APS College of Engineering,

(Affiliated to Visvesvaraya Technological University and Approved by AICTE, NAAC Accredited)

Somanahalli, Kanakapura Main Road, Bengaluru-560116

Department of Electronics and Communication Engineering

Subject Name: Technological Innovation Management and Entrepreneurship

Subject Name: 21EC61
Semester : 6th
Academic Year: EVEN 2023-2024
Module-1

Faculty Name: Dr. Naik D C

Assistant Professor,
 Module-1
Management: Nature and Functions of Management-
Importance, Definition, Management Functions, Levels of
Management , Roles of Manager, Managerial Skills,
Management & Administration, Management as a Science, Art &
crypto

Profession.
Planning: Planning- Nature, Importance, Types, Steps and
Limitations of Planning:
Decision Making- Meaning, Types and Steps in Decision
Making.
• Management is a critical element in the economic growth of a country. By
bringing together the four factors of production i.e. men, money, material and
machines.
• A country with enough capital, manpower and other natural resources can still be
poor if it does not have competent managers to combine and coordinate these
resources.
• Every business needs the direction this direction is given by Management.
• Peter Drucker rightly observes that without management, a country’s resources of
production remain resources and never become production.
• Manager - A manager is one who contributes to the organization’s goals
indirectly by directing the efforts of others not by performing the task himself.
• Employee - On the other hand, a person who is not a manager makes his
contribution to the organization’s goals directly by performing the task himself.
Definition of management
• By Mary Parker Follett - “Management is art of getting things done through
people”. Two weaknesses of Mary Parker Follett’s definition are

1. It uses the word “art” management is merely an art is half-truth. Art deals with
the application of knowledge. Management is not merely application of
knowledge. It also involves acquisition of knowledge.

2. This definition does not throw light on the various functions of a manager

By George R. Terry - “Management as a process consisting of planning, organizing,

actuating and controlling performed to determine and accomplish the objectives by
the use of people and resources”.
The four management activities included in this process are: planning, organizing,
actuating and controlling.
• Planning means that managers think of their actions in advance.
• Organizing means that managers coordinate the human and material resources of
the organization.
• Actuating means that managers motivate and direct subordinates.
• Controlling means that managers attempt to ensure that there is no deviation from
the norm or plan.
• By Henry Fayol - “Management is conduct of affairs of business moving towards its
objectives through a continuous process of improvement and optimization of
resources”
• By Koontz - “Management is a function of guidance and leadership control of
efforts of a group or individuals in order to achieve goals/objectives of an
organization”
Nature and characteristics of Management
The success of production depends on effective combination and co-ordination of
following factors – land, labor, capital, organization and entrepreneurship.
1. It should be stable
2. It should be applicable to all kinds of Organizations
3. It should be transparent
4. Its approaches are to be clear and goal oriented.
5. It should be simple yet effective.
6. It should have well defined goals.
7. It should have good planning, organizing, staffing, directing and controlling
functions..
8. It should provide conductive atmosphere of work.
Scope of Management
• The management is must for every organization

• The existence of management ensures proper function and running of an enterprise.

Management plans the activities, coordinates and utilizes the available recourses
effectively and efficiently at minimum cost.

• Scope of management is not limited only to business organization, but it is extended

to business establishment such as hospitals, educational institutions, Govt offices,
Service organizations, security organizations etc.
Management scope can be extended to the following areas of life

1. Developing Management

2. Financial Management

3. Marketing Management

4. Production Management

5. Transport Management

6. Purchase Management

7. Sales Management

8. Office Management
Functional Areas of Management / Process of Management
• There is enough disagreement among management writers on the classification of
managerial functions. Some classify these functions into four types, some into five and
some into six or seven

• Newman and Summer - classify these functions into 4 – Organizing, Planning,

Leading, Controlling

• Henry Fayol - classify these functions into 5 - Planning, Organizing, Commanding,

Coordinating and Controlling

• Luther Gulick - classifies into 7 functions – (POSDCORB) Planning, Organizing,

Staffing, Directing, Coordinating, Reporting, and Budgeting

• Koontz and O’Donnell - classifies into 5 types- Planning, Organizing, Staffing,

In general let consider 4 functions of a management
1. Planning
2. Organizing
3. Directing
4. Coordinating Ernest dale adds two additional functions
5. Innovation
6. Representation
1. Planning
• Planning is the function that determines in advance what should be done. It is
looking ahead and preparing for the future.
• It is a process of deciding the business objectives and charting out the methods of
attaining those objectives.
• It is the determination of what is to be done, how and where it is to be done, who
has to do it and how results are to be evaluated.
• This is done not only for the organization as a whole but for every division,
department or sub-unit of the organization.
• Thus planning is a function which is performed by managers at all levels top,
middle and supervisory.
• Plans made by top management for the organization as a whole may cover periods
as long as five or ten years.
• Plans made by middle or first line managers, cover much shorter periods. Such
2. Organizing
• It is a part of management that involves in establishing a structure of roles for
people to fill in an organization.
• To organize a business it’s necessary to provide it with everything useful to its
functioning: personnel, raw materials, tools, capital.
• All this may be divided into two main sections,
– Human organization and
– Material organization.
• Once managers have established objectives and developed plans to achieve them,
they must design and develop a human organization that will be able to carry out
those plans successfully.
• According to Allen, this organization refers to “the structure which results from
identifying and grouping work, defining and delegating responsibility and authority,
and establishing relationships.”
3. Directing
• After plans have been made and the organization has been established and
staffed, the next step is to move towards its defined objectives is directing.

• This function can be called by various names: “leading”, “directing”,

“motivating”, “actuating”, and so on.

• Directing means leading the people towards the defined objective. Explain the
people what they have to do. And help them to do their best.

• It is the act of stimulating or inspiring workers. If the workers of an enterprise are

properly motivated they will pull their weight effectively, give their loyalty to the
enterprise, and carry out their task effectively.
Two broad categories of motivation are
• Financial: Financial motivation takes the form of salary, bonus, profit-sharing,
etc.
• Non-financial: Non-financial motivation takes the form of job security,
opportunity of advancement, recognition, praise, etc.

Directing thus involves three sub-functions:

• Communication is the process of passing information and understanding from
one person to another.
• Leadership is the process by which a manager guides and influences the work of
his subordinates.
• Motivation means arousing desire in the minds of workers to give their best to
the enterprise
4. Controlling
• Controlling is measuring and correcting of activities of subordinates to make sure
that the work is going on as per the plan.
• Controlling function of management involves three elements:
1. Establishing standards of performance.
2. Measuring current performance and comparing it against the established standards
.
3. Taking action to correct any performance that does not meet those standards.
5. Innovating
• It is not necessary for an organisation to grow bigger.
• But it is necessary that it constantly grows better Innovation means creating new
ideas which may either results in developing new products or finding new users for
old products.
6. Representing
• Manager is required to represents his organization before various outside groups,
which have same stakes in organization.
• The stake holders can be Government officials, Labor unions, financial institutions,
Suppliers, Customers etc. A manager must win their support by effectively
managing the social impact of his organization.
• Every function has two dimensions:
– Substantive and
– Procedural.
• Substantive dimension is what is being done;
• procedure is how it is done.

Figure: Management
Roles / Goals of a management
• A role is a set of behaviours associated with a particular job.
• Manager plays variety of roles responding to a particular situation.
• There are 3 important roles:
1. Interpersonal Roles.
2. Informational Roles
3. Decisional Roles
1. Interpersonal Roles
• Figurehead – manager has to perform some duties of ceremonial nature such as
greeting dignitaries, attending the wedding of an employee, taking important
customers to lunch etc.
• Leader – as a leader every manager has to motivate and encourage his employees.
• Liaison – manager has to develop contacts with outside people and collects useful
2. Informational Roles
• Monitor – a manager monitors his environment and collect information through his
personal contacts with colleagues and subordinates

• Disseminator – manager passes some of the information directly to his key

subordinates.

• Spokesman – he communicates the goals of organization to his staff and the

progress of work to his superiors. And represents his organization before various
outside groups.
3. Decisional Roles
• Entrepreneur- manager looks for innovation to improve his organization.

• Disturbance Handler - the manager has to work reactively like fire fighter. Must
seek solutions for various unanticipated problems like strikes, supplier’s problems,
employee’s problems etc.

• Resource allocator - manager must divide work and delegate authority among his
subordinates. He must decide who will get what.

• Negotiator – negotiates with employees and tries to solve any internal problems
Levels of management
In any organization, there are three levels of management the
1. First-line management (Low Level): First-line management: is made up of
foreman and white collared supervisors.
2. Middle level management: consists of vast and diversified group consisting plant
managers, personnel managers and department heads.
3. Top level managers: Top management: consists of board chairman, the company
presidents, and the executive vice presidents

Figure: Skill-mix at
different management levels
Managerial Skills
• A skill is an individual's ability to perform physical or mental tasks with a specified
outcome.
• Skal; not necessarily inborn. It can be developed through practice and through
translating one's knowledge and experience into action.
• In order to be able to successfully discharge his roles, a manager should posses three
major skills.
1. Technical Skill
2. Human Relations Skill
3. Conceptual Skill
• Technical Skill deals with things, Human relation skill deals with people and
Conceptual skill deals with ideas.
• While both conceptual and technical skills are needed for good decision-making,
human skill is necessary for a good leader.
Technical Skill:
The technical skill is the manager's understanding of the nature of job that people under him
have to perform. It refers to a person's knowledge and proficiency in any type of process or
technique.
There are three things a manager must know about technical skills:
(i) Which skills should be employed in his particular enterprise?
(ii) What is the role of each skill employed?
(iii) How are different skills interrelated?
The front-line supervisor, whether a foreman or a section chief, requires considerable
technical skill in order to be able to:
(a) evaluate the quality of work turned out,
(b) teach new hands, and
(c) direct all subordinates in the work group.
Whereas this type of skill and competence seems to be more important at the lower levels of
management, its relative importance as a part of the managerial role diminishes as the
Conceptual Skill:
• The conceptual skill refers to the ability of a manager to take a broad and farsighted view
of the organization and its future, his ability to think in abstract, his ability to analyse the
forces working in a situation, his creative and innovative ability and his ability to assess
the environment and the changes taking place in it.
• In short, it is his ability to conceptualise the environment, the organisation, and his own
job, so that he can set appropriate goals for his organisation, for himself and for his team.
Human Relation Skill:
• It is the ability to interact effectively with people at all levels. This skill develops in the
manager sufficient ability
(a) to recognise the feelings and sentiments of others;
(b) to judge the possible reactions to, and outcomes of various courses of action he may
undertake; and
(c) to examine his owe concepts and values which may enable him to develop more useful
attitudes about himself.
• This type of skill remains consistently important for managers at all levels.
Management –A Science or AN ART.
• Management is a behavioural science
• We can call a discipline scientific if its
1. methods of inquiry are systematic and empirical;
2. information can be ordered and analysed; and
3. results are cumulative and communicable.
• Being systematic means being orderly and unbiased. The attempt to gain knowledge
must be without taint of personal or other prejudgement. Further, the inquiry must
be empirical and not merely an armchair speculation or a priori approach.
• All scientific information collected first as raw data is finally ordered and analysed
with the help of statistical tools.
• Science is also cumulative in that what is discovered is added to that which has been
found before.
• we may presume that management is also a science.
• But since the word "science" is used to denote two types of systematic knowledge—natural or
exact and behavioural or inexact,
• We must remember that management is not like the exact or natural sciences (such as physics,
chemistry). These sciences are called "exact" because here it is possible for us to study the effects
of anyone of the many factors affecting a phenomenon individually by making the other factors
inoperative for the time being.
Management as an ART.
• Whereas under "science" one normally learns the "why" of a phenomenon, under "art" one learns
the "how" of it.
• Art is thus concerned with the understanding of how a particular work can be accomplished.
• It is the art of getting things done through others in dynamic and mostly non-repetitive situations.
• Whether it is a factory or a farm or a domestic kitchen, the resources of men, machine, and money
have to be coordinated against several constraints to achieve given objectives in the most efficient
manner.
• The manager has to constantly analyse the existing situation, determine the objectives, seek
alternatives, implement, coordinate, control and evaluate information and make decisions.
Management- A Profession
• We have seen that management is partly an art and partly a science. Is it a profession?
• McFarland20 gives the following characteristics of a profession:
1. Existence of an organised and systematic knowledge.
2. Formalised methods of acquiring training and experience.
3. Existence of an association with professionalization as its goal.
4. Existence of an ethical code to regulate the behaviour of the members of the
profession.
5. Charging of fees based on service, but with due regard for the priority of service
over the desire for monetary reward.
• In the light of this analysis we can conclude that management cannot be called a
profession. There are, however, certain unmistakable trends toward the
professionalization of management.
• He says that "no greater damage could be done to our economy or to our society than to
attempt to professionalise management by licensing managers, for instance, or by limiting
access to management to people with a special academic degree.“

• Following are his arguments in support of the view:

1. A degree in management does not by itself make an individual a professional manager

any more than does a degree in philosophy make an individual a philosopher. The
essence of professional management is achievement, not knowledge; results not logic. By
insisting on holding adegree, we are overemphasising knowledge and completely
overlooking skill. This will eliminate those individuals who, though highly skilled, do
not have the required degree.

2. People once certified as professionals on the basis of their academic degrees would
always remain professionals, despite their knowledge becoming obsolete in later years.
Planning
• Planning is the beginning of the process of management. A manager must plan
before he can possibly organise, staff, direct or control. Because planning sets all
other functions into action, it can be seen as the most basic function of
management.
• Planning follows systems approach which results in an emphasis being given to
three major sub-systems, viz. the environmental sub-system, the competitive sub-
system and the internal sub-system.
• The environmental sub-system includes such factors as population changes,
anticipated governmental actions and international developments.
• The competitive sub-system includes consideration of the past, present and
anticipated actions of competitors.
• The internal sub-system includes particular unique features of the firm itself, e.g.
its location, facilities, personnel, etc.
• Planning is an intellectual process which requires a manager to think before acting.
It is thinking in advance.

• It is by planning that managers of organisations decide what is to be done, when it is

to be done, how it is to be done, and who is to do it.

• For example, in planning for their organisation, managers must first decide which
goal to pursue: "Shall we manufacture all parts internally or buy some from
outside?" In fact, deciding which goal to pursue is probably the most important part
of the planning process. Managers must also decide which assumptions about the
future and about the environment they will use in making their plans: "Will taxes on
our earnings increase, and thus strain our company's cash flow, or can we expect
taxes to remain at the present level?“.
• In addition, managers must decide how they will allocate their resources to attain
their goals: "Should we fill up a senior position by promoting an existing employee
or should we hire someone from outside the organisation?" Because decision-making
is such an integral part of planning,

• Planning is a continuous process Koontz and O’Donnell1 rightly observe that like a
navigator constantly checking where his ship is going in the vast ocean, a manager
should constantly watch the progress of his plans.

• He must constantly monitor the conditions, both within and outside the organisation
to determine if changes are required in his plans.
Principles of Planning
• Navigational Change: Keeping an eye on the progress of plan and the conditions
influencing the plan so as to keep plan design and implementation on track by
making needed changes in plan.
• Flexibility: Avoiding extreme rigidity and infusing some adaptability in plan so that
plan can keep pace
• Commitment: Making a plan with a consideration that scarce resources would get
committed and tied up with a plan and hence cannot be retrieved once plan gets
implemented.
• Planning Premises: The very assumptions regarding internal and external
conditions on which a plan is drawn need to be carefully thought and rechecked so
as to avoid plan failures.
• Objectivity: Precision and definite expression of a plan is a must for its better
understandability and usability.
• Continuity: The plan at all times is either being drawn or implemented or corrected.
Importance of planning
1. Minimises Risk and Uncertainty: In today’s increasingly complex organisations,
institution alone can no longer be relied upon as a means for making decisions. This is
one reason why planning has become so important. Planning allows managers and
organisations to minimise risk and uncertainty, planning helps the manager to cope
with and prepare for the changing environment.
2. Leads to Success: Planning does not guarantee success. Companies that plan not only
outperform the no planners but also outperform their own past results.
3. Focuses Attention on the Organisation’s Goals: Planning helps the manager to focus
attention on the organisation’s goals and activities. This makes easier to apply and
coordinate the resources of the organisation more economically.
4. Facilitates Control: In planning, the manager sets goals and develops plans to
accomplish these goals. Then these goals and plans are becomes standards or
benchmarks against which performance can be measured. The function of control is to
ensure that the activities conform to the plans.
5. Trains Executives: Planning is also an excellent means for training executives.
Types of PLANS
In a large organisation, there are various types of plans that are arranged in a hierarchy
within the organisation. This means that plans at each level have to be consistent with and
contributive to the achievement of plans.
Vision
• A vision should be brief, focused, clear and inspirational to an organization’s
employees. It should be linked to customers needs and convey a general strategy for
achieving the mission.
• At the top of this hierarchy is the vision. This is the dream that an entrepreneur
creates about the direction that his business should pursue in future.
• It describes his aspirations, beliefs and values and shapes organisation's strategy.
Mission
• Which is the unique aim of an organisation that sets it apart from others of its type.
• It is an organisation's specialisation in some area-service, product or client, which
decides the organisation's scope of business.
• For example, the mission of Asea Brown Boveri Ltd. (ABB) is as follows: " ... to be
a global leader ... most competitive, competent, technologically advanced and
quality-minded electrical engineering company."
• Like vision, a firm's mission also guides the development of strategies. It establishes the
context within which daily operating decisions are made and sets limits on available
strategic options.

• It is, therefore, necessary that it is not revised every now and then in response to every
new turn in the economy. But it may change overtime to take advantage of new
opportunities or respond to new market conditions.

Objectives
• Objectives are the specific targets to be reached by an organisation.

• Objectives are goals or aims that the management wishes the organisation to achieve in
pursuit of its mission.

• These are the end points or pole-star towards which all business activities like organising,
• Objectives should be distinguished from the word "purpose".

• The purpose of an organisation is its primary role defined by the society in which it
operates. For example, the purpose of every university is to impart education or the
purpose of every hospital is to provide health care.

• Purpose is therefore a broad aim that applies not only to a given organisation but to
all organisations of its type in that society.

• An organisation's objectives take into account all stakes and specify a common
viewpoint acceptable to all the stakeholders. This implies that no organisation can
adopt objectives unilaterally without considering what others want.
Characteristics of Objectives
1. Objectives are multiple in number:
2. Objectives change over time
3. Objectives are either tangible or intangible
4. Objectives have a priority
5. Objectives are generally arranged in a hierarchy
6. Objectives sometimes clash with each other.
Objectives are multiple in number:
• This implies that every business enterprise has a package of corporate objectives set
out in various key areas.
• As pointed out by Peter Drucker," there are eight key areas in which objectives of
performance and results have to be set. These are: market standing, innovation,
productivity. physical and financial resources, profitability, manager performance
and development, worker performance and attitude and public responsibility.
Thus, for example, a manufacturing and marketing company may have the following
objectives:
(a) Achievement of a specified market share for its products
(b) Development of a new product or service
(c) Identification of a parasitical overhead which only adds to costs
(d) Provision for raw material and physical facilities
(e) Reduction in cost
(f) Direction of managers by objectives
(g) Building of an Employee Relations Index based on turnover, absenteeism, safety,
calls on the medical department, suggestion system participation, grievances etc.
(h) Conducting the business so as not to undermine social beliefs and cohesion
Objectives change over time

• Although it is true that the successful manager tries to foresee all critical changes in
the environment that will affect given objectives yet this may not be enough.

• There may be in addition short- and long-range economic, technical, social,

political, and even ethical changes that affect what will or can be done in a near or
far future.

• Thus, consumers' liking for a product may change, employees may demand more
pay or fringe benefits, new anti-pollution or taxation laws may come into force.
These may make it essential for the enterprise to change its corporate.
Objectives are either tangible or intangible
• For some of the objectives (such as in the areas of market standing, productivity, and
physical and financial resources) there are quantifiable values available.
• Other areas of objectives are not readily quantifiable and are intangible, such as manager's
performance, workers' morale, public responsibility, etc.
Objectives have a priority
• This implies that at a given point in time, the accomplishment of one objective is relatively
more important than of others.
• For example, the objective of maintaining a minimum cash balance may be critically
important to a firm having difficulty in meeting pay rolls and due dates on accounts.
• Priority of objectives also says something about the relative importance of certain
objectives regardless of time.
Objectives are generally arranged in a hierarchy
This means that we have overarching corporate objectives of the total enterprise at the top,
followed by divisional or departmental objectives. Next come objectives of each section and
finally individual objectives.
Advantages of objectives
Basically the following benefits result from objectives:
1. They provide a basis for planning and for developing other type of plans such as
policies, budgets and procedures.
2. They act as motivators for individuals and departments of an enterprise by pointing the
way to desired performance.
3. They eliminate haphazard action which may result in undesirable consequences.
4. They facilitate coordinated behaviour of various groups which otherwise may pull in
different directions.
5. They function as a basis for managerial control by serving as standards against which
actual performance can be measured
6. They facilitate better management of the enterprise by providing a basis for leading,
guiding, directing and controlling the activities of people of various departments.
7. They lessen misunderstanding and conflict and facilitate communication among people
by minimising jurisdictional disputes.
8. They provide legitimacy to organisation's activities.
Strategies
• Strategies is a term originated in military,
• In a competitive situation, it is not enough to build plans logically from goals
unless the plans take into account the environmental opportunities and threats and
the organisational strengths and weaknesses. This is commonly referred to as
SWOT (strength, weaknesses, opportunities and threats) analysis.
• Two important activities involved in strategy formulation are environmental
appraisal and corporate appraisal.
Environmental appraisal:
• There are variety of ways of doing this appraisal which results in the identification
of threats and opportunities.
• One popular way is to analyse the components of external environment.
Components of external environment

1. Political and legal components:

(a) Stability of the government and its political philosophy

(b) Taxation and industrial licensing laws

(c) Monetary and fiscal policies

(d) Restrictions on capital movement, repatriation of capital, state trading, etc.

2. Economic components:

(e) Level of economic development and distribution of personal income

(f) Trend in prices, exchange rates, balance of payments, etc.

(g) Supply of labour, raw material, capital, etc.

3. Competitive components:
(a) Identification of principal competitors
(b) Analysis of their performance and programmes in major areas, such as market
penetration, product life-cycle, product mix, distribution channels and sales
organisation, servicing, credit and delivery, advertising and promotion, pricing and
branding, labour unions, training of personnel, technological development,
productivity and efficiency in manufacturing, financial strength, profitability and
rate of return on sales and investment
(c) Anti-monopoly laws and rules of competition
(d) (d) Protection of patents, trade marks, brand names and other industrial property
rights
4. Social and cultural components:
(e) Literacy levels of population
(f) Religious and social characteristics
(g) Extent and rate of urbanisation
Attributes of External Environment
1. Turbulence, i.e. marked by unpredictable changes and contradictory, unreliable
information. The opposite of a turbulent environment is a stable environment.
2. Hostile, i.e. marked by risk, stress and frustration, arbitrary and harsh laws,
severe price competition, threats of nationalisation, etc. The opposite of a
hostile environment is a benign environment.
3. Diverse, i.e.. marked by a clientele with variegated needs. For example, the
clientele of a departmental store has variegated needs but it is not so in the case
of customers of car dealers.
4. Restrictive, i.e. marked by many legal, political, economic and cultural
restraints.
5. Technically complex, i.e. marked by the requirement of a high order of
technical expertise in management.
Corporate Appraisal

• This involves an analysis of the company's strengths and weaknesses.

• A company's strengths may lie in its outstanding leadership, excellent product

design, low-cost manufacturing skill, efficient distribution, efficient customer
service, personal relationship with customers, efficient transportation and
logistics, effective sales promotion, ability to influence legislation, outstanding
research, advertising, and so on.

• Any of these strengths that represent unique skills or resources that can determine
the company’s competitive edge are called its core competency.
Operational Plans
• These plans act as means of implementing the organisation's strategy.
• They provide the details of how the strategy will be accomplished.
• There are two main types of operational plans: standing plans and single-use
plans.
Standing plans:
• These plans are designed for situations that recur often enough to
justify a standardised approach.
• For ex-ample, it would be inefficient for a bank to develop a new plan
for processing a loan application of each new client. Instead, it uses
one standing plan that anticipates in advance whether to approve or
turn down any request based on the information furnished, credit
rating and the like.
The major types of standing plans are policies, procedures, methods and rules.
Policies
• A policy is a general guideline for decision-making. It sets up boundaries around
decisions, including those that can be made and shutting out those that cannot.
• In the words of George R. Terry, "policy is a verbal, written or implied overall
guide, setting up boundaries that supply the general limits and direction in which
managerial action will take place.“
• Although, policies deal with "how to do" the work, they do not dictate terms to
subordinates.
• It should be noted that both policies and objectives guide thinking and action, but
with difference.
• Objectives are end points of planning while policies channelise decisions to these
ends.
The advantages of policies are as follows:
1. Policies ensure uniformity of action in respect of various matters at various
organisational points. This makes actions more predictable.
2. Policies speed up decisions at lower levels because subordinates need not
consult their superiors frequently.
3. Policies make it easier for the superior to delegate more and more authority to
his subordinates without being unduly concerned because he knows that
whatever decision the subordinates make will be within the boundaries of the
policies
4. Policies give a practical shape to the objectives by elaborating and directing the
way in which the predetermined objectives are to be attained.
Disadvantages of Policies
Policies with broad areas of discretion and initiative lead to inconsistent
interpretations and make the very delegation of authority difficult which they are
intended to implement.
Types of Policies
Policies may be variously classified on the basis of sources, functions or organisational
level.
1. Classification on the basis of sources: On this basis, policies may be divided into
originated, appealed, implied and externally imposed policies.
a) Originated policies: These are policies which are usually established formally and
deliberately by top managers for the purpose of guiding the actions of their subordinates
and also their own.
b) Appealed policies: Appealed policies are those which arise from the appeal made by a
subordinate to his superior regarding the manner of handling a given situation. When
decisions are made by the superior on appeals made by the subordinates, they become
precedents for future action.
c) Implied policies: There are also policies which are stated neither in writing nor verbally.
Such policies are called implied policies. Only by watching the actual behaviour of the
various superiors in specific situations can the presence of the implied policy be
ascertained.
d) Externally imposed policies: Policies are sometimes imposed on the business by
2. Classification on the basis of functions
• On the basis of business functions, policies may be classified into production, sales,
finance, personnel policies, etc.
• Everyone of these functions will have a number of policies.
• For example, the sales function may have policies relating to market, price,
packaging, distribution channel, commission to middlemen, etc.;
• The production function may have policies relating to the method of production,
output, inventory, research, etc.;
• The financial function may have policies relating to capital structure, working
capital, internal financing, dividend payment, etc.;
• The personnel function may have policies relating to recruitment, training, working
conditions, welfare activities, etc.
3. Classification on the basis of organisational level
On this basis, policies range from major company policies through major
departmental policies to minor or derivative policies applicable to the smallest
Guidelines for effective policy-making
The guidelines for making effective policies are as follows:
1. Policies should, as far as possible, be stated in writing and should be clearly
understood by those who are supposed to implement them.
2. Policies should make their purpose clear, define the appropriate methods, action
and responsibilities and delineate the limits of freedom of action permitted to
those whose actions are to be guided by them.
3. To ensure successful implementation of policies, the top managers and the
subordinates who are supposed to implement them must participate in their
formulation.
4. A policy must strike a reasonable balance between stability and flexibility.
Conditions change and policies must change accordingly. On the other hand,
some degree of stability must also prevail if order and a sense of direction are to
be achieved.
5. Different policies in the organisation should not pull in different directions and
should support one another. They must be internally consistent.

6. Policies should not be detrimental to the interest of society

7. Policies must be comprehensive to cover as many contingencies as possible.

8. Policies should be periodically reviewed in order to see whether they are to be

modified, changed, y completely abandoned and new ones put in their place.

Procedures:
• Policies are carried out by means of more detailed guidelines called "procedures".
• A procedureprovides a detailed set or instructions for performing a sequence of
actions involved in doing a certain pieces of work.
For example, the procedure for purchasing rav material may be:
(i) requisition from the storekeeper to the purchasing department;
(ii) calling tenders for purchase of materials;
(iii) placing orders with the suppliers who are selected;
(iv) inspecting the materials purchased by the inspecting department; and
(v) making payment to the supplier of materials by the accounts department.

Procedure for recruitment of personnel may be:

(vi) inviting applications through advertisement;
(vii)screening the applications;
(viii)conducting written test;
(ix) conducting interview for those who have passed the written test; and
(x) medical examination of those who are selected for the posts.
Difference between policy and procedure Various points of distinction between the
two are as under:
1. Policies are general guides to both thinking and action of people at higher
levels. Procedures are general guides to action only usually for people at lower
levels.
2. Policies help in fulfilling the objectives of the enterprise. Procedures show us
the way to implement policies.
3. Policies are generally broad and allow some latitude in decision making.
Procedures are specific and do not allow latitude.
4. Policies are often established without any study or analysis. Procedures are
always established after thorough study and analysis of work.
Advantages of procedures

• First, they indicate a standard way of performing a task. This ensures a high level of
uniformity of performance in the enterprise.

• Second, they facilitate executive control over performance. By laying down the
sequence and timing of each task, executive's dependence on the personal attributes
of his subordinates is reduced, supervision becomes more routine and discipline is
externalised.

• Finally, they enable employees to improve their efficiency by providing them with
knowledge about the entire range of work.
Limitations of procedures.

• By prescribing one standard way of performing a task, they limit the scope for

innovation or improvement of work performance.

• By cutting across department lines and extending into various other departments

they sometimes result into so much duplication. overlapping and conflict that the

actual work does not get done properly and resources are wasted.
Methods
• A method is a prescribed way in which one step of a procedure is to be
performed.

• The specified technique to be used in screening the applications or conducting a

written test is a method, whereas the sequence of steps involved in the
recruitment of personnel constitutes a procedure.

• The need for better and more economical methods of operation is great because
of the pressure of competition in the markets for the products of the concern.

• Methods help in increasing the effectiveness and usefulness of the procedure.

Rules
• Rules are detailed and recorded instructions that a specific action must or must
not be performed in a given situation.

• A rule is different from a policy, procedure or method.

• It is not a policy because it does not give a guide to thinking and does not leave
any discretion to the party involved.

• It is not a procedure because there is no time sequence to a particular action.

• It is not a method because it is not concerned with any one particular step of a
procedure.
Single-use Plans
• These plans, as their name suggests, are developed to achieve a specific end; when
that end is achieved, the plan is dissolved.
• The major types of these plans are programmes and budgets.
Programmes
• Programmes are precise plans which need to be made to discharge a non-routine
and non-repetitive task.
• Thus, an enterprise may have a programme of opening five branches in different
parts of the country or of deputing its employees for training or of acquiring a new
line of business or installing new machines in the factory or of introducing a new
product in the market.
• Often a single step in a programme is set up as a project.
• A schedule specifies the time when each of a series of actions should take place.
Sometimes, scheduling may be restricted to nearby actions only and the timing of
Budgets:
• According to the Institute of Costs and Works Accountants, London, a budget is
"a financial and/or quantitative statement prepared prior to a definite period of
time, of the policy to be pursued during that period, for the purpose of obtaining a
given objective."
• It is clear from this definition that budgets are plans for a future period of time
containing statements of expected results in numerical terms, i.e. rupees, man-
hours, product-units, and so forth.
• The important budgets are sales budget, production budget, cash budget, and
revenue and expense budget.
• Budgets are very useful for an enterprise. Being expressed in numerical terms,
they facilitate comparison of actual results with the planned ones and thus, serve
as a control device and yardstick for measuring performance.
• They also help in identifying and removing dead heads of expenditure.
Business Plan
• It is an important document prepared by an entrepreneur as a start-up strategy to
prove to private investors, customers, suppliers and distributors that he is in a
position to articulate and manage the diverse aspects of his business.

• A good business plan must have the following characteristics:

1. It must provide readers full information on all topics they may be interested in.

2. It must have an objective tone i.e., not written like a glowing advertising copy.

3. It must not be overcritical of past failures or mistakes, if any.

4. It should not be full of technical details; these may be put in the appendix.
STEPS IN PLANNING
The steps generally involved in planning are as follows.

1. Establishing Verifiable Goals or Set of Goals to be Achieved.

2. Establishing Planning Premises.

3. Deciding the planning Period

4. Finding Alternative courses of Action

5. Evaluating and Selecting a course of Action.

6. Developing Derivative Plans.

7. Establishing and Deploying Action plans

8. Measuring and controlling the Progress.

1. Establishing Verifiable Goals or Set of Goals to be Achieved
• The first step in planning is to determine the enterprise objectives.
• These are most often set by upper level or top managers, usually after a number
of possible objectives have been carefully considered.
• There are many types of objectives managers may select: a desired sales volume
or growth rate, the development of a new product or service, or even a more
abstract goal such as becoming more active in the community.
2. Establishing Planning Premises
• Plans are made to operate in the future. Hence, the second step in planning is to
establish planning premises, i.e., certain assumptions about the future on the basis
of which the plan will be ultimately formulated.
• Planning premises are vital to the success of planning as they supply pertinent
facts and information relating to the future such as population trends, the general
economic conditions, production costs and prices, probable competitive
behaviour, capital and material availability, governmental control, and so on.
These can be variously classified as under:
(a) Internal and external premises
(b) Tangible and intangible premises
(c) Controllable and non-controllable premises
a. Internal and external premises
• Important internal premises include sales forecasts, policies and programmes of
the organisation, capital investment in plant and equipment, competence of
management, skill of the labour force, other resources and abilities of the
organisation in the form of machines, money and methods, and beliefs, behaviour
and values of the owners and employees of the organisation.
• External premises may be classified in three groups: business environ-ment,
factors which influence the demand for the products of the enterprise and the
factors which affect the resources available to the enterprise.
b. Tangible and intangible premises
• Tangible premises are those which can be quantitatively measured while intangible
premises are those which being qualitative in character cannot be so measured.
• Population growth, industry demand, capital and resources invested in the
organisation are all tangible premises whose quantitative measurement is possible.
• On the other hand, political stability, sociological factors, business and economic
environment, attitudes, philosophies and behaviour of the owners of the
organisation are all intangible premises whose quantitative measurement is not
possible.
c. Controllable and non-controllable premises
• Controllable factors are those which can be controlled and normally cannot upset
well-thought out calculations of the organisation regarding the plan.
• Some of the examples of controllable factors are: the company's advertising policy,
competence of management members, skill of the labour force, availability of
resources in terms of capital and labour, attitude and behaviour of the owners of the
organisation, etc.
• Because of the presence of uncontrollable factors, there is need for the
organisation to revise the plans periodically in accordance with current
developments.
• Some of the examples of uncontrollable factors are strikes, wars, natural
calamities, emergency, legislation, etc.
3. Deciding the Planning Period
• Once upper-level managers have selected the basic long-term goals and the
planning premises, the next task is to decide the period of the plan.
• Other factors which influence the choice of a period are as follows:

(a) lead time in development and commercialisation of a new product;

(b) time required to recover capital investments or the pay-back period; and

(c) length of commitments already made.

a. Lead time in development and commercialisation of a new product
For example, a heavy engineering company planning to start a new project should
have a planning period of, say, five years with one or two years for conception,
engineering and development and as many more years for production and sales.
b. Time required to recover capital investments or the pay-back period
These are the number of years over which the investment outlay will be recovered
or paid back from the cash inflow if the estimates turn out to be correct.
c. Length of commitments already made
• The plan period should, as far as possible, be long enough to enable. the
fulfilment of commitments already made.
• For example, if a company has agreed to supply goods to the buyers for five years
or has agreed to work out mines for ten years it need also plan for the same period
to fulfil its commitments.
4. Finding Alternative Courses of Action
• For instance, technical know-how may be secured by engaging a foreign
technician or by training staff abroad.
• Similarly, products may be sold directly to the consumer by the company's
salesmen or through exclusive agencies.
5. Evaluating and Selecting a Course of Action
• To evaluate them in the light of the premises and goals and to select the best course
or courses of action.
• This is done with the help of quantitative techniques and operations research. Note
that substantial costs are involved in keeping two alternatives open.
6. Developing Derivative Plan
• Once the plan for the organisation has been formulated, middle and lower-level
managers must draw up the appropriate plans for their sub-units.
• These are the plans which are derived from the basic plan and not prepared
7. Establishing and Deploying Action Plans

• Managers possessing little understanding of how the organisation operates may

not know how to turn the derivative plans into action.

• The action plan identifies particular activities necessary for this purpose and
specifies the who, what, when, where and how of each action item.

8. Measuring and Controlling the Progress

• The process of controlling is a critical part of any plan.

• Managers need to check the progress of their plans so that they can

(a) take whatever remedial action is necessary to make the plan work, or

(b) change the original plan if it is unrealistic.

Steps of Strategic Planning Process
Following are the eight steps of the strategic planning process of a large
organisation that engages in this through some of these steps and reduce their
number.
Step 1 Evaluate and improve last year's strategic plan process by building into it
the deployment lessons learned during last year.
Step 2 Reaffirm the organisation's vision, mission, values and objectives, which
form the foundation for the strategic plan.
Step 3 Review organisation's operational performance for the prior year to know
its key strengths and weaknesses.
Step 4 Evaluate the external environment to prepare for each environmental
element (such as products, service, competitive advantage and marketing and
technological approach) a list of potential opportunities and threats.
Step 5 Conduct SWOT analysis based upon the issues identified in steps 1, 3
and 4 and forecast the results of continuing the existing strategy.

Step 6 Identify, evaluate and select alternative approaches if a change in the

existing strategy appears necessary.

Step 7 Deploy the modified plan. Communicate it to all departmental heads

and stakeholders for aligning their actions, measures and goals via derivative
plans, programmes and budgets.

Step 8 Provide for updates and tracking to be conducted throughout the year.
Limitations Of Planning
A manager's plans are directed at achieving goals. But a planning effort encounters
some limitations, which discussed below
1. Planning is an expensive and time-consuming process. It involves significant
amounts of money, energy and also risk, without any assurance of the
fulfilment of the organisation's objectives.
2. Planning sometimes restricts the organisation to the most rational and risk-free
opportunities. Sometimes planning may cause delay in decision-making.
3. The scope of planning is said to be limited in the case of organisations with
rapidly changing situations.
4. Establishment of advance plans tends to make administration inflexible.
5. There is the difficulty of formulating accurate premises. Since these premises
are the background against which a set of plans is made, they necessarily deal
with the future.
Decision-Making
• Decision-making is an essential part of modern management.
• A manager's life is filled with a constant series of decisions-where to invest
profits, what to do about an employee who is always late, where should the firm's
new warehouse be built, what subject will have top priority at the departmental
meeting.
• All major decisions, however, are taken very carefully and consciously. Such
decisions usually involve the application of considerable human judgement and
experience before a solution is obtained Decision-making is thus a key part of a
manager's activities.
• In planning it is through the process of decision-making that objectives and
policies are laid down and the manager decides many things such as what to
produce, what to sell, where, when, how, and so on.
• In organising, decision-making relates to the choice of structure, nature and form
of organisation, division of work, delegation of authority, fixing of responsibility
and the like.
• In directing, decision-making relates to determining the course, deciding the
orders and instructions to be given, providing dynamic leadership and similar
other issues.
• In controlling, the decisions relate to the laying down of performance standards,
strategic control points, procedure for control, and so on.
MEANING OF A DECISION
A decision is a choice between two or more alternatives. This implies
three things:
1. When managers make decisions they are choosing—they are
deciding what to do on the basis of some conscious and deliberate
logic or judgement.
2. Managers have alternatives available when they are making a
decision. It does not require a wise manager to reach a decision
when there are no other possible choices. It does require wisdom
and experience to evaluate several alternatives and select the best
3. Managers have a purpose in mind when they make a decision. There
would be no reason for carefully making a choice among
alternatives, unless the decision brings them closer to some goal.
Types of Decisions
• Programmed and Non-Programmed Decisions.

• Major and Minor Decisions

• Routine and Strategic Decisions

• Sequential and bear-by-the-Tail Decisions

• Individual and Group Decisions

• Simple and Complex Decisions

• Heuristics and Intuitive Decisions

• Rational Decisions
1. Programmed and Non-Programmed Decisions.
• Programmed decisions are those that are made in accordance with some policy, rule
or procedure so that they do not have to be handled de novo each time they occur.
• These decisions are generally repetitive, routine and are obviously the easiest for
managers to make.
• In the case of programmed decisions, since each manager is guided by the same set
of rules and policies, it is not possible for two managers to reach different solutions
to the same problem.
• Non-programmed decisions are novel and non-repetitive. If a problem has not
arisen before or if there is no cut and dry method for handling it or if it deserves a
custom-tailored treatment, it must be handled by a non-programmed decision.
• In the case of non-programmed decisions, since each manager may bring his own
personal beliefs, attitudes and value judgements to bear on the decision process, it
is possible for two managers to arrive at distinctly different solutions to the same
problem, each claiming that he is acting rationally.
• The ability to make good non-programmed decisions helps to distinguish
effective managers from ineffective managers.
2. Major and Minor Decisions
We can measure the relative significance of a decision in four ways:
1. Degree of Futurity of Decision: For how long into the future does a decision
commit the company? A decision which has a long-range impact, like
replacement of men by machinery or diversification of the existing product
lines must be rated as a very major decision.
2. Impact of the Decision on Other Functional Area: If a decision affects only
one function, it is a minor decision. Thus the decision to shift from bound
ledger to loose leaf ledger may be made by the accountant himself since it
affects no one except his department.
3. Qualitative Factors that Enter the Decision: A decision which involves certain
subjective factors is an important decision. These subjective factors include basic
principles of conduct, ethical values, social and political beliefs, etc
4. Recurrence of Decisions: Decisions which are rare and have no rules or
precedents as guides may be regarded as major decisions and may have to be made
at a high level.
3. Routine and Strategic Decisions
• Routine, tactical or housekeeping decisions are those which are supportive of,
rather than central to, the company's operations.
• They relate to the present. Their primary purpose is to achieve as high a degree of
efficiency as possible in the company’s ongoing activities.
• Provision for air conditioning, better lighting, parking facilities, cafeteria service,
deputing employees to attend conferences, etc.. Are all routine decisions.
4. Sequential and bear-by-the-Tail Decisions
• In a sequential decision the manager makes a decision one part at a time; when
the results of the first part are known, he can use them in deciding the second
part; the results of the second part help in shaping his decision on the third part,
and so on with each succeeding part.

• This form of decision is often used for executive promotions.

• Bear-by-the-tail decisions are like passing a car on a crowded two-lane highway

where once we start we have to follow through.

• Sales promotion campaigns are common examples of this type of decision.

5. Individual and Group Decisions
• Decisions may be taken either by an individual or by a group.
• Individual decisions are taken where the problem is of a routine nature, where the
analysis of variable is simple and where definite procedures to deal with the
problem already exist.
• First important and strategic decisions which may result into some change in the
organisation are generally taken by a group.
• Interdepartmental decisions are also taken by groups consisting of managers of
the departments affected by the decision.
• Important price decisions are likely to be group decisions, in the making of
which various individuals and departments participate.
• The Dialectic method is a time-honoured group decision-making method which
calls for managers to foster a structured debate of opposing viewpoints prior to
making a decision.
Some advantages of group decisions are:
1. Increased acceptance by those affected: Decisions made by a group help
implement those decisions more readily where they have been consulted and
a consensus arrived at.
2. Easier coordination Decisions made by groups reduce the amount of
coordination necessary to bring the decision into play.
3. Easier communication Decisions made by groups reduce the amount of
communication necessary to implement the decision.
4. More information processed Because many individuals are involved, more
data and information can be brought to bear on the decision. This can help
improve the quality of the decision and uncover obstacles in the way of its
execution.
5. Group cohesion Friendship and mutual understanding tend to develop.
Disadvantages of group decisions:
1. Group decisions take longer Groups take longer than individuals to make
decisions.
2. Groups can be indecisive Groups can drag on and never take decisions
because they can always blame other members of the group for lack of
progress.
3. Groups can compromise This can lead to decisions that satisfy the "lowest
common denominator".. It can lead to "group think or conformity to peer
pressure and neglect of better solutions.
4. Groups can be dominated The highest status individual, if he chooses, can
influence the group so that it notices his or her choices.
5. Groups may have a prior commitment to a particular solution This may
be due to ties to persons outside the groups, "empire building" attempts, or
belief that a decision will have sufficient personal impact.
6. Simple and Complex Decisions
• When variables to be considered for solving a problem are few, the decision is simple;
when they are many, the decision is complex.
• When we combine these two types of decisions with the low or high certainty of their
outcomes, we get four types of decisions:
1. Decisions in which the problem is simple and the outcome has a high degree of
certainty. These are called mechanistic or routine decisions.
2. Decisions in which the problem is simple but the outcome has a low degree of
certainty. These are called judgemental decisions. Many decisions in the area of
marketing, investment and personnel are of this type.
3. Decisions in which the problem is complex but the outcome has a high degree of
certainty. These are called analytical decisions. Many decisions in the area of
production are of this type.
4. Decisions in which the problem is complex and the outcome has a low degree of
certainty. These are called adaptive decisions. Changes in corporate plans and
policies to meet the changes in environment and technology are decisions of this type.
7. Heuristics and Intuitive Decisions
• Heuristics are rules of thumb which organisations evolve from their experience for use
in recurring decision situations.
• A common advertising heuristic is, "Cut down on advertising in a recession". In
intuitive decisions, also known as "seat of the pants" decisions, the decision-maker
relies on his intuition.
8. Rational Decisions
• A decision is rational if appropriate means are chosen to reach desired ends.
• Following are the seven steps involved in the process of rational decision-making:

Figure: Flow Diagram of the rational decision-making process.

1. Recognising the Problem:
First of all, it is necessary to search the environment for the existence of a problem.
A problem exists if any of the following conditions do occur:
1. When there is a deviation from past experience For example, this year's sales are
falling behind last year's; expenses have suddenly increased; employees' turnover
has grown; too many defective products are suddenly coming off the assembly
line.
2. When there is a deviation from the plan For example, profit levels are lower than
anticipated; a department is exceeding its budget; a project is off schedule.
3. When other people bring problems to the manager For example, customers may
complain about late deliveries, a lower level manager may complain about the
high performance standard set for him, workers may complain about poor
working conditions, and so on.
4. When competitors outperform the manager's organisation For example, other
companies might develop new processes or improvements in operating
2. Deciding Priorities among Problems
• A manager should not allow himself to be bogged down by all sorts of problems.
• He should set a sequence for them on the basis of strategic considerations.
• On examination he will find that some of his problems are such which can be solved
best not by him but by his subordinates because they are closest to them.
3. Diagnosing the Problem
• In business, in order to distinguish between symptoms and sources of trouble, every
problem should be correctly diagnosed.
4. Developing Alternative Solutions or Courses of Action:
• After having diagnosed the problem, the next step is to develop alternative
solutions.
• Generally, for every problem there are alternative solutions. In fact, if there seems to
be only one way of doing a thing, that way is probably wrong.
• In other words, in every course of action alternatives exist.
5. Measuring and Comparing the Consequences of Alternative Solutions.
• Once appropriate alternative solutions have been developed, the next step in
decision-making is to measure and compare their consequences.
• This involves a comparison of the quality and acceptability of various solutions.
• The quality of a solution must be determined after taking into account its tangible
and intangible consequences.
• Acceptability of a solution is also very important. Difficulties generally arise
when a solution, though good in quality is poor in acceptability or vice versa.
• In situations where enough information is not available about the quality or
acceptability of a solution, is advisable to experiment with it on a small scale.
This is called pilor-testing.
6. Converting the Decision into Effective Action:
• The next step is to translate the decision into action. A decision is not complete
until someone has been assigned responsibility to carry it out.
• This requires the communication of decision to the employees in clear and
unambiguous terms.
7. Follow-up of Action
• In the final step, the action should be continuously followed up, to ensure
whether the decision is achieving its desired purpose and whether the forecasts
and assumptions upon which the decision was based are still valid.
• Herbert A. Simon 'compresses the above steps into four principal stages:
• intelligence-searching the environment for conditions calling for decisions;
• design-inventing, developing, and analysing possible courses of action;
• choice-selecting a particular course of action from the available alternatives;
• review-assessing past choices.