CHAPTER ONE

INTRODUCTION TO MANAGEMENT

Introduction

At any time of our lives we are members of one organization or another e.g. Church, School,
College, Workplace etc. The organizations we belong to are diverse in many aspects for
example size, structure, membership and ownership. However these organizations all have
certain things in common.

These include:

 A goal or purpose
 Program or method for achieving the goals.
 Plans to ensure effectiveness of the goals.
  Leaders/Managers who are responsible for helping the organization achieve its
goals.

So the study of management involves the study of the work and performance of managers
i.e. how organizations are managed so that they can achieve their goals.

Meaning and Definition of Management

The term management has been defined in different ways by different authors as
follows:

i. Mary parker Follet defines management as an art of getting things done through
other people. E.g. managers achieve organizational goals by arranging for others to
perform any necessary task rather than performing the tasks by themselves. This is
done through delegation, communication and empowerment
ii. Brech is a social process entailing responsibility for the effective and economic
planning and regulation of operation of an enterprise in fulfillment of a given
purpose e.g. judgments on decisions in determining plans, guidance, integration,
motivation and supervision of personnel
iii. Ker either defines management as a process of reaching organizational goals by with
and through people and other organizational resources.
iv. . Management is the process undertaken by one or more individuals to coordinate
the activities of others to achieve results not achievable by one individual acting
alone.

Nature and scope of management

Management is a distinct activity having the following salient features:

Characteristics/key features of management

i.                    Economic resources- management is considered to be an important

economic resource together with land, labour and capital. As industrialization grows, the
need for managers increases

ii.                  Goal oriented -management is a purposeful activity and the aim of all

managers is the same i.e. to achieve a specific objective. It coordinates the efforts of workers
to achieve the goals of the organization. The success of management is measured by the
extent to which the organizational goals are achieved.

iii.                Management is concerned with productivity which implies effectiveness and

efficiency. Productivity is the ratio of output to input of resources within a given time period
with due consideration to quality.

iv.                Management involves the allocation and control of human, money and

other physical resources. However, it excludes the actions of a person working alone. A
person is not a manager unless involved in a process of getting thing done through others.

v.                  Management is a continuous process- management is a distinct process

consisting of such functions as planning, organizing, staffing, directing and controlling.
These functions are to inter-relate that it is not possible to lay down exactly the sequence of
various functions or their relative significance.

vi.                Management is an integrative force- the essence of management is

integration of human of other resources to achieve the desired objectives. All these
resources are made available to those who manage. Managers apply knowledge, experience
and management principles are getting the results from the workers by use of non-human
resources.

vii.              Management is an intangible force – management has been called as an

unseen force. Its presence is evidenced by the results of its efforts i.e. orderliness, informed
employees, and adequate work output.

viii.            Results are achieved through others – the managers cannot do everything

themselves, they must has the necessary ability and skills to get work accomplished through
the efforts of others. They must motivate the subordinates for accomplishment of the tasks
assigned to them.

ix.                Management as a science and an art – management as an organized body of

knowledge consisting of well-defined concepts, principles and techniques which has wide
application. For this reason, it is treated as a science. The application of these concepts,
principles and techniques requires specialized knowledge and skills on the part of the
management since the skills acquired by a manager are his personal possession,
management is viewed as an art.

x.                  System of authority – management as a team of managers represents a

system of authority, a hierarchy of command and control; managers at different levels
possess varying degree of authority. Generally as you move down in the managerial
hierarchy the degree of authority gets gradually reduced.  Authority enables the managers
to perform their functions effectively.

xi.                Management is a multi-disciplinary subject- management has grown as a

field of study taking the helps of some many others these disciplines such as engineering,
sociology and anthropology. Much of management literature is the results of the
association of these disciplines.

xii.              Universal application – management is universal in character. The principles

and techniques of management are equally applicable in the fields of business, education,
military, government and hospitals.

Henry Fayol suggested that principles of management would apply more or less in every
situation.

Characteristics of Managers

Managers must have a vision of the future and they must think in terms of success focusing
on the present rather than the past.

They must be able to trust others and take risks based on that trust.

They should be opportunity finders /seekers which is contrary to the routine problem
solvers.

They should know how to inspire /influence the behavior of the employees towards
performance.

They should have good knowledge of the original goals and should be able to measure the
effectiveness and efficiency of both group and themselves.

In conclusion, managers have a fundamental role which applies to both business and non-
business enterprises.
Objectives of management

The basic purpose of management of an enterprise is to achieve enterprise goals.

In order to achieve this, the managers peruse the following objectives

1. Efficient use of resources – management seeks to obtain max output with min
resources and efforts.
2. Satisfaction of customers – management attempts to produce products and
services required by customers. Satisfaction of customers is very important for
survival and growth of the business.
3. Adequate return on capital- as an objective of management, must achieve a
reasonable rate of return for the owners of the business.
4. Satisfied workforce – management attempts to build development a team of good
workers who are happy and satisfied with the organization.
5. Good working conditions – management seeks to achieve a system to ensure fair
wage for the workers, security for employment and better working conditions for
work force.

This raises the standards of living of life of workers.

6. Good relations with suppliers – management seeks to achieve good relations with
suppliers of raw materials and capital so as to continue in production
7. Contribution to national goals – the management must contribute to national
goals.

It should contribute towards the improvement of the surrounding where the plant is located

Management as an Activity

Like various other activities performed by human beings such as writing, playing, eating,
cooking etc., management is also an activity because a manager is one who accomplishes
the objectives by directing the efforts of others. According to Koontz, ―Management is
what a manager does. Management as an activity includes:

1.             Informational activities - In the functioning of business enterprise, the manager

constantly has to receive and give information orally or in written. A communication link has
to be maintained with subordinates as well as superiors for effective functioning of an
enterprise.

2.             Decisional activities - Practically all types of managerial activities are based on

one or the other types of decisions. Therefore, managers are continuously involved in
decisions of different kinds since the decision made by one manager becomes the basis of
action to be taken by other managers. (E.g. Sales Manager is deciding the media & content
of advertising).

3.             Inter-personal activities - Management involves achieving goals through people.

Therefore, managers have to interact with superiors as well as the sub-ordinates. They must
maintain good relations with them. The inter-personal activities include interacting with the
sub-ordinates and taking care of the problem. (E.g. Bonuses to be given to the sub-
ordinates).

Management as a Discipline

Management has been widely recognized as a discipline or a field of study.

Management as a discipline refers to that branch of knowledge which is connected to study

of concepts, techniques, principles & practices of basic administration. It specifies certain
code of conduct to be followed by the manager & also various methods for managing
resources efficiently.

Management as a discipline specifies certain code of conduct for managers & indicates
various methods of managing an enterprise. Management is a course of study which is now
formally being taught in the institutes and universities after completing a prescribed course
or by obtaining degree or diploma in management, a person can get employment as a
manager.

Any branch of knowledge that fulfills following two requirements is known as discipline:

1.             There must be scholars & thinkers who communicate relevant knowledge through
research and publications.

2.             The knowledge should be formally imparted by education and training

programmes. Since management satisfies both these problems, therefore it qualifies to be a
discipline. Though it is comparatively a new discipline but it is growing at a faster pace.

Management as a Group

Management as a group refers to all those persons who perform the task of managing an
enterprise. When we say that management of ABC & Co. is good, we are referring to a
group of those people who are managing. Thus as a group technically speaking,
management will include all managers from chief executive to the first - line managers
(lower-level managers). But in common practice management includes only top
management i.e. Chief Executive, Chairman, General Manager, Board of Directors etc. In
other words, those who are concerned with making important decisions, these persons
enjoy the authorities to use resources to accomplish organizational objectives & also
responsibility to for their efficient utilization.

Management as a group may be looked upon in 2 different ways:

1.       All managers taken together.

2.       Only the top management

The interpretation depends upon the context in which these terms are used. Broadly
speaking, there are 3 types of managers -

1.             Patrimonial / Family Manager: Those who have become managers by virtue of

their being owners or relatives of the owners of company.

2.             Professional Managers: Those who have been appointed on account of their

specialized knowledge and degree.

3.             Political Managers / Civil Servants: Those who manage public sector

undertakings. Managers have become a part of elite group of society as they enjoy higher
standard of living in the society

Management as a Science

 A science is a systematically organized body of knowledge based on proper findings and

exact principle and is capable of verification. Any subject which is scientifically developed
and consists of universally accepted principles is science.

In order to be recognized as a science, a subject should have/ fulfill the

following characteristics:

 a). Should have a systematic body of knowledge which includes concepts, principles and
theories.

 b). The principles have to be evolved on the basis of constant inquiry and examination (it
should have a method of scientific enquiry/ research).

c). The principles must explain a phenomenon by establishing a cause-effect relationship.

d).The principles should be available for verification to be universally acceptable i.e. should
be verifiable.

e).It should ensure predictable results.

Management as a discipline fulfills the above because:

i) It has emerged as a systematic body of knowledge with its own principles.

ii) The application of these principles helps any practicing manager to achieve the desired
goals.

iii) (Management is dynamic because it has borrowed heavily from other disciplines to help
solve management problems, disciplines e.g. Psychology, Sociology, Philosophy, Religion,
Economics.

NB: Management cannot be viewed as an exact science but rather inexact science
because of the following:-

i) By definition, management involves getting things done through other people who are
unique in respect of aspirations, attitudes, perceptions etc.

Their differences are so obvious that standard results may not be achieved in otherwise
similar environment.

ii) The behavior of human beings cannot be predicted accurately and therefore standards
and ready-made solutions cannot be prescribed.

iii) Management is concerned with the future which is complex and unpredictable so that if
there are changes in the environment, the management plans will be affected.

iv) Management plans are prone to change due to the changes in the external environment
e.g. technological changes, economic and socio-cultural changes.

Management as an Art

An art may be defined as a skill or knowledge in a particular field or an activity or a method

of doing a thing. It is the bringing about a desired result through application of skills. The
focus is on the skill with which the activities are performed.

 The constant practice of the theoretical concept (knowledge base) contributes to the
formation and sharpening of skills.

 Management as an art stresses the need for practice where in management graduate from
the best institute may not be very effective and therefore requires creativity and practice.

Features of an Art
It denotes personal skills in a particular field

It signifies practical knowledge

It helps in achieving concrete results

It is creative in nature

Conclusion:

Every manager has to apply certain knowledge and skills while dealing with people to
achieve desired resuts.Management is one of the most creative as it requires knowledge,
innovating, implementing and integrating skills in relation to goals, resources techniques,
and material.

In conclusion, management is both a science and an art.

  It is considered a science because it has an organized body of knowledge which

contains certain universal truths.
   It is called an art because managing requires certain skills which are personal skills
of a manager.

Management as a Profession

Over a large few decades, factors such as growing size of business unit, separation of
ownership from management, growing competition etc have led to an increased demand
for professionally qualified managers. The task of manager has been quite specialized. As a
result of these developments the management has reached a stage where everything is to
be managed professionally.

A profession may be defined as an occupation that requires specialized knowledge and

intensive academic preparations to which entry is regulated by a representative body. The
essentials of a profession are:

1.             Specialized Knowledge - A profession must have a systematic body of

knowledge that can be used for development of professionals. Every professional must
make deliberate efforts to acquire expertise in the principles and techniques. Similarly a
manager must have devotion and involvement to acquire expertise in the science of
management.

2.              Formal Education & Training - There are no. of institutes and universities to
impart education & training for a profession. No one can practice a profession without
going through a prescribed course. Many institutes of management have been set up for
imparting education and training..

3.             Social Obligations - Profession is a source of livelihood but professionals are

primarily motivated by the desire to serve the society. Their actions are influenced by social
norms and values. Similarly a manager is responsible not only to its owners but also to the
society and therefore he is expected to provide quality goods at reasonable prices to the
society.

4.              Code of Conduct - Members of a profession have to abide by a code of conduct

which contains certain rules and regulations, norms of honesty, integrity and special ethics.
A code of conduct is enforced by a representative association to ensure self-discipline
among its members. Any member violating the code of conduct can be punished and his
membership can be withdrawn.

5.             Representative Association - For the regulation of profession, existence of a

representative body is a must.

From above discussion, it is quite clear that management fulfills several essentials of a
profession, even then it is not a full-fledged profession because: -

a.              It does not restrict the entry in managerial jobs for account of one standard or
other.

b.             No minimum qualifications have been prescribed for managers.

c.              No management association has the authority to grant a certificate of practice to

various managers.

d.             All managers are supposed to abide by the code formulated by their respective
professional bodies

e.              Competent education and training facilities do not exist.

f.                Managers are responsible to many groups such as shareholders, employees and

society. A regulatory code may curtail their freedom.

g.             Managers are known by their performance and not mere degrees.

h.             The ultimate goal of business is to maximize profit and not social welfare
Management as a process
According to Henry Fayol, managenent is aprocess which has a series of interelated functions of
planning, organising,staffing, and controlling to achieve a stated objective through the utilization
of human resources, capital,technology and materia

Planning Directing

Men and
Women Goods and services
Materials desired by
Machines customers
Methods
Money
Markets
Staffing

Organizing Controlling

Levels of Management
LEVELS OF MANAGEMENT

The number of levels of management in a company depends upon the size and diversity in
the range of production. Generally, there are Three main Levels of Management, viz.,

1. Administrative or Top Level of Management.

2. Executive or Middle Level of Management.
3. Supervisory or Lower Level of Management.

At each level, individual manager has to carry out different roles and functions.

Top Level of Management

The Top Level Management consists of the Board of Directors (BOD) , Chief Executive
Officer (CEO) , General Manager (GM) ,Managing Director (MD) and President. The Board of
Directors are the representatives of the Shareholders, i.e. they are selected by the
Shareholders of the company. Similarly, the Chief Executive Officer is selected by the Board
of Directors of an organization.

Functions of Top Management

1. The top level management determines the objectives, policies and plans of the
organization.
2. They mobilizes (assemble and bring together) available resources.
3. The top level management does mostly the work of thinking, planning and deciding.
Therefore, they are also called as the Administrators and the Brain of the
organization.
4. They spend more time in planning and organizing.
5. They prepare long-term plans of the organization which are generally made for 5 to
20 years.
6. The top level management has maximum authority and responsibility. They are the
top or final authority in the organization. They are directly responsible to the
Shareholders, Government and the General Public. The success or failure of the
organization largely depends on their efficiency and decision making.
7. They appoint departmental and other key personnel of the company.
8. Analyse, evaluate and deal with the environment.
9. Officially represents the company to the external environment.
10. Exercise overall control of company operations.

Middle Level of Management

The Middle Level Management consists of Branch Managers, the Departmental Heads
(HOD), and the Junior Executives. The Branch Managers are the head of a branch or local
unit. The Departmental heads are Finance Managers, Purchase Managers, Production
managers, Human resource managers etc. The Junior Executives are Assistant Finance
Managers, Assistant Purchase Managers, Assistant production Managers, Assistant human
resource managers etc. The Middle level Management is selected by the Top Level
Management.

Functions of Middle Level Managers

1. Middle level management gives recommendations (advice) to the top level

management.
2. It executes (implements) the policies and plans which are made by the top level
management.
 3. It supervise and co-ordinate the activities of lower level management.
4. They also have to communicate with the top level Management and the lower level
management.
5. They prepare short-term plans of their departments which are generally made for 1
to 5 years.
6. The middle Level Management has limited authority and responsibility. They are
intermediary between top and lower management. They are directly responsible to
the chief executive officer and board of directors.
7. Train and develops supervisory personnel
8. Motivates supervisory personnel

Lower Level of Management/ Operative Level/ First Level/ Supervisory Level

The lower level management consists of the Supervisors, Office managers, Accounts officers,
the Foremen etc. They are selected by the middle level management.

It is also called Operative / Supervisory level or First Line of Management. They act as a link
between the workers and the management.

Functions Performed By Lower Level Management

1. Lower level management directs the workers or employee/ assigning job to workers.
2. They develop morale in the workers.
3. It maintains a link between workers and the middle level management.
4. The lower level management informs the workers about the decisions which are
taken by the management. They also inform the management about the
performance, difficulties, feelings, demands, etc., of the workers.
5. They spend more time in directing and controlling.
6. The lower level managers make daily, weekly and monthly plans.
7. They have limited authority but important responsibility of getting the work done
from the workers. They regularly report and are directly responsible to the middle
level management.
8. Planning day to day production within the goals laid down by the higher
management.
9. Maintaining personal contacts with workers.
10. Maintaining machinery.
11. Arranging materials and tools.
12. Advising and assisting workers.
13. Maintaining discipline among the workers.
14. Reporting feedback information and workers problems which cannot be solved
within the supervisory level.
Managerial Skill Sets

Skills are the various talents that managers need to perform their roles effectively. As the job
of today’s manager becomes more complex, different skills are required to manage
effectively. It’s agreed that effective managers tend to possess a mix of skills that set them
apart from others.

Much like a professional basketball player needs to know how to dribble and shoot a
basketball, or how a home builder understands the process of framing a house, managers
also need to have a specific set of skills in order to effectively perform their
jobs. Managerial skills are what the manager uses to assist the organization in
accomplishing its goals. Specifically, a manager will make use of his or her own abilities,
knowledge base, experiences, and perspectives to increase the productivity of those with
whom they manage.

These skills are grouped into four categories which are inter-related and required by all
managers.

They are discussed as below:

Technical Skills

These are skills a manager needs to perform specialized work within the organization. I.e.
they are those skills needed to accomplish a specific task. It is the 'how to' skill set that
allows a manager to complete his or her job. These skills are the combination of formal
education, training, and on-the-job experience. Most employees expect their managers to
have a technical skill set above their own so that, when needed, an employee can come to
their manager to find out how to do something specific to their individual job. They are
therefore very important for first level managers (lower managers) because they spend
much of their time with operating employees. They must have a good understanding of the
work the employees are in if they have to supervise them effectively. They are less important
for middle managers since a great portion of their time is devoted to other managerial
activities and even less important though not unimportant top managers.

Conceptual Skills

These relates to manager’s ability to think in an abstract manner. Managers need to be able
to see relationship between forces others cannot see, to understand how a variety of factors
are inter-related to take a global perspective of the organization and its environment.
 The level of analytical ability to envision both the parts and its sum directly translates into a
manager's conceptual skill set. Essentially, a manager's conceptual skills allow him or her to
solve problems in a strategic and calculated fashion. Conceptual skills are becoming
increasingly more important in today's chaotic business environment.

Managers are, continually, being challenged to think conceptually about their organizations
to develop action plans and harness resources to achieve organizational goals. A manager
with good conceptual skills can look at a problem, break it down into manageable pieces,
consider a variety of possible solutions, all before putting it back together again in a more
effective and efficient manner. Conceptual skills are most important for top managers
because their job is to identify and exploit new opportunities. The skills are moderately
important to middle level and less important for first class level managers.

Diagonistic skills

These are skills used to define and understand situations. They are most important at the
top, moderately important at the middle and least important at the bottom of managerial
hierarchy.

Human Skills

They are skills a manager needs to work well with others people. They include the ability to
understand someone else position, to present one’s position in a respectable way, to
compromise and deal effectively with conflicts.

These interpersonal skills are what a manager will use to work with his or her employees.
Some people are born with good human skills; others must work much harder at it.
Managers with good human skills understand their role inside the manager/employee
relationship and how important things, like trust, cohesion, fairness, empathy, and good will,
are to the overall success of the organization. Human skills help the manager to
communicate, lead, and motivate an employee to work towards a higher level of
productivity. They are equally important at all levels of organization because at every level
the manager interacts and works with workers.

MANAGERIAL FUNCTIONS AND ROLES

Managerial functions- an overview

The managerial functions and process are:

Planning –determining the objectives of the unit or activity. It also involves deciding in
advance as to what should be done, how and when.
Organizing – refers identification of activities to be carried out, grouping of similar activities
and creation of authority and responsibility relation throughout the organization.

Staffing – it involves manpower planning, employment of personnel, training, appraisal,

remuneration etc. it is a process of ensuring that organization positions are filled up with
the right kind of people in terms of quality and quantity.

Directing / leading – it is a very broad function concerned with the interpersonal
relations.it includes co-ordination with subordinates, providing leadership and motivating
them.

The process also involves providing guidance to workers. As the process of influencing them
to work willingly and enthusiastically in order to help ensure that activities are performed in
most efficient manner possible.

Controlling - it refers to comparing the actual performance with the plans or stands,
corrective steps are taken when the actual performance is not up to the mark or standard or
expectation. It is ensuring that events and situations conform to the plan adopted.

Managerial Roles

These roles fall under the modern theory (integrative perspective).

 Prof. Henry Mintzberg in studying what managers actually do, observe that managerial
work involves ten roles, three focuses on interpersonal contact, three mainly involves
information processing and four relates to decision making.

Roles Focusing On Interpersonal Contacts

The managerial roles in this category involve providing information and ideas.

1. Figurehead – As a manager, you have social, ceremonial and legal responsibilities.

You're expected to be a source of inspiration. People look up to you as a person with
authority, and as a figurehead.
2. Leader – This is where you provide leadership for your team, your department or
perhaps your entire organization; and it's where you manage the performance and
responsibilities of everyone in the group.
3. Liaison – Managers must communicate with internal and external contacts. You need
to be able to network effectively on behalf of your organization. The manager
establishes a network of contacts to gather information for the organization.

Roles That Involves Information Processing

The managerial roles in this category involve processing information.

1. Monitor – In this role, you regularly seek out information related to your
organization and industry, looking for relevant changes in the environment. You also
monitor your team, in terms of both their productivity, and their well-being. He may
attend meetings with subordinates and scan all the available information.
2. Disseminator – This is where you communicate potentially useful information to
your colleagues and your team. The manager transmits both factual and valuable
information to subordinates by sending memorandum to staff or meeting them
formally to inform them.
3. Spokesperson – Managers represent and speak for their organization. In this role
you're responsible for transmitting information about your organization and its goals
to the people outside it.

Roles Related To Decision Making

The managerial roles in this category involve using information.

1. Entrepreneur -In some ways, being a manager within a larger organization is like

running your own small business. While you will have managers above you to answer
to, you still need to think like an entrepreneur in terms of quickly solving problems,
thinking of new ideas that could move your team forward, and more. This is the first
role within the decisional category on the list.   As a manager, you create and control
change within the organization. This means solving problems, generating new ideas,
and implementing them.
2. Disturbance Handler – When an organization or team hits an unexpected
roadblock, it's the manager who must take charge. You also need to help mediate
disputes within it. The manager deals with problem that arises when the organization
operations break down.
3. Resource Allocator – You'll also need to determine where organizational resources
are best applied. This involves allocating funding, as well as assigning staff and other
organizational resources. The manager controls the allocation of people, money,
materials and time by scheduling his/her own time, programme, subordinate work
effort and organizing all significant decisions. Preparation of a budget is a major
aspect of this role.
4. Negotiator – You may be needed to take part in, and direct, important negotiations
within your team, department, or organization. A manager who hires a new
employee may negotiate work assignment and compensation with that person.
Environment of Management, Social
Responsibility and Ethics
Environment of Management, Social Responsibility and Ethics

Organization environment

Environment is the sum total of factors/variables that may influence the existence of the
organization that are both inside and outside the organization.

According to Philip koller, a term environment means those forces that originate from
within and outside the organization.

No enterprise of any kind can operate in absence of environmental constraints or

restrictions imposed by the organization surrounding.

It is therefore important to note that all enterprises must adjust to the environment can also
be defined as: the aggregate of all those variables or factors and forces that affect the firms
or organization ability to achieve. Its objectives, existence and its activities.

Environment generally can also be referred to as the surrounding circumstances and

influences of individual, organization or the aggregate of political, economic, social, cultural,
technological or physical environmental conditions that may influence the life of individual
organization or community at large.

The effect of environmental can either be positive or negative.

Types of environments

Every organization has two types of environments i.e. internal and external.

Internal environment (micro environment)

Consist of all those variables, forces and factors that are within the entity and affect the
terms ability to achieve its objective, activities and its existence

These factors may include

1. Resources – this includes the manpower, fixed assets i.e. machines in technological
aspects that helps the organization achieve its objectives.
2. Marketing aspects of the organization – includes how organization manages its
product rage, productivity of the product, marketing strategy
 3. Organizational factors – these includes organization structure, types of decisions
made, original policies, rules and procedures etc.
4. Organizational culture – culture is shared attitude, ideas, values, norms

It also acts as a limiting factor e.g. what a manager believes as a way of doing things will
actually affect what is new in an organization.

5. Current financial results how much finances in the account

6. Processes and financial systems

External Environment (macro environment)

Consist of those factors that are found outside the control of management but affect the
managerial decision making.

These factors include:

Political and legal factors – these forces are associated with the government which is the
custodian of the legal system within which a firm operates regardless of where a company is
located. The government regulates the activities of the companies e.g. in Kenya, the
government sets min wages which it stipulates within the labour acts, issues to do with
safety of workers.

Likewise, the government is in charge of security machinery which determines how the
business thrives in a given area e.g. with a stable political environment, business tends to
thrive easily.

Business managers plays a multitude of roles that limit their powers with regard to political
and legal constraints e.g. for a business to operate, it must be licensed by the government;
this means business cannot control want the government does.

Economic factors-It is an important aspect of economy that affect managerial decision

making

Economic forces entails rate of inflation, economic growth, balance of payment, internal
varies to trade tcc. For instance, during inflation, firms pay more economic growth tends to
influence demand of product, interest rate determines how much the organization will pay
as a cause of debt when borrowing money from lending institutions.

Level of unemployment will influence labour supply as well as labour cost. Thus each of the
above condition has a certain consequence on decision making of the organization.
Social cultural factors – these factors include the customs values, traditions and beliefs
that dominate the life of a given community in which the firm operation.

Such forces tend to influence customers taste, preferences, employees expectations, attitude
and the accepted role of the business in that society. They will also include religion,
demographic factors and social classes.

Demographic factors may include population distribution, birthrate, death rate, income
distribution in the society etc.

Technological factors – the rate of technology changes that has taken place recently
particularly in the area of ICT, has greatly affected the mode and style of doing business. E.g.
availability of E-commerce enables people do organize to organization trade with others all
over the world.

The breakthrough in production system has improved products while breakthrough in

communication has improved means of communication; processing and storage of data to
those organizations that have been able to embrace technological development compared
to those that have not bothered to invest in new technology.

Technology has been known to reduce the cost of operation and increase competitiveness.

International factors – the aspect of globalization has brought about multinational

corporations who operate usually in every corner of the block which means wen making
decisions, managers must put in mind how these corporations that are well endowed with
resources are behaving in the world market.

Task /operating (factors) environment – this consist of factors that are external to the
organization and are firm specific i.e. the firm interacts with them directly and they affect
that firm directly.

These factors include customers, suppliers, public, marketing intermediaries, competitors,

government.

Customers refers to the group that buys goods and services produced by an organization
the activities of this group are major determinants of decisions made by the management

Suppliers are firms/individual that supplies the firm with its inputs. The understanding of
suppliers is very important as they affect the firm in very much way directly e.g. the price of
the product they sell to the firm becomes a cost to the firm. The quality of their supply will
directly affect the quality of the firm’s output. Their reliability affects the firm’s efficiency in
operation.
Competitors refers to organization that offers similar/alternative products /services to
customers

Decisions on how to influence customers must be based on the action of competitors.

Marketing intermediaries are those firm/individuals that are involved in distribution of

firm’s products. Their distribution network will determine the size of the market the firm will
be able to serve. They sometimes dictate their terms e.g. distributors, retailers, wholesaler
etc.

Social Responsibility

It is the infelt obligation of managers of firms acting in their official capabilities to contribute
and enhance wellbeing of various stakeholders other than shareholders.

Involves managers making deliberate actions to enhance the wellbeing of various

stakeholders and refraining from actions that go against societal expectations.

It is managerial infelt obligation to do above min law requirements to contribute to the

wellbeing of various stakeholders and not just shareholders.   

Stakeholders in any one with potential to affect the wellbeing of the firm, also is affected by
the activities of the entity and has any sort of interest financially or otherwise.

Area of Social Responsibility of Managers

To employees

i.                    Fair remuneration

ii.                  Give them fringe benefits e.g. medical covers

iii.                Training and development, paying study leave etc.

iv.                Good working conditions e.g. ensuring there is ventilation and proper lighting
system.

v.                  Give them protective garments

vi.                Treating them with dignity and respect

vii.              Better terms of service

viii.            Providing them with economic security e.g. hiring them on permanent basis

ix.                Giving them adequate hardship allowances.

x.                  Sponsored holidays

xi.                Allowing them to form informal groups

xii.              Practicing equity

xiii.            Providing recreational facilities

To customers

Produce quality products

Charge fair prices

Offering after sales services

Giving right information about products

Make a full disclosure of product content and any likely negative effect

Give credit facilities

Give free samples and discounts

Ensure steady supply of goods

Give warrants and guarantee

Provide advice on how to use the product

Have fun days.

To suppliers

Paying them promptly

Treat them with respect in dignity

Fair awarding of tenders

Give them authentic/reliable financial/statements

Engage in fair negotiations with suppliers

Maintain them i.e. don’t terminate them without notice

To the government

Pay taxes

Operate within the law i.e. don’t engage in illegal activities

Contributing to the development duties/activities of the economy

To the community

Giving charity to the poor

Responsible disposal of waste

Improving infrastructure

Providing employment opportunity to the locals

Deal fairly with the society members

Obtaining resource from the community where they are available

To the environment

Responsible disposal of waste

Planting trees
Use environmentally friendly material

Argument/case for social responsibility

1. Benefits the firm in the long run

2. Improves the corporate image of the firm. It is the society that gives an organization
the charter to exist and to succeed. It is there it only fair that the firm gives back to
the society by being socially responsible
3. Prevention is better than care.
4. The firm contributes a lot to the very many problems faced by the society hence
should help in solving e.g. planting trees.
5. Organization has a lot of resources hence use to same to help the society
6. Co/firms has the responsibility to make the environment they operating in better and
even protect it by being socially responsible.
7. By being socially responsible, firms can avoid government interventions and enjoy
being in business.

Case against social responsibility

It violates the profit maximization objective which is the primary objective of a profit making
firm.

The society ends up paying for the cost of social responsibility through increased prices.

Lack of accountability system and structures for administering social responsibility.

The firm may end up acting illegally by engaging in activities they are not licensed to
undertake.

Organization also possesses a lot of power and influence over the society. By being socially
responsible e.g. helping the society a lot of power will be concentrated on them which will
not be politically proved.

Lack of full support in social actions

There are no established ways of taking stock and measuring the impact of social
responsibility.
Ethics of Management

Ethics refers to the study of moral obligations involving separation of what is right or wrong

It deals with what is morally good/bad and right or wrong.

Personal ethics refers to rules by which an individual lives his/her life.

Business/management ethics narrows the search for right/wrong for /to productive
organization it is concerned with truth and justice in business and the interaction of
managers with various stakeholders and his moral obligation towards them.

Moral agendas of Managers

1. To provide goods and services that are socially valuable

2. To protect and promote the economic wellbeing of various stake holders
3. To enhance freedom, dignity and general wellbeing of individuals both in and out of
the firm.

Why managers should behave ethically

1. Being leaders, they are role models and therefore need to set a good examples
2. They are the face of the organization and therefore to uphold and maintain a good
corporate image, they must be ethical.
3. In most cases, it is a professional requirement
4. The rules of mortality requires the managers or any other person to behave ethically
5. It is fair to the players in the field
6. There are rules and regulations e.g. on corruption, sexual harassment which
managers should abide with
7. Managers are the strategists in the organization and hence their decisions and
choices will highly impact on the whole organization and society in general

Criteria of evaluating whether managers are ethical or unethical

1. Theory of justice-If managers make decisions that are indiscriminative, then he/she
is said to be ethical
2. Theory based on right -If a manager respects or protects other people’s rights, then
he will be said to be ethical
3. Utilitarian theory -Where managers make decisions that benefit a large group, then
it is ethical
4. From the way the manager deals with the firm’s policies Ethical managers will
never compromise the policies of the firm for their own interest.
 5. By looking at how managers deals with his own personal issues- Ethical
managers will behave professionally always

Examples of Unethical Behavior

1. Underpaying workers, apprising them or mistreating them

2. Nepotism, favourism, tribalism, discrimination etc.
3. Sexual harassment
4. Accepting /taking bribes
5. Record falsification
6. Making misleading claims about a product
7. Environmental pollution
8. Behaving unprofessionally
9. Stealing from the firm in terms of money in time.

Causes of Unethical Behavior in an Organization

1. poor remuneration
2. selfishness
3. lack of clear guidelines on what constitutes ethical behavior
4. pressure for performance
5. pressure from competition
6. culture of the firm/organization
7. peer pressure
8. pay off from the past practices

Measures that managers can take to improve ethical behavior in an organization.

1. Better remuneration
2. Clear guidelines on what constitutes ethical behavior and code of ethics for the
entity.
3. Openly punishing unethical behavior (for others to learn from them) and rewarding
good behavior.
4. Policies of the firm should be clear and not ambiguous
5. Managers should be good role models
6. Conduct frequent ethical audit
7. Encouraging whistle blowing and also protecting the whistle blowers
8. Develop a culture of open communication and discussion of ethics
9. Establish ethical committee.

Factors determining individual ethics

1. Family influence
 2. Peer influence
3. Values and morals
4. Situational factors

Other factors include

i.                    Law

ii.                  Code of ethics for organized organization

iii.                Holy books e.g. Bible, Quran 

iv.                Conscience

v.                  Education

CHAPTER TWO

EVOLUTION OF MANAGEMENT THOUGHT

Introduction

Although the 20th century is marked by history as an area of scientific management, this

does not mean that management was not present in previous years.

Though large businesses did not exist, management has been practiced for 1000s of years.
Practice of management can be traced back to 1000s of years. The Egyptians used
management functions of planning, organizing and controlling when they constructed the
great pyramid

The Raman Empire developed a well-defined organization structure that greatly facilitated
communication and control

Plato, propounded a system of job specialization in 350 B.C

Thus the practice of management can be traced to earliest recorded history.

Management as it is today can be better understood as an evolution of the following stages:

1. Pre-scientific Era
2. Classical Era
3. Neo-classical Era
 4. Modern Era

PRE-SCIENTIFIC ERA/ EARLY MANAGEMENT PRACTICES- This covers the period before

1900

Archeological evidence such as the great pyramid stands in salient tribute of bygone
managers.

Illiterate workers, miserable working conditions, primitive agrarian economics and crude
tools made the task of managers in ancient civilization e.g. Egypt and Mesopotamia
civilization extremely difficult

Managers during the pre-scientific era didn’t have formal education and training in proven
management methods but they accomplished amazing things.

As time passed, exploitation of natural resources and technological advances led to the
industrial revolution.

The industrial resolution changed the nature of work, the nature of society and the location
of work.

This saw people moving from their local villages and firms to work in urban factories.

Money economies arose to replace the barter trade (economies) which saw the introduction
(payment) of wages. Industrial revolution also brought about different in interest in
nationalizing the managerial process.

Haphazard and unsystematic management practices proved to be inadequate for large scale
factory operations.

Some of the personalities/contributors/writers of the day during this period include:

Robert Owen (1771 – 1858) - He was a British industrialist and reformer was one of the
first managers to recognize the importance of an organized human resources. He believed
that workers deserve respect and dignity. He implemented better working conditions and
believed that giving more attention to workers will pay off in increased output.

Charles Babbage (1792 – 1871)- He was an English Mathematician and he focused his
attention on efficiency of production in his book titled “on economy of Machinery and
manufactures” the Babbage placed great faith in the division of labour and advocated for
the application of math’s to the problems such as efficient use of facilities and materials

Babbage was originator of modern management theory and practice.

The serious study of management did not begin until the 19 th century.

This came after haphazard and unsystematic management practices proved to be

inadequate for large scale factory operation and therefore the classical management era
was born out of this interest.

Classical Management Era/Perspective

The classical management emerged during the early years of this century (20 th century)
(1900 – 1930) and these ideas represent the first well developed frame work of
management.

The classical management consists of 3 distinct branches namely:

1. Scientific management
2. Administrative management
3. Bureaucratic management

Features of classical management

 Was closely associated with industrial revolution and development of large scale
industries which demanded the development of new forms of organization in
management.
 Classical theory is based upon scientific, administrative management and
bureaucratic management.
 Management thought focused on:

a)      Productivity

b)      Job content

c)      Structure

d)      Standardization

e)      Simplification

f)       Specialization

  Focused on scientific approach towards management and organization

 Classical management was based on 3 pillars
(i)                 Scientific school of thought

(ii)              Administrative school of thought

(iii)            Bureaucratic.

SCIENTIFIC THEORY OF MANAGEMENT/SCIENTIFIC SCHOOL OF THOUGHT (Taylorism)

Fredrick W Taylor

It was founded by Frederick Winslow Taylor and it puts emphasis on scientific thinking
where managers MUST give justification for decision making.

He started the Scientific Management movement, and he and his associates were the first
people to study the work process scientifically. They studied how work was performed, and
they looked at how this affected worker productivity. Taylor's philosophy focused on the
belief that making people work as hard as they could was not as efficient as optimizing the
way the work was done.

In 1909, Taylor published "The Principles of Scientific Management." In this, he proposed

that by optimizing and simplifying jobs, productivity would increase. He also advanced the
idea that workers and managers needed to cooperate with one another. Taylor believed that
all workers were motivated by money, so he promoted the idea of "a fair day's pay for a fair
day's work." In other words, if a worker didn't achieve enough in a day, he didn't deserve to
be paid as much as another worker who was highly productive.

With a background in mechanical engineering, Taylor was very interested in efficiency. While
advancing his career at a U.S. steel manufacturer, he designed workplace experiments to
determine optimal performance levels

The aim of the theory was to change the attitude of the employees and the managers
towards one another and work.

Objectives of the Theory

i) To use a lot of skills and knowledge in the production process.

ii) To revolutionize the whole process of production and marketing by having professionals
in charge.
iii) To standardize the plans, tools, materials and working conditions in order to increase
production.

iv) To reduce the possibility of slackness in production as a result of accidents.

v) To help the workers through proper guidance.

vi) To increase the level of wages, profits and customer service to the highest levels.

Principles of the Theory

Taylor's four principles are as follows:

1. Replace working by "rule of thumb," or simple habit and common sense, and instead
use the scientific method to study work and determine the most efficient way to
perform specific tasks.
2. Rather than simply assign workers to just any job, match workers to their jobs based
on capability and motivation, and train them to work at maximum efficiency.
3. Monitor worker performance, and provide instructions and supervision to ensure
that they're using the most efficient ways of working.
4. Allocate the work between managers and workers so that the managers spend their
time planning and training, allowing the workers to perform their tasks efficiently.
5. Introduction of the concept of stop watch.

Other Contributors to the Scientific Theory

Frank and Lillian Gilbreth

Were the most noted pioneers of time in motion study? These people were husband and
wife; they developed the classification of motion used to complete the job and they called it
Therbligs

Working individually and together they developed a numerous technique and strategies for
eliminating inefficiencies

They applied many of their ideas to their families. Their experience in raising 12 children are
documented in their books and movie “Cheape by Dozen”

Henry Gantt

He worked with Taylor on several projects including assignments in Bethlehem and other
many places.
He worked independently later and developed techniques for improving work output.

He came up with charting system for production scheduling i.e.

“Gantt Chart” which is still used today.

He developed work quarter system complete with bonus system for workers and all
managers who meet/exceed the quarter.

His bonus system was similar to the modern gain sharing technique where by employees
were motivated to higher levels of performance by the potential of sharing in profit
generated.

Advantages of Scientific theory

i. Uniformity- It gave birth to standardization of tools, working methods etc. which led
to uniformity.
ii. Incentives- Because of incentives, the workers performance increased greatly.
iii. Wastage- It reduced the level of wastage in production process through scientific
selection and training.
iv. It puts emphasis on better utilization of available organization's resources.
v. The system provides for the satisfaction of the needs of the customers by providing
high quality product/services at lower prices.
vi. It puts emphasis on good harmonious relationships between workers and
management.
vii. It puts emphasis on proper selection, training and promotion of employees.
viii. It has led to specialization which in turn led to increased productivity and job
satisfaction.

Disadvantages of Scientific theory

i. It puts a lot of emphasis on employee incentives but less on compensation in an

event of an accident.
ii. It has overlooked the human desire for job satisfaction.
iii. It assumes the social needs of workers such as forming and joining a trade union,
welfare society etc.
iv. The techniques of scientific management dehumanize the workers by making them
to work like mindless machines.
v. It rules out any bargaining about wages by emphasizing on the manager setting
salaries and wages.
vi. It gives too much power to managers which cause conflict and resistance.
vii. During Taylor’s time, the mental revolution, he advocated rarely come about but at
most time led to increased productivity but also led to mass layoffs.
ADMINISTRATIVE SCHOOL OF THOUGHT
ADMINISTRATIVE SCHOOL OF THOUGHT

This school of management looks at management as a process that involves certain

functions such as planning, organizing, controlling, directing, staffing etc.

That’s why it’s also called functional approach.

Henry Fayol

Regarded as the father of this school of management

Defined management interns of certain functions and then laid down 14 principles of
management. Which according to him has universal application?

He was a French executive who emphasized management could both be taught and learnt.

He began by classifying all operations in business organization under the following 6

categories:

1. Technical activities
2. Commercial activities i.e. buying and selling and creating
3. Financial activities dealing with the source and uses of funds or funding or
controlling capital.
4. Security dealing with safeguarding firms resources
5. Accounting operation i.e. balance sheet, cost recordings.
6. Administrative and managerial activities i.e. management function itself

Fayol pointed out that managerial activity deserved more attention.

According to him, management is the process composed of 5 elements i.e. planning,

organizing, coordination, commanding and controlling.

According to him, he observed that;

a)      To plan is to study the future and arrange the plan of operation.

b)      To organize is to build up material and human organization of the business

c)      To command is to make staff do their work

d)      To coordinate is to unify all activities

e)      Control is to see that everything is done to accordance to standards laid down and the
instructions given

f)       Fayol concluded his theory by stating that, to be effective management should be

based upon the following 14 principles:

14 Principles of Fayol

Division of labour work should be divided to allow specialization.

Specialization enables workers to acquire ability, sureness and accuracy which increase their
output.

Authority and responsibility – authority is the right to exercise power.

Responsibility is an obligation to perform and deliver results.

According to this principle, there should be a match between authority and responsibility

Too much authority without responsibility, will lead to abuse of power.

Too much responsibility without authority will render the worker incapable of delivering
results.

Unity of direction – states that the organization effort should be geared towards same
direction i.e. towards the attainment of a common organization purpose.

In modern organization, managers formulate corporate goals, vision and mission a

statement that provides direction to all organization members such that all members are
moving to the same direction.

Unity of command – here, an individual worker should be only directly answerable to one
boss.

Having multi-priority of processes will lead to confusion on the part of employee and
conflicts between managers

Order – according to this principle, people and material should have designated location for
ease of location.

Less time will be wasted locating people and material if there is order
This principle is applied into today’s management as people have designated to work
stations, there are store where material are kept and there are filling system that facilitate
ease of retrieval of data.

Discipline – according to this principle, workers behavior should be regulated through rules
and regulations that must be adhered to.

It is applied into today’s management as there is established code of conduct.

Centralization – here, an organization should have a central organ where decisions are
centrally made and control is exercised.

Subordination of individual interest to the general interest – according this principle,

the interest of the organization lay in supreme/comes before the interest of the individual.

Whenever there is a conflict of interest the organization should take precedent

Equity- involves fairness and justice.

Managers should exercise fairness in their dealing with employees and they should be non-
discriminative

Initiative – implies the workers should be encouraged to creative and innovate.

Scalar chain here, an organization should have clear hierarchy of authority flowing from top
to bottom.

Stability of tenure – the worker should be assured or guaranteed of their job.

Job insecurity will lead to lack of commitment and perpetuation of frauds by employees

Applied in modern management as workers are hired on permanent/pensionable basis or

contract.

Espirit de corps refers to harmony and mutual understanding among the members of an

organization

Managers should encourage team work in an organization.

Remuneration of personnel – the amount of remuneration in the methods of payment

should be just and fair and should provide max possible satisfaction to both employees and
employers.
Workers should be paid well in accordance to /with their contribution.

Henry Fayol also identified qualities that managers need /require in order to perform their
duties effectively. These qualities include;

1. Physical qualities – e.g. smart, average, height energetic, physically fit tcc.
2. Mental quality – a manager should possess an above average IQ and wisdom.
3. Moral quality – integrity, honesty, tcc
4. General knowledge and experience – should possess general knowledge on various
disciplines and on the happenings in the external environment.

 BUREAUCRATIC SCHOOL OF THOUGHT

Bureaucracy was a brain child of max weber.

Max weber was a German socialist who was concerned with abuse of power by those in
authority.

In order to reduce these abuses, an organization system that will be operated by rules and
regulations commonly known as bureaucracy was proposed.

Under bureaucracy, an organization would be hierarchically structured where authority is

clearly defined and people are guided by rationality, rules and regulations rather than
arbitrary actions.

He proposed the following bureaucratic principles

1. Assisting a system of interpersonal rules, regulations and procedures

2. Principle of division of labour and functional specialization.
3. Principle of hierarchy of authority
4. A cadre of professional employees
5. Autonomous decisions by office holders
6. Selection of workers should be based on competence/merit
7. Maintenance of written records, communication and rules
8. Separation of management from owners – the ownership should be separated from
management and this will ensure that organization is highly formalized.

Advantages of bureaucratic school of thought

1. There is consistence, predictability and order

2. Division of labour leads to increased efficiency
3. Division of labour eliminates conflicting jobs, duties and responsibilities
4. The high level of discipline in bureaucracy saves management time.
 5. There is no biasness.
6. Less time is wasted in decision making since policies are well laid down and
managers made simple reference to policies.
7. The merit based employee selection ensures that organization is staffed with
competent workers and this increases productivity.
8. Bureaucracy eliminates irrational decision making.

Disadvantages

1. Rigidity following the same rules

2. Hinders/hampers creativity, innovation and initiative.
3. Does not give room for participative management i.e. employees has no say
4. Some procedures are too lengthy and may not make any economic sales leading to a
lot of time wastage.
5. Over looks psychological impact it creates with people.

NEO-CLASSICAL ERA
NEO-CLASSICAL ERA

The classical writers or authors including Fayol, Taylor and weber neglected the human
relation aspect

The neo-classists focused on the human aspect of industry

They modified the classical theory by modifying the fact that organization as social systems
and human factors are the most important element within it. Thus, this came to address the
weakness of the classical school of thought.

The main short comings of classical theory included

(i)                 They all ignored the man behind the machine

(ii)              They all assumed that man is an economic beast who is only motivated by
economic gain/benefits.

(iii)            They were all concerned with maximizing gains of the owners and the needs of
the workers were totally ignored.
(iv)             They put all managerial control in the hands of management workers were
ignored.

The main schools of thought developed during this period were:

1.      Human relations school of thought

2.      Behavioral school of thought.

HUMAN RELATIONS SCHOOL OF THOUGHT

The main man behind this school of thought was Elton Mayo who was a professor at
Harvard University.

Together with his colleagues they did experiment in Hawthorne which was in Chicago.

The experiments were done in four phases. The main aim was to establish the factors that
affect workers’ productivity.

The four phases include

Phase 1: illumination study – the objective of this study was to determine the level of
illumination and level of productivity.

It was expected that workers’ productivity would increase with increase in illumination but
the study failed to prove the experiment accurately.

Phase 2: Relay assembling test room study – the objective of this study was to determine
the relationship between worker productivity and improved benefit and working conditions.

The experiment also wanted to find out whether there are other factors that influence
productivity and worker behavior.

The study found out there is no cause and effect relationship between working condition
and output, rather there were other factors e.g. attitude of the workers

Interviewing programme – this experiment, employees were interviewed to learn more

about their opinion with respect to their work, working conditions and supervisions.

The interviewers sought employees view on the factors that would lead in increased
productivity.

The interviewees suggested the following factors;

a)      Psychological factors which determine whether the workers are satisfied or dissatisfied.

b)      The persons need for self-actualization will determine his/her satisfaction in the work
place.

c)      A person work group and his relationship to it determines his productivity

Bank wiring test room study – this experiment was conducted to find out the effect of
social/factors on employees performance

A group of male workers were chosen and put in a room that was wired such that
experimenters could observe from remote locations.

The group was given the task and was left to work.

The experimenter’s observed that the workers selected a leader and organized themselves
and they helped to achieve objectives.

Conclusion

In summary, the following was the conclusion reached by the whole experiment:

(i)                 An organization is a social technical system

(ii)              Economic incentives are not the only significant motivators

(iii)            Human beings are active and not passive as machines

(iv)             Informal leader are as important as formal leaders

(v)               Productivity in many cases is influenced by group behavior

(vi)             Employees efforts (attitude) morale is an important determinant of productivity

Criticism of theory

1. Experiments lacked scientific objectivity

2. It is criticized for its failure to explain the effect of labour union.
3. The theory provides an unrealistic picture of informal groups by describing them as
major sources of satisfaction of industrial workers.
4. The approach was in fact production oriented and not employee oriented as it
argues
 5. The approach over emphasizes the importance of symbolic reward and under played
the role of material.

BEHAVIORAL THEORY

Concerned with human behavior i.e. the “why” of human behavior

They recognized that human behavior can be explained by unmet needs that a man is
struggling to satisfy.

There several theories within this the organization. The main one include the following

1. Abraham Maslow hierarchy of needs

2. Clayton Alderfer: ERG
3. McGregor

Abraham Maslow’s Hierarchy of needs

This content theory of motivation seeks to determine the individual’s choice of goods hence
certain things are more important than others.

Abraham Maslow suggested that individuals are motivated by 5 levels of needs.

When the first level has been satisfied, the individual will attempt to satisfy the 2 nd level then
move on to other level.

The five categories include;

1. Physiological needs – this must be satisfied for a person to survive. They include
basic needs e.g. food, shelter and clothing

Income from employment allows people to satisfy these needs.

2. Security needs/safety – once psychological needs has been met and satisfied, the
individual will seek security at home, tenure at work and protection against living
standards.

House and medical insurance are examples of attempts to achieve security

 3. Social needs most people desire affection, they want to belong to a community and
feel wanted hence social groups, religious, cultural, sporting and recreational
organization are formed.
4. Esteem needs – include need for recognition, authority and influence on one
another, also their desire to acquire position in external demand for self-respect.

Such needs could be met through the occupation of highly ranked jobs together with the
provision of status symbols; large expensive company cars, wall to wall carpeting etc.

5. Self-actualization – it is the highest level of needs in the Maslow’s hierarchy.

Contains creative entity and search for personal fulfillment

Having satisfied all other needs, the individual will want to accomplish everything he/she is
capable of achieving; to develop individual skills, talents and attitudes.

N.B, few people ever reach ever reach in this final stage                                                           

Douglas McGregor (X& Y)

Proposed theory X and Y

ASSUMPTIONS OF THEORY X

i.                    Most people must be forced and even threatened with punishment before
they work.

ii.                  Personal goals prevail and conflict with those of the organization

iii.                Man was lazy

iv.                Man had to be controlled through strict supervision.

v.                  Man needed a lot of guidance to ensure high performance.

vi.                Man hated work.

Assumptions of theory Y

Work is natural activity like rest and play

Man likes to work

Man was committed for organization goals

Man liked and sought responsibilities

Man has imagination and creativity

Implications of theory X and Y to managers

1. Management should identify different kind of employees

2. Theory x employees should be supervised to ensure results
3. Employees should be encouraged to be more creative and innovative.
4. Theory Y employees should be left to work on their own with minimal supervision.

Clayton Alderfer: ERG theory

Re-categorized Maslow’s hierarchy on need into 3 simpler and broader classes of needs i.e.

1. E-Existence Needs includes needs of basic material necessities i.e. physiological and
security needs
2. R-Relatedness – includes the aspirations individuals have for maintaining significant
inter-personal relationship with families, peers, getting or gaining public fame and
recognition.

Maslow’s social needs and external components of esteem needs fall under this class of
needs.

3. G-Growth Needs – needs for self-development and personal growth and

advancement i.e. self-actualization.

MODERN THEORIES OF MANAGEMENT

These theories run from 1960s to date Under this school of thought several theories has been
developed which include the following Contingency/Situational Theory This theory argues that there are
no ready-made universal answers to management, rather, appropriate managers action depends on
situations prevailing at the time i.e., what the manager does will depend on situational or contingency
factors Managers are entirely situational he should consider different situations before selecting the
cause of action. There is no best way of managing a company and structuring it. The management
depends upon the environment, the firm’s strategy, technology in use by the firm, size of the
organization, culture of the firm etc. Managers must use different strategies for different situations and
that a method that is highly effective in one situation may not even work in other situations. Mary
Parker Follet spoke of the rule of situation She argued that different situations require different kinds of
knowledge and the man possessing knowledge by a certain situation tends in the best manage business
other beings being people to become the leader of the moment Every situation that a manager will
confront will somehow be different and will require different reactions. Features of a contingency theory
1. It is situational oriented, arguing/ calling upon managers to study, analyze and diagnosing the
situation. 2. After analyzing of the situation, managers are expected to prepare inventory of
management, principle and techniques and concepts. 3. In order to tackle the situation efficiently, the
validity and applicability of the management tools and techniques is prepared which is appropriate for
the situation. 4. The organization environment is ever changing and the organization continually
interacts with dynamic environment 5. Management style and practice should match with requirement
of the situation. 6. Successful managers will depend on ability to cope with environmental demand,
therefore management should sharpen their diagnostic skills to anticipate and comprehend the
environmental changes. NB: It is important to know that contingency approach emphasizes the need for
managers to examine the relationship between internal and external environment of the organization.
Limitations of situational approach Lacks sound theoretical base (no guidelines) All depends upon the
situation A manager has to think on possible alternatives as he has no short cuts applied principles to act
upon. Process of contingency approach 1. Analyze and understand the particular situation 2. Examine
validity of alternative approaches to the situations at hand. 3. Make the right choice by matching right
choice with two situation 4. Implement the choice and review choices. THE SYSTEM THEORY /SYSTEMS
APPROACH TO MANAGEMENT Tries to look at how organization function and operate as a system which
can be a subsystem of a much bigger system. Views an organization as a system or a group of inter-
related parts with a unified purpose The action of one part will influence the other parts. It is therefore
incorrect to assume that if a problem exists in the production department, the solution to the problem
will not has an impact in another area e.g. market department In general a system is an inter-related set
of elements that functions as a whole. It is a set of integrated variables working together to achieve
common system goals It is a process by which an organization received feedback. Managers should view
the organization as a dynamic whole when solving problems System theorists started management by
putting thing together and assumed that the organization goals are created by the sum of its parts which
are uniquely related to one another. Every system has got subsystems which is a system within a
system. An organization as a system has got subsystems or inter-related components e.g. divisions,
depts., sections or other organization groupings. An organization operates as an open system receiving
inputs from the external environment and releasing output to the external environment. A system
therefore receives inputs, transforms the resources into output and receives feedback from the
environment. The feed from the environment serves as a source of information about the performance
of the organization and hence serves as a good basis for better decision-making. This idea of a system
being a part of a greater system is very useful to management and it is the greatest contribution of the
systems theory. Other concepts of systems theory are: Synergies suggest that 2 or more
people/unit/department can achieve more when working together than working individually. This
considers departments as inter-dependent components that complement each other in pursuit of
organizational goals It’s important for managers to promote cooperative effort/team work Entropy – it is
a concept that refers to what happens when an organization adopts a closed system approach. They fall
and die Entropy is the amount of disorder/randomness present in any system When an organization fails
to make the necessary adjustment for it to exist in a particular environment, it is likely to dis integrate
and disappear. The process of dis integration can take either a short period or a longer period but finally
the organization will fall and die. Feedback Input Transformation Output Equifinality – it is the idea that
two or more strategies/paths may lead to the same achievement or place. An organization is a system
containing for main part/subsystems. I.e. Task, structure, people and technology. a) Task subsystem –
the task system refers to the main purpose of the organisation b) Structure subsystem – refers to formal
distribution of authority and responsibility, communication channel and work flow. c) People sub-system
– refers to employees with their motives, attitudes and values in informal organization. d) Technology
subsystem refers to tools and equipment as well as techniques which are used by organization to
perform its task. Other subsystems include: e) Environment f) Objectives g) It is a set of interdependent
parts which form a unitary whole that performs some functions. Importance of understanding
organization system approach 1. It is an integrating approach which considers management in its totality
2. Points out the complex and multi-disciplinary character of management. 3. It is a valuable aid in
understanding the inter-relationship between different parts of an organization and its environmental
inter-phase. 4. Gives managers a wider and overall perspective. 5. This approach possesses a conceptual
framework of much higher order than any other approach. 6. Facilitate better understanding of
organization approach in complex environment 7. Suggest that the internal functioning of organization
must be consistent with the demands to changing environment and the needs of the members.
Operational research approach/theory/management science This involves the application of
quantitative techniques to problem solving. It is quantitatively oriented aspect of management and
today in company; it’s used for planning, designing, schedules, and managing inventories and
determining how much to order. The approach is sometimes referred to as Management science
approach Based on approach of scientific management. Characteristics of operational research approach
Management is essentially decision-making and an organization is a decision making unit. Organization
efficiency depends upon quality of managerial decisions. A problem is expressed in form of a
mathematical model containing mathematical symbols and relationship The different variables in
management can be quantified and expressed in form of equations. The approach has provided sharp
tools for rational decision making it is not used in organizing, staffing, leadership, where problems are
more human than taking it in nature and does not take total view in management. In conclusion a
theory is a systematic grouping of independent concepts and principles that give a frame work to ties
and as together a significant area of knowledge. Its relevant in the field of management because it
provides a means of classifies significant and pertinent management knowledge. When identify an
effective organization structure, there are a number of principles applied and which are inter-related.
These principles have a predictive value to managers e.g. certain principles guide managers when
delegating authority in an organization. Theories and history of management are important to managers
for various reasons; Importance of theories to managers History assists managers in understanding the
current developments and avoids mistakes of the past. History and theory promote an understanding
and appreciation of the current situations and development; also facilitate the prediction of future
conditions. Theories helps managers organize information and therefore are able to approach problems
systematically. Without theories all managers will has ideas or creations which will not be useful in
today’s complex and dynamic organization.

PLANNING FUNCTION
CHAPTER THREE
 PLANNING FUNCTION

Planning precedes all the other managerial functions and it is an ever increasing feature of
modern life even though there is no universal approach to planning.

Everyone has a plan either formally or informally

We are involved in planning leisure activities e.g. at work, at school, college 

Planning – is a process of determining in advance what should be accomplished and how it
should be realized.

It is the process of determining which path among the several that you need to follow.

It involves deciding in the present what will be done in the future.  Involves formulating
future goals of action; it is a systematic thought that precedes action.

It is simply deciding in advance what to do, how to do it, when to do it and who is to do it.

A good plan should be able to tell what, how and when something is to be done.

The primary purpose for planning is to provide guidelines necessary for decision making
and the resulting action throughout the organization.

Plans give purpose to our lives and formalized plans enable managers to mobilize their
intentions to accomplish organization purposes.

They are working documents by which organization or parts thereof are managed.

 A plan is a specific documented intention consisting of an objective and action statement.

An action plan is a documented method/strategy which is devised for the purpose of

achieving specific results. A plan for obtaining an objective which is an end or destination
and addresses the question.

Planning deals with future uncertainty and it is necessary for managers to be flexible. It
bridges the gap between the present and the future and it deals with future expectations.

Through planning, managers are able to have a clue of the future.

Planning involves selecting from among alternatives future courses of actions for the entire
organization for every department and section within
In any organization, it is necessary for people to know what they are expected to accomplish
if the group effort is to be effective.

In general, planning is what you do, before you do something so that when you do it, it is
not a mixed up.

Planning involves the following:

1. Decision making
2. Goal setting
3. Controlling
4. Forecasting

Nature of Planning

Characteristic of planning

It is an intellectual activity-Involves vision and foresightedness to decide the things to be

done in the future

It bridges the gap between where we are and where we want to go hence it requires mental
skills.

Involves selection from among alternatives – planning is a choice of activity. It involves

finding of alternatives and selection of the best alternatives to achieve specified objectives.
Thus decision making is an integral part of planning.

It is forward looking – It means looking ahead. It is carried out to achieve some objectives
in future.

It may involve forecasting of future events such as customers demand, competition etc.
Thus planning is futuristic in nature.

Related to objectives – every plan specifies the objectives to be obtained in the future and
steps necessary to reach them.

It is the most basic of all the managerial functions – Since managerial functions are
organizing, staffing, leading and controlling, they are all designed to support their
accomplishment of enterprise objectives.

Planning logically precedes the execution of all other managerial functions.

It is a continuous process – It is not a onetime event of activity but a continuous process

It is a pervasive function of management – Planning is a function of all managers

although the character or nature and breadth of planning will vary with their authority and
with the nature of authority plans attained by superior.

Reasons for planning/ Factors that necessitates the need for planning

Every function of business is planned in most of the enterprise because there are production
plans, sales plans, financial plans, research and development plans, purchase plans etc.

Planning is done to ensure proper utilization of human and material resources to achieve
the objectives of the business.

Planning is meant to avoid haphazard implementation of resources without plans, actions

must become merely random activity and it will lead to chaos and confusion.

Planning is prerequisite to good management. No organization can achieve its objectives

without planning because;

1. Growing complexity of modern business because of rapid technological changes and

keen competition in the market.
2. Rapid social and economic changes
3. Recognition of social responsibility
4. Growth of trade unionism
5. Uncertainties caused by trade or business cycle
6. Shortages of certain resources
7. Increasing government control over business
8. Need for research and development activities.

These are the challenges before the modern era managers, which can be dealt effectively
only through proper planning. That is to imply that good planning is the foundation of
management.

Planning is therefore important because;

Importance of planning
Importance of planning

Provides direction for the organization -Without a plan, members of the organization will
not know what is expected of them.
Reduces uncertainty and risk- This is because managers did predict circumstances in the
future and will prepare well for any eventuality.

Guides decision making – sound planning avoids hasty and plans established are used as
point of reference for decision making.

Facilitates control – The actual performance can be checked and measured against the
plans and objectives they are in.

Facilitates coordination – Through planning, it’s possible to divide labour and allocate
resources to ensure that there is harmony between various inter-related parts of the
organisation.

Enhances efficiency in operations – Planned efforts are always more efficient than
unplanned efforts

Facilitates optimal allocation of resources

Facilitates delegation/decentralization

Precedes the execution of all the other managerial functions- It is therefore impossible
to execute the other managerial functions effectively without prior planning

Limitations of planning

Sometimes planning fails to achieve the expected results because of

Lack of reliable data

There may be lack of reliable facts and figures over which plans may be based

Planning losses its value if reliable information is not available or if the planner fails to utilize
the available information.

Lack of initiative

Planning is a forward looking process, if a manager has a tendency of following rather than
leading, then he will not be able to make new plans.

Therefore, the planner must take the required initiative for planning to be effective.
Costly process

It is time consuming and expensive. This may delay action in certain process but it is also
true that if sufficient time is not given to the planning process, the plans so produced may
prove to be unrealistic.

Rigidity In organization working internal inflexibility in the organization may compel the
planner to make rigid plans.

This may deter the manager from taking the initiative in adjusting the plans.

Non acceptability of change

Resistance to change is another factor which puts limits on planning.

It is a commonly experienced phenomenon in a business world. Even the planners

themselves do not like changes in other occasions hence making planning process in
effective.

Psychological barrier

Psychological factors also limit the scope of planning

Some people consider present more important than future because present is more certain.

Such people are psychologically opposed to planning

External limitations The effectiveness of planning is sometimes limited because of external

factors which are beyond the control of planners. They may include drought, famine, and
war.

Measures to overcome (limitations of planning)

1. Setting clear-cut objectives the existence of clear cut objective is necessary for
efficient and effective planning

Objectives should not only be understandable but also rational

2. Management information system – an efficient system of management

information should be installed so that all relevant facts and figures are made
available to managers before they perform any planning function.
3. Effective forecasting – business is greatly influenced by economic, social, political
and international environment.
The management should have a mechanism of forecasting changes in such environment.

4. Careful premising – the planning premises constitutes a frame work within which
planning is done.

They are the assumptions to be made regarding future happening. It is a prerequisite to

determine future settings such as marketing, pricing, government policies, tax structure, tcc.

The planning premises should be set up very carefully

5. Flexibility – some element of flexibility must be introduced in the planning process

because modern business operates in an environment which keeps on changing.
6. Dynamic managers – the person concerned with the task of planning should be
dynamic in outlook.

They must take the required initiative to make business focused and develop planning
premises.

7. Availability of resources – determination and evaluation of alternatives should be

done in the light of resources available to the management

Alternatives are always present in any decision problems.

8. Cost benefit analysis – the planners must undertake cost benefit analysis to ensure
that the benefits of planning are more than the cost involved in it.

This necessarily calls for establishing measurable goals, clear insight to the alternative
courses of action available.

Principles of planning

1. Principle of contribution to the objective – the purpose of plans and their

components is to develop and to facilitate realization of organization aims or
objectives.

Long-range plans should be interwoven with medium range plans which in turn should be
set with short range ones in order to accomplish organisation objectives effectively and
economically.

2. Principle of pervasiveness of planning – planning is found at all levels of

management
Strategic planning long-range planning is related to top management while intermediate
and short range planning are the concern of middle and operating management respective.

3. Principle of limiting factors – planning must take into consideration the limiting
factors (manpower, money, machine, management and materials) by concentrating
on them when developing alternative plans, strategies, policies, procedures and
standards.
4. Principle of flexibility – flexibility should be built into organizational plans. The risk
of loss due to unexpected events can be reduced by building flexibility into the
plans.

Error in forecasting and decision making and future uncertainties are the two common
factors which call for flexibility in managerial planning.

5. Principle of navigational change- this principle requires that managers should

periodically check on the events and re-draws /re-drafts plans to maintain a course
towards a desired goal.
6. Principle of commitment- An organization should plan in future for a period of
time sufficient to fulfill the commitments (goals/targets) of the organization

I.e. logical planning should cover a time period necessary to forecast the fulfillment of
commitments involved in a decision.

This is necessary to make reasonably sure of meeting commitments.

7. Principle of efficiency of plans – the efficiency of a plan is measured by the amount

it contributes to objectives minus the cost and other undesirable consequences
involved in the formulation and operation of the plan.

This principle stresses upon economical use of individual effort to achieve group goals

8. Principle of timing – the appropriateness timing and planning is important. All

plans, policies, strategies and procedures are useless without proper timing.
9. Principle of alternative – in choosing from among alternatives the best alternative
will be that which contributes most effectively and efficiently in accomplishment of a
desired goal.
10. Principle of competitive strategies – while formulating plans a manager should
take into account the plans of rivals/competitors. The plans should be chosen in the
light of what a competitor will do in the same situation.
Types of plans/planning
Types of plans/planning

Can be categorized according to the following basis:

1. Scope
2. Time frame
3. Classification according to use

According to scope

Strategic plans – Cover the entire organization as a single business portfolio.

They are a broad plans developed by top level managers on how long term goals of the
organization will be achieved.

These plans are concerned with positioning a company as a whole in its external
environment.

They therefore has external focus

This type of planning has an aim of achieving effectiveness

They are complex as they try to integrate various units of the organization and they deal
with external environment that is unpredictable as well as distance future that may not be
predicted with accuracy.

These plans are also concerned with allocation of corporate resources among various units
of the firm.

These plans are greatly influenced by those people in power.

Strategic plans may include;

a)      Plans to merge

b)      Plans to liquidate a business

Tactical plans -These plans are developed by middle level managers and are concerned
with specific unit of the organisation e.g. department section branch etc.
These plans are drawn from a strategic plan and they focus on the medium term goals of
the organization will be achieved.

Formulated by the middle level managers and are concerned with effectiveness as opposed
to efficiency.

Example:

a)      New product plans

ii)                 Marketing plans

iii)               Human resource plans etc.

Operational plans – These plans has the narrowest focus and short term frame

Concerned with a specific activity in a specific unit in an organization

Classification according to time frame

 Based on the time period covered by the plan

 The plans include

(i)     Long range/term plans-Tthese are plans that cover a period more than 5years (5-
10yrs) though it can extend up to 20yrs or so.

 They are prepared after an analysis of the firm’s environment.

 Such plans may require changes in the organisation structure and activities
 Long term planning is mainly the responsibility of top management
 Developed to guide the future efforts of the enterprise.
 The need for long period has increased on account of growing competition
accelerated obsolescence, increased specialization, tcc.

(ii)  Medium term plans/intermediate – covers 2-5yrs.

 Meant to support the long term plans.

 May relate to development of new product and market, product publicity, raising
return of investment from existing product and market.
 Are more detailed than long range plans.

(iii)         Short-rage plans- Relates to a period of up to 1yr.

  Generally such plans are meant to achieve short term goals

Classification according to use/based on use

On the basis of use, there can be the following types of planning

1. Standing /multi-use planning are the recurring plans and they are used repetitively in
situations of a similar nature.

A standing plan is a standing guide to recurring problems and is used again and again

Objectives, policies procedures and rules are important standing plans

2. Single use/Adhoc planning – a single use plan is used once and then it is discarded.

Designed to meet the demands of a specific situation and scrap when the situation is over.

Programmes, budgets, schedules, projects are examples of single use plans

Goal Setting
Goal Setting

Goal a statement of where an organization wants to be at a specific time in future.

It is the end towards which the effort of the organization are directed to achieve its
plans/objectives

Types of goals

Corporate goals- Are the broad goal which relates to the organization as a whole i.e. what
does the overall organization wish to achieve.

Examples of corporate goals;

Company vision – a vision of a company is a mental picture of the company’s destination.

It is a road map to the company’s future and provides a general feature of the company.

Company vision will answer queries like;

(i)                 What is our business now?

(ii)              What will it be in future?

(iii)            What will our business in an ideal world?

Company mission – the company mission is a rationale for the business existence.

The mission statement describes a company’s function and purposes.

Operational Goals – these are goals that relate to the specific functional area of the
organization e.g. production goals, marketing goals, HR gods.

Long term, medium term and short term goals – long term goals are achieved in 5 yrs. and
above.

Medium term goals- are achieved in 2-5 years.

Short term goals are achieved in the current year.

Economic and non-economic goals – economic goals relates to profit. Non-economic goals
e.g. social responsibility goals do not relate to profit.

Primary vs. secondary goals – primary goals are basic goals that an organisation is
established to pursue. For profit making entities, max profit is a primary objective.

For nonprofit making entities, the primary goal is to provide services for members at an
affordable rate.

Characteristics of Good Objectives/Goals

S – Specific

M – Measurable

A – Attainable

R – Realistic

R – Relevant

T – Time bound
Specific – a good objective should state in clear terms what should be achieved

This will ensure that there is no confusion and the workers know what is expected of them.

Measurable – good objectives should be measurable in quantitative terms. Those that have
no quantitative parameters should have a bench mark or a standard established to enable
the manager to assess the extent to which goals has been achieved.

Attainable/achievable – this implies that the goals should be attainable setting goals that
are too high and over-ambitious and impossible will demotivate the workers.

However, this does not imply the setting of unchallenging goals. Those that are
unchallenging will lead to boredom on the side /part of the workers.

Realistic – good objectives should be in line with reality. I.e. in setting the objectives, the
circumstances surrounding the attainment of these objectives should be considered.

Relevant – good objectives should support the main purpose of the organisation (relevance)

Time bound – good objectives should state the time frame within which they are to be
achieved

Other characteristics

1. Flexibility should provide room for change

2. Validity should be consistently reviewed and revised to ensure that they are not
obsolete and still valid.
3. Consistency – given that an organization will pursue several objectives, at the same
time, the objectives should be made consistent with each other

Steps to goal/objective setting

1. Environmental scanning and monitoring through the SWOT analysis

2. Set the overall goal based on SWOT analysis
3. Establish the sub unit goals
4. Establish operational goals that will help attain sub-unit goals
5. Implementation and monitoring of progress towards goals attainment at all levels of
the organization
6. Assessment of the feedback so that appropriate remedial action can be taken

 
Importance of goals

1. Facilitate planning as planning is impossible without objectives

2. Objectives provide motivation as they act as milestone closed by the workers
3. Provide direction for the organization.
4. Objectives ensure there is optimal allocation and utilization of resources – this is
because resources are allocated based on what needs to be achieved.
5. Objectives facilitate control and measurement of performance i.e. objectives act as
yard sticks/bench marks
6. Goals assist in coordination especially voluntary
7. Goals will help in decentralization of power and authority i.e. delegation
8. Facilitate appraisal of all decisions

Barriers in effective goal

setting                                                                                                                                       
                                                                                                            

Lack of skills on part/side on those setting goals i.e. may end up setting goals that are not
SMART

Some time there is over emphasizes on quantitative goals at the expense of qualitative
goals.

Resistance by workers as well as managers.

Setting unattainable/unrealistic goals

Conflicting expectations from various stake holders

Measures to overcome barriers to effective goal setting

1. Goals should be stated clearly

2. Understand the purpose of the goals i.e. managers must understand and appreciate
that goals are only a target that are aimed at but not necessarily hit at all times.
3. Ensuring consistence in goal setting
4. Communication – once established, goals must be communicated to all members of
the organisation
5. Goals should be flexible
6. Involve workers in goal setting and reward them
 7. Collect sufficient information

FORECASTING AS A PLANNING TOOL

FORECASTING AS A PLANNING TOOL

Forecasting is a systematic attempt to discover those economic, social and financial influences
governing or regulating business activities so as to predict or estimate current and future
financial production and marketing operations.

Thus forecasting is a process of predicting future systematically

The results of this process in known as forecast.

Forecasting is based on ability of helping managers to understand the future makeup of the
organization environment which in turn helps them formulate more effective plans

It’s used in a variety of ways in such areas as;

1. Production planning
2. Strategic planning
3. Sales analysis
4. Purchasing planning
5. Inventory control
6. Marketing planning
7. Logistic planning
8. Materials planning

Importance of forecasting

It is an essential element of planning every business executive make a forecast in one way or
another. The need to foresee the future on a systematic basis was well emphasized by Henry
Fayol who was of the opinion that the entire planning in business is made up of a series of
separate plan called forecast.

Forecasting has assumed a great importance in modern business world which is characterized by
growing competition, rapid environmental changes, fast technological changes and increased
government control

Advantages of forecast

a)      Helps in effective planning by providing scientific and reliable basis for anticipating future
operations.
b)      Aims at reducing levels of uncertainty there surrounds management decision making with
respect to cost production sales, pricing, profit tcc.

c)      Making and reviewing of forecast on a continuous basis will compel the managers to think
ahead and to search for the best possible solution with a dynamic approach.

d)      It’s necessary for efficient managerial control as it can disclose the areas where control is
lacking

Limitations

a)      Though it is a necessarily in a modern business, it should not be forgotten that all forecast
are subject to a degree of errors and they can never be made with a 100% accuracy.

b)      The quantitative with the help of forecast are limitation because they are based on certain
assumptions.

c)      Managers often neglect to examine whether the forecast are supported by reliable
information

d)      Time consuming and costly to carry out the analysis

e)      Rapid environmental changes which renders forecast in effective

f)       The various techniques of forecasting project future trends but cannot guarantee that a
particular event will occur in the future.

Steps in Forecasting

Understanding the problem – this is the 1st step which requires the management to understand
the real problem about which forecasts are to be made.

Developing the ground work – at this stage the manager will try to understand what chances in
the past has occurred/happened. He can use past data on performance to get the speedometer
reading of the current rate and how fast this rate is increasing or decreasing. This will help in
analyzing the cause of changes in the past

Selecting and analyzing data there is definite relationship between the choice of statistical facts
and figure and determination why business fluctuations has occurred.

Estimating future events are estimated on the basis of analysis of past data. The manager must
use his past experience and judgment

Regulation of forecast – management has to constantly compare the actual operations with the
forecast prepared in order to find out the reasons for any deviations from the forecast.
Review of the forecasting process its necessary to examine the procedure adapted to the purpose
so that improvement can be made in the methods of forecasting.

Techniques of Forecasting

Jury of executive opinion – this method involves combining and arranging top executive views
concerning the items to be forecasted.

Executives from sales, finance, production etc. come together in order to get benefit of broad
experience and opinion.

Forecast can be provided easily and quickly without elaborating characteristics.

Time series analysis most common methods are: Exponential, smoothing method, moving
average method.

The general approach is to identify a pattern that pattern is then smoothen to eliminate the effect
of random fluctuations and extrapolated i.e. the future to provide forecast.

Regression analysis – assumes that the variable to be forecast can be predicted on the basis of
two values of one or more independent variables

It is a statistical technique that fits the specified model to the historical data available.

Goes beyond simple time series, extrapolation and basis forecast on causal relationship.

Sales force composite – involves obtaining the views of sales persons, sales management or both
on the outlook for individual products and on total sales

It is generally a bottom – up approach since different sales persons can estimate sales to only
some divisions of the company.

Has a disadvantage of being susceptible to the basis of those who are more influential in the sales
group.

Index number used commonly to provide a basis of anticipated short term fluctuations caused by
seasonal or cyclical pattern.

Such indices can be determined by simply looking at the ratio of sales for a given month to
annual sales for each of the past several years.

Economic model use a system of simultaneous regression equations that falls into account the
interaction between various segments of the economy or areas of corporate activity.

Customer expectation – this technique seeks to use customers’ expectations, their needs and
requirements as the basis of forecasting often done through selected surveys
DECISION MAKING

Involves choosing a course of action from several alternatives. It is a process of generating

alternatives and choosing among alternatives

The actual selection of a course of action from among alternatives the core of planning

Decision making is a matter of planning organization objectives and steps that will be used to
achieve them.

It is part of every managers job coz they must constantly choose what to be done, who is to do
and when it is to be done.

Regarded as a step in planning, even when done quickly and with little though or when it
influences action only for few minutes.

Elements of Decision Making

1. Decision maker
2. Decision problem
3. Environment in which the decision is to be made.
4. The objective of the decision maker
5. The alternative courses of actions
6. The outcomes expected from various alternatives.
7. The final choice of the alternatives.

Characteristics of Decision Making

1. It’s a process of choosing a course of action from among alternative courses of action
2. It is a human process involving to a great extent the application of intellectual abilities.
3. It’s the end process preceded by deliberation and reasoning
4. Always related do the environment. A manager may take one decisions in a particular set
of circumstances and another is a particular set.
5. Involves a time lapse.
6. It always have a purpose
7. Involves all actions such as defining and understanding the problem, probing the problem
and analyzing the various alternatives which takes place as final choice is made.

Types of Decisions

Classified according to different basis as discussed below:

Routine and strategic

Tactical/routine decisions are made repetitively following certain established rules and policies.
They neither require collection of new data nor confirming with people thus, they can be taken
without much deliberation.

Strategic decisions are generally taken by top management. They are concerned with policy
matters and exercise fundamental influence on objectives, facilities and structures of the
organization.

Such decisions involve long-term commitments and therefore, they require careful analysis and
considerable preparations e.g. location of plant, choice of a channel of distribution, development
of a new product etc.

Strategic decisions involve considerable risks and uncertainty

Experience, considered opinions and operations research techniques are used in making such
decisions.

Policy and operating decisions – policy decisions are of vital importance and affect the entire
organization

Taken by top manager are sometimes published in the form of a policy manual for the guidance
of lower level executives.

Operating/admin decisions – are generally taken at lower levels of management.

They translate policies into specific actions i.e. the manner of executing the established policies.

Organization and personal decisions – organization decisions are those which a manager takes
in each official capacity.

Such decisions can be delegated but personal decisions relate to the manager as an individual and
not as a member of the organisation.

Programmed and non-programmed decisions – programmed decisions are of routine of

repetitive nature which is to be dealt with according to specific procedures.

Non programmed decisions – arise because of unstructured problems i.e. they are required to
solve unstructured problems.

They are of a non-repetitive and novel nature

There exist no standard procedures for handling such problems in every decision is a unique
case.

Individual and group decision making – when a decision is taken by an individual in the
organization, its known as individual decision.
They are taken in small organization and in those organizations where autocratic style of
management prevails.

Group or collective decisions refers to those decisions taken by a group of organisation

members e.g. B.O.D or committee.

Important and strategic decisions are generally taken by a group.

Group decisions tend to be more balanced, acceptable and practical but they involve greater
expenditure of time, money and effort.

Usually difficult to fix responsibilities for such decisions.

Importance of Decision Making

Without effective decision making organization cannot achieve success. Decision making
spreads over all the managerial jobs and covers all the areas of the enterprise.

Management and decision making are inseparable as the manager is always making decisions
either knowingly or unknowingly

Importance of Decision Making

Helps in achieving objectives- Rational decisions helps the organization to achieve all its
objectives quickly because they are made after analysis and evaluating all alternatives.

Increases efficiency – rational decision makes results in higher returns at low cost.

Facilitates innovation- Helps develops new ideas, new product innovation etc.

Motivates employees – After rational decisions are implemented the organizations makes high
profit and can hence give financial and non-financial benefits to employees.

Better utilization of resources – Helps to utilize the available resources for achieving the
objectives of the organization.

Facing problems and challenges – correct decisions help solve problems and challenges not by
avoiding them but facing them.

Business, growth – if good decisions are made, business can grow since activities will run
smoothly and efficiently.

Decision making and planning are inter-linked. The determination of objectives, policies,
strategies, involve decision making.
The most outstanding quality of a successful manager is the ability to make sound decisions this
he has to make sound mind.

While taking decisions, he gets enough time for fact finding analysis for other alternatives and
choice of the best alternative

Decision making is a human process and when the manager decides he chooses a course which
he thinks it’s the best.

Stages in Decision Making

A decision will be justified on a logical basis and does not suffer from personal bias of the
decision maker, if it is scientifically done

The following are the most important stages followed while making a decision

1. Diagnosing and defining the problem

2. Analyzing the problem
3. Data collection
4. Developing alternatives
5. Review of the key factors
6. Selecting the best alternative
7. Putting the decision into action and practice
8. Follow up

Diagnosing and defining the problem

It’s true to a large extent that a problem well defined is half solved.

A lot of bad decisions are made because the person making the decision does not have a good
mastery/grasp of the problem.

Sufficient time should be used on defining the problem as it’s not easy to define the problem and
see the fundamental thing that is causing trouble and that needs correction.

Practically, no problem ever presents itself in a manner that an immediate decision may be taken.

It is therefore essential to define the problem before any action is taken otherwise the
management will answer the wrong problem rather than the core problem.

Analyzing the problem

After clearly recognizing the problem, the next phase is the analysis of the problem which
involves classifying the problem and gathering information;
Classification is necessary in order to know who should take the decision and who should be
consulted in taking it.

Without proper classification, the effectiveness of the decision may be jeopardized.

The following should be taken into consideration when the classification is done;

a)      Nature of the decision

b)      Impact of the decision

c)      Futurity of the decision

d)      Periodicity of the decision

e)      Limiting factors relevant to the decision.

Data collection

A lot of information is required to classify any problem thus collection of right type information
is very important in decision making

A decision is as good as the information on which it is based.

Collection of facts and figures also requires certain decisions on the part of the manager.

He must decide what type of information he requires and how to obtain it.

By gathering the information, one must be clear as to how much time and money he can spend
on it.

Developing alternative

After defining and analyzing the problem, the next important step in decision making process is
development of alternative course of action.

Without developing alternatives courses of action, a manager is likely to be guided by his limited
imagination.

It is rare for alternatives to be lacking in any course of action.

When managers start developing alternatives, various assumptions come into his mind.

Review of the key factors

While developing alternatives the principle of the limiting factors has to be taken care of
A limiting factor is the one which stands in the way of accomplishing the desired goals.

It is a key factor in decision making

Selecting the best alternative

In order to make the final choice of the best alternative, one will have to evaluate all the possible
alternatives.

There are various ways to evaluate alternatives;

The common method is through intuition. I.e. choosing the solution that seems to be good at that
time.

There is an inherent danger in this process because a manager’s intuition may be wrong on
several occasions.

The second way is weigh the consequence of one against those of the others by looking at factors
like; risk, economy of effort, situation/timing, limitation of resources etc.

Putting the decision into action and practice

The choice of alternative will not serve any purpose if it’s not put into practice.

The manager is not only considered with taking a decision but also with its implementation

He should try to ensure that systematic steps are taken to implement the decision.

Follow up

It is better to check the results after putting the decision into action

This is due to the following reasons;

a)      If the decision is a good one, one will know what to do if faced with similar problems
again.

b)      If the decision is a bad one and one follows up soon enough, corrective action may still be
possible.

c)      If the decision is a bad one, one will know what not to do next time.

In order to achieve proper follow-up, the management should device an efficient system of
feedback information.
This information will be very useful in taking the corrective measures and taking rightful
decisions in future.

Managers are unable to make perfectly rational decisions due to the following limitations;

Limitations of decision making

i. The individual does not study and analyze the problem fully because of personal bias in
different attitudes etc.
ii. The individual does not have full knowledge of the alternatives and their consequences.
iii. The individual interprets their organizations goals in his own ways he may adopt a
courses of action which according to him will meet the goals effectively.
iv. The individual does not search for the best solution but good enough. In other words, he
aims at satisfactory rather than optimum decision’s
v. The decision making situation may involve multiple goals all of which cannot be
maximized simultaneously. Further these goals may be of conflicting nature.
vi. The effectiveness of a decision is dependent upon environmental factors which are
beyond the control of decision makers. Thus, the consequences of variables alternatives
cannot be anticipated perfectly because uncertain environment.

ASSIGNMENT: Critically discuss in details the Techniques of decision making

Roles Played By Strategies, Policies, Procedures, Rules and Regulations in the Planning
Process

Strategies

It can be defined as a game man ship or administrative course of action designed to achieve
success in the face of difficulties.

It’s a plan prepared for meeting challenges posed by the activities of competitors and other
environmental forces.

Strategy is the complex plan for bringing the organization from a given posture to a desired
position in a future period of time. E.g. if the management anticipate price cuts/price reduction
by competitors, it may decide upon a strategy of launching an advertising campaign to educate
the customers and convince them of the superiority of its products.

In order to formulate an effective strategy, management must anticipate accurately the plans of
competitors and look at them from the view point of rival firms.

Nature of strategy/characteristics

1. Strategy is a contingent plan as it is designed to meet the demands of difficult situations

 2. Strategy provides the direction in which human and physical resources will be deployed
for achieving organizational goals in the face of the environmental pressure and
constraints.
3. Strategy relates an organisation to its external environment. Strategic decisions are
primarily concerned with expected trends in the market, changes in government policy,
technological development etc.
4. Strategy is an interpretive plan formulated to interpret and give meaning to other plans in
the light of specific situations.

Strategy making process

The process of strategic planning (strategy formulation) involves the following steps;

1. Environmental analysis – first of the entire external environment is analyzed to determine

the opportunities and threats for the enterprise.
2. Self-appraisal – the internal environment of the enterprise (resources, capabilities) is
examined to know the strengths and weaknesses of the firm.
3. Strategic alternatives – alternative strategies are developed to deal with the environmental
forces.
4. Strategic choice – the most appropriate strategy is chosen so as to capitalize on the
strengths of the enterprise.
5. Strategy implementation – detailed operational plans are developed and communicated to
employees so as to execute the chosen strategy.

Policies

A policy is a general guide to thinking and action other than a specific course of action.

It is a general statement that guides subordinates

It defines the areas/limits within which decisions can be made to achieve organisation objectives
i.e. a policy is laid down to cover pre-decided issues within a pre-defined bracket.

Advantages of policies

Ensure consistency in decision making

Provide uniformity in action in various units and in different periods of time.

Avoids repeated analysis and therefore saves time.

Enables managers to delegate authority without much loss of control

Minimizes mistakes in decision making in as much as it provide guidelines

Helps in training subordinates to handle responsibilities.

Disadvantages

Are subject to different interpretation since they allow discretion and are usually broad

Delegation through policies allows wide spread participation in decision making as more
subordinates participate into decision making process due to this fact, uniformity is lost and
inconsistencies starts to emerge.

It’s seldom possible to fully control policies. In many circumstances different exists between
actual policy, intended policy and pronounced policy.

Procedures

It’s a chronological sequence of steps to be undertaken to enforce a policy and to attain an

objective

It lays down the specific manner in which a particular activity is to be performed.

It is a plan sequence of operations for performing repetitive activities uniformly and consistently.

Advantages of procedures

1. Enhances efficiency. I.e. the sequence of steps of any operation has been laid down in
advance.
2. One only needs to follow the analysis to proceed towards the required goals.
3. They constitute a simplified methodology of training operational level staff
4. Useful as devices for handling emergencies.

Disadvantages

1. Inhibits/hinders rational and logical thinking

2. Frustrates clients sometimes thus defeating the very purpose of saving the economy and
the empowerment of organization image.

Rules and regulations

 Rules are rigid and definite plans that specify what is to be done/not done in a given
situation.
 A rule provides no scope of descriptions and judgment.
 It is a prescribed guide to conduct or action
 Usually, no deviation is expected from the rule.
 They are prescription of how members of a group ought not to behave.

Advantages of rules and regulations

 1. Standardize the behavior and provide organization uniqueness by projecting its mission
and identify.
2. Provide group members with a sense of security i.e. they know in advance want is
expected of them to do or not to do.
3. Rules set a discipline as a manager know in advance what action to take in the event of
breach of the rule.

Disadvantages

Don’t provide any desecration

Don’t need any decision

Violation or breach of rules is accompanied by penalties for non-compliance

Restrict initiative

It is highly bureaucratic

Programmes

Programmes are a planned series of future events, items or performances.

It is also a plan of action aimed at accomplishing a dear business objective with details on what
work is to be done, by whom, when and what means or resources will be used.

Advantages of programmes

Flexible distribution options are available

They are eligible; that is one can easily read them.

Disadvantages

Takes time to learn about them especially if they involve a group of people

They are tiresome to prepare.

Budgets

A budget is an estimate of income and expenditure for a set period of time.

It is an estimate of costs, revenues and resources over a specified period reflecting a reading of
future financial/ conditions and goals

 
Advantages of budgets

1. Provide a method of allocating and using resources within the organization

2. Helps to monitor and control operation
3. Provide a frame work for delegations
4. It helps co-ordinate different departments and aligns them towards shared objectives.

Disadvantages of budgets

1. Time consuming – a budget can be very time consuming especially in a poorly organized
environment where many alterations of budget may be required.
2. Blame of outcomes if a department does not achieve its budgeted results.
3. It only considers financial outcomes and not subjective issues such as the quality of
products or services provided to customers.
4. Strategic rigidity especially for annual budgets.

Projects

A project is a planned set of interrelated tasks to be executed over a taxed period and within a
certain cost and of the limitations.

It is also a unique, transient endeavor, undertaken to achieve planned objectives, which could be
defined in terms of output, outcomes or benefits.

Advantages

1. Projects helps in the advancement of knowledge in any field

2. Projects help to solve certain problems.
3. They help to predict future trend and patterns of any given phenomena.
4. They play a key role in confirming hypothesis and coming up with new theories.

Disadvantages

It is time consuming to undertake

Also expensive to conduct a project

Project planning documents are sometimes created and then never used.

Schedules

A schedule consists of a list of times at which possible tasks, events or actions area intended to
take place or of a sequence of events in the chronological order in which such things are intended
to take place. It is also a plan of procedure, usually written, for a proposed objective.

Advantages
 1. Schedules help to improve discipline among the employees since everyone knows where
to be and what to be doing.
2. Less time is devoted to administer duties to the various employees in an organisation
3. External networking – public scheduled training allows the employees to mix with and
talk to people from other companies and backgrounds.

This helps to improve on the knowledge.

Disadvantages

Complexity – keeping track of which production crew will be working, which materials will be
used and which products will be produced becomes very complex and tiresome for the person in
charge of production scheduling.

Cost – when implementing a production scheduling system, you may need to buy software and
other resources to help facilitate the process which ends up being expensive to maintain.