MANAGEMENT NOTES

Management, nature and scope

Introduction
Not unexpectedly, the variety of approaches to the theoretical background of
management has produced a number of versions of what is meant by such
key words as management and organisation. This paper looks at the
most typical interpretations of such words and offers some explanation
The meaning of management
There is no generally accepted definition of management as an activity,
although the classic definition is still held to be that of Henri Fayol.
To manage is to forecast and plan, to organise, to command, to coordinate
and to control.

H Fayol (1916)

Management is a social process... the process consists of ...planning, control,

coordination and motivation.
E F L Brench (1957)
Someone defined management as the process of acquiring and combining
human, financial, and physical resources to attain the organisations
primary goal of producing a product or service desired by some segment of
society. This process is essentially of the functioning of all organisations
profit or non profit; essential resources must be acquired and combined in
some way to produce an output.
Deciding what should be done and getting others to do it. Rosemary Stewart
Sensible working arrangements

Mary Parker Follet

Working with and through other people

Mintzberg has attempted to move away from this generalised approach
towards a more detailed and behaviour oriented analysis of what managers
actually do. Mintzberg highlights key roles that seem to appear regularly in
a managers job. He describes these roles as organised sets of behaviours
identified with a position and gathers them into three main grouping:
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Interpersonal

Informational roles

Decisional roles

Figure Head

Monitor

Entrepreneur

Leader

Disseminator

Disturbance Handler

Liaison

Spokesman

Resource Allocator
Negotiator

Differences between management and leadership

LEADERSHIP AND MANAGEMENT
At times management and leadership are seen as synonymous. There is,
however, a difference between the two and it does not follow that very leader
is a manager.
Management is more usually viewed as getting things done through other
people in order to achieve stated organizational objectives.

The manager

may react to specific situations and be more concerned with solving

relatively short-term problems.

Management is regarded as relating to

people working within structured organisations and with prescribed roles.

To people outside of the organization the manager might not be seen in a
leadership role.
On the other hand, leaderships emphasis is on interpersonal behaviour in a
broader context.

It is often associated with the willing and enthusiastic

behaviour of followers.

Leadership does not necessarily take place within

the hierarchy structure of the organization. Many people operate as leaders

without their role ever being clearly established or defined. A leader often
has sufficient influences to bring about long-term changes in peoples
attitudes and to make change more acceptable.
Distinction between Leadership and Management: Distinction between
Leadership and Management Leaders take a personal and active interest in
achieving goals whereas managers tend to play a relatively passive role in
accomplishing the goals. Managers need power to be entrusted to them by
the organization to deal with people. Leaders have power within themselves
and the required drive to lead people and motivate them to work
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enthusiastically towards achieving goals. Managers limit their interactions

with people to the minimum extent required to carry out their managerial
responsibilities. Leaders interact with people frequently and in a more
natural way. In the process they inspire people, motivate them and lead
them.
Leadership and management must go hand in hand. They are not the same
thing. But they are necessarily, and complimentary. Any effort to separate
the two is likely to cause more problems than it solves.
In his 1989 book On Becoming a Leader, Warren Bennis composed a list of
the differences:
Leader
innovates
An original
Focuses on people
Inspires trust
Has long-range perspectives
Ask what and why
Eye is on the horizon
Challenges the status quo
Is his/her own person
Does the right thing

Manager
administers
copy /imitates
Focuses on systems and structure
Relies on control
Has short-range perspective
Ask how and when
Eye always is on the bottom line
Accepts status quo
Classic good soldier
Does things right

Organisation
Organisations are systems of inter-dependent human beings. Pugh (1990)
A group (of two or more people who are) working together towards a common
goal or objective over a certain period of time.
Management is not an activity that exists in its own right. These activities
have generally been grouped in terms of planning, organising, motivating and
controlling activities.

Arts, Science & Profession, which combing makes MANAGEMENT .

Firstly we will take Arts and where it is in Management.
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a) Art requires skills whereas in management requires conceptual, technical,

human relations and decision making skills.
b) Art requires knowledge whereas in management requires learning and
acquiring knowledge such as Marketing, Finance, Technical and production
etc.
c) Art is creative whereas in management as a discipline is the function of
creativity. In this creativity is facing the challenges of competition.
Consider if we want to introduce our new product in market, then we must
make our self-ready for competition, i.e. Competition in sale, production,
advertising and price. So that to survive in the market.
d) Art is personalized whereas in management different people do a particular
task in a different way. Every individual has its own management style. We
can categories them as Democratic, Autocratic, Paternalistic, Beurocratic
etc.
e) Art is a performance whereas in management performance is seen by profit,
growth and development. These are the indicators, which decide the
management as good or bad.
Now we come to science where it is in management .
a) Science is a body of organized knowledge whereas in management as Social
Science consists of history of management thought.
b) Science is developed over a period of time whereas management is also
developed over a period of time. As consider that in many companies, In
1950s the productivity is 50% but in 90s it exceeds to 80% and in 2000 it
exceeds to 95%. It is just due to management. In which changes come in
various disciplines like human relations, services, finance, technical etc.
during the whole interval.
c) Science establishes cause and effect relationship whereas in management if
we put more worker on work, than there will be more productivity. Here the
cause is workers and the effect is in the productivity.

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d) Science has predictive power; in management also we can do predictions.

Like if the stock exchange rises then the rate of particular share may or may
not rise.
e) Rules/Regulations are verified from time to time whereas in management
new rules are established and old rules are changed, so that to have full use
of resources in a management.
At last we come to PROFESSION, and how it is related to management.
Before relating management and profession, we must know what is
profession. As in profession we require definite period of learning, it needs
certificate

of

practice,

centralized

rule

making

authority

and

social

commitment/obligation/accountability.

These are in case of academic one that sometimes wont applicable in case of
management

like

anyone

can

become

manager

without

any

specific

qualification or period of learning. It doesnt need any certificate of practice.

These are not in forcible under any law. If we come to practical approach of
profession, which is very close to practice of management. By these we can
know the roles of profession manager as:
a) Knowledge base decision instead of any intuition or predictions.
b) Based on experience and expertise in require field.
c) Help in meeting compitiveness challenges.
d) Apply theories of management in solving organizational problems.
e) Separation of ownership from management.
At last by discussing the Arts, Science and Profession role in
management. It is combination of all the three and it should be a way of life.

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The process of Management

As Drucker (1955) first put it, over forty years ago management is concerned
with the systematic organisation of economic resources and its task is to
make these resources productive. Management is a description of a variety
of activities (functions) carried out by those members of organisations
whose role is that of a manager, i.e. someone who either has formal
responsibility for the work of one or more persons in the organisation, or
who is accountable for specialist advisory duties in support of key
management activities.

These activities have generally been grouped in

terms of planning, organising, motivating and controlling activities.

The grouping of management activities (functions) can be summarised as
follows:
Planning

Deciding the objectives or goals of the organisation and

preparing how to meet them.

Planning is an activity which involves decisions about ends (organisational

aims/objectives), means (plans/strategies), conduct (policies) and results
(outcomes). It is an activity which takes place against a background of:
1. The organisations external environment, and
2. The organisations internal strengths and weaknesses.
Planning can be long-term, as in strategic and corporate planning, or
short-term, as in the setting of annual departmental budgets, work
plans etc.

Long-term usually implies a time-horizon of about five years,

although this may be ten or twenty years in certain industry (e.g. oil
extraction, pharmaceuticals etc).

Short-term can be any period from

immediate future (crisis management) up to about one year.

Organising
determining activities and allocating responsibilities
for the achievement of plans; coordinating activities and responsibilities into
appropriate structures.
Plans have to be put into operation. This involves detailed organisation and
coordination of tasks and the human and material resources needed to
carry them out. A key issue here is that of formal communication.

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Motivating
meeting the social and psychological needs of employees
in the fulfilment of organisational goals.
The motivating activities of managers, however, are essentially practical in
their intent for, in setting plans and executing them, managers have to gain
the commitment of their employees. This is primarily a question of
leadership, or style of management.
Controlling
monitoring and evaluating activities, and providing
corrective mechanisms.
It has to be recognised that these traditional groupings the POMC
approach- are the ones chosen to represent the framework for this paper. It
is appreciated that they do not tell the whole story about what constitutes
management, but they are a convenient way of describing most of the key
aspects of the work of managers in practice.
Controlling
Controlling activities are concerned essentially with measuring progress and
corrective deviations. The basic functions of control are:
to establish standard of performance
to measure actual performance against standards
to take corrective measures where appropriate.
Control activities acts as the feedback mechanism for all managerial
activities. Their use is, therefore, crucial to the success of management.

Frederick Winslow Taylor - Theory of Scientific Management

F.W.Tylor is considered as the "Father of scientific management" and his contributions mark a new era
in Modern Management Thought. The concepts propounded by him have an impact on management
service practice as well as on management thought up to the present day.. Taylor formalized the
principles of scientific management,and the fact-finding approach put forward and largely adopted
was a replacement for what had been the old rule of thumb.
He also developed a theory of organizations , which has been largely accepted by subsequent
Management Philosophers

Objectives of Scientific Management

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The four objectives of management under scientific management were as follows:

The development of a science for each element of a man's work to replace the old rule-ofthumb methods.
The scientific selection, training and development of workers instead of allowing them to
choose their own tasks and train themselves as best they could.

The development of a spirit of hearty cooperation between workers and management to

ensure that work would be carried out in accordance with scientifically devised procedures

The division of work between workers and the management in almost equal shares, each
group taking over the work for which it is best fitted instead of the former condition in which
responsibility largely rested with the workers. Self-evident in this philosophy are organizations
arranged in a hierarchy, systems of abstract rules and impersonal relationships between staff.

F.W. Taylor's Contribution to Organizational Theory

This required an organization theory similar for all practical purposes to that advocated by those
organizational theorists who followed. These theorists developed principles of management which
included much of Taylor's philosophy
His framework for organization was:

clear delineation of authority

responsibility

separation of planning from operations

incentive schemes for workers

management by exception

task specialization

Criticism Of Theories Expounded by Taylor

Taylor's Philosophy though gained immense popularity, was also widely criticised on three grounds.
1. Scientific management ignored human side of organization.. Taylor viewed on average worker
as a machine that could be motivated to work hard through economic incentives. Workers and
Trade Unions opposed his views strongly on the plea that it was exploitative.
2. Taylor's theory is narrow in scope having direct application to factory jobs at the Shop Floor
Level. Taylor and his disciples were called "Efficiency Experts" because they concentrated
attention on improving efficiency of workers and machines. Scientific management is
therefore restricted in scope as a theory of Industrial Engineering or Industrial Management,
rather than a general theory of management.
3. Taylor advocated excessive use of specialisation and separation of planning from doing.
Excessive division of labour had disastrous consequences in the form repetitive and
monotonous jobs and discontent among workers.
Nevertheless, Taylor's theory and principles have exercised considerable influence on modern
management thought. His emphasis on use of scientific methods in solving work-related problems is
widely accepted by modern experts on management. Taylor's impact has been so great because he
developed a concept of work-measurement, production control and other functions, that completely

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changed the nature of industry. Before scientific management, such departments as work-study,
personnel, maintenance and quality control did not exist.
"Scientific Management focuses on job-productivity at the shop floor, in particular upon techniques
that could be used on manual workers. Scientific management principles continue to be widely
applied today. In a typical manufacturing orgnization one will see scientific managment ideas and
techniques being applied to the shop floor, and bureaucratic principles of organization being used in
the office areas".*

Fayols principles of management

1. Division of Labour
Reduces the span of attention or effort for any one personal for any
one person or group. Develops practice and familiarity.
2. Authority
The right to give (lawful) orders. Authority should not be considered
without reference to responsibility.
3. Discipline
Outward marks of respect in accordance with formal or informal
agreements between firm and its employees.
4. Unity of command
One man one superior
5. Unity of direction
One head and one plan for a group of activities with the same
objective.
6. Subordinate of individual interest to the general interest
The interest of individual or one group should not prevail over the
general good.
7. Remuneration
Pay should be fair to both the employee and firm
8. Centralisation
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Is always present to a greater or lesser extent, depending on the size of

company and quality of its managers.
9. Scalar chain
The line of authority from top to bottom of the organisation.
10.

Order

A place for everything and everything in its place; the right man in the
right place.
11.

Equity
A combination of kindliness and justice towards employees.

12.

Stability of tenure of personnel

Employees need to be given time to settle into their jobs, even
though this may take a length period in case of managers.

13.

Initiative
Within the limits of authority and discipline, all levels of staff
should be encouraged to show initiatives.

14.

Esprit de corps
Harmony is the great strength to the organisation; teamwork
should be encouraged.

In your opinion, are the 14 principles of management advocated by

Henri Fayol still relevant in the todays 21st century of modern
management? Discuss.

Relevance of Fayols Principles of Management

Fayols General Principles have been adopted by the later followers of the
classical school such as Urwick and Brech. Present theorist, however, would

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not find much of substance in these precepts. From our present day view
point, the following general comments may be made:
1. The reference to division of work, scalar chain, unity of command
and centralisation, for example are descriptive of the kind of
formal organisation that has come to be known as
bureaucracy. Fayol, in true classical fashion, was emphasising
the structural nature of organisation.
2. Issues such as individual versus general interests, remuneration
and equity were considered very much from the point of view of a
paternalistic management. Todays questions concerns fairness,
or the bona fide conflict of interest between groups, have to be
worked out between management and organised labour, often
with third party involvement by the State.
3. Although emphasising the hierarchical aspects of the business
enterprise, Fayol was well aware of the need to avoid an excessive
mechanistic approach towards employees.
Thus reference to
initiative and esprit de corps indicated his sensitivity to peoples
needs as individuals and as groups. Such issues are of major
interest to theorists of today, the key difference being that whereas
Fayol saw these issues in the context of a rational organisation
structure, the modern organisation development specialist sees
them in terms of adapting structures and changing peoples
behaviour to achieve the best fit between organisation and its
customers.
4. Fayol was the first to achieve a genuine theory of management
based on a number of principles which could be passed on to
others. Many of these principles have been absorbed into
modern organisations.
Their effect on organisational
effectiveness has been subject to increasing criticism over the
last twenty years, however, mainly because such principles
were not designed to cope with modern conditions of rapid
change,
flatter
structures,
and
increased
employee
participation in the decision process of the organisation.

CO-ORDINATION

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MEANING

Co-ordination is the process of synchronizing activities of various persons in the organization

in order to achieve goals. Co-ordination undertaken at every level of management. At the top
level the chief executive will co-ordinate the activities of functional or departmental
managers. If there is lack of co-ordination between production and sales departments then
either production will suffer or sales will suffer. Similarly I personnel department will like to
know the manpower needs of various departments. No department will be able to function
with a proper co-ordination with finance department. At middle/lower levels of management
the deputy managers / foreman / supervisors will co-ordinate the work of persons working
under them. The purpose of co-ordination is to create team work and harmony in the
enterprise. It is the blending of human efforts in order to achieve better organization goals.

Co-ordination crease a mental awareness among all employees and their efforts are directed
in unison. An organization is like a human body. As various parts o the body combine
together to do a work, similarly the different segments of the organization should work in
unison so that task is completed in a better way.

DEFINITIONS

A number of authors have defined co-ordination differently. The views of some of them are
given here in order to know its exact nature.

HENRY FAYOL: "To co-ordinate is to harmonize all the activities of a person in order to
facilitate its working and its success." Co-ordination is necessary to enable a person to
improve his functioning. Without co-ordination, working cannot be harmonized.

ORDWAY TEAD: "Co-ordination is the effort to assure a smooth interplay of the functions
and forces of all the different component parts of an organization to the end that its purpose
win be realize with minimum of friction and maximum of collaboration effectiveness." The
purpose of the co-ordination is to synchronize the functions of various departments for
achieving organizational goals with minimum efforts.

STEPS / PROCESS OF CO-ORDINATION.

Co-ordination cannot be achieved through orders. It is a process which can be achieved

through managerial functions. It is a by-product of good management. When all the functions
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are carried out properly then co-ordination will come by itself. Co-ordination may be
achieved through following processes:

1. Through Planning: The planning is the elementary stage of achieving co-ordination.

When various functions are properly planned and various policies are integrated then
co-ordination will be easily achieved. If the production manager is to plan for his
development then it will be better to consult purchase manager, personnel manager,
finance manager, sales manager also. When production is planned with the consent of
other concerned managers then co-ordination takes place at planning level. If other
managers feel some difficulties then they will explain it and mutually accepted
decisions will resolve the differences. Co-ordination can certainly be achieved at
planning stage. According to Mary. Follett, planning stage is the ideal time to bring
about co-ordination and they must see to it that various plans are properly interrelated.
2. Through Organization: Co-ordination is an essential part of organization. Money
considers co-ordination as the very essence of organization. When a manager groups
and assigns various activities to subordinates, the thought of co-ordination will be
upper most in this mind. The related activities are placed together to avoid delays &
confusions.
3. Through Directing: When a manager directs his subordinates he will be coordinating
their work. He will give them directions, guidelines and instructions for doing a job
assigned to them. He will direct in such a way that the achievement of overall
organizational objectives is ensures
4. Through Controlling: The manager is required to control the work of everyone in the
organization so that all efforts are directed towards main goals. There may be
instances when performance of subordinates is not up to the mark or it is not in the
direction in which it should have been. The manager will take corrective measures as
and when required.
5. Through Staffing: The staffing function can also help in proper coordination. While
staffing, the manager should keep in mind the nature of jobs and the type of persons
required for managing, them. He should- ensure the right number of executives in
various positions for proper performance of their functions. The executives are of such
a .quality or are given such a training that they are able to co-operate and co-ordinate
their efforts.
6. Through proper communication: Effective communication is of utmost importance
for achieving better co-ordination. There should be a regular flow of information among
various persons so that they are given required information for proper co-ordination.
The personal contact is the most effective type of communication. Other methods like
reports, procedures, bulletins, etc., can also be used properly.
FEATURES OR CHARACTERISTICS OF CO-ORDINATION

An analysis of the above definitions indicates that co-ordination has certain characteristics.
They are,
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1.
2. It provides unity o faction in pursuit of a common purpose. Unity of action is
considered to be the heart of the co-ordination process
3. It aims at achieving the common purpose of the enterprise through the orderly
synchronization of the efforts of the subordinates.
4. It is a process whereby an executive develops an orderly pattern of group efforts for
accomplishing the common objectives of the enterprise.
5. The task of co-ordination is a managerial responsibility; co-ordination can be made
effective only if an executive makes conscious efforts
6. It is a continuous process
TECHNIQUES of CO-ORDINATION / METHODS

Some of the important techniques of co-ordination are as follows:

1. Co-ordination of command: In this technique, the superior or manager by directing,

commanding and controlling the efforts, of his subordinates achieves co- ordination.
In the words of L.A. Allan, A manager, in managing, must co-ordinate the work for
which he is accountably balancing timing and integrating it."
2. Co-ordination through group meetings: In a group meeting, the officials are
brought together for discussing common problems of organization. Such meetings
help in achieving co-ordination
3. Co-ordination through leadership, delegation etc.: Some of the management
functions such as leadership, authority delegation and communication contribute
towards co-ordination.
4. Hierarchy: Hierarchy or chain of command is the simplest design for achieving coordination. IN hierarchy, interdependent units are placed under one boss and by this
co-ordination can be achieved.
5. Rules, procedures and policies: Standard policies, procedures and rules are laid
down by the management and these help in achieving co-ordination in the repetitive
activities of sub-units
6. Co-ordination through liaison men: Liaison men help in securing particularly
external co-ordination. Many large organizations depend on & liaison .officer to
maintain relations with government and other outside agencies and organizations.
7. Incentives: Providing incentives (e.g., profit-sharing) to the interdependent units also
help in securing co-ordination among those units. Incentive plans promote better team
spirit and co-operation among the employees, and this ensures better co-ordination.
8. Voluntary co-ordination: Brown and Simon have advocated voluntary co- ordination.
They have stated that an ideal co-ordination is voluntary co-ordination and this can be
secured by encouraging informal contacts among people and by providing for
interpersonal and interdepartmental contacts. L.GULICK and URWICK have stated
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that the leader should inculcate in the minds of those who are associated with him in
any activity the desire and will to work together for a purpose.
9. Planning: Planning is a way of anticipating interdependencies and thus forestalling or
mitigating the coordinating difficulties. To the extent that contingencies not anticipated
in the plan arise, co-ordination requires communication to give notice of deviations
from planned or predicted conditions, or to give instructions for changes in activity to
rectify these deviations.
10. Committees: Constituting committees for decision-making is another common device
used by business concerns. This device greatly eased the rigidity of the hierarchical
structure, promotes effective communication and understanding of ideas, encourages
the acceptance of and commitment to policies and makes their implementation more
effective.
11. Climate of mutual trust and collaboration: Fostering of a climate of mutual trust
and collaboration is also a coordinating mechanism. MARY PARKER FOLLET
suggests that co-ordination cannot be achieved merely by giving orders or commands
because they invariably lead to opposition loss of pride and irresponsibility .Her
solution is to "depersonalize" the giving of orders, to unite all concerned in a study of
the situation and obey that, "One person should not give orders to another person but
both should agree to take their orders from the situation."
12. Indoctrination: Indoctrinating organizational members with the goals and mission of
the organization, a device used commonly in religious and military organizations, is
still another coordinating device.
PRINCIPLES OF CO-ORDINATION OR REQUISITIES
ORDINATION

FOR EFFECTIVE

CO-

In order to make co-ordination effective, it should be based on certain fundamental

principles. They are:
1. Early start: There should be co-ordination even in the early stages of planning and
policy-making. For example, there should be mutual consultation among the
concerned officials while preparing the plan itself.
2. Direct contact: Co-ordination is easier by direct personal contract among the
people concerned. One special advantage of direct personal contact is that the
concerned persons can avoid misunderstanding or misinterpretation.
3. Continuity: Co-ordination is the basis of an organization structure and so long as
the enterprise continues to function, co-ordination is a must Co-ordination must start
from the stage of planning and should go on all the time as it is a continuous
process.
4. Dynamism: There may be changes in the external environment which influences
the activities of the business. Further, internal actions and decision may be changed
or altered depending upon circumstances. In view of this, co-ordination to modified
to suit the changes in the external environment and internal actions and decisions.
In other words, co-ordination should not be rigid.
5. Simplified organization: Another principle which facilitated effective co- ordination
is the simplified organization structure. The management may consider a
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rearrangement or reorganization of departments in order to have better co-ordination
among the departmental heads.
6. Clear-cut objectives: Another requisite for securing effective co ordination in an
enterprise is the clear-cut objective. The manager of different departments should be
clearly explained the objectives of the enterprise and also they should be prevailed
upon to work for the achievement of the common objective of the enterprise. A clearcut objective and its effective communication to the heads of different departments is
bound to produce uniformity of action.
7. Gear definition of authority and responsibility: A clear definition of authority and
responsibility for each individual and department also facilitates effective coordination in an enterprise. Gear-cut authority helps in reducing conflicts among the
different officers and also helps in making them carry out their job with unit of
purpose. Further, a clearly defined authority helps the manager in case they violate
the limits and also for any other: irregularities.
8. Effective communication: For proper co-ordination, there is also a need for
effective communication. Through communication, individual and departmental
differences can be resolved. Further, effective communication helps in discussing
changes, adjustments of programmers, programmers future, etc.
9. Effective Leadership: Effective leadership also helps in proper communication. By
effective leadership, co-ordination of the activities of the people at all stages is
ensure. Further, it creates confidence in the subordinates and enhances their
morale.
10. Effective supervision: Though it is the duty of the top executive to see that the
subordinates perform their work as planned, he may entrust this task to the
supervisors. With- the help of supervisors, any deviation from the planned course of
action can be easily located and immediate steps may be taken to ensure that the
activities of subordinates conform to the planned activities. Thus, supervisors can
also play an important role in achieving effective co-ordination.
PLANNING

Need for planning: The need for planning in business arises because of a number of
factors or reasons. Those factors or reasons are:

1.
2.
3.
4.
5.

Growing complexities of modem business.

Rapid technological changes
Growing competition.
Rapid economic, social and political changes.
Fluctuations in demand for products.

These forces of challenges can be met by management only through proper planning.
Business activities without proper planning are likely to be ineffective, and may fail to
achieve success. So, planning is a must for every business organization. In fact, the maxim
in management is "First plan your work, and then work your plan".
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Definitions

According to Hodge and Johnson "Planning is the determination in advance of a line of

action in order to achieve better performance".

In other words of Koontz and O'Donnell, "Planning is deciding in advance what to do, how
to do, when to do it and who is to do it. Planning bridges the gap from where we are, to
where we want to go. It makes it possible for things to occur which would no otherwise
happen.

According to R.N. Farmer and B.M. Richman, "Planning is essentially decision-making

since it involves choosing from among alternatives".

Nature and Characteristics of Planning

1. Primacy of planning or primary function: .Planning is a primary function. That is, it

is a primary requisite to the managerial functions of organizing, staffing directing,
motivating, coordinating, communicating and controlling. A manager must do
planning before he can undertake the other managerial functions.
2. Goal-oriented or focus on objectives: Planning is goal-oriented. That is, planning
is linked with certain goals or objectives. A plan starts with the setting of objectives;
and then, develops policies, procedures, strategies, etc. to achieve the objectives.
3. Pervasiveness of planning: Planning pervades all levels of management. That is
planning is done at all levels of .management. In other words, every manager,
whether he is at the top, in the middle or at the bottom or organizational structure,
plans.
4. Essentially a decision-making process: Planning is essentially a decision-making
process, since it involves careful analysis of various alternative courses of action and
choosing the best.
5. Integrated process: Planning is an integrated process. That is it facilitates and
integrates all other functions of management.
6. Selective Process: Planning is a selective process. That is, it involves the selection
of the best course of action after a careful analysis of the various alternative courses
of action.
7. Flexible: Planning must be flexible. That is, generally, the process of pi3nning must
be capable of being adapted to the changes in the environment. In fact, successful
planning should be flexible.
8. Formation of premises: Planning requires the formation of premises (i.e.,
assumptions). It is only on the basis of premises or assumptions regarding the future
(i.e., the future political, social and economic environments) that the plans will be
ultimately formulated.
9. Directed towards efficiency: The main purpose of planning is to increase the
efficiency of the enterprise. That means, planning is directed to wards efficiency.
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10. Continuous Process: Planning is a continuous process. That is, the management
has to keep itself engaged in planning at the times because ~f the uncertainties of
the future.
11. Planning and control are inseparable: Planning, which is looking ahead, and
control, which Is looking back, are inseparable. They are the Siamese twins of
management. Unplanned action cannot be controlled, for control involves keeping
activities in course by correcting deviations from plans.
12. Future Oriented: Planning is future-oriented. 1ts essence is looking ahead. It is
undertaken to handle future events effective and achieve some objectives in the
future.
13. Action oriented: Planning is action-oriented. That is, planning should be undertaken
in the light of organizational preferences. The course of action determined must be
realistic. That is it should be neither impossible nor too easy to achieve.
14. Inter-dependent process: Planning is an inter-dependent process. It requires the
Co-operation of the various sections and sub-sections of the organization.
15. Involves participation: Planning involves the participation of all the managers as
well as the subordinates. In the words of Koontz and O'Donnell, "Plans must be
formulated in an atmosphere of close participation and high degree of concurrence".
16. A means, and not an end: Planning is riot an end. It is only a means to achieve an
end. i.e., the accomplishment of the pre-determined objectives or goals of the
organization.
Importance and Advantages of Planning

1. Management by objectives: It facilitates management by objectives. That is, it

makes the management formulate the objectives of the organisation in clear-cut
terms and take the right course of action to realize the specific objectives.
2. Facilities unity of direction and co-ordination: Planning facilitates coordination. Through its we-defined objectives. well-publicised policies,
programmes and procedures, planning facilitates the co-ordination of all the interconnected activities and avoids duplication of activities and delays in the
execution of activities
3. Reduces future uncertainties and charges: A business concern has to work in
an environment Which is uncertain and ever-changing, Planning helps the
concern in foreseeing the risks and uncertainties in the future and in advance in
the best possible way and in preparing the plan on the basis of its decisions in the
past and present.
4. Facilitates control: Planning facilitates control. Planning determines in advance
the work to be done, the person responsible for doing it, the time to be taken to do
the work and the costs to be incurred. This makes it easy to compare the actual
performance with the planed performance. In case there are deviations. corrective
actions are taken to remove the deviations. Thus planning facilitates control.
5. Focusses attention on organizational goals and facilitates management by
objectives: An organisation has definite goals or objectives, and all the activities
of the organization are directed towards the achievement of those objectives.
6. Improves adaptability: planning improves adaptability. That is, planning helps
the organization in coping with the changing business environment. The

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anticipation of future events and changing conditions, implied in planning,
prepares the organization to meet them effectively.
7. Improves competitive strength: Planning improves the competitive strength of
the organization by anticipating technological changes and tastes and preferences
of people for discovering new opportunities for expansion and. providing for
changes in work methods, improvement in quality of products, etc.
8. Planning motivation: Planning improves motivation. Planning ensures the
participation of managers in the determination of the goals, policies, programmes,
etc. of the organization. This improves the motivation and morale of the
managers.
9. Encourages innovation and creativity: Planning promotes or encourages
innovation and creativity on the part of managers, in the sense that many new
ideas come to the minds of managers during planning, which basically a deciding
function of management.
10. Ensures efficient use off resources: Planning ensures efficient use of all
resources at the disposal of the concern to achieve organizational objectives. In
planning, management evaluates alternative courses of action on the basis of
efficiency, and selects only that course of action which is considered most
efficient.
11. Brings about economy in operation: Planning brings about economy in
operation by determining the one best way of doing things.
12. Guides decision-making: The success of any organization depends to a great
extent on the types of decision made at the various levels of the organization.
Decision-making is the making of choice from the various available alternatives
after evaluating each of them.
13. Facilitates management by exception: Planning facilitates management by
exception. That is, planning ensures that top management is not involved in each
and every activity, and intervenes only when things are not going as per planning.
14. Facilitates delegation: Planning facilitates delegation of authority. Not only
managers but also their subordinates take part in planning. The involvement of
subordinates in planning necessarily requires delegation of authority to them for
getting the things done.
Principles of Planning

A number of fundamental principles have been devised over the year for guiding managers
undertaking planning. Some of these principles are discussed as under,

1. Principle of contribution to objective: All types of plans are prepared to achieve

the objectives of the organization. Both major and derivative plans are prepared to
contribute to the objectives of the enterprise. Planning is used as a means to reach
the goals.
2. Principles of primacy of Planning: This principle states that planning is the first or
primary function of every manager, He has to plan first and then proceed to carry
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3.

4.

5.

6.

7.
8.

out other functions. Other managerial function are organized to reach the objectives
se in planning.
Principle of Planning Premises: In order to make planning effective, some
premises or presumptions have to be made on the basis of which planning has to
be undertaken. Plans are, generally not properly structures. The reason being that
planning premises are not properly developed. This principle lays emphasis on
properly analyzing the situation which is going to occur in future.
Principle of Alternatives: Planning process involves developing of many
alternatives and then selecting one which will help in achieving desired business
goals. In the absence of various alternatives proper planning will be difficult.
Principle of Timing: Plans can contribute effectively to the attainment of business
goals if they are property timed. Planning premises and policies are useless without
proper timing.
Principle of Flexibility: This principle suggests flexibility in plans if some
contingencies arise. The plans should be adjusted to incorporate new situations.
The dangers of flexibility should be kept in mind. The changes may upset the earlier
commitments. So the cost of changes should be compared to the benefits of
flexibility.
Principle of Commitment: There should be a time frame for meeting the
commitments made. This will ensure the achieving of targets in time.
Principle of Competitive Strategies: While formulating own. Plans a manager
should keep in mind the plans of competitors. The plans should be framed by
thinking of what the. competitors will do in similar situations.

Limitations of Planning

1. Lack of Reliable Data: Planning is based on various facts and figures supplied to
the planners. If the data on which decisions are base are not reliable then decisions
base on such information will also be unreliable.
2. Time Consuming Process: Practical utility of planning is sometimes reduce? by
the time factor. Planning is a time consuming process and actions on various
operations may be delayed because proper planning has not yet been done. Under
certain circumstances an urgent action is needed then one cannot wait for the
planning process to complete.
3. Expensive: The planning process is very expensive. The gathering of information
and testing of various courses of action involve greater amounts of money.
Sometimes, expenses are so prohibitive that small concerns cannot afford to use
planning
4. External factors may reduce Utility: Besides internal factors these are external
factors too which adversely affect planning. These factors may be economic, social,
political, technological or legal. The general national and international climate also
acts as limitation on the planning process.
5. Sudden Emergencies: In case certain emergencies arise then the need of the hour
is quick action and not advance planning. These situations may not be anticipated.
In case emergencies are anticipated or they have regularity in occurrence then
advance planning should be undertaken for emergencies too.
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6. Resistance to Change: Most of the persons, generally, do not like any change.
Their passive outlook to new ideas becomes a limitation to planning. McFarland
writes, "The principal psychological barrier is that the future. The present is not only
more certain than the future, it is also more desirable. Resistance to change is
commonly experienced phenomenon in the business world. Planning often implies
changes which the executive would like to ignore, hoping they would not
materialize."
Planning Process

Planning process involves the setting up of business objectives and allocation of resources
for achieving them. Planning determines the future course of action for utilizing various
resources in a best possible way. It is a combination of information handling and decision
making systems based on information inputs, outputs and a feedback loop.

Steps in Planning Process

1. Recognising Need for Action: The first step in planning process is the awareness
of business opportunity and the need for taking action. Present and future
opportunities must be found so that planning may be undertaken for them. The trend
of economic situation should also be visualized. Before venturing into new areas the
pros and cons of such projects should be evaluated. A beginning should be made
only after going through a detailed analysis of the new opportunity.
2. Gathering Necessary Information: Before actual planning is initiated relevant facts
and figures are collected. All information relating to operations of the business
should be collected in detail. The type of customers to be dealt with, the
circumstances under which goods are to be provided, value of products to the
customers, etc. should be studied in detail. The facts and figures collected will help
in framing realistic plans.
3. Laying Down Objectives: Objectives are the goals which the management tries to
achieve. The objectives are the end products and all energies are diverted to
achieve these goals. Goals are a thread which bind the whole company. Planning
starts with the determination of objectives.
4. Determining Planning Premises: Planning is always for uncertain future. Though
nothing may be certain in the coming period but still certain assumptions will have to
be made for formulating plans. Forecasts are essential for planning even if all may
not prove correct. A forecast means the assumption of future events. The behaviour
of certain variables is forecasted for constituting planning premises. Forecasts will
generally be made for the following:
a. The expectation of demand for the products.
b. The likely volume of production.
c. The anticipation of costs and the likely prices at which products will be
marked.
d. The supply of labour, raw materials etc.
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5. Examining Alternative Course of Action: The next step in planning will be

choosing the best course of action. There are a number of ways of doing a thing.
The planer should study all the alternatives and then a final selection should be
made. Best results will be achieved only when best way of doing a work is selected.
6. Evaluation of Action Patterns: After choosing a course of action, the next step will
be to make an evaluation of those courses of actions. Evaluation will involve the
study of performance of various actions. Various factors will be weighed against
each other. A course of action may be suitable but it may involve huge investments
and the other may involve less amount but it may not be very profitable.
7. Determining secondary Plans: Once a main plan is formulated then a number of
supportive plans are required. In fact secondary plans are meant for the
Implementation of principal plan. For example, once production plan is decided then
a number of plans for procurement of raw materials, purchase of plant and
equipment, recruitment of personnel will be required. All secondary plans will be a
part of the main plan.
8. Implementation of Plans: The last step in planning process is the implementation
part. The planning should be put into action so that business objectives may be
achieved. The implementation will require establishment of policies, procedures,
standards and budgets. These tools will enable a better implementation of plans.
Types of Plans

1. Standard or Repeated-Use Plans and Single Use Plans:

Standing or repeated-use plans are plans which are to be used repeatedly (i.e., over
and over again) over a long period of time for tackling frequently recurring problems
and issues. They give ready-made answers to issues which occur again and again.
Standing plans serve as guideline for managerial decision-making and actions. They
make managerial decisions and actions easy and increase managerial efficiency, as
they offer standard procedures for tackling similar and frequently recurring problems
and issues.

Standing plans includes:

(a)
(b)
(c)
(d)
(e)
(f)

Objectives
Policies
Procedures
Methods
Rules
Strategies

2. Financial plans and Non-financial Plans: Financial plans or cash plans are plans
which relate to the monetary or financial resources of the concern. They determine
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the sources from which finance can be secured and the amounts which can be
allocated to various purposes.
Non-financial plans or non cash plans are plans which relate the physical resources,
and not to financial resources, and for the concern. It may be rioted that through
financial plans are more important than non-financial plans. It is as Important as
financial plans.

3. Formal Plans & Informal Plans: Formal plans are plans which are reduced to black
and white (i.e., put on paper). In other words1 formal plans are plans which specify
in writing the specific objectives to be achieved and the steps to be taken to achieve
those objectives. Formal plans are systematic and rational. They are quite
necessary for the successful running of a concern.
Informal plans are mere thinking by some individuals of a concern. Of course,
informal plans in future. Informal plans promote unhealthy tendencies like
carelessness, ineffective employee performance, etc. informal plans are not (;'f
much use for the smooth running of the enterprise.

4. Specific plans & Routine plans:

Specific plans are plans for specified or particular purposes. Preparation of specific
plans js a difficult task, because the methods to be de~eril1ined for specific
purposes have to be specially planned and formulated.

Routine plans ware plans which are routine or mechanical are called routine plans.
Preparation of routine plans is not difficult. In the case of the routine plans, the
methods determined for accomplishing the objectives of the organization will remain
the same during a particular period without major changes

5. Administrative plans & Operative plans: Administrative plans are plans which
determine the basis of action for the whole organization as well as for the various
segments of the organization for a particular period. Administrative plans are done
by the middle- level management, and they provide guidelines for operative plans.
Operative plans are plans which are concerned with the actual execution of day-today operations of the concern. Operative plans are, generally, for a short period.
They are prepared by the lower level of management who put the administrative
plans into action. Operative or operating plans cover aspects, such as preparation of
sales programme, planning of production activities, etc.

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6. Short-range plans & Long-range plans: Short range plans are plans which,
generally, cover a period of one year. Short range or short term plans are concerned
with the determination of short term activities to accomplish long term objectives. As
short term plans are intended to achieve long term objectives, short range plans
have to be consistent with long range plans. Short range plans are more actionoriented, more detailed, specific and quantitative.
Long range plans which cover a period of years or more. The length of the period
varies from one concern to another depending upon the nature of the business, the
risks and uncertainties, government control; etc. they care concerned with the
formulation of long-term goals of enterprise and the determination of the ways and
means of achieving those goals.

7. Strategic plans & Tactical plans: Strategic plans are plans designed to achieve
the overall or general objectives of the organization. Strategic plans are done by the
top level management. They are concerned with the enterprise, the formulation of
policies and the determination of strategies to be adopted and other steps to be
taken to accomplish those objectives.
Tactical plans are plans which are concerned with the planning of detailed
operations needed to achieve the organizational goals. Tactical plans are intended
to meet any changes in internal organization and external environment. For
instance, difficulty in procuring raw materials, changes in prices of products,
unexpected moves by the competitors and other unforeseen situations are met with
the help of tactical plans.

Components of Planning

1. Objectives: In the words of Koontz and O'Donnell, "Management terminology,

objectives are the end-point's of a management programme whether stated in
general or specific terms".
Characteristics of Objectives

1.
2.
3.
4.
5.
6.
7.
8.
9.

Objectives are multiple in nature

Objectives have a hierarchy
Objectives form a network
Objectives are both long range and short range
Business objectives are verifiable
Business objectives may be specific or general
Objectives may be tangible or intangible
Objectives have priority
Objectives may clash with one other
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2. Policies: In the words of George R, Terry, "Policy is a verbal, written or implied
overall guide setting up boundaries that supply the general limits and directions in
which the managerial action will take place". They are the guidelines or executive
action at all levels of management.
Differences between objectives and policies:
a. Objectives are the end points of planning. That is, objectives can be regarded as
the places which have to be approached through roads (i.e., policies). But policies
are the means. That is, policies are the broad ways or roads through which the
places (i.e., the objectives) have to be reaches
b. Objectives are basic to his existence and functioning of an organization. But
policies are not basic to the existence and functioning of an organization.
c. There is no room for discretion in the case of objectives on .the other hand,
policies may leave some room for discretion on the part of those who are to be
guided by them.
d. Objectives are determined by the top management, where as policies are left to be
determined, to some extent by the lower levels of management.
e. Objectives may, sometimes, remain, only on paper. On the other hand, policies
reflect the true intents of the organization.
f. Objectives have to be achieved, while policies have to be observed.
3. Procedures: According to George R. Terry "a procedure is a series of related tasks
that make up the chronological sequence and established way of performing the
work to be established".
4. Methods: A method is a specified or prescribed process, or manner or the way in
which a particular task or operation is to be performed.
5. Rules: Rules are a plan that lay down a required course of action with respect to a
given situation. In other words, rules are established principles for carrying out the
activities in a systematic manner. In short, they are the prescribed behaviour of the
people in the organization.
6. Strategies: In the words of A.D. Chandler, "Strategy is the determination of the basic
long-term goals and objectives of an enterprise and the adoption of courses of action
and the allocation of resources to carry out these goals".
7. Programmes: Programmes are the concrete scheme of the action designed to
implement the policies and realize the objectives. In other words, they are the actionsteps necessary to achieve the objectives. In short: they are the specific and precise
plan which lays down the operations to be carried out to accomplish a given task,
with a specified ~)i of time.
8. Schedules: Schedules are the dates and timings fixed for completing the
programmed activities. In short, schedules are the time-table for the work to be done.
9. Projects: A project is an individual part of a general programme. In other words, it is
part of the job that is required to be done in connection with a genera programme.
10. Budgets: The institute of cost and management accountants, London, has defined a
budge as "a financial and/or quantitative statement, prepared prior to a defined
period of time, of the policy to be pursued during that period for the purpose of
attaining a given objective",
ORGANIZING OR ORGANIZATION
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MEANING OF ORGANIZATION:

The term 'Organization' can be used in different senses. It can be used as a group of person
working together to as a structure of relationships or as a process of management.

When it is used to refer to a group of person working together, it means a concern, an

undertaking or as enterprise.

When it is used to refer to a structure of relationships, it means the structural relationships

among the positions and jobs and person (i.e., the framework of responsibility and authority)
through which the enterprise functions, and it is called organization structure.

DEFINITIONS OF ORGANIZATION:

1. Theo Haimann: "Organizing is the process of defining and grouping the activities; of
the enterprise and establishing authority relationships among them".
2. Koontz and O'Donnell: "Organization involves the grouping of activities necessary to
accomplish goals and plans, the assignment of these activities to appropriate
departments end tl1e provision for authority, delegation and co - ordination.
3. Louis A. Allen: "Organizing is the process of identifying and grouping the work to be
performed, defining and delegating responsibility and authority, and establishing
relationship the purpose for enabling people to work most efficiently together in
accomplishing objectives".
NATURE & CHARACTERISTICS OF ORGANIZA TION:

The main characteristics and nature of organization are:

Organizing or organization is a management process (i.e., a managerial function)
Organization is concerned with groups of peop19. An organization cannot be
constituted by a single person. It comes into existence only a group of persons come
together.
Organization is, concerned with identification and grouping of activities into logical
pattern so as to secure homogeneous groups of activities.
Division of work of division of labors the basis of organization.
Integration or-coordination of the various activities of the enterprise is another
important feature of organization.
An organization structure has no meaning unless it can contribute to the
accomplishment to the common objectives, i.e., the goal or objectives of the
enterprise.
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An organization structure consists of various positions arranged in a hierarchy with
clear definition of authority and responsibility associated with each of the positions.
Organization process involves taking a number to steps, such as the identification of
the activities to be performed to attain the objective of the enterprise, the appropriate
groping of activities into logical pattern, assignment to activities to appropriate
departments and people, delegation of authority, creation of authority -responsibility
relationships, etc.
PRINCIPLES OF SOUND ORGANIZATION:

There are many principle of organization. The main principles are:

1. Principle of Objectives: The principle of Objectives stresses the need for setting the
objectives of the enterprise. The setting of the objectives of the enterprise is
necessary, because the formulation of the organization structure s very much
influence by objectives of the enterprises
2. Principle of Unity 'of Objectives: The Principle of unity of objectives implies that /
every part of the organization and the organization as a whole should be geared to
the basic objectives of the enterprise, in other words the main objectives of the
enterprise.
3. Principle of division of work and specialization: Specialization has become the /
order of the day. So, sound and effective organization must be built on the principle
of specialization
4. Principle of Functional definition: The principle of functional definition implies that /
the functions, duties and responsibilities of the different departments and position in
the organization their authorities and their relationships with other departments and
position must be clearly defined.
5. Principle of balance of various factors: The principle of balance of various factors
suggests that there should be popper balance in the formal structure of the
organization in regard to various factors; For instance, there should be proper
balance among the; different segments or departments' of the undertaking. That ism,
the work- load should be properly distributed among the various departments to
maintain balance and harmony the working of the organization. There should be
balance in authority allocation to different departments.
6. Principle of simplicity: The principle of simplicity means that the organization
structure should be simple with a minimum number of managerial levels. If there are
a large number of managerial levels in the organization structure, there may raise the
problem of effective co-ordination and communication
7. Principle of Span of Control or Span of Management: Span of control or span of
management refers 10 'numbers of subordinates a superior can direct, guide and
control effectively. The span of control should be minimum, because there is a limit to
the number of subordinates that can be effectively supervise by a superior.
8. The Scalar Principle, the scalar chain, the chain of the command or line of
authority: Scalar chain is the chain of superiors. the line of command or the line of
authority form the highest rank to the lowest rank in the organization established for
the purpose of communication in both the directions, it establishes the channel
through" which communications should pass, and also states the superiorsubordinate relationships in the organization.
When the strict following of the line of authority becomes detrimental, and there is a
need of swift action, the scalar chain can be short-circuited by taking the permission
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of their immediate superiors. Through this arrangement, the scalar chain principle is
safeguarded, and at the same time, the subordinate officers are enabled to take swift
action. Such an arrangement is known as Gang Plank. In this context, it must be
noted that the short circuiting of the scalar chain is permitted only on routine matters.
But matters pertaining to decision -making should be routed through the usual scalar
chain.

9. Principle of responsibility: Responsibility is the obligation of performing the duties

assigned. Responsibility is fixed with different positions in the organization.
Responsibility cannot be shifted to others. The Principles of responsibility implies that
the superior cannot avoid responsibility by delegating authority to his subordinates.
He (i.e., the superior) must be held responsibi1ity for the acts of his subordinates to
whom he has delegate authority.
10. Principles of delegation of authority: With the allocation of duties and
responsibilities, u'1ere must logically go the grant of necessary authority to the
subordinates so as to enable him to perform his duties efficiently. The Principle of
delegation of authority emphasizes that the organization structure should provide for
the delegation of authority to the subordinates.
11. Principle of unity of command: The principle of unity of command suggests that
each subordinate should have only one superior. In other words there should not be
dual subordination. Dual subordination results in undermining of authority, delay,
confusion, disorder and indiscipline of subordinates.
12. Principe of unity of direction: The principle of unity of direction suggests that, for a
group of activities having the same objective, there should be one plan of action and
one objective. This would facilitate co-ordination of activities and the completion of
the task as per the schedule. If each person in a department is made to work under a
different plan or programme of action, there will be nothing but confusion.
13. Principle of coordination: As the organization is divided into a number of
departments, it is necessary that there should be co-ordination between the different
departments. The principle of co-ordination emphasizes that co-ordination between
the different departments is quite essential to bring unity of action and commonness
of purpose in the organization.
14. Principle of communication: The principle of communication suggests that their
should be a good communication network in the organization to achieve the
objectives of the enterprise. Further, there should be effective two-way
communication. i.e., downward communication and upward communication.
15. Principle exception or exceptional matters: The principle of exception implies that
the organization should be so designed that only exceptional or complex matters are
referred to executives at higher levels for their decision and routine meters are
decided by the subordinates themselves.
16. Principle of flexibility or continuity: An organization is built not just for today or
tomorrow. It is built to stand and serve for a long time. The principle of flexibility
means that the organization structure should be capable of adapting itself to the
needs or changing circumstances.
17. Principle of efficiency: The principle of efficiency means that the organization
structure formulated should enable the undertaking to function efficiently and achieve
the objectives of the enterprises with minimum cost and effort.
18. Principle of facilitation of leadership: the principle of facilitation of leadership
implies that the organizational structure should be so designed that there is enough
opportunity for the management to give effective leadership to the undertaking.

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19. Principle of flexibility: The principle of flexibility suggests that the organization must
be flexible so that it can easily adapt itself to the changing environment without
changing the basic organisation design.

FORMAL AND INFORMAL ORGANISATION

Introduction:

In the organizational structure of every enterprise, botl1 formal and informal organisations
exist. So, it is necessary for us to have some idea about the formal and informal
organisations existing in every concern.

FORMAL ORGANISATION

MEANING OF FORMAL ORAGANISATION:

In the words of Chester Barnard, " An organisation is formal when the activities of two or
more
persons are consciously co-ordinated towards a common objective".

Features of Formal Organisation:

The main features of formal organisation are:

(a) In a formal organisation, the position, authority, responsibilities, accountability of

each level are clearly defined.
(b) It prescribes the relationships amongst the people working in the organisation.
(c) The formal relations in the organisation arise from the pattern of responsibilities that
are created by the management.
(d) The structure is consciously designed to enable the people of the organisation to
work together for accomplishing the common objectives of the enterprise.
(e) A formal organisation is bound by rules) regulation and procedures.
(f) It is deliberately impersonal.
(g) It is base on ideal relationship arid the common1!yR~thesis of the nature of man.

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Advantages of Formal organisation:

Formal organisation has certain-advantages. They are:

(I)
(II)
(III)

It makes everybody responsible for a given task.

It ensures law -and order in the organisation by prescribing rules, regulations and
procedures.
It contributes to accomplishment of the common objectives of the enterprise.

Drawbacks or Criticisms of Formal Organisation:

Certain criticisms are leveled against forn1al organisation. They are:

(a) Formal Organisation is impersonal. So, emotions and sentiments of individuals are
ignored in determining the interactions, communication and accountability.
(b) Formal Organisation is deliberately designed to achieve the goals of the enterprise.
It does not consider the goals of the individuals.
(c) The rules and regulations prescribed in a formal organisation may be rigid, and so, it
may become difficult to achieve goals.
INFORMAL ORGANISATION

Meaning of Informal Organisation:

In the words of Keith Davis, Informal organisation is a network of personal and social
relations not established or required by the formal organisation but arising spontaneously as
people associate with one another.

Features of Informal Organisation:

The chief features of informal organisation are:

(a) Informal Organisation is not established by any formal authority. It arises from the
personal and social relations amongst the people working in the organisation.
(b) Informal Organisation arises spontaneously, and not by deliberate or conscious
efforts.
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(c) It is influenced by the personal attitudes, emotions, whims, likes and dislikes, etc. of
the people in the organisation.
(d) It is based on rules, regulations and procedures.
(e) The inter-relations amongst the people in an informal organisation cannot be charted
(i.e., cannot be shown in an organisation chart).
Benefits of Informal organisation:

Informal organisation has certain benefits. They are;

(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)

It helps the formal organisation to make a workable system to get the work done.
It assists the formal organisation to become humanistic.
It helps the group members to attain specific personal objectives.
It provides social satisfaction to group members.
It acts as a means by which the workers achieve a sense of security and belonging.
It is best means of employee communication.
It serves as an agency for social control of human behaviour.
It acts as a safety valve for the emotional problems and the frustrations of the
workers of the enterprise.
(i) It lightens the work-load of the formal managers.
(j) Many things which cannot be achieved through formal organisation can be achieved
through informal organisation.
(k) The presence of informal organisation in an enterprise makes the managers plan and
act more carefully.
Drawbacks of Informal Organisation:

Informal organisation is not free from drawbacks. It suffers from certain drawbacks. They
are:

(a) The communication in informal organisation may, son1etirnes, lead to rumours.

(b) Informal organisation may put resistance to changes and innovations.
(c) It may not effectively contribute to the attachment of the objectives of the enterprise.
Conclusion:

Formal organisation alone is not capable of accomplishing the organizational objectives.

It needs the help of informal organisation. Informal organisation supplements the formal
organisation in achieving the organizational objectives. In the words of Chester I.
Barnard, "Informal organisation brings cohesivencss to a formal organisation. It brings to
the members of a formal organisation, a feeling of belonging, of status, of self-respect
and of gregarious satisfaction". In the words of Keith Davis, "An informal organisation is
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'a powerful influence upon productivity and job satisfaction Both formal and informal
system are necessary for group activity, just as two blades are essential to make a pair
of scissors workable".

TYPES OF INTERNAL ORGANISATION

The main types of integral organisation are:

(I) Line, military or scalar organisation.

(II) Functional Organisation.
(III) Line and staff organisation.
(IV)Committee form of organisation.
1. LINE ORGANISATION, SCALAR ORGANISATION
OR HIERARCHICAL ORGANISA TION

Introduction:

Line organisation is; a direct type of internal organisation. It is the oldest and the simplest
form of integral organisation.

Meaning of Line Organisation:

Line organisation is a type of internal organisation in which there are direct vertical
authority relationships (i.e., superior-subordinate relationships), connecting the positions
at each level with those above and those below in the hierarchy. In other word, it is a
form of organisation in which the relationships between the various levels of
management form a hierarchy of authority or chain of command.

Chart showing the line organisation:

The following chart depicts the line organisation:

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Authority
General Manager

Production Manager

Assistant Production manager

Foremen

Supervisors

Workers

Features of Line Organisation

The chief features of line organisation are:

Responsibility

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(I) The line organisation forms a vertical line relationship from the top to the bottom of
the organisation.
(II) There is authority relationship or superior-subordinate relationship in the line
organisation. Each position in the organisation structure has authority over its
subordinate, and is accountable to his superior.
(III) Under this system, authority flows from the top of the structure to its bottom level step
by step through downward delegation of authority, while responsibility flows upward
from the bottom of the structure to the top step by step.
(IV)There is no provision for staff officers (i.e., experts or specialists) to offer advice to
the line officers under this system.
Advantages of Line Organisation:

Line organisation has certain advantages. They are:

1. This system is simple to establish and operate.

2. Under this system, responsibility and authority are clearly defined. Every member of
the organisation knows his exact position, to whom he is responsible and who are
responsible to him. Because of the clear fixation of responsibility, no person can
escape from his liability.
3. There is unity of command and control under this system. That is, a subordinate
receives orders from only one superior and is responsible only to one superior.
4. The unified authority and control implicit in this system ensures better discipline
among the employees.
5. The unification of authority and responsibility present in this system facilitates quick
and prompt decisions.
6. As all the activities relating to one department or division are managed by one
executive, there can be effective co-ordination of activities.
7. Under this system, communication is easy and quick.
8. This system is flexible or elastic, in -the sense that, as each executive has sole
responsibility in his own position and sphere of work, he can easily adjust the
organisation to changing conditions.
9. This system is less expensive, as there are no staff specialist to advise the line
authorities
Disadvantages of Line Organisation:

Line organisation is not free from defects. It suffers from several drawbacks. The main
drawbacks are:

1.

Under this system, as only one executive manages all the activities in his
department, there is no scope for specialization.
2. As only one executive is required to manage all the activities in his department, he is
over-burdened, As a result, he may not be able to direct and control the efforts of his
subordinates, properly.
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3. As all the decisions relating to a department are taken by only one executive, there is
unitary administration. Consequently, the successful functioning of the department
depends on the abilities of the departmental head.
4. Under this system, only one executive controls all the activities of department and
gets undue importance. The importance of the other people in the department is not
recognised. As a result, there may be lack of co-operation and team-spirit.
5. Since only one executive controls all the activities in his department, there is much
scope for nepotism and favouritism.
6. Under this system, the subordinates should follow the orders of their superior without
expressing their opinion on the orders. That means, there" is limited communication.
7. Under this system, the lower level managers lose their initiatives and interest, as they
have to merely carry out the orders and instructions of their superiors.
8. When there are too many levels of management, the process of communication may
become difficult under this system.
9. There is the danger that the line authorities may become autocratic or dictatorial.
10. Line organisation is rigid and inflexible.
Suitability of Line Organisation:

It is true that line organisation suffers from many limitations. But its importance has not
been reduced. It is considered suitable for:

(a)
(b)
(c)
(d)
(e)
(f)

Small concerns, i.e., concern which carry on their operations on a small scale.
Concerns which have a small number of subordinates.
Concerns which are engaged in operations which ate mainly of routine type.
Concerns which has straight and simple methods of machines.
Concerns where activities are performed by automatic machines.
Industries where continuous processes are followed.
2. FUNCTIONAL ORGANISATION

Meaning of Functional Organisation:

Functional organisation is a type of organisation in which the work of the whole

enterprise is divided into a number of specialised functions like production, purchasing,
marketing, office management, personnel relations, etc. and each of these spcci~11ised
functions is entrusted to a functional expert or specialist.

Features of Functional Organisation:

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Functional organisation has certain characteristic features. The main features of
functional organisation are:

(1) Functional organisation is a complex type of organisation when compared to line

organisation and line and staffing organisation.
(2) There is specialization in functional organisation, as the work of the concern as a
whole is divided into different specialised functions like production, purchasing,
marketing, finance, personnel relations, etc. and each specialised function is
entrusted to a functional expert or specialist.
(3) In this type of organisation, the line executive receives instructions not only from his
line boss but also from one or more specialists. For instance, a foreman in the
production department may receive orders and instructions from the superintendent,
who is his line boss, and also from the specialists like the personnel manager,
marketing managers, financial manager, etc.
(4) Under this system, the principle of unity of command is not observed, as a single
worker has to get instructions from more than one specialist.
(5) In this type of organisation, more importance is given to staff specialists or functional
experts. The functional experts are given even some line authority.
(6) In this type of organisation, ~ere are three type of authority relationships, viz., (i) line
authority relationship, (ii) staff authority relationship and (iii) functional authority
relationship.
(7) Under this type, the executive have to perform limited number of operations.
Advantages of Functional Organisation:

Functional organisation has certain advantages. They are:

1.
2.
3.
4.
5.
6.
7.

This system ensures maximum use of the principle of specialisation at every work
point and helps the enterprise to enjoy the benefits of specialisation of functions.
As the workers have to perform only a limited number of functions under this type of
organisation, this system contributes to higher efficiency of the workers.
As there is no scope for one-man control in this form of organisation, this system
ensures co-operation and team-work among the workers.
Under this system, the line officers are freed from the worries of technical problems
faced by the workers, as instruction regarding the technical problems flow to the
workers directly from the specialists.
This system is flexible, in the sense that any change in the organisation can be
introduced without disturbing the whole organisation.
This system is quite suitable for training young specialists.
This system ensures the separation of mental functions (i.e., planning) from manual
functions (i.e., functions at the workshop), and thereby, simplifies managerial
control.

Disadvantage of Functional organisation:

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Functional organisation suffers from some drawbacks. They are:

1. Under this type of organisation,' there are many supervisory staff of equal rank. This
may lead to conflicts among them.
2. As the workers have to work under many bosses under this system, it is difficult to
maintain discipline among the workers.
3. As there are several functional experts in the organisation under this system, there
may be the difficult or co-ordination.
4. The speed of action may be hampered under this system, as the control is divided
among several specialists.
5. As there are several functional experts under this system, the top management may
find it difficult to fix responsibility, when there is unsatisfactory progress.
6. As the workers have to carry out the orders of many posses or specialists, there is no
unity of command under this system.
7. As a large number of specialists, there experts are required to be appointed under
this type organisation, this system is very expensive.
8. It is very difficult to put this system into operation.
9. This system makes relationship more complex.
Suitability of Functional Organisation:

Functional organisation is quite good for division of work at the top. But for the division in
the various departments, this system is not very successful, as there is no clear line of
authority.

Chart showing Functional Organisation

Board of Directors

Manager
Manager

Manager

Manager

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Production
Personnel

Marketing

Finance

Section
Section

Section

Section

Officer I
Officer IV

Officer II

Officer III

3. LINE AND STAFF ORGANISATION

Introduction:

In line organisation, there is unity of command, hut there is no specialization. In functional

organisation, there is extreme specialisation, hut there is no unity of command. To overcome
the defects and to take advantage of the merits of both line organisation and functional
organisation, line and staff organisation has been evolved. Line and staff organisation is the
Usual fonn of organisation found in modern enterprise.

Meaning of Line and Staff Organisation:

Line and staff organisation is a combination of line organisation and functional organisation.
It is a type of organisation in which there arc two sets of officers for administration, viz., (1)
line officers who have the authority and command over the subordinates and are responsible
for the accomplishment of the results, and-(2) staff officers or specialists who render experts
advice to the line officers to help them to discharge their functions efficiently.

Features of Line and Staff Organisation:

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The main features of line and staff organisation are:

1. Line and Staff organisation is a combination of line organisation and functional (i.e., staff)
organisation. Under this system, there are line officers who have authority and command
over the subordinates and are accountable for the tasks entrusted to them, and there are
staff officers or specialists to offer expert advice to the line officers to perform their tasks
efficiently.
2. Line and staff organisation clear distinction between the two aspects of administration.
Viz. planning and execution. The staff personnel prepare the plans and give advice to the
line officials, and line officials execute the plans with help of the departmental personnel.
3. The line and staff organisation is based on the principle of specialization, in the sense
that the staff officers specialize in the planning function and the line officers
specialisation in the execution or doing function of the administration.
Advantage of Line and Staff Organisation:

Line and staff organisation enjoys certain advantages. They are:

1. Specialisation is ensured under the line and staff organisation2 as the staff officers
specialise in the planning function, and the line officers specialise in the execution or
doing function.
2. Line and staff organisation has greater flexibility , in the sense that new specialised
activities can be added to the line activities without disturbing the line procedure.
3. The expert advice and guidance given by the staff officers to the line officers benefits the
entire organisation.
4. As the decisions are made by experts or specialists, there will be sound managerial
decisions under this system.
5. As the staff officers look after t11e detailed analysis of each important managerial
activity, the line officers get a big relief.
6. Under this system, many varieties of responsible jobs are available. That means, more
opportunities are there for the advancement of the workers under this system.
Disadvantage of Line and Staff Organisation:

Line and staff organisation also is not free from drawbacks. It suffers from a number of
limitations. They are:

1. If the pattern of authority relationship between the line officers and the staff officers is not
clearly indicated, there will be considerable confusion in the organisation. Further, there
may be conflicts between the line officers and the staff officers.
2. As the staff officers do not have the authority to put their recommendations into practice,
their advice may be ignored by line officers.
3. As the staff officers are not 'concerned with the execution of the plan, they may not take
proper care before they advice the line officers. That means, this system may encourage
carelessness on the part of the staff officers.
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4. This type of organisation requires the appointment of a large number of staff officers or
experts in addition to the line officers. As a result, this system becomes quite expensive.
5. As the line system is expensive, small concerns cannot afford

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COMPARATIVE STUDY OF LINE ORGANIZATION, FUNCTIONAL ORGANISATION AND

LINE AND STAFF ORGANSIATION

1. Line organisation is a simple form of organisation. But functional organisation and line
and staff organisation are complicated.
2. In the case of the line organisation, there is clear-cut line of authority .m the case of
functional organisation, there is no clear-cut line of authority .In the case of line and staff
organisation, there is clear-cut division of authority for the line officers, but staff officers
do not have any authority.
3. In the case of line organisation, there is clear-cut responsibility .In the case of functional
organisation and line and staff organisation, there is clear-cut responsibility for the line
officers, but staff officers do not have any responsibility.
4. Because of clear-cut line authority, there is unity of command in the case of line
organisation. There is no unity of command in the case of functional organisation, as a
worker has to take instructions from several authorities. There is unity of command in the
case of line and staff organisation because of the existence of the line officers.
5. In the case of line organisation, there is flexibility in the sense that quick decisions and
prompt actions can be taken to adjust to changing situations because of the existence of
full authority. Functional organisation is rigid and inflexible. In the case of line and staff
organisation, flexibility is difficult.
6. Strict discipline is enforced in the case of line organisation. In the case of functional
organisation, enforcement of discipline is difficult because of lack of unity of command. In
the case of line and staff organisation, there is discipline enforced by line officers.
7. In the case of line organisation, there can be prompt and quick decisions. In the case of
functional organisation, there cannot be quick decisions. In the case' of line and staff
organisation, there can be better decisions by the line officers with the help of staff
advice.
8. There is no specialisation in the case of line organisation. There is maximum
specialisation in the case of functional organisation. There is certain amount of
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specialisation in the case of line and staff organisational because of the presence of staff
officers.
9. In the case of line organisation, there is heavy work load on the executive or managers.
There is less work load in the case of functional organisation. The work load is not heavy
in the case of line and staff organisation.
10. There is a good communication system in the case of line organisation. There is
overlapping of communication in the case of functional organisation. There is a good
communication system in the case of line and staff organisation.
11. In the case of line organisation, there can be better co-ordination within the department,
but inter- department co-ordination becomes difficult. In the case of functional
organisation, there is lack of effective co-ordination because of extreme specialisation. In
the case of line and staff organisation, there can be co-ordination through staff officers.
12. Efficiency is lacking in the case of line organisation, as one executive is entrusted with
many activities in which he is not efficient. In the case of functional organisation, there is
greater efficiency, as each executive is entrusted with limited duties. There is maximum
efficiency in the case of line and staff organisation because of the clear-cut duties of the
line officers and the availability of expert advice from the staff officers.
13. Line organisation is suitable for small enterprises, trading as well as industrial. Functional
organisation is suitable for large industrial enterprises. Line and staff organisation is
suitable for medium- sized industrial enterprises.
4. Committee Form of Organisation

A number of persons may come together to take decision, decide a course of action, advise
line officers on some matters, it is a committee form of organisation. It is a method of
collective thinking, corporate judgement and common decision. A committee may be
assigned some managerial functions or some advisory or exploratory service may be
expected from it.

Need for Committee:

The main reason for committee is to secure common judgement on administrative matters.
The committees are set up for the following reasons.
1) The committees provide a forum for exchanging ideas among organisational members.
2) The exchange of ideas among members may generate some suggestions and
recommendations which may be useful for the organisation.
3) There can be proper discussion on present problems and efforts are made to find the
solutions.
4) The committees may also be needed in establishing and developing organisational
policies.
Types of Committee;

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Different committees maybe formed with different ideas and purposes. Some committees
may be only advisory while some may perform managerial functions. There may be following
types of committees:

1) Formal and Informal Committees: If a committees is formed as a part of organisation

structure and is delegated some duties and authority, it is a formal committee. An
informal committee may be formed to tackle some problem. A manager may call some
experts to help him in analyzing a problem and suggesting a suitable solution.
2) Advisory Committee: These are the committees to advice line head on certain issues.
Line officers may refer some problems or issues to a committee foe advice.
3) Line Committee: There may be committees with managerial powers. Instead of giving
work to one person it may be assigned to a number of executives.
Advantages of committee form of organisation:

The committee form of organisation has the following has the following advantage:

1. Pooling of opinions: the members of committees come from different background and
areas or expertise and have different view points and values. When persons with varied
abilities sit together and discuss a problem, various aspects of the case are highlighted
and pros and cons are assessed. The pooled opinion will help in taking a realistic view of
the problems.
2. Better co-ordination: Committee form of organisation brings more co-ordination among
different segments of the organisation when representatives of different departments sit
together, they understand and appreciate the difficulties faced by others. This type of
frank discussions help on fixing the targets of different departments and better coordination is achieved through this type of decision making.
3. Balancing of Views: this type of organisation helps in balancing the views expressed by
different persons. There is a tendency to over emphasise the aspects of one's own
departme!1t by ignoring the inter dependent character of problems of different
departments. A committee helps to bring out an agreed view of the problems by taking
into account divergent views expresses in such meetings.
4. Motivation: The committees consist of managers as well as subordinates. The views of
subordinates are given recognition and importance. It gives them encouragement and
makes them feel as an integral part of decision making process. Such committees boost
the morale of subordinates and motivate them to improve their performance.
5. Dispersion of power: The concentration of power in few persons may lead to misuse of
authority and wrong decisions. By spreading powers among committee members this
problem can be solved.
Weakness of Committee Form of Organisation

This form of organisation suffers from the following weakness:

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1) Delay: The main drawback of committee form of organisation is delay in taking
decisions. A number of persons express their view points in meetings and a lot of time is
taken oh reaching a decisions.
2) Compromise: Generally, efforts are made to reach consensus decisions. The view point
of the majority is taken as a unanimous decision of the committee. The taking of the
majority may be valid but it may not be pursued for being singled out.
3) No Accountability: No individual accountability can be fixed if these decisions are bad.
Every member of the committee tries to defend himself by saying that he suggested a
different solution. If accountability is not fixed ~hen it is the weakness of the organisation.
4) Domination by some members: .Some members try to dominate in the committee
meetings. They try to thrust their view point on -others.
5) Strained Relations: Some times relations among committee members or with others
become strained. If some members take divergent stands on certain issues, some may
feel offended. It affects relations of employees not only on the job but at personal level
also.

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CENTRALISATION

Meaning of Centralisation:

In the words of Henry Fayol, "Everything which goes to increase the importance of the
subordinate's role is decentralisation, everything which goes to reduce it is
centralisation.

Important Features of centralization:

Centralization has the following features:

1) Concentration and reservation of the decision-making power with regards to various

management functions with the top level management.
2) Execution of the decisions taken by the top level management (i.e., performance of
operative functions) by with the middle and lower levels of management.
3) Functioning of the lower levels of management under the direct command, direction and
control of the top level management.
DECENTRALISATION

Meaning of Decentralisation:

According to Henry Fayol, "Everything which goes to increase the importance of the
subordinate's role' is decentralisation, everything which goes to reduce it is centralisation.

Advantages or Decentralisation:

Decentralisation has several advantages. They are:

1. Decentralisation relieves the top executive from routine works, and enables them to
concentrate on more important works.
2. By giving responsibility, authority and initiative to the subordinates, and thereby, widening
the scope of their activities, decentralisation contributes to the development of
executives or management m the organisation.
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3. By giving power, prestige and status to the subordinates, decentralisation increases the
morale of the subordinates and motivates them to put forth their best.
4. By giving authority for decision-making to the lower levels where actions take place,
decentralisation facilities quick decisions.
5. Under decentralisation, the performance of each unit is judged by the management on
the basis of the profitability. This ensures m9f.e, effective control by the management
over each unit.
6. In a decentralised enterprise, each of the different divisions or departments is made a
separate profit centre. This contributes to healthy competition between the different
divisions or departments to improve their performance.
7. In a decentralised enterprise, the division or departments are independent of one
another. This is helpful to the management to experiment with new ideas in one division
or depa11ment without adversely affecting the functioning of the other divisions or
departments.
8. In a decentralised enterprise, the employees have greater opportunity to come into close
contact with one another. This contributes to personal intimate relationship between
them.
9. Decentralisation contributes to the diversification of activities and products.
Disadvantages of Decentralisation:

Decentralisation is, no doubt, good .But it is not free from drawbacks or limitations. The
various
drawbacks or disadvantages of decentralisation are:

1. Decentralisation requires competent managers to run the various departments

independently. But it is difficult to find competent managers.
2. Decentralisation requires the employment of highly-paid managers. The employment of
highly-paid managers will increase the administrative costs of the enterprise.
3. In a decentralised enterprise, every unit may try to maximize its performance at cost of
the other units. This may lead to unhealthy competition among the different units of the
enterprise.
4. In a decentralised enterprise, authority lies dispersed widely throughout the organisation.
Each division or department enjoys complete freedom in the formulation of policies. This
may increase the problem of co-ordination.
5. Decentralisation may result in duplication of functions and wastage of resources.
6. Decentralisation may, sometimes, become a handicap in the case of quick emergency
decisions.
7. Decentralisation is not suitable for the development of specialised services, .such as
personnel, accounting, statistical departments, etc.
8. In a decentralised enterprise, establishment of adequate and effective controls over the
various divisions or departments becomes difficult.
Conclusion:

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Excessive centralisation kills the initiative and enthusiasm of the subordinates. Similarly,
excessive decentralisation reduces the importance of the superiors. Against complete
centralisation is impossibility, as management will be impossible without some measure of
delegation of authority. Similarly, complete decentralisation will amount to virtual
decentralisation. So, too munch of centralisation or too much of decentralisation must not be
res0rted to. A proper balance must be maintained between excessive centralisation and
excessive decentralisation.

Factors Determining the Extent or Degree of Decentralisation:

Decentralisation is not an absolute term. So, the extent or degree of decentralisation varies
from concern to concern. The degree of decentralisation in an enterprise is determined by a
number of factors. They are:

1. The size of the organisation determines the extent of decentralisation. As the size of the
organisation increases. it becomes necessary to decentralise and divide the organisation
into a number of semi-autonomous units. In fact the larger is the size of the organisation)
the greater is the extent of decentralisation.
2. Decentralisation requires a number of able middle level managers to run the various
divisions or departments of the enterprise. That means, the extent of decentralisation is
determined by the availability of competent middle level managers. Where such
managers are not available, decentralisation is not possible.
3. The extent of decentralisation is also determined by the management philosophy (i.e.,
the outlook of the top management). If the top management believes in centralisation of
authority, there will not be much decentralisation. On the other hand, if the top
management believes in greater .autonomy and freedom to the subordinate, the extent
of decentralisation will be great.
4. The nature of the growth and expansion of the business also determines the degree of
decentralisation. If the enterprise has growth through internal expansion, generally, there
will be centralised control, and so, there may not be much decentralisation. On the other
hand if the concern has growth through amalgamation or absorption, generally there will
be greater decentralisation.
5. The physical dispersion of operations of the enterprise also influences the extent of
decentralisation. When the operations of an enterprise are widely dispersed in different
territories, generally, there will be greater decentralisation for better results.
6. Government policies and regulations also determine the extent of decentralisation.
7. The product lines of the enterprise influence the extent of decentralisation. Where the
product lines of the enterprise are quite different, decentralisation is resorted to.
8. Technological changes also may create conditions favourable for decentralisation.
9. The costliness and the significance of the decisions to be taken also influence the extent
of decentralisation. Where the decisions to be taken involve heavy investment or cost,
generally, decentralisation is not thought of. Instead, centralisation is thought of.
Difference between Delegation and Decentralisation:

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Delegation and Decentralisation seem to be identical terms. But they are not identical terms.
They differ from each other in many respects. The main differences between them are:

1. Delegation is a process or act whereas decentralisation is the end result of delegation.

2. Delegation refers to the relati6nship between two individuals, viz., a superior and his
immediate subordinate. But decentralisation refers to the relationship between the top
management and the various divisions departments of the organisation.
3. Delegation is quite essential in the management process, as no manager can get things
done through his subordinates unless he delegates to them the requisite authority for the
performance of the work assigned. But decentralisation is optional (i.e., it mayor not be
resorted to by the management).
4. In the case of delegation, only authority is delegated, and responsibility is not delegated.
But in the case of decentralisation, even the responsibility is delegated (i.e., the superior
is relieved of his responsibility for the work decentralised.
5. In the delegation, the control over the subordinate's performance of the job rests entirely
with the delegator (i.e., the superior who has delegated the authority). On the other hand,
in the case of decentralisation, the top management may exercise the minimum control
in a broad way and delegate even the power to control to the divisions or the
departments concerned.
Organisation Charts

Organisation charts is a diagrammatical presentation of relationships in an enterprise. The

functions and their relationships, the channels of authority and relative authority of different
managers etc. are depicted in an organisational chart.

Types of Organisation charts

There are three ways in which organisation charts can be shown: (i) Vertical (ii) Horizontal
(iii) Circular.

I. Vertical or Top bottom: In this chart major functions are shown at the top and
subordinate functions in successive lower positions. In this chart scalar levels run
horizontally and functions run vertically. The supreme authority is shown at the top
while lowest authority at the bottom.

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II. Horizontal or Left to Right: In this chart highest positions are put on the left side and
those with diminishing authority move towards the right. The organisational levels are
represented by vertical columns, the flow of authority from higher to lower levels being
represented by movement from left to right.

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III. Circular: In circular chart the centre of the circle represents the position of supreme
authority and the functions radiate in all directions from the centre. The higher the
positions of authority the nearer they are to the centre and the lesser the positions of
authority. more distant they are from the centre. The positions of relative equal
importance are located at the same distance from the centre.

Principles of Organisation Charts:

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The top management should faithfully follow the line of authority while dealing with
subordinates. Any attempt to bye pass the organisation chart will make it meaningless.
The chart should define lines of position. The lines of different individuals should be so
defined so that there is no overlapping and no two persons should given the same
position.
The undue concentration of duty at any point should be avoided.
The organisation chart should not be influenced by personalities. Balance of organisation
should be given more importance than the individuals.
The organisation chart should be simple and flexible.
Advantages of Organisation Charts:

An organisation chart is a managerial tool. It helps in specifying authority and

responsibility of every .position. The relationships among different persons are also
established for smooth working of the organisation.
As organisation chart specifically defines authority and responsibility of people in the
enterprise there will be no duplication and overlapping of duties etc.
The organisation chart will help in pointing out the faults, deficiencies, dual command
etc. in the organisation.
The organisation chart acts as an information centre to the new entrants and they can
easily understand different levels of authority and responsibility.
The charts are also helpful in decision making process. They ct as a guide to the
decision makers.
Limitations of Organisation Charts:

The organisation charts suffer from the following drawbacks.

The organisation charts show the relationship of different positions and not the degree of
authority and responsibility. The size of boxes or circles in the chart cannot show the
level of authority etc.
A chart only depicts formal organisational relationship whereas informal organisation is
ignored. Practically informal organisation is an useful as formal organisation. Informal
organisation greatly helps management in knowing the reactions of the people and is an
important channel of communication.
A chart shows organisational position and status at different levels. It gives rise to
superior-inferior feeling among people and it retards the feeling of team work.
Delegation

Delegation is an administrative process of getting things done by others by giving them

responsibility.
All important decisions are taken at top level by Board of Directors.
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The execution is entrusted to Chief Executive.
The Chief Executive assigns to the work to departmental managers who in turn delegate
the authority to their subordinates.
Every superior delegates the authority to subordinates for getting a particular work done.
The process goes to the level-~here actual work is executed.
The person who is made responsible for a particular work is given the requisite authority
for getting it done.
There is a limit up to which a person can supervise the subordinates. When the number
of subordinates increases beyond it then he will have to delegate his powers to others
who perform supervision for him. A manager is not judged by the work he actually
performs on his own but the work he gets done through others.
Definitions:

Allen. "The entrustment or a part of the work, or responsibility and authority to another, and
the creation of accountability for performances".

Characteristics of Delegation:

Delegation has following Characteristics:

1) Delegation takes place when a manager grants some of his powers to subordinates.
2) Delegation occurs only when the person delegating the authority himself as that authority
i.e. a manager must possess what he wants to delegate.
3) Only a part of authority is delegated to subordinates.
4) A manager delegating authority can reduce, enhance or take it back. He exercises full
control over the activities of the subordinates even after delegation.
5) It is only the authority which is delegated and not the responsibility. A manager cannot
abdicate responsibility by delegating authority to subordinates.
Elements of Delegation

Delegation involves three elements:

1) Assignment of responsibility: the first step in delegation is the assignment of work or

duty to the subordinate i.e. delegation of authority.
2) Grant of Authority: the grant authority is the second element of delegation. The
delegator grants authority to the subordinates so that the assigned tack is accomplished.
The delegation of responsibility with authority is meaningless: The subordinates can only
accomplish the work when he has the authority required for completing that task.
Authority is derived from responsibility.
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3) Creation of Accountability: Accountability is the obligation of a subordinate to perform the
duties assigned to accomplish the task assigned to him by the superior. When a work is
assigned and authority is delegated then accountability is the by-product of this process.
The authority is transferred so that a particular work is completed as desired. The
subordinate should be made accountable to only one superior.
Principles of Delegation:

The following are the principles of delegation:

1) Principle of Functional Definition: The related or similar activities should be grouped

together according to enterprise function. When the definition of a position is clear then
delegation of authority becomes simple.
2) Principle of Unity of Command: the basic management principle is that of unity of
command. This principle states that a subordinate should report only single superior.
This will give a sense of personal responsibility.
3) Principle of Delegation by Results Expected: The delegation of authority should be
based on the basis of results expected. The .authority should be sufficient to achieve the
desired results.
4) Principle of Absoluteness of Responsibility: The responsibility of subordinates, once
he has accepted the work, is absolute to his superior. The responsibility of the superiors
does not decrease once he has delegated authority. A person can delegate authority and
not responsibility .He will remain accountable for the work even if it is delegated to the
subordinate. So the responsibility of superior and subordinate remains absolute.
5) Authority Level Principle: The managers delegate authority to subordinates but have
the temptation to make decisions for them. They should allow the subordinates to take
their own decisions as per the authority delegated to them.
Types of delegation:

Delegation may be of the following types:

General or Specific Delegation: when authority is given to perform general managerial

functions like planning. Organising, directing, etc., the subordinate managers perform
these functions and enjoy the authority required to carry out these responsibility. The
chief executive exercises overall control and guides the subordinates from time to time.
The specific delegation may relate to a particular functions or an assigned task. The
authority delegated to the productions manager for carrying out these functions will be
specific delegation.
Formal or Informal Delegation: Formal delegation of authority is the part of
organisational structure. Whenever a task is assigned to a person then the required
authority is also given to him. Informal delegation does not arise due to position but
according to circumstances. A person may undertake a pa11icular task not because he
has been assigned" it but it is necessary to do his normal work.

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Lateral Delegation: When a person is delegated an authority to accomplish a task, he
may need the assistance of a number of persons. It may take time to formally get
assistance from these persons. He may indirectly contact the persons to get their help
for taking up the work by cutting short time of formal delegation. When the authority is
delegated informally it is called lateral delegation.
Reserved Authority and Delegated Authority: A delegator may not like to delegate
every authority to the subordinates. The authority which he keeps with him is called
reserved authority and the authority which is assigned to the subordinates is delegated
authority.
PRE-REQUISITES FOR DELEGATION

1. Willingness to Delegate: The first prerequisite to delegation is the willingness of the

superior to part with his authority .Unless the superior, is psychologically prepared to
leave his authority, delegation will not be effective.
2. Climate of Trust and Confidence: There should be a climate of trust and confidence
among, superiors and subordinates.
3. Faith in subordinates: Sometimes the superiors do not delegate authority with the fear
that subordinates will not be able to handle the job independently. They are not confident
of the qualities of subordinates and do not want to take risks.
4. Fear of Supervisors: There is often a fear among superiors that their subordinates may
not over take them, once they are given higher responsibility. This is a case of interiority
complex. The supervisors may give many logics for delegating authority but this fear is
one of the important causes.
DIFFICULTIES INVOLVED IN DELEGATION OF.AUTHORITY

There may be certain defects in organisational structure which hamper proper delegation of
authority. Some of the difficulties involved in delegation are as such:

1. Over Confidence of Superior: The feeling in a superior that only he can do certain work
effectively than others is the main difficulty in delegation. When a manager is of the
opinion that his subordinates will not be able to make proper decisions then he will
concentrate all powers with him and will not like to delegate his authority.
2. Lack of Confidence in Subordinates: The superior may be of the view that
subordinates are not competent to carry out certain things of their own. He may lack
confidence in his subordinates. Under these circumstances superior will hesitate to
delegate authority.
3. Lack of Ability in Superior: A superior may lack the ability to delegate authority to
subordinates. The manager may not be able to identify the areas where delegation is
required. Lack of Proper Controls: There may not be proper controls in the organisation
which help the manager to keep in touch with performance of subordinates.
4. Lack of Proper Temperament of Superior: The chief executive may be over-cautious
or conservative by nature. An element of risk cannot altogether be ruled out but certain
risk will have to be taken.
5. Inability of Subordinates: The fear of committing mistakes or lack of confidence on the
part of subordinates may also act as a barrier in delegation of authority.
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Importance of Delegation:

Delegation is a universally accepted principle. An industrial undertaking benefits by

delegation in the following ways:

1.
2.
3.
4.
5.

Relieving Top Executives.

Improved Functioning.
Use of Specialists.
Helps in Employee Development.
Helps in Expansion and Diversification.

Factors Influencing Degree of Delegation

A number of factors influence the decision about delegation. Some of these are discussed
as follows:

1.
2.
3.
4.
5.
6.
7.

Company's History.
Availability of Capable Persons.
Importance and Costliness of Decisions.
Size of the Enterprise.
Available Controls.
Types of Enterprise.
Environmental Factors.
SPAN OF MANAGEMENT

In the words of Spriegal, "Span of control means the number of people reporting directly to
an authority. The principle of span of control implies that no single executive should have
more people looking to him for guidance and leadership than he can reasonably be
expected to serve.

The span of supervision is also known as span of control, span of management, span of
responsibility, span of authority and span of direction.

Factors influencing the span of supervision

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There are number of factors that influence or determine the span of supervision in a
particular organisation, the most important of these are as follows:

1. The capacity and ability of the executive: The characteristics and abilities such as
leadership, administrative capabilities; ability to communicate, to judge, to listen, to guide
and inspire, physical vigour, etc. differ from person to person. A person having better
abilities can manage effectively a large number of subordinates as compared to the one
who has lesser capabilities.
2. Competence and training of subordinates: Subordinates who are skilled, efficient,
knowledgeable, trained and competent require less supervision, and therefore, the
supervisor may have a wider span in such cases as compared to inexperienced and
untrained subordinates who requires greater supervision.
3. Nature of Work: Nature and importance of work to be supervised is another factor that
influences the span of supervision. The work involving routine, repetitive, unskilled and
standardized operations will not call much attention and time on the part of the
supervisor.
4. Time available for supervision: The capacity of a person to supervise and control a
large number of persons is also limited on account of time available at his disposal to
supervise them. The span of control would be generally narrow at the higher level of
management because top manager have to spend their major time on planning,
organising, directing and controlling and the time available at their disposal for
supervision will be less.
5. Degree of Decentralisation and Extent of Delegation: If a manager clearly delegates
authority to undertake a well-defined task, a well trained subordinate can do it with a
minimum of supervisor's time and attention.
6. Effectiveness of communication system: Faulty communication puts a heavy burden
on manager's time and reduces the span of control.
7. Quality of Planning: Effective planning helps to reduce frequent calls on the superior for
explanation, instructions and guidance and thereby saves in time available at the
disposal of the superior enabling him to have a wider span.
8. Degree of Physical Dispersion: If all persons to be supervised are located at the same
place and within the direct supervision of the manager, he can supervise relatively more
people as compared to the one who has to supervise people located at different places.
9. Assistance of Experts: the span of supervision may be wide where the services of
experts are available to the subordinate on various aspects of work. In case such
services are not provided in the organisation, the supervisor has to spend a lot of time in
providing assistance to the workers himself and a such the span of control would be
narrow.
Type of span of supervision

Broadly speaking there are two types, of span of supervision:

(a)Wider span of supervision (b) Narrow span of supervision.

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(a) Wider Span of Supervision: In this type of span, the supervisor controls and guides the
activities of subordinates directly under his control. Wider span or supervision is
fanoured where workers are competent and trained.
(b) Narrow Span of Supervision: under this type of supervision, there are many levels and
more supervisors are required to perform the job of guidance and control for different
activities. It increases the efficiency of supervision but the cost of supervision is very high
as compared to wider span of supervision. This type of supervision is favoured at higher
levels of management where all the other activities of planning, organising, directing, and
controlling are also to be performed. But more the levels of supervision, more difficult is
the task of coordinating the activities of various groups of people.
MANAGEMENT BY OBJECTIVES, (M.B.O)

Management by objectives is a process in which the manager and his subordinates jointly
agree upon a set of activities, targets and goal, keeping in view the overall objectives of the
organisation. and use these as the criteria for evaluating the performance of the
subordinates.

Features of management by Objectives:

1. Management by objectives is an approach and philosophy to-management, and is not

just a technique of management.
2. The basic emphasis of management by objectives is on setting of objectives or goals of
an organisation.
3. Management by objectives focuses on the integration of goals It relates the long-range
goals of the organisation with the short-range goals, overall systems goals of the
enterprise with the goals of the society.
4. MBO Places emphasis not only on the settings of goals but also on their achievement
(i.e., effective performance and tangible results).
5. The technique of MBO recognises the fact that the goals setting and achievement
process is a co-operative and participative endeavour of the superiors and subordinates.
6. The objectives enshrined in management by objectives provide guidelines for
appropriate systems, procedures, delegation of authority, allocation of resources, etc.
7. Management by objectives provides for substantial transfer of authority from a small
group of top managers to the large group of subordinate managers.
8. Periodic review of performance is an essential feature of management by objectives. The
review of performance is done regularly, generally, once in a year.
9. The philosophy of MBO views organisation as a dynamic entity.
10. Under the technique of MBO, consultation replaces exercise of authority, interaction and
communication replaces isolation, and self-control by subordinates replaces imposed
control by superiors.
Objectives of Management by objectives:

To relate individual goals to organisational goals.

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To clarify the jobs to be done aI1d the results expected to be accomplished.

To evaluate the performance 'of the subordinates.
To enhance the communication between the superiors and the subordinates.
To stimulate the subordinates motivation.
To serve as a device for integration.
To serve as a device for organisational control.

Steps involved in Management by objectives:

1.
2.
3.
4.
5.

Defining the overall specific corporate objectives.

Setting of sub-goals for each unit.
Setting performance targets for each individual manager.
Matching of goals and resources.
Evaluation or appraisal of performance, and re-appraisal

Benefits of Management by objectives:

1. It increases the participation and involvement of the subordinates in decision-making.

2. It provides the subordinates with an opportunity to be self-motivating by setting their
objectives.
3. As the managers at all levels are involved in setting their objectives, they are more
committed to the goals fixes. That means, the chance of accomplishment of objectives
are much brighter.
4. Under the MBO approach, the managers at all levels become more aware of the overall
objectives. This helps them in understanding their role in the total organisation.
5. MBO implies that the objectives of each department and each individual are consistent
with the overall objectives of the organisation. This ensures the integration of individual
goals with the goals of the organisation.
Limitations of Management by objectives:

1. The MBO approach is too pressure-oriented and time consuming.

2. Participation of the subordinates in goal-setting is the corner-stone of MBO. But this may
not be feasible in every organisation.
3. MBO requires the setting of verifiable goals. But it is difficult to set verifiable goals.
4. MBO will be successful only if the objectives are set in measurable and verifiable terms.
If the objectives cannot be set in quantitative terms, it will be difficult to judge the
performance of the individuals.
5. The 1vIBO approach over-emphasises quantification. Therefore, it is likely to overlook
the qualitative aspects of the performance of the organisation.
Conclusion:

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It is true that MBO is subject to certain limitations. But if it is implemented sincerely and
seriously, it will yield good dividends.

Supervisory Management

1. Supervisory management level is above the operatives and below the middle
management in an organization.
2. This level can be classified into three categories, particularly in a larged-sized
organization: senior supervisor, intermediate supervisors, and front line supervisors.
3. Supervisory Management is concerned with efficiency in using resources of the
organization.
4. It is an executor of policies and procedures making a series of decisions with welldefined and specified premises.
5. Generally a supervisor is .called a marginal man is the organization. He concerned with
explaining the views of management to workers and the views of workers to
management.
6. Because of this reason, the job of a supervisor becomes more complex than other levels
of management. Management treats him the man of workers which workers treat him the
man of management.
A supervisor specifically performs the following functions.

1. Planning the activities of his section, classifying and assigning jobs to workers.
2. Guiding workers about work procedure
3. Managing and arranging necessary materials, toots, etc., for the workers
4. Ensuring maintenance of machineries, etc.
5. Providing on the: job training to workers
6. Supervision and control of functioning of workers
7. Solving problems of workers relating to jobs
8. Communicating the problems of workers, which are not solved at his level
9. Providing feedback., to management about the nature of work environment in his section
10. Maintaining discipline among workers, developing in them right type of approach, and
maintaining good human relations.
Various functions performed by different levels of management suggest that managers at
every level have to perform all five functions. However, the relative importance of a function
may differ from level to level. For example) planning is the most crucial function at the top
level while routine and direct control becomes most important at supervisor level.

Effective Supervision

1. Leadership: Leadership is a process of influencing the activities of an individual or

group for goal -achievement in a given situation. Through this process, individual or
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2.

3.

4.

5.

6.

group contributes willingly to the goal -achievement. Effective supervisors perform

functions related to leadership instead of doing the same work as the subordinates do.
This style of supervision leads to higher morale and more productivity. The leadership
process will be described later in detail.
Closeness of Supervision: The degree of closeness of supervision may vary from
highly close -supervision to highly free-.supervision. Successful supervisors follow the
style of less close supervision. A closed supervision is defined as frequently checking up
on .subordination, providing them frequent and detailed instruction, and limiting their
freedom to perform the work in their own way. Normally close supervisor causes low
morale and motivation because it blocks the gratification of some strongly felt needs of
subordinates. Less close supervision, on the other hand produces motivation and
morale, which are essential for high productivity.
Employee -orientation or Human Relations: Taking into account both employees and
work being performed by them, there can be two style employee-oriented and
production-oriented. The employee-oriented style stresses the relationship aspects .of
employee's jobs. It emphasizes that every individual is, important and takes interest in
every one, accepting their individuality and. personal need. Production-oriented style
emphasizes production and .technical aspects of the jobs and employees are taken as
tools for accomplishing the jobs. Effective supervisors follow employee-oriented style and
take more personal interest in their men, understand their problems, and punish them
less frequently when mistakes occur.
Group cohesiveness: Effective supervision relates to group cohesiveness. Group
cohesiveness is characterized by the group situation in which all members work together
for a common goal, or where every one is ready to take responsibility for group chores.
Groups with high cohesiveness produce more as compared to groups with less
cohesiveness.
Delegation: Though delegation of authority is applicable to all types of superiorsubordinate relationships and all levels of management, it becomes important at the
supervision level because supervision management is considered to be the last level for
delegation of authority.
Other Factors: There are certain other factors, besides the above, which go to make the
supervision effective. Fro example, supervisors who can influence their superiors and
satisfy the needs of their Subordinates for promotion recognition, and work-center
benefits are considered better by their subordinates. They inspire higher morale in work
groups and more satisfaction to the employees. They also perform functions like on-thejob training, informing their subordinates their duties and relevant organization matters,
and present model behavior for their subordinates

FACTORS INFLUENCING DEGREE OF DELEGATION

1. Company' s History: The history of the company influences the degree of delegation A
company grow-n over a period of time has a tendency to centralize powers. When a
concern is small then most of the decision-making is done by the owner. With the growth
of business" the tendency to centralize powers remains. On the -other hand if a concern
is the outcome of a merger, amalgamation or combination, there may be a great amount
of decentralization.
2. Availability of Capable Persons: The element of delegation is linked to the availability
of subordinate managers. If sufficient persons are available who can take responsibility
then delegation can easily be done. Generally, managers complain that sufficient
subordinate managers are not available who can be assigned important, duties. Unless
subordinates are delegated the powers they win not learn the art of management.

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3. Importance and Costliness of Decision: The importance and costliness of decisions
greatly influences the degree of delegation. Generally speaking, the costlier and more
important the decision, the greater the probability of its being made at the upper level of
the managerial hierarchy. Decision-making also requires various facts and figures about
the issue. A manager will ensure that he gets all required information for deciding the
issue. This type of information is easily available at higher levels of management.
4. Size of the Enterprise: The ex-tent of delegation is linked to the size of the enterprise.
In a large unit more decision making is needed at various levels of management. The
problems of communication and co-ordination often arise in such units. If decision
making is closer to the place of action it will save time, paper work is reduced,
misunderstandings in con-1InUllication can largely be eliminated.
5. Available controls: A manager delegating authority want to be sure that it is used in
accordance with his intentions and the general objectives of the! organization. In order to
achieve this there must be control devices. Generally, managers hesitate to delegate due
to the reason that they do not know how to control.
6. Types of enterprise: The degree of delegation of authority may also be influenced by
the type of enterprise. If the enterprise is in an industry which is rapidly expanding, as in
the electronic field, top. management will have to delegate otherwise it will be over
burdened
with
many
decisions
If the enterprise operates in a static industry then all decision-making is done at the
central level In cage, of banking and insurance the growth is slow and decision-making
remains at the top.
7. Environmental factors: In addition to internal factors delegation may be influenced by
internal factors too. These factors may be natural unions, government control over
business and tax policies. Some large concerns have to deal with workers unions at
national level. All the negotiations are done and decisions are taken at national level. In
such a situation the things are decided at head quarter level and are applicable at all
levels.
STAFFING

Meaning:

Staffing basically involves matching jobs and individuals. This may require functions like
manpower planning, recruitment, selection, training, development, performance appraisal,
transfers, promotions etc.

Nature of Staffing:

Staffing has the following important features:

1. Staffing is a basic function of management.

2. It is concerned with human resources management in the organization.

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3. Staffing function is performed continuously. Every manager has to guide and train
employees and also evaluate their performance on a continuous basis.
4. The main purpose of this function is to make optimum utilization of human resources and
also to provide proper satisfaction to employees.
5. Staffing is performed by all managers. In big concerns there is a separate personnel
department to deal with this function, but even here this department advises line
managers regarding different aspect of human resources.
6. Since staffing deals with human beings who have their own needs, emotions and
aspirations this function is different from other managerial functions.
Process of Staffing

The purpose of staffing is to employ most suitable and competent persons as per the
requirements of the organization. With this aim in view- the following staff process is
followed:
1. Estimating Man power Need: The first thing in staffing process is to estimate
manpower needs. These needs are influenced by the type and size of the organization.
Total manpower requirements are properly assessed. It is also ascertained at what time
different persons are needed.
2. Recruitment and Selection of Staff: Recruitment is the process of searching
prospective employees and pursuading them to apply in the organization. Selection is
the procedure of spotting most suitable candidates out of those who are interested to get
employment in the enterprise. The purpose of recruitment and selection is to employing
right man for the right job. There are internal as well as external sources of recruitment.
3. Training and Development: Training is meant to improve the skill and knowledge of
employees. It is beneficial to both employer and employees. A well trained worker
improves his efficiency and productivity. Suitable training methods should be devised for
different categories of employees. A formal training will avoid the risk of trial and error
and will also minimize the cost and wastage involved in training.
Development refers to the training of managerial staff. Development helps the growth of
an individual in all respects through development managerial staff does not increase its
capabilities to perform the present work but also enhances their ability to meet
challenges in future.
4. Promotion and Transfer: Employees are promoted to higher rank on the basis of their
merit and seniority .Staffing also involves transfer of persons form one job to another,
from one place to another on the basis of their ability, competence and ability.
5. Remuneration: Remuneration is paid for the services of labour. Employee motivation
mainly depends upon the wage and salary structure prevalent in an organization.
Employees should be paid fair remuneration so that they feel encouraged to contribute
maximum in their efforts. The wages are normally paid on the basis of time spent or
piece rate.
6. Performances Appraisal: After selecting and training an employer for a particular job,
management would like to see how he performs high work. Performance appraisal is a
systematic evaluation of employees contribution to the organization in performance of
their .jobs. This evaluation is normally done by immediate superior in the organization
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and it is reviewed in turn by his superior. Not only the qualities but deficiencies are also
evaluated to improve the performance of employees.

Need and Importance of Staffing:

1) Employing suitable persons: The employment of suitable persons is essential for

every enterprise. The procedure of recruitment, tests for selection and methods of
training are decided by the staffing team. A properly laid down scheme will ensure the
employment of right persons.
2) Keep pace With New Development: New development are taking place everyday. A
business will have to keep pace with new changes. This will be possible only if
competent persons are employed who can adjust as per the new situation.
3) Manpower Development: Manpower planning will have to be done in advance. The
future requirements of personnel will be estimated quite in advance. The new staff will be
recruited people will be prepared for taking up higher responsibility jobs, all this will be
possible only with a well planned staffing function.
4) Optimum Utilization of Manpower: the cost of recruiting, selecting and training the staff
is very high. The remuneration is also paid at high rates. The manpower should be
utilized to the maximum capacity .It will help in controlling cost also.
5) Ensuring Job Satisfaction: The staffing function will ensure job satisfaction to
employees. The executive should be involved in decision-making process. They should
also be suitably rewarded for their contribution to the organization a good staffing
function will devise methods which will ensure job satisfaction to everyone.

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Recruitment

Meaning:

Recruitment is the process of searching for prospective employees and stimulating them to
apply for jobs in the organization. When more persons apply for job then there will be a
scope for recruiting better persons. The job-seekers too on the other hand, are in search of
organizations offering them employment. Recruitment is a linkage activity bringing together
those with jobs and those seeking jobs.

In the words of Yorder, "Recruitment is a process to discover the sources of manpower to

meet the requirements of the staffing schedule and to employ effective measures for
attracting that manpower in adequate numbers to facilitate effective selection of an efficient
working force." Recruitment is the process which promotes people to offer for selection in
an organization. This involves locating sources of manpower to meet job requirements. In
his words, "it is a process of searching for prospective employees and stimulating and
encouraging them to apply for job in an organization. It is often termed positive in that it
stimulates people to apply for jobs to increase the hiring ratio, i.e., the number of applicants
for a job."

Process of Recruitment:

Recruitment process passes thought the following stages:

1) Finding out the sources where suitable person will be recruited. Ex.: colleges
2) Developing the techniques to attract the desired candidates. The goodwill of an
organization in the market may be one technique. The publicity about the company
being a good employer may also help in stimulating candidates to apply.
3) Employing of techniques to attract candidates. There may be offers of attractive
salaries, proper facilities for development, etc.
4) The next stage in this process is to stimulate as many candidates as possible and ask
them to apply for jobs. In order to increase the selection ratio, there is a need to attract
more candidates.
Factors Affecting Recruitment:

1. Size of the organization: The number of persons to be recruited will depend upon the
size of the organization. A big enterprise needs more persons at regular intervals while a
small undertaking employs sometimes only. A big business house will always be in touch
with sources of supply and shall try to attract more and more persons for making a

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proper selection. It can afford to spend more amounts in locating prospective candidates.
So the size of an enterprise will influence the process of recruitment.
2. Employment Conditions: The employment conditions in a country greatly influence
recruitment process. In under-developed countries employment opportunities are limited
and there is no dearth of prospective candidates.
3. Salary structure and working conditions: The wages offered and working conditions
prevailing in an enterprise greatly influence the supply of personnel. If higher wages are
paid as compared to similar concerns, then the organization will not face any difficulty in
making recruitments. A concern offering low wages will always face the problem of labour
turnover.
4. Rate of Growth: The growth rate of an enterprise also influences recruitment process.
An expanding concern will require regular employment of new employees. There will also
be promotions of existing employees to higher jobs necessitating the filling up of those
vacancies: A stagnant enterprise will recruit persons only when present incumbent
vacates his position on retirement, etc.
Sources of Recruitment:
The finding out where suitable candidates are available and informing them about the
openings in the organization is the most important aspect of recruitment process. The
candidates may be available inside 1he organization as well outsider it. Recruitment
sources can be described as: internal and external sources.
o Transfers
o Promotions
o Present employees

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A. Internal Sources:

Internal source is one of the important sources of recruitment the employees already
working in the organization may be more suitable for higher jobs than those recruited from
1. Advertisement
2. Employment Exchanges
3. Education Institutions
4. Unsolicited Applicants
5. Professional Organizations
6. Data Banks
7. Similar Organizations
8. Casual Callers
9. Labour Contractors
10. 10. Trade Unions

outside. The present employees may help in the recruitment of new persons also internal
sources are discussed as follows:
1. Transfers: Transfer involves shifting of persons from present jobs to other similar
places. These don't involve any change in rank, responsibility and prestige. The
numbers of persons don't increase with transfer but vacant posts may be attended to.
2. Promotions: Promotions refers to shifting of persons to positions carrying better
prestige, higher responsibilities and more salaries. The higher positions falling vacant
may be filled up from within the organization. A promotion doesn't increase the number
of persons in the organization. A person going to get a higher position will vacate his
present position. Promotion avenues motivate employees to improve their performance
so that they get promotions to higher position.

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3. Present Employees: The present employees of an enterprise may be informed about
likely vacant position. The employees recommend their relations or persons intimately
known to them. Management is relieved of botheration for looking out prospective
candidates. The persons recommended by the employees will be suitable for the job
because they know the needs & requirement of various positions. The existing
employees take full responsibility for those recommended by them and try to ensure
their proper behavior and performance.
This method of recruiting employees is suitable for lower position only. It may create
nepotism and favoritism. The workers may be employees on the basis of their
recommendations and not suitability.

Merits of Internal Sources:

1. Improves Morale: The internal sources of recruitment will boost morale of employees.
They are assured of higher positions whenever vacancies arise. Existing employees are
given preferences in promotions. Outsiders are employed only when suitable candidates
are not available from within.
2. Proper Evaluation: The management is in a better position to evaluate the performance
of existing employees before considering them for higher positions. An outside employed
just on the basis of an interview may not prove suitable later on. The service records of
existing employees will be a guide to study their suitability for ensuring vacancies.
3. Economical: The method of internal recruitment is economical also. The cost incurred in
selecting a person is saved. Moreover, internal candidates do not required any training
since they are well acquainted with various jobs in the organization.
4. Promotes Loyalty: Internal sources of recruitment promote loyalty among employees.
They are preferred to consider at the time of filling up higher positions. They will feel a
part and parcel of the organization and will always try to promote its interests.
Demerits of Internal Sources:

1) Limited Options: The recruitment of only internal candidates restricts the choice of
management. The present employees may not be suitable to take up position of higher
responsibility but there will be no option. A person will be selected only out of the
available candidates. The outside candidates, even though they may be suitable, will not
get a chance to show their talent.
Internal sources may dry up in the meantime and filling up of higher position will bbecome a problem.
2) Lack of Originality: The present employees may not be able to bring new ideas. They
will be accustomed to carry on things in the same old ways. New persons will bring fresh
thinking and new methods may be tried.

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B. External Sources:

Every enterprise has to use external sources for recruitment to higher positions when
existing employees are not suitable. More person are needed when expansion are
undertaken. External methods are discussed as follows.

1. Advertisement: Advertisement is the best method of recruiting persons for higher and
experienced jobs. The advertisements are given in local or national press, trade or
professional journals. The requirements of jobs are given in the advertisement. The
prospective candidates evaluate themselves against the requirement of jobs before
sending their applications. Management gets a wider range of candidates for selection.
The flood of applications may create difficulties in the process.
2. Employment Exchanges: Employment Exchanges run by the government are also a
good source of recruitment. Unemployed persons get themselves registered with these
exchanges. The vacancies may be notified with the exchanges, whenever there is a
need. The exchange supplies a list of candidates fulfilling required qualification.
Exchanges are a suitable source of recruitment for filling unskilled, semi-skilled, skilled
and operative posts. The job seekers and job- givers are brought into contact by the
employment exchanges.
Private agencies also help in recruiting qualified and experienced person. These
agencies remain in contact with employees and persons seeking change in jobs for
higher posts.

3) Education Institutions: The jobs in trade and industry are becoming technical and
complex. These jobs require certain amount of educational and technical qualifications.
The employers maintain a close liaison with universities and technical institutions. The
students are spotted during the course of their studies. Junior level, executives or
managerial may be recruited in this way.
4) Unsolicited Applicants: Persons in search of employment may contact employers
through telephone, by post or in person. Generally, employers with good reputation get
unsolicited applications. If an opening is there or is likely to be there then these persons
are considered for such jobs. Personnel department may maintain a record of
unsolicited applications. When jobs suitable for these persons are available these
persons are available these are considered for employment.
5) Casual Callers: Management may appoint persons who casually call on them for
meeting short-term demands. This will avoid following a regular procedure of selection.
These persons are appointed for short periods only. They need not be paid
retrenchment or layoff allowance. This method of recruitment is economical because
management does not incur a liability in pensions, insurance and fringe benefits.
6) Labour Contractors: It is quite common to engage contractors for the supply of labour.
When workers are required for short period and are hired without going through the full
procedure of selection etc.., contractors maintain regular contracts with works at their

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places and also bring them to the cities at their own expense. The persons hired under
this system are generally unskilled workers.
7) Labour Unions: Labour unions are one of the sources of external recruitment. The job
seekers are required to register with labour unions, & the labour unions are require to
supply the names of persons for filing the vacancies. This method may encourage good
co-operation between business firms and labour unions, active participation of persons
in labour unions, the development of leadership qualities in workers, etc.,
8) Consulting Agencies: Consulting agencies are one of the important sources of
recruitment, especially for big companies. Consulting agencies are speaclised agencies
which recruit people on behalf of their clients. They invite application for jobs specified
by their clients from job seekers through advertisements, screen the application,
interview the candidates and select the suitable candidate. They do these services for
their clients for some Fees.
9) Educational Institutions: Universities, Colleges & Management institute are also one
of the sources of recruitment of personnel, particularly for the posts of Scientists,
Engineers & Management specialist. They have there own employment bureaus to help
business organizations in recruiting the students for various jobs.
10) Waiting List: Waiting list maintained by a business firm is one of the sources of
recruitment. Many business firms prepare waiting list of candidates who have already
been interviewed and considered suitable for employment, but could not be appointed
for lack of vacancies. When vacancies arise, the candidates in the waiting list are
appointed.
11) Present Employees: Present Employees are also one of the sources of recruitment of
personnel. The present employees of the concern are asked by the management to
recommend suitable persons for employment in the concern.
12) Business Friends: Business Friends are one of the sources of recruitment. Business
Friends are, some times, requested by a concern to recommend suitable persons for
employment.
13) Re-employment of former employees how have been laid of or how have resigned
for personal reasons: These people require less induction training, as they know the
policies and the activities of the concern.
14) Banks and Other Financial Institutions: Banks and Other Financial Institutions are
one of the sources of recruitment. These financial institutions are asked by there
customers, namely, Business Houses, to recommend suitable personnel of
employment.
15) Suppliers of Goods: Suppliers of goods are one of the important sources of
recruitment. They are asked by their customers, namely business houses, to
recommend suitable persons for employment.
16) Leasing: Leasing is one of the sources of recruitment, particularly for public sector
undertakings. It is resorted to for securing managerial personnel at higher levels from
civil services, accounts services and defense services, for specific periods.
Merits of External Sources:

1) Availability of Suitable Persons: Internal sources, sometimes, may not be able to

supply suitable persons from within. External sources will give a wide choice for
selection to the management. A larger number of applicants may be willing to join the
organization. They will also be suitable as per the requirements of skill, training and
education.
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2) Brings New Ideas: The selection of persons from outside sources will have the benefit
of new ideas. The persons having experience in other concerns will be able to suggest
new things and methods. This will keep the organization in a competitive position. The
present employees may not be able to infuse new thinking because their ways of
thinking will remain the same.
3) Economical: This method of recruitment may prove economical because new
employees may not require much training for the jobs.
Demerits of External Sources:

1) Demoralization: When new persons from outside join the organization then present
employees feel demoralized because these positions should have gone to them. There
will be a heart burning among old employees. Some employees may even leave the
enterprise to find out better avenues in other concerns.
2) Lack of Co-operation: The old staff may not co-operate with the new employees
because they feel that their right has been snatched away by them. This problem will be
acute especially when persons for higher positions are recruited from outside.
3) Expensive: The process of recruiting from outside is very expensive. It starts with giving
costly advertisements in the media and then arranging written tests and conducting
interviews. In spite of all this if suitable persons are not available among the applicants
then the whole process will have to be repeated.
4) Problem of Maladjustment: There may be a possibility that the new entrants have not
been able to adjust in the new environment. They may not temperamentally adjust with
the new persons. In such cases either the persons may leave themselves or
management may have to replace them. These things have adverse effect on the
working of the organization.
Difference between internal and external sources of recruitment

Bases
of Internal Sources
Difference

External Sources

Meaning

Recruitment is form within the

organization.

It is the recruitment from

outside employees.

Bases

It is generally based on
seniority cum merit.

It is strictly based on merit

and qualifications.

Time involved

It is less time consuming.

It is a time consuming
exercise.

Cost

It is a cheap source of
recruitment.

It is an expensive source of
recruitment. It involves time,
expense and resources.

Reference

No reference of the employees Since enterprise does not

is needed since all his records know about person,
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are available with the concern.

Choice

references about previous

work, conduct and character
are needed.

There is a limited choice from There is a wide choice from

among the present employees. a large number of applicants.

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Selection

Meaning:

Selection is a process of choosing duly qualified persons according to the requirement of

the job. In recruitment an effort is to attract more and more applicants while in selection the
effort is to eliminate unsuitable persons. The number of applicants will be much more than
the positions vacant. It becomes important to scruitinise applications properly and cal for
interview only those persons who are suitable for jobs. The selection of a right person will
improve will quantity and quality of performance.

Definition:

Dabyoder "Selection is the process in which candidates for employment are divided in two
classes, those who are to be offered employment and those who are not."

Selection Process:

The selection procedure consists of a series of methods or steps or stages by which

additional Information is secured about an applicant. At cash stage facts may come to light
which may lead to the rejection of an applicant. Selection procedure is required to cross
before he is finally selected. The following steps are generally followed in a selection
process:
1)
2)
3)
4)
5)
6)
7)
8)
9)

Receipt and scrutiny of applications.

Preliminary interview.
Blank application form.
Tests.
Interviews.
Checking references.
Preliminary and final selection.
Physical examination.
Placement and orientation.

1) Receipt and Scrutiny of Applications: The receipt and scruting of applications is the
first step in the process of selection. A receptionist in the personnel department gives
information about new opening to the visitors and receives their application.
The scrutiny of applications is essential to take out those applications which do not
fulfill the requirements of posts. Some people send applications even when they do not
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possess the required experience and qualifications. These applicants, if called for
preliminary interview, will waste their own time and that of the company. These
applications should out rightly be rejected and information should be sent to the
applicants in this regard.
2) Preliminary Interview: Preliminary interview is the first occasion when applicants
come into contact with company officials. This interview is to see whether applicants
are suitable for the company both mentally and physically. The candidates are asked
questions regarding his education qualifications, experience, age, hobbies, etc.
Since rejection rate is high at preliminary interview should be courteous, kind, receptive
and informal. He should give a good account of the company so that the applicant takes
a good view of it and hopes to apply again whenever new opening comes.
The applicants selected at preliminary interview are given blank application forms for
supplying detailed information.

3) Blank Application Form: A blank application form is a widely accepted device for
getting information from a prospective applicant. This is away of getting written
information about candidate's particulars in his own handwriting. It enables the
personnel department to draw tentative inferences about the applicant's suitability for
employment. The information collected in the application form may also be circulated to
various members of selection committee for enabling them to make a view about
different applicants.
The information collected in blank application relates to the following particulars;
i. Bio-data: Bio-data includes name of the applicant, father's name, date of birth,
place of birth, permanent adders, height, weight, identification mark, marital status,
physical disability, etc.
ii. Education qualifications: This part of educational qualifications relates to
education acquired, institutions attended, percentage of marks, distinctions
achieved, technical education acquired, subjects studied, areas of specialization.
iii. Work experience: Application blank also enquires about previous experience,
similar or other jobs held, nature of duties, salaries received, name of previous
employers, reasons for leaving the present job.
iv. Curricular activities: The information about participation in extracurricular activities
like N.S.S., N.C.C., debates and declamations, sports" etc is also received in blank
application form.
v. References: The applicant is also asked to give some references from where an
enquiry may be made about his nature and work. The references are normally the
persons with whom the applicant has worked but are hot related to him.
vi. Salary demanded: The salary demanded by the applicant is also given in the
application blank.
An attempt is made to elicit maximum information in application blank. The
information asked for should be relevant and specific. It should have relevance to
the post he has applied for. The information collected should be brief and to the
point. Questions requiring essay-type answer should be avoided..

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TESTS
4) Tests: The use of tests for making selection is the most controversial step. Some
persons are of the view that tests do not serve any purpose and do not improve
selection process. On the other; "hand, some persons are of the view that tests give a
valid judgment about the traits of applicants. Within these views, the use of tests is
becoming important these should not be used just for the sake of use. The selection of
appropriate tests may give good results and help in appointing suitable persons. The
worth of test will be judged from its ability to reject unsuitable persons and help in
selecting appropriate persons.
Characteristics of Good Test:

A good test has the following characteristics:

1) Reliability: a test should be reliable. Reliability of test means that it gives same results
when applied to a person at different time. A test will not be reliable if it gives varied
results when applied to the same person. For example, an intelligence test is applied to
a person on Sunday and he gets a score of 100. The test is applied again to the same
person on Wednesday and it given a score of 120. This test will not be called reliable
because it has given varied results.
2) Objectivity: the test should be similarly applicable to different persons. The results of
the test should not have a bias in favour of persons with particular education or
technical background. It should be so constructed that two or more persons can score
the responses to items, questions or tasks in the same way.
3) Consistency: a good test should give consistent results when carried out on different
persons at different times. For example, a test shows x superior to y when it is applied
on a particular day. If the test is repeated on the same persons on a different day it
should again show the superiority of X over Y. If this is so the test will be consistent.
4) Standardization: a good test must be standardized. It may be administered under
standard conditions to a group of persons who are representatives of the individual for
whom it is intended. The methods and procedures for conducting and measuring results
should also be standardized.
Type of test:
A variety of tests may be used to get results at different times. Psychologists have devised a
number of tests which are frequently used. Some of the psychological tests are as follows:
1. Proficiency tests
2. Aptitude tests

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A. Proficiency tests: These tests measure the skill or training which the applicant
possesses at the time of testing. The claims of the applicants about his ability to perform
a particular job are tested on actual work conditions in the factory .If the applicant is a
candidate for the post of a foreman, he may be asked to explain the working of different
machines. An applicant for the post of a sales executive may be asked to explain a
procedure he will follow for promoting the sales of a product. These tests may be
conducted in writing, orally or on the job.
1. Dexterity Tests: These tests are designed to find out how efficiently and swiftly an
applicant uses his hands, fingers, eyes or other parts of body. These tests are useful
where work requires the swift movement of parts of body.
B. Aptitude tests: Such tests measure the skill and ability which a person may develop
later on. These measure the talent / ability of a candidate to learn new job or skill. The
aptitude for learning and bent of mind is assessed in these tests.
1) Intelligence Test: These tests measure the overall intellectual activity or
intelligence quotient (I.Q.) of the applicants. We can know about the capability of a
person in dealing with new problems. Applicant's word fluency, memory, reasoning
are also determined with these tests.
Intelligence tests, generally, consist of a long list of questions, problem solving
questions, reasoning, multiple-choice questions which are to be answered in a
given time. The score of persons is judged against pre-decided scales. These tests
are very useful for selecting persons for jobs requiring executive responsibilities.
2) Personality Tests: Personality tests are designed to know about the nonintellectual aspect of the candidate. His mixing with people, temperament, likings
and disliking, capacity to get co-operation from others, behaviour, confidence,
initiative are studied with the help of these tests. Personality tests are essential for
selecting persons for middle and higher level positions.

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Personality test also help to discover individual's value system, his emotional
reaction and maturity , his reaction under certain conditions, his adjustability to new
situation and his characteristic mood. These tests are widely used in industry
because they provide a well-rounded personality of the applicant.
3) Movement Tests: These measure the speed and precision of movement in an
applicant. The nature of job may require swift movements of the person working
there. These tests are essential for person undertaking technical jobs.
4) Interest Tests: These tests are aimed to find out the type of work in which an
applicant is interested. The liking and disliking of the persons are also judged. These
tests are helpful in assigning different jobs to the persons. If a person is assigned
the job of his liking he is likely to contribute more. He may also find out better ways
of doing that job. The efficiency and job satisfaction will be more if the jobs are
according to the tastes of the persons.
Advantages of tests:

Tests can prove useful if used properly and under appropriate conditions. Some of these
advantages are as follows:
1) Proper Assessment: Test provide a basis for finding out the suitability of candidates for
various jobs. The mental capability , aptitude, linking and interests of the candidates
enable the selectors to find out whether a particular person is suitable for the job for
which he is a candidate or not.
2) Objective Assessment: Tests provide more objective criteria than any other method.
Subjectivity of every type is almost eliminated.
3) Uniform Basis: Tests provide a uniform basis for comparing the performance of
applicants. Same tests are given to the candidates and their score will enable selectors
to see their performance.
4) Selection of Better Persons: The aptitude, temperament and adjustability of
candidates are determined with the help of tests. This enables their placement on those
jobs where they will be most suitable. This will improve their efficiency and job
satisfaction.
5) Labour Turnover Reduced: Proper selection of person will greatly reduce labour
turnover. If suitable persons are not selected then they will leave the job sooner or later.
Tests are helpful in finding out the suitability of person for the jobs. Interest tests will
help in knowing the liking of applicants for different jobs. When a person gets a job
according to his temperament and interest he will not leave it.
Disadvantages of Tests:

The tests suffer from the following disadvantages:

1) Unreliable: The inference drawn in the tests may not be correct in some cases. The skill
and ability of a candidate may not be correct in some cases. The skill and ability of a
candidate may not be properly judged with the help of tests.
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2) Wrong Use: The test may not be properly used by the employees. It is also possible
that persons applying these tests may be biased towards certain persons. This will falsify
the results of tests. Tests may also give unreliable results if used by incompetent
persons.
3) Fear of Exposure: Some persons may not submit to the tests for fear of exposure. They
may be competent but may not like to be assessed though the tests. The enterprise may
be deprived of the services of such personnel who are not willing to appear for the tests
but otherwise may be suitable for the concern.
5. Interviews

Types of interviews:
Interviews may be of many types but some of these are discussed here:

1) Patterned or Structured Interview: this is the most common method of 'interview is

systematically planned in advance. The type of information to be asked, details to be
enquired, information to be given, time allotted for, it are all planned properly. The
interview is conducted in a pre-planned sequence. If the candidate makes some queries
and the sequence is disturbed, the questions are started again from where these were
left. These interviews are called standardized interviews.
2) Free Interview: this is unstructured interview and is not planned as to its format. The
candidate is asked to express his views on general topics interview is not directed as to
questions but the candidate expresses his views on his upbringing, interests,
motivations, etc. the interviewers make judgement as to the strengths and weakness of
the candidate.
The interviewer should be an experienced person because it is very difficult to make
judgement on such interviews.
3) Action Interview: This is semi-structured interview where questions are asked on the
subjects studied by the candidate. He is also asked questions about his previous
experience, aptitude, hobbies etc. the interview gives information about the nature of job
the candidate will be expected to perform, salary offered, avenues for promotion etc. the
replies of candidates are used to assess the potentiality of the candidate and his
suitability for the job.
4) Group Interview: In group interview, a group of candidates is interviewed at a time.
They are given some problems for discussion. The candidates express their views on
the problems. Someone initiates the discussion and someone may wind it up. The
interviews judge the views, initiative taken, way of expression of candidates. The
candidates are judged by performance in the group discussion.
5) Panel or Board Interview: In his interview the candidates is interviewed by a panel of
selectors. Different interviewers put questions on separate topics. For example, first
interviewer may ask questions about the educational qualifications, second may put
question on previous experience, third may ask general knowledge questions and so
no. the candidate is selected or rejected on the basis of combined rating by the panel.
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6) Stress Interview: The stress interview is to see how a candidate behaves in a difficult
situation. The interviewer assumes a hostile attitude towards the candidate. The
candidate may be asked questions in rapid succession, questions may be put on his
answers, he may be criticized for some of his answers, his arguments may be rejected
outrightly and so on. The purpose of such an interview is to see whether a candidate
keeps his cool under stress situations, what is his reaction to hostile situations, etc., The
interviewer must be an experienced person otherwise such interviews will not prove
useful.
6. Checking References: The references may provide significant information about the
candidate if they happened to be his former employers or with whom he might have been
working earlier. The applicants are normally asked to name two or three persons who
know about his experience, skill, ability, etc., but should not be related to him.
7. Preliminary and Final Selection: Upto this stage selection is handled by personnel
department or staff executives. Since the persons employed are to work under line
officers, the candidates are referred to them. Line officers will finally decide about the
work to be assigned to them. If line officer is a production manager or foreman he may
assess on the job performance of the candidates. If the candidate is not suitable for one
job then he is tried at some other. If candidates performance is not upto the mark then
he may be kept as apprentice for some time. Normally, a candidate is not rejected at this
stage.
8. Physical Examination: The jobs may require certain physical standards as to height,
eyesight, hearing etc. After the final selection, candidates are required to appear for
medical examination. For civil services and military jobs, the candidates are appointed
only when they clear medical test. Even for joining a government job, a medical fitness
certificate from the Civil Surgeon or State Medical Board is essential. Private
organisations too require a medical fitness certificate.
9. Placement and Orientation: Even after going through the rigorous procedure as
explained in various steps, the selection procedure is not complete. The placement and
orientation of the employee is also an important in this direction.
Difference between Recruitment and Selection:

Bases
of Internal Sources
Difference

External Sources

Nature

It is positive in nature.

It is negative in nature.

Meaning

It involves the identification of

sources of potential
employees and encouraging
them to apply.

It is the selection from

amongst the qualified
applicants.

Process

Recruitment process starts

Selection starts after the

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before selection.

process of recruitment.

Classification The sources of recruitment are

classified as internal and
external.

There is no such
classification.

Object

Its main object is to create a

large pool of candidates.

Its object is to select the

most appropriate person
after eliminating others.

Restriction

There is no restriction on the Only restricted number of

number of persons applying persons are selected.
for the job

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Training and Development

Introduction
After suitable candidates are selected for various jobs, there is a need for the management
to provide for training and development. Training and Development of the personnel is quite
essential in these days when the process and techniques of the management have become
highly complicated. Training and Development is essential for the improvement of the
personnel and for making them fit into their jobs. The efficiency of an organization depends
on the training and development of the personnel.

Meaning of Training and Development:

Training is the act of imparting information and special skills to trainee for the purpose of
increasing his knowledge and skills for doing the particular job. Training is mainly job
oriented. It is given to both new and old personnel throughout their stay in the organization.

On the other hand, development includes the process by which the personnel acquire not
only skills and competence in their present jobs, but also capacities for future tasks or
positions. Development includes all those activities and programmes, when recognize and
controlled, have substantial influence in changing the capacity of the individual to perform is
assignment better, and in so doing, are likely to increase potential for future higher
assignments. In short, development refers to the programmes which contribute to the growth
of the personnel to all respects.

Needs for, and importance and benefits of Training:

Training and Development of the personnel is quite essential for the successful working of
any concern. B. Flippo has highlighted the importance of training in the following words No
organization as a choice of whether to train or not, the only choice is that of methods.

Training offers several benefits. They are:

1. Training increases the knowledge and skill of the personnel, and there by helps them to
increase the quantity and quality of the output.
2. Training helps the trainee to utilize and develop is full potential
3. When there is training, a person doesnt take much time to achieve the required level of
the performance. This gives him job satisfaction.
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4. When training is imparted to personnel, they feel that they are taken care of by the
management. This will increase moral of the personnel.
5. Training enables the personnel to make the best and the most economical use of the
resources of the organization. This result in reduction in cost of production.
6. Trained personnel needs less supervision. That means, training contributes to increase
in the span of the management. That is, when personnel are trained, a superior can
supervise more subordinates. This result is reduced cost of supervision.
7. Training helps in building a second in line of competent officers or managers. As a result,
there will be competent replacement for more responsible positions.
8. The availability of trained personnel ensures the long term stability and flexibility of the
organization.
9. Buy exposing the personnel to the latest concept, information and techniques, trainings
makes the personnel better qualified, and thereby , increases there employability {i.e.,
their market value and earning power.
10. Training gives an employee personnel confidence in handling the job assigned to him.
Types of training programmes
Training programmes are four types .There are:
1. Induction or orientation training.
2. Job training
3. Promotional training
4. Refresher training
Training and Development Methods:
There are a number of training and developed methods for different types of personnel at
different levels. The various training and development methods can be broadly classified
into two categories. They are (1) On the job methods and (2) off-the-job methods.

On-the-job methods:
Refers to the methods which required the trainee to undergo training, while he is actually
engaged in work.

There are many on-the-jobs methods of training. There are:

1.
2.
3.
4.
5.
6.

Apprenticeship training
Internship training
Training on specific job
Job rotation
Special project or task force on special assignment
Visible training (i.e., giving training to a employee by the specialists of the concern by
duplicating as nearly place as possible the actual working conditions of the work)
7. Committees and junior boards
Off-the-job methods:

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Off-the-job methods refers to methods which require the trainee to leave his work place for
under going training programmes. The training programmes may be conduct by the
enterprise itself or by the external agencies.

Off-the-job methods include:

1.
2.
3.
4.
5.

Special courses and lectures

Conferences and Seminars
Case studies
Simulation-role playing
Sensitivity training

Under simulation role playing, instead of taking of the trainees to the field, the real situation
of the work environment in an organization is presented to the trainees in the training
session itself, and the trainee and made to act on samples of real business situation in order
to practice in decision-making. Role-playing is one of the common simulation method of
training.

Sensitivity training or T-group training means the development of awareness and sensitivity
to behavioural pattern of oneself and another. In other words, it is an experiences in interpersonnel relationship which result in a change in feeling an attitudes towards oneself and
another. Under this method, the trainees are unable to see themselves as other see them,
and develop an understanding and others views and behavior.

This method aims to influence an individual behaviour through group discussion. This
method helps the participants to understand how groups actually work and gives them a
chance to discuss how they are interpreted by others. It also aims to increasing tolerance for
the points of individuals and his ability to understand others.

Performance Appraisal, Employee Appraisal, Employee Rating or Merit Rating

Introduction:

Performance appraisal means the systematic appraisal or evaluation of the performance of

personnel by some qualified person. In other words, it is the systematic evaluation of the
personality, performance and potential of each of the personnel by his superior or by some
other qualified person. In short, it is the systematic evaluation of an Employees performance
of his job in terms of its requirements

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Importance and Advantages of Performance Appraisal

1. It helps the management to appraise the performance of the personnel, which of

immense help to the running of the organization.
2. It is helpful to the management to rate all the personnel on the same method of
measurement.
3. It forms a scientific basis for management decisions like increase in pay, transfer,
promotion, etc.,
4. It provides the personnel with information relating to their strong and week points. This
provides and incentive to the personnel to improve there performance.
5. It serves as an guidance for the management to consider the types of training, which
should be imparted to the personnel.
6. It helps the management in the proper placements of the personel.
7. It will help in preventing the grievances of the personnel, if it is conducted scientifically
and systematically.
8. It provides job satisfaction to the personnel, and there by, improves the morale of the
personnel.
9. The records of performance appraisal will be available permanently, and there will
protect the management against subsequent charges of discrimination.
10. It helps management to ensure that the personnel or assigned jobs for which they are
best suited.
11. It helps to evaluate the suitability of the selection policy and procedure of the
organization
12. It helps to evaluate the suitability of the training and development methods adopted by
the concern
13. It helps in improving the employer-employee relations.
Performance Appraisal Methods:

1.
2.
3.
4.

Check List Method

Man-to-man comparison Method
Easy Method
Confidential Report Method
DIRECTING

Meaning:

Direction is called management in action. In the words of Thco Haimann, "In order to make
any managerial decision really meaningful, it is necessary to directing.
Definition:

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In the words of Koontz and O'Donnel, "Directing is the interpersonal aspect of managing by
which subordinates are led to understand and contribute effectively and efficiently to the
attainment of enterprise's objectives".

Nature or Characteristics of direction:

1)
2)
3)
4)
5)

It is a Dynamic Function
It Initiates Action
It Provides Necessary Link Between Various Managerial Function
It is a Universal Function
It is Concerned With Human Relationships:

Principles of effective direction:

Effective direction leads to greater contribution of subordinates to organization goals. The

directing function of management can be effective only when certain well accepted principles
are followed. The following are the basic principles of effective direction:

I)

Harmony of Objectives: it is an essential function of management to make the people

realize the objectives of the group and direct their efforts towards the achievement of
their objectives. The interest of the group must always prevail over individual interest.
Effective direction fosters the sense of belongingness among all subordinates in such a
way that they always identify themselves with the enterprise and tune their goals with
those of the enterprise.
II) Unity of Command: This principle states that one person should receive orders from
only one superior, in other words, one person should be accountable to only one boss. If
one person is under more than one boss then there can be contradictory orders and the
subordinate fails to understand whose order to be followed. In the absence of unity of
command, the authority is undermined, discipline weakened, loyalty divided and
confusion and delays are caused.
III) Unity of Direction: To have effective direction, there should be one head and one plan
for a group of activities having the same objectives. In other words, each group of
activities having the same objectives must have one plan of action and must be under
the control of one supervisor.
IV) Direct Supervision: The directing function of management becomes more effective if
the superior maintains direct personal contact with his subordinates. Direct supervision
infuses a sense of participation among subordinates that encourages them to put in
their best to achieve the organizational goals and develop all effective system of feedback.

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V) Participative or Democratic Management: The function of directing becomes more
effective if participative or democratic style of management is followed. According to this
principle, the superior must act .according to the mutual consent and the decisions
reached after consulting the subordinates. It provides necessary motivation to the
workers by ensuring their participation and acceptance of work methods.
VI) Effective Communication: To have effective direction, it is very essential to have an
effective communication system which provides for free flow of ideas, information,
suggestions, complaints and grievances.
VII)Follow-Up: In order to make direction effective, a manager has to continuously direct,
guide, motivation and lead his subordinates. A manager has not only to issue order and
instructions but also to follow-up the performance so as to ensure that work is being
performed as desired. He should intelligently oversee his subordinates at work and
correct them whenever they go wrong.
Importance of Direction:

Directing various employees in an organization is an important managerial task. It is

indispensable for achieving enterprise objectives. Effective direction provides the following
advantages:
1) Initiates Action: Direction is required to initiate action. The function of planning,
organizing, staffing etc., will be taken up only when direction is given to initiate them.
Direction starts the actual work for achieving enterprise objectives.
2) Improves Efficiency: A manager tries to get maximum work from his subordinates. This
will be possible only through motivation and leadership and these techniques are a part
of direction.
3) Ensures Co-ordination: Direction helps in ensuring mutual understanding and team
work. The individual efforts are directed in such a way that personal performances help
in achieving enterprise objectives. The integration of various activities is possible
through direction.
4) Helpful in Implementing Changes: A business operates in a changing environment.
New situation develop every now and then. A proper system of motivation will help
employees in taking up new challenges.
5) Provides Stability: Effective leadership, supervision and motivation will help in the
smooth growth of an enterprise. A growing concern will provide stability to its activities.
6) Motivation: Motivation is an important element of direction. Motivation is a factor which
encourages person to give their best performance and help in achieving enterprise
goals. A strong positive motivation will enable the increased output of employees. A key
element in direction is motivation. It helps in getting willing co-operation of employees.
Every organization makes efforts that its employees contribute maximum for achieving
goals.
7) Supervision: Direction involves giving instruction to employees for undertaking some
work in order to see whether employees are doing the thing as per targets or not there
is a need for supervision. In supervision all the activities of the employees are controlled
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and efforts are made to ensure proper achievement of targets. In case the performance
is less than the targets then remedial steps are taken for improving the performance. So
supervision is an integral part of direction.
8) Co-ordination: Direction will be effective only when there is a proper co- ordination. In
direction, different persons are asked to perform specific task. In order to see that efforts
of every employee are in the direction of achieving organizational goals there is a need
to co-ordinate various activities. In the absence of co-ordination every person will go in
his own direction without bothering for the enterprise target. When various activities are
co-originated then overall enterprise objectives will be easily achieved.

CONTROLLING
Control is one of the managerial functions. These functions start with planning
and end at controlling. The other functions like organizing, staffing, directing act
as the connecting like between planning and controlling. Planning will be
successful only if the progress planning and controlled, Planning involves setting
up of goals and objectives while controlling seeks to ensure

Definitions:

Knootz and O'Donnel: The measurement and correction of the performance of activities of
subordinates in order to make sure that enterprise objectives and plan devised
to attain them are being accomplished." The accomplishment of organizational
goals is the main aim of every management. The performance of subordinates
should be constantly watched to ensure proper implementation of plans. Coordination is the channel through which goals can be achieved and necessary

Henry Fayol:

"In an undertaking, control consists in verifying whether everything occurs in

conformity with the plan adopted, the instructions issued and principles
established". It has to point out weakness and errors in order to rectify them and
prevent recurrence. It operates on everything:

Characteristics of Control
1. Managerial Function
2. Forward Looking
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3. Continuous Activity
4. Control is related to planning
5. Essence of Control is Action
Steps in Controlling Process
1. Setting of Control Standards
2. Measurement of Performance
3. Comparing Actual and Standard Performance
4. Taking Corrective Action.

Techniques of Control or Methods of Establishing Control

A number of techniques or tools are used for the purpose of managerial control.
Some of the techniques are used for the control of the overall performance of the
organisation, and some are used for controlling specific areas or aspects like
costs, sales, etc.

1. Budgetary control technique

2. Non-budgetary control techniques

1. Budgetary control technique

The technique of budgetary control refers to the use of budgets as the means
for controlling the activities of a business.

2. Non-budgetary control techniques

Non-budgetary control techniques refer to all techniques of control other than
the technique of budgetary control. Non-budgetary control techniques include
techniques such as:
a. Standard Costing
b. Break-even analysis
c. Inventory Control
d. Internal Audit
e. Statistical data analysis
f.

Personal observation

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g. Production planning and control
h. Financial statement analysis
i.

Return on investment control

j.

Management information system

k. Management audit
l.

PERT & CPM

m. Human resources accounting

n. Responsibility accounting

It may be noted that this type of classification of control techniques (i.e.,

classification of control techniques into budgetary control technique and nonbudgetary control techniques) is not quite common.

Techniques of Control are:

1. Traditional or Conventional Techniques &
2. Modern or Contemporary Techniques

Classification

of

Control

Technique

into

Traditional

and

Modern

Techniques:
As stated above, the various techniques of control can be classified into
categories, viz., (1) Traditional or Conventional techniques and (2) Modern or
Contemporary techniques.

The important Traditional or Conventional techniques are:

1. Budgetary Control
2. Standard Costing
3. Break-even Analysis
4. Inventory Control
5. Internal Audit
6. Statistical Data Analysis
7. Personal Observation
8. Production Planning and Control

The Important Modern or Contemporary techniques are:

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1. Financial Statement Analysis
2. Return on Investment Control
3. Management Information System
4. Management Audit
5. Zero-base Budgeting
6. Pert & CPM
7. Human Resources Accounting
8. Responsibility Accounting.

TRADITIONAL TECHNIQUES

1. Budgetary Control: According to J.A. Scott, Budgetary control is the

system of management control and accounting in which all operations are
forecasted and so far as possible planned ahead, and the actual results
compared with the forecasted and planned ones.
2. Standard Costing: According to the ICMA, England, Standard cost is a predetermined cost which is calculated from managements standards of
efficient operation and the relevant necessary expenditure.
3. Break-even Analysis or Cost-Volume-Profit Analysis: Cost-Volume-Profit
Analysis or Break-even Analysis is the study of the interrelationship between
the cost (i.e., cost of production), volume (i.e., the volume of production and
sales), the prices and the sales value, and the profits. In other words, it is the
study of the inter-relationship between the cost (i.e., cost of production),
volume (i.e., volume of production and sales), prices (i.e., selling prices) and
profits.
4. Inventory Control: Inventory is the stock of raw materials, work-in-progress,
finished goods, consumable stores and spare parts and components at any
given point to time. So, inventory control means control over different items
of inventory or stock. It is defined as physical control of stock items
and implementing the principles and policies relating thereto.
5. Internal Audit: Internal audit is a continuous and systematic review of the
accounting, financial and other operations of a concern by the staff specially
appointed by the management for the purpose. In other words, it is the
auditing for the management conducted by the staff specially appointed for
the purpose to ensure that the work of the concern is going on smoothly,
efficiently and economically.

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6. Statistical Data Analysis: It is a technique under which statistical data of
the past and the present relating to the important aspects of the business are
used for managerial control. The statistical data are collected from books and
registers of the concern and presented to the management in a systematic
manner in the form of tables, charts, graphs, etc.,
7. Personal Observation: Under the technique of personal observation, the
managers keep a close personal observation of the employees. In other
words, the manager observes whether the workers are doing what they are
expected to do.
8. Production Planning and Control: According to S. Elon, Production
planning and control may be defined as the direction and co-ordination of the
firms material and physical facilities towards the attainment of pre-specified
production goals in the most efficient and valuable way.

MODERN TECHNIQUES

1. Financial Statement Analysis: Financial statements are a means of

managerial control. They can be used by the management for measuring and
controlling the profitability, liquidity and the financial position of the business.
By comparing the financial statement of the current year with those of the
previous years and also by comparing the financial statement of their concern
with those of other concerns engaged in the same industry.
2. Return on Investment Control: Profits are the measure of overall efficiency
of business. Profit earned in relation to the capital employed in a business is
an important control device. ROI is used to measure the overall efficiency of a
concern. It reveals how well the resources of a concern are used, higher the
return better are the results.
3. Management

Information

System

(MIS):

Management

Information

System (MIS) is an approach of providing timely, adequate and accurate

information to the right person in the organisation which helps in taking right
decisions.
4. Management

Audit:

Management

audit

is

an

investigation

by

an

independent organisation to find out whether the management is carried out

most effectively or not. In case there are drawbacks at any level then
recommendations should be given to improve managerial efficiency.

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5. Zero-Base Budgeting (ZBB): In the words of Peter A Pyher, Zero-base
budgeting is a planning and budgeting process which requires each manager
to justify his entire budget request in detail from scratch and shifts the burden
of proof to each manager to justify why he should spend money at all. The
approach requires that all activities be analysed in decision packages which
are evaluated by systematic analysis and ranked in order of importance.
From his definition, it is clear that Zero-base budgeting is a technique of
preparing the budget in which the previous year is not taken as the base, and
every year is taken as a new year for preparing the current years budget.
6. Programme Evaluation and Review Technique (PERT) & Critical Path
Method (CPM):
PERT: It is useful at several stages & project management starting from early
planning stages when various alternative programmes have been
considered to the schedule place, when time and resources schedules
are laid

to final stage in operation, when used as control device

to measure actual against plant programmes. It is useful completing a

project on schedule (time) by co-ordinating different jobs involved in its
completion.
Feed Back Control:
It is a system & controlling which tries to rectify the deviations after they
have occurred. It is like a post-mortem analysis which aims at identifying the
point & cause of deviation.

Feed Forward Control

It tries to prevent the deviations rather than correcting them, critical areas
are identified at the planning stage itself where deviations may occur and
special care is taken to avoid such deviations. The approach is diagnostic
rather than post-mortem.
7. Human Resources Accounting: The American Accounting Association
has defined human resources accounting as the process of identifying and
measuring data about human resources and communicating this information
to interested parties.
8. Responsibility Accounting: Responsibility Accounting is defined as a
system designed to accumulate and report costs by individual levels of
responsibility. Each supervisory area is charged only with the cost for which it
is responsible and over which it has control.
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