KARNATAKA STATE OPEN UNIVERSITY

MUKTHAGANGOTHRI, MYSURU- 570 006.

DEPARTMENT OF STUDIES AND RESEARCH IN MANAGEMENT

M.B.A I SEMESTER
COURSE - MBHC - 1.1

MANAGEMENT AND ORGANIZATIONAL BEHAVIOUR

BLOCK : 1
MANAGEMENT CONCEPTS

UNIT - 1
PROCESS OF MANAGEMENT 1-12
UNIT - 2
TRENDS IN MANAGEMENT 13-26
UNIT - 3
LEVELS OF MANAGEMENTS 27-40

UNIT - 4
LEADERSHIP 41-55

BLOCK : 2
FUNCTIONS OF MANAGEMENT
UNIT - 5
PLANNING 56-89
UNIT - 6
PRINCIPES OF ORGANISATION 90-119
UNIT - 7
DIRECTING AND STAFFING 120-131

UNIT - 8
CONTOLLING 132-149
BLOCK : 3
ORGANIZATIONAL BEHAVIOR

UNIT - 9
ORGANIZATIONAL BEHAVIOR- INTRODUCTION 150-167
UNIT - 10
INDIVIDUAL BEHAVIOR 168-177
UNIT - 11
PERSONALITY 178-205

UNIT - 12
GROUP BEHAVIOR 206-240

BLOCK : 4
UNIT - 13
INTRODUCTION TO ORGANIZATIONAL CHANGE 241-263
UNIT - 14
ORGANIZATIONAL DEVELOPMENT 264-273
UNIT - 15
ORGANIZATIONAL CULTURE 274-285

UNIT - 16
ORGANIZATIONAL CONFLICT 286-305
 MANAGEMENT AND ORGANIZATIONAL BEHAVIOUR
The theory of management has grown over the past one- hundred years evolving from the time
and motion studies of engineers to contribution from social scientific, the hawthorn studies and a behavioral
approach to more quantitative approached that looks for the optimally functioning of an organization.
The development of principles and concepts of management encouraged the formalization of school of
business during the twentieth century. Today we see management process plays the key role in the
success of any organizations, hence a budding manager must have strong theoretical knowledge to
succeed in the process of management.
In each of the four blocks as described, every unit has been scheduled in a manner so to enable
the student to understand the contents easily. Each unit begins with the learning objectives, so that learner
known as to what he/she required to learn from the unit. Each unit concluded with summary followed by
key words ans self assessment questions help in framing a self-feed back on ascertaining the extent of
learning. The study material is designed to provide accessible introduction to the Management and
Organization behaviour. The present material is designed to provide accessible introduction to the
Management & Organization behaviour.
BLOCK -1 : First Block comprises of for unit (1 to 4) first unit deals with process of
management and evaluation of management second unit deals with trend in
management, various principles contributed by management guru third unit
comprises of levels of management and skill of managers, last unit deals with
planning, approaches to planning, steps in planning.
BLOCK -2 : Second Blockconsists four units ( 5 to 8) Unit 5 deals with organizing, dimensions
of organization, delegation and departmentation. Unit 6 deals with staffing &
directing, Unit 7 deals with Leadership and motivational theories and lastly
Unit 8 consists of controlling and controlling techniques.
BLOCK-3 : Third block comprises of four units (09-12) ninth unit deals with organizational
behavior nature and scope, factor affecting organisation behavior. Unit 10 deals
with the concept individual behavior. Unit 11 consists of Personality, dimensions
of personality, theories of personality and concept of learning. Lastly Unit 12
deals with various aspects of Group behaviour.
BLOCK-4 : This block consists of four units (unit 13 to 16) Unit 13 deals with Introduction
to or change, causes and resistance to change, unit 14 consists of organisational
development and Interventional and techniques Unit 15 consists of organisation
culture and lastly Unit 16 deals with various aspects of organisation conflict.
 CREDIT PAGE
Programme Name : MBA Year/Semester : 1st Year, 1st Semester Block No: 1 to 4

Course Name: Management & Organisational Behaviour Credit : 04 Units No: 1 to 16

Course Design Expert Committee

Prof. Vidya Shankar Chairman Prof. Kamble Ashok Member
Vice-Chancellor Dean (Academic)
Karnataka State Open University Karnataka State Open University
Mukthagangothri, Mysore-06 Mukthagangothri, Mysore-06
Course Designer/Course Co-ordinator
Prof. C. Mahadevamurthy BOS Chairman Prof. C. Mahadevamurthy Department
Professor, & Professor, Chairman
DOS & R in Management Member DOS & R in Management &
KSOU, Mukthagangothri, KSOU, Mukthagangothri, Member
Mysore-06 Mysore-06 Convener
Course Writer Course Editor
Prof. Mustiary Begum Block 1 Sri. Siraj Basha R
Professor, Units 1-3 Asst. Professor
Department of Management, Department of Management
Mangalagangothri, Mangalore. KSOU, Mukthagangothri,
Dr. Shivana Gowda, Mysore 06
Block 1
Associate Professor, Unit 4
Department of Management,
VTU Regional Center,
Gulbarga.

Prof. Rajashekar Block 2 Sri. Siraj Basha R

Professor, Unit 5 Asst. Professor
Department of Commerce, Department of Management
University of Mysore, KSOU, Mukthagangothri,
Mysore. Mysore 06
Dr. Shivana Gowda, Block 2
Associate Professor, Units 6-7
Department of Management,
VTU Regional Center,
Gulbarga.
Course Writer Course Editor
Dr. M.S. Yathish Chandra Block 2 Sri. Siraj Basha R
Associate Professor, Unit 8 Asst. Professor
Department of Management, Department of Management
UPDT Engineering College, KSOU, Mukthagangothri,
Davanagere Mysore 06
Dr. M.S. Yathish Chandra
Block 3 Sri. Siraj Basha R
Associate Professor,
Unit 9 Asst. Professor
Department of Management,
Department of Management
UPDT Engineering College,
KSOU, Mukthagangothri,
Davanagere
Mysore 06

Prof. Anand Block 3 Sri. Siraj Basha R

Professor, Units 10-11 Asst. Professor
BIMS, University of Mysore, Department of Management
Mysore. KSOU, Mukthagangothri,
Mysore 06
Prof. B.H. Suresh Block 3 Sri. Siraj Basha R
Professor, Units 12 Asst. Professor
Dean Department of Commerce Department of Management
& Management KSOU, Mukthagangothri,
University of Mysore, Mysore 06
Mysore.

Block 4 Prof. C. Mahadevamurthy

Sri. Siraj Basha R.,
Units 13-14 Professor
Assistant Professor,
Department of Management
Department of Management,
KSOU, Mukthagangothri,
KSOU, Mukthagangothri,
Mysore 06
Mysore.
Smt. Rajeshwari S.P. Block 4 Sri. Siraj Basha R
Assistant Professor, Units 15-16 Asst. Professor
Department of Management, Department of Management
Mahajana’s PG Center, KSOU, Mukthagangothri,
Mysore. Mysore 06
Copy Right
Registrar
Karanataka State Open University
Mukthagangothri, Mysuru. - 570006

Developed by the Department of Studies and Research in Management, KSOU, Mysuru

under the guidance of Dean (Academic), KSOU, Mysuru
Karanataka State Open University, 2021
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without permission in writing from the Karnataka State Open University.
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 MODULE I : MANAGEMENT CONCEPTS

UNIT-1 : PROCESS OF MANAGEMENT

Structure
1.0 Objectives
1.1 Introduction
1.2 Definition
1.3 Process of Management
1.4 Evolution of Management
1.5 Management theories
1.6 Summary
1.7 Self assessment Questions
1.8 Reference
1.9 Case Study

1
1 .0 OBJECTIVES
After studying this unit you will be in a position;
• To define management.
• Explain the Process of Management.
• Define work agenda
• Mention the different theories of management.
1.1 INTRODUCTION

Management in s imple terms, can be def ined as the attainment of

organisational goals in an effective and efficient manner through: Planning,
Organizing, Leading , Controlling and Staffing. Management makes human efforts
more productive and brings better technology, products and services to the society.
Management is a function of getting things done through and with people in formally
organised groups. And directing the efforts of individuals towards a common
objective. Managers guide and coordinate the efforts of other towards certain
specified goals. The skills which are required to get things done through people
consist of conceptual skills, technical skills, and administrative skills, and social
skills. Without proper management the resources of production ie., men machine
and materials cannot be converted into production. Thus management is a vital
function concerned with all aspects of the working of an organisation. It is the art
of creating the environment in which people can perform as individuals and yet
cooperate towards attainment of groups goals and removing hindrances to high
performance, a way of optimizing efficiency to reach goals.
Management is a vital aspect of the economic life of man, which is an
organized group activity. It is a activity consisting of a distinct process which is
primarily concerned with the important task of goal achievement.
1.2 DEFINITIONS

Definition: Management Process is the set of ongoing decisions and work

activities in which managers engage as they plan, organize, lead and control. A
manager manages the work activities and are usually done in a continuous manner
hence it is referred to as a process.
The process of management involves the determination of objective and
putting them into action. Management as a process is considered as a continuing

2
activity made up of basic management functions. The process is on going. It assumes
a cyclical character: Planning, Organising, Direction and controlling. A manager
performs various functions. When management is reviewed as a process, planning
is the first function performed by the manager. The work of manager begins by
setting the objectives. Next is organising i.e., Bringing together personnel, capital
machinery , materials to execute the plans. Staffing involves filling positions
needed in the organisation which includes manpower planning , training, motivation
and performance appraisal. Managing workers through proper leadership effective
communication is important part of the process of directing and finally measuring
actual results with standard performance to find out for deviations and taking
corrective actions as and when necessary.
A process is a sequence of activities that is intended to achieve some result.
It is a unique combination of elements, conditions or causes that collectively
produces a given outcome or set of results. There are various ways of looking at
the management Process. Some of which are:
1. The traditional view point of management focuses on what the managers
do. It is generally accepted that they perform four functions ie., Planning ,organising,
Leading and Controlling. Planning involves defining organizational goals and
proposing ways to reach them. Organising is the process of creating a structure of
relationships within the organisation that enables employees to interact with one
another, to interact with mangers and to carry out management’s plans and meet its
goals. Leading involves communicating with and motivating others to perform the
tasks necessary to achieve the organisation’s goals. And lastly controlling is the
process by which a person consciously monitors performance and takes corrective
action. In controlling mangers set standards of performance, measure current
performance against those standards, and take action to correct any deviation and
adjust the standards if necessary.
2. Behavioural view point of management focuses on the role which mangers
play while performing the four basic managerial functions. In the figurehead role,
the manger represents the organisation at ceremonial and symbolic functions. The
leader role of the manager involves responsibility for directing and co-ordinating
the activities of employees in order to accomplish organisational goals. As a liaison
role manager deals with people outside the organization. Such people include clients,
government officials, customers and suppliers. He seeks support from people who
can affect the organization’s success, such as the Chamber of Commerce.

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 3. Systems and Contingency viewpoint of Management recognises that an
organisation is an association of interrelated and interdependent parts or sub-
systems. The organisation has to interact with various external ‘systems’ such as
supplier, customers , shareholders, and government agencies. A manager with a
systems view of management will only make decision after identifying and analyzing
how other mangers , department, or customers might be affected by the decisions.
The underlying principle of Contingency viewpoint of management is that different
situations require different practices. It recommends using the other three
management viewpoints, namely the traditional, Behavioural and systems viewpoints,
independently or in combination , as necessary and appropriate to deal with various
situations. Managers are required to determine which of these three approaches is
likely to be more effective than others in a given situation.
Management is what mangers do. Management is the process of coordinating
work activities so that they are completed efficiently and effectively with and through
other people. The process represents the ongoing functions or primary activities
engaged in by managers. Efficiency refers to getting the most output from the
least amount of inputs. Effectiveness is often described as “doing the right things”.
Management is the process of planning, organising , staffing, directing and
controlling the efforts of organisation members in utilizing all resources to achieve
organizational goals, objectives and mission. Management is a process as it
operates the activities systematically.
1.3 PROCESS OF MANAGEMENT

Knowledge base and key

management skills

Management
Functions:
Work Work Methods Performance
Planning
Agenda
and Roles (goal achievement)
Organising

Leading

Controlling

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 THE MANAGEMENT PROCESS

Planning
Organising
Company mission is the
basis for planning .Planning Organising is the process of linking
is deciding in advance what and arranging activities in a
should be done. Managers sequence . It includes allocating
think logically to achieve work, authority and resources
goals.

Staffing

Staffing is acquiring, developing , utilizing

and compensating human resources
necessarily to achieve organisational
goals. Human resources help the process
of converting inputs into output and
achieving customer satisfaction.

Directing

Directing involves leading,

influencing and motivating
the people to perform
organizational tasks and to Controlling
convert input into output. It
Controlling is to make sure that
includes:
the organization is moving
 Motivation towards its mission and objectives
 Leadership
 Communication

5
 Evolution of Management - School of thoughts
1.4 EVOLUTION OF MANAGEMENT THOUGHT FROM EARLY
POINEERS TO MODERN MANAGEMENT THINKERS

Management Theories

Historical General Quantitative Organizational

Scientific

Background Administrative Approach Behavior

Management

Early examples of
management
Early
Advocates

Adam Smith

Hawthorne

Studies
Industrial

Evolution

1.5 MANAGEMENT THEORIES

Principles of management are evolved and different approaches to

management are designed. The first among the management theories is scientific
management.

6
1. SCIENTIFIC MANAGEMENT:
The practice of management has existed since the earliest time. Western
civilization has been dramatically affected by the Catholic and Protestant churches,
which have developed worldwide organizational structures using managerial
concepts.
Management practice in business, government, and the church remained quite
stable through the centuries until the mid-18th century with the birth of the Industrial
Revolution in England. With the Industrial Revolution, began the early scientific
inquiries into the practice of management. The forerunners of Scientific
Management theory are Robert Owen, Charles Babbage and F.W Taylor.
Robert Owen: was the first person to pay attention to labor welfare. He
suggested a change in the attitude of industrialists towards workers. He worked up
to his maximum possible extent for the amelioration of working conditions of
workers and thereby tried to win over their confidence. He stated that men should
not be treated as secondary and inferior to machines.
Charles Babbage: sometimes referred to as the patron saint of operations
research invented a predecessor to the modern day computers, an invention he called
the “difference machine” that actually performed mathematical calculations and
computed statistical probabilities. Two pioneering works of Babbage are ‘The
Differential Engine and On Economy of Machinery and Manufacturer’. He stated
that the methods of science and mathematics could be applied to the solution of the
factory’s problems.
Frederick Winslow Taylor: known popularly as the father of scientific
management and a classicist in management theory, was the first person whom
insisted on the introduction of scientific methods in management. He made for the
first time a systematic study of management and evolved an orderly set of principles
to replace the trial and error methods then in vogue. He observed that workers were
not enthusiastic and were doing as little as possible, just adequate to maintain their
job. Taylor’s contribution is based on his observation of the working conditions
and the behavior of the workers/ employees in the organization.
PRINCIPLES OF SCIENTIFICE MANAGEMENT
The contributions to scientific management evolved into principles. These
principles are called principles of scientific management. They include:

7
 • Time and Motion Study
• Science, but not rule of the thumb
• Differential payment
• Group harmony
• Co-operation between workers and management
• Methods study
• Scientific selection and training
• Standardization
• Separation of planning from execution

2. GENERAL ADMINISTRATIVE THEORISTS

Another group of writers looked at the subject of management but focused
on the entire organization. They are referred to as the general administrative
theorists. They developed more general theories of what managers do and what
constituted good management practice. The important contributions given by Henry
Fayol and Max Weber are:
Henry Fayol : Fayol’s attention was directed at the activities of all managers.
He described the practice of management as something distinct from accounting,
finance, production, distribution and typical functions. He argued that management
was an activity common to all human endeavors in business and government. He
then proceeded to state 14 principles of management. Division of work, Authority,
Discipline, Unity of Command, Unity of Direction, Subordination of individual
interest to the general interest, Remuneration, Centralization, Scalar Chain,
Order, Equity, Stability of tenure of personnel, Initiative, Esprit de corps.
Max Weber: Max Weber developed a theory of bureaucratic management,
which emphasizes on a strictly defined hierarchy governed by clearly defined
regulations and lines of authority. For Weber the ideal organization was a
bureaucracy. Weber sought to improve the performance of socially significant
organizations by making their operations productive. Weber recognized that ideal
bureaucracy did not exist in reality. Instead he intended it as the basis for theorizing
about work and how work could be done in large groups. His theory became the
model structural design for many of today’s large organizations.

8
3. QUANTITATIVE APPROACH TO MANAGEMENT
The quantitative approach involves the use of quantitative techniques to
improve decision-making. This approach has also been labeled as Operations
Research or Management Science. This approach to management involves
applications of statistics, optimization model, information model and computer
simulation to management activities. The quantitative approach has contributed
directly to management decision-making in the areas of planning ad control.
4. BEHAVIOURAL APPROACH / HUMAN RELATIONS APPROACH
The human element was recognized even in the scientific management school.
The human relations approach is the outcome of reactions of classical theorists
like Mary Parker and Chester I Bernard. Elton Mayo and his associates pointed out
that the techniques of scientific management are not adequate and they do not
contribute to individual and organizational goals. The essence of human relations
approach is that workers should be treated as human beings but not as mere factors
of production. Workers needs, feeling, attitudes, values and desires are extremely
important. The theme of human relations approach is that organizational situation
should be viewed in social terms as well as in economic and technical terms and the
social process of group behavior can be understood in terms of the clinical method
analogous. An intensive and systematic analysis of human factor was made in the
form of Hawthorne Experiments. The series of experiments conducted under the
Hawthorne study include the following:
• Illumination Experiment
• Relay Assembly Test Group
• Interviewing Program
• Bank Wiring Observation Room Experiment
The human relations approach pertains to motivating people in organizations
in order to develop teamwork, which effectively fulfils their needs and leads to
achieving organizations goals. Thus human relations strive to created a positive
and conducive work environment, focuses on people, has the ultimate goal of
increase in productivity, and seeks to build human cooperation towards achievement
of organizational goals.

9
5. SYSTMES APPROACH TO MANAGEMENT
Systems approach to management views the organization as a unified,
purposeful system composed of inter-related parts. Hence, managers have to deal
with the organization as a whole rather than dealing separately with various segments
of the organization. This approach also gives the managers to see the organization
as a whole and as a part of the larger external environment. The essence of the
systems approach is that each manager cannot function in isolation within his
organizational boundary of authority and responsibility of the traditional
organizational chart. Key concepts of systems approach are:
• Sub-system
• Synergy
• Open system
• Closed system
• System boundary
• Flows
• Feedback

6. CONTINGENCY APPROACH TO MANAGEMENT

This approach is also called situational approach. Managers, consultants and
researchers who tried to apply the concepts of the major schools to real life
situation developed this approach. They sought to know the causes for the success
of methods in one situation and failure in another situation. This approach
emphasizes that managers have to identify the techniques, which will best contribute
to the attainment of the management’s goals in a particular situation, under particular
circumstance and at a particular time. Classical theorists suggest work implication
for increase in productivity whereas Behavioral Scientists suggest job enrichment,
but the manager under contingency approach should find out which method will
work better in that particular situation. This approach is builds upon systems
approach. The composition of a particular situation or system will help to know the
techniques best suited to that particular situation or system.
7. HUMAN RESOURCE MANAGEMENT APPROACH
Human resource is a principle and a sub-system and resource of an
organization. Both the human resource system and the entire organization operate

10
under the same environmental factors. Human resource management approach is
developmental. It is concerned with the growth and development of people towards
higher levels of competency, creativity and fulfillment. The human resource
management approach is supportive. It helps employees to develop through training
and development and other techniques of human development, it also develops more
responsible and committed persons through the creation of conducive organizational
climate, strong culture, attractive rewards system, free and challenging work
environment, team spirit and the like. This approach assumes that increased
capabilities and expanded opportunities for people will lead directly to the
improvement of the organizational effectiveness and efficiency, employee job
satisfaction will be a direct result when employees make use of their resources to
the fullest extent. Thus, the human resource management approach reveals that
sound management of human resource through proper training and development,
proper salary administration, creating conducive work environment, providing
challenging job and maintaining sound industrial relations result in the employee
contribution for achievement of organizational goals.

1.6 SUMMARY

Thus the basic role of managing is to achieve certain objectives and goals. A
precise and complete statement in this regard would make the objectives clear and
understood by all concerned who have to direct their activities towards its
attainment. In order to accomplish satisfactorily anything of importance, it is
necessary to plan in advance of doing. What should be done, how it should be done,
who will be responsible for doing it, where action is to be taken an why it is to be
done. Management process becomes a cycle and indicates the unending nature of
managers’ job.

1.7 SELF ASSESSMENT QUESTIONS

1. What is process of management?

2. Describe the process of management and explain how it can be used to
accomplish result in any organisation?
3. What are the principles of management?
4. Briefly explain a few management schools of thought.
5. State the Principles of Scientific Management.

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1.8 REFERENCES

1. Davar. The Management process. Mumbai: Progressive Corporation Pvt. Ltd, 2010.

2. Harold Koontz. Heinze Weihrich. Essentials of management, New York: MacGraw-

Hill,1993
3. J S. Chandan. Management Concepts and Strategies, New Delhi: Vikas Publishing
House PvtLimited,1997.
4. Chauhry Omvir, Prakash Singh. Principles of Management, New Delhi: New Age
International Publishers, 2012.

5. Peter. Drucker. Management of 21st Century, New York: HarperBusiness,2001.

6. Prasad L.M. Principles of Management, New Delhi: Sultan Chand & Sons, 2015.
7. Stoner J.A. and Freeman R.E. Management, New Delhi: Pearson Education
India,1995.
8. Richard L. Daft.Management, Massachusetts, United States: Cengage Learning, 2013.

9. S.K. Mandal. Management: Principles and Practice, Mumbai: Jaico Publishing

House, 2011.
1.9 CASE STUDY

Rohith is an engineer in a large design engineering office. Rohith hails from

a rural background , and his family had a low income and stern rules. In order to
earn his college degree, he had to work, and he paid most of his own expenses.
Rohith is an intelligent and capable engineer. His main fault is that he does not want
to take risks. He hesitates to take decisions himself, often bringing petty and routine
problems to his supervisor or to other engineer colleagues of his for a decision.
Whenever he does a design job he brings it in rough draft to his chief engineer for
approval before he finalizes it. Since Rohith is a capable person, his chief engineer
wants to motivate him to be independent in his work. The chief engineer believes
that this approach will improve Rohith’ s performance, relieve the chief engineer
from extra routine and give Rohith more self confident. However the chief engineer
is not sure how to go about motivating Rohith to improve his performance.

Poser: In the role of chief engineer, explain how you would motivate Rohith. .
***************

12
 UNIT -2 : TRENDS IN MANAGEMENT
Structure
2.0 Objectives
2.1 Introduction –Trends in management
2.2 Peter Drucker
2.3 C.K Prahalad
2.4 A Chaudary
2.5 Michael Hammer
2.6 Michael Porter
2.7 Gary Hamel
2.8 Al Ries
2.9 Tom Peters
2.10 Jack Trout
2.11 Summary
2.12 Self Assessment Questions
2.13 References

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2.0 OBJECTIVE

After studying this unit you will be in a position to know:

• The major trends in management.
• The contribution of various management gurus to the field of management.

2.1 INTRODUCTION : TRENDS IN MANAGEMENT

Wave of globalization has been the driving force behind most far-reaching and
powerful changes in business, then information technology has indisputably been the
facilitator. In the changing management scenario current trends include managers that
manage the work and not the people. Work is more predictable than people. Rather than
trying to manage people so strictly, managers are living in the light and kindness with
employees as they are real people; their own neighbors. Emerging Trends in Management
- 2012 by Dr. Harry CD include , Contemporary Management styles,. Micro and Macro
management ,. Virtual and Open source management, Globally distributed management,
Global and International Management , Business ecosystems –Networked Management,.
Green Management,. Smart Management, Sustainability management. Green management
measures such as certified environmental management International and Global
Management is systems (EMS) or tools like life cycle concerned with the techniques
and assessment activities are considered to improve corporate environmental practices
that are involved in directing and performance directly by mandating controlling
international organisations. Companies are trying to introduce environmental goals and
management structures as well as programs to achieve them.
Dr. Harry CD 2012 focus on: S.M.A.R.T. Management includes (specific,
measurable, achievable, realistic, and time-based.) methods of implementation
Sustainable management takes the concepts from sustainability and synthesizes them
with the concepts of management. Sustainability has three branches: the environment,
the needs of present and future generations, and the economy Emerging Trends in
Management
Organizations are required to accomplish, a given task according to schedule and
pre-determined programme. People are made to work. They don not themselves work.
Management, therefore, has come to stay as an activity process in this complex industrial
and commercial world. Management is the body of people which performs certain
managerial functions for the accomplishment of pre-determined goals. The concept of

14
management is very old. Therefore, different view has been expressed about its nature
by different authorities. Management is a social science the subject matter of which is a
human being. Management generalisations and principles cannot hold good in all the
cultures and at the stages of economic development. Thus management has evolved and
changed considerably over a period of time and various management experts and gurus
have contributed to the development of management concepts and principles.

2.2 PETER DRUCKER

Peter Drucker popularly known as the ‘Father of Modern Management’ is still

remembered for his contribution in the field of management. He stressed on the fact
that the needs of society could be fulfilled only through business institutions and,
therefore, it was necessary that these institutions performed well. Drucker laid emphasis
on managers and management for the effective functioning of the business institutions.
His contributions to management is as follows:
• Each society is a society of institution which people look forward to a as a source
of employment and also the fulfillment of their varied needs. It is the management
of these institutions which affects their performance and survival. The managers,
he asserts , are different from the owners and possess specialized skills to perform
the managerial tasks. He, thus, considers management as a profession.
• Amongst the various institutions, the focus of attention of management is on the
business institutions as the efficacy of management can be judged through the
economic results that it produced, and the most prevalent economic institutions is
the business institution. Besides, management is also liked at as a form to reform
Government and Society and also to further the traditional values, customs, and
belief’s of the society.
• Drucker originated the concept of Management by Objective (MBO) . It stresses
on the need of participative management whereby managers at all levels participate
in the goal setting process so that the individual performance synthesizes with the
organizational performance. According to him, MBO, if effectively organized can
help in overcoming four major organizational problems: the specialized work of
most managers; the hierarchical structure of management; the differences in vision
and work, and the compensation structure of the management group.
• Drucker advocated the skills managers must possess so as to make management an
effective task.

15
 a. Skills to make effective decisions
b. Skills to communicate in an outside the organisation
c. Skills to make proper use of controls and measurements, and
d. Skills to make proper use of analytical tool – management science.
• Rather than focusing on task-oriented or person-oriented approach to management,
Drucker focused his attention on an organization structure that needs to be both
task-focused and person-focused. He, therefore, advocated both Scientific
Management and the Human Relations Doctrine.
• Every institution is a part of society in which it functions and, therefore, it cannot
remain oblivious of the impact of societal functions on business institutions and
vice versa. The systems approach to management, thus , is also considered by
Drucker while he advocated the need for management in the functioning of the
institutions.
Drucker’s work on management has been highly appreciated by subsequent
management thinkers. The work of Drucker is recognized even today and will continue
to guide managers , academicians, management thinkers. His work on management has
and will continue to provide a basic foundation for management thinkers.

2.3 C.K. PRAHALAD

He is known not only for his prolific works also for his management perceptions
and strategies C K Prahalad is a professor, researcher, speaker, author and prominent
consultant . Prahalad specializes in corporate strategy and the role of top management
in large, diversified, multinational corporations.
In 1994 he co-authored the bestseller, Competing for the Future, with Gary
Hamel. Translated into 14 languages, it was named the Best Selling Business Book of
the Year in 1994. Prahalad is particularly well known for the work he has conducted with
fellow strategy expert Gary Hamel. This includes the articles The Core Competence of
the Corporation (Harvard Business Review, May-June, 1990), Competing in the New
Economy: Managing Out of Bounds (Strategic Management Journal, Vol. 17, No. 3,
March, 1996) as well as the bestselling book Competing for the Future: Breakthrough
Strategies for Seizing Control of Your Industry and Creating the Markets of Tomorrow
(1994).

16
 Professor Prahalad’s books include: The Multinational Mission: Balancing Local
Demands and Global Vision (1987) with Yves. Many of the articles he has co-authored
have appeared in the Harvard Business Review, including Do You Really Have a Global
Strategy? (1985); Collaborate With Your Competitors - and Win (1989) Strategic Intent
(1989); The Core Competence of the Corporation (1990); Corporate Imagination and
Expeditionary Marketing (1991); Strategy as Stretch and Leverage (1993); Competing
for the Future (1994); and The End of Corporate Imperialism (1998).
Strategic Intent, The Core Competence of the Corporation and The End of
Corporate Imperialism won McKinsey Prizes in 1989, 1990 and 1998 respectively. The
Dominant Logic: A New Linkage Between Diversity and Performance (1986), co-
authored with Richard Bettis, was chosen as the best article published in Strategic
Management Journal for the Period 1980-88.
Professor Prahalad’ s contributions to strategic thinking are widely acknowledged.
In 1992 Business Week described him as a “Brilliant teacher at the University of
Michigan, Prahalad may well be the most influential thinker on corporate strategy today”.
He was named in Business Week as one of the top ten business professors in the country,
based on a nation-wide poll of MBA alumni. The Indo-American Society presented
Professor Prahalad with their 1994 Annual Award for his outstanding contribution toward
promotion of Indo-American goodwill, understanding and friendship. In 1995 he received
the American Society for Competitiveness Award for his outstanding academic
contribution to competitiveness.
One of the names most commonly cited in boardrooms across corporate America
is C K Prahalad. The pioneer of the ‘core competence’ management concept. In surveying
the corporate scene worldwide, one of the questions that has most intrigued management
guru C K Prahalad is how dark horses can beat the established favourites at their own
game, and on their turf.. What all that tells you, Dr Prahalad points out, is that being
small need not be a minus and being big need not be a plus, because the small have not
only survived, they have become winners. Madras-born Dr Prahalad, who has taught at
Harvard, the Indian Institute of Management in Ahmedabad and INSEAD in France, was
Harvey Freuhauf Professor of Business at the University of Michigan. His list of awards
and citations alone is as long as an arm.
His contribution to management theory and practice is reputedly path-breaking.
He pioneered the concept of “core competence” of a corporation — more on that later
— and together with his collaborator, Gary Hamel, has turned much of the conventional

17
wisdom on corporate strategy upside down. According to that wisdom, resources were
critical: resources equalled size and size equalled market share. Also, with big resources,
companies could innovate more because they could buy both brains and technology. The
old wisdom also focused on “maximising within constraints” — the idea that a company’s
ambitions should be in line with what it can afford. Furthermore, corporate strategy was
seen as something that was top-down: bosses came up with ideas and employees put
them into effect.
At first, Dr Prahalad tried to use the old paradigm to explain what was going on in
corporations. But it couldn’t do the job, no matter how much he twisted and stretched it.
“So what we ended up doing,” he says, “was to throw out all the old ideas and say: there
must be a totally different explanation, a different way of conceptualizing the process of
corporate strategy.” After much research, he narrowed down to four or five central themes.
The first was that most companies are “imagination-constrained”, not resource-
constrained. “Imagination, passion, excitement — these have to be as much part of a
senior management’s tasks as resource allocation,” he says. And no, resources don’t buy
imagination; more often, they limit imagination. “The rich companies are typically not
the ones that are the most creative, because they have a lot of money to throw at problems.
It’s the poor who have come up with the most imaginative ideas. Look at Apple, Microsoft,
Oracle or Silicon Graphics. None of them started with big resources. They started with
a big idea, an aspiration to change the world. To them, strategy was about discovery.”
Dr Prahalad’s second central idea blew the concept of “maximising within
constraints” to bits. “If you’re top management, you need to deliberately create a misfit
between aspirations and resources,” he suggests. “If your aspirations are not outside the
realm of your current resources, you’re unlikely to create new ideas. If you look at all
entrepreneurs, they instinctively follow this model.”
“The big question,” he says “is how do you create responsible entrepreneurship in
a large company which has 150,000 people working in 65 countries? If there are eight
people in a room, it’s no big deal. It happens spontaneously; there is no need for a process.
But in a large company, there is. Creating a misfit between aspirations and resources is
part of that process.”
Another part, according to Dr Prahalad, consists of tapping employees for
entrepreneurial ideas. He sees the elitist approach, where the top bosses are also the top
ideas people, as a recipe for mediocrity. “Smart strategy always involves a large number
of people,” he points out. “Because knowledge about customers, about competitors, about

18
new technologies — all this resides lower down in the organisation. So any top
management needs to capture the imagination of the people there.”
Another key element of strategy, according to Dr Prahalad, lies in the leveraging
of resources. “If you want to be innovative, you must leverage everything you can —
your suppliers, your partners, your employees, and even your competitors,” he points
out. “That’s how you get the most bang for your buck.”
But the scarcest and most important thing a company can leverage is talent and
skills, and the past products of these, he says. “A company must redeploy and recycle
what it has invested in.” “If you have a big investment over a long time in, say, optical
technology like Philips or Sony, you need to continuously redeploy it in new businesses.
It doesn’t have to be in businesses that you’re already in: it can be in businesses that
you’re not in. For example, the compact disc was invented as an audio device. But every
PC comes with a CD-ROM. The CD today is also an integral part of video, graphics and
games. That’s not what it was invented for. “The ability to leverage it across multiple
users is the basic idea behind core competence. It means re-using, redeploying, sharing,
furthering and nurturing the skill base of the company. If you have a core technology,
you must also have the capacity to share it across boundaries.”
“In other words,” says Dr Prahalad “you ought to look at a corporation not only as
a portfolio of businesses but as a portfolio of competencies that cut across multiple
businesses. Sometimes you have to create new businesses, you have to make new space.
That’s what discovery is all about.”

2.4 A. CHAUDARY

Speaking of contemporary business thinkers, another fine entrepreneur, educator,

author and enterprising personality is Arindham Chaudhuri. His contribution to the field
of management studies in India can be found in the iconoclastic “Theory ‘ i ’
Management” which he has developed for India Inc. “Theory ‘i’ Management” is about
India centric management ideas. For the last few years he has been conducting workshops
on Leadership and Strategic Vision exclusively for CEOs, MDs, Directors and Presidents
from the corporate sector. From the Managing Director of Hero Motors to the President
of Tata Chemicals, from the Executive President of A.V. Birla Group to the CEO of
Ernst & Young… have all taken leadership training workshops from him. As a celebrated
speaker he is regularly invited to speak at various annual conferences and national
conventions. He also happens to be highest paid speaker in the country.

19
 An economist by passion and education, during Bill Clinton’s historic visit to
India he launched his Great Indian Dream -: India can beat America, a series of seminars
for every Indian. Held in all the metros of India, these seminars had thousands of people
pouring in from all walks of life. In these seminar’s he not only highlights the inherent
strengths of the Indian culture but also talks about an alternative resource mobilization
and allocation package for an Indian turnaround. To facilitate social activities based on
this he has started the Great Indian Dream Foundation in memory of his brother Aurobindo
Chaudhuri. He was recently rated as one of the 50 leading thinkers in South Asia by
Wilton Park (an organisation supported by the European Commission and British foreign
office).
Further, he was awarded the Academic Gold Medal while completing the Post
Graduate Diploma in Planning and Management from IIPM. Prof. Chaudhuri was awarded
“Management Guru 2000 Award” by Chennai based Om Venkatesa Society which annually
honours management experts.

2.5 MICHAEL HAMMER

An engineer by training, Hammer was the proponent of a process-oriented view

of business management.
Michael Hammer is one of those celebrated big thinkers of the business world.
Reengineering the Corporation, his 1993 best-seller co-authored with James Champy,
prompted managers to overhaul their business structures in pursuit of dramatic
improvements. Some succeeded, but by the end of the decade, the term had also become
synonymous with layoffs and plant closures. Meanwhile, Hammer seemed bogged down
by his very success.
Dr. Hammer’s groundbreaking research and visionary thought leadership over the
years has galvanized the business world—beginning with his leadership of the
reengineering movement and continuing with his brilliant formulation of the process-
centered organization. Hammer’s ideas have become integrated into the DNA of
businesses and organizations worldwide and continue to retain their relevancy in today’s
challenging economic environment.
Michael Hammer five important contributions towards Business Process
Management. : ‘Reengineering and the Corporation’ emphasis on Concept of
‘Management Process Design’, ‘Coined the end of Adam Smith Era’, defended the
undoing of the Industrial Revolution and stated that a new organization had to re-emerge

20
under the supervision of a strong leader with vision , who, using information technologies
, consulting closely with the suppliers to reduce inventories, and empowering employees
, would build a more efficient organization. ‘Started Shaping the modern Business
Process ’, Michael Hammer defended that corporation ought to simplify and reorganize
business departments by having workers do their work which could contribute for greater
efficiency and productivity. ‘Empowered the information worker’, Michael defended
saying that in new organizations and managers should switch from supervisory roles to
facilitators. They ought to become enablers and mentors of those who they manage ,
empowering them to perform value –adding processes themselves, making sure their
contribution would be recognized by the top management. ‘Powerful ideas gone bad’
this misinterpretation let to firing of workers, hence Michael emphasized that the term
re-engineering was misappropriated and misunderstood and stated that re-engineering
should be taken to promote greater production and create more jobs.

2.6 MICHAEL PORTER

Professor Porter is a leading authority on competitive strategy and the

competitiveness and economic development of nations, states, and regions.
Professor Porter’s ideas on strategy have now become the foundation for one of
the required courses at the Harvard Business School. Professor Porter speaks widely
on competitive strategy and international competitiveness to business and government
audiences throughout the world. In 2001, Harvard Business School and Harvard University
jointly created the Institute for Strategy and Competitiveness, led by Professor Porter,
to further his work. Professor Porter is the author of 16 books and over 85 articles. His
book, Competitive Strategy: Techniques for Analyzing Industries and Competitors, is in
its 58th printing and has been translated into seventeen languages. His second major
strategy book, Competitive Advantage: Creating and Sustaining Superior Performance,
is in its 34th printing. His Harvard Business Review article ‘What is Strategy?’ is the
foundation for a new strategy book it also well known. His article ‘Strategy and the
Internet’ (2001) won for Professor Porter an unprecedented third first-place McKinsey
Award as the best Harvard Business Review article of the year.

2.7 GARY HAMEL

In the new economy, the companies that create new wealth are truly
revolutionaries: they upend long-held industry conventions, they fearlessly challenge
the old guard, and they amaze their customers with products and services that could

21
scarcely have been imagined a few years earlier. In doing so, they render existing business
models obsolete. In this environment, the most fearsome threat to continued success is
not inefficiency but irrelevancy. Any company that is not an industry revolutionary is
already on the road to insignificance.
Industry revolution is the product of strategy innovation. In an increasingly
non-linear world, only non-linear strategies will create new wealth. As companies move
beyond the incremental, strategy innovation—the capacity to reconceive product and
service concepts, redraw market boundaries, and radically alter deep-down industry
economics—will become the next critical competitive advantage. Strategy innovation
is the only way for a company to renew its lease on success.
Yet most companies are built for continuous improvement, rather than for
discontinuous innovation. They know how to get better, but they don’t know how to get
different. In a world where incumbency is worth next to nothing, a company must be
capable of reinventing its deepest sense of self and its core business concept not once
a decade, in the midst of a crisis, when it trades out one CEO for another, but continuously,
year after year. Twenty years ago the challenge was quality. Ten years ago the challenge
was re-engineering. Now the challenge is strategy innovation.
In Leading the Revolution, Professor Gary Hamel, the world’s most profound
business thinker, lays out a clear plan of action for any company intent on becoming—
and staying—an industry revolutionary. Leading the Revolution is not a book for
dilettantes. It is not a book for corner-office types who would rather protect their
prerogatives than overthrow industry orthodoxy. It is not a book for those who need
reassurance that they’re already doing “the right thing.” Leading the Revolution is a
book for those who want to make a difference-in their world and in their organization. It
is a book for those who are tired of playing it safe. It is a book for people who care so
much about their customers, their colleagues and their own legacy that they can’t imagine
not Leading the Revolution.

2.8 AL RIES

Positioning, a concept developed by the authors, has changed the way people
advertise. The reason? It’s the first concept to deal with the problems of communicating
in an over communicated society. With this approach, a company creates a ‘position’ in
the prospect’s mind, one that reflects the company’s own strengths and weaknesses as
well as those of its competitors. Witty and fast-paced, this book spells out how to position

22
a leader so that it gets into the mind and stays there, position a follower in a way that
finds a ‘hole’ not occupied by the leader, and avoid the pitfalls of letting a second product
ride on the coattails of an established one. Revised to reflect significant developments
in the five years since its original publication, Positioning reveals the fascinating case
histories and anecdotes behind the campaigns of many stunning successes and failures
in the world of advertising.
While he doesn’t go so far as to say that small is beautiful, Ries (Positioning)
levels a commonsense critique at the compulsion for growth that drives corporate
America. Growth for its own sake, particularly when it involves diversification into
products unrelated to a company’s original business, Ries says, causes many companies
to become unfocused, confuses customers and loses money. The frenzy for acquisitions
that spread many a well-known brand name over a diversity of products has proved
untenable, with the result that companies that grew fat are regaining their original focus
by slimming down. itself of all but its original retail chain.
Al Ries defines corporate focus as an organization’s “necessary” and relentless
pursuit to specialize within its industry. For example, one of Ries’ examples, PepsiCo,
should’ve focused on its core competency (the Pepsi cola brand), and spun off all other
divisions such as its food chains division (KFC, Pizza Hut, Del Taco) and its snack foods
division (Frito Lay). PepsiCo, he claims, will lose the war with Coca-Cola unless it
focuses on just one enemy (Coke) rather than several. Interestingly enough, Ries’s
prophecy towards future focus within organizations happens to have become the biggest
hit on Wall Street in 1997, and in the case of PepsiCo, came true.

2.9 TOM PETERS

“In no small part, what American corporations have become is what Peters
has encouraged them to be” New York. “Peters is ... the father of the post-modern
corporation.” —Los Angeles Times
“We live in a Tom Peters world.” —Fortune
Tom Peters the Uber-guru of management, and compares him to Ralph Waldo
Emerson, Henry David Thoreau, Walt Whitman, and H.L. Mencken. The Economist tagged
him the Uber-guru; and Business Week’s take on his “unconventional views” led them to
label him “business’s best friend and worst nightmare.” In 2004 the Bloomsbury. Press
book Movers and Shakers reviewed the contributions of 125 business and management
thinkers and practitioners, from Machiavelli and JP Morgan to Tom and Jack Welch.

23
 “Tom Peters has probably done more than anyone else to shift the debate on
management from the confines of boardrooms, academia, and consultancies to a broader,
worldwide audience, where it has become the staple diet of the media and managers
alike. Peter Drucker has written more and his ideas have withstood a longer test of time,
but it is Peters—as consultant, writer, columnist, seminar lecturer, and stage performer—
whose energy, style, influence, and ideas have shaped new management thinking.”
Two Tom Peters biographies have been published: Corporate Man to Corporate
Skunk: The Tom Peters Phenomenon and Tom Peters: The Bestselling Prophet of
the Management Revolution In an in-depth analytic study released by Accenture’s
Institute for Strategic Change in 2002, Peters scored 2nd among the top 50 “Business
Intellectuals,” behind Michael Porter and ahead of Peter Drucker.
Leadership guru Warren Bennis, the only person who knows both Peter Drucker
and Tom personally, told a reporter, “If Peter Drucker invented modern management,
Tom Peters verified it.” In fact, as even Tom’s book titles indicate, his passion is passion:
Destruction & Disruption & Re-imaginings ... Talent Liberation for a Brand You/WOW
Projects World ... Creativity, Game-changing Innovation & Sustained Entrepreneurship.
Tom’s newest passions are for Women-as-Leaders; the Supreme Role of Design in
product and service differentiation; the Creation of Customer Experiences that rival a
Cirque du Soleil performance; capturing the enormous, underserved market represented
by Women and Boomers-Geezers; Re-imagining Education for a Creative Age; and
reorienting healthcare from “fix-it-after-the-fact” to Wellness-Prevention. And pursuing
Excellence Variety2005 ... Tom’s first “return to excellence” in 22 years.

2.10 JACK TROUT

Instrumental in developing the vital approach to marketing known as “positioning,”

he is responsible for some of the freshest ideas to be introduced into marketing thinking
in the last decade. Jack Trout started his business career in the advertising department of
General Electric. In 1985 he and Al Ries wrote a second best-selling book entitled
Marketing Warfare. Positioning and Marketing Warfare are now published in 14 languages.
In 1988 Bottom-Up-Marketing was published. It became very popular as the “process”
book as it completed what has become known as the “Trilogy” of marketing books. In
1993 their book, The 22 Immutable Laws of Marketing quickly became the marketing
bible. It outlined the basic reasons why marketing programs succeed or fail in the
competitive nineties. Jack Trout closed the circle with the sequel to Positioning in 1995.
Entitled The New Positioning it takes the world’s No. 1 business strategy to a new level.

24
This was followed by The Power of Simplicity - A Management Guide To Cutting Through
the Nonsense and Doing Things Right. It is a candid, unvarnished look at the foibles and
complexities of business that get in the way of good decisions. This was followed by
Differentiate or Die - Survival in Our Era of Killer Competition. It presents the keys to
survival in a killer global economy. Differentiate or Die.- presents how you can and
cannot differentiate yourself in the age of killer competition. A very popular book and
lecture, it demonstrates that every product and service can be differentiated if you are
willing to focus and sacrifice.

2.11 SUMMARY

The field of management has always been responsive to environmental changes.

The modern society is experiencing more changes than were ever experienced in the
past and the modern managers must keep pace with these changes. In the light of the
recent developments in the economy, not only should management be responsive to
changes, it must, in fact, promote changes and create progress. Traditionally , management
was viewed as a field of study relevant to solve the technical problems related to
production of goods. The focus was, thus, on the industrial sector. Gradually, a shift was
observed from industrial sector to almost every field of the society. The focus changed
from technical aspect to non- technical types of organizational problems. No, wonder ,
management has come to be called as a generic and a universal concept. Managers have
to face ;bring about a change in the corporate governance. Thus the contributions from
various managements experts have a great deal in dealing with the human element in the
organization.

2.12 SELF ASSESSMENT QUESTIONS

1. Explain briefly the recent trends in management.

2. Discuss the contribution of Peter Drucker to the field of management.
3. In what way is Shiv Khera’s contribution different from A Chaudary contribution to
management ?.
4. In what way is Shiv Khera’s contribution benefiting the managers?
2.13 REFERENCES

1. Davar. The Management process. Mumbai: Progressive Corporation Pvt. Ltd, 2010.
2. Harold Koontz. Heinze Weihrich. Essentials of management, New York: MacGraw-
Hill,1993

25
3. J S. Chandan. Management Concepts and Strategies, New Delhi: Vikas Publishing
House PvtLimited,1997.
4. Chauhry Omvir, Prakash Singh. Principles of Management, New Delhi: New Age
International Publishers, 2012.
5. Peter. Drucker. Management of 21st Century, New York: HarperBusiness,2001.
6. Prasad L.M. Principles of Management, New Delhi: Sultan Chand & Sons, 2015.
7. Stoner J.A. and Freeman R.E. Management, New Delhi: Pearson Education
India,1995.
8. Richard L. Daft.Management, Massachusetts, United States: Cengage Learning, 2013.
9. S.K. Mandal. Management: Principles and Practice, Mumbai: Jaico Publishing
House, 2011.

26
 UNIT –3 : LEVELS OF MANAGEMENT

Structure
3.0 Objectives
3.1 Introduction
3.2 Management as science
3.3 Management as Art
3.4 Management as a profession
3.5 Management Levels
3.5.1 Top level managers
3.5.2 Middle level managers
3.5.3 Lower level managers
3.6 Managemetn skills
3.6.1 Technical skill
3.6.2 Human skill
3.6.3 Conceptual skill
3.7 Role Managers Play
3.8 Mintz Berg’s roles of present managers
3.9 Summary
3.10 Self assessment Questions
3.11 References

27
3.0 OBJECTIVES

After studying this unit you will be in a position

• To define management.
• Able to understand why management is an art.
• Understand the concept of management as a science.

3.1 INTRODUCTION

Arts and Science of Management: A question often arises whether management

is a science or an art. “ Management is the oldest of arts and the youngest of sciences”.
To have an exact answer to this question, it is necessary to know the meanings of the
terms” Science “ and “Arts”.
3.2 MANAGEMENT AS SCIENCE

Science has been defined as a body of systematized knowledge which establishes

a relationship between cause and effect. Such systematized knowledge contains concepts,
hypotheses, theories, experimentation and principles. Science of Management assumes
that problems can be approached using rational, logical, objective and systematic ways.
Requires technical, diagnostic and decision-making skills and techniques to solve
problems. Now management has been given the shape of an organized body of knowledge
. Its study helps in gaining a rational approach to the development of means for
accomplishing certain goals. Management is a developing science. However, management
cannot be equated with exact sciences like physics and chemistry. Most of the managerial
activities like decision-making, planning, organizing and directing cannot be an exact
science. In management , it is not possible to define , analyze and measure phenomena
be repeating the same conditions over and over again to obtain results. The observation
puts a limitation on management as a science. Management like other social sciences
can be called as “inexact science”.
3.3 MANAGEMENT AS ART

Art understands how a particular activity can be done. Art can be acquired be
conscious effort and practice. Management is getting things done through other people.
They have to continuously analyse the environment and formulate the plans and strategies.
They have to modify the strategies based on the environmental changes. The principles
of management and theories of management cannot be implemented as learnt, in the

28
real world. They are to be applied after making necessary modifications based on the
real life situations. Art may be defined as ‘the technique of applying the principles to
actual practice so as to achieve the desired results with efficiency.’ It is concerned with
the application of knowledge and skills, If science is learnt the art is practised. Decisions
are made and problems are solved using a blend of intuition, experience , instinct and
personal insights. Conceptual , communication,, interpersonal and time-management
skills are required to accomplish the tasks associated with managerial activities. The
principles and techniques of management, when applied in the organization to achieve
its objectives, becomes an ‘art’. In this manner management is an art.
Management is both a Science as well as an Art. The science of management
provides certain general principles , which can guide the managers in their professional
efforts. The art of management consists in tackling every situation in an effective manner.
As a matter of fact the science and the art of management go together and are both
mutually interdependent and complimentary. Management is thus a science as well as an
art. The art of management is as old as human history, but the science of management is
an event of the recent past. Although management has been recognized as a science , it
is not the biological or physical sciences. It falls in the area of ‘Social Sciences’ as it is
a social process and deals with complex human beings. The theories and principles of
management are situation bound. It may produce different results in different situations.
That is why Ernest Dale has called management a ‘Soft Science’.
It is clear that management is both a science and an art. It is considered a science
because it has an organized body of knowledge. It is considered an art because managing
requires certain skills. Science teaches hoe ‘to know’ and an art ‘to do’, hence science
and art are complimentary. A manager is a scientist as well as an artist. As a scientist ,he
relies heavily on the existing knowledge and develops new knowledge and principles. As
an artist , he sometimes wholly depends on his institution, guesswork and judgement.
Thus a manager uses his knowledge to solve the problems in managing men, materials,
methods and money.
3.4 MANAGEMENT AS A PROFESSION

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

29
 A profession may be defined as an occupation that requires specialized knowledge
and intensive academic preparations to which entry is regulated by a representative body.
The essentials of a profession are:
1. Specialized Knowledge - A profession must have a systematic body of
knowledge that can be used for development of professionals. Every professional must
make deliberate efforts to acquire expertise in the principles and techniques. Similarly
a manager must have devotion and involvement to acquire expertise in the science of
management.
2. Formal Education & Training - There are no. of institutes and universities
to impart education & training for a profession. No one can practice a profession without
going through a prescribed course. Many institutes of management have been set up for
imparting education and training. For example, a CA cannot audit the A/C’s unless he has
acquired a degree or diploma for the same but no minimum qualifications and a course
of study has been prescribed for managers by law. For example, MBA may be preferred
but not necessary.
3. Social Obligations - Profession is a source of livelihood but professionals
are primarily motivated by the desire to serve the society. Their actions are influenced
by social norms and values. Similarly a manager is responsible not only to its owners but
also to the society and therefore he is expected to provide quality goods at reasonable
prices to the society.
4. Code of Conduct - Members of a profession have to abide by a code of conduct
which contains certain rules and regulations, norms of honesty, integrity and special
ethics. A code of conduct is enforced by a representative association to ensure self
discipline among its members. Any member violating the code of conduct can be punished
and his membership can be withdrawn. The AIMA has prescribed a code of conduct for
managers but it has no right to take legal action against any manager who violates it.
5. Representative Association - For the regulation of profession, existance of
a representative body is a must. For example, an institute of Charted Accountants of
India establishes and administers standards of competence for the auditors but the AIMA
however does not have any statuary powers to regulate the activities of managers.
6. Specialised Educational Qualifications: There should be specialised
educational qualifications for employment for professional jobs. Specialised educational
institutions are established to impart specialized education. Indian Institutes of
Management and Department of Management in the Universities are established to

30
provide specialises management education leading to Post-Graduate Diploma in
Management and Master of Business Administration degree.
Management satisfies al the characteristics of a profession. Therefore,
management is a profession . From above discussion, it is quite clear that management
fulfills several essentials of a profession, even then it is not a full fledged profession
because: -
• It does not restrict the entry in managerial jobs for account of one standard or
other.
• No minimum qualifications have been prescribed for managers.
• No management association has the authority to grant a certificate of practice to
various managers.
• All managers are supposed to abide by the code formulated by AIMA,
• Competent education and training facilities do not exist.
• Managers are responsible to many groups such as shareholders, employees and
society. A regulatory code may curtail their freedom.
• Managers are known by their performance and not mere degrees.
• The ultimate goal of business is to maximize profit and not social welfare. That is
why Haynes has rightly remarked, “The slogan for management is becoming
• ‘He who serves best, also profits most’.”
Management Levels and Skills:
The Industrial Revolution which began in the eighteenth century transformed the
job of manager from owner-manager to professional, salaried manager. The inventions,
machines, and processes of the Industrial Revolution transformed business and
management (such as, the use of fossil fuels as sources of energy, the railroad, the
improvement of steel and aluminium metallurgical processes, the development of
electricity, and the discovery of the internal-combustion engine.) With the industrial
innovations in factory-produced goods, transportation, and distribution, big business came
into being. New ideas and techniques were required for managing these large-scale
corporate enterprises.
Today, business and management continue to be transformed by high technology.
In order to keep pace with the increased speed and complexity of business, new means
of calculating, sorting and processing information were invented. An interesting

31
description of the modern era is the Information Age that describes the general use of
technology to transmit information.
Managers realized that they could profit from immediate knowledge of relevant
information. Communication and processing technologies are an essential tool in almost
every field of business. Thus, the Information Age implies a time for a revolution in the
information environment for business and management. The changes that are taking place
may be more significant to management than the Industrial Revolution.
3.5 MANAGEMENT LEVELS

Managers basically formulate Mission , Objectives , Strategies and Tactics.

Management is essential to achieve the MOST. The organizational mission is the basic
reason for its existence. Mission provides a statement of what the company stands for
i.e., it purpose of its existence. Managers formulate objectives based on the mission .
Objectives are the ends towards which the activity is aimed. The goal is precise and is
expressed in clear and specific terms. For example the objective of the firm is to earn
profits whereas the goal is to earn certain percentage of profit on the capital employed.
Manager is the one who performs the managerial functions of planning, organizing,
staffing, directing, and controlling the human and non-human resources for the successful
achievement of the organizational goals.
Managers affect the establishment and accomplishment of many social , economic,
and political goals. Making a better economic life possible , improving social standards,
and establishing and achieving more efficient and effective government are challenges
to modern managerial ability . There is no good substitute for good management. “
good management is merely the exercise of common sense and the Golden Rule”.
Management include all the managers of a company. Management is classified as
managers at different levels that is top level mangers, middle level managers, and lower
level managers
3.5.1 Top Level Managers
Top level managers are the senior level executives of the company including the
Managing Director or President, Vice-President, General Manager, Chief Managers of
the company. Top management particularly the Managing Director or President of the
company is responsible for the overall management and performance of the company.
The formulate objectives , policies, and corporate level strategies of the company. Top
level managers lead and motivate the middle level managers . They coordinate the activities

32
of middle level managers. These managers work at the highest level of the organizational
hierarch. The number of manager in this group is the smallest.
3.5.2 Middle Level Managers
Middle level managers are responsible for coordination of the activities of various
department. Middle level manager include managers of various departments like
Production , Marketing, Finance, Human Resource and Research and Development
department. These managers are responsible for the success or failure of their
departments. Middle level managers formulate the objectives, goals and strategies of
their departments based on those of the organization. In addition, middle level managers
lead, motivate, and coordinate the activities of the lower-level managers. They act as a
link between the top level and the lower level managers. They direct the activities of
their subordinates according to their capacities for the achievement of the overall
organizational goals. These managers spend most of their time in managing the
company’s day to day operations and have very little interaction with the outside parties.
A large organization has a fairly large number of middle level managers though the
number is less than the lower level managers.
3.5.3 Lower Level Managers
Lower level Managers are responsible for the work of the operating staff working
with them. Lower level managers are also called First-line or First-Level or Junior
Managers. They direct, lead, motivate, and coordinate the activities of the operating
employees. These managers, mostly supervise the operating employees while they
perform their work. The lower level managers are also called supervisors. Largest
number of managers belong to this level of management.
Lower level Managers are responsible for the work of the operating staff working
with them. Lower level managers are also called First-line or First-Level or Junior
Managers. They direct, lead, motivate, and coordinate the activities of the operating
employees. These managers, mostly supervise the operating employees while they
perform their work.

33
Different Management Levels

Managing Director/ President

Top Level Mgt.

General Manager General Manager
Management
……………..... ........... Vice-President Vice-President

Middle Level
Manager Manager Manager Manager Manager
Management
……………… Production Finance Human Resource Marketing R&D

.................................

Lower Level
Management
Manager Manager Manager Manager
Materials Scheduling Quality Control Assembly

Based on the scope of activities performed there are two type of mangers. They are
Functional Managers
General Managers
3.6 MANAGEMENT SKILLS

In order to perform the functions of management and to assume multiple roles,

managers must be skilled Robert Katz identified three managerial skills that are essential
to successful management: technical, human, and conceptual.
3.6.1 Technical skill
Involves process or technique knowledge and proficiency. Managers use the
processes, techniques and tools of a specific area skill. Technical skills deals with things.
Technical skills are the proficiency in working with machines, tools and techniques in
human resource management. Managers at all levels should possess technical skills.
Those at the lower level should possess more of technical skills whereas managers at
the top level possess less technical skills compared to those at middle and lower levels.

34
3.6.2 Human skill
Involves the ability to interact effectively with people. Managers interact and
cooperate with employees. Human skills include the ability to work with people tactfully,
interpersonal proficiency, ability to build, maintain and work in teams and create an
open environment. Managers at all levels should possess these skills.
3.6.3 Conceptual skill
Involves the formulation of ideas. Managers understand abstract relationships,
develop ideas, and solve problems creatively. Thus, technical skill deals with things,
human skill concerns people, and conceptual skill has to do with ideas.
A manager’s level in the organization determines the relative importance of
possessing technical, human, and conceptual skills. Top level managers need conceptual
skills in order to view the organization as a whole. Conceptual skills are used in planning
and dealing with ideas and abstractions. Supervisors need technical skills to manage their
area of specialty. All levels of management need human skills in order to interact and
communicate with other people successfully.
Managerial Skills at Different levels

Conceptual
Top Management Skills

Human
Middle Mgt. Skills
Technical
Skills

Lower-level Mgt

Level Of Importance

As the pace of change accelerates and diverse technologies converge, new global
industries are being created (for example, telecommunications). Technological change
alters the fundamental structure of firms and calls for new organizational approaches
and management skills.

35
3.7 ROLES MANAGERS PLAY

To meet the many demands of performing their functions, managers assume

multiple roles. A role is an organized set of behaviors. Henry Mintzberg has identified
ten roles common to the work of all managers. The ten roles are divided into three
groups: interpersonal, informational, and decisional. The informational roles link all
managerial work together. The interpersonal roles ensure that information is provided.
The decisional roles make significant use of the information. The performance of
managerial roles and the requirements of these roles can be played at different times by
the same manager and to different degrees depending on the level and function of
management. The ten roles are described individually, but they form an integrated whole.
The three interpersonal roles are primarily concerned with interpersonal
relationships. In the figurehead role, the manager represents the organization in all matters
of formality. The top level manager represents the company legally and socially to those
outside of the organization. The supervisor represents the work group to higher
management and higher management to the work group. In the liaison role, the manger
interacts with peers and people outside the organization. The top level manager uses the
liaison role to gain favors and information, while the supervisor uses it to maintain the
routine flow of work. The leader role defines the relationships between the manger and
employees.
The direct relationships with people in the interpersonal roles place the manager
in a unique position to get information. Thus, the three informational roles are primarily
concerned with the information aspects of managerial work. In the monitor role, the
manager receives and collects information. In the role of disseminator, the manager
transmits special information into the organization. The top level manager receives and
transmits more information from people outside the organization than the supervisor. In
the role of spokesperson, the manager disseminates the organization’s information into
its environment. Thus, the top level manager is seen as an industry expert, while the
supervisor is seen as a unit or departmental expert.
The unique access to information places the manager at the center of organizational
decision making. There are four decisional roles. In the entrepreneur role, the manager
initiates change. In the disturbance handler role, the manger deals with threats to the
organization. In the resource allocator role, the manager chooses where the organization
will expend its efforts. In the negotiator role, the manager negotiates on behalf of the

36
organization. The top level manager makes the decisions about the organization as a
whole, while the supervisor makes decisions about his or her particular work unit.
The supervisor performs these managerial roles but with different emphasis than
higher managers. Supervisory management is more focused and short-term in outlook.
Thus, the figurehead role becomes less significant and the disturbance handler and
negotiator roles increase in importance for the supervisor. Since leadership permeates
all activities, the leader role is among the most important of all roles at all levels of
management.
Roles of Managers

Formal Authority and Status

Interpersonal Roles

 Figurehead
 Leader
 Liaison

Informational Roles

 Monitor
 Disseminator
 Spokesman

Decisional Roles

 Entrepreneur
 Disturbance Handler
 Resource Allocator
 Negotiator

3.8 MINTZ GERG’S ROLES OF PRESENT MANAGERS

Henry Mintzberg has identified ten roles common to the work of all mangers.
The ten roles are divided into three groups :

37
 • Interpersonal
• Informational
• Decisional
Interpersonal roles ensures that information is provided. Informational roles link
all managerial work together. The decisional roles make significant use of the information.
The activities of the mangers may be categorized under the following heads:
i. Interpersonal Activities: Managers deal with the subordinates to get things done
with their help. For this , they interact and maintain good relations with them.
ii. Informational Activities : It is very important for managers to communicate
effectively in order to get things done. They continuously receive information from
various sources and transmit only the desired information. They exchange information
with their superiors , subordinates and peers.
iii. Decisional Activities: Decision making inherent to the job of a manager. The
managers have to take a large number of decisions daily to run the organisation. They are
expected to come up with solutions to difficult problems and to follow through with
their decisions, even when doing so may be unpleasant.

Roles of Manager Roles

Roles of Manager as part of the Figurehead
Interpersonal Activities he has to perform Leader
Liaison
Roles a Manager takes up while engaged Monitor
in Informational Activities Disseminator
Spokesperson
Roles of Manager plays in relationship Entrepreneur
with other individual both inside and Disturbance handler
outside the firm. Resource Allocator
Negotiator

Managerial activities involve variety , fragmentation, brevity and a large volume

of work to be performed quickly. The three interpersonal roles are primarily concerned
with interpersonal relationships. In the figurehead role, the manager represents the
organisation in all matters of formality. The top level manager represents the company
legally and socially to those outside of the organisation. The supervisor represents the
work group to higher management and higher management to the work group. In the
liaison role, the manger interacts with peers and people outside the organisation. The

38
top level manager uses the liaison role to gain favours and information, while the
supervisor uses it to maintain the routine flow of work. The leader ole defines the
relationship between the manger and employees.
The direct relationship with people in the interpersonal roles place the manager
in a unique position to get information. Thus, the tree informational roles are primarily
concerned tithe the information aspects of managerial work. In the monitor role, the
;manager receives and collects information. In this role as of disseminator, the transmits
special information into the organization. The top level manger receives and transmits
more information from people outside the organization than the supervisor. In the role
of spokesperson, the manager disseminates the organization’s information into its
environment. Thus, the top level manger is seen as an industry expert, while the supervisor
is unit or department.
The unique access to information places the manager at the centre of organisational
decision making. There are four decisional roles. In the entrepreneur role, the manager
initiates change. In the disturbance handler role, manager deals with threats to the
organisation. In the resource allocator role, the manager chooses where the organization
will expend its efforts. In the negotiator role, the manager negotiate on behalf of the
organization. The top level manger makes the decisions about the organisation as whole,
while the supervisor makes decisions about this or her particular work unit.
The supervisor performs these managerial roles but with different emphasis than
higher managers. Supervisory management is more focused and short –term in outlook.
Thus, the figurehead role becomes less significant and the disturbance handler and
negotiator roles increase in importance for the supervisor. Since, leadership permeates
all activities, the leader role is among the most important of all roles at all levels of
management.
3.9 SUMMARY

Managers perform different roles . Formal authority gives rise to inter-personal

and informational roles. The manager in- charge of the organization or the department
coordinates the work of others and leads his subordinates. Formal authority provides
potential power to exercise and get the things done. As the leader of the organization,
the manager has to perform the functions of motivation, communication, encouraging
team spirit . Further, he has to coordinate the activities of all his subordinates which
involves the activity of liaison. According to Peter Drucker : “ the manager has the task
of creating a true whole that is larger than the sum of its parts, a productive entity that

39
turns out more than the sum of the resources put into it”. Though the different roles of
a manager are stated separately for convenience, they are not separable. The manager
has to perform these roles simultaneously, by integrating one with the other. Thus, the
role of the manager is integrating all the roles while playing the managerial role or
performing his tasks. The manager cannot play one role isolating the other roles. As a
strategist, the manager has to integrate all the roles in decision-making and performing
his tasks.
3.10 SELF ASSESSMENT QUESTIONS

1. Why is management called as an art and science?

2. Is management a profession ? Comment
3. Discuss the various levels of management.
4. Explain the different skills of management.
5. What are Mintz Berg’s roles of present managers?

3.11 REFERENCES

1. Davar. The Management process. Mumbai: Progressive Corporation Pvt. Ltd, 2010.
2. Harold Koontz. Heinze Weihrich. Essentials of management, New York: MacGraw-
Hill,1993
3. J S. Chandan. Management Concepts and Strategies, New Delhi: Vikas Publishing
House PvtLimited,1997.
4. Chauhry Omvir, Prakash Singh. Principles of Management, New Delhi: New Age
International Publishers, 2012.
5. Peter. Drucker. Management of 21st Century, New York: HarperBusiness,2001.
6. Prasad L.M. Principles of Management, New Delhi: Sultan Chand & Sons, 2015.
7. Stoner J.A. and Freeman R.E. Management, New Delhi: Pearson Education
India,1995.
8. Richard L. Daft.Management, Massachusetts, United States: Cengage Learning, 2013.
9. S.K. Mandal. Management: Principles and Practice, Mumbai: Jaico Publishing
House, 2011.

40
 UNIT- 4 : LEADERSHIP AND MOTIVATION

Structure
4.0 Objectives
4.1 Definition of Leadership
4.2 Leadership Styles
4.3 Qualities of a Good Leader
4.4 Definition of Motivation
4.5 Importance of Motivation
4.6 Theories of Motivation
4.7 Summary
4.8 Self Assessment Questions
4.9 References

41
4.0 OBJECTIVES

After studying this unit, you should be able to:

• Define leadership
• Evaluate formal and informal leadership styles
• Analyze various theories of leadership
• Explain various styles of leadership
• Identify qualities and characteristics of good leader

4.1 DEFINITION OF LEADERSHIP

A traditional definition of leadership: Leadership is an interpersonal influence

directed toward the achievement of a goal or goals.
Three important parts of this definition are the terms interpersonal, influence,
and goal.
• Interpersonal means between persons. Thus, a leader has more than one person
(group) to lead.
• ·Influence is the power to affect others.
• Goal is the end one strives to attain.
Basically, this traditional definition of leadership says that a leader influences
more than one person toward a goal.
After understanding the traditional definition of leadership let us understand the
standard definition
LEADERSHIP is a dynamic relationship based on mutual influence and common purpose
between leaders and collaborators in which both are moved to higher levels of motivation
and moral development as they affect real, intended change.
Three important parts of this definition are the terms relationship, mutual, and
collaborators. Relationship is the connection between people. Mutual means shared in
common. Collaborators cooperate or work together.
This definition of leadership says that the leader is influenced by the collaborators
while they work together to achieve an important goal.

42
4.2 LEADERSHIP STYLES

There are a number of different approaches, or ‘styles’ to leadership and

management that are based on different assumptions and theories. The style that individuals
use will be based on a combination of their beliefs, values and preferences, as well as
the organizational culture and norms which will encourage some styles and discourage
others.
i. Charismatic Leadership: The Charismatic Leader gathers followers through
dint of personality and charm, rather than any form of external power or authority.
ii. Participative Leadership: A Participative Leader, rather than taking autocratic
decisions, seeks to involve other people in the process, possibly including subordinates,
peers, superiors and other stakeholders. Often, however, as it is within the managers’
whim to give or deny control to his or her subordinates, most participative activity is
within the immediate team.
iii. Situational Leadership: When a decision is needed, an effective leader does
not just fall into a single preferred style, such as
using transactional or transformational methods. In practice, as they say, things are not
that simple.
iv. Transactional Leadership: The transactional leader works through creating
clear structures whereby it is clear what is required of their subordinates, and the rewards
that they get for following orders. Punishments are not always mentioned, but they are
also well-understood and formal systems of discipline are usually in place.
v. Transformational Leadership: Working for a Transformational Leader can
be a wonderful and uplifting experience. They put passion and energy into everything.
They care about you and want you to succeed.
vi. The Quiet Leader: The approach of quiet leaders is the antithesis of the
classic charismatic (and often transformational) leaders in that they base their success
not on ego and force of character but on their thoughts and actions. Although they are
strongly task-focused, they are neither bullies nor unnecessarily unkind and may persuade
people through rational argument and a form of benevolent Transactional Leadership.
Servant Leadership: The servant leader serves others, rather than others serving
the leader. Serving others thus comes by helping them to achieve and improve.

43
4.3 QUALITIES OF A GOOD LEADER

With the above detailed discussion of theories and styles of a leadership, we can
arrive at following qualities of a good leader:
i. Inspire action.
Try to paint a vision of the future that inspires your people to do whatever it takes
to get there. The best leaders also clear away the organizational roadblocks that constrain
employees’ natural creativity and initiative, unleashing a tremendous amount of energy
in the process.
ii. Be optimistic.
We all want to work with and for people who lift us up into the clouds instead of
dragging us down into the mud. Make sure to seek out the positives in your people,
helping them overcome their own feelings of self-doubt and spreading optimism
throughout your organization.
iii. Have integrity.
Research shows that the top thing that employees want from their leaders is
integrity. Be honest, fair, candid and forthright, and treat everyone in the same way that
you yourself would want to be treated.
iv. Support and facilitate your team.
For people to do their very best work, they need an organizational environment
that supports them by making it safe to take risks, to tell the truth, and to speak up ...
without being punished for doing so. Support your employees by creating this kind of
environment, and it will facilitate their progress toward attaining your organization’s
goals.
v. Have confidence.
Highly effective leaders know deep down inside that they and their team can
accomplish anything they set their minds to. Failure is not an option. Tentative leaders
make for tentative employees. If you’re confident, your people will be too.
vi. Communicate.
In any organization, knowledge is power, and great leaders ensure that every
employee, from the very top to the very bottom of the org chart, is provided with complete
and up-to-date information about the organization’s goals, performance, successes and
failures. To achieve this level of connection, you should also provide ample channels

44
for two-way communication between employees and managers, actively soliciting their
ideas for improvement and rewarding employees for submitting them.
vii. Be decisive.
One of the most basic duties of any leader is to make decisions. Highly effective
leaders aren’t afraid to be decisive and to make tough calls quickly when circumstances
require it. Once you have all the information you need to make an informed decision,
then don’t hesitate—make it. And once you make a decision, then stick with it unless
there is a particularly compelling reason for you to change it.
No matter what type of organization or industry you’re in, it’s possible to become
a more effective leader, inspiring your people to give their very best every day of the
week. Make a point of practicing these 7 leadership traits, and you will be a highly
effective leader too.

4.4 DEFINITION OF MOTIVATION

“The willingness to exert high levels of efforts to reach organisational goals,

conditioned by the effort’s ability to satisfy some individual need”
Although the general definition refers to effort toward any goal, here in our
discussion it refers to organisational goals because our focus is on work related behavior.
The three key elements in our definition are effort, organisational goals and needs.
The effort element is a measure of intensity. When someone is motivated he /she
try hard. However high levels of effort are unlikely to lead to favorable job performance
outcomes unless the effort is channeled in directions that benefit the organisation.
Therefore we must consider the quality of the effort as well as its intensity. Effort that
is directed toward and consistent with the organization’s goal is the kind of effort that
we should be seeking,
A need in our terminology is some internal state that makes certain outcomes
appear attractive. An unsatisfied need creates tension that stimulates drives with in an
individual. These drives generate a search behavior to find particular goals that, if attained,
will satisfy the need and reduce the tension.

4.5 IMPORTANCE OF MOTIVATION

Motivation is a very important for an organization because of the following benefits

it provides:

45
1. 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.
2. Improves Level of Efficiency of Employees
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.
3. 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.
4. 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:

46
• Effective co-operation which brings stability,
• Industrial dispute and unrest in employees will reduce,
• The employees will be adaptable to the changes and there will be no resistance to
the change,
• This will help in providing a smooth and sound concern in which individual interests
will coincide with the organizational interests,
• This will result in profit maximization through increased productivity.
5. 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.
Similarly, motivation is important to a business as:
1. The more motivated the employees are, the more empowered the team is.

47
2. The more is the team work and individual employee contribution, more profitable
and successful is the business.
3. During period of amendments, there will be more adaptability and creativity.
4. Motivation will lead to an optimistic and challenging attitude at work place.

4.6 THEORIES OF MOTIVATION

The motivation concepts were mainly developed around 1950’s. Main theories
were made during this period. For our purpose of understanding these theories can be
studied under two broad heads they are:
1. Content theories of motivation
2. Process theories of motivation
1. Content Theories of Motivation
In a historical perspective, the content theories tend to be the earliest theories
of motivation or later modifications of early theories. Within the work environment
they have had the greatest impact on management practice and policy, whilst within
academic circles they are the least accepted.
Content theories are also called needs theories, because they are generally
associated with a view that concentrates on the importance of determining ‘what’
motivates us. In other words they try to identify what our ‘needs’ are and relate motivation
to the fulfilling of these needs.
• Maslows Hierarchy of Needs
• “Management Assumptions” (Theory X and Theory Y)
• ERG Theory
• McClellands Need for Achievement, Affiliation and Power
• Herzbergs’ Two Factor Theory
Maslows Hierarchy of Needs
This is the most widely known theory of motivation and was hypothesized by
American psychologist Abraham Maslow in the 1940s and 1950s. Maslow put forward
the idea that there existed a hierarchy of needs consisting of five levels in the hierarchy.
These needs progressed from lower order needs through to higher level needs.

48
 The basic premise of the theory is that we all have these five levels of needs and
that starting at the lowest level we are motivated to satisfy each level in ascending order.
As each level is sufficiently satisfied we are then motivated to satisfy the next level in
the hierarchy. The five different levels were further sub-categorised into two main groups,
these being:
Deficiency needs - Maslow considered these the very basic needs required for survival
and security. These needs include:
• physiological needs
• safety needs
• social needs
Growth needs - These are needs associated with personal growth and fulfillment of
personal potential.
• esteem needs
• self-actualization needs
In Maslow’s theory we can never run out of motivation because the very top level,
self-actualization, which relates to the achievement of our full potential, can never be
fully met.

49
 Maslow’s theory has been widely embraced and taught within the business world
and few people who have attended a company supervision or basic management training
course are unlikely not to be familiar with this theory.
Management Assumptions” (Theory X and Theory Y)
Douglas McGregor further developed the needs concept of Maslow and
specifically applied it to the workplace. McGregor maintained that every manager made
assumptions about their employees and adopted a management approach based upon these
assumptions. He maintained there were two main categories and that managers adopted
one or the other.
The first category, which he termed Theory X, he maintained was the dominant
management approach and assumed:
• the average human being has an inherent dislike of work and will avoid it if possible,
• because of this most people needed to be coerced, controlled, directed and
threatened with punishment to get them to put adequate effort into the achievement
of organisational objectives, and
• The average person prefers to be directed, wishes to avoid responsibility, has very
little ambition and wants security above all else.
McGregor maintains that the application of this approach, as well as
misunderstanding the real needs of employees, creates a self-fulfilling outcome because
it forces people to become like this—they have no alternative.
McGregor proposed an alternative set of assumptions which he called Theory Y.
The assumptions here are virtually the opposite of Theory X. They are:
• Work is as natural as play or rest.
• External control and threat of punishment are not the only means of bringing about
effort towards organisational objectives. People will exercise self-direction and
self-control towards the achievement of objectives they are committed to.
• Commitment to objectives is a function of the rewards associated with their
achievement.
• The average person learns under proper conditions to not only accept responsibility
but also seek it.
• The ability to seek and develop innovative problem solving approaches is widely,
not narrowly distributed across the whole population.

50
• In most work organisations the abilities of most employees is only partially utilized.
McGregor advocated that the application of Theory Y, would not only meet the
needs of the organisation but also those of the employee. He believed that Theory X at
best only met Maslows Deficiency needs, whilst Theory Y also met the Growth Needs.
You would thus have more motivated employees if you adopted Theory Y.
ERG Theory
Clayton Alderfer revised Maslow’s theory in 1972. He reduced the levels in the
hierarchy from five to three and termed these Existence needs, Relatedness needs
and Growth needs. His most significant contribution, however, was to alter Maslow’s
concept of a one-way progression up the hierarchy, to one that allowed for regression to
lower levels if these needs are no longer being met. This is a more realistic approach as
it recognizes that, because a need is met, doesn’t mean it will always remain met. For
example, if I were to remove all the air from the room you are in, would you be motivated
to keep learning?
McClellands Need for Achievement, Affiliation and Power
McClelland’s model argues that all people have these three needs. He further
maintains that there is a direct link between high-performing managers and their need
for achievement, and to a lesser extent their need for power and affiliation. In other
words, people with a high drive to succeed are more likely to be more highly motivated
than people with a low drive to succeed. He also maintains that it is possible to arrange
work situations and conditions to gain the high motivational benefits from those with a
high need for achievement—starting by employing people with a high need for
achievement.
Herzbergs’ Two Factor Theory
Next to Maslow, Herzberg’s theory has probably received the most attention within
the workplace. He developed a theory that differentiated between factors that satisfied
employees, and factors that dissatisfied employees. In his theory the opposite of
‘satisfaction’ is not ‘dissatisfaction’ but rather ‘no satisfaction’. Likewise, the opposite
of ‘dissatisfaction’ is ‘no dissatisfaction’.
Herzberg related job satisfaction to five factors:
• achievement
• recognition

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• work itself
• responsibility
• advancement
He termed these factors ‘motivators’ and related the m back to growth needs.
Herzberg related job dissatisfaction to:
• company policy and administration
• supervision
• salary
• interpersonal relationships
• working conditions
These he termed ‘hygiene factors’ and equated them with deficiency needs.
His major impact was to argue that providing hygiene factors (more money, better
working conditions, etc) wouldn’t create more motivation, only less dissatisfaction. Only
motivators could motivate.
2. Process theories of Motivation
Whereas the content theories concentrate on the question of ‘what’ motivates,
the process theories address more the issues relating to how the process works and
sustains itself over time, such as factors that determine the degree of effort, the
continuation of effort, the modification of effort, etc.
As with content theory, there are a number of process theories. These include:
• Equity theory
• Expectancy theory
• The Porter-Lawler Model
Equity theory
In this theory employee constantly assesses their level of effort against fellow
workers and the reward they receive for their effort. If they perceive there is a significant
difference between their level of effort and their fellow workers, they will Endeavour to
bring about equality of effort for everyone—by adjusting up or down their own
performance or by taking measures to adjust the level of their fellow workers. Likewise,
the relative reward for effort is also monitored. The message for managers is that

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employees need to be seen to be rewarded on a fair and equitable basis, and inequities
quickly adjusted.

Expectancy Theory
This has been an important theory in the history of the study of motivation. This
theory highlights that motivation is partly a decision-making process that evaluates effort
for outcomes. It highlights the involvement of the active cognitive processes and user
choice in the process. It also highlights the importance of the outcome representing a
valued reward for the individual involved.
The actual evaluation process is broken down into a number of parts:
1. If I put in effort, can I expect to perform at the required task?
2. Will performing this act or task achieve a desired outcome?
3. Can I expect the outcome will be available and forthcoming?
Porter-Lawler Model

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 This model of motivation although based on the expectancy theory, is probably
the most complete theory of workplace motivation. It is an integrated approach that
includes elements of nearly all the other motivation theories. This is important as it
helps explain why each of the various theories have a contribution to make but also
serious limitations. If we consider each as part of a more complex model of motivation
this starts to make sense.

The model thus suggests that using individual theories won’t work. A more integrated
approach is needed. It also differs from content theories, particularly ‘two factor’ theory,
in suggesting that performance leads to job satisfaction, rather than job satisfaction leading
to performance
The complexity of the model, and the need to evaluate and provide valued rewards
on an individual basis, are practical limitations. However it is difficult to argue with the
process of the model. The area of motivation is complex and the model highlights this—
rather than presenting an unrealistically simple approach, as is the case with many of the
alternative theories.
4.7 SUMMARY

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 This unit has discussed the meaning and definition of motivation. We have also
evaluated the importance of motivation, features of motivation and the various useful
theories of motivation which are suitable to the managers in the present organisation to
achieve the goals of individuals and organisations.

4.8 SELF ASSESSMENT QUESTIONS

1. Define Motivation. Discuss the elements involved in the definition of motivation

2. Explain the importance of motivation. Add a note on benefits of motivation to
individual and organisation.
3. Enumerate the essential features of good motivation system. Discuss the usefulness
of these features in modern organisation.
4. Discuss the content theories of motivation.
5. Explain the various process theories of motivation.
4.9 REFERENCES

1. Davar. The Management process. Mumbai: Progressive Corporation Pvt. Ltd, 2010.
2. Harold Koontz. Heinze Weihrich. Essentials of management, New York: MacGraw-
Hill,1993
3. J S. Chandan. Management Concepts and Strategies, New Delhi: Vikas Publishing
House PvtLimited,1997.
4. Chauhry Omvir, Prakash Singh. Principles of Management, New Delhi: New Age
International Publishers, 2012.
5. Peter. Drucker. Management of 21st Century, New York: HarperBusiness,2001.
6. Prasad L.M. Principles of Management, New Delhi: Sultan Chand & Sons, 2015.
7. Stoner J.A. and Freeman R.E. Management, New Delhi: Pearson Education
India,1995.
8. Richard L. Daft.Management, Massachusetts, United States: Cengage Learning, 2013.
9. S.K. Mandal. Management: Principles and Practice, Mumbai: Jaico Publishing
House, 2011.

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 BLOCK II : FUNCTIONS OF MANAGEMENT

UNIT - 5: PLANNING

Structure
5.0 Objectives
5.1 Introduction
5.2 Meaning and Definition
5.3 Nature of Planning
5.4 Need for Planning
5.5 Approaches to Planning
5.6 Major Steps in the Process of Planning
5.7 Types of plans
5.8 Concept and Process of MBO
5.9 Introduction to Decision Making
5.10 Meaning of Decision Making
5.11 Decision Making Process
5.12 Summary
5.13 Key Words
5.14 Self Assessment Questions
5.15 References

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5.0 OBJECTIVES
After studying this unit you should be able to;
• Discuss the need for planning
• Highlight the importance of planning
• Assess the various approaches to planning
• Describe the process of planning
• Discuss the various steps involved in planning
• Discuss the various types of plans
• Explain the process of MBO
• Examine the types and steps in Decision making process.
• Evaluate the techniques of Decision Making
5.1 INTRODUCTION
Planning as a management discipline emerged in USA and other developed
countries around 1950s. By 1965, it came in vogue and large undertakings began to
practice it. Since 1965 it has gained much recognition and wide acceptance all around.
Even in India it entered the academic field and came to be taught in the Indian Universities
and management institutes.
Planning is the key management function. The functions of organizing, leading
and controlling all carry out the decisions of planning. The increased emphasis on planning
can be seen rapidly in the great number of executive conferences, workshop and writings
on the subject the past few years.
Although some environments are less predictable than others all organizations
operate in uncertain environments. For an organization to succeed, management somehow
must cope with and adapt to change and uncertainity. Planning is the only tool management
has to help it adapt to change. If an organization does no planning its position and fate
five years hence will mostly be the result of any momentum built up previously and of
luck (hopefully good). On its own the organization would follow some kind of course
however, it must plam. Otherwise it will have to have any rely on defensive reactions
rather than on planned actions. Management will be forced to respond to current pressures
rather than the organization long run.
Every manager plans in one way or another. However the approach to planning the
manner of arriving at plans and the completeness of plans can differ greatly from

57
organization .Formal planning (as distinguished from the informal planning that we do in
thinking through proposed actions prior to their execution) is an activity that distinguishes
managers from non managers. Formal planning also distinguishes effective managers
from ineffective ones.

5.2 MEANING AND DEFINITION

Planning is regards as a process of making decisions on what is to be done, When

and how. Most management scholars and practitioners consider planning as a process of
visualizing or anticipating the future. It is not enough to have a vision of the future. It
should be backed by ways and means of realizing it. Broadly planning is a process of
determining objectives, discovering alternative courses of action and choosing suitable
ones for achieving objectives, many stages are involved in the process of planning which
have to be tackled in a logical sequence.
In the next context of globalization of the business operations planning aprocess
of identifying strengths and weakness of an organization and matching them with
environmental threats of this nature is known as strategic planning.
Let us discuss few definitions of planning for a better learning:
“Planning is selecting and relating of facts and the making and using of assumptions
regarding the future in the visualizations and formulation of proposed activities believed
necessary to achieve desired results”
- Terry
“Planning is a process by which a manager looks to the future and discovers
alternative courses of action open to him”
- Joseph Massie
5.3 NATURE OF PLANNING
Planning is regards as a process of making decisions on what is to be done. When
and how. Most management scholars and practitioners consider planning as a process of
visualizing or anticipating the future. It is not enough to have a vision of the future. It
should be backed by ways and means of realizing it. Broadly planning is a process of
determining objectives, discovering alternative courses of action and choosing suitable
ones for achieving objectives, many stages are involved in the process of planning which
have to be tackled in a logical sequence.

58
 In the next context of globalization of the business operations planning aprocess
of identifying strengths and weakness of an organization and matching them with
environmental threats of this nature is known as strategic planning.
i. Planning Is An Intellectual Activity
In every planning process objectives are determined future is visualized
forecasted, alternative courses of actions are developed and finally suitablecourses of
action is selected for which managers require analytical abilities, imagination judgment
creativity and innovativeness. Therefore planning is considered as an intellectual process.
ii. Planning Is A Primary Function Of Management
The process of management starts with planning. It is only after planning various
activities that the structure of the organization is prepared. It is followed by staffing
directing and controlling. Without planning there is little organizing staffing directing
and controlling.
iii. Planning Involves Futurism
Plans are prepared for implementing them in the future. The planning process
calls for visualizing the future with the help of analysis of past performance and evaluation
of present position. Futurism has become an integral part of planning.
iv. Planning Involves Decision Making
In the process of planning after discovering various alternative courses action
the managers have to make a choice and select the best. For this purpose they have to
make decision
v. Planning Is A Goal Oriented Process
At the very outset the managers determine objectives. It is to achieve these
objectives that an action programme is formulated and implemented.
vi. Planning Is A Continuous Process
There is continuity and regularity in the planning process. It is an on going process
having no definable end. A set of carious plans made by the managers have to be revised
as per the changing environment. The managers keep a watch on the environment on a
regular basis and revise plans in the light of changing situations.
vii. Plan Is All Pervasive
Planning is the prime mover of an organization. By preparing and implementing
various plans different set of activities and resources of an organization are effectively

59
utilized for achieving predetermined objectives. Plans are made for various activities
carried out by different departments. Planning is the basic function of every manager. A
manner discharges his responsibility of directing and coordinating group effects to seek
objectives only by making sound plans and implementing them efficiently. Every,
managers irrespective of his level and position makes plan.
However the importance nature and magnitude of planning depends the level at
which it is made. Corporate planning at the top is broad fundamental and more strategic
compared to departmental planning and plans made by first linr supervisors. The scope
extent and importance of planning tends to decrease as n descends downward in the
organization
The nature of the problem area and degree of delegation of authority also effects
the coverage and scope of planning for example planning on vital matters affecting survival
and profitability of the organization is usually done at the higher level.
Planning is also regarded as a critical variable for the survival growth development
and diversification of organization activities. It is found in practice that highly developed
and profitability organization owe their success to sound planning and effectiveness in
implementation
The primacy and pervasiveness of planning may also be justified in terms of its
crucial place in the hierarchy of management functions. All managerial functions like
organizing staffing directing and controlling are by and large follow up functions.
5.4 NEED FOR PLANNING

You cannot develop a sound plant at any level of an organization without first
understanding and appreciating the necessary or planning if a manager does not believe
in the value of planning (and some managers do not) it is unlikely that he or she will
develop a useful plan.
To better appreciate the need for planning considers the following four important
factors.
1. The increasing time spans between present decision and future results
The time span separating the beginning of a project and its completion is increasing
in most organization. Managers today must look further into the future than ever before.
For example it took 10 years to develop the supersonic jet and 10 years for general
foods to develop maxim a concentrated instant coffee. Meanwhile Campbell Soup

60
Company spent 20 years in developing a line of dry soup mixes and Hills brothers worked
22 years to develop its instant coffee.
Obviously planning becomes very critical in situations where the results of
decision will occur long after the decisions actually are made. So managers must attempt
to consider what could happen that might affect the desired outcome. Effective planning
can require large commitments of time and money but management must seek every
way possible to minimize uncertainity and its consequences. Planning is the only tool
managers have to help them cope with change.
2. Increasing organization complexity
As organization become larger and more complex, the manager’s job also becomes
bigger and more complicated by the interdependence among the organization various
parts. It is virtually impossible to find an organization (or even a division of a large
organization) in which the decisions of the various functions such as research and
development, production finance and marketingcan be made independently of one another.
The more products an organization offers and more markets it competes in the greater
the volume of its decisions. One mid western bank for instance offers more than 175
services just for its consumers (not its business customers). Planning in these
circumstances becomes even more important for survival.
Planning enables each unit in the organization to define the job that needs to be
done and the way to go about doing it. With such a blue print of objectives there is less
likelihood of changing direction, costly improvising or making mistakes.
3. Increased external change
A major role of managers has always been that of change initiator A manager must
be an innovator and doer, someone in constant search of new markets business and
expanded missions Rapid rates of change in the external environment will force manager
at all levels to focus on larger issues rather than solely on solving internal problems.
The faster than pace of change becomes the greater the necessity for organized responses
at all levels in the organization and organized response spring from well thought out
plans.
4. Planning and other Management functions
The need for planning also is illustrated by the relationship between planning and
the other management functions. We already know that planning is the beginning of the
management process. Before a manager can organize, lead or control he or she must

61
have a plan. Otherwise these activities have no purpose or direction. Clearly defined
objectives and well-developed strategies set the other management functions into motion.
The effect of planning on the other management functions can be understood by
considering its influence on the function of control. Once a plan has been translated
from intention into actions, its relationship to the control functionbecomes obvious. As
time passes managers can compare actual results with the planned results. The
comparisons can lead to corrective action and that as well as see later in the book is the
controlling. The following management Application describes a company which has only
recently recognized the need for formal planning.
IMPORTANCE OF PLANNING
The need and importance of planning can be judged on the basis of following
factors:
i. Planning determines the future destination of an organization
At the first stage of the planning process the objectives of organization are
determined. All the activities are directed and coordinated for accomplishing the
objectives thereby making the organization a purposeful system with a predetermined
destination.
ii. Planning makes activities of employees meaningful
A clear understanding of the objectives helps the employees in knowing howtheir
work is related to organizational goals and enables them to direct their efforts to make
the contribution more valuable.
iii. Planning economics operations
Activities are planned to reduce inefficiency and wastage which leads to economy
in operations. It improves the performance of other managerial functions like organizing,
staffing directing and controlling by making the task of managing more effective.
iv. Planning helps in reducing the risk of uncertainties
The uncertainties associated with the future are exposed by using the technique
of forecasting which provides meaningful clues. Managers attempt to predict the nature
for identifying potential dangers and initiate action to reduce the adverse effects.
v. Planning leads to the discovery of new ideas and opportunities
Planning is an intellectual activity involving the use of analytical creative and
innovative abilities which may throw up ideas and generate opportunities for profitability

62
exploitation. Regular use of such abilities may inject dynamism in the management of
the organization
vi. Planning facilities co-ordination
Plans are made by managers at different levels of the organization which requires
co ordination. The corporate plan provides the guidelines and lays down the parameters
for different departments. First line supervisors plan within the departmental plan, thereby
providing complete co ordination of all activities from the lowest to the highest one.
vii. Planning facilitate efficient control
Control pre supposes the existence of planning without planning control has little
meaning. The objectives serve as a base for control. Actual results are compared with
objectives which also are a standard of performance . Deviations are sorted out and
necessary remedial measures are taken to improve the results.
viii. Planning provides direction
The objectives laid down in planning become guiding posts for directing and
mobilizing the activities of the employees. The quality of leadership motivation and
communication is conducted by the objectives. The knowledge of objectives on the part
of employees and their contribution acts as a motivation force and inspires them to
increase their efforts.
ix. Planning as a response of the management to cope with the changing
environment
Planning enhances the capabilities of the organization to cope with rapidly
changing environment. Managers keep track of the development which maylikely to affect
future and take suitable timely measures to deal with them, Without heroic planning
efforts the uncertainty associated with the future environment cannot be handled and
managed properly. Keeping in view the degree of profitability of occurrence of events
in the future managers develop alternative plans.
The increased importance of planning for business organization is a direct result
of the fast changing environment consisting of socio economic technological political
and legal factors which are complex and dynamic. The following points also indicate
importance of planning.
1. Coping with future uncertainty and change
It is planning by means of which managers is able to deal effectively with the
future uncertainty and change.

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2. Focuses attention on objectives
By its very nature planning is directed towards achieving enterprise objectives
that is what the enterprise aims at achieving in a given period and how it intends to
accomplish the predetermined objectives.
3. It obtains economical operations
Planning helps to minimize cost by bringing about efficiency in operation and
consistency all around eliminating expensive random inconsistent and haphazard activities
and overlapping efforts.
Without planning production would reach a stage of utter chaos and confusion
and would be so expensive.
4. Foundation for successful operations
Planning is the foundation of most successful operations of an enterprise indicating
the direction of its growth.
5. Provides performance standards and facilities control
A good plan clearly establishes and specifies its goals how will it be possible for
managers to check up and measurer their subordinates accomplishment? It is planning
that provides specific standards in terms of pre determined goals to check measure and
control.
6. Stimulates environmental awareness
For the successful operation of a business it becomes necessary for managers to
be well awake to the constant environmental changes that are taking place today and are
likely to occur in the future as a result of socioeconomic. political and technological
influences. It is planning that helps managers establish an agreeable relationship with
the environment and thus control the events posing risk and uncertainty.
7. Fosters unity of purpose
Within an organization there are functional departments like production finance
marketing and personnel. For carrying out their respective functional activities toward
the achievement of goals they rely on the so called functional plans which are essentially
based on and within the ambit of the corporate plan. It is fundamentally planning that
fosters unity of purpose within these plans.

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8. It helps foreseeing and identifying potential opportunities and risks,
In an organization long term planning it seems impossible to eliminate altogether
the risk and uncertainty of its decision. However planning helps the organization to foresee
and identify those areas of potential and challenging opportunities risks and uncertainties
and thus direct its efforts to minimize these risks and uncertainties and to better avail of
the opportunities (o the advantage of the organization.

5.5 APPROACHES TO PLANNING

Managers adopt various approaches to planning based on the degree of participation

delegation of authority and required capabilities of lower level managers.
1. Top Down Approach
Normally adopted in family managed organizations or by tradition or conservative
managers in this approach authority and responsibility for planning is centralized at the
top. The top management formulates basic policies determines corporate objectives
makes strategies and devises a course of action for achieving the objectives. On
preparation the plans are communicated to the managers at the lower level responsible
for implementation. The managers at the lower level will have little say in planning but
are involved only in implementation
The organization tends to be highly centralized because the mangers at the higher
level are more occupied with preparing plans and exercise final authority. Very little
authority is delegated to the lower level managers that too in implementation of plans.
The top down approach is based on the assumption that the managers working at
higher level are professionally qualified and well experienced. However it is found in
practice that many organizations do adopt modified and more refined form of this
approach either by getting lower level managers directly involved in the process or
indirectly by seeking their suggestions and ideas. It is done to get the benefits of their
involvement in execution.
2. Bottom up Approach
Based on the assumption that in planning thinking are closely related and both
functions can be performed by same managers a high degree of flexibility is maintained
in planning in the bottom up approach
Accordingly rough draft or tentative proposals on various plans originate at the
lower level and are communicated to the higher level managers for review and final

65
approval. However it can be profitably used provided the managers at the implementation
level have the requisite knowledge awareness and creativity to undertake planning the
basic job of top executives is to unify and coordinate various sub plans originating from
lower levels are not confined participative approach to planning managers at lower levels
are not confined to implementation only but are equally involved in initiating plans.
In the words of Alwin Brown it is impossible to separate all the planning from the
duty of doing Brown contented that planning is done most effectively by the managers
who have to carry it through.
3. Composite Approach
Combining the attributes of top do and bottom up approaches the composite is
more popular here the top executives provide guidelines parameters and limitations under
which middle and lower level managers are expected to formulate tentative plans which
are communicated upwards for review and approval. The authority for making plans rests
with the top xecutives.
The composite approach offers the advantages of top down ad bottom up
approaches in s musch as the managers at the action level are associated with thinking
process of planning and their involvement in thinking is regulated by prescribed guidelines
and parameters.
4. Team Approach
It is always advisable to have as many managers s possible to participate in planning
the more active the managers are in planning the more enthusiastic they will be in carrying
out plans. In the team approach the job of initiating plans is assigned to a team of managers
from concerned areas. They do the spade work for preparing plans initiate planning identify
need and importance of plans, examineand analyze both internal as well s external
environment formulate tentative proposals which are submitted to the chief executive
under whose command they have been working. The team of managers works as a brain
of the chief executive suggesting and recommending proposal to him. However the
ultimate authority for approval lies with the chief executive.
The team approach has practical utility especially when the task of preparing plans
requires specialized knowledge of different areas.
In practice organizations use a combination of approaches as per requirements.
Nonetheless it is evident that joint participation of subordinate managers in the planning
process in any form is beneficial to the organization.

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5.6 MAJOR STEPS IN THE PROCESS OF PLANNING

Although the steps in planning are presented here in connection with major
programmes, such as the acquisition of a plant or a fleet of jets or the development of a
product, managers would follow essentially the same steps in any thorough planning.
Since minor plans are usually simpler, some of the steps would be more easily
accomplished, but the practical steps listed below, and diagrammed in Figure 6.4 are of
general application. In practice, however, managers must study the feasibility of possible
courses of action at each stage. For example, in establishing objectives, it is necessary
to have some idea about the premises underlying the plans. An ambitious objective of
increasing sales by 200 per cent may be unrealistic in an environment with a projected
economic recession. Similarly, feedback is also essential. In formulating supportive plans,
there may be need to re-evaluate and change the overall objectives set earlier. Also, a
discriminating manager obviously would not use Rs. 100 worth of time to make a decision
worth 50 paise, but it is shocking to see 50 paise worth of time used to make a planning
decision involving millions of rupees.
Being Aware of Opportunities
Although it proceeds actual planning and is therefore not strictly a part of the
planning process, an awareness of problems opportunities in the external environment
as well as within the organization is the real starting point for planning. It is important to
take a preliminary loot at possible future opportunities and see them clearly and
completely. All managers should know what problems they wish to solve and why, and
know what they expect to gain. Setting realistic objectives depends on this awareness.
Planning requires realistic diagnosis of the opportunity situation, (see Figure 6.4)
1. Identifying and Establishing Objectives
The broader objectives need to be identified and stated in specific terms. These
objectives relate to the organization as a whole and functional areas.
• Overall objectives suggest the type of activities and their necessary sequence.
• These objectives point out where these activities have to be carried out.
• They will also determine the personnel to whom the duties and responsibilities of
the jobs connected with these activities are to be assigned.
• The objectives will also show the manner of doing the j ob, the methods and techniques
employed for the accomplishment of the work.

67
• Objectives also pinpoint the timing, as to when job is to be completed which is the
central element in every phase of planning. When all this done, it will be easier to
check and evaluate the actual performance against the expected performance in the
plan/Scheduled completion dates, qualitative standard specifications for output and
budgeted cost for a project provide good examples of what the objective will cover.
2. Premizing
The second step is premising. This essentially involves critical assessment of the
present status of the organization, that is, knowledge about the presentactivities being
carried on by the organization and future outlook on activities to be planned and their
possible effect on the total environment-internal external-existing activities or in other
words, the expected environment of plans inoperation.
This step requires the collection of data that will help the planner for his intelligent
planning. The source for data availability will be past experiences, usages and practices
of other companies, observation, company’s records, data obtained fro research and
experiments,
Equiped with this data the planner will go ahead to find out the needs of the
potential customers, dealers and individuals to be served.
As the developing situations demand, the manager will have to think aloud and
come up with some creative and new ideas for product methods and services.
This step encompasses forecasting, that is, what will be the future trends of
markets, competition, future sales potential, price trends, changes in demand range of
products, developments in technology, cost of manufacture and other relative factors of
finance-tax rates, policy, dividends, fiance involved in any industrial expansions, industrial
structure - new plants, modifications or revision in existing plans, socio-economic and
political environments.
We will come to a details discussion of forecasting, a little later.
3. Making Assumptions’
In planning process this step has its own importance.
Assumptions all how the total environmental (internal and external) factors will
behave, along with future facets in fact lead on to the development of the plan with the
showing up of good, average and bad economic conditions.

68
4. Determining Alternative Courses
This fourth step aims at searching, examining more promising - that hold most
gainful possibilities, alternative courses of action from amongst the several alternative
courses available.
5. Evaluating Alternative Courses
Having determined promising alternative courses of action the next step is to
evaluate them, weighing the various factors in light of promises and goals, with the help
of mathematical models and computing techniques as offered by operations research, if
necessary.
6. Selecting a course
This step involves the selection of optimum - most desirable, courses of action.
In this step, the plan itself emerges and develops. Now the plan is reduced& can
be writing which give to and rendered as a formal document. The plan is ready for
operation.
7. Arranging Detailed Sequences and Setting Specific Targets
For placing the plan in operation, its relations to all activities affected by it are
worked out.
Where when by whom the necessary action as the plan envisages to achieve the
objectives to take place is determined.
At this stage a plan may be called a budget schedule a routing or any other form of
target.
8. Follow up review checking up the progress of plan
This is the last step in planning and is concerned with the followup continual
review check up and if necessary withe the modification or revision of the initial plan in
light of experience gained as the success of the plan will depend upon the results obtained
i.e., its effectiveness in actual performances.

5.7 TYPES OF PLANS

Simply defined a policy is a verbal written or implied basic guide that provides
direction to a manager for action.
What policies achieve ?

69
 Policies acting as principles thereby provide rules of action for achieving
organizations specific objectives (goals).
The co-ordinating links in the organization are provided by policies. They govern
and guide the actions of an organizations overall performance and its objectives. These
provide him board guidelines for the achievement of company’s objectives.
While planning a course of action of policies is indispensable. The policies of
enterprises render purposive ness to the objectives.
With the guidelines as provided by the policies goal becomes clearer and more
realistic.
Policies are essential to foster co ordination so essential for effective group
working in short policy is an excellent means to achieve an intended objective.
Types of policies
There are many kinds’ o types of policies. Classifications of policies in a particular
enterprises will depend on purpose use subject extent of influence whether verbal or
written.
Types of policies generally in vogue in a typical enterprise are :
1. Basic Policy
This is comprehensive in its scope and permeates throughout the organization.
Basic policy formulation is the responsibility of the management at the highest say for
example Board of Directors in case of an incorporated company.
The basic policy is further split up into departmental divisions and sectional parts
of the organization for implementation under the overall supervision of the top
management .Within the ambit of basic policy comes marketing policy with all its
emphasis on the customer.
2. General Policy
This is more specific type of policy brought in application by middle level
managers. Purchasing policy comes within the scope of application of general policy
and it is concerned with giving preference to local suppliers.
3. Departmental policy
This is the most specific type of policy with its applicability confined to routine
activities in the department. Its use is made by first level managers, such as supervisors.

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4. Advantages of Policies
Policies help considerably in the overall development of those who apply them.
Policies encourage the development of sound judgment
The use of policies tends to bring about a better understanding and knowledge of
what is trying to be accomplished.
5. Characteristics of a Sound Policy
Sound policies by their very nature should be comprehensive in their scope flexible
in their implementations and excellent guides.
A sound policy must ensure that there exists good understanding and.harmony
between the departmental or sectional policies and the main (corporate) policy. A policy
m,ust be uniform in its application. A sound policy must breathe equity and justice fairness
to one and all affected by it.
Sound policies must be based on facts and sound judgement Policies to be sound
must reflect the intended objectives.
Policies to be effective in their implementation should be clear define positive
unambiguous consistent and well communicated and should be clearly understandable to
those affected by their decision. As far as possible policies to be sound should be stated
in writing Non written (verbal) or implied policies carry on effective voice sometimes
sound policies to obtain acceptance as guides must be reasonable permanent and stable/
A sound policy during the course of its implementation requires periodic check
ups to find out how it has worked and does it necessitate any modification or altogether
revision of it.
In a sound policy formulation all possible contingencies should be anticipated so
that the organization may not be taken by surprise by the course of events.
A policy to be sound should never be conceived hastily.
Procedures
Procedures are also plans in as mush as they involve a course of action and clarify
how action is to be carried out in practice to achieve an organization objectives as stated
in the policies.
The procedures provide a sequence of actions directed at a single goal(usually
short term) of a repetitive nature eg procedure for recruiting employees for purchasing
materials or for preparation and dispatch of invoices to customers.

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 Perhaps a good example of a procedure that can be cited is that adopted in the
systematic selection of employees involving following steps.
1. Preliminary interview
2. Application blank
3. Reference check
5. Final interview
6. Supervisors approval and acceptance
7. Medical check up
8. Appointment and
9. Induction or orientation
5. Methods
One of the most supporting means of an action is a method
A method is also categorized as a standing plan more specific in scope than a
procedure.
Methods may better be termed as work plans since they provide the manner and
the proper order keeping in full view the objective facilities available total time expense
and effort involved with other details for performing the individual tasks in particular
assignments.
Standard methods contribute to the efficiency in working and considerably
experience knowledge and skill and his creative ability all this considerably matter in
the solution of a problem in methods.
In practice methods are generally used in manufacturing and office work. However
they do work with success in the area of marketing planning also.
Management are quite prone to bring improvement in methods. Their efforts are
constantly directed to find out how best manual methods can be improved by mechanical
devices to bring about efficiency economy and resultant increase in the output of an
employee.
6. Rules
Rules reckon with the simple and most specific type of standing plans they are
characterized by rigidity and being more specific than a policy.

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 A rule demands whether a specific and definite action be taken or not taken with
respect to a situation so to say a rule guides action.
The observance of the rules does not permit any lenience to come in the way of
their application. Generally w find No Smoking signs and boards prominently displayed
in the factories particularly those dealing with inflammable materials. This is a good
example of the rule which the management insist the workers to strictly observe.
A budget is also essentially a plan expressed in qualitative terms. This is the
numerical expression of the anticipated results. The anticipated results may be expressed
in financial terms or non financial (monetary) terms ie in terms of a quantity to be
produced material to be used number of hours to be worked and quantity to be soul dot.
Like any other plans budget are flexible realistic and operate within a framework.
Budgets are drawn on the basis of well defined specific plans and policies.
Plans and policies are formulated on the basis of corporate business enterprises and
forecast of market trends supply factor and consumer preferences.
Within the corporate budget or plan as set up by a company are covered sales
budget, advertising budget sales promotion budget production budget materials budget
costs budget personnel budget equipment budget and profit budget.
Budgets serve a good purpose as a tool for planning and control. Top management
in an enterprises makes use of budgets in appraising the performance of divisions and
departments operating with in the enterprise and also in assessing the overall performance
of the enterprise.
A budget is distinguishable from other plans in the following respects.
I. A budget serves two purposes. It is a tool for planning as well as a controllingdevice.
II. A budget covers a specific period for example the business or financial year as is
generally the case of course we may have quarterly or monthly budgets also and finally.
III. Budgets are expressed in financial terms as most values are expressed in monetary
terms.
Budgets obtain better planning and improved co ordination, they also ensure
efficient control through establishment of standards.
8. Programmes
Programmes being specific and comprehensive come within single use plans.

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 Essentially programmes show the way and lay down procedure for activities to
take place within time limit for accomplishing the stated objectives.
A programme usually involves necessary financial and operating budgets and other
resources needed in the accomplishment of objectives.
The constituents of a programme include: objectives (goals), policies, procedures,
rules, methods and resources to be made use of for obtaining the objectives.
1. CORPORATE PLANNING
Planning activity can be undertaken at various levels of the organization. Itmay
cover the whole organization or part of it. When planning is undertaken at the organization
level it is referred to as corporate planning. In management literature sometimes even
corporate planning strategic planning long range planning and strategic management are
used interchangeable-because of the similarobjectives of all these. However some
distinction exists among them at least atconceptual level. There are some people who
use corporate planning as synonymous tototal management process for example Hussey
has defined corporate planning as follows.
Corporate planning includes the setting of objectives .organizing the work people
and systems to enable those objectives to be attained, motivating through the planning
process and through the plans measuring performance and so controlling progress of
the plan and developing people through better decision making clears objectives more
involvement and awareness of progress.)
This definition of corporate planning is quite broad and may cover many
management functions not necessarily related to planning aspect of management
functions. For example planning sets further course of action and its implementation is
not strictly the planning function. Therefore the concept of corporate planning should
be taken as the total planning activities in the organization and not the total management
functions.
Similarly corporate planning is used as long range planning because longrange
planning emphasis the future orientation of the process. However there is growing opinion
which disfavors the use of long range planning as synonymous with corporate planning
because it underemphasizes the comprehensive nature of corporate planning. The process
of corporate planning is concerned with all aspects and not only the long range. Although
the future of orientation is certainly the most important argument in favour of the process
long range planning without the back up of short range planning will fail. Difference

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between corporate planning and long range planning can be understood by classifying
the more comprehensive corporate planning further into segments. Normally corporate
planning is divided into strategic planning or long rang planning and operational tactical
or short range planning.

2. STRATEGIC PLANNING
Planning is concerned with future. Thus a plan process must involve different
degree of futurity. Some parts of the organization require planning for many years into
the future while others requires planning over a short period only. For example capital
expenditure is more of long term nature while budget for ayear has short term orientation.
The former is called strategic planning or longrange planning. Strategic planning has
been defined by Anthony as follows.
Strategic planning is the process of deciding on objectives of organization on
changes on these objectives on the resources used for attain these objectives and on the
policies that are to govern the acquisition use and disposition of these resources.
Examples of strategic planning in an organization may be planned growth rate in
sales diversification of business into new lines type of products to be offered and so on.
This way strategic planning encompasses all the functional areas of business and is
affected within the existing and long term frame work of economic political technological
and social factors Strategic planning also involves the analysis of various environmental
factors particularly with respect to how organization relates to its environment.
A basic problem in strategic planning is the period for which plan is to be
formulated. Normally more than one year period is considered to be a long one. Usually
for most of the organizations it ranges between 3 and 5 years. However there should be
some logic in selecting the right time range for planning. In general since planning and
forecasting that underlies it are costly and organization should not plan for a longer
period than is economically justifiable yet it is risky to plan for a shorter period. The
choice of period lies in the commitment principle which suggests that logical planning
encompasses a period of time in the future necessary foresee as well as possible the
fulfillment of commitments involved in decision made today. What the commitment
principle implies is that long range planning is not really planning for future decisions
but rather planning for the future impact of todays decision. In other similar things
therefore the most striking application of planning period would be the setting up of
time period long enough to anticipate the recovery of costs sunk in the course of action.

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3. OPERATIONAL PLANNING
Operational planning also known as tactical or short term planning usuallycovers
one year or so. It is aimed at sustaining the organization in its production and distribution
of current products or services to the existing markets. Operational planning can be
defined as follows.
Operational planning is the process of deciding the most effective use of the
resources already allocated and to develop a control mechanism to asure effective
implementation of the actions so that organizational objectives are achieved.
Operational planning taken in this way answers the questions about a particular
functions as follows :
1. Why is the action required?
2. What action is to be taken?
3. What will the action accomplish?
4. What are the results of the action required?
5. What objectives and conditions must be met?
Operational planning is undertaken out of the strategic planning. The various
examples of operational planning may be adjustment of production within given capacity,
increasing the efficiency of operating activities through analysing past performance,
budgeting future costs, programming the comprehensive and specific details of future
short term operations and so on.
5.8 CONCEPTS AND PROCESS OF MBO

MBO is both a philosophy and approach of management It is a process where by

superiors and subordinates assess the contribution of each individual and integrate
individuals with the organization so as to make best use of organizational resources.
Thus MBO is a system for integrating managerial activities. For example Koontz an
others have defined MBO as follows.
MBO is a comprehensive managerial system that integrates many key managerial
activities in a systematic manner consciously directed towards the effective and efficient
achievement of organizational objectives.
The integration of individual and organizational objectives through MBO has been
emphasized by Chakravarty when he has defined MBO as follows.

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 MBO is a result centered non specialist operational managerial process for the
effective utilsation of materials physical and human resources of the organization by
integrating the individual with the organization and organization with the environment N.

PROCESS OF MBO
MBO is a system for achieving organizational objectives enhancement of employee
commitment and participation Therefore its process should facilitate.

Organizationa l P lanning P rem ise s

Ke y Re sults are as

Superiors obje ctive

Subordina te s
Superior’s
state me nts of his
recomm e nda tion
obje ctives

M atching re source s Subordina te s agree d

objective s

Subordinates
P erf orm ance

P erform ance re vie w

and appraisa l

Above diagram suggests the following steps in MBO process.

1. Setting of organizational purpose and objectives :
The first basic step in MBO is the definition of organizational purpose and
objectives. Questions such as why does the organization exist. What business are we in
and what should be our business provide guideliri^for the statement of purpose. This in
interaction with external factors then determines the Ions range strategicobjectives like
(i) whether to achieve growth through expansion in the same line of business or diversity

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(ii) what should be the degree of vertical integration and so on. usually the objectives
setting starts at the top level of the organization and moves downward to the lowest
managerial levels. This will go in a sequence like this9i) defining the purpose of
organizational(ii) long range and strategic objectives (iii) short term organizational
objectives(iv) divisional/departmental/ sectional objectives (v) individual managers
objectives
2. Key results Areas :
Orgnisaional objectives and planning premises together provide the basis for the
identification of key result area (KRAs) it may be emphasized that KRAs are derived
from the expectations of the various stakeholders and indicate the priorities for
organizational performances. KRAs also indicates the present state of an organizations
health and the top management perspective for the future. Examples KRAs applicable to
most of the business organizations are (i) Profitability (ii) market standing (iii) innovation
(iv) productivity (v) worker performance (vi) financial and physical resources (vii)
manager performance and (viii) public responsibility, madura coasts limited which has
successfully installed MBO defined its KRAsduring 1978-1979 as follows, (i) Financial
resources (ii) profitability (iii) development of organization (iv) management
development (v) labour relations (vi) diversification and (vii) cotton development. Even
though KRAs are more durable the lit of KRAs gets considerable changed over the period
in response to new needs and opportunities sometimes the achievement in a particular
KRA also provide the impetus for a new KRA in future. For example when Madhura
coats achieved its objectives of diversification it did not remain this KRA for the
subsequent period.
3. Setting Subordinates :
Objectives the organizational objectives are achieved through individuals therefore
each individuals manager must know in advance what he is expected to achieve. Every
manager in he managerial hierarchy ks-both superior and subordinate except the person
at the top level and lowest level, therefore there is a series of superior and subordinates
relationships^ The process of objectives setting begins with superiors proposed
recommendations for his subordinates objectives in turn the subordinates states his own
objectives as perceived by him. Thereafter the final objectives for the subordinate are
set by the mutual negotiation between superior and subordinate. In the beginning of MBO
process in an organization there may be wide gap between the recommended objectives
by the superior and subordinates stated objectives because the latter may like tp put

78
lesser burden on him by setting easily achievable objectives. However with he experience
gained over the period of time this gap narrows because of narrowing down of the
perception of superior and subordinate about what can be done at aparticular level.
4. Matching resource with objectives :
When objectives are set carefully they also indicate the resource requirement in
fact resource availability becomes an important aspect of objective setting because.
Therefore there should be matching between objectives and resources/By relating these
to objectives a superior manager is better able to see the need and economy should be
done in consultation with the subordinates manager.
5. Appraisal :
Appraisal aspect of MBO tries to measure whether the subordinates is achieving
his objective or not. If not what are the problems and how these problems can be overcome.
Appraisal is undertaken as an on going process with a view to find out deficiency in the
working and also to remove it promptly. It is not taken as a matter of system to ensure
that everything is going as planned and the organization is able to achieve its objectives
6. Recycling :
Though appraisal is the last aspect of MBO process it is used as an input for
recycling objectives and other actions. Objectives are neither set at the top and
communicated o the bottom nor are they set at the bottom and go up. Objective setting
is ajoint process through interaction between superior and subordinate. Therefore what
happens at each level may affect other levels also. The outcome of appraisal at one level
is recycled to see if the objectives have been set properly at the level concerned and
also at the next higher level. This can be presented in fig 7.3
R Objective setting

E
Action planning
C
Y Performance review

C
The three aspects involved in recycling process include setting of objectives at
various action planning in the context of those objectives and performance review. Each
of these aspects gives for others. For example objectives give basis for action planning

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which in turn gives basis for performance review and performance review gives for
objective setting and action planning this process goes on a continuous basis.

5.9 INTRODUCTION TO DECISION MAKING

Managers at all level make decision. These decisions may ultimately influence
the survival of the organization. All decisions, however, will have some influence- large
and small- on performances. Thus, it is important for managers to develop decision-
making skills. Like it or not, managers are evaluated and rewarded on the basis of
imp.winnce, number, and results of their decisions. The quality of decisions that managers
reach is the yardstick of their effectiveness and of their value to the organizations. Thus,
decision-making is an important managerial activity, and a central point of the managing
process. Decisions are made by every manager though its significance and coverage
depends on the situation, problem and hierarchy. Indeed, the managers manage by making
decisions and getting them implemented. It is a regular exercise on the part of manager.
He makes decisions for solving problems, handling the situation and resolving crises.
By making decisions the manager translates various plans such as objective, policy and
strategy, etc., into action. These actions are converted into outcome or results by
implementing decisions.
Decisions are made on managerial functions like planning, organizing staffing,
controlling and other matters related to various functional areas such as production,
marketing, finance and personnel, etc. Decision-making involves many stages. The success
or failure of an organization depends on the quality of decisions. If the managers make
untimely and incorrect decisions on important matters, it may endanger the existence of
the organization.
5.10 MEANING AND DEFINITION OF DECISION MAKING
Decision Making is a managerial process involving selection of a particular course
of action out of alternatives for achieving given objectives or solving a problem. It takes
place only when more than one option is available ton the manager. By taking decision,
a manage attempts to reduce the gap between the present and the desired situation. A few
important definitions are:
Decision-making defined :
“Management decision-making a work the manager performs to arrive at a
conclusion and judgement.”
- Alien

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 “Decision-making is a conscious and human process of indentifying and choosing
alternative courses of action in a manner appropriate to the demand of the situation. The
act of choosing implies that alternative courses of action must be weighted and weeded
out.”
- Kreitner
“Decision-making is a conscious and human process involving both individual
and social phenomenon based upon factual and value premises which concludes with a
choice of one behavioural activity from among one or more alternatives with the intention
of moving towards some desired state of affairs.”
- Shull, Delberg and Gumming
“Broadly, decision-making involves making an organization committed to adoption
of a specific course of action and use of resources in a particular manner. To identify
the basic nature of decision-making, George Terry has treated managerial life as “a
perpetual decision-making challenge.”
“It is a process of a solution selected after examining several alternatives chosen
because the decider foresees that the course of action he elects will do more than the
others to further his goals and will be accompanied by the rewest possible objectionable
consequences.”
- Manley H. Jones
According to Peter Drucker: “Whatever a manager does, he does through decision-
making.” In every situation, a manager faces a challenge of making correct, timely and
effective decisions to get the best out of the situation. All decisions made by managers
are directed at making the organization a functional and productive unit, preserve its
identity and maintain continuity in its working life.
5.11 DECISION - MAKING PROCESS
The Decision making process is necessary to develop and evaluate various
alternatives to solve particular problem.
The process of decision making as follows.

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 Specific Identification Search for Evaluation of
Objectives of problems alternatives alternative

Feed back
Choice of
alternative
Results Actions

Decision-making process

1. Specific Objective :
The need for decision making arises in order to achieve certain specific objective.
Every action of human being is goal directed. This is true for decision making also which
is an action. Therefore, the starting point in any analysis of decision making involves the
determination of whether a decision need to be made. In fact, setting of specific objective
itself is an outcome of an earlier decision. However, since the objective setting is an
outcome of earlier decision, this may not be considered truly as the first step of decision
process but provides framework for the decision.
2. Problem Identification :
Science a particular decision is made in the context of certain given objectives,
identification of problem is the real beginning of decision-making process) A problem
is a felt need, a question thrown forward for solution. It is the gap between present and
desired state of affairs on the subject-matter of decision. Itis just like the diagnosis of
patient by the doctor. When a doctor makes a diagnosis he has a normal, healthy person
and he also has a fairly clear concept of what a healthy person is. With this model as the
desired result, he looks for disparities in the patient’s actualstate of health or factors

82
which indicate that his future health will fall short of normal. In the case of management
decision, however, a manager cannot y on a commonly accepted norm such as healthy
person. The objectives, if set precisely and specifically on the subject-matter of decision,
will provide clue in identifying the problem and its possible solution. Further in
management, a problem exists whenever one faces a question whose answer involves
doubt and uncertainty. If there is no solution to the problem, it cannot be treated as
problem from decision point of view, though the consequences of not solving this
problem may be terrible. A problem can be identified much clearly, if managers go through
diagnosis and analysis of the problem.
3. Diagnosis :
The term diagnosis has come from Medical Science where it is used as the process
of identifying a disease from its sign and symptoms. A symptom is a condition or set of
conditions that indicates the existence of problem. For example, a patient has certain
symptoms on the basis of which his disease can be identified. Symptoms occupy an
essential of problem-solving process they signal the existence of problem and guide the
search for the underlying problem. For example, if an organization has high turnover of
its employees, it indicates that something is wrong with the organization. The symptom
of high turnover may provide the clue to the real problem and managers can overcome
the problem by taking appropriate action (decision making involves in taking action).
Often managers fail to diagnose the problem correctly and sometimes they treat symptom
as problem. Therefore, they should do this exercise very carefully^ Diagnosing the real
problemimplies knowing the gap between what is and what ought to be, identifying the
reasons for the gap, and understanding the problem in relation to higher objectives of
the organization.
4. Analysis :
While the diagnosis of problem gives the understanding of what should be done
in terms of decision making, analysis of problem takes it a step further. The analysis of
the problem requires to find outwho would make decision, what information would be
needed, and from where the information is available. This analysis may provide managers
with revealing circumstances that help them to gain an insight into the problem.) The
whole approach of analysis of problem should, however, be based around critical factors
like the availability of information for making decision, criticality of decision, and the
time available for making decision. For example, information may be available from
external and internal sources and some of the information may not be available at all.

83
Similarly the criticality of decision will determine the level at which the decision can
be made. Thus diagnosis and analysis of problem requiring decision will clarify what is
needed and where the alternatives for doing the thing can be sought.
5. Search for Alternatives :
A thorough diagnosis defines both a specific problem and the situation in which
the problem exists. With this definition in mind, a decision maker seeds possible solution.
A problem can be solved in several ways, however, all the ways cannot be equally
satisfying. Further, if there is only one way of solving a problem, no question of decision
arises. Therefore, the decision maker must try to find out the various alternatives £JL
available in order to get the most satisfactory result of a decision. Identification of
various alternatives not only serves the purpose of selecting the most satisfactory one,
but it also avoids bottlenecks in operation)as alternatives are available if a particular
decision goes wrong. However, it should be borae in mind that it may not be possible to
consider all alternatives either because some of the alternatives cannot be considered
for selection because of obvious limitations of the decision maker or information about
all alternatives may not be available. Therefore, while generating alternatives, the concept
of limiting factor should be applied^ A limiting factor is one which stands in the way of
accomplishing a desired objective. If these factors are identified, managers will confine
their search for alternatives to thosewhich will overcome the limiting factors.! For
examples, if an organizationhas limitation in raising sizable finances, it cannot consider
projects involving high investment.
A decision maker can use several sources for identifying alternatives his own
past experience, practices followed by others, and using creative techniques. Past
experience, applied in most cases of decision making, takes into account the actions
taken by the decision maker in the past with obvious differences between the former
challenges and the present one. This is a very simple approach but has obvious limitations
because there may be so much changes in the decision context (hat old action becomes
totally irrelevant. Copying from the experience of others is another way of generating
alternatives. Thus alternatives used by successful decision makers can be thought of as
alternatives of decision making. This is also practiced by many organizations after making
suitable amendments in the light of changed decision context. Importing of technology
from foreign countries with suitable changes is good example of this type of alternatives.
The third method of generating alternatives is through creative process where various
exercises are taken to generate entirely new ideas. This aspect of search for alternatives
will be discussed in a separate section of the chapter.

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6. Evaluation of Alternatives :
After the various alternatives are identified, the next step is to evaluate them and
select the one that will meet the choice criteria, However, all alternatives available for
decision making will not be taken for detailed evaluation because of the obvious
limitations of managers in evaluating all alternativesjThe energy of managers is limited
and psychologically most of them prefer to work on plans that have good prospect of
being carried out. In narrowing down the number of alternatives, two approaches can be
followed: constraint on alternatives and grouping of alternatives of similar nature. The
decision maker develops a list of limits that must be met by a satisfactory solution. He
may treat these limits as constraints, that is, he may check proposed alternatives against
limits, and if an alternative does not meet them, he can discard it. In the second
approach,various alternatives can be grouped into classes on some specific criteria
important to decision making. A representative alternative from one group may be selected
for future analysis. Then having found the group that shows up the best, decision maker
can concentrate on alternatives within this group. This method is very helpful in decision
making regarding the location of plant, warehouse, etc.
Having narrowed down the alternatives which require serious consideration the
decision maker will go for evaluating how each alternative may contribute towards the
objectives supposed to be achieved by implementing the decision. Evaluation of various
alternatives dissects an alternative into various tangible and intangible factors. Tangible
factors are those which can be quantified because they are quite obvious like the cost
per unit, investment required, output to be received, ect. Such factors can be measured
easily, though their happening may not be measured with certainty; for example, demand
projection at a given price in a particular alternative. As against these, intangible factors
are mostly qualitative and cannot be measured in terms of quantity. Therefore, some
definitions can be used for such factors. For example, in a plant location, various non-
economic factors like psychological problem arising out of displacement of persons
from the plant site, ecological balance, etc., have to be taken into account which cannot
be quantified. In evaluating an alternative, both these factors have to be taken into account.
For determining the impact of a factor, various quantitative techniques have been
developed which can be discussed in a separate section of the chapter.
7. Choice of Alternative :
The evaluation of various alternatives presents a clear picture as to how each one
of them contributes to the objectives under question. A comparison in made among the

85
likely outcomes of various alternatives and the best one is chosen. Choice aspect of
decision making is related to deciding the most acceptable alternative which fits with
the organizational objectives.Tt may be seen that the chosen alternative should be
acceptable in the light of the organizational objectives. Thus it is notnecessary that the
chosen alternative is the best one. This concept is based on the satisfying approach rather
than the maximizing approach of decision making, to be discussed later in detail/In
choosing an alternative, the decision maker can go through three approaches: experience,
experimentation, and research and analysis.
i. Experience : Managers can choose an alternative based on their past experience
if they have solved similar problems earlier. Reliance on past experience plays a
larger part than it deserves in decision making. Managers rely more on experience
than alternative methods of choice. Past experience has some benefits but it has
certain limitation that it blocks making correct choice specially when the
environment factors are more flexible.
ii. Experimentation : Experimentation which is generally used in scientific enquiry
involves that a particular alternative is put in practice, result is observed, and the
alternative giving the best result is selected. For example, many organizations go
for test marketing of their products before the products are really introduced in
the market. During test marketing, the actions can be taken to change product
features which are not acceptable. Experimentation as a method for choice of an
alternative can be used on a limited scale because of cost and time factor.
iii. Research and Analysis : Research and analysis is the most certain method of
selecting an alternative, specially when major decisions are involved. This approach
entails solving a problem first by comprehending it. This involves a search for
relationships between the more critical variables, constraints, and planning premises
that bear the objectives sought. In the second stage, the alternative is broken into
various components. Their individual impact on objective is evaluated and the impact
of all factors of an alternative is combined to find out the total impact of the
particular alternative. The one having the mostpositive impact is chosen. Since
this requires making a lot of calculations, often the help of computer is taken. In
fact, various computer-based models have been developed to make the choice of
an alternative easier.
Though various approaches are available for choosing an alternative, the decision
maker’s personal values and aspirations affect what alternative will be chosen. In fact, in

86
one way, the decision making is the translation of one’s values and aspirations into action.
Thus the rational process of decision making is considerable affected by the personal
factors. Further, managers should take into account the uncertainly of outcome of a
decision. Therefore, they should be ready with alternative action if one fails. In order to
do this, managers should often be ready with contingency plans.
8. Action Once the alternative is selected, it is put into action. Truly speaking, the
actual process of decision making ends with the choice of an alternative through which
the objectives can be achieved. However, decision making, being a continuous and on-
going process, must ensure that the objectives have been achieved by the chosen
alternative. Unless this is done, managers will never know what way their choice has
contributed. Therefore, theimplementation of decision may be seen as an integral aspect
of decision.
Once the creative and analytical aspects of decision making through which an
alternative has been chosen are over, the managerial priority is one of converting the
decision into something operationally effective. This is the action aspect of decision
making. The basic difference between decision making as an analytical process and action
is that the former requires the use of conceptual skills since it translates the abstract
ideas into reality. For example, suppose that there is a change in consumers tastes. This
change is very abstract and cannot be seen unless some specific techniques and
measurements are applied. How this change can provide opportunity to theorganisation
is mostly a conceptual exercise requiring managers to interpret what changes are taking
place and what products or services will be preferred in the changed situation. Action,
on the other hand, relates to putting a decision into practice so that objectives of decision
are achieved. This practice will provide further feedback for evaluating the soundness of
the decision and, if need be, a change in the decision.
Implementation of a decision requires the communication to subordinates, getting
acceptance of subordinates over the matters involved in the decision, and getting their
support for putting the decision into action. The decision should be effected at appropriate
time and in proper way to make the action more effective. The effectiveness of action is
important because it is only effective action through which organizational objectives
can be achieved, and right decisions help in effective action.
9. Results :
When the decision is put into action, it bringscertainresults. These results must
correspond with objectives, the starting point of decision process, if good decision has

87
been made and implemented properly. Thus results provide indication whether decision
making and its implementation is proper. Therefore, managers should take up a follow-
up action in the light of feedback received from the results. If there is any deviation
between objectives and results, this should be analysed and factors responsible for this
deviation should be located. The feedback may also help in reviewing the decision when
conditions change which may require changes in decision. Therefore, a successful
manager is one who keeps a close look at the objectives and results of the decision and
modifies his decision according to the changes in the circumstances.

5.12 SUMMARY

The planning function includes those managerial activities that result in

predetermined courses of action. Planning necessarily focuses on the future and
managements responsibility is to prepare the organization for the future. Planning
requires managers to make decisions about objectives, actions, resources,
implementation. These four factors are essentials to effective planning.
In the past, planning almost always was done entirely by top managers, by
consultants, or by central planning departments. More modern approaches are the
decentralized planning staff or an interdepartmental task force composed of live
managers. Today’s learning organisations are pushing decentralisation even further and
involving workers at all levels in the planning process.

5.13 KEYWORDS

• Planning
• Decision Making
• MBO
5.14 SELF ASSESSMENT QUESTIONS

1. Define Planning.
2. Explain the approaches of Planning.
3. Discuss the Process of MBO.
4. Critically evaluate the steps involved in decision-making.

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5.15 REFERENCE

1. Davar. The Management process. Mumbai: Progressive Corporation Pvt. Ltd, 2010.
2. Harold Koontz. Heinze Weihrich. Essentials of management, New York: MacGraw-
Hill,1993
3. Chauhry Omvir, Prakash Singh. Principles of Management, New Delhi: New Age
International Publishers, 2012.
4. Peter. Drucker. Management of 21st Century, New York: HarperBusiness,2001.
5. Prasad L.M. Principles of Management, New Delhi: Sultan Chand & Sons, 2015.
6. Richard L. Daft.Management, Massachusetts, United States: Cengage Learning, 2013.
7. S.K. Mandal. Management: Principles and Practice, Mumbai: Jaico Publishing
House, 2011.

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 UNIT-6: PRINCIPLES OF ORGANISATION

Structure
6.0 Objectives
6.1 Meaning and definitions of organization
6.2 Principles of Organisation
6.3 Organization as a process
6.4 Formal and Informal organisations
6.5 Types of organisations
6.6 Meaning And Definitions of Organisation Structure
6.7 Importance of Organisation Structure
6.8 Building The Horizontal Dimension Of Organisations
6.9 Bases for Organisation Structure
6.10 Meaning And Definitions Of Departmentation
6.11 Principles of Departmentation
6.12 Principles of Delegation
6.13 Difference Between Delegation And Decentraliazation
6.14 Summary
6.15 Key Words
6.16 Self Assessment Questions
6.17 Case Study
6.18 References

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6.0 OBJECTIVE

After reading this unit, you will be able to;

• Define and state the meaning and definitions of organisation
• Explain the principles of organisation
• Distinguish between formal and informal organisation.
• Understand the importance and problems of entrepreneurship
• Diagnose the barriers to entrepreneurship and solutions to the barriers.
• Discuss the different types of organisations

6.1 MEANING AND DEFINITIONS OF ORGANISATION:

Organizing refers to the process of determining the tasks to be done, which will
do them and how those tasks will be managed and co-ordinated. It is an interactive and
organizing process that occurs throughout the life of the organization.
Koontz and O’Donnell defines “Organization is the grouping of activities
necessary to attain objectives, the arrangement of each grouping to a manager with
authority necessary to supervise it and the provision for co-ordination horizontally and
vertically in the enterprise structure”
An Organization has been defined by E. F. L. Breach as “a system of structural
interpersonal relationships. In it, individuals are differentiated in terms of authority,
status and roles with the result that personal interaction is prescribed, and anticipated
reactions between individuals tend to occur while ambiguity and spontaneity are
decreased”.
According to Louis A. Allen, Organization is “the process of identification
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”.
James Mooney defines organization as “the form of every human association
for attainment of a common purpose”.
McFarland has defined organization, “as an identifiable group of people
contributing their efforts towards the attainment of goals”. Thus, the term organization
represents a particular group of individuals engaged in accomplishing common goals.
Organization as a group has certain features. They are as follows:

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 a. It is a cooperative relationship of two or more persons
b. Its purpose is to accomplish certain goals
c. Its members can communicate with each other.
d. The behaviour of the group is regulated through their own bye-laws.

6.2 PRINCIPLES OF ORGANISATION

There are some principles which are common to all organizations that are
established in a classical form i.e. the form where there is hierarchy of authority and
responsibility and it flows downwards. The principles of Organization offer guidance
for the creation of a sound, efficient and effective Organization structure. In other words,
these principles are the sound criteria for efficient organizing. They ensure smooth and
orderly working of a business enterprise.
Principles of organizing are not given in a serial order by any authority on
management. Management thinkers (Henry Fayol, F. W. Taylor, U. L Urwick and others)
have laid down certain statements regarding organizing function of management. Such
statements are treated as principles of organization. Well accepted principles of
organization/organizing are as explained below.
i. Unity of Objectives: Objectives of the enterprise influence the Organisation
structure and hence the objectives of the enterprise should first be decided clearly
and firmly. In addition, there should be unity among the objectives decided. This
gives clear direction to the whole Organisation and it will be geared for the
achievement of such objectives. The Organisation acts as a tool for achieving the
objectives. The objectives may be divided into departmental objectives and
organizational objectives. There should be unity of objectives as such unity gives
one clear direction to the whole Organisation. In addition, objectives should be
made clear to all concerned persons so as to enable them to do their best to achieve
the objectives.
ii. Division of Work and Specialization: Division of work leads to specialization.
Every department of an Organisation should be given specialized functions. This
will raise the overall efficiency and quality of work of an Organisation. At the same
time, specialization and departmentation should not have any adverse effect on the
total integrated system. Coordination must be established among the departments
and activities. Specialization is necessary for raising the efficiency of the whole

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 Organisation structure. The functions given to each department should be preferably
only of one category. Employees should be assigned duties to different departments
as per their qualifications, qualities and so on.
iii. Delegation of Authority: There should be proper delegation of authored in every
Organisation, particularly in large organisations. The basic idea behind delegation
is to see that decision-making power is placed at a proper place. Delegation should
go to the lower levels of management. Everyone should be given authority which is
adequate to accomplish the task assigned to him. Delegation is useful for getting
the things done through others. A successful manager normally does not perform
the jobs by himself. He delegates the authority and responsibility to his subordinates.
He also motivates his subordinates and see that they take initiative, work efficiently
and contribute for achieving organizational objectives.
iv. Coordination: Organisation involves division of work and departmentation. This
naturally suggests the need of proper coordination among the departments and
efforts of people working in an Organisation. Due to coordination one clear-cut
direction is given to people/ departments and efforts will not be wasted or
misdirected. Coordination also brings integration in the basic functions of
management. The principle of coordination is important as it facilitates achievement
of overall objectives of a business Organisation. It also brings unity of action in
the Organisation. Coordination will not be available automatically. For this, working
relationships need to be established within the Organisation.
v. Unity of Command: Unity of command principle suggests that each subordinate
should have only one superior whose command he has to obey. Dual subordination
is undesirable as it leads to confusion, disorder, uneasiness and indiscipline. An
employee should not have more than one boss to whom he has to report and also
function as per his orders and instructions. Reporting to more than one boss leads
to confusion.
vi. Flexibility: According to the principle of flexibility, the Organisation structure
should be flexible and not rigid. Such structure is adaptable to changing situations
and permits expansion or replacement without any serious dislocation and disruption.
There should be an in-built arrangement to facilitate growth and expansion of an
enterprise.
vii. Simplicity: The Organisation structure should be simple for clear understanding
of employees. The structure should be easy to manage. Internal communication

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 will be easy due to simplicity of Organisation. The Organisation structure should
be simple as far as possible. The levels of management should also be limited.
viii. Span of Control: The span of control, as far as possible, should be small and fair.
This means a manager should not be asked to keep supervision on large number of
subordinates. The span of control should be narrow and manageable. It should be
properly balanced.
ix. Scalar Principle (Chain of Command): The principle of chain of command
suggests that the line of authority from the chief executive to the first line of
superior should be clearly defined. The line of authority should be properly defined
so as to avoid any confusion as regards the line of authority. This principle suggests
that as far as possible, the chain of authority should be short and should not be
broken.
x. Exception Principle: The executives at the higher level are busy in important
matters and have limited time for the study of routine administrative matters. It is
not desirable to take routine matters to the top level managers frequently. Very
crucial and exceptionally complex problems should be referred to the top executives
and routine matters should be dealt with by the junior executives at the lower levels.
Moreover, time of top executives is saved. They can use their time for dealing with
more important and complex problems.
xi. Authority and Responsibility: Authority acts as a powerful tool by which a
manager can achieve a desired objective. Authority of every manager should be
clearly defined. Moreover, it should be adequate to discharge the responsibilities
assigned. The superior should be held responsible for the acts of his subordinates.
He cannot run away from the responsibility simply by delegating authority to his
subordinates. In fact, the responsibility of the superior for the acts of his
subordinates is absolute.
xii. Efficiency: The Organisation structure should enable the enterprise to function
efficiently. This will enable the enterprise to accomplish its objectives quickly
and also at the lowest cost. For this, the structure introduced should be suitable to
the nature, size, activities etc. of the Organisation. A suitable Organisation structure
ensures full and purposeful utilisation of available human and material resources
and ensures efficiency.
xiii. Proper Balance: Proper balance is necessary in different aspects of the
Organisation. This means there should be reasonable balance in the size and

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 functions of departments, centralisation and decentralisation of the Organisation,
span of control, chain of command and finally in between human and material
resources. This principle of balance suggests that the top management should see
that the vertical and horizontal dimensions of the Organisation are fairly balanced.
xiv. Separation of line and staff functions: Line functions should be separated from
the staff functions even when they are supplementary in character. Line functions
are directly connected with operations while staff functions are auxiliary to the
line functions. These functions should be coordinated when necessary but normally
they should be kept separate.
6.3 ORGANIZATION AS A PROCESS

It is a process or managerial function of organizing work, people and the systems.

The process concept stresses dynamic nature of an organization and it permits an
organization to be considered as on open adaptive system. In this sense, an organization
is an ongoing process of structuring, arranging the parts of an organization. The second
concept of an organization as a process adds three major issues: 1. Provisions of an
organizational climate so that people are motivated to give off their best in achieving
organizational objectives. 2. Design of communication system for effective decision
making, control and coordination. 3. An overall organization that is innovative and
responsive to relevant environment changes.
The steps in forming an organization are:
1. Formulate objectives, strategies, plans and policies
2. Determine activities needed to execute these plans and policies and accomplish the
objectives.
3. Classify and group these activities in the best possible way such as grouping activities
to form individual jobs, grouping of jobs and people into sections, grouping of
sections into department, grouping of sections and departments to administrative
units such as division
4. Assign and delegate to the head of each group, section, department etc, the authority
needed to perform these activities.
5. Coordinate or tie these group of activities through authority relationship horizontally,
vertically and laterally and through organized information or communication system.
6. Organize work at shop or plant level.

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6.4 FORMAL AND INFORMAL ORGANISATIONS

The Formal Organization is one which refers to a structure of well defined

jobs each bearing a measure of authority and responsibility. It is a conscious determination
by which people accomplish goals by adhering to the norms laid down by the structure.
This kind of organization is an arbitrary set up in which each person is responsible for
his performance. Formal organization has a formal set up to achieve pre- determined
goals. Examples of formal organization are:- a company, a school, a college, a bank, etc.
Informal Organization refers to a network of personal and social relationships
which spontaneously originates within the formal set up. Informal organizations develop
relationships which are built on likes, dislikes, feelings and emotions. Therefore, the
network of social groups based on friendships can be called as informal organizations.
There is no conscious effort made to have informal organization. It emerges from the
formal organization and it is not based on any rules and regulations as in case of formal
organization. If you and your colleagues decide to meet every Sunday evening for two or
three hours to play games and other events, you are meeting in an informal. The following
table gives the details about the differences between Formal and Informal Organizations

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Sl. Formal Organisation Informal Organisation
No.
1 A formal organisation is formed by An informal organisation is formed by
the top level management. social forces within the formal
organisation.
2 The members of a formal The members of an informal organisation
organisation have to follow certain do not have to follow any rules and
rules and regulations. regulations.
3 In a formal organisation, the duties, In an informal organisation, there are no
responsibilities, authority and fixed duties, responsibilities, authority,
accountability of each member is accountability, etc. for the members.
well-defined.
4 In a formal organisation, the In an informal organisation, the
objectives or goals are specific and objectives are not specific and well-
well-defined. The main objectives defined. The main objectives of an
of a formal organisation are informal organisation are friendship,
productivity, growth, and security, common interest, individual and
expansion. group satisfaction, etc.
5 A formal organisation is stable. An informal organisation is not stable.
6 A formal organisation uses formal An informal organisation uses informal
channels of communication. channels of communication (i.e.
grapevine)
7 A formal organisation is shown on An informal organisation is not shown on
the organisational chart. the organisation chart.

8 In a formal organisation, there exist In an informal organisation, there is no

a superior-subordinate relationship such superior-subordinate relationship.
9 The members of the formal
organisation get financial benefits The members of informal organisation
and perks like wages or salaries, get social and personal benefits like
bonus, travelling allowances, health friend circle, community, groups, etc.
insurance, etc

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ADVANTAGES AND BENEFITS OF FORMAL ORGANIZATIONS
The benefits and advantages of formal organization include the following.
1. They provide the basic structure of division of work and responsibilities. Without
such a structure it will e very difficult for employees to agree between themselves
on duties and responsibilities of each, and such difficulties multiply in geometric
proportions with increasing size of the organization.
2. It generates clarity on what support and input each employee can expect from others,
and in turn what is expected of him by others.
3. It promotes discipline in the organization.
4. It makes it easier to review and revise organization with changing requirements.
5. It provides a structure for laying down pay scales and taking other decisions linked
to organizational levels.
6. It helps in other human resources development activities such as recruitment,
promotions, career planning and development and manpower planning.
DISADVANTAGES OF FORMAL ORGANISATIONS
Although formal organizations and structures are absolutely essential, they are
not free of drawbacks or shortcomings. Following are some common disadvantages of
formal organizations:
1. Because of their rigid nature, working in a very formal structure can often lead to job
dissatisfaction. Although there are various factors that contribute to that, but a tedious,
non-social and non-creative working environment is a big factor.
2. In formal structures, there is no room for social affiliation and psychological needs.
They are built solely for the benefits of the organization. Eventually, they may end up
suppressing the social needs of the employees. The great downside of this is that
people often get de-motivated – especially the ones who have high social affiliation
needs. Moreover, the process of communication is also affected by lack of socializing.
3. We just learned that formal structures are very rigid and systematic in terms of job
assignment and responsibilities. This, as a result, stampedes the creativity of employees
in the organization. Though not every organization will suffer from it, but the ones
that do require their workers to exhibit creativity and out-of-the-box approaches are
affected severely by formal structures. In short, the formal organization – with its
rigid approach – does not offer enough room to stimulate creativity.

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4. Sometimes, in order to speed up things, the structure and system should be avoided.
However, as formal organizations really require you to submit everything through a
well-organized system; it may result in operational delays. Everything goes through a
scalar chain, which is a hierarchical in nature. If there are no formal boundaries, a
labor can directly communicate and report to the top-level executive. But that’s hardly
the case in formal structures. As a result, formal structures do slow things quite a bit
– especially, when compared with the informal structures.
ADVANTAGES OF INFORMAL ORGANISATIONS:
Also known as the grapevine, the informal organization, consisting of informal
employee interaction, has some significant advantages over more formal communication
channels. Company leaders do sometimes have concerns about rumors or gossip
perpetuating through grapevine conversations. However, informal networks affect
company culture, and when well-managed, they can improve overall communication and
morale.
a. Rapid Communication
Some company leaders prefer to have employees hear important messages in more
formal ways. However, the informal organization often allows messages to spread fairly
quickly through employee ranks. If the message has a positive tone such as building
interest in supporting company initiatives or activities, employees can often inspire a
groundswell of interest through their informal interaction. This benefit is especially
useful in organizations that rely heavily on employee involvement.
b. Supports Formal Communication
Sometimes formal communication channels fail to produce enough useful and
relevant information to help employees optimize performance. Top managers and other
leaders may neglect to deliver important messages or leave front-line workers out of
communication. In these instances, informal communicate can help fill in some of the
gaps and keep more employees in the loop. Some front-line managers try to tap into this
benefit of informal organizations by asking workers to spread the word with important
messages.
c. Cohesion
A primary benefit of the informal organization is that it provides an opportunity
for employees to develop bonds with co-workers. This improves overall workplace
cohesion and morale. Employees that work together often produce better results if they

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have good rapport away from work processes. Similar, when employees from various
functional areas or work teams interact informally, they have better communication and
willingness to work together with others.
d. Employee Feedback
Though some managers have concerns about the conversations that go on in
informal organizations, others realize they are inevitable and proactively try to make
use of them. They may get involved within the grapevine conversations or gain feedback
from key employees on the sentiments of employees on certain issues and situations.
This informal feedback often takes place more quickly and with greater honesty that
when employees are formally asked to offer feedback or share opinions on company
activities.
However, the managers need to consider the effects of the informal organizations
on individual and group behavior when they make any organizational changes, because
altering the formal structure may disrupt the informal norms that make the organization
work.
Activity E
List all the informal organizations in which you regularly participate. What
are the activities undertaken by these informal organizations?
..............................................................................................................................................
..............................................................................................................................................
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6.5 TYPES OF ORGANISATIONS

Ordering a neat classification scheme in an organization is known as organizational

typology. Typology shows a scheme of categorization, a tool for differentiation based
on certain general characteristics possessed by as an organization. There is, however, no
single correct typology of organization. When variations occur in major organizational
properties, typologies also need a face lift. Some of the popular ways of classifying
organizations may be listed as follows.
1. Functions performed: According to Talcott parsons, organizations can be classified
primarily into four categories, based on functions:

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a. Economic organisations: these organisations are primarily concerned with producing
something of value to the society. They are wedded to a philosophy of generating
surplus profit. Examples: Industrial, Commercial and trading concerns.
b. Political organisations: These organisations survive on the basis of service to society.
They help in achieving the basic values cherished by the society.
c. Integrative organisations: Integrative organisations are concerned with social
control and maintenance. Police departments and other protective organisations are
included.
d. Pattern maintenance organisations: organisations like educational institutions,
research institutions, religious organisations, clubs etc. are primarily concerned with
long term interests of society.
2. Services rendered to the society: Peter M. Blau and Richard Scott’s have suggested
a two benefits criterion for classifying organisations. According to this scheme, an
organisation survives on the basis of the services rendered to the society. The authors
have suggested four types of organisations.
a. Mutual benefit associations: the associations like trade unions, political parties
professional bodies etc. crop up to serve the interests of members. It is not always
possible for these organisations to achieve the seemingly easy objectives because
of two problems-membership apathy and oligarchical control.
b. Business organisations: owners are the primary beneficiaries in business
organisations. They are mainly concerned with maintaining operational efficiency-
achieving maximum gain at minimum cost. It is true, that other groups like employees,
customers, society etc. receive benefits simultaneously from business organisations
but in the final analysis, the survival of such institutions depends on how effectively
the owners are rewarded for the risks undertaken.
c. Service Organisations: Organisations like hospitals, educational institutions, and
social welfare agencies etc. clients are the primary beneficiaries. In order to render
effective service to the clients, the professionals looking after these organisations
must emphasise two things. Service is more important than observing procedures
and the nature of service is to be decided by these clients and not by the clients.
d. Commonweal organisations: these organisations like the army, police departments,
post offices etc. are mainly concerned with serving the interests of the public at
large.

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3. Objectives they satisfy for the society: According to Samuel Deep, organisations
can be classified according to the objectives they satisfy for the society, in the following
ways.
a. For profit organisations: These organisations provide goods and services at a profit.
Companies, partnership firms. Sole proprietorship firms are organised along these
lines and they generate profit for survival and continuance in the market.
b. Government organisations: These organisations satisfy the public need for order
and provide a means for people to exercise some measure of control over their
environment. Examples are central and state government undertakings.
c. Protective organisations: They shield citizens from danger. Examples are Police
and military organisations.
d. Service organisations: They act in the interest of the general public without always
receiving payment in full for services rendered. Examples are voluntary organisations.
e. Political organisations: They seek to influence legislation by electing a member of
their group to public office. Political parties, groups and associations are these
examples.
f. Religious organisations: they provide for the spiritual needs of members and try to
enlist non-believers into their fold.
g. Social organisations: they satisfy the needs of persons to make friendships and to
make friendships and to have contact with others who have compatible interests.
Examples are clubs, team, and fraternities.

6.6 MEANING AND DEFINITIONS OF ORGANISATION STRUCTURE

Organization structure is typically hierarchical arrangement of lines of authority,

communications, rights and duties of an organization. Organizational structure determines
how the roles, power and responsibilities are assigned, controlled, and coordinated, and
how information flows between the different levels of management.
Explicit and implicit institutional rules and policies designed to provide a structure
where various work roles and responsibilities are delegated, controlled and coordinated.
Organizational structure also determines how information flows from level to level within

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the company. In a centralized structure, decisions flow from the top down. In a
decentralized structure, the decisions are made at various different levels.
A good organizational structure can often spell the difference between a smooth
operating organization and one in chaos. By establishing a hierarchical structure with a
clear chain of command, companies are better able to streamline their operations. levels
of management in organizations.
According to John Child in his book Organization, there are four major
components to the definition of structure:
1. It describes the assignment of tasks and responsibilities to individuals and
departments in the organization.
2. It designates formal reporting relationships, including the number of levels in the
management hierarchy and the span of control of each.
3. It identifies the grouping of individuals into departments and departments into the
organization.
4. It incorporates the design of systems to ensure effective communication,
coordination, and integration of efforts among departments and across levels of the
organization.
Essentially, structure is the way work is divided and coordinated among units of
the organization. The organization structure put in place by management is the formal
organization.
6.7 IMPORTANCE OF ORGANISATION STRUCTURE

Organization structure is the backbone of management. Its importance lies in

serving the following purposes:
1. Avoids confusions in relationships: Organization structure allocates authority and
responsibility, and thereby, enables people to know who is responsible for what and
to whom in the organization. People know who is to direct whom for what results.
This removes confusion, friction and conflict among people.
2. Leads to creativity and initiative: Organization structure stimulates creative thinking
and initiative among organizational members by providing them requisite authority
to perform their assigned tasks. Authority provides right to decision making to its
holder who feels motivated to take initiative in increasing and improving his team
performance.

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3. Optimum utilization of resources: allocation of resources is the core activity of
organization structure. Proper allocation of resources helps in proper utilization
also. Division of work and specialization are the tools used by organization to attain
the objective of optimum utilization of human efforts and physical resources.
4. Technology improvement: A sound organization structure is flexible enough to
accommodate changes in the work technology. Improved work technology modifies
pattern of authority responsibility relationships and helps in improving work
performance of employees.
5. Encourage Growth of the enterprise: Organization structure provides the framework
within which an enterprise functions. A sound organization structure has the capacity
to handle increased level of activity. This helps in the expansion and growth of
enterprise.
6. Facilitates management process: Organization structure is a mechanism through
which manager’s plan, allocates, direct, coordinate and control the activities of
people. No activity remains unattended and work is assigned to people in accordance
with their skills, aptitude, level of commitment etc. this facilitates smooth operation
of the management process which results in attaining enterprise goals.
6.8 BUILDING THE HORIZONTAL DIMENSION OF ORGANISATIONS

An organization structure has more than a vertical dimension that focuses on the
integration and co-ordination of work activities between organizational levels. It also
has horizontal dimension that looks at how work activities are organized at each specific
level of the organization.
a. Division of Labour:
The term division of labour was used by the economist and philosopher Adam
Smith in the late 1700s. Division of labour is the process of breaking a large task into
components an individual or group can accomplish and designing them specifically so
they can be coordinated and the organizations goals can be achieved. Restaurants provide
a simple illustration of how organizations goals must be vary their division of labour
according to their goals. Each restaurant has a number of tasks that must be performed.
For example, greeting customers, taking drink, and food orders, transferring food orders
to cooks, delivering food and drinks to customers, cleaning the tables, calculating a bill,
delivering a bill, collecting money, and preparing the table for the next customers.

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The work of specialization allows an employee to master a task in the shortest time with
a minimum of skill. It allows human labour to become interchangeable, which contributes
greatly to organizational efficiency. There are a number of other efficiencies achieved
through division of labour. Efficiency is exhibited in reducing time spent in changing
tasks, in putting away one’s tools and equipment from a prior step in the work process
and in getting ready for another. These inefficiencies are eliminated through
specialization. Additionally, training for specialization is more efficient from the
organizational perspective.
b. Departmentalization:
Each organization has its own specific way that it classifies and group work
activities. This process of grouping individuals into separate units or departments to
facilitate the accomplishment of organizational goals is known as departmentalization.
Departmentalization subdivides work into jobs and tasks and assigns them to specialized
units within an in organization. It includes dividing the standards for the performance of
jobs and tasks. L. A. Allen defined departmentalization as “a means of dividing a large
and monolithic functional organization into smaller, flexible administrative units”.
Departmentalization has important implications for organizational performance
and effectiveness. It helps in increasing the efficiency of the organization in many ways.
For example, departmentalization enables to get the advantages of division of labour and
specifications, provides for fixation of standards for performance of each of department
and individuals, enables the managers to take decisions independently and learn new
managerial skills, creates semi-autonomous units and managers are free to take operative
decisions concerning their department without consulting their superior, and finally it
helps in assessing the size, skills and capabilities of the personnel required to various
departments.
There are few recognized and accepted bases of departmentation. For example,
functional base, product base, customer base, geographic base, and process base.
Activity D
Identify and explain the various blocks of vertical organization structure
and horizontal organization structure. Draw a beautiful figure and identify these
blocks in figure.
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.6.9 BASES FOR ORGANISATION STRUCTURE
a. Product Structure: A product organizational structure creates a structure cantered
on the company’s product lines. Companies with multiple product lines or specific retail
divisions can benefit from a product-style organizational structure

President

Vice President Vice President Vice President Vice President

Production Marketing Finance Human Resources

General General General

Manager Manager Manager
Product A Product B Product C

This allows the company to create a tall structure divided by product type or style. Each
division has its own internal departments and operates like a mini-business.
Using a product organization structure is most common in companies such as
retail stores. These organizations will separate out their products by group, such as
apparel, appliances, food or electronics. This helps owners and managers run their
operations more efficiently.
A significant downside to a product organizational structure is that it can segment
the company into divisions that do not work together. Managers may compete with each
other in an unhealthy manner that inhibits the natural growth of the business or its ability
to achieve goals.
b. Functional Structure: It is the organizational structure that is based on the functions
of the units and sub-units of activities. Every organization has specialized functions and
they constitute as separate units of the organization.

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 President

Vice President Vice President Vice President Vice President

Production Marketing Finance Human Resources

It is the organizational structure that is based on the functions of the units and
sub-units of activities. Every organization has specialized functions and they constitute
as separate units of the organization. The entire activities that are connected with such
functions are placed in the same unit. The increase in volume of activity results in addition
of number of persons under each manager at various levels. It also results in the increase
of sub-units that are created at lower levels in each unit. It finally results in the inter-
related positions taking the shape of a pyramid. Its major significance is that there is
functional specialization in each unit. It leads to operational efficiency of the persons
engaged in the organization. The organization also gets the benefit of specialized
operations. This type of arrangement is well suited for small and medium size
organization. It becomes incompetent while handling problems of an organization as it
grows in size and complexity. When there are diverse trends of activities performed in
large number of sub-units, it become difficult to manage. In such type of arrangements,
the probability of lack of communication and coordination and control arises that leads
to problems in the organization.
c. Divisional Structure: This type of structure is well suited for large enterprise. It
works effectively to those large enterprises that deal in multiple products serving many
distinct markets. The division of organization takes place into small business units that
are entrusted with business related to difficult products or different market territories.

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 President

Vice President Vice President Vice President Vice President

Production Marketing Finance Human Resources

General General General

Manager Manager Manager
Division A Division B Division C

This type of structure is well suited for large enterprise. It works effectively to
those large enterprises that deal in multiple products serving many distinct markets. The
division of organization takes place into small business units that are entrusted with
business related to difficult products or different market territories. All the divisional
managers are given authority and autonomy to run all function relating to their respective
products or marketing segments or regional markets. Each division contributes planned
profits to the organization but works as independent business. Managers head the
functional units while divisional managers take the final authority. In this type of
arrangement, top management determines the organizational goals and formulates
policies. This type of structure is characterized by the decentralization of authority. It
enables managers to take decision promptly and helps them resolve problems that are
related to their respective divisions. Divisional managers are provided with opportunities
to take initiative in matters that are within their jurisdiction. Its demerits are that it
involves heavy financial costs due to the duplication of supporting functional u nits for
the divisions. It also demands adequate number of potential managers taking charge of
their respective divisions and their respective functional units.
d. Matrix Organization: It aims to combine the advantages of autonomous project
organization and functional specialization. In this structure functional departments are
having full time specialized workers to accommodate and are capable of handling more
than one project at a time. This is found suitable as the organization is most of the time
engaged in the project activities and the managers are also more in number and can

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accomplish the project work effectively. It provides for the flexible system of working
as it adapts the changes quickly. The demerit of such organizations is that the employees
are engaged in dual jobs and are burdened with more work which affects the unity of
command at times in the organization.
President

Executive Vice President

Vice President Vice President Vice President Vice President

Production Marketing Finance Human Resources

Manager
Project A

Manager
Project B

Manager
Project C

e. Team-based structure:
Here the total organization is made up of teams or work groups which perform
the organization’s work. Employees feel more involved, empowered and motivated. It
reduces fractions among functional areas. Though chain of command maybe a problem.
To make team-based structures successful, the employees need to be trained to work as
group members, acquire cross-functional skills and a matching compensation.

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f. Boundary less Organization:
An organization whose design or structure is not limited to, or not defined by, the
horizontal, vertical or external boundaries imposed by a predefined structure is known
as boundary less organization. The historical boundaries are blurred by increasing an
organization’s interdependence with its environment. The boundary less organization
doesn’t bother of job specialization, chain of command or span of management and
replaces departments with empowered teams. To eliminate these boundaries managers
might use virtual organization, network organization, modular organization and learning
organization.
The one common technological thread that makes the boundary less organization
possible is a networked computer. They allow people to communicate across intra-
organizational and inter-organizational boundaries. Electronic mail, for instance, enables
hundreds of employees to share information simultaneously and allows rank and file
workers to communicate directly with senior executives.
g. Virtual Structure:
A small, core organization that outsources major business functions is called a
virtual organization. This organization structure is based on the concept of “why own
when you can rent?” This structure is also called as network organization or modular
organization. In structural terms, this structure is likely centralized, with little or no
departmentalization. The virtual organizations create networks of relationships that allow
them to contract out manufacturing, distribution, marketing or any other business function
when management feels that others can do it better or more cheaply. This structure stands
in sharp contrast to the typical bureaucracy that has many vertical levels of management
and where control is sought through ownership. In such organizations, research and
development are done in-house, production occurs in company owned plants, and sales
and marketing are performed by the company’s won employees. To support all this,
management has to employ extra personnel including accountants, human resource
specialists, lawyers, etc. the virtual organization, however, outsources many of those
functions and concentrates on what it does best.
The major advantage of this structure is its flexibility. Such companies allow
someone with an innovative idea and little money, to successfully compete against large
companies. The primary drawback to this structure is that it reduces management’s control
over the key parts of its business.

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Activity:
Draw charts of different types of organizational structures and explain the
main features of these structures over others and also explain the applicability of
these inorganisations.
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6.10 MEANING AND DEFINITIONS OF DEPARTMENTATION

Departmentation represents the pattern of grouping activities. Similar activities

intimately related with a distinct function are grouped together to form departmentation.
It is concerned with horizontal organization on any one level of hierarchy. It aims at
achieving unity of direction, effective communication, coordination and control.
Departmentation may be defined as “the process of dividing the work and then
grouping them into units and sub-units or departments for the purpose of administration”.
According to L.A. Allen” departmentation is the means of dividing a large and
monopolistic functional organization into smaller, flexible, administrative units”.
Departmentation is the grouping of homogeneous activities into one organization unit
on the basis of special and contiguous nature of activities.
Departmentation should be based on analysis of activities so that similar activities
are grouped together.
Drucker provides three broad areas for grouping activities
i. Key activities should never be subordinated to secondary activities
ii. Revenue producing activities should never be subordinated to non-revenue producing
activities
iii. Support activities should never be grouped with result producing and result
contributing activities.

6.11 PRINCIPLES OF DEPARTMENTATION

a. Specialization: This is the most important factor for grouping activities. Activities
should be divided and grouped in a way that the similar activities are under one

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 department. This helps in using the advantage of specialization. Specialization may
be functional or by products.
b. Control: Departmentation should be able to facilitate control as effectively as
possible. There should be a clear break-up between two departments so that
responsibilities can be fixed clearly. Territorial departments may be established in
such a way that the performance of one can be checked by comparison with other.
c. Coordination: Activities which differ quietly should be grouped together under
one executive because they need to be coordinated.
d. Attention: The activities which are basic to the success of an enterprise should be
given greater attention than others and be placed in a separate division.
e. Local Conditions: Departments should be created in such a way that local conditions
like personalities of individuals who will man the organizations or the pattern of
informal relationships among people or the need to combine activities in full time
job must be given due consideration.
f. Economy: The cost of creation of department should be weighed against the benefits
of its creation.
6.12 PRINCIPLES OF DELEGATION

1. Specialization: Departmentation automatically provides the benefit of division of labour

and specialization. It increases the efficiency and performance level of the
organization. All the specialized skills and individual talents can be fully utilized by
creating specialization through departmentation.
2. Determining responsibility: Departmental heads should be free to take decisions for
the smooth and effective performance of their units. At the same time, responsibility
will also have to be fixed for their performance.
3. Coordination: The departmentalization process ensures coordination among different
units.
4. Skills and talents can be developed: Individual skills and talents can be developed to
the fullest possible level in the departmental system of work distribution.
Dangers of Departmentation:
Although departmentation is very essential for the efficient running and control
of a business, there are a few dangers of departmentation, which should be taken care of
while assigning, and grouping of activities.

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1. Dividing the business house into various departments makes the coordination of
various activities very difficult. To achieve individual efficiency, one department
may work against the interest of another department, thus reducing the overall
efficiency and profitability of the business as a whole.
2. Departmentation creates difficulties of communication among the various
departments of the organization and renders planning and control more difficult.
3. Departmentation increases the levels of management, which is more expensive, and
it also increases the gap between the top management and the workers.
Activity:
Discuss the advantages and dangers of departmentation
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6.13 DIFFERENCE BETWEEN DELEGATION AND DECENTRALIAZATION

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Basis Delegation Decentralization

Managers delegate some of Right to take decisions is shared by top

Meaning their function and authority to management and other level of
their subordinates. management.

Scope of delegation is limited

as superior delegates the Scope is wide as the decision making is
Scope
powers to the subordinates on shared by the subordinates also.
individual bases.

Responsibility remains of the

Responsibility is also delegated to
Responsibility managers and cannot be
subordinates.
delegated

Freedom is not given to the

Freedom to work can be maintained by
Freedom of subordinates as they have to
subordinates as they are free to take
Work work as per the instructions of
decision and to implement it.
their superiors.

It is an important decision of an
Nature It is a routine function
enterprise.

Need on Delegation is important in all Decentralization becomes more

purpose concerns whether big or small. important in large concerns and it
No enterprises can work depends upon the decision made by the

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 It is a systematic act which takes
Grant of The authority is granted by one
place at all levels and at all functions
Authority individual to another.
in a concern.

Grant of Responsibility cannot be Authority with responsibility is

Responsibility delegated delegated to subordinates.

Degree of delegation varies Decentralization is total by nature. It

Degree from concern to concern and spreads throughout the organization
department to department. i.e. at all levels and all functions

Delegation is a process which It is an outcome which explains

Process explains superior subordinates relationship between top management
relationship and all other departments.

Delegation is essential of all Decentralization is a decisions

Essentiality
kinds of concerns function by nature.

Delegation is essential for Decentralization is an optional policy

Significance
creating the organization at the discretion of top management.

It is considered as a general policy of

Delegated authority can be
Withdrawal top management and is applicable to
taken back.
all departments.

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6.14 SUMMARY

Organizing refers to the process of determining the tasks to be done, who will do
them and how those tasks will be managed and co-ordinated. It is an interactive and
organizing process that occurs throughout the like of the organization. The organization
hierarchy includes both vertical and horizontal dimensions. Building the vertical
dimension of organization includes unity of command, authority and responsibility, span
of control, centralization and decentralization. Building the horizontal dimension include
division of labour and departmentalization. There are different approaches to organization
structures like product structure, functional structure, divisional structure, Matrix
structure, team based structure, boundary less organization structure, and Virtual
structure. While designing an organization structure management has to consider various
factors like goals of the business, nature of business, form of organization, size of
organization and external environment.

6.15 KEY WORDS

1. Organisational structure: It is an established pattern of relationships among the

component parts of an organisation.
2. Work specialization: It is the extent to which tasks can be divided into separate
jobs.
3. Deparmentation: It involves clubbing the group jobs together so that common tasks
can be coordinated.
4. Chain of Command: It is the line of authority with the unity of command principle,
which flows from the top to the bottom clearly indicating who will report to whom.
5. Span of control: It is the ideal number of subordinates that a manager can effectively
and efficiently direct.
6. Formalization: It is the extent to which jobs within the organisation are standardized,
with little discretion over what is to be done, when it is to be done and how the job is
to be done.

6.16 SELF ASSESSMENT QUESTIONS

1. What is the importance of an organisational structure? Explain its need and the
elements in its formation.

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2. Distinguish and differentiate between product structure and functional organisational
structure.
3. Explain the main decisions in organisational structure process.
4. Explain the types of structures.
5. What is meant by span of control? State the factors influencing the span of control.

6.17 CASE STUDY

CASE STUDY-A:
John and Peter are working in an engineering organization, a reputed one, where
excellence goes hand-in-hand with every new imperative flexibility. By laying down its
clear-cut policies and procedures and corporate plans, this organization has earned the
name of one the best managed companies always striving for excellence by keeping
itself abreast of the developments in the endlessly changing world.
During the recent review of the functioning of one of the departments headed by
Peter, it was discovered that his department had been continuously showing declining
trend in terms of meeting the targets fixed for them and the problems of high rate of
turnover/absenteeism came to light. Majority of the subordinates working under Peter
were dissatisfied with their job and were feeling frustrated and depressed over the way
they were being handled by him. There was a break-down of communication and
innumerable complaints about the rude behaviour of Peter started pouring in. Peter, on
the other hand, had been in this department for the last so many years and was in the habit
of treating his subordinates in the traditional style. The situation started aggravating
day-by-day. The workers under Peter had to take the shelter of unions for airing their
greivences and the management was naturally disturbed over the state of affairs and could
no longer afford to be a silent spectator. Search for a suitable replacement of Peter was
accordingly initiated and John was identified for the purpose.
John was selected for replacing Peter as he possessed the skills of managing
different types of people under different situations. His acceptability and creditability
have all along been of the highest order.
Initially, of course, it was a painful surprise for John for this sudden change and
as it always happens any change in status quo affects people and John was no exception.
However, John moved in the department and was soon able to overcome initial difficulties.
With his concerted efforts and sincerity of purpose, he was soon able to create a strong

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trust-bond with his subordinates. He gave them a free hand in setting time-bound goals
for themselves. The subordinates were by then participating in arriving at the vital decision
in regard to their production and productivity. A very cordial and harmonious atmosphere
prevailed upon in this department under John. All this naturally resulted in ‘a blessing in
disguise’ both for the management and the workers in as much as that this department
paved the way in improving the climate and culture of the organization.
QUESTIONS:
1. Identify the issues involved in the above case?
2. What in your opinion could be the causes for replacement of Peter and the secret of
success of John in the so-called difficult department?
3. Do you agree with the statement that “a true manager should know the art of managing
his people?” Comment?
4. “Developing an effective team having healthy interpersonal relationship is the need
of the hour”. Please comment.
CASE-B:
R and Company Ltd. Is an organization having a total strength of about 2000
employees. It has a personnel officer for the factory having 300 workers and a Director
(personnel) at the corporate office. There is one Union commanding a good membership.
On a particular day, the Union office bearers wanted a meeting with the personnel
officer but the personnel officer stated that he would meet the union office bearer only
on the nominated days as per the existing rules. The union argued that they wanted an
immediate meeting on an issue, which they considered very urgent. The personnel officer
said he would meet the branch secretary or assistant secretary to sort out the urgent
issues, if any, but the union brought about twenty members with them. The personnel
officer refused and the members started to agitate by slogan shouting and disturbing the
work.
The personnel officer wanted to take action and curb attitude of indiscipline and
hence sought the assistance of Director (Personnel) on the phone. The director permitted
the personnel officer to go ahead and take action. Meanwhile, on his return to the site of
action, the personnel officer found the agitators returning back. He allowed matters to
rest at that.
Nest day the Director (personnel) wanted to know the position and action taken
and the personnel officer stated that the matter had been settled by compromise.

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 The director got annoyed on the discipline having been given a ‘go by’ and asked
for the explanation of the personnel officer. The personnel officer explained that the
‘Line manager’ had intervened and settled the matter during his absence of a few minutes
to talk to the director (personnel). The director was not satisfied and the personnel officer
was perplexed.
QUESTIONS:
1. Whether the personnel officer was right in asking for advice and then not following
advice of his chief?
2. Was it right on the part of line manager to intervene?
3. Now that the personnel officer has informed the Director (personnel) that the line
manager has intervened, will the relation between line and staff get alerted?
6.18 REFERENCES
1. Davar. The Management process. Mumbai: Progressive Corporation Pvt. Ltd, 2010.
2. Harold Koontz. Heinze Weihrich. Essentials of management, New York: MacGraw-
Hill,1993
3. J S. Chandan. Management Concepts and Strategies, New Delhi: Vikas Publishing
House PvtLimited,1997.
4. Chauhry Omvir, Prakash Singh. Principles of Management, New Delhi: New Age
International Publishers, 2012.
5. Peter. Drucker. Management of 21st Century, New York: HarperBusiness,2001.
6. Prasad L.M. Principles of Management, New Delhi: Sultan Chand & Sons, 2015.
7. Stoner J.A. and Freeman R.E. Management, New Delhi: Pearson Education
India,1995.
8. Richard L. Daft.Management, Massachusetts, United States: Cengage Learning, 2013.
9. S.K. Mandal. Management: Principles and Practice, Mumbai: Jaico Publishing
House, 2011.

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 UNIT-7: DIRECTING AND STAFFING

Structure
7.0 Objectives
7.1 Introduction
7.2 Concept of staffing
7.3 Meaning of Directing
7.4 Definition of Directing
7.5 Characteristics of Directing
7.6 Significance of Directing
7.7 Principles of Directing
7.8 Meaning of Coordination
7.9 Elements of Coordination
7.10 Principles of Coordination
7.11 Summary
7.12 Self Assessment Test
7.13 References

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7.0 OBJECTIVES

After going through this unit, you should be able to;

• Explain the concept of staffing
• Discuss the systems approach to human resource management
• Explain manpower planning and job design
• Explain the how do you conduct training & Development activities
• Evaluate performance of the employees

7.1 INTRODUCTION

Though the term human resource management is frequently used for the managerial
function of “staffing”, staffing is just a part of the HRM process and plays an important
role. Staffing involves a set of activities aimed at attracting and selecting individuals for
positions in a way that will facilitate the achievement of organizational goals. You know
two basic steps of staffing area: recruitment and selection
The staffing process is a systematic attempt to implement the human resource
plan by recruiting, evaluating and selecting qualified candidates for job positions in the
organization. Recruitment involves finding and attempting to attract job candidates who
are suitable for filling job vacancies. Job analysis, job description, and job specification
are important tools in the recruitment process. Once suitable candidates are attracted to
the job position, the management needs to find qualified people to fill the positions
through the selection process. Several methods are used in selecting prospective
candidates. These include preliminary screening. Application blanks, selection test.
Comprehensive interviews, etc.
According to Koontz and O’ Donell “The managerial function of staffing involves
managing the organization structure through proper and effective selection, appraisal
and development of personnel fill the roles designed into the structure” and Theo
Hainmann opined that “Staffing function is concerned with the placement, growth and
development of all those members of the organization whose function is to get things
done through the efforts of other individuals “

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7.2 CONCEPT OF STAFFING

While performing the staffing function, we have to see that men are fit for jobs
and jobs are not altered for men. We have to concentrate on the concept of staffing are
given below:
• Effective recruitment and selection.
• Proper placement
• Adequate and appropriate training for development
• Satisfactory and fair transfer and promotion
• Sound relationship between management and workers
• Adequate provision for retirement
Process of Staffing
1. Manpower planning & Job Design: The term planning of staff members includes
estimation of the number of staff members required for the company in various
grades. It is based upon the size of the company and the policy followed by the
company. Job design also gives information about the qualifications required for
doing the job and the reward (financial and non-financial benefits) for doing the job.
2. Recruitment and Selection: It deals with the selection of qualified applicants to
fill the jobs in the organization. A standard procedure may be followed while selecting
the staff members. The procedure may be valid for different types of personnel.
3. Training of developments: It is concerned with providing training to new staff
members as well as the existing staff members. The working efficiency of the staff
members may be developed through the training programs
4. Performance Appraisal: Performance appraisal deals with measurement of the
work performed by the staff members in an organization. A standard may be fixed in
order to evaluate the efficiency of the staff members.

7.3 MEANING OF DIRECTING

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 has got no importance
if direction function does not take place.

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7.4 DEFINITION OF DIRECTING

“Directing involves determining the course, giving orders and instructions and
providing dynamic leadership”- Marshall.
“Directing concerns the total manner in which a manager influences the actions
of subordinates. It is the final action of a manager in getting others to act after all
preparations have been completed.” -Joseph Massie
“Direction is the impersonal aspect of managing by which subordinates are led to
understand and contribute effectively and efficiently to the attainment of enterprise
objectives.”-Koontz and O’Donnell
“Direction is telling people what to do and seeing that they do it to the best of
their ability. It includes making assignments, corresponding procedures, seeing that
mistakes are corrected, providing on-the-job instructions and of course, issuing orders.
“-Ernest Dale
“Direction is the sum total of managerial efforts that are applied for guiding and
inspiring the working terms to make better accomplishments in the organization. “ -S.S.
Chatterjee
According to G. R. Terry - “Directing means moving to action and supplying
stimulative power to a group of persons”.
Another term used to describe this function is “Activating”. In the words of G. R.
Terry - “Activating means moving into action - supplying stimulative power to the group”.

7.5 CHARACTERISTICS OF DIRECTING

Directing as a function of management has got the following characteristics

• Pervasive function
• Continuous activity
• Human factor
• Creative activity
• Executive function
• Delegate function

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 Pervasive Function - Directing is required at all levels of organization. Every
manager provides guidance and inspiration to his subordinates.
Continuous Activity - Direction is a continuous activity as it continuous
throughout the life of organization.
Human Factor - Directing function is related to subordinates and therefore it is
related to human factor. Since human factor is complex and behavior is unpredictable,
direction function becomes important.
Creative Activity - Direction function helps in converting plans into performance.
Without this function, people become inactive and physical resources are meaningless.
Executive Function - Direction function is carried out by all managers and
executives at all levels throughout the working of an enterprise; a subordinate receives
instructions from his superior only.
Delegate Function - Direction is supposed to be a function dealing with human
beings. Human behavior is unpredictable by nature and conditioning the people’s behavior
towards the goals of the enterprise is what the executive does in this function. Therefore,
it is termed as having delicacy in it to tackle human behavior.

7.6 SIGNIFICANCE OF DIRECTING

Directing or Direction function is said to be the heart of management of process

and therefore, is the central point around which accomplishment of goals take place. A
few philosophers call Direction as “Life spark of an enterprise”. It is also called as on
actuating function of management because it is through direction that the operation of
an enterprise actually starts. Being the central character of enterprise, it provides many
benefits to a concern which are as follows:
• Directing initiate action
• Direction integrates efforts
• Directing is means of motivation
• Directing provides stability
• Directing will enable to cope up with changes
• Directing helps in efficient utilization of resources
Directing initiates actions: Directions is the beginning of the subordinate’s
execution of their work. Actions begin right from this function onward as the employees

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learn their jobs and carry out the proper instructions that are given to them. Plans which
are made can be carried out only after the actual job begins and it is only then that the
direction turns out to be helpful.
Directing integrates efforts: The superiors are capable of directing, inspiring
and instructing the employees to work only by directing. To do this, every person needs
to work hard in order to accomplish the goals of an organization. Every department’s
efforts can be easily connected and included along with the other departments through
proper direction. This can also be achieved through influential leadership and efficient
communication. A concern achieves certain stability only through effectively
incorporating all the efforts made by all.
Directing is a means of motivation: The function of direction aids in achieving
all the goals effectively. A manager uses this motivation factor effectively in order to
enhance the employee’s performance in the organization. This can be easily achieved by
giving proper salaries or rewards and this in turn enables to help as a sort of ‘’Morale
Booster’’ for the employees in an organization. The employees can do their best through
effective motivation and this in turn aids in the eventual expansion of an organization.
Directing provides stability: An organization’s balance and constancy is very
vital for surviving in the market in the long run. The managers can achieve this effectively
by using four tools or essentials of direction, cautiously blending influential leadership
skills, able communication, a firm command and also a well-organized motivation.
Stability is very vital as it is an indication of the enterprise’s expansion. Hence, a manager
can utilize all the four traits within himself in order to uphold the standards of performance
of an organization.
Directing will enable to cope with the changes: It is normal for humans to
resist any new changes that are brought in an organization. However, in order to become
a leader in the market, it is important to able to adapt oneself to the ever-changing
environment which in turn aids in supporting planned growth of an organization. The
function of direction is necessary for meeting the new challenges in a fast-changing
environment, both internally and externally. The changes in an environment can be
managed easily through effective communication. The manager’s role is to effectively
communicate all the contents and nature of new modifications explicitly to the
employees. This aids in clarifying, easily adapting and an enterprise’s smooth functioning.
For instance, if an enterprise changes from handlooms to doing power looms, it is
necessary to bring about a vital change in the methods of production. This results in a

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decrease of human labor and an increase in using more machines for this purpose. Hence,
in this case, the manager can explain to his employees that it is important to bring about
this change in order to benefit them. Production increases as a result of utilization of
more machines and this in turn results in more profits for the enterprise. Hence, the
subordinates are benefited indirectly through this change in the form of high salaries
being given to them.
Directing helps in efficient utilization of resources: The proper direction of
money aids in defining the roles and responsibilities of all the employees towards their
own work. Utilization of resources can be effectively done only when there is no
duplication of any efforts, no wastage, overlapping of achievements and so on. The roles
of employees become defined only through proper direction as the manager uses his
control, guiding and instructional abilities and skills of motivating and inspiring all his
subordinates in the organization. This aids in the greatest employment of resources
pertaining to humans, materials, machines and finance and this further aids in cost
reduction and an increase in profits of an organization.

7.7 PRINCIPLES OF DIRECTING

Direction is always a complicated task as it involves dealing with employees of

different kind. A manager can become successful in the skill of efficient direction by
learning and practicing the basics of direction. Nevertheless, observing the following
principles is important for managers to guide his sub-ordinates;
• Principle of harmony of objectives
• Principle of scalar chain
• Principle of unity of command
• Principle of unity of direction
• Principle of effective communication
• Principle of direct supervision
• Principle of effective leadership
• Principle of follow-up
Principle of harmony of objectives

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 An organization aims at achieving the predetermined objectives with the help of
people. With different techniques of direction management should try to integrate the
organisational and individual objectives. The interest of the group must always prevail
over individual interests. A manager must try to reconcile personal interest of the
subordinates with the common interest. Harmony of objectives makes the task of direction
easy.
Principle of scalar chain
Scalar chain means that chain of subordinates and superiors ranging from top to
the lowest ranks. This chain clearly establishes superior- subordinate relationships and
scope of authority is clearly defined. For carrying the function of direction successfully
a clear scalar chain is immensely helpful.
Principle of unity of command
Principle of unity of command means that a subordinate should get orders and
instructions from one boss only. The employee will be confused, if he has to report to
more than one superior. In the absence of unity of command, authority is undermined,
discipline weakened, Loyalty divided and confusion and delays in work are frequent.
Principle of unity of direction
For ensuring effective direction, there should be one head and one plan for a
group of activities having the same objectives. This principle clearly lays down that the
efforts of all the members should be directed by a single head for the accomplishment
of the objectives of the organization.
Principle of effective communication
Communication is an important instrument for effective direction. Without
communication, the function of direction cannot be performed. Two-way communication
provides an opportunity to the subordinates a chance to express their feelings and the
superior to know the feelings of the subordinates.
A well knit system of communication provides for free flow of ideas, information,
suggestion, complaints and grievances.
Principle of direct supervision
The function of direction becomes more effective, if the supervisor maintains a
direct and personal contact with his subordinates. Direct supervision infuses a sense of

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participation among the subordinates and encourages them to give their best to attain the
organisational goals.
It also boosts the morale of the employees, increases their loyalty and provides
the superior with immediate feedback about their performance.
Principle of effective leadership
Effective leadership is the essence of the function of direction. The superior
must possess the qualities of a good leader, if he is to get the work done from the
subordinates. Effective leadership is also helpful in winning the confidence of the
subordinates.
Principle of follow-up
A manager or the superior has to monitor or follow-up the performance of the
subordinates constantly so as to ensure that the work is being performed as per the plans
made. He should keenly observe the subordinates at work and correct them wherever
they go wrong.

7.8 MEANING OF COORDINATION

“Coordination means integration of activities”

Coordination is done to achieve the objectives of the organization. Co-ordination
is a process. It is not fixed. It applies to group activities. It does not apply to individual
activities. The managers have to make special efforts to get coordination. Coordination
does not come automatically. Co-ordination leads to unity of action.
Coordination encourages team spirit. It gives proper direction to the organisation.
It motivates the employees. It makes proper use of the resources. Coordination affects
all the functions of management. Therefore, it is also called the “Essence of
Management”.

7.9 ELEMENTS OF COORDINATION

According to Louis Allen co-ordination comprises three principal elements or steps-

• Balancing
• Timing and
• Integrating.

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 Balancing implies that something is provided more in order to compensate for
some other thing which is less. Thus in a large organisation it involves the provision to
staff support to the line personnel and vice versa.
Timing suggests that different parts of an operation are carried on according to
such schedules that the beginning of each part synchronizes with the end of the preceding
part and its end, in turn with the beginning of the following part.
Integrating is the effective co-ordination of different elements’ and diverse
interests so that all the units of the organisation and whatever they do ultimately conform
to the common goal of the enterprise.

7.10 PRINCIPLES OF COORDINATION

A good coordination depends on well defined principles and they are as follows:
1. Simplified Organization: – Authority, responsibility, duty and other job description
should clearly be described by the organization. Coordination may be simple and easy
when all duties and power are clearly simplified.
2. Harmonized Programs and Policies: – An organization must set the programs and
policies. These programs and policies must be harmonized. Harmonized policies help
to make coordination effective.
3. Well Designed System of Communication: – Without effective communication
coordination and harmonizing activities is not possible. Therefore, communication
system must be well designed.
4. Voluntary Cooperation: - When all members of the organization are voluntarily
cooperated, then only coordination can be successful.
5. Coordination Through Supervision: -Supervisors are most important actor to
coordinate the workers and their work. Mainly in all organization supervisors coordinate
the resources and activities.
6. Continuity: – It is never ending process. When it is done continuously, the resources
are not used effectively and they cannot provide the contribution.
7. Direct Contact: – Direct contact is necessary in effective coordination. Face to
face contact may provide more effectiveness
8. Clearly Defined Goals: – Organizational goals and other departmental goals must
be clearly defined otherwise it isn’t easy to coordinate the resources and activities.

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9. Effective Leadership: – Leadership must be effective. It helps to increase the
confidence of employees and it develops the morale of workers. In fact effective
leadership helps in effective coordination.

7.11 SUMMARY

“Co-ordination is the Essence of Management.” The meaning of this sentence

implies, Co-ordination affects all the functions of management. In other words, Co-
ordination affects Planning, Organizing, Staffing, Directing, Communication, Leading,
Motivating and Controlling.
Now we can conclude that all the functions of management are affected by
coordination. Hence coordination is essential for achieving the objectives of the
organisation. It is also required for the survival, growth and profitability of the
organisation. Coordination encourages team spirit, gives right direction, motivates
employees, and makes proper utilization of resources. Therefore, Coordination is rightly
called the “Essence of Management”.

7.12 SELF ASSESSMENT QUESTIONS

1. What do you mean by coordination? Add a note on elements of coordination.

2. Define coordination.
3. Discuss the various characteristic features of coordination and evaluate the suitability
of these characters in the modern organisations.
4. Explain the various types of coordination with suitable examples.
5. What are the principles of coordination? Discuss them in detail with suitable
examples.
6. Discuss the various techniques of coordination.
7.13 REFERENCES

1. Davar. The Management process. Mumbai: Progressive Corporation Pvt. Ltd, 2010.
2. Harold Koontz. Heinze Weihrich. Essentials of management, New York: MacGraw-
Hill,1993
3. J S. Chandan. Management Concepts and Strategies, New Delhi: Vikas Publishing
House PvtLimited,1997.

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4. Chauhry Omvir, Prakash Singh. Principles of Management, New Delhi: New Age
International Publishers, 2012.
5. Peter. Drucker. Management of 21st Century, New York: HarperBusiness,2001.
6. Prasad L.M. Principles of Management, New Delhi: Sultan Chand & Sons, 2015.
7. Stoner J.A. and Freeman R.E. Management, New Delhi: Pearson Education
India,1995.
8. Richard L. Daft.Management, Massachusetts, United States: Cengage Learning, 2013.
9. S.K. Mandal. Management: Principles and Practice, Mumbai: Jaico Publishing
House, 2011.

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 UNIT -8: CONTROLLING

Structure
8.0 Objectives
8.1 Introduction
8.2 Meaning of Controlling
8.3 Steps in Control Process
8.4 Types of Control
8.5 Control Techniques
8.6 Summary
8.7 Self Assesment Questions
8.8 Reference

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8.0 OBJECTIVES

After studying this unit, you will be able to;

• Explain controlling as a function of management and steps in setting standards
• Discuss various ways of performance appraisal
• Explain some of the devices used in measuring performance
• Describe various types of controls in relation to operations

8.1 INTRODUCTION

Control is a critical issue faced every manager in every organization. As managers

need to find new ways to cut costs, increase efficiency, and build i the organizations
otherwise will not survive. All organizations face similar challenges. Improving product
quality, minimizing the time need to supply to means retail stores, decreasing the number
of steps needed to process an online me order, or improving the tracking procedures for
overnight package delivery, including quality control. Also monitoring involves office
productivity, such as elimination bottlenecks and reduction in paperwork mistakes. In
addition, every organization i basic systems for allocating financial resources, developing
human resources, accering financial performance and evaluating overall profitability.
The term control in common parlance indicates that there is strict adherence to
the set of plans. Controls are there to ensure that the events turn up as they are intended
to be. Plans with out control are hollow hopes. It is not just enough if you have the road
map in your hand, you should also know where the deviations take place. Let us study
the basic control process in the present unit.

8.2 MEANING OF CONTROLLING

The systematic process through which managers regulate organizational activities

to make them consistent with expectations established in plans, targets, and standards of
performance.
Let us consider few definitions:
Douglas S. Sherwin summarizes controlling as: “The essence of control is action
which adjusts operations to predetermined standards, and its basis is information in the
hands of managers.”

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 Robert. Mockler defines “Management control is a systematic effort to set
performance standards with planning objectives, to design information feedback systems,
to compare actual performance with those pre-determined standard to determine whether
there are any deviations and to measure their significance and to take any action required
to assure that all corporate resources are being used in the most effective and efficient
way possible in achieving corporate objectives”.
Thus, effectively controlling an organization requires information about
performance standards and actual performance, as well as actions taken to correct any
deviations from the standards. Managers need to decide what information is essential,
how they will obtain that information (and share it with employees), and how they can
and should respond to it. Having the correct data is essential. Managers have to decide
which standards, measurements, and metrics are needed to effectively monitor and control
the organization and set up systems for obtaining that information.
Mockler defines that “controlling involves setting performance standards,
measuring the performance with devices, comparing measured performance with
performance standards and taking corrective actions”. These steps are to be carefully
followed.

8.3 STEPS IN CONTROL PROCESS

Control process has four steps. Even though controls are placed at different stages
of operations these phases are always present in each control cycle. Regardless of what
is being controlled, these elements are always involved. The steps involved are explained
below.
Establishing Standards
In order to evaluate the performance, standards have to be established. Standards
are in a way, levels of activities established by the management. The standards should
have certain characteristics.
• They must be clearly specified
• They must be understood by all the organizational members without ambiguity
• They should be defined in measurable terms.
• Vague wording of the standards should be avoided. Standards should be precisely
stated.

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 • In situations, where it is not possible to quantify standards, efforts should be made
to understand the qualitative goals and design the control mechanisms accordingly.
Some quantitative standards against which the performance can be measured are
given below
• Time Standards : The goals are set on the basis of time involved in performing a
Particular task. It could be units produced per hour, number of pages typed per hour
etc. Workflow and employee output are better forecasted by using time standards.
• Cost Standards: These are goals in terms of cost involved. These indicate financial
expenditure involved per unit of product. These standards are like monetary check
posts. These enable the comparison of actual costs with budgeted costs. ,
• Income Standards: These refer to standards set in terms of financial rewards
received for a particular activity. Eg: Sales volume per month, sales generated by
sales person per year etc.
• Market share standards: This is based on the percentage of the total market that a
company wants to retain or further acquire.
• Quality Standards: Standards are based on quality. But adherence to norms may
vary depending on the nature of the produce involved. Space shuttle and aircraft
manufacturers have zero defect production requirements while other products may
have less stringent quality standards.
• Productivity: Productivity standards are expressed in numerical terms. These are
set on the basis of past performance, degree of mechanization, employee’s skills
and training required, and motivation of employees. Eg. Items produced per man-
hour.
• Return on investment: It is the ratio of net income to invested capital. It is a useful
standard and it involves all facts of the business such as turnover sales, working
capital, invested capital, inventory levels at given times, production costs, marketing
costs and so on.
• Quantitative Personnel Standards : Personnel matters like morale and dedication
can be measured to some degree by some quantitative standards. These standards
may be the extern! of employee I turnover, number of work related accidents,
absenteeism, number of grievances, quality of performance and so on.
Measuring Performance

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 This is the second step in controlling process. It involves monitoring and measuring
the actual performance. This includes collection of data regarding the actual performance
of the activity. Then, a comparison can be made between what is to be accomplished and
what is intended to be accomplished. It is an ongoing and repetitive process. The
frequency of measurement depends upon the type of activity being measured. Continuous
monitoring may be required in some cases like that of levels of gas particles in the air,
in case of manufacturing plant. Long-term expansion objectives might be reviewed by
the top management, /only once or twice in a year,
According to Such man, there are five types of evaluation, which are given below:
• Effort: This involves the extent of input. The idea is to measure whether the input is
adequate in meeting the set objectives. For example, the number of patient beds in a
hospital would be a measure of input for providing health care. A sales person
performance may be measured by the number of calls he makes per day.
• Effectiveness: Since measurement of input is a poor indicator of results,
measurement of output is also required to convey the degree of effectiveness. In
case of employment agency the number of clients placed in jobs would be a better
measure than the member of applicants interviewed and counseled,
• Efficiency: Efficiency measures are useful for comparing the same process at
different points of time or different processes with the same output. Efficiency
relates output to input.
• Process : Hence, the focus is on evaluation of process that converts efforts into
results.
• Measuring devices : The performance measures used in controlling organizational
and individual performances should be valid as well as reliable. The measure should
reflect its quality and consistency in obtaining results.
Some measuring devices are given below:
• Mechanized measuring devices: Variety of technical instruments are used to
measure machine operations, product quality for size and ingredients and for
production processes. These instruments may be mechanical, electronic or chemical
in nature. Computers are widely used as measuring devices in recent days.
• Ratio Analysis: Various aspects of business operations are measured with the help
of this tool, Ratio relates the business variables with one another. There are various
ratios like net sales to working capital, net sales ratio, net profit to tangible net

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 worth ratio, net profit to net working capital ratios, collection period etc. These
ratios provide measuring yardsticks for liquidity, profitability, solvency, capital
gearing in the firm etc.
• Comparative statistical analysis: Measuring involves comparison also. Similar
operations of different companies can be compared or operations of any company
can be compared with the industry average. This in fact is a practical performance
measuring methodology. Data pertaining to the required area is used in such cases.
Statistical models can be used for such measures and comparisons.
• Personal observations: To measure the performances of the personnel, usually
personal observation is followed. Observation can be formal or informal, observation
is generally day-to-day routine type. Informal discussions with the concerned persons
also contribute to effective control. It allows for watching the work closely.
• Sampling: Measurement can be done considering only a sample, which is presumably
typical of the whole. For some operations sampling does the work of measuring the
performance. In some other cases a hundred percent check is desirable.
In spite of the usefulness of all these methods, it is important to balance the cost
of incremental measurements against the increased value that might accrue from catching
more errors.
Determining whether performance matches the standard
This step is considered to be the earliest one because; the complexities of the
process are already dealt in the first two steps. This involves comparing measured results
with the standards. If performance matches with the standards set, it is an indication that
everything is under control. If not taking corrective action becomes necessary.
Taking corrective action
If performance falls short of standards, corrective action is, required. The action
may in terms of further improvement in performance. Some stringent corrective action
may imply change in the standard-if the standard is too high and unattainable, there is a
need to lower it or else it will cause frustration among the workers.
8.4 TYPES OF CONTROL

There are broadly two types of control namely direct control and indirect control.
Cost control, quality control, budgetary control etc., are direct control. Indirect control
means establishing system in such a way that control is automatically exercised. On the

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basis of time period in which the control is applied in relation to the operation being
performed, there are three types of controls.
Feed forward control
Control that focuses on human, material, and financial resources flowing into the
organization; also called preliminary or preventive control.
Control that attempts to identify and prevent deviations before they occur is called
feed forward control. Sometimes called preliminary or preventive control, it focuses
on human, material, and financial resources that flow into the organization. Its purpose
is to ensure that input quality is high enough to prevent problems when the organization
performs its tasks.
Feed forward controls are evident in the selection and hiring of new employees.
Organizations attempt to improve the likelihood that employees will perform up to
standards by identifying the necessary skills, using tests and other screening devices to
hire people who have those skills, and providing necessary training to upgrade important
skills. Numerous nursing homes and assisted living centers have come under fire in
recent years due to lax feed forward controls, such as failing to ensure that workers have
the appropriate skills or provide them with the training needed to adequately care for
residents. Banks typically require extensive documentation before approving major loans
to identify and manage risks.
Concurrent Control
Control that monitors ongoing employee activities to ensure they are consistent
with performance standards is called concurrent control. Concurrent control assesses
current work activities, relies on performance standards, and includes rules and
regulations for guiding employee tasks and behaviors.
Concurrent control is also known as Steering Control.
This involves taking corrective action as soon as the deviation takes place the
process here will not be complete when the control is exercised. For example, when a
car is off the lane, it can be steered into the lane. Steering control has the advantage of
taking corrective action early
Many manufacturing operations include devices that measure whether the items
being produced meet quality standards. Employees monitor the measurements; if they
see that standards are not met in some area, they make a correction themselves or signal

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the appropriate person that a problem is occurring. Technology advancements are adding
to the possibilities for concurrent control in services as well.
Other concurrent controls involve the ways in which organizations influence
employees. An organization’s cultural norms and values influence employee behavior, as
do the norms of an employee’s peers or work group. Concurrent control also includes
self-control, through which individuals impose concurrent controls on their own behavior
because of personal values and attitudes.
Feedback Control
These are the controls that measure results from completed action. These are
also known as Post Action Control. These results measured so are compared with the
standards that are set initially. If there are any deviations, corrections can be taken for
future activities. For example, -If the actual expenses for office supplies exceed the
budgeted expenses for a given year, then the reasons for such a difference can be
investigated and in the light of this feedback, the budget for the following year can be
revised.
The advantage of feedback control is that, it enhances employees’ motivation. It
allows the employees to know how well they have performed and how to make
improvement.

8.5 CONTROL TECHNIQUES

Management has many control devices at its disposal. The type of control device
used depends on the situation that exists. Some common control devices used by every
organization is given below.
1. Break - Even – analysis
2. Budgets
3. Financial Control
4. TQM Techniques
Let us learn these techniques in detail.

1. BREAK-EVEN-ANALYSIS
Break Even-Analysis is extensively employed by executive in all organizations.
Break-Even-Analysis is also known as cost volume-profit relationship. It is designed to
assist planning and decision making, by predicting the net effect of change in cost-volume

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price and the level of activity on the profit of the company. Constitution of the Break-
Even-Chart takes into account, the following assumption.
• All the cost can be classified conveniently into fixed and variable.
• There is a linear relation between cost and revenues
• No changes in selling price, product mix, manufacturing process, efficiency, fixed
cost and management policies.
• There is no closing stock and opening stock-The total number of units produced and
sold are the same.
A company is said to be in break-even-position, when its total cost is just equal to
the total revenue. In other words, the contribution (Sales-variable cost) is just to meet
the fixed cost variable costs vary according to the production level or in other words,
they remain fixed per unit. Fixed costs remain fixed over a period of time.
Break even point can be calculated by two methods namely algebraic method and
graphical method. To find out break even sales, the following formula is uesd.
Break - Even (Sales) = Fixed Cost X Sales
Contribution.
Graphical method involves constructing a graph, by taking horizontal axis to-
represent the output and vertical axis to represent cost & revenue. The total cost and
total revenue lines are drawn and the point of intersection is called break-even point.
Break-Even analysis helps managers it taking decisions, as it establishes the
relationship between cost, volume and profits. Though there are limitations to the
application of break-even analysis it is widely employed by managers of the day. The
greatest advantage of this method is its simplicity in understanding, presentation analysis
and interpretation.
2. BUDGETING
Budgets are quantitative statement of objectives, plans and programs of
enterprises. These are the statement of resources set aside for carrying out planned
activities over given period of time. Organization prepares various budgets like sales
budget, production budget, cash budget, programme budget, capital expenditure budget,
material budget, manpower requirement budget etc. An overall master budget is also
prepared.

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 Budgets can be fixed as well as flexible. Fixed budget is a budget that is designed
to remain unchanged irrespective of the level of activity attained. Generally it is prepared
for a certain definite capacity level. Flexible budgets are prepared for coping with the
changing future. It is a dynamic budget and it works towards a range of activities.
A special budget is prepared to improve the organizational efficiency. This is
‘Programmed budgeting’. A programmes budget is a financial statement of programmed
plan. It allocated funds to groups of programmes or activities while setting programme
budgets, first of all objectives are set to reflect the major activities of the department.
Secondly, programmes are formulated to achieve these goals. According to these
programmes, budgets are allocated and finally the output of the programme is carefully
analysed in terms of the objectives laid down.
• Programme budgeting differs from traditional budgeting in many respects. Such
points of difference are given below.
• Programme budgeting emphasizes output of programmes that cut across system lines.
Traditional budgeting concentrate on inputs or organizational resources.
• Programme budgeting takes into account programme and its goal rather than resources
inputs before allocating the funds to these programmes.
• Programme budget extends over many years and is not confined to a specific period
of time.
• Programme budgets are most beneficial incase of long-range programme.
• Programme budgeting enables the management to analyse more carefully the costs
versus benefits of programme alternative.
BUDGETS- APPROACHES
Budgeting involves the following steps.
• Setting goals
• Planning and scheduling to reach the goals.
• Identifying and pricing resources
• Locating needed funds
• Adjusting goals, plans and resources to match actual fund availability.
The approaches used in the preparation of budgets are explained below.

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 Top down budgeting
Senior managers prepare these budgets and pass down it to lower levels; lower
level managers may or may not contribute input to it. Top management shall carefully
build the budget, by asking for input by others and taking into consideration all relevant
factors. Every care has to be taken to see that no significant information about
opportunities and risks is missed.
 Bottom up budgeting
Members of the departments prepare inputs with respect to the respective needs
and priorities of their departments. These inputs are consolidated to create a
comprehensive framework. It is a participative style of budget building and is known as
‘ grass root budgeting. Participation in preparing the budget gives the employees the
required enthusiasm in implementation. Due to downsizing of the companies and
decentralizing of authority bottom up budgeting is gaining additional significance
nowadays.
 Zero based budgeting
Dependence on previous budgets is common while building budgets zero based
budget builds up the cost from zero, rather than starting with current level of costs.
Zero-based budgeting involves the following steps.
• Activities are divided into parts known as decision packages. Each decision package
contains all the information about an activity.
• All such activities are evaluated and ranked on the basis of benefit to the organization
the activities with the highest ranks will get immediate and first attention and the
activities at the lowest ranks would get the lowest priority. The activities whose
benefits cannot be justified relative to the associated costs may even be eliminated.
• After assigning priorities to the activities the resources are budgeted according to
these priorities.

CHARACTERISTICS OF EFFECTIVE BUDGETARY CONTROL SYSTEM

Following are the features of an effective budgetary control system.
• Budgets should be result oriented
• Goals should be realistically established
• There should be provision for periodic evaluation and assessment of performance.

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• Budgets allocated should be appropriate for the established goals.
• Duties and responsibilities for all operation should be well defined and rightly
assigned.
• Budgets should be based on document able information.
• A budget should be simple and understandably fair and objective.
• Communications should be effective, so that timely information on deviation should
be available to the managers. A quick and two-way communication is needed.
• The budgets should be viewed as positive and be conducive to self control.

BENEFITS OF ZERO BASED BUDGETING

Compared to the conventional budgeting techniques. Zero-Based budgeting has
many advantages.
• It provides more rational justification regarding whether an activity should be
continued or terminated.
• It allows for greater participation of all concerned people in the planning process.
• The assessment and evaluation of each activity is clear and unambiguous, as managers
must quantify each alternative, which makes the measures needed for comparison,
objective in nature.
• It enables the management to eliminate low priority activities without considerable
economic losses.
• It focuses the management process on analysis and decision-making.
• It combines planning, budgeting and operational decision making into one process.
• It forces the managers to evaluate in detail the cost effectiveness of their operations.
• It provides a system to trade off between long term and short term needs during the
budgeting period.
• It is flexible and allows for quick budget adjustments or resources shifts during the
year, if necessary.
• It identifies similar functions among different departments for comparison and
evaluation.
• It expands management participation and training in the planning, budgeting and
decision making process.

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BENEFITS OF BUDGETARY CONTROL
The benefits of budgetary control are outlined below.
• Budgets help managers in integrating personnel efforts within the organizational
towards a common goal. By properly appropriating adequate budgets to different
activities within the organization, all activities can be synchronized and all efforts
can be co-ordinate to achieve the organizational objectives.
• Budgets act as controlling devices to correct any deviations. If the expenditure for a
given activity exceeds the allotted budget, at any point of time this will signal deviation
from the prescribed course, requiring attention and action by the management.
• Just measurement of performance is possible through budget. Due to qualification
of budgets, the measurement of performance becomes more objective in nature,
eliminating biases that might be introduced due to subjective evaluation.
• The budgeting process helps management learn from past experience. The management
can critically look at the success or failure of the past budgets and isolate errors and
analyse their causes and establish steps to be taken to avoid repetition of such errors.
• The budgeting process induces the management to shift attention to the future
operations. Since budgets area part of the planning process, they force managers to
anticipate and forecast the trends and changes in the external environment.
• Budgets facilitate communications throughout the organization. Budgets are the blue
prints for the company’s plan of operations and can only be coordinated through
proper communication at all levels, and these budgets are specially helpful to lower
level mangers, who are responsible for implementing the budgets and plans. They let
these managers know how their operations relate to their units or departments within
the organization. This improved communication reduces the risk of failure due to
any misunderstanding.
• Budgets help new people and lower level managers to see where the organization is
going and where they fit the organization such budgets assist the junior managers to
be acquainted with the organizational goals and priorities and their own
responsibilities and how their operations relate to other units or departments within
the organization.

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 LIMITATIONS OF BUDGETARY CONTROL
• Budgets are often too rigid and restrictive. Supervisors are not given much liberty to
manage their resources. The budgets may either be changed too often or not at all.
Employees find it difficult to meet the performance level.
• Funds allocated for various activities may not be transferable from one account to
another resulting in difficult situations.
• Budgets are used to evaluate the performance and the result, but the causes of failures
and successes are not thoroughly investigated. A poor manager may meet the budgetary
standards and be considered as superior, while on the other hand a good manager
may be reprimanded for failure to follow the budgetary guidelines exactly.
• Budgets may be used punitively. The employees may regard budget, simply as rating
tools or as a device for catching there mistakes. This will lower their morale and
dilute their sense of dedication.
• Some managers believe that all funds allocated in a budget for a given activity must
be spent on the activity. They fear that if they do hot spend the entire allocation,
their budgets will be reduced for the following year. This type of attitude is detrimental
to the organizational effectiveness.
• Budgeted goals may be perceived as too high. A high production level or sales level
may be resented as unrealistic and may create tension and pressures which could
result it worker inefficiency and create conflicts between the workers and the
management.
3. FINANCIAL CONTROL
Managers in every’ organization, need to watch how well the organization is
performing financially. Not only do financial controls tell whether the organization is
on sound financial footing, but they can be useful indicators of other kinds of performance
problems. For example, a sales decline may signal problems with products. customer
service or sales force effectiveness.
Balance sheet
A financial statement that shows the firm’s financial position with respect to assets
and liabilities at a specific point in time.

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Income statement
A financial statement that summarizes the firm’s financial performance for a given
time interval; sometimes called a profit-and-loss statement.
Financial Statements
Financial statements provide the basic information used for financial control of
an organization. Two major financial statements — the balance sheet and the income
statement — are the starting points for financial control.
The balance sheet shows the firm’s financial position with respect to assets and
liabilities at a specific point in time. The balance sheet provides diree types of
information: assets, liabilities, and owners’ equity Assets are what the company owns,
and they include current assets (those that can be converted into cash in a short time
period) and fixed assets (such as buildings and equipment that are long term in nature).
Liabilities are die firm’s debts, including both current debt (obligations that will be
paid by the company in the near future) and long-term debt (obligations payable over a
long period). Owners’ equity is the difference between assets and liabilities and is the
company’s net worth in stock and retained earnings.
The income statement, sometimes called a profit-and-loss statement or P & L
for short, summarizes the firm’s financial performance for a given time interval, usually
one year.
Organizations calculate the income statement at three-month intervals during the
year to see if they are on target for sales and profits. The income statement shows
revenues coming into the organization from all sources and subtracts all expenses,
including cost of goods sold, interest, taxes, and depreciation. The bottom line indicates
the net income—profit or loss—for the given time period.
More discussion about the topics covered will be dealt in detail in the accounting
and financial management papers.

4. TQM TECHNIQUES
The implementation of total quality management involves the use of many
techniques, including quality circles, benchmarking, Six Sigma principles, reduced cycle
time, and continuous improvement.

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Quality Circles
One technique for implementing the decentralized approach of TQM is to use
quality circles. A quality circle is a group of 6 to 12 volunteer employees who meet
regularly to discuss and solve problems affecting the quality of their work. At a set time
during the workweek, the members of the quality’ circle meet, identify problems, and
try to find solutions. Circle members are free to collect data and take surveys. Many
companies train team members in team building, problem solving, and statistical quality
control. The reason for using quality circles is to push decision making to an organization
level at which recommendations can be made by the people who do the job and know it
better than anyone else.
Benchmarking
Benchmarking is defined as “the continuous process of measuring products,
services, and practices against the toughest competitors or those companies recognized
as industry leaders.”27 The key to successful benchmarking lies in analysis. Starting with
its own mission statement, a company should honestly analyze its current procedures
and determine areas for improvement. As a second step, a company carefully selects
competitors worthy of copying. Introduced by Xerox in 1979, benchmarking is now a
major TQM component. For example, Xerox studied the order fulfillment techniques
of L. L. Bean and learned ways to reduce warehouse costs by 10 percent. Companies can
emulate internal processes and procedures of competitors, but must take care to select
companies whose methods are compatible. Once a strong, compatible program is found
and analyzed, the benchmarking company can then devise a strategy for implementing a
new program.
Six Sigma
Six Sigma quality principles were first introduced by Motorola in the 1980s and
were later popularized by General Electric, where former CEO Jack Welch praised Six
Sigma for quality and efficiency gains that saved the company billions of dollars. Based
on the Greek letter sigma, which statisticians use to measure how far something deviates
from perfection, Six Sigma is a highly ambitious quality standard that specifies a goal of
no more than 3.4 defects per million parts. That essentially means being defect-free
99.9997 percent of the time.28 However, Six Sigma has deviated from its precise
definition to become a generic term for a quality-control approach that takes nothing
for granted and emphasizes a disciplined and relentless pursuit of higher quality and
lower costs. The discipline is based on a five-step methodology referred to as DMAIC

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(Define, Measure, Analyze, Improve, and Control), which provides a structured way for
organizations to approach and solve problems.
Effectively implementing Six Sigma requires a major commitment from top
management, because Six Sigma requires widespread change throughout the organization.
Hundreds of organizations have adopted some form of Six Sigma program in recent
years. Six Sigma has evolved to a process used in all industries and affecting every aspect
of company operations, from human resources to customer service. Six Sigma is
important for both manufacturing and service organizations.
Continuous Improvement
The implementation of a large number of small, incremental improvements in all
areas of the organization on an ongoing basis is known as continuous improvement.
Managers measure the expected benefits of a change and favor the ideas with the biggest
payoffs. Japanese companies have realized extraordinary success from making a series
of mostly small improvements. This; approach, called continuous improvement, or kaizen
is the implementation of a large number of small, incremental improvements in all areas
of the organization on ar. ongoing basis. In a successful TQM program, all employees’
learn that they are expected to contribute by initiating changes in their own job activities.
The basic philosophy is that improving things a little bit at a time, all the time, has the
highest probability of success. Innovations can start simple, and employees can build on
their success in this unending process.

8.6 SUMMARY

Control is essential in any organization to ensure that events are turning out as
required. It involves four steps namely establishing standards, measuring performance,
comparing the performance with the standards and taking corrective actions. The standards
may be set in terms of time required cost involved, income generated, market share,
quality, productivity, return on investment and so on. Measuring performance is in terms
of effort, effectiveness, and adequacy efficiency. To measure the performance, devices
like ratio analysis, comparative statistical analysis personal observation and sampling
are used. Comparison is the next step involved. If performance matches the standards
then it is an indication that everything is under control. If performance falls short of
standards, the effort towards improvement has to be made on the other hand, it the
standards are very high, and on account of it, reaching the target is difficult, then the
standard may have to be lowered.

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 Inadequacy of control leads to a lot of problems like decline in profit, lack of
working capital, bottlenecks in operations, waste, inefficiency, high cost etc. control is
an inevitable function of any organization.

8.7 SELF ASSESSMENT QUESTIONS

1. Define Controlling
2. Explain the types of Controlling
3. Discuss the steps involved in Controlling.

8.8 REFERENCES
1. Davar. The Management process. Mumbai: Progressive Corporation Pvt. Ltd, 2010.
2. Harold Koontz. Heinze Weihrich. Essentials of management, New York: MacGraw-
Hill,1993
3. J S. Chandan. Management Concepts and Strategies, New Delhi: Vikas Publishing
House PvtLimited,1997.
4. Chauhry Omvir, Prakash Singh. Principles of Management, New Delhi: New Age
International Publishers, 2012.
5. Peter. Drucker. Management of 21st Century, New York: HarperBusiness,2001.
6. Prasad L.M. Principles of Management, New Delhi: Sultan Chand & Sons, 2015.
7. Stoner J.A. and Freeman R.E. Management, New Delhi: Pearson Education
India,1995.
8. Richard L. Daft.Management, Massachusetts, United States: Cengage Learning, 2013.
9. S.K. Mandal. Management: Principles and Practice, Mumbai: Jaico Publishing
House, 2011

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 BLOCK III : ORGANIZATIONAL BEHAVIOR

UNIT -9 : ORGANIZATIONAL BEHAVIOR - INTRODUCTION

Structure:
9.0 Objectives
9.1 Introduction to Organizational Behaivour
9.2 Meaning and Definition of Organizational Behavior
9.3 Contributing Disciplines to Organizational Behaviour
9.4 Scope of Organizational Behaviour
9.5 Forces Affecting OB
9.6 Dimensions of OB
9.7 OB- Challenges
9.8 Models of Organisation Behavior
9.9 Summary
9.10 Key Words
9.11 Self assesment Questions
9.12 Reference

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9.0 OBJECTIVES

After studying this unit, you should be able to ;

• Trace the origin of organisational behavior
• Discuss the influence of various disciplines that have contributed to the
development organisational behavior
• Explain the concepts of organisational behavior
• Identify the Determinants of organisational behavior
• Examine the significance of organisational behavior for the organizational
growth.

9.1 INTRODUCTION TO ORGANISATIONAL BEHAVIOUR

Human being is the most complex to understand as individuals differ from each
other in various aspects. As we have tried to understand the nature, relevance and
significance of organizations, it is very essential to know the behaviour of the workers
at the work place. This need has led to the emergence of a discipline known as
organizational behaviour, which had a connotation earlier as Industrial psychology.
The field of organisational behaviour focuses the study and research on human
behaviour in the work environment. Organisational behaviour (OB) is the study of
individual and group behaviour in work settings. However the study is complex as its is
has acquired new dimensions with dynamic social and technological changes for the
past two decades. Changing demographics, cultural diversity, more educated work force
and awareness of rights and privileges has promoted a new look at the entire organizational
structure and systems.
The traditional authority structure is giving way to employee involvement, work
teams, group spirit, participative decision making, lateral relations, flexible work
structures and the likes. High productivity and high quality of work life have become
order of the day. The management is becoming more and more aware that an organization,
has no life, but for the people in it. As people are considered the most important asset of
an organization, there is an increased emphasis in the need for understanding people in
an work environment.
9.2 MEANING AND DEFINITION OF ORGANIZATIONAL BEHAVIOR

Behavioural science has emerged as one of the most interesting area of study in

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the present context. Let us try to examine the origin and some of the definitions for
proper learning. Organizational behaviour emerged as a distinct field of study in the late
1950s and early 1960s, on the basis of the belief that all managerial and organizational
problem are not technical in nature and an understanding and predictability of human
behaviour can help managers make their organizations more effective.
The study of human behaviour, being a part of general management can be traced
back to 4000 EC, when Egyptian pyramids were built or when the dawn of mankind when
people hunted in groups for livelihood and protected their families against hostile
environment forces. An organized development of economic science and management
as distinct disciplines began around the early 18th century when there was shift from
cottage industry to the factory system, which gave birth to the industrial revolution in
Europe, specifically in England (UK). The Industrial revolution changed the entire
behaviour of the civilized world. Adam smith a famous economist was the person who
advocated management principles, in the area of division of labour and specialization in
1776.
Over the years many scholars and practitioners have contributed towards an
organized study of human behaviour within organizational environment with special
consideration goin g into Prof. Elton Mayo and his Hawthorne experiments. These
experiments focused upon an understanding of human needs and desires and their
relationship with motivation and performance.
Abraham Maslow in support with Elton Mayo’s contention and findings presented
a theory of individual needs, which is popularly known as need hierarchy. The basic aim
of this approach is to increase the organizational effectiveness of its common resources,
which could be achieved properly by taking care of human needs. In general, the lower
level needs must be satisfied before the higher level needs arise. A manager should be
aware of all these needs and use different methods to motivate workers. This is critical
and very significant because the fact that complexity of Man’s nature. The management
must try to assess what motivates people towards better performance and the necessary
steps to create an environment which induces positive and strong motivation.
The behavioral approach had a major impact on management thinker’s night through
the 1970s and indeed changed the structure of the organization from the bureaucratic to
participative in which the workers have more freedom to participate in the affairs of the
organization. However, some serious questions have to be answered, as to whether a
workers is entirely ‘social man’ or an ‘economic man’ .This is because of the fact that

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not all employees seek self actualization as their ultimate goal. Whereas some
professionals may be motivated by recognition and feeling of self-fulfillment, it may be
different in case of blue collar workers for whom increased economic benefits are the
only motivators. Considering the above observation and the fact that human behaviour is
complex, there is a need to study as to know how does an employee behaves in a group
or as an individual in the work environment and also as to study what is the motivating
factor that increases performance of an employee.
The present day challenging business environment and cut-throat competition has
given more scope for the study of organisational behaviour.
Let us try to get a clear picture of organisational behaviour and learn the meaning.
“Organisational behaviour is the study and application of knowledge about how
people act within organizations. It is a tool for human benefit. It applies broadly to the
behaviour of people in all types of organizations. Such as business, government, schools
and science organization.
“Organisational behaviour means that study of the behaviour of individuals and
groups in organizations and organizations themselves, as they interact to attain desired
outcomes”.
“Organisational behaviour is directly concerned with the understanding, predic-
tion and control of human behaviour in an organization”.
Figure 1.1 Organisational Behaviour-Nature

E n v iro n m e n t

H u m a n B e h a v io u r in

o r g a n is a tio n s e ttin g

T h e In d iv id u a l a n d
o rg a n iz a tio n In te r fa c e

T h e o rg a n iz a tio n

E n v iro n m e n t

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From the definitions we can assess that the study of human behaviour in work environment
is the interface between human behaviour and the organistion, and organization itself
study of the individual behaviour alone is incomplete because the action of the employee
influences and are influenced by the organization where they work. The influence of the
environment on the interface between the individual and the organization cannot be
overlooked. Fig 1.1 depicts the integrative study of Organisational Behaviour.

9.3 CONTRIBUTING DISCIPLINES TO ORGANIZATIONAL BEHAVIOR

The study and understanding of human behaviour has posed a strong challenge to
both the scientific thinkers as well as traditional thinkers. Many of them have been
concentrating to identify the causes of human behaviour. Science has always been involved
in the “cause” and “effect” phenomenon and the relationship between them as to how a
“cause” induces “effect”. Likewise, the behavioural scientists want to find out why people
behave the way they do. They want to find a common denominator of human behaviour
which can be generalized and classified into standard causes which result into identifiable
and functionally dependent patterns of behaviour. Thus, by discovering and analyzing
these causes, the behaviour can be predicted, manipulated and controlled.
OB is concerned with people’s thoughts feelings, emotion and actions in a work
environment. To understand an individuals behaviour is in itself a challenge and
understanding group behaviour in an organisational environment would be a Herculean
managerial task.
The organizational behaviour is specifically concerned with work related behaviour,
which takes place in an organization. Organisational behaviour is the synthesis of many
other fields of study and is built upon contribution from a number of behavioural
disciplines. The predominant area of psychology is concerned with the study of individual
behaviour. Also, other behavioural disciplines affect the group dynamics and
organizational system. The contributing disciplines to organisational behaviour field are
shown in fig 1.2 and a brief description of each field is essential to understand better.
Figure 1.2 Inter Disciplinary Influ-

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 Psychology Sociology
Semantics
Social psychology
Medicine

Organizational Behaviour Industrial psychology

Engineering

Anthropology
Economics Political Science

Psychology
Psychology is a science that seeks to study, understand, measure, explain and
possibly change the behaviour of hurnans. Relative to organizational environment, it
assists in understanding motivation at work, individual and interpersonal perceptions,
functioning of personality, effects of training, leadership effectiveness, job satisfaction
and attitude measurement. Psychology also studies such behaviour patterns as fatigue,
boredom and monotony which impede efficient work performance. This discipline is
considered as fundamental for the study of organisational behaviour.
Sociology
Sociology as a science, has a major impact on the field of organisational behaviour.
It involves the study of social systems in which individuals exercise their social roles in
relation to their fellow human beings, be it within the family or within the organization.
Few of the organizational processes considered are group dynamics, organizational
structure, bureaucracy, power and conflict.
Social Psychology
As we have observed that psychology deals with individual behaviour, and

155
sociology deals with group behaviour, the social psychology examines interpersonal
behaviour. The social psychologists are concerned with intergroup collaboration, group
decision making and integration of individual needs with group activities. Another area
under investigation by social scientists is the effect of “change” on individuals and how
people adjust to “change” both as individuals and in group context.
Industrial Psychology
Industrial psychology helps to understand the individual reactions to industrial
environment. It involves selection and placement of individual into particular jobs through
psychological tests, study of mental health as affected by physical industrial enviroment,
impact of organizational structure on human performance and the types of job affecting,
safety and morale of workers. Organisational behaviour is an extension of Industrial
psychology and in the present situation both the terms have become synonymous.
Anthropology
Anthropology primarily studies the cultural impact on individual behaviour. It is
our cultural heritage that builds our value system and our sense of right and wrong which
in terms affect our norms of acceptable behaviour. The differences in behaviour under
the same set of circumstances can be traced to cultural up bringing and the values learned
in the cultural environment. Thus behaviour to some degree, can be predicted on the
basis of cultural generalities.
Political Science
Political science even though considered as the study of political system, has
many ingredients which directly affect human behaviour in organizations since politics
dominates every organisation to some degree. Many themes of interest directlty related
to organizational behaviours are political manipulation, allocation of power, conflict
and conflict resolution, coalition for power and self interest enhancement.
Economics
Economics aids in the understanding of economic condition at a given time,
economic policies of the government allocation of scarce resources to different
competing alternatives and all these factors affect organizational climate. Organizational
behaviour has learned a great deal from such economic factors as labour market dynamics,
cost-benefit analysis, marginal utility analysis, human resource planning, forecasting
and decision making.

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Engineering
Engineering, especially the industrial engineering branch, has contributed
significantly in the areas of time and motion study, work measurement, work flow analysis,
job analysis, job design, wage and salary administration, ergonomics, training and
development etc. Each of these areas has impact on Organisational behaviour.
Medicine
Medicine is the latest discipline to contribute for organisational behaviour. The
primary area of interest is work related stress; tension, fatigue and depression. The study
of cause and consequences of stress, fatigue and use of individual drugs, physiotherapy,
physical exercise, meditation, yoga to reduce stress is fast becoming an area of study
with in the organizational environment.
Semantics
Semantics is one of the more recent disciplines, helps in the study of
communication within the organization. Misinterpreted and misdirected communication
or simply lack of proper communication creates many behavioural problems.
Communication as such, is the life line of an organization and flow of information at all
levels is very essential for the success of an organization. This study tries to sort out
differences in individual interpretations of words and symbols.
9.4 SCOPE OF ORGANIZATIONAL BEHAVIOR
Organizational behaviour, as mentioned earlier, is the study of human behaviour
in organizations. The subject encompasses the study of individual behaviour inter-indi-
vidual behaviour, and the behaviour of organizations themselves,
Intra-personal behaviour covers such aspects as personality, attitude perception,
learning, opinion, motivation and job satisfaction.
Interpersonal behaviour includes group dynamics; inter group conflict, leadership,
communication transactional analysis and the like.
About organizations, the study covers such aspects as their formation, structures,
effectivensss and formal and informal organizations.
These three levels of analysis are not necessarily mutually exclusive. The field of
organizational behaviour embraces them as being complementary. In the past, the three
levels were pursued with little coordination by behavioural scientists. Now however, a
major contribution of those interested in the organizational behaviour field is the attempt

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to integrate these three levels of analyses, although this will require much more effort.
The individual focus is no more important or valuable to the manager within an organization
than is the group or formal organization focus. There is no need to choose one level of
analysis and exclude the others. The managers in business, health care, education
government, and religious organizations have problems in common that require a inter
disciplinary approach. This can be provided by organizational behaviour because it
emphasizes all these levels of anlysis the individual the group and the formal organization.
It may be emphasized that though the subject of organizational behaviour applies
to all types of organizations, the focus here is towards business establishments only.
This is so because, the paper is primarily addressed so the management students preparing
themselves for occupying important positions in industrial and business enterprises.

9.5 FORCES AFFECTING OB

Organization is affected by a complex set of forces today. The forces can be
broadly classified into four- people, structure, technology and environment. It is clearly
depicted in figure
People

 Individual

 Groups

Environment

 Government Structure
Organizational
 Competition  Jobs Behavior

 Societal  Relationshi

Technology

 Machinery

 Computer hardware and software

FIGURE 3.1 Key forces affecting Organizational Behavior

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 (Source: Organizational Behavior-John W Newstrom)
People: People make up the internal social system of the organization. That
system consists individual and groups, and large groups as well as small once. There are
unofficial, and disband. People are the living, thinking, feeling belongs who work in the
organization to achieve their objectives. We must remember that organization exists to
several people, rather than people existing to serve organization.
Structure: Structure defines the formal relationship and use of people in the
organization. Different jobs are required to accomplish all of an organization’s activities.
There are managers and employees, accountants and assemblers. These people have to
be related in some structural way so that their work can be effectively coordinated. These
relationships create complex problems of cooperation, negotiation and decision making.
Many organizational structures have become flatter (containing fewer levels, a goal of
ten attained by cutting middle-management positions.) This downsizing and restructuring
has occurred as a result of the pressure to lower costs while remaining competitive.
Technology: Technology provides the resources with which people work and
affects the tasks that they perform. They cannot accomplish much with their bare hands,
so they construct building, design machines, create work processes and assemble
resources. The technology used as a significant influence on the working relationship.
An assembly line is not the same as research laboratory, and steel mill does not have the
same working conditions as a hospital. The great benefit of technology is that it allows
people to do more and better work, but it also restricts people various ways.
Environment: All organization operates within an internal and an external envi-
ronment .A single organization does not exist alone. It is part of a larger system that
contains many other elements, such as government, the family, and other organization
.Numerous changes in the environment create demands on organizations. Citizens ex-
pect organizations to be socially responsible: new products and competition for cus-
tomers come from around the globe; the direct impact of unions diminishes; the dra-
matic pace of change in society quickens.Environment is an ever dynamic force which
affects all organizations, inturn the people concerned.

9.6 DIMENSIONS OF OB
OB as a interdisciplinary study,and has been influenced to a great extent by four
dimensions. Let us try to learn each one in detail.

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A) HUMAN RESOURCES APPROACH
The human resource approach is developmental. It is concerned with growth
and development of the people toward high level of competency, creativity, and
fulfillments, because people are the central resource in any organization and any society.
The nature of the human resource approach can be understood by comparing it with
traditional management approach of the early 1900’s. In the traditional approach,
managers decided what should be done and then closely controlled employee to ensure
task performance. Management in the earlier days was direct and control. The human
resource approach, on the other hand, is supportive. It helps employees become better,
more responsible people, and then it tries to create a climate in which they may contribute
to limits of their improved abilities. It assumed that expanded capabilities and
opportunities for people will lead directly to improvements in operating effectiveness.
Work satisfaction also will be a direct result when employees make fuller use of their
abilities. Essentially, the human resources approach means that better people achieve
better results.
Human resources approach is known as the supportive approach, because
the manager’s primary role changes from control of employees to active support of
their growth and performance.
B) CONTIGENCY APPROACH
The more accepted view in the twenty-first century is that few across-the-board
concepts apply in all instances. Situations are much more complex than first perceived,
and different variables may require different behavioral approaches. The result is the
contingency approach to organizational behavioral, which means that different situations
require different behavioral practices for greatest effectiveness.
Each situation must be analyzed carefully to determine the significant variables
that exist in order to establish the kinds of practices that will be most effective. The
strength of the contingency approach is that it encourages analysis of each situation
prior to action while at the same time discouraging habitual practice based on universal
assumptions about people. The contingency approach also is more interdisciplinary,
more system-oriented, and more research-oriented then the traditional approach. Thus
it helps managers use in the most appropriate manner all the current knowledge about
people in organization.
C) RESULT-ORIENTED APPROACH
A dominant goal for many organisations are to be productive, hence result

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orientation is a common thread woven through organizational behavior. Productivity, at
it simplest, is a ratio that compare units of output with units of input, often against a
predetermined standard. If more outputs can be produced from the same amounts of
inputs, productivity is improved. Or if fewer inputs can be used to produce the same
amounts of outputs, productivity has increased. The idea of productivity does not imply
that one should produce more output; rather, it is a measure of how efficiently one
produces what ever output is desired. Consequently, better productivity is a valuable
measure of how well resources are used in society. It means that less is consumed to
produce each unit of output. There is less waste and conservation of resources-a result
increasingly valued by many in society.
Fig 3.3 Role of Organisational Behaviour in Work Systems
1. Knowledge × skill = ability
2. Attitude × situation = motivation
3. Ability ×motivation = potential human performance
4. Potential performance ×resource × opportunity = organizational result

(Source: Organizational Behavior-John W Newstrom)

The role that organization behavior plays in creating organization result is illustrated by
a set of factors and the relationship between the factors and the relationship between the
factors. Let us look first at a workers ability. It is generally accepted that the product of
knowledge and can be improved through hiring better workers or providing existing
employees with job related trainings. Motivation results from a person’s attitude reacting
in specific situation. This emphasizes employee attitude and how they are affected by
situational factors to determine motivation. The interaction of motivation and ability
determines a person’s potential performance in any activity.
D) Systems Approach
The system approach compels managers to take a holistic view of the subject.
Holistic organization behavior interprets peoples-organization in terms of the whole
persons. Whole group, whole organization, and the whole social system. It takes an across-
the-board view of people in organization in an effort to understand as many of the factors
possible that influence people’s behavior. Issues are analyzed in terms of the total situation
affecting them rather than in terms of isolated events or problem.

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 A system viewpoint should be the concern of every person in an organization. The
clerk at a service counter, the machinist, and the manager all work with people and there
by influence the behavioral quality of life in an organization and the organization’s outputs.
Managers, however, tend to have a larger responsibility, because they are the once who
make more of the decision affecting human issues, and most of their daily activities are
people related. The role of managers, then, is to use organizational behavior to help
achieve individual, organizational, societal goals. Managers help build an organizational
culture in which talents are utilized and further developed, people are motivated, firrms
becomes productive, organization achieve their goals, and society reaps the rewards.
9.7 OB- CHALLENGES
OB in the present scenario is facing many challenges as the operations of the
organizations are going global, organization structure becoming flat and increased use
of technology. Let us examine some of the challenges of OB.
RESPONDING TO GLOBALIZATION:
Organizations are no longer constrained by national boarder. The world has become
a global village. Organisations have become flat and decision making is completeletly
decentralised, employees are empowered and diverse work culture persists. In the process,
the manager’s job has changed.
 Increased overseas assignment:The managers are facing increasing likely to
find themselves in a foreign assignment-transferred to your employer’s operat
ing division or subsidiary in another country.
 Working with Different Cultures : Even in own country managers find
themelves working with bosses, peers, and other employees born and raised in
different cultures.
 Transfer of jobs to countries with low cost labor : Managers in advanced
nations are facing challenges, where minimum wages are typically $6 or more an
hour, to compete against forms that rely on workers from china and other develop
ing nations where labor is available for 30 cents an hour.
MANAGING WORK-FORCE DIVERSITY:
Diversity can out to be a big liability in the hands of a manager who is not sensitive
to the needs, cancers and expectations of a diversified work group, it can pose, lot of
problems when a particular section of employee feels neglected or bypassed. The
perceived in equity might reside only in the brains of some who might have been pushed

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to a corner on grounds of poor performance. Subsequent law suits could threaten the
very existence of a company. When the reputation of a company, for right or wrong
long reasons, takes a serious dent, it may be difficult to attract talent later on. Some of
the challenges may seen insurmountable but it commitment in sincerity managers can
cross over the hurdles. Here are some challenges that come up :
 Unexamined assumptions: seeing the world from some one else’s perspective
is real challenge.
 Lower cohesiveness: Diverse groups, typically, or less cohesive than homoge-
neous groups.
 Communication problems : diverse groups carry lot of emotional baggage in
the form of misunderstandings, inaccuracies, inefficiencies.
 Mistrust and tension : because of limited interaction and low familiarity with
members belonging to a particular community ,region, race or religion, you do
not like to share your feelings and opinions freely.
 Stereotyping : we tend to see the world in a particular manner based on our
background and experience.
VARYING ENVIRONMENT :
Another challenge that confronts organizational behavior is to see whether the ideas
that have been developed and tested during periods of organizational growth and economic
plenty will endure with equals success under new conditions. Specifically, the environment
in the future may be marked by shrinking demand, scarce resources, and more intense
competition. When organization stagnate, decline, or have their survival threatened, there
is evidence the stress and conflict increase. Will the same motivational models be useful
in these situations? Are different leadership styles called for ? will the trend toward
participative processes be reversed ? since these and many other questions have no easy
answers, tremendous scope for further development of organizational behavior still
exists.

9.8 MODELS OF ORGANISATION BEHAVIOR

Organizations differ in the nature of the systems they develop and maintain and in the
results they achieve. Varying results predictable follows from different models of
organizational behavior. These models constitute the belief system that dominates
management’s thoughts and affects management’s actions in each organization. It is highly
important that managers recognize the nature, significance, and effectiveness of their
own models, as well as the model of others around them.

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 Models such as Theory X and Theory Y are also called paradigms, or frame work
of possible explanations about how things work. Model of any kind that a manager holds
usually begins with certain assumptions about people and leads to certain interpretations,
amplification, and even predictions of events. Underlying paradigms, whether consciously
or unconsciously developed, become powerful guides to managerial behavior. Managers
tend to act as they think, because they are guided by their dominant thoughts.
1. AUTOCRATIC MODEL
The autocratic model has its roots in history, and certainly, it becomes the pre-
vailing model of the industrial revolution. The autocratic model depends on power. Those
who are in command must have the power to demand meaning that an employee who
does not follow orders will be penalized. In an autocratic environment the managerial
orientation is formal, official authority. This authority is delegated right of command
over the people to whom it applies. Management believes that it knows what is best and
that the employee’s obligation is to follow orders. It assumes that employees have to be
directed, persuaded, and pushed into the performance, and such prompting is
management’s tasks. Management does not do the thinking; the employees obey the or-
ders.
Under autocratic conditions the employee orientation is obedient to a boss, not
respect for a manager. The psychological result for employees is dependence on their
boss, whose power to hire , fire and “perspire” them is almost absolute.
The autocratic approach was an acceptable model to guide managerial behavior
when there were no well-known alternatives, and it still can be useful under some extreme
conditions, such as organizational crises, army and few critical area of functioning. The
combination of emerging knowledge about the needs of employees and changing societal
values, suggests that there are much better ways to manage organizational system.

2. CUSTODIAL MODEL
Managers when they began to study their employees, soon recognize that although
autocratically managed employees did not talk back to their boss, they certainly “though
back”. A successful custodial approach depends on economic resources. The resulting
managerial orientation is toward money to pay wages and benefits. Since employees
physical needs are already reasonably met The custodial approach leads to employee
dependence on the organization. Rather than being dependent on their boss for their
weekly bread, employees now depend on organization for their security and welfare. If
employees have 10 years of seniority under the union contract and good pension, they
cannot offered to quit even if the grass looks creamer some where else.

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 Employees working in custodial environment become psychologically
preoccupied with their economic rewards and benefits. As a result of their treatment,
they are well maintained and reasonably contended. The custodial model is described in
its extreme in order to show its emphasis on material rewards, security, and organizational
dependence. In actual practice, this model also has various shades of gray , from dark to
light. Its great benefit is that it brings security and satisfaction to workers, but it does
have substantial flaws.
3. SUPPORTIVE MODEL
The Supportive model of organizational behavior has its origins in the “principal
of supportive relationships”. as stated by Rensis Likert,
They concluded that an organization is a social system and the workers is in a
deed the most important element in it. Their experiments concluded that the workers is
not a simple tool but a complex personality that an understanding of group dynamics,
cooped with the application of supportive supervision, was important.
The supportive model depends on leadership instead of power or money. Through
leadership, management provides a climate to help employees grow and accomplish in
the interests of the organization the things of which they are capable the leader assumes
that workers are not by nature passive and resistant to organizational needs but that they
are made so by an inadequately supportive climate at work. They will take responsibility,
develop a drive to contribute and improve themselves if management will give them a
chance.
The supportive model works well with both employees and managers, and it has
been widely accepted to- at least philosophically –by many managers in the United states
and elsewhere. The supportive model of organizational behavior tends to be especially
effective in affluent nations, because it responds to employee drives towards a wide ray
of emerging needs. It has less immediate application in the developing nations, where
employee’s current needs and social conditions are often quite different.

4. SYSTEM MODEL
An emerging model of organizational behavior is the system model, it is the result
of a strong search for higher meaning at work by many of today’s employees, and they
want more than just a paycheck and job security from their jobs. Since they are being
asked to spend many hours of their day at work, they want a work contexts there that is
ethical, infused with integrity and trust , and provides an opportunity to experience a

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growing since of community among co workers .to accomplish this managers must
increasingly demonstrate a sense of caring and compassion being sensitive to the needs
of a diverse workforce with rapidly changing needs and complex personal and family
needs.
The system models reflects the values underlying positive organizational behavior,
where managers their attention on helping employees develop feelings of hope optimism
, self confidence ,empathy, trustworthiness ,esteem ,courage, and resiliency . Managers
using the system model carefully protect and nature their employees so as to develop
positive workplace culture that leads to organizing to success and committed employees.
Managers at all levels need to display two key ingredients authenticity and social
intelligence.
Employees’ are inspired, feel important, and believe in the usefulness viability of
their system for the common good. Employees’ hopes and ideals built around what the
system accomplishes rather than solely what employees do as individuals.

9.9 SUMMARY
Organisational behaviour is the study of human behaviour in organizations knowledge
about human behaviour is useful to improve organizational effectiveness.
Organisational Behaviour is a inter disciplinary area of study. It draws heavily
from behavioural disciplines, prominent among them are psychology, sociology,
anthropology, industrial psychology and engineering. While, psychology and anthropology
have contributed to the study of individual behaviour, sociology is responsible for the
study of group behavior, society and organization. The discipline such as OB like any
other discipline is based on the fundamental concepts. The most important amongst them
have been discussed to enable the students to have a better learning. The growth and
development of OB as an important discipline is based on the concepts and determinants.
Furthermore, the factors’ affecting individual behavior in the organization is the focus
of study.
9.10 KEY WORDS
• Contribution
• Technology
• Environment

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9.11 SELF ASSESMENT QUESTIONS
1. What is Organizational Behavior? Explain the Major Contribution of Organizational
Behavior.
2. Discuss the factor affecting Organizational Behavior.
3. Briefly explain the dimension of Organizational Behavior.
4. Highlights the Challenges of Organizational Behavior.
9.12 REFERENCE
1. Jit S.Chand, Organizational Behavior, New Delhi: Vikas Publishing House Pvt.
Ltd, 2001.

2. K Aswathappa. Organisation Behaviour, Text, Cases, New Delhi: Himalaya

Publishing House. 2010
3. K Sridhar Bhatt. Management and Behavioural Process, New Delhi: Himalaya
Publishing House. 2005
4. Paul heresy. Management of Organization Behaviour, New Delhi: Prentice
Hall India 7th Ed.
5. Prasad L M. Organisational theory and Behaviour, New Delhi: Sultan Chand
& Sons, 2014.
6. Stephen P Robins. Organisation Behaviour, New Delhi: New D Prentice Hall
India, 2005.
7. VSP Rao and P S Narayan. Organization theory and Behaviour: New Delhi,
Konark Publishes Pvt Ltd., 2007

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 UNIT - 10 : INDIVIDUAL BEHAVIOUR

Structure:
10.0 Objectives
10.1 Introduction
10.2 Individual Behaviour
10.3 Individual Difference
10.4 Introduction to perception
10.4.1 Concept of Perception
10.5 Process Of Perception
10.6 Factors Influencing Perception
10.7 Developing Perceptual skills
10.8 Summary
10.9 Key Words
10.10 Self Assesment Questions
10.11 Reference

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10.0 OBJECTIVES
After studying this unit , you will able to ;
• Explain Foundations of individual behaviour
• Discuss Personality related factors as well as environmental influences factors
• Describe vividly the possible influence of various environmental, personal,
characteristics on the perceptual process
• Discuss the process of perception

10.1 INTRODUCTION
We are living in a world of multi dimensional organisations, be it national,
international or transnational, they are made of people. Organisations of all types
irrespective of their size and nature of business are made up of people. The success or
failure of an organisation can be easily attributed to the people who makes it, because
the performance of an organization is the replica of the quality of the people and not the
type of machines used in its operations or the quality of cement or bricks used in
constructing the massive structures where they are housed. In the present global business
scenario, unless we understand the nature of people and their involvement any amount of
research cannot reveal the secrets of business. The emergence of human relations
approach to management has neccessiated a close analysis of the people and their
composition. Orgnanisations are basically collections of individuals. Every individual
is an unique composition of physical and psychological make up. The ability to respond
to the external world, depends on his understanding and interpretation of the investigation
in the nature. At a given point of time in a similar environment the experiences of different
individuals may be different depending on their preparedness to accept or to reject the
event. For a similar problems different individuals may comeout with different solutions
based on their own insights. In a group of employees or students, everyone may have
their own reasons for working or otherwise. Thus, it is the individuals who makes an
organisation to be different from others.
10.2 INDIVIDUAL BEHAVIOUR
Individual behaviour, according to Kurt Levin, is a function of the (p) person and
the environment (E)
B=f (PxE)

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 These two factors are closely related. Any one of these two factors individually
will not be able to throw light on why a person behaves in a particular manner. The behaviour
may change due to variety of reasons, attributable to individual difference as well as
environment factors.
 Individual differences: Individual differences in terms of age, sex, education,
learning capabilities tell us why people behave differently in different situation.
Surprisingly, even in similar situations, all people do not act alike, like the behaviours
exhibited by different workers when the organization want to fully computerize its
operations. In fact, as search evidence shows, people’s behaviour is function of three
main influences: the genetic, physiological and learning, that predispose them to behave
in certain way.
 Environmental influences: Human behaviour is influenced by environmental
influences-both physical and social . The physical environment consists of factors such
as climate, topography, geographical location and the physical surrounding.Where as
the social environment includes the nature of the family , relations, friends , relatives ,
religion and the society at large.

10.3 INDIVIDUAL DIFFERENCES

It is said that, “ Man is the same but men are different “. Though every human
being belongs to the same category of animals, we are not the same in terms of our
capacity to understand the realities of the world. There is no common measure through
which one can gauge the quality of either a group or an individual reactions to a given
situations. The human mind and the consequent actions and reactions are so dynamic
which cannot be easily explained. A group of employees or an individual cannot be
expected to discharge a similar work in an 100% predetermined manner. Therefore it is
necessary to understand why people behave in the way they do? What makes an
organisations to fail when its counterparts are succeeding? How can an individual with
his unique likes and dislikes be convinced to be a member of a group? What causes
disturbance for one group when the other group looks at it as an incentive? Why there
are lazy and hardworking people ? what makes one to be obedient and the other one is
deviant? Why there are fast learners , slow learners and no learners in an organisations?
To answer the questions of this nature it is inevitable to study and analyse the human
behaviour and the factors that influences the same. On the basis of an individual reactions
to the external stimuli man can be of different type.
i) Rational and Economic Man:. An individual who makes a balance between

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costs and benefits of his actions. He is more concerned with calculations of value for
his effort in terms of economic rewards and maximising it.
This model is built around certain assumptions.
 The decision-maker operates to achieve goals that are known and agreed upon. He
would define a problem carefully and would have a clear and specific goal.
 The decision-maker tries to gather complete information about the problem. The
model assumes that people have access to complete and perfect information. All
alternatives and the potential results are calculated.
 Criteria for evaluating alternatives are known. The decision –maker has the free-
dom to select that alternative which would maximize his satisfaction.
ii) Organisational Man : William Whyte advocated the concept of organisational
man. An organisational man sacrifices for the sake of organisations’ interest. An individual
possessing a belief that social satisfaction is powerful tool to achieve objectives instead
of competitive struggle falls under this category. Organisational man suggests that
individual behaviour is oriented towards loyalty, belongingness, conformity and sacrifice
of individual interest in the realisation of organisational goals. So individual attitude is
developed towards resolving conflicts. Organisational man model is helpful in creation
of an organisational structure to provide satisfaction to individuals. Therefore,
organisational strategies takecare of people’s interest.
iii) Social Man : This model is an outgrowth of empirical behavioural research
and development of human relations movement. Elton Mayo, Kurt Lewin, McGregor
have popularised and used this model. It is based on the concept of social relationships.
According to this model group pressures, norms and sanctions direct individual actions.
Individual is motivated by social rewards and his satisfaction is measured in terms of his
status among group members.
iv) Self-Actualizing: Self-actualizing means to use the capacity of becoming
what an individual is capable of becoming. Men who engage themselves in innovations,
creations, and dynamism are grouped under this category. Self-Actualizing Man is an
indivial realises his full potential energy to achieve his final goal.
v) Complex Man: Complex man model is of recent origin. It assumes that an
individual is unpredictable in his behaviour. According to the model human being is
complex mixture of needs, goals, aspirations, perceptions, attitudes, learning, values
and beliefs. A man is complex because of lack of cause and effect relationship in his

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behaviour and due to individual difference.

10.4 INTRODUCTION TO PERCEPTION

Perception is one of the most important psychological factor that influences
individual behaviour. It is the process of through which an individual give meanings to
his external surroundings. The meaning an individual gives to the world in terms of
opportunities and threats and good and bad depends on his psychological ability to select,
interpret and organise the stimuli. Therefore, an employees behaviour in the working
place depends on the competencies that makes him to understand the organisational
objectives, people , technology and the culture. Therefore , before speaking about an
individual’s behaviour it is essential to know about his perceptual competence. In this
unit, you will learn the concept, process, the factors and barriers to the accurate
perception. You will be exposed to the theory of attribution and the managerial uses of
perception. You will be further familiarised with the process of developing perceptual
skills.
10.4.1 CONCEPT OF PERCEPTION
Human beings understand the world through five sensory organs namely eyes,
ears, nose, tongue, and skin. Perception is the process of giving meanings to the sensory
impressions an individual may get through the these senses. The basic five sense organs
help us to collect information through their respective tasks. Through eyes we see, through
ears we listen, through nose we smell, through tongue we taste and through skin we feel
touch.
10.5 PROCESS OF PERCEPTION
Perception is the process by which people view the world.It is the process of
receiving information about and making sense of the world. It consists of three most
important stages through which the individual decides to take note of the information
around him and recognises its importance and the second stage is the one through which
the information is interpreted in the light of the individuals experience and emotional
outlook. In the third stage the individual organises the information to get a complete
shape or meaning to the impressions got through the senses. The following figure
depicts the perceptual process and the pages.

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 The process by which an individual perception happen is the consequence of both
learned and instinctive reactions. Sometime, it comes out of the impressions drawn by
the senses and from one’s own view. Thus people see the world through their eyes that
are influenced by their mind.
10.6 FACTORS INFLUENCING PERCEPTION
Perception is influenced by mainly three sets of factors:
 Factors in the perceiver (perceiver variables);
 Factors in the target (subject characteristics);
 Factors in the situation (situational variables).
Factors in the perceiver include following issues:
• Self-concept of the perceiver;
• Attitudes of the perceiver;
• Motives of the perceiver;
• Interests of the perceiver;
• Experience of the perceiver;
• Expectations of the perceiver.

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Factors in the target include following issues:
 Physical appearance;
 Verbal and Nonverbal Communication;
 Status;
 Occupations;
 Personal characteristics;
 Novelty of the target;
 Motion of the target;
 Sounds of the target;
 Size of the target;
 Background of the target;
 Proximity of the target.
Factors in the situation include following issues:
• Social context;
• Organisational role;
• Work setting;
• Location of event;
• Time.
Collectively, these three sets of factors determine our perceptions about others.
10.7 DEVELOPING PERCEPTUAL SKILLS
We have already observed that when our perceptions are distorted, our judgement
of the objects, persons, or of the situations may go wrong. Therefore there is need to
develop our perceptual skills, so that the gap between our perceptions and the actual
facts may be minimized. Now, we shall discuss some of the techniques to enhance our
perceptual skills.
Giving Feedback and Receiving Feedback: Perceptual skills can be improved
by knowing about ourselves through receiving feedback, and let people know how you
feel about them through giving feedback. Joe Luft and Harry Ingham developed the tech-

174
nique of Johari Window (Johari representing the combination of their first names). The
techniques explain that there are four aspects of the self:
 I know the self
 I do not know the self
 Others know the self (about me)
 Others do not know the self (about me).
Combining the four aspects differently produce four windows (areas) of the self:
• Public Area: The aspects of me which I know as well as others also know
• Blind Area: The aspects of me which I do not know but others know
• Private Area: The aspects of me which I know but others do not know
• Dark Area: The aspects of me that I do not know as well as others also do not
know.
Public area does not create problem in perceptual process, but other three areas
do, hence these should be reduced. Receiving feedback from others can reduce blind
Area, and giving feedback and information about self to others can reduce Private area.
Reducing dark area is concerned more with self-purification.
Having Empathy: Empathy is not sympathy. Sympathy to some extent is to feel
pity about others, whereas empathy means rising above our perceptual frame and making
an attempt to comprehend the issues from others’ perspective.
Having Positive Attitudes: Positive attitudes create right perspective, and helps per-
ceiver to perceive without distortion.
Enhancing Self-Concept: Enhancing self-concept and self-esteem help one to
treat others with respect and with right perspective.
Avoiding Common Biases: A conscious effort to get rid of common biases helps
to get rid of distorted perceptions.
Communication: Lack of communication is a common cause of distorted per-
ception. Creating an atmosphere of open and authentic communication help to develop
perceptual skills of individuals.
Correct Use of Attribution: Wrong attributions lead to distorted perception.
Attributing success and failures correctly to internal or external factors, lead to right
judgements for future course of action.

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 Thus, understanding the perceptual process and dealing with perceptual biases are
essential aspects for taking right decision in any walk of life.

10.8 SUMMARY
Individual behaviour is unpredictable because it arises from people’s deep-seated
needs and value systems. It is the study and application of knowledge about how people
act within organizations. It is a human tool for human benefit. It applies broadly to the
behaviour of people in all types of organizations, such as business, government, schools
and services organizations. It covers three determinants of behaviour in organizations:
individuals, groups, and structure.
Perception on the other hand refers to the process by which individuals organise
and interpret their sensory impressions in order to give meaning to their environment. It
is an important determinant of human behaviour. The process of perception includes:
perceptual inputs of stimuli, perceptual mechanisms, perceptual outputs and pattern of
behaviour. Perception is influenced by mainly three sets of factors which are: factors in
the perceiver, factors in the target and factors in the situation. As the perception facilitates
the understanding of human behaviour in the organisation; the perceiver’s own mindset
and tendency in judging others may become the barriers to accurate perception. Some
of the important barriers to accurate perception are: stereotyping, halo effect, similar
to me effect or projection, selective perceptions, distortion and contrast effects.
Attribution is an important concept for understanding perception. The attribution
theory describes that when individuals observe behaviour, they attempt to determine
whether it is internally or externally caused. Perception is an important concept for
managers. Some important managerial activities where concept of perception can be
applied include : advertising, maintaining safety, managing impression, building corporate
image, managing performance, evaluating performance, judging employee’s loyalty, self
assessment and development and building relationship. The techniques involved in
enhancing perceptual skills are: giving feedback and receiving feedback, having empathy,
having positive attitudes, enhancing self concept, avoiding common biases,
communication and correct use of attribution.

10.9 KEY WORDS

 Behaviour
 Perception
 Attribution

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10.10 SELF ASSESMENT QUESTIONS
1. Discuss the salient features of the perceptual process model.
2. What is the attribution theory? What factors do you think might create the
fundamental attributions error?
3. What is Perception? Explain the various factors affecting Perception.
10.11 REFERENCES

1. Jit S.Chand, Organizational Behavior, New Delhi: Vikas Publishing House Pvt.
Ltd, 2001.
2. K Aswathappa. Organisation Behaviour, Text, Cases, New Delhi: Himalaya
Publishing House. 2010
3. K Sridhar Bhatt. Management and Behavioural Process, New Delhi: Himalaya
Publishing House. 2005
4. Paul heresy. Management of Organization Behaviour, New Delhi: Prentice
Hall India 7th Ed.
5. Prasad L M. Organisational theory and Behaviour, New Delhi: Sultan Chand
& Sons, 2014.
6. Stephen P Robins. Organisation Behaviour, New Delhi: New D Prentice Hall
India, 2005.
7. VSP Rao and P S Narayan. Organization theory and Behaviour: New Delhi,
Konark Publishes Pvt Ltd., 2007

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 UNIT - 11 :PERSONALITY

Structure:
11.0 Objectives
11.1 Introduction
11.2 Definition of Personality
11.3 Determinants of Personality
11.4 Sigmund Freud’s 5 Stages Of Personality Development
11.5 Personality Traits And Types
11.6 Personality Theories
11.7 Introduction to Learning
11.8 Theories of Learning
11.8.1 Classical Conditioning
11.8.2 Operant Conditioning
11.8.3 Congnitive Learning
11.9 Attitude
11.10 Process of Formation Of Attitude
11.11 Values
11.12 Types of Values
11.12.1 Value Based Organisation
11.13 Definition of Emotion
11.14 Determinants of Emotions
11.15 Emotional Intelligence
11.16 Summary
11.17 Key Words
11.18 Self Assesment Questions
11.19 References

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11.0 OBJECTIVES
After studying this unit, you will able to :
• Evaluate the personality determinants of personality and personality traits.
• Realize the importance of key personality traits relevant to work behaviour
• Describe the Different personality attributes influencing organization behaviour
11.1 INTRODUCTION
Personality is the complex set of various factors. It is composed of several
characteristics which are relatively permanent and influences individuals behaviour.
Different behaviours of the individuals that are frequently or less frequently demonstrated
are the basis on which the personalities are identified. In the words of GM Allport , “
Personality is the dynamic orgnisations within the individual of those psychological
systems that determines his or her unique adjustment to his or her environment.
11.2 DEFINITION OF PERSONALITY
Personality is an important aspect in understanding the human beings that are the
most important resources of an organization. They provide life to other resources for
the accomplishment of goals and objectives. Human energy makes all the difference in
organizations. Personality determines the human energy. It provides an opportunity to
understand the individuals, properly direct their energy and motivate them in a proper
manner. Personality is the study of the characteristic traits of an individual, the inter
relations between them and the way in which a person responds and adjust to other people
and situations.
Kolasa defined personality as a broad, amorphous designation relating to
fundamental approaches of persons to others and themselves. It is the study of the
characteristic traits of an individual, relationships between these traits, and the way in
which a person adjust to other people and situations. Stephen P. Robbins has defined
personality as the sum total of ways in which an individual reacts and interacts with
others.
These definitions reveal that the personality has the following characteristics.
• Personality refers to both physical and psychological qualities of an individual.
• It is unique in the sense that no two individuals are same in terms of their personal-
ity.

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• Personality is the manner of adjustment of individual to the organisation, environ-
ment and the group.
• It is a qualitative aspect. Certain techniques exist to quantify it indirectly.
• Personality is dynamic. It changes with the time and situation.
• Personality is a system. It has input, processing and output mechanisms.
• Personality influences goal achievement and performance of an individual.

11.3 DETERMINANTS OF PERSONALITY

Personality is an intangible concept. It is complex as it is related to the cognitive
and psychological process. It is believed that a man is born with certain physical and
mental qualities but the environment in which he is brought up shapes his personality. A
number of factors determine the personality of individual i.e., biological factors, family
factors, environmental factors and situational factors. Let us learn them in detail.
Biological Factors: Biological factors are related to human body. Three factors:
heredity, brain and physical features are considered as relevant. They are explained below.
i) Heredity: Heredity refers to those qualities transmitted by the parents to the next
generation. These factors are determined at conception. Certain factors of personality
inherited are : physical stature, facial attractiveness, gender, colour of skin, hair and eye
balls, temperament, muscle composition, sensitivity, skills and abilities, intelligence,
energy level and biological rhythms.
ii) Brain: Brain is influenced by biological factors. Structure and composition of brain
plays an important role in shaping personality. There are few empirical findings to state
that the brain influences the personality.
iii) Physical Features: The physical features and rate of maturation influence
personality.
The rate of maturity is related to the physical stature. It is believed that an
individual’s external appearance has a tremendous effect on personality. For instance
height, colour, facial attraction, muscle strength influences ones’ selfconcept.
Family Factors: The family factors are also important in determining personality
of an individual. Three major factors: viz., the socialisation process, identification process
and birth order influence the personality.
i) Socialisation Process: Socialisation is a process of acquiring wide range of

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behaviour by an infant from the enormously wide range of behavioural potentialities that
are open to him at birth. Those behaviour patterns are customary and acceptable according
to the standards of his family and social groups. Members of the family compel the
infant to conform to certain acceptable behaviour.
ii) Identification Process: Shaping of personality starts from the time the iden-
tification process commences. Identification Process occurs when a person tries to
identify himself with some person whom he feels ideal in the family. Normally a child
tries to behave as his father or mother.
iii) Birth Order: Birth order is another significant variable influencing the
personality of an individual. For instance first born are likely to be more dependent,
more rational, ambitious, hardworking, cooperative, and more prone to guilt, anxiety
and are less aggressive.
Environmental Factors: Environmental factors are those, which exists in and
around the individual. They are social and cultural factors. Culture determines human
decision-making, attitudes, independence: dependence, soberness: aggression,
competition, co-operation and shyness. There are two vital aspects of culture. Firstly,
conformity by the individual and secondly, acceptance by the larger group. Culture
establishes norms, values and attitudes, which are enforced by different social groups.
Individuals are compelled to behave in conformity to the culture established by the society.
Thus, culture and society exert greater influence in shaping the personality of an
individual.
Situational Factors: In recent years, the influence of situational factors on
personality is increasingly recognised. Generally an individual’s personality is stable
and consistent, it changes in different situations. A study conducted by Milgram suggested
that actions of an individual are determined by the situation. He states that situation
exerts an important influence on the individual. It exercises constraints and may provide
push to the individual. Thus it is clear from the above discussion that hosts of factors
exert influence in shaping the personality of an individual. Therefore, one has to
understand personality as a holistic system.
11.4 SIGMUND FREUD’S 5 STAGES OF PERSONALITY DEVELOPMENT

Freud’s 5 Stages Of Personality Development:

Freud believes that there are 5 stages in the formation of your personality:
1. Oral/Dependency
This stage takes place from birth to age 2, where the child explores the world

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using their mouth. If needs are not satisfied during this stage, one goes through life
trying to meet them. Smoking, eating and drinking are seen as oral fixations. Recurring
dreams, the feeling of incompleteness or unmet needs are common themes.
2. Anal/ Potty Training
In this second stage, the child learns to control their bodily functions. If not
handled properly or if the child is traumatized at this stage, then he or she might become
anal retentive, controlling, or rigid. The child can also develop obsessive compulsive
behaviors. Dreams of being out of control or trying to keep things in order are common.
3. Phallic Stage
Between the ages of 3 to 5, the child becomes aware of male and female. Person-
ality is fully developed by this stage. This stage is also classified by the Oedipus and
Electra Complexes. The Oedipus represents a male child’s love for his mother and the
fear/jealousy towards his father. The Electra is the female version where the female
child has anger toward her mother and exhibits “penis envy”.
4. Latency Period
Little new development is observable during this stage.
5. Genital
Starting from age 12 to the peak of puberty, this stage is classified by the
reawakening of sexual interest.
As previously mentioned, Freud believes that the motivating force of a dream is
wish fulfilment. Issues of power, lack of control, or unsatisfactory love may manifest in
dreams as a way of satisfying these needs. Thoughts that are repressed during the day
may also find a way into your dream as a way to getting fulfilment.
Freud believes that every imagery and symbol that appears in a dream have a sexual
connotation. For example, anxiety dreams are seen as a sign of repressed sexual im-
pulses.
Critique: There are many critics on Freud’s theory of dreams. Freud lived in a sexually
repressed Victorian era. His preoccupation with sexual imagery may therefore have been
a product of the times, the culture or his own relationship/conflict with sex.

11.5 PERSONALITY TRAITS AND TYPES

Identification of personality is closely associated with the identification of traits.
It is based on the proposition that personality is a culmination of whole person. Traits

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are combination of actions and reactions of an individual. It can be understood as rela-
tively distinguishable characteristics that describe behaviour. Let us learn personality
traits and types in detail.
Personality Traits
1) Allport’s Trait Theory:
Gordon Allport has identified a number of traits to describe complex behaviour
of human personality. He classified traits into two categories. Common traits and
Personal dispositions. While common traits are used to compare people, personal
dispositions are unique and the most pervasive attributes describing the complexity of
human personality. For providing comparison, six distinguishing trait orientations are
used. They are social, political, economical, aesthetic, religious and theoretical. For
instance social traits emphasises love and affection, care and interest on others and
expression of sympathy. Political trait is related to power consciousness. While economic
traits place emphasis on practical approach and cost and benefits of situation, aesthetic
trait is concerned with creative and artistic aspects. Whereas, religious trait is related to
unity and integrity. On the other hand, theoretical trait consists of use of rationality and
empirical approach. A person possessing theoretical trait is characterised by the
discoverer of critical truth.
2) Cattel’s Trait Theory:
Cattels’ theory has developed on a new approach. The traits are identified into
two categories. Surface traits and Source traits. Surface traits are visible outside and
appear on the surface of personality. They are determined largely by underlying source
traits. While source trait is a cause, surface trait is effect. Surface trait is symptom of
source trait. Trait theories have recognised the continuity of personality. The theories
have shown the utility of quantitative application in behavioural sciences. They have great
deal of intuitive appeal.
PERSONALITY TYPES
Personality traits provide an understanding of the personality types. Certain
personality types identified are described below:
1. The Myers-Briggs Type Indicator:
This is called MBTI framework. Sixteen personality types are identified with the
help of answers to 100 questions provided in the test. Some of them are Extroverted vs.
introverted, sensing vs. intuitive, thinking vs. feeling, and perceiving vs. judging etc.

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Qualities of a personality type ‘introverted, intuitive, thinking and judging’ possess certain
qualities. They are:
 Possess vision,
 Thinks with original mind,
 Have original ideas,
 Have great drive,
 Skeptical, critical, independent, determined and stubborn.
2. The Big Five Personality Types:
Personality dimension is identified in terms of the big five factors. The types of
personality are:
• Extraversion: Giving importance to relationships.
• Agreeableness: Thinking in a different manner.
• Conscientiousness: Possession of reliability.
• Emotional stability: Ability to withstand stress.
• Openness to experience: Interested and fascinated by novelty.
3. Physiognomy Personality Types:
William Sheldon has propounded three types of personality based on the human
anatomical or physical structure of persons and psychological characteristics. Physical
size of the body influences the human behaviour and temperaments. The personality types
are.
a) Endomorph: Certain characteristics of personality and behaviour associated
with the body type are friendly, concern to people, helping others in troubles, very slow
reaction to stimuli. They seek comfort, have strong inclination to delicious food, etc.
The persons who posses these personality characteristics, are liked by all.
b) Mesomorph: Persons having moderate physical characteristics are known as
Mesomorph. The body is strong and tough. Some of the personality characteristics of
this type are: seeks physical adventure, enjoys body building, feels restless, shows high
aggression and self assertiveness, likes to take risk and develops competitive spirit. The
person is liked by virtue of his physique.
c) Ectomorph: Ectomorph body type is characterised by a thin and flat chest. The
person is intelligent, feels shy and avoids social contacts. However, he is typically
anxious, ambitious, and dedicated to his work. He is quick to react and hypersensitive to

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pain and pleasure.
4. Extrovert-Introvert Personality Types:
Carl Jung is the proponent of the theory. The theory used analytical psychology
approach. According to the theory, personality is developed as a process of creativity. It
consists of four phases: thinking, feeling, sensation and intuition. Individual personality
is a mixture of these factors. The theory proposed two personality characteristics on
two extreme ends. They are extrovert and introvert type personality. While extrovert
persons are more sociable, introvert persons are more self-confident and they are guided
by their own individual thinking. Extroverts are sociable and reality oriented individuals.
They are performers. On the other hand, introverts are less risk taking and directive
oriented. They require strong motivation and specific directions. While extroverts think
in terms of objective and interactive relationships, the own philosophy and ideology
guide the thinking of introverts. This theory is very useful in the management of
organisational behaviour. Job design, motivation, leadership styles, career development,
training, organisational change, organisational development and organisational
effectiveness are based on the personality characteristics. Introvert is more likely to
perform better in repetitive jobs. Extrovert performs better in dynamic and environmental
centred jobs. Similarly extrovert needs democratic style of leadership and introvert needs
more directive oriented leadership. Thus, the theory is used in developing organisational
strategies to deal with individual employees for increasing organisational effectiveness.
5. Type A and Type B Personality :
Type A personality is defined by Friedman and Rosenman as aggressively involved
in a chronic, incessant struggle to achieve more and more in less and less time, and, if
required to do so, against the opposing efforts of other things or other persons. They
have defined Type B personality as rarely harried by the desire to obtain a wildly increasing
number of things or participate in a endless growing series of events in an ever decreasing
amount of time.

11.6 PERSONALITY THEORIES

In the previous section, you have learnt about the traits and types of personality.
Personality theories have been developed to provide an understanding of the personality
of an individual. They help in understanding the elements that shape out personality.
Interestingly society also plays a major role in shaping the personality of an individual.
Personality theories were developed in three streams of thought. They are psychoanalytic

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theory, self-theory and social learning theory. While psychoanalytic theory considers
that certain elements in the human brain are responsible for shaping the personality,
self-theory explains the impact of environment on the individual personality. Similarly
social learning theory provides that situation determines the personality. Let us learn
them in detail.
Psychoanalytic Theory
i) Sigmund Freud developed psychoanalytic theory. According to him human mind
consists of three elements that are responsible for shaping the personality. They are
preconscious, conscious and unconscious elements. The unconscious state of mind is
influenced by hedonistic principle. Unconscious mental activity determines behaviour.
Conscious element is guided by reasoned reality principle. Freud developed a structure
of human mind in order to explain personality. It consists of three elements known as :
Id, Ego and Super ego. Consciousness is guided by principle of reasoned reality and
unconsciousness is ruled by hedonistic principle of pleasure. According to this approach,
personality determines the behavior. The personality systems of human mental activity
are : The Id, The Ego, The Super Ego, and The Libido. They are described below:
i) The Id: Id is the totality of instincts oriented towards increasing pleasure,
avoiding pains and striving for immediate satisfaction of desires. The personality
characteristics of an individual are built on the foundation of the Id.
ii) The Ego: Ego is the executive part of the personality. It selects the features of
the environment and stores them. It is rational and logical. It is the conscious mediator
between realities of world and the id’s demands.
iii) The Super Ego: Super ego is a moralistic segment of human personality
consisting of noblest thoughts, ideals, feelings developed through absorption of cultural
values and attitudes.
iv) The Libido: It is a psychic energy. It makes any system to function. It is
dynamic.
According to this theory, wishes are generated by the Id. It compels immediate
gratification of these desires. Otherwise, tension is generated for their gratification. It
tries to gratify them by primary process and reflex action. For example, if an employee
is negative, the superior scolds him for not performing the given task. He is hurt by the
words of the superior. Since he cannot be harsh with the superior, he tries to bear
discomfort by withstanding his emotion. He does this by grinding his tooth and bears it.
If he fails to withstand his emotion he tries to share the emotions with his close friends.

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This is called as primary process of overcoming the tension. If the primary process
fails, energy flows to ego, which provides perception, thinking, judgment and memory.
Then individual decides a particular action. However, while applying secondary process
super ego acts as a judge. Hence, wishes are satisfied by ego according to the values
established by super ego. If ego is able to integrate id and super ego individual gets
satisfaction, otherwise it results into frustration because super ego tries to punish the
ego. To continue the example, the employee tries to introspect himself and learns to
work to avoid any discomfort in future. The theory is helpful in understanding the
personality of an individual.
Self Theory
Carl Rogers contributed the self-theory. It is also known as Organism theory or
Field theory. The theory emphasises individual as an initiating, creating, and influenting
the determinant of behaviour within the environmental framework.
Elements of self-theory are explained below:
a) Organism: Organism is the individual. It is the storage of all experiences. Thus forms
locus of reference. It is guided by conscious and unconscious elements. So individual
behaviour is caused by self evaluation and by experiences.
b) Phenomenal field: Phenomenal field represents totality of all experiences gathered
by environmental interaction. According to the theory fulfilment of self-actualization
need is the basic motivator. It is controlled by environment in which individual lives.
c) Self-concept: Self-concept is an outcome, which forms basis for individual behaviour
and personality. Self is a combination of perceptions, attitudes, beliefs, values and traits.
It characterises the concept of ‘I’ and “Me”. In this context, ‘I’ indicates one’s own
psychological process. Hence it is called personal self. ‘Me’ is related to the thinking
of an individual as to how he appears to others. So, it is called social self. Thus both
personal self and social self determine individual behaviour.
Self-theory provides valuable guide in understanding behaviour. The theory is
organised around individual and not around environment, which is uncontrollable.
Social Learning Theory
Albert Bandura developed social learning theory. It states that personality is
determined by the situation in which a person interacts. The following are the assumptions
of the theory.
According to the theory, a person’s behaviour is determined by the modelling and

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observational learning from the environment. A person interacts with the environment.
He observes and imitates the stimuli in the environment. He experiences certain cognition.
This cognition is retained. When the same conditions are reinforced he shows actions.
These actions are called behaviour. Bandura described that : It is largely through their
actions that people produce the environmental conditions that affect their behaviour
in a reciprocal fashion. The experiences generated by behaviour also partly determine
what a person becomes? In addition, what he can do? Which in turn affects subsequent
behaviour?
Social learning theory provides valuable insights into understanding of personality.
The theory considers environment as determinant of behaviour, rather than an unconscious
element, which is considered as determining behaviour. Thus, it suggests that by
controlling environment, behaviour can be modified suitable to organisational process.
11.7 INTRODUCTION TO LEARNING
Learning can be defined as a relatively permanent change in behavior or
performance resulting from experience or practice.Learning involves change, though
not necessarily improvement in behavior. It may be good or bad from an organizational
point of view. For example, bad habits such as reporting late for work ,fighting with co-
workers when the supervisor is away, careless and reckless use of facilities etc, can be
learned, especially when management is viewed as weak or not very effective in enforcing
discipline. The change brought about by learning should be long-lasting. Therefore, short-
lived performance changes, that typically occur prior to the visit of a top management
team, should not be confused with learning. The change in behavior should occur as a
result of experience, practice, education or training. Any change in an individual’s thought
processes or attitudes, if not accompanied by change in behavior should not be interpreted
as learning
Reinforcement is the process by which An external reinforce or reward products
and maintains a behavior. Rewards for workers, who are regular and sincere to their
work, would induce others to learn such behaviors. Reinforcement increases the strength
of response and tends to induce reputations of the behavior that precedes the
reinforcement. The practice of learning, thus, must be reinforced in order that learning
occurs if reinforcement does not accompany the practice or experience, the behavior
will eventually disappear.
Definitions of Learning:
1. Learning is a modification of perception and experience-Hernold

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2. Learning is a process of progressive behaviour of attitude , experience and training-
C F Skinner
3. Learning is relatively permanent change in behaviour which occurs as a result of
experience-Bernard , Bass and James Vaughn
4. Learning is a relatively change in the behaviour , that occurs as a result of experi-
ence or reinforced practice- Fred Luthans
5. Learning is the process by which an activity originates or is changed through react-
ing to an encountered situation, provided that the characteristics of the change
activity cannot be explained on the basis of native response tendencies , matura-
tion or temporary states of the organism-Hilgard and Bower
CHARACTERISTICS OF LEARNING:
1. Learning is an inferred process that is believed to influence the behaviour.
2. Learning results in a relatively permanent change of an individual’s behaviour.
3. Learning is one of the several factors that influences the behaviour.
4. The practice of learning must be reinforced in order to occur , if reinforcement
doesnot occur the behaviour will disappear.
5. Learning is a continuous process.

11.8 THEORIES OF LEARNING

Learning theories explain the different approaches through which people
learn.People learn new behavior through one or more of the four learning processes or
models namely - classical conditioning, operant conditioning, observational learning
and cognitive learning.
11.8.1 CLASSICAL CONDITIONING
Classical model of learning developed with experience of the material process
accompanied with learning stimuli It is a simple from of learning in which a conditioned
response is linked with an unconditioned stimulus.Ivan Pavlov, a Russian psychologist
developed classical conditioning theory based on his experiments to teach a dog to
salivate in response to the ringing of a bell.He observed that a dog started secreting
salvia with the ringing of the bell, as the ringing of the bell was accompanied by the
showing of the meat to the dog. It is a natural phenomenon that a dog secretes salvia
when meat is put before the mouth of a dog .If the natural phenomenon is known as

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unconditioned stimulus is accompanied by an artificial phenomenon known as conditioned
stimulus, the dog generated a conditioned response.
Before conditioning
 When Pavlov offered meat (unconditioned stimulus) to the dog, he noticed a
great deal of salivation (unconditioned response ).Pavlov termed the food an
unconditioned stimulus because food automatically led to salivation (that is ,
unconditioned response) when the dog saw the meat, it salivated .
 On the other hand Pavlov merely rang the bell (neutral stimulus), the dog did not
salivate.
After conditioning
Pavlov subsequently introduced the sound of a bell (artificial or conditioned
stimulus) each time the meat (unconditioned stimulus) was given to the dog. Thus when
the bell was paired with the meat, it produced a response. the dog eventually learned to
salivate in response to the ringing of the bell even when there was no meat. (Conditioned
stimulus leading to conditioned response). Pavlov, then, had conditioned the dog to
respond to a learned stimulus. This is known as the “law of exercise” which state that
behavior can be learned by repetitive association between a stimulus and a response
In organizations, however, only simple behaviors and response can be learned in
this way. For example, if the boss were to reprimand an employee for going late to the
office over phone immediately after his arrival , If the employee receives a call from
the boss immediately after reaching the office, he becomes extremely nervous because
of his association of the phone call with the reprimands. The classical conditioning
does not explain situations where people choose a course of action in a rational and
objective manner. In actual practice managers are more interested in how employees
behave voluntarily and freely.
11.8.2 OPERANT CONDITIONING
Operant conditioning theory is an argument that behaviour is a function of
consequences. People learn to behave to get something voluntary or learned behaviour
in contrast to reflexive or unlearned behaviour.tThe tendency to repeat such behaviour is
influenced by the reinforcement or lack it brought about by the consequences of the
behaviour. Operant conditioning, according, to B.F.Skinner, is based on the premise
that people learn to behave to obtain something they want or avoid something they do
not want. Behavior thus, is a function of its consequences, and not a function of inner

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thoughts feelings, emotions or perceptions –as suggested by classical conditioning.
People in short learn to behave to get something they want or to avoid something they
don’t want. Operant behavior therefore is something that is learned as against something
that is reflexive or unlearned. The consequences of a given behavior would ultimately
decide whether the same behavior is likely to occur in future or not. As a result, behaviors
that are rewarded (or reinforced) get repeated and behaviors that are punished (or not
reinforced) are avoided (known as the law of effective)- Thorndike. An employee who
receives a written disciplinary warning after submitting a report 24 hours late is more
likely to submit the report on time next time.
Table 9.1 Classical and Operant Conditioning: Comparison

Features Classical conditioning Operant conditioning

Type of association Between the stimuli Between a response and
its consequences
State of the subject Passive Active
Focus of attention On what procures On what fellows response
response
Type of response typically Involuntary response Voluntary response
involved Relatively simple Simple to highly complex
Range of response Emotional responses: fear, Goal- oriented response
Responses learned likes and dislikes

11.8.3 COGNITIVE LEARNING

Cognition refers to an individual’s ideas, thoughts, knowledge, interpretations,
understandings etc. about himself and his environment. According to Cognitive Theory
– proposed by Tolman and Kohler – learning is considered to be the outcome of deliberate
thinking about a problem or situation both intuitively and based on known facts and
responding in an objective and goal oriented way. Edward Tolman, using rats in his
laboratory, explained how the rats learned through a complicated maze their goal of
food. It was found that rats developed expectations at every choice point could ultimately
lead to food. If the rat actually got the food, the association between the cue and the

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expectancy was strengthened, and learning took place. As against the S-R and R-S learning
in the classical and operant approaches, Tolman’s approach could be described as S-S
(stimulus-stimulus, or learning the association between the cue and the expectancy. The
theory became highly popular in 1940s and 1950s, and in fact, several training programmes
were designed along similar lines. The training programmes were basically aimed at
strengthening the relationship between cognitive cues (supervisory, organizational and
job procedures) and worker’s expectations (incentive payments for good performance).
The assumption was that the worker would learn to be more productive by building an
association between taking orders or following directions and expectancies of monetary
reward for this effort.
Along similar lines, Kohler and his team were interested in finding how animals
solved problems confronted by them. Chimpanzees’ were put in a cage with some fruits
placed tantalizingly out of reach. A stick was kept in view, so that the chimpanzees em-
ploy the stick as a tool to bring the fruit into the cage. Expectedly, chimpanzees re-
trieved the fruits and Kohler proposed that the chimpanzees solved the problem through
the use of insight.
11.8.4 SOCIAL/ OBSERVATIONAL LEARNING
People can learn through observation and direct experience which is also called
vicarious learning which means getting knowledge from others’ experiences. It happens
when people observe the behavior of others, note their consequences and alter their own
behavior . Thus, social learning is nothing but acquisition of knowledge through processing
of information. Watching the boss reprimand someone for being late, would simply make
another learn the importance of being punctual. People supposedly learn behaviors and
attitudes, at least partly, in response to what others expect of them. Like operant
conditioning, social/observational learning theory also states that behavior is a function
of consequences.

11.9 ATTITUDE
Attitude is a learned predisposition to respond in a consistently favourable or
unfavourable manner with regard to a given object, event , individual or an issue. Attitudes
refer to tendency to respond to certain objects, persons or situations. They are the feelings
and beliefs that determine the behaviour of the person. They provide framework for
responding in a particular fashion. The attitudes may be positive or negative. The persons
having positive attitudes towards the job and organisation may contribute their best to
the organisation and visa versa In this unit, you will learn the concept of attitude, the

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process of formation and change in attitude. You will be exposed to various work related
attitudes. You will further learn the meaning, importance and types of values and the
values across the culture. You will be familiarised with the process of designing the
value based organisation.
Consider following three statements:
Statement 1 : Junior executives are high achievers in comparison to their seniors.
Statement 2 : Any product with a tag “Made in Japan” is reliable;
Statement 3 : New technology be taught
You might have heard the statements such as above, or you might have yourself
used such statements sometime in recent past. In all the three statements you are inclined
to evaluate something. The first, second, and third statements are attempts to evaluate
groups, juniors versus seniors , products a made in Japan, and an issue that is teaching
new technology respectively. These statements may or may not be true in overall sense.
However a person giving such statements is revealing his/her own attitude towards the
groups or objects or the issue. Therefore, we can understand that attitudes are evaluative
statements either favourable or unfavourable concerning people, events, objects or issues.
They reflect how one feels about something .
There are three basic components of Attitudes: Cognitive component which
includes an individual’s opinion or belief about something. It is the out- come of
experience or knowledge an individual has at that given point of time. The second
component is the affective or emotional component which indicates the feeling or
emotion reflected in the opinion. It is the understanding of the individual as to how he or
she is affected or going to be affected by the object, event or the person in consideration.
The third component is the behaviour or action component, which indicates the individuals
preparedness to act favourably or unfavourably towards the event , object or the person,
hence all the three components constitutes the mental predisposition that influences
the positive or negative behaviour of the person.
Features of Attitudes:
1. Attitudes are not the inborn qualities.
2. Attitudes are subject to valence.
3. Attitudes are the apathy or preparedness of an individual’s mind.
4. Attitudes can be formed and altered.

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5. Attitudes can be measured.
6. Attitudes are subject to the centrality of behaviour.
11.9.1 FUNCTIONS OF ATTITUDE
According to Katz, Attitudes serve four important functions for individuals:
 Adjustment Function: People tend to develop favourable attitude towards
rewarding and beneficial functions as well as relationship. Similarly people develop
negative attitude towards such functions and relationships, which shall attract punitive
actions.
 Ego-defensive Function: Attitude can serve as devise for protecting self-image.
 Value-expressive Function: Attitude supports expression of core values.
 Knowledge Function: Attitude serves as standard or frame for understanding and
interpreting people and events around them.
 Dissonance reduction function: Attitudes makes an individual’s decision to be in
conformity with the belief or mental predispositions hence it helps in reducing
dissonance.

11.10 PROCESS OF FORMATION OF ATTITUDE

Attitude formation is a process concerned with learning and behavioural
development or modification. Attitudes are formed through three different ways
a) Social Learning: It is acquiring attitudes from others. There are broadly three
processes of acquiring attitudes through social learning: Classical Conditioning,
Instrumental Conditioning, and Modelling.
 Classical Conditioning is a basic form of learning in which one stimulus regularly
precedes another. It is learning based of association, that when first stimulus is present,
the second would follow. Prejudices and preferences are created through classical
conditioning. Classical Conditioning can play a role in the development of attitudes.
 Instrumental Conditioning is concerned with learning to express the “right”
views. Instrumental Conditioning is created through rewarding a desirable behaviour and
discouraging an undesirable behaviour. Thus a particular type of attitude is created towards
a particular type of action through Instrumental Conditioning.
 Modeling as a concept, deals with individuals acquiring new behaviours through

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observing the actions of others. Individuals tend to do what others do, not what others
say. Thus attitudes may be transmitted from one person to another or from one group to
another, or from one generation to another.
b) Direct Experience: Attitudes are also formed through real life experience,
which may be also called as direct experience or personal experience. Various studies
suggest that strength of the attitudes acquired through direct experience is stronger than
the strength of attitudes acquired indirectly. Attitudes acquired through direct experience
are held more confidently and are more difficult to be subjected to change.
11.10.1 CHANGEING ATTITUDE
Behaviour of an individual can be altered by altering his or her attitude. In an
organisation there will be needs to mould the behaviours of people accourding to the
requirements of the purpose to be achieved. Training, Education and orientations are the
means through which the employee attitudes are changed. There are continuous
instigations of both natural and manmade around us to change the attitude. The environment
and the happenings around us may make an impact on our attitude and behaviour.
Advertisements, publicity, appeals, announcements etc. in various media are attempts to
change our attitude towards objects, people, or issues, so that our behaviour towards
them may be directed in desired direction. There are broadly two processes of change in
attitude: a) Persuasion, and ii) Cognitive Dissonance. Persuasion influences us from
outside, and Cognitive Dissonance influences us from within.
Changing Attitude through Persuasion
Persuasion is an act of convincing by giving relevant information. Changing attitude
through persuasion is a difficult task. People resist persuasion due to three factors.
These factors are: i) Reactance, ii) Forewarning, and iii) Selective Avoidance. Reactance
refers to the negative reactions we experience whenever we feel that someone is trying
to limit our personal freedom. In some cases individuals shift away from a view advocated
even if it is one they might normally accept. Forewarning refers to tendency of building
counter-arguments against a persuasive argument. These help receivers resist the
conclusions recommended by the message. Selective avoidance refers to a tendency to
direct our attention away from information that challenges our existing attitudes. There
are two approaches of analysing effect of persuasion on attitudes: i) Traditional Approach,
and ii) Cognitive Approach.
The Traditional Approach : According to this approach, there are three ele-
ments of persuasion:

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 • Source: the communicator or sender;
• Message: the communication;
• Target audience: the receiver.
The traditional approach focussed on a basic question: “Who says what to whom
and with what effect?” The most notable findings of this approach are:
• Experts are more persuasive than non-experts;
• Messages which do not appear to be designed to change our attitudes have more
impact than those appearing to be designed so;
• Popular and attractive communicators are more effective in changing attitudes than
unpopular or unattractive ones;
• Individuals with relatively low in self-esteem tend to get persuaded more easily
than those high in selfesteem, especially by persuasion from high-status or attrac-
tive sources;
• Two-sided approach is more successful than one-sided approach;
• Persuasion can be enhanced by messages that arouse strong emotions in the audi-
ence.
The Cognitive Approach : Cognitive approach attempts to explain what do people
think about when exposed to persuasive appeals. Several theoretical models have emerged
to explain this phenomenon, but the most widely known among them is Elaboration
Likelihood Model (ELM).
ELM explains that there are two distinct routes to persuasion, depending on how
important or relevant the issues are to the persons who are the targets of persuasions.
The two routes are called- Central Route, and Peripheral Route. If we focus considerable
attention on a message and its argument, because persuasive message appears to be
important, persuasion occurs through central route. In this case degree of attitude change
depends on quality of arguments. To the contrary, if we find the persuasive message to
be of little interest, we may not pay considerable attention on the message. Yet such
messages can change our attitude, if we find that message or the argument was more
balanced rather tilted one-sided, or if we find that the source (communicator) has
expertise and commands high status. In such case, persuasion occurs through peripheral
route. There are two implications of ELM. First, attitude may or may not change either
through central route or through peripheral route. Second, attitude is more likely to

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change if persuasions come from multiple sources as well as the arguments are strong,
because in this case information receives greater scrutiny by the receivers.
Another model that explains the cognitive approach to persuasion is the Heuris-
tic Model of Persuasion. This model deals in one question: When individuals overhear
the reactions of an audience to a persuasive message, does this influence the extent to
which they, too, are persuaded? Studies on this model suggested that audience reaction
would be influential when the individuals in question had little involvement in the issue.
In contrast, when the issue is important to the persons involved, audience reactions would
make little difference- in this case systematic processing would occur and persuasion
would depend on quality of arguments.
Cognitive approach provides insight for choosing message in advertisements for
different types of products. Some products serve utilitarian function- people buy and
use them because they are required to be used. In contrast, some products serve social
identity function- people buy and use them because they boost the personal image of the
users. For the utilitarian products, users are more persuaded by advertisements, which
describe features of the products. For the social-identity products, they are more
influenced by advertisements, which have glamorous appeal.
Cognitive approach to persuasion explains why are people in a good mood easier
to influence. It states that perhaps when people are in a good mood, they are less able to
engage in careful, systematic processing than when they are in a neutral mood. Therefore,
they may be more easily influenced, particularly by strong and convincing arguments.
Cognitive approach to persuasion also explains the relation between individual
differences and its influence on persuasion. Take one aspect of personality, self-
monitoring. Persons high in self-monitoring tend to make an attempt for creating positive
impression in the minds of others. Such persons are more likely to be persuaded, if the
message is coming from attractive sources, and get relatively less effect of persuasion
if the message is coming from expert sources. On the other hand, persons low on self-
monitoring are less interested in creating positive impressions on others, and, more
concerned with reflecting their true and inner feeling. They are persuaded less by
attractive sources, and, more by expert sources.
11.10.2 CHANGING ATTITUDE THROUGH COGNITIVE DISSONANCE
In the late 1950s Leon Festinger proposed the theory of cognitive dissonance to
explain the relationship between attitudes and behaviour.Cognitive dissonance means
the imbalance or incompatibility that an individual may perceive between two or more

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of his attitudes. Cognitive Dissonance is the internal state that occurs when individuals
notice inconsistencies among their attitudes or between their attitudes and their overt
behaviour. Such inconsistencies create unpleasant feeling, which produces pressures
that may result in change in attitudes. The discomfort occurs due to the conflicting
thoughts will create unrest in the mind if the unrest is recognised by the individual it
reflects the feelings held prior to the actions. If there is a disharmony between belief
and the action by changing any of them the uncomfort can be reduced. Dissonance arising
from the conflicting views and actions can be reduced through the re-evaluation of the
thoughts to arrive at consonance and adoption of new beliefs. The opinions of the
dissasatisfied employees can be altered by balancing between the reasons for
dissatisfaction and the realities by creating more favourable attitudes and conditions.
The weaker the reasons for acting in attitude-discrepant ways, the stronger these pressures
are. Dissonance is a motivational state- people who experience it want to reduce it.
Earlier, inconsistency was identified as the basic feature of cognitive dissonance.
11.10.3 METHODS OF EFFECTING ATTITUDE CHANGE
Richard M. Steers has described the following methods of effecting attitude
change.
 Providing New Information: New information, especially coming from accurate
sources, may alter belief structure, subsequently leading to expected attitude changes.
 Fear Arousal and Reduction: Both can lead to change in attitude. However
excessive arousal of fear may lead to rejection of message by the individuals. Studies
suggest that fear reduction is more appropriate for changing attitudes than fear arousal.
 Dissonance Arousal: Dissonance leads to inconsistencies among individual’s
attitude or between his/her attitudes and overt behaviour. This creates unpleasant feeling
which results in change in attitudes.
 Position Discrepancy: The greater the discrepancy between the individual’s own
position and the position advocated by others, the more the individual will move towards
the position held by others.
 Participation in Decision Making: Attitude change can be brought about by
involving the individual in the process by which decisions are made.
Kelman has identified three processes that act as instruments of change in attitude.
 Compliance: It is application of subtle pressure either through reward or
punishment in order to change the behaviour, and expecting this change to be lasting.

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 Identification: It is identification with the person who is affecting the change
and is acting as a change agent.
 Internalisation: This means that the new attitude is integrated with the other
attitudes and becomes a part of the person’s total personality. It is more permanent in
nature. This change may occur due to desire to change that comes from within.

11.11 VALUES
Values are the absolute standards by which people mould their lives. Values
represent the basic convictions that a specific model of conduct or an end-state of
existence is personally or socially preferable to opposite or converse mode of conduct
or end state of existence. Values contain an opinion based on judgement of right or
wrong , or good or bad. Values have both content and intensity attributes. Content attribute
describes- what is important; intensity attribute describes- how much is it important.
When individual’s values are ranked in terms of their intensity, we obtain that person’s
value system. Value system is a hierarchy based on a ranking of an individual’s values in
terms of their intensity.

11.12 TYPES OF VALUES

Values may be of different types, depending on the sources of their origion, namely
family values, social values, religious values and national values.Family values preach
methods of living in a family. The behaviour of every member in the family towards
each other depends on the value developed in that family. G.W. Allport and his associates
have identified six types of values.
 Theoretical: high importance to discovery of truth through critical and rational
approach.
 Economic: Emphasis on useful and practical.
 Aesthetic: Highest value on form and harmony.
 Social: Highest value to the love of people.
 Political: Emphasis on acquisition of power and influence.
 Religious: Concerned with the unity of experience and understanding of the cos-
mos as a whole.
Jones and Gerard have broadly identified two types of values- positive and negative.
According to them anything for which the individual strives, or approaches, extols,

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embraces, voluntarily consumes, incurs expense to acquire is a positive value. Anything
that the individual avoids, escapes from, deplores, rejects, or attacks is a negative value.
M. Rokeach identified two sets of values. One set is called terminal values, which
refers to desirable endstates of existence. These are the goals that a person would like
to achieve during his or her lifetime e.g. a sense of accomplishment, family security,
self- respect, social recognition etc. The other set, called instrumental values, which
refers to preferable modes of behaviour or means of achieving one’s terminal values.
Several studies suggest that values differ across culture. Various cultural factors
influence values of a particular society; in turn they also influence perceptions, attitudes,
motivation, behaviour, relationship patterns, leadership styles etc. of the people of the
society. As far as findings of cross-cultural studies are concerned, they are more indicative
than deterministic, at a particular point of time.
11.12.1 VALUE BASED ORGANISATION
Like an individual , organisations do have certain values. Values set the principles
that guides the organisational actions and practices, they act as the cultural milestones
to set the boundaries for the do’s and don’ts. Organisations should be so designed that
they ensure high productivity, high satisfaction of all stakeholders, and low negative
factors such as absenteeism, employee turnover etc. Woodcock and Dave, have proposed
four types of values for organisations.
A. Power, Elightism and Reward
B. Effectiveness, efficiency and economy
C. Fairness, Teamwork and Law and Order
D. Defence, competitiveness and Opportunism.
A value-based organisation promises sustainability and prosperity to its endeavours.
For designing value based organisation, based on suggestions of Tannenbaum and Davis,
following points may be useful.
 Treat people with trust.
 Be respectful to human being.
 Treat people as dynamic entity.
 Accept and utilise human differences.
 Treat individual as a whole person.

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  Encourage appropriate expression of feelings.
 Promote authentic behaviour.
 Use authority and networking for benefit of organisation.
 Encourage appropriate confrontation.
 Encourage willingness to take calculated risks.
 Set process which shall take care of effective accomplishment.
 Emphasise collaboration.
Values can be developed in an individual or an organisation not by sermons or
lectures on it, but by modelling and an open examination values practiced as against
values desired. Therefore, organisations themselves will not have values on their own
but they generally reflects the values of the people in the key positions.

11.13 DEFINITION OF EMOTION

Emotions are psychological and physiological episodes experienced towards an
object, person or event that creates the state of readiness. Emotions are brief events
would typically make an individual to experience joy, anger, fear or other feelings towards
the someone or something. Emotions create a state of readiness to react positively or
negatively. They generate the motivation to act or not to act in a situation. Emotions are
experienced through thoughts, behaviour and physiological reactions. An individual may
experience fear in a stressful situation by mentally sensing it which is depicted in his
facial expressions or the increased heart beats. Emotions are the inseparable part of
organisational life as it is made up of people. The organisational outlook to a greater
extent depends on the emotional state of people who are in different positions.
Organisational commitment, loyalty, involvement, performance, productivity and job
satisfaction are the indicators of emotions. Emotions are subjective feelings
a Make us feel in a particular way.
b Anger or joy.
c Meaning and personal significance.
d Vary in intensity and quality.
e Rooted in mental processes.

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11.14 DETERMINANTS OF EMOTIONS
Emotions are the communications that makes an individual to aware of the events
that may affect his survival or well being. Generally, they trigger the attention of an
individual and interrupt or motivate to act in a particular way.
The following are the determinants of Emotions –
a. Values
b. Beliefs
c. Attitudes.
d. Experience.
e. Learning
f. Motivation
g. Expectations
h. Attachments
i. Perception

11.15 EMOTIONAL INTELLIGENCE

Emotional intelligence is an ability to perceive and express emotions in a way
that serves the purpose.
It represents a set of competencies that allows an individual to perceive , under-
stand and regulate own and others emotions .this concept has become popular with the
publication of a book by psychologist and journalist Daniel Goleman.
Popular definitions on emotional intelligence are:
“An array of non-cognitive capabilities, competencies and skills that influence
one’s ability to succeed in coping with environmental demands and pressures”
— Reuven BarOn
“The ability to perceive emotions, to access and generate emotions so as to assist
thought, to understand emotions and emotional meanings, and to reflectively regulate
emotions in ways that promote emotional and intellectual growth”
— Salovey & Mayer
“The capacity for recognizing our own feelings and those of others, for motivat-

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ing ourselves, and for managing emotions well in ourselves and in our relationships”
— Daniel Goleman
According to Daniel Goleman, emotional intelligence consists of 4 different
dimensions. Each dimension consists of a set of emotional competencies that people
must have to fulfill that dimension of emotional intelligence. The following are the
important dimensions.
1. Self awareness
2. Self management
3. Social awareness

Figure 2: Showing Four major elements of Emotional Intelligence

Emotional intelligence is the ability to
1. Identifying your feelings and needs, through body-awareness.
2. The ability to read others’ feelings, and to listen to others with empathy.
3. Knowing how to express your feelings with words and/or body-language.
4. Choosing when to contain (not repress) emotion, and when to communicate
emotion appropriately.

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5. The ability to process and let go of emotion when necessary.
6. The willingness to give ourselves time to feel, and to enjoy the depths of our
‘selves’ through feeling.
7. The ability to lead wisely or follow with grace.
8. The ability to honour our own limits, as well as to celebrate our talents.
9. The ability to give and receive love.

11.16 SUMMARY
Human energy makes all the difference in organizations. Personality determines
the human energy. It provides an opportunity to understand the individuals, properly direct
their energy and motivate them in a proper manner. Personality is the study of the
characteristic traits of an individual, the inter relations between them and the way in
which a person responds and adjust to other people and situations. Personality is an
intangible concept. It is complex as it is related to the cognitive and psychological
process. It is believed that a man is born with certain physical and mental qualities but
the environment in which he is brought up shapes his personality. A number of factors
determine the personality of individual i.e., biological factors, family factors,
environmental factors and situational factors. Identification of personality is closely
associated with the identification of traits. It is based on the proposition that personality
is a culmination of whole person. Traits are combination of actions and reactions of an
individual. It can be understood as relatively distinguishable characteristics that describe
behaviour. The change in behavior should occur as a result of experience, practice,
education or training. Any change in an individual’s thought processes or attitudes, if not
accompanied by change in behavior should not be interpreted as learning

11.17 KEY WORDS

• Personality
• Attitude
• Values
• Emotional Intelligence

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11.18 SELF ASSESMENT QUESTION
1. What is Personality?
2. Explain the various dimension of Personality
3. Discuss the traits of Personality
4. Critically evaluate Classical condition theory of Learning.
5. Explain the process of Attitude formation
6. Write a note on Emotional Intelligence.
11.19 REFERENCES

1. Jit S.Chand, Organizational Behavior, New Delhi: Vikas Publishing House Pvt.
Ltd, 2001.

2. K Aswathappa. Organisation Behaviour, Text, Cases, New Delhi: Himalaya

Publishing House. 2010
3. K Sridhar Bhatt. Management and Behavioural Process, New Delhi: Himalaya
Publishing House. 2005
4. Paul heresy. Management of Organization Behaviour, New Delhi: Prentice
Hall India 7th Ed.
5. Prasad L M. Organisational theory and Behaviour, New Delhi: Sultan Chand
& Sons, 2014.
6. Stephen P Robins. Organisation Behaviour, New Delhi: New D Prentice Hall
India, 2005.
7. VSP Rao and P S Narayan. Organization theory and Behaviour: New Delhi,
Konark Publishes Pvt Ltd., 2007

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 UNIT – 12: GROUP BEHAVIOR

Structure:
12.0 Objectives
12.1 Introduction
12.2 Meaning and Definition of Groups
12.3 Teams and groups
12.4 Meaning of Group Dynamics
12.5 Theories of Group Formation
12.6 Reasons for Group Formation
12.7 Stages of Group Development
12.8 Types of Groups
12.9 Differences Between Formal and Informal Groups
12.10 Group Dynamics A Synoptic View
12.11 Meaning of Group Cohesiveness
12.12 Features of Group Cohesiveness
12.13 Factors Influencing Group Cohesiveness
12.14 Meaning of Group Decision Making
12.15 Process of Group Decision Making
12.16 Techniques of Group Decision Making
12.17 Advantages of Group Decision Making
12.18 Disadvantages of Group Decision Making
12.19 Summary
12.20 Key Words
12.21 Self Assesment Questions
12.22 References

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12.0 OBJECTIVES
After studying this unit you will be able to:
• Give the meaning and definition of the term group
• Define the term group dynamics
• Differentiate between groups and teams
• Explain the theories of group formation
• Give reasons for group formation from the members’ point of view
• Give reasons for group formation from the organisation’s point of view
• Explain the different stages of group development

12.1 INTRODUCTION
Organisations are made up groups of people. There cannot be any organisation
without people working in it. People form groups for their convenience. These groups
act and react to the situations in which they are working. These reactions are very important
from the view point of organisational success as they tell the attitudes, level of motivation,
commitment of people and groups towards organisations in which they are working.
Hence it becomes imperative for the management to understand the behaviour of groups
in a bid to make them work towards the accomplishment of the organisational goals.
Of all the topics in management and organisational behaviour literature, perhaps
the concept of group dynamics appears to be the most rigorously examined, thoroughly
researched and possibly the least understood. A 1972 bibliography listed more than five
thousand articles and books on the subject, and more work has been done since. In the
light of such overwhelming evidence, it will be platitudinous to say that small groups
influence behaviour significantly. In fact, the human group is a pervasive phenomenon, a
formidable force in modern organisations. It is the most familiar thing in the world.
Small groups are found in all types of organisations. They are essential mechanisms of
socialisation and a primary source of social order. They perform an important mediating
service between the individual and the larger society. Again, understanding group
behaviour and the properties of groups is necessary to being both a good manager and an
effective member of groups. When managers understand the nature of human behaviour
in organisations, they can use the group more effectively in achieving the goals of the
organisation and of the employees.

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12.2 MEANING AND DEFINITION OF A GROUP
People are social beings. They have needs beyond the ones satisfied by the formal
organisations. To satisfy their needs beyond the ones which are satisfied by the formal
organisation, they form groups. These groups not only satisfy needs for affiliation,
affection, and emotional needs but also help members to achieve other goals such as
training, recognition and task performance.
In simple terms a group may be defined as “a collection of two or more people
with a unifying relationship.”
According to Robert A. Baron, a group is a collection of two or more interacting
individuals with a stable pattern of relationships between them, who share common goals
and who perceive themselves as being a group.
According to David H. Smith, “A group is a set of two or more individuals who are
jointly characterised by a network of relevant communications, a shared sense of col-
lective identity and one or more shared dispositions with associated normative strength.”
According to Marvin Shaw, “A group is two or more persons who are interacting
with one another in such a manner that each person influences and is influenced by each
other person”.
Thus it can be said that a group is the aggregation of small number of persons who
work for common goals, develop a shared attitude and are aware that they are a part of a
group and perceive themselves as such. Thus, casual aggregates of people do not qualify
as group because they ordinarily are not aware of one another, or if aware, do not inter-
act with other individuals in a meaningful way.

12.3 TEAMS AND GROUPS

A team is a group of individuals who possesses complementary skills and are
committed to common purpose for which they hold themselves mutually accountable.
According to Steven L. McShane, Mary Ann Von Glinow and Radha R. Sharma “
teams are groups of two or more people who interact and influence each other, mutually
accountable for achieving common goals associated with organisational objectives and
perceive themselves as a social entity within an organisation.”
Katzenbach and Smith define a team as “a small number of people with
complementary skills who are committed to a common purpose, common performance
goals, and an approach for which they hold themselves mutually accountable.”

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The above definitions reveal that
 The teams are small groups of people. This is essential because the interaction
and mutual influence is essential for a team to function.
 The teams will have members with mix of skills appropriate to the task to be
done.
 The team will have a common purpose and common performance goal.
 The team members hold themselves mutually accountable for the results.
The following table brings out the differences between Groups and Teams.
Differences between Groups and Teams

GROUPS TEAMS

1. The basic purpose of group is to 1. The basic purpose of a team is

interact primarily to share information. collective performance.
2. The performance of a group is merely 2. A team generates positive synergy
the summation of each group member’s through coordinated effort. The level of
individual contribution. There is no performance of a team is greater than the
positive synergy. sum of individual inputs.
3. Every group must have strong and 3. The teams do not have a clearly focused
clearly focused leaders. leader.
4. In the group, the members are 4. In a team, there is both individual and
individually accountable. mutual accountability.
5. The basic objective of group is the 5. The teams have their own specific
attainment of the goals of the objectives that the teams themselves
organisation. deliver.
6. The group has formal and efficient 6. The team generally encourages open
meetings. ended active problem solve meetings.
7. The effectiveness of the group is 7. The effectiveness of the teams is
measured indirectly. For example, if the directly measured by the teams assessing
overall financial performance of the the collective work products.
business is good, it will be presumed that
the groups have also effectively
contributed to the performance.
8. The functioning of the group is that it 8. The functioning of the team is that it
discusses, decides and delegates. discusses, decides and does real work.

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12.4 MEANING OF GROUP DYNAMICS
The history of group dynamics has a consistent, underlying premise that ‘the whole
is greater than the sum of its parts.’ The word “dynamics” has been derived from the
Greek word meaning “force”. Hence group dynamics refers to the study of forces
operating within a group. In other words, “the social process by which people interact
face to face in small groups is called group dynamics.
Kurt Lewin is commonly identified as the founder of the movement to study groups
scientifically. He coined the term group dynamics to describe the way groups and
individuals act and react to changing circumstances. Group dynamics can be defined as a
field of enquiry dedicated to the advancing knowledge about the nature of groups, the
laws of their development, their interrelations with individuals, other groups and larger
institutions. Based on their feelings and emotions, members of a group form a common
perception. The interactive psychological relationship in which members of a group form
this common perception is actually “Group Dynamics”.
The phrase “Group Dynamics” contains two words-
(i) Group- a social unit of two or more individuals, who have in common a set of
beliefs and values, follow the same norms and works for a common goal which
can be established. The members of the group share a set of common purpose,
tasks or goals.
(ii) Dynamics- the flow of, coherent activities which as envisaged, will lead the group
towards the establishment of its set goals.
Further it is argued that two key ideas are important in the group process.
They are interdependence of fate and interdependence of task.
Interdependence of Fate: The groups do not come into being because the members
are similar but because they realise that their fate depends on the fate of the group as a
whole.
Interdependence of Task: When the task of the group is such that the members of
the group are dependent on each other for achievement, a powerful dynamic is created.
Group dynamics in the paradigm of organisational behaviour is primarily concerned
with the interactions of forces between group members in a social situation. In spite of
expressing different views and different things, the one expressed by Kurt Lewin has
received wider acceptability. His findings are based on the experiments he conducted on

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small groups in 1930s. The other experiments having status of historical landmarks were
those which were conducted by Elton Mayo and his associates in 1920s and 1930s.
In short, group dynamics may be stated as the behaviour of individuals as mem-
bers of a group in an organisational setting.
Thus, group dynamics encompasses the dynamic of interaction patterns within
the group, the subtle and the non subtle pressures exerted by group members, the man-
ner in which decisions are made in the group, how works get done, and how members’
needs are satisfied. Understanding of all these will enable managers to manage groups
effectively leading to organisational effectiveness.

12.5 THEORIES OF GROUP FORMATION

1. Propinquity Theory
The most basic theory explaining affiliation is propinquity. This interesting word
simply means that individuals affiliate with one another because of spatial or geographical
proximity. In an organisation employees who work in the same area of the plant or office
or managers with offices close to one another would more probably form into groups
than would those who are not physically located together. There is some research evidence
to support the propinquity theory and on the surface, it has a great deal of merit for
explaining group formation.
The drawback of this theory is that it is not analytical and does not explain some
of the complexities of group formation. Some more theoretical and practical reasons
need to be explored.
2. Homan’s theory
According to George C. Homans, “The more activities persons share, the more
numerous will be there interactions and the stronger will be their shared activities and
sentiments, and the more sentiments people have for one another, the more will be their
shared activities and interactions”.
It is a very comprehensive theory and based on activities, interactions and
sentiments. These three elements are directly related to each other. The members of a
group share activities and interact with one another not just because of physical proximity
but also to accomplish group goals. The key element is interaction because of which
they develop common sentiments for one another. These sentiments gradually get
expressed through the formation of informal groups. If any disturbance is caused to any

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of the three activities, interactions and sentiments, it is likely to disturb all the others.
3. Balance Theory
Another very comprehensive theory is a Balance Theory of group formation. This
theory is proposed by Theodore Newcomb which states that “Persons are attracted to
one another on the basis of similar attitudes towards commonly relevant objects and
goals. Once a relationship is formed, it strives to maintain a symmetrical balance between
the attraction and the common attitudes. If an imbalance occurs, attempts are made to
restore the balance. If the balance cannot be restored, the relationship dissolves”.
Thus, the balance theory is additive in nature in the sense, that it introduces the
factor of balance to the propinquity and interaction factors. There must be a balance in
the relationship between the group members for the group to be formed and for its
survival.
4. Exchange Theory
This theory is based on reward-cost outcomes of interactions. To be attracted
towards a group, a person thinks in terms of what he will get in exchange of interaction
with group members. A minimum positive level (rewards greater than costs) of an outcome
must exist in order for attraction or affiliation to take place. Rewards from interactions
gratify needs while costs incur anxiety, frustrations, embarrassment or fatigue.
Propinquity, interaction and common attitudes all have roles in the exchange theory.

12.6 REASONS FOR GROUP FORMATION

There are many reasons for forming a group. Some important reasons are explained
as follows:
A) FROM MEMBERS’ POINT OF VIEW
1. Companionship
The need for relationship with other people is one of the strongest and most
constant of human drives. Relationships give an individual, who earlier felt lonely and
miserable, recognition and his work life pleasant and comfortable. Many research studies
have indicated that the employees who have no opportunity for social contacts find their
work unsatisfying and this lack of satisfaction often itself in low productivity and high
rate of absenteeism and turnover.

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2. Identity
We try to understand ourselves through the behaviour of other towards us. If oth-
ers praise us, we feel we are great. Groups provide many others who will laugh, praise or
admire us. Workers get more identified in small groups tend to enjoy high morale as
compared to large groups.
3. Information
The informal group to which a member belongs is a source of communication or
information to him. A piece of information available to one member will nearly reach all
the members in a short span of time. An individual comes to know about what is happening
in an organisation even if he has been on leave or is otherwise away. The group may
develop a special code or language for speedy communication. The groups help reduce
many of the psychological barriers to communication. Sometimes the group will amend,
amplify and interpret the news, once it is released. Thus, each person gets a larger, more
detailed and meaningful but at times, a distorted and erroneous picture of what is going
on in the organisation.
4. Security
Perhaps, the strongest reason for group formation is the people’s need for security.
By joining a group, a person can reduce his insecurity, he feels stronger, has lesses self
doubts and is more resistant to threats. A person always derives reassurance from
interacting with others and being part of a group. The group protects its members from
the arbitrary policies and orders of the formal organisations and provides a psychological
buffer between the individual and the organisation. This often explains the concept of
unions.
5. Esteem
Membership in a prestigious group is a source of enhanced self esteem. Th
members will feel good about themselves by virtue of the group’s power, prestige and
social standing. They will get opportunities for recognition and praise that are not available
outside the group.
6. Sense of belongingness
It is an emotional need for friendship, love, affection and affiliation. Most people
have strong need for being with others who can understand, support and help them when
they are in need and render them moral and emotional support in time of difficulty. The
concept of family and friends fulfill this need. When people are new to an organisation,

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they are eager to find friends with which they can check their perception of new and
uncertain environment.
7. Outlet for frustrations
An individual may be faced with several problems relating to his family life and
work life. At times, he feels tremendous stress in life and gets frustrated. If he shares
his feelings and anxieties with someone, his tension is released to a great extent. The
social relations provide an important outlet for frustration. Informal groups serve as
safety valves and help release frustrations, thus avoiding any mental or physical breakdown
of the individual. Organisations which don’t have the informal groups sometimes rely on
the expensive system of employee counseling in which outsiders hear employees’
problems and advise them accordingly.
8. Perpetual of cultural values
Common cultural backgrounds bring people together and are a strong cementing
force. People, sharing a common culture, are able to maintain their cultural identity and
even propagate their culture. A group with a particular cultural value often takes up
activities which help perpetuate those values. This, even gives, psychological satisfaction
to members.
9. Generation of new ideas
Informal groups are a breeding ground for new ideas s they provide a supportive
environment in which the members can engage themselves in creative thinking. Under
quality circles in Japan is an important example in this regard. Under quality circles,
workers meet periodically and discuss problems relating to quality and come out with
new ideas to solve the problems.
10. Self evaluation
Groups help members in evaluating themselves as against others. By employing
any yard stick, an individual can judge himself against other members of the group. This
will help him in having a realistic self assessment and encourage him to acquire the plus
point of others or inculcate a competitive spirit. The group also provides acceptable
ways of compensating for an individual’s deficiencies.
11. Job satisfaction
Many jobs which appear superficially dull and routine are made interesting by the
group and spontaneity is encouraged and protected by the group. Certain jobs can be
done by the isolated workers, but working as a group often results in higher motivation

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to the workers.
12. Power
Membership of group offers power to member in at least two ways.
a) There are sayings such as “united we stand, divided we fall” and “unity is strength”.
Workers enjoy much greater power collectively than they do as individuals.
b) Leadership of a group enables an individual to exercise power over group members
even if he does not enjoy a formal position of authority in the organisation.
B) FROM ORGANIZATION’s POINT OF VIEW
Informal group satisfies some of the social and psychological needs f its members
on the one hand, and on the other hand, it can also prove useful from the organisation’s
point of view. In fact, the findings of many social researchers suggest that informal
groups are essential for the organisational stability. Such a group can prove useful in the
following ways:
1. Lightening of responsibility
A cooperate group can always be entrusted with some responsibility which will
lighten the manager’s mental burden to some extent.
2. Filling the gaps
An enlightened group can also fill in gaps in management’s abilities. Sometimes,
a subordinate who has knowledge in the area can help the superior, who does not have
adequate grasp over the problem.
3. Restraining the authority
A group also helps to keep checks and balances on the manger’s excessive use of
authority. A manager is not allowed to cross his limits or bounds.
4. Proper and careful planning
A manager will be very careful in planning and other jobs for the fear of the pres-
ence of the group.
5. Information
Groups act as a medium of information for the management. A set of information,
which the management is reluctant to express in writing can be conveyed to the members
through the informal communication channels of the group. On the other hand, it conveys
to the management also what is in the minds of the employees. This information will

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help in avoiding resistance to change and aid in implementation of decisions.
6. Potential formal mangers
An organisation can easily recruit formal managers from among informal leaders.
Informal groups provide a reservoir to the management for future managers.
Since jobs in organisations are becoming more complex and interdependent, the
use of group in performing task functions will become increasingly important.

12.7 STAGES OF GROUP DEVELOPMENT

Groups proceeds through five stages of development. These stages and their characteristics
are as follows:
1. Forming
a) Characterized by uncertainty about the group’s purpose, structure, and leadership.
b)Activies focus on efforts to understand and define their objectives, roles and assignments.
c) Interaction patterns tried out, discarded, or adopted.
d) The more diverse the group, the more difficult is forming; particularly
sensitive stage for multicultural groups.
2. Storming
a) Characterized by conflict and confrontation.
b) Involves redefinition of group’s tasks and goals.
c) Members may begin to withdraw.
d) If conflict is not suppressed at this stage, it will hinder future stages.
3. Norming
a) Characterized by cooperation and collaboration.
b) Cohesiveness begins.
c) Open communication, significant interaction, and efforts to agree on
goals occur.
d) Behavioral norms are established.
4. Performing

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 a) Group is fully functional.
b) Structure and roles are set and accepted.
c) Some groups attain a level of effectiveness that remains more or less
constant; others continue to change.
5. Adjourning
a) Termination of group activities resulting from task completion or goal attainment
b) Marked by very positive emotions as well as feelings of loss, disappointment, or
anger.
There is an alternative theory of group development. According to this, group
development proceeds on four stages:
1. Mutual acceptance
In the mutual acceptance stage of group development, members get to know about
each other by sharing information about them. They discuss subject, often not connected
with the groups, such as politics, weather, price rise, deteriorating morals, sports or
recent vents within the organisation. Some aspects of the groups’ task, such as its formal
objectives, may also be discussed at this stage.
As the members get to know one another, discussion may turn to more sensitive
issues, such as the organisation’s politics or recent controversial decisions. In this way,
the participants explore one another’s reactions, knowledge and expertise. From the
discussion, members may learn one another’s view on a variety of issues, how similar
their beliefs and values are and the extent which they can trust one another. Eventually,
the conversation will turn to the business of the group. When this discussion becomes
serious, the group is moving to the next stage- communication and decision making.
2. Communication and decision making
Once group members have begun to accept one another, the group progresses to
the communication and decision making stage. Here, the group members discuss their
feelings and opinions more openly. They may show more tolerance for opposing
viewpoints and explore different ideas to bring them about a reasonable solution or
decision. Members discuss and eventually agree on the group’s goals. Then they are
assigned roles and tasks to accomplish the goals.
3. Motivation and productivity stage
In the motivation and productivity stage, emphasis shifts away from personal

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concerns and viewpoints to activities that will benefit the group. Members co-operate
and actively help others accomplish their goals. The members are highly motivated and
may carry out their activities creatively. In this stage, the group is accomplishing its
work and is moving towards the final stages of development.
4. Control and organisation
In the final stage, control and organisation, the group works effectively towards
accomplishing its goals. Tasks are assigned by mutual agreement and according to ability.
In a mature group, the members’ activities are relatively spontaneous and flexible, rather
than subject to rigid structural restraints. Mature groups evaluate their activities and
potential outcomes and take corrective actions if necessary. The characteristics of
flexibility, spontaneity and self correction re essential if the group is to become
productive last long.
Not all groups go through all four stages of development. Some groups disband
before reaching the final stage. Others may skip certain stage because of pressure from
leaders or deadlines. Group productivity, however depends on successful development
at each stage. A group that evolves fully through the four stages of development will
become a mature and effective group. Its group members will be interdependent,
coordinated, cooperative, competent, motivated and in active communication with one
another.

12.8 TYPES OF GROUPS

Groups may be classified into different types. The basis of differentiation may
be purpose, extent of structuring, process of formation, and size of the membership.
However, an analytical classification of the group may be formal or informal. Each type
has different features and different effect on its participants.
1. Formal Groups:
Stephen P. Robbins defines a formal group as “a structure characterised by high
complexity, high formalisation, impersonality, career tasks, employment decisions based
on merit and separation of members’ organisational and personal lives.”
Formal groups are structures in which roles, tasks and relationships among people
and positions are clearly defined, carefully prescribed and controlled in accordance with
formal authority.
Formal groups are created and maintained to fulfill specific needs or tasks which

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are related to the total organisational mission. Thus these are consciously and deliberately
created. Such groups may be either permanent in the form of top management team such
as board of directors or management committees, work units in the various departments
of the organisation, staff groups providing specialised services to the organisation, and
so on, or the formal groups may be constituted on temporary basis for fulfilling certain
specified objectives. When such objectives are fulfilled they disappear. These may be in
the form of temporary committee, task force etc.
The characteristics of formal groups are as follows:
a) Formal groups are the units constituted by management as part of the organization
structure.
b) The principal role of formal groups is to further the aims and objectives of the
organization as established in the mission statement and policy statement.
c) They are based on the principles of division of labour and efficiency in operations.
d) They concentrate more on the performance of jobs and not on the individuals
performing the jobs.
e) The authority and responsibility assigned to each job have to be adhered to by the
job holders. Based on the concept of authority and responsibility, people are placed
in hierarchy and their status is determined accordingly.
f) These groups are equipped with financial and physical resources.
g) Coordination among members and their control are well specified through processes,
procedures, rules, etc.
Further, formal organisations possess the following inbuilt features:
1. Division of labour and Specialisation
2. Impersonality
3. Hierarchy of Authority and Responsibility
4. Professional and Technical competence
5. Rules and Regulations
6. Official Records
The formal groups may further be sub classified into the following groups:
i) Command groups
The command group is the most frequent type of formal group. It is relatively

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permanent and is specified by ht organisation chart. It comprises of managers or
supervisors and subordinates, who meet regularly to discuss general and specific ideas
to improve product or service. In business organisations, most employees work in such
command groups.
ii) Task forces
Task force is somewhat related to committee, particularly ad hoc one, but distinct
from it. It is like ad hoc committee because it is usually temporary, but differs because
it has broader powers of action and decision, as well as responsibilities for investigation,
planning, research and analysis. A task force is made up of a group of people with different
backgrounds who are assigned a specific task or mission. Since the tenure of a task
force is over when the task or mission is over, usually membership in the task group is
temporary; each person remains part of it only so long as his skills and knowledge are
required and task force continues. The task force also differs from a matrix organisation
in the sense that the latter appears almost on continuous basis and personnel are assigned
tasks in different projects at different periods of time. A task force is constituted when
the organisation faces some unusual problem which cannot be solved by a single individual
or by a single department. Such task forces are quite usual in government to fight drought
or flood, to eradicate some non recurring disease, or tackle specific administrative
problems. In business organisations too, task forces may be constituted to develop and
launch a new product, to select a new project, or to negotiate certain terms and conditions
etc.
The essential feature of a task force is that it is temporary creation of a separate
unit in the organisation to take up a task which is (i) quite new to the organisation, (ii)
which cannot be solved by a single individual or department, (iii) the tenure of which
may not be very long. In such a case, a temporary group is constituted with personnel
drawn from several departments depending on the need of skills and experience. They
are on the full time basis in the task force. When the work of task force is over, they
return back to their original department. A task leader is also appointed to coordinate
the activities of the task force. However, task force boundaries are not defined by its
immediate hierarchical structure because the leader is not the boss of people working
with the task force.
iii) Committees
Organisational committees are quite popular at different levels in the organisation.
A committee may be defined as a group of persons in an organisation for taking or

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recommending certain decisions. There is a limitation on the maximum number of
persons. However, number of persons rises above seven, communication tends to become
centralised because committees’ members do not have adequate opportunity to
communicate directly with one another. A committee charged with dealing with specific
problems and it cannot go in for actions in all spheres of activities. There are strictly
defined jurisdictions within which a committee is expected to justify its existence.
Beyond these limited spheres, a committee is doomed to fail as an organ of action. A
committee may be temporary or permanent. For example, the committee constituted to
elect the president of the company is temporary and is disbanded after the election.
2. Informal groups
Informal groups refer to those patterns of relationship that develops among
members of a formal group which are not expected by formal group. Such groups originate
because of the limitations of formal group. Formal groups fail to define meaningful
relationship among the members of a formal group. But human beings are social animals
and would like to associate with others in more than one way leading to informal groups.
Informal groups are alliances that are neither formally structured nor
organisationally determined. These groups are natural formations in the work environment
that appear in response to the common interest of the organisation members such as self
defense, work assistance and social interaction. The features of these groups are as
follows:
i) The informal groups are formed by the members of such groups by themselves
rather than by management.
ii) These groups arise spontaneously in the organisation because of social interaction
between the people.
iii) These are based on common interests, language, taste, caste, religion, background
etc.
iv) These groups exist outside the formal authorities system and without any set of
rigid rules.
v) Though officially unrecognised, these groups exist in the shadow of the formal
structure as a network of personal and social relations which must be understood
and respected by the management.
vi) These groups have their own structure, with their own leaders, and followers, group
goals, social roles and working patterns. They have their own unwritten rules and a

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 code of conduct which every member accepts implicitly. Members trust and respect
each other.
vii) The informal groups are more flexible than the formal groups. Rules and procedures
being unwritten, they can change from situation to situation.
viii) Since these groups concentrate on the personal contact between the members, they
represent the human side of enterprise as compared to technical side represented
by formal groups.
ix) Since informal interaction is spontaneous it can take place in any way. Consequently,
informal organisations may be of different types as explained below:
i)Interest and friendship groups
People who may or may not be aligned into common command or task groups
may affiliate to attain a specific objective with which each is concerned, this is called an
interest group. For instance, the employees who group together to pressurise the
management for subsidised transport constitute an interest group.
A friendship group includes close friends or relations. These groups arise because
members know each other very well before joining the organisation and in the initial
stages, they recognise each other only. These social alliances, which frequently extend
outside the work situation, can be based on similar age or ethnic heritage or for holding
similar political views or for having the same hobbies etc.
ii) Cliques
Another type of informal groups is called cliques. These groups consist of
colleagues or those who commonly associate with each other and observe certain social
norms and standards, but the number of members tends to be smaller, and only rarely
exceeds five or six. The objective is to provide recognition to each other and exchange
information of mutual interest.
M.Dalton has identified three types of cliques. They are as follows:
a) Vertical clique
This group consists of people working in the same department drawing membership
regardless of ranks. In this case, the superior may be a member in the group consisting
mainly of subordinates. Such groups which cut across hierarchical lines develop because
of the earlier acquaintance of people or because the superior is dependent upon the
subordinates for some formal purposes like filling gaps in his abilities.

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b) Horizontal clique
This group consists of people of more or less the same rank and working more or
less in the same area. Members are able to find some points of commonness and keep-
ing the objectives in mind, come together. This is the commonest type of informal group.
c) Random or mixed clique
This group draws members from different ranks, departments or physical locations.
Again, people having some similarities come together for a common purpose. The
members may be residing in the same locality, travelling by the same bus or may be
members of the same club.
iii) Sub-cliques
This group consists of some members of a clique inside the organisation forming
a group along with persons outside the organisation. The members of the cliques give
these outsiders due recognition because of some members of their group being associated
with them. Such groups are regarded as partially external to the organization.
iv) Sayles’ Classification of group
On the basis of the pressure tactics adopted by the groups L.R.Sayles identified
four kinds of groups in the organisations which are discussed below:
a) Apathetic groups
This group is characterised by relatively few grievances and it hardly ever uses
pressure tactics. In the group, no one ever emerged as an acceptable leader and therefore,
there is lack of clearly defined leadership. These groups are composed of relatively low
paid and low skilled assembly line workers who lack unity and power and hardly ever use
pressure tactics. Such groups are generally indifferent to formal organisations.
b) Erratic groups
Members in the erratic groups are easily inflamed and easily pacified. There is
lack of consistency in their behaviour. Sometimes they show antagonism towards the
management while on other occasions, they may be cooperative. In such a group, any
active member could assume the reins of the group and become the leader. These groups
are composed of semi-skilled workers who work together in performing jobs that require
some interaction. They display considerable unity, but it is very difficult to predict their
behaviour.

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c) Strategic groups
The members of such group are able to prepare a strategy for putting pressure on
other groups and the management. Members of such groups are generally performing
technologically independent jobs and are comparatively better placed than members of
earlier categories. It is difficult to apply exact time standards for judging their
performance as their jobs are of such a nature that personal judgement matters. These
people are highly united and actively participate in union activity. These people maintain
a relatively consistent antagonism.
d) Conservative groups
These groups are composed of professionals and highly skilled employees in the
plant. They are found at higher levels of the organisation and display considerable self
confidence. They work on their own and the nature of their jobs is such that they can shut
down the plant if they so desire. These people are found to be very strong and very stable
among informal groups. Such groups exercise restrained pressure for highly specified
objectives and display moderate internal unity and self assurance. In terms of union
activities there are Activity-Inactivity Cycles. They are cooperatively oriented most of
the times. They adopt antagonistic attitude towards management only when highly specific
goals are sought by group members acting together.
The relationship between formal and informal groups is mutually reinforcing and
competing. Informal groups can assist formal groups in solving a complex problem. But
what concerns an individual who is interested in the study of organisational behaviour is
the negative role played by informal groups. Some informal groups are deliberately
formed to work against management.

12.9 DIFFERENCES BETWEEN FORMAL AND INFORMAL

GROUPS
Both formal and informal groups co exist in any organisation. They are inseparable
from one another. Wherever there is a formal group, there is bound to be an informal
group. Therefore, informal groups are called shadow groups. But these two groups are
different and having their own distinct characteristic features. The differences between
them are detailed as follows:
a) Origin: Formal groups are the result of conscious and deliberate efforts of
the promoters of an organisation. Informal groups are natural creations in an work
environment. They take birth in organisation because of operation of social and

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psychological forces operating at the work place. Employees working together develop
certain liking or disliking towards others leading to formation of informal groups.
b) Purpose: Formal groups are conscious creations to achieve certain legitimate
objectives of an organisation. Formal groups are the parts of formal organisation structure.
Informal groups are natural creations by people and their purpose is to satisfy the social
and psychological needs of the group members. Thus, informal groups satisfy the needs
which are not satisfied by the formal groups.
c) Size: Formal groups can grow to any gigantic size whereas informal groups
cannot.The size of informal group may range between 8 to 12 so as to maintain the face-
to-face contact.
d) Stability of Tenure: Formal groups are stable and may continue for a long
period. Their membership is specified through organisational process. Since the
formation of informal group depends on the value system, general liking or disliking
and other personality characteristic features of the members, they are unstable and their
tenure is also uncertain.
e) Number: The number of formal groups depends on the policy decisions of the
top management. However, their number would be definite at a particular period of time.
The number of informal group would be large and varies frequently depending on the
whims and fancies of members.
f) Membership: The membership in formal group is the result of the incumbent’s
position in an organisation and the membership is not overlapping. In case of informal
group the membership is a matter of interest and liking and one member may become
the member of more than one group. Thus, membership is overlapping in informal group.
g)Authority: In formal groups, members derive authority by virtue of their posi-
tion in the organisation. higher the level of an individual, greater is the authority and
vice-versa. The extent of authority is decided through the process of delegation and
delegation. In informal groups all members are equal. However, some members may
command more authority by virtue of their personal qualities.
h)Communication: Pattern of communication is highly systematic and well
defined in formal groups. Normally it follows the chain of command and expected to
follow a specific channel. The communication in informal groups does not have a said
pattern. It can take any route depending on the situation. The communication in informal
groups is called grapevine.

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 i)Norms of Behaviour: Rules, regulations, procedures govern the behaviour of
members of formal groups. Value system, belief and norms of the group directs and
controls the behaviour of the members of informal group.

12.10 GROUP DYNAMICS: A SYNOPTIC VIEW

Group dynamics refers to the “Social process by which people interact face to
face in small group”. In other words, group dynamics may be stated as the behaviour of
individuals as members of a small group in an organisation. All experiments conducted
by Kurt Lewin, the founder of group dynamics movement, were on small groups in 1930s.
Since the group dynamics concentrates vitally on face to face work group philosophy
the whole concept revolves around small group. What is small group? has been the subject
of debate within result that many definitions are available on it. In the words of Terrence
R. Mitchell, “The common elements of these definitions suggest that the small group is
composed of a restricted number of people usually fewer than ten who enjoy personal
interaction over a long span of time”. There is a common goal by mutual agreement. For
achieving the goal, different functions and goal have to be performed by the members of
the small group. Further, the group has the capacity to adapt itself to changing
environments.
The entire philosophy of group dynamics has been summarised by Gordon L. Lippit
under the head ‘Factors in group Behaviour’. These factors are:
i) Group background
ii) Group participation patterns
iii) Group communication patterns
iv) Group cohesion
v) Group atmosphere
vi) Group standards
vii) Group procedures
viii) Group goals
ix) Group leader behaviour
x) Group member behaviour
i) Group background
Group leader’s effectiveness depends upon his knowledge about the group

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members. For this purpose, it is necessary to know the background of its members. It is
the background which determines the personality composition and in turn the behaviour
pattern of the member. The background includes prior experience, circle of his friends
and the opinions of his superiors and subordinates. In addition, the leader’s task will get
facilitated in case he comes to know the extent of preparation for the group work and the
expectations of the members from the group and their role as the members of the group.
ii) Group participation patterns
Group participation pattern indicates the status and power structure in the group.
It is the organisational structure which may determine the extent of the member’s
contribution in decision making in the group. The leader has to ensure that it is not only
a few articulate members knowing the art of oratory, who are dominating the discussion
scene. He has to devise a system in which majority members are capable of contributing
in the decision making process.
iii) Group communication patterns
An effective communication is apt to contribute to organisational effectiveness.
A system is to be so designed that there is face to face communication with utmost
clarity and ability of expression so that appropriate decision could be taken without
problem.
iv) Group cohesion
Cohesion is essential not only for the existence of the group but more importantly
for the achievement of the group’s objectives. Cohesion is the force which keeps together
the members of the group. Cohesiveness has a direct bearing on group behaviour. In a
cohesive group, group members are apt to conform to group norms, conformity is
essential for the effective functioning of the group. Members adjust themselves to
common attitude and work behaviour of the group.
v) Group atmosphere
Group atmosphere indicates whether the group is accepting or defensive in its
climate. When defensive atmosphere is prevalent within the group, members are unable
to express their dissent with the result that they have to fall in line with the line of
thinking chalked out by the leader. Such an atmosphere having elements of rigidity, control
and punishment will activate the forces of authoritarianism and ‘Rule of Thumb’ which
will go counter to the basic principles of organisational effectiveness. Conversely, if
the atmosphere is that of accepting i.e. of understanding trusting it will encourage

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productivity, creativity and confidence among members.
vi) Group standards
Group standards as well as norms of behaviour as laid down by the group affect
both morale and productivity in the group. If the norms are realistic based on socio-
psychological principles of human behaviour, the group will not acquire durability in
relationship but encourage the quantum of efficiency.
vii) Group procedure
Group procedure outlines the details of the participation on mechanism. In other
words, it includes the procedure for the formulation of agenda, recording of the views
expressed by the members, system of voting in the meeting and the procedure for
resolving crisis if no decision or any vital matter could be taken due to stiff opposition
put by some members.
viii) Group goals
Group goals are important as group communication or group accepting.
ix) Group leader behaviour
Group leader behaviour is also an important factor in grouping behaviour. It refers
to the tasks which are required to be performed by the leader in the operation of a group.
It includes a wide range of activities from the control of decision making to the realisation
of group’s objectives. Initially the leader assumes a wide variety of functions but many
of them may later on be adopted by the group members. The leader will however, continue
to provide direction to group in addition to enforcing coordination among group members.
x) Group member behaviour
Group member behaviour is the most vital component of group dynamics. The
effectiveness of the group is directly related to the efficacy and efficiency with which
the members in group are engaged in the performance of their tasks. The behaviour of
members depends on the structure of the group, group environment and the individual
behaviour at work. Member behaviour is therefore, ‘task centred’, ‘group centred’ and
‘self centred’. In other words, every group operates at three levels.
(a)Group task level
Every group within the organisation is required to perform the task assigned to it.
The group channelizes all its energies to achieve the goal of task performance which is
vital for its existence. Sometimes, the group concentrates so much on task performance

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that it fails to provide adequate attention to group maintenance and individual needs.
(b) Group Maintenance Level
The group task is to be accomplished by the group members. The completion of
the task depends on the interaction and relationship among group members. If the
interaction is hampered due to any reason no task could be performed by the group with
efficiency. Interaction among the members depends primarily on the harmony existing
in the group and the mechanics of conflict resolution which may strengthen interpersonal
relationships and the relationship between the individual and the group. The leader is
expected to play an important role to ensure maintenance of group on proper footing.
(c)Individual needs level
An individual being the human being has a number of needs which ought to be
fulfilled to enable him to put his mind and heart into the work. Sometimes the pattern of
individual needs may impinge upon the group and its tasks and thus, they are relegated to
the background. Such a situation will create more problems and the group task will turn
out to be a distant reality.

12.11 MEANING OF GROUP COHESIVENESS

“Cohesiveness” is a term that describes one of the maintenance variables of groups.
What does it mean to say that a group is cohesive? Like many concepts, cohesiveness is
easy to recognize but difficult to define. People intuitively understand the term. However,
it is difficult to define it precisely to everyone’s satisfaction.
Cohesive groups have several positive qualities that we all can recognize and agree
upon. For example, cohesive groups have a general perception of “we-ness.” There is a
feeling of friendship and loyalty among group members. The group also has high morale.
However, it is problematic to use these qualities to describe the concept of cohesiveness.
For example, “morale” is a troublesome term in itself that is difficult to define. Also, a
list of qualities will not serve as a definition.
12.12 FEATURES OF GROUP COHESIVENESS
A cohesive group usually has the following features:
1. The members share the group goals and norms and have common interests and
backgrounds.
2. The number of members is small.

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3. The members interact among themselves quite frequently and interpersonal
communication is very effective.
4. Group loyalty among the members is high because the group enjoys high status.
5. The members stand united against any perceived external threats to the group.
6. The members keep themselves glued to the group as they feel that their needs would
be satisfied by the group.
7. The group has a past history of success.

12.13 FACTORS INFLUENCING GROUP COHESIVENESS

The main factors that influence group cohesiveness are as follows
1. Similarity of group members
Similarity of group members has different influences on group cohesiveness
depending on how to define this concept. Lott and Lott (1965) who refer to interpersonal
attraction as group cohesiveness conducted an extensive review on the literature and
found that individuals’ similarities in background (e.g., race, ethnicity, occupation, and
age), attitudes, values and personality traits have generally positive association with group
cohesiveness.
On the other hand, from the perspective of social attraction as the basis of group
cohesiveness, similarity among group members is the cue for individuals to categorize
themselves and others into either an in-group or out-group. In this perspective, the more
prototypical similarity individuals feel between themselves and other in-group members,
the stronger the group cohesiveness will be.
In addition, similar background makes it more likely that members share similar
views on various issues, including group objectives, communication methods and the
type of desired leadership. In general, higher agreement among members on group rules
and norms results in greater trust and less dysfunctional conflict. This, in turn, strengthens
both emotional and task cohesiveness.
2. Entry difficulty
Difficult entry criteria or procedures to a group tend to present it in more exclusive
light. The more elite the group is perceived to be, the more prestigious it is to be a
member in that group. As shown in dissonance studies conducted by Aronson and Mills
(1959) and confirmed by Gerard and Mathewson (1966), this effect can be due to

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dissonance reduction (see cognitive dissonance). Dissonance reduction can occur when
a person has endured arduous initiation into a group; if some aspects of the group are
unpleasant, the person may distort their perception of the group because of the difficulty
of entry. Thus, the value of the group increases in the group member’s mind.
3. Group performance
Group performance, like exclusive entry, increases the value of group membership
to its members and influences members to identify more strongly with the team and to
want to be actively associated with it.
4. External competition and threat
When members perceive active competition with another group, they become
more aware of members’ similarity within their group as well as seeing their group as a
means to overcome the external threat or competition they are facing. Both these factors
increase group cohesiveness; leaders throughout human history have been aware of this
and focused the attention of their followers on conflicts with external enemies when
internal cohesion was threatened. Similar effects can be brought about by facing an
‘objective’ external threat or challenge (such as natural disaster).
5. Size of the Group
Small groups are effective. The larger the size of the group, the less cohesive the
group is. When the group is small, its members have constant face to face contacts.
Thus, there will be high degree of interaction and communication with each other. In
large groups, the possibility of interaction among group members is less. Another
problem with large size groups is that there is a likelihood of forming small groups
within the large groups. This would result in dilution of the common group goal thus
increasing the extent of power politics play. This tends to decrease the overall
cohesiveness. Studies have shown that if all the members of the group are of the same
sex, then small groups have better cohesion than large ones. But when the groups were
made up of both males and females, the large groups have better cohesion.
6. Time
It is quite natural that the more time people spend with one another, the more they
will get to know each other and more tendency there will be to get closer to each other,
thus, strengthening the degree of cohesiveness. In a workplace, people who work near
each other are more likely to spend more time together. In routine life people will spend
more time with only those they like personally and want to continue interacting with
them.

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7. Location
Location of the group plays an important role in determining the cohesiveness.
Where members of a group are located close together separated from other groups,
they will develop greater cohesiveness because of constant face to face interaction.
Where ther is no dividing line between one group and another, cohesion is more difficult
to achieve because a chain of interactions develops.
8. Inter Dependency
When each member of a group has independent activities, the cohesiveness among
the members of such group will be less as compared to the group whose members are
doing the operations which are dependent upon each other. Thus, mutual dependency
leads to greater cohesiveness.
9. Management behaviour
The behaviour of management has a direct influence on the degree of cohesiveness
that exists within a group. The manager can make close relations difficult by creating
unhealthy competition among employees. On the other hand, he can build solidarity by
rewarding cooperative behaviour. The cohesive group can help attain the group goals
more effectively, if the group members are properly inspired by the manager.
10. Member turnover
To make a group more cohesive, there is a need for some degree of stable
relationships among members. The higher the degree of member turnover, the less
cohesive a group becomes, because the more frequently members leave a particular group
the more time the old member takes to get attached to the new group.
11. Cooperation
Sometimes the general atmosphere of group enhances cohesiveness. The overall
atmosphere depends among other things on leadership.

12.14 MEANING OF GROUP DECISION MAKING

Decision making is the process of examining the possibilities, options, comparing
them, and choosing a course of action. In other words, decision making is an act of
choice wherein an individual or a group selects a particular course of action form the
available alternatives in a given situation.
Thus group decision making refers to the process where the group as a whole
makes the decision. In group decision making, group members consider all the possible
solution of a problem and select the most feasible option.

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12.15 PROCESS OF GROUP DECISION MAKING
1. Identify and define the problem
2. Gather information and examine constraints
3. Identify and evaluate alternatives
4. Make a choice
5. Implement the decision
6. Evaluate the results and consequences of decision
The above process of group decision making is detailed below
1. Identify and define the problem
The first step in the decision-making process is getting oriented with the decision.
The group members need to agree on where they are and where they would like to be.
This is the difference between reality and a desired situation.
2. Gather information and examine constraints
The second step identifies factors surrounding the decision. Through these
processes, individuals or groups can determine the nature of the decision, issue, or
problem to the best of their ability. At this point, it is in the best interest of the group
members to be sure they have adequately defined the decision to be made or problem at
hand.
3. Identify and evaluate alternatives
The third stage is identifying and evaluating alternative courses of action. Using
the clearly defined and articulated issues from the previous stages, the group generates
a list of potential decisions. There are four traps that groups might fall into during this
stage of the decision-making process:
a. The group might not have the appropriate skills or knowledge to identify or evaluate
the alternatives.
b. The group may not have an established way to go about identifying and evaluating
different choices.
c. The group may pressure individual members who possess knowledge or skills that
would improve the assessment of the alternatives to conform to what the rest of
the group is doing.
d. The group may fail to identify all possible alternatives.

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4. Make a choice
The fourth step in the decision-making process is choosing one of the alternatives
to implement and will affect the group’s acceptance and support of the final course of
action. If the group members feel they have been part of the process and that each
individual’s opinions have been considered, then the group will be more apt to buy into
the final decision. If the group members feel discounted or that individuals have been
overlooked or marginalized, they may not support the final course of action.
5. Implement the decision
The fifth stage is implementing the decision. This may involve all the group
members, selected group members, or one group member. When individuals and groups
feel as though they have been part of the decision-making process, they are more likely
to implement the decision and perform better in conditions created by the decision.
6. Evaluate the results and consequences of decision
In the sixth and final stage of the decision-making process, the outcomes of the
decision should be evaluated. There are two parts to this process. First, the group should
determine whether the decision was implemented the way it was meant to be (or if it
wasn’t, what made the way in which it was implemented successful or unsuccessful).
Second, the group should figure out if the outcomes of the decision were what they were
intended to be.

12.16 TECHNIQUES OF GROUP DECISION MAKING

1. Ordinary group interaction
This is the conventional method where the chairman calls the meeting, explains
the problem, controls who speaks when and tries to obtain a consensus. The discussion
is somewhat unstructured and lengthy, social pressures exert considerable influence.
Suboptimal decisions are often reached just to end the meeting. In order to improve
decision making abilities of the group, the leader must solicit inputs from members,
clarify them and try to resolve the conflicting views satisfactorily. Proper agenda,
management of time, effective participation to all members-these factors also determine
how effectively the decisions are arrived at.
2. Brainstorming
Brainstorming as a technique of problem solving gained popularity in the 1950s.
It is often used in the idea generation phase of decision making and is intended to solve

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problems that are new to the organisation and have major consequences. In brainstorming,
the group convenes specifically to generate alternatives. The members present ideas and
clarify them with brief explanations. Each idea is recorded in full view of all members,
usually on a flip chart. To avoid self censoring, no attempts to evaluate the ideas are
allowed. Group members are encouraged to offer any ideas that occur to them, even
those that seem too risky or impossible to implement. The absence of such ideas, in
fact, is evidence that group members are engaging in self censorship.
3. Nominal Group Technique
The nominal group technique aims to eliminate “group think” among members
when ideas are presented. Under the nominal group technique, a group moderator is
selected to write on a display board in the front. The group moderator states the problem
that the group must solve. Group members individually write their solution ideas on
paper or note cards and do not converse with one another. The group moderator takes the
note cards, lists the solutions on the board and invites each group member to field
questions about her solution and make clarifications. After that, each group member
individually ranks each solution on a note card using a scale, say from 1 to 5. The
moderator takes up the note cards, assigns scores to each solution on the list and picks
the most popular solution.
The nominal group technique helps overcome the negative effects of power and
status differences among group members. There is no chance of domination by any
member. It can be used to explore problems to generate alternatives, or to evaluate them.
Its primary disadvantage lies in its structured nature, which may limit creativity. The
group members may feel frustrated as they don’t get any opportunity to benefit from
cross fertilization of ideas.
4. Delphi Technique
The Delphi method is a structured communication technique, originally developed
as a systematic, interactive forecasting method which relies on a panel of experts. The
experts answer questionnaires in two or more rounds. After each round, a facilitator
provides an anonymous summary of the experts’ forecasts from the previous round as
well as the reasons they provided for their judgments. Thus, experts are encouraged to
revise their earlier answers in light of the replies of other members of their panel. It is
believed that during this process the range of the answers will decrease and the group
will converge towards the “correct” answer. Finally, the process is stopped after a pre-
defined stop criterion (e.g. number of rounds, achievement of consensus, and stability
of results) and the mean or median scores of the final rounds determine the results.

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 Delphi is based on the principle that forecasts (or decisions) from a structured
group of individuals are more accurate than those from unstructured groups. The technique
can also be adapted for use in face-to-face meetings, and is then called mini-Delphi or
Estimate-Talk-Estimate (ETE). Delphi has been widely used for business forecasting
and has certain advantages over another structured forecasting approach, prediction
markets.
5. Electronic Decisions
The electronic decision method works similarly to the nominal group technique;
except that it uses special computer programs for anonymity so group members can
address their concerns about a proposed solution without the effects of group think. The
electronic method usually uses an online forum where group members sign in, write
their proposed solutions and vote on them using an anonymous voting system. For
instance, a group member could rank solutions to a problem in order from best to worst,
then the computer assigns point values to each solution until all votes are tallied.
6. SWOT
The Situation, Weaknesses, Opportunities, Threats (SWOT) technique is not an
anonymous method for creating solutions in a group setting, but it does attempt to use a
rationalized approach to selecting a solution based on what the group members know
about their business. When using the SWOT technique, group members discuss and list
the strengths, weaknesses, opportunities and threats or challenges facing their business
or facing the matter at hand. Then, the group narrows down solutions based on the SWOT
analysis. For instance, the group may know that they can produce a product very quickly
but not in high volumes. The business might also have first-mover advantage in a new
market but faces the rivalry of a powerful competitor as soon as it moves into the market.
Based on this information, a group would narrow down its solutions to a problem.
7. Value Analysis
The value analysis technique assigns a scale of points to each goal that a group
wants to meet. The solution with the most points is selected to be best. For instance, if
stronger profits merit value equal to 5 points, cleaner emissions 4 points and employee
satisfaction 3 points, the max points a solution could garner is 12 points. If a possible
solution leads to stronger profits and nothing else, it receives only 5 points.

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12.17 ADVANTAGES OF GROUP DECISION MAKING
The potential advantages of group decision making are as follows:
1. A group has more information than individual. As many individuals are involves,
more data and information can be brought to bear on the decision. The group provides
specialised inputs in defining variables and suggests alternatives that the manager acting
alone, would be unlikely to come up with. The tremendous amount of information and
knowledge so generated might help in improved decision making.
2. A group can bring to bear a wider experience, a greater variety of opinion and a
more thorough probing of facts than a single individual. Members not only bring new
information to the problem but also generate more alternative solutions. Since group
members do not have identical approaches, each can contribute by knocking others out
of ruts of thinking.
3. Participation in decision making and problem solving increases acceptance and
commitment. Many studies have shown that when participation is given, people see the
solution as their own and acquire a psychological stake in its success.
4. When a manager makes a decision individually he must relay it to those who
carry it out. Failure to implement decisions effectively can often be traced to grabbled
communication. When those who must execute the decision have participated in making
it, the chance of communication failure is reduced. People understand the decision better
because they saw and heard it develop.
5. Group decisions are likely to be implemented effectively. The group members
who have participated in taking the decision jointly are supposed to lend full support to
the decision because of their greater commitment to the decision. However, it is important
that the decision should be accepted by all members of the group.
6. Group decision making can be used as a training ground for new members to
learn decision making and communication skills. Thus, it can serve as an instrument of
human resource development.
12.18 DISADVANTAGES OF GROUP DECISION MAKING
The disadvantages of group decision making are as follows:
1. Group decision making is a time consuming process. Usually, a group takes
more time in reaching a decision since there are many opinions to be taken into
consideration. The greater the difference among group members, the greater is the time
taken in decision making.

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 2. When groups are confronted with a problem, the major goal is to obtain
the best possible solution. But as alternative solutions are put forward, group members
may begin to view and defend their own form a win or lose standpoint, instead of
examining objectively the merit of each. The clash of ideas that develops in a group can
breed resentment and hurt feelings.
3. The group is composed of several individuals and hence, it is easy to pass
the buck in decision making. Moreover by spreading the responsibility for a decision,
groups can occasionally come up with ill conceived or irresponsible conclusions.
4. Group decision making may prove to be more risky than individual decision
making. Since it is a collective decision, the group may be tempted to take more risk
than warranted b the situation. Such a tendency is known as risky shift.
5. When there is a conflict between the group goals and the organisational
goals, the group decision is likely to be detrimental to the interests of the organisation.
6. Some members may resort to social loafing. Social loafing occurs when
there a large number of members. Members who indulge in social loafing do not take
part or play insignificant role in decision making. They enjoy all privileges but
contributions from such members are nonexistent or very minimal.

12.19 SUMMARY
A group is an aggregation of small number of individuals who are aware of each
other, interact with each other in a meaningful way and work for a common goal. They
develop a shared attitude and are aware that they are a part of a group and perceive
themselves as such.
Often two words are used in the organisational context. These are group and team.
Every management would like to have teams in their organisations. The reasons are very
clear. The groups are formed primarily to share the information and should have a strong
leader to lead them . They lack positive energy and individual responsibility.
Group dynamics is concerned with the interactions of forces between group
members in a social situation. It refers to the study of forces operating within a group.
In other words, “the social process by which people interact face to face in small groups
is called group dynamics.
Many theories have been developed over a period which try to explain the process
of group formation. The important theories are Propinquity Theory, Homan’s theory,
Balance Theory and Exchange Theory.

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 There are many reasons why people form groups in an organisation, the important
reasons for the formation of groups in an organisation are companionship, identity,
security, information and sense of belongingness.
One of the realities of organisational behaviour is that one must work in and with
groups to accomplish his aspirations. No matter how much he values and protect his
individuality, it is a fact that the goals can be achieved only in a group. The behaviour of
individuals in groups is something more than the sum total of each individual’s acting in
his or her own way. Alternatively it can be said that individuals behave differently when
they are in groups as compared to when they are alone.

Decision making is at the core of managerial planning. It involves establishing

goals, defining tasks, searching for alternatives and choice of the best alternative. In an
organisation, decision making may be carried out by both individuals and groups. In modern
organisations facing the environmental uncertainties, group decision making has become
almost indispensable. Organisations are composed of several groups. Both formal groups
(e.g. work teams, committees) and informal groups are supposed to take decisions to
resolve various problems. Decision making in groups is a collective process which is
based on the old adage “two heads are better than one”. In group decision making, the
group members interact with each other, deliberate on the problem and arrive at some
collective decision. The decision may be arrived at through either consensus or simple
majority. Consensus implies that all members must agree to the proposed decision,
whereas majority vote implies that it is enough for the majority of the group members
to agree on the decision arrived at.
There has been a debate on the issue whether decisions are to be taken individually
or collectively. The factors like nature of the problem, time available for decision making,
quality of decision expected, organisational policies etc. will decide whether decisions
are to be taken individually or collectively.
12.20 KEY WORDS
• Group
• Cohesiveness
• Dynamics
• Decision-Making

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12.21 SELF ASSESMENT QUESTIONS
1. Explain the types of Groups.
2. Discuss the various reasons for Group formation.
3. Describe the process of Group Decision Making.
4. Explain the causes and consequences of Group Cohesiveness.
5. Discuss the techniques of Group Decision making
12.22 REFERENCES

1. Jit S.Chand, Organizational Behavior, New Delhi: Vikas Publishing House Pvt.
Ltd, 2001.
2. K Aswathappa. Organisation Behaviour, Text, Cases, New Delhi: Himalaya
Publishing House. 2010
3. K Sridhar Bhatt. Management and Behavioural Process, New Delhi: Himalaya
Publishing House. 2005
4. Paul heresy. Management of Organization Behaviour, New Delhi: Prentice
Hall India 7th Ed.
5. Prasad L M. Organisational theory and Behaviour, New Delhi: Sultan Chand
& Sons, 2014.
6. Stephen P Robins. Organisation Behaviour, New Delhi: New D Prentice Hall
India, 2005.
7. VSP Rao and P S Narayan. Organization theory and Behaviour: New Delhi,
Konark Publishes Pvt Ltd., 2007

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 BLOCK IV

UNIT - 13 : INTRODUCTION TO ORGANIZATIONAL CHANGE

STRUCTURE
13.0 Objectives
13.1 Introduction
13.2 Meaning Of Organizational Change
13.3 Need/ Reasons for Organizational Change
13.4 Types of Organizational Change
13.5 Forces of Change
13.6 Impact of Organizational Change
13.7 Process of Organizational Change
13.8 Resistance to Change
13.9 Sources of Resistance to Change
13.10 Reasons for Resistance to Change
13.11 Measure to Prevent/Overcoming Resistance to Change
13.12 Meaning of Change Agent
13.13 Characteristics of Change Agent
13.14 Approaches of Change Agent
13.15 Summary
13.16 Key Words
13.17 Self Assesment Questions
13.18 References

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13.0 OBJECTIVES
After studying this unit, you should able to :
• Provide Meaning and definition of change
• Emphasis the need for change
• Analyze the types of change
• Discuss the forces of change
• Explain the process of change
• Describe the impact of change

13.1 INTRODUCTION
Change is a constant, a thread woven into the fabric of our personal and
professional lives. Change occurs within our world and beyond in national and
international events, in the physical environment, in the way organizations are structured
and conduct their business, in political and socioeconomic problems and solutions, and
in societal norms and values. As the world becomes more complex and increasingly
interrelated, changes seemingly far away affect us. Thus, change may sometimes appear
to occur frequently and randomly. We are slowly becoming aware of how connected we
are to one another and to our world. Organizations must also be cognizant of their holistic
nature and of the ways their members affect one another. The incredible amount of change
has forced individuals and Organizations to see “the big picture” and to be aware of how
events affect them and vice versa.
Change is a natural phenomenon, the law of nature, an indispensable function of
life and many a time it is desirable. The change may be due to change in the customs and
traditions, perceptions and conceptions, needs and wants, food and dress habits, life
style and behavioral patterns over a period of time under natural, social, political and
economic environmental pressures, which also change from time to time. Not only an
individual, a family, a society, and a nation but also an organization changes over a period
of time. The change may be a growth, an improvement or a shrink. It may be towards
good or bad. The change may be natural or artificial, sudden or gradual, clear or vague,
immediately discernible or apparent only after some time.
Nothing is permanent expect change. Organization struggle for survival and strive
for growth in the face of changing demand, growing competition, and vacillating
government policies. Hence, if an organization is to survive, the management is required
to manage the change properly.

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 An organization must develop adaptability to change otherwise it will either be
left behind or be swept away by the forces of change. Both these objectives call for a lot
of adoption and adjustment at various levels of management
Today, team and organizations face rapid change like never before. Globalization
has increased the market and opportunities for more growth and revenue. However,
increasingly diverse markets have a wide variety of needs and expectations that must be
understood if they are to become strong customers and collaborators. Concurrently,
scrutiny of stakeholders has increased as some executives have been convicted of illegal
actions in their companies, and the compensation of executives seems to be increasing
while wages of others seems to be decreasing of leveling off. Thus, the ability to manage
change, while continuing to meet the needs of stakeholders, is a very important skill
required by today’s leaders and managers.

13.2 MEANING OF ORGANIZATIONAL CHANGE

Change is an ongoing process. Companies no longer have a choice, they must
change to survive. Unfortunately, people tend to resist change. It is not easy to change an
organization, let alone an individual. This puts increased pressure on management to
learn the subtleties of change.
Change is an act or process through which something became different. Change
constitutes a departure from the established order of things. It may be circumstantial or
deliberate, depending upon situation beyond the control of top management or to bring
about substantial expansion, modernization or improvement in the operations of the
organization
Organizational Change is an important issue in organizations. It is actually a
process in which an organization optimizes performance as it works toward its ideal
state.
Organizational Change occurs as a reaction to an ever-changing environment, a
response to a current crisis situation, or is triggered by a leader.
Organizational change is about reviewing and modifying management structures
and business processes. Small businesses must adapt to survive against bigger competitors
and grow. However, success should not lead to complacency. To stay a step ahead of the
competition, companies need to look for ways to do things more efficiently and cost
effectively. There is no need to fear change. Instead, small businesses should embrace
change as a way to lay the foundations for enduring success.

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13.3 NEED/REASONS FOR ORGANIZATIONAL CHANGE
An organization may require changes at various level and various points for one
or more of the following reasons:
A. Globalization
B. Technology
C. Customer Needs
D. The Economy
E. Growth Opportunities
F. Challenging the Status Quo
A. Globalization:
Globalization and the constant innovation of technology result in a constantly
evolving business environment. Phenomena such as social media and mobile adaptability
have revolutionized business and the effect of this is an ever increasing need for change,
and therefore change management. The growth in technology also has a secondary effect
of increasing the availability and therefore accountability of knowledge. Easily accessible
information has resulted in unprecedented scrutiny from stockholders and the media
and pressure on management.
With the business environment experiencing so much change, organizations must
then learn to become comfortable with change as well. Therefore, the ability to manage
and adapt to organizational change is an essential ability required in the workplace today.
Yet, major and rapid organizational change is profoundly difficult because the structure,
culture, and routines of organizations often reflect a persistent and difficult-to-remove
“imprint” of past periods, which are resistant to radical change even as the current
environment of the organization changes rapidly.
Due to the growth of technology, modern organizational change is largely
motivated by exterior innovations rather than internal moves. When these developments
occur, the organizations that adapt quickest create a competitive advantage for themselves,
while the companies that refuse to change get left behind. This can result in drastic
profit and/or market share losses.
Any business in today’s fast-moving environment that is looking for the pace of
change to slow is likely to be sorely disappointed. In fact, businesses should embrace
change. Change is important for any organization because, without change, businesses

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would likely lose their competitive edge and fail to meet the needs of what most hope to
be a growing base of loyal customers.
B. Technology:
Without change, business leaders still would be dictating correspondence to
secretaries, editing their words and sending them back to the drawing board, wasting
time for all involved. Change that results from the adoption of new technology is common
in most organizations and while it can be disruptive at first, ultimately the change tends
to increase productivity and service
Technology also has affected how we communicate. No longer do business people
dial a rotary phone, get a busy signal, and try again and again until they get through. No
longer do business people have to laboriously contact people, in person, to find out
about other people who might be useful resources - they can search for experts online
through search engines as well as through social media sites. Today’s burgeoning
communication technology represents changes that allow organizations to learn more,
more quickly, than ever before.
C. Customer Needs:
Customers who were satisfied with conventional ovens many years ago are
sometimes impatient with the microwave today. As the world evolves, customer needs
change and grow, creating new demand for new types of products and services — and
opening up new areas of opportunity for companies to meet those needs.
D. Economy:
The economy can impact organizations in both positive and negative ways and
both can be stressful. A strong economy and increasing demand for products and services
will mean that companies must consider expansion that might involve the addition of
staff and new facilities. These changes offer opportunities for staff, but also represent
new challenges. A weak economy can create even more problems as companies find
themselves needing to make difficult decisions that can impact employees’ salaries and
benefits and even threaten their jobs. The ability to manage both ends of the spectrum
are critical for organizations that want to maintain a strong brand and strong relationships
with customers as well as employees.
E. Growth Opportunities:
Change is important in organizations to allow employees to learn new skills,
explore new opportunities and exercise their creativity in ways that ultimately benefit

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the organization through new ideas and increased commitment. Preparing employees to
deal with these changes involves an analysis of the tools and training required to help
them learn new skills. Training can be provided through traditional classroom settings
or, increasingly, through online learning opportunities. Importantly, organizations need
to do a good job of evaluating employees’ capabilities and then taking steps to fill the
gaps between current skills and the skills required to respond to growth.
F. Challenging the Status Quo:
Simply asking the question “Why?” can lead to new ideas and new innovations
that can directly impact the bottom line. Organizations benefit from change that results
in new ways of looking at customer needs, new ways of delivering customer service,
new ways of strengthening customer interactions and new products that might attract
new markets. New employees joining an organization are especially valuable because
they can often point to areas of opportunity for improvement that those who have been
long involved in the company might have overlooked. But even existing employees should
be encouraged to question why things are done a certain way and look for new ways to
get work done faster, better and with higher levels of quality and service.
Why Organizations can Change
Organizations change for a number of different reasons, so they can either react
to these reasons or be ahead of them. These reasons include:
1. Crisis: Obviously September 11 is the most dramatic example of a crisis which
caused countless organizations, and even industries such as airlines and travel, to change.
The recent financial crisis obviously created many changes in the financial services
industry as organizations attempted to survive.
2. Performance Gaps: The organization’s goals and objectives are not being met
or other organizational needs are not being satisfied. Changes are required to close these
gaps.
3. New Technology: Identification of new technology and more efficient and
economical methods to perform work.
4. Identification of Opportunities: Opportunities are identified in the market
place that the organization needs to pursue in order to increase its competitiveness.
5. Reaction to Internal & External Pressure: Management and employees,
particularly those in organized unions often exert pressure for change. External pressures
come from many areas, including customers, competition, changing government

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regulations, shareholders, financial markets, and other factors in the organization’s
external environment.
6. Mergers & Acquisitions: Mergers and acquisitions create change in a number
of areas often negatively impacting employees when two organizations are merged and
employees in duel functions are made redundant.
7. Change for the Sake of Change: Often times an organization will appoint a
new CEO. In order to prove to the board he is doing something, he will make changes
just for their own sake.
8. Sounds Good: Another reason organizations may institute certain changes is
that other organizations are doing so (such as the old quality circles and re-engineering
fads). It sounds good, so the organization tries it.
9. Planned Abandonment: Changes as a result of abandoning declining products,
markets, or subsidiaries and allocating resources to innovation and new opportunities.
What Organizations Can Change
Organizations change can fall into the following broad areas:
1. Mission, Vision, & Strategy: Organizations should continually ask
themselves, “What is our business and what should it be?” Answers to these questions
can lead to changes in the organization’s mission (the purpose of its business), its vision
for the future (what the organization should look like), and its competitive strategy.
2. Technology: Organizations can change their technology (for example the
way they produce whatever they sell) in order to increase efficiency and lower costs.
3. Human-Behavioral Changes: Training can be provided to managers and
employees to provide new knowledge and skills, or people can be replaced or downsized.
As result of the recent financial crisis, many organizations downsized creating massive
unemployment that continues to this day.
4. Task-Job Design: The way work is performed in the organization can be
changed with new procedures and methods for performing work.
5. Organizational Structure: Organizations can change the way they are
structured in order to be more responsive to their external environment. Again to be
more responsive to the marketplace, this also includes where decisions should be made
in the organization (centralized or decentralized).

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 6. Organizational Culture: Entities can attempt to change their culture,
including management and leadership styles, values and beliefs. Of all the things
organizations can change, this is by far the most difficult to undertake.
These are the major elements that organizations can change. It is important to
note that changes in one of these elements will usually have an impact on another element.
As an example, changing technology may require changes in the human-behavioral area
(new knowledge and skills on how to use the technology).

13.4 TYPES OF ORGANIZATIONAL CHANGE

For organizations, the last decade has been fraught with restructurings, process
enhancements, mergers, acquisitions, and layoffs—all in hopes of achieving revenue
growth and increased profitability.
While the external environment (competitive, regulatory, and so on) will continue
to play a role in an organization’s ability to deliver goods and services, the internal
environment within the organization will increasingly inhibit it from delivering products
required to meet the demands of the marketplace unless it is able to adapt quickly. The
major areas of changes in a company’s internal environment include:
Strategic: Sometimes in the course of normal business operation it is necessary
for management to adjust the firm’s strategy to achieve the goals of the company, or
even to change the mission statement of the organization in response to demands of the
external environments. Adjusting a company’s strategy may involve changing its
fundamental approach to doing business, the markets it will target, the kinds of products
it will sell, how they will be sold, its overall strategic orientation, the level of global
activity, and its various partnerships and other joint business arrangements.
Structural: Organizations often find it necessary to redesign the structure of the
company due to influences from the external environment. Structural changes involve
the hierarchy of authority, goals, structural characteristics, administrative procedures,
and management systems. Almost all change in how an organization is managed falls
under the category of structural change. A structural change may be as simple as
implementing a no smoking policy, or as involved as restructuring the company to meet
the customer needs more effectively.
Process Oriented: Organizations may need to reengineer processes to achieve
optimum workflow and productivity. Process oriented change is often related to an
organization’s production process or how the organization assembles products or delivers

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services. The adoption of robotics in a manufacturing plant or of laser scanning checkout
systems at supermarkets are examples of process oriented changes.
People Centered: This type of change alters the attitudes, behaviors, skills, or
performance of employees in the company. Changing people centered processes involves
communicating, motivating, leading, and interacting within groups. This focus may entail
changing how problems are solved, the way employees learn new skills, and even the
very nature of how employees perceive themselves, their jobs, and the organization.
Some people centered changes may involve only incremental changes or small
improvements in a process. For example, many organizations undergo leadership training
that teaches managers how to communicate more openly with employees. Other programs
may concentrate on team processes by teaching both managers and employees to work
together more effectively to solve problems.
Remember that strategic, structural, process oriented, and people centered changes
occur continuously in dynamic businesses. Often, changes in one of these areas impact
changes in the other areas.
Many employees believe that a change is often reactive and nothing more than a
quick fix; then they brace themselves for more changes in the future. Management needs
to realize that serious underlying problems in organizations must be addressed with long-
term consequences in mind. Thus, when management implements changes, careful thought
must be given to ensure that the new processes are for the longterm good of the company.

13.5 FORCES OF CHANGE

As societies continue to evolve and changing demand creates the need for new
products and services, businesses often are forced to make changes to stay competitive.
The businesses that continue to survive and even thrive are usually the ones that most
readily adapt to change. Today many organizations face a dynamic and changing
environment.

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 Force
Of
Change

External Force Internal Force

A variety of factors can cause a business to reevaluate its methods of operation.

The above diagram clearly shows the two force of environment that stimulate
for change. They are:
1. External Force
2. Internal Force
1.External Force: The external forces for change originate in the school’s environment.
They include the marketplace, government laws and regulations, technology, labor
markets, and economic changes.
A. Marketplace: The emergence of a global economy is forcing US companies
to change the way they do business. Companies are having to forge new partnerships
with their suppliers in order to deliver higher quality products at lower prices. Consider
how Thomas Stalkamp,Chrysler Corporation’s vice president of purchasing, uses a win-
win approach to lower suppliers’ costs:
B. Government laws and regulations: Government laws and regulations are a
frequent impetus for change. As a case in point, strict enforcement of Equal Employment
Opportunity Commission regulations cause many school districts to examine carefully
their hiring, promotion, and pay policies for women and minorities (Robinson, 2010).
The No Child Left behind Act of 2001 (Public Law 107-110) has had a significant impact
on the operation of public schools throughout the country.

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 C. Technology: Both manufacturing and service organizations are increasingly
using technology as a means to improve productivity and market competitiveness.
Manufacturing companies, for instance, have automated their operations with robotics,
computerized numerical control (CNC), which is used for metal cutting operations, and
computer-aided design (CAD).Technological innovations have created the need for change
in schools Computers have made possible high-speed data processing and retrieval of
information and have created the need for new positions.
D. Labor Markets. The fluctuation of labor markets forces school leaders to
initiate change. For instance, the education, talents, and attitudes of potential teachers
play an important role in a school’s effectiveness. Changes in these facets of the labor
force can lead to a shortage or a surplus of qualified teachers.
E. Economic Changes. Changes in economic and business environment is a
reason for introducing changes in the organization. Introduction of new economic order
world over, integration or disintegration of the existing market, and sudden rise or fall
of the economies send economic waves of change requiring the organization across the
globe to change. Economic reforms like Liberalization, Privatization and Globalization
bring about a lot of changes in the country’s economic environment. To cope with such
changes, organizations have to adopt new strategies Economic changes affect schools
as well. During periods of recession, inflation, or downturns in the local or national
economy, the attitudes and morale of some staff members suffer, which may hinder
school performance
F. Competition: Competition increase with passage of time. This is a natural
phenomenon. Increase in the competition may be the result of innovation, entry of new
actors into the market etc. to survive and to thrive, organization have to invent new things
and to introduce new strategies
2. Internal Forces
Pressures in the internal environment of the school district/school can also
stimulate change. The two most significant internal pressures for change come from
administrative processes and people problems.
A. Administrative processes. Processes that act as pressures for change include
communications, decision making, leadership, and motivational strategies, to name only
a few. Breakdowns or problems in any of these processes can create pressures for change.
Communications may be inadequate; decisions may be of poor quality; leadership may
be inappropriate for the situation; and staff motivation may be nonexistent.

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 B. People problems. Some symptoms of people problems are poor performance
levels of teachers and students; high absenteeism of teachers or students; high dropout
rates of students; high teacher turnover; poor school-community relations, poor
management-union relations; and low levels of staff morale and job satisfaction (Bulach,
Lunenburg, & Potter, 2008; Lunenburg & Ornstein, 2008). A teacher’s strike, numerous
employee complaints, and the filing of grievances are some tangible signs of problems
in the internal environment (Alexander & Alexander, 2009). These factors provide a
signal to school leaders that change is necessary. In addition, internal pressures for change
occur in response to organizational changes that are designed to deal with pressures for
change exerted by the external environment.

13.6 IMPACT OF ORGANIZATIONAL CHANGE

The whole organization tends to be affected by change in any part of it. Press a
balloon at a point and observe how the shape of the balloon changes. Like that the entire
organization gets affected by a change one of the parts of the organization.
In fact, each change is interpreted by different individuals according to their
behavioral patterns and attitudes. Change may affect social relations between employees
that have developed over a period of time and they do not like the same to be disturbed.
Attitudes are generally slow to change, nebulous and hidden. It is literally true
that people sometimes do not know why they react to a change in a particular fashion.
Somebody in the group takes a position and everybody follows suit. No body analyses
the rationality or otherwise of this behavior. Thus feeling are just feelings, they have
nothing much to do with logic quite often.
The various reaction to change, therefore, may be willing acceptance, a mild
opposition, a wide spread resentment followed by work to rule, absenteeism, a charter
of demands, strikes and sometimes even violence.

13.7 PROCESS OF ORGANIZATIONAL CHANGE

It is the process which changes the state or which results in change. Change process
as problem solving and problem finding.
Kurt lewin’s Model of Change Process
This model is also known as Unfreeze-Change-Refreeze Model. This model
suggested following three steps for ensuring successful change. .

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1.Unfreeze: Change efforts to overcome the pressures of resistance to change. Driving
force for change need to be greater than restraining forces working for status quo.
Following steps need to be taken:
a. Determine what needs to be done
b. Ensure there is strong support from upper management
c. Create the need for change
d. Understand and manage doubts and concerns
This is a process where the forces acting on individuals are arranged so that they
see the need for change. In brief, unfreezing is the breaking down of the mores, customs
and traditions of individuals ie., freezing oneself from the belief in the old ways of
doing things, so that they are ready to accept the new alternatives.
2. Changing: this may be achieved through various model of motivation. After making
them free from old beliefs and preparing them to receive change.
Following steps need to be taken:
a. Communicate often
b. Dispel rumours
c. Empower action
d. Involve people in the process
3. Refreeze: refreezing is the process by which the newly acquired behavior is
integrated as patterned behavior into the individual’s personality. This highlights how
important it is for an individual engaged in a change process to be in an environment that
is continually reinforcing the desired change.

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Following steps need to be taken:
a. Anchor the changes into culture
b. Develop ways to sustain the change
c. Provide support and training
d. Celebrate success

13.8 RESISTANCE TO CHANGE

The problem in the management to change is the study of causes of resistance to
change. Despite the fact that change is a persistent phenomenon, it is a common
experience that employees resist change whether in the context of their pattern of life
or in the context of their situation in the organization.
The term ‘organization change’ implies the creation of imbalance in the existing
pattern of situation.
The adoption of innovations involves altering human behavior, and the acceptance
of change. There is a natural resistance to change for several reasons.
People resist change:
 When the reason for the change is unclear. Ambiguity—whether it is about costs,
equipment, jobs—can trigger negative reactions among users.
 When the proposed users have not been consulted about the change, and it is offered
to them as an accomplished fact. People like to know what’s going on, especially if
their jobs may be affected. Informed workers tend to have higher levels of job
satisfaction than uninformed workers.
 When the change threatens to modify established patterns of working relationships
between people.
 When communication about the change—timetables, personnel, monies, etc.—has
not been sufficient.
 When the benefits and rewards for making the change are not seen as adequate for
the trouble involved.
 When the change threatens jobs, power or status in an organization.

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13.9 SOURCES OF RESISTANCE TO CHANGE
1. Individual sources
A. Habit: To cope with life’s complexities, we rely on habits or programmed
responses. But when confronted with change, this tendency to respond in our
accustomed ways becomes a source of resistance.
B. Security: People with a high need for security are likely to resist change because
it threatens their feeling of safety.
C. Economic factors: Changes in job task or established work routines can arouse
economic fear if people are concerned that they won’t be able to perform the new
task or routines to their previous standards, especially when pay is closed tied to
productivity.
D. Fear of the unknown: Change substitutes ambiguity and uncertainty for the
unknown.
E. Selective information processing: Individuals are guilty of selectively processing
information in order to keep their perceptions intact. They hear what they want to
hear and they ignore information that challenges the world they’ve created.
2. Organization sources
A. Structural inertia: Organizations have built-in-mechanism like their selection
processes and formalized regulations to produce stability. When an organization is
confronted with change, this structural inertia acts as a counterbalance to sustain
stability.
B. Limited focus of change: Organizations are made up of a number of interdependent
subsystems. One can’t be changed without affecting the others. So limited changes
in subsystem tends to be nullified by the larger system.
C. Group inertia: Even if an individual wants to change their behavior, group norms
may act as a constraint.
D. Threat to expertise: Changes in organizational patterns may threaten the expertise
of specialized groups.

13.10 REASONS FOR RESISTANCE TO CHANGE

Some of the changes bring about a reduction in authority and power to direct,
necessitate learning of new skills, affect group loyalties, and create misunderstanding

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about the nature, scope and effects of the change. Depending upon the felt effect of
change by the employee, Keith Davis classified the reason for resistance to change into
three. They are:
A. Economic Reasons
B. Personal Reasons
C. Social Reasons
Above reasons are briefly explained below:
A. Economic Reasons: Economic reasons for resistance are classified into three
groups. They are
1. Fear of Reduction in Employment: Due to the changes in technology, methods
of work, quantity or quality of work etc. This fear leads to resistance to change on
the part of people. Opposition to automation is an example to it.
2. Fear of Demotion: Employees may fear that they may be demoted if they do not
posses the new skills required for their jobs, after the introduction of change. Hence,
they prefer ‘status quo’.
3. Fear of Workload: Change in work technology and methods may lead to the fear
that workload will be increased while there will not be any corresponding increase
in their salaries and benefits. This feeling creates resistance to change.
B. Personal Reasons: Personal reasons for resistances are also divided into three
classes. They are
1. Need for training: If a change in technology and work organization necessitates
training and re-learning on the part of employees, it may lead to resistance, as all
do not like to go for refresher and retraining courses off and on.
2. Boredom and Monotony: If the proposed change is expected to lead to greater
specialization resulting in boredom and monotony, it may also be resisted by
employees.
3. No Participation in Change: Some employees resist any change as they are critical
of the situation and they are not being given any part in decision making process for
change. When they do not understand fully the implication of change, they resist it.
C. Social Reasons: Social reasons for resistances are also classified into three groups.
They are:

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1. Need for New Social Adjustment: Organizational change requires new social
adjustment with the group, work situation and new boss. All individuals are not
ready to accept this challenge. Some people refuse transfers and promotions for
this reason only, as they will have to break their present social ties.
2. Taking Change as Imposed from Outside: Some employees take any change as
imposed from outside upon them.
3. Other Considerations: Some employees may consider that every change brought
about is for the benefits of the organization only and not for them, their fellow
workers or even the general public. Hence, they resist the change.

13.11 MEASURE TO PREVENT/OVERCOMING RESISTANCE TO

CHANGE

Major change is a double edged sword. Even when people know that it’s necessary
to do things differently because of new opportunities, mergers, acquisitions,
reorganizations, crises, or an alliance, resistance is commonplace. The biggest challenge
of leading through resistance, however, can be recognizing its various disguises.

It’s easy to recognize when resistance is overt and appears as hostile encounters
with others, ignoring requests, or outright refusal to change. But even the savviest CEOs
and executives can miss signs of covert resistance. This is because everyone appears to
have good intentions and it’s often difficult to pinpoint exactly where the problems are
coming from. For instance, employees may initially agree to take on new projects or
adhere to new policies or procedures, but they’re steadily busy with other priorities or
consistently forget to do things differently. The bottom line is that progress stalls.

Eight Steps to Overcoming Organizational Resistance to change:

1.Understand the sources of resistance. In order to determine the best way to
address resistance, you must know where it’s coming from and why it’s happening.
Unfortunately, there are at least as many reasons for resistance as there are reasons for
change. Some of the most common issues we’ve observed in companies include: anger
over real or perceived loss of power and control, discomfort with doing things differently,
resentment over increased workload, fear of job loss, and generalized anxiety about the
unknown.

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 2.Identify a “grass roots” plan to engage others: Winning over key leaders
who can influence groups and sub-groups at every level of the organization is a great way
to build trust relatively quickly. Keep in mind that while many leaders hold management
positions, the most powerful leaders are actually those who hold social influence,
regardless of their position in the organizational hierarchy. For example, in one company,
the clerk who dispensed office supplies was a powerful social leader. The more leaders
you can engage, the faster you can amplify their influence.
3.Be candid about the challenge and the path ahead: Give people the facts
about what they’re facing and they’ll respect your honesty, even if they are unhappy about
the situation. Provide them with a path for moving through the change that they can buy
into, and they will be more likely to cooperate. Example: at one company that was
merging with a competitor, executives kept all employees informed about what was
happening and what to expect during integration. The company also provided employees
at every level with workshops on change management, and individual coaching on
developing a resume and interviewing skills. The result most employees committed to
staying productive on the job until the company closed its doors nine months later.
4.Build confidence: Provide examples of how your organization has overcome
other difficult times and concrete evidence that supports the slow but incremental
progress being made in the here and now. The more that people can see how their individual
and group contributions are making a difference, the more in control they will feel and
the more committed they will be to changes.
5. Communicate frequently – and credibly: In times of uncertainty, people
crave information. and with information readily accessible on the Internet, if they don’t
get what they need from you, they’ll get it from anyone or anything else that seems at all
credible. This is how rumors, grapevines, and other misleading information are circulated.
Even if you don’t have complete information, people will be more inclined to trust you
if they can perceive a connection between what you’re telling them and what they can
readily observe happening around them.
6. Use appropriate communication channels: There is no one best way to
communicate with diverse groups and individuals. In the age of texting, Twitter, YouTube,
etc. it’s easy to believe that everyone communicates using the newest technology.
However, we still meet people who don’t have smart phones, who don’t tweet or text
each other, and prefer hard copy mail and magazines to email. The greater the variety of
channels you use to communicate (both high tech and low tech), the more likely it is that
you’ll successfully connect with your stakeholders.

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 7. Admit mistakes: One of the best ways to soften resistance is to acknowledge
your own mistakes and what you’re doing to correct them. Not only does this minimize
the amount of time spent stuck on the conflict, it also opens the door for others to admit
their own mistakes, and for both sides to find a new common ground.
8. Monitor progress and adjust as necessary: It’s critical to set realistic
milestones for progress that are in proportion to the degree of resistance you are
experiencing. Are decisions getting made? Do you observe fewer conflicts? Are project
milestones back on track? Use concrete evidence rather than opinion to determine
whether progress is actually happening.

13.12 MEANING OF CHANGE AGENT

A Change Agent is an event, organization, material thing or, more usually, a person
that acts as a catalyst for change.
In business terms, a Change Agent is a person chosen to bring about organizational
change. Corporations often hire senior managers or even chief executives because of their
ability to effect change.
The people who foresee the need for change, plan for change and introduce change
are called change agent
The role of a change agent is to bring about change in his/her area. Change agents are
involved in helping a team implement new organizational systems to achieve a higher degree
of output. The result expected of a change agent is to enable people to do more and find a
better perspective on life.
The change agents are:
1.Leaders: The first and probably the most important and effective agent of change
is the leader, the chief executive of the organization. His management style, behavioral pattern,
personal relationship and concern for other in the organization are the elements which make
most of his decision acceptable by his collogue. Technical specialists’ viz. engineers, cost
accountants, job analysts etc., have quite often human relation blind spots in dealing with
people. When they talk to worker, they sometimes use jargons and theories that do not make
sense to the practical functionaries. Further, they do not discuss, they tell. If they are once
convinced that the proposed change is logical, they ignore the psychological aspects. The
true leader acts in an altogether different fashion. He listens, reacts, and convinces to succeed
as a real agent of change

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 2.Beneficiaries: Another set of people who can act as agents of change are those
who may directly or indirectly benefit from change. They can use the grapevine to convince
the people about the utility and usefulness of the proposed change, they can actively engage
themselves in immobilizing the restraining forces and try to convert either all or some of
them as drive forces.
3.Early Adopter: In every organization, there will be a set of people who will never
resist any change. In fact, they belongs to the culture which bow before the chair and accepts
whatever comes from above with utmost sincerity and obedience, such persons, the early
adopters, if fairly large in number, have a demoralizing influence on the ‘non- conformists’
or the ‘ no-men’. Sometimes these people are quite vocal and have a subtle influence on
persons sitting on the fence.
4.Trade Union Activists: What is good for the company is good for the employees
may not be acceptable to all. Sometimes, out of sheer ignorance the trade union activists
may bite the hand that feeds them. The trade union activist, if convinced about the benefits,
usefulness, utility and positivist of the change, can be the best agents of change
13.13 CHARACTERISTICS OF CHANGE AGENT
As part of her research on organizational change, Kanter studied leaders who had a
track record of success implementing change. She considered numerous innovators from a
variety of organizations, at various levels, who implemented different kinds of changes. In
each case, she found a set of common traits that distinguished these leaders from less
successful innovators.
The following are the essential characteristics of successful change agent they are:
1) Successful innovators are comfortable with change. They understand that change
is a fact of organizational life, are not threatened by it, and even enjoy the stimulation
associated with change. They know change is required for personal and organizational growth.
They also have a high degree of self-confidence and see themselves as being able to cope
with change.
2) The leaders Kanter studied set clear goals and direction for themselves and
those involved in the change effort. They knew the key indicators of success in their areas
of responsibility and managed against those measures. They set difficult but attainable goals
for themselves and their co-workers but used their optimism and self-confidence to build
positive expectations in others. They let people know how changes or innovations would
help them succeed and incorporated this into their visions for future success.

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 3) Successful innovators prepare thoroughly. They invest the time and effort to
do their homework and get the facts regarding changes or innovations. The leaders Kanter
studied analyzed who the important stakeholders were in their situations and how to get their
acceptance. These leaders considered how the change would impact people and empathized
with their concerns. They thought through the innovation and were prepared to answer “what
if” questions from various constituencies.
4) It isn’t surprising that successful innovators use a participative management
style. Successful organizational change requires involving others to improve the idea, secure
cooperation, build trust, and deal with fears and concerns. Kanter’s leaders were willing to
talk to others about the change and listen to their ideas. They involved others and were willing
to give people important jobs to do in support of the change. They were careful to give
people credit for their contributions and recognized groups often for their achievements.
5) Successful innovators are persistent. A leader must overcome skepticism,
complaints, criticism, politics, resistance and foot dragging. They run a gauntlet of nay-
Sayers and sometimes have to wait months, if not years, before seeing their ideas implemented.
However, they won’t take no for an answer and find ways over or around obstacles. They are
willing to modify the innovation to address people’s concerns and deal with resistance and
criticism in a positive, problem-solving fashion. They are thick-skinned and don’t take negative
comments as personal attacks.
Many people comment that they can’t be effective change agents because they don’t
have “that kind of personality.” Although personality factors are correlated with these
characteristics, none of them are determined by personality. Instead, they are driven by an
individual’s skill, training, energy, desire and attitude. While they may be enhanced by one’s
personality, anyone can learn to be an effective innovator.
Leaders must understand that change is a process, that you must have a compelling
story that you have to use a variety of strategies to get people to buy into your plan, and that
there are some key characteristics that successful innovators should try to emulate.

13.14 APPROACHES OF CHANGE AGENT

In this part, we try to attempt in analyzing the effectiveness of the different approaches
of change agents to bring about a change in an organization.
1. Structural Approaches
2. Technological Approaches

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3. People Approaches
1. Structural Approaches: The structural change mechanism as enunciated by
classical organization theorists emphasizes optimization of the structure for optimizing
organization performance. These approaches are deductive approaches and logic runs
backwards from task to appropriate system of authority. It was presumed that the people
would accept the responsibility once it is assigned to them, that people act in accordance
with the terms of contract once they enter into a contract to work, that the people try whole
heartedly to achieve the goal of the organization once they are told about it.
2. Technological Approaches: Technological approaches develop a body of technical
methods for solving work problems, these approaches separate planning of problem solving
programmes from the doer of work. Starting from Taylor’s scientific management to
operations research and simulation technique, however, the conflict between technology and
humanity continues. Nevertheless, these approaches have made their impact felt on different
variables of the organization system. But here again one should not fail to recognize that real
“carrier of change” is its acceptance by human beings, thus the real barrier to the introduction
of change is human resistance. Several changes and technological innovation fell through
because they ignored the human aspect
3. People Approaches: These approaches attempt to bring change in organization by
introducing changes in the behavior of actors, people. The argument runs that by introducing
change in the behavior patterns, creative invention of new tools can be brought about leading
to a modification in the structure of the organization and ultimately in task performance.
According to this approach organization members are counseled and encourage to modify-
ing their behavior in line with proposed model.

13.15 SUMMARY
Change is a natural phenomenon, the law of nature, an indispensable function of
life and many a time it is desirable. Man and society change with the passage of time. A
change constitutes a departure from the established order of things. In an organizational
context there are certain forces, which make a change not only desirable but also
inevitable. Change may sometimes be necessitated by a new policy of the Government
which requires product diversification, control of capital issues, foreign exchange
regulations, export import licenses and social responsibility
Finally, the match between change plan and organizational context may also play
a significant role in the success or failure of organizational change. Organizational change

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is to establish new pattern of thinking and behavior. When the new pattern conflicts with
the old ones, the oversized resistance tends to cause the plan to fail. Therefore, in
designing a change plan, the organizational context must be incorporated.

13.16 KEY WORDS

• People
• Change
• Forces
• Resistance
13.17 SELF ASSESMENT QUESTIONS
1. Explain the reasons for Organizational Change.
2. Discuss the process of Organizational Change.
3. Highlights the role of Change Agent.
4. Explain the various approaches of Change Agent.
13.18 REFERENCES

1. Jit S.Chand, Organizational Behavior, New Delhi: Vikas Publishing House Pvt.
Ltd, 2001.
2. K Aswathappa. Organisation Behaviour, Text, Cases, New Delhi: Himalaya
Publishing House. 2010
3. K Sridhar Bhatt. Management and Behavioural Process, New Delhi: Himalaya
Publishing House. 2005
4. Paul heresy. Management of Organization Behaviour, New Delhi: Prentice
Hall India 7th Ed.
5. Prasad L M. Organisational theory and Behaviour, New Delhi: Sultan Chand
& Sons, 2014.
6. Stephen P Robins. Organisation Behaviour, New Delhi: New D Prentice Hall
India, 2005.
7. VSP Rao and P S Narayan. Organization theory and Behaviour: New Delhi,
Konark Publishes Pvt Ltd., 2007

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 UNIT - 14 : ORGANIZATIONAL DEVELOPMENT

STRUCTURE
14.0 Objectives
14.1 Introduction
14.2 Meaning/Definition of Organizational Development
14.3 Characteristics of Organizational Development
14.4 Process of Organization Development
14.5 OD Intervention or Techniques
14.6 Summary
14.7 Key Words
14.8 Self Assesment Questions
14.9 Reference

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14.0 OBJECTIVES
After studying this unit, you should able to ;
• Explain the concept of organizational Development
• Discuss the objectives of organizational Development
• Highlight the characteristics of organizational Development
• Explain the core value of organizational Development
• Critically evaluate the process of action research
• Explain the intervention of organizational Development

14.1 INTRODUCTION
Organization development is an ongoing, systematic process of implementing
effective organizational change. OD is known as both a field of science focused on
understanding and managing organizational change and as a field of scientific study and
inquiry. It is interdisciplinary in nature and draws on sociology, psychology, particularly
industrial and organizational psychology, and theories of motivation, learning, and
personality. Although behavioral science has provided the basic foundation for the study
and practice of OD, new and emerging fields of study have made their presence felt.
Experts in systems thinking and organizational learning, structure of intuition in decision
making, and coaching (to name a few) whose perspective is not steeped in just the
behavioral sciences, but a much more multi-disciplinary and inter-disciplinary approach,
have emerged as OD catalysts or tools.
Organization development is a growing field that is responsive to many new
approaches.
Organization development (OD) is a deliberately planned, organization-wide effort
to increase an organization’s effectiveness and/or efficiency and/or to enable the
organization to achieve its strategic goals. OD theorists and practitioners define it in
various ways. Its multiplicity of definition reflects the complexity of the discipline and
is responsible for its lack of understanding. For example, Vasudevan has referred to OD
being about promoting organizational readiness to meet change, and it has been said that
OD is a systemic learning and development strategy intended to change the basics of
beliefs, attitudes and relevance of values, and structure of the current organization to
better absorb disruptive technologies, shrinking or exploding market opportunities and
ensuing challenges and chaos. It is worth understanding what OD is not. It is not training,

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personal development, team development or team building, human resource development
(HRD), learning and development (L&D) or a part of HR although it is often mistakenly
understood as some or all of these. OD interventions are about change so involve people
- but OD also develops processes, systems and structures. The primary purpose of OD is
to develop the organization, not to train or develop the staff.

14.2 MEANING AND DEFINITION OF ORGANIZATIONAL

DEVELOPMENT MEANING
An approach to organizational change in which the employees themselves
formulate the change that’s required and implement it, usually with the aid of a trained
consultant.
A series of techniques and methods that managers can use in their action research
program to increase the adaptability of their organization.
Goal is to improve organizational effectiveness and to help people in organizations
reach their potential and realize their goals and objectives can be used to unfreeze, change,
and refreeze attitudes and behaviors
Organization Development (OD) is a planned process of change in an
organization’s culture through the utilization of behavioral science technology, research,
and theory.
DIFINITIONS
OD refers to a long-range effort to improve an organization’s problem-solving
capabilities and its ability to cope with changes in its external environment with the help
of external or internal behavioral-scientist consultants.
OD is an effort (1) planned, (2) organization-wide, and (3) managed from the top,
to (4) increase organization effectiveness and health through (5) planned interventions
in the organization’s “processes,” using behavioral science knowledge.
A system wide application and transfer of behavioral science knowledge to the
planned development, improvement, and reinforcement of the strategies, structures, and
processes that lead to organization effectiveness.
14.3 CHARACTERISTICS OF OD
An in-depth study of the definition of OD indicates the following characteristics
of OD. They are:

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1. OD focuses on the whole organization to assure that all parts of the organization
are well coordinated.
2. OD is concerned with the interaction and interrelation among its various sub-
systems as it utilizes system model.
3. OD used one or more change agents who stimulate and coordinate the change within
a group. Some organizations employ the change agent while some others have their
own change agents within their organization.
4. OD is concerned with problem-solving approach as it seeks to solve the problems
rather than merely discussing them
5. OD emphasis learning by experience. As such participants are expected to learn by
experience.
6. OD utilizes group processes like group discussion, inter group conflict, collabo-
ration and cooperation.
7. OD provides feedback data and information to the participants.
8. OD is a long term approach to improve the overall organizational effectiveness.
9. OD is research based as most of its interventions are based on research findings.

14.4 PROCESS OF ORGANIZATIONAL DEVELOPMENT

The OD Process is based on the action research model which begins with an
identified problem or need for change. The process proceeds through assessment,
planning of an intervention, implementing the intervention, gathering data to evaluate
the intervention, and determining if satisfactory progress has been made or if there is
need for further intervention. The process is cyclical and ends when the desired
developmental result is obtained.

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The OD process begins when an organization recognizes that a problem exists which
impacts the mission or health of the organization and change is desired. It can also begin
when leadership has a vision of a better way and wants to improve the organization. An
organization does not always have to be in trouble to implement organization development
activities.
Employee Benefits: What You Need to Know

Once the decision is made to change the situation, the next step is to assess the
situation to fully understand it. This assessment can be conducted in many ways including
documentation review, organizational sensing, focus groups, interviewing, or surveying.
The assessment could be conducted by outside experts or by members of the organization.
After the situation is assessed, defined, and understood, the next step is to plan an
intervention. The type of change desired would determine the nature of the intervention.
Interventions could include training and development, team interventions such as team
building for management or employees or the establishment of change teams, structural
interventions, or individual interventions.
Once the intervention is planned, it is implemented.
During and after the implementation of the intervention, relevant data is gathered.
The data gathered would be determined by the change goals. For example, if the
intervention were training and development for individual employees or for work groups,
data to be gathered would measure changes in knowledge and competencies.
This data is used to determine the effectiveness of the intervention. It is reported
to the organization’s decision-makers. The decision-makers determine if the interven-
tion met its goals. If the intervention met its goals, the process can end, which is de-
picted by the raising of the development bar. If it did not, the decision is made whether
to continue the cycle and to plan and carry out another intervention or to end it
The process of Organizational Development comprises of follows steps andtheyare:-
1.InitialDiagnosis
2.DataCollection
3.DataFeedback
4.SelectionofInterventions
5.Implementationofinterventions

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6.Actionplanningandproblemsolving
7.TeamBuilding
8.Inter-GroupDevelopment
9.EvaluationandFollowup
1. Initial Diagnosis: The initial diagnosis refers to finding the inadequacies within
the organization that can be corrected by OD activities then it is necessary to find out
the professionally competent persons within organization to plan and execute OD
activities. The outside consultants can be also employed to help in diagnosing the
problems and diagnosing OD activities. The consultants adopt various methods and that
primarily includes interviews, questionnaires, direct observation, analysis of documents
and reports for diagnosing the problem.
2. Data Collection: The survey method is employed to collect the data for
determining organizational climate. It also helps in identifying the behavioral problems
that are rising in the organization.
3. Data Feedback: The collected data are analyzed and reviewed by various work
groups that are formed for this purpose. It is done in order to intervene in the areas of
disagreement or confrontation of ideas or opinions.
4. Selection of Interventions: The interventions can be described as the planned
activities that are introduced into the system to achieve desired changes and
improvements. The suitable interventions are to be selected and designed at this stage.
5. Implementation of Interventions: The selected intervention should be
implemented progressively as the process is not a one shot, quick cure for organizational
problems. Consequently, it achieves real and lasting change in the attitudes and behavior
of employees.
6. Action Planning and Problem Solving: To solve the specific and identified
problems by using the collected data, groups prepare recommendations and specific
action planning.
7. Team Building: The consultants explain the advantages of the teams in OD
process and encourage the employees throughout the process to form into groups and
teams.
8. Inter-group Development: After the formation of groups/teams, the consultants
encourage the inter-group meetings, interaction etc.

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 9. Evaluation and follow up: The organization should evaluate the OD programmes
and should find out their utility, and develop the programmes further for correcting the
deviations. The consultants make great significance to the organization in this respect.
The entire steps in the OD processes should be followed by the organization in order to
derive full range of OD benefits.
14.5 OD INTERVENTION AND TECHNIQUES
“Interventions” are principal learning processes in the “action” stage of
organization development.
Interventions are structured activities used individually or in combination by the
members of a client system to improve their social or task performance. They may be
introduced by a change agent as part of an improvement program, or they may be used by
the client following a program to check on the state of the organization’s health, or to
effect necessary changes in its own behavior. “Structured activities” mean such diverse
procedures as experiential exercises, questionnaires, attitude surveys, interviews, relevant
group discussions, and even lunchtime meetings between the change agent and a member
of the client organization. Every action that influences an organization’s improvement
program in a change agent-client system relationship can be said to be an intervention.
There are many possible intervention strategies from which to choose. Several
assumptions about the nature and functioning of organizations are made in the choice of
a particular strategy. Beckhard lists six such assumptions:
1. The basic building blocks of an organization are groups (teams). Therefore, the
basic units of change are groups, not individuals.
2. An always relevant change goal is the reduction of inappropriate competition between
parts of the organization and the development of a more collaborative condition.
3. Decision making in a healthy organization is located where the information sources
are, rather than in a particular role or level of hierarchy.
4. Organizations, subunits of organizations, and individuals continuously manage their
affairs against goals. Controls are interim measurements, not the basis of managerial
strategy.
5. One goal of a healthy organization is to develop generally open communication,
mutual trust, and confidence between and across levels.
6. People support what they help create. People affected by a change must be allowed

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 active participation and a sense of ownership in the planning and conduct of the
change.[6]
Interventions range from those designed to improve the effectiveness of individuals
through those designed to deal with teams and groups, inter group relations, and the total
organization. There are interventions that focus on task issues (what people do), and
those that focus on process issues (how people go about doing it). Finally, interventions
may be roughly classified according to which change mechanism they tend to emphasize:
for example, feedback, awareness of changing cultural norms, interaction and
communication, conflict, and education through either new knowledge or skill practice.
One of the most difficult tasks confronting the change agent is to help create in
the client system a safe climate for learning and change. In a favorable climate, human
learning builds on itself and continues indefinitely during man’s lifetime. Out of new
behavior, new dilemmas and problems emerge as the spiral continues upward to new
levels. In an unfavorable climate, in contrast, learning is far less certain, and in an
atmosphere of psychological threat, it often stops altogether. Unfreezing old ways can
be inhibited in organizations because the climate makes employees feel that it is
inappropriate to reveal true feelings, even though such revelations could be constructive.
In an inhibited atmosphere, therefore, necessary feedback is not available. Also, trying
out new ways may be viewed as risky because it violates established norms. Such an
organization may also be constrained because of the law of systems: If one part changes,
other parts will become involved. Hence, it is easier to maintain the status quo.
Hierarchical authority, specialization, span of control, and other characteristics of formal
systems also discourage experimentation.
A few examples of interventions include team building, coaching, Large Group
Interventions, mentoring, performance appraisal, downsizing, TQM, and leadership
development.
Organization development intervention techniques are the methods created by
OD professional and other. Single organization or consultant cannot use all the
interventions. They use these interventions depending upon the need or requirement.
The most important intervention is:
 Survey feedback
 Process consultation
 Sensitivity training

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 Managerial grid
 Goal setting and planning
 Team building
 MBO
Other interventions are job enrichment, changes in organizational structure and
participative management and quality circles.

14.6 SUMMARY
OD as a field has thrived because of the value-added concepts and tools that it has
brought to organizations and its stakeholders (those concerned with how the organization
operates), including customers, stockholders, employees, management, the community,
and even the nation. If an OD professional can be helpful in bringing about desired change
with a process that uses the values described in the next section, everyone benefits.
Organization Development (1991) suggested the following benefits to the use of OD
(as opposed to other types of consulting or using individuals within the organization
who do not have OD skills): An atmosphere can be established which will support more
innovation and creativity, increase job satisfaction, develop more positive interpersonal
relationships and foster greater participation in creating plans and defining organizational
goals. Systems can help to establish this kind of atmosphere.
All of this will create a more effective and efficient organization that will,
consequently, provide higher-quality goods and services at a reasonable price, increase
profitability, improve stock values, improve the work environment, and support
management in its leadership role.
14.7 KEY WORDS
Action Planning: A sequence of steps that must be taken to perform an
action
Managerial Grid: A graphical plot of a leader’s assessment
Organizational Development: A field of research, theory, and practice dedicated to
expanding the knowledge and effectiveness of people
to accomplish more successful organizational change
and performance.
Refreezing: Make or become frozen again

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Sensitivity training: Form of training with the goal of making people more
aware of their own prejudices
Team building: Organizing groups of employees into manageable units
for various purposes
Unfreezing: Remove restrictions on the use or transfer of

14.8 SELF ASSESMENT QUESTIONS

1. What is Organizational development?
2. Explain the objectives of Organizational development.
3. Discuss the characteristics of Organizational development.
4. Write a note on improved Organizational Performance
5. Explain the process of Organizational Development
6. Discuss the importance of Managerial Grid
7. Bring out the various techniques of Organizational development
14.9 REFERENCES

1. Jit S.Chand, Organizational Behavior, New Delhi: Vikas Publishing House Pvt.
Ltd, 2001.

2. K Aswathappa. Organisation Behaviour, Text, Cases, New Delhi: Himalaya

Publishing House. 2010
3. K Sridhar Bhatt. Management and Behavioural Process, New Delhi: Himalaya
Publishing House. 2005
4. Paul heresy. Management of Organization Behaviour, New Delhi: Prentice
Hall India 7th Ed.
5. Prasad L M. Organisational theory and Behaviour, New Delhi: Sultan Chand
& Sons, 2014.
6. Stephen P Robins. Organisation Behaviour, New Delhi: New D Prentice Hall
India, 2005.
7. VSP Rao and P S Narayan. Organization theory and Behaviour: New Delhi,
Konark Publishes Pvt Ltd., 2007

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 UNIT-15 :ORGANIZATIONAL CULTURE

STRUCTURE:
15.0 Objectives
15.1 Definition of Organizational Culture
15.2 Characteristics of Organizational Culture
15.3 The Importance of Culture in Organizations
15.4 Types of Organizational Culture
15.5 Factor Affecting Organizational Culture
15.6 Distinguish Between the Organizational Culture VS Organizational
Climate
15.7 Definition of Organizational Effectiveness
15.8 Approaches to Measuring Organizational Effectiveness
15.9 Summary
15.10 Key Words
15.11 Self Assesment Questions
15.12 References

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15.0 OBJECTIVES
After studying this unit, you should able to ;
• Discuss the organizational culture and characteristics of organizational culture
• Discuss the importance of culture in organizations
• Explain the types of organizational cultures or models of organization cultures

15.1 DEFINITION OF ORGANIZATIONAL CULTURE

Organizational culture is a set of shared mental assumptions that guide interpre-
tation and action in organizations by defining appropriate behavior for various situa-
tions.
- Ravasi and Schultz (2006)
The organizations often have very differing cultures as well as subcultures.
- Schein (1992), Deal and Kennedy (2000), and Kotter (1992)
Organizational culture as the way things get done around here
- Deal and Kennedy (1982
Organizational culture represents the collective values, beliefs and principles of
organizational members and is a product of such factors as history, product, market,
technology, and strategy, type of employees, management style, and national culture.
Corporate culture on the other hand refers to those cultures deliberately created by
management to achieve specific strategic ends.
- Needle (2004)
15.2 CHARACTERISTICS OF ORGANIZATIONAL CULTURE
The primary characteristics of an organizational culture are as follows:
 Innovation and Risk Taking: It can be described as the degree or extent to which
employees are encouraged to take innovative steps and calculated risk.
 Attention to Detail: It can be described as degree or extent to which employees
are expected to pay attention to details.
 Outcome Orientation: It can be described as the degree or extent to which manage
ment focuses outcome rather than on process to achieve outcome.
 People Orientation: It can be described as the degree or extent to which

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 management gives attention to effect of decisions on people working in the
organization and on its shareholders.
 Team Orientation: It can be described as the degree or extent to which works are
organized around team rather than individuals.
 Aggressiveness: It can be described as the degree or extent to which people are
aggressive or competitive rather than unconcerned or relaxed.
 Stability: It can be described as the degree or extent to which maintaining status
quo is emphasized in contrast to growth.
 Individual Autonomy: It can be described as the degree or extent of responsibility,
independence, and opportunities for exercising initiative that individuals in an
organization have.
 Structure: It can be described as the degree or extent of rules and regulations and
the amount of direct supervision that is used to supervise and control behavior.
 Support: It can be described as the degree or extent of assistance and warmth
managers provide for their subordinates.
 Identity: It can be described as the degree or extent to which members identify
with the organization as a whole rather than with their particular work group or
field of professional expertise.
 Performance-Reward: It can be described as the degree or extent to which reward
in the organization are based on employee work performance.
 Conflict Tolerance: It can be described as the degree or extent of conflict present
in relationships between peers and work groups as well as the motivation to be
honest and open about differences.
 Attitude towards Change: It can be described as the response given to new
methods, ways, and values.
 Focus: It can be described as the vision of the goals and objectives of an
organization’s operations as communicated by those in control.
 Standard and Values: The levels of performance and behavior considered to be
acceptable by both types of criteria – formal and informal.
 Rituals: It can be described as the expressive events that support and reinforce
organizational standards and values.

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 Openness, Communication, and Supervision: It can be described as the amount
and type of interchange permitted. The communication flow can be downward,
upward, across the organization, and in other directions as spelled out by the culture.
 Market and Customer Orientation: It can be described as the degree or extent
to which the organization is responsive to its markets and customers.
 Excitement, Pride, and esprit de corps: It can be described as a perceptibly
good feeling about the organization and its activities.
 Commitment: It can be described as the degree or extent to which individuals are
willingly working towards goals on a long-lasting basis.
15.3 THE IMPORTANCE OF CULTURE IN ORGANISATIONS
Every organization has its own culture. Since many employees spend most their
hours at their workplace, their organization’s culture obviously affects both their work
lives as well as their personal lives. Organizational culture refers to the beliefs, ideologies,
principles and values that the individuals of an organization share. This culture is a
determining factor in the success of the organization.
Unity
A shared organizational culture helps to unite employees of different
demographics. Many employees within an organization come from different backgrounds,
families and traditions and have their own cultures. Having a shared culture at the
workplace gives them a sense of unity and understanding towards one another, promoting
better communication and less conflict. In addition, a shared organizational culture
promotes equality by ensuring no employee is neglected at the workplace and that each
is treated equally.
Loyalty
Organizational culture helps to keep employees motivated and loyal to the
management of the organization. If employees view themselves as part of their
organization’s culture, they are more eager to want to contribute to the entity’s success.
They feel a higher sense of accomplishment for being a part of an organization they care
about and work harder without having to be coerced.
Competition
Healthy competition among employees is one of the results of a shared
organizational culture. Employees will strive to perform at their best to earn recognition

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and appreciation from their superiors. This in turn increases the quality of their work,
which helps the organization prosper and flourish.
Direction
Guidelines contribute to organizational culture. They provide employees with a
sense of direction and expectations that keep employees on task. Each employee
understands what his roles and responsibilities are and how to accomplish tasks prior to
established deadlines.
Identity
An organization’s culture defines its identity. An entity’s way of doing business is
perceived by both the individuals who comprise the organization as well as its clients
and customers, and it is determined by its culture. The values and beliefs of an organization
contribute to the brand image by which it becomes known and respected.

15.4 TYPES OF ORGANIZATIONAL CULTURE

These different cultural concepts include:
 Dominant culture: Defines the core values which are shared by majority of the
employees in the organization. It is the macro – cultural perspective that presents
the organizations personality.
 Sub- culture: They are the subcultures within the company. Thus subcultures are
denoted by units/departments/geographic separations.
 Core Values: core values are primary or dominant values; those are accepted by the
majority of the organizational members.
 Strong organizational Cultures Vs. Weak organizational Cultures: A strong
organizational culture works like strong social glue, which bonds members of an
organization together through shared goals. This builds loyalty and commitment among
the group and makes them less likely to leave their tight knit organization. Although
organizations with strong cultures experience fewer turnovers, it doesn’t mean that
a strong culture is better than a weak culture in every instance. A strong culture is
difficult to change in an organization and can stifle innovation, because members of
the organization are used to doing their jobs exactly the same way.
Weak cultures can be advantageous for organizations that benefit from independent
thought and innovation by their members. In an unstable environment, organizations with
weak cultures often function better than organizations with strong cultures, because they

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are much more adaptable to change. In order for an organization to succeed, the culture
of that organization must fit the environment in which it operates.
 Mechanistic and Organic culture: The most important aspects of organization in
public sector companies include hierarchies, supervision, control, formalization,
flow of authority and communication from top to bottom, etc, rather than the results
or outcome. Organization with these characters is termed as mechanistic
organizations. They follow status quo strategy and therefore resist innovation and
aggressiveness on the part of employees. These organizations also lack customer-
orientation and employee welfare.
Tata InfoTech, on the other hand, is more flexible and open. Jobs and roles are not
defined rigidly and employees are given freedom to adjust themselves to the environment
requirements concern is more towards the outcome and results, but not the procedure
or hierarchy. Communication in this company is more multi – directional. The informal
communication is widely used. Decision making is more decentralized. People with the
ability to handle problems are given freedom to assume authority and responsibility.
This company is a continuous learning organization from the environment and such
companies are termed as organic structures.
The mechanic culture de- motivates the competent people and leads to negative
organizational culture. While the organic culture motivates the employees to be
competitive and innovative.
 Authoritarian and Participative Cultures: Culture of concentration of authority
and power at the central level is called authoritarian culture. Such culture kills the
initiative and innovativeness of the employees at different levels.
Communication flows not only from the top to bottom but also from the bottom
the top. Such type of culture is called participative culture. Participative culture
encourages the employees to be innovative, aggressive and to risks.

15.5 FACTOR AFFECTING ORGANIZATIONAL CULTURE

Organizational culture is responsible for the behavior and actions of the employee
of that organization.
“Culture= values + attitude + Behaviors”
There are 6 Factor affecting organizational culture:
1) Attitude of top management

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2) Socialization of the organization
3) Adherence of important values
4) Selection and placement of employee
5) Performance evaluation and rewards
6) Recognition and promotion
Let us Discuss these factors in brief:
1) Attitude of top Management: As we know top management run the business
and manage the organization based on certain set of values, philosophy, and policy. Their
attitude and polices are getting reflected in the decisions they take and systems and
procedure, rules and regulations set for the employees.
2) Socialization of the organization: It is the procedure of new employee
familiar with the culture of organization
A) Entrance – Every new employee has their own values, belief and attitudes. Initially
they match with organizational culture.
B) Struggle – Here organization culture and individual culture enter into conflicts.
C) Change – Here individual try to change and modify their culture to match with
organization culture.
3) Adherence of important values: If organization has good values in its policy,
such as, social welfare, human up liftmen etc. then employee in that organization also
develop that kind of values and put in their best by strictly following rules and regulations.
4) Selection and placement of employee: Employee should be selected based
on qualifications as well as by examining their values, belief and attitudes.
5) Performance evaluation and rewards: If employee efforts are properly
evaluated and then suitably rewarded then good conductive culture can prevail in the
organization.
6) Recognition and Promotion: Recognizing good and exceptional performance
and achievement of the employees and then rewarding them through proper promotions.

15.6 DISTINGUISH BETWEEN THE ORGANIZATIONAL CULTURE

VS ORGANIZATIONAL CLIMATE
With the popularization of the term organizational Culture, another concept of

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organizational climate has emerged. Some managers feel that these two are quite different
terms while other managers feel that these two are similar concepts.
These two are similar concepts as both of them are concerned with overall work
atmosphere of an organization. In addition, both of them deal with the social context in
organizations and are believed to affect employee behavior in organizations.
However, some view the following differences between Organizational culture and
organizational climate. According them:
 Organization culture is based on anthropology and sociology
 Organization climate is based on Psychology
 This climate refers to current situations in organizations and the linkage among
teams, employees and performance.
 Organizational culture refers to the historical context and its input on employee
behavior
 It is difficult to alter organizational culture in short run.
 People learn and communicate what is acceptable and unacceptable in an
organization (Its values and norms) through organizational culture.
 Organizational climate does not deal with values and norms. It is concerned with
the current atmosphere in an organization.

15.7 DEFINITION OF ORGANIZATINAL EFFECTIVENESS

Organizational effectiveness is the concept of how effective an organization is
in achieving the outcomes the organization intends to produce. The idea of organizational
effectiveness is especially important for non-profit organizations as most people who
donate money to nonprofit organizations and charities are interested in knowing whether
the organization is effective in accomplishing its goals.
According to Richard et al. (2009) organizational effectiveness
captures organizational performance plus the myriad internal performance outcomes
normally associated with more efficient or effective operations and other external
measures that relate to considerations that are broader than those simply associated
with economic valuation (either by shareholders, managers, or customers), such
as corporate social responsibility.
For instance, a non-profit organization which supplies meals to house bound people

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may collect statistics such as the number of meals cooked and served, the number
of volunteers delivering meals, the turnover and retention rates of volunteers,
the demographics of the people served, the turnover and retention of consumers, the
number of requests for meals turned down due to lack of capacity (amount of food,
capacity of meal preparation facilities, and number of delivery volunteers), and amount
of wastage. Since the organization has as its goal the preparation of meals and the delivery
of those meals to house bound people, it measures its organizational effectiveness by
trying to determine what actual activities the people in the organization do in order to
generate the outcomes the organization wants to create.
Organizational effectiveness is typically evaluated within nonprofit organizations
using logic models. Logic models are a management tool widely used in the nonprofit
sector in program evaluation. Logic models are created for specific programs to link
specific, measurable inputs to specific, measurable impacts. Typically, logic models
specify how program inputs, such as money and staff time, produce activities and outputs,
such as services delivered, which in turn lead to impacts, such as improved beneficiary
health.
15.8 APPROACHES TO MEASURING ORGANIZATIONAL
EFFECTIVNESS
The firm to be successful initially should be effective and it should be efficient
to be successful in the long run. In fact, effectiveness of the organization also contributes
for its long run success. Thus, effectiveness refers to the achievement of organizational
goals by performing functions and using resources. Therefore, organizational
effectiveness can be studied through:
1. Goal Approach: Organizational theorist believes that organizational effectiveness
depends upon the degree of achievement of organizational goals. This approach is built
on two assumptions viz.,
• The complex organizations strive for their ultimate goal
• Ultimate goal can be identified and progress of achievement of the goal can be
measured.
Effectiveness, according to the goal approach is:
• Profit maximization
• Providing efficient service

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 • Productivity maximization
• High employee job satisfaction.
2. Functional Approach: Under this approach, formulates its activities or functions
to be performed based on the requirements of the society in which it operates. The goals
of the organization, in turn, are formulated based on the function. This approach is
expected to contribute to solve the social problems and to the attainment of organizational
goals.
3. System Approach: A system is a set of interrelated but separate parts working
towards a common purpose. The arrangement of elements must be orderly and there
must be proper communication facilitating interaction between the elements and finally
the interaction should lead to achieve a common goal.
Open system has flows of information, materials and energy. These enter the system
from the environment as inputs undergo transformation process within the system and
exist the system as output.
4. The strategic Constituencies Approach: Under this approach, the organization
is expected to interact and be interdependent with its relevant environment. In addition,
the organizational draws inputs from the relevant provide the same to environment. The
major difference between this approach and the systems approach is that the latter deals
with the total environment whereas the former deals with the relevant environment only.
5. Behavioral Approach to Organization Effectiveness: This approach recognizes
the significance of human resources in an organization and its contribution to the
organizational effectiveness. In fact, the success or failure of an organization depends
upon the quality of human resources it possesses. The appropriate human behavior makes
the employee
• Understand organizational goals , adjust the individual goals with the organizational
goals and commits to it,
• Integrate individual goals with organizational goals as latter are superior to the
former,
• Exert the individual resources and skills to the attainment of organization goals.
15.9 SUMMARY
This unit has concentrated on Organizational culture, Importance and different types of
models.

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 Organizational culture is the behavior of humans who are part of an organization
and the meanings that the people react to their actions.
The primary characteristics of an organizational culture are Innovation and Risk
Taking, Attention to Detail, Outcome Orientation, People Orientation, Team Orientation,
Aggressiveness, Stability, Individual Autonomy, Structure, Support, Identity,
Performance-Reward, Conflict Tolerance, Attitude towards Change, Focus, Standard and
Values, Rituals, Openness, Communication, and Supervision, Market and Customer
Orientation, Excitement, Pride, and esprit de corps and Commitment.
The importances of culture in organizations are Unity, Loyalty, Competition,
Direction and Identity.
Several methods have been used to classify organizational culture. Some
researchers have developed models to describe different indicators of organizational
cultures. We have discussed
Deal and Kennedy created a model of culture that is based on 4 different types
like Work-hard, play-hard culture, Tough-guy macho culture, Process culture and Bet-
the-company culture. They each focus on how quickly the organization receives feedback,
the way members are rewarded, and the level of risks taken.
According to Edgar Schein culture are the most difficult organizational attribute
to change, outlasting organizational products, services, founders and leadership and all
other physical attributes of the organization. His organizational model illuminates culture
from the standpoint of the observer, described by three cognitive levels of organizational
culture.
Charles Handy (1976) popularized Roger Harrison (1972) with
linking organizational structure to organizational culture. The described four types of
culture are: Power culture, Role culture, Task culture and Person culture
Kim Cameron and Robert Quinn (1999) made a research on organizational
effectiveness and success. Based on the Competing Values Framework, they developed
the Organizational Culture Assessment Instrument that distinguishes four culture types
- The polarities construct a quadrant with four types of culture: Clan culture (internal
focus and flexible) Adhocracy culture (external focus and flexible) Market culture
(external focus and controlled) - Hierarchy culture (internal focus and controlled).
Robert A. Cooke defines culture as the behaviors that members believe are re-
quired to fit in and meet expectations within their organization. The Organizational Cul-

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ture Inventory measures twelve behavioral norms that are grouped into three general
types of cultures: Constructive cultures, Passive/defensive cultures and Aggressive/de-
fensive cultures.

15.10 KEY WORDS

• Culture

• Climate

• Effectiveness

15.11 SELF ASSESMENT QUESTIONS

1. Explain the Characteristics of Organizational Culture.
2. Differentiate between Organizational Culture v/s Organization Climate.
3. Give the meaning of Organizational Effectiveness.
4. Explain the approaches to measures Organizational Effectiveness.
15.12 REFERENCES

1. Jit S.Chand, Organizational Behavior, New Delhi: Vikas Publishing House Pvt.
Ltd, 2001.
2. K Aswathappa. Organisation Behaviour, Text, Cases, New Delhi: Himalaya
Publishing House. 2010
3. K Sridhar Bhatt. Management and Behavioural Process, New Delhi: Himalaya
Publishing House. 2005
4. Paul heresy. Management of Organization Behaviour, New Delhi: Prentice
Hall India 7th Ed.
5. Prasad L M. Organisational theory and Behaviour, New Delhi: Sultan Chand
& Sons, 2014.
6. Stephen P Robins. Organisation Behaviour, New Delhi: New D Prentice Hall
India, 2005.
7. VSP Rao and P S Narayan. Organization theory and Behaviour: New Delhi,
Konark Publishes Pvt Ltd., 2007

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 UNIT -16 : ORGANIZATIONAL CONFLICT

STRUCTURE
16.0 Objectives
16.1 Introduction
16.2 Definition of Organizational Conflict
16.3 Causes of Organizational Conflict
16.4 Four Types of Conflict in Organisations
16.5 Managing Conflict
16.6 Definition of Morale
16.7 The Factors That Affect Employee Morale
16.8 The Measures For Building High Morale
16.9 Seven Predominant Factors That Motivate Companies, Large and Small,
To Diversify Their Workforces
16.10 Definition Of Quality Of Working Life (QWL)
16.11 Principles of QWL
16.12 Measures of Quality of Working Life And Jobs
16.13 Summary
16.14 Key Words
16.15 Self Assessment Questions
16.16 References

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16.0 OBJECTIVES
After studying this lesson, you will be able to:
• Define the organizational conflict and causes of the organizational conflict.
• Explain the four types of conflict in organizations and managing the conflict in
organizations.
• Define the morale and the characteristics of morale
• Discuss the importance of morale and factors that affect employee morale
• Discuss the measures for building high morale
16.1 INTRODUCTION
Conflict is the difference between the perception/expectation and reality. K.W
Thomas defines the term conflict as “a Process that begins when one party perceives
that another party has negatively affected, or is about to negatively affects, something
that the first party cares about”. Conflict may be a difference what is expected and what
really happens or is going to happen. It may be disagreement or misunderstanding with
others or events. Conflicts may be over expectations, roles, goals, viewpoints, etc. They
also may be struggle between or among incompatible interests, needs, goals, people,
ideas, etc. Conflicts also arise due to competition between individuals or groups for the
same resources, opportunities, positions, markets, etc.

16.2 DEFINITION OF ORGANIZATIONAL CONFLICT

Organizational conflict is a state of discord caused by the actual or perceived
opposition of needs, values and interests between people working together. Conflict takes
many forms in organizations. There is the inevitable clash between formal authority and
power and those individuals and groups affected. There are disputes over how revenues
should be divided, how the work should be done and how long and hard people should
work. There are jurisdictional disagreements among individuals, departments, and
between unions and management. There are subtler forms of conflict involving rivalries,
jealousies, personality clashes, role definitions, and struggles for power and favor. There
is also conflict within individuals — between competing needs and demands — to which
individuals respond in different ways.

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16.3 CAUSES OF ORGANIZATIONAL CONFLICT
In order to survive, a company must focus its efforts on generating revenue in the
face of competition. According to Ryan Bannerman Associates, sometimes the need to
focus on beating the competition can get derailed by internal organizational conflict. In
order to keep your employees focused on being productive and bettering the competition,
it is necessary to understand the causes of organizational conflict.
Managerial Expectations
It is the job of an employee to meet the expectations of his manager, but if those
expectations are misunderstood, conflict can arise. Managers need to spend time clearly
communicating their goals to employees and then confirming those goals in writing. A
manager should also encourage her employees to ask questions about their goals, and
hold regular meetings to discuss the goals and how best to reach them.
Breakdown in Communication
If a department requires information from another department in order to do its
job, and the second department does not respond to the request for information, a conflict
can arise. Some interdepartmental disagreements might trigger a nonresponsive attitude
that can quickly become an internal conflict. Another way of creating this sort of conflict
is by giving a circular response such as an issue being perpetually “under review.” When
people or departments are late in responding to information requests, or they are
withholding information on purpose, it is best to address the situation immediately with
a personal meeting with both sides to resolve the situation.
Misunderstanding the Information
One person may misunderstand information, and that can trigger a series of
conflicts. In order to deal with this kind of situation, it is best to have the person admit
her misunderstanding and work with the affected parties to remedy the situation. For
example, if the production manager misunderstands the product manufacturing goals,
then the sales manager may not have enough products to sell. Taking responsibility for a
mistake can quickly defuse a potential organizational conflict.
Lack of Accountability
Organizational conflict might arise from frustration. One source of frustration is
a lack of accountability. If something has gone wrong, and no one is willing to take
responsibility for the problem, this lack of accountability can start to permeate throughout
the entire company until the issue is resolved. One way to combat a lack of accountability

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is to have anyone who comes into contact with a document sign his name to it and include
the date. The paper trail may sometimes find the source of the problem, which can then
be addressed.
Differing Values
The workplace consists of individuals who all have their own perspective of the
world. Some employees have strong beliefs, which they are not willing to compromise.
These beliefs can conflict with coworkers’, creating conflict. For example, if one
individual strongly opposes workplace diversity, he may have trouble accepting other
workers different from him. To avoid conflict with these workers, he must try to accept
or initiate more tolerance of those with differing values.
Opposing Interests
When an employee decides to pursue her own career goals, without regard for
the organizational goals and its well-being, it results in strife among her coworkers.
This occurs when the employee becomes so focused on achieving her own objectives,
she disregards how it affects others within the company and the company itself.
For instance, she may “forget” that she is a part of a team, in which the goal is to
work together on a specific assignment. Consequently, she may work according to her
own schedule and in the manner she sees fit, building resentment in her coworkers.
Personality Conflicts
No two people are exactly alike. Therefore, personality clashes in the workplace
are unavoidable. One employee may have a reserved personality while another may be
more outgoing and forward. Problems arise when the two do not understand or respect
each others’ inner nature.
For instance, the more extroverted employee may feel slighted if the more
introverted worker doesn’t talk to him much. He may perceive it as a slight, rather than
it simply being the employee’s personality. Furthermore, his approach to handling projects
may be analytical while hers is intuitive. When the two do not understand and respect
each others’ approach, conflict occurs.
Poor Communication
Poor communication leads to misunderstanding and strife among employees. For
instance, misunderstandings can occur if the manager asks one employee to relay
important instructions to the other employees, but the employee fails to do so
appropriately. Conveying wrong information can lead to projects being incorrectly done

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and to employees blaming each other for the end result.
Personal Problems
If the employee has problems outside of the workplace, such as marital or parental
issues, she may take them to work with her. Consequently, if she is short and withdrawn
from her coworkers, and if they are ignorant about the cause of her behavior, they will
assume that she has an issue with them. Therefore, if she is not willing to divulge her
problems to her coworkers, she should leave them at home.
16.4 FOUR TYPES OF CONFLICT IN ORGANIZATIONS
Conflict is inevitable whenever two or more people interact, whether in the
workplace or at home. Conflict can occur between two or more individuals, two or more
groups, or an individual and a group. When dealing with conflict in an organization, it is
important to remember to address the issue, not the people. Types of conflict that can
occur in any organization include unclear definitions of role responsibility, conflict of
interest, lack of resources and interpersonal relationships within the workplace.
Interpersonal Conflict
 Interpersonal conflict is the conflict between individuals of the organization.
Intra group Conflict
Intra group conflict is the conflict within an internal group, team or department.
These are conflicts that typically involve more than one person within a group.
Conflict arises in groups because of the scarcity of freedom, position, and
resources. People who value independence tend to resist the need for interdependence
and, to some extent, conformity within a group. People who seek power therefore struggle
with others for position or status within the group. Rewards and recognition are often
perceived as insufficient and improperly distributed, and members are inclined to compete
with each other for these prizes
Intergroup Conflict
Intergroup conflict is the conflict between different groups, teams and
departments. When different groups are pitted against each other, this is an example of
an intergroup conflict.
Intergroup conflict between groups is a sometimes necessary, sometimes
destructive, event that occurs at all levels and across all functions in organizations.
Intergroup conflict may help generate creative tensions leading to more effective

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contributions to the organization’s goals, such as competition between sales districts
for the highest sales. Intergroup conflict is destructive when it alienates groups that
should be working together, when it results in win-lose competition, and when it leads
to compromises that represent less-than-optimum outcomes.
Intergroup conflict occurs in two general forms. Horizontal strain involves
competition between functions, for example, sales versus production, research and
development versus engineering, purchasing versus legal, line versus staff, and so on.
Vertical strain involves competition between hierarchical levels, for example, union
versus management, foremen versus middle management, and shop workers versus
foremen. A struggle between a group of employees and management is an example of
vertical strain or conflict. A clash between a sales department and production over
inventory policy would be an example of horizontal strain.
Certain activities and attitudes are typical in groups involved in a win-lose conflict.
Each side closes ranks and prepares itself for battle. Members show increased loyalty
and support for their own groups. Minor differences between group members tend to be
smoothed over, and deviants are dealt with harshly. The level of morale in the groups
increases and infuses everyone with competitive spirit. The power structure becomes
better defined, as the “real” leaders come to the surface and members rally around the
“best” thinkers and talkers.
In addition, each group tends to distort both its own views and those of the
competing group. What is perceived as “good” in one’s own position is emphasized,
what is “bad” is ignored; the position of the other group is assessed as uniformly “bad,”
with little “good” to be acknowledged or accepted. Thus, the judgment and objectivity of
both groups are impaired. When such groups meet to “discuss” their differences,
constructive, rational behavior is severely inhibited. Each side phrases its questions and
answers in a way that strengthens its own position and disparages the other’s. Hostility
between the two groups increases; mutual understandings are buried in
negative stereotypes. It is easy to see that under the conditions described above,
mutual solutions to problems cannot be achieved. As a result, the side having the greater
power wins; the other side loses. Or the conflict may go unresolved, and undesirable
conditions or circumstances continue. Or the conflict may be settled by a higher authority.
Inter organizational Conflict
 Inter organizational conflict is the conflict that arises across different
organizations. When different businesses are competing against one another, this is an

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example of inter organizational conflict.

16.5 MANAGING CONFLICT

Overall conflict management should aim to minimize affective conflicts at all
levels, attain and maintain a moderate amount of substantive conflict, and use the
appropriate conflict management strategy—to effectively bring about the first two goals,
and also to match the status and concerns of the two parties in conflict.
In order for conflict management strategies to be effective, they should satisfy
certain criteria. The below criteria are particularly useful for not only conflict
management, but also decision making in management.
 Organization Learning and Effectiveness- In order to attain this objective, conflict
management strategies should be designed to enhance critical and innovative thinking to
learn the process of diagnosis and intervention in the right problems.
 Needs of Stakeholders- Sometimes multiple parties are involved in a conflict in an
organization and the challenge of conflict management would be to involve these parties
in a problem solving process that will lead to collective learning and organizational
effectiveness. Organizations should institutionalize the positions of employee advocate,
customer and supplier advocate, as well as environmental and stockholder advocates.
 Ethics - A wise leader must behave ethically, and to do so the leader should be open
to new information and be willing to change his or her mind. By the same token
subordinates and other stakeholders have an ethical duty to speak out against the decisions
of supervisors when consequences of these decisions are likely to be serious. “Without
an understanding of ethics, conflict cannot be handled”.
STEPS TO MANAGE
The first step is reactionary by assessing and reacting to the conflict. The second
step is proactive by determining how the employee reacted to the decision. The manager
tries to take (create) a new approach, and once again tries to discern how the employee
reacts. Once the manager feels that the best decision for the organization has been chosen,
and the employee feels justified, then the manager decides if this is a single case conflict,
or one that should be written as policy. The entire process starts as a reactive situation
but then moves towards a proactive decision. It is based on obtaining an outcome that
best fits the organization, but emphasizes the perception of justice for the employee.
Maccoby and Studder identify five steps to managing conflict.

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1. Anticipate – Take time to obtain information that can lead to conflict.
2. Prevent – Develop strategies before the conflict occurs.
3. Identify – If it is interpersonal or procedural, move to quickly manage it.
4. Manage – Remember that conflict is emotional
5. Resolve – React, without blame, and you will learn through dialogue.

16.6 DEFINITION OF MORALE

Morale (also known as esprit de corps (French pronunciation: is the capacity
of a group’s members to maintain belief in an institution or goal, particularly in the face
of opposition or hardship. Morale is often referenced by authority figures as a
generic value judgment of the willpower, obedience, and self-discipline of a group tasked
with performing duties assigned by a superior.
According to Alexander H. Leighton, “Morale is the capacity of a group of people
to pull together persistently and consistently in pursuit of a common purpose”.
Morale is a state of mind or willingness to work which in turn affects individuals
and organizational objectives. According to Flippo “Morale is a mental condition or
attitudes of individuals and groups which determine their willingness to co-operate. Good
morale is evidenced by employee enthusiasm, voluntary conformance with regulation
and orders, and a willingness, to cooperate with others in the accomplishment of an
organization’s objectives. Poor morale is evidenced by insubordination, a feeling of
discouragement and dislike of the Job Company and associates.
In military science, there are two meanings to morale. Primarily it means unit cohesion:
the cohesion of a unit, task force, or other military group. An army with good supply
lines, sound air cover and a clear objective can be said to possess, as a whole, “good
morale” or “high morale.” Historically, elite military units such as special operations
forces have “high morale” due to both their training and pride in their unit. When a unit’s
morale is said to be “depleted”, it means it is close to “crack and surrender”. It is well
worth noting that generally speaking, most commanders do not look at the morale of
specific individuals but rather the “fighting spirit” of squadrons, divisions, battalions,
ships, etc.

16.7 THE FACTORS THAT AFFECT EMPLOYEE MORALE

Employee morale is a huge factor in determining productivity. There are many

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factors that can affect employee morale both positively or negatively, and it is important
to be aware of them so that you can make sure your employees are happy and not scanning
the local job sites for something better. Here is a list of factors known to have an impact.
 The Office Environment: Employee morale is definitely affected by office
surroundings, so it is important to keep it orderly and clean. When chaos rules, chaos
invades our minds as well. Hiring a janitorial service if you are a start-up may not be in
the budget, but it will pay dividends when customers come to visit a clean, orderly space
and when your employees are proud to come to work.
It is also important to have spaces that are well lit. If your facilities are dim or
dark, your employees may work slower as they have trouble seeing, or even suffer from
SAD (seasonal affective disorder), which is a form of depression common in winter
when sunlight is rare. Lots of windows help, but if your building has only a few, changing
the lighting may be in order.
Making the office area nice and pleasant, using well-placed plants and motivational or
artistic posters will help establish the office as a warm place to be, making employees
feel more comfortable and able to get down to work.
 Feedback or Lack of it: No one likes to work in a vacuum. If an employee is
doing a good job and never hears from the boss one way or another, he will eventually
slow down as he never feels appreciated. Feeling appreciated is a fundamental human
need. On the other hand, if an employee is not doing a good job, he or she is also not
going to be happy as most people have an innate sense that something is just not quite
right. Giving this employee some help or guidance will put him or her back on the right
track and enhance morale through creating alignment with the needs of the organization.
It should go without saying that mean-spirited feedback or abuse creates an adverse
effect on morale and should not be tolerated in managers that are part of your organization.
Employee recognition programs or rewards for completing difficult tasks can go
a long way toward establishing morale and keeping good employees.
 Work Load: Employees working under impossible deadlines with workloads that
would choke a camel are not going to be happy employees. Encourage all your employees
to come to you to help them prioritize their workloads if they are overloaded.
 Teamwork or Lack of it: Employees are happiest when working as a team, for
the most part. When teams are contributing and working well together, then morale is
high. When teams are dysfunctional, then there is a problem. It pays to be a fly on the

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wall during team meetings to see who is carrying his weight, and who is causing problems
for the other team members. Address these issues individually if necessary.
 Employee Benefits: Employees are happy when they have security — and security
means knowing that a major medical event in their families will not financially wipe
them out. Benefits such as medical insurance, family leave, disability, etc. are all morale
boosters as they remove a degree of uncertainty from the employee’s life, which allows
him or her to focus on work.
 Corporate Image: Employees tend to have higher morale when working for a
company that is known outside of its walls as a “good” place to be. Companies that
donate to the community treat their employees well and have high integrity fall into this
category. It is tough to work for a company that creates a product that erodes the public’s
health, pollutes the environment or is being sued by former employees. It is important
to be a good citizen of the community in which your business is established, and to
conduct business with integrity.
16.8 THE MEASURES FOR BUILDING HIGH MORALE
Morale building is a difficult exercise as it involves removing misconception,
changing attitudes and dealing with emotions. The following measures may be helpful in
improving employee morale: -
• Proper working condition.
• Job security.
• Sound compensation system.
• Sound promotion policy.
• Job enrichment.
• Sound procedure of employee grievances.
• Worker’s participation in management.
16.9 SEVEN PREDOMINANT FACTORS THAT MOTIVATE
COMPANIES, LARGE AND SMALL, TO DIVERSIFY THEIR
WORKFORCES
It refers to policies and practices that seek to include people within a workforce
who are considered to be, in some way, different from those in the prevailing constituency.
The following are the predominant factors that motivate companies to diversify
their workforces

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As a Social Responsibility
Many of the beneficiaries of good diversity practices are from groups of people
that are “disadvantaged” in the communities, there is certainly good reason to consider
workforce diversity as an exercise in good corporate responsibility. By diversifying our
workforces, we can give individuals the “break” they need to earn a living and achieve
their dreams.
As an Economic Payback
Many groups of people who have been excluded from workplaces are consequently
reliant on tax-supported social service programs. Diversifying the workforce, particu-
larly through initiatives like welfare-to-work, can effectively turn tax users into tax pay-
ers.
As a Resource Imperative
The changing demographics in the workforce, that were heralded a decade ago,
are now upon us. Today’s labor pool is dramatically different than in the past. No longer
dominated by a homogenous group of white males, available talent is now overwhelmingly
represented by people from a vast array of backgrounds and life experiences. Competitive
companies cannot allow discriminatory preferences and practices to impede them from
attracting the best available talent within that pool.
As a Legal Requirement
Many companies are under legislative mandates to be non-discriminatory in their
employment practices. Non-compliance with Equal Employment Opportunity or
Affirmative Action legislation can result in fines and/or loss of contracts with government
agencies. In the context of such legislation, it makes good business sense to utilize a
diverse workforce.
As a Marketing Strategy
Buying power, particularly in today’s global economy, is represented by people
from all walks of life (ethnicities, races, ages, abilities, genders, sexual orientations,
etc.). To ensure that their products and services are designed to appeal to this diverse
customer base, “smart” companies, are hiring people, from those walks of life - for
their specialized insights and knowledge. Similarly, companies who interact directly with
the public are finding increasingly important to have the makeup of their workforces
reflect the makeup of their customer base.

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As a Business Communications Strategy
All companies are seeing a growing diversity in the workforces around them -
their vendors, partners and customers. Companies that choose to retain homogenous
workforces will likely find themselves increasingly ineffective in their external
interactions and communications.
As a Capacity-building Strategy
Tumultuous change is the norm in the business climate of the 21stcentury.
Companies that prosper have the capacity to effectively solve problems, rapidly adapt to
new situations, readily identify new opportunities and quickly capitalize on them. This
capacity can be measured by the range of talent, experience, knowledge, insight, and
imagination available in their workforces. In recruiting employees, successful companies
recognize conformity to the status quo as a distinct disadvantage. In addition to their
job-specific abilities, employees are increasingly valued for the unique qualities and
perspectives that they can also bring to the table.
For whichever of these reasons that motivates them, it is clear that companies
that diversify their workforces will have a distinct competitive advantage over those that
don’t. Further, it is clear that the greatest benefits of workforce diversity will be
experienced, not by the companies that that have learned to employ people in spite of their
differences, but by the companies that have learned to employ people because of them.

16.10 DEFINITION OF QUALITY OF WORKING LIFE (QWL)

The following are the definitions of QWL
The American Society of Training and Development established a task force
on the QWL in 1979. This task force defined QWL as” a Process of work organizations
which enables its members at all levels to actively participate in shaping the organizations,
environment, methods and outcomes.
Cohen and Rosenthal (1980) describe it as an “Internationally designed effort
to bring about increased labour management cooperation to jointly solve the problem of
improving organizational performance and employee satisfaction”.
OBJECTIVES OF QWL
 To improve the standard of living of the employees
 To increase the productivity

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  To create a positive attitude in the minds of the employees
 To increase the effectiveness of the organization
 To improve Profitability, goal accomplishment etc.

16.11 PRINCIPLES OF QWL

QWL is also known as “Humanization of work”. It involves basically the
development of an environment of work that stimulates the creative abilities of the
workers, generated cooperation and interest in self- growth. Herick and Maccoby (1975)
have identified four basic principles which summarize the humanization of work. These
principles are briefly discussed below:
 The principle of Security: Humanization of work implies freedom from anxiety,
fear and the loss of future employment. The working conditions should be safe and there
should be no fear of economic want. These preconditions will guarantee utmost
development of skills and ideas.
 The principle of Equity: Hostility is generated if there are substantial differences
between efforts and rewards. The equity principle requires that there is just way of
evaluating the conditions of an employee. Another aspect of equity refers to paying for
knowledge and skill to carry out the task and not for the task alone. If work has to be
humised, equity would also require sharing in the profits of the organization according
to the individual or group contribution.
 The Principle of Democracy: This implies greater authority and responsibility
vested in the work force. Increasing controls, close supervision, and a general
institutionalization inhibit humanization of work. Meaningful participation in decision
– making also guarantees the “right of citizenship”.
QWL is a complex and multifaceted concept implying a concern for the member
of an organization irrespective of the level they belong to. It includes job factors like
wages and hours of work and also the nature of work itself.
MODELS AND COMPONENTS
Various authors and researchers have proposed models of quality of working life
which include a wide range of factors. Selected models are reviewed below.
1. Hackman and Oldham (1976) drew attention to what they described as
psychological growth needs as relevant to the consideration of Quality of working life.
Several such needs were identified :

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• Skill variety,
• Task Identity,
• Task significance,
• Autonomy and
• Feedback.
They suggested that such needs have to be addressed if employees are to experience
high quality of working life.
2. Taylor (1979) more pragmatically identified the essential components of
quality of working life as basic extrinsic job factors of wages, hours and working
conditions, and the intrinsic job notions of the nature of the work itself. He suggested
that a number of other aspects could be added, including :
• Individual power,
• Employee participation in the management,
• Fairness and equity,
• Social support,
• Use of one’s present skills,
• Self-development,
• A meaningful future at work,
• Social relevance of the work or product,
• Effect on extra work activities.
Taylor suggested that relevant quality of working life concepts may vary according
to organization and employee group.
3. Warr and colleagues (1979), in an investigation of quality of working life,
considered a range of apparently relevant factors, including :
• Work involvement,
• Intrinsic job motivation,
• Higher order need strength,
• Perceived intrinsic job characteristics,
• Job satisfaction,

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• Life satisfaction,
• Happiness, and
• Self-rated anxiety.
They discussed a range of correlations derived from their work, such as those
between work involvement and job satisfaction, intrinsic job motivation and job
satisfaction, and perceived intrinsic job characteristics and job satisfaction. In particular,
Warr et al. found evidence for a moderate association between total job satisfaction and
total life satisfaction and happiness, with a less strong, but significant association with
self-rated anxiety.
Thus, whilst some authors have emphasized the workplace aspects in quality of
working life, others have identified the relevance of personality factors, psychological
well being, and broader concepts of happiness and life satisfaction.
Factors more obviously and directly affecting work has, however, served as the
main focus of attention, as researchers have tried to tease out the important influences
on quality of working life in the workplace.
4. Mirvis and Lawler (1984) suggested that quality of working life was associ-
ated with satisfaction with wages, hours and working conditions, describing the “basic
elements of a good quality of work life” as :
 Safe work environment,
 Equitable wages,
 Equal employment opportunities and
 Opportunities for advancement.
5 . Baba and Jamal (1991) listed what they described as typical indicators of
quality of working life, including:
 Job satisfaction,
 job involvement,
 Work role ambiguity,
 Work role conflict,
 Work role overload,
 Job stress,

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 Organizational commitment and
 Turn-over intentions.
Baba and Jamal also explored routinisation of job content, suggesting that this
facet should be investigated as part of the concept of quality of working life.
6. Ellis and Pompli (2002) identified a number of factors contributing to job dissat-
isfaction and quality of working life in nurses, including:
• Poor working environments,
• Resident aggression,
• Workload, inability to deliver quality of care preferred,
• Balance of work and family,
• Shift work,
• Lack of involvement in decision making,
• Professional isolation,
• Lack of recognition,
• Poor relationships with supervisor/peers,
• Role conflict,
• Lack of opportunity to learn new skills.
7. Sirgy et al. (2001) suggested that the key factors in quality of working life
are:
 Need satisfaction based on job requirements,
 Need satisfaction based on work environment,
 Need satisfaction based on supervisory behavior,
 Need satisfaction based on ancillary programmes,
 Organizational commitment.

16.12 MEASURES OF QUALITY OF WORKING LIFE AND JOBS

There are few recognized measures of quality of working life and jobs, and of
those that exist few have evidence of validity and reliability, although the Brief Index of
Affective Job Satisfaction has been systematically developed to be reliable and is

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rigorously psychometrically validated. A recent statistical analysis of a new measure,
the Work-Related Quality of Life scale (WRQoL), provides support for the
psychometric structure of this instrument. The WRQoWL measure uses six core factors
to explain most of the variation in an individual’s quality of working life: Job and Career
Satisfaction; Working Conditions; General Well-Being; Home-Work Interface; Stress
at Work and Control at Work.
 Brief Index of Affective Job Satisfaction (BIAFJS)
It is a 4-item, purely affective as opposed to cognitive, measure of overall affective job
satisfaction that reflects quality of working life. The BIAJS differs from other job
satisfaction measures in being comprehensively validated not just for internal consistency
reliability, temporal stability, convergent and criterion-related validities, but also for
cross-population invariance by nationality, job level, and job type.
 Job & Career Satisfaction (JCS) scale
Work-Related Quality of Life scale (WRQoL) is said to reflect an employee’s
feelings about, or evaluation of, their satisfaction or contentment with their job and
career and the training they receive to do it. Within the WRQoL measure, JCS is reflected
by questions asking how satisfied people feel about their work. It has been proposed that
this Positive Job Satisfaction factor is influenced by various issues including clarity of
goals and role ambiguity, appraisal, recognition and reward, personal development career
benefits and enhancement and training needs.
 General well-being (GWB) scale
Work-Related Quality of Life scale (WRQoL), aims to assess the extent to which an
individual feels good or content in themselves, in a way which may be independent of
their work situation. It is suggested that general well-being both influences, and is
influenced by work. Mental health problems, predominantly depression and anxiety
disorders, are common, and may have a major impact on the general well-being of the
population. The WRQoL GWB factor assesses issues of mood, depression and
anxiety, life satisfaction, general quality of life, optimism and happiness.
 WRQoL Stress at Work sub-scale (SAW)
It reflects the extent to which an individual perceives they have excessive
pressures, and feel stressed at work. The WRQoL SAW factor is assessed through items
dealing with demand and perception of stress and actual demand overload. Whilst it is
possible to be pressured at work and not be stressed at work, in general, high stress is

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associated with high pressure.
 Control at Work (CAW) subscale
WRQoL scale addresses how much employees feel they can control their work
through the freedom to express their opinions and being involved in decisions at work.
Perceived control at work as measured by the Work-Related Quality of Life scale
(WRQoL) is recognized as a central concept in the understanding of relationships between
stressful experiences, behavior and health. Control at work, within the theoretical model
underpinning the WRQoL, is influenced by issues of communication at work, decision
making and decision control.
 WRQoL Home-Work Interface scale (HWI)
It measures the extent to which an employer is perceived to support the family
and home life of employees. This factor explores the interrelationship between home
and work life domains. Issues that appear to influence employee HWI include adequate
facilities at work, flexible working hours and the understanding of managers.
 Working Conditions scale
WRQoL assesses the extent to which the employee is satisfied with the
fundamental resources, working conditions and security necessary to do their job
effectively. Physical working conditions influence employee health and safety and thus
employee Quality of working life. This scale also taps into satisfaction with the resources
provided to help people do their jobs.

16.13 SUMMARY
Organizational conflict is a state of discord caused by the actual or perceived opposition
of needs, values and interests between people working together. Conflict takes many
forms in organizations.
The Causes of organizational conflict are Managerial Expectations, Breakdown
in Communication, Misunderstanding the Information, Lack of Accountability, Differing
Values, Opposing Interests, Personality Conflicts, Poor Communication and Personal
Problems.
The four types of conflict in organizations are Interpersonal Conflict, Intra group
Conflict, Intergroup Conflict and Inter organizational Conflict
Maccoby and Studder identify five steps to managing conflict. Anticipate, Prevent,
Identify, Manage and Resolve

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 Alexander H. Leighton, “Morale is the capacity of a group of people to pull
together persistently and consistently in pursuit of a common purpose”.
We have discussed the characteristics and importance of morale.
Employee morale is a huge factor in determining productivity. The factors that
affect employee morale are Office Environment, Feedback or Lack of it, Work Load,
Teamwork or Lack of it, Employee Benefits and Corporate Image.
The following measures may be helpful in improving employee morale: Proper
working condition, Job security, Sound compensation system, Sound promotion policy,
Job enrichment, Sound procedure of employee grievances, and Worker’s participation
in management.
16.14 KEYWORDS
• Conflict
• Morale
• Quality of Working Life

16.15 SELF ASSESMENT QUESTIONS

1. Define Organizational Conflict.
2. Explain the factors affecting employee Morale.
3. Discuss the Concept of QWL.
16.16 REFERENCES
1. Jit S.Chand, Organizational Behavior, New Delhi: Vikas Publishing House Pvt.
Ltd, 2001.
2. K Aswathappa. Organisation Behaviour, Text, Cases, New Delhi: Himalaya
Publishing House. 2010
3. K Sridhar Bhatt. Management and Behavioural Process, New Delhi: Himalaya
Publishing House. 2005
4. Paul heresy. Management of Organization Behaviour, New Delhi: Prentice
Hall India 7th Ed.
5. Prasad L M. Organisational theory and Behaviour, New Delhi: Sultan Chand
& Sons, 2014.
6. Stephen P Robins. Organisation Behaviour, New Delhi: New D Prentice Hall
India, 2005.

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7. VSP Rao and P S Narayan. Organization theory and Behaviour: New Delhi,
Konark Publishes Pvt Ltd., 2007

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