CHAPTER ONE

FUNDAMENTALS OF MANAGEMENT
1.1 Definition of Management:
It is not easy to define the term management. There are
many definitions of management as there are books on the
subject. There are certain genuine reasons for this:
Management is a vast subject. It is therefore not possible to
put all the essential features of management in a single
formula.
Management is concerned with the human beings, who are
behaviorally highly unpredictable.
Management is young developing discipline whose
concepts are continuously changing.
Most definitions emphasize on one common idea; it is
concerned with the accomplishment of objectives through the
efforts of the people performing certain functions. 1
 CONT’D
Let’s look into these definitions:

Management is the accomplishment of results through the efforts of

other people – Lawrence A. Appley

Management is the art of getting things done through and with the
people in formally organized groups –Koontz H.

Management is the process of planning, organizing, actuating and

controlling to determine and accomplish the objectives by the use of
people and resources.–Terry.

Some have defined management as a decision making, rule making and

rule enforcing body.

According to Prof. Moore, management means decision making and

2
 CONT’D
For the sake of simplicity and convenience, we can broadly
define the term in the following way:
Management is the process of planning, organizing, staffing,
directing and controlling to accomplish organizational
objectives through the coordinated use of human and
material resources.
Features of Management:
The flowing are major characteristics of management.
1-Management is purposeful
It is the process of efficiently getting activities completed
with and through other people. Goals orientation and action
focus provide the bench marks for managerial operations.
Achieving results here implies mobilization, interaction and
judicious employment of resources in a disciplined manner.
 CONT’D
2-Management is concerned with the ideas, and obtaining
results through people.
Management is the dynamic life-giving element in every
enterprise. It provides the dynamic force necessary to
convert disorganized resources of many machineries and
materials into a useful, productive organization.
While obtaining results managers should emphasize three
things:
i.They should provide a healthy atmosphere where the
organizational participants can work out new and creative ideas.
ii.They should manage the resources effectively and efficiently.
iii.They should treat human beings as, mature individuals, as
creative and innovative creatures rather than as passive and
lifeless machines.
4
 CONT’D
3)-Management is a social process: Management is a social
process because managerial actions are chiefly concerned
with relation between people. Managers are needed to direct,
coordinate and regulate human efforts in order to accomplish
predetermined organizational goals.
4-Management is a coordinating force. A major part of
management’s job is the coordination of the efforts of
employees each of whom has his own values and aspirations
into an organizational objectives and individual goals.
5-Management is concerned with group efforts: An
organization basically comes into existence to achieve
certain objectives, which are attained more easily by a group,
than, by an individual working alone.
6-Management is an activity: Management is a discerningly
distinct activity. It can be studied. Knowledge about it
obtained and skill in its application acquired.
5
 CONT’D
7-Management is composite process: The management
process is not a series of separate functions (planning,
organizing, directing, and controlling), which can be
performed independently, it is a composite process made up
of these individual ingredients. No single function can be
performed without involving the others.
8-Management acts as a creative and invigorating force in the
organization: Management creates a result that is bigger
whole than a sum total of efforts put in by the group.
9-Management is a dynamic discipline: It is a dynamic and
growth –oriented function. Managing is not just passive, but
adaptive behavior; it means taking action to make the desired
results to come to pass.
10-Management is intangible: It is an unseen force. Its
presence is often evidenced by the results of its efforts that
are orderliness, adequate work output, satisfactory work
climate, employee satisfaction etc. 6
 1.2. Significance of Management

No enterprise can long be successful that does not utilize

effective management. To a great extent the accomplishment
of many economic, social and political goals rest up on the
competency of the manager. The task of constructing a better
economic society, improved social standards, or more
efficient government is the challenge to modern managerial
ability.

1-Management provides effectiveness to human efforts.

It helps achieve better equipments, plants, offices, products,

services, and human relations. It keeps up to date with the
 1.2. Significance of Management (cont’d)

2-Management brings order to endeavors.

By means of management, apparently isolated events or

factual information or beliefs are brought together and
significant relationship discerned.

3-Managing a successful enterprise is difficult work.

Problems arise, new resources become available. Goals

change.

To cope with these conditions, effective management is

required.
 1.3. Managerial Functions an Overview
According to the functional approach, originated by Henery
Fayol, in every organization managers perform certain basic
functions in order to achieve results.
These functions may be broadly classified into five
categories:
1. Planning:
Planning is the process of making decisions about future.
 It is the process of determining enterprise objectives and
selecting future courses of actions necessary for their
accomplishment.
9
 1.3. Managerial Functions an Overview
Planning (cont’d):
It is the process of deciding in advance what is to be done,
when and where it is to be done, how it is to be done and by
whom.
Planning is a fundamental function of management and all
other functions of management are influenced by the
planning process.

2. Organizing:

Organizing is concerned with the arrangement of an

organization’s resources – people, materials, technology and
10
 1.3. Managerial Functions an Overview
Organizing (cont’d):
It involves decisions about the division of work, allocation of
authority and responsibility and the coordination of tasks.
This function increases in importance as a firm grows.
3. Staffing:
It may be defined as an activity where people are recruited,
selected, trained, developed, motivated and compensated for
manning various positions. It includes not only the
movement of individuals into an organization, but also their
movement through (promotion, job rotation, transfer) and out
( termination, retirement) of the organization. 11
 1.3. Managerial Functions an Overview
4. Directing:
The function of guiding and supervising the activities of the
subordinates is known as directing.
This work involves four important elements:
1.Leadership: leadership is the process of influencing the
actions of a person or a group to attain desired objectives.
The success of an organization depends on the quality of
leadership shown by its managers.
2.Motivation: is the work a manager performs to inspire,
encourage and impel people to take required actions.
12
 1.3. Managerial Functions an Overview
Directing (cont’d):
3.Communication: is the transfer of information and
understanding from one person to another.
It is a way of reaching others with ideas, facts, and thoughts.
4.Supervision: In getting the work done it is not enough for
managers to tell the subordinates what they are required to
do.
They have also to watch and control the activities of the
subordinates.
 Supervision is seeing that subordinates do their work and
do it as directed. 13
 1.3. Managerial Functions an Overview
5. Controlling:
The objective of controlling is to ensure that actions contribute
to goal accomplishment.
 It helps in keeping the organizational activities on the right
path and aligned with plans and goals.
 In controlling, the performances are observed, measured and
compared with what had been planned.
Thus controlling includes four things:
(i) setting standard of performance,
(ii) measuring actual performance,
(iii) comparing actual performance against the standard, and
 1.4. Levels of Management and Types of Managers
The term ‘levels of management’ refers to a line of
demarcation between various managerial positions.
In a large organization, three levels of management are
usually identified:
1. Top Level Management:
Determines objectives and policies
Designs the basic operating and financial structure of an
organization
Provides guidance and direction
Lays down standards of performance
Maintains good public relations.
 1.4. Levels of Management and Types of Managers
2. Middle Level Management:
Interprets and explains the policies framed by the top
Issues detailed instructions
Participates in operating decisions
Trains other managers
3. Lower Level Management:
Plans day-to-day operations
Assigns jobs to workers
Provides supervision and control over work
Arranges materials, tools and equipments
Maintains discipline.
 TYPES OF MANAGERS
1. FIRST-LINE MANAGERS
often called supervisors stand at the base of the managerial
hierarchy
2. MIDDLE MANAGERS
heads of various departments and organize human and
other resources to achieve organizational goals
3. TOP MANAGERS
set organizational goals, strategies to implement them and
make decisions
 1.5. Managerial Roles and Skills
 In addition to the broad categories of management functions,
managers in different levels of the hierarchy fill different
managerial roles.
 These roles were categorized by researcher Henry Mintzberg, and
they can be grouped into three major types:
decisional,
interpersonal, and
informational.
I. Decisional Roles.
Decisional roles require managers to plan strategy and utilize
resources.
 1.5. Managerial Roles and Skills
I. Decisional Roles (cont’d)
There are four specific roles that are decisional:
a. The entrepreneur role:
 Making change that is important for the improvement and
betterment of the organization, i.e. acting as designer and initiator
of change with in the group to improve organization’s position..
 Managers play this role when they initiate new project; launch a
survey; test new market; etc…
 Most of these roles will be held by top-level managers, although
middle managers may be given some ability to make such
decisions.
b. The disturbance handler:
 Making decisions or taking corrective actions in response to
situations that are beyond their control, or dealing with problems and
changes beyond manager’s immediate control.
 1.5. Managerial Roles and Skills
I. Decisional Roles (cont’d)
c. The resource allocator role: involves determining which work units will get
which resources.
d. The negotiator: works with others, such as suppliers, distributors, or labor
unions, to reach agreements regarding products and services.
ii. Interpersonal Roles.
 Interpersonal roles require managers to direct and supervise employees and
the organization.
a. The figurehead role: representing the organization as the ceremonial and
symbolic functions, acting as public official for the organization. Or
performing ceremonial duties important for the organization’s image and
success
 1.5. Managerial Roles and Skills
ii. Interpersonal Roles(cont’d)
b. Leadership role:
is directing and coordinating the activities of subordinates to accomplish
objectives.
Include some aspects like:
creating a vision that employees can identify with.
doing with staff:- hiring, training, promoting.
motivating subordinates to meet organizational needs.
c. Liaison role:
In the role of liaison, a manager must coordinate the work of others in different work
units, establish alliances between others, and work to share resources.
 1.5. Managerial Roles and Skills
iii. Informational Roles.
 Informational roles are those in which managers obtain and transmit information.
a. The monitor role:
It involves actively seeking out, receiving and securing information that may be
of value.
Here managers, just as radar, scan their environment.
It is like a nerve center.
managers seek information to detect problems or opportunities, build general
knowledge about the work situation, make necessary changes.
 1.5. Managerial Roles and Skills
iii. Informational Roles (cont’d).
b. Disseminator role:
It is transmitting or providing relevant information back to others in the workplaces. i.e.
sharing/ sending information found from internal and external sources to others both
internal and external to the organization.
c. Spokesperson role:
It focuses on external communication. It is representing an organization to outside
party on the behalf of members of the organization, or transmitting information about
the work group to others especially outside the organization. e.g. to public, press,
customer group, etc…
 Managerial skills
Every manager needs three basic skills:
Technical,
Human, and
Conceptual.
1.Technical Skill:
It is the ability of a manager to use the equipments, methods
and techniques involved in performing specific tasks.
Technical skill is required more at the lower level of
management I.e. at the supervisory level.
At higher levels, the technical skill is less important as
managers can rely upon others for technical information
 Managerial skills
2. Human Skill:
 The ability of a manager to work with, understand, and
motivate people in the organization is known as human
skill.
 It also involves the ability to build effective work teams.
 Human skills are important at all levels of management.
 Middle managers and top managers also use human skills
equally in their respective level of responsibility.
3. Conceptual Skill:
 This consists of the manager's ability to coordinate all
organizational activities and varied interests involved in it.
 It involves viewing the organization in its totality and
understanding the inter-dependence of its individual parts.
 Conceptual skill is very important for top management in
formulating long-range plans, broad policies and relating
the business enterprise to the industry and economy.25
 1.6. Universality of Management
 Many professionals in the field of management agree
that “management is universal”.

 These proponents argue the universality of

management by stating that the functions of managers
are really the same whether the organizations are
private or public, profit making or non profit,
manufacturing and service giving, small firms or
industrial giants
 The basic principles and concepts of management are
universally applicable to all types of organization.
26
 1.6. Universality of Management (cont’d)
The main points which characterizes the universality of
management:
All managers operate in organization with specific
objectives
All managers must plan, organize, lead, and control in order
to achieve these organizational objectives
The functions of planning, organizing, leading and
controlling are similar in all organizations regardless of the
types of ownership.
The vital force of management is needed to integrate scarce
resources in optimum productive relationships
Management, in all organizations, helps to achieve
organizational objectives.
27
1.7. Is Management an art, Science, or profession?
The question whether management is a science or an art is
put to debate quite frequently.
There are arguments on both sides.
A. Properties of Science:
Science, has four elements:
1.Systematic body of knowledge: it is systematized in the
sense that it is based on the cause and effect relationship
between different variables. Such a knowledge helps in
explaining past events and predicts the outcome of specific
actions.
2.Scientific Inquiry: Scientific inquiry is unaffected by the
personal likes and dislikes of a scientist. When we say that
the rotation of earth causes days and nights, we do not
express the opinion of just one person. 28
1.7. Is Management an art, Science, or profession?
Properties of Science (cont’d):
3. Experimentation: The principles of science are derived
after repeated observations and experiments. The result of
each experiment can be verified and outcomes predicted in a
definite way.
4. Universal truths: Scientific principles represent basic
truths; they are developed after a series of experiments. They
can be applied in all situations and at all times.
Management as Science:
Management is a science because it has all characteristics
of a science, namely,
1. Systematic body of knowledge: Management is distinct
discipline. It has a number of principles which can be studied
and put to application. 29
1.7. Is Management an art, Science, or profession?
Management as Science(cont’d):
2. Management is a social science:
Management is a social science, as it deals with human
behavior about which little is known at present.
As we all know, it is not possible to study human behavior
under controlled laboratory conditions.
The principles of management cannot be accepted as
absolute truths. They are still in a developing stage and
evolutionary in nature.
3. Management is an inexact science:
Management is not an exact science like physics, chemistry
or biology. It can offer only flexible guidelines that would be
of use in solving problems. 30
1.7. Is Management an art, Science, or profession?
Management as Science(cont’d):

4. Scientific Management:

When Taylor used the term ‘scientific management’, he was

aware of the fact that experimentation and verification of
facts is not possible in managing human resources.

He had used the term ‘scientific’ as an organized body of

knowledge as opposed to ‘traditional rules and empirical
dexterity’.

31
1.7. Is Management an art, Science, or profession?
B. Properties of Art:
Art is the application of knowledge and personal skills to
achieve results. It is a way of living.
 Art is based on the knowledge of principles offered by
science.
Art is basically concerned with application of knowledge,
how to do things creatively and skillfully.
Management as an Art:
Management is basically an art as it involves the use of
know-how and skills like any other art such as music,
painting, sculpture, etc.
The practical knowledge acquired in the areas of planning,
decision making and motivating certainly help managers to
tackle problems in a better way. 32
1.7. Is Management an art, Science, or profession?
Management as an Art (cont’d):
The following is the argument in favor of management as an
art:
1. Use of knowledge: Just as doctor uses the science of
medicine while diagnosing and treating the patients, a
manager uses the knowledge of management theory while
performing the managerial function.
2. Creative art: Management is creative like any other art. It
combines human and non human resources in a useful way
so as to achieve results.
3.Personalized: Like any other art, management is
personalized activity. Every manager has his own way of
managing things and people, based on his knowledge and
experience.
4. Constant practice: Managers learn from mistakes. The
application of managerial principles over a period of time
enables them to tackle difficult problems with confidence.
1.7. Is Management an art, Science, or profession?
Management: Science as well as Art:

Management is thus, an art as well as a science.

The art of management is as old as civilization.

The science of management is young and developing.

Both are complementary and mutually supportive.

Managers need to acquire the knowledge of management

principles and practice in order to be successful.
 MANAGEMENT AS A PROFESSION
 The question, ‘Is management a profession?’ is asked quite
frequently. Over the last few decades, factors such as
growing size of business units, competition, and separation
of ownership from management have led to an increased
demand for professionally qualified managers.
 The task of management have become quite specialized.
Characteristics of a Profession:
1.Well-defined body of knowledge: A profession must have a
systematic body of principles, techniques and skills.
2. Formal education and training: Everybody cannot enter a
profession. An individual can enter a profession only after
acquiring knowledge and skills through formal education
and training.
3. Minimum Qualification: An individual can enter a
profession after obtaining a degree or diploma from
recognized colleges, universities or institutes. 35
 MANAGEMENT AS A PROFESSION
Characteristics of a Profession (cont’d):
4. Representative body: A representative body of
professionals exists to regulate and develop the professional
activities.
5. Service above self: According to Edgar Schein, a
profession must be committed to service. Success in work
should be more important than financial rewards or political
gains.
6.Ethical code of conduct: A strict code of conduct exists in
every profession. Members of a profession are expected to
follow the code sincerely and honestly.
Management as a Profession:
1. Well defined body of knowledge: Management has well
defined body of knowledge that are generally valid in a
variety of organizations and situations.
Management literature has been continually growing. 36
 MANAGEMENT AS A PROFESSION
Management as a Profession(cont’d):
2. Formal education and training: Acquiring management
education through training is possible now. A number of
management institutes have been set up in recent years, to
turn out a good crop of managers throughout the globe.
3. Representative Body: As things stand now, there is no
organization or body of professionals whose membership is
essential to become a manager. There is no organization
whose authority is recognized as final.
4. Code of Conduct: There is no universal code of conduct.
Although, certain trade associations and management
associations have formulated ethical codes for managers
working in particular industries.
5. Service Motto: In the absence of a regulating body and
code of conduct, managers often indulge in practices aimed
at maximizing their personal wealth 37
 CHAPTER TWO: MANAGERIAL PLANNING
2.1 Concepts and need for planning:
 The necessity for planning arises because of the fact that
business organization have to operate, survive and progress
in a high dynamic economy where change is the rule not the
exception.
These changes often give rise to innumerable problems and
throw countless challenges.
 Most of these changes are thrust on managers thus,
managers are forced to adjust their activities in order to take
full advantage of favorable developments or to minimize the
adverse effects of unfavorable ones.
As pointed out by Terry “successful managers deal with
foreseen problems, and unsuccessful managers struggle
with unforeseen problems. The difference lies in planning.”
38
 CHAPTER TWO: MANAGERIAL PLANNING
Meaning of Planning:
A plan is forecast for accomplishment. It is predetermined
course of action. It is today’s projection for tomorrow’s
activity.
In other words, to plan is to produce a scheme for future
action, to bring about specified results at a specified cost, in
a specified period of time.
Management thinkers have define the term, basically, in two
ways:
1. Based on futurity:
“Planning is a trap laid down to capture the future” – Allen
“Planning is deciding in advance what is to be done in
future” – Koontz.
“Planning is informed anticipation of future” – Haiman
“Planning is anticipatory’ decision making” – R.L.Ackoff
 CHAPTER TWO: MANAGERIAL PLANNING
2. As a Thinking Function:
“Planning is a thinking process, an organized foresight, a
vision based on fact and experience that is required for
intelligent action” – Alford and Beatty
“Planning is deciding in advance what to do, how to do it,
when to do it and who is to do it” – Koontz and O’Donnell.
It is deciding in the present, what is to be done in future. It is
a process of thinking before doing it.
 A plan is specific, documented intention consisting of an
objective and an action statement.
Properly conceived plans tell what, where and how
 CHAPTER TWO: MANAGERIAL PLANNING
Nature of Planning:
Planning has a number of Characteristics:
1. Planning is goal oriented:
All plans arise from objectives. Objectives provide the basic
guidelines for planning activities.
Planning has no meaning unless it contributes in some
positive manner to the achievement of predetermined goals.
2. Planning is a primary function:
Planning is the foundation of management. It is a parent
exercise in management process.
It is preface to business activities.
The idea of primacy of planning emphasizes the fact that
planning takes precedence over other managerial functions
like organizing, directing and controlling because none of
these functions can come into being until there is a plan.
 CHAPTER TWO: MANAGERIAL PLANNING
Nature of Planning(cont’d):
3. Planning is all pervasive:
Planning is a function of all managers.
 It is needed and practiced at all managerial level.
Managers have to plan before launching a new business.
They have to plan whenever things change.
 Even when they decide to close down a plant, they have to
plan meticulously to avoid problems from employees.
4. Planning is a mental Exercise:
Planning is a mental process involving imagination,
foresight and sound judgment.
Planning compels managers to abandon guesswork and
wishful thinking.
It makes them think in logical and systematic manner.
 CHAPTER TWO: MANAGERIAL PLANNING
Nature of Planning(cont’d):
4. Planning is a continuous process:
Planning is a continuous process. It is never ending activity.
Once plans for a specific period are prepared, they are
translated into action. At the end of that period, there is a
need for a new plan to be drawn based on the new situations
and conditions.
Planning is thus, an on-going process of adjustment to
change.
5. Planning involves choice:
Planning essentially involves choice among various
alternative courses of action. If there is one way of doing
something, there is no need for planning. The need for
planning arises only when alternatives are available. Out of
these alternatives, a manager would select the best
alternative, after careful analysis and evaluation.
 CHAPTER TWO: MANAGERIAL PLANNING
Nature of Planning(cont’d):
6. Planning is forward looking:
Planning means looking ahead and preparing for the future.
Managers plan today with a view to flourish tomorrow.
Without planning, business becomes random in nature and
decisions would become meaningless, adhoc choices.
7. Planning is flexible:
•Planning is based on a forecast of future events.
•Since future is uncertain, plans should be reasonably
flexible.
8. Planning is an integrated process:
Plans are structured in a logical way wherein every lower
level plan serves as a means to accomplish higher level
plans. They are highly interdependent and mutually
supportive to each other.
 CHAPTER TWO: MANAGERIAL PLANNING
Nature of Planning(cont’d):
9. Planning includes efficiency and effectiveness dimensions:
Plans aims at deploying resources economically and
efficiently.
They also try to accomplish what has been actually targeted.
The effectiveness of plan is usually dependent on how much
it can contribute to the predetermined objectives.
Need for planning
Planning is important for every organization irrespective of
its size, objectives, and location. Organizational tasks can’t be
performed with out plans.
Planning is critical managerial function that forms the basis
for other managerial functions. Without planning business
decisions would become inconsistent, random & ad-hoc
choices, and this may lead to failure of entire organization. i.e.
“Failing to plan is planning to fail”
 CHAPTER TWO: MANAGERIAL PLANNING
Need for planning(cont’d):
Planning is important for several reasons:
It provides direction for an organization by specifying
objectives
 It reduces risk and uncertainty for the future
It allows organizational members to concentrate on common
organizational objectives
 It provides the criteria for decision making
It provides basis for control or facilitates control
 it helps organizations to succeed or reach their objectives
it promotes efficient utilization of resources
 it enables an organization to use opportunities and face
challenges, and
it contributes to the performance of other managerial
functions.
 CHAPTER TWO: MANAGERIAL PLANNING
2.2. Types of plans
Plans can be classified on different bases or dimensions. The
most important ones are:
A.Repetitiveness (frequency of use)
B.Time dimension/ horizon (duration) &
C.Scope/ breadth dimension.
A. Classification of plan based on repetitiveness:
Based on repetitiveness, plans are classified into two, as
Standing plans and Single use plans.
1.Standing plans:
Standing plans are plans that are used again & again;
followed each time; and designed to deal with organizational
issues or problems that recur frequently.
They can limit employees' flexibility & make it difficult to
respond to the needs of the customers.
 CHAPTER TWO: MANAGERIAL PLANNING
2.2. Types of plans(cont’d)
1.Standing plans(cont’d):
By using standing plans management handles repetitive
problems.
Standing plans include mission or purpose, goals/
objectives, strategy, policy, procedure, method and rule.
2. Single-use plans
Single-use plans are developed to address a specific
organizational situation.
They are used up only once but not over & over again as the
standing plans.
They are not used up again once the objective is
accomplished.
Single-use plans are commonly three types, namely
programs; projects and budgets.
 CHAPTER TWO: MANAGERIAL PLANNING
2.2. Types of plans(cont’d)
B. Classification of plans based on time:
Plans in terms of time periods are classified into three as
long term/ range; intermediate range and short range.
1. Long-range planning:
Long – range planning has longer time horizon; and usually
concerned with the future direction of the organization but
not concerned with the immediate future but with distant
future. The time usually ranges from 5-10 years, but the time
length is a relative term that depends on the size & the nature
of the organization.
2. Intermediate-range planning
Intermediate-range planning ranges between long & short
range planning; and they are usually developed for 1-5 years,
but the time dimension can also vary depending on the size &
nature of the organization.
 CHAPTER TWO: MANAGERIAL PLANNING
2.2. Types of plans(cont’d)
3. Short – range planning:
Short-range plans are not developed separately.
They are also taken as operational plans derived from the
long ranging or intermediate plans. The time length is
commonly taken as less than 1 year.
C. Classification based on scope/ breadth
Based on scope, plans are classified into 3 categories as
Strategic plan; Tactical plan & Operational plan.
1. Strategic planning:
Planning that is strategic in nature; focuses on changing the
competitive position and the overall performance of the
organization in the long term. Strategic plan is a general plan
outlining decisions of resources allocation, priorities, and
action/ steps necessary to reach strategic goals.
 CHAPTER TWO: MANAGERIAL PLANNING
1. Strategic planning (cont’d)
Strategic planning is a process of analyzing & deciding the
organization’s mission, objective, strategy (major courses of
action) and the major resource allocations.
It is developed by top level managers, mostly long-range in
its time horizon, expressed in relatively general, non-specific
terms & a type of planning that provides a general direction
to the organization.
2. Tactical planning:
Tactical plan is a plan aimed at achieving tactical goals and
developed to implement specific parts of strategic plan.
 It refers to the process of developing action plans through
which strategies are executed.
Departmental managers in organizations are often involved
 CHAPTER TWO: MANAGERIAL PLANNING
3. Operational planning:

Operational plans focuses on carrying out technical

plans to achieve operational goals.
Operational planning is mainly short range; more
specific & detailed.
 It is made at operational level & concerned with day- to
day; week – to - week activities of the organizations.
 CHAPTER TWO: MANAGERIAL PLANNING
2.3. Planning process
The planning process indicates the major steps taken in
planning.
And generally there are 10 steps in planning process.
Step 1: Understanding the existing situation:
Awareness to the external and internal environments to the
organization is great important in planning to identify
opportunities (O) & threats (T) and identify strength (S) &
weaknesses (W) of an organization.
Therefore managers must look at O and T as well as S &
Ws, and understand what problems they wish to solve & why,
and know what they expect to gain.
Setting realistic objectives depends on this awareness.
Planning requires a realistic diagnosis of the opportunity
situation.
 CHAPTER TWO: MANAGERIAL PLANNING
Step 2: Forecasting:
Forecasting is assumption what the future looks like. To
decide where one wants to go, it is necessary to have
information about what the future looks like.
Planning is deciding what is to be done in the future. The
future is full of uncertainties; the manager must make certain
assumptions about it in order to plan properly. These
assumptions are based on forecasts of the future.
Step 3: Establishing objectives:
Objectives established for the entire enterprise and then for
each subordinate work unit.
They specify the expected results and indicate the end
points what is to be done, where the primary emphasis to be
located, & what is to be accomplished by the network of
strategies, policies, procedures, rules, budgets, & programs.
 CHAPTER TWO: MANAGERIAL PLANNING
Step 4: Determining the alternative courses of action
Determining the alternative courses of action is searching
for & examining alternative course of action (strategies),
especially for those not immediately apparent.
The more common problem is not finding alternatives but
reducing the number of alternatives.
It is seeking out alternative courses and examining their
strong & weak points.
Step 5: Evaluating alternative courses of action
Evaluating alternative courses of action is assessing the
alternatives by weighing them in light of premises and goals.
Step 6: Selecting a course of action
Selecting a course of action is the point at which the plan is
adopted.
It is the real point of decision making.
 CHAPTER TWO: MANAGERIAL PLANNING
Step 7: Formulating derivative plans:
Derivative plans are those support the basic or main plan.
Step 8: Numberizing plans by budgeting:
After decisions are made & plans are set, the final step is
giving them meaning.
Budgeting is to numberize plans by converting them into
budgets.
The organization’s budget represents the sum total of
income & expenses.
If done well, budgets become a means of adding together
various plans & also set important standards against which
planning progress can be measures.
Step 9: Implementing the plan:
After selecting optimum alternative, the manager has to
develop an action plan to implement it.
 CHAPTER TWO: MANAGERIAL PLANNING
Step 9: Implementing the plan(cont’d)
The manager must decide these issues:
Who will do what
By what date will the tasks be initiated & completed
What resources will be available for the process (human &
material)
How will the plan be evaluated
What reporting procedures are to be used
What type & degree of authority will be granted to achieve
these ends
Step 10: Controlling & evaluating the results:
Once the plan is implemented, the manager must monitor
the progress, i.e. evaluate the reported results, and make any
modifications necessary.
 CHAPTER TWO: MANAGERIAL PLANNING
2.4. Objectives
Types of objectives in organizations
Objectives can be separated in to two categories:
Organizational and individual.
i. Organizational objectives: are the formal targets of the
organization and are set to help the organization accomplish
its purpose.
They concern such areas as organizational efficiency,
productivity, and profit maximization.
ii.Individual objectives: which also exist within organizations,
are the personal goals each organization member would like
to reach through activity within the organization. These
Objectives might include high salary, personal growth and
development, peer recognition, and societal recognition.
A major problem arises when organizational objectives and
individual objectives are not compatible.
 CHAPTER TWO: MANAGERIAL PLANNING
2.4. Objectives (cont’d)
Goals and objectives are commonly used interchangeably.
They are closely related to planning.
Goals and objectives represent the end point towards which
all management functions are aimed.
And also they are the desired future outcomes/ state end
results. i.e. they represent not only the end point of planning
but also the end towards which organizing, staffing, leading
and controlling are aimed.
They specify the expected results and indicate the end point
of what is to be done; where the primary emphasis is to be
placed and what is to be accomplished by the network of
strategies, policies, procedures, rules, budgets and
programs.
Goals and objectives are the important ends towards which
organizational and individual activities are directed
 CHAPTER TWO: MANAGERIAL PLANNING
Purposes of goals
Goals serve four important purposes:
1.To provide guideline and direction
They provide guidance and a unified direction for people in
the organization.
2.To facilitate planning
Goal settings & developing plans to reach the goals should
be seen as complimentary activities.
3.To inspire motivation and commitment
Goals can serve as sources of motivation to employees of
the organization.
4.To promote evaluation and control
Goals provide an effective mechanism for evaluation and
control.
 CHAPTER TWO: MANAGERIAL PLANNING
The Difference between goals and objectives
Although goals and objectives are commonly used
interchangeably, they are differentiated as follows:
 Goals are the refinements of an organization’s mission
where as objectives state end-results and they are more
specific and need to be supported by sub-objectives.
Goals are broad where as objectives are narrow.
Goals are general intentions; where as objectives are
precise.
Goals are intangible; where as objectives are tangible.
Goals are abstract; where as objectives are concrete.
Goals can't be validated as is; where as objectives can be
validated.
Goals can be likened to a mission and to complete the
mission one has to complete certain tasks.
 CHAPTER TWO: MANAGERIAL PLANNING
The Difference between goals and objectives (cont’d)
Objectives make up a goal and they are SMART (specific;
measurable; attainable/ achievable; realistic and time bound).
Example:
Goal: To speak English fluently
Objective: Take two college English courses in three
months.
Objective: Work with a language tutor once a week
Hierarchy of objectives/ goals
Organizations establish different kinds of goals. Goals vary
by level, area, and time frames.
Goals/ Objectives form a hierarchy reaching from corporate
purpose & mission down to individual goals as well as
networks within an organization. Hierarchy of objectives is a
series of objectives linked to one another.
 CHAPTER TWO: MANAGERIAL PLANNING
Hierarchy of objectives/ goals(cont’d)
Overall objectives need to be supported by sub-objectives.
Each higher level objective is supported by one or more
lower level ones. Managers at different level are concerned
with different kinds of objectives.
The top levels very much involve in determining the
purpose/ mission & the overall objectives of the firm as well
as the more specific overall objectives in the Key Result
Areas (KRAs).
Middle levels are involved in setting of KRA objectives,
division & department objectives.
Lower levels primarily concerned in setting objectives of
department & units as well as of their subordinates.
Individual objectives consisting of performances &
development of goals. Managers at the top level should set
objectives for their performance & development.
 CHAPTER TWO: MANAGERIAL PLANNING
Hierarchy of objectives/ goals(cont’d)
Key result areas (KRAs) are areas where performances are
essential for the success of the organization. They are
operative objectives
Organizations can use to set objectives top–down approach
or bottom–up approach:
 In top–down approach the upper–level managers determine
the objectives for subordinates where as in bottom–up
approach the subordinates initiated the setting of objectives
for their position and present them to their superiors.
Both approaches are important, but the emphasis should
depend on the situation, i.e. the size of the organization; the
organizational culture; the leadership style and the urgency
of the plan.
 CHAPTER TWO: MANAGERIAL PLANNING
2.5. Planning Techniques
Forecasting is one of the tools for planning and decision
making. To plan, managers must make assumptions about
future events. Forecasting is the process of developing
assumptions or premises about the future that managers/
planners can use in planning and decision making.
Forecasting techniques
To carry out various kinds of forecasting, managers use
different techniques. The common models are the
quantitative forecasting techniques and the qualitative
forecasting techniques
1. The quantitative forecasting techniques
They use mathematical analysis. The most quantitative
techniques are Time-series analysis and casual modeling.
 CHAPTER TWO: MANAGERIAL PLANNING
Forecasting techniques(cont’d)
a. Time-series analysis
Time-series is analysis forecasting technique that extends
past information into the future through calculation of a best
fit line.
Time-series analysis assumes that the past is a good
predictor of the future, it is most useful when the manager
has a lot of historical data are available, trends are stable,
and patterns are apparent.
b. Casual modeling:
Casual modeling is a group of different techniques that
determine casual relationships between different variables.
The common casual modeling forecasting techniques are
regression modes; econometric models and economic
indicators.
 CHAPTER TWO: MANAGERIAL PLANNING
Forecasting techniques(cont’d)
2. The qualitative forecasting techniques
The qualitative forecasting techniques are one of the several
techniques that rely on individual or group judgments or
opinions rather than on mathematical analysis.
a. The Delphi method/ procedure
A mechanism for managing group decision making activities;
can also be used to develop forecast.
b. The jury-of-executive/ expert-opinion approach
involves using the basic Delphi process with members of top
management. In this instant top management serves as a
collection of experts asked to make prediction about
something.
 CHAPTER TWO: MANAGERIAL PLANNING
Forecasting techniques(cont’d)
c. The sales-force-composition method
is the pooling of the predictions and opinions of
experienced salespeople.
Their experience enables to forecast quite accurately what
various customers will do.
d. The customer evaluation/expectation
Involves a survey of customers as to their future needs.
 It is collecting data from costumers of the organization.
The customers provide estimate of their future needs for the
goods and services that the organization supplies, and then
the managers combine, interpret and act on their information.
 CHAPTER THREE: DECISION MAKING
3.1. Meaning of decision making
Decision making is defined as a rational choice among
alternatives.
“If there is no option, there is no choice & no decision.”
 In decision making, manager is making judgments –
reaching conclusion- from a list of known activities.
Decision making is universal. It is the main part of all
managers job.
A management makes decisions constantly while
performing management functions.
Decision making is not a separate, isolated function of
management, but the common core to other functions.
 CHAPTER THREE: DECISION MAKING
Managers at all levels are engaged in decision making and
make big & small decisions daily.
They make decisions while:
 Planning a budget
 Organizing a work schedule
 Interviewing a prospective employee
 Watching a worker on the assembly line
 Making adjustment to projects, etc.
3.2. Rational decision making process
Decision making process has seven (7) steps:
Step 1. Define the problem
Defining the problem is the critical step.
 If the problem is inaccurately defined, every step in the
decision making process will be based on that incorrect
point.
 CHAPTER THREE: DECISION MAKING
Step 2. Identify the limiting or critical factors
Once the problem is defined, the manager needs to develop
the limiting or critical factors of the problem.
Limiting factors are the constraints those rule out certain
alternative solutions.
The common limitations are time, resources, personnel,
money, facilities, and equipment. They narrow down the
range of possible alternatives.
Step 3. Develop potential alternatives
At this point, it is necessary to look for, develop & list as
many possible alternative solutions to the problem as you
can. These alternatives should eliminate, correct, or
neutralize the problem.
Doing nothing about a problem sometimes is the proper
alternative at least until the situation has been thoroughly
analyzed.
 CHAPTER THREE: DECISION MAKING
Step 4. Analyze the alternatives
This step is to decide the relative merits and demerits of
each of the alternatives.
If the alternatives conflict with critical (limiting) factors,
they must be automatically discarded (rejected).
Step5. Select the best alternative
Here all the alternatives are listed along with their
corresponding advantages and disadvantages.
To select the alternatives, you must find a solution that
appears to offer the fewest serious disadvantages & the most
advantages.
Take care not to solve one problem & create another with
your choice.
 CHAPTER THREE: DECISION MAKING
Step 6. Implement the solution
Managers are paid to make decisions and to get results
from these decisions. A decision has to be put into effect.
Everyone involved with it must know what s/he must do;
how to do it; why & when.
People must be told on their roles & must know exactly
what they must do & why.
Programs, procedures, rules or policies must be
thoughtfully put into effect.
Step 7. Establish a control & evaluation system.
Ongoing actions need to be monitored. It should provide
feedback on
how well the decision was implemented
what results are positive & negative , and
what adjustments are necessary to get the results that were
 CHAPTER THREE: DECISION MAKING
3.3 Types of decisions
1. Programmed decisions
Programmed decisions are decisions managers make in
response to repetitive & routing problems.
If a particular situation occurs often, managers will develop
a routine procedure for handling it.
Most management faces a great number of programmed
decisions in their daily operations. Programmed decisions
should be made with out expending unnecessary time &
effort. In most organizations, programmed decisions are
handled through policies; in some management scientists
 CHAPTER THREE: DECISION MAKING
2. Non – programmed decisions
Non – programmed decisions are decisions made for novel
and unstructured problems. When a problem hasn’t arisen in
exactly the same manner before, or is complex or extremely
important, it requires a non programmed decision.
Non programmed decisions are more complicated. They
require the expenditure of lots of money, worth of resources
every year. Very little is known about this type of decision
making. They are usually handled by general problem solving
processes, judgments, intuitions, and creativity.
 CHAPTER FOUR: THE ORGANIZATION FUNCTION
4.1. Concept of organizing and organization
Grouping the work of organization and assigning workers
to carry out the work with the provision of appropriate
authority are undertaken in the organizing function.
In organizing, managers must match the work, the workers,
and the resources necessary to carry out the work.
Organizing are boldly exploring new approaches to designing
work, linking jobs, and coordinating activities.
No single organizational structure can be effective in all
situations. A structure suitable to one organization may be
ineffective to another because two different organizations
cannot have the same people, resources or objectives.
Organizations should continuously adapt the challenges of
competition. Organizations those do not revise their
structures periodically with the ongoing global competition
will face extinction/ death.
 4.1. Concept of organizing and organization (cont’d)
Organization is used in two different ways:
I.One denotes the process of organization; and
II.the other denotes the result of the process called
organizational structure.
As to the first sense organization is the process of defining
and grouping activities and establishing the authority
relationship among them.
In performing organizing functions, the manager
differentiates and integrates activities of an organization.
1.Differentiation means the process of departmentalization or
segmentation of activities on the basis of some homogeneity,
or segmentation of the organizational system into
subsystems.
2.Where as integration is the process of achieving unity of
effort among different departments, or various subsystems
while achieving the stated goals.
 4.1. Concept of organizing and organization (cont’d)
Therefore, organizing consists of dividing work among
groups/ individuals and providing coordination between
individual and group activities.
Definition of organizing
Organizing is the process of establishing orderly uses for
all resources in the organization.
Organizing is the process of identification, classification
and grouping of tasks that are necessary to achieve
objectives and assigning of work to individuals and
designing hierarchy of decision making relationship.
Organizing is a managerial function; it leads to the creation
of the formal organization and results in an organization
 4.1. Concept of organizing and organization (cont’d)
The main objectives of organizing are;
Determining what kind of activities should be performed to
materialize objectives
Classifying those activities and grouping them based on
certain criteria
Assigning the work to individuals and delegating authority
Creating hierarchy of decision making
5.2 Formal and informal organization
I. Formal organization
Formal organization is an organization that is deliberately
and rationally designed and approved by management
through organizing process to achieve organizational goals/
objectives. It is planned structure of an organization which is
deliberately created to attain desired objectives. It is a
system with well-defined jobs, definite authority,
responsibility, and accountability.
 5.2 Formal and informal organization (cont’d)
Common characteristics of formal organization are:
1.Consciously designed: Formal organization are
purposefully designed and established to attain certain end
results.
2.Based on delegated authority: In a formal organization each
employee has delimited authority; therefore there is superior-
subordinate relationship.
3.Organizational chart is drawn: Organizational chart shows
jobs & departments, and it is the most tangible depiction/
picture of an organizational structure.
4.Deliberately impersonal: Positions in an organization are
not personal properties. They are always open to some one
who fit the position. People who meet the requirements of the
job can fulfill the position.
 5.2 Formal and informal organization (cont’d)
II. Informal organization:
Informal organization refers to people in-group
associations, but these associations are not specified in the
structure of the formal organization.
They are not included or established deliberately/ officially
in the formal organization channel but formed adjacent to the
formal organization. They always exist in the formal
organization; nothing can destroy them; they can not be
avoided. They are natural grouping of people in the work
situation based on their behavioral patterns; interests;
beliefs; objectives; etc..
No conscious attempt is made to create it. Informal
organization may affect formal organizations positively or
negatively. Managers should recognize that it exists in a
formal organization; and should try to use it for the benefit of
the formal organization.
 5.2 Formal and informal organization (cont’d)
Reasons for the formation of informal organization are:
1. Mutual benefit: Members of an organization have their own
personal interests that tied them to their colleagues so as to
meet these interests.
Hence the communality of people’s interest in the formal
organizations leads to the formation of informal organization.
2. Friendship: Members of an organization establish
friendship among themselves due to different reasons.
This friendship among the members paves the way for the
formation of informal organization.
3. The need to fulfill social needs: A need to be the member
of a society put the workers in the organization together.
Therefore, one of the mechanisms through which people in
the organization meet their social needs is being the member
of informal organization.
 5.2 Formal and informal organization (cont’d)
4. Physical work condition: People working in the same unit
are closely related.
Hence, working in proximity or together is one of the
reasons for the formation of informal organization.
5. Administrative practice: Some managers encourage while
others suppress the formation of informal organization.
Thus the type of management entertained by managers is
the result for the establishment of informal organization.
Characteristics of informal organization:
1. Group norms:
This is the core behavior among the workers in the informal
organization.
There are agreements/ rules and regulations which may not
be written that govern the behavior of members.
The members act accordingly with out showing any
deviation.
 cont’d
2. Group cohesiveness:
•Members of the informal organizations basically have strong
relationships. The more the group sticks together the more
they will be successful in attaining the objectives.
3.Group leadership:
•Members in the informal organization select someone who is
most active among the others as a leader, and such people
are conventional leaders.
4.Communication network:
•It is also called grapevine.
•It is the network outside the formal communication channel
established by the organization.
 5.2 Formal and informal organization (cont’d)
5.Lifespan and purpose:
Informal organizations have short life span in comparison
with formal organization.
Therefore, they cease to exist when the members meet their
interests and re-established when another need arises.
6.Existence of a number of informal organizations in a formal
organization:
The divergent nature of people’s interest, their feeling,
tradition, attitude, etc., lead to the formation of different
informal organizations in a big formal organization.
7.Informal organizations gradually can develop into formal
organization:
Informal organizations gradually can be emerged as formal
organization.
 Advantages and disadvantages of informal organizations:
i. Advantages:
1.They are additional assets for the formal organization:
If informal organizations are properly associated to the
formal organization, they are additional assets for the formal
organization because they may come up with innovative
ideas to promote the work of the organizations.
2. They could be useful channels of communication:
 In the informal organization, information can be easily and
rapidly reach the members of the organization through their
informal ways of communication.
3.They provide satisfaction and stability in the organization:
1.When workers are given opportunity to establish the
informal organizations, they entertain their idea that leads
them to be satisfied and stable in the organization.
 Cont’d
4. Their existence alerts managers to plan and act
accordingly than otherwise:
A manager becomes watchful more than any other time
when there are informal organizations to check whether they
are out of line or not.
And if the activities seem against the interest of the formal
organization, necessary measures are taken to normalize or
reverse the condition.
5. They inform managers sensitive issues that would be
embarrassing if formally released:
Some information may destruct the normal organizational
climate if formally released.
In such cases, informal organizations informally
disseminate the information to the group’s endurance and
then the manager also becomes aware of the consequences
if formally communicated.
 Cont’d
Ii. Disadvantages
1.Resistance to change: There is often a tendency to resist
changes.
2.Role conflict: Bothe types of organizations have their own
objectives. These objectives will not be the same and this
may arise role conflict in the organization.
3.Rumor: Managers may not equally release information to
the members of the organization.
When there is too much secrecy or ambiguous situations
informal organizations disseminate, distorted information.

5. Conformity: Some leaders of informal organizations may

have hidden agenda or promote destructive actions, hence
such leaders may use the members as an instrumental to
create challenge to the leaders of formal organization.
 4.3. Organization chart:
The organizing process leads to the creation of
organization structure, which defines how tasks are divided
and resources deployed.
Organization structure is defined as:
1. the set of formal tasks assigned to individuals and
departments;
2.formal reporting relationships, including lines of authority,
decision responsibility, number of hierarchical levels, and
span of managers’ control; and
3. the design of systems to ensure effective coordination of
employees across departments.
The set of formal tasks and formal reporting relationships
provides a framework for vertical control of the
organization. The characteristics of vertical structure are
portrayed in the organization chart, which is the visual
representation of an organization’s structure.
 4.4. Departmentalization: Meaning and Bases
Departmentalization is the process of grouping/ combining
jobs into groups or manageable units.
The main bases for departmentalization are :
function
location or Geography
product
customer and
process.
Hence the types of departmentalization are:
•Functional departmentalization
• Geographic departmentalization
•Product departmentalization
•Customer departmentalization
•Process departmentalization and
•Multiple departmentalization
 1. Functional departmentalization
The common form where activities are grouped based on
similarity in function or content. It is grouping jobs according
to the functions of an organization. It is common for business
firms. Within each department individuals perform
specialized jobs.
Fig: Functional departmentalization for business firm

General Manager

Marketing Production Finance Personne R & D

l
 1. Functional departmentalization (cont’d)
I. Advantages
1.It promotes specialization and organizational efficiency.
2.Avoid overlap performing basic businesses
3.It provides unity of direction. Among members of the
department, there is job interrelation.
4.It facilitates staffing and training. If there are highly
qualified staffs in a department, other workers will be
initiated or encouraged to fill the position.
5.It promotes communication within departments.
6.Create strong team sprit among people working in one
department.
II. Disadvantages
1.It has problems of horizontal coordination, i.e. Lack of
understanding of interrelationship and dependency between
all functions.
 II. Disadvantages of functional departmentalization (cont’d)
2. The tendency of “empire building”. Unhealthy competition
will occur between/ among departments.
3. It frustrates the development of managerial talents from
the organization as a whole to top managerial position. There
is a tendency for the manager who comes to the position of
organization’s to favor the workers in his department.
4. focuses on departmental problems and objectives; and
ignores organizational issues and objectives, i.e. Narrows the
understanding of employees about the organization at large
5. Create communication barrier among people with different
specialization
6. Department managers can not develop general managerial
skills to take up higher managerial position.
6. Lack of generalism and internal destructive competition
among different departments reduces the success of the
entire organization
 2. Geographic departmentalization
It is also called location departmentalization or
departmentalization by territory.
It is grouping of jobs on the bases of geographic areas.
 It is established when a company has different branches
that are geographically dispersed.
The operations are similar from region to region

General Manager

Region
Region one two Region three
 2. Geographic departmentalization
I. Advantages
It helps in exploiting local advantages.
It provides a training ground for new managers, i.e. to place
managers out of territory and then asses their progress.
It enables the firm to develop local market areas and adjust
quickly to local customers’ needs
It helps the company to reach close to raw materials.
It saves a substantial amount of transport costs.
It provides chance to local people employment opportunity.
Create customers goodwill and awareness of local feeling
and desire.
Facilitate decision making
It can provide a high level of service as employees know the
local culture and language.
 2. Geographic departmentalization
II. Disadvantages
Difficulties in maintaining consistent adherence to company
policy and practices
Duplication of effort
The necessity of having a relatively large number of managers
It poses serious problems of coordination and control.
It may create gaps between head offices and branch offices.
It is costly to host many geographically dispersed departments.
A company uses territory as basis for departmentalization often
needs a large head quarter’s staffs to control dispersed
operation.
 3. Product based departmentalization
It is grouping on the bases of products (goods/ services).
Such kind of departmentalization is best to a large and
multiple product organizations.

General Manager

Shoe Dep’t Clothing Dep’t Cosmetic Dep’t

 3. Product based departmentalization
I. Advantages
Allows workers to identify with a particular product and
develop team sprit.
It results in high product visibility.
It facilitates innovation; and also enhances specialization of
production.
Stem from the need to create relatively independent
division
Each division has its appropriate personnel
II. Disadvantages
Employees’ insecurity during time of turmoil.
Pressure for highly qualified managerial resources.
It results in poor coordination across the product lines.
Duplication of efforts among divisions
 4. Customer based departmentalization
It is grouping of tasks based on the type of customers
served. Customers are the key to the way activities are
grouped. Such forms of departmentalization are more
common in banking, book publishing and food industry.

General Manager

Women shoe Men shoe Kids’ shoe

I Advantages
 Customers’ interest and priority is respected;
 Helps to meet customers’ special needs by setting up
separate departments
 Indicate the willingness to understand the business of its
clients
 Workers are identified with a particular group of customers
that create team sprit
 4. Customer based departmentalization
II. Disadvantages
It is almost impossible to consider all the customers, their
interests, habits and customs.
In the period of no or little demand for goods and services
of an organization, some sections may not be profitable.
There is a problem of duplication of resources
Creates difficulty in coordination between departments
High competition among departments may deter the overall
organizational performance
Requires manager and staff specialists similar with the
customers’ situation
Differentiation among the various customer groups might
be difficult
 5. Departmentalization by process
It is appropriate when departmentalization by production is
inflow. Under it activities are grouped on the basis of various
manufacturing process.
General Manager

Drilling Grinding Welding Assembling Finishing

Fig: departmentalization by process
I. Advantages
 It is appropriate for organizing certain types of work.
 It helps to group production facilities.
 It puts full responsibility of completing each stage of the job.
II. Disadvantages
 Failure in one of the process may adversely affect the whole job.
 Due to sub specialization a worker has, he can not be shifted to
another department, i.e. it restricts flexibility.
6. Multiple bases for departmentalization
It is the combination of two or more departments discussed above. It
helps to divide work exhaustively. It is also a way of combining jobs into
departments. E.g. matrix organizations
 4.5. Span of Management
Manager can not supervise unlimited number of employees.
There should be a limited capacity to control the work of
different subordinates.
The manager’s ability to supervise a large number of
subordinates is constrained by knowledge, experience, tine,
energy, etc.
To overcome this limitation, every manager has to delegate
work to subordinates.
Span of management/ control refers to the number of
subordinates that single manager can effectively supervise
or should have to direct.
There is no correct number for the span of control or there
is no exact formula to determine the span of control.
It varies from one situation to another
 4.5. Span of Management (cont’d)
As a general rule :
The more complex a subordinate’s job, the fewer will be the
manager’s number of subordinates.
The more routine the work of subordinates, the grater will
be the number of subordinates that can be effectively
directed and controlled.
Because of these general rule organizations have a narrow
span of control at the top and wider span at the lower levels.
That is as one goes up the hierarchy, the fewer will be the
number of subordinates. A well trained person/ subordinate
follows directions and routines; master tasks; requires less
supervisory of time and energy.
 4.5. Span of Management (cont’d)
Factors those influence spans of control of a manager are:
1.The ability & the experience of a manager;
2.the complexity & variety of the subordinates’ work
3.the qualification of the manager and subordinates;
4.growth in competence and experience in personnel
5.The company’s philosophy towards centralization or
centralization in decision making.
If the manager has:
I. Too many people to supervise, the subordinates will be
frustrated by their ability to get immediate assistance from
their boss; time & other resources could be wasted; plans,
decisions& actions be delayed or made without proper
control or safeguard.
II. Too few people to supervise, the subordinates could
become overloaded or over supervised; and frustrated &
dissatisfied.
 4.5. Span of Management (cont’d)
III. The more capable & experienced the subordinates, the
more that can be effectively supervised by one competent
manager; the less time is needed to train & acclimate; the
more there is to devote to producing output.
4.6. Authority and power: source of power
I. Authority
All managers in an organization have authority. They have
different authorities based on the management position they
occupy.
Authority is described as institutional power.
It is the right to act, or to give order/ command, or deploy
resources in an organization. It is the power derived from the
rights that comes with position.
Authority represents legitimate exercise of power in the
organization structure. With out authority a manager can not
perform tasks with confidence and show results.
 4.6. Authority and power: source of power (cont’d)
Essential features of authority:
It is the relationship between two individuals - one superior
and the other subordinate.
It is the right to act.
It is the power to make decisions and seeing that they are
carried out.+
It is used to achieve organizational goals.
II. Power
Power is the ability to affect the behavior of others or power
is the ability to exert influence on others, or the ability to do
something.
In an organizational setting, there are different sources of
power:
•Legitimate power: Legitimate power is Power granted
through organizational hierarchy. i.e. power due to position
 4.6. Authority and power: source of power (cont’d)
 All managers have legitimate power over their subordinates.
 A manager can assign subordinates tasks, and subordinate
who refuses to do them can be reprimanded or even fired.
 Such outcomes stem from the manager’s legitimate power
as defined and vested in her or him by the organization.
 Legitimate power then is authority.
 All managers have legitimate power over their subordinates.
 The mere possession of legitimate power, however, does
not by itself make someone a leader.
 Some subordinates only follow orders that are strictly within
the letter of organizational rules and policies.
 If asked to do something not in their job description, they
refuse or do a poor job.
 So, the manager of such employees is exercising authority
but not leadership.
 source of power (cont’d)
2.Reward power: is the Power to give /withhold rewards.
Rewards that a manager may control include salary
increases, bonuses, praise, recognition, and interesting job
assignments.
In general, the greater the number of rewards a manager
controls and the more important the rewards are to
subordinates, the greater is the manager’s reward power.
 If the subordinate sees as valuable only the formally
organizational rewards provided by the manager, then the
manager is not a leader.
But if the subordinate wants and appreciates the manager’s
 source of power (cont’d)
3.Coercive Power: is a Power to force compliance via
psychological, emotional or physical threat.
In the past physical coercion in organizations was relatively
common. In most organizations today, however, coercion is
limited to verbal reprimands, written reprimands, disciplinary
layoffs, demotion and termination.
The more punitive the elements under a manager’s control
and the more important they are to subordinates, the more
coercive power the manager possesses.
 On the other hand, the more a manager uses coercive
power, the more likely he is to provoke resentment and
 source of power (cont’d)
4.Reference power: is the power based on identification,
imitation or charisma i.e. followers may react favorably
because they identify in some way with a leader, who may be
like them in personality, background, or attitudes.
In other situations, followers might choose to imitate a
leader with referent power by wearing the same clothes,
working the same hours, or espousing the same management
philosophy.
Thus, a manager might have referent power, but it is more
likely to be associated with leadership.
5.Expert power: is the power derived from information &
expertise.
It is the power resulting from a leader’s special knowledge
or skill regarding the tasks performed by followers.
When the leader is a true expert, subordinates go along
with recommendations because of his/her superior
 The relationship between power and authority
 Authority is the power that has been legitimized by the
organization.
 Where as power is ability to exert influence on others, or
the ability to do something.
Like authority, power is institutionalized and impersonal.
 In organizations, it is necessary to keep a balance between
power and authority.
 In some cases a manager may have the authority (the right
to do something), but may lack the power (ability to do
something) and vice versa.
 Failure to associate power and authority at all organization
levels may lead to disastrous consequence.
 ‘Power with out authority may be abused and authority
without power is totally meaningless.’
 4.6. Line and staff authority
The process of accomplishing organizational objectives through people
entails the establishment of relationship among the members of the
organization and different hierarchies of the management.
This results the presence of the two distinct types of authority in
business organization.
I. Line authority:
Line authority is the relationship between superior and subordinates.
It is directed supervisory relationship.
 It enables the manager to tell subordinates what to do.
 It is represented by the chain of command.
It flows downward in an organization.
A manager supervising employees or other managers has line authority.
Staff authority
Staff authority is the right to give advice. It is advisory in nature. Thus the
people in the staff position assist and advise the line manager. People in
theses positions have the authority to offer advice and
recommendations. e.g. legal service; public Relation service. It is an
advisory authority for manager. Advisory authority doesn’t provide any
basis for direct control over subordinates or activities of other
 4.6. Line and staff authority (cont’d)
II. Staff authority
Staff authority is the right to give advice.

It is advisory in nature.

Thus the people in the staff position assist and advise the
line manager. People in theses positions have the authority
to offer advice and recommendations. e.g. legal service;
public Relation service.
It is an advisory authority for manager.

Advisory authority doesn’t provide any basis for direct

control over subordinates or activities of other departments.
 4.7. Delegation, centralization and decentralization
1. Delegation:
Every manager must delegate duties to subordinates since
management means getting work done through others.
Effective managers normally delegate as many operation
tasks as possible to subordinates and concentrate their
efforts on core managerial tasks.
Delegation is authorizing subordinates to act in a certain
manner independently. It is a concept describing the passing
of formal authority to another person or passing authority
downward to subordinates. It helps to facilitate work being
accomplished. It is delivering to another the right to act; to
make decision; to requisition resources; and to perform other
tasks in order to fulfill jobs responsibility.
Delegation is a two side relationship, i.e. the assigner and
assignee. It is an act of trust; an expression of confidence;
requires necessary skills & strength, and requisite
 4.7. Delegation, centralization and decentralization(cont’d)
Delegation occurs for two purposes:
1.When managers are absent from their jobs - Subordinates
act on behalf and exercise authority.
2.To develop subordinates and facilitate decision making
process
Process of delegation
•Assignments of tasks:- Kinds of tasks to be performed by
subordinate are identified and assigned to the subordinate
•Delegation of authority: – for a subordinate to carry out the
activity, the necessary authority should be given by the
manager. A guideline for authority is that “no more no less”.
i.e. It has to be adequate to complete the task.
•Acceptance of responsibility:- When subordinates are
assigned with duties and delegated authority, then they will
be responsible or obliged to perform the tasks to the
maximum ability they can perform.
 4.7. Delegation, centralization and decentralization(cont’d)
4.Creation of accountability: - When subordinates are
assigned for certain tasks and are delegated a certain
authority, and then they will be accountable for the actions
taken.
Accountability
Accountability is just having an answer to somebody;
answer for the actions taken with regard to the tasks
assigned and authority delegated.
Accountability means taking the consequence- either credit
or blame. If one accepts assignments and authority, s/he is
answerable for the actions taken.
A manager is accountable for the use of his/her authority
and performance, and the performances and actions of
subordinates.
 4.7. Delegation, centralization and decentralization(cont’d)
The process of delegation produces clear understanding on
the part of manager and of the subordinates.
The manager should take time to think thoroughly what is
being assigned and to confer authority necessary to achieve
results.
The subordinate accepting the assignment, obliged
(responsible) to perform and is accountable for the results.
To delegate a manager must be able to consider the following
issues:
•Analyze how the manager spends his/ her time.
•Determine the tasks that can be assigned:
•Decide which task can be handled by whom among the
subordinates.
•Delegate the authority and create the responsibility.
•Control whether the delegated subordinates are performing
the tasks to the expected standard or not.
 4.7. Delegation, centralization and decentralization(cont’d)
In delegation, managers are required to think the principle
of parity that states “authority and responsibility must
coincide”; i.e. responsibility created should be equivalent to
the authority granted.
If employees are assigned tasks without authority, they can
not perform tasks as expected because the necessary
authority is not granted for them. Therefore, this creates
frustration and anxiety.
If employees are delegated more authority than the
expected responsibility they discharge, they will interfere on
the job of others and hinder others job.
Both centralization and decentralization refers to the nature
of authority within an organization structure. Centralization
and decentralization are merely the results of
circumstances.
Absolute centralization or absolute decentralization is
 4.7. Delegation, centralization and decentralization(cont’d)
2. Centralization
Centralization is a systematic and consistent reservation of
authority at central point within the organization.
It is the concentration of authority for decision making
within the hands of one or few.
In centralization:
There is little delegation of authority
Rules, power & discretion are concentrated at the top level
Control & decision making reside at the top level of
management
The more highly centralized the organization, the more
control and decision making will be exercised at the top.
Centralization is essential in case of small organizations to
survive in a highly competitive world.
The larger the size of the organization, the more consent is
 4.7. Delegation, centralization and decentralization(cont’d)
Special circumstances forcing managers to reserve/ keep
authority and centralize decision making power are:
1.To facilitate personal leadership: Centralization generally
works well in the early stages of organizational growth.
Dynamic and talented leader can derive advantages in a
small firm in the form of quick decisions, enterprising &
imaginative action, and highly flexible.
2.To provide for integration: Under centralization the
organization moves as a unit. It keeps all parts of the
organization moving together harmoniously toward a
common goal.
3.To handle emergencies: Centralization is highly suitable in
the time of emergency because it helps to mobilize resources
and information quickly. Centralization of decision making
ensures prompt action necessary to meet the emergencies.
 4.7. Delegation, centralization and decentralization(cont’d)
Centralization makes:
difficult for managers to process the bundles of data in time
and take decision in an appropriate manner
the manager burdened with a great amount of detailed &
exhaustive work
managers to work painfully long hours
forces top management to posses a broad view they may
have beyond their capacity. the vast amount of power given
to a few people may be abused
the organization is highly vulnerable to what happens to its
dynamic and talented top management people
Centralization floods communication lines to a few
individuals at the top of the organization. As a result the
speed of communication upward and decision processes are
slow. Centralization kills the initiative; self reliance and
judgment of lower level personnel.
 4.7. Delegation, centralization and decentralization(cont’d)
3. Decentralization
Decentralization is a systematic effort to delegate all
authority to the lowest levels except that which can be
exercised at central point.
It is pushing down of authority and power of decision
making to the lower levels of organization.
The essence of decentralization is the transfer of authority
from a higher level to the lower level.
Some guidelines to identify the degree of decentralization in
a company:
1.The greater the number of decisions made at the lower level
of management, the more the company is decentralized.
2.The more important decisions are made at the lower level,
the greater is the decentralization.
 4.7. Delegation, centralization and decentralization(cont’d)
3. The more flexible the interpretation of the company policy
at the lower levels, the greater the degree of decentralization.
4. The more widely dispersed the operations of the company
geographically, the greater the degree of decentralization.
5. The less the subordinate has to refer to his/her manager
prior to decision, the greater the decentralization.
1. Advantages of decentralization
It reduces the work load on overburdened manager.
It brings the decision making process closer to the scene of
the action.
It facilitates product diversification. i.e. treats each product
lines as separate and important.
It gives individuals an opportunity to learn by doing.
It facilitates effective control. i.e. often results in improved
controls & performance measurements.
It ensures participative management.
 4.7. Delegation, centralization and decentralization (cont’d)
2. Disadvantages of decentralization

1.Conflict: Decentralization puts increased pressure on each

heads to realize profit at any cost. To meet this each deviate
or veer away form corporate objective. i.e. leads to
competition that may ultimately result in bitter individual
rivalries.

2.Cost or duplication: Decentralization results in duplication

of staff effort. To be independent each division should have
access to purchasing, personnel, etc. hence each carry a
large group of specialists at numerous cost.
 4.8. Groups and Committees(cont’d)
1. Groups:
A group is any numbers of people who (1) interact with one
another, (2) are psychologically aware of one another, and (3)
perceive themselves to be a group.
Kinds of groups in organization
Groups that exist in organizations typically are divided into
two basic types: Formal and informal.
I. Formal group: is a group that exists in an organization by
virtue of management decree to perform tasks that enhance
the attainment of organizational objectives. Organizations
actually are made up of a number of formal groups that exist
at various organizational levels.
Formal groups commonly are divided in to command groups
and task groups:
a. Command groups: are formal groups that are outlined on
the chain of command on an organization chart.
 4.8. Groups and Committees (cont’d)
b. Task groups: are formal groups of organization members
who interact with one another to accomplish most of the
organization’s non routine tasks.
2. Committees
A committee is a group of individuals that has been charged
with performing some type of activity. Committees are a more
traditional formal group that can be established in
organizations.
From managerial viewpoint, the major reasons for
establishing committees are:
• to allow organization members to exchange ideas,
•to generate suggestions and recommendations that can be
offered to other organizational units,
•to develop new ideas for solving existing organizational
problems, and
•to assist in the development of organizational policies.
 4.8. Groups and Committees (cont’d)
II. Informal groups: Informal groups, the second major kind of
group that can exist within an organization, are groups that
develop naturally as people interact.
An informal is defined as a collection of individuals whose
common work experiences result in the development of a
system of interpersonal relations that extend beyond those
established by management.
Informal groups generally are divided into two types: interest
groups and friendship groups:
a.Interest groups: informal groups that gain and maintain
membership primarily because of a special concern each
member possesses about a specific issue.
An example is a group of workers pressing management for
better pay or working conditions. Once the interest or
concern that causes an informal group to form has been
eliminated, the group needs to disband
 4.8. Groups and Committees (cont’d)
b. Friendship groups: are informal groups that form in
organizations because of the personal affiliation members
have with one another.

Personal factors such as personal interests, race, gender,

and religion serve as foundations for friendship groups.

As with interest groups, the membership of friendship

groups tends to change over time.

Here, however, group membership changes as friendships

dissolve or new friendships are made.
 CHAPTER FIVE: STAFFING AN ORGANIZATION
INTRODUCTION:
After jobs are identified, grouped & organizational structure
is created, then comes the other managerial task staffing.
Organizations possess and utilize different kinds of
resources to achieve their objectives.
These resources can be; materials, capital, machineries,
money, information and men.
Among these resources human resources is the most
important one.
Other resources remain futile and organizations are said to
be lifeless without HR.
Human resources have the ability to develop and improve
their abilities and skills.
As Robert Owen said human resources are the most
important resources of an organization, which deserve
special treatment, respect and dignity.
 Staffing Processes:
The managerial function of staffing is defined as filling and
keeping filled position in the organization structure through
identifying work force requirement, inventorying the people
available, recruiting, selection, Placing, promoting,
appraising, compensating, training and developing both
candidate and comment job holders to accomplish their
tasks effectively and efficiently.
Staffing involves a series of steps:
1.HR planning (manpower planning)
2.Recruitment and selection
3.Placement & Employment decision
4.Induction & Orientation (Socialization)
5.Training and development
6.Compensation & performance appraisal (PA)
7. Separation, Promotion, Transfer & Layoffs
 Staffing Processes(cont’d)
5.1. HR planning (manpower planning):
One can also define human resource planning as the
process of determining the need of the provision of adequate
human resources to the job in the organization.
It is designed to ensure that the personnel need of the
organization will be constantly and appropriately met.
Through planning management strives to have the right
number and the right kind of people at the right place, at the
right time, to do things which would result in achievement of
maximum long term benefit for both the individual and the
organization.
It is accomplished through analysis of:
1.Internal factors such as current and expected skill needs,
vacancies, and departmental expansions and reductions.
2.External environmental factors such as the labor market,
the government regulation, the labor union etc.
 5.1. HR planning (manpower planning) (cont’d):
As a result of this analysis, plans are developed for
executing the other steps in the starting process.
This helps an organization to determine the need of
employees for short term or for long term.
The activities generally seen in human resource planning are:
Forecasting about the future manpower requirements.
Making an inventory of the present manpower and also
finding out to what extent they are effectively deployed.
Anticipating future manpower problems by comparing the
forecasted requirements with that of the current manpower
assessments.
Planning the necessary programs and procedures to
overcome the problems identified. The planning can be
done for programs concerning, requirements, recruitment,
selection, training, development, promotions, companions
etc.
 5.1. HR planning (manpower planning) (cont’d):
Why human resource planning is needed?
To carry out the work of the organization, skilled and
qualified manpower is needed. A good human resource plan
would help the management in recruiting and selecting the
best available personnel to carry out the activities of the
organization effectively and efficiently.
People leave organizations for a number of reasons like
retirement, transfer, better opportunities in other
organizations and it is the duty of the human resource
department to replace them.
A good human Resource plan would go a long way in trying
to predict when the vacancies would be created and when the
recruitment and selection should be carved out.
Labor turn over and absenteeism seem among workers are
also factors which make human resource planning important.
 5.1. HR planning (manpower planning) (cont’d):
Why human resource planning is needed?(cont’d)
In order to meet the requirements of expansions and
diversification programs of the organization human resource
is important.
The present situation of fast paced change in technology
and changing needs of the work force has also necessitated
creation of an effective human resource plan to cope up with
future uncertainties.
Human resource planning will help the management in
identifying the areas where there are surplus personnel.
These surplus personnel can be transferred to other
 5.1. HR planning (manpower planning) (cont’d):
Model of human resource Planning:
Basically a human resource plan consists of the following
five phases or steps:
Determining future human resource requirement
Determine future human resource availability
Conducting external and internal environmental scanning
The Concealing requirements and availabilities
Action planning
 After developing the model of human resource planning
the manager will try to audit the human content of the
organization to decide on the quality and quantity of workers
that might stay with the Organization for the future plan.
Following the human resource audit the manager is also
responsible to conduct job analysis to determine the vacant
position available in the organization.
 5. 2. Recruitment :
This is the second stage in procurement process of any
personnel department, the first being human resource
planning.
The recruitment process acts as a bridge between the
prospective employees and the organization.
Recruiting is the discovering of potential applicants for
actual or anticipated organizational vacancies.
Hence the main purpose of recruitment is to identify
sources of manpower so as to satisfy the man power
requirement of the organization.
It can be considered as the most important function of the
personnel department.
Unless and until the organization attracts the best and the
brightest professionals it would not succeed.
 5. 2. Recruitment (cont’d):
Even the best personnel policies, the best devised plans and the latest technology
cannot be harnessed properly if the manpower is of low quality.
The process of recruitment is considered to be both positive as well as negative.
Positive because, stimulates people to apply for the vacancies created in the
organization , and
 negative because, it screens out or rejects the majority of applicants who don not
match the broad job requirements.
So, during recruitment the potential candidates will be pooled together throu8gh
the advertisement of vacancies on mass media.
The vacancy to be announced to the candidates should incorporate at least the two
statements:
1. The job description statements and
2. The job specification statement
Job description- is the written record of duties, responsibilities and requirements of
a particular job. It gives information of about the title, locations, duties, working
conditions and hazards. It is the description of job quality characteristics.
Job Specification -It is a statement giving the requirements of personnel who should
be made responsible for a given job. It gives information regarding the
characteristics, qualities (physical, psychological and demographic),
qualifications, experience, etc, of the worker who is most suitable to carry out the
activities mentioned in the job description. So it is a statement specifying the
characteristics of the worker occupying the position.
 5. 2. Recruitment (cont’d):
1.Job description:- is the written record of duties,
responsibilities and requirements of a particular job. It gives
information of about the title, locations, duties, working
conditions and hazards. It is the description of job quality
characteristics.
2.Job Specification:- It is a statement giving the requirements
of personnel who should be made responsible for a given
job. It gives information regarding the characteristics,
qualities (physical, psychological and demographic),
qualifications, experience, etc, of the worker who is most
suitable to carry out the activities mentioned in the job
 5. 2. Recruitment (cont’d):
Sources of Recruitment:
1. Internal Recruitment (Recruitment from with in):
This involves recruitment from with in the organization; it
could be through promotion, demotion or lateral transfer.
The employees who already are a part of the organization
are given an opportunity for filling up vacant positions.
Here, not only the existing employees but also ex-
employees of the organization who left the organization for
various reasons belong to the internal source of recruitment.

The advantages of these sources are:-

Employees have high moral because they are sure of
getting relations for the hard work they put in to the
organization growth.
The old employees can be better evaluated than out sides
 5. 2. Recruitment (cont’d):
Sources of Recruitment:
The advantages of Internal Recruitment (cont’d):-
Since the organization gives preference to existing
employees in filling up vacancies, job security is more and
also the opportunity for advancement is higher which
enhances employee loyalty towards the organization.
Minimum time needs to be spent on training since the
employees are already used to the organization policies,
procedures and philosophy.
Employees selected from the internal sources are generally
more reliable because they have more loyalty to the
organization than a new comer.
Recruiting from the internal sources is much cheaper than
the external source.
 5. 2. Recruitment (cont’d):
Sources of Recruitment:
The disadvantages of Internal Recruitment are:-
Too much dependence on the internal sources will lead to
inbreeding and discourages people with fresh ideas, more
qualification and more creativity room entering the
organization.

2.External source of Recruitment

Here the potential candidates are totally coming from the
external environment i.e. Out side the organizations and
generally these sources are new entrants or fresh products,
the educated, but unemployed section of the society,
 5. 2. Recruitment (cont’d):
The advantages of external sources are:
The management need not compromise in their recruitment;
they can get the best professionals available in the market
with the required experience, skill, education etc.
Recruitment can be done which might include all sections of
the society
Fresh blood can be pumped in to the organization personnel
who are creative and who are specialists can be attracted.
The disadvantages can be:
 Adequate time and money needs to be spent on training
and induction
Chances of brain drain or the employees being recruited by
other organizations increase
The whole process of external recruitment is more
expensive than internal
 5. 2. Recruitment (cont’d):
Methods of recruitment
i.Direct method recruitment:- The recruiters are sent directly
to the colleges, universities, educational institutions, and
contact the graduating students and select the best among
them. The recruiters also contact the prospective employees
directly, the recruiters may hold conference and seminars for
the prospective employees and encourage them to apply for
vacancies, and the recruiters may participate in job
exhibitions or job fairs to attract prospective employees.
ii.Indirect method:- In this method the organization
encourage prospective employees to apply for vacancies
through advertisements in newspapers, magazines, journal
etc. Generally the advertisements for top-level position are
given in national newspapers and for lower level and workers
advertisements are given in regional newspapers.
 5. 2. Recruitment (cont’d):
The advertisements could be detailed (name of the
organization, type of the job, salary and other benefits etc)or
bind (only the type of job and p.o.box number).
III. Third party method: -
There are many private employment agencies which carry
out the recruitment process of an organization for a fee.
Governments also have employment exchange which
provide organizations with man power.
Placement services of colleges and universities, trade
unions etc, are also part of the third party method of
recruitment.
5. 3. Selection
Selection is the procedure, which is concerned with
securing and extracting relevant information about an
applicant. Its objective is to Determine whether the applicant
has the required qualifications for a specific job or position
and in hiring the best candidate among all the applicants.
 5. 3. Selection (cont’d)
Selection process
1.Application blank:- The applicants are made to fill up a
predesigned application form which tries to extract detailed
information about the applicant’s personal information
(name, age, sex, family background etc) educational
qualifications, training programs, undergone, work
experience, salary expected, future career plans, self
assessment of previous work, reasons for leaving the current
or previous employer etc, or the applicant is asked to submit
his/her bio-data instead of filling up the form.
2.Preliminary interview: - This is generally done by a junior
executive of the human resource department where in the
general information about the company and the job/position
is given and brief information about the applicants,
educational and professional qualifications are obtained.
Observation is also made of the general physical feature and
physical fitness of the applicant.
 5. 3. Selection (cont’d)
Selection process(cont’d)
3.Final Interview:- Interview is the most widely used selection
tool.
It is a complex process in which the interviewer tries to form
an opinion about the interviewee’s personality, intelligence,
technical competence, interests, attitudes etc. through face-
to-face interaction.
It is an attempt to secure maximum amount of information
from the candidate concerning his/her suitability for the job
under consideration.
This technique can also be used for purposes other than
selection like, in performance appraisal, in grievance
handling, in disciplinary action, for counseling and other
general problem solving.
 5. 3. Selection (cont’d)
The basic objectives of interviews would be:
To properly judge an applicants qualifications and
characteristics
To give the applicant important and relevant information
about the job and the organization
To establish a good rapport with all the candidates attending
the interview
To promote the good will of an applicant towards the
organization, immaterial of the out come to the selection
process
To help the management in grievance handling in
conduction of disciplinary actions and in interactions with
the workers union
To observe the applicants, appearance personality,
confidence level etc.
 5. 3. Selection (cont’d)
Types of interviews
a.Patterned or structured interview:- is a very common type
of interview in which the focus is on asking structured
predetermined questions in a strict sequence. There is little
or no deviation of the sequence of questions and most of
them are job/skill oriented.
b.Non-directive or free interview:-is unstructured and un
planed. The basic aim of this type of interview is to judge the
real nature of the applicant. General, unstructured questions
are asked and the candidate is given adequate time to answer
in detail
c.Depth or Action interview: is semi structured, where
structured questions are asked in intervals of unstructured
questions or conversations. It is a combination of the
patterned and free interview styles. The aim of this interview
is to obtain detailed information about both the personal as
well as the professional life of the interviewee.
 5. 3. Selection (cont’d)
d. Group or Discussion interview:-The interview is held for
more than one candidate and the role of the interviewer
becomes that of the observer, where in he tries to identify the
persons with the required qualities for the concerned job.
The group of candidates is given a topic or a problem for
discussion and the observers identify the persons who are
having good leadership skills, who influence the discussion,
who are good analyzers, who have good communication
skills etc. and select the ones most suitable for the given job.
e. Panel or board interview: It is an interview in which the
number of interviewer would be many and the interviewee
will be one. The panel (board) consists of expertise of
different areas.
f. Stress interview: It is in which the interviewer pretends to
be hostile & provokes the candidate by asking questions
rapidly by criticism & trying to annoy him.
 5. 3. Selection (cont’d)
Stress interview is conducted to find out the reaction of the
candidate under pressures & also to observe the presence of
the mind of the candidate when he is angry or confused.
g. Physical examination: It is checking the physical fitness of
the candidates
Medical examination of the candidate before employment is a
necessary step in the selection process. To prevent the
existing employees from the communicable diseases &
unwarranted claims in the form of medical & insurance
expenses
This step is necessary for 3 vital reasons: to assure that the
applicant is fit to work in the organization, to assure that the
candidate is physically fit for placement in a particular job, to
provide base against which later physical examination may
be compared. (- is important in the disability claims that may
occur during the job assignments
 5. 3. Selection (cont’d)
4. Reference letters/ Reference check & background
investigation: Verification of information obtained from the
candidate’s application form & selection interview.
After a candidate has passed successfully all the above
stages in the process of selection, a reference check is made
where in the HR manager gets in touch with the current or
previous employer of the candidate and find out relevant
details.
This is done to see whether the candidate has furnished
correct details & also to cross check the suitability of the
candidate for the given position.
Include:
letter of recommendation;
references;
testimonials, etc… from the former employers so that it is
possible to know the competence of the candidates.
 5. 3. Selection (cont’d)
5. Final selection & communication (Job offering): After
getting a positive reference, a final list of selected candidates
is made & this information is passed on to the candidates,
the concerned line managers & other people.
4. Decision making and Placement(4th step in staffing
process)
The candidates who have been selected should be given
placement letters that state their employment and specific
positions, and other employment related matters.
5. Induction & Orientation (Socialization)
When the candidate is selected and offered a job, it is
necessary to introduce the new employee to the
organizations philosophy, rules, policies, etc…..then the new
employee begins his work. He should be assimilated to the
job & organizational environment.
 5. 3. Selection (cont’d)
5. Induction & Orientation (Socialization)(cont’d)
Induction & orientation have to do with familiarizing the new
employee with the organization.
The employee will be given information on the organizations
history, products, operations, policies & rules, services
available, opportunities & other issues.
Induction & orientation are the two important tasks to be
accomplished to ensure smooth organizational membership
of a new employee.
They are assimilation & socialization of a new employee.
Induction- Refers to the process of familiarizing a new
employee with the overall organizational environment
through the provision of adequate information to bring about
change in new employee’s expectation, behavior, and
attitude in order to assure the best match with organizational
interest.
 5. 3. Selection (cont’d)
5. Induction & Orientation (Socialization)(cont’d)
It involves providing information about the organization’s
history, purpose, operations, products/services and his
contribution to the organization and needs & benefits for the
new entry. It is done through the interaction of the employee,
the immediate supervisors & personnel.

Orientation: -It is designed to enable new employee to

familiarize with working environment through the provision
of adequate information. It involves discussion between a
manager & employee regarding the job assignment including
specific location, rules and procedures of the work as well as
the materials, equipments needed to do the job.
 5. 3. Selection (cont’d)
5. Induction & Orientation (Socialization)(cont’d)
The purposes of induction & orientation:
Reduce the start-up cost - enable a new employee to meet
performance standards sooner.
Reduce anxiety - employee fear of failure on the job can be
avoided, and he develops self confidence.
Decrease turn over - provision of all kinds of information
during the entry time make new employee stable in the
organization.
Save time to supervision - reduce the time of a supervisor
to supervise and observe the performance of an employee.
 5.4 . Training and development
Training:
Training becomes necessary because of the changing
technology, up-production of skills & knowledge of workers,
the need to increase the productivity of the workers, etc.
Training is any process by which the aptitudes, skills and
abilities of employees to perform specific jobs are increased.
It is the act of increasing the knowledge & skills of employee
for doing a particular job; and a process of learning a
sequence of programmed behavior which help the trainees in
improving their job performance and better apply their
knowledge.
Training is designed to improve a person’s skills to do the
current job at high level from the first day they start working.
To ensure improvement in person’s skills & knowledge to
perform the work through training, effective training system
should be designed
 5.4. Training and development ( cont’d)
Objectives of Training:
To make the workers perfect in their work
Proper training would help the worker in producing quality
product
Training will help the management in developing personnel
for future expansion or diversifications
A good and well-planed training program will help in
improved performance
Proper training will help the worker in adopting safe work
procedures
Proper training will help the worker in adopting safe work
procedures
Training will help the worker in avoiding them from being
obsolete
 5.4. Training and development ( cont’d)
Importance of training:
It is important that the employee be indicated into training
programs to improve their knowledge, skills and future
performance.
The need for proper training is increased by the following
considerations:
Increased productivity
Improvement in employee moral
Availability for the future personnel needs of the
organization
Improvement in health and safety
Reduced supervision
Personal growth
Organizational stability
 5.4. Training and development ( cont’d)
Steps in designing effective training:
1.Need assessment-assess the needs for training based an
organizational analysis, person analysis & task analysis.
2.Assessment of employee readiness-Consider whether
employees are motivated to learn.
3.Creation of learning environment -Lay a foundation for
successful training by creating the conditions under which
employee will learn best.
4.Ensuring transfer of training -Ensure that employee will be
able to apply what they have learned to their jobs.
5.Selection of training methods-Consider the possible
training methods & select those that will be most appropriate.
6.Evaluation of the training program-Evaluate the outcome of
the training program.
 Methods of training:
On-the-job-training:- In this type of training, an employee is
put on the work floor directly and is assigned to a superior to
an experienced co-worker who teaches/guides him in how to
do the work practically. These methods are parts of the every
day job activity of the organization. This is the most common
method of training, because it is practical it is practical
oriented, less expensive and the focus is on the job. The
various techniques used under this method are, coaching
(understudy) apprenticeship, where the super visor or an
experienced worker gives personal and in-depth guidance to
an employee or subordinate.
Off the job-training- This type of training is given to the
trainees away from the work floor and is not the every day
activity of the organization. The trainees are imparted
theoretical knowledge in a classroom or a training center and
the most popular kind of off the-job training methods are
lectures, conferences, group discussions, case studies, etc.
 Methods of training (cont’d):
Vestibule/Simulated training: - This is a combination of on
the job training methods.

In this method identical machines and equipment, which are

used on the work floor, are installed in a training center and
also an effort id made to implicate work atmosphere found on
the actual work floor.

This method tries to give the trainees a chance of getting

trained in a situation that is as close to the original work
situation as possible.

Here the work environment is almost similar to the actual

environment, but is not the rest environment. Eg. Training
given for a pilot.
 5.5. Performance Appraisal and Compensation
Performance appraisal is a process of evaluating an
employee’s performance of the job assigned.
Performance appraisal is a step which tells the
management how effective their processes of recruitment,
selection, and training are.
 It basically involves the estimation of the value, excellence
and quality of the personnel of the organization.
 Performance appraisal is also called as merit ratings,
employee evaluation, progress report, staff assessment etc.
Objectives of performance Appraisal
 It helps the management in maintaining the inventory of
man power along with their quality and worth for the
organization
 A good performance appraisal helps the management in
identifying and meeting the training need of the employee
 5.5 . Performance Appraisal and Compensation (cont’d)
 It helps the management in deciding about salary
increments, incentives and in deciding who should get
promotions, transfers and demotions.
Performance Appraisal Process:
Establishing performance standards:- performance
standards are developed at the time of developing job
descriptions and job specifications. These standard should
be clear, precise, and objective oriented.
Communication of standards to employees:- Performance
standards should be communicated to all the concerned
employees, because unless and until the employees are
aware of the standards, they will not be in a position to meet
them.
Measurement of the actual performance:- In this third stage
the actual performance of the employees is noted and the
information about the employees performance is collected
through personal observation, written report, oral report etc.
 5.5 . Performance Appraisal and Compensation (cont’d)
Comparison of the actual performance with that of the
standard:- This comparison is also used to identify the most
promising employees who have the potential for growth and
advancement.
Communication of the results:- These results are
communicated to the concerned employees and
discussions are held with them to identify their strengths
and weaknesses and also to identify the difficulties in
carrying out their activities. Objective discussions and
accurate information about the performance will help the
employee in bettering his performance.
Corrective actions:-If there are any short falls in the
performance of the employees the management along with
the concerned employees should identify the reasons of the
short falls. After the reasons are properly identified, the
ways and means of overcoming these difficulties are
devised and implemented.
 5.5 . Performance Appraisal and Compensation (cont’d)
Compensation
People work in organizations for the sole purpose of earning
enough money to live comfortably and satisfy alls their
needs. Wage and salary administration is the establishment
and implementation of sound policies and practices of
employee compensation. Compensation is just the reward for
the work done by an employee and it should be balanced so
as to keep the parties, the employer and the employee happy
and satisfied.
Factors affecting compensation policies of the organization
Organizational ability to Pay:- The organization should have
enough funds to pay enough salary or wage to the employee.
Supply and demand of labor:- If the supply of labor is more
than the requirement then the management can pay less
wages and salaries to its employee and reverse in case of
less supply.
 Factors affecting compensation policies of the organization
Prevailing market rate: - The going wage rate or salary in
the industry also influences the wage and salary policy of
the organization.
Cost of living:- The cost of living differs in different cities
Productivity: - The level of productivity of the workers also
has an impact on the kind of wage/salaries they get; more
productive workers get more salaries.
Bargaining Power of the worker’s unions:- Powerful
worker’s union generally have a lot of influence on kinds of
wages and salaries given by the organization
Job requirement: - Some jobs are more hazardous and
dangerous than others and the employees understating
them would get more pay than others who are in relatively
safer positions.
Managerial attitude: - The top management has a lot of
influence on the wage and salary administration.
 Types of incentives
Intrinsic rewards: - These are rewards which a worker
receives for himself and are totally dependent on the kind of
work done by him. These individual incentives could be in
the form of participation in decision-making , job freedom,
more responsibility, more interesting work assignment,
opportunity for personal growth etc.
Extrinsic rewards: - These incentives are meant for all the
employees of the organization and they can be :
Direct compensation: - These incentives are given to all
employees of the organization and basically are monetary in
nature and the payment is made immediately like salaries or
wages paid to the employees , over time earning’s, holding
premiums, performance bonus, profit-sharing, etc.
Indirect Compensation:-These incentives are realized at a
later period of time, generally once in a year or at the time of
retirement like group insurance schemes, contribution for
provident fund services etc.
 The time and mode to payment
There are two basic methods of payment:
1.Payment on a time basis
 is more satisfactory when Units of out put are not
distinguishable and measurable.
Employees have little control over the quantity of out put or
there is no clear-cut relation between effort and out put, as
on some machine-paced jobs.
 Work delays are frequent and beyond employees’ control.
Supervision is good, and supervisors know that constituter’s
a fair day’s work
2. Payment on the basis of out put is more satisfactory
when:-
Units of out put are measurable
A clear relation exists between employee effort and quantity
of out put.
 The time and mode to payment (cont’d)
2. Payment on the basis of out put is more satisfactory
when(cont’d):-
Units of out put are measurable
A clear relation exists between employee effort and quantity
of out put
The job is standardized, the flow of work is regular, and
break downs are few or if many consistent
Quality considerations are somewhat less important than
quantity of out put
Supervision is unsatisfactory, or supervisors cannot devote
enough attention to individual performance
Competitive conditions and lost control make it imperative
that labor costs per unit be definite and fixed in advance, as
in the shoe and clothing industries
 5.6 .Separation, Promotions, Transfers and Layoffs
Separation
Separation: refers to the discontinuation of the relation
between employee & the employer. It is the final HRM
function. Like other functions it requires preparation &
planning.
Separation can be initiated by:
the employers like - mandatory retirement; dismissal; layoff
the employees like - resignation; voluntary retirement; quit
the agreement - when the contract ends; or they can also be
caused by things outside the will of both the employer & the
employee (accidents, death)
Causes for separation:
Causes for separation of employee from the organization
mainly are retirement; layoff; dismissal; permanent;
disability; resignation; quit; outplacement.
 Cont’d
Promotion: is the advancement of an employee to a better
job. Characteristics of ' better job' to which an employee
seeks promotion are greater responsibilities, more prestige
or status, greater skill, and specially increased rate of pay or
salary, better hours or better locations or working conditions.
If the job doesn’t involve greater skill or responsibilities &
high pay, it should not be considered as promotion.
Upgrading refers to a practice related to promotion, but it
amounts to a small scale advance in status. It is the
movement of an employee to a more responsible job within
the same occupational unit and with a corresponding
increase in pay.
Transfer: is the movement of an employee from one job to
another on the same occupational level of wage/ salary. No
appreciable increase or decrease in duties and
responsibilities involved but there may be a change in their
specific nature and in working conditions.
 Cont’d
Some transfers entail a decrease in job duties and
especially in pay, and called downgrading or bumping. It is
more frequently used to protect employment opportunities
for employees displaced from higher rated jobs. It is moving
to less desirable jobs.
Layoff: Layoff occurs when there is lack of business or
budget curtailment/ shortage. It is forced reduction of the
number of employees.
It is the most frequent type of separation of employees from
the employed workforce.
Layoff is unlike quits, retirements or deaths, it doesn’t
necessarily involve a permanent separation from the payroll.
Laid-off employees normally expect to be rehired by their
employer when conditions improve.
Quits-Quit refers to the voluntary movement of the worker
from the organization such as health problem resignation.
 CHAPTER SIX: DIRECTING FUNCTION
6.1 Meaning and the need for leadership
To achieve organizational objectives HR should be directed
towards the accomplishment of goals. Hence, the successful
achievement of organizational objectives is greatly the
manifestation of the managers’ ability to lead employees.
Planning, organizing & staffing are simply the preparation
for doing the work and the actual work starts when managers
start performing the directing function.
Different authors define leading in different ways, but the
general ideas of each definition give the same messages.
Therefore, directing is simply defined as the process of
influencing people so that they will contribute to the
organization & group goals or actuating organizational
members to work efficiently & effectively for the attainment of
organizational goals /objectives
 6.1 Meaning and the need for leadership (cont’d)
Influencing means motivating people to contribute their
maximum efforts for the achievement of organizational
goals; but it does not to mean coercing/ forcing, imposing
sanctions or pushing people at the behind.
Directing is a management function performed by the top
level management. It is aimed at getting the members of the
organization to move in the direction that will achieve
organizational objectives.
 And it is also the interpersonal aspect of management
which deals with influencing, guiding, supervising &
motivating the subordinates for the accomplishment of the
predetermined objectives.
Directing is the process of integrating the people with the
organization, so as to obtain their willingness and
enthusiastic co-operation for the achievement of its goals. It
is the heart of managerial functions because it involves with
initiating actions.
 Elements of directing
Employees as individual or group members, contribute their efforts &
abilities to achieve organizational goals which can result in advancement
towards their own individual or group goals.
There are three elements of directing that helps managers to influence
people contribute willingly for the achievement of organization goal.
These are:-
i. Leadership:
To lead is to guide, direct, conduct & proceed. Leaders act to help a
group to achieve objectives with the maximum application of their
capabilities.
Success of a business concern is dependent upon the ability of its
leadership, leadership exists in any types of organization whenever and
in whatever situation.
 If someone tries to influence the behavior of another individual or a
group, there is leadership in an organization, wherever an individual has
subordinates, he may act as a leader. The efforts of subordinates
(followers) are to be channeled in the right direction. As leaders, they are
not only the responsible for the attainment of goals of the organization.
It is believed that leaders are born and not made at the same time; a few
people also believe the leaders are not born but made. But generally,
 Elements of directing
Employees as individual or group members, contribute
their efforts & abilities to achieve organizational goals which
can result in advancement towards their own individual or
group goals.
There are three elements of directing that helps managers to
influence people contribute willingly for the achievement of
organization goal. These are:-
i. Leadership:
To lead is to guide, direct, conduct & proceed. Leaders act
to help a group to achieve objectives with the maximum
application of their capabilities.
Success of a business concern is dependent upon the
ability of its leadership, leadership exists in any types of
organization whenever and in whatever situation.
 Elements of directing (cont’d):
i. Leadership (cont’d):
If someone tries to influence the behavior of another
individual or a group, there is leadership in an organization,
wherever an individual has subordinates, he may act as a
leader.
The efforts of subordinates (followers) are to be channeled
in the right direction.
It is believed that leaders are born and not made at the
same time; a few people also believe the leaders are not born
but made.
But generally, leaders are born and also made.
 Need or Importance of Leadership
Perfect organization structure- An organization structure
cannot provide for all kinds of relationships. That is why,
informal relation ships are made to exist within the
framework of formal organization structure. But the
organization structure is complete or perfect with the help
of effective leadership.
Directing group activities- The personal conduct and
behavior of a leader can direct others to achieve
organization goals. The main responsibility of a leader is to
get the work hard and effectively without leadership. A
leader alone can consolidate the efforts and direct them
towards the goal.
Technological, economical and social changes- There is
frequent change in technology, economic and social
structure in the present computer world. So, the
organization should change its operation and style. This is
possible only with the help of effective leadership.
 Need or Importance of Leadership (cont’d)
Better Utilization of man power -The plans, policies and
programs do not work themselves. There is a need for a
leader. The leader implements the plans, policies and
programs to utilize the available manpower effectively and
get highest production with minimum cost.
 Avoiding imbalances: An organization grows in size and
complexity with the imbalances. Complexity arises due to
the introduction of new functions. The reason is that the
introduction of new functions resulted in increased levels of
management. So, there is a problem of command, Co-
ordination and control. A leader can tackle these problems
and maintain balances.
Source of motivation- Simply, the existence of leadership
does not motivate the workers. The leadership style should
be utilized to motivate the workers according to the
situations prevailing. The achievement of goals is doubtful
in the absence of leadership
 Need or Importance of Leadership (cont’d)
Reconciliation of goals:- An effective leadership can
reconcile the goals of organizations and employees.
Developing good human relations:- Human relations
represent the relations between the leader and the followers
(subordinates). An efficient leader can develop the skill of
the followers and promote self-confidence apart from
motivation.
Promoting the spirit of Co-ordination:- A dynamic leader
can co-ordinate the activities of the subordinate.
Fulfilling social responsibilities:-Social responsibilities
refer to the high standard of living to workers, higher
productivity and income to the organization, more revenue
to the government, reasonable price to consumers and fair
return on investment to the investors. These could be
achieved with the help of effective leadership. Only efficient
leader can get work done and fulfill social responsibilities.
 6.2. Concept and meanings of Leadership theories
Leadership is a complex interpersonal process of
influencing behavior, and it is crucial ingredient in
organizational effectiveness.
The systematic study of personal characteristics & traits of
leaders is important to discover the characteristics that
distinguish the most effective managers from least effective
ones.
There are three leadership theories:
Trait theory
Behavioral theory, and
Situational theory
1.Trait theory:
According to this theory, leadership is largely a matter of
personality, a function of specific traits. Leaders differ from
followers with respect to some key traits, which remain
unchangeable across time.
 6.2. Concept and meanings of Leadership theories
1. Trait theory(cont’d):
 Trait theory attempts to insolate the attributes of
successful & unsuccessful leaders that help select
leaders for organization.
 But it failed to consider how different situations demand
different characteristics, styles & skills.
 It examines successful leadership from the stand point of
individual’s personal characteristics’ even as intelligence,
initiative, self-assurance, etc.
 According to this theory there exists some basic trait or
set of traits that differentiate leaders from non-leaders,
leaders are different from other people.
 If they were not different, we wouldn’t be interested in
them; Leadership is to be found in the characteristics of
leadership
 6.2. Concept and meanings of Leadership theories (cont’d):
2. Behavioral theory: Behavioral theory in contrast to trait
theory, attempts to describe leadership in terms of what
leaders do. According to this approach leadership is the
result of effective role behavior; what matters a lot is not
person’s traits rather his acts.
3. Situational theory: There is no one-best way to lead. The
best way to lead varies with the forces that exist in specific
situations. Effective leader must be flexible enough to adapt
to differences among subordinates & situations.
Qualities of Leadership
1.Physical appearance and strength: The leader has to put in
hard work physically. He should have a capacity to work for
long hours than others.
2.Mental vigor: The leader is also strong mentally. It means
that the leader is expected to withstand strain in finishing
the work properly.
 6.2. Concept and meanings of Leadership theories (cont’d):
Qualities of Leadership(cont’d)
3. Emotional Stability: The leader should not be moved by
emotion or sentiment. He should analyze the problem
rationally and take a decision without bias.
4. Sense of judgment: A leader should know to human
psychology. He should understand the behavior, needs,
thoughts, motives etc. of his followers. This will help him to
take a strategic decision and get it recognized by his
followers.
5. Good will: A leader should be able to understand the
feelings of others. He takes decision on the basis of
expectations of his followers.
6. Motivation: A leader should know the motivation
techniques and how to use them. If a person is forced to do
his job under the threat of getting punishment, he will not
perform his job more than the expectations of his leader.
 6.2. Concept and meanings of Leadership theories (cont’d):
Qualities of Leadership(cont’d)
7.Communication skill: Whatever the information needed to
workers, it should pass through the leader. If the leader has
communication skills he will direct his followers effectively.
8.Guiding ability: The leader acts as a teacher to new
workers. So the leader helps his followers to learn their
work. He should train the workers by work and deed to
complete the job effectively.
9.Sociability: An able leader can easily mingle with the
workers. The workers should be encouraged to discuss their
problems and difficulties with their boss. The leader should
also meet the workers frequently. The leader should show
his keen interest to develop the ability of workers.
10. Technical knowledge: A leader should possess a
through knowledge of the theory and practice of his job.
 6.2. Concept and meanings of Leadership theories (cont’d):
Qualities of Leadership(cont’d)
11.Be honest, sincere and fair: A leader should also be
honest, sincere and fair. Others mostly like sincere, fair and
honest people and their leadership is accepted by one or all.
6.3. Concept and meaning of Leadership Styles
Leadership style is the behavior exhibited by a leader
during influencing subordinates to accomplish
organizational objectives.
It implies the ways in which the leaders exercise
leadership; the ways in which the functions of leadership are
carried out, and the ways how the leaders behave towards
their subordinated in the accomplishment of the work.
Leadership style describes how a leader has relationship
with his group some of the leadership styles are discussed
below.
 6.3. Concept and meaning of Leadership Styles (cont’d)
1. Autocratic leadership style
Autocratic leader centralizes power & decision making for
him & exercises complete control over the subordinates.
In autocratic situations frustrations, low moral & conflict
develop easily.
Under this leadership style, the leaders have full power or
authority to take a decision.
The leaders create a work situation under which the
subordinates are expected to work they will work no more or
less than the instruction of the leader. So, the leaders have
full responsibility.
The followers are not aware of organization goals besides;
the followers fell insecure and are afraid of the authority of
the leaders.
The reason is that these leaders have the desire to wield
loving more powers.
 6.3. Concept and meaning of Leadership Styles (cont’d)
2. Democratic/ Participative leadership Style
Participative leadership style initiates decision sharing &
practices leadership by consultation. It improves job
satisfaction & moral of the employees. It is just opposite to
autocratic style. The authority is decentralized. So the
followers are permitted to take decisions under this style.
The decisions are taken whole-heartedly; the reason is that
the superior has consolation with his subordinates before
taking a decision. The subordinates know the goals of the
organization, so, they after fruitful ideas during discussion.
3. Laisez- fair or free –rein leadership
Lasses fair or Free –rein leadership style is a complete
delegation of authority to subordinates so that they must
plan, motivate & control and be responsible for their own
actions.
The free- rein manager avoids power & relinquishes the
 6.4. Motivation
Motivation refers to the forces within a person that affect
his or her direction, intensity, and persistence of voluntary
behavior.
Motivated employees are willing to exert a particular level of
effort (intensity), for a certain amount of time (persistence),
toward a particular goal (direction).
Technically, the term motivation can be traced to the Latin
word mover, which means “to move.”
This meaning is evident in the following comprehensive
definition:
Motivation is a process that starts with a physiological or
psychological deficiency or need that activates behavior or
a drive that is aimed at a goal or incentive.
 6.4. Motivation (cont’d)
The importance of motivation:
1.Maximum utilization of factors of production: Workers
perform the work sincerely through the inspiration of
motivation. This creates the possibility of maximum
utilization of factors of production, viz, labour, capital.
2.Willingness to work: Motivation influences the willingness
of people to work.
3.Reduced absenteeism: Financial incentives shames coerce
the workers to work more. This reduces absenteeism.
4.Reduced labor turn over: Motivation has both financial and
non financial intensive schemes.
5. Availability of right personnel: Financial and non financial
incentives not only retain the existing employees but also
attract the employees from out side the enterprise. In other
words right people are attracted from outside to work for the
enterprise.
 The importance of motivation (cont’d):
6. Building of good labor relations: Motivation helps to solve
the labor problems of absenteeism, labor turn over,
indiscipline and grievances. This ensures building of good
labour relations.
7.Increase in the efficiency and out put: Both workers and
management have got benefits from motivational plans. On
the one hand, wages of the workers increase corresponding
to the increase of out put and efficiency. On the other hand,
the productivity of the organizations and its profits increases
due to consolidated efforts of the motivated people.
8.Sense of belonging: A proper motivation scheme promotes
closer rapport between enterprise and workers. The workers
begin to feel that the enterprise belongs to them and
consider its interests as their own. Thus there is no
difference between workers and enterprise.
9. Basis of cooperation: Efficiency and output are increased
through co-operation.
6.4.1. The concept of motivation
 6.4.1. The concept of motivation (cont’d)
Understanding the concept of motivation lies in the
meaning and relationships among needs, drives, and
incentives.
Needs set up drives aimed at incentives.
In a systems sense, motivation consists of these three
interacting and interdependent elements.
1.Needs: Needs are created whenever there is a physiological
or psychological imbalance. For example, a need exists
when cells in the body are deprived of food and water or
when the personality is deprived of other people who serve
as friends or companions.
2. Drives: With a few exceptions, drives, or motives (the two
terms are often used interchangeably), are set up to
alleviate needs. A physiological drive can be simply defined
as a deficiency with direction.
193
 6.4.1. The concept of motivation (cont’d)
 Physiological and psychological drives are action oriented
and provide an energizing thrust toward reaching an
incentive.
 They are at the very heart of the motivational process.
 The examples of the needs for food and water are
translated into the hunger and thirst drives, and the need for
friends becomes a drive for affiliation.
3. Incentives: At the end of the motivation cycle is the
incentive, defined as anything that will alleviate a need and
reduce a drive.
 Thus, attaining an incentive will tend to restore
physiological or psychological balance and will reduce or
cut off the drive.
 Eating food, drinking water, and obtaining friends will tend
to restore the balance and reduce the corresponding drives.
194
 6.4.1. The concept of motivation (cont’d)
Primary motives. Such motives are variously called
physiological, biological, unlearned, or primary.
Two criteria must be met in order to be included in the
primary classification:
i. It must be unlearned, and ii. it must be physiologically
based.
These include hunger, thirst, sleep, avoidance of pain, sex,
and maternal concern.
 Although the precedence of primary motives is implied in
some motivation theories, there are many situations in which
general and secondary motives predominate over primary
motives.
General motives. There are a number of motives that lie in the
grey area between the primary and secondary classifications.
To be included in the general category, a motive must be
unlearned but not physiologically based 195
 6.4.1. The concept of motivation (cont’d)
 These needs are sometimes called “stimulus motives.”
 The motives of curiosity, manipulation, activity, and
affection seem to best meet these criteria for this
classification.
General motives are more relevant to organizational
behavior than are primary motives.
Secondary motives: The secondary drives are questionably
the most important to the study of human behavior in
organizations.
Secondary motives are closely tied to the learning concepts.
In particular, the learning principle of reinforcement is
conceptually related to motivation.
A motive must be learned in order to be included in the
secondary classification. Need for power, achievement,
affiliation, security and status are important secondary
needs. 196
 6.4.2. Theories of motivation
1. EARLY THEORIES OF MOTIVATION:
a.The traditional approach: - the traditional approach to
employee motivation is represented explicitly by the work
of Fredrick W. Taylor who suggested the use of an incentive
pays system.
Taylor believed that management knows more clearly
about the job being performed than the worker and he
assumed economic gain was every ones primary
motivation.
Other assumption of traditional approach were the fact
that work is inherently unpleasant for most people and that
the money employees earn is more important than the
nature of the job they are performing.
People could expected to perform any kind of job if they
were paid enough .
197
 6.4.2. Theories of motivation (cont’d)
b. The human relations approach:- the human relation
approach grew out of the work at western electric of Elton
mayo and his associates.
The human relationists emphasized the role of social
processes in the work place.
Their basic assumptions were that employees want to
feel useful and important ,employees have strong social
needs and that these needs are more important than money
in motivating employees.
Advocates of the human relations approach advise
managers to make workers feel important and allow them a
modicum of self direction and self control in carrying out
routine activities.
The human relationists believed that the illusion of
contribution and participation enhanced motivation.
198
 6.4.2. Theories of motivation (cont’d)
2. CONTEMPORARY THEORIES OF MOTIVATION
Although it is recognized that work-motivation theories are
generally categorized into content and process approaches,
equity and procedural justice theories have emerged in
recent years and command most of the attention.
a. THE CONTENT THEORIES OF MOTIVATION
The content theories of work motivation attempt to
determine what motivates people at work.
The content theorists are concerned with identifying the
needs/drives that people have and how these need/drives are
prioritized.
They are concerned with the types of incentives or goals
that people strive to attain in order to be satisfied and
perform well.

199
 6.4.2. Theories of motivation (cont’d)
Content theories do not necessarily predict work motivation
or behavior, but are still important to understand what
motivates people at work.
MASLOW’S NEEDS HIERARCHY THEORY
Abraham H. Maslow suggested that people have a complex
set of exceptionally strong needs, which can be arranged in
a hierarchy.
Underlying this hierarchy are the following basic
assumptions:
A satisfied need does not motivate. However, when one
need is satisfied, another need emerges to take its place, so
people are always striving to satisfy some need.
The needs network for most people is very complex, with a
number of needs affecting the behavior of each person at
any one time.
200
 6.4.2. Theories of motivation (cont’d)
Lower level needs must be satisfied, in general, before
higher level needs are activated sufficiently to drive
behavior.
There are more ways to satisfy higher level needs than
lower level needs.
This theory postulates five needs categories:
1.physiological,
2.security,
3.affiliation,
4. esteem, and
5.self-actualization.
1. Physiological Needs: The needs for food, water, air, and
shelter are all physiological needs and constitute the lowest
level in Maslow's hierarchy. People concentrate on
satisfying these needs before turning to higher order needs.
201
 6.4.2. Theories of motivation (cont’d)
Managers should understand that, to the extent that
employees are motivated by physiological needs, their
concerns do not center on the work they are doing.
They will accept any job that serves to meet their needs.
Managers who focus on physiological needs in attempting
to motivate subordinates assume that people work primarily
for money and are primarily concerned with comfort,
avoidance of fatigue, and the like.
These managers try to motivate employees by offering
wage increases, better working conditions, more leisure
time, longer breaks, and better fringe benefits.
2. Security Needs: The needs for safety, stability, and
absence of pain, threat, or illness are all security needs.
Like physiological needs, unsatisfied security needs cause
people to be preoccupied with satisfying them
202
 6.4.2. Theories of motivation (cont’d)
People who are motivated primarily by security needs value
their jobs mainly as a defense against the loss of basic need
satisfactions.
Managers who feel that security needs are most important
to their employees focus on them by emphasizing rules and
regulations, job security, and fringe benefits.
Managers whose subordinates have strong security needs
will not encourage innovation in solving problems and will
not reward risk taking.
The employees, in turn, will strictly follow rules and
regulations.
3. Affiliation Needs: The needs for friendship, love, and a
feeling of belonging are all affiliation needs.
When physiological and security needs have been satisfied,
affiliation needs emerge and motivate people.
203
 6.4.2. Theories of motivation (cont’d)
Managers must realize that, when affiliation needs are the
primary source of motivation, people value their work as an
opportunity for finding and establishing warm and friendly
interpersonal relationships.
Managers who believe that their subordinates are striving
primarily to satisfy these needs are likely to act in a more
supportive and permissive way, emphasizing employee
acceptance by co-workers, extracurricular activities (such
as organized sports programs and company picnics), and
group norms.
4. Esteem Needs: Both personal feelings of achievement and
self-worth and recognition or respect from others meet
esteem needs.
People with esteem needs want others to accept them for
what they are and to perceive them as competent and able.
204
 6.4.2. Theories of motivation (cont’d)
 Managers who focus on esteem needs in their attempts to
motivate employees tend to emphasize public rewards and
recognition for services.
Acknowledgment of the work's difficulty and the skills
required for doing it successfully characterizes the
managers' recognition of employees. These managers may
use lapel pins, articles in the company paper, achievement
lists on the bulletin board, and the like to promote their
employees' pride in their work.
5. Self-Actualization Needs: Self-fulfillment is the meeting of
self-actualization needs. People who strive for self-
actualization experience acceptance of themselves and
others and increased problem-solving ability. Managers who
emphasize self-actualization may involve employees in
designing jobs, make special assignments that capitalize on
employees' unique skills, or provide leeway to employee
205
groups in planning and implementing work procedures.
 6.4.2. Theories of motivation (cont’d)
Managerial Implications
Research has found that top managers generally are more
able to satisfy their esteem and self-actualization needs than
are lower level managers
Line managers perceive greater fulfillment of security,
affiliation, esteem, and self-actualization needs than do staff
managers. The largest differences between line and staff
managers occur in meeting esteem and self-actualization
needs.
Top managers tend to have more challenging jobs and an
opportunity for self-actualization. Lower level managers, on
the other hand, tend to have more routine jobs, which makes
satisfying higher level needs more difficult.
Employees who have little or no control over their work
(such as assembly-line workers) may not even experience
higher level needs in relation to their jobs. 206
 6.4.2. Theories of motivation (cont’d)
Managerial Implications(cont’d)
Fulfillment of needs differs according to the job a person
performs, a person's age or race, the size of the company,
and the cultural background of the employee. Young workers
(25 or younger) have greater deficiencies in meeting esteem
and self-actualization needs than do older workers (36 or
older).
At lower levels of management, managers of small
companies are less deficient in meeting their needs than are
managers who work for larger companies.; however
managers at upper levels in large companies are more
207
 6.4.2. Theories of motivation (cont’d)
ALDERFER’S ERG THEORY
Clay Alderfer agrees with Maslow that individuals have a
hierarchy of needs. But instead of the five categories of
needs suggested by Maslow, Alderfer's ERG Theory holds
that the individual has three sets of basic needs: existence,
relatedness, and growth.
1.Existence needs, or material needs, which are satisfied by
food, air, water, pay, fringe benefits, and working conditions.
2.Relatedness needs, or needs for establishing and
maintaining interpersonal relationships with co-workers,
superiors, subordinates, friends, and family.
3.Growth needs, or needs that are expressed by an
individual's attempt to find opportunities for unique personal
development by making creative or productive contributions
at work.
 6.4.2. Theories of motivation (cont’d)
The arrangement of these categories of needs is similar to
Maslow’s.
Existence (E) needs are similar to Maslow's physiological
and safety needs; relatedness (R) needs are similar to
Maslow's affiliation needs; and growth (G) needs are similar
to Maslow's esteem and self-actualization needs.
However, the two theories differ in their views of the way
people satisfy the different sets of needs.
Maslow states that unfilled needs are motivators and that the
next higher level need is not activated until the preceding
lower level need is satisfied. Thus a person progresses up
the needs hierarchy as each set of lower level needs is
satisfied. In contrast, ERG theory suggests that in addition to
this fulfillment-progression process, a frustration-regression
process is at work at the same time. That is, if a person is
continually frustrated in attempts to satisfy growth needs,
 6.4.2. Theories of motivation (cont’d)
The individual will return to satisfying this lower level need
instead of attempting to satisfy growth needs, and frustration
will lead to regression.
Managerial Implications
The ERG theory states that individuals will be motivated to
engage in behavior to satisfy one of the three sets of needs.
Thus Alderfer's ERG theory provides an important insight for
managers.
If a manager observes that a subordinate's growth needs are
blocked, perhaps because the job doesn't permit satisfaction
of these needs or the company lacks the resources to satisfy
them, the manager should attempt to redirect the
subordinate's behavior toward satisfying relatedness or
existence needs.
Because it is relatively new, very few research studies have
tested the ERG theory of motivation.
 6.4.2. Theories of motivation (cont’d)
Managerial Implications(cont’d)
However, several studies support the concept of the three
sets of needs in the ERG theory, rather than the five
categories of needs in Maslow s hierarchy.
Some of the most interesting findings are:
Individuals with parents who have more education had
greater growth needs than did individuals with parents who
have less education.
Men had higher strength of existence needs and lower
strength of relatedness needs than did women.
Blacks showed significantly greater strength of existence
 6.4.2. Theories of motivation (cont’d)
HERZBERG’S MOTIVATION-HYGIENE THEORY
The motivator-hygiene theory is one of the most
controversial theories of motivation, probably because of two
unique features.
First, the theory stresses that some job factors lead to
satisfaction, whereas others can only prevent dissatisfaction.
Second, it states that job satisfaction and dissatisfaction do
not exist on a single continuum.
Frederick Herzberg and his associates examined the
relationship between job satisfaction and productivity in a
group of accountants and engineers.
Through the use of semi structured interviews, they
accumulated data on various factors that these employees
said had an effect on their feelings about their jobs. Two
different sets of factors emerged: motivators and hygiene’s.
 6.4.2. Theories of motivation (cont’d)
Motivator and Hygiene Factors
The first set of factors, motivator factors, includes the work
itself, recognition, advancement, and responsibility.
They are associated with an individual's positive feelings
about the job and are related to the content of the job itself.
These positive feelings, in turn, are associated with the
individuals' experiences of achievement, recognition, and
responsibility in the past.
They are predicated on lasting rather than temporary
achievement in the work setting.
The second set of factors, hygiene factors, includes
company policy and administration, technical supervision,
salary, working conditions, and interpersonal relations.
They are associated with an individual's negative feelings
about the job and are related to the context or environment in
which the job is performed.
 6.4.2. Theories of motivation (cont’d)
Hygiene Factors are extrinsic factors, or factors external to
the job.
In contrast, motivators are intrinsic factors, or internal
factors directly related the job.
Viewed somewhat differently, extrinsic outcomes are
largely determined by the company (for example, salary,
policies and rules, and fringe benefits).
They serve as rewards for high performance only if the
organization recognizes high performance.
On the other hand, intrinsic outcomes (for example, a
feeling of accomplishment after successful task
performance) are largely internal to the individual.
The organization's policies have only an indirect impact on
them. Thus by defining exceptional performance, an
organization may be able to influence individuals to feel that
they have performed their tasks exceptionally well.
 6.4.2. Theories of motivation (cont’d)
This theory also states that satisfaction and dissatisfaction
are not a single continuum but are on a separate and distinct
continuum.
Thus the concept is that a person can be satisfied and
dissatisfied at the same time.
Hygiene factors, such as working conditions and salary,
cannot increase or decrease job satisfaction; they can only
affect the amount of job dissatisfaction.
Relation to Maslow's Need Hierarchy:
 Herzberg's theory is closely related to Maslow's need
hierarchy.
The hygiene factors are preventive and environmental in
nature , and they are roughly equivalent to Maslow's lower-
level needs.
These hygiene factors prevent dissatisfaction, but they do not
lead to satisfaction.
 6.4.2. Theories of motivation(cont’d)
Relation to Maslow's Need Hierarchy (cont’d):
In effect, hygiene factors bring motivation up to a
theoretical zero level and are a necessary "floor" to prevent
dissatisfaction, and they serve as a takeoff point for
motivation.
By themselves, the hygiene factors do not motivate.

Only the motivators motivate employees on the job.

They are roughly equivalent to Maslow's higher-level needs.

According to Herzberg's theory, an individual must have a

job with a challenging content in order to be truly motivated.
 6.4.2. Theories of motivation (cont’d)
Contribution to Work Motivation:
 Herzberg's two-factor theory casts a new light on the
content of work motivation.
Up to this point, management had generally concentrated
on the hygiene factors.
 When faced with a morale problem, the typical solution
was higher pay, more fringe benefits, and better working
conditions.
 However, as has been pointed out, this simplistic solution
did not really work.
Management are often perplexed because they are paying
high wages and salaries, have an excellent fringe-benefit
package, and provide great working conditions, but their
employees are still not motivated.
Herzberg's theory offers an explanation for this problem.
 6.4.2. Theories of motivation (cont’d)
Contribution to Work Motivation (cont’d):
By concentrating only on the hygiene factors, management
are not motivating their personnel.
There are probably very few workers or associates who do
not feel that they deserved the raise they received.
On the other hand, there are many dissatisfied associates
and managers who feel they did not get a large enough raise.
This simple observation points out that the hygiene factors
seem to be important in preventing dissatisfaction but do not
lead to satisfaction.
Herzberg would be the first to say that the hygiene factors
are absolutely necessary to maintain the human resources of
an organization.
 6.4.2. Theories of motivation (cont’d)
Contribution to Work Motivation (cont’d):
However, as in the Maslow sense, once "the belly is full" of
hygiene factors, which is the case in most modern
organizations, dangling any more in front of employees will
not motivate them.
According to Herzberg's theory, only a challenging job that
has the opportunities for achievement, recognition,
responsibility, advancement, and growth will motivate
personnel.
 6.4.2. Theories of motivation (cont’d)
McClelland’s LEARNED NEEDS THEORY
McClelland has proposed a theory of motivation that is
closely associated with learning concepts.
He believes that many needs are acquired from the culture.
Three of these learned needs are:
 the need for achievement (n Ach),
the need for affiliation (n Aff), and
the need for power (n Pow).
McClelland contends that when a need is strong in a
person, its effect is to motivate the person to use behavior
that leads to its satisfaction.
For example, having a high n Ach encourages an individual
to set challenging goals, to work hard to achieve the goals,
and to use the skills and abilities needed to achieve them.
 6.4.2. Theories of motivation (cont’d)
Based on research results, McClelland developed a
descriptive set of factors that reflect a high need for
achievement. These are:
1.The person likes to take responsibility for solving
problems.
2. The person tends to set moderate achievement goals & is
inclined to take calculated risks.
3.The person desires feedback on performance.
The need for affiliation reflects a desire to interact socially
with people.
A person with a high need for affiliation is concerned about
the quality of important personal relationships, and thus,
social relationships take precedence over task
accomplishment.
 6.4.2. Theories of motivation (cont’d)
A person with a high need for power, meanwhile,
concentrates on obtaining and exercising power and
authority. He or she is concerned with influencing others
and winning arguments.
Power has two possible orientations according to
McClelland:
i. It can be negative in that the person exercising it
emphasizes dominance and submission.
ii. Or power can be positive in that it reflects persuasive and
inspirational behavior.
The main theme of McClelland's theory is that these needs
are learned through coping with one's environment.
Since needs are learned, behavior, which is rewarded,
tends to recur at a higher frequency.
Managers who are rewarded for achievement behavior learn
to take moderate risks and to achieve goals.
 6.4.2. Theories of motivation (cont’d)
Similarly, a high need for affiliation or power can be traced
to a history of receiving rewards for sociable, dominant, or
inspirational behavior.
As a result of the learning process, individuals develop
unique configurations of needs that affect their behavior
and performance.
b. PROCESS THEORIES OF MOTIVATION
The process theories of motivation are concerned with
answering the questions of how individual behavior is
energized, directed, maintained, and stopped.
In other words, they are more concerned with the cognitive
antecedents that go into motivation or effort, and, more
important, with the way they relate to one another.
 6.4.2. Theories of motivation (cont’d)
VROOM’S EXPECTANCY THEORY OF MOTIVATION
Vroom defines motivation as a process governing choices
among alternative forms of voluntary activity.
 In his view, most behaviors are considered to be under the
voluntary control of the person & consequently are
motivated.
First-level & Second-level Outcomes:
i. First-level outcomes resulting from behavior are those
associated with doing the job itself and include productivity,
absenteeism, turnover, and quality of productivity.
ii. The second-level outcomes are those events (rewards or
punishments) that the first-level outcomes are likely to
produce, such as merit pay increases, group acceptance or
rejection, promotion, and termination.
 6.4.2. Theories of motivation(cont’d)
Vroom’s Expectancy Theory of Motivation(cont’d)
Valence: Valence means the strength of an individual’s
preference for a particular outcome. Outcomes is positively
valet when it is preferred and negatively valet when it is not
preferred or is avoided. An outcome has a valence of zero
when the individual is indifferent to attaining or not attaining
it.
Instrumentality: Another major input into the valence is the
instrumentality of the first-level outcome in obtaining a
desired second-level outcome. Instrumentality is the
perception by an individual that first level outcomes
(performance) are associated with second-level outcomes
(rewards/punishment). Instrumentality can be negative,
suggesting that attaining a second-level outcome is less
likely if a first-level outcome has occurred, or positive,
suggesting that the second-level outcome is more likely if the
first-level outcome has been obtained.
 6.4.2. Theories of motivation (cont’d)
Vroom’s Expectancy Theory of Motivation(cont’d)
Expectancy: The belief that a particular level of effort will be
followed by a particular level of performance is called
expectancy.
In other words, it refers to the individual’s belief regarding
the likelihood or subjective probability that a particular
behavior will be followed by a particular outcome.
 Expectancy can take values ranging from 0, indicating no
chance that an outcome will occur after the behavior or act,
to +1, indicating perceived certainty that a particular outcome
will follow a behavior or act.
Expectancy relates efforts to first-level outcomes, whereas
instrumentality relates first-level outcomes and second-level
outcomes.
 6.4.2. Theories of motivation (cont’d)
Vroom’s Expectancy Theory of Motivation(cont’d)
In other words, expectancy in Vroom’s theory is probability
(ranging from 0 to +1) that a particular action or effort will
lead to a particular first-level outcome.
Instrumentality refers to the degree to which a first-level
outcome will lead to a desired second-level outcome.
 In summary, the strength of the motivation to perform a
certain act will depend on the algebraic sum of the products
of the valences for the outcomes (which include
instrumentality) times the expectancies.
 Vroom’s Expectancy Theory of Motivation(cont’d)
Managerial Implications:
While there are still problems with expectancy theory, it has
some direct implications for motivating employees.
These implications can be grouped into six suggestions for
managerial action.
1.Managers should try to determine the outcomes that each
employee values. They can do so by:
i. using a questionnaire;
ii. observing employee reactions to different rewards; and
iii.asking employees about their career goals and the kinds of
rewards they want.
However, managers must understand that employees can
and do change their minds about desired outcomes.
The effective manager correctly diagnoses these changes
and also does not assume that all employees are alike.
 Vroom’s Expectancy Theory of Motivation(cont’d)
Managerial Implications(cont’d) :
2. Managers should determine the kinds of performance they
desire.
They must define good performance and adequate
performance in terms that are observable and measurable, so
that subordinates can understand what managers desire of
them.
3. Managers should make sure that desired levels of
performance can be attained.
Motivation is determined not only by expectancy, but also by
instrumentality. This means that the levels of performance
set by managers as the points at which employees receive
desired outcomes must be attainable.
If employees feel that the level of performance necessary to
get a reward is higher than they can reasonably achieve, their
motivation to perform will be low
 Vroom’s Expectancy Theory of Motivation(cont’d)
Managerial Implications(cont’d) :
4. Managers should directly link the specific performance
they desire to the outcomes desired by employees.
 If an employee has achieved the desired level of
performance and wants a promotion, the manager should
promote that person as soon as possible.
 If a high level of motivation is to be created and
maintained, it is extremely important for employees to clearly
see the reward process at work in a timely manner.
Concrete acts must accompany statements of intent in
linking performance to rewards.
Managers should not forget that it is an individual's
perceptions—not reality— that determines motivation. It does
not matter, for example, whether a manager feels that
subordinates' pay is related to their motivation.
 Vroom’s Expectancy Theory of Motivation(cont’d)
Managerial Implications(cont’d) :
5. Managers should analyze the situation for conflicts.
Having set up positive expectancies for employees,
managers must look at the entire situation to see whether
other factors conflict with the desired behaviors (for example,
the informal work group or the organization's formal reward
system).
Motivation will be high only when employees see many
rewards and few negative outcomes associated with good
performance.
6. managers should make sure that changes in outcomes or
rewards are large enough to motivate significant behavior.
Trivial rewards may result in minimal efforts, if any, to
improve performance.
Rewards must be large enough to motivate individuals to
make the effort required to significantly change performance.
 THE PORTER-LAWLER MODEL OF MOTIVATION
Porter and Lawler start with the premise that motivation
(effort or force) does not equal satisfaction or performance.
Motivation, satisfaction, and performance are all separate
variables and relate in ways different from what was
traditionally assumed.
The value of the expected reward to the individual
combines with the individual’s perception of the effort
involved in attaining the reward and the probability of
achieving it to produce a certain level of effort.
This effort combines with the individual’s abilities and traits
and the way he or she sees the task to yield a specific
performance level.
This resulting level of performance leads to intrinsic
rewards (or negative consequences if the performance level
is lower than expected) that are inherent in the task
accomplishment and perhaps to extrinsic rewards.
 The Porter-Lawler Model of Motivation(cont’d)
The individual has his or her own idea about the
appropriateness of the total set of rewards received, which
when measured against the rewards actually received,
results in the level of satisfaction experienced by the
individual.
The individual’s experience will then be applied to his or
her future assessments of the values of rewards for further
task accomplishment.
Implications for practice:
Porter and Lawler recommend that practicing managers go
beyond traditional attitude measurement and attempt to
measure variables such as the values of possible rewards,
the perceptions of effort-reward probabilities, and role
perceptions.
These variables, of course, can help managers better
understand what goes into employee effort & performance.
 The Porter-Lawler Model of Motivation (cont’d)
Implications for practice (cont’d):
Giving attention to the consequences of performance,
Porter and Lawler also recommend that organizations
critically re-evaluate their current reward policies.
They stress that management should make a concentrated
effort to measure how closely levels of satisfaction are
related to levels of performance, and recently a practitioner-
oriented article emphasized that the accuracy of role
perceptions may be the missing link in improving employee
performance.
The inference here is that employees need to better focus
their efforts on high-impact behaviors and activities that
result in higher performance.
Both studies and comprehensive analyses continue to
point out the complex impact that the cognitive process has
in relation to rewards and other outcomes in organizations.
 The Porter-Lawler Model of Motivation (cont’d)
Implication For Managers Implication For
Organizations
1. Determine the rewards valued by 1. Organizations
each subordinate usually get what
2. Determine the performance you they reward, not
desire what they want
3. Make the attainable performance 2. The job itself can be
level available made intrinsically
4. Link rewards to performance rewarding
5. Analyze what factors might 3. The immediate
counteract the effectiveness of the supervisor has an
reward important role in the
6. Make sure the reward is adequate motivation process
c. J.STACY ADAM’S EQUITY THEORY
Equity theory refers to an individual’s subjective judgments
about the fairness of the reward she or he got, relative to the
inputs (which may include many factors such as effort,
experience, education, and so on), in comparison with the
rewards of others.
The essence of equity (which also means "fairness") theory
is that employees compare their efforts and rewards with
those of others in similar work situations.
This theory of motivation is based on the assumption that
individuals are motivated by a desire to be equitably treated
at work.
Four important terms in this theory are:
1.Person: The individual for whom equity or inequity is
perceived
2.Comparison other: Any group or persons used by Person 236

as a referent regarding the ratio of inputs and outcomes.

J.Stacy Adam’s Equity Theory(cont’d):
Four important terms in this theory are (cont’d):
3. Inputs: The individual characteristics brought by Person to
the job. These may be achieved (e.g., skills, experience,
learning) or ascribed (e.g., age, sex, race)
4. Out comes: What Person received from the job (e.g.,
recognition, fringe benefits, pay)
Equity occurs when employees perceive that the ratios of
their inputs (efforts) to their outputs (rewards) are equivalent
to the ratios of other employees.
 Inequity exists when these ratios are not equivalent; an
individual’s own ratio of inputs to outcomes could be greater
than, or less than, that of others.

237
J.Stacy Adam’s Equity Theory(cont’d):
Consequences of Inequity:
Employees are motivated to reduce or eliminate their feelings of inequity by correcting the inequitable situation.
There are six possible ways to reduce feelings of inequity:
Notice, however, that the strategy used depends on the persons past experience as well as whether they are
under or over rewarded.
1.Changing inputs: under rewarded workers tend to reduce their effort and performance if these outcomes don't
affect their paycheck. Overpaid workers sometimes (but not very often) increase their inputs by working harder
and producing more.
2.Changing outcomes: People with under reward inequity might ask for more desired outcomes, such as a pay
increase.

If this does not work, some are motivated to join a labor union and demand these changes at the bargaining table.
Others misuse sick leave for more paid time off. At the extreme, some people steal company property or use
facilities for personal use as ways to increase their outcomes.

1.3. Changing perceptions—Employees may distort inputs and outcomes to restore equity feelings. Over
rewarded employees typically follow this strategy because it's easier to increase their perceived inputs (seniority,
knowledge, etc.) than to ask for less pay!
2.4. Leaving the field—some people try to reduce inequity feelings by getting away from the inequitable situation.
Thus, equity theory explains some instances of employee turnover and job transfer. This also explains why an
under rewarded employee might take more time off work even though he or she is not paid for this absenteeism.
3.5. Acting on the comparison other—Equity is sometimes restored by chang¬ing the comparison others inputs or
outcomes. If you feel over rewarded, you might encourage the referent to work at a more leisurely pace. If you feel
under rewarded, you might subtly suggest that the overpaid co-worker should be doing a larger share of the
workload.
4.6. Changing the comparison other—If we can't seem to alter the outcome/ input ratio through other means, we
might eventually replace the com¬parison other with someone having a more compatible outcome/input ratio. As
238
was mentioned earlier, we sometimes rely on a generalized comparison other, so feelings of inequity may be
J. Stacy Adam’s Equity Theory (cont’d):
Six possible ways to reduce feelings of inequity (cont’d):
3. Changing perceptions: Employees may distort inputs and
outcomes to restore equity feelings.
4. Leaving the field: some people try to reduce inequity
feelings by getting away from the inequitable situation.
Thus, equity theory explains some instances of employee
turnover and job transfer.
This also explains why an under rewarded employee might
take more time off work even though he or she is not paid for
this absenteeism.
5. Acting on the comparison other: Equity is sometimes
restored by changing the comparison others inputs or
outcomes. If you feel over rewarded, you might encourage
the referent to work at a more leisurely pace. If you feel under
rewarded, you might subtly suggest that the overpaid co-
worker should be doing a larger share of the workload. 239
J.Stacy Adam’s Equity Theory (cont’d):
Six possible ways to reduce feelings of inequity (cont’d):
6. Changing the comparison other: If we can't seem to alter
the outcome/ input ratio through other means, we might
eventually replace the comparison other with someone
having a more compatible outcome/input ratio.
Managerial Implications
Managers should treat employees equitably
People make decisions concerning equity only after they
compare their inputs and outcomes with those of comparable
employees. These others may be employees of the same
organization or of other organization.
Women, and members of minority groups, have argued for
pay based on comparable worth. Comparable worth means
that individuals holding jobs that require similar
qualifications and involve similar level of effort should240

receive equal pay.

6.5 Concept and meaning of Communication
Communication is the exchange of facts, ideas, opinions or
emotions by two or more people.
It is the transfer of information from the sender to the
receiver with the information being understood by the
receiver. It is the act of influencing & inducing others to
interpret an idea.
Every management function involves communication.
Therefore, understanding & a proper use of communication
is essential to successful management.
Managers at any level should know elements of
communication, methods of communication, barriers of
communication & ways overcoming them.
Importance of Communication
Communication is the means by which people are linked
together in an organization to achieve a common purpose.
241
6.5 Concept and meaning of Communication(cont’d)
Importance of Communication:
1.An aid to managerial performance: The manager can get
things done by subordinates through communication.
2.Achieving coordination: Co-ordination among employees
working on the basis of division of work obtained through
communication.
3.Helps in smooth working: Communication helps the worker
to know the real situation prevailing in an organization.
4.Increase managerial efficiency: Communication helps the
manager discharge his duties systematically and facilitates
him to increase his efficiency.
5.Helps in decision making : Good communication system
provides all the necessary information which enables the
manager to take quality decisions in the proper time.
242
6.5 Concept and meaning of Communication(cont’d)
Objectives of communication
Communication enables organizations to give & receive
information (advice, order, suggestions, persuasion,
education, warning, motivation, etc.). it is impossible to
speak about organization without speaking about
communication. Communication is indispensable in every
managerial function.
Formal and Informal communication
i. Formal communication: follows the hierarchy of authority
and chain of command of the organization. For example,
technical information, decision-making process, procedural
policies and rules as set forth in company manuals might be
downward, upward or horizontal.
a. Down ward communication:- It starts with top management
and flows down through management level to line workers
and non-supervisory personnel.
243
6.5 Concept and meaning of Communication(cont’d)
Formal and Informal communication( cont’d)
b. Upward communication:- Is transmission of information
formally from the lower level of the organization to the top
levels of the organization. It includes progress reports,
suggestion and request for aid or decision:
c. Lateral/Horizontal Communicational:- this is a type of
formal communication between people at different units
having the same status in organizational structures.
It is a communication between and among members of work
group, different departments, one work group and another.
Its main function is to provide a direct channel for
organizational coordination and problem solving.
It helps to avoid a much flower procedure of communication
through a common superior. It also enables organizational
members to form relationships with their peers. 244
CHAPTER SEVEN: THE CONTROLLING FUNCTION
7.1. Meaning and need for control
Controlling is the last management function and it affects
or is affected by the other managerial functions.
 Planning, organizing, staffing & directing must be
monitored to maintain their effectiveness & efficiency.
Efficiency and effectiveness are the measures of
performance.
 Managers review performances of employees daily, weekly,
and monthly to determine actual performances.
Controlling is the process of monitoring, evaluating,
comparing performance to standards and taking corrective
action, if needed. In other words, control involves
measurement and regulation.
It is the means by which management assures that desired
objectives are being achieved. 245
7.1. Meaning and need for control (cont’d)
Control is closely associated with the management function
of planning:
People often refer to "planning and control» in one phrase,
as if the two were almost one function.
 Control complements planning because it is the means by
which management assesses whether or not plans are being
appropriately carried out.
Control is the process of monitoring activities to ensure
that they are being accomplished as planned and of
correcting any significant deviations.
Planning and controlling are highly interrelated in a sense
that it is the planned objective that is supervised and it is
usually the objective, when developed clearly that is used as
a bench mark for controlling. Controlling attempts to prevent
failure reduce the degree of failure and learn from previous
failure and are able to function properly.
246
 7.2 Control process
In undertaking managerial controlling there are a series of
activities that need to be performed:
1.Establishing Standards:
Standards are the bench marks against which performance is
compared.
Standards can take a variety of forms and be derived from a
variety of sources. For example, standards could take the
form of goals or could consist of professional guidelines or
legal or financial procedure.
Standards can also be derived from the practice of
benchmarking, examining the performance of other
organizations.
No mater how standards are derived and whatever types they
are, they form the requirements of the job. The standards are
the criteria against which performance will be compared.
247
 7.2 Control process (cont’d)
2. Measuring Performance and compare it against standards
It is comparison between ‘what is’ & ‘what should be’. It is
discovering the deviation.
3. Taking corrective action
When deviations from a standard are meaningful gaps in
performance, a manager should take action. Corrective
actions need to be directed at the cause(s) of the deficiencies
but not to aspects of the performance system that are not the
cause of the problem.
Determining precise action to be taken depends on three
things: the standard, accuracy of the measurements that
determine the existence of deviation & the diagnosis of the
person or device investigating the causes of deviation.
Corrective action can be prescribed by management in
advance through policies, procedure & practices. It is
sometimes automatic.
 7.3 Types of Control
Based on the nature of work and work flow, various types of
control have been developed.
There are three basic types of control that managers can
exercise:
1.Prevention control It: is sometimes called pre-action
control. Prevention control is designed to prevent problems
before they occur. It is also represented by rules and
procedures that are to be followed so that ethical and
performance problems are minimized.
2.Feed forward/Concurrent control: Concurrent control takes
place as the work process is being carried out. A
knowledgeable manager observes the work process and
quickly corrects problems as they occur.
3.Feedback control: It is some times called post-action
control. Feedback control occurs after a process has been
completed. Feedback control uses data from past
 7.4 Techniques of control
1. Market control: is the use of indicators of market values
as standards for regulating performance. For example, an
organization may use profits as the means for evaluating
the performance of a business unit.
2. Financial controls –Financial control use various
monetary measures to regulate performance. Financial
controls focus on internal monetary values, largely
regarding revenues and expenses in the organization
3. Budgetary control:- Budgets used to specify amounts to
be expended for various activities or events. Budgets
provide the yardstick by which performance can be
judged. Further, budgeting allows management to control
and allocate its resources.
4. Financial statements: financial statements are tools that
are used to asses and control the financial health of the
organization. Two of the most commonly used are balance
sheets and profit and loss statements.
 7.5. Effective control system
An effective control system requires the following essentials:
1.Control must be understandable:
2.Control must be flexible:
3.Control must be economical
4.Control must be objective.
5. Control should recognize the importance of time element.
6.Control system should provide useful and understandable
information.
7. Control should be forward-looking.
8.Control should be selective.
9.Control should reflect the organization structure and needs.
10.Control should lead to corrective action.