MPOB-MODULE 1

Management is the act of getting people together to accomplish desired goals and
objectives using available resources efficiently and effectively. Management comprises
planning, organizing, staffing, leading, coordinating and controlling an organization (a
group of one or more people or entities) or effort for the purpose of accomplishing a goal.
Resourcing encompasses the development and manipulation of human resources, financial
resources, technological resources and natural resources. Management is essential for the
conduct of business activity in an orderly manner. It is a vital function concerned with all
aspects of working of an enterprise.

Definition

According to Harold Koontz, "Management is the art of getting things done through and
with people in formally organized groups".

According to Henry Fayol," To manage is to forecast and to plan, to organize, to command,

to coordinate and to control".

According to Peter Drucker, "Management is a multi-purpose organ that manages business

and manages managers and manages workers and work".

Management is needed for planning business activities, for guiding employees in the right
direction and finally for coordinating their efforts for achieving best/most favorable results.
Efficient management is needed in order to achieve the objectives of business activity in an
orderly and quick manner. Planning, Organizing, Coordinating and Controlling are the
basic functions of management. Management is needed as these functions are performed
through the management process. Management is needed for effective communication
within and outside the Organization. Management is needed for motivating employees and
also for coordinating their efforts so as to achieve business objectives quickly.

Efficient management is needed for success, stability and prosperity of a business

enterprise. Modem business is highly competitive and needs efficient and capable
management for survival and growth.

Management is needed as it occupies a unique position in the smooth functioning of a

business unit.This suggests the need of efficient management of business enterprises.
Profitable/successful business may not be possible without efficient management.Survival
of a business unit in the present competitive world is possible only through efficient and
competent management.
Management as both Science and Art
Management is both an art and a science. The above mentioned point clearly reveals that
management combines features of both science as well as art. It is considered as a science
because it has an organized body of knowledge which contains certain universal truth. It is
called an art because managing requires certain skills which are personal possessions of
managers. Science provides the knowledge & art deals with the application of knowledge
and skills.

Featuresof Management
 Management is Goal-Oriented
 Management integrates Human, Physical and Financial Resources
 Management is Continuous
 Management is all Pervasive
 Management is a Group Activity

ManagementFunctions

Planning

It is the basic function of management. Planning is determination of courses of action to

achievedesired 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.

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.

Staffing

The main purpose of staffing is to put right man on right job.According to Kootz &
O’Donell, “Managerial function of staffing involves managing the organization structure
through proper and effective selection, appraisal & development of personnel to fill the
roles designed on the structure”. Staffing involves:

 Manpower Planning (estimating manpower in terms of searching, choose the person

and giving the right place).
 Recruitment,Selection&Placement.
 Training&Development.
 Remuneration.
 PerformanceAppraisal.
 Promotions&Transfer.

Directing

It is that part of managerial function which actuates the organizational methods to work
efficiently for achievement of organizational purposes. Direction is that inter-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

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 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 managementcan be classified in three broad
categories:

1. Toplevel/Administrativelevel
2. Middlelevel/ Executory
3. Lowlevel/Supervisory/Operative/First-linemanagers

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
devote 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. MiddleLevelof 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 indirect contact with the
workers.

ROLES OF MANAGER

Henry Mintzberg identified ten different roles, separated in to three categories. The categories
he defined are as follows
a) Interpersonal Roles
The ones that, like the name suggests, involve people and other ceremonial duties. It can be
further classified as follows
 Leader–Responsible for staffing, training, and associated duties.
 Figurehead–The symbolic head of the organization.
 Liaison–Maintains the communication between all contacts and informers that compose
the organizational network.
b) Informational Roles
Related to collecting, receiving, and disseminating information

 Monitor–Personally seek and receive information, to be able to understand the organization.

 Disseminator–Transmits all import information received from outsiders to the members
of the organization.
Spokesperson–On the contrary to the above role, here the manager transmits the
organization’s plans, policies and actions to outsiders

 .
c) Decisional Roles
Roles that revolve around making choices
 Entrepreneur–Seeks opportunities. Basically they search for change, respond to it, and
exploit it.
 Negotiator–Represents the organization at major negotiations.
 Resource Allocator –Makes or approves all significant decisions related to the allocation
of resources.
 Disturbance Handler–Responsible for corrective action when the organization faces
disturbances.

Managerial Skills:
 Technical skills:
Technical skills reflect both an understanding of and a proficiency in a specialized field.
For example, a manager may have technical skills in accounting, finance, engineering,
manufacturing, or computer science.
 Human Skills:
Human skills are skills associated with manager’s ability to work well with others, both as a
member of a group and as a leader who gets things done through other.
 Concept Skills:
Conceptual skills related to the ability to visualize the organization as a whole, discern
interrelationships among organizational parts, and understand how the organization fits into
the wider context of the industry, community, and world. Conceptual skills, coupled with
technical skills, human skills and knowledge base, are important ingredients in
organizational performance.
 Design Skills:
It is the ability to solve the problems in ways that will benefit the enterprise. Managers
must be able to solve the problems.

The Skills vary at different levels:

Top management Concept and design Skills.
Middle Human Skills
Supervisor’s Technical skills
Skills of management at different levels

ManagementandAdministration
The difference between Management and Administration can be summarized under 2
categories:-
1. Functions
2. Usage/Applicability

On the Basis of Functions:-

Basis Management Administration

Meaning Management is an art of getting things done It is concerned with formulation of

through others by directing their efforts broad objectives, plans & policies.
towards achievement of pre-determined goals.

Nature Management is an executing function. Administration is a decision-making

function.

Process Management decides who should it & how Administration decides what is to be
should he do it. done & when it is to be done.

Function Management is a doing function Administration is a thinking function

because managers get work because plans & policies are
done under their supervision. determined under it.

Skills Technical and Human skills Conceptual and Human skills

Level Middle & lower level function Top level function

 On the Basis of Usage:-

Basis Management Administration

Applicability It is applicable to business concerns It is applicable to non-business concerns

i.e. profit-making organization. i.e. clubs, schools, hospitals etc.

Influence The management decisions are The administration is influenced by

influenced by the values, public opinion, govt. policies, religious
opinions,beliefs & decisions of the organizations, customs etc.
managers.
Status Management constitutes the Administration represents owners of the
employees of the organization who enterprise who earn return on their
have paid remuneration (in the form capital invested & profits in the form of
of salaries &wages). dividend.

The Concept of Evolution of Management Thought

To understand the entire concept of evolution of the management thought, the topic is divided
into 4 major stages, which are as follows:

 Pre-scientific management period

 Classical theory

 Neo-classical theory ( or behavior approach)

 Bureaucratic Model of Max Weber

Pre-Scientific Management Period

As the industrial revolution occurred in the 18th century, there was a huge impact on
management. The scenario changed the method of raising capitals, organizing labor, and
goods’ production for the individuals and businesses. Entrepreneurs then had access to
production factors like land, labor, and capital. The final step was only to make some effort to
combine these factors to achieve the target successfully.
But, after the industrial revolution, the newer dimension taken by management is because of
the involvement of certain notable personalities who introduced some effective ideas and
approaches for giving management an acceptable and precise direction. Here is a brief on
some of the personalities and their theories:

Professor Charles Babbage of United Kingdom (1729 to 1871)

Prof. Babbage was a renowned Mathematics professor at Cambridge University. He
discovered that manufacturers rely on guessing and suggesting and advised them for utilizing
science and mathematics to be more productive and accurate.

Robert Owens of United Kingdom (1771 to 1858)

Sir Robert is often regarded as personnel management’s father as his approach focuses on
employee welfare. He also introduced cooperation and trade unions. He mainly believed that
employee welfare might determine the performance to a larger extent. Sir Robert also
encouraged the workers’ training, children’s education, ensuring canteens in the workplaces,
shorter working durations, and others.

The Classical Theory

Robert Owens, Charles Babbage, and other prominent personalities are regarded as
management’s pioneers. However, their contribution to the evolution of management is lower.
Further, by the last decade of the 19th century, the science of management began, and with it,
some professionals like H. L. Grant, F. W. Taylor, Emerson, and others entered for the
establishment of scientific management.

Further, during the classical period, management thought focused on standardization, job
content, labor division, and scientific approaches for the organization. It also related closely to
the industrial revolution and the rise of large-scale enterprises.

The Neo-Classical Theory

This duration of the evolution of management thought is a better version of classical theory. It
is a modified version of classical theory with several improvements. The classical theory
focused mainly on the areas of job including physical resources and their management, but
Neoclassical theory focuses on employee relationships in the work ecosystem.

The Bureaucratic Model

Max Weber, a German sociologist, proposed the bureaucratic model. This includes a system of
labor division, rules, authority hierarchy, and employees’ placement based on their technical
capabilities.
 Scientific Management

Frederick Winslow Taylor (1856-1915) is considered to be the father of ‘Scientific

Management’. Subsequently, he was supported by Henry Gantt, George Berth, Edward Felen,
Lillian Gilberth and Harrington Emerson. Four basic parts of a series of ideas developed by
Taylor are as under:

 Each person’s job should be broken down into elements and a scientific way to perform each
element should be determined;
 Workers should be scientifically selected and trained to do the work in the designed and
trained manner;
 There should be good cooperation between management and workers so that tasks are performed
in the designed manner;
 There should be a division of labor between managers and workers. Managers should take over
the work of supervising and setting up instructions and designing the work and the workers
should be free to perform the work themselves.

Thus the Scientific Management provides a logical framework for the analysis of problems.
Taylor’s contributions can be described in two parts: elements & tools of Scientific
Management; and principles of Scientific Management.
(a) Elements and Tools of Scientific Management
Taylor conducted various experiments to find out how human being could be made more
efficient by standardizing the work and better methods of doing the work. These experiments
have provided the following features of Scientific Management:

i. Separation of Planning and Doing:

This means the planning should be done by the supervisor and the worker should emphasize only
on operational work.

ii. Functional Foremanship:

Taylor evolved this concept based on specialization of functions. In this system, four persons are
involved in planning (route clerk, Instruction card clerk, Time & Cost clerk, and disciplinarian);
and another four persons are concerned with doing the work (speed boss, inspector, maintenance
foreman, and gang boss). All of them give instructions to workers on different aspects of work.

iii. Job Analysis:

This helps in fixing fair amount of work so that there are least movements, consequently less
time and less cost. Taylor also suggested making fatigue study and calculating time for the rest
period of the workers to complete the job.
iv. Standardization:
This is required to be maintained in respect of instruments and tools, period of work, amount of
work, working conditions, cost of production, etc. This should be fixed in advance.

v. Scientific selection and Training of Workers:

Selection should be made keeping in view the qualifications, experience, aptitude, physical
strength, etc. of the workers. Most suitable persons should be selected fairly and then necessary
training should be given to them before putting them on work.

vi. Financial Incentives:

For motivation, good workers should be rewarded, given higher pay and promotion. This would
lead to efficiency and more work.

vii. Economy:
Taylor suggested that due consideration should be given to economy and profit, which can be
achieved by eliminating wastage of resources and making the resources more productive.

viii. Mental Revolution:

There should be mental change in management as well as workers from conflict to cooperation.
Taylor says that this is the most important feature of Scientific Management because, in its
absence, no principle of Scientific Management can be applied.

(b) Principles of Scientific Management

The fundamental principles propounded by Taylor are as under:

i. Replacing Rule of Thumb with Science:

While the use of scientific method denotes precision in determining any aspect of work, rule of
thumb emphasizes estimation. Hence it is essential that all details should be measured precisely
and should not be based on mere estimation. This approach can be adopted in all aspects of
management.

ii. Harmony in Group Action:

Group harmony suggests that there should be mutual give and take situation and proper
understanding so that group as a whole contributes to the maximum.

iii. Cooperation:
Scientific management involves achieving cooperation rather than chaotic individualism. It is
based on mutual confidence, cooperation and goodwill between management and workers.
iv. Maximum Output:
Continuous increase in production and productivity instead of restricted production either by
management or by workers would lead to more profit.

v. Development of Workers:
In Scientific Management, all workers should be developed to the fullest extent possible for their
own and for the organization’s highest prosperity. It requires scientific selection of workers, their
proper training and regular updating according to the requirement of new methods of working.

Thus the Scientific Management created awareness about increasing operational efficiency.
However, from the point of view of the development of theoretical framework, the principles of
Scientific Management were more concerned with problems at the operating levels and did not
emphasize management of an organization from the manager’s point of view. That is why; some
critics are of the opinion that Scientific Management is more relevant form the engineering point
of view rather than the management point of view. In its early development, Scientific
Management had little concern for the external environment of the organization and was almost
exclusively concerned with internal operations. It also placed little emphasis on the needs of the
workers, instead of focusing on producing better results.

Administrative Theory

Henry Fayol (1841-1925), a French industrialist is the chief architect and father of the
‘Operational Management Theory’. It is also known as ‘Administrative Management School of
Thought’. He propounded fourteen ‘Principles of Management’, which are listed below.

Division of Work: There should be a clear division of duties. Breaking jobs into smaller pieces
will results in specializing. Management should be separate and distinct.

Authority: The authority that individuals possess should be equal to their responsibility. Anyone
responsible for the results of a task should be given the authority to take the actions necessary to
ensure its success.

Discipline: There should be clear rules and complete obedience to behaviour in the best interest
of the organization.

Unity of Command: An employee should receive orders from only one supervisor, in order to
avoid confusion and conflict.

Unity of Direction: There should be one head and one plan, in order to ensure a coordinated
effort
.
Subordination of Individual Interest to the General Interest: Employee should place the
organization’s concerns before their own interests.

Remuneration of Personnel: Pay should be fair.

Centralization: Centralization is the most desirable arrangement within an organization.

Scalar Chain: Each position is part of a vertical chain of authority (the scalar
chain). Communication should move up and down this chain of command.

Order: To avoid conflicts, there should be a right place for everything and everyone in the
organization.

Equality: Equality of treatment must be taken into account in dealing with employees. Justice
should be tempered with kindness.

Stability of Tenure of Personnel: Long term stability for workers is good for an organization.
Initiative: Initiative rewards must be provided to stimulate production.

Esprit de Corps: Develop a strong sense of morale and unity. Communication is the key to a
satisfied working group.”

Human Relations Theory

Elton Mayo (1880-1949) is recommended as the Father of Human Relations School. He

introduced human relations approach to management thought. His contribution to the
development of management thought is unique and is also treated as human relations approach to
management. It was Mayo who led the team for conducting the study at Western Electric's
Hawthorne Plant (1927-1932) to evaluate the attributes and psychological reactions of workers in
on-the-job situations. His associates included John Dewery, Kurt Lewin and others. Mayo and
his associates came to the following conclusions from their famous Hawthorne experiments:

1. The amount of work to be done by a worker is not determined by his physical capacity but by
the social norms.
2. Non-economic rewards play a significant role in influencing the behavior of the workers.
3. Generally the workers de not reacts as individuals, but as members of group.
4. Informal leaders play an important part in setting and enforcing the group norms.
Mayo is best known for his work on the project commonly referred to as the Hawthorne Studies.
They were conducted in the Hawthorne plant of Western Electric Company in the USA between
1927 and 1932. It is said that Mayo applied psychological approach to management for the first
time. He used clinical and diagnostic methods. Mayo has drawn various conclusions from these
studies. The Hawthorne Studies have had a shattering impact on management thinking. Mayo is
regarded as revolutionary thinker because of his contribution to the management thought in the
recent period. The credit of humanization of management with a view to achieve common
interest of management and workers goes to Elton Mayo. Some of the major findings of
Hawthorne Studies we as noted below:

1. Employee's behavior is influenced by mental attitudes and emotions including prejudices.

2. The workers in a group develop a common psychological bond uniting them as a group in the
form of informal organization.
3. In managing and motivating employee groups, human and social motivation plays greater role
then financial incentives.
4. Management must understand that a typical group behavior can dominate or even supersede
individual propensities and preferences.
5. When workers are given special attention by management, the productivity is likely to
increase irrespective of actual changes in the working conditions.

Hawthorne Studies are primarily responsible for consideration of non financial incentives in
improving productivity. Mayo pointed out that the organization is a social system and informal
organization is a reality. The knowledge of human nature can solve many problems of
management. He emphasized that successful human relations approach can easily create
harmony in an organization, higher employee satisfaction and great operational efficiency.
Central to this approach was an increased understanding of the individual worker with emphasis
on motivation, needs, interpersonal relationships and group dynamics Mayo believed that a
factory is not only a workplace but also a social environment in which the employees interact
with each other. This gave rise to the concept of the 'social man' whose interaction with others
would determine the quality and quantity of the work produced.

Mayo developed his Human Relations Theory of Management on his Hawthorne experiments.
He introduced human relations approach to management and is rightly considered as one of the
pioneers of the Human Relations Theory of Management.

Features of Human Relations Approach

1. A business organization is not merely a techno-economic system but also a social system and
involves human element.
2. An individual employee is motivated not merely by economic incentives but also by non
economic incentives, psychological and social interests, needs and aspirations.
3. The informal groups in the organization are more important than individuals and play an
important role in raising productivity.
4. In place of task-centered leadership, the employee-centered, humanistic, democratic and
participative style of leadership should be introduced as it is more effective / productive.
5. Employees are not necessarily inefficient or negative in their approach. They are capable of
self-direction and control.
6. Employees performance can be raised by meeting their social and psychological needs.
Cordial atmosphere at work place is also useful for raising productivity.
7. Management needs social skills along with technical skills in order to create a feeling (among
the employees) that they are a part and parcel of the organization and not outsiders.
8. Employees need respect and positive feeling from the management. For this, employees
should be encouraged to participate and communicate freely their views and suggestions in the
concerned areas of decision making.
9. The management has to secure willing cooperation of employees. The objective before the
management should be to secure cooperative effort of its employees. For this, employees should
be made happy and satisfied.

Systems Theory

A system is an organized entity i.e. a company or a business enterprise made up of parts

connected and directed to some purpose. Each system has an input, a process and an output. It
acts as a self sufficient unit. Every system is interlinked with its subsystems. Any organization is
looked upon as an artificial system, the internal parts of which work together to achieve
established goals and the external parts to achieve interplay with the environment including
customers, the general public, suppliers and government. The manager integrates available
facilities to achieve a goal by means of systems that relate activities required for the end result.
The system serves as the media through which the manager operates. An integrated system can
be used purposefully for the conduct of production, marketing, distribution and other activities
relating to business in an orderly manner. A manager can conduct various activities in an orderly
manner with the help of the systems established. A system is a set of interrelated and
interdependent parts arranged in a manner that produces a unified whole. Almost anything can be
viewed as a system.

Features of Systems Approach to Management

1. Open or Closed Systems: Systems may be either open or dosed. An open system is one that is
dependent on the outside environment for survival e.g., human body as a system is composed of
many subsystems. This is an open system and it must depend on outside input and energy for
survival. A system is considered closed if it does not interact with the environment. Physical and
mechanical Systems are closed system because they are insulated from their external
environment. Traditional organization theorists regarded organizations as closed systems while
according to the modern view organizations are open systems, always interacting with the
environment.
2. Interdependent parts: A system is a set of interdependent parts which together form a unitary
whole that perform some function. An organization is also a system which consists of four
interdependent parts viz., task, structure, people and technology.

3. Consideration of whole system: No part of the system can be precisely analyzed and under-
stood apart from the whole system. Conversely, the whole system cannot be exactly evaluated
without understanding all its parts. Each part is related to every other part. It means rather than
dealing separately with the various parts of one organization, the systems approach attempts to
give the manager a way of looking at the organization as a whole. For example, in order to
understand the operations of the finance or production or marketing departments, he must
understand the company as a whole. It is because activity of any one part of the company affects
the activity of every other part.

4. Information, energy and material: Generally, there are three basic inputs that enter the
processor of the system viz., information (technology), energy (motive power) and materials to
be transformed into goods. If the output is service, materials are not included in the inputs. If we
have manufacturing company, output is goods or materials. If we have a consultancy firm, output
is information or advice. If we have a power generating company, output is energy.

5. Defined boundaries: Each system including an organization has its own boundaries which
separate it from other system in the environment. For open systems the boundaries are penetrable
whereas for closed systems, they are not. The boundaries for closed systems are rigid. In a
business organization, it has many boundary contacts or 'interfaces' with many external system
like creditors, suppliers, customers, government agencies etc. The system is inside the boundary,
the environment is outside the boundary'.

6. Synergy: Output of a system is always more than the combined output of its parts. This is
called 'synergy‘. In organizational terms, synergy means when separate departments within an
organization cooperate and interact, they become more productive than if they had acted in
isolation e.g., it is certainly more efficient for each department to deal with one secretarial
department than for each department to have a separate secretarial department of its own.

7. Feedback mechanism: A system can adopt and adjust itself to the changing environment
through the feedback mechanism. This helps to assess the work and if need be, to get it
corrected.
8. Multidisciplinary approach: Systems approach integrates and uses with profit ideas emerging
from different schools of thought. Management freely draws concepts and techniques from many
fields of study such as psychology, sociology, ecology, economics, mathematics, statistics,
operations research, systems analysis etc.

Contingency Theory

This situational management approach is relatively a new approach to management and is an

extension of systems approach. The basic theme of contingency approach is that organizations
have to deal with different situations in different ways. There is no single best way of managing
applicable to all situations. In order to be effective, the internal functioning of the organization
must be consistent with the needs and demands of the external environment. In other words
internal organization should have the capacity to face any type of external situation with
confidence.

Features of the Contingency / Situational Approach

1. Management is entirely situational. The management has to use the measures/techniques as

per the situation from time to time.

2. Management should match its approach as per the requirements of the situation. The policies
and practices used should be suitable to environmental changes.

3. The success of management depends on its ability to cope up with its environment. Naturally,
it has to make special efforts to anticipate and comprehend the possible environmental changes.
Managers should realize that there is no one best way to manage. They have to use management
techniques as per the situation which they face.

Decision Making

Every organization needs to make decisions at one point or other as part of managerial process.
Decisions are made in the best interest of the organization.

Trewatha& Newport defines decision making process as follows: ―Decision-making involves

the selection of a course of action from among two or more possible alternatives in order to
arrive at a solution for a given problem‖.

As evidenced by the foregone definitions, decision making process is a consultative affair done
by a comity of professionals to drive better functioning of any organization. Thereby, it is a
continuous and dynamic activity that pervades all other activities pertaining to the organization.
Since it is an ongoing activity, decision making process plays vital importance in the functioning
of an organization. Since intellectual minds are involved in the process of decision making, it
requires solid scientific knowledge coupled with skills and experience in addition to mental
maturity. Further, decision making process can be regarded as check and balance system that
keeps the organization growing both in vertical and linear directions. It means that decision
making process seeks a goal. The goals are pre-set business objectives, company missions and its
vision. To achieve these goals, company may face lot of obstacles in administrative, operational,
marketing wings and operational domains. Such problems are sorted out through comprehensive
decision making process. No decision comes as end in itself, since in may evolve new problems
to solve. When one problem is solved another arises and so on, such that decision making
process, as said earlier, is a continuous and dynamic.

Process

1. Defining the problem

2. Gathering information and collecting data
3. Developing and weighing the options
4. Choosing best possible option
5. Plan and execute 6. Take follow up action

The McKinsey 7S Model refers to a tool that analyzes a company’s “organizational design.” The
goal of the model is to depict how effectiveness can be achieved in an organization through the
interactions of seven key elements – Structure, Strategy, Skill, System, Shared Values, Style, and
Staff.

The focus of the McKinsey 7s Model lies in the interconnectedness of the elements that are
categorized by “Soft Ss” and “Hard Ss” – implying that a domino effect exists when changing
one element in order to maintain an effective balance. Placing “Shared Values” as the “center”
reflects the crucial nature of the impact of changes in founder values on all other elements.

Structure of the McKinsey 7S Model

Structure, Strategy, and Systems collectively account for the “Hard Ss” elements, whereas the
remaining is considered “Soft Ss.”

1. Structure

Structure is the way in which a company is organized – the chain of command and accountability
relationships that form its organizational chart.
2. Strategy

Strategy refers to a well-curated business plan that allows the company to formulate a plan of
action to achieve a sustainable competitive advantage, reinforced by the company’s mission and
values.

3. Systems

Systems entail the business and technical infrastructure of the company that establishes
workflows and the chain of decision-making.

4. Skills

Skills form the capabilities and competencies of a company that enables its employees to achieve
its objectives.

5. Style

The attitude of senior employees in a company establishes a code of conduct through their ways
of interactions and symbolic decision-making, which forms the management style of its leaders.

6. Staff

Staff involves talent management and all human resources related to company decisions, such as
training, recruiting, and rewards systems

7. Shared Values

The mission, objectives, and values form the foundation of every organization and play an
important role in aligning all key elements to maintain an effective organizational design.
Rensis Likert and his associates studied the patterns and styles of managers for three decades at
the University of Michigan, USA, and identified a four-fold model of management systems.

The model was developed on the basis of a questionnaire administered to managers in over 200
organizations and research into the performance characteristics of different types of
organizations.

The four systems of management system or the four leadership styles identified by Likert are:

1. System 1 - Exploitative Authoritative: Responsibility lies in the hands of the people at

the upper echelons of the hierarchy. The superior has no trust and confidence in
subordinates.The decisions are imposed on subordinates and they do not feel free at all to
discuss things about the job with their superior. The teamwork or communication is very
little and the motivation is based on threats.
2. System 2 - Benevolent Authoritative: The responsibility lies at the managerial levels
but not at the lower levels of the organizational hierarchy. The superior has
condescending confidence and trust in subordinates (master-servant relationship).Here
again, the subordinates do not feel free to discuss things about the job with their superior.
The teamwork or communication is very little and motivation is based on a system of
rewards.
3. System 3 - Consultative: Responsibility is spread widely through the organizational
hierarchy. The superior has substantial but not complete confidence in subordinates.Some
amount of discussion about job related things takes place between the superior and
 subordinates. There is a fair amount of teamwork, and communication takes place
vertically and horizontally. The motivation is based on rewards and involvement in the
job.
4. System 4 - Participative: Responsibility for achieving the organizational goals is
widespread throughout the organizational hierarchy.There is a high level of confidence
that the superior has in his subordinates. There is a high level of teamwork,
communication, and participation.

The idea that a manager’s attitude has an impact on employee motivation was originally
proposed by Douglas McGregor, a management professor at the Massachusetts Institute of
Technology during the 1950s and 1960s. In his 1960 book, The Human Side of Enterprise,
McGregor proposed two theories by which managers perceive and address employee motivation.
He referred to these opposing motivational methods as Theory X and Theory Y management.
Each assumes that the manager’s role is to organize resources, including people, to best benefit
the company. However, beyond this commonality, the attitudes and assumptions they embody
are quite different.

Theory X

According to McGregor, Theory X management assumes the following:

 Work is inherently distasteful to most people, and they will attempt to avoid work
whenever possible.
 Most people are not ambitious, have little desire for responsibility, and prefer to be
directed.
 Most people have little aptitude for creativity in solving organizational problems.
 Motivation occurs only at the physiological and security levels of Maslow’s hierarchy of
needs.
 Most people are self-centered. As a result, they must be closely controlled and often
coerced to achieve organizational objectives.
 Most people resist change.
 Most people are gullible and unintelligent.

Theory Y

 Work can be as natural as play if the conditions are favorable.

  People will be self-directed and creative to meet their work and organizational objectives
if they are committed to them.
 People will be committed to their quality and productivity objectives if rewards are in
place that addresses higher needs such as self-fulfillment.
 The capacity for creativity spreads throughout organizations.
 Most people can handle responsibility because creativity and ingenuity are common in the
population.
 Under these conditions, people will seek responsibility.

Bernard’s Contribution towards the Development of Management!

1. Theory of Formal Organization:

He defined it as “a system of consciously coordinated activities offered of two or more persons.”

According to him organization consisted of human beings whose activities were coordinated and
therefore becomes a system:

According to Barnard initial existence of organization depends upon three elements:

(i) The willingness of persons to contribute efforts to the co-operative system

(ii) There should be an objective of co-operation

(iii)Proper communication system is necessary.

2. Organizational Equilibrium:
Barnard suggested an equilibrium model to describe the balance achieved between the
contributions of the members of an organization and return contribution made by the
organization to the fulfillment of private goals of the members. Barnard treated organization as
separate from the environment where it works.

The persons working in the organization have two roles—a personal role and an organizational
role. There should be balance between what employees get out of the organization (money,
status, recognition, etc.) and what they contribute in form of time, knowledge, discomfort,
production, etc.
3. Acceptance Theory of Authority:
Barnard did not agree with the classical concept of authority where it comes from top to bottom.
He said that authority comes from bottom. In his opinion authority is confirmed only when it is
accepted by a person to whom it has been addressed. Disobedience of such a communication is a
denial of authority.

According to Barnard the decision as to whether an order has authority or not lies with the
person to whom it is addressed, and does not resides in persons of authority or those who issue
these orders. Thus, in Barnard’s view, if a subordinate does not accept his manager’s authority, it
does not exist.

A person will accept authority under following conditions:

(a) He can and does understand the communication;

(b) At the time of his decision he believes that it is not inconsistent with the purpose of the
organization;

c) At the time of decision, he believes it to be compatible with his personal interest is a whole;
and

(d) He is able (mentally and physically) to comply with it.

4. Functions of the Executive:

Barnard postulated three types of functions for the executives in formal organization set up.

These functions are:

(a) Maintaining proper communication in the organization

(b) Obtaining essential services from individuals for achieving organizational goals

(c) Formulating purposes and objectives at all levels.

5. Informal Organization:
Barnard was of the opinion that both formal and informal organizations coexist in every
enterprise. Informal organization refers to those social interactions which do not have
consciously co-ordinated joint purpose. This organization is to overcome the problems of formal
organization.Barnard suggested that execrates should encourage the development of informal
organization to bring cohesiveness in the organization and also to serve as a means of
communication.
Peter F. Drucker:

We can present an overview of Drucker’s contribution to management, in terms of the following

points:

(i) Nature of Management:

Drucker considers management as a way of life for the well-being of society. According to him,
management is the dynamic, life-giving element in an organization, which converts resources
into results. According to him, management is more a practice than a science. However, he
recognizes the value of Taylor’s scientific work study approach.

(ii) Functions of Management:

According to Drucker, among management functions, the function of objective-setting is very
important.He sets out eight areas in which objectives should be set and performance should be
measured:

1. Market standing

2. Innovation

3. Productivity

4. Physical and financial resources

5. Profitability

6. Managers’ performance and development

7. Workers’ performance and attitude

8. Public responsibility

(iii) Management by Objectives (MBO):

The concept of MBO is regarded as the most significant contribution by Drucker to present- day-
management. Drucker introduced this concept in 1954 in his classical work; “The Practice of
Management” Following is given a detailed account of MBO.

MBO might be defined as follows:

MBO is a distinct philosophy of managing any business enterprise in which (under a short- term
management-programme) objectives for subordinates are worked out through a process of
mutual consultation between subordinates and concerned superiors, in verifiable (i.e. numerical)
terms; and such objectives subsequently becoming standards of control for measuring
performance of individuals against these.

Analysis of the definition:

For a better and quick comprehension of the concept of MBO, the above definition could be
analyzed in terms of the following points:
(i) MBO is a distinct philosophy of any management. In fact, there is no universal scheme of
MBO that could be applied to all organizations, alike, MBO, is something, like a railway time-
table; which is different in every country operating railway.

(ii) MBO is a short-term management programme. MBO schemes may range from a week to a
year. A year perhaps, is the maximum time period for an operational system of MBO.

(iii) MBO is based on principles of democratic management. Under MBO, objectives are set
through a process of mutual consultation between subordinates and concerned superiors.

(iv) Verifiability is the key to MBO. Under MBO, objectives are determined in numerical or
quantitative terms; which alone carry an element of verifiability.

(v) MBO is a complete philosophy of managing. It is both a technique of planning and a

technique of controlling. It is a technique of planning in that objectives become assignments for
people. And it is also a technique of controlling; when these very objectives are used as
standards of control for measuring performance of individuals against these.

George Odiorne defines MBO as follows:

“MBO is a process whereby the superior and the subordinate managers of an enterprise jointly
identify its common goals, define each individual’s major areas of responsibility in terms of the
result expected of him, and use these measures as guides for operating the unit and assessing the
contribution of each of its members.”

The Process of MBO:

(i) Preliminary setting of objectives at the top management level:
Top management usually gives a start to launching of scheme of MBO; by identifying the
fundamental objectives of the enterprise as a guide to superiors and subordinates throughout the
organization for setting their own objectives.

(ii) Clarification of organizational roles:

As a background step to MBO, each role in the organization is clarified; so that each
organizational role is somebody’s clear responsibility.

(iii) Setting individual objectives:

Superiors and subordinates throughout the enterprise determine their individual objectives
through a process of mutual consultation. Such setting of individual objectives is the core aspect
of MBO.

(iv) Matching goals with resources:

To make MBO scheme realistic, goals of individuals are compared to the resources available for
their implementation. At this stage, objectives might be revised suitably, in view of limitations of
resources.

(v) Recycling objectives:

Recycling or reshuffling objectives under MBO is done to take care of the interconnection
among related objectives i.e. objectives of individuals in one department may not be inconsistent
with related objectives of subordinates, in other departments.

(vi) Performance appraisal:

As a final step of MBO, performance of people is judged against objectives (which now become
standards of control) determined for them initially.

Some major merits of MBO are as follows:

(i) Overall improvement in organizational performance:
Provided, a scheme of MBO is appropriately designed in a ‘tailor-made’ system; it is likely to
lead to an overall improvement in the organizational performance.

(ii) Specific Planning:

Because of numerical expression of objectives under MBO, planning becomes more specific.
Subordinates better appreciate as to what exactly is expected to them.

(iii) Elicits commitment:

Perhaps the biggest advantage of MBO is that it is a great motivational device. It elicits
commitment to objectives on the part of subordinates, as subordinates feel inclined towards
achieving those targets which they have determined for themselves.

(iv) Better controlling:

MBO leads to better controlling in two senses:
(a) Controlling is immediate, as standards of controlling are the objectives themselves.

(b) There is least or no resistance to controlling; because objectives (i.e. standards of controlling)
are determined by subordinates themselves in consultation with superiors.
 Michael E. Porter:
Introduction:
Born in 1947, Michael E. Porter is an authority on competitive strategy. According to
Porter, “Strategy is not a subject of poets”. It is a set of ideas which give competitive
advantage to business units.

Contributions by Porter:
Two most important contributions by Porter include:
(i) Value chain analysis

(ii) Generic strategies driven by five force analysis

Following is a brief account of these concepts:

(i) Value Chain Analysis:
For a strategic analysis of internal resources, Porter suggests the use of ‘value-chain’ as a
framework. According to Porter, there are two categories of value activities: primary activities
and support activities. In his view, competitive advantage lies not in activities themselves; but
the way the activities relate to each other, forming a value chain for competitive advantage.

I. Primary Activities:
Primary activities are connected with physical creation of a firm’s product or service, its
marketing and after-sales support.

Following are the primary activities:

1. Inbound Logistics:
Activities associated with procurement, storage and flow of inputs like receipts, handling,
warehousing, inventory control etc.

2. Operations:
Activities connected with turning inputs into finished goods like, machining, assembling,
packaging, equipment maintenance etc.

3. Outbound Logistics:
Activities connected with collection, storage and physical distribution of goods like, order
processing, scheduling deliveries, operation of delivery vehicles etc.

4. Marketing and Sales:

Activities inducing customers to buy and ensuring that products are available like, advertising,
sales promotion, sales force management, channel selection etc.

5. Service:
Activities connected with maintaining or enhancing products’ value like, installation, repairs,
warranty services etc.

II. Support Activities:

Support activities are those which provide infrastructure for primary activities to be performed.

Following are the support activities:

1. Procurement:
Activities including purchase of materials and service inputs, equipment and machinery etc. In
fact, every activity in the value chain needs to use purchase inputs of some kind.

2. Technology Development:
Activities to be performed for perfection and up-gradation of technology involved in product
designing, equipment designing, servicing procedures, manufacturing processes etc.

3. Human Resource Management:

Activities connected with recruitment, training, development, and compensation etc. of
manpower. Manpower is needed for every activity in the value chain.

4. Company’s infra-structure:
Activities relating to general management practices, finance, accounting, legal affairs etc. These
activities are essential to the entire chain of value activities.

Point of Comment:
To survive amidst competitive conditions, the company must link all value chain activities
together; as weakness in any of the activities will have impact on the entire value-chain and
affecting competitiveness adversely.

We can depict the concept of value-chain through the following chart:

(ii) Generic strategies driven by five force analysis:

The bases on which an organisation may seek to achieve a lasting position in environment are
known as generic strategies.

According to Porter, there are three fundamental generic strategies:

1. Cost leadership strategy
2. Differentiation strategy

3. Focus strategy

Cost leadership strategy implies achieving the lowest cost in production and marketing to gain a
large market share compared with competitors, over time. Differentiation strategy implies
differentiating the product in terms of physical and psychological attributes, making the product
unique which is valued by customers.

Such a product commands a premium price. Focus strategy implies narrowing competitive scope
by selecting a market segment; and tailoring strategy for serving the segment (niche market) to
the exclusion of others.

Further, these three generic strategies are driven by five competitive forces; which are:
1. Degree of competitive rivalry among competitors

2. Threat of entry posed by potential entrants

3. Threat of actual or potential substitutes

4. Bargaining power of suppliers

5. Bargaining power of customers

The skill of a firm lies in choosing the right strategy at the right time, in view of the five-force
analysis.

The idea of generic strategies and five forces analysis is illustrated below through a chart:
C.K. Prahalad:
Introduction:
Born in 1941, C.K. Prahalad, entered management sphere from the world of physics – one of the
most precise sciences. C .K. Prahalad is regarded as a very influential thinker on strategy; giving
strategic concepts much different from traditional strategic thinking.

His outstanding work on strategy is contained in a book ‘Competing for the Future’, written in
association with Gary Hamel. Prahald and Hamel coined the term ‘core-competence’ a fountain
head from which stronger competitive advantages keep sprouting.

Developing core-competence is a process of competence – building; which even enables smaller

rivals to face against much larger and richer organisations. In a way, Prahalad has given a new
shape and orientation to strategic thinking; and his work has been widely acknowledged,
especially in the U.S.A.

An Account of Prahalad’s Thinking on Strategy:

C.K. Prahalad and Gary Hamel define core competence as follows:

“A core competence is a bundle of skills and technologies that enables a company to provide a
particular benefit to the customers”.

Some examples of core competence include: Sony’s competence in miniaturization (a very small
model); Philips optical-media expertise; Du Pont’s core competence in chemical technology;
Honda’s core competence in engines, giving it an advantage in diverse products like two-
wheelers, three-wheelers, generators and the like. Many more examples of core competence may
be cited.

Point of Comment:
Core competency theory of Prahalad leads to the concept of Business Process Outsourcing;
which advises business enterprises to identify their core competencies and focus only on the
them and getting everything else done through outside agencies.

Salient features of the concept of core competence:

Some salient features of the concept of core competence may be summarized as under:
(i) Core competence is that strength of a firm which competitors cannot easily match or imitate
i.e. core competence cannot be copied easily by others. However, it is a dynamic concept, rather
than an absolute and static one.
It gives advantage for a specific period; because new competitors may come out with still
superior core-competence. However, it is true that by the time competitors come out with
superior core competence; the company in question has taken the cream out of the opportunity.

(ii) Core competence is largely a technological competence; because new products are an
outcome of technology. However, core competence as a means of creating competitive
advantage, may be developed in other areas also, such as marketing.

(iii) Core competence does not reside in one particular product; it underscores leadership in a
wide range of products/services. Accordingly, core competence makes for or mars the success of
a company.

It may lead to winning or losing the battle for competitive leadership in a particular field. Failure
of one product built on the capitalization of core competence may lead to failure of all products
based on that core competence and vice-versa.

(iv) Development of core competence requires a learning organization. In fact, core competence
represents the sum of learning of individual skills and is unlikely to reside entirely in a single
individual or a small team of individuals. Core competence is developed through collective
learning of organizational members.

(v) Core competence requires corporate imagination, to realize its potential. Corporate
imagination, according to Prahalad, implies visualizing new markets and leading customers
rather than following them through making a search for innovative product concepts.