MANAGEMENT: INTRODUCTORY APPROACH

BY

ABEBE EJIGU
LECTURER, DEPARTMENT OF MANAGEMENT

MEKELLE UNIVERSITY
FACULTY OF BUSINESS AND ECONOMICS
DEPARTMENT OF MANAGEMENT
2001

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 chapter One
THE NATURE AND SCOPE OF MANAGEMENT
Because of human limitation, people started cooperation and working in- group. To
coordinate and lead groups of people to achieve their pre-stated goals, functions of
management i.e., planning, organizing, staffing, leading/ directing, and controlling are
important and essential. The monumental accomplishments and scripts of the ancient
societies proved their importance. However, the discipline needs to be studied in a modern
way.

When people started working in group, although it was not formalized, they planned their
work, they organized their activities, assigned people to those positions, led their
people/workers and checked whether they achieved their interest or planned action or not;
and these activities were prevalent and apparent. This is to say that, management, had existed
in the past, exists today, and will exist tomorrow.
1 Learning Objectives:
After studying this unit, you will be able to
Define management and
Understand the nature of management
Understand whether management is science or art
Understand the management levels, skills and roles
Understand the functions of management
Explain the universality of management

As far as the definition of management is concerned, it is rich in definition. Hence, there is no

one universally accepted definition of management. This is because,
(i) Management as a discipline is recent in origin: management as a field of study is
too young, to develop.
(ii) Management is so broad that it is difficult to encompass all of its aspects in a single
definition.
(iii) There are different approaches to management, definitions change as the
environment changes. The environment of an organization change because of
changes in political, economic, social, ethical, etc environment changes.

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Management has been given various but mutually supportive definitions by different authors
and scholars. Among others the following are several of them are:
1) According to F.W. Taylor, "Management is the art of knowing what you want to do... in
the best and cheapest way."
2) According to H. Koontz and his co-author, "Management is the process of designing and
maintaining an environment in which individuals are working together in-group
accomplish efficiently selected aims."
3) According to Terry and Franklin, "Management is a distinct process consisting of
activities of planning, organizing, actuating, and controlling, performed to determine and
accomplish stated objectives with the use of human beings and other resources.
Graphically

Planning Actuating

Men and
Women
Materials
Machines
Methods
Money
Markets
Organizing Controlling

4) According to Henery Fayol; "to manage is to forecast and plan, to organize, to command,
to coordinate, and to control.
5) According to Mery Parker Fellott; "the art getting things done through the efforts of other
people."
6) According to Kinard, "Management is the process of maximizing the potential of an
organization's people and co-ordinating their efforts to attain predetermined goals.
7) Management is defined as the process of planning, organizing, leading and controlling
the efforts of organization members and of using all other organizational resources to
achieve stated organizational goals.

From the various definitions of management, we can derive the following important
points.
a) Management refers to the managerial functions of planning, organizing, staffing,
leading and controlling.

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 b) Management co-ordinates both human and non human resources (land, labour,
capital) for the accomplishment of objectives.
c) Management is applied to all types of organization
- Profit or not for profit
- Large, medium or small organization
- Manufacturing or service giving, etc.
d) Management deals with creating a comfortable internal environment, with a great
consideration of the external environment.

For the sake of convenience, we can define management as a distinct process consisting
of managerial functions of planning, organizing, staffing, directing/leading, and
controlling so as to design and maintain a conducive environment in order to achieve
common group goals and organizational objectives efficiently and effectively.

From this definition, we have the following points that characterize management:
a) Management is a continuous process-when ever there is a group endeavor/effort, the
need for management arises.
b) Management is viewed in terms of the managerial function a manager does.
c) Management deals with the coordination of both human and non- human
resources/physical resources.
d) Management is applied wherever there is an organization with an objective to be
achieved.
e) Since an organization exists in an open system, management creates a favorable
environment in order to achieve organizational goals.
f) The target of managerial process is to achieve organizational objective-reason for
their existence.
The Nature of Management
1. Universal Application:- Management is applied in any organization (large, small in size, or
service or manufacturing or for-profit or not-for-profit) and its functions are practiced in any
level of management.
2. Goal Oriented:- Any organization is established to achieve objectives, and management
is important for any organization to achieve its pre-stated objectives efficiently and
effectively.

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3. Guidance:- The main task of management is guidance in the utilization of material and
human resources in the best possible manner. Without the involvement of management,
resources might be misutilized and wasted. Through the optimum utilization of resources,
it to ensure that the objectives are attained.
4. Divorced/Separated from proprietorship:- Management does not signify
proprietorship/ownership. Managers work for the attainment of organizational goals and
objectives.
5. Management is a human activity:- Management functions are discharged by individuals
not by machines such a computers. However, it can be aided by such instruments as
computers.
6. Management signifies Authority:- Since the significance of management is to direct, to
guide and to control, it has to have authority. Authority is the power to compel others to
work and behave in particular manner.
7. Leadership:- The manager has to lead a team of workers. He/she must be capable of
inspiring, motivating and winning their confidence.
8. Management is Multidisciplinary:- It has grown as a body of discipline taking the help
of so many social sciences like sociology, psychology, economics, etc.
Is Management Science or Art?
Science:- It is an organized/systematized body of knowledge constituting concepts, theories
and principles concerning a particular field of study. Especially, it is knowledge obtained
from observation, test and experimentation of facts; and it is universally true; and applied in
any country, organization, etc. Besides, it exploits mathematical models.

When we say it is a systematized body of knowledge, it is in the sense that relationship

between variables and their limitation have been ascertained and underlying principles have
been discovered. These facts are again verified through continuous observation. Finally,
certain relationships and principles are developed which are fundamental truths that help to
reflect or explain reality.

The principles developed after a detailed observation acts as a universally applicable

foundation.

As science, management is a systematized body of knowledge representing a core of

principles or fundamental truths that tend to be true in most managerial situations. This

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systematized body of knowledge of management helps the practicing manager to make
decisions rationally and objectively rather than rule of thumb, hunch, or institution, what they
did in the part.
As an emerging science, management has certain basic principles, which are universally
applicable in any organization regardless of its size, mature and objective. Effective
managers use the scientific approach in making decisions.
However, management is not considered as an exact science as chemistry, physics etc. It
is an Inexact Science. This is because, it deals with people/human behavior in which
change is the fashion rather than the exception. It is to say that human behavior is even
changing and unpredictable.
To conclude, management is categorized as science for the following reasons:
Its principles are systematized body of knowledge
Its principles are universally applicable
They are based on scientific inquiry, observation, test and experiment
They explain the cause and effect relationships among/between various variables.
Their validity can be verifiable and can serve as a reliable basis for predicting future
events.
Art:
Art is a skill or know- how, which can be modified to accomplish a desired concrete result. It
is doing things in light of the prevailing realities of a situation. It is concerned with the
application of know- how and skill to the specific time, place and condition tactfully,
creatively and wisely.
Art is a personal creative power plus skill in performance
Art is based on subjective judgement, feelings, intuition, etc.
Art helps to create new ideas and effective methods to use from the underlying
knowledge and skill. Management as an art.
Is a know- how or doing things in the realities of the situation.
Art in management has a great role in creating new idea, innovation, initiating and
implementing the skills or know-how in relation with the resources and goals of the
organization.
Calls for subjective judgement, intuition where time pressures force rapid-fire
decisions, often based on incomplete and unverifiable data.
To conclude, management as a creative art

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1. It required a skill or a practical know-how of the principles and techniques of
management in order to perform a specific job efficiently and effectively.
2. It depends on the personal skill and effective use of one's knowledge and proficiency to
ensure maximum result at minimum cost.
3. It follows result oriented course of action – or depends on specific objective to be
achieved.
4. Management calls for creative ability – to introduce new ideas, new products, new
techniques to yield higher returns to an organization (higher surplus)
5. Continuous practice of management theories and principles results in better performance.
N.B. The science and art of management practice are not mutually exclusive but are
complementary. If science teaches one to know, art teaches one to do. So manage rs have
to know and do things to perform their activities efficiently and effectively to be
successful.
Management as a Profession
A profession is a vocation requiring,
1. body of specialized knowledge and Technical proficiency
2. formal training / standardized education and training
3. social Responsibility
4. code of conduct/professional Ethics

1) Body of specialized knowledge and Technical proficiency

If an organization needs to have rational and scientific decision making ability, managers
have to be specialized on a systematic body of management. And also management requires
technical proficiency is special fields such as production, marketing, finance, human resource
management, etc. To ensure all these, management requires intellectual preparation or
graduate study.
2) Formal/standardized Education and Training:
A certain field of study to be a profession, it requires formal training and education. This
holds true for management. There are universities, colleges, and educational institutions
specialized that provide formal teaching of management concepts, theories and principles.
3) Social Responsibility:
Any organization has an objective whether to make surplus, or provide efficient services to
the society, and the like. And also a manager of an organization is responsible to lead the
organization and its members. Besides, managers have to take into account the obligation to

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serve the society (mission) and strict adherence to the prescribed moral, social, and legal
conduct; because their existence depend on the service they give to the society in general.
4) Code of Conduct:
Any discipline to be a profession, it is subjected to the fulfillment of strict standards, rules
and regulations providing the norm of honesty, integrity, and professional morality to be
adhered by the members.
Management Levels, Skills and Roles:
Type of Managers
Managers can be classified into two ways,
1. by their level in the organization – so called first line, middle and top managers
and
2. by the range of organizational activities for which they are responsible – so called
Functional and general managers.
(1) First line Managers- managers who are responsible for the work of operating
employees only and do not supervise other managers; they are the first or lowest levels
of managers in the organizational hierarchy. These pest people are managers at the
firing line where most concrete organizational tasks are performed.

It includes office managers, superintendents, foreman, chief clerks, supervisors, etc.

First level management is often called "supervisors". They are mainly concerned with:
i) Planning of day to day work.
ii) Assignment of jobs
iii) Keeping a watch on workers performance.
iv) Sending reports and statements to superiors
v) Maintaining close and personal contacts with workers and evaluation
of their work.
(2) Middle level Managers: these are managers who direct the activities of lower level
managers and some times extends to supervision of operating employees. Their
principal responsibilities are to direct the activities that implement their organization's
policies and to balance the demands of their superiors with the capacities of heir
subordinates. The titles include Department heads, deputy department heads, branch
managers, work managers, etc.
(3) Top Managers:- composed of a comparatively small group of executives and they are
responsible for the over all management an organization.

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 They establish operating policies and guides the organization's interactions with
environment. Typical titles include CEO, president, senior vice president, etc.
Responsibility of planning and executing broad policy decisions.
Functional and General Managers
The other major classification of managers depends on the scope of the activities they
manage.
1. Functional Managers:- these are managers who are responsible for only one
organizational activity, such as production, marketing, sales, or finance. The people and
activities headed by a functional manager are engaged in a common set of activities.
2. General Managers:- these managers, on the other hand, oversee a complex unit, such as
a company, a subsidiary, or an independent operating division. He or she is responsible
for all the activities of that unit, such as its production, marketing, sales, and finance.
Managers who are responsible for managing the entire operations of a more complex unit
or division which may have two or more functional units.
Skills of Management
A skill is a person's or an individual's ability to do or perform a certain thing expertly or
intellectually. Similarly, managerial skills are skills of a manageability of a manager to
perform his duties and responsibilities expertly. These skills help managers to perform their
activity in efficient and effective way/manner for the achievement of the objective of the
organization.
These managerial skills can be classified as:
(i) Technical skills
(ii) Human skills
(iii) Conceptual skills
1. Technical skills: These skills are the abilities of a manager that are necessary to carryout
a specific task. It involves the ability to use specialized knowledge and expertise with
work related tools, procedures, and techniques. Technical knowledge is of great
importance at lower levels where the organization's goods and services are produced.
Examples include:
- Writing computer programs
- Completing accounting statements
- Analyzing marketing statistics
- Drafting a design for a certain building etc…

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Technical skills are usually obtained through training programs that an organization may
offer its managers, or employees, or may be obtained by way of a college degree.
2. Human Skill: the ability to work with, motivate, direct individuals or groups in the
organization whether they are subordinates, pears, or superiors and the ability to resolve
conflict. Because, all tasks in an organization are done with people, these skills are
equally important to all levels of management. This skill includes:-
- effective communication (writing and speaking);
- creation of positive attitude toward others and the work setting;
- development of co-operation among group members; and
- motivation of subordinates.
3. Conceptual skill:- the ability of a manager "to see" the big picture of the organization /to
view the organization from a broad perspective. It is the ability of a manager to see the
organizational system in its totality, how its different parts are interrelated and how they
affect each other. A manager needs conceptual skills to recognize the interrelationships of
various situational factors, and; therefore, make decisions that will be in the best interests
of the organization. They are most important in strategic (long range) planning; therefore,
it is top level managers/executives who require more conceptual skill than middle level
managers and supervisors.

Top Strategic Planning

Conceptual Skill

Level and
Human Skill

Technical Skill

Management Decision Making

Middle Coordination and Planning for

Management Implementation
First Line Management
/supervisors. Implementation

Fig. 1.1 Managerial levels, required skills, and primary responsibilities.

Managerial Roles:
Managerial functions are general administrative duties that need to be carried out in all
productive organizations. Managerial roles are specific categories of behavior/managerial
behavior. Managerial functions involve "desired out comes". These outcomes are achieved
through the performance of managerial roles (actual behavior). In other words, Roles are the
means and functions are the ends of the manager's job.

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Henry Mintzberg identified ten different but interrelated organized sets of behavior, or roles.
These ten roles can be separated into three categories /general groupings.
1. Inte rpersonal roles: three managerial roles are enacted when the manager engages in
interpersonal relationship. They are:
Figure head role:- this role is played by managers who are required to perform duties of
ceremonial and symbolic in nature such as signing documents, receiving visitors, etc.
- e.g. When the president of a college hands out diplomas at commencement.
Leader role:- managers play this role through hiring, training, motivating and
disciplining employees to get the job done properly.
Liaison role:- managers play this role by contacting people outside the group, ^ by
serving as a link in a horizontal (as well as vertical) chain of communication.
- e.g. the sales manager who gains information from the personnel manager with in
the same company. Internal liaison.
- The sales manager who has contact with other sales executive through a making
trade association. – External liaison.

2. Informational roles:- All managers, to some degree, will receive and collect information
from organizations and institutions out side his or her own. Managers play:
Monitor/Nerve Cente r Role:- as a monitor /nerve center, the manager tries to keep
informed about what is happening in the organization or group. Managers serve as a focal
point for non-routine in formation; they receive all types of information from news
reports, trade publications, magazines, clients, etc.
Disseminator role:- the information a manager gathers as a monitor must be gleaned and
transmitted to appropriate members of the organization. As a disseminator, a manager
sends out side information into the organization and internal information from one
subordinate to another. /Transmitting selected information to subordinates.
Spokes person role:- it is the role of a manager in transmitting selected information to
outsiders. It is played by a manager whenever he/she represents the organization or its
position to other groups, including the their, government age ncies, customer, and trade
organizations.
3. Decisional Roles:- Both interpersonal and informational roles are really includes to the
decisional role. It involves decision- making. The manager plays this role as:

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 Entrepreneur: managers as an entrepreneur initiate and oversee new projects that will
improve their organization's performance. (Designing and initiating changes with in the
organization.
Disturbance handler: - taking corrective actions in none routine situations/the manager
deals with situations our which he or she has little control. These may involve conflict
between people or groups or unexpected events out side the company may affect he firm's
operations.
Resource allocates:- managers play this role when they are in a position to decide exactly
who should get what resources. (These resources include time, money, people-people,
physical resources)
Negotiator:- participating in negotiating sessions with other parties (e.g. vendo rs and
unions) to make sure the organizations interests are adequately represented. Managers
perform this role, in which they discuss and bargain with other units to gain advantages
for their own unit.
Functions of Management
Regardless of the type, size and objective of the firm, all managers have certain basic
functions. These are planning, organizing, staffing, leading/directing/, and controlling. The
nature and scope of these functions differ from manager to manager and from firm to firm.
Planning
It is a decision making process which involves selection of missions and objectives and
choose the best course of action to achieve them from among alternatives. It is an intellectual
task, which bridges the gap between the present and future conditions of the organization.
(From where we are to where we want to be in a desired future).
Planning is a decision making process that determines what to be done, how it is to be done,
why it is done, when it is to be done, and by whom it is to be done.

The first step in planning is determination of the objective of an organization. And then
objectives are established for the sub units of the organization- its departments, divisions, etc.
Once the objectives are determined, programs are established for achieving them in a
systematic manner.

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Top level managers set plans for the entire company; while lower level managers prepare
plans for their immediate areas of responsibility. Planning doesn't occur in a vacuum. It is
done in light of budgetary constraints, personnel requirements, competition, and other factors.

Planning, as a managerial function, is the process of integrating the future activities of an

organization, and requires the ability to foresee, visualize, and look ahead purpose fully.
Organizing:
It is a managerial activity that involves establishing an intentional structure of roles for
people to fill in an organization. In other words, it is the process of creating an environment
for human performance depending on the objectives set. In short, organizing is the process of
determining the role by which an individual plays and the individual roles are related and
integrated to achieve the common organizational goal. Organizing, thus involves:
identification of activities to achieve the predetermined objective;
grouping these activities into working units;
assignment of responsibility to each unit with corresponding authority; and
the creation of intentional organizational relationship so as to enhance coordination.

Staffing:
It is the process of filling and keeping filled the positions in the organization structure. This is
done by identifying work force requirements, inventorying the people available, recruiting,
selecting, placing, promoting, compensating, training and developing both candidates and
current job holders to accomplish their tasks effectively and efficiently.
Leading:
It is influencing, motivating and directing people so that they will contribute to organization
and group goals; it has to do predominantly with the interpersonal aspect of managing. To be
effective leaders managers need to understand individual and group behavior, techniques of
motivation, and effective styles of leadership. Mangers must develop relation ships that
ensure adequate communication with their subordinates. Leading also includes managing
personal conflict, helping employees, deal with changing conditions, and in some cases
disciplining employees. Leadership requires good interpersonal skills. Leading /directing has
the following three elements:
(i) Motivation
(ii) Leadership styles

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 (iii) Communication
Controlling
It is the measuring and correcting of activities of subordinates, to ensure that events conform
to plans. It also involves taking corrective measures (actions) if negative deviations exist.
The controlling function involves the following steps:
Establishing standards of performance:
Measuring actual performance and comparing it against the plan the goal /the established
standard;
Taking corrective measures if there are devotions. (Taking corrective actions when
standards are not met or in anticipation that they may not be met.)
Actual results may differ from desired results in any area, but the three that require the most
attention are product quality, worker performance, and cost control.

Universality of Management
Management is universal in the sense that
Basic applications of management in any organizations are the same whether it is small or
complex, business or non-business. The managerial functions exist in every organization
regardless of the size and the type of the organization. This is because any organization
has an objective to be achieved and goal achievement requires planning, organizing,
staffing leading and controlling. (The army general, the bishop of the church, the financial
manager use the same management principles to achieve objectives.)
The concept of universality of management is also applicable to all levels of management
within an organization; it is not confined to a particular level. Although the scope of
authority held, responsibility assigned and the types of problems dealt vary from one level
to another, as managers all obtain results by establishing an environment for effective
group endeavor.
Managers can be transferred from one organization to another and the higher the
management level the less will be the operating non- managerial job components and the
more "pure" will be the managerial jobs and the easier the transferability of managers.

The Environment of Management

According to Stephan, "the term environment refers to institutions or forces that are outside
the organization and that affect the organization's performance." Another writer put it, "just

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take the universe, subtract from it the sub set that represents the organization, and the
remainder is environment." But an environment is really not that simple.

In management, the term environment refers influences/forces that reside inside or out side
the organization and affects the operations of the organization negatively or positively.
/which provide both problems and opportunities to the firm./
Therefore, the management environment can be divided in to two:
I. The Internal Environment:
It includes all the activities that are performed with in the organization. Since they are with in
the organization, internal factors are under the control of the management. These factors
include the activities of different divisions and departments, the organizations physical,
financial and human resources along with the value systems of managers who control those
systems. However we are more concerned with the external environment on which the
existence of the organization depends.
II. The External Environme nt:
Organizations are neither self sufficient not self contained. They exchange resources with the
environment and depend on it for their survival. Organizations take resource inputs (raw
materials, money, labour, energy, etc) from the external environment, transform them into
products and services, and then send them back as out pat to the external environment.
The external forces include
(a) Political and Legal Forces:
The political environme nt
Government affects virtually every organization and every aspect of life. In respect to
business it either promotes or constrains. The general activities of organizations depend on
the political directions of the government. Sometimes government promotes business by
subsidizing selected industries, by reducing tax payments, by supporting research and
development, by increasing the availability of capital etc. It is also the biggest customer,
purchasing goods and services.

The legal environme nt.

The political and legal environments of management are intertwined with the social
environment. Laws are ordinarily passed as the result of social pressures and problems. This
force is a complex of laws and regulations. Every manager is included by a wed of laws,
regulations, and court decisions that are designed to protect different social groups in the

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society. Many of then are designed to regulate the behavior of managers and their
subordinates in business and non-business areas. Thus, managers are expected to know the
legal restrictions and requirements applicable to their actions in their decision making
process.

(b) The Economic Forces:

The economic forces include the availability /resource inputs (capital, labour, money,
energy), trends in GNP, disposable personal income, consumer's purchasing power, industrial
investment, price levels, governments policy towards tax and fiscal policies, the nature of
competition, price level of goods and services, demands o f goods and services by the
customers, and other similar variables that influence and are influenced by the organization.

(c) The Social Forces:

The social environment includes national traditions, values, customs, consumer psychology,
attitudes, desires, expectations, degree of intelligence and education, and beliefs, of people in
a given group or society. There forces present both opportunities and threats to the business
sector.

The variety of values makes it difficult for managers to design an environment conducive to
performance and satisfaction. The reason is the attitudes, values and beliefs are different for
numerous social groups such as workers and employers, rich and poor people, literate and
illiterate people and among various professions it is really very difficult for a manager to be
responsive to these forces, thus managers have no choice but to take them into consideration
in their decision making.

The Technological Forces

Technological variables are breakthroughs that result in improved products, services,
production methods, techniques, procedures. Its influence is reflected on way of doing things,
on how we design, produce, distribute and sell goods as well as services.

Greater productivity, higher living standards, more leisure time and a greater variety of
products are a few of the advantages of technology. But it also has some disadvantages such
as air pollution, unemployment, shortage of energy, etc. Here managers should weigh the

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advantages and disadvantages of technology and their impacts on the society. Besides, any
organization should cope with the technological changes.

The Ethical Forces:

Ethics is the discipline dealing with what is good and bas and with moral duty and
obligation.
Consists of sets of generally accepted and practiced standards of personal conduct. The
standards may or may not be confined by law, but for any group to which they are meant
to apply, they sometimes have virtually the force of law. The Ethical standards may differ
from one society to another.
Ethics is beyond legal responsibilities, thus it fills the gap between legal requirements and
the actual decisions that managers must take. Beyond the strict term of legal obligation,
management of an organization should see what is bad and good, and what is r ight and
wrong. Actually, our conceptions of bad or good depends on the custom, religion, belief,
intuition and tradition of the society.
Therefore, managers have the responsibility to consider and adhere to the ethical codes of the
society by integrating the ethical concepts in their decision making.

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 Chapter Two
The Development of Management Thought
Chapter Objective:
- To give general understanding to students about the contribution of early
influences, classical and behavioral theorists to the modern management
theories.
- To provide them the limitations of each management theory.
- To summarize the significance of modern theories and how they are useful in
solving management problems.
2.1 Early Influences
This stage of management covers the time between the beginning of man's co-operative effort
to the start of his attempt to approach the study of management scientifically about 1880.
Management functions have existed for thousands of years since people began to work in
group/organized endeavor was recognized important for the achievement of organizational
goals. Though the principles of management, as we know them today, are no where to be
found in the ancient literature, there are enough indications to show that the importance of
management and organization was well recognized even those days.
The earliest Egyptian and Chinese literature, for instance, contain references to
the need for efficient and effective administration of public affairs.
Ancient Greek literature pours to the existence of administrative apparatus like
councils, courts and boards of military personnel to manage the affairs of the
state.
Socrates, a famous philosopher, was among the first to look up on management
as something different from mere technical knowledge and skills.
Generally, had there not been considerable skill in the various management functions, those
monumental accomplishments such as the pyramid of Egypt, the Great wall of China &
Babylon, the monument in Axum & the temple in Lalibela, and the castle of Gondar would
not have been possible. During that period the contribution given by religious and military
groups to management thought were significant & undeniable. For example:
The bible /Exodus 18 = 13-26/- This is the advice which was given by Jethro, the
father- in- law of Mosses, to Mosses. It includes the following.
(i) "Ordinances & Laws" should be taught to the people. In modern terms,
organizations need to have a statement of policies, rules, & procedures.

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 (ii) "Leaders be selected & assigned to be the rulers thousand's, hundred's, fifty's, and
rulers of ten's. In modern terms it is the base for delegation of authority (Span of
management)
(iii) "These rulers should administer all routine maters, & should bring only the
important questions." In modern terms it is related to the exception principle.
Roman Catholic Church was one of the most effective formal organizations in the history
of western civilization. The church had a set of well-defined objectives and effective and
efficient organizational set up to achieve them. It introduces hierarchy of authority and
staff concept
Military organizations also contributed in their own simplistic way to the development of
managerial practices though there was little use of theory in it. Even so, their techniques
of authority-relationships between individuals and groups, direction, motivation, and
communication underwent considerable improvement over the years.

Until about the middle of the 18th century, the people of Western Europe used basically the
same methods and implements of production that had been used for centuries. Management
practice in business, government, and the church remained quite stable through the centuries.
It was carried through trial and error basis. Then within a few decades a series of inventions
were discovered and the whole picture of industrial activity was enormously attained. That
new period, commonly referred to as the industrial revolution, was the landmark in human
history. It brought massive technological changes. It revolutionized the economic system,
initiated mass production and the factory system of production brought the need of huge
collection of capital.

Those changes of production methods reduced the crafts, which were the main factors in
production into wage earner (employees) in the factory. Introduction of mass production,
large-scale industry, the use of expensive machines, extended markets, etc made things very
complex. In addition, maintaining harmonious relationship between the employer & the
employees was a problem. These factors brought the need of more thoughtful, resourceful
and dynamic management. Management on traditional lines became useless. Rule of thumb
could no longer exist. It had to be replaced by logical and rational principles, scientific
approach and psychological handling.

19
Despite the long history of management, it walked as a tortoise. Because of
i) low esteem to business in society
ii) indifferent approaches of economists, political scientists psychologists,
sociologists, etc towards business organizations.
iii) treatment of management as an art not as a science and
iv) the attitudes that successful managers are born but not made.
These factors made management not develop and studied systematically and scientifically. In
the twentieth century, the situation had changed rapidly, so me of the factors that contributed
to the need of a systematic management are:

1. The development of capitalism and the emergence of industries, mass production, the
concentration of workmen and organization of trade unions, the growing competition for
markets, technological innovations, the increase in capital investment, increasing
obsolescence of instruments of production etc. forced organizations to be efficient or to
find out ways for efficiency.
2. The complexities of organizations, society became more complex. These complexities of
society were generated by:
- The increasing size of organizations.
- High degree of division of labour & specialization
- Increase in government regulations & controls.
- Organized trade-union activities &
- Pressure of various conflicting interest groups in society.
A few of the contributor of early influences are:
1. Robert Owe n (1771-1858):
He was a successful textile mill manager in Scotland from 1800-1828. During that time
he carried out most of his experiments in the area of management. He recognized that
human resources were as valuable as financial & material resources to the production of
goods. He believed that factory workers would be more productive if they were motivated
through rewards rather than punishments.

He experienced with several motivating techniques. Some of them were:

He improved working conditions with in the factory, i.e., providing meals, bath
facilities,

20
 Housing & marketing facilities.
Reducing the workday to 10 ½ hrs. with no night work for children.
Refused to hire children under the age of 10.
Because of his emphasis on the workers, he is regarded as the father of modern personnel
management.

21
2. Charles Babbage /1792/1871/
He a British professor of mathematics, Charles Babbage become convinced t hat the
application of scientific principles to work processes would both increase productivity and
lower expenses. He was an early advocator of division of labor, believing that each factory
operation should be analyzed so that the various skills involved in the operation could be
isolated. He had also a strong understanding of the importance of human resources as related
to efficiency. He advocated profit-sharing plans & bonus systems as ways to achieve better
relations between management & labor.

Despite the suggestions given by the early theorists, owners & managers did not begin to
raise the concern of the problem of material & human efficiency. They raised the issue when
markets were becoming saturated, demands for greater profits and when competition was
becoming keen. This emphasis on cutting costs and increasing efficiency led to the
emergency of the classical school of management theory.

2.2 Classical Management Theory

Assumptions:
People are most responsive to economic incentives, i.e, they will rationally consider
opportunities made available to teem & do whatever is necessary to achieve the greatest
economic gain.
Classical management consists primarily of three streams of thought.
(i) Scientific management of Frederic W.Taylor-concerned with productivity and the
management of work & workers.
(ii) Classical administrative management-concerned with administration-with discussing
universally applicable principles of management and the nature and management of the
total organization (the organization as a whole). It is identified with the Frenchman
Henery Fayol.
(iii) Bureaucratic theory – concerned with the bureaucratic organization and is identified
with a German author, Max Weber. He believed in one best organizational structure – a
highly formal and goal-oriented structure in which human emotions, personal bias, and
charismatic leadership are subordinated to rational thinking and impersonal decision
making.

Scientific Manage ment Theory

22
Scientific management theory addresses issues concerning the management of work. It is a
systematic & analytical study of work, which originated in the United States around 1900. Its
objective was to find the most efficient method for performing any task and to train workers
in that method.
The most important contributors of scientific management theory are Frederic W.Taylor,
Henery Gantt, Frank & Lithan Girbreth, and Harrington Emerson. Among these F.W. Taylor
is considered/regarded as the father of scientific management.

Frederic Winslow Taylor /1856-1915/

He was an American Engineer and worked in the Midvale steel co. as an apprentice pattern
maker, a common laborer, a foreman, a master mechanic and then a chief engineer of the
steel co. That gave him ample opportunity to know at first hand the problems & attitudes of
workers and to see the great opportunities for improving the quality of management.

His major concern was to increase efficiency in production, not only to cover costs raise
profits but also to make possible increase in pay for workers through their higher
productivity, through one best of doing a job. Taylor wanted to find the most effective way to
use people and resources in the workplace. He believed that there was one best way of
performing every process and task in industry. He thought that, to find the best way, workers'
performance of a task should be examined scientifically, objectively, and in great detail,
using an empirical and experimental approach. Only then could a more productive way of
doing the job be found.

After finding the one best way of doing a job, managers should then teach it to the workers.
He thought that an incentive system rewarding fast workers and penalizing slow workers
would encourage them to adopt the new system. He believed that scientific methods would
eventually replace intuition and rule-of thumb, which had been used in organizations up until
then.

Scientific management he testified, "required complete mental revolution", he believed that

the mental revolution must occur in the workers minds and in the minds of management as
well. This is because he believed that

23
 The first problem of labor- management was the issue of division of surplus created by the
industry. Here the mental revolution was important to avoid the quarrelling about how
surplus should be divided and unite to increase the size of surplus.
The second aspect was to make the scientific method the sole basis for designing work
methods and production standards (how much each worker should produce). This is
because management was ignorant in setting 'fair days work' and 'fair days pay'.
Taylor also believed in that people were basically lazy by nature, although training could
improve performance. He especially disliked "systematic soldiering", deliberate slow downs,
and loafing promoted by what were latter called informal work groups. Thus, he strongly
believed in breaking up such groups and emphasizing rewards for individual performance.

His engineering back ground provided a model for establishing principles of management
that would guide scientific analysis of work so as to improve task efficiency.
Taylor's principles can be summarized as follows.
1. Develop a science for each element of an individuals work./replacing rules of thumb with
science. /scientifically select than train, teach and develop the worker.
2. Achieving co-operation of human beings rather than chaotic individualism.
3. Working for maximum out put rather than restricted
4. Developing all workers to the fullest extent possible for their own and their company's
higher prosperity.
Frank Gilbreth (1868-1924)
Gilbreth was primarily concerned with the method of doing work. He was concerned with the
method requiring the fewest and smallest motions as well as with the work area and the
positioning of the tools and workers themselves.

Gilbreth and his wife Lillian developed recording techniques called "Therblings" and
process- flow-charting. Therblings are the basic elements of on-the-job motions and provide a
standard basis for recording movements. They included such items as search, find, graph,
assemble and inspect. Flow-process-charts (process flow-charts) were devised to enable
whole operation or process to be scientifically analyzed as opposed to a single task or
operation.

Henry Gantt (1861-1919)

24
He was a contemporary of Frederick Taylor. Gantt is best known for his graphic system of
planning and control system that is still used today. His charts know as "Gantt Chart" enables
managers to visualize the completion stage of various projects, such as procurement, of
materials, manufacturing and shipping. By these means managers coordinate related
activities, avoid delays, and otherwise make sure that dead lines are met. An example of a
simplified Gantt chart is given in Figures 2.1

Along the horizontal axis of the Gantt chart (in figure 2.1) work scheduled and work
completed are measured. Along the vertical axis are the jobs to be done. In the example given
in figure 1.2, there are five jobs scheduled. The first order number 94 calls for the production
of 4500 units. The job was begin on January 2 and is scheduled for completion on March 2.
The second job, order number 160, was begun on January 23 and is scheduled to be finished
on March 16. The V at the top of the chart after the week of February 27 indicates the current
date, namely march 2. Progress on each order is designated by the dark line bar that extends
throughout the bar line. A visual examination of the chart reveals the following:
1. Order 94: finished on time
2. Order 160: currently one week late
3. Order 223: currently two weeks ahead of schedule
4. Order 309: currently on time
5. Order 411: scheduled to begin March 19

Assessing Scientific Manage ment

Scientific management was successful in increasing productivity and consequently increasing
the wealth that improved the living standard of the workers. The proponents of scientific
management believed that workers are motivated primarily by a desire to earn money to
satisfy their economic and physical needs. However, they failed that workers have social
needs and that working conditions and job satisfaction are often equally important. Highly
repetitive jobs often produce boredom and alienate employees from their job.

FIGURE 1.1.
Simplified Gantt Chart for a Print Shop

Print Shop
January-June, 19___

25
Printing
press January February March April May June
Job # 72 Job # 81
No.1

Job # 63 Job # 73
No. 2

Job # 71
No. 3

Job # 83 Job # 94 Job # 95

No. 4

Scheduled work Time planned to

Today Cover possible
Completed work

Classical Administrative and Organization Theory

Scientific management theory was aiming at improving the efficiency and productivity of
workers; consequently, it provided little guidance for managers above the supervisory level.
But, realizing the importance of efficiency operations at all levels, theor ists began to focus on
organizations as a whole. The theory focuses on the total organization and attempts to
develop rules and principles that will direct managers to more efficient activities. The single
most contributor of this theory is Henery Fayol.

Henery Fayol (1841-1925)

The single greatest contributor to this theory is Henery Fayol, Now regarded as "the father of
modern operational management." He was a French mining engineer who spent many of his
latter years as an executive for a French coal and Iron combine where he worked for 30 years.
He identified /classified business activities in to six. These are
1. Technical activities:- These include activities of production and manufacturing.
2. Commercial activities:- These include activities of baying, selling or exchange
3. Financial activities:- These activities include searching for & optimum use of capital
4. Security activities:- These include protection of property and persons.
5. Accounting activities:- These include recording and taking stock of costs, profits &
liabilities, keeping balance sheets, and compiling statistics; and

26
6. Managerial activities:- These include planning, organizing, commanding, co-ordinating
and controlling.
Fayol felt that the first five activities were well known and performed by business people, but
little was known about the managerial activities and it had been the most neglected aspect of
business operations. Thus, he concentrated on /devoted much of his time on the analysis of
the managerial activities.
Principles and Ele ments of Management:-
Fayol's monograph can be divided in to three categories
1. Elements of management- he listed planning, organizing, commanding, coordinating
and controlling as elements of management.
2. Managerial qualities and training – he identified the following qualities managers
should possess to be effective on his job.
- Physical – state of health – good manager should be in good state of health
- Mental – ability to understand, appreciate, learn, judge and decide.
- Moral – Loyal, true to his words,
- General- solid educational background & Technical education
- Experience – helps a person to discharge his function efficiently & confidently.
3. General Principles of manage ment:-
- Based on his own experience in the field he developed fourteen principles of
management which are useful not only in business organizations, but also in
military, religious, governmental and financial institutions. But these principles are
not commandments; they are used by modifying, or adjusting to fix the prevailing
realities.
These principles are
1. Division of labor - The more people specialize, the more efficiently they can
perform their work.
2. Authority & responsibility - Managers must give orders so that they can get
things done, this authority rests on the job the manager holds. Responsibility, on
the other hand, is the sense of obligation that goes with authority. Authority should
be delegated only to subordinates who are witting to assume commensurate
responsibility.
3. Discipline - members of an organization need to respect the rules and agreements
that government the organization.

27
4. Unity of Command - Each employee should receive instructions or orders from
one superior; he believed that it was fundamental to effective management of an
organization violating this principle undermines authority & jeopardizes discipline
and stability.
5. Unity of Direction -Those operations with in the organization that have the same
objective should be directed by one manager using one plan. Tasks of similar
nature that are directed toward the same goal should be grouped under one
manager. It emphasizes that there should be "one head and one plan."
6. Subordination of individual interest to the general interest - the interests of any
employee or group of employees should not take precedence over the interests of
the organization as a whole.
7. Remuneration - compensation for work done should be fair and afford
satisfaction to both employees and employers.
8. Centralization - This refers to the involvement of subordinates in decision
making. Decreasing the role of subordinates or concentration of authority at the
top can be referred as centralization. When it is dispersed through out
levels/increasing the involvement of subordinates in decision making is
DECENTRALIZATION. Fayol believed that managers should retain final
responsibility but also need to give their subordinates enough authority to do their
jobs properly. The question of centralization and decentralization is the question
of proportion. It is important to find optimal degree of proportion.
9. Scalar Chain/The hierarchy) - The line of authority runs in order of rank from
top management to the lowest level of the enterprise. Communications should
flow through this chain or line of authority. However, if following the chain
creates delays, cross communications can be allowed if agreed to by all parties and
superiors are kept informed.
10. Orde r - People and materials should be the night place at the right time. People
particularly should be in the jobs or positions most suited for them.
11. Equity - Managers should be kind and fair to their subordinates.
12. Stability of Tenure of personnel - high employee turnover results in
inefficiently. Management should provide orderly personnel planning and ensure
replacements are available to fill vacancies.
13. Initiative - Subordinates should be given the freedom to conceive and carry out
their plans, even though some mistakes may result.

28
 14. Esprit do corps - Promoting team spirit will build harmony and unit with in the
organization.
Fayol's principles were not meant to be exhaustive. Rather hey attempt to provide managers
with necessary building blocks to serve as guidelines for managerial activities. In some the
principles emphasize efficiency, order, stability and fairness. Managers apply these principles
today. The problem with Fayol's principles of management was knowing when to apply them
and how to adopt them to new situations.

Theory of Bureaucracy - This theory is concerned with the bureaucratic organization and is
identified with a German author Max Weber. (1864-1920). He believed in one best
organizational structure, which is highly formal, and goal oriented structure, human emotions
and personal bias are subordinated by rational thinking and impersonal decision making. He
described an ideal type of organization that he called bureaucracy. It was a system
characterized by division of labor, a clearly defined hierarchy, detailed rules & regulations
and impersonal relationships.

Features of Weber's ideal bureaucracy:

1. Division of labour: - Jobs are broken down into simple, routine and well-defined tasks.
2. Authority Hierarchy: - Offices or positions are organized in a hierarchy so that power
and authority increases as one moves up through the levels of positions in the
organization. /This is similar to scalar chain/
3. Formal selection /technical competence: - All organizational members are to be
selected on the basis of technical qualifications demonstrated by training, education, or
formal examination as opposed to friendship, family this, or other forms of favoritism.
4. Formal Rules & Regulations: - To ensure uniformity and to regulate the action of
employees there is a heavy dependence on formal organizational rules. Rules and
regulations governing decision making and interpersonal behaviors are critical to
bureaucratic organizations. He believed that continuity in rules & regulations was
necessary to maintain order and enhance organizational achievement of goals. Where
owners, managers and workers may come and go, the rules and regulations provided
organizational stability. Moreover, rules and regulation serve to restrict decision makers
who may feel compelled to act in their over interests of the organization.
5. Impe rsonality: - Rules & controls are applied uniformly avoiding involvement with
personalities and personal preference of employees.

29
6. Career Orientation /Separation from owners hip/: - managers are professional officials
rather than owners of the units they manage, They work for fixed salaries and pursue their
career with in the organization. /This was because he believed that owners were the
causes for inefficiency/. He believed that societies are rational in performing their
activities. Organizations, to be efficient, they shall have to be arranged in rational
way/structured in bureaucratic way.

Contribution
1. To efficiency & Productivity: - Their idea to increase efficiency and productivity is
applied in many organizations today.
2. Provision of guide lives and general principles of management that tend to be important
to all types of organizations
Limitation
1. Reliance on experience:- many of the writers of classical theorists wrote based on their
experience as managers or consultants to a few firms.
2. Untested assumptions:- the assumptions of classical theorists were not tested
scientifically.
3. Failure to consider informal organizations:- by stressing on formal relationship in the
organizations, classical approaches tend to ignore informal organization.
4. Human Machinery:- The classical approaches to management theorists considered
/reduced the human side of the organization to machines to make the organization run
efficiently.
2.3 Behavioral Management Theory
This management theory is commonly referred to as the NEOCLASSICAL management
theory, consists of both the human relation and behavioral science movements. It is b uilt on
the basis of classical management theories. It modified, unproved and extended the classical
theory. Classical theory concentrated on job content and management of physical resources.
But, classical theory gave greater emphasis to the man behind the machine and stressed on
the importance of individual as well as group relationships in the plant or the workplace.
Behavioral management theory:
- Emphasizes the interaction of people in the organization in order to understand the practice
of management.
- Points out the role of psychology and sociology understanding the individual as well as
group behavior in the organization

30
- Advocated the human values in an organization.
Major contributors are
George Elton Mayo
Duglas McGregor
Abraham Maslow
Cheris Argyris

George Elton Mayo (1880-1949) (Australian Psychologist)

- One of the prominent contributor /writer of behavioral management theory is G.E. Mayo.
He was known of conducting an experiment at the Howthorn plant at the Western Electric
Co. in U.S.A. The experiement was divided in to four:
1. Illumination experiment
2. The relay assembly test room
3. The massive interview program
4. Bank wining observation roof.

The illumination experiment was designed to prove the effect/impact of physical

surroundings such as noise, light, tonicity on productivity. The result of the experiment was
that there was little relationship/or physical surroundings did not have an impact on
productivity.

But of all the various experiments in this period, it was the relay assembly experiments
(1927-32) that captured the attention of people concerned with human relations in industry.
The relay assembly test room helped them to conclude that the most likely cause was that
changes in the social conditions and in the method of supervision brought about the improved
attitude and increased output. To investigate these factors, they conducted a MASSIVE
INTERVIEW PROGRAM. Based on the responses. They realized that the individuals work.
Performance, position and status in the organization were determined not only by the person
himself but by the group members as well. His peers had an effect on his performance.
Inorder to study this more systematically, the research entered its fourth and final phase, that

31
is, the bank wiring observation room. By this they realized the existence of INFORMAL
WORK GROUPS.

To summarize, changing illumination for the test group and other conditions such as
modifying rest periods, shortening work days, etc did not seem to explain changes in
productivity. They found in general, that the improvement in productivity was due to such
social factors as moral, satisfactory interrelationships between members of a workgroup and
effective management a kind of managing that would understand human behavior, specially
group behavior, and serve it through such interpersonal skills as motivat ing, condoling,
loading and communication. This phenomenon's arising basically from people's being
"noticed," has been known as the Hawthorne Effect.
From the Hawthorne study, May and his colleagues realized that an important contribution to
the study and practice of management had evolved from the experiment. These contributions
are:
1. The Hawthorne study established that workers, were not so much driven by pay and
working conditions as by psychological wants and desires which could be satisfied by
belonging to a workgroup.
2. The chance by workers to make decisions concerning the task, whither as individuals or
in a group, was a stimulus to treat the task as more important.
3. Recognition by superiors made workers feel that they made a unique and important
contribution to the operation of the organization.
Douglas McGregor- (1906-1964)
He felt that organizations were designed on faulty assumptions about human behavior. Those
assumptions were
1. Most workers disliked work, that workers preferred to be directed by super visors rather
than assume responsibility for their tasks, and that workers were more interested in
monetary gains than in performing their jobs well. Because of these assumptions, he felt
that managers were prone to design organizations that were centralized in decision
making, contained in numerous rules and regulations and required close supervision of
subordinates. Thus, for fear of technical and financial inefficiency, he felt that
organizations over-emphasized control mechanism.(Theory X)
2. 'Theory' assumptions stated that workers can enjoy their work under favorable conditions
and can provide valued input to the decision making process of the organization. Rather
than developing needless mechanisms of control in the organization, he felt that managers

32
 should emphasize coordination of activities by providing assistance to workers when
problems are identified.
Chris Argyris: - The argued that an overemphasis on control by managers encouraged
workers to become passive, dependent, subordinate and to shirk responsibility. As a result,
workers become frustrated and dissatisfied with the workplace and will either quite their jobs
or engage in behaviors that hamper the achievement of organizational goals.
Abraham Maslow (1908-1970)
He is most noted for suggesting a theory that humans were motivated by needs that exist in a
hierarchy. The most basic needs were physiological and when satisfied, human ould then be
motivated to satisfy needs for safety, love, esteem, and self actualization.
Contribution:
Advanced our understanding of management by emphasizing the importance of the
individual with in the organization – an element ignored by writers in the classical school.
That are social needs of individuals, group processes, and subordinate – superior relations
were all identified as integral components to the practice of management

Limitation
- They did not completely resolve issues concerning the nature of the individual.
- The psychological and social dimensions of the individual only partially explain
organizational out comes and constitute only a part of the larger and more
complex managerial picture.

Ele ments of Neo-classical Theory

- The Individual - Classical theorists neglected individual differences, which the behavioral
theorists emphasize individual differences and advice managers to consider such
differences.
- The Work-Group - an individual in a group develops social works. e.g. Desire to belong,
desire to be accepted by and stand well in his work group. Workers and not isolated,
unrelated individuals, rather they are social beings and should be treated as such, by
management. The existence of informal organization is natural it can't be denied. Managers
are required to use them is constructive purposes. The theorists described the vital effects of
group psychology and behavior on motivation and productivity. Each work group has its
own leader, unwritten constitution and its own production standard imposed by social

33
 sanctions on the group members. - Classical theorists ignored the existence and importance
of informal organizations.
Participative Management - They advocated workers participation in management.
Allowing workers to participate in decision making as a ways of increasing productivity was
considered vital by neoclassical theorists.
Behavioral scientists were interested in such areas
- Organization as social system
- Employee Motivation
- Democratic Leadership
- Two-way communication
- Employee Development
- Group psychology and Attitudes
- Human Importance in Machine system.
Modern Manage ment Theories
This stage of management is the rein of the refinement, extension and synthesis of the
classical and behavioral theories to management. A few of the streams of this approach are:
1) Quantitative approach
2) Systems
3) Contingency
Quantitative Approach
This theory of management can also be called management science or mathematical
operations research approach. It tries to offer systematic analysis and solutions to many
complex problems faced by management. New mathematical models and statistical tools are
applied in the field of management, particularly in decision making on complex problems.
Some of the quantitative models suggested are:
- Linear Programming – Technique managers use for resource allocation choices.
- Critical path method – Technique used by manager for work scheduling.
- Economic –Order-Quantity Model – Technique used to determine the optimum inventory
levels a firm should maintain.
- Queuing (waiting) live theory)
- Probability Theory
- Etc.
Quantitative approach helps to solve many managerial problems: such as
Production /work scheduling

34
 Inventory control
Replacement of capital equipment
Resource avocation choices
etc.
The above problems are often solved with the help of operation techniques and computers. As
management is multidisciplinary field, different field of study such as mathematics, statistics,
economics, etc. have contributed to the development and application of the quantitative
approach to management.
In general, management science represents the use of scientific methods to facilitate
managerial planning and decision making. However, quantitative approaches to management
are limited to their usefulness. They can't take final decision. They can merely suggest best
alternatives based on mathematical data. A mgr. has to decide whether or not to follow the
solutions suggested by these tools. Quantitative analysis can be valuable supplement rather
than a substitute for management.
The Systems Approach:-
During recent years, many management scholars and writers have emphasized the systems
approach to the study and analysis of management.
A SYSTEM is essentially a set or assemblage of things interconnected, interdependent, (so
as to form a complex unit with a purpose:) things that form a complex unity. It consists of
two or more parts, subsets, elements, and interacting together in order to form a whole. A
system has its boundaries, which it keeps its identity. These things may be physical such as
parts of an automobile, they may be biological such as like components of human body; they
may be theoretical, as is a set of concepts principles, theory, and techniques in an area such as
managing. All systems perhaps except the universe, interact with, and influenced their
environments although we define boundaries for them so that we can see them more clearly
and analyze them.
Key concepts in systems approach:
(i) Synergy:- tells us that the whole is more than the sum of its parts.
- a system can be open or closed.
(ii) Open system:- a system interacting with the environment
Closed system:- a system that does not interact with the environment.
(iv) Any system, probably with the exception of the universe, is the subset of another
larger system.

35
Contribution of systems approach to the development of mgt. thought:-
It calls attention to the dynamic and interrelated nature of organizations and the mgt. of
task.
It provides a framework within which we can plan actions and anticipate both immediate
and far-reaching consequences; at the same time, it allows us to understand unant icipated
consequences as they may develop.
With a systems perspective, general managers can more easily maintain a balance
between the needs of the various parts of the enterprise and the needs and goals of the
firm as a whole.
The systems approach to management attempts to view the organization as a unified,
purposeful system composed of interrelated parts. Rather than dealing separately with the
various segments of an organization the systems approach gives managers a way of looking
at an organization as a whole and as a part of the larger, external environment. In so doing
systems theory tells us that the activity of any segment of an organization in varying degrees
affects the activity of every other segments.
The Contingency Approach
The system approach forces managers to recognize that organizations are systems made up of
interdependent parts and that a change in one part affects other parts. It reeks to identify the
characteristics of jobs, people and organizations allowing managers to see the
interdependence between the various segments of an organization. The basic idea of the
contingency approach is that there is no one best way of managing planning, organizing,
staffing, leading and controlling) Rather, manages must find different ways to fit different
situations, method highly effective in one situation may not work in other situations. The
contingency approach seeks to match different situations with different management
methods.
Part Two: Managerial Functions
CHAPTER III
PLANNING
3.1 Nature & purpose of planning
Every human activity is undertaken with their to achieve something following planning.
Since man is gifted with the power of reasoning, he rarely does anything without weighing
the consequences of his action.
- The head of a family plans his expenditure

36
 - The housewife plans here daily chores,
- The students plan their studies
- Teachers plan their teaching work, etc
In the field of business, the need for planning is all the greater. This is because of ever-
growing competition, frequent fluctuations in demand, discovery of new products.
The new ways in which these can be used, and a worldwide scarcity of resources.
Planning is an activity, which is performed before any action is taken. The action we take is
based on the plan. Thus, it is anticipatory decision making a process and improve
performance. Planning allows integrated, consistent and purposeful action

Planning is the primary function of management. The chief function of management is to

attain the objectives of the enterprise. For this, it is to plan not only in the beginning but
throughout the operations. Planning involves deciding a best course of action from among a
number of alternatives which would help the enterprise to achieve its objectives most
expeditiously & economically.
3.1.1 What is planning?
Planning has as many definitions ad management, be which many authors gave to it.
However, these definitions are mutually supportive or complementary to each other. Several
of the definitions are:
Determining specified objectives & how to accomplish them.
The process by which managers set objectives, assess the future, & develop courses of
action to accomplish these objectives.
The process of preparing for change coping with uncertainty by formulation future
courses of action.
Planning is deciding in advance what to do, how to do it, when to do it, and who is to do
it.
Thus, it is clear from the various definitions given above that planning involves two things.
i) Determining the aims and objectives
ii. Selecting on the bases of past experience, present facts and circumstances and future
possibilities, the best course of action to realize the planning objective.
Planning involves selecting missions and objectives and the actions to achieve the; it requires
decision making, i.e., choosing future course of action from among alter natives. Planning is
determining in advance what is to be accomplished and how it is to be accomplished

37
Because planning paves the way for all down stream management functions, by serving as a
bridge between the present & the future, it is regarded as the primary function of
management.

3.1.2 Nature/Characteristics of Planning

(i) The Primacy of planning
The primacy of planning means that the function of planning precedes all other managerial
functions. Since the other management functions are performed to facilitate the achievement
of goals that are set in facilitate the achievement of goals that are set in planning process,
planning logically precedes all other managerial functions.

Although in practice all the managerial functions inter-match as a single system of action,
planning is unique in that it establishes the objective necessary for all group effort. And, of
course, all the other managerial functions must be planned if hey are to be effective. That is,
the managerial functions are inseparable, especially, planning and controlling are often
referred as the Siamese twins. This is because, controlling, by definition, is the comparison of
actual performance with the planned. It is the planned performance, which is controlled.
ii) Pervasiveness of planning
Planning is pervasive/universal in the sense that:
(a) It is the function of all managers regardless of the level they belong, the time spent on
planning the significance, the characteristic, etc.
(b) Planning exists in all organizations regardless of their type and size.
iii) Contribution to purpose & objective
This implies that the purpose of any plan and all its supportive & derivative plans is to
facilitate the accomplishment and the achievement of the purposes and the objectives of the
organization. Managerial planning seeks to achieve a consistent, coordinated structure of
operations focused on desired ends. Without planning, actions much become merely random
activity, producing nothing but chaos.
iv) Planning is directed towards efficiency
The efficiency of a plan is measured by its contribution to purpose & objectives, offset by the
costs and other unsought factors required to formulate & operate it. Plans are efficient if they
achieve their purpose at reasonable costs, when cost is measured not only in terms of time,
money, or production but also in the degree of individual & group satisfaction.
v) It concerns future activity

38
Since planning is deciding currently about the future, it involves forecasting and decision
making. The essence of planning is looking a head & is concerned with deciding in the
present what is to be done in the future.
vi) It has dynamic aspects (it is flexible & continuous)
A manager plans on the basis of some assumptions, which may not come true in the future.
Therefore, he had to go on revising, modifying and adjusting plans in the light of the
prevailing realities/circumstances. Thus, planning is not only the primary function of
management, but it is also a continuous function of management. Planning is flexible as it is
based on future conditions which are always dynamic.
In sum, every business plan must have the following characteristics: objectivity, futurity,
flexibility, stability, comprehensiveness, clarity & simplicity.
3.1.3 Importance/purpose of planning
i) To offset uncertainty:-
Future is always full of uncertainties and charges which make planning a necessity because
planning foresees the future and makes provisions for it thereby giving an added strength to
the organization for continuous growth and steady prosperity.
ii) To focus attention on objectives:-
Because, all planning efforts are directed towards achieving enterprise objectives, the very act
of planning focuses attention on these objectives. Well considered overall plans unify
interdepartmental activities.
iii) To gain economical operation:
Planning minimizes costs because of its emphasis on efficient operation and consistency. It
substitutes joint directed effort for uncoordinated piecemeal activity, even flow of work for
uneven flow, and deliberate decisions for snap judgements.
iv) To facilitate control
Planning and controlling are inseparable, and commonly referred to as the Siamese twins.
This is because; unplanned action cannot be controlled, for control involves keeping activities
on course by correcting deviations from plans. Any attempt to control without a plan would
be meaningless, since there is no way for people whether they are going where they want to
go (the task of control), unless they first know where they want to go (the task of planning),
plans thus furnish the standards of control.

Generally, a coordinated sense of action, managerial perspective, improved decision making,

increased efficiency, improve control & performance are also benefits of planning.

39
The Planning Process
The following are the steps that serve as a general model, which can be applied, with some
modification, to the planning processes of any organization. (Whether it is large or small,
profit making or not- for-profit.)
1. Identifying and defining the real problem
An awareness of opportunities in the external environment as well as with in the organization
is the real starting point for planning. We should take a preliminary look at possible future
opportunities and see them clearly and completely, know where we stand in the light of our
strengths and weakness, understand what problems we wish to solve and why, and know
what we expect to gain. Our setting of realistic objectives depends on this awareness planning
requires realistic diagnosis of the opportunity situation.
2. Establish clear-cut objectives
The next step in the planning process is to set objectives to the entire organization and to each
work unit, not only for long-term but also for the short range.
Objectives specify the expected results and indicate the end point of what is to be done,
where the primary emphasis is to be placed, and what is to be accomplished by the net work
of strategies, policies, procedures, rules, budgets, and programs.
3. Establishing the planning Premise
Premises are assumptions providing a background against which estimated events affecting
the plan will take place. They are assumptions about the environment in which the plan is to
be carried out knowledge of the organizations goods and existing condition provides a
framework for defining which aspects of the environment will have the greatest influe nce on
the organizations ability to achieve its objectives. The purpose of environmental analysis is to
identify ways to respond to changes in economic, technological, social /cultural & political/
and legal environments having indirect influence to the organizations plans, and for changes
direct influences which have extended on the organizations market, industry, suppliers,
competitors, or key resources and skills. Here, great consideration should be made to the
assumptions regarding the future. Therefore, the assumption and the constraints under which
plans are to operate should be clearly brought about/established.
4. Identify Alternative Courses of Action
The fourth step in planning process is to find alternative course of action. We may have a
number of alternatives and finding alternatives is not common problem, but reducing the
number of alternatives so that selecting the most promising may be analyzed which requires

40
the assessment of their probable consequences. Thus, the planner must usually make
preliminary examination to discover the most fruitful possibilities.
5. Evaluating Alternative Courses
After identifying the alternatives, the next logical step is to evaluate each and every
alternative by weighing them against in the light of the premises a nd goals. One course may
appear to be profitable but require a large each out lay with a slow pay back; another may
look less profitable but involves less risk; still another may better suit the company's long
range objectives but it is difficult to adapt it, etc. Therefore, make an adjustment for the
forecast plan if any; see if the cost, speed, and quality requirements are satisfied and if
mechanization expedites the work for the achievement of desired objectives in terms of each
possible course of action.
6. Selecting a course of action /best Alternative
After evaluating each alternative based in the goals and premises, the next step is to decide or
select the best course of action that will help efficiently achieve the organization objectives.
When we decide, we have to make sure that the plan possesses flexibility to adjust to varying
conditions, acceptance of the plan by operating personnel as well as the existing capacity of
the firm and need for new equipment, space personnel, training and supervision.
7. Formulating Derivative Plans
An arrangement of detailed sequence and timing should be made for the proposed plan. At
the point when a decision is made, planning is seldom complete and certain arrangements
should be made that support the basic plan of action chosen, that is, identification of the
derivative plans that support the major plan of action.
8. Numberizing Plans by Budgeting
After decisions are made and plans are set, the final step is to give them meaning that is to
numberize plans by converting them to budgets, this helps to establish verifiable targets of
achievement, to facilitate control and hear. The planner should be able to arrange for
sufficient reports and records over a reasonable period to be collected to inform proper
management members and measure results as well as what remedial action could be proposed
if results indicates weakness when plans are in action.
Skills Required In Planning
Skills required in planning are
(i) Forecasting
(ii) Decision Making

41
(i) Forecasting: is the attempt to predict outcomes and future trends that can serve as basis
for planning, by inferences from known facts. By relating the past and the present
information or data, management should be able to anticipate the future environment.
In developing premises, the kind of markets, volume of sales, prices, products, technical
developments, costs, tax rates, policies, policies related to dividends, the social and
political environment, long-term trends, etc of the future should be predicted with the
help of forecasting.

Effective planning is made with the help of forecasting because planning it self is a future
oriented course of action. *Accordingly, we have to assess the dynamism of both the
internal and external environment. When managers assess the alternative s, they try to
forecast how events both with in and outside the organization will affect each alternative
and what the outcome of each will be.
Forecasting Methods
We can use both qualitative & quantitative forecasting methods to predict future situations.
Qualitative Forecasting:- it is a judgement-based forecasting technique used when hard data
are scarce or difficult to use. It is appropriate when hard data are scarce or difficult to use. It
thus involves the use of subjective judgements and rating sche mes to transform qualitative
information into quantitative estimates. Example includes the jury of executive opinion,
market research and the survey of expert opinion.
Quantitative Forecasting:- It Is a technique used when enough hard data exist to specify
relation ships between variables. It is used when there is sufficient "hard" or statistical data to
specify relationships between key variables. Extrapolation forecasting, such as time-series
analysis, uses past or current trends to project future events. Sales records of the past several
years, for example, could be used to extend the sales pattern into the coming year. It
disregards political considerations, action of competitors, technologica l changes. It merely
depends on the past and current trends.
Quantitative forecasting can be used if information exists about the past, if information exists
about the present, if information exists about the present, if these information can be specified
numerically and if it can be assumed that the pattern of the past will continue. To the
contrary, inputs to qualitative forecasts are mainly the results of intuitive thinking,
judgement, and accumulated knowledge. However, it is believed that quantitative techniques
are generally more accurate than qualitative ones. To conclude, our forecasting should be
accurate, up to date, applicable and less costly as much as possible

42
(ii) Decision Making: is defined as the process of selecting or choosing based on some
criteria, the best course of action from a number alternatives. Because managers are
continually confronted with opportunities and problems, they must constantly analyze
the effect of different decisions on their organizations and select the alternative t hat will
move the firm toward its stated objectives.
Types of Decisions: Several authors believe that there are two types of decisions:
programmed & non-programmed decisions.
Programmed decisions: are the kinds that managers face time and again. These decisions are
"programmable" because of a specific procedure can be worked out to resolve them based on
experience in similar situations.
Once a standard procedure has been established, it can be used to treat all like situations.
They usually involve an organization's every day operational and administrative activities
They are primarily found at the middle and lower levels of management.
Data used in making a programmed decision usually are complete and well defined.
Participants know the details and agree on how to resolve the problem.
Non-programmed Decisions: are used to solve nonrecurring problems.
No well-established procedure exists for handling them, primarily because managers do
not have experience to draw upon.
In contrast to programmed decisions, available data are usually incomplete.
Non programmable decisions are commonly found at the middle and top levels of
management and often is related to an organization's policy-making activities such as
whether to add a product to the existing product line, to reorganize the company, or to
acquire another firm, are examples
The steps in decision making process include the following:
1. Ascertain the need for a decision/Identify the problem:
The decision making process begins by determining a problem exists; that is, there
is an unsatisfactory condition.
2. Establish decision criteria:
Once the need for a decision has been determined, there comes a need to establish
decision criteria which requires identifying those characteristics that are important in
making the decision.
3. Allocate weights to criteria

43
 the identified criteria should be weighted based on their importance and arranged in
priority. This is because some are obviously more important than others and we need to
weight each criterion to reflect its importance in the decision.
4. Develop Alternatives
This involves developing a list of the alternative that may be viable in dealing with
the stated problem.
5. Evaluate Alternatives
Once the alternatives are enumerated. The decision maker must critically evaluate
each one and identify the strong and weak points when compared against the criteria and
the weights established. In evaluating each alternative, we not only consider things that
can be measured in numerical terms such as time and various types of fixed & operating
costs, but also consider intangible or qualitative factors such as the quality of labor
relations, the risk of technological change or the international political climate.
6. Select the Best Alternative
After we evaluate the alternatives, the next logical step is to select the best
alternative that suits to solve our decision problem. In selecting the best alternative,
factors such as risk, economy of efforts, timing and limiting factors should be considered
adequately.
7. Putting Decision Into Action
After selecting the best alternative, we implement or put it into action. This requires
communication of decisions to subordinates, getting acceptance of the decisions, and
getting support and cooperation for converting the decision in to effective action. The
decision should be effective at proper time and in proper way to make the action effective
to achieve desired objectives.
8. Following up Decisions
Having implemented the decision, the manager should compare the results of that course
of action with the desired out come, if necessary, take corrective action. Since decisions
are made based on forecasts about the future, the best decision that we select may not suit
absolutely to achieve our objectives. Therefore, managers should adjust, modify or take
any other correctives if necessary.

Decision making situations

1. Decisions under certainty:- decisions made in which the external conditions are identified
and very predictable /when ever there is complete data & information/

44
2. Decisions under risk:- those decisions in which probabilities can be assigned to the
expected outcomes of each alternative
3. Decisions under uncertainty:- it is a case where neither there is complete data not
probabilities can be assigned to the surrounding conditions. Some conditions that are
uncontrollable by management include competition, government regulations,
technological advances, the overall economy, and the social and cultural tendencies of
society.
Types of Plans
Planning can be classified in different ways in different basis:-
1. Duration /Time dimension/
Some plans are in effect for short periods, where as others stretch decades into the future.
An important component of any plan is the planning horizon: i.e., the length of time the
plan specifies for activities to be implemented / the time that elapses between the
formulation and the execution of a planned activity. Hence, there are three planning
horizons that can be identified for classifying plans.
i) Short range plans:- a plan for a year or less one year
e.g. Annual plan of sales, revenue, production material requirement, operating
expenses budget.

ii) Intermediate range plans:- plan between a year and five years. P 5 years
e.g. Development of new products, modernization of facilities.
iii) Long range plans:- Plan for five or more years.
e.g. Long term leases on production or ware house facilities

2. Scope dime nsion

Planning can be classified in to two based on the scope or breadth of activities they represent.
a. Strategic Plans: These plans are comprehensive in scope & reflect long-term needs &
direction of the organization. Strategic plans/top management plans include the development
of over all company objectives. They are primarily concerned with solving long-term
problems associated with external, environmental influences. They establish the mission of
the organization. Strategic planning is a process that involves the assessment of market
conditions, customer needs, competitive strengths and weakness; sociopolitical, legal and
economic conditions; technological developments and the availability of resources that lead
to the specific opportunities or threats facing the organization

45
 Strategic plans include:-
1) Mission/purpose
2) Objectives
3) Strategies
1. Mission:- Every kind of organized operation has or at least should have, if it is to be
meaningful purposes or missions.
In every social system, enterprises have a basic function or task which is assigned to them
by society – This is the mission of the organization
e.g. The purpose of a business generally is the production & distribution of goods and
services.
2. Objectives/Goals:- The ends toward which activity is
Objectives are a desired future results
They represent not only the end of planning but the end toward which organizing,
staffing, leading and controlling are aimed.
While enterprise objectives are the basic plan of the film, a department may also have
its own objectives.
ORGANIZATIONAL OBJECTIVES
The setting of organizational objectives begins with the definition of mission. A mission is
the organization's reason for existence. It describes the organization's values, aspirations and
reason for being. A well-defined mission is the basis for development of all subsequent
objectives and plans. A mission statement - mission in writing - is used to guide managers,
work units, and individual employees throughout the organization: For instance, "to become
the nation's most profitable producer of children's shoes."
Once the organization's mission is articulated mana gers can begin developing specific
mission related objectives at every managerial level to reflect the responsibilities applicable
to each.
What is an Objective?
An objective is an end result upon which the existence of an organization depends. It is the
desired outcome organizations hope to attain eventually. An objective provides a standard for
the measurement of success. An objective helps determine technologies required and set the
basis for specialization of effort, authority pattern, communication and decision net- works
and other structural relationships.

46
 Managers are directly concerned with organizational objectives. Top managers
generally establish broad organizational objectives that help, relate the organization to its
environment. Managers, then, translate these broad objectives into operational objectives and
provide means of control to measure the extent of accomplishment. They must continually
deal with goal conflicts and find a means of satisfying the interests of many internal and
external individuals and groups.

Classification of Objectives
Objectives may be classified as strategic, tactical and operational or long-term, intermediate
and short-term. These classification is made based on the levels of decision making authority
and time the objectives cover.
Hierarchy of Objectives
Strategic Objectives
Strategic objectives are broad statements describing where the organization wants to be in the
future. They pertain to the organization as a whole rather than a specific department or
division. They focus on such issues as profitability, market positioning and managerial
performance and attitude and public responsibility.
Example: -to achieve a 10% net profit
- to improve market share 15-20% over next three years.
The top- level management has the responsibility and authority to make strategic objectives.
Tactical Objectives
Tactical objectives are set by the middle management level. These objectives define the
outcomes that major departments and divisions must achieve in order for the organization to
reach overall objectives. For example, a company may have a tactical objective of
"communicating in writing with clients and customers via, newsletter once a month." This
tactical objective is one part of achieving the strategic objective and of communicating
effectively with clients and employees.
Operational Objectives
Operational objectives are specified and measurable results expected from departments, first-
level managers, work groups and individuals within an organization. Examples:- Setting
daily, weekly and monthly sales targets for each product category, Process 200 sales
applications each week, Reduce overtime by 10% next month.
Time Frame Objectives

47
Time frame objectives imply that an organization's activities are guided by different
objectives depending on the duration of the action being planned.
Long-term Objectives These objectives extend up to 5 years. They must be accomplished to
ensure the long-term survival of the organization.
Intermediate Objectives These objectives cover a time period between the short-term
objectives and long-term objectives- probably 1-3 years.
Short-term Objectives These objectives can be accomplished in less than a year.
Characteristics of Sound Objectives
Specific and Measurable
Not all objectives can be expressed in numeric terms, but they should be quantified when
possible. Specific outcomes are easier to focus on than general ones, and performance can be
more easily measurable when the task is defined
Example:
- increasing profit by 5%
- decreasing scrap by 1%
- increasing average teacher effectiveness ratings from 3.5 to 3.7.
Challenging but Realistic
Objectives should be challenging but not unreasonably difficult, i, e, objectives should be
challenging but attainable, given the resources and skills available. The best objectives
require people to search their abilities. On the other hand, when objectives are unrealistic,
they set employees up for failure and lead to decreasing employee morale causing
demotivation. However, if objectives are too easy, employees may not feel motivated.
Cover Key Result Areas
Objectives cannot be set for every aspect of employee behavior or organizational
performance; if they were, their sheer number would render them meaningless. Instead,
managers should identify a few key result areas. Key result areas are those activities that
contribute most to company performance.
Example: focus on key results-sales, profits, production, or quality-that affect overall
performance.
Defined Time Period:
Objectives should specify the time period over which they will be achieved. A time period is
a deadline specifying the date on which objective attainment will be measured. The period
should be realistic and productive. Short-term objectives should complement long-term

48
 objectives. For example a strategic sales objectives could be established on a three-year time
horizon with a 100, 000 target in year one, 150,000 in year two and 200,000 in year three.
Linked to Reward
The ultimate impact of objectives depends on the extent to which salary increases,
promotions and awards are on objective achievement. People who attain goals should be
rewarded. Rewards given meaning and significance to objectives and help commit employees
to achieve objectives. However, attainment of objectives may fail due to variables outside of
the control of the employees. Still reward may be appropriate if the employee partially
achieved objectives under difficult circumstances.
Conflicts Among Objectives
The process of setting objectives must incorporate and integrate the interest of the forces in the
internal and external environment. The form and weight to be given to any particular interest
group illustrates precisely the nature of management’s dilemma. Some of the most common
objective setting trade-offs faced by managers in business organizations are:
1. Short - term profits versus long - term growth.
2. Profit margin versus competitive position.
3. Direct sales effort versus development effort.
4. Greater penetration of present markets versus developing new markets.
5. Achieving long-term growth through related businesses versus achieving it through
unrelated businesses.
6. Profit objectives versus nonprofit objectives (that is, social responsibilities).
7. Growth versus stability.
8. Low-risk environment versus high-risk environment.

Management must consider the expectations of the diverse groups on when the company’s
ultimate success depends. For example, present and potential customers ho ld ultimate power
over the company. If they are not happy with the price and quality of company’s product,
they withdraw their support (stop buying), and the company fails because of lack of funds.
Suppliers can disrupt the flow of materials to express d isagreement with the company’s
activities. Government agencies have the power to enforce the company’s compliance with
regulations. The existence of these interest and their power to affect the objectives of the
company must be recognized by managers.

49
 Studies of objectives that business managers set for their organizations confirm the
difficulty of balancing the concern of interest groups. These studies also suggest that the
more companies consistently emphasize profit – seeking activities that maximize the
stockholders’ wealth. This is not to say that successful companies seek only profit-oriented
objectives but rather that such objectives are dominant.

The satisfaction of human participants within companies another concern of managers

– in setting company objectives. Creating greater human satisfaction is a means for obtaining
better organizational effectiveness. On the other hand, many practices that are developed to
increase organizational effectiveness may create human dissatisfaction. For insta nce, a high
degree of task specialization may lead to technical efficiency but may also create employee
boredom and apathy.

Thus, organizational and human participant goals may be both compatible and
incompatible. Without minimum degree of compatibility organizations could not exist. But
total agreement is impossible and conflicts do exist. For these reason, managers should
develop objectives that can minimize the conflict between its organizational goals and human
participant (employee) goals.

The existence of multiple objectives differentiated by functions is also another source of

conflict. Organizations have multiple objectives resulted from the interaction and negotiation
among different organizational units. For example, in a company, the sales department’s goal
may be increase sales, the production department’s objective may be more efficient
production, and the research department’s goal may be the development of new products, the
Finance department’s goal may be reducing financial outflows. Maximizing the performance
of one functional department may lead to scarifying the goals of another department. This in
turn affects the rationality of goal structure of the company. Therefore, managers have to
implement these objectives according the priority of their importance. Besides, managers at
different level of positions should subject their objectives to the overall objectives of the
organization. This is to say that each objective of each functional unit is subjected to the
overall objectives of the organization.
Priority of Objectives
The phrase priority of objectives implies that at a given time, accomplishing one objective is
more important than accomplishing others. For example, to a firm having difficulty in

50
 meeting payrolls and due date on accountants, the objective of maintaining cash balance may
be more important than achieving minimum profitability. Priority of objectives also reflects
the relative importance of certain objectives regardless of time. For example, survival of the
organization is a necessary condition for the relation of all other objectives.

Managers always face alternative objectives that must be evaluated and ranked and they
must establish priorities if they want to allocate resources in a rational way. Managers of
non-business organizations are particularly concerned with the ranking of seemingly
interdependent objectives. For example, a university president must determine the relative
importance of teaching, research and service. Because determining objective and priorities is
a judgmental decision, it is difficult process.
Measure ment of Objectives
Objectives must be understandable and acceptable to those who will help to achieve them. In
fact, many people believe that specific, measurable objectives, increase the performance of
both employees and organizations and that difficult objectives, if accepted by employees,
result in better performance than do easier objectives. In practice, effective managerial
performance requires establishing objectives in every area that contributes to overall
organizational performance. Management expert Peter Drucker has stated that objectives
should be established in at least eight areas of organizational performance: (1) market
standing, (2) innovations, (3) productivity, (4) physical and financial resources,(5)
profitability, 6) manager performance and responsibility, (7) worker performance and
attitude, and (8) social responsibility. This classification in no way implies relative
importance, nor is it the only classification system available.

Drucker has observed that "the real difficulty lies indeed not in determining what objectives
we need, but in deciding how to set them.." This involves determining what should be
measured in each area and how it should be measured. Immediately, one can recognize the
difficulty of measuring performance in certain areas. For example, how can a manager
measure employee attitudes and social responsibility? The more abstract the objective, the
more difficult it is to measure performance.

Nevertheless, effective planning requires measurement of objectives. a variety of

measurements exist to quantify objectives in the eight areas that Drucker suggests.

51
Profitability Objectives
Profitability objectives include the ratios of (1) profits to sales, (2) profits to total assets, and (3)
profits to capital (net worth). The tendency in recent years has been to emphasize the ratio of
profits to sales as an important measure of profitability. Both quantities in this ratio are taken
from the income statement, which management generally regards as a better test of
performance than the balance sheet.

However, other managers believe that the true test of profitability must combine the income
statement and the balance sheet. These managers would use either the profit-to-total-asset
ratio or the profit-to-net-worth ratio. Which of these two measures is preferred depends on
whether the source of capital is an important consideration. The profit-to-total-asset ratio
measurer management's use of all resources, regardless of origin (that is creditors or owners).
The profit-to- net-worth ratio measures how management used the owner's contribution.

The measures are not mutually exclusive. All three ratios are profitability objectives because
each measures and therefore evaluates different yet important aspects of profitability.

The purposes of profit are to measure efficiency, recover one cost element of being in
business (return on invested capital), and provide funds for future expansion and innovation.
The minimum profitability is that which ensures the continuous stream of capital into the
organization, given the inherent risk of the industry in which the organization operates.

Marketing Objectives
Marketing objectives measure performance relating to products, markets, distribution, and
customer service objectives. They focus on the prospects for long-run profitability. Thus,
well- managed organizations measure performance in such areas as market share, sales
volume, number of outlets carrying the product, and number of new products developed.

Productivity Objectives
Productivity is measured with ratios of output to input. Other factors being equal, the higher the
ratio, the more efficient is the use of inputs.

Drucker has long proposed that the ratios of value added to sales and to profit are the superior
measures of productivity. He believes that a business's objective should be to increase these

52
 ratios and that departments in the firm should be evaluated on the basis of these increases.
The argument for value

Table 3.1 Selected Measures of Objectives

Management must Objective Possible Measures

decide Which profitability 1. Ratio of profit to sales.
measures to use to 2. Ratio of profit to total assets.
indicate whether 3. Ratio of profit to capital.
objectives are
being achieved. Marketing 1. Market share.
2. Sales volume.
3. Rate of new product
development.
4. Number of outlets.

53
 Productivity 1. Ratio of output to labor costs.
2.Ratio of output to capital costs.
3. Ratio of value added to sales.
4. Ratio of value added to profit.

Physical and 1. Current ratio.

Financial 2. Working capital turnover.
3. Ratio of debt to equity.
4.Accounts receivable turnover.
5. Inventory turnover.

added is that it measures the increase in value of the purchased materials due to the combined
efforts of the firm, since value added is equal to the difference between the purchase price
and the market value of materials and supplies. In this way, the efficiency of the firm's efforts
is measured directly. This measure of productivity also could be used for comparisons among
the individual departments in the firm.
Physical and Financial Objectives
Physical and financial objectives reflect the firm's capacity to acquire resources sufficient to
achieve its objectives. Measurement of physical and financial objectives is comparatively
easy since numerous accounting measures can be used. Liquidity measures such as the
current ratio, working capital turnover, acid-test ratio, debt-to-equity ratio, and accounts
receivable and inventory turnover can be used in establishing objectives and evaluating
performance in financial planning.

Other Objectives
Objectives for profitability, market standing, productivity, and physical and financial resources
are amenable to measurement. Objectives for innovation, employee attitudes, manager
behavior, and social responsibility are, however, not so easily identifiable or measurable in
concrete terms. This is important because, without measurement, any subsequent evaluation
is inconclusive. For example, a vaguely stated objective such as "to become more socially
responsible" is virtually impossible to evaluate, whether or not it is accomplished. Selected
measures of objectives are summarized in Table 3-1.

54
 Table 3.2 The Development of Objectives

Management can Objective Possible Secondary Possible Indicators

subdivide some objectives
objectives and 1. Achieve a 15 a. Earn maximum Interest income.

develop fairly percent return return on idle

specific indicators on investment. funds.
of achievement.
2. Maintain a 40 a. Retain 75 percent Percent replacement
percent share of old customers. purchases.
of the market. b. Obtain 25 percent Percent initial
of first-time purchases.
customers.

3. Develop middle a. Develop a merit Report submitted on

managers for review system November 1.
executive by year-end
positions. b. Select 10 managers Number selected by
to attend industry January 1.
sponsored executive
school.

4. Help to ensure a. Reduce air pollution By April 1,pollutants

that clean air is by 15 percent. to be 125 pounds/
maintained in all hour measured at
geographical areas stack by
in which the firm electrostatic.
has plant locations.

5. Provide working a. Automate loading Installation to be 50

conditions that process in plant B. percent complete
constantly exceed January 1.
industry wide b. Reduce in-plant Ratio of labor days

55
 safety levels. injuries by 10 lost to total
labor d percent by year-end. days.

6. Manufacture all a. Increase productivity Installed by

August 1.
products as by 5 percent through Ratio of output
to
efficiently as installation of new total labor hours.
possible punching machine.

7. Maintain and a. Improve employee Ratio of quits to

improve employee satisfaction levels total employees.
satisfaction to in all functional Attitude survey
levels consistent areas by 15 percent questionnaires
with those in our by year-end. administered to all
own and similar employees.
industries.
7. Management by Objectives(MBO)
Management by objectives was first popularized by management expert Peter Drucker. MBO
addresses the need to involve managers at all levels in the goals setting process. MBO may
be defined as a process whereby the superior and the subordinate managers jointly establish
objectives, define areas of responsibility interms of expected results, and use these measures
as guides for operating the unit and assessing the contribution of each member of the
organization. The essence of MBO is the practice of goal setting at every level of
management. MBO, programs are designed to improve emplo yees’ motivation through their
participation in setting their objectives and knowing in advance precisely how they will be
evaluated. MBO usually results in employees more committed to the achievement of the
objectives than they may be if they were not involved in setting them.

While employees are working toward the accomplishment of their objectives,

managers (supervisors) should hold periodic review sessions. A supervisor may authorize
modifications to the objectives or their timetables as circumstance dictate. At the end of
agreed time period, the manager and subordinate hold a final review session to evaluate the

56
 results and repeat the process. The subordinate is evaluated on the basis of whether the
objectives were accomplished, how effectively and efficiently they were achieved and what
was learned in the process. Rewards are usually linked to each of these elements.

Steeps in MBO Process

Since MBO is a method whereby managers and employees define goals for every department,
project, and person and use them to monitor subsequent performance, it involves the
following steps:
1. Setting goals
- A goal that should be concrete, realistic that provide a specific target and time frame
and assign responsibility.
- Goals that can be quantitative – described in numerical terms or qualitative expressed
with the use of statements.
2. Developing action plans
- An action plan defines the course of action and resources needed to achieve the stated
goals. An action plan is a detailed plan made for both departments and individuals.
3. Reviewing progress
- A periodic progress review is important to insure that action plance are working. This
review can occur informally between managers and subordinates, where the
organization may wish to conduct three, six or nine month's review d uring a year.
This periodic review allows managers and employees to see whether they are on
target or whether corrective action is necessary.

4. Appraising overall performance

- Careful evaluation should be made to see whether annual goals have been achieved
for both departments and individuals. Success or failure to achieve goals can become
part of the performance appraisal system and the designation of salary increases and
other rewards. The specific application of MBO must fit the needs of each company.

The benefit of MBO is the linking of objective setting with individual motivation. Since the
employee participates in own goals setting there is commitment to them. Improved morale
may also result regular face-to-face communications between subordinates and superiors.
Furthermore, appraisal is more objective since subordinates are evaluated on the extent to
which their goals have been met. It forces think for results.

57
Proble ms with MBO
MBO may fail due to one or more of the following problems.
1. Lack of adequate resources: It has to be made sure that a person who is held responsible
for results has access to the resources needed to achieve them.
2. Since every manager at every level runs his/her own objectives, there may not be support
and involvement by top management.
3. Lack of optimal coordination - because every one strive for the attainment of his/her own
unit goals.
4. Over emphasis on appraisal.
5. Over emphasis of paper work.
6. Failure to teach the philosophy of MBO.
7. Failure to give guidelines to goal setters.
8. Difficulty of setting verifiable goals.
9. Emphasis on short-term objectives strategic goals may be displaced by operational goals.
10. Constant change prevents MBO from taking hold.
11. Strategies:- derived from Greek word 'strategos', meaning 'general'
Def. (i) General programs of action and deployment of resources to attain
comprehensive objectives
(ii) The program of objectives of an organization and their changes, resources
used to attain these objectives, and policies governing the acquisition, use,
and disposition of these resources and
(iii) The determination of the basic long-term objectives of an enterprise and the
adoption of courses of action and allocation of resources necessary to achieve
these goals
Generally, it is concerned with the direction in which human and material resources which
human and material resources will be applied in order to increase the chance of achieving
selected objectives.
It is the choice of the means by which the enterprise's forces may be employed most
effectively in order to accomplish its intended goal.
Strategy indicates the pattern of the organizations response to its environment overtime;
i.e., strategy links the human and material resources of an organization on one hand, with
the challenges & risks posed by the outside world on the other.
Operational /Tactical plans:-

58
 These are plans used to implement strategic plans
These plans are more limited in scope & address those activities & resources required
to implement strategic plans.
these tactical plans deal more with the allocation of resources & scheduling of actual
work activities than with the selection of strategies.
Based on their use dimension these plans can be classified in to
(i) Single use plans
(ii) Standing plans
Standing Plans- are used to guide activities that occur over a period of time. These are
plans that are designed to be used again and again.
Standing plans exist in the form of
a) Policies
b) Procedures/ Standard operating procedures
c) Rules & Regulations
a) Policies:- these are standing plans in that they are general statements or understandings
which guide or channel thinking in decision making.
Policies define an area with in which a decision is to be made and ensure that
the decision will be consistent with, and contribute to, an objective.
They allow some discretion / freedom
Policies help decide issues before they become problems. E.g. hiring policy-
"All employees of the organizations must have a college degree/diploma,
Purchasing policy
Procedures:- are standing plans that establish a required method of handling future activities.
They are guides to action rather than thinking
are plans that describe a series of action to be taken in a given situation.
Their essence is chronological sequence for a required action.
Companies have hundreds of procedures for example, telling how to perform a job.
e.g. – Many companies have a policy of a least partially reimbursing their employees for
educational expenses. When this occurs the employee will have to follow a set
procedure in order to be reimbursed.
He/she may have to fill a form
attach a copy of his/her grades
take both documents to personnel for processing

59
 Wait for the check in the mail.
Rules and Regulations:- are plans that describe exactly how one particular situation is to be
handled.
are statements of actions that most be taken or not taken
rules are must restricting device
There is no room for flexibility

e.g. No smoking at an employee's desk or

All employees must be at their desks at 8:00 A.M. in the morning.
Where policies and procedures provide guidelines for decision making, rules & regulations
are statements that designate specific required action. Rules and regulations are the most
explicit and specific forms of & standing plan procedures are different from rules &
regulations in that they designate specific steps one is to perform in a situation. Policies
provide a room for discretion for our decision but rules do not allow any discretion in their
application.

Single Use Plans

Single use plans are plans that are used once, and then discarded. This type of plans is
designed to meet the needs of a unique or single situation; such as for special project or
task. These plans are formulated to achieve a specific goal & usually with I n a shorter
period of time. Non- repetitive unique situations call for the formulation of single use
plans. They are also called one-time plans. under these plans, we have
1- Program (project)
2- Budget
A. Program:- Programs are a complex of goals, policies, procedures, rules, task assignments,
steps to be taken, resources to be employed and other elements necessary to
carryout a given course of action; they are ordinarily supported by budgets.
A program is a comprehensive plan that includes future use of different
resources in an integrated pattern and establishes a sequence of required
actions, time schedules for each in order to achieve stated objectives.
It covers a relatively large set of activities such as
(i) The major steps required to reach an objective

60
 (ii) The organization unit or member responsible for each step; and
(iii) The order and timing of each step.
Budgets:- are statements of expected results or resources set aside for specific activities
expressed in numerical or quantitative terms.
They are primary devices to control an organization activities and are thus
important components of programs and projects.
It is referred to as a "Numberized" plan /program
It is a single use plan that specifics allocation of financial resources required
to support specific activities with in a given time period.
Budgets are important devices for controlling activities by setting limits on
the amount of expenditures.
A budget may be expressed either in financial terms or in terms of labor hrs,
units of products, machine hours, in any other numerically measurable term.

(1) Variable plans:- Which state figures in terms of ranges to allow for the uncertainty of
the environment. For instance, the time estimated to complete a phase of a project
might be stated as "three months plus or minus one week." Its advantage is that one
can easily estimate the effect on the organization of different levels of operations.
(2) Alternative plans:- plans which are similar to variable plans in recognizing
environmental uncetainties, but in this case the planner sets up two or more entirely
separate plans. The plan that is finally chosen is the one that most closely accounts for
the circumstances that arise.
(3) Supplementary Plans: A third type of flexibility can be obtained through
supplementary plans. Although the basic plan may set a firm ceiling all expenditures
in a given area, the plan allows for the manager (the responsible unit) to request
further resources should they latter weded. supplementary plans reduce the
constraining effect of the original plan by providing a prearranged appeal channel.

Plans can also be classified on the basis of regions or geographic feasibility. For
instance, an organization, which operates on diverse regions, may formulate different
plans for each region or territory of operation that would help the overall achievement
of organizational objectives.

61
 CHAPTER IV

ORGANIZING

Objective - To provide students with general guidelines about organizing.

- Its role for the achievement of organizing objectives
- Nature or characteristics of organizing.
- To give high light about organizational relationships
(Line Vs staff and formal Vs informal relationships)

Meaning and Definition:

The management process starts from planning; i.e., in planning, objectives that are going to
be achieved are identified / established and courses of action have been determined. Then, the
manager continues his activities by giving practical shape to the activities/works to be
performed identifying the roles where by workers are supposed to play, and making known to
the group what their duties and responsibilities are therefore, to design and maintain such
systems of roles is the managerial function of organizing.

To begin with the definition of organizing, there is no universally accepted definition of

organizing. Different authors gave various but supplementary definitions. Among others the
following are a few:

62
- It is the establishing of effective behavioral relation ships among persons so that they
may work together efficiently and gain personal satisfaction in doing selected tasks
under given environmental conditions for the purpose of achieving some goals and
objectives.
- It is one of the functions of management, the one concerned with choosing what tasks
are to be done, who is to do them, how the tasks are to be grouped, who is to report to
whom and where decisions are to be made.
- It is the grouping of activities necessary to attain objectives, the assignment of each
grouping to a manager with authority to supervise it, and the provision of co-ordination
vertically and horizontally in the enterprise structure.
- It defines the part, which each member of an enterprise is expected to perform and the
relation between such members to the end that their consorted endeavor shall be most
effective to the purpose of the enterprise.
- Organizing is the part of managing that involves establishing an intentional structure of
roles for people to fill in an organization.

Hence, it is a function of identifying, classifying, grouping, and assigning various activities and
prescribing authority relationships to create an organism or structure capable of accomplishing
predetermined objectives.
Organizing involves,
i) The identification and classification of required activities necessary to attain
objectives.
ii) The grouping of activities necessary to attain objectives.
iii) The assignment of each grouping to a manager with authority necessary to supervise
it.
iv) The provision for co-ordination horizontally and vertically in the organizational
structure.

Nature /characteristics/ basic concepts in organizing

Division of Labor/specialization/
In small organizations, just having three or four employees, each of them do a certain job at
different time; for example a tea room having an owner manager and two waiters can make
tea, wait on customers, treat them, collect money and perform all other duties required in a
business. but as the firm grows, people must be assigned specific tasks in which they

63
specialize. This process is called division of labor or specialization. It involves breaking
down of a task in to its most basic elements, training workers in performing specific duties,
and sequencing activities so that one person's effort build on another's.

Advantage:
- It enables a person performing a task to become highly proficient at it in relatively short
time and these results in increasing efficiency in productivity.
- It saves time that is always lost in changing from one job to another.
- There is less waste of materials in the learning process when division of labor is used.
Disadvantage:
- The boredom (boring) and fatigue caused by monotonous, repetitive tasks.
- The specialist lacks job enrichment
Coordination:
- It is the establishment of proper and adequate relationships between an employee and
his work, one employee to another or to the group, and one department or sub-
department and another. Managers, to promote co-ordination, in addition to other
methods, use MBO program. This helps managers and subordinates to approach and
decide in common about the objectives to be achieved and the actions to be taken.
Failure to establish such relationships may result in different persons (or departments)
pursuing different paths, thus making difficult for the enterprise to achieve its goals.
Accomplishment of Objectives:-
The organization structure, the result of organizing, is bound together by the pursuit of
specific and well-defined objectives. This is not typical for organizing function, all
managerial functions should bound together for the achievement of predetermined
objectives.

Authority & Responsibility Relationships:

Authority is the right to command subordinates action. It is defined as the legitimate power a
manager possesses to act and make decisions in caring out responsibilities. Responsibility is
the obligation of the manager to carry out assigned duties.

Thus, the organization structure; the result of organizing, should consist of various
positions arranged in a hierarchy with a clear definition of authority and responsibility.

64
Formal Organization: The organizing function results in an intentional formal organization
structure of roles in a legally and formally organized enterprise.
Communication:
It is the transfer of information among people to achieve organizational goals. Successful
communication is good for business and for us too. Every organizing function should be able
to create an organization, which has its own channels and methods of communication.

Since management is concerned with working with people and unless there is
common understanding between people, goals cannot be achieved; effective communication
is vital for management. Channels of communication could be formal, informal, upward,
downward or horizontal.
The process of Organizing
Organizing function can follow the following steps.
(1) Determine tasks /activities necessary to attain objectives
(2) Create jobs and define their duties and responsibilities.
(3) Group jobs in to practical units/departments based on similarities,
importance, who will do the work, etc.
(4) Create authority/reporting relationships
(5) Delegate authority
Important Ele ments of Organizing Process
i) Departmentation
ii) Delegation
iii) Decentralization

i) Departmentation:
Departmentation is a part of the organizing process. In the context of management, it means
dividing and grouping the activities and employees of an enterprise into various departments.
All organizations divide their overall operations in to sub activities and combine these sub
activities in to working groups. This grouping process of specialized activities in a logical
manner is called Departmentation. It implies the division of the total work of an enterprise
into individual functions and sub functions. Then, either on the basis of similarity of work,
or efficiency, these various functions or sub-function are grouped together into work units.
The work units so formed may b called departments, divisions, units, or any other name.
It results:

65
 In division of work
In organizational units to be manageable size and
Utilization of managerial ability based on specialization to secure maximum results.
The basic need of departmentation arises from the limitation on the number of subordinates
that can be directly managed by a superior. If there is no departmentation, it would seriously
put limitations on the size of the organization.
Span of Management /span of control/- refers to the number of subordinates that a single
manager can directly, immediately and effectively supervise. It is related to the levels. We
can have wide span, which is associated with few organizational level; and a narrow span
which results in many levels.

Organizations with wide span

Advantage: Disadvantage:
Supervisors are forced to delegate Tendency of overloaded superiors to become
Clear policies must be made decision bottlenecks.
Subordinates must be carefully selected Dangers of superior's loses of control
Requires exceptional quality of managers.
Organizations with narrow span

66
Advantages: Disadvantage:
Close supervision Superiors tend to get too much involved in subordinate's work
Close control Many levels of management
Fast communication between High costs due to many levels
subordinates and superiors Excessive distance between lowest level and top level.

Departmentation makes organizations to expand to an indefinite degree.

It also helps increasing efficiency of organization in the following ways:
Specialization
Fixation of responsibility
Feeling of autonomy
Development of management
Facility in appraisal
The Bases of Departme ntation
The most common bases of departmentation used by organizations are:
Functional Departmentation
Product Departmentation
Geographic / Territorial Departmentation
Customer Departmentation
Process Departmentation
Matrix /project/ and task force
Functional Departmentation:
Functions refer to the various responsibility areas of an organizational component. It is the
process of grouping the organization's activities in to units in logical manner on the basis of
essential functions that must be performed to attain organizational objectives/goals.
These functions include marketing, finance, operations, manufacturing personnel,
engineering etc.

67
 CEO/President
General Manager

Marketing Finance Manufacturing Personnel

Advantages:- It is logical, scientific and time-tested method because it groups like or similar
activities together which facilitates specialization. (efficiency is fostered through
specialization.)
- It makes supervision easier, since each manager is an expert in only a narrow range of
skills.
- Tight control of all functional units is assured, because the top managers are responsible for
the end results.
- It simplifies training.
Disadvantage:
- People in a functional department may lose sight of the overall operations of the business;
it in turn invites employees to de-emphasize the overall company objective.
- Workers may develop highly specialized skills, but not general managerial abilities.
Consequently, functional Departmentation is not an ideal training ground for top level
managers.
- Although there is strong relationship between with in a function, co-ordination between
functions is reduced.
- Sometimes conflict develops among departments as each unit competes for resources.
- The geographic area served; or the type of product or product line produced may require a
different type of Departmentation.
- Responsibility for profit is at the top.
Despite its disadvantages, it is widely used by various managers.
2. Product Departmentation
It is the grouping of activities on the basis of product or product line. It is adopted by
(commonly used by) manufacturers who produce and sell a number of product lines made up
of several different items; such as drug, food, clothing, machines, automobiles. etc.
e.g. Product Departmentation of an automobile management enterprise.
General Manager

68
 Car Division Truck Division Bus. Division

Production Marketing

Finance Personnel

Advantage:
- It enables the enterprise to focus attention effort on product lines, making it easier for to
management to see the efficiency and effectiveness of production determining which
product is profitable or not.
- It improves co-ordination between functions relating to a particular product.
- Furnishes measurable training ground for general managers.
- Facilitates use of specialized capital, facilities, sk ills and knowledge.
Disadvantages:
- Requires more persons with general manager abilities.
- There is an ever-present danger of duplication of activities.
- It presents increased problem of top management control.
3. Departmentation by Geographical Area/Territory
It is often referred to as area or territorial Departmentation, and it groups business activities
on the basis of geographic region or territory, enabling a firm to adapt to local customs and
laws and to survey customer more quickly. It is especially attractive to large-scale firms or
other enterprises whose activities are physically or geographically dispersed.
President

Western Region Southern Region Central Region Eastern Region

69
 Engineering Production Accounting Sales

Advantages:
- Results in great saving in time and money. The enterprise can benefit from lower freight,
lower rents and lower labor costs. Thus, it takes advantages of economics of local
operations (places emphasis on local markets and operations)
- Places responsibility at lower level (There will be quick decision.)
- Places measurable training ground for general managers.
- Better face to face communication with local interests.
Disadvantages:
- Requires more persons with general manager abilities /it is costly to implement./
- Duplication of effort
- Increase problem of top management control (This is because of having flat span of
management.)
Sometimes, the decision to set up geographic departments is based on economic
considerations; such as, transportation costs for raw materials, for distribution, etc.
4. Custome r Departmentation:
It is the grouping of enterprise activities based on customers' interests. Companies that must
provide special services to different groups set up departments by types of customers, using
customer departmentation. For example, a manufacturer may have both an industrial products
division for its industrial customers and consumer products division for other consumers. An
airlines company may make departments its selling departments for travelling agencies,
government passengers, tourists and other customers. Normally, setting up departments by
customers is not a primary form of departmentation. It is used instead within some other
framework.

General Manager

Production Marketing Finance Personnel

Whole Sale Retail Installment Export

Advantages:

70
- Encourages concentration on customer needs
- Giving customers feeling that they have an understanding supplier
- Develops expertise in customer area.
Disadvantage:
- May be difficult to coordinate operations between competing customer demands.
- Requires managers and staff expert in customer's problems
It may result in under utilization of resources in some departments.
- Customer groups may not always be clearly defined.
There may be duplication of activities.

5. Process or Equipment Departme ntation

It is the grouping of enterprise activities according to the products' manufacturing process.
This method of departmentation is logical and used when the machines or equipment used
require special skill for operating and are of large capacity which eliminate organizational
diving or have technical facilities which strongly suggest a concentrated location. For
example, a textile factory. may be classified in to Spinning, Walling, processing, etc.
- Economic and
- Technological considerations are the foremost reasons for adopting process
departmentation.
- It is mostly found in production departments.

71
 President

Production Manager

Spinning Dyeing Weaving Processing

Advantage: Disadvantage:
- Achieves economic advantage - Coordination of departments is difficult
- Uses specialized knowledge - Responsibility for profit is at the top
- Simplifies training - It is unsuitable for developing general managers
- Sues specialized technology

6. Matrix Departmentation
- It is an organizational arrangement that developed because of the need for quick
completion of highly technical projects that required significant contributions by two or
more functional groups.
- It begins with functional stricture and then another structure organized by product or by
client /customer or by project is overlaid upon the original structure.
- The result is that employees are assigned to a basic functional department and, at the
same time, they are assigned to work on a particular product/project or for a particular
customer/client.
- The essence of matrix organization normally is the combining of functional and product
departmentation in the same organization structure.

72
 President

Production Manager

Marketing Production Engineering Finance

Project A Marketing Production Engineering

Manager Specialist-1 Specialist-1 Specialist-1

Project B Marketing Production Engineering

Manager Specialist-2 Specialist-2 Specialist-2

Advantage Disadvantage
Since there are a number of managers, there are Conflict in organization authority exists (it lends
more channels of information it self to power struggle.
It is oriented toward end results. (The project Possibility of disunity of command exists
objectives are clear.) It also /results in higher over head costs because
Professional identification is maintained. more managerial positions are created.
Resources are used efficiently because workers Requires manager effective in human relations.
are assigned to different projects as needed and
groups or projects can share equipment.

Delegation:
Because of human limitation, a single person can't do all tasks necessary for accomplishing a
group purpose. By the same taken, as enterprises grow, it is difficult for one person to
exercise all the authority for making decisions. To solve these problems managers share their
authority and responsibility to their subordinates which is delegation.
Managers get things done through other people. Since top managers cannot personally
oversee all the activities of an organization, they delegate authority to their subordinate
managers. It is this delegation of authority that gives subordinate managers the means with
which to act.

Definition: It is the act of assigning formal authority and responsibility for completion of
specific activities to a subordinate.

73
 Delegation is the assignment to another person of authority and responsibility to carry out
specific activities.
Delegation is the process of allocating tasks to subordinates giving them adequate
authority to carry out those assignments and making obligated to complete the tasks
satisfactorily.
To delegate means to entrust authority to a deputy so as to enable him to accomplish the
tasks assigned to him.

The Importance of Delegation:

It frees a manager from some time-consuming duties that can be adequately handled by
subordinates and lets the manager devote more time to problems requiring his/her full
attention.
Decisions made by lower level managers are more timely than those that go through
scalar layers of management.
Subordinate managers can reach their full potential of and only if they are given the
chance to make decisions and to assume responsibility for them.

Delegation process involves;

1. The allocation of duties:-
Duties are the tasks and activities that a supervisor desires to have someone else do.
Before authority can be delegated, the duties over which the authority rests must be
allocated to a subordinate.
2. The delegation of authority:-
The essence of the delegation process is empowering another person to act for the
manager. This is a passing of formal rights to act on behalf of another.
3. The assignment of responsibility:-
When authority is delegated, we must assign responsibility. That is, when one is given
"rights", one must also be assigned a corresponding "obligation" to perform. To allocate
authority without responsibility creates opportunities for abuse, and of course, no one
should be held responsible for what he/she has no authority.
4. The creation of accountability:-

74
 To complete the delegation process, the manager must create accountability; that is,
subordinates must be held answerable to properly carryout their duties. They must accept
credit or blame for their action. So while responsibility represents a subordinate's
obligation to carryout what is assigned, accountability is the obligation to his or her
superior to carry out the assignment in a satisfactory manner. Subordinates are
responsible for the completion of tasks assigned to them and are accountable to their
superiors for the satisfactory performance of that work.
Obstacles to Effective Delegation:
It takes two parties for delegation to be effective, a manager willing to delegate and a
subordinate willing to accept operating responsibility. Either party can be an obstacle to
effective delegation.

Management Obstacle
There are, nevertheless, several reasons why managers hesitate to delegate authority to
subordinates.
Some managers feel the need to be in total control of every aspect of the organization
Others lack confidence in their subordinates
Fear the consequences of having subordinates make decisions
Subordinate Obstacles
In some cases / instances, subordinates are reluctant to assume an equa l amount of
responsibility because of either of the following reasons.
Subordinates usually feel that making decisions is the boss's job.
Subordinates fear criticisms for making bad decisions
Subordinate managers do not have enough factual information on which to base a
decision.
Subordinates are already overworked
Subordinates lack self-confidence.
There is a lack of incentive or reward for assuming a greater workload.
Decentralization
Decentralization is the opposite of centralization. In a centralized set up, decision making
authority is concentrated in a few hands at the top. Contrary to this, is a decentralized
organization, there is dispersal of decision making authority.
Definition:

75
It is the tendency to disperse decision- making authority in an organized structure. It is a
fundamental aspect of delegation, i.e., to the extent authority is not delegated, it is
centralized.
Reasons for Decentralizing:
(i) One major reason for decentralizing is to tap the knowledge and expertise
of managers, it provides the basis for greater innovation. It does so because it allows
for the utilization of specialized knowledge. Additionally, it provides greater
flexibility for the organization to respond to new ideas and test them.
(ii) To enable the organization to respond to a social environment faster.
(iii) To help participate non- managerial employees in decision making process,
consequently, it can increase such employees' performance and commitment to decisions
and promote better overall relations between non- managerial employees and managers.
Advantages:
Relives top management of some burden of decision making and forces upper level
managers to let go.
Encourages decision making and assumption of authority & responsibility.
Gives managers more freedom and independence in d ecision making.
Makes comparison of performance of different organizational units possible.
Promotes development of general managers.
Aids in adaptation to fast changing environment.
Limitations of Decentralization:
It increases the chances that a lower- level manager will take undesirable action.
It decreases control and monitoring of subordinates' activities and also may hinder co-
ordination between diverse units.
Makes it more difficult to have a uniform policy.
Can be limited by the availability of qualified managers.
Involves considerable expenses for training managers.
Organizational Relationships
Formal and Informal organizations & their relationships
The design (framework) of an organization can be divided into two categories: The formal
and informal organization.
Formal Organization:
It is an organization, which is established with intentional structure of roles in a formally
organized enterprise. It is one, which is drafted by top management. It is the organization

76
 structure, which defines everything clearly, and explicitly. It is consciously, deliberately,
and rationally designed by management to achieve predetermined objectives.

Thus, formal organization has the following important points:

It is consciously brought in to existence for the achievement of predetermined objectives.
Authority and responsibility are clearly defined.
The line of communication is also formalized (It is shown in organization charts)
The relationship of the superior and the subordinate is fixed. (it is deliberately
impersonal it is bureaucratic in nature and operated by the rules & regulations; personal
issues are not entertained.)
It exists in a written form.
Informal Organization:
- It is a network of personal and social relations not established or required by the formal
organization but arising spontaneously as people associate with one another.
- It is undocumented and officially unrecognized relationship between members of an
organization that inevitably emerges out of the personal & group needs of employees. It is
an organization, which consists of small social groups and friendly associations with in
the formal organization. It is genuine that whenever formal organizations are formed,
informal social groups are created within its framework. such groups are created on the
basis of similarity of status, interests, beliefs, attitudes, back grounds, etc.

Such small groups are results of the need of people for social interaction, & for friendly
associations. They affect the formal organization positively or negatively, however,
management neither create nor abolish them. Therefore, managers should learn how to live
with it, how to influence it, and how to direct its energy and initiative towards constructive
channels.

Managers, to deal with informal organizations the following general suggestions are helpful:
- Managers accept and understand the informal organizations
- Consider possible effects on informal organizations when they take any action.
- Integrate, as far as possible, the interests of informal groups with those of the
formal organization.

Line and Staff Relationships

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The concept of line and staff is related to authority and positions/functions.
Line and staff authority
This is the relationship between different types of authority exercised by managers of an
organization. These three forms of authority are called line staff and functional authority.
Line authority: the authority of those managers directly responsible, throughout the
organization chain of command, for achieving organizational goals. It enables a manager to
tell subordinates what to do. This authority is represented by the chain of command, which
links superiors and subordinates from top to bottom in an organizatio n. Both line and staff
managers have line authority over their subordinates.
Staff authority: The authority of those groups of individuals who provide line managers with
advice and services. People in staff positions assist and advise line managers. They relieve
some of the line managers' burdens by giving them the information they need to make
operational decisions. People in these positions have the authority to offer advice and make
recommendations; they have staff authority.
Functional Authority: The authority of staff department members to control the activities of
workers of other departments that are related to specific staff responsibilities. This authority
is exercised over people or activities in other departments. Usually limited in scope and
duration; it is exercised one level below the person wholes it.
Line and staff positions/functions:
To classify a position as line or staff, it is related to the degree to which the function in
question contributes to the direct achievement of organizational objectives. The line functions
contribute directly to accomplishing to firm's objectives, while staff functions facilitate the
accomplishment of the major organizational objectives.
- The line functions of an organization are those functions that contribute d irectly to the
creation and distribution of the goods or services of the organization.
- People with line positions are responsible for physically producing the product or service
and for selling it.
- Staffs people advice and assist line people. That is the o nly reason these positions exist.
- All staff positions are advisory, staff people may make recommendations, but line
managers retain formal authority and decide what to do with a staff person's advice.

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 President Legal Service

Research
Development Finance Management Marketing Personnel

Training & Employee Health

Designing Production Development Safety Section

Production
Workers

Organizational Structure & Charts:

Organizational Structure:- can be defined as the arrangement and interrelationship of the
component parts and positions of a company. It is the established pattern of relationships
among different components or parts of the organization. There are different forms of
organizational structure: - line / military, functional organization line & staff.
Organizational Charts:- are diagrams of the organizational structure, showing the functions,
departments, or positions of the organization and how they are related.
Organizational Manual:- is the description of the organizational chart, and is designed to
promote, understanding of the basic organizational structure by means of descriptions of the
various jobs that may be listed only by title on the charts.

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 Chapter V
Staffing
Definition:
The managerial function of staffing is defined as filling and keeping filled positions in the
organizational structure through identifying work-force requirement, inventorying the people
available recruiting, selecting, placing, promoting, appraising, compensating the training
and/or developing both candidates and current job holders to accomplish their tasks
effectively and efficiently.
Staffing processes:
The staffing process represents the following eight activities or steps:
1. Human resource planning /Man power planning/;
2. Recruitment;
3. Selection;
4. Orientation and Induction;
5. Training and Development;
6. Performance Appraisal;
7. Transfer; and [Promotion, demotion, lateral transfer)
8. Separation
1) Human Resource Planning /Man powe r planning/:
It is the process of determining the need of the right man at the right time to the right job.
It is the process of determining the need of the provision of adequate human resources to
the job in the organization. It is designed to ensure that the personnel need of the
organization will be constantly and appropriately met. It is accomplished through analysis
of
(i) Internal factors such as current and expected skill needs, vacancies, and departmental
expansions and reductions; and
(ii) External environmental factors such as the labor market, the government regulation,
the labor union; etc
As a result of this analysis, plans are developed for executing the other steps in the
staffing process. This helps an organization to determine the need of employees for short
term or for long term.
There are four basic steps in human resource planning:
a. Planning for future needs. How many people with what abilities will the organization
need to remain in operation for the foreseeable future?

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b. Planning for future balance. How many people presently emplo yed can be expected to
stay with the organization? The difference between this number and the number the
organization will need leads to the next step.
c. Planning for recruiting and selecting or for lay off. How can the organization attain the
number of people it will need?
d. Planning for development. How should the training and movement of individuals within
the organization be managed so that the organization will be assured of a continuing
supply of experienced and capable personnel?
The organizational internal environment (such as its strategic plan) as well as its external
environmental will broadly define for managers the limits with in which their human resource
plan must operate. Once there broad limits have been established, managers can begin to
compare their future personnel needs against the existing personnel situation inorder to
determine what recruitment, training and development procedures they will need to follow.
The fact that the internal and external environments of an organization change means that
managers must monitor these environments to keep their human resource plan up to date.

The central elements in human resource planning are forecasting and the human resource
audit. Forecasting attempts to assess the future personnel needs of the or ganization. The
human resource audit assesses the organizations current human resources. These two
elements give managers the information they need to plan the other steps in the staffing
process, such as recruiting and training.
2) Recruitment:
It is the process of reaching out and attempting to attract potential candidates who are capable
of and interested in filling available positions of an organization. It is concerned with
developing a pool of job candidates, in line with the human resource plan. It is an
intermediary activity between manpower planning on the one hand, and selection of
employees on the other hand.

An important part of the recruiting process is developing a written statement of the content
and the location (on the organization chart) o f each job. this statement is called the job
description or position description. This statement lists the title, duties and responsibilities for
that position. Once this position /job description has been established/determined and
accompanying hiring or job specification, which defines the background, experience, and

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personal characteristics an individual must have in order to perform effectively in the
position, is developed.
Sources of Recruitme nt:
Sources of supply are the places, agencies, and institutions to which recruiters go to seek
potential candidates that will fill the vacant positions or the job needed. These sources of
supply are generally categorized in to two.
(i) Inte rnal Recruitment / recruitment from within: this involves recruitment within the
organization; it could be through promotion lateral transfer, demotion or any therefrom.
Advantage:
It is usually less expensive to recruit or promote from within than to hire from outside the
organization.
It may faster loyalty and inspire greater effort among organization members.
Individuals will already be acclaimed to the organization and may therefore need less
initial training and orientation.

Disadvantage:
It limits the pool of talent available to the organization.
(ii) External /outside/ recruitment: It involves recruitment outside the organization. The
major alternative sources are:
a. Direct application
b. Employee referrals /word of month/
c. Advertising
d. Educational institutions
e. Private/public employment agency
f. Other sources such as professional associations
3) Selection:
It can be defined as the process of determining from among applicants WHICH ONE
FILLS BEST for the job description and specification which is offered to the job within
the organization. It involves evaluating and choosing among job candidates. The role of
recruiting is to locate job candidates; the role of selection is the evaluate each candidate
and the pick the best one for the position available. Application forms, resumes,
interviews, employment & skill tests, and reference checks are the most commonly used
aids in the selection process.

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 Selection is the mutual process whereby the organization decides whether or not to make
a job offer and the candidate decides on the acceptability of the offer.
4) Orientation and socialization /induction/
It is designed to provide a new employee with the information he/she needs inorder to
function comfortably and effectively in the organization. Typically, socialization will convey
three types of information.
(i) General information about the daily work routine;
(ii) a review of the organizations history, purpose, operations, and products or services, and
how the employee's job contributes to the organizations needs, and
(iii) a detailed presentation, perhaps in a brochure, of organizations policies, work rules, and
employee benefits.
5) Training and Development:
Organizing human resources is a dynamic activity. Job demands change, which requires
altering and updating an employee's skills. Therefore, managers are involved in dec iding
when their subordinates may be in need of training. Thus, training is a process designed to
maintain or improve current job performance; development is a process designed to develop
skills necessary for future work activities.
Reasons for Training:
a. to orient new employees: while schools and training institutions provide general
education in many skills new employees require additional training to acquaint them with
specific situation of the organization and the job.
b. To improve performance: training will help to improve performance by increasing
productivity, improving quality, reducing turnover, reducing labor cost, etc.
c. To maintain current performance: sometimes individuals holding a position or doing a
job may get obsolete so train these employees will help to maintain current performance.
Training Methods:
There are two different types of training techniques.
(i) On-the-job training
(ii) Off- the-job training
(i) On-the-job training: involves learning methods and techniques by actually doing a job
(performing the work) and increasing the levels of skills of the employee. The employee
usually learns under the supervision of the in mediate boss or co-worker who has greater
knowledge and skills about the job. It is widely used, because it is economic and
convenient; and no special facilities, equipment and training places are required and the

83
 employee produces and contributes to the organizational objective and at the same time
he learns job rotation and job instruction methods are few of the techniques used in on
the job training. It is convenient for small number of trainees. Some of its disadvantages
are: - it creates disinterest of employees, employees have dual responsibility, & it is not
convenient for large number of employees.
(ii) Off-the-job training: This technique involves participation of employees in a series of
events removed from the actual performance of the organization and the work situation.
Advantages:
It creates interest of employees: because employees are removed from their routine
activities and are moved to new environment.
It is convenient for large number of employees. (trainees)
Disadvantages:
It is expensive- there are costs for trainers, facilities, and also the employee does not
contribute during the training.
There is a problem of transfer of knowledge from the training situation to the actual situation
of the job.
Vestibule training, classroom instruction / lectures, films and simulation exercises are the
more popular techniques of off-the-job training.
6) Performance Appraisal:
It is the process used to determine whether an employee is performing according to what is
designed or intended. It helps to formally evaluate the adequacy of recruitment and selection
and suggests whether or not the employee will need to be replaced, or trained.

The many purposes of performance appraisal can be summarized in the following key points:
Performance appraisal should lead directly to increased productivity.
It helps in salary administration
It plays a vital role in determining an employee for promotion.
Appraisals are used as a vehicle for bringing about employee development because the
results of the performance evaluation can serve as a basis for coaching and counseling.
Performance appraisal results are used extensively in human resource research.
7) Transfer:
It is a shift of a person from one job, organization level, or location to another. The transfer
may be a promotion, demotion, or a shift to another same level position /lateral transfer./

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Promotion: refers to a shift for advancement of an employee to a higher job with more
employment and prestige, higher status, and higher responsibility. The possibility of
advancement often serves as a major incentive for superior performance, and promotions are
the most significant way to recognize such superior performance. Therefore, it is externally
important that promotions be fair i.e., based on merit and free from favoritism.
Demotion: refers to a shift of an employee to a lower position in the hierarchy due to
inefficiency, and incompetence to fulfill assigned tasks.
Lateral transfer: refers to the movement of an employee from one job or position to another
without involving any significant change in the employment and status
Separation:
This refers to those factors that bring the termination or ceasing of the relationship between
the organization and the employee. Separation may result from such factors as resignation,
layoff, discharges, and retirement.
CHAPTER VI

DIRECTING/LEADING
Definition

Leading according to Kooth and Weihrich, is the process of influencing people so that they
will contribute to organization and group goals. It is influencing people so that they will work
willingly and enthusiastically to ward the achievement of organizational goals ultimate
objectives. When we say influencing, it does not mean that coercing/forcing, imposing,
suctioning or pushing people behind. It means rather- motivating people so that they
contribute their maximum effort for the achievement of organizational goal.

Leading/Directing is that part of management function which actuates the

organization members to work efficiently and effectively for the attainment of organizational
objectives. Planning, organizing, and staffing are merely preparations for doing the work, and
the work actually starts when managers start performing the directing function. Directing is
the interpersonal aspect of management, which deals directly with influencing, guiding,
supervising, and motivating the subordinates for the accomplishment o f the per determined
objectives.

Directing is a challenging function of management, because it deals with the human

element of the organization, which represents a complex of forces about whom not much is

85
known. A person's beliefs, hopes, ambitions, behavior, satisfaction, and interaction with other
persons are all involved in the directing process.

Ele ments of Directing Leading

There are three elements of directing that helps managers to influence people to contribute
willingly for the achievement of organizational goal. These are:
(a) Motivation
(b) Leadership
(c) Communication

A) MOTIVATION

- Motivation refers to the forces to a person that arouse enthusiasm and persistence to
pursue a certain course of action. It means stimulating people to action through
incentives or inducements
4 The study of motivation helps managers understand what prompts people to initiate
action, what influences their choice of action, and why they persist in that action over
time.

- People have basic needs such as for food, achievements or monetary gain that translate
into an internal tension that motivates specific behaviors with which to fulfill the need.
To the extent that the behavior is successful, the person is rewarded in the sense that the
need is satisfied. The reward also informs the person that the behavior was appropriate
and can be used again in the future.
Rewards are of two types
a. Intrinsic reward - the satisfaction a person receives in the process of
performing a particular action. The completion of a complex task ma y bestow
a pleasant feeling of accomplishment, or solving a problem that benefits others
may fulfill a personal mission.
b. Extrinsic rewards - given by another person, typically the manager, and
include promotion and pay increases.

THEORIES OF MOTIVATION

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The following are some of the basic theories of motivation:
Hierarchy of Needs Theory (Abrham Maslow)
5 It proposes that humans are motivated by multiple needs and that these needs exist in
hierarchy order:
1. Physiological needs - the need for food, water air & sex
2. Safety needs - the need for security & safety
3. Belongingness/Social needs - the need for friendship, interaction and love
4. Esteem needs - the need for respect & recognition
5. Self-actualization needs - the ability to reach one's potentials.

Self actualization
Need

Esteem need

Social Need

Security Need

Physiological
Neeed
This theory is based on
1. Only an unsatisfied need can influence behavior; a satisfied need is not a
motivator.
2. A person's needs are arranged in a priority order of importance. The
hierarchy goes from the most basic needs to the best complex.
3. A person will at least minimally satisfy each level of need before feeling the
need at the next level.
4. If need satisfaction is not maintained at any level, the unsatisfied need will
become a priority once again. For example, for a person who is presently
feeling social needs, safety will become a priority once again if he or she is
fired.

The two-Factor Theory (Herzberg 1975)

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The findings of the two factor theory suggested that the work characteristics associated with
dissatisfaction are quite different from those pertaining to satisfaction which prompted the
notion that two factors influence work motivation. These factors are hygiene factors and
motivation factors.

Hygiene factors (salary, job security, working conditions, status; Company policies;
quality of technical supervision and quality of interpersonal, relationships among peers,
supervisors, and subordinates) are the primary elements involved in job dissatisfaction.
When present in sufficient quality, they have no effect; when absent, they can lead to job
dissatisfaction. Motivation factors (achievement, recognition, responsibility, advancement,
the work itself, and possibility of growth) are the primary elements involved in job
satisfaction. When present, they can stimulate personal and psychological growth.

Theory X and Theory Y (Douglas McGregor 1960)

Theory X is a philosophy of management with negative pe rception of subordinates potential

for work and attitudes toward work. It assumes that subordinates dislike work, are poorly
motivated, and require close supervision. A manager with these beliefs tends to control the
group, use negative motivation, and refuse to delegate decision-making.

Theory Y is a philosophy of management with a positive perception of subordinates'

potential for and attitudes toward work. It assumes that subordinates can be self-directing,
will seek responsibility and find work as natural as play or rest. The outcome of this belief is
a manager who encourages people to seek responsibility, involves people in decision making
and work with people to achieve their goals.

The important point about theory X and theory Y is that a manage ment philosophy
influences the type of work climate the manager endeavors to create and ultimately, how the
manager treats people.

The following are the components of theory X and theory Y.

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o People basically dislike work and avoid it Most people find work as natural as play or rest
whenever, possible and develop an attitude toward work based on
their experience with it.

Because most people dislike work, they have People do not need to be threatened with
to be closely supervised and threatened with punishment, they will work voluntarily toward
punishment to reach objectives organizational objectives to which they are
committed.
Most people preferred to be told what to do,
have little ambition, want to avoid
responsibility, and want security above all The average person working in an environment
else. will good human relations will accept and seek
responsibility.
Most people have little creativity. They are
not capable of solving problems. Rather, Most people possess a high degree of
they must be directed. imagination, ingenuity, and creativity with
which to solve organizational problems.
Most people have limited intellectual
potential. Contributions above basic job Although people have intellectual potential,
performance should not be expected. modern industrial life utilizes only part of it.

B) LEADERSHIP
Leadership is the process of influencing individuals and groups to set and achieve goals. It is
an act of influencing and motivating people to perform certain tasks to achieve organizational
objectives. Thus, an effective leader is expected to have adequate knowledge of human
behavior, including the ability to persuade and motivate people and communicate with them
properly.

Definition
a) "The art or process of influencing people so that they will strive willingly and
enthusiastically towards the achievement of group goals."
b) "Leadership is the ability to secure desirable actions from A group of followers
voluntarily without the use of coercion."

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c) "The process of directing & inspiring workers to perform the task related activities of the
group."

People should be encouraged to develop not only willingness to work, but also willingness to
work with zeal and confidence.

In short leadership involves,

Influencing and interacting with people to attain goals.
Related to a particular situation at a given point of time and a specific set of
circumstances.
By accepting the willingness, followers will make the leadership process possible.

THEORIES OF LEADERSHIP

1. The trait theory of leadership:-

Traits are inborn and inherent personal qualities of individuals. This theory believes leaders
possess certain specific inborn traits, which are inherited rather than acquired. It has a root
from "the great man theory" dating back to the ancient Greeks & Romans time, holds that
leaders are born not made.

The trait theory studies focused on the personal traits of leaders and attempted to identify
a set of individual characteristics that distinguished leases from followers' also successful
leaders from unsuccessful ones. In general the trait theory hasn't been a fruitful approach to
explain leadership.
2. The behavioral theory of leadership:-

The behavioral theory of leadership focused on what leaders do rather than their traits. Studies
showed that one set of traits/leadership style might not be equally appropriate in all situations.
This theory suggested that there were two distinct types of leadership which are known as task-
oriented /production centered/ and employee o riented /people centered/.

3. The situational /contingency/ theory of leadership:

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According to this theory, leadership is strongly affected by a situation from which a leader
emerges and in which he/she works. It's a function of the leader, the followers and the
situation.

It attempts to discover that the one unique set of leadership traits were largely
unsuccessful. Modern management theorists are more prone to the belief that leadership is
more complex; that is it can't be represented by one set of traits or by single set of behavior,
thus effective leadership behavior depends on the environment or the situation.

LEADERSHIP STYLES
Managers in an organization shall relatively be consistent in the way they try to influence
others behavior. The manager who dominates subordinates in one situation is not likely to use
a high degree of consideration and participation in another. This behavioral pattern of leaders
is known as leadership style.

It can be defined as the various patterns of behavior favored by le aders during the
process of directing and influencing workers, which is determined by leaders personality,
experience and value system, nature of followers and environment.
There are three important leadership styles
a) Autocratic
b) Democratic /participate/
c) Laissez-faire /free rein/
Autocratic style - "I" approach,
Is a leadership approach in which a manager does not share decision making authority with
subordinates. Autocratic managers may ask for subordinates' ideas & feedback about the
decision, but the impute does not usually change the decision unless it indicates that
something vital has been overlooked.
Under certain conditions, the autocratic style is appropriate. eg. During crisis & when
subordinates are trainees and when there is act of insubordination.
It is also effective when managers face issues that they are best equipped to solve, create
solutions, whose implementation does not depend on others & desire to communicate through
orders & instructions

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 This leadership style is closely associated with the classical approach to management
and it is characterized by the following behavioral patterns of leaders.
The leader doesn't seek any opinions from subordinates, holds conflicts a nd with less
creativity.
Exercises rigid control and close supervision, relies on punishments.
Subordinates typically react by doing only what's expected and by suppressing their
frustration.
The autocratic leader is task-oriented, gives little value on showing consideration to
subordinates.
Depends on one way communication downward only.
Participate (democratic) style - "We" approach
It is a leadership approach in which a manager shares decision making authority with
subordinates. It involves others and lets them bring their unique viewpoints, talents &
experiences to bear on an issue.
Before subordinates are made to participate in the decision making process:
a. mutual trust & respect must exist between them & managers
b. subordinates must be willing & trained to be competent to solve problems
c. managers should give time & be patient to make subordinates participate.
However, limits on subordinates' participation must be clearly spelled out before hand there
should be no misunderstanding about who holds authority to do what.

This leadership style is characterized by the following behavioral patterns of the leader.
Allows the group members to participate in decision making process, proposed actions
and encourages participation at all levels.
The leader will develop two way communications and promote team sphere.

The democratic leader explains to the group members like reasons for personal decisions
when necessary and objectively communicates criticism and praise to subordinates.
Free-rein style -"They" approach
It empowers individuals or groups to function on their own, without direct involvement from
the managers to whom they report. The style relies heavily on delegation of authority, and
works best when the parties have expert power, when participants have and know how to use
the tools & techniques needed for their tasks.

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Free-rein leadership works particularly well with managers & experienced professionals in
engineering, design, research & sales. Such people generally resist other kinds of
supervision.
In most organizations managers must be able to use the decision making style that
circumstances dictate. Because people & circumstance constantly change & because
subordinates must be prepared to the change. The effective manager switches from one
leadership style to another as appropriate.
The following are the behavioral patterns of laissez- faire leader.
Laissez- faire leaders make a few attempts to increase productivity, to develop their
attempts or to meet subordinates psychological needs.
Use their power very little, if a tall, giving subordinates a high degree of independence in
their operation.
These leaders maintain hands off policy where each subordinate work is clearly defined.
Such leaders depend on subordinates to set their own goals and the means of achieving
them, and they see their role as one of aiding the operations of followers by furnishing
them information and acting primarily as a contact with the groups external environment.
The laissez- faire leader has little or no self-confidence in his/her leadership ability, sets and
goals for the group and minimizes communication and group interaction.
COMMUNICATION
Communication is the tool in which we exercise to influence others, bring about changes in
the attitudes and views of our associates, motivate them, establish and maintain relations with
them. Without communication there would be no interaction between persons.
Definition:
"Communication is the transfer of information from one person /sender/ to another person
/receiver/ to achieve goals."
"It's a process consisting of a sender transmitting a message through media to a receiver
who respond"
Importance of Effective Communication
Effective communication is important to managers for three primary reasons.
Communication provides a common thread for the management processes of planning,
organizing, leading, and controlling.
Effective communications skills can enable managers to draw on the vast array of talents
available in the multicultural world of organizations.

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 Managers spend a great deal of time by communicating face-to face, electronic or
telephone communication with employees, supervisors, suppliers or customers.
The Communication Process
Communication takes place in the relationship between a sender and a receiver. It can flo w in
one direction and ends there.
A model of the communication process:

Transmit Receive
Message Message

Sender Enco Channel RECEIVER

ding
SENDER
(Source) Decoding

Noise

Feed back
Receive Transmit

a) Sender:
The sender/source of message initiates the communication. In an organization the sender will
be a person with information, needs or desires and a purpose for communicating them to one or
more other people.

b) Receiver:
The person whose senses perceive the sender's message. There may be a large number of
receivers, as when a memo is addressed to all members of an organization or there may be just
one, as when one discusses something privately with a colleague.

c) Encoding:
It takes place when the sender translates the information to be transmitted into a series of
symbols.
d) Decoding:
The process by which, the receiver interprets the message and translates it into meaningful
information. It's a two-step process.
e) Channel:

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The formal medium of communication between a sender and a receiver.
f) Noise:
Any factor that disturbs confuses or interferes with communication. Noise can arise along what
is called the communications channel or method of transmission.
g) Message:
The encoded information sent by the sender to the receiver.
h) Feed back:
It's the response of the receiver to the sender, also passes through the same process.
Communication can be
i) Formal Communication

a) Downward communication Messages from higher authority levels to lower

levels.
b) Upward communication Messages from subordinates to supervisors and to higher
levels.
c) Horizontal communication That flows between persons of equal status in the
organization.
d) Vertical communication May be downward or up word communication.
ii) Informal Communication
* Grapevine.
* Gossip, etc.

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 CHAPTER VII

CONTROLLING

In the series of managerial functions, planning is the first function and controlling is the last.
Success in business is very often proportionate to the astuteness of its planning and the skill
with which it is controlled. Plans can be effectively achieved in mo st organizations only with
good controls, and planning is always pre-requisite for controlling. Planning seeks to set
goals and programs and control seek to secure performance in accordance with plans.

Definition
a) According to Koontze and O'donnell,, "The managerial function of control is the
measurement and correction of the performance of activities of subordinates in order to
make sure that enterprise objectives and the plans devised to attain them are being
accomplished. It's thus the function of every manager, from the chief executive to the
Forman."
b) "Controlling is the process by which management sees if what did happen was what was
supposed to happen. If not, necessary adjustments are made." Moore.

An analysis of the foregoing statements regarding control brings out the controlling function
of management.
i) Planning is the foundation of control:
Planning sets the course, control observes deviations from the course, and takes corrective
action.
ii) Action's the essence of control:
Control terminates in taking corrective action where there is a deviation in performance from
the desired goals.

iii) Delegation is the key to control:

Control is exercised by taking action, and action can be taken within the authority delegated.
Accountability must be within the authority given to the manager.
iv) Information is the guide to control:
Control exercised by a manager on the basis of the information and reports from those actively
doing the job. Such reports and information may be described as "feed-back" from
subordinates. Feedback enables the manager to determine how far the operations.

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THE CONTROL PROCESS
In controlling process there are three steps,
1. Setting standards
2. Measurement of performance
3. Taking corrective action
1) Setting Standards:
Standards may be tangible or intangible. Greater emphasis should be laid on tangible
standards. The standards in tangible terms may be in terms of output, costs, profit, time
persons available for training etc. intangible terms standards may be for the results to be
expected from a training program, employee morale, advertising campaign, etc.

Organizations create standards to help measure and monitor both productivity and
quality efforts. People and processes are governed by qualitative and quantitative standards.
An organization uses these standards to teach, train, and evaluate organizational performance.

2) Measurement of Performance and comparing it against standards

An organization measures actual performance of people and processes to ascertain if they are
functioning according to plans and expectations. After it has been measured it will be
compared against the established standards.

2) Taking Corrective Actions

As soon as the deviations are reported, it is the duty of the manager concerned to take steps to
correct the past action or at least to bring similar action closer to the standards in future.
When significant deviations from established standards occur, the organization must
determine the cause by identifying the nature and scope of the problem

TYPES OF CONTROLLING
Controlling can be feedforward, concurrent or feedback controls.
1. Feedforward controls are preventive in nature. They are created to screen out possible
causes of problems. Procedures and training can be preventive as well as remedial.
2. Concurrent controls monitor on going operations as they occur in real time, allowing for
instant reactions and the spotting of trends.
3. Feedback controls are after action controls. Inspecting output after an operation has been
performed and soliciting customer feedback are examples of after-action control.

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All the three types of controls are important to managers and their organizations. When
designed and used properly, they can prevent, identify, and correct deviations from
established standards.

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