MANAGEMENT

MANU MN
Assistant Professor
INTRODUCTION
Management was formally introduced as an academic discipline in the USA with the
establishment of Harvard Business School in 1908. Harvard Business School has many firsts
to its credit in the field of management.

In India, the advent of management education can be traced back to 1962, when the Indian
Institute of Management (IIM) at Calcutta was established by the Government of India in
collaboration with the Sloan School of Management, Massachusetts Institute of Technology
(MIT). Later in the same year, the Indian Institute of Management at Ahmedabad was
established in association with the Harvard Business School.

Arguably, the discipline of management existed in India during the ancient times, when Lord
Krishna gave sermons to Arjuna during the war against the Kauravas. These sermons, vividly
captured in the Bhagwat Gita, can be success- fully applied to the current managerial
scenarios.
MANAGEMENT MEANING
Management cannot be defined or understood—let alone practiced—except in
terms of its performance dimensions and of the demands of performance on
it” (Drucker, 1973).

These words of Peter Drucker place high importance on achievement of results by

managers. The results of a manager’s actions should be enjoyed by the customer or the
client as the ultimate beneficiary.

The customers may be external or internal to the organization, i.e. at times, the results of
manager’s actions may impact the internal customers like the employees of another
department of the organization. The internal customers for a manager may also be the
shareholders of the company and the Board of Directors
MANAGEMENT MEANING
Mary Parker Follett (1868–1933) defined management as “the art of
getting things done through people.”

Peter Drucker, who is hailed as the father of modern management theory,

discovered Follett’s work in the 1950s and is said to have referred to Follett
as his “guru” (Mary Parker Follett Foundation, 2008). This simple yet
compelling definition captures the essence of management, though it can
be argued that management is an art as well as a science.
MANAGEMENT MEANING
If we merge Drucker’s emphasis upon achievement of
results by managers for the benefit of the customer/client
in the definition by Follett, it gets trans- formed to:
“Management is getting things done through people
for the benefit of the customer or the client.”

George R Terry: Management  is a distinct process

consisting of planning, organizing, actuating and
controlling, performed to determine and accomplish the
objectives by the use of people and resources.
NATURE AND CHARACTERISTICS OF MANAGEMENT
NATURE OF MANAGEMENT
1.It should be Stable.
2.It should be Transparent
3.It should be applicable to all kinds of Organizations
4.Its approaches are to be clear and goal oriented.
5.Management is an activity
6. Management is concerned with the efforts of a group
7.Management applies economic principles.
8. Management involves decision making.
9. Management is getting things done through others.
10. Management is an integrating process.
11. Management co-ordinates all activities and resources.
1. Management is a universal activity.
2. Management is dynamic not rigid.
Management as a Science, Art, or Profession
Management is perhaps the only subject in academics which enjoys the distinction of
being a science as well as an art and a profession.

Management is an art because it requires the creativity and subjective skills of a manager
like the communication skills, negotiation skills, motivational skills, etc. Every individual
manager has his own personal traits—attitude, ethics, values and style, which constitute
an art form.

Management is also a science as it requires a systematic study based upon scientific

methods to analyse business problems and to find optimal solutions.

Management is undoubtedly one of the most sought after professions, which is evident
from the immense achievements of successful managers in creating new enterprises,
growing existing enterprises, and the lucrative pay packages offered by organizations
worldwide to its managers.
Managerial Knowledge and Skills

Katz (1955) proposed three areas of managerial knowledge and skills required
by managers, namely technical, human, and conceptual.
However, later, Shenhar (1990) further expanded the areas into four, viz.
technical, human, operational, and strategic.

Technical knowledge is constituted by the scientific methods, tools, techniques, and

concepts that managers should know for taking informed decisions in various
situations. Technical skills are required to apply the know-how to solve technical
problems and are necessary to evaluate the work done by others.
Human knowledge comprises of human and behavioural theories developed by
social scientists who propounded various models on leadership, motivation,
negotiation, communication, etc. Human skills are needed to practically get the
work done through people, i.e. to lead them, to motivate them, to communicate
with them, and to negotiate with them in such a manner that they contribute to
work with their heart and soul.

Operational knowledge relates to the day-to-day running of an enterprise. This

involves designing, implementing, and maintaining a transformation process
which converts various inputs into output of desired products and services.
The inputs can be capital, buildings, equipment, workers, etc. Operational skills
involve proper resources allocation to various activities in the transformation
process, sequencing of activities according to precedence requirements, routing
the material into factory premises, preparing production plans, etc.
Strategic knowledge deals with long-term planning for the organization as a whole.
This involves scanning the environment for threats and opportunities while
analysing the strengths and weaknesses of the organization. It provides an
overall direction to the whole of the organization keeping in view the industry
dynamics in which the organization operates and the market forces like the
competitors.
Levels of Management
Top management
Top management of the organization is constituted by the Chairman, and the
Board of Directors, the President, and the Chief Executive Officer (CEO).
The strategic knowledge and skills are most useful for this level of managers,
whose primary role is to set the vision, mission, and long-term direction of the
organization.

Middle management
According to Drucker (1954, p. 126), the operating (middle) management tends
to see things “functionally.” Thus, the middle management consists of
managers taking care of the functional areas like operations, finance, marketing
and human resources, strategy and management information systems. The
functional areas may further be segregated into specialized sub-functions.
Lower management
Lower management level is formed by the managers who are entrusted with
the job of implementing the operating policies and targets given by the middle
management. As shown in Figure 1.2, the regional managers are responsible
achieving the sales targets for their respective regions like North, South, East,
and West.
The Regional Manager (South), say, has a team of managers operating under
him for the states of Karnataka, Tamil Nadu, Kerala, and Andhra Pradesh.
Depending upon the sales growth prospects in the four states, the Regional
Manager (South) may charge the Manager (Karnataka) to achieve a sales
growth rate of 30%, while instructing the Manager (Kerala) to achieve a sales
growth rate of 15% and so on such that the overall growth for all the four
states in South aggregates to 20% (the operating target set by the middle
management).
MANAGEMENT FUNCTIONS
MANAGEMENT FUNCTIONS
As shown in Figure 1.4, the core of management shows the modified form of
management functions initially identified by Fayol (1916). These are the
functional activities in which managers are involved. Fayol’s original
management functions were planning, organizing, command, coordination, and control.
However, Gulick (1937) adapted the acronym POSDCORB from Fayol with
the initials representing planning, organizing, staffing, directing,
coordination, reporting, and budgeting (Wren, 2003, p. 100).
MANAGEMENT FUNCTIONS
1.Planning Selecting objectives and the means for accomplishing those
objectives.
2.Organizing Designing a structure of roles for people to fill.
3.Staffing Selecting and developing people to fill organizational roles
effectively.
4.Directing Taking actions to motivate people and help them see that
contributing to group objectives is in their own interest.
5.Controlling/Coordinating Measuring and correcting activities of people to
ensure that plans are being realized.
6. Reporting: Reporting involves regularly updating the superior about the
progress or the work related activities. The information dissemination can be
through records or inspection.
7. Budgeting: Budgeting involves all the activities that under Auditing,
Accounting, Fiscal Planning and Control.
Functional areas of management
Operations are constituted by the transformation process which coverts
various types of inputs into desired products and services.
Marketing is a set of processes for creating, communicating and delivering
value to customers and for managing customer relationships in ways that
benefit the organization and its stakeholders.
The organization function of finance is about time, money, risk, and the
interrelationships thereof.
In layman’s terms, strategy is all about long-term planning for achieving the
long-term goals of the organization.
Human resources is the organizational function which deals with selection and
recruitment of employees, performance appraisal, compensation, rewards,
recognition, training and development, etc.
The MIS focuses on providing needed information to the managers in a useful
format and at a proper time by using contemporary information technologies.
Scope of management
It encompasses for-profit as well as non-profit organizations, government as well as non-
governmental organizations, and service as well as manufacturing organizations. It is in fact difficult
to find an area of activity where management is not applicable.

For-profit organizations like business enterprises need management for wealth maximization of their
shareholders. Non-profit organizations like educational institutions, healthcare organizations, etc.
value management for keeping their cost of operations at optimal levels.

Government organizations like municipal corporations, water supply departments, electricity boards
etc. use management to effectively use the taxpayer’s money in providing best possible services to
the public. Non-governmental organizations like environmental agencies, etc. benefit from
management in achieving their societal objectives in a cost-effective manner.

Manufacturing organizations extensively use management to increase productivity, to enhance quality

of the products manufactured and in innovating new products. Similarly, service organizations
benefit from management in providing an exemplary service experience to the customers.
Roles of Management
Mintzberg (1973) classified managerial roles into three broad categories
(Figure 1.1), namely information roles, decision-making roles, and interpersonal
roles.

Information role
In the information role, managers are expected to use state-of-the-art
communication channels to extract the latest information and use it for the
advantage of the organization. For example, it is necessary to keep a track
about what the competitor’s latest moves are. A manager, thus, must use
formal and informal channels of communication to know about the
competitor’s actions and accordingly, prepare plans to offset their moves in
order to retain and grow the market share.
Decision-making role

In their decision-making role, managers have to take four kinds of

decisions according to Mintzberg (1973). The first and foremost is
to act as an entrepreneur within the organization and try to set new
goals and objectives for it. In management jargon, they need to be
the intrapreneurs to identify new opportunities of growth and make
the organization exploit such opportunities.
The next role is that of a disturbance-handler—a manager should take
appropriate decisions in crisis situations like strikes, lock-outs, etc.
to resolve conflicts between two or more people and to take care of
any unforeseen circumstances requiring urgent attention and action.
Decision-making role

Managers have to also act as resource allocators. Resources are limited

for any organization and optimal utilization of resources helps in
minimizing the costs and in increasing the competitiveness of the
firm in the market.

Another important decision-making role for a manager is to act as a

fierce negotiator. Negotiating prices of supplies with vendors,
negotiating selling prices of products with clients, negotiating with
trade unions for arriving at fair compensation structures for
workers, are a few examples here.
Interpersonal role

The interpersonal role puts demands on managers in three respects.

Firstly, they have to act as a figurehead, i.e. to perform ceremonial
and social duties like presenting the progress report before the
Board of Directors in board meetings, to preside over major events,
e.g. launch of a new product, etc. Secondly, managers have to act as
leaders in directing and motivating people. At last, they have to
perform the role of acting as a liaison or an interface with other
departments outside their purview to achieve coordination and to
create synergy.
Management and Administration
Let us first look at the definitions of the terms administration,
organization, and management as given by Schulze (1919).
Administration is the force which lays down the object for which an
organization and its management are to strive and the broad policies
under which they are to operate.
An organization is the combination of the necessary human beings,
materials, tools, equipment, working space, and appurtenances
(accessories) brought together in systematic and effective
correlation, to accomplish some desired object.
Management is the force which leads, guides and directs an
organization in the accomplishment of the predetermined object.
DIFFERENCE BETWEEN MANAGEMENT AND ADMINI
DEVELOPMENT OF MANAGEMENT THOUGHT
EVOLUTION OF MANAGEMENT
DEVELOPMENT OF MANAGEMENT THOUGHT
Management thought seems to have its roots grounded in ancient and medieval times, when
scholars, priests, kings, and courtesans were trying to develop their administrative skills (Figure
1.5).
Management started developing into its full-fledged form during the industrial revolution in
Europe when the classical management movement started gaining its pace. The time frame usually
assigned to this movement is 1885 to 1940, though initial references to its evolution can be
traced back to 1796.
The next stage of the development of management thought is popularly known as the
behavioural management movement with its starting time some- where around 1930. This movement
continues to traverse through the current times. However, due to its inception in the early part
of the twentieth century,
The modern management movement was arguably heralded by Peter Drucker with his seminal work
—The Practice of Management (1954), in which he explained the various lacunae in the American
management systems by giving various pragmatic examples, case studies and proposing
solutions thereof. Perhaps, this book by Drucker served as a harbinger to the end of American
dominance in management thought and the imminent rise of Japan.
DEVELOPMENT OF MANAGEMENT THOUGHT
➤ “Management in one or other form has existed in every hook and
corner of the world service the down of civilization. Although the
20th century is marked in history as an ‘Era of scientific
management’, yet it does not mean that management was totally
absent in yester years.
➤ 1700 to 1800 highlights the industrial revolution and the factory
system highlights the industrial revolution and the factory system
highlighted the importance of direction as a managerial function.
Several economists during this period explained the concept of
management.”
DEVELOPMENT OF MANAGEMENT THOUGHT
➤ “The evaluation of management thought during this period can be
classified into two parts namely
➤ Early management and Modern management approach
➤ Early management approaches represented by Taylor’s scientific
management, Foyal’s administrative management and
➤ Behavioural approach: human relations movement, behavioural
approach.
➤ Modern management approaches, represented by quantitative/
management science approach, systems approach, process
approach, contingency approach and Japanese-style management
approach.
➤ 

Taylor’s Scientific Management

F.W. Taylor started his career as an apprentice in a steel company in USA and finally became Chief Engineer.
Taylor along with his associates made the first systematic study in management. He launched a new movement in
1910 which is known as scientific management. Taylor is known as father of scientific management and has laid
down the following principles of scientific management.

(1) Separation of planning and doing: In the pre-Taylor era, a worker himself used to decide or plan how he had
to do his work and what machines and equipments would be required to perform the work. But Taylor separated
the two functions of planning and doing, he emphasized that planning should be entrusted to specialists. 


(2) Functional foremanship: Taylor introduced functional foremanship for supervision and direction. Under
eight-boss-scheme of functional foremanship, four persons: (i) route clerk, (ii) instruction card clerk, (iii) time and
cost clerk and (iv) disciplinarian are related with planning function, and the remaining four: (vi) speed boss, (vii)
inspector, (viii) maintenance foreman, and (ix) gang- boss are concerned with operating function. 


(3) Elements of scientific management: The main elements of scientific management are:
(a) Work study involving work important and work measurement using method and time study.
b) Standardization of tools and equipments for workmen and improving working conditions.
(c) Scientific Selection, placement and training of workers by a centralized personal department. 

Taylor’s Scientific Management

(4) Bilateral mental revolution: Scientific management involves a complete mental

revolution of workmen towards their work, toward their fellow-men and toward their
employers. Mental revolution is also required on the part of management’s side–the
foreman, the superintendent, the owners and board of directions. 


(5) Financial incentives: In order to motivate workers for greater and better work
Taylor introduced differential piece-rate system. According to Taylor, the wage should
be based on individual performance and on the position which a worker occupies. 


(6) Economy: Maximum output is achieved through division of labour and

specialization. Scientific Management not only focuses on technical aspects but also
on profit and economy. For this purpose, techniques of cost estimates and control
should be adopted.
Henry Fayol’s Administrative Management (1841–1925)

Henry Fayol was a French Mining Engineer turned into a leading

industrialist and successful manager. Fayol provided a broad analytical
framework of the process of administration. He used the word
Administration for what we call Management.

Foyal focused on general administrative and managerial functions and

processes at the organizational level.

Foyal divided activities of business enterprise into six groups: Technical,

Financial, Accounting, Security, and Administrative or Managerial
Henry Fayol’s Administrative Management (1841–1925)

He focused on this last managerial activity and defined management in terms

of five functions: Planning, Organizing, Commanding, Coordinating and
Controlling.

Foyal presented 14 principles of management as general guides to the

management process and management practice.
Henry Fayol’s Administrative Management (1841–1925)

1.Division of work: In practice, employees are specialized in different areas and they have
different skills. Different levels of expertise can be distinguished within the knowledge areas
(from generalist to specialist). Personal and professional developments support this. According
to Henri Fayol specialization promotes efficiency of the workforce and increases productivity.

2.Authority and responsibility: In order to get things done in an organization, management

has the authority to give orders to the employees. Of course with this authority comes
responsibility. According to Henri Fayol, the accompanying power or authority gives the
management the right to give orders to the subordinates. The responsibility can be traced back
from performance and it is therefore necessary to make agreements about this.

3.Discipline: Holding that discipline is “respect for agreements which are directed at
achieving obedience, application, energy and the outward marks of respect”. Fayol declares
that discipline requires good superiors at all levels, clear and fair agreement, and judicious
application of penalties. 

Henry Fayol’s Administrative Management (1841–1925)

4.Unity of command: The management principle ‘Unity of command’ means that an

individual employee should receive orders from one manager and that the employee is
answerable to that manager. If tasks and related responsibilities are given to the employee
by more than one manager, this may lead to confusion which may lead to possible conflicts
for employees. By using this principle, the responsibility for mistakes can be established
more easily.

5. Unity of direction: According to Fayol, unity of direction is the principle that each
group of activities having the same objective must have one head and one plan. As
distinguished from the principle of unity of command, Fayol perceives unity of direction as
related to the functioning of personnel. 


6.Subordination of individual interest to general interest: There are always all kinds of
interests in an organization. In order to have an organization function well, Henri
Fayol indicated that personal interests are subordinate to the interests of the organization
(ethics). The primary focus is on the organizational objectives and not on those of the
individual. This applies to all levels of the entire organization, including the managers.
Henry Fayol’s Administrative Management (1841–1925)



7.Remuneration of personnel: Motivation and productivity are close to one another as far as the smooth running of
an organization is concerned. This management principle of the 14 principles of management argues that the
remuneration should be sufficient to keep employees motivated and productive. There are two types of remuneration
namely non-monetary (a compliment, more responsibilities, credits) and monetary (compensation, bonus or other
financial compensation). Ultimately, it is about rewarding the efforts that have been made.

8.Centralization: Although Fayol does not use the term ‘Centralization of Authority’, his principle definitely refers to
the extent to which authority is concentrated or dispersed in an enterprise. Individual circumstances will determine the
degree of centralization that will give the best overall yield. 


9.Scalar chain: Hierarchy presents itself in any given organization. This varies from senior management (executive
board) to the lowest levels in the organization. Henri Fayol ’s “hierarchy” management principle states that there
should be a clear line in the area of authority (from top to bottom and all managers at all levels). This can be seen as a
type of management structure. Each employee can contact a manager or a superior in an emergency situation without
challenging the hierarchy. Especially, when it concerns reports about calamities to the immediate managers/superiors.

10.Order: Breaking this principle into ‘Material order’ and ‘Social Order’, Fayol thinks of it as the simple edge of “a
place for everything (everyone), and everything (everyone) in its (his) place”. This is essentially a principle of
organization in the arrangement of things and persons.
Henry Fayol’s Administrative Management (1841–1925)

11.Equity: Fayol perceives this principle as one of eliciting loyalty and

devotion from personnel by a combination of kindliness and justice in
managers dealing with subordinates. 


12.Stability of tenure of personnel: Finding that such instability is both the

cause and effect of bad management, Fayol points out the dangers and costs
of unnecessary turnover. 


13.Initiative: Initiative is conceived as the thinking out and execution of a

plan. Since it is one of the “Keenest satisfactions for an intelligent man to
experience”, Fayol exhorts managers to “Sacrifice Personal Vanity” in order
to permit subordinates to exercise it.
Henry Fayol’s Administrative Management (1841–1925)

14. Esprit de Corps

The management principle ‘esprit de corps’ of the 14 principles
of management stands for striving for the involvement and unity
of the employees. Managers are responsible for the development
of morale in the workplace; individually and in the area of
communication
Human Relations Approach
The human rationalists (also known as neo-classicists) focused as human
aspect of industry. They emphasize that organization is a social system and
the human factor is the most important element within it.

The human relationists, proposed the following points as a result of

Hawthorne experiments.

Social system: The organization in general is a social system composed of

numerous interacting parts. The social system defines individual roles and
establishes norms that may differ from those of formal organization. 


Social environment: The social environment of the job affects the workers
and is also affected.
Human Relations Approach
Informal organization: The informal organization does also exist within the
frame work of formal organization and it affects and is affected by the formal
organization.

Group dynamics: At the workplace, the workers often do not act or react as
individuals but as members of group. The group plays an important role in
determining the attitudes and performance of individual workers.

Informal leader: There is an emergence of informal leadership as against

formal leadership and the informal leader sets and enforces group norms.

Non-economic reward: Money is only one of the motivators, but not the
sole motivator of human behaviour. Man is diversely motivated and socio-
psychological factors act as important motivators.
Modern Management Approaches
The modern management movement builds upon the classical and behavioural
movements by integrating the fundamental theories of management with con-
temporary approaches like quantitative, process, systems, contingency, and Japanese-
style.

The quantitative approach

Quantitative management has its roots in the development of mathematical and
statistical techniques to solve military problems during the Second World War
(Ivancevich et al., 1994). Over the years, it evolved into three major areas: management
science, operations management, and management information systems. In management
science, mathematical models are developed specifically to aid in decision-making
and problem solving. Operations management has its focus on the application of
management science to organizations. As the name suggests, management
information systems are communication systems designed to provide relevant
information to the managers as and when they require.
The process approach

Koontz (1961) proposed that managing is a process and can best be dissected intellectually by analysing the functions of the manager as
outlined by Fayol (1916). According to him, management is a universal process, regardless of the type of enterprise, or the level in a given
enterprise, although the environment of management differs widely between enterprises and levels. Further, it is a continuous process in
the form of a circular loop (Figure 1.6) such that the last function in the process, namely controlling leading back to the first function
planning (Robbins, 1991).
The systems approach

Von Bertalanffy (1972) describes a system as consisting of connected parts joined to form a whole in which the coordinated and combined
effect of the subsystems creates synergy. There are two types of systems: closed and open. Closed systems do not interact with the external
environment, while open systems do so. Taylor’s scientific management, Weber’s bureaucratic theory, and Gulick’s administrative
principles are considered as closed system models, while the human relations and behavioural theories are deemed as an open system
model.
➤
The contingency approach

The contingency approach (also known as situational management) suggests that

there are many situational factors which make a business problem different
from the other and hence, a unique approach to problem solving/decision-
making by managers is required rather than a generic approach. These situation
factors can be external environment (say competitors, vendors, government,
etc.), technology, organizational characteristics, characteristics of the manager,
characteristics of the subordinates, etc.
Japanese-style management approach

The Japanese concepts of management like just-in-time (JIT), single- sourcing, the
Keiretsu system, kaizen, poka-yoke, hoshin kanri, quality circles, and quality function deployment
(QFD)

Schonberger (1982) defined the JIT system as to “Produce and deliver finished
goods just-in-time to be sold, sub-assemblies just-in-time to be assembled into
finished goods, and purchased materials just-in-time to be transformed into
fabricated parts.”
Single-sourcing is a concept whereby the Japanese companies try to forge long- term
relationship with a single supplier, who is given the order for supplying a component
for all the volumes required.
Keiretsu are vertically integrated groups with a dominant manufacturing firm and a
network of major suppliers and subcontractors.
Japanese-style management approach

Kaizen in Japanese means continuous improvement in every sphere of activity.

Kaizen is a sub-system of JIT.
Poka-Yoke are simple and inexpensive devices used in order to ensure that zero
defects are produced by the organization.
Hoshin Kanri literally means in Japanese: ho–method; shin–shiny metal showing
direction; kanri–planning. A useful interpretation of the literal translation is that
Hoshin Kanri is a methodology for setting strategic direction
Quality circles are voluntarily formed informal groups of workers with an
objective to problem-solve and propose solutions
PLANNING
Planning is the conscious, systematic process of making decisions
about goals and activities that an organization will pursue in the
future.
A plan is a pre-determined course of action. Planning is
essentially a process to determine and implement actions to
achieve organizational objectives.
Planning involves the task of deciding in advance
• What to do?
• How to do?
• When to do it?
• Who will do it?
NATURE OF PLANNING
The following are the essential characteristics of planning which describe the nature of planning:

1. Planning is primary function of management:

The functions of management are broadly classified as planning, organisation, direction and control. It is thus the first function of management at
all levels. Since planning is involved at all managerial functions, it is rightly called as an essence of management.

2. Planning focuses on objectives:

Planning is a process to determine the objectives or goals of an enterprise. It lays down the means to achieve these objectives. The purpose of every
plan is to contribute in the achievement of objectives of an enterprise.

3. Planning is a function of all managers:

Every manager must plan. A manager at a higher level has to devote more time to planning as compared to persons at the lower level. So the
President or Managing director in a company devotes more time to planning than the supervisor.

4. Planning as an intellectual process:

Planning is a mental work basically concerned with thinking before doing. It is an intellectual process and involves creative thinking and
imagination. Wherever planning is done, all activities are orderly undertaken as per plans rather than on the basis of guess work. Planning lays
down a course of action to be followed on the basis of facts and considered estimates, keeping in view the objectives, goals and purpose of an
enterprise.

5. Planning as a continuous process:

Planning is a continuous and permanent process and has no end. A manager makes new plans and also modifies the old plans in the light of
information received from the persons who are concerned with the execution of plans. It is a never ending process.

➤
NATURE OF PLANNING
6. Planning is dynamic (flexible):
Planning is a dynamic function in the sense that the changes and modifications are continuously done in the planned course of action on account of
changes in business environment.

As factors affecting the business are not within the control of management, necessary changes are made as and when they take place. If
modifications cannot be included in plans it is said to be bad planning.

7. Planning secures efficiency, economy and accuracy:

A pre- requisite of planning is that it should lead to the attainment of objectives at the least cost. It should also help in the optimum utilisation of
available human and physical resources by securing efficiency, economy and accuracy in the business enterprises. Planning is also economical
because it brings down the cost to the minimum.

8. Planning involves forecasting:

Planning largely depends upon accurate business forecasting. The scientific techniques of forecasting help in projecting the present trends into
future. ‘It is a kind of future picture wherein proximate events are outlined with some distinctness while remote events appear progressively less
distinct.”

9. Planning and linking factors:

A plan should be formulated in the light of limiting factors which may be any one of five M’s viz., men, money, machines, materials and
management.

10. Planning is realistic:

A plan always outlines the results to be attained and as such it is realistic in nature.

➤
IMPORTANCE OF PLANNING
Planning is the first and most important function of management. It is
needed at every level of management. In the absence of planning all the
business activities of the organisation will become meaningless.
IMPORTANCE OF PLANNING
(1) Planning Provides Direction:

Under the process of planning the objectives of the organisation are defined in simple and clear words. The obvious
outcome of this is that all the employees get a direction and all their efforts are focused towards a particular end. In this
way, planning has an important role in the attainment of the objectives of the organisation.

For example, suppose a company fixes a sales target under the process of planning. Now all the departments, e.g.,
purchase, personnel, finance, etc., will decide their objectives in view of the sales target.

(2) Planning Reduces Risks of Uncertainty:

Planning is always done for future and future is uncertain. With the help of planning possible changes in future are
anticipated and various activities are planned in the best possible way. In this way, the risk of future uncertainties can be
minimised.

For example, in order to fix a sales target a survey can be undertaken to find out the number of new companies likely to
enter the market. By keeping these facts in mind and planning the future activities, the possible difficulties can be
avoided.
IMPORTANCE OF PLANNING
(3) Planning Reduces Overlapping and Wasteful Activities:

Under planning, future activities are planned in order to achieve objectives. Consequently, the problems
of when, where, what and why are almost decided. This puts an end to disorder and suspicion. In such a
situation coordination is established among different activities and departments. It puts an end to
overlapping and wasteful activities.

(4) Planning Promotes Innovative Ideas:

It is clear that planning selects the best alternative out of the many available. All these alternatives do not
come to the manager on their own, but they have to be discovered. While making such an effort of
discovery, many new ideas emerge and they are studied intensively in order to determine the best out of
them.
IMPORTANCE OF PLANNING
(5) Planning Facilitates Decision Making:

Decision making means the process of taking decisions. Under it, a variety of alternatives are discovered
and the best alternative is chosen. The planning sets the target for decision making. It also lays down the
criteria for evaluating courses of action. In this way, planning facilitates decision making.

(6) Planning Establishes Standards for Controlling:

By determining the objectives of the organisation through planning all the people working in the
organisation and all the departments are informed about ‘when’, ‘what’ and ‘how’ to do things.
TYPES OF PLANS
The process of planning may be classified into different categories on the following basis:

(i) Nature of Planning

a. Formal planning.

b. Informal planning.

(ii) Duration of planning:

a. Short term planning.

b. Long term planning.

(iii) Levels of Management:

a. Strategic planning.

b. Intermediate planning

C. Tactical planning

D. Operational planning.

(iv) Use:

a. Standing plans

b. Single-use plans.
1.Nature of Planning
a. Formal Planning

Planning is formal when it is reduced to writing. When the numbers of actions are large it is good to have a formal plan since
it will help adequate control.

The term formal means official and recognised. Any planning can be done officially to be followed or implemented. Formal
planning is aims to determine and objectives of planning. It is the action that determine in advance what should be done.

Advantages:

1. Proper Cooperation among employees,

2. Unity of Action,

3. Economy

4. Proper coordination and control,  

5. Choosing the right objectives, and 

6. Future plan.

b. Informal Planning

An informal plan is one, which is not in writing, but it is conceived in the mind of the manager. Informal planning will be
effective when the number of actions is less and actions have to be taken in short period.
2.Duration of Planning
a. Short term Planning:

Short term planning is the planning which covers less than two years. It must be formulated in a manner consistent
with long-term plans. It is considered as tactical planning. Short-term plans are concerned with immediate future; it
takes into account the available resources only and is concerned with the current operations of the business.

These may include plans concerning inventory planning and control, employee training, work methods etc.

Advantages:

1. It can be easily adjustable.

2. Changes can be made and incorporated.

3. Easy to Gauge.

4. Only little resources required.

Disadvantages:

1. Very short period-left over things will be more.

2. Difficult to mobiles the resources.

3. Communication cycle will not be completed.

b. Long-Term Planning:

Long-term planning usually converse a period of more than five years, mostly between five and fifteen years. It deals with broader technological and
competitive aspects of the organisation as well as allocation of resources over a relatively long time period. Long-term planning is considered as strategic
planning.

Short-term planning covers the period of one year while long term planning covers 5-15 years. In between there may be medium-term plans. Usually, medium
term plans are focusing on between two and five years. These may include plan for purchase of materials, production, labour, overhead expenses and so on.

Advantages:

1. Sufficient time to plan and implement.

2. Effective control.

3. Adjustment and changes may be made gradually.

4. Periodic evaluation is possible.

5. Thrust areas can be identified easily.

6. Weakness can be spotted and rectified then and there.

Disadvantages:

1. Prediction is difficult.

2. Full of uncertainties.

3. Objectives and Targets may not be achieved in full.

4. More resources required.

3.Levels of Management
a. Strategic Planning:

The strategic planning is the process of determining overall objectives of the organisation and the
policies and strategies adopted to achieve those objective. It is conducted by the top management, which
include chief executive officer, president, vice-presidents, General Manger etc. It is a long range
planning and may cover a time period of up to 10 years.

It basically deals with the total assessment of the organisation’s capabilities, its strengths and its
weaknesses and an objective evaluation of the dynamic environment. The planning also determines the
direction the company will be taking in achieving these goals.
3.Levels of Management
b. Intermediate Planning:

Intermediate planning cover time frames of about 6 months to 2 years and is contemplated by middle
management, which includes functional managers, department heads and product line mangers. They
also have the task of polishing the top managements strategic plans.

The middle management will have a critical look at the resources available and they will determine the
most effective and efficient mix of human, financial and material factors. They refine the broad strategic
plans into more workable and realistic plans.
3.Levels of Management
c. Operational Planning:

Operational planning deals with only current activities. It keeps the business running. These plans are
the responsibility of the lower management and are conducted by unit supervisors, foremen etc. These
are short-range plans covering a time span from one week to one year.

These are more specific and they determine how a specific job is to be completed in the best possible
way. Most operational plans .ire divided into functional areas such as production, finance, marketing,
personnel etc.

Thus even though planning at all levels is important, since all levels are integrated into one, the strategic
planning requires closer observation since it establishes the direction of the organisation.
(iv) Use
a. Standing Plan:

Standing plan is one, which is designed to be used over and over again. Objectives, policies procedures,
methods, rules and strategies are included in standing plans. Its nature is mechanical. It helps executives
to reduce their workload. Standing plan is also called routine plan. Standing or routine plan is generally
long range.

b. Single Use Plan:

Single use plan is one, which sets a course of action for a particular set of circumstances and is used up
once the particular goal is achieved. They may include programme, budgets, projects and schedules. It is
also called specific planning. Single use plan is short range.
TYPES OF PLANNING
HIERARCHY OF PLANNING
STEPS IN PLANNING
STEPS IN PLANNING
STEPS IN PLANNING
The main steps that are taken in planning process are as follows:

1. Establishing Objectives:
Establishing the objectives is the first step in planning. Plans are prepared with a view to achieve certain goals. Hence,
establishing the objectives is an important step in the process of planning. Plans should reflect the enterprise’s
objectives. Objectives should clearly define as to what is to be achieved by policies, procedures, rules, strategies,
budgets and programmes. Plan must make sure that every activity undertaken contributes to the achievement of
objectives.

The objectives fixed must clearly indicate what is to be achieved, where action should take place, who
is to perform it, how it is to be undertaken and when it is to be accomplished. That is, managers should
be able to restate the objectives of the firm in definite and clear terms that will motivate examination and evaluation
of performance against targeted performance in the plan. Objectives should be measurable.

2. Determining Planning Premises

This is the second step in planning. Premises include actual forecast data, policies and plans of the enterprise.
Planning involves looking into the future which necessitates the enterprise to know, how future conditions will affect
its activities. Thus, forecasting is an important step in planning. There are two types of forecasting namely,

i. Prediction of general economic conditions.

ii. Prediction of market conditions for a specific product or service dealt with by the enterprise.
Keeping the general economic conditions in mind, a study of the industry is made. Then the manager proceeds to
make a study of his company’s share of the market. Forecasting will reveal those areas where control is lacking.
Planning will be reliable when the forecast methods are accurate. Hence, the success of the planning depends very
much upon the forecasts.
STEPS IN PLANNING
3. Determining Alternative Courses
Determining alternative courses is the third step in the planning process. The planner should study all the
alternatives, consider the strong and weak points of them and finally select the most promising ones.

4. Evaluating Alternative Courses

Alternative courses so selected should be evaluated in the light of premises and goals. Evaluation involves the study
of performance of various actions. Various factors such as profitability, investment requirements, etc., of such
alternatives should be weighed against each other. Each alternative should be closely studied to determine its
suitability.

Many other factors such are uncertain future trend, problems faced financially, future uncertainties renders the
evaluation process, complex and difficult. Usually, alternative plans are evaluated against factors such as cost, risks,
benefits, organizational facilities, etc. Computer based mathematical plans and techniques can also be utilized to
identify best course of action.

5. Selecting the Best Course

After having evaluated the various alternatives, the most suitable alternative is selected. With this, the plan can be
considered to have been adopted. It is exactly the point at which decisions are made. Sometimes, in the best interests
of the enterprise, several alternative courses can be adopted.
STEPS IN PLANNING
6. Formulating Derivative Flans
Planning is not complete as soon as the best course is selected. The main plan should be supported by a number of
derivative plans. Within the framework of a basic plan, derivative plans are formulated in each functional area.
Segregation of master plan into departmental, sectional and individual plans, helps to understand the real nature of
future uncertainties. To make the planning process more effective, it should also provide for a feedback mechanism.
These plans are meant for the implementation of the main plan.

7. Implementation of Flans
Implementation of plans is the final step in the process of planning. This involves putting the plans into action so as
to achieve the business objectives Implementation of plans requires establishment of policies, procedures,
standards, budgets, etc.
ORGANIZING
An ‘organisation’ is a group of individuals working together to
achieve one or more objectives. Although organisations have
been defined differently by different theorists, virtually all
definitions refer to five common features:
1. they are composed of individuals and groups of individuals
2. they are oriented towards achieving collective goals
3. they consist of different functions
4. the functions need to be coordinated
5. they exist independently of individual members who may
come and go.
NATURE AND PURPOSE
PRINCIPLES OF ORGANIZATION
1. Division of Labour
2.Delegation of Authority
3.The Scalar Principle
4.Unity of Command

The division of labour is the separation of tasks in any system so that

participants may specialize. Individuals, organizations, and nations are
endowed with or acquire specialized capabilities and either form
combinations or trade to take advantage of the capabilities of others in
addition to their own. Specialized capabilities may include equipment
or natural resources in addition to skills and training and complex
combinations of such assets are often important, as when multiple items of
specialized equipment and skilled operators are used to produce a single
product.
PRINCIPLES OF ORGANIZATION
The Delegation of Authority is a process through which a manager assigns
responsibility to the subordinate to carry out the work on his behalf. Also, a
certain authority is delegated to the subordinate to the extent, which is
sufficient to accomplish the assigned responsibility.

Scalar principle (chain of command) a clear definition of authority in the

organization. This authority flows down the chain of command from the top
level to the first or lowest level in the organization.

Unity of command provides that an employee is responsible to only one

supervisor, who in turn is responsible to only one supervisor, and so on up
the organizational hierarchy.
Types of Organisation Structure

The types are:

1. Line Organization
2. Line and Staff Organization
3. Functional Organization
4. Project Organization
5. Matrix Organization
Type # 1. Line Organisation
Line organisation is the simplest and oldest form of organisation
structure. It is called as military or departmental or scalar type of
organization. Under this system, authority flows directly and
vertically from the top of the managerial hierarchy ‘down to different
levels of managers and subordinates and down to the operative level
of workers.
Line organisation clearly identifies authority, responsibility and
accountability at each level. The personnel in Line organization are
directly involved in achieving the objectives of the organization
Type # 1. Line Organisation
Type # 1. Line Organisation
Advantages:

1. A clear-cut division of authority and responsibility, hence no scope of shifting the responsibility.

2. Strong in discipline.

3. It permits quick decisions.

4. As responsibility of each individual is fixed, hence faults can be easily and quickly known.

5. Everybody from top to bottom remains busy like a machine and hence total cost of product will be less.

6. It is simple to understand.

7. Flexible and able to extend or contract.

Disadvantages:

1. It requires different departmental heads to be expert in their respective functions, hence lack of specialisation.

2. Departmental heads are over-burdened with various routine jobs, hence no time for further expansion and planning.

3. Certain people become key points and they are loaded maximum with work.

4. Chances of accidents, wastage of material and labour are more because of insufficient knowledge of all the work by one man.

5. Chances of delay in reaching the orders of General Manager or any other departmental head upto the workers and, therefore, possibility of distortion, due
to long channel.

6. Over-burdened foreman may not be able to give sufficient time for each job and will cause wastage and error.

7. It has no means of rewarding good workers.

Line and Staff Organization

In line and staff organization, the line authority remains the same as it does
in the line organization. Authority flows from top to bottom. In addition, the
specialists are attached to line managers to advice them on important
matters.
The staff organizations mentioned above all has in common the fact that they
are auxiliary to the main functions of the business. There are, however,
different types of staff.
The three main divisions may be listed as:
1. Personal Staff.
2. Specialized Staff.
3. General Staff.
Line and Staff Organization
Line and Staff Organization

Advantages:

1. It is a planned specialised system.

2. Quality of product will be better.

3. Wastage will be less.

4. Expert knowledge is available.

5. Sufficient time is available to general manager for future planning and expansion.

6. Discipline problem is solved because of line relationship.

Disadvantages:

1. Sufficient expert knowledge and guidance is not available as compared with functional type.

2. Lack of responsibility among higher levels and hence the discipline as a whole will be poor.

3. The overhead cost of product may rise, because of high salaried staff.

4. The slackness of any section or department will largely affect whole working.
Type # 3. Functional Organisation

The functional organisation was evolved by F.W. Taylor while he was working as a foreman. He
suggested eight foremen, four in factory and four in planning division as under.
Factory Division:
(i) The gang boss,
(ii) The speed boss,
(iii) The inspector, and 
(iv) The maintenance or repair boss.
Planning Division:
(i) Route Clerk,
(ii) Instruction card clerk,  
(iii) Time and cost clerk, and
(iv) The shop disciplinarian.
According to Terry, “Functional organisation refers to the organisation which is divided into
a number of functions such as finance, production, sales, personnel, office and research
and development and each of functions are performed by an expert”. Line authority, staff
authority and functional authority as a third type of authority are in this type of organisation.
Type # 3. Functional Organisation

Advantages:
1. Due to specialisation quality of work is better.

2. This system provides more specialised knowledge and guidance to individual workers through experts.

3. It helps mass production by standardisation and specialisation.

4. If any operation needs improvement, it can be improved even upto the last moment.

5. Considerable expansion of the factory is possible.

6. Since for every operation expert guidance is there, hence wastage of material will be minimum which will
reduce prime cost.

7. Unnecessary overloading of responsibilities will not be there, as was in the case of line organisation.

8. No special knowledge of workers is required as the instructions are supplied by drawing and experts.
Type # 3. Functional Organisation

Disadvantages:

1. It is complicated from control point of view as every functionalized expert feels himself to be superior
than the other and there is no one-man control over the workers. Therefore, it makes discipline problem
difficult to solve among lower level.

2. By employing high waged experts, the total cost of job may become high.

3. As line workers will not be using their skill, their initiative cannot be utilised.

4. Shifting of responsibility is possible.

5. The failure of any of the expert will largely affect the production because, if any expert tells wrong
operation, there is no other body to correct him. This will result in large wastage of material.

6. Proper co-ordination of the work of different departments is required but it is difficult to maintain as
everybody is working individually.

➤
Type # 4. Committee Organisation

A committee is a group of persons formed for the purpose of giving advice on certain important problems, which cannot usually be solved by an
individual. It helps by pooling the thoughts of several persons on problems involving several functions and offered for criticism. Therefore, now-a-
days many large companies add a network of committees to the line and staff organisation.

Meaning of a Committee:
A committee is a group of people who work collectively, discuss, decide and recommend solutions to the problems (of a concern) which possibly
cannot be solved by an individual. A committee consists of a group of men conversant with a subject; naturally their advice will be much superior to
that of one man.

These committees may be either “Permanent” sometimes referred to as standing committees or they may be organised to serve a temporary function
only. Examples of committees are Research Committee, Co-ordination, and Advisory Committee, Purchase Committee, Education Committee etc.

—>used to purpose of helping

Principles of a Committee:
1. The number of persons in a committee should depend upon the need and be optimum minimum (about 5 to 10 persons).
Types.

2. Responsibility, authority, objectives and duties of the committee should be clearly defined.

3. Agenda of the committee should be prepared and communicated to the committee members at least a week before they meet for discussions.

4. Problems which can be taken care of by an individual should not be included in the agenda of the committee.
5. Committee meetings should begin and end on prefixed timings.
6. Problems not related to the subject-matter at hand should not be discussed because it will simply waste time.
7. The operation of the committee should be a cooperative development.
8. The recommendations made by the committee should be published and circulated to interested and concerned persons.
9. A committee must be dissolved after its purpose is over.
Type # 4. Committee Organisation

Types of Committee:
(a) A standing or permanent committee is needed in a complex organisation experiencing multifaceted
problems almost all the times.
(b) A temporary committee is formed to face and solve problems arising occasionally.
(c) The committee in control has full powers to act and may assume a position that could be manned by
one individual.
(d) The coordination and discussion committee discusses problems and gives its advice. It has no power
to act.
(e) The advisory committee explores various aspects of a problem and suggests courses of action to the
concerned executive, thereby helping him to reach the decisions for which he is held responsible. The
committee does not have power to act. Advisory Committee is used extensively in business.
(f) The educational committee aids in getting information about company problems, policies and
projects to major individuals concerned. It also gives an insight into the ultimate company organisation,
etc.
Type # 4. Committee Organisation

Advantages of a Committee:
1. A committee often performs worth-while tasks since two experts are better than one.
2. A committee coordinates the efforts of the departments which are represented (e.g., sales, production
and engineering) in development of a new product.
3. A committee is of special value in broad policy determination and rounding out plans.
4. A committee reduces the work load of management.
5. Committees are especially good at innovation or brain storming.
6. A committee helps securing co-operation of various personnel.
Type # 4. Committee Organisation

Advantages:

1. Since “two” heads are better than “one”, quick and valuable decisions can be taken.

2. By this, time schedule and proper follow up are instituted which causes speedy action.

3. Decision taken is impersonal which leave the chairman free from personal criticism.

4. As the members are from the plant side, they know better what is going on in the shops and can give the correct suggestions and team up with other
persons and departments.

5. There is a stimulus towards co-operative action.

6. Expert knowledge is utilised.

Disadvantages:
1. Sometimes the committees may be too large in strength which cause delayed actions and wasted time.

2. It is an expensive form of organisation as outside members are paid travelling allowance and honorarium for attending the meetings.

3. Committees tend to hang on after its usefulness is over.

4. As members are from different departments, they may not reach to a final conclusion at all.

5. It functions very slowly.

6. As there is joint responsibility of members. Hence, it amounts to irresponsibility, as “Every body’s business is no body’s business”.
Type # 5. Matrix Organisation

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

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

The second chain is horizontal depicted by a project team, which is led by the project, or group manager
who is an expert in his team’s assigned area of specialisation.
Type # 5. Matrix Organisation
 Type # 5. Matrix Organisation

Advantages of Matrix Organisation:

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

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

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

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

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

Disadvantages of Matrix Organisation:

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

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

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