Management

Management is a process through which an organization designs and maintains an

environment in which individuals work together with the motive of achieving organizational
goals effectively and efficiently. The three essential elements that come under the modern
concept of Management are as follows:
i. Management is a Process: As a process, management refers to series of inter-related
activities to accomplish the stated objective.
ii. Management requires Effective Performance: Effectiveness in Management means
achieving goals on time. In simple terms, it aims at end result. For example, if an
organization achieves its sales target within time, it is said to be effective.
iii. Management needs Efficiency: Efficiency in Management means doing tasks
correctly with minimum cost. It is the ability to produce maximum output with limited
resources.
Characteristics of Management
i. Getting things done through people: Management is the process of getting things
done through the efforts of other people in order to achieve the predetermined
objectives of organization.
ii. Result oriented: Management is result oriented because it gives a lot of importance
to "Results". Examples of Results like, increase in market share, increase in profits,
etc. Management always wants to get the best results at all times.
iii. Follows established principles or rules: Management follows established principles,
such as division of work, discipline, unity of command, etc. These principles help to
prevent and solve the problems in the organization.
iv. Situational in nature: Management makes plans, policies, and decisions according to
the situation. It changes its style according to the situation. It uses different plans,
policies, decisions, and styles for different situations.
v. Uses a professional approach in work: Managers use a professional approach to get
the work done from their subordinates
vi. Dynamic in nature: Management is dynamic in nature. That is, management is
creative and innovative. It bring new and creative ideas, new products, new product
features, techniques, etc.

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Differences between Management and Administration
The major differences between management and administration are given below:
1. Management is an activity of business and functional level, whereas Administration is
a high-level activity.
2. Management focuses on policy implementation, policy formulation is performed by
the administration.
3. Management can be seen in the profit making organization like business enterprises.
Conversely, the Administration is found in government and military offices, clubs,
hospitals, religious organizations and all the non-profit making enterprises.
4. Management performs an executive role such as controlling the core daily operations
of the organization, while Administration performs a decisive role such as making key
decisions, Rules and regulations, legislation, and policies of the Organization.
5. A Person in charge of a Management is called a Manager, while a person in an
Administration is called an Administrator.
Functions of Management
i. Planning: Planning is concerned with deciding in advance what, when, where, why
and how is to be done and who shall do it. Thus, planning is the process of setting
goals and choosing the means to achieve those goals.
According to Koontz, "Planning is deciding in advance what to do, how to do it, when
to do it and who is to do it. Planning bridges gap from where we are to where we want
to go".
ii. Organizing: organizing is a process of structuring the essential relationships among
the people, tasks, and other activities. This is done in a way that the organization’s
resources are integrated and are coordinated to accomplish the objectives efficiently
and effectively.
iii. Staffing: Staffing refers to the process of filling vacant positions in the organization
with skilled and qualified personnel.
OR
Staffing is the process of hiring eligible candidates in the organization or company for
filling specific vacant positions.
iv. Directing: Directing consists of process or technique by which instruction can be
issued and operations can be carried out as originally planned.” Therefore, Directing
refers to a process or technique of instructing, guiding, inspiring, counselling and
leading people towards the accomplishment of organizational goals.
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 v. Controlling: Controlling involves ensuring that performance does not deviate from
standards. Controlling consists of three steps: i) establishing performance standards,
ii) comparing actual performance against the standards, iii) taking corrective action
when necessary.
vi. Coordination: Coordination involves arranging and placing all managerial functions
together to run the management smoothly and achieve the required goals of the
organization. It is an Integration of resources, responsibilities and activities to achieve
the goals of an organization.
Taylor’s Principles of Scientific Management: Taylor is known as the “father” of
scientific management. His four principles of scientific management are given below:
i. Study each part of the task scientifically, and develop a best method to perform it.
ii. Carefully select workers and train them to perform a task using the scientifically
developed method.
iii. Cooperate fully with workers to ensure they use the proper method.
iv. Divide work and responsibility so management is responsible for planning work
methods using scientific principles and workers are responsible for executing the
work accordingly.
Henri Fayol’s Principles: Henri Fayol a successful French industrialist, developed 14
principles of management which are still being used nowadays. These principles are given
below:
i. Division of work: Managers should divide work among individuals and groups. This
ensures that effort and attention will be focused on special portions of the work.
Output can increase if employees are specialized. This is because they become
increasingly skilled and efficient in their fields.
ii. Authority and Responsibility: These are the two key aspects of management.
Authority facilitates the management to work efficiently, and responsibility makes
them responsible for the work done under their guidance or leadership.
iii. Discipline: Employees must obey and respect the rules that govern the organization.
iv. Unity of Command: An employee should receive orders from one superior only.
v. Unity of direction: The organization should have a single plan of action to guide
managers and workers.
vi. Subordination of individual interests to the general interest: The interests of any
one employee or group of employees should not take precedence over the interests of
the organization as a whole.
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vii. Remuneration: Workers must be paid a fair wage for their services.
viii. Centralization: This term refers to the degree to which subordinates are involved in
decision making.
ix. Scalar Chain: Scalar Chain refers to the lines of authority from superior to
subordinate. It establishes channels of authority or the purpose of communication and
decision-making.
x. Order: People and materials should be in the right place at the right time.
xi. Equity: Managers should be kind and fair to their subordinates.
xii. Stability of tenure of personnel: Management should provide orderly personnel
planning and ensure that replacements are available to fill vacancies.
xiii. Initiative: Employees who are allowed to originate and carry out plans will exert high
levels of effort.
xiv. Esprit de corps: Promoting team spirit will build harmony and unity within the
organization.
General Principles of Management:
Planning: Planning means defining SMART (Specific, Measurable, Achievable, Relevant,
and Time-Bound) goals for the organization and determining what actions and resources are
needed to achieve the goals. It deals futuristic with 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”.
Organizing: It is the process of bringing together physical, financial and human resources
and developing productive relationship amongst them for achievement of organizational
goals.
Organizing 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.
Leading: Leading involves influencing others through direction, inspiration, and motivation
toward the attainment of organizational objectives.
Controlling: Controlling involves ensuring that performance does not deviate from
standards. Controlling consists of three steps, which include (1) establishing performance
standards, (2) comparing actual performance against standards, and (3) taking corrective
action when necessary. Performance standards are often stated in monetary terms such as
revenue, costs, or profits.
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Importance of management
i. It helps in Achieving Group Goals: It arranges the factors of production, assembles
and organizes the resources, integrates the resources in effective manner to achieve
goals. It directs group efforts towards achievement of pre-determined goals.
ii. Optimum Utilization of Resources: Management utilizes all the physical & human
resources productively. This leads to efficacy in management.
iii. Reduces Costs: It gets maximum results through minimum input by proper planning
and by using minimum input & getting maximum output. Management uses physical,
human and financial resources in such a manner which results in best combination.
This helps in cost reduction.
iv. Establishes Sound Organization: in order to make a sound and smooth organization
the management establishes effective authority & responsibility relationship i.e., who
is accountable to whom, who can give instructions to whom, who are superiors & who
are subordinates.
v. Essentials for Prosperity of Society: Efficient management leads to better
economical production which helps in turn to increase the welfare of people.
Scope of Management
It is very difficult to precisely state the scope of management. However, management
includes the following aspects:
1. Subject-matter of Management: Management is considered as a continuing activity
made up of basic management functions like planning, organizing, staffing, directing and
controlling.
2. Functional Areas of Management: Management covers the following functional areas:
a) Financial Management: Financial management includes forecasting, cost control,
inventory control, budgetary control, financial planning etc.
b) Human Resource Management: Human Resource Management covers the various
aspects relating to the employees of the organization such as recruitment, training,
transfers, promotions, retirement, terminations, remuneration, labour welfare and
social security etc.
c) Marketing Management: Marketing management deals with marketing of goods,
sales promotion, advertisement and publicity, channels of distribution, market
research etc.
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 d) Production Management: Production Management includes production planning,
quality control and inspection, production techniques etc.
e) Material Management: Material management includes purchase of materials, issue
of materials, storage of materials, maintenance of records, materials control etc.
f) Purchasing Management: Purchasing management includes inviting tenders for raw
materials, placing orders, entering into contracts etc.
g) Maintenance Management: Maintenance Management relates to the proper care and
maintenance of the buildings, plant and machinery etc.
3. Management is an Inter-Disciplinary: The science of management draws ideas and
concepts from a number of disciplines making it a multi-disciplinary subject.
4. Principles of Management: The principles of management are of universal application.
These principles are applicable to any group activity undertaken for the achievement of
some common goals.
5. Management is an Agent of Change: The techniques of management can be improved
by proper research and development.
6. The Essentials of Management: The essentials of management include scientific
method, human relations and quantitative techniques.
Management as Art: Arts means the practical application of knowledge, and skills to
achieve the desired results. Features of management as art are:
i. Practical Knowledge: Management is based on practical knowledge that helps to
make a correct decision.
ii. Creativity: Creativity is a major dimension in managerial success. It creates new
situations for further improvements. It combines human and non-human resources in
useful way to achieve desired results.
iii. Personal Qualities: it is concerned with the ability to know how particular work can
be accomplished. That is, art has to do with applying knowledge/science and
expertness in performance.
iv. Perfection through practice: Practice makes a man perfect. Every artist becomes
more and more proficient through constant practice. Similarly managers learn through
an art of trial and error initially but application of management principles over the
years makes them perfect in the job of managing.
v. Result-oriented: Management is an art that focuses on the attainment of the
organizational goal in the most effective and efficient manner.

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Management as science: Science can be defined as a systematic and organized body of
knowledge based on logically observed findings, facts and events. Some of the features of
management as science are:
i. Systematic body of knowledge: Management has various theories, concepts,
principles, models, and techniques which help in systematic solution to an issue.
Thus, management is a systemized body of knowledge.
ii. Universally applicable: The concepts and theories of management are true
throughout the world. It is applicable and useful in every organization in any place.
iii. Cause and effect relationship: Management also follows the principle of cause and
effect relationship. When a certain management action is taken then it affects the
organization in a certain manner. Hence, we can find management is based on cause
and effect relationships.
iv. Observation and Experiment: The laws of management are derived from many
observations and different experiments carried out in various organizations. So the
theories of management are based on the findings and proofs of observation and
experimentations.
v. Predictability: Predictions of future events can be forecasted because of the
recognized management techniques.
Management as Profession: A profession may be defined as an occupation that requires
specialized knowledge and intensive academic preparations to which entry is regulated by a
representative body. The basic features of management as a profession are:
i. Well defined body of knowledge: Management has well defined body of knowledge
as in profession.
ii. Restrict entry: Management has restricted entry through an examination or degree as
in profession.
iii. Presence of professional associations: All profession has some associations
affiliated to it and even management has association affiliated to it.
iv. Existing of ethical code: For every profession there are some set of ethical codes
fixed by the profession association. Management also has some ethical codes fixed by
the concerned professional association.
v. Service Motive: The basic motive of each professional is to render committed service
to the society.

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 Concept of Planning: Planning is based on the theory of “thinking before acting”. Planning
is an integral part of our life. We make plans according to the limitations of our budget and
resources to get maximum satisfaction and to fulfill goals from our activities.
Planning is defined as "defining objectives for a given period, designing various courses of
action to achieve them, and selecting the most practicable course of action from the set of
alternatives."
Nature and characteristics of Planning:
I. Planning is goal-oriented: Planning is result oriented function, focuses on the
accomplishment of goal in a feasible and economical way.
II. Primacy of Planning: Planning is the first of the managerial functions. It precedes all
other management functions.
III. Pervasiveness of Planning: Planning is found at all levels of management. Top
management looks after strategic planning. Middle management is in charge of
administrative planning. Lower management has to concentrate on operational
planning.
IV. Future-Oriented: Planning is always future-oriented because it is done for the future.
It decides in the present what is to be done in the future.
V. Co-ordination: Planning co-ordinates the what, who, how, where and why of
planning. Without co-ordination of all activities, we cannot have united efforts.
VI. Flexibility: The process of planning should be adaptable to changing environmental
conditions.
VII. Planning is an intellectual process: Planning is an intellectual process, which
involves creative thinking and. imagination. Managers have to consider various
courses of action, go in detail the pros and cons of every course of action and then
finally decide which course of action may suit them best.
VIII. Selective Process: In order to achieve a set of objectives, there are a number of
alternatives, which are available to an organization. The planning is essentially a
process of choosing among alternatives. It is concerned with decision-making relating
to what is to be done, how it is to be done, when it is to be done, and by whom it is to
be done.
IX. Increases Efficiency: Planning aims to increase the efficiency of the organization at
all levels. The guiding principle of a good plan is the maximum output and profit at
the minimum cost. Planning helps in the utilization of resources and reducing
wastage.
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Importance of Planning
i. Helps to achieve goals: Planning helps an organization to achieve their goals in
efficient and effective way.
ii. Increases efficiency: Planning makes optimum utilization of all available resources.
It helps to reduce the wastage of valuable resources and avoids their duplication. It
aims to give the highest returns at the lowest possible cost.
iii. It helps in avoiding business failures: As planning involves the selection of best
objectives, unity of action, co-ordination of activities, economy in operation and
offsetting of future uncertainty and change, there is a great possibility of avoiding
business failures.
iv. Gives right direction: Direction means to give proper information, accurate
instructions and useful guidance to the subordinates. It is impossible without
planning. It is because planning tells us what to do, how to do it and when to do it.
Therefore, planning helps to give the right direction.
v. Improves competitive strength. The enterprises which adopt planning will have a
competitive edge over the competitors. This is because, planning enables the
enterprises to discover new opportunities and thereby shape its own future.
vi. Secures economy in operation: As planning involves the selection of the most
profitable course of action after evaluating the various alternatives, the enterprise can
achieve the best results at a minimum cost.
vii. Motivates personnel: A good plan provides various financial and non-financial
incentives to both managers and employees. These incentives motivate them to work
hard and achieve the objectives of the organization.
viii. It tackles increasing complexity in modern business. To run a modern business
undertaking, there is need for a large number of people with different specialization
and complex machines. This makes it necessary for the management to depend on
planning to get a clear idea of what is to be done, when it is to be done, where it is to
be done and how it is to be done.
ix. It helps in exercising effective control: Planning involves the determination in
advance of the work to be done, the person responsible to do it, the time to be taken to
do that work and the costs to be incurred. This makes it easy to compare the actual
performance with the planned one. In the case of deviations, steps may be taken to

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 find out the reasons for such deviations. Thus, planning helps in exercising effective
control.

Limitations of Planning
i. Time-consuming: Planning is time-consuming activity as it requires data collection,
data analysis, forecasting, etc., for selecting the best future course of action.
ii. Expensive: Planning requires expertise and the collection of authentic data, which
incurs a lot of costs for the organization. For instance, companies like IBM need to do
a lot of planning prior to starting any new venture. For this, such companies also
spend a lot on research and pay highly to experts to get their advice.
iii. Rigidity. Planning involves strict implementation of predetermined policies,
procedures and programs. This restricts individual's freedom, initiative and desire for
creativity.
iv. Gap between Targets and Results: Planning is done by top-level management and
implemented by middle and lower-level management. This creates a gap between the
plan set and actual results achieved as different employees may have different
perceptions of accomplishing plans.
v. Resistance towards Change: Planning often requires changes due to the dynamic
business environment. However, as a natural human tendency, employees are always
reluctant to accept changes and may not provide their full cooperation.
vi. Reason of Frustration: Sometimes, planned targets are not achieved by managers
and employees irrespective of their best efforts. Such failures frustrate them and cause
a low level of motivation in them.
vii. Problem of Over-target: Planning sometimes makes the top-level management fix
targets that are unachievable and causes problems of over-expectation from
employees.
Essential elements of good and effective planning
Following are the essential elements of good and effective planning in management:
i. Simple: Planning should be so simple and understandable that every employee of the
institution may easily understand and implement it and may give his valuable
contribution to the achievements of the goals.
ii. Comprehensive: All the activities and requirements for achieving the goal should
also be sufficiently described within the plan.

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 iii. Flexibility: Flexibility means introducing changes according to the changed
circumstances and requirements. Planning should be flexible to adopt changes
according to changing circumstances, without incurring heavy financial and work
efficiency losses.
iv. Economical: Minimum resources may be spent on the formulation, execution, and
evolution of the plan.
v. Stability: A good plan should also have the quality of stability, which means that due
to general changes, may not deviate the determined plans. Hence, for the stability of
any plan, it is necessary that it should be formulated in consonance with the long-term
circumstances and should base on forecast prepared on the basis of proper, rational
and factual facts regarding futures circumstances, problems, and difficulties.
vi. Free from Ambiguity: An essential element of a good plan is that it should be free
from ambiguity. So that it may be understood and executed easily. If the plan is
ambiguous, various doubts will arise and several problems with emerging and
efficient implementation and operation of such plans will not be possible.
vii. Reliability: Sufficient information, data, facts should be obtained at the proper time
from reliable sources for good and reliable planning.
Process of Planning: The process of planning involves a number of steps in chronological
order which are given below:
i. Setting Organizational Objectives: The planning process begins with the first step
of establishing organizational objectives. It involves identifying organizational goals
to be achieved by examining internal and external business conditions. For this, the
answers to be given for the following questions:
What is to be achieved?
What actions are to be taken?
Who is to perform it?
How is it to be undertaken?
What should be the time frame?
ii. Examining Business Environment: The next step in the planning process is to
examine internal and external factors that influence the business environment. The
internal factors include strengths and weaknesses of the organization, while external
factors involve threats and opportunities.
iii. Assessing Available Alternatives and Selecting the Most Appropriate
Alternative: The next step in the planning process is to evaluate all available
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 alternatives and then select the best alternative. Generally, an alternative is evaluated
against risks associated, costs involved, upcoming benefits, etc.
iv. Formulating secondary plans: The successful accomplishment of organizational
objectives is confirmed by formulating secondary or alternative plans. These plans are
derived for various activities, units, departments, etc., and indicate a sequence in
which various tasks are to be performed and the time schedule for per- forming those
tasks.
v. Ensuring cooperation and participation: In this step, employees at middle and
lower levels of management are encouraged to participate in the successful
accomplishment of organizational goals. Suggestions were given by operating
personnel to help the management rectify shortcomings in plans and set things right at
the start of the planning process and at the time of its implementation.
vi. Following up: The last step in the planning process is to provide the scope of follow-
up for determining the value of plans made and implemented. This step involves a
continuous review of plans for ensuring their relevance and effectiveness. Reviewing
plans on a continuous basis helps the organization develop sound plans for the future
and avoid mistakes that took place while implementing the previous plans.
Types of Planning

i. Objective: Objective are the goals, aims, or purpose that organizations wish to
achieve over varying periods of time. For example to increase sales revenue by 10%

Features

Measurable in nature.

It can be for the long term or short term.

It can be single or multiple.

It must be achievable or feasible.

Result oriented

Clear and specific

All the activities are guided towards the objective.

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 ii. Strategy: Originally strategy was used in a military action plan. Now strategies are
used in business plans. It is an imperative and comprehensive plan designed to
achieve the organizational objective.

“The determination of basic long-term goals and objectives of an enterprise and the adoption
of the course of action and the allocation of resources necessary to carry out these goals”

Example- techniques for sale promotion

Features

To determine long-term objective.

It is designed to achieve the specific objective.

It is consistent and directs future goals.

iii. Policies: Policies are designed for all levels of management. It is made under limited
guidelines for integrated performance.

“A policy is verbal, written, or implied, overall guide setting up boundaries that supply
general limits and direction in which managerial action takes place”

Example – no credit sale of a product X

Features

Design to implement the strategy

Instructions and guidelines to be followed.

Based on objective

iv. Procedures

It is a sequence of steps that need to be followed by management for achieving future goals.
They specify the series of activities that need to be performed to accomplish a particular goal.

“Procedure prescribes the manner or methods through which work is to be performed.”

Example- the procedure to be followed for school admission.

Features

Series of the task to carry different activities of a department.

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Goal oriented

Chronological order.

v. Rules

Rules are special actions need to be followed strictly by the management.

“A rule requires that a specific and definite action with respect to a situation”

Example- no smoking in premises

Features

Specific in nature

Involve punishment for non -compliance.

Code of conduct

Rigid and compulsive

vi. Programs

It is the combination of Goals, Policies, Procedures, and rules to achieve the special
objective.

“Program is a mixture of procedures, policies, rules, assigned works and elements necessary
for operating the group of activities smoothly”

Example- development of a product

Features

Enhances systematic working.

Designed for the definite objective.

Design for effective use of resources

vii. Budget: It is the monetary expression for the business plan that needs to be followed
in future. With the help of budget, the cost is controlled.

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“A budget is a financial statement and quantitative statement prepared prior to a defined
period of time, of the policy to be pursued during that period for the purpose of attaining a
given objective.” Institute of Cost and work accountants, London

Feature

Monitor the cost and expenditure.

Based on past figures and future possibilities.

Meaning Decision Making

Decision-making can be defined as the process of selecting a course of action from the set of
alternatives to achieve a desired goal or to solve the problem. It is also the process of
selecting the best alternative from the available alternatives.
Elements of Decision Making
I. Decision making is a selection process and is concerned with selecting the best type
of alternative.
II. The decision taken is aimed at achieving the organizational goals.
III. It is concerned with the detailed study of the available alternatives for finding the best
possible alternative.
IV. Decision making is a mental process. It is the outline of constant thoughtful
consideration.
V. It leads to commitment. The commitment depends upon the nature of the decision
whether short term or long term.
Importance of decision making:
I. Achieving Objectives: Decision making help the organization to achieve all its
objectives quickly. This is because rational decisions are made after analyzing and
evaluating all the alternatives.
II. Better Utilization of Resources: Decision making helps to utilize the available
resources for achieving the objectives of the organization. The available resources are
Men, Money, Materials, Machines, Methods and Markets.
III. Selecting the Best Alternative: As we know that the problem has multiple solutions.
Decision making is important to select the best alternative among various alternatives
by analyzing them one by one using various financial, statistical, and accounting
tools/techniques.

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IV. Facing Problems and Challenges: Decision making helps the organization to face
and tackle new problems and challenges. Quick and correct decisions help to solve
problems and to accept new challenges.
V. Increases Efficiency: Rational decisions help to increase efficiency. Efficiency is the
relation between returns and cost. If the returns are high and the cost is low, then there
is efficiency and vice versa. Rational decisions result in higher returns at low cost.
VI. Pervasive Function: Decision-making is a pervasive function of managers aimed at
achieving organizational goals. Decisions are to be taken in all managerial functions
such as planning, organizing, motivating, directing and controlling and in all
functional areas such as production, marketing, finance, personnel, and research and
development. It indicates that the decision-making is spread over many areas of the
organization.
Decision making Process
i. Define the Problem: A problem is a question put forward for solution. A problem
may arise due to the unfilled goals or due to deviations from the desired state of
affairs. Therefore, clear understanding of the problem is necessary for providing the
right alternatives for solving a problem.
ii. Analyzing the Problems: Analyzing the problems is a part of the decision-making
process to study the main reasons for problems and their impact on short as well as
long term organizational performance. A quick analysis of the problem by
accumulating all the related facts, data, and information is a must to find out the
actual source of the problems.
iii. Development of Alternatives: A problem may have various alternatives solutions.
The decision-maker has to identify and study all the possible solutions.
iv. Evaluation of Alternatives: All alternatives should be evaluated by considering the
efforts involved and the outcome expected. Generally, the following queries are taken
into consideration while evaluating any alternative solution, firstly, whether the
alternative solution is feasible in terms of costs, time, legal, constraints, human and
other resources, secondly, whether the alternative is satisfactory for solving problems,
thirdly, whether the consequences of alternative are favorable to the organization.
v. Selection of Best Alternative: This is the final stage of the decision-making process
after the evaluation of various alternatives. Here the best feasible alternative is being
selected. The selection of the best solution helps for implementation and to gain
positive outcomes in organizational objectives.
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 vi. Implementation of Alternative: The operational part of the decision-making
process, in which the best course of action is practically implemented.
vii. Review of Implementation: Decision-making is a continuous process it is necessary
to evaluate the performance from time to time. A follow-up and review of actual
achievement are essential. In case the implementation does not give the desired
results, it is necessary to involve in the modification of procedures and techniques that
can be made to bring the work to the desired track. It also helps in taking an
appropriate decision at the right time.

Features of effective decision making: The features of decision making are discussed as
under:
i. Process: Decision making is a process to find out the solution to any problem or for
the achievement of a specific result.
ii. Selective: It is a selective process in which the optimal alternative is opted, among the
various alternatives. The selection of the alternative is done, only after evaluating all
the alternatives against the objectives.
iii. Cognitive: As the decision making encompasses the application of intellectual
abilities, such as analysis, knowledge, experience, awareness and forecasting, it is a
cognitive process.
iv. Dynamic: It is a dynamic activity in the sense that a particular problem may have
different solutions, depending upon the time and circumstances.
v. Evaluative: Evaluation of the possible alternatives using critical appraisal methods, is
a part of the decision-making process.
vi. Pervasive: Decision making is a pervasive function because it is used in all
organizations.
Nature of Organization
Organization is a social system composed of people, structure and technology for achieving
common goals in a dynamic environment. It is a mechanism, enabling person to work
together efficiently and effectively to achieve the set goals through integrated group effort.
Therefore, organization is a place with certain structure, where people come and work
together to achieve a common goal, in a changing environment.
Characteristics of Organization:
1. Human Association: Organization is the place where people work together to
achieve the common goals.
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 2. Common goal: It is a common purpose which binds all the individuals and groups to
contribute their effort.
3. Division of work: Organization always divides the large task into smaller packages
for easy and prompt functioning by individuals. This brings specialization in work.
4. Hierarchy of authority: Organization has a chain of command, determined by
hierarchy of authority. Under the basis of job responsibility and accountability, skill
demand of the job and complexity of the job hierarchy of authority is constructed. The
power of decision making and control is always determined by the hierarchy of
authority in organization.
5. Flexibility (Environmental Adaptation): Organizational activities directly and
indirectly influence by the environmental factors. So, it is always formulating its plans
and policies that can match the changing requirements of environment.
Importance of Organization:
1. Makes the management simple and efficient
2. Encourages specialization
3. Improves techniques
4. Encourages constructive thinking
5. Increase productivity and
6. Accelerates the progress
Steps in the process of organization:
i. Identification and division of work: Identifying and dividing work to be done into
smaller and manageable tasks.
ii. Departmentalization: Grouping of activities similar in nature as department.
iii. Assignment of duties: Allocating work according to the skills and abilities of
employees.
iv. Establishing reporting relationship: Defines the authority, responsibility,
relationship clearly stating for each employee from whom they have to take orders
and to whom they are accountable.
Formal organization: A formal organization is a social system structured by clearly laid out
rules, goals, and practices and that functions based on a division of labor and a clearly
defined hierarchy of power.
Features:

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 I. Defined inter-relationship: It is a sort of arrangement which clearly defines mutual
relationship. Everybody knows their authority and responsibilities. This clearly shows
who will be reporting to whom.
II. Based on rules and procedures: It is important to observe all the predetermined
rules and procedures in the formal organization. The objectives laid down under
planning are thus achieved.
III. Based on division of work: The chief basis of formal organization is the division of
work. It is this that connects the efforts of different departments with each other.
IV. Deliberately created: It is deliberately created in order to achieve the objectives of
the organization in an easy manner.
V. It is more stable: Changes cannot be introduced because of the needs of individuals
and their wishes. Therefore, it is more stable.
Informal organization: Informal organization is an aggregate of inter-personal relationships
without any conscious purpose but which may contribute to joint results.
Features:
I. Based on formal organization: This is based on formal organization where people
also have informal relations. It means first of all formal organization is established
and then informal organization is created out of it.
II. No written rules and procedures: In this organization, there are no written rules and
procedures to govern inter-relationship. But there are group norms which have to be
observed.
III. Independent channels of communication: In this organization, relations among
different people are not defined because a person at the lowest rank can have direct
contact with the person at the highest level.
IV. Not deliberately created: It is not deliberately created. It emerges out of mutual
relationship and tastes.
V. No place on organization chart: It has no place on the properly prepared
organization chart. Moreover, there is no information about it even in the organization
manual.
Principles of Organization
For timely and systematic completion of work it is must for every organization to adopt some
techniques or principles. Thus these principles would be the deciding factor for the success or
failure of an organization.

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 1. Principle of Objective: All the enterprises whether large or small, set certain central
objectives. Every element of the organization and organization as whole should be
geared to the central objectives identified by the enterprise.
2. Principle of Specialization: Precise division of work facilitates specialization.
According to this principle, division of work among the employees should be based
on their knowledge, skills, abilities, capabilities and interests. This would lead to
specialization which would in turn lead to efficiency, quality and elimination of
wastage of resources.
3. The Scalar Principle: This principle is sometimes referred to as the chain command.
There must be clear lines of authority running from the top to bottom of the
organization and linking all the individuals in the organization.
4. The Principle of Authority: Authority is an important ingredient of the organization
structure. It is the tool by which the manager can create an environment where an
individual can perform with greater efficiency.
5. The Principle of Span of Control: Span of control refers to the number of
subordinates that can be managed effectively and efficiently by supervisors or
managers in an organization.
6. The Principle of Unity of Command: This principle is basically about avoiding dual
reporting. It states that every individual employee working in the organization should
be kept in the supervision of one boss only. This principle eliminates the possibility of
conflicts in instructions and fosters a feeling of personal responsibility for work.
7. The Principle of Definition: Each individual in the organization should be made
aware about his / her responsibilities, duties, authorities and relations with the other
job positions in the organization structure.
8. Principle of Unity of Direction: The basic motive for the existence of organization is
the attainment of certain objectives. Major objectives should be split into functional
activities and there should be one objective and one plan for each group of people.
9. The Principle of parity of Authority and Responsibility: The responsibility for
execution of work must be accompanied by the authority to control and direct the
means of doing the work.
10. The Principle of Supremacy of Organizational Objectives: The organizational
goals and objectives should be given wide publicity within the organization. The
people contributing to it should be made to understand that enterprise objectives are

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 more valuable and significant and one should give higher priority to organization’s
objectives in comparison to personal motives.
What is Communication?
The word ‘communication’ is derived from the Latin word communis, which means
common. It is a two-way process wherein the message in the form of ideas, thoughts,
feelings, opinions is transmitted between two or more persons with the intent of creating a
shared understanding. Communication is the essence of management. The basic function of
management cannot be performed well without effective communication.
Communication process: The communication process has several components that enable
the transmission of a message. Here are the various parts:
Sender: The person that is delivering a message to a recipient.
Message: This refers to the information that the sender is conveying to the receiver.
Encoding: converting the message into an understandable symbol i.e. a written format, oral
means, pictures, gestures, etc.
Channel of communication: This is the transmission or method of delivering the message.
Receiver: The receiver is the person who is getting or receiving the message.
Decoding: Decoding is the act of translating message in readable form or understandable
form.
Feedback: The receiver might have feedback or a response for the sender.
Noise: Noise is that factor which disturbs and reduces the accuracy of communication.

Importance of Communication: The importance of communication can be explained below:

i. Communication facilitates to prepare targets, standards, and instruction for future
plans.
ii. Communication helps an organization to gain maximum productivity and achieve the
predetermined goal.
iii. Communication creates coordination among departments, activities and persons in the
organization.
iv. Effective communication helps in the smooth and successful working of the
enterprise. Effective communication system co-ordinates the physical facilities and
manpower, and makes the maximum output at minimum cost.
v. An efficient downward communication helps the management to tell the subordinates
what the organization wants and how it can be achieved.

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 vi. Communication provides feedback and progress report or internal information that
helps to make the decision quickly.
vii. Effective communication establish mutual trust and confidence between management
and labor.
Types of Communication:
1. Formal Communication: Communication through the official chain of command is
called formal communication. It flows through the scalar chain of authority. Formal
communication may be of two types: Vertical Communication and Horizontal
Communication
i. Vertical Communication: Vertical communication flows vertically i.e., upwards or
downwards through formal communication channels.
a. Downward Communication: Downward communication refers to flow of
communication from a superior to subordinate. E.g. Notices, circulars, memos,
reports, etc.
b. Upward Communication: It refers to flow of communication from a subordinate
to superior. E.g. application for leave, submission of progress report, suggestions,
complaints, etc.
ii. Horizontal or Lateral communication: The flow of communication between
persons holding position at the same level of the organization is known as horizontal
communication.
2. Informal Communication: Communication that takes place without following the
formal lines of communication is said to be informal communication. It results from
the social interaction among the members. It satisfies the social needs of members in
the organization. The network of informal communication is known as Grapevine. It
is so called because the origin and direction of flow of communication cannot be
easily traced out.

Barriers to Communication
I. Semantic barriers: Semantic barriers are concerned with problems and obstructions
in the process of encoding and decoding of message into words or impressions.
Semantic barriers are:
 Badly expressed message: The badly expressed messages may be an account of
inadequate vocabulary, usage of wrong words, omission of needed words, etc.

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  Symbols with different meanings: People may interpret the same message differently
depending upon their attitude, education, social and cultural backgrounds.
 Faulty Translations: If the translator is not proficient with both the languages,
mistakes may arise causing different meanings to the communication.
 Technical jargon: Technical words may not be understood by the workers.
II. Psychological Barriers: Emotional or psychological factors act as barriers to
communicators. Psychological barriers are:
 Premature evaluation: People evaluate the meaning of message before the sender
completes his message.
 Lack of attention: The preoccupied mind of receiver and the resultant non-listening of
message acts as a major psychological barrier.
 Loss by transmission and poor retention: When communication passes through
various levels, there is a chance of distortion of the message.
 Distrust: Distrust between sender and receiver acts as a barrier.
III. Organizational Barriers: Organization’s policies, Number of levels of management,
rigid rules, etc., are the examples of organizational barriers.
 Organizational policy: If the organizational policy is complex, it restricts the free flow
of communication.
 Rules and regulations: Rigid Rules and regulations may be a hurdle to communication
 Status: Status differences of people in communication chain also adversely affect the
effectiveness of communication.
 Complex organizational structure: If there are number of managerial levels,
communication gets delayed and distorted.
IV. Personal barriers: It includes fear of challenge to authority, lack of confidence, lack
of incentives, etc.
 Fear of challenge to authority: If a superior perceives that a particular communication
may affect his authority, then he withholds such communication.
 Lack of confidence: If superiors do not have confidence on the competency of
subordinates they may not seek their advice.
 Lack of incentives: If there is no motivation or incentive for communication,
subordinates may not take initiative to communicate.
Measures to overcome barriers to communication
The following are some of the measures that can be adopted to overcome various barriers of
communication.
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i. The communication should take place as per the understanding level and capabilities of the
receiver. That is, it must be ensured that the receiver is clearly able to understand the
information.
ii. The language, tone and content of the information should be appropriately chosen. It should
be easily understandable and should not harm anybody’s sentiments.
iii. For the communication to be effective proper feedbacks must be taken from the receiver.
That is, he must be encouraged to respond during the conversation.
iv. It must be ensured that the information is complete in all respect and nothing is left
ambiguous.
v. The core idea of the communication must be clear between the sender and the receiver. That
is, it must be conveyed properly what the communication is about.
vi. The sender of the information should also be a patient listener. He should be open to
communication from the other end as well.

Characteristics of good communication system:

i. Clear Message: The message which the sender wants to convey must be simple, easy
to understand and systematically framed to retain its meaningfulness.
ii. Correct Message: The information communicated must not be vague or false in any
sense; it must be free from errors and grammatical mistakes.
iii. Complete Message: Communication is the base for decision making. If the
information is incomplete, it may lead to wrong decisions.
iv. Precise Message: The message sent must be short and concise to facilitate
straightforward interpretation and take the desired steps.
v. Reliability: The sender must be sure from his end that whatever he is conveying is
right by his knowledge. Even the receiver must have trust on the sender and can rely
on the message sent.
vi. Consideration of the Recipient: The medium of communication and other physical
settings must be planned, keeping in mind the attitude, language, knowledge,
education level and position of the receiver.
vii. Sender’s Courtesy: The message so drafted must reflect the sender’s courtesy,
humbleness and respect towards the receiver.

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Staffing: Staffing has been described as the managerial function of filling and keeping filled
the positions in the organization structure. Staffing is process of recruiting right people for
the right job.
Staffing means putting people to jobs. It begins with human resource planning and includes
different other functions like recruitment, selection, training, development, promotion and
performance appraisal of work force.
Recruitment may be defined as the process of searching for prospective employees and
stimulating them to apply for jobs in an organization.
Sources of recruitment
1. Internal Sources of Recruitment: Internal sources refer to inviting candidates from
within the organization.
2. External Sources of Recruitment: When the candidates from external sources are invited
to fill in the vacant job position then it is known as external recruitment.
The common methods of external sources of recruitments are:
i. Direct Recruitment: Under the direct recruitment, a notice is put up on the notice
board of the enterprise specifying the details of the jobs available.
ii. Casual callers: Many reputed business organizations keep a data base of unsolicited
applicants in their office. This list can be screened and best candidate is selected.
iii. Advertisement: Advertisement media is used when a wider range of candidates to
choice are required. Example– Newspapers, Internet, Radio, Television etc.
iv. Employment Exchange: Employment exchange run by government is regarded as a
good source of recruitment for unskilled and skilled operative jobs.
v. Placement Agencies and Management consultants: Placement agencies provide a
nationwide service in matching personnel demand and supply.
vi. Campus Consultants: Campus recruitment means recruitment of candidates directly
from management and technical institutions and universities.
vii. Labour Contractors: Labour contractors maintain close contacts with labourers and
they can provide the required number of unskilled workers at short notice.
viii. Advertising on Television: The practice of telecasting of vacant posts over
Television is gaining importance these days.
ix. Web Publishing: There are certain websites specifically designed and dedicated for
the purpose of providing information about both job seekers and job opening.
x. Recommendations of Employees: Applicants introduced by present employees, or
their friends and relatives may prove to be a good source of recruitment.
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 Training, development and Education
Training: Training is the process of improving an employee's skills and competence
required to perform a specific job.
Development: Development refers to the learning opportunities that are designed to help
the employee's grow.
Education: It is the method of increasing the knowledge and understanding of the
employees. It helps in better interpretation of the knowledge.
Training methods
1. On the Job Methods: On-the-job training refers to the training where the subordinates
learn by doing in the workplace, under the supervision of superiors. It includes:
i. Apprenticeship Programmes: It is a method in which a trainee works under the
guidance of a master worker for a prescribed period of time with an aim to acquire
specific skills.
ii. Coaching: It is a method in which a superior acts as a coach and guides or
instructs the employee trainee to learn skills and processes within a defined period
of time.
iii. Internship Training: It is a combined effort of educational institutions and
business organization to give work exposure to students and prepare them for real
work culture.
iv. Job Rotation: It is a method of training where employees are trained with a full
range of skills by shifting them from one job to another or from one department to
another.
2. Off the Job Methods: On-the-job training refers to the training where the
subordinates learn by doing at a place away from the workplace. It includes:
i. Classroom Lectures/ Conference: It is a method of training where information is
conveyed through lectures for conferences. Films: It is a method of training where
important information or skills are demonstrated using films, televisions, videos or
presentations.
ii. Case study: It is a method of training where actual work situations of the past are
discussed to identify problems, analyze its causes, and develop alternative
solutions to solve problems.
iii. Computer Modelling: It is a method of training where the actual work
environment is imitated by programming a computer.

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 iv. Vestibule Training: It is a method of training where a duplicate work
environment called "vestibule' is created to train employees with the technical and
operating skills.
v. Programmed Instructions: It is a method of training where specific skills or
knowledge are broken into units and arranged in a logical and sequential learning
package.
Directing: Directing refers to giving instructions, guidance and motivation to the staff in an
organization to work efficiently in order to achieve organizational goals. Directing is a key
managerial function performed by the manager along with planning, organizing, staffing and
controlling. Directing is a continuous process initiated at top level and flows to the bottom
through organizational hierarchy.
Characteristics of Directing
i. Directing Initiates Action: Directing is required at all stages, a manager has to
perform this function along with planning, organizing, staffing and controlling.
ii. Directing Takes Place at all Levels of Management: every manager has to perform
this function and thence it takes place at all levels of management.
iii. Directing is a Continuous Process: Directing takes place at all levels of the
organization so that all activities are directed towards the achievement of
organizational goals.
iv. Directing Flows from Top to Bottom: Directing initiates at top level and flows to
the bottom of organization through organizational hierarchy.

Importance of Directing:
i. Directing Initiates Action: It helps in initiating action by the people in the
organization towards attainment of desired objectives.
ii. Directing Integrates Employee’s Efforts: Coordination of all the activities of an
organization is very necessary. A manger .is required to motive employees and work
as team.
iii. Motivation and Leadership: It motivates the subordinates by showing leadership
qualities to work efficiently and to contribute their maximum efforts towards the
achievement of organizational goals.
iv. Directing Facilitates Change: Employees often resist changes due to fear of adverse
effects on their employment and promotion. Effective directing through motivation,

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 communication and leadership help employees to cope with changes in the
environment.
v. Directing helps in Stability and Balance in the organization: Effective directing
fosters cooperation and commitment among employees and helps in creating a
balance between various activities and departments.
Principles of directing
Effective directing is a challenging task as it involves many complexities. A manager has to
deal with people with diverse background, and expectations. This complicates the directing
process.
The following are the basic principles of effective direction:
i. Maximum Individual Contribution: Directing techniques must be applied towards
maximizing individual contribution of employees for the achievement of
organizational objectives. It should bring out untapped energies of employees for the
efficiency of organization.
ii. Harmony of Objectives: It is an important function of management to motivate
people and direct their efforts towards the achievement of enterprise objectives and
their personal goals. The interest of the group must always prevail over individual
interest. The principle implies harmony of personal interest and common interest.
iii. Unity of Command: This principle states that one person should receive orders from
only one superior, in other words, one person should be accountable to only one boss.
If a person receives orders from more than one superior, it creates confusion, conflict
and disorder.
iv. Appropriateness of Direction Technique: Appropriate motivational and leadership
technique should be used by a manger while directing the people based on
subordinate needs, capabilities, attitudes and other situational variables.
v. Managerial Communication: Directing should convey clear instructions to
subordinates and proper feedback ensure that they understood the instructions clearly.
To have effective direction, it is very essential to have an effective communication
which provides for free flow of ideas, information, suggestions, complaints and
grievances.
vi. Use of Informal Organization: A manager must be aware of the informal groups in a
organization and use it for effective directing.
vii. Leadership: Managers should exercise good leadership as it can influence the
subordinates positively without causing dissatisfaction among them.
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 viii. Follow through: A manager not only issue orders and instructions, but also follow-up
the performance employees so as to ensure that work is being performed as desired. He
should intelligently oversee his subordinates at work and correct them whenever they
go wrong.
Technique of Directing: Direction in the organization is to be implemented in a methodical
way. Various Techniques are used that prove good when used as Direction in the
organization. Let us now discuss the various techniques used in the process of Direction:
i. Consultative Direction: Here the superiors in the organization system consults the
decisions with their subordinates or team members, before implementing it or putting
it into action.
ii. Free-Rein Direction: In this type of Direction, the educated and experienced
subordinates take decisions on their own. Decisions are relied on and they also take
the accountability of the decision.
iii. Autocratic Direction: Here the superior clearly sets the directions and gives precise
orders to the subordinates to accomplish a predetermined goal. He does not take the
suggestions or viewpoints of the subordinates.
iv. Supervision: Supervision is only overseeing the subordinates at work. He gives a
clear-cut instruction about the work. Skills, group togetherness and coordination
affect the direction of supervision.
v. Motivation: In this type, the direction does not only limit till giving orders or
instructions, it is rather a force that creates a burning desire among the subordinates to
perform the task. Motivation is the driving energy that keeps the subordinates
interested in the work, this can also be fulfilled by offering them incentives.

Leadership: leadership is the ability to motivate and influence subordinates to complete their
tasks with passion, competence, and willingness to achieve group objectives.
Essential Leadership Qualities
i. Dedication, Commitment and Determination: Dedication, commitment and
determination to complete a task successfully and being always ready to face any kind of
challenges is a Leadership characteristic.
ii. Leadership is a Passion: Leadership is a passion. Thinking out of the box, being
innovative, and going against the waves is leadership.

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iii. Honesty: A good leader should maintain a high degree of honesty. He should be sincere
and should follow ethics and values. He should be an idol for others in terms of honesty,
integrity and values.
iv. Intelligence: A leader must have a good presence of mind and knowledge. He should be
competent enough to effectively examine and solve the problems encountered in the
course of work. He must have the required intelligence to make proper decisions based on
logic and facts.
v. Inspiration: A leader should be a source of inspiration and motivation to others. That is,
he must be exemplary in terms of work, performance and values. He must be able to
develop willingness among the subordinates to work to the best of their capabilities.
vi. Confidence: A leader should be high in confidence. He must also be able to maintain his
confidence in difficult situations as well. Only when a leader is confident himself, he can
boost the confidence of his subordinates.

vii. Responsibility: A leader should command responsibility for the work and tasks of his
group. He should hold the responsibility of being answerable for the mistakes of his
subordinates. However, as a mark of encouragement, he must share the credit of the
success with his subordinates.
viii. Effective Communication Skill: A leader should be able to clearly express his ideas
and instructions clearly to the subordinates. On the other hand, a leader also forms the
link between the higher authorities and the subordinates. He should be able to effectively
pass the problems and suggestions of the subordinates to the seniors. Besides, he should
also be a patient listener and counsellor.
ix. Ability to take Decisions: A leader should be able to make appropriate decisions based
on logic, facts and figures.
x. Social Behavior: He should maintain a friendly and supportive behavior with his
subordinates. He must be able to understand people and maintain good social relations
with them.

Leadership Styles
Autocratic leadership style: It refers to a leadership style where the leader takes all the
decisions by himself.
Democratic leadership style: It refers to a style where the leader consults its subordinates
before taking the final decision.
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Laissez-faire or Free-rein leadership style: It refers to a style where the leader gives his
subordinates complete freedom to take the decisions.

Functions of Leadership
Establish the organizational goals: The first important function of a leader is to establish
the organizational goals and objectives. It is his primary function. Therefore, a leader
establishes organizational goals or should participate with superiors to get it done.
Planning and organizing function: As a leader, manager is responsible to prepare the plans
and design the total functions of organizing that is presenting chain of command, authority
responsibility relationship.
Execution and implementation of plans: After planning and organizing, a leader has to
execute or implement the plans in such a style that it is directed towards organizational goals.
Therefore, a leader as manager must execute the plans.
Control and supervision: It is the responsibility of the leader to see the various departments
and supervise them properly. A leader has to control and supervise the activities of the
followers to achieve the goals.
Maintaining good relation: Leader is the chief of the organization. He has to establish good
relations with others. Since, leadership is related to influence the behavior of followers.
Leader can only influence the person by maintaining good relations.
Administration of rewards and punishment: A leader guides and motivates the behavior of
sub-ordinates to match the requirements of the plans and jobs. In course of administering
rewards and punishments, a leader encourages, upgrades and promotes the workers who
perform their works as per the demand of the organization and demotes the workers who
violate the rules of the organization.
Integration: leader integrates the efforts of the group. Common objectives cannot be
achieved without co-ordination. In this age of specialization, each individual is a part of the
whole is the leadership function that has to be carried out by a managerial leader.
Communication: Communication of organizational policies, procedures and programs is
necessary in order to integrate the efforts of the members of the group. Realizing the
importance of communication, a managerial leader has to design a proper system of
communication.

Motivation: Motivation means stimulation or inducement to act or move. It is the process of

stimulating people to action to accomplish desired goals.
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 Importance of Motivation:
i. Motivation helps to change from negative attitude to positive attitude.
ii. Motivation improves performance level of employees.
iii. Motivation helps to reduce employee turnover.
iv. Motivation creates supportive work environment.
v. Motivation helps to reduce absenteeism in the organization.
vi. Motivation helps managers to introduce changes smoothly without much resistance
from workers.
Financial and non-financial incentives
Incentive means all measures which are used to motivate people to improve their
performance.
1. Financial incentives: refer to incentives which are measurable in monetary terms and serve
to motivate people for better performance.
Types of Financial incentives:
i. Salary and Allowances: In every organization salary and allowances given to the
employees forms the basic form of financial incentive. Regular raise in salaries and
grant of allowances acts as a motivation for the employees.
ii. Performance Based Incentives: Often organization offer monetary rewards for good
performance. This induces the workers to improve their efficiency and performance.
iii. Bonus: Bonus refers to the extra reward over and above the basic salary. It can take the
form as cash, gifts, paid vacations, etc. For example, some organizations grant bonus
during festival times such as Eid bonus.
iv. Stock Option: Under this incentive scheme, the employee is offered the shares of the
company at a price lower than the market price. This instils a feeling of ownership and
belongingness in the employee and urges him to contribute towards the goals of the
organization.
v. Sharing of Profit: Herein, the organization shares a portion of the profit with its
employees. This encourages the workers to contribute actively towards the growth of
the organization.
vi. Retirements Benefits: Many organizations offer certain retirement benefits to its
employees such as pensions, gratuity, provident fund, etc. This provides a sense of
security and stability to the employees.
vii. Fringe Benefits: Besides the basic salary an organization may offer certain additional
advantages also to its employees such as housing allowance, medical allowance, etc.
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2. Non-Financial Incentives: Non-financial incentives refer to those incentives that focus on
non-monetary needs of the employees such as the social and psychological needs. The
following are some of the non- financial incentives used in the organizations.
i. Position: Rise in status in terms of power, authority, responsibility provides a
psychological boost to the employees. For example, a promotion may satisfy the
esteem and self-actualization needs of an individual.
ii. Organizational Characteristics: Certain characteristics such as employee freedom,
recognition of performance, incentives and rewards play an important role in
influencing the behavior of the employees. For example, if the employees get due
recognition for their performance, it encourages them to work more efficiently.
iii. Work Enrichment: Often, a challenging work endowed with greater responsibility
and requiring higher knowledge and skill enhances the interest of the employee. It
provides the employee prospects for personal growth. Thus, it proves to be a good
source of motivation for him.
iv. Career Opportunities: If the organization is endowed with appropriate growth and
career opportunities for its employees, it strives then to perform better and thereby,
climb the professional ladder.
v. Job Security: An employee should have a certain extent of security regarding his
association with the organization. Constant fear of losing the job hampers their
efficiency. However, a complete security can also result in loss of interest in work.
vi. Involvement: If an organization allows the participation of the employees in the
policy and decision making matters, then it instils a feeling of belongingness in them
and motivates them to work towards the organizational goals.
Maslow’s Need Hierarchy theory: Maslow’s Need Hierarchy theory provides an
understanding of the complex phenomenon of motivation. According to Maslow, within each
individual there exists a set of five needs that can be arranged in a hierarchy. Knowledge of
these needs helps the manager in understanding the behavior of employees. With
identification of the needs of the employees, appropriate motivation can be provided to them.
Assumptions
Maslow’s theory is based on the following assumptions.
i. People’s need influences their behavior.
ii. Needs of the individuals can be arranged in a hierarchical order.

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 iii. An individual can move to a higher level need only when the lower level need in the
hierarchy is satisfied.
iv. Once a need is satisfied, an individual can be motivated only through the next higher
level need.
Theory
The following is the hierarchy of needs as given by Maslow.
i. Physiological Needs: Such needs comprise of essential requirements for sustenance of
life. They are at the top of the hierarchy. The fulfilment of these needs is necessary for
survival. For example, food, clothing, shelter are physiological needs. An employee
requires a certain basic salary for the satisfaction of these needs.
ii. Security Needs: These needs relate to physical and economic security and well-being. For
example, an employee desires job security, income stability, etc.
iii.Belongingness Needs: Such needs comprise of the social needs of an individual such as
affection, acceptance, companionship, etc. as every individual yearns for social acceptance
and belongingness.
iv.Esteem Needs: These needs include such elements as respect, dignity, recognition, etc. as
every individual wants to command respect and acknowledgement in the peer group.
v. Self-Actualization Needs: This need refers to achieving what one aims or aspires. It is the
highest level need in hierarchy. For an employee such needs relate to growth, work
satisfaction, etc.
Maslow’s theory is widely appreciated and is used as basis for motivation by the managers.
However, sometimes it can happen that needs of an individual do not follow the exact order
of hierarchy. Nevertheless an understanding of the needs as given by Maslow helps the
managers in practicing efficient motivation.

Understanding Theory X and Theory Y

Douglas McGregor work is established in motivation theory. Mr. McGregor postulated two
theories on human management and leadership which are Theory X and Theory Y.
Theory X:
Theory X managers tend to take a pessimistic view of their people, and assume that they are
naturally unmotivated and dislike work. As a result, they think that team members need to be
prompted, rewarded or punished constantly to make sure that they complete their tasks.
Theory Y:

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Theory Y managers have an optimistic, positive opinion of their people, and they use a
decentralized, participative management style. This encourages a more collaborative, trust-
based relationship between managers and their team members.

Controlling: Controlling is one of the management function, which involves setting

standards, measuring actual performance and taking corrective action. Controlling involves
comparison of actual performance with the planned performance.
Controlling means ensuring that activities in an organization are performed as per the plans.
It also ensures that an organizations resources are being used effectively and efficiently for
the achievement of desired goals.
Characteristics of Controlling
i. Goal-oriented function: It ensures that everyone follows the plan or the work is
accomplished as per the plan and tries to achieve the goals of the organization.
ii. Pervasive function: It is an activity performed not only by top level managers but also
by managers working at all levels, i.e. top, middle and operational levels.
iii. Both backward and forward looking function: The work which is done is assessed and
deviations from the pre-determined standards are evaluated. Based on the deviations, the
controlling function seeks to take the required corrective action. In this way, controlling
evaluates the actual performance (by comparing it with) and guides future actions.
iv. Continuous function: Controlling is an ongoing process. This function is carried out till
the time an organization survives.
Objective of Controlling
Below are the various objectives of controlling:
i. To ensure that the performance of activities takes place in accordance with the standards
that have been predetermined
ii. To improve the operational efficiency of operations by avoiding unnecessary actions
iii. To ascertain the correct action to take with the least amount of costs, effort, and time
iv. To have an understanding of what is happening in the organization
v. To unite the various diverse efforts of employees towards a single goal.

Steps in the process of controlling.

Controlling is a systematic process involving following steps

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i. Setting Performance Standards: The first step in the controlling process is setting up of
performance standards. Standards are the criteria against which actual performance would
be measured.
Standards can be set in both quantitative as well as qualitative terms.
Some of the qualitative standards are—cost to be incurred, product units to be produced,
time to be spent in performing a task etc. Improving goodwill and motivation level of
employees are examples of qualitative standards.
ii. Measurement of Actual Performance: Once performance standards are set, the next step
is measurement of actual performance. Performance should be measured in an objective
and reliable manner. Some of the techniques used for measuring the performance are
personal observation, sample checking performance reports etc.
iii.Comparing Actual Performance with Standards: This step involves comparison of
actual performance with the standards. Such comparison will reveal the deviation between
actual and desired results. Comparison becomes easier when standards are set in
quantitative terms. For instance, performance of a worker in terms of units produced in a
week can be easily measured against the standard output for the week.
iv.Analyzing Deviations: Some deviations in performance can be expected in all activities.
It is therefore, important to determine the acceptable range of deviations. Also, deviations
in key areas of business need to be attended more urgently as compared to deviations in
certain insignificant areas. Critical point control and management by exception should be
used by a manager in this regard.
v. Taking Corrective Action: The final step in the controlling process is taking corrective
action. No corrective action is required when the deviations are within acceptable limits.
However, when the deviations go beyond the acceptable range, especially in the important
areas, it demands immediate managerial attention so that deviations do not occur again and
standards are accomplished. In case the deviations cannot be corrected through managerial
action, the standards may have to be revised.

Essentials of Effective Control System

An effective control system has the following features:
i. Future-oriented: The control system ensures that mistakes made in the past are not
repeated in future. It is a future-oriented process that focuses plans.

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 ii. Multiple control system: No control system can be effective if it aims to control only
one activity. The effective control system simultaneously controls production, inventory,
sales, cost and quality.
iii. Economical: It is costly to institute a control system. It is ensured that costs to the
control system are less than its benefits. This is possible by applying corrective measures
only on significant deviations (management by exception).
iv. Timeliness: Deviations must be reported as frequently as possible to the management
so that timely remedial action can be taken. Late actions may be as good as no actions.
v. Flexible: Business operates in the turbulent and dynamic environment; Control system
should be flexible to adjust business operations to environmental changes. Impact of
changes on planned performance (or standards) must be incorporated from time to time.
There should be alternative plans to meet unexpected situations.
vi. Control of critical points: Rather than controlling every activity, control system should
focus on critical points only where deviations affect the organizational goals. Poor
performance in these areas indicates deviations from the standards and requires
corrective action. Critical points determine areas where actions should be monitored.
“Effective control requires attention to those factors critical to evaluating performance
against plans.”
vii. Operational: The control system should not only find deviations but also correct the
deviations. Managers can artificially create a deviation and see how effectively the
control system works in such conditions.
viii. Organizational climate: In organizations where freedom is not given to workers
(autocratic style of management), a tight control system will be successful and
organizations where participative or democratic style of management prevails, a lenient
control system should be adopted.
ix. Objective standards: A control system will be effective if standards of performance are
framed objectively. Standards should be specific, quantified and attainable. Poor or non-
measurable standards will violate the purpose of control system. It may result in short-
term gains at the cost of long-term profits.
x. Control by exception: Managers should control only exceptional deviations as they
have serious impact on organizational efficiency.
xi. Positive environment: Control system should not be viewed as a negative force that
restricts workers’ innovative and creativity. It should create positive organizational

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 climate. It should allow freedom of actions rather than punishing undesirable action. The
focus should be on work (ends) and not workers (means.).

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