Introduction to management

Part I - Nature and Scope of Management

1. What is Management?
There is no definition of management every one agrees upon. There is no universally accepted
definition of management.
There are almost as many definitions of management as there are books on the subject. However,
most definitions of management do share a common idea –
Management is concerned with the accomplishment of objectives through the efforts of other
people. The various definitions of management by different writers are outlined and analyzed
here under:
 Management is the development of people and not the directions of things---- Management is
personnel administration. (Lawrence A. Apply.)
 Management is simply the process of decision-making and control over the actions of human
beings for the express purpose of attaining pre-determined goals.( Stanley Vance).
 Management is the function of executive leadership anywhere. (R.C Davis).
 Management is that function of an enterprise, which concerns itself with the direction &
control of various activities to attain the business objective. Management is essentially an
executive function; it deals particularly with the active direction of the Human effort. (William
Spreigel)
 Management is concerned with seeing that the jobs get done: its tasks all center on planning
and guiding the operations that are going on in the enterprise.( E.F.L Brech.)
Appley – regards Personnel Management as coterminous with Management.
Stanley Vance Views decision-making and control as the only functions of management.
Davis & Spreigel – consider leadership as the only managerial function
Brech: According to him planning and guiding constitute management.
* All take a partial view of Management.
 Peter Drucker: takes a more pragmatic view of Management. According to him Management
is what is does because “Management is an organ; an organ can be described and defined only
through their function.

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  Newman and summer: regard management as a social process. According to them, it is a
process, as it comprises a series of actions that lend to the accomplishment of objectives. It is
a social process because these actions are principally concerned with relations between people.
 Taking these approaches into consideration, Management may be defined as follows for the
purpose of study and analysis here:
Management is the social process of PLANNING, ORGANIZING STAFFING, LEADING,
& CONTROLLING for the determination and achievement of organizational objectives in a
dynamic environment.
2. The Nature of Management
Management science or an Art?
Management as a science is of recent origin, even though its practice is ages old.
Frederick W. Taylor was the first Manager theorist who made significant contributions to the
development of management as a science.
He used the scientific methods of analysis, observation and experiment in the management of
production function.
A perceptive manager, as he was he distilled certain fundamental principles, and propounded the
theory and principles of Scientific Management. Many others including Gantt, Emerson, Fayol,
and Barnard etc followed his work.
During the last few decades, great strides have been made in the development of management as
a systematized body of knowledge, which can be learnt, taught and researched. It has also
provided powerful tools of analysis, prediction and control to practicing managers.
Management scientists who have developed mathematical models of decision-making have
particularly strengthened the scientific character of management.
Another characteristic of science in management is it uses scientific methods of observation,
experimentation and laboratory research. Management principles are firmly based on observed
phenomena, and systematic classification and analysis of data.
Even though Management is a science so far as it possesses a systematized body of knowledge and
uses scientific methods of research, it is not an exact science like natural sciences.
This is simply because management is a social science, and deals with the behavior of people in
organizations.

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 Behavior of people is much more complex and variable than the behavior of inanimate things
such as light or heat. This makes controlled experiments very difficult. As a result, management
principles lack the rigor and exactitude, which is found in physics and chemistry.
In fact, many natural sciences, which deal with living phenomena such as botany and medicine,
are also not exact.
Management is a social science like economics or psychology, and has the same limitations,
which these and other social sciences have.
However, this does not in any way diminish the value of management as a body of knowledge
and discipline. It has provided powerful tools of analysis, prediction and control to practicing
managers and helped them in performing their managerial tasks more efficiently and effectively.
Management as an Art
Just as an engineer uses the science of engineering while building a bridge, a manager uses the
knowledge of management theory while performing his managerial functions.
Engineering is a science; its application to the solution of practical problems is an art.
Similarly, management as a body of knowledge and discipline is a science; its application to the
solution of organizational problems is an art.
The practice of medicine is firmly grounded in an identifiable body of concepts, theories and
principles. A medical practioner who does not base his diagnosis and prescription on the science
of medicine, endangers the life of his patient. Similarly, a manager who manages without
possessing the knowledge of management creates chaos and jeopardizes the well being of his
organization.
Principles of management like the principles of medicine are used by the practioner not as rules of
thumb but as guides in solving practical problems.
To sum-up, management is a science as well as an Art.
b) Management levels, skills and roles
i) Management levels
There are three distinct levels of management. These are:
 Top Management
 Middle Management
 Supervisory Management

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 A company’s top management is made up of individuals who have the responsibility for making
the decisions and formulating the policies that affect all aspects of the firms operations.
Middle Management: includes all managers above the supervisory level but below the level
where overall company policy is determined.
Supervisory Management: is at the base of the pyramid. Supervisors manage workers who
perform the most basic job duties required in the business.
. Management Skills
Good management practices can be learned and applied. Management success depends both on
fundamental understanding of the principles of management and on the application of
management skills.
There are three management skills. These are:
 Technical skills
 Human relations skills, and
 Conceptual skills.
Technical Skills: are the specialized knowledge and abilities that can be applied to specific tasks.
Normally, technical skills are most important at lower levels of management and much less
important at upper levels.
Human Relation Skills: are the abilities needed to resolve conflict, motivate, lead, and
communicate effectively with other workers. Human relations skills are equally important at all
levels of management.
Conceptual skills: are the abilities needed to view the organization from a broad perspective and
to see the interrelations among its components. Conceptual skills are most important in strategic
(long-range) planning; therefore, they are more important to top-level executive; than to middle
managers and supervisors.

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i. Management Roles
Carrying out the management functions requires a manager to behave in a certain way to fill
certain roles. Mintzberg identified 10 management roles related to the interpersonal,
informational, and decision aspects.
Interpersonal roles: These are those in which the manager interacts with others is that of
figurehead.
Some figurehead duties are largely ceremonial and others relatively important, but non-involves
significant decision-making. Signing documents or presiding at a ceremonial event is examples of
figurehead duties.
The leader role is evident in the interpersonal relationship between manager and subordinates, as
a leader, the manager hires, trains, evaluates, motivates, and promoter subordinates.
The manager also serves as a liaison between the company and the external community. He or
she fulfills this role through community service, conferences, social events and so forth.
Informational roles: A second set of managerial activities relates to receiving and transmitting
information.
These informational roles require managers to serve as monitors, disseminators, and
spokespersons.
 As a monitor, the manager tries to keep informed about what is happening in the organ or
group.
 As a disseminator, a manager sends outside information into the organ and internal
information from one subordinate to another
 A manager serves as a spokesperson whenever he/she represents the company or its position
to other groups, including the press, government agencies, customers, and trade organizations.
 Decisional Role: The third set of managerial activities involves decision-making. As
decision maker, the manager becomes as an entrepreneur, disturbance handler,
resource allocator and negotiator.
A manager acting as an entrepreneur recognizes problems and opportunities and initiates
action that will move the organ in the desired direction. Often he/she may create new projects,
change original structure, and institute other important programs for improving the company's
performance.

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  As a disturbance handler, the manager deals with situations over which he/she has
control. These may involve conflict between people or groups, or unexpected events
outside the company that may affect the firms operation.
 As a resource allocator, the manager must divide the company's resources as well as
personal time among the various demands on them. This involves assigning work to
subordinates, scheduling meetings, approving budgets, deciding on pay increases, making
purchasing decisions, and other maters related to the firms Human Financial and Material
Resources.
 The Manger acting as a negotiator represents the firm in financial matters. For example,
the manager is a negotiator when the company tries to buy another firm, when meeting
with a union seeking a new contract, or with members of the financial community to
negotiate a new stock issue.

c) Functions of Management
Regardless of the type of firm, all managers have certain functions - planning, organizing, staffing,
leading, and controlling.
The scope and nature of these functions differ from manager to manager and from firm to firm.
There are 5 major functions of management. These are:
Planning
Organizing
Staffing
Leading, and
Controlling
Planning
Planning encompasses determining specific objectives and how to accomplish them. Top-level
managers set plans for the entire company; lower level managers prepare plans for their immediate
areas of responsibility. For example, top-level managers of a bank plan ways to increase its
deposits and to enlarge its share of the market. These plans may require opening new branch
banks, modifying interest rates, or offering additional services. Branch Managers, on the other

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hand, plan for taking care of walk-in customers. Their plans may call for adequate staffing at peak
periods, procedures for opening and closing accounts, and periodic teller balancing.
Planning doesn't occur in a vacuum. It is done in light of budgetary constraints, personnel
requirements, competition, and other factors. For example, a bank's plans to modify its interest
rates would be influenced by what other financial institutions do and by how such actions would
affect earnings. Similarly, the branch manager's plan to take care of customers efficiently would
be affected by staffing limitations and other events beyond his or her control.
Organizing
When goals have been established, a manager must create a way to accomplish them. In other
words, through organizing, he or she must develop a system in which people can perform tasks
that lead to the desired results. Initially, organizing by top-level executives includes the following
activities:
Creating job positions with defined duties, responsibilities, requirements, and salary
ranges based on job requirements
Arranging positions into a hierarchy by establishing authority-reporting relationships.
Determining the number of subordinates each manager should have reporting to him or
her (called span of control or span of management), the number of hierarchical levels
in the organization, the most appropriate way to set up departments (departmentation).
Developing a structure like this ensures that duties are well defined and coordinated. Each.
Position in the organization is accountable for identifiable tasks that contribute to its overall
purpose.
Of course, most organizations also undergo continual change. Jobs may be enlarged, diminished,
or eliminated; additional positions may be created; new production methods may be instituted;
new management skills may be required; or reporting relationships may be altered. Both internal
and external forces bring about such change. External forces or change may be social, political,
economic, and technological. More technologically advanced production methods might be
developed, new laws and regulations might be enacted, and values might change. Internal forces
result from the interaction of an organization's technology, structure, and people. Because these
internal and external forces of change always exist, managers must constantly organize and
reorganize.

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Staffing
As we have pointed out, organizing involves creating job positions with assigned duties and
responsibilities.
Staffing involves the recruitment, selection, development, and retention of employees with
appropriate qualifications for positions created by the manager.
Staffing is one of the manager's most important duties because the success of any organization
depends on the quality of its employees. Most managers therefore, choose their new employees
very carefully.
Staffing usually is systematic and includes many of the following activities:
 Human resource planning
 Announcing and advertising vacant positions
 Receiving applications
 Preliminary and final interviewing
 Testing
 Medical examination
 Final selection and orientation
Staffing has undergone remarkable change in recent years. Human resource planning, equal
employment opportunity, affirmative action, equal pay for equal work, and similar terms were
rarely mentioned twenty-five years ago.
Today, managers involved in staffing are tremendously aware of the importance of these
concepts. For the most part, the changes have benefited employers and employees alike because
they have resulted in a better matching of people and jobs. However, they also have created
problems that managers of the past could not have imagined.
Leading
Leading involves influencing others in order to accomplish specific objectives.
To be effective leaders, managers need to understand individual and group behavior, techniques
of motivation, and effective styles of leadership. Managers must develop relationships that ensure
adequate communication with their subordinates.

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 Leading also includes managing personal conflict, helping employees deal with changing
conditions, and in some cases, disciplining employees.

Even in the most freewheeling of companies, leading is more than creating a "one big, happy
family" atmosphere. It involves developing a climate of individual integrity, corporate honesty,
and high productivity. Making decisions with a question in mind can best create a climate like
this: what is right, just, and equitable? Effective leadership is built on a foundation of mutual trust
and respect.
A manager must do a number of things to be an effective leader. For instance, he or she must
make certain that everyone in the unit knows exactly what is expected in terms of performance.
Objectives must be identifiable, measurable, and individually attainable. The manager also must
recognize and reward outstanding performance. This involves setting up an appraisal reward
system that rewards superior performance and does not reward mediocrity. To be effective,
managers also must surround themselves with competent employees and ask their advice when
making decisions that affect them. In other words, a manager should use all the organizational
resources available especially people.
Of the five basic functions of management, leading is perhaps the one area where most managers
are weakest.
Lawrence Appley, chairman emeritus of the American Management Association (AMA),
contends that American businesses are suffering from the greatest leadership vacuum this nation
has ever seen. This void, he says, stems from managers' failure to recognize human development
and the demands this places on mangers in the workplace. Effective leadership is always at the
core of effective management.

Controlling
In controlling, a manager continually compares the performance of the organization with its goals
and takes corrective action, if needed. Actual results may differ from desired results in any area,
but the three that require the most attention are product quality, worker performance, and cost
control.
The quality of the company's product may not measure up for a number of reasons. For instance,
raw materials used in the manufacturing process may be inferior, or their blending or mixing may

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be improper. Product quality also will suffer if the manufacturing process malfunctions. For
example, a machine breakdown may cause the quality of the final product to be unacceptable.
Control also is required when employees fail to meet desired performance standards. Controlling
people follows the same procedure as controlling product quality: establishing standards,
measuring worker output and comparing it with standards, and taking corrective action when
necessary. Employee performance standards are formulated through experience, judgment, and
observation. Once standards are determined, some method for measuring worker performance
must be developed. Typically, each employee is formally evaluated annually on all critical job
elements. In an appraisal interview, the employee is told which areas need improvement and how
to bring it about. In some cases, additional training and instruction are needed; in other cases,
disciplinary action is required.
The third major area requiring significant attention, cost control, involves comparing expenditures
with budgeted funds. Actual costs are compared with standards set before actual production for
such items as materials, labor, and overhead. Variations from the standards helps managers find
problem areas and can lead to cost-reduction programs.

An informal View of the Manager's Job

The functions just discussed tell us what managers should do. In James Cribbin's opinion, these
functions depict managers of ideal firms under ideal conditions, where they are masters of their
fate and captains of their souls. What do mangers actually do? In reality, managers do perform
these functions, but their duties are much more complicated.
Managers spend as much - and perhaps more - time reacting as they do acting. They are entangled
in many relationships and situations, some over which they have little control. A more realistic
description of what managers do is provided by Leonard Sayles:
1. Managers strive to implement their personal career plans, using the firm as a vehicle. In
so doing, they seek to satisfy the requirements of the organization.
2. Managers seek to be sensitive and responsive to the needs of their superiors. They try to
keep abreast of new pressures, new developments, and new requirements that may affect
the way they do their work.
3. Managers negotiate with peers in other interdependent departments in an effort to get
their jobs done effectively.

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 4. Managers cultivate good personal relations with staff and service groups whose actions
can impact their jobs for better or worse.
5. Managers respond to the requests, demands, and requirements of various individuals and
groups in order to retain their good will. Thus, they must be flexible in adjusting to a
variety of personalities, cliques, and eccentricities.
6. Managers oversee the flow of work into, within, and out of their departments to assure
that it goes smoothly.
7. Managers are alert to the work output, needs, wants, and morale of their subordinates, and
they interact with their subordinates while maintaining a managerial perspective.

8. Managers represent their subordinates and their subordinates' view to higher-level

managers and to individuals in other departments.
9. Managers try to retain control over their own lives while accommodating the needs of the
firm. Thus, they set up priorities and engage in those activities that satisfy the demands of
their families, the firm, and themselves.
10. Managers attempt to cope with stress so as to receive psychic as well as economic income
from their work.
11. Managers strive to attain organization rewards which they use to secure more important
off - the - job goals

d) Universality of Management
Is the manager’s job universal? Are the principles of management universally applicable?
It has already been stated that management is found in all types, functions, levels and sizes of
organizations.
Management can be applied to all organized human efforts whether they are in business,
government, educational, social religious or other fields.
Universality of management suggests that the manager uses the same managerial skills and
principles in each managerial position held in various organizations.
Accordingly, an industrial manager could manage a philanthropic organization, a retired army
general could manage a university, a civil servant could manage and industrial organization, and
so on.

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 Universality implies transferability of managerial skills across industries, countries. It means
that management is generic in content and applicable to all types of organizations.
Lawrence A. Appley declared that 'He who can manage can manage anything." Let us examine
the factors that have contributed to the universal application of management in every level of
organ and at every level of organization.
1. Managers perform the same functions irrespective of their level in the organ, industry or
country.
2. Classical writers like Fayol, Urwick and others believed that there are certain principles in
management, which are universally applicable. Such principles as one man one boss,
division of work to improve speed and efficiency etc.
3. The fundamentals governing the management of a business, a church or a university are
same; the difference lies in the techniques employed and practices followed.
4. The very fact that managers regularly move from public to private sector organs bears
ample testimony to the fact that management concepts are universal across organizational
types. For example, D.D Eisenhower went from a general in the US army to president of
Columbia University to president of United States.
3. Management and its Environment
Many different forces outside and inside of an organization influence manager's performance.
The managerial functions of planning, organizing, staffing, leading coordinating and controlling
must be accomplished under constantly changing conditions.
Managers must deal with both the external environment and the Internal environment.
The External Environment includes all the forces acting on the organization from the outside.
Customers, competitors, suppliers and human resource are some of the obvious forces in an
organization's external environment. Other not - so - obvious forces include technological,
economic, political, legal regulatory, cultural, social and international forces.
The Internal environment includes the day-to-day forces within the organization in which
mangers perform their functions.

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Chapter Two
The Development of Management Thought
1. Early influences
Although examples of management practice go back to several thousand years, the
development of management as a field of knowledge is much more recent.
Much of the impetus for developing management theories and principles stemmed from the
industrial revolution, which spawned the growth of factories in the early 1800s.
With the proliferation of factories came the widespread need to coordinate the efforts of large
numbers of people in the continual production of goods.
This challenge brought forth a number of individuals who begun to think about innovative
ways of running factories effectively.
This group, known as the pre-classical contributors to Mgt, focused largely on particular
techniques that might be applied to solve specific problems.
Among the pre-classical contributors are Robert Owen, Charles Babbage, and Henry R.
Towne.
Robert Owen:(1771-1858)
- Successful British entrepreneur
- Recognized the importance of human resources.
- Interested in working & living conditions of his employees while
running a cotton mill in Scotland.
- Tried to improve the living conditions of employees by upgrading
streets, houses, sanitation and the education system.
-
His ideas laid the groundwork for the human relations movement.
Charles Babbage: (1792- 1871)--- English mathematician.

- Known as the father of modern computing.

- Produced the first mechanical calculator& an analytic engine.

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 - Enthralled with the idea of work specialization, the degree to which
work is divided in to various jobs.
- Devised a profit sharing plan that had two parts, a bonus and a
portion of wages that was dependent on factory profits.

Henry R. Towne- (1844-1924)--- was the president of Yale & Towne manufacturing Company &
mechanical engineer.
Outlined the importance of management as a science & called for the development of management
principles.
ASSESSMENT OF THE PRE-CLASSICAL CONTRIBUTORS: their efforts were somewhat
fragmentary. They were largely oriented toward developing specific techniques, often to
solve visible problems.

The Classical Theories

Henry Towne’s call for mgt as a separate field of inquiry helped usher in a major new
approach called the classical viewpoint.
The classical viewpoint is a perspective on mgt that emphasizes finding ways to manage
work and organizations more efficiently.
It is made up of three different approaches: scientific management, administrative
management, and bureaucratic management.

This view is labeled classical because it encompasses early works and related contributions that
have formed the main roots of the field of management.
Scientific management
Scientific management is an approach within classical management theory that
emphasizes the scientific study of work methods in order to improve workers
efficiency.
Major representatives of this approach include F.W.Taylor, Frank & Lillian
Gilberth, and Henry Gantt.
F.W.Taylor-- (1856-1915) An American Jew.
- Is the father of scientific management.

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 - Became an apprentice patternmaker & a machinist at Midvale Steel.
- Rose to chief engineer in 6 years.
F.W.Taylor observed and tackled soldiering by workers. Soldiering is deliberately
working at less than full capacity.

Taylor believed that workers engaged in soldiering for three main reasons.
First, they feared that increasing their productivity would cause them or other workers
to lose their jobs.
Second, faulty wage systems set up by mgt encouraged workers to operate at a slow
pace.
Thirdly, general methods of working & rules of thumb handled down from generation
to generation were often very inefficient.
Taylor believed that managers could resolve the soldiering problem by developing a
science of management based on four principles namely:
1. Scientifically study each part of a task & develop the best
method for performing the task.
2. Carefully select workers & train them to perform the task by
using scientifically developed method
3. Cooperate fully with workers to ensure that they use the
proper method.
4. Divide work & responsibility so that management is
responsible for planning work methods using scientific
principles & workers are responsible for executing the work
accordingly.
Taylor also pioneered a method now known as Time and Motion Study (Taylor called it
“Time Study”).
He also advocated the use of Wage Incentive Plans.
The Gilberths-Frank (1868-1924) and Lillian (1878 - 1972) were other advocates of
scientific management.
Frank - had qualified for admission to the Massachusetts Institute of Technology, decided to
become a bricklayer because of the importance of the profession at the time.

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 • He noticed the inefficiencies that were handed down from experienced
workers
• He proposed using motion studies to streamline the bricklaying process

• Was able to reduce the motions involved in bricklaying from 18 ½ to 4.

Using these motions, workers increased the number of bricks laid per day
from 1000 to 2700 with no increase in physical exertion.
Lillian Moller
• Doctorate in psychology
• Published the book - The Psychology of Management
• With her husband, continued at eliminating unnecessary motion and
expanded their interests to exploring ways for reducing task fatigue
• They have isolated 18 basic motions; each called a therbligs, which
included motions as search find, select, grasp, position, assemble, use,
disassemble, inspect, load transport, pre-position, release load,
transport empty, wait when available, avoid delay, rest for overcoming
fatigue, and hold that they used to study tasks in a number of industries.
Henry L. Gantt (1861 - 1919)
• Worked with Taylor in several companies including Midvale

• Known for his Gantt chart - a graphic aid to planning, scheduling and
control that is still in use today.
• He also devised a unique pay incentive system that not only paid workers
extra for reaching standard in the allotted time but also awarded bonuses to
supervisors to coach workers who were having difficulties.
2.2 Bureaucratic Management- is an approach that emphasizes the need for organizations to
operate in a rational manner rather than relaying on the arbitrary whims of owners and
managers.

Max-Weber (1864 - 1920) German sociologist consultant, professor and author

• Reacted to the prevailing norms of class consciousness and nepotism (e.g.
in Prussian Army, Aristocratic birth- become officers)

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 • Believed that running organizations on the basis of whom one knows rather
than what one knows and engaging in nepotism tended to interfere with
organizational effectiveness
• He formulated the characteristics of ideal bureaucracy. He coined the term
bureaucracy to identify large organizations that operated on rational basis
Major characteristics of Weber’s ideal bureaucracy are:
 Specialization: jobs are broken in to routine, well-defined
tasks so that members know what is expected of them and
can become extremely competent at their particular subset of
tasks.
 Formal rules and procedures: written rules and procedures
specifying the behaviors desired from members facilitate
coordination and ensure uniformity.
 Impersonality: rules procedures and sanctions are applied
uniformly regardless of individual personalities and personal
considerations.
 Well defined hierarchy: multiple levels of positions, which
carefully determined reporting relationships among levels,
provide supervision of lower offices by higher ones, a means
of handling exceptions, and the ability to establish
accountability of actions.
 Career advancement based on merit: selection and
promotion is based on the qualification and performance of
members.
Because of the possibility of carrying Weber’s ideas to excess, the term “bureaucracy” is
sometimes used in pejorative sense to denote red tape and excessive rules. Yet, there clearly are
advantages to the bureaucratic characteristics outlined by Weber.
 Assignment of activities to individuals as fixed duties
 A hierarchy of authority and chain of command running
throughout the organization, with a regulated system of appeal

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 Administration through a well-defined rules
 Decision making on rational and objective criteria so that all
decisions are impersonal
 Employment and promotion based on demonstrated competence;
protection against arbitrary dismissal, and training of officials
 Office holding as a career within the hierarchical order
Fixed salary based on status or rank rather than on the work performed, and a guaranteed
pension on supernuation as security for old age
The major advantage of bureaucracy is that, “precision, speed unambiguity, knowledge of the files,
continuity, discretion, unity, strict subordination, reduction of friction, and of material and personal
costs are raised to the optimum point”. Its major disadvantages lie in red tape, rigidity and neglect
of human factor.

2.3 Administrative Management- is an approach that focuses on principles that can be used by
managers to coordinate the internal activities of organizations.
The major contributors include Henri Fayol and Chester Barnard, both of whom were
executives of large enterprises.
Henri Fayol (1841 - 1923) French Industrialist
• Trained as mining engineer

• Convinced that it should be possible to develop theories about management

that could be then taught to individuals with administrative responsibilities.
(His efforts toward developing such theories were published in a
monograph titled - General and Industrial Management)
• He delineated five major functions namely planning, organizing,
commanding, coordinating and controlling which is called the functional
approach to management
• Fayol also outlined 14 general principles of management namely
1. Division of work- work specialization can result in efficiencies and
is applicable to both managerial and technical functions. Yet there
are limitations to how much that work should be divided.

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2. Authority- is the right to give orders and the power to exact
obedience. it derives from the formal authority of the office and
from personal authority based on factors like intelligence and
experience. With authority comes responsibility.
3. Discipline- is absolutely necessary for the smooth running of an
organization, but the state of discipline depends essentially on the
worthiness of its leaders.
4. Unity of command- an employee should receive orders from one
superior only.
5. Unity of direction- activities aimed at the same objective should be
organized so that there is one plan and one person in charge.
6. Subordination of individual interests to general interest- the
interests of one employee or group should not prevail over the
interests and goals of the organization.
7. Remuneration- compensation should be fair to both the employee
and the employer.
8. Centralization- the proper amount of centralization or
decentralization depends on the situation. The objective is the
optimum use of the capabilities of personnel.
9. Scalar chain- a scalar (hierarchical) chain of authority extends from
the top to the bottom of an organization and defines the
communication path. However, horizontal communication is also
encouraged as long as the managers in the chain are kept informed.
10. Order- materials should be kept in well-chosen places that facilitate
activities. Similarly, due to good organization and selection, the
right person should be in the right place.
11. Equity- employees should be treated with kindness and justice.
12. Stability of personal tenure- because time is required to become
effective in new jobs, high turn over should be prevented.

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 13. Initiative- managers should encourage and develop subordinate
initiative to the fullest.
14. Esprit de corps- since union is strength, harmony and teamwork are
essential.

Chester Barnard (1886 -1961) ---- Born in Massachusetts, attended Harvard but did not complete
his degree work.
One of Barnard’s best-known contributions is his Acceptance theory of authority- a theory that
argues that authority does not depend as much on person of authority who gives orders as on the
willingness to comply of those who receive the orders.
He argued that employees are more willing to accept directions from manager if they (1)
understand the communication, (2) see the communication as consistent with the purpose of the
organization, (3) feel that the actions indicated are in line with their needs and those of other
employees and, (4) view themselves as mentally and physically able to comply.

2. The Behavioral Theories

The classical theorists generally viewed individuals as mechanisms of production. As a result, they
primarily interested in finding ways for organizations to use these productive mechanisms more
efficiently.
In Contrast, the behavioral viewpoint is a perspective that emphasizes the importance of
attempting to understand various factors that affect human behavior in organization.
In exploring this viewpoint, we examine four aspects of its development: the contributions of the
early behaviorists, the Hawthorne studies, the human relations movement, and the more
contemporary behavioral science approach.
3.1Early behaviorists: Two early behaviorists, psychologists Hugo Munster berg and political
scientist Mary Parker Follett contributed pioneering ideas that helped make the behavioral
perspective a major viewpoint.
Huge Munsterberg (1863-1916)
− Born and educated in Germany

20
 − Earned a Ph. D in Psychology and a Medical degree
In 1892, he set up a psychological laboratory at Harvard and Began seeking practical applications
of Psychology.
He published a book - Psychology and Industrial efficiency in 1913.
The book argued that psychologist could help industry in three major ways.

i. Psychology could study jobs and find ways of analyzing the individuals who are best suited to
particular jobs.

ii. Psychologists could help industry in identifying the psychological conditions under which
individuals are likely to do their best work.

iii. Psychologists could help by developing strategies that would influence employees to behave
in ways that are compatible with management interests.
These ideas ignited and led to the establishment of the field of Industrial Psychology.
Munsterberg is considered to be the father of Industrial Psychology.
Mary Parker Follett (1868-1933)
− Born in Boston.
− Interested in employment and work place issues
− Attributed much greater significance to the functioning of groups in organs than proponents of
the classical view of management.
− She argued that the groups within which they operate continually influence members of
organizations.
− Another of Follett's forward-looking ideas was her belief that organizations should operate on
the principle of "power with" rather than "Power over".
Power, to her, was the general ability to influence and bring about change.
She argued that power should be jointly developed, cooperative concept, involving employees and
mangers working together, rather than a coercive concept based on hierarchical pressure.

3.2 Hawthorne Studies

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Elton Mayo (1880-1949), an Australian who immigrated to the United States with a group of
researches from Harvard University had conducted Hawthorne experiments at Western Electrics
Hawthorne, Illinois, plant from 1924 to 1932.
The Hawthorne studies are a group of studies whose results ultimately led to the human relations
movement, a behavioral approach that emphasized concern for the worker.
Three sets of studies were conducted.

First set of studies: The illumination studies (1924-1927)

− Light was decreased over successive period for the experimental group while light was held at
a constant level for the control group.
− In both groups, performance rose steadily, even though the lighting for the experimental group
became so dim that the workers complained they could hardly see. At that point, performance
in the experimental group finally began to decline.
− The researchers concluded that factors other than lighting are at work and the project was
discontinued.

Second, set of Studies (1927-1933) Relay assembly Test room.

− The most famous study involved five women who assembled electrical relays in the relay
assembly test room, where they were away from other workers and the researchers could alter
work conditions and evaluate the results.
− The researchers changed the usual supervisory arrangement so that there would be no official
supervisor.
− Instead, the workers would operate under the general direction of the experimenters.
− The workers were also given special privileges such as being able to leave their workstation
without permission.

22
 − The study was aimed at exploring the best combination of work and rest periods, but a number
of other factors were also varied (sometimes simultaneously), such as pay, length of work day,
and provision for free lunches.
− Generally productively increased over the period of the study, regardless of how the factors
under consideration were manipulated.
− The researchers concluded that the change in the supervisory arrangement was the major
reason for the increase in the productivity.
Researchers felt that the physical changes, such as rest periods, free lunches, and shortened ours,
as well as the group incentive pay plans were factors of less importance.

Third, set of studies (1931-1932) Bank wiring observation Room study.

− Built on the emerging findings of the second set

− 14 male workers were formed in to small work group and intensively observed for 7 months in
the bank wiring room.
− Studying the group provided knowledge about informal social relations within groups and
about the use of group norms to restrict output when doing so seems advantageous to the
group.
Impact of the Hawthorne Studies
The Hawthorne studies pointed to the impact that social aspects of the job had on productivity,
particularly the effects of personal attention from supervisors and relationships among group
members.
As one writer has pointed out, "No other theory or set of experiments has stimulated more research
and controversy nor contributed more to a change management thinking than the Hawthorne
studies and the human relation movement they spawned.

3.3 Human Relations movement

Human relation - is motivating people in organizations in order to develop teamwork, which

effectively fulfills their needs and achieves organizational goals (Keith Davis).

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Two major theorists, Abraham Maslow & Douglas McGregor, were among those who came
forward with ideas that mangers found helpful with respect to human relations.
Abraham Maslow (1908-1970) - Ph.D. in Psychology.
− Developed a theory of motivation that was based on three assumptions about human nature.
•Human beings have needs that are never completely satisfied.
•Human action is aimed at fulfilling the needs that are unsatisfied at a given point in
time.
•Needs fit in to a somewhat predictable hierarchy, ranging from basic, lower-level
needs at the bottom to higher level needs at the top.
Maslow out lined five levels of needs
1. Physiological (lowest)
2. Safety
3. Belongingness
4. Esteem
5. Self-actualization (highest)
Maslow's work dramatized to mangers that workers have needs beyond the basic requirements of
earning money to put a roof over their heads.
This concept conflicted with the views of scientific management, which emphasized the
importance of pay.
Of all the management related theories, Maslow's hierarchy of needs theory is probably the best
known among mangers today.
Douglas McGregor (1906-1964) … Earned Ph.D. from Harvard was professor of Industrial
management.
− He developed the concept of theory X Versus Theory Y, a dichotomy dealing with the possible
assumptions that mangers make about workers.
− Theory X mangers tend to assume that:

 Workers are lazy,

 Need to be coerced,
 Have little ambition, and

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  Focused mainly on the security needs.

Theory Y managers tend to assume that

 Workers do not inherently dislike work,
 Are capable of self control
 Have the capacity to become creative and innovative, and
 Generally have high level needs that are often unmet on the job
These theory-helped mangers develop a broader perspective on the nature of workers a new
alternative for interacting with them.

McGregor believed that managers who hold Theory X assumptions are likely to treat workers
accordingly. Hence, such a manager sets up elaborate controls and attempts to motivate strictly
through economic incentives .As a result, workers are likely to respond in a manner that reinforces
the manager’s original assumptions.

In contrast, managers with Theory Y assumptions have the potential for integrating individual
goals with organizational goals.
McGregor believed this integration could occur if managers give workers latitude in performing
their tasks, encourage creativity and innovation, minimize the use of controls, and attempt to make
the work more interesting and satisfying in regard to higher level needs. Under such conditions,
workers are likely exhibit greater commitment to organizational goals, because the goals coincide
more closely with their own.

McGregor understood, however, some relatively immature and dependant workers might require
greater control at first in order to develop the maturity needed for the Theory Y approach.

3.4. Behavioral Science approach

− The behavioral science approach is an approach that emphasizes scientific research as the basis
for developing theories about human behavior in organizations that can be used to establish
practical guidelines for mangers.

25
 − The ultimate aim of behavioral science approach is to develop theories that mangers can use as
guides in assessing various situations and deciding on appropriate actions.
− An example of the useful outcomes of behavioral science research is the idea that individuals
perform better with challenging, but attainable, goals than they do without goals.
3. Quantitative Management View Point:
Focuses on the use of mathematics, statistics, and information aids to support managerial decision-
making and organizational effectiveness. Three main branches have evolved: Management
science, operations management, and management information systems.
− Management Science is an approach aimed at increasing decision effectiveness through the
use of sophisticated mathematical models and statistical methods.
− Operations management- is the function, or field of expertise that is primarily responsible for
managing the production and delivery of an organization's products and services.
− Management Information Systems - refers to the field of management that focuses on
designing and implementing computer based information systems for use by management.
4. Contemporary views:
These views represent major innovations in ways of thinking about management.
Two of the most important contemporary viewpoints are the systems and contingency
theories.

5.1 Systems theory - This approach is based on the notion that organizations can be
visualized as a system.
A system is a set of interrelated parts that operate as a whole in pursuit of common goal.
The theory views organization as an open system, which is composed of interacting and
interdependent parts.
As open system, organizations are in a continuous interacting and interdependent relationship
with their environment. The theory stresses that organizations must be viewed as total
systems, with each part linked to every other part.
5.2 Contingency theory - is a viewpoint that argues that appropriate managerial action depends on
the particular parameters of the situation. Hence, rather than seeking universal principles

26
 that apply to every situation, contingency theory attempts to identify contingently principles
that prescribe actions to take depending on the characteristics of the situation.
The approach seeks to match different situations with different management methods.
6. Emerging views - Japanese Management approach
Management expert William Ouchi has outlined theory Z.
Theory Z approach involves:
 Giving workers job security
 Including them in decision making,
 Emphasizing group responsibility,
 Increasing quality,
 Establishing gradual advancement policies,
 More informal controls, and broader career paths; and
 Showing greater concern for employees' work and non-work well-being.

Chapter Three
Management Functions
1. Planning
A) Nature and Purpose of Planning

Every human activity under taken with a view to achieve something must be preceded by
planning. A student desirous of securing a good grade in the examination has to plan his study.
This will mean deciding as to how much time he would devote for different subjects; on which
topics to lay a greater stress and so on. In other words, one has to decide the course of action to
adopt-which would bring better results.

27
A person intending to set up a business can not do so unless he has done a lot of previous thinking,
considered various aspects and taken many decisions if not all. He has to plan within available
resources, the location, the products to be sold, customers to be approached or the market to be
entered. Everybody has to plan in his own field. A teacher has to plan his teaching. Even a
housewife plans her daily chores.
All our activities undertaken individually or in groups have the element of planning whether done
consciously or unconsciously or whether elaborated or in brief outlines. Managerial operation
must be based on suitable and sufficient planning. It is the primary function of management. The
chief function of the management is to attain the objective of the enterprise. For this, it has to plan
not only in the beginning but also throughout the operations. Planning will involve deciding a
course of action from amongst a number of alternative courses, which would help the enterprise to
achieve its objectives most expeditiously and economically. Planning is the basic activity for all
managerial operations. Managerial success depends to a very great extent upon good and effective
planning. Without planning Work will be, haphazard and success will be doubtful.

What is planning?
Planning is the chalking out of the course of action. It is the preparation of the blue print. It is the
spelling out of what is to be done, when how and by whom. Planning is the determination of the
course and sequence of activities, which would help the enterprise to attain its objective.

Planning is the task of thinking in advance, i.e., before actually starting operations, visualizing the
future and finalizing the course of action. It is therefore a mental process. To quote Harold
Koontz and Cyrie O' Donnel,"
Planning is an intellectual process, the conscious determination of the course of action and the
taking of decisions on purpose, knowledge and considered estimates." planning bridges the gap
between where we are and what we want to achieve.

Thus in the context of management, planning is the function of forecasting, framing of the
objectives, policies, procedures, schedules, budgets etc. Planning is basically making a choice
from a number of alternative courses of action. It is the application of creative thinking to choose
the best possible course. In its absence, management would be a random activity producing
nothing but chaos, confusion and wastage of resources.

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To summarize, planning involves:

- Determination of objectives to be achieved.

- Taking stock of the present resources.
- Forecasting the likely possible problems to be faced in achieving the objectives.
- Discovering alternative course of action and
- Choosing the most expedient and effective courses of action

What is to be done

Identification

When is it to be done

Righ time

How is it to be
29
 Method

Where is it to be done?

Place
Elements of planning

Principles of planning
The following principles underlie sound planning:
1. Principle of contribution to objective,
The basic purpose of planning for the future is to ensure effectiveness and efficiency.
2. Principle of sound and consistent premising,
The assumptions made must be as accurate as possible.
3. Principle of limiting factor,
The limiting factors are those elements in a company’s internal and external situation, which
should be removed or modified if plans are to be formulated for the achievement of its
objectives.
4. Principle of commitment,
This relates to the time period of planning, and provides the criterion for the period to be
covered by the long-range plans. This should encompass the period during which the resources
expended on the implementation of plans are fully recovered.
5. Principle of coordinated planning,
All plans of the company should be coordinated with one another so as to produce an
integrated plan.
6. Principle of timing

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 Plans should be synchronized as to the time of their implementation. E.g. derivative plans for
purchasing, construction, hiring etc.
7. Principle of efficiency,
Plans should aim at minimizing the cost and there by achieve the most efficient utilization of
scarce resources.
8. Principle of flexibility,
Plans should have an in-built flexibility so that they do not become in operational or outmoded
when actual environment turns out to be different from predictions.
9. Principle of navigational change,
Plans should be reviewed periodically as to their premises in relation to actually operating
environment and future expectations, and as to their results in relation to the planned goals.
10.Principle of acceptance.
It is essential that plans should be understood and accepted by employees.
Nature of planning: -
i. Planning is basic to managerial operations.
ii. Planning is an intellectual activity
iii. Planning pervades every department of managerial activity
iv. Planning aims at targets
v. Planning is a continuous activity

Importance of planning
The importance of planning lies in its utility. It is the function, which establishes the importance
of a thing. Absence or lack of it would only bring wastage, chaos and confusion. Stating the
following can emphasize the importance of planning.

i. Focuses attention on objectives

ii. Planning is essential in modern business
iii. Planning brings economy in to operation
iv. Planning makes control possible
v. Planning helps motivation possible
vi. Planning ensures against failures and setbacks.

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 vii. Planning helps decision making

Limitations of planning
Planning has its own limitations. Some of these are:
i. Lack of reliable data
ii. Expensive
iii. Time consuming
iv. Stifles initiative
v. Psychological hurdle
vi. External factors

B) The Planning Process

Determining objectives and outlining the course of action needed to achieve these objectives is
referred to as the planning process. The actual steps in the planning process are difficult to specify
for all organs because of wide differences in size and complexity. However, it is possible to
reduce the planning process to the following steps:

1. Identify goals: - The first step in planning process is identifying the goals of the
organization. The objectives fixed must clearly indicate what is to be achieved, where
action should take place, who is to perform it, how is it to be undertaken and when it is
to be accomplished. In other words, managers should try to restate the broad objectives
in definite and clear terms that will encourage checking and measuring performance
against targeted performance in the plan. Objectives must be specific, measurable,
attainable, reliable, and time bound (SMART).

2. Developing Premises (Collect & forecast information): - After establishing objectives it

is necessary to collect and forecast information. The current status of the organization
in the environment must be assessed with a forward look at the future changes.
Planning premises supply the necessary information concerning internal as well as
external environment. Actually, premises are the assumptions about the environment

32
 in which plans are to be implemented. " Because the future is so uncertain; it is
unrealistic to make assumptions in great detail about environmental factors. Hence, it
is wise to limit assumptions to those items that are critical to the planning process.
3. Determine and evaluate alternative plans: - In the third step, alternatives plans are
developed and evaluated thoroughly. Developing alternative courses of action is not a
tough exercise. The difficulty lies in reducing the alternative, so that the more fruitful
ones can be analyzed. Once alternative courses of action have been determined, they
must be evaluated. Future uncertainties, financial problems and other intangible
factors make the evaluation process very difficult and complex usually alternative
plans are evaluated against such factors like cost, risks, benefits, organizational
facilities etc. Computer Oriented Mathematical planning techniques can also be used
to find out the best course of action.

4. Select the plan and develop sub-plans: - The forth step involves selection of the most
desirable plan and the development of derivative plans. Selection of one course of
action to face future challenges introduces rigidity and inflexibility in the planning
process. Therefore, where the future is highly uncertain adaptation of several courses
of action rather than one would be advisable. Once a choice is made and a master plan
drafted, derivative plans must be developed to support it within the framework of the
basic plan, derivative plans are formulated in each functional area. The divisions of
master plan into departmental, sectional and individual plans, provides a realistic
picture of things to come in future. In order to be effective, the planning process
should also provide for a feedback mechanism
.
5. Communication of the plan: - Plan proposals and targets should be thoroughly
communicated to very employee of the enterprise. Everyone should understand it. It
should be noted in this aspect that the personnel should also be involved in some way
or the other in the preparations of plans. This will invite voluntary and wholehearted
cooperation from the staff, as they would be mentally prepared for the plan even before
its final communication.

33
 6. Evaluation: - The managerial responsibility includes following the action being taken
on the plan. They have to see that the plan is worked out as desired and the targets are
being achieved. Therefore, the manager should know the techniques of fallow-up. The
plan should device the scheme of continuous appraisal. This will reveal the pitfalls and
the shortcomings in the actual working of the plan. If necessary, steps should be taken
to adjust the plan.

Skills required in planning

Planning requires forecasting and decision-making skills. Forecasting is the process of

making predictions about changing conditions and future events that may significantly affect
the business of conditions and future events that may significantly affect the business of an
organization. The forecasting process is important to both planning and decision-making
because each depends heavily on assessment of future conditions.
Forecasting is used in variety of areas, such as production planning, budgeting, strategic
planning, sales analysis, inventory control, marketing planning, logistics planning, purchasing,
material requirements planning, and product planning.
Forecasting methods fall into three major categories: quantitative; technological, or qualitative;
and judgmental.
Quantitative forecasting relies on numerical data and mathematical models to predict future
conditions.
Eg. Time series and explanatory methods.
Technological, or qualitative, forecasting is aimed primarily at predicting long-term trends in
technology and other important aspects of the environment. Expert knowledge, creativity, and
judgment are used in technological forecasting.
Eg. Delphi methods & scenario analysis
Judgmental forecasting relies mainly on individual judgments or committee agreements
regarding future conditions.
Eg. Jury of executive opinion and sales force composites.
Decision-making is the process through which mangers identify organizational problems and
attempt to resolve them.

34
Managerial decision-making typically centers on three types of problems-crisis, no crisis, and
opportunity problems.
A crisis problem is a serious difficulty requiring immediate action.
E.g. Severe cash-flow deficiency.
Non-crisis problem - is an issue that requires resolution but does not simultaneously have the
importance and immediacy characteristics of a crisis. E.G. Factory that needs to be brought
into conformity with new state antipollution standard during the next 3 years and an employee
who is frequently late for work.
An opportunity problem: - is a situation that offers strong potential for significant
organizational gain if the appropriate actions are taken.
In addition to facing three types of decision problems, managers also typically deal with
different types of decision-making situations. These are: Programmed decisions and non-
programmed decisions.
Programmed decisions are those made in routine, repetitive, well structured situations
through the use of predetermined decision rules. These may be based on habit computational
techniques, or established policies and procedures.
Non-programmed Decisions - are those for those pre-determined decision rules are
impractical because the situations are novel and/or ill structured. Most of the significant
decisions that managers made fall into the non-programmed category.
Planning sills need creativity and some of the following suggestions, which are based on
research and thinking on creativity, may help you, are more creative in your planning and
your daily life.Some of the following suggestions, which are based on research and
thinking on creativity, may help you, are more creative in your planning and your daily
life.
I) What do you want to do?
- Take time to understand a problem before you begin trying to solve it.
- Get all the facts clearly in mind.
- Identify the facts that seem to be the most important before you try to work out
a detailed solution
ii) How can you do it?

35
 - Set aside a sizable block of time to focus on particular problem, rather than
attending to it in scattered sessions.
- Workout a plan for attacking the problem.
- Establish sub-goals. Solve part of a problem and go on from these you don't
have to do everything at once. Write out your thought. This allows you to
capture important points and to come back to them later. It also allows you to
look for patterns.
- Imagine you acting out the problem. Actually act out the problem.
- Think of a similar problem you have solved in the past and build on the
strategy you used them.
- Use analogies whenever possible. See whether you can generalize from a
similar situation to your current problem.
- Use several different problems solving strategies verbal, visual,
mathematical, acting. Draw a diagram to help you visualize the problem, talk
to yourself out loud, or walk through a situation.
- Look for relationships among various facts.
- Trust your intuition. Take a guess and see whether you can back it up.
- Play with ideas and possible approaches. Try looking at the same situation
in a number of different ways.

iii) How can you do it better?

- Try consciously to be original, to come up with new ideas
- Don't worry about looking foolish if you say or suggest something unusual
or if you come up with the wrong answer.
- Eliminate cultural taboos in your thinking (such as gender stereo typing)
that might interfere your ability to come up with a novel situation.
- Try to be right the first time, but if you are not, explore as many alternatives
as you need to.
- Keep an open mind. If your initial approach doesn't work, ask whether you
made assumptions that might not be true.
- If you get stuck on one approach, try to get the solution by other route.

36
 - Be alert to odd or puzzling facts. If you can explain them, your solution
may be at hand.
- Think of unconventional ways to use objects and the environment. Look at
similar things as if you have never seen them before.
- Consider taking a detour that delays your goal but eventually leads to it.
- Discard habitual ways of doing things, and force yourself to figure out new
ways.
- Do some brainstorming with one or more other people. This involves trying
to produce as many new and original ideas as possible, without evaluating
any of them until the end of the session.
- Strive for objectively. Evaluate your own ideas as you would those of a
stranger.

D) Types of plans

Plans can be classified in different ways from different points of view.

From the point of view of approach, planning may be
- Formal or Informal
From the point of view of the period covered by the plan it may be
- Short range planning or long-range planning.
-
From the point of view of use the plan may be
- Standing plan or Single use plan.

Formal planning is the name given to the type of planning in which the plan is in the form of a
written document. In other words, the course of action is systematically written. Important
project planning should always be formal. Formal planning should be undertaken when the course
of action is prolonged or it has to cover a long period of time.

37
On the other hand, if it is a single action for which planning is to be done it should be informally
planned. Informal planning refers to a plan, which is in the minds of the planners, is roughly
made & covered orally. It is to be done for a single activity in a short period of time.

Short & Long range Planning

As the very name implies a short range planning covers a very short period of time. What time
can be reckoned as a short period? Nothing definite can be said in this connection. This will
depend on the nature and scale of business. Usually the period of a few days, few weeks or few
months will be a short period. It may be extended even to a year. Short range planning is done to
achieve the immediate target, for the work in hand. It is based on the long-term plan. It is
concerned with the immediate future. A short-range plan is made for the current operation. It is a
step-by-step approach to cover the long-range plan.

Long range planning is done with a long period in view. It foresees not the immediate future but
the distant future. Long range planning aims to achieve long-range goals. It involves the setting
up of the machinery to make sure that these goals are attained. The top management does this
planning. It may be a planning for five, or even greater number of years.
The following are some of the advantages of long-range planning.

I) It ensures replacement of capital in time

II) It ensures availability of adequate personnel
III) It ensures that decisions are not taken in haste.
IV) It provides standards for measurement of overall performance.
V) It takes in to account the possible competition and plans how to overcome it.

VI) Ensures that projects are assigned to the executives

Properly.
Standing and single use plans

Plan
38
Standi standing plans
Single use plans

Objective Progra programs

s
Policies Budgets

Projects
Procedure
s
Plans are also classified as standing and single use plans. A standing plan is one, which can be
used over and over again. In other words, they can be applied in similar situations; objectives,
policies, rule, strategies and procedures are kinds of standing plans.
On the other hand, a single use plan is one, which is prepared for a particular situation or a
particular operation. It is also called a specific plan. Standing plans come from top management
while those at the lower levels prepare single use plans.

Objectives
- The first thing for planning will be to lay down objectives. Objectives are what the organization
would like to attain, stated in concrete or non-concrete terms. They are the goals, which an
enterprise would like to achieve. Planning has to b e done within the framework of the objectives.
In the words of Louis Allen "Objectives are the goals established to guide the efforts of the
management and each of its components.
Objectives can be general or specific. General objectives are common to every enterprise. Profit
making is one. The following is a list of objectives, which every enterprise should aim at:
- Maximization of profit
- Reduction in cost

39
 - Optimum use of physical resources
- Procurement of qualified and expert personnel.
- Maintenance of healthy industrial relations etc.
However, apart from general objectives organizations should set out their own objectives.
Preferably, department- wise. These would be referred to as specific objective.
They should be: -
- Within the framework of general objectives.
- In line with the objectives of the departments, other wise there may become
contradiction or overlapping.

Policy
Policies are statements, of those principles and rules that are set up by the executive leadership as
guides and constraints for the thoughts and action of the managers at different levels in the
organization. According to Harold Koontz "Policies are general statements or understandings
which guide or channelize thinking in decision making of the subordinates.
Policies do not require action, but are intended to help managers in their decision commitment;
when they make decisions. The essence of policy is the existence of discretion.
A policy is, thus, a standing plan, which guides managers at all, levels in all departments in taking
decisions on problems likely to come up in the course of working.

Uses of policy
- Helps the manager to make decisions without referring the matter to the higher
authorities.
- It ensures uniformity of action.
- In matters of personnel, it avoids dissatisfaction heart burning, because in the absence
of a policy there are chances that dissimilar decisions may be taken in similar cases.
- Policies give a unified structure to the plan.
- A policy defines the limit within which managerial decisions can be taken.
- It helps in taking prompt decisions.
- It boosts the confidence of the managers.

Procedure

40
Procedure is a type of plan. It lays down the sequence in which operations will be performed.
Sometimes the procedure is laid down in a chronological order. The procedures will lay the
activities step by step by which the work will be performed. Procedures are laid down for routine
matters like payment of wages, traveling allowances, contingencies, purchase of certain items,
handling of cash, raw materials and stores etc. In bigger concerns, they are written in the
company’s handbook. The staff is supplied with a copy of the handbook.
Advantages
- They minimize the burden of decision making of the individual.
- They bring out uniformity, certainty & consistency of action
- They enhance the efficiency
- They help to divide the work
- They help in saving time
- They solve as the basis of evaluation of workers performance

Policy Vs Procedure
Policy and procedure are often mixed up. It is necessary that the distinction between them be
properly understood.
i) In policy, the emphasis is on the general approach, while in procedure it is on the details.
ii) Policy provides a direction; procedure deals with the approach.
iii) Policy is guide to decision making. However, procedure is guide to routine activities.
iv) Policy suggests what to do; procedure suggest; how to do it.

Method
Apart from policy and procedure, there is also the need of laying down the method. In fact, a
policy gives rise to the method. The method tells us the manner of performance. For example in
teaching learning process there are several methods, chalk and talk method, the discussions
method, the question answer method, the case method of study and so on.

Program
Objectives, policies and procedures can be converted into a program. A program will be a course
described step by step, in detail as to how the resources will be applied for each objective. In this

41
 respect, it is a type of plan. A program is a course of integrated action intended to implement the
planned actions. A program gives a concrete shape to the policy and method. In fact, objectives
and policies will be of little use if a program is not made out.
The program may be a standing plan if it can be put to repeated use. Otherwise, it may be specific
in which case it is planned for a single action. Success of a program will near success of
managerial planning.

Budgets
Budgets are the most widely used instrument of planning as well as control. These are often called
numerical plans as they are quantitative in nature.
Financial budgets, also called profit plans are an estimate of revenue and expenditure for one year.
Capital budgets relating to new investment in product diversification, plant expansion, etc may
extend over a period of one year. Non-financial budgets include manpower budgets, performance
budget, material budgets, sales budgets etc.

E) Management by Objectives (MBO)

The phrase Management By Objectives or MBO has become part of the language of managers
throughout the world. In virtually every type of organization-from churches to military, and from
multinational corporations to the family owned grocery store-managers are familiar with the term.
It has appeared under several names: result-oriented management, management by objectives and
results plan management, and management by agreement, to name a few.

George Odiorne has defined MBO as a management process whereby the supervisor and the
subordinate, operating under a clear definition of the common goals and priorities of the
organization established by top management, jointly identify the individual's major areas of
responsibility in terms of the results expected of him or her, and use these measures as guides for
operating the unit and assessing the contribution of each of its members.
MBO involves setting specific, measurable goals with subordinates and then periodically
discussing their progress. In some firms, MBO is the only method used for appraising the
performance of supervisory personnel.

42
 MBO can be used with any employee to make certain that each employee gets timely feed back on
his or her performance.
MBO essentially has four steps.
1. Precisely defining the job that needs to be done. Overall goals are usually are set by
top management; supervisors usually set specific departmental goals.
2. Establishing goals. Supervisors and workers together set attainable, specific
objectives to be achieved over a set period of time.
3. Evaluating results. At the end of the time period, supervisors evaluate how well
objectives have been met.
4. Providing feedback to the subordinate. Subordinates are informed of their
progress, and the process of setting objectives begins again.

Purposes of MBO
The primary purpose of MBO is to improve the effectiveness of the individual and of the
organization as a whole.
It also guides the management process itself.
MBO forces managers to answer the question posed by Peter Drucker: What are the purposes
and nature of organization, and what should they be? After that question has been answered,
clear objectives are established, along with priorities and measurable performance. Then an
environment is created in which employees' exercises self-direction and self-control by monitoring
their results and taking corrective action as needed.

Pitfalls of MBO
The secret of success in implementing and utilizing MBO program is recognizing the pitfalls that
trap a manager. The most common mistakes that managers make in attempting to institute MBO
are these:

Managers fail to support the program fully.

43
 2. Subordinates are not given an equal voice in the setting of the objectives.
3. Managers fail to prepare adequately for evaluation and feedback.
4. Managers fail to recognize that a subordinate can meet an
objective and still have unsatisfactory performance.
Too much paper work is required.
Too many objectives are set.
A system of rewards is omitted.
8. Supervisors are not trained properly in the process and
mechanics involved.
Objectives are never modified.

PART IV ORGANIZING
A) Meaning of organizing
It has been pointed out that planning involves setting objectives and then determining exactly
what to do to attain those objectives.
Of course, no one person can implement all the plans of a modern organization. Nor can one
person do everything to meet the goals set forth in those plans. Planning consequently requires
organizing the efforts of many people. It forces us to address several basic questions:
∗ What specific tasks are required to implement our plans?
∗ How many organizational positions are needed to perform all the required tasks?
∗ How should these positions be grouped?
∗ How these activities are effectively coordinated?
∗ How many layers of management (organizational levels) are needed to coordinate
them?

44
 ∗ How many people should a manager supervise directly?
The answers to these and other questions enable us to create an organizational
arrangement, a structure, for putting plans in to action.
Organizing, another of manager’s major duties involves arranging human and physical
resources to help attain organizational objectives.
Organizing is the development of jobs and the arrangement of them in to structure that will
assure that duties are accomplished in a coordinated way.
The organizing process results in to a hierarchy of tasks and relationships among various
position holders. This leads to the creation of an organization structure or a framework for
decision-making and task performance. This organization structure is called the formal
organization, as it is created and defined by the exercise of executive authority.
It aims at:
I) Defining every employee’s tasks, duties and goals;
II) Establishing authority-responsibility relationships for cooperative and
concerted efforts.
III) Providing a framework of decision making; and
IV) Creating a network of communications for the purpose of achieving the enterprise
objective with optimum efficiency and effectiveness.

B) Basic concepts of organizing.

A number of theories have been propounded from time to time with a view to providing
guidelines for designing organizations. The concept of organization has been a subject of much
controversy with the result that it is not easy to set forth its precise definition. We will briefly
discuss here the classical, bureaucratic, human relations, systems and contingency approaches
to organization.
The classical approach
Fayol proposed that the following principles underlie the designing of organizational
structure: I) division of work; ii) unity of direction; iii) centralization; iv) authority and
relationship; and v) scalar chain. He recognized the tentative nature of these principles and
held that the art of management consisted in selecting the appropriate principles for a given
situation.

45
The Bureaucratic Approach
Max Weber held that in order to maximize the benefits of the bureaucratic form, an
organization should be designed on the following principles:
I) All the activities required for the attainment of organizational goals should be divided in to
highly specialized jobs, so that job holders acquire special abilities in the performance of their
jobs;
ii) Jobs should be performed in accordance with definite policies, rules, and procedures;
iii) Each job holder should be accountable to a superior in the chain of command;
iv) Decisions should be made in a formalistic and personal manner;
v) Employment should be used on the criterion of merit.
The classical principles of organizing formulated by Fayol, and bureaucratic principles
advanced by Max Weber are characterized by marked similarities among them. Central to
both sets of principles of designing the organizations are the concepts of division of work and
specialization, scalar principle or the chain of command, unity of direction, authority-
responsibility relationships and unity of command.
Organizations designed on classical principles were visualized by Fayol to be characterized by
order, stability, initiative and esprit de corps.
Weberian principles of organizing are aimed at attaining the same goals, though stated
differently, namely precision, discipline, reliability, and stability.
Weber views bureaucracy as the only appropriate design, where as Fayol advocated the
classical principles of organizing should be applied with discretion.
The classical as well as the bureaucratic principles have been subjected to much criticism
during recent years. Thompson argues that organizations designed on these principles are
characterized by excessive insistence on procedures and routines, strong attachment to
sub-goals, emphasis on authority-responsibility relationships and resistance to change.
Argyris regards such organizations as damaging to the development of mature employees, and
Etzioni agreeing with both, emphasizes that these types of organizations stifle individual
initiative, and alienate the employees.
Gouldner`s studies also support these views. He found that employees in bureaucratic
organizations tend to gear their activities to the minimum acceptable levels prescribed by the
rules and procedures.

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Organizations designed on classical-bureaucratic principles have also been found to be
mechanistic. They are mainly characterized by :I) division of labor and specialization; ii)
precise definitions of role requirements; iii) use of authority for achieving coordination; and v)
emphasis on positions as means to goal attainment rather than on the goals.
Human Relations Approach: The Hawthorne studies led to the emergence of the human
relations of school of thought, which emphasized the importance of human factor in
organizations. The chief exponents of viewing organizations in terms of a pattern of
interpersonal, group and inter group behavior are McGregor,Likert and Argyris. They
emphasize group oriented management, team work, voluntary cooperation and self control in
place of hierarchical coordination and control; enrich jobs instead of task specialization; broad
span of control with fewer levels in the organizations; management by objectives in place of
close supervision; group decision-making instead of management prerogative; and use of
informal norms and standards in place of policies and rules as framework of decision-making.

The human relation approach has been subjected to severe criticism. It ignores the basic
characteristics of formal organizations that they are deliberately created mechanisms for the
achievement of explicit common goals. It naively assumes that organizations tasks can be
performed by voluntary cooperation resulting from interpersonal and group processes. It
prescribes a universal approach, which is not applicable to all kinds of organizations because
of differences on their goals and environment.
System Theory Approach: Regards organizations as an “open System” which is in a
continuous interact ional and interdependent relationship with its environment, and seeks to
control and adapt it. A system is defined as “anything that consist of interdependent elements.
The behavior or the state of each element is dependent upon the behavior of or state of the
other elements.
According to Argyris, an organization is:
 A plurality of parts;
 Maintaining themselves through their interrelatedness;
 Achieving specific objectives;
 Maintaining interrelated parts.

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Systems approach to organizations is regarded as highly “exacting and expensive” when used for
research. It has limited utility for practicing managers as requires him to comprehend and evaluate
the multiple environmental factors that affect his decisions.
Contingency Approach: Integrates close and open system approach to organization. According
to this approach, an organization has multiple goals and a form and structure. It attempts to attain
its goals by attempting to make rational choices within the constraints imposed by its internal and
external environments.
The ability of an organization to respond to its environment depends on the “strategic choices”
that it makes. These strategic choices or decisions determine organizational goals, its form,
structure, and the manner in which it adapts and influences its environment. The strategic
decisions are in return determined by the internal power policies of an organization, which is the
function of power distribution within it.

The contingency approach is the latest and the most widely accepted view of organization. It
emphasizes that the goals, design and structure of an organization are the function of the
environment within which it operates. It attempts to achieve its goals as efficiently and effectively
as possible by coping with uncertainty resulting from the dynamic nature of its environment.

C. The process of organizing

The organizing process involves:
1. Identification and classification of required activities.
2. Grouping of activities necessary to attain objectives.
3. The assignment of each grouping to a manager with the authority (delegation)
necessary to supervise it, and
4. The provision for coordinating horizontally and vertically in the organization structure.
Organizational structure is the formal pattern of interactions and coordination designed by
management to link the tasks of individuals and groups in achieving organizational goals. The
word “formal” in this context refers to the fact that management typically creates organization
structures for specific purposes and, hence, is official, or formal, outcomes of the organizing

48
 function. Organizations also have informal structures, or pattern of interaction, which are not
designed by management but usually emerge because of common interest or friendship.
Organization structure consists mainly of four elements:
 The assignment of tasks and responsibilities that define the job of individuals and units.
 The clustering of individual positions into units and of units into departments and larger units
to form an organizations hierarchy.
 The various mechanisms required facilitating vertical (top-to-bottom) co-ordination, such as
the number of individuals reporting to any given managerial position and the degree of
delegation of authority.
 The various mechanisms needed to foster horizontal (across departments) coordination, such
as task forces and interdepartmental teams.
The process of developing an organization structure is some times referred to as organization
design.
The Organization Chart: is a line diagram that depicts the broad outlines of an organization’s
structure. Organization charts vary in detail, but they typically show the major positions or
departments in the organization.
They also indicate the way the positions are grouped into specific units, the reporting
relationships from lower to higher levels, and the official channels of communicating information.
Organizational chart for ABC Insurance Company is depicted as under:

Chairman, president,
and chief executive
officer

Secretary

V/P Marketing General V/P Operations V/P – Human V/P Finance

Counsel Resources

Communication Insurance HR -
Internal
Operations Audit
Developmen

49
 Market Support Actuarial Investment
Health Unit

Field Management I Information Real

Management Training Estate
system Financial
Field Management II Analysis

Tax

Every organization, regardless of its size, has two types of organizational structures. These are
formal and informal organizational structures.
Formal Organizational Structure: is a framework of officially established relationship between
divisions (horizontal level) and various management levels (vertical). This structure is an outcome
of the organizing process and is clearly represented by the organizational chart.

Informal Organizational Structure

As discussed above, in all formal structures, there are established policies and channels of
communications, clear lines of authority, and well defined tasks to be performed.
Informal structures, on the other hand, are shadow organizations that evolve through the
personal interactions, sentiments, and social activities of individuals. They are not written down,
they do not have job titles or formal descriptions of authority, yet they are often more influential
than formal structures of authority.
Chester Barnard described informal organization as “any joint personal activity without
conscious joint purpose, even though contributing to joint results”.
Keith Davis on the other hand described informal organization as “ a net work of personal and
social relations note established and required by the formal organization but arising spontaneously
as people associate with on another.
With every formal organization, there exists an informal organization. According to Badway,
because of the spontaneous nature of the informal structure, it does not appear on the
organizational chart Informal leadership and communication channels, lunch at coffee break
conversations, small group interactions, cliques, friendships, group gossip, and grapevines are all
powerful components of the informal structure of an organization. Badway further noted that

50
social, security, and identification needs are usually largely satisfied through the informal
organization system.

2. Basic Principles of Organizational Structure

There are some basic principles and guidelines to follow in designing an organization. These are:
2.1 Authority and power principles
2.2 Division of labor and specialization principles
2.3 Coordination and communication principles.
It is important to keep in mind that this is a practical classification, and should not be considered
as to be exhaustive. However, these principles will enable managers or experts in the field to use
them while designing an organization. Each principle consists of other principles.

2.1 Authority and Power Principles

The authority and power system in an organization is composed of four major principles. These
are:
 Scalar Principle
 Unity of Command
 Authority and responsibility
 Influence, power and Accountability

2.1.1 Scalar Principle

The Scalar principle establishes that authority and responsibility flow from the top management
to the lowest level in an organization. This principle suggests that an employee should not feel
free to contact his immediate boss’s boss. Here, there is no ambiguity about who should report to
whom, since an employee reports to his immediate boss who also in turn reports to his immediate
boss.
2.1.2 Unity of Command
The unity of command principle suggests that an employee should have one boss to whom
he/she is directly responsible. It refers to the reporting relationship in which an employee should
receive orders from and reports to only one boss.

51
This one-man one boss principle has several justifications according to Badway. Hence, the
principle refers to the reporting relationship in which an employee should receive orders from and
reports to only one boss.
This one-man one boss principle has several justifications according to Badway. Hence, the
principle:
 Minimizes duplication and conflict in instruction down the line
 Decreases confusion since every one is accountable to only one boss
 Prevents diffusion since every one is accountable to only one boss
 Prevents diffusion of responsibility since the boss is ultimately accountable for getting
the job done.
 Helps improve communication and promote mutual understanding between the boss
and his subordinate.

2.1.3 Authority and Responsibility

Authority refers to the rights inherent in a managerial position to give orders and expect the
orders to be obeyed. It is legal or institutionalized responsibility. Responsibility, on the other
hand refers to the obligation to perform a task.
Authority is also the right to command subordinates action. The chain of command that limits the
organizational levels in a hierarchy is represented in the organizational chart. Higher-level
positions have greater authority, with ultimate power resting at the top. Authority decreases all the
way to the bottom of the chart.

In practice, the amount of authority a manager can exercise depends on his/her boss's willingness
to let the manager make decisions. When authority is dispersed throughout the organization, it is
said have to be decentralized, when most decisions are made at the top, the organization is
centralized.
Responsibility Vs Accountability
Responsibility which complements authority, is felt obligation, unlike authority, responsibility
cannot be assigned or given away. It must be willingly accepted. For this reason, authority should
be given to managers who are willing to assume equal amount of responsibility.

52
Although accountability can't be delegated, a manager certainly can hold subordinates
accountable for their actions e.g. a manager who uses authority irresponsibly who consistently
makes poor decisions may be reprimanded, may have the authority taken away, or may even be
fired.
2.1.4 Influence, power, and Accountability
Influence is the right to control and direct the actions of others’ by suggestion or example rather
than by command. Power can be defined, as the ability to influence others’ behavior to
accomplish preferred results.
Accountability on the other hand, is the liability created for the use of authority. It is an obligation
to report to one’s superior for the achievement of objectives. It is important to note that
responsibility and authority can be delegated to others, accountability can never be delegated.

2.2 Division of Labor Principles

There are seven major principles relating to how the entire work of an organization is broken
down into components and assigned to individuals or groups. These principles are:
2.2.1 the objectives
2.2.2 Job design and task specialization
2.2.3 Departmentalization
2.2.4 Span of control
2.2.5 Decentralization versus centralization
2.2.6 Delegation
2.2.7 Line-staff relationship
2.2.1 The objectives
Since the organizational structure is a mean toward an end, the preparation of objectives must
precede the design of the organizational structure. Clearly formulated objectives provide the
organization a sense of direction, guide performance, and facilitate the overall management
process.
2.2.2 Job Design and Task Specialization

53
This principle suggests that the overall work of the organization should be divided into specialties.
Here job design refers to the structuring of individual jobs, integrating them within work groups,
and making efficient and interesting. It is important to bear in mind that task specialization largely
depends on the nature of functions to be carried out, technology, staff’s backgrounds, and cost
consideration.
2.2.3 Departmentalization
Departmentalization is a logical grouping of work activities based on expertise, products, markets,
customers, or projects to enhance planning, leading, and controlling. It is classifying
organizational functions and responsibilities into distinct administrative units.
According to Holt, there are four approaches to departmentalization, each based on a different way
of grouping specialists. These approaches are called functional, product, geographic, and
customer patterns of organization.

2.2.4 Functional Departmentalization

Bringing together people with similar skills and expertise, and then giving them authority for
those, expert activities create a functional pattern of an organization. For example, employees in
an accounting department are all responsible in keeping financial records and balance of the
books.
2.2.4.1 Products Departmentalization
An approach to departmentalization based on grouping people according to an organization’s
products or services, with functional activities relocated under product or service divisions.
2.2.4.2 Geographic Departmentalization
An approach to departmentalization based on geography or territory. For example, the
manufacturing function of an organization may have eastern, southern, western and northern
regions.
2.2.4.3 Customer Departmentalization
This is grouping activities based customers’ need. Here organizations organize their employees
and functions according to the type of customers they are going to serve. For example, a hospital
might be organized by separating pediatrics, maternity, cardiac, etc.

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Departmentation is also the arrangement of the work of an enterprise into manageable parts.
Departmentalization involves 3 steps
Step 1- reasonably like or similar tasks are grouped together.
Step 2 - Authority to perform these activities is assigned to a department head, which may be
given one of many titles such as Chief, Vice president, Chairperson, Manager,
Commander, or Administrator.
Step3--The department head accepts responsibility for achieving organizational goals and is held
accountable to a superior for performance.
The goal of departmentalization is to perform the work of an enterprise in the most efficient
manner- that is, to obtain the best possible use of human, material, and financial resources.

Other Bases of Departmentalization

There is no one best way to departmentalize activities or divide the work of an organization.
The four bases of departmentalization that have been discussed are the most common, but an
organization may find it more efficient to organize some or all of its activities on still design plans.
Activities may be organized on the basis of
- Process - Matrix, and
- Project -Task force

 Process Departmentalization: - Some organizations, particularly production enterprises,

group similar manufacturing production processes into departments. This is called Process
Departmentalization.
e.g. Bakery – mixing ingredients, baking, packaging the finished products.
 Project Organization: - is a method of structuring an enterprise in order to carry out a
specific mission. The project may be temporary, such as building a new manufacturing
plant or a new weapons system.
 Matrix organization: - is the grouping of activities according to functional
departments and projects, enabling a dual rather than a single chain of command.

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  Task force Departmentalization: – A task force is a temporary kind of organization
that is formed to study and solve or prepare a recommendation for a unique problem that
will not likely recur. It typically represents an interdisciplinary approach to goal
achievement. A task force is used when no one manager has the expertise to solve a
problem

Guidelines for effective Departmentalization

i) Strive for simplicity: - An organization structure should be as simple as possible.

ii) Commit organizational relationships in writing: – organization should have an

original chart that clarifies relationships among departments, shows lines of authority and
accountability and indicates the chains of command.
iii) Review the structure frequently: - Departmentalization should never be regarded
as finished.

2.2.5 Span of Control

Span of control is also called the “span of management” and the “span of supervision”. The
principle has to do with the number of people who directly report to a given manager or the
number of people whose work a manager can effectively manage. The organizational level, the
nature of tasks, the kind of personnel, and the kind of organization are factors that help to
determine the ideal span of control applicable in a particular situation. This varies from one
situation to another. There is no magic number.
Span of Management can be wider or narrow
If the span of management is too wide (that is, an excessive number of people report to one
manager), subordinates will receive less supervision than they need and various forms of waste
will occur. If the span is too narrow (that is, an excessive number of managers are employed), the
cost of managing will be unnecessarily higher.
Limits of the span of management- V.A Graicunas, a French Management Consultant recognized
three types of relationships i.e.
i) Single direct, ii) Group, and iii) Cross. With this rationale devised a formula that fro
calculating the number of relationships given any number of subordinates, is

n 2n + n-1 Where n = the number of subordinates

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 2

Factors affecting the Span of Management

i) Routines and simplicity of work – Mangers supervising people with simple and
repetitive jobs are able to manage more immediate subordinates than are those who
supervise people with complex, non-repetitive tasks. Tasks are usually more repetitive
at lower levels than at upper levels of an organization.
ii) Geographic dispersion of subordinates: - Normally, there is an inverse relationship
between a managers span of control and the geographic dispersion of his or her
subordinates. e.g. A sales manager whose sales people are scattered over a wide
geographic region cannot supervise as many subordinates as manager can whose
subordinates are in one building.

iii) Subordinates training and experience- the amount of training, experience and ability
that subordinates have is directly related to managers span of control. Knowledgeable
subordinates who work well on their own require less supervision than inexperienced,
poorly trained workers do.
iv) Management by Exception – Management by exception is a philosophy of
supervision that encourages lower level managers to take decisions on routine matters
with in set guidelines. The only time higher-level managers become involved is in
new, exceptional situations. Management by exception therefore requires
decentralized decision- making. A manager who insists on making all decisions,
regardless of their importance, limits his/her span of control.
v) Use of assistants – The number of assistants that a manager has is related to the span
of management. That is, the greater the support given a manager, including the more
assistants the manager has to help handle details, the wider the span of management
can be.
2.2.6 Decentralization Versus Centralization
Decentralization is the degree to which responsibility and decision making authority is dispersed
throughout the organization. In centralized organizations, on the other hand, decisions are
concentrated at the highest level in the organization.

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2.2.7 Delegation
Delegation is the process of partially distributing authority to subordinates for making decisions or
performing tasks. A manger, in order to get things done with and through other people, he must
delegate part of his authority and responsibility to another person. Since at the manger is
ultimately responsible for the achievement of the organizational objectives, he must establish a
system for controlling each person’s performance.
According to Badway, there are many good reasons for delegation, including:
1. Delegating important tasks to subordinates gives them opportunities for valuable training
and skill growth and development
2. Delegating enhances effective communication with subordinates
3. Delegating gives subordinates the opportunity to participate in decision-making and thus
creates a commitment toward putting these decisions into action.
4. Delegating gives, the manger the opportunity to do what he was hired to do managing.
5. It frees a manager from those time- Consuming duties that can be adequately handled by
subordinates and lets the manager devote more time to problems requiring his/her full
attention.
6. Decisions made by lower level managers usually are timelier than those that go through
several layers of management.
7. Subordinate managers can reach their full potential only if given the chance to make
decisions and to assume responsibility for them.
It is important to remember that delegation involves:
 The allocation of duties
 The delegation of authority
 The assignment of responsibility
 The creation of accountability
There are, nevertheless, several reasons why managers hesitate to delegate authority to
subordinates. Some managers feel the need to be in total control of every aspect of an
organization. Others lack confidence in their subordinates or fear the consequences of having
subordinates make decisions. In some instances, subordinates are reluctant to assume an equal
amount of responsibility.

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According to William Newman, subordinates inhibit the delegation process for a variety of
reasons:
 It’s easier to let the boss make the decision; subordinates usually feel that making
decisions is the boss's job.
 Subordinates fear criticism for making bad decision.
 Subordinate managers don't have enough factual information on which to base a
decision.
 Subordinates are already over worked
 Subordinates lack self-confidence
 There is lack of incentive or reward for assuming a greater workload.
Guidelines for effective delegation
- Grant proper amount of authority
- Define the results expected
- Consider the capabilities of the subordinates
- Make that authority is clearly stated
- Modify the authority whenever necessary
- Follow unity of command and chain of command
- Develop a willingness to delegate

2.2.8 Line-staff Relationships

The line employees are those who are directly concerned with primary operations of the
organization. For example, teachers are all line employees in educational institution. Staff
employees, on the other hand, are those who provide advice, service as counsel to the line
employees. Example of staff employees in a business firm is lawyers who give legal counsel to
the top management.
2.3 Coordination and Communication Principles
This principle enables managers to maintain effective coordination among departments, groups,
and individuals. The following major mechanisms, according to Badway, enhance communication
and achieve coordination in the organization.
2.3.1 Formal structure or hierarchy
2.3.2 Policies and procedures

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2.3.3 Informal communications
2.3.4 Committees and task forces
2.3.1 Formal Structure
As discussed earlier, the formal structure is an official relationship among various management
levels on organizational hierarchy. This formal hierarchy is the most basic means of
organizational coordination and is therefore, a central element in any bureaucratic organization. It
is a means for coordinating.
 Tasks
 Communication flows, and
 Decision making up, down, and across the organization.
2.3.2 Policies and Procedures
Policies and procedures are another set of coordination mechanisms. A policy is a set of general
guidelines formulated by the top management to enable lower level mangers in dealing with
organizational problems. Procedures, on the other hand, the step-by-step guides to action. They
eliminate uncertainty in dealing with a recurring situation and ensure conformity and consistency.
Procedures assist employees at any level exactly what to do in the described situation.
2.3.3 Informal communications
The informal communication network is an important medium for coordination. As Badway,
stated, through informal contacts, friendships, and harmonious relationships with people in his and
other divisions or on other level of management, the manager can get faster action and handle
more problems and situations without burdening the formal hierarchy with an excessive number of
rules and procedures.
2.3.4 Committees and Task Forces
Committees and task forces are found in all organizations. Badway identified many good reasons
for the creation of a committee in an organization, including:
• Group judgment can be better than individual judgment
• Cooperation is assured in the execution of plans developed by the committee
• Coordination between various activities and functions can be improved.

D) Organizational Relationships

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 Line and staff positions and their relationships:
Managers in an organization exercise two different kinds of authority:
- Line authority, and
- Staff authority
Line managers are involved in carrying out the primary activities of the organization. Usually
they are involved in either production or marketing. They are the original commanders, the people
who make decisions that relate to the enterprises raison d` etre.
Staff Managers: - on the other hand, serve as advisers and are auxiliary to the organization in
terms of helping it achieve its goals. Staff managers counsel, advise, guide, and serve line
managers. Some common staff activities are public relations, research, accounting, purchasing,
medical services, personnel management, quality control and legal services.

- It is common to refer to staff managers as "advisors" and line managers as

"doers".
The distinction between a line job and a staff job is baffling to most people; even authors of books
on management and organization theory cannot agree on the distinguishing characteristics.
However, the following points may help to determine whether a position is line or staff.
1. Line positions have authority over business operation, such as production and selling
in a manufacturing firm. Sales manager and production supervisor, for example, are
line jobs.
2. People with line positions are responsible for physically producing the product or
service and for selling it.
3. Staff people advice and assist line people. That is the only reason these positions exist.
4. All staff positions are advisory. Staff people may make recommendations, but line
managers retain formal authority and decide what to do with a staff person's advice.

Types of staff positions

Much of the confusion over line and staff positions occurs because we sometimes fail to realize
that there are different types of staff jobs. Many large organizations create as many as four
different types of staff positions.

- Assistant to - Specialized staff and

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 - General staff - Operating services

- Assistant to: - An assistant-to is a personal assistant to someone holding an office

or position that is usually high in the organization.
Duties: - including whatever the boss directs him/her to do so, the assistant
may be
- Trouble shooter
- Speech writer
- Advisor or anything that helps the boss
Although the position is powerful, because of its ties with a high-ranking manager, it carriers no
formal authority over other positions in the organization.
General staff: - The idea of general staff was originally conceived by the military as a way to help
line officers develop strategic battle plans. No single military officer could possibility gather and
analyze all necessary information and make timely decisions without the help of other people.
Consequently, the military begun using planning specialists in areas like Personnel, intelligence,
operations and training, and supply and logistics. These staff officers prepared plans in their own
areas and submitted them to the commanding officer. Today, the general staff assists the general
commanding an army, the general commanding a division, and other, lower-ranking officers.
Recently, large corporations have created general staff positions to help develop strategic, long-
range plans. However, they still are used more in the military and in government than in business.

Specialized staff: - specialized staff positions are filled with people with special training, skills,
and experience. In most cases, they are hired because they have formal, academic training. A
specialized staff includes accountants, computer programmers, personnel managers, engineers,
and corporate attorneys. It is this category that we normally think of as "staff".

Operating services:- most people in operating services have tasks not directly related to the
purpose of the business. Their efforts benefit the entire organization indirectly. For example,
cafeteria workers, custodians, and grounds keepers at a university are not directly concerned with
educating students; nevertheless, their physical contributions to the organization are worthwhile.

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Line and Staff Relationships
Now that we understand the difference between line and staff positions, we need to examine the
authority relationships between them more closely. Three distinct types of authority are evident in
business organizations.

- Line
- Staff, and
- Functional
Line authority: - Line authority enable a manager to tell subordinates what to do. Both line and
staff managers have line authority over their subordinates. This authority is represented by the
chain of command, which links superiors and subordinates from top to bottom in an organization.
Staff authority: - As already pointed out, people in staff positions assist and advise line managers.
They relieve some of the line managers’ burdens by giving them the information they need to
make operational decisions. People in these positions, have the authority to offer advice and make
recommendations, they have staff authority.
Functional authority: - is exercised over people or activities in other departments. Usually
limited in scope and duration, it is exercised one level below the person who has it. The safety
director may be given functional authority over people who work under the production supervisor
when it comes to established safety procedures, for instances. He/she may be given the authority
to direct workers to wear safely goggles, hard hats, and the like. Similarly, the corporate attorney
may exercise functional authority over the vice presidents in hiring. For example, the attorney
may insist that they follow prescribed hiring procedures to assure compliance with federal laws
prohibiting employment discrimination.

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 PART V Staffing
5.1 The meaning of staffing
Staffing is the set of activities aimed at attracting and selecting individuals for positions in a way
that will facilitate the advancement of organizational goals.
Increasingly, companies are recognizing that having committed employees with superior
competencies can represent an important source of competitive advantage. A critical element in
building competitive advantage through people is attracting and hiring the right people through the
recruitment and selection process associated with staffing.

5.2 The staffing process

The staffing process encompasses recruitment, selection, development, evaluation, and
compensation.

5.2.1 Recruitment
Recruitment is the process of finding and attempting to attract job candidates who are capable of
effectively filling job vacancies.

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Job descriptions and job specifications are important in the recruiting process because they specify
the nature of the job and the qualifications required of job candidates. Recruiting can be conducted
both internally and externally.
Internal recruitment: most vacant positions in organizations are filled with through internal
recruitment, the process of finding potential internal candidates and encouraging them to apply for
and/or be willing to accept organizational jobs that are open.
The advantages and disadvantages of internal recruitment are outlined below.
Advantages
1. Candidates are already oriented to the organization.
2. Reliable information is available about candidates.
3. Recruitment costs are lower.
4. Internal morale is increased as a result of upward mobility opportunities.
5. Good performance is rewarded.

Disadvantages
1. There may be few new ideas.
2. Unsuccessful contender may become upset.
3. Selection is more susceptible to office politics.
4. Expensive training may be necessary.
5. Candidates’ current wok may be disrupted.
One major method of recruiting internally is job posting, a practice whereby information about job
vacancies is placed in conspicuous places in an organization, such as on bulletin boards or in
organizational newsletters.

External recruitment
External recruitment is the process of finding potential external candidates and encouraging them
to apply for and/or be willing to accept organizational jobs that are open.
The advantages and disadvantages of external recruitment are depicted below.

Advantages
1. Candidates are potential source of new ideas.

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 2. Candidates may have broader experience.
3. Candidates may be familiar with competitors.
4. Candidates may have new specialties.

Disadvantages
1. The probability of mistake is higher because of less reliable information.
2. Potential internal candidates may be resentful.
3. The new employee may have a slower start because of the need for orientation to the
organization.
4. The recruitment process may be expensive.
A variety of sources exist for obtaining external job candidates. Advertising is generally the most
heavily used recruiting source. Other sources include college recruiting programs, employment
agencies, and referrals by employees.
Rather than focusing on a particular recruitment source per se, recruiters should usually
concentrate first on the types of qualifications that are required and then think of the best way to
locate individuals who have those qualifications.

5.2.2 Selection
Selection is the process of determining which job candidates best suit organizational needs.
During this process, managers must determine the extent to which job candidates have the skills,
abilities and knowledge required to perform effectively in the positions for which they are being
considered.

Major selection methods

More than one selection method is typically used in assessing job candidates. The most prevalent
methods include the use of:
• Application blanks
• Selection interviews
• Tests
• Assessment centers, and
• Reference checks.
An application blank is a form containing a series of inquiries about an applicants` educational
background, previous job experience, physical health, and other information that may be useful in

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assessing individuals` ability to perform a job. It serves as prescreening device to help determine
whether an applicant meets the minimum requirements of a position, and it allows preliminary
comparisons with the credentials of other candidates.
Selection interview is a relatively formal in depth conversation conducted for the purpose of
assessing the candidates` knowledge, skills, and abilities as well as providing information to
the candidate about the organization and potential jobs.
Employment Test is a means of assessing job applicants` characteristics through paper-and-pencil
responses on simulated exercises. Three major types of tests used in the selection process are:
• Ability
• Personality, and
• Performance tests.
Ability test measures mainly mental (such as intelligence), mechanical and clerical abilities or
sensory capacities (such as vision & hearing). Except for measures for sensory capacities, the
tests are usually paper-and-pencil type.
Personality tests are means of measuring characteristics, such as patterns of thought, feelings,
and behaviors that are distinctly combined in a particular individual and influence those
individuals interaction in various situations. Paper-and-pencil personality tests measure such
characteristics as sociability, independence, and need for achievement.
Performance tests are means of measuring practical ability on a specific job.
An assessment center is a controlled environment used to predict the probable managerial
success of individuals mainly on the basis of evaluations of their behaviors in a variety of
simulated situations. The situations are essentially performance tests that reflect the type of work
done in managerial positions.
Reference checks are attempts to obtain job-related information about job applicants from
individuals who are knowledgeable about the applicants` qualifications. Such checks are
conducted to verify information on application blanks and resumes and, sometimes, to collect
additional data that will facilitate the selection decision.
5.2.3 Development and Evaluation
After individuals are hired, both they and their employing organizations will ultimately gain from
efforts aimed at enhancing their knowledge, skills, and abilities. Major approaches to increasing

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the effectiveness of organization members include training and development, as well as
performance appraisal.

5.2.3.1 Training and Development

Training and Development is a planned effort to facilitate employee learning of job-related
behaviors in order to improve employee performance. Experts sometimes distinguish between the
terms “training” and “development”; “training” denotes efforts to increase employee skills on
present jobs, while “development” refers to efforts oriented toward improvements relevant to
future jobs. In practice, though, the distinction is often blurred (mainly because upgrading skills in
present jobs usually improves performance in future jobs).

Phases of the training process

Training efforts generally encompass three main phases. These are:
• Assessment phase
• Training design and implementation phase, and
• Evaluation phase
Assessment phase involves identifying training needs, setting training objectives, and
developing criteria against which to evaluate the results of the training program.
Training requirements are determined by conducting a needs analysis. Needs analysis is an
assessment of an organizations` training needs that is developed by considering overall
organizational requirements, tasks associated with jobs for which training is needed, and the
degree to which individuals are able to perform those tasks effectively.
Training design and implementation phase involves determining training methods, developing
training materials, and actually conducting the training.
Evaluation phase entails evaluating the results of the training in terms of the criteria developed
during the assessment phase.
Types of training programs
The most common types of training programs are:
• Orientation training,
• Technical skill training, and

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 • Management development training.
Orientation training is usually a formal program designed to provide new employees with
information about the company and their jobs.
Technical skill training is oriented toward providing specialized knowledge and developing
facility in the use of methods, process, and techniques associated with a particular discipline or
trade.
Management development training focuses on developing managerial skills for use at the
supervisory, managerial, and executive levels.
5.2.3.2 Performance appraisal
Performance appraisal is the process of defining expectations for employee performance;
measuring, evaluating and recording employee performance relative to those expectations; and
providing feed back to the employee. A major purpose of performance appraisal is to influence, in
a positive way, employee performance and development .In addition, the process is used for a
variety of other organizational purposes, such as determining merit pay increases, planning future
performance goals, determining training and development needs, and assessing the promotional
potential of employees.

5.5.4 Compensation
Compensation consists of wages paid directly for time worked, as well as more indirect benefits
that employees receive as part of their employment relationship with an organization. Wages paid
for time worked are typically payments made in cashable form that reflect direct work-related
remuneration such as base pay, merit increase, or bonuses.
Benefits, on the other hand, are forms of compensation beyond wages for time worked, including
various protection plans (such as health insurance or life insurance).
Benefits are considered a more indirect form of compensation because they are generally not as
closely tied to job and performance issues as other forms of remuneration.

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