Unit- one

Chapter 1: Introduction to Management

Concept of Management

Management is the art of getting work done through others. It is the capacity to know what the
people want to do and search the best and cheapest way to do it. The word management is made up of
three word manage+men+t(tactfully) that means managing a man tactfully in a proper manger. From the
word management we know how to manage (money, men, material, machine, method) in a proper way to
achieve certain goal. In other words management is a set of activities including (planning, organizing,
controlling, decision making, leading) directed at an organizational resource ie. human, financial,
physical and informational with the aim of achieving organizational goal in an efficient and effective
manner.
The concept of management is continuously changing. However it is widely accepted that
management is a process of activities like planning, organizing and controlling to achieve an
accomplished objective with the use of human being and other resources. It is a vital part of business
organization which helps to accumulate, mobilize and optimum use of various resources to achieve an
organizational goal. The business cannot achieve its objective unless the human material, capital,
technique, different resources etc are used effectively and efficiently. In the sense management represents
a body of person determining the organizational objective and performing certain managerial function
like planning, organizing, staffing, directing, co-ordinating and controlling to achieve the objective.

Definition of management

According to Marry Parker Follet, “Management is the art of getting work done through
others”.
According to F.W.Taylor, “Management is the art of knowing what you want to do”.
According to James Stoonner, “Management is the process of planning, organizing, staffing,
leading and controlling the work of organizational member and using all resources to reach
organizational goal.”
According to Knoontz O’ Donnell, “management is the task of manager to establish and
maintain informal environment in which people work together in a group to perform work
effectively and efficiently towards achievement of group goal”.
In Conclusion, Management is the process of working together in group efficiently in order to
accomplish the particular goal. In short management may be defined as the agency that provide
leadership, guidance and control for the achievement of the objective set by administration. Thus
management may be understood as a process by which manager or executive in an organization gets
things done through the effort of other people.

Function/Process of management

Management is considered as a kind of activity of function. Different writers and experts have
given different function of management. Thus the various function of management visualized by different
writers and experts may be classified into various points which are as follows:
1. Planning/Decision making: Planning is the foundation stone of management. It is the function
of setting an organizational goal and deciding how best to achieve them. Decision making is a part
of planning process which involve selecting a course of action from a set of alternatives. Planning
and decision making helps managerial effectiveness by serving as a guide for future activities. All
other management function are followed by planning and decision making. Planning is conserved
with “what, how and when” to perform. It is deciding in the present about future objective and the
course of action for their achievement. It is the process of setting organizational goal and deciding
 how best to achieve them. While planning we have to think about external and internal
requirement. In short planning includes:
a. Channel to be followed
b. Steps and methods to be used
c. Setting plan, policies, budgeting

2. Organizing (coordinating the activities): After setting the goal and developing a workable plan
the next function/process is to organize people and other resources necessary to carry out the plan.
It is the decision of work. It tells the way to the manager to decide the organization work. The
firm are run by different executives each of whom is given specific responsibilities for a manager
functional areas such as marketing, finance, manufacturing etc. Organization is a process of
dividing and combining effort of a working group for making such effort more productive,
effective and fruitful. Organizing includes division of work among different people whose effort
has to be co-ordinate to achieve specific objectives and to implement pre-determined strategies.
For achieving each goal manager hires his own employees and handle the business that relates to
his area of responsibilities. It is concerned with arranging and allocating work among the
organization member to achieve the organizational goal. Organizing includes
d. Grouping in section.
e. Getting right people
f. Defining their responsibility
g. Designing structure for reporting.
h. Delegating, authorizing.

3. Staffing (human resource): It is distinct, continuous and vital function of management. The
efficiency and effectiveness of organization significantly depends on the quality of its personal.
One of the primary function of management is to acquire qualified and trained people to fill
various qualified trained people to fill various position. Once the goal, objective, strategies,
policies, programme and rules has been formulated for their achievement, the next step is to
procure suitable personal for performing the job. It comprises of following sub division
i. Manpower
j. Recruitment
k. Selection
l. Placement and orientation
m. Transfer
n. Promotion
o. Training

4. Leading (managing people): Leading is a process used to get people to work together for the
interest of the organization. Leading means how to get best work from the employees. The
capacity of the leader is to lead their employees and also affect the working behavior. The
behavior of the leader should be such that it helps in directing, motivating and influencing to get
the best work from them to achieve the goal of an organization.

5. Controlling (monitoring and evaluating activities): Controlling is the final step of management
and it is the monitoring of organization process towards its goal. Actually it is the controlling of
standard. As an organization moves towards its goal, manager must perform in such a way as to
achieve its destination at appropriate time. Controlling helps to ensure the effectiveness and
efficiency needed for successful management. If the organization doesn’t achieve its goal than
rectification of some kind is needed.
 Figure for process

Planning and decision

making Organizing:
Setting the organization goal Determining how best to
and deciding how best to group the activities
achieve them.

Leading:
Controlling Motivating members of
Monitoring and controlling the organization to work
on going activities to in the best interest of the
facilitate goal attainment. organization.

Characteristics of Mgmt.
1) Goal oriented: Every orgn. has certain goals. Mgmt. is an instrument to achieve the pre-determined
goals. Mgmt. helps in or contributes use of different resources to achieve the goal.
2) Universal activity: Mgmt. is universal in nature. It is necessary and practiced in almost all types of
orgn. Mgmt. is required or essential where there is human activity. It means where ever there is a
human activity there is a mgmt.
3) Group activity: Mgmt. is a group activity. Mgmt. is a group activity as different people are involved
in carrying different function of mgmt. It is required where two or more individuals work together to
achieve the common goal. Mgmt. always attempts to coordinate the efforts of its group members.
4) Dynamic activity: Mgmt. is a dynamic process as it helps an orgn. to make adjustments according to
need, time and situation by modifying its objective, policies, strategies, procedure and programs.
Mgmt. involves adaption of an orgn. to change in its environment and modifying the environment for
the benefit of the orgn.
5) Multi-disciplinary: Mgmt. is a multi-disciplinary subject drawing knowledge from various
disciplines like mathematics, economics, psychology, sociology, political, science and other disciple.
Mgmt. integrates the knowledge and concept from different discipline in managing orgn.
6) Both Art and Science: Mgmt. consist of the element of both science and art. It is a science because
some of its principle has universal application like science. It is also an art because the degree of
success depends upon how manager apply their skills and abilities in managing human and other
resources.
7) Distinct process: Mgmt. is a distinct process in the sense that it uses different resources like physical,
capital and information through human resources. These resources have different functions and arre
inter-related with each other. So mgmt. is a distinct process of planning, organizing, leading and
controlling.
8) Social process: Mgmt. is a social process as the activities of mgmt. are performed by the use of
human. It utilize and mobilize the human resources for the achievement of organizational goals. So, it
has to fulfill the needs, wants and demands of employees along with fulfilling the organizational
objectives.
9) Intangible: Mgmt. cannot be seen but it ca be felt. It has no physical appearance. The function of
managers cannot be seen with our naked eye but the consequence or result of the mgmt. can be felt.
10) Coping with environment: Mgmt. is a social process. It operates as an open system. it is influenced
by general environmental forces like political, legal, economic, social, cultural, technological forces
etc. Mgmt. adapt the orgn. to the changing environmental force.

Principle of management
The practice of mgmt. is based on specific discipline which are known as principle of mgmt.
Mgmt. principles are the facts and truths gained through observation and experiment. The principle of
mgmt. are as follows:
1. Division of labour: This is the principle of specialization which is necessary to get efficiency in
the utilization of labour. Fayol tells that this principle is applied to all kind of work managerial as
well as technical to get best from his employees.
2. Principle of authority and responsibility: Authority and responsibility should be properly
passed so that we can function properly. Some authority can be passed to sub ordinate but
responsibility might not be passed. However responsibilities arise as authority is passed.
3. Principle of discipline: People in the organization must respect the rules that govern
organization. Without discipline no organization can achieve its goal.
4. Principle of unity of command: Each employee must receive instruction from only one
superior/supervisor/boss and report to only one superior in order to remove conflict in instruction
and confusion in authority.
5. Principle of unity of direction/objective: The operation within the organization must have the
one objective should be directed by only one manager using only one plan
6. Principle of subordination of individual goal to the organizational goal/group goal:
Employees of the organization must not think about their interest rather they should think about
the interest of organization as a whole. In other words employees should dissolve their individual
goal towards the goal of the organization.
7. Principle of remunerations Compensation for work should be fair to both employees and
employer, so that it doesn’t affect the daily life of employees.
8. Principle of centralization: Although manager holds the final authority but he should give some
authority for his subordinate to do his work properly. The organization has to find proper degree
of centralization.
9. Principle of hierarchy/scalar chain: It tells that how authority should be given/ ranked
according to their post. A chain of authority should extend from the top to the bottom of the
organization and should be followed all the time.
10. Principle of order: Human and material resource should be coordinated so that they are in the
required place at the required time. This is essentially a principle of organization in the
arrangement of things and person.
11. Principle of equity: Manager should be kind and fair when dealing with sub-ordinates.
12. Principle of stability of tenure of personnel: Instability is both the cause and affect of bad
management. Fayol points out the danger and cause of unnecessary turnover.
13. Principle of initiative: Subordinate should be given the freedom to carry out their plan even
though some mistakes may result.
14. Espirit de corps: Team work, team spirit and a sense of unity and togetherness should be fostered
and maintained. If the group works together in cooperative manner, then it becomes easy to work
and production will increase.

Types of Manager
According to level: Level of manager means dividing the authority and responsibilities among the
various management position. There are mainly three level of management. They are
1. Top manager: This includes president, vice-president, chairman, directors, CEO and BOD, Their
main function is to manage the overall organization. Top managers are responsible for planning,
policy making, decision making, motivating, leading etc. They also represent their office in meeting
with different parties like government, executive of other organization and so on. The job of top
manager is very complex and variant. Top manager take decision about activities as acquiring other
companies, investing in research and development, entering in various market and building new plan
and facilities.
 Function or role of top managers
• To determine goal of an organization
• To make plan and policies for the achievement of that goal.
• To collect the resource like man, machine, material, money for executive plan
• To provide overall direction in the organization
• To exercise effective control of an organization.

2. Middle level management/manager: Middle level manager mostly include plan manager, operation
manager, division head, section head etc who are responsible for implementing the plan and policies
made by top management to achieve the goal and objective of and organisaion. Middle managers are
also responsible for supervising and coordinating the activities of level managers. They act as link
between top managers and lover level managers.
Function/ role of middle managers
• To implement policies laid by top managers.
• To give training for employees in organization.
• To recruit and select suitable staff and manpower.
• To issue instruction to the supervisory staff.
• To motivate personnel to obtain higher productivity.
• To cooperate with other department for ensuring smooth functioning of organization.

3. Lower level manager/ first line manager: Lower level managers supervise and coordinate the
activities of operating employees. They include supervisor, coordinator and office manager. They
implement the policies made by top managers in contrast to top and middle managers. They spend a
large proportion of time in supervising sub-ordinates. They also work directly in organization.
Functions/ role of lower managers:
• To issue orders and instruction to workers and to control their work.
• Classify and assign job to the workers.
• To direct and guide the workers about work procedure.
• To inform the unsolved problems of workers to the management.
• To maintain good discipline and relation among the workers.

Level of management

Top level management Middle management Lower level management

Board of directors(BOD) Departmental head Senior supervisor
Chairman Division head Foreman
Directors Section head First line manager
Chief executive officer(CEO) Office manager
Intermediate supervisor

According to function:
1. Marketing manager: Marketing manager works in area related to the marketing function like getting
consumer and clients to buy the organization product and services. As marketing managers look after
the market situations of the product so they help to change their plan and quality according to the
demand of the market.
2. Finance manager: Finance manager work in area related to the financial resources. They deal
primarily with an organisation’s financial matter. They are responsible for activities such as
accounting, cash management, investment etc. In business finance manager is very important because
they have to work in an adverse situation. They manage how to get profit by investing or expanding
amount of the organization.
3. Production manager: They look after the production process of an organization. They suggest how
to achieve their goal by producing best quality product by using less employees and less raw material.
4. Personnel or human resource manager: They look after the personnel part of the organization.
They also look after when to get employees, when to provide training and development. They also
formulate compensation and benefit system, performance appraisal system and discharging low
performing people.
5. Purchase manager: They look after purchasing part of organization like how to purchase, when to
purchase, how much stock has to be kept and at what price.
6. Officer manager: They are those persons who look after official part of the organization which is the
centre of all the organization and organizational activities. Office manager helps the planner by
providing past report of the organization.
7. Administrative manager: Administrative or general manager are not associated with particular
management specialty. Probably the best example of an administrative is that of a hospital or clinic
administrator. Administrative managers have to be familiarized with all functional areas of
management rather than specialized training in any one area.

8. Other kinds of managers

a. Public relation manager
b. Research and development manager
c. Sales manager
d. Advertising manager

Roles of manager (basic management role of managerial role)

Role of manager (by Henry Mintzberg)

Informational role Decisional role

Interpersonal role
• Monitor role Entrepreneur role
Figure head roles
• Disseminator role Disturbance role
Leader role
• Spoke person role Resource allocator
Liaison role
Negotiator

Regardless of level or area within an organization, a manager must play certain role and show
certain skill if they are to be successful. The concept of role is similar to the role of an actor in the theatre.
A person does certain things in organization has certain responsibilities. To fulfill these responsibilities,
Henry Mintz Berg has give role that managers play in the organization. Actually Mintz Berg concluded
that managers play ten different roles. They are categorized into 3 different sections which are as follows:

1. Inter personnel role: Managers assume inter personnel role in order to coordinate and interact with
organizational members. Through this role, manager provides direction and supervision to employee.
In inter personnel role manager develops contact and build relationship with people inside and outside
the organization. Inter personnel roles are characterized by three activities.
a. Figure head: First the manager should serve as a figure head. In this role he takes visit to
dinner, attend ribbon cutting ceremonies etc. These activities are more ceremonial and
symbolic than substansive.
b. Leader role: In a leader role, manager should give training, hiring, motivating, controlling the
activities of the employee. In this role he encourages employees to improve productivity.
c. Liaison role: Finally manager should perform as a liaison. In this role he co-ordinate the
activities of different groups. As a liaison person he maintains relation internally and
externally with different parties for building the image, gathering resources for the
organization.

2. Informational role: The role of monitor, disseminator and spoke person involves the processing of
information. Informational roles are closely related with the task necessary to obtain and transmit
 information. Manager performs informational role in various ways. They handle a great deal of
information in connection with their work. In this role he develops a network of contact and relation
within and outside the organization. Informational roles are characterized by three activities. They
are:
a. Monitor: The first information role is that of monitor, in this role he actively seeks
information that may be of value. In this role he watches the activities taking place in and
around the organization.
b. Disseminator: As a disseminator he provides information to sub-ordinate and keep them
informed of what is going on around the organization related to their work. Here he emerge as
a vital link in the organization chair of communication.
c. Spoke person: The third informational role focuses on external communication. As a spoke
person he formally relays information to people outside the unit or outside the organization
about the related issues of their interest. Here he makes a speech to discuss the growth plan of
the organization.

3. Decisional role: Decision making is the vital function of every manager. Decision making involves
negotiating and compromising with conflicting interest. Here manager develops strategies to deal
with different parties and put them into action to achieve goal. Hence, decisional role are closely
related with the method manager used to plan strategies to utilize resource.
a. Entrepreneurship role: Entrepreneurship role is concerned with planning and initiating
change within the organization. Here he initiates changes in the organisation and develops the
new idea of innovation.
b. Disturbance handler: In a disturbance handler role he maintains good working environment
and organizational stability by resolving problems of disagreement and conflict.
c. Resource allocator: As a resource allocator he deals with the managerial function of
allocating resources (money, material, man, machine etc) to different units and subordinates.
d. Negotiator role: In a negotiator role he represents as well as protects organization interest in
dealing with outsiders and insiders regarding the important matter of the organization.

Skills of Manager:
To become a perfect manager he should possess some sort of skills Whatever may be the level of
manager, he needs different kinds of skill, some in large quantity some in less quantity if they are to
successful in their field. A manager should be perfect in every field of organizational work. As skill is an
individual ability to translate knowledge into action. Therefore in order to be successful a manager should
possess a wide variety of skills and ability. Basically, there are 3 kinds of skills with two supporting skill
which are necessary for successful manager. They are as follows:
1. Conceptual skill: Conceptual skill represent the managers ability to organize the overall working of
the organization and take a broad decision of the organization or insight view of the organization.
Here manager needs the mental capacity to understand the overall working of the organization and its
environment. Here manager’s ability helps the organization to take important decision of the
organization. Here manager’s ability helps to understand how different parts depend on one another
and a change in one part will have impact on other parts. Conceptual skill is necessary to see the
“Big” picture of the organization and make a broad base decision that will help the overall
organization. In this skill manager needs to look for opportunities in the environment and develop
strategic plan to capitalize these opportunities. Formal education and training are very important in
helping manager develop conceptual skill. This skill is needed by the top level management.
2. Human skill: Human skills are ability to work, understand and motivate other people. It is needed to
get along with other people and to get work done through other people. Human skills include
interpersonal skill such as directing, motivating, communicating, negotiating, bargaining, leading. A
manager must have human skill because they spend more time interacting with other people both
inside and outside the organization. A manager who has good human skill is likely to be more
successful. This skill is mostly needed by middle managers.
3. Technical skill: Technical skill are the skill necessary to accomplish or understand the specific kind
of work done in the organization. These skills are the ability to use the procedure technique and
knowledge of a specialized field. These skills are specially important for first line manager/ lower
 lever managers. These managers spent most of the time in training subordinate and answering
questions about work related matter. They must know how to perform the talk assigned to them if
they are to be successful manager. For example accountant must be expert in accounting, A
production manager must have the skill to plan, operate, repair, maintain machines and equipment.

Relative skills required for successful manager

4. Design skill: Design skill is the ability to solve problems in a way that will benefit the enterprise. To
be effective particularly at an upper level need this skill to solve the problem. If manager merely see
the problem become “problem watcher” he will fail. Manager will have these valuable skill to
become successful to design the workable solution of the problem.
5. Diagnostic skill: Successful manager should possess some diagnostic skill that enables a manager to
visualize the most appropriate response to a problem. A physician diagnoses a patient’s illness by
analyzing symptoms and determining their problems’ cause. Similarly a manager diagnoses and
analyses the problems in the organization by studying its symptoms and then developing a solution to
the problem. Diagnostic skill is useful in finding the solution of a problem.

Emerging challenges for management/managers

Today several challenges are confronted by managers. These challenges arise mainly due to
significant changes in the outside world. We are now in a cut throat competition period. The managers
face restless work force, more domestic and international competition and declining industrial
performance. The managers must have the skill to diagnose environmental, analysis competition action,
compete in international market and manage organizational change. The manager’s main task today is to
respond to new internal development and the demand of the society. A summary of this emerging
challenge for management are as follows:
1. Globalisation of business: The world economy is becoming increasingly global in character. The
magnitude of this globalization is very high. Today managers operate in a boundary less world.
Therefore they must learn to operate in a borderless and global economy. They need to understand the
process of globalization and the competition it creates for them. These add complexity to a managers
job. At the same time there is extreme competition for market and also for natural resources.
Employment of people is also across culture and national boundaries which further complicate the
management process. All these factors and forces present a challenge to managers.
2. Quality assurance and productivity: Another competitive challenge that has attracted much
attention in quality and productivity. Quality is an important issue for several reasons. Firstly more
and more organization are using quality as a basis for competition, secondly improving quality tends
to increase productivity and finally enhancing quality lowers cost. Thus managers attention must be
focused on the assuarance of the quality of the product or services. Along with quality managers are
also responsible for productivity as well. Productivity has become a major issue for organizations
during recent years. It is a central challege for managers in all types of organization. Managers are
being asked to get more result out of their limited resources of human, financial, informational and
material.
3. Ethics and social responsibility: Another managerial challenge that has emerged is ethics and social
responsibility. There is increasing concern about the role and state of ethics in business because of the
belief that business ethics have declined in recent years. Managers are concerned about the
complexities of ethics in decision making. Every business has its own ethics and violation of this
ethics may result in penalties and social condemnation.
In recent years public attention has been focused on the issue of social responsibilities of business.
Society is generally expecting more from business organization like providing quality product, luck
easing quality of life, noise control, pollution of air etc. The growing consumerism carries thread to
business about social responsibilities and ethical issues of business.
4. Innovation and change: Another challenge that is faced by management is innovation and change.
So organization must pay attention to innovation and change otherwise they will go out of market.
Product life span has reduced considerably. Products need continuous improvement, up gradation and
modification. Success will go to those organizations which continuously improve their product
quality. They have to head their competition with constant flow of innovative product. The challenge
for managers is to in stimulate employees’ creativity for innovation and change.
5. Work force diversity: Work force diversity means organizations are becoming more heterogeneous
in terms of gender, race, ethics, culture, religion and other background. The manager should realize
that employees come to work with their cultural values ad personal lifestyle. The challenge for
managers therefore is to become more accommodating to diverse group of people. Conflict are more
approved in today’s organization because of diverse background of employees. The managers need to
shift their approaches and philosophy for work force management. They should recognize the
difference among employee and respond to them in ways that will ensure employees commitment, so
managers need to rely less on traditional manaement and motivation technique.
6. Empowerment (Power of employees): The role of difference between managers and the workers
have narrowed down considerably. Decision making pushed down to the operating level. Workers are
now being given the freedom to make choice about schedules, procedures and solving work related
problem. Earlier managers took decisions for the employees. New managers provide power to take
decision regarding the work related decision.
7. Technology: Technological environment consists of the innovation, technique and the organized
knowledge of ways of doing things. Modern business is categorized by newer and ever changing
technological development. The managers need to recognize and anticipate technological changes.
Technological changes result in modification in product and services. So manager has to cope with all
these changes taking place in the technology.
 Chapter 2: Management Theories
 Scientific Management
Life span of F.W.Taylor
F.W.Taylor was born on 1856 and died on 1917. He is regarded as the father of scientific
management. He has influenced vastly on development of management theory through experiments and
theory. During his career spanning a period of 26 years he conducted a series of experiments in three
companies, Hidvale Steel Company, Simond Rolling Machine and Bethlehem Steel. Taylor’s major
concern throughout his life was to increase efficiency in production and also make possible improvement
in workers salary and also to make possible improvement in worker productivity. He has written different
books namely ‘A piece rate system’ (1895), ‘shop management’ (1903), ‘On the art of cutting
metal’(1905), and ‘The principle of scientific management’(1911).
His theory was formulated by F.W.Taylor. This theory tells the way to increase productivity.
Taylor says we can increase productivity by selecting best employees and motivating them. There are few
skilled labours in the market. So the only way to increase productivity is the increase of efficiency of
employees. F.W.Taylor, Henry L. Gantt and Lilan Gilberth defined the theory of principle known as
scientific management theory
F.W.Taylor has given his philosophy on four basic principles which are listed below:
1. Development of best work method.
2. Scientific selection and development of workers.
3. The co-ordination of best work method and developing trained workers for specialization.
4. Friendly co-operation between management and labour.
Contribution of F.W.Taylor
Today we find development in production due to science and technology. This miracle is the
contribution of scientific management. Taylor conducted several experiments to increase efficiency of
workers. The main contribution given by him are summarized below:
1. Scientific task setting :Scientific task setting means the amount of work which average worker can
do under proper condition. Taylor called it as a fair day work. For that he studied time study, motion
study, fatigue study and method study.
2. Differential payment: Taylor had fixed salary standard according to the basic study of average
worker. If any employee produces more quantity than the average worker, then he receives more
payment where as if he is unable to produce according to standard he gets less payment. He started
this differential payment because he know how to get best from the employees.
3. Supervision system: F.W.Taylor said that the supervision system should be separated from workers
and supervisors. The supervisor should make the plan and the workers should implement it.
4. Recruitment and training: Scientific method should be used for the selection of worker to increase
efficiency to get best employees from the market. Proper job should be given to the proper person to
get best out of employees. They should be given regular training to rectify their deficiency.
5. Economy: F.W.Taylor says that we must keep trained manpower (human resources) in order to
decrease cost per unit. Without economizing no organization can survive in this competitive world
6. particular organization or industry. There should be complete mental revolution on the part of this
man to their duties, towards their fellow workers’ work and towards their employee. And there should
be mental revolution on the side of the management also. Such as towards their duties, towards their
fellow workers in the management, towards their work men and towards their daily problems.
Without this complete mental revolution on both sides, scientific management doesn’t exist or work.
7. Functional foremanship: Taylor introduced functional foremanship for supervision and direction.
Under the eight boss scheme of functional foremanship, four foremen that are related to planning are:
i. Route clerk
ii. Instruction card clerk
iii. Time and cost clerk
iv. Disciplinarian
And remaining four that are concerned with operating function and factory are:
i. Speed boss
ii. Repair boss
iii. Gang boss
iv. Inspector
Evaluation (Criticism of scientific management theory)
Taylor’s idea on time and motion study, scientific selection and training of workers, incentive
programmed were greatly appreciated. He contributed a lot to management. However his theory is not
free from criticism. The ground of his criticism is as follows:
1. He put too much pressure on employees to work faster.
2. The emphasis of productivity and profitability employed worker.
3. He placed over emphasis on economic nature of man. That means he highlighted desire of people
for money.
4. Method of scientific management has less importance in complex organization.
5. People object the use of word “scientific before management”. It has been strongly objected by
Breach. He tells that in the time that has not seen best of science, scientific was an unfortunate
choice.
Conclusion:
In spite of above criticism Taylor’s technique was supported by Henry L. Gantt, Frank Gillberth
and others, because Taylor’s ideas, research and recommendation brought human focus towards
technological, human and organizational issues in industrial management. Benefit of this theory includes
wider space for specialization, accurate planning, time in delivery, standard advice method, better quality
product, less cost, minimum uses of material and time and coordinal relation between man and boss.

 Administrative management theory

Life sketch of Henry Fayol
Henry Fayol was born in 1841 and died in 1925. He was a French engineer and an important
contributor of administrative management. He was born in Constantinople in France and graduated as a
mining engineer in 1860 from the National School of mining at St. Etiene. In 1860 he joined a famous
French company in the mining and metallurgical field (In the commantry four chumbcunt company as an
engineer). After a couple of year he was promoted as the manager of the mining industry and continued
his job for 24 years. In 1888 the condition of company became very bad due to heavy loss. The firm was
nearly bankrupt. At this point Fayol was 47 and was a general manager. When he retired 30 years later,
the company had entered into a large coal and steel company with a strong financial position and a long
record of profit and dividend.
During his long and successful career as an industrial manager, Fayol tried to prove or go into the
bottom of administration and management. He delivered the lecture on his investigation in 1900 and 1908
followed by his distinguished book on “general and industrial management” in 1916. After retiring from
his executive position in 1918, Fayol devoted himself in popularizing his principle of management.
Contribution of Henry Fayol/ administrative management
Henry Fayol is generally known as the founder of the classical management school. He was the first
person to systematically analyze managerial behaviour. The 14 principle of management given by him
are as follows:
1. Division of labour: This is the principle of specialization which is necessary to get efficiency in
the utilization of labour. Fayol tells that this principle is applied to all kind of work managerial as
well as technical to get best from his employees.
2. Principle of authority and responsibility: Authority and responsibility should be properly passed
so that we can function properly. Some authority can be passed to sub ordinate but responsibility
might not be passed. However responsibilities arise as authority is passed.
3. Principle of discipline: People in the organization must respect the rules that govern organization.
Without discipline no organization can achieve its goal.
4. Principle of unity of command: Each employee must receive instruction from only one
superior/supervisor/boss and report to only one superior in order to remove conflict in instruction
and confusion in authority.
5. Principle of unity of direction/objective: The operation within the organization must have the one
objective should be directed by only one manager using only one plan
6. Principle of subordination of individual goal to the organizational goal/group goal: Employees of
the organization must not think about their interest rather they should think about the interest of
 organization as a whole. In other words employees should dissolve their individual goal towards
the goal of the organization.
7. Principle of remunerations: Compensation for work should be fair to both employees and
employer, so that it doesn’t affect the daily life of employees.
8. Principle of centralization: Although manager holds the final authority but he should give some
authority for his subordinate to do his work properly. The organization has to find proper degree
of centralization.
9. Principle of hierarchy/scalar chain: It tells that how authority should be given/ ranked according
to their post. A chain of authority should extend from the top to the bottom of the organization
and should be followed all the time.
10. Principle of order: Human and material resource should be coordinated so that they are in the
required place at the required time. This is essentially a principle of organization in the
arrangement of things and person.
11. Principle of equity: Manager should be kind and fair when dealing with sub-ordinates.
12. Principle of stability of tenure of personnel: Instability is both the cause and affect of bad
management. Fayol points out the danger and cause of unnecessary turnover.
13. Principle of initiative: Subordinate should be given the freedom to carry out their plan even
though some mistakes may result.
14. Espirit de corps: Team work, team spirit and a sense of unity and togetherness should be fostered
and maintained. If the group works together in cooperative manner, then it becomes easy to work
and production will increase.

Evaluation/ criticism of theory: Social scientists describe administrative theory as an idle (inactive)
theory. It plays heavy emphasis on power and authority structure of organization. It enjoys all the
advantages of centralization and authority. It identifies important management process, function and skill.
It proposes the most complex system of organizing and managing work. This theory was supported by
Lyndall Urwrik, Mark Weber and Chester Barnard.
It also suffers from a demerit such as
1. It is rigid/ strict rules and regulation, impersonality and excessive categorization
2. It is institutionally power center and cannot give greater scope for individualism.
3. It cannot provide democratic organization.
4. It is a way to achieve bureaucracy.
5. It has focused mainly towards management, as it doesn’t pay adequate attention to workers.
6. This theory is superficial.
7. The principle which is considered universal by the function doesn’t stand the test of scrutiny in all
situations.

 The Behavior School (Hawthorne experiment/ Human Relation

Theory (1924-1933)
The famous Hawthrone experiment marks the beginning of human relation theory. The behaviour
school was introduced in order to achieve sufficient production, efficiency and work place harmony. In
this theory of management, scholars trained in sociology, psychology and related field who use their
knowledge to propose more effective way to manage in organization. Major source of behaviour school is
based on sociology and psychology, where sociology deals with human behaviour in society whereas
psychology deals with individual behaviour of human being.
Elton Mayo, Dauglas Mc Gregor Maslaw conducted several experiments from 1924-1933 which
was called Hawthrone experiment. Mayo's and his associates concluded that out of various factors of
production, human factor is very important factor to increase productivity. Mainly four experiments were
done in order to find out which factor influence the productivity. They are:
1. Illumination Experiment (1924-1927): This experiment was done from 1924-1927 to find out
the effectiveness of illumination on workers productivity. In this experiment researchers divided
the group into two test groups. They were given to perform work in dim and bright light but in
both case productivity was increased. That means there was no effect on productivity due to light.
Thus they concluded that light makes no influence on the workers’ performance.
2. Relay Assembly Test Room Experiment (1927-1928): This experiment was done from 1927 to
1928 to find out the effects of change in working hour and other working conditions in
productivity. In this experiment a small group of workers were placed in separate room and a
number of variables were altered like wages were increased, rest period was introduced, working
day and working week were reduced. Researchers also allowed the group to choose their own
working hour and working condition by the result there was no effect on productivity and
performance.
3. Mass Interviewing Programme (1928-1930): This experiment was done from 1928 to 1930 to
find out the working attitude and sentiments. In this experiment 2,000 people were interviewed
and motivated them to improve their work performance. Supervision has further reinforced their
motivation. The researchers concluded that employees will work if they believe management was
concerned about their welfare and supervision pay special attention to them.
4. Bank wiring observation room experiment (1931-1932): This experiment was done from 1931-
1932 to find out the social aspect of work organization. In the experiment both skilled and
unskilled were taken. Skilled workers were told to teach the unskilled workers to work properly
and association and friendship among the workers result in better performance. Thus researchers
concluded that informal work group has positive influence in productivity. Thus informal
relationship and socialization influence worker productivity.
Thus behaviour school focuses on human side of several factors of production. They hold
that human factor is the most important element to increase the productivity.
Features of behaviour school
1. Workers are the most important element in the organization.
2. Main source of their approach are sociology and psychology.
3. Greater production and higher motivation can be achieved through good human relation.
4. Motivation, leadership, communication, participative management and groups are the core of this
approach.
Limitations of behaviour school
There are certain limitations about the behavioural approach which are mentioned below:
1. This school made the individual main focus which is complex and difficult to predict individual.
2. Mainly behavioural concepts have not been put into use because some managers don’t understand
and some managers don’t want to adopt them.
3. The findings are not properly communicated to the practicing managers in an understandable way.
4. It plays more emphasis on human factor ignoring other factors of production.
Contribution of behavioural school
Having this limitation behavioural school has contributed hugely to the development of
management. They are:
1. It focuses on employees’ behaviour in the organization. It provides important understanding about
group dynamic, motivation and other interpersonal process in the organization.
2. It draws attention of management on important aspect of human behaviour and relationship.
3. It challenges the view that employees are tools and machines.
4. It gives importance to employees as being valuable resource.

 Management Science School

When the Second World War was over, the application of operation research to solve problem in
industry, generally become apparent. Now industrial technology, transportation, communication were
becoming more complicated. This development brought tools of problem that couldn’t be solved by
conventional means. Increasing by operation research specialists were called to help manager and come up
with answers to this new problem. Over the year operation research producers were formalized into what is
now generally called as management science school
The management science school gained popularity after the Second World War. The development
of high speed computer and communication provided the means for tackling complex and large scale
organizational problems. Today the management science approach is used to solve a problem through the
mixed team of specialists from relevant discipline to analyse the problem of the management. The team
constructs a model that shows symbolic terms and all other relevant factors bearing all the problems and
how they are interrelated. By changing the values of the variable in the model (such as increasing or
decreasing the cost of raw material) and analyzing the different equation of the model in a computer the
team can determine the effect of each change. Finally the management science team presents management
the basis for making a decision.
 Characteristics of Science School
Essential characteristics of science school are as follows:
i. Management is a problem solving mechanism with the help of mathematical tools and
technology.
ii. This theory heavily depends on computers.
iii. It focuses on maximizing performance and efficiency through mathematical process.
iv. The problem can be expressed in quantitative terms
v. The different variable in management can be expressed in the form of equation and
formula.
Contribution of Mnagement Science Approach
The theory has helped management to discover significant relationship between management and
science. It provides the guide line in a logical way for solving the problems. It has been mostly used in
solving technical and forecasting of future. Following are the main contributions of management science
approach:
i. This theory has been successfully applied in quantity control, inventory control,
production allocation etc.
ii. It applies tools of mathematics to solve various management problems.
iii. This theory has helped manager to think logically.
Limitations of Management Science Approach
Having this contribution this theory has certain limitations which are as follows:
1. The management science approach promotes and emphasizes only on the aspect of the organization
that can be computed in numbers. It ignores the importance of people.
2. It gives over emphasis on management science technique which may hamper development of
managerial school.
3. This theory pays less attention to relationship or human factor in making decision.
4. This approach is not a suitable approach for management because the technique are useful but cannot
solve all problems
5. It is costly for small organization.
6. The assumption with the operation research may not be realistic because they may not be available
everywhere.
7. The quantitative model may not be suitable for non routine and unpredictable management decision.
8. All the problems in the organization cannot be quantified. So it has no usefulness.
 System Theory/ System approach
The word system is derived from Greek work system which means to bring together or to
combine. We can say this universe is one system and there are many sub systems under one system in the
universe ie. Galaxy, aakash ganga etc. system in integrated part that works for common goal. System is a
group of different integrated part working together for achievement of goal. If there in one mistake in one
part then the whole part is damaged. For eg. Different sub systems of an organization have to achieve a
goal for development of whole organisation. Thus system theory studies management by putting all part of
an organization together. So system theory is the unified view of management and looks at an organization
in its totality.
The system theory of management is relatively new approach to the management thought. A
number of authorities working in diverse field of specialized have contributed to the development of this
theory. They are Lydwig Bertalanffy, Kennth Bouding, Narbert Weinus, Herbert Simon and Chester
Barhard.
Contribution of system approach
An organization in a system is composed of 4 independent components ie. task, structure,
technology and people. Thus every system consists of sub-systems. Organisation in a system is explained
in the following figure:

Environment

Input Process Output

• Material • Technology • Product/ser
• Human • Operating vice
• Finance system • Profit/
• Information • Administrat loss
ive system • Employees’
• Feedback behaviour
 Feedback

Process of system management

Characteristics of system approach

1. Sub system: A sub system is a part of a system, so they are inter dependent. A change in one
system can affect other sub system also. So manager must manage the system with some degree
of freedom.
2. Open system: It is one which interacts with outside organization. All the organizations must
interact with outside environment to be successful but the way may vary.
3. Synergy system: Synergy means that whole is greater than the sum of its parts. In organizational
term synergy means that a separate department within an organization have to interact and co-
operate with the system to become more productive otherwise they will be isolated. Eg 2+2=5,
now it depends on the manage how skillfully he initiates, integrates, combines and get result
2+2=5 not 4.
4. Feed back: Feed back is the continuous and key for the system control. It is the result which we
get back. It is also the part of system in which the result of the action are returned to the individual
and also to the system allowing work procedure to be analyzed and connected.
5. Flow: A system has different things to be focused in the path like information, material energy
etc. if input is not proper than the output will not be according to the objective. The system to be
functioned should be proper there should be proper flow of input in the environment.
6. Integrated: Integrated means to join or combine all together in the system of the organization.
This system is holistic view of an organization because no single part can work in isolation. The
other parts are equally necessary to each other.
Evaluation of system approach
System approach provides an overall picture which represents the reality of the organization. It
facilitates the co-ordinated efforts towards the accomplishment of goal. It has provided management with
framework for analyzing and controlling of diverse business operation in co-ordinated manner.
This theory focuses on dynamic inter relation between specialized activities and comprehensive
environment. Today complexity and size of the organization has become very sophisticated and growing
day by day due to competition which has made system theory important tool of management.
Thus this approach provides comprehensive frame work than other approaches of management.
They are:
i. It highlights the importance of environment.
ii. It conceptualizes the interaction of various parts of the organization.
iii. It emphasizes on paying attention to all parts for organizational effectiveness.
iv. The feedback receives from the environment can be used to bring required changes in the
system.
Criticisms of system approach:
i. This theory is suitable only for large scale organizations. Small organizations cannot take
benefit from it.
ii. It provides no specific technique of analysis.
iii. This approach fails to recognize the difference in system, therefore it is not applicable to
practice situation.

 Contingency theory (situational theory)

The functional, behavioural and system approach assumed that concept and techniques are
universal. In practice managers often find that a particular concept, techniques does not work
 effectively in all situation. So Tom Burns, B.M.Stalker, Jay Lorsh, Jay Gilbraith, Paul Lawrence and
other in 1960s purposed the theory which is popularly known as contingency theory.
It was developed by practitional managers, consultant researchers etc. who tried to apply the
concept and techniques of earlier approach to real life situation. But they found that management
concept do not produce the same result across situation. The concept tool and techniques which are
highly effective in one situation are not at all effective in another situation. Therefore their conclusion
was that management concepts are contingent on a particular situation. Result differs because
situation differs. The important message of contingency theory is that “there is no one best way to
manage” and decided outcome of the organization can be achieved in several ways.
This theory attempts to reduce the gap between management theory and management practice.
The basic thinking of this theory is that managerial action and organizational design must be
appropriate to the given situation and particular action is valid under certain condition.
Characteristic of contingency theory
Basic characteristics of this theory are as follows:
1. Manager should use method, techniques but according to time and situation.
2. No particular action is suitable in all situation.
3. There is no best way of implementing different theories in one situation.
4. Situation makes better leader.
5. This theory is reactive theory rather than proactive theory.
Evaluation of contingency theory
This theory is not based on the universal principle of management. There is no one best way
of doing work. This approach provides a clear view of reality of the managerial job. It increases the
horizon of manager from concepts, principles and techniques of management theory. This theory also
stretches the comparative study of organization before applying the theory so as to develop guidelines
for coping in different situation.
However this theory is not free from limitation and criticism. The main criticisms of this
theory are as follows:
1. It has inadequate research as compared to other theories.
2. It doesn’t recognize that management concept and techniques can influence
environmental variable.
3. It also adds confusion to the management that all things depend of situation.
4. Proactive approach is most suitable than reactive approach.
Conclusion
Despite the limitations it had hold great promise for integrated development of management
thoughts. It attempts to integrate various management theories.

 Contemporary Perspectives on Management

Mgmt. is a fast growing discipline. Contingency theory of mgmt. assumes that there is no one
best way of doing things or managing resources. After the contingency theory lot of new concept has
evolve which collectively known as contemporary perspective of mgmt..Lot of things has change in
last 30 years and this change concept has evolve due to development of science and technology,
globalization in business, transportation and communication system, increase new pace of economic
development emerge new perspectives in mgmt. Some of the exciting new ideas about the practice of
mgmt. are as follow:
i. Theory Z model: This theory was developed by William Ouchi is a comparative analysis
of three type business firms i) typical US firms, ii) typical Japanese firms and iii) Type Z US
firms. On comparison, Ouchi found that the typical Japanese and type Z firms were different from
typical US firms..This differences explain the success of many Japanese firms and difficulties
faced by typical US firms. Ouchi states that Z orgn. can model for many Americian firms
struggling with problems of high employee turnover, declining productivity and worker
alienation. Theory Z stresses that the special abilities of the individual workers are more important
than the contents of the job description.
ii. In Search of Excellence: Thomas J. Peters and Robert M. Watermen, has challenged the
conventional theories of mgmt. in their book In search of excellence. They studied the best
manged and most successful companies across the America. The mgmt. of this companies was
assessed on the basis of eight different attribute of excellence. Excellent companies were found to
be relatively decentralized, dedicated to human treatment of employees, innovation,
experimentation and customer satisfaction. They have highlighted the importance of job
experimentation.
iii. Corporate Culture: This concept was popularized by Terrence Deal and Allan Kenned,
through their book Corporate Cultures. According to them, orgrn. Are unique in many ways.
Their corporate culture makes them so different and unique. To them, establishing mgmt. methods
and technique are culture. They serve to prescribe a meaning to actions and efforts. Managers
employ techniques that give them comfortable felling. They, however, argue that successful orgn.
tend to rely more on culture than on conventional mgmt techniques for achieving high
performance.
iv. Learning Organization: In 1990, Peter Senge, develop the concept known as Learning
Orgn. The necessary requirement for business success is ability to gather, analyze and use
information. Senge identified five disciplines of a learning orgn. they are i) personal
responsibility, self reliance and mastery ii) mental model iii) shared vision iv) team learning and
v) systems thinking.
v. Agency theory: Agency theory explain why behavior or decision of organizational
members vary. It describes the relationship between one party called the principal, that delegate
work to another called the Agent. It explains their differences in behavior or decision by noting
that the two parties often have different goals and different attitudes toward risk. This theory
essentially acknowledge that different parties involved in a given situation with the same given
goal will have different motivations and that these different motivation can function in divergent
ways. It states that there will always be partial goal conflict among parties. The theory has been
successfully applied to discipline including accounting, economics, politics, finance, marketing
and sociology
vi. Chaos Theory: Change is constant. Although certain events and circumstances in an orgn.
can be controlled others can’t. Chaos theory recognize that change is inevitable and is rarely
controlled. While orgn. grow, complexity and the possibility for susceptible events increase.
Orgn. increase energy to maintain the new level of complexity and as orgn. spend more energy,
more structure is needed for stability. The system continues to evolve and change.

End of chapter
 Chapter 3 Environmental Context

Concept of environment (orgn-environment interface)

An organization exists in the association with its environment which provides resources and
limitations. Today’s environment is very dynamic. In order to survive and grow, an organization must
continuously adopt to its environment which is the major cause due to which organization fails. The
environment is the sum of factors and forces outside and inside the organization. It consists of forces that
influence organization’s ability to achieve goal.
Environment occupies a significant role in the functioning of an organization. It is being
generally realized that even the best managed organization may at time be not able to achieve desired
goal due to environmental factor. Environment understanding is more important to management than
before. This is both because of faster rate of environmental changes and because of widening dimensions
of environmental forces.
Environmental forces determine the effectiveness of an organization. The organization therefore
must adjust with these environmental forces, if it is to survive and succeed. Business organizations react
to this emerging environmental force through their strategic response. Hence on important indicator of
how well an organization deals with its environment for effective functioning of an organization.
Constant monitoring of an environment and timely and appropriate and timely and appropriate steps to
explain the existing oppurtunities and to meet the emerging challenges are essential for success. Analysis
of environmental force is thus the key to effective practice of management. The failure of organization to
understand access, predict and manage these environmental forces ultimately affects the organization of
its business.
Definitions
 According to Richman and Eopen “Business environment constitute the factors or constraint that
are largely if not totally external and beyond the control of business enterprise and its management”.
According to Keith Davis “Business environment is the aggregate of all conditions, events and
influences that surround and affect a business.”
According to Breadwell and Holder “business environment is multilayered, multi dimensional and
interwoven in which concrete events and ideas intervene to create business scenarios and issues”.
Environment literally means the surrounding external objects or influence under which someone
or something exists. Business environment is thus the sum total of all force that surrounding influence the
life and development of organisation. It reflects total of all things/factors, forces and institutions.
Business environment consists of all the forces that influence organization ability to carry out its
operation effectively to achieve its objective.
Types of business environment
There are two types of business environment.
1. External environment:External environment consist of those factors and conditions that are
outside the control of organization. Such as customer, competitor, trade union, supplier etc. It is
the condition, circumstances and influences surrounding and effecting the total organization or
any part of it. External environment includes those factors which are external and beyond the
control of organization and its management. It is also defined as the element outside an
organization that is relevant to its operation. The external environment contains both direct and
indirect elements. This element affects an organization and its management directly or indirectly.
External environment are further divided into two groups. They are:
i) General environment: Every organization operates in the general environment. The general environment
consists of inter related forces and each dimension of the general environment has the potential to
influence every organization directly. General environment is further divided into

a. Socio cultural environment: This environment affects the behavior of people and organization.
People are influenced by the traditions, customs, believes and values that are influenced by society
and complex culture. As society change the cultural dimension also get changed. Thus the element
of life style, social values and cultural forces change over a time. So organization must be culture
sensitive.

b. Economic environment: General economic conditions are critical to the success of an organization.
It shows overall health of the economic system in the environment it operates. Important economic
factor for business are inflation, interest rate, unemployment, saving etc. All of which affect on
demand for different products. All these factors vary over a time and manager devotes much of the
organisation’s time and resources to manage this factor.

c. Political and legal environment: This environment contain those rules and regulations which
regulate the operations of an organization. It is designed for overall common good of the society. It
is important for three basic reasons. Firstly the legal system defines what an organization can or
cannot do. Secondly the business sentiment of government influence business activities. Finally
political stability has huge influence on planning of organization. The stability of the organization
depends on the stability to face the challenge arising out of political and legal forces.

d. Technological environment: The technological environment of the general environment refers to

the method available for converting resource to product or services. Although technology is
applied within the organization. The form and availability of that technology come from the
general environment. All the organizations need to keep close watch on the technological changes
and development which affect its operation. The manager must be concerned about the process of
innovation and process of technology. Technological development has helped organization to
control physical environment to some extent and utilization of natural resources effectively.

e. International environment: Another component of the general environment for many organizations
is the international environment. That means the extent to which the organization is affected by
business activities of other countries. As a result of globalization, advancement in transportation
 and communication in the host country has made every part of the world related to other part.
Almost every organization is affected by the international factor.

ii) Task environment: Task environment consists of specific organization or groups that influence an
organization. The impact of general environment is often huge, imprecise and long term. So, most of
the organizations tend to focus attention on task environment than general environment. Task
environment is quite complex but it provides useful information more rapidly than general
environment which are as follows:

a. Competition: An organization that fails to meet the need of the customers as effectively as their
competitors can’t survive for long. In many cases, it is not the customer who determine the price of
the product but is determined by the competitor product. Organisation must be innovative, efficient
and effective in order to cope with change.

b. Customer: Customer exchange resource usually in the form of money for an organization goods
services. Organisation can’t survive in an open market without customer. Customer may be an
institution, another firm or an individual. There should be good relation between customer and
organization. Customers influence all organization as they reject or accept organizations goods and
service. Customer determine the nature quality and price of goods and services.

c. Supplier: An organization must acquire raw materials, equipment in order to produce and supply
goods. Thus the supplier support and co-operation is essential for smooth functioning of an
organization.

d. Government: Government creates many regulations of agencies that are usually given the task of
protecting the public interest from the undesirable practices. The policies, rules, regulations,
attitude of the government either promote or restrict organisational activities. They have great
influence on corporate policies, procedures and business practices of modern organization.

e. Labour union: Personal specialist generally deals with the labour supply, sometime supplemented
by other manager with specific hiring and negotiating activities. But now a days labour union
greatly influence the functioning of an organization from the different factor relating to the labour.

f. Financial institution: Organisations depend on numerous financial institutions such as

development bank, insurance, financial institution, commercial banks etc for the supply of fund for
their functioning. Effective coordination relationship is a must with financial institution. As they
influence their ability to subtract and expand the business activities.

2) Internal environment
Internal environment is sum total of all forces and condition within an organization which
influence its approach plan and behavior. Some of the internal environments are as follows:
a) Employees: Organizations hire employees and they become the major forces within the internal
environment. They tend to differ in terms of belief, attitude, education and capabilities. They have to adopt
with the organisational culture to achieve the goal and smooth functioning of the organization.

b) Owners/share holders: The owners or share holders are the people who invest the money and have a legal
property right to that business. Nowadays more and more share holders are taking active role in
influencing the management of company.

c) BOD: The management of organization is concerned with BOD who retains the right of ownership,
management and power of functioning of organization. The actual management of organization is in the
hand of elected BOD. It has great influence on mission, objective and strategies of the organization.

How organizations adopt to their environment?

 Given the different issues, the problems and oppurtunities in an organization, how should
organization adopt? Obviously each organization must access own unique situation and then adopt
according to the situation that arise while working in the organization. They are as follows:
1. Information management: An organization adopts to their environment through information
management. Organization used several techniques for information management, the techniques are
recognizing the importance of information, scanning and establishing proper management information
system.

2. Strategic response: Another way that an organization adopts to its environment is through a strategic
response. Options include maintaining the status quo, altering strategy or adopting an entirely new
strategy.

3. Merger, Take over, Aquision and alliance: Organisation adopts to its environment by doing following
things i.e. a merger occurs when two or more firm combine to form a new firm. A Take over occurs when
one firm buys another firm, sometime against their will. An acquision is nationalization by government
and the acquired firm continues to operate. In an alliance, the firm undertakes a new venture with another
firm. A company engage in this kind of strategies for variety of reason.

4. Organisation design and flexibility: An organization may also adopt to their environmental condition by
designing flexible structure. If it is flexible and permit the organization to respond quickly to
environmental change. An organization can adopt to the different changes easily and quickly. So rules and
regulation must be changeable and flexible according to the situation.

5. Direct influence of the environment: Many organization are able to directly influence their environment
in different way like the firm can influence their supplier by signing long term contract with fixed price.

Organization environment relationship

A business organization exists in the world of resource (financial, physical and human resources).
Modern organizations are facing the critical challenge of rapid and accelerating change. Organizations
can survive and grow only when the environment accept its output i.e. goods and services and approve its
activities. An organization is an integral part of its environment. A common theme in organization is that
organizations must adopt to their environment if they are to maintain or increase their effectiveness.
The environment of a business is the aggregate of the internal and external influence that affect its
life and development. The basic business environments of a company are market and economy. It govern
changes in the demand for every product and services. Every business organization I neither self
sufficient nor self contained. They are influenced by many environmental forces and active business firm
effectively respond to environmental factors by adopting its strategy accordingly. But an aggressive firm
may affect the environment and try to modify some of its element in an pro-active way.
First points of looking at the organization environment relationship are:
How environment affects the organization:
a) Environment affects the organization: James D.Thompson was one of the first person to recognize the
importance of organization environment relationship. There are uncertainty of environmental change and
society has also become complex. Uncertainty is a major force caused by the change and complexity that
affect many organizational activities. Uncertainty is a driving force that influences many organizations’
decision. Some type of uncertainty is needed in the organization to develop the organization. The
environment has a large number of element and nature of those elements is constantly changing. For eg
electronic goods face these types of uncertainty because of rapid rate of technological innovation and
change of consumer’s taste.

b) Competitive forces: Michael E.Porter, a Harvard University professor, an expert in strategic management
has proposed a more developed form of accessing environment. In particular he suggested that manager
view about the environment of their organizations in term of five competitive forces. They are:

a. Threat of new entrant

b. Competitive rivalry
 c. Threat of substitute product.

d. Power of buyer

e. Power of supplier.

c) Environmental turbulence (unexpected problem): Some organizations also face the possibility of
unexpected environmental change or turbulence sometime comes without warning. The most common
form of organizational turbulence is the crisis of some sort, that you don’t think of happening. The effect
of this crisis can be devastating to an organization specially if manager are unprepared to deal with them.

Emerging concept of business environment in Nepal

For a long time business firms in Nepal are running under conditions of state regulations and
protection. Protection such as tariff quota and license. They were protected not only against foreign
competition but also against competition but also against competition within the country. The Nepalese
economy for a long time operated in a scarcity. Following are the emerging concepts of business
environment in Nepal.
1. Emergence of Multi National Company(MNC): With the economic reform an environment was created
for the multinationals in Nepal. Number of MNCs have been established after the economic reform.
MNC’s are entering the Nepalese market in alliance with Nepalese partner and also individually.

2. Free enterprise (market) system: The reform programs have offered huge scape for free market
activities in the country. Many oppurtunities have been created with the hange in business environment
arising from freedom of reform. The Nepalese entrepreneurs have thus started exercising new freedom in
market. This has resulted in rapid change in the industrial scene of the country.

3. Growing private investment in core industries: The open door policy of the government has made a big
change in core industries like power, telecom, road etc has remained with the exclusive control of the
public sector of the country for a long time. Now these industries are open to private sector and foreign
investment.

4. Growth of the private sector: The change in environment has boosted the role of private sector in the
economy. The new system totally reverse the earlier policy and philosophy. Private and public sector are
now in an one seat exchanging their information. Some of the example of areas which are newly open to
private sector are hydropower, open sky, telecom, road, water supply etc.

5. Shift towards the service sector: It has been observed over the past few years that the service sectors are
growing very fast in the country. There has been shift from manufacturing to service sector. Service
sectors like tourism, radio, cinema, courier, newspaper, entertainment, printing services are growing very
rapidly.

6. Emergence of information technology (IT): Remarkable growth has been achieved in the application of
IT resources in a number of activities specially in private business. The application and use of IT services
are increasing at a very fast rate.

7.Development of market scenario (environment): The consumer goods market has changed every
dramatically during a period of 15 years. The market is flooded with wide range of product imported from
foreign countries which was not available in the market few years ago.

End of chapter