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MBAH 401: PRINCIPLES AND PRACTICE OF MANAGEMENT
Workload : 4 hours per week - Total credits 04
1. Introduction: The concept of management; levels and types of managers; Management Roles;
The management process in practice; development of management thought – classical, neo-
classical and modern; An overview of Managerial functions.
2. Planning and Decision Making: Nature and Purpose of planning, types of plans, objectives of
plans, Planning Premises, planning process, limits of planning; decision-making- process of
decision making, types of decisions, techniques in decision making, the rational Model of
Decision Making; MBO - concept and process of managing by objectives; Strategic planning and
implementation - an overview; Planning- control relationship.
3. Organizing: Nature and purpose of organizing; formal and informal organizations; levels and
span of management; Departmentation – line and staff relations; centralization and
decentralization; Delegation of authority; Types of emerging organization structures, organization
design & contingency factors.
4. Staffing: Nature and purpose; an introduction to acquisition, maintenance, development and
retention of personnel in organization.
5. Directing: Introduction to leadership, motivation and communication as managerial functions.
6. Controlling: The control process – common types of standards used in control process –
control technique - factors influencing control effectiveness.
7. Key issues in Modern Management: Management in the 21st century – Manager’s external
environment, Globalization and management, Easternisation of management, Challenges of
multiculturism, Quality Management.
K Deepak Rao, Assistant Professor, A.J

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Institute of Management
CHAPTER –ONE
INTRODUCTION

2
Introduction:
The term management is used in different senses:
* Process, function or activity

* Group of managerial personnel of an enterprise
* Discipline – branch of knowledge
Management is universal in nature as every organization requires

making of decisions, procurement of resources, coordination of
activities, leading of people, and evaluation of performance
directed towards its objectives.
Modern organizations are open systems which has continuous
interface with the external environment.
Strictly speaking it is a functional concept.
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Functional Concept of Management:
* Management is what management does.

* Management is a process.
* Management is the art of getting things done.
* Management is the function of executive leadership.
* Management is the development of people.
* Management is a discipline.

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* Management is what management does.
Peter F. Drucker
“Management is a multi- purpose organ that manages a business
and manages managers and manages worker and work”.
* Management is a process.
Henry Fayol
“ to manage is to forecast and to plan, to organize, to command,
to coordinate and to control”.
George R. Terry
“ management is a distinct process consisting of activities of
planning, organizing, actuating and controlling, performed to
determine and accomplish stated objectives with the use of
human beings and other resources.

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Management is the process of effective utilization of human and
material resources to achieve enterprise objectives.

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* Management is the art of getting things done.
Prof. Harold Koontz
“ Management is the art of getting things done through and
with people in formally organized groups”.
William Spriegel
“ Management is that function of an enterprise which concerns
itself with the direction and control of the various activities to
attain the business objectives. Management is essentially an
execution function, it deals particularly with the actual direction
of the human effort”.

7
Need for Management Principles:
* To increase efficiency
* To crystallize the nature of management
* To train and develop managers
* To influence human behaviour
* To improve research
* To attain social objectives

8
Nature/Characteristics of Management:
* Goal oriented (It co-ordinates the efforts of employees to achieve

the goals of the organization. The success of management is measured
by the extent to which the organizational goals are achieved)
* Economic resource (Management is one of the factors of production
together with land, labour and capital)
* Distinct process (Management is a distinct process consisting of
such functions as planning, organizing, staffing, directing and
controlling)
* Integrative force (The essence of management is integration of
human and other resources to achieve the desired objectives)
* Intangible force (Management has been called as unseen force)
* Results through others
* A science and an art
* System of authority (Management as team of managers represents a
system of authority, a hierarchy of command and control)
* Multi- disciplinary subject
* Universal application K Deepak Rao, Assistant Professor, A.J
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Classification of Managerial Functions:
* Planning
* Organizing
* Staffing
* Directing
* Controlling

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Levels of Management:
* The ‘levels of management’ refers to a line of demarcation

between various managerial positions in an organization.
* The number of levels of management increases when the size of
the business and workforce increases.
* The number of levels of management cannot be increased to an
unlimited extent because it may create problems. It may
complicate the communication process and make coordination
and control difficult.

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Top Level Management:
Top management of a company consists of Board Of Directors

and the Chief Executive or the Managing Director. It is the
ultimate source of authority and it establishes goals and policies
for the enterprise. It devotes more time in planning and
coordinating functions. It is accountable to the owners of the
business for the overall management.
* Top management lays down the objectives of the enterprise.
* It prepares strategic plans and policies for the enterprise.
* It issues necessary instructions for the preparation of
departmental budgets, schedules, procedures etc.
* It appoints the executives of middle level.
* It coordinates the activities of different departments.
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Upper Middle or Intermediate Management:
Upper middle management consists of heads of various divisions.

E.g. Production Director, Finance Director, Marketing director
etc. The Heads of functional divisions are in constant touch with
the top management. They are responsible for the effective
performance of their functional divisions.
* Upper middle management lays down plans and policies for the
middle management.
* They put the top management’s plans into practice.
* They coordinate the functioning of their divisions.
* They appraise and control the functioning of middle
management.

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Middle Level Management:
Middle level management generally consists of heads of functional

departments. They are responsible to the top management for the
efficient functioning of their departments. They devote more time to
the organization and direction functions of the management.
* To cooperate in making a smoothly functioning organization.
* To achieve the coordination between the different parts of the
organization.
Supervisory or Lower Level Management:

Supervisory management refers to those executives whose work is to
oversee and direct operative employees. This level includes
supervisors, foremen, finance and account officers etc. The essential
feature of this level is that managers at this level are in direct contact
with the operative employees. They help in providing training to
workers, To arrange necessary materials, machines , tools etc,
To supervise and guide subordinates, To solve problems of workers.
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Types of Managers:
Functional Managers: A manager responsible for just one

organizational activity such as accounting, human resources,
sales, finance, marketing, or production
* Focus on technical areas of expertise
* Use communication, planning and administration, teamwork
and self-management competencies to get work done
General Managers: responsible for the operations of more
complex units—for example, a company or division
* Oversee work of functional managers
* Responsible for all the activities of the unit
* Need to acquire strategic and multicultural competencies to
guide organization

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Roles of Managers:
A role consists of the behavior patterns expected of a manager

within an organization or a unit. Henry Mintzberg conducted a
comprehensive study of the nature of managerial roles in 1973.
A summary of Mintzberg’s findings gives us a complete picture
of what a manager actually does.
Interpersonal Roles
* A manager is a symbol, or figurehead (It consists of such duties
as signing certain documents required by law and officially
receiving visitors)
* A manger serves as a leader
* A manager serves as liaison

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Informational Roles:
* Monitors (Observes, collects & reviews data on meeting of
standards)
* Managers are Disseminators of information flowing from both
external and internal sources.
* Managers are spokes-persons or representatives of the
organization.
Decision Roles:
* Role of Entrepreneur (Initiates changes, Authorizes action, Sets
goals, formulate plans)
* Disturbance Handler (Mangers react to situations that are
unexpected, such as absenteeism, resignation of subordinates etc)
* Resource allocator ( Approves budget, schedules and
programmes)
* Negotiator (Managers negotiate with customers, suppliers etc)
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19
Development of Management Thought:
Industrial Revolution:
* 1760 – 1820
* Increase in the demand for products - widening of markets –
geographical discoveries of the late 15th and 16th centuries.
* Industries – labour intensive techniques
* Inventors in England – task of finding ways and means to
remove the hindrances in production
Significant contributions of Industrial Revolution
* Growth of engineering industries
* Rise of chemical industries
* Use of power driven machines
* Advancement in coal mining
* Development of means of transport
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Impact of industrial revolution on Management Thought:
* Large scale production

* Change of form of ownership
* Factory system
* Specialization
* Functional specialization

21
Forerunners of Scientific Management / Management in Pre- scientific
Management Period / Management during the period following the
industrial revolution up to 1880
• Robert Owen ( 1771- 1858)

• Prof. Charles Babbage ( U.K., 1792 – 1871)
• James Watt Junior ( U.K., 1796 – 1848) and Mathew Robinson
Boulton ( U.K., 1770 – 1842)
• Charles Dupin (1784 – 1873)
• Henry Robinson Towne ( U.S.A., 1844 – 1924)
• Henry Varnum Poor
• Daniel C. McCallum
• B.Seebohm Rowntree ( U.K., 1871 – 1954)

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APPROACHES TO MANAGEMENT
( Schools of Management Thought)
Traditional School of Management Thought:

* Classical theory (1900-1930)
(a) Scientific Management Approach
(b) Management Process / Administrative Management Approach
(c) Bureaucratic organization Approach
* Neo- classical or Human relations Approach (1930-1950)
* Behavioral Science Approach
Modern Approaches: (1950 to present)
* Quantitative or Management Science Approach
* Decision Theory Approach
* Empirical Approach
* Systems Approach
* Contingency Approach
* Operational Approach
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1) Classical Theory / Structural Theory of
organization
* This Represents the traditionally accepted views about organizations.
* It signifies the beginning of the systematic study of organizations.
* It is the oldest school of thought about organizations and their
management.
* Classical theorists concentrated on organization structure for the
achievement of organizational goals and also developed certain
principles of management.
* Many of the classical concepts and principles hold good even today.
* Several writers like Taylor, Fayol, Weber, Luther, Gulick, Urwick,
Mooney and Reiley and many others contributed to the classical
thought in the early years of the 20th century.
* They placed emphasis on the planning of the work, the technical
requirements of the organization, principles of management and the
assumption of rational and logical behaviour.
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• The classical theory incorporates three view points:
- Taylor’s Scientific Management
- Fayol’s Administrative Management
- Weber’s Ideal Bureaucracy
CLASSICAL THEORY
( focus on management principles for efficient organization)
Scientific Management Administrative Bureaucratic

Approach Functional or Approach
Process Approach
( F.W. Taylor) (Henri Fayol) (Max Weber)

34
Features of Classical Theory:
1. Concentrated on the anatomy of formal organization - emphasis
on division of labour and specialization, structure, scalar and
functional processes and span of control
2. Emphasized organization structure for coordination of various
activities – ignored the role of human element.
3. Ignored the impact of external environment – treated
organizations as closed systems.
4. Efficiency of the organization can be increased by making each
individual efficient.
5. Integration of the organization is achieved through the authority
and control of the central mechanism – it is based on
centralization of authority.
6. People could be motivated by the economic rewards – they are
supposed to be ‘ rational economic persons’.
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Contributions / Merits of classical theory:
1. Provided principles of management which can be applied in

different types of situations– highlighted the universal nature of
management.
2. Management principles are flexible in nature.
3. Focused on the functions of managers in different types of
organizations.
4. Provides a scientific basis for management practice.
5. Emphasised the role of money or financial incentives in
motivating the workers.
6. Gave supreme importance to the organization and its objectives.

36
Criticism of Classical theory:
* Narrow view of organization

* Assumption of closed system
* Assumption about Human behaviour
* Economic rewards as main motivators
* Lack of empirical verification
* Lack of universality of principles
* Excessive emphasis on rules and regulations

37
Scientific management approach:
* Frederick W. Taylor was the first person who insisted on the

introduction of scientific methods in management.
* He launched a new movement in 1910 known as “ Scientific
Management” and known as Father of Scientific Management
* Acc to Taylor “Scientific Management is the substitution of
exact scientific investigations and knowledge for the old
individual judgment or opinion in all matters relating to work
done in the shop”
* Application of science to the management of business concerns

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Principles of Scientific management:
* Replacement of old rule of thumb method

* Scientific selection and training of workers
* Co-operation between labour and management*(Mental
Revolution)
* Maximum output
* Equal division of responsibility
Mental Revolution:*
* Efforts for increase in production
* Creation of spirit of mutual trust and confidence
* Inculcating and developing the scientific attitude towards
problems

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Techniques of scientific management:
• Scientific task setting( fair day’s work)
• Work study
- Method study
- Motion study
- Time study or work measurement
- Fatigue study
• Planning the task
• Standardization
• Scientific selection and training
• Differential Piece – wage plan
• Specialization (‘Functional foremanship’)
- Planning department: route clerk, instruction card clerk,
time clerk and cost and disciplinary clerk
- Getting required Performance: Gang boss, speed boss,
repair boss and inspector
40
Criticism of scientific management:
* The use of word ‘scientific’ before ‘management’ was objected

* Confined only to production management. Ignored other
essential aspects like finance, marketing, accounting and
personnel.
* Taylor advocated the concept of functional Foremanship to
bring specialization in the organization
* Scientific management undermined the human factor in
industry.
* Trade unionists regarded the principles of scientific
management as the means to exploit labour.

41
Management Process School / Administrative
Management/ Functional Approach:
* Management process school is also called the ‘traditional’ or

‘universalist’ school.
* Henri Fayol is regarded as the father of this school.
* The advocates of this school perceive management as a process
of getting things done through and with people operating in
organized groups.
* It regards management as a universal process.
* It looks upon management theory as a way of organizing
experience so that practice can be improved through research,
empirical testing of principles and teaching of fundamentals
involved in the management process.
* Henri Fayol defined management in terms of certain functions
and then laid down 14 principles of management.
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Fayol’s Theory of Management:
Fayol classified all operations in business organizations under the
following 6 categories:
* Technical ( production)
* Commercial ( purchases and sales)
* Financial ( funding and controlling capital)
* Security ( protection)
* Accounting ( balance sheet, costing records)
* Administrative or Managerial ( planning, organizing,
commanding, coordinating and controlling).

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Henri Fayol’s Principles of Management:
* Division of work
* Authority and Responsibility
* Discipline
* Unity of Command
* Unity of Direction
* Subordination of Individual interest to the general interest
* Remuneration of personnel
* Centralization
* Scalar Chain
* Order
* Equity
* Stability of tenure of personnel
* Initiative
* Espirit de corps (Unity in strength)
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Bureaucratic Approach:
* Max Weber contributed the theory of bureaucracy to the management
thought.
* He used the word ‘ bureaucracy’ to refer to a specific kind of
administrative organization.
* Primary contribution - theory of authority structure and his
description of organizations based on the nature of authority relations
within them.
According to Weber, there are three types of legitimate authority:
(1) Rational – legal authority (Obedience is owed to a legally
established position or rank within the hierarchy of a business, military
unit, government and so on)
(2) Traditional authority (leaders are not chosen for their competence)
(3) Charismatic authority (Obedience is based on the followers ‘belief’
that a person has some special power or appeal)
50
Characteristics of Bureaucracy:
* Division of work
* Hierarchy of positions
* Rules and regulations
* Impersonal conduct (total depersonalization)(No room for
emotions and sentiments)
* Staffing (contractual relationship between employee & employer)
* Technical competence ( neither elected nor inherited – appointed
through selection & basis of selection is technical competence)
* Official records (Is supported by an efficient system of record-
keeping)(extensive filing system)

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Merits of Bureaucracy: Demerits of Bureaucracy:
1. Competence 1. Rigidity in operations

2. Rules and regulations 2. Delay and redtapism
3. Rationality 3. Goal displacement
4. Predictability 4. Ineffective communication
5. Efficiency 5. Compartmentalisation of
6. Impartiality activities
6. Empire building
7. Lack of personal touch

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(2) Neo- classical theory or Human relations Approach:
* The neo- classicists focused on the human aspect of industry.

* Emphasized the fact that organization is a social system and the
human factor is the most important element within it.
* Conducted Hawthorne experiments – investigated informal
groupings, informal relationships, patterns of communication, patterns
of informal leadership, etc. – led to the development of human relations
approach.
* Elton Mayo – recognized as the father of the Human Relations
School.
* Concerned with the recognition of the importance of human element
in organizations.
* It revealed the importance of social and psychological factors in
determining worker’s productivity and satisfaction.
* Put stress on interpersonal relations and informal groups at the
workplace. It was instrumental in creating a new image of man and
the work place.
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Basic tenets of Human relations approach:
* The business organization is a social system.

* The behaviour of an individual is dominated by the informal
group of which he is a member.
* An individual employee cannot be motivated by economic
incentives alone. His social and psychological needs must be
satisfied to improve the level of motivation.
* In an organization, it is ultimately cooperative attitude and not
the mere command which yields result.
* Management must aim at developing social and leadership
skills in addition to technical skills. It must take interest in the
welfare of workers.
* Morale and productivity go hand in hand in an organization.

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Factors affecting human relations
WORK
INDIVIDUAL
ENVIRONMENT
WORK GROUP LEADER
1. Individual
2. Work- group
3. Work environment
4. Leader

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Hawthorne Studies:
* For the first time, an intensive and systematic analysis of human
factor in organizations was made in the Hawthorne plant of General
Electric Company, Chicago, manufacturing telephone system bell.
* Team of researchers led by Elton Mayo (psychologist), Whitehead
and Roethlisberger (sociologists), and company representative, William
Dickson.
Conducted various researches in four phases:
* Experiments to determine the effects of changes in illumination on
productivity, illumination experiments, 1924- 27;
* Experiments to determine the effects of changes in hours and other
working conditions on productivity, relay assembly test room
experiments, 1927- 28;
* Conducting plant – wide interviews to determine worker attitudes and
sentiments, mass interviewing programme, 1928 -30;
* Determination and analysis of social organization at work, bank
wiring observation room experiments, 1931 -32.
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Implications/ major findings of Hawthorne experiments:
1. Social factors in output.
2. Group influence/Group Dynamics
3. Informal Organization
4. Informal Leader
5. Supervision.
6. Two-way Communication.
7. Non-Economic Reward
Criticisms of Hawthorne experiments:
• Lack of Scientific Validity
• Limited focus on Work
• Over-emphasis on Group
• Over-stretching on Socio-psychological factors
• Negative View of conflict
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(3) Behavioural Sciences/ Human Behaviour/ Leadership
Approach
• The knowledge drawn from behavioral sciences, namely, psychology,
sociology and anthropology is applied to explain and predict human
behaviour.
• It lays emphasis on the study of motivation, leadership,
communication, group dynamics, participative management, etc.
• Looked at the organization as collectivity of people for certain
specified objectives.
• The study of management must revolve around human behaviour –
since management involves getting things done through others.
• In contrast to Human Relations Approach which assumes that happy
workers are productive workers, Human behaviour approach has been
goal and efficiency- oriented and considers the understanding of
human behaviour to be the major means to that end.
• Emphasises human resources in an organization more as compared to
physical and financial resources.
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Behavioral scientists made the following propositions:
* An organization is a socio- technical system.

* Individuals differ with regard to attitudes, perceptions and
value systems. As a result, they behave differently to different
stimuli under different conditions.
* Attempts should be made to achieve fusion between
organizational goals and human needs.
* A wide range of factors influence interpersonal and group
behaviour of people in organizations.

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Features of Behavioural Science Approach:
1. It is an inter- disciplinary approach and integrates the

knowledge drawn from different disciplines for the study of
human behaviour.
2. It is an applied science with an objective to apply various
researches to solve the organizational problems.
3. It is a normative science which not only suggests cause and
effect relationship but also prescribes ways and means to solve
organizational problems and effect results.
4. It is goal oriented – suggests reconciliation of the goals of the
individuals and the organization.
5. It adopts systems approach which takes into account all the
factors affecting organizational behaviour.
66
(4) Quantitative/ Mathematical/ Operations research/
Management Science Approach
• This school uses scientific tools for providing a quantitative base

for managerial decisions.
• The techniques commonly used for managerial decision- making

include :
- Linear Programming
- Critical Path Method ( CPM)
- Programme Evaluation Review Technique (PERT)
- Games Theory
- Queuing Theory
- Break- Even Analysis, etc.
68
The basic assumptions of quantitative approach are:
1. Organizational efficiency depends upon the quality of managerial

decisions.
2. The problem is expressed in the form of a quantitative or
mathematical model containing mathematical symbols and
relationships.
3. The different variables in management can be quantified and
expressed in the form of an equation.
4. Development of decision- making models may require the skills
of many disciplines such as engineering, mathematics,
economics, statistics, behavioral sciences and cost accountancy.
5. The mathematical models enable the managers to discover
significant relationships between variables that could be
controlled.
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• It has its root in the scientific management movement – Taylor
advocated a logical sequence of problem formulation, fact
finding, modelling, a tentative solution, testing, etc. – his
scientific approach could be classified as an early form of
quantitative approach to management.
• The mathematical formulation enables practicing managers to
discover significant relationships that they could control –
provides a rational base for making decisions with precision and
perfection.
• Widely used in planning and control activities in industrial
organizations.

70
Limitations of Quantitative approach:
1. Its main focus is on decision- making and it ignores other
functions of management.
2. It does not consider the human element in the organization.
3. Quality of decision is based on the quality of the data. If the

data is incomplete or faulty, optimum solutions can’t be obtained.
4. This approach assumes that all variables are quantitable and

measurable which may not be fully true in all cases.
5. The mathematical model used may fail to represent the real

situation because of which decisions taken may not be
practicable.
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(5) Decision Theory Approach:
* In 1950s, this school of management thought was developed.

* It is concerned with rational-decision making by way of
defining problems, development of alternatives, evaluating such
alternatives and choosing the best solution thereof.
* It is through decision-making that managers can discharge
their responsibility.
* Decision theory approach looks at the basic problem of
management around decision-making- the selection of suitable
course of action out of the given alternatives.
* Major contributions in this approach has come from Simon.

72
(6) Empirical Approach:
* The empirical approach is also known as Management

Experience Approach or Case Approach
* It is based on a close study of past experiences of managers
and management cases.
* According to this approach, management is considered a study
of managers in practice.
* The intentions of studying experiences is to draw
generalizations and to develop means of teaching experiences to
other practitioners and students.
The empirical approach emphasizes the most conventional way
of acquiring skills in management, that is, learning through the
experience of others.
73
(7) Systems Approach
• Was developed only in the late 1960s.

• It is an integrating approach which considers management in its
totality based on empirical data.
• A system is a set of inter- connected and interrelated elements
or components parts which are arranged in order and operate
together to achieve certain goals.
• Cleland & King “a system is composed of related and dependent
elements which, when in interaction, form a unitary whole”.
• A system is composed of hierarchy of subsystems.
Parts of a system:
1. Input 2. Process 3. Output
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Open System view of organization
ENVIRONMENT
THE
ORGANISATION
INPUTS OUTPUT
AND
E
MANAGERIAL
Labour PROCESSES
Raw materials Goods and
Technology services
information
FEEDBACK

75
Elements of systems approach:
1. An organization is a unified and a purposeful system.
2. The parts and sub- parts of a system have mutual relationship
with each other.
3. An organizational system has a boundary that determines which
parts are internal and which are external.
4. The parts and sub- parts of a system are arranged in an orderly
manner.
5. A sub- system gets its strength by its association and
interaction with other subsystems.
6. System transforms inputs into outputs.
7. The reaction of the outputs environment is known as feedback.

76
Features of Management as system:
1. Social system
2. Open system view of organization
3. Adaptive system
4. Interdependent subsystems (Production, Sales, Finance)
5. Synergy
6. Multidisciplinary (Psychology, Sociology, Economics,
Anthropology, Mathematics, Operations research etc)
7. Dynamic
8. Multilevel and multidimensional
9. An integrated approach

77
(8) Contingency or Situational Approach:
* Pigors and Myers propagated this approach in the area of

personnel management as early as in 1950. However the work of
Joan Woodward in the 1950s marked the beginning of this
approach.
* The basic idea of this approach is that there cannot be a
particular management action which will be suitable for all
situations.
* An appropriate action is one which is designed on the basis of
external environment and internal states and needs.
* Systems approach does not adequately spell out the precise
relationship between organization and its environment –
contingency approach tries to fill this gap by suggesting what
should be done in response to an event in the environment.
79
* Kast and Rosenzweig – “ the contingency view seeks to
understand the inter- relationships within and among sub-
systems as well as between the organization and its environment
and to define patterns of relationships or configurations of
variables. Contingency views are ultimately directed toward
suggesting organizational designs and managerial actions most
appropriate for specific situations”.
* The application of management principles and practices should
be contingent upon the existing circumstances.
* Functional, behavioral, quantitative and system tools of
management should be applied situation ally.
Three major parts of the overall conceptual framework for
contingency management:
* Environment
* Management concepts, principles and techniques
* Contingent relationship between the first two.
80
Practical utility of Contingency approach:
• Advocates that there is no single best way of managing
applicable in all situations.
• It rejects universality of management concept and it appeals to
common sense.
• Management should match or fit its approach to the
requirements of the particular situation.
• It is action oriented as it is directed towards the application of
systems concepts and the knowledge gained from other
approaches.

81
Implications of contingency approach:
1. Management is entirely situational and there is nothing like universal
principles of management or one best way of doing a particular thing.
What managers do depends on the circumstances and environment.
2. The approach suggests suitable alternatives for those managerial
actions which are generally contingent upon external and internal
environment.
3. It suggests that since organization interacts with its environment,
neither the organization nor any of its subsystems is free to take
absolute action. Rather, it has to modify and adjust the actions subject
to various forces like social, political, technical and economic.
Limitations of contingency approach:
1. Inadequate literature
2. Complex
3. Difficult empirical testing
4. Reactive not proactive
83
(9) Operational approach to management
• Koontz, O’Donnell and Weihrich advocated this approach.

• They have attempted to draw together the pertinent knowledge
of management by relating it to managerial job, i.e., what
managers do.
• Recognises that there is a central core of knowledge about
managing which exists in management such as line and staff,
patterns of departmentation, span of management, managerial
appraisal and various managerial control techniques.
• It regards management as a universally applicable body of
knowledge.

84
Based largely on the following fundamental beliefs that:
1. Management is an operational process initially best
dissected by analyzing the management functions.
2. If the knowledge of management is to be presented
effectively, clear concepts are necessary.
3. Experience with managing in a variety of situations can
furnish grounds for distillation of basic truths – theory and
principles – which have a clarifying and predictive value in
understanding and improving practice.
4. Principles of management can become the focal points for
useful research both to ascertain their validity and to improve
their applicability.
5. Managing is an art that should rely on underlying science –
concepts, theory and principles and techniques.
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Chapter - 02
PLANNING & DECISION

MAKING

86
Introduction
• Planning is the most basic of all management functions.
• Planning logically precedes the execution of all other

managerial functions.
• Planning is unique – it establishes the objectives for the group

effort and lays down steps to accomplish them before the manager
proceeds to perform other functions.
• Planning is an intellectual process of thinking resorted to decide

a course of action which helps achieve the predetermined
objectives of the organization in future.

87
Definitions
Killen – “ planning is the process of deciding in advance what is to

be done, who is to do it, how it is to be done and when it is to be
done”.
Koontz, O’Donnell and Weihrich – “ planning is an intellectually

demanding process; it requires the conscious determination of
courses of action and the basing of decisions on purpose,
knowledge and considered estimates”.
McFarland – “ planning may be broadly defined as a concept of

executive action that embodies the skills of anticipating,
influencing, and controlling the nature and direction of change”.
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Characteristic features of planning
• Planning is looking into the future.

• Planning involves pre determined line of action.
• Planning discovers the best alternative out of available many
alternatives.
• Planning requires considerable time for implementation.
• Planning is a continuous process.
• Planning’s object is to achieve pre determined objectives in a better
way.
• Planning integrates various activities of organization.
• Planning is done for a specific period.
• Planning not only selects the objectives but also develops policies,
programmes and procedures to achieve the objectives.
• Planning is required at all levels of management.
• Planning directs the members of the organization.
• Growth and prosperity of any organization depends upon planning.
89
Objectives of planning
• Reduces uncertainty
• Brings cooperation and coordination
• Economy in operation
• Anticipates unpredictable contingencies
• Achieving the predetermined goals
• Reduce competition

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Nature of planning
• Planning is an intellectual activity.

• Planning is a rational approach.
• Planning involves selection among alternatives.
• Planning is forward- looking.
• Planning is related to objectives.
• Planning is the most basic of all management functions.
• Planning is a pervasive function of management.
• Planning is a continuous process.
• Planning is flexible.
• Planning adopts an open system approach.

91
Importance of planning
• Primacy of planning *
• To offset uncertainty and change
• To focus attention on objectives
• To help in coordination
• To help in control
• To increase organizational effectiveness

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Benefits/ Advantages of planning
• Focuses attention on objectives.

• Ensures economical operation.
• Reduces uncertainty.
• Facilitates control.
• Encourages innovation and creativity.
• Improves motivation.
• Improves competitive strength.
• Achieves better coordination.
• Better utilisation of resources.

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Principles of planning
1. Principle of contribution to objectives.
2. Principle of pervasiveness of planning.
3. Principle of limiting factors.
4. Principle of flexibility.
5. Principle of navigational change.
6. Principle of commitment.
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Steps in planning process
• Perception of opportunities
• Establishing objectives
• Collection and forecasting of information
• Development of planning premises
• Identifying alternatives
• Evaluation of alternatives
• Selection of best alternative
• Formulation of derivative plans
• Establishing sequence of activities
• Appraisal of plans
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Perception of Steps in planning process
opportunities
Forecasting demand,
Planning
Establishment competition,
premises
of objectives government policy,
etc.
Identification
of
Appraisal of alternatives
plans
Establishing Formulation Selection of

Evaluation of
sequence of of derivative best
alternatives
activities plans alternative

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Types/ Methods/ Kinds of Planning
Coverage of activities/ Approach adopted:
Organisational level: 11. Proactive planning
1. Corporate planning (top) 12. Reactive planning
2. Divisional planning ( middle)
3. Sectional planning ( lower) Degree of formalisation:
4. Functional planning 13. Formal planning
14. Informal planning
Focus / Importance of contents:
5. Strategic planning Others:
6. Operational planning 15. Ad hoc planning
7. Tactical planning 16. Standing planning
17. Physical planning
Time period involved:
8. Long- range planning
9. Intermediate planning
10. Short- range planning
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Corporate Planning:
• Defined as a systematic and comprehensive process of planning taking

account of the resources and capability of the organization and the
environment within which it has to operate and viewing the organization
as a total corporate unit.
• George Steiner – “ corporate planning is a process of determining

major objectives of the organization and the policies and strategies
that will govern the acquisition, use and disposition of resources to
achieve these objectives”.
• Is strategic in nature and covers the entire spectrum of organizational

activities.
• Lays down the basic objectives, policies and strategies for the
organization as a whole.
• Formulated by the top level managers and they integrate various
divisional and functional plans of the enterprise.
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Scanning of external environment –
economic, socio- cultural, political,
legal and technological factors
Opportunities
Corporate Action
CORPORATE Mission and Plans and
APPRAISAL Objectives Implementation
Assessment of internal profile of

organization in terms of production,
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marketing, finance, personnel, etc. Institute of Management
Divisional Planning:
* Relates to a particular division or department.
* Sets the objectives, policies and programmes of a particular division
or department in tune with the corporate plans of the enterprise.
Sectional planning:
* Also called as unit planning
* Is highly specific as it is done to achieve the divisional objectives.
* Focus is to lay down detailed plans for a particular unit for the day- to-
day guidance of personnel working there.
Functional planning:
* Is segmental and is undertaken for each major function of the
organization. At the second level, functional planning is undertaken for
sub- functions within each major function.
* It is derived out of corporate planning and therefore, it should
contribute to the latter.
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Strategic planning:
* Is the process of deciding the objectives of the organization
and determining the manner in which the resources of the
enterprise are to be deployed to realize the objectives in the
uncertain environment.
* Strategic plans are made by the top management of the firm
after taking into account the firm’s strengths and weaknesses in
the light of internal and external environment.
* It enables the management to plan for a desired future and to
ensure survival and growth of the organization.

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Characteristic features of strategic planning:
• It emphasises the basic mission and goals of the organization.
• It is a top management activity.
• It is normally long term in nature.
• It provides for coherence in organisation’s policies, decisions and
activities over time.
• It deals with uncertain environment by forecasting opportunities and
threats in the environment.
• It is a comprehensive and unified plan for the deployment of scarce
organizational resources.
• It sets the direction of organizational activities for the attainment of
organizational objectives.

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Significance of strategic planning:
• Enhance the likelihood of business survival and enable to meet the

aspirations of individuals for opportunities in the company.
• Clarifies the objectives of the organization towards which its resources
will be directed.
• Facilitates the implementation of policy and long- range plans for
achieving organizational goals.
• Important in defining the kind of business in which the organization
engages and its reliance on ethical business practices.
• Companies that do strategic planning are able to predict the outcome
of planning better than other companies.
• Is very useful to fight competition in the market and to have control
over the market.
• It facilitates environment scanning – only way to anticipate future
problems and opportunities.
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Broad steps in strategic planning:
* Determination of Mission or Purpose

* Environmental Scanning
* Organizational Analysis
* Developing Strategic alternatives
* Evaluation of strategic alternatives
* Formulation of strategy
* Execution of strategic plan

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Determination of mission Environmental Scanning:
or purpose Opportunities and Threats
Organisational Analysis: Strengths

and Weaknesses
Execution of Strategic
plan Developing Strategic Alternatives
Formulation of strategy Evaluation of Strategic

or Strategic Plan Alternatives
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Limitations of Strategic Planning:
* Requires considerable investment in time, money and human

resources.
* Small organizations can’t afford the costs of carrying out
formal strategic planning.
* It requires trained persons to make use of opportunities.
* It may sometimes restrict the organization to comparatively
risk- free options which will defeat the purpose of strategic
planning.

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Operational Planning:
* “Operational planning is the process of deciding the most

effective use of the resources already allocated and to develop
a control mechanism to assure effective implementation of the
actions so that organizational objectives are achieved”.
* Thus, it is concerned with the efficient use of the resources
already allocated.
* It provides the details of how the strategic plans will be
accomplished.
* An operational plan is often more specific than a strategic plan.

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Strategic Planning v/s Operational Planning
Basis Strategic Planning Operational Planning

Time span It covers a long period of It covers a short- term perspective
time depending upon the upto one year
nature of business and its
environment
Level of It is done by the top level It is done by the middle level and
management managers lower- level managers
Scope It covers the whole It may cover specific departments
enterprise or functional areas of business
Primacy Strategic plans are based on Operational plans are based on
organizational objectives strategic plans and they succeed
and they precede strategic plans
operational plans
Details Strategic plans contain Operational plans contain greater
relatively less details and so details and so are more specific
are less specific
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Resources Strategic plans are Operational plans are made to
concerned with the utilise the given resources
acquisition and allocation of effectively
new resources
Environment Strategic plans are made in Operational plans are focused on
the light of external the internal environment of the
environment. They are firm so as to make effective use of
generally based on long- firm’s resources
term forecasts of
technological changes,
economic changes, socio-
political changes, etc.

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Tactical Planning:
* Tactical plans are made for short- term moves and necessary for
supporting the strategic plans and achieving firm’s objectives.
* They are required to meet the challenges of sudden changes in the
environmental forces.
* The nature of a tactical plan is dictated by the threats posed by the
environment.
Long-range Planning:
* Is the process of establishing long- term goals, working out strategies,
policies and programmes to achieve these goals.
* Long- range planning sets long- term goals and formulates strategic
plans for attaining these goals.
* Is of strategic nature. Generally covers a period ranging from 5
years to 20 years or more.
* Long- range planning is associated with a great deal of uncertainty.
Its success will be determined by the ability of the organization to
predict and deal with the environment.
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Intermediate or Medium- range planning:
* These are made to support the long- term plans.
* Usually covers a period of more than one year but less than five
years.
* The length of period may vary form one business to another
depending on the nature of the business, risks and uncertainties,
government control, changes in technology, nature of market, etc.
Short-range Planning:
* Relates to a period of upto one year. Such plans are made to
achieve short- term goals.
* Is concerned more with the current or near- future operations
of the enterprise.
* Short- range planning is generally action- oriented and is the
responsibility of lower level managers.
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Long-range, Medium- range and Short-range Planning
Basis Long – range Medium – range Short – range

planning planning planning
Time span Generally more More than one year, Restricted upto one
than five years but less than five years year
Focus Focused on the Focused on the long- Main focus is on
external range plans and internal environment
environment of internal environment of of business. Linkage
the business the business between various
elements of business
is greatly emphasized
Uncertainty Is very high Is moderate Is low
Specificity The actions are The actions are The actions are
less specified specified, but details highly specified and
are lacking detailed
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Linkage It is linked with It is linked with long- It is instrumental in
the corporate range planning implementing
objectives medium and long-
range planning
Means Strategies and Policies, procedures, Methods, rules,
long- term programmes and budgets, schedules,
policies are projects are quite often etc., are employed
formulated used

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This classification is based on the organization's response to
environmental dynamics.
Proactive Planning:
* It involves designing suitable courses of action in anticipation of
likely changes in the relevant environment.
* Organizations that use proactive planning use broad planning
approaches, broad environmental scanning, decentralized control, and
reserve some resources to be utilized for their future use.
* These organizations do not wait for the environment to change but
take actions in advance of environmental change.
Reactive Planning:
* Here, organizations' responses come after the environmental changes
have taken place.
* These organizations start planning after the changes take place.
* In such a situation, the organizations lose opportunities to those
organizations which adopt proactive approach.
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Formal Planning:
* Is in the form of well- structured process.
* Generally, large organizations undertake planning in formal
way in which they create separate corporate planning cell placed
at sufficiently high level in the organization.
* These cells monitor the external environment on continuous
basis. The planning process adopted is rational, systematic,
well documented and regular.
Informal Planning:
* Is generally undertaken by smaller organizations.
* The planning process is based on managers’ memory of events,
intuitions and gut- feelings.
* Smaller organizations do reasonably well with informal
planning process since their environment is not complex.
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Ad hoc planning:
* Ad hoc planning committees may be constituted for certain
specific matters.
Standing Planning:
* Standing plans are designed to be used over and over again.
* They include organizational structure, standard procedures,
standard methods, etc.
Physical planning:
* Is concerned with the physical location and arrangement of
building and equipment.
* Examples are city planning and regional planning.

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Types of Plans:
Standing plans & Single- use plans Financial plans & Non- financial
plans
Standing/ Repeated – use plans
a) Objectives b) Policies Financial plans /Cash plans
c) Procedures d) Methods Non- financial / Non-cash plans
e) Rules f) Strategies
Single – use plans/ Ad hoc plans
a) Programmes b) Schedules
c) Projects d) Budgets
Formal plans & Informal plans Specific plans & Routine plans
1. Formal plans Specific plans
2. Informal plans Routine plans
Administrative plans & Operative plans Short- range plans & Long- range
plans
Strategic plans & Tactical plans

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Limitations of Planning:
* Lack of reliable data

* Lack of initiative
* Costly process
* Rigidity in organizational working
* Non- acceptability of change
* External limitations
* Psychological barriers
Measures to overcome the limitations of Planning:

* Setting clear- cut objectives
* Management Information System
* Careful premising
* Business forecasting
* Dynamic management
* Flexibility
* Availability of resources
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Planning premises
Weihrich and Koontz – “ Planning premises are the anticipated
environment in which plans are expected to operate. They include
assumptions or forecasts of the future and known conditions that
will affect the operation of plans”.
Planning premises include both anticipated and known conditions under
which plans are formulated.
Types of planning premises:
External premises and Internal premises

External premises:
• For understanding external factors and premising these, environmental
analysis is undertaken which is the process through which an
organization monitors and comprehends various environmental factors
to identify opportunities and threats that are provided by these factors.
• Environmental analysis helps in formulation of plans, particularly,
strategic, long- term plans.
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Internal premises:
• Various internal premises are related to the events occurring within the
organization like organization structure, management systems, etc.
• Such factors may lie in various functions of the organization.
• These factors may be either strength or weakness of the organization.
• Strength and weakness of an organization can be identified by
corporate or organizational analysis which is a process through which
managers analyze various factors of the organization.
Tangible premises and Intangible premises:

Tangible premises:
• Tangible premises are those which can be expressed in quantitative
terms like monetary unit, unit of product, labour hour, machine hour,
etc.

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Intangible premises:
• Intangible premises are of qualitative nature and cannot be translated
into quantity.
Controllable , Uncontrollable and Semi- controllable premises :
Controllable premises:
• Controllable premises are those that can be controlled by an
organisation’s actions.
• Such premises are mostly internal (policies, system, procedures,
structure)
Uncontrollable premises:
• They are mostly external and cannot be controlled by an
organisation’s actions ( rate of economic growth, taxation policy,
population growth)
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Semi- controllable premises:
• Are those which can be controlled to some extent but not
wholly.
• These are semi- controllable because an organization has some
kind of control over these factors within the overall constraints of
external and internal factors ( pricing policy)
Significance of planning premises:
1. Well organized planning can be done.

2. Risk of uncertainty reduces.
3. Risk of flexibility reduces.
4. Co- ordination becomes effective.
5. Increase in profitability
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Decision making
Definitions:
G. R. Terry – “ Decision- making is the selection based on some

criteria from two or more possible alternatives”.
Thus, decision- making is a process of selection from a set of

alternative courses of action which is thought to fulfill the
objectives of the decision problem more satisfactorily then others.

133
Characteristics of decision- making:
• It is the process of choosing the best course of action from
among the alternative courses of action.
• It is a human process involving to a great extent the application
of intellectual abilities.
• It is the end process preceded by deliberation and reasoning.
• It is always related to the environment.
• It involves a time dimension and a time lag.
• It always has a purpose.
• It involves all actions like defining the problem and probing and
analysing the various alternatives which take place before a final
choice is made.

134
Types of decisions:
1. Routine and Strategic decisions
2. Policy and Operating decisions (e.g., bonus issue)
3. Organisational and Personal decisions
4. Programmed and Non- programmed decisions
5. Individual and Group decisions
Stages in Rational (Scientific) Decision- making:

1. Diagnosing and defining the problem.
2. Analysing the problem.
3. Collection of data.
4. Developing alternatives.
5. Review of key factors.
6. Selecting the best alternative (risk, economy of effort, situation or
timing, limitation of resources)
7. Putting the decision into practice.
8. Follow up.
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Decision making and Problem-Solving Steps:
* Define the problem (deal with the real problem – not its
symptoms)
* Gather information (information that pertains to or can
influence the situation)
* Develop alternatives (Brain storm, Openness)
* Weigh alternatives (Identify important criteria, Identify
important advantages & Constraints)
* Select the best alternative (Suitable, Feasible, Flexible)
* Implement the solution
* Monitor progress and follow up

136
137
Techniques of Decision Making:
* Brainstorming:
Brainstorming is a technique to stimulate idea generation for decision
making. It works on the belief that the more the number of ideas,
greater the possibility of arriving at a solution to the problem that is
acceptable to all.
* Nominal group technique:
In a nominal group technique, the team divides itself into smaller
groups and generates ideas. Possible options are noted down in
writing and the team members further discuss these to narrow down the
possible choices they would like to accept. Team members then
discuss and vote on the best possible choice. The choice that receives
the maximum votes is accepted as the group decision.
* Marginal Cost Analysis:
The technique is also known as marginal costing as under it the
additional revenues from additional costs are compared. Break-even
analysis is the modification of this technique.
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* Paired Comparison Analysis:
Evaluating the relative importance of different options
* Grid Analysis:
Selecting between good options. Evaluate a larger set of options based
on numerous criteria, then weight the importance of each criterion to
derive the best choice.
* Decision Trees:
Choosing between options by projecting likely outcomes. This is a
graph or model that involves contemplating each option and the
outcomes of each. Statistical analysis is also conducted with this
technique.
* Six Thinking Hats:
Looking at a decision from all points of view
* Cost/Benefit Analysis:
Seeing whether a change is worth making
* Multivoting:
Narrows a large list of possibilities to a smaller list of the top
priorities or to a final selection.
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* Operations Research:
Is a scientific method of analysis of decision problems to provide the
executive the needed quantitative information in making decisions.
* Linear Programming:
This is defined as "How could a company with limited resources
make optimum use with their resources, combination for the
achievement of the desired objective, or goal was, the central idea of
this mathematical technique".
* PERT & CPM:
* T-Chart:
This chart is used when weighing the plusses and minuses of the
options. It ensures that all the positives and negatives are taken into
consideration when making a decision.
* Pareto analysis:
This is a technique used when a large number of decisions need to be
made. This helps in prioritizing which ones should be made first by
determining which decisions will have the greatest overall impact.
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Rationality in decision- making:
Rational Economic Model of Decision- making:
• Classical management thinkers stressed that managerial decisions
must be rational.
• They argued that the decision- maker is an ‘ economic man’ and is
guided by economic considerations in choosing solution to a problem.
• He will find the optimum solution to maximize the advantages.
The classical approach is based on the following assumptions:

1. The decision- maker intends to maximize economic gains.
2. He is fully objective and rational, uninfluenced by emotions.
3. He can identify the problem clearly and precisely.
4. He has full information about various alternatives and is able to
evaluate them intelligently to find out which alternative is the best.
5. He has complete freedom to choose the best alternative.

141
• The rational economic model is prescriptive and explains how
decision- makers should behave.
• In real life, the decision- maker cannot be completely rational due to
several constraints.
• The decision- making behaviour is contingent upon personal and
environmental factors.
Administrative Model of Decision- making (Principle of Bounded

Rationality):
Herbert Simon emphasized that a person makes decisions not only on
absolutely logical analysis of facts but also on his intuition, value
system and way of thinking, which are subjective in nature.
Model describes the decision- making behaviour of individuals in actual
practice.
It recognizes that managers are unable to make perfectly rational decisions
due to the following constraints or limitations:
142
• The individual does not study and analyze the problem fully
because of personal bias, indifferent attitude, etc.
• The individual does not have the full knowledge of the alternatives
and/ or their consequences.
• The individual interprets the organizational goals in his own way.
• The individual does not search for the best solution, but for ‘good
enough solutions’.
• The decision- making situation may involve multiple goals all of
which can’t be maximised simultaneously. Further, these goals may
be of conflicting nature.
• The effectiveness of a decision is dependent upon environmental
factors which are beyond the control of decision- makers. Thus, the
consequences of various alternatives cannot be anticipated perfectly
because of uncertain environment.

143
Objectives
Definitions:
Koontz and O’Donnell – “ in management terminology, objectives

are the end- points of a management programme whether stated
in general or specific terms”.
Louis A. Allen – “ Objectives are goals established to guide the

efforts of the company and each of the components”.
Dalton E. McFarland – “Objectives are the goals, aims or purposes

that organization wishes to achieve over varying periods of time”.
Thus, Objectives are the ends towards which the activities of an

enterprise are directed.
144
Characteristics of objectives:
• Objectives are multiple in nature

• Objectives have a hierarchy
• Objectives form a network
• Objectives are both long range and short range
• Business objectives are verifiable
• Business objectives may be specific or general
• Objectives may be tangible or intangible
• Objectives have a priority
• Objectives may clash with one another.

145
Management by Objectives ( MBO)
John Humble – “ MBO is a dynamic system which integrates the

company’s need to achieve its goals for profit and growth with
manager’s need to contribute and develop himself.
Koontz and others – “ MBO is a comprehensive managerial system

that integrates many key managerial activities in a systematic
manner consciously directed towards the effective and efficient
achievement of organizational objectives.
The credit for advocating and popularising the approach of MBO

goes to Peter F. Drucker

146
Traditional objective setting v/s MBO
Traditional objective setting is defined as the process of objectives being

set at the top and then broken down into sub - goals for each level in
an organization. The top imposes its standards on everyone below.
Traditional objective setting is conducted at the top level of a corporation

and then objectives are filtered down to each succeeding level. It is a
top-down approach with the top level management imposing its
standards on members below.
MBO, on the other hand, seeks participative goal setting. This is not to
say top management does not have a say in the objectives. It implies
that organizational goals have been set and now each member will
set his or her own goals. As each member reaches his or her goals, the
organization will also meet its goals.
147
Features or characteristics of MBO:
• Operational technique (Highly practical technique)

• Comprehensive technique
• Participative management
• Result oriented (Performance oriented)
• Systems approach
• Concentration on key result areas
• Periodic review of performance

148
Objectives of MBO:
• To relate individual goals to organizational goals.

• To clarify the jobs to be done and the results expected to be
accomplished.
• To evaluate the performance of the subordinates.
• To enhance the communication between the superior and the
subordinates.
• To stimulate the subordinates’ motivation.
• To increase the competence of the subordinates by placing
responsibility on each manager for achieving results for his part
of the work.
• To serve as a device for integration.
• To serve as a device for organizational control.
149
Steps in Managing by Objectives:
1. Setting of overall specific organizational/ corporate objectives

2. Formulation of Departmental objectives
3. Establishing goals or targets for each individual manager/
subordinates.
4. Establishing check- points or Key Result Areas
5. Follow- up and Periodic review of progress
6. Appraisal of performance and counseling

150
Importance/ benefits /advantages of MBO:
• Increases the participation and involvement of the subordinates in
decision making.
• Provides the subordinates with an opportunity to be self-
motivating by setting their objectives.
• Managers are more committed to the goals fixed – thus the chances
of accomplishment of objectives are much brighter.
• There is integration of individual goals with the goals of the
organization.
• It provides definite performance standards for a just and meaningful
appraisal of the contributions of different units and different managers.
• It is helpful in making a more systematic evaluation of performance.
• It helps the management to cope with the changes in the environment
by compelling it to review the organizational objectives against the
changes in the environment.
• It serves as a device for organizational control.
• It envisages planning. K Deepak Rao, Assistant Professor, A.J
151
Difficulties in Managing by Objectives:
1. Difficulty in setting quantitative targets
2. It is too pressure- oriented and time consuming
3. Emphasis on short- term goals
4. Resistance to change
5. Lack of training
6. Lack of follow-up
7. Rigidity
8. Limited application
9. Costly process
Guidelines for effective implementation of Managing by Objectives:
1. Top management support
2. Education about MBO
3. Active participation in goal setting
4. Decentralisation of authority
5. Orientation of executives
6. Integration of MBO programme
152
Planning –Control Relationship:
Planning is the basic function of every enterprise as in planning we decide what is to
be done, how it is to be done, when it is to be done and by whom it must be done.
Planning bridges the gap between where we are standing today and where we want
to reach.
Controlling means keeping a check that everything is in accordance with plan and if
there is any deviation, taking preventive measures to stop that deviation.
* Planning and controlling functions always co-exist or have to exist together as one
function depends on the other. The controlling function compares actual performance
with the planned performance and if there is no planned performance then controlling
manager will not be able to know whether the actual performance is O.K. or not.
* The planning function is also dependent on controlling function as plans are not
made only on papers but these have to be followed and implemented in the
organization. The controlling function makes sure that everyone follows the plan
strictly. Continuous monitoring and check in controlling function make it possible that
everyone follows the plan.
* Plans are always formulated for future and determine the future course of action for
the achievement of objectives laid down. On the contrary, controlling is looking back
because under it a manager tries to find out, after the work is completed, whether it has
been done according to the standards or not. It is thus clear that planning looks ahead
and controlling looks backwardK or in the
Deepak Rao, past.
Assistant Professor, A.J
153
Chapter – 03
ORGANIZING

154
Organizing:
Koontz and O’ Donnell – “Organization involves the grouping of

activities necessary to accomplish goals and plans, the assignment
of these activities to appropriate departments and the provision for
authority, delegation and coordination”.
Louis A. Allen – “ Organizing is the process of identifying and

grouping the work to be performed, defining and delegating
responsibility and authority, and establishing relationship for the
purpose of enabling people to work most efficiently together in
accomplishing objectives”.

155
Steps involved in the Process of Organization:
1. Determination of objectives
2. Identification of activities
3. Grouping of activities
4. Defining the duties to be performed by various departments
5. Appointment of personnel for various jobs
6. Assignment of duties to the personnel
7. Delegation of authority
8. Establishment of authority- responsibility relationship

156
Nature and characteristics of organization:
1. An organization connotes group of persons.

2. Communication is the nerve system of organization.
3. Organizing is a basic function of management.
4. Organizing is a continuous process.
5. Organizing is always related to certain objectives.
6. Organization connotes a structure of relationships.
7. Organization involves a network of authority and responsibility
relationships.

157
Purpose of Organizing:
- Helps to achieve organizational goal
- Optimum use of resources
- To perform managerial function
- Facilitates growth and diversification

158
Span of management / Span of control
• It represents a numerical limit of subordinates to be supervised

and controlled by a manager.
• Proper span of control is considered a necessity for effective
coordination.
• The view in the traditional theory has been that a small span is
better than a large one because an executive must have direct
contact with his subordinates.
• The ideal ratio was considered to be 15 to 25 subordinates for first
level supervision and 5 to 8 subordinates in executive spans.

160
Impact of span of supervision:
• If the span is large, it means that fewer levels are needed in
the organization – structure would tend to be flat and wide.
• If the span is small, the structure would be narrow and deep
– there would be more levels in the organization.
Wide span of supervision:

• When the span of supervision is wider, the number of
executives needed to supervise the workers will be less
• It costs less money to run a wider span of control
• organization structure will be wide
• number of levels is less
• quality of performance is likely to deteriorate.
• It requires a higher level of management skill to control a
greater number of employees
161
Narrow span of supervision:
• A narrow span of control allows a manager to communicate
quickly
• better personal contacts.
• Feedback of ideas from the workers will be more effective
• facilitates tight control and close supervision.
• sufficient time to an executive for developing relations with the
coordinates.
• an increase in the executive payroll.
• problem of effective coordination of the activities.

162
163
Factors determining span of supervision:
Ability of the managers

Competence and abilities of the subordinates
Time available for supervision
Nature of work
Capacity of subordinates
Degree of decentralization
Delegation of authority
Clarity of plans and definiteness of responsibility
Effectiveness of communication
Control mechanism

164
Forms/ types of Organization Structure
In order to organise the efforts of individuals, any of the following types of
organization structures may be set up:
1. Line, Military or Scalar organization
2. Functional or Staff organization
3. Line and staff organization
4. Committee organization
5. Project organization
6. Matrix organization
1) Line/ Military/ Scalar/ Traditional/ Hierarchical organization:
• Line organization represents the structure in a direct vertical
relationship through which authority flows.
• Simplest form of organization structure.
• The line of authority flows vertically downward from top to bottom
throughout the organization.
• Quantum of authority is highest at the top and reduces at each
successive level down the hierarchy.
• Every person in the organization is inProfessor,
K Deepak Rao, Assistant the direct
A.J chain of command.
165
GENERAL MANAGER
PRODUCTION FINANCE MARKETING

MANAGER MANAGER MANAGER
ASST.
ASST. FINANCE
SUPERINTENDENT MARKETING
MANAGER
MANAGER
SALES
FOREMEN ACCOUNTANTS
SUPERVISORS
WORKERS CLERKS SALESMEN

166
Features of line organization:
Forms a vertical line relationship from top to bottom.
1. There is authority or superior- subordinate relationship in the organization.
2. There is downward delegation of authority and upward flow of
responsibility.
3. No provision for staff officers (experts or specialists) to offer advice to the
line officers.
4. At each level, the executive makes decisions within the scope of his authority.
Advantages of line organization:

1. Very easy to establish and can be easily understood by the employees.
2. Facilitates unity of command and thus conforms to the scalar principle of
organization.
3. Clear- cut identification of authority and responsibility relationship.
4. Ensures excellent discipline in the enterprise.
5. Facilitates prompt decision making.
6. Effective coordination of activities.
7. Communication is easy and quick.
8. System is flexible/ elastic – an executive can easily adjust the organization to
changing condition.
9. Less expensive.
167
Disadvantages of line organization:
• With growth, the line organization makes the superiors too overloaded with
work which in turn will hamper their effectiveness.
• There is concentration of authority at the top. If the top executives are not
capable, the enterprise will not be successful.
• It is not suitable for big organizations because it does not provide specialists
in the structure.
• There is practically no communication from bottom upwards because of
concentration of authority at the higher levels.
• There is the danger that the line authorities may become autocratic or
dictatorial.
Suitability of line organization:

• Small concerns.
• Concerns which have a small number of subordinates.
• Concerns which are engaged in operations which are mainly of routine type.
• Concerns which have straight and simple methods of operations.
• Concerns where activities are performed by automatic machines.
168
2) Line and Staff organization:
• The line executive is often described as the individual who stands in the
primary chain of command and is directly concerned with the
accomplishment of primary objectives.
• Line executives are generalists and do not possess specialised
knowledge which is a must to tackle complicated problems.
• With a view to give specialist aid to line executives, staff positions are
created throughout the structure.
• Staff elements bring expert and specialised knowledge to provide
advice to line managers so that they may discharge their responsibilities
successfully.
• In line and staff organization, the line authority remains the same as it
does in the line organization.
• Authority flows from top to bottom.
• The main difference is that specialists are attached to line managers
to advice them on important matters.
169
BOARD OF DIRECTORS
EXECUTIVE MANAGING CONTROLLER OF

COMMITTEE DIRECTOR FINANCE
MANAGER MANAGER MANAGER

DIVISION A DIVISION B DIVISION C

Line authority Institute of Management
Staff authority 170
Advantages of line and staff organization:
• Specialised knowledge
• Reduction of burden
• Better decisions
• Flexibility
• Unity of command
• Varieties of responsible jobs are available
Disadvantages of line and staff organization:

• There is generally a conflict between the line and staff executives.
• The allocation of duties between the line and staff executives is generally not
very clear which may hamper coordination in the organization.
• Since Staff men are not accountable for the results, they may not be
performing their duties well.
• There is a wide difference between the orientation of the line and staff men.
Line executives deal with problems in a more practical manner. But staff
officials who are specialists in their fields tend to be more theoretical.
171
Line organization v/s Line and staff organization:
Line organization Line and staff organization
1. Line refers to those positions 1. Staff refers to those positions which
which have the responsibility of have responsibility for providing
achieving the primary advice and service to the line in
attainment of organizational
objectives of the organization. objectives.
2. There are no experts to assist 2. There are experts known as staff
and advice the line officials. to assist and advise the line
3. There is no scope of friction officials.
between line and staff. 3. There is always a risk of friction
4. It is not based upon planned between line and staff people over
specialization. their respective roles.
4. It is based upon planned
5. Certain line men become key specialization.
men as they occupy those
5. This is not possible in case of line
positions on which the survival and staff organization as staff
of the organization depends. officials always share credit with
line officials.
172
3) Functional organization or Staff organization:
• Under functional organization, various activities of the

enterprise are classified according to certain functions like
production, marketing, finance, etc., and are put under the charge
of functional specialists.
• A functional in-charge directs the subordinates throughout the
organization in his particular area of business operation.
• Subordinates receive orders and instructions not form one
superior but from several functional specialists.
• The subordinates are accountable to different functional
specialists for the performance of different functions.

173
Features of functional organization:
1. There is specialization in functional organization, as the entire
organizational activities are divided into specified functions.
2. Each functional area is put under the charge of a functional
specialist.
3. If anybody in the enterprise has to take any decision relating to a
particular function, it has to be in consultation with the
functional specialist.
4. Principle of unity of command is not observed.
5. More importance is given to staff specialists or functional
experts.
6. In this type of organization, there are three types of authority
relationships – line authority relationship, staff authority
relationship and functional authority relationship.
174
Advantages of functional organization:
• Principle of Specialisation
• Reduction of workload
• Scope for expansion
• Better control – no scope for one- man control
• Free from technical worries - Line officers are freed from the worries
of technical problems faced by the workers.
• System is flexible.
• Suitable for training young specialists.
• Ensures separation of mental functions from manual functions.

175
Demerits of functional organization:
• Violates the principle of unity of command.

• Operation of functional organization is too complicated to be easily
understood by the workers.
• There are many supervisory staff of equal rank which may lead to
conflicts among them.
• There may be difficulty of coordination as there are several functional
experts in the organization.
• The speed of action may be hampered.
• This system is very expensive.
• This system makes relationship more complex.
• It is very difficult to put this system into operation.
176
MANAGING DIRECTOR
PRODUCTION FINANCE MARKETING PERSONNEL

DIRECTOR DIRECTOR DIRECTOR DIRECTOR
General General General

Manager Manager Manager
Division X Division Y Division Z
LINE AUTHORITY FUNCTIONAL

K Deepak Rao, Assistant Professor, A.J AUTHORITY
177
Line organization v/s Functional organization
Line organization Functional organization

1. The line of authority is 1. The line of authority is
vertical as it follows the functional or diagonal. The
principle of scalar chain. functional manager has authority
over his function wherever it is
performed.
2. Line managers are 2. Functional managers are
generalists. specialists in their respective
areas.
3. There is unity of 3. Unity of command is not
followed.
command.
4. There is loose discipline.
4. There is strict discipline.
5. It is suitable for large scale
5. It is suitable for small operations where expert
scale operations. knowledge in certain fields is a
must.
178
4) Committee Organization
• Committee type of organization is a type of organization in which
the administrative functions are performed by committees.
• Herbert A. Hicks – “ A committee is a group of people who meet by
plan to discuss or make a decision for a particular subject”.
• Louis A. Allen – “ a committee is a body of persons appointed or
elected to meet on an organized basis for the consideration of
matters brought before it”.
• A committee may review budgets, formulate plans, or make
policy decisions. Or the committee may only have power to make
recommendations and suggestions to a designated official.
• A committee may be an advisory committee (a staff committee) or
an executive committee (a line committee).
• Staff committee – gives expert advice on matters referred to it.
• Executive committee – puts things into action.
179
Points to be kept in mind for the successful operation of the
committees:
• The committee should have a clearly stated purpose.
- functions and scope of the committee.
- responsibilities of the committee.
- authority of the committee.
- organizational relationships.
• Members of the committee should be carefully selected.
• The committee should be of proper size.
• The committee should have a capable chairman.
• There should be adequate preparation for the committee meeting.
• There should be adequate follow up.
• The chairman of the committee must be dynamic.
• Meetings must be organized and regulated so that there is no minority
domination. K Deepak Rao, Assistant Professor, A.J
180
5) Project Organization
• Project organization is oriented towards the completion of a big

project or a small number of big projects.
• The project organization is usually structured to facilitate
planning and designing of the product, completion of the
assigned task and phasing out of the project.
• The project led by the project manager consists of specialists
from different departments.
• It involves the horizontal grouping of a number of functions and
creation of a special team called project team.
• It is of a temporary nature.

181
Features of project organization:
• It is the orientation of the organization towards the planning,
execution and completion of a specific project.
• Generally, the project is a single big task or a few big tasks.
• It involves the horizontal grouping of a number of functions and
creation of a special team called project team.
• It is of a temporary nature.
• The project team would be lead by project manager.
Suitability of project organization:

• The project is a one- time assignment with well defined
specifications and the organization wants to continue concentration on
its regular activities.
• The assignment presents a unique or unfamiliar challenge.
• Successful completion of the project is critical for the organization.
• The project must be completed within the given time limit.
182
6) Matrix Organization / Grid:
• Matrix organization is created by merging the two complementary

organizations – the project and the functional.
• The project teams are composed of people from the functional
departments who are assigned to the project for a specific period or for
the duration of the project.
• It is one of the latest types of organizational designs which has been
developed to establish flexible structure to achieve a series of project
objectives.
• It has been evolved as an answer to the growing size and complexity
of undertakings which require an organization structure more flexible
and technically oriented than the traditional line and staff or functional
structure.

183
Organization Structures For The Global Environment:
Organization structures differ greatly for enterprises operating in the

global environment.
The kind of structure depends on a variety of factors, such as the

degree of international orientation and commitment.
Virtual Organization:
The virtual organization is a rather loose concept of a group of
independent firms or people that are connected often through
information technology.

184
A virtual organization is an organization involving detached and disseminated entities
(from employees to entire enterprises) and requiring information technology to support
their work and communication.
Virtual can be defined as "not physically existing as such but made by software to
appear to do so“. in other words “unreal but looking real”.
This new form of organization, i.e., ‘virtual organization’ emerged in 1990 and is also
known as digital organization, network organization or modular organization. Simply
speaking, a virtual organization is a network of cooperation made possible by, what is
called ICT, i.e. Information and Communication Technology, which is flexible and
comes to meet the dynamics of the market.
Alternatively speaking, the virtual organization is a social network in which all the
horizontal and vertical boundaries are removed. In this sense, it is a boundary less
organization. It consists of individual’s working out of physically dispersed work
places, or even individuals working from mobile devices and not tied to any particular
workspace. The ICT is the backbone of virtual organization.
Virtual organization can be thought of as a way in which an organization uses
information and communication technologies to replace or augment some aspect of the
organization. People who are virtually organized primarily interact by electronic
means. For example, many customer help desks link customers and consultants
together via telephone or the Internet and problems may be solved without ever
bringing people together face-to-face.
185
Departmentation
• A department is a work group combined together for performing
certain functions of similar nature.
• The process of division of the enterprise into different parts is
broadly called departmentation or departmentalization.
• Departmentalization leads to grouping of both functions &
personnel who are assigned to carry out allocated functions.
• Every level in the hierarchy below the apex is departmentalised
and each succeeding lower level involves further departmental
differentiation.

186
Advantages of departmentation:
1. Increase in efficiency
2. Fixation of accountability
3. Performance appraisal
4. Better control
Methods of departmentation:
1. Departmentation by numbers
2. Departmentation by function
3. Departmentation by product
4. Departmentation by customer
5. Departmentation by territory
6. Departmentation by process or equipment
187
Choice of method of departmentation:
The choice of a basis of departmentation is affected by the following
factors:
1. Degree of specialization
2. Adequate attention to key areas
3. Coordination
4. Cost considerations
5. Human considerations

188
Composite structure:
Chief Executive
Finance Marketing Production R&D Human Functional

Director Director Director Director Relations
Director
Textile Product
Steel Division
Division
Ginning Spinning Weaving Dyeing Printing Process
Marketing Marketing Marketing Fine

Woolen Coarse & Superfine Customer
Marketing South Marketing North

Territorial
189
Organization structure
• Organization structure is the basic framework within which the
members of an enterprise work together to achieve the common
objectives.
• It is the structure pattern or system of relationships among the
positions and people working together for the attainment of the
common goals or objectives.
• In short, it is the hierarchical arrangement of various positions and
individuals in the enterprise. 1. Tall Organizational Structure
2. Flat Organizational Structure
3. Virtual Organizational Structure
Types of Organization Structure: 4. Boundary less Organizational Structure
There are two important types of authority structure in an organization.
1. Classical organization structure / Tall organization structure

2. Behavioral organization structure / Flat organization structure.

190
Classical organization structure / Tall organization structure
It is usually pyramid in shape.
It is characterised by:
• Centralization of authority at the top.
• Departmentalization of activities or jobs.
• Intense division of labour.
• Hierarchy of commands.
• Narrow span of control or supervision.
• Distance from top to bottom.
• Extended communication lines.
• Impersonality.

191
192
Behavioral organization structure / Flat organization structure:
The behavioral organizations structure is usually flat.
It is characterised by:
• More decentralization.
• Wider span of control.
• More general supervision.
• Less extended communication lines.

193
Factors influencing organization structure:
• Size of the business unit.

• Nature of the business unit.
• Form of ownership of the business unit.
• Goals or objectives of the business unit.
• Number of men working in a concern.
• Skills, attitudes, needs, aspirations, etc., of the personnel.
• Grouping of activities or departmentalization.
• Span of control, management or supervision.
• Authority- responsibility relationships.
• Other factors – technology, external environment, etc.

194
Delegation of Authority:
Delegation means assignment of work to others and granting

them the requisite authority to accomplish the job assigned. OR
Delegation is the entrustment of a part of the work, or
responsibility and authority to another, and the creation of
accountability for performance
Within the framework of the formal organization, there are three

basic organizational relationships – authority, responsibility
and accountability.

195
Advantages of Delegation of Authority:
- Sharing of work – load
- Quick decision – making
- Motivation
- Training
- Better Performance

196
Weaknesses of Delegation in Practice:
Difficulties on the part of superior:

- Lack of receptiveness
- Lack of ability to direct
- Unwilling to let go
- Lack of trust in subordinates
Difficulties on the part of subordinate:

- Lack of self confidence
- Desire to play safe by depending on the boss for all decisions
- Fear of committing mistakes and being criticized by the boss
- Overburden with duties
Difficulties on the part of organization:

- Defective organization structure and non- clarity of authority
responsibility relationships
197
Guidelines for effective delegation:
1. Well- defined goals.
2. Selection and training.
3. Motivation.
4. Communication.
5. Adequate controls.
6. Principles of delegation.
Principles of delegation:
1. Assignment of duties in terms of results expected.
2. Clarification of limits of authority.
3. Parity of authority and responsibility.
4. Absoluteness of accountability.
5. Authority level principle.
6. Unity of command.
7. Effective communication. Institute of Management 198
Centralization of Authority
Centralization of authority means concentration of decision-

making power at the top hierarchy of management.
Under centralization, all important decisions are taken by the top
executives and operative decisions and actions at lower levels in
the organization are subject to the close supervision of the top
executives.
Advantages of Centralization:
- To promote uniformity of action

- To handle emergencies
- To avoid duplication

199
Disadvantages of Centralization:
- There is delay in decision- making because decisions are taken

at the top level.
- There may be problems in communication because of several
layers between the top management and operative workers. As a
result, decisions are not implemented effectively.
- There is no development of lower level employees as they can’t
take decisions independently. (Morale will be low)
- Fortunes of the organization depend upon the health and
vitality of higher level executives.

200
Decentralization of authority
Decentralization means dispersal of decision- making power to

the lower levels of the organization.
OR
Decentralization means reservation of some authority (power to
plan, organize, direct and control) at the top level and delegation
of authority to make decisions at points as near as possible to
where actions take place.

201
Advantages of Decentralization:
- Reduction in the burden of chief executive.

- Quick decisions
- Diversification of activities
- Development of managerial personnel
- Improvement of motivation and morale
Limitations of decentralization:
- It increases the administrative expenses because it requires the

employment of trained personnel to accept authority
- May create problems in bringing coordination among the
various units.
- May bring about inconsistencies in the company.
- It may not be possible because of external factors
202
Distinction between Delegation and Decentralization
It refers to the entrustment of It refers to the systematic delegation of

responsibility and authority from one authority throughout the organization.
individual to another. It can take
place from one person to another and
be a complete process
It can take place from one person to It takes place when delegation is made
another and be a complete process to all the employees at a particular
level
The person who delegates authority Control is exercised in a general
keeps the power to control with manner. The authority to control
himself may also be delegated to lower levels
Delegation is compulsory if an Decentralization is optional.
executive wants to get the help of Management may not find it
others in getting things done necessary to decentralize authority
It establishes superior subordinate It is a step towards creation of
relationship semi-autonomous units.
It is a technique of management to It is a basic philosophy of
get work from the subordinates management which influences the
design
K Deepak Rao, Assistant Professor, A.J of organization structure.
203
Formal organization
It refers to the structure of well defined jobs, each bearing a

definite measure of authority, responsibility and accountability.
Characteristics / features of formal organization:
- It is laid down by the top management to achieve organizational

goals
- It is based on division of labour and specialization to achieve
efficiency in the operations
- The organization does not take into consideration the sentiments
of organizational members
- The authority and responsibility relationships created by the
organization structure are to be honoured by everyone
- It is bound by rules, regulations and procedures
204
Significance of formal organization:
❖ It helps in determining the objectives of various departments and units.

❖ It facilitates the attainment of organizational goals through the
fulfillment of objectives of various departments.
❖ It facilitates optimum use of resources and new technological
developments.
❖ It clarifies authority and responsibility relationships which lead to better
communication.
❖ There is clear cut division of work among the departments and
individuals. As a result there is no overlapping of efforts. This will
avoid wastage of resources and conflicts between individuals.
❖ The creation of chain of command from top to bottom indicates
avenues for promotion and the qualifications needed to hold a higher
level job. Employees are motivated to work for personal advancement.
❖ It brings about stability in the enterprise through procedures, policies,
rules and regulations. K Deepak Rao, Assistant Professor, A.J
205
Informal organization
It refers to the relationship between people in the organization

based on personal attitudes, emotions, likes, dislikes, etc.
Informal groups may be based on common taste, language,
culture or some other factor.
It is also known as ‘ Shadow Organization’ as it exists along with
the formal organization.
They are not preplanned, but they develop automatically through
continuous interaction between people.
Formation of informal organizations is a natural process.
The membership of informal organizations is voluntary.

206
Significance of informal organization:
- It serves as a very useful channel of communication in the

organization. (The informal communication is very fast)
- It gives support to the formal organization.
- Informal organization gives psychological satisfaction to the

members.
- The informal leader lightens the burden of the formal manager

and tries to fill in the gap in the manager’s abilities.

207
Formal Organization v/s Informal Organization
Basis Formal Organization Informal Organization
Objectives It is consciously created to It has no predetermined

achieve predetermined objectives. It is created
objectives because of the interaction
among people in the formal
organization .
Structure It is an official hierarchy of Its structure is based on
relations. It refers to the human emotions and
structure of well defined sentiments. It refers to the
authority and responsibility personal relationships which
relationships. develop automatically when
people work together.
Formation Formal relations are well Informal relations are
planned and are created unplanned and they
deliberately. originate automatically.

208
Chain of command Formal organization follows Informal organization does not
the official chain of have a fixed chain of
command which can’t be command. It is based on the
changed. Communication sentiments of the members.
has to follow formal There are no fixed patterns of
channels. communication.
Stability Formal organization is The life of informal groups is
usually stable. It continues generally short. They can
to exist even if some disintegrate if some members
members leave it. leave the organization or get
transferred to some other
department.
Authority Formal authority is Informal authority is personal
institutional i.e., it attaches i.e., it attaches to a person. It
to a position and a person flows downward, upward and
exercises it by virtue of his horizontally. Formal authority is
position. It flows downward replaced by informal influence.
as it is delegated.
209
Leadership The managers who have Informal leaders are not
formal authority provide appointed, but chosen by the
leadership to the workers. group members.
Human Relations Formal organization reflects Informal organization reflects
technological aspect of the human aspect. It is based on
organization. It does not take the attitudes, likes and dislikes,
care of human sentiments. tastes, language, etc., of
people.
Flexibility It follows a rigid structure of It is loosely structured and is
relationships. The lines of highly flexible in nature. There
communication and flow of are no barriers to downward,
authority are pre-decided. upward or horizontal
communication.
Pattern of behaviour It has a prescribed pattern It develops social norms of

of behaviour for its behaviour through mutual
members. There is a system consent. Rewards include
of reward and punishment to satisfaction, social esteem,
regulate the behaviour of recognition, etc., and
members. punishments include isolation,
boycott, etc. 210
Contingency Factors Affecting Organisational Design:
(i) Strategy:
Logically structure follows strategy because organisational structures
are built to achieve objectives by implementing the strategies.
When strategy changes, structures must change. At the corporate level,
strategies are formulated based on the company’s mission and strategic
goals or objectives.
(ii) Environment:
Environment has an impact on decision making – specifically the
difficulty of making decisions in an uncertain or unpredictable
environment. Similarly, the stability and predictability of the
environment have a direct bearing on the ability of the organization to
function effectively. An unstable environment that changes rapidly and
is less predictable has two requirements:
i. The organization must be able to adapt to change, for which it
needs to be flexible and responsive.
ii. The organization needsK greater coordination among departments.
Deepak Rao, Assistant Professor, A.J
211
(iii) Size of the organization:
The number of employers working in an organization indicates its size.
It is observed that large organizations differ structurally from small
ones in terms of division of labour, rules and regulations, performance
appraisal and budgeting procedures.
(iv) Age of the organization:
With age; an organization incorporates standardized systems,
procedures and regulations. Like people, organizations evolve through
stage of life cycle – birth, youth, midlife and maturity. In the birth
stage, the organization created by the entrepreneur is informal, with no
rules and regulations. Decision making is centralized with the owner
and tasks are not specialized.
(v) Technology:
Some kind of technology is used to convert the resources into outputs
in every organization. Technology includes the knowledge,
machinery, work procedures, and materials that convert the inputs
into outputs. The technology used to manufacture the products decides
the kind of the organization for the production system.
212
Topics for Assignment I
* Types of authority relationships

* Sources of Authority
* Power, Sources of Power
Date of submission: 21-11-2016

213
CHAPTER – FOUR
STAFFING

222
Introduction:
* Previously considered to be a part of organization function of
management .
* Presently recognized as a separate management function.
* Staffing assumes greater importance because of sophisticated
technology, increasing size of organization & complex behavior
of human beings.
As a separate function of management concerned with human
resource planning, recruitment & selection, placement,
training, growth and development, appraisal & remuneration
of workers.
It involves determination of manpower requirements of the
enterprise & providing it with adequate competent people at all
levels.
223
Definition:
According to koontz and O’ Donnell, “ The management function

of staffing involves managing the organization structure through
proper and effective selection, appraisal and development of
personnel to fill the roles designed into the structure.”
According to S. Benjamin, “ Staffing is the process involved in

identifying, assessing, placing, evaluating and directing
individuals at work.”
According to Luther Gulick and Lyndall Urwick, “ Staffing is the

whole personnel function of bringing in and training the staff and
maintaining favoring conditions of work”.

224
Nature & Characteristics:
* Concerned with assessment of the manpower requirements,

recruitment and selection of personnel, training and development
of the personnel and the periodic appraisal of the performance of
the personnel.
* Aims at selecting right people for right jobs at right time and
retaining them in the organization
* Separate managerial function
* Staffing is a continuous function
* It has to follow a logical sequence
* The magnitude of the staffing function in an organization
depends upon the size of the undertaking, the nature of the
undertaking the philosophy of the management, the type of
management practices adopted, the success of the enterprise.
225
* Deals with current as well as the future manpower
requirements of the concern.
* Staffing function is a line responsibility. Even an organization
where there is a separate personnel department, staffing is the
responsibility of the line managers. The personnel department is
essentially a staff department.
* Staffing function is performed by every manager right from
the board of directors down to the superintendent. However the
responsibility for staffing function increase as one goes up in the
organization hierarchy.

226
Need, Significance & Importance of Staffing:
* Staffing function has assumed greater significance because of a

number of factors.
* Almost all the big organizations have separate personnel department
to look after this function.
* Ensures that all the positions in the organization are occupied by right
persons.
* Ensures quality personnel.
* Improve the efficiency of personnel and the productivity of the
organization.
Factors that have increased the significance of staffing are-
- Advancement of technology
- Increasing size of organization
- Long range needs of manpower
- High wage bill
- Recognitions of human relations
227
Objectives of Staffing:
* Proper estimation of man power requirements

* Scientific recruitment, selection and training of personnel
* Effective utilization of manpower
* Adequate personnel development programme
* Provision of adequate compensation to personnel

228
Factors Affecting Staffing:
External factors
* Nature of competition for Human Resources
* Legal Factors
* Socio-cultural factors
* External influences
Internal factors
* Organizational business plan
* Size of organization
* Organizational Image
* Past practices

229
Factors Affecting Staffing
INTERNAL ENVIRONMENT
Internal Factors EXTERNAL ENVIRONMENT
External Factors
Promotion policy Labor Laws
Future Growth plans of Organization Pressure from Socio-political group
Technology Used Competition
Support from Top Management Educational Standards
Image of the Organization Other external factors

230
Steps Involved in Staffing:
* Manpower planning
* Recruitment and selection
* Induction and orientation
* Training and development
* Performance appraisal

231
Steps in staffing
Manpower planning
Recruitment
Selection
Orientation & Placement
Training and development
Employee remuneration
Performance Evaluation, Appraisal
Promotion and Transfer

232
* Manpower planning / Human resource Planning:
According to Geisler “Manpower planning is the process-

including forecasting, developing, implementing, and controlling-
by which a firm ensures that it has the right number of people and
right kind of people, at the right place, at the right time, doing
things for which they economically more suitable”.
Importance of MRP/Human resource planning:
- Defining future personnel need
- Coping with changes
- Providing base for developing talents
- Increasing investment in human Resources
- Forcing Top Management to involve in staffing

233
Steps in Manpower Planning
• Analysing the current manpower
– Type of organization
– Number of departments
– Number and quantity of such departments
– Employees in these work units
• Making future manpower forecasts-
– Expert Forecasts
– Trend Analysis
– Work Load Analysis
– Work Force Analysis
• Developing employment programmes
• Design training programmes
234
* Recruitment & Selection:
According to Werther and Davis “ Recruitment is the process of finding
and attracting capable applicants for employment. The process begins
when new recruits are sought and ends when their applications are
submitted.
Sources of Manpower:
Advertisement
Employment Agencies
On campus recruitment
Deputation
Employee recommendations
Labour unions
Gate hiring
Selection:
Selection involves choosing the fit candidates, or rejecting the unfit
candidates, or a combination of both.
235
Internal sources External Sources
Transfers Factory gate hiring
Promotions Unsolicited applicants
Employee referrals Job portals (monster.com, naukri.com)
Lay-off University or institute campus
Circulars Public Employment exchange
Notification Labour contractors
Extension of services Head hunters
Informal Search Internships
Employment Agencies/ Consultancies
Poaching / Raiding
E-Recruitment
Internships
Outsourcing
Walk-in Interviews
Advertisement
K Deepak Rao, Assistant Professor,Tele
A.J recruiting 236
Recruitment: Indian Experiences
• Pepsi:
Pepsi is a flat organisation. There are a maximum of four reporting

levels. Executives here emphasise achievement, motivation, the
ability to deliver come what may. As the Personnel Manager of Pepsi
Foods remarked “we hire people who are capable of growing the
business rather than just growing with the business”. Recruitees
must be capable of thinking outside the box, cutting the cake of
conventional barriers whenever and wherever necessary. They must
have a winner’s mindset and a passion for creating a dynamic
change. They must have the ability to deal with ambiguity and
informality.
237
• Reebok:
As Reebok’s customers are young, the company places emphasis on youth. The
average age at Reebok is 26 years. Employees are expected to have a passion for
the fitness business and reflect the company’s aspirations. Recruitees should be
willing to do all kinds of job operations. The willingness to get one’s hands dirty is
important. They must also have an ability to cope with informality, a flat
organisation and be able to take decisions independently and perform consistently
with their clearly defined goals.
• Indian Hotels
The Taj group expects the job aspirants to stay with the organisation patiently and
rise with the company. Employees must be willing to say ‘yes sir’ to anybody.
Other criteria include: communication skills, the ability to work long and stressful
hours, mobility, attention to personal appearance and assertiveness without
aggression.

238
Stages In Selection Procedure
- Preliminary interview
- Receipt of applications
- Screening of applications
- Employment tests
a) Intelligence tests
b) Aptitude tests
c) Proficiency tests
d) Interest tests
e) Personality tests
d) Interview
- Medical examination
- Reference checking
- Final selection

239
* Placement and Induction:
- After a candidate is selected for employment, he is placed on the

job.
- Initially, the placement may be on probation, the period may
range from six months to 2 years.
- Induction is the technique by which a new employee is
rehabilitated into the changed surroundings and introduced
to the purposes, policies and practices of the organization,
employee’s job and working condition, salary, perks etc.
- It is the process of introducing the employee to the organization
and vice versa

240
* Training & Development:
- Training is imparting and developing specific skills for a particular
purpose
- According to Edwin Flippo training is “ the act of increasing the skills
of an employee for doing a particular job.”
- Training is a process of learning a sequence of programmed
behaviour.
Methods of Training:
Demonstration Job instruction training Apprenticeship
Coaching/ Understudy Job Rotation Participation in deliberations
Lectures and conferences Syndicate Simulation training
Role playing In- basket Exercise Case study
Management Game Sensitivity Training

241
* Performance Appraisal:
According to Beach “ performance appraisal is the systematic

evaluation of the individual with regard to his or her performance
on the job and his potential for development.”
It is process of process of evaluating the performance and

qualifications of the employee in terms of the requirements of
the job for which he is employed, for the purposes of
administration including placement, selection for promotion,
providing financial rewards, and other actions which require
differential treatment among the members of a group as
distinguished from actions affecting all members equally.

242
Reasons WHY people Leave:
* Manager’s poor supervision

* Lack of growth potential
* Lack of recognition
* Do not enjoy their job
* Inadequate pay
* Job is not challenging
* Overwork
* Work life imbalance
Managing Employee Retention:
* Identify the cost of employee turnover

* Understand why employee leave(exit interview)
* Implement retention strategy
243
Employee Retention Strategies:
* Right people
* Employee empowerment
* Employee being the most valuable asset
* Believe in your employees
* Provide them information and knowledge
* Feedback on their performance
* Recognize and appreciate
* Keep their morale high
* Create a “ healthy environment
* Hire the best and avoid the rest
* Orientation program for new employees
* Provide flexible work place
* Learning new skills and advancing their career is as important as the
money they make
* Early warning detection system
* Look for triggers
* Identify and weed out poor managers
244
Managers Role in Employee Retention Strategy:
* Creating motivating environment

* Standing up for the team
* Providing coaching
* Delegation
* Extra responsibility
* Focus on future career

245
HRM Implementation Activities:
* ACQUISITION:
Acquisition duties consist of human resource planning for employees,
which includes activities related to analyzing employment needs,
determining the necessary skills for positions, identifying job and industry
trends, and forecasting future employment levels and skill requirements.
The acquisition function also encompasses activities related to
recruiting workers, such as designing evaluation tests and interview
methods.
* DEVELOPMENT:
The second major HRM function, human resource development, refers to
performance appraisal and training activities. The basic goal of
appraisal is to provide feedback to employees concerning their
performance. This feedback allows them to evaluate the appropriateness
of their behavior in the eyes of their coworkers and managers, correct
weaknesses, and improve their contribution.
246
* COMPENSATION:
Compensation, the third major HRM function, refers to HRM
duties related to paying employees and providing incentives for
them. HRM professionals are typically charged with developing
wage and salary systems that accomplish specific organizational
objectives, such as employee retention, quality, satisfaction, and
motivation.
* MAINTENANCE:
The fourth principal HRM function, maintenance of human
resources, encompasses HRM activities related to employee
benefits, safety and health, and worker-management
relations.
It is concerned with the process of retaining the employees in
the organization.
247
CHAPTER – FIVE
DIRECTING

248
Definition & Meaning:
Dale – “ direction is telling people what to do and seeing that

they do it to the best of their ability. It includes making
assignments, explaining procedures, seeing that mistakes are
corrected, providing on-the-job instructions, and, of course,
issuing orders”.
Direction involves communicating and providing leadership and
motivation to the people to contribute to the best of their
capabilities for the achievement of objectives of the enterprise.

249
Elements of Direction:
* Issuing of orders that are clear, complete and within the

capabilities of subordinates to accomplish.
* Continuous training activity in which subordinates are
instructed to carry out the particular assignment in the existing
situation.
* Motivation of subordinates to try to meet the expectations of
the manager and
* Maintaining discipline and rewarding those who perform
properly.

250
Features of Direction:
* Managerial function
* Continuous activity
* Pervasive function
* Communication
- Linear (one-way)
- Circular (two-way)
Principles of Direction:
• Principle of harmony of objectives
• Principle of maximum individual contribution
• Principle of unity of command
• Principle of direct supervision
• Principle of effective communication
• Principle of effective leadership
251
Leadership:
Meaning and Definition
* Leadership is a process of influence on a group.

* Leadership is a ability of a manager to induce subordinates to
work with confidence and zeal.
* It is the driving force which gets things done by others.
Chester Barnard viewed leadership as the quality of behaviour of
individuals whereby they guide people or their activities in
organizing efforts.
In the words of Louis A. Allen, “ A leader is one who guides and
directs other people. He gives the efforts of his followers a
direction and purpose by influencing their behaviour.

252
Functions:
• Determination of goals
• Organisation of activities
• Achieving Coordination
• Representation of group
• Providing Guidance
• Inspiration of employees
• Building employees’ Morale
• Facilitating Change
Characteristics of Leadership:
• It is a process of influence
• Related to situation
• It is the function of stimulation
• It gives an experience of helping attain the common objectives
• Employees must be satisfied with the type of leadership provided.
253
Styles of leadership
• Leadership style refers to a leader’s behaviour.
• Behavioural pattern which the leader reflects in his role as a

leader is often described as the style of leadership.
Different types of leadership styles are:

1. Autocratic / Authoritarian Leadership
a) Strict autocrat
b) Benevolent autocrat
c) Manipulative autocrat
2. Participative/ Democratic Leadership
3. Free rein/ Laissez Faire Leadership
4. Paternalistic Leadership
256
Autocratic or Authoritarian Leader:
• Gives orders which he insists shall be obeyed. He determines policies
for the group without consulting them & does not give detailed
information about future plans. He gives personal praise or
criticizes to each member on his own & remains away from the
group. All decision making power is centralized in the leader
• Autocratic leadership may be negative because followers are
uninformed insecure & afraid of leaders authority. Such leader is
called strict autocrat.
• Leadership can be positive when the leader may use his power to
disperse rewards to his group. When his motivational style is positive
he is called benevolent Autocrat
• Manipulative Autocrat who makes the subordinates feel that they
are participating in decision making process even though he has
already taken the decision.
• It permits quick decision making.

257
Leadership Styles
Based on Use of
Authority

258
Participative or Democratic Leader – is one who gives orders
only after consulting the group, sees to it that policies are worked
out in group discussions & with the acceptance of the group.
Decisions arise from consultation with the group members &

participating by them.
• It increases the acceptance of managements ideas
• It improves the attitude of employees towards their jobs & the
organization
• It increases the co-operation between management &
employees.
• It leads to reduction in the number of complaints & grievances
• It increases the morale of the employees.
259
Free Rein or Laiseez Faire Leader:
Such a leader does not lead but leaves the group entirely to
itself.
* He avoids power .
* He depends largely upon the group to establish its own goal
& work out its own problems.
* It ignores the managers contribution in the same way as the
autocratic management ignores that of the group.
There is least intervention by the leader, avoids authority &
letting the group to operate entirely on its own.
This leadership can get good & quick results if the subordinates
are highly educated & brilliant people who have a sincere desire
to go ahead & perform their responsibilities

260
A
Autocratic leadership
B C D
Participative leadership
E A C
A
B C D
Free rein leadership

D E K Deepak Rao, Assistant Professor, A.J
261
Likert’s Management Systems and Leadership
• System 1- Exploitative Authoritative
• System 2- Benevolent Authoritative
• System 3- Consultative
• System 4- Participative (Democratic)
• Likert sought to measure & evaluate the actual patterns of
management in a wide range of organizations within the
framework of his four systems. He found that most individual
managers & organizations fit into 1 or the other of his systems in
terms of certain operating characteristics related to such variables
as goal setting, decision making communication & control

262
Likert’s Management Systems and Leadership
System 1- Exploitative Authoritative-Managers makes all the work related

decisions & order their subordinates to carry them out. Standards &
methods of performance are also set. Communication is highly formal
& downward. Subordinates have no say.
System 2- Benevolent Authoritative- not fully Autocratic. Sometimes they
give flexibility& faithful subordinates. They are very harsh with the
subordinates who do not carry out their tasks. Motivation is carrot &
stick approach
System 3- Consultative- set goals & issue general orders after discussing
with subordinates. Take only major decisions. There is 2 way
communication.
System 4- Participative (Democratic)- relations between managers &
subordinates are cordial & friendly. Group approach is adopted in
supervision & control. Managers are very supportive. They not only
use economic rewards but also try to give their subordinates a feeling
of worth & importance
263
Leadership Theories
There are three main theories that attempt to explain Leadership.
1. Personality Trait Theories
2. Behavior theories
3. Contingency Theories
• According to the trait theories, leaders possess some personality

traits that non leaders do not possess at all, or possess only to
small extent.
• The behavior theories explain the behavior characteristics of the
leaders.
• Contingency deals with leadership in different situations

264
Trait Theory
• Earlier researchers believed that there were certain unique

characteristics in people that made them leaders.
• According to them, a person must possess certain unique
personality traits that are essential for effective leadership.
• One of the trait theories is the “Great man theory” which
emphasized that leaders might not be born with the desired
leadership traits but can be acquired by learning and experience.
• Great man approach actually emphasizes “charismatic”
leadership.
• Researchers also tried to study the relationship between physical
traits and leadership, but were unsuccessful to establish a valid
relationship.
265
Traits of an effective leader
• Intelligence
• Physical features (height, weight, physique, health, appearance)
• Inner motivation
• Maturity
• Vision & foresight
• Acceptance & responsibility
• Open mind & adaptability
• Self confidence
• Human relations attitude
• Fairness & objectivity (Free from bias, prejudice)
266
Behavior Theories
• The behavioral theorists concentrated on the unique behavioral

aspects found in leaders that enabled them to attain effective
leadership.
• Following are the our main behavior theories of leadership

- The Ohio State studies
- Universities of Michigan studies
- The Managerial Grid
- Scandinavian studies

267
The Ohio State Studies
• In 1945 researchers from various fields conducted studies on leadership at
Ohio State university - The research was based on a questionnaire called
‘Leader Behavior Description Questionnaire’.
• They narrowed down to two independent dimensions along which an
individual’s leadership behavior could be studied.
1. Initiating Structure – Individual’s ability to define his own task as well as the
subordinates tasks and also accomplish them in time. People who score high
in this dimension put pressure on subordinates to meet deadlines and
maintain certain level of performance.
2. Consideration – This refers to the extent to which a leader cares for his
subordinate, respects their ideas and feelings and establishes work relations
which are characterized by mutual trust and respect.
The studies revealed that the people who scored high on both the dimensions
were able to achieve higher performance as well as job satisfaction.
268
University of Michigan studies
• A research was conducted at the Survey Research Centre at the
University of Michigan.
• The research was conducted on twelve pairs of sections, each
section consisted on one high producing section and one low
producing section.
• During the study, researchers also interviewed 24 supervisors and
400 workers.
Following was observed.

1. Employee-oriented dimension
2. Production-oriented dimension
Researchers concluded that leaders with an inclination towards

employee-oriented dimension resulted in higher job satisfaction
and greater productivity.
269
The Managerial Grid
• By Robert R. Blake and Jane S. Mouton
• The Managerial Grid graphic below is a very simple framework

that elegantly defines FIVE basic styles that characterize
workplace behaviour and the resulting relationships.
• The FIVE managerial Grid styles are based on how two

fundamental concerns (concern for people and concern for
results) are manifested at varying levels whenever people
interact.
The concept distinguishes 5 different leadership styles, based on the

concern for people and the concern for production:
270
(High)
Managerial Grid
9 1-9 9-9
8 (country club) (Team)
Concern for people
7
6
5 5-5
4 (Middle Road)
3
2 (Impoverished) (Task)
(Low)
1 1-1 9-1
0 1 2 3 4 5 6 7 8 9
(Low) Concern for production (High)
271
272
Impoverished style (Low Production / Low People) (1:1)
• Description: A delegate-and-disappear management style. A basically
lazy approach.
• Characteristics: The manager shows a low concern for both people and
production. He (or she) avoids to get into trouble. His main concern is
not to be held responsible for any mistakes.
• Results in: Disorganization, dissatisfaction and disharmony due to lack
of effective leadership.
Country Club style (Low Production / High People)(1:9)
• Description: One-sided, thoughtful attention to the needs of employees.
• Characteristics: The relationship-oriented manager has a high concern
for people, but a low concern for production. He pays much attention
to the security and comfort of the employees. He hopes that this will
increase performance. He is almost incapable of employing the more
punitive, coercive and legitimate powers. This inability results from
fear that using such powers could jeopardize relationships with the
other team members.
• Results in: A usually friendly atmosphere, but not necessarily very
productive. K Deepak Rao, Assistant Professor, A.J
273
Produce or Perish style OR Authoritarian style(High Production / Low
People)(9:1)
• Description: Authoritarian or compliance leader.
• Characteristics: The task-oriented manager is autocratic, has a high
concern for production, and a low concern for people. He finds employee
needs unimportant and simply a means to an end. He provides his
employees with money and expects performance back. There is little or
no allowance for cooperation or collaboration. He pressures
his employees through rules and punishments to achieve the company
goals. Heavily task-oriented people are very strong on schedules. They
are intolerant of what they see as dissent (it may just be someone's
creativity).
• Results in: Whilst high output is achievable in the short term, much will
be lost through an inevitable high labour turnover.

274
Middle-of-the-road style (Medium Production / Medium People) (5:5)
• Description: The manager tries to balance between the competing goals of
the company and the needs of the workers.
• Characteristics: The manager gives some concern to both people and
production, hoping to achieve acceptable performance. He believes this is
the most anyone can do.
• Results in: Compromises in which neither the production nor the people
needs are fully met.
Team Management style (High Production / High People).(9:9)
• Description: The ultimate. The manager pays high concern to both people
and production. Motivation is high.
• Characteristics: The manager encourages teamwork and commitment
among employees. This style emphasizes making employees feel part of
the company-family, and involving them in understanding organizational
purpose and determining production needs.
• Results in: Team environment based on trust and respect, which leads to
high satisfaction and motivation and, as a result, high production.
275
Scandinavian Studies
• The previous three behavior theories did not take into account the
dynamics, or even chaotic environments that influence the
modern organizations.
• Some Finnish and Swedish theorists began reviewing earlier
theories to find new dimensions that could incorporate the
dynamics of the environment.
• The new dimension found was called as ‘development–oriented
behavior’.
• According to this dimension leaders were ready to experiment
with new ideas and practices and embrace change.
• Leaders who were inclined towards this dimension were found to
be more efficient by the subordinates.
276
Contingency Theories
• According to the contingency approach of leadership, a single

leadership style is not applicable to all situations.
• Every leader is to carefully analyze the situation before adopting a

style that best suits the requirements of the situations. Below are the 5
contingency models of leadership styles.
1. Fiedler’s Contingency
2. Model Hersey and Blanchard’s situational theory
3. Leader-member exchange theory
4. Leadership-participation model
5. Path Goal Theory
277
Fiedler’s Contingency Theory
• The Fiedler contingency model is a leadership theory of industrial and

organizational psychology developed by Fred Fiedler.
• Fiedler (1967), differentiated situation from contingency. He

emphasized the fact that differing roles, traits and behaviours of leaders
did not just require an specific understanding of interactions with
subordinate, it also required favourable conditions.
• Fiedler's model assumes that group performance depends on:

Leadership style, described in terms of task motivation and relationship
motivation.

278
Situational favorableness, determined by three factors:
1. Leader-member relations - Degree to which a leader is accepted and
supported by the group members.
2. Task structure - Extent to which the task is structured and defined,
with clear goals and procedures.
3. Position power or the leader’s position - The ability of a leader to
control subordinates through reward and punishment.
• High levels of these three factors give the most favourable situation,
low levels, the least favourable. Relationship-motivated leaders are
most effective in moderately favourable situations. Task-motivated
leaders are most effective at either end of the scale.
• Fiedler suggests that it may be easier for leaders to change their

situation to achieve effectiveness, rather than change their leadership
style.
279
Hersey and Blanchard’s situational theory
• The situational leadership model focuses on the fit of leadership style
and followers maturity .
• In contrast to Fiedler’s contingency leadership model and its
underlying assumption that leadership style is hard to change, the
Hersey-Blanchard situational leadership model suggests that successful
leaders do adjust their styles.
• The situational leadership model views leaders as varying their
emphasis on task and relationship behaviors to best deal with different
levels of follower maturity.
• The two-by-two matrix shown in the figure indicates that four
leadership styles are possible.
Telling Style — giving specific task directions and closely supervising

work; this is a high-task, low-relationship style.
Selling Style —explaining task directions in a supportive and persuasive
way; this is a high-task, high-relationship style.
Participating Style —emphasizing shared ideas and participative
decisions on task directions; this is a low-task, high-relationship style.
Delegating Style —allowing the group to take responsibility for task
decisions; this is a low-task, low-relationship style.
280
Leader-member exchange theory
• According to this theory, leaders often behave differently with different

subordinates. They establish close relationships with a small group of
subordinates early in their interactions.
In-Group :Good relation with leaders and high frequency of interactions.

Out-Group: Formal relation with leader and less frequency of interaction
compared to in-group.
The theory suggests that the leaders give promotions to the in-group
employees quickly and also that employee turnover rate in such groups
is low.

281
Leadership-participation model
• In 1973 Victor Vroom and Philip Yetton came up with the leadership-
participation model that tried to establish relation between leadership
behavior and the decision making style.
• As per them leaders are required to adapt their behavior to suit changes
in the situations.
• The model proposed a sequential set of rules that could help the
managers in taking decisions in different situations.
• The model had 12 contingencies also called as ‘problem attributes’ and
5 alternative leadership styles.
• The Problem Attributes were categorized into decision-quality and
employee acceptance.
Decision-quality – cost considerations, information availability, nature of

problem structure.
Employee acceptance – need for commitment, their prior approval,
congruence of their goals
282
Path Goal Theory
• This theory was developed by Robert House.
• Here the leader provides the necessary support and guidance to his
followers and help them achieve organizational goals.
• Leader defines the individual(or groups) goals and help them achieve
them.
• As per the theory – Leaders are accepted by the subordinates when
They find that the satisfaction of their needs depend upon their effective
performance.
They are provided with guidance ,support, and rewards needed for
effective performance.
Robert House suggested 4 types of leadership by this model
1. Directive leadership
2. Supportive leadership
3. Participative leadership
4. Achievement-oriented leadership.
283
Motivation
Definition and meaning
Dalton E. McFarland - “ Motivation refers to the way in which urges, drives,
desires, aspiration, strivings or needs direct, control or explain the
behaviour of human beings.
• Motivation is an important function which every manager performs for
actuating the people to work for the accomplishment of objectives of the
organisation.
Nature of Motivation
1. Motivation is an internal feeling
2. It is a continuous process
3. It is a complex process
4. Motivation is different from satisfaction
5. Motives of an individual change from time to time, even though he may
continue to behave in the way.
284
A simple model of motivation
Needs
Tension
Goals Behaviour
F (Motive)
Reduction of tension Goals Goals not

Achieved achieved
Frustration

285
Theories of Motivation
1. Maslow’s Need Hierarchy Model

2. Herzberg’s Motivation - Hygiene Model
3. McGregor’s ‘Theory X’ and ‘Theory Y’
4. Ouchi’s Theory Z
5. McClelland’s Three Need Model
6. Vroom’s Valence – Expectancy Theory
7. Porter and Lawler’s Model
Types of Motivation
1. Carrot and stick approach
2. Financial and non - financial incentives
286
Maslow’s Need Hierarchy Model
Needs ca be arranged from the lower to the higher
- Physiological Needs - breathing, food, water, sleep, shelter, air
etc . Survival & maintenance of human life.
• Safety: security of body, of employment, of resources, of morality,
of the family, of health, of property
• Social Need – Man is a social being & he is interested in
conversation, sociability, exchange of feelings & grievances,
recognition , belongingness etc
• Esteem: self esteem, confidence, achievement, respect of others,
respect by others. They are also called as egoistic needs. They are
concerned with prestige & status of the individuals
• Self- actualization: the need to fulfill what a person considers to be
his mission in life. Morality, creativity, problem solving, lack of
prejudice, acceptance of facts.
287
Implications for management
• There are opportunities to motivate employees through management
style, job design, company events, and compensation and packages
• Physiological needs: provide lunch breaks, rest breaks and wages that
are sufficient to purchase the essentials of life
• Safety needs: create a sense of community via team based projects and
social events
• Esteem needs: recognize achievements to make employees feel
appreciated and valued. Offer job title that convey importance of the
position
• Self-actualization: provide employees a challenge and the opportunity
to reach their full career potential
• Not all the employees are driven by the same needs - To motivate an
employee, the manager must be able to recognize the needs level at
which the employee is operating, and use those needs as levers of
motivation. K Deepak Rao, Assistant Professor, A.J
288
Herzberg’s Motivation Hygiene Theory/ Two Factor Theory
• A significant development is distinction between motivational and

maintenance factor in job situation.
• A research was conducted by Herzberg and his associates based on the
interview of 200 engineers and accountants who worked for eleven
different firms in Pittsburgh area.
• These men were asked to recall specific incidents in their experience
which made them feel either particularly good or particularly bad about
jobs.
• The findings of the research were that good feelings in the group under
test were keyed to the specific tasks that the men performed rather than
to background factors such as money , security or working conditions
when they felt bad, it was because of some background factors which
caused them to believe that they were treated unfairly.
289
• This led to draw a distinction between ‘Motivators’ and ‘Hygiene
factors’
• To this group of engineers and accountants, the real motivators were
opportunities to become more expert and to handle more demanding
assignments.
• Thus Hygiene factors provide no motivation to the employees, but the
absence of these factors serves as dissatisfier.
Two – factor theory distinguishes between:
Motivators that give positive satisfaction, arising from intrinsic conditions

of the job itself, such as recognition, achievement, or personal growth.
Hygiene factors that do not give positive satisfaction, though dissatisfaction

results form their absence. These are extrinsic to the work itself, and
include aspects such as company policies, supervisory practices, or
wages/ salary. K Deepak Rao, Assistant Professor, A.J
290
Herzberg’s Maintenance and Motivational factors
MAINTENANCE OR HYGIENIC MOTIVATIONAL FACTORS

FACTORS
1. Company policy and 1. Achievement
administration. 2. Recognition
2. Technical supervision 3. Advancement
3. Inter- personal relations with 4. Work itself
supervisor 5. Possibility of growth
4. Inter- personal relations with 6. Responsibility
peers
5. Inter- personal relations with
subordinates
6. Salary
7. Job security
8. Personal life
9. Working conditions
10.Status
291
McClelland’s Three Need Model
David C. McClelland model concerns three motives
1. The need for achievement - the desire to excel and succeed
2. The need for power – the need to influence the behaviour of others.
3. The need for affiliation – the desire for interpersonal relationship
Everyone possesses these needs in varying degrees. However one of the needs
will; tend to be more characteristic of the individual rather than the other two.
Individuals with a high need for achievement thrive on the jobs & projects
that tax their skills & abilities. Such individuals are goal oriented in their
activities, seek a challenge & want relevant feedback.
Individuals with high affiliation needs value interpersonal relationship &

exhibit sensitivity towards other peoples feelings.
But individuals with high power needs seek to dominate, influence or have
control over people. K Deepak Rao, Assistant Professor, A.J
292
Vroom’s Valence – Expectancy Theory
• Vroom offered an expectancy approach to the understanding of
motivation.
• According to him, a person’s motivation towards an action at any
time would be determined by his anticipated values of all the
outcomes of the action multiplied by the strength of that person’s
expectancy that the outcome would yield the desired goal.
• Motivation is a product of the anticipated worth to a person of an
action & the perceived probability that persons goals would be
achieved
Force = Valence x Expectancy
• Force= strength of a person’s motivation
• Valence = strength of an individual’s preference for an outcome or
goal
• Expectancy = probability that a particular action will lead to a
desired outcome
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The Porter and Lawler Motivation Model

294
Porter and Lawler’s Model
Perceived
Value of Ability equitable
reward rewards
Intrinsic
rewards
Efforts Performance
accomplishment
Extrinsic
rewards satisfaction
Perceived Role
effort reward perception
probability

295
McGregor’s Theory X and Theory Y
He propounded 2 contrasting theories of human behaviour caled Theory X and
theory Y. they are are theories of human motivation created and developed by
Douglas McGregor.
Theory X
• ‘authoritarian management’ style
• The average person dislikes work and will avoid it if he/she can.
• Therefore most people must be forced with the threat of punishment to
work towards organisational objectives.
• Most people lack ambition. They are not interested in achievement. They like
to be directed.
• Most people have little capacity for creativity in solving organisational
problems.
• Most people are indifferent to the organisational goals.
• Motivation of average human beings occurs at the physiological and safety
levels.
• Carrot and stick approach to motivation is followed.
• Theory X suggests that threats of punishment & strict control are the
ways to manage people. Suggested autocratic style of leadership
296
Theory Y
• ‘participative management’ style.
• Effort in work is as natural as work and play, if the conditions are
favourables.
• People will apply self- control and self- direction in the pursuit of
organisational objectives, without external control or the threat of
punishment.
• Commitment to objectives is a function of rewards associated with
their achievement.
• The average human being learns under proper conditions, not only to
accept but also to seek responsibility.
• The capacity to exercise a relatively high degree of imagination,
ingenuity and creativity in the solution of organisational problem is
widely, not narrowly, distributed in the population.
• The intellectual potentialities of the average human being are only
partially utilized under the conditions of modern industrial life.
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Theory X Theory Y
1. Based on the assumption that people 1. Based on the assumption that
are basically lazy and so shirk work. people like work as children like
2. People do not take initiative. They play.
like to be directed. 2. People like to take initiative. They
3. People avoid responsibility seek self- direction.
whenever possible. 3. People assume responsibility gladly
4. For getting things done, people must if conditions are favourable.
be supervised closely and strictly. 4. People do not require close and
5. Autocratic style of leadership is strict supervision for performing
likely to be more effective. their jobs.
6. Applicable to illiterate, unskilled and 5. Democratic/participative style of
lower-level workers. leadership is likely to be more
7. Believes in mental sickness and so effective.
negative motivation of employees. 6. Applicable to educated and skilled
employees who occupy higher
positions in the organisation.
7. Believes in mental health and so
positive and intrinsic motivation of
employees.
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Ouchi’s Theory Z
William Ouchi made a comparative study of American and Japanese
management practices.
Japanese Management American Management
1. Lifetime employment 1. Short term employment
2. Slow advancement 2. Rapid advancement
3. Collective decision making 3. Personal decision making
4. Group responsibilities 4. Individual responsibility
5. Holistic concern for 5. Segmented concern for
employees employees
6. General career 6. Specialisation in careers

299
Theory Z
Characteristics of Japanese management:

1. Emphasis on group
2. Emphasis on human relations
3. Role of top management
Japanese management can be characterized by the following principles
- An emphasis on the group rather than the individual- they are joining
for life “us against them” mentality against the competitors- not the
workers against the management
- An emphasis on human rather than functional relationship(housing
facilities, welfare facilities & counseling services)
- A view of top management as generalists & facilitators rather than
as decision makers (group decision making is encouraged)

300
The features of Theory Z or US- Japanese system of management are as
follows:
1. Strong bond between the company and the employees.-life time
employment , retrenchment , lay off is avoided. Paternalistic style
2. Employees’ participation.- decision making under theory Z is less
centralized & more consensus seeking
3. Mutual trust- between employees, supervisors, work groups, unions
& management which would make employees committed to the
organization
4. Integrated structure- No formal structure, no chart or visible
structure employees must develop the team spirit ( basket ball –no
reporting relationship players play together)
5. Human Resources Development- develop new skills among the
employees, job enlargement, career planning , socialization,
technical training, research & development are encouraged
6. Informal Controls- reduce formal controls, managers shld emphasize
mutual trust & co-operation rather than authority over their
subordinates
Thus, Theory Z is a comprehensive philosophy of management

301
Types of Motivation
1.Carrot & stick Approach-

This approach consists of forcing people to work by threatening
to punish or dismiss them or to cut their reward if they do not
work. The assumption is that people would work if they are
driven by the fear of punishment. In recent times this approach
has become less effective because people expect more from their
jobs rather than mere money.
2. Financial & non financial Motivators-

An incentive has a motivational power.

302
Financial incentives- flow of money from the organization to its
staff e.g.- wages, salaries, allowances, bonus, fringe benefits
Non financial incentives– they do not add to the money income
of those who receive them e.g.- praise, opportunity for growth,
job enrichment, participative management.
• Financial incentives are meant to satisfy those needs which
money can buy. But non financial incentives satisfy, ego,
sense of responsibility, career advancement, status, freedom,
self actualization etc
• Financial incentives are tangible non financial incentives are
intangible
• Financial incentives are used to motivate workers & non
managerial employees. But non financial incentives motivate
managerial & higher level personnel
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Communication:
“Communication is exchange of facts, ideas, opinions or

emotions, by two or more persons” – George Terry
Communication means to inform, tell, show, or spread
information.
It can be interpreted as an interchange of thought or information
to bring about greater understanding and confidence, leading to
better industrial relations.

304
Nature:
* It is a process
* Inevitable
* Intentional or unintentional
* Systematic
* Two-way traffic
* Social process
* Dynamic process
* It is a life blood of business
* Continuous process
* Interaction and transaction
* Needs proper understanding
* Leads to achievement of the organisational objective
* Dispels misunderstanding
* Pervasive
* It shares thoughts and ideas, which produce response

305
Role of communication
• Better planning
• Effective operations
• Decision making
• Controlling
• Co-ordination
• Motivation
• Better human relations
• Worker’s participation
• Facilitation of change
• Public relations

306
Purpose of communication
• To keep employees informed of company’s progress
• To provide employees with orders and instructions in
connection with their duties
• To solicit information from the employees which may aid
management
• To make each employee interested in his respective job and in
the work of company as a whole
• To express management’s interest in its personnel
• To reduce or prevent labour turnover
• To indoctrinate employees with the will to work and the
benefits derived from their association with the company
• To instill each employees with personal pride in being member
of the company
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Functions of communication
• Information sharing • Good industrial relations

• Feedback • Development of managerial
• Influence skills
• Problem solving • Ensuring effectiveness of
• Assists in decision making policies
• Facilitating change • Motivating people
• Group building • Performance feedback
• Gate keeping • Job instruction
• Conveying the right • Controlling people
message • Spreading rumors
• Helps in coordination of • Emotive function
effort

308
Process of Communication:
* Elements of the communication process

- Sender/ encoder/ speaker
- Receiver/decoder/listener
- Message
- Medium
- Feedback
sender encoding message channel decoding

309
Types of Communication
NUMBER OF
CHANNEL DIRECTION MEDIUM
RECIEVER
• Formal • Downward • Verbal • Intrapersonal

• Informal • Upward • Non verbal • Interpersonal
• Horizontal • Meta • Group
• Mass

310
Barriers to Communication:
* Semantic barriers
* Organisational barriers
* Interpersonal barriers
* Individual barriers
* Cross cultural barriers
* Physical/channel/ media barriers
* Technological barriers

311
Semantic barriers:
- Words having similar pronunciation but multiple meaning( Site,
Sight, cite)
- Badly expressed message
- Wrong interpretation
- Unqualified assumptions
- Technical language
Organizational barriers:
- Organisation culture and climate
- Organisational rules and regulation
- Status relationships
- Complexity in organisational structure
- Inadequate facility and opportunity
- An lack of co-operation between superior and subordinate
312
Interpersonal barriers:
• From superiors
- Shortage of time for employee
- Lack of trust
- Lack of consideration for employee’s needs
- Wish to capture authority(hide confidential matters)
- Fear of losing power of control
- Information overload
• From subordinates
- Lack of proper channel
- No interest to communicate
- Lack of co-operation
- Lack of trust
- Poor relationship between superior and subordinate
- Fear of penalty
313
Individual or psycho-sociological barriers:
- Style
- Selective perception
- Halo effect
- Status relationship
- Poor attention and retention
- Inattention
- Closed minded
Technical Aspects in communication Barriers:

- If the message can be understood in different ways
- Filtering
- Meta communication
- Noise in communication
314
Cross – cultural/ Geographical Barriers:
- National Character
- Language
- Values and norms of behaviour
- Social Relationships
- Concept of time
- Concept of space
- Non verbal Communication
- Perception
Physical barriers:
- Noise
- Environment
Number of links in the chain
Circumstantial Factors
- Defects in the media
315
Overcoming the barriers in communication
• Fostering good relationship
• Purposeful and well focused communication
• Co-ordination between superior and subordinate
• Avoid technical language
• Feedback
• Accuracy
• Clarity in message
• Flat organisational structure
• Organisational policies
• Minimize semantic problem
• Proper communication channels

316
Principles of effective communication
• Courtesy/ consideration
• Clarity
• Correctness
• Concreteness
• Credibility
• Completeness and consistency
• Conciseness
• Shortness
• Simplicity
• Sincerity
• Strength
317
Controlling

318
Control
❑ Control is an important function of management.
❑ It is process that measures current performance and guides it
towards some predetermined objectives.
❑ It involves setting up standards of individual and organisational
performance, checking actual performance against these
standards to make sure that the objectives are being achieved as
originally anticipated in organisation’s plans.
E.F.L. Breach- “control is the process of checking actual

performance against the agreed standards performance”.
Koontz and Weihrich, - “The managerial function of controlling is
the measurement and correction of the performance in order to
make sure that enterprise objectives and the plans devised to attain
them are accomplished.
319
Characteristics of control
❑ Pervasive function
❑ Review of past events
❑ Forward looking
❑ Action- oriented
❑ Continuous process
❑ Dynamic process
❑ Control does not curtail the rights of individuals

320
Relationship between Control and Planning
• Planning and controlling are closely related to each other

• After plan becomes operational, control is necessary to measure
progress, to uncover deviations from the targets and to take
corrective steps.
• It is also not possible to think of an effective control without the
existence of good plans.
• Billy E. Geotz has explained the relationship between planning
and controlling in the following Words, “ Managerial planning
seeks consistent, integrated and articulated programmes, while
management control seeks to compel events conform to plans”

321
Relationship between Control and Planning
Planning Performance Control

322
Significance of Controlling
• Coordination
• Corrective Action
• Decision- making
• Better planning
• Decentralisation of authority
• Effective supervision

323
Limitations of control
❖ An enterprise cannot control external factors.

❖ Control is an expensive process.
❖ Control system loses its effectiveness when standards of
performance cannot be defined in quantitative terms.
❖ The effectiveness of controls mainly depends on their acceptance
by the subordinates. They may resist controls if they feel that
these will reduce or curtail their freedom. Control also loses its
significance when it is not possible to fix the accountability of
the subordinates

324
Steps taken for effective controlling
❑ Every manager should be conscious of the need of control while

performing any managerial task
❑ Standards of performance must be laid down for their use in
appraising the results of various operations
❑ Standards of performance should be laid down in consultation
with the subordinates. They must be put in writing wherever
possible. It should be ensured that they are properly understood
by the concerned persons in the organisation
❑ Standards of performance should not be too high. They must be
capable of being achieved by the average workers.

325
The Process of control
(Feedback)
Operations
Standards (organizing Meets
Performance
( planning) staffing and standards
directing)
Does not
meet
standards
(Feedback) Corrective
actions
(Feedback)

326
Steps in control process( explanation of the previous diagram)
1. Establishment of standards
2. Measurement of Performance
3. Comparing performance with standards
4. Taking corrective Action
Principles or Requirements of good control system

❑ Emphasis on objectives
❑ Efficiency of control techniques
❑ Responsibility for control
❑ Direct control
❑ Suitability
❑ Flexibility
❑ Self – control
327
❑ Control by exception
❑ Strategic point control
❑ Corrective action
❑ Forward - looking control
❑ Human factor
❑ Economical
Control by Exception
• Management by exception is an important principle of
organisational control.
• This principle holds that only significant deviations
(exceptions) from standards of performance should be brought
to the management’s attention.
• The exception principle has been devised to conserve
managerial time, effort and talent and apply these in more
important areas.
328
Kinds of control Systems
Three kinds of control systems are used by the modern
organisations. They are:
1. Historical or Post- action or Feedback control
2. Concurrent control
3. Predictive or Feed - forward control
Historical or Post- action or Feedback control

• Feedback or post- action control measures result from a
completed action. The causes of deviations from the standards
are determined and corrective steps are taken so that such
deviations do not occur again.
• Any good managerial system controls itself by information
feedback which discloses errors in accomplishing goals and
initiates corrective action.
329
• Feedback is the process of adjusting future action based
upon information about past performance.
• Though feedback is ‘after the fact’, it is still vital to the control
process.
• Feedback is necessary in any continuous activity as it enables to
take corrective action which is essential for the accomplishment
of goals of the system.
• The concept of feedback is important to the development of an
effective control system in any organisation.
• Feedback information may be received formally or informally.
• Formal feedback involves all written information about actual
performance, reports, financial statements, etc.
• Informal feedback is through personal observations, personal
contacts and informal discussions.
330
Concurrent control
• It is also known as ‘real time’ or ‘steering’ control.
• It provides for taking corrective action or making adjustments
while programme is still in operation and before any major
damage is done.
• Example – control chart in a factory; safety check.
• Concurrent control occurs while an activity is still taking place.
Predictive or Feed-forward control

• Feed-forward control involves evaluation of inputs and taking
corrective measures before a particular sequence of operations
is completed.
• It is based on the timely and accurate information about
changes in the environment.
• If right information is not available in time, feed-forward
control is likely to beK Deepak
imperfect.
Rao, Assistant Professor, A.J
331
Types of controls: flow of information
Corrective action
Feed-forward Concurrent
controls controls
Inputs Processing Outputs
Feedback
controls

333
Areas of control
Peter F. Drucker - there are eight Holden and others have

key result areas where identified following:
objectives should be set and 1. Policies
controls should be exercised. 2. Organisation
These are: 3. Personnel
4. Wages and salaries
1. Marketing 5. Costs
2. Innovation 6. Methods and manpower
3. Productivity 7. Capital expenditure
4. Human organisation 8. Service department efforts
9. Line of products
5. Financial resources
10. Research and development
6. Physical resources
11. Foreign operations
7. Profitability 12. External relations
8. Social responsibilities 13. Overall control
334
Managerial control techniques
Traditional or conventional techniques:
1. Budgetary control
2. Statistical data and reports
3. Marginal costing
4. Break- even analysis
5. Standard costing
Modern or contemporary techniques:

1. Management Audit
2. Programme Evaluation and Review Technique (PERT)
3. Critical Path Method (CPM)
4. Management Information System (MIS)
5. Quality circles (QC)
6. Total quality management (TQM)
335
Budgetary control
Budgetary control involves the use of budgets to plan, coordinate

and control day-to-day operations of business in accordance
with the overall objectives of business.
A budget is an estimate of future needs, arranged according to an

orderly basis covering some or all the activities of an enterprise
for a definite period of time.
Budgetary control may be defined as the establishment of budgets

relating to the responsibilities of executives to the requirements
of a policy, and the continuous comparison of actual with
budgeted results, either to secure by individual action the
objective of that policy or to provide a basis for its revision.
336
Statistical data and reports
• Statistical data are widely used for the purpose of managerial
control.
• Statistical data may be presented in the form of statistical tables,
graphical charts or special reports.
• A report is a form of systematic presentation of information and
statistical data relating to some aspect of business. It may arise
out of available factual data, thorough enquiry, investigation or
experiment.
• It will help in knowing whether the policies of the management
are being followed and if not, what steps should be taken to
implement them.

339
Marginal Costing
• Marginal costing is a very useful technique which guides
management in pricing, decision- making and assessment of
profitability.
• Marginal costing is the ascertainment of marginal cost and of
the effect on profit of changes in volume or type of output by
differentiating between fixed and variable costs.
• Profit- volume ratio :- it is the ratio of contribution to sales.
• Since marginal costing is based on variable costs, the
responsibility for controlling variable costs can be assigned to
various departments.
• The control of fixed costs is the responsibility of the higher
level managers.

340
Break – even Analysis
• Break- even analysis determines the probable profit or loss at
different levels of activity.
• It establishes relationship among cost of production, volume of
production, profit and sales and , that is why, it is also known as
cost-volume-profit analysis.
• The break-even point is defined as that volume of sale at which
revenue exactly equals total cost.
Management Audit
• Management audit may be defined as a comprehensive and
constructive review of the performance of management team of
any organisation.
• It is an important aid for evaluation of management techniques
and performance.
• Management audit measures the degree of efficiency of
management and points out the deficiencies in managing.
341
Network Techniques
• Network analysis is widely recognised as a management tool in
both commerce and industry.
• Under network analysis a project is broke down to small
activities or operations which are arranged in a logical
sequence. After this the order in which various operations
should be performed is decided.
• A network diagram may be drawn to present the relationship
between all the operations involved.
• The diagram will reveal the gaps in the flow plan.
• The network thus drawn shows the interdependence of various
activities of a project and also points out the activities which
have to be completed before the others are initiated.
• The object of network analysis is to help in planning, organising
and controlling the operations to enable the management in
accomplishing the project economically and efficiently.
342
• PERT and CPM are the widely recognised network techniques.
• Both PERT and CPM recognize the interrelated nature of
elements within large work projects.
Programme Evaluation and Review Technique (PERT)

• PERT/ Cost is an integrated management system designed to
provide managers with the information they need in planning
and controlling schedules and costs in development projects.
• It specifies techniques and procedures to assist project
managers in:
1. Planning schedules and costs.
2. Determining time and cost status.
3. Forecasting manpower skill requirements.
4. Predicting schedule slippages and cost overruns.
5. Developing alternate time- cost plans.
6. Allocating resources among tasks.
343
• PERT uses probability and linear programming for planning
and controlling the activities.
• Probability helps in estimating the timings of various activities
in the project, and linear programming is used to maximize the
achievement of the project objective.
Critical Path Method (CPM)

• Under CPM, the project is analyzed into different operations or
activities and their relationships are determined and shown on
the network diagram.
• The network or flow plan is then used for optimizing the use of
resources and time.
• CPM marks critical activities in a project and concentrates on
them.
• It is based on the assumption that the expected time is actually
the time taken to complete the
K Deepak Rao, project.
Assistant Professor, A.J
344
Management Information System ( MIS )
MIS is a system designed to supply information required for
effective management of an organisation.
The main functions of MIS is data collection and data management.
Decision Support System (DSS)

Laudon and Laudon – “A decision support system is a computer
system at the management level of an organisation that
combines data, sophisticated analytical tools and user- friendly
software to support semi- structured and unstructured decision-
making”.

346
Quality Circle
❖ Is one of the employee participation methods.
❖ It implies the development of skills, capabilities, confidence
and creativity of the people through cumulative process of
education, training, work experience and participation.
❖ It also implies the creation of facilitative conditions and
environment of work, which creates and sustains their
motivation and commitment towards work excellence.
❖ Quality Circles have emerged as a mechanism to develop and
utilize the tremendous potential of people for improvement in
product quality and productivity.

347
Total quality management
TQM is a management philosophy, a paradigm, a continuous
improvement approach to doing business through a new
management model.
TQM is a comprehensive management system which:

• Focuses on meeting owners’/customers’ needs, by providing
quality services at a reasonable cost.
• Focuses on continuous improvement.
• Recognizes role of everyone in the organization.
• Views organization as an internal system with a common aim.
• Focuses on the way tasks are accomplished.
• Emphasizes teamwork
348
CHAPTER - 7
Key issues in Modern Management: Management in the 21st
century – Manager’s external environment, Globalization and
management, Easternisation of management, Challenges of
multiculturism, Quality Management.

349
Management challenges in the new millennia (21st Century)
• Impact of Globalization - leads to strategic challenges of mixed cultures

and languages in the business environment.
• Managing Across Borders – the ability of an organization to survive and

succeed in the 21st century transnational workforce and borderless business
environment. Challenges in managing enterprise-wide production
environments.
• Revolution of Information Technology – supported by a new world

infrastructure of data communications and telecommunications i.e. use of
internet, wireless, e-commerce as part of management tools and easing of
technology transfer.
• Security Issues with wide usage of internet platform in business

transactions.
• Increasing demand for knowledge-worker in the knowledge driven

350
organizations. Institute of Management
The Key to Organization Survival & Prospering in the 21st
Century
• Corporate Strategy - Organizations must have a structure that help to unleash the
power of their professionals and to capture the opportunities of today's economy.
• Ethical Issues – Understanding the new ethical issues emerged from changes in the
social and political landscape and from the development of new technologies.
• Social Responsibility – The issues of privacy and confidentially, accessibility to

technology issues, property right and ownership issues, freedom of speech…etc
• Global Challenges – impact of globalization and cross-border work culture.
• Ecological Issues – Oil exploitation and land rights, food security, mining in Africa,
climate vulnerability and ecotourism.
• Workforce Diversity - Cultural Awareness/Acceptance (i.e. Ethnic Minorities,

Multilingualism, Individual Differences)
351
Managers and External Environment:
The Manager's job cannot be accomplished in a vacuum within

the organization. Many interacting external factors can affect
managerial performance
* Labour force:
The labour force is always changing. This inevitably causes
changes in the workforce of an organization thus affecting the
way management must deal with its workforce.
* Legal considerations:
Law is important in business transactions. It provided a basic
framework within which a business enterprise must operate. All
business organizations must comply also with the legal
constraints of that country.
* The Economy:
* Political:
352
* Society:
Social responsibility is the enforced or felt obligated of managers,
acting to serve or protect the interest of groups other than
themselves.
* Labour unions:
Wage levels, benefits, and working conditions for millions of
employees now are decisions made jointly by unions and
management.
* Competition:
Business organizations not only must compete in terms of sales
and profit but also in other areas.
* Customers/Suppliers:
* Technology:
This includes the level of advancement of knowledge and
equipment in society (or in specific countries), and the rate of
development and application of such knowledge.
353
Globalization and Management:
Globalization in short, points to the whole effort towards making

the world global community as a one village.
Because of globalization the economies of the world are being
increasingly integrated, example mobile phones and internet have
brought people closer.
* Global Market: (Proximity, Location, Attitude)

* Cross-cultural management
* Resource Imperative
* Foreign trade, Foreign Investment
* Culture
* Competition
354
Easternization of Management:
* Easternization is a term that has only come to prominence since

the mid 1990s.
* Easternization refer to the spread of oriental (mainly
Japanese/South Korea) management techniques against west
management techniques.
Japanese Management
• Scientific selection process • Good benefits for employees
• Life time employment • Egalitarianism
• Seniority system • Ethical Conduct
• Continuous training • In-process Inventory
• Emphasis on group work • Management(KANBAN)
• Decision-making • Long-term Corporate Strategy
• Father leadership
• Simple and flexible organization
355
Japanese Organizations American Organizations
• Lifetime employment • Short term employment
• Slow evaluation and • Rapid evaluation and
promotion promotion
• Non specialized career paths • Specialized career paths
• Implicit control mechanism • Explicit control mechanism

• Collective decision making • Individual decision making
• Collective responsibility • Individual responsibility
• Wholistic concern • Segmented concern

356
EASTERNISATION V/S WESTERNISATION
EASTERNISATION WESTERNISATION
1. Decision Making Consensus By Individual or Voting

Right
2. Duration of Life time Employment No Guaranteed
Employment Employment
3. Individual v/s Individualism as strong as Individualism persistent
Group group
4. Commitment Strong Commitment Not critically important
5. Seniority Very important Based on Experience
6. Leadership Style Authoritarian Participative
7. Compensation Based on Seniority Based On Performance
8. Government and Close Relationship No direct Relation

Business Institute of Management
357
Japanese Management Style
Japanese management emphasizes the need for information flow from the bottom of the company to the top.
This results in senior management having a largely supervisory rather than 'hands-on' approach. As a result, it
has been noted that policy is often originated at the middle-levels of a company before being passed upwards
for ratification. The strength of this approach is obviously that those tasked with the implementation of
decisions have been actively involved in the shaping of policy.
The higher a Japanese manager rises within an organisation, the more important it is that he appears
unassuming and unambitious. Individual personality and forcefulness are not seen as the prerequisites for
effective leadership.
The key task for a Japanese manager is to provide the environment in which the group can flourish. In order
to achieve this he must be accessible at all times and willing to share knowledge within the group. In return
for this open approach, he expects team members to keep him fully informed of developments. This
reciprocity of relationship forms the basis of good management and teamwork.

358
South Korea Management Style
Managers expect that their instructions will be obeyed and this expectation of obedience is
usually fulfilled. Confucianism stresses obedience and loyalty and this manifests itself strongly in
the manager/subordinate relationship. It is useful to think of the manager as a father who, in
return for loyalty, respect and obedience, gives the subordinate support and help at all times.
Although leadership is hierarchical and paternalistic, it is also infused with the Korean concept of
inwha, which emphasizes the harmony necessary between people of equal rank and standing.
Thus, it is important that group situations are characterized by lack of confrontation and blame.
The good manager spends a great deal of time and effort ensuring that his team has a good
working relationship and that all members feel fully integrated.
The Koreans also employ a process of consensus decision-making in certain situations, which is
similar to the system of nemawashi found in Japan. This system ensures that the group feels
involved in the decision, whilst ensuring that the manager can still maintain an influence over the
outcome.

359
S O U T H K O R E A MA N A G E ME N T F E AT U R E S
❖ Decision making by is not centralized
❖ Lifetime employment
❖ Individualism in group settings
❖ Significance of promotion
❖ Leadership
❖ Close relationship between government and business
❖ Hard work
Multiculturalism:
As applied to the workplace, the view that there are many

different cultural back-grounds and factors that are important in
organizations, and that people from different backgrounds can
coexist and flourish within an organization.
Usually multiculturism refers to cultural factors such as ethnicity,
race, gender, physical ability, sexual orientation, but sometimes
age and other factors are added.

361
How Diversity and Multiculturalism Promote
Competitive Advantage:

362
The cost argument suggests that organizations that learn to manage diversity generally
have higher levels of productivity and lower levels of turnover and absenteeism. Those
organizations that do a poor job of managing diversity, on the other hand, suffer from
problems of lower productivity and higher levels of turnover and absenteeism.
The resource acquisition argument suggests that organizations who manage diversity
effectively become known among women and minorities as good places to work. These
organizations are thus better able to attract qualified employees from among these groups.
The marketing argument suggests that organizations with diverse and multicultural
workforces are better able to understand different market segments than are less diverse
organizations.
The creativity argument suggests that organizations with diverse and multicultural
workforces are generally more creative and innovative than other organizations. If an
organization is dominated by one population segment, it follows that its members will
generally adhere to norms and ways of thinking that reflect that segment.
Related to the creativity argument is the problem-solving argument. Diversity is
accompanied by an increased pool of information. In virtually any organizations, there is
some information that everyone has and other information that is unique to each individual.
The systems flexibility argument suggests that organizations must become more flexible as
a way of managing a diverse and multicultural workforce. As a direct consequence, the
overall organizational system also becomes more flexible. Organizational flexibility enables
the organization to better respond to changes in its environment.
363
Quality:
Quality in the workplace has gone beyond creating a better-than-

average product at a good price, and now refers to achieving
increasingly better products and services at progressively more
competitive prices; this includes doing things right the first time,
rather than making and correcting mistakes.

364
365

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MBAH 401: PRINCIPLES AND PRACTICE OF MANAGEMENT

Workload : 4 hours per week - Total credits 04

K Deepak Rao, Assistant Professor, A.J

K Deepak Rao, Assistant Professor, A.J

The term management is used in different senses:

* Process, function or activity

Management is universal in nature as every organization requires

* Management is what management does.

K Deepak Rao, Assistant Professor, A.J

K Deepak Rao, Assistant Professor, A.J

K Deepak Rao, Assistant Professor, A.J

K Deepak Rao, Assistant Professor, A.J

K Deepak Rao, Assistant Professor, A.J

* Goal oriented (It co-ordinates the efforts of employees to achieve

K Deepak Rao, Assistant Professor, A.J

* The ‘levels of management’ refers to a line of demarcation

K Deepak Rao, Assistant Professor, A.J

Top management of a company consists of Board Of Directors

Upper middle management consists of heads of various divisions.

K Deepak Rao, Assistant Professor, A.J

Middle level management generally consists of heads of functional

Supervisory or Lower Level Management:

Functional Managers: A manager responsible for just one

K Deepak Rao, Assistant Professor, A.J

A role consists of the behavior patterns expected of a manager

K Deepak Rao, Assistant Professor, A.J

* Large scale production

K Deepak Rao, Assistant Professor, A.J

• Robert Owen ( 1771- 1858)

K Deepak Rao, Assistant Professor, A.J

Traditional School of Management Thought:

Scientific Management Administrative Bureaucratic

K Deepak Rao, Assistant Professor, A.J

1. Provided principles of management which can be applied in

K Deepak Rao, Assistant Professor, A.J

* Narrow view of organization

K Deepak Rao, Assistant Professor, A.J

* Frederick W. Taylor was the first person who insisted on the

K Deepak Rao, Assistant Professor, A.J

* Replacement of old rule of thumb method

K Deepak Rao, Assistant Professor, A.J

* The use of word ‘scientific’ before ‘management’ was objected

K Deepak Rao, Assistant Professor, A.J

* Management process school is also called the ‘traditional’ or

K Deepak Rao, Assistant Professor, A.J

K Deepak Rao, Assistant Professor, A.J

1. Competence 1. Rigidity in operations

K Deepak Rao, Assistant Professor, A.J

* The neo- classicists focused on the human aspect of industry.

* The business organization is a social system.

K Deepak Rao, Assistant Professor, A.J

WORK GROUP LEADER

K Deepak Rao, Assistant Professor, A.J

* An organization is a socio- technical system.

K Deepak Rao, Assistant Professor, A.J

1. It is an inter- disciplinary approach and integrates the

• This school uses scientific tools for providing a quantitative base

• The techniques commonly used for managerial decision- making

1. Organizational efficiency depends upon the quality of managerial

K Deepak Rao, Assistant Professor, A.J

2. It does not consider the human element in the organization.

3. Quality of decision is based on the quality of the data. If the

4. This approach assumes that all variables are quantitable and