GLOBAL INSTITUTE OF TECHNOLOGY

DEPARTMENT OF ELECTRICAL ENGINEERING

INDUSTRIAL ECONOMICS AND MANAGEMENT LAB 7EE9A
Object: -Study about nature of planning, decision making and also discuss about management by
objective, line and staff authority, decentralization, span of management.
INTRODUCTION:-
Nature ofPlanning
1) Planningisgoal-oriented:Everyplanmustcontributeinsomepositivewaytowards
Theaccomplishmentofgroupobjectives.Planninghasnomeaningwithoutbeing related
togoals.
2) PrimacyofPlanning:Planningisthefirstofthemanagerialfunctions.Itprecedesall other
managementfunctions.
3) PervasivenessofPlanning:Planningisfoundatalllevelsofmanagement.Top
managementlooksafterstrategicplanning.Middlemanagementisinchargeof
administrativeplanning.Lowermanagementhastoconcentrateonoperational planning.
4) Efficiency,EconomyandAccuracy:Efficiencyofplanismeasuredbyitscontribution
totheobjectivesaseconomicallyaspossible.Planningalsofocusesonaccurate forecasts.
➢ Importance ofPlanning
As a managerial function planning is important due to the following reasons:-

1. Tomanagebyobjectives:Alltheactivitiesofanorganizationaredesignedtoachieve
certainspecifiedobjectives.However,planningmakestheobjectivesmoreconcreteby focusing
attention onthem.
2. Tooffsetuncertaintyandchange:Futureisalwaysfullofuncertaintiesandchanges.
Planningforeseesthefutureandmakesthenecessaryprovisionsforit.
3. Tosecureeconomyinoperation:Planninginvolves,theselectionofmostprofitable
courseofactionthatwouldleadtothebestresultattheminimumcosts.
4. Toincreaseorganizationaleffectiveness:Mereefficiencyintheorganizationisnot
important;itshouldalsoleadtoproductivityandeffectiveness.Planningenablesthe
managertomeasuretheorganizationaleffectivenessinthecontextofthestated
objectivesandtakefurtheractionsinthisdirection.
➢ Advantages ofPlanning
a) Alleffortsaredirectedtowardsdesiredobjectivesorresults.Unproductiveworkand
wasteofresourcescanbeminimized.
b) Planningenablesacompanytoremaincompetitivewithotherrivalsintheindustry.
c) Throughcarefulplanning,crisiscanbeanticipatedandmistakesordelaysavoided.
d) Planningcanpointouttheneedforfuturechangeandtheenterprisecanmanagethe
changeeffectively.
➢ Disadvantages ofPlanning
a) Environmentalfactorsareuncontrollableandunpredictabletoalargeextent.Therefore
 GLOBAL INSTITUTE OF TECHNOLOGY
DEPARTMENT OF ELECTRICAL ENGINEERING
INDUSTRIAL ECONOMICS AND MANAGEMENT LAB 7EE9A
planningcannotgiveperfectinsuranceagainstuncertainty.
b) Planningismanytimesverycostly.
c) Tendencytowardsinflexibilitytochangeisanotherlimitationofplanning.
d) Planning delaysaction.

➢ PlanningProcess
The planning process involves the following steps:

1. AnalysisofExternalEnvironment:Theexternalenvironmentcoversuncontrollableand
unpredictablefactorssuchastechnology,market,socio-economicclimate,politicalconditions
etc.,withinwhichourplanswillhavetooperate.

2. AnalysisofInternalEnvironment:Theinternalenvironmentcoversrelativelycontrollable
factorssuchaspersonnelresources,finance,facilitiesetc.,atthedisposalofthefirm.Suchan
analysiswillgiveanexactideaaboutthestrengthsandweaknessoftheenterprise.
3. DeterminationofMission:The"mission"shoulddescribethefundamentalreasonforthe
existenceofanorganization.Itwillgivefirmdirectionandmakeoutactivitiesmeaningfuland
interesting.

4. DeterminationofObjectives:Theorganizationalobjectivesmustbespelledoutinkeyareas
ofoperationsandshouldbedividedaccordingtovariousdepartmentsandsections.The
objectivesmustbeclearlyspecifiedandmeasurableasfaraspossible.Everymemberofthe
organizationshouldbefamiliarwithitsobjectives.

5. Forecasting:Forecastingisasystematicattempttoprobeintothefuturebyinferencefrom known
facts relating to the past and the present. Intelligent Functions of Management
forecastingisessentialforplanning.Themanagementshouldhavenostoneunturnedin
reducingtheelementofguessworkinpreparingforecastsbycollectingrelevantdatausingthe
scientifictechniquesofanalysisandinference.
Which the plan is adopted. It is the real point of decision-making.

An action plan:

1. The time-limit ofperformance.

2. Theallocationoftaskstoindividualemployees.
3. Thetime-tableorscheduleofworksothatthefunctionalobjectivesareachievedwithin the
predeterminedperiod.

➢ DECISON MAKING
 GLOBAL INSTITUTE OF TECHNOLOGY
DEPARTMENT OF ELECTRICAL ENGINEERING
INDUSTRIAL ECONOMICS AND MANAGEMENT LAB 7EE9A
`A decision is course of action which consuously chosen for achieving a desired result. Haynes
and massi oxford action of carrying out /carring in to effect.

Trewaltha and Newport :

Decision making involves selection of curse of item from amoung or more
possible alternative in order to arrive at solution for given problem.

CHARACTERISTICS OF DECISION MAKING :

1 It implies choice
2. It involves mental and intellectual activity
3. It is systematic process
4. It sequential in nature
5. It is influenced by personal value
6. It is based on reliable information and feed back
7. It is situation based activity

DECISION MAKING MODEL :

Economic model : This assume that with limited puschasing power a set of needs and test or
consumer would allocate in expenditure over diierent products and different prices so as to
maximize utility.
Law of equimarginal utility enable consumer to secure maximum utility from limited purchasing
power.
This model is based on :-
1. Price effect : lesser price of substitute, lesser the utility of original product
2. Substitution effect : lesser price of substitute , lesser the utility of original price
3. Income effect : more increase more quantity will be purchased according to behavioural
scientist. This model is not complete as this model assumes homogenuity of market.
Similarly of buying behaviour and concentrates only on product and price. It ignores other
aspect, motivation, attitude, perception , personality
4. Psychological model :
5. Pavlovain learning model : according to this model 3 steps is learning process. Learning is
different as all changes in behaviour dat occurs as a result of practise and based on
a) Drive – this is internal stimulus
b) Cue – cue acts as a stimulia which can come in form of advertising and sales promotion
c) Response – buyer respond to cue by process of trial and error in stimulus response
situation. This is way consumer tries to learn ads and promotion and takes decision.
6. Sociological model : peer groups, are affecting decision making. Sociatial stauts of
cunsumer depends on income, occupation, place of residence.

Management By Objectives
 GLOBAL INSTITUTE OF TECHNOLOGY
DEPARTMENT OF ELECTRICAL ENGINEERING
INDUSTRIAL ECONOMICS AND MANAGEMENT LAB 7EE9A
Definition: -‘Management By Objectives’ is a comprehensive managerial system that integrates
many key managerial activities in a systematic manner and that is consciously directed towards the
effective and efficient achievement of organizational and individual objectives.
Evolving Concepts In MBO:

• Early Impetus to MBO:

Since many centuries people have used their common sense and given importance to management
by objectives. It was in 1954 that Peter F.Drucker first emphasized that objectives must be set in
all areas where performance affects the health of the enterprise. About at the same time General
Electric Co. was using MBO in its reorganization

• Emphasis On PerformanceAppraisal:

In traditional appraisal programs personality traits were used for evaluating subordinates. But
when MBO was implemented emphasis was given on performance rather than personality which
lead to self appraisal and self development. The active involvement of subordinates leads to
commitment and creates an environment for motivation.

• Emphasis on short-term objectives andmotivation:

Individual goal setting is an important factor in motivating employees. It is known that
performance is higher when people have specific objectives than when they are asked simply to
do their best.

• Inclusion Of Long Range Plan InMBO:

In MBO programs that emphasis performance appraisals and motivation the focus tends to be on
short term objectives, which may lead to undesirable managerial behavior. Due to these short-
comings many organization now include long range and strategic planning in MBO programs.

➢ LINE AND STAFF RELATIONSHIPS

Introduction

Line and staff are the most widely used concepts in organizing, and most of the structures have
line-staff structures. Large and complex organizations operating in increasingly dynamic
environment need a variety of special abilities, knowledge and skills for supporting the effective
and efficient performance of their major functions of production and marketing. They, therefore,
employ a variety of experts including industrial experts, quality control managers, industrial
relation directors, legal advisors, cost accountants, market researchers, research and development
scientists, and so forth. These specialists perform the staff functions of rendering expert advice
and service to line managers in the performance of their functions.

Line and Staff Organisation Structure

 GLOBAL INSTITUTE OF TECHNOLOGY
DEPARTMENT OF ELECTRICAL ENGINEERING
INDUSTRIAL ECONOMICS AND MANAGEMENT LAB 7EE9A
Definition:Line and staff organization is an organization in which line managers make decisions, and
staff personnel provide advice and support.

Meaning:
Line and staff organization structure refers to a pattern in which staff specialists advice managers
to perform their duties. When the work of an executive increases, its performance requires the
services of specialists which he himself cannot provide because of his limited capabilities on
these fronts. Such advice is provided to line managers by staff personnel who are generally
specialists in their fields. The staff positions or departments are of purely advisory nature. They
have the right to recommend but no right to enforce their preference on other departments.
Sometimes it is difficult to determine which departments are line and staff. This problem can be
solved by classifying the activities in two ways:

1. The activities that are substantive or direct in its contribution to the organization are line
ones,and

2. The activities which are objective or indirect in its contribution are staff ones.Merits

Following are the merits of line-staff organizations:

1.Planned Specialization: the primary advantage of line-staff organizations is that it uses the
expertise of specialists, i.e. it brings knowledge to bear upon marginal and operational problems.
Line executives can, then, plan effectively and be responsible for proper execution while the staff
specialists assist as and whenneeded.

2.Scientific Actions: the actions of a line manager can become more scientific by means of
concentrated and skilful examination of business problems. Expert advice definitely helps line
executives in arriving at a sounddecision.

3.Quality Decisions: the quality of decisions in line and staff structure is high because the
decisions come after careful consideration and thought. Each expert gives his advice in the area of
his specialization which is reflected in thedecisions.

4.Definiteness: in a line-staff organization, authority and responsibility are fixed. The unity of
command principle is honored as each individual reports only to one superior, while specialized
help is available as and when needed. In addition, accountability is definite. Only line executives
are accountable for the results of their divisions or departments. Undivided responsibility compels
line executives to enforce discipline strictly. Control and coordination in these organizations
areeffective.

4.Training ground for developing people: as everyone is expected to concentrate on one area,
one’s training needs can be expressed easily. Line managers can improve their problem solving in
this kind or organizationstructure.
 GLOBAL INSTITUTE OF TECHNOLOGY
DEPARTMENT OF ELECTRICAL ENGINEERING
INDUSTRIAL ECONOMICS AND MANAGEMENT LAB 7EE9A
Demerits

The line-staff suffer from some limitation which particularly becomes acute when it is not
implemented properly. The basic problems are:

1.Lack of well-defined Authority: It becomes difficult to differentiate clearly between line and
staff because in actual practice, the authority is often diffused. Thus the managers may not be
clear as to what is expected of them or what is the actual area of operation of the authority. Thus,
confusion may be created in theorganization.

2.Line and Staff Conflicts: the main problem of line and staff structure is the conflicts between
line and staff managers. Such conflicts may be because of various reasons and sometimes the
organizational conflicts may be taken as personal conflicts resulting in interpersonalproblems.

➢ Decentralization
Decentralization or decentralisation (see spelling differences) is the process of dispersing
decision-makinggovernance closer to the people and/or citizens. It includes the dispersal of
administration or governance in sectors or areas like engineering, management science,
politicalscience, political economy, sociologyand economics. Decentralization is also possible in
the dispersal of population and employment. Law, scienceand technological advancements lead
to highly decentralized human endeavours.

"While frequently left undefined (Pollitt, 2005), decentralization has also been assigned many
different meanings (Reichard & Borgonovi, 2007), varying across countries (Steffensen &
Trollegaard, 2000; Pollitt, 2005), languages (Ouedraogo, 2003), general contexts (Conyers,
1984), fields of research, and specific scholars and studies." (Dubois and Fattore 2009)

A central theme in decentralization is the difference between:

• ahierarchy, based onauthority: two players in an unequal-power relationship;and

• an interface: a lateral relationship between two players of roughly equalpower.

The more decentralized a system is, the more it relies on lateral relationships, and the less it can
rely on command or force. In most branches of engineering and economics, decentralizat ion is
narrowly defined as the study of marketsand interfaces between parts of a system. This is most
highly developed as general systems theoryand neoclassicalpolitical economy.

Organizational Theory

Decentralization is the policy of delegating decision-makingauthority down to the lower levels

in an organization, relatively away from and lower in a central authority. A decentralized
organization shows fewer tiers in the organizational structure, wider span of control, and a
bottom-to-top flow of decision-making and flow of ideas.
 GLOBAL INSTITUTE OF TECHNOLOGY
DEPARTMENT OF ELECTRICAL ENGINEERING
INDUSTRIAL ECONOMICS AND MANAGEMENT LAB 7EE9A
In a centralized organization, the decisions are made by top executives or on the basis of pre-set
policies. These decisions or policies are then enforced through several tiers of the organization
after gradually broadening the span of controluntil it reaches the bottom tier.

➢ Span Of Management0
Span of management means the number of people managed efficiently by a single officer in an
organization. This is also called span of management, span of authority, span of supervision, span
of authority, span of responsibility or levels of organization. This principle is based on
theprinciple ofrelationship.

An organization is characterized by the presence of a number of levels and departments. But more
the levels are created more will be the administrative cost due to additional staff required and
more will be the difficulty to be encountered in communication and controlling.

This is basically the problem of deciding the number of subordinatesto report directly to each
manager. According to this principle there is a limit of the number of subordinates that each
managers can effectivelysupervise.

Basically there are two types of span of management –

1. Narrow span of management – It leads to many level in heresy system in organization
situation. Narrow span also effect employees moraladversely.

2. Wide span of management – Wide spans of management leads to flat organization in

which manager have a developing skill and experience of knowledge.

Factors influencing Span of Control

Important factors influencing the determination of proper span of control/supervision
management are: 1. nature of work 2. ability of the supervisor 3. competence of the subordinates
4. ability of staff services 5. availability of time and energy with the supervisor 6. delegation of
authority
7. degree of decentralization 8. planning required by the supervisor 9. use of objective standards
and 10. territorial contiguity of functions supervised!

1. Nature ofwork:
The span of control greatly depends upon the nature of activities and problems faced by the
supervisor, which in turn will depend on nature and size of production. In case the supervisor
carries routine type of job underset guidelines, he need not devote much time on the workers
underhim.

As the job is repetitive in nature, span of supervision or control can be larger. In other words, a
supervisor can control more workers under him. On the other hand, in case of complex and
complicated jobs it would be difficult for the supervisor to control large number of workers
effectively. The span of control will be narrow in such cases.
 GLOBAL INSTITUTE OF TECHNOLOGY
DEPARTMENT OF ELECTRICAL ENGINEERING
INDUSTRIAL ECONOMICS AND MANAGEMENT LAB 7EE9A
2. Ability of thesupervisor:
The ability and skill of the supervisor greatly affects determination of span. A highly qualified
and experienced supervisor with specialised knowledge and technical skill will be able to
undertake effectively a larger span than a supervisor who is not well qualified and experienced.

3. Ability of staffservices:
Theterm‘staff’meanstheappointmentofexpertsinthelineorganisationfor guiding, advising, and expert
opinion to the line officers. The supervisor or line superior is greatly benefited and relieved by the
staff advice. He can manage large number of subordinates and the span will be large. If staff
services are not available, lesser number of subordinates should be put under the control of one
supervisor which will lead to narrowspan.

4. Availability of time and energy with thesupervisor:

The availability of time with the supervisor will depend upon the type of the problems, simple or
complex, tackled by him and he has to do many other things like preparation of reports and
planning. If he is busy in these complexities, he will not be able to manage large number of
subordinates. Here the span of control will be narrow.

5. Delegation ofauthority:
In an enterprise which is effectively organised and structured, management is able to influence
and minimise the frequency and severity of superior.

Result:-Thus we have successfully studied aboutnature of planning, decision making and also
discuss about management by objective, line and staff authority, decentralization, span of
management.