CHAPTER I: MANAGEMENT AN OVERVIEW

Meaning and Definition Of Management

• “Management is the process of coordinating all resources
through the five major functions of planning, organizing,
staffing, directing /leading and controlling to achieve
organizational goals/desired objectives.”
In the above definition there are three key concepts:
i. Coordination of all resources
ii. The five managerial functions
iii. Objectives
– Profit oriented business → ROI goals
– Hospital → Patient care
– Educational institution → Teaching, research & community service.
“Management is the art of getting things done through other
people by making the atmosphere conducive for others.”
→ An effective manager focuses on both work and people.
→ the job of every manager is to achieve organizational
goals through the combined efforts of people.
“Management is the process of achieving organizational goals
through engaging in the five major functions of planning,
organizing, leading, staffing and controlling.”
This definition recognizes that:
→ Management is an ongoing activity
→ Entails reaching important goals, and
→ Involves knowing how to perform the five major functions
of management.
* Managers – are those persons in the position of authority
who make decisions to commit (use) their resources and
the resources of others towards the achievement of
organizational objectives.
Everybody is the manager of his/her time, energy and
talents.
Organization – is a group of two or more people brought
together to achieve common stated objectives.
Managerial Functions
• Regardless of the type of firm and the organizational level, all
managers perform certain basic functions.
i. PLANNING: is making decisions today about future actions.
 It involves selecting missions and objectives and the
actions to achieve them
 No real plan exists until a decision – a commitment of
human or material resources – has been made.
 Planning bridges the gap between where we are to
where we want to be in a desired future.
 Planning identifies goals and alternatives. It maps out
courses of action that will commit individuals,
departments and the entire organization for days,
months and years to come.
ii. ORGANIZING: is concerned with assembling the resources necessary
to achieve organizations’ objectives and establishing the activity
authority relationship.
 It is the management function that focuses on allocating
and arranging human and non-human resources
 Planning has established the goals of the company and
how they are to be achieved; organizing develops the
structure to reach these goals.
 It determine which tasks are to be done, how tasks can
best be combined into specific jobs, and how jobs can be
grouped into various units that make up the structure of
the organization.
iii. STAFFING: It involves filling and keeping filled positions in
the organization structure.
 It is concerned with locating prospective employees to fill
the jobs created by the organizing process.
 Staffing is concerned with human resource of the
organization.
iv. Directing/LEADING: It is aimed at getting the members of an
organization move in the direction that will achieve its
objectives.
 It involves influencing others to engage in the work
behavior necessary to reach organizational goals
v. CONTROLLING: is the measuring and correcting of activities of
subordinates to ensure that events conform to plans.
 Controlling is the process through which mangers assure
that actual activities conform to planned activities.
 It is checking current performances against predetermined
standards contained in the plan.
 Why management?
 It is important for personal life

 Managers are universal

 It affects the accomplishment of social, economic, political

and organizational goals

 Management is needed to coordinate and direct the efforts of

individuals, groups and the entire organization
Is management the same throughout
an organization? Yes and No
Yes: because all managers perform the five managerial functions.

No: because despite the fact that they perform all managerial
functions, they perform it with different emphasis and scope.

Managers can be divided based on two criteria. These are:

1) Levels of management (vertical difference)

2) Scope of responsibilities (horizontal difference)

I. Types of Managers based on levels of management
 Levels refer to hierarchical arrangement of managerial
positions or persons in an organization.

 The number of managerial levels in an organization depends

on the size of the organization.

1. Top Level Managers

 They deal with the big picture, not with the nitty gritty.
Top management:
 Develop overall structure of the organization.
 Direct the organization in accordance with the environment.
 Develop policy in areas of Equal Employment Opportunity &
employee development.
 Represent the organization in community affairs, business
deals, and government negotiations.
 Spent much of their time in planning and dealing with middle
level managers and other subordinates.
 Are persons who are responsible for making decisions and
formulating policies that affect all aspects of the firm’s
operations.
 Provide overall leadership of the organization towards
accomplishment of its objectives
2. Middle Level Managers
 They interpret and implement top management directives
and forward messages to and from first-line management.
 Often coordinate and supervise the activities of lower level
managers.
 Receive broad/overall strategies from top managers and
translate it into specific objectives and plans for First-Line
Mangers/operating managers.
 Are responsible for the proper implementation of policies and
strategies defined by top level managers.
 Their principal responsibility is to direct the activity that
implement the policies of the organization.
 3. First Level Managers/Supervisory Level managers
 Are those at the operating level or at the last level of
management.
 Their subordinates are non managers.
 They are responsible for overseeing and coordinating the
work of operating employees.
 Assign operating employees to specific tasks.
 Are directly responsible for the production of goods and
services.
 Motivate subordinates to change or improve their
performance.
 Are often neither fish nor fowl – neither management nor
labor
E.g. Department Heads, supervisory personnel, Sales managers,
Loan officers, Foreman.
Fig. 1.1 The relative importance of the managerial
functions at different levels
II. Types of Managers based on scope of responsibility
1. Functional Managers
 Functional managers are managers who are responsible for a
department that performs a single functional task
 Has employees with similar training and skills.
 Supervise employees (managers + workers) with specialized
skills in specific areas of operations such as accounting,
payroll, finance, marketing, production, or sales etc.
2. General Managers
 General Managers are managers who are responsible for
several departments that perform different functions.
 They are responsible for the entire operations of the
organization without being specific.
Managerial Roles
 Role is an organized set of behaviors that is associated with a
particular office or position.
 Factors which affect managerial roles are:
 manager’s formal job description,
 the values & expectations of other managers,
 subordinates and peers
Henry Mintzberg identified 10 managerial roles which are in turn
grouped into three categories:
1. Interpersonal Roles involve developing and maintaining
positive relationships with significant others in the
organization.
It includes:
i. Figurehead Role: managers perform symbolic duties of a
legal or social nature.
 The manager represents his work unit at ceremonial or
symbolic functions.
 The top level managers represent the company legally and
socially to those outside of the organization.
E.g. Signing documents, presiding at a ceremonial event,
greeting visitors, attending a subordinate’s weeding, taking a
customer to lunch, university president hands out a diploma
for graduates – in all these cases the manager is
representing his/her organization.
 .
ii. Leadership Role: The manager is the environment creator –
she/he makes the environment conducive for work by
improving working conditions, reducing conflicts, providing
feedback for performance and encouraging growth.
iii. Liaison Role/Coordinator role: The liaison maintains a
network of contacts outside the work unit to obtain
information.
 She/he fulfills this role through community service,
conferences, social events, etc
 The top management uses this role to gain favors and
information
2. Informational Roles focuses on the transmission of
important information to and from internal and external
sources.
i. Monitor role: is also called information gathering role.
 The manager is constantly monitoring the environment
to determine what is going on.
 Information is gathered from news reports, trade
publications, magazines, clients, associates, and a host of
similar sources, attending seminars & exhibitions.
ii. Disseminator Role: the manager passes on to subordinates
some of the information that would not ordinarily be
accessible to them.
iii. Spokesperson/representative Role: the spokesperson
transmits information about the organization to outsiders.
 One aspect of this role is to keep superiors well informed
 second aspect is to communicate outside the organization
like press, government agencies, customers and labor
unions.
• the manager seeks information in the monitor role,
communicates it internally in the disseminator role and
transmits it externally in the spokesperson role.
3. Decisional Roles: involve making significant decisions that
affect the organization.
i. Entrepreneur Role: (initiator of change) In the role of
entrepreneur, the manager tries to improve the unit.
 The entrepreneur acts as an initiator, designer, and
encourager of change and innovation.
ii. Disturbance Handler Role: solution seeking role.
 The disturbance handler is responsible for taking corrective
action when the organization faces important, unexpected
difficulties.
 .
iii. Resource Allocator Role: deciding on the allocation of the
organization’s physical, financial and human resources.
 This involves:
 assigning work to subordinates,
 scheduling meetings,
 approving budgets,
 deciding on pay increases,
 making purchasing decisions
 and other matters related to the firm’s human, financial,
and material resources.
iv. The Negotiator Role: representing the organization in all
important/major negotiations.
 MANAGERIAL SKILLS
Skill is ability to do something expertly and
well. It is meant ability related to
performance that is not necessarily in born
but which can be developed/acquired.
 For the purpose of discussion, managerial
skills are classified into four distinct
categories: technical, interpersonal,
conceptual and communication skills.
 Technical Skills
Technical kills involve the ability to apply specific methods,
procedures, and techniques in a specialized field. It is easy
to visualize the technical skills of design engineers, market
researchers, accountants, musicians, and in on-the-job
training programs.
Interpersonal Skills
Interpersonal skills include the ability to lead, motivate,
manage conflicts, and work with others. Whereas
technical skills emphasize working with things (techniques
or physical objects), interpersonal skills focus on working
with people. In long run organizations have only one
resource, people. Thus, interpersonal skills are a vital part
of every manager’s job regardless of level or function.
 Interpersonal Skills
include the ability
to lead,
motivate,
manage conflicts, and work with others.
Whereas technical skills emphasize
working with things (techniques or
physical objects), interpersonal skills
focus on working with people.
 Conceptual Skills
 involves the ability to view the organization as a
whole and recognize its relationships to the
environment (business world).
 It also involve visualizing the different parts of an
organization as one big whole and understand
the whole’s interaction with its relevant
environment. More specifically
The manager uses conceptual skills to diagnose
and assess different types of management
problems because they depend on an
understanding of the interrelationships of
various factors. Conceptual skills are among the
most difficult to develop. The conceptual skills
are especially important to managers in making
decisions.
 CHAPTER TWO
THE EMERGENCE AND DEVELOPMENT OF MANAGEMENT THOUGHT

A. Management in Antiquity and Pioneer Contributors

• Management in Antiquity: - Management thought has been
shaped over a period of centuries by three major sets of
forces.
• These forces are:
 Social,
 economical and
 political
• The development of management thought dates back to the
days when people first attempted to accomplish goals by
working together in groups.
• Since pre-historic times people have been managed in groups
and organizations
• As societies grew larger and more complex, the need for
organizations and managers became increasingly apparent.
• Attempts to develop theories and principles of management,
however, are relatively recent.
• In particular, the industrial revolution of the 19th century gave
rise to the need for a systematic approach to management.
• Some examples in ancient times where management was
effectively used include the following:
Egypt - The construction of the Egyptian pyramid (5000-525 BC)
is a testimony of the ancient Egyptian organization and
managerial abilities.
• The ancient Egyptians constructed the pyramid by 100,000
labor forces for 20 years on 13 hectares of land using
2,300,000 stones.
• This construction is equivalent with managing a city with a
population of 100,000 for 20 years.
• This construction shows how extensively Egyptians used the
management functions.
“Comparing the technology and information we have today,
managers of those days exceed managers of today.” Sisk

“The best managers in history are the ones who managed the
building of the pyramids." Peter Drucker
Romans - the ancient Romans also provided numerous
illustrations of effective management.
 Assuming his position in A.D. 284, Diocletian soon realized
that the empire had acquired an unmanageable form.
 There were far too many people and matters of importance
for the emperor to handle individually.
 Abandoning the old structure, in which all provincial
governors reported directly to him, Diocletian established
more levels in the hierarchy.
 He reorganized the Roman Empire as: Empire into 100
provinces with 13 dioceses and 4 major geographical areas.
 By doing so the emperor was able to more effectively manage
this vast empire.
• Here the levels of a management are shown clearly: 4
geographical areas ----- 13 dioceses --- 100 provinces
• After he divided Rome as such, he appointed 3 people on the
divisions and the rest for himself - Delegation of authority.
Roman Catholic Church - was the most successful formal
institution in the western civilization.
 Roman Catholic Church also made important contributions to
early management thought.
 One was the church's wide use of job descriptions for its
priests, presbyters, and other religious workers. (hierarchy of
authority)
 A second Roman Catholic Church contribution was that of
compulsory staff service
 A third was the use of staff independence, the assignment of
certain advisors to key church officials.
Greece - Exhibited a real skill and capacity for management in
the operation of trading companies.
 They recognized the means to maximize output through the
use of uniform methods and motion study.
Bible - Exodus 18:13-26; this passage tells how Jethro, Moses',
father in-law, observed Moses spending an entire day
listening to the complaints and problems of his people.
 Then Jethro advised Moses that he was doing more than one
man should and suggested specific steps to relief him of his
burden.
 He first recommended that ''ordinances and laws'' should be
taught to the people.
 In modern terms, the origination needed a statement of
policies, rules and procedures.
 Second, he commended that leaders be "selected and
assigned” to be rulers to thousands, and rulers of hundreds,
and rulers of fifties and rulers of tens.
• That was recommending delegation of authority.
 Jethro’s third point, that these rulers should administer all
routine matters and should “bring to Moses the important
questions,” forms the basis of a well known control
procedure: the principle of exception.
 In Ethiopia, the construction of obelisks of Axum, Castle of
Gondar, Rock Hewn Churches of Lalibela, the Wall of Harrar
etc. are good examples that modern management was
practiced in ancient time.
Early Management Pioneers (Contributors)
• Although examples of management practices go back several
thousand years, the development of management as a field of
knowledge is much more recent.
• The challenge posed by the factories brought forth a number
of individuals who began to think in terms of innovative ways
to run factories more effectively.
PRE CLASSICAL CONTRIBUTORS
Among the principal pre-classical contributors:
1. Robert Owen (1771 - 1858) - was a British industrialist and an
owner-manager of several successful cotton mills in Scotland.
 At that period in history, working and living conditions for
employees were very poor.
 Child workers were common and the standard working day
was 13 hrs long.
 Workers were treated in much the same terms as tools and
machines.
 Owen was called industrialist and reformer.
 the first managers to recognize the importance of human resource in
an organization.
 He was considered as ‘father of modern personnel management.’
 He introduced in his organization the following:
 Reduce working hrs from 13 hrs to 10 hrs a day,
 Set a minimum hiring age (10 year) to protect children from the
abuses of employers,
 Provide meal, housing, and shopping facilities for employees,
 Improved working conditions in the factory
 He argued, "Improving the condition of employees would
inevitability lead to increased production and profits".
2. Charles Babbage (Prof.) (1792-1871) : is widely known as "the
father of modern computing".
 His management interest stemmed from his difficulties with
directing his various projects.
 He became convinced that the application of scientific
principles to work processes would both increase productivity
and lower expenses.
 Babbage was particularly enthralled with the idea of work
specialization.
 Work specialization is the degree to which work is divided
into various jobs.
 He was an early advocator of division of labor principle and
the application of mathematics as the efficient use of facilities
and materials in production.
 Babbage believed that each factory operation should be
analyzed so that the various skills involved in the operation
could be isolated.
 Each worker would then be trained in one particular skill and
would be responsible only for that part of the total operation.
• Division of labor Specialization/improve skills of workers.
Reduce learning time and other expenses.
 He said, “The relationship between management and workers
is the reason for the success or failure of the organization.”
 Babbage also had some innovative ideas in the area of reward
systems.
 He devised a profit sharing plan that had two parts,
i. a bonus that was awarded for useful suggestions and
ii. a portion of wages that was dependent on factory profits.
 He understood that a harmonious relation between management
and labor could serve to benefit both.
 He was an avid proponent of:
• Division of labor
• Economies of scale in manufacturing
• Incentive pay
• Profit sharing
• Application of mathematical concepts in production
• Harmonious relationship between management and workers
 Babbage laid the groundwork for much of the work that later
became known as Scientific Management.
3. Adam Smith: Smith made an important contribution to the
development of management thought regarding the impact
of division of labor on manufacturing in his book ‘The Wealth
of Nations’ in 1976.
 His conclusion was specialization could lead to increased
efficiency. This is because:
• Specialization increases the dexterity in every particular work
person.
• Specialization saves the time lost in passing from one species
of work to another.
• Specialization helps to the invention of great number of
machines, which facilitates and bridge and enable one person
to do the work of many.
CLASSICAL MANAGEMENT THEORY
 The classical viewpoint is a perspective on management that
emphasizes finding ways to manage work and organizations more
efficiently.
 It is made up of two/three different approaches:
1. scientific management,
2. administrative management (Classical Organization) theory, and
3. bureaucratic management.
 There were two factors that had contributed for the emergence of
classical management theory.
i. the research or writings of pioneers such as Charles Babbage,
ii. the evolution of large-scale business management and practices.
• The classical approach to management cab be better
understood by examining it from two perspectives.
i. scientific management: concentrate on the problems of lower
level managers dealing with the everyday problems
ii. classical organization theory: concentrate onthe problems of
top managers dealing with the everyday problems of
managing the entire organization.
1. SCIENTIFIC MANAGEMENT THEORY
 Emphasizes the scientific study of work methods in order to
improve worker efficiency.
 Its objective was to find the most efficient method for
performing any task and to train workers in that method.
• The emergence of industrial revolution gave challenges in
management which took two forms:
1. how to increase productivity (output/input) by making the
work easier to perform
2. how to motivate workers to take advantage of new methods
and techniques.
• The individuals who developed approaches for meeting these
challenges helped lay the foundation for what is known as
scientific management.
• Scientific management grew up from the research of 5
pioneers. They are :
A) Frederick W. Taylor (1856-1915) is known as "the father of scientific
management.“
 At the beginning of 20th century business was expanding, resources
were readily available but labor was in short supply.
 The primary goal of management during that time was to use the
existing labor force efficiently, but there was no skilled manpower.
 It is at this time that Taylor saw how to use the available resource
efficiently.
 The following were some of the problems of the factory system
production as he called them:
i. Management had no clear concept of worker - management
responsibility.
ii. Virtually no effective work standards were applied
iii. No incentive was used to improve labor’s performance
iv. Managerial decisions were made based on intuition, rule of thumb
methods or past experience.
• He was angry or he was impressed with the degree of “soldiering” -
systematic, deliberate delay in performance
• Due primarily to:
(1) the workers’ fear that they might work themselves out of a job if
they produce more,
(2) faulty wage systems set up by management encouraged workers to
operate at a slow pace.
 For example, pay by the hour or the day mainly encouraged
attendance rather than output.
 On the other hand, companies that cut incentive pay when workers
began to exceed standards also made workers reluctant to excel
(3) rule of thumb method permitted by managers.
 These factors led Taylor to conclude that managers, not workers,
were responsible for the soldiering
• The interest target of Taylor was to utilize human and material
resources efficiently and effectively.
• The following are some of the studies he conducted.
1. Time and motion study
• Objective: to standardize activities for workers/determine a full-
day’s work
• Time and motion study involves :
 breaking down the task into various elements, or motions,
 eliminating unnecessary motions,
 determining the best way to do the job, and
 timing each motion to determine the amount of production that could be
expected per day (without allowances for delays).
• He used stop - watch system to start and finish the test.
• This study permitted the determination of practical, relatively
precise and reliable standards of output.
2. Uniform method of routine tasks
Objective: to adjust worker with work.
• With this objective in mind he worked out such techniques as:
 Instruction cards,
 Order of work cards,
 Material specialization,
 Inventory control systems,
 Material handling standards.
3. Functional foremanship study - which man for which work.
Objective: to scientifically select the best worker for a given job
• It was concerned with assuring which man will be best for
which job, considering his initial skill and the potential for
learning.
4. Individual Incentive
Objective: to determine the appropriate wage or salary
• His study reached higher pay would serve as an incentive for
workers that would result from the increased productivity.
• During his time there was a reduction of rates if the workers
earn beyond an acceptable limit.
• His view was efficient workers should be rewarded for their
productivity without limit.
• After Taylor conducted the above studies in 1911 he wrote a
book called principles of scientific management.
• In his book he outlined four principles:
1. Develop a science for each element of a job, which replaces
the old rule-of-thumb method.
2. Heartily cooperate with the workers so as to insure all of the
work being done in accordance with the principles of the
science which has been developed.
3. Scientifically select and then train, teach and develop the
worker.
4. There is an almost equal division of work and responsibly
between management and workers.
 The management takes over all work for which they are better fitted
than workers
• Taylor testified, however, that in order for these principles to
be successful “a complete mental revolution” on the part of
management and labor was required.
• Taylor believed that management and labor had a common
interest in increasing productivity.
Frank and Lillian Gilbreth (1868-1972)
• The Gilbreths were contemporaries of Taylor.
• Their accomplishments still stand out for their devotion to a
single goal:
 the elimination of waste and the discovery of the ‘one best way’ of
doing work.
• He was determined to learn to lay bricks the ‘right’ way.
• In the end, he was able to develop a method which cut the
motions required to lay bricks.
• In so doing, he identified 17 on-the-job motions and called
them ‘THERBLIGS’.
• The on-the-job motions are: search, find, select, grasp,
position, assemble, use, disassemble, inspect, load/transport,
pre-position, release load, transport empty, wait when
avoidable, avoidable delay, rest for overcoming fatigue, and
plan and hold.
• For his work, Frank was named as ‘The Father of Motion
Study’.
• After he died, Lillian was determined to continue his work.
She pioneered the field of personnel administration.
• She argued that the purpose of scientific management is to
help people reach their maximum potential by developing
their skills and abilities.
Henry L. Gantt (1861-1919)
• Gantt worked with Taylor at the Midvale Steel Company and
was early proponent of scientific management.
• Gantt is perhaps known for his development of ‘Gantt Chart’ -
a simple graph method of scheduling work according to the
amount of time required instead of the quantity of work to be
performed.

Individual Assignment
 Develop synopsis on the limitations of scientific
management
2. Classical Organization Theory
• Scientific management was concerned with increasing the
productivity of the shop and the individual worker.
• The classical organization theory focused on the
management of the entire organization unlike the scientific
management theory.
• Classical organization theory had two major purposes:
(a) develop basic principles that could guide the design, creation and
maintenance of large corporations, and
(b) identify the basic functions of managing organizations.
Henri Fayol (1841-1925)
• A French industrialist and a well-known contributor to the
administrative management theory, was born to a middle
class family near Lyon-France.
• To him management (administration) was not a personal talent but
a skill that could be taught.
• His efforts toward developing such theories were published in
General and Industrial Management,
 Henri Fayol is the one who identified:
A. The major types of activities involved in an industry or a business
as
i. Technical - producing and manning products
ii. Commercial - buying raw materials and selling products
iii. Security: protecting employees and property
iv. Financial – search for and optimum use of capital
v. Accounting - recording and taking stock of costs, profits, and
liabilities, keeping balance sheets, profit and loss statements, etc
vi. Managerial – planning, organizing, commanding, coordinating and
controlling
• These six elements, he said, will be found regardless of
whether the undertaking is simple or complex, big or small.
• Fayol’s primary focus was the managerial activity, because he
put managerial skill had been the most neglected, least
understood but the most crucial aspect of business
operations.
B. Management as a separate field of study
 Fayol said management is a discipline worth studying
 He said there is a need for the introduction of formal
managerial training schools.
C. General management principles
 Part of his thinking was expressed in the 14 principles of
effective management.
• Fayol hastened to explain in his monograph that he employed
the word principles, not laws or rules
• In his words, he said,
“I prefer the word principles in order to avoid any idea of
rigidity, as there is nothing rigid or absolute in
administrative matters; everything is a question of degree.
The same principle is hardly ever applied twice in exactly the
same way, because we have to allow for different and
changing circumstances, for human beings who are equally
different and changeable, and for many other variable
elements. The principles, too, are flexible, and can be
adopted to meet every need; it is just a question of knowing
how to use them.”
• The 14 principles that Fayol felt he had occasion to use most
frequently were:
1. Division of labor
• Division of work (labor) encompasses three basic concepts:
i. Breaking down a task into its components.
ii. Training workers to become specialist in specific duties, and
iii. Putting activities in sequence so one person’s efforts build on
another’s
2. Authority and responsibility
 Authority is the right to give orders, to exact obedience.
 Responsibility, on the other hand, is a sense of obligation that goes
with authority .
3. Discipline
 Fayol saw the necessity for discipline and precise and exact
obedience at all levels for the smooth running of a business.
 Members in an organization need to respect the rules and
agreements that govern the organization.
4. Unity of Command
 An employee should receive directives from only one superior.
5. Unity of Direction
 One head, one plan, one set of objectives.
 This improves coordination and ensures that energies are
channeled in the proper direction.
6. Subordination of individual interest to general
interest/common good
 In any undertaking, the goals and interests of an organization
must take precedence over those of individuals or groups of
employees.
7. Centralization
 Fayol believed that managers should retain final responsibility
but also need to give their subordinates enough authority to do
their jobs properly.
8. Remuneration of personnel
 Compensation or wages for the work done should be fair and
equitable to both to workers and the organization.
9. Scalar Chain
 Scalar chain is the line of authority that extends from the top
to the bottom of an organization and defines the
communication path.
10. Order
 Order is best defined as “a place for everything (everyone)
and everything (everyone) in its/his place.
 Materials and people should be in the right place at the right
time.
11. Equity
 Is dealing with subordinates, managers should be friendly,
fair, kind and lawful.
12. Stability of tenure of personnel
 Trained and experienced workforce and management are
crucial for organizational success.
 Labor turnover should be minimized and stability nurtured.
13. Initiative
 To Fayol, the keenest interest for an intelligent executive is to
be able to scarify his personal vanity and instill those under
him with the attribute to make initiative.
14. Esprit de corps
 The gist of this principle is that ' in union there is strength.'
3. Bureaucratic management theory
• It is a form of organization that is characterized by division of
labor, a clearly defined hierarchy, detailed rules and regulations
and impersonal relationships.
• The major contributor to this theory was Max Weber (1864-
1920), a German sociologist, consultant professor, and author.
Max Weber:
• Reacted to the prevailing norms of class consciousness and
nepotism
• Believed that the running organizations on the basis of whom
one knows rather than what one knows and engaging in
nepotism tended to interfere with organizational effectiveness.
• He formulated the characteristics of an ideal bureaucracy.
Major characteristics of Weber’s Ideal bureaucracy:
 Specialization: jobs are broken into routine, well-defined tasks
so that members know what is expected of them and can
become extremely competent at their particular subset of tasks.
 Formal rules and procedures: written rules and procedures
specifying the behaviors desired from members facilitate
coordination and ensure uniformity.
 Impersonality: rules, procedures, and sanctions are applied
uniformly regardless of individual personalities and personal
considerations
 Well-defined hierarchy: multiple levels of positions, which
carefully determined reporting relationships among levels
 Career advancement based on merit: selection and promotion
is based on qualification and performance of members.
3. Behavioral Management Theory
• It emphasized on human relations
• They used concepts from psychology, sociology and
anthropology to assist managers understand human behavior
in the work place.
• They focused on motivation, communication, work group
formation and leadership.
• Behavioral management theory was stimulated by a number
of writers and theoretical movements.
• Among writers Abraham Maslow, Douglas Mc Gregor and
Elton Mayo were well-known.
The Hawthorne studies
• The Hawthorne studies (1924-1932) had their roots in the
logic of scientific management.
• The initial purpose of these experiments was to study the
effect of physical factors such as:
 illumination,
 rest periods,
 length of working days, and
 the payment schemes up on productivity
• The studies were conducted at the Hawthorne plant of
Western Electric Company in Illinois, USA.
• The Hawthorne studies consist of four major experiments.
1. Illumination Experiments
• The intention of this experiment was to learn if there was
any correlation between intensity of light and productivity.
• To this effect two groups of women were taken:
 the experiment group - one subjected to variety in the intensity of
light and
 the other a controlled group which was exposed to constant
illumination intensity.
• After seeing this puzzle researchers concluded that
illumination has little or no effect on productivity.
2. Relay Assembly Test Room Experiment
• In the relay assembly test room experiment, Mayo and his
associates placed two groups of six women (five assemblers
and a layout operator) with an observer
• They were instructed to keep working at the regular pace.
• Researchers allowed the groups to choose their own rest
periods (were allowed to leave their work station without
permission) and to have a say in other suggested changes.
• A number of variables were tried: salaries, coffee breaks (rest
periods), refreshments, workday and workweek,
temperature, and noise.
• In one room job conditions were varied and in the other they
were not.
• Output went up in both the test room and controlled room
regardless of how the factors under consideration were
manipulated.
• However, when these changes were later terminated and
original conditions reestablished, output still remained high
 indicating that the change in conditions was not the only reason for
the increase in output.
• Mayo and his associates concluded that such physical changes
have no significant effect on productivity
• Supervisory management was the major reason for the
increase in productivity in the relay assembly test room study.
3. The Massive Interviewing Program
• After the first two phases, the researchers concluded that
their attempt to relate physical conditions of the job to
productivity did not produce any significant results.
• So they postulated that the human element in the work
environment apparently had a significantly greater impact on
productivity than the technical and physical aspects of the
job.
• Over 20,000 interviews were conducted in the third phase of
the studies.
• The interviews begun by asking employees direct questions
about supervision and the work environment in general.
• The researchers realized that an individual's work
performance, position and status in the organization were
determined not by that person alone but also by the group
members.
• Peers had an effect on individual performance.
• In order to study this more systematically, the research
entered its fourth and final phase
4. The Bank Wiring Observation Room Study
• Nine males who assembled terminal banks for telephone
exchanges were selected.
• This experiment focused on the effect of a group piecework
incentive pay.
• The assumption was that the workers would seek their own
economic interests by maximizing their productivity and that
faster workers would pressure the slower ones to improve
their efficiency.
• However, the researchers found that pressure was actually a
form of social behavior.
• In order to be accepted in the work group, the worker had to
act in accordance with group norms and be a "rate buster" by
overproducing or a "chiseler" by under producing.
• The researchers concluded that the work group set the fair
rates for each of its members.
• They found no relationship between productivity and
intelligence, dexterity, and other skills.
• They concluded that the wage incentive plan was less
important in determining an individual worker's output than
was group acceptance and security.
Findings and implications of Hawthorne
1. Physical working conditions did not seem to explain the
changes that were related in productivity.
2. There are other factors other than physical factors and
monetary incentives, which affect productivity. Theses factors
are social and psychological in nature.
 Social environment:
 Ability to talk to each other.
 The right to choose their rest periods.
 The right to leave the workstation without permission.
 The right to have a say in suggested changes.
 Psychological conditions
• Since they were selected as a member of the study group
they felt social acceptance, recognition, and social
importance.
3. Workers are not motivated by the bodily needs only but also
by social and psychological needs.
4. A kind of managerial leadership capable of understanding
individual and group behavior and that would serve them
through such skills as motivation and communication is
necessary.
5. Hawthorne Effect: refers to the possibility that individuals
singled out for a study may improve their performance simply
because of the added attention they receive from
researchers, rather than because of any specific factor being
tested in the study.
 The attention given them led them to increase their output.
4. Modern approaches to management
• Modern management theory is really a rich mosaic of many
theories that have endured over at least the past century.
• Traditional organizational theories used a highly structured
closed system approach.
• But modern theories have moved towards the open system
approach.
• The classical and neo classical approaches focused on the
internal management of the organization.
• They didn't take into consideration the effect of the external
environment on the organization and vice versa.
• Two of the most important contemporary viewpoints are the
systems and contingency theories.
1. Systems Theory
• The systems theory approach is based on the notion that
organizations can be visualized as systems.
• A System is a set of interrelated parts that operate as a
whole in pursuit of common goals.
• According to the systems approach, an organizational system
has four major components.
• Inputs - are the various human, financial, equipment and
informational resources required to produce goods and
services.
• Transformation process - are the organization's managerial
and technological abilities that are applied to convert inputs
in to outputs.
• Outputs - are the products, services and other outcomes
produced by the organization.
• Feedback - is information about results and
organizational status relative to the environment. It
is a key to system control.
Types of systems:
1. Open system
• It is one that continually interacts with its environment
• Therefore is well informed about changes within its
surroundings and its position relative to these changes.
• Organizations that operate closer to the open end of the
system share certain characteristics that help them survive
and prosper.
• Some are: negative entropy, differentiation, and synergy.
Entropy - refers to the tendency of systems to decay over time.
 If a system does not bring in or receive inputs and energy
from its environment, it will eventually cease to exist.
Negative entropy is the ability of open systems to bring in new
energy in the form of inputs and feedback from the
environment .
Differentiation - is the tendency of open systems to become
more complex.
Synergy - the main gist of this concept is "the whole is greater
than the sum of its parts.“
 It emphasizes on the importance of working together in a
cooperative and coordinated fashion.
Steady state - the balance to be maintained between inputs
flowing in from the external environment and the
corresponding outputs returning to it.
 An organization in steady state is not static, but in dynamic
form of equilibrium.
2. Closed system
• A closed system is a system that does little or no interaction
with its environment and receives little feedback. It has rigid
boundary.
 According to the systems viewpoint, managers are likely to be
more successful if they attempt to operate their units and
organizations as open systems.
2. Contingency theory
• Contingency theory is a viewpoint that argues that
appropriate managerial action depends on the particular
parameters of the situation.
• No universal principles that apply to every situation.
• Managerial decisions must be specific for specific situations
by recognizing the uniqueness of the environment.
• It states, "Nothing is best for all situations.“
• Managerial practices and technique that are appropriate in
one area might not be appropriate in another.
3. Integrative approach
• The initial premise of the integrative approach is that before
attempting to apply any concepts or ideas from the various
schools of management thought we must recognize:
 the interdependence of units within the organization

 the effects of environmental influences

 the need to respond to the unique characteristics of the

situation
 CHAPTER THREE
THE PLANNING FUNCTION
I. MEANING, NATURE AND IMPORTANCE OF PLANNING
The Meaning of Planning
• Planning – is the dynamic process of making decisions today
about future actions
 It bridges the gap between where we are now and where we
want to be.
• Planning - is preparing today for tomorrow; it is the activity
that allows managers to determine what they want and how
to get it.
• Answers six basic questions in regard to any intended activity:
What (the goal or goals).
When (the time frame in which it will be accomplished)
Where (the place or places where the plans or planning
will reach its conclusion).
Who (which people will perform the tasks).
How (the specific steps or methods to reach the goals).
What resources (resources necessary to reach the
goals).
Nature of Planning
1. The contribution of planning to purpose and objectives
2. The primacy of planning
3. The pervasiveness /Universality of planning
4. Planning and information
5. Planning is a continuous process
6. Planning is a means to an end
7. Plans are arranged in a hierarchy
 Corporate plans
 Departmental/divisional plans
 Sectional plans
The Importance of Planning
1. It provides direction and sense of purpose
2. It reduces uncertainties and anticipates the future/ preparing for
change
3. It provides basis for controlling
4. It forces managers to see the organization as a system
5. It promotes efficiency
6. It provides the base for cooperative and coordinated efforts
7. Developing managers
8. It provides guideline for decision making

II. ORGANIZATIONAL OBJECTIVES

• Objectives are the important ends of planning toward which
organizing, staffing, leading and controlling are aimed.
• Objectives are the important ends toward which
organizational and individual efforts or activities are directed.
• Objectives are essential starting points in planning because
they provide direction for all other managerial activities.
• Mission/Purpose - denotes the reason for the existence of an
organization.
• Target – identifies specific qualitative or quantitative ends
(points).
• In short Mission/ purposes, objective, goals/ Targets differ in
scope.
Benefits of Objectives
 Objectives provide basis for the performance of all
managerial functions.
 Objectives provide guidelines for action.
 Objectives can limit employee activities.
 Objectives provide a unique identity for organizations.
 An organization’s goal can serve as a source of employee
motivation.
 Objectives provide performance standards and bases for
control.
How Goals Facilitate Performance
• In order to make use of goals, managers need to understand
just how goals can facilitate performance.
• Goals facilitate performance if they have:
• Goal Content: Goals that are effective in channeling effort
toward achievement at the strategic, tactical, and operational
levels have a content that reflects five major characteristics .
 Goals should be SMART
• Goal commitment: A critical element in using goals effectively
is getting individuals and/or work groups to be committed to
the goals they must carry out.
• Goal commitment is one's attachment to, or determination to
reach, a goal.
• Research indicates that five major factors positively influence
goal commitment:
 supervisory authority,
 peer and group pressure,
 public display of commitment,
 expectations of success, and
 incentives and rewards.
• Work Behavior: Research so far suggests that goal content
and goal commitment affect an individual's actual work
behavior by influencing four work behavior factors:
 Direction: Goals provide direction by channeling attention
and action toward activities related to those goals
 Effort: In addition to channeling activities, goals to which we
are committed boost effort by mobilizing energy.
 Persistence: Persistence involves maintaining direction and
effort on behalf of a goal until it is reached.
 Planning: Goal setting affects planning because individuals
who have committed themselves to achieving difficult goals
are likely to develop plans.
 Feedback: feedback to employees as to their performance
will let them know if they have work as to the expectation.
III. The Planning Process
• These steps are interrelated and there is no rigid boundary
between or among these steps, and one is the base for the
other.
1. Establishing objectives
• Objectives specify the expected results and indicate the end
points of:
 what is to be done,
 where the primary emphasis is to be placed, and
 what is to be accomplished by the network of strategies, policies,
procedures, rules, budgets, and programs.
• Objective setting is a three steps process:
 assessing the present situation,
 anticipating future conditions, and
 setting the objectives.
2. Developing premises
• Planning premises are assumptions about the environment
within which the plan is to be carried out.
• knowing factors that facilitate or block the attainment of
these objectives.
• This involves examining the external and internal factors
which affect the performance of the organization:
 the external environment (for Treats and Opportunities)
through PEST analysis
 internal environment (for Strengths and Weaknesses)
through Self-Audit.
• The key element of planning at this stage is forecasting. It is
based on the forecasts made in different areas that premises
are made.
3. Determining alternative courses of actions
• Alternatives are courses of actions that are available to a
manager to reach a goal.
4. Evaluating alternative courses of action
• Managers evaluate the benefits, costs and effects of
alternative courses in light of their weight to goals and
premises.
• This is a step in planning process that operations research
and mathematical as well as computing techniques have
their primary application to the field of management.
5. Selecting a course of action
• This is the point at which the plan to be adopted is chosen or
selected.
• It is the real point of decision-making.
6. Formulating derivative plans
• At step 5 planning is ended. Formulating derivative plans
means formulating other plans based on one major plan.
7. Numbering plans by budgeting
• Numbering plans is converting them into budgets.
8. Implementing the plan
• Implementation involves determining:
 who will be involved,
 what resources will be assigned,
 how the plan will be evaluated, and
 the reporting procedure.
9. Controlling and evaluating the results
IV. Types of Plans
i. Scope/Breadth Dimension
 Strategic Plan: is organization wide plan that is formulated or developed by
top-level management in consultation with the board of directors and middle
level management.
• The following are distinguishing characteristics of strategic
plan.
– It requires looking outside the organization for threats and
opportunities.
– It requires looking inside the organization for strengths and
weaknesses
– It takes a longer view, i.e. it covers a relatively long time horizon
> 5 years.
– It tends to be top management responsibility, but it reflects a
mentality useful at all levels.
– It is expressed in relatively general non-specific terms.
 Strategic planning is primarily concerned with closing that
gap.
• Planning gap: The difference between a firm would like to be
(where we want to be) and where it will be.
 Tactical Plan: refers to the implementation of activities and
the allocation of resources necessary for the achievement of
the organization’s objectives.
 It is an intermediate plan that helps to reduce long range
planning into intermediate one by increasing the amount of
specificity and making the actions goal oriented.
 Concerned with what the lower level units within each
division must do, how they must do it, and who will have the
responsibilities for doing it.
 Operational Plan: is concerned with the day to day activities of the
organization and is made at the lower level management in
consultation with middle level management.
 It is concerned with the efficient, day-to-day use of resources
allocated to a department manager’s area of responsibility.
ii. Time Dimension
 Long-range (five years or more),
 medium-range (between one and five years) and
 short-range plans (one year or less)
iii. Use Dimension
• standing plans and
• single use plans.
Standing Plans: are plans that provide an ongoing guidance for
performing recurring activities.
• They are plans which are formulated to be used again and
again for the day-to-day operation of the organization.
• The major types of standing plans are policies, rules and
procedures.
i. Policies: is a general guide that specifies the broad
parameters within which organization members are expected
to operate in pursuit of organizational goals.
 Policies are general statements or understandings which
guide or channel thinking and actions in decision-making to
achieve organizational objectives.
Policies have the following characteristics:
• Policies define an area within which a decision is to be made
• Policies help to decide issues before they become problems;
 make it unnecessary to analyze the same situation every time it
comes up and unify other plans.
• Policies tell us what to do in a general sort of way.
• Policies provide discretion within limits since they are guides to
decision-making.
• Policies must be flexible.
Policies are established at the top because:
a) They feel it will improve the effectiveness of an organization.
b) They want some aspect of the organization to reflect their personal
values
c) They need to clear up some conflict or confusion that has occurred
at a lower level in the organization.
ii. Rules: spell out specific required action or non-actions, i.e.,
actions that must be or must not be taken, allowing no
discretion, in a given situation.
• A rule is an ongoing, specific plan for controlling human
behavior and conduct at work.
• The purpose of policies is to guide decision-making by
marking off areas in which managers can use their discretion.
• Although rules also serve as guides, they allow no discretion
in their application.
iii. Procedures: are statements that detail the exact manner in
which certain activities must be accomplished.
• procedures are chronological sequences of required actions.
• They provide detailed step-by-step instructions as to what
should be done.
Single use plans: are plans aimed at achieving a specific goal that, once
reached, will most likely not recur in the future and dissolved when
these have been accomplished.
• Are designed to accomplish a specific objective usually in a
relatively shorter period of time and it is non repetitive.
• The major types of single use plans are programs, projects, and
budgets.
a. Programs: is a comprehensive plan that coordinates a complex set
of activities related to a major non-recurring goal.
b. Projects: is a plan that coordinates a set of limited scope activities
that do not need to be divided into several major projects in order
to reach a major non-recurring goal.
 Projects are the smaller and separate portions of programs.
E.g. Building a warehouse can be taken as a program. In the
warehouse example, typical projects might include the
preparation of layout drawings, a report on labor availability
etc.
c. Budgets: are statements of expected results expressed in
numerical terms.
• Budget is a single use plan that commits resources to an
activity over a given period.
• Are statements of financial resources set aside for specific
activities in a given period of time.
• It may be expressed in Birr, labor hours, units of product,
machine hrs, or any other numerically measurable term.
Characteristics of a Good Plan
• Objectivity
• Futurity
• Flexibility
• Stability
• Comprehensive
• Simplicity and clarity
MANAGEMENT BY OBJECTIVES
 A managerial objective is the intended goal that prescribes definite
scope and suggests direction to the planning efforts of a manager
----Terry.
 This definition includes four concepts:
 Goal – the target to be attained should be identified in clear and
precise terms.
 Scope- the scope of the intended goal is included in a statement of
the prescribed boundaries or constraints to be observed.
 Definiteness – purposes stated in vague double meaning have little
or no managerial value because they are subject to various
interpretations and result in confusion.
 Direction - it shows the results to be sought and segregated these
results form the many possible targets that might otherwise be
pursued.
• “Management by objectives is a comprehensive managerial system
that integrates many key managerial activities in a systematic
manner and that is consciously directed toward the effective and
efficient achievement of organizational and individual objectives”----
Koontz
Features of MBO:
i. As an approach to managements with objective orientation as its
essence.
ii. MBO is concerned with determining what the results and
resources should be. It tries to match the objective and
resources.
iii. The MBO is characterized by the participation of concerned
managers in objective setting and performance reviews.
iv. Periodic review of performance is an important feature of MBO
v. Objectives in MBO provide guidelines for appropriate systems
and procedures.
Process of MBO:
1. Setting of organizational purpose and objectives:
 The first step in MBO is to determine the purpose or mission and
the more important goals of the enterprise for a given period ahead
2. Key result areas (KRA’s): KRA’s are derived from the expectations of
the various stakeholders and indicate the priorities for
organizational performance
3. Setting subordinate’s objective: The subordinate’s states his own
objective as perceived by him.
4. Matching resources with objectives: The next step is to match the
resources with the objectives and verify that resources are
adequate to fulfill the individual and organizational objectives.
5. Appraisal (Evaluation): Measuring whether the subordinate is
achieving his/her objective or not.
• Recycling i.e.,

R |-------------------------------OBJECTIVE SETTING
E |
C |
Y |-------------------------------ACTION PLANNING
C |
L |
E |-------------------------------PERFORMANCE REVIEW
BENEFITS OF MBO:
a) Better management: MBO forces managers to think about
planning for results, rather than merely planning activities or
work.
b) Clarity in organizational action: MBO tends to provide the
KRA’s. It provides basis for long-range planning.
c) Encouragement: of personal commitment – It encourages
people to commit themselves to their goals
d) Development of effective controls: It aids in effective control
because it provides a clear set of verifiable goals as the best
guide.
LIMITATIONS OF MBO:

• Failure to reach the philosophies of MBO – Managers fail to

understand and appreciate this new approach.
• Difficulty in setting goals – Truly verifiable goals are difficult
to set, Objectives are more in the form of statement rather
than in quantitative form
• Emphasis on short-run goals – There is a danger of
emphasizing on the short run at expense of the longer range
• Danger of inflexibility – Managers often hesitates to change
objectives
• Frustration – Introduction to MBO tends to arise high
expectations for rapid changes (the vision of new world)
Prerequisites for installing MBO Program:
– Purpose of MBO
– Top - Management support
– Training for MBO.
– Participation
– Feedback for self – direction and self – control
 CHAPTER 4
THE FUNDAMENTALS OF ORGANIZING

It forces us to address several basic questions:

• What specific tasks are required to implement our plans?
• How many organizational positions are needed to perform all
the required tasks?
• How should these positions be grouped?
• How many layers of management (Organizational levels) are
needed to coordinate them?
• How many people should a manager supervise directly?
• Organizing - is a management function that involves
arranging human and non-human (physical) resources to help
attain organizational objectives.
• Organization - is the total system of social and cultural
relationship among peoples who are joined together to
achieve some specific common objectives.
The Organizing Process
a) Identification of objectives
b) Identification of the specific activities needed to accomplish
objectives
c) Grouping of activities necessary to attain objectives
d) Assigning group of activities (work) and delegate the
appropriate authority
e) Provision for coordination/Design a hierarchy of relationships
Importance of Organizing
 Organizing promotes collaboration and negotiation among
individuals in a group.
 Organizing sets clear-cut lines of authority and responsibility for
each individuals or department’s.
 Organizing improves the directing and controlling functions of
managers.
 Organizing develops maximum use of time, human, and material
resources.
 Organizing enables the organization to maintain its activities
coordinated
Types of Organizations

A. Formal organization - is the intentional, deliberate or rational

structures of roles in a formally organized enterprise.
 It is characterized by well-defined authority - reporting
relationships, job titles, policies, procedures, specific job
duties and a host of other factors necessary to accomplish its
respective goals.
 Formal organization has consciously designed durable and
inflexible structure.
 Formal organization may have legal personality.
B. Informal organization - is a network of personal and social
relationships that arises spontaneously as people associate
with one another in a work environment.
 It is an unofficial network of personal and social relations
developed as a result of association or working together.
 It operates outside formal authority relationships.
 It doesn’t have legal personality.
 Informal organization develops within the formal
organization.
Types of Groups in the Informal Organization
 Horizontal Groups:
 Include persons whose positions are on the same level of the
organization
 The groups can consist of all the members in the same work
areas or membership developed across departmental lines.
 Membership in a horizontal group is usually mutually
beneficial to individuals - “You help me and I will help you”.
 Vertical Groups:
 Include people on different levels of the formal organization’s
hierarchy.
 These people always come together within the same
department (work areas).
 Their relationships can be the result of outside interests or
various employment relationships.
 Mixed Group:
 It is a combination of two or more persons whose positions
are on different levels of the formal organization and in
different work areas.
Why people form informal groups?
• Need for satisfaction
• Proximity and interaction
• Similarity
Why informal groups exist?
• Informal groups remain in existence because they serve four
major functions:
 They maintain the social and cultural values of the group
members.
 They provide group members the opportunity for status
fulfillment and social interaction.
 They provide information for their members
 They influence the work environment
The Impact of Informal Organization on the Formal
Organization
• The Negative Impacts
 Resistance to change
 Conflict
 Rumor
 Pressure to conform
• The Positive Impacts
 Makes the total system effective
 Provides support to management
 Provides a useful communication channel
 Encourages better management
 Provides stability in the environment
Major Elements of the Organizing Function
1. Division of Labor
Division of labor involves:
• Breaking down a task into its most basic elements
• Training workers in performing specific duties
• Sequencing activities so that one person's efforts build on
another's
Advantages of Division of Labor
 It enables a person performing a task to become highly
proficient in a relatively short time
 Decreased transfer time.
 Less wastage of materials in the learning process including
time.
 Ease of supervision.
Disadvantages of Division of Labor
• Boredom and fatigue caused by monotonous
• Specialization would result in workers' having limited
knowledge.
• Becoming engrossed in their own tasks, they lose sight of the
company's mission.
• Specialization leads to time-oriented confusion.
2. Departmentation
• process of grouping specialized activities in a logical manner
• Department: It is a unit formulated as a result of the
departmentation process.
• Departmentation is not an end in it self but is simply a
method of arranging activities to facilitate the
accomplishment of objectives.
Bases for Departmentation
I. Departmentation by Function
• It is the grouping together of activities in accordance with the
functions of an enterprise - on the basis of similarity of
expertise, skills or work activities.
• In other words, jobs that call for certain skills or the use of
similar working methods will be put together.
II. Departmentation by Territory/ Geography
• Groups activities on the basis of geographic region or
territory.
• Is common in enterprises that operate over wide geographic
areas
III. Departmentation by Product (Line)
• It is the grouping and arrangement of activities around
products or product groups.
• Departmentation by product should be considered when
attention, energy and efforts need to be focused on an
organization’s particular products.
IV. Departmentation by Customer
• It is a grouping of activities around customers.
• Customers are the key to the way activities are grouped when
each of the different things an enterprise does for them is
managed by one department head.
• It helps organizations meet the special and widely varying
needs of customers.
V. Departmentation by Process
• Manufacturing firms often group activities around a process
or type of equipment
• This is when special skill is needed to operate different
machines.
VI. Departmentation on Combined Base
• It is a base in which multiple bases are used at different
organizational levels of a particular organization.
3. Delegation of Authority
• Authority - is the right to commit resources (that is, to make
decisions that commit an organization’s resources), or the
legal (legitimate) right to give orders (to tell someone to do or
not to do something)
• is the right to make decisions, carry out actions, and direct
others in matters related to the duties and goals of a position
• is the formal right of a superior to command and compel his
subordinates to perform a certain act.
• Authority decreases all the way to the bottom of the chart, where
positions have little or none.
• Higher-level managers have greater authority, with ultimate power
resting at the top.
• Responsibility means being held accountable for attainment of the
organization’s goal.
• Authority is derived from the person’s official position in the
organization.
• Delegation of Authority - is the downward pushing of authority from
superiors to subordinates to make decision within their area of
responsibilities.
• Delegation is a concept describing the passing of formal authority to
another person.
• In delegating authority a manager doesn’t surrender his power
because he does not permanently dispose of it
• delegated authority can always be regained. This is called recovery of
delegated authority.
The Process of Delegation
i. Assignment of tasks
ii. Delegation of authority
iii. Acceptance of responsibility: Responsibility is not delegated
by a manager to an employee, but the employee becomes
obligated when the assignment is accepted.
iv. Creation of accountability: Accountability is having to answer
to someone for your results or actions.
Importance of Delegation
• It relieves the manager from his/her heavy workload
• It leads to better decisions
• It speedup decision-making
• It helps subordinates to train and builds moral
• It encourages the development of professional managers
• It helps to create the organization structure
Factors Determining Delegation
• Some factors that affect the degree of centralization or
decentralization- delegation of authority- are:
a. The history and culture of the organization
b. The nature of the decision
 The costlier and the riskier the decision is, the more
centralized the authority will be.
c. Availability and ability of managers (Lower level managers)
 A real shortage of managers would limit decentralization of
authority
d. Management philosophy
 The willingness of managers to delegate authority and limit
the degree of decentralization
e. Size and character of the organization
 The larger the organization, the more decisions to be made,
and the more places in which they must be made, the more
difficult it is to coordinate them.
f. Geographic dispersion of operations
 Geographic dispersion of operations makes decentralization
more necessary
g. Environmental uncertainty
 Environmental uncertainty tends to produce a need for more
decentralization.
4. Centralization and Decentralization
• Centralization - is the extent to which power and authority
are systematically retained by top managers
• Decentralization - is the extent to which power and authority
are systematically dispersed / delegated throughout the
organization to middle and lower level managers.
• Centralization and decentralization are not opposites rather
they are tendencies/proportions in delegation of authority.
• there is no absolute centralization or absolute
decentralization.
5. Authority Relations in Organization (Line, Staff, Functional)
i. Line Authority: it defines the relationship between superior
and subordinate.
ii. Staff Authority : is advisory in nature.
Problems in Effective Delegation
 Reluctance to delegate/Problems from Managers
 Fear of loss of power
 “I can do it better myself” fallacy
 Lack of confidence in subordinates
 Fear of being exposed
 Difficulty in briefing
 Reluctance to Accept Delegation/problems from subordinates
 Fear of failure and criticism
 Subordinate may believe that the delegation increases the risk of
making mistakes but doesn’t provide adequate rewards for assuming
greater responsibility
 Lack of adequate information and resources
 If subordinates are already overworked
 Lack of self-confidence
 Believing / Thinking that decision-making is the boss’s job.
iii. Functional Authority
 It is the right which is delegated to an individual or a
department to control specified process, practices, or
provinces or other matters relating to activities undertaken by
persons in other departments.
6. Span of Management
 The term span of management is also referred to as a span of
control, span of supervision, span of authority or span of
responsibility.
 Span of management - refers to the number of subordinates
who report directly to a manger
i. Narrow Span of Management
 This means superior controls few numbers of subordinates or
few subordinates report to a superior.
• When there is narrow span of management in an
organization, we get:
 Tall organization structure with many levels of supervision
 More communication between superiors and subordinates.
 Managers are underutilized and their subordinates are over
controlled.
 More trained managerial personnel and centralized authority.
ii. Wide Span of Management
 This means many subordinates report to a superior
• If the span of management is wide, we get:
 A flat organization structure with fewer management levels between
top and lower level
 Many number of subordinates and decentralized authority
 Managers are overstrained and their subordinates receive too little
guidance and control
 Fewer hierarchal level
Factors Determining an Effective Span of Management
 Ability of the manger
 Manager’s personality
 The abilities of subordinates
 Motivation and commitment
 Need for autonomy
 Type of work
 Geographic dispersion of subordinates
 The availability of information and control systems
 Levels of management
7. Organizational Structure
• Organization structure is the structural framework for
carrying out the functions of planning, decision-making,
controlling, communication, motivation, etc.
• Organization structure is the formal pattern of interactions
and coordination designed by a manager to link the tasks of
individuals and groups in achieving organizational goals.
• Organization structure is the arrangement and
interrelationship of the component parts, and positions of an
organization.
• The formal structure of an organization is of two-dimensional:
The horizontal dimension and vertical dimension.
• The horizontal dimension identifies departments, units, and
divisions on the same level of a management.
• Whereas the vertical dimension refers to the authority
relationships between superiors and subordinates
• Organizational Chart
 Organization chart is a line diagram that depicts the broad outlines
of an organization’s structure.
The organization chart can tell us:
• Who reports to whom (chain of command)
• The number of managerial levels
• How many subordinates work for each manager (the span of
control)
• Channel of official communication through the solid lines that
connect each job (box)
• How the organization is structured-by function, territory,
customer, etc.
• The work being done in each job- the labels on the boxes
• The hierarchy of decision making- where a decision maker for a
problem is located
• How current the present organization is (if a date is on the chart)
• Type of authority relationships- line authority, staff authority, and
functional authority
THANK YOU