UNIT-1

INTRODUCTION TO MANAGEMENT

Definition: “Management is knowing exactly what you want men to do and then
seeing that they do it the best and cheapest ways”.
F.W.Taylor
“Management is defined as the creation and maintenance of an internal environment
in an enterprise where individuals working together in groups, can perform
efficiently and effectively towards the attainment of group goals”.
Koontz and O‟Donell
Nature of Management: The study and application of management techniques in
managing the affairs of the organization have changed its nature over the period of
time.
Multidisciplinary: Management is basically multidisciplinary. This implies that,
although management has been developed as a separate discipline, it draws
knowledge and concepts from various disciplines. It draws freely ideas and concepts
from such disciplines as psychology, sociology, anthropology, economics, ecology,
statistics, operations research, etc. Management integrates the ideas and concepts
taken from these disciplines and present newer concepts which can be put into
practice for managing the organization.
Dynamic nature of principle: Based on integration and supported by practical
evidences, management has formed certain principles. However, these principles
are flexible in nature and change with the changes in the environment in which an
organization exists.
Relative, not absolute principles: Management principles are relative, not absolute,
and they should be applied according to the need of the organization. Each
organization may be different from others. The difference may exist because of time,
place, socio-cultural factors, etc.
Management Science or Art: There is a controversy whether management is science
or art. However, management is both a science and art.
Management as profession: Management has been regarded as profession by many
while many have suggested that it has not achieved the status of a profession.

Characteristics of Management:

Setting goals for Organizations:

Goals differ from organization to organization in business, the basic economic
goal is to earn maximum profit, while in service organization like hospital and
educational institution for the basic goal is to provide better service and better
education.
Awareness of Opportunities and Resources:
Management has awareness of opportunities and resources like men, materials,
money which assembles and integrates by management.
Management is Transformation Process:
Management is a transformation process consisting of planning, organizing,
staffing, directing and controlling.
Management is Universal:
The principles and techniques of management are universally applicable to all
group activities performed at any level of organization.
System of Authority:
System of authority means a hierarchy of command and control. Managers at
different levels possess varying degrees of authority.
Co – Ordination:
Various human beings organized in formal groups are endeavoring to achieve
the common organizational objectives, so various departments in the organization
must work in harmony with one another.
Management is Dynamic:
The ever-changing social environment directly and indirectly effect the group
activity thus changing environments provide a challenge to management. Efficient
management cannot remain static it must adopt itself to changing conditions.
Management is Decision Making:
The managers are decision makers the marketing managers decide about how to
market, when to market, where to market how to collect funds for organization.
Management is a Profession:
Management is not only a science but also an art. Art means managers have to
handle the person and things tactfully. Science means achieving objectives through
procedures

Importance of Management:
“No ideology, no ism, or political theory can win greater output with less efforts
from a given complex of human and materials resource only sound management and
it is on such greater output that a higher standard of life, more leisure, more
amenities for all must necessarily be found”.
Effective utilization of resources:
Management tries to make effective utilization of various resources. The
resources are scarce in nature and to meet the demand of the society, their
contribution should be maximum for the general interests of the society.
Management not only decides in which particular alternative a particular resource is
used but also takes actions to utilize it in that particular alternative in the best way.
Development of resources:
Management develops various resources. This is true with human as well as non-
human factors. Most of the researches for resource development are carried on in an
organization way and management is involved in those activities.
To incorporate innovations:
Today changes are occurring at a very fast rate in both technology and social
process and structure these changes need to be incorporated to keep the
organizations alive and efficient. Therefore, they require high degree of
specialization, high level of competence, and complex technology. All these require
efficient management so that organizations work in the most efficient way.
Integrating various interest groups:
In the organized efforts, there are various interest groups and they put pressure
over other groups for maximum share in the combined output. For example, in the
case of business organization, there are various pressure groups such as
shareholders, employees, government etc. These interest groups have pressure on an
organization.
Stability in the society:
Management provides stability in the society by changing and modifying the
resources in accordance with the changing environment of the society. In the modern
age, more emphasis is on new inventions for the betterment of human beings. These
inventions make old systems and factors mostly obsolete and inefficient.
Management provides integration between traditions and new inventions and
safeguards, society from the unfavorable impact of these inventions so that
continuity in social process is maintained.

FUNCTIONS OF MANAGEMENT
According to Henry Fayol, “To manage is to forecast and plan, to organize, to
command, & to control”. Whereas Luther Gullick has given a keyword POSDCORB
where P stands for Planning, O for Organizing, S for Staffing, D for Directing, Co for
Co-ordination, R for reporting & B for Budgeting. But the most widely accepted are
functions of management given by KOONTZ and O‟ DONNEL i.e. Planning,
Organizing, Staffing, Directing and Controlling.
1. Planning
It is the basic function of management. It deals with chalking out a future course of action &
deciding in advance the most appropriate course of actions for achievement of pre- determined
goals. According to KOONTZ, “Planning is deciding in advance - what to do, when to do & how to
do. It bridges the gap from where we are & where we want to be”. A plan is a future course of
actions. It is an exercise in problem solving & decision making. Planning is determination of courses
of action to achieve desired goals. Thus, planning is a systematic thinking about ways & means for
accomplishment of pre-determined goals. Planning is necessary to ensure proper utilization of
human & non-human resources. It is all pervasive, it is an intellectual activity and it also helps in
avoiding confusion, uncertainties, risks, wastages etc.
2. Organizing
It is the process of bringing together physical, financial and human resources and developing
productive relationship amongst them for achievement of organizational goals. According to Henry
Fayol, “To organize a business is to provide it with everything useful or its functioning i.e. raw
material, tools, capital and personnel’s. To organize a business involves determining & providing
human and non-human resources to the organizational structure. Organizing as a process involves:
 Identification of activities.
 Classification of grouping of activities.
 Assignment of duties.
 Delegation of authority and creation of responsibility.
 Coordinating authority and responsibility relationships.
3. Staffing
It is the function of manning the organization structure and keeping it manned. Staffing has
assumed greater importance in the recent years due to advancement of technology, increase in size
of business, complexity of human behavior etc. The main purpose o staffing is to put right man on
right job i.e., square pegs in square holes and round pegs in round holes. According to Kootz &
O‟Donell, “Managerial function of staffing involves manning the organization structure through
proper and effective selection, appraisal & development of personnel to fill the roles designed un
the structure”. Staffing involves:
 Manpower Planning (estimating man power in terms of searching, choose the person and giving
the right place).
 Recruitment, Selection & Placement.
 Training & Development.
 Remuneration.
 Performance Appraisal.
 Promotions & Transfer.
4. Directing
It is that part of managerial function which actuates the organizational methods to work
efficiently for achievement of organizational purposes. It is considered life-spark of the enterprise
 which sets it in motion the action of people because planning, organizing and staffing are the mere
preparations for doing the work. Direction is that inert-personnel aspect of management which
deals directly with influencing, guiding, supervising, motivating sub-ordinate for the achievement
of organizational goals. Direction has following elements:
 Supervision
 Motivation
 Leadership
 Communication
Supervision- implies overseeing the work of subordinates by their superiors. It is the act of watching &
directing work & workers.
Motivation- means inspiring, stimulating or encouraging the sub-ordinates with zeal to work. Positive,
negative, monetary, non-monetary incentives may be used for this purpose.
Leadership- may be defined as a process by which manager guides and influences the work of
subordinates in desired direction.
Communications- is the process of passing information, experience, opinion etc from one person to
another. It is a bridge of understanding.
5. Controlling
It implies measurement of accomplishment against the standards and correction of deviation if
any to ensure achievement of organizational goals. The purpose of controlling is to ensure that
everything occurs in conformities with the standards. An efficient system of control helps to predict
deviations before they actually occur. According to Theo Haimann, “Controlling is the process of
checking whether or not proper progress is being made towards the objectives and goals and acting
if necessary, to correct any deviation”. According to Koontz & O‟Donell “Controlling is the
measurement & correction of performance activities of subordinates in order to make sure that the
enterprise objectives and plans desired to obtain them as being accomplished”. Therefore
controlling has following steps:
a) Establishment of standard performance.
b) Measurement of actual performance.
c) Comparison of actual performance with the standards and finding out deviation if any.
d) Corrective action.
Levels of Management

The term “Levels of Management‟ refers to a line of demarcation between various

managerial positions in an organization. The number of levels in management increases when the size
of the business and work force increases and vice versa. The level of management determines a chain of
command, the amount of authority & status enjoyed by any managerial position. The levels of
management can be classified in three broad categories:
1. Top level / Administrative level
2. Middle level / Executory
3. Low level / Supervisory / Operative / First-line managers
Managers at all these levels perform different functions. The role of managers at all the three levels is
discussed below:

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

Definition: Scientific management may be defined as the “Art of knowing exactly what is to be done
and the best way of doing it”.
Scientific management is the result of applying scientific knowledge and
scientific methods to the various aspects of management and the problems that arise
from them.

Principles of Scientific Management:

Taylor through his principles of scientific management initiated a system in
which there would be an effective and fruitful coordination and cooperation between
the management and the workers.
Development of Science for each element of work:
Analyze the work scientifically, rather than using thumb rule. It means that an
attempt is made to find out what is to be done by a particular worker, how he is to
do it, what equipment will be necessary to do it. This information is provided to the
worker, so as to reduce wastage of tie, material etc. and improve the quality work.
Scientific selection, placement and training of workers:
This principle states that select the workers best suited to perform the specific
task, and then train them within the industry in order to attain the objectives of the
enterprise workers should also be trained from time to time to keep them informed
of latest development in the techniques of production.
Division of Labour:
Division of work in smaller tasks and separation of thinking element of job from
doing element of the job, this is the principle of specialization. It is essential for
efficiency in all spheres of activities as well as in supervision work
Standardization of methods, procedures, tools and equipment:
Standardization helps in reducing time, labour and cost of production. The
success of scientific management largely depends upon standardization of system,
depends upon standardization of system, tools, equipments and techniques of
production
Use of time and motion study:
Taylor’s introduced time and motion study to determine standard work. Taylor’s
undertook studies on fatigue, incurred by the workers and the time necessary to
complete task.
Differential wage system:
Taylor’s differential piece rate scheme provides an incentive for a worker to
 achieve high level of optimum output. It distinguishes the more productive
workers from less productive workers and motivates them to produce more.
Cooperation between labour and management:
Mutual respect and cooperation between the workers and management helps in
providing proper and effective leadership. The labour starts thinking that it is their
work and they must put their heart in the work assigned to him.
Principle of Management by Exception:
Taylor suggested that only major or significant deviations between the actual
performance and standard performance should be brought to the notice of top
management. Top management should pay more attention to those areas of work
where standards and procedures could not be established and where there is a
significant variation between standard performance and actual performance.

Administrative Management Theory (Henri Fayol and others):

Henri Fayol is called as father of Modern Management.
He established the pattern of management and the pyramidal form of
organization. He pointed out that technical ability is more dominating on the lower
level of management managerial ability is more important on the higher level of
management.
Henri Fayol analyzed the process of management and divided the activities of
an industrial undertaking into six groups
1. Technical activities
2. Commercial activities
3. Financial activities
4. Security activities
5. Accounting activities
6. Managerial activities
Henry Fayol is called as father of Modern Management
He established the pattern of management and the pyramidal form of organization. He
pointed out that technical ability is more dominating on the lower level of management managerial ability
is more important on the higher level of management.

There are 14 Principles of Management described by Henry Fayol.

1. Division of work
a. Henri Fayol has stressed on the specialization of jobs.
b. He recommended that work of all kinds must be divided & subdivided and allotted
to various persons according to their expertise in a particular area.
c. Subdivision of work makes it simpler and results in efficiency.
d. It also helps the individual in acquiring speed, accuracy in his performance.
e. Specialization leads to efficiency & economy in spheres of business.
2. Authority & Responsibility
a. Authority & responsibility are co-existing.
b. If authority is given to a person, he should also be made responsible.
c. In a same way, if anyone is made responsible for any job, he should also have
concerned authority.
d. Authority refers to the right of superiors to get exactness from their sub-ordinates
whereas responsibility means obligation for the performance of the job assigned.
e. There should be a balance between the two i.e. they must go hand in hand.
f. Authority without responsibility leads to irresponsible behavior whereas
responsibility without authority makes the person ineffective.
3. Discipline
a. According to Fayol, “Discipline means sincerity, obedience, respect of authority &
observance of rules and regulations of the enterprise”.
b. This principle applies that subordinate should respect their superiors and obey their
order.
c. It is an important requisite for smooth running of the enterprise.
d. Discipline is not only required on path of subordinates but also on the part of
management.
e. Discipline can be enforced if -
 - There are good superiors at all levels.
- There are clear & fair agreements with workers.
- Sanctions (punishments) are judiciously applied
4. Unity of Command
a. A sub-ordinate should receive orders and be accountable to one and only one boss at
a time.
b. In other words, a sub-ordinate should not receive instructions from more than one
person because -
- It undermines authority
- Weakens discipline
- Divides loyalty
- Creates confusion
- Delays and chaos
- Escaping responsibilities
- Duplication of work
- Overlapping of efforts
c. Therefore, dual sub-ordination should be avoided unless and until it is absolutely
essential.
d. Unity of command provides the enterprise a disciplined, stable & orderly existence.
e. It creates harmonious relationship between superiors and sub-ordinates.
5. Unity of Direction
a) Fayol advocates one head one plan which means that there should be one plan for a
group of activities having similar objectives.
b) Related activities should be grouped together. There should be one plan of action for
them and they should be under the charge of a particular manager.
c) According to this principle, efforts of all the members of the organization should be
directed towards common goal.
d) Without unity of direction, unity of action cannot be achieved.
e) In fact, unity of command is not possible without unity of direction.
Therefore it is obvious that they are different from each other but they are dependent on
each other unity of direction is a pre-requisite for unity of command. But it does not automatically
comes from the unity of direction.
6. Sub-Ordination of Individual Interest to General Interest
a. An organization is much bigger than the individual it constitutes therefore interest
of the undertaking should prevail in all circumstances.
b. As far as possible, reconciliation should be achieved between individual and group
interests.
c. But in case of conflict, individual must sacrifice for bigger interests.
d. In order to achieve this attitude, it is essential that -

- Employees should be honest & sincere.

- Proper & regular supervision of work.
- Reconciliation of mutual differences and clashes by mutual agreement.
For example, for change of location of plant, for change of profit sharing
ratio, etc.
7. Remuneration
a) The quantum and method of remuneration to be paid to the workers should be fair,
reasonable, satisfactory & rewarding of the efforts.
b) As far as possible it should accord satisfaction to both employer and the employees.
c) Wages should be determined on the basis of cost of living, work assigned, financial
position of the business, wage rate prevailing etc.
d) Logical & appropriate wage rates and methods of their payment reduce tension &
differences between workers & management creates harmonious relationship and
pleasing atmosphere of work.
Fayol also recommended provision of other benefits such as free education, medical &
resident Equity
a. Equity means combination of fairness, kindness & justice.
b. The employees should be treated with kindness & equity if devotion is
 expected of them.
c. It implies that managers should be fair and impartial while dealing with the
subordinates.
d. They should give similar treatment to people of similar position.
e. They should not discriminate with respect to age, caste, sex, religion, relation
etc.
f. Equity is essential to create and maintain cordial relations between the
managers and sub-ordinate.
g. But equity does not mean total absence of harshness.
h. Fayol was of opinion that, “at times force and harshness might become
necessary for the sake of equity”.
8. Centralization & De-Centralization
1. Centralization means concentration of authority at the top level. In other
words, centralization is a situation in which top management retains most of
the decision making authority.
2. Decentralization means disposal of decision making authority to all the levels
of the organization. In other words, sharing authority downwards is
decentralization.
3. According to Fayol, “Degree of centralization or decentralization depends on
no. of factors like size of business, experience of superiors, dependability &
ability of subordinates etc.
4. Anything which increases the role of subordinate is decentralization &
anything which decreases it is centralization.
5. Fayol suggested that absolute centralization or decentralization is not feasible.
An organization should strike to achieve a lot between the two.
9. Scalar Chain
1. Fayol defines scalar chain as ’The chain of superiors ranging from the ultimate authority to
the lowest”.
2. Every orders, instructions, messages, requests, explanation etc. has to pass through Scalar
chain.
3. But, for the sake of convenience & urgency, this path can be cut shirt and this short cut is
known as Gang Plank.
4. A Gang Plank is a temporary arrangement between two different points to facilitate quick &
easy communication as explained below:

In the figure given, if D has to communicate with G he will first send the communication upwards
with the help of C, B to A and then downwards with the help of E and F to G which will take quite
some time and by that time, it may not be worth therefore a gang plank has been developed between
the two.
10. Order
1. This principle is concerned with proper & systematic arrangement of things and people.
2. Arrangement of things is called material order and placement of people is called social
order.
3. Material order- There should be safe, appropriate and specific place for every article and
 every place to be effectively used for specific activity and commodity.
4. Social order- Selection and appointment of most suitable person on the suitable job.
There should be a specific place for everyone and everyone should have a specific place
so that they can easily be contacted whenever need arises.
11. Equity
a. Equity means combination of fairness, kindness & justice.
b. The employees should be treated with kindness & equity if devotion is expected of them.
c. It implies that managers should be fair and impartial while dealing with the subordinates.
d. They should give similar treatment to people of similar position.
e. They should not discriminate with respect to age, caste, sex, religion, relation etc.
f. Equity is essential to create and maintain cordial relations between the managers
and sub- ordinate.
g. But equity does not mean total absence of harshness.
h. Fayol was of opinion that, “at times force and harshness might become necessary for
the sake of equity

12. Stability of Tenure

a) Fayol emphasized that employees should not be moved frequently from one job
position to another i.e. the period of service in a job should be fixed.
b) Therefore employees should be appointed after keeping in view principles of
recruitment & selection but once they are appointed their services should be served.
c) According to Fayol. “Time is required for an employee to get used to a new work &
succeed to doing it well but if he is removed before that he will not be able to render
worthwhile services”.
d) As a result, the time, effort and money spent on training the worker will go waste.
e) Stability of job creates team spirit and a sense of belongingness among workers
which ultimately increase the quality as well as quantity of work.
13. Initiative
a) Workers should be encouraged to take initiative in the work assigned to them.
b) It means eagerness to initiate actions without being asked to do so.
c) Fayol advised that management should provide opportunity to its employees to
suggest ideas, experiences& new method of work.
d) It helps in developing an atmosphere of trust and understanding.
e) People then enjoy working in the organization because it adds to their zeal and energy.
f) To suggest improvement in formulation & implementation of place.
g) They can be encouraged with the help of monetary & non-monetary incentives.
14. Espirit De’ Corps (can be achieved through unity of command)
a) It refers to team spirit i.e. harmony in the work groups and mutual understanding
among the members.
b) Spirit De‟ Corps inspires workers to work harder.
c) Fayol cautioned the managers against dividing the employees into competing groups
because it might damage the moral of the workers and interest of the undertaking in the
long run.
d) To inculcate Espirit De‟ Corps following steps should be undertaken –

1. There should be proper co-ordination of work at all levels

2. Subordinates should be encouraged to develop informal relations among
themselves.
3. Efforts should be made to create enthusiasm and keenness among subordinates
so that they can work to the maximum ability.
4. Efficient employees should be rewarded and those who are not up to the mark
should be given a chance to improve their performance.
5. Subordinates should be made conscious of that whatever they are doing is of
great importance to the business & society.
e) He also cautioned against the more use of Britain communication to the subordinates
i.e. face to face communication should be developed. The managers should infuse team
spirit & belongingness. There should be no place for misunderstanding. People then
enjoy working in the organization & offer their best towards the organization.
 Elton Mayo: Elton Mayo generally recognized as father of human relations approach
Mayo led the team which conducted the study psychological reaction of workers in
on- the job situations Mayo concluded that work arrangements in addition to
meeting the objective requirements of production must at the same time satisfy the
employees subjective requirement of social satisfaction at his work place.

MOTIVATION
Motivation is the word derived from the word ‟motive‟ which means needs, desires, wants or drives
within the individuals. It is the process of stimulating people to actions to accomplish the goals. In the
work goal context the psychological factors stimulating the people’s behaviour can be -desire for money

 success
 recognition
 job-satisfaction
 team work, etc

One of the most important functions of management is to create willingness amongst the employees to
perform in the best of their abilities. Therefore the role of a leader is to arouse interest in performance
of employees in their jobs. The process of motivation consists of three stages:-

1. A felt need or drive

2. A stimulus in which needs have to be aroused
3. When needs are satisfied, the satisfaction or accomplishment of goals.

Therefore, we can say that motivation is a psychological phenomenon which means needs and wants of
the individuals have to be tackled by framing an incentive plan.

1. Maslow’s Hierarchy of Needs Theory

Abraham Maslow is well renowned for proposing the Hierarchy of Needs Theory in 1943. This theory
is a classical depiction of human motivation. This theory is based on the assumption that there is a
hierarchy of five needs within each individual. The urgency of these needs varies. These five needs are as
follows-
According to Maslow, individuals are motivated by unsatisfied needs. As each of these needs is
significantly satisfied, it drives and forces the next need to emerge. Maslow grouped the five needs into
two categories - Higher-order needs and Lower-order needs. The physiological and the safety needs
constituted the lower-order needs. These lower-order needs are mainly satisfied externally. The social,
esteem, and self-actualization needs constituted the higher-order needs. These higher-order needs are
generally satisfied internally, i.e., within an individual.
 1. Physiological needs- These are the
basic needs of air, water, food,
clothing and shelter. In other
words, physiological needs are the
needs for basic amenities of life.
2. Safety needs- Safety needs include
physical, environmental and
emotional safety and protection.
For instance- Job security, financial
security, protection from animals,
family security, health security, etc.
3. Social needs- Social needs include
the need for love, affection, care,
belongingness, and friendship.
4. Esteem needs- Esteem needs are of
two types: internal esteem needs
(self- respect, confidence,
competence, achievement and
freedom) and external esteem
needs (recognition, power, status,
attention and admiration).
5. Self-actualization need- This
include the urge to become what
you are capable of becoming /
what you have the potential to
become. It includes the need for
growth and self-contentment. It
also includes desire for gaining
more knowledge, social- service,
creativity and being aesthetic. The
self- actualization needs are never
fully satiable. As an individual
grows psychologically,
opportunities keep cropping up to
continue growing.

Limitations of Maslow’s Theory

 It is essential to note that not all employees are governed by same set of needs. Different
individuals may be driven by different needs at same point of time. It is always the most powerful
unsatisfied need that motivates an individual.
 The theory is not empirically supported.
 The theory is not applicable in case of starving artist as even if the artist‟s basic needs are not
satisfied, he will still strive for recognition and achievement.
Theory X and Theory Y
In 1960, Douglas McGregor formulated Theory X and Theory Y suggesting two aspects of human
behaviour at work, or in other words, two different views of individuals (employees): one of which is
negative, called as Theory X and the other is positive, so called as Theory Y. According to McGregor, the
perception of managers on the nature of individuals is based on various assumptions.
Assumptions of Theory X
 An average employee intrinsically does not like work and tries to escape it whenever possible.
 Since the employee does not want to work, he must be persuaded, compelled, or warned with
punishment so as to achieve organizational goals. A close supervision is required on part of
managers. The managers adopt a more dictatorial style.
 Many employees rank job security on top, and they have little or no aspiration/ ambition. Employees
generally dislike responsibilities.
 Employees resist change.
 An average employee needs formal direction.
Assumptions of Theory Y
 Employees can perceive their job as relaxing and normal. They exercise their physical and mental
efforts in an inherent manner in their jobs.
 Employees may not require only threat, external control and coercion to work, but they can use
self-direction and self-control if they are dedicated and sincere to achieve the organizational
objectives.
 If the job is rewarding and satisfying, then it will result in employees‟ loyalty and commitment to
organization.
 An average employee can learn to admit and recognize the responsibility. In fact, he can even learn
to obtain responsibility.
 The employees have skills and capabilities. Their logical capabilities should be fully utilized. In
other words, the creativity, resourcefulness and innovative potentiality of the employees can be
utilized to solve organizational problems.
Thus, we can say that Theory X presents a pessimistic view of employees‟ nature and behaviour at work,
while Theory Y presents an optimistic view of the employees‟ nature and behaviour at work. If correlate it
with Maslow‟s theory, we can say that Theory X is based on the assumption that the employees emphasize
on the physiological needs and the safety needs; while Theory X is based on the assumption that the social
needs, esteem needs and the self-actualization needs dominate the employees.
McGregor views Theory Y to be more valid and reasonable than Theory X. Thus, he encouraged cordial
team relations, responsible and stimulating jobs, and participation of all in decision-making process.

System Approach to Management:

Following are the important features of systems approach to management thought:
1. System approach considers the organisation as a dynamic and inter-related set of parts.
Each part represents a department or a sub-system. Each department has its sub-system.
Continuous and effective interaction of sub-systems helps to attain goals of the larger system.
Thus, every sub-system is a system and has sub-systems which together make an organisation a
set of mutually dependent parts and their sub-parts.
2. It considers the impact of both near and distant future on organisational activities.
Organisations constantly respond to changes in the internal and external environmental
conditions. They also act as market leaders in the dynamic, competitive environment.
3. System approach integrates goals of different parts of the organisation (sub-systems or
departments) with the organisation as a whole. It also integrates goals of the organisation with
goals of the environment or society in which it operates. Integration of goals maintains
equilibrium or balance and enables organisations to grow in the dynamic environment.

4. It synthesizes knowledge of different fields of study such as biology, sociology,

psychology, information systems, economics etc. As business organisation deals with different
components of society, it makes best use of different fields of study to improve interaction with
its counterparts.
5. System approach enables organisations to frame policies that promote business
objectives and social objectives. Business operates in the social system and social values,
culture, beliefs and ethics are important constituents of business operations.

Evaluation of System Approach:

The system approach has the following merits:

1. System approach provides a holistic view of the organisations and emphasizes on their
adaptive nature. It increases organization’s adaptability to environmental changes. The
organisation is studied as a whole and not through its parts. This enables it to adapt to the
needs of the environment. Decisions are made keeping in mind organisation-environment
interface.
2. It analyses the system at different levels and inter-relates and integrates it into a unified
set of direction. Starting from individual goals, it focuses on overall organizational goals,
synthesizes the two and converges them into global economy.

3. System approach provides a framework for effective interaction of parts of the

organisation in a specific arrangement for attainment of its goals. It does not focus on one part
of the organisation.
 4. It considers the impact of environment on the organisation and vice versa. Interaction of
external environment with the internal environment is the most significant contribution of
systems theory.
5. System approach synthesizes the classical and behavioural theories into a broader
framework to solve managerial problems.
It, thus, focuses on organisations as multi-dimensional in nature.

Limitations of System Approach:

1. Critics of this theory claim this as a theoretical approach to management. The way an
organisation actually works and solves problems (by applying different techniques and
methods) has no appeal in the theory.
2. Relationship amongst parts of the organisation is emphasised upon but the exact nature
of inter-dependence is not defined.
3. Exact relationship between internal and external environment of the organisation is also
not defined.
For example, it specifies that change in economic policies necessitates change in internal policies
of the organisation but what changes are required to match the changes in economic
environment is not talked about.
4. System approach fails to provide uniform approach to management. Management
practices change with changes in environmental variables. No standard set of principles apply
to all types of organisations.
It has added nothing new to the study of management. Even before this approach was
introduced, managerial decisions were taken keeping in mind the environmental variables. No
specific decision-making techniques are offered to deal with specific problems.
5. It fails to provide concepts that apply to all types of organisations. The small
organisations are less adaptive to environmental variables than large organisations. The theory
assumes that most of the organisations are big, complex and open systems. It, thus, fails to
provide a unified theory.

Herzberg’s Two-factors Theory:

In 1959, Frederick Herzberg, a behavioural scientist proposed a two-factor theory or the
motivator-hygiene theory. According to Herzberg, there are some job factors that result in satisfaction
while there are other job factors that prevent dissatisfaction. According to Herzberg, the opposite of
“Satisfaction” is “No satisfaction” and the opposite of “Dissatisfaction” is “No Dissatisfaction”
“Herzberg called these factors as „dissatisfiers‟ and not motivators, by this he means their presence
or existence does not motivate in the sense of yielding satisfaction, but their absence would result in
dissatisfaction. These are also referred to as „hygiene‟ factors.
In the second group are the „satisfiers‟ in the sense that they are motivators, which are related
to „Job content‟. He included the factors of achievement, recognition, challenge work, advancement
and growth in the job. He says that their presence will yield feelings of satisfactory or no satisfaction,
but not dissatisfaction.

FIGURE: Herzberg’s view of satisfaction and dissatisfaction

Herzberg classified these job factors into two categories-

Hygiene factors- Hygiene factors are those job factors which are essential for existence of
motivation at workplace. These do not lead to positive satisfaction for long-term. But if these factors are
absent / if these factors are non-existant at workplace, then they lead to dissatisfaction. In other words,
hygiene factors are those factors which when adequate/reasonable in a job, pacify the employees and
do not make them dissatisfied. These factors are extrinsic to work. Hygiene factors are also called as
dissatisfiers or maintenance factors as they are required to avoid dissatisfaction. These factors describe
the job environment/scenario. The hygiene factors symbolized the physiological needs which the
individuals wanted and expected to be fulfilled. Hygiene factors include:
 Pay - The pay or salary structure should be appropriate and reasonable.
It must be equal and competitive to those in the same industry in the
same domain.
 Company Policies and administrative policies - The company policies
should not be too rigid. They should be fair and clear. It should include
flexible working hours, dress code, breaks, vacation, etc.
 Fringe benefits - The employees should be offered health care plans
(mediclaim), benefits for the family members, employee help
programmes, etc.
 Physical Working conditions - The working conditions should be safe,
clean and hygienic. The work equipments should be updated and well-
maintained.
 Status - The employees‟ status within the organization should be
familiar and retained.
 Interpersonal relations - The relationship of the employees with his
peers, superiors and subordinates should be appropriate and acceptable.
There should be no conflict or humiliation element present.
 Job Security - The organization must provide job security to the employees.
Motivational factors- According to Herzberg, the hygiene factors cannot be regarded as
motivators. The motivational factors yield positive satisfaction. These factors are inherent to work.
These factors motivate the employees for a superior performance. These factors are called satisfiers.
These are factors involved in performing the job. Employees find these factors intrinsically rewarding.
The motivators symbolized the psychological needs that were perceived as an additional benefit.
Motivational factors include:
 Recognition - The employees should be praised and recognized for their
accomplishments by the managers.
 Sense of achievement - The employees must have a sense of achievement. This
depends on the job. There must be a fruit of some sort in the job.
 Growth and promotional opportunities - There must be growth and advancement
opportunities in an organization to motivate the employees to perform well.
 Responsibility - The employees must hold themselves responsible for the work. The
managers should give them ownership of the work. They should minimize control
but retain accountability.
 Meaningfulness of the work - The work itself should be meaningful, interesting and
challenging for the employee to perform and to get motivated.

Limitations of Two-Factor Theory

The two factor theory is not free from limitations:
1. The two-factor theory overlooks situational variables.
2. Herzberg assumed a correlation between satisfaction and productivity. But the research
conducted by Herzberg stressed upon satisfaction and ignored productivity.
3. The theory‟s reliability is uncertain. Analysis has to be made by the raters. The raters
may spoil the findings by analyzing same response in different manner.
4. No comprehensive measure of satisfaction was used. An employee may find his job
acceptable despite the fact that he may hate/object part of his job.
5. The two factor theory is not free from bias as it is based on the natural reaction of
employees when they are enquired the sources of satisfaction and dissatisfaction at
work. They will blame dissatisfaction on the external factors such as salary structure,
company policies and peer relationship. Also, the employees will give credit to
themselves for the satisfaction factor at work.
6. The theory ignores blue-collar workers. Despite these limitations, Herzberg‟s Two-
Factor theory is acceptable broadly.
Implications of Two-Factor Theory
 The Two-Factor theory implies that the managers must stress upon guaranteeing the
adequacy of the hygiene factors to avoid employee dissatisfaction. Also, the managers must
make sure that the work is stimulating and rewarding so that the employees are motivated
to work and perform harder and better. This theory emphasize upon job- enrichment so as
to motivate the employees. The job must utilize the employee‟s skills and competencies to
the maximum. Focusing on the motivational factors can improve work-quality
Leadership and Leadership Styles:
Leadership is a process by which an executive can direct, guide and influence the
behavior and work of others towards accomplishment of specific goals in a given situation.
Leadership is the ability of a manager to induce the subordinates to work with confidence and
zeal.
Leadership is the potential to influence behaviour of others. It is also defined as the
capacity to influence a group towards the realization of a goal. Leaders are required to develop
future visions, and to motivate the organizational members to want to achieve the visions.
According to Keith Davis, “Leadership is the ability to persuade others to seek defined
objectives enthusiastically. It is the human factor which binds a group together and motivates it
towards goals.”

Characteristics of Leadership
It is a inter-personal process in which a manager is into influencing and guiding workers
towards attainment of goals.
It denotes a few qualities to be present in a person which includes intelligence, maturity and
personality.
It is a group process. It involves two or more people interacting with each other.
A leader is involved in shaping and moulding the behaviour of the group towards
accomplishment of organizational goals.
Leadership is situation bound. There is no best style of leadership. It all depends upon tackling
with the situations.
All leaders do not possess same attitude or same perspective. As discussed earlier, few leaders
adopt the carrot approach and a few adopt the stick approach. Thus, all of the leaders do not
get the things done in the same manner. Their style varies. The leadership style varies with the
kind of people the leader interacts and deals with. A perfect/standard leadership style is one
which assists a leader in getting the best out of the people who follow him.
Some of the important leadership styles are as follows:
1. Autocratic leadership style: In this style of leadership, a leader has complete command
and hold over their employees/team. The team cannot put forward their views even if they are best for
the teams or organizational interests. They cannot criticize or question the leaders way of getting things
done. The leader himself gets the things done. The advantage of this style is that it leads to speedy
decision-making and greater productivity under leaders supervision. Drawbacks of this leadership
style are that it leads to greater employee absenteeism and turnover. This leadership style works only
when the leader is the best in performing or when the job is monotonous, unskilled and routine in
nature or where the project is short-term and risky.
2. Democrative/Participative leadership style: The leaders invite and encourage the team
members to play an important role in decision-making process, though the ultimate decision-making
power rests with the leader. The leader guides the employees on what to perform and how to perform,
while the employees communicate to the leader their experience and the suggestions if any. The
advantages of this leadership style are that it leads to satisfied, motivated and more skilled employees.
It leads to an optimistic work environment and also encourages creativity. This leadership style has the
only drawback that it is time-consuming.
3. The Laissez Faire Leadership Style: Here, the leader totally trusts their employees/team
to perform the job themselves. He just concentrates on the intellectual/rational aspect of his work and
does not focus on the management aspect of his work. The team/employees are welcomed to share
their views and provide suggestions which are best for organizational interests. This leadership style
works only when the employees are skilled, loyal, experienced and intellectual.
Designing an Organisation structure
Organization is form of organizing which is a part of management process
Organization defied as collectivity of people for achieving common objectives
“Organization means the determination and assignment of duties to people, and also
the establishment and the maintenance of authority relationships among these grouped
activities it is the structural frame work with in which the various efforts are coordinated
and related to each other”.
Definitions: “Organization are collectivities of people that have been established for the
pursuit of relatively specific objectives on a more or less continuous basis”.
William Scott
“Organization is the form of every human association for the attainment of
a common purpose”.
Mooney and Reilly
“Organization involves the grouping of activities necessary to accomplish
goals and plans assignment and these activities to appropriate departments and positions
to appropriate departments and positions for authority delegation and coordination”.
Koontz and O‟Donnell
Organization is used in the following ways with or without prefix or suffix
1. as entity
2. as group of people
3. as structure
4. as process
Process of Organization:
Determination of objectives, strategies, plans and policies: Objectives should be clear and
precise, because the entire organization is to be built around the objectives of the
enterprises.

Determination of activities: Determine activities needed to execute these plans and policies
and accomplish the objectives. The work load is broken into component activities that are to
be performed by all the employees. The activities are so split to determine the job which can
be performed by an individual.

Separation and grouping of activities: To attain the benefits of specialization and division of
labour, every company, will separate its activities on the basis of primary functions like
finance, engineering, purchasing, production, sales and industrial relations. All the similar
or directly related activities are grouped together in the form of departments.

Delegation of authority: Authority is necessary for the performance of the job and therefore
authority is delegated to the subordinates for enabling them to carry out their work
smoothly and efficiently.

Delegation of responsibility: Responsibility may be described as the obligation and

accountability for the performance of delegated duties. A superior is always accountable for
the acts of his subordinate. Therefore, responsibility always flows from subordinates to
superiors.
Establish inter-relationships: The grouped activities are placed in the overall organization
structure at appropriate level. It is necessary to integrate or the these groups of activities
through.
a) Authority relationship horizontally, vertically and diagonally
b) Organized information or communication system i.e., with the help of
effective coordination and communication.
Providing physical facilities and proper environment: Physical facilities means provide
machinery, tools equipments, infrastructure etc, environment means provide proper
lighting, ventilation, heating, cooling arrangement at the work place, reasonable hors of
work, safety devices, job security etc
Principles of Organization:
Principle of unity of objectives: An organization structure is effective if is enables
individuals to contribute to entire objectives.

Principle of co-ordination: The aim of the objective can be achieved it proper co- ordination
exists for efferent activities

Principles of organizational efficiency: An organization is efficient it is structured to aid the

accomplishment of enterprise objective with a minimum of unsought consequences or
costs.

Span of management principle: In each managerial position, there is a limit to the number
of persons an individual can effectively manage but the exact number will depend on the
impact of underlying variables.

Scalar principle: The clearer the line of authority from the ultimate management position in
an enterprise to every subordinate position, the clearer will be the responsibility for
decision making the more effective will be organization communication.

Principle of delegation by results expected: Authority delegated to all individual managers

should be adequate enough to ensure their ability to accomplish the results expected.
Principle of responsibility: The responsibility of subordinates to their superiors for
performance is absolute, and superiors can not escape responsibility for the organization
activity of their subordinates.

Principle of parity of authority and responsibility: The responsibility for actions can not be
greater than that implied by the authority delegated, not should it be less.
Principle of unity command: The more complete an individual‟s reporting relationships toa
single superior, the smaller the problem of conflicting instructions and the greater the
feeling of personal responsibility for results.

Authority level principle: Maintenance of intended delegation requires that decisions with
in the authority of individual managers should be made by them and not be referred
upward in the organization structure.

Principle of balance: The application of principles or technique must be balanced to ensure

the over all effectiveness of the structure in meeting enterprise objectives.

Principle of flexibility: the more that provisions are made for building flexibility in to an
organization structure can fulfill its purpose.

Principle of leadership facilitation: The more an organization structure and its delegations
of authority enable managers to design and maintain an environment for performance, the
more they will help the leadership abilities of those managers.
Design of Organization structure: The main objective of an organization structure is to
ensure that efforts of all the people working in various sections are co-ordinate and
integrated for achieving the task in the most efficient effective way with minimum
consumption of resources i.e. economical ways
1) Formal organization structure 2) Informal organization structure
Formal organization structure: According to classical theorists the formal organization is
built an four pillars
1) Division of labour
2) Scalar functional processes
3) Structure
4) Span of control
Definition: An organization is formal when the activities of two or more persons are
 consciously coordinated towards common objectives.
Informal organization: Informal organization arises spontaneously based on friendship or
some common interest and not based on rules, regulation and procedures. It is developed
by the employees themselves and not by the formal authority.
Definition: Informal organization brings cohesiveness to a formal organization, it brings to
the members of formal organization a feeling of belonging of status, of self-respect and of
gregarious satisfaction.
Comparison between formal and informal organization:

Basis of comparison Formal Informal

Formation Planned & deliberated Spontaneous
Purpose Well-set goals Social interaction

Structure Well structured Un structured

Focus Positions Persons

Nature Official Unofficial

Leadership Superior Any one

Source of power Delegated Given by group

Guidelines for behaviour Rules procedures Group norms
Source of control Rewards/Punishment Sanctions

Type of organization: On the basis of authority relationships organization classified

as follows
1. Line organization or Military organization or Scalar organization
2. Functional organization
3. Line and Staff organization
4. Project organization
5. Committee organization
6. Matrix organization

1. Line organization:

Where efforts of large number of people have to be controlled and discipline is of

prime importance line type organization structure will serve the purpose. This is also one of
 the oldest structures. However, in present conditions this type of structure has lost the
applicability. In line structure ten lines of instruction, directing is vertical. This means in
this type boss is always right and his orders are to be obeyed at any cost.
Merits:
Simplicity: Line organization is very simple to establish and can be easily understand by
the employees
Discipline: Since each position is subject to control by its immediate superior position, often
the maintenance of discipline is easy unity of command and unity of direction foster
discipline among the people in the organization.
Co-ordination: The hierarchy in management helps in achieving effective coordination
Effective communication: There will be a direct link between superior and his subordinate;
both can communicate properly among himself or herself.
Economical: Line organization is easy to operate and less expensive
Unity of command: In line organization every person is under the command of one boss
only.
Prompt decision: Only one person is in charge of one division or department. This enables
manager to take quick decisions.
Over all development of the managers: The departmental head has to look after all the
activities of his department; therefore, it encourages the development of all round
managers at the higher level of authority.
Demerits:
Undue reliance: The success of the enterprise depends upon the caliber and ability of few
departmental heads, loss of one or two capable men may put the organization in
difficulties.
Personnel limitations: In this type of organization an individual executive is suppose to
discharge different types of duties. He cannot do justice to all different activities because he
cannot be specialized in all the trades.
Overload of work: Departmental heads are overloaded with various routine jobs hence they
can not spare time for important managerial functions like planning, development
budgeting etc.
Dictatorial way: In line organization, too much authorities centre on line executive. Hence
it encourages dictatorial way of working.
Duplication of work: Conflicting policies of different departments result in duplication of
work.
Unsuitable for large concerns: It is limited to small concerns
General interest of enterprise may be over looked: Departments may work for their
self- interest and may sacrifice the general interest of the enterprise.
Scope of favourism: As the departmental heads has the supreme authority, there is chance
of favourism.
2. Functional organization: This structure most widely used, in the medium and large
organizations having limited number of products.
This was introduced by F.W.Taylor and is logical extension of the division of labour
cover departments as well as men. In this authority is delegated to an individual or
department to control specified processes, policies or other matter relating to activities
under taken by persons in other departments. In this system planning is separated from
performance since the direction of work is divided by various function in the factory. It has
been found that this type of structure becomes ineffective when the work of departments
and individuals increases in variety and complexity.
Merits:
Separation of work: In functional organization, work has been separated from routine
work. The specialist has been given the authority and responsibility for supervision and
administration pertaining to their field of specialization unnecessary over loading of
responsibilities is thus avoided.

Specialization: Specialization and skilled supervisory attention is given to workers the

result is increase in rate of production and improved quality of work. Narrow range with
high depth: The narrow range of activities enable the functional expert to developing in
depth understanding in his particular area of activity
Ease in selection and training: Functional organization is based upon expert
knowledge. The availability of guidance through experts makes it possible to train the
workers properly in comparatively short span of time.
Reduction in prime cost: Since for every operation expert guidance is there, wastage
of material is reduced and thus helps to reduce prime cost.
Scope of growth and development of business: This type of organization presents
ample scope for the growth and development of business.
Demerits:
Indiscipline: Since the workers receive instructions from number of specialist it leads to
confusion to whom they should follow. Therefore, it is difficult to maintain discipline
Shifting of responsibility: It is difficult for the top management to locate responsibility for
the unsatisfactory work every body tries to shift responsibility on others for the faults and
failure.
Kills the initiative of workers: As the specialized guidance is available to the workers the
workers will not be using their talents and skills therefore their initiative cannot be utilized.
Overlapping of authority: The sphere of authority tends to overlap and gives rise to friction
between the persons of equal rank.
Lack of co-ordination between functions: except the function in which he is specialized he is absolutely
indifferent to other functions. Therefore, there is a lack of coordination of function and efforts.
3. Line and Staff Organization: Line and Staff organization is the in which the line
heads are assisted by specialist staff.
If the firm is of large size, manager cannot give careful attention to every aspect of
management. They are busy with ordinary task of production and selling. Hence staff is
deputed to do the work of investigation, research, recording, and advising to managers.
Thus the staff brings advising to managers. Thus the staff brings specialization by assisting
the line officers.
“Line” means - Operating
“Staff” means – Service
 Merits:
Planned specialization: The line and staff structure is based upon the principle of
specialization. The line managers are responsible for operations contributing directly to the
achievement of organizational objectives where as staff people are there to provide expert
advice on the matters of their concerns.
Quality decisions: Decisions come after careful consideration and thought each expert gives
his advise in the area of his specialization which is reflected in the decisions.
Prospect for personal growth: Prospect for efficient personal to grow in the organization
not only that, it also offers opportunity for concentrating in a particular area, there by
increasing personal efficiency
Less wastage: There will be less wastage of material.
Training ground for personnel: It provides training ground to the personnel in two ways. First, since
everybody is expected to concentrate on one field, one‟s training needs can easily be identified. Second, the
staff with expert knowledge provides opportunities to the line managers for adopting rational multi-
dimensional approach towards a problem.
Demerits:
Chances of Misinterpretation: Although the expert advice is available, yet it reaches the
workers through line supervisors. The line officers may fail to understand the meaning of
advice and there is always a risk of misunderstanding and misinterpretation.
Chances of friction: There are bound to be occasions when the line and staff may differ in
opinion may resent in conflict of interests and prevents harmonious relations between the
two.
Ineffective Staff in the absence of authority: The staff has no authority to execute their own
advice. Their advice is not a binding on the line officers. Therefore the advice given by
specialist may be ignored by line heads.
Expensive: The overhead cost of the product increases because of high salaried specialized
staff.
Loss of initiative by line executives: If is they start depending too much on staff may loose
their initiative drive and ingenuity.
4. Project Organization: A project organization is a special case where common service like finance,
purchase etc. are organized at the functional level. But project resources are allocated to the
project manager. Since the business responsibility rests with the project manager, necessary
authority is given to him with the requisite resources. This type of organization structure helps in
making decisions for project control in terms of cost, resource and time. In a project organization
some of the functions are corporate responsibility and some of them are project manager’s
responsibility.

Managing Director

Project Division-A Project Division-B

Manufacturing Finance

Design Erection Commissioning

Design Erection Commissioning

Merits
1. This calls for quick divisions
2. Organizing all functional
3. Proper coordination of work of different departments
Demerits:
1. It tends to increase the problems of control for top management
2. It is special case of product organization
3. The organization may get disintegrated with increasing focus
on departments
5. Committee Organization: A committee is formed when two or more persons are
appointed to work as a team to arrive at a decision on the matters referred to it. It is
intended to utilize the knowledge, skills, and experiences of all the concerned parties.
Particularly, in large organizations, problems are too big to be handled by one single expert.
Merits:
1. It pools up the organizational resources in terms of knowledge skills and
experiences.
2. It represents all interested groups and thus, facilitates group decision.
3. It yields good results if the committee are headed by taskmaster like chairman and
time bound in terms of decision-making.
4. It minimizes the fear of too much authority vested in one person
5. It motivates all the concerned or effected groups to participate.
Demerits:
1. Responsibility of decisions cannot be fixed on a particular person.
2. It calls for high degree of coordination.
3. It involved high cost in terms of time and money.
6. Matrix Organization: This is also called as project orgnisation it is a combination
of all relationships in the organization in vertical, horizontal and diagonal. It is
mostly used in complex projects. It provides a high degree of operational freedom,
flexibility and adoptability for both the line and staff managers in performing their
respective roles. The main objective of matrix organization is to secure a higher
degree of coordination than what is possible from the conventional organizational
structure as the line and staff.

Merits:
1. It offers operational freedom and flexibility
2. It seeks to optimize the utilization of resources
3. It focuses on results
4. It maintains professional identity
5. It holds employees responsible for management of resources
Demerits:
1. It calls for greater degree of coordination
2. It violates unity of command principle
3. It may be difficult to define authority and responsibility precisely
4. Employees may find it frustrating to work with two bosses
MODERN TRENDS IN ORGANISATIONAL STRUCTURE DESIGNS:
Organizations in the recent times have been gearing themselves to suit to the
growing demands from their stakeholders in terms of responsiveness, flexibility, agility,
adaptability etc. In this process, they are following organic structure, which are more agile,
flexible and adaptable to the changing circumstances. Virtual organizations, cellular
 organizations, team structure, boundaryless organization and inverted pyramid and
different forms of organic structure that are widely seen among most of the sun-rise sectors
such as financial services, Information Technology (IT) and IT enabled services. These
structures have been contributing to the organic growth of the organization.
The focus of organic structures is to do away with those activities which do not
directly contribute to the growth of the organization and focus only on those activities
which directly lead the organization for the achievement of the given goals.
These are discussed below:
1. Virtual Organisation:
Virtual organizations facilitate competitiveness particularly when these
organizations are part of the global economy. Here, there can be alliances and partnerships
with other organizations almost all over world. It is a flexible organization structure that
removes the traditional boundaries. It allows easy reassignment and reallocation of
resources to take quick advantage of shifting opportunities in global markets. To avoid
disintegration and to attain the effective needed focus, the lead virtual organizations must
have a shared vision,, strong brand and high trust culture.
The virtual organization is a temporary network of companies that come together
quickly to exploit fast changing opportunities. Virtual organizations appear to be bigger
than traditional organizations. As virtual organizing required a strong information
technology
(IT) platform, The boundaries that traditionally separate a firm form its suppliers,
customers and even competitors are largely eliminated, temporarily and in respect to a
given transaction or business purpose. Virtual organizations come into being „as needed‟
when alliances are called into action to meet specific operating needs and objectives. When
the task is complete, the alliances rests until next called into action. Each partner in the
alliance contributes to the virtual organization what it is best as-its core competence.
2. Cellular Organization:
Organizations structured around the units/cells that complete the entire assembly
process are called cellular organizations. In the modern organizations, cellular
organizations have been replacing the continuous line or linear production process system.
In cellular organizations, workers manufacture total product or sub-assemblies in teams
(cells). Every team (cell) of workers has the responsibility to improve or maintain the
quality and quantity of its products. Each team is free to recognize itself to improve
performance and product quality. These cells comprise self-managed teams. They monitor
themselves and also correct where necessary on their own. Cellular organizations are
characterized by much smaller staff all over the organization with middle management
positions reduced and lean management members at the top. It is both a lean and flat
structure.
3. Team Structure:
A structure in which the entire organization is made up of work groups or teams is known
as team structure. Team structures are both permanent and temporary in nature as situation
demands. Traditional organizations are characterized by vertical structures and modern
organizations are identified by the horizontal i.e., team structures. „We report to each other‟
is the main feature of team structure. It leads to boundary less organsiation in a borderless
world. In team structures, we find cross-functional teams meant for improving lateral
relations, solving problem, completing special projects and accomplishing routine tasks. A
cross- functional team comprises members from different functional departments such as
marketing, finance, HR, production etc. Project teams are convened for a particular task or
project and these get dissolved once task is completed. The intention here is to quickly
bring together the people with the needed talents and focus their efforts intensely to solve
a problem or take advantage of a special opportunity. Here employees are more involved
and empowered because of reduced barriers among functional areas. Sometimes, when
there is pressure on teams to perform and there is no clear chain of command, team
structure fails to deliver results.
4. Boundaryless Organization:
At the name indicates, a boundary less organization eliminates internal boundaries among
subsystems and external boundaries with external environment. It is a combination of team
 and network structures with the addition of temporariness. Such type of organization
structure is characterized by spontaneous teamwork and communication. This replaces
formal chain of command. It is a dynamic organization structure wherein organizational
needs are met through a judicious mix of outsourcing contracts and alliances as and when
needed. The key features of boundary less organization include knowledge-sharing,
absence of hierarchy and bureaucracy, empowerment voluntary participation of expert
members, technology utilization and temporariness. The focus is on mustering necessary
talent and competencies required for the achievement of a task without any bureaucratic
restrictions. Creativity, quality, timeliness, increase in speed and flexibility are the benefits
the boundary less organization yields. It also reduces inefficiencies. The boundary less
organization is highly flexible and responsive. These draw on talent wherever it is found.
Sometimes, they are ineffective due to problems in communication.
5. Inverted Pyramid:
This is an alternative to the traditional chain of command. This is a structure, which is
narrow at the top and wide at the base. It includes a few levels of management. For
instance, sales people and sales support staff sit on the top as the key decision makers for
all the issues related to sales and dealing with the customers. Since the sales staffs are in
touch with the customer and aware of the requirements of the customers, they are given all
the freedom to follow their own best judgment at all levels.