the scheme was extended to all other sections. Consequently, the symptoms of fatigue
disappeared, and the labour turnover almost came to an end as the workers started taking interest in work.
The overall production level increased, and the morale of the workers boosted. Further, Mayo suggested
certain measures whereby workers had to earn their rest periods and bonus by producing more than a
certain percentage. While these privileges made the workers happy but not liked by the supervisors as the
same were not available to them. Keeping this fact in mind Mayo introduced a new scheme of shutting
down whole of the spinning department for ten minutes, four times a day. This brought a new change in the
outlook of supervisors and employees as all of them were satisfied with this new work culture.

2.1.1. Hawthorne Experiments

Hawthorne Experiments of Elton Mayo are considered as the bedrock of human relations movement in the
management. These experiments were conducted in the Hawthorne plant of the Western Electric
Company from 1924 to 1932.
A brief description of these experiments is given below:

• The Test Room Studies—Great Illumination Experiment: The first in the series was "The Great
Illumination" experiment (1924-27) having its objective to find out the impact of single variable i.e.
illumination on the working capacity of workers. Under this experiment, two groups (control and
experimental) of female workers, consisting of six members each, were formed and located in two
different rooms, each group performing the same task. In the beginning, the rooms were equally
illuminated but later on the experimental group was subjected to changes in the level of illumination.
The research team observed both the groups and kept accurate record of production. The result
was that regardless of the level of illumination, the production in both the groups increased. This
made the researchers to conclude that certain other factors rather than illumination influence the
level of production. So, various experiments were conducted to find out the other factors.
• Relay Assembly Test Room Studies: The relay assembly tests were designed to evaluate the
effect rest periods and hours of work have on efficiency. In this experiment, a small homogeneous
work group was constituted. Several new elements were introduced to the work atmosphere of this
group. These included shorter working hours, rest pauses, improved physical conditions, friendly
and informal supervision, free social interaction among group members, etc. Productivity and
morale increased considerably during the period of the experiment. Morale and productivity are
maintained even if improvements in working conditions are withdrawn. The researchers concluded

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that socio-psychological factors such as a feeling of being important, recognition, attention,

participation, cohesive work groups, and non-directive supervision held the key to higher
productivity.
• Mass Interview Program: In this experiment, a large number of workers were interviewed to judge
their attitudes and opinions on the factors influencing productivity. Under this worker were asked to
express their views freely on the programs and policies of the management, working conditions and
treatment by the supervisors. It was found that the opportunity to talk freely about things that are
important to workers had a positive effect on their morale and productivity.
• Bank Wiring Observation Room Study: This last experiment was conducted by Australian social
psychologist Elton Mayo and American anthropologist Lloyd Warner in the early 1930s. Its purpose
was to find out the effect of payment incentives on employee productivity. The study involved
fourteen male employees whose normal work routine involved assembling telephone switching
equipment. The employees were compensated based on their individual productivity. To the
surprise of both the researchers and the company, the study found that employee productivity
decreased with increased wage incentives.
o Apparently, the employees became suspicious of the unexpected wage incentive. They saw
it as part of a strategy to either fire some employees or cut wages at some point in the
future. The researchers were fascinated by the initial findings and decided to dig deeper into
the cause of the productivity decline. They found that the employees had formed informal
groups that set rules of conduct and devised strategies to ensure that the employees
complied with the rules. The rules were designed to ensure that productivity remained
relatively stable, regardless of any changes or inducements introduced.
o The informal group controlled its members, managing how they interacted with their bosses
and how they responded to the experimenters’ questions. The researchers concluded that
employees were more responsive to the informal group than they were to incentives offered
by management.
Contribution of Hawthorne Experiment:
The most important contribution of Hawthorne experiments is the development of the human relations
approach. The focus of the approach that became popular after Mayo's experiments is human behaviour,
which has a great bearing on administrative efficiency and organizational dynamics.
The main characteristics of this approach are as under:

• Emphasis on Human Element: The foremost characteristic of human relations approach is its
emphasis on human element in industry. It assumes man not as a machine rather a living and
sensitive entity having his own views. Prior to Mayo, workers were considered as "cog in the wheel"
or "extension of a machine". Labor was treated as commodity or non living means of production.
There were wrong assumptions of human nature in industry. Generally, society was considered as
horde of unorganized people. In the eyes of managers workers were a "contemptible commodity".
Mayo while refuting these assumptions re-established human factor in industry. Thus, he advocated
human relations approach by emphasizing needs, aspirations and sentiments of workers.
• Impact of Social and Human Factors in Productivity: Advocates of Human relations approach
believe that output is affected by social and human factors along with technical and material ones.
Before Hawthorne experiments, the impact of only technical and material changes was considered
on productivity. However, Mayo‘s experiments showed that the impact of human and social factors
is more than the material and environmental ones.
• Man is not only an Economic Man: Human relations approach strives to know the non-economic
motivations instead of purely economic ones. According to this approach man is not only an
"economic man" who works only for material benefits and rewards. Mayo realized that there are
some social and psychological needs of man such as social prestige, appreciation, sympathy,
recognition of work etc. which inspire him to work. So, he suggested that managers should pay due
attention to the individual and social needs of workers in addition to proper wages. Hawthorne
experiments proved that financial means are inadequate to provide incentive to employees rather
non-financial incentives such as participation in management, security of service, freedom of work

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are more important. In fact, human relations approach believes in the concept of "social man" who is
altogether different from the "economic man".
• Importance of Informal Groups: At the workplace, the workers often do not act or react as
individuals but as members of groups. A person who resists pressure to change his behaviour as an
individual often changes it quite readily if the group of which he is a member changes its behaviour.
The group plays an important role in determining the attitudes and performance of individual
workers.
• Two-way communication: Two-way communication is necessary because it carries necessary
information downward for the proper functioning of the organisation and transmits upward the
feelings and sentiments of people who work in the organisation.
• Liberal Supervisory Style: Human relations approach supports liberal supervisory style in industry.
According to Mayo, free, liberal and sympathetic supervision inspire workers to work more. When
workers have freedom of discussion, determining work procedure and controlling work environment,
they work more enthusiastically. Further, morale of employees is boosted when supervisors behave
friendly with workers, sympathetically consider their personal problems and avoid strict control.
Critical Evaluation
Hawthorne Experiments proved a landmark in the evolution of management thought. They made a
significant contribution towards humanising organization and management. These experiments directed
attention towards social and psychological needs, informal groups, motivation, morale, communication,
leadership, etc. Several new sub-disciplines like industrial psychology, individual sociology, social
psychology and group dynamics emerged.
Hawthorne Experiments have been criticised on the following grounds:

• Pro-Management Bias: In Hawthorne studies, the ends of the company were assumed to be
correct. Mayo has in fact been criticised for implying that management is always logical whereas
workers are largely driver by emotions.
• Clinical Bias: The research methods used in Hawthorne Studies overstressed empirical
observations. Mayo’s work has been described as “radical empiricism”.
• Doubtful Validity: The reactions of small groups of American women can hardly be taken as
sufficiently representative to provide a valid solution in different countries. The conclusion cannot be
generalised.
• True but Irrelevant: The conclusions of Hawthorne Experiments are true but irrelevant. Some
industrialists argue that the main object of a business is to make profits rather than to keep workers
happy.
• Limited focus on work: The human relations approach lacks adequate focus on work. It puts all
the emphasis on interpersonal relations and on the informal group.
• Over-emphasis on Group: The human relations approach emphasises group and group decision-
making. But in practice, groups may create problems and collective decision-making may not be
possible.
• Over-stress on Socio-psychological factors: The human relations approach undermines the role
of economic incentives in motivation and gives excessive stress on social and psychological factors.
If the wages are too low, the employees will feel dissatisfied despite good interpersonal relations at
the workplace. Thus, it may be said that the human relations approach seeks to exploit the
sentiments of employees for the benefit of the organisation.
Despite the criticism, Hawthorne’s studies are regarded as ‘a milestone and a turning point’ in the
history of man at work and in the development of management thought. These studies challenged some of
the basic postulates of the classical approach and focused attention on the human factor in the industry.
This revealed the inadequacy of studying the workers in isolation and focusing on the physical aspects of
the industry. The studies indicated that an improved understanding of the human factor in the organization
was necessary for achieving major gains in productivity.

3. System Approach to Management

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Ludwig von Bertalanffy introduced General System Theory of Management in 1968 in a publication
“General System Theory: Foundations, Development, Applications”. The basic idea of this theory is
that a system is better than the parts which mean, multiple parts/departments/subsystems/components
work harmoniously to yield the optimal benefit to a larger system.
The Systems Approach to management theory, commonly viewed as the foundation of
organizational development, views the organization as an open system made up of interrelated and inter-
dependent parts that interact as sub-systems. The theory emphasizes that a system is not simply a
collection of individual parts but rather an organized whole, where the interdependence of its parts
contributes to the unique characteristics of the entire system. Every system, including organisations, is
composed of interdependent subsystems, which themselves can consist of smaller subsystems. This
recognition highlights the complexity and interconnectedness of organisations as open systems.

• For example, a firm is a system that may be composed of sub-systems such as production,
marketing, finance, accounting and so on. As such, the various sub-systems should be studied in
their inter- relationships rather, than in isolation from each other.

Other Contributor to System Theory

• Chester Bernard introduced the concept of Cooperative Systems in his book, Functions of an
Executive (1938).
• Economist, Herbert Simon, introduced in his book, Administrative Behavior (1947), the concept of
systems process in decision-making within organizations. Notably, he introduced concepts of
bounded rationality and satisfying.

Features of Systems Approach to Management

Some of the features of the systems approach are:

• Interconnected Sub-systems: An organisation is like a big puzzle made up of smaller pieces that
work together. These pieces, called sub-systems, interact and depend on each other for the
organisation to function properly.
• No Isolation: We can’t understand the sub-systems by looking at them individually. Instead, we
need to see how they relate to each other and to the organisation as a whole. It’s like understanding
how each puzzle piece fits into the larger picture.
• Boundary: An organisation has a boundary that sets it apart from other systems. It helps us identify
which parts are inside (like employees) and which parts are outside (like customers). This boundary
defines the organisation’s scope and limits.

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• Changing Environment: Organisations are dynamic systems because they are affected by their
environment. They can be influenced by things, like power cuts, strikes, or shifts in customer
preferences. That’s why management needs to keep an eye on what’s happening outside and make
adjustments when needed.
• Sensitivity to the Environment: Because organisations are influenced by their environment, they
need to be sensitive to changes. Just like we react when something unexpected happens,
organisations must be responsive and adapt to external factors that may affect their operations.
• Monitoring and Taking Action: To ensure a healthy organisation, it’s crucial to constantly monitor
its well-being. Management needs to pay attention to signs of problems and take corrective action
promptly. It’s like regularly checking the pulse of the organisation to make sure everything is running
smoothly.
Uses and Limitations of Systems Approach to Management
Some of the uses of the Systems Approach are:

• Meaningful Analysis: The systems approach provides a helpful way to understand organisations
and how they are managed. It encourages us to look at the bigger picture and consider how
different parts of the organisation interact with each other.
• Integrated Thinking: Instead of focusing on individual problems in isolation, the systems approach
encourages us to think about how different problems and solutions are connected. This helps us
see the organisation as a whole and make more informed decisions.
• Unified Focus: The systems approach helps bring everyone in the organisation together by giving
a common focus. It helps align goals, strategies, and actions across different teams and
departments, making sure everyone is working towards the same objectives.
• Dynamic Nature: Organisations are always changing, and the systems approach recognizes this. It
reminds us that organisations need to be adaptable and flexible to keep up with the constantly
evolving business environment.
• Understanding Interactions: The systems approach highlights the importance of how different
things in the organisation interact and depend on each other. It helps us see the ripple effects of
changes and decisions, allowing us to make better choices.
The following are the limitations of the systems approach:

• Simplification: While the systems approach is helpful, it may oversimplify the complexity of real-life
organisations. Real organisations can be much more intricate and have more nuances than what
the systems approach may capture.
• Subjectivity: Applying the systems approach requires interpretation and judgment, which can vary
from person to person. Different managers may see things differently, leading to potential variations
in analysis and decision-making.
• Time and Resource Constraints: Using the systems approach can take time and resources. It
may be challenging to gather and analyse all the necessary data, especially for larger and more
complex organisations.
• Overemphasis on Interactions: While understanding interactions is crucial, focusing solely on
them may overlook the unique qualities and contributions of individual elements in the organisation.
• Lack of Precision: The systems approach provides a general framework rather than specific step-
by-step instructions. Its concepts are open to interpretation and can vary depending on the situation.

4. Contingency Approach to Management

The contingency approach to management is based on the idea that there is no single best way to manage.
Contingency refers to the immediate contingent circumstances. Effective organizations must tailor their
planning, organizing, leading, and controlling to their particular circumstances. In other words, managers
should identify the conditions of a task, the requirements of the management job, and people involved as
parts of a complete management situation. The leaders must then work to integrate all these facets into a
solution that is most appropriate for a specific circumstance.

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• The contingency approach evolved during the 1960s. The contingency approach to management
emerged from the real-life experience of managers who found that no single approach worked
consistently in every situation. The basic idea of this approach is that the no management technique
or theory is appropriate in all situations.
• The main determinants of a contingency are related to the external and internal environment of an
organization. The process, behavioural, system approach to the management didn't integrate the
environment. They often assumed that their concepts and techniques have universal applicability.

What is Nudge Theory?

American academics Richard H. Thaler and Cass R. Sunstein are primarily credited with developing the
nudge theory. The 2008 book "Nudge: Improving Decisions About Health, Wealth, and Happiness," which
became a significant international best-seller, popularised the name and idea of "Nudge" or "Nudge theory."

• As per Collin’s dictionary, If you nudge someone, you push them gently, usually with your
elbow, in order to draw their attention to something.
Humans, being not-so-rational, often need encouragement or intervention — a nudge — to get going and
do what is best for the country or society at large. The ‘Nudge Theory’ recognizes this behavioural trait.
It says that people, rather than being forced, can be encouraged, and influenced to pursue or desist
from certain actions through nudges. Nudges are not mandates. So, while there is encouragement,
there is no compulsion to comply, and people have the freedom to choose other options. Health
organizations, for example, have used nudges to educate citizens about COVID-19 testing and vaccination.
Consumer-goods companies have used them to steer customers toward climate-friendly products and
services.
In 2017 the Nobel Prize in economics was awarded to Richard Thaler for his contributions to
behavioural economics through ‘nudge theory’. Although its application has mainly been in government
policy, its use isn’t limited to that field. A nudge refers to principle that small action can influence on the
choice of people, or the way people behave. It focuses on engaging people by knowing that how people
make choices or make decisions.

The Nudge theory encourages indirect techniques to influence the behaviour instead of giving
direct instructions. For example, instead of saying that monitoring of diabetes is essential, availability and
accessibility of glucometer can be improved which will positively influence human behaviour. Similarly,
asking people to join a gym or play a sport in office, create conditions that people start using stairs.

• The ‘Nudge Theory’ has potential applications in varied fields such as public policy, influencing
citizen behaviour, healthcare, personal finance and investment planning. For example, tax breaks
under Section 80C are a nudge to encourage people to invest in financial instruments such as the
Public Provident Fund and equity-linked savings schemes, in place of gold or property. Insurers use
the ‘nudge’ of lower premiums on life covers to encourage customers to keep away from smoking.

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Chapter: 2 - Motivation
Motivation Syllabus: Concept, importance, Content theories (Maslow’s need theory, Alderfer’s’ ERG
theory, McClelland’s’ theory of needs, Herzberg’s two factor theory) & Process theories (Adams equity
theory, Vrooms expectancy theory).

2.1. What is Motivation?

"Motivation is the result of processes, internal or external to the individual, that arouse enthusiasm and
persistence to pursue a certain course of action." ~Gray Starke
"We define motivation as the willingness to exert high levels of effort toward organisational goals,
conditioned by the effort's ability to satisfy some individual needs." ~Stephen P Robbins
"Motivation is the immediate influences on the direction, vigour and persistence of action." ~Atkinson J.W.
"Motivation is steering one's actions toward certain goals and committing a certain part of one's energies to
reach them." ~S. W Gellerman
"Motivation is how behaviour gets started, is energized, is sustained, is directed, is stopped and what kind
of subjective reaction is present in the organism while all these are going on." ~M.R. Jones
All these definitions contain three common aspects of the motivation process:

• What energizes human behaviour?

• What directs or channels such behaviour?
• How is this behaviour maintained or sustained?
Motivation has certain underlying properties:

• It is an individual phenomenon: Each individual is unique, and this fact must be recognized in
motivation research.
• Motivation is intentional: When an employee does something, it is because he or she has chosen
to do it.
• Motivation has many facets: Researchers have analyzed various aspects of motivation, Notes
including how it is aroused, how it is directed, what influences its persistence, and how it is stopped.
• The purpose of motivation theories is to predict behaviour: The distinction must be made
between motivation, behaviour and performance. Motivation is what causes behaviour; if the
behaviour is effective, high performance will result.
Motivation is the word derived from the word ’motive’ which means needs, desires, or wants within the
individuals. It is the process of stimulating people's actions to accomplish the goals. Motivation is the
underlying process that initiates, directs and sustains behaviour in order to satisfy physiological and
psychological needs. At any given time, one might explain behaviour as a combination of motives – needs
or desires that energize and direct behaviour toward a goal.
The intensity of our motivation, which depends on the number and the strength of the motives involved, has
a bearing on the effort and the persistence with which we pursue our goals. Sometimes we pursue an
activity as an end in itself simply because it is enjoyable, not because any external reward is attached to it.
This type of motivation is known as intrinsic motivation.
On the other hand, when we engage in activities not because they are enjoyable, but in order to gain some
external reward or to avoid some undesirable consequence, we are pulled by extrinsic motivation.
Table 11.1 gives examples of intrinsic and extrinsic motivation.

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2.1.1 Importance of Motivation:

Motivation is very important for an organization because of the following benefits it provides:

• Puts human resources into action

o Every concern requires physical, financial and human resources to accomplish the goals. It
is through motivation that the human resources can be utilized by making full use of it. This
can be done by building willingness in employees to work. This will help the enterprise in
securing best possible utilization of resources.
• Improves level of efficiency of employees
o The level of a subordinate or a employee does not only depend upon his qualifications and
abilities. For getting best of his work performance, the gap between ability and willingness
has to be filled which helps in improving the level of performance of subordinates. This will
result into-
▪ Increase in productivity,
▪ Reducing cost of operations, and
▪ Improving overall efficiency.
• Leads to achievement of organizational goals:
• The goals of an enterprise can be achieved only when the following factors take place :-
o There is best possible utilization of resources,
o There is a co-operative work environment,
o The employees are goal-directed, and they act in a purposive manner,
o Goals can be achieved if co-ordination and co-operation takes place simultaneously which
can be effectively done through motivation.
• Builds friendly relationship:
o Motivation is an important factor which brings employees satisfaction. This can be done by
keeping into mind and framing an incentive plan for the benefit of the employees. This could
initiate the following things:
▪ Monetary and non-monetary incentives,
▪ Promotion opportunities for employees,
▪ Disincentives for inefficient employees.
▪ In order to build a cordial, friendly atmosphere in a concern, the above steps should
be taken by a manager. This would help in:
• Effective co-operation which brings stability,
• Industrial dispute and unrest in employees will reduce,
• The employees will be adaptable to the changes and there will be no
resistance to the change,
• This will help in providing a smooth and sound concern in which individual
interests will coincide with the organizational interests,
• This will result in profit maximization through increased productivity.

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• Leads to stability of work force:

o Stability of workforce is very important from the point of view of reputation and goodwill of a
concern. The employees can remain loyal to the enterprise only when they have a feeling of
participation in the management. The skills and efficiency of employees will always be of
advantage to employees as well as employees. This will lead to a good public image in the
market which will attract competent and qualified people into a concern. As it is said, “Old is
gold” which suffices with the role of motivation here, the older the people, more the
experience and their adjustment into a concern which can be of benefit to the enterprise.
From the above discussion, we can say that motivation is an internal feeling which can be understood
only by manager since he is in close contact with the employees.
Needs, wants and desires are inter-related, and they are the driving force to act. These needs can be
understood by the manager, and he can frame motivation plans accordingly. We can say that motivation
therefore is a continuous process since motivation process is based on needs which are unlimited. The
process has to be continued throughout.
We can summarize by saying that motivation is important both to an individual and a business.

• Motivation is important to an individual as:

• Motivation will help him achieve his personal goals.
• If an individual is motivated, he will have job satisfaction.
• Motivation will help in self-development of individual.
• An individual would always gain by working with a dynamic team.
Similarly, motivation is important to a business as:

• The more motivated the employees are, the more empowered the team is.
• The more is the teamwork and individual employee contribution, more profitable and successful is
the business.
• During period of amendments, there will be more adaptability and creativity.
• Motivation will lead to an optimistic and challenging attitude at workplace.

2.1.2. Motivation and Morale - Relationship and Differences

Motivation and morale are two closely related concepts, but they are not the same.
Motivation is the internal drive that prompts a person to take action. It is what energizes and directs our
behaviour. Motivation can be intrinsic (driven by a personal desire to achieve something) or extrinsic
(driven by external rewards or punishments).
Morale is the overall attitude, outlook, and satisfaction of a person or group. It is influenced by a variety of
factors, including the work environment, relationships with colleagues and supervisors, and the perceived
fairness of treatment.
Relationship between motivation and morale

• High motivation can lead to high morale, and vice versa. When employees are motivated to do their
best work, they are more likely to be positive and engaged in their work. This can lead to a more
productive and successful team or organization.
• However, it is important to note that motivation and morale are not always directly correlated. For
example, an employee may be highly motivated to achieve their personal goals, even if they are not
happy with their job or their work environment. Similarly, an employee may have high morale
because they enjoy working with their colleagues or have a good relationship with their supervisor,
even if they are not particularly motivated by their work.
Differences between motivation and morale

• The key difference between motivation and morale is that motivation is an individual concept, while
morale is a group concept. Motivation is what drives each individual employee to perform, while
morale is the overall attitude and outlook of the team or organization as a whole.

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• Another difference is that motivation is based on internal factors, such as personal goals and
values. Morale, on the other hand, is influenced by external factors, such as the work environment,
relationships with colleagues and supervisors, and the perceived fairness of treatment.
• Motivation is nothing but the inner psychological impulse, which induces the employee to behave in
a particular manner. As against, morale is a social-emotional association.
• The factor that affects the motivation of an employee are related to the individual’s performance,
say pay, promotion, achievement or non-achievement of goals etc. In contrast, the factors
influencing employee’s morale are concerned with the overall work environment, including the
supervision, reward and recognition, job satisfaction, work climate, etc.
• Motivation supplements, i.e., complete or enhance the morale of an employee. Conversely, morale
is one of the determinants of motivation, i.e., a factor which affects the motivation of an employee.

2.1.2. Motivational Theories

• Content Theories (Traditional Theories): Content Theories look at specific needs that motivate
people. They are also called Need based theories or Humanistic approach to motivation.
• Process Theories (Contemporary Theories): Process theories attempt to explain how the
process of motivation works in an individual.

Difference Between Content and Process Theory

• The main difference between content and process theories is that content theory focuses on
individual needs, while process theory focuses on behaviour.
• Content theories focus on WHAT, while process theories focus on HOW human behaviour is
motivated.
• Content theories are the earliest theories of motivation. Content theories are also called
needs theories, they try to identify what our needs are and relate motivation to the fulfilling of these
needs.
• Process theories are concerned with “how” motivation occurs, and what kind of process can
influence our motivation.
No single motivation theory explains all aspects of people’s motives or lack of motives. Each
theoretical explanation can serve as the basis for the development of techniques for motivating.

2.2. Maslow’s Need Hierarchy Theory

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Maslow's hierarchy of needs is a theory in psychology proposed by Abraham Maslow in his 1943 paper "A
Theory of Human Motivation" in Psychological Review. Maslow's hierarchy of needs is often depicted
as a pyramid with the most basic needs at the bottom and the most complex needs at the top.

• According to Maslow, though no need is ever fully gratified, a substantially satisfied need no longer
motivates. Therefore, as each of these needs becomes substantially satisfied, the next one
becomes dominant. Individuals first satisfy lower-level needs before they generally satisfy
higher order needs. A satisfied need does not motivate a person, only a next higher order
needs motivates him. This concept of lower-level needs being satisfied first before moving higher is
called satisfaction progression.
• Physiological and safety needs are considered lower order needs and social, esteem, self-
actualization needs are higher order needs.
• Lower order needs are satisfied externally (pay, fixed tenure, union contract) whereas higher order
needs are satisfied internally.
• Managers must ensure that basic needs of employees are satisfied first and only then can be
motivated to achieve higher.

Maslow identified five general types of motivating needs:

Physiological needs: These are the most basic human physical needs, including food, water, shelter,
sex, warmth, sleep and other conditions necessary for survival. In the organisational setting, these are
reflected in the needs for pleasant working conditions and salary.

• The physiological needs in this hierarchy refer to the most basic human needs. Employees need
access to vital services and opportunities while at work to feel their most basic needs are being met.
You need access to a restroom, a place to get drinking water, breaks to eat meals and snacks, and
a comfortable working environment. When applied to the workplace, one of your physiological
needs is also a steady income to support yourself and pay for somewhere to live, food, utilities and
other essential needs.
Safety needs: These are the needs for a safe and secure physical and emotional environment and
freedom from threats and emotional distress. In an organisational workplace, safety needs reflect the needs
for safe jobs, fringe benefits and job security.

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• Safety is another vital need that can impact overall satisfaction at the workplace. It is natural to
worry about own safety and the safety of loved ones. For example, for an employee, one of the
priorities might be to provide a safe living space for their family, which is why they work hard to
provide for that need. At work, it’s also important to feel that their physical safety is valued and
prioritized.
• Another aspect of safety in the workplace pertains to feeling emotionally safe and supported. If
you’re worried about losing your job due to layoffs or budget cuts, it is more challenging to achieve
motivation to move to the next level in the hierarchy and perform at your highest level. Unsteady
futures also lead to decreased morale in the workplace.
Social needs (Love and Belongingness): These needs reflect the desire to be accepted by one’s peers,
have friendships, be loved, and be part of a group. In the organisation, these needs influence the desire for
good relationships with co-workers and supervisors and participation in a work group.

• The love and belonging level of Maslow’s hierarchy is slightly different in the workplace than it is in
other areas of life. If employee don’t feel a sense of belonging, they may not feel as engaged at
work or as motivated to succeed.
• It’s not always easy for individuals to establish and form relationships at work. Companies that host
social activities, cultural groups, and offer more opportunities for relationship-building outside the
office tend to have higher rates of employee engagement than organizations that don’t focus on
these aspects of a work-life balance. When people feel like they belong and fit in within workplace
and team, it becomes easier for them to feel motivated to work hard and achieve results.
Esteem needs: These needs relate to the desire for a positive self-image and to receive attention,
recognition, and appreciation from others. Within an organisation, esteem needs reflect a motivation for
recognition, an increase in responsibility, high status, and credit for contributions to the organisation.

• Just as every individual needs to love and be loved by others, all humans have a need to respect
and to be respected by others. They have a need for self-esteem and self-respect. In order to gain
such self-respect, people engage themselves in an activity or activities that give them a sense of
contribution and bring forth recognition.
• When an employee has confidence in themselves and their abilities, as well as they receive positive
feedback and encouragement, they are more likely to succeed.
• An employee’s esteem ultimately impacts their overall engagement as well. Offering regular
recognition and appreciation for the tasks employees are doing can positively impact esteem, even
when an employee is struggling. If feedback only comes in the form of an annual review, employee
esteem may suffer.
Self-actualisation needs: These represent the need for self-fulfilment, which is the highest need category.
They concern developing one’s full potential, increasing one’s competence, and becoming a better person.
Self-actualisation needs can be met in the organisation by providing people with opportunities for growth,
creativity, advancement and achievement.

• The final level of Maslow’s hierarchy of needs is self-actualization, which translates to maximizing
an individual’s potential at work. A person ultimately wants to feel they are doing the best they can
in their position, which helps them feel motivated to continue on their career path and succeed. A
self-actualized employee feels empowered and trusted, which encourages growth and engagement.
• One of the keys to making sure this need is met is giving employees opportunities that allow them to
succeed. Supervisors should focus on their employees’ skills and abilities, helping them look for
ways to advance their careers without pushing them into roles that will not be good fits. To feel self-
actualized, you should feel challenged at work but not overwhelmed or overloaded.

1.1. Criticism of Maslow’s Theory:

• Geert Hofstede criticized this theory because as per him, in collectivist society social
belongingness holds more importance than personal achievement.
• Lack of empirical evidence: Maslow's theory is not based on rigorous scientific research. Instead,
it is based on his observations of a small group of people.

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• Linear progression: Maslow's theory suggests that people move up the pyramid in a linear fashion,
from meeting their most basic needs to meeting their highest-level needs. However, research
suggests that people's needs are more complex and fluid than this. Some people may be deprived
of lower order needs but still try for self-actualization. Mahatma Gandhi is an example of the
same.
• Ethnocentrism: Maslow's theory is based on Western values and may not be applicable to other
cultures.
• Other Criticisms are about position of sex being in psychological needs rather than in social
belongingness because of emotional connect that sex involves.

1.2. Example/Application:
• Google is known for its employee-centric culture. Google offers its employees a variety of benefits
and perks, such as a free and healthy lunch, on-site childcare, and generous vacation time. Google
also encourages its employees to take care of their physical and mental health by offering fitness
classes, meditation sessions, and stress management workshops. By meeting the basic needs of its
employees, Google is able to create a more supportive and productive work environment.
• Microsoft offers its employees free tuition reimbursement, as well as access to a variety of other
educational resources.
• Amazon offers its employees competitive salaries and benefits, as well as opportunities for career
advancement.
• These are just a few examples of how businesses can apply Maslow's hierarchy of needs to create
a more motivating and productive work environment. By meeting the needs of their employees at all
levels, businesses can create a more positive and productive work culture.

2.3. Alderfer's Hierarchy of Motivational Needs

To bring Maslow’s need hierarchy theory of motivation in synchronization with empirical research, Clayton
Alderfer redefined it in his own terms. His rework is called as ERG theory of motivation. He recategorized
Maslow’s hierarchy of needs into three simpler and broader classes of needs:

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• Existence needs are concerned with physical survival and include the needs for food, water,
shelter and physical safety. Organisations can satisfy these needs through pay, fringe benefits, a
safe working environment and job security.
• Relatedness needs involve interactions with other people and the associated satisfaction in terms
of emotional support, respect, recognition, and belongingness. These needs can be satisfied on
the job by developing interpersonal relationships with co-workers and mentors and off the job
by having family and friends.
• Growth needs are those related to the attainment of one’s potential. These needs can be satisfied
by using our skills and abilities to the fullest. A job can satisfy growth needs if it involves
challenge, autonomy, and creativity.

From the above diagram, ERG theory demonstrates that more than one need may be operative at
the same time, in contrast to Maslow’s theory which assumes satisfaction progression, which implies
that higher level needs can fulfilled only after lower-level needs are fulfilled. On a work level, Alderfer’s
model implies that managers must recognize their employees’ multiple simultaneous needs.
Focusing exclusively on one need at a time will not motivate your people.
According to Maslow an individual would stay at a certain need level until that need was satisfied. ERG
theory counters by noting that when a higher-level need is not met, it frustrates the employee, then
the individual’s desire to increase a lower- level need takes place. So, frustration can lead to a
regression to a lower need. This concept is called frustrated regression. This concept is explained
through diagram below:

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2.3.1. The ERG theory differs from the hierarchy of needs in several ways:
While Maslow’s need hierarchy theory is rigid as it assumes that the needs follow a specific and orderly
hierarchy and unless a lower-level need is satisfied, an individual cannot proceed to the higher-level need;
ERG Theory of motivation is very flexible as he perceived the needs as a range/variety rather than
perceiving them as a hierarchy. It accepts the likelihood that all three levels might be active at any time – or
even that just one of the higher levels might be active.
According to Alderfer, an individual can work on growth needs even if his existence or relatedness needs
remain unsatisfied. Thus, he gives explanation to the issue of “starving artist” who can struggle for growth
even if he is hungry.
It suggests that if an individual is continually unable to meet upper-level needs, the person will regress
and return to the lower-level needs and then regress again.

• For example, if employees cannot find emotional support, recognition on the job (relatedness
needs), they may demand higher pay or better health coverage (existence needs) as compensation
for failing to satisfy the other needs.
The model proposes that growth needs are not only unlimited but are actually wakened each time some
satisfaction is attained. Thus, while Maslow suggested that a satisfied need no longer motivates us,
ERG model predicts that a satisfied need may actually increase its strength. For example, if a job
provides a great deal of challenge and creativity, our growth needs might become stronger, leading us to
seek greater challenges at work.

2.3.2. Implications of the ERG Theory

• Managers must understand that an employee has various needs that must be satisfied at the same
time. According to the ERG theory, the manager will not be able to simultaneously motivate their
staff by catering to one of their needs.
• According to the ERG theory, if the manager concentrates solely on one need at a time, this will not
effectively motivate the employee. Also, the frustration-regression aspect of ERG Theory has an
added effect on workplace motivation.
o For instance – if an employee is not provided with growth and advancement opportunities in
an organization, he might revert to the relatedness need such as socializing needs and to
meet those socializing needs, if the environment or circumstances do not permit, he might
revert to the need for money to fulfil those socializing needs. The sooner the manager
realizes and discovers this, the more immediate steps they will take to fulfil those needs
which are frustrated until such time that the employee can again pursue growth.
In summary, ERG theory argues – like Maslow – that satisfied lower order needs lead to the desire to
satisfy higher order needs; but multiple needs can be operating as motivators at the same time, and
frustration in attempting to satisfy a higher-level need can result in regression to a lower-level need.
Because of the frustration-regression aspect of ERG theory, managers need to be particularly concerned
with providing opportunities to satisfy growth needs, lest employees cease to be interested in them.

2.4. McClelland’s Theory of Needs (Achievement theory of Motivation)

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American psychologist David McClelland’s theory explains how the need for achievement, power and
affiliation motivates people in a professional environment. According to this theory, which was
developed in the 1971, all individuals have these needs in varying degrees, irrespective of race, age or
location.
As per him there are three types of people:

✓ Need for Achievement: Wish to take responsibility, like complex problems and tasks, need regular
feedback, avoid substantial risk and minimal risk situations

✓ Need of Affiliation: relationship with people, teamwork, dislike uncertainty, collaboration over
competition

✓ Need for Influence: Drive to Control, highly Disciplined, good for manual a dless skilled group tasks

Need for Achievement:

• The individuals with high achievement needs are highly motivated by competing and challenging
work. They look for promotional opportunities in job.
• They have a strong urge for feedback on their achievement. Such individuals try to get satisfaction
in performing things better.
• High achievement is directly related to high performance.
• McClelland called such individuals as gamblers as they set challenging targets for
themselves, and they take deliberate risk to achieve those set targets.
• Such individuals look for innovative ways of performing job.
• Examples:
o A salesperson who is motivated to set and achieve high sales goals.
o An athlete who is motivated to train hard and compete at the highest level.
o A student who is motivated to get good grades and attend a prestigious university.
Need for Power/Influence:

• The individuals who are motivated by power have a strong urge to be influential and controlling.
• They want that their views and ideas should dominate and thus, they want to lead.
• Such individuals are motivated by the need for reputation and self-esteem.
• Generally, managers with high need for power turn out to be more efficient and successful
managers.
• They are more determined and loyal to the organization they work for.
Need of Affiliation:

• The individuals who are motivated by affiliation have an urge for a friendly and supportive
environment.
• Such individuals are effective performers in a team. These people want to be liked by others.
• The manager’s ability to make decisions is hampered if they have a high affiliation need as they
prefer to be accepted and liked by others, and this weakens their objectivity.
• Individuals with a high need for affiliation strive for building and maintaining relationships with
people. They value people more than accomplishment of goals and objectives. They are fit for
fields such as public relations and human resources where interaction with people and
understanding of human resources is highly appreciated.
• Prefer work that provides significant personal interaction; they perform well in customer service
and client interaction situations
• Such people have a need to be on the good books of all. They generally cannot be good
leaders.
• Examples:
o A team player who is motivated to work well with others and contribute to the success of the
team.
o A teacher who is motivated to create a positive and supportive learning environment for their
students.

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He recommended:

• High achievers should be given challenging projects and regular feedback;

• People with High need for power should be given opportunity to manage others.
• People with High need for Affiliation should be given cooperative environment;

Scenario:

Mr. Deshpande, a school principal is sitting in his cabin. He has called all the teachers for a review
meeting to see whether the set annual day celebration preparations are done. He asked the teachers
about annual day preparation and when he came to know that the task assigned are not being
accomplished, he did not scold them or gave warning. On the other hand, he explained them the need to
accomplish the task given in a friendly manner. He suggest them ways for accomplishing the tasks 3
assigned. He also asks the teachers if they require any help in accomplishing those tasks assigned to
them.

Mr. Deshpande exhibits which need?

Application of McClelland’s Need Theory of Motivation

• Manager should be capable of identifying the need of others. Managers should motivate individuals
according to their needs. Let's take a closer look at how to manage team members who are driven
by each of McClelland's three motivators:
• Achievement needs:
o People motivated by ‘achievement’ need prefer challenging, but not unachievable tasks.
They work very effectively either alone or with other high achievers. So it’s essential to
provide feedback and let them be aware about their triumphs and mistakes as well for further
improvement. People with high Achievement need should be given challenging projects.
They should be given feedback, appreciation and recognition for their work. When providing
feedback, give achievers a fair and balanced appraisal. They want to know what they are
doing right and wrong so that they can improve.

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• Affiliation needs:
o People motivated by ‘affiliation’ work best in a group environment, so engage them in
teamwork rather than asking them to work alone if or whenever possible. As such individuals
dislike uncertainty and risk do not assign them task with high risk. While providing feedback,
give it personally. People with high affiliation need should be given task in team/group. They
should be given feedback in private rather than in front of others.
• Power needs:
o People with a high need for power can work best when they're in command of the situation.
Such individuals enjoy competition. They can be proved very effective in negotiations or in
situations where the objective is to convince others. People with high power need should be
given leadership roles whenever possible. They should be motivated by offering career
development opportunities. Those with high need for power work best when they are in
charge because they enjoy competition. They do well with goal-oriented projects or tasks.
Overall, McClelland's Theory of Needs is a useful tool for understanding and predicting human motivation.
By understanding the three primary needs (achievement, affiliation, and power), manager can better
motivate their sub-ordinates.

2.5. Herzberg's Two Factor Theory

On the basis of research with engineers and accountants, Frederick Herzberg (1966) developed the
motivator-hygiene theory.

• He asked his subjects to think about the times they felt especially good or bad about their jobs.
• Tabulating the reported good and bad feelings, Herzberg concluded that there are two sets
of needs:
o the hygiene needs, which produce job dissatisfaction and
o the motivator needs, which produce job satisfaction.
• Taken together, the hygiene factors and motivators are known as Herzberg’s two-factor theory of
motivation.
According to Herzberg, there are some job factors that result in satisfaction while there are other job factors
that prevent dissatisfaction. According to Herzberg, the opposite of “Satisfaction” is “No satisfaction”
and the opposite of “Dissatisfaction” is “No Dissatisfaction”.

Hygiene factors, or extrinsic motivators, tend to represent more tangible, basic needs—i.e., the kinds of
needs included in the existence category of needs in the ERG theory or in the lower levels of Maslow’s
hierarchy of needs. Extrinsic motivators include status, job security, salary, and fringe benefits. It’s
important for managers to realize that not providing the appropriate and expected extrinsic motivators will
sow dissatisfaction and decrease motivation among employees.

• These do not lead to positive satisfaction for long-term. But if these factors are absent/if these
factors are non-existent at workplace, then they lead to dissatisfaction.
• In other words, hygiene factors are those factors which when adequate/reasonable in a job, pacify
the employees and do not make them dissatisfied.
• These factors are extrinsic to work. Hygiene factors are also called as dissatisfiers or
maintenance factors as they are required to avoid dissatisfaction.

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Hygiene factors include:

• Pay - The pay or salary structure should be appropriate and reasonable. It must be equal and
competitive to those in the same industry in the same domain.
• Company Policies and administrative policies - The company policies should not be too rigid.
They should be fair and clear. It should include flexible working hours, dress code, breaks, vacation,
etc.
• Fringe benefits - The employees should be offered health care plans (Mediclaim), benefits for the
family members, employee help programmes, etc.
• Physical Working conditions - The working conditions should be safe, clean and hygienic. The
work equipment should be updated and well-maintained.
• Status - The employees’ status within the organization should be familiar and retained.
• Interpersonal relations - The relationship of the employees with his peers, superiors and
subordinates should be appropriate and acceptable. There should be no conflict or humiliation
element present.
• Job Security - The organization must provide job security to the employees.
Motivation factors, or intrinsic motivators, tend to represent less tangible, more emotional needs—i.e.,
the kinds of needs identified in the “relatedness” and “growth” categories of needs in the ERG theory and in
the higher levels of Maslow’s hierarchy of needs. Intrinsic motivators include challenging work, recognition,
relationships, and growth potential. Managers need to recognize that while these needs may fall outside the
more traditional scope of what a workplace ought to provide, they can be critical to strong individual and
team performance.
Motivational factors include:

• Recognition - The employees should be praised and recognized for their accomplishments by the
managers.
• Sense of achievement - The employees must have a sense of achievement. This depends on the
job. There must be a fruit of some sort in the job.
• Growth and promotional opportunities - There must be growth and advancement opportunities in
an organization to motivate the employees to perform well.
• Responsibility - The employees must hold themselves responsible for the work. The managers
should give them ownership of the work. They should minimize control but retain accountability.
• Meaningfulness of the work - The work itself should be meaningful, interesting and challenging for
the employee to perform and to get motivated.

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2.5.1. Limitations of Two-Factor Theory

• The two-factor theory is not free from limitations:
o The two-factor theory overlooks situational variables.
o Herzberg assumed a correlation between satisfaction and productivity. But the research
conducted by Herzberg stressed upon satisfaction and ignored productivity.
o The theory’s reliability is uncertain. Analysis has to be made by the raters. The raters may
spoil the findings by analysing same response in different manner.
o No comprehensive measure of satisfaction was used. An employee may find his job
acceptable despite the fact that he may hate/object part of his job.
o The two-factor theory is not free from bias as it is based on the natural reaction of
employees when they are enquired the sources of satisfaction and dissatisfaction at work.
They will blame dissatisfaction on the external factors such as salary structure, company
policies and peer relationship. Also, the employees will give credit to themselves for the
satisfaction factor at work.
o The theory ignores blue-collar workers.
• Despite these limitations, Herzberg’s Two-Factor theory is acceptable broadly.

2.5.2. Implications of Two-Factor Theory

• The Two-Factor theory implies that the managers must stress upon guaranteeing the adequacy of
the hygiene factors to avoid employee dissatisfaction. Also, the managers must make sure that the
work is stimulating and rewarding so that the employees are motivated to work and perform harder
and better.
• This theory emphasizes upon job-enrichment so as to motivate the employees. The job must utilize
the employee’s skills and competencies to the maximum. Focusing on the motivational factors can
improve work-quality.

Summary of Maslow Theory of Need, McClelland’s’ theory of needs and Herzberg’s two
factor theory

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Process theories (Adams equity theory, Vrooms expectancy theory).

2.6. Adams's Equity Theory
Adam’s Equity Theory strives to create a balance between an employee’s input and output in the
workplace. Input includes hard work, skills, and enthusiasm. Output can be things like salary, recognition,
and responsibility. Theory developed in 1963 by John Stacey Adams says if an employee finds his/her
balance between what they put in and what they get in return for their work it would make them
motivated and help develop a more productive relationship with the management.

• It suggests that individuals engage in social comparison by comparing their efforts and
rewards with those of relevant others.
• The perception of individuals about the fairness of their rewards relative to others influences their
level of motivation.
• Equity exists when individuals perceive that the ratio of efforts to rewards is the same for them as it
is for others to whom they compare themselves.
• Inequity exists when individuals perceive that the ratio of efforts to rewards is different for them
than it is for others to whom they compare themselves.
There are two types of inequity—under-reward and over-reward.

• Under-reward occurs when a person believes that she puts in more effort than another, yet
receives the same reward, or puts in the same effort as another for a lesser reward.
• For instance, if an employee works longer hours than her co-worker, yet they receive the same
salary, the employee will perceive inequity in the form of under-reward.
• Conversely, with over-reward, a person will feel that his efforts to rewards ratio is higher than
another person’s, such that he is getting more for putting in the same effort or getting the same
reward even with less effort.
Adams' Equity Theory calls for a fair balance to be struck between an employee's "inputs" (hard work,
skill level, acceptance, enthusiasm, and so on) and their "outputs" (salary, benefits, intangibles such as
recognition, and more). He is convinced that employees lose motivation when they think or feel that
their input is greater than the output.
Inputs basically refer to what an employee gives or brings to the job and typically include effort, loyalty,
hard work, commitment, skill set, determination, support of colleagues, adaptability, enthusiasm, personal
sacrifice, flexibility, trust in superiors, time, etc.
The output is what the employer gives you for doing a job. This can be tangible or intangible. Tangible
could be financial rewards such as the salary you earn, benefits and perks. Intangible are the recognition
given, praise, job security, reputation, responsibility, sense of achievement, sense of advancement/growth
and so on.

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The theory suggests that there are four possible referents for comparison:

• Self-inside: The employee compares his experiences in the present position with the experiences
of those holding a similar position in the same organisation.
• Self-outside: The employee compares his experiences in the present position with the experiences
of those holding a similar position in another organisation.
• Other-inside: The employee compares his experience in the present position with the experience of
another individual or group of individuals holding a different position but belonging to the same
organisation.
• Other-outside: The employee compares his experiences in the present position with that of another
individual or group of individuals holding a different position and belonging to a different
organisation.
Adam’s Equity Theory shows that when Inequality happens an employee can be expected to make
one of the following choices.

• Change the inputs – A person may change his or her level of effort; an employee who feels under-
rewarded is likely to work less hard.
• Change the outcomes – A person may try to change his or her rewards, such as by asking for a
raise or making unauthorised use of company resources.
• Change the comparison other’s inputs – A person may change the behaviour of the reference
person, perhaps by encouraging that person to put forth more effort.
• Change the comparison other’s outcomes – A person may change the outcome of the reference
person perhaps by asking the boss to stop giving favourable treatment to him/her.
• Change the comparison other – A person experiencing inequity may change the reference person
and compare him or herself to a different person to assess equity.
• Change one’s perception – A person may believe that the co-worker is doing more or that the
higher outcomes that the other receives are no better that his/hers.
• Leave the field – A person may avoid thinking about the inequity by keeping away from the office,
moving to another department or quitting the job.

2.6.1. Merits of Adam’s Equity Theory

These are some of the merits of Adam’s Equity Theory:

• Promotes Perceived Fairness: Adam’s Equity Theory underscores the significance of fairness in
relationships. It recognizes that individuals naturally evaluate the fairness of inputs and outcomes.
By addressing equity considerations, organizations can cultivate a sense of fairness among
employees leading to increased job satisfaction and engagement.
• Drives Motivation: The theory suggests that individuals are motivated to maintain equity in their
relationships. When people perceive an inequity, whether it is being underpaid or overpaid, it acts
as a powerful motivator for behavioural change. Individuals strive to restore balance by seeking
appropriate rewards for their contributions or adjusting their efforts to align with outcomes, thus
promoting motivation and productivity.
• Enhances Employee Retention and Loyalty: A fair and equitable work environment attracts and
retains talented employees. When individuals perceive fairness in the distribution of rewards, they
develop a sense of loyalty and commitment to the organization. This, in turn, reduces turnover rates
and increases employee retention, saving costs associated with recruitment and training.
• Improves Interpersonal Relationships: Adam’s Equity Theory emphasizes the role of social
comparisons in evaluating fairness. By fostering fairness in reward systems and organizational
practices, it fosters positive relationships among employees. When individuals perceive fairness, it
enhances teamwork, collaboration, and overall harmonious work dynamics.
• Upholds Organizational Justice: The theory aligns with the concept of organizational justice,
which emphasizes fair treatment of employees. By addressing equity concerns, organizations
create an environment where employees feel valued, respected, and treated fairly. This promotes a
positive organizational culture, reduces conflicts, and enhances overall employee well-being.

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• Boosts Performance: When individuals perceive fairness and equity in their relationships, they are
more likely to be satisfied with their work and motivated to perform at their best. This leads to
improved individual and team performance, increased productivity, and ultimately organizational
success.

2.6.2. Demerits of Adam’s Equity Theory

These are some of the demerits of Adam’s Equity Theory:

• Limited Focus on Individual Needs: Adam’s Equity Theory primarily emphasizes the balance
between inputs and outcomes, overlooking the unique needs and preferences of individuals. It
assumes that all individuals strive for equity, disregarding the fact that some individuals may
prioritize other factors like personal growth, job satisfaction, or work-life balance over strict equity
considerations.
• Subjectivity in Evaluating Inputs and Outcomes: The theory assumes that individuals have a
clear understanding of their inputs and outcomes, as well as those of others. However, subjective
interpretations and biases can cloud these evaluations. People may have different perceptions of
what constitutes a fair input or outcome, making it challenging to establish a universal measure of
equity.
• Ignores Individual Perception of Fairness: Adam’s Equity Theory does not sufficiently account for
how individuals perceive fairness. It assumes that equity is solely based on the comparison of
inputs and outcomes, neglecting the importance of factors such as effort, skills, and unique
circumstances that individuals consider when evaluating fairness.
• Inadequate Consideration of Organizational Context: The theory tends to overlook the influence
of organizational factors on perceptions of equity. Organizational policies, procedures, and
hierarchical structures can impact the distribution of inputs and outcomes, making it difficult for
individuals to achieve perceived equity even if they try to adjust their inputs or outcomes.
• Disregard for Group and Collective Equity: Adam’s Equity Theory primarily focuses on individual
perceptions of fairness, failing to address the importance of group or collective equity. In many
organizational settings, people value fairness not only at an individual level but also in terms of how
outcomes are distributed among teams or departments. Neglecting this aspect can lead to a limited
understanding of fairness dynamics in complex group settings.
• Limited Scope in Non-Work Relationships: While the theory is primarily applied to work-related
relationships, it may not fully capture fairness dynamics in non-work relationships. Different factors
and dynamics may come into play when evaluating fairness in personal relationships, friendships, or
community settings.

2.7. Vroom's Expectancy Theory of Motivation

The expectancy theory was proposed by Victor Vroom of Yale School of Management in 1964. Vroom
stresses and focuses on outcomes, and not on needs unlike Maslow and Herzberg. This theory proposes
that individuals are motivated to perform a specific behaviour or task based on their belief that the effort
they put in will lead to a certain level of performance, and that the performance will lead to a specific
outcome or reward that they value.
Expectancy Theory has three variables: Expectancy, Instrumentality and Valence. The theory
established relationship between effort, performance and rewards.
o Vroom suggested that motivation is a product of three factors Expectancy is the belief
that putting in the effort will result in improved performance. If an individual believes that their
efforts will not lead to improved performance, they are unlikely to be motivated to try.
Instrumentality is the belief that improved performance will lead to desired outcomes or
rewards. If an individual believes that their improved performance will not lead to desirable
outcomes, they are unlikely to be motivated to try. And valence is the value an individual
place on the outcomes or rewards they will receive. If an individual does not value the
outcomes or rewards, they are unlikely to be motivated to try.
o Motivation = (Valence) * (Expectancy) * (Instrumentality)

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o If either E, I or V are zero, then the equation fails, and this indicates that motivation is low
or non-existent.

So, the Expectancy Theory of Motivation proposes that individuals will be motivated to perform a behaviour
or task if they believe their efforts will result in improved performance, leading to desired outcomes or
rewards they value.
Relationship between Effort, Performance and Rewards:

• Effort-Performance Relationship: It is the probability perceived by the individual that exerting a

given amount of effort leads to performance.
• Performance-Reward Relationship: This is the degree to which the individual believes that
performing at a particular level will lead to the attainment of a desired outcome.
• Rewards-Personal Goals Relationship: It is the degree to which organisational rewards satisfy an
individual’s personal goals or needs and the attractiveness of those potential rewards for the
individuals.

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2.7.1. Advantages of Expectancy Theory of Motivation

The Expectancy Theory of Motivation has the following advantages:

• Flexibility: This means that the theory can be applied to a wide range of settings and contexts. It
can be used to explain motivation in work, education, sports, and other areas of life giving out some
positive outcomes.
• Personalization: The theory recognizes that individuals have unique beliefs, values, and
preferences that influence their motivation. It allows for a personalized approach to motivating
individuals, based on their specific expectations, instrumentalities, and valences.
• Clarity: This theory provides a clear framework for understanding the factors that influence
motivation. It helps managers and leaders to identify and address specific obstacles to motivation,
such as a lack of belief in the connection between effort and performance or a lack of valued
rewards that would be provided.
• Practicality: The theory offers practical strategies for improving motivation, such as providing clear
goals, feedback, and rewards that are valued by individuals.
• Research support: The theory has been extensively researched and is a reliable predictor of
motivation in various contexts.
• Encourages goal setting: The theory emphasizes the importance of setting clear and challenging
goals for individuals. This set of goals can help to increase motivation by providing a clear direction
for their efforts.
• Focuses on individual motivation: The theory recognizes that motivation is influenced by
individual beliefs, values, and preferences. It encourages managers to focus on understanding and
addressing the specific needs and motivations of each employee.

2.7.2. Limitations of Expectancy Theory of Motivation

The Expectancy Theory of Motivation, like any theory, has some limitations that need to be
considered. These limitations include:

• Simplistic view of motivation: The theory takes a relatively simplistic view of motivation, focusing
on the relationship between effort, performance, and rewards. This does not account for other
factors that may influence motivation, such as personality, emotions, or social context.
• Assumes rational decision-making: The theory assumes that individuals are rational decision-
makers who weigh the costs and benefits of their actions before making a decision. However,
individuals may not always make decisions in a completely rational manner.
• Limited scope of rewards: The theory assumes that rewards are the primary motivator for
individuals. However, research suggests that other factors, such as job satisfaction, autonomy, and
social connection, can also influence motivation.
• Ignores the role of feedback: The theory does not fully account for the role of feedback in
motivation. Feedback can be a powerful motivator, but it is not explicitly addressed in the theory.
• Difficult to measure: The theory can be difficult to measure in practice, particularly when it comes
to measuring an individual’s valence for a particular reward. It can also be difficult to determine the
level of expectancy or instrumentality that an individual.
• Ignores the role of emotions: The theory assumes that individuals are motivated solely by the
desire to receive rewards and does not fully account for the role of emotions in motivation. Emotions
such as fear, anxiety, or excitement can influence an individual’s motivation but are not addressed
by the theory.
• Individualistic focus: The theory has a strong focus on individual motivation and may not fully
account for the influence of group dynamics or social context on motivation. In some cases,
motivation may be influenced more by social factors such as peer pressure or group norms than by
individual beliefs and values.

2.7.3. Implications of Expectancy Theory of Motivation

The Expectancy Theory of Motivation has several implications for individuals, managers, and organizations.
Some of these implications include:

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• Importance of goal setting: The theory emphasizes the importance of setting clear and
challenging goals for individuals. Managers should work with employees to establish specific,
measurable, and attainable goals that align with the organization’s overall objectives.
• Need for feedback: The theory recognizes the importance of feedback in motivating individuals.
Managers should provide regular feedback to employees regarding their performance and progress
towards their goals, in order to help them improve and stay motivated.
• Customizing rewards: The theory emphasizes the need to customize rewards to meet individual
needs and preferences. Managers should work to understand what motivates each employee and
design reward systems that are tailored to their unique needs.
• Linking rewards to performance: The theory suggests that rewards should be linked to
performance in order to motivate individuals. Managers should ensure that reward systems are
transparent and that employees understand the connection between their efforts, their performance,
and the rewards they receive.
• Emphasizing skill development: The theory encourages individuals to continuously improve their
skills and abilities in order to improve their performance and increase their chances of achieving
desired outcomes or rewards. Managers should provide opportunities for skill development and
encourage employees to pursue training and development opportunities.
• Creating a positive work environment: The theory recognizes the importance of creating a
positive work environment in motivating individuals. Managers should work to create a supportive,
collaborative, and respectful workplace culture that encourages individuals to work towards their
goals.
In summary, Expectancy Theory provides a useful model for understanding how individuals make choices
about their behaviour based on their expectations of effort, performance, and outcomes. It highlights the
importance of aligning these expectations with organizational goals to maximize motivation and
performance.

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Chapter: III - Leadership

Leadership Syllabus: Concept, Theories (Trait, Behavioural, Contingency, Charismatic, Transactional and
Transformational Leadership).
1.0. Who Are Leaders and What Is Leadership?
Let’s begin by clarifying who leaders are and what leadership is. A leader is someone who can
influence others and who has managerial authority. Leadership is what leaders do. It’s a process of leading
a group and influencing that group to achieve its goals.

• It is the process by which an individual mobilizes people and resources to achieve a goal. Leaders
inspire, challenge, and encourage others.
• It is the ability of a manager to induce the subordinates to work with confidence and zeal. It is the
human factor which binds a group together and motivates them towards goals.
• It denotes a few qualities to be present in a person which includes intelligence, maturity and
personality that can be nurtured as well as a set of skills that can be learned.
• Leadership is situation bound. There is no best style of leadership. It all depends upon tackling with
the situations.
1.1. Importance of Leadership
Leadership is an important function of management which helps to maximize efficiency and to achieve
organizational goals.
Initiates action – Leader is a person who starts the work by communicating the policies and plans to the
subordinates from where the work actually starts.
Motivation – A leader proves to be playing an incentive role in the concern’s working. He motivates the
employees with economic and non-economic rewards and thereby gets the work from the subordinates.
Providing guidance – A leader has to not only supervise but also play a guiding role for the subordinates.
Guidance here means instructing the subordinates the way they have to perform their work effectively and
efficiently.
Influencing the behaviour of people – It will help employees in fulfilling their needs and organizational
goal.
To Fulfil People’s Needs First - A leaders’ job is to serve their people selflessly, keep others’ needs first,
and build a work environment where everyone can thrive and learn from each other. Good leaders
understand that when you invest in others and prioritize their needs, they build undying loyalty and trust.
To Solve Internal Conflicts - Conflicts in a workplace are very prominent. When a diverse set of people
come together under the same roof, differences of opinions and clashes are bound to happen. A leader is
aware of this fact and makes sure to resolve conflicts that can affect the organization’s productivity
To Provide the Right Training and Development - One thing that great leaders believe in is good hiring.
But hiring itself would not do much if they are not provided with the right training and development over time
Building Morale - Throughout the employee life cycle, people go through many events that can break their
morale. For some, it could be not having the right work-life balance, hectic schedules, or not being
appreciated enough by the management. Leaders do not want their best employees to leave the
organization due to low morale. They are therefore keen on listening to them. To motivate them from time
to time by recognizing and acknowledging their work.
1.2. Functions of a Leader
According to Peter Drucker, "An effective leader is one who can make ordinary men do extraordinary
things, make common people do uncommon things. Leadership is a lifting of a man's sights to a higher
vision, the raising of man's standard to a higher performance, the building of a man's personality beyond its
normal limitations." This viewpoint of Peter Drucker stresses the leader's obligation to attain organisational

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goals and gives attention to the needs of the individuals who are his subordinates. The important functions
of a business leader may be briefly summarized as follows:
1. To take the initiative: A leader initiates all the measures that are necessary for the purpose of
ensuring the health and progress of the organisation in a competitive economy. He should not
expect others to guide or direct him. He should lay down the aims and objectives, commence their
implementation and see that the goals are achieved according to the predetermined targets.
2. He identifies group goals: A leader must always help the group identify and attain their goals.
Thus, a leader is a goal setter.
3. He represents the organisation: A leader represents the organisation and its purpose, ideals,
philosophy and problems to those working for it and to the outside world. In other words, a leader is
a true representative of the entire organisation.
4. He acts as an arbitrator: When groups experience internal difference, whether based on emotional
or intellectual clashes, a leader can often resolve the differences. He acts as an arbitrator to prevent
serious differences from cropping up within the group.
5. To assign reasons for his action: It is the delicate task of a leader to assign reasons to his every
command. He has to instruct things in such a way that they are intelligible to all concerned and their
co-operation is readily forthcoming.
6. To interpret: He interprets the objectives of the organisation and the means to be followed to
achieve them; he apprises his followers, convinces them, and creates confidence among them.
7. To guide and direct: It is the primary function of the leader to guide and direct the organisation. He
should issue the necessary instructions and see that they are properly communicated.
8. To encourage teamwork: A leader must try to win the confidence of his subordinates. He must act
like the captain of a team.
9. He manages the organisation: Last but not the least, he administers the undertaking by arranging
for the forecast, planning, organisation, direction, co-ordination and control of its activities.
1.3. Leadership and management characteristics.
Characteristics of a Leader

• Innovates
• Motivates
• Inspires
• Empowers
• Focuses on people
• Creates a vision for the future
• Sets the tone for a great group culture
• Long-range vision
• Embraces change
Characteristics of a Manager

• Administers
• Sets specific goals
• Provides structure for the team
• Plans
• Organizes
• Delegates
• Implements strategies
• Solves problems
• Detail-oriented
1.4. Difference between a Leader and a Manager:
A person can be effective manager, an effective leader, both or neither. Leadership is part of management,
but not all of it. All works performed by leader may not be management work. Outstanding leaders might be
poor managers. Leaders are different from manager in following ways:

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• A leader is a person who directs, guides and influences the behaviour of his followers towards the
attainment of specific goals, whereas A manager is a representative of the organization responsible
for the management of the work of a group of employees and takes requisite actions whenever
required.
• A person becomes a manager by virtue of his position whereas A person becomes a leader on
basis of his personal qualities.
• Leaders are considered as visionaries. They set the pathways to excel the organizational growth. In
comparison, Managers' vision is bound to the implementation strategies, planning, and organizing
tasks to reach the objectives set out by leaders.
• Leader Performs only one function i.e direction whereas A manager performs all five functions -
planning, organizing, staffing, directing, and controlling.
• While a leader gets his authority from his followers, a manager gets his authority by virtue of his
position in the organization.
• While managers follow the organization’s policies and procedure, the leaders follow their own
instinct.
• Management is based more on written communication, while leadership is based more on verbal
communication.
2.0. Different Leadership Styles
In the 1940s, apart from the research studies being conducted on the traits displayed by leaders, research
was also conducted on the behaviours exhibited by leaders. The first and foremost study on leadership
was carried out by psychologist, Kurt Lewin and his associates in 1939 and identified different styles of
leadership, viz. autocratic, democratic and laissez-faire leadership, later few other styles were added.
A leadership style is a leader's style of providing direction, implementing plans, and motivating people.
Throughout history, great leaders have emerged with particular leadership styles in providing direction,
implementing plans and motivating people. These can be broadly grouped into 5 different categories:

• Authoritarian Leadership
• Participative Leadership
• Delegative Leadership
• Transactional Leadership
• Transformational Leadership

2.1. Autocratic Leadership or Task Management

The autocratic leader gives orders which he insists shall be obeyed. He determines policies for the group
without consulting them, and does not give detailed information about future plans, but simply tells the
group what immediate steps they must take. In other words, an autocratic leader is one who centralizes the
authority in himself and does not delegate authority to his subordinates. He is dictatorial by nature, and has
no regard for his subordinates. He drives himself and his subordinates with one thought uppermost in his

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mind – action must produce results. An autocratic leader controls the entire planning process, and calls
upon his subordinates to execute what he has planned. An autocratic leader operates on the following
assumptions:
(a) An average human being has inherent dislike for work and will avoid it if he can.
(b) If his subordinates were intelligent enough, they would not be in subordinate positions.
(c) He assumes that unintelligent subordinates are immature, unreliable and irresponsible persons.
Therefore, they should be constantly watched in the course of their work.
(d) As he has no regard for his subordinates, he gets the work done by his subordinates through
negative motivation, that is, through threats of penalty and punishment.
Thus, under this style, all decision-making power is centralized in the leader. The autocratic leader stresses
his prerogative to decide and order, and denies subordinates the freedom to influence his behaviour.

In summary,

• An autocratic or authoritarian leader imposes policies and procedures, sets expectations and
defines outcomes.
• This is basically a boss that has full control of their team and makes all of the decisions with little
input from anyone else.
• The leader gives the directions and the team follows them and reports back.
• Some experts argue that this type of leadership style can be damaging rather than rewarding in the
long run as it resembles that of a dictator. It leads to low employee morale, which in turn may lead to
attrition in many cases.
• However, there are some advantages of autocratic leadership as well. It leads to quick decision-
making, control over the processes and the operations of a company, etc.
• Autocratic leadership will be helpful in situations where a business faces constant change or a
crisis. It will be able to react to the situation promptly compared to other leadership styles, because
of streamlined organizational structure and quick decision-making ability.
Types of Autocratic Leadership
(a) Strictly autocratic leaders: A strictly autocratic leader relies on negative influence and gives orders
which the subordinates must accept. He may also use his power to dispense rewards to his group.
(b) Benevolent Autocrat: The benevolently autocratic leader is effective in getting high productivity in
many situations and he can develop effective human relationships. His motivational style is usually
positive.
(c) Manipulative Autocrat: A manipulative autocratic leader is one who makes subordinates feel that
they are participating in decision making process even though he has already taken the decision.
2.2. Participative/Democratic/Consultive Leadership
A democratic leader is one who consults and invites his subordinates to participate in the decision-making
process. He gives orders only after consulting the group, sees to it that policies are worked out in group
decisions and with the acceptance of group. The manager largely avoids the use of power to get a job
done. He behaves that a desired organisational behaviour can be obtained if employees' needs and wants
are satisfied. Therefore, he not only issues orders but interprets them anises to it that the employees have

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the necessary skills and tools to carry out their assignments. He assigns a fair work load to his personnel
and accords due recognition to jobs that are well done. There is a team approach to the attainment of
organisational goals. He recognizes the human value of showing greater concern for his subordinates.
A participative leader operates on the following assumptions:
(a) Subordinates are capable of doing work independently and assuming the responsibility for proper
execution if they are given opportunities and incentives.
(b) Subordinates are supervised, guided and aided rather than threatened and commanded to work.
(c) Mistakes are not viewed seriously. The assumption is that disciplinary action breeds discontent and
frustration among employees and creates an unhealthy work environment.
In Summary,

• A participative leadership also known as democratic leadership allows everyone on the team to get
involved and work together to make important decisions.
• While everyone’s input is encouraged, it’s the leader who will have the final say in the decision-
making process.
• These leaders encourage their team to be actively involved in decision making.
• They delegate authority to suitably skilled team members and provide opportunities for others to
develop their skills.
• Because there is an ongoing exchange of information, the team tends to be productive and efficient.
• Creativity and innovation are encouraged, which also improves job satisfaction among employees
and team members.
Limitations/Disadvantages

• Decisions taken through consultation may cause delay and require compromises to meet different
viewpoints.
• A few vocal individuals may dominate the decision-making process.
• No one individual may take the responsibility for implementing the decision taken by the group as a
whole.
• The more people that are involved in making decisions, the longer the decision-making process is
going to be.

2.3. Laissez Faire/ Delegative Leadership/Free Reign Style/Permissive Style

This is a French term that translates to “leave it be,” Laissez-faire leaders provide the necessary tools
and resources. But then they step back and let their team members make decisions, solve problems, and
get their work accomplished—without having to worry about the leader obsessively supervising their every
move.
A free-rein leader does not lead, but leaves the group entirely to itself. The leader avoids using power and
entrusts the decision-making authority to his subordinates. He does not direct his subordinates, thereby
giving them complete freedom of operation. Groups of members work independently and provide their own
motivation. The manager exists as a facilitator and buffer contact man between the team and outsiders,
while bringing for his group the information and resources it needs to accomplish its job. A free-rein leader
operates in the following manner:
(a) He follows the rule of minimum exposure to accountability.

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(b) He relieves himself of responsibilities and is ready to blame his subordinates if something goes
wrong.
(c) He has no clear idea of the goals to be attained.
(d) He is more security conscious than status conscious.
This type of leader tends to adopt a policy of not 'interfering' with the group by letting them run
themselves. This mode of direction can produce good and quick results, if the subordinates are highly
educated and brilliant people who have a sincere need to go ahead and discharge their responsibility.

• This level of trust and independence is empowering for teams that are creative and self-motivated.
However, this method is generally only effective in highly specialized fields.
• Delegative leadership allows competent employees to shine and be rewarded for their innovation.
This can result in a positive atmosphere that’s incredibly fulfilling to employees and makes them feel
valued.
Advantages of free rein leadership:

• Opportunity for individual development is offered to group members.

• All persons are given a chance to express themselves and to function relatively independently.
Limitations/Disadvantages

• However, like participative leadership, delegative leadership has also been associated with low
levels of productivity.
• The more people that are involved in making decisions, the longer the decision-making process is
going to be.
• Chaos and confusion can quickly ensue—especially if a team isn’t organized or self-directed.
• Although laissez-faire leadership can empower employees by trusting them to work however, they'd
like, it can limit their development and overlook critical company growth opportunities.

2.4. Transactional Leadership

Transactional leadership styles use "transactions" between a leader and his or her followers - rewards,
punishments and other exchanges - to get the job done.

• It is also known as managerial leadership which is based on rewards (Carrot) and punishments
(Stick) approach.
• The leader sets clear goals, and team members know how they'll be rewarded for their compliance.
• This "give and take" leadership style is more concerned with following established routines and
procedures in an efficient manner, than with making any transformational changes to an
organization.
• Transactional leadership eliminates or minimizes confusion in the chain of command.
• It creates a system that is easy to implement for leaders and easy to follow by employees.
• Effective in crisis and emergency situations as well as for projects that need to be carried out in a
specific way.

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• It is basically active Management by Exception.

Disadvantages

• These are mostly passive managers who do not believe in innovative or creative work but rather
following established routines and procedures
• Transactional leadership creates more followers than leaders among employees.
• Empathy is not valued.
2.5. Transformational Leadership
In transformational leadership styles, the leader inspires his or her followers with a vision and then
encourages and empowers them to achieve it. The leader also serves as a role model for the vision.

• This type of leadership usually helps to raise team morale, encourage faster ideation, facilitate
conflict resolution, reduce disengagement and instil a feeling of ownership within the team.
• Leaders provide opportunities for creativity and innovation and allow people to learn, grow and try
new things.
• This helps to build stronger relationships between teams and can result in higher employee
retention and engagement – particularly among millennial employees.
• This is a highly encouraged form of leadership among growth-minded companies because it
motivates employees to see what they're capable of.
• Prime Minister Modi is a great example of a transformational leader that inspired an entire nation of
people to work towards a common goal.
• Elon Musk is another example of a transformational leader. His company SpaceX is the first private
spaceflight company to send a crewed spacecraft to space.
• Transformational Leadership Style was given by James Burns and then extended by Bernard
M. Bass.
Bernard M. Bass (1985) extended the work of Burns (1978) by explaining the psychological mechanisms
that underlie transforming and transactional leadership.
According to Bass, there are four factors to transformational leadership, (also known as the "four
I's"): idealized influence, inspirational motivation, intellectual stimulation, and individual
consideration.

Idealized Influence - the leader serves as an ideal role model for followers; the leader "walks the talk," and
is admired for this.
Inspirational Motivation - Transformational leaders have the ability to inspire and motivate followers.
Combined these first two I's are what constitute the transformational leader's charisma.

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Individualized Consideration - Transformational leaders demonstrate genuine concern for the needs and
feelings of followers. The followers are treated differently according to their talents and knowledge. They
are empowered to make decisions and are always provided with the needed support to implement their
decisions.
Intellectual Stimulation - Such leaders encourage their followers to be innovative and creative. They
encourage new ideas from their followers and never criticize them publicly for the mistakes committed by
them.
2.5.1. Additive Effects of Transformational Leadership
Additive effects of transformational leadership are the hypothesis that the four dimensions of
transformational leadership (idealized influence, inspirational motivation, intellectual stimulation, and
individualized consideration) have a combined effect that is greater than the sum of their individual
effects.
In other words, the additive effect hypothesis suggests that transformational leaders who are high in all four
dimensions will achieve better results than leaders who are high in some dimensions but not others.
Some research has supported the additive effect hypothesis, while other research has not. For example, a
study by Bass and Riggio (1990) found that transformational leaders who were high in all four dimensions
had higher employee satisfaction and performance than leaders who were lower in one or more
dimensions. However, a later study by Alatawi (2013) found that the combined effect of the four dimensions
of transformational leadership was not statistically significant.
2.5.2. Additive Effects of Transformational and Transactional Leadership
Additive effects of transformational and transactional leadership are the hypothesis that the two leadership
styles have a combined effect that is greater than the sum of their individual effects. In other words, leaders
who are both transformational and transactional will achieve better results than leaders who are only one or
the other.
There is some research to support the additive effects hypothesis. For example, a study by Avolio et al.
(1999) found that transformational and transactional leadership were both positively related to employee
performance, but the strongest relationship was found for leaders who were high in both leadership styles.
Another study by Judge and Piccolo (2004) found that transformational and transactional leadership had a
synergistic effect on employee job satisfaction. This means that the combined effect of the two leadership
styles was greater than the sum of their individual effects.
While the research on the additive effects of transformational and transactional leadership is still in its early
stages, it is clear that the two leadership styles can be complementary. Transformational leaders can
inspire and motivate their team members to achieve their goals, while transactional leaders can provide
them with the structure and guidance, they need to get the job done.

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Here are some examples of how transformational and transactional leadership can be used
together:

• A transformational leader might set a clear and inspiring vision for their team, and motivate them to
achieve their goals. The leader might also use transactional leadership principles to provide the
team with the resources they need to succeed, and to reward them for their accomplishments.
• A sales manager might use transformational leadership to inspire and motivate their sales team to
achieve their sales goals. The manager might also use transactional leadership principles to set
clear goals for the team, to provide them with training and support, and to reward them for their
sales performance.
2.5.3. Difference between Transactional and Transformational Leadership
Transactional and transformational are the two modes of leadership that tend to be compared the most.

• James MacGregor Burns distinguished between transactional leaders and transformational by

explaining that: a transactional leader is a leader who exchanges tangible rewards for the
work and loyalty of followers.
• Transformational leaders engage with followers, focus on higher-order intrinsic needs, and raise
consciousness about the significance of specific outcomes and new ways in which those outcomes
might be achieved.
• Transactional leaders tend to be more passive as transformational leaders demonstrate active
behaviours, including providing a sense of mission.
Comparison based on various parameters:
Definition - Transactional Leadership or otherwise known as management leadership, refers, to a
leadership style which lays emphasis on the transaction between leader and its subordinates. On the other
hand, Transformational Leadership is a type of leadership which becomes a reason for the transformation
(change) in the subordinates. In this style, the leader works with the subordinates to ascertain the desired
change in the organization.
Functions of Leaders - The major function of Transactional leader includes determination of objectives,
clarifying tasks and helping subordinates in achieving objectives. On the other hand, Transformational
Leadership is Providing vision and mission, instilling pride, gaining respect and trust as well as inspiring
people
Motivation - In transactional leadership motivation is linked to immediate performance through rewards
and Punishment whereas in transformational leadership inspirational Motivation takes place, which makes
followers/subordinates act beyond their scope.
Follower Development - In transactional leadership followers are created through formal training and
development program whereas in transformational leadership it is done through individual mentoring and
coaching.
Influence - The power of transactional leaders comes from their formal authority and responsibility in the
organization whereas in transactional leadership authority is created by Influence through idealized
Influence by being a role model.
Approach - Transactional Leadership follows Passive and Stable Approach whereas transformational
leadership follows Active and Dynamic
Style - Transactional Leadership follows Management-by-exception, it maintains the status quo; stress
correct actions to improve performance. On the other hand transformational leadership follows
Individualized consideration where leader's behaviour is directed to each individual to express
consideration and support.
Intellectual stimulation - Intellectual stimulation Promote creative and innovative ideas to solve problems
which is zero or negligible in Transactional leadership and maximum in Transformational Leadership.

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Conclusion: Both transactional and transformational leadership are needed. The transactional
leaders ensure that routine work is done reliably, while the transformational leaders look after initiatives that
add value.

3.0. Theories of Leadership

Leadership Theories
Behavioural Contigency Transformational Transactional Charismatic
Trait Theory
Theory Theory Theory Theory Theory

3.1. Great Man Theory/Trait Theory of Leadership

The development of the Great Man theory is mainly credited to Scottish philosopher and historian Thomas
Carlyle. In 1840, he gave a series of lectures on heroes and heroism and later published various pieces,
including Hero Worship and The Heroic in History. In them, he commented on great men or heroes from
history. According to him, a leader is a person who is blessed with unique qualities from birth in positions
of power that capture the masses' imagination. Thomas Carlyle said that 'the history of the world is but
the biography of great men'.
According to Carlyle, history is shaped by extraordinary leaders. This ability to lead is something that
people are simply born with, Carlyle believed, and not something that could be developed. Carlyle's ideas
inspired early research on leadership, which almost entirely focused on inheritable traits. Essentially,
according to this theory, people in positions of power deserve to lead the world, because of the
characteristics that were given to them at birth, which ultimately help them become heroes.
He asked, why is it that some men or women rise above others? And why is it that a specific family can
produce multiple highly successful leaders? For most people, the answers to these questions are a
mystery. Some theorists, claim that these questions have been answered by the Great Man Theory. In
short, this theory of leadership posits that great leaders are born, not made or trained.
The trait theory of leadership is tied to the "great man" theory of leadership first proposed by
Thomas Carlyle. Some of the leaders in the history have always been identified as strong leaders based
on the qualities or traits that they display. Leaders like Mahatma Gandhi, Indira Gandhi, Margaret Thatcher,
Nelson Mandela, Narayana Murthy of Infosys, Apple's Cofounder Steve Jobs etc. has been identified,
based on the traits that they displayed. For instance, when Indira Gandhi was the prime minister of the
India, she was regularly described as a confident, iron-willed, determined and decisive leader.

• Everything began in the 1800s when several research studies emerged trying to respond to the
so-called Great Man theory of leadership.
• The Theory was initially proposed by Thomas Carlyle, who was sure "leaders are born and not
made", as per him leaders are born with concrete traits, which can’t be acquired over time.
• The theory also assumes that a leader cannot be a normal person and they are different from the
average person in terms of personality traits such as intelligence, perseverance and ambition.
• However, the Great Man theory cannot answer a list of questions and from there Trait theory
emerged.
• The trait theories of leadership consider personal qualities and characteristics that differentiate
leaders from non-leaders.
3.1.1. The Characteristics of Trait Theory of Leadership
Unlike the Great Man theory, the trait theory of leadership doesn’t believe good leaders are born with
specific traits. Instead, the theory focuses on characteristics that make persons good leaders.

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Gordon Allport was the first investigator who thought there are traits anyone can develop to become a
good leader. Shortly, many others welcomed his idea.

• Allport is known for identifying up to 18,000 words in the English-language dictionary that describe a
good leader.
• From this list they reduced the number of words to approximately 4,500 personality-describing
adjectives which they considered to describe observable and relatively permanent personality traits.
• Those words were divided into three groups of cardinal, central, and secondary traits and
skills.
Cardinal traits dominate and shape an individual’s behaviour, such as Mother Theresa’s altruism. They
stand at the top of the hierarchy and are collectively known as the individual’s master control. They are
considered to be an individual’s ruling passions. Cardinal traits are powerful, but few people have
personalities dominated by a single trait. Instead, our personalities are typically composed of multiple
traits.
Central traits come next in the hierarchy. These are general characteristics found in varying degrees in
every person (such as loyalty, kindness, agreeableness, friendliness, sneakiness, wildness, or
grouchiness). They are the basic building blocks that shape most of our behaviour.
Secondary traits exist at the bottom of the hierarchy and are not quite as obvious or consistent as
central traits. They are plentiful but are only present under specific circumstances; they include things like
preferences and attitudes. These secondary traits explain why a person may at times exhibit behaviours
that seem incongruent with their usual behaviours. For example, a friendly person gets angry when
people try to tickle him; another is not an anxious person but always feels nervous speaking publicly.
3.1.2. Traits of a Successful Leader:
Charles Bird examined twenty lists of traits attributed to leaders in various surveys and found that none of
the traits appeared on all lists. Leaders were characterized a wide variety of traits ranging all the way from
neatness to nobility.
Persons who are leaders are presumed to display better judgment and engage themselves in social
activities. Study of the lives of successful leaders reveals that they possessed many of these traits.
According to the trait theory, persons who possess the following Notes traits or personal characteristics
could become successful leaders:
(a) Good personality: Physical characteristics and level of maturity determine the personality of an
individual. Good personality is an important factor in determining the success of a leader.
(b) Intellectual ability: A leader must have a higher level of intelligence than the average follower. A
leader should analyse the situation accurately and take decision accordingly.
(c) Initiative: A leader should initiate suitable activities at a proper time.
(d) Imagination: A leader should have the ability to imaginatively visualize trends and device his policies
and programmes.
(e) Maturity: A leader should be emotionally mature and have a balanced temperament. They should
also have high frustration tolerance.
(f) Desire to accept responsibility: A leader should be prepared to shoulder the responsibility for the
consequences of any step he takes. In other words, he should accept full responsibility for his
actions.
(g) Self-confidence: A leader should possess self-confidence. Self-confidence is essential to motivate
the followers and boost up their morale.
(h) Flexibility: A leader should be prepared to accommodate others viewpoints and modify his
decisions. He should have an open mind, ready to absorb and adopt new ideas and views of others.
(i) Fairness and objectivity: A good leader is fair and objective in dealing with subordinates. Honesty,
fair play, justice and integrity of character are expected of any good leader.
(j) Considerate: A good leader is considerate to the followers as his success as a leader largely
depends on the co-operation of his followers.

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Research indicates that a few traits show a weak but consistent link to holding positions of leadership.
People with a high energy level tend to rise to leadership positions. Leadership potential has been
associated with the social trait of dominance and with the motives of need for achievement and need for
power. Leadership has also been widely linked to high self-esteem. General cognitive ability has one of the
strongest links to leadership ability.

3.1.3. Limitations of The Trait Theory

(a) It assumes that leadership is an inborn quality. This is not always true but, leadership qualities may
be developed through training also.
(b) A leader may prove very successful is one situation due to some traits, but may fail in another
situation.
(c) The theory also fails to mention the traits which are necessary to maintain leadership. Measurement
of a trait usually occur after a person becomes a leader.
(d) There cannot be any common list of personal traits found in all successful leaders.
(e) Personal traits are only a part of the whole environment. By emphasizing merely on the personal
traits, the other qualities of a leader are ignored.
3.1.4. Applications of Trait Theory
Despite the limitations of trait theory, people still think in terms of leadership traits. For example, in many
hiring and promotion decisions, the decision maker selects people, he or she should have "leadership
potential". There is nothing wrong about such a choice, but is this an effective strategy? Probably not.
Using valid systems for employee selection results in higher-quality employees than basing decisions on
non-job-related personality traits.

3.2. Behavioural Theory

Behavioural theories assume that specific behavioural patterns of leaders can be acquired through
learning and experience. It believes that leaders are made and not born by asserting that people can
be taught to become a good leader.

• While the trait theory concentrates on "what the leaders are", the behavioural theories
concentrate on "what the leaders do".
Divides leaders into Two categories:

• Task Oriented: Mainly concerned with accomplishment of the task as per the standard operating
procedures
• People Oriented or Group Maintenance Oriented: Mainly concerned with inner needs of the
people getting satisfied whilst achieving results
Explanation in Detail,
According to this theory, a particular behaviour of a leader provides greater satisfaction to the followers and
so they recognize him as a good leader. The behavioural approach is based on the premise that effective
leadership is the result of effective role behaviour. A leader uses conceptual, human and technical skills to

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influence the behaviour of his subordinates. The behavioural theory does not concentrate on the traits of
leaders; it inspires study of the activities of leaders to identify their behavioural patterns.
The inability of the trait approach to consistently define specific traits that would differentiate successful and
unsuccessful leaders led to the conclusion that emphasis on the behaviour of leaders (which could be
measured) rather than emphasis on traits (which could not be measured) were an appropriate new
research strategy. Beginning in the late1940s and continuing through the early 1960s, research based on
this emphasis was conducted at Ohio State University and the University of Michigan.
A. The Ohio State University Studies: A team of Ohio State University researchers including Edwin
Fleishman conducted extensive surveys. The goal of the research was to:
(i) Identify the behaviours exhibited by leaders.
(ii) Determine what affect these behaviours had on employee satisfaction and performance.
(iii) Identify the best leadership style.
To do this, questionnaires were developed to assess leadership styles. The Leader Behaviour Description
Questionnaire (LBDQ) was designed to tap subordinate perception of the leader's behaviours, while the
Leader Opinion Questionnaire (LOQ) measured the leader's perception of his own style.
After an analysis of actual leader behaviour in a wide variety of situations, two important leadership
behaviours were isolated:
(i) Initiating-structure behaviour (IS): Clearly defining the roles of leader and follower so that
everyone knows what is expected. This includes establishing formal lines of communication and
deciding how tasks are to be performed.
(ii) Consideration Behaviour (C): Demonstrating concern for followers and trying to establish a
friendly and supportive work climate based on mutual trust.
These two kinds of behaviour were viewed as independent, meaning a particular Notes leader can score
high in use of one type of behaviour, the other, or both. Leaders who scored high on IS generally led high-
producing groups and were rated highly by their superiors. However, the subordinates of those leaders
tended to have lower morale, higher grievance rates, and higher turnover. Leaders high on C, on the other
hand, generally led groups with higher morale but lower productivity. Thus, each of the specific leader
behaviours had positive and negative outcomes associated with them. The extension of these findings by
some later theorists led to the conclusion that leaders high on both LS an C would simultaneously satisfy
their superiors (by achieving high performance) and their subordinated (by improving their morale).
B. University of Michigan Studies: Under Rensis Likert, researchers at the University of Michigan
conducted extensive interviews with managers and the employees who reported to them. After studying
numerous industrial situations, the researchers concluded that two leadership styles – employee-centered
and production or task cantered – influenced employee performance and satisfaction.
(i) Task-Cantered Leader Behaviour: An effort to lead employees by focusing on work and how
well employees perform. The task-cantered leader pays close attention to employees' work,
explains work procedures, and is deeply interested in performance.
(ii) Employee-centered Leader Behaviour: An effort to lead employees by developing a cohesive
work group and ensuring employee satisfaction. The employee-cantered leader emphasizes
employees' wellbeing rather than the tasks they perform.
The researchers defined these behaviours as mutually exclusive; a leader tends to use one or the other.
The Michigan studies showed that employee-centred leaders supervised groups with higher morale and
productivity, while production-centered leaders supervised groups with lower productivity and morale.
These findings led to the belief that the employee-centred leadership style was superior to the production-
centered leadership style.
Examples of Behavioural Leadership
In 2016, the biopic movie Dangal became a record-breaking commercial success in Bollywood. It’s
loosely based on the journeys of Gita and Babita Phogat, who became household names in Indian
wrestling. The movie also highlighted the influence of Mahavir Singh Phogat, the father, who is instrumental

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to their success. The character of Mahavir displays a good balance of authority, empathy and inspiration.
He changes his leadership style according to changing needs and contexts. Mahavir is an ideal example of
a behavioural leader.
Dr. Kiran Mazumdar-Shaw, the chairperson of Biocon started her organization with minimal experience
and several obstacles. She succeeded at making Biocon a global brand because of her dynamic leadership
style. She motivated her employees by putting them in charge of their work. It helped her establish a
trusted network of people who championed Biocon’s mission like their own.
Mahendra Singh Dhoni, former captain of the Indian cricket team is one of India’s most beloved
sportspeople. He established a leadership style where he placed immense trust in his teammates. Dhoni
believed in his team as much as they believed in him. This team centric and game centric behaviour of
Dhoni has made him one of the most successful captains of Indian Cricket team.

Behavioural Theories of
Leadership
Tannenbaum and Schmidt's
Michigan and Ohio University
Continuum of Leadership
Leadership Studies
Behaviour

The Studies by Lewin's Leadershup Likert's Four styles Huneryager and

Reddin 3-D
Blake and Mouton - Theory or Power of Management Hacman 4 styles of
Leadership Model
Managerial Grid Orientation Theory Management

3.2.1. Ohio State University Studies (1945)

One of the foremost studies that emanated on behavioural theories was the study made by Ohio State
University in 1945 by E.A. Fleishman, E.F. Harris and H.E. Burtt. The study narrowed the leadership
behaviours into two categories, viz. initiating structure and consideration, under which the various
leadership behaviours were clubbed.

• Initiating Structure: Initiating structure refers to the extent to which a leader is likely to define and
structure his or her role and those of employees in the search for goal attainment. It includes
behaviour that attempts to organize work, work relationships, and goals. A leader with initiating
structure is generally task oriented, with focus on performance of employees and meeting of
deadlines.
• Consideration: As per “consideration” category, a leader pays more attention to the employee of
the organization rather than the task and shows concern for the well-being, comfort and
satisfaction of employees. That is, a leader focuses on the relationships that are characterised by
mutual trust, respect for employees‟ ideas, and regard for their feelings.
3.2.2. University of Michigan Studies (1946)
Similar to the Ohio State University studies, research on leadership studies was also carried out by the
University of Michigan‟s Research centres, in 1946 by Rensis Likert and his associates. The study
made an analysis of the relationship between leadership behaviours and organizational performances.
Michigan Studies also identified a two-factor component, viz. “employee-oriented leader” and “production-
oriented leader”.

• Employee-Oriented Leader: The concern of the employee-oriented leaders was more on the
interpersonal relations with the employees and such leaders paid more attention on the needs of the
employees and accepted the individual differences among members.
• Production-Oriented Leader: The production oriented-leaders paid attention to the technical
aspects of the job or the tasks assigned to the employees, rather than on employees. Such leaders

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gave least importance to the group members, and regarded the employees as only a means to
achieve the ends, that is, the goals of an organization
It can be found that the two-factor conceptualization of the Ohio study is similar to the two-way
dimension of the Michigan studies.

• While the employee-oriented leadership can be compared with the “consideration” component of
Ohio studies, production-oriented leadership can be compared with “initiating structure”.
• While the Ohio studies considered both its components to be important for effective leadership, the
Michigan studies gave supremacy to the component of “employee-orientation” over “production-
orientation”.
3.2.3. Blake and Mouton’s Managerial Grid
The treatment of task orientation and people orientation as two independent dimensions was a major step
in leadership studies.

• Many of the leadership studies conducted in the 1950s at the University of Michigan and the
Ohio State University focused on these two dimensions.
• Building on the work of the researchers at these Universities, Robert Blake and Jane Mouton
(1960s) proposed a graphic portrayal of leadership styles through a managerial grid
(sometimes called leadership grid).
The grid depicted two dimensions of leader behavior, concern for people (accommodating people’s
needs and giving them priority) on y-axis and concern for production (keeping tight schedules) on x-
axis, with each dimension ranging from low (1) to high (9), thus creating 81 different positions in which the
leader’s style may fall.

• Concern for people is the degree to which a leader considers the needs of employees when
deciding how tasks or jobs should be done. This can be personal or professional development.
• Concern for production is the degree to which a leader emphasizes objectives and productivity
goals when deciding how tasks or jobs should be done. This can be rules, policies or performance
standards.

The five resulting leadership styles are as follows:

• Impoverished Management (1,1)

• Produce or perish (9,1)
• Middle-of-the-Road (5,5)
• Country Club (1,9)
• Team Management (9,9)
Impoverished Management (1, 1): Managers with this approach are low on both the dimensions and
exercise minimum effort to get the work done from subordinates.

• The leader has low concern for employee satisfaction and work deadlines and as a result
disharmony and disorganization prevail within the organization.

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• The leaders are termed ineffective wherein their action is merely aimed at preserving job and
seniority.
Produce or perish (9,1): Also called dictatorial or perish style. Here leaders are more concerned about
production and have less concern for people.

• The style is based on theory X of McGregor. The employees’ needs are not taken care of and they
are simply a means to an end.
• The leader believes that efficiency can result only through proper organization of work systems and
through elimination of people wherever possible
• Such a style can definitely increase the output of organization in short run but due to the strict
policies and procedures, high labour turnover is inevitable.
Middle-of-the-Road (5, 5): This is basically a compromising style wherein the leader tries to maintain a
balance between goals of company and the needs of people.

• The leader does not push the boundaries of achievement resulting in average performance for
organization. Here neither employee nor production needs are fully met.
Country Club (1, 9): This is a collegial style characterized by low task and high people orientation where
the leader gives thoughtful attention to the needs of people thus providing them with a friendly and
comfortable environment.

• The leader feels that such a treatment with employees will lead to self-motivation and will find
people working hard on their own. However, a low focus on tasks can hamper production and lead
to questionable results.
Team Management (9, 9): Characterized by high people and task focus, the style is based on the theory Y
of McGregor and has been termed as most effective style according to Blake and Mouton.

• The leader feels that empowerment, commitment, trust, and respect are the key elements in
creating a team atmosphere which will automatically result in high employee satisfaction and
production.
The Managerial or Leadership Grid analysis of leader is done by administering a questionnaire that
helps managers identify how they stand with respect to their concern for production and people.
Updated Blake and Mouton Managerial Grid
Includes two new styles namely, Opportunistic and Paternalistic Styles
Opportunistic Style leaders adopt any style that has highest likelihood of achieving their objectives. It
does not have any fixed position on the grid.
Paternalistic Style leaders guide and define objectives for their employees and discourage any initiative
contrary to their views

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3.2.4. Tannenbaum and Schmidt’s Continuum of Leadership Behaviour

The leadership continuum was originally written in 1958 by Tannenbaum and Schmidt and was later
updated in the year 1973.
The Tannenbaum and Schmidt leadership continuum presents 7 styles of leadership across a
continuum from maximum to minimum exercise of authority.

• At one end the leader exercises maximum authority by making decisions without consultation and
tells the team what to do.
• At the other end, the manager allows staff the full freedom to make decisions they want.
• It lays out a range of potential strategies for a leader to choose depending upon their management
style.
• It does not advocate that any approach is best, but allows space for different strategies for different
situations.
The 7 styles can be summed up as:

• Tells: leader tells the team about their decisions.

• Sells: leader sells their decision to the team.
• Suggests: leader comes up with a decision and allows the team to ask questions about their
choice.
• Consults: leader presents a range of solutions and asks the team about their input before making a
decision.
• Joins: leader presents a problem and the team brainstorm solutions before the leader decides.
• Delegates: Leader presents a problem and sets parameters then the team makes the decision.
• Abdicates: The team identifies the problem, brainstorms solutions and makes the decision without
constraints imposed by the leader.

3.2.5. Lewin’s Leadership Theory - It has been discussed in the start of this chapter under Different
Leadership styles. We are proving you further detailed information as there could be a Descriptive
Question (Discuss the Lewin’s Theory of Leadership).
In 1939, psychologist Kurt Lewin and a team of researchers determined that there were three basic
leadership styles: Authoritarian (Autocratic), Participative (Democratic) and Delegative (Laissez-Faire).
While further research has identified more distinct types of leadership, this early study was very influential

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and established three major leadership styles that have provided a springboard for more defined leadership
theories.
In Lewin's study, schoolchildren were assigned to one of three groups with an authoritarian, democratic, or
laissez-faire leader. The children were then led in an arts and crafts project while researchers observed the
behaviour of children in response to the different styles of leadership. The researchers found that
democratic leadership tended to be the most effective at inspiring followers to perform well.
A. Authoritarian Leadership (Autocratic)
Authoritarian leaders, also known as autocratic leaders, provide clear expectations for what needs to be
done, when it should be done, and how it should be done. This style of leadership is strongly focused on
both command by the leader and control of the followers. There is also a clear division between the leader
and the members. Authoritarian leaders make decisions independently, with little or no input from the rest
of the group.

• Researchers found that decision-making was less creative under authoritarian leadership. Lewin
also concluded that it is harder to move from an authoritarian style to a democratic style than vice
versa. Abuse of this method is usually viewed as controlling, bossy, and dictatorial.
• Authoritarian leadership is best applied to situations where there is little time for group decision-
making or where the leader is the most knowledgeable member of the group. The autocratic
approach can be a good one when the situation calls for rapid decisions and decisive actions.
However, it tends to create dysfunctional and even hostile environments, often pitting followers
against the domineering leader.
Characteristics of Autocratic Leadership:
Some of the primary characteristics of autocratic leadership include:
1. Allows little or no input from group members
2. Requires leaders to make almost all of the decisions
3. Provides leaders with the ability to dictate work methods and processes
4. Leaves the group feeling like they aren't trusted with decisions or important tasks
5. Tends to create highly structured and very rigid environments
6. Discourages creativity and out-of-the-box thinking
7. Establishes rules and tends to be clearly outlined and communicated

Is autocratic leadership good or bad?

• Autocratic leadership is generally a bad thing when it is used excessively. However, it is important to
note that this type of leadership can be useful in certain situations. When group members lack
knowledge, need direction, and time is of the essence, autocratic leadership can provide guidance,
relieve pressure, and offer the structure that group members need to succeed.

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B. Participative Leadership (Democratic)

Lewin’s study found that participative leadership, also known as democratic leadership, is typically the most
effective leadership style. Democratic leaders offer guidance to group members, but they also participate in
the group and allow input from other group members. In Lewin’s study, children in this group were less
productive than the members of the authoritarian group, but their contributions were of a higher quality.
Participative leaders encourage group members to participate, but retain the final say in the decision-
making process. Group members feel engaged in the process and are more motivated and creative.
Democratic leaders tend to make followers feel like they are an important part of the team, which helps
foster commitment to the goals of the group.
Characteristics of Democratic Leadership

• Some of the primary characteristics of democratic leadership include:

o Collaboration: Group members are encouraged to share ideas and opinions, even though
the leader retains the final say over decisions.
o Engagement: Members of the group feel more engaged in the process.
o Creativity: Creativity is encouraged and rewarded.
Researchers suggest that good democratic leaders possess specific traits such as being a team player,
possessing a willingness to adapt, having a fair mind, and being engaged in the process. Strong
democratic leaders inspire trust and respect among their followers.
These leaders are sincere and make decisions based on their morals and values. They also tend to seek
diverse opinions and do not try to silence dissenting voices or those that offer a less popular point of view.
As a result, followers feel inspired to take action and con tribute to the group.
Benefits of Democratic Leadership
1. Because group members are encouraged to share their thoughts, democratic leadership can lead to
better ideas and more creative solutions to problems. Group members feel more involved and
committed to projects, making them more likely to care about the end results.
2. Research on leadership styles has shown that democratic leadership contributes to higher
productivity among group members. This way of leading has also been connected to increases in
group morale.
Potential Pitfalls of Democratic Leadership
1. While democratic leadership has been described as the most effective leadership style, it does have
some potential downsides. In situations where roles are unclear or time is of the essence,
democratic leadership can lead to communication failures and uncompleted projects.
2. In some cases, group members may not have the necessary knowledge or expertise to make
quality contributions to the decision-making process. Democratic leadership can also result in team
members feeling like their opinions and ideas aren't taken into account.
3. For a government or organization to be truly democratic requires the sharing of all the information.
This can lead to potential security issues in some cases, making it another pitfall of using a
democratic leadership style.
C. Delegative Leadership (Laissez-Faire)
Lewin found that children under delegative leadership, also known as laissez-faire leadership, were the
least productive of all three groups. The children in this group also made more demands on the leader,
showed little cooperation, and were unable to work independently.
Delegative leaders offer little or no guidance to group members and leave the decision-making up to group
members. While this style can be useful in situations involving highly qualified experts, it often leads to
poorly defined roles and a lack of motivation. Lewin noted that laissez-faire leadership tended to result in
groups that lacked direction and members who blamed each other for mistakes, refused to accept personal
responsibility, made less progress, and produced less work.

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Examples

• Here's how laissez-faire leadership could look in different settings:

o In school: The teacher is more of an observer while students are able to do as they wish.
There is a lack of expectations and discipline in the classroom.
o At work: Leaders and supervisors stand back and let their employees make decisions and
may let them set their own deadlines.2 They don't offer much feedback.
o In government: A political leader who exhibits laissez-faire leadership would leave decisions
to subordinates and provide little direction.
Benefits

• Like other types of leadership, the laissez-faire style has its advantages.
1. It encourages personal growth. Because leaders are so hands-off in their approach,
employees have a chance to be hands-on. This leadership style creates an environment that
facilitates growth and development.
2. It encourages innovation. The freedom given to employees can encourage creativity and
innovation.
3. It allows for faster decision-making. Since there is no micromanagement, employees under
laissez-faire leadership have the autonomy to make their own decisions. They are able to
make quick decisions without waiting weeks for an approval process.
Disadvantages
Because the laissez-faire style depends so heavily on the abilities of the group, it is not very effective in
situations where team members lack the knowledge or experience, they need to complete tasks and make
decisions. This can lead to poor job performance and less job satisfaction. Some possible disadvantages of
the laissez-faire style include:
1. Lack of role clarity: In some situations, the laissez-faire style leads to poorly defined roles within the
group. Since team members receive little to no guidance, they might not really be sure about their
role within the group and what they are supposed to be doing with their time.
2. Poor involvement with the group: Laissez-faire leaders are often seen as uninvolved and withdrawn,
which can lead to a lack of cohesiveness within the group. Since the leader seems unconcerned
with what is happening, followers sometimes pick up on this and express less care and concern for
the project.
3. Low accountability: Some leaders take advantage of this style as a way to avoid responsibility for
the group's failures. When goals are not met, the leader can blame members of the team for not
completing tasks or living up to expectations.
4. Passivity: At its worst, laissez-faire leadership represents passivity or even an outright avoidance of
true leadership. In such cases, these leaders do nothing to try to motivate followers, don't recognize
the efforts of team members, and make no attempts at involvement with the group.
Observations About Lewin's Leadership Styles
In their book, The Bass Handbook of Leadership: Theory, Research, and Managerial Applications, Bass
and Bass note that authoritarian leadership is often presented solely in negative, often disapproving, terms.
Authoritarian leaders are often described as controlling and close-minded, yet this overlooks the potential
positives of stressing rules, expecting obedience, and taking responsibility.
While authoritarian leadership certainly is not the best choice for every situation, it can be effective and
beneficial in cases where followers need a great deal of direction and where rules and standards must be
followed to the letter. Another often overlooked benefit of the authoritarian style is the ability to maintain a
sense of order.
Bass and Bass note that democratic leadership tends to be centered on the followers and is an effective
approach when trying to maintain relationships with others. Bass BM. The Bass Handbook of Leadership:
Theory, Research, and Managerial Applications. 4th Ed. Simon & Schuster; 2009. People who work under
such leaders tend to get along well, support one another, and consult other members of the group when
making decisions.

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3.2.6. Likert's Leadership Theory (Style Theory)

Rensis Likert established Leadership styles called Likert's management systems in the 1960s. To
characterize the interaction, engagement, and roles of managers and subordinates in industrial contexts,
he proposed four Leadership Styles. He developed the procedures based on research conducted with
highly productive managers and their teams at an American insurance company. Later, he and Jane G.
Likert altered the methods so that they could be applied in educational contexts. The goal of the new study
was to describe the role of school administrators, students and teachers. Eventually, the study also
involved others such as administrators, parents and regulators.
The management theory of Rensis Likert added a new dimension to theories and existing ideas about
organisational development. For the first time, such a system allowed for the qualification of results of all
the research into group dynamics. The Likert Management System also simplifies the measuring of soft
skills in managers, such as trust and communication.
Rensis Likert and his colleagues at the University of Michigan in the United States studied the patterns and
styles of managers for three decades and established a four-fold model of management systems. The
model was developed using information from a poll of over 200 managers as well as research into the
performance characteristics of various types of firms.
There are four management systems or four leadership styles, according to Likert:
1. Style or System 1 - Exploitative Authoritative
2. Style or System 2 - Benevolent Authoritative
3. Style or System 3 - Consultative
4. Style or System 4 - Participative
Style-1: Exploitative Authoritative System
It is the first system in Likert's Leadership Styles. Under this style Likert states that the ultimate power lies
in the hands of the top subordinates. The Top management makes the policies and rules and the
employees in the lower level are bound to follow the instructions given to them by their superiors. Here, it is
observed that the workers at the lower level do not feel free to discuss their work with their superiors. The
communication and teamwork in this system are very little.
The leaders in the system of Exploitative authoritative have a lower level of concern for their employees.
They use threats or methods that involve fear to achieve their work. The method of threat works well and
the employees work efficiently upon entering the organization. The leaders are ignorant of the
psychological feelings of the employees and the communication between them is almost nil.
In this type of system, the upper management burdens employees with a heavy workload and they are to
finish the work without fail. The monetary benefits and work satisfaction in this type of system is very less.
Style-2: Benevolent Authoritative System
Under this system of Likert’s, it is observed that the authority lies in the hands of the managers and not in
the hands of the lower-level workers. The superiors have a small amount of confidence and trust in the
employees. The superiors have less control over the employees. They do not use methods of threats.
However, the employees are rewarded and punished as per their performance in the organization.
In this system of management, the employees are involved in some of the decision-making processes. But
the ultimate power lies in the hands of the superiors. Here also the communication is very little and the
employees do not feel free to share their work experience with the superiors.
Style-3: Consultative System
This is the third style of leadership given by Likert. In this system, Likert has stated that responsibility and
authority are spread widely throughout the organization. The subordinates in the different levels of the
organizations are given different responsibilities. The employees and subordinates work as a team on
certain decisions. There is fair communication between the employees and the superiors. However, the
power to form policies and rules lies in the hands of the top management.

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Under this system, the employees are rewarded for better performance and at the same time, they are also
punished for bad performances. The employees are free to communicate with their superiors and
subordinates. They can share their work-related issues with the superiors freely. The system promotes a
healthy work environment for the employees and motivates them to work efficiently.
Style-3: Participative System
This is the last style of leadership given by Likert. Under this style, Likert states that the power and
responsibility to achieve the goals of the organization is distributed among all the employees and
subordinates in the organization. According to this system, each employee has a certain role to play in the
success of the organization. The superiors have the utmost confidence and trust in their employees.
The employees are made to participate in the decision-making process of the organization. The system
states that there is a continuous flow of information in both an upward and downward direction. The
employees are provided with a healthy work environment and they are motivated continuously by their
superiors.
Likert found style 3 and 4 as high producing while styling 1 and 2 as low producing. Likert also
suggested extensive and intensive leadership training at all management levels to move into style-4 as
early as possible. Likert 4 Management Leadership Styles study and its findings give a thorough
perspective of the leadership styles and how each leadership style influences the organization’s structure,
value system, attitude towards workers, productivity level, and organization’s total environment. Likert 4
Management Leadership Styles indicates which leadership style is suitable for which organization types in
a scientific method
Advantages of Likert’s Management System

• With the help of the profile developed by Likert, it became possible to quantify the results of the
work done in the field of group dynamics.
• Likert theory also facilitated the measurement of the “soft” areas of management, such as trust and
communication.
What are the disadvantages of the style theory of leadership?
This leadership style also has some disadvantages due to its flexibility. The primary disadvantage of this
theory is that it doesn't directly state how to act in order to achieve specific results.

• Some additional disadvantages of this theory include:

o No specific style for different situations
o Largely influenced on leaders' experiences
o Affected by each working environment
o Effectiveness varies between teams
3.2.7. Huneryager and Heckman Four Styles of Management
Four leadership styles identified by Huneryager and Heckman (1967) are:
Dictatorial style: The pursuer of this style threatens the subordinates and punishes and penalizes in case
of any deviations.
Autocratic style: The leader following this style believes in centralized decision making. All sort of
participation is discouraged.
Democratic style: This is often regarded as the best leadership style. In this style, decision making is
decentralized and participation in decision making is encouraged.
Laissez-faire style: In this style, subordinates are given extremely diminutive, or no direction at all. They
are given absolute freedom to set up their own goals and to take their own decisions.

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3.2.8. Reddin 3-D Leadership Model

The Three-Dimensional Grid or 3-D Leadership Model is developed by Professor Bill Reddin, who
introduced the concept of “situational demands” which talks about the way in which the leader must behave
to be most effective.
The 3-D model has taken into the consideration the beliefs of the managerial grid and added one more
dimension to it i.e., Effectiveness.
The effectiveness means to know what was the result when one used a particular leadership style in a
particular situation.
Thus, three-dimensional axes represent the “task-orientation”, “relationship orientation” and
“effectiveness”.
When the leadership style meets the demands of the situation, then the leadership is said to be effective
else ineffective.
On the basis of this, there are four styles that a manager adopts and is shown in the figure below:

The Separated Manager is the one who is engaged in correcting deviations. He is the person who
formulates the rules and policies and imposes these on others.
The Related Manager is the one who likes to work with others and see an organization as a social system
where everyone works together. He does not worry about the time and accepts others as they are and do
not try to change them.
The Dedicated Manager is the one who is task oriented and is only concerned with the production. He
does not like to mix up with the subordinates and cannot work without power and responsibility.
The Integrated Manager is the one who mixes up with the subordinates and facilitate two way
communication. His major emphasis is on building a strong teamwork and effective communication
network.
Reddin believed that the way leader behaves in a certain situation may not be appropriate in some other
situations, and this led to the evolution of the 3-D leadership model.

3.3.0. Contingency/Situational Theory of Leadership

Sometimes the success of a leader does not depend upon the qualities, traits and behaviour of a leader
alone. The context in which a leader exhibits her/his skills, traits and behaviour matters, because same

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style of functioning may not be suitable for different situations. Thus, the effectiveness of leadership also
depends upon situations. Several research studies, when analysing the reason for inconsistent results in
differing conditions with the same leadership style, laid their focus on situational variables.
This theory views leadership in terms of a dynamic interaction between a number of situational variables
like the leader, the followers, the task situation, the environment, etc.
Some of the noteworthy studies on situational contexts that gained wide recognition include Fiedler’s
model, Hersey and Blanchard’s Situational theory, Leader-Member Exchange theory, Path-Goal theory and
Leader-Participation model.
The primary focus of this model is team member maturity.

• High-maturity employees have more experience and can make decisions on their own.
• Moderately mature employees have the capability to make good decisions, but they may lack
confidence. On the flip side, they may also be confident but unwilling to complete tasks that have
been assigned to them.
• Low-maturity employees are enthusiastic and willing to get things done, but they also lack the
needed skills or experience.
The Situational Leadership model also posits that leaders should choose between four leadership styles
based on their employees’ maturity:
1. Delegating style: When using the delegating style, leaders allow team members to be responsible
for specific tasks to lead smaller groups. This approach works best for high-maturity employees.
2. Participating style: When using this style, leaders encourage team members to share ideas and
decisions. This approach works well for moderately mature team members who need help building
confidence or further developing their skills.
3. Selling style: The selling style requires a leader to sell team members on an idea with clear and
persuasive instructions. This approach is helpful for moderately mature team members —
specifically those with confidence but an unwillingness to complete tasks.
4. Telling style: The telling style involves explicit directions and close supervision. It works best for
low-maturity employees who are willing but lack the skills to act independently.

Contigency/Situational
Theory

Hursey and Blanchard’s

Fiedler’s Contingency Model
Situational Model

Path-Goal Model by Vroom-Yetton-Jago Decision Cognitive Resource Theory

Robert House Making Model of Leadership of Leadership

3.3.1. Fiedler’s Contingency Model

Fred Fiedler was the first person to develop a comprehensive model for the contingency theory of
leadership in 1967. Fiedler's contingency model is one of the most serious and elaborate situational
theories in leadership literature. Fiedler is probably the first researcher who recognised the need for a
broader explanation of leadership phenomena anchored on situational variables. Fiedler's model is called a
'contingency' model because the leader's effectiveness is partially contingent upon three major situational
variables.
1. Leader-member relations: It refers to the degree of confidence, trust and respect followers have in
the leader. It indicates the degree to which group members like the leader and are willing to accept
the leader's behaviour, as an influence on them. If followers are willing to follow because of
charisma, expertise, competence or mutual respect, the leader has little need to depend on task
structure or position power. If, on the other hand, the leader is not trusted and is viewed negatively
by followers, the situation is considered less favourable.

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2. Task structure: It measures the extent to which the task performed by subordinates is routine or
non-routine. Task structure refers to the degree to which the task requirements are clearly defined,
(clarity of goals) the correctness of a decision can be easily verified (verifiability of decisions made)
and there are alternative solutions to task problems (multiplicity of options to solve problems). In
other words, task structure refers to how routine and predictable the work group's task is.
3. Leader position power: The most obvious manner in which the leader secures power is by
accepting and performing the leadership role. Position power in the contingency model refers to the
power inherent in the leader's organisational position. It refers to the degree to which the leader has
at his disposal various rewards and sanctions, his authority over group's members, and the degree
to which this authority is supported by the organisation.
The basic premise behind this theory is that, effective performance of an organization or a group of people
in an organization highly depend upon the style adopted by a leader and the degree to which a situation
gives control to the leader. In order to assess the style followed by a leader, Fiedler developed "Least-
Preferred Co-worker" (LPC) scale, in which the leaders were asked to give their preference on the
employee with whom they have least preference to work with.

• If the least preferred co-worker was described in favourable terms, such response was rated as
‘relationship oriented’ and if rated in unfavourable terms, a leader was regarded as ‘production
oriented’.
• However, in contrast, the response derived from such study did not show a clear-cut picture, as
some of the responses had a score in the mid-range.
• Through such responses, it was difficult to classify a leader either as a relationship-oriented or a
production-oriented leader, as the scoring was neither high nor low.
Fiedler’s model thus illuminated attention on a new dimension of leadership studies. Thus, through
this study, it was suggested that, if a situation requires a task-oriented leader and the person in that
leadership position is relationship-oriented, either the situation has to be modified or the leader
replaced, if optimal effectiveness is to be achieved.
Favourableness of the situation: Thus, depending on the 'high' and low' categories of these situational
variables, Fiedler developed eight possible combinations ranging from highly favourable to unfavourable
situations.

• The degree varies from good to poor in leader-member relations, high to low in task structure and
strong to weak in position power
• According to Fiedler, a leadership is said to have more control of organizational situations, if
the leader-member relations are good, task assignments are highly structured along with a stronger
power position.
• Similarly, the situations in an organization would be unfavourable, if the respect that members have
for leaders is poor, with unstructured task assignments and weak position power.

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The first cell in the table is identified with this high degree of favourableness. At the other extreme,
an unfavourable situation is, where the leader's power is weak, relations with members are poor and the
task is unstructured and unpredictable.
The last cell represents this situation. Between these two extremes lies the situation of intermediate
difficulty. Fiedler states that a permissive, relationship-oriented style is best when the situation is
moderately favourable or moderately unfavourable. When the situation is highly favourable or highly
unfavourable, a task-oriented style produces the desired performance. Fiedler's model evaluates the
effectiveness of leadership, based on the degree of existence of the above-mentioned situational factors
Fiedler states that a task-oriented leader performs better in situations that are very favourable to
her/him and in situations that are very unfavourable. That is, when faced with a Category I, II, III, VII or
VIII situation, task-oriented leaders perform better. Relationship-oriented leaders perform better in
moderately favourable situations – categories IV through VII.
3.3.2. Hursey and Blanchard’s Situational Model
The Hersey-Blanchard model, also known as the Hersey-Blanchard Situational Leadership Theory,
developed by Paul Hersey and Kenneth Blanchard, is based on the ’readiness’ level of the
subordinate whom the leader is attempting to influence.

• Ability is the knowledge, experience, and skill that an individual possesses to do the job and is
called job readiness.
• The Hersey-Blanchard model introduced the concept of "follower maturity" which is a measure
of the capability and willingness of a group to perform a task under the guidance of a leader.
• This model empowers managers to adopt different leadership styles based on the level of
readiness of the followers.
The readiness(R) is divided into a continuum of four levels which are:

• R1 - low follower readiness - refers to low ability and low willingness of followers i.e. those who
are unable and insecure
• R2 - low to moderate follower readiness - refers to low ability and high willingness of followers i.e.
those who are unable but confident
• R3 - moderate to high follower readiness - refers to high ability and low willingness of followers
i.e., those who are able but insecure
• R4 - high follower readiness - refers to high ability and high willingness of followers i.e. those who
are both able and confident
Leadership Style – According to Hursey and Blanchard the leadership style can be determined on the
basis of two considerations, Viz. Relational Behaviour and the Task behaviour.
The relational behaviour refers to the interpersonal relationship between the leader and his subordinates,
while the task behaviour refers to the amount of guidance and direction a leader gives to his subordinates.
On the basis of these considerations four types of leadership styles can be obtained, which are
shown in the matrix below:

• S1 - High Task - Low Relational

• S2 - Hi Task - Hi Relational
• S3 - Low Task - High Relational
• S4 - Low Task - Low Relational
Subordinate Maturity - The subordinate skill and knowledge are called job maturity. The confidence and
commitment of the subordinate to use this toward the accomplishment of work tasks is psychological
maturity. This leads to the following matrix:

• D1 - Low Ability - Low Willingness

• D2 - Low Ability - High Willingness
• D3 - High Ability - Low Willingness
• D4 - High Ability - High Willingness

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The model then identifies four leadership styles that will correspond with these leader and
subordinate attributes:
Telling (Directing) (D1 - S1) - This style is most appropriate for low follower readiness (R1). When the
subordinate is low-ability-low-willingness, the leader must show high-task-low-relationship behaviour.
Selling (Coaching) (D2 - S2) - This style is most appropriate for low to moderate follower readiness (R2).
When the subordinate is low-ability-hi-willingness, the leader must show high-task-high-relationship
behaviour.
Participating (Supporting) (D3 - S3) - This style is most appropriate for moderate to high follower
readiness (R3). When the subordinate is hi-ability-low-willingness, the leader must show low-task-high-
relationship behaviour.
Delegating (D4 - S4) - This style is most appropriate for high follower readiness (R4). When the
subordinate is hi-ability-hi-willingness, the leader must show low-task-low-relationship behaviour.

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3.3.3. Path-Goal Model by Robert House

Path-Goal Model of leadership was proposed by Robert House. The theory was developed by Robert
House and has its roots in the expectancy theory of motivation. The term ‘path-goal’ denotes that a leader
must illuminate the path to the goal and explain how to make the journey successful to the followers. The
path-goal theory of leadership indicates that a leader is in charge of clarifying the subordinates about the
actions and behaviour, which, if followed, will lead to goal attainment.
Main propositions of House’s Path-goal Theory
The path-goal model presents several key propositions:

• The acceptability and satisfaction of leader behaviour depend on how subordinates perceive it as a
direct source of immediate satisfaction and as instrumental to their future satisfaction. When
subordinates recognize that the leader’s behaviour contributes to their well-being in the present and
future, they are more likely to find it acceptable and satisfying.
• The effectiveness of leader behaviour lies in its ability to fulfil subordinates’ needs and align with
their environments. This entails providing support, guidance, and rewards necessary for
subordinates to perform effectively. By addressing their needs and creating a supportive
environment, leaders can motivate their subordinates.
• A crucial role of the leader is to clarify the paths to work goals for subordinates. This involves
eliminating confusion or conflicting ideas surrounding the goals and providing clear guidance on
how to achieve them. By offering clarity, leaders help subordinates understand expectations and
how their efforts contribute to organisational goals.
• Subordinates are most likely to contribute optimally to organisational goals when they perceive a
direct connection between their personal satisfaction and effective performance. When subordinates
believe that their efforts directly impact their satisfaction and well-being, they are motivated to
perform at their best.
• Leaders should provide guidance and support to remove obstacles or bottlenecks that hinder
subordinates from reaching their goals. By offering assistance, and resources, and removing
barriers, leaders create a supportive environment that enables subordinates to overcome
challenges and work towards goal attainment.
• House’s theory advocates servant leadership. As per servant leadership theory, leadership is not
viewed as a position of power. Rather, leaders act as coaches and facilitators to their subordinates.
According to House’s path-goal theory, a leader’s effectiveness depends on several employee and
environmental contingent factors and certain leadership styles. Path goal theory suggests 4 various styles
which can be and are used by the same leader in different situations.

• Instrumental or Directive: This leadership style focuses on planning, organising, and coordinating
the activities of subordinates. Similar to the initiating structure observed in the Ohio State Studies,
leaders exhibiting this behaviour provide clear instructions and guidance to their team members.
• Supportive: A supportive leader is approachable, friendly, and genuinely concerned about the well-
being and needs of their subordinates. This style aligns with the consideration dimension identified
in Ohio State Studies, emphasizing the leader’s supportive and nurturing role.
• Participative: Leaders who adopt a participative style actively involve their subordinates in
decision-making processes. They seek input, consult with their team members, and incorporate
their suggestions when making important choices.
• Achievement-Oriented: Leaders with an achievement-oriented style set challenging goals for their
subordinates and demonstrate confidence in their abilities. They strive to inspire and motivate their
team members to reach higher levels of performance and accomplishment.
In path-goal theory, leaders can change their style or behaviour to meet the demand of situations. What
style a leader should select depends on a complex analysis of the situation.
Two situational factors identified by the path-goal theory are;
1. Subordinates’ Characteristics
2. Environmental Characteristics of Workplace

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Subordinates’ Characteristics

• Important personal characteristics include the subordinates’ perception of their abilities and locus of
control. If people think they lack ability, directive leadership is the preferable method to lead them.
For example, if followers are high inability, a directive style of leadership may be unnecessary;
instead, a supportive approach may be preferable.
• Participative leadership is preferable if a person has the focus of control. Managers may not be able
to change the personal characteristics or the personnel but can shape their approach to leading and
managing by understanding them.
Environmental Characteristics of Workplace

• These include factors such as task structure and team dynamics that are outside the control of the
employee. For example, for employees performing simple and routine tasks, a supportive style is
much effective than a directive one. Similarly, the participative style works much better for non-
routine tasks than routine ones.
• When team cohesiveness is low, a supportive leadership style must be used whereas in a situation
where performance-oriented team norms exist, a directive style or possibly an achievement-oriented
style works better. Leaders should apply directive style to counteract team norms that oppose the
team’s formal objectives.
Applying Path-Goal Theory
The leader will begin by choosing a leadership style that fits the situation. To do this, the leader has to
assess five aspects of the situation and people involved:
(a) Assess the task: Structured tasks and clear goals require less direction then less structured tasks
and less clear goals.
(b) Assess the leader's formal authority: managers with formal authority typically should not use a
directive style because it duplicates their authority, but they may use supportive achievement-
oriented or participative styles.
(c) Assess the nature of the work group: The leader should assess its cohesiveness as well as its
experience in working together. The more cohesive the group, the less need for supportive
leadership since this is redundant with the group's character.
(d) Assess the organisation's culture: A culture that supports participation also supports a participative
leadership style. A culture that encourages goal accomplishment or a results orientation reinforces
an achievement-oriented style.
(e) Assess the subordinate's skills and needs: Subordinates skilled in a task require less direction than
those less skilled. Subordinates with high achievement needs, require a style that helps meet these
needs. Subordinates with social needs, require a style that helps meet these needs
Evaluation of House’s Path-goal Theory
The path-goal model of leadership offers several strengths but has also faced criticisms:
Strengths:

• Comprehensive Perspective: Unlike Fiedler’s contingency model, the path-goal model considers
both the personality characteristics of subordinates and situational variables. This holistic approach
provides a more thorough understanding of leadership effectiveness and explains the reasons
behind the effectiveness of different leadership styles in specific situations.
• Explanatory Power: The model not only suggests which leadership styles may be effective in certain
circumstances but also offers insights into the mechanisms through which leaders influence
subordinates’ perceptions and motivations. It provides a framework for understanding how leaders
can enhance performance and goal attainment through their behaviours.
• Heuristic Framework: For researchers new to the field of leadership effectiveness, the path-goal
model serves as a valuable starting point. It provides a structured framework that guides
investigations into the interactions between leader behaviours, situational variables, and
subordinate characteristics.

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Criticisms:

• Complexity: The path-goal model is intricate, making empirical testing challenging due to its
methodological complexities. Researchers need to carefully design and implement studies to
address the multifaceted nature of the model, which can be demanding.
• Limited Empirical Support: Although the path-goal model has potential, it is still in the early stages of
development. There is a scarcity of research supporting its propositions, and some studies even
present findings that contradict its predictions. This indicates the need for further refinement and
more extensive investigation.
• Post hoc Reasoning: Critics argue that the path-goal model exhibits post hoc reasoning, as some of
the research evidence used to support it was also used in its construction. This raises concerns
about circular reasoning and potential biases in interpreting findings.
• Incompleteness: The path-goal theory provides only a tentative explanation of leadership styles and
has been criticized for neglecting the effects of personal traits that may constrain leader behaviour
selection. It also lacks a comprehensive explanation of how leader behaviours impact subordinate
satisfaction. Additionally, the model assumes that leaders can adapt their behaviours to suit various
situations without fully considering other factors such as subordinate expectations and behaviour.
3.3.4. Vroom-Yetton-Jago Decision Making Model of Leadership
The Vroom Yetton Jago Decision Model was originally developed by Victor Vroom and Phillip Yetton in
1973, and it was expanded 15 years later by supplementations from Arthur Jago.

• The Vroom Yetton Jago Decision Model is a model for decision-making that’s based on situational
leadership. The model can be used by everyone, irrespective of rank or position and helps to
choose the right management style in various decision situations.
• In some business situations, it’s better that the leader takes all the decisions, whereas in other
situations it’s better if the group has a say.
• The Vroom Yetton Jago Decision Model helps to choose the right style by having the user
answer a series of questions with either yes or no. This series of questions is presented in
the form of a decision matrix. After answering the questions, the user immediately sees what
method best suits the situation concerned.
• According to the model, three specific factors have direct influence on the method for
decision-making: quality, collaboration and time. The series of questions creates clarity regarding
the influence of these factors in the decision situation.
Determining the Right Decision Style
Victor Vroom, Phillip Yetton and Arthur Jago developed eight questions that must be answered with yes or
no to arrive at the right decision style. All the questions have a certain theme.

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Five Decision-making Styles

The Vroom Yetton Jago Decision Model distinguishes between three leadership styles (Autocratic,
Consultive and Collaborative) and five different decision processes:
(a) Autocratic I (A1) - In this decision process, the leader uses the available information to make a
decision independently. The opinion of team members or external parties is not consulted in this
case. Although the decision itself is not dependent upon the team members, and their opinion
doesn’t matter, it is important that the made decision is communicated openly and clearly towards
the team.
(b) Autocratic II (A2) - Here too, the leader independently makes the decision, but the difference with
autocratic style 1 is that the leader has a bit more time and gathers information from team members
or external parties. The team members don’t know why information is requested from them and
don’t think about the situation, alternative or eventual choice.
(c) Consultative I (C1) - The leader adopts a consulting role and actively takes the lead to have team
members individually give their opinion about the situation, the problem and the decision to be
made. Here, the team’s involvement is higher than in the autocratic decision-making style. However,
the decision is still made by the leader; he can choose to disregard the team’s opinion and input
when these haven’t changed his outlook on the situation.
(d) Consultative II (C2) - Where the leader requests the individual opinions from the team members in
the first consulting style, he brings the team together in a group meeting for a discussion in the
second. Ideas and suggestions are asked for in this meeting. Here, the leader shares the problem
and the situation with the group, but eventually, the leader is still the one to individually make the
decision.
(e) Collaborative - Group II (G2) - The group as a whole makes the decision. The leader presents the
situation and the problem to the group, identifies alternatives and makes a consensus decision. The
leader purely plays the role of facilitator and accepts the decision of the group without considering
his own opinion or vision.
The main advantage of the Vroom Yetton Jago Decision Model is that it can flexibly be used in many
situations. The capacity to organise the decision process is a quality of the model many a leader could use
to their advantage. Each situation demands a different approach, and practically every situation can be
considered with this model.

• On the other hand, the model also has several shortcomings. For instance, the personal factors and
characteristics of the leader aren’t considered, and the questions in the model might not be specific
enough to determine the ideal decision method.
3.3.5. Cognitive Resource Theory of Leadership
It was formulated by Fred E. Fiedler and Joe Garcia from the former's Contingency Model (1967) in 1987.
The cognitive resources of a leader are experience, intelligence, competence, and task-relevant
knowledge

• The Contingency Model developed by Fiedler was criticized for its lack of flexibility. Fiedler
then went on to develop the Cognitive Resource Theory (CRT) which takes into account the
personality of the leader, degree of situational stress, and group-leader relations.
The assumption behind this theory is that stress impacts the ability to make decisions. It is the enemy
of rationality and a leader cannot think in a logical and analytical manner if she/he is under a high
level of stress.
According to this proposition, the importance of a leader’s intelligence and experience to effectiveness
differs under low and high-stress situations.

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Fiedler and Gracia state that a leader’s intellectual ability correlates positively with performance
under low stress but negatively under high stress. And conversely, a leader’s experience correlates
negatively with performance under low stress but positively under high stress.

• The theory proposes the style of leadership required depending on three variables – the degree
of stress, situational control, and task structure.
The Cognitive Resource theory predicts that the leader's abilities and intelligence can aid organizational
success only when leaders adopt a directive leadership style, the situation is stress-free, the group
members are supportive and the task requires high intellect.
Directive Approach

• When a leader is better in cognitive abilities like intelligence, planning, and decision-making, he
must follow a directive approach to improve the overall performance of the team. He needs to
communicate to the group what to do, to ensure his plans and decisions are implemented, hence
improving the overall performance of the group.
• When the group and the people on the group are better than the leader in cognitive abilities, then
the leader should choose a non-directive approach. He should seek ideas from the group and
identify the best approach/idea and move ahead with the same.
• A leader's cognitive ability contributes to the performance of the team only when the leader uses the
directive leadership style.
Impact of Stress

• Stress has a direct co-relation with intelligence and decision quality.

• When there is a low stress, then intelligence is fully functional and makes an optimal contribution.
• When there is high stress, natural intelligence does not make any difference, but may also have a
negative effect.
Supportive Group Members: A leader's abilities will contribute to group performance only when group
members are supportive of the leader and his goals. In such a situation leader's directions can be easily
followed and implemented.
Cognitively Demanding Tasks

• The intellectual abilities and intelligence of the leader can only be utilized efficiently in difficult,
cognitively demanding tasks.
According to Theory, Leaders should be trained on stress management so that a leader's intellect can be
most effectively utilized and also to train leaders to take a directive approach when their knowledge will
benefit the group but a less directive approach when group member abilities will contribute to performance.

• Based on this theory, for a given situation, depending on the level of the stress, leaders can decide
on whether to rely on intelligence or on experience. For low-stress situations, one should rely on
intelligence; however, for high-stress situations, one should rely on experience.
• In high-stress situations, leaders who are more experienced will produce more quality results. In
high-stress situations, rational solutions are generally not available and hence intelligence will not
be able to support the decision-making process, whereas previous experience can allow the leader
to react.

3.4.0. Transformational Leadership Theory

Creating high-performance workforce has become increasingly important and to do so business leaders
must be able to inspire organizational members to go beyond their task requirements. As a result, new
concepts of leadership have emerged - transformational leadership being one of them.
Transformational leadership may be found at all levels of the organization: teams, departments, divisions,
and organization as a whole. Such leaders are visionary, inspiring, daring, risk-takers, and thoughtful
thinkers. They have a charismatic appeal. But charisma alone is insufficient for changing the way an
organization operates.

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For bringing major changes, transformational leaders must exhibit the following four factors:

• Inspirational Motivation: The foundation of transformational leadership is the promotion of

consistent vision, mission, and a set of values to the members.
o Their vision is so compelling that they know what they want from every interaction.
Transformational leaders guide followers by providing them with a sense of meaning and
challenge.
o They work enthusiastically and optimistically to foster the spirit of teamwork and
commitment.
• Intellectual Stimulation: Such leaders encourage their followers to be innovative and creative.
They encourage new ideas from their followers and never criticize them publicly for the mistakes
committed by them.
o The leaders focus on the “what” in problems and do not focus on the blaming part of it. They
have no hesitation in discarding an old practice set by them if it is found ineffective.
• Idealized Influence: They believe in the philosophy that a leader can influence followers only when
he practices what he preaches. The leaders act as role models that followers seek to emulate.
o Such leaders always win the trust and respect of their followers through their action. They
typically place their followers needs over their own, sacrifice their personal gains for them,
ad demonstrate high standards of ethical conduct. The use of power by such leaders is
aimed at influencing them to strive for the common goals of the organization.
• Individualized Consideration: Leaders act as mentors to their followers and reward them for
creativity and innovation. The followers are treated differently according to their talents and
knowledge. They are empowered to make decisions and are always provided with the needed
support to implement their decisions.
Mahatma Gandhi as an Example of Transformational Leadership
Mahatma Gandhi is a prime example of a transformational leader. He inspired millions of people in India to
fight for their independence through nonviolent resistance. He also inspired people all over the world to
stand up for their rights and to fight for justice and equality.
Gandhi's transformational leadership was characterized by the following:

• Charisma: Gandhi was a charismatic leader who was able to inspire and motivate his followers. He
had a strong vision for a better India, and he was able to articulate that vision in a way that
resonated with people.
• Intellectual stimulation: Gandhi was a deep thinker who was constantly challenging his followers to
think critically about the world around them. He encouraged them to question the status quo and to
come up with creative solutions to problems.
• Individual consideration: Gandhi cared about his followers as individuals. He took the time to get to
know them and to understand their needs and concerns. This helped him to build strong
relationships with his followers and to create a sense of community.
• Idealized influence: Gandhi was a role model for his followers. He lived a simple life and he always
put the needs of others before his own. He was also a strong advocate for nonviolence, and he
taught his followers to resolve conflicts peacefully.
Nelson Mandela as Example of Transformational Leadership
Nelson Mandela is another prime example of a transformational leader. He spent 27 years in prison for
fighting against apartheid in South Africa, but he never gave up on his dream of a free and democratic
country. After his release from prison, Mandela led the negotiations that ended apartheid and ushered in a
new era of democracy for South Africa.
Mandela's transformational leadership was characterized by the following:

• Charisma: Mandela was a charismatic leader who was able to inspire and motivate people from all
walks of life. He had a strong vision for a united and democratic South Africa, and he was able to
articulate that vision in a way that resonated with people.

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• Intellectual stimulation: Mandela was a deep thinker who was constantly challenging his followers to
think critically about the world around them. He encouraged them to question the status quo and to
come up with creative solutions to problems.
• Individual consideration: Mandela cared about his followers as individuals. He took the time to get to
know them and to understand their needs and concerns. This helped him to build strong
relationships with his followers and to create a sense of community.
• Idealized influence: Mandela was a role model for his followers. He lived a life of integrity and
compassion, and he always put the needs of others before his own. He was also a strong advocate
for forgiveness and reconciliation.
Mandela's transformational leadership was evident in the way that he was able to unite people from all
races and ethnicities in South Africa. He was able to bridge the deep divisions that had been created by
apartheid and to build a new nation based on the principles of democracy, equality, and justice.
Effects of Transformational Leadership
In their classic text, Transformational Leadership, authors Bass and Riggio explained that these leaders
inspire people to achieve extraordinary results. Group members are not just encouraged to participate; they
are also inspired to become leaders themselves.
Transformational leaders can accomplish this by being responsive and empowering. The individual's goals
become better aligned with the purposes of the entire group so that each group member's success furthers
the organization's goals.
Researchers have found that this style of leadership can have a positive effect on the group. Some of these
effects include:

• Better performance: Those led by transformational individuals have better performance and are
more satisfied than those in groups with different types of leaders.
• Better well-being: Employees who identified a higher level of transformational leadership in their
employers also reported higher levels of well-being. The effect stayed significant even after
researchers controlled for factors linked to well-being, such as job strain, education, and age.
• Sense of empowerment: This is attributed to the fact that transformational leaders believe that their
followers can do their best, leading group members to feel inspired and empowered.
Potential Pitfalls of Transformational Leadership

• While transformational leadership is often viewed as one of the best approaches to leadership, that
doesn't mean that it is necessarily right for every situation. For example, when group members need
more guidance and direction, it can be more effective to utilize a more transactional approach.
• The transactional style can help improve group cohesion and commitment, but it can also contribute
to burnout when group members feel constantly pressured to give up all of their time and effort to
support the goals of the group.
• In situations where a lot of creativity and innovation are important to success, a transformational
style is often a beneficial approach. But if the focus is on achieving a prescribed set of short-term
goals, taking a more transactional approach might lead to less chaos and better results.

3.5.0. Transactional Leadership Theory

The transactional style of leadership was first described by Max Weber in 1947 and then by Bernard Bass
in 1981. The term “transactional” refers to the fact that this type of leader essentially motivates
subordinates by exchanging rewards for performance. This style is most often used by the managers. It
focuses on the basic management process of controlling, organizing, and short-term planning.
Transactional leadership involves motivating and directing followers primarily through appealing to their
own self-interest. The power of transactional leaders comes from their formal authority and responsibility in
the organization. The main goal of the follower is to obey the instructions of the leader. The style can also
be mentioned as a ‘telling style’.
The leader believes in motivating through a system of rewards and punishment.

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• If a subordinate does what is desired, a reward will follow, and if he does not go as per the wishes
of the leader, a punishment will follow. Here, the exchange between leader and follower takes place
to achieve routine performance goals.
These exchanges involve four dimensions:
1. Contingent Rewards: Transactional leaders link the goal to rewards, clarify expectations, provide
necessary resources, set mutually agreed upon goals, and provide various kinds of rewards for
successful performance. They set SMART (specific, measurable, attainable, realistic, and timely)
goals for their subordinates.
2. Active Management by Exception: Transactional leaders actively monitor the work of their
subordinates, watch for deviations from rules and standards and taking corrective action to prevent
mistakes.
3. Passive Management by Exception: Transactional leaders intervene only when standards are not
met or when the performance is not as per the expectations. They may even use punishment as a
response to unacceptable performance.
4. Laissez-faire: The leader provides an environment where the subordinates get many opportunities
to make decisions. The leader himself abdicates responsibilities and avoids making decisions and
therefore the group often lacks direction.
Assumptions of Transactional Theory

• Employees are motivated by reward and punishment.

• The subordinates have to obey the orders of the superior.
• The subordinates are not self-motivated. They have to be closely monitored and controlled to get
the work done from them.
Implications of Transactional Theory

• The transactional leaders overemphasize detailed and short-term goals, and standard rules and
procedures. They do not make an effort to enhance followers’ creativity and generation of new
ideas. This kind of a leadership style may work well where the organizational problems are simple
and clearly defined. Such leaders tend to not reward or ignore ideas that do not fit with existing
plans and goals.
• The transactional leaders are found to be quite effective in guiding efficiency decisions which are
aimed at cutting costs and improving productivity. The transactional leaders tend to be highly
directive and action oriented and their relationship with the followers tends to be transitory and not
based on emotional bonds.
The theory assumes that subordinates can be motivated by simple rewards. The only ‘transaction’
between the leader and the followers is the money which the followers receive for their compliance
and effort.
When Is Transactional Leadership the Most Effective?

• Followers are not encouraged to be creative or to find new solutions to problems. Research has
found that transactional leadership tends to be most effective in situations where problems are
simple and clearly defined.
• It can also work well in crisis situations where the focus needs to be on accomplishing certain tasks.
By assigning clearly defined duties to particular individuals, leaders can ensure that those things get
done.
• Transactional leaders focus on the maintenance of the structure of the group. They are tasked with
letting group members know exactly what is expected, articulating the rewards of performing tasks
well, explaining the consequences of failure, and offering feedback designed to keep workers on
task.
• This model is also useful for big corporations, such as Hewlett-Packard, a company known for its
extensive use of management by exception.
• Many high-level military members, CEOs of large international companies, and NFL coaches are
known to be transactional leaders.

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• Transactional leadership also works well with policing agencies and first responder organizations.
• While transactional leadership can be useful in some situations, it is considered insufficient in many
cases and may prevent both leaders and followers from achieving their full potential.
Example of Transactional Leadership:
Bill Gates as Example of Transactional Leadership

• Bill Gates can be considered an example of a transactional leader. Transactional leaders focus on
exchanging rewards and punishments with their followers in order to motivate them to achieve
goals. Gates was known for being a demanding and results-oriented leader. He set high
expectations for his employees and rewarded them for meeting those expectations. He also
punished employees who failed to meet his expectations.
• In the early days of Microsoft, Gates was working on a new product called MS-DOS. He gave his
employees a clear goal: to have the product finished within six months. He also warned them that if
they failed to meet that goal, they would be fired.
• Gates' employees worked long hours and met the deadline. Gates was pleased with their
performance and rewarded them with bonuses and promotions.
• This incident illustrates how Gates used transactional leadership to motivate his employees to
achieve goals. He set clear expectations, provided close supervision, and rewarded and punished
his employees based on their performance.
• It is important to note that Gates' leadership style evolved over time. As Microsoft became more
successful, he began to focus more on developing his employees and creating a positive work
environment. However, he remained a demanding and results-oriented leader throughout his
career.
Example of Transactional Leader in TCS and Infosys

• TCS has a program called the "TCS Performance Excellence Program" (TPEP). This program
rewards employees for meeting their performance targets. Under the TPEP, employees are eligible
for bonuses, promotions, and other rewards based on their performance rating.
• For example, employees who receive a "top performer" rating are eligible for a bonus of up to 20%
of their annual salary. They are also eligible for promotion to the next level of their career.
• Another example of transactional leadership in an Indian MNC is the way that Infosys uses a "360-
degree feedback" system to evaluate its employees. This system collects feedback from employees'
managers, peers, and customers. The feedback is used to assess employees' performance and to
identify areas where they need to improve. Employees who receive positive feedback are eligible for
bonuses, promotions, and other rewards.
• Both of these examples illustrate how Indian MNCs use transactional leadership to motivate their
employees to achieve their goals. By setting clear expectations, providing close supervision, and
rewarding and punishing employees based on their performance, these companies are able to
achieve high levels of productivity and efficiency.
3.6.0. Charismatic Leadership Theory
Charismatic leadership is a trait-based leadership theory where the leaders act as visionary driven by their
convictions and motivate their followers to work towards common vision using their charm and
persuasiveness. These charismatic leaders act as role models and exhibit extraordinary characteristics that
inspire devotion and motivation in followers to persuade change. Leaders are able to cultivate a profound
sense of trust with the group of followers.

• It was first formalized as a leadership theory by Robert House in 1976, following the work of Weber.
German sociologist and founder of Bureaucratic Theory, Max Weber introduced the term in his
essay The Three Types of Legitimate Rule in 1958. Max Weber saw charisma as a characteristic of
the individual, which seems to be possessed by supernatural and exceptional forces.
Given below are the characteristics of Charismatic Leadership, what distinguishes charismatic
leaders from others:

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• Charismatic leaders have a special charm and glow

• They have a natural charisma that draws people to them
• A charismatic leader is good at recognizing the emotions and moods of others
• They have dynamic personalities that are active, persuasive, enthusiastic, and project confidence.
• They are clear communicators and articulators who can make ideas approachable in both individual
and group settings.
• They effortlessly work with people and make everyone feel important and valued
• They have strong motivation to attain self-actualization
• They are good at motivating others and use the right word or action to uplift the team’s spirit
• They use these gifts to maintain power and control over the group
Examples of Charismatic Leaders - Mahatma Gandhi, Martin Luther Kind Jr., Nelson Mandel, Napoleon
Bonaparte, Winston Churchill

4.0. Some Other Leadership Theory

4.1. Five Forms of Power (French & Raven)
Social psychologists John R. P. French and Bertram H. Raven conducted a remarkable study about power
in 1959.

• They stated that power is divided into five separate and different forms. As we know, power and
leadership are closely linked. The concept shows how the different forms of power affect a person’s
leadership and success.
• This concept is often used in an organization-wide communication. The French-Raven’s five forms
of power are introduced with observance of the level of observability, and the extent to which the
power is dependent on structural conditions. Dependency refers to the degree of internalization that
occurs among individuals subject to social control. On the basis of these considerations, it is
possible to link personal processes to structural conditions.
What are the Five Forms of Power?
John French and Bertram Raven introduced the following forms of power:
1. Coercive Power
2. Reward Power
3. Legitimate Power
4. Referent Power
5. Expert Power
1. Coercive Power
This form of power is based upon the idea of coercion. This means that someone is forced to do something
against their will. The main objective of coercion is compliance. This form of power illustrates what happens
when compliance is not obtained.
According to French and Raven there are also other forms of power that can be used in a coercive manner
such as withholding rewards or expertise or using referent power to threaten social exclusion. The force of
power is also associated positively with punitive behaviour and negatively associated with conditional
reward behaviour.
This form of power often leads to problems. In many cases this form of power is abused. Coercive power
can lead to unhealthy behaviour and dissatisfaction at work. Leaders who use this leadership style rely on
threats in their management styles. Often these threats relate to dismissal or demotion.
2. Reward Power
This type of power involves the ability of individuals to delegate matters they do not wish to do to other
people and to reward them for this. For managers in an organization, it is a perceived possibility to value or
reward their subordinates’ good results in a positive manner.

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This form of power is based on the idea that as a society we are more inclined to do things well when we
are getting something in return for this. The most popular forms are raises, promotions or compliments.
The problem with this form of power is that when the reward does not have enough perceived value to
others, the power is weakened. One of the frustrations when using rewards is that they often need to be
bigger than the last time if they are to have the same effect. Even then, when they are given regularly,
employees can become satiated by the rewards and as a result, they will lose their effectiveness.
3. Legitimate Power
This form of power gives the ability to link certain feelings of obligation or notion of responsibility to the
management. Rewarding and punishing employees can be seen as a legitimate part of the formal or
appointed leadership role.
Most managers in organizations execute a certain degree of reward and punishment. Legitimate power is
usually based on a role. People always run with the pack and traditionally obey the one person with power
which is solely based on their position or title.
This form of power can easily be overcome as soon as someone loses their position or title. This power is a
weak form to persuade and convince other people.
4. Referent Power
This form of power is about management based on the ability to administer to someone a sense of
personal acceptance or approval. The leader in this form of power is often seen as a role model. Their
power is often treated with admiration or charm.
This power emanates from a person that is highly liked and people identify strongly with them in some way.
A leader who has referent power often has a good appreciation of their environment and therefore tends to
have a lot of influence. Responsibility in this form of power is heavy and one can easily lose oneself in this.
In combination with other forms of power, it can be very useful. Celebrities often have this form of power in
society, but also lose a lot of power because of certain circumstances.
5. Expert Power
This form of power is based on in-depth information, knowledge or expertise. These leaders are often
highly intelligent and they trust in their power to fulfil several organizational roles and responsibilities. This
ability enables them to combine the power of reward in the right mode.
The fact is that if someone has a particular expertise within an organization, they can often persuade
employees, who trust and respect them, to do things for them. This expertise is greatly appreciated and
forms the basis of this type of leadership.

4.2. Relational Leadership Theory (RLT)

In 2015, Megan Reitz, a professor specialising in leadership, wrote the book ‘Dialogue in
Organizations’, in which she describes the Relational Leadership Theory (RLT) that further explains the
social processes of leadership within organisations.
She investigates how relationships at work affect people and how this helps and hinders people in their
ambitions in becoming the people they want to be. It is a philosophical concept in which she focuses
on Martin Buber’s I-Thou theory.
This theory will be briefly explained later in this article. Reitz wonders how different contact with people is
established within the workplace, and how an empathic connection is created between manager and
employee.
She is always looking for dialogue between people and indicates that people-to-people contact is
unavoidable. In her book, Reitz writes that she is convinced that mutual relationships between employees
and managers can ultimately lead to an increase in the performance of each individual.

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In her book, Reitz focuses on the following question: ‘To what extent does Martin Bubers’ I-Thou
dialogue correspond in theory and practice with that of relational leadership?’
By applying new research methods like cooperative research in which Reitz—in collaboration with others—
came to conclusions, has drawn up a concept that describes the ‘space in between’ where leadership
comes about. In her research, she has made use of non-hierarchical but similar groups (peer-setting).
She indicates that Relational Leadership Theory focuses on leadership processes and relational leadership
practices.
Nevertheless, it is also about the quality of management, which affects the relationship with employees.
Conversely, the relationship between employee and manager also influences the quality of leadership.
I and Thou

• It was the German theologian Martin Buber who, in his book ‘Ich und Du’, described a new way of
looking at communication between individuals. ‘Ich und Du’ eventually became internationally
known as ‘I and Thou’, where ‘Thou’ is the old-fashioned word for ‘You’.
• Buber indicated that within his concept, communication is not based on individuals alone, but on
relational attitudes between two beings.
• He talks about two ways of communicating which he categorises into two primary pairs of words: ‘I-
Thou’ and ‘I-It’. He believes that these two basic pairs of words are essential for understanding how
one person reacts or communicates with the other.
• There is constant switching between people and one is able to reposition oneself in relation to
others. People do not exist in a vacuum; people take on a form based on their relationship with
elements outside himself and/or other persons. The other one is seen as the complete ‘Thou’ or the
more objective ‘It’.
• In Buber’s theory, ‘Thou’ refers to the presence of uniqueness and wholeness in a person, as a
result of real listening and responding. The I-Thou relationship is two-sided when both individuals
enter into a conversation and are open with their unique selves.
• This relationship is reciprocal, but also short-lived and always takes place in the present. I-Thou
relationships arise both consciously and unconsciously.
• They are conscious at moments of real dialogue and unconscious when people pass each other on
the street and there is almost imperceptible eye contact. An I-Thou relationship makes someone
completely human. In such relationships, there is a close bond that stems from a natural
association.
• ‘I-It’ considers others as objects, with which one interacts to gain knowledge or experience. The
relationship is one-sided and there is control, with the focus on the conceptualisation, manipulation,
and inflection of things.
• Where an I-Thou relationship takes place in the present, I-It focuses on a world of experiences that
lies in the past where one can imagine a situation and feel something.
• The I-It relationship addresses the needs of the other and includes a world of first-hand knowledge.
Relational Leadership Theory: two perspectives
Relational Leadership is a relatively new term in leadership literature and can be interpreted in different
ways. One can look at the entity perspective on the one hand and at the relational perspective of the
Relational Leadership Theory on the other:
1. The entity perspective focuses on identifying the attributes that managers need for entering into
interpersonal relationships with their employees.
2. The relational perspective sees leadership as a process of social construction, through which
certain conceptions of leadership are established among both the manager and the employees.
Although the two approaches differ, they can also complement each other. By examining both
perspectives, one can create an overarching framework for the Relational Leadership Theory.
Leadership is a process of social influence, which is achieved through, among other things, social and
hierarchical order and changing values, norms, attitudes, and behaviours.

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It is interesting to investigate how leadership relationships are established within RLT, which context plays
a role in this, and which relational dynamics one has to deal with. Both the present (I-Thou) and the past (I-
It) play an important role in this.
According to Reitz, this is how the Relational Leadership Theory explores the relational dynamics of
leadership.
Dialogue

• Dialogue leads to better leadership in politics, society, and business, where there is room to discuss
differences and contradictions well and clearly with each other. In organisations, executives often
have deep-rooted assumptions.
• Through the dialogues being conducted, it is possible to discuss cultural norms that have become
entrenched and to gain a better understanding of each other.
• According to Reitz, this is what Relational Leadership Theory is all about: stimulating effective
dialogue in organisations in order to bring people together. This benefits management quality and
gives everyone the opportunity to be actively involved in processes.
• Mutual relationships form the communication, so that coordination takes place in a positive or
negative sense. The stronger the ties between employees and their managers, the better the results
and performance they will deliver.
• These include results in the form of quality, efficiency, customer involvement, resilience, loyalty, and
openness to innovation. According to Reitz, dialogue leads to productive discussions between one
another.
Conclusion Relational Leadership Theory

• Interpersonal communication is sometimes very complex. In order to stimulate interpersonal

encounters, Reitz encourages people to have a real dialogue with one another. This benefits
relational leadership. It is also important to consider the reason why people meet in the workplace
and need each other.
• On the one hand, this has to do with an organisational aspect; the task of a manager is to train,
motivate, and control an employee. In addition, an employee will have the task of following up on
the instructions of a manager. On the other hand, people also visit each other because of the
interpersonal contact.
• That explains why colleagues want to work together, have lunch together, and so on, while other
colleagues avoid each other on every level. Nevertheless, Reitz considers it important that
organisations try to find out how people meet each other.
• People will always be looking for justification behind what they’re doing. Without room for dialogue,
employees will work much more individually and will be less inclined to want to work together.

4.3. Leader Member Exchange Theory (LMX)

The Leader Member Exchange Theory (LMX), also called the Vertical Dyad Linkage Theory, describes
how leaders maintain their position in groups and how relationships develop with other members of a team
that can contribute to growth or hinder development.
The model assumes that leadership consists of several dyadic (two-way) relationships that connect the
leader to the members. The quality of the relationship is measured by means of the level of trust, respect,
support, loyalty, job satisfaction and job performance.
According to the Leader Member Exchange Theory, team members with a good relationship with the
manager have a higher moral and are more productive than those who don’t. This means that the manager
and the group member can both profit from a healthy relationship.
Furthermore, the Leader Member Exchange Theory (LMX) suggests that leaders automatically develop a
relationship with each of their subordinates, and that the quality of this relationship strongly influences the
responsibility, decision making, access to resources and performance of subordinates.
This gives rise to two sides of employees, the in-group and the out-group (exchange relationships).
The in-group members are given more space to fulfil the work they do, more responsibility, more attention

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and greater rewards. They work within the personal circle of the leader. On the other hand, there are the
out-group members.
They receive less attention, responsibility and fewer rewards. Exchanging leadership can cause friction and
displeasure among the out-group, but it could also create opportunities to give capable employees room for
development.
The Leader Member Exchange Theory (LMX) is rooted in the belief that leaders and followers have a
relationship that could yield advantages. Various psychologists have attempted to understand
leadership and its effects on followers, but it was George B. Graen and his colleagues in particular who
described the leadership member exchange and made this into an effective leadership theory.
The Leader Member Exchange Theory Process
The initiation and shaping of these relationships begin immediately after a new member has been
introduced in the group under the leader and includes three steps.
1. Role Taking
The new member has been added to the group and the leader assesses his or her skills and talents. This
happens quickly and the leader forms an image of the new member through all expressions this new
member displays and utters.

• Based on this image, formed after a few signals, the leader can offer the new member opportunities
to demonstrate his or her capacities in the form of appointed tasks.
• In this phase of the Leader Member Exchange Theory, both the leader and the new member
develop a sense of what the etiquette is like within the group. Particularly the level of respect
towards and from the leader is quickly noticed and is important.
2. Role Making
The new member is carrying out his first appointed tasks and an informal and unstructured negotiation
about work-related factors or relation factors often automatically takes place between the leader and the
new member. Building trust is the most important phase, and the level of respect that’s established in the
first phase is crucial.
Cultural and ethnic differences can cause lots of problems if not handled properly. In this phase, the leader
expects that new members will work hard and are loyal and dependable during the training period.
In general, people assume that when a new member is liked by the leader, he has a good chance of being
successful. If the new member is not much liked by the leader, this decreases his chances of being
successful. Consequently, the leader-sometimes subconsciously-creates two sides: the ingroup or
outgroup.
A. Ingroup: The ingroup is trusted, is given more risky tasks and therefore more responsibility,
receives more career opportunities and opportunities for personal development, and constantly
receives support and guidance. Often, they have sufficient resources at their disposal to carry out
their vision.
B. Outgroup: On the other hand, an outgroup is formed. They are given tasks that aren’t challenging
because the leader doesn’t have sufficient trust in them. As a result, they won’t be exposed to
opportunities and chances to develop their skills, competences and capacities.
3. Routinisation
Developing routine is the last phase. In this phase, routines, expectations and standards are established
and both parties gain better insight into how other parties work. The constant social exchange between the
leader and the new member give rise to a pattern.
The members of the ingroup work hard and value the leader’s opinion. They wish to maintain their position
and reputation by displaying respect, perseverance, patience and empathy. In this phase, the outgroup
members are certain they don’t like their leader and that the leader is starting to annoy them.

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4.4. Servant leadership

In his 1970 essay The Servant as Leader, it was Robert Greenleaf who first coined the term and
definition “servant leadership”. In Servant Leadership, the team is most important, followed by the
manager himself. The servant leader focuses on the needs of his team and put his own needs second. This
is an empathic way to approach one’s staff.
From their perspective, the servant leader provides his employees with support, which they not only need
to properly conduct their tasks, but also to achieve personal goals. This leads to higher levels of
commitment from employees in making decisions, creating stronger relationships and improving mutual
trust.
Servant Leadership Approach: 10 characteristics
Filling the role of servant leader by the manager is possible by means of ten characteristics. Only when the
manager prioritises his employees’ instead of himself, he will be able to work on different skills. Below is a
list of the ten characteristics.
1. Listening
With proper listening a manager can better come to an understanding of others. It will be easer for him to
understand what an employee says.
By giving them complete attention, considering their non-verbal communication and not obstructing them, a
manager can properly understand his employees and respond appropriately.
2. Empathy
The ability to empathize with someone else’s situation is the basis for empathy. This allows a manager to
understand the intention of his employees. Every situation is different. It is therefore a positive to put aside
one’s personal vision and be open to the opinions and views of others.
3. Health
This characteristic is related to the emotional health of employees. By supporting them both mentally and
physically, employees will remain healthy. A manager can achieve this by firstly ensuring that employees
have sufficient knowledge, support and resources in order to carry out their work effectively and efficiently.
In addition, a healthy workplace and varied tasks are important. In discussions with employees, the
manager can figure out what the needs are in this specific area.
4. Self-awareness
A manager must have the ability to critically assess himself and realise how his behaviour affects his
employees. What are his values and how does he express them? By being aware of these aspects, a
manager is able to learn about his strengths and weaknesses. By properly understanding and controlling
his own emotions, a manager can positively influence the behaviour of both himself and others.
5. Conviction
Rather than strict authority, persuasion is a much more effective way to stimulate employees. By properly
communicating, they can ensure that t heir team understands why certain decisions were made. This leads
to openness and increased support from employees.
6. Vision and Focus via servant leadership
Every manager, regardless of his level, has the task of translating the mission and strategy of the company
into department objectives. By openly discussing these matters with employees and involving them in the
division of roles that reflect the department objectives, they will become more motivated and collaborate
more closely. All employee must understand the bigger picture and why certain decisions were made.
7. Foresight
Nobody knows what the future holds, but as a manager it is always a good thing to be prepared. To be
accurately prepared, it is wise to examine internal strengths and weaknesses and external challenges and

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threats (SWOT Analysis). A manager may rely on his intuition, but it is advisable to also discuss matters
with the team and listen to their opinion on the company’s overall vision.
8. Figurehead
Every manager is responsible for the work of his team. By setting the right example and to demonstrate the
values of the organisation, employees will come to understand what is expected of them. A manager must
build trust, so that employees will see him as the figurehead of the organisation and be willing to adapt their
behaviour.
9. Growth of employees
A manager must be committed to his employees and stimulate their personal and professional
development. By carefully figuring out each employee’s training and development needs, a manager can
act accordingly. With improved skills, employees will be able to perform their work more effectively and take
on more responsibility.
10. Team spirit through servant leadership
Only a well-functioning team can make a positive contribution to the organisation. It is the task of the
manager to come up with approaches that make the team come into contact with each other in different
ways.
For example, these may include social events such as team lunches or pleasant work environments in
which staff can approach each other informally. By encouraging employees, managers can also make a
contribution in further improving team spirit.
Disadvantages of Servant Leadership

• Servant Leadership is a concept that particularly pays off in the long term and positively affects the
organisation. Managers who respect their employees generally receive better performances in
return.
• However, one must keep in mind that the team must be fairly independent as is and that employees
should be self-reliant. Servant Leadership doesn’t work with teams that consist of (extremely)
inexperienced employees. This because they are not yet able to take their own responsibility.
• Servant Leadership is also less effective in organisations that are dependent on rules and
requirements, such as a bureaucracy. In such organisations, one may not deviate from the standard
procedures too much and decisions are all made by senior management or the board.
Consequently, this makes it impossible for employees to have a voice.
Qualities of an Effective Leader
A leader cannot be effective unless he possesses certain qualities of head and heart. Irrespective of the
nature of the manager-leader's own responsibilities of the job and the style adopted by him, a number of
qualities are generally found to be possessed by the effective leader. The more important of these qualities
are listed below:
Mental and physical health: To be able to bear the pulls and pressures of leadership, it is essential for the
leader to have sound health both mental and physical. Along with a balanced temperament and optimistic
outlook, he must possess stamina and sound health.
Empathy: A leader must have the capacity to appreciate others and look at things from his subordinates'
angle. This attitude of the leader motivates his subordinates.
Self-confidence: Confidence about one's leadership ability makes it possible for a leader to analyse and
face different situations and adopt a suitable style. Lack of self-confidence often prevents managers to
adopt participative style and repose trust in his subordinates.
Awareness of others' opinion about himself: A leader having self-confidence should not ignore how
others perceive him as a leader. He must be aware of his strength and weakness in relation to his
subordinates.

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Objectivity: A leader who is effective does not get carried away by emotions. He is fair and objective in his
dealings with subordinates.
Knowledge and Intelligence: A leader to be effective must have knowledge of group behaviour, human
nature, and activities involving technical and professional competence. He must have intelligent perception
of human psychology and ability to think clearly and argue cogently on points of dispute,
Decisiveness: Decision-making is a necessary but difficult task for every leader. A leader often has to take
initiative and exercise mature judgement while taking decisions. Besides, he has to have foresight,
imagination and creative ideas for effective decision making. Open mindne.sr is yet another essential
quality for that purpose.
Ability to communicate: The skill of effective communication of goals and procedure of work is extremely
important in leadership. To achieve desired results and coordination of efforts in a group, oral
communication is of great significance.
Sense of purpose and responsibility: A leader must have clarity of purpose and responsibility to be able
to inspire his subordinates to achieve specific goal.
Effective and Ineffective Styles
Effectiveness depends on the situational demands of a specific environment. When the style, of a leader is
appropriate to a given situation, it is termed effective. On the other hand, when the style is inappropriate to
a given situation, it is termed ineffective.

• The basic styles of leadership are further divided into eight styles according to their degrees of
effectiveness i.e., as more effective and less effective styles.
The following are regarded as more effective styles.
Executive: Used by a manager this style attaches maximum importance to work as well as the people.
Such a manager is able to motivate people and utilise the team effectively. He sets high standards 'of
performance and can accomplish the goals successfully.
Developer: The manager adopting this style attaches greatest importance to the people at work and has
minimum concern for work. He devotes maximum attention to the development of individual subordinates
and believes in their capability.
Benevolent autocrat: The manager whose attitude and style are those of a benevolent autocrat has high
concern for work and low concern for people. But he is able to achieve the goals without causing any
resentment among the subordinates.
Bureaucrat: With a bureaucratic style the manager is able to control the work-situation and achieve goals
by means of rules and procedure. He has minimum concern for people and work as such.
The less effective (or ineffective) styles are stated to be those which are not appropriate to the
situation. These are as follows:
Compromiser: A manager who is equally concerned with people and work in a situation which requires
emphasis on one of these, is a poor decision maker due to pressures on both counts. Thus, he is
ineffective manager leader.
Missionary: The missionary manager is one who aims at harmonious relations along people as an ideal
and is little concerned with work, although the situation requires greater on work. He is unable to get
results.
Autocrat: An autocratic manager is interested only in work and results thereof, whereas the situation
requires relation-orientation. Such a manager lacks confidence in his subordinates and depends on high-
handed management. So, his leadership fails in the long-run.
Deserter: The manager who is concerned with neither people nor work reflects a passive attitude towards
his job. He is an escapist.

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Descriptive Writing Practice Questions

Q. What do you understand by leadership? How does it differ from managership?
Q. Define 'leadership style'. What are the main differences between autocratic, democratic and free rein
leadership styles?
Q. Explain in detail the concept of 'managerial grid' and its purpose
Q. Difference between Transformational and Transactional Leadership
Q. Discuss the Skills required for a manager to be effective Leader.
Q. Who is a Successful Leader? List Five key attributes of a successful leadership
Q.1. Identify the four main styles of leadership displayed by the manager which identified in Tannenbaum and
Schmidt’s continuum of possible leadership behaviour:

A. Tells, help, joins and leads

B. Commands, sells, consults and resists
C. Tells, sells, consults and joins
D. Commands, help, joins and leads

Q.2. Contingency theories of leadership based upon:

A. That there is no single style of leadership appropriate to all situations

B. That there is a single style of leadership appropriate to all managers
C. That there is a single style of leadership appropriate to all situations
D. None of the above

Q.3. Leaders with a low LPC score gain satisfaction from _______________ according to Fiedler’s LPC scale:

A. Developing team relationships

B. Achieving objectives
C. Both of these
D. None of the above

Q.4. Trait theories most accurately predict ________.

A. distinguishing features of an effective leader

B. differences between an effective and an ineffective leader
C. the success of a leader
D. the emergence of a leader

Q.5. Which of the following theoretical approaches in the study of leadership focuses on followers' readiness as a
determinant of effective leadership?

A. Big Five personality model

B. Situational leadership theory
C. Fiedler contingency model
D. Laissez-faire leadership

Answers:

Q.1. C

Q.2. A

Q.3. B

Q.4. D

Q.5. B

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Descriptive Writing Practice Questions

Q. What do you understand by leadership? How does it differ from managership?
Q. Define 'leadership style'. What are the main differences between autocratic, democratic and free rein
leadership styles?
Q. Explain in detail the concept of 'managerial grid' and its purpose
Q. Difference between Transformational and Transactional Leadership
Q. Discuss the Skills required for a manager to be effective Leader.
Q. Who is a Successful Leader? List Five key attributes of a successful leadership
Q.1. Identify the four main styles of leadership displayed by the manager which identified in Tannenbaum and
Schmidt’s continuum of possible leadership behaviour:

A. Tells, help, joins and leads

B. Commands, sells, consults and resists
C. Tells, sells, consults and joins
D. Commands, help, joins and leads

Q.2. Contingency theories of leadership based upon:

A. That there is no single style of leadership appropriate to all situations

B. That there is a single style of leadership appropriate to all managers
C. That there is a single style of leadership appropriate to all situations
D. None of the above

Q.3. Leaders with a low LPC score gain satisfaction from _______________ according to Fiedler’s LPC scale:

A. Developing team relationships

B. Achieving objectives
C. Both of these
D. None of the above

Q.4. Trait theories most accurately predict ________.

A. distinguishing features of an effective leader

B. differences between an effective and an ineffective leader
C. the success of a leader
D. the emergence of a leader

Q.5. Which of the following theoretical approaches in the study of leadership focuses on followers' readiness as a
determinant of effective leadership?

A. Big Five personality model

B. Situational leadership theory
C. Fiedler contingency model
D. Laissez-faire leadership

Answers:

Q.1. C

Q.2. A

Q.3. B

Q.4. D

Q.5. B

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Chapter – IV. Communication

Syllabus – Communication: Steps in the Communication Process

• Communication Channels
• Oral vs Written Communication
• Verbal vs non-verbal Communication
• Upward, downward and lateral communication
• Barriers to Communication
• Role of Information Technology in Communication
1.0. What Is Communication?
Communication is the transfer and understanding of meaning. Note the emphasis on the transfer of
meaning: If information or ideas have not been conveyed, communication hasn’t taken place. The speaker
who isn’t heard or the writer whose materials aren’t read hasn’t communicated. More importantly, however,
communication involves the understanding of meaning. For communication to be successful, the meaning
must be imparted and understood. A letter written in Spanish addressed to a person who doesn’t read
Spanish can’t be considered communication until it’s translated into a language the person does read and
understand. Perfect communication, if such a thing existed, would be when a transmitted thought or idea
was received and understood by the receiver exactly as it was envisioned by the sender. Another point to
keep in mind is that good communication is often erroneously defined by the communicator as agreement
with the message instead of clear understanding of the message. If someone disagrees with us, we
assume that the person just didn’t fully understand our position. In other words, many of us define good
communication as having someone accept our views. But I can clearly understand what you mean and just
not agree with what you say.
1.1. Significance of Communication
Communication is an indispensable activity in all organisations. No organisation can think of its existence
without effective communication. That is why Chester Bernard once remarked, “the first executive function
is to develop and maintain a system of communication”. An organisation’s very survival depends on its
employees’ ability to communicate with one another and with the members of its environment. The free flow
of ideas and information is an essential ingredient in the drive for quality and continuous improvement. The
organisation relies on communications to learn what its customers want, to foster cooperation among its
employees, and to identify and adapt to changes in the environment. An effective communication system is
essential to pass messages, ideas and information for explaining objectives and plans, controlling
performance and taking corrective action.
The importance of communication in management can be judged from the following:
1. Gaining acceptance of policies, winning cooperation of others, getting instructions and ideas clearly
understood and bringing about the desired changes in performance are dependent upon effective
communication.
2. Communication helps the management in arriving at vital decisions. In its absence, it may not be
possible for the top-level management to come in closer contact with each other and discuss the
important problems pertaining to the organisation.
3. Constant communication with personnel helps the management to remain informed about their
problems, difficulties and grievances. Appropriate steps can be taken in time to remove the worker’s
difficulties. Conflicts often arise because of communication gaps. They can be averted by setting up
a regular arrangement of keeping contact with the workers through communication media.
4. Communication is quite essential for coordination, which is the essence of effective management. It
brings about mutual understanding between the personnel at all levels and fosters the spirit of
cooperation. In the words of Mary Crushing Niles, “Good communications are essential to
coordination. They are necessary upward, downward and sideways, through all the levels of
authority and advise for the transmission, interpretation and adoption of policies, for the sharing of
knowledge and information, and for the more subtle needs of good morale and mutual
understanding”.

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5. Greater, better and cheaper production are the aims of all managers. In today’s organisations, the
information passes through a variety of filters and there is always a chance for misinterpretation. An
effective system of communication can play a vital role in avoiding this illusion. The employees
should be told clearly what exactly to do and the way in which an instruction is to be carried out. In
this process, certain directions are to be given, certain feelings must be expressed and a certain
number of interpersonal perceptions must be exchanged. In the words of Shobhana Khandwala,
“For this, management has to sell ideas, motivate the workers to work with a will, and build up
higher morale in the company. Communication, as an influence process, plays a vital role here. It
becomes, thus, a part of education, propaganda, leadership and guidance function of the
management”.
6. Under an effective system of communication, it is quite convenient for the employees to express
their grievances, and bring all their problems to the notice of the management. Proper
communications between the interested parties reduce the point of friction and minimize those that
inevitably arise. Hence by effective communication, a group having ‘skill’ and ‘will’ to do can be built
up. Communication helps in securing the largest possible participation or consultation in decision
making, planning and general administration. This will give a democratic character to the
managerial process and strengthen the morale of the staff.
2.0. What is Communication Process? Steps of Communication Process
Communication process consists of some interrelated steps or parts through which messages are sent
from sender to receiver.

• The process of communication begins when the sender wants to transmit a fact, idea, opinion or
other information to the receiver and ends with receiver’s feedback to the sender.
• The main components of communication process are sender, message, channel of
communication, receiver and feedback

Steps of Communication Process

1. Developing idea by the sender: In the first step, the communicator develops or conceptualizes an
idea to be sent. It is also known as the planning stage since in this stage the communicator plans
the subject matter of communication. It is the most essential components of the key components of
a communication channel. It is a deliberate process that envisions what to commute and the overall
goal of communication.
2. Encoding: Encoding means converting or translation the idea into a perceivable form that can be
communicated to others. This is sequential with the choice of communication method and
communication objectives intended to use for sending the message.
3. Developing the message: After encoding, the sender gets a message that can be transmitted to
the receiver. The message can be an oral or verbal message, written message, symbolic or
nonverbal message. For example, when people talk, speech is the message; when people write a
letter, the words and sentences are the message; when people cries, the crying is the message.

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4. Selecting the medium: communication mediums are channel of communication or means of

transmitting the message to the receiver. Once the sender has encoded his thoughts or ideas into a
message, the next step is to select a suitable medium for transmitting it to the receiver. The medium
of communication can be speaking, writing, signalling, body gestures, facial expressions, etc.
5. Transmission of message: In this step, the sender actually transmits the message through chosen
medium. In the communication cycle, the tasks of the sender end with the transmission of the
message.
6. Receiving the message by receiver: This stage simply involves the reception of sender’s
message by the receiver.
7. Decoding: Decoding is the receiver’s interpretation of the sender’s message. Here the receiver
converts the message into thoughts and tries to analyse and understand it through a decoding
process. Effective communication can occur only when both the sender and the receiver assign the
same or similar meanings to the message.
8. Feedback: The final step of communication process is feedback. Feedback means receiver’s
response to sender’s message. It increases the effectiveness of communication. It ensures that the
receiver has correctly understood the message.

2.1. Characteristics of Communication Process

It is continuous because there is no time when a person stops communicating and because every
moment, we are either sending messages or receiving messages. It is obvious that we do not talk or write
all the time. Yet there is a lot of communication we do without knowing we are doing so. We might be
listening to music or watching television. Here we tell yourself that the music is melodious or indifferent or
that the TV serial is good or bad. Or, we may be looking at a poster as we are walking. We read the poster
and think about its contents. We may see people on the road, animals, new vehicles, goods in display
windows and react to them actively or passively.

• All these responses are acts of communication known as interpersonal communication. The source
here is the poster on the wall, the people walking the streets, the goods in the display windows etc.
The messages are what these things mean to you or even do not mean to you. The channels are
eyes and ears and the receiver is yourself. Therefore, whenever we interact with what we see, hear
or touch, smell and taste, it amounts to communication and there is no such time when we are not
communicating in this sense. That is why communication is continuous, whether we are consciously
speaking or listening to another person or whether we are Interacting with our environment
consciously or unconsciously.
Communication is personal because what we make of the messages or what meaning we derive from
the messages depends not on the inherent content of the message, but depends very much on how we
interpret the message. This depends on our mood, our background, our motives etc. For example, A (boss)
says to B (clerk) "come here." Whether this is a command or a request or simply a statement depends on
B, his mood, his background etc. B may do as A demands of him in their office. B may regard the message
"come here" as an insult if A were to say it to B when he is outside his office and amidst his friends. Thus,
what meaning is attached to communication is very much a personal matter. The same message may
mean different things to the same person depending on time, mood, place etc. We also learn from this that
there are many variables in the communication process which determine the result - that is, how we
understand a message or information.
Communication is circular because it is difficult to identify the point where it begins and where it ends.
When you say good morning to B, verbally you might have begun the communication. But long before your
greeting, B might have smiled at you which is as good as beginning a communication. This is haw
communication is not only continuous and personal but also circular.
Communication is irreversible because once something is said or written and reaches the receiver, the
act become irreversible. You cannot take back what you have said: You may take back the note you have
written, but its contents or messages have already been consumed by the receiver. Once a message
leaves the source and reaches the receiver, communications become irreversible.

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3.0. Oral Communication - Meaning, Advantages and Limitations

• Oral communication implies communication through mouth.
• It includes individuals conversing with each other, be it direct conversation or telephonic
conversation.
• Speeches, presentations, discussions are all forms of oral communication.
• Oral communication is generally recommended when the communication matter is of temporary
kind or where a direct interaction is required.
• Face to face communication (meetings, lectures, conferences, interviews, etc.) is significant so as to
build a rapport and trust.
Advantages of Oral Communication

• There is high level of understanding and transparency in oral communication as it is interpersonal.

• The feedback is spontaneous in case of oral communication. Thus, decisions can be made quickly
without any delay.
• Oral communication is not only time saving, but it also saves upon money and efforts.
• Oral communication is best in case of problem resolution. The conflicts, disputes and many
issues/differences can be put to an end by talking them over.
• Oral communication is an essential for teamwork and group energy.
• Oral communication can be best used to transfer private and confidential information/matter.
Disadvantages/Limitations of Oral Communication

• Oral communication is less authentic than written communication as they are informal and not as
organized as written communication.
• Relying only on oral communication may not be sufficient as business communication is formal and
very organized.
• Oral communication (such as speeches) is not frequently used as legal records except in
investigation work.
• Oral communication is time-saving as far as daily interactions are concerned, but in case of
meetings, long speeches consume lot of time and are unproductive at times.
• Oral communications are not easy to maintain and thus they are unsteady.

3.1. Written Communication - Meaning, Advantages and Disadvantages

• Written communication has great significance in today’s business world. It is an innovative activity of
the mind.
• Speech came before writing. But writing is more unique and formal than speech.
• Effective writing involves careful choice of words, their organization in correct order in sentences
formation as well as cohesive composition of sentences.
• Effective written communication is essential for preparing worthy promotional materials for business
development.
• But while speech is spontaneous, writing causes delay and takes time as feedback is not
immediate.
Advantages of Written Communication

• Written communication helps in laying down apparent principles, policies and rules for running of an
organization.
• It is a permanent means of communication. Thus, it is useful where record maintenance is required.
• It assists in proper delegation of responsibilities. While in case of oral communication, it is
impossible to fix and delegate responsibilities on the grounds of speech as it can be taken back by
the speaker or he may refuse to acknowledge.
• Legal defences can depend upon written communication as it provides valid records.
Disadvantages of Written Communication

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• Written communication is time-consuming as the feedback is not immediate. The encoding and
sending of message take time.
• Also, if the receivers of the written message are separated by distance and if they need to clear
their doubts, the response is not spontaneous.
• Effective written communication requires great skills and competencies in language and vocabulary
use. Poor writing skills and quality have a negative impact on organization’s reputation.
• Written communication does not save upon the costs. It costs huge in terms of stationery and the
manpower employed in writing/typing and delivering letters.
4.0. Functions of Communication
Communication serves four major functions within a group or organization. These are: Control,
Motivation, Emotional expression, and Information.

Control

• Communication clarifies duties, authority and responsibility thereby permitting control.

• Communication tries to control the behaviour of the person engaged in communication.
• It also regulates the activities of the person.
• Formal guidelines and authority hierarchies are an example of the control function of
communication.
• Example: Complete your work, then you can get a leave.
Motivation

• Communication encourages commitment to organizational objectives, thus enhancing motivation.

• It helps in boosting the efficiency of a person by motivating him.
• Example: Giving appreciation to employees for their hard work on the new project.
Information

• Communication provides information to be used for decision making.

• It helps in communicating and sharing information.
• Example: What is the exact time of the meeting?
Emotional expression/Social Interaction

• Communication permits the expression of feelings and the satisfaction of the social needs.
• It forms relationships, bonds, intimacy, and connections with others.
• Example: Your face is looking dull today. Is everything alright?

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5.0. Types of Communication

Verbal and Non-Verbal Communication

Imagine you’re in a work meeting and a colleague is making a presentation. She is animated and uses her
hands a lot to make a point. What do you focus on? Obviously, you listen carefully to her words to make
sure you understand what she’s saying.
But that isn’t all. You probably also pay attention to her body language–including posture, gestures, and
facial expressions–as she speaks.
Many think that communication is just about the spoken word. But verbal communication is not the only
form of communication. Nonverbal communication is equally important.
We communicate our thoughts, ideas, and plans to other people through both, verbal and nonverbal
communication. Verbal and nonverbal communication in humans are the outcome of thousands of years of
processing and perfecting the art of communication.
Verbal communication consists of getting your message across using sounds, words, and languages, while
nonverbal communication involves unsaid things like eye movement, body language, and tone.
For Example: a lie is visible in the eye, nervousness can be gauged from shaking hands or legs, and
happiness is easily understood from the tone someone uses when speaking.
Let us look at the differences between verbal and nonverbal communication:

VERBAL COMMUNICATION NONVERBAL COMMUNICATION

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Medium of Verbal communication uses language, Nonverbal communication uses body

communication words, sentences, and voice as the language, facial expressions, tone, and
medium of communication. pauses in speech as the medium of
communication.

Channels of Verbal communication uses a single Nonverbal communication uses multiple

communication channel of communication, the human channels of communication including your
voice, which speaks a single word at a entire body, facial expressions, and tone
time. of voice.

Examples of Verbal communication can take place Nonverbal communication can only occur
communication over a phone call, in a face-to-face when all the parties in the conversation
conversation, over loudspeakers, can see each other. This helps them
through audio recordings, and so on. properly understand what they are
communicating nonverbally.

Mode Verbal communication is linear and Nonverbal communication is a continuous

of communication voluntary. You set out to say something, process. It is not well-thought-out and is
gather your thoughts, form your largely involuntary, although you can train
sentences, and then start delivering yourself to use it more purposefully.
your message. It is a well-thought-out Unlike verbal communication, nonverbal
process in which the speaker focuses communication is not linear. It depends
on communicating their message more on how one uses their body
effectively. language and other cues to respond to
external stimuli.

Consciousness Verbal communication is a conscious Nonverbal communication happens on an

in communication process. It involves thinking, unconscious level. One doesn’t really
processing, and articulating. think about it actively

Decoding the Verbal communication is fairly easy to Nonverbal communication is a little

communication decode if you understand the language harder to decode than verbal
and the words being used. When you communication. You have to pay attention
pay close attention to the person who is to many factors including the speaker’s
speaking, you will understand what they body language, facial expressions, and
are saying. tone to decode what the other person is
trying to convey.

Formal and Informal Communication

Formal Communication

• Messages in this type of channel follows a chain of command

• It follows hierarchical structure present in the organization
• Information like Organization goals, policies, procedures, reports, notes etc. communicated through
this channel
• Ex. A boss communicating project requirements to his subordinates
Informal Communication

• This type of channel does not follow any hierarchy present in the organization
• It is informal by that it means it does not carry proof of transcripts or communication between
individuals like formal communication gives
• Ex. Colleagues meeting at cafeteria; Colleagues chatting with each other, etc.
• It is a type of Grapevine communication
• It could play a role of distortion as well as constructive role in an organization
Directions in Communication Channels - Upward, Downward, Lateral and Grapevine

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What is Downward Communication? Advantages and Importance

• Downward Communication flows from a top-level to a low level in an organisation is known as

downward communication.
• In other words, communication that takes place from superiors to subordinates in a chain of
command is a downward communication.
• This flow of communication is used by the managers to convey work-related information to the
employees at lower levels. Employees require this information for carrying out their jobs and for
meeting their manager’s expectations.
Importance of Downward Communication
1. To give an idea - With the help of downward communication objectives, policies, rules are
explained to the subordinates by superior to give complete understanding.
2. To encourage - Employees are required to be motivated to work more to achieve organisational
objectives. Management has to resort to downward communication to encourage lower-level
employees.
3. To maintain discipline - Such communication follows the organisational hierarchy, so every
section unit or department must follow the set rules or procedure. As a result, discipline is ensured.
4. To inform job rationale - An important objective of this type of communication is to give information
regarding the rationale of the task assigned and its relation to other organisational tasks.
5. To explain about change - Changes are dependent to circumstances. When there is any change
in respect of plans, policies, procedures or rules etc. such are communication with explanation
through downward communication.
6. To give direction - To direct any assignment, job or task to the subordinates, superior makes
downward communication.
7. Assignment of job - To assign job according to efficiency of the workers, superior makes
justification through downward communication.
8. To control - Since necessary instructions are forwarded through downward communication,
employees are very much aware about their task and activities. Therefore, such communication can
act as a control tool.
9. To evaluate - Downward communication helps supervisors to evaluate works performed by the
employees. Downward communication is used to inform the employees of their evaluations.
Advantages of Downward Communication

• Efficiency - Downward communication offers efficiencies because instructions and information

come from the sources in power that are able to coordinate activities from the top of the
organisation.
• Ease of delegation - Delegation is much easier if the delegation comes directly from the vertical
communication structure representing the chain of command.
• Organisational discipline - Downward communication follows the organisation’s hierarchy,
meaning that organisational discipline and member compliance is much easier to maintain.
• Effective communication of goals - Upper management can easily communicate goals and
assign responsibilities regarding achieving those goals.
Disadvantages of downward communication

• It tends to promote one-way communication

• It is time-consuming because information passes through various levels
• Sometimes a manager may filter the information or hold back some of the information due to fear
that it might be unpalatable
• As communication takes time, sometimes message become ineffective and can lose significance
What is Upward Communication? Advantages and Disadvantage

• Upward communication is the flow of information from lower to higher levels in the organization.
• It consists of messages from subordinates to superiors. It gives feedback on how well the company
is working.

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• The subordinates use upward communication to express their performances and problems to their
superiors.
• The subordinates also use upward communication to tell how well they have understood the
downward communication.
• It can also be used by the employees to share their ideas and opinions and also to take part in the
process of decision-making.
Advantages of Upward Communication
1. Good Relations - Subordinates express their opinions in terms of upward communication. As a
result, the harmonious relationship prevails between the superiors and subordinates.
2. Providing Counsel - Subordinates can provide their constructive opinions to the superiors through
upward communication. These opinions may be useful to the achievement of organisational goals.
3. Favourable Organizational Environment - Upward communication enriches the relationship
between subordinates and superiors. As a result, organisation attains continuous development.
4. Knowing Employee Attitude - Every organisation starts some welfare measures for the
employees. If upward communication is active then management can know that how far employees
are satisfied with the welfare activities.
5. Feedback - Through such communication, the subordinates send back their reactions to the
decision sent by the superiors. Thus upper-level management can ensure whether the lower-level
employees have accepted the message sent by the superiors.
6. Prompt Appreciation - Because of upward communication, subordinates get the opportunity to
praise their boss for any positive or effective movement. This ultimately results in a cordial
relationship between superiors and subordinates.
7. Decision Making - Upper management wants to know specific information regarding production,
procurement, marketing, financial matters and so on before making any decision. Subordinates
supply the related information through upward communication and thus decision making is made
easier and quicker.
8. Development of Creativity - Upward communication calls for a creative environment to grow
where employees show their initiatives for development.
9. Motivation - Upward communication allows the lower-level staff to express their attitude or opinion
to upper-level staff. As result subordinates are influenced to work more towards fulfilment to target.
10. Development of Plan - Upper-level management can collect information from lower-level
management through upward communication. Information obtained from such communication can
be used to develop and implement any plan.
Disadvantages of Upward Communication

• Subordinate provides only that information which is favourable to upper management.

• It may be discouraged due to lack of proper response of top management.
• It takes a lot of time to communicate the problems at higher level due to various levels from which it
has to pass.
• There may be wilful manipulation of information to attain personal goals.
• There arises a threat that superior may react negatively.

Difference between Upward and Downward Communication

PARAMETERS UPWARD COMMUNICATION DOWNWARD COMMUNICATION

Objective To exchange feedback, It emphasizes communicating organizational goals,

suggestions, complaints, policies, procedures, targets, and upcoming events
requests, and opinions. along with instructions, orders, and directions of the
superiors to subordinates.
Flow Bottom to top, i.e., subordinates Top to bottom, i.e., seniors to subordinates.
to seniors.

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Frequency Less frequent as compared to Very frequent in performing all the organizational
downward. activities.
Purpose It’s the voice of employees to Passing instructions, orders, advice, or assigning
make complaints, give responsibilities in the organization.
feedback and suggestions.

Nature It is participative in nature and It is basically authoritative & directive in nature.

opinions are collected from
various team members.

Coverage Sometimes it’s related to only It covers majorly the whole organization.
concerned departments of an
organization.

Transparency High chances of misleading the Mostly transparent, less distortion of information.
information and changing the
messages.

Speed Slow Fast

Form Reports, suggestion box, Circulars, notices, audio-visual media
meetings

What is Horizontal/Lateral Communication?

• Horizontal communication is the communication that flows laterally within the organization, involves
persons at the same level of the organization.
• Horizontal communication normally involves coordinating information and allows people with the
same or similar rank in an organization to cooperate or collaborate.
• Horizontal Communication within a team is an example of horizontal communication; members
coordinate tasks, work together, and resolve conflicts.
• Horizontal communication is lateral or diagonal message exchange either within work – unit
boundaries, involving peers who report to the same supervisor or across-work unit boundaries,
involving individuals who report to different supervisors
• Communication within a team is an example of horizontal communication; members coordinate
tasks, work together, and resolve conflicts.
Advantages of Horizontal Communication

• It provides emotional and social assistance to the organisational members.

• It helps in solving various organisational problems.
• It can also be used for resolving conflicts of a department with other department or conflicts within a
department.
• It facilitates co-operation among team members.
• It is a means of information sharing.
• It facilitates coordination of the task.

6.0. What is Grapevine Communication?

Grapevine communication is defined as unstructured and Informal network formed on social
relationship rather than organizational charts or job descriptions. It is actually an informal vehicle
through which message flows throughout the organization. Gossips, which is a form of grapevine often
becomes the main reason for bringing people closer and making them friendly.

• Informal communication is a natural human form of communication that exists in every human
situation. It has a tremendous capacity to convey any information, whether oral, written, or
observational. The term “Grapevine” originated during the Civil War in North America (1860-1865).
• In those days, intelligence telegraph lines were strung loosely from tree to tree in the manner of a
grapevine, and the message was often garbled; thus, any rumour was said to be from the
“grapevine.”

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• Grapevine is the spontaneously generated interactions between persons to exchange information

without following the formal communication channels of an organization. It operates both in internal
and external informal channels, which can contribute to and benefit the organization. Therefore, it is
found in all organizations. It does not follow any prescribed or predetermined rule and spreads any
information quickly.
• Through the grapevine, information flows in different directions, linking almost every one of an
organization. Gossips, which is a form of grapevine often becomes the main reason for bringing
people closer and making them friendly. It is governed by social and personal relationships rather
than officially recognized rules and formalities. Grapevine operates both in internal and external
informal channels. It passes opinions, suspicions, and rumours that generally do not move through
formal channels.
By nature, the grapevine is a channel of horizontal communication. However, in fact, it does not follow
any set pattern. It effectively operates horizontally, vertically, and even diagonally.

• Grapevine is a natural outgrowth person-to-person informal communication channel through which

information flows horizontally, vertically, or diagonally without following any set rule or regulation
among the people within or outside the organization.

Types of Grapevine Communication: There are 4 types of grapevine communication

• Single Strand Chain

• Gossip Chain
• Probability Chain
• Cluster Chain

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Single Strand Network

• The Single Strand Network represents an informal communication network in which one person
conveys a message to another person, who then communicates it to yet another person. This relay
of information gradually spreads but may encounter interruptions along the way.
Gossip Network

• In the Gossip Network, one person serves as the source of information and shares the message
with everyone. Here, a single individual disseminates the message to all others who come to know
it. This network tends to have a lower likelihood of information distortion since it originates from one
source.
Probability Network

• The Probability Network is an informal communication network in which each liaison individual
randomly shares the same message with others.
• In this network, the source of information for each person receiving the message is different.
Consequently, the potential for information distortion is relatively high due to multiple sources.
Cluster Network

• The Cluster Network is an informal communication network in which one person initially shares a
piece of information with three individuals.
• Out of these three, one passes it on to two more individuals, but only one of those two individuals
shares it with another person. Notably, only specific individuals within the cluster pattern tend to
repeat what they hear.
6.1. Ways to Make Grapevine Beneficiary to Organization
Grapevine represents the unofficial communication system of the informal organization. Informal
communication carries information along the organization’s unofficial lines of activity and power.

• Providing real news to the grapevine initiators

o Managers should identify the people who take an active part in grapevine channels and
provide them with real news so that they can transmit real facts to the grapevine channels.
o This will eventually, resist transmission of rumor, untrue and distorted messages.
• Considering grapevine as a pulse-feeling tool
• Since grapevine is an important source of receiving feedback, managers should use it as a tool for
feeling the pulse of the employees.
• Contradicting the false rumour
o If any false rumour occurs in the organization, management should immediately contradict
and protest the rumour through formal channels.
o As a result, the feeding of false rumours will decrease.
• Allowing workers in the decision-making process
o If the workers are allowed to take part in the decision-making process, they will be well
informed of the facts.
o In such a situation, there will be nothing to suspect and to create a false rumour.
• Developing good organizational climate
o Good organizational climate impels the employees to develop a sense of belongingness, to
maintain status, chain of command and self-respect, and to enhance satisfaction.
• All these will facilitate the occurrence of grapevine in the most desired and effective way.
Advantages of Grapevine Communication

• Grapevine channels carry information rapidly. As soon as an employee gets to know some
confidential information, he becomes inquisitive and passes the details then to his closest friend
who in turn passes it to other. Thus, it spreads hastily.
• The managers get to know the reactions of their subordinates on their policies. Thus, the feedback
obtained is quick compared to formal channel of communication.

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• The grapevine creates a sense of unity among the employees who share and discuss their views
with each other. Thus, grapevine helps in developing group cohesiveness.
• The grapevine serves as an emotional supportive value.
• The grapevine is a supplement in those cases where formal communication does not work.
Disadvantages of Grapevine Communication

• It may provoke sudden unexpected and unwanted reactions from emotionally unstable persons.
• The grapevine carries partial information at times as it is more based on rumours. Thus, it does not
clearly depict the complete state of affairs.
• The grapevine is not trustworthy always as it does not follow official path of communication and is
spread more by gossips and unconfirmed report.
• The productivity of employees may be hampered as they spend more time talking rather than
working. It may result in personal vilification and character assassination of persons.
• Grapevine channels can be moderated but not eradicated.
• Information spreading through grapevine is like to be distorted as it moves point to point, terminal to
terminal or person to person.
• The grapevine may hamper the goodwill of the organization as it may carry false negative
information about the high-level people of the organization.

7.0. Barriers in Communications

Managers face several problems due to communication breakdowns or barriers. Barriers may prevent a
communication or filter part of it carry incorrect meaning due to which misunderstandings may be created.
Therefore, it is important for a manager to identify such barriers and take measures to overcome them.

Semantic Barriers

• Symbols with Different Meanings (Bypassing): Communicators (sender and the receiver) do not
attach the same symbolic meanings to their words. For example- Rest room is used for toilets, but
somebody might perceive it as a place to rest.
• Technical Jargons: Technical jargon is a word which is used commonly in a particular field but not
in other fields. For example, KT is jargon used in BPO and IT industry which basically means
Knowledge Transfer which another person might not be able to understand
• Faulty Translations: Sometimes a message for wide circulation is translated from one language to
another. Fault in Translation will make the communication ineffective
• Use of Gestures having different meanings: Gestures are interpreted differently by different
people. For example, flashing a victory sign with 2 fingers might be interpreted as number 2
• Unclarified Assumptions: Sometimes unclarified assumptions lead to communication gap.

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• Ambiguity of words/phrases- Words sounding the same but having different meaning can convey
a different meaning altogether. For example, the words hear and here sound the same, but they
have different meanings?
Psychological Barriers
Psychological barriers also known as emotional barriers emerge because of psychological state of
message receiver.
They are as follows: -

• Distrust in the person communicating the message

• Inattention
• Loss of Transmission and Poor Retention
• Premature Evaluation: It means interpreting the message even before its transmission is complete.
This happens due to prejudice against the message.
Organizational Barriers
Organizational Barriers arise because of the working culture of the organization. These are

• Organizational Policy/Rules and Regulations: Suppose policy is that all communication must be
strictly in written form then such policies will restrict smooth communication flow
• Status Relationships: The hierarchical relationships also stem the flow of communication.
Subordinates feel hesitant to talk to seniors if they are not supportive
• Organizational Facilities: Organizational can provide facilities for smooth, adequate, clear, and
timely flow of information. These may be in form of Complaint box, suggestion box, open door
policy, social and cultural gatherings
• Complexity in Organizational Structure
Personal Barriers
Personal Barriers can be categorized as barriers related to subordinates or superiors
Superior Related Barriers

• Negative Attitude of Superiors towards Communication

• Fear of Challenge to Authority
• Insistence on Proper channel: Sometimes superiors insist on formal channels and do not like any
bypassing in communication. Superiors may thwart any attempt at bypassing
• Lack of Confidence in subordinates: Superiors feel subordinates are not capable and may not
take their advice seriously
• Lack of time: Superior feels he is busy and its ok for him to ignore the communication by
subordinates
Subordinate Related Barriers

• Unwillingness to Communicate: For example, a woman who is getting married might not share
this information as this might impact her promotion opportunities
• Lack of Incentive: Suppose in spite of giving numerous ideas, the employee got nothing in return.
He would not be motivated to share any such information in future
Linguistic Barriers

• The language barrier is one of the main barriers that limit effective communication. Language is the
most commonly employed tool of communication. The fact that each major region has its own
language is one of the Barriers to effective communication. Sometimes even a thick dialect may
render the communication ineffective.
Technological Barriers

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• Other barriers include the technological barriers. The technology is developing fast and as a result,
it becomes difficult to keep up with the newest developments. Hence sometimes the technological
advance may become a barrier. In addition to this, the cost of technology is sometimes very high.
• Most of the organizations will not be able to afford a decent tech for the purpose of communication.
Hence, this becomes a very crucial barrier. Other barriers are socio-religious barriers. In a
patriarchal society, a woman or a transgender may face many difficulties and barriers while
communicating.

8.0. Role of Technology in Communication

For as long as humans have been on this planet, we’ve invented forms of communication—from smoke
signals and messenger pigeons to the telephone and email—that have constantly evolved how we interact
with each other. One of the biggest developments in communication came in 1831 when the electric
telegraph was invented. While post existed as a form of communication before this date, it was electrical
engineering in the 19th century which had a revolutionary impact.
Now, digital methods have superseded almost all other forms of communication, especially in business.
The internet has made communication easier and faster; it’s allowed us to stay in contact with people
regardless of time and location. It’s accelerated the pace of business and widened the possibilities within
the enterprise space. It’s allowed people to find their voice and express themselves through social media,
YouTube and memes. The internet has connected and divided us like nothing before.
Here are some of the key ways in which IT has impacted communication:

• Speed and efficiency: IT has made communication faster and more efficient. With tools like email,
instant messaging, and video conferencing, we can now communicate with people all over the world
in seconds.
• Reach and scale: IT has also increased the reach and scale of communication. Social media
platforms like Facebook and Twitter allow us to communicate with millions of people at once.
• Interactivity and collaboration: IT has made communication more interactive and collaborative.
With tools like Google Docs and Microsoft Teams, we can work on documents and projects together
with people who are located all over the world.
• Accessibility: IT has also made communication more accessible. People with disabilities can now
use assistive technologies like screen readers and voice recognition software to communicate more
effectively.
• Facilitates Remote Work: With the rise of remote work, technology plays a crucial role in
maintaining communication and connectivity. Virtual meetings, teleconferencing, and remote
collaboration tools support effective communication among geographically dispersed teams,
promoting flexibility and work-life balance.
• Improved Collaboration: Cloud-based technology provides platforms for real-time collaboration,
allowing team members to work together seamlessly. Shared workspaces, project management
tools, and document sharing foster effective collaboration, enhancing productivity and innovation.
Communication technology examples

• Blogs
o Blogs are personal websites that you might use to share content with anyone interested in
the subject from anywhere in the world. You can use blogs for leisure or business purposes.
Businesses also use blogs for publicity and to attract new clients. For example, an online
company that markets books may start a blog highlighting its marketing expertise. When
writers read the posts, they may trust the company and use its services to market their book.
• Conferencing Technology
o Conferencing technology allows multiple people to communicate in real time from different
locations. Often, conferencing technology includes audio and video features, making
interactions using this technology feel more personal than communicating via a phone call.
• Wearable technology

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o Wearable technology, or wearables, are electronic devices you can wear as accessories or
incorporate into your clothing. You might use wearable technologies for various purposes,
such as fitness tracking, playing video games, and even enhancing your hearing.
• Virtual Reality (VR)
o The next generation of VR has only been around since 2016, but it’s already shaking up
communications. The beauty of VR—presence—means you can connect to someone in the
same space at the same time, without the time sink and cost of travel, even if participants
are on different continents.
• Email
o As a byproduct of the World Wide Web, email was introduced to the world in 1991 (although
it had been operating years before) and it has vastly changed our lives—whether for better
or worse depends on your viewpoint. The first users of the messaging platform were
educational systems and the military who used email to exchange information.
Conclusion
Technology has revolutionized communication within organizations, offering benefits such as enhanced
efficiency, collaboration, and remote work capabilities. While barriers to effective communication exist,
managers can overcome them through cultural sensitivity, clear messaging, and feedback mechanisms.
Organizational leaders must prioritize communication channels, promote information management skills,
and streamline processes to prevent information overload. By harnessing the power of technology and
implementing effective communication strategies, organizations can foster a culture of effective
communication and achieve their goals efficiently.
RBI Grade B 2023: Read the following Paragraph and answer the questions that follows.
Rohan's career journey was full of changes, trying out different roles. However, poor communication always
held him back. Despite his skills, he felt the need to conquer this obstacle for true success. Like Rohan,
many people face multiple barriers to the communication process, some of the them are listed below -
A. Misunderstanding due to translation error caused due to lack of proficiency of translator in both
languages.
B. Lack of confidence of subordinate to communicate and give feedback to superior.
C. Rules and regulations hindering the communication and Complexity in Organizational structure.
D. Lack of time due to pre-occupied mind.
Lastly, Rohan can improve his communication skills through several steps. Firstly, he should actively listen
to others and be open to feedback. Practicing clear and concise expression will help him articulate his
ideas better.
Q.1. With regards to the above-mentioned passage, which of the following is/are example of
personal barriers in the communication process. (2 Marks)
A. Only A
B. Only B
C. Only C and B
D. Only A, B and C
E. Only B and D
Q.2. Identify the barriers of communication, wherein the person (Sender or Receiver) is unable to translate
the language in the required manner.
A. Personal Barriers
B. Semantic Barriers
C. Organizational Barriers
D. Emotional Barriers
E. Psychological barriers

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Q.3. Which of the following is an example of Non-Verbal Communication

A. Writing letter
B. Memos
C. Body Language and Gestures
D. Flyers and posters
E. Infographics
Answers: E – B – C
Descriptive Practice Questions:
1. What are the key differences between oral and written communication?
2. What are the different types of organizational communication?
3. What are the different types of communication barriers? Discuss the ways to overcome the barriers.
4. How has information technology changed the way we communicate?
5. What are the benefits of using IT in communication?
Q. What is the first step in the communication process?
(A) Encoding
(B) Decoding
(C) Transmitting
(D) Receiving
Explanation: The first step in the communication process is encoding, which is the process of converting a
message into a form that can be transmitted.
Q. What is the process of interpreting a message called?
(A) Encoding
(B) Decoding
(C) Transmitting
(D) Receiving
Explanation: Decoding is the process of interpreting a message.
Q. Which of the following is NOT a step in the communication process?
(A) Encoding
(B) Feedback
(C) Transmitting
(D) Decoding
Explanation: Feedback is not a step in the communication process. It is the response to a message.
Q. What type of communication channel is used when you send an email to a colleague?
(A) Verbal
(B) Non-verbal
(C) Written
(D) Visual
Explanation: Email is a written communication channel.
Q. What type of communication channel is used when you have a face-to-face conversation with a friend?
(A) Verbal
(B) Non-verbal
(C) Written
(D) Visual
Explanation: Face-to-face conversation is a verbal communication channel.

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ORGANIZATIONAL BEHAVIOUR
WHAT IS An ORGANIZATION:
An organization is a structured group of individuals working together towards a common goal, typically
characterized by a defined structure, roles, and responsibilities.
FEATURES OF AN ORGANIZATION:
1. Structure: Organizations have a defined structure that outlines the hierarchy of authority, roles, and
responsibilities. This structure helps in establishing order and facilitating efficient coordination.
2. Goals and Objectives: Organizations are driven by a set of goals and objectives that guide their
activities. These goals provide a sense of direction and purpose, aligning the efforts of individuals
within the organization.
3. People: The workforce is a crucial component of any organization. Individuals with diverse skills and
expertise come together to contribute towards the achievement of organizational goals.
4. Processes and Workflows: Organizations implement specific processes and workflows to streamline
their operations. These processes help in the efficient utilization of resources and ensure a
systematic approach to tasks.
ORGANIZATIONAL BEHAVIOUR:
Organizational Behaviour seeks to analyse how individuals within an organization interact with each other
and their environment, and how these interactions impact the overall performance and effectiveness of the
organization.
KEY COMPONENTS OF ORGANIZATIONAL BEHAVIOUR:
1. Individual Behaviour: Understanding how individual characteristics such as personality, perception,
attitude, and motivation influence behaviour is crucial. It involves examining factors that affect an
individual's performance and satisfaction in the workplace.
2. Group Behaviour: Groups play a vital role in organizational dynamics. Studying how groups form,
develop norms, communicate, and make decisions is essential for effective teamwork and
collaboration. Group dynamics significantly impact organizational culture and productivity.
3. Organizational Structure: The formal and informal arrangements in an organization influence
behaviour. The structure defines roles, responsibilities, and reporting relationships, affecting how
individuals and groups interact. A well-designed structure can enhance efficiency and
communication.
4. Organizational Culture: Culture represents the shared values, beliefs, and norms within an
organization. It shapes employees' behaviour, influencing how they perceive their work and interact
with others. A positive organizational culture can contribute to employee engagement and
satisfaction.
KEY COMPONENTS OF ORGANIZATIONAL BEHAVIOUR:
1. Individual Behaviour: Understanding how individual characteristics such as personality, perception,
attitude, and motivation influence behaviour is crucial. It involves examining factors that affect an
individual's performance and satisfaction in the workplace.
2. Group Behaviour: Groups play a vital role in organizational dynamics. Studying how groups form,
develop norms, communicate, and make decisions is essential for effective teamwork and
collaboration. Group dynamics significantly impact organizational culture and productivity.
3. Organizational Structure: The formal and informal arrangements in an organization influence
behaviour. The structure defines roles, responsibilities, and reporting relationships, affecting how
individuals and groups interact. A well-designed structure can enhance efficiency and
communication.
4. Organizational Culture: Culture represents the shared values, beliefs, and norms within an
organization. It shapes employees' behaviour, influencing how they perceive their work and interact
with others. A positive organizational culture can contribute to employee engagement and
satisfaction.

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5. Leadership and Power: Leadership styles and the distribution of power within an organization
impact behaviour. Effective leadership fosters motivation, communication, and a positive work
environment. Understanding power dynamics is crucial for managing conflicts and promoting
cooperation.
SIGNIFICANCE OF ORGANIZATIONAL BEHAVIOUR IN MANAGEMENT:
1. Enhances Employee Performance: By understanding individual and group behaviour, managers can
tailor their leadership approach and motivational strategies to improve employee performance and
job satisfaction.
2. Promotes Effective Communication: Organizational Behaviour emphasizes the importance of
communication in fostering a healthy work environment. Clear communication channels enhance
collaboration and reduce misunderstandings.
3. Facilitates Change Management: In a dynamic business environment, change is inevitable.
Organizational Behaviour equips managers with the tools to manage and facilitate organizational
change effectively, minimizing resistance and maximizing acceptance.
4. Builds Strong Organizational Culture: A positive organizational culture, fostered through an
understanding of Organizational Behaviour principles, contributes to employee loyalty, commitment,
and a shared sense of purpose.
5. Resolves Conflicts: Conflict is inherent in any organization. Organizational Behaviour provides
insights into the sources of conflicts and offers strategies for resolution, ensuring a more
harmonious workplace
ELEMENTS OF ORGANIZATIONAL BEHAVIOUR:
1. Individual Behaviour:
• Personality: Each individual brings a unique set of characteristics, traits, and values to the
workplace. Understanding personality differences is crucial for effective communication and
collaboration.
• Perception and Attitude: How individuals perceive and interpret their environment influences
their behaviour. Attitudes, whether positive or negative, impact job satisfaction and
performance.
2. Group Behaviour:
• Team Dynamics: The way individuals interact in groups significantly affects organizational
outcomes. Understanding team dynamics, such as communication patterns and conflict
resolution, is vital for building high-performing teams.
• Leadership: Leadership styles and behaviours greatly influence the motivation and
performance of team members. Effective leadership fosters a positive work culture and
enhances organizational effectiveness.
3. Organizational Structure:
• Formal Structure: The formal organization includes the official hierarchy, roles, and
responsibilities. Clarity in organizational structure helps in defining authority, promoting
accountability, and streamlining communication.
• Informal Structure: Apart from the formal structure, organizations have an informal structure
based on social relationships, networks, and informal communication channels.
Understanding the informal structure is essential for effective communication and decision-
making.
4. Organizational Culture:
• Values and Beliefs: Organizational culture encompasses shared values, beliefs, and norms.
A strong and positive culture contributes to employee engagement, satisfaction, and
commitment.
• Cultural Diversity: In a globalized world, organizations often comprise diverse workforce.
Managing cultural diversity is crucial for promoting inclusivity and leveraging the strengths of
a varied talent pool.
5. Motivation and Reward Systems:
• Motivational Theories: Understanding different theories of motivation helps managers design
effective incentive systems that drive employee performance and job satisfaction.

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• Reward and Recognition: Fair and transparent reward systems, including monetary and non-
monetary incentives, play a
crucial role in motivating employees and aligning their efforts with organizational goals.
DISCIPLINES CONTRIBUTING TO ORGANIZATIONAL BEHAVIOUR:
1. Psychology:
• Individual Behaviour: Psychology delves into the study of individual behaviour, cognition, and
emotions within the organizational context. It provides valuable insights into factors such as
motivation, perception, learning, and personality, influencing how individuals behave in a
workplace setting.
2. Sociology:
• Group Behaviour: Sociology contributes by exploring the dynamics of group behaviour,
social structures, and interactions within organizations. Understanding how individuals form
groups, establish norms, and engage in collective actions is vital for effective team
management and organizational culture development.
3. Anthropology:
• Cultural Influence: Anthropology aids in understanding the impact of culture on
organizational behaviour. It focuses on the study of customs, rituals, and social practices
within a workplace, helping organizations create inclusive and culturally sensitive
environments.
4. Economics:
• Incentives and Decision Making: Economics provides insights into how individuals and
organizations make decisions in the face of scarce resources. It helps in understanding the
economic factors that influence employee motivation, job satisfaction, and organizational
performance.
5. Political Science:
• Power and Conflict: Political Science contributes by examining power dynamics, authority
structures, and conflicts within organizations. Understanding the distribution of power and
managing conflicts is essential for maintaining a healthy organizational environment.
6. Engineering:
• Engineering also influences the study of organisational behaviour. Some topics are common
to engineering as well an organisational behaviour e.g., work measurement, productivity
measurement, workflow analysis, work design, job design and labour relations. In fact,
organisational behaviour is dependent on engineering for these technical jobs.

7. Ethics and Philosophy:

• Values and Ethics: Ethics and Philosophy contribute to OB by addressing issues related to
morality, values, and ethical decision-making. Understanding the ethical dimensions of
organizational behaviour is essential for building a socially responsible and sustainable
organizational culture.
SCOPE OF ORGANISATIONAL BEHAVIOUR
1. Individual behaviour:
• Personality and Perception: Understanding individual differences in personality and
perception helps in managing and motivating employees effectively.
• Learning and Motivation: Examining how individuals learn and what motivates them is crucial
for designing reward systems and training programs.
2. Group behaviour:
• Team Dynamics: Analysing how teams form, develop, and function is essential for fostering
collaboration and achieving organizational goals.
• Communication: Studying communication patterns within groups aids in enhancing
organizational communication and reducing misunderstandings.
3. Organizational Structure:
• Design and Culture: Assessing how the organization's structure and culture impact behavior
is fundamental for creating a positive work environment.

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• Change Management: Understanding how employees respond to change helps in

implementing successful organizational change initiatives.
4. Leadership:
• Leadership Styles: Investigating different leadership styles and their effects on employee
performance and satisfaction is crucial for effective leadership development.
• Power and Influence: Examining how leaders use power and influence helps in creating
ethical and effective leadership practices.
5. Organizational Processes:
• Decision Making: Analysing decision-making processes aids in improving the quality of
decisions and increasing organizational effectiveness.
• Communication Networks: Understanding communication networks helps in optimizing the
flow of information within the organization.
Organizational Models:

Autocratic Organizational behaviour Model:

Autocratic organizational behaviour model is a management approach characterized by a high level of
centralization of decision-making authority within a hierarchical structure. In this model, leaders exercise a
significant degree of control over their subordinates, making decisions without much input or participation
from the lower levels of the organization.
Key Characteristics of Autocratic Organizational behaviours Model:
1. Centralized Decision-Making:
• One of the primary features of the autocratic model is the concentration of decision-making
power at the top levels of the organization. Leaders, typically at the apex, make decisions
unilaterally, without seeking extensive input from subordinates.
2. Limited Employee Participation:
• Autocratic leadership limits the involvement of employees in decision-making processes.
Subordinates have minimal influence on organizational decisions, and their role is primarily
to execute the directives handed down from above.
3. Clear Chain of Command:
• The autocratic model emphasizes a clear and rigid chain of command. Authority and
responsibility are clearly defined, and communication primarily follows a top-down approach.
4. Swift Decision-Making:
• Autocratic leaders can make decisions quickly due to the absence of extensive consultation.
This agility can be advantageous in situations where prompt action is required.
5. Authoritarian Leadership Style:

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• Autocratic leaders often exhibit an authoritarian leadership style, where they assert control,
set strict guidelines, and expect compliance from their subordinates.
Custodial Organizational behaviour Model:
1. Workers being managed under the autocratic model often feel insecure and disappointed. They may
also show aggression towards their boss and their family and neighbours. So progressive managers
felt that something must happen ways to develop better employee relations so that insecurities and
frustrations could be removed.
2. The custodial approach induces employees now to show their dependency and loyalty towards the
company and not to the boss or managers, or supervisors.
3. To overcome the shortcomings of autocratic model, it came into existence. This model is reward
based. The custodial model is based on the concept of providing economic security for employees –
through pay and other benefits that will create employee loyalty and motivation.
4. The underlying principle for the organization is that they will have a more skilled workforce, more
motivated employees, and have a competitive advantage through employee knowledge and
expertise.
5. The downside with the custodial model is that it also attracts and retains low-performing employees.
Or perhaps even some offer low-level motivation from employees who feel they are “stuck” in an
organization because the benefits are too good to leave.
Supportive Organizational behaviours Model:
The Supportive Organizational behaviour (SOB) model is a management approach that emphasizes
creating a work environment where employees feel valued, supported, and empowered. This model
recognizes the significance of aligning organizational goals with the well-being and satisfaction of its
workforce. It is rooted in the belief that a positive and supportive workplace culture leads to increased
employee morale, engagement, and ultimately, organizational success.
Key Components of the Supportive Organizational behaviour Model:
1. Open Communication: This includes regular feedback sessions, town hall meetings, and platforms
for employees to voice their opinions and concerns.
2. Empowerment: Employees are empowered to take initiative and make decisions within their roles.
This not only fosters a sense of ownership but also enhances individual and collective performance.
3. Trust and Collaboration: It promotes a collaborative atmosphere where employees trust their
colleagues and leadership. This trust encourages teamwork, innovation, and the sharing of ideas.
4. Employee Development: Organizations following the SOB model invest in training programs,
mentorship initiatives, and career development opportunities to nurture their employees' potential.
5. Recognition and Rewards: This can be through formal recognition programs, performance bonuses,
or even simple gestures of appreciation.
Collegial Organizational behaviour Model:
The Collegial Organizational Behaviour Model is a conceptual framework that highlights the importance of
collaboration, teamwork, and shared decision-making within an organization. This model emphasizes a
horizontal structure where communication flows freely among all members, fostering a sense of equality
and mutual respect. Unlike traditional hierarchical structures, the Collegial Model encourages employees to
work together as peers, promoting a more inclusive and dynamic work environment.
Key Features of the Collegial Organizational behaviour Model:
1. Equal Participation: In the Collegial Model, there is a departure from the top-down approach. All
members of the organization, regardless of their hierarchical position, are encouraged to actively
participate in decision-making processes. This inclusivity ensures that diverse perspectives are
considered, leading to well-rounded and informed decisions.
2. Open Communication: Effective communication is at the core of the Collegial Model. Employees are
encouraged to express their ideas, share feedback, and engage in open discussions. This free flow
of information enhances transparency and creates a culture where everyone feels heard and
valued.

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3. Teamwork and Collaboration: Collaboration is a fundamental aspect of the Collegial Model. Teams
work together towards common goals, pooling their strengths and expertise. This collaborative
approach not only enhances problem-solving but also builds a sense of camaraderie among team
members.
4. Flexibility and Adaptability: The Collegial Model promotes flexibility in organizational structures and
processes. This adaptability allows the organization to respond swiftly to changes in the external
environment, fostering innovation and resilience
System Organizational behaviour (SOB) Model:
The System Organizational behaviour (SOB) model is a comprehensive framework that aids in the analysis
and understanding of the intricate dynamics within an organization. It is rooted in the systems theory, which
perceives organizations as complex entities with interconnected and interdependent components, much
like living organisms. The SOB model emphasizes the holistic nature of organizational behaviour,
considering the interactions between individuals, groups, and the larger organizational context.
Key Components of the System Organizational behaviour Model:
1. Individual Level:
• At the individual level, the model recognizes the importance of understanding the behaviour,
attitudes, and motivations of employees. This includes factors such as personality,
perception, and individual values, all of which contribute to the overall dynamics within the
organization.
2. Group Level:
• Moving beyond individuals, the SOB model considers the dynamics of groups within the
organization. It acknowledges the influence of group norms, communication patterns, and
team dynamics on organizational behavior. Group cohesion, leadership styles, and the
impact of diversity are critical aspects examined at this level.
3. Organizational Level:
• The organizational level in the SOB model focuses on the broader systems and structures
that shape behavior. This includes organizational culture, policies, and leadership practices.
Understanding how these elements interact is essential for comprehending the overall
organizational behaviour.
4. External Environment:
• The model also accounts for the external environment, recognizing that organizations do not
operate in isolation. Factors such as economic conditions, regulatory frameworks, and
market trends can significantly impact organizational behavior.

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Contemporary Issues in Organizational Behavior.

1. Diversity and Inclusion:
• In today's globalized world, organizations are increasingly diverse, encompassing individuals
with different cultural backgrounds, genders, ages, and perspectives. Managing this diversity
effectively to foster inclusion is a critical challenge in organizational behavior. Strategies that
promote an inclusive culture, such as diversity training and mentorship programs, are crucial
to ensure a harmonious and productive work environment.
2. Remote Work and Virtual Teams:
• The advent of technology has facilitated remote work and the rise of virtual teams. While this
provides flexibility, it also presents challenges in terms of communication, collaboration, and
maintaining a cohesive organizational culture. Leaders need to adapt their management
styles to accommodate remote work dynamics, emphasizing clear communication, virtual
team-building activities, and the use of collaborative tools.
3. Work-Life Balance:
• The boundary between work and personal life has become increasingly blurred, leading to
concerns about employee burnout and well-being. Organizations need to address this issue
by implementing policies that promote work-life balance, such as flexible working hours,
mental health support programs, and initiatives to reduce workplace stress.
4. Ethical Leadership:
• Ethical leadership is gaining prominence as organizations face scrutiny for their practices.
Issues such as corporate social responsibility, ethical decision-making, and transparency in
leadership are integral to organizational behavior. Leaders must prioritize ethical conduct,
fostering a culture of integrity and accountability to build trust with both internal and external
stakeholders.

5. Technology and Automation:

• Rapid advancements in technology, including artificial intelligence and automation, are
transforming the nature of work. This introduces challenges related to job displacement, skill
gaps, and the need for continuous learning. Organizations must proactively manage these
changes by investing in employee training and reskilling initiatives to ensure a workforce that
is adaptive and future-ready.
THEORIES OF ORGANIZATIONAL BEHAVIOUR
1. Scientific Management Theory
It was Fredric Taylor who noticed that employees use vastly different techniques
to do the same job — which he improved. At his time, there were no clear responsibilities
laid for workers and management. The work done by workers was very slow. Worker’s
output never matched their abilities and attitudes. No effective work standards existed.
Taylor made a mental revolution among both the workers and management by defining
clear guidelines for improving production efficiency. The four principles of management
that he defined are as follows:
a Develop a science for each element of an individual.
b. Scientifically select, train, teach and develop the worker.
c. Co-operate with the workers heartily so as to ensure that all work to be done is in
accordance with the principles of the science that has been developed.
d. Divide work and responsibility almost equally between management and workers.

2. Administrative Theory
The Administrative Theory, also known as the Classical Theory, is one of the earliest schools of
thought in organizational behavior, primarily associated with the works of Henri Fayol and Max
Weber. This theory focuses on the structure and functioning of organizations, emphasizing the
principles of management and authority.

1. Henri Fayol's Principles of Management:

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Henri Fayol, a French mining engineer, proposed 14 principles of management that form the
foundation of the Administrative Theory.

a. Division of Work: This principle suggests that work should be divided among individuals based on
their specialization to increase efficiency.

b. Authority and Responsibility: Fayol emphasized the need for a clear line of authority within an
organization, accompanied by corresponding responsibility.

c. Discipline: Discipline is essential for organizational success. Fayol argued for fair, consistent, and
effective disciplinary actions.

d. Unity of Command: Employees should have only one supervisor to avoid confusion and
conflicting instructions.

e. Unity of Direction: The organization should have a single plan of action to ensure coordination
and focus.

f. Subordination of Individual Interest to General Interest: Individuals' interests should align with the
organization's goals for overall success.

g. Remuneration: Fair compensation is crucial for employee motivation and satisfaction.

h. Centralization: The degree of centralization in an organization should depend on the nature of

tasks and the capabilities of employees.

i. Scalar Chain: There should be a clear and unbroken line of communication and authority from the
top to the bottom of the organization.

j. Order: Organizations should have a place for everything, and everything should be in its place.

k. Equity: Managers should treat employees with kindness and justice to foster a positive work
environment.

l. Stability of Tenure: Employees' tenure in an organization should be stable to reduce turnover and
increase efficiency.

m. Initiative: Encouraging employees to take initiative fosters innovation and creativity.

n. Esprit de Corps: Team spirit and unity among employees are vital for organizational success.

3. Structural theory
Simultaneously, the German sociologist Max Weber developed a theory of authority
structures and described organizational activity as based on authority relation. He was
one who looked at management and organizational behaviour from a structural perspective.
Weber described an ideal type of organization that he called a bureaucracy. The detail
features of his ideal bureaucratic structure are as follows:
i. Job — specialization: Jobs are broken into simple, routine and well-defined tasks.
ii. Authority hierarchy: Positions are organized in a hierarchy, each lower one controlled
by and supervised by a higher one.
iii. Formal selection: All organization members be selected on the basis of technical
qualifications demonstrated by training, education or exams.
iv. Rules and regulations- To ensure uniformity and to regulate the actions of employees,
managers must depend upon company’s rules.
v. Impersonality- Rules and controls are applied uniformly. Avoiding involvement of
personalities and personnel preferences.

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vi. Career orientation: Managers are professionals and not owners of units they manage.
They work for fixed salaries and pursue their careers within their organizations.

4. ‘Social Man’ Theory

Taylor, Fayol and Weber could be faulted for forgetting that, human beings who are the core for
every organization and humans are social animals. Mary Parker Follett and Chester Barnard saw
the importance of the social aspect of organizations. Their ideas, though born in scientific
management, did not achieve any large degree of recognition until 1930’s.
Mary first recognized that, organization could be viewed from the perspective of individual and
group behaviour. Her humanistic ideas have influenced the way we look at motivation, leadership,
power and authority today. The Japanese put a lot of stress on group togetherness.
On the other hand, Barnard saw organizations as social systems that require human co-operation.
Barnard maintained that success depends on maintaining good relations with people and introduced
the idea that managers had to examine the environment and then adjust the organization to
maintain the state of equilibrium.

5. Maslow's Hierarchy of Needs Theory

Abraham Maslow's Hierarchy of Needs theory provides valuable insights into human motivation and
behavior, offering a framework that is highly applicable to the organizational context.

1. Physiological Needs:
At the base of Maslow's hierarchy are physiological needs, which include basic requirements for
survival such as food, water, shelter, and rest. In an organizational setting, these needs are
reflected in the provision of fair wages, comfortable working conditions, and adequate breaks.
Organizations must ensure that employees' physiological needs are met to create a foundation
for higher-level motivation.
2. Safety Needs:
Once physiological needs are satisfied, individuals seek safety and security. In a workplace,
safety needs manifest in job security, a stable work environment, and health benefits.
Organizations can contribute to employees' well-being by implementing safety measures,
offering job stability, and providing opportunities for career development.
3. Social Needs:
Moving up the hierarchy, social needs become prominent. This level encompasses the desire for
belongingness, social interaction, and interpersonal relationships. Organizations foster a positive
work environment by encouraging teamwork, communication, and social activities. Building a
sense of community within the workplace helps meet employees' social needs, contributing to
job satisfaction and overall well-being.
4. Esteem Needs:
Esteem needs involve the desire for recognition, achievement, and self-worth. In an
organizational context, this translates to providing opportunities for career advancement,
acknowledging employees' contributions, and fostering a culture of appreciation. Recognition
programs, performance appraisals, and skill development initiatives play a crucial role in
addressing esteem needs.
5. Self-Actualization:
At the pinnacle of Maslow's hierarchy is self-actualization, representing the realization of one's
full potential. In the workplace, self-actualization is achieved through challenging tasks,
opportunities for personal growth, and a supportive work culture. Organizations can promote
self-actualization by encouraging creativity, autonomy, and continuous learning.
TECHNIQUES RELEVANT TO ORGANISATIONALBEHAVIOUR

1. Re-engineering -Re engineering is the fundamental and radical redesign of business processes to
achieve dramatic improvements in critical, contemporary measures of performance such as cost,
quality, service and speed. Many TQM approaches are designed to increase efficiency by
streamlining current operations. Re-engineering however, involves a total redesign of operations by
analysing jobs and asking-How can this work be done most efficiently? Rather than modifying

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current work procedures, the reengineering process begins with a clear state and plans the job from
beginning to end. Re-engineering allows the organisation to eliminate inefficiencies and increase
productivity.

2. Bench Marking -Benchmarking is the process of company work and service methods, against the
best practices and outcomes for the purpose of identifying changes that will result in higher quality
output. It incorporates the use of human resources techniques such as goal setting to set targets
that are pursued, identified and then used as a basis for future action. The bench marking process
involves looking inside and outside the organisation to find ways and means to improve operational
efficiency. It is benefitial.to the Organisations because - (a) This technique helps organisations
compare themselves against successful companies for the purpose of identifying improvement
strategies. (b) It enables organisations to learn for others. (c) It helps create a need for change by
showing the organisation how procedures work assignments should be altered and resources
reallocated.

3. Empowerment - Empowerment is the authority to make decisions within one’s area of operations
without having to get approval from anyone else. It has two unique characteristics: (a) The
personnel are encouraged to use their initiative. (b) Employees are given not just authority but
resources, as well, so that they are able to make a decision and see that it is implemented. There
are several basic conditions necessary for empowerment to become embedded in the
organisational culture and become operational (i) Participation -Empowerment assumes that all
employees are willing to improve their daily work processes and relationships. (ii) Innovation -
Empowerment encourages innovation because employees have the authority and bring out new
ideas and make decision that result in new ways of doing things. (iii) Access to Information -When
employees are given access to information, their willingness to cooperate and use their
empowerment is enhanced.

4. Accountability -Although employees are empowered to make decisions, they believe will be most
beneficial to the organisation, they are also held accountable for results. However thus
accountability is not intended to punish personnel or to generate immediate shortterm results.
Instead, the intent us to ensure that the empowered employees are giving their best efforts, working
towards agreed upon goals, and behaving responsibility towards each other. If these behaviours are
exhibited then management continues to empower employees to proceed at their own place in their
own way.

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Personality: Meaning, factors affecting personality, Big five model of

personality; concept of reinforcement
WHAT IS PERSONALITY
Personality can be defined as the unique set of characteristics, traits, and patterns of behavior that
distinguish one individual from another. It encompasses a range of psychological qualities that shape how a
person thinks, feels, and behaves in various situations.

The word personality is derived from a Greek word “persona” which means “to speak
through.” Personality is the combination of characteristics or qualities that forms a person’s
unique identity.
Ex: Dhirubai Ambani had traits of proactivity, Risk Taking ability, Openness, Conscientiousness, Timeliness,
and determination which made him a great businessman
According to Gordon Allport, Personality is the dynamic organisation within the individual of those
psychological systems that determine his unique adjustment to environment. The conduct, behaviour,
activities, movements and everything else concerning the individual are known as personality. It is the way
of responding to the environment; the way in which an individual adjusts with the external environment is
personality.
Personality trait is basically influenced by two major features −

• Inherited Characteristics: The features an individual acquires from their parents or forefathers, in
other words the gifted features an individual possesses by birth is considered as inherited
characteristics.
• Learned characteristics: Nobody learns everything by birth. First, our school is our home, then our
society, followed by educational institutes. The characteristics an individual acquires by observing,
practicing, and learning from others and the surroundings is known as learned characteristics.

Determinants of Personality
Following are the factors that determines personality and development. The determinants of personality can
be grouped in five broad categories:

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Biological Factors: Physical stature, facial attractiveness, sex, temperament, muscle composition
and reflexes, energy level, and biological rhythms are characteristics that are considered to be
inherent from one’s parents.
Cultural Factors: Among the factors that influence personality formation is the culture in which we
are raised, early conditioning, norms prevailing within the family, friends and social groups and
other miscellaneous experiences that impact us. The culture largely determines attitudes towards
independence, aggression, competition, cooperation and a host of other human responses.
Family Factors: Whereas the culture generally prescribes and limits what a person can be taught,
it is the family, and later the social group, which selects, interprets and dispenses the culture.
Thus, the family probably has the most significant impact on early personality development.
Social Factors: Socialization involves the process by which a person acquires, from the
enormously wide range of behavioural potentialities that are open to him or her, those that are
ultimately synthesized and absorbed.
Situational Factors: Human personality is also influenced by situational factors. The effect of the
environment is quite strong. Knowledge, skill and language are obviously acquired and represent
important modifications of behaviour. An individual’s personality, while generally stable and
consistent, does change in different situations.
PERSONALITY THEROIES
1. TYPE THEORY
• One of the most well-known proponents of this theory is Isabel Briggs Myers and
Katharine Cook. Type Theory of Personality is a psychological framework that classifies
individuals into distinct categories or types based on certain inherent characteristics
and behavioural patterns. Also called as Myers-Briggs Type Indicator or 16
Personality Indicators by Myers-Briggs.
• According to Type Theory, individuals can be categorized into different personality types,
each characterized by specific preferences in how they perceive the world and make
decisions.
• The foundation of Type Theory rests on the assumption that people naturally exhibit
consistent and predictable patterns in their thoughts, feelings, and behaviors. These patterns
are organized into dichotomies, such as extraversion vs. introversion, sensing vs. intuition,
thinking vs. feeling, and judging vs. perceiving.
• The combination of these preferences results in 16 distinct personality types, providing a
framework to understand and categorize individual differences.
• Understanding individual differences through Type Theory has several implications,
particularly in the field of organizational behavior and management.
• By identifying and acknowledging diverse personality types within a team or workforce,
organizations can enhance communication, optimize team dynamics, and promote effective
leadership.

2. TRAIT THEORY
• A personality trait is understood as an enduring attribute of a person that appears
consistently in a variety of situations. A trait of an individual is abstracted from his behaviour
and serves a useful — “unit of analysis” to understand personality.
• Trait theorists assume that a personality can be described by its position on a number of
continuous dimensions or scales, each of which represents a trait. Thus, we could rate an
individual on a scale of intelligence, emotional stability, aggressiveness, creativeness
or any of a number of other dimensions.
• It is important to remember that traits are reactions, not something a person possesses.
One does not possess shyness; he feels and acts shy under some circumstances. In many
ways, the trait theory is a multiple model of type theory.

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Critiques and Limitations:

A. Situational Factors:
• Critics argue that the Trait Theory may oversimplify personality by not adequately
accounting for the influence of situational factors on behavior.
• Human behavior is also shaped by the context in which individuals find themselves,
and this theory may not fully capture the complexity of these interactions.
B. Lack of Developmental Perspective:
• Trait theory tends to focus on adult personality and may not provide a comprehensive
understanding of personality development across the lifespan.
• Other theories, such as psychodynamic or humanistic approaches, offer more insights
into the developmental aspects of personality.

3. PSYCHOANALYTIC THEORY
Sigmund Freud is credited with psychoanalytic theory. Freud, acknowledged as one of the
intellectual giants in the history of modern thought, developed,
o The first comprehensive personality theory.
o A method for treating neurotic ills.
o An extensive body of clinical observations based on his therapeutic experience and
self-analysis.

Freud saw personality as composed of three structures:

A) The ID: Refers exclusively to the innate component of personality. The id is the mental agency
containing everything inherited, present at birth, and fixed in the individual’s constitution
especially instincts. It is raw, animalistic, unrecognized knows no laws, obeys no rules and
remains basic to the individual throughout life.
The id, according to Freud, employs to rid the personality of tension, reflex actions and primary
process. Primary process refers to attempts of an individual to form a mental image of the object
that will remove the tension.

B) The ego: Mental images do not satisfy needs. The starving man cannot satisfy hunger by eating
images. Reality must be considered. This is the role of the ego. The ego develops out of the id
because of the necessity for dealing with the real world.

C) The super ego: In order for a person to function constructively in society, he should acquire a
system of values, norms, ethics and attitudes which are reasonably compatible with that society.
The superego, represents the internalized representation of the values and morals of society as
taught to the child by the parents and others. The super ego judges whether an action is right or
wrong according to the standards of society. The id seeks pleasure, the ego tests reality and the
superego strive for perfection.

Sometimes, the three components of personality are at odds: the ego postpones gratification
that the id wants right away and the superego battles with both the ego and the id, because
behaviour often falls short of the moral code it represents. But more often in the normal
person the three works as a team, producing integrated behaviour.
Criticisms of Psychoanalytic Theory

• Overemphasis on Sexuality: Critics argue that Freud's focus on sexual drives may be overly
reductionistic and neglects other crucial factors in human development. The theory's tendency to
explain all behaviours through a sexual lens has been criticized for oversimplifying the
complexities of human motivation.
• Lack of Empirical Evidence: Freud's emphasis on the unconscious mind and its influence on
behavior is intriguing but lacks the kind of empirical evidence that modern psychology demands.

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Critics argue that many of Freud's ideas, such as the Oedipus complex or the interpretation of
dreams, lack scientific rigor and are based more on anecdotal evidence than on systematic
observation and experimentation.
• Limited Generalizability: ideas were primarily based on clinical observations of a small number
of patients, leading to concerns about the generalizability of his findings to the broader
population. Critics argue that Freud's theories may not be applicable to individuals from diverse
cultural backgrounds or those with different personality structures.

4. MASLOW'S SELF-ACTUALIZATION THEORY

This theory suggests that individuals are motivated by a hierarchy of needs, with each level needing
fulfilment before progressing to the next. At the summit lies self-actualization, representing the
realization of one's full potential and personal growth.
Key Components of Self-Actualization:
A. Autonomy and Independence: Self-actualized individuals exhibit a strong sense of autonomy
and independence. They are not easily swayed by societal pressures, making decisions based
on their own values and beliefs.
B. Creativity and Problem Solving: Creativity is a hallmark of self-actualization. Maslow observed
that those who reach this stage are often innovative thinkers, capable of solving complex
problems with a unique perspective.
C. Embracing Realities and Facts: Self-actualized individuals possess a realistic understanding
of themselves and the world around them. They accept facts and truths, avoiding self-deception.
D. Continuous Personal Growth: A distinguishing feature of self-actualization is the pursuit of
continuous personal growth. These individuals are not complacent; instead, they actively seek
opportunities for learning and development.

5. SOCIAL LEARNING THEORY (SLT)

Social Learning Theory (SLT) of Personality, developed by Albert Bandura, is a comprehensive
framework that emphasizes the role of observational learning, imitation, and modelling in shaping
an individual's personality. Unlike traditional theories that focus solely on internal processes, the
Social Learning Theory recognizes the significant influence of external factors on the development
of personality.

Core Concepts:
1. Observational Learning: Individuals acquire new behaviors and attitudes by observing and
imitating the actions of others. Bandura argued that people are not passive recipients of
environmental stimuli; instead, they actively engage in learning through the process of
modelling.
2. Modelling: Modelling involves the replication of behaviors exhibited by others. In the context of
personality development, individuals are more likely to adopt behaviors if they witness positive
consequences for the model or if the model is perceived as similar, attractive, or possessing
authority.
3. Reinforcement and Punishment: reinforcement and punishment play a crucial role in the
acquisition and maintenance of behavior. Individuals are more likely to repeat behaviors that
result in positive outcomes and less likely to engage in behaviors that lead to negative
consequences.
4. Self-efficacy: Bandura introduced the concept of self-efficacy, which refers to an individual's
belief in their ability to perform a specific task or achieve a particular outcome. High self-efficacy
is associated with increased motivation, persistence, and resilience in the face of challenges,
contributing significantly to personality development.

PERSONALITY DEVELOPMENT STAGES

FREUDIAN STAGES OF PERSONALITY DEVELOPMENT

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According to Freud, an individual's personality is shaped by their experiences during different stages of
childhood. The Freudian stages of personality development include the Oral, Anal, Phallic, Latency, and
Genital stages.
1. Oral Stage (0-1 years):
In the oral stage, the primary focus is on the mouth as an erogenous zone. Infants explore the world
through oral activities such as sucking and biting. According to Freud, experiences during this stage
can influence an individual's later personality traits, such as dependency or aggression.
2. Anal Stage (1-3 years):
The anal stage centres around the child's interaction with the anal region. The main conflict involves
toilet training, and successful resolution results in the development of a sense of autonomy and
control. Failure to resolve this conflict may lead to issues such as anal retentiveness or anal
expulsiveness.
3. Phallic Stage (3-6 years):
The phallic stage is characterized by the child's growing awareness of gender differences. The
focus shifts to the genitals as the primary erogenous zone. Freud introduced the concept of the
Oedipus and Electra complexes during this stage, wherein children experience unconscious
feelings of desire for the opposite-sex parent and rivalry with the same-sex parent.
4. Latency Stage (6-12 years):
The latency stage is a period of relative calm, where sexual urges are repressed, and the child
focuses on developing social and intellectual skills. Freud suggested that during this stage, children
primarily interact with same-sex peers, and sexual feelings are sublimated into other activities.
5. Genital Stage (12 years and onwards):
The genital stage marks the onset of puberty and the reawakening of sexual urges. During this final
stage, individuals seek mature, adult sexual relationships. Successful navigation of the previous
stages is thought to contribute to the development of a healthy, well-adjusted adult personality.
ERIKSON'S PSYCHOLOGICAL STAGES OF PERSONALITY DEVELOPMENT
Erik Erikson, a renowned developmental psychologist, proposed a theory of psychosocial development that
encompasses eight distinct stages, each associated with a particular crisis or conflict that individuals must
navigate to achieve healthy personality development. These stages span from infancy to old age and
emphasize the interplay between individual development and social interactions. Erikson's model provides
valuable insights into the complex nature of human personality and the challenges individuals face as they
progress through life.
1. Trust vs. Mistrust (Infancy): In the first year of life, the primary task is to establish a sense of trust
in the world. Infants who receive consistent care and affection develop a basic trust in their
caregivers and the environment, forming a foundation for future relationships.
2. Autonomy vs. Shame and Doubt (Early Childhood): Toddlers begin to assert their independence
and control over their environment. Successful resolution leads to a sense of autonomy, while failure
results in feelings of shame and doubt.
3. Initiative vs. Guilt (Preschool): During the preschool years, children explore their surroundings
and develop a sense of purpose. Encouragement allows the development of initiative, but overly
critical responses may lead to guilt.
4. Industry vs. Inferiority (School Age): The elementary school period is marked by the development
of competence in various skills and tasks. Success fosters a sense of industry, while failure can
result in feelings of inferiority.
5. Identity vs. Role Confusion (Adolescence): Adolescents seek to establish their identity by
exploring personal values, beliefs, and goals. A clear sense of identity emerges through successful
resolution, while confusion and role ambiguity may arise if the process is incomplete.
6. Intimacy vs. Isolation (Young Adulthood): Forming deep, meaningful relationships becomes the
focal point during young adulthood. Individuals who establish intimate connections experience
fulfilment, whereas those who struggle may face isolation.
7. Generativity vs. Stagnation (Middle Adulthood): Middle-aged adults focus on contributing to
society and future generations. Successful resolution results in a sense of generativity, while
stagnation occurs if individuals feel unproductive.

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8. Integrity vs. Despair (Late Adulthood): In the final stage, individuals reflect on their lives. A sense
of integrity is achieved by accepting one's life and accomplishments, while despair may arise from
unresolved issues and regrets.
TYPES OF PERSONALITY
The three most common type of personalities are: Jungian type, Friedman type and Holland type.
JUNG’S CLASSIFICATION OF PERSONALITY

• Jung's classification is based on his theory of psychological types, emphasizing the interplay of
conscious and unconscious elements within an individual.
• Jung proposed that personality is composed of three fundamental components: the ego, the
personal unconscious, and the collective unconscious. The ego represents the conscious mind,
the personal unconscious contains individual experiences and memories, while the collective
unconscious is a shared reservoir of universal experiences and symbols common to all
humanity.
• The cornerstone of Jung's classification is the concept of psychological types, which he divided
into two attitudes (introversion and extraversion) and four functions (thinking, feeling, sensation,
and intuition). The combination of these attitudes and functions results in eight distinct
personality types. For instance, an individual with an introverted thinking personality type would
exhibit characteristics such as introspection, logical analysis, and a preference for solitude.

FRIEDMAN’S CLASSIFICATION OF PERSONALITY

Friedman proposed a two-dimensional model of personality, highlighting the interplay between two
fundamental dimensions: the "Type A" and "Type B" personalities.

1. Type A Personality:
• Characteristics: Individuals classified as Type A are often characterized by a sense of
urgency, competitiveness, and a constant drive to achieve goals. They are ambitious, time-
conscious, and may exhibit a high level of impatience.
• Behavioural Patterns: Type A personalities are prone to engage in multitasking, and they
often set high standards for themselves and others. They may experience higher levels of
stress due to their intense work ethic and competitive nature.
2. Type B Personality:
• Characteristics: In contrast, Type B individuals tend to be more laid-back, patient, and
tolerant of others. They are generally less concerned with time pressure and competition and
are more relaxed in their approach to life.
• Behavioural Patterns: Type B personalities exhibit a more easy-going attitude, and they may
find it easier to cope with stress. They are less likely to experience the negative health
effects associated with chronic stress.

HOLLANDS CLASSIFICATION OF PERSONALITY

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 MANAGEMENT COMPENDIUM – RBI GRADE B ~BRAJESH MOHAN

This theory is based on the premise that individuals can be classified into six primary personality types, and
that career satisfaction and success are more likely when individuals work in environments that align with
their dominant personality type.
Holland identified six main personality types, each corresponding to a distinct work environment:
1. Realistic (R): Individuals with a realistic personality are practical, hands-on, and enjoy working with
tools and machinery. They thrive in environments that require physical skills and coordination.
2. Investigative (I): Those with investigative personalities are analytical, curious, and enjoy solving
problems through research and analysis. They are well-suited for careers in science, research, and
information technology
3. Artistic (A): Artistic individuals are creative, imaginative, and prefer self-expression through various
forms of art. They are drawn to careers in the arts, design, and other creative fields.
4. Social (S): Individuals with social personalities are outgoing, empathetic, and enjoy helping others.
They excel in careers that involve interpersonal relationships, such as teaching, counseling, and
healthcare.
5. Enterprising (E): Enterprising individuals are assertive, persuasive, and enjoy taking on leadership
roles. They are often found in business, sales, and entrepreneurial pursuits.
6. Conventional (C): Conventional personalities are detail-oriented, organized, and thrive in
structured environments. They are well-suited for careers in finance, administration, and other rule-
based professions.

Big Five Personality Traits

J.M. Digman proposed his five-factor model of personality in 1990, and Goldman extended it to the highest
level of organizations in 1993. The Big Five personality traits, also known as the five factors model (FFM),
is a widely examined theory of five broad dimensions used by some psychologists to describe the human
personality.
In Big Five Personality traits, each traits represents a continuum, individuals can fall anywhere in the
continuum for any personality trait. It is important to keep in mind that each of the big five traits represent a
range between two extreme personality traits. For instance, neuroticism signifies a continuum between
extreme neuroticism and extreme emotional stability. Similarly, what these five traits suggest that, most
people fall under one of these categories. An average person lies somewhere between the two polar ends
of each dimension.

The five major dimensions include Openness, Conscientiousness, Extraversion, Agreeableness, and
Neuroticism, often referred to by the acronym OCEAN:
Openness: It is Being curious, original, intellectual, creative, and open to new ideas.

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• Openness addresses one’s range of interests. Extremely open people are fascinated by novelty and
innovation. They have a general appreciation for art, emotion, beauty, adventure, unusual ideas,
imagination, curiosity, and variety of experience.
• People who are high in this trait tend to be more adventurous and creative. People low in this trait
are often much more traditional and may struggle with abstract thinking.
• For example, if a person is open to traveling new places spontaneously, he can be considered
open to new experiences. One the other hand a closed person wouldn't like to experience new
things and rather occupy himself with the everyday schedule.
Conscientiousness: It is being organized, systematic, punctual, achievement-oriented, and
dependable.

• People with higher score on conscientiousness tend to be self-disciplined, dutiful and prefer planner
behaviours to a spontaneous one.
• For example, if a person is highly self-disciplined, say he always does his chores done right away,
he can be called conscientious. Opposite can a person who prefer spontaneity, doing and planning
things in the moment rather than being planned and organized
Extraversion: It is being outgoing, enthusiastic, talkative, sociable, and enjoying social situations

• It reflects a person’s comfort level with relationships. Extroverts are characterized by excitability,
sociability, talkativeness, assertiveness, and high amounts of emotional expressiveness.
• People low on the traits are classified as Introverts and they are less sociable, less talkative, less
assertive, and more reluctant to begin a new relationship.
• For Example, a person with extraversion characteristics loves going out with friends and
colleagues, like to socialize with new people whereas introverts are the persons who are reserved
to all these things and generally enjoys the company of themselves or with the one with whom they
get along really well means close friends and family.
Agreeableness: It is being affable, tolerant, sensitive, trusting, kind, and warm.

• It reflects individual differences in general concern for social harmony. They are generally
considerate, kind, generous, trusting and trustworthy, helpful, and willing to compromise their
interests with others.
• They value harmony more than they value their own say. Low agreeableness personalities are often
competitive or challenging people, which can be seen as aggressive or untrustworthy. They focus
more on their own needs than the needs of others.
Neuroticism: It is being anxious, irritable, temperamental, and moody.

• It is the tendency to experience negative emotions, such as anger, anxiety, or depression. It is

sometimes called emotional instability.
• A high need for stability manifests as a stable and calm personality but can be seen as uninspiring
and unconcerned.
• A low need for stability causes a reactive and excitable personality, often very dynamic individuals,
but they can be perceived as unstable or insecure.
• For example, if a person easily loses his temper when he doesn't get his order in time or there is too
much sugar in his coffee, such people have high score on neuroticism, whereas if a person can
handle criticisms and gloomy environments calmly, such people receive low score on neuroticism.
Relevance of Big Five Personality Traits
1. Job Performance Prediction: For instance, individuals high in Conscientiousness tend to be
organized, responsible, and achievement-oriented, making them valuable assets in roles that
require attention to detail and reliability. Extraversion is often associated with effective
communication and leadership, making extraverts well-suited for roles that involve teamwork and
social interaction.
2. Team Dynamics and Collaboration: Diverse personality profiles contribute to a team's ability to
tackle challenges from multiple perspectives. Teams composed of individuals with varying levels of

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extraversion, agreeableness, and openness may be more creative and adaptable, fostering a
dynamic and innovative work environment.
3. Leadership and Management: Leaders who score high in conscientiousness are likely to be
organized and goal-oriented, while those with high extraversion may excel in motivating and
inspiring their teams. The ability to tailor leadership styles based on the individual personalities of
team members is a key aspect of effective management.
4. Career Development and Training: For instance, individuals high in openness may benefit from
roles that allow for creativity and exploration, while those high in conscientiousness may excel in
positions that require attention to detail and adherence to established procedures.
Limitations of the Big Five Personality Theory
1. Cultural Variations: The traits identified by the theory are rooted in Western cultural perspectives,
which may not fully capture the diversity of personality traits across different cultures. Cultural
factors, such as collectivism and individualism, can influence the expression and interpretation of
personality, challenging the universality of the Big Five traits.
2. Situation-Specific Behavior: The Big Five Personality Theory tends to emphasize stable and
enduring traits, but it may overlook the impact of situational factors on behavior. People often exhibit
different aspects of their personality in various situations, making it challenging to predict behavior
solely based on broad personality dimensions.
3. Limited Predictive Power: While the theory can offer insights into general tendencies, it may fall
short in providing accurate predictions for individual behaviors or performance in specific contexts.
Other factors, such as skills, experience, and situational factors, play crucial roles in determining
behavior and outcomes.
4. Inability to Capture Change and Development: Research indicates that personality traits can
evolve based on life experiences, personal growth, and environmental influences. The theory's
inability to capture these changes limits its applicability in understanding the dynamic nature of
personality across the lifespan.

Myers-Briggs Type Indicator (Not in Syllabus but Widely Used)

You may have seen people on social media sites or on dating site using four letters word such as
ENTP or ISTJ, do you know what is it? What does it signify? Let’s understand it in detail.
In personality typology, the Myers–Briggs Type Indicator (MBTI) is an introspective self-report
questionnaire indicating differing psychological preferences in how people perceive the world and make
decisions. It is a self-help assessment test which helps people gain insights about how they work and learn.
The MBTI was constructed by two Americans: Katharine Cook Briggs and her daughter Isabel Briggs
Myers, who were inspired by the book Psychological Types by Swiss psychiatrist Carl Jung, who
had proposed that there are four essential psychological functions by which we see this world.
These functions are sensation, intuition, feeling, and thinking. All of us rely on one function more than
others. The base of MBTI lies in identifying our preferences which are driven through our interests, values,
needs, and motivation.
Eight essential psychological functions of MBTI include, extraversion (E), sensing (S), thinking (T),
judgment (J), introversion (I), intuition (N), feeling (F), and perception (P). These further divides people
into 16 different types, called sociotypes which are; ESTJ, ENTJ, ESFJ, ENFJ, ISTJ, ISFJ, INTJ, INFJ,
ESTP, ESFP, ENTP, ENFP, ISTP, ISFP, INTP & INFP.
Extraversion (E) – Introversion (I)

• Extraverts (also often spelled extroverts) are "outward-turning" and tend to be action-oriented, enjoy
more frequent social interaction, and feel energized after spending time with other people. Introverts
are "inward-turning" and tend to be thought-oriented, enjoy deep and meaningful social interactions,
and feel recharged after spending time alone.
Sensing (S) – Intuition (N)

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• This scale involves looking at how people gather information from the world around them. Just like
with extraversion and introversion, all people spend some time sensing and intuiting depending on
the situation. According to the MBTI, people tend to be dominant in one area or the other. People
who prefer sensing tend to pay a great deal of attention to reality, particularly to what they can learn
from their own senses. They tend to focus on facts and details and enjoy getting hands-on
experience. Those who prefer intuition pay more attention to things like patterns and impressions.
They enjoy thinking about possibilities, imagining the future, and abstract theories.
Thinking (T) – Feeling (F)

• This scale focuses on how people make decisions based on the information that they gathered from
their sensing or intuition functions. People who prefer thinking place a greater emphasis on facts
and objective data.
• They tend to be consistent, logical, and impersonal when weighing a decision. Those who prefer
feeling are more likely to consider people and emotions when arriving at a conclusion.
Judging (J) – Perceiving (P)

• The final scale involves how people tend to deal with the outside world. Those who lean toward
judging prefer structure and firm decisions. People who lean toward perceiving are more open,
flexible, and adaptable. These two tendencies interact with the other scales.

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Each type is then listed by its four-letter code:

• ISTJ - The Inspector: Reserved and practical, they tend to be loyal, orderly, and traditional.
• ISTP - The Crafter: Highly independent, they enjoy new experiences that provide first-hand learning.
• ISFJ - The Protector: Warm-hearted and dedicated, they are always ready to protect the people
they care about.
• ISFP - The Artist: Easy-going and flexible, they tend to be reserved and artistic.
• INFJ - The Advocate: Creative and analytical, they are considered one of the rarest Myers-Briggs
types.
• INFP - The Mediator: Idealistic with high values, they strive to make the world a better place.
• INTJ - The Architect: High logical, they are both very creative and analytical.4
• INTP - The Thinker: Quiet and introverted, they are known for having a rich inner world.
• ESTP - The Persuader: Out-going and dramatic, they enjoy spending time with others and focusing
on the here-and-now.
• ESTJ - The Director: Assertive and rule-oriented, they have high principles and a tendency to take
charge.
• ESFP - The Performer: Outgoing and spontaneous, they enjoy taking center stage.
• ESFJ - The Caregiver: Soft-hearted and outgoing, they tend to believe the best about other people.
• ENFP - The Champion: Charismatic and energetic, they enjoy situations where they can put their
creativity to work.
• ENFJ - The Giver: Loyal and sensitive, they are known for being understanding and generous.
• ENTP - The Debater: Highly inventive, they love being surrounded by ideas and tend to start many
projects (but may struggle to finish them).
• ENTJ - The Commander: Outspoken and confident, they are great at making plans and organizing
projects.

Check your Personality Type: https://www.16personalities.com/personality-types

Applications of Personality at Organizational Level

1. Employee Selection and Recruitment:
• Personality assessments can aid in the hiring process by identifying candidates whose traits
align with the job requirements and organizational culture.
• Matching personalities with job roles can enhance job satisfaction and reduce turnover rates.

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2. Team Building and Collaboration:

• Knowledge of team members' personalities facilitates the formation of well-balanced and
complementary teams.
• Teams with diverse personality profiles can leverage different strengths, fostering innovation and
creativity.
3. Leadership Development:
• Identifying leadership traits in individuals can guide the selection and development of effective
leaders within the organization.
• Tailored leadership training programs can be designed based on an understanding of the
personality traits that contribute to successful leadership.
4. Employee Engagement and Motivation:
• Recognizing and addressing individual differences in motivational factors based on personality
can enhance employee engagement.
• Tailoring motivational strategies to align with employees' personality preferences can boost
morale and productivity.
Applications of Personality at the Individual Level
1. Career Selection and Development:
• Personality assessments, such as the Myers-Briggs Type Indicator (MBTI) or the Big Five
Personality Traits, are often employed in career counselling. Individuals can identify their
strengths, weaknesses, and preferences, aiding them in making informed career choices.
2. Educational Settings:
• Understanding personality helps educators tailor teaching methods to match students' learning
styles. For example, extraverted students might thrive in group activities, while introverted
students may excel in individual projects.
3. Health and Well-being:
• Personality traits can influence health-related behaviors. For instance, individuals with high
conscientiousness are more likely to adopt healthy lifestyles, including regular exercise and
balanced nutrition.
4. Emotional Regulation:
• Awareness of one's personality can aid in recognizing and managing emotions. For example,
individuals with high emotional stability may cope better with stress and adversity.
5. Financial Decision-Making:
• Personality traits influence financial behaviors, such as risk-taking and spending habits.
Understanding one's personality can be valuable in making sound financial decisions and
planning for the future.

Concept of Reinforcement in Organizational Behaviour

Reinforcement is the attempt to develop or strengthen desirable behaviour. Reinforcement theory
is a psychological principle suggesting that behaviours are shaped by their consequences, and
that individual behaviours can be changed through reinforcement, punishment and extinction.
Reinforcement theory proposes that you can change someone's behaviour by using
reinforcement, punishment, and extinction. Rewards are used to reinforce the behaviour you
want and punishments are used to prevent the behaviour you do not want. Extinction is a
means to stop someone from performing a learned behaviour.
Any behaviour that elicits a consequence is called operant behaviour, because the individual
operates on his or her environment. Reinforcement theory focuses on the relationship between the
operant behaviour and the related consequences, and is also called as operant conditioning.
Major contributor of this theory was B.F. Skinner who developed modern ideas about
reinforcement theory. Skinner argued that the internal needs and drives of individuals can be
ignored because people learn to exhibit certain behaviours based on what happens to them as a

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result of their behaviour. Management team must always try to shape employee behaviours to get
better contributions to the company. This can involve supporting positive behaviours or reducing
negative behaviours.
Reinforcement can be divided into positive reinforcement and negative reinforcement.

see image

Positive Reinforcement: It occurs when a behaviour in response to a situation is met by a reward

(adding something in order to increase a response). For example, giving a bonus for high
productivity is positive reinforcement.
• There are primary reinforcers and secondary reinforcers. Primary reinforcers satisfy
basic biological needs and include food and water. However, primary reinforcers don not
always reinforce. For instance, food may not be a reinforcer to someone who has just
completed a five-course meal.
• Most behaviours in organizations are influenced by secondary reinforcers. These
include such benefits as money, status, grades, trophies and praise from others.
• These become positive reinforcers because of their associations with the primary
reinforcers and hence are often called conditioned reinforcers.
Negative Reinforcement: It is anything that strengthens and increases behaviour by the
withdrawal or removal of unpleasant consequences. For example, consider an organisation that
puts a ban on recreational activities of employees during working hours (such as not allowing them
to read or check emails) due to low productivity. When productivity improves, the organisation may
lift the ban and allow recreational activities in a limited form. The lifting of the ban is negative
reinforcement
• Supervisors apply negative reinforcement when they stop criticizing employees whose poor
performance has improved. By withholding the criticism, employees are more likely to
repeat behaviours that enhance their performance.
• Negative reinforcement is sometimes confused with punishment, because both use
unpleasant stimuli to influence behaviour. However, negative reinforcement is used to
increase the frequency of a desired behaviour, where as punishment is used to decrease
the frequency of an undesired behaviour.
Punishment: It is the act of causing an unpleasant consequence to a response to prevent the
person from repeating that behaviour. Placing an employee on suspension for excessive
absenteeism is an example of punishment.
Extinction: Eliminating any reinforcement that is maintaining a behaviour is called extinction. For
instance, an organisation may announce that it wants to adopt an open-door policy to encourage
employees to express their opinions to the management. However, the managers may not be
responsive to employees who approach them to discuss problems. This lack of responsiveness
causes employees to stop coming up to the managers over time.

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Some Other Types:

Extrinsic Reinforcement: Extrinsic reinforcement involves the use of external rewards or punishments to
motivate or discourage certain behaviors.

• Examples: Giving a student a sticker for completing homework (positive reinforcement), allowing
extra playtime for good behavior (positive reinforcement), deducting points for misbehaviour
(negative reinforcement), or giving detention for breaking rules (negative reinforcement).
Intrinsic Reinforcement: Intrinsic reinforcement involves the inherent satisfaction or enjoyment derived
directly from engaging in a particular behavior. Intrinsic reinforcement comes from within the individual, and
the behavior itself is rewarding.

• Examples: Reading a book for the joy of learning, engaging in a hobby because it brings personal
satisfaction, or solving a challenging puzzle for the sense of accomplishment.
Primary Reinforcement: Primary reinforcement refers to a type of reinforcement that is inherently
rewarding because it satisfies a biological or physiological need.

• Examples: Examples of primary reinforcers include food, water, shelter, and other necessities for
survival. These stimuli are considered intrinsically rewarding because they fulfil basic biological
requirements.
Secondary Reinforcement: Secondary reinforcement, also known as conditioned reinforcement, is a type
of reinforcement that gains its reinforcing properties through association with primary reinforcers or other
secondary reinforcers.

• Examples: Money, praise, and tokens are examples of secondary reinforcers. These stimuli become
reinforcing because they are associated with primary reinforcers or have been paired with other
reinforcing stimuli through conditioning. For example, money can be exchanged for primary
reinforcers like food or shelter.
ASPECTS IN ADMINISTERING REINFORCEMENT:
1. Identifying Target Behaviors: Clearly define the behaviors you want to reinforce. Be specific and
observable in your descriptions.
2. Positive vs. Negative Reinforcement: Understand the difference between positive reinforcement
(adding a stimulus to increase a behavior) and negative reinforcement (removing a stimulus to
increase a behavior).
3. Timing and Contingency: Reinforce the behavior immediately or as close to it as possible. The
reinforcement should be contingent on the desired behavior.
4. Consistency: Be consistent in delivering reinforcement. Inconsistency can lead to confusion and
may not effectively strengthen the desired behavior.

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5. Individual Differences: Consider the individual differences among learners. What may be
reinforcing for one person may not be as effective for another.
6. Reinforcement Schedule: Decide on the schedule of reinforcement (continuous or intermittent)
based on the goals and the stage of learning.
There are two types of schedules of Reinforcement – Continuous and Partial (Intermittent
Reinforcement)
Continuous Reinforcement:

• In continuous reinforcement, a behavior is reinforced every time it occurs. This means that every
instance of the desired behavior is followed by a reward or reinforcement. Continuous reinforcement
is effective for quickly establishing and strengthening a new behavior. However, it can also lead to
faster extinction (the disappearance of the behavior when reinforcement is discontinued) if the
reinforcement stops.
• Example: Giving a treat to a dog every time it sits on command.
Partial Reinforcement (Intermittent Reinforcement): Partial reinforcement involves reinforcing a
behavior only part of the time. This means that not every occurrence of the desired behavior is followed by
reinforcement. There are different schedules of partial reinforcement, including fixed ratio, variable ratio,
fixed interval, and variable interval. These schedules determine when and how often reinforcement is
delivered.

• Partial reinforcement tends to result in more persistent behavior. Extinction is typically slower with
partial reinforcement because the individual has learned that the reinforcement is not guaranteed
with every instance of the behavior.
• Example: Giving a treat to a dog for sitting on command only sometimes, such as after every 3rd or
4th time.
Partial reinforcement is further of 4 types:
A. Fixed Ratio (FR): Reinforcement is delivered after a fixed number of responses. For example,
every 5th behavior is reinforced.

Characteristics of Fixed Ratio Schedule:

1. Predictability: This predictability makes it easier for the individual to understand the relationship
between their behavior and the reinforcement.
2. High Response Rate: Since the individual knows that a certain number of responses will lead to
reinforcement, they often engage in rapid and steady behavior to achieve the reinforcement.
3. Post-Reinforcement Pause: In some cases, there may be a brief pause in responding
immediately after reinforcement. This is known as a post-reinforcement pause and is more
commonly observed in higher fixed ratio schedules (e.g., FR-10 or FR-20). After receiving
reinforcement, the individual may take a momentary break before resuming the behavior.
4. Resistance to Extinction: Behaviors reinforced on a fixed ratio schedule tend to be more
resistant to extinction compared to behaviors reinforced on other schedules, such as variable
ratio or fixed interval schedules. This means that even if reinforcement is no longer provided, the
behavior persists for a longer time.

B. Variable Ratio (VR): Reinforcement is delivered after an average number of responses, but the
exact number varies. For example, on average, every 5th behavior is reinforced, but it could be
after 3 or 7 behaviors.
Characteristics of Variable Ratio Schedule:
1. Unpredictable Timing of Reinforcement: Unlike fixed ratio schedules, where reinforcement
follows a fixed number of responses, the variability in a variable ratio schedule makes it difficult
for individuals to predict when the next reinforcement will occur.
2. High and Steady Response Rates: Variable ratio schedules tend to result in high and steady
rates of responding. Since individuals cannot predict exactly when the reinforcement will occur,
they are motivated to continue responding at a consistent pace.

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3. Application in Real-world Settings: Variable ratio schedules are used in various real-world
situations to maintain desired behaviors. For example, salespeople who receive commissions on
an unpredictable basis, or individuals playing mobile games with random rewards, are
experiencing variable ratio reinforcement.
4. Resistance to Extinction: Extinction refers to the gradual fading away of a learned behavior
when reinforcement is no longer provided. The unpredictability of reinforcement in variable ratio
schedules makes it more challenging for the behavior to extinguish.

C. Fixed Interval Schedule: A fixed interval schedule is a type of reinforcement schedule in

operant conditioning, which is a learning process that involves rewards and punishments to
strengthen or weaken behavior. In a fixed interval schedule, the reinforcement is delivered at
fixed, predictable time intervals, regardless of the behavior exhibited by the individual.

Key features of a fixed interval schedule include:

1. Timing: Reinforcement is provided after a specific, constant amount of time has passed since
the last reinforcement, regardless of how many responses the individual makes during that time.
2. Predictability: The individual knows when to expect the reinforcement, which can lead to specific
patterns of behavior. For example, there might be a noticeable increase in the rate of responding
as the time for reinforcement approaches.
3. Scalloping Effect: Behavior tends to increase as the time for reinforcement approaches and then
drops off immediately after reinforcement is delivered. This creates a scalloped pattern on a
graph of response rate over time.
4. Limited Response Requirement: The individual only needs to make a response (engage in the
behavior) at least once during the interval to receive reinforcement.

D. Variable Interval Schedule:

A Variable Interval (VI) schedule is a type of reinforcement schedule used in operant conditioning, a
learning process in which behavior is strengthened or weakened by the consequences that follow it.
In a variable interval schedule, reinforcement is delivered based on the passage of time, but the
time intervals are unpredictable.
Variable Interval schedule works:
1. Time-Based Reinforcement: In operant conditioning, reinforcement is a consequence that
increases the likelihood of a behavior being repeated. In a variable interval schedule,
reinforcement is provided based on the passage of time.
2. Unpredictable Timing: Unlike a fixed interval schedule where the reinforcement is delivered at a
constant rate after a specific amount of time has passed, in a variable interval schedule, the time
intervals are variable and unpredictable. For example, if a variable interval schedule has an
average interval of 5 minutes, the reinforcement might be delivered after 2 minutes, then 7
minutes, then 4 minutes, and so on.
3. Steady, Moderate Rate of Responding: Variable interval schedules typically result in a steady
and moderate rate of responding. Since the individual cannot predict exactly when the
reinforcement will occur, they are more likely to engage in the behavior consistently rather than
at a specific time.
4. Resistance to Extinction: Behaviors reinforced on a variable interval schedule tend to be more
resistant to extinction compared to behaviors reinforced on a fixed interval schedule. This
means that the behavior is less likely to diminish if reinforcement is withheld.

STEPS OF B.F. SKINNER'S ORGANIZATIONAL BEHAVIOR MODIFICATION (OB MOD)

1. Identify Critical Performance Behaviors: Begin by clearly defining and identifying the specific
behaviors that are critical to the success of the organization. These behaviors should be observable,
measurable, and directly related to organizational goals.

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 MANAGEMENT COMPENDIUM – RBI GRADE B ~BRAJESH MOHAN

2. Measure Baseline Performance: Establish a baseline by objectively measuring the current frequency
and quality of the identified behaviors. This provides a benchmark against which progress can be
evaluated.
3. Select Reinforcers: Determine appropriate reinforcement strategies, both positive and negative, to
encourage the desired behaviors. Positive reinforcement involves rewarding desired behaviors, while
negative reinforcement involves removing or avoiding negative consequences.
4. Administer Reinforcers Consistently: Consistency is key in administering reinforcement. Reinforcers
should be applied promptly and consistently following the display of the target behaviors to strengthen their
occurrence.
5. Monitor and Adjust: Continuously monitor employee performance and make adjustments to the
reinforcement strategies as needed. This involves refining the approach based on ongoing assessment and
feedback.
6. Evaluate the Program's Effectiveness: Assess the overall effectiveness of the OB Mod program by
comparing current performance levels to the baseline. This evaluation helps determine whether the
intervention has successfully achieved its objectives.
7. Extend the Program: f successful, consider expanding the OB Mod program to other areas of the
organization or introducing it to new behaviors. This allows for the application of behavior modification
principles to a broader range of organizational contexts.
UTILITIES OF OB MOD
1. Performance Improvement: OB Mod is primarily employed to enhance employee performance. By
identifying and reinforcing desired behaviors through positive reinforcement, organizations can
motivate employees to meet and exceed performance expectations.
2. Employee Motivation: The use of positive reinforcement encourages employees to repeat
behaviors that contribute to organizational goals. This can lead to increased job satisfaction and
motivation, fostering a positive work environment.
3. Behavioural Change: OB Mod can be utilized to modify undesirable behaviors by applying
consequences such as punishment or extinction. This helps in curbing behaviors that are
counterproductive or inconsistent with organizational objectives.
4. Training and Development: The principles of OB Mod are often employed in training programs to
facilitate skill acquisition. By reinforcing correct behaviors during training, organizations can
expedite the learning process.
5. Goal Setting: OB Mod involves setting clear and achievable performance goals. This process helps
align individual and organizational objectives, providing employees with a sense of direction and
purpose.
Criticism of OB Mod:
1. Overemphasis on Quantifiable Metrics: This may lead to neglecting important but intangible
aspects of employee performance, such as creativity, innovation, and teamwork, which are vital for
overall organizational success.
2. Rigidity in Goal Setting: OB Mod relies heavily on setting specific and measurable goals for
employees. Critics argue that this approach can be overly rigid, failing to accommodate the dynamic
and complex nature of many job roles.
3. Potential for Manipulation: When employees feel that their behavior is being closely monitored
and controlled, it may create a negative organizational culture characterized by distrust and a sense
of invasion of privacy.
4. Short-Term Focus: By concentrating on immediate behavior modification, organizations may
neglect the development of intrinsic motivation and commitment, which are crucial for sustained
high performance and employee satisfaction.
5. Ignoring External Factors: Economic conditions, industry changes, or personal life events can
significantly impact an employee's behavior, and a rigid focus on internal behavioural modification
may ignore these external influences.

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 MANAGEMENT COMPENDIUM – RBI GRADE B ~BRAJESH MOHAN

Perception: Concept, Nature and perceptual errors

WHAT IS PERCEPTION
Perception refers to the process by which individuals interpret and make sense of sensory information from
their environment. It involves the way people organize, interpret, and give meaning to the stimuli they
receive through their senses, such as sight, sound, touch, taste, and smell.
For example, imagine two people witnessing the same event, like a street performance. One person might
perceive it as entertaining and skilful, focusing on the artistic aspects of the performance. Another person
might perceive it as disruptive and noisy, emphasizing the inconvenience caused by the crowd.
SIGNIFICANCE OF PERCEPTION
1. Decision-Making: Perception shapes the way managers interpret information and make decisions.
Individual perceptions of a situation can vary, leading to diverse perspectives and potential
differences in decision outcomes. Understanding the perceptual filters through which information is
processed is crucial for effective decision-making.
2. Interpersonal Relationships: Management involves working with diverse teams and stakeholders.
The way individuals perceive each other, their roles, and their contributions significantly impacts the
quality of interpersonal relationships. Managers must be attuned to the perceptions of their team
members to foster a positive and collaborative work environment.
3. Organizational Culture: Perception contributes to the formation and sustenance of organizational
culture. The collective perceptions of employees regarding the values, norms, and practices within
an organization shape its culture. A shared perception of the organization's goals and values
enhances cohesion and employee engagement.
4. Leadership Effectiveness: Leaders must be cognizant of how they are perceived by their
subordinates, peers, and superiors. Perception influences the acceptance and effectiveness of
leadership styles. A leader who is perceived as fair, transparent, and competent is more likely to
inspire trust and commitment among team members.
5. Conflict Resolution: Conflicts often arise due to differing perceptions of a situation. Recognizing
and addressing these perceptual differences is crucial for effective conflict resolution. Managers
need to facilitate open communication to understand and reconcile conflicting perceptions among
team members.
6. Motivation and Job Satisfaction: Employees' perceptions of their work environment, opportunities
for growth, and the significance of their contributions directly impact motivation and job satisfaction.
Managers can enhance employee morale by aligning organizational practices with positive
perceptions and addressing factors that may lead to negative perceptions.
FACTORS CONTRIBUTING TO PERCEPTION
A number of factors operate to shape and sometimes distort perception. These factors can reside:
1. In the perceiver
2. In the object or target being perceived or
3. In the context of the situation in which the perception is made.
1. Characteristics of the Perceiver: Several characteristics of the perceiver can affect perception. When
an individual looks at a target and attempts to interpret what he or she stands for, that interpretation is
heavily influenced by personal characteristics of the individual perceiver. The major characteristics of the
perceiver influencing perception are:
(a) Attitudes: The perceiver's attitudes affect perception. For example, suppose Mr. X is interviewing
candidates for a very important position in his organisation – a position that requires negotiating contracts
with suppliers, most of whom are male. Mr X may feel that women are not capable of holding their own in
tough negotiations. This attitude will doubtless affect his perceptions of the female candidates he
interviews. influence, affect synonyms

(b) Moods: Moods can have a strong influence on the way we perceive someone. We think differently
when we are happy than we do when we are depressed. In addition, we remember information that is

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 MANAGEMENT COMPENDIUM – RBI GRADE B ~BRAJESH MOHAN

consistent with our mood state better than information that is inconsistent with our mood state. When in a
positive mood, we form more positive impressions of others. When in a negative mood, we tend to evaluate
others unfavourably.
(c) Motives: Unsatisfied needs or motives stimulate individuals and may exert a strong influence on their
perceptions. For example, in an organisational context, a boss who is insecure perceives a subordinate's
efforts to do an outstanding job as a threat to his or her own position. Personal insecurity can be translated
into the perception that others are out to "get my job", regardless of the intention of the subordinates.
(d) Self-Concept: Another factor that can affect social perception is the perceivers' self concept. An
individual with a positive self-concept tends to notice positive attributes in another person. In contrast, a
negative self-concept can lead a perceiver to pick out negative traits in another person. Greater
understanding of self allows us to have more accurate perceptions of others.
(e) Interest: The focus of our attention appears to be influenced by our interests. Because our individual
interests differ considerably, what one person notices in a situation can differ from what others perceive.
For example, the supervisor who has just been reprimanded by his boss for coming late is more likely to
notice his colleagues coming late tomorrow than he did last week. If you are preoccupied with a personal
problem, you may find it hard to be attentive in class.
(f) Expectations: Finally, expectations can distort your perceptions in that you will see what you expect to
see. The research findings of the study conducted by Sheldon S Zalkind and Timothy W Costello on some
specific characteristics of the perceiver reveal
(i) Knowing oneself makes it easier to see others accurately.
(ii) One's own characteristics affect the characteristics one is likely to see in others.
(iii) People who accept themselves are more likely to be able to see favourable aspects of
other people.
(iv) Accuracy in perceiving others is not a single skill.
These four characteristics greatly influence how a person perceives others in the environmental
situation.
2. Characteristics of the Target: Characteristics in the target that is being observed can affect what is
perceived. Physical appearance plays a big role in our perception of others. Extremely attractive or
unattractive individuals are more likely to be noticed in a group than ordinary looking individuals. Motion,
sound, size and other attributes of a target shape the way we see it.
Physical appearance plays a big role in our perception of others. The perceiver will notice the target's
physical features like height, weight, estimated age, race and gender. Perceivers tend to notice physical
appearance characteristics that contrast with the norm, that are intense, or that are new or unusual.

• Verbal communication from targets also affects our perception of them. We listen to the topics they
speak about, their voice tone, and their accent and make judgements based on this input. Non-
verbal communication conveys a great deal of information about the target.
• The perceiver deciphers eye contact, facial expressions, body movements, and posture all in an
attempt to form an impression of the target. The perceiver, who observes the target's behaviour,
infers the intentions of the target.
• For example, if our manager comes to our office doorway, we think "oh no! he is going to give me
more work to do". Or we may perceive that his intention is to congratulate us on a recent success.
In any case, the perceiver's interpretation of the target's intentions affects the way the perceiver
views the target.
3. Characteristics of the Situation: The situation in which the interaction between the perceiver and the
target takes place has an influence on the perceiver's impression of the target. For example, a professor
may not notice his 20-year-old female student in a bikini at the swimming pool. Yet the professor will notice
the same girl if she comes to his organisational behaviour class in a bikini. In the same way, meeting a
manager in his or her office affects your impression in a certain way that may contrast with the impression
you would have formed, had you met the manager in a restaurant.

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 MANAGEMENT COMPENDIUM – RBI GRADE B ~BRAJESH MOHAN

The factor that influences the perception are:

• Time: The situation in which the interaction between the perceiver and the target takes
place has an influence on the perceiver’s impression of the target.
o For Example, a person decked up for a party may not be noticeable but the same
dress in office would be noticed distinctly, though the person has not changed.
• Work setting: You would have very frequently heard people say that their manager is
different during working hours and completely opposite while in a social setting.
• Social setting: The strength of the situational cues also affects social perception.
o For example, you may encounter an automobile salesperson who has a warm and
personable manner, asks you about your work and hobbies, and seems genuinely
interested in your taste in cars. Can you assume that this behaviour reflects the
salesperson’s personality? You probably cannot, because of the influence of the
situation. This person is trying to sell you a car, and in this particular situation, he
probably treats all customers in this manner.

Errors in Perception
As seen above perception is the process of analysing and understanding a stimulus as it is. But it
may not be always possible to perceive the stimuli as they are. Knowingly or unknowingly, we
mistake the stimulus and perceive it wrongly.
• A perceptual error is the inability to judge humans, things or situations fairly and accurately.
Many times, the prejudices in the individual, time of perception, unfavourable background,
lack of clarity of stimulus, confusion, conflict in mind and such other factors are responsible
for errors in perception.
• Perceptual error has strong impact in organisation and it hampers in proper decision-
making skill while hiring, performance appraisal, review, feedback etc
FREQUENTLY USED SHORTCUTS IN JUDGING OTHERS
1. Selective Perception: Selective perception is also our tendency to choose information that
supports our viewpoints; individuals often ignore information that makes them feel uncomfortable or
threatens their viewpoints.
Selective perception allows us to "speed-read" others, but not without the risk of drawing an
inaccurate picture. Because we see what we want to see, we can draw unwarranted conclusions
from an ambiguous situation. Our perception tends to be influenced more by an individual's
attitudes, interests, and background than by the stimulus itself.
2. Stereotype: A stereotype is a generalization about a group of people. When we judge someone on
the basis of our perception of the group to which he or she belongs, we are using the shortcut called
stereotyping. Stereotypes reduce information about other people to a workable level, and they are
efficient for compiling and using information. It is a means of simplifying a complex world and it
permits us to maintain consistency. It is less difficult to deal with an unmanageable number of stimuli
if we use stereotypes. Stereotypes can be accurate, and when they are accurate, they can be useful
perceptual guidelines. However, most of the time, stereotypes are inaccurate.
3. Halo Effect: The halo error in perception is very similar to stereotyping. Whereas in stereotyping the
person is perceived according to a single category, under the halo effect the person is perceived on
the basis of one trait. When we draw a general impression about an individual based on a single
characteristic, such as intelligence, sociability or appearance, a halo effect is operating.
The propensity for the halo effect to operate is not random. Research suggests it is likely to be most
extreme when the traits to be perceived are ambiguous in behavioural terms, when the traits have
moral overtones, and when the perceiver is judging traits with which he or she has limited
experience. Example of halo effect is the extremely attractive secretary who is
perceived by her male boss as being intelligent, and a good performer, when, in fact, she is a poor
typist.

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4. Self-fulfilling Prophecies: Self-fulfilling prophecies are situations in which our expectations about
people affect our interaction with them in such a way that our expectations are fulfilled. Self-fulfilling
prophecy is also known as the Pygmalion effect, named after a sculptor in Greek mythology who
carved a statue of a girl that came to life when he prayed for this boon and it was granted. Manager
has high expectations of his employee & therefore grades him topper although the facts
indicate otherwise
• Golem effect (-ve) - Opposite of Pygmalion: What is the Golem effect in leadership?
o The Golem effect describes the process where superiors (such as teachers or
managers) anticipate low performance from a subordinate, causing the very
behaviour they predict.
Use following table as Fodder for Answer Writing:

Attribution error Tendency to underestimate the influence of external factors and

overestimate the internal ones.
Example: For example, when a driver cuts someone off, the person who
has been cut off is often more likely to attribute blame to the reckless
driver's inherent personality traits (e.g., "That driver is rude and
incompetent") rather than situational circumstances (e.g., "That driver
may have been late to work
Self-Serving Bias Tendency of people to attribute success to internal factors & failure to
external factors
Example: A student gets a good grade on a test and tells herself that she
studied hard or is good at the material. She gets a bad grade on another
test and says the teacher doesn't like her or the test was unfair.

Selective Judging something by only one/some parameter

Perception Example: a team member doesn't invite a teammate to an after-work
social event because they assumed that they wouldn't share similar
interests with the group.
Halo Effect Previous success creates a halo & we feel that he will be successful
again
Example: one assumes that a good-looking person in a photograph is
also an overall good person. Sachin will hit century everytime he bats

Horn Effect Opposite of Halo effect. The horn effect, a type of cognitive bias,
happens when you make a snap judgment about someone on the basis
of one negative trait.
Example: Say you meet your new supervisor, who's bald, and
immediately remember a bald middle school teacher who bullied and
mocked you
Projection Our tendency to feel & see that others are like us & talking decisions
on premise that others want what we want. When we experience projection
bias, we overestimate how much we will value an item in the future.
For example, you might see a new mobile device, and your momentary
desire to own the product will lead you to believe that you will continue to
value the device to the same degree in the future.

Stereotyping Judging someone on the basis of our projection of the group to which he or
she belongs
For example, if an outsider believes that a social group is aggressive, this
might cause him or her to act antagonistically or with animosity towards
members of that group.

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 MANAGEMENT COMPENDIUM – RBI GRADE B ~BRAJESH MOHAN

Primacy effect First impression effect

For example, when an individual tries to remember something from a long
list of words, they will remember words listed at the beginning, instead of
the middle. The primacy effect aids an individual in recalling information
they first see better than information presented later on.
Recency effect Judging something/some one by end result not what has been in between.
The recency effect is the tendency to remember the most recently
presented information best.
For example, if you are trying to memorize a list of items, the recency
effect means you are more likely to recall the items from the list that you
studied last
Contrast effects Individual do not evaluate a person in isolation. Contrast effect is an
unconscious bias that happens when two things are judged in
comparison to one another, instead of being assessed individually.
Example: Looking at the image below, the grey square on the right
appears to be lighter, when they’re in fact the same shade of grey.

PERCEPTIONS AND ITS APPLICATION IN ORGANISATION

1. Employment Interview: A major input into who is hired and who is rejected in any organisation is
the employment interview. Evidence indicates that interviewers often make inaccurate perceptual
judgements. Interviewers generally draw early impressions that become very quickly entrenched. If
negative information is exposed early in the interview, it tends to be more heavily weighted than if
that same information comes out later.
As a result, information elicited early in the interview carries greater weight than does information
elicited later. A "good applicant" is probably characterized more by the absence of unfavourable
characteristics than by the presence of favourable characteristics. The employment interview is an
important input into the hiring decision and a manager must recognize that perceptual factors
influence who is hired. Therefore, eventually the quality of an organisation's labour force depends
on the perception of the interviewers.
2. Performance Evaluation: An employee's performance appraisal very much depends on the
perceptual process. The performance appraisal represents an assessment of an employee's work.
While this can be objective, many jobs are evaluated in subjective terms. Subjective measures are,
by definition, judgemental. The evaluator forms a general impression of an employee's work. What
the evaluator perceives to be "good" or "bad" employee characteristics will significantly influence the
appraisal outcome. An employee's future is closely tied to his or her appraisal – promotions, pay
raises and continuation of employment are among the most obvious outcomes.
3. Employee Loyalty: Another important judgement that managers make about employees is whether
they are loyal to the organisation. Few organisations appreciate employees, especially those in the
managerial ranks openly disparaging the firm. The assessment of an employee's loyalty or
commitment is highly judgemental. What is perceived as loyalty by one may be seen as excessive
by another. An employee who questions a top management decision may be seen as disloyal.
Some employees – called whistle-blowers – who report unethical practices by their employer to
authorities inside or outside the organisation, typically act out of loyalty to their organisation but are
perceived by management as troublemakers.

ATTRIBUTION THEORY
Attribution simply refers to how a person explains the cause of another's or his or her own behaviour.
Attribution thus is the most relevant application of perception concepts to organisation behaviour – the
issue of person perception. The attribution or inferred causes we provide for behaviour have important
implications in organisations. In explaining the causes of employee performance, good or bad, we are
asked to explain the behaviour that was the basis for the performance

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Internal and External Attributions

• Internal attributions: Attributions can be made to an internal source of responsibility. That means
something within the individual's control. For example, suppose you perform well in your MBA
examination, you might say you did well because you are smart or because you studied hard. If you
attribute your success to ability or effort, you are citing an internal source
• External Attributions: Attributions can be made to an external source of responsibility. That means
something outside the individuals' control. For example, suppose you perform well in your MBA
examination you might say the examination was easy or that you had good luck. In this case, you
are attributing your performance to sources beyond your control or external attributions.
ATTRIBUTION THEORY

Attribution Theory (KELLY)

• Attribution theory is concerned with how individuals interpret events and how this relates to
their thinking and behaviour.
• Harold Kelley's covariation model is an attribution theory in which people make causal
inferences to explain why other people and ourselves behave in a certain way.
• It is concerned with both social perception and self-perception (Kelley, 1973).
• Attributions are made based on three criteria: Consensus, Distinctiveness, and
Consistency
Consensus is the co-variation of behaviour across different people. If many people find Katrina
Kaif attractive, consensus is high. If only one finds her attractive, consensus is low. High
consensus is attributed to the stimulus, while low consensus is attributed to the person.
Distinctiveness refers to how unique the behaviour is to the particular situation. There is a
low distinctiveness if an individual behaves similarly in all situations, and there exists a high
distinctiveness when the person only shows the behaviour in particular situations. If the
distinctiveness is high, one will attribute this behaviour more to the circumstance instead of person
• If Ram almost never compliments other people's work, he shows high distinctiveness. But if
he compliments everybody's work, this is low distinctiveness, and one will attribute the
behaviour to the person, in this case, Ram
Consistency is the covariation of behaviour across time. If Jane is generous all the time, she
shows high consistency.
• If Raj is rarely generous or is generous only at specific times, perhaps around the holidays,
she shows low consistency. High consistency is attributed to the person (Jane is a
generous person), while low consistency is attributed to the circumstance (the holidays
make people generous).

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 MANAGEMENT COMPENDIUM – RBI GRADE B ~BRAJESH MOHAN

EMOTIONAL INTELLIGENCE
WHAT IS EMOTIONAL INTELLIGENCE?

Emotional intelligence or EI is the ability to understand and manage your own emotions, and
those of the people around you. People with a high degree of emotional intelligence know what
they're feeling, what their emotions mean, and how these emotions can affect other people.
One of the most popular definitions is “Emotional intelligence is the capacity for recognising our
own feelings and those of others, for motivating ourselves, and for managing emotions well in
ourselves and in our relationships” (Goleman)
• The term was coined by two researchers – Peter Salovey and John Mayer in 1990 but got
popular in 1996 from Dan Goleman’s book ‘Emotional Intelligence: Why It Can Matter More
Than IQ’. use in definition
• Emotional Quotient (EQ) is a measure of one’s EI i.e., through a standardized test, one’s
awareness of emotions in relation to self and others is known.
What emotional intelligence ‘is’:
• Being aware of oneself
• Being able to manage emotions
• Being socially aware
• Ability to manage interpersonal relationships by using emotions
• A field of scientific study
What emotional intelligence is ‘not’:
• Ignoring or suppressing emotions
• Allowing emotions to dominate thinking and decision making
• A permanent trait
• An indicator of cognitive and academic intelligence
• A person’s aptitude or interest
• Avoidance of conflict
• Best predictor of success in life
Concepts of Emotional Intelligence
According to Salovey and Mayer, emotional intelligence is known to have four factors.
Perceiving Emotions: How would you control your emotions if you fail to understand them?
Unless and until you know what is actually troubling you or your team member, it would be difficult
for you to respond or react. One needs to perceive emotions correctly. That is actually the first
step. Do not only depend on verbal communication to perceive emotions. There are other options
as well which are more reliable. The other person might not come to you and share his emotions.
Very few people actually do that. It is for you to understand. Body movements, gestures, facial
expressions play an important role in acquainting you with other’s emotions.
Logical Reasoning: Once the emotions are perceived correctly, the next step is to figure out
which all emotions need prompt attention and which all are irrelevant. Sometimes, one may feel
upset without a reason. In such cases emotions certainly can be given a pass.
Decoding Emotions: Decoding emotions in simpler words refers to understanding and finding out
the exact reason behind a certain emotion. For example, if someone is feeling low, you need to
know the exact reason as to why the other person is upset and sad. Interpreting the emotions
correctly is extremely crucial.

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 MANAGEMENT COMPENDIUM – RBI GRADE B ~BRAJESH MOHAN

Let us make it simple with the help of an example:

• Tim noticed that his Boss, Charlie was not at all speaking to him for quite some time
now. He could somehow make out from his expressions and gestures. Tim was smart
enough to find out the exact reason of his Boss’s anger. He immediately finished all his
pending assignments and also ensured his team met its monthly targets.
Managing Emotions: The last but most important part is to know how to manage your emotions.
You may be angry over someone but that does not mean you can shout over him/her or abuse in
public. Do not let your emotions come out and spoil the office environment. As a mature
professional, you are expected to deal with your emotions sensibly. Try to find a solution to your
problems rather than cribbing and crying over spilled milk.
IMPORTANCE OF EMOTIONAL INTELLIGENCE
1. Effective Communication: People with high emotional intelligence can express themselves clearly
and empathize with others, leading to better interpersonal relationships.
2. Conflict Resolution: Conflict is inevitable in life, but individuals with high emotional intelligence are
better equipped to handle conflicts. They can manage their emotions during disagreements and
understand the perspectives of others, leading to more constructive and collaborative problem-
solving.
3. Adaptability: People with high emotional intelligence are more adaptable and resilient in the face of
change. They can navigate uncertainties with a positive attitude and adjust their responses based
on the emotional demands of different situations.
4. Empathy: Empathy, the ability to understand and share the feelings of others, is a cornerstone of
emotional intelligence. It fosters meaningful connections with people, promotes a sense of
community, and encourages a supportive social environment.
5. Decision-Making: Emotional intelligence contributes to better decision-making by helping
individuals consider not only logical factors but also emotional implications. This balanced approach
can lead to decisions that take into account the well-being of oneself and others.
USEFULNESS OF EMOTIONAL INTELLIGENCE IN ORGANIZATIONS
1. Leadership Effectiveness: Leaders with high emotional intelligence are better able to understand
and connect with their team members. They can inspire and motivate others, fostering a positive
and collaborative work environment.
2. Conflict Resolution: Emotional intelligence helps individuals navigate conflicts by understanding
their own emotions and those of others involved. This understanding allows for more effective
communication and negotiation.
3. Communication Skills: Individuals with high emotional intelligence are better equipped to express
themselves clearly and empathetically. They also tend to be more attentive listeners.
4. Customer Relations: Employees who are emotionally intelligent can better understand and
respond to the needs and emotions of customers. This can lead to improved customer satisfaction
and loyalty.
5. Team Collaboration: Employees with high emotional intelligence are more likely to work well with
others, communicate effectively, and navigate conflicts in a constructive manner.
6. Employee Well-being: Organizations that prioritize emotional intelligence contribute to a positive
and supportive work culture. This, in turn, can enhance employee well-being, job satisfaction, and
retention.

Components/Dimensions of Emotional Intelligence

Psychologist and author Daniel Goleman have suggested that there are five Components/ Dimensions to
emotional intelligence.
Below are the components of Emotional Intelligence:

• Self-Awareness
• Self-Management

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 MANAGEMENT COMPENDIUM – RBI GRADE B ~BRAJESH MOHAN

• Social Skill
• Empathy
• Motivation
Self-Awareness

• Self-awareness is a basic understanding of one’s own personality. It is one of the core qualities that
disclose the capacity of the individual to make a self-reflection and monitor self. It also involves self-
observation of the various functions being carried out.
• As a person is self-reflective, aware of the feelings than taking good decisions in crucial times
becomes uncomplicated.
• As a person begins to understand their own feelings, it enables us to make informed choices.
Ultimately the person starts self-assessment of the job that is being executed, as a result, the
person feels confident and never hesitates to change the direction in middle of journey. This helps
them in taking quick decisions and accessing public opinion.
Self-Management

• It is all about how a person manages emotions. It allows people to control their thoughts and
feelings. Basically, humans get distressed and disgusted when things are not going our way. But in
such conditions are we still able to hold our nerves and remain adaptable, can we still stay focused
and motivated.
• The ability to remain calm, self-motivated, showing flexibility is related to internal Self –
Management.
• In the present world, we all are put to go through various states of disequilibrium that is a chance to
display the self-management skills, a person who holds the ground and retain the equilibrium is a
well-defined leader. Managing fear, anxiety, anger, distrust, and disappointment can be achieved if a
person is a well self – managed.
Social Skills
Social Skills refer to the management of relationships and building networks, which ultimately helps to
communicate and interact with each other.

• It is a major personality trait required to be an outstanding leader. A person who possesses good
social skills is always an inspiration for the workforce and can easily motivate the team during tough
times.
• It helps in building rapport and building better bonds with the team members and various other
organizations. It maintains a personal friendship amongst colleagues/work associates.
• A great leader with good social skills can always create enthusiasm and make missions get
accomplished much accurately. How a leader makes the employees feel plays a vital role in the
level of their work execution and commitment.
Empathy

• Empathy makes us understand how other people are thinking and feeling. This is a great skill to
understand very well sometimes one should get into someone else’s shoes. It makes us be aware
of someone’s feelings and act accordingly. Empathy is a critical skill required to be an outstanding
leader.
• An impeccable leader always has concerns that how the team members feel, always take care of
the employees, always help them in critical situations, and always stand, come forward
courageously during failures.
• One, who wants to lead the firm to the real path of success and growth, should give full freedom to
the employees to show disagreement wherever it’s being felt. Disagreements and asking questions
always made an organization strong and resilient. A mature leader tries to value the differences and
learn from them, instead of eliminating them.
Motivation

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 MANAGEMENT COMPENDIUM – RBI GRADE B ~BRAJESH MOHAN

• Motivation is the willingness of an individual to do something. It drives an individual to the goals and
targets indirectly.
• Motivation generated externally from others may stay for a very short period but inner and self-
motivation makes you much enthusiastic towards the work and duties. It describes truly what we
want and ultimately creates a focus to reach the destination.
• It helps in discarding various distractions in between the journey and keeps us moving forward. It
makes a person strong and works magically to turn a failure into learning. As soon as a person
understands the purpose and sense of meaning, work is providing; the person gets motivated,
forgetting all the external odds and tries to approach the goals with utmost accuracy.
• Motivation keeps the person positive ever and as a leader passes a similar kind of vibes and energy
towards his team members. That’s the reason motivation plays a key role in becoming a perfect
leader.

Models of Emotional Intelligence

Though there have been many models of EI proposed by researchers from time to time, however
the following three models are the most popular and widely accepted:
Ability Model: The major principle of this model are that emotions are a source of information that
are useful in social interactions and relationships. It proposes that all individuals have varying
degree of power to understand emotions, to process emotional information and then to relate it to
the cognitive process.
Trait Model: This model was proposed by K.V.Petrides. He stated trait EI is "a constellation of
emotional self-perceptions located at the lower levels of personality.” Simply put, this model helps
to calculate EI by making an individual score himself on certain emotional characteristics, on the
basis of which a self-report is generated i.e. an individual ranks himself on a scale for self-
perception of possession of certain traits.
Mixed Model: This model was proposed by Daniel Goleman and as on date it is the most popular
and commonly used model for measuring EI. He viewed emotional intelligence as a total of
personal and social competences. Personal competence determines how we manage ourselves,
whereas social competence determines how we handle our interpersonal relationships.
Emotional Quotient (EQ) vs. Intelligent Quotient (IQ)
• EQ is a measure of a person's level of emotional intelligence. It refers to a person's ability
to perceive, control, evaluate, and express emotions.
• IQ is a score derived from one of several standardized tests designed to assess an
individual's intelligence. It is used to determine academic abilities and identify individuals
with off-the-chart intelligence or mental challenges.
• EQ is centred on abilities such as identifying emotions, evaluating how others feel,
controlling one's own emotions, perceiving how others feel, using emotions to facilitate
social communication and relating to others.
• IQ represents abilities such as visual and spatial processing, knowledge of the world, fluid
reasoning, working memory and short-term memory and quantitative reasoning.

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 MANAGEMENT COMPENDIUM – RBI GRADE B ~BRAJESH MOHAN

INTERPERSONAL BEHAVIOR
Interpersonal behavior is a multifaceted concept that plays a pivotal role in shaping professional
relationships within organizational settings. It encompasses the manner in which individuals interact,
communicate, and relate to one another in the workplace.
TYPES OF INTERPERSONAL BEHAVIOR
The following are different types of interpersonal behavior:
1. Assertiveness: Assertive behavior involves expressing one's thoughts, feelings, and needs in a
direct and honest manner without being aggressive or disrespectful. It is a balanced approach that
values both the individual's rights and the rights of others.
2. Aggressiveness: Aggressive behavior is characterized by an overly forceful and dominating
approach in interactions. Individuals displaying aggressiveness may use intimidation, criticism, or
hostility to achieve their goals, often at the expense of others.
3. Passivity: Passivity is the opposite of assertiveness. Passive individuals tend to avoid expressing
their thoughts and needs, often yielding to others' opinions. This behavior may lead to unmet
personal needs and frustration.
4. Empathy: Empathetic behavior involves understanding and sharing the feelings of others. It
enhances emotional connections and fosters a supportive environment. Empathy is essential for
building strong interpersonal relationships.
5. Active Listening: Active listening is a behavior where individuals fully concentrate, understand,
respond, and remember what is being said in a conversation. It demonstrates respect and promotes
effective communication.
6. Conflict Resolution: Conflict resolution skills involve the ability to address and resolve disputes or
disagreements in a constructive manner. Effective conflict resolution promotes understanding and
helps maintain positive relationships.
TRANSCATIONAL ANALYSIS
Transactional analysis refers to method of analysing and understanding interpersonal behavior. TA was
developed by Eric berne. Later, this was popularized by Harris and Jongeward. Transactional analysis
involves analysis of following factors

• 1. Self-Awareness 2. Ego states 3. Analysis of Transactions 4. Script Analysis 5. Psychological

Games, 6. Study of Life Positions 7. Stroking
1.Self-Awareness
It implies knowing about ourselves. To what extent, a person is aware of himself affects his interpersonal
transactions. The Johari Window, developed by psychologists Joseph Luft and Harry Ingham in 1955, is a
widely recognized and influential model that helps individuals understand interpersonal communication and
self-awareness. It is named after combining the first names of its creators, Joe and Harry. The Johari
Window is a metaphorical tool used to enhance self-awareness and improve communication within groups
or teams.
Explanation of the Johari Window Model:
1. Open Area (Arena): The Open Area represents information about oneself that is known to both the
individual and others. This includes behaviors, feelings, thoughts, and experiences that are shared
openly. Effective communication and mutual understanding contribute to expanding the Open Area.
In professional settings, transparency and openness foster trust among team members and
enhance collaboration.
2. Blind Spot: The Blind Spot consists of information about oneself that is unknown to the individual
but is apparent to others. This information may include certain habits, traits, or behaviors that others
observe but the individual is unaware of. Feedback and constructive criticism play a crucial role in
reducing the Blind Spot, as it helps individuals gain insights into aspects of their behavior that might
be hindering personal or professional growth.

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3. Hidden Area (Facade): The Hidden Area contains information about oneself that is known to the
individual but kept hidden from others. This may involve personal feelings, fears, or experiences that
one is not comfortable sharing openly. While maintaining some level of privacy is normal, excessive
secrecy may hinder effective communication and collaboration within a team.
4. Unknown Area: The Unknown Area represents information that is neither known to the individual
nor to others. This may include undiscovered talents, unrealized potential, or aspects of personality
that have yet to be expressed. Personal and professional development activities, such as self-
reflection and feedback, can help individuals explore and expand the Unknown Area.

2.EGO STATES
Parent Ego State:
This ego state reflects learned behaviors, attitudes, and values from authority figures, typically
parents or caregivers. It can manifest as a nurturing and supportive "Nurturing Parent" or a critical
and controlling "Critical Parent." Understanding these influences helps individuals recognize
patterns in their behavior and responses.
Adult Ego State:
The Adult ego state involves rational thinking, objective analysis, and decision-making based on
current information. It represents the individual's ability to process information without emotional
bias and respond in a balanced manner. Effective communication often involves maintaining an
adult ego state, fostering clarity and cooperation.
Child Ego State:
The Child ego state encompasses emotions, feelings, and spontaneous reactions. It can be either
"Adapted Child," shaped by societal expectations, or "Free Child," expressing genuine emotions
without constraints. Recognizing and managing one's Child ego state is crucial for emotional
intelligence and building healthy relationships.
3. ANALYSIS OF TRANSCATION
A transaction, in the context of TA, is the basic unit of social interaction. It involves an exchange of stimuli
and responses between individuals. These transactions can be verbal, non-verbal, or a combination of
both. Berne classified transactions into three main types: complementary, crossed, and ulterior.
1. Complementary Transactions: Complementary transactions occur when the ego states of both
individuals involved in the interaction are aligned. The ego states, as per TA, are Parent, Adult, and
Child. In a complementary transaction, the transaction flows smoothly as each person responds
from the ego state that corresponds with the other.
2. Crossed Transactions: Crossed transactions happen when there is a mismatch between the ego
states of the individuals involved. This misalignment can lead to communication breakdowns and
misunderstandings. Recognizing crossed transactions is crucial for effective communication and
relationship management.
3. Ulterior Transactions: Ulterior transactions involve hidden agendas or concealed meanings.
Individuals may communicate with an ulterior motive, which can create complexity and challenge in
understanding the true nature of the interaction. Awareness of ulterior transactions is vital for
deciphering underlying messages and maintaining transparency in communication.

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 MANAGEMENT COMPENDIUM – RBI GRADE B ~BRAJESH MOHAN

4. SCRIPT ANALYSIS
A life script is a set of unconscious decisions made by an individual early in life in response to the
perceptions of self, others, and the world. These decisions form the basis for a person's script, influencing
their life path, relationships, and overall life satisfaction.
Factors of Script Analysis:
1. Early Decisions: Script Analysis involves examining the early decisions individuals make, often in
their childhood, about themselves, others, and the world. These decisions are formed based on
experiences, perceptions, and interactions with significant figures in their lives.
2. Drivers: Transactional Analysis identifies a set of unconscious driving forces called "Drivers" that
propel individuals toward certain behaviors. Common Drivers include "Be Perfect," "Hurry Up," and
"Please Others." Script Analysis explores how these Drivers become ingrained in an individual's
script, shaping their responses to various life situations.
3. Life Positions: Life Positions represent an individual's fundamental stance toward oneself and
others. Script Analysis explores whether a person adopts life positions such as "I'm OK, You're OK,"
or more limiting positions like "I'm Not OK, You're Not OK." Understanding these positions is crucial
for unravelling the script and promoting positive change.
4. Reinforcing Transactions: Transactional Analysis emphasizes transactions, which are social
exchanges between individuals. Script Analysis scrutinizes repetitive and reinforcing transactions
that individuals engage in, shedding light on the recurrent patterns that maintain their life scripts.
5. LIFE POSITIONS
Transactional Analysis (TA) elucidates human behavior through its Life Positions concept, a pivotal aspect
in understanding interpersonal dynamics. Life Positions refer to individuals' fundamental beliefs about
themselves and others, influencing their perceptions and interactions. TA posits four primary Life Positions:
"I'm OK, You're OK," "I'm OK, You're Not OK," "I'm Not OK, You're OK," and "I'm Not OK, You're Not OK."
These positions stem from early life experiences and shape individuals' attitudes towards themselves and
the world. "I'm OK, You're OK" reflects a healthy, assertive approach, fostering positive relationships.
Conversely, negative positions like "I'm Not OK, You're OK" can lead to feelings of inferiority or resentment.
6. STROKING
The Stroking factor in Transactional Analysis (TA) refers to the fundamental human need for recognition
and acknowledgment. Stroking is the unit of social recognition, akin to a psychological "pat on the back."
People seek positive strokes to fulfill their emotional needs, contributing to their sense of self-worth. In
transactions, individuals exchange strokes through verbal and non-verbal communication. Positive strokes
foster healthy relationships, while negative strokes can lead to conflicts or emotional distress.
Understanding the Stroking factor allows individuals to navigate social interactions consciously, fostering
positive connections.
7. PSYCHOLOGICAL GAMES
Psychological Games represent repetitive patterns of behavior that individuals engage in, often
unconsciously, to meet their emotional needs. These games are complex manoeuvres played out in
interpersonal relationships, driven by hidden motivations and ulterior transactions.
The concept of Psychological Games is rooted in the three ego states defined by TA: Parent, Adult, and
Child. Games typically involve players assuming roles from these ego states, leading to predictable and
often destructive patterns of communication. For instance, the critical Parent may engage with the
rebellious Child, perpetuating a power struggle that fulfils emotional needs at the cost of genuine
connection.
BENEFITS AND USES OF TRANSACTIONAL ANALYSIS.
1. Improved Communication: TA provides a framework for understanding and improving
communication patterns between individuals. By analysing transactions (interactions) between
people, individuals can learn to communicate more effectively and avoid misunderstandings.

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2. Self-awareness and Personal Development: TA encourages individuals to explore their own

thought patterns, emotions, and behaviors. This self-awareness can lead to personal development
and growth by helping individuals understand how their past experiences influence their current
thoughts and actions.
3. Relationship Improvement: TA offers insights into interpersonal relationships. By identifying and
understanding the roles people take on in relationships (such as Parent, Adult, and Child),
individuals can develop healthier and more satisfying relationships
4. Conflict Resolution: TA provides tools for analysing and resolving conflicts. By recognizing and
understanding the different ego states involved in a conflict, individuals can work towards resolution
and build more positive relationships.
5. Therapeutic Intervention: Transactional Analysis is used as a therapeutic approach in
psychotherapy and counselling. It helps individuals address emotional and psychological issues by
examining their internal dialogues and interpersonal dynamics.
FUNDAMENTAL INTERPERSONAL RELATIONSHIP ORIENTATION – BEHAVIOR
Fundamental Interpersonal Relationship Orientation (FIRO) is a theory of interpersonal relations developed
by William Schutz. The theory posits that humans have three primary interpersonal needs that influence
their behavior in social situations. These needs are affection/openness, control, and inclusion.
The three primary interpersonal needs according to FIRO:
1. Inclusion: This refers to the need to establish and maintain a satisfactory quantity and quality of
interaction with others. Individuals with a high need for inclusion seek social contact and
involvement, while those with a low need may prefer more independence.
2. Control: This involves the need to influence or control the behavior of others and the environment.
People with a high need for control want to direct others and events, while those with a low need
may prefer a more laid-back and flexible approach.
3. Affection/Openness: This is the need for emotional closeness, warmth, and communication in
relationships. Individuals with a high need for affection/openness desire personal disclosure and
intimacy, while those with a low need may be more reserved and private.
The FIRO-B instrument is a self-report questionnaire that individuals can use to assess their own
interpersonal needs. It consists of scales that measure the three dimensions mentioned above. The results
provide insights into an individual's preferred ways of interacting with others and their interpersonal
behavior.
Relevance of FIRO-B
1. Team Building: Understanding the interpersonal needs of team members can contribute to
effective team building. Teams can be more cohesive and productive when the members' needs for
inclusion, control, and affection are acknowledged and addressed.
2. Communication: Recognizing one's own and others' interpersonal needs can improve
communication. For example, a person with a high need for inclusion may seek more social
interaction, while someone with a high need for control may prefer clear and structured
communication.
3. Leadership Development: Leaders who understand the interpersonal needs of their team
members can tailor their leadership style to meet those needs. This can contribute to a more
positive and productive work environment.
4. Conflict Resolution: FIRO-B can be useful in resolving conflicts by helping individuals understand
the underlying interpersonal needs that may be contributing to the conflict. Addressing these needs
can lead to more effective resolution strategies.
5. Personal Development: Individuals can use FIRO-B to gain insights into their own behavior and
interpersonal needs, fostering personal growth and self-awareness.

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 MANAGEMENT COMPENDIUM – RBI GRADE B ~BRAJESH MOHAN

Conflict: Concept, Sources, Types, Management of Conflict

What is Conflict?
Whenever two individuals opine in different ways, a conflict arises. In a layman’s language conflict is
nothing but a fight either between two individuals or among group members. No two individuals can think
alike and there is definitely a difference in their thought process as well as their understanding.
Disagreements among individuals lead to conflicts and fights. Conflict arises whenever individuals have
different values, opinions, needs, interests and are unable to find a middle way.
Tim and Joe were working in the same team and were best of friends. One fine day, they were asked to
give their inputs on a particular project assigned to them by their superior. There was a major clash in their
understanding of the project and both could not agree to each other’s opinions. Tim wanted to execute the
project in a particular way which did not go well with Joe. The outcome of the difference in their opinions
was a conflict between the two and now both of them just can’t stand each other.

• The dissimilarity in the interest, thought process, nature and attitude of Tim and Joe gave rise to a
conflict between the two. We can define, conflict as a process that begins when one party
perceives another party has or is about to negatively affect something the first party cares
about.
Changing Views of Organizational Conflict
Different schools of thoughts have emerged over the years, lets Differentiate among the traditional,
interactionist, and managed-conflict views of conflict.
Traditional View of Conflict: The early approach to conflict assumed all conflict was bad and to be
avoided. This traditional view of conflict was consistent with attitudes about group behavior that prevailed in
the 1930s and 1940s.

• Conflict was a dysfunctional outcome resulting from poor communication, a lack of openness and
trust between people, and the failure of managers to be responsive to the needs and aspirations of
their employees.
• The view that all conflict is bad certainly offers a simple approach to looking at the behavior of
people who create conflict. We need merely direct our attention to the causes of conflict and correct
those malfunctions to improve group and organizational performance.
• This view of conflict fell out of Favor for a long time as researchers came to realize that some level
of conflict was inevitable.
The Interactionist View of Conflict

• The belief that conflicts is not only a positive force in a group but that it is absolutely necessary for a
group to perform effectively.
• The interactionist view of conflict encourages conflict on the grounds that a harmonious, peaceful,
tranquil, and cooperative group is prone to becoming static, apathetic, and unresponsive to needs
for change and innovation.
• The major contribution of this view is recognizing that a minimal level of conflict can help keep a
group viable, self-critical, and creative.
• The interactionist view does not propose that all conflicts are good. Rather, functional conflict
supports the goals of the group and improves its performance and is, thus, a constructive form of
conflict.
Resolution-Focused View of Conflict

• Researchers, including those who had strongly advocated the interactionist view, have begun to
recognize some problems with encouraging conflict.
• Advocates of the resolution focused view hold the idea that conflict is inevitable but we should
focus on productive conflict resolution. Conflict could be functional but in other instances, it is
rather not productive.
image

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 MANAGEMENT COMPENDIUM – RBI GRADE B ~BRAJESH MOHAN

Traditional Vs Current Views of Conflict

The traditional view of organizational conflict Current view of organizational conflict
Conflict is avoidable. Conflict is inevitable.
Conflict is caused by management error in Conflict arises from many causes, including
designing organizations or by trouble makers. organizational structure, unavoidable differences in
goals, differences in perceptions and values of
specialized personnel and so on.
Conflict disrupts the organization and prevents Conflict contributes and detracts from
optimal performance. organizational performance in varying degrees.
The task of the management is to eliminate conflict. The task of the management is to manage the level
of conflict and its resolution for optimal
organizational performance.
Optimal organizational performance requires the Optimal organizational performance requires a
removal of conflict. moderate level of conflict.

What differentiates functional from dysfunctional conflict?

• The evidence indicates we need to look at the type of conflict—whether it’s connected to task,
relationship, or process.
• Task conflict relates to the content and goals of the work. Relationship conflict focuses on
interpersonal relationships. Process conflict relates to how the work gets done. Studies demonstrate
that relationship conflicts are almost always dysfunctional. A conflict that hinders group performance
is a destructive or dysfunctional conflict.
• In contrast, low levels of process conflict and low to moderate levels of task conflict can be
functional, but only in very specific cases. Conflict that supports the goals of the group and improves
its performance is called functional conflict.

Conflict Process
The conflict process has five stages: potential opposition or incompatibility, cognition and
personalization, intentions, behaviour, and outcomes.

Stage I: Potential Opposition or Incompatibility - The first step in the conflict process is the
appearance of conditions that create opportunities for conflict to arise. These conditions need not
lead directly to conflict, but one of them is necessary if conflict is to surface.

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Communication: -
• The communication source represents the opposing forces that arise from semantic
difficulties, misunderstandings, and noise in the communication channels.
• The potential for conflict increases when either too little or too much communication takes
place. Furthermore, the channel chosen for communicating can have an influence on
stimulating opposition
Structure: -
• The term structure is used, in this context, to include variables such as size, degree of
specialization in the tasks assigned to group members, jurisdictional clarity, member–goal
compatibility, leadership styles, reward systems, and the degree of dependence among
groups.
• Research indicates that size and specialization act as forces to stimulate conflict. The larger
the group and the more specialized its activities, the greater the likelihood of conflict.
Tenure and conflict appear inversely related, meaning the potential for conflict tends to be
greatest when group members are younger and when turnover is high.
• Reward systems, too, are found to create conflict when one member’s gain is at another’s
expense.
Personal Variables –
• As practical experience has taught us, some people are conflict oriented and others are
conflict aversive. Evidence indicates that certain personality types—for example, individuals
who are highly authoritarian and dogmatic—lead to potential conflict. Emotions can also
cause conflict.
• For example, an employee who shows up to work irate from her hectic morning commute
may carry that anger to her 9:00 A.M. meeting. The problem? Her anger can annoy her
colleagues, which may lead to a tension-filled meeting.
• It is also important to note that culture can be a source of differing values. For example,
research indicates that individuals in Japan and in the United States view conflict differently.
Compared to Japanese negotiators, Americans are more likely to see offers from their
counterparts as unfair and to reject such offers.
Stage II: Cognition and Personalization
• Perceived conflict — a cognitive awareness on the part of at least one group that events
or conditions make overt conflict possible.
• Felt conflict — an escalation, which includes emotional involvement creating anxiety,
tenseness, frustration, or hostility. Before attempting resolution is possible, both parties
must perceive and feel conflict. Resolution is more likely to have good results at this stage.
Stage III: Intentions
Intentions intervene between people’s perceptions and emotions and their overt behaviour.
Intentions are decisions to act in a given way. It can be based on :
• Cooperativeness ‐ Attempting to satisfy the other party’s concerns
• Assertiveness ‐ Attempting to satisfy one’s own concerns
A lot of conflicts are escalated merely by one party attributing the wrong intentions to the other
party.

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Stage IV: Behaviour

When most people think of conflict situations, they tend to focus on Stage IV because this is where
conflicts become visible. The behaviour stage includes the statements, actions, and reactions
made by the conflicting parties, usually as overt attempts to implement their own intentions.
• Most difficult to deal with conflict at this stage and most likely to have longer lasting effects.
Stage V: Outcomes
The outcomes of conflict may be functional or dysfunctional. Conflict is constructive when it
improves the quality of decision, stimulates creativity and innovation, encourages interest and
curiosity among group members, provides the medium through which problems can be aired and
tensions released and fosters an environment of self-evaluation and change.
REASONS/FACTORS FOR ORGANIZATIONAL CONFLICT

1. INTEREST OF PARTIES: Undoubtedly, in every organization, there are 2 different interests

which prevail. First one is of the workers and the other is of the organization. An
organization wants to earn more and more profits, for which they are not ready to pay
higher wages. On the other hand, workers want more and more wages. These two interests
are contradicting to each other. In this present era, organizations try their level best to
match both the needs. Whenever any of the parties go aggressive towards their needs, it
may lead to a conflict.
2. COMPETITION: Competition is the most common cause of team conflicts. Every person
wants to be recognized and appreciated for their work. This leads to cutthroat competition
and conflicts in the end. Unhealthy competition can be addressed by building team spirit.
3. PERSONAL DIFFERENCES: There are bound to be differences among the people in a
team. Their unique abilities, traits and skills affect interpersonal relations. So do their
backgrounds, culture, and thinking. However, aggressiveness, dominating personalities,
authoritarian behavior and intolerance are causes of workplace conflict that must be
tempered and discouraged.
4. LACK OF RESOURCES: Conflicts happen when employees have to compete for
managerial support, tools and equipment, or finances. Having sufficient resources that
employees can access when needed ensures a stress-free environment. When resources
are lacking, employees get demoralized and are more prone to negativity. This becomes a
source of conflict in an organization.

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5. COMMUNICATION BREAKDOWN: It is safe to say that communication barriers are one of

the causes of conflict in an organization. If there is a misunderstanding in sharing
information from one person to another, it may cause a conflict. Communication is a
complex process; it causes barriers that often stir conflict. Any hindrances to two-way
communication make it easy to misjudge another person or group. Such misunderstandings
can hurt employee performance. Creating specific and clear communication channels that
inculcate a culture where questions are welcomed will go a long way in relieving this type of
conflict.
6. TIME CONSTRAINTS: Deadlines are necessary to meet targets, but too much pressure is
counterproductive. They often turn into causes of workplace conflict. Unreasonable
deadlines lead to stress and unhappiness. Managers must respect an individual’s capability
before setting their targets. The employee also needs to know how long they have to
complete a task. Carefully creating the job design and cross-training employees can lessen
these conflicts.
7. TASK INTERDEPENDENCE: When the two teams or departments are interdependent for
supplies, information, direction or help, they need perfect coordination. While
interdependence can be fruitful, it is also a reason for workplace conflict. This is especially
true for teams that often work closely with each other, such as sales and production, sales
and marketing, production and re-search and development, etc. The higher the
interdependence among individuals or groups, the greater the chance of conflict. Therefore,
coordination and communication are necessary for interlinked teams.
8. SOCIAL STATUS: Status could mean the respect and prestige a person receives in the
organization. At times, mem-bers disagree with the status quo leading them to become
frustrated and resentful. Everyone tries to protect and elevate their positions. This is a
reason for conflict in the workplace. This issue can be resolved if people are aware of one
another’s position. Finally, all employees must treat their colleagues with respect,
regardless of their post.
POSITIVE ASPECTS OF CONFLICT
1. Increased Creativity and Innovation: Conflict can stimulate creative thinking and problem-solving
as individuals or groups seek alternative solutions to resolve differences.
2. Improved Communication: Conflict provides an opportunity for open and honest communication. It
encourages individuals to express their thoughts, feelings, and concerns, leading to better
understanding among parties involved.
3. Enhanced Relationships: When conflicts are managed constructively, they can strengthen
relationships. Resolving differences can deepen understanding and foster a sense of trust and
mutual respect.
4. Personal and Professional Growth: Dealing with conflict requires individuals to learn and adapt. It
can lead to personal and professional development by enhancing skills such as communication,
negotiation, and emotional intelligence.
5. Increased Team Cohesion: Well-managed conflict can bring team members together. When a
team successfully navigates through conflicts, it can strengthen bonds and create a sense of unity
and shared purpose.
6. Conflict as a Sign of Passion and Engagement: In some cases, conflict may arise from
passionate individuals who are deeply engaged in their work or a particular cause. Channeling this
passion in a positive direction can lead to positive outcomes.
NEGATIVE ASPECTS OF CONFLICT
1. Deterioration of Relationships: Conflict often leads to a breakdown in communication and trust,
which can strain relationships. This is particularly true in personal and professional settings where
collaboration and cooperation are essential

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2. Reduced Productivity: In a workplace or team setting, conflict can disrupt workflow and decrease
overall productivity. Team members may spend more time addressing the conflict than focusing on
their tasks, leading to inefficiencies.
3. Negative Impact on Creativity and Innovation: Conflict can stifle creativity and innovation within a
group. When individuals are focused on disagreements, they may be less inclined to share ideas or
take risks, fearing further conflict.
4. Escalation: If conflicts are not effectively managed, they can escalate and become more intense
over time. Unresolved issues may lead to a cycle of escalating tensions, making resolution even
more challenging.
5. Destruction of Trust: Trust is a crucial element in any relationship, whether personal or
professional. Conflict can erode trust, making it difficult to rebuild even after the conflict is resolved.

Types of Conflict:
If we are to try to understand the roots of conflict, we need to know what type of conflict is present.
At least four types of conflict can be identified:
• Goal conflict - Goal conflict can occur when one person or group desires a different
outcome than others do. This is simply a clash over whose goals are going to be pursued.
• Cognitive conflict - Cognitive conflict can result when one person or group holds ideas or
opinions that are inconsistent with those of others. This type of conflict is evident in political
debates.
• Affective conflict - This type of conflict emerges when one person’s or group’s feelings or
emotions (attitudes) are incompatible with those of others. Affective conflict is seen in
situations where two individuals simply don’t get along with each other.
• Behavioural conflict - Behavioural conflict exists when one person or group does
something (i.e., behaves in a certain way) that is unacceptable to others. Dressing for work
in a way that “offends” others and using profane language are examples of behavioural
conflict.

Levels of Conflict
In addition to different types of conflict, there exist several different levels of conflict. Level
refers to the number of individuals involved in the conflict. That is, is the conflict within just one
person, between two people, between two or more groups, or between two or more organizations?
Both the causes of a conflict and the most effective means to resolve it can be affected by level.
Four such levels can be identified:
• Intrapersonal conflict - Intrapersonal conflict is when conflict is within a person or
individual. A person can be attracted to two equally appealing alternatives, such as two
good job offers (approach-approach conflict) or repelled by two equally unpleasant
alternatives, such as the threat of being fired if one fails to identify a co-worker guilty of
breaking plant rules (avoidance-avoidance conflict). In any case, the conflict is within the
individual. example please
• Interpersonal conflict - Conflict can also take form in an interpersonal conflict, where two
individuals disagree on some matter. For example, you can have an argument with a co-
worker over an issue of mutual concern. Such conflicts often tend to get highly personal
because only two parties are involved and each person embodies the opposing position in
the conflict. Hence, it is sometimes difficult to distinguish between the opponent’s position
and her person.
• Intergroup conflict - Third, conflict can be found between groups. Intergroup conflict
usually involves disagreements between two opposing forces over goals or the sharing of
resources. For example, we often see conflict between the marketing and production units
within a corporation as each vies for more resources to accomplish its subgoals. Intergroup

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conflict is typically the most complicated form of conflict because of the number of
individuals involved.
• Intragroup Conflict - It is within a group or team, where members conflict over goals or
procedures. For instance, a board of directors may want to take a risk to launch a set of
products on behalf of their organization, in spite of dissenting opinions among several
members. Intragroup conflict takes place among them as they argue the pros and cons of
taking such a risk.
• Interorganizational conflict - Finally, we can see interorganizational conflict in disputes
between two companies in the same industry (for example, a disagreement between
computer manufactures over computer standards), between two companies in different
industries or economic sectors (for example, a conflict between real estate interests and
environmentalists over land use planning), and even between two or more countries (for
example, a trade dispute between the United States and Japan or France). In each case,
both parties inevitably feel the pursuit of their goals is being frustrated by the other party.
SOME COMMON FACTORS THAT CONTRIBUTE TO INTERPERSONAL CONFLICT:
1. Communication Issues:
Misunderstandings: Lack of clarity or misinterpretation of verbal and non-verbal communication can
lead to conflict.
2. Difference in Values and Beliefs:
Divergent Perspectives: Conflicts can arise when individuals have fundamentally different values,
beliefs, or worldviews.
Cultural Differences: Varied cultural backgrounds may lead to misunderstandings or clashes in
communication styles and expectations.
3. Power Struggles:
Competition for Resources: Limited resources, such as time, money, or recognition, can trigger
conflicts as individuals compete for these resources.
4. Personalities and Behavioural Differences:
Differences in Personalities: Clashes between extroverted and introverted personalities, or differing
communication styles, can lead to conflict.
5. Role Ambiguity:
Unclear Expectations: Lack of clarity regarding roles, responsibilities, and expectations can lead to
conflicts, especially in group settings.
STAGES OF CONFLICT
1. Latent Conflict:
o This stage involves conditions that may lead to conflict but have not yet resulted in overt
disagreements.
o The factors contributing to conflict, such as differences in values, goals, or interests, are
present but not yet apparent.
2. Perceived Conflict:
o At this stage, individuals or parties become aware of the conditions that may lead to conflict.
o It's the point where people start to recognize that there are differences, and these
differences could lead to a conflict situation.
3. Felt Conflict:
o Felt conflict occurs when individuals or parties experience emotional responses to the
perceived conflict.
o Emotions such as frustration, anger, or anxiety may arise as a result of the perceived
differences.
4. Manifest Conflict:
o This is the stage where the conflict becomes visible and can be observed by others.
o It involves overt behaviors and actions, and communication often becomes more direct and
explicit.
5. Conflict Aftermath:

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o After the conflict has been addressed or resolved, there may be consequences or lingering
effects.
o These consequences can be positive, such as increased understanding and improved
relationships, or negative, such as damaged relationships or unresolved issues.
6. Conflict Resolution:
o In some cases, conflicts are resolved through various means, such as negotiation,
compromise, or mediation. Resolution may lead to a better understanding of each party's
needs and concerns, and it can contribute to improved relationships.
MANAGING CONFLICT
Preventive Measures for Managing Conflict
1. Effective Communication:
Foster open and transparent communication. Encourage active listening to understand others'
perspectives. Clearly convey expectations and guidelines.
2. Clarify Expectations:
Define roles and responsibilities to minimize misunderstandings. Establish clear goals and
objectives. Ensure that everyone is aware of the expectations.
3. Conflict Resolution Training:
Provide training in conflict resolution techniques. Equip individuals with skills to identify and address
conflicts early on.
4. Promote a Positive Work/Relationship Environment:
Foster a positive and inclusive culture. Recognize and reward positive behaviors. Address negative
behaviors promptly.
5. Establish Policies and Procedures:
Develop and communicate clear policies and procedures. Ensure that everyone is aware of the
dispute resolution process.
6. Encourage Collaboration:
Promote teamwork and collaboration. Emphasize the importance of working towards common
goals.
7. Mediation and Facilitation:
Use mediation or facilitation when conflicts arise. Neutral third parties can help parties find common
ground.

Management of Conflict-Handling Intentions

Conflicts happen. How an employee responds and resolves conflict will limit or enable that
employee's success. Here are five conflict styles that a manager will follow according to
Kenneth W. Thomas and Ralph H. Kilmann:
Competing (assertive and uncooperative) ‐ A desire to satisfy one’s interests, regardless of the
impact on the other party to the conflict.
• When one person seeks to satisfy his or her own interests regardless of the impact on the
other parties to the conflict, that person is competing. For example, you compete when you
place a bet that only one person can win
Collaborating (assertive and cooperative) ‐ A situation in which the parties to a conflict each
desire to satisfy fully the concerns of all parties
• In collaborating, the parties intend to solve a problem by clarifying differences rather than
by accommodating various points of view. If you attempt to find a win–win solution that
allows both parties’ goals to be completely achieved, that’s collaborating.
Avoiding (unassertive and uncooperative) ‐ The desire to withdraw from or suppress a conflict
A person may recognize a conflict exists and want to withdraw from or suppress it. Examples of
avoiding include trying to ignore a conflict and avoiding others with whom you disagree.

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Accommodating (unassertive and cooperative) ‐ The willingness of one party in a conflict to

place the opponent’s interests above his or her own
• A party who seeks to appease an opponent, may be willing to place the opponent’s
interests above his or her own, sacrificing to maintain the relationship. We refer to this
intention as accommodating. For example, supporting someone else’s opinion despite your
reservations about it is accommodating.
Compromising (moderate assertive and moderate cooperative) ‐ A situation in which each
party to a conflict is willing to give up something
• In compromising, there is no clear winner or loser. Rather, there is a willingness to ration
the object of the conflict and accept a solution that provides incomplete satisfaction of both
parties’ concerns.
• The distinguishing characteristic of compromising, therefore, is that each party intends to
give up something.

CONFLICT STIMULATION
1. Negotiation:
o Identify Interests: Focus on the underlying interests of both parties.
o Seek Win-Win Solutions: Look for solutions that benefit all parties involved.
2. Mediation:
o Neutral Third Party: Bring in a neutral mediator to facilitate communication.
o Problem Solving: Work collaboratively to find a resolution.
3. Establishing Boundaries:
o Set Ground Rules: Establish guidelines for respectful communication.
o Define Limits: Clearly define what behaviors are unacceptable.
4. Problem-Solving:
o Define the Problem: Clearly define the issues causing the conflict.
o Brainstorm Solutions: Generate possible solutions together.
1. NEGOTIATION
Negotiation is a process in which two or more parties with different interests and objectives engage in
discussions to reach a mutually acceptable agreement.
In negotiation 2 types of bargaining is possible
1. Distributive bargaining is a competitive negotiation strategy where the parties involved seek to
maximize their own gains or benefits at the expense of the other party. Also known as "win-lose" or
"zero-sum" bargaining, this approach assumes that there is a fixed number of resources, and any
gain by one party comes at the expense of the other
2. Integrative bargaining is a negotiation strategy where parties collaborate to find a "win-win"
solution that satisfies the interests of all involved. The goal of integrative bargaining is to maximize
joint outcomes and create value for both parties, rather than pursuing a zero-sum game where one
party's gain is the other party's loss.
NEGOTIATION PROCESS
Some key elements and stages often involved in the negotiation process:
1. Preparation: Before negotiations begin, each party must thoroughly prepare by researching their
own position and the other party's interests. This involves understanding goals, priorities, and
potential areas of agreement or disagreement. Prepare your BATNA (“best alternative to a
negotiated agreement”).
2. Opening: The negotiation starts with each party presenting its position. This involves stating
objectives, priorities, and initial proposals. It sets the tone for the discussions to follow.

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3. Exploration: Parties engage in discussions to understand each other's needs, concerns, and
constraints. This phase involves active listening, asking questions, and gathering information to
identify common ground and potential areas of compromise.
4. Bargaining: This is the core of the negotiation process, where parties make concessions and trade-
offs to reach a mutually acceptable agreement. Effective communication and creative problem-
solving are crucial during this stage.
5. Closure: Once an agreement is reached, the terms are formalized, and both parties commit to the
terms. Closure involves drafting a written agreement, ensuring clarity on responsibilities, and
addressing any remaining concerns.
6. Implementation: After the agreement, parties must fulfill their respective commitments. This stage
may involve additional communication and collaboration to ensure the successful execution of the
negotiated terms.
7. Post-Negotiation Evaluation: After the implementation, it is essential to evaluate the negotiation
process. Reflecting on what worked well and what could be improved helps parties learn from the
experience and enhances their negotiation skills for future interactions.
NEGOTIATING IN SOCIAL CONTEXT

• In social negotiation, individuals must be adept at active listening, empathy, and understanding the
perspectives of others. Building rapport and establishing trust are crucial components of successful
negotiation, as they create an environment where parties feel comfortable sharing their needs and
concerns. Negotiators must also be flexible and open to compromise, recognizing that concessions
may be necessary to reach a resolution.
• Cultural awareness plays a significant role in social negotiation, as different cultures may have
distinct communication styles, norms, and expectations. Sensitivity to cultural nuances helps avoid
misunderstandings and facilitates smoother interactions. Additionally, effective negotiation involves
clear communication, assertiveness, and the ability to manage conflicts constructively.
THIRD-PARTY NEGOTIATIONS

• Third-party negotiations involve a process where two conflicting parties seek the assistance of an
impartial third party to facilitate communication, manage disputes, and help them reach a mutually
acceptable agreement. The third party, often a mediator or arbitrator, serves as a neutral
intermediary, guiding the negotiation process without having a personal stake in the outcome.
• Mediation is a common form of third-party negotiation where the mediator assists the disputing
parties in identifying common ground, understanding each other's perspectives, and generating
potential solutions. Unlike arbitration, where the third party imposes a decision, mediation
empowers the parties to voluntarily reach a consensus.
• These negotiations are beneficial in resolving conflicts in various contexts, including business
disputes, legal cases, international relations, and interpersonal conflicts. The impartiality of the third
party can enhance trust, reduce tension, and facilitate open communication between the conflicting
parties. Third-party negotiations offer a structured and collaborative approach to conflict resolution,
often leading to more sustainable and mutually satisfactory agreements compared to adversarial
processes. The involvement of a neutral third party can bring objectivity to the negotiation table,
fostering a constructive atmosphere for resolving differences

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ORGANIZATIONAL CHANGE & DEVELOPMENT

ORGANIZATIONAL CHANGE
Organizational change refers to the process of making significant alterations to an organization's structure,
processes, culture, or strategies. It is a planned and intentional effort to improve an organization's
performance, adapt to external circumstances, or address internal challenges.
KEY ASPECTS OF ORGANIZATIONAL CHANGE INCLUDE:
1. Strategic Alignment: Changes are often driven by a need to align the organization with its strategic
goals. This may involve shifting priorities, entering new markets, or adapting to changes in the
business environment.
2. Cultural Transformation: Changing the organizational culture is a common goal of organizational
change. This involves shifting values, norms, and behaviors to create a more adaptive, innovative,
or customer-focused culture.
3. Structural Changes: Organizations may undergo structural changes, such as reorganizing
departments, teams, or reporting lines. This can help improve efficiency, communication, and
collaboration.
4. Technology Implementation: Adopting new technologies is a common driver of change. This could
involve implementing new software, upgrading infrastructure, or embracing digital transformation.
5. Process Improvement: Organizations often seek to enhance efficiency and effectiveness by
reevaluating and improving their processes. Process reengineering is a common approach to
achieving these improvements.
6. Leadership Changes: Changes in leadership can have a profound impact on an organization. New
leaders may bring different perspectives, priorities, and management styles, influencing the
organization's direction.
7. Employee Involvement: In successful organizational change, employees are often actively
involved. This can include communication, training, and creating a culture that supports and
embraces the proposed changes.
8. Resistance Management: Change is often met with resistance, as individuals may be
apprehensive about the unknown or fear the impact on their roles. Effective change management
involves identifying and addressing resistance to ensure a smoother transition.
FACTORS AFFECTING ORGANIZATIONAL CHANGE
1. Involvement in Decision-Making: Employees who are involved in the decision-making process are
more likely to support and embrace change.
2. Financial Resources: Adequate financial support is essential for implementing and sustaining
change.
3. Market Conditions: Changes in market conditions, competition, or customer preferences may
necessitate organizational change.
4. Change History: Previous experiences with change, whether positive or negative, can influence
how employees and leaders approach new initiatives.
5. Market Timing: Launching changes at the right time can impact their success. It's important to
consider external factors and market trends.
6. Resistance to Change: The existing culture may resist change. A culture that values innovation
and adaptability is more likely to support change initiatives.
7. Communication: Leaders must communicate the need for change, the reasons behind it, and the
expected benefits to gain support.
SYSTEM APPROACH TO ORGANIZATIONAL CHANGE
This approach recognizes that changes in one part of the organization can have ripple effects throughout
the entire system.
1. Holistic Perspective: The system approach considers the organization as a whole, emphasizing
the interconnectedness of its various components, including structures, processes, people, and
culture.

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2. Interdependence: Changes in one subsystem can impact other subsystems, highlighting the need
to understand and manage the interdependencies within the organization.
3. Feedback Mechanisms: The approach incorporates feedback loops to monitor and adjust the
ongoing change process. Feedback helps in assessing the impact of changes and making
necessary adjustments.
4. Complexity Recognition: Acknowledging the complexity of organizational dynamics, the system
approach considers the multiple factors influencing change, such as internal and external
environments, technology, and market conditions.
5. Continuous Process: Change is viewed as an ongoing and dynamic process rather than a one-
time event. The system approach recognizes that organizations exist in a state of constant
adaptation to external and internal pressures.
6. Stakeholder Involvement: Involving all stakeholders is crucial in the system approach. This
includes employees, managers, customers, and other relevant parties to ensure a comprehensive
understanding of the organization's needs and goals.
7. Strategic Planning: Change initiatives are aligned with the organization's strategic goals. The
system approach emphasizes the importance of integrating change efforts with the overall strategic
direction of the organization.
8. Cultural Considerations: Organizational culture is recognized as a critical factor in change. The
system approach acknowledges that cultural elements may support or resist change and
emphasizes the need to manage cultural shifts effectively.
9. Adaptive Leadership: Leadership plays a vital role in guiding the organization through change. The
system approach encourages adaptive leadership that can navigate the complexities of
organizational transformation.
10. Learning Organization: Organizations should foster a culture of continuous learning. The system
approach promotes the idea of a learning organization that can adapt and thrive in dynamic
environments.

REACTIVE AND PROACTIVE CHANGE

Reactive change occurs in response to external pressures or events that force an organization to alter its
current state. This type of change is often a response to problems, crises, or unexpected developments. In
a reactive change situation, organizations may not have much time to plan and may be driven by the need
to address an urgent issue. Examples of triggers for reactive change include financial crises, market shifts,
legal issues, or technological disruptions.
Characteristics of Reactive Change:
1. It is driven by external factors.
2. It is often a response to a crisis or unexpected event.
3. Change is implemented as a reaction to a problem.
Ex: A company facing a sudden decline in market share due to a new competitor entering the market may
react by restructuring its operations and launching new marketing strategies to regain market share.
Proactive change, on the other hand, is a planned and intentional approach to change. In this scenario,
organizations anticipate future challenges and initiate changes to stay ahead of the curve or to capitalize on
new opportunities. Proactive change is strategic and involves a systematic and planned effort to improve or
innovate. This type of change is driven by a vision for the future and a desire to be proactive in shaping the
organization's destiny.
Characteristics of Proactive Change:
1. It is driven by internal factors and a strategic vision.
2. It is a planned and intentional effort.
3. Change is implemented to create a better future or capitalize on opportunities.
Ex: A company proactively investing in research and development to stay ahead of industry trends, even if
there is no immediate threat, is an example of proactive change. This might involve adopting new
technologies, improving processes, or entering new markets before it becomes a necessity.

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PLANNED CHANGE
Planned change in organizations refers to a purposeful and systematic effort to alter or improve certain
aspects of an organization. This type of change is typically initiated to address issues, improve
performance, adapt to external circumstances, or implement a new strategy.
Objectives of planned change in an organization typically include:
1. Strategic Alignment: Planned change should align with the organization's strategic goals and
objectives. It ensures that the changes made contribute to the long-term success and sustainability
of the organization.
2. Cost Reduction or Efficiency Improvement: Some planned changes may be driven by the need
to reduce costs, streamline processes, or improve overall operational efficiency.
3. Improving Performance: One of the primary objectives of planned change is to enhance the
overall performance of the organization. This may involve improving efficiency, productivity, and the
quality of products or services.
4. Adaptation to External Environment: Organizations operate in dynamic environments, and
planned change helps them adapt to changes in the external environment. This could include
changes in technology, market conditions, or regulatory requirements.
5. Enhancing Employee Satisfaction and Morale: Planned change often aims to create a positive
work environment, boost employee morale, and increase job satisfaction. This, in turn, can lead to
higher levels of employee engagement and commitment.
6. Cultural Transformation: Organizations may undergo planned change to shift or reshape their
organizational culture. This could involve fostering innovation, encouraging collaboration, or
promoting a customer-centric mindset.
PROCESS OF PLANNED CHANGE IN AN ORGANIZATION
1. Recognizing the Need for Change: This could be triggered by internal or external pressures such
as market shifts, technological advancements, or changes in customer preferences.
2. Establishing Objectives and Goals: Set specific, measurable, achievable, relevant, and time-
bound (SMART) goals. This step helps provide a clear direction for the change effort.
3. Diagnosing the Current State: This involves conducting a thorough analysis of existing processes,
structures, and systems to identify areas that require improvement or modification.
4. Developing a Change Plan: This includes defining roles and responsibilities, allocating resources,
and establishing a timeline for the different stages of the change process.
5. Gaining Support and Building a Coalition: This may involve creating a coalition of influential
individuals who can champion the change and help overcome resistance.
6. Communicating the Change: Effectively communicate the reasons for the change, the anticipated
benefits, and the expected impact on individuals within the organization.
7. Implementing the Change: Execute the planned changes according to the established timeline
and strategy. This may involve training employees, restructuring processes, or introducing new
technologies.
8. Monitoring and Evaluating Progress: Regularly assess the progress of the change initiative. Use
key performance indicators (KPIs) and other metrics to measure success and identify any deviations
from the planned course.
9. Making Adjustments: This could involve refining strategies, addressing unforeseen challenges, or
making modifications based on feedback from stakeholders.
10. Institutionalizing the Change: Integrate the changes into the organization's culture, policies, and
practices. Ensure that the new way of doing things becomes a permanent part of the organizational
fabric.
FACTORS RESPONSIBLE FOR RESISTANCE TO CHANGE IN ORGANIZATION
1. Fear of the unknown: Change often introduces uncertainty, and employees may fear the unknown.
They might be concerned about how the change will impact their roles, job security, or daily
routines.

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2. Lack of understanding and communication: If employees don't fully understand the reasons
behind the change or how it will be implemented, they are more likely to resist. Clear and
transparent communication from leadership is crucial to address this.
3. Perceived loss of control: Employees may resist change if they feel it will reduce their autonomy
or control over their work. People generally prefer to have a sense of control and may resist
changes that they perceive as a threat to that control.
4. Past experiences with change: Negative experiences with previous changes, especially if they
were poorly managed or resulted in negative consequences, can lead to a reluctance to embrace
new initiatives.
5. Lack of trust in leadership: If employees do not trust the leaders implementing the change, they
may resist simply because they doubt the intentions behind the change or the competence of those
driving it.
6. Organizational culture: If the organizational culture is resistant to change or values stability over
innovation, employees may resist changes that go against these cultural norms.
7. Perceived lack of benefits: If employees do not see the benefits of the proposed change or
believe that the costs outweigh the benefits, they are likely to resist.
OVERCOMING RESISTANCE TO CHANGE IN ORGANIZATION
1. Two-way Communication: Encourage open and honest communication. Allow employees to
express their concerns, ask questions, and provide feedback. This helps address fears and
misconceptions.
2. Inclusive Decision-Making: Involve employees in the decision-making process whenever possible.
When people feel that their opinions are valued and considered, they are more likely to support the
change.
3. Resource Allocation: Ensure that adequate resources, both human and material, are allocated to
support the change initiative.
4. Feedback Mechanisms: Establish feedback loops to continuously assess the impact of the
change. Use this feedback to make necessary adjustments and improvements to the change
process.
5. Celebrate Successes: Acknowledge and celebrate small victories along the way. Recognizing
achievements helps build momentum and morale.
6. Change Champions: Identify and involve employees who are supportive of the change to act as
"change champions." These individuals can help influence and reassure their peers.
7. Training Programs: Provide the necessary training and resources to help employees acquire the
skills and knowledge required for the new way of working. This can reduce anxiety and increase
confidence in handling the change.

ORGANIZATION DEVELOPMENT
Organization Development (OD) interventions are planned activities or actions designed to improve the
functioning of an organization and enhance its effectiveness.
There are various types of OD interventions, each with its own purpose and application. Here are some
common types of OD interventions:
1. Survey Feedback:
Purpose: Collecting and analysing data to identify organizational strengths and weaknesses.
Techniques: Employee surveys, feedback mechanisms, and data analysis.
2. Appreciative Inquiry:
Purpose: Focusing on an organization's strengths and positive aspects to drive change.
Techniques: Interviews, storytelling, and dialogues that highlight success stories and positive
experiences.
3. Quality Circles:
Purpose: Involving employees in problem-solving and decision-making related to quality
improvement.
Techniques: Small groups of employees meet regularly to discuss and address quality-related
issues.

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4. Workforce Diversity Programs:

Purpose: Promoting inclusivity and managing diversity within the organization.
Techniques: Training programs, mentorship initiatives, and policies that support diversity and
inclusion.
5. Job Redesign:
Purpose: Enhancing job satisfaction and performance by modifying job roles.
Techniques: Job rotation, enrichment, and enlargement to make work more meaningful and
challenging.
THEORIES OF PLANNED CHANGE
KURT LEWIN’S CHANGE MANAGEMENT MODEL: THE PLANNED APPROACH TO
ORGANIZATIONAL CHANGE

The model is often represented as a three-stage process: Unfreeze, Change, and Refreeze.
1. Unfreeze:
• This stage involves preparing the organization for change. It's about breaking down the existing
mindset and creating a sense of urgency or motivation for change.
• Lewin believed that people are often resistant to change because they are comfortable with the
current state of affairs. Unfreezing helps in creating awareness and understanding that change
is necessary.
2. Change:
• Once the organization is unfrozen, the actual change is implemented. This stage involves
introducing new processes, structures, or ways of doing things.
• Communication and involvement are crucial during this stage. Leaders need to communicate
the vision for change clearly and involve employees in the process to reduce resistance and
increase commitment.
3. Refreeze:
• After the change has been implemented, it's important to stabilize the new state of affairs. This
involves reinforcing the changes and making them a permanent part of the organizational
culture.
• The goal is to ensure that the new ways of working become the norm and are sustained over
time. This might involve updating policies, procedures, and reinforcing the desired behaviors.

THE ACTION RESEARCH MODEL (ARM)

The Action Reserch Model, as it is known today, evolved from Lewin's ideas and was further developed by
others in the field. The key elements of the Action Research Model involve a cyclical process of planning,

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acting, observing, and reflecting. Researchers and practitioners engage in a series of iterations to
continuously refine and improve their understanding of a problem or situation.
The Action Research Model:
1. Identify the Problem: Clearly define the problem or issue that needs attention.
2. Plan Action: Develop a plan for addressing the identified problem, based on existing knowledge and
theories.
3. Implement Action: Put the plan into action and make the necessary changes.
4. Observe and Reflect: Observe the effects of the implemented actions and reflect on the outcomes.
5. Revise and Repeat: Based on observations and reflections, make adjustments to the plan and
repeat the cycle as necessary.
The Action Research Model emphasizes the collaboration between researchers and practitioners, as well
as the importance of practical and actionable insights. It aligns with Lewin's general approach to change,
which involves a participatory and iterative process rather than a top-down imposition of change.

Advantages of Action Research Model

1. Practical and Relevant: Action research is rooted in real-world, practical issues that practitioners
face. It focuses on solving immediate problems and improving specific situations, making it highly
relevant to the context in which it is conducted.
2. Empowerment of Practitioners: Action research involves practitioners actively participating in the
research process. This empowers them to take control of their own professional development and
problem-solving, fostering a sense of ownership and commitment to the outcomes.
3. Continuous Improvement: The cyclical nature of action research, involving planning, acting,
observing, and reflecting, promotes continuous improvement. This iterative process allows
practitioners to refine their strategies based on ongoing feedback and experience.
4. Contextual Understanding: Action research is conducted within the specific context in which the
issues arise. This ensures that solutions are tailored to the unique characteristics and
circumstances of the environment, leading to more effective and sustainable outcomes.
5. Collaborative Approach: Action research often involves collaboration among stakeholders,
including practitioners, researchers, and other relevant parties. This collaborative approach
enhances the diversity of perspectives and promotes shared decision-making, fostering a sense of
collective responsibility.

5 STAGES OF POSITIVE MODEL OF ORGANIZATIONAL CHANGE

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The model is designed to foster collaboration, engagement, and innovation. The five stages are as
follows:
1. Define: In this stage, the focus is on identifying the strengths and positive aspects of the
organization. This involves appreciating what is already working well and defining the positive core
that the organization can build upon. It encourages a shift from problem-solving to opportunity-
seeking.
2. Discover: The Discover stage involves conducting inquiries and interviews to explore the positive
elements identified in the Define stage. It seeks to uncover stories, experiences, and examples of
success within the organization. This process helps to build a collective understanding of what
works and what contributes to the organization's success.
3. Dream: This stage involves envisioning the future of the organization based on the positive aspects
identified in the Define and Discover stages. It encourages stakeholders to imagine possibilities and
articulate a shared vision for the future. The focus is on creating a compelling and inspiring picture
of what the organization could become.
4. Design: In the Design stage, strategies and plans are developed to realize the shared vision and
goals identified in the Dream stage. This involves identifying specific actions, initiatives, and projects
that will help the organization move towards the desired future. It emphasizes collaboration and
participation in designing the future.
5. Destiny (or Deliver): The final stage, often referred to as Destiny or Deliver, involves implementing
the plans developed in the Design stage. It is about translating the positive vision and strategies into
concrete actions. This stage emphasizes continuous learning and adaptation as the organization
works towards its positive future.
BURKE-LITWIN MODEL OF ORGANIZATIONAL CHANGE
The Burke-Litwin Model of Organizational Change is a comprehensive framework that helps organizations
understand the complex interplay of internal and external factors that influence organizational performance
and change.
1. External Environment:
Recognizes the impact of external factors (e.g., economic conditions, technology, competition) on
organizational change. External factors influence organizational strategy and structure.
2. Mission and Strategy:

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Emphasizes the importance of a clear organizational mission and strategy. Aligns the mission and
strategy with the external environment to guide decision-making.
3. Leadership:
Acknowledges the critical role of leadership in shaping organizational culture and change. Effective
leadership promotes a shared vision and commitment to change.
4. Organizational Culture:
Identifies organizational culture as a key driver of behavior and decision-making. Culture influences
employee attitudes, motivation, and adaptability to change.
5. Structure:
Examines the formal and informal structure of the organization. Recognizes that the structure can
either facilitate or hinder change initiatives.
6. Systems:
Focuses on the various systems within an organization (e.g., communication, reward, information).
Systems impact employee behavior and are essential for successful change implementation.
7. Management Practices:
Considers management practices and their impact on organizational performance. Effective
management practices support change efforts and overall organizational effectiveness.
8. Work Unit Climate:
Highlights the significance of the work unit climate on employee satisfaction and performance.
Positive work unit climates contribute to successful change implementation.
9. Task and Individual Skills:
Addresses the skills and capabilities of individuals and work units. Identifies the importance of
training and development to enhance adaptability.
10. Motivation:
Recognizes the role of motivation in influencing individual and collective behavior. Motivated
employees are more likely to support and contribute to organizational change.
11. Individual Needs and Values:
Emphasizes the impact of individual needs and values on behavior. Understanding and addressing
individual needs is crucial for successful change.
12. Performance:
Views performance as an outcome of the interplay between various factors. Changes in external
and internal factors can influence overall organizational performance.
MCKINSEY 7S CHANGE MODEL
The McKinsey 7S Framework is a management model developed by consulting firm McKinsey & Company.
It's a tool designed to facilitate organizational change and improve effectiveness. The model identifies
seven key internal elements that must be aligned for an organization to be successful. The seven "S"
elements are divided into hard elements and soft elements.
1. Hard Elements:
a. Strategy: This involves the plan devised to maintain and build competitive advantage over the
competition.
b. Structure: Refers to the way the organization is structured and how its various components are
organized.
c. Systems: The daily activities and procedures that staff members engage in to get the job done. This
includes both the formal and informal processes.
2. Soft Elements:
a. Skills: The capabilities and competencies that exist within the company. This includes both the technical
and interpersonal skills of the employees.
b. Staff: The people employed by the company, and how they are developed, motivated, and organized.
c. Style: The leadership style of the management team and how they go about achieving goals and
objectives.

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d. Shared Values: The core values of the company that are reflected in its culture and general work ethic.
The idea behind the 7S model is that all of these elements are interconnected and need to be in alignment
for an organization to be successful. If there is a misalignment in any of these elements, it can lead to
issues and challenges. For example, a company may have a well-defined strategy (S1) but if its structure
(S2) and systems (S3) are not aligned with that strategy, it may struggle to implement it effectively.
Advantages of 7S Model:
1. Holistic Approach:
One of the main advantages of the 7S Model is its holistic approach to organizational effectiveness.
It considers multiple factors simultaneously, emphasizing the interconnectedness of various
elements within an organization.
2. Shared Values as Core:
The inclusion of "Shared Values" as a central element emphasizes the importance of organizational
culture. It recognizes that a strong and positive organizational culture can influence and shape the
other six elements.
3. Long-Term Success:
The 7S Model is designed to focus on long-term success rather than short-term fixes. It encourages
organizations to consider the interplay of elements over time, fostering sustainability and
adaptability.
Disadvantages of 7S Model:
1. Complexity: The 7S Model involves seven interconnected elements: strategy, structure, systems,
shared values, style, staff, and skills. Some critics argue that this complexity can make it challenging
for organizations to effectively apply the model, especially if they are looking for a simple and quick
analysis.
2. Static Nature: The model might be criticized for being somewhat static, as it provides a snapshot of
an organization at a specific point in time. Organizations are dynamic and constantly evolving, and
the model may not capture the fluid nature of organizational change.
3. Overemphasis on Internal Factors: The 7S Model tends to focus heavily on internal factors within
an organization. While these internal factors are undoubtedly important, the model may not give
enough consideration to external factors, such as changes in the market, technological
advancements, or shifts in the competitive landscape.
4. Lack of Prescriptive Guidance: The 7S Model is more diagnostic than prescriptive. While it helps
identify key elements that need attention, it may not provide clear guidance on how to implement
changes or improvements in each area. Organizations may need additional frameworks or
methodologies to complement the 7S Model.

KOTTER’S 8 STEP MODEL OF CHANGE

John Kotter, a renowned leadership and change management expert, developed the 8-Step Model of
Change as a framework to guide organizations through the process of successful transformation. The
model is designed to help organizations navigate and implement change in a structured and effective
manner. Here are the eight steps of Kotter's model:
1. Create a Sense of Urgency: Kotter emphasizes the importance of establishing a compelling
reason for change. This involves communicating the need for change in a way that motivates
individuals within the organization to take action.
2. Build a Guiding Coalition: Forming a coalition of influential individuals who support the change
initiative is crucial. This group helps drive the change effort and ensures a broad base of support
within the organization.
3. Form a Strategic Vision and Initiatives: Develop a clear vision for the future and define the
initiatives required to achieve that vision. This step involves outlining the goals and direction of the
change effort.

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4. Enlist a Volunteer Army: Mobilize a large group of people who are willing to actively support and
contribute to the change initiative. This grassroots approach helps to spread the message and
implementation of change throughout the organization.
5. Enable Action by Removing Barriers: Identify and eliminate obstacles that may impede the
progress of the change initiative. This step involves addressing issues such as outdated policies,
structures, or systems that hinder the change process.
6. Generate Short-Term Wins: Celebrate early successes to build momentum and reinforce the belief
that the change initiative is making a positive impact. Short-term wins help to maintain enthusiasm
and commitment.
7. Sustain Acceleration: Consolidate gains and continue to drive the change effort forward. This step
involves reinforcing new behaviors, systems, and practices to embed the changes into the
organizational culture.
8. Institute Change: Ensure that the changes become part of the organization's core by integrating
them into everyday practices. This step involves reinforcing the new values and norms to solidify the
transformation.
ADVANTAGES OF KOTTER'S 8-STEP MODEL OF CHANGE:
1. Clear Process: Kotter's model provides a clear and structured process for managing change. It
breaks down the change initiative into eight distinct steps, making it easier for organizations to
understand and follow.
2. Emphasis on Urgency: The model emphasizes the importance of creating a sense of urgency.
Kotter argues that a sense of urgency is crucial for overcoming complacency and mobilizing people
to take action.
3. Leadership Focus: The model emphasizes the role of leadership throughout the change process. It
highlights the need for strong and visible leadership to guide the organization through the changes.
4. Short-Term Wins: Kotter advocates for creating and celebrating short-term wins to build
momentum and reinforce the benefits of the change. This helps to keep employees motivated and
engaged.
DIADVANTAGES OF KOTTER’S 8 STEP MODEL OF CHANGE
1. Linear Approach: Kotter's model is often criticized for its linear and sequential nature. In reality,
change processes are often more complex and iterative. Organizations may need to revisit and
revise certain steps as they progress through the change journey.
2. One-size-fits-all: The model is a bit prescriptive and may not be suitable for every organization or
situation. Different organizations have different cultures, structures, and needs, and a rigid
application of the model may not account for these variations.
3. Overemphasis on Urgency: Kotter places a strong emphasis on creating a sense of urgency as
the first step. Critics argue that this urgency can sometimes lead to rushed decision-making and
implementation, potentially overlooking critical factors or resistance from stakeholders.
4. Time-Consuming: Implementing all eight steps can be time-consuming, and in fast-paced
environments, organizations may not have the luxury of following each step meticulously. This could
result in shortcuts that may impact the overall success of the change initiative.
ADKAR MODEL OF CHANGE.
The ADKAR model of change is a goal-oriented approach that helps organizations and individuals
successfully navigate through change initiatives. Developed by Prosci, the model focuses on five key
elements: Awareness, Desire, Knowledge, Ability, and Reinforcement.
1. Awareness: This initial stage involves creating an understanding among individuals about the need
for change. It is crucial to communicate the reasons behind the change, the benefits it brings, and
the potential consequences of not changing. This awareness sets the foundation for the entire
change process.
2. Desire: Once individuals are aware of the need for change, the next step is to cultivate a desire to
support and participate in the change. This involves addressing concerns and helping individuals
see the personal and organizational benefits associated with the change. Building motivation is
essential for commitment.

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3. Knowledge: Providing the necessary information and knowledge is critical for individuals to
understand how to change. This stage focuses on training and education to equip individuals with
the skills and understanding required to implement the change successfully.
4. Ability: With knowledge in place, individuals must be able to implement the change effectively. This
involves providing the tools, resources, and support needed for individuals to apply their knowledge
in practical situations. Building competency is essential for sustainable change.
5. Reinforcement: The final stage involves reinforcing the change to ensure its long-term success.
Recognition, rewards, and ongoing support help to solidify the new behaviors and make the change
a part of the organizational culture. Continuous reinforcement helps prevent a return to old habits
and practices.
Advantages of ADKAR Model.
1. Structured Approach: The ADKAR model provides a structured and systematic approach to
change management. It breaks down the change process into five distinct stages, making it easier
for organizations and individuals to understand and manage.
2. Individual Focus: One of the strengths of the ADKAR model is its focus on the individual. It
recognizes that successful organizational change depends on the successful adoption of change by
individuals. Each stage in the model addresses specific aspects of individual change, from creating
awareness to reinforcing new behaviors.
3. Diagnostic Tool: The ADKAR model can serve as a diagnostic tool to identify where individuals or
the organization may be struggling in the change process. By assessing progress in each of the five
stages, stakeholders can pinpoint areas that require additional attention or support.
4. Customizable: The ADKAR model is flexible and can be customized to fit the unique needs and
context of different organizations and change initiatives. This adaptability allows organizations to
tailor their change management strategies based on their specific circumstances.
Limitations of ADKAR Model:
1. Limited Emphasis on Organizational Culture: The model doesn't explicitly address the role of
organizational culture in the change process.
2. Overemphasis on Individuals: While individual change is critical, the ADKAR model may not
sufficiently emphasize the importance of collective action and collaboration within teams.
3. Limited Consideration of External Factors: The ADKAR model does not explicitly address
external factors that may impact the change process, such as market conditions, regulatory
changes, or external economic factors.
4. Lack of Continuous Monitoring: The model may be perceived as a one-time, linear process,
lacking a continuous monitoring and evaluation component.
STRATEGIES FOR CHANGE MANAGEMENT
1. Communication: Establish clear communication channels for sharing information about the change.
Develop a communication plan that includes regular updates, town hall meetings, and Q&A
sessions.
2. Leadership Involvement: Ensure leaders are actively involved and visible throughout the change
process.
3. Employee Involvement: Foster a sense of ownership and involvement among employees.
4. Training and Development: Provide comprehensive training programs to equip employees with the
skills needed for the change.
5. Change Champions: Identify and empower change champions within the organization.
6. Recognize and Reward: Acknowledge and reward individuals and teams for their contributions to
the change effort.
7. Address Resistance: Address resistance with empathy and transparency, addressing concerns with
factual information.
8. Measure and Evaluate: Establish key performance indicators (KPIs) to measure the success of the
change initiative.
9. Continuous Improvement: Foster a culture of continuous improvement.

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CORPORATE GOVERNANCE
WHAT IS CORPORATE GOVERNANCE
Corporate governance refers to the system of rules, practices, and processes by which a company is
directed and controlled.
KEY ELEMENTS OF CORPORATE GOVERNANCE INCLUDE:
1. Board of Directors: The board is a central component of corporate governance. It is responsible
for making major corporate decisions, overseeing management, and representing the interests of
shareholders.
2. Shareholder Rights: Corporate governance seeks to protect and enhance the rights of
shareholders. This includes the right to vote on key issues, such as the election of directors and
approval of major corporate transactions.
3. Transparency and Disclosure: Companies are expected to provide timely and accurate
information about their financial performance, ownership, and governance structures. Transparency
helps build trust among stakeholders.
4. Ethical Behavior: Corporate governance emphasizes the importance of ethical conduct and
integrity in business operations. This involves adherence to laws, regulations, and ethical standards.
5. Corporate Social Responsibility (CSR): Many corporate governance frameworks promote the
idea that companies should be socially responsible and contribute positively to the communities in
which they operate.
DIFFERENCE BETWEEN CORPORATE GOVERNANCE AND MANAGEMENT

Aspect Corporate Governance Management

Definition The system of rules, practices, and processes The process of planning, organizing,
by which a company is directed and controlled. directing, and controlling resources
It involves balancing the interests of a (human, financial, physical, and
company's many stakeholders, such as informational) to achieve
shareholders, management, customers, organizational goals.
suppliers, financiers, government, and the
community.
Focus Concerned with ensuring that the company is Responsible for implementing the
run in the best interests of all stakeholders, policies and decisions made by the
including shareholders, and that there is board of directors. It involves day-to-
accountability, transparency, and fairness in its day operations, resource allocation,
operations. and achieving organizational goals.

Decision- The board of directors, as elected The executive management team,

Making representatives of shareholders, holds the led by the CEO, has decision-making
ultimate decision-making authority. They appoint authority in operational matters.
executives and make major strategic decisions.
Accountability Accountable to shareholders and other Accountable for achieving specific
stakeholders. Must adhere to legal and ethical goals and objectives set by the
standards. board.
Transparency Emphasizes transparency in financial reporting, Transparency is important within the
decision-making processes, and overall organization, but the level of external
corporate behavior. transparency is typically lower than
in corporate governance.

Role in Sets the overall strategic direction and monitors Develops and executes strategies to
Strategy the company's performance in relation to its achieve the company's objectives as
goals. set by the board.

SIGNIFICANCE OF CORPORATE GOVERNANCE

1. Accountability: Corporate governance ensures that companies are accountable to their
shareholders and stakeholders, promoting transparency in decision-making processes.

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2. Risk Management: It helps in identifying and managing risks by implementing effective controls
and procedures, safeguarding the interests of investors and the company.
3. Investor Confidence: Good corporate governance practices enhance investor confidence,
attracting investment and fostering a positive image in the financial markets.
4. Ethical Conduct: Corporate governance sets the framework for ethical behavior, guiding the
company to operate with integrity and in compliance with laws and regulations.
5. Long-Term Sustainability: It contributes to the long-term sustainability of the business by focusing
on responsible and sustainable business practices, considering environmental and social impacts.
6. Board Effectiveness: Through clear roles and responsibilities, corporate governance ensures the
effectiveness of the board of directors, facilitating strategic decision-making and oversight.
7. Financial Performance: Companies with strong corporate governance often exhibit better financial
performance, as sound governance practices contribute to efficient operations and prudent financial
management.
8. Stakeholder Management: It helps in managing relationships with various stakeholders, including
employees, customers, and the community, fostering a positive corporate reputation.
9. Adaptability: Corporate governance frameworks provide mechanisms for adaptability to changing
market conditions, technological advancements, and regulatory environments.
PRIMARY AND SECONDARY STAKEHOLDERS:
1. Primary Stakeholders:
• Directly Involved: Primary stakeholders are individuals or groups that are directly affected by the
outcome of a project or the activities of an organization. They have a direct interest in the
success or failure of the project.
• Examples: Customers, employees, investors, suppliers, and business partners are often
considered primary stakeholders. For example, customers are directly impacted by the quality
and features of a product, while employees are directly affected by organizational decisions and
policies.
2. Secondary Stakeholders:
Indirectly Affected: Secondary stakeholders are those who are indirectly affected by the activities of
an organization or project. While they may not be directly involved, their interests can still be
influenced by the outcomes.
Examples: Government agencies, local communities, advocacy groups, and the media are often
considered secondary stakeholders. For instance, a community near a manufacturing plant may be
indirectly impacted by the plant's operations, and regulatory agencies may have an interest in
ensuring compliance with laws and regulations.
ECONOMIC, SOCIAL AREAS WHERE CORPORATE GOVERNANCE CONTRIBUTE
1. Investor Confidence and Capital Formation: Effective corporate governance practices instil
confidence in investors, encouraging them to invest in companies. This, in turn, facilitates capital
formation, which is essential for economic growth.
2. Financial Performance and Accountability: Good corporate governance promotes transparency
and accountability in financial reporting. This helps investors and stakeholders make informed
decisions, leading to better financial performance.
3. Long-Term Sustainability: Corporate governance encourages a focus on long-term sustainability
rather than short-term gains. This helps companies make decisions that consider the interests of
various stakeholders and contribute to sustained economic growth.
4. Employee Welfare and Engagement: Corporate governance influences human resource policies,
ensuring fair treatment of employees, opportunities for professional development, and a safe
working environment. Engaged and satisfied employees contribute to social stability.
5. Diversity and Inclusion: Corporate governance can address diversity and inclusion issues within
companies. A diverse board and workforce contribute to social equity and reflect a commitment to
equal opportunities.

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PRINCIPLES OF CORPORATE GOVERNANCE

1. Transparency: Ensure clear and open communication with stakeholders, disclosing relevant
information about the company's performance, financial status, and decision-making processes.
2. Accountability: Establish mechanisms to hold individuals and entities accountable for their actions,
both internally and externally. This includes adherence to laws, regulations, and ethical standards.
3. Fairness: Treat all stakeholders fairly and avoid favouritism. This includes fair treatment of
shareholders, employees, customers, and other relevant parties.
4. Responsibility: Define and fulfil the organization's responsibilities to its shareholders, employees,
customers, and the broader community. This involves considering the environmental and social
impact of business decisions.
5. Independence: Promote independence in decision-making, ensuring that there is no undue
influence that could compromise the integrity of corporate decisions.
6. Board Effectiveness: Establish a competent and diverse board of directors that can provide
effective oversight and strategic guidance to the company.
7. Risk Management: Implement effective risk management processes to identify, assess, and
manage risks that may impact the company's objectives.
8. Ethical Leadership: Promote ethical behavior at all levels of the organization, with leaders setting a
positive example and fostering a culture of integrity.
9. Shareholder Rights: Protect and respect the rights of shareholders, including the right to
participate in major decisions and the right to information.
10. Long-term Sustainability: Focus on the long-term sustainability of the company, considering
economic, environmental, and social factors to ensure ongoing success and value creation.
EXECUTIVE AND NON-EXECUTIVE DIRECTORS
1. Executive Directors:
• Role: Executive directors are typically part of the company's management team and are
actively involved in the day-to-day operations and decision-making processes. They are
employed by the company and often hold specific functional responsibilities, such as
finance, operations, marketing, or technology.
• Responsibilities: Executive directors play a hands-on role in the strategic direction and
daily management of the company. They are responsible for implementing policies, making
operational decisions, and ensuring that the company meets its financial and operational
objectives.
2. Non-Executive Directors:
• Role: Non-executive directors (NEDs) are not involved in the day-to-day operations of the
company. Instead, they provide an independent perspective and oversight to ensure that the
company is being run in the best interests of its shareholders and stakeholders. Non-
executive directors are not full-time employees of the company; they may have other
business commitments or interests.
• Responsibilities: Non-executive directors focus on governance, strategy, and performance
monitoring. They contribute to the development of company strategy, scrutinize the
performance of management, and provide guidance on issues such as risk management,
corporate governance, and succession planning.
MODELS OF CORPORATE GOVERNANCE
A. ANGLO-AMERICAN MODEL
The "Anglo-American model" of corporate governance refers to a system of corporate governance
practices that is predominantly observed in the United States and the United Kingdom. This model
is characterized by a shareholder-centric approach, emphasizing the interests of shareholders as
the primary stakeholders in a company.
Several key features distinguish the Anglo-American model:
1. Shareholder Primacy: The Anglo-American model prioritizes the interests of shareholders
above other stakeholders, such as employees or the broader community. This is based on the
belief that maximizing shareholder value leads to overall economic prosperity.

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2. Market Orientation: This model places a strong emphasis on market forces and competition as
mechanisms for ensuring corporate efficiency. It assumes that a competitive market will
discipline companies, encouraging them to operate efficiently and respond to the demands of
shareholders.
3. Board Independence: Corporate boards in the Anglo-American model typically have a
substantial degree of independence from management. Independent directors are expected to
provide objective oversight and ensure that the company is being run in the best interests of
shareholders.
4. Executive Compensation: Executive pay in this model is often linked to company performance,
particularly shareholder returns. Stock options and other forms of equity-based compensation
are common, aligning the interests of executives with those of shareholders.
5. Transparent Financial Reporting: There is a strong emphasis on transparent financial
reporting to keep shareholders informed about the company's performance. Regulatory
frameworks, such as the Sarbanes-Oxley Act in the U.S., aim to enhance corporate governance
and financial disclosure.
6. Takeovers and Mergers: The Anglo-American model tends to be more permissive toward
takeovers and mergers as mechanisms for disciplining underperforming companies and
reallocating resources efficiently.

B. JAPANESE MODEL
1. Stakeholder-Oriented Approach:
• Emphasis on long-term relationships with stakeholders, including employees, suppliers, and
the local community.
• Decision-making considers the impact on various stakeholders, not solely focused on
shareholder value.
2. Cross-Shareholdings:
• Common practice of companies holding shares in each other, fostering stable, long-term
relationships.
• Aims to promote collaboration and reduce the risk of hostile takeovers.
3. Board Structure:
• Dual board structure with both a Board of Directors and a Board of Statutory Auditors.
• Statutory auditors, often external, monitor the actions of the directors and enhance
transparency.
4. Lifetime Employment:
• Tradition of offering lifetime employment to employees, creating a sense of loyalty and
commitment.
• Focus on employee development and job security.
5. Keiretsu System:
• Network of closely aligned businesses, often with cross-shareholdings.
• Mutual support among affiliated companies, enhancing stability and cooperation.
6. Consensus Decision-Making:
• Decision-making through consensus-building rather than a top-down approach.
• Aiming for harmony and collective agreement among stakeholders.
7. Seniority-Based Promotion:
• Promotion based on years of service rather than meritocracy.
• Encourages stability and loyalty within the organization.
8. Company Social Responsibility (CSR):
• Companies often engage in social responsibility activities and contribute to community
development.
• CSR seen as integral to corporate success and reputation.
9. Bank-Company Relationships:
• Close ties between banks and corporations.
• Banks play a role in strategic decision-making and provide financial support.
10. Insider-Shareholder Focus:

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• Emphasis on maintaining a stable shareholder base with a focus on insiders.

• Reduces susceptibility to short-term market pressures.

C. CONTINENTAL EUROPEAN MODEL

1. Two-Tier Board System: Continental European countries often employ a two-tier board
structure, consisting of a management board (executive) and a supervisory board (non-
executive). This separation aims to enhance checks and balances.
2. Supervisory Board Oversight: The supervisory board is responsible for overseeing the
management board's decisions and ensuring alignment with the company's long-term interests.
This helps prevent a concentration of power within the executive branch.
3. Employee Representation: In many Continental European countries, there is a strong
emphasis on including employee representatives on the supervisory board. This practice aims to
foster collaboration between management and workers, promoting a more inclusive decision-
making process.
4. Stakeholder-Oriented Approach: Corporate governance in Continental Europe often reflects a
stakeholder-oriented perspective, considering the interests of various stakeholders beyond just
shareholders. This includes employees, customers, suppliers, and the broader community.
5. Emphasis on Long-Term Success: The focus is often on long-term sustainable growth rather
than short-term financial gains. This perspective aligns with the idea that companies should
contribute positively to the economic and social environment in which they operate.
6. Legal Frameworks: Corporate governance practices are influenced by legal frameworks in
each country, with some nations having more prescriptive regulations than others. The legal
environment plays a crucial role in shaping corporate governance norms.
7. Shareholder Rights: While shareholder rights are recognized, they might not be as extensive
or influential as in some Anglo-American models. Decision-making power is distributed among
various stakeholders, contributing to a more balanced approach.
8. Consensus Decision-Making: The decision-making process often involves seeking consensus
among different stakeholders, emphasizing collaboration and cooperation in corporate
governance matters.
9. Emphasis on Disclosure and Transparency: Despite differences in the approach to
governance, there is a shared emphasis on transparency and disclosure, ensuring that relevant
information is available to stakeholders for informed decision-making.
THEORIES OF CORPORATE GOVERNANCE
A. AGENCY THEORY
1. Principal-Agent Relationship: Agency theory revolves around the relationship between
principals (shareholders) and agents (managers or executives) in a corporation.
2. Misalignment of Interests: Recognizes the inherent conflict of interest between principals and
agents due to different objectives—shareholders seek to maximize wealth, while managers may
prioritize personal goals or job security.
3. Information Asymmetry: Highlights the information gap between principals and agents, with
managers possessing more knowledge about day-to-day operations. This can lead to
opportunistic behavior by agents.
4. Monitoring and Control Mechanisms: Agency theory suggests the need for monitoring and
control mechanisms to align the interests of principals and agents. Examples include
performance measurement, incentives, and corporate governance structures.
5. Contractual Relationships: Emphasizes the importance of contractual agreements
(employment contracts, incentive plans) to mitigate agency problems and align interests.
Contracts specify expectations, performance metrics, and consequences for deviation.
6. Costs of Monitoring: Acknowledges that monitoring agents incurs costs, including financial and
time resources. Striking a balance between effective monitoring and minimizing associated
costs is crucial.
7. Executive Compensation: Agency theory often discusses executive compensation as a
mechanism to align the interests of executives with shareholders, aiming to discourage actions
contrary to shareholder wealth maximization.

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8. Shareholder Activism: Recognizes the role of shareholders in holding management

accountable through mechanisms like voting, board representation, and activism to address
agency issues.
9. Corporate Governance Structures: Advocates for robust corporate governance structures,
including independent boards and committees, to ensure checks and balances and reduce
agency conflicts.
10. Continuous Adaptation: Agency theory acknowledges that the corporate governance
landscape is dynamic, requiring continuous adaptation to changes in the business environment
to effectively address agency problems.

B. STEWARDSHIP THEORY
1. Definition: Stewardship theory posits that corporate executives act as responsible stewards,
prioritizing the interests of shareholders and the long-term success of the company.
2. Alignment of Interests: Stewardship theory emphasizes the alignment of interests between
managers and shareholders, assuming that executives will naturally act in the best interests of
the company to maximize shareholder value.
3. Trust and Delegation: The theory suggests that trusting managers and delegating decision-
making authority fosters a sense of responsibility and commitment, as executives are seen as
stewards acting on behalf of shareholders.
4. Long-Term Orientation: Stewardship theory contrasts with agency theory by emphasizing a
long-term perspective. It argues that executives, as stewards, will make decisions that contribute
to the sustained growth and prosperity of the company.
5. Corporate Culture: Stewardship theory underscores the importance of a positive corporate
culture that encourages ethical behavior and responsible decision-making. It assumes that
executives will embody these values in their stewardship role.
6. Reduced Monitoring: Unlike agency theory, which advocates for extensive monitoring and
control mechanisms, stewardship theory suggests that too much monitoring may erode trust and
discourage executives from acting as committed stewards.
7. Social Responsibility: Stewardship theory acknowledges the broader social responsibilities of
corporations, expecting executives to consider the impact of their decisions on stakeholders
beyond shareholders.

C. STAKEHOLDERS’ THEORY
Stakeholders' theory emphasizes that corporations have responsibilities not only to shareholders
but also to a broader set of stakeholders.
Key Principles:
1. Inclusivity: Recognizes various entities beyond shareholders, including employees, customers,
suppliers, and the community.
2. Equitable Treatment: Advocates fair and just treatment of all stakeholders, ensuring their
interests are considered in decision-making.
3. Corporate Purpose: Shifts focus from maximizing shareholder wealth to achieving a balance
between profit generation and meeting stakeholders' needs.
4. Decision-making Process: Considers the impact of corporate decisions on all stakeholders,
seeking to create value for the entire network of interested parties.
5. Accountability and Transparency: Calls for transparent communication about corporate
actions, fostering accountability to stakeholders.
6. Long-term Sustainability: Encourages practices that promote the long-term sustainability of
the corporation, taking into account environmental, social, and governance (ESG) factors.
7. Resolving Conflicts: Provides a framework for resolving conflicts of interest among
stakeholders, promoting negotiations and compromises.
8. Legal and Ethical Framework: Advocates compliance with laws and ethical standards in
interactions with stakeholders.

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9. Measuring Success: Success is measured not only in financial terms but also by the positive
impact on stakeholders and the community.
10. Adaptability: Recognizes the dynamic nature of stakeholder relationships and encourages
corporations to adapt to changing circumstances and expectations.
11. Corporate Social Responsibility (CSR): Integrates CSR into the core business strategy,
aligning business goals with societal and environmental concerns.

D. TRANSACTION COST THEORY

Definition: Transaction Cost Theory (TCT) is a framework in corporate governance that examines
the costs associated with various transactions within a firm.
1. Core Premise: TCT suggests that firms exist to minimize transaction costs, which include the costs
of searching for information, negotiating and enforcing contracts, and monitoring and managing
relationships.
2. Role in Corporate Governance: TCT argues that the choice of governance structures (e.g.,
hierarchy, contracts, markets) is influenced by the desire to reduce transaction costs.
3. Internal vs. External Transactions: TCT distinguishes between transactions that occur within the
firm (hierarchical) and those that occur in external markets (contractual). The goal is to choose the
governance structure that minimizes the total costs associated with these transactions.
4. Incomplete Contracts: TCT recognizes that contracts cannot always specify all possible future
contingencies, leading to the importance of trust and relational governance.
5. Implications for Decision-Making: TCT suggests that decisions about the firm's organizational
structure and governance mechanisms should be based on an analysis of the transaction costs
associated with different alternatives.
6. Efficiency Perspective: TCT contributes to the efficiency of corporate governance by emphasizing
the importance of aligning governance structures with the specific characteristics of transactions to
minimize costs.

E. DEPENDENCY THEORY
Dependency theory in corporate governance focuses on the relationships and
dependencies between various stakeholders within a corporation.
1. Key Concepts:
• Stakeholder Interdependence: Emphasizes the interconnectedness of stakeholders,
such as shareholders, management, employees, and suppliers.
• Power Dynamics: Examines the power relations between stakeholders and how
dependencies can lead to unequal power distribution.
2. Corporate Governance Structures:
• Board of Directors: Dependency theory suggests that the composition and functioning
of the board influence the power dynamics within a corporation.
• Shareholder Activism: Analyses how shareholders may exploit dependencies to
influence corporate decisions.
3. Risk Management:
• Dependency on Suppliers: Highlights how reliance on specific suppliers can impact a
company's risk profile.
• Employee Relations: Examines the impact of employee relations on corporate
governance and decision-making.
4. Global Perspective:
• International Dependencies: Explores how global markets and international
dependencies can shape corporate governance structures.

F. ETHICAL THEORY
1. Utilitarianism: Corporate actions should maximize overall happiness or societal welfare.
2. Deontology: Corporations must adhere to a set of moral principles and duties.
3. Virtue Ethics: Focus on cultivating virtuous characteristics within the corporate culture.

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 MANAGEMENT COMPENDIUM – RBI GRADE B ~BRAJESH MOHAN

4. Stakeholder Theory: Corporations should consider the interests of all stakeholders, not just
shareholders.
5. Social Contract Theory: Emphasizes the implicit agreements and expectations between
corporations and society.
6. Justice and Fairness: Ensuring fair distribution of benefits and burdens.
7. Rights-Based Approach: Respecting and protecting the rights of individuals affected by
corporate actions.
8. Sustainability Ethics: Corporations should prioritize environmental and social sustainability.
9. Corporate Social Responsibility (CSR): Voluntarily going beyond legal obligations to
contribute positively to society.
10. Integrity and Transparency: Emphasizes honesty, openness, and ethical conduct in corporate
practices.
CORPORATE GOVERNANCE OUTSIDE INDIA
Main recommendations of Cadbury Committee:
1. Board Composition: Emphasized a balanced board with a mix of executive and non-executive
directors.
2. Role of Non-Executive Directors: Stressed the importance of non-executive directors in providing
independent judgment and constructive challenge.
3. Audit Committees: Called for the establishment of audit committees composed entirely of non-
executive directors to enhance financial accountability.
4. Remuneration Committees: Recommended the creation of remuneration committees to determine
executive pay, composed primarily of non-executive directors.
5. Internal Controls and Risk Management: Encouraged the implementation of effective internal
controls and risk management systems to safeguard shareholder interests.
6. Shareholder Communication: Advocated for transparent and timely communication with
shareholders to ensure accountability.
7. Accountability and Stewardship: Emphasized the board's role in promoting corporate
governance, accountability, and responsible stewardship.
OECD PRINCIPLES OF CORPORATE GOVERNANCE.
1. Shareholder Rights: Ensure equitable treatment and protection of shareholders' rights.
2. Equitable Treatment of Shareholders: Promote fair treatment of all shareholders, including
minority and foreign shareholders.
3. Role of Stakeholders: Recognize the interests of stakeholders and their role in corporate
governance.
4. Disclosure and Transparency: Enhance transparency through timely and accurate disclosure of
material information.
5. Responsibilities of the Board: Clearly define the responsibilities of the board, ensuring effective
leadership and supervision.
6. Risk Management and Control: Implement robust risk management and internal control systems.
7. Integrity and Ethical Behavior: Foster a corporate culture that encourages integrity and ethical
behavior.
8. Role of Institutional Investors: Encourage active and informed participation by institutional
investors.
9. Responsibilities of the Board: Clearly define the responsibilities of the board, ensuring effective
leadership and supervision.
10. Remuneration of Directors and Executives: Ensure a fair and transparent process for setting
remuneration of directors and executives.
IMPORTANT PROVISIONS IN THE SARBANES OXLEY ACT, 2002:
1. Corporate Governance: Mandates CEOs and CFOs to certify accuracy of financial reports.
2. Financial Disclosures: Requires timely and accurate financial reporting.

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3. Internal Controls: Requires companies to establish and maintain internal controls for financial
reporting.
4. Audit Committees: Enhances independence of audit committees and their oversight of auditors.
5. Prohibition of Personal Loans: Prohibits companies from making personal loans to executives.
6. Whistleblower Protection: Provides protection for employees reporting corporate misconduct.
7. Criminal Penalties: Imposes severe penalties for fraudulent activities, including fines and
imprisonment.
8. Document Retention: Mandates retention of financial records for specified periods.
9. CEO/CFO Certification: Requires CEOs and CFOs to personally certify the accuracy of financial
statements.
10. Enhanced Penalties: Increases penalties for securities fraud and white-collar crimes.

EVOLUTION OF CORPORATE GOVERNANCE IN INDIA - VARIOUS COMMITTEES IN INDIA

ESTABLISHED FOR CORPORATE GOVERNANCE
A. The Kumar Mangalam Birla Committee
• Committee Formation: The Kumar Mangalam Birla Committee on Corporate
Governance was constituted in 1999 by the Securities and Exchange Board of India
(SEBI).
• Objective: The primary objective was to enhance corporate governance practices in
Indian companies and improve transparency and accountability.
Recommendations for Clause 49: The committee's recommendations were instrumental in the
formulation of Clause 49 of the Listing Agreement, which focuses on corporate governance practices for
listed companies.
1. Board Composition: Emphasized the importance of having a balanced and independent board,
with a majority of directors being independent.
2. Audit Committee: Recommended the establishment of an audit committee with a majority of
independent directors to oversee financial reporting and disclosure.
3. Roles and Responsibilities: Clearly defined the roles and responsibilities of the board, audit
committee, and other key entities within the company to ensure proper checks and balances.
4. Disclosure and Transparency: Stressed on the need for transparent and timely disclosure of
information to shareholders and the public.
5. Code of Conduct: Advocated the adoption of a code of conduct for board members and senior
management to promote ethical behavior and integrity.
6. Shareholders' Rights: Emphasized protecting and enhancing shareholders' rights and suggested
measures to strengthen their role in corporate governance.
7. Compliance and Reporting: Companies were required to comply with the recommendations of the
committee and disclose their corporate governance practices in their annual reports.
8. Impact: The committee's recommendations significantly influenced the corporate governance
landscape in India, fostering a culture of accountability, transparency, and ethical conduct among
companies listed on the stock exchanges.

B. Naresh Chandra Committee

1. Board Composition and Structure:
• Majority of independent directors on the board.
• Separate roles of Chairman and CEO to ensure a system of checks and balances.
2. Audit Committee:
• Establishment of a qualified and independent audit committee.
• Regular and direct interaction between the audit committee and internal and external
auditors.
3. Financial Reporting:
• Adoption of international accounting standards for financial reporting.
• Clear and transparent financial disclosures to be made in a timely manner.

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4. Shareholders Rights:
• Strengthening of shareholder rights and protection.
• Mechanisms for effective exercise of shareholder voting rights.
5. Code of Conduct:
• Adoption of a comprehensive code of conduct for the board and senior management.
• Disclosure of adherence to the code in the annual report.
6. Risk Management:
• Implementation of a robust risk management framework.
• Regular review and monitoring of risks by the board.
7. Whistleblower Mechanism:
• Establishment of a mechanism for employees and other stakeholders to report unethical
behavior.
• Protection for whistle-blowers from any adverse actions.
8. Remuneration of Directors:
• Setting up a transparent and performance-based system for remuneration.
• Disclosures on the remuneration policy in the annual report.

C. NARAYAN MURTHY COMMITTEE

1. Board of Directors:
• The committee emphasized the need for a balanced and independent board,
recommending that at least half of the board members should be independent directors.
This ensures a diversity of perspectives and reduces the likelihood of conflicts of interest.
2. Audit Committee:
• The committee underscored the importance of an effective audit committee, suggesting
that a majority of the members should be independent directors. This committee plays a
critical role in overseeing financial reporting and ensuring the integrity of financial
statements.
3. CEO and Board Responsibilities:
• Clearly defining the roles and responsibilities of the CEO and the board was another
crucial recommendation. This included delineating the powers and functions of the CEO,
and establishing a framework for the board to exercise independent judgment.
4. Accountability and Transparency:
• To enhance accountability and transparency, the committee proposed regular financial
and operational disclosures. This includes timely and accurate reporting of financial
information and performance metrics to the stakeholders.
5. Shareholders' Rights:
• The committee advocated for strengthening shareholders' rights, encouraging
mechanisms such as e-voting and postal ballot to facilitate greater shareholder
participation in decision-making processes.
6. Disclosure and Reporting:
• The committee emphasized the importance of comprehensive disclosure and reporting
practices, ensuring that companies provide adequate and clear information about their
financial health, operations, and risk management strategies.
7. Ethical Conduct:
• Highlighting the significance of ethical conduct, the committee recommended the
establishment of a code of conduct for board members and senior management. This
would contribute to fostering a culture of integrity within the organization.
8. Training and Development:
• Recognizing the dynamic nature of the business environment, the committee proposed
continuous training and development programs for board members to keep them abreast
of emerging trends, regulations, and governance best practices.

D. Uday Kotak Committee

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1. Board Composition and Structure:

• The committee emphasized the need for a balanced and diverse board composition,
including independent directors, to mitigate conflicts of interest and enhance decision-
making processes.
• Recommended the separation of the roles of the Chairperson and Managing
Director/CEO to avoid concentration of power.
2. Strengthening Independence of Directors:
• Proposed stricter criteria for determining the independence of directors, ensuring that
they can effectively exercise independent judgment without any undue influence.
3. Audit Committees and Auditors:
• Suggested enhancing the role and responsibilities of the audit committee, including
oversight of financial reporting and vigilance over potential financial irregularities.
• Stressed the need for an effective and independent audit function, recommending the
rotation of audit firms to prevent any long-term association that might compromise
independence.
4. Accountability and Risk Management:
• Advocated for a robust risk management framework, with the board actively involved in
overseeing and addressing risks associated with the company's operations.
• Emphasized the importance of a culture of accountability within the organization to foster
ethical behavior and discourage malpractices.
5. Shareholder Rights:
• Recommended measures to enhance shareholder rights, such as ensuring equitable
treatment and information disclosure, allowing shareholders to make informed decisions.
6. Disclosure and Transparency:
• Encouraged greater transparency in financial reporting and disclosures, ensuring that
stakeholders have access to accurate and timely information about the company's
performance and governance practices.
STRUCTURE OF CORPORATE GOVERNANCE:
1. Board of Directors:
• The board is a key component of corporate governance. It is responsible for making
major corporate decisions, including setting the company's strategic objectives.
• The board typically includes executive and non-executive directors. The latter are
expected to bring an independent perspective to decision-making.
2. Shareholders:
• Shareholders are the owners of the company. They exercise their control through voting at
general meetings and electing the board of directors.
• Institutional investors, such as pension funds and mutual funds, often represent a significant
portion of share ownership.
3. Management:
• The executive management team, led by the CEO, is responsible for the day-to-day
operations of the company.
• The board oversees and appoints top management, ensuring that their actions align with the
company's strategic goals.
PROCESSES OF CORPORATE GOVERNANCE:
1. Transparency and Disclosure:
• Companies are required to provide accurate and timely information regarding their financial
performance, corporate governance practices, and other material information.
• This promotes transparency and helps stakeholders make informed decisions.
2. Accountability:
• Accountability ensures that individuals and entities are responsible for their actions. The
board and management are accountable to shareholders and other stakeholders for the
company's performance and adherence to corporate governance principles.

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3. Ethical Behavior:
• Corporate governance emphasizes ethical conduct in all aspects of business. This includes
fair treatment of shareholders, employees, and other stakeholders, as well as compliance
with laws and regulations.
4. Risk Management:
• Effective corporate governance involves identifying and managing risks. This includes
financial risks, operational risks, and risks related to compliance and reputation.
5. Internal Control Systems:
• Companies need robust internal control systems to safeguard assets, ensure the reliability of
financial reporting, and comply with laws and regulations.
6. Stakeholder Engagement:
• Engaging with stakeholders, including shareholders, employees, and the local community, is
crucial for understanding their concerns and incorporating their perspectives into decision-
making processes.
7. Performance Evaluation:
• Regular evaluation of the performance of the board, committees, and individual directors is
essential for continuous improvement and ensuring that they effectively fulfill their
responsibilities.
8. Legal and Regulatory Compliance:
• Corporate governance processes must adhere to applicable laws and regulations, which
vary by jurisdiction.
ROLE OF BOARD OF DIRECTORS IN CORPORATE GOVERNANCE
1. Fiduciary Duty:
The Board has a fiduciary duty to act in the best interests of the company and its shareholders. This
involves making decisions that contribute to the long-term success of the company.
2. Strategic Oversight:
The Board is responsible for setting the company's strategic direction and ensuring that
management implements strategies that enhance shareholder value. This involves approving
strategic plans and major business decisions.
3. Appointing and Monitoring Management:
The Board hires, evaluates, and, if necessary, replaces the CEO and other top executives. It is
responsible for ensuring that competent and ethical management is in place and that executive
compensation is fair and linked to company performance.
4. Risk Management:
The Board is tasked with identifying and managing risks that could affect the company's ability to
achieve its strategic objectives. This includes overseeing the implementation of risk management
systems and ensuring that the company complies with relevant laws and regulations.
5. Financial Oversight:
Boards are responsible for approving financial statements, budgets, and major financial
transactions. They also oversee the company's internal control and audit processes to ensure the
accuracy and reliability of financial reporting.
6. Shareholder Communication:
The Board communicates with shareholders, keeping them informed about the company's
performance, strategies, and major decisions. This often involves holding regular shareholder
meetings and providing transparent and accurate information.
7. Succession Planning:
The Board is responsible for planning and overseeing the succession of key executives, including
the CEO. This ensures continuity in leadership and helps mitigate risks associated with leadership
transitions.
8. Board Composition and Evaluation:
The Board is responsible for determining its own composition, ensuring a mix of skills, experience,
and independence. Boards often conduct regular evaluations to assess their own performance and
identify areas for improvement.

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FACTORS AFFECTING CORPORATE GOVERNANCE

1. Legal and Regulatory Environment: The legal and regulatory framework of a country plays a
crucial role in shaping corporate governance practices. Laws and regulations establish the rights
and responsibilities of various stakeholders, such as shareholders, directors, and executives.
2. Board of Directors: The composition, structure, and effectiveness of the board of directors are
critical factors in corporate governance. The board is responsible for overseeing the company's
management and making strategic decisions. Factors such as board independence, diversity, and
expertise can impact governance.
3. Shareholder Activism: The level of activism among shareholders can influence corporate
governance. Activist investors may advocate for changes in the company's management, strategy,
or governance practices to enhance shareholder value.
4. Executive Compensation: The design and disclosure of executive compensation packages can
affect corporate governance. Misaligned incentives or excessive executive compensation without
corresponding performance can lead to governance issues.
5. Transparency and Disclosure: Companies that prioritize transparency and timely disclosure of
information to stakeholders tend to have better corporate governance. Open communication fosters
trust and helps stakeholders make informed decisions.
6. Ethical Culture: The ethical standards and culture within a company significantly impact corporate
governance. Companies with a strong ethical culture are more likely to make decisions that consider
the interests of all stakeholders and comply with legal and regulatory requirements.
7. Risk Management: Effective risk management is integral to good corporate governance. Boards
and management should identify, assess, and manage risks to ensure the long-term sustainability of
the company.
8. Stakeholder Engagement: Engaging with a broad range of stakeholders, including employees,
customers, suppliers, and the community, is essential for good corporate governance. Companies
that consider the interests of all stakeholders are likely to be more sustainable and socially
responsible.
9. Internal Control Systems: Robust internal control systems help ensure that the company's
operations are efficient, reliable, and comply with applicable laws and regulations. This includes
financial controls, operational controls, and compliance monitoring.
10. Market Forces: Market conditions, competition, and industry dynamics can influence corporate
governance. Companies operating in highly competitive markets may face different governance
challenges than those in less competitive environments.
External Mechanisms of Corporate Governance in India.
1. SEBI Regulations:
SEBI formulates rules like the Listing Obligations and Disclosure Requirements to ensure fair
practices and protect investor interests in the securities market.
2. Companies Act, 2013:
The Act mandates governance practices, including board composition, audit committees, and
independent directors, strengthening governance in Indian companies.
3. Independent Directors:
Mandated by law, independent directors bring objectivity to boards, acting as a check on
management decisions and safeguarding minority shareholder interests.
4. Credit Rating Agencies:
These agencies assess and rate companies, providing investors an independent view on financial
health and governance practices.
5. Institutional Investors:
Mutual funds, insurers, and pension funds actively engage with companies to promote better
governance practices and protect shareholder value.
6. Regulatory Framework for Auditors:
Guidelines ensure auditor independence, maintaining the quality and reliability of financial reporting.
7. National Financial Reporting Authority (NFRA):

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 MANAGEMENT COMPENDIUM – RBI GRADE B ~BRAJESH MOHAN

NFRA oversees audit quality, investigating and disciplining auditors for professional misconduct,
contributing to reliable financial reporting.
SEBI LODR REGULATIONS:
On September 2, 2015, SEBI notified the Listing Obligations and Disclosure Requirements. Regulations,
2015 to be called as the Securities and Exchange Board of India (Listing Obligations and Disclosure
Requirements) Regulations, 2015 with objectives: -
To align clauses of the listing agreement with Companies Act and secondly, to consolidate the conditions
under different securities' listing agreements in one single regulation. The 2015 Regulations are applicable
to any entity (whether a company or not) accessing the stock exchange, for listing equity shares (on main
board, SME exchange, institutional trading platforms), debt securities, preference shares, depository
receipts, securitized debt instruments, mutual fund units, and other securities as may be specified by SEBI.
These regulations have been structured into single document with the aim to consolidate and streamline
the provision of existing listing agreements for different segments of capital markets, such as equity shares
(including convertibles), non-convertible debt securities, etc. for ensuring better enforceability.
Some of the Provisions:
Compliance Officer and his Obligations [Regulation 6]
• A listed entity shall appoint a qualified Company Secretary as the Compliance Officer.
• Compliance Officer shall be responsible for the following:
– Ensuring conformity with the regulatory provisions applicable to the listed entity in
letter and spirit.
– Co-ordination with and reporting to SEBI, recognized stock exchanges and
depositories with respect to compliance with rules, regulations and other directives of
these authorities in specified manner.
– Ensuring that the correct procedures have been followed that would result in the
correctness, authenticity and comprehensiveness of the information, statements and
reports filed by the listed entity under these regulations.
– Monitoring email address of grievance redressal division as designated by listed
entity for the purpose of registering complaints by investors.
• However, requirement to appoint a qualified Company Secretary shall not be applicable in
the case of units issued by mutual funds which are listed on recognized stock exchange but
shall be governed by the provisions of the SEBI (Mutual Funds) Regulations, 1996.
Policy for Preservation of documents [Regulation 9]
• Listed entity shall have a policy for preservation of documents, approved by its board of directors,
classifying them in following two categories –
o Documents whose preservation shall be permanent in nature.
o Documents with preservation period of not less than 8 years after completion of the relevant
transactions.
• Listed entity may keep documents in electronic mode.
Filing of information [Regulation 10]
• Listed entity shall file the reports, statements, documents, filings and any other information with the
recognized stock exchange on the electronic platform as specified by the SEBI or the recognized
stock exchange.
Scheme of Arrangement [Regulation 11]
• Listed entity shall ensure that any scheme of
arrangement/amalgamation/merger/reconstruction/reduction of capital etc. to be presented to any
Court or Tribunal does not in any way violate, override or limit the provisions of securities laws or
requirements of the stock exchanges.
Payment of dividend interest, redemption or repayment principal amounts [Regulation 12]
• Listed entity shall use electronic mode of payment facility approved by the RBI for the payment of
dividends, interest, redemption or repayment principal amounts.
However, where it is not possible to use electronic mode of payment, ‘payable-at-par’ warrants or
cheques may be issued.
• Where the amount payable as dividend exceeds Rs.1,500, the ‘payable-at-par’ warrants or cheques
shall be sent by speed post.

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Fees and other charges [Regulation 14]

• Listed entity shall pay all such fees or charges, as applicable, to the recognized stock exchanges, in
the specified manner.
Applicability of corporate governance provisions [Regulation 15]
• The provisions of the Chapter IV [Regulations 15 to 48] shall apply to a listed entity which has listed
its specified securities on any recognized stock exchange either on the main board or on SME
Exchange or on Innovators Growth Platform.
• Applicability of corporate governance provisions for listed entities having non-convertible
debt securities: The provisions of this regulation and Regulations 16 to 27 shall apply to a listed
entity which has listed its non-convertible debt securities and has an outstanding value of listed non-
convertible debt securities of Rs.500 Crore and above.
• In case an entity that has listed its non-convertible debt securities triggers the specified threshold of
Rs.500 Crore during the course of the year, it shall ensure compliance with these provisions
within 6 months from the date of such trigger:
o These provisions shall be applicable to a ‘high value debt listed entity’ on a ‘comply or
explain’ basis until March 31, 2023 and on a mandatory basis thereafter.
• High value debt listed entities: Listed entity which has listed its non-convertible debt securities
and has an outstanding value of listed non-convertible debt securities of Rs.500 Crore and above
are referred to as ‘high value debt listed entities’.
• Applicability of corporate governance provisions for listed entities having paid-up equity
share capital and listed entities that have listed specified securities on the SME
Exchange: The compliance with the corporate governance provisions as specified in regulations
17, 17A, 18, 19, 20, 21, 22, 23, 24, 24A, 25, 26, 27 and clauses (b) to (i) and (t) of sub-regulation (2)
of regulation 46 and paras C, D and E of Schedule V shall not apply, in respect of –
o Listed entity having paid-up equity share capital not exceeding Rs.10 Crore and net worth
not exceeding Rs.25 Crore, as on the last day of the previous financial year.
However, where the provisions of regulations 17 to 27, clauses (b) to (i) and (t) of sub-
regulation (2) of regulation 46 and paras C, D and E of Schedule V become applicable to a
listed entity at a later date, it shall ensure compliance with the same within 6 months from
such date.
▪ Once the above regulations become applicable to a listed entity, they shall continue
to remain applicable till such time the equity share capital or the net-worth of such
entity reduces and remains below the specified threshold for a period of 3
consecutive financial years.
o Listed entity which has listed its specified securities on the SME Exchange.
For other listed entities which are not companies, but body corporate or are subject to
regulations under other statutes, the provisions of corporate governance provisions as
specified in regulations 17, 17A, 18, 19, 20, 21, 22, 23, 24, 24A, 25, 26, 27 and clauses (b)
to (i) of sub-regulation (2) of regulation 46 and Paras C, D and E of schedule V shall apply to
the extent that it does not violate their respective statutes and guidelines or directives issued
by the relevant authorities.
Other Provisions:

• Shareholder Meetings: The LODR Regulations provide guidelines on conducting annual general
meetings (AGMs) and extraordinary general meetings (EGMs). Shareholders have the right to
attend and vote at these meetings.
• Voting Rights: Shareholders have the right to vote on various matters, including the appointment of
directors, approval of financial statements, and certain corporate actions. The LODR Regulations
may specify the procedures for voting, including electronic voting.
• Dividend Declaration: The regulations may provide guidance on the declaration and distribution of
dividends to shareholders.
• Rights Issues: In the case of rights issues, the LODR Regulations may outline the procedures for
offering additional shares to existing shareholders.
EFFICIENT DISCHARGE OF ROLES AND RESPONSIBILITIES BY THE BOARD ACCORDING TO
COMPANIES ACT, 2013

• As per Section 164 of the companies Act, any person of unsound mind, an insolvent person or
who has been convicted of the offence dealing with related party transaction at any time during

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the last preceding five years cannot be appointed as director.

• As per Section 164 of the companies Act, any person who has been convicted by a court of any
offence and has been sentenced to imprisonment for not less than six months cannot be appointed
as director.
• As per Section 178 of the companies Act, every Listed Public Company and non-listed companies
having paid capital >= 10 crore or Turnover >= 100 Crore, or outstanding loans, debentures and
deposits >= 50 crore shall constitute a Nomination and Remuneration
Committee. This committee shall
o Shall formulate the criteria for determining qualifications and independence of a director
o Shall identify persons who are qualified to become directors and recommend to the board for
appointment
• As per section 149 of the companies act, at least one director should stay in India for a total
period of >= than 182 days during the financial year. This ensures that directors are not there
just for the namesake and they should be discharging their duties by being present in India
• As per section 174 of the companies act, the quorum for a meeting of the Board of Directors of
a company shall be 1/3rd of its total strength or two directors, whichever is higher. This ensures
that a certain minimum number is present in meeting when any decisions are taken.
SEBI LODR Regulations mentions following points with respect to functions of board.
1. Strategic Planning and Policy Formulation:
o The board is responsible for formulating and overseeing the implementation of the
company's strategic plans.
o It plays a key role in policy formulation and ensures that policies are aligned with the
company's objectives.
2. Financial Oversight:
o The board is tasked with monitoring the financial performance of the company.
o It reviews and approves financial statements, budgets, and significant financial transactions.
3. Risk Management:
o The board is responsible for identifying and managing risks associated with the company's
operations.
o It oversees the implementation of risk management policies and systems.
4. Compliance and Legal Obligations:
o The board ensures that the company complies with all applicable laws, regulations, and
guidelines.
o It establishes effective systems for internal control and compliance.
5. Board Composition and Independence:
o The board ensures an appropriate mix of executive and independent directors.
o It is responsible for evaluating the independence of directors and maintaining the required
independence ratio.
6. Appointment and Remuneration:
o The board is involved in the appointment and remuneration of key managerial personnel.
o It establishes remuneration policies and ensures they are in line with regulatory guidelines.
INDEPENDENCE OF INDEPENDENT DIRECTORS:
Independent directors play a crucial role in providing unbiased opinions and safeguarding the interests of
minority shareholders. The independence of independent directors is emphasized to ensure that they can
act objectively and in the best interests of the company.
INDEPENDENCE OF INDEPENDENT DIRECTORS UNDER THE COMPANIES ACT, 2013:
Appointment Criteria: Independent directors are appointed based on certain criteria to ensure their
independence. They should not have any pecuniary relationship with the company, its promoters, directors,
or senior management, which could affect their independence.
SEBI LODR regulations:

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1. Term of Appointment: Independent directors are usually appointed for a specific term, and their
reappointment is subject to the passing of a special resolution by the shareholders.
2. No Material Pecuniary Relationships: Independent directors are required to disclose any material
pecuniary relationships or transactions that may have a potential conflict of interest with the
company.
3. No Family Relationships: Independent directors should not have any family relationships with
promoters or senior management of the company that could affect their independence.
4. Remuneration: The remuneration of independent directors should be fixed, and they are not eligible
for stock options. This is to ensure that their decisions are not influenced by short-term financial
gains.
DISTRIBUTION OF POWERS UNDER THE COMPANIES ACT, 2013:
Shareholders:
1. Ultimate decision-making authority lies with the shareholders, who exercise their powers through
passing resolutions at general meetings.
2. Shareholders have the power to appoint and remove directors, approve financial statements, and
decide on key matters affecting the company.
Board of Directors:
The board of directors is responsible for the overall management and decision-making of the company. The
board is accountable to the shareholders and must act in the best interests of the company. Certain
decisions require the approval of the board, such as the appointment of key managerial personnel and
approval of financial statements.
REDRESSAL OF SHAREHOLDER AND STAKEHOLDER GRIEVANCES UNDER THE COMPANIES
ACT, 2013:
o National Company Law Tribunal (NCLT):
o Shareholders and stakeholders can approach the National Company Law Tribunal (NCLT) to
file complaints or seek redressal for grievances. The NCLT has the authority to hear and
decide matters related to company law, including disputes between the company and its
shareholders.
o Class Action Suit
o Shareholders, including depositors and debenture holders, have the right to file a class
action suit against the company for any fraudulent, unlawful, or wrongful act or omission that
is prejudicial to the interests of the company or its members.
o Registrar of Companies (RoC):
o The Registrar of Companies has the authority to inquire into complaints against companies
and take appropriate actions. Shareholders and stakeholders can file complaints with the
RoC regarding matters such as financial irregularities, non-payment of dividends, or any
other violation of the Companies Act.
o Investor Education and Protection Fund (IEPF):
o The Act mandates the creation of the Investor Education and Protection Fund to promote
investor awareness and protect the interests of investors. Unclaimed dividends and shares
are transferred to this fund, and shareholders can claim their dues from the fund.
CHALLENGES TO CORPORATE GOVERNANCE IN INDIA
1. Transparency Issues: Inconsistent financial reporting and disclosure practices hinder transparency.
2. Regulatory Gaps: Incomplete regulatory frameworks and uneven enforcement.
3. Conflict of Interest: Instances of conflicts among board members, executives, and major
shareholders.
4. Board Governance Weaknesses: Challenges in board independence, effectiveness, and diversity.
5. Limited Shareholder Activism: Lack of shareholder engagement and activism.
6. Ethical Concerns: Risks related to corruption and unethical practices.
7. Related Party Transactions: Concerns about fairness in transactions with related parties.

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8. Inadequate Risk Management: Challenges in identifying and managing risks effectively.

9. Cybersecurity Threats: Increasing risks from inadequate cybersecurity measures.
10. Shareholder Education: Lack of awareness impacts shareholder participation.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
Corporate Social Responsibility (CSR) is a concept that refers to a company's commitment to conducting its
business in an ethical and socially responsible manner. It involves taking into account the impact of a
company's activities on various stakeholders, including employees, customers, communities, and the
environment.
GOVERNMENT MANDATE FOR CSR
Companies with a net profit of RS 5 crore should spend 2% of their average profit in the last three years on
social development-related activities such as sanitation, education, health care and poverty alleviation,
among others, which are listed in Schedule 7 of the rule.
NEED FOR CORPORATE SOCIAL RESPONSIBILITY (CSR)
1. Access to Capital: Investors are increasingly considering a company's CSR performance when
making investment decisions. Companies with strong CSR practices may find it easier to attract
investment and access capital as socially responsible investing becomes more prevalent.
2. Competitive Advantage: CSR can provide a competitive advantage by differentiating a company
from its competitors. When consumers have the choice between similar products or services, they
may be more inclined to choose a company with a strong commitment to social and environmental
issues.
3. Positive Reputation and Brand Image: Engaging in CSR activities can enhance a company's
reputation and brand image. Consumers often prefer to support companies that are socially
responsible, and a positive image can lead to increased customer loyalty and trust.
4. Community Relations: Companies operate within communities, and contributing positively to those
communities through CSR initiatives can help build strong relationships. This can lead to increased
support from local stakeholders and a more conducive operating environment.
5. Long-Term Sustainability: Companies that take into account their impact on society and the
environment are more likely to operate sustainably in the long term. This includes considerations of
resource usage, waste reduction, and overall environmental stewardship.
ISSUES WITH CSR
1. Lack of Uniformity in Implementation: The CSR mandate in India applies to companies meeting
specific criteria, but the implementation and reporting processes vary. There is a lack of uniformity in
how companies interpret and execute CSR activities.
2. Focus on Compliance Rather Than Impact: Some companies view CSR as a regulatory
requirement rather than a commitment to social development. This can lead to a focus on meeting
compliance standards rather than creating a meaningful impact on society.
3. Challenges in Monitoring and Evaluation: There are difficulties in monitoring and evaluating the
impact of CSR initiatives. Many companies struggle to measure the effectiveness of their programs
and demonstrate tangible outcomes.
4. Geographical Imbalance: There is often a geographical imbalance in the distribution of CSR funds.
Companies may concentrate their efforts in regions where they operate, leading to uneven
development across the country.
5. Challenges in Identifying Relevant Projects: Companies sometimes struggle to identify and
implement CSR projects that are closely aligned with their core competencies and have a
sustainable impact on the community.
6. Short-Term Orientation: Some companies may adopt a short-term orientation in their CSR
initiatives, focusing on immediate results rather than long-term sustainability and impact.

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 MANAGEMENT COMPENDIUM – RBI GRADE B ~BRAJESH MOHAN

ETHICS
WHAT IS ETHICS?
Ethics refers to the branch of philosophy that deals with moral principles and values, guiding human
behavior and decision-making.
WHY ETHICAL PROBLEMS OCCUR IN BUSINESS?
1. Profit Maximization: The primary goal of many businesses is to maximize profits, which can
sometimes lead to unethical decisions. The pressure to achieve financial targets may encourage
actions that compromise ethical standards.
2. Competition: Intense competition can create an environment where companies feel pressured to
cut corners, engage in deceptive practices, or compromise on ethical principles to gain a
competitive advantage.
3. Pressure from Stakeholders: Businesses often face pressure from various stakeholders, including
shareholders, customers, and employees. These pressures can sometimes lead to ethical lapses as
organizations attempt to satisfy conflicting demands.
4. Weak Corporate Culture: A corporate culture that does not emphasize ethical behavior or does not
have strong values in place can contribute to ethical problems. Employees may not have clear
guidelines or may not feel supported in making ethical decisions.
5. Complexity of Business Operations: As businesses become more complex, decision-making
processes can become convoluted. In such environments, ethical considerations may be
overlooked or downplayed in the pursuit of business goals.
6. Lack of Accountability: When there is a lack of accountability within an organization, individuals
may feel they can act without consequences. This can result in unethical behavior going unchecked.
7. Globalization: Operating in different countries and cultures can create challenges for businesses to
navigate varying ethical standards. What may be considered acceptable in one culture may be
viewed as unethical in another.
BRANCHES OF ETHICS
1. Metaethics:
Metaethics deals with the nature of ethics itself. It explores the meaning of ethical terms, the nature
of moral facts, and the origin and justification of ethical principles. Metaethics is concerned with
questions about the nature of morality rather than providing specific moral guidance.
2. Normative Ethics:
Normative ethics is concerned with providing a framework for determining what is morally right or
wrong. It aims to establish general principles that can guide individuals in making ethical decisions.
Common normative ethical theories include consequentialism, deontology, and virtue ethics.
• The deontological approach to ethics is a normative ethical theory that emphasizes the inherent
nature of actions themselves, rather than the consequences or outcomes of those actions. In other
words, it asserts that certain actions are inherently right or wrong, regardless of the context or the
outcomes they may produce.
• The teleological approach, also known as teleology, is a philosophical and ethical concept that
focuses on the purpose or end goal of an action, process, or entity. The word "teleology" is derived
from the Greek word "telos," which means end or goal. In a teleological framework, the morality or
value of something is often determined by its ultimate purpose or the outcome it produces.
• Virtue ethics is an ethical theory that focuses on the development of virtuous character traits as the
foundation for ethical decision-making. Unlike some other ethical theories that emphasize rules,
consequences, or duties, virtue ethics is more concerned with the qualities of individuals and how
those qualities contribute to moral excellence.
3. Applied Ethics:
Applied ethics involves the application of ethical theories and principles to real-world issues and
situations. It addresses specific moral dilemmas and provides guidance on how to approach ethical
problems in areas such as bioethics, business ethics, environmental ethics, and medical ethics.
• Medical Ethics: Organ Transplantation

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 MANAGEMENT COMPENDIUM – RBI GRADE B ~BRAJESH MOHAN

o Applied ethics in medicine addresses issues like organ transplantation. Ethical

considerations include questions about organ allocation, donor consent, and the
definition of death. For instance, should organs be allocated based on need, age, or
other criteria? How do we ensure informed consent from donors, and what ethical
dilemmas arise when dealing with live donors?
• BioEthics: Genetic Engineering
o Bioethics deals with ethical issues in biology and medicine. Genetic engineering raises
questions about the ethical implications of altering human genes. Should we edit genes
to eliminate hereditary diseases, and if so, what are the potential consequences? How
do we navigate the ethical terrain of designer babies and the potential for unintended
consequences?
• Business Ethics: Corporate Social Responsibility (CSR)
o In the business world, applied ethics focuses on topics like corporate social
responsibility. Companies often face decisions about how their actions impact society
and the environment. For instance, should a company prioritize profit over environmental
sustainability? How can businesses contribute positively to the communities in which
they operate?
4. Descriptive Ethics:
Descriptive ethics involves the study of how people actually behave and think in moral situations. It
seeks to describe and understand existing moral beliefs, practices, and norms within societies.
Descriptive ethics does not necessarily prescribe how people ought to behave but focuses on the
observation and analysis of ethical behavior.
Ex: Studying opinion of people about live in relationship, male female relations in
different societies. Describing psychological orientation and physical actions will give us
idea about ethical standard of the society.
FAIRNESS/JUSTICE APPROACH
The fairness/justice approach is an ethical principle that focuses on treating individuals equitably and
impartially, ensuring that everyone is treated fairly and justly. This approach is often associated with the
concept of distributive justice, which concerns the fair distribution of benefits and burdens in a society.
Example: Positive discrimination in India (reservation) is the intervention to do justice with oppressed.
RIGHTS APPROACH.
o The Rights Approach is one of the ethical frameworks used to analyze and evaluate moral issues. It
is based on the concept of inherent human rights, where individuals are entitled to certain rights by
virtue of being human. These rights may include but are not limited to the right to life, liberty, privacy,
and freedom of expression.
o In the context of India, a specific example related to the Rights Approach could be the right to
freedom of religion. India is known for its cultural and religious diversity, and its constitution
guarantees the right to freedom of religion to its citizens. This means that individuals have the right
to practice, profess, and propagate the religion of their choice.
UTILITARIAN APPROACH
o The utilitarian approach is a consequentialist ethical theory that suggests that the best action is the
one that maximizes overall happiness or pleasure. According to utilitarianism, an action is morally
right if it leads to the greatest happiness for the greatest number of people.
o An India-specific example of the utilitarian approach could be related to public policy decisions. For
instance, consider a scenario where the government is deciding whether to allocate funds to build a
new hospital in a densely populated urban area or to improve existing healthcare facilities in rural
areas with limited access to medical services.
o Applying the utilitarian approach, the decision-makers would need to assess the overall happiness
or well-being that each option would bring to the affected populations. They might consider factors
such as the number of people who would benefit, the improvement in healthcare outcomes, and the

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overall impact on the quality of life. The utilitarian calculus would involve weighing the benefits and
drawbacks of each option to determine which choice maximizes overall happiness.
o In this context, if building the hospital in the urban area significantly improves healthcare access for
a larger number of people, and the overall increase in well-being is greater compared to improving
rural healthcare, a utilitarian approach would support the decision to build the hospital in the urban
area.
COMMON GOOD APPROACH
o The Common Good Approach is an ethical perspective that focuses on promoting the well-being of
all members of a community. In India, the Mahatma Gandhi National Rural Employment Guarantee
Act (MGNREGA) exemplifies this approach by providing rural households with 100 days of
guaranteed employment, enhancing livelihoods, and contributing to community development.
ETHICAL SYLLOGISM
o An ethical syllogism typically involves reasoning about what is morally right or wrong.
o Premise 1: It is ethically wrong to discriminate based on caste.
o Premise 2: The practice of untouchability is a form of discrimination based on caste.
o Conclusion: Therefore, the practice of untouchability is ethically wrong.
o In this example, the ethical syllogism addresses a specific issue related to social ethics in India,
highlighting the moral principle against caste-based discrimination and applying it to the specific
case of untouchability.
WHAT ARE MORAL PRINCIPLES?
Moral principles are foundational beliefs or rules that guide individuals in determining what is right or wrong,
good or bad, in the realm of human behavior. These principles serve as the basis for ethical decision-
making and are often influenced by cultural, religious, philosophical, or personal perspectives. Moral
principles help individuals navigate ethical dilemmas and make judgments about the appropriateness of
actions.
Key features of moral principles include:
Universality: Moral principles are often considered to be universal, applying to all individuals regardless of
their cultural or personal differences. They aim to provide a common framework for ethical behavior that
transcends individual or group perspectives.
Consistency: Moral principles should be consistent and not subject to arbitrary changes. They provide a
stable foundation for ethical reasoning and decision-making.
Guidance: Moral principles offer guidance on how individuals should behave in various situations. They
help people assess the ethical implications of their actions and make choices that align with their moral
values.
Justifiability: Moral principles are often accompanied by reasoning that supports their adoption.
Individuals may articulate reasons why a particular principle is morally sound, providing a basis for ethical
discussions and debates.
Examples of moral principles include:
Respect for Autonomy: The principle that individuals have the right to make their own decisions and
choices, and these choices should be respected by others.
Beneficence: The principle of promoting the well-being of others and taking actions to benefit them.
Nonmaleficence: The principle of "do no harm," which emphasizes the importance of avoiding actions that
cause harm or negative consequences.
Justice: The principle of treating individuals fairly and equitably, ensuring that benefits and burdens are
distributed fairly in society.

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Honesty: The principle of truthfulness and integrity, emphasizing the importance of honesty in interpersonal
relationships and communication.
DIFFERENCE BETWEEN MORALITY AND ETHICS:

COGNITIVISM AND NON-COGNITIVISM

Cognitivism: Cognitivism is the view that moral statements express propositions or beliefs that can be true
or false. According to cognitivists, when we make moral judgments, we are making claims about the world
that can be objectively evaluated.
"Murder is morally wrong" is considered by cognitivists as expressing a proposition that can be either true
or false. It is making a claim about the objective moral status of murder.
Non-Cognitivism: Non-cognitivism is the view that moral statements do not express propositions or beliefs
with truth values. Instead, they are expressions of emotion, attitudes, preferences, or commands. Non-
cognitivists argue that moral language serves a different function than descriptive language.
"Boo to murder!" might be interpreted by non-cognitivists as expressing an emotional reaction to murder
rather than making a truth-apt claim about its moral status.
WHAT IS BELIEF?
Belief refers to the acceptance that something is true or exists, often without direct evidence or proof.
Beliefs can encompass a wide range of ideas, including religious, philosophical, political, or personal
convictions.
WAYS OF BELIEF FORMATION:
1. Perception: Beliefs often arise from our sensory experiences and perceptions of the world. What
we see, hear, touch, taste, and smell contribute to our understanding of reality. However,
perceptions can be subjective and influenced by individual differences and biases.

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2. Socialization and Cultural Influence: Beliefs are often acquired through socialization, as
individuals absorb the values, norms, and beliefs of their culture, family, and community. Cultural
and societal norms shape our worldview and influence the formation of beliefs.
3. Personal Experience: Personal experiences, especially significant or emotionally charged ones,
can strongly influence belief formation. Positive or negative events can shape our perspectives and
lead to the development of specific beliefs based on individual encounters.
4. Reasoning and Logic: Logical reasoning and critical thinking play a crucial role in belief formation.
Individuals may form beliefs based on rational analysis, deduction, and inference. This process
involves evaluating evidence, considering arguments, and drawing conclusions.
5. Authority and Trust: People often form beliefs based on the trust they place in authoritative figures
or sources. This can include experts, leaders, institutions, or even information from the media.
Beliefs formed through authority can be influential, but they also carry the risk of being misguided or
biased.
6. Emotional and Intuitive Processes: Emotions and intuition can play a significant role in belief
formation. Sometimes, beliefs are formed based on gut feelings, instincts, or emotional responses
to certain stimuli. Emotions can either reinforce or challenge existing beliefs, shaping the overall
belief system.
VALUES:
Values are fundamental beliefs or principles that guide our behavior and decision-making. They reflect what
is important to us and often serve as a foundation for our attitudes and actions.
SIGNIFICANCE OF VALUES
1. Guiding Principles: Values serve as guiding principles that shape behavior, decisions, and actions,
providing a moral compass for individuals and communities.
2. Identity and Belonging: Values contribute to the formation of individual and collective identities,
fostering a sense of belonging and shared purpose within a community.
3. Ethical Framework: Values establish an ethical framework, influencing the way people distinguish
right from wrong, and promoting responsible and moral conduct.
4. Cultural Heritage: Values are intrinsic to cultural identity, transmitting beliefs, traditions, and norms
from one generation to the next, preserving a society's cultural heritage.
5. Social Cohesion: Shared values promote social cohesion by creating common ground, reducing
conflict, and fostering collaboration among diverse individuals and groups.
6. Personal Fulfillment: Aligning personal actions with one's values enhances a sense of purpose
and fulfillment, contributing to overall well-being and satisfaction.
7. Decision-Making: Values guide decision-making processes, helping individuals prioritize goals,
allocate resources, and navigate complex choices in both personal and professional contexts.
CHARACTERISTICS OF VALUES
1. Subjectivity: Values are subjective and vary among individuals based on their beliefs, culture, and
personal experiences.
2. Stability: Values tend to be stable and enduring, shaping an individual's behavior consistently over
time.
3. Hierarchy: Values often exist in a hierarchical order, with some being more central and influential in
guiding behavior than others.
4. Cultural Influence: Values are significantly influenced by cultural norms, traditions, and societal
expectations.
5. Learned and Acquired: Values are typically learned and acquired through socialization processes,
such as family, education, and social interactions.
6. Expressed Through Behavior: Values are reflected in an individual's actions and decisions,
serving as a guide for ethical and moral conduct.
7. Instrumental and Terminal: Values can be categorized as instrumental (means to an end) or
terminal (end goals in themselves).
SOURCES OF VALUES.

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1. Cultural Background: Cultural norms and traditions play a significant role in shaping individual
values.
2. Family Upbringing: Family values and the upbringing provided by parents influence personal
values.
3. Religious Beliefs: Many individuals derive their values from religious teachings and principles.
4. Education: Formal education and exposure to diverse ideas can shape one's values and
worldview.
5. Peer Influence: Values can be influenced by the beliefs and behaviors of peers and social circles.
6. Personal Experiences: Life events, successes, failures, and challenges contribute to the
development of personal values.
7. Media and Technology: Exposure to media, including social media, can shape values by
influencing opinions and perspectives.
WHAT IS ATTITUDE?
Attitude refers to a psychological and emotional disposition or a way of thinking and feeling about
something or someone. It encompasses a set of beliefs, feelings, values, and behaviors directed toward a
particular object, person, situation, or group. Attitudes can be positive, negative, or neutral, and they can
influence an individual's thoughts, actions, and interactions with others.

COMPONENTS OF ATTITUDE:
Cognitive Component: This involves the beliefs, thoughts, and information one has about a particular
object, person, or situation. For example, if someone believes that regular exercise is beneficial for health,
that represents the cognitive component of their attitude toward exercise.
Affective Component: This relates to the emotional or feeling aspect of an attitude. It reflects the
individual's emotional response or evaluation of a particular object, person, or situation. Using the exercise

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example, a positive affective component might involve feelings of enjoyment and satisfaction associated
with regular physical activity.
Behavioral Component: This pertains to the behavioral intentions or actions directed toward the attitude
object. Continuing with the exercise example, the behavioral component would involve the person's actual
engagement in regular physical activity.
WHAT IS VIRTUE?
Virtue generally refers to moral excellence, goodness, or righteousness in character and behavior. It
involves possessing and practicing positive qualities, values, and habits that are considered morally good
or desirable.
ARISTOTLE'S PERSPECTIVE ON VIRTUE:
1. Mean between Extremes (Doctrine of the Mean): Virtue, according to Aristotle, lies in finding a
balance between extremes. He introduces the concept of the "Doctrine of the Mean," asserting that
virtues are the midpoint between deficiencies and excesses. For example, courage is the mean
between recklessness and cowardice.
2. Golden Mean: Aristotle emphasizes the idea of the "golden mean," which represents the desirable
middle ground between two vices. This principle applies to various virtues, suggesting that virtue is
a habit of choosing moderation.
3. Ethical Virtues vs. Intellectual Virtues: Aristotle distinguishes between ethical virtues (related to
character and moral habits) and intellectual virtues (related to reasoning and knowledge). Ethical
virtues are acquired through habit and practice, while intellectual virtues result from education and
rationality.
4. Habituation and Practice: Aristotle emphasizes that virtue is developed through habituation and
practice. Virtuous actions are not merely theoretical or the result of rules but are ingrained in one's
character through repeated virtuous behavior.
5. Teleology and Eudaimonia: Aristotle's ethics is teleological, meaning it is oriented towards a
purpose or end. The ultimate human goal, according to Aristotle, is eudaimonia, often translated as
"flourishing" or "well-being." Virtuous actions contribute to achieving eudaimonia.
6. Practical Wisdom (Phronesis): Aristotle introduces the concept of practical wisdom or phronesis,
which is the ability to make sound judgments about the moral choices one faces. Practical wisdom
is crucial in determining the mean in various situations.
SOCRATES ON VIRTUE
According to Socrates, virtue is intricately tied to knowledge. He argued that people do not knowingly
commit evil; rather, they lack understanding of what is truly virtuous. In the Socratic view, virtue is not just a
set of actions but a form of knowledge or wisdom.
Socrates famously claimed that "virtue is knowledge." He believed that if one truly understood what was
good and just, they would naturally act in accordance with those principles. This perspective led him to
emphasize the importance of education and the pursuit of knowledge in the development of virtuous
character.
Furthermore, Socrates engaged in dialectical questioning to guide others in examining their beliefs about
virtue. Through a process known as the Socratic method, he encouraged individuals to question and refine
their understanding of morality, challenging them to think critically about their values.
GOLDEN MEAN THEORY
It suggests that virtue lies between extremes and that the ideal moral or ethical behavior is found in the
moderate or balanced position between deficiency and excess.
In other words, the theory encourages individuals to seek a middle ground or a balanced approach in
various aspects of life, avoiding extremes of excess or deficiency. The idea is to find the "golden mean" or
the moderate position that represents virtuous and morally upright behavior.

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For example, courage is considered a virtue, and the Golden Mean Theory would suggest that
recklessness (excessive courage) and cowardice (deficient courage) are both extremes to be avoided. The
virtuous middle ground would be a courageous but reasonable and measured response to a situation.
TELEOLOGICAL THEORY.
Teleological theory, also known as consequentialist ethics, is a moral framework that evaluates the morality
of an action based on its outcomes or consequences. The word "teleological" is derived from the Greek
word "telos," which means end or purpose. In teleological theories, the ultimate goal or purpose is
considered when determining the rightness or wrongness of an action.
The key idea behind teleological theories is that the morality of an action depends on whether it leads to a
desirable outcome. The most well-known form of teleological ethics is utilitarianism, which asserts that the
morally right action is the one that maximizes overall happiness or pleasure and minimizes suffering. Other
teleological theories may focus on different ultimate goods or goals, but they all share the common feature
of evaluating actions based on their consequences.
WHAT IS UTILITARIANISM
Utilitarianism is a consequentialist ethical theory that was developed in the 18th and 19th centuries by
philosophers such as Jeremy Bentham and John Stuart Mill. The central idea of utilitarianism is that the
moral worth of an action is determined by its overall utility or usefulness in maximizing happiness or
pleasure and minimizing suffering or pain.
Key principles of utilitarianism include:
1. The Principle of Utility: This is the foundational idea of utilitarianism. It states that actions are right
to the extent that they promote happiness or pleasure and wrong to the extent that they produce
unhappiness or pain. The measure of utility is often understood in terms of the overall well-being of
individuals affected by the action.
2. Greatest Happiness Principle: Often associated with Mill, the Greatest Happiness Principle
asserts that one should act to produce the greatest amount of happiness for the greatest number of
people. Mill argued for a qualitative approach to pleasure, distinguishing between higher pleasures
(intellectual and moral) and lower pleasures (physical). He contended that higher pleasures should
be given more weight in moral calculations.
3. Consequentialism: Utilitarianism is a consequentialist theory, meaning that it focuses on the
outcomes or consequences of actions rather than the inherent nature of the actions themselves. An
action is judged as morally right or wrong based on the overall balance of its consequences.
4. Impartiality: Utilitarianism emphasizes impartiality, meaning that everyone's happiness and
suffering are considered equally. The interests of all individuals, regardless of personal relationships
or affiliations, should be taken into account.
5. Flexibility: Utilitarianism is a flexible theory that can adapt to different situations. It doesn't
prescribe specific rules but rather encourages individuals to assess each situation on its own merits
and choose the action that maximizes overall well-being.
CONSEQUENTIALISM
According to consequentialism, the rightness or wrongness of an action is determined solely by the overall
outcome it produces. This ethical framework contrasts with deontological ethics, which emphasizes the
inherent nature of actions and adherence to moral rules or duties, and virtue ethics, which focuses on the
development of virtuous character traits.
In consequentialism, the ultimate goal is to maximize overall good or value. The specific definition of "good"
may vary among consequentialist theories, but common formulations include happiness, well-being,
pleasure, or the satisfaction of preferences. The idea is that an action is morally right if it leads to the best
overall consequences and is morally wrong if it results in more harm or less overall good.
THEORY OF DEONTOLOGY AND CATEGORICAL IMPERATIVE

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Deontology is a moral and ethical theory that focuses on the inherent nature of actions rather than the
consequences that result from them. Immanuel Kant, an 18th-century German philosopher, is one of the
key figures associated with deontological ethics. The central idea of deontology is that there are moral
principles or rules that are binding regardless of the situation, and individuals have a duty to adhere to
these principles.
Kant introduced the concept of the "categorical imperative" as a fundamental principle of deontological
ethics. The categorical imperative is a universal moral law that applies to all rational beings in all situations.
Kant formulated the categorical imperative in various ways, but one of the most well-known formulations is:
"Act only according to that maxim whereby you can at the same time will that it should become a universal
law."
This formulation emphasizes the idea of universality and consistency in moral actions.
To understand the categorical imperative, its components:
Maxim: A maxim is a subjective principle of action, essentially the underlying motive or intention behind an
action. For example, if someone is considering whether to lie to get out of trouble, the maxim might be "It's
acceptable to lie to avoid negative consequences."
Universalization: The idea of universalizing a maxim means testing whether it can be consistently applied
as a universal law without contradiction. In the lying example, universalizing the maxim would mean
considering whether it would be acceptable for everyone to follow the same principle in all similar
situations.
If universalizing the maxim leads to a contradiction or undermines the possibility of a coherent society,
according to Kant, the action is morally impermissible.
RIGHTS AND DUTIES:
Rights refer to a set of legal, social, or ethical principles of freedom or entitlement that are typically
recognized and protected by law. These rights are essential for the highest personal good and
social benefits.
KEY PHILOSOPHICAL PERSPECTIVES ON RIGHTS:
1. Natural Rights (John Locke): John Locke, an influential Enlightenment thinker, argued for the
existence of natural rights. According to Locke, individuals possess inherent rights to life, liberty, and
property. These rights are not granted by governments but are instead fundamental and exist in the
state of nature. Governments, in Locke's view, are created to protect these natural rights.
2. Utilitarianism (Jeremy Bentham and John Stuart Mill): Utilitarianism is a consequentialist ethical
theory that assesses the morality of actions based on their outcomes. Jeremy Bentham and John
Stuart Mill, key figures in utilitarian thought, considered rights as instrumental to the overall
happiness of society. They believed that rights and laws should be designed to maximize the
greatest happiness for the greatest number of people.
3. Social Contract (Jean-Jacques Rousseau): Rousseau's social contract theory posits that
individuals come together to form a society through a mutual agreement. In this social contract,
individuals surrender some freedoms in exchange for the benefits of organized society. Rights, in
Rousseau's view, are a product of this social contract and should reflect the general will of the
community.
DUTIES
Duties refer to moral or legal obligations that individuals are required to fulfill.
Kantian Theory of Duty:
1. Central Concept:
• Categorical Imperative: A universal moral law that applies to all rational beings, requiring actions
that can be consistently willed for everyone.

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2. Principles of Kantian Duty:

o Autonomy of the Will: Individuals have the capacity for self-governance and rational
decision-making.
o Universalizability: An action is morally acceptable if its principle can be applied universally
without contradiction.
3. Good Will:
• Highest Good: According to Kant, the only thing that is unconditionally good is a "good will" – the
intention to do one's duty for the sake of duty.
4. Deontological Ethics:
• Duty-Centered: Actions are inherently right or wrong, regardless of their consequences.
• Non-Consequentialist: Emphasizes the inherent nature of actions, not their outcomes.
5. Two Formulations of the Categorical Imperative:
• Formula of Universal Law: Act only according to that maxim whereby you can at the same time
will that it should become a universal law.
• Formula of Humanity: Act in such a way that you treat humanity, whether in your own person or
in the person of any other, never merely as a means to an end, but always at the same time as
an end.
THEORY OF ENTITLEMENT AND PROPERTY RIGHTS:
Robert Nozick is an American philosopher. His entitlement theory (ET):
o The theory of entitlement and property rights is a cornerstone of political and economic philosophy,
aiming to define the just distribution and ownership of resources within a society. At its core,
entitlement theory asserts that individuals have a moral right to the fruits of their labor and the
resources they acquire through voluntary transactions or legitimate means. This perspective is often
associated with thinkers like John Locke, who argued that individuals have a natural right to life,
liberty, and property.
o Property rights, as an extension of entitlement theory, delineate the rules governing the use, control,
and transfer of resources. These rights serve as a crucial mechanism for organizing social
interactions and economic transactions. In a just system, property rights are typically grounded in
principles of fairness, justice, and individual autonomy.
o However, debates arise concerning the distribution of resources and whether historical injustices
should be considered in determining current entitlements. Some argue for a more egalitarian
approach that rectifies past injustices, while others emphasize the importance of respecting current
property rights and the principle of non-interference.
CONCEPT OF JUSTICE
Justice is a complex and multifaceted concept that generally refers to fairness, impartiality, and the
equitable treatment of individuals based on principles of morality, ethics, and law. It involves ensuring that
people receive what they deserve or are entitled to, and it is often associated with the idea of righting
wrongs or rectifying injustices.
Some of the key types of justice include:
1. Distributive Justice:
• Focuses on the fair distribution of resources, opportunities, and benefits in a society.
• Concerned with addressing economic and social inequalities
2. Retributive Justice:
• Centers around the idea of punishment for wrongdoing.
• Aims to ensure that individuals who commit offenses face consequences proportionate to the
severity of their actions.
3. Restorative Justice:
• Emphasizes repairing the harm caused by criminal behavior.
• Focuses on rehabilitation, reconciliation, and restoring relationships between offenders and the
affected parties.

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4. Procedural Justice:
• Concentrates on the fairness and transparency of the legal and judicial processes.
• Emphasizes fair treatment, impartiality, and adherence to established rules and procedures.
5. Social Justice:
• Concerned with addressing systemic inequalities and promoting a fair and just society.
• Focuses on issues such as poverty, discrimination, and human rights.
6. Commutive Justice:
• Relates to the fairness in contracts and agreements between individuals and parties.
• Involves the exchange of goods, services, or promises in a just and equitable manner.
EGALITARIAN THEORY OF JUSTICE
Here are a few key points associated with the egalitarian theory of justice:
1. Equality of Opportunity: Egalitarians often argue for equal opportunities for all individuals,
regardless of their background, socioeconomic status, or other personal characteristics. This
includes access to education, employment, and other resources that contribute to personal
development.
2. Distributive Justice: Egalitarians are concerned with the fair distribution of resources and benefits
in society. They argue that economic and social inequalities should be minimized, and that steps
should be taken to address disparities in wealth, income, and other forms of privilege.
3. Rawlsian Justice: The philosopher John Rawls is often associated with contemporary egalitarian
thought. In his influential work "A Theory of Justice," Rawls proposed the difference principle, which
allows for social and economic inequalities only if they benefit the least advantaged members of
society.
4. Equality of Outcome: Some forms of egalitarianism advocate for equality of outcome, meaning
that not only should everyone have equal opportunities, but the end results or outcomes should also
be as equal as possible. This might involve more direct intervention in the distribution of resources
to ensure a more even outcome.
5. Critique of Meritocracy: Egalitarians often challenge the idea of a pure meritocracy where
individuals succeed or fail based solely on their abilities and efforts. They argue that societal
structures and systemic inequalities can limit opportunities and contribute to unjust outcomes.
6. Social Justice Movements: Egalitarian principles have been influential in various social justice
movements, advocating for the rights and equal treatment of marginalized and underrepresented
groups.
CAPITALIST THEORY OF JUSTICE
The capitalist theory of justice is grounded in the principles of capitalism, which is an economic and social
system characterized by private ownership of the means of production, free markets, and the pursuit of
profit. In the context of justice, proponents of capitalist theory argue that a just society is one that allows
individuals the freedom to engage in voluntary transactions, accumulate private property, and compete in
open markets. Here are some key aspects of the capitalist theory of justice
The capitalist theory of justice:
1. Individual Liberty: Emphasis on individual freedom and the right to make personal choices.
2. Private Property: Recognition of the importance of private property rights for economic growth and
individual control.
3. Free Markets: Advocacy for minimal government intervention in markets, allowing voluntary
exchanges and determining prices through supply and demand.
4. Meritocracy: Belief in a system where individuals are rewarded based on their abilities, efforts, and
contributions.
5. Incentives for Innovation: The pursuit of profit as a driving force for innovation and economic
development.
6. Limited Government: Support for a government role in protecting property rights and enforcing
contracts, but with minimal interference in economic affairs.

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SOCIALIST THEORY OF JUSTICE

The socialist theory of justice is a perspective within political philosophy that seeks to address issues of
justice and fairness within the context of socialist or Marxist ideologies. It is rooted in the broader tradition
of socialist thought, which emphasizes the importance of collective ownership of the means of production,
economic equality, and the elimination of social class distinctions.
1. Economic Equality: Socialists argue that true justice can only be achieved when there is a
significant reduction or elimination of economic inequality. They criticize capitalist systems for
perpetuating a wide gap between the rich and the poor, and advocate for the redistribution of wealth
to create a more egalitarian society.
2. Collective Ownership: Socialists typically advocate for the collective or social ownership of the
means of production, such as factories, land, and natural resources. This is seen as a way to
prevent the concentration of economic power in the hands of a few individuals or corporations,
promoting a more just distribution of resources and benefits.
3. Classless Society: One of the ultimate goals of socialist theory is the establishment of a classless
society. Socialists argue that social classes, which are seen as inherently unjust, should be
abolished. In a classless society, there would be no exploitation of one class by another, and all
individuals would have equal access to resources and opportunities.
4. Social Justice: Socialists often emphasize the importance of social justice, which goes beyond
economic considerations. This includes issues such as equal access to education, healthcare, and
other social services. Socialists argue that these basic needs should be guaranteed to all members
of society, regardless of their economic status.
5. Democratic Control: Many socialist theories advocate for democratic control over the means of
production and decision-making processes in society. This means that workers and communities
should have a say in how economic and political systems are organized, as opposed to power being
concentrated in the hands of a small elite.
JOHN RAWLS' THEORY OF JUSTICE
His theory is based on the idea of a hypothetical social contract, where individuals, unaware of their own
circumstances and advantages or disadvantages in life, come together to establish principles of justice.
Rawls proposes two key principles:
1. The First Principle of Justice: Each person is to have an equal right to the most extensive basic
liberty compatible with a similar liberty for others. This principle emphasizes fundamental individual
freedoms such as freedom of speech, assembly, and conscience.
2. The Second Principle of Justice (the Difference Principle): Social and economic inequalities are
to be arranged so that they are both (a) to the greatest benefit of the least advantaged and (b)
attached to positions and offices open to all under conditions of fair equality of opportunity. This
principle allows for economic inequalities as long as they work to the advantage of the least well-off
members of society and are tied to fair opportunities for everyone.
3. Rawls introduces the concept of the "original position," a hypothetical scenario where
individuals, behind a "veil of ignorance," don't know their own characteristics, talents, or social
positions. In this state of ignorance, people would make decisions about the principles of justice
without knowing how these principles would affect them personally.

4. Rawls argues that this approach would lead individuals to choose principles that are fair and just for
all, as they would be motivated to protect the interests of the least advantaged, given the
uncertainty of their own position in society.
GANDHIAN CONCEPT OF JUSTICE
Several key principles:
1. Ahimsa (Non-violence): The cornerstone of Gandhian justice is non-violence. Gandhi believed in
resolving conflicts and seeking justice without resorting to physical or verbal harm. Ahimsa extends

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beyond mere abstention from physical violence and includes non-violence in thought, speech, and
action.
2. Satyagraha (Truth Force): Gandhi advocated the use of satyagraha as a means to achieve justice.
Satyagraha is the pursuit of truth and justice through nonviolent resistance. It involves holding onto
truth and resisting injustice without hatred or retaliation.
3. Sarvodaya (Welfare of All): Gandhian justice is not individual-centric; it is concerned with the well-
being of the entire community. Sarvodaya, meaning the welfare of all, emphasizes social and
economic justice, ensuring that the benefits of development reach every segment of society.
4. Swadeshi (Self-Reliance): Gandhi believed in the concept of swadeshi, promoting self-reliance
and economic independence. This extends to justice, as he sought a decentralized and self-
sufficient society where local communities could address their issues and conflicts.
5. Decentralization of Power: Gandhi was a proponent of decentralized governance, advocating for
local self-rule. He believed that justice is better achieved when power is distributed at the grassroots
level, allowing communities to participate in decision-making and dispute resolution.
6. Spiritual and Ethical Foundation: Gandhian justice is deeply rooted in spirituality and ethics.
Gandhi believed that justice could only be achieved by individuals who adhere to a strong moral and
ethical code. Personal transformation and adherence to truth were considered essential for the
pursuit of justice.
7. Equality and Brotherhood: Gandhi envisioned a just society where there is equality among
individuals, regardless of caste, religion, or socio-economic status. Brotherhood and unity among
people were seen as crucial for the attainment of justice.
CARE ETHICS
Care ethics is a moral and ethical theory that emphasizes the significance of relationships,
empathy, and care in the ethical decision-making process.
FEMINIST THEORY OF CARE ETHICS
NEL NODDING’S VIEW
Points to understand Nel Noddings' view:
1. Ethics of Care: Noddings argues that traditional ethical theories, often based on principles like
justice or rights, neglect the moral significance of caring relationships. She suggests that an ethics
of care should be at the center of moral philosophy.
2. Caring as a Moral Emotion: Noddings contends that caring is not just an action or a duty but is
grounded in a moral emotion. She places importance on the emotional response to the needs of
others and the recognition of those needs.
3. Engrossment and Motivation: Central to Noddings' view is the concept of "engrossment," which
refers to the ability to be fully present and attentive to the needs of another. This engrossment is the
basis for moral motivation in caring relationships.
4. The Care Dyad: Noddings introduces the idea of a "care dyad," a relational framework where there
is a caregiver and a care receiver. This dyadic relationship forms the basis for ethical decision-
making, emphasizing the interdependence and mutual responsiveness between individuals.
5. Partiality and Universality: Noddings recognizes that caring is often partial, meaning that
individuals naturally care more for those with whom they have close relationships. However, she
argues that this partiality can be a foundation for a broader sense of universality, where caring
relationships contribute to a more compassionate and just society.
6. Critique of Traditional Ethics: Noddings critiques traditional ethical theories, such as deontology
and utilitarianism, for their abstract and impersonal nature. She argues that an ethics of care
provides a more nuanced and contextually sensitive approach to morality.
7. Educational Implications: Noddings extends her care ethics into the realm of education,
suggesting that caring should be a fundamental aspect of the educational process. She emphasizes
the importance of educators fostering caring relationships with students to create a positive and
conducive learning environment.
MARILYN FRIEDMAN’S VIEW

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Friedman challenges traditional moral theories that often prioritize abstract principles and individual
autonomy over relational aspects of ethics.
Friedman argues that care should be recognized as a fundamental ethical value, foundational for
understanding human morality. She contends that care is not merely a private or personal matter but is
deeply embedded in social structures and should be acknowledged as a crucial aspect of social and
political philosophy. According to Friedman, caring relationships are central to human flourishing, and the
moral framework should reflect the interdependence and vulnerability inherent in these relationships.
Furthermore, Friedman critiques the gendered nature of care, highlighting that women have historically
been assigned caregiving roles, leading to an undervaluation of care work. She advocates for the
transformation of societal attitudes towards care, challenging the traditional gender norms associated with
it.
ETHICAL PLURALISM
Ethical pluralism is a moral theory that acknowledges the existence of multiple, equally valid ethical
principles or values that may sometimes conflict with each other. This approach recognizes that different
situations may require different ethical considerations, and there is no single, overarching moral rule that
applies universally.
ETHICAL OBJECTIVISM.
Ethical objectivism is a philosophical position that asserts that there are objective moral facts and values
that exist independently of individual beliefs, opinions, or cultural practices. In other words, ethical
objectivism holds that certain moral principles are true for everyone, regardless of personal feelings or
cultural differences.
ETHICAL ABSOLUTISM
Ethical absolutism is a perspective in ethical theory that asserts the existence of objective and universal
moral principles. According to ethical absolutism, certain actions are inherently right or wrong, regardless of
the context, culture, or individual beliefs. These moral principles are considered to be fixed and unchanging,
providing a foundation for determining the morality of any given behavior.
ETHICAL/ MORAL REALISM
Ethical Realism:
Ethical realism posits that there are objective moral facts or properties that exist independently of human
beliefs, feelings, or cultural practices. Moral statements are seen as truth-apt, meaning they can be
objectively true or false. Realists argue that moral facts are part of the fabric of the universe and can be
discovered through rational inquiry or empirical observation
Moral Realism:
Moral realism is a broader term that encompasses various forms of ethical realism but also includes non-
cognitivist versions of realism. Like ethical realism, moral realism asserts the existence of objective moral
facts.Some forms of moral realism argue that moral facts are irreducible and cannot be reduced to natural
or non-moral facts.
HEDONISM
The central idea is that the pursuit of pleasure and the avoidance of pain should guide human behavior.
Hedonism is often associated with the belief that pleasure is the ultimate good and that maximizing
pleasure and minimizing pain lead to a good and fulfilling life.

WHAT IS BUSINESS ETHICS?

Business ethics refers to the application of ethical principles and moral values in a business or
organizational context. It involves making decisions and conducting business activities in a manner
that is consistent with fundamental principles of right and wrong. Business ethics goes beyond

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legal requirements and compliance and addresses issues such as fairness, honesty, integrity,
transparency, and social responsibility.
IMPORTANCE OF BUSINESS ETHICS
1. Reputation and Trust: Ethical behavior builds trust and enhances the reputation of the business.
2. Customer Loyalty: Ethical practices contribute to customer loyalty and repeat business.
3. Employee Morale and Productivity: A strong ethical culture boosts employee morale and
productivity.
4. Legal Compliance: Ethical behavior helps businesses comply with laws and regulations.
5. Risk Management: Ethical decision-making is crucial for effective risk management.
6. Investor Confidence: Investors prefer companies with a reputation for ethical practices.
7. Long-Term Success: Ethical businesses are more likely to achieve sustained success.
8. Social Responsibility: Ethical behavior demonstrates a commitment to social responsibility.
Profit-Based Morality Approach in Business Ethics:
1. Wealth Creation: Emphasizes the role of businesses in creating wealth, jobs, and economic
development.
2. Stakeholder Value: Focuses on creating value for stakeholders, including shareholders,
employees, customers, and suppliers.
3. Market Efficiency: Believes in the efficiency of free markets, arguing that profit pursuit leads to
innovation and resource allocation.
4. Legal Compliance: Acknowledges the importance of operating within legal boundaries for a fair
economic system.
5. Responsibility to Shareholders: Prioritizes maximizing shareholder value as a primary ethical
obligation.
MAJOR UNETHICAL BUSINESS PRACTICES:
1. Fraud: Manipulating finances or deceiving consumers through false advertising.
2. Corruption: Offering bribes or secret payments for influence and favors.
3. Environmental Violations: Improper waste disposal, exceeding emission limits, harming the
environment.
4. Labor Exploitation: Employing underage or forced labor, exploiting workers.
5. Discrimination: Unfair treatment or pay disparities based on protected characteristics.
6. Supply Chain Abuses: Exploitative practices and conflict mineral sourcing in the supply chain.
7. Privacy Violations: Data breaches and surveillance without consent.
8. Anticompetitive Practices: Colluding on prices or abusing dominant market positions.
9. False Advertising: Making false claims to deceive customers.
10. Product Safety Violations: Knowingly selling unsafe products, ignoring recalls.
11. Tax Evasion: Engaging in illegal tax schemes to evade taxes.
ETHICAL ISSUES IN BUSINESS
1. Corporate Governance:
Corruption and Bribery: Offering or accepting bribes, kickbacks, or other forms of corrupt practices
can undermine fair competition and erode trust.
2. Human Resources:
Employee Treatment: Issues such as discrimination, harassment, and unfair labor practices can
create ethical dilemmas.
3. Marketing and Advertising:
Truth in Advertising: Misleading or false advertising can deceive consumers and damage trust in a
brand.
4. Supply Chain Management:
Child Labor and Exploitation: Using suppliers that employ child labor or engage in other forms of
exploitation can lead to ethical concerns.
5. Privacy and Data Security:

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Data Breaches: Failing to protect customer data can lead to breaches of privacy and trust.
6. Globalization and Fair Trade:
Exploitative Practices in Developing Countries: Some businesses may face ethical concerns when
operating in countries with lax labor or environmental regulations.
Fair Trade Practices: Ensuring fair treatment of workers and suppliers in all parts of the world is an
ethical imperative.
ETHICAL ISSUES IN MARKETING AND ADVERTISEMENT
1. Deceptive Advertising:
False Claims: Making false or misleading claims about a product's features, benefits, or
performance is unethical. It can lead consumers to make purchasing decisions based on inaccurate
information.
2. Targeting Vulnerable Audiences:
Children: Marketing to children, especially in ways that exploit their limited understanding or
manipulate them into pressuring parents to make purchases, raises ethical concerns.
3. Privacy Concerns:
Data Collection: The extensive collection and use of personal data without clear consent or proper
safeguards can infringe on individuals' privacy rights.
4. Influencer Marketing Ethics:
Transparency: Influencers not disclosing paid partnerships or providing genuine opinions about
products can mislead their followers.
5. Unfair Competition:
Comparative Advertising: While comparing products is common, making unfair or false comparisons
to undermine competitors can be ethically problematic.
6. Stereotyping and Discrimination:
Gender Stereotyping: Ads that perpetuate gender stereotypes or objectify individuals based on
gender can be ethically problematic.
CONSUMER ETHICS IS BASED ON THE FOLLOWING THEORIES:
a. CONTRACRUAL THEORY
The Contractual Theory of consumer ethics posits that the relationship between consumers and
businesses is akin to a contractual agreement. According to this theory, individuals implicitly enter
into a social contract with companies when engaging in economic transactions. Both parties are
expected to adhere to certain ethical norms, with consumers demanding fair treatment and quality
products, while businesses commit to transparent practices and responsible product development.
The theory emphasizes the importance of mutual trust, honesty, and reciprocity. Consumers are
viewed as active participants who, through their purchasing decisions, reinforce or challenge the
terms of the social contract. In essence, the Contractual Theory promotes a symbiotic relationship
where ethical behavior from both consumers and businesses contributes to the overall well-being of
society.
b. SOCIAL COST THEORY
The Social Cost Theory in consumer ethics posits that individuals should consider the broader
societal impacts of their consumption choices. It extends beyond personal preferences and
economic costs to encompass the social and environmental consequences of production and
consumption. Advocates argue that consumers bear a responsibility for the externalities associated
with the products they buy, including environmental degradation and social inequalities. By factoring
in these external costs, consumers can make more ethical choices, fostering sustainability and
social justice. This theory emphasizes the interconnectedness of individual consumption patterns
with wider societal well-being, encouraging consumers to make informed and conscientious
decisions that account for the full social cost of their actions.
c. DUE CARE THEORY
The Due Care Theory in consumer ethics emphasizes that consumers have a moral responsibility to
exercise reasonable care and diligence when making purchasing decisions. It posits that consumers
should actively seek information about products, weigh potential risks and benefits, and make
informed choices to safeguard their own well-being and the well-being of others. This ethical

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framework encourages consumers to be vigilant in assessing product quality, safety, and

environmental impact. It recognizes that informed consumer choices contribute to market dynamics
by rewarding ethical business practices and encouraging companies to prioritize responsible
behavior. The Due Care Theory underscores the importance of consumer education and
empowerment, fostering a sense of responsibility among individuals to engage in ethical
consumption, thereby influencing businesses to uphold higher standards in their products and
operations.
ETHICAL CONSUMERISM IS ADDRESSING SEVERAL KEY ISSUES:
1. Environmental Sustainability:
Climate Change: Consumers are increasingly concerned about the impact of their purchases on
climate change.
2. Fair Labor Practices:
Worker Rights: Ethical consumers are concerned about the treatment of workers in the production
process. They support companies that ensure fair wages, safe working conditions, and uphold
human rights throughout their supply chains.
3. Animal Welfare:
Cruelty-Free Products: Consumers are concerned about the treatment of animals in the production
of goods. This has led to an increased demand for cruelty-free products and a shift away from those
tested on animals.
4. Waste Reduction:
Single-Use Plastics: Ethical consumers are actively seeking alternatives to products with excessive
packaging and single-use plastics.
5. Health and Well-being:
Healthy and Sustainable Food: There is a growing interest in food products that are not only healthy
but also produced sustainably.
6. Technology and Data Privacy:
Data Security: With the increasing reliance on technology, ethical consumers are concerned about
data privacy.
ETHICAL ISSUES IN HRM
1. Discrimination and Diversity:
Ethnicity, Gender, Age, and other forms of Discrimination: HRM should ensure equal opportunities
and fair treatment for all employees, regardless of their race, gender, age, or other characteristics.
2. Compensation and Benefits:
Equitable Pay: Ensuring that employees receive fair compensation for their work and that there are
no gender or other biases in pay structures.
3. Recruitment and Selection:
Honesty in Recruitment: Providing accurate information about job roles, company culture, and future
prospects during the recruitment process.
4. Health and Safety:
Providing a Safe Workplace: Ensuring that the workplace is safe and that employees are not
exposed to unnecessary risks.
5. Employee Exit:
Termination Procedures: Treating employees with dignity and respect during termination and
ensuring that the reasons for termination are justifiable and communicated appropriately.
6. Corporate Social Responsibility (CSR):
Sustainable Practices: Ensuring that HRM practices align with the organization's commitment to
social and environmental responsibility.
WAYS TO STRENGTHENING OF ETHICAL AND MORAL VALUES
1. Incorporate Values in Education:
Curriculum Enhancement: Integrate moral and ethical values into the school and college curriculum.
Emphasize the teaching of Indian philosophical and ethical traditions.

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2. Promote Cultural and Traditional Values:

Cultural Integration: Encourage the understanding and appreciation of India's diverse cultural and
traditional values. Celebrate festivals that emphasize moral and ethical principles.
3. Media and Entertainment Influence:
Promote Positive Content: Encourage the creation and promotion of media content that reflects
positive moral and ethical values. Support movies, television shows, and literature that highlight
these principles.
4. Leadership by Example:
Political Leadership: Encourage political leaders to lead by example, exhibiting high moral and
ethical standards. Transparent and ethical governance sets a positive tone for society.
5. Family and Community Involvement:
Family Values: Reinforce the importance of family values in the upbringing of children. Encourage
open communication and the transmission of ethical principles within families.
6. Educational Institutions as Ethical Hubs:
Institutional Ethics Committees: Establish ethics committees in educational institutions to ensure
that ethical standards are maintained in research, teaching, and administration.
CITIZEN CHARTER
Citizen's Charter is a document that outlines the commitments and standards of service that citizens can
expect from government departments and organizations. It serves as a tool to enhance transparency,
accountability, and efficiency in public service delivery. The Citizen's Charter typically includes the following
key components:
1. Vision and Mission: Clearly articulates the vision and mission of the government department or
organization, outlining its goals and objectives.
2. Services Offered: Provides a comprehensive list of services offered by the department, along with
details such as eligibility criteria, procedures, and timelines.
3. Service Standards: Defines the standards of service delivery, including the time frames within
which services will be provided, the quality of service, and any other relevant parameters.
4. Citizen's Rights: Clearly states the rights of citizens in availing the services, emphasizing principles
such as fairness, equality, and non-discrimination.
5. Grievance Redressal Mechanism: Outlines the procedure for filing complaints or grievances,
along with details on how they will be addressed and resolved.
6. Feedback Mechanism: Establishes a system for receiving feedback from citizens on the quality of
services provided, with a view to continuous improvement.
7. Responsibilities of Citizens: Clearly communicates the responsibilities of citizens in the service
delivery process, encouraging a collaborative approach
8. Accessibility: Ensures that services are accessible to all citizens, including those with special
needs, and provides information on how to access services through various channels.
9. Citizen Engagement: Encourages citizen participation in decision-making processes and policy
formulation, fostering a sense of ownership and accountability.
10. Monitoring and Evaluation: Specifies the mechanisms for monitoring and evaluating the
performance of the department or organization in adhering to the commitments outlined in the
Citizen's Charter.
6 PRINCIPLES OF CITIZEN CHARTER MOVEMENT
1. Quality Service: The first principle emphasizes the commitment of public organizations to deliver
high-quality services to citizens. This includes efficient and timely delivery of services without any
discrimination.
2. Citizen-Centric: The services provided should be designed with the citizen in mind. This involves
making services easily accessible, transparent, and responsive to the needs and expectations of
citizens.
3. Citizen Participation: Encouraging citizen involvement in the design, implementation, and
evaluation of public services is crucial. This principle promotes a participatory approach to
governance, ensuring that citizens have a voice in decision-making processes.

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4. Transparency and Accountability: Public organizations are expected to operate transparently,

providing clear and accessible information about their functions, processes, and performance.
Additionally, there should be mechanisms in place to hold officials accountable for their actions.
5. Redress of Grievances: Establishing effective grievance redressal mechanisms is essential.
Citizens should have a straightforward way to voice their concerns and seek resolution when they
encounter problems with public services.
6. Continuous Improvement: The Citizen's Charter movement promotes a culture of continuous
improvement in public service delivery. Regular feedback from citizens should be used to identify
areas for enhancement, and organizations should strive for ongoing improvement in their
operations.
CORPORATE SOCIAL RESPONSIBILITY
Corporate Social Responsibility (CSR) refers to the voluntary initiatives undertaken by companies to
address social and environmental issues while balancing their economic objectives.
DIFFERENCE BETWEEN CSR AND BUSINESS ETHICS
1. CSR (Corporate Social Responsibility):
Focus: Broad commitment to societal and environmental well-being.
Scope: Involves voluntary actions beyond legal requirements.
Stakeholders: Addresses the impact on a wide range of stakeholders.
Voluntariness: Primarily voluntary, reflecting a sense of social responsibility.
Timeframe: Often involves long-term initiatives contributing to sustainability.
2. Business Ethics:
Focus: Moral principles guiding individual and organizational behavior.
Scope: Primarily concerned with internal conduct within the organization.
Stakeholders: Emphasizes ethical decision-making in interactions.
Voluntariness: Involves immediate choices aligned with ethical standards.
Timeframe: Concerned with day-to-day decision-making and behavior.
ETHICAL DILEMMA
An ethical dilemma is a situation in which a person is faced with conflicting moral principles, making it
difficult to choose the right course of action. In these situations, there is often a choice between two or more
options, each of which has its own set of ethical considerations, and the decision-maker must navigate the
complexities of right and wrong.
TYPES OF ETHICAL DILEMMA
1. Truth vs. Loyalty: Example: A friend confides in you about a mistake they made but asks you not to
tell anyone. Balancing your loyalty to your friend with the ethical obligation to be truthful can create
a dilemma.
2. Individual vs. Community: Example: A decision that benefits an individual but harms the
community or vice versa. For instance, choosing between a job that pays well but harms the
environment or one that pays less but contributes to community well-being.
3. Short-Term vs. Long-Term: Example: Making a decision that provides immediate benefits but may
have negative long-term consequences. This can be common in business decisions where short-
term gains might conflict with long-term sustainability.
4. Justice vs. Mercy: Example: Deciding whether to enforce strict justice or show mercy in a situation
where someone has committed an offense. This dilemma often arises in legal and criminal justice
contexts.

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5. Autonomy vs. Control: Example: Balancing an individual's autonomy or freedom with the need for
control or supervision. This can occur in healthcare decisions, where patients may make choices
that impact their well-being.
6. Utility vs. Rights: Example: Weighing the overall benefit to society against the protection of
individual rights. This dilemma is common in policy-making, where decisions might infringe on
individual freedoms for the greater good.
STEPS TO RESOLUTION OF ETHICAL DILEMMA
1. Identify the Problem:
o Clearly define the ethical dilemma you are facing.
o Identify the conflicting principles or values involved.
2. Gather Information:
o Collect all relevant facts and information related to the dilemma.
o Consider the perspectives of all parties involved.
3. Identify Stakeholders:
o Identify and list the individuals or groups affected by the decision.
o Consider the potential impact on each stakeholder.
4. Consider Relevant Ethical Principles:
o Apply ethical principles such as autonomy, justice, beneficence, non-maleficence, and
integrity.
o Evaluate how each principle relates to the specific situation.
5. Explore Alternatives:
o Identify various courses of action that can be taken.
o Evaluate the ethical implications of each alternative.
o Consider short-term and long-term consequences.
6. Seek Guidance:
o Consult relevant ethical guidelines, codes of conduct, or professional standards.
o Seek advice from colleagues, mentors, or ethical committees.
7. Make a Decision:
o Based on the information gathered and ethical analysis, make a decision.
o Choose the alternative that aligns with the most ethically sound principles.
8. Implement the Decision:
o Put the decision into action.
o Communicate the decision to relevant stakeholders.
9. Evaluate the Decision:
o Assess the outcomes of the decision.
o Reflect on whether the chosen course of action resolved the ethical dilemma and consider
any unintended consequences.
10. Learn and Adapt:
o Learn from the experience.
o Use the lessons learned to inform future decision-making

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