National Institute of

Business Management
Master of Business
Administration (MBA)
Principles and Practices of
Management

CONTENTS
Chapter

Title

Page No

PRINCIPLES OF MANAGEMENT

II

PLANNING

52

III

ORGANIZING

62

IV

ORGANIZATION - GROUPING AND DEPARTMENTATION

70

STAFFING

77

VI

DIRECTING

87

VII

MOTIVATION

94

VIII

COMMUNICATION

99

IX

LEADERSHIP

109

CONTROLLING

114

CHAPTER - I

PRINCIPLES OF MANAGEMENT
OBJECTIVES
The chapter is formatted to familiarize the meaning, philosophy, characteristics, scope, nature,
principles, universality, effectiveness, elements and activity levels of management. The reader also gets an
opportunity to understand the theories of management, management process and coordination and
management levels.
INTRODUCTION
The large connotation attributed to the word manager or management stems from the manipulative
instinct of man. In another point of view man had tried from his very birth to control or try to remodel his
environment to suit his development. The exercise of attaining managerial control over his environment in
different fields resulted in the enhancement of interest in management. Every human being is a manager in one
field or the other throughout his life. Instinctively he would start using his will and ingenuity to curb and
manipulate the disadvantages and advantages in his environment and fashion it in such a way to assist the
achievement of his goals. Modern management got a fillip from the upsurge of science and technology.
Economic and industrial life became larger, far-flung, time consuming, round about, specialized and complex.
In other words, the whole scenario had to be managed with managerial skills and techniques.
MEANING OF MANAGEMENT
Management is the executive function that concerns itself with the carrying out of the administrative
policies laid down by administration. Management directs the active operations within the enterprise and
combines the work of the employees with the available capital equipment and materials to produce an
acceptable product. Management also markets the product or service according to the broad policies
established by administration. According to Dr. William R. Spriegal. The Management also functions, in
carrying out the policies of administration, expand as the lower levels of supervision are reached while the
administrative function decreases in importance.
WHY MANAGEMENT
We have, we believe, portrayed by now the nature of the economy, the social environment and the
trends, clearly to show the new and bewildering complexity which have developed rapidly in all forms of
business and economic management. It looks, inside industry or business (or for that matter, in agriculture, in
fact any sphere of economic administration), as if nothing happens, nothing moves unless it is contrived, set in
motion from the state of it, in short, unless it is managed. To cite certain obvious symptoms which strike an
observer from outside as a puzzle or enigma? Most of the industry in India is state-owned and state-managed.
It is the peoples own organization with the peoples own money. Nevertheless, there are widespread
5

industrial problems (like overt strike or lockout); large loss of man-days (from ceasing work, go-slow, or just
loitering and non-work) in all cadres; resulting in colossal ineptitude; poor accountability; and general
mismanagement.
Management- the most Important Inputs
Management, always important in all spheres of economic activity, has never been of such critical
significance as today, as it plays a significant role in all sphere of economic activity. It is good to summarize
here some of the general and significant influences which have brought about this change.
1.

Earlier individualistic society had now become amorphous.

2.

There is a shift toward pluralism, of multiple competing interests, concentrated around power and
service centers.

3.

The interface between all social and economic units, including the government machinery, is now
wider, more complex, demanding more managerial skill.

4.

Industries and institutions are closer to people and vice versa. Whether as taxpayers, consumers,
beneficiaries or employees, people cannot be taken for granted.

5.

In a macro sense the economy is much planned.

6.

The economic laws and regulations are many and regulated, today. They often shift and change.

7.

Meetings, conferences, consultations and the role of influence have grown enormously over the
years culminating in enormous contexts, liaison and coordination.

8.

Systems refuse to work on an even keel.

9.

At all levels of the management team, human element is more unpredictable than ever.

10.

We seem to be at the cross road where individuals rights and demands of factions vie and
compete, in devastating rivalries, with the common social interest.

11.

Social accountability of business has developed as a growing consciousness. Governmental

machineries are there to enforce this accountability.

12.

Professional management in farming and the small sector of the economy is either absent or in a
rudimentary stage.

13.

In a developing economy the basic goals are known but largely unfulfilled. The critical constraints
are two (1) management of the resources and (2) making full use of vast untapped opportunities.

PHILOSOPHY OF MANAGEMENT
Management denotes executive function of getting things done by others according to some
predetermined or pre-arranged policies or plans. Management is the art of directing human activities and it
directs the active operations within the enterprise and combines the work of the employees with the available
equipment and materials for the accomplishment of certain common goals or purposes.

Management is what Management Does

Three different steps involved in it. Viz. (1) Formation of policy and its translation into plans; (2)
Execution and implementation of plans; and (3) Exercising administrative control over the plans. These three
essential tasks of management may be titled as Planning, Implementing and Controlling. According to Dr.
James Lundy Management is principally a task of planning, co-ordinating, motivating and controlling the
efforts of others toward a specific objective. It involves the combining of the traditional factors of production
(land, labour and capital) in an optimum manner, paying due attention, of course, to the particular goals of the
organization. This definition broadens the scope of management and includes within its orbit, three major
management activities viz. (a) Planning; (b) Implementing, and (c) Controlling. Planning is the determination of
the course of objectives of a business, division or department to achieve maximum profit effectiveness, the
establishment of policies and the continuous seeking and finding of new ways to do things. Implementing
applies to the doing phases. After plans have been prepared, personnel must be selected and assigned their
jobs; they must be trained and motivated to perform properly. Activities must be implemented in terms of the
plans initially developed. This may include (i) selecting personnel, (ii) training personnel, (iii) motivating
personnel, (iv) delegation, (v) direction and (vi) co-ordinating. Controlling refers to the evaluation of the
performance of those who are responsible for executing the plans agreed upon. This may include: (i)
controlling adherence to plans, and (ii) appraising performance.
Management is Primarily Direction
In each industry, the important departments are, Finance, Purchase, Production and Sales. All these
departments play their respective role; but the force that co-ordinates these departments is the Management
even though these departments play their respective roles.
Management is the Development of People
As aptly noted Business is not the management of things. It is, in the words of Appley Lawrence,
The development of people and not the direction of things. It is the selection, the training, the supervision
and the development of people. The most recent definition in the words of Appley. Management is the
attainment of pre-established goal by the direction of human performance along pre-established lines.
Managers do not wait for the future, they make the future. According to this definition, it can be said truthfully
that management is nothing but the development of (i) people and (ii) the over-all tone under which they work.
Management is the development of people and not the direction of things. There are two important elements,
which make up the art of management: (i) Human resources and (ii) Physical resources. The term human
resources includes personnel administration, training, development of human environment, development of the
natural talents of the people, development of human personality, etc. Similarly, the term physical resource
includes finance or money, raw materials, buildings, plant and machinery and other equipments.
Management is a Process for the Utilization of Growth-Inputs
Utilization of resources has been the most common and yet perhaps the most complex human activity
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ever since the dawn of civilization. Maximum return and utility from limited resources available have been the
main aim of the human society. The entrepreneur may be a person who has his own resources and is
organizing them with a view to attaining economic efficiency and returns or he may be a person who does not
own the resources but as a custodian of the same, organizes it with a view to attaining maximum output and
efficiency with minimum input. In his capacity as a non-owner of resources, he may be designated as a
manager. From this standpoint, management may be defined as a process through which all the resources
are organized and utilized to attain maximum output and efficiency through minimum input.
Characteristics of Management
The following are the salient characteristics of management implied in the concepts discussed above:
1.

Management is that important process the principal elements of which are planning, implementing
and controlling.

2.

Management is an endeavor to achieve the pre-determined objectives:

3.

For the achievement of the enterprise-goals, management plans, organizes, co-ordinates, directs
and controls the group-efforts and hence a group activity.

4.

Management aims at reaping rich results in economic terms. Management carries with it a major
responsibility for creative action. It is no longer considered as passive or a mere adjustment of
resources.

5.

Management also implied skill and experience in getting things done through people. Getting the
suitable types of people to execute the operations is the significant aspect of management.

6.

Management is a science as also an art. As there are definite principles in management, it is an art.
Further, it is also a science because by the application of these principles predetermined
objectives can be achieved.

7.

Management is also gradually becoming a profession like other recognized professions.

8.

The principles of management have universal application. They are not the monopoly of industry
alone, but can be applied in any sphere where group effort is required.

9.

Although management is a scientific method of getting things done through and with the people,
yet the identity of the Thinkers is quite different from the identity of the Doers.

10.

Management is needed at different levels of an organization.

11.

Management uses organization for achieving the objectives determined by administration.

12.

It is not necessary that those who manage may also be the owners of the enterprise.

13.

Principles of Management are dynamic and not static. Management not only adapts itself
according to social changes, but also introduces innovation in methodology.

14.

Since management is a process of directing men to perform a task, authority to extract the work
8

from others is implied in the very concept of management.

15.

Management is also characterized by the quality of leadership. According to R.C Davis,

management is the function of executive leadership everywhere.

Scope of Management
Although it is difficult to precisely define the scope of management, the following may be included
in it:
1.

Subject-matter of Management. Planning, Organization, Direction, Co-ordination and Control

form the subject matter of management.

2.

Functional Areas of Management. Functional areas of management include:

i)

Financial Management; which includes forecasting, cost control management accounting,

budgetary control, financial planning and management of earnings.

ii)

Personnel Management; which includes recruitment, training, transfer, promotion, demotion,

retirement, termination, labour-welfare and social security, industrial relations, etc.

iii)

Purchasing Management; which includes inviting tenders for raw materials, placing orders,
entering into contracts, materials control, etc.

iv)

Production Management; which relates to the intricacies of production of goods.

v)

Maintenance Management; which relates to the proper care and maintenance of the buildings,
plant, machinery, etc.

vi)

Transport Management; which includes packing, warehousing, transportation by rail, road,

air, etc.

vii) Distribution Management; which includes marketing market-research, price-determination,

market-risks and their avoidance, advertisement, publicity, sales promotion, etc.
viii) Office Management; which includes the proper layout, staffing and equipment of the office.
ix)

Development Management; which relates to experimentation, research etc.

3.

Management is an inter-disciplinary approach. For the correct application of the management

principles study of commerce, economics, sociology, psychology and mathematics is very
essential.

4.

The principles of management are of universal application.

5.

Three essentials of management are:

i)

Scientific method

ii)

Human relations, and

iii)

Quantitative technique
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6.

Modern management is an agent of change. The techniques of management can be improved by

proper research and development.

NATURE OF MANAGEMENT
The concept of management is universal. The continuous and rapid development of management
principles and their practices in organizations has rapidly changed the nature of management. The management
is being divorced from ownership because of the complexity in management process. The nature can be
analyzed in the context of it being an economic resource, a system of authority, a class or team, a science or
art, and a profession.
Management: An Economic Resource
There are five factors of production, viz., land, labour, capital, management, and entrepreneur. These
various factors are classified as human and non-human factors in an organization. In fact, entrepreneur
establishes the organization as owner, and it is management, which transforms these various resources into
productive processes. Development is a matter of human energies rather than of economic wealth, and the
generation of human energies is the task of management. Management is the mover and development is a
consequence.
Management is an important factor of industrialization, and any country, whose management is not
efficient, can remain backward as it may remain backward in the lack of natural physical resources.
In the early stages of economic development, only two factors- capital and labour- were
emphasized as owner of the enterprise could provide capital, and land was treated to be an element of capital.
Later on, with the industrial revolution, the factory system was adopted which emphasized the importance of
other factors too. To look after the industrialization process effectuated by technological innovation, a new
class of persons was needed. Thus, management as a coordinator of different resources emerged.
Management: A System of Authority
Management is a system of authority. A system can be defined as a set or assembly of things
connected or interrelated and interdependent to form a complex unity. The authority may be defined as the
legal right to command others to act or not to act in a prescribed manner. Thus, management is the
arrangement of various types of authority Theo Haiman has described management as a group of top-level
managers. This statement shows the authority of management.
In an organization, there are two groups of individuals- manager and managed (operatives). The
basic function of manager is to get thing done by operatives, and for this purpose, the manager commands the
activities of operatives because he has the authority to do while operatives do not have such authority. In
management itself, there are various levels top level, middle level and lower level or supervisory level. A
10

person at a particular level of management has certain authority, which differ in degree when it is compared with
the authority held by a manager at different levels. Generally, as we move down in the managerial levels the
degree of authority is gradually reduced. This authority enables managers to perform their function of planning,
organizing, staffing, directing, and controlling in the organization. The use of authority by manager, however,
depends upon his approach to the authority, his personality factors, subordinates, and situational variables.
Management: A Class, Team or Group
Management as a group is classified into three parts- patrimonial or family management, political
management, and professional management.
1.
Patrimonial or Family Management. This may be called feudal, dynastic or proprietary
management. In this system, the owners become the managers of the enterprise and different family members
occupy managerial positions. Their relative positions and status in the organization are determined by their
relative positions in the family. In such cases, whims, prejudices, and traditions play a great role in managerial
decisions. Managers of the management team do not owe their allegiance to organization, but to head of the
family. This system suits the medium and small sized units. It is very common in India.
2.
Political Management. This system is quite frequent in Indian public sector organizations.
The political party in power establishes these and the party enjoys the right to manage them. The Government
decides the general policy and top-level managers are also appointed by it. Top-level managers appointed in
such a way may comprise politicians and retired civil and military considerations and efficiency criterion
becomes a secondary one. These persons do not add to efficiency but they hamper the organizational
efficiency.
3.
Professional Management. Here the management is divorced from ownership. Owners
provide initial financial resources, and well-qualified and trained managers manage the organization. In fact,
they are the paid employees and are appointed through selection based on their professional competence. The
people in this system may be required to go through some formal education and training in the field of
management. However, management being a flexible profession, sometimes this requirement is not strictly
adhered to.
Management: Science or Art
1.
Management as a Science. Science is a systematized body of knowledge pertaining to an area
of study and contains some general truth explaining the past events or phenomena. Science is systematized in
the sense that relationships between variables and limits have been ascertained and underlying principles
discovered. Science has, thus, the following characteristics:
(i)

It is systematized body of knowledge and uses scientific methods for observations.

(ii) The principles are evolved based on continued observations.

(iii) The principles are exact and have universal applicability without any limitation.
11

The management may be a systematized body of knowledge and its principles may be evolved
based on observations not necessarily with scientific methods. However, the principles of management are not
as exact as is the case with natural sciences- physical or biological sciences. The principles of management are
flexible and are used with various modifications in various situations. This puts a limitation on management as
a science.
The management may rightly be called inexact science, which is the case with other social sciences.
It is also sometimes indicated that management is perhaps the most inexact of social sciences. The reasons for
this are: (1) all social sciences in general and management in particular deal with complex phenomena about
which very little is known, and (2) management being a comparatively new social science, general principles
are yet to be evolved. The study and analysis of management have lagged behind other sciences until recent
years.
2.
Management as an Art. Art is the expertise to accomplish a desired concrete result. It is
related with the understanding of how a particular work will be accomplished in the best way. People learn the
particular art and through continuous practice, they reach at the level of perfection. However, every art
requires some principles though they are not as rigid as scientific principles. Thus, art and science are
interrelated in the sense that putting a principle to practice requires art.
From this point of view, management is an art and that too a fine art. Management while performing
the activities of getting things done by others requires the knowledge of certain underlying principles, which are
necessary for every fine art. The management gets perfection in the art of managing through continuous
practice.
Management is both a science and an art. It is a science because it evolves and uses certain
principles; it is an art because it requires continuous practice to get the desired result in the best way. The
science and the art are not mutually exclusive and these two exist almost in every human function; however,
there is only the difference of emphasis. This is true with management too, though the emphasis differs with
respect to time and place.
Management: A Profession
It can be defined as an occupation for which specialized skills and training are required and the use
of these skills is not meant for self-satisfaction, but these are used for the larger interests of the society and the
success of these skills is measured not in terms of money alone. Thus, all professions are occupations in the
sense that they provide means of livelihood; however, not all occupations are professions because some of
them lack certain characteristics of profession.
There are three angles of looking at professionalisation in management.
1.

Owner- managers claim to be professionals by virtue of their managing the organizations in which
they have stake in risk and return. This is called as ownership concept.

2.

According to practicing managers, the professionals are those who are engaged in the practice of
12

management by virtue of certain assets of character and valuable experience gained on the job.
This is known as practice concept.
3.

According to academics in management field who are neither owners nor practitioners, but have
the gift of organization and self-salesmanship, professionals are related with a formal body. Slowly
an elective entry procedure has been established where entry is not by practice, but by
permission of others based on some formal training and not merely in talent. This is known as
formal body concept.

A professional manager is one who is trained through a prescribed process; and practices the art for
which he has been duly admitted (on the basis of pre-determined eligibility standards); accepted (after being
examined and found qualified and allowed with the grant of license). Kenneth Andrews has studied the
problems of profesionalisation of management. He evolved five criteria of judgment for evaluating management
as profession: (i) knowledge, (ii) competent application, (iii) social responsibility, (iv) self-control, and (v)
community action. McFarland has identified following characteristics of management as a profession:
1.

Existence of an organized and systematic knowledge,

2.

Formalized methods of acquiring training and experience,

3.

Existence of an association with professionalisation as its goal,

4.

The formation of ethical codes for guidance of conduct,

5.

Charging of fees based on service, but with due regard for the priority of service over the desire
for monetary reward.

Now, the analysis of the existence or absence of these characteristics in management will show
whether management is a profession or not.
1.
Existence of Knowledge. Professionalism emerges from the establishment of fact that there
is a body of knowledge, which cannot be skirted around, but has to be assiduously studied for being a
successful manager. The accumulation of knowledge about management is due to the need to develop a large
number of managers. However, the concept of management is still evolving and continuously new principles are
being established.
2.
Acquiring Knowledge. An individual can enter a profession only after possessing certain
knowledge and skills through formal training. However, the entry to the managerial cadre in organizations is not
limited to management graduates only, though it can be said that management graduates can put better
performance in the organization. Nowadays there is an emphasis on taking management graduates in the
managerial cadre because of their availability.
3.
Existence of Representative Body. A representative body of professionals is needed to
regulate and develop the professional activities. This body also prescribes the criteria for individuals who want
to enter the profession. Many countries have Management Associations. In India, too, there is All-India
Management Association with various local management associations affiliated to it. The association manages
and coordinates researches and other activities in management areas.
13

4.
Ethical Standards. For every profession, some ethical standards are provided and every
individual professional is expected to maintain conformity with these standards. Though there is lack of
universally accepted formal ethical standards for management, they are socially responsible and it is their duty
to protect the interests of all parties- owners, labour, suppliers, consumers, government concerned with
organizations. In this respect, they are expected to maintain a code of conduct.
5.
Reasonable Remuneration. Professionals in management, whatever their way of service to
community- as managers, consultants require money to satisfy their needs; however, their success is not
measured in terms of money which they receive by way of rendering their services to the society, but the
contribution which they make to the welfare of society. The managements contribution in the society by way
of integrating various resources into productive units very important for the stability of society. This important
contribution cannot be measured in terms of money alone because without their efforts resources worth
millions of rupees may be useless.
Thus the above discussion shows that management has some characteristics of profession fully while
others exist partially.
MANAGEMENT PRINCIPLES
Management has been defined as a science, though an inexact science. It means managerial functions
are based on certain principles. Principle is a fundamental truth, which establishes cause, and effect
relationship of a function, and theory is a systematic grouping of interrelated principles. The principles of
management have a tremendous impact upon the practice of management in increasing the efficiency of the
organization. The needs and importance of management principles can be visualized as follows:
1.
To Increase Efficiency. The established principles of management provide managers
guidelines as how they should work in different situations. These principles increase managerial efficiency.
Though, there is a serious limitation of management principles, that is, these have to be modified according to
situations as these deal with human beings of diverse nature, these enable a manager to understand the different
situation in a better way and save him from costly trial-and-error method.
2.
To Crystallize the Nature of Management. Lack of understanding of management principles
makes it difficult to analyze the management job and to define the exact scope of managerial functions. Thus,
individuals cannot be trained effectively for managerial positions.
3.
To Carry on Researches. If in any subject certain fundamental principles are developed, the
scope and limitations defined, these become the basis for future researches. In the absence of these principles,
researches become difficult and future horizons of knowledge cannot be expanded. The recent emphasis on
management researches has increased the quantum to knowledge in this field.
4.
To attain Social Objectives. Management itself is part of the society and it takes the inputs
from the society and gives the output to the society. Thus, the standards of the society depend upon the quality
of the management. If the management is efficient, the resources of the society are better utilized thereby giving
14

more satisfaction to the society and improving the quality of life of people. In this context, management
principles play an important role.
Thus, the understanding of management principles enables managers to take a more realistic view of
organizational problems and their solution. Management deals with people in the organization, and the structure
and behavior of the atom are less complex than the structure and behavior of groups of people. To direct the
human behavior for objective achievement, some principles are certainly required. Development of
management principles would definitely have an impact on the cultural level of society by increasing efficiency
in the use of human as well as material resources. However, managers, while using management principles in
practice, should check their validity and applicability before use. For this reason, they should be aware of the
fundamental nature of management principles.
Nature of Management Principles
Management is a social science as well as an art. Thus, the principles are not expected to be
thoroughly exact as is the case with physical and natural sciences. The following basic nature of management
principles should be kept in mind:
1.

Universality of Principles. Henry Fayol has emphasized that management principles are

universal. These can be applied in different organizations business, government, hospital, military, etc. The
basic task before every human organization is to get the desired results through integrated human efforts. Thus,
the managers of different managerial levels may use the principles with equal utility. This shows the flexibility of
a manager to handle different departments of an organization or the functions of different organizations.
2.

Dynamic Nature of Principles. Management principles are flexible in nature and change with

the changes in the environment in which an organization exists. Others are replacing many of the golden
principles of management, which were though to be very useful at one time, because of changes in the society.
Continuous researchers are being carried on to establish principles in the changing society and no principles
can be regarded as a final truth. Nothing is permanent in the landslide of management.
3.

Relative, Not Absolute Principles. Management principles are relative, not absolute and they

should be applied according to the need of the organization. Organizations differ in respect of place, time,
social, culture, etc. Moreover, individuals working in the same organization also differ. Thus, a particular
management principle has different strength in different conditions and the principle should be modified or
replaced by another.
4.

Limitations Due to Human Nature. Management involves the direction of human behavior

in the organization. It is also related with other human factors- suppliers, customers, owners, government, etc.
The complex nature of human behavior has considerably affected the progress of management principles. The
principles of other disciplines dealing with human nature such as psychology, sociology, anthropology should
also be taken into account.
15

Universality of Management
As the area of management has increasingly commanded worldwide interest and recognition, the
question whether it is a science with universal application has concerned scholars and practitioners alike. The
analysis of the problem will help management scholars and practitioners to transfer management from one
country to another, if it is universal. If it were otherwise, there would be limit on the transferability of
management from one place to another place. The concept of universality of management suggests that
transmission of managerial knowledge may be undertaken (i) by a manager from one country to another
country; or (ii) by people from a developing country coming to study and work in a more industrialized one
and returning to take up jobs in their own country; or (iii) through developed and training programmes for
managers in developing countries. This managerial knowledge may be transferred from (i) one country to
another; (ii) one firm to another within a country; and (iii) one person to another.
Arguments for the Universality Concept
Experts subscribing to this concept have forwarded the following arguments:
1.

Emphasis on Management Process. It is argued that management is found in all organized

activities. Management functions in every phase of human activity, and its functions- planning, organizing,
staffing, directing and controlling- are found in any enterprise belonging to any part of the world.This is the
principle of universality of managerial functions. This implies that any principle or theory about a particular
managerial function will apply to all managers, irrespective of their level in the organization, culture or country.
2.

Distinction between Management Fundamentals and Management Techniques. It has

been emphasized that management theory and principles should be differentiated from management techniques
and approaches because it is a specific technique, which varies; managerial approaches may differ from culture
to culture and from country to country, but management fundamentals are universally applicable. 3.
Distinction between Management Fundamentals and Management Practices. Supporters of universality
concept feel that fundamentals are the same, only practice differs. Management is both science and art. The
most productive art is always based on an understanding of the science underlying it. Thus, science and art are
complementary. The art of managing or the practice of managing makes use of organized knowledge (science).
Science is truth. However, its practice is subject to variations under different conditions. Managers shift from
one company to another, from one industry to another. Such shifts indicate that there are general skills and
principles of management at work. The knowledge of management principles and skills in managing enables
the executive to learn specific applications and problems as he applies his skills to the new setting.
Arguments against the Universality Concept
Many experts do not agree with the universality concept. Their arguments are based on the
following lines:
1

Objective of an Enterprise. The objective of an enterprise determines the type of

16

management. Drucker is of the opinion that the skills, the competence, and the experience of management
cannot as such be transferred and applied to the organization and running of other institutions. The basis for his
view is that business organizations exist for economic ends and the management consists of skills, and
techniques for attaining these ends. Since the main objective of a business- profit consistent with security and
welfare of the business- differs from that of non-business organization, management can transfer only analytical
and administrative types of skills, abilities, and experience.
2

Differences in Philosophies. Differences in philosophies of different enterprises put a limit on

the person being a good manager in all types of enterprises. If the management fundamentals are having
universal applicability, a manager should have the ability to predict the outcomes of managerial activity
irrespective of its setting. Dale feels that this contradicted by experience, many businesspersons have trouble
when they join government services. Even two business organizations having different philosophy may require
different types of management approaches.
3.
Management is Culture- Bound. The applicability of management principles may be limited
to a particular situation of culture. Many studies, quoted earlier in this section, confirm this view. Oberg feels
that if the ground rules under which the manager operates are different in different cultures (countries), it is
useless to search for a common set of strategies of management.
The arguments for and against universality concept may be analyzed to arrive at a particular
conclusion. This conclusion is important because developing countries can import managerial expertise and
principles developed by the advanced countries if they are universal. If these arguments are analyzed, the
analysis will give us the result that there are management principles which have certain universal truth, however,
their practices may differ from organization to organization or from country to country. Whatever the
organization we take, whatever the culture we take, whatever the philosophy we take, in all such cases we
face the problem of allocating scare resources- time, money, human factors and other forms of wealth- among
needs and purposes, which are not few. Such allocation requires managerial skills. Hence, managerial skills are
transferable. If this is not the case, a manager can be successful in one organization only. There has been
substantial transfer of management knowledge and skill across national and cultural boundaries not only through
educational efforts, but also through the development of international and multinational firms. This shows the
universality of management, though objective, philosophy, and culture of an organization may call for a change
in managerial styles.
Management and Administration A Terminological Conflict
In management literature, both management and administration are used interchangeably. Initially, no
distinction in these two terms was made. In 1923, however, Oliver Sheldon first raised the terminological
conflict when he emphasized administration as decision making function and management as execution function.
Afterwards, there have been many controversies between these terms. Some take management and
administration as one; others take these as different. McFarmand thinks that these are synonymous though he
has pointed out minute distinction between these two terms in practice. He states that in government agencies,
17

administration is preferred over management, although in recent years the term management has become
widely used in government agencies. Another possible distinction refers to the levels of organization. In
business, the term administration refers to the activities of the higher levels in the managerial ranks. Still another
distinction related to organizational level is that administration refers to the determination of major aims and
policies, while management to the carrying out of the operations designed to accomplish the aims and make the
policies. Here again, this distinction is not only widely followed but it exists. On the analysis of the various
views expressed in this regard, three conclusions can be derived:
1.

Management and administration are one,

2.

Administration is above management, and

3.

Administration is the part of management.

1.
Management and Administration are one. There are the authors- Henry Fayol, Koontz
and ODonnell, Allen, Strong, Terry, Newman, etc., who recognize that management and administration are
the same. Both involve the same functions, principles and objectives.
2.
Administration is Above Management. According to the other approach, management and
administration are different. Administration is related with policy formulation and decision while management
looks after the execution of these policies and decisions. Management is the process and agency through which
execution of policy is planned and supervised.
Administration is Part of Management. This approach holds that management is a
comprehensive term and administration is its part. E.F.L. Brech has given this approach. According to him, the
management has the responsibility of planning and integration of organizational functions in the most effective
way. This responsibility involves (i) making appropriate programmes and procedures according to plans, and
(ii) organizing, directing and supervising the individuals in the organization. Accordingly, management can be
divided into three parts: (i) top management- responsible for policy formulation, (ii) departmental or functional
managers- responsible for planning, organizing, directing and controlling, and (iii) lower managementresponsible for supervision. Thus, at the top level, administrative functions are more important and as one
move down the organization, administrative functions decrease and managerial functions increase as shown in
Figure below though managers perform total functions.
Top Management

Lower Management

Policy decisions
(Administration)
Execution
(Management)

Administrative and Managerial Functions

18

The above discussion fails to give any concrete ideas about the relationship between management and
administration and terminological conflict remains in existence. If the entire theories, principles, processes and
objectives of both management and administration are analyzed, it may be found that both have the same set
of functions and objectives and hence same theories and principles. The difference between management and
administration can be made theoretically and conceptually; however, practically there is no difference. The
attempt to draw distinction between business administration and business management is thoroughly
misleading and all recent studies have tried to avoid it as far as practicable.
EFFECTIVE MANAGEMENT
The basic objective of management functions and techniques is to make one an effective manager.
The organizations require effective managers because these bear costs for employing them. However, the basic
question is: who is an effective manager? From this point of view, one must identify the various characteristics
of effective managers so that attempts are made to correlate the various functions of management for
achieving effectiveness.
Truly speaking, the concept and criteria of effectiveness are quite debatable points in management.
Effectiveness is not one-dimensional concept that can be measured and predicted from a set of clear-cut
criteria. However, managerial effectiveness can be defined mostly in terms of organizational goal-achieving
behavior. The executives own behavior contributes to the achievement of organizational goals only by its
influence on the perceptions, attitudes, and motives of other people in the organization and on their subsequent
behavior.
Effectiveness and Efficiency
Often confusion is created between two terms: effectiveness and efficiency, though both these terms
have clear meanings. The term efficiency is used in engineering way and it refers to the relationship between
input and output. Thus, efficiency denotes how much inputs have been used to produce certain amount of
outputs. Generally, this is also taken as effectiveness. This can be true only when outputs meet the objectives
for which these are meant. Similar is the case with managerial effectiveness, though a managers productivity
is unlikely to be measured so precisely.
Effective Manager
An effective manager is one who is positive in his personality, that is, what type of person he is, his
managerial process, and results of his managerial process, although all these are interdependent.
1.

The Person. The basic question in this context is: what types of persons are most likely to

become effective managers, and what types fail? There are various such studies to suggest the possible
personal qualities of a successful manager. Jurgensen has described the following characteristics of a successful
manager:
19

Most descriptive of effective manager

Least descriptive of effective manager

Decisive

Amiable

Aggressive

Conforming

Self-starting

Neat

Productivity

Reserved

Well-informed

Agreeable

Determined

Conservative

Energetic

Kindly

Creative

Mannerly

Intelligent

Cheerful

Responsible

Formal

Enterprising

Courteous

Clear-thinking

Modest

The above descriptions suggest that the various qualities contribute to the effectiveness directly and
hence important. However, least descriptive qualities are also necessary because these may contribute
indirectly to the effectiveness.
1.
The process. Managerial effectiveness depends upon the managerial process involved in
managing the affairs of the organization. In this category, there is a long list, because it is not just possible to
specify here the behavior of manager as related to his various functions. However, the following are some of
the important behaviors of effective managers:
1.

They manage work instead of people.

2.

They plan and organize effectively

3.

They set goal realistically.

4.

They derive decision by group consensus but accept responsibility for them.

5.

They delegate frequently and effectively.

6.

They rely on others for help in solving problems.

7.

They communicate effectively.

8.

They are stimulus to action.

9.

They coordinate effectively.

10.

They co-operate with others.

11.

They show consistent and dependable behavior.

12.

They win gracefully.

13.

They express hostility tactfully.

2.

The Results. Effective managers and effective managing will lead inevitably to good things, that
20

is, the achievement of goals for which they are working in the organization. Thus, what will be the outcome
depends upon the type of organizations they are working for. There may be some conflict about the
organizational goals and their measurement criteria, but here it is sufficient to say that managerial actions and
behaviors must contribute to the realization of organizational goals.
The Elements of Management
(a) There has to be a horizon a universe, an ambit, with in which the management must perform.
This ambit may be large or small but it ought to be properly defined. (b) There must be an organization, which
gives the body to the management. (c) There is a universal need for planning, planning a decision, planning a
system, a programme and a way of implementation and its monitoring. (d) Any management must properly
manage its team. To keep to the usual management vocabulary, we may call it staffing. (e) Just as for any other
teamwork, management needs leadership and direction. (f) Communication is the lifeblood of the management
process. It is basic to understanding and teamwork; it helps steer away from criss-cross, counter productive,
even inimical activities conscious or unwitting counter productive to the corporate goal; it is the key to
keeping to the plan and all forms of improvement and innovation. (g) There is the need for all-pervasive
coordination. Reduced to its last elements, all management actions are taken by men who make the
management. (h) Having proceeded so far the management needs to know that everything is going on
schedule; according to plan. This process may be called evaluation, monitoring or control. (i) We would add
as an important management element what may be termed innovation. To broaden its connotation, on the
negative side, it consists in anticipating pitfalls from the outside environment or inside.
In other words, management consists in gathering and using its resources both human and material
through the processes just now described, to achieve its allotted aims most economically and effectively.
Five Activity Levels of Business Management
The management of an industry can be sub-divided into the following different level:
1. Top Management
It consists of the Board of Directors and the principal officers such as the Chief Executive, Managing
Director, and others concerned with the general operation as distinct from some functional specialization. They
are the ultimate level of authority in the operation of the enterprise. They set the objectives, define the goals,
establish the policies, see that the policies are put into effect and judge the results. Livingston has described
the top managements actual operation by listing it as follows:
A. Decision-making
(i) Origination versus confirmation or veto
(ii) Planning
1. Setting of goals
What, how much, at what price, when and where.
21

2. Mechanism
a) Process
b) Structural organization and co-ordination
c) Appointment of key personnel.
(iii) Policy
1. Definition
General versus specific
2. Integration.
(iv) Implementation
1. Release of authority
2. Integration.
(v) Financial
1. Selection of types of funds to be secured
2. Distribution of profit.
B. Judicial
(i)
Comparison
Of accomplishment with goal.
(ii)
Evaluation
1. Of accomplishment with the cost.
2. Of alternative possibilities.
(iii) Counsel
In place of decision or command.
There are certain behavioral characteristics of top-level executives given below:
i) Drive - Pure physical energy is an absolute necessity.
ii) A strong desire to become the top man.
iii) A willingness to work for long hours.
iv) Projecting an image of success.
v) Managements effectiveness.
2.

Upper Middle Management

It consists of the head of the Personnel Administration Department, Production or Works Manager,
Sales Manager or others responsible for research, finance, accounting and the like. Thus, Upper Middle
management consists of the executives responsible for leading functions within the enterprise such as Personnel
Administration, Production, Sales, Research, etc.
3.

Middle Management

Middle Management acts with and under Top Management to accomplish these broad objectives
of administration:
22

1.

To run the details of the organization, leaving the top officers as free as possible of their other
responsibilities.

2.

To co-operate in making a smoothly functioning organization.

3.

To understand the interlocking of departments in major policies.

4.

To achieve the co-ordination between the different parts of the organization.

5.

To build up a contented and efficient staff where regard is given according to capacity and merit
and not according to change or length of service.

6.

To develop leaders for the future by broad training and experience.

7.

To build up a company spirit where all are working to provide a product or service wanted by
others.

4. Foreman
They are men who have direct supervision over the working force in office, factory, sales field or
other areas of activity of the concern. The function of the foreman include the supervision of the workmen,
procurement of needed material and tools for his crew from the stockrooms, the planning, scheduling and
assignment of work of each man, the training of workers, the issuing of orders, the maintenance of quality, the
care of machines and equipments, the getting out of the required production, improving working condition,
developing morale and team spirit, maintaining discipline, controlling absenteeism, adjusting grievances,
improving methods of production and representing the management to the workmen and the workmen to the
management.
5.

Rank and File

The responsibilities of the persons belonging to this group are even more restricted and more specific
than those of the foreman.
Concepts for Getting Results through People
The well-known American Management Consultant, Mr.Raymond.G.Leon in his popular book
captioned Manage More by Doing Less, has outlined the following emerging concepts for getting results
through people:
1.

Management by Communication (M.B.C.)

2.

Management by System (M.B.S)

3.

Management by Results (M.B.R.)

4.

Management by Exception (M.B.E.)

5.

Management by Participation (M.B.P.)

6.

Management by Motivation (M.B.M.)

7.

Management by Objectives (M.B.O.)

Some of these concepts are briefly explained in the following paragraphs.
23

Management by Communication
Communication means the process of passing information and understanding from one person to
another. Since managing is getting things done through others, it is an obvious requirement that the manager
must communicate with the members of his organization.
Management by System
The management by system may briefly be summarized as: (i) Recognize the problem, analyze it and
define objectives; (ii) Gather and analyze the necessary data; (iii) Synthesize possible alternatives; (iv) Review
and evaluate each alternative; (v) Test conclusions, if possible; (vi) Take selected action; (vii) Review results
and, if necessary correct action; (viii) formulate and test principles based on experimental results of many
cases.
Management by Results
In any measurement, there are four essential elements (i) Definition of the characteristic or quality to
be measured. (ii) Selection of the standard for that characteristic or quality. (iii) Determination of the units in
which measurement is to be made, and (iv) Creation of accurate means to compare the characteristic or
quality, of a product, with the selected standard.
Management by Participation
Well, this is possible under Participative Management. The four corner-stones of philosophy are: (i)
belief in the doctrine of trusteeship advocated by Mahatma Gandhi, (ii) reorganization that employee is not
merely a means of production, but above all a human being first and always, (iii) realization that as an employer
one is more of a Giver and less of a Taker, and (iv) that workers do not want money they need money.
Management by Motivation
Motivation actually relates to the will to work. It seeks to know the motives for work and to find out
ways and means, by which their realization can be helped and encouraged.
Management by Objectives
M.B.O. is a system of management involving effective participation and involvement by each
member of the organization. The disciple of M.B.O. makes each individual output-centered, result-oriented,
optimum-committed and achievement-motivated.
Once job responsibilities have been adequately defined, there are five main steps to be taken in
setting and achieving objectives:
1.

Objectives should, as far as possible, be quantified.

2.

Managers must be relieved of constraints, which inhibit the achievement of their objectives.

3.

The manager must be aware of his performance.

24

4.

The performance appraisal must be fair and result in an appreciation managements strength and
weakness.

5.

The performance appraisal must result in equitable reward being established between managers
of the same grade.

The Manager and His Job

A Manager is a person who gets things done through and with the people in formally organized
groups and he is the key man in the organization structure. The Manager essentially deals with the people and
resources. His job is to co-ordinate the activities of people and optimizes the use of resources to reach the
defined goals. According to Haimann, Manager plans, organizes, staffs, directs and controls. As observed by
Peter Drucker, the Manager performs three types of work simultaneously: (i) manage a business (ii) managing
managers; and (iii) managing workers and work. Whatever decision is taken by a Manager affects all these
facets.
He occupies pivotal role in between the Board of Directors and the Subordinate Managers. Since
the Manager is a member of the group next above and at the same time the leader of the group reporting to
him, he is best placed to bring to his group interpretation of the goals decisions, attitude, and actions of the
higher group. The Manager, thus, becomes the interlocking tie between higher and lower levels of the
organization and the natural and most effective channel for communication.
Ordinarily, he is responsible for: (1) Carrying on to effect the policy laid down by the Board of
Directors; (2) Communication and interpretation of policy for information and instructions of subordinate
executives; (3) Keeping the operations of the company under constant review and presenting to the board
periodically the accounts and statistics showing the progress and current position of companys affairs; (4)
Maintaining definitions and structure of responsibilities of executive and supervisory positions in the
organization up-to-date in requirements; (5) Approving the manufacturing , distributing, development plans
submitted by the senior executives concerned; (6) Giving decisions and interpretation of policies when for
good reasons a departure from agreed policy arises; (7) Ensuring adequate arrangement to safeguard the
continuity of supplies to the customers; (8) Having periodical meetings with the senior executives to review
performances against budget standard; (9) Ensuring adequate coordination of activities throughout the
organization; and (10) Ensuring adequate facilities for development of executive and supervisory staff.
Duties of the Manager
(1) To consider suggestions from subordinate executives in regard to companys policy and submit
them objectively to the Board of Directors; (2) To review the reports received from specialist executives in
relation to their own fields; (3) To ensure that all executives understand the nature and importance of budgetary
control principles and applications of such principles to the activities carried out within their own jurisdiction;
(4) To give adequate attention and promoting high level of morale among the executive staff and throughout the
organization.
25

MANAGEMENT THEORIES
The evolution of modern management thought and principles have been developed chiefly by the
following theorists.
TAYLOR AND SCIENTIFIC MANAGEMENT
Taylor and other contributories, notably Frank Gilbreth and Lilian Gilbreth, Henry Gant, Emerson,
investigated the effective use of human beings in industrial organizations. They studied primarily the use of
human beings as adjuncts to machines in performance of routine tasks. The area of human behavior in
organizations investigated by them was quite narrow, and the theories of human behavior in this approach
encompass primarily physiological variables. This is because of the historical accidents of their positions and
training in the industry and the type of problems they faced then.
F.W Taylor is known as the father of scientific management. He has defined scientific management
as the art of knowing exactly what you want men to do and then seeing that how they do it in the best and
cheapest way.
1.

Replacing rule-of-thumb methods with scientific determination each element of a mans job;

2.

Scientific selection, and training of workers;

3.

Co-operation of management and labour to accomplish work in accordance with scientific

method; and

4.

An equal division of responsibility between managers and workers.

Taylor has emphasized that these are the mechanisms of management, and the mechanisms of
management must not be mistaken for its essence, or underlying philosophy. Taylor also adopted differential
piece-rate plan to motivate workers for higher efficiency. According to this plan, high wage rates were
provided to workers performing least standard work, and lower wage rates to workers achieving less than
standard work with no guarantee of minimum wage.
Principles of Scientific Management
1.
Separation of Planning and Doing. Before Taylors scientific management, a worker
himself used to decide how he had to work and what instruments were necessary. Thus, he planned his work
also, and there was gang boss to supervise his work. Taylor has emphasized that planning function should be
separated from actual performance and should be given to specialists.
2.
Functional Foremanship. Taylor has evolved functional foremanship to supervise and giving
various directions. In this system, eight persons are involved to direct the activities of workers. Out of these,
four persons (i) route clerk, (ii) instruction card clerk, (iii) time and cost clerk, and (iv) disciplinarian are related
with planning function and the remaining four (a) speed boss, (b) inspector, (c) maintenance foreman, and (d)
gang boss are concerned with operating function. This is totally against the principle of unity of command as
shown in the following chart.
26

3.
Job analysis. There is one best way of doing a job, which requires least movements,
consequently less time and cost. In every industry, this way should be determined which involves time,
motion, and fatigue study.
Workshop Manager

Planning Incharge

Route
Clerk

Instruction
Card Clerk

Time & Cost

Clerk

Production Incharge

Speed
Boss

Disciplinarian

Inspector

Maintenance

Gang
Boss

Worker

Functional Foremanship
(i)

Time study. Time study involves the determination of time a movement takes to complete. The
movement, which takes minimum time, is the best. This helps in determining fair work for a
particular period.

(ii)

Motion study. Motion study involves the study of movements in parts, which are involved in
doing a job and thereby eliminating the wasteful movement and performing only necessary
movements. This helps in reducing the fatigue of workers.

(iii)

Fatigue study. This indicates that the workers feel fatigued after putting in work for a certain
period and they are not able to do the work at their full capacity. Thus, they should be provided
appropriate rest at appropriate intervals. The fatigue study shows the time and frequency of rest.

4.
Standardization. Standardization is to be maintained in respect of instruments and tools,
period of work, amount of work, working conditions, cost of production, etc. These things should be fixed in
advance based on various experiments.
5.
Scientific selection and training. Selection of workers should be on scientific basis, and
their education, experience, aptitude, physical strength, etc., should be adequately considered. A worker should
be given work for which he is physically and technically most suitable. Training should be provided to workers
to make them more efficient.
6.
Financial incentives. Workers can be motivated by financial incentives. If provision exists to
earn higher wages by putting higher efficiency, workers will put more work. Taylor himself applied differential
27

piece-rate system, which is of a highly motivating nature. The wage should be based on individual performance
and on the position, which he occupies. The rate should be fixed on accurate knowledge and not on estimation.
7.
Economy. While applying scientific management, not only scientific and technical aspects
should be considered but adequate consideration should be given to profit and economy. For this purpose,
techniques of cost estimates and control should be adopted.
8.
Bilateral Mental Revolution. Scientific management depends upon the co-operation
between management and workers. For this co-operation, there should be a mental change in both parties
from conflict to co-operation. Taylor feels that this is the most important factor in executing scientific
management.
Taylors Principles and Afterwards
Although Taylors principles were intended for broad application, his emphasis was not on general
management; but on management at the shop level. He was more concerned about the efficiency of workers
and managers and actual work and left the principles of management, which could be followed, in other
functional areas. These principles, more specifically time, motion, and fatigue study, became the basis for some
time, but the much talked mental revolution could not take place. Managers on the plea that it involved extra
costs on their part in various experiments, and by workers on the plea that by this method they could put in
more work; however, the profit did not go to them resisted the adoption of scientific management. Both the
parties took a short-term view.
FAYOL AND ADMINISTRATIVE MANAGEMENT
Henry Fayol studied the functions and principles of management in a systematic manner. Besides,
Olivr Sheldon, Haldane, Luther, Gullick, Mooney and Reiley, Urwick and many others, has made notable
contributions. These theorists viewed the central problem as being one where there must be identification of
tasks necessary for achieving the general purpose of the organization and of the grouping to take place to fulfill
these functions most effectively.
Fayol observed the organizational functioning from managers point of view. He found that all
activities of the organization could be divided into six groups:
1.

Technical (relating to production);

2.

Commercial (buying, selling, and exchange);

3.

Financial (search for capital and its optimum use);

4.

Security (protection of property and person);

5.

Accounting (including, statistics) and

6.

Managerial (planning, organization, command, coordination and control).

He points out that these activities exist in every organization. He further observes that first five
activities are well known to a manager and consequently has devoted most of his book to analyze managerial
28

activities. Fayol has divided his approach of studying management in three parts: (i) managerial quantities and
training, (ii) general principles of management, and (iii) elements of management.
A.

Managerial Qualities and Training

Henry Fayol was the first person to identify the various qualities for a manager. According to him
these qualities are;

B.

(i)

Physical (health, vigour, and address);

(ii)

Mental (ability to understand and learn, judgment, mental vigour, and adaptability);

(iii)

Moral (energy, firmness, initiative, loyalty, tact and dignity);

(iv)

Educational (acquaintance with matters related to general functioning);

(v)

Technical (acquaintance with the functions being performed); and

(vi)

Experience (erasing from the work).

Principles of Management
Fayol has given fourteen principles of management. These principles are as follows:

1.
Division of Work. Fayol has advocated division of work to take the advantage of
specialization. According to him, specialization belongs to the natural order. The worker always works on the
same matters, the manager concerned always with the same matters; acquire an ability, sureness, and
accuracy, which increase their output. Each change of work brings in it training and adaptation, which reduces
output. Thus, division of work can be applied at all levels in the organization. However, he has recognized the
limitations of division of work and has advocated that experience and sense of proportion will decide the extent
to which division of work can be utilized fruitfully.
2.
Authority and Responsibility. The authority and responsibility are related, with the latter the
corollary of the former and arising from the former. He finds authority as a continuation of official and personal
factors. Official authority is derived from the managers position and personal authority is derived from
intelligence, experience, moral worth, past services, etc. Responsibility arises out of assigning the work.
3.
Discipline. All the personnel serving in the organization should be disciplined. Discipline is
obedience, application, energy, behavior, and outward mark of respect shown by employees. Discipline can
be classified into two types: self-imposed discipline and command discipline. The former springs from within
the individual and is in the nature of spontaneous response to a skilful leader. Command discipline stems from
a recognized authority and utilizes deterrents to secure compliance with a desired action, which is expressed
by established customs, rules, and regulations. The ultimate strength of command discipline lies in its certainty
of application.
4.
Unity of Command. Unity of command means a person in the organization should receive
orders from only one superior. The more completely an individual has a reporting relationship to a single
superior, the less the problem of conflict in instructions and the greater the feeling of personal responsibility for
results. The principle of unity of command is useful in the clarification of authority-responsibility relationships.
29

5.
Unity of Direction. Unity of direction means one unit and one plan. According to this
principle, each group of activities with same objective must have one head and one plan. The unity of direction
is different from unity of command in the sense that former is concerned with the functioning of body
corporate; the latter is concerned with personnel at all level. Unity of direction is provided for by sound
organization of the body corporate, unity of command turn on the functioning of the personnel. Unity of
command exists without unity of direction, but does not flow from it.
6.
Subordination of Individual to General Interest. Command interest is above the individual
interest and when there is conflict between these two, the common interest must prevail. However, factors like
ambition, laziness, weakness, etc., tend to reduce the importance of general interest.
7.
Remuneration of Personnel. Remuneration and methods of payment should be fair and
provide maximum possible satisfaction to employees and employers.
8.
Centralization. Everything, which goes to increase the importance of the subordinates role,
is decentralization; everything, which goes to reduce it, is centralization. Without using the term centralization
of authority. This pattern is determined by individual circumstances and should be based on optimum
utilization of all faculties of the personnel.
9.
Scalar Chain. There should be a scalar chain of authority and communication ranging from
the highest to the lowest positions. It suggests that each communication going up or coming down must flow
through each position in the line of authority. It can be short-circuited only in special circumstances when its
rigid following would be detrimental to the organization. For this purpose, Fayol has suggested gangplank, which is used to prevent the scalar chain from bogging down action. His gangplank can be
presented as follows:
A

M
N
O

D
E
F

Scalar Chain and Gang-Plank

In this figure, A is the top man having immediate subordinates B and L. In turn, B and L are having
immediate subordinates C and M. This continues up to the level of G and Q. Ordinary the communication
must follow from A to B to C to D and so on. It means if any communication is going from F to P, it will flow
from F to E reaching A via D,C,B, and coming down to P via L,N, and O. Fayol suggests that this system
takes time and can be substituted by gang-plank (dotted line) without weakening the chain of command. It
would only be necessary for the superiors of F and P to authorize them to deal directly provided each informed
his superiors of any action taken. Fayol writes that it allows the two employees F and P to deal in a few hours
with some question or other which via the scalar chain would pass through twenty transmissions, inconvenience
people, involve masses of paper, lose weeks or month, to get to a conclusion less satisfactory than the one
which could have been obtained via direct contact.
30

10. Order. Both material order and social order are necessary. The former minimises lost time and
useless handling of materials. The latter is achieved through organization and selection.
11. Equity. In running a business a combination of kindliness and justice is needed. Treating
employees well is important to achieve equity.
12. Stability of Tenure of Personnel. Employees work better if job security and career progress are
assured to them. An insecure tenure and a high rate of employee turnover will affect the organization adversely.
13. Initiative. Allowing all personnel to show their initiative in some way is a source of strength for the
organization. Even though it may well involve a sacrifice of personal vanity on the part of many managers.
14. Esprit de Corps. Management must foster the morale of its employees. Real talent is needed the
coordinate effort, encourage keenness, use each persons abilities and reward each ones merit without arousing
possible jealousness and disturbing harmonious relations.
C.

Elements of Management

Fayol holds that management should be viewed as a process consisting of five elements. He has
regarded the elements of management as its functions. These are planning, organizing, commanding,
coordinating, and controlling. He observes that planning is the most important and difficult managerial
responsibility and a failure to plan properly leads to hesitation, false steps, and untimely changes in directions
which cause weakness in the organization. He has given particular attention to the human aspects of
organization. Creation of organizational structure and commanding function is necessary to execute the plans.
Coordination is necessary to make sure that everyone is working together, and control looks whether
everything is proceeding according to plan.
Universality of Management. Fayol has emphasized that management is universal. The principles
of management apply not only to business, but also to political, religious, philanthropic, military, or other
organizations. The principles of management are, however, flexible, not absolute, but they are usable regardless
of changing and special conditions.
Other Administrative Theorists
Besides Fayol, contributions have come from other administrative theorists. Notable among these are
Max Weber, Sheldon, Mooney, Reiley, Urwick, and Bernard etc. Max Weber, who has analyzed church,
government, military, and business organizations, believes that bureaucratic structures are most efficient form
for all types of organizations. According to him, bureaucratic organizations are the most rational means of
carrying out imperative control over human beings. There are five basic characteristics of a bureaucratic
organization: specialization, hierarchy of authority, rules, impersonality, and trained personnel. These principles
are quite similar to those developed by many early organization theorists in business field.
Oliver Sheldon made a marked departure from earlier writings by adding ethics and social
responsibility to the scientific study of management. Sheldon recognized management as having responsibility
to the society, and his normative approach was able to develop for the first time to view management as both
a science and a philosophy.
Mooney and Reiley, both executives at General Motors, U.S.A., have emphasized some principles
which have become the cornerstone of classical organization theory. These principles are: coordination
31

principle, scalar principle, functional principle, and staff phase of functionalism. They have also demonstrated
that all organizations- military, religious, and industrial- have common attributes. They all require coordination
and have a system of hierarchy, and clearly defined duties and responsibilities for each job.
Mary Parker Follett made significant contributions in the areas of motivation, leadership, power, and
authority. She has also described management as a philosophy. Her recognition that organizations can be
viewed from the perspective of individual and group behavior established her as an early advocate of what
was to become the behavioral movement. Urwick, though not strictly an original thinker, has integrated the
various views into a unified whole. Apart from these, contributions have come from Sloan, Gullick, Merriam,
Stene and Dale.
BERNARD AND SOCIAL SYSTEMS THEORY
Bernards analysis of manager is truly a social systems approach since, in order to comprehend and
analyze the functions of executives. The main contributions of Bernard can be summarized as follows:
1.
Concept of Organization. Bernard has defined organization as a system of consciously
coordinated activities of two or more persons. He has emphasized three characteristics of the organization: (i)
the persons are able to communicate with each other; (ii) they are willing to contribute to the action; and (iii)
there is a common purpose.
2.
Formal and Informal Organizations. Organizations can be divided into two kinds: formal
and informal. The formal organization has consciously coordinated interactions that have a deliberate and
common purpose. On the other hand, informal organization refers to those social interactions, which do not
have common or consciously coordinated joint purpose.
3.
Elements of Organization. Every formal organization must have the following elements: (i) a
system of functionalization so that people can specialize: (ii) a system of effective and efficient incentive system
that will induce people to contribute to group action; (iii) a system of authority which will lead group members
to accept the decisions of executives; (iv) a system of logical decision-making.
4.
Functions of the Executives. Bernard has identified following functions of executives in the
formal organizations: (i) the maintenance of organizational communication through a system of organization; (ii)
the securing of essential services from individuals in the organization; and (iii) the formulation and definition of
purpose.
5.
Authority. Bernards new concept of authority is termed as acceptance theory of authority.
Bernard feels that a person will accept the communication as authoritative only when four conditions are met:
(i) he can understand the communication; (ii) he believes that it is not inconsistent with organizational purpose;
(iii) he believes it to be compatible with his own personal interest as a whole; and (iv) he is mentally and
physically able to comply with it.
6.
Executive Effectiveness. To make the executive effective, a high order of leadership is
necessary. He has emphasized that coordination, not leadership, is the creative process, but leadership is the
indispensable fulminator of its forces. Leadership is the test of executive responsibility because for successful
accomplishment, it requires an element of conviction that means identification of personal codes and
organization codes for the future of the leader.
32

7.
Motivation. Bernard did not agree with motivation through monetary rewards. Rather, he has
emphasized such factors as opportunity of distinction and power, pride of workmanship, pleasant organization,
participation, mutual supporting personal attitudes, and feeling of belongingness.
8.
Organizational Equilibrium. The organizational equilibrium is dynamic not static, as it has to
cope up with the dynamic situation. The equilibrium of the organization depends upon the individuals working
within it, other organizations, and society as a whole. The organizational equilibrium can be perceived not only
through logical appraisal but also through analysis and intuition, as in decision-making a person depends upon
beliefs and intuition also.
9.
Interaction between Formal and Informal Organizations. Within every formal
organization, informal organizations also exist in order to overcome the limitations of the formal organization.
In fact, Bernard has suggested that executives must develop informal organizations to serve as a means of
communication, to bring cohesion in the organization, and to protect the individuals from dominance and
onslaught of the organization. Both the formal and informal organizations depend upon each other and there is
continuous interaction between two organizations.
SIMON AND DECISION THEORY
Simon, a well-known authority in the field of administrative behavior and decision-making, has made
notable contribution in the field of management. He examined accepted principles of management and found
them contradictory and ambiguous. He decried these principles as myths, slogans, and homely proverbs.
He looked at the problems of management in the totality of social and psychological context. Though he
belongs primarily to co-operative social systems school, he has emphasized its decision-making aspects. His
main contributions can be analyzed as follows:
1.
Concept of Organization. Simon has emphasized the organization as a complex network of
decisional process, all pointed towards their influence upon the behavior of the operatives. He has viewed
organization containing distribution and allocation of decision-making functions.
2.
Decision-making. Decision-making is not only the core of management but management itself
is synonymous with managing. Decision-making can be broken into a series of three sequential processes: (i)
intelligent activity, the initial phase consisting of searching the environment for conditions calling for decisions;
(ii) design activity relating to invention, development and analysis of alternatives; and (iii) choice activity relating
to selection of a course of action.
3.
Bounded Rationality. Simon is of the view that man is not completely rational. He has
criticized such theories, which are based on the assumption of complete rationality. According to him,
managers are in search of optimal solutions and are satisfied with good enough solutions. Managers cannot
maximize because of various reasons and constraints.
4.
Administrative Man. Simon has given the concept of administrative man as the model of
decision-making. The model is based on the following assumptions: (i) Administrative man satisfies rather than
33

maximizes in decision-making process (ii) He recognizes that world he perceives is a simplified model of the
real world. Thus, he contends with simplification. (iii) He can make his choice without first determining all
possible alternatives and without ascertaining that these are in fact all the alternatives. (iv) He is able to make
decisions with relatively simple rules of thumb or tricks of trade, or force of habit.
CONTRIBUTIONS OF PETER DRUCKER
Peter Drucker contributions can be analyzed under six heads.
1.
Nature of Management. Drucker is against bureaucratic management. He has emphasized
creative and innovative management. The basic objective of management is to lead towards innovation. He has
taken the concept of innovation in a broad sense. Accordingly, the development of new ideas, combining of
old and new ideas, adaptation of ideas from the other fields or even to act as a catalyst and encourage others
to carry out innovation also constitute innovation. He has treated management both as discipline and as
profession. As a discipline, management has its own yardsticks for measurement. It has its own tools, skills,
techniques, and approaches. However, management is a practice, rather than a science.
Management as a profession is independent of ownership. Management professionals should be held
responsible for performance. He views that managements only authority is performance. Managers should not
be equipped only with skills, tools, and techniques, but they must be good practitioners so that they can
understand the cultural and social requirements of various countries and organizations.
2.
Management Functions. According to Drucker, management is the organ of its institution. It
has no functions in itself, and no existence in itself. He sees management through its tasks. Accordingly, there
are three basic functions of a manager, which he must perform to enable the institution to make its contributions
for (i) the specific purpose and mission of the institution, whether business, hospital, or university; (ii) making
work productive and the worker achieving; (iii) managing social impacts and social responsibilities. All these
three functions are performed simultaneously within the same managerial action. A manager has to act as
administrator where he has to improve upon what already exists and is already known. He has to act as an
entrepreneur in redirecting the resources from areas of low or diminishing results to areas of high or increasing
results. Thus, a manager has to perform several functions: setting of objectives, decision-making, organizing,
and motivating. Drucker has attached great importance to the objective setting function and has specified eight
areas where clear objective setting is required. These are market standing, innovation, productivity, physical
and financial resources, profitability, managerial performance and development, worker performance and
attitude, and public responsibility.
3.
Organization Structure. Drucker feels that there are three structural requirements of an
enterprise. First, it must be organized for business performance. Second, it should contain the least possible
number of management levels. Third, it must make possible the training and testing of tomorrows top
managers- giving responsibility to the manager while he is still young. Drucker has identified three important
aspects in organizing: activity analysis, decisions, and analysis of relations.
4.

Federalism. Drucker has advocated federal decentralization which is like Sloans concept of
34

centralized control in decentralized structure. Drucker has emphasized that decentralization goes far beyond
delegation. It creates a new constitution and new ordering principle. Decentralization can be equated with
federalism. In his view, federalism (i) sets the top management free to devote itself to its proper functions; (ii)
defines the functions and responsibilities of the operating people; (iii) creates yardstick to measure their
success and effectiveness in operating jobs; and (iv) helps to resolve the problem of continuity through giving
the managers of various units education in top management problems and functions while in an operating
position.
5.
Management by Objectives. Drucker regards the concept of management by objectives
(MBO) as one of the major contributions to the management discipline. It is regarded to be such an important
method that a firm cannot claim to be modern if it does not follow the practice of management by objectives.
This concept includes method of planning, setting standards, appraisal of performance, and motivation.
Druckers MBO, in his opinion, is a philosophy. It rests on a concept of human action, human behavior, and
human motivation. It applies to every manager, whatever his level of function and to any business enterprise
whether large or small. It ensures performance by converting objective needs into personal goals. The concept
and technique of MBO are being applied by most of modern organizations. In fact, it has revolutionalised the
management process.
6.
Futurity. Drucker has all along been concerned with futurity. He bases his forecasts on the
present actions and decisions. Though he does not profess resistance to change, the rapid pace of
development of technology and its effects on the society obsess him. .
HAWTHORNE EXPERIMENTS AND HUMAN RELATIONS
Many of the findings of earlier writers, particularly of scientific management, which focused attention
on the mechanical and physiological variables of organizational functioning, were tested in the field to increase
the efficiency of the organizations. Surprisingly, positive aspects of these variables could not evoke positive
response in work behavior, and researchers tried to investigate the reasons for human behavior was something
more than mere physiological variables. Such findings generally a new phenomenon about the human behavior
and focused attention on the human beings in the organizations. As such, this new approach has been called
human approach of management.
The essence of the human relations contributions is contained in two points: (1) organizational situation
should be viewed in social terms as well as in economic and technical terms, and (2) the social process of
group behavior can be understood in terms of clinical method analogous to the doctors diagnosis of the human
organism.
Now, the main contributions of Hawthorne Experiments may be generalized as below:
1.
Social Factors in Output. An organization is influenced by social factors. Elton Mayo has
described an organization as a social system, a system of cliques, informal status system, rituals, and a mixture
of logical, non-logical, and illogical behavior. Thus, organization is more than a formal structure of arrangement
of functions. The level of production is set by social norms, not by physiological capacities. People are socio35

psychological beings. These characteristics determine the output and efficiency in the organization. Economic
satisfaction and productivity do not necessarily go together. Non-economic rewards and sanctions significantly
affect the behavior of the workers and limit the effect of economic incentives.
2.
Groups. In the organization, individuals tend to create groups. Often workers tend to react as
members of the groups and not as individuals. The group determines their norms of behavior. If a person
resists a particular norm of group behavior he tries to change the group norm because any deviation from the
group norm will make him unacceptable to the group. Thus, management cannot deal with workers as
individuals but as members of work groups, subject to the influence of these groups.
3.
Leadership. Leadership is important for directing groups behavior. Leadership cannot come
from superiors only as held by scientific management approach. There may be informal leadership as is clear
by bank wiring experiments. In some cases, informal leader is more important than formal one- as in the
experiments, the supervisor could not exert pressure on the work group about the production norm because
he was under considerable pressure to accept group norm of which he was in charge. However, a supervisor
is more acceptable as a leader if his style is in accordance with human relations approach. In this context,
democratic style is the best, which provides greater satisfaction to workers.
4.
Communication. These experiments show that communication in the organization is very
important. Through communication, workers can be explained why a particular course of action is being taken:
participation of workers can be sought in decision-making process concerning the matters of their importance;
and problems faced by them and their attitudes, opinions and methods of working may be identified.
5.
Conflict. The conflict generates in the organization because of the creation of groups with
conflicting objectives. Thus, groups may be in conflict with organization, though the creation of groups
sometimes helps to achieve organizational objectives. Similarly, conflict may arise because of maladjustment
of individual and organization. This conflict raises the problem of adjustment of individual to the organization.
As the individual moves through the time and space within the organization, there constantly arises the need of
adjustment of the individual to the total structure because either individual progresses upward at a rapid pace
or the structure itself may change in time, while the individual stands still. In either event, the change takes place
in the position of individual with respect to the structure, hence requires adjustment.
6.

Supervision. The supervisory climate has also an important role to play in determining the

rate of output. The friendly to the worker, attentive, genuinely concerned supervision affects the productivity
favorably.
Contributions of Behavioral Scientists
In contrast to human relations, which assumes that happy workers are productive workers, the
behavioral scientists have been goal and efficiency-oriented and consider the understanding of human behavior
to be the major means to that ends. Contributions in this way are in the areas of motivation, leadership,
communication, organizational conflicts, organizational change and development, integrating organizational and
individual goals, and group dynamics.
36

Contributions of Systems Scientists

Various authors on systems thinking have attempted to develop a generalized theory, which can be
applied to any system physical, biological, and social. They have termed it as General Systems theory (GST).
The theory is related with developing a systematic theoretical framework for describing the empirical world.
It seeks to classify systems by way of their components are organized, and to derive the laws, or typical
patterns of behavior for different classes of systems.
Though systems approach is comparatively new in management, during 1930s and 1940s, many
persons from other fields raised the voice for new logic of studying both living and non-living systems. The
ideas brought about by the information theory and cybernetics had two divergent effects. They showed that (i)
how closed systems could approximate open systems by introduction of feedback mechanism, and (ii) the
impossibility of duplicating of non-living systems in living systems.
MANAGEMENT PROCESS AND COORDINATION
The process, in general, is defined as a series of actions or operations conducting to an end. The
management has been defined as a process. The management process assumes that the totality of what
managers do can be divided into a set of interrelated functions. The logic of the management process is that
particular functions are performed in a sequence through time. For example, planning comes first, then
organizing and other function is a sequence. However, there may be significant departures from this sequence
idea in actual practice. Thus the functions may be fused and sequence may begin with different functions and
come to an end without completing the entire process cycle. Moreover, the management functions have
iterative quality, that is, they are contained within each other. For example, planning, organizing, directing and
controlling all may occur within the planning process. Similarly, organizing function may involve planning,
directing and controlling functions. Thus, all functions of the management can be conceived as subfunctions of
each other.
Functions of Management
It is true that all the managers have to perform certain functions in the organization to get the things
done by others. But what are these functions is not clear. The reasons are: (i) there is not complete agreement
among writers on management on what functions should be included in management process; (ii) terms or
functions have not been defined with a sufficient degree of precision and it is often difficult to know what a writer
really means by a given concept; and (iii) list of managerial functions, and descriptions of them, generally have
been derived from individual experiences rather than from systematic observations.
Table: Evolution of Organic Management Functions
1.
2.

Early concept borrowed

Management process
defined by Fayol

Plan
Plan

Organize
Organize
Coordinate
37

Command
Command

Discipline
Control

3.
4.
5.
6.

Further modification
Modified by behavioural
influence
Recent modification
by business
Suggested further modification

Plan
Plan

Organise
Organize

Direct
Motivate

Control
Control

Plan

Organize

Integrate

Measure

Plan

Organize

Achieve

Appraise

Thus, the list of managerial functions varies from three to eight. Unanimity is to be found only in
respect of three functions, viz., planning, organizing and controlling. However, to get things done by others
requires the directing of human behavior which has been called by various authors as commanding, motivating,
communicating or leadership. These all can be included under the directing function making the scope of
directing wide. However, this has acquired great importance in the context of the managers responsibility for
assembling of human resources in the organization. Thus, the managerial functions may be grouped as planning,
organizing, staffing, directing, and controlling.
It is always not possible in practice to classify all managerial functions neatly into these categories,
since the functions tend to grow together. It is not particular to insist on a special time sequence for the various
functions and management process may be seen as a circular continuous movement as shown in Figure.

Planning

Controlling

Directing
Fig. Management
Process

Organizing

Staffing

This process may start from any point, not necessarily from planning, and end at any point.
Moreover, at the same time several functions may be performed. The various functions of the management are
described as follows:
1.

Planning. Planning is the conscious determination of a future course of action to achieve the

desired results. Before starting any action, one has to plan as how the work will be performed, when and how
to be performed so that he can perform the function efficiently and effectively. The planning involves, in the
organization, the selecting of objectives, policies, procedures, and programmes. This also involves taking the
decision about choosing the best one out of the several alternatives available to the management.
Planning function, in the organization, is not performed only by top management but it is the
responsibility of managers at every level because planning may be either for the entire organization or for any
38

organized part thereof. Planning is a pervasive, continuous and never-ending activity. It leads to more effective
and faster achievements in any organization and enhances the ability of the organization to adapt to future
eventualities.
2.

Organizing. Organizing is the process of dividing work into convenient tasks or duties, of

grouping such duties in the form of posts, of delegating authority to each so that work is carried out as
planned. Organizing function involves the process of (i) determining and defining the specific activities that are
necessary to accomplish the planned goals; (ii) grouping the activities in a logical pattern or structure; (iii)
assigning the activities to specific positions and people; and (iv) delegating authority to these positions or
people. Organizing can be viewed as a bridge connecting the conceptual ideas developed in creating and
planning to the specific means for accomplishing these ideas.
Organizing function contributes to the efficiency of the organization (enterprise). Through organizing
process, all the activities necessary for goal achievement are performed and repetition and duplication of
activities is avoided, thereby reducing operation cost in the organization.
3.

Staffing. Staffing involves manning the positions created by organization process. This

process includes inventory, appraising, and selecting candidates for positions, fixing financial compensation,
training and developing them to discharge organizational functions effectively. 4. Directing. After planning,
organizing, and staffing, the manager has to tell the subordinates as how they have to perform the functions. The
subordinates should know organizational policies, objectives, organization structure, various individuals in the
organization, authority and responsibility, every related thing which is helpful in performing the activities. Once
subordinates are oriented, the superior has a continuous responsibility of guiding and leading them for better
work performance and motivating them to work with zeal, confidence and enthusiasm. Thus directing includes
communicating, motivating and leading.
5.

Controlling. Controlling involves the process of visualizing whether the activities have been

or are being performed in the same way as contained in the plans because any deviation will result in
inefficiency in the organization. Control processes comprise (i) fixing appropriate standard for measuring work
performance; (ii) comparing actual and planned work; (iii) finding variances between the two and reasons for
the variance; and (iv) taking corrective actions. Control keeps a check on other functions for ensuring
successful functioning of management. It brings to light all bottlenecks to work performance and operates as
a straight pointer to the needs of the situation.
A manager has to perform these functions in the organization whatever the level of manager or the
objective of the organization is.
COORDINATION: THE ESSENCE OF MANAGEMENT
It is essence of management, rather one of its functions. Some manages even feel that coordination
is one word that best suggests the sum-total of managerial functions. Certain proponents further suggest that
the term coordination is better descriptive term of managers functions than management itself. Such advocates
39

feel that coordination is, for the most part, synonymous with management. The reasons for such thinking are
that for any group effort it is desirable that each effort should be purposeful, constructive, and contribute toward
the predetermined results. Each such effort should tend to help others of the group in achieving the composite
effort deemed essential for the task accomplishment. While this is true but the arguments that coordination is
synonymous to management, or coordination seems better reflection of managerial actions are not highly
tenable in that because coordination is the heart of management and the heart of the body cannot be whole.
This, however, suggests that coordination is not a management function.
A management function is different from coordination. Tead has defined a function as a body of
duties closely related in harmonious character and in operational similarity, which for purpose of execution has
to perform some important and some less significant functions. Thus the different managerial elementsplanning, organizing, staffing, directing, and controlling are the various functions with certain objectives and
having within each various sub functions, some more important and some less important. In fact, the various
managerial functions taken individually serve a particular purpose only in achieving total managerial goals- to
get the things done by others. Coordination, on the other hand, involves the integration of human efforts for
achieving the goal, which is not a particular function but the basic objective of all the managerial functions.
When various managerial functions are performed properly and adequate consideration is given to
their interdependency, the result should be an integrated, well-balanced composite effort exerted by an
informed and satisfied work group. Thus coordination is achieved automatically. It is only when there is a poor
execution of management process, the need for special means of coordination arises.
Coordination Defined
Coordination may be defined as integration or synchronization of group efforts in the organization to
achieve its objectives. Each individual in the organization is related with others and his function affects others
too. Thus, all persons in the organization contribute to the organizational, efficiency and this efficiency will be
maximum when each individuals efficiency is maximized and integrated. If this is not integrated, the efficiency
of some individuals may be counter-productive. The definition of coordination indicates the following features
of coordination.
1.

Coordination is applied on group efforts not on individual efforts. It involves the orderly pattern
of group efforts because an individual who is working in isolation does not affect any ones
functioning and no need of coordination arises.

2.

Coordination is a continuous and dynamic process and some sort of coordination exists in every
organization; however, management attempt is directed to achieve high degree of coordination.

3.

Coordination emphasizes unity of efforts, which is the heart of coordination process. This involves
the fixation of time and manner of performing various activities in the organization and makes the
individual efforts integrated with the total process.

4.

Coordination is managerial responsibility and management tries to achieve it through various

functions.
40

5.

Coordination has a common purpose of getting organizational objectives, and achievement of

organizational objectives depends upon the degree of coordination.

Coordination and Co-operation

Coordination is not to be confused with co-operation, for two terms denote quite different meanings
in management. The term coordination is related with the synchronization of efforts, which may have amount,
time, and direction attributes. To each manager, it affords a means of viewing in true perspective of work of the
particular unit or department of which he is in-charge. On the other hand, co-operation is collective action of
one person with another or other persons towards a common goal. The act of co-operation leads to the
establishment of co-operative system in which physical, biological, personal, and social factors or elements are
present. It is based on the assumption that every member of the co-operative social system will work in the
general interest of the system as a whole and not for his self-interest. Thus the co-operation is the spirit which
works under motto Each for all and all for each.
Judging from the above point of view, for a given situation, it is entirely possible for co-operation to
exist without coordination. Though established on co-operative basis, coordination may lack creating lot of
inefficiency. The non-existence of co-operation and coordination together is possible because the basic
objectives of these two might be different and consequently the working. However, it is not necessary that
coordination always exist in all cases. Thus for organizational efficiency and effectiveness, coordination is
necessary for all organizations which have collectively of people with common objectives.
Need for Coordination
The need for synchronizing individual efforts in the organization arises because of differences as to
how group objectives can be achieved or how individual and group objectives are integrated. When the
organization grows in size, it requires the large number of individuals. However, their efforts towards mutual
goals do not automatically mesh with the efforts of others. To perform the different functions properly by these
individuals, managers have to reconcile differences in approach, timing, effort and interest. Thus, in an
organization coordination is needed because of two factors:
1.

Number and Complexities of Activities. With the increase in the size of organization,

number and complexities of various activities increase. These require greater degree of specialization, division
of labour and a large number for individuals. Each individual in the organization has his independent personality,
way of working, and approach towards problems. To evolve harmonious working throughout the organization,
coordination is also needed but its degree varies.
2.

Conflicting Individual and Organizational Goals. Individuals join the organization as its

members to fulfill their certain goals, that is, to satisfy their physiological and psychological needs. These
individual goals may be different from group goals and a conflict between these two sets of goals may arise. In
such cases, organizational and individual goals are not fully achieved. It is imperative, for organizational
41

efficiencies, that both these goals are brought to a level of conformity and management tries to integrate
individual and group goals through coordination.
The coordination takes two forms: (i) coordination of various activities, and (ii) coordination of
individuals. However, coordination of individual becomes a very complex process because of the complexity
of individual nature.
Principles of Coordination
There are four fundamental principles of coordination.
1.

Principles of Direct Contact. Principles of direct contact state that coordination can be

achieved in a better way through interpersonal relationships. Coordination requires communication, and
communication in oral form through personal contact is most effective to convey and understand ideas,
suggestions, views, feelings, etc. This helps in removing misunderstanding between two persons or
departments making their functioning harmonious. The coordination is achieved through understanding and not
by order.
2.

Early Beginning. Coordination is to be aimed at in the early stages of management process,

that is, at the stage of planning and policy-making stage. Even at the stage of planning, coordination can be
achieved through consultation, exchange of ideas, and co-operation. At the later stage, when plans are
executed into actions, coordination is difficult unless the process has been initiated earlier.
3.

Continuity. Coordination is a continuous process and is involved with every managerial

function. Thus, it should always be formed to tackle some specific problems of coordination; these cannot
replace the continuous efforts of coordination.
4.

Reciprocal Relation. The principle states that all factors in a situation are reciprocally related.

They influence each other and are influenced by others. Thus, the functioning of an individual is influenced by
the functioning of others and, in turn, it also affects the functioning of others. This requires integration of all
efforts, actions and interests. This indicates that the method of achieving coordination is largely horizontal rather
than vertical.
Techniques of Effective Coordination
The basic objective of all managerial functions is to get things done by coordinated efforts of others.
Thus, every function leads to coordination. However, following are the specific techniques for achieving
coordination:
1.
Coordination by Chain of Command. In an organization, the chain of command is the most
important method of coordination. Superior, because of his organizational position, has the authority to issue
orders and instructions to his subordinates. Weber has indicated that in a controlled administration,
coordination is achieved .
42

2.
Coordination by Leadership. Leadership brings individual motivation and persuades the
group to have identify of interests and outlook in group efforts. Ordway Tead has stated that top management
should practice leadership because without it, no coordination can be achieved. In fact, whatever is necessary
for effective leadership is also required for coordination.
3.
Coordination by Effective Communication. Communication helps to developing
understanding between individuals or groups among whom coordination is to be achieved. Through
communication, every person understands his scope and limits of functioning, authority and responsibility, and
relationship with others. Thus, effective communication provides horizontal as well as vertical coordination if
there is a free and adequate flow of communication in all the directions horizontal, vertical, upward and
downward. Communication to be effective does not require only a communication network but to keep the
network free from any barrier, which affects flow of messages adversely.
4.
Coordination by Committees. Committees are the body of persons entrusted with
discharging some functions collectively as a group. Some committees have the authority to take decisions and
others make recommendations only. The decisions of the committees are group decisions and the persons
whose departments are affected by decisions generally constitute the committees. Thus the decisions
themselves provide coordination among various functions of the organization.
5.
Coordination by General Staff. Generally, in big organizations there is general staff meant
for coordination. This staff enjoys a central position in communication network. All the heads of departments
and sections send the various information to this center. This center stores the information and sends to various
departments only relevant and related information. This center, because of its specialized knowledge, is able
to assess the relevance and need of various information for a department. Thus, the coordination is achieved
by supplying inter-departmental information.
6.
Special Coordinators. In some organizations, special coordinators are appointed for
coordinating some specified activities. For example, in a particular project, along with various functionaries, a
project coordinator is appointed. His basic function is to coordinate various activities of the project and to
keep information about the development of project so that he can provide it to the party concerned for which
the project is being completed. Such projects are generally taken on contract basis which are to be completed
within the specified time.
7.
Self-coordination. This principle states that a particular department affects other departments
and in turn is affected by them. However, this department has no control over others. In such a case, if other
departments modify their actions in such a way that this affects the particular department favorably, selfcoordination is achieved. This requires effective communication across the department so that they are able to
appreciate the functioning of related departments. However, this method is not free from limitations and
shortcomings, and in the organization, favorable climate and environment need to be created for self-control.
Functional Areas of Management
Management process consists of several functions and a distinction should be maintained between
43

management functions (planning, organizing, staffing, directing and controlling) and organizational functions
(production, marketing, finance, etc.). Organizational functions differ from organization to organization
depending upon their nature, while the functions of the managers are common to all. Thus, a manager may be
put in production function, marketing or finance functions but he completes the activities of these functions
through all the managerial functions. These organizational functions are called functional areas of management.
Identification and classification of these functional areas are important as these put certain limitations over
mobility of a manager from one area to another. The universality of management functions suggests that a
manager can move in any area but the requirement to technical knowledge of a particular area prevents his
movement freely. Higher the level of management, more managerial and less technical ability is required. As
such, the mobility is greater at higher levels.
The number and types of functional areas of management are determined by the nature of the
organization and the types of classifications of various activities. U.K. A more acceptable and practical
classification includes four broad functional areas- production, marketing, finance and personnel. These areas
have their own organization, policies, procedures, and sub activities.
1.

Production. This area is normally kept under the control of a production manager who is

responsible for the performance of entire related activities. This area may further be classified into major sub
areas:
(i)

Purchasing. This is related with the purchase of various things required by the organization, and
managing transportation, etc.

(ii)

Materials Management. This sub area deals with the storing of the materials, materials control,
and issue of materials to departments where these are needed. This works in close
coordination with purchasing management.

(iii)

Research and Development. This area deals with the research and development of various
products in a manufacturing organization. The objective is either to bring refinement in an existing
product line or to develop entirely a new product.
2.

Marketing. This area involves the distribution of organizations product to the buyers. This

requires a number of steps and can be divided into following sub areas.
(i)

Advertising. This sub area deals with advertising of the products giving information about the
products to the prospective buyers and inducing them to purchase these.

(ii)

Marketing Research. It is related with the systematic collection, recording, and analyzing of data
relating to the marketing of goods and services.

(iii)

Sales Management. Sales management involves managerial efforts directed towards the
movement of products and services from producers to consumers.
3.

Finance and Accounting. This area deals with the record-keeping of various transactions

and management of financial resources.

44

(i)

Financial Accounting. It relates to record-keeping of various financial transactions, their

classification, and preparation of various statements to show the working of results and financial
position of the organization.

(ii)

Management Accounting. It deals with the analysis and interpretation of financial records so that
management can take certain decisions.

(iii)

Costing. Costing deals with the recording of costs, their classification, analysis, interpretation, and
cost control.

(iv)

Investment Management. It takes care of how the financial resources can be applied to various
alternatives.

(v)

Taxation. This area deals with the management of various direct and indirect taxes which the
organizations have to pay.
4.

Personnel. This aspect deals with the management of human beings in the organization. It

includes following areas:

(i)

Recruitment and Selection. These deal with the hiring and employing of the human beings in the
organization.

(ii)

Training and Development. Training and Development deal with the process of making
employees in the organization more efficient.

(iii)

Wage and Salary Administration. These are related with wage and salary surveys, job evaluation,
merit rating and incentives.

(iv)

Industrial Relations. This area deals with the maintenance of overall employee relations functions.
The classification of the above functional areas does not necessarily support that an organization

divisionalised on the functional basis will have all these departments. This however, is determined by the
specific need of the organization.
People sometimes talk about sectoral management besides these functional areas. The sectoral
management deals with the management of a particular sector because managers have to face different
problems in different sectors. In India, industry, agriculture, hospital, educational institutions, hotel, and public
sector management is being emphasized. However, in all such sectors, management functions are the same.
MANAGERIAL HIERARCHY OR LEVELS
Hierarchy involves persons or other entities arranged in a series. Managerial hierarchy means the
arranged managerial positions in an organization. All the human beings working in the organization can be
divided into two groups-managerial personnel and operating force or rank and file. The classification is based
on the functions which they perform in the organization. In the managerial personnel too, there are various
levels. When a new managerial positioning a line of command is created, it adds to a management level.

45

Characteristics of Hierarchy
For coordinating the activities of large number or people, some form of pyramidal organization is
inevitable, simply because there will always be fewer people with very high status than with moderate or low
status. The concept of pyramidal structure of the organization suggests the following characteristics.
1.

The only significant contacts in an organization are those between superiors and subordinates. Out
of those contacts, emerge the order giving (downward), reporting on results (upward), or
requesting information (up or down).

2.

Each subordinate must receive instructions or orders from only one boss. The boss is viewed as
the one source of legitimate power to which subordinates should respond. Other sources are
viewed as illegal.

3.

An individual at any level (except top and bottom) has contact only with his boss above him and
his subordinates below him. As a result, every manager has full information about the activities and
people he is responsible for.

4.

Each superior has only limited span of control, that is, the number of subordinates being
supervised by him is limited. This is done in order to maintain efficiency in the organization, which
requires a tight control.

5.

All important decisions are made by the top-level managers because they are supposed to be
well-informed and competent people. The policies are communicated through successive levels
and at each lower level, these are spelled out in increasing detail and transformed into operating
instructions.

Recent studies, however, show contradicting results as compared to traditional view of hierarchy.
Such factors as increasing size of the organization, complexity in organizational processes, entering of
professionally and technically competent people in the managerial cadre, and need for greater autonomy to
individuals in the organization, have resulted in many changes in the pattern of hierarchical structures. As such
decision-making process is being decentralized, horizontal relationships are being emphasized; sub scalar chain
method of communication is being violated. In spite of these, the traditional concept and characteristics of
hierarchy hold good in organizations, though there may be changes in the nature of hierarchical relationships.
The classification and understanding of management levels is very important. The main significant of
levels is that they substantially determine authority relationships. They give social status to their occupants,
influence patterns of association, provide authority and affect role perception. Though, a manager has to
perform all the managerial functions, the stress placed on individual functions varies in different managerial
levels. In fact, at times, the differences between management positions, particularly when viewed along a
hierarchical dimension, are so great that they appear to be distinctly different classes of work. Thus, a person,
who performs well on the level, may not do equally well on another. This may be because of inherent personal
qualities, which cannot be changed, or because of a failure to perceive a change behavior, which the person
has followed, in the old job.
46

Number of Levels
There is no fixed number of management levels. This varies somewhat with how they are defined and
classified. In fact, there will be as many levels as the number of superiors in a line of command. Keith Davis
has classified various management levels as trusteeship management, general management, departmental
management, middle management, and supervisory management. Litterers classification suggests three levels
institutional (trusteeship function) level, general management (facilitating function), and departmental
management (integrating function). This last category, according to him, includes foreman and other supervisory
personnel. Pfiffner and Sherwood have classified management level into four parts corporate management,
top management, middle management, and supervisory management. Many other writers, such as Koontz and
ODonnell, and Brech have classified these as top level, and supervisory level. In fact, this classifications more
suitable from analysis point of view. Hence, this is taken as base for further analysis.
1.

Top Management. The scope of top management depends upon how it is defines. A

distinction can be made between top management and corporate management while both may be included
under one to be called as top management. If latter view is taken, top management includes Board of
Directors, Chairman, and Chief Executive of the organization. Koontz and ODonnell define top managers as
the general officers and those men who report to them.
2.

Middle Management. The middle management stands between front line and top

management level. The number of levels of middle managers obviously depends upon the size of the
organization in terms of number of employees. This may further be bifurcated into two parts- upper middle
management and lower middle management. At upper middle management level, the basic divisions of the
organization are established. Here, the fundamental decisions are made as to which system needs prominent
attention, and results are carefully analyzed to make sure that the organization is meeting its objective. The
lower middle management is primarily concerned with carrying out or achieving the more specific goals.
In fact, in a large organization, the success largely depends upon the efficiency, effectiveness, and
integrity of middle management. Research study shows that maximum role conflicts and organizational stress
occur at the middle management levels because of their ambiguous position in the organization.
3.

Supervisory Management. Supervisory management is above the operatives, but below the

middle management in the organization. In a large organization, supervisory management may consist of three
levels- senior supervisors, intermediate supervisors and front-line supervisors.
Supervisory management is deeply concerned with efficiency, specially the use of resources. It is
merely an executor of policies and procedures, making a series of decisions with well-defined and specified
premises. Supervisor is also called a marginal man in the organization. He is both management point of contact
with workers, and the workers, means of contacting management.
FUNCTIONS OF VARIOUS LEVEL MANAGERS
The management functions are universal, which suggests that the management at all levels, have to
47

perform all the functions- planning, organizing, staffing, directing and controlling. This is, in a broad sense, true,
but the emphasis varies on a particular function with the change of management level. For example, a top-level
manager is involved more in policy formulation rather than the control function and supervisor may put more
emphasis on control. These differences in the emphasis of various functions at different levels require different
characteristics and qualities in managers.
The various positions which are included under particular levels may be viewed from the following
chart:

MANAGEMENT

Top
Management

Middle
Management

Supervisory
Management

Board of
Directors

Department
Heads

Senor
Supervisors

Chairman

Divisional
Heads

Intermediate
Supervisors

Chief
Executive

Sectional
Heads

Front-line
Supervisors

Fig. Levels of Management

TOP MANAGEMENT
Top management in an organization consists of shareholders, board of directors, and the chief
executive. The chief executive may be called by various names- Managing Director, Director- General,
President, Chief Executive Officer, etc. Top management is responsible for overall management of the
organization and performs all such functions necessary for this. These functions may be classified into three
parts:
(i)

Overall Management. This includes determination of organizational goals and objectives, overall
planning, organizing, staffing, directing, and controlling. It integrates the entire organization,
maintains balance between specialized interests within the organization, and accommodates it to
the external environment.

(ii)

Overall Operations. This includes the overall execution of plans and designing organization
structure for the same. Coordination among various functionaries at this level becomes very
important.

(iii)

Overall Relationship. This requires maintaining relationship among different individuals in the
48

organization and maintaining organizational relationship with external environment-Government,

trade associations, suppliers, financial institutions, etc.
As discussed above top management consists of three groups- shareholders, board of directors and
chief executive. These three groups are responsible for the overall functioning of organization; however, a
distinction may be made among their functions.
Functions of Shareholders
Shareholders are the owners of an organization constituted in corporate form. They invest their
financial resources in the organization and hence have the authority for overall management. However, because
of their large number and geographical distance, it is not practicable to take part in day-to-day functioning of
the organization. As such, they elect from among themselves some members as directors who are collectively
called board of directors. The shareholders maintain their control on the organization through board of
directors. They analyze the functions of the organization in their meetings and give suggestions as how the
work should be carried on.
Functions of Board of Directors
Board of Directors is the trustee of the organization. Its responsibility is to provide guidelines and to
represent the interests of its clients and the public. It is not generally executive in nature. Board generally
performs two types of functions: (i) Analyzing and deciding the important matters concerning the organization,
these may include (a) deciding long-range policies, objectives, programmes, budgets, etc., (b) designing broad
Organization structure and (c) controlling financial and operating results of the organization. (ii)
Appointing higher managerial personnel and ratifying the appointment of other managers. Sometimes directors
are full-time executives of the organization and in that case, they perform dual role of directors and executives.
Functions of Chief Executive
Chief executive, in an organization, is responsible for the day-to-day management. He is responsible
for overall functions of the organization as decided by the board or directors. Thus, on the one hand, he is chief
liaison officer between board and other personnel of the organization and provides information about what
board has decided in terms of organizational goals, policies, etc.; on the other hand, he is the chief executive
to execute these policies and programmes into action. A chief executive performs the following functions in the
organization:
(a) Functions of Guidance and Direction. He provides guidance and direction to the various
functionaries in the organization, which include the following:
(i)

Explaining and interpreting policies, programmes formulated by the Board of Directors;

(ii)

Executing plans by giving appropriate orders to his subordinates;

49

(iii)

Ratifying or modifying the programmes set by departmental managers for achieving organizational
goals.

(b) Functions of Integrating. Chief executive integrates the functioning of various departmental
heads reporting to him. He performs the following functions in this context:
(i)

Integrating various departments by prescribing organizational relationships;

(ii)

Prescribing and defining authority and responsibility of various departments;

(iii)

Creating and providing conducive environment in the organization for efficient functioning;

(iv)

Providing effective leadership in the organization.

(c) Functions of Review and Control. Chief executive, being responsible for overall efficiency,
also makes review whether the various functions are being carried on in the same way or not. If any
discrepancy is located, he takes immediate corrective action. In this regard, he discharges the
following functions:
(i)

Organizing meetings of the various functionaries to consult on organizational matters and to

review functions performed;

(ii)

Suggesting and effecting corrective actions in the case of discrepancy;

(iii)

Preparing and presenting progress and control reports for perusal of board of directors;

(iv)

Informing board about functioning of organization, views and feelings of subordinates working
under him.

(d) Staffing Functions. The chief executive makes most of the appointments in the organization.
He is responsible for fixing pay structural transfer, promotion, demotion and discharge of persons at higher
echelons. He may take the help of committees; however, the final authority lies with him.
(e) Public Relations Functions. Chief executive has to integrate organizational functioning in the
context of the social environment. As such, he has to maintain relations with various factors and groups in the
society. These include Government, trade associations, trade unions, financial institutions. All these groups
affect the functioning of the organization. As such, the chief executive has to maintain good relations with them
for their favorable impact on the organization.
MIDDLE MANAGEMENT
This group comes between top management and supervisory management. There functions are
following:
(i)

To execute various functions of the organization so that top management gets enough time for
integrating overall functioning of the organization;

(ii)

To co- operate among themselves, with top management and with supervisors so that
organization functions without any impediment;

50

(iii)

To integrate various parts of the organization;

(iv)

To develop and train employees in the organization for better functioning and for filling future
vacancies ;

(v)

To develop and inculcate feeling among employees for subordination of individual goals to
organizational goals.

SUPERVISORY MANAGEMENT
The term supervisor includes all types of foremen and junior executives below middle management
level. Generally, there are three levels of supervisors. The first level super visor represents the level where a
person no longer performs an operators job. He is full-time on supervision and devotes most of his time in
planning, decision-making, and communication. The second and third level-supervisors are almost similar, but
may cover a wide range.
Sometimes the job of a supervisor becomes more complex and difficult than that of higher level
managers because a supervisor has to maintain relationship between two groupsmanagement and labour
who are not only different from function point of view but they also differ in many other respects, namely,
education, skills, socio-cultural backgrounds, levels of expectations in the organization, and the identity of
group and group goals.
Supervisors are directly related with workers. They take directions from middle managers. If is
assumed that a supervisor is like any other member of management, but actually both his function and status
are quite different. A supervisors job differs from that of other managers because the group he supervises is
different. This requires him to interact with two groupsmanagers, who are his superiors, and workers who
are his subordinates.
QUESTIONS
1.

Explain the scope of Management.

2.

Write about Management principles and its nature.

3.

Explain the different activity levels of Management.

4.

Write about Fayol and his Administration Management.

51

CHAPTER - II

PLANNING
OBJECTIVES
The reader after going through the chapter should get an overall idea about features, importance,
steps, types, strategies, policies, budgets and other dimensions of planning.
INTRODUCTION
Functions of management are classified as planning, organizing, staffing, directing, and controlling. All
these functions are required to achieve the objectives of an organization. Without setting the objectives there
is nothing to organize, direct, or control. So, every organization is required to specify what it wants to achieve.
Planning is related with this aspect.
DEFINITIONS AND FEATURES OF PLANNING
Planning as a process which involves the determination of future course of action, that is why an
action, what action, how to take action, and when to take action. Terry has defined planning in terms of
future course of action. He says that:
Planning is the selection and relating of facts and making and using of assumptions regarding the
future in the visualization and formalization of proposed activities believed necessary to achieve desired result.
IMPORTANCE OF PLANNING
Planning has assumed great importance in all types of organizations business or non-business,
private or public sector, small or large, in developed countries or developing countries. The organization,
which thinks about future, is likely to succeed as compared to one, which fails to do so.
1.

Preliminary planning - Planning precedes all other managerial functions. Of organizing, staffing,
directing, and controlling .Planning logically precedes the execution of all other managerial
functions.

2.

To Offset Uncertainty and Change - There is continuous change in the environment and the
organization has to work in accelerating change. This change is reflected in both tangible and
intangible forms. Tangible changes are in the form of changes in technology, market forces,
government regulations, etc. Intangible changes reflect in changes in attitudes, values, cultures, etc.

3.

Planning focuses on organizational objectives and direction of action for achieving the objectives.

4.

Though all managerial functions lead to the coordination in the organization, real beginning is
made at the level of planning stage. Well-considered overall plans unify interdepartmental
activities and consequently restrict the area of freedom in the development of purely departmental
plans.
52

5.

Control involves the measurement of accomplishment of events against plans and the correction
of deviations to assure the achievement of objectivities as set by the plans. Control is exercised
in the context of planning action as standards against which actual results are to be compared
through planning.

6.

Planning ensures organizational effectiveness in several ways. The concept of effectiveness is that
the organization is able to achieve its objectives within the given resources.

TYPES OF PLANS
A plan is a commitment to a particular course of action believed necessary to achieve specific results.
Some of these are the form of standing plans while others are use plans. Objectives, policies, strategies, rules,
procedures, etc., are standing plans because once formulated, they will be used for a long period and
repeatedly. On the other hand, budgets, targets, quotas are single-use plans because once these are achieved,
these are to be formulated again.
Purpose or Mission
It is a standing plan in the sense that it defines the basic intention of an organization in the light of
which other actions are designed. It is managements concept of the organization and its contribution to the
society. The mission of an organization, when expressed in managerially meaningful terms, indicates exactly
what activities the organization intends to engage in now and in future. It suggests something specific about
what kind of organization it is or is to become.
Objectives
Objectives, or goals, are the results towards which activities are aimed for purposive creation. In
large organizations, objectives are arranged in hierarchy in which the objective of a lower unit contributes to
the realization of a higher unit objective.
Strategies and Policies
Strategies are the complex plans for bringing the organization from a given posture to a desired
position in the future period. Policies are general statements or understandings, which provide guidance in
decision making to various managers.
Procedures
There are plans, which establish a method for handling future activities. There are specific manner in
which a particular activity is to be performed. Jerry defined it as
A procedure is a series of related tasks that make up the chronological sequence and the
established way of performing the work to be accomplished.
Procedures guide the board of directors to take a particular decision. Similarly, procedure can be set
53

up how an order will be executed. However, there is a difference between that procedures set at various
levels. They are more exacting and numerous at lower levels as compared to higher levels.
Policy and Procedure: A Comparison
1.

Policy provides guidance for managerial thinking as well as action. On the other hand, a
procedure simply provides guidelines to the action by prescribing how an action can be
performed systematically.

2.

A policy is more flexible as compared to a procedure.

3.

Policy is more pronounced at higher levels while procedures are more prevalent at lower levels.

Characteristics of a Good procedure

Since procedure provides the way in which an action will be completed, it should be prescribed in
such a manner that it contributes positively to the managerial actions. Following factors should be observed
while setting a procedure.
1.

Based on Facts.

2.

Procedures as a System.

3.

Well-balanced.

4.

Updating Procedures.

5. Minimum Procedure.

Rules
Rules are often confused with policies or procedures. However, there are differences among these.
A policy provides guidelines for managerial actions by defining areas of discretion, while in rule, there is no such
discretion. A rule provides definite action to be taken or not taken with respect to situation. Thus rule does not
allow any deviation from stated course of action.
A rule is also different from procedure, though related with it sometimes.. A rule requires that a
specific and definite action be taken or not taken with respect to a situation. Thus, it is related with procedure
in that it guides action but specifies no time sequence. In fact, a procedure could be looked upon as a
sequence of rules. A rule, however, may or may not be part of a procedure.
Budgets
A budget is a plan of expected results expressed in numerical terms. It expresses organizational and
departmental objectives and programmes in financial and non-financial quantities. It anticipates operating
results over some future period, normally one year, and provides a basis for measuring performance as plans
are translated into accomplishments. The budgets may be prepared for various activities. They provide
guidelines for action and standards for control.
STEPS IN PLANNING
It is not possible to prescribe a certain fixed process of planning for all organizations or for all types
of plans. Here the steps are given for a major plan. The major steps in planning are the following:
54

1.
Perception of Opportunities. It is related with the awareness of the opportunities for
deciding whether a programme should at all be carried on. Any organisational activity requires the help of
environment that is social factors.
2.
Establishing Objectives in fact, the first step in planning process is the determination of
organisation objectives. These objectives set the pattern of the proposed course of action and the purpose
of the future action is to arrive at these objectives.
3.
Establishing Planning Premises. Premises are the various factors that affect planning.
There are several factors which affect the organisational functioning. These are political factors, ethical
standards, government controls, fiscal policy, price, demand and availability of various factors of production.
The information is collected in respect of these. Their analysis leads to make certain forcasts and the limitations
are determined within which proposed course of action is to be undertaken.
4.
Determining Alternative Course of Action. An action can be performed in several ways.
However, a particular way is the most suitable for the organisation keeping its limitations in view. The
management should try to find out these alternatives. The various available alternatives should be examined in
the light of planning premises which reduce the number of alternatives which can be evaluated for selection.
5.
Evaluating Alternatives Courses. The various alternatives are evaluated in the light of
objectives and premises. This process presents a difficult problem, because a particular alternative may be best
from one point of view but not from other points. A number of methods in Operations Research have been
developed to evaluate the various alternatives, which will be discussed later on in this part.
6.
Selecting the Best Course. After evaluating the various alternatives, the most fit alternative
is selected. Sometimes, the evaluation shows that more than one alternative is equally good. In such a case,
a manager chooses several rather than one and combines them in action.
7.
Formulating Derivating Plans. In the organization, various activities contribute to
organizational objectives. After formulating the basic plan, various plans are derived for departments, units,
activities, etc. In fact, there are invariable-derivative plans to be constructed to support the basic plan.
8.
Establishing the Sequence of Activities. After formulating basic and derivative plans, the
sequence of various activities is determined. This helps in executing the plans and provides continuity in the
operation.
Planning: A Rational Approach
Planning process is a rational approach to accomplishing an objective or set of objectives.
Rationality may be defined as the objective and intelligent, action. It is usually characterized by choosing
appropriate means for desired results. Since, objectives may be achieved through various alternative ways and
the resources which can be used for these are limited, a basic problem before every manager is to make the
optimum use of these resources. However, there are two problems in applying the concept of rationality in
planning. First, choosing of means for achieving certain objectives presents numerous problems. It is really
55

difficult to separate means from ends, for every end is really just a means to another end. This is what is
known as means-ends hierarchy. However if the means and ends are analyzed within the specific planning
action much of the confusion is over because at that time, the manager has some definite objective which he
wants to achieve by planning action. Second, the planning involves future course of action. If the future is,
certain management can take a rational planning action. However, in actual practice, a myriad of factors in the
environment in which plan is to operate may push events away from or towards the desired goal. These are
the planning premises. Since managers cannot forecast the exact happening in the future, they try to rationalize
their planning process to making alternative plans for the same objective.
Time Dimension of Planning
Planning is concerned with problems of future. Thus, a Planning system must involve different
degrees of futurity. Some parts of the organization have requirements that entail planning for many years in the
future, while others require planning over only a short horizon Capital expenditure, for example, is more
subject to long-range planning than any other area. Such plans frequently form the basis of other planning.
The planning period is divided generally into (i) short term and (ii) long term. Many complex factors interact
to determining planning period-industry peculiarities, the market demand, the availability of resources, the leadtime involved in the product life cycle, etc. Thus, what might be a long period of planning for one organization
might be a short period for others?
What should be an ideal planning period depends upon commitment principle. Commitment
principle implies that long-range planning is not really planning for future decisions, but rather planning the
future impact of todays decisions. In other words, a decision is a commitment normally of funds, direction of
action, or reputation.
1. Long-range planning. A distinction between short-range and long-range planning is often made
based on the period involved. Though there is a clear correlation between these kinds of planning and the
length of time horizons, the more important distinction is one of the bases of the nature of planning.
Long-range planning, also known as strategic planning, involves more than one-year period extending
to twenty years or so. However, the more common long-term period is 3 to 5 years. The long-term plans
usually encompass all the functional areas of the business and are affected with the existing and long-term
framework of economic, social and technological factors. Long-term plans also involve the analyses of
environmental factors, particularly with respect to how the organization relates to its competition and
environment.
2. Short-range planning. Short-range planning, also known as operational or tactical planning,
usually covers one year. These are aimed at sustaining organization in its production and distribution of current
products or services to the existing markets. These plans directly affect functional groups- production,
marketing, finance, etc. Within its time dimension, they answer pertinent questions about a particular function
as follows
1.

Why is the action required?

56

2.

What action is to be taken?

3.

What will the action accomplish?

4.
5.

What are the results of the action required?

What objectives and conditions must be met?

Flexibility in Planning
A good planning requires being reasonable, incorporating the socio-psychological factors,
coordination between short-term and long-term plans, contributing to organizational objectives. Besides, the
planning should be flexible enough to incorporate unforeseen future events. Though a forecast can be made in
respect of future uncertainties, unforeseen future changes require a change in planning. Thus planning cannot
be static, but flexible. There are two principles of flexibility in planning.
1. Principle of Flexibility. The more the flexibility can be built into plans, the less the danger of
losses incurred by unexpected events; but the cost of flexibility should be weighed against the risks involved in
future commitments made. Flexibility is required generally in long-range planning when there may be
fundamental changes. Sometimes, it might be required in short run also; for example, change in production
schedule in case of strike.
2. Principles of Navigational Change. This is based on the principle of a navigators checking
constantly where his ship is going in this vast ocean, if it is not going on the right path he changes it according
to planned path to reach at the destination. Since the distant future is generally more uncertain than the
immediate future, long-range planning requires such constant checking. This uncertainty of future places
limitations on the practicability of forward planning. A plan which is soundly conceived and evaluated for
feasibility, desirability, and practicability provides the basis for day-to-day decisions and action. However, it
requires a constant watch.
Limitations of Planning
Planning as a fundamental function of management is essential but there are practical limitations to its
use. The reasons why people fail planning emphasize the practical difficulties encountered in planning. Thus,
effective planning is not an easy task. A number of limits within which planning has to operate make this
undertaking difficult. Awareness of the factors, probably, helps in removing many difficulties in planning.
1. Lack of Accurate Information. The first basic limitation of planning is the lack of accurate
information and facts relating to future. Planning concerns future activity and its quality will be determined by
the quality of forecast of future events.
2. Problems of Change. The problem of change is more complex in long-range planning. Present
conditions tend to weigh heavily in planning, and by overshadowing future needs, may sometimes result in error
of judgment. Such factors as changing technology, consumer tastes and desires, business conditions, and many
others change rapidly and often unpredictably. In such conditions, planning activities taken in one period may
not be relevant for another period because the conditions in two periods are quite different.
57

3. Failure of People. There are many reasons why people fail in planning, at both the formulation
level as well as implementation level. Some of the major failures are lack of commitment to planning, failure to
develop sound strategies, lack of clear and meaningful objectives, tendency to overlook planning premises,
failure to see the scope of the plan, failure to see planning as a rational approach, excessive reliance on the
past experience, failure to use the principle of limiting factor, lack of top management support, lack of
delegation of authority, lack of adequate control techniques, and resistance to change. These factors are
responsible for either inadequate planning or wrong planning in the organizations concerned.
4. Inflexibilities. Managers while going through the planning process have to work in a set of
given variables. These variables may be more in terms of organizational or external. These often provide
considerably less flexibility in planning action.
(i)

Internal Inflexibilities. Major internal inflexibilities that may limit planning are related to human
psychology, organizational policies and procedures, and long-term capital investment.
The first internal inflexibility is in the form of human psychology in that most of the people have regard

for the present rather than for future.

Second type of internal inflexibility emerges because of organizational policies and procedures.
Once these are established, they are difficult to change. Such problems are more common in bureaucratic
organizations where rules and procedures are the matters of prime concerns.
Third type of internal inflexibility comes because of long-term capital investment. Long-term planning
is not a process of making future decisions, but a means of reflecting the future in todays decisions. .
(ii)

External Inflexibilities. Beside the internal inflexibilities managers are confronted with many
external inflexibilities and they do not have control over these. These factors may be social,
technological, legal, labour union, geographical, and economic.
5. Rigidity in Planning. The planning stifles employee initiative and forces managers into rigid or

straightjacket mode of executing their work. In fact, rigidity may make managerial work more difficult than it
need be. This may result in it delay in work performance, lack of initiative, and lack of adjustment with
changing environment
6. Time and Cost Factors. Planning suffers because of time and cost factors. Time is a limiting
factor for every manager in the organization and if they are busy in preparing elaborate reports and instructions
beyond certain, level, they are risking their effectiveness excessive time spent on securing information and
trying to fit all of it into a compact plan is dysfunctional in the organization.
The planning also involves cost on the part of the organization. Costs increase in planning if it
becomes more detailed, because more information is gathered.
Making Planning Effective
Following factors are important for making planning effective.
58

1. Establishing a Climate for Planning. This can be done by setting clear goals, establishing
and publishing applicable significant planning premises, involving all managers in planning process, reviewing
subordinate plans and their performance, and assuring appropriate staff assistance and information at all levels
of management.
2. Initiative at Top Level. Planning to be effective must have the initiative and support of top level
management. It is the top level which is responsible for success or failure of any organizational process, and
planning is no exception.
3. Participation in Planning. Participation in planning affecting managers areas of authority at
any level through their being informed, contributing suggestions, and being consulted, leads to good planning,
commitment, loyalty, and managerial effectiveness.
4. Communication of Planning Elements. If these are communicated clearly, adequately, and
timely, the managers are motivated and initiated to take planning process which may be necessary for them.
When a manager understands the various aspects of planning, he is in a better position to foresee his future
course of action and may develop a habit of planning every course of future action.
5. Integration of Long-term and Short-term Plans. Managers often focus their attention only
on very short-term plans, even if they plan. A short-term plan contributes towards the achievement of the longterm plan. Thus, if a manager is planning for very short period, he must take into account his long-term plans
also. He must constantly watch and review that his short-term plans contribute to his long-term plans.
6. An Open Systems Approach. The problems of planning should be dealt through open systems
approach. Open systems approach makes it necessary on the part of the managers that they take into
account the environmental variables, such as, technological, social, cultural, legal, political, and economic..
Corporate Planning
Planning activity can be undertaken at various levels of the organization. It may cover the whole
organization or part of it. When planning is undertaken at the organization level, it is referred to as corporate
planning. Hussey has defined corporate planning as follows:
Corporate planning includes the setting of objectives, organizing the work, people, and systems to
enable those objectives to be attained, motivating through the planning process and through the plans,
measuring performance and so controlling progress of the plan and developing people through better decision
making, clearer objectives more involvement, and awareness of progress.
This definition of corporate planning is quite broad and may cover many management functions not
necessarily related to planning aspect of management functions.
Similarly, corporate planning is used as long-range planning because long-range planning emphasizes
the future orientation of the process. However, there is growing opinion which disfavors the use of long-range
planning as synonymous with corporate planning because it underemphasizes the comprehensive nature of
corporate planning.
59

Strategic Planning
Planning is concerned with future. A planning process must involve different degree of futurity. Some
parts of the organization require planning for many years into the future while others require planning over a
short period only.
Anthony states as follows:
Strategic planning is the process of deciding in objectives of the organization, on changes in
these objectives, on the resources used to attain these objectives and on the policies that are to govern
the acquisition, use and disposition of these resources.
Operational Planning
Operational planning, also known as tactical or short-term planning, usually covers one year or so.
It is aimed at sustaining the organization in its production and distribution of current products or services to the
existing markets. Defined as follows:
Operational planning is the process of deciding the most effective use of the recourses
already allocated and to develop a control mechanism to assure effective implementation of the
actions so that organizational objectives are achieved.
Objectives
Organizations, being deliberate and purposive creations, are created for the fulfillment of some
objectives. The end for which they strive are variously known as purpose, mission, objective or goal.
Concept and Features of Objectives
Objectives are the goals, aims, or purposes that organizations wish to achieve over varying periods
of time.
Terry says that:
A managerial objective is the intended goal which prescribes definite scope and suggests
direction to efforts of a manager.
Role of objectives
Clearly defined objectives govern behavior of organization members, and as such, every organization
should specify its objectives clearly.
The major functions and contributions of objectives are as follows:
1.

Every organization works in an environment consisting of several forces. These forces provide
both opportunities and threats.

2.

Objectives provide the directions for decision making in various areas of the organizations
60

operation. The objectives set the limits and prescribe the areas in which the managers can make
decisions.
(i)

Clear definition of objectives encourages unified planning. Objectives embody the basic idea
and fundamental theories as to what the organization is trying to achieve.

(ii) Objectives work as a motivating force by providing direction to organizational members.

(iii) Voluntary coordination, an essential feature of the organizational objectives, is achieved easily
if the objectives are clearly specified and mutually agreed upon.
3.

Objectives provide standards against which performance of the organization, its units, sub-units,
and individuals can be measured.

4.

Decentralization includes assigning decision-making authority to lower-level people; thereby a

subordinate is given considerable leeway in deciding to perform his work.

5.

Clearly specific objectives may provide integration of organization and its various groups and
individuals. An organization cannot exist apart from its individuals, and various groups associated
with it, such as creditors, customers, etc.

QUESTIONS
1.

What are the features and types of Planning?

2.

Explain the different steps in Planning.

3.

What is Time Dimensions of Planning?

4.

What are the limitations of Planning?

61

CHAPTER - III

ORGANIZING
OBJECTIVES
The reader of the chapter is to get familiarized with the principles of organization, its elements, nature,
dynamics, features, types and also good management techniques.
ORGANIZATION PRINCIPLES - NATURE AND PURPOSE
Organization provides the structure, the frame on which rests the management of the enterprise. Like
all structures, it upholds the management functions, in their totality and interrelationship, aiding their movement
to the appointed goal.
PRINCIPLES OF ORGANIZATION
There are certain basic principles of an organization structure, which should always be observed.
These are:
(i)

It should reflect adequately a virile awareness of the dynamic goal of the enterprise.

(ii)

It should reflect adequate decentralization

(iii)

The unity of command and line of responsibility should be clear.

(iv)

The channel of communication should be free, easy and logical.

(v)

The span of control should be legitimate (not too wide nor too narrow) without split in the line of
control.

(vi)

The functional levels in the Organization chart should be armed with proper (-delegated) authority,
matching their task and responsibility.

(vii)

The levels in the Chart (the nodes in the Organization net) should represent homogenous cohesive
units of functions.

(viii) The Chart should avoid overlapping of functions and authority.

(ix)

The channels of communication-vertically and horizontally-should be well laid out.

(x)

The functional aims of the departments (branches) at different levels should be drawn up and
reflected with precision.

(xi)

The hierarchical position of the staff functional levels and their structural relationship with the line
management levels should be stated without ambiguity.

(xii)

The organizational tree like structure has properties of a living organism. As the branches of a tree
stem from the trunk and the twigs spring from the branches, and every branch and twig draw
succour from the roots of the main tree, so in an enterprise the Chief Executive is the main spring
of leadership. The other levels provide the feedback and the reciprocal team support. The
process is a two-way one.
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(xiii) The best and the most logically framed organization chart is still a skeleton. It does to come alive
without the people who man it. The chart must reflect the powerful interrelations of the human
element within an enterprise.
NATURE AND PURPOSE
Organization provides the frame and structure to the management process. It embodies and upholds
the logic of the enterprise functioning as a system aiming at its goal. A system is not an end in itself. It is nothing
if it does not stand for an aim and achieve it. Organization is a vehicle, moving the management efforts- through
the management team, with the help of the enterprise resources, to the appointed fruition.
The purpose:
(i)

It embodies the objective of the enterprise.

(ii)

It helps show the breakdown of the objective into functional and sub-divisional goals at the
different levels.

(iii)

It thus helps each manager see his task; it also tells him what authority he has to accomplish it.

(iv)

It tells each manager where his accountability lies; and who (below him) are in his sphere of
command.

(v)

The manager knows what communication to other levels (up and down and laterally) is
demanded of him.

(vi)

The manager is aware (through the organization net) of his rights and responsibilities of
coordination with other levels-up down and lateral.

(vii)

The organization net (chart) helps vigilance against loss through criss-cross (wasteful) efforts and
misdirection.

(viii) The organization structure helps a visual appraisal of how well( or otherwise) the human talent is
absorbed into the scheme of management. It achieves two purposes.
(a) Secure the best out of the management team, and
(b) Adding the essential flexibility (and dynamics) to the structure.
ORGANIZATIONAL ELEMENTS
Aim of Organizational Analysis and Planning is designing the most effective overall human system for
achieving the objectives of an organization. The following monitoring steps are important for the top
management to ensure continued health of the organization.
(1)

Watch the team to spot the misfit. Change him at the first opportunity.

(2)

In practice, it is often difficult to change the man. In that case, the individual may be shifted either
where he may be less of a misfit, or failing that, see if the Organization itself may be adjusted to
secure the best out of the odd man out. Remember, no price is too high to pay to restore the
even tenor of the system.
63

(3)

Check whether the accountability and the tasks have been set up on a concrete and verifiable
basis. Clear accountability is one of the best safeguards against errant moves and aberrations.

(4)

Check against any factions or group interests that may have taken roots

(5)

Check on the system (and its operation) of discipline and reward for and good work.

(6)

Check on the direction of individual and group efforts; whether it is working in harmony with the
enterprise goal.

(7)

Hold the balance between the barons (the line executives) and the courtiers (the advisers on the
staff side).

(8)

Finally, have a look on the ambitions (and frustration) of the individual members; whether fair (and
uniform) personnel treatment is meted out to all.

ORGANIZATION DYNAMICS - CLOSED AND OPEN SYSTEMS

We have seen that management is a system; organization is the frame that upholds the system.
Enterprise organization must share these features, which are common to all living units. It must be responsive
to impulses, both within its own system and from the wider social system outside. A common hazard (and
experience) in an organizational set up is that it tends to degenerate into a stereotype- a stale, repetitive, dead
process losing the quality of life. This is a sensitive area for the student of organizational dynamics. Divide
organizational into two types: (a) open door organization, and (b) closed door organization- and define the two
terms as under.
An open door organization is one that incorporates the mechanism of change. The business situation
and the problems that confront a manager are in a state of flux.
Features of an Open Door Organization
(1)

An open door organization is task oriented. The accountability is clearly defined.

(2)

The authority (within the related functional area) is also absolute (or nearly so) matching the
absolute character of the accountability.

(3)

Consultations are minimum and are not compulsive; the executive is free to consult and
communicate (or otherwise) so long as he performs and delivers the objective.

(4)

Rules and procedures exist but only as guides- the executives (within their sphere of
responsibilities) having wide freedom of discretion to depart from the rules within the periphery of
the broad corporate policies.

(5)

The accountability is clear-cut; objective is verifiable- in terms of cost, output target, time and
profit. The means are (relatively) unimportant so long as the end is achieved.

(6)

The managerial behaviour is highly flexible bending with lithe suppleness to the internal shifts in
conditions and external maneuvers of the environmental zone of contract.
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Closed Door Organization

A closed-door organization is rigid where authority is delimited, formed and impersonal. At the
opposite extreme is what is called the closed-door organization system. The main features of this system are:
(i)

There is rigid compartmentalization of enterprise goal among the divisional and functional
managers.

(ii)

Authority (and discretion) of managers is severely (and inflexibly) delimited.

(iii)

The accountability is more in terms of correct practices than in terms of result.

(iv)

There are elaborate rules and procedures, default from which is frowned upon regardless of the
provocation or wisdom in such departure.

(v)

Inter-level communication is poor; each manager seems to know (and is concerned with) his own
limited task without feeling or getting involved in the enterprise goal.

(vi)

Each managers task is broken down (to the lowest level) into a series of routine steps, the
performance of which is credited with loud and open approbation.

(vii)

The relationships are formal; consultation taking place through elaborate notings and counternoting. The result is considerable paper work.

(viii) The value of time is ill recognized; delays and drifts (and far worse, obstructions) can be more
successfully excused away.
(ix)

The balance between the executive (line and operative) and the service (staff and auxiliary)
functions is mostly upset; the latter enjoying and out of place precedence with often (virtual) veto
power on decision and performance.

(x)

The management style is impersonal with the evil of below-the-surface factions often developing
for the end of self-service.

(xi)

Cadre- loyalty to take precedence over enterprise weal.

(xii)

The system as a whole is unresponsive to its impact on the environment or vice versa.

Irrational and Organizational Conflicts

Conflicts exist in all social sciences-sociology, economics, psychology and of course in behavioral
science. In enterprise organization, too conflict is a reality and must be accepted as such and managed.
Functional and Dysfunctional Conflicts
Organizational conflicts fall in two classes:
Functional Conflicts are those that aim at the organizational goal- support organizational
performance. Often, conflicts, which appear functional from the point of view of one group, may appear
dysfunctional from that of another.
Dysfunctional Conflicts are irrelevant to organizational goal and performance. They are harmful.
Their origin is interpersonal, power-hunger, self-service. These have to be combated and uprooted.
65

Conflict Theories
There are three approaches (theories) to organizational conflicts:
(i)

The hierarchical theory: This theory postulated that conflict situation must arise due to the
hierarchical nature of management.

(ii)

The behavioral theory: Shifts the emphasis in their diagnosis of conflicts from the hierarchical
situation to the behavioral patterns of a human group.

(iii)

The Interactionist Theory, seeks to modify weakness. It is advocated and appreciated: (a) the
utility of functional conflicts, (b) the need for resolving dysfunctional conflicts, simultaneously, the
case and legitimacy of functional conflicts, and (c) a set of analytical methods to approach and
manage the two kinds of conflicts.

Managing Organizational Conflicts

The first step in managing conflicts is to identify them. Second, isolate the conflicts as functional and
dysfunctional. A complete separation is not possible and there is bound to be overlapping, but the exercise is
still worthwhile Third, many of the conflicts (barring, perhaps, those that are fundamental and deep-rooted)
may be solved by the direct method, through confrontation of the warring elements. Fourth, where there is a
conflict of local (group) goals, the contestants may be confronted with a larger (superodinate) goal, to which
their interests could merge. Fifth, where constrained resources triggered off the conflict, (like promotion,
budget, etc) an enlargement of the wherewithal might help. Sixth, certain conflicts were best solved by letting
them cool off. Seventh, the Chief Executive (or the senior manager) might talk to the parties, explain and
assuage. Eighth, the parties to the conflict might see reason (themselves or through arbitration) and compromise
in a spirit of give and take. Ninth, if one of the parties was fighting a wrong case, he could be overruled and
suppressed by a command from the proper authority, Tenth; the human element itself could be shifted or
readjusted. Finally, if the conflict is caused by a structural maladjustment, the organization could be monitored
for a desirable change.
TYPES OF ORGANIZATION
Line Pattern
It is the simplest of organization charts. It reflects a pure executive form of management. The line of
command proceeds straight from the chief executive through managers to supervisors and foreman.
Line and Staff Organization Structure
The pattern includes appropriate staff functions reporting to suitable levels of the line management.
The format recognizes the role of the staff services in the effective functioning of the organization.

66

Functional
In this form of organization, the line of control from top downward proceeds along the functional
lines. This is a common pattern of structuring the organization where it is recognized that all functions in the
management process contribute to the management goal and are equally important. The major universal
functions are- production, marketing, finance, personnel and project. The advantages of this patterns include
(a) recognition of the importance of the major functions, (b) assurance of functional control, (c) helps build and
sustain skill and specialization, and (d) ensures managers training and development. Among its limitations may
be mentioned - (a) the link with the organizational goals at middle and lower management levels (b) growth of
functional goals and ambitions cutting across organizational goals, (c) erosion and hamstringing of the authority
of the line management, (d) difficulty in coordination-which rests only at the top, and (e) interventional conflicts.
Line, Staff and Functional Pattern
While the staff activity proceeds in a relation of counselling, services and support of the line activity
(as in the line and staff pattern) a third channel of communication and influence is superimposed from the
functional authority centres. Here, the functional heads- director (personnel), director (finance) etc.- establish
contacts at the lower levels of line management, through the functional representatives at those levels. The
influence line also works when the functional heads undertake (with the consent, tacit or express, of the Chief
Executive) to instruct (or even prescribe) rules of conduct of the lower line managers in areas related to
functional operations-such as staff relations, accounting and information systems.
Some Classical Principles of Good Management
The ten commandments given below were formulated by the American Management Association as
sound principles of a good organization.
(1)

Well-defined responsibilities for each management level.

(2)

Matching responsibility with authority.

(3)

No change in the assignment of a level (authority and responsibility) without prior consultation.

(4)

Each one should take orders from only one (unity of command).

(5)

No by-passing of levels in issuing executives orders.

(6)

Chasten subordinates privately, not in the presence of his colleagues or juniors.

(7)

Attend to all conflicts among levels concerning authority and responsibility.

(8)

Orders concerning advancement, wages and discipline to be approved by the executive

immediately superior to the one directly responsible.

(9)

No executive or employee should be a critic of his own boss.

(10) An executive whose work is subject to inspection should be helped to enable him to appraise
independently the quality of his own work.
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Urwicks Ten Principles of Organization

Ten principles of organization were propounded by the noted management scientist, Lyndall F.
Urwick. A version of the same is given below.
(1)

Principle of the Objective: Every organization and every part of it must be an expression of the
purpose of the undertaking concerned or it is meaningless and therefore redundant.

(2)

Principle of Specialization : The activities of every member of any organized group should be
confined, as far as possible, to the performance of a single function.

(3)

Principle of Coordination: The purpose of organizing per se, as distinguished from the purpose of
the undertaking, is to facilitate coordination, unity of effort.

(4)

Principle of Authority : In every organized group, the supreme authority must rest somewhere.
There should be a clear line of authority from the supreme authority to every individual in the
group.

(5)

Principle of Responsibility : The responsibility of the superior for the acts of his subordinate is
absolute.

(6)

Principles of Definition: The content of each position-the duties involved, the authority and
responsibility contemplated, and the relationships with other positions should be clearly defined
in writing and published to all concerned.

(7)

Principle of Correspondence: In every position, the responsibility and the authority should
correspond.

(8)

The Span of Control: No person should supervise more than five, or at the most six, direct
subordinates whose work interlocks.

(9)

Principle of Balance: It is essential that the various units of an organization should be kept in
balance.

(10) Principle of Continuity : Reorganization is a continuous process; in every undertaking specific

provision should be made for it.
Organization Theory
Organizational behaviour, performance and group dynamics are taken into account while formulating
the theory of one or more of the scientific methods of observation, generalization, testing and manipulation to
bear on the theme of organizational behaviour and management of organizational systems.
Techniques and Approaches
(i)

The Small Group Experimental Laboratory : It aims at designing experimental facilities for
observing small group behaviour in simulated real-life (or nearly so) conditions.

(ii)

Simulation Method : In this method real-life studies or organization behaviour is simulated. This
is done in two ways: (a) through the computer, and (b) in organizational laboratories.
68

(iii)

Mathematical Models: This method is both powerful and dangerous. Dangerous because the
mathematical model variables are apt to distort the reality-when the model is likely to give useless
results. Techniques such as servomechanism theory, information theory, game theory can throw
extremely useful light on organization behaviour.

(iv)

Survey Method: In this method the actual operation of the organization is studied either by a
researcher from outside or by someone within the organization working as a researcher.

None of these methods has an assurance of perfection. Each one suffers from the quality and realism
of the input data, which is the single major source of distortion. In all observations and studies, a liberal
sprinkling of assumptions, impressions and subjective judgments are likely to find a place. At the same time,
by piecing together knowledge and insight into the systematic functioning of organizations-from all these
techniques the available powers of manipulating and influencing organizational behaviour are bound to grow.
SUMMARY
There are certain basic principles of an organization which should always be observed. Organization
is a vehicle moving the management efforts through the management team with the help of the enterprise
resources. There are many steps to be followed by the top management to ensure continued health of the
organization. Dynamics of organization has closed and open systems with its own features. There are different
types of organization like line pattern and line and staff organization structure. The ten commandments of sound
principles of a good organization have been given by American Management Association. The organization
theory is formulated by organizational behaviour, performance and group dynamics. Various techniques and
approaches are adopted for designing a near perfect theory.
QUESTIONS
1.

What is the nature and purpose of Organizational Principles?

2.

What is Organizational Dynamics?

3.

What are the major types of Organization?

4.

Elucidate the classical principles of good Management.

69

CHAPTER - IV

ORGANIZATION - GROUPING AND

DEPARTMENTATION
OBJECTIVES
The reader will get familiarised with grouping principles, decentralization, departmentation and
methods of departmentation.
WHY GROUPING ?
An organization is a host of complex of activities. The basic elements of the management process are
planning, organizing, staffing, directing, communication and control, natural groups; the homogeneity of a set
of activities (which mark them out from another set) within the set itself, the heterogeneity of one set from
another, and the specialization (different types of skill) that is attached to each set of activities, first and foremost
the logic of group formation. Second, and it occurs as a corollary, no single person (or even a single group)
could perform the different activities, the limitation would be physical, intellectual, of education, training and
skill. Third reason is efficiency and economy. The logic is the same as propounded by Adam Smith two
hundred years ago. He noted that ten men, who, with specialization (division of labour as he would say) could
produce (in those days) 4800 pins a day would do no more than 200, in the same period, if each one of the
team were to do all the operations (activities) in producing a pin- draw the wire, cut, flatten heads, sharpen
the points, solder and pack. The same principle applicable to the groupings of activities in the management
task.
GROUPING PRINCIPLES- CRITERIA
(i)

Homogeneity of the function within the group

(ii)

Heterogeneity of the intergroup functions

(iii)

A project may be an activity group as it constitutes a natural unit of planning and control.

(iv)

As a cost and effectiveness centre. A product, a region, an overseas market, the after-sales
service division, the R&D function can thus be an activity group.

(v)

As a unit of contribution to the organizational goal. Any function or segment in the organization
which comprehends a sub-goal, leading to the enterprise goal-would logically form an activity
group.

(vi)

Finally, a compulsive logic behind both grouping and departmentation of organization activities is
to restrict the span of control within manageable limits.

SPAN OF CONTROL
Both control and control span are part and parcel of organization hierarchies and the grouping
principle. The span of control is the range of direct reporting by ( a number of ) subordinate managers to a
70

single senior manager stationed above them in the management pyramid. We have seen already Lyndall
Urwick declaring (in his Ten Principles) the optimum number not to exceed five or six at least in the higher
echelons. Another writer (JC Worthy ) does not rule out a manager managing effectively twenty to thirty
subordinates.
In summing up, the following conclusions seem to emerge:
(i)

The best span of control cannot follow a rigid arithmetical prescription

(ii)

The most important consideration is what span can be effectively managed by an executive.

(iii)

The optimum span must be determined for each enterprise, taking into account all the variables

(iv)

Levels being expensive, continuous attention must be paid against its proliferation

(v)

Through planning standardization, objective task setting, effective communication system and well
defined policies, inter levels references should be combated, thereby enlarging the effective span
of control.

(vi)

The span of control will differ from level to level; the optimum span should be determined
individually for the different levels of management.

Centralized and Decentralized Organization

Here we shall briefly note the logic and relevance of the process for organizational effectiveness. The
words centralization and decentralization are often used with reference to geographical location. If
geographical dispersal is a factor for autonomy of functioning and dispersal of authority, decentralized,
geographically dispersed units are possible. But the underlying principle of decentralization has to include some
or all of the following:
(1)

dispersal of authority

(2)

dispersal of autonomy

(3)

dispersal of functions

(4)

dispersal of results, and

(5)

autonomy of cost-effectiveness.

Vertical Decentralization
Growth oriented activities sometimes move an enterprise toward vertical expansion. For example,
a major steel plant may find that it is tormented with acute, chronic power shortage; it may decide to set up
a power plant. The subsidiary functions- marketing, production, utilities, raw materials will be shown in the
organization chart as decentralized units or divisions.
Horizontal Decentralization
This occurs when several horizontal or collateral divisions are set up as a result of diversification. A
major tobacco company operating hotels; or a machine tool enterprise starting a watches division or electrical
bulbs are some examples of horizontal decentralization.
71

DEPARTMENTATION
The logic of departmentation is two-fold:
(a)

the size of an enterprise,

(b)

the growth of specialization (division of labour) in the activities of the enterprise.

Normally, a manager can (directly) control up to a limit of the size of activities. Logically, it helps a
manager to control the subordinate activities in the form of logically bound (homogeneous) tasks and functions.
Departmentation, then is the process of dividing the enterprise activities into manageable units (by size),
grouped on the logic of their internal similarity (homogeneity).
Methods of Departmentation- Pattern and Criteria
(1)

By Simple Numbers

The number of persons pursuing a set of activities can be the basis of departmentation. This method
is limited and is suitable in situations where the work is repetitive where manpower is the most important
condition, where group efforts are as important as individual efforts and where the group task (output) can be
related to number in the group.
(2)

By Time

This method of forming groups has limited applicability. It often goes with the first methods so that
number in the group working for a defined period makes the joint criterion of grouping.
(3)

By Function
A function stands for a composite concept which includes:
(a) the task (homogenous)
(b) the skill (specialization) required for the task
(c) the service-discrete and well defined, and
(d) clear cut objective.

Functional departmentation offers one of the most logical method of divisioning (grouping) enterprise
activities. It is one of the most commonly used methods, either independently or in combination with others.
The major functional divisions are production, marketing, finance and personnel. Note that these are linked
with the major(divisions) objectives of an enterprise; demand specific skill and training for their operation;
possess a well-laid-out task set apart from each; and cover discrete, well demarcated areas of activities within
the enterprise.
The merits of the functional method of departmentation are;
(a)

It is most logical and consistent with the natural division of the enterprise task and objective.

(b)

It gives necessary status to these functions by placing their heads high in the organizational
echelon.
72

(c)

It gives full weightage to the skill and specialization required in the discharge of the several
functions.

(d)

The major functions need cooperation and team work, starting from the highest level, for effective
implementation of enterprise goal.
The limitations of this method are not so much inherent as situational and empirical. These are:

(i)

An excessive emphasis on the functions rather than on the operational goals. The functions are
sometimes misconceived as an end in themselves rather than as the means to an end.

(ii)

Functional goals and group interests tend to develop, cutting across organizational goal.

(iii)

As specialization grows, each function seems to carve out a niche, ruling out communication with
other department.

(iv)

It confuses (often) the line of operational authority. Conflicts arise when a functional director
vetoes the line general managers suggestions on functional grounds.

(v)

A serious doubt exists whether the functional heads like finance, personnel, etc. should not be
located one step below in the organizational echelon, say under the second level of the main line
authority, for example, general manager( production), in a manufacturing organization.

(4)

By Products or Service
This method may work well when a few major products or services absorb most of the activities
(manufacture, sales profits) of the enterprise. Each of these products is then constituted into a major Division,
which functions largely on independent basis.
The merits of this arrangement are:
(i)

The operational integrity and accountability of the line management is not blurred or underrated.

(ii)

Each major product constitutes a cost and profit-centre. It is proper that functional services
should be placed subordinate to the divisional(line) chief as sub-functions, in the organization
structure.

(iii)

This method helps product development, diversification, innovation and products research.

(iv)

The pattern is suited to rapid growth and product and market expansion. It helps the Chief
(Chairman or President) of the enterprise to divest himself of responsibility, transfer a high degree
of autonomy to the Divisions and enforce aggressive profit and growth targets.

The limitations of this methods coincide with the problems of (a) duplication of functional services, (b)
high overheads, (c) divisional goals overriding enterprise goals (when the two diverge), (d) it requires more
manpower and skilled managers- which often is a constraint, and (e) in certain functional areas, especially,
finance, personnel and industrial relations, product-wise division of these functions leads to basic difficulties of
harmony and uniform standards.
(5)

By Geographical Region

Departmentation by geographical region is sometimes seen as a compulsion when the enterprise

produces and sells in the wide national market, often in international markets.
73

The advantages of this method may be summarized thus:

(i)

Better adjustment with the social and socio economic environment.

(ii)

Greater access to local and territorial economies and facilities. Since regional factories or
territorial sales offices are opened, considering regional and locational advantages-such benefits
accrue to the enterprise.

(iii)

To the extent regional autonomy vests in the departments, decision-making and communication
are facilitated. The regional departments loop up to the central office in large policy matters, but
in matters of regional operations can move with speed and responsive flexibility.

(iv)

Territorial departments usually constitute natural cost and profit centres-allowing, of course, for
any special advantages (low cost, well-developed market, etc) or disadvantages (high cost, high
overheads, poor local market etc.) when a correction factor should be applied to bring about
uniformity on the basis of inter-territory comparison and control of profit or any other objective
criterion.

(v)

Even in respect of functions, such as finance, personnel and public relations-which are intrinsically
convenient to operate from the centre( head quarters), certain limited and local responsibilities of
accounting, invoicing, credit control etc. and routine staff matters can always be left with
advantage to be operated by the territorial department.
The drawbacks of the method are, again, duplication of personnel, large manpower requirement, high

overheads, territorial loyalty overriding enterprise interest, problems of coordination and control.
(6)

By Marketing Channel
Retailing to consumers directly is not feasible-considering the size and complexity of the business and

the spread of the market. Products as mass consumption items, pharmaceuticals, farming inputs etc. rely on
the support of the marketing channel to (a) reach the consumers, and (b) to steer competition.
(7)

By Customers and Clientele

When preference or differentiation is prominent and decisive, it is always logical to organize

departmentation on customers basis- if not at the primary level, at least at the second level (e.g. at products or
services level below the major functional level of production, personnel, finance etc.) of the organizational
chart.
One or two limitations of the customers based departmentation need to be noted:
(i)

There is some uncertainty about the differentiation required

(ii)

Special demands (terms, methods of sale, specifications or products, etc.) are put forward by the
departments which cause problems of adjustment with overall enterprise policies and operations.

(iii)

It needs a delicate and far-sighted balancing between the cost of the customers services
demanded by the departments and the profit goals of the enterprise.
74

(iv)

The demand on the major departments like production, marketing, finance etc, for adjustments to
cater to the needs of the customer-wise departmental setup, often cause overall managerial
problems.

(8)

By Process or Plant
This method is similar to product-based departmentation. Instead of the product forming a major

division of the enterprise, a major process or composite plant or equipment constitutes a significant segment
(centre) of enterprise operation.
(9)

By Committees
Committees sometimes are placed in charge of functions and take the place of department. This

method of departmentation is seen in operation in academic and research institutions and universities, although
in any organization where the major functions are mainly deliberative and directive and where the output of the
function demands independent specialist views to be brought to bear on it, this method may be adopted.
(10) Matrix or Grid Method of Departmentation
The Matrix (or Grid) structure is a mosaic of task and functions. Often the situation is, as in a
sizeable program or project the task is large and rewarding, yet temporary, as all programmed must be
completed.
The advantages of the method are:
(i)

Unity of command so far as the project is concerned; the project leader or manager is
accountable for the success of the project.

(ii)

The project manager can draw on the specialist (functional) services of the other departments to
complete the network.

(iii)

As individual projects are completed and wound up, the functional services are released, with
ease and flexibility. These may join other projects which may replace the completed ones or
attend to other basic objectives of the Institution.

(iv)

The method provokes functional (as opposed to dysfunctional) conflicts which is healthy
especially in academic institution.

(v)

It produces economy of efforts and expenses.

(vi)

It helps speed and flexibility in organizing projects and consultation services.

Among its limitations may be mentioned:

(i)

Inter functional (interdisciplinary) dysfunctional conflicts cannot be ruled out.

(ii)

Discordance between the project manager and the functional hands is likely.

(iii)

When the organization has other demands on the functional services for its other objectives
besides the projects, competing claims (and quarrels) on the functional resources may result.
75

In a healthy climate of co-operation and team work the system on the whole should work.
SUMMARY
There are many grouping principles which are to be thoroughly understood by the manager for
effectiveness in achieving the goals in the organization. Span of control is a range of direct reporting by
subordinate managers to a single senior manager stationed above them in the management pyramid. There are
centralized and decentralised organizations. The principle of decentralization includes disposal of authority of
autonomy of functions of results and autonomy of cost effectiveness. There is virtual and horizontal
decentralization. The logic of departmentation is two fold, that is the size of an enterprise and the growth of
specialization in the enterprise. The different methods of departmentations are by simple numbers by time by
function, by product or service, by geographical region, by marketing channel, by customers, by process or
plant, by committees and by matrix or grid method of departmentation.
QUESTIONS
1.

What are the Grouping principles?

2.

What is Departmentation and its methods?

3.

What is grid method of Departmentation?

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CHAPTER - V

STAFFING
OBJECTIVES
This chapter will enable the reader to acquaint himself with the fundamentals of staffing, manpower
and its process, recruitment and selection, training and development and training methods.
FUNDAMENTALS OF STAFFING
Organizations require the services of a large number of personnel. These personnel occupy the
various positions created through the process of organizing. Each position of the organization has certain
specific contributions to achieve organizational objectives. Hence the person occupying the position should
have sufficient ability to meet its requirements. Staffing basically involves matching jobs and individuals. This
may require a number of functions like manpower planning, recruitment, selection, training and development,
performance appraisal, promotion, transfer, etc. Various authors look at staffing as one of the elements of
organizing process.
The responsibility for staffing rests on all managers at all levels of the organization. It increases as one
goes up in the organizational hierarchy. For example, chief executive takes active interest in the selection of
personnel particularly at higher levels. Similarly managers at other levels are involved in some form of staffing
function, for example, besides selection of subordinates for their departments, they are involved in their
training, performance appraisal, etc. Normally, managers try to ensure two things. First, they want that they
get subordinates who are capable of performing the work of their departments. Second, they want that their
subordinates are trained and developed appropriately so that their performance increases and there is suitable
replacement of personnel whose positions fall vacant because of any reason.
In order to facilitate the effective performance of staffing function, personnel department is created
in large organizations. This department is basically staff department. Its primary responsibility is to take those
aspects of staffing which cannot be performed well by line managers either because discharge of such a
function requires the use of specific skills not adequately possessed by line managers or because line
managers may not get enough time to go through these aspects.
MANPOWER PLANNING
Planning for manpower resources is a major managerial responsibility to ensure adequate supply of
personnel at the right time both in terms of their quality and aptitude and effective utilization of these
personnel.
MacBeath had divided manpower planning into two parts: planning of manpower requirements and
planning of manpower supplies. He defines manpower planning as follows:
Manpower planning involves two stages. The first stage is concerned with the details of planning
77

manpower requirements for all types and levels of employees throughout the period of the plan and the second
stage is concerned with planning of manpower supplies to provide the organization with the right types of
people from all sources to meet the planned requirements.
Objectives of Manpower Planning
1.

Manpower planning enables an organization to forecast its manpower requirement.

2.

Manpower planning helps the organization to match its manpower with skills necessary for
achieving its objectives.

3.

Manpower planning helps the organization to know how its personnel are employed and how
their skills are being used.

4.

Systematic manpower planning facilitates similar approach in other aspects of staffing.

MANPOWER PLANNING PROCESS

Manpower planning considers matching all jobs and individuals in future. Since there is enough time,
the organization can achieve this by taking systematic manpower planning. The process of manpower planning
entails consideration of several steps with relevant inputs before the manpower demand can be arrived at, on
the one hand, and identification of the sources of supply to meet the demand taking into account the several
constraints on the other hand.
1.

Projecting Manpower Requirements The first essential step in manpower planning is to

forecast organization structure that will meet the future needs of the organization. The basic
exercise that has to be undertaken in this context is to arrive at the scale of business activity over
a time period.

2.

Job Analysis Job analysis can be directed along the following lines:
(i)

What is the basic objective of the job? What is the purpose of the segment of the
organization to which the job is related?

(ii) What types of plans and projects are undertaken in this job?
(iii) What types of decisions are to be made by the incumbent on the job?
(iv) What is the authority of the job? How many subordinates will work under him? Can this
job alter the present organization structure? If yes, in what way?
(v) What type of personnel does the incumbent contact?
(vi) What are the requirements of personal attributes of incumbent in terms of education, training,
experience, apprenticeship, physical strength, mental capabilities, social skills, etc.
3.

Manpower Inventory Manpower inventory is related to the identification of key personnel in

the organization and cataloguing their characteristics without reference to the present positions
78

held by them. It provides information about present and future personnel being available in the
organization.
(i)

The first step in manpower inventory is the determination of personnel whose inventory is to be
prepared.

(ii)

After determination of personnel to be included in manpower inventory, detailed information

about them is collected. The information may be factual regarding age, education, experience,
employment records, merit rating history, health status, retirement data, results of psychological
and other tests etc.

(iii)

The third step of manpower inventory involves appraisal of personnel included in inventory. This
will give the information about present and potential talents of each individual.

(iv)

After appraising all personnel included in manpower inventory, detailed study will be made of
those individuals who have high potential for promotion and holding of key positions in the
organization.

4.

Identification of Gap between Available and Required Manpower When all these
exercises are undertaken, the organization is in a position to determine the actual needs of
personnel and their availability. These factors will, however, be affected by the rate of loss of
personnel. Therefore, the additional requirement of personnel will be equal to manpower required
and manpower available without considering loss of personnel.

RECRUITMENT AND SELECTION

Recruitment and selection process starts after the identification of vacancies to be filled up. While
recruitment is concerned with the identification of sources from where the personnel can be employed and
motivating them to offer for the employment, selection takes care of choosing the most suitable personnel for
employment. Flippo has defined recruitment as follows: Recruitment is the process of searching for
prospective employees and stimulating them to apply for jobs in the organization.
Sources of Manpower Supply
Normally, an organization can fill up its vacancies either through promotion of people available in the
organization or through the selection of people from outside. Thus there can be two sources of supply of
manpower external and internal. The first problem is to identify outside sources. Normally, following outside
sources are utilized for different positions.
1.

Advertisement Advertisement is the most effective means to search potential employees from
outside the organization.

2.

Employment Agencies Many organizations get the information about the prospective
candidates through employment agencies. In our country, two types of employment agencies are
operating: public employment agencies and private employment agencies. There are employment
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exchanges run by the government almost in all districts. The employment seekers get themselves
registered with these exchanges.
3.

On Campus Recruitment Many organizations conduct preliminary search of prospective

employees by conducting interviews at the campuses of various institutes, universities, and
colleges. This source is quite useful or selecting people to the posts of management trainees,
technical supervisor, scientist, and technicians.

4.

Deputation Many organizations take people on deputation from other organizations. Such
people are given choice either to return to their original organization after a certain time or to opt
for the present organization.

5.

Employee Recommendations Employee recommendations can be considered to employ

personnel particularly at the lower levels.

6.

Labour Unions In many organizations, labour unions are used as source of manpower supply,
though at the lower levels.

7.

Gate Hiring The concept of gate hiring is to select people who approach on their own for
employment in the organization. This happens mostly in the case of unskilled and semi-skilled
workers.

SELECTION
Selection is a deliberate effort of the organization to select a fixed number of personnel from a large
number of applicants.
Selection Process
A selection process involves a number of steps. The basic idea is to solicit maximum possible
information about the candidates to ascertain their suitability for employment. Since the type of information
required for various positions may vary, it is possible that selection process may have different steps for various
positions. For example, more information is required for the selection of managerial personnel as compared to
workers. Similarly, various steps of selection process may be different for various organizations because their
selection practices may differ. For example, some organizations conduct selection tests of various types while
others may not use these. However, a standard selection process has the following steps: screening application
forms, selection tests, interview, checking of references, physical examination, approval by appropriate
authority and placement. Below is a discussion of the various steps.
1.

Screening of Applications Prospective employees have to fill up some sort of application

forms. These forms have variety of information about the applicants like their personal bio-data,
achievements, experience, etc.

2.

Selection Tests Many organizations hold different kinds of selection tests to know more about
the candidates or to reject the candidates who cannot be called for interview etc.

3.

Interview Selection tests are normally followed by personal interview of the candidates.
80

4.

Checking of References Many organizations ask the candidates to provide the names of
referees from whom more information about the candidates can be solicited.

5.

Physical Examination Physical examination is carried out to ascertain he physical standards

and fitness of prospective employees. The practice of physical examination varies a great deal
both in terms of coverage and timing.

6.

Approval by Appropriate Authority On the basis of the above steps, suitable candidates are
recommended for selection by the selection committee or personnel department.

7.

Placement After all the formalities are completed, the candidates are placed on their jobs
initially on probation basis. The probation period may range from three months to two years.

TRAINING AND DEVELOPMENT

The term training is concerned with imparting specific skills for particular purposes. For example,
Flippo has defined training as the act of increasing the knowledge and skills of an employee for doing a
particular job.
Development has been defined as follows:
Management development is all those activities and programmes when recognized and controlled,
have substantial influence in changing the capacity of the individual to perform his assignment better and in so
doing are likely to increase his potential for future management assignments.
Role of Training and Development
No organization has a choice of whether to train its employees or not, the only choice is that of
methods. The primary concern of an organization is its viability, and hence its efficiency. There is continuous
environment pressure for efficiency, and if the organization does not respond to this pressure, it may find itself
rapidly losing whatever share of market it has. Training can play the following roles in an organization.
1.

Increase Efficiency Training plays active role in increasing efficiency of employees in an

organization. Training increases skills for doing a job in better way.

2.

Increase in Morale of Employees Training increases morale of employees. Morale is a mental

condition of an individual or group which determines the willingness to cooperate.

3.

Better Human Relations Training attempts to increase the quality of human relations in an
organization.

4.

Reduced Supervision Trained employees require less supervision. They require more
autonomy and freedom.

5.

Increased Organizational Viability and Flexibility Trained people are necessary to maintain
organizational viability and flexibility. Viability relates to the survival of the organization during bad
days, and flexibility relates to sustain its effectiveness despite the loss of its key personnel and
making short-term adjustment with the existing personnel.
81

Identifying Training Needs

The basic aim of training is to induce a suitable change in the individual concerned.
1.

Organization Analysis Organization Analysis is the first factor for identifying training needs. It
is a systematic effort to understand where training effort needs to be emphasized in the
organization.

2.

Task Analysis Task analysis entails a detailed examination of a job, its various operations, and
the conditions under which it has to be performed.

3.

Man Analysis The focus of man analysis is on the individual employee, his abilities, his skills,
and the inputs required for job performance, or individual growth and development in terms of
career planning. Man analysis helps to identify whether the individual employee requires training
and, if so, what kind of training.

TRAINING METHOD
The range of training methods is such that they can provide opportunity to unskilled to become
skilled; they offer people to be promoted at various levels of the organization. Training methods are means of
attaining the desired objectives in a learning situation. These methods can be grouped in some categories on
various bases.
On-the job training methods

Off-the job training methods

1. On specific job:

1. Special courses and lectures

A. Experience

2. Conference

B. Coaching

3. Cases

C. Understudy

4. Role playing

2. Position rotation

5. Management games

3. Special projects, task forces, etc.

6. Brainstorming

4. Apprenticeship

7. In-basket exercise

5. Vestible school

8. Sensitivity training
9. Transactional analysis.

On-the-job Training Methods

1.

On Specific Job On specific job method is the most common form of training for all
individuals. A person can learn when he is put on a specific job. He can develop skills for doing
the job in better way over the period of time.

2.

Position Rotation In position rotation, a person is given jobs in various departments of the
organization. The major objective of job rotation training is to broaden the background of the
trainee.
82

3.

Special Projects, Task Forces, etc. Assignment of people on special projects, task forces,
committees, etc. works like position rotation.

4.

Apprenticeship Apprenticeship is like understudy in which the trainee is put under the
supervision of person who may be quite experienced in his field.

5.

Vestibule School The concept of vestibule school is that people will learn and develop skills
while working in the situations similar to what they will face after they are put on actual jobs.

Off-the-job Training Methods

In off-the-job training, a trainee has to leave his place of working and devote his entire time for
training purpose. During this period, the trainee does not contribute anything to the organization.
1.

Special Courses and Lectures Special courses and lectures are knowledge based training
methods. In these programmes, an effort is made to expose participants to concepts and
theories, basic principles, and pure and applied knowledge in any subject area.

2.

Conference In order to overcome the limitations of lecture method which emphasizes only one
way of communication, that is, from trainer to trainee, many organizations have adopted guideddiscussion type of conferences in their training programmes.

3.

Cases Case method of training has been developed by Harvard Business School of U.S.A. It
is one of the most commonly used training methods not only for business executives but also for
management institutes.

4.

Role Playing Role playing is a training technique which can be used very easily as a supplement
to various training techniques. The concept of role playing has been drawn from drama and play
in which actors play the various roles.

5.

Management Games Management games are used to stimulate the thinking of people to run
an organization or its department. The game can be used for developing skills for a variety of
purposes like investment strategy, marketing strategy, production strategy, collective bargaining,
etc.

6.

Brainstorming Brainstorming is a technique to stimulate for idea generation. Originally applied

by Osborn in 1938 in an American company, the technique is now widely used by many
companies, educational institutions, and other organizations for building ideas.

7.

In-basket Exercise In-basket exercise is a simulation technique designed around the incoming
mail of a manager. A variety of situations is presented in this exercise which would usually be dealt
by a manager in his typical working day.

8.

Sensitivity Training Probably no other training technique has attracted so much attention or
controversy in recent years as sensitivity training. Many of its advocates have an almost religious
83

zeal in their enchantment with the training experience. Some of its critics match this fervour in their
attacks on the technique. In part as a result of criticisms and experience, a somewhat revised
approach, often described as team development training, has appeared.
9.

Transactional Analysis Transactional analysis (TA) is used to develop better interpersonal

interactions among individuals. It involves understanding of personality factors of individuals and
their ego with which they interact.

PERFORMANCE APPRAISAL
Concept of Performance Appraisal
Appraisal is the evaluation of worth, quality or merit. In the organization context, performance
appraisal is a systematic evaluation of personnel by superiors or others familiar with their performance.
Performance appraisal is also described as merit rating in which one individual is ranked as better or worse in
comparison to others. The basic purpose in this merit rating is to ascertain an employees eligibility for
promotion. Performance appraisal is a systematic and objective way of judging the relative worth or ability of
an employee in performing his job.
Importance of Performance Appraisal
Performance appraisal is expected to provide answers to many of the questions relating to
management of people in the organization. The role of performance appraisal is not limited only to make
decisions about salary increase but it helps to arrive at many decisions. Let us see how performance appraisal
helps in arriving at decisions for various points.
1.

Salary Increase Performance appraisal plays role in making decision about salary increase.

2.

Promotion Performance appraisal plays significant role where promotion is based on merit.

3.

Training and Development Performance appraisal tries to identify the strengths and
weaknesses of an employee on his present job.

4.

Feedback Performance appraisal provides feedback to employees about their performance.

5.

Pressure on Employees Performance appraisal puts a sort of pressure on employees for better
performance.

Methods of Performance Appraisal

There are various methods of performance appraisal. In fact, each organization may have its own
unique system and method of appraisal.
Trait Approach
Trait approach of evaluation is quite old. For many years, and even today, employees have been
evaluated against standards of personal traits and work characteristics.
84

1.

Ranking Ranking is the oldest and simplest method of appraisal in which a person is ranked
against others on the basis of certain traits and characteristics.

2.

Paired Comparison Paired comparison method is a slight variation of ranking system

designed to increase its value for use in the large groups. In this method, each person is compared
with other persons taking only one at a time.

3.

Grading In this method, certain categories of abilities or performance are defined well in
advance and persons are put in particular category depending on their traits and characteristics.

4.

Forced-choice method The forced-choice rating method contains a series of groups of

statements, and the rater checks how effectively the statement describes each individual being
evaluated.

5.

Critical Incident Method In this method, only critical incidents and behaviour associated with
these incidents are taken for evaluation.

6.

Graphic Rating Scale This method assesses the degree of certain qualities required for a job.
The central idea behind this scaling is to provide the rater with a continuum representing varying
degrees of a particular quality.

Appraisal by Results or Objectives

The basic idea behind this appraisal is that the organization is concerned with the achievement of
objectives through the contributions of the individual managers rather than merely their traits.
Though there may be some variations, usually the appraisal by results goes through the following
process.
1.

Appraisal by result is a joint process between superior and his subordinates.

2.

The subordinate prepares his plan for specific period usually for one year in the light of the overall
plan provided by his superior. The final plan is prepared through mutual consultation.

3.

Through mutual consultation, both of them decide the evaluation criteria, that is what factors will
be taken up for evaluation of subordinates performance. The supporting role of superior is also
finalized so that the subordinate is clear about the various supports he will get.

4.

At the end of specified period, normally one year, the superior makes a performance evaluation
of subordinate on the basis of mutually agreed criteria.

5.

Superior discusses the results of his evaluation with the subordinate; corrective actions, if
necessary, are suggested; and mutually agreed targets for the next period are set.

85

SUMMARY
Staffing basically involves matching jobs and individuals. Manpower planning involves two stages,
one concerned with the details of planning manpower requirements and the other with the planning of
manpower supplies to provide the organisation with the right types of people. The process of manpower
planning has several steps. Recruitment is concerned with the identification of sources from where the
personnel can be employed. Selection is a deliberate effort of the organisation to select a fixed number of
personnel from the large number of applicants. Training is the act of increasing the knowledge and skills of an
employee for doing a particular job. Training methods is such that they can provide opportunity to the unskilled
to become skilled. There are on-the-job and off-the-job training methods. Appraisal is the evaluation of worth,
quality or merit. There are many methods of performance appraisal.
QUESTIONS
1.

What is Manpower Planning Process?

2.

What is Recruitment and Selection?

3.

What is Training and Developments?

4.

What is Performance Appraisal?

86

CHAPTER - VI

DIRECTING
OBJECTIVES
The reader of the chapter should get acquainted with nature and function of directing, theories and
concepts of man and his nature, guiding principles of directive functions and its link with management board.
NATURE AND FUNCTION OF DIRECTING
Etymologically directing is to point or aim to point out the proper course; to guide; to order, to plan
and superintend; to command; to counsel. Directing may thus be conceived as a vector with two dimensions
namely (a) magnitude and (b) aim or direction.
Therefore directing must have an aim which in fact is the goal of the enterprise. Without an aim there
is no direction and therefore, no directing. The areas that are directed are the enterprise as a whole, the total
system, lock stock and barrel-the enterprise structure and the human elements that man it.
The Human Element
Human element is emphasized in the task of directing. The enterprise must produce tangible goods
and services of a quality and at a price that must sell in the competitive market. And this managing has to be
achieved through the human element of the enterprise. Without harnessing the manpower to its full productive
capacity, good work done in the other managerial functions, such as planning, organizing and staffing, would
remain sterile and unproductive. The human element itself is a productive factor, whether employees at lower
levels or managers from bottom upward. Each worker is thinking and feeling unit. Each has a compulsion
(wages and discipline) to work; each also has a will (the natural human passion for fulfillment) to work. It is the
task of the directing function that the will and the compulsion are not at loggerheads. More than this, each man
is either a co-operator or a contender. A man is seldom a piece, alone; he is always the member of a group,
and then the manager. He is the more complex man by education and environment. He occupies a higher
centre of power and influence in the organization hierarchy. He is closer to the enterprise goal-has more
access to it-wields more influence on it, for good or evil.
What is the Individual - and the Group?
The Universe of the directing functions is the world of men within the enterprise. Its subject is the
man as the unit. We will attempt here a survey of the human behaviour individually and in groups which has a
distinct relevance to their status as participants in the process of enterprise management and therefore, a direct
bearing on the directive function. Man is a bundle of conflicts. This conflict shapes his conduct within the
enterprise, in his interpersonal relationships, how he works for the enterprise, how he discharges his obligations
to other groups and to the enterprise. Second man is self-inconsistent. It is both a strength and weakness in his
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partnership in the enterprise effort. It is also a challenge and opportunity of the directing authority. He can be
changed, directed, managed or developed. Third man is primarily emotional, egoistic. He is logical to a point.
But if you can rouse him (and rouse is an emotional word) he can work wonders beyond normal boundaries.
Negatively, if he is hurt, affronted, his wrath is roused, he can be a nuisance. The range between his use and
uselessness is enormous. Managing the ego (and the ego status) of the human element of the enterprise need
to be consciously pursued by the directing function. Every man has a secret life; and this is not only in his
emotional and psychological self but in his way of life. Part of it need not concern us, as the enterprise
manager; but quite a part reveals itself in his in-enterprise behaviour which cannot be overlooked. This element
decides between his openness, candour, cooperative team spirit and his secretiveness, slyness, subterfuge,
habit of pulling strings and spreading stench and foul air all around. It should be understood that the
organizational man cannot be all open, direct, straightforward. Secretiveness should not be encouraged; it is
the one surest way how dysfunctional conflicts raise their heads. Sixth, there are formal groups within the
enterprise, functions divisions, departments, cadres, grades and others. These groups function openly with
assigned tasks, within the recognized organizations structure. There are other groups, many of which are
unobserved-only felt and perceived. The inner logic of such informal grouping may be divided into six motives:
(i)

Survival. As in nature, so in an enterprise, the group is a more effective unit than the lone
individual in the struggle for survival.

(ii)

A genuine fondness, commonness of likes and dislikes may provoke an informal group, although
the cementing of such a group is often looser apt to snap under stress and strain.

(iii)

The motive of gain is a good bond holding together a group. It is one step more active than the
survival group.

(iv)

A group often functions for revenge.

(v)

A man also forms or joins a group for sport and pleasure, to combat boredom and drudgery of
the workplace. Such a group is comparatively harmless and neutral to enterprise interest but may
still cause waste and dissipation of enterprise time and direction.

(vi)

Finally, a man seeks a group where he can feel important, here he can show off, where he has
others who praise him for qualities of which he seeks to boast and which he desires to possess.
Two important points need to be remembered by the directing functionary.
(i)

Such informal groups often spell potential harm to the enterprise. They have to be watched,
spotted and discouraged.

(ii) The groups do not work within the rigid boundaries under which they have been described.
Seventh, no man is free from worries and frustrations. He does not leave these behind, at home,
when he centers the work place; he carries the stress and strain into it. Eight, the employee is not interested in
the organization unless it is for what the organization can give him. The lesson of this observation is that the
enterprise and the job must be made worthwhile for the man. Ninth, the man is usually skeptical about the
senior. This is not an intrinsic situation but a derived one. Tenth, both the managerial staff and others can be
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changed and for the benefit of the enterprise. Eleventh, the unit of the enterprise man is his family. More
precisely, the mans world is composed of three concentric spheres. The inner sphere is he and his family. The
interest of this inner group is paramount. It will easily override the interest-all that concern the enterprise. The
second sphere of his interest comprehends his friends and closset associates. He will use his position in the
enterprise to work for this group. The third sphere includes the mans wide social contract-his acquaintances
with whom he may have a bond of shifting quid pro quo give and take. Finally, directing and leadership consist
in directing and leading people. In all walks of life, leaders are few, followers are many. Hero worship is a trait
not uncommon in human nature.
The Average Man
The concept of the average man-the average economic man or the average social man-can be traced
to the classical economic theorists. The economic behaviour of the common man was postulated and
theorized on assumptions on how the average economic man would behave, given certain economic
environmental conditions. Later studies and empirical testing established that there are many ifs and buts and
exceptions in the application of the classical economic theories in real life situations. Directing men is no
substitute for directing the man as he is. The enterprise man contributes to the work and objective of the group
to which he belongs (and through the group, to the enterprise objective) his own work and attitudes, Group
dynamics, in which the members of the group combine and participate disclose a pattern of group behaviour,
but no two groups behave alike nor does the same group behave or react to environment identically at different
times or under different sets of impulses.
The Directing Function and the Followers
It needs to be emphasized that the directing function directs, guides, harmonizes and manages the
human element-not as power or wisdom from outside the zone of operation. The truth is far from it. The
followers and subordinates are very much part of him and of his function. He appraises through their
experience and their own assessment of situations. He gleans their wisdom and their skills( much as a skilled
gardener gleaning flowers) puts the string of harmony round them and synthesizes their efforts-labour, initiative,
resourcefulness and gives them a direction, a goal to achieve, and avenue to reach the goal. His followers and
subordinates are his raw materials his bricks and mortar, clay and timber, the colour and the brush out of which
all, he must raise the architecture, a work or art and achievement. The elements are all there, bonded,
recreated as it were, into a new weapon of power and success.
Some Theories and Concepts of Man and his Nature
Psychologist, Edgar H. Schein, in his book, Organizational Psychology, formulated four concepts
of the developing man. These in summary are,
(i)

Man is basically an economic animal and will pursue the aim of maximizing his economic gain.
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(ii)

Since the power of economic reward vests in the organization, man can be moulded and
motivated by manipulating his economic gains.

(iii)

Man cannot always perceive his self-interest due to his emotional nature which has to be held in
check.

(iv)

An organization must be so structured as to curb and combat mans irrational and emotional
nature.
Elton Mayo, another noted researcher and management theorist, emphasizes the social needs of the

working man. According to him, due to specialization and division of labour, work in a modern industrial
setup, has lost all meaning and interest for the industrial worker. He now turns to his social needs and seeks
his satisfaction from his work environment. Psychologists like Argyris and Maslow question this total emphasis
on the satisfaction of social needs supplying the dominant motivation for the worker. According to them, mans
overriding need is to seek productive fulfillment of his skill and capacity for work. He needs an outlet for his
talents and creative urges in a process of self-actualization.
Man and His superior Self
Man, as a social being, has imbibed certain social responsibilities which he often discharges,
overriding his immediate selfish interests. This social man is loyal to his friend, considerate to his colleagues,
compassionate, respectful, coopertant, willing to subordinate his personal gains to the community. He owes
allegiance to the enterprise to which he belongs, is often proud of it. He is discriminating rational, prefers what
is right and abhors what is wrong, unfair, clandestine. He obeys discipline as natural and accepts it as part of
his social responsibility. He will be proud, egotistic, seeking fulfillment of his talents and ambitions in a logical
and fair enterprise atmosphere. He will demand justice and fair play and be willing to do it to others. This
rational superior self in every man is one who makes a sound team and is a strong link in the enterprise chain
of command. He too is the subject of the directing functionary who need to be cultivated and directed. There
is another part of man which is his moral, philosophical self. It is often dormant, seldom dead. This is the self
of man who makes sacrifices, observes the path of truth, puts principles over expediency. Finally, let us own
that, man, the subject of the directing functions is (and will ever be) a complex blend of his animal and his
superior self and it is a fascinating spectacle to strive and to work for the dominance of the latter.
GUIDING PRINCIPLES OF DIRECTIVE FUNCTION
We may perhaps identify five specific principles of directing that should guide the functioning of the
directing authority. These principles are both a cause and an outcome of the general principles of good and
sound organization and management.
(i)

The Vector principle of directing. This principles calls attention to the two-dimensional content of
the directive function (a) mustering the optimum volume of efforts (and effectiveness) through the
human element and (b) aiming and moving them on to the goal via the shortest route.
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(ii)

The principle of the potential. The human resources possess an undefined potential for
effectiveness and productivity.

(iii)

The principle of erosion. This is indeed the obverse of the second principle. The output of the
human variable is neither defined not static. If it does not grow, it is very likely to shrink erode,
in both its dimensions-quantity and direction.

(iv)

The principle of unison. It is no error to conceive every man as a source emitting waves-of zeal,
verve, dynamism, faith, steamship; or of weariness, scepticism, indiscipline, intrigue,
irresponsibility.
It involves allaying the internal conflicts principally the dysfunctional conflicts-the individual and
group interests contending with the enterprise objective. The principle of unison yields the crop of
conservation, of skill, will and energy.

(v)

The principle of command. The directing functionary would need the principle of the unity of
command fully realized in the enterprise system. His main task is to harness and channel the
human activities straight on the path to the enterprise goal.

The Directing Function and The Satellite System

The directing functionary occupies the centre of the enterprise system. The functional advisers and the
specialists that crowd round his chair. It is an almost natural weakness of the auxiliary functions(the staff ) that
they must seek importance fight against the (often suspected) air of being ignored. The importance of the
adviser (the staff head varies directly with his proximity to the head that he advises). The countries have the
advantage of proximity to the directing Head. Others (who may be called barons in the system) hold charge
of the line functions perhaps away in the factories, or the marketing divisions. One major task of the directing
function is to hold the balance between these two pressures-which often betray an element of rivalry, hostility,
conflict.
The Directing Function and The Management Board
For our purpose, the directing functionary is the chief executive organ of the enterprise. He may be
the President or the Executive Vice-President who is entrusted with managing the enterprise. Either he chairs
the board or he sits there as number two to the President (or Chairman) when the latter is a senior and
distinguished part-time head of the deliberative and policy making function of the board of management. The
directing functionary is necessarily the Chief Executive of the enterprise.
Some major observations on the functioning of a board are;
(i)

But the construction of the agenda is often not need-based. If, it just happens that important
decision points (which hand around the corridors) are omitted or overlooked.

(ii)

Each member of the board, whether functional or advisory, is interested in (or concerned with)
only one or two items of the agenda out of the large number, say twenty that is included.
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(iii)

During the deliberations in the board, a member talks forcefully and persuasively (but not
necessarily, logically and cogently or even wisely nor, always, on proper and verified facts) coming
out with his interest (even stake) seeking often to muffle it through(rather transparent, quite often
puerile) eloquence.

(iv)

Members spend unconscionable time and energies on frivolities-mainly personal cases (for facts
and figures are dead, only persons are alive); the result is vital enterprise decisions (whatever of
them has chanced to get a seat in the agenda) are either shelved (for the next meeting) or cleared
without a proper debate or appraisal.

(v)

When failures(poor performance results) are reported, feeling sun high and the atmosphere is
critical. But the comments are layman type that is, layman with authority loud with exhortation and
indictment.

(vi)

The debates mostly do not yield solutions; fundamental are not tackled. Losses (large losses) are
tolerated merely because they have happened.

(vii)

The board is mainly on the defensive, tackling problems as they come. Little endeavor is manifest
to think ahead, to take a forward look, to locate and seize opportunities.

(viii) The director in charge of an item that is under debate takes the position of an accused and pleads
defensively on the excuses and extenuating factor behind the patent defaults.
(ix)

Lobbying pays. A director (including the managing director_ who knows he would be on the
defensive (in the dock) on a major point of default of his function must meet and talk to some
other important (due to his ferocity and/or status in the board) directors and brief them, Then he
can expect a comparatively easy time in the board meeting securing a condescending wink from
the (otherwise) dangerous quarters.

(x)

When there is a government director (that is, a director nominated by the government) in the
board, he usually applies (de facto) the veto. He is backed by his official position in the
government-which, in case he is annoyed or affronted, he can use to harm and harass the
enterprise management.
The lesson to the directing function is that he cannot let the board go, run amuck; he must hold the

reins firmly as his position and authority demand. He must manage control the dysfunctional conflicts and
group interests developing in this senior group. He must also use the board, make it work, justify its high
authority and status-and above all, its pervading responsibility. He has himself to prepare the agenda, or closely
review it, mould it, monitor it. It must be his document to the board. He must force decision through the
board, with his own dominating appraisal of situation; he must get restoratives cleared, so wounds do not
fester, and problems do not drift. It is a safe conclusion that much depends on the directing functionary as to
how he faces the board to his own managerial purpose-bends the wisdom and authority of the board to the
overall dynamics of enterprise objective.
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SUMMARY
Directing has two dimensions namely magnitude and aim or direction. The human element has great
importance in the task of directing. The universe of the directing functions in the world of men within the
enterprise. The concept of the average man - the average economic man or the average social man - can be
traced to the classical economic theorists. It needs to be emphasized that the directing function directs, guides,
harmonizes and manages the human element - not as power or wisdom from outside the zone of operation.
Man as a social being has imbibed certain social responsibilities which he often discharges overriding his
immediate selfish interests. Otherwise specific guiding principles directing functionary is the chief executive
organisation of the enterprise.
QUESTIONS
1.

What is the nature and functions of Directing?

2.

What are the Directing functions?

3.

What are the guiding principles of Directive functions?

4.

Write about the Directing functions and the management board.

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CHAPTER - VII

MOTIVATION
OBJECTIVES
The reader should familiarise himself with the definitions and concepts of motivation, connection
between motivation and behavioural science, strengthening motivation and behaviour modification.
INTRODUCTION
Motivation has a complex origin in the context of human behaviour. Part of it is in the subconscious
state, not easily observed or measured. It is unstable varying internally within the man. It is intervariable with
the environment shifts. It is partly emotional and only partly logical. The group influence on the individuals
distorts the link line between desire (need) as input through the intervening variable, namely activity or
behaviour to the output, that is, performance toward the enterprise objective.
Some Concepts and Definitions
We have observed that a motive is the active form of a desire, craving or need. Out of hundreds of
desires or needs that, consciously or subconsciously, bubble continuously within the mans self, some are so
prominently felt as to assume the active form of a motive. A motive is observed as a behaviour, or a behaviour
is the visible realization of the motive. A motive is observed as a behaviour, or a behaviour is the visible
realization of the motive. A motive works toward a cherished goal; it is goal-oriented. A motive is invisible it is
observed as behaviour. A behaviour is also therefore goal oriented. Behaviour is a series of patterned
activities. An attitude may be seen as patterned potential behaviour. Not all needs can be satisfied. The
strongest need may be blocked. The environment may be so potent and hostile as effectively to thwart and
frustrate the keenest need (desire) of the subject. In such a situation need-substitution is likely to take place.
When a persons need is effectively blocked, when he accepts that the barrier cannot be overcome, he is likely
to give up. This phase is known as frustration.
Motivation and Behavioural Science
Its primary task of the management process is to define and set out the enterprise goal. The rest of
the management task may be summed up in the phrase-moving the organization most effectively, to reach the
goal. Generalizations (which are basic to scientific) in behavioural models are printed heavily with two kinds of
constraints (1) the situational constraints, and (2) the personal (individual) constraint.
Behavioural research and behavioural science are at locating general laws of human behaviour under
given (or postulated) environment.

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The two major tasks in the study of motivation are:

(i)

Mould and channel individual (and group) objectives in alignment with the enterprise objective.

(ii)

Convert individual (and group) motivation into such individual (and group) behaviour as are
directed to the common objectives of the individual (and the group) and the enterprise.
The four variables which need to be manipulated in the accomplishment of the above two tasks are:

(i)

The individual and the group desires (needs) that cause and bring about motivation.

(ii)

Motivation(individual and group) that blossoms forth in observed behaviour.

(iii)

The behaviour (individual and group) directed to the common (as closely as the management can
engineer) objectives of the individual (and the group) and of the enterprise as a whole.

(iv)

The objectives themselves of the individual or group and the enterprise.

The following limitation, in varying degrees, characterize the motivation and behaviour models of the
enterprise man:
(i)

The models are mainly normative. Expressly or tacitly the models assume at least three norms:
(a) the normal man,
(b) behaving in the normal way, and
(c) in a normal environment.
These assumptions introduce abstractions from reality for three reasons:
(a) No two men respond to the same impulses in the same way.
(b) The same man responds and behaves differently with a shift in environment-environment
being defined as anything (or combination of things) outside the man.
(c) There is no necessary assurance that the same man behaves in the same way at different
points of time.

(ii)

The conversion chain from the mans needs via motivation and behaviour, finally, to enterprise goal
does not yield the same input output nexus.

(iii)

The samples chosen for observation have no necessary assurance of uniformity or homogeneity
with the universe from which they are carved.

(iv)

The variables in the system-needs, motivation, behaviour and behaviour effectiveness toward
enterprise goal are not additive linear quantities.

(v)

The concept of man as the unit of the model varies with the culture and tradition in which he is
born and bred.

(vi)

Finally, the conclusions of the theories cannot be put to the test. This is due to the almost
insoluble difficulty of simulation of the reality into the model system or of the model variables
being reproduced in reality with absolute conformity.
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Blocked Needs and Resultant Behaviour

When rational coping behaviour fails to overcome the block, the resultant behaviour branches off into
two channels.
(i)

rational behaviour system

(ii) irrational (aberrated) behaviour characteristics.

The rational behaviour is frustration (that is giving up the behaviour) followed by needs and goal
substitution. The irrational behaviour system finds expression in different kinds of illogical (and ineffective)
behaviour patterns. These may be observed as under:
(i)

When a mans perception of himself is in conflict (dissonant) with the environment-which he

cannot mould-tension results.

(ii)

We have observed that frustration prompts goal substation and behaviour modification. It also
manifests itself in different aberrated behaviour.

(iii)

Another form of irrational behaviour is regression. This phenomenon is sliding back into more
primitive conduct meaningless and incompatible.

(iv)

Fixation is another form of manifestation. This often observed in child behaviour showing it up as
unexplained obstinacy. An adult also shows sometimes his resentment to the frustrating situation,
not through behaviour-modification, but by a fixation; he sort of spurns the environment, resents
and is frozen, in his old (objectionable) habits.

(v)

Finally, frustration can cause resignation, a phenomenon marked by unresponsiveness to stimuli.

It is a mental condition similar to paralysis of the limbs.

Strengthening Motivation
Motivation, which is internal to the person, is externalized via behaviour, reaching out to the goal
which is outside of the person.
(i)

Motivation is goal directed- externalized through behaviour.

(ii)

Motivation works best toward the goal when a challenge intervenes. It draws the full potential
and the urge for self actualization out from the person.

(iii)

The motivation goal cycle is not completed without a reciprocating (matching) reward from the
attained goal back to the motivation source.

(iv)

The cycle motivation-challenge-goal-reward-motivation, is not static.

(v)

The process goes on till (and when) and impossible goal (perceived by the subject as
unattainable) is set, it then acts as a block which stifles motivation.
The model holds forth two lessons for the enterprise manager.
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(i)

To create and strengthen goal-directed motivation, there must be a challenge on the passage to the
goal. A matching reward for attainment of (or performance toward) the goal must be built into the
system.

(ii)

Goals or targets, perceived us unattainable, are likely to be self-defeating. Instead of

strengthening motivation to attain the goal, it may dampen the urge (motivation) to act at all.
There is the relationship between the success-chance in attaining a goal and the corresponding

motivation (strength) index:

Three points need to be observed:
(i)

As the goal approaches certainty that is the probability of success approaches 1, the strength of
motivation declines. It emphasizes the need for the element of challenge in the attainment of goal.

(ii)

When the chance of success is zero, the motivation strength is negligible.

(iii)

When the probability of success of goal exceeds say 0.5, the motivation strength is falling,
although not necessarily at the same rate as it went up over equal range of probability change.

Perception-Expectancy-Availability
Behaviour modification, as a weapon of improved goal effectiveness, is the constant theme of
behaviour science. Behaviour modification thus relies on the managers ability to mould the inner springs (the
needs and motives) of behaviour. There is a second way of monitoring and modifying behaviour; that is by
manipulating the consequences of behaviour. Behaviour that results in a pleasing consequence (reward) is apt
to be fostered and strengthened; another that evokes an adverse consequence is likewise smothered and
discouraged. Behaviour is thus a function also of the consequence of such behaviour. Combining the two
forces that shape behaviour, it follows that behaviour is the joint function of internal needs (motives) of the
person and the external consequences that arise from such behaviour. The first pushes, and the second pulls
the behaviour to its final manifest shape and position. Thus the three important variables which enter the system
of the different models of behaviour-modification are : (a) needs (motives), (b) consequences, and (c) manifest
behaviour. All these three variables are essentially subjective to the person at the centre of the model-whole
behaviour is sought to be modified. The needs are as the person feels, perceived them; the consequences
that matter are as they are perceived by the person; the resultant behaviour, what the person feels (perceives)
right and proper. Perception, thus plays a critical role throughout the process of manipulation. The reality is
not absolute or external; it is internal how it is perceived (perception) by the person. A positive expectancy is
an a priori, abinitio motivator. The lawyer son of successful barrister would commence his practicing career
with high expectancy-which works as a motivator. Availability connotes the perceived quality of the
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environment in terms of the probability of how it supports achievement of the goal. Just as expectancy is a
perceived probability status of satisfying a particular need, availability is a perceived probability of the
environment supporting or thwarting a desired goal.
SUMMARY
Motive is the active form of a desire, craving or need. Generalization in behavioural models have two
kinds of constraints namely the situational constraint and personal constraint. When rational coping behaviour
fails to overcome blocked needs it branches to rational behaviour system and irrational behaviour
characteristics. Motivation which is internal to the person is externalized via behaviour reaching out to the goal
which is outside the person. Behaviour modification as a weapon of improved goal effectiveness is the constant
theme of behavioural science.
QUESTIONS
1. Write an essay on important factors of Motivation.
2. What is the role of Behavioural Science and Motivation?
3. How will you strengthen Motivation?
4. What is blocked needs and resultant behaviour?

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CHAPTER - VIII

COMMUNICATION
OBJECTIVES
The reader should familiarise with the role and significance of communication and how it is done in
organization, the model of communication, management information system and its various facets.
ROLE AND SIGNIFICANCE OF COMMUNICATION
Organization is made dynamic by communication. A change is the process by which the enterprise
runs. A thought is a change, a decision is a change; an action is a change. The goal is something which needs
to be approached, achieved-moved forward to. The whole concept is one of motion, of progress from one
status to another of change. Communication provides the bonding element which makes the human element
behave-logically, meaningfully, cohesively toward the enterprise goal. Communication is a universal process
which infuses all elements of management-planning, organizing, staffing, directing and control. It is the
coordinating, cementing influence which runs through all levels and all facts of enterprise activities.
THE UNIVERSAL MODEL OF COMMUNICATION
Human beings communicate. They do so in the enterprise through speaking and listening; and writing
and reading. It has been estimated that managers send sixty to seventy per cent of their enterprise time in
attending to these four steps which is a measure of the importance of the communication process in enterprise
management. A communication is meant to convey a meaning that the sender seeks to transmit, so the receiver
can understand. The message is sent through a medium; it may be across the table (oral) on telephone (the
medium of wires and vibration), through letters or notes (the written languages)
Communication - Nature in Enterprise
Enterprise communications may be divided on the basis of
(i) Channel (ii) The medium
Based on channel. Communications are classified into:
(a) Formal (b) Informal
Formal communications can be of two kinds:
(1) In-enterprise (2) with the environment.
In-enterprise communications may take three routes.
(i) From up downward (ii) From down upward (iii) horizontal or crosswise
Communications flow from up downward (that is, from superior to subordinate levels) mainly in the
form of directions, interpretations and clarifications. Communications from down upward ( that is from
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subordinate to superior levels) are either in the nature of feedback (responses) or in the nature of original
thoughts and suggestions (stimuli) at the initiative of the lower levels, Horizontal communications travel among
peers and functions occupying the same (or nearly same) vertical level in the hierarchy. Free and frequent
communication between the same level (peers) in different disciplines and departments serve two beneficial
purposes:
(i)

It helps pool lower level delegation, thereby setting the senior levels free from too many routine
references.

(ii)

It helps greater understanding, teamwork and mutual trust among interdisciplinary and interdepartmental functionaries.

Formal communications with the environment may be either out flowing or incoming. In the former
case, enterprise officials need to communicate with various external agencies-such as customers, creditors,
agents, institutions, stock-holders, press, governmental departments and the public. Such communications are
prone to committing enterprise policies and practices in varying measures. Informal communications transcent
the barriers and boundaries of the formal channels. These normally take place in informal, interpersonal
contacts among employees and informal employees group. Informal communications are much freer and
therefore much less distorted. Informal communications are also much faster, better listened to, carry readier
conviction and, therefore, are interpersonally more effective. Informal communications can be achieved in two
ways: (a) by keeping the informal groups informed about all concerned organizational matters in a systemic
way;(b) and, encouraging them to disseminate information among their members and peer groups, thereby
routing their inevitable grapevine talking propensities (as Keith Davis noted) into desirable and constructive
channels. Based on medium (a) Express (b) Implied.
Express communications can be either written or oral (verbal). Written communications such as
letters, notes notices, bulletins, telegrams, telexes, rules, manuals, standing orders and procedures are more
formal and no less ambiguous. They are slower and more rigid and now allow exchanges which improve
understanding and acceptance. Oral communications are faster, more flexible and being more informal, are
better accepted. Implied (or silent) communications play an important role in monitoring management
behaviour. When a senior does not communicate on a case or subject it may well mean that he has lost interest
or wants the case to die out without further thought or action. Gestures, voice the turn of the phrases used
during discussions may all be loud with meaning and suggestiveness. The message of the eyes, the atmosphere
cordial or cold-even a studious silence between two sentences would tell the parties to a conversation about
the unspoken desire of the partners to the communication session.
To be informed itself is to be motivated. Communication inspires change, motivation is the motive
power behind change.
MANAGEMENT INFORMATION SYSTEM (MIS)
Management Information System (MIS) is a systematized cyclic pattern of communication. It is
management that begets information; it is also management that receives and benefits by it. This closed circle
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model highlights the contingency and situational nature of the information system. The MIS is a means to an
end. The end is the organizational goal of which the achievement is a joint function of (a) organization structure,
including its dynamics, and (b) the dynamic human element that informs (and breathes life into) the organization.
MIS is the structure, formal, and systematic part of communication. Communication reflects the universe of
knowledge and awareness in the enterprise in itself and as a subsystem of the wider environment. In the
discharge of the management functions and performance of the management tasks, management, at every level,
needs information-with economy, relevance, speed and precision. MIS has the task of processing the massive
incoherent communication (data and knowledge) generated in the enterprise, systemize it and feed it to every
level of management as an aid in its tasks and functions.
Information
Possessed data information : it is a unit of knowledge that is meaningful to the manager to whom it is
served and calls for a change.
Three elements are in-built in an information:
a)

A surprise element-carrying a new knowledge

b)

An uncertainty element-calling for an action in further probe or choice

c)

A deviant element needing action to restore the wheels on the track.

The System
There are four essential components of a system:
(a)

A number of variables or elements which, themselves in a state of flux, shape the systemdynamics.

(b)

A subsisting interrelationship between the variables-the nature (quality and degree) of which is apt
to change with its quota of influence on the system dynamics.

(c)

A purpose (or objective) that the system is designed to accomplish.

(d)

A direction that the system must follow in its progress to the destined purpose.

A system is a means to an end. It must perform. It has a task, a purpose that it must accomplish. It
must yield and output, the quality (speed, precision, economy and purposive relevance) of which is a measure
of the systems success. The system must process the inputs to produce the output. These then are the three
phases of an operating system
(i)

Input

(ii)

Processing

(iii)

Output

But a system must know how it is doing, whether everything is fine, if something has gone wrong.
This control function is exercised through the feedback loop and is the essential fourth element in every system.
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The control mechanism measure, registers and monitors the self-evaluation and self-correction of the system;
it measures actual performance, compares it with norm or target, reads and analyzes deviation. The control
mechanism also tells whether (i) the output (goal, target, plan, objective or forecast) should be changed, (ii) the
input variable should be changed or (iii) both should be changed (iv) or whether the system should float,
proceeding along the state of nature.
A system can be of two types:
(i)

Instinctive, automatic or self-regulating system

(ii)

Managed system.

Examples of automatic system are: human respiratory system, automatic voltage stabilizer, automobile
speed control system. Examples of a managed system are all business enterprise and planning systems including
all management information system; in fact all social, economic and environmental systems.
What is MIS
Since a definition should be brief, an MIS may be defined as the system method of bonding the
managed functions(components or sub-system) through the medium of information. The components of subsystems may comprise people, physical quantities or thoughts and concepts in any combination whatsoever.
A system has synergistic properties. Synergy is the quality of a combination where the combination is larger
than the sum total of its constituents. This synergistic effect is secured from three positive independent attributes,
missing or adverse in the subsystems(elements), which vest in the total system. These are:
(i)

Conflict in the direction of the elements away from the goal-path is smoothened, reducing the
divergence between the systems direction and the goal path

(ii)

Each element (sub-system) invariably has a weakness (skill specialization, knowledge, etc) of its
own, this is corrected by the strength of the other sub-system, leaving the system (combination)
stronger than the sum total of the several strengths of the sub-systems.

(iii)

The inherent and organic interdependence of the sub systems leaves each one incomplete without
the bonding exchange of information secured through their synthesis into a system.

What MIS Does - the Three Levels of MIS

MIS is an information system designed to fulfill the common needs of the operations system of the
enterprise. MIS deals with internal operations and their interface with the environment. It concerns all three
levels or subsystems of the management process: Strategic level that concerns itself with the major tasks of the
organization:
(a)

Long-range planning

(b)

Policies

(c)

Setting and monitoring goals.

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The tactical level- the departmental and functional heads is the processing and digesting segment of
the organization. The broad functions of the tactical level concerning the enterprise communication and
management information system are:
(i)

Make and monitor short term (say for one, two or three years) plan.

(ii)

Reduce the strategic long-term plan to its own short term plans; and then translate its own short
term plans into operational plans and programmes.

(iii)

Co-ordinate activities at operational levels, iron out anomalies and misconceptions; correct errors
and aberrations in procedure and programmes and prevent conflicts and conduct, working at
cross purposes.

(iv)

Filter, abridge and process information generated at operational levels and feed such processed
information output to the strategic levels.

(v)

Supply planning information to the strategic level to help it build sound and realistic long-term
plans.
For the operational level MIS supplies information for the following purposes:

(a)

Implement plans sent down from the tactical level.

(b)

Reduce the short term plans into operation plans, programmes and schedules.

(c)

Filter upward its responses to the environment, both human and physical, at the operationtactical levels interface.

Functional Spheres of MIS

Certain concrete spheres that the MIS should comprehend may be identified thus:
(i)

Information that provokes a decision in any management sphere-planning, decision, control,

respecting any management task-target, objective, time or concerning input/output variablesresources, methods, processes, output.

(ii)

Information-in the nature of feedback, confirming status quo or calling for a change, and if the
latter, defining the nature of the required change.

(iii)

Information disclosing the need for inter-functional and inter-variables readjustment

(iv)

Information about evaluated achievement and impact of on-going decisions and resulting
programmes.

(v)

Information that quantifies environment variables are indicative of the need for adjustment of the
enterprise-environment interface.

(vi)

Information which defines and monitors the time-series changes which must be fed into the
enterprise system to lay the path to effective transition from the short term to the long term
objective of the organization.

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Formal Reporting
The universe or enterprise communication both within the system and as a unit within the wider
environmental system is a moving, massive sea of bewildering complexity. On the formal plane, the significant
information is to be called out information that is, or betokens to be, a deviant; going away, unexpected posing
a surprise.
Informal Reporting
Informal communication in the enterprise takes place unceasingly as part of meeting of human beings
within the enterprise. MIS has the task of receiving, harnessing and registering the informal waves of
communication into significant, meaningful channels. Informal communication include the following:
I.

In-house seminars

II.

Participative management forums

III.

Group discussions

IV.

Suggestion schemes

V.

Meeting and conferences

VI.

Interpretation of conflicts-functional and dysfunctional

VII.

Feedback from the environment-through meetings, letters, complaints and communication

VIII. Intelligence reports-oral or written.

Designing an MIS
It is necessarily confined to an outline of the concepts and definition of the framework of an MIS
design. Designing the MIS needs, thus, a close look at three essential parameters:
(1)

The business as it is likely to take shape in the future

(2)

Second designing the MIS is a creative process; not (necessarily) continuing or extending or
improving status, but divining new patterns carving new directions for the flow of resources and
information. It is vital here that creative senior in-house managers participate in the designing
process.

(3)

Third, designs of alternative information systems should be framed with problems and pitfalls each
has to face, thought out and tabulated.
The choice of the MI system will then be made on the following criteria.
(a) cost (b) feasibility (c) flexibility (d) implementability

Clearly See the Problem

The following steps in sequence (or simultaneously where feasible) in designing an MIS are
important.
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(i)

Formulate, define and tabulate the problems-action by management in consultation with the MIS
designing expert.

(ii)

Set priorities to the problems in the order of their solution needs

(iii)

Segregate and phase out current problems from future ones- as envisaged along the growth-path
of the organization.

(iv)

Set out long range plans on planned MIS support.

(v)

Design alternatives blueprints of MIS design corresponding to alternative (ranges of) long-range
plans

(vi)

Match

(iv)

and (v) above for the best fit-with alternative forms of reference business-over different time
horizons, say one, three, five and ten years.

Manning (a) key executive positions senior levels- with personality identification (b) number of
middle level managers (c) number of employees.
Marketing (a) market (b) share of the market (c) saleable products, products mix (d) distribution
channels (e) warehousing and logistics (f) customers-numbers, nature, location (g) competitors and their market
share.
Production and operation (a) plant size and location (b) methods, process technology, (c) keyfactor, constraints and limitations (d) flexibility possible diversification
Finance (a) investment plan-resources (b) working funds cash flow plans (c) planned profit- return
on capital
Communication status and possibilities (a) status of communication system within the company (b)
possibility plans for computer services.
Environmental conditions (a) political (b) legal (c) economic and business conditions (d) social.
Matching Systems Objectives with Operational Goals
One major difficulty in designing the MIS is to identify the system needs and correlate it with the
needs of the operational system. The aim of an MIS is not perfecting the information network but prove the
legitimacy of the information needs and confirming that the information does indeed fulfill the needs. It is to be
stressed that a sound MIS is not built on the premise of perfecting processing efficiency of the information
demand but to serve the objective of managerial effectiveness. The value of the MIS is a function not of the
efficiency of transactions but of its use by the concerned manager in the performance of his enterprise (or
management) objective.
Identify and Adjust Constraint on the System
An enterprise functions as a sub-system within its own limitations; and within certain constraints
imposed by the environmental system. Constraints may be internal or environmental. Among the restraining or
retarding factors within the organization the following are important:
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(a)

Top-management interest and support for the system under designing

(b)

Organizational nature and policies circumscribe the design of a system. Too many products,
dispersed and diffused market and a loosely knit organization structure pose a severe constraint
on a clear, economical and effective information (communication) system.

(c)

Frequent changes in managerial incumbents and resultant changes in managers needs and
approach to information service pose constraint and difficulties in evolving a stable information
system.

(d)

Manpower and personnel-both size and quality-limit both the installation of a sound system and
its utilization by the users.

(e)

The in-house peoples attitude is another intractable constraint.

(f)

Economics is another constraint. The cost of sophistication in designing the information system is
always to be carefully balanced against the value in use of the system.

(g)

An information systems has to fit in with the other limiting factors such as equipment, managerial
style and the overall working conditions and available data base.
The important external constraints are:

(1)

Government and institutional agencies: Information required by these authorities under various
rules and regulations has to be integrated into the information system

(2)

Customers and selling agents: These both supply and receive information to and from the
enterprise. The MIS of the enterprise must dovetail his information and communication net into
the design of its management information system.

(3)

Suppliers and creditors: There is an information interface between these parties and the enterprise.
Their requirements need to be reckoned and built into the MIS design

What Colours Managerial Information-needs

Communication and information-needs of an enterprise are a function of (a) the enterprise structure
(b) the managers that man the organization. If the organization structure is elaborate, dispersal of authority and
decentralization is large and the decision centres are loosely bound and the information need will be complex
and ill defined. The second factor that colours and influences the information needs is the attitude and
idiosyncrasies of the managers and their management style.
Define Information Sources
Sources of information are twofold: (i) external, and (ii) internal and within the enterprise. The
external source assumed importance when the enterprise interface with the environment is large and shifting.
An advertising company or a mail order concern will have a large dependence on the external source. In a
normal situation, the internal source is more important. A balance is to be struck between the information need
(demand) and information sources (supply). The existing information system is a good point to begin with. It
defines the available information and, when set off against the information need.
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Selecting the MIS

Having integrated the demand and supply of information, we have now reached a stage when the
MIS can be designed. In selecting the best (most suitable) out of several alternative designs, the following tests
or criteria are appropriate:
In selecting the best (most suitable) out of several alternative designs, the following tests or criteria
are appropriate.
(i)

Performance evaluation; check and compare performance (expected or actual on trial basis)
with targeted objective.

(ii) Evaluate cost of information as a percentage of its benefit or effectiveness.

(iii) Compare the intensity of information usage and avoidance of duplication as per the flow
chart of the different design
(iv) Compare the data-needs of the alternative designs of the MIS and the ease, speed and
economy with which the necessary data can be made available.
(v) Identify the design with the best and most natural fit with the organizational structure, the
nature and genius of the enterprise and the attributes of its key managerial personnel.
(vi) Compare in-built flexibility of the several alternatives.
Principles of Effective Communication
Clarity :

A message should be clear, free from distortion and noise.

Precision :

A communication should be precise. Both over communication (exaggeration) and

inadequacy should be avoided.

Brevity:

A communication should be brief-just necessary and sufficient.

Timeliness:

Communication is a means to an end. It must serve a purpose-decisioning,

planning and evaluation.

Compass:

The communication net should be just right to serve the organizational end. The
people who are concerned must know; what exactly they need and when they need
it.

Integrity:

The communication flow and its spread must avoid bypassing level or people.

Improving communication : Three methods of improving the quality and acceptability of communication
are mentioned here. These are:
(i)

Repetition

(ii) Feedback
(iii) Matching wavelength
A message need to be iterated and repeated so it properly sinks-is registered. Feedback polishes
messages and communications. It helps counteract noise and distortion.
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Matching Wavelength
Communications go wrong often and more easily in a highly structured and formal organizational
setting. When the management style is authoritarian and task-oriented, there is less meeting of minds-attitude
and approach-between the managers and the followers. It is worth repeating that communication is not a
discrete message-by message process. It is part of an atmosphere of understand, a large commonness of
approach, attitude and empathy.
SUMMARY
Organization is made dynamic by communication. There is a universal model of communication.
Enterprise communications take different forms according to its purpose. Management Information System
(MIS) is a systematized cyclic pattern of communication. It is an information system designed to fulfill the
common needs of the operation systems of the enterprise. The chapter also deals with the functional spheres
of MIS, formal and informal reporting, designing an MIS, selection of MIS and also principles of effective
communication.
QUESTIONS
1.

What is the role and significance of Communication?

2.

What are the major features of MIS?

3.

What are the different levels of MIS?

4.

What are the functional spheres of MIS?

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CHAPTER - IX

LEADERSHIP
OBJECTIVES
The reader after going through the chapter gets an opportunity to understand what leadership is, the
different approaches to leadership, and role of leadership in management.
INTRODUCTION
It has been the experience of the business world that, given all other variables internal and
environmental the management input (good and sound management) makes all the difference between
enterprises success and failure. Leadership occupies a central position in management. Leadership in
administration is one of the most investigated spheres of management . Leadership (when it exists and when it
does not) is visible, yet seems to baffle diagnosis-its construction and synthesis from out of the perceived
elements. George R.Terry believed leadership is the activity of influencing people to strive willingly for group
objectives (emphasis supplied by us). According to Robert Tannebaum, Irving R,Weschler and Fred
Massarik, leadership is interpersonal influence exercised in a situation and directed, through the
communication process toward the attainment of a specialized goal or goals (emphasis ours). In the terms of
Harold Koontz and Cyril O. Donnel, leadership is influencing people to follow the achievement of a common
goal. The two common elements in all these perceptions of leadership are:
(i)

Influencing People

(ii)

To pursue a common goal.

To influence people to move toward a common goal is common to all management forms. Goal
setting, communicating and motivating, are all essential elements of management. What distinguishes a leader
from the common run of manager is the measure of willingness on the part of the followers (the led) that the
leader can bring into the system. Tannebaums (and his colleagues) definition quietly introduces the term in a
situation in its formulation. This has the quality of bringing in the situational variable which differentiates
contingency models of leadership from the absolute models. It emphasizes leadership effectiveness as distinct
from leadership qualities (or traits) perceived absolutely irrespective of the situational variables.
The Trait Approach
Traits are innate, inherent personal qualities. It follows that (by this approach) if a leader is seen to
possess certain traits, his leadership index can be read (almost) off a leadership meter. Three necessary and
sufficient conditions which must be satisfied if traits should be unique determinants of the leadership index.
These may be summarized thus:
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(i)

The trait quality should follow a descending order as one traverses from the highest (top
executives in leadership position) to the lowest (employees) levels of the enterprise system.

(ii)

There must be a high correlation between the level of a managers traits and the level of his
success.

(iii)

The correlation between success (achievement) and traits should be higher as one goes up the
management hierarchy from bottom (employees) level upward to top executive levels.
There is a large measure of consensus that certain essential traits are common elements of leadership

as observed from different surveys and investigations. These are:

(a)

Intelligence

(b)

Confidence

(c)

Initiative

(d)

Urge for achievement

(e)

Strong power need

Attitude Criterion Approach to Leadership

The leader-attitude approach to leadership studies registers and appraises the variables in terms of
attitudes (orientation to or concern fro) conditioning leadership behaviour and effectiveness. Studies defined
two variables (attitudes) which were termed employees orientation and production orientation. A parallel set
of concepts was evolved by Dorwin Cartwright and Alving Zandar as a result of a number of research studies.
They identified the aim of a group as a composite of two elements (group dynamics).
(i)

Achieving a group goal

(ii)

Service of the group itself

The goal-oriented manager will set tasks, improve techniques and productivity and structure his
activities toward the group goal. The manager, on the other hand, who concentrates on group service and
group maintenance, will be relations oriented, with concern for people, cultivating popular participation,
fostering and trusting informal group behaviour, trustful and communicative. Still another parallel concept may
be observed under what may be styled Authoritarian Democratic behaviour tapering off into the laissez faire
leadership style. In terms of the group dynamics phraseology (discussed above), authoritarian leader style is
set parallel to achieving the group goal as against group maintenance or service which approximates to the
democratic leader style. The authoritarian leader will decide and tell his followers what to do; the democratic
leaders will opt for a participative style of decision making.
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Management and Leadership

All management includes (and needs) leadership, but leadership exists and is called into play even
where management, strictly is not involved. Management is a weapon of achieving group or enterprise
influencing followers to move toward the goal leadership is involved. But leadership is a much more universal
attribute. The followers to a leader are not necessarily his junior or subordinates. Leadership is an instrument
of management but its content is neutral to management.
Position of Power
Positional power of a leader falls into two groups-classified according to their source and nature.
These are: (i) coercive power and (ii) persuasive power. Broadly speaking, coercive leader (manager) power
flows from the owners position of authority, his power to do good positive power and to do harm negative
power. Coercive power works by imposition external to the followers. The exercise of coercive power as
perceived by the followers may be actual or threatened. Actualized coercive power is a spent force. Coercive
power likewise, must carry a continued element of expectancy. Coercive power that has exhausted and realize
its full potential for good is dislodged from its power position. Other attributes of coercive power and its
exercise that help sustain its potency are;
(i)

Fairness of punishment and reward.

(ii)

Adequacy of the nature and degree of the award should be seen to be linked and commensurate
with the performance of the follower.

(iii)

Promptness in the implementation of the award, reward or punishment.

Persuasive power reveals and reflects the leader influence on the followers. It largely stems from

personalized leader qualities. A third kind of power can be distinguished which may be called the monopoly or
specialist power. A leader manager who commands skill and expertise not shared by any other can use his
special knowledge and skill for extracting acceptance and follower behaviour from his associated juniors,
peers and superiors.
Leadership and Change-Output and the Intervening Variables
Any social system is inherently dynamic in character. This maneuvering and manipulating change is
mainly a function of leadership. Leadership success must build at least four elements into the leadereffectiveness model. These include success in the following areas:
(i)

Profitability or short term goal

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(ii)

Stability and innovative growth from long-term goal, success of the output variables; and

(iii)

What is perhaps the most important element, development of the intervening variables.

Leader Effectiveness and Force Field Analysis

Kurt Lewin gave a diagrammatic expression to an equilibrium situation (of productivity or
effectiveness ) under the two opposite system of forces influencing change. We have seen that the three input
variables in the leader effectiveness function are:
(i)

The leaders task (structure) behaviour

(ii)

The leaders relations (considerations) behaviours

(iii)

The situation (environment) which has two major subcomponents:

(a) the positional power-dynamics
(b) followers style and behaviour
It has been also observed that the first two inputs leader task and leader relations style while they are

coexistent, in varying mix in any observed leader-style, include a degree of inter se hostility, an excess of one
element in the synthetic leader-style causing an erosion in the other and vice versa.
Leader Style (perceived Behaviour) Versus Leader Expectation (Intended Behaviour)
We have seen that we need to make a distinction between the leaders own perception of his leader
behaviour and his leader style (or behaviour) as it is observed by others, mainly the followers. It is difficult yet
important, to help a leader to see how his leader style appears to others; how as a leader, he is observed to
behave. Leader expectation may be defined as the leader style that the leader seeks to reproduce to his
environment of subordinates, peers, associates and superiors. For achieving most effective leader style, the
leader expectation needs to be adjusted with the environment which comprises, mainly, followers expectation,
superiors expectation and the organizations expectation. There is also a triangular dichotomy between (a)
leaders self perceived behaviour (b) leader-behaviour as perceived by others, and (c) leader-expectation.
Task Structure and Leadership effectiveness
According to Fred E.Fielder, there is a relation between the nature of the job (task structure) and the
most desirable leader style for maximum leader effectiveness. His conclusion was that a highly structured
situation, where jobs and performance are well specified, needs a task. Situational leadership Theory
postulated that there is a complex empirical functional relationship between leader behaviour and the situational
environment, symbolized by followers behaviour.
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Types of Situational Key Variables

There is no universal leader-style equally effective for all situations and followers maturity status.
Cultural Status
Organization structure and follower style have been found to possess fundamental cultural
divergences demanding different leader-behaviour patterns. A leader style which is found effective in a given
situation in West Germany or Japan is very likely to be a misfit in a similar industrial setting in Tanzania,
Bangladesh or India.
Leader Selection and Empirical Situation
Observe that the aim of the selection process is to identify a person who will be effective through
observed and perceived symptoms of traits, attitudes, behaviour and responses to empirical situation. We saw
that leader qualities include but extend beyond the desirable qualities of a manager. This is in three respects.
(1)

Leader quality is more pervasive and covers a wider universe not merely in an enterprise or goal
directed situation but wherever a group of people has to be led toward any purpose.

(2)

The emphasis is on influencing not merely followers and subordinates but associates, peers and
superiors.

(3)

Leadership-effectiveness is concerned emphatically with the intervening variables (the human

resources) along with the output variables.
These attributes of leadership qualities and leadership effectiveness condition the selection criteria and

the selection process.

SUMMARY
Leadership is interpersonal influence exercised in a situation and directed through the communication
process toward attainment of a specialized goal or goals. There are many approaches to the understanding of
leadership. Management and leadership agrees that it is an instrument of management and its content is neutral
to management position of power, leadership and change output, leader effectiveness, leader style versus
leader expectation, task structure and leadership effectiveness and cultural status.
QUESTIONS
1. What are the major facets of Leadership?
2. What is the Trait approach to Leadership?
3. Write a essay on Management and Leadership.
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CHAPTER - X

CONTROLLING
OBJECTIVES
The reader is to get an overall idea about control system and process, control and other functions,
importance of control, steps in controlling, behavioral implications of control, control areas and control
techniques.
CONTROL SYSTEM AND PROCESS
All organizations, business or non-business, face the necessity of coping with problems of control.
Like other managerial functions, the need for control arises to maximize the use of scarce resources and
achieve purposeful behavior of organization members.
Control Defined
Terry has defined control as follows:
Controlling is determining what is being accomplished, that is evaluating the performance
and, if necessary, applying corrected measures so that the performance takes place according to plan.
Based on the definition of control, its following features can be identified:
1.

Control is forward looking because one can control future happenings and not the past.
However, on control process always the past performance is measured because no one can
measure the outcome of a happening which has not occurred.

2.

Control is both an executive process and, from the point of view of the organizations of the
system, a result.

3.

Control is a continuous process.

4.

A control system is a co-ordinated integrated system.

Control and other functions

Control is closely related with other functions of management because control may be affected by
other functions and may affect other functions too. Often it is said planning is the basis, action is the essence,
delegation is the key, and information is the guide for control.

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1.

Planning as the Basis

Planning is the basis for control in the sense that it provides the entire spectrum on which control

functions is based. In fact, these two terms are often used interchangeably in the designation of the department
which carries production planning, scheduling, and routing. It emphasizes that there is a plan which directs the
behaviour and activities in the organization. Control measures these behaviour and activities and suggests
measures to remove deviation, if any. Control further implies the existence of certain goals and standards.
These goals are provided by the planning process. Control is the result of particular plans, goals, or policies.
Thus, planning offers and affects control.
2.

Action as the Essence

Control basically emphasizes what actions can be taken to correct the deviation that may be found

between standards and actual results. The whole exercise of managerial process is taken to arrive at
organizational objectives set by the planning process. For this purpose, actions and further actions are
necessary; each time there may be correction and change in the actions depending upon the information
provided by control procedure.
3.

Delegation as the Key

Delegation is the key for control to take place because control action can be taken only by the

managers who are responsible for performance but who have authority to get the things done. A manager in
the organization gets authority through delegation and redelegation. It does not make sense to make someone
responsible for achieving results without delegating adequate authority. In the absence of adequate authority,
a manager is unlikely to take effective steps for correcting the various deviations located in the process of
analysis.
Information as the Guide
Control action is guided by adequate information from beginning to the end. Management
information and management control systems are closely interrelated; the information system is designed based
on control system. Every manager in the organization must have adequate information about his performance,
standards, and how he is contributing to the achievement of organizational objectives.
Control system ensures that every manager gets adequate information.

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Importance of Control
Control is an integrated action of an organization or manager. It offers help in the following directions:
1.

Adjustments in Operations - A control system acts as an adjustment in organizational

operations. Every organization has certain objectives to achieve which become the basis for
control. It is not sufficient merely to have objectives but also to ensure that these objectives are
being achieved by various functions. Control provides this clue by finding out whether plans are
being observed and suitable progress towards the objectives is being made, and acting, if
necessary, to correct any deviation. This may result into taking actions more suitable for the
achievement of organizational objectives.

2.

Policy Verification - Various policies in the organization generate the need for control. For
organizational functioning, managers set certain policies and other planning elements, which later
become the basis and reason for control. They become basis in the sense that organizational
performance is reviewed in these lights. They also become the reason for control because
through these, an organization tries that its various individuals adhere to such framework.

3.

Managerial Responsibility - In every organization, managerial responsibility is created through

assignment of activities to various individuals. This process starts at the top level and goes to the
lower levels. However, when a manager assigns some activities to his subordinates, he remains
responsible for that portion of activities for their ultimate performance. It is quite natural that when
a person is responsible for the performance of his subordinates, he must exercise some control
over them.

4.

Psychological Pressure - Control process puts psychological pressure on the individuals for
better performance. The performance of the individuals is evaluated in the light of targets set for
them. A person is likely to put better performance if he is aware that his performance will be
evaluated. He may feel pressure to achieve the results according to the standards fixed for him.
This is further complemented by the reward and punishment based on the performance.

5.

Co-ordination in Action - Though coordination is the essence of management and is achieved

through the proper performance of all managerial functions, control affects this aspect significantly.

6.

Organizational Efficiency and Effectiveness - Proper control ensures organizational efficiency

and effectiveness. Various factors of control, namely, making managers responsible, motivating
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them for higher performance, and achieving coordination in their performance, control ensures that
the organization works efficiently.
Steps in Controlling
Control is reciprocally related with planning. It is performed in the context of planning and aids
planning in two ways: it draws attention to situations where new planning is needed; and it provides some of
the data upon which plans can be based.
These steps may broadly be classified into four parts (i) establishment of control standards (ii)
measurement of performance, (iii) comparison between performance and standards and the communication
and (iv) correction of deviations from standards.
1.

Establishment of Control Standards - every function in the organizations begins with plans that are
goals, objectives, or targets to be achieved. In the light of these, standards are established which
are criteria against which actual results are measured. For setting standards for control purposes.
It is important to identify clearly and precisely the results which are desired.
After setting the standards, it is also important to decide about the level of achievement or
performance, which will be regarded as good or satisfactory. Important characteristics which
should be considered while determining any level of performance as food for some operations
are; (i) output, (ii) expense, and (iii) resources. Expense refers to services or functions, which
may be expressed in quantity, for achieving a particular level of output. Resources refer to capital
expenditure, human resources, etc.after identifying these characteristics the desired level of each
characteristic is determined. The desired level of performance should be reasonable and feasible.
Control standards are most effective when they are related to the performance of a specific
individual, because a particular individual can be made responsible for specific results.

2.

Measurement of Performance - The step involves measuring the performance in respect of a

work in terms of control standards. The measurement of performance against standards should
be on a future basis, so that deviations may be detected in advance of their actual occurrence and
avoided by appropriate actions. Appraisal of actual or expected performance becomes an easy
task, if standards are properly determined. The performance, which is qualitative and intangible,
such as human relations, employee morale, etc., cannot be measured precisely. For such
purposes, techniques like psychological tests and opinion surveys may be applied.

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3.

Comparing Actual and Standard Performance - The third major step in control process is the
comparison of actual and standard performance. It involves two steps: (i) finding out the extent
of deviations, and (ii) identifying the causes of such deviations. When adequate standard are
developed and actual performance is measured accurately, any variation will be clearly revealed.
When the deviation between standard and actual performance is beyond the prescribed limit, an
analysis is made of the causes of such deviations.

4.

Correction of Deviations - This is the step in the control process which requires that actions
should be taken to maintain the desired control in the system or operation. Some additional
actions are required to maintain the control. Such control action may be (i) review of plans and
goals and change therein based on such review; (ii) change in the assignment of tasks; (iii) change
in expositing techniques of direction; (iv) change in organization structure; provision for new
facilities, etc.
In fact, correction of deviation is the step in management control process which may involve either

all or some of the managerial functions.

BEHAVIOURAL IMPLICATIONS OF CONTROL
Though control should aim at satisfying the needs of the members of the organization, they often take
it otherwise. The major behavioral problems of control can be analyzed by taking the nature of control,
perception of those who are being controlled, and action taken by them.
1.

Nature of Control
Control often puts pressure for engaging in desirable behavior by those who are subject to control.

The basic question is: will they not behave in desirable way if there is no control. Though opinion may differ on
this question, often it is recognized that people engage in that behavior which provides them satisfaction
whether control or no control.
2.

Perception of People
Another behavioral implication of control is the perception of people who are being controlled.

Though perception may be that control is against the nature of people, it is further aggravated by the fact that
people perceive it to be for the benefit of the organization but against them. Thus perception may be right or
otherwise, that control if brings better result, is shared by organization alone whereas it may be brought by the
organizational members.
3.

Actions by Participants
Participants in most of the cases resist control attempt. They will try to escape from the purview of

control and may take several actions: (i) they may try to bring behavior which is satisfying to them but not
necessarily satisfying to the organization; (ii) they may engage in a behavior which may appear to be in
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conformity with organizational requirements but actually it is not; and (iii) if these are not possible they may try
to engage in behavior as required by the organization.
Control and Organizational Factors
The behavioral implications of control, as elaborated above, do not mean that control should not be
applied in the organization. In fact, control has many positive aspects, as discussed earlier. The necessity is
that it should suit the participants to make it more effective. The main factors related directly to control are:
1.

Organizational Rules and Procedures. Most of the organizations prescribe some standing
measures for providing guidelines for peoples actions in the organizations in the form of policies,
rules, and procedures.

2.

Perception Formation. A number of factors, as discussed earlier affect the peoples perception.
In organizational situation, the action of management, and the type of relationship between
management and employees affect it.

3.

Organizational communication. The organization has to design a communication network for

carrying the control information both downward and upward.

4.

Motivational Dynamics. The control is affected by the motivational dynamics of people and how
the organization is going to satisfy the various needs of the people.

Overcoming Behavioral Problems

(i)

As far as possible, direct hierarchical pressure should be avoided. This problem can be
overcome by structural arrangement.

(ii)

Management should build co-operation through participation. This is the problem related with
setting right organizational climate.

(iii)

Management should build communication network based on open and two-way communication.
This is the problem of communication in the organization.

(iv)

For obtaining co-ordination and co-operation in control, group processes must be strengthened.
This is the problem of group dynamics.

(v)

Management should reinforce both economic and non-economic needs of the people. This is the
problem of motivation.

(vi)

Management should have long-term perspective in designing control system so that frequent and
abrupt changes do not take place. This is the problem related with organization planning and
control.

CONTROL AREAS
For effective control, it is important to know what the critical areas where control would be exercised
are. The identification of these areas of control enhances the management to (i) delegate authority and fixing
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up of responsibility, (ii) reduce burden of supervising each activity in detail, and (iii) have means of securing
satisfactory results.
CONTROL TECHNIQUES
Some believe that most of the functions of planning and control should be combined into one
control. As such, many techniques, which are applied in planning, can be applied in control with equal benefit,
such as budgeting, costing, time event analysis, etc. they are tools both for planning and control. Some
important traditional control techniques are budgeting, costing, statistical data, internal audit, and personal
observation.
Budget and budgetary control
A budget can be defined as a numerical statement expressing the plans, policies and goals of an
organization for a definite period in future. Budgets are mostly expressed in financial terms though they can be
expressed in non-monetary terms also. Budgetary control is derived from the concept and use of budgets.
Thus, budgetary control is a system, which uses budgets as a means for planning and controlling entire aspects
of organizational activities or parts thereof.
BENEFITS OF BUDGETARY CONTROL
Budget and budgetary control leads to maximum utilization of resources with a view to ensure
maximum returns because it provides aid to managerial planning and control. Besides, it also helps in
coordination. Thus, budgetary control can play three roles in an organization. These are budgetary control as
a tool for planning, budgetary control as a tool for control, and budgetary control as an aid to co-ordination.
A. Budgetary Control as Tool for Planning
The system of budgetary control, by preparing budgets before the activities are actually undertaken,
facilitates the planning function of management in the following ways:
1.

Budgetary control forces manager to plan their activities.

2.

Since budgetary control is duly concerned with concrete numerical goals, it does not leave any
ambiguity regarding the targets.

3.

It leads to a cautious utilization of resources since it keeps a rigid check over activities in the
organization.

4.

It also contributes indirectly to the managerial planning at higher levels.

B. Budgetary Control as Tool for Control

Budgetary control acts as a tool of control in the following ways:
1.

Budgetary control, as a control device, is very exact, accurate, and precise. A budget provides
standards against which control activities are undertaken.
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2.

Budgetary control pinpoints any deviation between budgeted standards and actual achievement.

3.

Budgetary control system also points out the reasons, which may be responsible for deviation
between budgets and actual.

C. Budgetary Control as an aid to co-ordination

Budgetary control system provides aid in coordination in the organization.
1.

Budgetary control system promotes cooperation among various sub-units in the organization.

2.

The system encourages exchange of information among various units of the organization.

3.

The system promotes balanced activities in the organization.

Thus, budgetary control system is a vital and important device for planning, controlling, and

coordinating the activities in an organization thereby contributes to attain higher standard of performance and
efficiency.
Problems in Budgetary Control
Though budgetary control helps a lot to management in planning, controlling, and coordinating the
activities of an organization, it is not a foolproof system. It has its own limitations. Therefore, managers should
be well aware about these problems to take adequate precautions to minimize the impact of these. Problems
in budgetary control system emerge from two sources: problems because of planning limitations and
operational problems.
A. Planning Problems
As seen earlier, planning activity has its own limitations. Since budget is an outcome of planning
activity,, it can not remain free form the limitations of planning.
1.

The biggest problem in budgetary control comes because of uncertainty of future. It is a wellknown fact that budgets are prepared in the assumptions of future happenings in certain way.
However, due to change in situations, budgets do not remain reliable and meaningful and do not
help in achieving control.

2.

Budgetary control, sometimes, may jeopardize the basic and important functions in the
organization. Once budgets are prepared, they become basis for further course of action.

3.

The role of budgetary control system in the planning function is sometimes over emphasized.
Budgets become end in themselves and any deviation from budgeted figures is looked upon with
contempt. This inflexibility contributes negatively to the organizational objectives.

B. Operational Problems
Besides many planning problems, some operational problems also come in the way of effective
budgetary control system.
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1.

A budget is just a sophisticated guesswork, so question can be raised about its usefulness for
being used as standard against which to measure the performance and take actions.

2.

Budgetary control, sometimes, may affect organizational morale adversely in another way.

3.

Budgetary control system requires a lot of paper work, which the technical personnel always
resent.

Types of Budgets
The budgets may be classified on the basis (i) coverage of functions master budget and functional
budgets; (ii) nature of activities covered by budgets capital budget and revenue budget; (iii) period longterm budget and short-term budget; (iv) flexibility fixed volume budget and flexible budget. Besides, there
may be classification based on how budgets are prepared like performance budgeting and zero-base
budgeting. Below is given a description of major budgets.
Functional Budgets
The functional budgets have a number of classifications depending upon the type of functions
performed and budgeting practices adopted by an organization. Thus, there can be budgets for each major
function and sub function like production budget, sales budget, purchase budget, research and development
budget, personnel budget, etc.
Master Budget
The master budget is the summary budget incorporating its component functional budgets. Thus, this
is nothing but the targeted profit and loss statement and balance sheet of the organization. Though practices
differ, a master budget generally includes sales, production, costs materials, labour, factory overhead,
administrative overhead and selling and distribution overhead, profit, appropriation of profit, and major
financial ratios.
Capital and Revenue Budgets
Business activity involves two processes, viz. (i) creating of facilities for carrying the business
activities; (ii) carry out the activities. Budget in respect of former is called capital and latter is called revenue
budget. Thus, a capital budget is essentially a list of what management believes to be worthwhile projects for
acquisition of new capital assets together with the estimated cost of each project. Revenue budget involves the
formulation of targets and the allied process in respect of routine functions, viz., sales, production and other
functions.
Flexible Budget
A budget, which is designed to change in accordance with the activities of the organization, is known
as flexible budget. The total costs are divided into three components based on the nature of their variability:
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fixed cost, variable cost varies in proportion and direction of volume of operation. Mixed cost may vary but
not in the proportion of volume.
A flexible budget is quite useful for control as well as for planning purposes in uncertain environments.
When the environment for a given organization is uncertain and it becomes difficult to make forecast of future
events, budgeting at fixed level does not provide any basis for comparison and hence control and total
budgetary control may be in jeopardy. If the control is based on fixed budgeting, it may require calculating
cost and its variation afresh. Flexible budget provides readymade answer for exercising control with varying
capacity utilization because variation of capacity utilization due to environmental uncertainty has been taken care
of at the time of budget preparation itself.
Performance Budgeting
A performance budget is an input/output budget or costs and results budget. It shows costs matching
with operations. Although the terms programme budgeting and performance budgeting refer to the same
concept, some distinction can be made between the two. Programme budgeting measures total costs of
programmes or activities, performance budgeting measures both costs and activities.
Zero-Base Budgeting
Zero-base budgeting (ZBB), comparatively a newer concept in business and non-business
budgeting.
ZBB is based on a system where each function, irrespective of the fact whether it is old or new, must
be justified in its entirety each time a new budget is formulated. It requires each manager to justify his entire
budget in detail from scratch that is zero bases. Each manager states why he should spend any money at all.
The process of ZBB involves the four basic steps: (i) Identification of decision units, that is, cluster of activities
or assignments within a managers operations for which he is accountable. (ii) analysis of each decision unit in
the context of total decision package; (iii) evaluation and ranking of all decision units to develop the budge
request; and (iv) allocation of resources to each unit based upon ranking. Thus, emphasis is placed upon
resource allocation according to the contributions of each decision unit.
Control through Costing
Costing is concerned with cost determination and indicates what is the approximate cost of a
process or a product under existing conditions. Control through costing involves the control over costs in the
light of certain predetermined costs usually known as standard costs. Standard costs are predetermined
operation costs computed to reflect quantities, prices, and level of operations.
Essentially control through standard costing involves the following steps:
1.

The first step involves the fixation of standards. The standards are fixed for different components
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of cost separately. Such standards can be fixed based on post records or through experiments
also known as engineering methods.
2.

The second step consists in determining the actual costs to make a comparative study. This is
achieved from the cost accounting records.

3.

A comparison between standard costs and actual costs is made in order to find out the variation
between the two. If there is no variation or if it is within the prescribed limit, no further action is
envisaged.

4.

If the variation is beyond the specified limit, it is taken to further analysis and an attempt is made
to locate the reasons for such a variation.

5.

In the light of the reasons identified, further course of action is planned so that in future there is no
such variation.

Benefits of Control through Costing

Standard costing offers many advantages as a standard for control acts as a guide to many
operations. Its specific benefits are as follows:
1.

Standard costs provide basis for measuring operating performance. As they are developed from
the study of cost operations and existing conditions, they become a pointer to the weaker aspects
of operation. The efficiency or inefficiency can be ascertained easily by comparing actual and
standard costs.

2.

Standard costs provide easy comparability. Because of adequate standards, cost control
exercises a permeating influence on all factors of operation. Measurement, comparison, and
evaluation of current performance as well as of current expenses become much more effective in
character.

3.

Standard costing is an economic tool. It helps in cost reduction and control by putting effective
check over inefficiency in operations and by culminating in certain undue paper work. It suggests
standard cost cards and accordingly the required resources are arranged.

4.

Standard costing is a basis for budgeting. Budgets are prepared based on standard costs. Thus,
budgeting and standard costing together provide effective control device and make managers
cost conscious.

5.

Standard costing also provides basis for adopting incentive wage system and bonus plan. Since
standard cost is set up from adequate and careful analysis and study, it provides basis for work
implication and other methods of standardization.

Limitations
Standard costs have certain disadvantages and limitations as follows:
1.

Some times standard costs are expensive to set up and difficult to operate.
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2.

Standard costs require frequent revisions especially if the conditions are always changing because
standard costs are applicable in a particular condition.

3.

Limitations of budgetary control also apply in the case of cost control. Consequently, some type
of resistance is expected from the people.

BREAK-EVEN ANALYSIS
The Break-even Analysis is concerned with the cost-volume-profit relationships. It magnifies a set
of relationships of fixed costs, variable costs, price, level of output and sales mix to the profitability of the
organization. Break-even analysis is made mathematically by applying the formulae to trace the break-even
point, contribution, margin of safety, and profit volume ratio, or graphically by break-even chart concerning the
profitability of the organization.
Break-even analysis is useful in planning and control because it emphasizes the marginal concept. Its
practical implications are profit estimation at the different levels of activity, ascertaining turnover for desired
profit, and estimating the impact of the variations of fixed and variable costs.
Break-even analysis is not free from its limitations. It proceeds with certain basic assumptions of
constant factor prices, technology and efficiency, product mix. However, these factors are variable which
undergo changes depending upon different circumstances.
Statistical Data
Statistical analysis of the innumerable aspects of a business operation is important to control.
Analysis in terms of averages, percentages, ratios, correlation provides help for control. Such areas of control
are production planning and control, quality control, inventory control, etc. Various tools indicate the deviation
from the standard and suitable managerial actions in respect of these.
Audit
Internal audit, now coming to be called operational audit, is an effective tool of managerial control.
Internal audit is carried out by managers themselves or by special staff appointed for this purpose. In contrast
to external audit, which remains unconcerned with the operational aspect of the organization, internal audit is
much broader in scope and encompasses the whole range of activities of the organizations. Thus internal audit,
in addition to ensuring that accounts properly reflect the facts, also appraises policies, procedures, use of
authority, quality of management, effectiveness of methods, special problems, and other phases of operation,
the latter aspects being more emphasized in present-day internal audit.

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Personal Observation
Though various devices of managerial control such as budgets, standard costs, statistical tools, audit
reports and recommendations are quite helpful in managerial control, managers should not forget the
importance of control through personal observation. Managers need to hold discussion with the persons whose
work is being controlled and they should visit the actual operations. There are certain kinds of impression and
information that can be conveyed only through face-to-face contact, personal observation and conversation.
When a man is new to the job, a supervisor will like to watch his work more closely than he would that of an
experienced operator. Managers, after all, have responsibility of achieving organizational objectives whatever
control devices they use. This largely involves measuring of human performance. Thus, the success of personal
information as a control method depends upon how much information a manager can collect through this
process.
QUESTIONS
1.

Write about Control and other function in an Organization.

2.

What are the different steps in Controlling?

3.

What are the behavioral implications of Control?

4.

What are the benefits of Budgetary Control?

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MODEL QUESTION PAPER

National Institute of Business Management
Chennai 020
FIRST SEMESTER EMBA/ MBA
Subject : Principles & Practices of Management

Time : 3 hours

Marks : 100

Section A
I

Answer all questions. Each question carries 2 marks :1.

Definitions of Management.

2.

Mention the five activity levels of Business Management.

3.

What is the Behaviour School Theory of Management?

4.

What is Strategic Planning?

5.

What is the purpose of planning in Management?

5x2=10 marks

Section B
II

Answer all questions. Each question carries 6 marks :1.

What are the top managements actual operation according to Livingston?

2.

What are the elements of management?

3.

Which are the steps in Planning?

4.

Give the fundamentals of Staffing.

5.

What is Matrix or Grid method of Departmentation Give the advantages.

5x6=30 marks

Section C
III Answer any three questions. Each question carries 20 marks :1.

What is Manpower Planning? Explain its process.

2.

Explain F.W. Taylors teachings in Management.

3.

Explain the managers job and his duties.

4.

Explain briefly recruitment and sources of manpower supply.

5.

Write about the off-the-job training methods.

3x20=60 marks