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PRINCIPLES OF ORGANISATION THEORY & BEHAVIOUR

UNIT-I BUSINESS ORGANISATION AND MANAGEMENT

INTRODUCTION TO MANAGEMENT

Management is a vital aspect of the economic life of man, which is an organised group activity. A central directing and controlling agency is indispensable for a business concern. The productive resources - material, labour, capital etc. are entrusted to the organising skill, administrative ability and enterprising initiative of the management. Thus, management provides leadership to a business enterprise. Without able managers and effective managerial leadership the resources of production remain merely resources and never become production. Under competitive economy and ever-changing environment the quality and performance of managers determine both the survival as well as success of any business enterprise. Management occupies such an important place in the modern world that the welfare of the people and the destiny of the country are very much influenced by it.

Definition of Management

Management may be defined in many different ways. Many eminent authors on the subject have defined the term “management”, some of these definitions are reproduced below:

According to Lawrence A Appley, “Management is the development of people and not the direction of things”.

According to Joseph Massie, “Management is defined as the process by which a co-operative group directs action towards common goals”.

In the words of George R Terry, “Management is a distinct process consisting of planning, organising, actuating and controlling performed to determine and accomplish the objectives by the use of people and resources”.

In the words of Henry Fayol, “To manage is to forecast and to plan, to organise, to command, to co-ordinate and to control”.

According to Peter F Drucker, “Management is a multi-purpose organ that manages a business and manages managers and manages worker and work”.

In the words of Koontz and O’Donnel, “Management is defined as the creation and maintenance of an internal environment in an enterprise where individuals working together in groups can perform efficiently and effectively towards the attainment of group goals”.

From the definitions quoted above, it is clear the “management” is a technique of extracting work from others in an integrated and co-ordinated manner for realising the specific objectives through productive use of material resources. Mobilising the physical, human and financial resources and planning their utilisation for business operations in such a manner as to reach the defined goals can be referred to as “management”. If the views of the various authorities are combined, management could be defined as “a distinct ongoing process of allocating inputs of an organisation (human and economic resources) by typical managerial functions (planning, organising, directing and controlling) for the purpose of achieving stated objectives namely – output of goods and services desired by its customers (environment). In the process, work is preformed with and through personnel of the organisation in an ever-changing business

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environment”.Management is a universal process in all organised social and economic activities. It is not merely restricted to factory, shop or office. It is an operative force in all complex organisations trying to achieve some stated objectives. Management is necessary for a business firm, government enterprises, education and health services, military organisations, trade associations and so on.

Nature & Characteristics

1. Management is a group activity: - Management is an essential part of group activity. As no individual can satisfy all his desires himself, he units with his fellow- being and works in an organized group to achieve what he cannot achieve individually.

2. Management is goal-oriented: - Management aims to achieve economic and social objective. It exists to achieve some definite goals or objectives. Group efforts in management are always directed toward the achievement of some pre-determined goals.

3. Management is a factor of production: - Management is anuran end in itself but a means to achieve the group objectives. Just as land, labor and capital are factor of production and are essential for the production of goods and services.

4. Management is universal in character: - Management is applicable in all types of organization. Whenever there is human activity, there is management. The basis principle of management are universal application and can be applied in all organization whenever they are business, social, religious, cultural, sport, educational, politics or military.

5. Management is needed at all levels of the organization: - Another important feature of management is that it is needed at all levels of the organization, e.g. top level, middle level and supervisory level. The only difference is of the nature of task and the scope of authority.

6. Management is a distinct process: - Management is a distinct process performed to determine and accomplish started objective by the use of human beings and other resources. It is different from the activities technique and procedures.

7. Management is a social process: - Management is getting thing through others. This involves dealing with people. The efforts of the human beings have to be directed, co-ordinate and regulated by management in order to achieve the desired results.

8. Management is a system of authority: - Since management is a process of directing men to perform a task, authority to accomplish the work from others is implied in the every concept of management. Management cannot perform in the absence of authority.

9. Management is a dynamic function: - Management is a dynamic function and it has to be performed continuously. It is constantly engaged in the molding of the enterprise in an over charging business environment.

10. Management is an art as well as a science: - Management is a science because it has Management & Entrepreneurship developed certain principle which is of universal application. But the result of management depend upon the personnel skills of managers and in this sense management is an art.

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Scope of Management

The field of management is very wide. The operational areas of business management may be classified into the following categories:

(i) Production Management: Production management implies planning, organising, directing and controlling the production function so as to produce the right goods, in right quantity, at the right time and at the right cost. It includes the following activities:(a) designing the product(b) location and layout of plant and building(c) planning and control of factory operations(d) operation of purchase and storage of materials(e) repairs and maintenance(f) inventory cost and quality control(g) research and development etc.

(ii) Marketing Management: Marketing management refers to the identification of consumers needs and supplying them the goods and services which can satisfy these wants. It involves the following activities:(a) marketing research to determine the needs and expectation of consumers(b) planning and developing suitable products(c) setting appropriate prices(d) selecting the right channel of distribution, and(e) promotional activities like advertising and salesmanship to communicate with the customers

(iii) Financial Management: Financial management seeks to ensure the right amount and type of funds to business at the right time and at reasonable cost. It comprises the following activities:(a) estimating the volume of funds required for both long-term and short-term needs of business(b) selecting the appropriate source of funds(c) raising the required funds at the right time(d) ensuring proper utilisation and allocation of raised funds so as to maintain safety and liquidity of funds and

the credit- worthiness and profitability of business, and(e) administration of earningsThus, financial management involves the planning, organising and controlling of the financial resources.

(iv) Personnel Management: Personnel management involves planning, organising and controlling the procurement, development, compensation, maintenance and integration of human resources of an organisation. It consists of the following activities:(a) manpower planning(b) recruitments,(c) selection,(d) training(e) appraisal,(f) promotions and transfers,(g) compensation,(h) employee welfare services, and(i) personnel records and research, etc.

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Importance of Management

Management is indispensable for the successful functioning of every organisation. It is all the more important in business enterprises. No business runs in itself, even on momentum. Every business needs repeated stimulus which can only be provided by management. According to Peter Drucker,“ management is a dynamic lifegiving element in an organisation, without it the resources of production remain mere resources and never become production”.

The importance of management has been highlighted clearly in the following points:(i) Achievement of group goals: A human group consists of several persons, each specialising in doing a part of

the total task. Each person may be working efficiently, but the group as a whole cannot realise its objectives unless there is mutual cooperation and coordination among the members of the group. Management creates team-work and coordination in the group. He reconciles the objectives of the group with those of its members so that each one of them is motivated to make his best contribution towards the accomplishment of group goals. Managers provide inspiring leadership to keep the members of the group working hard.

(ii) Optimum utilisation of resources: Managers forecast the need for materials, machinery, money and manpower. They ensure that the organisation has adequate resources and at the sametime does not have idle resources. They create and maintain an environment conducive to highest productivity. Managers make sure that workers know their jobs well and use the most efficient methods of work. They provide training and guidance to employers so that they can make the best use of the available resources.

(iii) Minimisation of cost: In the modern era of cut-throat competition no business can succeed unless it is able to supply the required goods and services at the lowest possible cost per unit. Management directs day-to-day operations in such a manner that all wastage and extravagance are avoided. By reducing costs and improving efficiency, managers enable an enterprise to be competent to face competitors and earn profits.

(iv) Survival and growth: Modern business operates in a rapidly changing environment. An enterprise has to adapt itself to the changing demands of the market and society. Management keeps in touch with the existing business environment and draws its predictions about the trends in future. It takes steps in advance to meet the challenges of changing environment. Changes in business environment create risks as well as opportunities. Manag- ers enable the enterprise to minimise the risks and maximise the benefits of opportunities. In this way, managers facilitate the continuity and prosperity of business.

(v) Generation of employment: By setting up and expanding business enterprises, managers create jobs for the people. People earn their livelihood by working in these organisations. Managers also create such an environment that people working in enterprise can get job satisfaction and happiness. In this way managers help to satisfy the economic and social needs of the employees.

(vi) Development of the nation: Efficient management is equally important at the national level. Management is the most crucial factor in economic and social development. The development of a country largely depends on the quality of the management and coordination among the members of the group. Manage- ment creates team-work and coordination in the group. He reconciles the objectives of the group with those of its members so that each one of them is motivated to make his best contribution towards the accomplishment of group goals. Managers provide inspiring leadership to keep the members of the group working hard.

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Management – As Science or Art

A question often arises whether management is a science or art. It is said that “management is the oldest of arts and the youngest of sciences”. This explains the changing nature of management but does not exactly answer what management is? To have an exact answer to the question it is necessary to know the meanings of the terms “Science” and “Art”.

What is “Science”?

Science may be described, “as a systematic body of knowledge pertaining to an area of study and contains some general truths explaining past events or phenomena”.

The above definition contains three important characteristics of science. They are:

1. It is a systematized body of knowledge and uses scientific methods for observation,

2. Its principles are evolved on the basis of continued observation and experiment, and

3. Its principles are exact and have universal applicability without any limitation. Judging from the above characteristics of science,

it may be observed that:

1. Management is a systematized body of knowledge and its principles have evolved on the basis of observation.

2. The kind of experimentation (as in natural sciences) cannot be accompanied in the area of management since management deals with the human element.

3. In management, it is not possible to define, analyse and measure phenomena by repeating the same conditions over and over again to obtain a proof.

The above observation puts a limitation on management as a science. Management like other social sciences can be called as “inexact science”.

What is “Art”?

‘Art’ refers to “the way of doing specific things; it indicates how an objective is to be achieved.” Management like any other operational activity has to be an art. Most of the managerial acts have to be cultivated as arts of attaining mastery to secure action and results.

The above definition contains three important characteristics of art. They are:

1. Art is the application of science. It is putting principle into practice.

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2. After knowing a particular art, practice is needed to reach the level of perfection.

3. It is undertaken for accomplishing an end through deliberate efforts.

Judging from the above characteristics of art, it may be observed that:

1. Management while performing the activities of getting things done by others is required to apply the knowledge of certain underlying principles which are necessary for every art.

2. Management gets perfection in the art of managing only through continuous practice.

3. Management implies capacity to apply accurately the knowledge to solve the problems, to face the situation and to realise the objectives fully and timely.

The above observation makes management an art and that to a fine art.

Management is both a Science as well as an ArtManagement is both a science as well as an art. The science of management provides certain general principles which can guide the managers in their professional effort. The art of management consists in tackling every situation in an effective manner. As a matter of fact, neither science should be over-emphasised nor should be the art discounted; the science and the art of management go together and are both mutually interdependent and complimentary.

Management is thus a science as well as an art. It can be said that-”the art of management is as old as human history, but the science of management is an event of the recent past.”

Evolution of Management Thought

The origin of management can be traced back to the days when man started living in groups. One can argue that management took the form of leadership which was essential to coordinate the efforts of the group members in order to arrange the necessities of life. History reveals that strong men organised the masses into groups according to their intelligence, physical and mental capabilities. According to Egyptian literature of 1300 B.C., the art of management was being practiced in different forms by different people. The literature clearly indicates the recognition of the importance of organisation and administration in the bureaucratic set up. Similar records exist for ancient China.

Classical Theory

The classical theory signifies the beginning of the systematic study of management organisation. It is often called the traditional theory. It can be traced historically to the 19th century prototype industrial and military organisations. Several writers contributed to the classical thought in the early years of the 20th century. They include Taylor, Fayol, Weber, Luther Gulick, Urwick, Mooney and Reiley and may others.

The classical theory incorporates three viewpoints: (1) Taylor’s Scientific Management (2) Fayol’s Administrative Management; and (3) Weber’s Ideal Bureaucracy (an organisation based on rules and regulations, formal relations, specialization, etc.). All the three concentrated on the structure of organisation for greater efficiency. Several other trailblazers have also contributed to the classical theory. For instance, Mooney and Reiley published ‘Onward Industry’ in 1931 in which they attempted to find organisational universals. Subsequently, notable contributions came form Gullick,

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Oliver Sheldon, Urwick and many others. All these theorists were concerned with the structure of organisations and that is why their approach is also sometimes labelled as ‘structural theory of organisation’. Salient features of classical approach are as follows:

1. The classical theory laid emphasis on division of labour and specialization, structure, scalar and functional processes and span of control. Thus, they concentrated on the anatomy of formal organisation.

2. The classical theorists emphasis organisation structure for co-ordination of various activities. They ignored the role of human element.

3. The classical theory ignored the impact of external environment on the working of the organisation. Thus, it treated organisations as closed systems.

4. The efficiency of the organisation can be increased by making each individual efficient.

5. The integration of the organisation is achieved through the authority and control of the central mechanism. Thus, it is based on centralization of authority.

6. There is no conflict between the individuals and the organisation. In case of any conflict, the interests of the organisation should prevail.

7. The people at work could be motivated by the economic rewards as they were supposed to be ‘rational economic persons’.

Scientific Management Approach

The impetus for the scientific management approach came from the first industrial revolution. Because it brought about such an extraordinary mechanization of industry, this revolution necessitated the development of new management principles and practices. The main contributors to scientific management were Frederick W. Taylor, Henry L. Gantt, Frank Gilbreth, Lillian Gilbreth and Harrington Emerson.

F.W. Taylor (1865-1915) was the first person who insisted on the introduction of scientific methods in management. He launched a new movement during the last decade of 19th century which is known as ‘Scientific Management’. That is why, Taylor is regarded as the father of scientific management. Taylor was an American engineer who responded to the challenges of management around the turn of the century. During that period, productivity was very low, labour became extremely dissatisfied and industries had to face frequent strikes and lockouts. Taylor’s contribution was a system based on science whereby lower labour cost could be achieved simultaneously with higher wages. He suggested the change in the mental attitudes of the workers and the management to bring harmony in the industry.

Scientific management means application of scientific methods to the problems of management. Taylor advocated scientific task setting based on time and motion study, standardization of materials, tools and working conditions, scientific selection and training of workers and so on. It is to be noted that Taylor’s thinking was confined to management at the shop level. However, he demonstrated the possibility and significance of the scientific analysis of the various aspects of management. To sum up, he laid emphasis on the following principles:

1. Science, not rule of thumb.

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2. Harmony in group action, rather than discord.

3. Maximum output in place of restricted output.

4. Scientific selection, training and placement of the workers.

5. Almost equal division of work and responsibility between workers and managers.

The basic idea behind the principles of scientific management is to change the mental attitudes of the workers and the management towards each other. Taylor called it ‘Mental Revolution’ which has three implications:

1. all out efforts for increase in production;

2. creation of the spirit of mutual trust and confidence; and

3. inculcating and developing the scientific attitude towards problems.

Taylor suggested that management should try to find the best methods of doing various jobs and introduce standardized materials, tools and equipment so that wastages are reduced. The management should select right types of people and give them adequate training so as to increase the quantity and quality of production. It must create congenial working conditions for optimum efficiency of the workers. It should perform the decision-making function and should always try to give maximum cooperation to the workers to ensure that work is done according to the scientific techniques.

The workers should also revise their attitude towards the management. They should not be work-shirkers. They should be disciplined, loyal and sincere in fulfilling the tasks assigned to them. They should not indulge in wastage of resources. Both the management and the workers should trust each other and cooperate in achieving maximum production.

Thus, Taylor stood for creating a mental revolution on the part of management and workers. It is to be noted that Taylor’s thinking was confined to management at the shop level. However, he demonstrated the possibility and significance of the scientific analysis of the various aspects of management. To put the philosophy of scientific management into practice, Taylor and his associates suggested the following techniques:

1. Scientific task setting to determine a fair days; work.

2. Work study to simplify work and increase efficiency. This involves methods study, time study and motion study.

3. Standardization of materials, tools equipment, costing system, etc.

4. Scientific selection and training of workers.

5. Differential piece-wage plan to reward the highly efficient workers.

6. Specialization in planning and operations through ‘functional foremanship’. Foremen in the planning department include: route clerk, instruction card clear, time and cost clerk and shop disciplinarian and those in the operations department include: gang boss, speed boss, repair boss and inspector.

7. Elimination of wastes and rationalization of system of control.

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Criticism of Scientific Management

Taylor’s scientific management was criticized not only by the workers and managers but also by the psychologists and the general public. The main grounds of criticism are given below:

1. The use of the word ‘Scientific’ before ‘Management’ was objected because what is actually meant by scientific management is nothing but a scientific approach to management.

2. Taylor advocated the concept of functional foremanship to bring about specialization in the organisation. But this is not feasible in practice as a worker can’t carry out instructions from eight foremen.

3. Scientific management is production-centered as it concentrates too much on the technical aspects of work and undermines the human factor in industry.

4. Scientific Management ignores social and psychological needs of workers as it treats them as extension of machines devoid of any feelings and emotions.

5. Trade unionists regarded the principles of scientific management as the means to exploit labour because the wages of the workers were not increased in direct proportion to productivity increases.

Many of the above objections were later remedied by the other contributors to scientific management like Henri L. Gantt, Frank Gilbreth, Lillian Gilbreth and Harrington Emerson. Many of the recommendations of Taylor are still being applied by the modern business undertakings. In short, it can be said that Taylor was the pioneer in introducing scientific reasoning to the discipline of management.

Management Process or Administrative Management ApproachThe advocates of this school perceive management as a process involving certain functions such as planning, organising, directing and controlling. That is why, it is also called the ‘functional’approach. Henri Fayol is regarded as the father of this school. Henri Fayol defined management in terms of certain functions and then laid down fourteen principles of management which according to him have universal applicability.

Henri Fayol was a French executive who emphasized that management could be both taught and learnt. His long practical experience is reflected in his paper. “Administration industrielle et generale” (General and Industrial Management). Fayol tried to develop a theory of management. He discussed the principles of general management and argued that managerial ability can be acquired as any other technical ability. He not only recommended formal teaching in management but also practised it by founding the Centre for Administrative Studies in Paris. Thus, he was a pioneer in the field of management education. In brief, Fayol’s views on management command acceptability even today because they are much in tune with the requirements of the management in the present-day world.

Principles of Management (Contribution of Henry Fayol)

Henry Fayol was born in 1941 at Constantinople in France.He graduated as a mining engineer in 1860 from the National School of Mining. After his graduation, he joined a French Coal Mining Company as an Engineer.

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After a couple of years, he was promoted as manager. He was appointed as General Manager of his company in 1888. At that time, the company suffered heavy losses and was nearly bankrupt. Henry Fayol succeeded in converting his company from near bankruptcy to a strong financial position and a record of profits and dividends over a long period.

Concept of Management: Henry Fayol is considered the father of modern theory of general and industrial management. He divided general and industrial management into six groups:

1. Technical activities: Production, manufacture, adaptation.

2. Commercial activities: Buying, selling and exchange.

3. Financial activities: Search for and optimum use of capital.

4. Security activities: Protection of property and persons.

5. Accounting activities: Stock-taking, balance sheet, cost, and statistics.

6. Managerial activities: Planning, organisation, command, co- ordination and control.

These six functions had to be performed to operate successfully any kind of business. He, however, pointed out that the last function i.e., ability to manage, was the most important for upper levels of managers.

The process of management as an ongoing managerial cycle involving planning, organising, directing, co-ordination, and controlling, is actually based on the analysis of general management by Fayol. Hence, it is said that Fayol established the pattern of management thought and practice. Even today, management process has general recognition.

Fayol’s Principles of Management: The principles of management are given below:

1. Division of work: Division of work or specialization alone can give maximum productivity and efficiency. Both technical and managerial activities can be performed in the best manner only through division of labour and specialization.

2. Authority and Responsibility: The right to give order is called authority. The obligation to accomplish is called responsibility. Authority and Responsibility are the two sides of the management coin. They exist together. They are complementary and mutually interdependent.

3. Discipline: The objectives, rules and regulations, the policies and procedures must be honoured by each member of an organisation. There must be clear and fair agreement on the rules and objectives, on the policies and procedures. There must be penalties (punishment) for non-obedience or indiscipline. No organisation can work smoothly without discipline - preferably voluntary discipline.

4. Unity of Command: In order to avoid any possible confusion and conflict, each member of an organisation must received orders and instructions only from one superior (boss).

5. Unity of Direction: All members of an organisation must work together to accomplish common objectives.

6. Emphasis on Subordination of Personal Interest to General or Common Interest: This is also called principle of co-operation. Each shall work for all and all for each. General or common interest must be supreme in any joint enterprise.

7. Remuneration: Fair pay with non-financial rewards can act as the best incentive or motivator for good

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performance. Exploitation of employees in any manner must be eliminated. Sound scheme of remuneration includes adequate financial and non-financial incentives.

8. Centralization: There must be a good balance between centralization and decentralization of authority and power. Extreme centralization and decentralization must be avoided.

9. Scalar Chain: The unity of command brings about a chain or hierarchy of command linking all members of the organisation from the top to the bottom. Scalar denotes steps.

10. Order: Fayol suggested that there is a place for everything. Order or system alone can create a sound organisation and efficient management.

11. Equity: An organisation consists of a group of people involved in joint effort. Hence, equity (i.e., justice) must be there. Without equity, we cannot have sustained and adequate joint collaboration.

12. Stability of Tenure: A person needs time to adjust himself with the new work and demonstrate efficiency in due course. Hence, employees and managers must have job security. Security of income and employment is a pre-requisite of sound organisation and management.

13. Esprit of Co-operation: Esprit de corps is the foundation of a sound organisation. Union is strength. But unity demands co-operation. Pride, loyalty and sense of belonging are responsible for good performance.

14. Initiative: Creative thinking and capacity to take initiative can give us sound managerial planning and execution of predetermined plans.

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Human Relations Approach

The classical writers including Weber, Taylor and Fayol neglected the human relations aspect. The neo-classicists focussed on the human aspect of industry. They modified the classifical 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 human relations approach. Elton Mayo is generally recognized as the father of the Human Relations School. Other prominent contributors to this schools include Roethlisberger, Dickson, Dewey, Lewin, etc.

The human relations approach is concerned with recognition of the importance of human element in organisations. It revealed the importance of social and psychological factors in determining workers’ productivity and satisfaction. It was instrumental in creating a new image of man and the work place The neo-classical or human relations approach put stress on inter-personal relations and informal groups at the work-place.

The human relationists argued that achievement of organisational objectives is impossible without the willing cooperation of people and such cooperation cannot be automatically secured or ordered. It has to be consciously achieved. The neo-classical approach advocated people- oriented organisation structure which will integrate both informal and formal organisations.

The basic tenets of neo-classical theory or human relations approach are as under:

1. The business organisation is a social system.

2. The behaviour of an individual is dominated by the informal group of which he is a member.

3. An individual employee cannot be motivated by economic incentives alone. His social and psychological needs must be satisfied to improve the level of motivation.

4. In an organisation, it is ultimately cooperative attitude and not the more command which yields result.

5. Management must aim at developing social and leadership skills in addition to technical skills. It must take interest in the welfare of workers.

6. Morale and productivity go hand in hand in an organisation.

Hawthorne Studies

In 1927, a group of researchers led by George Elton Mayo and Fritz J. Roethlisberger at the Harvard Business School were invited to join in the studies at the Hawthorne Works of Western Electric Company, Chicago. The experiment lasted upto 1932. Earlier, from 1924 to 1927, the National Research Council made a study in collaboration with the Western Electric Company to determine the effect of illumination and other conditions upon workers and their productivity.

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Some of the major phases of Hawthorne experiments are as follows: 1. Illumination Experiments 2. Relay Assembly Test Room Experiments 3. Mass Interviewing Programme 4. Bank Wiring Observation Room Experiment.

1. Experiments to determine the effects of changes in illumination on productivity, illumination experiments, 1924-27.

2. Experiments to determine the effects of changes in hours and other working conditions on productivity, relay assembly test room experiments, 1927-28;

3. Conducting plant-wide interviews to determine worker attitudes and sentiments, mass interviewing programme, 1928-30; and

4. Determination and analysis of social organisation at work, bank wiring observation room experiments, 1931-32.

1. Illumination Experiments:Illumination experiments were undertaken to find out how varying levels of illumination (amount of light at the workplace, a physical factor) affected the productivity. The hypothesis was that with higher illumination, productivity will increase. In the first series of experiments, a group of workers was chosen and placed in two separate groups. One group was exposed to varying intensities of illumination.

Since this group was subjected to experimental changes, it was termed as experimental group. Another group, called as control group, continued to work under constant intensities of illumination. The researchers found that as they increased the illumination in the experimental group, both groups increased production. When the intensity of illumination decreased, the production continued to increase in both the groups.

The production in the experimental group decreased only when the illumination was decreased to the level of moonlight. The decrease was due to light falling much below the normal level.

Thus, it was concluded that illumination did not have any effect on productivity but something else was interfering with the productivity. At that time, it was concluded that human factor was important in determining productivity but which aspect was affecting, it was not sure. Therefore, another phase of experiments was undertaken.

2. Relay Assembly Test Room Experiments:Relay assembly test room experiments were designed to determine the effect of changes in various job conditions on group productivity as the illumination experiments could not establish relationship between intensity of illumination and production. For this purpose, the researchers set up a relay assembly test room two girls were chosen.

These girls were asked to choose for more girls as co-workers. The work related to the assembly of telephone relays. Each relay consisted of a number of parts which girls assembled into finished products. Output depended on the speed and continuity with which girls worked. The experiments started with introducing numerous changes in sequence with duration of each change ranging from four to twelve weeks.

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An observer was associated with girls to supervise their work. Before each change was introduced, the girls were consulted. They were given opportunity to express their viewpoints and concerns to the supervisor. In some cases, they were allowed to take decisions on matters concerning them.

Following were the changes and resultant outcomes:1. The incentive system was changed so that each girl’s extra pay was based on the other five rather than output of larger group, say, 100 workers or so. The productivity increase as compared to before.

2. Two five- minute rests one in the morning session and other in evening session were introduced which were increased to ten minutes. The productivity increased.

3. The rest period was reduced to five minutes but frequency was increased. The productivity decreased slightly and the girls complained that frequent rest intervals affected the rhythm of the work.

4. The number of rest was reduced to two of ten minutes of each, but in the morning, coffee or soup was served along with the sandwich and in the evening, snack was provided. The productivity increased.

5. Changes in working hours and workday were introduced, such as cutting an hour off the end of the day and eliminating Saturday work. The girls were allowed to leave at 4.30 p.m. instead of usual 5.00 p.m. and later at 4.00 p.m. productivity increased.

As each change was introduced, absenteeism decreased, morale increased, and less supervision was required. It was assumed that these positive factors were there because of the various factors being adjusted and making them more positive. At this time, the researchers decided to revert back to original position, that is, no rest and other benefits. Surprisingly, productivity increased further instead of going down.

This development caused a considerable amount of redirection in thinking and the result implied that productivity increased not because of positive changes in physical factors but because of the change in girls’ attitudes towards work and their work group.

They developed a feeling of stability and a sense of belongings. Since there was more freedom of work, they developed a sense of responsibility and self-discipline. The relationship between supervisor and workers became close and friendly.

3. Mass Interviewing Programme:During the course of experiments, about 20,000 interviews were conducted between 1928 and 1930 to determine employees’ attitudes towards company, supervision, insurance plans, promotion and wages. Initially, these interviews were conducted by means of direct questioning such as “do you like your supervisor?” or “is he in your opinion fair or does he have favorites?” etc.

this method has disadvantage of stimulating antagonism or the oversimplified ‘yes’ or ‘no’ responses which could not get to the root of the problem, the method was changed to non- directive interviewing where interviewer was asked to listen to

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instead of talking, arguing or advising. The interview programme gave valuable insights about the human behaviour in the company.

Some of the major findings of the programme were as follows:1. A complaint is not necessarily an objective recital of facts; it is a symptom of personal disturbance the cause of which may be deep seated.

2. Objects, persons or events are carriers of social meanings. They become related to employee satisfaction or dissatisfaction only as the employee comes to view them from his personal situation.

3. The personal situation of the worker is a configuration, composed of a personal preference involving sentiments, desires and interests of the person and the social reference constituting the person’s social past and his present interpersonal relations.

4. The position or status of worker in the company is a reference from which the worker assigns meaning and value to the events, objects and features of his environment such as hours of work, wages, etc.

5. The social organisation of the company represents a system of values from which the worker derives satisfaction or dissatisfaction according to the perception of his social status and the expected social rewards.

6. The social demands of the worker are influenced by social experience in groups both inside and outside the work plant.

During the course of interviews, it was discovered that workers’ behaviour was being influenced by group behaviour. However, this conclusion was not very satisfactory and, therefore, researches decided to conduct another series of experiments. As such, the detailed study of a shop situation was started to find out the behaviour of workers in small groups.

4. Bank Wiring Observation Room Experiment:These experiments were conducted to find out the impact of small groups on the individuals. In this experiment, a group of 14 male workers were formed into a small work group. The men were engaged in the assembly of terminal banks for the use in telephone exchanges.

The work involved attaching wire with switches for certain equipment used in telephone exchanges. Hourly wage for each worker was fixed on the basis of average output of each worker. Bonus as also payable on the basis of group effort.

It was expected that highly efficient workers would bring pressure on less efficient workers to increase output and take advantage of group incentive plan. However, the strategy did not work and workers established their own standard of output and this was enforced vigorously by various methods of social pressure. The workers cited various reasons for this behaviour viz. fear of unemployment, fear of increase in output, desire to protect slow workers etc.

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The Hawthorne experiments clearly showed that a man at work is motivated by more than the satisfaction of economic needs. Management should recognise that people are essentially social beings and not merely economic beings. As a social being, they are members of a group and the management should try to understand group attitudes and group psychology.

The following were the main conclusions drawn by Prof. Mayo on the basis of Hawthorne studies:1. Social Unit:A factory is not only a techno-economic unit, but also a social unit. Men are social beings. This social characteristic at work plays an important role in motivating people. The output increased in Relay Room due to effectively functioning of a social group with a warm relationship with its supervisors.

2. Group Influence:The workers in a group develop a common psychological bond uniting them as £ group in the form of informal organisation. Their behaviour is influenced by these groups. Pressure of a group, rather than management demands, frequently has the strongest influence on how productive workers would be.

3. Group Behaviour:Management must understand that a typical group behaviour can dominate or even supersede individual propensities.

4. Motivation:Human and social motivation can play even a greater role than mere monitory incentives in moving or motivating and managing employee group.

5. Supervision:The style of supervision affects worker’s attitude to work and his productivity. A supervisor who is friendly with his workers and takes interest in their social problems can get co-operation and better results from the subordinates.

6. Working Conditions:Productivity increases as a result of improved working conditions in the organisation.

7. Employee Morale:Mayo pointed out that workers were not simply cogs, in the machinery, instead the employee morale (both individual and in groups) can have profound effects on productivity.

8. Communication:Experiments have shown that the output increases when workers are explained the logic behind various decisions and their participation in decision making brings better results.

9. Balanced Approach:The problems of workers could not be solved by taking one factor i.e. management could not achieve the results by emphasizing one aspect. All the things should be discussed and decision be taken for improving the whole situation. A balanced approach to the whole situation can show better results.

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Systems Approach

In the 1960s, a new approach to management appeared which attempted to unify the earlier schools of thought. This approach is commonly referred to as ‘Systems Approach’. Basically, it took up where the functional process management school let off to try to unify management theory. “A system viewpoint may provide the impetus to unify management theory. By definition, it could treat the various approaches, such as the process, quantitative and behavioural ones, as subsystems in an overall theory of management. Thus, the systems approach may succeed where the process approach has failed to lead management out of the theory jungle”.

The systems approach is based on the generalization that an organisation is a system and its components are inter-related and inter-dependent. “A system is composed of related and dependent elements which, when in interactions, form a unitary whole. It is simply an assemblage or combination of things or parts, forming a complex whole. Its important feature is that it is composed of hierarchy of sub-systems. The world as a whole can be considered to be a systems in which various national economies are sub-system. In turn, each national economy is composed of its various industries, each industry is composed of firms, and of course, a firm can be considered a system composed of sub-systems such as production, marketing, finance, accounting and so on”. Thus, each system may comprise several sub-systems and in turn, each sub-system be further composed of sub-systems.

An organisation as a system has the following characteristics:

1. A system is goal-oriented.

2. A system consists of several sub-systems which are interdependent and inter-related.

3. A system is engaged in processing or transformation of inputs into outputs.

4. An organisation is an open and dynamic system. It has continuous interface with the external environment as it gets inputs from the environment and also supplies its output to the environment. It is sensitive to its environment such as government policies, competition in the market, technological advancement, tastes of people, etc.

5. A system has a boundary which separates it from other systems.

Open System Concept

A system may be closed or open. A closed system is self-dependent and does not have any interaction with the external environment. Physical and mechanical systems are closed systems. A closed system concentrates completely on internal relationships, i.e. interaction between sub- systems only. Because of lack of interaction with environment, it is unable to monitor changes occurring in the external environment. On the other hand, an open system has active interface with the environment through the input-output process as shown in Figure 2.1. It can respond to the changes in the environment through the feedback mechanism. That is why modern authors consider organisation as an open system.

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An open system obtains inputs, such as raw materials, layout, capital, technology and information, from the environment. Operations are performed upon the inputs and combined with the managerial process to produce desirable outputs which are supplied to the environment (i.e., customers). Through a feedback process, the environment’s evaluation of the output becomes part of the inputs for further organisational activity. If the environment is satisfied with the output, business operations continue. If it is not, changes are initiated within the business systems so that requirements of the customers are fully met. This is how an open system responds to the forces of change in the environment.

Features of Systems Approach

The systems approach is far more superior to classical and neo-classical approach because of the following features:

1. Interdependent Sub-systems: An organisation is a system consisting of several sub-systems. For example, in a business enterprise, production, sales and other departments and sub- systems. All these sub-systems are functionally interacting and interdependent. They are used together into an organic whole through goals, authority flows, resources flows and so on.

2. Whole Organisation: The system approach provides a unified focus to organisational efforts. It gives managers a way of looking at the organisation as a whole that is greater than the sum of its parts. The stress is laid on integration of various sub-systems of the organisation to ensure overall effectiveness of the system.

3. Synergy: The output of a system is always more than the combined output of its parts. This is called the law if synergy. The parts of system become more productive when they interact with each other than when they act in isolation.

4. Multi-disciplinary: Modern theory of management is enriched by contributions from various disciplines like psychology, sociology, economics, anthropology, mathematics, operations research and so on.

Contingency Approach

A review of the earlier schools of management helps us to place the current approach to management in perspective. The performance results of the management process school’s universalist assumptions were generally disappointing. The behavioural approach to management was incomplete. Certain quantitative techniques worked in some situations and not in others. The quantitative people could not solve behavioural problems and behavioural people could not overcome operations problems adaptable to quantitative solutions. Many authors believe that systems based theory could solve this dilemma. But this approach is also as yet incomplete. The latest approach to management which integrates the various approaches to management is known as ‘contingency’ or ‘situational’ approach.

The contingency approach is not new. Pigors and Myers propagated this approach in the area of personnel management as early as in 1950. However, the work of Joan Woodward in the 1950s marked the beginning of the contingency approach to organisation and management. Other contributors include Tom Burns, G.W. Stalker, Paul Lawrence, Jay Lorsch, and James Thompson. They analyzed the relationship between the structure of the organisation and the environment. Thus, contingency approach incorporates external

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Thus, ‘Sole Proprietorship’ from of business organisation refers to a business enterprise exclusively owned, managed and controlled by a single person with all authority, responsibility and risk.

environment and attempts to bridge the theory-practice gap. It does so in the systems framework. In other words, contingency approach as regards organisation as an open and dynamic system which has continuous interaction with environment.

The contingency theory stresses that there is no one best style of leadership which will suit every situation. The effectiveness of a particular leadership style will vary from situation to situation. For instance, participative leadership may be more effective in an organisation employing professional personnel in a high technology operation in an atmosphere of non- materialistic orientation and free expression. On the other hand, authoritarian leadership would be more effective in an organisation which employs unskilled personnel on routine tasks in social values oriented towards materialism and obedience to authority.

CONCEPT OF BUSINESS ORGANIZATION AND ITS FORMS

A business organization is an entity aimed at carrying on commercial enterprise by providing goods or services, to meet needs of the customers. All business organizations: have the common features such as formal structure; aim to achieve objectives, use of resources, requirement of direction, and legal regulations controlling them.

SOLE PROPRIETORSHIPDefinition of Sole Proprietorship

J.L. Hanson: “A type of business unit where one person is solely responsible for providing the capital and bearing the risk of the enterprise, and for the management of the business.”

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CHARACTERISTICS OF SOLE PROPRIETORSHIP FORM OF BUSINESS ORGANISATION

(a) Single Ownership: The sole proprietorship form of business organisation has a single owner who himself/herself starts the business by bringing together all the resources.

(b) No Separation of Ownership and Management: The owner himself/herself manages the business as per his/her own skill and intelligence. There is no separation of ownership and management as is the case with company form of business organisation.

(c) Less Legal Formalities: The formation and operation of a sole proprietorship form of business organisation does not involve any legal formalities. Thus, its formation is quite easy and simple.

(d) No Separate Entity: The business unit does not have an entity separate from the owner. The businessman and the business enterprise are one and the same, and the businessman is responsible for everything that happens in his business unit.

(e) No Sharing of Profit and Loss: The sole proprietor enjoys the profits alone. At the same time, the entire loss is also borne by him. No other person is there to share the profits and losses of the business. He alone bears the risks and reaps the profits.

(f) Unlimited Liability: The liability of the sole proprietor is unlimited. In case of loss, if his business assets are not enough to pay the business liabilities, his personal property can also be utilised to pay off the liabilities of the business.

(g) One-man Control: The controlling power of the sole proprietorship business always remains with the owner. He/she runs the business as per his/her own will.

MERITS OF SOLE PROPRIETORSHIP FORM OF BUSINESS ORGANISATION

1. Full control: Complete control of the entire business, allowing for a quick decision-making process and full freedom to do business according to their wishes.

2. No legal formalities: Legal technicalities are minimum to the extent that there is no law which requires a sole proprietorship to publish its financial accounts or any other such documents to any members of the public. This allows the business a great deal of confidentiality which is sometimes important in the business world.

3. Maximum benefits: The owner derives the maximum incentive from the business. He does not have to share any of his profits. So the work he puts into the business is completely reciprocated in incentives.

4. No unnecessary procedures: Not many people are involved and thus it cuts out the procedures of hierarchy generally present in a company. Single-handedly managing your business enterprise has its own advantages like you are not answerable to anyone neither you are responsible to share your profit or ask someone to bear the loss for you.

Limitations

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(a) Limited Resources: The resources of a sole proprietor are always limited. Being the single owner it is not always possible to arrange sufficient funds from his own sources. Again borrowing funds from friends and relatives or from banks has its own implications. So, the proprietor has a limited capacity to raise funds for his business.

(b) Lack of Continuity: The continuity of the business is linked with the life of the proprietor. Illness, death or insolvency of the proprietor can lead to closure of the business. Thus, the continuity of business is uncertain.

(c) Unlimited Liability: You have already learnt that there is no separate entity of the business from its owner. In the eyes of law the proprietor and the business are one and the same. So personal properties of the owner can also be used to meet the business obligations and debts.

(d) Not Suitable for Large Scale Operations: Since the resources and the managerial ability is limited, sole proprietorship form of business organisation is not suitable for large-scale business.

(e) Limited Managerial Expertise: A sole proprietorship from of business organisation always suffers from lack of managerial expertise. A single person may not be an expert in all fields like, purchasing, selling, financing etc. Again, because of limited financial resources, and the size of the business it is also not possible to engage the professional managers in sole proprietorship form of business organisations.

Partnership Firm

Definition:The proprietorship form of ownership suffers from certain limitations such as limited resources, limited skill and unlimited liability. Expansion in business requires more capital and managerial skills and also involves more risk. A proprietor finds him unable to fulfill these requirements. This call for more persons come together, with different edges and start business. For example, a person who lacks managerial skills but may have capital.Another person who is a good manager but may not have capital. When these persons come together, pool their capital and skills and organise a business, it is called partnership. Partnership grows essentially because of the limitations or disadvantages of proprietorship.

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

According to J. L. Hanson, “a partnership is a form of business organisation in which two or more persons up to a maximum of twenty join together to undertake some form of business activity”. Now, we can define partnership as an association of two or more persons who have agreed to share the profits of a business which they run together. This business may be carried on by all or anyone of them acting for all.

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The persons who own the partnership business are individually called ‘partners’ and collectively they are called as ‘firm’ or ‘partnership firm’. The name under which partnership business is carried on is called ‘Firm Name’. In a way, the firm is nothing but an abbreviation for partners.

Main Features:Based on the above definitions, we can now list the main features of partnership form of business ownership/organisation in a more orderly manner as follows:1. More Persons:As against proprietorship, there should be at least two persons subject to a maximum of ten persons for banking business and twenty for non-banking business to form a partnership firm.

2. Profit and Loss Sharing:There is an agreement among the partners to share the profits earned and losses incurred in partnership business.

3. Contractual Relationship:Partnership is formed by an agreement-oral or written-among the partners.

4. Existence of Lawful Business:Partnership is formed to carry on some lawful business and share its profits or losses. If the purpose is to carry some charitable works, for example, it is not regarded as partnership.

5. Utmost Good Faith and Honesty:A partnership business solely rests on utmost good faith and trust among the partners.

6. Unlimited Liability:Like proprietorship, each partner has unlimited liability in the firm. This means that if the assets of the partnership firm fall short to meet the firm’s obligations, the partners’ private assets will also be used for the purpose.

7. Restrictions on Transfer of Share:No partner can transfer his share to any outside person without seeking the consent of all other partners.

8. Principal-Agent Relationship:The partnership firm may be carried on by all partners or any of them acting for all. While dealing with firm’s transactions, each partner is entitled to represent the firm and other partners. In this way, a partner is an agent of the firm and of the other partners.

Advantages:As an ownership form of business, partnership offers the following advantages:

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1. Easy Formation:Partnership is a contractual agreement between the partners to run an enterprise. Hence, it is relatively ease to form. Legal formalities associated with formation are minimal. Though, the registration of a partnership is desirable, but not obligatory.

2. More Capital Available:We have just seen that sole proprietorship suffers from the limitation of limited funds. Partnership overcomes this problem, to a great extent, because now there are more than one person who provide funds to the enterprise. It also increases the borrowing capacity of the firm. Moreover, the lending institutions also perceive less risk in granting credit to a partnership than to a proprietorship because the risk of loss is spread over a number of partners rather than only one. .

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

4. Diffusion of Risk:You have just seen that the entire losses are borne by the sole proprietor only but in case of partnership, the losses of the firm are shared by all the partners as per their agreed profit-sharing ratios. Thus, the share of loss in case of each partner will be less than that in case of proprietorship.

5. Flexibility:Like proprietorship, the partnership business is also flexible. The partners can easily appreciate and quickly react to the changing conditions. No giant business organisation can stifle so quick and creative responses to new opportunities.

6. Tax Advantage:Taxation rates applicable to partnership are lower than proprietorship and company forms of business ownership.

Disadvantages:In spite of above advantages, there are certain drawbacks also associated with the partnership form of business organisation.

Descriptions of these drawbacks/ disadvantages are as follows:1. Unlimited Liability:

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In partnership firm, the liability of partners is unlimited. Just as in proprietorship, the partners’ personal assets may be at risk if the business cannot pay its debts.

2. Divided Authority:Sometimes the earlier stated maxim of two heads better than one may turn into “too many cooks spoil the broth.” Each partner can discharge his responsibilities in his concerned individual area. But, in case of areas like policy formulation for the whole enterprise, there are chances for conflicts between the partners. Disagreements between the partners over enterprise matters have destroyed many a partnership.

3. Lack of Continuity:Death or withdrawal of one partner causes the partnership to come to an end. So, there remains uncertainty in continuity of partnership.

4. Risk of Implied Authority:Each partner is an agent for the partnership business. Hence, the decisions made by him bind all the partners. At times, an incompetent partner may lend the firm into difficulties by taking wrong decisions. Risk involved in decisions taken by one partner is to be borne by other partners also. Choosing a business partner is, therefore, much like choosing a marriage mate life partner.

Joint Stock CompanyJoint stock company is a voluntary association of persons having a separate legal existence, perpetual succession and common seal. Its capital is divided into transferable shares.

Features: Separate legal existence: It is created by law and it is a distinct legal entity independent of its members.

It can own property, enter into contracts, can file suits in its own name.

Perpetual existence: Death, insolvency and insanity or change of members has no effect on the life of a company. It can come to an end only through the prescribed legal procedure.

Limited Liability: The liability of every member is limited to the nominal value of the shares bought by him or to the amount, guaranteed by him.

Transferability of shares: Shares of public company are easily transferable. But there are certain restrictions on transfer of share of private company.

Common seal: It is the official signature of the company and it is affixed on all important documents of company.

Separation of ownership and control: Management of company is in the hands of elected representatives of shareholders known individually as director and collectively as board of directors.

Merits: Limited liability: Limited liability of shareholders reduces the degree of risk borne by him.

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Transfer of Interest: Easy transferability of shares increases the attractiveness of shares for investment.

Perpetual existence: Existence of a company is not affected by the death, insanity, insolvency of member or change of membership. Company can be liquidated only as per the provisions of companies Act.

Scope for expansion: A company can collect huge amount of capital from unlimited number of members who are ready to invest because of limited liability, easy transferability and chances of high return.

Professional management: A company can afford to employ highly qualified experts in different areas of business management.

Limitations: Legal formalities: The procedure of formation of company is very long, time consuming, expensive and

requires lot of legal formalities to be fulfilled.

Lack of secrecy: It is very difficult to maintain secrecy in case of public company, as company is required to publish and file its annual accounts and reports.

Lack of motivation: Divorce between ownership and control and absence of a direct link between efforts and reward lead to lack of personal interest and incentive.

Delay in decision making: Red tapism and bureaucracy do not permit quick decisions and prompt actions. There is little scope for personal initiative.

Oligarchic management: Company is said to be democratically managed but actually managed by a few people i.e., Board of Directors. Sometimes they take decisions keeping in mind their personal interests and benefit, ignoring the interests of Shareholders and company.

UNIT-II

Introduction, Concept, Meaning & Definition of Planning

Planning is the primary function of management. It is the important process of deciding business objectives and charting out the method to accomplish these goals. This includes decision of what type of activity is to be done, where to be done and how the results to be analyzed.

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Theoretical review: Many theorists thoroughly describe the planning process of management function. Koontz and O'Donnel stated that "Planning is deciding in advance what to do, how to do it, when to do it and who is to do it. It bridges the gap from where we are and to where we want to go. It is an essence of the exercise of foresight. Another management theorist, M.S. Hardly explained "Planning is deciding in advance what is to be done". It involves the selection of objectives, policies, procedures and programs from among alternatives. Heying and Massie defined "It can be said that planning is first function of the manager in which he has to decide in advance action that is to be done." It is an intellectual process in which managers must have to use their imaginative mind. Planning is an attempt to foresee the future in order to get high performance.

Plans have numerous benefits. Planning enables managers to think ahead. It leads to development of performance standards. Plan forces management to articulate clear objectives. Planning makes organization to get ready for unexpected developments.

Planning includes various features such as Planning is mainly concerned with looking into future. In planning process, management team has to select suitable course of action under particular business environment. It means there are several ways to achieve objectives. Planning is done at all levels of the organization because managers at all levels are concerned with determination of future course of action. Planning is persistent and constant managerial function.

Nature of Planning

planning is a rational approach, open system, flexibility and pervasiveness. It clarifies where one stands, where one wants to go in future and how accomplishes goal.

Rationalist denotes a manager chooses suitable way to achieve the stated objectives and rational approach fills the gap between the current status and future status.

Planning is an open System approach in which firm is an open system because it accepts inputs from the environment and exports output to environment. Planning accepts an open system approach. Open system approach designates that the gap between current and desired status and the action required overpassing this gap which is influenced by array of environmental economic, legal, political, technological, socio-cultural and competitive factors. These factors are vibrant and change with time. Therefore managers have to take into account the dynamic features of environment while using open system approach.

Another aspect of planning is the flexibility of Planning: it means plan has ability to change direction to take on to changing situations without excessive cost. Many scholars said that the plans must be stretchy to become accustomed to changes in technology, market, finance, personal and organizational factors. However flexibility is possible only within limits, because it involves extra cost.

Another feature is pervasiveness of Planning. Planning is persistent and it broadens throughout the organization. Planning is the primary management function and every manager at different level has to do planning within his particular area of activities. Top management is responsible for general objectives and action of the organization. Therefore it must plan what these objectives should be and how to achieve them. Similarly a departmental head has to develop the objectives of his department within the organizational objectives and also the methods to accomplish them.

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Importance/Objectives of Planning:Planning is important because it enables the organisation to survive and grow in the dynamic, changing environment. Planning is the basis of distinction between the successful and unsuccessful organisations. In the dynamic environment, planning helps in scanning the environmental changes and forecasting the future.

It is important to plan because of the following reasons:1. Achievement of organisational objectives:Planning helps the organisation to achieve its objectives. Planning provides the path for achievement of organisational goals with minimum waste of time, money and energy. It bridges the gap between where we are and where we want to go.

2. Fulfillment of organisational commitments:Organisations have long-term and short-term commitments towards society, depending on their nature. A defence organisation, for example, has long-run commitments while a retailer is more interested in short-term goals or responsibilities. These commitments or goals of the organisation can be fulfilled through planning.

3. It facilitates decision making:Decision-making is deciding what to do when managers face a problem-solving situation and adopting the best way out of the available courses/ ways of doing it.

It is “the process of choosing a course of action from two or more alternatives.”

Managers have to make decisions like: what to produce and how to produce, what are the organisational resources and how can they be effectively allocated over different functional areas, what are their primary goals — profit or social responsibility and many more. Planning helps to decide a course of action that will solve the specific problem.

4. It provides stability to organisations:

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Organisations that plan their operations are more stable than others. Managers foresee risk and prepare the organisations to face them when they occur. Planning precedes all other managerial functions and coordinates them for providing stability to the organisation.

Planning before organizing (what kind of organisation structure), planning before staffing (what kind of people), planning before direction (what kind of motivation, leadership and communication system) and planning before control (the controlling techniques to achieve standards of performance) promotes group effort and team work to give right direction to organisational activities.

5. Overall view of the organisation/coordination:Organisation is a structure of relationships where authority and responsibility are clearly defined. Planning coordinates the functions performed by individual members and departments and unifies them into a single goal — the organisational goal. It unifies inter-departmental activities so that all departments work according to plans.

6. Optimum utilisation of resources / efficiency of operations:Organisations work with limited resources. Planning allocates these resources over different objectives and functional areas (production, personnel, finance and marketing) in the order of priority. This results in optimum utilisation of scarce organisational resources (men, material, money etc.) and their effective conversion into productive outputs.

7. Development of managers:Planning involves imagination, thought and creativity by managers. Managers develop their conceptual and analytical skills to plan and coordinate organisational activities with external environment.

8. Promotes innovation / creativity:Planning involves forecasting. Managers foresee future, analyse the strengths of their competitors and think of new and innovative ways of promoting their products. Planning promotes new ideas, new products, new relationships and, thus, promotes innovation and creativity.

9. Basis for control:Planning frames standards of performance and control ensures achievement of standards. Controlling involves measurement of actual performance, its comparison with standard performance, finding deviations and taking steps to remove the deviations to make better plans for future. Unless there are plans, there will be no control. Planning is, thus, the basis for control.

10. Reduction of risk:Risk is a situation where moderately reliable information is available about future but it is incomplete. Uncertainty, on the other hand, is a situation where no information is available about future. Changes in government’s policies is a situation of uncertainty while entry of competitors in the market with better technology represents a situation of risk. Planning helps to reduce risk through forecasting.

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11. Morale boost up:If organisational plans succeed and goals are achieved, managers and employees feel satisfied and morally boost up to concentrate on organisational activities. Successful planning, thus, promotes success of the organisation and higher standards in the next planning cycle.

12. Facilitates delegation:Well-designed plans enable managers to concentrate on strategic issues and delegate routine/operating activities to lower-level managers. It, thus, facilitates delegation.

Reasons of Planning

Planning is the first step in management. The increasing complexities of business, technological changes, increasing marketing competition, changing consumer preferences have necessitated proper planning.

Following reasons emphasize the need for planning:1. Essential for Modern business:The growing complexities of modern business, rapid technological changes, opening of economies to international competition, changes in consumer tastes necessitate planning not only in the current context but also in the future environment. Planning has a future outlook and it takes into account all possible future developments.

2. Related to performance:Planning helps in setting goals for each function and for each employee. The concerns having formal planning have performed better as compared to those where planning is not taken up as a regular activity. The variables for assessing performance may be return on investment, sales target, earning per share etc. Studies have proved that planning has been an instrument in improved performance.

3. Focus on Objectives:The thrust of formal planning is on setting objectives and providing guidelines for reaching them. Objectives provide a direction and all planning decisions are directed towards achieving them. It ensures maximum utilisation of managerial time and efforts.

4. Proper Allocation of Resources:The needs of the organisation are anticipated with the help of planning. The acquisition and allocation of resources can be properly planned thus minimising wastages and ensuring optimal utility of these resources.

5. Facilitates Control:

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Planning can be used to devise a mechanism of control. There can be quantitative targets and their comparison with actual performance can bring to notice any deviations. A periodical review can also help in pointing out low performance. The deviations in production, sales, profits etc. may come to light during periodic investigations and remedial action can be taken.

6. Helpful in Decision making:Planning is helpful in the process of decision-making. Since planning helps in specifying the actions to be taken for achieving organisational objectives, it serves as a basis for decision-making for the future. The objectives, plans, policies, schedules, rules etc. serve as guidelines for routine decision making.

7. Avoiding Business Failures:Business failures may be due to wrong and unscientific planning. A bad planning may result into wastage of human and physical resources. The enterprise may not be able to face competition from well planned units. Good planning will help in utilising available resources in a best possible way thus reducing the chances of failures.

Major Steps in Planning Process

The planning process is different from one plan to another and varies from company to company. Common steps in planning are mentioned below:

1. Establishing goals or objectives: The initial phase of planning process is to establish the business objectives. These organizational goals are made by senior level managers after reviewing numerous objectives. These objectives are based on the number of factors like mission of the organization, abilities of the organization. Once management team establishes the organizational goals, the section wise or department wise objectives are planned at the lower level. Defining the objectives of every department is important and accordingly precise direction is given to the departments.

2. Establishing planning premises: The next step in planning which involves establishing planning premises is the conditions under which planning activities will be done. Planning premises are planning statements that are the expected environmental factors, pertinent facts and information relating to the future such as general economic conditions, population trends, and competitive behavior. The planning premises can be Internal and External premises, Tangible and Intangible premises, Controllable and non-controllable premises.

3. Deciding the planning period: After determining the long term objectives and planning premises, another phase is to choose the period of the plan. Some plans are made for a year and other plans are devised for longer period. There are many factors which influence the choice of a period. Lead time in development and commercialization of a new product. Big companies like an aircraft building company plans for a period of five to ten years where as a small manufacturer can commercialize his idea in a year. Another factor is time needed for recovery of capital investment or the payback period. The payback period also influence the planning period. Length of commitment already made also impact the choice of time span in planning. Researchers emphasized that the plan period should be made in such a way that it can fulfil the commitments already made. Identification of alternatives is important factor in determining time frame in planning. A particular objective can be achieved through various actions. Evaluation and selection of alternative is the next step which assess the alternatives with the support of the premises and goals and to choose the best course or courses of action.

4. Developing derivative/supportive plans: After selection process of plan done, various plans are derived so as to support the main plan. These derivative plans are devised from the main plan.

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5. Measuring and controlling the process: It is advised that plans once established should not be executed unless its progress is monitored. Managers must have continually monitor progress of their plans so that remedial action can be taken to make fruitful plan.

MANAGEMENT BY OBJECTIVES

Management guru Peter Drucker is credited with being the first to introduce Management by Objectives (MBO) as an approach for increasing organizational effectiveness. He observes that every manager, from the highest to the lowest levels in the organisation, should have clear objectives to pursue. According to him, such a process would enable each manager to have a clear understanding of what the organisation expects of him or her and how their individual objectives are integrated with the overall organizational objectives. George Odiorne has done substantial research work on MBO and further popularized the concept.

To quote George Odiorne, “MBO is a process whereby the superior and subordinate managers of an organisation jointly identify the common goals, define each individual’s major areas of responsibility in terms of the results expected of him, and use these resources as guides for operating the unit and assessing the contribution of each of its members”.

Different goals are sought to be achieved by the introduction of MBO in organizations. MBO, as a management tool, thus, is so versatile that it is used; a) to integrate the organizational goals with the individual goals; b) as a motivational technique wherein individuals are driven towards the achievement of goals; c) to appraise the performance of managers; and d) to control the activities as they are performed.

Drucker suggests that objectives are to be specified in the key result areas of business (KRAs). A key result area may be understood as one the performance of which, directly and vitally affect the success and survival of the business. Accordingly, for a manufacturing firm production, productivity, profitability, market share, social responsibilities, employer and employee relations, manager and worker develop

ment, development of physical resources, constitute the important key result areas. It may be understood that the KRAs vary from business to business. Since MBO involves a systematic effort towards the achievement of objectives, utmost care has to be exercised in setting the objectives for all the key result areas.

Principles of Effective Planning

Planning requires scientific thinking and it should spell out in clear terms the definition of the purpose, analyse the problem and make a careful and diligent search for all the facts bearing upon it. The task of planning will be well-accomplished if some fundamental principles are followed in the process.

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The important principles may be stated as follows:1. Principle of Commitment:This means that certain resources must be committed or pledged for the purpose of planning. Planning is not an easy task. So, necessary help is to be taken from experts. The enterprise must be ready to exhaust the available resources for the achievement of a plan.

2. Principle of the Limiting Factor:A plan involves varied factors of different importance. This principle implies that more emphasis has to be put on that factor which is scarce or limited in supply or extremely costly. This will help in selecting the most favourable alternative.

3. Principle of Reflective Thinking:Planning, being an intellectual activity is based on rational considerations. These involve reflective thinking which signifies problem-solving thought process—a process by which past experiences are superimposed on the facts of the present situation and possible future trends. None can be a planner whose mind is not active, who does not possess any deliberate power and whose sense of judgement is not strong.

4. Principle of Flexibility:Though a plan is prepared after reflective thinking, this does not mean that no departure can be made in the course of its operation. The plan should be so prepared that there is sufficient scope for changing it from time to time. Changes must necessarily be effected in the plan for taking into account new developments that may take place in the course of the operation of the plan.

5. Principle of Contribution to Enterprise Objectives:A major plan is prepared and it is supported by many derivative plans. But all plans must contribute in a positive way towards the achievement of the enterprise objectives.

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6. Principle of Efficiency:A plan should be made efficient to attain the objectives of the enterprise at the minimum cost and least effort. It must also achieve better results with the minimum of unexpected happenings. Therefore, it is to be seen that what is expected is likely to be achieved.

7. Principle of Selection of Alternatives:Planning is basically a problem of choosing. The essence of planning is the choice among alternative courses of action. There is no need for planning if there is only one way for doing something. In choosing from alternatives, the best alternative will be that which contributes most efficiently and effectively to the accomplishment of a desired goal.

8. Principle of Planning Premises:A plan is prepared against some foundations or backgrounds known as ‘Planning Premises’. There must be complete agreement among the managers in respect of planning premises over which the structure of plan is to be framed.

9. Principle of Timing and Sequence of Operations:Timing and sequence of operations determine the starting and finishing time for each piece of work according to some definite schedule and give practical and concrete shape and form to work performance.

10. Principle of Securing Participation:To secure participation of the employees with whole-hearted co-operation in execution of the plan, it is necessary that the plan must be communicated and explained to them for their full understanding. This understanding provides the basis for additional knowledge about new facts and matters to the employees. This is needed for improvement in the quality of planning. It also ensures an obligation of the personnel of the enterprise to execute the plan by individual and joint participation.

11. Principle of Pervasiveness:Though major planning function is entrusted to the top management, it is not restricted to the top level only. It is a function of every manager at every level in the organisation.

12. Principle of Strategic Planning:Strategic planning is essential where there is competition. It is prepared in the light of what the competitors are intending to do. Planners must take into account the strategies of the rival organisations, otherwise the planning projection may land them in trouble.

13. Principle of Innovation:A good system of planning should be responsive to the opportunities for innovation. Innovation consists in creating something new for increasing satisfaction of the consumers. This may also be stated as an important strategy of

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business. Innovation is a necessity for its sustaining growth in this dynamic world. Innovation is achieved through research and development and planning is required to provide such scope.

14. Principle of Follow-up:In the course of execution of a plan, certain obstacles may crop up in midway and planning may require revision, alteration or correction. This is why there must be a follow-up system in the planning process itself. This allows timely changes in the planning and makes it more effective.

ORGANISING

Introduction, Meaning & Definition of Organising

The managerial function organizing may be understood as “defining and grouping the activities of the enterprise and establishing authority, responsibility and relationships among them”. It results in the creation of a structure most appropriate for the organization’s objectives and other internal and external factors. The best structure is the one that enables the organization to interact effectively with its environment, to efficiently channelize the efforts of its people, to make efficient use of its resources. Thus, while planning specifies the objectives, organizing facilitates the accomplishment of objectives.

According to Sheldon, "Organisation is the process of so combining the work which individuals or groups have to perform with facilities necessary for its execution, that the duties so performed provide the best channels for efficient, systematic, positive and coordinated application of available effort."

Nature of Organising

1. Identification of Activities: Enterprise must perform different activities to achieve definite objectives. ● It is one of important component of organizing ● The activities of enterprise depend on its nature and size.

2. Grouping of Activities: Identified activities must be classified on the basis of common nature and should be put at one group or subgroup. ● Involves creating departments and sections for specific works such as production, marketing, finance, human resources etc. ● Department may be sub divided into sections and individual jobs. ● It is helpful to maintain coordination and exercise control over activities.

3. Accumulation of Resources: Resources are essential for smooth functioning of an enterprise. ● Resources involve manpower, materials, machines, money, technology etc. ● Availabitity of needet resources facilitate for uniform and smooth performance of the enterprise which if supportive to produce quality products and to provide quality service in time.

4. Defining Hierarchy of Position: Hierarchy of authority is formed on the basis of degree of responsibility and accountability. ● It clarifies the role of each individual from top to the subordinate level. ● Higher level job needs more skill, experience and responsibility. ● Chain of command is implemented to see the progress of work of respective subordinates.

5. Assignment of jobs: Total works of an enterprise is divided into small units on the basis of their common nature. ● Each work is assigned to different individuals on the basis of their skill, ability and experience. ● Assignment of right jobs to the right persons develops the practice of specialization and efficiency among them. ● Minimizes wastage of materials, breakdown of machines and equipments and supervision cost.

6. Establishing Authority and Reponsibility Relationship: For systematic functioning of managerial function it is essential to establish authority and responsibility relationship of all the employees from top level to

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subordinate levels. ● Job responsibility should be given to the employees on the basis of their skill and efficiency. ● ~ly, proper authority should be given on the basis of level of responsibility.

7. Evaluation of Performance: Organizing involves evaluation of actual performance achieved within stipulated time. ● After implementation of plan it is essential to evaluate actual work completed. ● Facilitates to compare acutal work completed with planned estimation and to take corrective measures if actual work completed it not in accordance of planned work. ● It is helpful to meet determined objectives within time defined

Significance/ Importance of Organising

The organising process creates a network of roles and relationships and provides a framework within which each employee performs the activities that have been assigned to him.His role becomes more meaningful and he contributes effectively for achieving predetermined objectives. Therefore, organising is regarded as a mechanism or means to achieve planned objectives. Its importance can be outlined as under:

1. Provides framework to perform management functions:Organisational structure provides a framework within which various management functions can be performed by the managers more efficiently. It is only through relationship of superior and subordinate, which is created by organising process that the manager plans, directs and controls activities of his subordinates.

2. Facilitates coordination:Organising process may also be used as a device of maintaining and achieving coordination. In organising, the activities performed by an individual employee are related to the functioning of his department, and then functioning of various departments is harmonised for seeking common goals.

3. Leads to specialisation:Organising is based on the concept of division of work that ultimately leads to specialisation. Through it, activities are divided, grouped-up and assigned to the concerned department having requisite competence, and resources, and the department develops as a specialised centre for those activities.

4. Helps in achieving efficiency:Organising process aims at achieving higher efficiency because it helps in making efficient utilisation of both human as well as physical resources.

5. Promotes Employee development:In a highly decentralised organisational structure, each position is strengthened by delegating required authority. As a result of it, each manager makes decisions, solves problems and tackles the situation that ultimately leads to overall development in his personality.

6. Increases clarity of authority and responsibility:

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Division of work and delegation of authority among employees, through the process of organising, gives them a precise idea of what they are expected to perform and within what limits of authority they have to perform. It helps in boosting an employee’s morale and he feels comfortable in the work- setting.

7. Facilitates adaptation:Organisational structure also provides a useful means to cope with changing environment. In the event of change, necessary modification may be made in the organising process, organisational structure and organisational goals, so as to bring them in conformity with the change. It may be done by maintaining flexibility in the structure and making it adaptive to changes.

ORGANISATIONAL STRUCTURE

First and foremost we must remember that an organisation structure is a result of the organising process. The organisation structure consists of the various jobs, departments and responsibilities in the enterprise coupled with the definition of the extent of control, management and authority.

It also consists of the relationships between various members of the enterprise. All in all, an organisation structure is a framework within which managerial and operating tasks are performed. This is because it defines the extent of management or the span of management.

In other words, it specifies authority by clearly stating the subordinates to a superior and to whom the superior is a subordinate himself. In effect, this highlights the levels of management in an enterprise and allows for correlation and coordination among individuals.

Talking about the significance of an organisation structure, it facilitates growth and changes within an enterprise. As a matter of fact, an enterprise with a static structure and thus resistance to change can soon go out of fashion in the dynamic business world. Thus it is important to realise that an enterprise needs a change in the organisation structure whenever it expands and grows in complexity

Also, an efficient organisational structure facilitates smooth business operations. Lastly, it also facilitates coordination and regulation of responsibilities within the enterprise. Consequently, this enables the enterprise to function as an integrated unit.

Key Elements of Organisational Structure

Five elements create an organizational structure: job design, departmentation, delegation, span of control and chain of command. These elements comprise an organizational chart and create the organizational structure itself. "Departmentation" refers to the way an organization structures its jobs to coordinate work. "Span of control" means the number of individuals who report to a manager. "Chain of command" refers to a line of authority.

Types of Organisation Structure

On the basis of nature of activities performed, the organisation structure is classified into two:

Functional Structure

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Divisional Structureunctional Structure

As the name suggests, in a functional structure grouping is based on functions. This means that similar jobs are integrated into functions and major functions are further categorised as departments which are handled by respective coordinating heads. These departments can further consist of sections. Note that functional structure is a basic and simple organisational structure.

Advantages

Since functional structure revolves around functions, the division is such that an employee performs a specific set of tasks as a part of his routine. Effectively, this creates room for job specialisation and efficient use of manpower.

Again, as similar tasks are grouped together into a function and emphasis is laid on specific functions, this structure facilitates coordination and control.

In a functional structure, we keep similar tasks together and different tasks away. This implies that there is no scope for duplication. Effectively, this lowers cost.

As the focus is mostly on a specific and limited range of skills, training of employees becomes easier.

This also leads to an increase in managerial efficient which in turn increases profit margins.

Lastly, it ensures that all the diverse tasks get a fair amount of attention.

Disadvantages

A major drawback of the functional structure lies in its definition itself. As stated already, it puts emphasis on division based on functions of an enterprise. Now as it stresses on the diverse functions, it generally leads to an increased concern on interests of departmental interests rather than the interests of the organisation as a whole. Technically, this can lead to the emergence of functional empires and even dwindling levels of concern for organisational objectives.

Again, as the departments are completely different in operations from each other, there is a big barrier to communication between them.

There may arise a conflict of interests among these departments which are profusely looking to fulfil the individual departmental interests. Such conflicts can hinder the growth of an enterprise. Further, such conflicts can further arise in the absence of clear separation of responsibility.

When individuals always deal with specific tasks their perception narrows down and they don’t appreciate the varying point of views. Consequently, they remain fixated on specific ideas and fail to develop as individuals. All in all, this leads to inflexibility.

In the light of above-mentioned facts, we can observe that functional structure is suitable for an enterprise which is large, has a large number of activities to perform and looks for a high degree of specialisation.

ivisional Structure

Divisional structure, as the name suggests percieves an enterprise as the integration of independent divisions. We must note that such a structure is adopted in large and complex enterprises which handle diverse products. This is because although an organisation produces a homogeneous set of products, it can deal in a wide variety of differentiated products. Again, the organisation does this to deal with complexity.

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We must remember that in such a structure, the organisation is divided into separate business units or divisions which are a bit independent and multifunctional in their operations. Each unit has a divisional manager at the apex who looks after all the operations within a division.

Further, each division performs most of the functions like production, finance etc. to achieve a common goal. In a nutshell, each enterprise is divided into various divisions which further adapt the functional structure. For example, the Reliance group has various product lines like clothing, communications, electronics etc.

Advantages

Here each divisional head looks after all the aspects of the division which is his responsibility. As a result of this, instead of fixation on specialisation the divisional head develop various skill sets which ultimately make him a suitable candidate for higher job positions.

Again each division is the complete responsibility of the division head. Consequently, the division head looks after all the operations within the division. Hence, this helps in performance measurement. Additionally, the division head is responsible for the poor performance of a division. This also facilitates quick remedial actions.

Each division functions as a self-sustaining and autonomous unit. Accordingly, it promotes flexibility, initiative and faster decision making.

A notable advantage of the divisional structure is that it promotes expansion. Evidently, if an enterprise tries to step into a new product’s market, it can simply do so by adding a new division for that product line without interfering with the existing structure.

Disadvantages

Divisional structure promotes the emergence of autonomous divisions within an enterprise. Consequently, a division might try to compete with other divisions to maximise it’s profits and hence cause hindrance to the growth of the bigger entity that is the organisation.

Similar sets of functions are performed across all units. In that case, there is a duplication of functions which lead to an overall increase in expenditure.

Lastly, this structure gives a lot of power to a divisional manager. This may result in the rise of an independent manager who might hold the division’s interests in higher regard than the organisational interests.

Type # 1. Line Organisation:Line organisation is the simplest and oldest form of organisation structure. It is called as military or departmental or scalar type of organization. Under this system, authority flows directly and vertically from the top of the managerial hierarchy ‘down to different levels of managers and subordinates and down to the operative level of workers.

Line organisation clearly identifies authority, responsibility and accountability at each level. The personnel in Line organization are directly involved in achieving the objectives of the organization.

The line organisation structure is given below:

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Advantages of Line Organization:a. The line organization structure is very simple to understand and simple to operate.

b. Communication is fast and easy and feedback can be acted upon faster.

c. Responsibility is fixed and unified at each level and authority and accountability are clear-cut, hence each individual knows to whom he is responsible and who is or in truth responsible to him.

d. Since it is especially useful when the company is small in size, it provides for greater control and discipline in the organization.

e. It makes rapid decisions and effective coordination possible. So it is economic and effective.

f. The people in line type of organization get to know each other better and tend to feel close to each other.

g. The system is capable of adjusting itself to changing conditions for the simple reason that each executive has sole responsibility in his own sphere.

Disadvantages of Line Organization:a. It is a rigid and inflexible form of organization.

b. There is a tendency for line authority to become dictatorial.

c. It overloads the executive with pressing activities so that long-range planning and policy formulation are often neglected.,

d. There is no provision for specialists and specialization, which is essential for growth and optimisation.

e. Different departments may be much interested in their self-interests, rather than overall organizational interests and welfare.

f. It is likely to encourage nepotism.

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g. It does not provide any means by which a good worker may be rewarded and a bad one punished.

Type # 2. Line and Staff Organization:This type of organization structure is in large enterprises. The functional specialists are added to the line in line and staff organization. Mere, staff is basically advisory in nature and usually does not possess any command authority over line managers. Allen has defined line and staff organization as follows.

“Line functions are those which have direct responsibility for accomplishing the objectives of the enterprises and staff refers to those elements of the organization that help the line to work most effectively in accomplishing the primary objectives of the enterprises.”

In the line and staff organisation, staffs assist the line managers in their duties in order to achieve the high performance. So, in an organization which has the production of textiles, the production manager, marketing manager and the finance manager may be treated as line executives, and the department headed by them may be called line departments

On the other hand, the personnel manager who deal with the recruitment, training and placement of workers, the quality control manager who ensure the quality of products and the public relations manager are the executives who perform staff functions.

Here, it is better to see the type of staff, which may be in an organization.

Type of Staff:The staff organizations mentioned above all has in common the fact that they are auxiliary to the main functions of the business. There are, however, different types of staff.

The three main divisions may be listed as:1. Personal Staff.

2. Specialized Staff.

3. General Staff.

1. Personal Staff:Personal staff consists of a personal assistant or adviser attached to the line executive at any level. His main function is to aid and advise the line executive as also to perform any other work assigned to him.

In business, the personal staffs is typified by the private secretary, who may keep the executive’s personal check book, buy his Christmas presents and arrange his appointments. General or business executives are given personal staff assistants on the same theory. Their time is too valuable to be spent in handling the details of daily living.

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2. Specialised Staff:The specialised staff have expert knowledge in the specific fields. The specialised staff are those that handle the specialised functions. For example, accounting, personnel, engineering and research. It is now impossible for one man to familiarise himself with all the various specialities needed in the modern large business.

Hence the general or the company president, and perhaps the department head, is provided with experts in each Field to counsel him on the various specialise staff could serve in any of the following capacities:a. Advisory Capacity.

b. Service Capacity.

c. Control Capacity.

a. Advisory Capacity:Its purpose is to render specialised advice and assistance to management while needed. Some typical areas covered by advisory staff is legal, public relations and economic development areas.

b. Service Capacity:This group provides a service, which is useful to the organisation as a whole and not to any specific division or function. An example would be the personnel department serving the enterprises by procuring and training the needed personnel for all departments. Other areas of service include research and development, purchasing, statistical analysis, insurance problems etc.

c. Control Capacity:This includes quality control staff that may have the authority to control the quality and enforce standards.

3. General Staff:Any decision that cuts across departmental lines must be made by the Chief Executive. It cannot be delegated to the head of a specialised staff group or to a line department head, since other department heads will naturally resent interference in their department heads will naturally resent interference in their department by someone who is in no way their superior.

A typical case would be a change in the organisation structure of the company as a whole: the combination of two departments under a single head, for example or the organisation of a new top-level department.

It is with these functional that cannot be delegated that the general staff personnel can provide assistance and save the time of the top man. True, the chief cannot delegate any one of these functions to a general staff person, but he can often delegate parts of each of them.

The title of the general staff person is most often “assistance to” the company president, or other executive.

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A staff member may serve as a coach, diagnostician, policy planner, coordinator, trainer, strategist etc.

A line and staff organisation chart is given below:

Advantages of Line and Staff Organisation:a. Line officers can concentrate mainly on the doing function as the work of planning and investigation is performed by the staff. Specialisation provides for experts advice and efficiency in management.

b. Since the organisation comprises line and staff functions, decisions can be taken easily.

c. The staff officers supply complete factual data to the line officers covering activity within and without their own units. This will help to greater co-ordination.

d. It provides an adequate opportunity for the advancement of workers.

e. The staff services provides a training ground for the different positions.

f. Adequate organisation a balance among the various activities can be attained easily.

g. The system is flexible for new activities may be undertaken by the staff without forcing early adjustments of line arrangements.

h. Staff specialists are conceptually oriented towards looking ahead and have the time to do programme and strategic planning and analyse the possible effects of expected future events.

Disadvantages of Line and Staff Organisation:

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a. Confusion and conflict may arise between line and staff. Because the allocation of authority and responsibility is not clear and members of the lower levels may be confused by various line orders and staff advices.

b. Staff generally advise to the lines, but line decides and acts. Therefore the staffs often feel powerless.

c. Too much reliance on staff officers may not be beneficial to the business because line officials may lose much of their judgment and imitative.

d. Normally, staff employees have specialised knowledge and expert. Line makes the final decisions, even though staff give their suggestions. Staff officers, therefore, may be resented.

e. Staff officers are much educated so their ideas may be more theoretical and academic rather than practical.

f. Although expert advice is available it reaches the workers through the managers. Here it is liable to create a greater deal of misunderstanding and misinterpretation.

g. Since staff specialists demand higher payments, it is expensive.

h. The staff are unable to carry out its plan or recommendations because of lack of authority. So they become ineffective sometimes, it will make them careless and indifferent towards their jobs.

i. Since the line are performed, with the advise provided by the staff, if things go right then the staff takes the credit and if things go wrong then the line get the blame for it.

PROJECT ORGANISATION STRUCTURE

This organisational structure are temporarily formed for specific projects for a specific period of time, for the project of achieving the goal of developing new product, the specialists from different functional departments such as production, engineering, quality control, marketing research etc., will be drawn to work together. These specialists go back to their respective duties as soon as the project is completed.

Really, the project organisation is set-up with the object of overcoming the major weakness of the functional organisation, such as absence of unity of command, delay in decision-making, and lack of coordination.

The project organization chart may be shown as follows:

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Advantages of Project Organisation:a. It is a remarkable illustration of relationship between environment, strategy and structure.

b. The grouping of activities on the basis of each project results in introduction of new authority patterns.

c. Since the specialists from different departments is drawn to work together under the project organisation it helps to coordination.

d. It makes for meaningful control and fixation of individual responsibility.

Disadvantages of Project Organisation:a. The uncertainty may be attributed to the diverse backgrounds of the professional who are deputed to the project.

b. The project manager finds it difficult to motivate and control the staff in a traditional way in the absence of well-defined areas of responsibility lines of communication and criteria to judge performance.

c. Delay in completion of the project may occur.

d. Effective project management may also be hindered by the top management who may not be wholly are of the problems at the project centre.

MATRIX ORGANISATION STRUCTURE

According to Stanley Davis and Paul Lawrence matrix organisation is “any organisation that employs a multiple command system that includes not only the multiple command structure, but also related support mechanism and an associated organisational culture and behaviour pattern.”

A matrix organisation, also referred to as the “multiple command system” has two chains of command. One chain of command is functional in which the flow of authority is vertical.

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The second chain is horizontal depicted by a project team, which is led by the project, or group manager who is an expert in his team’s assigned area of specialisation.

Since the matrix structure integrates the efforts of functional and project authority, the vertical and horizontal lines of authority are combination of the authority flows both down and across. The matrix form of organisation is given below.

Advantages of Matrix Organisation:1. Since there is both vertical and horizontal communication it increases the coordination and this coordination leads to greater and more effective control over operations.

2. Since the matrix organisation is handling a number of projects, available resources will be used fully.

3. It focuses the organisational resources on the specified projects, thus enabling better planning and control.

4. It is highly flexible as regards adherence to rules, procedures etc. Here experience is the best guide to establishing rules and procedures.

5. As any department or division has to harness its effort towards accomplishment of a single project, employees are effectively motivated.

Disadvantages of Matrix Organisation:1. Since, there is more than one supervisor for each worker, it causes confusion and conflicts and reduce effective control.

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2. There is continuous communication both vertically as well horizontally, which increases paper work and costs.

3. It is difficult to achieve a balance below on the projects technical and administrative aspects.

CONCEPT OF CENTRALISATION

Centralization refers to the process in which activities involving planning and decision-making within an organization are concentrated to a specific leader or location. In a centralized organization, the decision-making powers are retained in the head office, and all other offices receive commands from the main office. The executives and specialists who make critical decisions are based in the head office.

Similarly, in a centralized government structure, the decision-making authority is concentrated at the top, and all other lower levels follow the directions coming from the top of the organization structure.

CONCEPT OF DECENTRALISATION

Decentralisation can be viewed as an extension of delegation.

When a part of the work is entrusted to others, it is known as delegation. Decentralisation extends to the lowest level of the organisation.

A few definitions are given below:1. “Decentralisation refers to tire systematic effort to delegate to the lowest levels all authority except that which can only be exercised at central points.” —Louis A. Allen

2. “Decentralisation means the division of a group of functions and activities into relatively autonomous units with overall authority and responsibility for their operation delegate.’—Earl. P. Strong

3. “Decentralisation is simply a matter of dividing up the managerial work and assigning specific duties to the various executive skills.”

—Newman, summer and Wairen

Thus, decentralisation is concerned with the decentralisation of decision-making authority to the lower levels in managerial hierarchy.

CONCEPT OF SPAN OF CONTROL

Span of Control means the number of subordinates that can be managed efficiently and effectively by a superior in an organization. It suggests how the relations are designed between a superior and a subordinate in an organization.

Span of control is of two types:

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1. Narrow span of control: Narrow Span of control means a single manager or supervisor oversees few subordinates. This gives rise to a tall organizational structure.

Wide span of control: Wide span of control means a single manager or supervisor oversees a large number of subordinates. This gives rise to a flat organizational structure.

CONCEPT OF AUTHORITY

Authority is the right to command. It is the discretion power vested with a manager to use the organizational resources. Managers acquire authority by virtue of the rank or title associated with their position. Authority is granted to the individuals in a formal way in the organization. It flows from the top to down in the organization structure.

CONCEPT OF RESPONSIBILITY

Responsibility, on the other hand is the obligation to perform the tasks and accounts for their satisfactory completion. It is implied that an individual is expected to fulfill certain job requirements when he or she accepts a position in the organization. In other words, the individual is answerable for the results of the task to be performed. In contrast to authority, responsibility of an individual in the organization is always upwards, that is, the subordinate is responsible to his or her superior.

CONCEPT OF DELEGATION OF AUTHORITY

Delegation is the process by which authority is granted to a subordinate by his superior. But for delegation of authority, organizations would remain forever small. Delegation is the only solution to cope with the increasing work load of managers as the organization grows. Because of the constraints of time and ability, a manager cannot perform all the tasks himself. Therefore, he delegates certain of the tasks to the subordinate and gets them done.

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UNIT-III

STAFFINGMeaning of StaffingThe term ‘Staffing’ relates to the recruitment, selection, development, training and compensation of the managerial personnel. Staffing, like all other managerial functions, is the duty which the apex management performs at all times. In a newly created enterprise, the staffing would come as a. third step—next to planning and organizing—but in a going enterprise the staffing process is continuous.

In order to define and clarify the group of employees included in the staffing concept, it must be stated that the staffing function is concerned with the placement, growth and development of all of those members of the organization whose function it is to get things done through one effort of other individuals.

This definition includes all levels of management because those who will occupy positions in the top two or three levels of management fifteen or twenty years from now are likely to be found in the lower levels today.

Definition of Staffing

“The managerial function of staffing involves manning the organisational structure through effective and proper selection, appraisal, and development of personnel to fill the roles designed into the structure.” — Koontz and O’Donnell

Factors affecting Staffing: Staffing is basically a dynamic process and it is affected by various external and internal factors.External Factors:There are various external factors that affect the staffing process and organization has no control over these factors.Nature of competition for Human Resources: -In India there is a cut throat competition among organization for hiring managerial talents both fresh and experienced, computer professionals etc. Companies are making campus recruitments and students from reputed institutes like IIMs are being placed on very high packages. Companies are amending changes to retain their good employees and offering a good working environment and salaries. Legal factors: -There are various legal provisions which affect the staffing policies of an organization. Various acts which provide restrictions to free recruitment are Child Labour Act 1986, Employment Exchange (compulsory notification of

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vacancies) Act 1959and Mines Act 1952. Also some provisions regarding compulsory employment of certain categories like OBC, SC/ST affects the staffing policies of an organization.Socio-culture Factors: -Various socio-culture factors affect the staffing process due to which certain jobs are to be given to certain categories of people like our culture prevent the women to be employed on in manufacturing operations involving physical exertion. External influences:-There are various other elements which exert pressure on organization like political pressure to employ local people or pressure from business contacts.Internal Factors: Size of Organization: -Small organization cannot have same staffing practices which a large organization may have; it may not be able to attract highly talented staff. Even if it tries to do so it may increase the staffing cost. Organizational Business Plan: -Organizational business plan directly affect the staffing function because it determines the type of personal that may be required in future. On the basis of business plan growing organization may need more staff in the future and declining organization will have to shun out its staff and stagnating organization will work for retaining its staff. Staffing strategies may be different for these organizations.Organizational Image: -Organization image also affects the staffing practices. Organizational image depends upon facilities to staff for training and development promotional policies, working conditions and compensation, incentives etc. if all these factors are positive then organization will attract more candidates

DIRECTING

Concept

Directing is the heart of management function. All other functions of management such as planning, organizing, and staffing have no importance without directing. Leadership, motivation, supervision, communication are various aspects of directing. Let us study the importance and principles of directing.

Directing refers to a process or technique of instructing, guiding, inspiring, counselling, overseeing and leading people towards the accomplishment of organizational goals. It is a continuous managerial process that goes on throughout the life of the organization.

Principles

1. Maximum Individual Contribution

One of the main principles of directing is the contribution of individuals. Management should adopt such directing policies that motivate the employees to contribute their maximum potential for the attainment of organizational goals.

2. Harmony of Objectives

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Sometimes there is a conflict between the organizational objectives and individual objectives. For example, the organization wants profits to increase and to retain its major share, whereas, the employees may perceive that they should get a major share as a bonus as they have worked really hard for it.

Here, directing has an important role to play in establishing harmony and coordination between the objectives of both the parties.

3. Unity of Command

This principle states that a subordinate should receive instructions from only one superior at a time. If he receives instructions from more than one superiors at the same time, it will create confusion, conflict, and disorder in the organization and also he will not be able to prioritize his work.

4. Appropriate Direction Technique

Among the principles of directing, this one states that appropriate direction techniques should be used to supervise, lead, communicate and motivate the employees based on their needs, capabilities, attitudes and other situational variables.

5. Managerial Communication

According to this principle, it should be seen that the instructions are clearly conveyed to the employees and it should be ensured that they have understood the same meaning as was intended to be communicated.

6. Use of Informal Organization

Within every formal organization, there exists an informal group or organization. The manager should identify those groups and use them to communicate information. There should be a free flow of information among the seniors and the subordinates as an effective exchange of information are really important for the growth of an organization.

7. Leadership

Managers should possess a good leadership quality to influence the subordinates and make them work according to their wish. It is one of the important principles of directing.

8. Follow Through

As per this principle, managers are required to monitor the extent to which the policies, procedures, and instructions are followed by the subordinates. If there is any problem in implementation, then the suitable modifications can be made.

Importance

1. Initiates Action

Each and every action in an organization is initiated only through directing. The managers direct the subordinates about what to do, how to do when to do and also see to it that their instructions are properly followed.

2. Integrates Efforts

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Directing integrates the efforts of all the employees and departments through persuasive leadership and effective communication towards the accomplishment of organizational goals.

3. Motivates Employees

A manager identifies the potential and abilities of its subordinates and helps them to give their best. He also motivates them by offering them financial and non-financial incentives to improve their performance.

4. Provides Stability

Stability is significant in the growth of any organization. Effective directing develops co-operation and commitment among the employees and creates a balance among various departments and groups.

5. Coping up with the Changes

Employees have a tendency to resist any kind of change in the organization. But, adapting the environmental changes is necessary for the growth of the organization. A manager through motivation, proper communication and leadership can make the employees understand the nature and contents of change and also the positive aftermaths of the change. This will help in a smooth adaptation of the changes without any friction between the management and employees.

6. Effective Utilization of Resources

It involves defining the duties and responsibilities of every subordinate clearly thereby avoiding wastages, duplication of efforts, etc. and utilizing the resources of men, machine, materials, and money in the maximum possible way. It helps in reducing costs and increasing profits.

Coordination

Concept of Coordination

Coordination is the function of management which ensures that different departments and groups work in sync. Therefore, there is unity of action among the employees, groups, and departments.

It also brings harmony in carrying out the different tasks and activities to achieve the organization’s objectives efficiently. Coordination is an important aspect of any group effort. When an individual is working, there is no need for coordination.

Therefore, we can say that the coordination function is an orderly arrangement of efforts providing unity of action in pursuance of a common goal. In an organization, all the departments must operate a part of a cohesive unit to optimize performance.

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Coordination implies synchronization of various efforts of different departments to reduce conflict. Multiple departments usually perform the work for which an organization exists.

Therefore, synchronization between them is essential. Lacking coordination, departments might work in different directions or at different timings, creating chaos.

Definition

Mary Parker Follett – ‘The first test of a business administration should be whether you have a business with all its parts so coordinated, so moving together in their closely knit and adjusting activities, so linking, inter-locking, inter-relating, that they make a working unit that is not congenic of separate pieces, but a functional whole or integrated unit.‘

Importance

Here are some reasons which describe the importance of coordination in management:

Unity in Diversity

Every large organization has a large number of employees, each with different views or opinions, activities and background. Therefore, there are diverse activities in an organization. However, all these activities would not be highly effective in the absence of coordination. Hence, coordination is important for unity in diversity.

Unity of Direction

An organization needs to integrate the efforts and skills of different employees in order to achieve common objectives. Coordination also eliminates duplication of work leading to cost-efficient operations.

Functional Differentiation

An organization has many departments or sections performing different functions. All these functions are important for achieving the overall goals of the organization. If all departments work in isolation from the others, then they might not work in tandem. Therefore, coordination is essential for integrating the functions.

Lesser disputes

Many departments play an important role in helping the organization achieve its goals. They are also capable of assessing the nature and scope of work they perform. However, they are usually unaware of the importance of other department’s roles leading to disputes. Coordination can help solve such disputes.

Reconciliation of goals

All individuals have their own goals which are more important to them than the organization’s goals. Coordination helps to reconcile the employee’s goals with the departmental and organizational goals.

Differentiation and Integration

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Usually, activities of an organization are divided into two types of units – specialized and homogeneous. Also, to achieve group efforts, authority is delegated to different levels in the organization. Coordination facilitates this process.

Optimum Utilization of Resources

Primarily, coordination ensures that employees do not engage in cross-purpose work since it brings together the human and material resources of the organization. Therefore, there is less wastage of resources which helps the organization utilize them optimally.

Encouragement of team spirit

In an organization, there exist many conflicts between employees, departments, etc. Coordination encourages people and departments to work as one big team and achieve the common objectives of the organization. Therefore, it encourages team spirit.

MOTIVATION

Meaning:Motivation is the word derived from the word ’motive’ which means needs, desires, wants or drives within the individuals. It is the process of stimulating people to actions to accomplish the goals. In the work goal context the psychological factors stimulating the people’s behaviour can be -

desire for money success recognition job-satisfaction team work, etc

Motivation is an important factor which encourages persons to give their best performance and help in reaching enterprise goals. A strong positive motivation will enable the increased output of employees but a negative motivation will reduce their performance. A key element in personnel management is motivation.

According to Likert, “It is the core of management which shows that every human being gives him a sense of worth in face-to face groups which are most important to him….A supervisor should strive to treat individuals with dignity and a recognition of their personal worth.”

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Definition

Dubin has defined motivation as “the complex of forces starting and keeping a person at work in an organisation. Motivation is something that moves the person to action, and continues him in the course of action already initiated”. Motivation refers to the way a person in enthused at work to intensify his desire and willingness to use his energy for the achievement of organisational objectives.

According to Dalton E.McFarland, “Motivation refers to the way in which urges, drives, aspirations, striving or needs direct, control or explain the behaviour of human beings”. Motivation has close relationship with the behaviour of human beings. It explains how and why human behaviour is caused. Thus, motivation is a term which applies to the entire class of urges, derives, desires, needs and similar forces.

Theories of Motivation

Maslow’s Need Hierarchy Model

Self-actualization Needs

Esteem Needs

Social Needs

Security Needs

Physiological Needs

FIGURE - Maslow’s Need Hierarchy Model

Abraham Maslow has propounded this need hierarchy theory as early as in 1943. Maslow points out that human beings have divergent needs and they strive to fulfill those needs. The behaviour of an individual is determined by such needs.

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These needs range from biological needs at lower level to psychological needs at the highest level. Further, these needs arise in an order of hierarchy or priority such that lower level needs must be satisfied before higher level needs become important for motivation. Maslow postulates five basic needs arranged in an hierarchical fashion as follows:

The needs have been classified into the following in order:

1. Physiological needs- These are the basic needs of an individual which includes food, clothing, shelter, air, water, etc. These needs relate to the survival and maintenance of human life.

2. Safety needs- These needs are also important for human beings. Everybody wants job security, protection against danger, safety of property, etc.

3. Social needs- These needs emerge from society. Man is a social animal. These needs become important. For example- love, affection, belongingness, friendship, conversation, etc.

4. Esteem needs- These needs relate to desire for self-respect, recognition and respect from others.5. Self-actualization needs- These are the needs of the highest order and these needs are found in those person

whose previous four needs are satisfied. This will include need for social service, meditation.

Appraisal of Need Hierarchy Model

The need priority model may not apply at all times in all places. Surveys in European countries and Japan have shown that the model does not apply very well to their managers. Their degree of satisfaction of needs does not vary according to the need priority model. For example, workers in Spain and Belgium felt that their esteem needs are better satisfied than their security and social needs. Apparently, cultural differences are an important cause of these differences. Thus, need hierarchy may not follow the sequence postulated by Maslow.

Another important proposition that one need is satisfied at one time is also a doubtful validity. Man’s behaviour at any time mostly guided by multiplicity of motives. However, one or two motives in any situation may be more dominant, while others may be of secondary importance.

There are always some people in whom, for instance, need for self-esteem seems to be more prominent than that of love. There are also creative people in whom the drive for creativeness seems to be more important. In certain people, the level of operation may be permanently 197 lower. For instance, a person who has experienced chronic unemployment may continue to be satisfied for the rest of his life if only he can get enough food.

HERZBERG’S Two Factor theory of MOTIVATION

A significant development in motivation theory was distinction between motivational and maintenance factors in job situation. A research was conducted by Herzberg and his associates based on the interview of 200 engineers and accountants who worked for eleven different firms in Pittsburgh area. These men were asked to recall specific incidents in their experience which made them feel particularly bad about jobs. The findings of the research led to draw a distinction between what are called as ‘motivators’ and ‘hygiene factors’. To this group of engineers and accountants, the real motivators were opportunities to gain expertise and to handle more demanding assignments. Hygiene factors served to prevent loss of money and efficiency. Thus, hygiene factors provide no motivation to the employees, but the absence of these factors serves as dissatisfies.

Some job conditions operate primarily to dissatisfy employees. Their presence does not motivate employees in a strong way. Many of these factors are traditionally perceived by management as motivators, but the factors are really more potent as dissatisfiers. They are called maintenance factors in job because they are necessary to maintain a reasonable

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level of satisfaction among the employees. Their absence proves to be strong dissatisfiers. They are also known as ‘dissatisfiers’ or ‘hygienic factors’ because they support employees’ mental health. Another set of job conditions operates primarily to build strong motivation and high job satisfaction among the employees. These conditions are ‘Motivational Factors’. Herzberg’s maintenance and motivational factors have been shown in the table given below.

Leading to Dissatisfaction Leading to Satisfaction

Company policy Achievement

Supervision Recognition

Relationship w/Boss Work itself

Work conditions Responsibility

Salary Advancement

Relationship w/Peers Growth

Hygienic factors include such things as wages, fringe benefits, Physical conditions and overall company policy and administration. The presence of these factors at a satisfactory level prevents job dissatisfaction, but they do not provide motivation to the employees. So they are not considered as motivational factors, on the other hand, are essential for increasing the productivity of the employees. They are also known as satisfiers and include such factors as recognition, feeling of accomplishment and achievement, opportunity of advancement and potential for personal growth, responsibility and sense of job and individual importance, new experience and challenging work etc.

Comparison of Herzberg and Maslow Models

In fact, there is a great similarity between Herzberg’s and Maslow’s models. A close examination of Herzberg’s model indicates that some employees may have achieved a level of social and economic progress in the society and for them higher level needs of Maslow (esteem and self actualization) are the primary motivators. However, they still must satisfy the lower level needs for the maintenance of their current state. Thus, we can say that money might still be a motivator for operative employees and 199 for some managerial employees. Herzberg’s model adds to the Maslow’s need hierarchy model because it draws a distinction between the two groups of factors, namely, motivational and maintenance, and points out that the motivational factors are often derived from the job itself. Most of the maintenance factors come under comparatively lower order needs. In economically advanced countries, such needs of the employees are fulfilled and hence cease to be motivators.

As shown in the following diagram Maslow’s Physiological, security and social needs come under Herzberg’s maintenance factors whereas self fulfillment comes under motivating factors. It may further be noted that a part of esteem need comes under maintenance factor and another under motivational factors. The esteem needs are divided because there are some distinct differences between status per se and recognition. Status tends to be a function of position one occupies. This position may be gained through family ties or social pressures and so this may not be a

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reflection of personal achievement or recognition. Recognition is gained through competence and achievement. It is earned and granted by others. That is why status is classified with physiological, safety and social needs as a hygiene factor, while recognition is classified with esteem as a motivator

Importance of Motivation

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

1. Puts human resources into action

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.

2. Improves level of efficiency of employees

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-

a. Increase in productivity,b. Reducing cost of operations, andc. Improving overall efficiency.

3. Leads to achievement of organizational goals

The goals of an enterprise can be achieved only when the following factors take place

a. There is best possible utilization of resources,b. There is a co-operative work environment,c. The employees are goal-directed and they act in a purposive manner,d. Goals can be achieved if co-ordination and co-operation takes place simultaneously which can be

effectively done through motivation.4. Builds friendly relationship

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:

a. Monetary and non-monetary incentives,b. Promotion opportunities for employees,c. 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:

i. Effective co-operation which brings stability,

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ii. Industrial dispute and unrest in employees will reduce,iii. The employees will be adaptable to the changes and there will be no resistance to the change,iv. This will help in providing a smooth and sound concern in which individual interests will coincide with

the organizational interests,v. This will result in profit maximization through increased productivity.

2. Leads to stability of work force

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:

1. Motivation will help him achieve his personal goals.2. If an individual is motivated, he will have job satisfaction.3. Motivation will help in self-development of individual.4. An individual would always gain by working with a dynamic team.

Similarly, motivation is important to a business as:

1. The more motivated the employees are, the more empowered the team is.2. The more is the team work and individual employee contribution, more profitable and successful is the

business.3. During period of amendments, there will be more adaptability and creativity.4. Motivation will lead to an optimistic and challenging attitude at work place.

Leadership

What is Leadership

Leadership is a process by which an executive can direct, guide and influence the behavior and work of others towards accomplishment of specific goals in a given situation. Leadership is the ability of a manager to induce the subordinates to work with confidence and zeal.

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Leadership is the potential to influence behaviour of others. It is also defined as the capacity to influence a group towards the realization of a goal. Leaders are required to develop future visions, and to motivate the organizational members to want to achieve the visions.

According to Keith Davis, “Leadership is the ability to persuade others to seek defined objectives enthusiastically. It is the human factor which binds a group together and motivates it towards goals.”

Characteristics of Leadership

1. It is a inter-personal process in which a manager is into influencing and guiding workers towards attainment of goals.

2. It denotes a few qualities to be present in a person which includes intelligence, maturity and personality.3. It is a group process. It involves two or more people interacting with each other.4. A leader is involved in shaping and moulding the behaviour of the group towards accomplishment of

organizational goals.5. Leadership is situation bound. There is no best style of leadership. It all depends upon tackling with the

situations.

Qualities or Characteristics of a Leader

A leader has got multidimensional traits in him which makes him appealing and effective in behavior. The following are the requisites to be present in a good leader:

1. Physical appearance- A leader must have a pleasing appearance. Physique and health are very important for a good leader.

2. Vision and foresight- A leader cannot maintain influence unless he exhibits that he is forward looking. He has to visualize situations and thereby has to frame logical programmes.

3. Intelligence- A leader should be intelligent enough to examine problems and difficult situations. He should be analytical who weighs pros and cons and then summarizes the situation. Therefore, a positive bent of mind and mature outlook is very important.

4. Communicative skills- A leader must be able to communicate the policies and procedures clearly, precisely and effectively. This can be helpful in persuasion and stimulation.

5. Objective- A leader has to be having a fair outlook which is free from bias and which does not reflects his willingness towards a particular individual. He should develop his own opinion and should base his judgement on facts and logic.

6. Knowledge of work- A leader should be very precisely knowing the nature of work of his subordinates because it is then he can win the trust and confidence of his subordinates.

7. Sense of responsibility- Responsibility and accountability towards an individual’s work is very important to bring a sense of influence. A leader must have a sense of responsibility towards organizational goals because only then he can get maximum of capabilities exploited in a real sense. For this, he has to motivate himself and arouse and urge to give best of his abilities. Only then he can motivate the subordinates to the best.

8. Self-confidence and will-power- Confidence in himself is important to earn the confidence of the subordinates. He should be trustworthy and should handle the situations with full will power. (You can read more about Self-Confidence at : Self Confidence - Tips to be Confident and Eliminate Your Apprehensions).

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9. Humanist-This trait to be present in a leader is essential because he deals with human beings and is in personal contact with them. He has to handle the personal problems of his subordinates with great care and attention. Therefore, treating the human beings on humanitarian grounds is essential for building a congenial environment.

10. Empathy- It is an old adage “Stepping into the shoes of others”. This is very important because fair judgement and objectivity comes only then. A leader should understand the problems and complaints of employees and should also have a complete view of the needs and aspirations of the employees. This helps in improving human relations and personal contacts with the employees.

From the above qualities present in a leader, one can understand the scope of leadership and it’s importance for scope of business. A leader cannot have all traits at one time. But a few of them helps in achieving effective results.

Importance of Leadership

Leadership is an important function of management which helps to maximize efficiency and to achieve organizational goals. The following points justify the importance of leadership in a concern.

1. 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.

2. 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.

3. 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.

4. Creating confidence- Confidence is an important factor which can be achieved through expressing the work efforts to the subordinates, explaining them clearly their role and giving them guidelines to achieve the goals effectively. It is also important to hear the employees with regards to their complaints and problems.

5. Building morale- Morale denotes willing co-operation of the employees towards their work and getting them into confidence and winning their trust. A leader can be a morale booster by achieving full co-operation so that they perform with best of their abilities as they work to achieve goals.

6. Builds work environment- Management is getting things done from people. An efficient work environment helps in sound and stable growth. Therefore, human relations should be kept into mind by a leader. He should have personal contacts with employees and should listen to their problems and solve them. He should treat employees on humanitarian terms.

7. Co-ordination- Co-ordination can be achieved through reconciling personal interests with organizational goals. This synchronization can be achieved through proper and effective co-ordination which should be primary motive of a leader.

Leadership theories

TRAIT THEORY OF LEADERSHIP

The trait theory of leadership is an early assumption that leaders are born and due to this belief, those that possess the correct qualities and traits are better suited to leadership. This theory often identifies behavioural characteristics that are common in leaders.

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Trait theory of leadership is one of the first academic theories of leadership and attempts to answer why some people are good leaders and others are not.

In fact the theory can be traced back to the nineteenth century, whereby a man called Thomas Carlyle used such understanding to identify the talents, skills and characteristics of men who rose to power.

The trait theory of leadership is based on the characteristics of many leaders – both successful and unsuccessful – and is used to predict leadership effectiveness. The resulting lists of traits are then compared to those of potential leaders to assess their likelihood of success or failure. Once found, the theory is that these natural leaders can then be nurtured to become great leaders.

Key Characteristics

Some of the most common leadership traits identified, are:

Knowledge of the business

Initiative

Tenacity

Energy

Good cognitive skills and capable of using good judgement and decisions

Flexibility

Creativity

Charisma

Emotional intelligence

Drive and motivation to succeed

Confidence

Honesty and integrity

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Traditionally, the most ardent versions of trait theory see these “leadership characteristics” as innate, and as such, some people are seen to be ‘born leaders’, due to their psychological makeup.

Proponents to this theory, which is now considered largely out of date, believe that leadership development consists of identifying and measuring leadership qualities, screening potential leaders from non-leaders, and then training those with potential.

In fact, modern thinking suggests that the above traits are little more than characteristics, which although some people can possess them naturally, can be learned, and built into one’s behaviours and thinking, thus affecting their leadership potential.

Trait TheoryThe trait theory is based on the great man theory,

Like the great man theory,are the key to leadership success.

this theory assumes that the leader’s personal traits

Motivators

Need for Occupational

Achievement

Self-actualization

Power Over Others

High Financial Reward

Job Security

Personal Traits

Self-Assurance

Decisiveness

Masculinity/Famininity

Maturity

Working Class Affinity

Abilities

Supervising Ability

Intelligence

Initiative

Personality Traits

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Behavioral Theories of Leadership

Behavioral theories of leadership are classified as such because they focus on the study of specific behaviors of a leader. For behavioral theorists, a leader behavior is the best predictor of his leadership influences and as a result, is the best determinant of his or her leadership success.

This behavior-focused approach provides real marketing potential, as behaviors can be conditioned in a manner that one can have a specific response to specific stimuli. As a result, we have gone from the supposition that leaders are born, (Great Man Theory) through to the possibility that we can measure your leadership potential (Trait Theory) via psychometrics measurements and then to the point that anyone can be made a leader (Behavioral Theories) by teaching them the most appropriate behavioral response for any given situation. When a few of those situations are combined; you have a program that you can trademark and market! The The evolution of leadership: From Philosophy to Market article explores that question. On a side note: There are excellent leadership programs available to guide you on your leadership journey, just assure that the program you chose is complete.

There are two important Behavioral studies

(1) Ohio State University (1940s)

As leadership studies that were aimed at identifying the appropriate traits didn't yield any conclusive results, a group of people from Ohio State University developed a list of 150 statements from their generated responses that included 1,800 hundred statements. The list was designed to measure nine different behavioral leadership dimensions. The resulting questionnaire is now well-known as the LBDQ or the Leaders Behavior Description Questionnaire.

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As part of the study, the LBDQ was administered to various groups of individuals ranging from college students and their administrators, private companies including military personnel. One of the primary purposes of the study was to identify common leadership behaviors. After compiling and analyzing the results, the study led to the conclusion that there were two groups of behaviors that were strongly correlated. These were defined as Consideration (People Oriented behavioral Leaders) and Initiating Structure (Task Oriented Leaders).

Task oriented leaders

The task concerned leaders are focusing their behaviors on the organizational structure, the operating procedures (S.O.P.) and they like to keep control. Task-oriented leaders are still concern with their staff motivation; however it's not their main concern. They will favor behaviors that are in line with:

Initiating Organizing Clarifying Information Gathering

People oriented leaders

The people oriented leaders are focusing their behaviors on ensuring that the inner needs of the people are satisfied. Thus they will seek to motivate their staff through emphasizing the human relation. People oriented leaders still focus on the task and the results; they just achieve them through different means. Leaders with a people focus will have behaviors that are in line with:

Encouraging Observing Listening Coaching and Mentoring.

University of Michigan Studies

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A series of studies on leadership were done in Michigan University, starting in the 1950s. Under the general direction of Rensis Likert, the focus of the Michigan studies was to determine the principles and methods of leadership that led to productivity and job satisfaction. Two types of leadership behaviours were identified:

employee orientation (stress the human-relations aspect, employees are viewed as human beings with personal needs)

production orientation (stress on the technical and production aspects of the job, employees viewed as the means of getting the work done).

Leaders with an employee orientation showed genuine concern for interpersonal relations. Those with a production orientation focused on the task or technical aspects of the job.

The conclusion of the Michigan studies was that an employee orientation and general instead of close supervision yielded better results. Likert eventually developed four "systems" of management based on these studies; he advocated System 4 (the participative-group system, which was the most participatory set of leader behaviors) as resulting in the most positive outcomes

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. (See figure 1).

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The five resulting leadership styles are as follows:

1. 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. The leaders are termed ineffective wherein their action is merely aimed at preserving job and seniority.

2. Task management (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.

3. 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.

4. 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.

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5. 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.

Advantages of Blake and Mouton’s Managerial Grid

The Managerial or Leadership Grid is used to help managers analyze their own leadership styles through a technique known as grid training. This is done by administering a questionnaire that helps managers identify how they stand with respect to their concern for production and people. The training is aimed at basically helping leaders reach to the ideal state of 9, 9.

Limitations of Blake and Mouton’s Managerial Grid

The model ignores the importance of internal and external limits, matter and scenario. Also, there are some more aspects of leadership that can be covered but are not.

Controlling

What is Controlling?

Controlling consists of verifying whether everything occurs in confirmities with the plans adopted, instructions issued and principles established. Controlling ensures that there is effective and efficient utilization of organizational resources so as to achieve the planned goals. Controlling measures the deviation of actual performance from the standard performance, discovers the causes of such deviations and helps in taking corrective actions

According to Brech, “Controlling is a systematic exercise which is called as a process of checking actual performance against the standards or plans with a view to ensure adequate progress and also recording such experience as is gained as a contribution to possible future needs.”

According to Donnell, “Just as a navigator continually takes reading to ensure whether he is relative to a planned action, so should a business manager continually take reading to assure himself that his enterprise is on right course.”

Controlling has got two basic purposes

1. It facilitates co-ordination2. It helps in planning

Process of Controlling

Controlling as a management function involves following steps:

1. Establishment of standards- Standards are the plans or the targets which have to be achieved in the course of business function. They can also be called as the criterions for judging the performance. Standards generally are classified into two-

a. Measurable or tangible - Those standards which can be measured and expressed are called as measurable standards. They can be in form of cost, output, expenditure, time, profit, etc.

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b. Non-measurable or intangible- There are standards which cannot be measured monetarily. For example- performance of a manager, deviation of workers, their attitudes towards a concern. These are called as intangible standards.

Controlling becomes easy through establishment of these standards because controlling is exercised on the basis of these standards.

2. Measurement of performance- The second major step in controlling is to measure the performance. Finding out deviations becomes easy through measuring the actual performance. Performance levels are sometimes easy to measure and sometimes difficult. Measurement of tangible standards is easy as it can be expressed in units, cost, money terms, etc. Quantitative measurement becomes difficult when performance of manager has to be measured. Performance of a manager cannot be measured in quantities. It can be measured only by-

a. Attitude of the workers,b. Their morale to work,c. The development in the attitudes regarding the physical environment, andd. Their communication with the superiors.

It is also sometimes done through various reports like weekly, monthly, quarterly, yearly reports.

3. Comparison of actual and standard performance- Comparison of actual performance with the planned targets is very important. Deviation can be defined as the gap between actual performance and the planned targets. The manager has to find out two things here- extent of deviation and cause of deviation. Extent of deviation means that the manager has to find out whether the deviation is positive or negative or whether the actual performance is in conformity with the planned performance. The managers have to exercise control by exception. He has to find out those deviations which are critical and important for business. Minor deviations have to be ignored. Major deviations like replacement of machinery, appointment of workers, quality of raw material, rate of profits, etc. should be looked upon consciously. Therefore it is said, “ If a manager controls everything, he ends up controlling nothing.” For example, if stationery charges increase by a minor 5 to 10%, it can be called as a minor deviation. On the other hand, if monthly production decreases continuously, it is called as major deviation.

Once the deviation is identified, a manager has to think about various cause which has led to deviation. The causes can be-

a. Erroneous planning,b. Co-ordination loosens,c. Implementation of plans is defective, andd. Supervision and communication is ineffective, etc.

4. Taking remedial actions- Once the causes and extent of deviations are known, the manager has to detect those errors and take remedial measures for it. There are two alternatives here-

a. Taking corrective measures for deviations which have occurred; and

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b. After taking the corrective measures, if the actual performance is not in conformity with plans, the manager can revise the targets. It is here the controlling process comes to an end. Follow up is an important step because it is only through taking corrective measures, a manager can exercise controlling.

Types of Control:Controls can be numerous in kind. These may be classified on the basis of (a) timing, (b) designing systems, (c) management levels, and (d) Responsibility

On the basis of timing:Control can focus on events before, during, or after a process. For example, a local automobile dealer can focus on activities before, during, or after sales of new cars. Such controls may be respectively called as Preventive, Detective, and Corrective.

On this basis the control may be:(i) Feed forward Control

(ii) Concurrent Control

(iii) Feedback Control

1. Feed forward Control:The objective of feed forward control or preliminary control is to anticipate the likely problems and to exercise control even before the activity has started or problem has occurred or been reported. It is future directed.

This kind of control is very popular in airlines. They go in for preventive maintenance activities to detect and prevent structural damage, which may result in disaster. These controls are evident in the selection and hiring of new employees. It helps in taking action beforehand.

In case of feedback control, one relies on historical data, which will come after the activity has been performed. This means information is late and the rectification is not possible. One can make correction only for future activities.

That means whatever wrong has been done is done, and it cannot be undone. Though, future-directed control is largely disregarded in practice, because managers have been excessively dependent on accounting and statistical data for the purpose of control. In the absence of any means of looking forward, reference to history is considered better than no reference at all.

However, the concept of feed forwarding has been applied now and then. One common way managers have practised it is through careful and repeated forecasts using the latest available information, comparing what is desired with the forecasts, and introducing program changes so that forecasts can be made more promising.

2. Concurrent Control:

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Concurrent control monitors ongoing employee activity to ensure consistency with quality standards takes place while an activity is on or in progress. It involves the regulation of ongoing activities that are part of transformation process to ensure that they conform to organizational standards.

The technique of direct supervision is the best-known form of concurrent control. Concurrent control is designed to ensure that employees’ activities produce the correct results and to correct the problems, if any, before they become costly.

In case of computer typing, if the spelling is wrong or construction is incorrect, the programme immediately alerts the user. Many manufacturing operations include devices that measure whether the items being produced meet quality standards.

Since concurrent control involves regulating ongoing tasks, it requires a complete understanding of the specific tasks involved and their relationship to the desired and product.

Concurrent control sometimes is called steering, screening or yes-no control, because it often involves checkpoints at which decisions are made about whether to continue progress, take corrective action, or stop work altogether on products or services.

3. Feedback Control:The control takes place after the job is over. Corrective action is taken after analysing variances with the planned standards at the end of the activity. It is also known as ‘post action control’, because feedback control is exercised after the event has taken place.

Such control is used when feed forward or concurrent is not possible or very costly; or when exact processes involved in performing a work is difficult to specify in advance.

The twin advantages of feedback control are that meaningful information is received with regard to planning efforts, and feedback control enhances employee motivation.

On the basis of designing Control Systems:Three approaches may be followed while designing control systems, viz., Market Control, Bureaucratic Control, and Clan Control. However, most organisations do not depend only on just one of them.

1. Market Control:Control is based upon market mechanisms of competitive activities in terms of price and market share. Different divisions are converted into profit centres and their performance is evaluated by segmental top line (turnover), bottom line (profit) and the market share.

Using market control will mean that the managers in future will allocate resources or create departments or other activities in line with the market forces.

2. Bureaucratic Control:Bureaucratic control focuses on authority, rule and regulations, procedures and policies. Most of the public sector units in India go in for bureaucratic control.

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If they do not go by the rulebook, the legislative committees and the ministries under whom they work will reprimand them. In a hospital no medicine can be used unless the prescription is there and it is recorded in the issue register, even if the patient may die in between.

3. Clan Control:The control systems are designed in a way that give way to shared vision, shared values, norms, traditions and beliefs, etc., part of the organisational culture.

It is not based upon hierarchical mechanisms, but work-related and performance measures. This kind of control is most suitable for the organisations which use team style of work groups and where technology changes very fast.

On the basis of Levels:People at different level have different planning responsibilities, so do they undertake controlling. On the basis of levels controls, can be categorised as Operational, Structural, Tactical, and Strategic.

1. Operational Control:Its focus remains upon the processes used by the organisation for transforming the inputs (resources) into outputs (products/services). Operational controls are used at the lower management. It is exercised almost every day. Quality control, financial controls are part of operational controls.

2. Structural Control:Are the different elements of organisation structure serving their intended aims? Is there overstaffing? Is the ratio of staff to line increasing? Necessary action is to be undertaken.

Two important forms of structural control can be bureaucratic control and clan control, about which we have already talked. Structural control is exercised by top and middle management.

3. Tactical Control:Since tactical control deals with the departmental objectives, the controls are largely exercised by middle management levels.

4. Strategic Control:Strategic controls are early warning systems. Strategic control is the process to determine whether the effectiveness of a corporate, business and functional strategies are successful in helping organisations to meet its goals. Strategic controls are exercised by top level management.

On the basis of Responsibility:Who has the responsibility of controlling? The responsibility may rest with the person executing the things or with the supervisor or manager. This way control may be internal and external.

Internal control permits highly motivated people to exercise self-discipline. External control means that the thread of control is in the hands of supervisor or manager and control is exercised through formal systems.

Characteristics of Effective Control

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Requirements of Effective Control System:A control system is not an automatic phenomenon but deliberately created. Though different organisations may design their control systems according to their unique and special characteristics or conditions, yet in designing a good and effective control system the following basic requirements must be kept in view:

1. Focus on Objectives and Needs:The effective control system should emphasise on attainment of organizational objectives. It should function in harmony with the needs of the enterprise. For example, the personnel department may use feed forward control for recruiting a new employee, and concurrent control for training.

At the shop level, control has to be easy, but more sophisticated and broad ranging controls may be developed for higher level managers. Thus, controls should be tailored to plans and positions.

2. Immediate Warning and Timely Action:Rapid reporting of variations is at the core of control. An ideal control system could detect, not create bottlenecks and report significant deviation as promptly as possible so that necessary corrective action may be taken well in time. This needs an efficient system of appraisal and timely flow of information.

3. Indicative, Suggestive as well as corrective:Controls should not only be able to point to the deviations, but they should also suggest corrective action that is supposed to check the recurrence of variations or problems in future.

Control is justified only if indicated or experienced deviations from plans are corrected through appropriate planning, organizing, staffing and directing. Control should also lead to making valuable forecasts to the managers so that they become aware of the problems likely to confront them in the future.

4. Understandable, Objective, and Economical:Controls should be simple and easy to understand, standards of performance are quantified to appear unbiased, and specific tools and techniques should be comprehensive, understandable, and economical for the managers.

They must know all the details and critical points in the control device as well as its usefulness. If developed and complex statistical and mathematical techniques are adopted, then proper training has to be imparted to managers.

Standards should be determined based on facts and participation. Effective control systems must answer questions such as, “How much does it cost?” “What will it save?” or “What are the returns on the investment?”

The benefits of controls should outweigh the costs. Expensive and elaborate control systems will not suit, for example to small enterprise.

5. Focus on Functions and Factors:Control should emphasise the functions, such as production, marketing, finance, human resources, etc and focus on four factors – quality, quantity, timely use and costs. Not one, but multiple controls should be adopted.

6. Strategic Points Control:

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Control should be selective and concentrate on key result areas of the company. Every detail or thing cannot and is not to be controlled in order to save time, cost and effort.

Certain strategic, critical or vital points must be identified along with the expectations at those points where failures cannot be tolerated and appropriate control devices should be designed and imposed at those stages.

Controls are applied where failure cannot be tolerated or where costs cannot exceed a certain amount. The critical points include all the areas of an organization’s operations that directly affect the success of its key operations.

7. Flexibility:Control must not become ends in themselves. It must be environment friendly and be able to make modifications or revisions necessitated by the rapidly changing and complex business environment. Flexibility in control system is generally achieved by the use of alternative plans or flexible budgets.

8. Attention to Human Factor:Excess control causes corruption. It should not arouse negative reactions but positive feelings among people through focus on work, not on people. The aim of control should be to create self-control and creativity among members through enmeshing it in the organisational culture. Employee involvement in the design of controls can increase acceptance.

9. Suitability:Controls have to be consistent with the organization structure, where the responsibility for action lies, position, competence, and needs of the individuals who have to interpret the control measures and exercise control. The higher the quality of managers and their subordinates, the less will be the need for indirect controls.

Management by Exception

Management by Exception is an employee empowerment and management style, policy or philosophy wherein managers intervene only when their employees fail to meet their performance standards or when things go wrong.

The idea behind it is that management's attention will be focused only on those areas in need of action

If the personnel are performing as expected, the manager will take no action.

MBE normally involves substantial delegation by the manager to his team.

MBE Using Example

The MBE is similar to the vital signs monitoring systems in hospital critical care units (ICUs).

When one of the patient's vital signs goes outside the range programmed into the machine, an alarm sounds and staff runs to the rescue.

If the machine is quiet, it's assumed that the patient is stable, and they will receive only regular staff attention.

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Advantages / Merits of MBE

Some advantages of MBE would include:

The process focuses management time and attention on the most critical variances, which should be a more efficient use of time.

The process allows staff to handle daily operations per the business plan independent of management; managers only step in when variances reach the threshold. This should give management more time for other functions, such as strategic planning.

Disadvantages / Demerits of MBE

Some disadvantages of MBE would include:

The process assumes the budget is well designed, and that there are no issues that need to be addressed if results match the budget.

The process assumes staff cannot handle variances; instead management must be brought in.

The process assumes that management's attention should be focused on 'mistakes'. When staff manages to the defined plan, nothing happens. When things vary, management swoops down to fix them. This can be very un-motivating to staff.

UNIT-IV

ORGANISATIONAL BEHAVIOUR

MEANING & DEFINITION

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Organizational Behaviour is concerned with the understanding, prediction and control of human behaviour in organizations. It focuses on the individuals, the groups and the organization and also on their interactional relationships. It is the study and application of knowledge about how people act with organizations. It is a human tool for human benefit. It applies broadly to the behaviour of people in all types of organizations. Wherever organizations are, there is a need to understand organizational behaviour. According to Fred Luthans, “Organisational behaviour is directly concerned with the understanding, production and control of human behaviour in organisations.”

NATURE

The nature/ characteristics of OB are as given below:

1. A Separate Field of Study and Not a Discipline Only:By definition, a discipline is an accepted science that is based on a theoretical foundation. But, O.B. has a multi- interdisciplinary orientation and is, thus, not based on a specific theoretical background. Therefore, it is better reasonable to call O.B. a separate field of study rather than a discipline only.2. An Interdisciplinary Approach:Organizational behaviour is essentially an interdisciplinary approach to study human behaviour at work. It tries to integrate the relevant knowledge drawn from related disciplines like psychology, sociology and anthropology to make them applicable for studying and analysing organizational behaviour.3. An Applied Science:The very nature of O.B. is applied. What O.B. basically does is the application of various researches to solve the organizational problems related to human behaviour. The basic line of difference between pure science and O.B. is that while the former concentrates of fundamental researches, the latter concentrates on applied researches. O.B. involves both applied research and its application in organizational analysis. Hence, O.B. can be called both science as well as art.4. A Normative Science:Organizational Behaviour is a normative science also. While the positive science discusses only cause effect relationship, O.B. prescribes how the findings of applied researches can be applied to socially accepted organizational goals. Thus, O.B. deals with what is accepted by individuals and society engaged in an organization. Yes, it is not that O.B. is not normative at all. In fact, O.B. is normative as well that is well underscored by the proliferation of management theories.5. A Humanistic and Optimistic Approach:Organizational Behaviour applies humanistic approach towards people working in the organization. It, deals with the thinking and feeling of human beings. O.B. is based on the belief that people have an innate desire to be independent, creative and productive. It also realizes that people working in the organization can and will actualise these potentials if they are given proper conditions and environment. Environment affects performance or workers working in an organization.6 A Total System Approach:The system approach is one that integrates all the variables, affecting organizational functioning. The systems approach has been developed by the behavioural scientists to analyse human behaviour in view of his/her socio-psychological framework. Man’s socio- psychological framework makes man a complex one and the systems approach tries to study his/her complexity and find solution to it.

IMPORTANCE OF ORGANIZATION BEHAVIOR/ WHY TO STUDY OB

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1. It builds better relationship by achieving, people, organizational, and social objectives.

2. It covers a wide array of human resource like Behavior, training and development, change management, leadership, teams etc.

3. It brings coordination which is the essence of management.

4. It improves goodwill of the organization.

5. It helps to achieve objectives quickly.

6. It makes optimum utilization of resources.

7. It facilitates motivation.

8. It leads to higher efficiency.

9. It improves relations in the organization.

10. It is multidisciplinary in the sense that applies different techniques, methods, and theories to evaluate the performances.

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PERSONALITY

Personality is known by the conduct, behavior, movements and everything else concerning the individual. Personality is derived from Latin word “Persona” which means mask. it was used by the actors to change their appearance, but in Roman times it was taken as the articular character itself. We can say that, Personality is not a fixed state but a dynamic totality which continuously changes due to relation with environment. The words of “Munn”: “Personality is the most characteristic integration of individuals, structure, modes of behavior, interests, abilities and aptitudes”.

Gordon Allport defines personality as : Personality is the dynamic organisation within the individual of those psycho-physical systems that determine his unique adjustment to his environment”. The Personality is the combination of activities whether internal or external. It can be said like as organisation of internal and external activities.

Nature of Personality

There are various characteristics which throw light on the nature of Personality. Let me understand some of them to you:

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Personality is a dynamic whole: The definition of Personality given by Allport reveals that the personality is the dynamic whole. The constituents of Personality are organised into units which are not static but active.

Personality measures behavior: Personality of an individual is more or less stable. It can be predicted by ones behavior.

Outcome interaction of heredity and environment: Most of the psychologists review that Personality is the net result of the interaction of heredity characters and environment factors. The growth and the development of physical, social, emotional and moral are affected by environmental factors.

Motive Force: There are many theories of motivation which contributes to the understanding of the dynamics of personality. Behavior is affected overall by motives, ego involvement, incentives, etc.

ATTITUDE

An attitude is a positive, negative, or mixed evaluation of an object that is expressed at some level of intensity. Our attitude can vary in strength along both positive affect, and with negative affect, with ambivalence or with apathy and indifference. It usually implies feelings that are either positive or negative.

It is an expression of a favorable or unfavorable evaluation of a person, place, thing or event.

These are fundamental determinants of our perceptions of, and actions toward all aspects of our social environment.

Attitudes involve a complex organization of evaluative beliefs, feelings, and tendencies toward certain actions.

How much we like or dislike something determines our behavior towards that thing.

Some examples of attitudes are- he has a positive attitude about the changes, she is friendly and has a good attitude, he was showing some attitude during practice today, so the coach benched him, I like my friends that means I am expressing my attitudes towards my friends, etc.

Definitions

Social psychologists use the term attitude differently.

Gordon Allport formulated the following definition: “An attitude is a mental and neural state of readiness, organized through experience, exerting a directive or dynamic influence upon the individual’s response to ill objects and situations with which it is related.”

Frank Freeman said, “An attitude is a dispositional readiness to respond to certain institutions, persons or objects in a consistent manner which has been learned and has become one’s typical mode of response.”

Nature of Attitude

Attitude are a complex combination of things we tend to call personality, beliefs, values, behaviors, and motivations. An attitude.

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An attitude exists in every person’s mind. It helps to define our identity, guide our actions, and influence how we judge people.

Although the feeling and belief components of attitude are internal to a person, we can view a person’s attitude from his or her resulting behavior.

Attitude helps us define how we see situations, as well as define how we behave toward the situation or object. Attitude provides us with internal cognitions or beliefs and thoughts about people and objects. Attitude cause us to behave in a particular way toward an object or person.

PERCEPTION

Perception is how people look at and understand the things. It is a unique interpretation of the situation rather than recoding of it. Perception is a complex cognitive process of understanding the world, sometimes not in its real form. Perception is a learning process and hence it differs from person to person. As a result, the same stimuli may produce different behaviours and responses. In managing the organizations, particularly in dealing with the people, managers should be able to understand the perceptions of the people. It is in this context, an attempt is made here to explain the perceptual process, factors influencing perceptions and managing the perceptions to the advantage of the organization.

Definition:

Perception is a process by which people regard, analyze, retrieve and react to any kind of information from the environment. For example, some people feel happy about earning money while others feel happy about spending money.

Nature of Perception: “Perception refers to the interpretation of sensory data. In other words, sensation involves detecting the presence of a stimulus whereas perception involves understanding what the stimulus means. For example, when we see something, the visual stimulus is the light energy reflected from the external world and the eye becomes the sensor. This visual image of the external thing becomes perception when it is interpreted in the visual cortex of the brain. Thus, visual perception refers to interpreting the image of the external world projected on the retina of the eye and constructing a model of the three dimensional world.”

From the above explanation it becomes clear that perception is something more than sensation. It correlates, integrates and comprehends diverse sensations and information from many organs of the body by means of which a person identifies things and objects, the sensations refer to.

Perception is determined by both physiological and psychological characteristics of the human being whereas sensation is conceived with only the physiological features. Thus, perception is not just what one sees with the eyes it is a much more complex process by which an individual selectively absorbs or assimilates the stimuli in the environment, cognitively organizes the perceived information in a specific fashion and then interprets the information to make an assessment about what is going on in one’s environment.

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Perception is a subjective process, therefore, different people may perceive the same environment differently based on what particular aspects of the situation they choose to selectively absorb, how they organize this information and the manner in which they interpret it to obtain a grasp of the situation.

Process of Perception

Perception is the process by which people select, organize, interpret and respond to information from the world around them. This information is obtained through the senses namely, seeing, hearing, touch, taste and smell. Perception may be defined as the process of receiving, selecting, organizing, interpreting, checking, and reacting to sensations. It is also defined as ‘a process by which individuals organize and interpret their sensory impressions in order to give meaning to their environments.’ The perceptional processes show that their functioning is affected by three variables – the objects perceived, the environment in which perception occurs, and the individual perceiving the objects.

Reception: In this process, a person receives the information through stimuli.

Selection: This is governed by two types of factors:

External factors: These are size, intensity, proximity, motion and novelty.

Internal factors: These are attitude, motives, experiences, interests and expectations.

Organization: It is the process by which we sort stimuli into a meaningful pattern. It involves the following:

Grouping: Assembling of stimuli on the grounds of similarity.

Proximity: This is the closeness of stimuli to one another that affects perception.

Closure: It is the ability to organize stimuli so that together they form a whole pattern.

Interpretation: It is the formation of an idea about the information that is sensed, selected and organized. It involves the following phenomena: primacy effect, selective perception, stereotyping, halo effect, projection and expectancy effect. They are the types of perceptual errors.

Primacy/ Recency Effect: The first impression is given the most important which is known as the primacy effect. Recency effect, on the other hand, is that human beings remember latest events more than the less recent ones.

Stereotyping: It is the effect caused by forming a certain belief about a category of stimuli and generalizing that notion to encounters with each member of that category. In reality, there is a difference between the perceived notion of each category and the actual traits of the members. It may affect the interview process in an organization.

Halo effect: It is the process of generalizing from a comprehensive analysis to a single attribute or trait. A negative halo effect is known as the reverse halo effect. It affects the performance appraisal of employees in a company.

Projection: It is a psychological defence mechanism which makes a person compare his negative traits with other people and conclude that they are better off than others. Perceptual checking minimizes the negative effects of projection.

Selective Perception: This means a person sees, feels or hears what he wants to and skips other information which are inconsistent to his view.

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Expectancy effect: It is the tendency of an individual to interpret any person or object based on how he expects the person or object to be in the first place. It is also called as Pygmalion effect.

Importance of PerceptionPerception is a subjective, active and creative process through which we assign meaning to sensory information to understand ourselves and others. It can be defined as our recognition and interpretation of sensory information. It also includes how we respond to the information.It is the process by which an organism detects and interprets information from the external world by means of the sensory receptors. It is our sensory experience of the world around us and involves both the recognition of environmental stimuli and actions in response to these stimuli.Through the perceptual process, we gain information about the properties and elements of the environment that are critical to our survival.Perception not only creates our experience of the world around us; it allows us to act within our environment.

1. Perception is very important in understanding human behavior because every person perceives the world and approaches life problems differently. Whatever we see or feel is not necessarily the same as it really is. When we buy something, it is not because it is the best, but because we take it to be the best.

2. If people behave on the basis of their perception, we can predict their behavior in the changed circumstances by understanding their present perception of the environment. One person may be viewing the facts in one way which may be different from the facts as seen by another viewer.

3. With the help of perception, the needs of various people can be determined, because people’s perception is influenced by their needs.

4. Perception is very important for the manager who wants to avoid making errors when dealing with people and events in the work setting. This problem is made more complicated by the fact that different people perceive the same situation differently. In order to deal with the subordinates effectively, the managers must understand their perceptions properly.

5. Perception can be important because it offers more than objective output; it ingests an observation and manufactures an altered reality enriched with previous experiences.

6. Perception builds character (not necessarily good or bad character) that defines different roles individuals fall into the clown, the hypocrite, the self-righteous, the victim, etc..

7. It is vitally important if we want to get along with others to try to see things from their perspective or walk in their shoes for a while. If we walk in their shoes we will gain a new perspective about things and in that understand the other and also can love and help the other more appropriately.

Errors in Perception / Barriers As seen above perception is the process of analyzing 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.Many times the prejudices in the individual, time of perception, unfavorable background, lack of clarity of stimulus, confusion, conflict in mind and such other factors are responsible for errors in perception.There are some errors in perception;

Illusion. Hallucination. Halo Effect. Stereotyping. Similarity. Horn Effect. Contrast.

Illusion

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The illusion is a false perception. Here the person will mistake a stimulus and perceive it wrongly.For example, in the dark, a rope is mistaken as a snake or vice versa. The voice of an unknown person is mistaken as a friend’s voice. A person standing at a distance who is not known may be perceived as a known person.HallucinationSometimes we come across instances where the individual perceives some stimulus, even when it is not present.This phenomenon is known as a hallucination. The person may see an object, person, etc. or he may listen to some voice though there are no objects and sounds in reality.Selective PerceptionSelective perception means the situation when people selectively interpret what they see on the basis of their interests, background, experience, and attitudes.It means any characteristics that make a person, object, or event stand out will increase the probability that it will be perceived.Because it is impossible for us to assimilate everything we see, only certain stimuli can be taken in.Halo EffectThe individual is evaluated on the basis of perceived positive quality, feature or trait. When we draw a general impression about an individual on the basis of a single characteristic, such as intelligence, sociability, or appearance, a halo effect is operating.In other words, this is the tendency to rate a man uniformly high or low in other traits if he is extraordinarily high or low in one particular trait: If a worker has few absences, his supervisor might give him a high rating in all other areas of work.StereotypingPeople usually can fall into at least one general category based on physical or behavioral traits then they will be evaluated. 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.or example, a boss might assume that a worker from a Middle East country is lazy and cannot meet performance objectives, even if the worker tried his best.SimilarityOften, people tend to seek out and rate more positively those who are similar to themselves. This tendency to approve of similarity may cause evaluators to give better ratings to employees who exhibit the same interests, work methods, points of view or standards.Horn EffectWhen the individual is completely evaluated on the basis of a negative quality or feature perceived. This results in an overall lower rating than an acceptable rate.He is not formally dressed up in the office, that’s why he may be casual at work too.ContrastThe tendency to rate people relative to other people rather than to the individual performance he or she is doing. Rather will evaluate an employee by comparing that employee’s performance with other employees.In the early 20th Century, Wilhelm Wundt identified contrast as a fundamental principle of perception, and since then the effect has been confirmed in many different areas.These effects shape not only visual qualities like color and brightness but other kinds of perception, including how heavy an object feels. One experiment found that thinking of the name “Hitler” led to subjects rating a person as more hostile.Basically, we use the above shortcuts when we judge others. Perceiving and interpreting what others do is burdensome. As a result, individuals develop techniques for making the task more manageable.These techniques are frequently valuable-they allow us to make accurate perceptions rapidly and provide valid data for making projections. But sometimes it also creates problems.Because firstly, we have said that these are the shortcuts.In these ways, we can judge others in a short period of time but sometimes we mistakenly judge others by these shortcuts.

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UNIT-V

ORGANISATIONAL CULTURE

Organisational culture is the set of important understandings, such as norms, values, attitudes, and beliefs, shared by organisational members. The essential core of organisational culture is system of shared meaning among members. Organisational climate has strong impact on the performance of the organisation. It has basic elements of culture and they are artifacts, espoused values and basic assumptions. It is expressed in terms of norms, values, attitudes and beliefs shared by organisational members. Organisational culture has its key functions and they include sense of identity, enhancement of commitment and reinforcement of behaviour.

The primary nature / characteristics of an organisational culture are as follows: -

1. Innovation and Risk Taking: It can be described as the degree or extent to which employees are encouraged to take innovative steps and calculated risk.

2. Attention to Detail: It can be described as degree or extent to which employees are expected to pay attention to details.

3. Outcome Orientation: It can be described as the degree or extent to which management focuses outcome rather than on process to achieve outcome.

4. People Orientation: It can be described as the degree or extent to which management gives attention to effect of decisions on people working in the organisation and on its shareholders.

5. Team Orientation: It can be described as the degree or extent to which works are organised around team rather than individuals.

6. Aggressiveness: It can be described as the degree or extent to which people are aggressive or competitive rather than unconcerned or relaxed.

7. Stability: It can be described as the degree or extent to which maintaining status quo is emphasized in contrast to growth.

8. Individual Autonomy: It can be described as the degree or extent of responsibility, independence, and opportunities for exercising initiative that individuals in an organisation have.

9. Structure: It can be described as the degree or extent of rules and regulations and the amount of direct supervision that is used to supervise and control behaviour.

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10. Support: It can be described as the degree or extent of assistance and warmth managers provide for their subordinates.

Importance of Organizational Culture

Culture plays a very significant role in any organization by communicating information about the overall acceptable and unacceptable behavior. Culture communicates whether the organization expects its managers to be aggressive or conservative in decisions-making, generous or moderate in supporting social causes and ruthless or kind in competitive dealings.

Some organizations have clear, strong and well-defined culture whereas: others have ambiguous, weak and poorly defined cultures. Most managers agree that a strong and clear culture is preferable to weak and vague culture because it helps to provide a common frame of reference for managerial decision-making and a wide variety of other organizational activities.

An organizational culture generally lakes shape over time and is often deeply influenced by the values of the organizational founders. As organizational culture evolves, various symbols, stories, heroes, slogans and ceremonies also come into being. These, then, serve to maintain and perpetuate the culture through subsequent generations of employees.

The values of an organization’s culture are strongly influenced by the values of its founder and top managers. People are often attracted to a company because they share its founder’s values, and many organizations select only such people for employment. Hence the cultures of different organizations tend to become more distinct and different over time.

ORGANISATIONAL CHANGE

Organizational Change looks both at the process in which a company or any organization changes its operational methods, technologies, organizational structure, whole structure, or strategies, as well as what effects these changes have on it. Organizational change usually happens in response to – or as a result of – external or internal pressures.

It is all about reviewing and modifying structures – specifically management structures – and business processes.

Small commercial enterprises need to adapt to survive against larger competitors. They also need to learn to thrive in that environment. Large rivals need to adapt rapidly when a smaller, innovative competitor comes onto the scene.

To avoid falling behind, or to remain a step ahead of its rivals, a business must seek out ways to operate more efficiently. It must also strive to operate more cost effectively.

Nature of Organizational Change: The term change refers to an alteration in a system whether physical, biological, or social. Thus organizational change is the alteration of work environment in organization. It implies a new equilibrium between different components of the organization- technology, structural, arrangement, job design, and people. Thus organizational change may have following features:

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When change occurs in any part of the organization, it disturbs the old equilibrium necessitating the development of the a new equilibrium. The type of new equilibrium depends on the degree of change and its impact on the organization.

Any change may affect the whole organization; some parts of the organization may be affected more, others less; some parts are affected directly, others indirectly.

Organizational change is a continuous process. However, some changes which are of minor type, may be absorbed by the existing equilibrium; others, which are major ones may require special change efforts.

Importance of Organisational Change

Build up Competition:

Change can be big or small, easy or complex in an organization. Change does not necessarily indicate a major transformation every time. But it can seriously help to build competition, which can help organizations progress and develop themselves. Without change, organizations would struggle to lift up themselves to face the competition put forward by their competitors. Example- When a particular organization changes its way of working and if it attracts more customers, the neighboring competitor will definitely observe the same and would try to bring a change in his usual form of working. Thus, here change plays a very positive role in building up competition which leads to a desire among organizations to develop themselves more than their competitors.

Bring Technological Advancement:

Technology plays a vital role in development of an organization. Change that results from the adoption of new technology is common in most organizations and while it can be disruptive at first, ultimately the change tends to increase productivity and service. To beat the competition, organizations can make use of new technologies. The same, old, obsolete ways of doing things would not work out when the competitors would be moving fast forward with new technologies. It also enables employees to adopt the new technology and indirectly helps in growth of organization. For Example Toyota – the company to emulate in the automobile industry, it has emerged to become one of the most successful organizations in terms of establishing change management.

Develop Satisfied Customers:

Adopting change in organizations can create a certain extent of dissatisfaction among employees and also among customers. But, once change brings in a favorable effect, customers and employees start accepting it. Eventually this change brings satisfied customers which inturn acts positively for customers. As always said, satisfied customer is a boon for every organization. Just a mere tweak in the strategy can do wonders for you. The most famous example being Google – The Google experience is a classic example of a company committed to wowing its customers based on consistent quality and constant innovation over the years.

Eventually, change plays a very positive role in building up competition which leads to a desire among organizations to develop themselves more than their competitors. Also change is an evitable, unavoidable part of any organization. Every organization strives to change and it eventually leads to business excellence.

ORGANISATIONAL CONFLICT

Organisational conflict is a disagreement between two or more organisation members or groups arising from the fact that they must share scarce resources or work activities and/or from the fact that they have different statuses, goals, values or perceptions.

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Organisation members or sub- units in disagreement, attempt to have their own cause or point of view prevail over that of others. Conflicts may be at individual level, group level and at organisational level. Conflicts affect the work efficiency of the individual and of the group; as a result productivity is reduced.

Characteristics of Conflict:1. Conflict is a Process:Conflict occurs in ‘layers’. First layer is always misunderstanding. The other layers are differences of values, differences of viewpoint, differences of interest, and interpersonal differences. It is also called a process because it begins with one party perceiving the other to oppose or negatively affect its interests and ends with competing, collaborating, compromising or avoiding.

2. Conflict is Inevitable:Conflict exists everywhere. No two persons are the same. Hence they may have individual differences. And the differences may be because of values or otherwise, lead to conflict. Although inevitable, conflict can be minimized, diverted and/or resolved. Conflict develops because we are dealing with people’s lives, jobs, children, pride, self-concept, ego and sense of mission. Conflict is inevitable and often good, for example, good teams always go through a “form, storm, norm and perform” period.

3. Conflict is a Normal Part of Life:Individuals, groups, and organisations have unlimited needs and different values but limited resources. Thus, this incompatibility is bound to lead to conflicts. The conflict is not a problem, but if it is poorly managed then it becomes a problem.

4. Perception:It must be perceived by the parties to it, otherwise it does not exist. In interpersonal interaction, perception is more important than reality. What we perceive and think affects our behaviour, attitudes, and communication.

5. Opposition:One party to the conflict must be perceiving or doing something the other party does not like or want.

6. Interdependence and Interaction:There must be some kind of real or perceived interdependence. Without interdependence there can be no interaction. Conflict occurs only when some kind of interaction takes place.

7. Everyone is inflicted with Conflict:Conflict may occur within an individual, between two or more individuals, groups or between organisations.

8. Conflict is not Unidimensional:

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It comes into different ways in accordance with degree of seriousness and capacity. At times, it may improve even a difficult situation.

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