Perspectives of Management 1 Semester Paper-I: DR - Nagaraju Battu

PERSPECTIVES OF MANAGEMENT
1st Semester Paper-I
LESSON WRITERS
Dr.B. Nagaraju Dr. V. Tulasi Das

Associate Professor Associate Professor
Dept. of HRM, ANU Dept. of HRM, ANU
Dr. M. Rama Satyanarayana Dr. K. Madhu Babu

Faculty , Dept. of HRM, ANU Faculty , Dept. of HRM, ANU
Dr. V. Naga Nirmala

Faculty , Dept. of HRM, ANU
EDITOR
Dr. V. Tulasi Das
Associate Professor
Dept. of Human Resource Management
Acharya Nagarjuna University
Director
Dr.Nagaraju Battu
M.H.R.M., M.B.A., L.L.M., M.A. (Psy), M.A., (Soc), M.Ed., M.Phil., Ph.D.
Centre for Distance Education
Nagarjuna Nagar-522510
Phone No.0863-2346208, 0863-2346222, Cell No.9848477441

0863-2346259 (Study Material)
Website: www.anucde.info
e-mail: [email protected]
MHRM: PERSPECTIVES OF MANAGEMENT
First Edition: 2021
No. of Copies
(C) Acharya Nagarjuna University
This book is exclusively prepared for the use of students of MHRM Centre for
Distance Education, Acharya Nagarjuna University and this book is mean for limited
circulation only
Published by
Dr.Nagaraju Battu
Director
Centre for Distance Education
Nagarjuna Nagar-522510
Printed at
Sainath Printers, Vijayawada

FOREWORD
Since its establishment in 1976, Acharya Nagarjuna University has been forging
ahead in the path of progress and dynamism, offering a variety of courses and
research contributions. I am extremely happy that by gaining ‘A’ grade from the
NAAC in the year 2016, Acharya Nagarjuna University is offering educational
opportunities at the UG, PG levels apart from research degrees to students
from over 443 affiliated colleges spread over the two districts of Guntur and
Prakasam.
The University has also started the Centre for Distance Education in
2003-04 with the aim of taking higher education to the door step of all the
sectors of the society. The centre will be a great help to those who cannot join in
colleges, those who cannot afford the exorbitant fees as regular students, and
even to housewives desirous of pursuing higher studies. Acharya Nagarjuna
University has started offering B.A., and B.Com courses at the Degree level and
M.A., M.Com., M.Sc., M.B.A., and L.L.M., courses at the PG level from the
academic year 2003-2004 onwards.
To facilitate easier understanding by students studying through the

distance mode, these self-instruction materials have been prepared by eminent
and experienced teachers. The lessons have been drafted with great care and
expertise in the stipulated time by these teachers. Constructive ideas and
scholarly suggestions are welcome from students and teachers involved
respectively. Such ideas will be incorporated for the greater efficacy of this
distance mode of education. For clarification of doubts and feedback, weekly
classes and contact classes will be arranged at the UG and PG levels
respectively.
It is my aim that students getting higher education through the Centre for
Distance Education should improve their qualification, have better employment
opportunities and in turn be part of country’s progress. It is my fond desire that
in the years to come, the Centre for Distance Education will go from strength to
strength in the form of new courses and by catering to larger number of people.
My congratulations to all the Directors, Academic Coordinators, Editors and
Lesson- writers of the Centre who have helped in these endeavours.
Prof. P. Raja Sekhar

Vice-Chancellor (FAC)
MASTER OF ARTS: HUMAN RESOURCE MANAGEMENT (H.R.M)
SEMESTER-I
101HM21 - PERSPECTIVES OF MANAGEMENT
UNIT I: INTRODUCTION TO MANAGEMENT

Definition of Management - Science or Art - Management and Administration –
Development Management Thought - Contribution of Taylor and Fayol - Functions of
Management – Managerial. Roles - Levels of Management - Types of Business Organization.
UNIT II: PLANNING

Nature and Purpose - Steps involved in Planning - Objectives - Setting Objectives - Types of
Plan Proess of Managing by Objectives – Strategies - Policies and Planning Premises –
Forecasting –Decision Making.
UNIT III: ORGANISING

Nature and Purpose - Formal and Informal Organization - Organization Chart - Structure and
Process - Departmentation by different Strategies - Line and Staff Authority - Benefits and
Limitations - Decentralization and Delegation of Authority
UNIT IV: DIRECTING

Scope - Human Factors - Creativity and Innovation - Harmonizing Objectives - Leadership –
Types of Leadership - Leadership Theories - Motivation - Hierarchy of Needs - Motivation
Theories Motivational Techniques - Job Enrichment .
UNIT V CONTROLLING
System and process of Controlling - Requirements for effective Control - The Budget as
Control Technique - Information Technology in Controlling - Use of computers in handling
the information - Productivity - Problems and Management - Control of Overall Performance
- Direct and Preventive Control - Reporting
Prescribed Books:
1. Stoner, A.F.James and Freeman Edward: Management, Printice –Hall of India Pvt. Ltd.
New Delhi , 2003.
2. Robins, P. Stephen: Management Concepts and Practices, Prentice-Hall Inc., engle Wood
Cliffs, New jersey , 1984.
3. Koontz, O. Donnel and Weirich: Management, Mc Graw-Hill Ltd., New Delhi ,2002.
4. Prasad, L.M : Principles and Practice of Management, sultan chand and sons, New Delhi ,
2005.
5. Khanna, O.P: Industrial Engineering and Management, Dhanpat Raj and sons, New Delhi ,
1993.
6. Elvin and Others: Production Management, Printice3-Hall of India Pvt. Ltd., New Delhi .
7. Kotler Philip: Marketing Management, Prenctice-Hall of India Pvt. Ltd., New Delhi ,2004.
8. Laurie J. Mullins,” Management and Organizational Behaviour”, Pitman.
9. Louis A. Allen, Management and Organization, McGraw-Hill Kogakusha, Ltd.’
10. A.R.Arya sri Fundamentals of Management, McGraw-Hill Kogakusha, Ltd.’New Edition
2018.
CONTENT
Unit - I INTRODUCTION Page No

Lesson - 1 Introduction to Management 1.1-1.7
Lesson - 2 Administration and Management 2.1-2.7
Lesson - 3 Development of Management Thoughts 3.1-3.10
Lesson - 4 Levels of Management 4.1-4.5
Unit - II PLANNING
Lesson - 5 Importance of Planning 5.1-5.11
Lesson - 6 Planning Process and Forecasting 6.1-6.11
Lesson - 7 Strategic Planning 7.1-7.9
Lesson - 8 Planning Premises 8.1-8.14
Unit - III ORGANISING
Lesson - 9 Organizing 9.1-9.7
Lesson - 10 Organization Structure 10.1-10.10
Lesson - 11 Departmentation 11.1-11.15
Lesson - 12 Decentralization and Delegation of Authority 12.1-12.8
Unit -IV DIRECTING
Lesson - 13 Directing, Creativity and Innovation 13.1-13.12
Lesson - 14 Leadership 14.1-14.12
Lesson - 15 Motivation 15.1-15.15
Lesson - 16 Job Enrichment 16.1-16.10
Unit - V CONTROLLING
Lesson - 17 System and Process of Controlling 17.1-17.8
Lesson - 18 Directive and Preventive Measures of Control 18.1-18.6
Controlling Techniques
Lesson - 19 Information Technology in Controlling 19.1-19.7
Lesson - 20 Productivity Improvement 20.1-2.07
UNIT - I
LESSION – 1
INTRODUCTION TO MANAGEMENT
Learning objectives
After studying this lesson, the students are able to understand.
• Overview of Management.
Features of Management,
• Functions of Management
• Importance of management.
Structure
1.1 Introduction and Definition of Management
1.2 Features of Management
1.3 Functions of Management
1.4 Importance of Management

1.5 Summary
1.6 Keywords
1.7 Self Assessment Questions
1.8 Further Readings
1.1 Introduction and definition of management
Management is a universal phenomenon. It is a very popular and widely used term.

All organizations - business, political, cultural or social are involved in management because
it is the management which helps and directs the various efforts towards a definite purpose.
According to Harold Koontz, Management is an art of getting things done through and with
the people in formally organized groups. It is an art of creating an environment in which
people can perform and individuals and can co-operate towards attainment of group goals.
According to F.W. Taylor, management is an art of knowing what to do, when to do and see
that it is done in the best and cheapest way.
Management is a purposive activity. It is something that directs group efforts towards
the attainment of certain pre – determined goals. It is the process of working with and
through others to effectively achieve the goals of the organization, by efficiently using
limited resources in the changing world. Of course, these goals may vary from one enterprise
to another, e.g.: For one enterprise it may be launching of new products by conducting
market surveys and for other it may be profit maximization by minimizing cost.
Management as a discipline refers to that branch of knowledge which is connected to
study of principles & practices of basic administration. It specifies certain code of conduct to
be followed by the manager & also various methods for managing resources efficiently.
Any branch of knowledge that fulfils following two requirements is known as discipline:
1. There must be scholars & thinkers who communicate relevant knowledge through
research and publications.
2. The knowledge should be formally imparted by education and training programmers'.
Centre for Distance Education 1.2 Acharya Nagarjuna University
3. Since management satisfies both these problems, therefore it qualifies to be a

discipline. Though it is comparatively a new discipline but it is growing at a faster
pace.
4. It cannot be denied that management has a systematic body of knowledge but it is not
as exact as that of other physical sciences like biology, physics, and chemistry etc.
5. The main reason for the inexactness of science of management is that it deals with
human beings and it is very difficult to predict their behavior accurately. Since it is a
social process, therefore it falls in the area of social sciences. It is a flexible science &
that is why its theories and principles may produce different results at different times
and therefore it is a behavior science. Ernest Dale has called it as a Soft Science.
1.2 Features of management
Management is an activity concerned with guiding human and physical resources

such that organizational goals can be achieved. Nature of management can be highlighted as:
-
Management is goal-oriented: The success of any management activity is accessed by its
achievement of the predetermined goals or objective. Management is a purposeful activity. It
is a tool which helps use of human & physical resources to full fill the pre-determined goals.
For example, the goal of an enterprise is maximum consumer satisfaction by producing
quality goods and at reasonable prices. This can be achieved by employing efficient persons
and making better use of scarce resources.
Management integrates human, physical and financial resources: In an organization,
human beings work with non-human resources like machines. Materials, financial assets,
buildings etc. Management integrates human efforts to those resources. It brings harmony
among the human, physical and financial resources.
Management is continuous: Management is an ongoing process. It involves continuous
handling of problems and issues. It is concerned with identifying the problem and taking
appropriate steps to solve it, e.g. the target of a company is maximum production. For
achieving this target various policies have to be framed but this is not the end. Marketing and
Advertising is also to be done. For this policies have to be again framed. Hence this is an
ongoing process.
Management is all pervasive: Management is required in all types of organizations whether
it is political, social, cultural or business because it helps and directs various efforts towards a
definite purpose. Thus clubs, hospitals, political parties, colleges, hospitals, business firms all
require management. Whenever more than one person is engaged in working for a common
goal, management is necessary. Whether it is a small business firm which may be engaged in
trading or a large firm like Tata Iron & Steel, management is required everywhere
irrespective of size or type ofactivity.
Management is a group activity: Management is very much less concerned with
individual‘s efforts. It is more concerned with groups. It involves the use of group effort to
achieve predetermined goal of management of an organization.
1.3 Functions of management
The functions of Management are common to all alike; weather a business firm or a
non-business firm. Management‘s primary function is the satisfaction of the stakeholders.
Perspectives of Management 1.3 Introduction to Management
This typically involves making a profit (for the shareholders), creating valued products at a
reasonable cost (for customers), and providing rewarding employment opportunities (for
employees). This can be achieved only when management accomplishes its functions. A
diagrammatic representation of the functions of management is as under
Figure 1
Following are the common functions of management:
Planning: Planning means looking ahead and chalking out future courses of action to be
followed taking into consideration available & prospective human and physical resources. It is
a systematic activity which determines when, how and who is going to perform a specific job.
It is rightly said ― Well plan is half done.
According to Koontz &O‘Donnell, ―Planning is deciding in advance what to do,

how to do and who is to do it. Planning bridges the gap between where we are to, where we
want to go. It makes possible things to occur which would not otherwise occur.
Planning requires administration to assess appropriate course of action to attain the
company‘s goals and objectives. For management to do this efficiently, it has to be very
practical and simple. Planning is important at all levels of management. However, its
characteristics vary by level of management.
Steps in planning function:
i) Establishment of objectives:
a. Setting of goals and objectives to be achieved.
b. Stated in a clear, precise and unambiguous language.
c. Stated in quantitative terms.
d. Should be practical, acceptable, workable and achievable.
ii) Establishment of planning premises:
a. Planning premises may be internal or external. Internal includes capital investment
policy, management labour relations, philosophy of management, etc. Whereas external
includes socioeconomic, political and economical changes.
b. Internal premises are controllable whereas external are non controllable.
iii) Choice of alternative course of action:
a. A number of alternative course of actions have to be considered.
b. Evaluated each alternative in the light of resources available
c. Chose the best alternative.
iv) Securing co-operation:

After the plans have been determined, it is necessary rather advisable to take subordinates or
those who have to implement these plans into confidence. This motivates them, valuable
suggestions can come and employees will be more interested in the execution of these plans.
Figure 2
v) Follow up/Appraisal of plans:

After the selected plan is implemented, it is important to appraise its effectiveness and correct
deviations or modify the plan as required.
Planning is basically a decision making function which involves creative thinking and
imagination that ultimately leads to innovation of methods and operations for growth and
prosperity of the enterprise
Organizing
Organizing is the function of management which follows planning. It is a function in which
the synchronization and combination of human, physical and financial resources takes place.
All the three resources are important to get results.
Therefore, organizational function helps in achievement of results which in fact is important

for the functioning of a concern. Hence, a manager always has to organize in order to get
results.
A manager performs organizing function with the help of following steps:-

1. Identification of activities - All the activities which have to be performed in a concern
have to be identified, grouped and classified in to units.
2. Departmentally organizing the activities - dividing the whole concern into independent
units and departments is called departmentation.
3. Classifying the authority - Authorities bringing smoothness in a concern‘s working.

4. Co-ordination between authority and responsibility: Each individual is made aware of
his authority and knows whom they have to take orders from and to whom they are
accountable and to whom they have to report.
Thus an organization structure should be designed to clarify who is to do what tasks and who
is responsible for what results and to furnish decision-making and communications networks
reflecting.
Staffing:
The managerial function of staffing involves manning the organization structure through
proper and effective selection, appraisal and development of the personals to fill the roles
assigned to the employers/workforce. Staffing pertains to recruitment, selection, development
and compensation of subordinates.
Nature of staffing function:
1. Staffing is an important managerial function
2. Staffing is a continuous activity
3. The basis of staffing function is efficient management of personals.
4. Staffing helps in placing right men at the right job
5. Staffing is performed by all managers depending upon the nature of business, size of
the company, qualifications and skills of managers, etc.
Since, the success of the organization depends upon the performance of the individual,
staffing function of manager deserves sufficient care & attention of the management.
Directing
Directing is a process in which the managers instruct, guide and oversee the performance of
the workers to achieve predetermined goals. Planning, organizing, staffing has got no
importance if direction function does not take place.
Characteristics of direction
1. Pervasive function - Directing is required at all levels of organization.
2. Continuous activity - Direction is a continuous activity as it continuous throughout
the life of organization.
3. Human factor - Since human factor is complex and behavior is unpredictable,
direction function becomes important.
4. Creative activity - Direction function helps in converting plans into performance
5. Executive function - Direction function is carried out by all managers and executives
at all levels throughout the working of an enterprise;
To sum up, the plans may be the best feasible ones, the activities may be systematically
organized, the staff may be highly efficient, but the organization will not succeed, if there is
no proper direction. Mere planning, organizing and staffing are not sufficient to set the tasks
in motion. Directing involves not only instructing people what to do, but also ensuring that
they know what is expected from them.
Co-ordination
Co-ordination tries to achieve harmony between individual‘s efforts towards achievement of

group goals and is a key to success of management. Management seeks to achieve co-
ordination through its basic functions of planning, organizing, staffing, directing and
controlling. Co-ordination is achieved through planning, organizing, staffing, directing and
controlling. Co-ordination is life-line of management. It is required in each and every function
and at each and every stage and therefore it cannot be separated.
Figure 3
Controlling:
Controlling is measuring and correcting individual or organizational performance to ensure
that event confirm to plans. It involves measuring performance against set goals and plans
showing where deviations from the standards exist and helping to correct those deviations.
The control process is cyclical which means it is never ending. Employees often view
controlling negatively No matter how positive the changes may be for the organization,
Controlling is a four-step process of establishing performance standards based on the firm's

objectives, measuring and reporting actual performance, comparing the two, and taking
corrective or preventive action as necessary.
1.4 Importance of management
1. It helps in achieving group goals – Management converts disorganized resources of

men, machines, money etc. into useful enterprise. It arranges, assembles, organizes
and integrates the factors of production. These resources are coordinated, directed and
controlled in such a manner that enterprise work towards attainment ofgoals.
2. Optimum utilization of resources – Management utilizes all the physical and human
resources productively. Management provides maximum utilization of scarce
resources by selecting its best possible alternate use in industry from out of various
uses. This leads to optimum utilization of resources and avoid wastage.
3. Reduces costs – It gets maximum results through minimum input by proper planning
and by using minimum input and getting maximum output. Management uses
physical, human and financial resources in such a manner which results in best
combination. This helps in cost reduction.
4. Establishes sound organization –To establish sound organizational structure is one
of the objective of management which is in tune with objective of organization and for
fulfilment of this, it establishes effective authority and responsibility relationship i.e.

who is accountable to whom, who can give instructions to whom, who are superiors
and who are subordinates.
5. Establishes equilibrium – It enables the organization to survive in changing
environment. It adapts organization to changing demand of market / changing needs of
societies. It is responsible for growth and survival of organization.
6. Essentials for prosperity of society – Efficient management leads to better
economical production which helps in turn to increase the welfare of people.. It
improves standard of living, increases the profit which is beneficial to business and
society will get maximum output at minimum cost by creating employment
opportunities which generate income.
1.5 Summary
Management is an art of knowing what to do, when to do and see that it is done in the best
and cheapest way. It has to be done through and with the people in formally organized groups.
Some of its features are: it integrates human, physical and financial resources, it is goal-
oriented, it is a continuous process, it is all pervasive and finally it is a group activity.
There are six functions of management viz. planning, organizing, staffing, directing,
coordinating and controlling. All these functions are unique in themselves and they assist in
smooth functioning of an organization.
1.6 Keywords
Management :The responsibility for and control of a company or organization.

Organization : An organized group of people with a particular purpose, such as a
business or government department.
Directing :Control the operations or manage
Controlling :Determine the behaviour or supervise the running of.
Planning : The process of making plans for something.
1.7 Self assessment questions

1. Define and explain the concept of management?
2. Explain the features of management?
3. Discuss in detail the functions of management?
4. Explain the importance of management for an organization?
1.8 Further readings

• Durai, P. (2015). Principles of Management, Text and Cases. New Delhi: Pearson
Education
• Robbins, S.P. & Decenzo, D. A. (2014). Fundamentals of Management: Essential
Concepts and Applications. New Delhi: Pearson Education
• Robbins & Coulter (2013). Management. New Delhi: Prentice Hall.
Koontz, H. (2010). Essentials of Management. New Delhi: Tata McGraw-Hill Education.
Dr. B. Nagaraju
LESSION – 2
ADMINISTRATION AND MANAGEMENT
Learning objectives
After Studying this lesson, the students are able to understand.
• Over view Administration and management.

• The difference between administration and management
• Finally the chapter will end with discussing the concept of manager, manager ‘s
functions and the role played in running theorganization.
Structure
2.1 Definition Administration and Management
2.2 Manager
2.3 Functions of a Manager
2.4 Roles performed by managers
2.5 Summary
2.6 Keyword
2.1 Definition administration and management
According to The o Haimann, Administration means overall determination of policies, setting

of major objectives, the identification of general purposes and lying down of broad
programmes and projects. It refers to the activities of higher level. It lays down basic
principles of the enterprise. According to Newman, Administration means guidance,
leadership and control of the efforts of the groups towards some common goals.
Whereas, management involves conceiving, initiating and bringing together the various
elements; coordinating, actuating, integrating the diverse organizational components while
sustaining the viability of the organization towards some pre-determined goals. In other
words, it is an art of getting things done through and with the people in formally organized
groups.
Difference between administration and management
The difference between Management and Administration can be summarized under two
categories: -
1. Functions
2. Usage /Applicability
Basis Pointof Management Administration

difference
Meaning Management is an It is concerned with formulation of
determined goals. Broad objectives, plans &policies
Nature Management is Administration is a decision-
executing function. making function
Process Management decides whoAdministration decides what is to

should as it &how should hebe done & when it is to be done.
On the basis of
do it.
functions
Functions Management is Administration decides what is to
under their be done & when it is to be done.
supervision.
Skills Technical and Human skills Conceptual and Human skills
Level Middle &lower levelTop level function

function
Applicability It is applicable to businessIt is applicable to non- business
concerns i.e. profit-makingconcerns i.e. clubs, schools,
organization. hospitals etc.
On the basis of
usage Influence The management decisions The administration is influenced
Decisions of the managers. by public opinion, govt. policies,
religious organizations, customs
etc.
Status Management constitutes theAdministration represents owners
employees of the organizationof the enterprise who earn return
who are paid remuneration (inon their capital invested &profits
the form of salaries &wages). in the form of dividend.
Practically, there is no difference between management and administration. Every manager is

concerned with both – administrative management function and operative management
function as shown in the figure. However, the managers who are higher up in the hierarchy
denote more time on administrative function and the lower level denote more time on
directing and controlling worker‘s performance i.e. management.
Perspectives of Management 2.3 Administration and Mang.
Figure 4
The Figure above clearly shows the degree of administration and management performed by
the different levels of management
2.2 Manager
Definition
A Manager is the person responsible for planning and directing the work of a
group of individuals, monitoring their work, and taking corrective action when necessary. For
many people, this is their first step into a management career.
Managers may direct workers directly or they may direct several supervisors
who direct the workers. The manager must be familiar with the work of all the groups he/she
supervises, but does not need to be the best in any or all of the areas. It is more important for
the manager to know how to manage the workers than to know how to do their workwell.
A manager's title reflects what he/she is responsible for. An Accounting
Manager supervises the Accounting function. An Operations Manager is responsible for the
operations of the company. The Manager of Design Engineering supervises engineers and
support staff engaged in design of a product or service. A Night Manager is responsible for
the activities that take place at night. There are many management functions in business and,
therefore, many manager titles. Regardless of title, the manager is responsible for planning,
directing, monitoring and controlling the people and their work.
Skills required by a manager

Not everyone can be a manager. Certain skills, or abilities to translate knowledge into
action that results in desired performance, are required to help other employees become
more productive. These skills fall under the following categories:
Technical: This skill requires the ability to use a special proficiency or expertise to
perform particular tasks. Managers acquire these skills initially through formal education
and then further develop them through training and job experience. Technical skills are
most important at lower levels of management.
Human: This skill demonstrates the ability to work well in cooperation with others. A
manager with good human skills has a high degree of self-awareness and a capacity to
understand or empathize with the feelings of others.Human skills is critical for all managers
because of the highly interpersonal nature of managerial work.

Conceptual: This skill calls for the ability to think analytically. Analytical skills enable
managers to break down problems into smaller parts, to see the relations among the parts,
and to recognize the implications of any one problem for others. The higher the
management level, the more important conceptual skillsbecome.
Although all three categories contain skills essential for managers, their relative importance
tends to vary by level of managerial responsibility.
Following are some of the skills and personal characteristics that a manager should acquire
through observation, formal training or on the job:
• Leadership — ability to influence others to perform tasks

• Self-objectivity — ability to evaluate yourself realistically
• Analytic thinking — ability to interpret and explain patterns in information
• Behavioral flexibility — ability to modify personal behaviour to react objectively
rather than subjectively to accomplish organizational goals
• Oral communication — ability to express ideas clearly in words
• Written communication — ability to express ideas clearly in writing
• Personal impact — ability to create a good impression and in still confidence
• Resistance to stress — ability to perform under stressful conditions
• Tolerance for uncertainty — ability to perform in ambiguous situations
2.3 Functions of a manager
Following are the main functions of manager:

• Planning: This step involves mapping out exactly how to achieve a particular goal.
Say, for example, that the organization's goal is to improve company sales. The
manager first needs to decide which steps are necessary to accomplish that goal.
These steps may include increasing advertising, inventory, and sales staff. These
necessary
• steps are developed into a plan. When the plan is in place, the manager can follow it
to accomplish the goal of improving company sales.
• Organizing: After a plan is in place, a manager needs to organize his team and
materials according to the plan. Assigning work and granting authority are two
important elements of organizing.
• Staffing: After a manager discerns his area's needs, he may decide to beef up his
staffing by recruiting, selecting, training, and developing employees. A manager in
a large organization often works with the company's human resources department to
accomplish this goal.
• Leading: A manager needs to do more than just plan, organize, and staff her team
to achieve a goal. She must also lead. Leading involves motivating,
communicating, guiding, and encouraging. It requires the manager to coach, assist,
and problem solve with employees.
• Controlling: After the other elements are in place, a manager's job is not finished.
He needs to continuously check results against goals and take any corrective
actions necessary to make sure that his area's plans remain on track.
All managers at all levels of every organization perform these functions, but the amount of
time a manager spends on each one depends on both the level of management and the specific
organization.
2.4 Roles performed by managers

A manager wears many hats. Not only is a manager a team leader, but he or she is
also a planner, organizer, cheerleader, coach, problem solver, and decision maker — all
rolled into one. And these are just a few of a manager's roles. In addition managers'
schedules are usually jam-packed. Whether they're busy with employee meetings,
unexpected problems, or strategy sessions, managers often find little spare time on their
calendars.
In his classic book, The Nature of Managerial Work, Henry Mintzberg describes a set of
ten roles that a manager fills. These roles fall into three categories:
• Interpersonal: This role involves human interaction.

• Informational: This role involves the sharing and analyzing of information.
• Decisional: This role involves decision making.
Mintzberg's Set of Ten Roles
Category Role Activity

Monitor Seek and receive information;
with stakeholders.
Forward information to organization
Disseminator members via memos, reports, and phone
Informational calls.
Transmit information to Outsiders via
Spokesperson reports, memos, and speeches.
Perform ceremonial and symbolic duties,
Figurehead such as greeting visitors and signing
legal documents.
Leader Direct and motivate subordinates; counsel
Interpersonal
and communicate with subordinates.
Liaison Maintain information links both inside and
outside organization via mail, phone
calls, and meetings.
Entrepreneur Initiate improvement projects; identify new
ideas and delegate idea responsibility to
others.
Disturbance handler Take corrective action during disputes or
crises; resolve conflicts among subordinates;
adapt to environments.
Decisional Resource allocator Decide who gets resources; prepare
Schedules and determine priorities.
Negotiator Represent department during negotiations

Of union contracts, sales, purchases, and
budgets.
Table 1
Administration means setting of major objectives, and broad programmes and projects.
Whereas, management involves conceiving, initiating and bringing together the various
elements; together towards meeting organization pre-determined goals.
A Manager is the person responsible for planning and directing the work of a group of
individuals, monitoring their work, and taking corrective action when necessary. Managers
need to acquire technical, human and conceptual skills. Manager has to perform all the
functions of management. This is the first step into a management career.
2.5 Summary
Administration means overall determination of policies, setting of major

objectives, the identification of general purposes and lying down of broad programmers and
projects. It refers to the activities of higher level. It lays down basic principles of the
enterprise. Managers may direct workers directly or they may direct several supervisors who
direct the workers. The manager must be familiar with the work of all the groups he/she
supervises, but does not need to be the best in any or all of the areas. It is more important for
the manager to know how to manage the workers than to know how to do their work well.
Administration means setting of major objectives, and broad programmes and

projects. Whereas, management involves conceiving, initiating and bringing together the
various elements; together towards meeting organization pre-determined goals. A Manager is
the person responsible for planning and directing the work of a group of individuals,
monitoring their work, and taking corrective action when necessary. Managers need to
acquire technical, human and conceptual skills. Manager has to perform all the functions of
management. This is the first step into a management career.
2.6 Keywords
Administration :The process or activity of running a business, organization, etc.

Manager :A person responsible for controlling or administering an
organization or group of staff.
Interpersonal :Relating to relationships or communication between people.
Informational : Relating to or characterized by facts about something; providing
information.
Decisional :Having the power or authority to make decisions.
Planning : The process of making plans for something.
2.7Self assessment questions
1. Practically, there is no difference between management & administration Justify ?

2. Who is called a manager? What skills does he need to be successful?
3. What functions do managers perform?
4. Explain the role of a manager according to Mintzberg?
Education
• Robbins, S.P. & Decenzo, D. A. (2014). Fundamentals of Management: Essential
• Koontz, H. (2010). Essentials of Management. New Delhi: Tata McGraw-Hill
Education.
- Dr. B. Nagaraju
Lesson -3
DEVELOPMENT OF MANAGEMENT
THOUGHTS
Learning objectives
After studying the unit the students will be able to:
• Know the evolution of management thoughts through various schools of thoughts.
• Discuss the System contingency approaches to management.
• Understand the contribution of F. W. Taylor, Henri Fayol and Elton Mayo to the
development of management.
• Elaborate the various management functions.
• Discuss the responsibilities of business/management to the society.
Structure
3.1 Introductions
3.2 The Evolution of Management Thought
3.3 Contingency Approach to Management
3.4 Contribution of Frederick Winslow Taylor, Henri Fayol, Elton Mayo
3.5 Summary
3.6 Keywords
3.1 Introductions
Through the practice of management and the continued development of commerce and
wealth we are transforming our lives. While appreciating the past success of management ‘we
would also recognise that today‘s accelerating pace of change is putting pressure on our
organisations to be at the forefront of management thinking.
In his comprehensive book ‗The Evolution of Management Thought ‘Daniel A Wren writes,
“Within the practices of the past there are lessons of history for tomorrow in a continuous
stream. We occupy but one point in this stream. The purpose... is to present…the past as a
prologue to the future."
So with the aim of accelerating the development of our management practice for the future let
us examine that stream of evolving management thought of the past.
3.2 Evolution of management thought
The evolution of the discipline of management has helped to develop a body of knowledge
about the practice of management. Within the field of management, eight schools of thought
have contributed significantly to the development of management.
The following table brings together the theories of management and the issues that they
address.
Theories of management and the problems they address
Theories of management skills
The human relations The motivational problem

school
The organization behavior school Improving the integration of people into
organizations
The information and The management decision-skills
decision school problem
Theories of management
functions
Scientific management The human productivity problem
The quantitative school The application of objective
functions to management
The strategic management school The organization long-range planning
problem
Theories of organization systems
Administrative management The organization problem
The organization theory The organization design problem

school
Table 1
In this chapter, we will focus on four well-established schools of management thought: the
scientific management school, the classical organization theory school, the behavioral school,
and the management science school. Although these schools or theoretical approaches
developed historical sequence, later ideas have not replaced earlier ones. Instead, each new
school has tended to complement or coexist with previous ones. At the same time, each school
has continued to evolve, and some have even merged with others.
The scientific management school
Scientific Management theory rise in part from the need to increase productivity. In the
United States especially, skilled labour was in short supply at the beginning of the twentieth
century. The only way to expand productivity was to raise the efficiency of workers.
Therefore, Frederick W. Taylor, Henry L. Gantt, and Frank and Lillian Gilbert devised the
body of principles known as scientific management theory.
Perspectives of Management 3.3 Development of Management…
F W Taylor is considered to be the father of scientific management. Henery Gantt, Frank and
Lillian Gilberth and Harring to Emerson supported Taylor in his efforts. Together with Taylor
they revolutionized management thinking. Scientific management is the name given to the
principles and practices that grew out of their work of Taylor and his followers and that are
characterized by concern for efficiency and systematization in management. Four basic part of
a series of ideas developed by Taylor are as follows:
Each person‘s job should be broken down into elements and performed in a scientific way.
Workers should be scientifically selected and trained to do the work.
There should be co-operation between management and workers and
There should be division of labor between managers and workers.
Among the other significant contribution to this school of thought was Henry L Grant. He
emphasized the psychology of the worker and the importance of morale in production. Grant
devised a wage payment system and developed a chart in system of control for scheduling
production operation which became the basis for modern scheduling techniques like CPM and
PERT.
Frank and Lillian Gilbert concentrated on time-and-motion study to develop more efficient
ways of performing repetitive tasks. Time-and-motion study and piece-rate incentives are two
major managerial practices developed and widely in use today.
Harrington Emerson in his book ―Twelve Principles of Efficiency‖ states that a manager
should carefully define objectives, use the scientific method of analysis, develop and use
standardized procedure, and reward employees for good work.
Classical organization school
Scientific management theory concerned the optimization of individual workers and work
processes. During the same period, classical organization theory complimented scientific
management by providing a framework for the structuring the organization. The leading
proponents of classical organization theory were Henri Fayol (a French engineer), Lyndall
Urwick (a British company manager), and Max Weber (a German sociologist).
Classical organization theory is the bureaucracy. Weber defined the organization elements
which comprised the ideal bureaucracy. These included:
A clearly defined set of rules and procedures
Division of labor according to functional expertise
A clear chain of command
Individual advancement based on merit
Professional managers
As you can see, many aspects of Weber‘s ―ideal bureaucracy‖ are simply measures that ensure
fairness and objectivity.
The Classic organizational theory has been derived from organizational structures and
procedures during the industrial revolution which emphasis the Economic rationale for the
factory system and believed that all formal organizations are force multipliers. It main
features:
Organizations exist to accomplish production-related and economic goals.
There is one best way to organize for production, and that way can be found through
systematic, scientific inquiry.
Production is maximized through specialization and division of labor.
People and organizations act in accordance with rational economic principles.
The Classic organizational theory is followed by Neoclassical Organization Theory and the
Modern Structural Organization Theory which talked about the important source of the power
and politics, organizational culture, systems theory, specialization and division of labor.
Behavioral management school
The behavioral management theory is often called the human relations movement because it
addresses the human dimension of work. Behavioral theorists believed that a better
understanding of human behavior at work, such as motivation, conflict, expectations, and
group dynamics, improved productivity.
The theorists who contributed to this school viewed employees as individuals, resources, and
assets to be developed and worked with — not as machines, as in the past. Several individuals
and experiments contributed to this theory.
The Elton Mayo and Roethlisberger Hawthorne experiment in Chicago from 1924 to 1932
concludes that human relations and the social needs of workers are crucial aspects of business
management. Abraham Maslow, developed one of the most widely recognized need theories,
a theory of motivation based upon a consideration of human needs. His theory of human
needs had three assumptions:
Human needs are never completely satisfied.
Human behavior is purposeful and is motivated by the need for satisfaction.
Needs can be classified according to a hierarchical structure of importance, from the
lowest to highest.
The Two Factor theory of Douglas McGregor that, the Theory X manager has a negative view
of employees and assumes that they are lazy, untrustworthy, and incapable of assuming
responsibility. On the other hand, the Theory Y manager assumes that employees are not only
trustworthy and capable of assuming responsibility, but also have high levels of motivation.
As a group, these theorists discovered that people worked for inner satisfaction and not
materialistic rewards, shifting the focus to the role of individuals in an organization's
performance.
Management science school
During World War II the allies faced many complex problems and to overcome these
problems operational research teams were set up, consisting of mathematicians, physicists and
other scientists, who pooled their knowledge to solve problems. After the war, their ideas
were applied to industrial problems which were previously unsuccessfully solved by
conventional means. With the aid of the electronic computer, these procedures became known
as the management science‖ school relying heavily on quantitative methods.
The contribution of the quantitative school was greatest in the areas of planning and control.
However, many doubted the ability of this school to deal effectively with ―people.‖ The
techniques in this school consisted of capital budgeting, production scheduling, optimum
inventory levels and development of product strategies
The management science school differs from the classical and behavioral schools in the
following ways:
The classical or scientific management approach concentrates on the efficiency of the
manufacturing process. The management science school places greater weight on the overall
planning and decision-making process.
It relies heavily on the use of computers and mathematical models in planning;
It is focused on the evaluation of effectiveness of models like the techniques of the use of
models in managerial decision making: the return on investment analysis for example..
In essence, by using computers and quantitative analysis techniques, the management science
school has made it possible to consider the effect of a number of variables in organizations
which may otherwise have been overlooked. It must be emphasized that statistical evidence
alone may not be sufficient to solve various management problems. The more comprehensive
techniques of the behavioral school or the administrative management approach may still be
needed to complement. Especially the behavioral school has the ability to look at the welfare
of staff and can identify the reasons behind certain behavior.
3.3 Contingency approach to management

The contingency approach believes that it is impossible to select one way of managing
that works best in all situations like promoted by Taylor.
The contingency approach believes that it is impossible to select one way of managing that
works best in all situations like promoted by Taylor. Their approach is to identify the
conditions of a task (scientific management school), managerial job (administrative
management school) and person (human relations school) as parts of a complete management
situation and attempt to integrate them all into a solution which is most appropriate for a
specific circumstance. Contingency refers to the immediate (contingent or touching)
circumstances.
The manager has to systematically try to identify which technique or approach will be the best
solution for a problem which exists in a particular circumstance or context.
An example of this is the never ending problem of increasing productivity. The different
experts would offer the following solutions:
Behavioral scientist: create a climate which is psychologically motivating;
Classical management approach: create a new incentive scheme;
Contingency approach: both ideas are viable and it depends on the possible fit of each
solution with the goals, structure and resources of the organization.
The contingency approach may consider, for policy reasons, that an incentive scheme was not
relevant. The complexity of each situation should be noted and decisions made in each
individual circumstances.
It should be realized that the contingency approach is not really new because Taylor already
emphasized the importance of choosing the general type of management best suited to a
particular case. Henri Fayol, in turn, also found that there is nothing rigid or absolute in
management affairs.
Similar ideas were expressed in the 1920s, by Mary Parker Follett (1865-1933) who was
greatly interested in social work and was a genius for relating individual experience to general
principles. Her concept of the law of the situation referred to the necessity of acting in
accordance with the specific requirements of a given situation. She noted that these
requirements were constantly changing and needed continuous efforts to maintain effective
working relationships.
The contingency approach seeks to apply to real life situations ideas drawn from various
schools of management thought. They claim that no one approach is universally applicable
and different problems and situations require different approaches. Managers must try to find
the approach that is the best for them in a certain given situation, so they can achieve their
goals.
It is important to note that the contingency approach stresses the need for managers to
examine the relationship between the internal and external environment of an organization.
Critics of the contingency approach have blamed it to lack theoretical foundation and are
basically intuitive. Managers today are advised to analyze a situation and use ideas from the
various schools of thought to find an appropriate combination of management techniques to
meet the needs of the situation.
3.4 Contribution of Frederick Winslow Taylor, Henrys Fayol, Eltonmayo
3.4.1 Frederick Winslow Taylor
Taylor was born in 1856 to a wealthy Quaker family in Germantown, Philadelphia,

Pennsylvania. After the depression of 1873, Taylor became an industrial apprentice
patternmaker, gaining shop-floor experience at a pump-manufacturing company.
Taylor is regarded as the father of scientific management, In Peter Drucker's description;

Frederick W. Taylor was the first man in recorded history who deemed work deserving of
systematic observation and study. On Taylor's 'scientific management' rests, above all, the
tremendous surge of affluence in the last seventy-five years which has lifted the working
masses in the developed countries well above any level recorded before, even for the well-to-
do.
Taylor believed that the industrial management of his day was amateurish, that management
could be formulated as an academic discipline, and that the best results would come from the
partnership between a trained and qualified management and a cooperative and innovative
workforce. Each side needed the other, and there was no need for trade unions.
Taylor's approach is also often referred to, as Taylor's Principles, or frequently disparagingly,
as Taylorism. Taylor's scientific management consisted of four principles:
1. Replace rule-of-thumb work methods with methods based on a scientific study of the
tasks.
2. Scientifically select, train, and develop each employee rather than passively leaving
them to train themselves.
3. Provide "Detailed instruction and supervision of each worker in the performance of
that worker's discrete task" (Montgomery 1997:250).
4. Divide work nearly equally between managers and workers, so that the managers
apply scientific management principles to planning the work and the workers actually
perform the tasks.
Taylor had very precise ideas about how to introduce his system. It is only through
enforced standardization of methods, enforced adoption of the best implements and working
conditions, and enforced cooperation that faster work can be assured. And the duty of
enforcing the adoption of standards and enforcing this cooperation rests with management
alone.
Taylor thought that by analyzing work, the "One Best Way" to do it would be found. He is
most remembered for developing the time and motion study. Taylor's system was widely
adopted in the United States and the world until its demise in the 1930's as organized labor
pushed for a minimum wage based on hourly pay, as opposed to Taylor's contention that pay
ought to be based on performance.
In practice "Taylorism" too often fell short of collaboration between labor and management
and, frequently, was a mask for business exploitation of workers. The enduring and
unquestionable contribution of Frederick Taylor is that management is firmly established as
something done by trained, professional practitioners and is elevated as the subject of
legitimate scholarship.
3.4.2 George Elton John Mayo ( 26 December 1880 - 7 Sptember1949)
Mayo was an Australian psychologist, sociologist and organization theorist. He lectured at

the University of Queens land from 1911 to 1923 before moving to the University of
Pennsylvania, but spent most of his career at Harvard Business School(1926 - 1947), where
he was professor of industrial research. Mayo is known as the founder of the Human
Relations Movement, and is known for his research including the Hawthorne Studies, and his
book The Human Problems of an Industrialized Civilization(1933).The research conducted
under the Hawthorne Studies of the 1930s showed the importance of groups in affecting the
behavior of individuals at work. However it was not Mayo who conducted the practical
experiments but his employees Roethlisberger and Dickinson. This enabled him to make
certain deductions about how managers should behave. He carried out a number of
investigations to look at ways of improving productivity, for example changing lighting
conditions in the workplace. What he found however was that work satisfaction depended to a
large extent on the informal social pattern of the work group. Where norms of cooperation
and higher output were established because of a feeling of importance, physical conditions or
financial incentives had little motivational value. People will form work groups and this can
be used by management to benefit the organization. He concluded that people's work
performance is dependent on both social issues and job content. He suggested a tension
between workers' 'logic of sentiment' and managers' 'logic of cost and efficiency' which could
lead to conflict within organizations.
Flowing from the findings of these investigations he came to certain conclusions as follows:
Work is a group activity.
The social world of the adult is primarily patterned about work activity.
The need for recognition, security and sense of belonging is more important in determining
workers' morale and productivity than the physical conditions under which he works.
A complaint is not necessarily an objective recital of facts; it is commonly a symptom
manifesting disturbance of an individual's status position.
The worker is a person whose attitudes and effectiveness are conditioned by social demands
from both inside and outside the work plant.
Informal groups within the work plant exercise strong social controls over the work habits
and attitudes of the individual worker.

The change from an established society in the home to an adaptive society in the work plant
resulting from the use of new techniques tends continually to disrupt the social organization
of a work plant and industry generally.
Group collaboration does not occur by accident; it must be planned and developed.
3.4.3 Henri Fayol, (1841-1925)
Fayol's career began as a mining engineer. He then moved into research geology and in 1888
joined Comambault as Director. Comambault was in difficulty but Fayol turned the operation
round. On retirement he published his work - a comprehensive theory of administration -
described and classified administrative management roles and processes that became
recognized and referenced by others in the growing discourse about management. He is
frequently seen as a key, early contributor to a classical or administrative management school
of thought.
His aspiration for an "administrative science" sought a consistent set of principles that all
organizations must apply in order to run properly.
F. W. Taylor published "The Principles of Scientific Management" in the USA in 1911, and
Fayol in 1916 examined the nature of management and administration on the basis of his
French mining organisationexperiences.
Fayol argued that principles existed which all organisations in order to operate and be
administered efficiently - could implement. This type of assertion typifies a "one best way"
approach to management thinking. Fayol's five functions are still relevant to discussion today
about management roles and action.
1. to forecast and plan – purveyance examine the future and draw up plans of action.
2. to organise build up the structure, material and human of the undertaking.
3. to command maintain activity among the personnel.
4. to bind together, unify and harmonise activity and effort.
5. to see that everything occurs in conformity with policy and practice.
Fayol also synthesised 14 principles for organisational design and effective administration as
under:
1. Division of work: Division of work and specialization produces more and better work
with the sameeffort.
2. Authority and responsibility: Authority is the right to give orders and the power to
exact obedience. Authority creates responsibility.
3. Discipline: Good discipline requires managers to apply sanctions whenever violations
become apparent.
4. Unity of command: An employee should receive orders from only one superior.
5. Unity of direction: Organizational activities must have one central authority and one
plan of action.
6. Subordination of individual interest to general interest: The interests of one employee
or group of employees are subordinate to the interests and goals of the organization.
7. Remuneration of personnel: Salaries to employees should be fair and provide
satisfaction both to the employee and employer.
8. Centralization: The objective of centralization is the best utilization of personnel.
9. Scalar chain: A chain of authority exists from the highest organizational authority to
the lowest ranks.
10. Order: The right materials and the right employees are necessary for each
organizational function and activity.

11. Equity: equity is a combination of kindliness and justice. Both should be considered
when dealing with employees.
12. Stability of tenure of personnel: To attain the maximum productivity of personnel, a
stable work force is needed.
13. Initiative: Zeal, energy, and initiative are desired at all levels of the organizational
ladder.
14. Esprit de corps: Teamwork is fundamentally important to an organization.
3.4.4 Peter Ferdinand Drucker (November 19, 1909 – November 11, 2005)
The man who invented management he took schumpeter's advice to heart, beginning a career
in consulting while continuing his life as a teacher and writer. Drucker's most famous text,
The Practice of Management, published in 1954, laid out the American corporation like a
well-dissected frog in a college laboratory, with chapter headings such as "What is a
Business?" and "Managing growth." It became his first popular book about management, and
its title was, in effect, a manifesto. He was saying that management was not a science or an
art. It was a profession, like medicine or law. It was about getting the very best out of people.
As he himself put it: "I wrote The Practice of Management because there was no book on
management. I had been working for 10 years consulting and teaching, and there simply was
nothing or very little. So I kind of sat down and wrote it, very conscious of the fact that I was
laying the foundations of a discipline."
Drucker emerged as one of Corporate America's most important critics. When conglomerates
were the rage, he preached against reckless mergers and acquisitions. When executives were
engaged in empire-building, he argued against excess staff and the inefficiencies of numerous
"assistants to." In a 1984 essay he persuasively argued that CEO pay had rocketed out of
control and implored boards to hold CEO compensation to no more than 20 times what the
rank and file made. What particularly enraged him was the tendency of corporate managers to
reap massive earnings while firing thousands of their workers. "This is morally and socially
unforgivable," wrote Drucker, "and we will pay a heavy price for it."
• It was Drucker who introduced the idea of decentralization in the 1940s which became
a bedrock principle for virtually every large organization in the world. He was the first
to assert in the 1950s that workers should be treated as assets, not as liabilities to be
eliminated.
• He originated the view of the corporation as a human community again, in the 1950s
built on trust and respect for the worker and not just a profit-making machine, a
perspective that won Drucker an almost godlike reverence among the Japanese.
• He first made clear still the '50s that there is "no business without a customer," a
simple notion that ushered in a new marketing mind-set.
• He argued in the 1960s long before others for the importance of substance over style,
for institutionalized practices over charismatic, cult leaders.
• And it was Drucker again who wrote about the contribution of knowledge workers in
the 1970s long before anyone knew or understood how knowledge would trump raw
material as the essential capital of the New Economy.
3.5 Summary
Over the years various theories of management have addressed various problems. Theories of
management skills, management functions and organisation systems have been developed.
Centre for Distance Education 3.10 Acharya Nagarjuna
University
Further various management schools have evolved such as scientific management school,
classical organization school, behavioral management school and management science school.
Frederick Winslow Taylor, George Elton John Mayo, Henri Fayol, Peter Ferdinand drucker
and others have contributed in furthering the development of management thoughts and
theories. Taylor's scientific management of four principles, mayo human relations movement,
fayol 14 principles for organisational design and effective administration and drucker‘s
management have all enriched the process of management development.
3.6 Keywords
Behavioral
Trade Unions :An organized association of workers in a trade, group of trades, or
profession, formed to protect and further their rights and interests.
Industry :Economic activity concerned with the processing of raw materials
and manufacture of goods in factories.
Remuneration :Money paid for work or a service.
Administration :The process or activity of running a business, organization, etc.
Manager :A person responsible for controlling or administering an
organization or group of staff.
3.7 Self assessment questions
1. Briefly explain the evolution of management thoughts along with the theories of
management and the problems they address
2. Explain Taylor‘s Principles ofmanagement
3. Explain the findings of George Elton John Mayo regarding the connection between
cooperation and higheroutput
4. What are the five functions ofFayol&Fayol‘s 14 principles ofmanagement
Education
• Robbins, S.P. &Decenzo, D. A. (2014). Fundamentals of Management: Essential
Koontz, H. (2010). Essentials of Management. New Delhi: Tata McGraw-Hill Education.
- Dr. B. Nagaraju
LESSON 4
LEVELS OF MANAGEMENT
Learning objectives
After studying the unit the students will be able to:
• Elaborate the management roles.

• Discuss the Levels of Management
• Elaborate the Types of Business Organization
Structure
4.1 Management Roles
4.2 Levels of Management
4.3 Types of Business Organization
4.4 Summary
4.5 Keywords
4.1 Management roles
Henry Mintzberg proposed an alternative approach to defining what management is

about. Instead of describing in theory what managers should do, he studied what managers
actually spend their time doing. This led him to describe management in terms of the different
roles that managers undertake. The ten major roles that he identified are discussed below.The
roles of managers 'Mintzberg shows a substantial difference between what managers do and
what they are said to do. On the basis of work activity studies, he demonstrates that a
manager's job is characterised by pace, interruptions, brevity, variety, and fragmentation of
activities, and a preference for verbal contacts. Managers spend a considerable amount of time
in scheduled meetings and in networks of contacts outside meetings.
The fragmentary nature of what managers do leads to the suggestion that they have to perform
a wide variety of roles. Mintzberg suggests that there are ten managerial roles which can be
grouped into three areas: interpersonal, informational and decisional.Interpersonal roles cover
the relationships that a manager has to have with others. The three roles within this category
are figurehead, leader and liaison. Managers have to act as figureheads because of their
formal authority and symbolic position, representing their organisations. As leader, managers
have to bring together the needs of an organisation and those of the individuals under their
command. The third interpersonal role, that of liaison, deals with the horizontal relationships
which work-activity studies have shown to be important for a manager. A manager has to
maintain a network of relationships outside the organisation.
Managers have to collect, disseminate and transmit information and have three
corresponding informational roles, namely monitor, disseminator and spokesperson. A
manager is an important figure in monitoring what goes on in the organisation, receiving
information about both internal and external events and transmitting it to others. This process
of transmission is the dissemination role, passing on information of both a factual and value
kind. A manager often has to give information concerning the organisation to outsiders, taking
on the role of spokesperson to both the general public and those in positions of influence.
As with so many writers about management, Mintzberg regards the most crucial part of
managerial activity as that concerned with making decisions. The four roles that he places in
this category are based on different classes of decision, namely, entrepreneurs, disturbance
handler, resource allocator, and negotiator. As entrepreneurs, managers make decisions about
changing what is happening in an organisation. They may have to both initiate change and
take an active part in deciding exactly what is to be done. In principle, they are acting
voluntarily. This is very different from their role as a disturbance handler, where managers
have to make decisions which arise from events beyond their control and unpredicted. The
ability to react to events as well as to plan activities is an important managerial skill in
Mintzberg's eyes.
The resource allocation role of a manager is central to much organisational analysis. Clearly a
manager has to make decisions about the allocation of money, people, equipment, time and so
on Mintzberg points out that in doing so a manager is actually scheduling time, programming
work and authorising actions. The negotiation role is put in the decisional category by
Mintzberg because it is 'resource trading in real time'. A manager has to negotiate with others
and in the process be able to make decisions about the commitment of organisational
resources.
For Mintzberg these ten roles provide a more adequate description of what managers do than
any of the various schools of management thought. In these roles it is information that is
crucial: the manager is determining the priority of information. Through the interpersonal
roles a manager acquires information, and through the decisional roles it is put into use.The
scope for each manager to choose a different blend of roles means that management is not
reducible to a set of scientific statements and programmes. Management is essentially an art
and it is necessary for managers to try and learn continuously about their own situations. Self-
study is vital. At the moment there is no solid basis for teaching a theory of managing.
According to Mintzberg, "the management school has been more effective at training
technocrats to deal with structured problems than managers to deal with unstructured ones."
4.2 Levels of management
The term “Levels of Management’ refers to a line of demarcation between various managerial
positions in an organization. The number of levels in management increases when the size of
the business and work force increases and vice versa. The level of management determines a
chain of command, the amount of authority & status enjoyed by any managerial position. The
levels of management can be classified in three broad categories:
• Top level / Administrative level
• Middle level / Executory
• Low level / Supervisory / Operative / First-line managers
Managers at all these levels perform different functions. The role of managers at all the three
levels is discussed below:
Perspectives of Management 4.3 Levels of Management
Levels of management
1. Top Level of Management

It consists of board of directors, chief executive or managing director. The top management is
the ultimate source of authority and it manages goals and policies for an enterprise. It devotes
more time on planning and coordinating functions.
The role of the top management can be summarized as follows -
a) Top management lays down the objectives and broad policies of the enterprise.
b) It issues necessary instructions for preparation of department budgets,
procedures, schedules etc.
c) It prepares strategic plans & policies for the enterprise.
d) It appoints the executive for middle level i.e. departmental managers.
e) It controls & coordinates the activities of all the departments.
f) It is also responsible for maintaining a contact with the outside world.
g) It provides guidance and direction.
h) The top management is also responsible towards the shareholders for the
performance of the enterprise.
2. Middle level of management
The branch managers and departmental managers constitute middle level. They are
responsible to the top management for the functioning of their department. They devote more
time to organizational and directional functions. In small organization, there is only one layer
of middle level of management but in big enterprises, there may be senior and junior middle
level management. Their role can be emphasized as -
a) They execute the plans of the organization in accordance with the policies and
directives of the top management.
b) They make plans for the sub-units of the organization.
c) They participate in employment & training of lower level management.
d) They interpret and explain policies from top level management to lower level.
e) They are responsible for coordinating the activities within the division or
department.
f) It also sends important reports and other important data to top level
management.
g) They evaluate performance of junior managers.
h) They are also responsible for inspiring lower level managers towards better
performance.
3. Lower level of management
Lower level is also known as supervisory / operative level of management. It consists of
supervisors, foreman, section officers, superintendent etc. According to R.C. Davis,
“Supervisory management refers to those executives whose work has to be largely with
personal oversight and direction of operative employees”. In other words, they are concerned
with direction and controlling function of management. Their activities include -
a) Assigning of jobs and tasks to various workers.
b) They guide and instruct workers for day to day activities.
c) They are responsible for the quality as well as quantity of production.
d) They are also entrusted with the responsibility of maintaining good relation in
the organization.
e) They communicate workers problems, suggestions, and recommendatory
appeals etc to the higher level and higher level goals and objectives to the
workers.
f) They help to solve the grievances of the workers.
g) They supervise & guide the sub-ordinates.
h) They are responsible for providing training to the workers.
i) They arrange necessary materials, machines, tools etc for getting the things
done.
j) They prepare periodical reports about the performance of the workers.
k) They ensure discipline in the enterprise.
l) They motivate workers.
m) They are the image builders of the enterprise because they are in direct contact
with the workers.
4.3 Types of business organization

It is important that the business owner seriously considers the different forms of business
organization—types such as sole proprietorship, partnership, and corporation. Which
organizational form is most appropriate can be influenced by tax issues, legal issues, financial
concerns, and personal concerns. For the purpose of this overview, basic information is
presented to establish a general impression of the business organization.
Sole Proprietorship
A Sole Proprietorship consists of one individual doing business. Sole Proprietorships are the
most numerous form of business organization in the United States, however, they account for
little in the way of aggregate business receipts.
Partnership
A Partnership consists of two or more individuals in business together. Partnerships may be as
small as mom and pop type operations, or as large as some of the big legal or accounting
firms that may have dozens of partners. There are different types of partnerships—general
partnership, limited partnership, and limited liability partnership—the basic differences
stemming around the degree of personal liability and management control.
Corporation
Corporations are probably the dominant form of business organization in the United States.
Although fewer in number, corporations account for the lion’s share of aggregate business
Perspectives of Management 4.5 Levels of Management
receipts in the U.S. economy. A corporation is a legal entity doing business, and is distinct
from the individuals within the entity. Public corporations are owned by shareholders who
elect a board of directors to oversee primary responsibilities. Along with standard, for-profit
corporations, there are charitable, not-for-profit corporations.
4.4 Summary
Henry Mintzberg proposed an alternative approach to defining what management is about.
Instead of describing in theory what managers should do, he studied what managers actually
spend their time doing.
The term “Levels of Management’ refers to a line of demarcation between various managerial
positions in an organization. The number of levels in management increases when the size of
the business and work force increases and vice versa.
4. 5 Keywords

Leadership : The action of leading a group of people or an organization.
Team Building :The action or process of causing a group of people to work
together effectively as a team, especially by means of activities
and events designed to increase motivation and promote
cooperation.

1. Explain the management roles?
2. Elaborate the levels of management ?
3. Briefly explain Types of Business organization?

Education
• Robbins, S.P. &Decenzo, D. A. (2014). Fundamentals of Management: Essential
• Koontz, H. (2010). Essentials of Management. New Delhi: Tata McGraw-Hill
Education.
Dr. B. Nagaraju
UNIT - II
LESSON -5
IMPORTANCE OF PLANNING
LEARNING OBJECTIVES:
After studying this lesson, the students are able to understand.
Understand what is planning.
Know the components of planning.
Discuss the importance of planning.
Detailed explanation on advantages and disadvantages of planning.
Know the purpose of planning.
Understand basic topics of planning.
Attain knowledge regarding objectives of planning
STRUCTURE
5.1 Meaning and definition

5.2 Components of planning
5.3 Planning topics
5.3.1 Psychological aspects
5.3.2 Neuropsychological tests
5.4 Nature of planning
5.5 Advantages and limitations of planning
5.5.1 Advantages of planning
5.5.2 Limitations of planning
5.6 Objectives of planning
5.7 Importance of planning
5.8 Summary
5.9 Key Words
5.10 Self-Assessment questions
5.1 INTRODUCTION:
Planning is the process of thinking about the activities required to achieve a desired goal.
It is the first and foremost activity to achieve desired results. It involves the creation and
maintenance of a plan, such as psychological aspects that require conceptual skills. There are
even a couple of tests to measure someone’s capability of planning well. As such, planning is
a fundamental property of intelligent behaviour. An important further meaning, often just
called "planning" is the legal context of permitted building developments.
Also, planning has a specific process and is necessary for multiple occupations
(particularly in fields such as management, business, etc.). In each field there are different
types of plans that help companies achieve efficiency and effectiveness. An important, albeit
often ignored aspect of planning, is the relationship it holds to forecasting. Forecasting can be
described as predicting what the future will look like, whereas planning predicts what the
future should look like for multiple scenarios. Planning combines forecasting
with preparation of scenarios and how to react to them.
Planning is one of the most important project management and time management
techniques. Planning is preparing a sequence of action steps to achieve some specific goal. If
a person does it effectively, they can reduce much the necessary time and effort of achieving
the goal. A plan is like a map. When following a plan, a person can see how much they have
progressed towards their project goal and how far they are from their destination.
Planning is very important for successfulness and the effective performance of an

organisation not only for organisations but also for individuals. It is the most basic of all the
managerial functions. It involves selecting missions and objectives and the actions to achieve
them. Therefore every organisation gives a greater emphasis on planning.
Planning as a process involves the determination of future course of action, that is why
an action, what action, how to take action, and when to take action. These are related with
different aspects of planning process.
Thus, Terry has defined planning in terms of future course of action i.e., “planning is the
selection and relating of facts and making and using of assumptions regarding the future in
the visualisation and formalisation of proposed activities believed necessary to achieve
desired result.”
Organizations have to typically plan for long-range and short-range future direction. By
forecasting and predicting the market and socio-political-economic trends, managers can
plan to determine where they desire the company to be in future. Planning involves
determining various types and volumes of physical and other resources to be acquired from
outside, allocating these resources in an efficient manner among competing claims and to
make arrangement for systematic conversion of these resources into useful outputs.
Since plans are made to attain goals or objectives, every plan should lead to the
achievement of the organization’s purpose and objectives. An organized enterprise exists to
accomplish group objectives through willing and purposeful co-operation. Planning bridges
the gap between where the organization stands currently and wishes to be in future. In the
absence of planning, events are left to chance. Planning is the most basic of all managerial
functions. It is the process by which managers establish goals and define the methods by
which these goals are to be attained.
Planning involves selecting missions and objectives and the actions to achieve them; it
requires decision making, which is choosing from among alternative future courses of action
–Weinrich and Koontz.
Planning is thus taken as the foundation for future activities. Newman has thus defined it
as, “Planning is deciding in advance what is to be done; that is a plan is a projected course of
action.” So, planning can be thought of as deciding on a future course of action. It may also
Perspectives of Management 5.3 Importance of Planning
be treated as a process of thinking before doing. Management has to plan for long-range and
short-range future direction by looking ahead into the future, by estimating and evaluating the
future behaviour of the relevant environment and by determining the enterprise’s own desired
role.
Planning involves determining various types and volumes of physical and other resources
to be acquired from outside, to allocate these resources in an efficient manner among
competing claims and to make arrangement for systematic conversion of these resources into
useful outputs.
DEFINITONS OF PLANNING:
McFarland has defined Planning as “a concept of executive action that embodies the skills
of anticipating, influencing and controlling the nature and direction of change.”
Peter Drucker defined as “planning is the continuous process of making present

entrepreneurial decisions systematically and with best possible knowledge their futurity,
organizing systematically the efforts needed to carry out these decisions and measuring the
results of these decisions against the expectation through organised systematic feedback.”
In the words of Koontz and O’Donnell, “planning is deciding in advance what to do, how to
do it, when to do it, and who is to do it. Planning bridges the gap from where we are to here,
we want to go.”
According to Theo Heiman, “planning is the function that determines in advance what
should be done. It consists of selecting the enterprise objectives polices, programmes,
procedures and other means of achieving these objectives.”
5.2 COMPONENTS OF PLANNING/PLANNING TECHNIQUES:

Planning consists of several individual plans or components of planning, which are
usually bound together.
(i) Forecasting.
(ii) Objectives.
(iii) Policies.
(iv) Programmes.
(v) Strategies.
(vi) Schedules.
(vii) Procedures.
(viii) Rules, and
(ix) Budgets.
5.2.1 Forecasting:
Forecasting becomes an integral part of the planning process. It is a prediction of
future events and conditions. It, therefore, includes both the assessment of the future and the
provision for it. It helps to reduce the uncertainties that surround management, decision
making.
5.2.2 Objectives:
Objectives are the ends toward which activity is aimed— they are the results to be
achieved. They represent not only the end point of planning but also the end toward which
organising, staffing, leading and controlling are aimed.Organisation can grow without any
difficulty if it has well-defined objectives. These objectives should be clearly defined and
communicated throughout the organisation. Such objectives must be realistic.
5.2.3 Policies:
Koontz and O’Donnell define “policies are general statements or undertakings which
guide or channel thinking in decision-making of subordinates.” So, policies act as guides to
thinking and action of subordinates in the organisations. It should be clearly prescribed and
understandable by all.
5.2.4 Programmes:
It refers to the course of action of work to be carried out in proper sequence for the
purpose of achieving specific objectives.
5.2.5 Strategies:
Koontz and Heinz Weinrich defined strategies as “a general programme of action and
deployment of resources to attain comprehensive objectives” or 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. It is specific type of plan for achieving
organisational goals.
5.2.6 Schedules:
Fixing a time sequence for every operation is known as schedules. Normally it forms
part of programming a part of action plan.
5.2.7 Procedures:
Procedures are plans that establish a required method of handling future activities.
They are guides to action, rather than to thinking and they detail the exact manner in which
certain activities must be accomplished. They are chronological sequences of required
actions.
5.2.8 Rules:
Rules spell out specific required actions or non-actions, following no direction. They
are usually the simplest type of plan.
5.2.9 Budgets:
A budget is a statement of expected results expressed in numerical term. It may be
referred to as a numberised programme. A budget may be expressed either in financial terms
or in terms of labour-hours, units of product, machine hours, or any other numerically
measurable term. It helps the organisation to control the action by comparing budgetary and
actual results.
5.2 PLANNING TOPICS
5.3.1 Psychological aspects

Planning is one of the executive functions of the brain, encompassing
the neurological processes involved in the formulation, evaluation and selection of a
sequence of thoughts and actions to achieve a desired goal. Various studies utilizing a
combination of neuropsychological, neuro pharmacological and functional neuro
imaging approaches have suggested there is a positive relationship between impaired
planning ability and damage to the frontal lobe. A specific area within the mid-dorsolateral
frontal cortex located in the frontal lobe has been implicated as playing an intrinsic role in
both cognitive planning and associated executive traits such as working memory.
Disruption of the neural pathways, via various mechanisms such as traumatic brain
injury, or the effects of neurodegenerative diseases between this area of the frontal cortex and
the basal ganglia specifically the striatum (cortico-striatal pathway), may disrupt the
processes required for normal planning function. Individuals who were born Very Low Birth
Weight (<1500 grams) and Extremely Low Birthweight (ELBW) are at greater risk for
various cognitive deficits including planning ability.
5.3.2 Neuropsychological tests

There are a variety of neuropsychological tests which can be used to measure variance of
planning ability between the subject and controls.
Tower of Hanoi (TOH-R), a puzzle invented in 1883 by the French mathematician
Édouard Lucas. There are different variations of the puzzle, the classic version
consists of three rods and usually seven to nine discs of subsequently smaller size.
Planning is a key component of the problem-solving skills necessary to achieve the
objective, which is to move the entire stack to another rod, obeying the following
rules:
• Only one disk may be moved at a time.
• Each move consists of taking the upper disk from one of the rods and sliding it
onto another rod, on top of the other disks that may already be present on that
rod.
• No disk may be placed on top of a smaller disk
Tower of London (TOL) is another test that was developed in 1992 (Shallice 1992)
specifically to detect deficits in planning as may occur with damage to the frontal
lobe. Test participants with damage to the left anterior frontal lobe demonstrated
planning deficits (i.e., greater number of moves required for solution).
In test participants with damage to the right anterior, and left or right posterior areas of
the frontal lobes showed no impairment. The results implicating the left anterior frontal lobes
involvement in solving the TOL were supported in concomitant neuro imaging studies which
also showed a reduction in regional cerebral blood flow to the left pre-frontal lobe. For the
number of moves, a significant negative correlation was observed for the left prefrontal
area: i.e. subjects that took more time planning their moves showed greater activation in the
left prefrontal area.
Planning in public policy
Public policy planning includes environmental, land use, regional, urban and spatial
planning. In many countries, the operation of a town and country planning system is often
referred to as "planning" and the professionals which operate the system are known as
"planners".
It is a conscious as well as sub-conscious activity. It is "an anticipatory decision-making
process" that helps in coping with complexities. It is deciding future course of action from
amongst alternatives. It is a process that involves making and evaluating each set of
interrelated decisions. It is selection of missions, objectives and "translation of knowledge
into action." A planned performance brings better results compared to an unplanned one. A
manager's job is planning, monitoring and controlling. Planning and goal setting are
important traits of an organization. It is done at all levels of the organization. Planning
includes the plan, the thought process, action, and implementation. Planning gives more
power over the future. Planning is deciding in advance what to do, how to do it, when to do
it, and who should do it. This bridges the gap from where the organization is to where it
wants to be. The planning function involves establishing goals and arranging them in logical
order. A well-planned organization achieves faster goals than the ones that don't plan before
implementation.
5.4 NATURE OF PLANNING:

The following are the essential characteristics of planning which describe the nature
of planning:
5.4.1 Planning is primary function of management:
The functions of management are broadly classified as planning, organisation,
direction and control. It is thus the first function of management at all levels. Since planning
is involved at all managerial functions, it is rightly called as an essence of management.
5.4.2 Planning focuses on objectives:

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

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

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

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

Planning is a dynamic function in the sense that the changes and modifications are
continuously done in the planned course of action on account of changes in business
environment.As factors affecting the business are not within the control of management,
necessary changes are made as and when they take place. If modifications cannot be included
in plans it is said to be bad planning.
5.4.7 Planning secures efficiency, economy and accuracy:

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

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

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

A plan always outlines the results to be attained and as such it is realistic in nature.
5.5 ADVANTAGES AND DISADVANTAGES OF PLANNING:
5.5.1Advantages of Planning:
A. Primacy of Planning:
Even though there are other managerial functions such as organising, staffing,
directing and controlling which helps to achieve the organisational goals, planning precedes
all other managerial functions. It establishes objectives necessary for all group effort.
B. Helping to Management:
Since the planning is a future course of action, mangers are able to define their
objectives and get direction. Also it creates a unity of purpose.
C. Effective Utilisation of Resources:
Proper planning helps to proper and effective utilisation of resources. Resources are
identified for optimum utility through planning. So waste or minimum waste of resources will
not result and thereby idle time for workers and downtime for machines will be reduced. This
will lead to result in minimum cost of operations.
D. Minimum Cost:
Planning helps to minimise cost by providing greater utilisation of the available
resources. All kinds of wastage of men, materials, money and machines are prevented with
the help of planning.
E. To help in Motivation:
All employees of the organisation can feel that we have taken this plan, if the plans
are communicated to them. In this case the sense of belonging of employees increases and
therefore they will be highly motivated.
F. To Offset Uncertainty and Change:

There may be continuous change in the environment and organisation has to work in
accelerating change. This change is reflected in both tangible and intangible forms. Tangible
changes are in the form of changes in technology, market forces, and government
regulations.Intangible changes reflect in changes in attitudes, values, cultures etc. In order to
cope up with the requirements of such changes, organisation must role ahead for its future
course of action, which is basically provided by planning process. Planning does not stop
changes in the environment, but gears the organisation to take suitable actions so that it is
successful in achieving its objectives.
G. Help in Coordination:
Proper planning is made by unifying all areas on departments of the organisation. It
wills leads to coordinate and harmony among the departments is achieved.
H. Facilities Control:
Planning provides performance standards and standards for measuring the progress of
the organisations. Therefore, management can compare the actual performance with the
standards. Manager can control action by looking at different if any deviation.
I. Facilitates Decision-making:
Planning provides a framework for decision-making. Since the planning provides for
feedback, periodic evaluation, and indication for any deviation, corrective action can be taken
which leads to better decision-making.
J. Encourage Innovation and Creativity:
It brings about rationality in managerial approach and improvement in executive
thinking. D. F. Hussey said that, “A good planning process will provide avenues for
individual participation will throw up more ideas about the company and its environment,
will encourage an atmosphere of frankness and corporate self-criticism and will stimulate
managers to achieve more.”
K. Improves Competitive Strength:
Since the operations are planned in advance, company can take its action concretely.
It improves the competitive strength of the organisation.
5.5.2 Disadvantages of Planning:

A. Corporate Planning is not Integrated into the Total Management System:
The top management fails to identify and associate properly the formal planning with
the central concept of the organisation’s mission.
B. There is a Lack of Understanding of the Different Steps of the Planning Process:
The management may not be knowledgeable or skilled in understanding all steps of
the planning requirements.
C. Non-Availability of Correct Information and Data:
Planning is made by having information and data available. Generally correct
information and data not available.
D. Management at Different Levels in the Organisation has not Properly
Contributed to Planning Activities:
Generally, all strategic planning are made and conducted at top management. So
sometimes middle level and lower level of management, which are closer to the operation,
may not understand all aspects of planning. This will affect their fullest contribution.
E. Costly or Uneconomical:
Planning is expensive. The cost of planning should not be in excess of its contribution
and managerial judgement is necessary to balance the expenses of preparing the plans against
the benefits derived from them.
5.6 IMPORTANCE OF PLANNING:
5.6.1 Planning Provides Direction:

Planning is concerned with predetermined course of action. It provides the directions
to the efforts of employees. Planning makes clear what employees have to do, how to do, etc.
By stating in advance how work has to be done, planning provides direction for action.
Employees know in advance in which direction they have to work. This leads to Unity of
Direction also. If there were no planning, employees would be working in different directions
and organisation would not be able to achieve its desired goal.
5.6.2 Planning Reduces the risk of uncertainties:
Organisations have to face many uncertainties and unexpected situations every day.
Planning helps the manager to face the uncertainty because planners try to foresee the future
by making some assumptions regarding future keeping in mind their past experiences and
scanning of business environments. The plans are made to overcome such uncertainties. The
plans also include unexpected risks such as fire or some other calamities in the organisation.
The resources are kept aside in the plan to meet such uncertainties.
5.6.3 Planning reduces over lapping and wasteful activities:
The organisational plans are made keeping in mind the requirements of all the
departments. The departmental plans are derived from main organisational plan. As a result
there will be co-ordination in different departments. On the other hand, if the managers, non-
managers and all the employees are following course of action according to plan then there
will be integration in the activities. Plans ensure clarity of thoughts and action and work can
be carried out smoothly.
5.6.4 Planning Promotes innovative ideas:
Planning requires high thinking and it is an intellectual process. So, there is a great
scope of finding better ideas, better methods and procedures to perform a particular job.
Planning process forces managers to think differently and assume the future conditions. So, it
makes the managers innovative and creative.
5.6.5 Planning Facilitates Decision Making:
Planning helps the managers to take various decisions. As in planning goals are set in
advance and predictions are made for future. These predictions and goals help the manager to
take fast decisions.
5.6.6 Planning establishes standard for controlling:
Controlling means comparison between planned and actual output and if there is
variation between both then find out the reasons for such deviations and taking measures to
match the actual output with the planned. But in case there is no planned output then
controlling manager will have no base to compare whether the actual output is adequate or
not.
For example, if the planned output for a week is 100 units and actual output produced
by employee is 80 units then the controlling manager must take measures to bring the 80 unit
production upto 100 units but if the planned output, i.e., 100 units is not given by the planners
then finding out whether 80 unit production is sufficient or not will be difficult to know. So,
the base for comparison in controlling is given by planning function only.
5.6.7 Focuses attention on objectives of the company:
Planning function begins with the setting up of the objectives, policies, procedures,
methods and rules, etc. which are made in planning to achieve these objectives only. When
employees follow the plan they are leading towards the achievement of objectives. Through
planning, efforts of all the employees are directed towards the achievement of organisational
goals and objectives.
5.7 OBJECTIVES OF PLANNING

Economic planning is often regarded as technique of managing an economy. When
the structure of an economy becomes complex and subject to rapid change and
transformation (due to population growth, discovery of resources, industrialisation, etc.) some
sort of advance thinking becomes necessary to resolve that complexity and to prepare the
economy for those changes. Such preparation is called planning.
Most often than not an economic plan is regarded as a programme of action. It may also be
taken to mean an instrument for regulating a free private enterprise economy. The regulatory
measures may vary from country to country.They may leave either too much or too little a
degree of freedom to private enterprise. This may hamper the working out of the plan. Many
plans leave their programmes incomplete because they hesitate to exercise their regulatory
functions. They are little more than a list of public development projects.
Many other plans perform their regulatory functions with such seriousness and
severity that their programmes of action are completely jeopardised. In such planned
economies any sort of enterprise ceases to exist. The correct plan is one in which a
comprehensive and consistent programme of action is sought to be implemented by carefully
harnessing enterprise for the success of the plan.It should be noted that a plan is just a
programme of action, it is not a guarantee for action. In short, a good plan is one which
makes adequate provisions for and ensures that its targets are properly fulfilled.The
objectives of planning are many and varied. These aims are not the same for all countries, nor
are the same for the same country at all times.
Some major objectives of economic planning are:

(a) An improvement in the standard of living of the people through a sizable increase in
national income within a short period of time;
(b) A large expansion of employment opportunities for the removal of unemployment and for
creating jobs and incomes;
(c) A reduction in all types of social, economic and regional inequalities;
(d) An efficient utilisation of the country’s resources for faster growth;
(e) Removal of mass poverty within a definite time limit through land reform, employment
creation, and provision of educational and medical facilities;
(f) Attainment of self-reliance by reducing dependence on foreign capital and foreign aid.
In the language of Gunnar Myrdal, “A main element of every national development plan is a
decision to increase the total amount of investment, aimed at raising the productive powers of
the country, and to procure the capital formation necessary for this purpose.”
The usefulness can be gauged only by examining the extent to which it succeeds in removing
the ills of unregulated free enterprise, while simultaneously realising the above goals. In
underdeveloped countries like India an economic plan is to be looked at not as a substitute for
private enterprise. Rather it is to be taken as the only instrument through which enterprise can
spread to non-traditional forms of economic activity. In countries like India the most
important objective of an economic plan is to bring into being new forms of production by
accelerating capital formation. This will surely raise the overall productivity of the economy
and thus raise people’s income by providing them adequate employment opportunities, and
thus remove the problems of mass poverty.
5.8 SUMMARY:
Planning is the most basic of all managerial functions which involves establishing goals,
setting out objectives and defining the methods by which these goals and objectives are to be
attained. ... Planning involves selecting missions and objectives and the actions to achieve
them.
5.9 Key Words

Planning is the process of thinking regarding the activities required to achieve a desired goal.
Planning is based on foresight, the fundamental capacity for mental time travel. The
evolution of forethought, the capacity to think ahead, is considered to have been a prime
mover in human evolution
Goal is an idea of the future or desired result that a person or a group of people envision,
plan and commit to achieve.
5.10 SELF ASSESSMENT QUESTIONS

1. Explain the meaning and definition of planning.
2. What are the components of planning?
3. What are the different aspects regarding planning?
4. Explain the nature of the planning
5. What are the advantages and disadvantages of planning?
6. Describe objectives of planning
7. Explain importance of planning.
5.11 FURTHER READINGS

1. Management Concepts and Cases - Andrew DuBrin, Cengage Learning India Private
Limited, 2009.
2. Principles and Practice of Management, L. M. Prasad, Sultan Chand & Sons, 2020.
3. Principles of Management, S. Govindarajan, M. Natarajan, PHI Publications, 2005.
4. Principles of Management, Prakash Chandra Tripathi, McGraw-Hill Education
(India) Pvt. Limited, 2008.
5. Essentials of Management, Harold Koontz, Heinz Weihrich, McGraw Hill
Education, 2012.
6. Principles and Practice of Management, P. Subba Rao, Himalaya Publishing House,
2010.
7. Principles & Practice of Management, VSP Rao, PS Narayana ,Konark Publishers
Pvt Ltd , 2008.
Dr. V. Tulasi Das

LESSON –6
PLANNING PROCESS AND FORECASTIN
LEARNING OBJECTIVES: After studying this lesson, the students are able to understand.
Understand planning process.
Know the Steps in planning process.
Understand the forecasting.
Know the steps in forecasting process.
Attain the knowledge regarding planning process and forecasting process.
STRUCTURE
6.1 Purpose of planning
6.2 Types of planning
6.3 Planning process
6.4 Forecasting
6.5 Steps in forecasting
6.6 Methods of forecasting:
6.7 Difference between Planning and Forecasting
6.8 Summary
6.9 Key Words
6.10 Self-assessment questions
6.11 Further readings.
6.1 PURPOSE OF PLANNING IN AN ORGANIZATION
The following are some of the important purposes of planning in an organization.
6.1.1Facilitates Accomplishment of Objectives:

The aim of planning is to facilitate the attainment of objectives. It focuses its attention
on the objectives of the organization. It states the objectives of each department in the
organization and of the enterprise as a whole. This helps personnel to see the enterprise in its
entirety and see how their actions contribute to its ultimate goals. Planning forces the
managers to consider the future and revise its plans if necessary for achieving the objectives.
6.1.2. Ensures Economy in Operations:

Since planning emphasizes efficient operation and consistency, it minimizes costs
and gains economical operation. Coordinated group effort, even flow of work and deliberate
decisions are due to planning.
6.1.3 Precedes Control:

Control involves those activities which are carried out to force events to conform to
plans. Plans serves as standards of performance. Control seeks to compare actual
performance with set standards. So control cannot be exercised without plans.
6.1.4. Provides for Future Contingency:

Planning is required because future is uncertain. Planning enables the management to
look into the future and discover suitable alternative course of action. Planning helps the
management to have a clear-cut idea about the future and to frame a suitable programme for
action. Even when the future is highly certain, planning is essential to decide the best course
of action.
6.1.5. Facilitates Optimum Utilization of Resources: Various resources that are relevant to
an organization namely, funds, physical resources, manpower, technological know-how, etc.,
are by and large inadequate due to demand from competing organizations and have
alternative uses. This necessitates the organization to make the best possible use of resources.
Planning facilitates optimum use of available resources.
6.1.6. Pr-requisites for other Managerial Functions:

The purposes of planning are to provide a conceptual and concrete basis for initiating
and undertaking other managerial functions like staffing, organizing, directing and control.
Planning is a primary function and it goes a long way to improve efficiency of other functions
of management and makes the management tasks more effective.
6.1.7. All Pervasive Function:

Planning is a function of managers at all levels though the scope, nature and extent of
planning differs from one enterprise to another and from one level to another. Irrespective of
the level and area of his operation, each and every manager has to perform this function.
Planning at the top level will be fundamental, broad and far-reaching. Managers at other
levels may plan about their departmental activities for a short period.
In this connection, Theo Haimann says that “the scope, extent and importance of the nature
of planning tend to decrease as we descend toward the lower levels of management and
approach the point of execution of the plan”.
6.1.8 Coordinates the Activities: Coordination is an important factor for the smooth
functioning of an organization. As pointed out by H.G. Hicks, “planning coordinates the
activities of the organization toward defined and agreed upon objectives. The alternative is
random behaviour”.
If planning is absent, various divisions of the organization may pursue different objectives.
6.1.9 Provides for the Delegation of Authority: Planning provides for the delegation of
authority to subordinates. Well-formulated plans serve as guides to subordinates and reduce
risk involved in delegation of authority.
6.2 TYPES OF PLANNING:
The process of planning may be classified into different categories on the following basis:
6.2.1 Nature of Planning:

a. Formal planning.
b. Informal planning.
6.2.2 Duration of planning:
a. Short term planning.
b. Long term planning.
6.2.3 Levels of Planning:
Perspectives of Management 6.3 Planning process…
a. Strategic planning.
b. Intermediate planning.
c. Operational planning.
6.2.4 Use:
a. Standing plans
b. Single-use plans.
6.2.1 NATURE OF PLANNING:

a. Formal Planning:
Planning is formal when it is reduced to writing. When the numbers of actions are large it is
good to have a formal plan since it will help adequate control.The term formal means official
and recognised. Any planning can be done officially to be followed or implemented. Formal
planning is aims to determine and objectives of planning. It is the action that determine in
advance what should be done.
Advantages:
1. Proper Cooperation among employees,
2. Unity of Action,
3. Economy,
4. Proper coordination and control,
5. Choosing the right objectives, and
6. Future plan.
b. Informal Planning:
An informal plan is one, which is not in writing, but it is conceived in the mind of the
manager. Informal planning will be effective when the number of actions is less and actions
have to be taken in short period.
6.2.2 DURATION OF PLANNING:

a. Short term Planning:
Short term planning is the planning which covers less than two years. It must be formulated
in a manner consistent with long-term plans. It is considered as tactical planning. Short-term
plans are concerned with immediate future; it takes into account the available resources only
and is concerned with the current operations of the business.
These may include plans concerning inventory planning and control, employee training, work
methods etc.
Advantages:
1. It can be easily adjustable.
2. Changes can be made and incorporated.
3. Easy to Gauge.
4. Only little resources required.
Disadvantages:
1. Very short period-left over things will be more.
2. Difficult to mobiles the resources.
3. Communication cycle will not be completed.
b. Long-Term Planning:
Long-term planning usually converse a period of more than five years, mostly between five
and fifteen years. It deals with broader technological and competitive aspects of the
organisation as well as allocation of resources over a relatively long time period. Long-term
planning is considered as strategic planning.
Short-term planning covers the period of one year while long term planning covers 5-15
years. In between there may be medium-term plans. Usually, medium term plans are focusing
on between two and five years. These may include plan for purchase of materials, production,
labour, overhead expenses and so on.
Advantages:
1. Sufficient time to plan and implement.
2. Effective control.
3. Adjustment and changes may be made gradually.
4. Periodic evaluation is possible.
5. Thrust areas can be identified easily.
6. Weakness can be spotted and rectified then and there.
Disadvantages:
1. Prediction is difficult.
2. Full of uncertainties.
3. Objectives and Targets may not be achieved in full.
4. More resources required.
6.2.3 LEVELS OF PLANNING:

a. Strategic Planning:
The strategic planning is the process of determining overall objectives of the organisation and
the policies and strategies adopted to achieve those objectives. It is conducted by the top
management, which include chief executive officer, president, vice-presidents, General
Manger etc. It is a long range planning and may cover a time period of up to 10 years.It
basically deals with the total assessment of the organisation’s capabilities, its strengths and its
weaknesses and an objective evaluation of the dynamic environment. The planning also
determines the direction the company will be taking in achieving these goals.
b. Intermediate Planning:
Intermediate planning cover time frames of about 6 months to 2 years and is contemplated by
middle management, which includes functional managers, department heads and product line
mangers. They also have the task of polishing the top management’s strategic plans.The
middle management will have a critical look at the resources available and they will
determine the most effective and efficient mix of human, financial and material factors. They
refine the broad strategic plans into more workable and realistic plans.
c. Operational Planning:
Operational planning deals with only current activities. It keeps the business running. These
plans are the responsibility of the lower management and are conducted by unit supervisors,
foremen etc. These are short-range plans covering a time span from one week to one year.
These are more specific and they determine how a specific job is to be completed in the best
possible way. Most operational plans .ire divided into functional areas such as production,
finance, marketing, personnel etc.Thus even though planning at all levels is important, since
all levels are integrated into one, the strategic planning requires closer observation since it
establishes the direction of the organisation.
6.2.4 Use:
a. Standing Plan:
Standing plan is one, which is designed to be used over and over again. Objectives, policies
procedures, methods, rules and strategies are included in standing plans. Its nature is
mechanical. It helps executives to reduce their workload. Standing plan is also called routine
plan. Standing or routine plan is generally long range.
b. Single Use Plan:
Single use plan is one, which sets a course of action for a particular set of circumstances and
is used up once the particular goal is achieved. They may include programme, budgets,
projects and schedules. It is also called specific planning. Single use plan is short
range. Effective planning is the foundation of any successful business. Planning revolves
around organizing priorities and resources and it relates to productivity. Since productivity
levels directly affect the success of any organization it’s vital that businesses are creating plans
that work. When there are issues with leadership there are often flaws in the company’s plan.
When a company improves how they plan they can expect all other aspects of the business to
improve as well.
We already know what planning is, it is the deciding of what is to be done in advance. It
is the groundwork for all future plans of the organization. Planning bridges the gap between
where the organization currently finds itself and where it wishes to be. So in
essence business planning comprises of setting objectives for the organization and developing a
plan of action to achieve these objectives. Once the objectives are set, the managers
and workers can have a clear vision of what to work towards. Managers are a very important
part of the function of business planning. Planning requires innovation, creativity and multi-
tasking from the managers. And planning is a function that managers of all levels must perform,
i.e upper, middle and lower management.
The first step to improving a business plan is to make sure that specific issues are being dealt
with directly within the plan. This means that there is a clear vision of what a successful
execution will look like. Set goals and establish markers so that progress can be measured and
necessary changes can be made accordingly to stay on track. Everyone involved should have a
clear understanding of what the goals are before the plan is ever put in motion.
Example:
On the basis of historical data of revenue:
So, here forecast of Rs. 1, 60,000 is based on the past performance of the company which is
just an estimate. But, planning of
Rs. 2, 00,000 is based on forecast and desire.
6.3 PLANNING PROCESS:

Planning is the process of thinking about the future course of action which is required to
achieve a specific goal. It explains about what course of action is required to be taken, when
is the right time, by whom and where. Also, it explains the best scenario, the worst scenario,
and the most expected case etc.
The planning function of management is one of the most crucial ones. It involves setting the goals
of the company and then managing the resources to achieve such goals. As you can imagine it is
a systematic process involving eight well thought out steps. Let us take a look at the planning
process. The planning process is concerned with defining a company’s goals and determining
the resources necessary to achieve those goals. Achieving a vision requires coordinated
efforts that adhere to a broader organizational plan. This is enabled through consistent
strategies that are supported by staff at all levels. To meet business goals, managers develop
business plans not only to reach targets but also to strengthen and change public perception of
the company’s brand.
Since they have achieved defined goals through the planning process, managers and
employees can focus and control their efforts and their resources, follow determined plans of
action, coordinate activities between divisions, and use time management to meet specific
goals. Planning helps to achieve these goals or targets by efficiently and effectively using
available time and resources. In short, planning, if executed properly, should lead to the
following benefits:
6.3.1 Focus
There are a wide variety of activities an organization (or the individuals within the
organization) might viably pursue. While there is value in the pursuit of many activities,
understanding which ones the organization should focus on to leverage organizational
competencies and align with market research requires careful planning and delegation. This is
how planning achieves focus.
6.3.2Coordinated Action
If department A is reliant on inputs from department B, department A cannot utilize
department B’s work without coordination. If department B has too much work and
department A too little, there is poor interdepartmental coordination. This is alleviated
through detail-oriented planning processes.
6.3.3 Control
The control process is based on benchmarks, which is to say that controlling requires a
standard of comparison when viewing the actual operational results. Control relies on the
planning process to set viable objectives, which can then be worked towards through
controlling operations.
6.3.4Time Management
Time management underlines the importance of maximizing the use of time to minimize the
cost of production. If a full-time employee can accomplish their work within 32 hours, the
planning process can find meaningful use for their remaining time. Costs can be lowered and
productivity increased by ensuring that each element in the operational process functions
according to ideal time constraints.
6.3.5The Process Itself

Perhaps the most important benefit of developing business and marketing plans is the nature
of the planning process itself. This typically offers a unique opportunity, a forum, for
information-rich and productively focused discussions between the various managers
involved. The plan and the discussions that arise from it provide an agreed context for
subsequent management activities, even those not described in the plan itself.
STEPS IN PLANNING:
A. PERCEPTION OF OPPORTUNITIES
An important part of the planning process is to be aware of the business opportunities in the
firm’s external environment as well as within the firm. Once such opportunities get recognized
the managers can recognize the actions that need to be taken to realize them. A realistic look
must be taken at the prospect of these new opportunities and SWOT analysis should be done.
Say for example the government plans on promoting cottage industries in semi-urban areas. A
firm can look to explore this opportunity.
B. ESTABLISHING OBJECTIVES
This is the second and perhaps the most important step of the planning process. Here we
establish the objectives for the whole organization and also individual departments.
Organizational objectives provide a general direction, objectives of departments will be more
planned and detailed.
Objectives can be long term and short term as well. They indicate the end result the company
wishes to achieve. So objectives will percolate down from the managers and will also guide and
push the employees in the correct direction.
C. PLANNING PREMISES
Planning is always done keeping the future in mind, however, the future is always uncertain. So
in the function of management certain assumptions will have to be made. These assumptions are
the premises. Such assumptions are made in the form of forecasts, existing plans, past policies,
etc. These planning premises are also of two types – internal and external. External assumptions
deal with factors such as political environment, social environment, the advancement of
technology, competition, government policies, etc. Internal assumptions deal with policies,
availability of resources, quality of management, etc. These assumptions being made should be
uniform across the organization. All managers should be aware of these premises and should
agree with them.
D. IDENTIFICATION OF ALTERNATIVES
The fourth step of the planning process is to identify the alternatives available to the managers.
There is no one way to achieve the objectives of the firm, there is a multitude of choices. All of
these alternative courses should be identified. There must be options available to the manager.
Maybe he chooses an innovative alternative hoping for more efficient results. If he does not
want to experiment he will stick to the more routine course of action. The problem with this step
is not finding the alternatives but narrowing them down to a reasonable amount of choices so all
of them can be thoroughly evaluated.
E. EVALUATIONOF ALTERNATES
The next step of the planning process is to evaluate and closely examine each of the alternative
plans. Every option will go through an examination where all there pros and cons will be
weighed. The alternative plans need to be evaluated in light of the organizational objectives.For
example, if it is a financial plan. Then it that case its risk-return evaluation will be done. Detailed
calculation and analysis are done to ensure that the plan is capable of achieving the objectives in
the best and most efficient manner possible.
F. CHOICE OF ALTERNATIVE PLANS

Finally, we reach the decision making stage of the planning process. Now the best and most
feasible plan will be chosen to be implemented. The ideal plan is the most profitable one with
the least amount of negative consequences and is also adaptable to dynamic situations.The
choice is obviously based on scientific analysis and mathematical equations. But a manager’s
intuition and experience should also play a big part in this decision. Sometimes a few different
aspects of different plans are combined to come up with the one ideal plan.
G. FORMULATIONOF SUPPORTING
Once you have chosen the plan to be implemented, managers will have to come up with one or
more supporting plans. These secondary plans help with the implementation of the main plan.
For example plans to hire more people, train personnel, expand the office etc are supporting
plans for the main plan of launching a new product. So all these secondary plans are in fact part
of the main plan.
H. ESTABLISHING THE SEQUENCE OF ACTIVITIES

And finally, we come to the last step of the planning process, implementation of the plan. This is
when all the other functions of management come into play and the plan is put into action to
achieve the objectives of the organization. The tools required for such implementation involve
the types of plans- procedures, policies, budgets, rules, standards etc.
6.4 FORECASTING
Forecasting is process of using past and present data and analysis of trends for predictions of
the future. It helps the organization to cope with the future uncertainties. It is more advanced
term of prediction.Forecasting is done with certain assumption based on the experience of
management, their knowledge, and judgment. An error in assumptions may result in
forecasting error.
6.5 STEPS IN FORECASTING:

• Analyzing and understanding the problem
• Developing strong foundation
• Collecting and analyzing relevant data

• Estimating future events.
• Finding reason for poor performance.
• Continuous follow up
6.6 METHODS OF FORECASTING:
• Qualitative and quantitative forecasting method: Personal opinion based

forecasting is qualitative method whereas; forecasting based on past numerical data is
quantitative forecasting.
• Naive forecasting method: In this method, last year’s actual are used as present
period’s forecast, without trying to adjust them.
• Judgmental forecasting method: This method of forecasting is based on subjective
estimates and intuition. The Statistical survey, the Delphi method, composite forecast
all are judgmental forecasting.
• Time series forecasting method: In this method, a group of data is recorded over a
specific time period. Most of the time past patterns repeats in the future. So, this
method is used to make a long term forecast like 5 years, 10 years, and 15 years.
Moving average, exponential smoothing, trend analysis all are time series forecasting.
6.7 DIFFERENCE BETWEEN PLANNING AND FORECASTING

Both Planning and forecasting are basic and most important managerial activity. They are
closely related to each other. Planning gives answer to how, when and what to be done. It is a
goal oriented activity which designs future course of action and provides future
environment of organization.
As future is uncertain, planners are forced to make some assumptions. This assumption
related to future is called forecasting which is based on facts, past trend, economic condition
and information.
Both Planning and forecasting are basic and most important managerial activity. They
are closely related to each other. Planning gives answer to how, when and what to be done. It
is a goal oriented activity which designs future course of action and provides future
environment of organization.As future is uncertain, planners are forced to make some
assumptions. This assumption related to future is called forecasting which is based on facts,
past trend, economic condition and information.
1. Planning is the process of thinking about the future course of action in advance,
whereas forecasting is predicting future performance of the organization on the basis
of past and present performance and data.
2. Forecasting is done by different levels of experts or managers, economists or analysts
employed by the organization. But, Planning is done by top level managers to
formulate plans for the organization.
3. Planning is based on information, objective and forecast. Whereas, forecast is based
on an assumption, postulation and certain degree of guess.
Planning vs. forecasting: Comparison table
Summary of Planning vs. Forecasting

• Planning and forecasting both are related to the future events. However, Forecasting provides
a base for planning and plays a vital role in process of planning.
• Planning is based on objective, performance and relevant information which require making a
plan. Whereas, forecasting is based on a certain degree of guess and assumption of a
particular event.
• Planning stresses on facts and expectation. Forecasting, on the other hand, based on Facts and
some assumptions on the basis of past and current performance.
• Planning is the responsibility of top level managers. While forecasting is done by different
level of managers, analysts, and experts employed by the organization.
6.8 SUMMARY:
There are two main aspects to the practice of town planning: forward planning and
development control. Forward planning is the process of goal-setting: identifying the best
possible use for each part of the country and developing guidelines toward the future vision.
6.9 Key Words:

Strategic planning: is the process of determining overall objectives of the organisation
and the policies and strategies adopted to achieve those objectives.
Planning premise: is a set of assumptions that are derived from forecasting the future. It
is a logical and systematic estimate of the future factors that can affect planning. Planning
premises provide a background against which the estimated events take place.
6.10 Self - ASSESSMENT QUESTIONS:

1. What are the various types of planning?
2. What are the steps in planning process?
3. Explain the different between planning and forecasting?
6.10 FURTHER READINGS:

Limited, 2009.
4. Principles of Management, Prakash Chandra Tripathi,McGraw-Hill Education

Education, 2012.
2010.
7. Principles & Practice of Management, VSP Rao, PS Narayana , Konark Publishers
Pvt Ltd , 2008.
- Dr. V. Tulasi Das

LESSON- 7
STRATEGIES OF PLANNING
OBJECTIVES: After studying this lesson, the students are able to understand.
Understand major types of planning
Know the strategies of planning.
Discuss the policies of planning.
Detailed principles of planning.
STRUCTURE:
4.1 Types of plans
4.2 Principles of planning
4.3 Planning vs. Plan
4.4 Concept of strategy, policy and strategic planning
4.5 Strategies of planningprocess
4.6 Policies
4.7 Summary
4.8 Key Words
7.8Self-assessment questions
7.9 Further readings.
7.1 TYPES OF PLANS:
There are four types of planning. Each type of plan commits employees within different
departments and their resources to specific actions. While there are many different types, the
four major types of plans include strategic, tactical, operational, and contingency.
Here is a breakdown of what each type of planning entails.
7.1.1Operational Plans
Operational planning can be ongoing or single-use. The latter is usually created for a specific
event that will only occur once, such as a unique marketing campaign. Ongoing plans can
include rules and regulations, procedures, and the day to day running of the company.
7.1.2 Strategic Plans

Strategic planning is the foundation of an organization. Essentially, strategic plans dictate the
important decisions made within a business. Strategic plans can have scopes that range from
three years to ten years. These plans include the organization’s mission, values, and vision. A
good strategic plan always considers things in the long-term and remembers the big picture.
7.1.3 Tactical Plans

Tactical planning is supportive of the strategic plan. It involves the tactics that will be used to
execute the strategic plan. Within a tactical plan, there are specific questions that need to be
answered about what it will take to accomplish the goals set in the strategic plan; the most
important question being how the company will accomplish the mission. This type of planning
is very focused and short-term. Tactical plans are sometimes flexible and often break the
strategy down into several parts and assign actionable tasks to each part.
7.1.4 Contingency Plans

Contingency planning is important for any business because there is always the possibility of
unforeseen changes. A contingency plan is created for when the unexpected occurs or a major
change needs to be made in order to continue towards the goal. Not every change can be
anticipated which is why it’s imperative to have a contingency plan in place. Every business
leader should understand the importance of having a contingency plan.A company whose
leaders have a clear understanding of the different types of planning can expect to create a
successful business that is sustainable.
7.2 PRINICPLES OF PLANNING:

Planning requires scientific thinking and it should spell out in clear terms the definition of the
purpose, analyse the problem and make a careful and diligent search for all the facts bearing
upon it. The task of planning will be well-accomplished if some fundamental principles are
followed in the process.
The important principles may be stated as follows:

7.2.1 Principle of Commitment:
This means that certain resources must be committed or pledged for the purpose of planning.
Planning is not an easy task. So, necessary help is to be taken from experts. The enterprise
must be ready to exhaust the available resources for the achievement of a plan.
7.2.2 Principle of the Limiting Factor:
A plan involves varied factors of different importance. This principle implies that more
emphasis has to be put on that factor which is scarce or limited in supply or extremely costly.
This will help in selecting the most favourable alternative.
7.2.3 Principle of Reflective Thinking:
Planning, being an intellectual activity is based on rational considerations. These involve
reflective thinking which signifies problem-solving thought process—a process by which past
experiences are superimposed on the facts of the present situation and possible future trends.
Perspectives of Management 7.3 Strategies of Planning
None can be a planner whose mind is not active, who does not possess any deliberate power
and whose sense of judgement is not strong.
7.2.4 Principle of Flexibility:
Though a plan is prepared after reflective thinking, this does not mean that no departure can
be made in the course of its operation. The plan should be so prepared that there is sufficient
scope for changing it from time to time. Changes must necessarily be affected in the plan for
taking into account new developments that may take place in the course of the operation of
the plan.
7.2.5 Principle of Contribution to Enterprise Objectives:
A major plan is prepared and it is supported by many derivative plans. But all plans must
contribute in a positive way towards the achievement of the enterprise objectives.
7.2.6 Principle of Efficiency:
A plan should be made efficient to attain the objectives of the enterprise at the minimum cost
and least effort. It must also achieve better results with the minimum of unexpected
happenings. Therefore, it is to be seen that what is expected is likely to be achieved.
7.2.7 Principle of Selection of Alternatives:
Planning is basically a problem of choosing. The essence of planning is the choice among
alternative courses of action. There is no need for planning if there is only one way for doing
something. In choosing from alternatives, the best alternative will be that which contributes
most efficiently and effectively to the accomplishment of a desired goal.
7.2.8 Principle of Planning Premises:
A plan is prepared against some foundations or backgrounds known as ‘Planning Premises’.
There must be complete agreement among the managers in respect of planning premises over
which the structure of plan is to be framed.
7.2.9 Principle of Timing and Sequence of Operations:
Timing and sequence of operations determine the starting and finishing time for each piece of
work according to some definite schedule and give practical and concrete shape and form to
work performance.
7.2.10 Principle of Securing Participation:
To secure participation of the employees with whole-hearted co-operation in execution of the
plan, it is necessary that the plan must be communicated and explained to them for their full
understanding. This understanding provides the basis for additional knowledge about new
facts and matters to the employees. This is needed for improvement in the quality of
planning. It also ensures an obligation of the personnel of the enterprise to execute the plan
by individual and joint participation.
7.2.11 Principle of Pervasiveness:
Though major planning function is entrusted to the top management, it is not restricted to the
top level only. It is a function of every manager at every level in the organisation.
7.2.12 Principle of Strategic Planning:
Strategic planning is essential where there is competition. It is prepared in the light of what
the competitors are intending to do. Planners must take into account the strategies of the rival
organisations, otherwise the planning projection may land them in trouble.
7.2.13 Principle of Innovation:
A good system of planning should be responsive to the opportunities for innovation.
Innovation consists in creating something new for increasing satisfaction of the consumers.
This may also be stated as an important strategy of business. Innovation is a necessity for its
sustaining growth in this dynamic world. Innovation is achieved through research and
development and planning is required to provide such scope.
7.2.14 Principle of Follow-up:

In the course of execution of a plan, certain obstacles may crop up in midway and planning
may require revision, alteration or correction. This is why there must be a follow-up system
in the planning process itself. This allows timely changes in the planning and makes it more
effective.
However, to plan any kind of work, the following facts demand utmost attention:
(i) The nature, quality and quantity of work to be done, the best way of doing it, the time
available for its accomplishment, how to do it, when it is to be done and who are to do it.
(ii) Adequate knowledge about the capacity of the force available through observations and
experiments and from established standards.
(iii) The priority to be given in succession for the accomplishment of different tasks through
careful analysis.
7.3 Planning Vs. Plan.

The concept of planning defined as looking ahead into the future and try to anticipate as what
it would be or likely to look like and how it will affect the organization and what direction the
organization should take so as to be ready to cope up with the eventualities it may face.
Planning is the concept of setting future objective in right perceptive and decision on the
ways and means of achieving these objectives. Planning is systematic way of deciding about
and doing things in a purposeful manner.
Planning vs Plan
• Planning proves the way for plans.
• Plans are the part of planning.
• Planning is objective, plan is subjective.
• Planning is continuous and ongoing, plans are specific and time sensitive.
• Planning is flexible and are subject to change, plans are more or less rigid and usually are
not subject to change.
• Plans maybe short-term or long term, planning is continuous and forever.
• Planning is a guide map towards objective of an organization, plans are guide map for a
particular action.
• Planning is management functions, plans area supervisory function.
• Plans help achieve the objectives, planning sets the objectives.
• Plans complement and supplement planning. Planning initiates plans.
7.4 STRATEGIES, POLICIES AND STRATEGIC PLANNING

Strategies and policies are closely related. They provide direction for the organization and
form the basis of operational plans. Strategy refers to the determination of the long-term
objectives of an enterprise and the adoption of courses of action to achieve these aims, while
policies are concepts that guide the thought processes and behavior of managers when they
make decisions.
These include (i) defining the mission of the organization, (ii) determining organizational
objectives, (iii) assessing organizational resources and evaluating environmental risks and
opportunities, (iv) formulating strategy, (v) implementing strategy through operating plans,
and (vi) monitoring and adapting strategic planning.
There are three different levels of strategy - the corporate-level, business-level and
functional-level strategies. Corporate-level strategies address what businesses the
organization operates in, how the strategies of those businesses can be coordinated to
strengthen the organization's competitive position, and how resources are to be allocated
among the businesses. The two major approaches that can be adopted by managers in
developing corporate-level strategy are the corporate portfolio approach and the values-based
approach.
A widely used portfolio management method is the BCG matrix, devised by the Boston
Consulting Group. This matrix plots businesses against relative market share and industry
growth and helps organizations evaluate their business portfolios in order to determine their
profitability. Strategic planning is the formal process of developing long-term plans which
help in defining and achieving organizational goals. Strategic planning provides consistent
guidelines for organizational activities. It helps managers to make appropriate decisions and
anticipate problems before they arise. The strategic planning process involves six
steps.Before devising an effective strategy to gain a competitive edge, managers need to
analyze the organization's competitive situation carefully.
For this purpose, a SWOT analysis, which involves analyzing the organization's internal
strengths and weaknesses and environmental opportunities and threats, is carried out.
Different kinds of strategies and policies cover the areas of growth, finance, organization,
personnel, public relations, products or services and marketing.
Michael Porter has outlined the business-level strategies of overall cost leadership,
differentiation, and focus, that may be adopted by firms. Cost leadership strategies aim at
reduction in cost. Firms which adopt a differentiation strategy attempt to offer products and
services that are considered unique in the industry. A focus strategy facilitates specialization
by establishing a position of overall cost leadership, differentiation, or both. A firm adopting
a focus strategy attempts to serve a specific segment of the market, instead of catering to the
entire market. Thus, all the major aspects of strategies, policies and planning premises have
been discussed in the chapter. These concepts are of great significance in contemporary
management theory.
Note: Strategic Management is now full subject and specialization in management. But it is
essential to note from this chapter that strategy making is a part of management process and
is a part of planning function of management. Every student of management has to learn
strategy development. It is a core management step or activity as we stated earlier that
planning is a primary function of management.
7.5 STRATEGIC PLANNING

Some writers include both the end points (purpose, mission, goals, and objectives) and the
major means of achieving them (programs, policies, and plans) in strategy of the firm. Others
emphasize the means. Conceptually, strategic planning is very simple: Analyze the current
and future environmental situation, assess the firm's capabilities, determine the direction of
the firm (mission), and develop means of achieving the mission. In practice, it is a complex
process. Determination of the mission is done periodically and mission remains the same for
many years. Strategies are more dynamic and every year as part of annual plan strategy is
explicitly stated.
7.5.1 THE STRATEGIC PLANNING PROCESS
7.5.1.1 Inputs
The goal inputs of various claimants on the organization have to be ascertained.
7.5.1.2 Enterprise Profile
Enterprise profile gives where the company is presently. It also gives present competitive
situation in the industry and the position of the company in it.
7.5.1.3 Orientation of Top Managers
The enterprise profile is shaped by people, especially top managers. They set the
organizational climate and they determine the direction of the firm.
7.5.2 Purpose (Mission) and Major Objectives

7.5.2.1 Strategic Intent
Strategic intent is the commitment to win in the competitive environment. Some companies
make intent statements. Authors gave the examples of Komatsu "encircle Caterpillar," Canon
"beat Xerox," and Honda's intent ot become an automotive pioneer, "a second Ford." The
intent statement is stable over time and focuses on the essence of winning. It requires effort
and commitment of all the persons in the organization.
7.5.2.2 External Environment
Economic, social, political, legal, demographic, geographic, technological and industry

(competition) developments are to be monitored and pertinent information is to used in
strategic planning.
7.5.2.3 Internal Environment
A firm's resources and capabilities are to be understood before the start of each strategic
planning effort. The strengths and weaknesses in research & development, production and
other operations, supply chain, marketing, HRD, Financing are to be identified. Intangible
assets and their relative strength in competitive situation are to be determined.
7.5.2.4 Alternative Strategies
Generic competitive strategies of cost leadership in a standard product (commodity product)
or differentiated product offering is possible in all product categories that a company is doing
business.An organization may focus on niche (one or two customer segments) and or produce
and offer complete product line to cater to various customer segments in the market. A firm
can specialize in one product or it can diversify into multiple products. Growing
internationally is another strategic choice. Retrenchment or sales of certain parts of the
organization and liquidation are also strategic choices.
7.5.2.5 Evaluation and Choice of Strategies
Various strategic alternatives have to be carefully evaluated before the choice is made. Risk
assessment also needs to be done as certain failures can bankrupt the organization.
7.5.2.6 SWOT Analysis or TOWS Matrix
External opportunities and threats and internal strengths and weaknesses are to be evaluated
by organizations as a part of strategic planning process. If an opportunity and strength match,
the organization can exploit the opportunity with confidence. If there is a threat and company
seems to be weak in the area, retrenchment can be an alternative.
7.5.2.7 The Product Portfolio Matrix
It classifies the products based on two dimensions: Business growth rate and relative market
position. Stars, Cash cows, Question marks and Dogs are the four quadrants.Michael Porter
outlined that as generic strategies organizations can follow cost leadership or differentiation
to achieve competitive advantage or higher profit margins. Similarly focus on special groups
of customers can also be a generic strategic choice.
STEPS FOR SUCCESSFUL IMPLEMENTATION OF STRATEGIES
1. Communicating strategies to all key decision-making managers.

2. Developing and communicating planning premises
3. Ensuring that action plans contribute to and reflect major objectives and strategies.
4. Reviewing strategies regularly.
5. Developing contingency strategies and programs.
6. Making organization structure fit strategic needs
7. Continuing to emphasize planning and implementing strategy.
8. Creating a company climate that forces planning.
7.6 POLICIES
Policies are generic statements, which are basically a guide to channelize energies towards a
particular strategy. It is an organization’s general way of understanding, interpreting and
implementing strategies. Like for example, most companies have a return policy or recruitment
policy or pricing policy etc. Policies are made across all levels of management, from major
policies at the top-most level to minor policies. The managers need to form policies to help the
employees navigate a situation with predetermined decisions. They also help employees to make
decisions in unexpected situations.
7.6.1 Procedure
Procedures are the next types of plan. They are a stepwise guide for the routine to carry out the
activities. These stepwise sequences are to be followed by all the employees so the activities can
be fulfilled in an organized manner. The procedures are described in a chronological order. So
when the employees follow the instructions in the order and completely, the success of the
activity is pretty much guaranteed.Take for example the procedure of admission of a student in a
college. The procedure starts with filling out an application form. It will be followed by a
collection of documents and sorting the applications accordingly.
7.6.2 Rules
Rules are very specific statements that define an action or non-action. Also, rules allow for no
flexibility at all, they are final. All employees of the organization must compulsorily follow and
implement the rules. Not following rules can have severe consequences. Rules create an
environment of discipline in the organization. They guide the actions and the behaviour of all the
employees of the organization. The rule of “no smoking” is one such example.
7.6.3 Program
Programmes are an in-depth statement that outlines a company’s policies, rules, objectives,
procedures etc. These programmes are important in the implementation of all types of plan.
They create a link between the company’s objectives, procedures and rules. Primary
programmes are made at the top level of management. To support the primary program all
managers will make other programs at the middle and lower levels of management.
7.6.4 Methods
Methods prescribe the ways in which in which specific tasks of a procedure must be performed.
Also, methods are very specific and detailed instructions on how the employees must perform
every task of the planned procedure. So managers form methods to formalize routine jobs.
Methods are very important types of plan for an organization. They help in the following ways
• give clear instructions to the employees, removes any confusion
• Ensures uniformity in the actions of the employees

• Standardizes the routine jobs
• Acts as an overall guide for the employees and the managers
7.6.5 Budget
A budget is a statement of expected results the managers expect from the company. Budgets are
also a quantitative statement, so they are expressed in numerical terms. A budget quantifies the
forecast or future of the organization.
• There are many types of budgets that managers make. There is the obvious financial
budget, that forecasts the profit of the company. Then there are operational budgets
generally prepared by lower-level managers. Cash budgets monitor the cash inflows and
outflows of the company.
• Policies are guides to thinking in decision making. They reflect and interpret
objectives and guide decisions to to achieve the objectives. They establish the
framework for planning programs. They establish limits or boundaries to plans
whereas planning premises provide the operational background.
Policies themselves are plans. They are also the result of planning and decision
making. Policies also have levels. A policy can be a major as that of financing growth
through retained profits.
• Policies can be categorized as originated policy, appealed policy, implied policy, and
externally imposed policy.The most logical way of policy setting is that originated by
managers at a certain level for the express purpose of guiding their decisions and the
decisions of their subordinates in the operation of business. The decisions made by
superiors in the on problems referred to them can develop into policies and such
policies are termed as appealed policy.
•
Many times policies develop from the actions that people see about them. If a company talks
of high quality in speeches and slogans, but is frequently producing and selling shoddy
goods, people working in the company assume that poor quality is the policy of the company.
Implied policy emerges from instances where stated policy is not enforced. Government,
trade associations and trade unions impose certain policies on the organizations.
GUIDELINES FOR EFFECTIVE POLICIES

• Policies should reflect objectives and plans.
• Policies should be consistent.
• Policies should be flexible
• Policies should be distinguished from rules and procedures.
• Policies should be in writing.
• Policies should be taught.
• Policies should be controlled
• Policies in Various Functional Areas of Business
4.9 SUMMARY:
Organizations process of defining its strategy, or direction, and making decisions on

allocating its resources to pursue this strategy. It is here that priorities are set. It may also
extend to control mechanisms for guiding the implementation of the strategy.
4.10 Key Words
Strategy: a plan of action designed to achieve a long-term or overall aim.

Policy: a course or principle of action adopted or proposed by an organization or individual.
Budget is a statement of expected results the managers expect from the company.
4.11 SELF ASSESSMENT QUESTIONS:

4.12
1. Describe the strategic planning?
2. What are the principles of planning?
3. Define the concept of planning and distinguish it from plan.
4. Explain the strategic planning process?
5. What are the steps for successful implementation strategies?
6. Explain in brief about the guidelines for effective planning policies?
4.13 FURTHER READINGS:

Limited, 2009.
Education, 2012.
2010.
Pvt Ltd , 2008.
- Dr. V. Tulasi Das

LESSON- 8
PLANNING PREMISES
LEARNING OBJECTIVES: After studying this lesson, the students are able to understand.
Understand the concept of planning premises.
Know the role of planning.
Discuss the importance of manager role in planning.
Understand what is decision making
Know the rationality in decision making
Know the Objectives and Mbo.
STRUCTURE:
8.1 Introduction
8.2 Role of Managers in planning
8.3 Planning premising
8.4 Management by Objectives
8.5 Decision Making
8.6 Group Decision making
8.7 Rationality in Decision making
8.8 Systems approach to Decision Making
8.9 Decision Making Techniques
8.10 Summary
8.11 Key Words
8.12 Self-assessment questions
8.13 Further Readings.
8.1 Introduction:
Planning is the primary and most important function of management and occupies a
very vital position in the management process. It is the starting point of the whole
management process and involves the determination of future course of action. Why an
action is required, how to take an action, and when to take action are main subjects of
planning for the management. Planning is a determined course of action for achieving a
specific objective. It is deciding in advance what to do and how to do. It is needed at every
level of management. In the absence of planning all the business activities of the organization
become meaningless. The importance of planning has increased all the more in view of the
increasing size of organizations and their complexities and because of uncertain and
constantly changing business environment. In the absence of planning, it may not be
impossible but certainly difficult to guess the uncertain events of future. Planning is one of
the basic management functions. In fact it occupies the top position in the management
process. It is the starting point of the management process as other management function can
take place only through this function. Before doing a thing, it is necessary that the
management formulates an idea of how to work on a particular task. Thus, planning is closely
connected with creativity and innovation. It involves setting objectives and developing
appropriate courses of action to achieve these objectives. Objectives are achieved by fixing
time based goals.
For achieving its goals management of an organization usually works with several
management plans such as business plan, production plan, maintenance plan, or marketing
plan etc. Further management plans can be either short term or long term or both.Planning
helps an organization chart a course for the achievement of its goals. The process begins with
reviewing the current operations of the organization and identifying what needs to be
improved operationally in the upcoming year. From there, planning involves envisioning the
results the organization wants to achieve, and determining the steps necessary to arrive at the
intended destination – success, whether that is measured in financial terms, or goals that
include being the highest-rated organization in customer satisfaction.
8.1.1 Efficient Use of Resources

All organizations, large and small, have limited resources. The planning process
provides the information top management needs to make effective decisions about how to
allocate the resources in a way that will enable the organization to reach its objectives.
Productivity is maximized and resources are not wasted on projects with little chance of
success.
8.1.2 Establishing Organizational Goals

Setting goals that challenge everyone in the organization to strive for better
performance is one of the key aspects of the planning process. Goals must be aggressive, but
realistic. Organizations cannot allow themselves to become too satisfied with how they are
currently doing – or they are likely to lose ground to competitors.The goal setting process can
be a wake-up call for managers that have become complacent. The other benefit of goal
setting comes when forecast results are compared to actual results. Organizations analyze
significant variances from forecast and take action to remedy situations where revenues were
lower than plan or expenses higher.
8.1.3. Managing Risk and Uncertainty

Managing risk is essential to an organization’s success. Even the largest corporations
cannot control the economic and competitive environment around them. Unforeseen events
occur that must be dealt with quickly, before negative financial consequences from these
events become severe.
Planning encourages the development of “what-if” scenarios, where managers attempt to
envision possible risk factors and develop contingency plans to deal with them. The pace of
change in business is rapid, and organizations must be able to rapidly adjust their strategies to
these changing conditions.
8.1.4 Team Building and Cooperation

Planning promotes team building and a spirit of cooperation. When the plan is
completed and communicated to members of the organization, everyone knows what their
responsibilities are, and how other areas of the organization need their assistance and
expertise in order to complete assigned tasks. They see how their work contributes to the
success of the organization as a whole and can take pride in their contributions.Potential
conflict can be reduced when top management solicits department or division managers’
Perspectives of Management 8.3 Planning premises
input during the goal setting process. Individuals are less likely to resent budgetary targets
when they had a say in their creation.
8.1.5 Creating Competitive Advantages

Planning helps organizations get a realistic view of their current strengths and
weaknesses relative to major competitors. The management team sees areas where
competitors may be vulnerable and then crafts marketing strategies to take advantage of these
weaknesses. Observing competitors’ actions can also help organizations identify
opportunities they may have overlooked, such as emerging international markets or
opportunities to market products to completely different customer groups.
8.2 ROLE OF MANAGER IN PLANNING:

• Assist to monitor all department budgets and manage all inventories on quarterly basis
and assist all team members to manage all production schedules.
• Prepare efficient training programs for all planning processes and manage inventory
level for all components and finished products and ensure compliance to all business
requirements.
• Manage all work flow for projects and maintain control on same and manage an
efficient inventory level of all safety stock and review all volume requirements for all
production materials.
• Assist all new product development and improvement in all existing products and
ensure optimal inventory level at all times.
• Facilitate and provide data to prepare all sales forecast and implement all new
products and processes for all manufacturing plants.
• Assist to obtain and manage all orders and deliveries for all external processes and
prepare reports to be presented to management and manage demand and supply of all
materials.
• Collaborate with all stakeholders to perform various strategies and coordinate with
program manager to monitor all supply chain activities and resolve all availability
issues.
• Prepare reports for all planning activity metrics and analyze all results to recommend
required improvements in performance and collaborate with material manager to
forecast all required strategies.
• Evaluate and prepare forecast all policy changes and recommend appropriate business
requirements.
• Participate in all evaluation meetings on weekly and monthly basis.
• Plan inventory levels and locations and execute all forecasting and planning
programs.
• Maintain optimal level of performance within required budget and ensure compliance
to all standard projects.
• Train all subordinates of all planning team in various systems.
• Process requirement and analyze all working of supply chain team.
8.3 PLANNING PREMISES:

Planning is made for the future. Future is uncertain the management makes certain
assumptions about the future. The assumptions are not to be based on hunch or guess work. It
should be developed through scientific forecasting of future events.The assumptions derived
from forecasting and used in planning are called as planning premises. According to Koontz
O’Donnell.“Planning premises are the anticipated environment in which plans are expected to
operate. They include assumptions or forecasts of the future and known conditions that will
affect the course of plans such as prevailing policies and existing company plans that controls
the basic nature of supporting plans.”
So planning premises provide a framework for planning and action in the midst of
uncertainties in the business environment. They imply not only the assumptions about the
future but also predictions. Planning premises constitute the framework with which planning
is done.They provide the bedrock upon which future course of action is based. To have
effective planning, plans must be based on sound premises. Therefore, premises are to be
established on the basis of systematic forecasting. Effective planning is largely dependent on
the correct knowledge and choice of planning premises.For planning the planning premises
are to be correctly formulated without which planning will be without proper foundation.
Further change in planning premises may result in modification of plans. There are
innumerable forces and factors which react on business economy.A manager must consider
these forces and factors while formulating premises. Such forces may be internal or external.
The manager is to recognise the strategic, crucial and limiting factors. Based on this the
manager is to select the proper and adequate premises upon which the super structure of
planning are to be raised.
8.3.1 Types of Planning Premises:

Planning premises may be classified as:
(a) Internal and external
(b) Tangible and Intangible
(c) Controllable, semi-controllable and uncontrollable
(d) Constant and variable
(e) Foreseeable and unforeseeable
(a) Internal and External Premises:

Internal premises are those which exist within the business enterprise. This may
include men, material, money and methods. Competence of managerial personnel and skill of
labour force are some of the important internal premises.External premises centre round the
markets and derived from the external environment surrounding the business. Examples:
Product market, money market, population growth, government policies, business cycles
technological changes.
(b) Tangible and Intangible Premises:

Tangible premises are those which can be measured quantitatively. They may be
quantified in terms of money, time and units of production. Intangible premises are those
which cannot be measured quantitatively. Examples are: Reputation of the business, Public
relations, employee morale, motivation etc. Planning is to consider both tangible and
intangible premises.
(c) Controllable, Semi-Controllable and Uncontrollable Premises:

There are certain factors which are well within the control of the management to a
great extent. Factors like materials, money and machines are areas where management has
maximum control over their future commitments. The management can decide what policies,
procedures, rules and strategies are to be followed in the organisation for achieving the
objectives.
Semi-controllable premises are those assumptions about future which are under the partial
control of a business. Examples of such premises are demand for the product, Trade union
relations.
Non-controllable premises are entirety beyond the scope of business-like government policy,
international trade agreements, wars, natural calamities new discoveries and inventions etc.
Such events cannot be predicted or controlled. These factors disturb all well-thought-out
calculations. All intangible premises also fall in this category as human behaviour also cannot
be predicted accurately.
(d) Constant and Variable Premises:

Constant premises are those which behave in similar fashion irrespective of action
taken. They are definite, well known and well-understood. The behaviour of constant
premises is not subject to changes these are ignored in planning. Such factors are men,
machine and money.
Variable premises are those which vary in relation to the course of action.
The management is to consider these factors in formulating plans as their variations are
dependent on the action taken by the management. These cannot be controlled and predicted.
For example, sales volume of the enterprise can be partly controlled by the management.
There are certain other factors which affect the sales volume of the enterprise but are quite
uncontrollable.
8.4 MANAGEMENT BY OBJECTIVES (MBO):

Management by objectives (MBO) is a strategic management model that aims to improve the
performance of an organization by clearly defining objectives that are agreed to by both
management and employees. According to the theory, having a say in goal setting and action
plans encourages participation and commitment among employees, as well as aligning
objectives across the organization. The term was first outlined by management guru Peter. F.
Drucker in 1954 in his book, The Practice of Management.
Management by objectives (MBO) is the establishment of a management information system

to compare actual performance and achievements to the defined objectives. Practitioners
claim that the major benefits of MBO are that it improves employee motivation and
commitment and allows for better communication between management and employees.
However, a cited weakness of MBO is that it unduly emphasizes the setting of goals to attain
objectives, rather than working on a systematic plan to do so. Management by objectives
(MBO) is a strategic business model designed to improve the performance of an organization.
It is a strategy with clearly defined objectives which is agreed by both the management and
the employees.
MBO helps managers to systemically update and delegate tasks to employees with mutual
understanding and keeping the goals aligned with the organizational mission. A definite set of
task is set for each employee and also their work is monitored. The strategy is quite simple. It
to plan, designs, and execute objectives with transparency and complete it at a definite time
frame.A critical part of MBO is also to check employee performance through monitoring the
performance. It is also widely practiced as an employee appraisal method for promotion and
also giving other monetary and non-monetary bonuses.
MBO follows the mnemonic S.M.A.R.T while setting objectives. ‘SMART’ objectives are-
• Specific - Target a specific area for improvement.

• Measurable- Quantify or suggest an indicator of progress.
• Assignable - Specify who will do it.
• Realistic - State what results can realistically be achieved, given available resources.
• Time-bound - Specify when the result(s) can be achieved.
8.4.1 Steps in MBO (Also called MBO Process Cycle):
Figure 4.4.1
1. In the first step, MBO emphasizes on goals that are measurable, tangible and achievable
keeping the organizational mission in mind.
2. The second step is to set and align these objectives with the employees.
3. In the third step, the employees are allowed plan their own objectives.
4. In the fourth step, the progress of the employees is monitored.
5. The fifth step is to evaluate and reward employees. Honest feedback is given and also new
strategies for goals not achieved are established.
8.4.2 NATURE OF MBO:
It is a functional approach, giving importance to the goal-setting process. It is a systematic

approach to set goals and helps every individual department to set their own goals.But MBO
doesn’t interfere in the process of implementation of those goals. It gives every member the
freedom to complete their tasks on their own. This promotes creativity and innovation in the
organization and helps them generate ideas, solve problems and contribute to organizational
goals with diversified inputs. This helps employees to keep themselves motivated and
committed to the process.MBO is a result-oriented strategy. Therefore, the outcomes are
easily monitored and help the organization to understand if their goals are achieved.
8.4.3 ADVANTAGES OF MANAGEMENT BY OBJECTIVES:
a. Efficient Management:
The management is efficient when the team’s output is higher than the input and resources
they put into it. It is directly related the employee productivity or how much time they take to
meet their goals and objectives. Often productivity gets dwindled when there is no proper
structure aligned to fulfil organizational goals.Organizations that follow MBO are more
productive at their jobs and their efficiency increases. Employees are clearer about their goals
which help them plan and have a very clear structure to follow. One of the clear reasons for
this is the systematic plan which is adopted by every member of the organization to complete
the assigned tasks.
b. Effective Planning:
The purpose of planning is to develop a blueprint for growing a business. The better the
planning is, the easier it is for management to take action. Effective planning requires an
attitude of never being satisfied with the organization’s current performance.Planning
becomes quite easier with MBO. Since employees are clear about the organizational
objectives, therefore, they can develop a systematic approach and plan to achieve those. With
this business strategy, the planning process becomes relatively easier.
c. Transparency of Organizational Roles:
With MBO members of the organization becomes aware of the roles others are playing. It
helps subordinates to report to their managers and also understand it better since the work
assigned is mutually decided. Also since all the members work towards the main organization
goal, MBO gives an edge to understand it and follow transparency in the process.
d. Reinforces Commitment:
In an organization, we often see employees gradually lose their job satisfaction and their
sense of commitment. The reason behind this though has diverse reasons but one of the major
factors is lack of direction, lack of transparency and miscommunication between the superior
and subordinates. This strategic model bridges that gap and creates a positive and open work
environment.Since everyone is assigned goals to reach the target, therefore, it gives
employees a sense of commitment. The fact that their work is designed and monitored for the
greater purpose reinforces the commitment in them. It also helps in employee motivation as
employees are included in the goal-setting process and give them the extra push to complete
the tasks.
e. Goal Setting:
We are aware of the fact that how important goal-setting is for any organization. It directs
management and gives a road-map to follow. And it is better when everyone in the
organization is aware of the process or included to give their perspectives and idea on the
same. This also helps the employees to understand their roles and tasks better.With MBO
Strategic Model, goal-setting is done with mutual participation of the management and the
organization. Objectives are more likely to be fulfilled by the employees as they actively
participate in the goal-setting process and also choose the actions to achieve those.
8.4.4 Management by Objectives in Practice

Management by objectives outlines five steps that organizations should use to put the
management technique into practice.
1. The first step is to either determine or revise organizational objectives for the entire
company. This broad overview should be derived from the firm's mission and vision.
2. The second step is to translate the organizational objectives to employees. Drucker
used the acronym SMART (specific, measurable, acceptable, realistic, time-bound) to
express the concept.
3. Step three is stimulating the participation of employees in setting individual
objectives. After the organization's objectives are shared with employees, from the top
to the bottom, employees should be encouraged to help set their own objectives to
achieve these larger organizational objectives. This gives employees greater
motivation since they have greater empowerment.
4. Step four involves monitoring the progress of employees. In step two, a key
component of the objectives was that they are measurable in order for employees and
managers to determine how well they are met.
5. The fifth step is to evaluate and reward employee progress. This step includes honest
feedback on what was achieved and not achieved for each employee.
8.5 DECISION MAKING
Decision-making is an integral part of modern management. Essentially, Rational or

sound decision making is taken as primary function of management. Every manager takes
hundreds and hundreds of decisions subconsciously or consciously making it as the key
component in the role of a manager. Decisions play important roles as they determine both
organizational and managerial activities. A decision can be defined as a course of action
purposely chosen from a set of alternatives to achieve organizational or managerial objectives
or goals. Decision making process is continuous and indispensable component of managing
any organization or business activities. Decisions are made to sustain the activities of all
business activities and organizational functioning.
Decisions are made at every level of management to ensure organizational or business goals
are achieved. Further, the decisions make up one of core functional values that every
organization adopts and implements to ensure optimum growth and drivability in terms of
services and or products offered.As such, decision making process can be further exemplified
in the backdrop of the following definitions.
Definition of Decision Making

According to the Oxford Advanced Learner’s Dictionary the term decision making
means - the process of deciding about something important, especially in a group of people or
in an organization.Trewatha& Newport defines decision making process as follows:,
“Decision-making involves the selection of a course of action from among two or more
possible alternatives in order to arrive at a solution for a given problem”.
As evidenced by the foregone definitions, decision making process is a consultative affair

done by a comity of professionals to drive better functioning of any organization. Thereby, it
is a continuous and dynamic activity that pervades all other activities pertaining to the
organization. Since it is an ongoing activity, decision making process plays vital importance
in the functioning of an organization. Since intellectual minds are involved in the process of
decision making, it requires solid scientific knowledge coupled with skills and experience in
addition to mental maturity.
Further, decision making process can be regarded as check and balance system that keeps the
organisation growing both in vertical and linear directions. It means that decision making
process seeks a goal. The goals are pre-set business objectives, company missions and its
vision. To achieve these goals, company may face lot of obstacles in administrative,
operational, marketing wings and operational domains. Such problems are sorted out through
comprehensive decision making process. No decision comes as end in itself, since in may
evolve new problems to solve. When one problem is solved another arises and so on, such
that decision making process, as said earlier, is a continuous and dynamic.
A lot of time is consumed while decisions are taken. In a management setting, decision
cannot be taken abruptly. It should follow the steps such as
• Defining the problem
• Gathering information and collecting data
• Developing and weighing the options
• Choosing best possible option
• Plan and execute
• Take follow up action
Since decision making process follows the above sequential steps, a lot of time is spent in this
process. This is the case with every decision taken to solve management and administrative
problems in a business setting. Though the whole process is time consuming, the result of
such process in a professional organization is magnanimous.
8.5.1STEPS OF THE DECISION-MAKING PROCESS

Robert Frost wrote, “Two roads diverged in a wood, and I—I took the one less
travelled by, and that has made all the difference.” But unfortunately, not every decision is as
simple as “Let’s just take this path and see where it goes,” especially when you’re making a
decision related to your business.Whether you manage a small team or are at the head of a
large corporation, your success and the success of your company depend on you making the
right decisions—and learning from the wrong decisions.Use these decision-making process
steps to help you make more profitable decisions. You'll be able to better prevent hasty
decision-making and make more educated decisions when you put a formal decision-making
process in place.
Defining the business decision-making process

The business decision-making process is a step-by-step process allowing
professionals to solve problems by weighing evidence, examining alternatives, and choosing
a path from there. This defined process also provides an opportunity, at the end, to review
whether the decision was the right one.
STEPS IN DECISION-MAKING PROCESS

Though there are many slight variations of the decision-making framework floating
around on the Internet, in business textbooks, and in leadership presentations, professionals
most commonly use these seven steps.
A. Identify the decision

To make a decision, you must first identify the problem you need to solve or the
question you need to answer. Clearly define your decision. If you misidentify the problem to
solve, or if the problem you’ve chosen is too broad, you’ll knock the decision train off the
track before it even leaves the station.
If you need to achieve a specific goal from your decision, make it measurable and timely so
you know for certain that you met the goal at the end of the process.
B. Gather relevant information

Once you have identified your decision, it’s time to gather the information relevant to
that choice. Do an internal assessment, seeing where your organization has succeeded and
failed in areas related to your decision. Also, seek information from external sources,
including studies, market research, and, in some cases, evaluation from paid consultants.
Beware: you can easily become bogged down by too much information—facts and statistics
that seem applicable to your situation might only complicate the process.
C. Identify the alternatives
With relevant information now at your fingertips, identify possible solutions to your
problem. There is usually more than one option to consider when trying to meet a goal—for
example, if your company is trying to gain more engagement on social media, your
alternatives could include paid social advertisements, a change in your organic social media
strategy, or a combination of the two.
D. Weigh the evidence
Once you have identified multiple alternatives, weigh the evidence for or against said
alternatives. See what companies have done in the past to succeed in these areas, and take a
good hard look at your own organization’s wins and losses. Identify potential pitfalls for each
of your alternatives, and weigh those against the possible rewards.
E. Choose among alternatives
Here is the part of the decision-making process where you, you know, make the
decision. Hopefully, you’ve identified and clarified what decision needs to be made, gathered
all relevant information, and developed and considered the potential paths to take. You are
perfectly prepared to choose.
F. Take action
Once you’ve made your decision, act on it! Develop a plan to make your decision
tangible and achievable. Develop a project plan related to your decision, and then set the
team loose on their tasks once the plan is in place.
G. Review your decision
After a predetermined amount of time—which you defined in step one of the
decision-making process—take an honest look back at your decision. Did you solve the
problem? Did you answer the question? Did you meet your goals?
If so, take note of what worked for future reference. If not, learn from your mistakes as you
begin the decision-making process again.
8.6 GROUP DECISION MAKING:

Decision-making by groups in not a rare thing to observe in business operations. Board
meetings, committees, staff meetings, conferences, provide examples of decision - making by
groups. Thus, directors at the top of an organisation make decisions in their Board meetings.
Similarly, departmental managers or executivessolve number-of problems jointly.It what type
of problems, at what level, and how, decision - making by group may be used-in the
organisation is a policy matter and rests with higher ups. But whenever it is resorted to, the
appointing authority down in explicit terms the scope and exact functions expected of the
group.
8.6.1. GROUP DECISION MAKING ADVANTAGES:

If properly handled, decision - making by groups or committees offers the following
advantages.
(i), Itimproves quality of the decision since different viewpoints and opinions are reflected in
it. (ii) Coordination 'of departmental activities through meetings of their respective heads
become easier.
(iii) Group decision - making provides opportunity for participation by individuals

representing different interests and thus improve their morale and motivate them for whole -
hearted cooperation in carrying out the decisions. (iv) It provides opportunity for training of
employees and their development.
Some Disadvantages which includes are: However, group decision making is not free from
limitations. The important weaknesses may be enumerated as follows, (i) it is costly as well
as a time - consuming affair and as such, cannot be recommended particularly in situations
where decisions must be made promptly. (ii) More often differences in opinion and
compromises lead to indecision. (iii) It is also observed that group decisions help members
evading their individual responsibilities. (iv) If an influential member of the group is able to
dominate discussion in the meetings, decision so made does not represent synthesis of view
point~ of different interests.'
8.7. RATIONALITY IN DECISION MAKING:

Effective decision making requires a rational selection of a course of action. But what is
rationality? Certain conditions must be met before we can say that people are acting or
deciding rationally.
i) They must be attempting to reach some goal that could not be attained without positive
action.,
ii) They must have a clear understanding of alternative courses by which a goal could be
reached under existing circumstances and limitations.
iii) They must have the information and the ability to analyze and evaluate alternatives in the
light of the goal sought.
iv) Finally, they must have a desire to come to the best solution by selecting the alternative
that best satisfies goal achievement.
Complete rationality can seldom be achieved, particularly in the area of managing; what a
manager must settle for is limited rationality. or what has been called "bounded" rationality,
It view of the very great limits to being completely rational in practice. it is not surprising that
manages sometimes allow their dislike of risk the desire to "play it safe" - to interfere with
the desire to reach the best solution. This was referred by Herbert I Simon' as "satisfying",
picking a course of action that is satisfactory or "good enough" under t116circumstances.
8.8. SYSTEM APPROACH AND DECISION MAKING:

Decisions cannot usually be made in a closed - system environment. As emphasized earlier in
the unit on planning premises, many elements of the environment of planning lie outside the
enterprise. In addition, every department or section of an enterprise is a subsystem of the
entire enterprise; managers of these organisational units must be responsive to the policies
and programmes of other organisation units and of the total enterprise. Moreover, people
within the enterprise are a part of the social system, and their thinking and attitudes must be
taken into account whenever a manager makes a decision.
8.10 DECISION MAKING TECHNIQUES:
8.10.1. Marginal Analysis:

This technique is used in decision-making to figure out how much extra output will result if
one more variable (e.g. raw material, machine, and worker) is added. In his book,
‘Economics’, Paul Samuelson defines marginal analysis as the extra output that will result by
adding one extra unit of any input variable, other factors being held constant.Marginal
analysis is particularly useful for evaluating alternatives in the decision-making process.
8.10.2. Financial Analysis:

This decision-making tool is used to estimate the profitability of an investment, to calculate
the payback period (the period taken for the cash benefits to account for the original cost of
an investment), and to analyze cash inflows and cash outflows. Investment alternatives can be
evaluated by discounting the cash inflows and cash outflows (discounting is the process of
determining the present value of a future amount, assuming that the decision-maker has an
opportunity to earn a certain return on his money).
8.10.3. Break-Even Analysis:

This tool enables a decision-maker to evaluate the available alternatives based on price, fixed
cost and variable cost per unit. Break-even analysis is a measure by which the level of sales
necessary to cover all fixed costs can be determined. Using this technique, the decision-
maker can determine the break-even point for the company as a whole, or for any of its
products. At the break-even point, total revenue equals total cost and the p
8.10.4. Ratio Analysis:

It is an accounting tool for interpreting accounting information. Ratios define the relationship
between two variables. The basic financial ratios compare costs and revenue for a particular
period. The purpose of conducting a ratio analysis is to interpret financial statements to
determine the strengths and weaknesses of a firm, as well as its historical performance and
current financial condition.
8.10. 5. Operations Research Techniques:

One of the most significant sets of tools available for decision-makers is operations research.
Operation research (OR) involves the practical application of quantitative methods in the
process of decision-making. When using these techniques, the decision-maker makes use of
scientific, logical or mathematical means to achieve realistic solutions to problems. Several
OR techniques have been developed over the years.
8.10. 6. Linear Programming:

Linear programming is a quantitative technique used in decision-making. It involves making
an optimum allocation of scarce or limited resources of an organization to achieve a
particular objective. The word ‘linear’ implies that the relationship among different variables
is proportionate. The term ‘programming’ implies developing a specific mathematical model
to optimize outputs when the resources are scarce. In order to apply this technique, the
situation must involve two or more activities competing for limited resources and all
relationships in the situation must be linear.
8.10.7. Waiting-line Method:

This is an operations research method that uses a mathematical technique for balancing
services provided and waiting lines. Waiting lines (or queuing) occur whenever the demand
for the service exceeds the service facilities. Since a perfect balance between demand and
supply cannot be achieved, either customers will have to wait for the service (excess demand)
or there may be no customers for the organization to serve (excess supply).When the queue is
long and the customers have to wait for a long duration, they may get frustrated. This may
cost the firm its customers. On the other hand, it may not be feasible for the firm to maintain
facilities to provide quick service all the time since the cost of idle service facilities have to
be borne by the company.The firm, therefore, has to strike a balance between the two. The
queuing technique helps to optimize customer service on the basis of quantitative criteria.
However, it only provides vital information for decision-making and does not by itself solve
the problem. Developing queuing models often requires advanced mathematical and
statistical knowledge.
8.10.8. Game Theory:

This is a systematic and sophisticated technique that enables competitors to select rational
strategies for attainment of goals. Game theory provides many useful insights into situations
involving competition. This decision-making technique involves selecting the best strategy,
taking into consideration one’s own actions and those of one’s competitors.
The primary aim of game theory is to develop rational criteria for selecting a strategy. It is
based on the assumption that every player (a competitor) in the game (decision situation) is
perfectly rational and seeks to win the game.In other words, the theory assumes that the
opponent will carefully consider what the decision-maker may do before he selects his own
strategy. Minimizing the maximum loss (minimax) and maximizing the minimum gain
(maximin) are the two concepts used in game theory.
8.10.9. Simulation:
This technique involves building a model that represents a real or an existing system.
Simulation is useful for solving complex problems that cannot be readily solved by other
techniques. In recent years, computers have been used extensively for simulation. The
different variables and their interrelationships are put into the model.When the model is
programmed through the computer, a set of outputs is obtained. Simulation techniques are
useful in evaluating various alternatives and selecting the best one. Simulation can be used to
develop price strategies, distribution strategies, determining resource allocation, logistics, etc.
8.10.10. Decision Tree:

This is an interesting technique used for analysis of a decision. A decision tree is a
sophisticated mathematical tool that enables a decision-maker to consider various alternative
courses of action and select the best alternative. A decision tree is a graphical representation
of alternative courses of action and the possible outcomes and risks associated with each
action.In this technique, the decision-maker traces the optimum path through the tree
diagram. In the tree diagram the base, known as the ‘decision point,’ is represented by a
square. Two or more chance events follow from the decision point. A chance event is
represented by a circle and constitutes a branch of the decision tree. Every chance event
produces two or more possible outcomes leading to subsequent decision points.
8.10. SUMMARY:
The role of premises in planning, the types of premises is discussed. The planning premises
are classified as internal/external, quantitative / qualitative; controllable / non - controllable.
Later, it was also explained the concept of decision making, its process, group decision
making, systems approach to decision making and decision-making techniques.
8.11Key Words
Planning premise: is a set of assumptions that are derived from forecasting the future. It is
a logical and systematic estimate of the future factors that can affect planning. Planning
premises provide a background against which the estimated events take place.
Management by objectives (MBO) is a strategic management model that aims to improve
the performance of an organization by clearly defining objectives that are agreed to by
both management and employees.
Decision making: Decision making is the process of making choices by identifying a

decision, gathering information, and assessing alternative resolutions.
8.11. SELF ASSESSMENT QUESTIONS
1. What is the importance of premises in planning?

2. Describe briefly external and internal premises in planning?
3. Describe the 'decision making process in organisation.
4. Examine the role of Group Decision Making in Organisation.
5. What is bounded rationality in decision making?
6.What are various techniques of decision making?
7. What is MBO? Explain the process of MBO.
8.12 FURTHERREADINGS:
Limited, 2009.
Education, 2012.
2010.
Pvt Ltd , 2008.
- Dr. V. Tulasi Das

UNIT - III
LESSON-9
ORGANIZING
Learning Objectives
To study the Purpose of the Organization
To Learn the Nature of Organization
To Understand the Formal and Informal Organisation
Structure
9.0 Introduction
9.1 Definition of organizing
9.2 Nature of Organizing
9.3 Purpose of organizing
9.4 Formal & Informal Organisation
9.5 Informal Organization
9.6Summary
9.7 key words
9.8 Self-Assessment Questions
9.0 INTRODUCTION
Once the plans have been laid down and objectives specified therein, the next step is
to organise resources in a manner which leads to the accomplishment of objectives. A critical
issue in accomplishing the goals specified in the planning process is structuring the work of
an organisation to adapt to the dynamic business environment. The activities of an enterprise
must be organised in such a manner that plans can be successfully implemented. For planning
to be fruitful a number of considerations like resources that will be needed, optimum
utilisation of the same translation of work into attainable tasks, empowering the workforce to
accomplish these tasks etc., need to be understood and dealt with properly. It is evident from
the way Wipro has moved towards reaching for it’s goal of becoming a globally successful
technology company, that organising plays a significant role in implementation of plans.
What has Wipro done to become a contending force among other global giants? Are there
lessons to be learnt from Wipro’s approach? Wipro organised itself in a manner that allowed
customer orientation to dominate over other goals and diversified on the basis of product
lines. It also modified the relationships within the management hierarchy to suit the goals.
The management function of organising ensures that efforts are directed towards the
attainment of goals laid down in the planning function in such a manner that resources are
used optimally and people are able to work collectively and effectively for a common
purpose. Thus, it is in the context of effective management that the organisation function
earns due importance. It is a means for translating plans into action. The organising function
leads to the creation of an organisational structure which includes the designing of roles to be
filled by suitably skilled people and defining the inter relationship between these roles so that
ambiguity in performance of duties can be eliminated. Not only is this important for
productive cooperation between the personnel but also for clarification of extent of authority,
as well as responsibility for results and logical grouping of activities.
9.1 Definition of Organizing
Organising is the process of identifying and grouping the work to be performed,
defining and delegating responsibility and authority, and establishing relationships for the
purpose of enabling people to work most effectively together in accomplishing objectives.
Louis Allen
Organising is the process of defining and grouping the activities of the enterprise and
establishing authority relationships among them.
Theo Haimman D
9.2 Nature of Organizing
9.2.1 Identification and division of work
The first step in the process of organising involves identifying and dividing the work
that has to be done in accordance with previously determined plans. The work is divided into
manageable activities so that duplication can be avoided and the burden of work can be
shared among the employees.
9.2.2 Departmentalisation
Once work has been divided into small and manageable activities then those activities
which are similar in nature are grouped together. Such sets facilitate specialisation. This
grouping process is called departmentalisation. Departments can be created using several
criteria as a basis. Examples of some of the most popularly used basis are territory (north,
south, west etc.) and products (appliances, clothes, cosmetics etc).
9.2.3 Assignment of duties:

It is necessary to define the work of different job positions and accordingly allocate
work to various employees. Once departments have been formed, each of them is placed
under the charge of an individual. Jobs are then allocated to the members of each department
in accordance to their skills and competencies. It is essential for effective performance that a
proper match is made between the nature of a job and the ability of an individual. The work
must be assigned to those who are best fitted to perform it well. (iv) Establishing reporting
relationships: Merely allocating work is not enough. Each individual should also know who
he has to take orders from and to whom he is accountable. The establishment of such clear
relationships helps to create a hierarchal structure and helps in coordination amongst various
departments.
Perspectives of Management 9.3 Organizing
9.3 PURPOSE OF ORGANISING

Performance of the organising function can pave the way for a smooth transition of
the enterprise in accordance with the dynamic business environment. The significance of the
organising function mainly arises from the fact that it helps in the survival and growth of an
enterprise and equips it to meet various challenges. In order for any business enterprise to
perform tasks and successfully meet goals, the organising function must be properly
performed. The following points highlight the crucial role that organising plays in any
business enterprise:
9.3.1 Benefits of specialisation
Organising leads to a systematic allocation of jobs amongst the work force. This
reduces the workload as well as enhances productivity because of the specific workers
performing a specific job on a regular basis. Repetitive performance of a particular task
allows a worker to gain experience in that area and leads to specialisation.
9.3.2 Clarity in working relationships

The establishment of working relationships clarifies lines of communication and
specifies who is to report to whom. This removes ambiguity in transfer of information and
instructions. It helps in creating a hierarchical order thereby enabling the fixation of
responsibility and specification of the extent of authority to be exercised by an individual.
9.3.3 Optimum utilization of resources
Organising leads to the proper usage of all material, financial and human resources.
The proper assignment of jobs avoids overlapping of work and also makes possible the best
use of resources. Avoidance of duplication of work helps in preventing confusion and
minimising the wastage of resources and efforts.
9.3.4 Adaptation to change

The process of organising allows a business enterprise to accommodate changes in the
business environment. It allows the organisation structure to be suitably modified and the
revision of inter-relationships amongst managerial levels to pave the way for a smooth
transition. It also provides much needed stability to the enterprise as it can then continue to
survive and grow inspite of changes.
9.3.5 Effective administration
Organising provides a clear description of jobs and related duties. This helps to avoid
confusion and duplication. Clarity in working relationships enables proper execution of work.
Management of an enterprise thereby becomes easy and this brings effectiveness in
administration
9.3.6 Development of personnel
Organising stimulates creativity amongst the managers. Effective delegation allows the
managers to reduce their workload by assigning routine jobs to their subordinates. The
reduction in workload by delegation is not just necessary because of limited capacity of an
individual but also allows the manager to develop new methods and ways of performing
tasks. It gives them the time to explore areas for growth and the opportunity to innovate
thereby strengthening the company’s competitive position. Delegation also develops in the
subordinate the ability to deal effectively with challenges and helps them to realise their full
potential.
9.3.7 Expansion and growth

Organising helps in the growth and diversification of an enterprise by enabling it to
deviate from existing norms and taking up new challenges. It allows a business enterprise to
add more job positions, departments and even diversify their product lines. New geographical
territories can be added to current areas of operation and this will help to increase customer
base, sales and profit. Thus, organising is a process by which the manager brings order out of
chaos, removes conflict among people over work or responsibility sharing and creates an
environment suitable for teamwork.
9.4 FORMAL AND INFORMAL ORGANISATION
The formal organisation is a system of well-defined jobs, each bearinga definite measure of
authority, responsibility and accountability.
Louis Allen
Formal organisation is a system of consciously coordinated activitiesof two or more persons

toward a common objective.
Chester Barnand
Formal organisation refers to the organisation structure which is designed by the

management to accomplish a particular task. It specifies clearly the boundaries of authority
and responsibility and there is a systematic coordination among the various activities to
achieve organisational goals. The structure in a formal organisation can be functional or
divisional.
9.4.1 Features
(a) It specifies the relationships among various job positions and the nature of their
interrelationship. This clarifies who has to report to whom.
(b) It is a means to achieve the objectives specified in the plans, as it lays down rules and
procedures essential for their achievement.
(c) Efforts of various departments are coordinated, interlinked and integrated through the
formal organisation.
(d) It is deliberately designed by the top management to facilitate the smooth functioning of
the organisation
(e) It places more emphasis on work to be performed than interpersonal relationships among
the employees.
9.4.2 Advantages
Some of the important ones are:
(a) It is easier to fix responsibility since mutual relationships are clearly defined.
(b) There is no ambiguity in the role that each member has to play as duties are specified.
This also helps in avoiding duplication of effort.
(c) Unity of command is maintained through an established chain of command.
(d) It leads to effective accomplishment of goals by providing a framework for the operations
to be performed and ensuring that each employee knows the role he has to play.
(e) It provides stability to the organisation. This is because behaviour of employees can be
fairly predicted since there are specific rules to guide them.
9.4.3 Limitations
The formal organisation suffers from the following limitations:
(a) The formal communication may lead to procedural delays as the established chain of
command has to be followed which increases the time taken for decision making.
(b) Poor organisation practices may not provide adequate recognition to creative talent, since
it does not allow any deviations from rigidly laid down polices.
(c) It is difficult to understand all human relationships in an enterprise as it places more
emphasis on structure and work. Hence, the formal organisation does not provide a complete
picture of how an organisation works.
9.5 INFORMAL ORGANISATION

Interaction among people at work gives rise to a ‘network of social relationships
among employees’ called the informal organisation. Informal organisation emerges from
within the formal organisation when people interact beyond their officially defined roles.
When people have frequent contacts they cannot be forced into a rigid formal structure.
Rather, based on their interaction and friendship they tend to form groups which show
conformity in terms of interest. Examples of such groups formed with common interest may
be those who take part in cricket matches on Sundays, meet in the cafeteria for coffee, are
interested in dramatics etc. Informal organisation has no written rules, is fluid in form and
scope and does not have fixed lines of communication. The Table in the next page compares
informal organisation with the formal organisation to provide better understanding of both
types.
9.5.1 Features of Informal Organisation
(a) An informal organisation originates from within the formal organisation as a result of
personal interaction among employees.
(b) The standards of behaviour evolve from group norms rather than officially laid down
rules and regulations.
(c) Independent channels of communication without specified direction of flow of
information are developed by group members.
(d) It emerges spontaneously and is not deliberately created by the management.
(e) It has no definite structure or form because it is a complex network of social relationships
among members.
9.5.2 Advantages
The informal organisation offers many benefits. Important among them are given below:
(a) Prescribed lines of communication are not followed. Thus, the informal organisation
leads to faster spread of information as well as quick feedback.
(b) It helps to fulfill the social needs of the members and allows them to find like minded
people. This enhances their job satisfaction since it gives them a sense of
belongingness in the organisation.
(c) It contributes towards fulfillment of organisational objectives by compensating for
inadequacies in the formal organisation. For example, employees reactions towards
plans and policies can be tested through the informal network
9.5.3 Disadvantages
The informal organisation has certain disadvantages. Some of them are as follows:
(a) Informal organisation may become a disruptive force when it spreads rumours. This may
work against the interest of the formal organisation.
(b) The management may not be successful in implementing changes if the informal
organisation opposes them. Such resistance to change may delay or restrict growth.
(c) It pressurises members to conform to group expectations. This can be harmful to the
organisation if the norms set by the group are against organisational interests. Informal
organisation cannot be altogether eliminated. Thus, it would be in the best interest of the
organisation if the existence of such groups is recognised and the roles that their members
play are identified. The knowledge of such groups can be used to gather their support and
consequently lead to improved organisational performance. Such groups can also provide
useful communication channels. Instead of confronting them, the management should
skillfully take advantage of both the formal and informal organisation so that work continues
smoothly.
9.6Summary
Organising helps in the growth and diversification of an enterprise by enabling it to
deviate from existing norms and taking up new challenges. It allows a business enterprise to
add more job positions, departments and even diversify their product lines. It gives them the
time to explore areas for growth and the opportunity to innovate thereby strengthening the
company’s competitive position. Delegation also develops in the subordinate the ability to
deal effectively with challenges and helps them to realise their full potential.
9.7 Key words

Organizing -Organising is the process of defining and grouping the activities of the
enterprise and establishing authority relationships among them
Formal organisation- Formal organisation refers to the organisation structure which is
designed by the management to accomplish a particular task
Informal Organization - Interaction among people at work gives rise to a ‘network of social
relationships among employees’ called the informal organisation
Departmentalisation- Once work has been divided into small and manageable activities then
those activities which are similar in nature are grouped together

1. Define Organizing? Discuss the Nature and Purpose of Organizing?
2. Examine the difference between the Formal and Informal Organization?
3. Explain the advantages and Disadvantages of Informal Organisation?

1. C.B. Mamoria& S.V. Gankar,Personnel Management (Text & Cases);
HimalayanPublishing House, New Delhi 2010
2. Andrew J.Dubrin, Essentials of Management, South Western college Publication, 2011.
3. Dipak Kumar Bhattacharya, Principles of Management -Text & Cases, Pearson
Publication, 2012.
4. Harold Koontz, Essentials of Management- An International Leadership Perspective- TMH
Publications, 2012
5. Stephen D.Robbins, A.Decenzo, Fundamentals of Management, Pearson Education,
7thCandidian Edition, 2013.
6. Ricky Griffin, Fundamentals of Management, Cengage learning, 2016.
7. Peter Eichhorn, Principles of Management: Efficiency and Effectiveness in Private and
Public Sector, Springer International Publications, 2018.
- Dr. M. Rama Satyanarayana

LESSON-10
ORGANIZATION STRUCTURE
Learning Objectives
To study the types of Organization charts
To Learn the principles of organization charts
To Understand on the types of the organization structure
Structure
10.0 Introduction
10.1 Factors influencing the organisation structure
10.2Types of Organisation Charts
10.3 Principles of Organization charts
10.4 Organisation structure
10.5 Types of Organization structure
10.6 Summary
10.7 Key words
10.0 INTRODUCTION
Organization chart is a diagrammatical presentation of relationships in an enterprise.
The functions and their relationships, the channels of authority and relative authority of
different managers etc. are depicted in an organizational chart.
George Terry defines an organization chart as “a diagrammatical form which shows
important aspects of an organization, including the major functions and their respective
relationships, the channel of supervision and the relative authority of each employer who is
in-charge of each respective function.” So a chart is a pictorial and indicating functions and
their relationship, clear lines of authority and responsibility, channels of communication and
span of control and supervision.
Organization charts can be divided into:

(i) Master charts and
(ii) Supplementary charts.
The master chart shows the whole formal organizational structure while supplementary chart
shows details of relationships, authority and duties within the prescribed area of a
department.
10.1 Factors influencing organisation structure
The organisation function is the immediate logical function after planning. To achieve
the objectives set in the plan, somebody should work and should do the right work. The
organising function makes the people to work. The function "involves managers in decisions
which result in a system of specialised coordinated jobs." In an organisation structure so
many aspects are involved. Human and non-human elements will be working. Orgnisationál
structure is an integrated whole. Job of each worker is specified, control measures are
adopted for performing those jobs effectively. An organisational chart depicts tangibly the
reporting relationships and channels of communication.
10.1.1 Size of the Unit
Size indicates the scale of operation. Normally there are three scales of operation,
viz., small, medium and large. Size is an important factor governing cost, efficiency and
profitability of a business enterprise. Before any business or non-business enterprise is
started, the organisers will have to decide the most profitable and viable size of the unit.
Optimum or the best size is a dynamic concept and it changes with the development of
science and technology. Therefore, technology is one factor which determines the size and
the organisation structure. To introduce new technology, in business enterprise, the activity
has to be expanded and hence the structure changes.
10.1.2 Job Design.
The bricks that develop an organisation structure are jobs. What are the jobs to be
done in an organisation has to be decided by the top brass. Job design is the first managerial
decision of the organisation structure. Jobs in a task have to be specified as one person cannot
perform a task. It is a team work. Job in each task is to be specified and assigned. What an
individual has to do to contribute to the overall tasks and objectives has to be decided.
Therefore the fundamental factor, which determines the organisation structure is "Job
designing" and "numbering" them. These numbers decide the size of the organisation.
10.1.3. Grouping of Activities
The designed jobs have to be formed into groups according to the nature of activity.
Grouping of activities are essential to achieve coordination. Each group is termed as
"DEPARTMENT." Departmentation is another factor which determines the organisation
structure. Thus in each business organisation we observe departments like Marketing
Department, Production Department, Finance Department etc which discharge their
functions.
10.1.4 Span of Control
Another factor that determines the organisation structure is the number of persons to
be managed by each manager. This is called "Span of management." Depending upon the
nature of organisation some departments will be big in size and some will be small.
Therefore, each manager should be assigned with manageable tasks and personnel. If the
tasks are many in a department, there should be splitting the tasks into number of divisions
and lower levels are to be created. All this takes place depending upon resources and
personnel available. However, the span of management, i.e., the number of persons to be
Perspectives of Management 10.3 Organization Structure
managed by each manager, has to be decided and that becomes one of the major factors to
decide the size of organisation structure. The number varies from manager to manager and
the number determines the span. Manageable span found out by experience is six, i.e., one
manager can manage six, persons effectively.
10.1.5 Delegation of Authority.
Authority relationship also decides the organisation structure. If the span is more,
there will be more authority levels and top management has to delegate authority to each
level. Authority, means "the right to make decisions without having to obtain approval from a
higher up." In an organisation structure, if the span and levels of management are more, the
delegation of authority will be more and there will be decentralisation of authority for smooth
functioning of tasks. If the span is narrow, less levels and more centralisation of authority.
Thus delegation of authority decides the organisation structure.
10.2TYPES OF ORGANIZATION CHARTS

There are three ways in which organization charts can be shown:
(i) Vertical
(ii) Horizontal
(iii) Circular
(i) Vertical or Top to Bottom:

In this chart major functions are shown at the top and subordinate functions in successive
lower positions. In this chart scalar levels run horizontally and functions run vertically. The
supreme authority is shown at the top while lowest authority at the bottom.
10.2.1 Vertical Type of Organisation Chart

The vertical chart is shown in the following diagram. In this diagram Board of
Directors is at the top of the organization. The chief executive controls various functional
managers, who in turn have downward staff as the requirement of respective departments.
10.2.2 Horizontal or Left to Right

In this chart highest positions are put on the left side and those with diminishing
authority move towards the right. The organizational levels are represented by vertical
columns, the flow of authority from higher to lower levels being represented by movement
from left to right. In other words it presents scalar levels in a vertical position and functions
horizontally.The same levels of authority as shown in vertical chart can be depicted in a left
to right chart as follows:
In horizontal chart the supreme authority Le. Board of Directors is shown on the left and
chief executive and functional managers and other levels move towards right.
Horizontal Type of Organisation Chart
10.2.3 Circular
In circular chart the centre of the circle represents the position of supreme authority
and the functions radiate in all directions from the centre. The higher the positions of
authority, the nearer they are to the centre and the lesser the positions of authority, more
distant they are from the centre. The positions of relative equal importance are located at the
same distance from the centre. The lines forming different blocks of functions or positions
indicate the channels of formal authority, the same as in other arrangements. The circular
chart depicts the actual condition of outward flow of formal authority from the Chief
Executive in many directions.
10.3 Principles of Organization Charts

Following principles should be kept in mind while framing organization charts:
(i) The top management should faithfully follow the line of authority while dealing with
subordinates. Any attempt to buy pass the organization chart will make it meaningless.
(ii) The chart should define lines of position. The lines of different individuals should be so
defined so that there is no overlapping and no two persons should be given the same position.
(iii) The undue concentration of duty at any point should be avoided.
(iii) The organization chart should not be influenced by personalities. Balance of organization
should be given more importance than the individuals.
(v) The organization chart should be simple and flexible.
10.3.1 Advantages of Organization Charts

1. An organization chart is a managerial tool. It helps in specifying authority and
responsibility of every position.
The relationships among different persons are also established for smooth working of the
organization.
2. As organization chart specifically defines authority and responsibility of people in the
enterprise there will be no duplication and overlapping of duties etc. Even if it happens in a
particular instance it can be rectified immediately.
3. The organization chart will help in pointing out the faults, deficiencies, dual command etc.
in the organization. The management will be able to take prompt remedial action in case of
certain lacuna.
4. The organization chart acts as an information centre to the new entrants and they can easily
understand different levels of authority and responsibility.
5. The charts are also helpful in decision-making process. They act as a guide to the decision
makers.
10.3.2 Limitations of Organization Charts
The organization charts suffer from the following drawbacks:
1. The organization charts show the relationship of different positions and not the degree of
authority and responsibility. The size of boxes or circles in the chart cannot show the level of
authority, etc.
2. A chart only depicts formal organizational relationship whereas informal organization is
ignored. Practically informal organization is as useful as formal organization. Informal
organization greatly helps management in knowing the reactions of the people and is an
important channel of communication.
3. A chart shows organizational position and status at different levels. It gives rise to
superior-inferior feeling among people and it retards the feeling of team work.
10.4 ORGANISATION STRUCTURE

Organisation structure is the outcome of the organising process. An effective structure
will result in increased profitability of the enterprise. The need for an adequate organisation
structure is felt by an enterprise whenever it grows in size or complexity. It is only those
enterprises which do not focus on growth that can maintain a particular structure for a long
period of time. However, it is important to understand that such stagnancy may prove to be
detrimental to an enterprise as those companies which do not change at all will close down or
cease to grow. As an organisation grows, coordination becomes difficult due to the
emergence of new functions and increase in structural hierarchies. Thus, for an organisation
to function smoothly and face environmental changes, it becomes necessary to pay attention
to its structure. Peter Drucker emphasises on the importance of having an appropriate
organisation structure when he says, “organisation structure is an indispensable means; and
the wrong structure will seriously impair business performance and even destroy it.” The
organisation structure can be defined as the framework within which managerial and
operating tasks are performed. It specifies the relationships between people, work and
resources. It allows correlation and coordination among human, physical and financial
resources and this enables a business enterprise to accomplish desired goals. The organisation
structure of a firm is shown in an organisation chart. The span of management, to a large
extent gives shape to the organisational structure. Span of management refers to the number
of subordinates that can be effectively managed by a superior. This determines the levels of
management in the structure. A proper organisation structure is essential to ensure a smooth
flow of communication and better control over the operations of a business enterprise. An
organisation structure provides the framework which enables the enterprise to function as an
integrated unit by regulating and coordinating the responsibilities of individuals and
departments.
10.5 TYPES OF ORGANISATION STRUCTURES

10.5.1. Bureaucratic Structures
The bureaucratic structure has some level of standardization. This structure defined the clear
roles and responsibilities of every individual employee. It is a hierarchical structure, with
respect to merit. It has many levels, so decision-making authority has to pass through more
layers than flatter organizations. A disadvantage of bureaucratic structures is that they can
discourage innovation and creativity within the organization. This type of structures is
usually used in larger organizations.
10.5.2. Hierarchical Organizational Structure

The hierarchy phenotype model of the organizational structure shows an organization

having both community and hierarchy in the same structure. A hierarchical organizational
structure is a pyramid-shaped chart where the board of directors is at the top position and
workers are at the bottom level. This is the most common type of organizational structure.
Each employee has a supervisor in this organizational structure.
Some advantages of this structure are- it gives every employee a speciality and creates
a healthy working environment. It motivates employees with chances for promotion. Above
all, it better defines levels of authority and responsibility.
Some of the major disadvantages are – it can slow down innovation due to increased
bureaucracy. Employees show interest in their own departments rather than the whole
company. It can make lower-level employees think that they have less authority to express
their ideas for the company.
10.5.3.Functional Organizational Structure

A functional organizational structure consists of activities like task allocation, supervision
and coordination. Functional Structure is also like a hierarchical structure. A person with the
highest level of responsibility positioned at the top and employees are positioned according to
their skills and speciality. Each department here is managed independently.
Some advantages of this structure are – It allows employees to focus on their role help
teams and departments feel self-determined. It also encourages specialization, and it is
scalable.
Some of the important disadvantages are – it can affect interdepartmental
communication and create silos within an organization.
10.5.4. Divisional Organizational Structure

Divisional organizational structure is one of the smartest organizational structure ever. In this
structure, an organization is separated into some divisions, and each division has control over
its own resources and operations. This structure is specially designed for large companies.
10.5.5 Geographic Divisional Organizational Structure

Divisions are separated by districts, territories and regions offering more effective
localization and logistics. Companies might set up satellite offices around the country in
order to stay close and connected to their customers.
10.4.6 Market-Based Divisional Organizational Structure
The divisions are separated by industry, market and customer types. The market-
based structure is ideal for an organization that has product or services that are incomparable
to specific market segments, and it is especially effective if that organization has advanced
knowledge of those segments. This structure also keeps the business constantly conscious of
demand changes among its different audience segments
Advantages & Disadvantages of Divisional Structure

The major advantages of the divisional structure are- it helps large companies to stay
flexible, and it promotes autonomy and a customized approach. It also allows for a faster
response to customer need
some disadvantages of the divisional structure. First of all, duplicate resources can
dominate easily and result in a company competing with itself.
10.5.7 Matrix Structure

The matrix organizational structure groups employees by both function and product at
the same time. This organizational chart looks like a grid and it displays cross-functional
teams that form for specific projects. It doesn’t follow the traditional hierarchical model. In
this structure, employees have dual reporting relationships. The main objective of this
structure is to provide both flexibility and more balanced decision making.
For Example – An engineer may regularly belong to the technical department under the
engineering director but work on a temporary project under the project manager.
Some advantages of the matrix structure are, it lets supervisors easily choose
individuals through the needs of a project. It shows the more kinetic view of the organization
and it inspires employees to use their ability or skills in various capacities aside from their
original roles.
And the disadvantages are – it can create a conflict between project managers and
departmental managers. It can also change more frequently than other organizational
structures.
10.5.8. Flat or Horizontal Organizational Structure
A flat or horizontal structure can fit companies with few levels between upper-level
management and lower-level employees. Basically, startup businesses use this type of
structure to grow. This structure is completely free of hierarchy related pressure so that
employees can be more productive.
Some of the advantages of this structure are – it gives employees more responsibility
and provides a better opportunity to grow. It also promotes more open communication and
improves coordination.
Some disadvantages are – it can be difficult to maintain when the company grows
beyond the startup state. It produces employees with more generalized skills and knowledge.
It can also create confusion between employees of different level.
10.5.9. Circular Organizational Structure
The appearance of circular organizational structure is different from the rest of
organizational structures but it still relies on the hierarchy, in which higher-level employees
occupying the inner rings of the circle while the lower-level employees occupying outer
rings.
The advantages of circular organizational structure are – It meant to promote
communication and free flow of information between different parts of the organization.Now
here are some disadvantages of the circular organizational structure. The circular structure
can be confusing for the new employees. Unlike a hierarchical structure, a circular structure
makes it difficult to find out whom to report and how they’re meant to fit into the
organization.
10.5.10 Team-based Organizational Structure

The team is the newest organizational structure developed in the 20th century. In a
small business, the team-based structure defines the entire organization. It can be both
horizontal and vertical. A team organizational structure is meant to disrupt the traditional
hierarchy, giving employees more control, cooperation and focusing more on problem-
solving.
Advantages of this structure are – it increases performance, productivity and
transparency within an organization. It values experience rather than seniority and promotes
an aggressive business mindset. It requires minimal management and can fit anywhere. Some
disadvantages of this type of organizational structure. The promotional path is less clear in
this structure. It goes against the traditional hierarchical system.
10.5.11 Network-Based Organizational Structure
Network Structure is a modern concept. The network organization contract out any
business function that can be done better and more cheaply. Managers in this structure spend
most of their time coordinating and controlling external relations. It makes sense of the
spread of resources. The advantages of this structure are – it focuses more on open
communication rather than hierarchy and allows companies to be more flexible. It gives all
employees the power to collaborate and make decisions. It also helps employees to
understand workflow and processes deeply.
10.6 Conclusion
An organizational structure is a visual diagram of a company that describes what
employees do, whom they report to, and how decisions are made across the business.
Organizational structures can use functions, markets, products, geographies, or processes as
their guide, and cater to businesses of specific sizes and industries.As the company gets
bigger, an organizational structure can also be helpful for new employees as they learn who
manages what processes at company. Then, if they need to pivot or shift your leadership, it
can visualize how the work flows would work by adjusting your organizational structure
diagrams. To put it simply, this chart like a map that simply explains how the company works
and how its roles are organized.
10.7 key words

Matrix Organization structure- The matrix organizational structure groups employees by
both function and product at the same time.
Circular Organization structure- The appearance of circular organizational structure is
different from the rest of organizational structures but it still relies on the hierarchy, in which
higher-level employees occupying the inner rings of the circle while the lower-level
employees occupying outer rings
Flat or horizontal structure- A flat or horizontal structure can fit companies with few levels
between upper-level management and lower-level employees
Span of control- It determines the organisation structure is the number of persons to be
managed by each manager. This is called "Span of management
Division organization structure- Divisional organizational structure is one of the smartest

organizational structure
Functional organizational structure-Functional organizational structure consists of
activities like task allocation, supervision and coordination
Bureaucratic Structures- The bureaucratic structure has some level of standardization. This
structure defined the clear roles and responsibilities of every individual employee

1. Discuss the Principles of Organization charts?
2. Briefly Explain the Types of Organization charts?
3. Describe the Types of Organization structure

2. Andrew J.Dubrin, Essentials of Management, South Western college Publication,
2011.
Publication, 2012.
4. Harold Koontz, Essentials of Management- An International Leadership Perspective-
TMH Publications, 2012
7. Peter Eichhorn, Principles of Management: Efficiency and Effectiveness in Private
and Public Sector, Springer International Publications, 2018.

LESSON-11
DEPARTMENTATION
Learning Objectives
To study the importance of Departmentation

To define the types of Departmentation
To design the line and staff authority
To focus on the merits and demerits of line staff organisation
Structure
11.0 Introduction
11.1 Need and Importance of Departmentation
11.2 Types of Departmentation
11.3 Line and Staff Authority
11.4 Line and Staff Position
11.5 line and staff organization
11.6 Merits of Line and Staff organization
11.7 Demerits of Line and Staff Organisation
11.8 Summary
11.9 Key words
11.10 Self Assessment questions
11.0 INTRODUCTION
Departmentation’ or ‘Departmentalisation’ is the process of grouping the activities of

an enterprise into several units for the purpose of administration at all levels.The
administrative units so created may be designated as departments, divisions, units, branches,
sections, etc.The process of organising consists of dividing and grouping of the works to be
done in an enterprise and assigning different duties and responsibilities to different people.
Dividing the work naturally means the identification of individual activities which
have to be undertaken for the attainment of the organisational objectives. But once the
various activities have been identified, it is necessary to group them together on some logical
basis so that a team can be organised.Departmentation can provide a necessary degree of
specialisation of executive activity for efficient performance. It can simplify the tasks of
management within a workable span. It also provides a basis on which the top managers can
co-ordinate and control the activities of the departmental units.
11.1 NEED AND IMPORTANCE OF DEPARTMENTATION
The basic need for Departmentation is to make the size of each departmental unit
man-ageable and secure the advantages of specialisation. Grouping of activities and,
consequently, of personnel, into departments makes it possible to expand an enterprise to any
extent.
Departmentation is necessary on account of the following reasons:
11.1.1 Advantages of Specialisation
Departmentation enables an enterprise to avail of the benefits of specialisation. When

every department looks after one major function, the enterprise is developed and efficiency of
operations is increased.
11.1.2. Feeling of Autonomy
Normally departments are created in the enterprise with cer-tain degree of autonomy
and freedom. The manager in charge of a department can take inde-pendent decisions within
the overall framework of the organisation. The feeling of autonomy provides job satisfaction
and motivation which lead to higher efficiency of operations.
11.1.3. Expansion
One manager can supervise and direct only a few subordinates. Group-ing of
activities and personnel into Departmentation makes it possible for the enterprise to expand
and grow.
11.1.4. Fixation of Responsibility
Departmentation enables each person to know the spe-cific role he is to play in the
total organisation. The responsibility for results can be defined more clearly, precisely and
accurately and an individual can be held accountable for the per-formance of his
responsibility.
11.1.5. Upliftment of Managerial Skill
Departmentation helps in the development of managerial skill. Development is

possible due to two factors. Firstly, the managers focus their attention on some specific
problems which provide them effective on-the-job training. Sec-ondly, managerial need for
further training can be identified easily because the managers’ role is prescribed and training
can provide them opportunity to work better in their area of spe-cialisation.
11.1.6. Facility in Appraisal
Appraisal of managerial performance becomes easier when specific tasks are assigned
to departmental personnel. Managerial performance can be meas-ured when the areas of
activities are specified and the standards of performance are fixed. Departmentation provides
help in both these areas.
Perspectives of Management 11.3 Departmentation
When a broader function is divided into small segments and a particular segment is
assigned to each manager, the area to be appraised is clearly known; and the factors affecting
the performance can be pointed out more easily. Similarly, the standards for performance can
be fixed easily because the factors influencing the work performance can be known clearly.
Thus, performance appraisal becomes more effective.
11.1.7. Administrative Control
Departmentation is a means of dividing the large and com-plex organisation into

small administrative units. Grouping of activities and personnel into manageable units
facilitates administrative control. Standards of performance for each and every department
can be precisely determined.
11.2 TYPES OF DEPARTMENTATION
There are several bases of Departmentation. The more commonly used bases are—function,
product, territory, process, customer, time etc.
11.2.1 Departmentation by Functions
The enterprise may be divided into departments on the basis of functions like
production, purchasing, sales, financing, personnel etc. This is the most popular basis of
departmentation. If necessary, a major function may be divided into sub-functions. For
example, the activities in the production department may be classified into quality control,
processing of materials, and repairs and maintenance.
The organisation chart based on functional departmentation is shown in Fig.
Functional Departmentations
Advantages
The advantages of functional departmentation include the following:
(a) It is the most logical and natural form of departmentation.

(b) It ensures the performance of all activities necessary for achieving the organisational
objectives.
(c) It provides occupational specialisation which makes optimum utilization of man-power.
(d) It facilitates delegation of authority.
(e) It enables the top managers to exercise effective control over a limited number of
functions.
(f) It eliminates duplication of activities.
(g) It simplifies training because the managers are to be experts only in a narrow range of
skills.
Disadvantages
There are some problems associated with functional departmentation. These are mentioned
below:
(a) There may be conflicts between departments.
(b) The scope for management development is limited. Functional managers do not get
training for top management positions. The responsibility for results cannot be fixed on any
one functional head.
(c) There is too much emphasis on specialisation.
(d) There may be difficulties in coordinating the activities of different departments.
(e) There may be inflexibility and complexity of operations.
11.2.2 Departmentation by Products
In product departmentation, every major product is organised as a separate

department. Each department looks after the production, sales and financing of one product.
Product departmentation is useful when the expansion, diversifica-tion, manufacturing and
marketing characteristics of each product are primarily significant.
It is generally used when the production line is complex and diverse requiring
specialised knowl-edge and huge capital is required for plant, equipment and other facilities
such as in automo-bile and electronic industries.
In fact, many large companies are diversifying in different fields and they prefer
product departmentation. For example, a big company with a diversified product line may
have three product divisions, one each for plastics, chemicals, and metals. Each division may
be sub-divided into production, sales, financing, and personnel activities.
Product departmentation provides several advantages which may be stated as follows:
(a) Product departmentation focuses individual attention to each product line which
fa-cilitates the expansion and diversification of the products.
(b) It ensures full use of specialised production facilities. Personal skill and specialised
knowledge of the production managers can be fully utilised.
(c) The production managers can be held accountable for the profitability of each prod-uct.
Each product division is semi-autonomous and contains different functions. So, product
departmentation provides an excellent training facility for the top managers.
(d) The performance of each product division and its contribution to total results can be easily
evaluated.
(e) It is more flexible and adaptable to change.
Disadvantages
Product departmentation presents some problems as follows:
(a) It creates the problem of effective control over the product divisions by the top managers.
(b) Each production manager asserts his autonomy disregarding the interests of the
organisation.
(c) The advantages of centralisation of certain activities like financing, and accounting are not
available.
(d) There is duplication of physical facilities and functions. Each product division main-tains
its own specialised personnel due to which operating costs may be high.
(e) There may be under-utilisation of plant capacity when the demand for a particular product
is not adequate.
11.2.3 Departmentation By Territory
Territorial or geographical departmentation is especially useful to large-scale

enterprises whose activities are widely dispersed. Banks, insu-rance companies, transport
companies, distribution agencies etc. are some examples of such enterprises, where all the
activities of a given area of operations are grouped into zones, branches, divisions etc.
It is obviously not possible for one functional manager to manage efficiently such
widely spread activities. This makes it necessary to appoint regional manag-ers for different
regions.
The organisation chart of territorial depart mentation may take the following form:
Advantages
Territorial departmentation offers certain facilities in operation. These are pointed out below:
(a) Every regional manager can specialise himself in the peculiar problems of his region.
(b) It facilitates the expansion of business to various regions.
(c) It helps in achieving the benefits of local operations. The local managers are more familiar
with the local customs, preferences, styles, fashion, etc. The enterprise can gain inti-mate
knowledge of the conditions in the local markets.
(d) It results in savings in freight, rents, and labour costs. It also saves time.
(e) There is better co-ordination of activities in a locality through setting up regional

divisions.
(f) It provides adequate autonomy to each regional manager and opportunity to train him as
he looks after the entire operation of a unit.
Disadvantages
Territorial departmentation have the following problems:
(a) There is the problem of communication.
(b) It requires more managers with general managerial abilities. Such managers may not be
always available.
(c) There may be conflict between the regional managers.

(d) Co-ordination and control of different branches from the head office become less
effective.
(e) Owing to duplication of physical facilities, costs of operation are usually high.
(f) There is multiplication of personnel, accounting and other services at the regional level.
11.2.4 Departmentation By Customers
In such method of departmentation, the activities are grouped according to the type of
customers. For example, a large cloth store may be divided into wholesale, retail, and export
divisions. This type of departmentation is useful for the enterprises which sell a product or
service to a number of clearly defined customer groups. For instance, a large readymade
garment store may have a separate department each for men, women, and children. A bank
may have separate loan departments for large-scale and small- scale businessmen.
The organisation chart of customer-oriented departmentation may appear as follows:
Advantages
The important advantages of customer departmentation are the follow-ing:
(a) Special attention can be given to the particular tastes and preferences of each type of
customer.
(b) Different types of customers can be satisfied, easily through specialised staff. Cus-tomers’
satisfaction enhances the goodwill and sale of the enterprise.
(c) The benefits of specialisation can be gained.
(d) The enterprise may acquire intimate knowledge of the needs of each category of
customers.
Disadvantages
This method of departmentation may have certain disadvantages, specially when it is

followed very rigidly. These are as follows:
(a) Co-ordination between sales and other functions becomes difficult because this method
can be followed only in marketing division.
(b) There may be under-utilisation of facilities and manpower in some departments,

particularly during the period of low demand.
(c) It may lead to duplication of activities and heavy overheads,
(d) The managers of customer departments may put pressures for special benefits and
facilities.
11.2.5 Departmentation By Process Or Equipment
In such type or departmentation the activities are grouped on the basis of production
processes involved or equipment used. This is generally used in manufacturing and
distribution enterprises and at lower levels of organi-sation. For instance, a textile mill may
be organised into ginning, spinning, weaving, dyeing and finishing departments. Similarly, a
printing press may have composing, proof reading, printing and binding departments. Such
departmentation may also be employed in enginee-ring and oil industries.
The organisation chart of departmentation by process or equipment in the

manufacturing department of a textile industry has been shown in Fig.
11.2.6 Process Departmentation
Advantages
The basic object of such departmentation is to achieve efficiency and economy of

operations. The processes are set in such a way that a series of operations is feasible making
operations economic. Efficiency can be achieved if departments are created for each process
as each one has its peculiarities.
It provides the advantages of specialisation required at each level of the total

processes. The maintenance of plant can be done in better way and manpower can be utilised
effectively.
Disadvantages
In such departmentation, there may be difficulty in coordinating the different process-

departments, because the work of each process depends fully on the prece-ding process. So,
there are chances of conflicts among the managers looking after the differ-ent processes. It
cannot be used where manufacturing activity does not involve distinct proc-esses.
11.3 LINE AND STAFF AUTHORITY

The line organization is the simplest organizational structure. It is the "doing"
organization, in that the work of all organizational units is directly involved in producing and
marketing the organization's goods and services. There are direct vertical links between the
different levels of the scalar chain. Since there is a clear authority structure, this form of
organization promotes greater decision-making and is simple in form to understand
The aim of any business is to maximize profit. In order to do this there must be
division and specialization of labour. This implies that different people come together in
order to create a product that has value to consumers. Hence, the activities of different people
involved in a business must be coordinated. So there is a need for an organizational structure
that brings this coordination about. People in an organization must know first is what their
activity is and where it fits into the product as a whole. Second is what their roles is, what
responsibilities they have and to whom they are answerable.
Line and staff organisation is a combination of line organisation and functional

organisation. It is a type of organisation in which there are two sets of officers for
administration, viz., Line officers who have the authority and command over the subordinates
and are responsible for the accomplishment of the results. Eg marketing executive and Staff
officers or specialists who advice, guide and council to the line officers to help them to
discharge their functions efficiently.Eg. Personal Secretary Health institutions in general and
tertiary health institutions in particular provide practical examples of line and staff
employees' relationship in formal organizations. How this relationship is managed impact
directly on the organization's performance in terms of realization of its set goal and
objectives. Industrial dynamics presented by tertiary health institutions make them one of the
most appropriate organizations for the analysis of line and staff relationship (Bassey et al.,
2011). Staffs refers to employees in an organization who function towards providing
conducive environment and assistance to line employees to work most effectively in order to
accomplish the primary objectives of an organization. Staff perform advising role to line
employees in order of authority within the organization. Like technicians, artisans, social
workers, psychologists, clerical and engineers are all staff personnel.
11.3.1 Need For Line And Staff Organisation
1. In line organisation, there is unity of command, but there is no specialization.
2. In functional organisation, there is extreme specialisation, but there is no unity of
command.
3. To overcome the defects and to take advantage of the merits of both line organisation and
functional organisation, line and staff organisation has been evolved.
4. Line and staff organisation is the usual form of organisation found in modern enterprise.
11.3.2 Meaning of Line and Staff Organisation
Line and staff organisation is a combination of line organisation and functional organisation.
It is a type of organisation in which there are two sets of officers for administration, viz.,
(1) Line officers who have the authority and command over the subordinates and are
responsible for the accomplishment of the results. Eg marketing executive.
(2) Staff officers or specialists who advice, guide and council to the line officers to help them
to discharge their functions efficiently. Eg. Personal Secretary
11.3.3 Features Line and Staff Organisation

1. There are two types of staff first is Staff Assistants- Personal Assistant to Managing
Director, Secretary to Marketing Manager second is Staff Supervisor- Operation Control
Manager, Quality Controller and PRO.
2. Line and Staff Organization is a compromise of line organization.
3. It is more complex than line concern and Division of work and specialization takes place
in line and staff organization.
4.The whole organization is divided into different functional areas to which staff specialists
are attached. Efficiency can be achieved through the features of specialization
5. Powers of command remains with and staff the line executive serves only as counsellors.
6. There are two lines of authority which flow at one time in a concern that is Line Authority
and Staff Authority.
STAFF ORGANIZATION
When staff specialists are added to a line organization to "advise; "serve;” or
“support" the line in some manner, we have a line and staff organization. These specialists
contribute to the effectiveness and efficiency of the organization. Their authority is generally
limited to making recommendation to the line organization. Sometimes this creates conflict.
However, such conflict can be reduced by having staff specialists obtain some line
experience, which will tend to make them better understand the problems facing the line
managers they support. Such functions as human resources management and research and
development are typical staff functions
LINE ORGANIZATION
The line organization is the simplest organizational structure. It is the "doing"
organization, in that the work of all organizational units is directly involved in producing and
marketing the organization's goods and services. There are direct vertical links between the
different levels of the scalar chain. Since there is a clear authority structure, this form of
organization promotes greater decision-making and is simple in form to understand
generating product or service demand. Therefore, line positions, whether they are personnel
or managers, engage in activities that are functionally and directly related to the principal
workflow of an organization. Staff positions serve the organization by indirectly supporting
line functions. Staff positions consist of staff personnel and staff managers. Staff personnel
use their technical expertise to assist line personnel and aid top management in various
business activities. Staff managers provide support, advice, and knowledge to other
individuals in the chain of command. Although staff managers are not part of the chain of
command related to direct production of products or services, they do have authority over
personnel. An example of a staff manager is a legal adviser. He or she does not actively
engage in profit-making activities, but does provide legal support to those who do. Therefore,
staff positions, whether personnel or managers, engage in activities that are supportive to line
personnel.
11.4 LINE-AND-STAFF POSITIONS

A wide variety of positions exist within a line-and-staff organization. Some positions
are primary to the company's mission, whereas others are secondary in the form of support
and indirect contribution. Although positions within a line-and-staff organization can be
differentiated in several ways, the simplest approach classifies them as being either line or
staff. A line position is directly involved in the day-to-day operations of the organization,
such as producing or selling a product or service. Line positions are occupied by line
personnel and line managers. Line personnel carry out the primary activities of a business and
are considered essential to the basic functioning of the organization. Line managers make the
majority of the decisions and direct line personnel to achieve company goals. An example of
a line manager is a marketing executive.
11.5 LINE-AND-STAFF ORGANIZATION

Although a marketing executive does not actually produce the product or service, he
or she directly contributes to the firm's overall objectives through market forecasting and
LINE AUTHORITY
Line authority flows down the chain of command. For example, line authority gives a
production supervisor the right to direct an employee to operate a particular machine, and it
gives the vice president of finance the right to request a certain report from a department
head. Therefore, line authority gives an individual a certain degree of power relating to the
performance of an organizational task. Two important clarifications should be considered,
however, when discussing line authority: (1) line authority does not ensure effective
performance, and
(2) line authority is not restricted to line personnel. The head of a staff department has line
authority over his or her employees by virtue of authority relationships between the
department head and his or her directly-reporting employees.
STAFF AUTHORITY
Staff authority is the right to advise or counsel those with line authority. For example,
human resource department employees help other departments by selecting and developing a
qualified workforce. A quality control manager aids a production manager by determining the
acceptable quality level of products or services at a manufacturing company, initiating quality
programs, and carrying out statistical analysis to ensure compliance with quality standards.
Therefore, staff authority gives staff personnel the right to offer advice in an effort to improve
line operations.
FUNCTIONAL AUTHORITY
Functional authority is referred to as limited line authority. It gives a staff person
power over a particular function, such as safety or accounting. Usually, functional authority is
given to specific staff personnel with expertise in a certain area. For example, members of an
accounting department might have authority to request documents they need to prepare
financial reports, or a human resource manager might have authority to ensure that all
departments are complying with equal employment opportunity laws. Functional authority is
a special type of authority for staff personnel, which must be designated by top management.
LINE-AND-STAFF CONFLICT
Due to different positions and types of authority within a line-and-staff organization,
conflict between line and staff personnel is almost inevitable. Although minimal conflict due
to differences in viewpoints is natural, conflict on the part of line and staff personnel can
disrupt an entire organization. There are many reasons for conflict. Poor human relations,
overlapping authority and responsibility, and misuse of staff personnel by top management
are all primary reasons for feelings of resentment between line and staff personnel. This
resentment can result in various departments viewing the organization from a narrow stance
instead of looking at the organization as a whole.
Fortunately, there are several ways to minimize conflict. One way is to integrate line
and staff personnel into a work team. The success of the work team depends on how well
each group can work together in efforts to increase productivity and performance. Another
solution is to ensure that the areas of responsibility and authority of both line and staff
personnel are clearly defined. With clearly defined lines of authority and responsibility, each
group may better understand their role in the organization. A third way to minimize conflict
is to hold both line and staff personnel accountable for the results of their own activities. In
other words, line personnel should not be entirely responsible for poor performance resulting
from staff personnel advice. Line-and-staff organizations combine the direct flow of authority
present within a line organization with staff departments that offer support and advice. A
clear chain of command is a consistent characteristic among line-and-staff organizational
structures. Problems of conflict may arise, but organizations that clearly delineate
responsibility can help minimize such conflict.
11.6 MERITS OF LINE AND STAFF ORGANIZATION
11.6.1 Relief to line of executives

In a line and staff organization, the advice and counselling which is provided to the
line executives divides the work between the two. The line executive can concentrate on the
execution of plans and they get relieved of dividing their attention to many areas.
11.6.2 Expert advice

The line and staff organization facilitates expert advice to the line executive at the
time of need. The planning and investigation which is related to different matters can be done
by the staff specialist and line officers can concentrate on execution of plans.
11.6.3 Benefit of Specialization

Line and staff through division of whole concern into two types of authority divides
the enterprise into parts and functional areas. This way every officer or official can
concentrate in its own area.
11.6.4 Better co-ordination

Line and staff organization through specialization is able to provide better decision
making and concentration remains in few hands. This feature helps in bringing coordination
in work as every official is concentrating in their own area.
11.6.5 Benefits of Research and Development

Through the advice of specialized staff, the line executives, and the line executives
get time to execute plans by taking productive decisions which are helpful for a concern. This
gives a wide scope to the line executive to bring innovations and go for research work in
those areas. This is possible due to the presence of staff specialists.
11.6.5 Training
Due to the presence of staff specialists and their expert advice serves as ground for
training to line officials. Line executives can give due concentration to their decision making.
This in itself is a training ground for them.
11.6.6 Balanced decisions
The factor of specialization which is achieved by line staff helps in bringing co-
ordination. This relationship automatically ends up the line official to take better and
balanced decision.
11.6.7Unity of action
Unity of action is a result of unified control. Control and its affectivity take place
when coordination is present in the concern. In the line and staff authority all the officials
have got independence to make decisions. This serves as effective control in the whole
enterprise.
11.7 DEMERITS OF LINE AND STAFF ORGANIZATION

11.7.1 Lack of understanding
In a line and staff organization, there are two authorities flowing at one time. This
results in the confusion between the two. As a result, the workers are not able to understand
as to who is their commanding authority. Hence the problem of understanding can be a hurdle
in effective running.
11.7.2 Lack of sound advice

The line official get used to the expertise advice of the staff. At times the staff
specialist also provides wrong decisions which the line executive has to consider. This can
affect the efficient running of the enterprise.
11.7.3 Line and staff conflicts
Line and staff are two authorities which are flowing at the same time. The factors of
designations, status influence sentiments which are related to their relation, can pose a
distress on the minds of the employees. This leads to minimizing of coordination which
hampers a concern’s working.
11.7.4 Costly
In line and staff concern, the concerns have to maintain the high remuneration of staff
specialist. This proves to be costly for a concern with limited finance.
11.7.5 Assumption of authority

The power of concern is with the line official but the staffs dislikes it as they are the
one more in mental work. • Staffs steal the show- In a line and staff concern, the higher
returns are considered to be a product of staff advice and counselling
11.8 Summary
This lesson which was focused on line and staff organization those were Line and
staff organisation is a combination of line organisation and functional organisation. In line
organisation, there is unity of command, but there is no specialization. In functional
organisation, there is extreme specialisation, but there is no unity of command. To overcome
the defects and to take advantage of the merits of both line organisation and functional
organisation, line and staff organisation has been evolved. Line and staff organisation is the
usual form of organisation found in modern enterprise. The whole organization is divided
into different functional areas to which staff specialists are attached. Efficiency can be
achieved through the features of specialization. There are two lines of authority which flow at
one time in a concern first is Line Authority and second is Staff Authority. Both management
has two separate hierarchies. There is some conflict between them and some merits and
demerits between them.
11.9 Key words

Departmentalisation -Departmentalisation is the process of grouping the activities of an
enterprise into several units for the purpose of administration at all levels
Functional Authority-Functional authority is referred to as limited line authority. It gives a
staff person power over a particular function, such as safety or accounting
Line and staff organisation -The line organization is the simplest organizational structure. It
is the "doing" organization, in that the work of all organizational units is directly involved in
producing and marketing the organization's goods and services
Line and staff conflict-Poor human relations, overlapping authority and responsibility, and
misuse of staff personnel by top management are all primary reasons for feelings of
resentment between line and staff personnel.

1. Define line and Staff organisation? Differentiate between the line and staff
organisation?
2. Briefly explain the Need and Importance of Departmentation?
3. Discuss the Merits and Demerits of Line and Staff Organisation

2011.
Publication, 2012.

LESSON-12
DECENTRALIZATION AND DELEGATION OF

AUTHORITY
Learning Objectives
To Learn the Importance of Delegation of Authority
To study Elements of Delegation of Authority
Structure
12.0 Introduction
12.1 Concept of Delegation
12.2 Delegation of Authority
12.3 Elements of Delegation
12.4 Importance of Delegation
12.5 Summary
12.6 Key words
12.0 INTRODUCTION
Decentralisation refers to systematic effort to delegate to the lowest level all authority
except that which can be exercised at central points. Louis Allen
Everything which goes to increase the importance of a subordinate’s role is
decentralisation; everything that goes to reduce it is centralisation. Henry Fayol
In many organisations the top management plays an active role in taking all decisions
while there are others in which this power is given to even the lower levels of management.
Those organisations in which decision making authority lies with the top management are
termed as centralised organisations whereas those in which such authority is shared with
lower levels are decentralised organisations. Decentralisation explains the manner in which
decision making responsibilities are divided among hierarchical levels. Put simply,
decentralisation refers to delegation of authority throughout all the levels of the organisation.
Decision making authority is shared with lower levels and is consequently placed nearest to
the points of action. In other words decision making authority is pushed down the chain of
command. When decisions taken by the lower levels are numerous as well as important an
organisation can be regarded as greatly decentralised.
12.1 Concept of Delegation

Decentralisation is much more than a mere transfer of authority to the lower levels of
management hierarchy. It is a philosophy that implies selective dispersal of authority because
it propagates the belief that people are competent, capable and resourceful. They can assume
the responsibility for the effective implementation of their decisions .Thus this philosophy
recognises the decision maker’s need for autonomy. The management, however, needs to
carefully select those decisions which will be pushed down to lower levels and those that will
be retained for higher levels. Decentralisation is a fundamental step and its importance can be
understood from the following points:
12.1.1Develops initiative among subordinates
Decentralisation helps to promote self-reliance and confidence amongst the
subordinates. This is because when lower managerial levels are given freedom to take their
own decisions they learn to depend on their own judgment. It also keeps them in a state
wherein they are constantly challenged and have to develop solutions for the various
problems they encounter. A decentralisation policy helps to identify those executives who
have the necessary potential to become dynamic leaders.
12.1.2Develops managerial talent for the future

Formal training plays an important part in equipping subordinates with skills that help
them rise in the organisation but equally important is the experience gained by handling
assignments independently. Decentralisation gives them a chance to prove their abilities and
creates a reservoir of qualified manpower who can be considered to fill up more challenging
positions through promotions. It also helps to identify those who may not be successful in
assuming greater responsibility. Thus, it is a means of management education as well as an
opportunity for trained manpower to use its talent in real life situations.
12.1.3 Quick decision making

The management hierarchy can be looked upon as a chain of communication. In
centralised organisation because every decision is taken by the top management the flow of
information is slow as it has to traverse many levels. Response also takes time. This reduces
the speed of decision making and makes it difficult for an enterprise to adapt to dynamic
operating conditions. In a decentralised organisation, however since decisions are taken at
levels which are nearest to the points of action and there is no requirement for approval from
many levels, the process is much faster. There are also less chances of information getting
distorted because it doesn’t have to go through long channels.
12.1.4 Relief to top management

Decentralisation diminishes the amount of direct supervision exercised by a superior
over the activities of a subordinate because they are given the freedom to act and decide
albeit within limits set by the superior. Also, personal supervision is generally replaced by
other forms of control such as return on investment etc. Decentralisation also leaves the top
management with more time which they can devote to important policy decisions rather than
occupying their time with both policy as well as operational decisions. In fact decentralisation
is greatest when checking required on decisions taken by lower levels of management is least.
12.1.5 Facilitates growth

Perspectives of Management 12.3 Decentralization…
Decentralisation awards greater autonomy to the lower levels of management as well

as divisional or departmental heads. This allows them to function in a manner best suited to
their department and fosters a sense of competition amongst the departments. Consequently,
with each department doing its best in a bid to outdo the other, the productivity levels
increase and the organisation is able to generate more returns which can be used for
expansion purposes.
12.1.6 Better control

Decentralisation makes it possible to evaluate performance at each level and the
departments can be individually held accountable for their results. The extent of achievement
of organisational objectives as well as the contribution of each department in meeting the
overall objectives can be ascertained. Feedback from all levels helps to analyse variances and
improve operations. In decentralisation, one of the challenges is the accountability of
performance. In response to this challenge, better control systems are being evolved such as
the balance score card and management information system. Decentralisation compels the
management to innovative performance measurement systems. As a conclusion, it must be
noted that in spite of its benefits decentralisation should be applied with caution as it can lead
to organisational disintegration if the departments start to operate on their own guidelines
which may be contrary to the interest of the organization.
12.2 DELEGATION OF AUTHORITY

Delegation is the process a manager follows in dividing the work assigned to him so
that he performs that part which only he because of his unique organisational placement, can
perform effectively and so that he can get others to help with what remains. Louis Allen
Delegation of authority merely means the granting of authority to subordinates to operate
within prescribed limits.
Theo Haimman
Delegation A manager, no matter how capable he is, cannot manage to do every task
on his own. The volume of work makes it impractical for him to handle it all by himself. As a
consequence, if he desires to meet the organisational goals, focus on objectives and ensure
that all work is accomplished, he must delegate authority. Delegation refers to the downward
transfer of authority from a superior to a subordinate. It is a pre-requisite to the efficient
functioning of an organisation because it enables a manager to use his time on high priority
activities. It also satisfies the subordinate’s need for recognition and provides them with
opportunities to develop and exercise initiative
Delegation helps a manager to extend his area of operations as without it, his
activities would be restricted to only what he himself can do. However, delegation does not
mean abdication. The manager shall still be accountable for the performance of the assigned
tasks. Moreover, the authority granted to a subordinate can be taken back and redelegated to
another person. Thus, irrespective of the extent of delegated authority, the manager shall still
be accountable to the same extent as before delegation.
12.3 ELEMENTS OF DELEGATION
According to Louis Allen, delegation is the entrustment of responsibility and authority
to another and the creation of accountability for performance. A detailed analysis of Louis
Allen’s definition brings to light the following essential elements of delegation: (i) Authority:
Authority refers to the right of an individual to command his subordinates and to take action
within the scope of his position. The concept
of authority arises from the established scalar chain which links the various job positions and
levels of an organisation. Authority also refers to the right to take decisions inherent in a
managerial position to tell people what to do and expect them to do it. In the formal
organisation authority originates by virtue of an individual’s position and the extent of
authority is highest at the top management levels and reduces successively as we go down the
corporate ladder. Thus, authority flows from top to bottom, i.e., the superior has authority
over the subordinate.
12.3.1 Authority relationships

It helps to maintain order in the organisation by giving the managers the right to exact
obedience and give directions to the workforce under them. Authority determines the superior
subordinate relationship wherein the superior communicates his decision to the subordinate,
expecting compliance from him and the subordinate executes the decision as per the
guidelines of the superior. The extent to which a superior can exact compliance also depends
on the personality of the superior. It must be noted that authority is restricted by laws and the
rules and regulation of the organisation, which limit its scope. However, as we go higher up
in the management hierarchy, the scope of authority increases.
12.3.2 Responsibility
Responsibility is the obligation of a subordinate to properly perform the assigned
duty. It arises from a superior–subordinate relationship because the subordinate is bound to
perform the duty assigned to him by his superior. Thus, responsibility flows upwards i.e., a
subordinate will always be responsible to his superior. An important consideration to be kept
in view with respect to both authority and responsibility is that when an employee is given
responsibility for a job he must also be given the degree of authority necessary to carry it out.
Thus, for effective delegation the authority granted must be commensurate with the assigned
responsibility. If authority granted is more than responsibility, it may lead to misuse of
authority, and if responsibility assigned is more than authority it may make a person
ineffective.
12.3.3 Accountability
Delegation of authority, undoubtedly empowers an employee to act for his superior
but the superior would still be accountable for the outcome: Accountability implies being
answerable for the final outcome. Once authority has been delegated and responsibility
accepted, one cannot deny accountability. It cannot be delegated and flows upwards i.e., a
subordinate will be accountable to a superior for satisfactory performance of work. It
indicates that the manager has to ensure the proper discharge of duties by his subordinates. It
is generally enforced through regular feedback on the extent of work accomplished. The
subordinate will be
expected to explain the consequences of his actions or omissions. In conclusion, it can be

stated that while authority is delegated, responsbility is assumed, accountability is imposed.
Responsibility is derived from authority and accountability is derived from responsibility
12.4 IMPORTANCE OF DELEGATION
Delegation ensures that the subordinates perform tasks on behalf of the manager thereby
reducing his workload and providing him with more time to concentrate on important
matters. Effective delegation leads to the following benefits:
12.4.1 Effective management
By empowering the employees, the managers are able to function more efficiently as
they get more time to concentrate on important matters. Freedom from doing routine work
provides them with opportunities to excel in new areas.
12.4.2 Employee development
As a result of delegation, employees get more opportunities to utilise their talent and
this may give rise to latent abilities in them. It allows them to develop those skills which will
enable them to perform complex tasks and assume those responsibilities which will improve
their career prospects. It makes them better leaders and decision makers. Thus, delegation
helps by preparing better future managers. Delegation empowers the employees by providing
them with the chance to use their skills, gain experience and develop themselves for higher
positions.
12.4.3 Motivation of employees
Delegation helps in developing the talents of the employees. It also has psychological
benefits. When a superior entrusts a subordinate with a task, it is not merely the sharing of
work but involves trust on the superior’s part and commitment on the part of the subordinate.
Responsibility for work builds the self-esteem of an employee and improves his confidence.
He feels encouraged and tries to improve his performance further.
12.4.4 Facilitation of growth

Delegation helps in the expansion of an organisation by providing a ready workforce
to take up leading positions in new ventures. Trained and experienced employees are able to
play significant roles in the launch of new projects by replicating the work ethos they have
absorbed from existing units, in the newly set up branches.
12.4.5 Basis of Management Hierarchy

Delegation of authority establishes superior-subordinate relationships, which are the
basis of hierarchy of management. It is the degree and flow of authority which determines
who has to report to whom. The extent of delegated authority also decides the power that
each job position enjoys in the organisation.
12.4.6 Better coordination
The elements of delegation, namely authority, responsibility and accountability help
to define the powers, duties and answerability related to the various positions in an
organisation. This helps to avoid overlapping of duties and duplication of effort as it gives a
clear picture of the work being done at various levels. Such clarity in reporting relationships
help in developing and maintaining effective coordination amongst the departments, levels
and functions of management. Thus, delegation is a key element in effective organising
12.5 Summary
Delegation of authority is the process of transferring responsibility for a task to
another employee. As a manager, you can typically transfer responsibility to any of your
direct team members. That employee may then decide to delegate some of those
responsibilities among their team members if necessary. The purpose of delegating authority
is to ensure a productive and well-functioning workplace.
12.6 Key words

Decentralization - Decentralisation refers to systematic effort to delegate to the lowest level
all authority except that which can be exercised at central points
Delegation of authority-Delegation of authority merely means the granting of authority to
subordinates to operate within prescribed limits.
Management Hierarchy - It is the degree and flow of authority which determines who has
to report to whom.
Employee Development - Employees get more opportunities to utilise their talent and this
may give rise to latent abilities in them
Responsibility-Responsibility is the obligation of a subordinate to properly perform the
assigned duty
1. Define the Delegation Discuss the Importance of Delegation?

2. What are the Elements of Delegation?
2011.
Publication, 2012.

UNIT - IV
LESSON – 13
DIRECTING, CREATIVITY AND INNOVATION

Learning Objectives
To perceive the directing in management
To understand the directing principles
To get the idea about the creativity and innovation
To watch the creativity and innovation in an entrepreneurial organization
Structure
13.0 Introduction
13.1 Nature and Scope of directing in Management
13.2 Characteristics of Directing
13.3 Principles of Directing
13.4 Techniques for Effective Direction
13.5 Creativity
13.6 Reasons why people are motivated to be creative:
13.7 Principles and Characteristics of Creativity
13.8 Innovation
13.9 The Elements of Innovation
13.10 Creativity and Innovation in an Entrepreneurial Organisation
13.11 Harmonizing
13.12 Summary
13.13 Keywords
13.14 Self – Assessment Questions
13.0 Introduction
DIRECTING is said to be a process in which the managers instruct, guide and oversee the
performance of the workers to achieve predetermined goals. Directing is said to be the heart
of management process. Planning, organizing, staffing have got no importance
if direction function does not take place.
Directing is the heart of management function. All other functions of management such as
planning, organizing, and staffing have no importance without directing. Leadership
motivation, supervision, communication are various aspects of directing. Let us study the
importance and principles of directing.
Directing refers to a process or technique of instructing, guiding, inspiring, counselling,

overseeing and leading people towards the accomplishment of organizational goals. It is a
continuous managerial process that goes on throughout the life of the organization.
According to Koontz and O ‘Donnel; “directing is a complex function that includes all those
activities which are designed to encourage subordinate to work effectively and efficiently in both
the short and long-run.”
,
13.1 Nature and Scope of directing in Management
Nature and Scope of direction clearly pinpoints that it is heart and soul of management.
Without direction managerial functions may crumble like pack of cards. It is the direction
which provides impetus to all managerial functions.
The nature and scope of directing in management is concerned with employee orientation,
issuing instructions, supervision, motivation, communication and leadership. Employee
Orientation: An employee must be properly oriented to the enterprise in which they are
working.
The nature and scope of directing in management is concerned with employee orientation,
issuing instructions, supervision, motivation, communication, leadership and command.
(i) Supervision:
Supervision is concerned with overseeing the subordinates at work and is done at all levels of
management. It refers to the direct and immediate guidance and control of subordinates in the
performance of their task. It is concerned with seeing that the subordinates are working
according to plan, policy, programme, instruction and keeping up the time schedule.
Supervision is inevitable at every level of management for putting the managerial plans and
policies into action. It can be compared to the key that keeps the managerial train into motion.
(ii) Communication:
It is the process of telling, listening, understanding or passing information from one person to
another. A manager has always to tell the subordinates what they are required to do, how to
do it and when to do it. He has to create an understanding in the minds of the people at work.
An organisation can’t operate successfully without an effective system of communication.

The process of communication can be carried through different Media’s viz., telephone,
intercom system, issuing letters and messengers etc.
(iii) Leadership:
It can be defined as the process by which a manager guides and influences the work of his
subordinates. It is concerned with influencing people for the achievement of common goals.
An executive, as an effective leader, should consult his subordinates before starting any line
of action to ensure their voluntary cooperation. The manager as a leader acts as a dynamo
which charges a battery.
Perspectives of Management 13.3 Directing, Creativity…
(iv) Motivation:
Employees come forward to work in any enterprise in order to satisfy their needs. Past
experience reveals that in most cases they do not contribute towards the organisational goals
(as much as they can) because they are not adequately motivated.
Motivation relates to a conscious attempt made by the executive to influence the direction
and role of individual and group behaviours. A manager should understand the process of
human-behaviour while performing his managerial function of directing and leading.
He can get things done through other people willingly by motivation. Motivation inspires the
subordinates to work with zeal, willingness and initiates to achieve enterprise goals. It
promotes team work. It can tap the human potential in the best possible manner.
Managers must continuously be in search of the causes that motivate employees and develop
a motivational system which may satisfy most of their needs. Otherwise, productivity will not
increase. Leadership and motivation are thus the two wings of direction in the process of
management.
(v) Command:
Commanding refers to setting the business going to get the desired optimum results from the
subordinates. Fayol conceived the function of command as the ‘operation of organisation.’
He emphasised that the managers must possess the requisite personal qualities and knowledge
of the principles of management.
13.2 Characteristics of Directing
Main characteristics of Directing are as follows:
13.2.1. Initiates Action
A directing function is performed by the managers along with planning, staffing, organizing and
controlling in order to discharge their duties in the organization. While other functions prepare a
platform for action, directing initiates action.
13.2.2. Pervasive Function
Directing takes place at every level of the organization. Wherever there is a superior-subordinate
relationship, directing exists as every manager provides guidance and inspiration to his
subordinates.
13.2.4. Continuous Activity
It is a continuous function as it continues throughout the life of organization irrespective of the

changes in the managers or employees.
13.2.5. Descending Order of Hierarchy
Directing flows from a top level of management to the bottom level. Every manager exercises
this function on his immediate subordinate.
13.2.6. Human Factor
Since all employees are different and behave differently in different situations, it becomes
important for the managers to tackle the situations appropriately. Thus, directing is a significant
function that gets the work done by the employees and increases the growth of the organization.
13.2.7. Initiates Action
Each and every action in an organization is initiated only through directing. The managers direct
the subordinates about what to do, how to do when to do and also see to it that their instructions
are properly followed.
13.2.8. Ingrates Efforts
Directing integrates the efforts of all the employees and departments through persuasive
leadership and effective communication towards the accomplishment of organizational goals.
13.2.9. Motivates Employees
A manager identifies the potential and abilities of its subordinates and helps them to give their
best. He also motivates them by offering them financial and non-financial incentives to improve
their performance.
13.2.10. Provides Stability
Stability is significant in the growth of any organization. Effective directing develops co-
operation and commitment among the employees and creates a balance among various
departments and groups.
13.2.11. Coping up with the Changes
Employees have a tendency to resist any kind of change in the organization. But, adapting the
environmental changes is necessary for the growth of the organization. A manager
through motivation, proper communication and leadership can make the employees understand
the nature and contents of change and also the positive aftermaths of the change. This will help
in a smooth adaptation of the changes without any friction between the management and
employees.
13.2.12. Effective Utilization of Resources
It involves defining the duties and responsibilities of every subordinate clearly thereby avoiding
wastages, duplication of efforts, etc. and utilizing the resources of men, machine, materials, and
money in the maximum possible way. It helps in reducing costs and increasing profits.
13.3 Principles of Directing

13.3.1. Maximum Individual Contribution
One of the main principles of directing is the contribution of individuals. Management should
adopt such directing policies that motivate the employees to contribute their maximum potential
for the attainment of organizational goals.
13.3.2. Harmony of Objectives
Sometimes there is a conflict between the organizational objectives and individual objectives.
For example, the organization wants profits to increase and to retain its major share, whereas,
the employees may perceive that they should get a major share as a bonus as they have worked
really hard for it. Here, directing has an important role to play in establishing harmony and
coordination between the objectives of both the parties.
13.3.3. Unity of Command
This principle states that a subordinate should receive instructions from only one superior at a
time. If he receives instructions from more than one superiors at the same time, it will create
confusion, conflict, and disorder in the organization and also he will not be able to prioritize his
work.
13.3.4. Appropriate Direction Technique
Among the principles of directing, this one states that appropriate direction techniques should be
used to supervise, lead, communicate and motivate the employees based on their needs,
capabilities, attitudes and other situational variables.
13.3.5. Managerial Communication
According to this principle, it should be seen that the instructions are clearly conveyed to the
employees and it should be ensured that they have understood the same meaning as was
intended to be communicated.
13.3.6. Use of Informal Organization
Within every formal organization, there exists an informal group or organization. The manager
should identify those groups and use them to communicate information. There should be a free
flow of information among the seniors and the subordinates as an effective exchange of
information are really important for the growth of an organization.
13.3.7. Leadership
Managers should possess a good leadership quality to influence the subordinates and make them
work according to their wish. It is one of the important principles of directing.
13.3.8. Follow Through
As per this principle, managers are required to monitor the extent to which the policies,
procedures, and instructions are followed by the subordinates. If there is any problem in
implementation, then the suitable modifications can be made.
13.4 Techniques for Effective Direction

Effective direction can be achieved by adopting one or more of the following techniques. The
manager can utilise them according to the need of the situation.
There are basically three effective techniques of direction namely:
13.4.1. Consultative or Participative Technique:

The essential feature of this technique is that the executive should consult his subordinates
regarding the feasibility, workability and the extent and content of a problem before taking a
decision and issue a directive. Under this techniques manager can get best suggestions, ideas,
opinions, from the subordinates. As well as he gets the knowledge of reactions of the
subordinates in order to extract new ideas and help from them.
But then the manger must have sincere desire of securing suggestions from his subordinates.
Many times a manager with no desire may simply pretend tube consultative. But this attitude
is dangerous and may cause conflicts leading to non-accomplishment of task. Under this
technique there is actually no danger to managers’ authority and powers, because ultimately
decision is to be taken by him only. Right to take decisions ultimately lies in his own hands.
The quantum of subordinates’ participation depends upon a number of factors such as the
attitude, interest, liking, past experience of the subordinates, the nature and type of the
problem, availability of time for loving the problem and so on. If the subordinates trust the
managers, and believe that “the boss knows the best” regarding making decisions and giving
directives, there is no need for consultative direction.
This ultimately would result in formation of better plans and better decisions because of
pooling of experience, better communication, closer contacts and training, growth and
experiences of the subordinates. All these merits can be enjoyed by the manager by extensive
and careful application of consultative techniques.
The technique suffers from the following shortcomings also:
i. If the subordinates form an opinion that the manager is incompetent and incapable of taking
decisions, they may undermine his authority and prestige.
ii. Sometimes the discussion may lead to confusion and the subordinates may not have any
clear-cut directives from managers.
iii. Sometimes the subordinates think consultation to be their right. Under this situation, if a
manager takes some decision, even on important occasions, without consulting the
subordinates, it may lead to disputes, frustration, confusion, misunderstanding etc. among the
subordinates.
iv. If this technique is not used properly, it may lead to unnecessary discussions, unhealthy
and out-of the way criticism of the boss and even to insubordination.
13.4.2. Free Rein Direction Techniques:

Under the free reign technique, the superiors motivate the subordinates to contribute their
ideas, thoughts etc. for solving a problem. This technique is widely accepted by many
managements. It shows the best and quick results, if the subordinates are highly educated.
The free rein technique encourages and enables the subordinates to contribute their own
initiative, independent thought, drive and ingenuity to the solution of the problem. This does
not mean that this technique gives full freedom to the subordinates.
The superior who adopts free rein technique must be sure that the subordinates know the
overall objectives, their duties, responsibilities, and policies, plans of the organisation and
their role as well as jurisdiction. Then only he should assign the work to his subordinate and
allow him to decide, the manner in which he has to proceed. But the superior must ensure that
the subordinates are trust worthy, willing and capable of assuming responsibility.
This technique would be followed by the superior when the sub-ordinates possess high
intelligence, strong drive, high sense of responsibility etc. This type of directing gives pride
to the capable men in their work. It develops their self-confidence, motivates them to give
independent thought. It develops their managerial ability and experience. In this type of
direction technique there may be chances of difference in the point of view of the manager
and the subordinate.
Then the manager has to take risk of such mistakes and continue to provide opportunity to the
subordinates to learn by their mistakes. The superior should not criticise and should not
discourage the subordinates. This technique requires a great amount of patience and
forbearance on the part of managers.
13.4.3. Autocratic Direction Techniques:
This technique is just the opposite of the free rein direction technique. Under this technique,
the superior gives direct, clear and precise orders to his subordinates with detailed
instructions as to how and what is to be done, The role of subordinates with detailed
instructions as to how and what is to be done. The role of sub-ordinates is simple to
implement. This technique is used in military organisation.
Such superiors believe in minimum delegation of authority to sub-ordinates are expected to
follow the instructions only. The manager has to perform both the functions namely planning
and taking decisions. The manager strongly believes that, without detailed instructions from
him, his subordinates would not properly carry out directives. Under his type of direction
technique the subordinates depend totally upon their superiors. They do not think, and do not
have any interest, and motivation in taking decisions.
They stop thinking and taking initiative. They become “Yes Men” and obedient employees.
Such subordinates become frustrated. They lack in self-confidence. They are less motivated
and less inspired. Naturally, they hardly acquire managerial ability. This technique obstructs
subordinates from becoming future executives.
Merits of this techniques are that managers can take quick decisions, quick implementation of
such decision, quick problem solving. This also helps in maintaining peace and discipline.
Employees are more obedient and can be effectively utilized.
13.5 Creativity
Creativity as an outcome has been defined primarily in management as the generation of
ideas, solutions, or processes that are novel and useful.
According to Robert E. Franken Creativity is defined as the tendency to generate or recognize
ideas, alternatives, or possibilities that may be useful in solving problems, communicating
with others, and entertaining ourselves and others.
According to Robert W. Weisberg. "Creative" refers to novel products of value, as in "The
airplane was a creative invention." "Creative" also refers to the person who produces the
work, as in?Picasso was creative." "Creativity," then refers both to the capacity to produce
such works, as in "How can we foster our employees' creativity?" and to the activity of
generating such products, as in "Creativity requires hard work."
13.6 Reasons why people are motivated to be creative:

There are three strong reasons to motivate the people to be creative are:
need for novel, varied, and complex stimulation
need to communicate ideas and values
need to solve problems
In order to be creative, you need to be able to view things in new ways or from a different
perspective. Among other things, you need to be able to generate new possibilities or new
alternatives. Tests of creativity measure not only the number of alternatives that people can
generate but the uniqueness of those alternatives. the ability to generate alternatives or to see
things uniquely does not occur by change; it is linked to other, more fundamental qualities of
thinking, such as flexibility, tolerance of ambiguity or unpredictability, and the enjoyment of
things heretofore unknown.
13.6.1 Ways that "creativity" is commonly used

1. Persons who express unusual thoughts, who are interesting and stimulating - in short,
people who appear to unusually bright.
2. People who experience the world in novel and original ways. These are (personally
creative) individuals whose perceptions are fresh, whose judgments are insightful,
who may make important discoveries that only they know about.
3. Individuals who have changes our culture in some important way. Because their
achievements are by definition public, it is easier to write about them.
13.7 Principles and Characteristics of Creativity

People become more creative when they feel motivated primarily by the interest, satisfaction,
and challenge of the situation and not by external pressures; the passion and interest – a
person’s internal desire to do something unique to show-case himself or herself; the person’s
sense of challenge, or a drive to crack a problem that no one else has been able to solve.
Within every individual, creativity is a function of three components:
1. Expertise
2. Creative thinking skills
3. Motivation.
Expertise encompasses everything that a person knows and can do in the broad domain of his
or her work- knowledge and technical ability. Creative thinking refers to how you approach
problems and solutions- the capacity to put existing ideas together in new combinations. The
skill itself depends quite a bit on personality as well as on how a person thinks and works.
Expertise and creative thinking are the entrepreneur’s raw materials or natural resources.
Motivation is the drive and desire to do something, an inner passion and interest. When
people are intrinsically motivated, they engage in their work for the challenge and enjoyment
of it. The work itself is motivating. People will be most creative when they feel motivated
primarily by the interest, satisfaction and the challenge of the work itself-“the labour of love”,
love of the work- “the enjoyment of seeing and searching for an outstanding solution – a
break through.
Creativity, according to Robert Gahim, consists of anticipation and commitment.

Anticipation involves having a vision of something that will become important in the future
before anybody else has it. Commitment is the belief that keeps one working to realize the
vision despite doubt and discouragement.
Creative outcomes seldom emerge in an instant: a recognized process is involved, even if it
appears to be rather chaotic. It begins with recognition of a problem or anticipation of an
opportunity, and then, through understanding the situation and reflecting on the issues, new
linkages are contemplated and possible new combinations of components are aired: From this
emerge visible solutions or possibilities that are subjected to valuation, which may be
continuous with judgment being suspended while the search process is prolonged in pursuit
of genuine newness.
13.7.1 Characteristics of the creative personality
1. Creative individuals have a great deal of energy, but they are also often quiet and at
rest.
2. Creative individuals tend to be smart, yet also naive at the same time.
3. Creative individuals have a combination of playfulness and discipline, or
responsibility and irresponsibility.
4. Creative individuals alternate between imagination and fantasy ant one end, and
rooted sense of reality at the other.
5. Creative people seem to harbor opposite tendencies on the continuum between
extroversion and introversion.
6. Creative individuals are also remarkable humble and proud at the same time.
7. Creative individuals to a certain extent escape rigid gender role stereotyping and have
a tendency toward androgyny.
8. Generally, creative people are thought to be rebellious and independent.
9. Most creative persons are very passionate about their work, yet they can be extremely
objective about it as well.
10. The openness and sensitivity of creative individuals often exposes them to suffering
pain yet also a great deal of enjoyment.
13.8 INNOVATION
Innovation is the process of bringing the best ideas into reality, which triggers a creative idea,
which generates a series of innovative events. Innovation is the creation of new value.
Innovation is the process that transforms new ideas into new value- turning an idea into
value. You cannot innovate without creativity. Innovation is the process that combines ideas
and knowledge into new value. Without innovation an enterprise and what it provides quickly
become obsolete.
The dictionary defines innovation as the introduction of something new or different.
Innovation is the implementation of creative inspiration. The National Innovation Initiative
(NII) defines innovation as “the inter-section of invention and insight, leading to the creative
of social and economic value” Innovation is “value” – the creation of value adding value to
customer’s satisfaction- “delighting the customers”.
13.9 THE ELEMENTS OF INNOVATION

Innovation is the successful development of competitive advantage and as such, it is the key
to entrepreneurship. The entrepreneurs are the “dreamers”, who take hands on responsibility
for creating innovation. It is the presence of innovation that distinguishes the entrepreneur
from others. Innovation, must therefore, increase competitiveness through efforts aimed at the
rejuvenation, renewal, and redefinition of organizations, their markets or industries, if
business are to be deemed entrepreneurial.
Fiona Fitzpatrick identified the following elements of innovation:
1. Challenge: What we are trying to change or accomplish-the “pull”
2. Customer focus: Creating value for your customers – the “Push”
3. Creativity: Generating and sharing the idea(s)- the “brain”
4. Communication: The flow of information and ideas –the “life blood”
5. Collaboration: People coming together to work together on the idea(s) - the “heart.”
6. Completion: Implementing the new idea-the “muscle”.
7. Contemplation; Learning and sharing lessons lead to higher competency-the “ladder”
8. Culture: The playing field of innovation includes:
a. Leadership (sees the possibilities and positions the team for action-the rolemodel)
b. People (diverse groups of radically empowered people innovate –the source of
innovation)
c. Basic values (trust and respect define and distinguish an innovativeorganization-
the backbone). Innovation values (certain values stoke the fires that make the
“impossible” possible-the Spark).
9. Context: Innovation is shaped by interactions with the world.
13.10 Creativity and Innovation in an Entrepreneurial Organisation

Growth and development cannot be sustained without additional innovations (usually in the
product or services or in its marketing) with additional innovations, firms become
“glamorous” Introducing new products is usually seen as part of the process of innovation,
which is itself seen as the engine driving continued growth and development.
The “winning performance” of the entrepreneur and the organization focuses on.
Competing on quality not prices
Domination of a market niche
Competing in an area of strength
Having tight financial, and operating controls
Frequent product or service innovation (particularly important in manufacturing).
Porter (1985) argues that, while successful businesses will each employ their own strategy,
they achieve completive advantage through acts of innovation. Learning and problem-solving
are common activities in many working environments today, but some people believe that
true entrepreneurship occurs when individuals ignore the established ways of thinking and
acting and seek novel ideas and solutions that can meet customers’ needs Entrepreneurship is,
therefore, the innovatory process involved in the creation of an economic enterprise based on
a new product or service which differs significantly from products or services offered by
other suppliers in content or in the way its production is organized nor in its marketing.
Creativity and Innovation are at the heart of the spirit of enterprise. It means striving to
perform activities differently or to perform different activities to enable the entrepreneur
deliver a unique mix of value. Thus the value of creativity and innovation is to provide a
gateway for astute entrepreneurship actively searching for opportunities to do new things, to
do existing things in extraordinary ways. Creativity and Innovation therefore, trigger and
propel first-rate entrepreneurship in steering organization activities in whatever new
directions are dictated by market conditions and customer preferences, thereby delighting the
customers to the benefit of the stakeholders. Innovation also means anticipating the needs of
the market, offering additional quality or services, organization efficiently, mastering details,
and keeping cost under control.
13.11 Harmonizing
Harmonization means working on those areas which are complementary in order to have the
plans working together for the achievement of an overall strategic objective. Harmonization
helps different departments in local authorities share the same vision, work together and
optimize the use of resources.
Harmonization means to match the allowance of the person with kind of work and value
addition the individual is doing to the organization. If there is a disparity between the works
and take away salary given to the person, then there is chance of worsening of attrition rate in
the company.
Harmonization, in broad terms, means to get things in synchronization with one another. It
means to have everything in coordination so as to attain better results. Term was coined to be
used in musical instruments for chords but have taken a general meaning as time passes by.
Finding the match between the two is a huge task for the HR personals and they generally
take help of line mangers in this regard. Nowadays, company make the process of
harmonization the part of the HR strategy. There are series of recommendations and
feedbacks to finally achieve proper Harmonization. Plus they generally do the benchmarking
with the competitors and also consider the industry average.
13.12 Summary
Directing is said to be the heart of management process. Planning, organizing, staffing have
got no importance if direction function does not take place.The directing functions of HRM
involve encouraging people to work willingly and efficiently to achieve the goals of the
organization. In simpler words, the directing functions of HRM entail guiding and motivating
people to accomplish the personnel programs.
13.13 Keywords
Directing - Directing refers to a process or technique of instructing – guiding- inspiring,
counseling- overseeing and leading people towards the accomplishment of organizational
goals.
Creativity - Creativity is defined as the tendency to generate or recognize ideas, alternatives,

or possibilities that may be useful in solving problems, communicating with others, and
entertaining ourselves and others.
Innovation - An innovation can be described as a result of the creative process of turning an
idea into an outcome that creates value for people.
13.14 Self – Assessment Questions:

1. What the major elements involved in direction.
2. How can be communication prove to be an important element of directing function in an
organization?
3. Direction takes place at all levels of management. True or False?
4. Explain the principles and importance of direction in management?
5. Define creativity, explain the principles of creativity?
6. Examine the reasons and Characteristics of the creative personality?
7. What is innovation, explain the elements of innovation?
8. Did you write what are the challenges of innovation?
1. https://www.toppr.com/guides/business-studies/directing/elements-of-directing/
2. Leonard, Bill. ‘Mike R. Bowlin: HR Ver Leads ARCO’, HR Magazine, December 1994,
pp. 46–51.
3. https://theintactone.com/2019/09/18/fom-u4-topic-2-principles-and-techniques-of-
directing/
4. https://www.preservearticles.com/management/directing-in-management/directing-in-
management/31372, Seema
1. https://www.csun.edu/~vcpsy00h/creativity/define.htm
2. Amabile T.M. (1998) “How to kill Creativity” Harvard Business Review, September, -
October.
3. Bhide A. (1994) “How Entrepreneurs Craft Strategies that Work” Harvard Business
Review, March – April.
4. Chakravorti B. (2004) ‘The New Rules for Bringing Innovations to Markets”. Harvard
Business Review, March.
5. Drucker P. F. (1995) Management in a Time of Great Change. Oxford:
ButterworthHeinemann.
6. Essentials of Management - An International, Innovation and Leadership Perspective | 11th
Edition Paperback – 15 July 2020, by Harold Koontz (Author), Heinz Weihrich and Mark V.
Cannice..
7. Fundamentals of Management, Stephen. P. Robins, Press education india , JULY 2016, ISSN
933257412X.
- Dr. K. Madhu Babu

Lesson -14
LEADERSHIP
Learning Objectives
To study the Leadership
To creaming the Leadership types in the organisations
To understand the theories of leadership
Structure
14.0 Introduction
14.1 Objectives of Leadership
14.2 Types of Leadership
14.3 Leadership Theories
14.4 Trait Theory
14.5 Behavioural and Contingency Theories of Leadership
14.6 Managerial Grid
14.7 Contingency Theories
14.8 Fiedler’s Contingency Theory
14.9 Life-Cycle Theory
14.10 Summary
14.11 Keywords
14.12 Self- Assessment Questions
14.0 Introduction
The skill, personality, attitude, and problem-solving methods used by a leader determine the
success of an organization. With competition increasing in the world of business and
organizations having to face all kinds of new challenges with each passing day, the role of a
leader is becoming increasingly important. Leadership can be defined as the factor that assists
the process of goal achievement. It can be described as the act of influencing and supporting
members of a team or an organization as a whole to work with enthusiasm towards achieving
common objectives or goals.
Keith Devis said that leadership is the process of encouraging and helping others to work
enthusiastically toward objectives.
According to Koontz and Donnell, the act of leadership is the process of influencing people
so that they will strive willingly and enthusiastically toward the achievement of the group
goal.
14.1 Objectives of Leadership
Leadership is the process of leading individuals as a group to achieve a common objective.
The objectives of leadership are geared toward bringing out out the best in employees by
communicating effectively about what needs to be done and why it matters. In addition,
effective leaders strive to bring out the best in employees through careful instruction as well
as management practices aimed at motivating workers to do their best. Successful leaders
achieve these objectives through a mixture of natural ability and commitment to improving
their leadership skills.
14.2 Types of Leadership

Leadership is the practice of uniting the efforts of a group towards a common purpose. Any
group of people who are isolated together will form leaders and being working towards
common goals. The following are the basic types of leadership.
14.2.1. Autocratic Leadership
Autocratic leadership is defined by a top-down approach when it comes to all decision-

making, procedures, and policies within an organization. An autocratic leader focuses less on
collecting input from team members and tends to make executive decisions that others are
expected to follow.
14.2.2. Transactional Leadership
Transactional leadership is defined by control, organization, and short-term planning. Leaders
who adopt this style rely on a system of rewards and punishment to motivate their followers.
As you can see, there are many similarities between transactional leadership and autocratic
leadership. The main difference is that transactional leadership, as the name implies, involves
a clear exchange between the leader and the team members. For instance, in exchange for
compliance and high performance, an employee might be rewarded with a promotion.
14.2.3. Bureaucratic Leadership
Bureaucratic leadership relies on a clear chain of command, strict regulations, and
conformation by its followers. As the name implies, this is a leadership style that’s commonly
found in government entities, as well as military and public organizations.
14.2.4. Charismatic Leadership
Charismatic leadership is defined by a leader who uses their communication skills,
persuasiveness, and charm to influence others. Charismatic leaders, given their ability to
connect with people on a deep level, are especially valuable within organizations that are
facing a crisis or are struggling to move forward.
Perspectives of Management 14.3 Leadership
14.2.5. Transformational Leadership

Transformational leaders create a vision based on identified needs and guide their teams
toward that unified goal through inspiration and motivation. The main difference between
transformational leadership and the other styles we’ve covered so far is that this one is
focused on changing the systems and processes that aren’t working – unlike transactional
leadership or bureaucratic leadership, which don’t aim to change the status quo.
14.2.6. Coaching Leadership
Coaching leadership is a style defined by collaboration, support, and guidance. Coaching
leaders are focused on bringing out the best in their teams by guiding them through goals and
obstacles.
14.2.7. Democratic Leadership
Democratic leadership, which is also commonly known as participative leadership, is about

letting multiple people participate in the decision-making process. This type of leadership can
be seen in a wide range of contexts, from businesses to schools to governments.
14.2.8. Collaborative Leadership
Collaborative leadership is focused on encouraging people to work together across functional
and organizational boundaries. The purpose of this leadership style is to encourage
collaboration with other teams and departments to accomplish shared goals.
14.2.9. Servant Leadership
Servant leadership puts the needs and wellbeing of followers first. In other words, these types
of leaders adopt a serve-first approach and growth mindset to prioritize their organization,
employees, and community above themselves.
14.2.10. Laissez-Faire Leadership

Laissez-faire leadership takes a hands-off approach to leadership and gives others the
freedom to make decisions. While leaders still provide their teams with the resources and
tools they need to succeed, they remain largely uninvolved in the day-to-day work. This is a
leadership style you’ll commonly find in creative settings, such as advertising agencies or
startups, due to its encouragement of independent thinking.
14.3 LEADERSHIP THEORIES
Leadership is all about inspiring and influencing others. To be able to inspire and influence, a
leader needs to possess certain traits. Some of these are intelligence, selfassurance, ability to
supervise and the ability to take initiative. In addition, a leader should have confidence, the
ability to analyse and the charisma to make people believe in him. He should be a man of
principles and at the same refrain from being too rigid.
Over the last eighty years, a number of different theories and approaches to studying
leadership have been developed. Prior to 1945, the most common approach to the study of
leadership concentrated on leadership traits. It was thought that leaders possessed and
exhibited some unique set of qualities that distinguished them from their peers. Since this line
of investigation did not produce consistent outcomes, research centered on other theories
such as behavioural and situational approaches to leadership identification. These theories are
examined in more detail as follows:
14.4 Trait Theory

The Trait Theory rests on the traditional approach that describes leadership in terms of certain
personal and special characteristics that are not acquired by knowledge and training but are
considered inherited. This theory emphasizes that leaders are born and not made, and that
leadership is a function of inborn traits. Some of these inborn traits are considered to be
intelligence, understanding, perception, high motivation, socioeconomic status, initiative,
maturity, need for self-actualization, self-assurance and understanding of interpersonal
human relations. In the earlier studies, the existence of these traits became a measure of
leadership. The theory holds that possession of these traits permits certain individuals to gain
a position of leadership. Since all individuals do not have these qualities, only those who
have them would be considered potential leaders. It was further believed that training
individuals to assume leadership roles was not possible and such training would help only to
those who possessed these inborn leadership traits to start with.
The trait theory of leadership has suffered from lack of conclusiveness and over-
simplifications. As Eugene E. Jennings concluded, ‘fifty years of study have failed to produce
one personality trait or a set of qualities that can be used to discriminate leaders and non-
leaders.’ The old assumption that ‘leaders are born’ has never been substantiated in several
decades of research. The critics have charged that the theory focuses attention only on the
leader and disregards the dynamics of the leadership process. Also the theory ignores the
situational characteristics which may result in the emergence of a leader.
Some of the other weaknesses and failures of the trait theory are:
1. All the traits are not identical with regard to the essential characteristics of a leader.
2. Some traits can be acquired by training and may not be inherited.
3. It does not identify the traits that are most important and those that are least important
in identifying a successful leader.
4. The traits required to ‘attain’ leadership may not be the same as those required to
‘sustain’ leadership.
5. It fails to explain the many leadership failures in spite of the required traits.
6. It has been found that many traits exhibited by leaders are also found among followers
without explaining as to why followers could not become leaders.
7. It ignores the environmental factors which may differ from situation to situation.
8. It is difficult to define traits in absolute terms. Each trait can be explained in a variety
of terms. For example, intelligence cannot be accurately defined or described.
9. The extent and influence of traits would also depend upon the level of leadership in an
organization. A supervisor of production, for example, does not need or use the same
traits as the president of a company. The lower level management requires more
technical skills while at the top level of management, human and conceptual skills are
highly significant. Thus, it would be unreasonable to assume that these traits are
uniformly distributed at all managerial levels.
The trait theory approach has been criticized as lacking predictability. There are probably no
personality traits that consistently distinguish the leader from his followers. According to B.
Solomon, History is replete with non-trained, non-academic Fords, Edisons and Carnegies
who could not even claim a grammar school education, yet managed to become leaders
whose influences was felt around the globe. As for appearance of robust health, need we
mention more than the delicate Gandhi or George Washington or Carver, the frail, shriveled,
insignificant little negro who was one of America’s greatest scientists and so many more like
them. As for high ideals and fine character act, where would Hitler, Capone or Attila the Hun
rate here? Similarly, if tall people were more inclined to be leaders then how could such short
people as Napoleon or the most respected prime minister of India, Lal Bahadur Shastri have
risen to a high level of leadership?
14.5 BEHAVIOURAL AND CONTINGENCY THEORIES OF LEADERSHIP

The behavioural theory studies leadership by looking at leaders in terms of what they ‘do’.
This is in contrast to the trait theory that seeks to explain leadership in terms of who the
leaders ‘are’. Thus, according to the behaviour theory, leadership is shown by a person’s acts
more than by his traits. The leadership effectiveness is determined in terms of leader–
subordinate interaction and outcome. Research studies conducted by Katz, Maccoby and
More suggested that leadership behaviour should be defined along an employee-centered
dimension and a production-centered dimension complementing each other so that the
employee’s performance and productivity is enhanced.
Further in-depth investigations into this approach have been conducted at the Ohio State
University. These studies isolate two particular factors affecting the leadership dimension.
These are as follows:
1. Consideration: It refers to the extent to which there is a rapport between the leader
and the group, a mutual warmth and trust, a concern for the needs of the members of
the work group, an attitude that encourages participative management, two-way
communication and respect for the feedback of the followers.
2. Initiating structure: It refers to the extent to which a leader is task oriented and his
ability and concern in utilizing resources and personnel at an optimum level. It
involves creating a work environment so that the work of the group is organized,
coordinated, sequential and organizationally relevant. It ensures that people know
exactly what is to be done and how it is to be done. The structure involves having the
leader to organize and define the role each member is to assume, assign tasks to them
and push for the realization of organizational goals. An important discovery made by
the Ohio studies was that the leader does not necessarily have to rate high both on the
consideration as well as the initiating structure element. He could be high on one and
low on the other and still lead the group successfully. Since the initiating structure
dimension includes planning,coordinating, directing, problem solving, criticizing poor
work and pressurizing subordinates to perform better and consideration means
friendliness and consultation with subordinates, these two elements may seem to be in
conflict with each other.
However, according to Weissenberg and Kavanaugh, these two elements are considered to be
relatively independent dimensions of a leader’s behaviour. This means that a high score on
one dimension does not necessarily mean a low score on the other. Thus, consideration and
initiating structure can be shown in various combinations as follows:
Thus, a manager with high structure and high consideration rates high in directing and
controlling his subordinates and has a high level of concern and warmth towards employees.
Such managers have subordinates who are more satisfied, have fewer grievances and stay
longer with the organization. There is also evidence that such managers who exhibit high
levels of both consideration and initiating structure, generate higher levels of subordinate
performances. One advantage of this theory is that these two dimensions of leadership
behaviour are tangible and observable and do account for a major part of the leader
behaviour. Even though a causal connection of these two dimensions with performance has
not been clearly demonstrated, their relationship to leadership effectiveness has been quite
obvious.
14.6 Managerial Grid

Another aspect of the behavioural theory of leadership is represented by the managerial grid.
It was developed by Robert Blake and Jane Mouton and plays an important part in
managerial behaviour in organizational development. In general, behavioural scientists have
separated the two primary concerns in organizations, namely the concern for production and
concern for people. They believed that a high concern for production necessarily meant low
concern for people and high consideration for workers meant tolerance for low production.
However, the managerial grid model emphasized that both concerns should be integrated to
achieve the objectives of the organization. It assumes that people and production factors are
complementary to each other rather than mutually exclusive.
According to Rao and Narayana, the concern for production is not limited to things only, and
the concern for people cannot be confined to narrow considerations of interpersonal warmth
and friendliness. Production can be measured in terms of creative ideas of people that turn
into useful products, processes or procedures, efficiency of workers and quality of staff and
auxiliary services. Similarly, concern for people includes concern for the degree of personal
commitment of complementing the work requirement assigned to each person, accountability
based upon trust rather than fear or force, sense of job security and friendship with co-
workers leading to a healthy working climate.
The managerial grid is built on two axes, one representing the ‘people’ and the other the
‘task’. Both the horizontal, as well as the vertical axes are treated as scales from 1 to 9 where
1 represents the least involvement and 9 represents the most involvement, so that the
coordinates (1, 1) would indicate minimum standards for worker involvement and task
design, and coordinates (9, 9) would indicate maximum dedication of the workers and highly
structured operations. Such an involvement would reflect upon the managerial orientation
towards tasks and towards workers who are expected to perform such tasks. Blake and
Mouton have identified five coordinates that reflect various styles of leader behaviour. The
managerial grid figures and these styles are shown as follows:
The managerial grid diagram as shown earlier can be interpreted as follows:

Coordinates (1,1). This represents an impoverished management and the manager
makes minimum efforts to get the work done. Minimum standards of performance
and minimum worker dedication.
Coordinates (9,1). Excellent work design. Well-established procedures. Minimum
worker interference. Orderly performance and efficient operations.
Coordinates (1,9). Personal and meaningful relationship with people. Friendly
atmosphere and high morale. Loosely structured work design.
Coordinates (9,9). Ultimate in managerial efficiency. Thoroughly dedicated people.
Trustworthy and respectable atmosphere. Highly organized task performances.
Known as team management style, it relies upon interdependence of relationships
based upon the commitment of employees.
Coordinates (5,5). Known as the middle-of-the-road management style, it is
concerned with balancing the necessity to get the work done as well as maintaining
worker morale at a satisfactory level. The goal is to achieve adequate organizational
performance.
This managerial grid provides a reasonable indication of the health of the organization as well
as the ability of the managers. The model assumes that there is one best or most effective
style of management, which is the style indicated by coordinates (9,9) also known as team
management style. It is the objective of all management to move as close to this style as
possible, for managers who emphasize both high concern for people as well as productivity
are presumed to be more successful. Accordinglymanagers should be carefully selected on
the basis of their ability to coordinate people and tasks for optimum benefit. The managerial
grid model, however has become controversial on the basis of lack of empirical evidence
supporting whether the team management style is the best management style. Even Blake and
Mouton offer conceptual, rather than empirical arguments as to why the team management
style should be the best style, when conditions are favourable.
14.7 Contingency Theories

All the leadership theories discussed so far attribute leadership performance on the basis of
certain traits or in terms of a leader’s behaviour. The contingency theories state that an
analysis of leadership involves not only the individual traits and behaviour but also a focus on
the situation. The leadership behaviour is used in combination with work groups
contingencies to predict performance outcomes. The effectiveness of leader behaviour is
contingent upon the demands imposed by the situation. The focus is on the situation in which
leadership is exercised and not upon the leader. Different types of situations demand different
types of leadership behaviour. Similarly, a successful leader under one set of circumstances
may be a failure under a different set of circumstances. For example, Winston Churchill was
considered a successful prime minister and an effective leader of England during World War
II. However, he turned out to be much less successful after the War when the situation
changed.
The contingency approach, known also as the situational approach defines leadership in terms
of a leader’s ability to handle a given situation and is based on the leader’s skill in that given
area. This approach can best be described by a hypothetical example developed by Robert A.
Baron. Imagine the following scene:
The top executives of a large corporation are going in their limousine to meet the president of
another large company at some distance. On the way, their limousine breaks down many
miles from any town. Who takes charge of the situation? Who becomes the situational
leader? Not the president or the vice-president of the company, but the driver of the car who
knows enough about the motor to get the car started again. As he does or oversees the repair,
he gives direct orders to these top echelons of the organization, who comply. However, once
the car starts and they arrive at the meeting, the driver surrenders his authority and becomes a
subordinate again.
This example suggests that in a given situation, the person most likely to act as a leader is the
one who is most competent for the situation or for a given group as the case may be. Thus, in
defiance of the trait theory, some shy and introvert person may take command of leadership if
he meets the group’s requirements under given circumstances. However, it must be
understood that it would require the leaders to change their behaviour in order to fit the
changed situation, if necessary, rather than having to change the situation to suit the
leadership behaviour style. This means that the leaders must remain flexible and sensitive to
the changing needs of the given group.
While this approach emphasizes that external pressures and situational characteristics and not
the personal traits and personality characteristics determine the emergence of successful
leaders in performing a given role, it is probably a combination of both types of
characteristics that sustains a leader over a long period of time.A leader is more successful
when his personal traits complement the situational characteristics.
According to Szilagyi and Wallace, there are four contingency variables that influence a
leader’s behaviour. First, there are the characteristics of the leader himself. These
characteristics include the personality of the leader relative to his ability to respond to
situational pressures as well as his previous leadership style in similar situations. The second
variable relates to the characteristics of the subordinates. The subordinates are important
contributors to a given operational situation. The situation will very much depend upon
whether the subordinates prefer a participative style of leadership and decision making and
what their motivations in this situation are. Are the subordinates motivated by the intrinsic
satisfaction of performing the task well or do they expect other types of reinforcements?
The third factor involves the group characteristics. If the group is highly cohesive it will
create a more cordial situation than if the group members do not get along with each other so
that the leadership style will vary accordingly. The fourth situational factor relates to the
organizational structure. The organizational structure is the formal system of authority,
responsibility and communication within the company. Factors such as hierarchy of
authority, centralized or decentralized decision-making and formal rules and regulations
would affect the leader behaviour. All these factors are diagrammatically shown as follows:
14.8 Fiedler’s Contingency Theory

Fred Fiedler was one of the earliest proponents of a leadership model that explicitly
accounted for situational factors. He proposed, in 1967, a theoretical explanation for
interaction of three situational variables which affect the group performances. These three
variables are (1) leader-member relations, (2) task structure and (3) leader’s positional power.
These variables determine the extent of the situational control that the leader has.
Leader-member relations—This relationship reflects the extent to which the followers have
confidence and trust in their leader and his leadership ability. A situation in which the leader–
member relations are relatively good with mutual trust and open communications is much
easier to manage than a situation where relations are strained.
Task structure—It measures the extent to which the tasks performed by subordinates are
specified and structured. It involves clarity of goals, as well as clearlyestablished and defined
number of steps required to complete the task. When the tasks are well structured and the
rules, policies and procedures clearly written and understood, then there is little ambiguity as
to how the job is to be accomplished.
Position power—This refers to the legitimate power inherent in the leader’s organizational
position. It refers to the degree to which a leader can make decisions about allocation of
resources, rewards and sanctions. Low position power indicates limited authority. A high
position power gives the leader the right to take charge and control the situation as it
develops.
The most favourable situation for the leader then would be when the leader group relations
are positive, the task is highly structured and the leader has substantial power and authority to
exert influences on the subordinates. The leadership model proposed by Fiedler measures the
leadership orientation and effectiveness with a differential type of attitude scale which
measures the leader’s esteem for the ‘least preferred co-worker’ or LPC as to whether or not
the person the leader least likes to work with is viewed in a positive or negative way. For
example, if a leader would describe his least preferred co-worker in a favourable way with
regard to such factors as friendliness, warmth, helpfulness, enthusiasm, and so on, then he
would be considered high on LPC scale. In general, a high LPC score leader is more
relationship-oriented and a low LPC score leader is more task-oriented.
A high LPC leader is most effective when the situation is reasonably stable and requires only
a moderate degree of control. The effectiveness stems from motivating group members to
perform better and be dedicated towards goal achievement. A low LPC leader would exert
pressure on the subordinates to work harder and produce more. These pressures would be
directed through organizational rules, policies and expectations.
One of the basic conclusions that can be drawn from Fiedler’s contingency model is that a
particular leadership style may be more effective in one situation and the same style may be
totally ineffective in another situation. Also, since a leadership style is more difficult to
change, the situation should be changed to suit the leadership style. The situation can be
made more favourable by enhancing relations with subordinates, by changing the task
structure or by gaining more formal power that can be used to induce a more conducive work
setting based upon personal leadership style. Fiedler and his associates also developed a
leadership training programme known as LEADER MATCH, giving the manager some
means and authority to change the situation so that it becomes more compatible with the
leader’s LPC orientation. Studies conducted by Strube Garcia have shown strong support for
Fiedler’s approach.
14.9 Life-Cycle Theory

The life-cycle theory of leadership has been developed by Paul Hersey and Kenneth
Blanchard. The model focuses on the maturity of the followers as a contingency variable
affecting the style of leadership. The maturity of the subordinates can be defined as their
ability and willingness to take responsibility for directing their own behaviour in relation to a
given task. The level of such maturity would determine the leader’s emphasis on task
behaviours (giving guidance and direction) and relationship behaviour (providing socio-
emotional support). ‘Task behaviour’ can be defined as the extent to which the leader
engages in spelling out the duties and telling people what to do, how to do it, when to do it,
where to do it and who is to do it. Task behaviour is characterized by one-way
communication from the leader to the follower and this communication is meant to direct the
subordinate to achieve his goal.
Similarly, ‘relationship behaviour’ is defined as the extent to which the leader engages in
two-way or multi-way communication. The types of behaviour include listening, facilitating
and supportive behaviour.
‘Maturity is the crux of the life-cycle theory. It has been defined previously as reflecting the
two elements of ability and the willingness on the part of the followers. Ability is the
knowledge, experience and skill that an individual or a group has in relation to a particular
task being performed and the willingness refers to the motivation and commitment of the
group to successfully accomplish such given tasks.’
The style of leadership would depend upon the level of maturity of the followers. The
following diagram suggests four different styles of leadership for each stage of maturity and a
particular style in relationship to its relative level of maturity is considered to be the best
‘match’.
These various combinations of leadership styles and levels of maturity are explained in more
detail as follows:
(S1 ) Telling—The ‘telling’ style is best for low follower maturity. The followers feel very
insecure about their task and are unable and unwilling to accept responsibility in directing
their own behaviour. Thus, they require specific directions as to what, how and when to do
various tasks so that a directive leadership behaviour is more effective.
(S2 ) Selling—The ‘selling’ style is most suitable where followers have low to moderate
maturity. The leader offers both task direction and socio-emotional support for people who
are unable to take responsibility. The followers are confident but lack skills. This style
involves high task behaviour and high relationship behaviour.
(S3 ) Participating—This leadership approach involves high relationship behaviour and low
task behaviour and is suitable for followers with moderate to high maturity where they have
the ability but are unwilling to accept responsibility requiring a supportive leadership
behaviour to increase their motivation. The leader has an open door policy with open
channels of communication and encourages his followers to perform their tasks well.
(S4 ) Delegating—Here, the employees have both high job maturity and high psychological
maturity. They are both able and willing to be accountable for their responsibility towards
task performance and require little guidance and direction. It involves low relationship and
low task leader behaviour. The life-cycle theory of leadership requires that leaders attend to
the demands of the situation as well as the feelings of the followers, and adjust their styles
with the changing levels of maturity of the followers so as to remain consistent with the
actual levels of maturity.
14.10 Summary
Leadership is about mapping out where you need to go to "win" as a team or an organization;
and it is dynamic, exciting, and inspiring. Yet, while leaders set the direction, they must also
use management skills to guide their people to the right destination, in a smooth and efficient
way.A good leader acts strategically, they craft out a vision and refer constantly to their
vision, in their communications and when giving feedback. They are firstly a good manager
and they are focused on their people, surrounding themselves with good people.
14.11 Keywords
Leadership - The ability to inspire confidence and support among the people who are needed
to achieve organizational goals.
Leadership style the relatively consistent pattern of behavior that characterizes a leader.
Leadership effectiveness - Attaining desirable outcomes such as productivity, quality, and
satisfaction in a given situation.
Leadership diversity the presence of a culturally heterogeneous cadre of leaders.

14.12Self- Assessment Questions
1. Examine the types of leadership?
2. Are charismatic leaders born with their qualities or can they learn how to be
charismatic leaders? Discuss.
3. Discuss the disadvantages of the inherited trait theory.
4. Describe the characteristics of a charismatic leader.
5. Explain the life-cycle theory.
6. The style of leadership would depend upon the level of maturity of the followers.
Comment.

1. Parker, S. K. (2013). Beyond motivation: Job and work design for development,
health, ambidexterity, and more. Annual Review of Psychology, 65, 661-691.
2. Pakarinen, E., Lerkhanen, M-K., Poikkeus, A-M., Sidkkinen, M., &Nuirmi, J-E.
(2010). Classroom organization and teacher stress predict learning motivation in
kindergarten children. European Journal of Psychology of Education, 25(3), 281-
300. https://www.jstor.org/stable/23421684
3. Schermerhorn, J. R., & Wright, B. (2014). Management: Third Canadian Edition.
John Wiley & Sons Canada.
4. Fritz, M. S., & Arthur, A. M. (2017). Moderator variables. Oxford Research
Encyclopedias,
Psychology. https://oxfordre.com/psychology/view/10.1093/acrefore/9780190236557.
001.0001/acrefore-9780190236557-e-86
5. Hackman, J. R., & Oldham, J. R. (1980). Work redesign. Addison-Wesley.
6. Osteraker, M. C. (1999). Measuring motivation in a learning organization. Journal of
Workplace Learning, 11(2), 73-77.
7. Bergendahl, M., Magnusson, M., & Bjork, J. (2015). Ideation high performers: A
study of motivational factors. Creativity Research Journal, 27(4), 361-
368. https://www.tandfonline.com/doi/pdf/10.1080/10400419.2015.1088266?need
Accesstrue
8. Management: A Global, Innovative and Entrepreneurial Perspective (15th Edition) ,
28 October 2019,by Heinz Weihrich , Mark V Cannice , Harold Koontz .
- Dr. K. Madhu Babu

Lesson -15
MOTIVATION
Learning Objectives
To read the motivation
To understand the objectives of motivation
To learn about the theories of motivation
To inspect the good motivation system at workplace
Structure
15.0 Introduction
15.1 Objectives
15.2 Hierarchy of needs
15.3 Good Motivation System
15.5 Objectives of Motivation Theories
15.6 Maslow put the following important propositions about human behaviour
15.7 Motivation Hygiene Theory
15.8 Herzberg’s Theory
15.9 Motivation—Hygiene Theory
15.10 Theory of Douglas McGregor
15.11 Summary
15.12 Keywords
15.13 Self –Assessment Questions
15.14 Keywords
15.0 Introduction
People differ by nature, not only in their ability to perform a specific task but also in their
will to do so. People with less ability but stronger will are able to perform better than people
with superior ability and lack of will. Hard work is crucial to success and achievement. This
belief was underscored by Albert Einstein when he said that ‘genius is 10 per cent inspiration
and 90 per cent perspiration.’ This ‘will’ to do is known as motivation. The force of
motivation is a dynamic force setting a person into motion or action. The word motivation is
derived from motive that is defined as an active form of desire, craving or need that must be
satisfied. All motives are directed towards goals. New needs and desires affect or change
your behaviour that then becomes goal oriented. Viteles defines motivation as follows:
‘Motivation represents an unsatisfied need which creates a state of tension or disequilibrium,

causing the individual to move in a goal directed pattern towards restoring a state of
equilibrium, by satisfying the need.’
15.1 Objectives
After going through this unit, you will be able to:
• Understand the meaning of motivation
• Analyse the nature of the motivational process
• Explain the various types of motivation
• Know the history of the study of motivation as a resource for behaviour modification
• Discuss content theories of motivation such as Maslow model of hierarchical needs, ERG
theory of motivation, McClelland theory of needs and Herzberg’s two-factor theory of
motivation
• Understand motivation of employees at all levels
• Discuss job satisfaction
15.1.1 Motivation
Motivated people are in a constant state of tension. This tension is relieved by drives towards
an activity and outcome that is meant to reduce or relieve such tension. The greater the
tension, the more activity will be needed to bring about relief and hence higher the
motivation. Thus the basic motivation process can be depicted as follows:
Effort The amount of effort put into the activity identifies the strength of the person’s work
related behaviour. Hard work usually reflects high motivation. A student who works very
hard to get top grades can be referred to as highly motivated. A professor who is engaged in
research and publishes many high quality articles is exerting extensive effort relating to his
job.
Persistence Motivation is a permanent and an integral part of a human being. Its second
characteristic is persistence in the efforts. Motivation is continuously goal directed so that
once a goal is achieved, a higher goal is selected and efforts are exercised towards this higher
goal. Accordingly, high motivation requires persistent efforts.
Perspectives of Management 15.3 Motivation
Direction Persistent hard work determines the quantity of effort while direction determines
the quality of the anticipated output. All efforts are to be directed towards the organizational
goal. This would ensure that the persistent effort is actually resulting into accepted
organizational outcomes.
15.1.2 Importance of Motivation
Motivation is a very important for an organization because of the following benefits it
provides:
15.2.i.Puts human resources into action
Every concern requires physical, financial and human resources to accomplish the
goals. It is through motivation that the human resources can be utilized by making full
use of it. This can be done by building willingness in employees to work. This will
help the enterprise in securing best possible utilization of resources.
15.2.ii. Improves level of efficiency of employee
The level of a subordinate or a employee does not only depend upon his
qualifications and abilities. For getting best of his work performance, the gap between ability
and willingness has to be filled which helps in improving the level of performance of
subordinates. This will result into-
a. Increase in productivity,
b. Reducing cost of operations, and
c. Improving overall efficiency.
15.2.iii. Leads to achievement of organizational goals
The goals of an enterprise can be achieved only when the following factors take place :-
a. There is best possible utilization of resources,
b. There is a co-operative work environment,
c. The employees are goal-directed and they act in a purposive manner,
d. Goals can be achieved if co-ordination and co-operation takes place simultaneously
which can be effectively done through motivation.
15.2.iv.Builds friendly relationship
Motivation is an important factor which brings employees satisfaction. This can be done by
keeping into mind and framing an incentive plan for the benefit of the employees. This could
initiate the following things:
a. Monetary and non-monetary incentives,
b. Promotion opportunities for employees,
c. Disincentives for inefficient employees.
In order to build a cordial, friendly atmosphere in a concern, the above steps should be taken
by a manager. This would help in:
1) Effective co-operation which brings stability,

2) Industrial dispute and unrest in employees will reduce,
3) The employees will be adaptable to the changes and there will be no resistance to the
change,
4) This will help in providing a smooth and sound concern in which individual interests
will coincide with the organizational interests,
5) This will result in profit maximization through increased productivity.
15.2. Leads to stability of work force
Stability of workforce is very important from the point of view of reputation and
goodwill of a concern. The employees can remain loyal to the enterprise only when they have
a feeling of participation in the management. The skills and efficiency of employees will
always be of advantage to employees as well as employees. This will lead to a good public
image in the market which will attract competent and qualified people into a concern. As it is
said, “Old is gold” which suffices with the role of motivation here, the older the people, more
the experience and their adjustment into a concern which can be of benefit to the enterprise.
From the above discussion, we can say that motivation is an internal feeling which can be
understood only by manager since he is in close contact with the employees. Needs, wants
and desires are inter-related and they are the driving force to act. These needs can be
understood by the manager and he can frame motivation plans accordingly. We can say that
motivation therefore is a continuous process since motivation process is based on needs
which are unlimited. The process has to be continued throughout.
We can summarize by saying that motivation is important both to an individual and a

business. Motivation is important to an individual as:
1. Motivation will help him achieve his personal goals.

2. If an individual is motivated, he will have job satisfaction.
3. Motivation will help in self-development of individual.
4. An individual would always gain by working with a dynamic team.
15.2 Hierarchy of needs

The original hierarchy of needs five-stage model includes:
Maslow (1943, 1954) stated that people are motivated to achieve certain needs and that some
needs take precedence over others.
Our most basic need is for physical survival, and this will be the first thing that motivates our
behavior. Once that level is fulfilled the next level up is what motivates us, and so on.
15.2.1. Physiological needs - these are biological requirements for human survival, e.g. air,
food, drink, shelter, clothing, warmth, sex, sleep.
If these needs are not satisfied the human body cannot function optimally. Maslow
considered physiological needs the most important as all the other needs become secondary
until these needs are met.
15.2.2. Safety needs - once an individual’s physiological needs are satisfied, the needs for
security and safety become salient. People want to experience order, predictability and
control in their lives. These needs can be fulfilled by the family and society (e.g. police,
schools, business and medical care).
15.2.3. Love and belongingness needs - after physiological and safety needs have been
fulfilled, the third level of human needs is social and involves feelings of belongingness.
Belongingness, refers to a human emotional need for interpersonal relationships, affiliating,
connectedness, and being part of a group.
Examples of belongingness needs include friendship, intimacy, trust, and acceptance,
receiving and giving affection, and love.
15.2.4. Esteem needs are the fourth level in Maslow’s hierarchy and include self-worth,
accomplishement and respect. Maslow classified esteem needs into two categories: (i) esteem
for oneself (dignity, achievement, mastery, independence) and (ii) the desire for reputation or
respect from others (e.g., status, prestige).
Maslow indicated that the need for respect or reputation is most important for children and
adolescents and precedes real self-esteem or dignity.
15.2.5. Self-actualization needs are the highest level in Maslow's hierarchy, and refer to the
realization of a person's potential, self-fulfillment, seeking personal growth and peak
experiences. Maslow (1943) describes this level as the desire to accomplish everything that
one can, to become the most that one can be.
Individuals may perceive or focus on this need very specifically. For example, one individual
may have a strong desire to become an ideal parent. In another, the desire may be expressed
economically, academically or athletically. For others, it may be expressed creatively, in
paintings, pictures, or inventions.
15.3 Good Motivation System
Motivation is a state of mind. High motivation leads to high morale and greater production. A
motivated employee gives his best to the organization. He stays loyal and committed to the
organization. A sound motivation system in an organization should have the following
features:
Superior performance should be reasonably rewarded and should be duely
acknowledged.
If the performance is not consistently up to the mark, then the system must make
provisions for penalties.
The employees must be dealt in a fair and just manner. The grievances and obstacles
faced by them must be dealt instantly and fairly.
Carrot and stick approach should be implemented to motivate both efficient and
inefficient employees. The employees should treat negative consequences (such as
fear of punishment) as stick, an outside push and move away from it. They should
take positive consequences (such as reward) as carrot, an inner pull and move towards
it.
Performance appraisal system should be very effective.
Ensure flexibility in working arrangements.
A sound motivation system must be correlated to organizational goals. Thus, the
individual/employee goals must be harmonized with the organizational goals.
The motivational system must be modified to the situation and to the organization.
A sound motivation system requires modifying the nature of individual’s jobs. The
jobs should be redesigned or restructured according to the requirement of situation.
Any of the alternatives to job specialization - job rotation, job enlargement, job
enrichment, etc. could be used.
The management approach should be participative. All the subordinates and
employees should be involved in decision- making process.
The motivation system should involve monetary as well as non- monetary rewards.
The monetary rewards should be correlated to performance. Performance should be
based on the employees’ action towards the goals, and not on the fame of employees.
“Motivate yourself to motivate your employees” should be the managerial approach.
The managers must understand and identify the motivators for each employee.
Sound motivation system should encourage supportive supervision whereby the
supervisors share their views and experiences with their subordinates, listen to the
subordinates views, and assist the subordinates in performing the designated job.
15.4 Motivational Techniques

Any manager knows that a motivated team is a productive team. The success of any business
is dependent on the motivation of its employees. Happy and engaged employees invariably
lead to productivity and profit. Unfortunately, motivational techniques are anything but an
exact science. What works for one individual doesn’t for another.
It is critical for a manager or small business owner to find out what motivates their team. In
many cases, it boils down to getting to know each employee on an individual basis. Some are
motivated by money alone, some prefer recognition and others are motivated when they feel
valued.
15.4.1. Communicate
It is said that good communication is the number one factor in any good relationship. A
leader must always be approachable and accessible. In other words, keep the door open.
Spending time with employees on a one to one basis will put them at ease and alleviate
uncertainty. It will also give the manager keen insight into what motivates each of his
employees.
15.4.2. Socialize
A manager should make time for his employees to spend time together socializing during
work hours. Treat your team to refreshments after a meeting or go all out and provide a meal
for them. Cater it or cook it up yourself. A brunch or sandwiches will let the team know they
are appreciated. This is also a teambuilding exercise as they will have the opportunity to
spend time together ‘outside’ of work.
15.4.3. Reward
Award programs have been around for years and are a great way to recognize employees for
achieving a goal or objective. Choose an award that is appropriate to the achievement. It
might be something casual, like an envelope with movie tickets. Or you may want to go all
out and present something like a nice art-glass award for a bigger reward. Either way, the
reward should be conveyed with a genuine sense of appreciation.
15.4.4. Challenge
Everyone wants to improve themselves. Take advantage of this human trait by providing
employees with challenges and goals they can achieve. Instead of facing new challenges
alone, use the opportunity to put them on members of the team. Are there projects sitting idly
on the shelf? Hand them over to a staff member to head up and get moving again. Have too
much on your own plate? Look for an opportunity to hand some of the workload off to one of
your top performers.
15.4.5. Time Off

Few things are appreciated more than a little paid time off. If an individual or team had gone
above and beyond on a project, let them take an afternoon off. Or go the extra mile in
showing your appreciation by taking an employee to lunch and then giving them the rest of
the day off.
15.4.6. Train and Mentor

Motivate employees by providing them with additional training, even if doing so makes them
all the more attractive to other employers. Employees in companies where additional training
or educational opportunities exist are more likely to stay motivated, even if they don’t take
immediate advantage of the opportunities. The same is true of organizations that take the time
to set up mentoring programs.
Motivation theory is the study of understanding what drives a person to work towards a
particular goal or outcome. It's relevant to all of society but is especially important to
business and management. That's because a motivated employee is more productive, and a
more productive employee is more profitable.
According to David McClelland's motivation theory of management suggests that each
person has three basic needs: the need for power, achievement, or affiliation. In this
employee motivation theory, McClelland says that a person's particular need will have a
significant impact on their behavior.
15.5 Objectives of Motivation Theories

The objectives of motivation theories are to create conditions in which people are willing to
work with zeal, initiative, interest, and enthusiasm.
It also creates conditions in which people work with a sense of responsibility, loyalty,
discipline and with pride and confidence so that the goals of an organization are achieved
effectively.
15.5.1 Importance of theories
The key function of managers is ‘getting things done’ through employees. The following
assignment looks at the role of motivation and why it is essential for managers to be aware of
the various motivational theories and how the motivational theories could be implemented in
a professional context to achieve organisation’s goals and objectives.
Motivation has been defined as: the psychological process that gives behaviour purpose and
direction (Kreitner, 1995); a predisposition to behave in a purposive manner to achieve
specific, unmet needs (Buford, Bedeian, & Lindner, 1995); an internal drive to satisfy an
unsatisfied need (Higgins, 1994); and the will to achieve (Bedeian, 1993).
15.6 Maslow put the following important propositions about human behaviour:
1. Man is a wanting being – Maslow says that man is a wanting animal and his needs are
never fully satisfied. “He always wants and wants more. But what he wants depends upon
what he already has”. His needs continue to emerge from birth to death. Although his partic-
ular need may be satisfied, needs in general cannot be.
2. A hierarchy of needs – Human needs differ in importance and can, therefore, be arranged
in a series of levels—a hierarchy or pyramid. Some needs are more important than the others.
3. Emergence of needs – An individual’s needs at a particular level on the hierarchy emerge

only when the lower-level needs are reasonably well-satisfied.
4. Progression of needs – Maslow says that once a person has moved from a lower level of
needs to a higher level, the lower-level needs assume a less important role. According to
Maslow progression of needs means “as a man moves up the ladder (pyramid of needs),
personal wants and goals increase in number and variety.”
5. Deprivation and domination – Needs do not have to be 100 percent satisfied, before higher
needs emerge. They only have to be satisfied enough, “satisfied”. People accept a sufficient,
not necessarily a maximum or optimum, level of satisfaction. Hence, needs may become
temporarily dominant again as a result or deprivation. According to Maslow, only needs that
have not been satisfied exert any considerable force on what a man does.
6. Gratification and activation – Maslow says that only unsatisfied needs motivate behaviour.
A satisfied need is not a motivator of behaviour. Also, as soon as the needs of one level are
satisfied, the needs of higher level are emerged and become active demanding gratification.
Once a certain need is satisfied, it ceases to be a motivating factor.
7. Physiological needs are the highest priority – At the lowest level of the hierarchy and at the
starting point for motivation are physiological needs. These are the needs that must be
satisfied on priority basis, because they are very essential to maintain life. These are more
finite than the higher level needs (ego, esteem or social needs).
8. Self-fulfilment can never be achieved – At the apex of the hierarchy is the need for self-
actualization, which is very difficult to satisfy. These are the individual’s needs for realizing
one’s own potentialities, for self- fulfillment, for self-development.
15.7 Motivation—Hygiene Theory:

During the 1950s, Frederick Herzberg proposed a theory of employee motivation based on
satisfaction. He conducted a research study by having interviews with 200 engineers and
accountants working in eleven different firms in U.S.A.
Herzberg concluded that two separate factors influenced motivation. These two classes of
factors were associated with employee satisfaction and dissatisfaction. Hence, his concept has
come to be called Herzberg’s two-factor theory. These factors are called hygiene factors and
motivators.
15.7.1 Hygiene Factors:

These factors include working conditions, job security, salary, supervision, company policy
etc. These are extrinsic to the job and environment centred. These factors are called
“dissatisfiers” or hygiene factors as they are essential for the mental health of employees.
These are also called maintenance factors, because they are necessary to maintain a
reasonable level of satisfaction. If they exist in a work environment, they yield no
dissatisfaction. But their existence does not motivate employees. These factors are not
strongly motivating; however, their lack of existence would result in dissatisfaction. These
are job context factors.
15.7.2 Motivators:
These factors are related to the content of the job. They are inherent in the job and operate
primarily to build motivation. Their existence will yield feelings of satisfaction but their
absence will not create strong dissatisfaction among employees. These include achievement,
recognition, challenging work etc. These are called satisfiers. According to Herzberg, these
job content factors are the real motivators.
15.8 Herzberg’s Theory:
Herzberg’s theory led to the following conclusions:

1. Not all needs are motivational. Different sets of needs play different roles in the overall
process of motivation and satisfaction in organisations.
2. A satisfied employee is motivated from within to work harder and that a dissatisfied
employee is not self- motivated.
3. Job satisfaction is not a unidimensional concept. Thus, to eliminate factors that create job
dissatisfaction can bring about peace, but cannot necessarily motivate.
4. The factors leading to job satisfaction are separate and distinct from those that lead to job
satisfaction.
5. The opposite of “satisfaction” is “no satisfaction”, and the opposite of “dissatisfaction” is

“no dissatisfaction.”
6. The work itself is the key to satisfaction and motivation. Herzberg concluded that
“enriched jobs” were the key to self-motivation. Hence, managers must give considerable
attention to upgrading job content.
Herzberg’s theory has two stages in the process of motivating employees. First, managers
must ensure that the hygiene factors are not deficient. By providing hygiene factors at an
appropriate level, managers do not stimulate motivation but merely ensure that employees are
“not dissatisfied”.
Employees whom managers attempt to “satisfy” through hygiene factors alone will usually
do just enough to get by. Hence, managers should proceed to stage two – giving employees
the opportunity to experience motivation through job enrichment that is through motivators
such as challenging work, responsibility etc. Herzberg argues that jobs should be redesigned
to provide higher levels of the motivational factors.
15.8.1 Critical Appraisal of Herzberg’s Theory:

Herzberg’s framework of motivation has received a great deal of notice and acceptance
among managers. It is helpful in understanding the effect of job characteristics on motivation
and performance. It casts a new light on the content of work motivation.
15.8.2 Herzberg’s theory is important in the following way:

(a) It points out by concentrating only on the hygienic factors, managers cannot motivate its
employees. To motivate people, this theory says, attention should be directed to the
motivators that is changing jobs to remove the boredom, routineness, and lack of challenge.
Only a challenging job which has the opportunity for achievement, recognition and growth
will motivate employees.
(b) Herzberg is the first to say that “hygienic factors are absolutely necessary to maintain the
human resources of an organisation.”
(c) The theory suggests that the key to improving motivation lies in the concept of job
enrichment.
(d) It emphasizes that satisfaction and dissatisfaction do not represent the two extremes of the
same continuum.
(e) It extends the Maslow need hierarchy concept and makes it more applicable to work
motivation.
(f) It has common-sense appeal to some managers.
15.8.3 In spite of the seemingly value and importance, Herzberg’s theory has also been
criticized by behavioural scientists on a number of points:
(1) This theory is not universally applicable. It applies best to managerial, professional, and
upper-level employees only.
(2) Researchers question Herzberg’s methods of investigation. These tended to prejudice his
results. The theory is method-bound.
(3) The conclusions of this theory are based on a small sample which is not representative of
human nature.
(4) It reduces the motivational importance of maintenance factors (i.e. pay, working
conditions, interpersonal relations etc.). House and Wigdor argued that even if Herzberg is
correct in noting that hygiene factors seldom produce satisfaction or motivation, this does not
mean they never can do so.
(5) The distinction between maintenance and motivational factors is not rigid and definite.
There may be an appearance of two factors but in reality there is only one.
(6) It over-simplifies the relationship between satisfaction and motivation as well as between
the sources of job satisfaction and job dissatisfaction. House and Wigdor argue that one
factor can cause job satisfaction for one person and job dissatisfaction for another. On the
other hand, motivation is a process while satisfaction is an outcome that occurs after actual
motivated behaviour has been exhibited.
(7) It is not really a theory of motivation, because it stresses the importance and provides an
explanation of satisfaction rather than motivation.
(8) It fail to account for differences in individuals. It basically assumes that all employees
will react similarly to motivational factors. In fact, some people will indeed be motivated by a
challenging job, but others are highly motivated by money.
(9) It ignores situational variables.
(10) It is not held in high esteem by researchers in the field.
Overall, Luthans concludes, “Herzberg added much to the better understanding of job content
factors and satisfaction, but like his predecessors, fell short of the content of work
motivation.”
15.9 Motivation—Hygiene Theory:
During the 1950s, Frederick Herzberg proposed a theory of employee motivation based on
satisfaction. He conducted a research study by having interviews with 200 engineers and
accountants working in eleven different firms in U.S.A.
Herzberg concluded that two separate factors influenced motivation. These two classes of
factors were associated with employee satisfaction and dissatisfaction. Hence, his concept has
come to be called Herzberg’s two-factor theory. These factors are called hygiene factors and
motivators,
15.9.1 Hygiene Factors:

These factors include working conditions, job security, salary, supervision, company policy
etc. These are extrinsic to the job and environment centred. These factors are called
“dissatisfiers” or hygiene factors as they are essential for the mental health of employees.
These are also called maintenance factors, because they are necessary to maintain a
reasonable level of satisfaction. If they exist in a work environment, they yield no
dissatisfaction. But their existence does not motivate employees. These factors are not
strongly motivating; however, their lack of existence would result in dissatisfaction. These
are job context factors.
15.9.2 Motivators:
These factors are related to the content of the job. They are inherent in the job and operate
primarily to build motivation. Their existence will yield feelings of satisfaction but their
absence will not create strong dissatisfaction among employees. These include achievement,
recognition, challenging work etc. These are called satisfiers. According to Herzberg, these
job content factors are the real motivators.
15.10 Theory of Douglas McGregor:
In 1960, Douglas McGregor formulated Theory X and Theory Y suggesting two aspects of
human behaviour at work. In other words, two different views of individuals (employees)-
one of which is negative, called as Theory X and the other is positive, so called as Theory Y.
15.10.1 Theory X’:

The important assumptions underlying this theory are as follows:
a. Average human being has an inherent dislike of work and will avoid if they can.
b. Because of this human characteristic of disliking work, people must be controlled, directed
and even threatened to put their efforts for achieving an organisational goals.
c. He avoids accepting responsibility.
d. An average person lacks ambition and prefers to be led by someone else.
e. He is self-centered and indifferent to organisations goals.
f. Man resists to change of any type and want security above all.
Conclusion of Theory X:
An Organization with theory X type of management will have close supervision. As per
McGregor, all assumptions about human nature are negative in their approach. So, a manager
has to persuade, punish or reward such workers in order to achieve goals of an organization.
Employees will have little or no influence over business policy. Autocratic type of leadership
is required to lead such kind of people.
15.10.2 Theory Y:
According to McGregor, Theory X was based on negative assumptions. So he suggested a

different theory of managing people which was named as Theory Y.
The important assumptions of Theory Y, described by McGregor are:
a. People do not dislike work; work is a natural part of their lives.
b. People are internally motivated to reach objectives to which they are committed.
c. An employee is capable of assuming responsibility and accepting challenge and change.
d. People have the capacity to be innovative in solving organizational problems.
e. This theory further suggests that employees may not require threat, external control and
coercion to work, but they can use self-direction and self-control if they are dedicated and
sincere to achieve the organizational objectives.
15.10.3 Conclusion of Theory Y:
Theory Y is dynamic and flexible as an average employee is a sociable and smart person. An
average person likes work, capable of assuming responsibility and accepting challenge and
change, ambitious, and achievement-oriented.
Managers practicing theory Y attempt to get maximum output from their employees with
minimum amount of supervision and control. Here, individual goals are coordinated with
organizational goals. He is competent to exercise self-direction and self-control.
Thus, we can say that Theory X presents a pessimistic view of employees’ nature and
behaviour at work, while Theory Y presents an optimistic view of the employees’ nature and
behaviour at work.
15.10.4 Theory X:
1. Theory ‘X’ is pessimistic, rigid and conservative
2. People are not self-motivated.
3. Manager has to control, supervise, threat or punish employees to achieve organisational
goals. People prefer to be directed.
4. Centralization of authority, autocratic system of leadership is required.
5. People do not like work and try to avoid it.
6. People are not ambitious and dislike responsibility.
15.10.5 Theory Y:
1. Theory ‘Y’ is optimistic, flexible and progressive.
2. People are self-motivated.
3. People can be self-directed and creative at work and need no close supervision and control.
4. Decentralization of authority, democratic system of leadership is required.
5. People do not dislike work. Work is a natural part of their lives.
6. People are ambitious and accept responsibility.
15.11 Summary
Motivation theory is the study of understanding what drives a person to work towards a
particular goal or outcome. It's relevant to all of society but is especially important to
business and management. That's because a motivated employee is more productive, and a
more productive employee is more profitable. Motivation is the process that initiates, guides,
and maintains goal-oriented behaviors. It is what causes you to act, whether it is getting a
glass of water to reduce thirst or reading a book to gain knowledge. Motivation involves the
biological, emotional, social, and cognitive forces that activate behavior.
15.12 Keywords
Motivation - a reason or reasons for acting or behaving in a particular way- Being moved into
action or engaging in behavior directed to some end
Motivation theory - Motivation theory is the study of understanding what drives a person to
work towards a particular goal or outcome.
Need – A deficiency in some resource that our body needs.
1. Define motivation? Explain the objective and historical development of motivation?
2. Discuss about the importance and incentives of motivation?

3. What is the difference between self motivation team motivation?
4. Examine the good motivation system?

1. https://www.oreilly.com/library/view/motivating-employees/9781562863975,
October 2005
2. https://bookauthority.org/books/best-team-motivation-books
3. Ashkenas, R. (2013). Forget work-life balance: It's time for work-life blend.
Retrieved from:
4. Buetow, S. (2007). What motivates health professionals? Opportunities to gain greater
insight from theory. Journal of Health Services Research and Policy, 12 (3), 183-
185.
5. Chester, E. (2013). True work-life balance? It's a myth we need to quit worrying
about. Retrieved from: http://www.tlnt.com/2013/05/14/work-life-balance-its-a-
myth-we-need-to-quit-worrying-about/.
6. 7.A Theory of Human Motivation Hardcover – 1 January 2017,by Abraham H
Maslow
7. A Theory of Human Motivation, Abraham MaslowOct 2019, Trinity Spirit Media,
Narrated by Jim D. Johnston.
8. Theory Of Human Motivation Paperback – Import, 28 October 2020, by Abraham H
Maslow.
- Dr. K. Madhu Babu
LESSON – 16
JOB ENRICHMENT
Learning Objectives
To study the job enrichment
To know the objectives of job enrichment
To be read the Characteristics of Job Enrichment
To grasp the principles of job enrichment
Structure
16.0 Introduction
16.1 Objectives
16.2 Purpose of Job Enrichment
16.3 Characteristics of Job Enrichment
16.4 Reason for Enriching Jobs
16.5 Principles of Job Enrichment
16.6 Steps in Job Enrichment
16.7 Action Steps for Job Enrichment:
16.8 Core Dimensions of Job Enrichment
16.9 Job Enrichment interventions
16.10 Job Enrichment Merits and Demerits
16.11 Summary
16.12 Keywords
16.0 Introduction
Job enrichment is a management concept that involves redesigning jobs so that they're more
challenging to the employee and have less repetitive work. The concept is based on a
1968 Harvard Business Review article by psychologist Frederick Herzberg titled ''One More
Time: How Do You Motivate Employees?'' In the article, Herzberg stated that the greatest
employee motivators, based on several investigations, are (in descending order):
achievement, recognition, work itself, responsibility, advancement, and growth. To improve
employee motivation and productivity, jobs should be modified to increase the motivators
present for the employee.
To make this concept more usable, let's imagine you're a company manager and want to
increase the satisfaction of your staff. As you walk through the process of job enrichment,
you'll need to keep in mind these goals:
• Reduce repetitive work.
• Increase the employee's feelings of recognition and achievement.
• Provide opportunities for employee advancement (as in promotions into jobs requiring
more skills).
• Provide opportunities for employee growth (as in, an increase in skills and knowledge
without a job promotion).
16.0.1Meaning
Job enrichment refers to structuring of jobs to involve higher level conceptual thinking and
responsibility so that employees can take decisions that were formerly the prerogative of
superior managers. According to Keith Davis, “Job enrichment means additional motivators
added to the job so that it (job) is more rewarding, although the term has come to be applied
to any effort to humanize jobs.”
Paul Robertson and Herzberg in 1969 have observed, “It seeks to improve both efficiency
and human satisfaction by means of building into people’s job quite specifically a greater
scope of personal achievement and recognition, more challenging and responsible work and
more opportunity for individual advancement and growth.”
In Job enrichment programme, an employee decides how the job is performed, planned and
controlled and makes more decision concerning the entire process.
Job enrichment involves providing an employee with more responsibility for a job and
challenges the individual’s skill at work. Enrichment involves increasing the decision-making
authority and encouraging the employee with their tasks. Providing employees with
meaningful tasks will increase their performance compared to just “piling” on a lot of work
and increasing the same type of work-load.
Job enrichment directly relates to motivation factor and employee satisfaction. The concept
of job enrichment was developed by Fredrick Herzberg in the 1950s. Previous studies have
shown that job enrichment causes significant increases in employee job satisfaction, job
involvement and increased internal motivation. Decreases in absenteeism were also found to
be a result of increased job enrichment.
Job enrichment is a type of job redesign intended to reverse the effects of tasks that are
boredom, lack of flexibility, and employee dissatisfaction. The underlying principle is to
expand the scope of the job with the greater variety of tasks, vertical in nature, that require
self-sufficiency.
16.0.2 Concept
Work is one of the primary means of achieving economic, political and cultural goals. People
spend a considerable amount of time in working and earning livelihood. People are working
year after year. Therefore work / job have become an issue for many workers because it is
losing its intrinsic (internal) value and there is no motivation among the employees.
Some of the workers are dissatisfied with their work which adversely effect on efficiency,
productivity and on motivation, efforts have been made to use job for motivating employees
in organization, job enrichment and job rotation are the examples in that direction.
HERZBERG is the first in this direction. In his famous research on motivators and
maintenance factors focus on job enrichment also, and now, job enrichment has become a
popular concept.
Job enrichment means changing or improving a job so that a worker is likely to be more
motivated. It simply adding a few more motivators to a job to make it more rewarding. It
provides the employee with an opportunity for greater recognition, advancement, growth, and
responsibility.
To be specific, a job is enriched when the nature of the job is exciting, challenging and
creative or gives the job holder more decision making, planning and controlling powers. It
Perspectives of Management 16.3 Job Enrichment
would make the job more interesting and challenging. It is designed to be less specialized and
more enriched.
More autonomy will be given to the workers, allowing him to plan inspect and keep the
control on his own job, It means upgrading of responsibility, scope and challenge. It does not
mean to make the work more varied but to make every employee a manager.
An employee will perform the functions of management such as planning controlling etc. It
provides an opportunity for the employee’s psychological growth. In every enriched job, an
employee knows the overall deadlines and quality standards to the work.
Within that framework of the plans and controls and holds himself responsible for meeting
the deadlines and the quality standards. Job enrichment is more successful in improving
quality of the work than its quantity and keeps the employee morale high. He gets satisfaction
of doing the job well. Job enrichment removes job monotony, boredom and dissatisfaction on
the part of the employee.
16.1 Objectives
Job enrichment involves vertical loading, addition giving more challenge, it applies to
improvement of job in such a way that it has more motivators than before and at the same
time maintaining the degree of maintenance factors. It is based on the assumption that in
order to motivate personnel, the job itself must provide opportunities for achievement,
recognition, advancement, responsibility and growth.
The basic objectives of a job enrichment programme are to motivate people to work to their
highest level of capacity and ability improve employee relations, attract and retain quality
employees, reduce absenteeism, improve quality and productivity, and increase return on
investment.
16.2 Purpose of Job Enrichment
1. Increasing the responsibility of the job by adding different tasks.
2. Giving a natural unit of work to an employee.
3. Allowing employees to set their own standards.
4. Providing the freedom of work by minimizing control.
5. Introducing new, innovative, tough and creative tasks to the employees.
6. Encouraging employee participation in planning and decision making process.
7. Making or holding an employee directly responsible for his performance in the
organization.
16.3 Characteristics of Job Enrichment

(1) Direct Feedback- An employee can easily get the feedback of what he has achieved?
What is the result of his work done?
(2) Client Relationship- In an enriched job, an employee develops direct relationship with his
client or customer. Such client may be either inside or outside the organization.
(3) New Learning- An enriched job allows an employee to feel that he is growing mentally.
Such employee always learns something new on the job.
(4) Scheduling Own Work- Full freedom is given to the employee to schedule for his own
work, contributes to enrichment of job. In case of employees who perform creative or some
outstanding work, opportunity should be given to them to schedule their assignment then to
the employees performing routine jobs.
(5) Unique Experience- An enriched job has some unique qualities and features which
ultimately results in unique in doing a job.
(6) Control over Resources- Every employee have to control his resources and expenses,
contributes to job enrichment. He is having authority to order whatever supplies he required
for performing a job.
(7) Direct Communication Authority- Job enrichment allows the worker to contact directly
with the people or customers who are the user of his product. Therefore he is able to get the
feedback of the users about his output / product.
(8) Personal Accountability- An enriched job holds the employee responsible for the work
done or for the results. He will be praised for good work and would be blamed for bad /poor
work.
16.4 Reason for Enriching Jobs

The purpose of job enrichment is to make the position more satisfying to the employee.
Overall goals for the company often include increasing employee job satisfaction, reducing
turnover, and improving productivity of employees.
To rephrase this as if it's coming from the mouth of the company manager or even the CEO:
''We want to enrich our staff's positions so that they'll be happier, more productive, and less
likely to seek a job elsewhere.''
16.5 Principles of Job Enrichment

Job enrichment involves deliberate upgrading of responsibility and challenges at work. More
and more works are being redesigned to make it more ‘meaningful,’ and in some cases it
includes giving employees responsibility for the planning and control of work and operations.
So much so that in some countries like Sweden and Norway, it is the law to have employee
representatives in the governing boards of companies. Job enrichment is also known as ‘job
enlargement,’ both in scope and depth. Some of the principles of job enrichment are
advanced by Herzberg himself. These are:
1. Give the employees the freedom of operation and responsibility. An opportunity to

schedule one’s own work enhances a sense of achievement and motivation. Expand
his authority while retaining some controls and accountability for actions and results.
2. To increase responsibility, give the person a whole unit to operate. This unit may be
one group, section or division and grant additional authority to achieve the group
goal. This will help the growth and advancement factors.
3. Introduce new and more difficult tasks at each step, giving workers an opportunity to
learn and specialize.
4. The employee must be given frequent feedback on his performance and on his
handling of his own duties and responsibilities. This feedback will reinforce the
learning process and reduce or eliminate ‘any existing deviations and will appraise the
employee about his progress.’
The job enrichment program can only be initiated and implemen-ted successfully, if the
conditions for such a program are highly adequate and receptive. It cannot work in a vacuum.
Its success is dependent upon the existing organizational structure, physical and conceptual
environment, technology etc. For example, if the jobs are already diverse and challenging,
and the workers have reasonable autonomy, further enrichment may not be necessary.
Similarly if the employees are not happy with other extrinsic rewards such as pay and fringe
benefits, they may not respond positively to the job enrichment program. Accordingly, the
job enrichment programs must blend in with the total organizational environment.
Job redesigning, job enlargement, job enrichment etc. was a concept advanced by Peter
Drucker in 1950. He has been quoted as, ‘the worker is put to use as a poorly designed, one
purpose machine tool, but repetition and uniformity are two qualities in which human beings
are weakest. In everything, but the ability to judge and coordinate, machines can perform
better than men.’ This indicates that the- jobs should be designed in such a manner so that
these abilities of workers are optimally utilized.
One of the more recent job redesign strategies involves the area of time scheduling known us
Flextime. This schedule substitutes the rigid 9 to 5 working schedule and gives the worker the
flexibility to arrange his own working hours within reason and in compliance with
organization situation. Research has indicated that flextime results in greater job satisfaction.
According to Douglas L. Fleuter, flextime programs can result in higher motivation for
workers which results in improved productivity.
16.5.1 Vertical job loading is the terminology used by Herzberg to describe his principles
for enriching positions and giving employees more challenging work. It's intended to contrast
with job enlargement, a.k.a. horizontal job loading, which often involves giving employees
more work without changing the challenge level.
To enrich a position, you first need to brainstorm a list of potential changes to the position.
Once you have a list of options, Herzberg recommends using the following seven principles
to review the options, and shortlist only those that invoke one or more of the following:
1. Removing some controls while retaining accountability
2. Increasing the accountability of individuals for own work
3. Giving a person a complete, natural unit of work
4. Granting additional authority to employees in their activity
5. Making periodic reports directly available to the workers themselves rather than to
supervisors
6. Introducing new and more difficult tasks not previously handled
7. Assigning individuals specific or specialized tasks; enabling them to become experts
For example, you might have on your list ''Allow staffer A to present the monthly report
directly to senior management.'' When you review this option against our list above, you find
that it will meet the following goals:
• Increasing the accountability of individuals for own work by having them present
directly to senior staff.
• Granting additional authority to employees in their activities by trusting them to make
a presentation to a second-level manager.
Since it does meet some of the goals on our enrichment list, it would be added to the shortlist.
Once you have a final list, prioritize the options and document implementation steps and
dates for each option you plan to implement.
16.6 Steps in Job Enrichment

The process of job enrichment has the following steps
(i) Selection of a job which is convenient for job enrichment.
(ii) Identification of change that will enrich the job.
(iii) Making a change in the content of the job to make the job more attractive and also to
make the employees more responsible.
(iv) Providing training, guidance & encouragement to employees.
(v) Identifying motivational factors like achievement, recognition, responsibility etc.
(vi) Introducing the job enrichment programme in to the daily work routine of the
organization.
16.7 Action Steps for Job Enrichment:

Job enrichment makes the job more challenging and enhances the worker’s responsibility,
motivation and enthusiasm. Dale S. Beach has suggested specific action steps for designing
enriched jobs.
16.7.1 They are as follows:
1. Creation of natural or logical work units.
2. Combining several duties which require various skills into each job.
3. Allowing the employees to have direct contact (if possible), and knowledge about the
people for whom his products are required.
4. Providing vertical job loading to incorporate some planning and controlling duties into the
job.
5. Providing feedback information to the employees to correct and improve their

performances.
16.8 Core Dimensions of Job Enrichment

Lawler and Hachman have identified three core dimensions that especially provide
enrichment for job. It is desirable that all the five dimensions be provided.
16.8.1 Skill Variety:
The employees who are performing different operations using several procedures and may be
using different equipment. The jobs which are having a lot of variety, employees feel that,
such jobs are more challenging simply because they required a range of skills while
performing it. These jobs also relieve monotony that develops from any repetitive function.
Variety gives employees a greater sense of competence, because they can perform different
kinds of work in different ways.
16.8.2 Task Identity:
Task identity is the second core job dimension, which allows employees to perform complete
piece of the work. Many job enrichment efforts have been focused on this dimension. In the
earlier days due to over specialization of routine jobs, individual employees worked on a
small part of the whole work/job that they were unable to identify any product with their
efforts.
The employees could not feel any sense of completion or feel any responsibility for the whole
product. When tasks are broadened to produce a whole product or an identifiable part of it,
then task identity has been established.
16.8.3 Task Significance:
“Task significance” is third core dimension of job enrichment. It refers to the amount of
impact that the work has on other people, which is done by the worker. This impact may be
on others in the organization or may be on others outside the organization. Because of task
workers believe that they are also having something unique and important in their
organization or in the society in which they live.
16.8.4 Autonomy:
The fourth core dimension of job is “autonomy”. It controls over the affairs of the employee.
Autonomy builds a sense of responsibility in workers. It is a fundamental characteristic which
must be developed among all the employees. The workers have to work within the broad
constraints of an organization, they also insist on a degree of freedom.
16.8.5 Feedback:
A fifth core dimension is feedback. Feedback refers to information that tells workers how
well they are performing. Since they are investing substantial part of their lives in their work,
they want to know how well they are doing. If their performance is not satisfactory, they must
try to improve the same, watch such workers and inform them how they are doing now.
Weekly and daily reports are much better for feedback.
The model is self-explanatory that what is the relationship between the job dimension and
emerging psychological states and results of personnel and work outcomes.Hackman and
Oldman in 1976 have developed a questionnaire called the Job Diagnostic Survey which
provides an objectives and quantitative measure of five core dimension the responses to it
will reveal how much each core dimension is present in a job.If a job is high on all five
dimensions, the job enrichment is not needed even if employees are unproductive or
unhappy. It means that such job is already enriched but the cause for employee’s unhappiness
or poor performance are unrelated with the design of the work.
16.9 Job Enrichment interventions
In this section, we will go over a series of job enrichment interventions. All these
interventions are aimed at increasing skill variety, task significance, broadening roles, and
increasing autonomy.
16.9.1. Job Diagnostic Survey. The first intervention is the JDS we discussed previously. I
mention this here as this is often the starting point of any enrichment intervention. These
interventions should be aimed at jobs with low motivating potential scores.
16.9.2. Creating natural work units. The formation of natural work units is about grouping
interrelated tasks together. This creates ownership of the tasks and allows the employee to see
the result of their work, leading to an increase in ownership, task identity, and perceived task
significance.
16.9.3. Combining tasks. Divided jobs can be put together to create broader, more rewarding
jobs. Cummings & Worley mention Corning Glass Works, a laboratory hotplate assembling
plant. Separate tasks were combined so that each operator would completely assemble,
inspect, and ship a hotplate. This meant that each assembler could identify with a finished
product and self-inspect it, leading to greater task significance, autonomy, and feedback. This
resulted in an increase in productivity of 84%, a drop of controllable rejects from 23 to less
than 1%, and absenteeism dropped from 8 to less than 1%.
16.9.4. Quality circles. Quality circles, or Kaizen groups, are groups of employees who
regularly meet to consider ways of resolving problems and improving productivity in their
organization. These small groups increase participatory management and lead to more task
identity and autonomy.
16.9.5. Suggestion programs. In line with quality circles, Employee Suggestion Programs
(ESP) encourage employees to offer suggestions that improve the performance and quality of
their work. Usually, the ESP is overseen by HR. Sometimes cash awards are awarded for
employees whose ideas are implemented or result in savings or revenue.
16.9.6. Task teams. A task team, task force, or task group is a unit established to work on a
single defined task or activity. Originally introduced by the United States Navy, it is now
used in business settings as well. Similar to the quality circle, a group of employees works
together to come up with improvements related to a specific business activity, often overseen
by a manager.
16.9.7. Feedback. The simple act of giving regular feedback may be the easiest job
enrichment intervention of them all. Feedback, whether it comes from one’s direct manager
or peers through a 360-degree feedback assessment, helps the employee to grow and develop
and is a key way to enrich one’s job.
16.9.8. Autonomy. Autonomy is another key part of the motivating potential of a job. Any
intervention that can increase autonomy will lead to an increase in motivating potential.
Examples include being able to determine when one takes a break or being made responsible
for a project or process.
16.9.9. Purpose. We haven’t mentioned Deci and Ryan’s self-determination theory yet. Deci
and Ryan propose that motivation is created through three drivers, a need for autonomy, a
need for competence, and a need for relatedness. This was later popularized in Daniel Pink’s
book Drive. A purpose for doing the work can help in creating relatedness to the work. A
clearly stated and identifiable purpose will increase task significance.
16.9.10. Establish client relationships. Another job enrichment intervention is to establish

client relationships. When jobs are split up, workers have little to no contact with, or
knowledge of, the ultimate user. By establishing client relationships, the task identity and task
significance are increased. Cummings & Worley recommend three steps. First, the client
must be identified. Second, the contact between the worker and the client needs to be as
direct as possible. Third, criteria by which the client judges the product or service should be
clear and the client’s judgment should be relayed back to the worker.
16.9.11. Vertical loading. Vertical loading may be the most crucial job enrichment and
design principle. A job that is vertically loaded has responsibilities and a large degree of
control that was formally reserved for management. This greatly increases autonomy.
Vertical loading is often lost when a mistake is made. At this point, a supervisor steps in and
removes the responsibility, leading to lower vertical loading and a decrease in autonomy.
16.9.12. Horizontal loading. Horizontal loading is also referred to as job enlargement. Job
enlargement is a form of job enrichment and will be discussed in the next section.
16.10 Job Enrichment Merits and Demerits
16.10.1 The following are the merits or benefits of job enrichment:

(1) It improves and enhances the basis relation between the person and his work.
(2) It attempts to change one’s behaviour positively while maintaining the change.
(3) It helps to convert monotonous work into a source of motivation.
(4) It offers a change to initiate and allow other organizational changes and alter the
management style.
(5) It helps organization in the long run in rehumanizing than dehumanizing their manpower.
(6) Job enrichment enables the employees and the organisation to be more flexible.
(7) It enables the employees to be more committed to their organisation.
(8) It checks the organisation from over staffing.
(9) It enables the organisation to get more competitive advantage from its employees.
(10) It becomes a powerful tool to create a learning organisation.
16.10.2 The following are the demerits or drawbacks of job-enrichment:

1. Job enrichment may initially reduce productivity.
2. The management may not involve in supporting functions.
3. It may make attrition rates higher.
4. It requires large investment in terms of time and money,
5. Managing people becomes difficult due to high empowerments.
16.11 Summary
Job enrichment is the process of adding motivators to existing roles in order to increase
satisfaction and productivity for the employee. This can be done through increasing
autonomy, skill and task variety, providing feedback, and so on.
16.12 Keywords
Job Enrichment - Job enrichment is a process that is characterized by adding dimensions to
existing jobs to make them more motivating. Examples of job enrichment include adding
extra tasks (also called job enlargement), increasing skill variety, adding meaning to jobs,
creating autonomy, and giving feedback.
The Job Diagnostic Survey - A tool to enrich jobs is the Job Diagnostic Survey (JDS). The
JDS is a framework that helps to calculate a motivating potential score.
Job enrichment interventions - In this section, we will go over a series of job enrichment
interventions. All these interventions are aimed at increasing skill variety, task significance,
broadening roles, and increasing autonomy.
16.13 Self – Assessment Questions:

1. What is job enrichment? Explain the purpose of job enrichment?
2. Explain the characteristics of job enrichment?
3. Examine the principles and dimensions of job enrichment?
4. Discuss the merits and demerits of job enrichment?
1. Study.com/academy/lesson/job-enrichment-definition-advantages-disadvantages-
examples.html
2. www.economicsdiscussion.net/human-resource-management/job-enrichment/32240
3. www.digitalhrtech.com/job-enrichment/
4. eeedrmcet.zohosites.com/files/IV%20Year/SEM%207/POM/POM_L35.pdf
5. hbr.org/1969/03/job-enrichment-pays-off2 William J. Paul, Jr., Keith B. Robertson
and Frederick Herzberg.2016.
6. Management: A Global, Innovative and Entrepreneurial Perspective, October 2019,
by Heinz Weihrich , Mark V Cannice , Harold Koontz.
- Dr. K. Madhu Babu

UNIT - V
LESSON-17
SYSTEM AND PROCESS OF CONTROLLING

Learning Objectives
To Study the importance of Controlling

To Learn about the Characteristics of control
To understands the requirement of effective control
Structure
17.0 Introduction
17.1 Importance of controlling
17.2 Characteristics of Control
17.3 Controlling process
17.4 Requirement of Effective control
17.5 Limitation of controlling
17.6Summary
17.7 Key words
17.0 INTRODUCTION
Controlling is one of the important functions of a manager. In order to seek planned
results from the subordinates, a manager needs to exercise effective control over the activities
of the subordinates. In other words, controlling means ensuring that activities in an
organisation are performed as per the plans. Controlling also ensures that an organisation’s
resources are being used effectively and efficiently for the achievement of predetermined
goals. Controlling is, thus, a goal-oriented function.
Controlling function of a manager is a pervasive function. It is a primary function of
every manager. Managers at all levels of management- top, middle and lower-need to
perform controlling functions to keep a control over activities in their areas. Moreover,
controlling is as much required in an educational institution, military, hospital, and a club as
in any business organisation.
Controlling should not be misunderstood as the last function of management.
It is a function that brings back the management cycle back to the planning function.
The controlling function finds out how far actual performance deviates from standards,
analyses the causes of such deviations and attempts to take corrective actions based on the
same. This process helps in formulation of future plans in the light of the problems that were
identified and, thus, helps in better planning in the future periods. Thus, controlling only
completes one cycle of management process and improves planning in the next cycle.
17.1 IMPORTANCE OF CONTROLLING
Control is an indispensable function of management. Without control the best of plans

can go awry. A good control system helps an organisation in the following ways:
Accomplishing organisational goals
The controlling function measures progress towards the organisational goals and
brings to light the deviations, if any, and indicates corrective action. It, thus, guides the
organisation and keeps it on the right track so that organisational goals might be achieved.
17.1.1 Judging accuracy of standards
A good control system enables management to verify whether the standards set are
accurate and objective. An efficient control system keeps a careful check on the changes
taking place in the organisation and in the environment and helps to review and revise the
standards in light of such changes.
17.1.2 Making efficient use of resources

By exercising control, a manager seeks to reduce wastage and spoilage of resources.
Each activity is performed in accordance with predetermined standards and norms. This
ensures that resources are used in the most effective and efficient manner
17.1.3 Improving employee motivation

A good control system ensures that employees know well in advance what they are
expected to do and what are the standards of performance on the basis of which they will be
appraised. It, thus, motivates them and helps them to give better performance.
17.1.4 Ensuring order and discipline

Controlling creates an atmosphere of order and discipline in the organisation. It helps
to minimise dishonest behaviour on the part of the employees by keeping close check on their
activities.
17.1.5Facilitating coordination in action

Controlling provides direction to all activities and efforts for achieving organisational
goals. Each department and employee is governed by predetermined standards which are well
coordinated with one another. This ensures that overall organisational objectives are
accomplished.
17.2 Characteristics of control

Control is a device or a procedure which keeps the manager informed as the-activities
for' which he is responsible and which assures him that his plans and policies are being
carried
out according to schedule. The nature of control function will be clearly understood from the
following characteristics of control
17.2 Characteristics of control

1. Control is all pervasive function:
Control is essential at all levels of organisation. It isa follow-up action to the other
management functions. Every manager performs the control function irrespective of his rank
Perspectives of Management 17.3 System and process…
and nature of job. Control is the essential counterpart of planning. It is the control function
which completes the management process.
2. Control is a continuous process:

Control is an ongoing and dynamic function of management. It involves continuous
review of performance and revision of standards of operations. As long as an organisation
exists, control continues to exist. It is amenable to change with the external environment.
Therefore it is a highly flexible process.
3. Planning is the basis of control:

Control can be exercised only with reference to and on the basis of plans. Effective
control is not possible un less the management spells out clear objectives of the organisation.
In fact, measurement of performance requires certain standards which are laid down under
planning. Planning sets course and control ensures that actual action conforms to the planned
action.
4 .Action is the essence of control
Control is an action-oriented process. A manager initiates action which guides the
operation within the sphere of plans. In order to 'prevent a recurrence of deviations a manager
modifies or improves the existing plans,
5. Control is a forward looking process:
Control aims at future. Although past experience is the criteria for future standards,
control is concerned with checking the current performance and providing guidelines for the
future. Therefore, control is both backward-looking and forward-looking. It looks at future
through the eyes of past.
6. Delegation is the key to control:

Effective control requires adequate delegation of authority. An executive can perform
the control function properly if he enjoys the authority. to take remedial action and is to be
held accountable for results.
7. Control allows the organisation to cope with uncertainty

Control helps in regulating the uncertain events of the organisation. It anticipates any
shift in task and preferences of consumers and directs the organisation to modify its process
in order to meet the contingencies of the future
17.3 Controlling process

Controlling is a systematic process involving the following steps.
1. Setting performance standards
2. Measurement of actual performance
3. Comparison of actual performance with standards
4. Analysing deviations
5. Taking corrective action
17.3.1 Setting Performance Standards:

The first step in the controlling process is setting up of performance standards.
Standards are the criteria against which actual performance would be measured. Thus,
standards serve as benchmarks towards which an organisation strives to work. Standards can
be set in both quantitative as well as qualitative terms. For instance, standards set in terms of
cost to be incurred, revenue to be earned, product units to be produced and sold, time to be
spent in performing a task, all represents quantitative standards. Sometimes standards may
also be set in qualitative terms. Improving goodwill and motivation level of employees are
examples of qualitative standards.
At the time of setting standards, a manager should try to set standards in precise
quantitative terms as this would make their comparison with actual performance much easier.
For instance, reduction of defects from 10 in every 1,000 pieces produced to 5 in every 1,000
pieces produced by the end of the quarter. However, whenever qualitative standards are set,
an effort must be made to define them in a manner that would make their measurement
easier. For instance, for improving customer satisfaction in a fast food chain having self-
service, standards can be set in terms of time taken by a customer to wait for a table, time
taken by him to place the order and time taken to collect the order. It is important that
standards should be flexible enough to be modified whenever required. Due to changes taking
place in the internal and external business environment
17.3.2 Measurement of Actual

Performance: Once performance standards are set, the next step is measurement of
actual performance. Performance should be measured in an objective and reliable manner.
There are several techniques for measurement of performance. These include personal
observation, sample checking, performance reports, etc. As far as possible, performance
should be measured in the same units in which standards are set as this would make their
comparison easier.
It is generally believed that measurement should be done after the task is completed.
However, wherever possible, measurement of work should be done during the performance.
For instance, in case of assembling task, each part produced should be checked before
assembling. Similarly, in a manufacturing plant, levels
of gas particles in the air could be continuously monitored for safety. Measurement of
performance of an employee may require preparation of performance report by his superior.
Measurement of a company’s performance may involve calculation of certain ratios like
gross profit ratio, net profit ratio, return on investment, etc., at periodic intervals. Progress of
work in certain operating areas like marketing may be measured by considering the number
of units sold, increase in market share etc., whereas, efficiency of production may be
measured by counting the number of pieces produced and number of defective pieces in a
batch. In small organisations, each piece produced may be checked to ensure that it conforms
to quality specifications laid down for the product. However, this might not be possible in a
large organisation. Thus, in large organisations, certain pieces are checked at random for
quality. This is known as sample checking.
17.3.3 Comparing Actual Performance with Standards

This step involves comparison of actual performance with the standard. Such
comparison will reveal the deviation between actual and desired results. Comparison
becomes easier when standards are set in quantitative terms. For instance, performance of a
worker in terms of units produced in a week can be easily measured against the standard
output for the week.
17.3.4 Analysing Deviations:

Some deviation in performance can be expected in all activities. It is, therefore,
important to determine the acceptable range of deviations. Also, deviations in key areas of
business need to be attended more urgently as compared to deviations in certain insignificant
areas. Critical point control and management by exception should be used by a manager in
this regard.
1. Critical Point Control:
It is neither economical nor easy to keep a check on each and every activity in an
organisation. Control should, therefore, focus on key result areas (KRAs) which are critical to
the success of an organisation. These KRAs are set as the critical points. If anything goes
wrong at the critical points, the entire organisation suffers. For instance, in a manufacturing
organisation, an increase of 5 per cent in the labour cost may be more troublesome than a 15
per cent increase in postal charges.
2. Management by Exception:
Management by exception, which is often referred to as control by exception, is an
important principle of management control based on the belief that an attempt to control
everything results in controlling nothing. Thus, only significant deviations which go beyond
the permissible limit should be brought to the notice of management. Thus, if the plans lay
down 2 per cent increase in labour cost as an acceptable range of deviation in a
manufacturing organisation, only increase in labour cost beyond 2 per cent should be brought
to the notice of the management. However, in case of major deviation from the standard (say,
5 per cent), the matter has to receive immediate action of management on a priority basis.
After identifying the deviations that demand managerial attention, these deviations need
to be analysed for their causes. Deviations may have multiple causes for their origin. These
include unrealistic standards, defective process, inadequacy of resources, structural
drawbacks, organisational constraints and environmental factors beyond the control of the
organisation.
case the deviation cannot be corrected through managerial action, the standards may have to
be revised. The table below cites some of the causes of deviations and the respective
corrective action that might be taken by a manager. The information in the box in next page
gives an account of how Saco Defense was able to control a crisis situation.
The budget as control technique

There are many controlling techniques which were also commonly known as controlling aids.
Generally these controlling techniques can be categorized into two types i.e.,
Traditional Techniques and Modern Techniques. Now in this article we can concentrate on
both the techniques in detail. So that one can understand them well and can practice well in
their organizations to achieve their predetermined objectives.
17.4 Requirements of Effective control

To be effective and to serve its purpose, the system of control must satisfy
certainrequirements. These may be regarded as the prerequisites of effective control.
Therequirements of an effective control system may bc enumerated in brief as under:
1 Definition of objectives: Before planning a control system, it is essential to clearly define

the objectives of the organisation. The control system must be directed towards the potential
or actual deviations from plans early enough to permit corrective action.
2 Efficiency of control techniques: Control techniques are said to be efficient when they
detect deviations from plans and make possible corrective action at an early stage with the
minimum of unsought consequences.
3 Responsibility of control: The primary responsibility for the exercise of control should rest
with the manager charged wit11 the implementation of plans.
4 Direct control: Any control system should be designed to maintain direct control between
the controller and the controlled.
5 Organisation suitability: Controls should be tailored to fit the organisation. The flow of
information concerning current performance should correspond with the organisational
structure. If superior is to control overall operations, he must find a pattern that will provide
control for individual parts
17.5 LIMITATIONS OF CONTROLLING

Although controlling is an important function of management, it suffers from the following
limitations.
17.5.1Difficulty in setting quantitative standards

Control system loses some of its effectiveness when standards cannot be defined in
quantitative terms. This makes measurement of performance and their comparison with
standards a difficult task. Employee morale, job satisfaction and human behaviour are such
areas where this problem might arise.
17.5.2Little control on external factors

Generally an enterprise cannot control external factors such as government policies,
technological changes, competition etc.
17.5.3Resistance from employees

Control is often resisted by employees. They see it as a restriction on their freedom.
For instance, employees might object when they are kept under a strict watch with the help of
Closed Circuit Televisions (CCTVs).
17.5.4Costly affair
Control is a costly affair as it involves a lot of expenditure, time and effort.A small
enterprise cannot afford to install an expensive control system. It cannot justify the expenses
involved. Managers must ensure that the costs of installing and operating a control system
should not exceed the benefits derived from it.
17.6Summary
Management control can be defined as a systematic torture by business management
to compare performance to predetermined standards, plans, or objectives in order to
determine whether performance is in line with these standards and presumably in order to
take any remedial action required to see that human and other corporate resources are being
used in the most effective and efficient way possible in achieving corporate objectives
17.7 Key words

Controlling - Controlling also ensures that an organisation’s resources are being used
effectively and efficiently for the achievement of predetermined goals
Performance standards-Standards are the criteria against which actual performance would
be measured
Management by exception- Management by exception, whichis often referred to as
controlby exception, is an importantprinciple of management controlbased on the belief that
an attemptto control everything results in controlling nothing
Critical Point Control- It is neither economical nor easy to keep a check on each and every
activity in an organisation

1. Briefly Explain the Importance and Limitations of Controlling
2. Discuss the Traditional Control techniques
3. Explain the Importance of Budgeting, and Types of Budget

1. C.B. Gupta: Human Resource Management, Sultan Chand & sons, New
Delhi,(Reprint) 2002, p.13.8 Human Resource Management
2011.
Publication, 2012.
- Dr. V. Naga Nirmala

LESSON-18
DIRECTIVE AND PREVENTIVE MEASURES OF

CONTROL CONTROLLING TECHNIQUES
Learning Objectives
To study the Traditional and Modern Techniques of control

To learn the Ratio Analysis
To understand the Management Audit
Structure
18.0 Introduction
18.1 Traditional Techniques
18.2 Modern Techniques
18.3 Ratio Analysis
18.4 Reporting
18.5 Management Audit
18.6 PERT & CPM
18.7 Summary
18.8 Key words
18.0 Introduction
Traditional techniques are those which have been used by the companies for a long
time now. However, these techniques have not become obsolete and are still being used by
companies. These include:
(a) Personal observation
(b) Statistical reports
(c) Breakeven analysis
(d) Budgetary control
18.1 Traditional Methods
1. Personal Observation
This is the most traditional method of control. Personal observation is one of those
techniques which enables the manager to collect the information as first-hand information.
It also creates a phenomenon of psychological pressure on the employees to perform

in such a manner so as to achieve well their objectives as they are aware that they are being
observed personally on their job. However, it is a very time-consuming exercise & cannot
effectively be used for all kinds of jobs
2. Statistical Reports
Statistical reports can be defined as an overall analysis of reports and data which is
used in the form of averages, percentage, ratios, correlation, etc., present useful information
to the managers regarding the performance of the organization in various areas.
This type of useful information when presented in the various forms like charts,
graphs, tables, etc., enables the managers to read them more easily & allow a comparison to
be made with performance in previous periods & also with the benchmarks.
3. Break-even Analysis
Breakeven analysis is a technique used by managers to study the relationship between
costs, volume & profits. It determines the overall picture of probable profit & losses at
different levels of activity while analyzing the overall position.
The sales volume at which there is no profit, no loss is known as the breakeven point.
There is no profit or no loss. Breakeven point can be calculated with the help of the following
formula:
Breakeven point = Fixed Costs/Selling price per unit – variable costs per unit
4. Budgetary Control
Budgetary control can be defined as such technique of managerial control in which all
operations which are necessary to be performed are executed in such a manner so as to
perform and plan in advance in the form of budgets & actual results are compared with
budgetary standards.
Therefore, the budget can be defined as a quantitative statement prepared for a
definite future period of time for the purpose of obtaining a given objective. It is also a
statement which reflects the policy of that particular period. The common types of budgets
used by an organization.
Some of the types of budgets prepared by an organisation are as follows,
1. Sales budget: A statement of what an organization expects to sell in terms of quantity
as well as value
2. Production budget: A statement of what an organization plans to produce in the
budgeted period
3. Material budget: A statement of estimated quantity & cost of materials required for
production
4. Cash budget: Anticipated cash inflows & outflows for the budgeted period
5. Capital budget: Estimated spending on major long-term assets like a new factory or
major equipment
6. Research & development budget: Estimated spending for the development or
refinement of products & processes
18.2 Modern Techniques

Modern techniques of controlling are those which are of recent origin and are
comparatively new in management literature. These techniques provide a refreshingly new
thinking on the ways in which various aspects of an organisation can be controlled. These
include:
Perspectives of Management 18.3 Directive and Preventive…
(a) Return on investment

(b) Ratio analysis
(c) Responsibility accounting
(d) Management audit
(e) PERT and CPM
(f ) Management information system
18.2.1 Return on Investment

Return on Investment (RoI) is a useful technique which provides the basic yardstick
for measuring whether or not invested capital has been used effectively for generating
reasonable amount of return. RoI can be used to measure overall performance of an
organisation or of its individual departments or divisions. It can be calculated as under.
Net Income before or after tax maybe used for making comparisons. Total investment
includes both working as well as fixed capital invested in business.
According to this technique, RoI can be increased either by increasing sales volume
proportionately more than total investment or by reducing total investment without having
any reductions in sales volume. RoI provides top management an effective means of control
for measuring and comparing performance of different departments. It also permits
departmental managers to find out the problem which affects RoI in an adverse manner.
18.3 RATIO ANALYSIS
Ratio Analysis refers to analysis of financial statements through computation of

ratios. The most commonly used ratios used by organisations can be classified into
the following categories:
18.3.1. Liquidity Ratios: Liquidity ratios are calculated to determine short-term solvency of
business. Analysis of current position of liquid funds determines the ability of the business to
pay the amount due to its stakeholders.
18.3.2. Solvency Ratios: Ratios which are calculated to determine the long-term solvency of
businesss are known as solvency ratios. Thus, these ratios determine the
ability of a business to service its indebtedness.
18.3.3. Profitability Ratios: These ratios are calculated to analyse the profitability position of
a business. Such ratios involve analysis of profits in relation to sales or funds or capital
employed.
18.3.4. Turnover Ratios: Turnover ratios are calculated to determine the efficiency of
operations based on effective utilisation of resources. Higher turnover means better utilisation
of resources. The table given below gives examples of some ratios commonly used by
managers.
18.4 REPORTING
Responsibility accounting is a system of accounting in which different sections, divisions and
departments of an organisation are set up as ‘Responsibility Centres’. The head of the centre
is responsible for achieving the target set for his centre. Responsibility centres may be of the
following types:
18.4.1.Cost Centre
A cost or expense centre is a segment of an organisation in which managers are held
responsible for the cost incurred in the centre but not for the revenues. For example, in
manufacturing organisation, production department is classifieds cost centre.
18.4.2.Revenue Centre
A revenue centre is a segment of an organisation which is primarily responsible for

generating revenue. For example, marketing department of an organisation may be classified
as a revenue center.
18.4.3. Profit Centre
A profit centre is a segment of an organisation whose manager is responsible for both

revenues and costs. For example, repair and maintenance department of an organisation may
be treated as a profit centric it is allowed to bill other production departments for the services
provided to them.
18.4.4. Investment Centre
An investment centre is responsible not only for profits but also for investments made
in the centre in the form of assets. The investment made in each centre is separately
ascertained and return on investment is used as basis for judging the performance of the
centre.
18.5 MANAGEMENT AUDIT
Management audit refers to systematic appraisal of the overall performance of the

management of an organisation. The purpose is to review the efficiency and effectiveness of
management and to improve its performance in future periods. It is helpful in identifying the
deficiencies in the performance of management functions. Thus, management audit may be
defined as evaluation of the functioning, performance and effectiveness of management of an
organisation.
The main advantages of management audit are as follows.
1. It helps to locate present and potential deficiencies in the performance of management
functions.
2. It helps to improve the control system of an organisation by continuously monitoring the
performance of management.
3. It improves coordination in the functioning of various departments so that they work
together effectively towards the achievement of organisational objectives.
4. It ensures updating of existing managerial policies and strategies in the light of
environmental changes.
Conducting management audit may sometimes pose a problem as there are no
standard techniques of management audit. Also, management audit is not compulsory under
any law. Enlightened managers, however, understand its usefulness in improving overall
performance of the organisation.
Perspectives of Management 18.5 Directive and Preventive…
18.6 PERTand CPM
PERT (Programme Evaluation and Review Technique) and CPM (Critica Path
Method) are important network techniques useful in planning and controlling. These
techniques are especially useful for planning, scheduling and implementing time bound
projects involving performance of a variety of complex, diverse and interrelated activities.
These techniques deals with time scheduling and resource allocation for these activities
and aims at effective execution of projects within given time schedule and structure of costs.
The steps involved in using PERT/CPM are as follows:
1. The project is divided into a number of clearly identifiable activities which are then
arranged in a logical sequence.
2. A network diagram is prepared to show the sequence of activities, the starting point and the
termination point of the project.
3. Time estimates are prepared for each activity. PERT requires the preparation of three time
estimates – optimistic (or shortest time), pessimistic (or longest time) and most likely time. In
CPM only one time estimate is prepared. In addition, CPM also requires making cost
estimates for completion of project.
4. The longest path in the network is identified as the critical path. It represents the sequence
of those activities which are important for timely completion of the project and where no
delays can be allowed without delaying the entire project.
5. If required, the plan is modified so that execution and timely completion of project is under
control. PERT and CPM are used extensively in areas like ship-building, construction
projects, aircraft manufacture, etc.
18.7 Summary
Controlling is to measure the performance. Finding out deviations becomes easy
through measuring the actual performance. Performance levels are sometimes easy to
measure and sometimes difficult. Measurement of tangible standards is easy as it can be
expressed in units, cost, money terms, etc. Quantitative measurement becomes difficult when
performance of manager has to be measure. Comparison of actual performance with the
planned targets is very important. Deviation can be defined as the gap between actual
performance and the planned targets. The manager has to find out two things here- extent of
deviation and cause of deviation. Extent of deviation means that the manager has to find out
whether the deviation is positive or negative or whether the actual performance is in
conformity with the planned performance. The managers have to exercise control by
exception. He has to find out those deviations which are critical and important for business.
18.8 Key words

Budgetary Control-Budgetary control can be defined as such technique of managerial
control in which all operations which are necessary to be performed are executed in such a
manner
Management audit- Management audit refers to systematic appraisal of the overall
performance ofthe management of an organisation
Ratio Analysis Ratio Analysis refers to analysis of financial statements through computation
of ratios
Responsibility accounting- Responsibility accounting is a system of accounting in which
different sections, divisions and departments of an organisation are set up as ‘Responsibility
Centres’
PERT stands for program evaluation and review technique. It provides a visual
representation of a project's timeline and breaks down individual tasks
CPM- critical path method (CPM) is a technique where you identify tasks that are necessary
for project completion and determine scheduling flexibilities
18.8 Self-Assessment Questions.

1. Outline the Traditional and Modern Techniques of Controlling
2. Explain the Ratio Analysis in controlling
3. Discuss the Reporting
4. Exhibits the issues in PERT and CPM.

1. Edwin B. Flippo: Personnel Management, McGrow-Hill, New York, 1984, p.5
2. National Institute of Personnel Management: Personnel Management in India, Asia
Publishing House, Bombay, 1973, pp.29-30.
3. Dr. G. L. Dave (2001) ; Social Accounting ; Renuka Publisher ; Jodhpur.
4. P. Subba Rao (2008); Personnel & Human Resource Management; Himalaya Publishing
House; New Delhi.
5. Aswathapa.K, Human Resource Management, Himalaya Publishing House, 2007, p.695
6. Ravi M. Kishore (2008); Advanced Management Accounting; Taxmann Publication; New
Delhi.
7. A.M. Sarma (2009) ; Personnel & Human Resource Management ; Himalaya Publishing
House, New Delhi.
8. C.B. Mamoria& S.V. Gankar (2010); Personnel Management (Text & Cases); Himalayan
Publishing House, New Delhi.

LESSON-19
INFORMATION TECHNOLOGY IN CONTROLLING
Learning Objectives
To study the Information technology in controlling

To Understand the Computer in Handling Information
To learn the components and Resources of Information system
Structure
19.0 Introduction
19.1 Meaning
19.2 Production Marketing
19.3 Use of computer in Handling Information
19.4 Business Expert system
19.5 Components/resources of Information system
19.6 Summary
19.7 Key words
19.0 INTRODUCTION
Management information system is a system consisting of people, machines,
procedures, databases and data models, as its elements. The system gathers data from the
internal and external sources of an organisation.
19.1 MEANING
Management information system is an acronym of three words, viz., Management,
information, system .in order to fully understand the term MIS, let us try to understand these
three words.
Management
Management is the art of getting things done through and with the people in formally
organised groups.
Managerial function
1. Planning
2. Organising
3. Staffing
4. Directing and Controlling
Information
Information is data that is processed and is presented in a form which assists
decisionmaking.it may contain an element of surprise, reduce uncertainty or provoke a
manager to initiate an action. Data usually take the form of historical records. In contrast to
information, raw data may not be able to surprise us, may not be organised and may not add
anything to our knowledge.
DATA-------→PROCESSING-------→INFORMATION
System
The term system is the most loosely held term in management literature because of its
use in different contexts. However, a system may be defined as a set of elements which are
joined together to achieve a common objective. The elements are interrelated and
interdependent. The set of elements for a system may be understood us input, process and
output.
A system has one are multiple inputs; these inputs are processed through a
transformation process to convert these input into outputs.
The three elements of a system are INPUT------→PROCESS--------→OUTPUT
2. What are the various functions of information systems?
One of the mostly widely used bases for organising activities in almost every
organisation is the business function. Business activities are grouped around functions such
as production, marketing, finance and personnel etc... Resulting in the respective department
or an area of the business organisation. These departments or functional areas are commonly
known as the functional areas of business. There is no standard classification of such sub-
Perspectives of Management 19.3 Information Technology…
system in an organisation, but a typical set of functions in a manufacturing organisation

includes:
19.2 PRODUCTION MARKETING

1. Finance and accounting
2. Materials and Personnel systems
Production:
1. Production planning and control

2. Engineering standards
3. Quality control R & D etc
Marketing:
1. Sales order
2. Forecasting Sales analysis
3. Billing Distribution
4. Stock availability
5. Sales quota control
6. Pricing Product promotion
7. Finance and accounting:
8. Financial planning
9. Budgeting Cost accounting
10. Asset accounting
11. Accounts receivable
12. Payroll Accounts payable, etc...
Materials:
1. Material planning
2. Bill of material
3. Cost estimate
4. Warehousing planning etc...
Personnel:
1. Employee recruitment
2. Employee selection
3. Employee development
4. Employee transfers
5. Employee retirements etc...
In information system includes four major resources, hardware, software, people and
data. Let’s briefly discuss some basic concepts and examples of how these resources
contributes to the information processing activities of information system. Hardware---- it
includes all physical devices Software-----it includes all set of information processing
instructions. People -------people are required for the operation of all information systems.
These people resources include specialists and end users
Data-----data is more than the raw material of information systems. The concepts of data
resources have been broadened by managers and information system professionals.
Different types of information. Information could be classified on the basis of the purpose for
which it is utilised, into three main categories:
Strategic information-----it is required by the managers at the strategic level of management
for the formulation of organisational strategies.
Tactical information -----information in this category is used in short term planning and is
of use at management control level.
Operational information-----it applies to short periods which may vary from an hour to a
few days.
19.3 USE OF COMPUTER IN HANDLING INFORMATION

The discipline of MIS is in its evolutionary stage. MIS is a concept, which is a matter of
degree rather than an absolute one. The classifications of information system are
1. Transaction processing system
2. Management information system
3. Decision support system
4. Executive support system
5. Office automation system
6. Business expert system
19.3.1 Transaction processing system

It represents the automation of the fundamental, routine process used to support
business operations. It does not provide any information to the user for his/her decision
making. Previously Transaction processing system was known as MIS. Prior to computers,
data processing was performed manually or with simple machines.
(INPUT) DATA--------→PROCESSING--------→DATA (OUTPUT)
19.3.2 Management Information System

MIS is an information system which process data and converts it into information. A
MIS uses TPS for its data inputs. The information generated by the information system may
be used for control of operations, strategic and long range planning, short range planning,
management control and other managerial problem solving. It has some functional business
areas.
They are Marketing Production Human resources Finance Accounting etc...
TPS------→DATA------→INPUT------→PROCESSING-------→OUTPUT--------
→INFORMATION Decision support system:
19.3.3 The Decision support system
(DSS) is an information system application that assist decision making. Decision
support systems tend to be designed primarily to serve management control level and
strategic planning level managers. The data in the database typically is a combination of
master files (internal corporate data) and from external sources.
Database←-------------→model base ↘user interface ↙
19.3.4 User Executive support system

Executive support system (ESS) is an extension of the management information
system which is a special kind of DSS. An ESS is specially tailored for the use of chief
executive of an organisation to support his decision making. An ESS is designed to cater to
the information needs of a chief executive keeping in view not only his requirements but also
taking into account his personality and style of functioning etc.,
19.3.5 Office automation system

Office automation refers to the application of computer and communication
technology to office functions. Office automation systems are meant to improve the
productivity of managers at various level of management by providing secretarial assistance
and better communication facilities. Office automation systems are the combination of
hardware, software and people in information systems, that process office transactions and
support office activities at all levels of the organisation. These systems include a wide range
of support facilities, which include word processing, electronic filing, electronic mail,
message switching, data storage, data and voice communication etc...
In the first category, the following is a list of activities.

Typing Mailing
Scheduling of meetings and conferences
Calendar keeping and Retrieving documents
In the secondary category,

Conferencing Production of information
Controlling performance
19.4BUSINESS EXPERT SYSTEM
Business expert system (BES) is a knowledge based information system that uses its
knowledge about a specific, complex application area to act as an expert. This system is one
of the knowledge based information system. Expert system provides decision support to
managers in the form of advice from an expert in a specific problem area.
Expert systems find application in diverse areas, ranging from medical, engineering
and business.
Knowledge base←-------------→inference engine ↘user interface
Every legitimate solution will have some advantages is benefits and some
disadvantages or costs. These advantages and disadvantages are identified when each
alternative solution is evaluated. This process is typically called cost/benefit analysis.
Examples:
↑ in sales or profits.
↓ in operating costs.
↓ in required investment
19.4.1 Selecting the best solution
Once all alternative solutions have been evaluated the process of selections the best
solution can begin. Alternative solutions can be compared to each other because they have
been evaluated using the same criteria. It is possible that to decide to select the best solution
to the problem.
19.4.2 Implementing a solution

Once a solution has been selected it must be implemented. An implementation plan
may be developed. An implementation plan specifies the activities, resources and timing
needed for proper implementation.
19.4.3 Post implementation review

The final step of the system approach recognized that an implemented solution can
fail to solve the problem for which it was developed. The results of implementing a solution
should be monitored and evaluated. This is called a post implementation review process.
19.4.4 Global business strategies
MNC is a firm that operates across products, markets, nations and cultures. It consists of the
parent company and a group of subsidiaries.
19.4.5 Multinational strategies

It was a type of “hands off” strategy in which the parent allowed the subsidiaries to
develop their own products and practise. The information flows are primarily from the
subsidiaries to the parent in the form of financial reports. Global strategy and international
strategy is also comes under cost/benefit analysis.
19.5COMPONENTS /RESOURCES OF INFORMATION SYSTEM
An information system depends on the resources of people, hardware, software, data
and networks to perform input, processing, output, storage and control activities that convert
data resources into information.
IS consists of 5 major resources:
People resources: People are the essential ingredient for the successful operation of all
information systems.
This people resource includes: End users are also called users or clients are people
who use an information system or the information it produces. They can be customers,
salespersons, engineers etc... Most of us are IS end users.
IS SPECIALISTS are people who develop and operate information system. They
include system analysis, software developers, system operators and other managerial,
technical and clerical IS personnel.
19.6 Summary
Improve an organization's operational efficiency, add value to existing products,
engender innovation and new product development, and help managers make better
decisions. Companies are able to identify their strengths and weaknesses due to the presence
of revenue reports, employee performance records etc. Identifying these aspects can help a
company improve its business processes and operations. Giving an overall picture of the
company. Acting as a communication and planning tool. The availability of customer data
and feedback can help the company to align its business processes according to the needs of
its customers. The effective management of customer data can help the company to perform
direct marketing and promotion activities.
19.7 Key words
Data-----data is more than the raw material of information systems
Information - Information is data that is processed and is presented in a form which assists
decisionmaking
Executive support system (ESS) is an extension of the management information system

which is a special kind of DSS
MIS- MIS is an information system which process data and converts it into information
System- A system may be defined as a set of elements which are joined together to achieve a
common objective
1. Outline how to use of Computer in Handling the information?
2. Briefly explain the Components and resources of Information system
3. Discuss the Production Marketing process in information system?

1 C.B. Mamoria& S.V. Gankar,Personnel Management (Text & Cases);
2.Andrew J.Dubrin, Essentials of Management, South Western college Publication, 2011.
Publication, 2012.
CHAPTER-20
PRODUCTIVITY IMPROVEMENT
Learning Objectives
To study the Importance of Productivity
To Understand the techniques used in Measurement of Productivity
To Study the Productivity Improvement indices
Structure
20.0 Introduction
20.1 Importance of Higher Productivity
20.2 Techniques for Measurement of Productivity
20.3 Productivity Improvement Indices
20.4 Summary
20.5 Key words
20.6 Self-Assessment questions
20.0 INTRODUCTION
Productivity is the ratio between output and input. It is quantitative relationship
between what we produce and what we have spent to produce. Productivity is nothing but
reduction in wastage of resources like men, material, machine, time, space, capital etc. It can
be expressed as human efforts to produce more and more with less and less inputs of
resources so that there will be maximum distribution of benefits among maximum number of
people. Productivity denotes relationship between output and one or all associated inputs.
European Productivity Council states that „Productivity is an attitude of mind. It is a
mentality of progress of the constant improvement of that which exists. It is certainty of being
able to do better than yesterday and continuously. It is constant adoption of economic and
social life to changing conditions. It is continual effort to apply new techniques and methods.
It is faith in human progress‟.
In the words of Peter Drucker productivity means a balance between all factors of
production that will give the maximum output with the smallest effort. On the other hand,
according to International Labour Organisation productivity is the ratio between the volume
of output as measured by production indicates and the corresponding volume of labour input'
as measured by production indices and the corresponding volume of labour input as measured
by employment indices. This definition applies to an enterprise, industry or an economy as a
whole. The productivity of a certain set of resources (input) is therefore the amount of goods
or services (output) which is produced by them. Land and building materials, machines,
manpower (labour), technology etc. are the resources at the disposal of manufacturing
company. Therefore higher (improved) productivity means that more is produced with the
same expenditure of resource i.e. at the same cost in terms of land, materials, machine, time
or labour, alternatively, it means same amount is produced at less cost in terms of land,
materials, machine time or labour that is utilized.
In countries where capital and skill are short, while unskilled labour is plentiful and
poorly paid, it is especially important that higher productivity(improved) should be looked
for by increasing the output per machine or piece of plant or per skilled worker. Improving
productivity means increasing or raising productivity with the help of using same amount of
materials, machine time, land, labour or technology. The following examples of each type of
productivity may make improved or higher productivity meaning clearer.
1. Improved productivity of land

If by using better seed, better methods of cultivation and more fertilizer, the yield of
corn from a particular hectare of land can be increased from 4 quintals to 6quintals, the
productivity of that land, in the agricultural sense is increased (improved)by 50 percent. The
productivity of land used for industrial purposes is said to have been increased if the output of
goods or services within that area of land is increased by whatever means.
2. Improved productivity of materials
A skilled tailor is able to cut 12 suits from a bale of cloth where an unskilled labour is
able to cut only 10 suits from a bale of cloth, then the productivity of the bale used by skilled
worker is 16.6 percent greater than unskilled labour.
3. Improved productivity of machines:
A machine tool is producing 90 pieces per working day (i.e. 8 hours).Considering that
through the use of improved cutting tools, the output is increased to120 pieces, then the
productivity of that machine will be increased by 33.33 percent.
4. Improved productivity of Men (Labour):
The worker is producing 32 plates per hour. Considering that with the improved
methods of work, he will be able to produce 42 plates per hour, then productivity of worker
will be improved by 31.25 percent. Thus it can be said that more output results into higher
productivity or improvement from same amount of resources which means lower money
costs and higher net money returns per unit of output.
Another productivity concept known as Japanese Holistic View of Productivity
explains productivity as a comprehensive holistic phenomenon encompassing all elements
required to improve products/ services (output). Productivity in the future must be concern
itself with seeking affluence of a kind which will provide people with material wealth as well
as spiritual satisfaction. Also the outputs particularly in the form of physical pollution must
be controlled in the context of increasing concern of society for clean environment and
sustainable development. To improve productivity products must be designed to satisfy
customer need with optimum consumption of resources without generation of waste in the
manufacturing process.
20.1 IMPORTANCE OF HIGHER PRODUCTIVITY
Conceptual framework of productivity and productivity improvement. This discussion

shows that Productivity improvement can be achieved in a number of ways. If the level of
output is increased faster than that of input, productivity will increase. Conversely,
productivity will be increased if the level of input is decreased faster than that of output.
Also, an organization may realize productivity increase from producing more output with the
same level of input.
Perspectives of Management 20.3 Productivity Improvement
Finally, producing more output with a reduced level of input will result in increased
productivity.
Any of these scenarios may be realized through improved methods, investment in
machinery and technology, improved quality, and improvement techniques and philosophies
such as just-in-time, total quality management, lean production, supply chain management
principles, and theory of constraints.
A firm or department may undertake a number of key steps toward improving productivity.
William J. Stevenson lists these steps to productivity improvement:
1. Develop productivity measures for all operations; measurement is the first step in
managing and controlling an organization.
2. Look at the system as a whole in deciding which operations are most critical; it is
over-all productivity that is important.
3. Develop methods for achieving productivity improvement, such as soliciting ideas
from workers (perhaps organizing teams of workers, engineers, and managers),
studying how other firms have increased productivity, and re-examining the way work
is done.
4. Establish reasonable goals for improvement.
5. Make it clear that management supports and encourages productivity improvement.
Consider incentives to reward workers for contributions.
6. Measure improvements and publicize them. Don't confuse productivity with
efficiency. Efficiency is a narrower concept that pertains to getting the most out of a
given set of resources; productivity is a broader concept that pertains to use of overall
resources. For example, an efficiency perspective on mowing the lawn given a hand
mower would focus
7. on the best way to use the hand mower; a productivity perspective would include the
possibility of using a power mower.
Therefore it is essential to know the importance of higher / improved productivity in
manufacturing company/ organization. Thus importance of productivity can be summarized
as follows:
20.1.1Productivity is a key to prosperity
Rise in productivity results in higher production which has direct impact on standard
of living. It reduces cost per unit and enables reduction in sale price. It increases wages for
workers and increased profit for organisation. Higher demand creates more employment
opportunities.
20.1.2Higher productivity leads to economic growth and social progress
Higher productivity helps to reduce cost per piece which make product available at
cheaper rate. Thus it is beneficial for consumers. Low price increases demand of the product
which in turn increases profit of the organisation. Higher profit enables organisation to offer
higher dividend for shareholders. It increases export and increases foreign exchange reserves
of a country.
20.1.3Higher productivity requires elimination of waste in all forms
It is necessary to eliminate wastage in raw material, wastage of time in case of men
and machinery, wastage of space etc. to improve productivity. Several techniques like work
study, statistical quality control, inventory control, operation research, value analysis etc. Are
used to minimise wastage of resources.
20.1.4Improvement in productivity is important for country like ours because it can
minimise level of poverty and unemployment.
20.2 Techniques for Measurement of Productivity
Productivity has been defined as the ratio of output to input. An increase in
productivity means an increase in output that is proportionally greater than increase
ininput.Productivity may be measured either on an aggregate basis or individual basis. On

aggregate basis, output is compared with all inputs taken (added) together. This is called as
total productivity. On individual basis, output is compared with any one of the input factor
and this is called as partial productivity or factor productivity.
This index measures the productivity of the entire organisation with use of all resources. It is
a way of evaluating efficiency of entire plant or firm. It has been said that the challenge of
productivity has become a challenge of measurement. Productivity is difficult to measure and
can only be measured indirectly, that is, by measuring other variables and then calculating
productivity from them. This difficulty in measurement stems from the fact that inputs and
outputs are not only difficult to define but are also difficult to quantify.
Any productivity measurement system should produce some sort of overall index of
productivity. A smart measurement program combines productivity measurements into an
overall rating of performance. This type of system should be flexible in order to
accommodate changes in goals and policies over time. It should also have the ability to
aggregate the measurement systems of different units into a single system and be able to
compare productivity across different units.
The ways in which input and output are measured can provide different productivity
measures. Disadvantages of productivity measures have been the distortion of theme asure by
fixed expenses and also the inability of productivity measures to consider quality changes
(e.g., output per hour might increase, but it may cause the defect rate to rise). It is easier to
conceive of outputs as tangible units such as number of items produced, but other factors
such as quality should be considered.
Experts have cited a need for a measurement program that gives an equal weight
toquality as well as productivity. If quality is included in the ratio, output may have to be
defined as something like the number of defect-free units of production or the number of
units which meet customer expectations or requirements. Therefore, it is very much essential
to understand different techniques of measuring the productivity and its improvement.
20.3 PRODUCTIVITY IMPROVEMENT INDICES

Factor productivity or partial productivity indices are of following types:
20.3.1 Labour productivity

The important function in any production set-up is that the budgeted quantity of work
must be achieved over a period of time. Labour productivity depends upon how labours are
utilised. Labour productivity can be higher or lower depending on factors like availability of
work load, material, working tools, availability of power, work efficiency, level of
motivation, level of training, level of working condition (comfortable or poor) etc. Labour
productivity can be measured in terms of hours or money.
20.3.2 Material productivity

Production system converts raw material into finished product with the help of
mechanical or chemical processes. Material productivity plays important role in cost of
production. Material productivity depends upon how material is effectively utilised in its
conversion into finished product. Material productivity depends upon percentage of rejection,
creation of scrap, level of spoilage, obsolescence, work wastage etc.
20.3.3 Machine Productivity

Production system converts raw material into finished product through mechanical or
chemical process with the help of machines and equipment’s. Machine productivity depends
upon availability of raw material, power, skill of workers, machine layout etc.
20.3.4 Capital productivity

For any production set-up, facilities of machines, tools, land etc. are required which
are assets of organisation. Capital is needed for such assets. As huge capital is locked in
assets, their effective utilization is absolutely necessary. Capital productivity depends on how
effectively assets are utilised.
Therefore decision is necessary to take about replacement of fixed assets. Early
replacement of fixed assets brings down maintenance cost but requires capital expenses. On
the other hand, late replacement of fixed assets improves ratio of production to capital
expenditure, but it increases maintenance cost. Therefore proper balance is necessary.
Organisation spent large amount (direct expenditure)for assets like direct material, direct
wages, land, building, equipment etc. But a production system incurs a lot of direct
expenditure like salaries of manpower employed in planning, store keeping, record keeping,
inspection etc. Indirect labour is also used for material movement, good housekeeping,
cleaning etc. Indirect expenditure is incurred on indirect material like tools, oils, lubricant etc.
20.4Summary
Production system converts raw material into finished product with the help of
mechanical or chemical processes. Material productivity plays important role in cost of
production. Material productivity depends upon how material is effectively utilised in its
conversion into finished product. Material productivity depends upon percentage of rejection,
creation of scrap, level of spoilage, obsolescence, work wastage etc.
20.5 Key words

Productivity-Productivity is the ratio between output and input
Labour productivity- Labour productivity depends upon how labours are utilised, It depends
on the availability of work load, material, working tools, availability of power, work
efficiency, level of motivation, level of training, level of working condition
Machine Productivity- Production system converts raw material into finished product
through mechanical or chemical process with the help of machines and equipment’s
Material productivity- Production system converts raw material into finished product with
the help of mechanical or chemical processes

1. Briefly Explain the Importance of Controlling
2. Discuss the Techniques for measurement of Productivity
3. Examine the Productivity improvement in India
4.
1. Hemendra Verma: Seminar Presented on HRIS at Indian Institute of Management,
Ahmedabad,30th June, 19994.
3. Andrew J.Dubrin, Essentials of Management, South Western college Publication, 2011.
Publication, 2012.

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PERSPECTIVES OF MANAGEMENT

1st Semester Paper-I

Dr.B. Nagaraju Dr. V. Tulasi Das

Dr. M. Rama Satyanarayana Dr. K. Madhu Babu

Dr. V. Naga Nirmala

Phone No.0863-2346208, 0863-2346222, Cell No.9848477441

First Edition: 2021

(C) Acharya Nagarjuna University

Sainath Printers, Vijayawada

To facilitate easier understanding by students studying through the

Prof. P. Raja Sekhar

UNIT I: INTRODUCTION TO MANAGEMENT

UNIT II: PLANNING

UNIT III: ORGANISING

UNIT IV: DIRECTING

Unit - I INTRODUCTION Page No

1.3 Functions of Management

1.4 Importance of Management

1.1 Introduction and definition of management

Management is a universal phenomenon. It is a very popular and widely used term.

3. Since management satisfies both these problems, therefore it qualifies to be a

1.2 Features of management

Management is an activity concerned with guiding human and physical resources

Following are the common functions of management:

According to Koontz &O‘Donnell, ―Planning is deciding in advance what to do,

iv) Securing co-operation:

v) Follow up/Appraisal of plans:

Therefore, organizational function helps in achievement of results which in fact is important

A manager performs organizing function with the help of following steps:-

3. Classifying the authority - Authorities bringing smoothness in a concern‘s working.

Co-ordination tries to achieve harmony between individual‘s efforts towards achievement of

and at each and every stage and therefore it cannot be separated.

Controlling is a four-step process of establishing performance standards based on the firm's

1.4 Importance of management

1. It helps in achieving group goals – Management converts disorganized resources of

fulfilment of this, it establishes effective authority and responsibility relationship i.e.

Management :The responsibility for and control of a company or organization.

1.7 Self assessment questions

1.8 Further readings

• Over view Administration and management.

2.1 Definition administration and management

According to The o Haimann, Administration means overall determination of policies, setting

Difference between administration and management

Basis Pointof Management Administration

Process Management decides whoAdministration decides what is to

Level Middle &lower levelTop level function

Practically, there is no difference between management and administration. Every manager is

Skills required by a manager

because of the highly interpersonal nature of managerial work.

• Leadership — ability to influence others to perform tasks

2.3 Functions of a manager

Following are the main functions of manager:

2.4 Roles performed by managers

• Interpersonal: This role involves human interaction.

Category Role Activity

Negotiator Represent department during negotiations

Administration means overall determination of policies, setting of major

Administration means setting of major objectives, and broad programmes and

Administration :The process or activity of running a business, organization, etc.