Вы находитесь на странице: 1из 136

Management Functions And Process,

Management Thought
What is Management?

The concept of management has acquired special significance in the present competitive
and complex business world. Efficient and purposeful management is absolutely essential
for the survival of a business unit. Management concept is comprehensive and covers all
aspects of business. In simple words, management means utilizing available resources in
the best possible manner and also for achieving well defined objectives. It is a distinct
and dynamic process involving use of different resources for achieving well defined
objectives. The resources are: men, money, materials, machines, methods and markets.
These are the six basic inputs in management process (six M's of management) and the
output is in the form of achievement of objectives. It is the end result of inputs and is
available through efficient management process.

The term 'management' is used extensively in business. It is the core or life giving
element in business. We expect that a business unit should be managed efficiently. This is
precisely what is done in management. Management is essential for the conduct of
business activity in an orderly manner. It is a vital function concerned with all aspects of
working of an enterprise.

Definitions of Management
1. According to George R. Terry, "Management is a distinct process consisting of
planning, organizing, actuating and controlling, performed to determine and
accomplish stated objectives by the use of human beings and other resources".
2. According to Henry Fayol, "To manage is to forecast and to plan, to organize, to
command, to coordinate and to control".
3. According to Peter Drucker, "Management is a multi-purpose organ that manages
business and manages managers and manages workers and work".
4. According to Harold Koontz, "Management is the art of getting things done
through and with people in formally organized groups”.
5. According to Mary Parker Fallett, "Management is the art of getting things done
through people".

Characteristics of Management
1. Management is a managerial process: Management is a process and not merely
a body of individuals. Those who perform this process are called managers. The
managers exercise leadership by assuming authority and direct others to act
within the organization. Management process involves planning, organizing,
directing and unifying human efforts for the accomplishment of given tasks.
2. Management is a social process- Management takes place through people. The
importance of human factor in management cannot be ignored. A manager's job is
to get the things done with the support and cooperation of subordinates. It is this
human element which gives management its special character.
3. Management is action-based: Management is always for achieving certain
objectives in terms of sales, profit, etc. It is a result-oriented concept and not
merely an abstract philosophy. It gives importance to concrete performance
through suitable actions. It is an action based activity.
4. Management involves achieving results through the efforts of others:
Management is the art of getting the things done through others. Managers are
expected to guide and motivate subordinates and get the expected performance
from them. Management acts as an activating factor.
5. Management is a group activity: Management is not an isolated individual
activity but it is a collective activity or an activity of a group. It aims at using
group efforts for achieving objectives. Managers manage the groups and
coordinate the activities of groups functioning in an organization.
6. Management is intangible: Management is not directly visible but its presence is
noticed in the form of concrete results. Management is intangible. It is like
invisible spirit, which guides and motivates people working in a business unit.
Management is like government, which functions but is not visible in physical
7. Management is aided, not replaced by computers: The computer is an
extremely powerful tool of management. It helps a manager to widen his vision.
The computer supplies ocean of information for important decision-making. The
computer has unbelievable data processing and feedback facilities. This has
enabled the manager to conduct quick analysis towards making correct decisions.
A computer supports manager in his managerial work. However, it cannot replace
managers in business. They were required in the past, at present and also in
future. Their existence is absolutely essential in the management process.
8. Management is all pervasive: Management is comprehensive and covers all
departments, activities and employees. Managers operate at different levels but
their functions are identical. This indicates that management is a universal and all
pervasive process.
9. Management is an art, science as well as a profession: Management is an art
because certain skills, essential for good management, are unique to individuals.
Management is a science because it has an organized body of knowledge.
Management is also a profession because it is based on advanced and cultivated
10. Management aims at coordination of activities: Coordination is the essence of
management. It gives one clear direction to the whole organization and brings
unity and harmony in the whole business unit. For such coordination, effective
communication at all levels is essential.
11. Management is innovative: Management techniques are dynamic and
innovative. They need to be adjusted as per the requirements of the situations.
Another manager need not repeat the decisions of one manager. Similarly, a
manager has to change his decisions under different situations.
12. Management has different operational levels: Every Organization needs
managers for managing business activities. The manager's job is basically the
same at all levels. The managers at the higher levels have more important duties
while managers at the lower levels have to perform routine functions i.e. duties.
13. Management is different from ownership: Management is concerned with the
management of business activities. Managers are not the owners but they manage
the business on behalf of the owners. Separation of ownership and management is
a special feature of modem business organization.
14. Management has vast scope: The scope of management is quite comprehensive.
It covers all aspects of business. The principles of management guide managers
while managing various business activities.
15. Management is dynamic: Business is influenced by changes in economic, social,
political technological and human resource. Management adjusts itself to the
changing atmosphere making suitable forecasts and changes in the policies.
Hence, management is treated as a dynamic activity.
16. Management aims at achieving predetermined objectives: Management is a
meaningful activity. All organizations are essentially groups of individuals
formed for achieving common objectives. An Organization exists for the
attainment of specific objectives.

Need of Management
1. Direction, coordination and control of group efforts: In business, many
persons work together. They need proper direction and guidance for raising their
efficiency. In the absence of guidance, people will work as per their desire and
the, orderly working of enterprise will not be possible. Management is needed for
planning business activities, for guiding employees in the right direction and
finally for coordinating their efforts for achieving best/most favorable results.
2. Orderly achievement of business objectives: Efficient management is needed in
order to achieve the objectives of business activity in an orderly and quick
3. Performance of basic managerial functions: Planning, Organizing, Co-
ordinating and Controlling are the basic functions of management. Management is
needed as these functions are performed through the management process.
4. Effective communication at all levels: Management is needed for effective
communication within and outside the Organization.
5. Motivation of employees: Management is needed for motivating employees and
also for coordinating their efforts so as to achieve business objectives quickly.
6. Success and stability of business enterprise: Efficient management is needed
for success, stability and prosperity of a business enterprise.

Modem business is highly competitive and needs efficient and capable management for
survival and growth. Management is needed as it occupies a unique position in the
smooth functioning of a business unit. This suggests the need of efficient management of
business enterprises. Profitable/successful business may not he possible without efficient
management. In this sense, "No management, no business" is true. Survival of a business
unit in the present competitive world is possible only through
efficient and competent management.

Meaning of Management Process

The term management is explained in different ways. For example, it is said that
management is what management does. Here, management is explained with reference to
its basic functions which include planning, organizing, coordinating and controlling.
Similarly, management is described as a process which involves various elements.
Management process is a continuous one and is run by the managers functioning at
different levels. Management is now recognized as a distinct process in which managers
plan, organize, lead, motivate and control human efforts in order to achieve well defined
goals. In fact, process means a series of activities/operations undertaken/conducted for
achieving a specific objective. Process is a systematic way of doing things. For example,
in a factory there is a production process. Similarly, in the management process,
resources and human efforts are used in an orderly manner for achieving specific
objectives. The management process suggests functions to be performed by the

Definition of Management Process

1. According to D. E. McFarland, "Management is the distinct process by which the
managers create, direct, maintain and operate purposive organization through
systematic, co-coordinated and cooperative human efforts”.
2. According to Gemp R. Terry, "Management is a distinct process consisting of
planning, organizing, actuating, and controlling, performed to determine and
accomplish objectives by the use of people and other resources".

Functions of Management

The essential elements/components of Management Process are four.

a. Planning
b. Organizing
c. Directing and
d. Controlling.

We may add some more elements in the management process. Such elements are:-

i. Motivating
ii. Co-coordinating
iii. Staffing and
iv. Communicating.
The elements in the management process are actually the basic functions of management
these functions constitute the management process in practice. Management process is in
fact, management in practice. This process suggests what a manager is supposed to, do or
the basic functions that he has to perform while managing the job assigned to him.

Luther Gullic gave a new formula to suggest the elements of Management Process i.e.
basic functions of management. According to him, management process may be indicated
by the word "PODSCORB”. Here, ‘P' states for 'planning'. "O" for 'organizing', "D" for
'directing', "S" for 'Staffing', "CO" for 'Coordinating, "R" for 'Reporting' and "B" for
'Budgeting'. Gullic coined the word "PODSCORB" to suggest seven functions of

The following figures show the management process and the elements involved:

Elements of Management Process

1. Planning: Planning is the primary function of management. It involves
determination of a course of action to achieve desired results/objectives. Planning
is the starting point of management process and all other functions of
management are related to and dependent on planning function. Planning is the
key to success, stability and prosperity in business. It acts as a tool for solving the
problems of a business unit. Planning plays a pivotal role in business management
It helps to visualize the future problems and keeps management ready with
possible solutions.
2. Organizing: Organizing is next to planning. It means to bring the resources (men,
materials, machines, etc.) together and use them properly for achieving the
objectives. Organization is a process as well as it is a structure. Organizing means
arranging ways and means for the execution of a business plan. It provides
suitable administrative structure and facilitates execution of proposed plan.
Organizing involves different aspects such as departmentation, span of control
delegation of authority, establishment of superior-subordinate relationship and
provision of mechanism for co-ordination of various business activities.
3. Staffing: Staffing refers to manpower required for the execution of a business
plan. Staffing, as managerial function, involves recruitment, selection, appraisal,
remuneration and development of managerial personnel. The need of staffing
arises in the initial period and also from time to time for replacement and also
along with the expansion and diversification of business activities. Every business
unit needs efficient, stable and cooperative staff for the management of business
activities. Manpower is the most important asset of a business unit. In many
organizations, manpower planning and development activities are entrusted to
personnel manager or HRD manager. 'Right man for the right job' is the basic
principle in staffing.
4. Directing (Leading): Directing as a managerial function, deals with guiding and
instructing people to do the work in the right manner. Directing/leading is the
responsibility of managers at all levels. They have to work as leaders of their
subordinates. Clear plans and sound organization set the stage but it requires a
manager to direct and lead his men for achieving the objectives. Directing
function is quite comprehensive. It involves Directing as well as raising the
morale of subordinates. It also involves communicating, leading and motivating.
Leadership is essential on the part of managers for achieving organizational
5. Coordinating: Effective coordination and also integration of activities of
different departments are essential for orderly working of an Organization. This
suggests the importance of coordinating as management function. A manager
must coordinate the work for which he is accountable. Co-ordination is rightly
treated as the essence of management. It may be treated as an independent
function or as a part of organisms function. Coordination is essential at all levels
of management. It gives one clear-cut direction to the activities of individuals and
departments. It also avoids misdirection and wastages and brings unity of action
in the Organization. Co-ordination will not come automatically or on its own
Special efforts are necessary on the part of managers for achieving such
6. Controlling: Controlling is an important function of management. It is necessary
in the case of individuals and departments so as to avoid wrong actions and
activities. Controlling involves three broad aspects: (a) establishing standards of
performance, (b) measuring work in progress and interpreting results achieved,
and (c) taking corrective actions, if required. Business plans do not give positive
results automatically. Managers have to exercise effective control in order to
bring success to a business plan. Control is closely linked with other managerial
functions. It is rightly treated as the soul of management process. It is true that
without planning there will be nothing to control It is equally true that without
control planning will be only an academic exercise Controlling is a continuous
activity of a supervisory nature.
7. Motivating: Motivating is one managerial function in which a manager motivates
his men to give their best to the Organization. It means to encourage people to
take more interest and initiative in the work assigned. Organizations prosper when
the employees are motivated through special efforts including provision of
facilities and incentives. Motivation is actually inspiring and encouraging people
to work more and contribute more to achieve organizational objectives. It is a
psychological process of great significance.
8. Communicating: Communication (written or oral) is necessary for the exchange
of facts, opinions, ideas and information between individual’s and departments. In
an organization, communication is useful for giving information, guidance and
instructions. Managers should be good communicators. They have to use major
portion of their time on communication in order to direct, motivate and co-
ordinate activities of their subordinates. People think and act collectively through
communication. According to Louis Allen, "Communication involves a
systematic and continuing process of telling, listening and understanding".

Importance of Management
1. Optimum utilization of resources: Management facilitates optimum utilization
of available human and physical resources, which leads to progress and prosperity
of a business enterprise. Even wastages of all types are eliminated or minimized.
2. Competitive strength: Management develops competitive strength in an
enterprise. This enables an enterprise to develop and expand its assets and profits.
3. Cordial industrial relation: Management develops cordial industrial relations,
ensures better life and welfare to employees and raises their morale through
suitable incentives.
4. Motivation of employees: It motivates employees to take more interest and
initiatives in the work assigned and contribute for raising productivity and
profitability of the enterprise.
5. Introduction of new techniques: Management facilitates the introduction of new
machines and new methods in the conduct of business activities. It also brings
useful technological developments and innovations in the management of
business activities.
6. Effective management: Society gets the benefits of efficient management in
terms of industrial development, justice to different social groups, consumer
satisfaction and welfare and proper discharge of social responsibilities.
7. Expansion of business: Expansion, growth and diversification of a business unit
are possible through efficient management.
8. Brings stability and prosperity: Efficient management brings success, stability
and prosperity to a business enterprise through cooperation among employees.
9. Develops team spirit: Management develops team spirit and raises overall
efficiency of a business enterprise.
10. Ensures effective use of managers: Management ensures effective use of
managers so that the benefits of their experience, skills and maturity are available
to the enterprise.
11. Ensures smooth functioning: Management ensures smooth, orderly and
continues functioning of an enterprise over a long period. It also raises the
efficiency, productivity and profitability of an enterprise.
12. Reduces turnover and absenteeism: Efficient management reduces labor
turnover and absenteeism and ensures continuity in the business activities and
13. Creates sound organization: A dynamic and progressive management
guarantees development of sound Organization, which can face any situation -
favorable or unfavorable with ease and confidence.

The very survival of an enterprise depends on its management. Ineffective management

leads to disastrous consequences. According to George Terry, "Ineffective management
cuts at the very roots of economy of an enterprise’s. This suggests the importance of
efficient management. In brief, management occupies a unique position in the
functioning of business enterprises. Its importance and positive role is accepted in all
sector-private, public, joint and co-operative. Management is like a human brain. It is an
integral aspect of business itself.

The importance of management is not fully realized in many developing countries. The
economic progress of western countries is not merely due to abundant material resources
but because they are efficiently managed and utilized. In other countries, resources are
not utilized fully and properly due to lack of managerial skills. This suggests that
management is a key factor in the working of business enterprises. There is no substitute
to efficient management. An inefficiently managed business enterprise has no place in the
present complex and competitive business world groups.

Management in the Future

In the next couple of decades, management theory and practice is bound to change in
order to meet the complex and ever changing environmental variables. The phenomenal
growth in multinational and transnational operations, fast changing technology,
increasing complexity of decision making, dynamic social and economic environment,
globalization of business and elastic project organizations and task groups will
significantly influence the future managerial world and managerial tasks. There are
successful business and management leaders publishing their memories and offering their
experience to the world. There is great increase in the number of business schools.
Management education is bank ably providing expertise to nonage the business and this
trend is likely to continue. Career paths are likely to be based on expertise alone.
Managers will be under pressure to develop this expertise and apply it in an ever-
widening range of situations rather than their ability to survive the bureaucratic jungle.
They will have to combine their personal, professional and operational qualities and
capacities to the satisfaction of employers and the society. The future must be considered
as an opportunity and not a problem.

The future business environment will he dominated by information technology (IT),

globalization, material and energy shortages, problems of pollution and ecological
balance, consumerism, inflation and R & D. The costs of employing expert managers are
regarded as an investment for effective business performance. Management is a
designated expertise, increasingly professionalized and is likely to progress to a highly
organized status. It is assumed that young people will choose management as an
occupation and will progress from lower to middle and from middle to top management
positions. An ever-greater range of knowledge is available to all aspects of business and

Some forces/factors that are likely to have an impact upon management in future are as
mentioned below:-

1. Emergence of knowledge society.

2. Development of socially concerned Humanistic society.
3. Widespread application of information technology (IT)
4. Transition from industrial to service economy.
5. Growing use of innovations and R & D.
6. Social accountability of business.
7. Satisfaction of human and social values in man-machine system.
8. Liberalization and Globalization of the business.

Development of Management Thought

Management thought has a long history. It is as old as human civilization itself.

Management in one form or the other has been a significant feature of economic life of
mankind throughout ages. Management thought is an evolutionary concept It has develop
along with and in line with the growth of social, political, economic and scientific
institutions. Management thought has its origin in the ancient times. It developed
gradually along with other socioeconomic developments. The contributor’s to
management though are many. They include Management philosophers, management
practitioners and scholars. Modem management is based on the solid foundations laid
down by management thinkers from the early historical period.

Historical Background of Management

The recorded use of organized management dates back to 5000 B.C. when the
agricultural revolution had taken place. These agricultural civilizations existed in India,
China and Egypt According to Peter Drucker these irrigation civilizations "were not only
one of the great ages of technology, but it represented also mankind’s most productive
age of social and political innovation". As the villages grew and civilizations evolved, the
managers too grew and evolved. They became the priests, the kings, the ministers holding
power and wealth in the society. Written documents found in the Sumerian civilization
which flourished some 5000 years ago, contains evidence of management control

As early as 4000 B.C., the Egyptians were aware of the importance of planning,
organizing and controlling. The huge pyramids of Egypt stand a mute testimony to the
managerial and organizational abilities of the ancient Egyptian civilization. One pyramid
required 1,00,000 men working for 20 years, covering 13 acres, using 2.3 million blocks,
each weighing an average of 2.5 tons. To produce such a monument required proper
planning, work allocation, organizing, directing, controlling and decision making.

In the Grecian civilization we find the origin of the Scientific Method in the famous
Socratic discourses. The Romans who built a vast empire extending from Britain in the
west to Syria in the east ruled it for many years only because of their superior and
advanced managerial abilities.

In ancient India Kautilya wrote his Arthashastra in about 321 B.C. the major theme of
which was political, social and economic management of the State. The study of
administration of the cities of Mohenjodaro and Harappa of the ancient Aryans in 2000
B. C., Buddha's order and the Sangha in 530 B. C., provide evidence about the use of the
principles of management.

During the 13th and 14th centuries AD the large trading houses of Italy needed a means
of keeping records of their business transactions. To satisfy their needs Luca Pacioli
published a treatise in 1494 describing the Double Entry System of Book-keeping for the
first time.

Management thought is an evolutionary concept. New theories and principles were

suggested along with new developments in the business field. The new thoughts
supplemented the existing thoughts and theories. This is how developments are taking
place continuously in regard to management thoughts/theories. Management thinkers and
thinkers from other fields such as economics, psychology, sociology and mathematics
have also made their contribution in the evolution of management thought.

Evolution of Management Thought

This evolution of management thought can be studied in the following flum broad stages:

A. The Classical Theory of Management (Classical Approach): It includes the

following three streams of thought: (i) Bureaucracy, (ii) Scientific Management;
and (iii) Administrative Management
B. The Neo-classical theory of Management: It includes the following two streams:
(i) Human Relations Approach and (ii) Behavioral Sciences Approach.
C. The Modern Theory of Management: It includes the following three streams of
thought: (i) Quantitative Approach to Management (Operations Research); (ii)
Systems Approach to Management and (iii) Contingency Approach to

It is rather difficult to state the exact period of each stage in the evolution of management
thought. Experts, in general, agree with the following period for each thought/school.
a. Classical School/thought: 1900 to 1930.
b. Neo-classical School/thought: 1930 to 1960.
c. Modern School/thought: 1960 onwards.

Contributors to Management Thought

The development of management thought is the result of contributions made by

pioneering management thinkers and experts from other social sciences such as
economics and psychology.

Contribution of F. W. Taylor to Management Thought

F.W. Taylor is one of the founders (the other two are Max Weber and Henry Fayol) of
classical thought/classical theory of management. He suggested scientific approach to
management also called scientific management theory. F. W. Taylor (1856-1915) is
rightly treated as the father of scientific management. He suggested the principles of
scientific management. His concept of scientific management developed into a movement
and dominated the industrial management for several decades after him. His concepts and
principles were refined and popularized by several of his followers, notable among them
being Henry Gantt, The Gilberths and Emerson.

Principles of Scientific Management

According to Taylor, scientific management in its essence consists of a philosophy which

results in a combination of four important underlying principles of management. First, the
development of a true science, second, the scientific selection of the workers, third, their
scientific education and development, Froth, intimate co-operation between management
and their men. The basic principles of Taylor philosophy of scientific management are as
noted below. These principles of scientific management are most crucial aspects of
scientific management.

1. The development of 'One best way" of doing a job. This suggests the task of
finding out the best method for achieving the objectives of a given job. The
standards are decided scientifically for Jobs and incentive wages were paid for all
production above this standard. Here, job analysis and standardization of tools,
equipment, machinery, etc. are required.
2. Scientific selection of workers and their development through proper training.
3. Scientific approach by management. The management has to develop a true
science in all fields of work activity through scientific investigation and
4. Close co-operation of managers and workers (labor management relations) for
better results and understandings.
5. Elimination of conflict between methods and men. The workers are likely to resist
to new methods. This can be avoided by providing them an opportunity to earn
more wages.
Features of Scientific Management
1. Scientific task setting: F. W. Taylor suggested the introduction of standard task
which every worker is expected to complete within one day (working hours) the
task is to be calculated through careful scientific investigation. For this, work
study (i.e. method study and work measurement study) is essential. Taylor
suggested time study, motion study, fatigue study and rate-setting for the
introduction of scientific task. Time study is the art of observing and recording the
time required to do each detailed element in an industrial operation. Motion study
refers to the study and analysis of the movements of an operator while performing
a job so that attempts can be made to remove useless/unwanted movements from
the process. Both the studies together help in determining the best method of
performing a job and the standard time allowed for it. This replaces the old rule-
of-thumb knowledge of the workers. The workload, the best method of
performing the same and the time within which it must be performed are
suggested in this feature of scientific management by Taylor.
2. Planning the task: For performing the task by every worker, Taylor suggested
the need of planning the production activity accurately. This idea of planning is
Taylor's gift to the science of management. Planning of task gives answers to the
following questions. What has to be done, how it is to be done, where the work
shall be done and when the work shall be done.
3. Scientific selection and training of workers: Taylor suggested the need of
scientific selection of workers for the plant/production activities. The procedure
of selection must be systematic so as to select the best and the most suitable
persons for different types of jobs. Correct placement of workers is equally
important He also suggested the need of training of workers so as to raise their
ability or efficiency. Training is to be integrated with the promotion policy. He
also suggested differential piece wage plan for compensation payment to workers.
He also suggested the importance of cordial relations between management and
4. Standardization: Taylor suggested the importance of standardization of tools and
equipment, materials, conditions of work and speed of machines. This brings co-
ordination in different activities and all workers will be able to perform the task
assigned easily. The workers will have satisfactory working conditions for work
due to such standardization.
5. Specialization: Taylor suggested specialization in the administrative and
organizational setup of the plant He suggested functional foremanship. Taylor
recommended eight functional foremen for different activities and functions. The
foremen suggested by him are like route clerk, instruction card clerk, speed boss
etc. Such specialization is useful for raising efficiency of the whole organization.
6. Mental revolution: The techniques suggested by F. W. Taylor in his scientific
management are different as compared to traditional techniques and methods.
Naturally, these techniques can be used only when workers supervisors and
managers accept them in theory and also in practice For this, Mental revolution on
their part is essential The success of scientific management rests basically on the
attitude of management and workers. They must give up their old ideas and
methods and must accept new scientific methods. For this, mental revolution on
the part of both is essential. Cooperation from workers and management for the
introduction of scientific management depends on this mental revolution.

Benefits / Advantages of Scientific Management

1. Application and use of scientific methods.
2. Wide scope for specialization and accurate planning.
3. Minimum wastages of materials, time and money.
4. Cordial relations between workers and management.
5. Benefits to workers (higher wages and less burden of work), management (cost
reduction, better quality productions) and consumers (superior goods at lower

Scientific management not only developed a rational approach to solving organizational

problems but also contributed a great deal to the professionalization of management.
Time and motion studies, scientific selection of workers, work design and one best way
to doing a job are some new ideals suggested by Taylor and are responsible for the
introduction of Many positive changes in the field of industrial/ production management.

F. W. Taylor’s Contribution to the Development of Management Thought /


The contribution of F. W. Taylor to management thought is as explained below:

1. Emphasis on rational thinking: Taylor suggested rational thinking on the part of

management for raising efficiency and productivity. He wanted managements to
replace old methods and techniques by Modern methods which will raise
productivity and offer benefits to all concerned parties. He was in favor of
progressive, scientific and rational thinking on the part of management on all
managerial problems. Such progressive outlook is essential for the introduction of
new techniques and methods in the Management.
2. Introduction of better methods and techniques of production: F. W. Taylor
suggested the importance of improved methods and techniques of production.
Work-study techniques are his contribution to management thought. He suggested
new methods after systematic study and research. Taylor recommended the use of
new methods for raising overall efficiency and productivity.
3. Emphasis on planning and control of production: Taylor suggested the
importance of production planning and control for high production, superior
quality production and also for low cost production. He introduced the concept of
production management in a systematic way.
4. Importance of personnel and personnel department: Taylor suggested the
importance of manpower in management. He was in favor of progressive
personnel policies for the creation of efficient and satisfied labor force. He
suggested the need of personnel department and its importance. He favored
incentive wage payment to workers.
5. Industrial fatigue and rest pauses: Taylor noted the nature of industrial fatigue
and suggested the introduction of suitable rest pauses for removing such fatigue of
workers. He wanted to reduce the burden of work on workers through the use of
scientific methods.
6. Time and motion study: Taylor introduced new concepts like time study, motion
study and work study in the field of industrial management such concepts are for
the introduction of new methods which will be more quick, scientific and less
troublesome to workers.

The positive view of scientific management was described by Taylor as "Science, not
rule of thumb; Harmony, not discord; Co-operation, not individualism; maximum output
in place of restricted output. The development of each man to his greatest efficiency and

F.W. Taylor a rightly treated as father of scientific management. In fact, through his
concept of scientific management, Taylor actually developed a new science of
management which is applicable not only to management of industrial units but also to
the management of all other business units. He suggested certain techniques which can be
applied purposefully to all aspects of management of business activities. This is treated as
Taylor’s unique contribution to management thought.

The fundamental principles suggested by F. W. Taylor in his scientific management can

be treated as his contribution to management thought. In fact, Taylor suggested scientific
attitude and a new philosophy for discarding old and outdated ideas and techniques. He
was instrumental for the introduction of new ideas and techniques in the science of
management. These ideas aid techniques are now accepted in theory as well as in

Criticism of Scientific Management or Opposition to Scientific


Scientific management has wider economic and social significance. It has succeeded in
revolutionalising the very concept of management by offering a novel approach to the
managers in managing men, materials and methods. In spite of several benefits, Taylor's
scientific management concept has widely been criticized by employers, workers, trade
unions and also by theorists. They oppose Taylor's scientific management on different
grounds. The points of criticism we as explained below:

Criticism from Employers

1. Huge investment required: Heavy investment is necessary for reorganization of
preliminary standardization of tools, machines and equipment and conduct of time
and motion studies and other research activities for the introduction of scientific
management. Such investment may not be possible in small and medium size
2. Sudden change may disturb existing working arrangements: Sudden change
due to the introduction of scientific management may paralyze the existing
arrangement of work and will bring the entire Organization in difficulties. There
will be loss due to reorganization, if scientific management is to be introduced.
3. Unsuitable to small units: Small manufacturers argue that the concept of
scientific management is not suitable to their units due to financial and other
4. Benefits after a long period: The benefit of scientific management will be
available only after a long period and the business unit may come in financial and
other difficulties during the process of introduction of new changes as suggested
in the scientific management.
5. Huge overhead expenses required: Introduction of scientific management
involves huge overhead expenses which may erode profitability.

Criticism from Workers and Trade Unions. Why did

Trade Unions Oppose Scientific Management?
1. Heavy burden on workers: Workers feel that they will have to share more
burden of work as a result of introduction of scientific management. They also
fear that the benefits will he shared by the employer alone and that they will be at
a loss from all sides. Workers and their unions feel that it will lead to their
exploitation and they oppose scientific management on this ground.
2. Reduces initiative among workers: Workers and trade unions argue that
scientific management will destroy their initiative and they will be converted into
machines in the production process with no freedom, initiative and choice.
Similarity, over-specialization (excessive specialization) will lead to monotony
and mental fatigue. Hence, they oppose Taylor's scientific management.
3. Possibility of unemployment: Workers and their unions also feel that scientific
management will lead to unemployment and that workers will be removed due to
the use of labor-saving devices. This will lead to loss of employment and income
to workers. This is likely to make trade unions weak and hence they oppose
scientific management.
4. Exploitation of workers: Workers argue that they will be exploited under
scientific management as they will have to share more burden of work without
corresponding increase in the wage rate. Trade unions also oppose to scientific
management as it is likely to put more burden of work on the workers without
corresponding monetary benefit.
5. Possible adverse effects on workers unity: Trade unions also oppose scientific
management as they fear that the unity among workers will be adversely affected.
Workers will be divided into efficient and inefficient categories. In addition,
different piece rate plans will be introduced in place of uniform wage rate. As a
result, workers will be divided. Workers getting high salary will not be interested
in the union activities and this will make their union week and ineffective. Even
more unions and rival unions will be formed. In brief, trade unions strongly
criticize scientific management as it breaks solidarity of workers

The criticism of scientific management by employers and workers/trade unions is not

based on sound reasoning. Their arguments are not based on realities. It is possible to
give counter-arguments to every point of criticism noted by them. For example,
employers object scientific management on the ground of huge investment for its
introduction. It is true that huge investment will be necessary but it is likely to give
greater return in due course. In addition, scientific management will bring down the cost
and thereby enhance the profits.

Contribution of Henry Fayol to Management Thought

Henry Fayol (1841-1925) is rightly treated as the father of modern theory of general and
industrial management. The credit of suggesting the basic principles of management in an
orderly manner goes to Henry Fayol. After obtaining an engineering degree, Henry
Fayol, joined as chief executive in a coal mining company. He developed his
management principles and general management theory and published them in the form
of a book (in French) "General and Industrial Administration" in 1916. It was translated
into English in 1930. In due course of time, Henry Fayol came to be recognized as the
founder of modern management theory. His analysis of management process acts as the
foundation of the whole management theory and the present super-structure of
management has been built on it.

Henry Fayol suggested important qualities of managers and stressed the need for raising
such qualities. He developed fourteen principles of management out of his practical
experience. These principles are universal in character and are applicable to all types of
organizations. Each principle suggested by him has specific meaning and significance.
According to him, managers in all organizations need to follow these
principles/guidelines while managing the affairs of their business units. The management
principles suggested by him in 1916 are universally accepted by modern authorities on
management and are treated as valid even to this day. This is because these principles are
practical in nature and also result-oriented. In fact, these principles are the outcome of his
long experience as a practicing manager. These basic principals are useful for effective
management of business activities. They are related to the basic components of
management process such as planning, organizing, staffing, leading, coordinating and
controlling. He incorporated these principles in the management theory suggested by
him. The principles of management suggested by him are useful not only in
business/industrial enterprises but also in other organizations such as colleges, hospitals,
charitable institutions and government departments. Due to his contribution to
management theory and principles, Henry Fayol is rightly treated as the Father of Modern
Management Thought. Fayol is the first management thinker who provided the
conceptual framework of the functions of management in his book “General and
Industrial Management. The functions of management according to Fayol are,
1. Planning
2. Organizing
3. Staffing
4. Commanding
5. Coordinating
6. Controlling

The fourteen principles of management suggested by him are related these basic
functions of management process and are universally accepted. Fayol has given adequate
details of every principle suggested by him. He also made them easily acceptable by
others. According to Henry Fayol, managers should be flexible in the application of these

The fourteen principles of management suggested by him are related these basic
functions of management process and are universally accepted. Fayol has given adequate
details of every principle suggested by him. He also made them easily acceptable by
others. According to Henry Fayol, managers should be flexible in the application of these

Fayol divided general and industrial management into following six groups:-

a. Technical activities (production, manufacture, adaptation).

b. Commercial activities (buying, selling and exchange).
c. Financial activities (search for and optimum use of capital).
d. Security activities (protection of property and persons).
e. Accounting activities (stock taking, balance sheet, cost, and statistics).
f. Managerial activities (planning, organizing, command, coordination and control).

Henry Fayol also suggested 14 principles of management. These principles are:-

1. Division of work,
2. Authority and responsibility,
3. Discipline,
4. Unity of command,
5. Unity of direction,
6. Subordination of personal interest to organizational interests,
7. Remuneration,
8. Centralization,
9. Scalar chain,
10. Order,
11. Equity,
12. Stability of tenure,
13. Span of co-operation and
14. Initiative
Henry Fayol’s contribution to management theory is certainly remarkable. He gave
overall concepts of general management and suggested the basic functions of
management. He recommended the selection and training of workers and managers. He
also advocated the use of organization charts. He suggested certain qualities of manager’s
winch include physical, mental, moral, educational technical and experience. Fayol’s
theory of management was the first complete theory of management as we understand
today. It incorporated proven principles, elements, procedures and techniques based on
his practical experience.

Contribution of Elton Mayo to the Development of Management Thought

Elton Mayo (1880-1949) is recommended as the Father of Human Relations School. He

introduced human relations approach to management thought. His contribution to the
development of management thought is unique and is also treated as human relations
approach to management. It was Mayo who led the team for conducting the study at
Western Electric's Hawthorne Plant (1927-1932) to evaluate the attributes and
psychological reactions of workers in on-the-job situations. His associates included John
Dewery, Kurt Lewin and others. Mayo and his associates came to the following
conclusions from their famous Hawthorne experiments:

1. The amount of work to be done by a worker is not determined by his physical

capacity but by the social norms.
2. Non-economic rewards play a significant role in influencing the behavior of the
3. Generally the workers de not reacts as individuals, but as members of group.
4. Informal leaders play an important part in setting and enforcing the group norms.

Mayo discussed the factors that cause a change in human behavior. He concluded that the
cause of increase in the productivity of the workers is not a single factor like rest pauses
or changing working hours but a combination these and several other factors such as less
restrictive supervision, giving autonomy to workers, allowing the formation of small
cohesive groups of workers and so on. Today, as a result of the efforts of Mayo and his
associates, the managers in different organizations recognize that workers' performance is
related to psychological, sociological and physical factors. Thus, Hawthorne Study was
an important landmark to study the behavior of worker and his relationship to the job, his
fellow workers and the organization. It proved that informal work groups and the
opportunity to be heard and participate in decision-making have an important impact on
the productivity of the workers.

Mayo is one leading management thinker and also a leading advocate of neo-classical
theory. The concept of participative management style was suggested in the neo-classical
theory. The human relations approach suggested by Mayo has special importance in the
present period. He rightly suggested the importance of democratic leadership and
participative management style for running business activities efficiently. The role of
people (workers) is clearly suggested by Mayo. He rightly suggested that management is
not a mechanical process but a study of people involved in the production activities.
Management will get positive response from its employees when their actions, sentiments
and expectations are given due attention.

Mayo is best known for his work on the project commonly referred to as the Hawthorne
Studies. They were conducted in the Hawthorne plant of Western Electric Company in
the USA between 1927 and 1932. It is said that Mayo applied psychological approach to
management for the first time. He used clinical and diagnostic methods. Mayo has drawn
various conclusions from these studies. The Hawthorne Studies have had a shattering
impact on management thinking. Mayo is regarded as revolutionary thinker because of
his contribution to the management thought in the recent period. The credit of
humanization of management with a view to achieve common interest of management
and workers goes to Elton Mayo.

Some of the major findings of Hawthorne Studies we as noted below:

1. Employee's behavior is influenced by mental attitudes and emotions including

2. The workers in a group develop a common psychological bond uniting them as a
group in the form of informal organization.
3. In managing and motivating employee groups, human and social motivation plays
greater role then financial incentives.
4. Management must understand that a typical group behavior can dominate or even
supersede individual propensities and preferences.
5. When workers are given special attention by management, the productivity is
likely to increase irrespective of actual changes in the working conditions.

Hawthorne Studies are primarily responsible for consideration of non financial incentives
in improving productivity. Mayo pointed out that the organization is a social system and
informal organization is a reality. The knowledge of human nature can solve many
problems of management. He emphasized that successful human relations approach can
easily create harmony in an organization, higher employee satisfaction and great
operational efficiency. Central to this approach was an increased understanding of the
individual worker with emphasis on motivation, needs, interpersonal relationships and
group dynamics Mayo believed that a factory is not only a workplace but also a social
environment in which the employees interact with each other. This gave rise to the
concept of the 'social man' whose interaction with others would determine the quality and
quantity of the work produced.

Mayo developed his Human Relations Theory of Management on his Hawthorne

experiments. He introduced human relations approach to management and is rightly
considered as one of the pioneers of the Human Relations Theory of Management.
Features of Human Relations Approach
1. A business organization is not merely a techno-economic system but also a social
system and involves human element.
2. An individual employee is motivated not merely by economic incentives but also
by non economic incentives, psychological and social interests, needs and
3. The informal groups in the organization are more important than individuals and
play an important role in raising productivity.
4. In place of task-centered leadership, the employee-centered, humanistic,
democratic and participative style of leadership should be introduced as it is more
effective / productive.
5. Employees are not necessarily inefficient or negative in their approach. They are
capable of self-direction and control.
6. Employee’s performance can be raised by meeting their social and psychological
needs. Cordial atmosphere at work place is also useful for raising productivity.
7. Management needs social skills along with technical skills in order to create a
feeling (among the employees) that they are a part and parcel of the organization
and not outsiders.
8. Employees need respect and positive feeling from the management. For this,
employees should be encouraged to participate and communicate freely their
views and suggestions in the concerned areas of decision-making.
9. The management has to secure willing cooperation of employees. The objective
before the management should be to secure cooperative effort of its employees.
For this, employees should be made happy and satisfied.

The features of human relations school (noted above) are important as they were
introduced in the management theory for the first time. At present, these features are well
recognized but were unique when suggested by 1930.

Human relations approach is a progressive development as compared to classical

approach. Here, productivity is not treated merely as an engineering problem.
Cooperation of employees, team spirit and their satisfaction are treated as factors useful
for raising productivity. The human relations approach has put special stress on social
needs and the role of management in meeting such needs.

Limitations of Human Relations Approach

1. Too much importance to employees, and social needs: Human relations
approach to management has given too much importance to employees, their
needs and satisfaction. It has given undue stress on the social side of management
as compared to technical side. It is another extreme as compared to classical
theory where employees were neglected considerably. Human relations approach
has also neglected many other aspects such as organizational issues, environment
at the work place, labor unions, structure of the organization and so on.
2. Employee-oriented approach to a limited extent: It is argued that human
relations approach is apparently employee-oriented but in reality it is
organization-oriented. Many measures are suggested for the happiness and
satisfaction of employees. Measures are suggested to satisfy employees in order to
achieve organizational objectives and not for meeting the real needs of workers.
Their participation in management or upward communication with the
management, etc. is outwardly employee-oriented and gives them a false sense of
happiness. In brief, the human relations approach is employee-oriented but only to
a limited extent.
3. Faulty assumption in the theory: The human relations approach is based on a
wrong assumption that satisfied workers are more productive. After 1950s, it was
proved that productivity improvement, as a result of better working conditions
and the human relations skills of manager’s did not result in productivity
improvement as expected. Thus, workers satisfaction is one but not the only factor
which raises industrial productivity.
4. Limited importance to economic incentives: The human relations approach has
given limited importance to economic incentives in motivating employees. They
prefer informal groups and cordial relations among them. However, their interest
and loyalty to the organization largely depends on monetary incentives. Low
wages lead to Labor turnover even when the good treatment is given to

The human relations movement is based on the experiments conducted in the Hawthorne
Plant in Cicero (USA). The major conclusion (of Hawthorne Experiments) was that the
workers respond to their work situation as a whole and their attitudes and social relations
constitute an important part of the total situation. In addition, the attitudes of workers and
their relations with each other and with the management would play a role in forming
their attitudes towards the total work situation. Elton Mayo conducted a series of
pioneering studies at the Hawthorne plant they proved to be of much use in associating
employees with the management for achieving organizational objectives.

It is rightly pointed out that F. W. Taylor in his contribution to management thought

suggested rationalizing work for greater labor productivity while Elton Mayo
recommended/ advocated humanism work for enhanced efficiency and personal
satisfaction. The basic purposes of both the approaches are identical. However; the
approaches of Taylor and Mayo are different. Taylor's approach was purely engineering
while may referred to social needs of employees and their satisfaction. Taylor's approach
to scientific management lacks human elements in the production process. He treated
employee as a cog in the wheel emphasizing on efficiency at all costs as if there is no
difference between workers and machines. Mayo applied psychological approach to
management. He recommended humanization of management for better results in terms
of production and productivity. He rightly suggested that workers are human beings and
not machines. They should be treated with dignity and honor while on job.

Both the approaches (of Taylor and Mayo) are supplementary in the present management
thought. At present, stress is on scientific management principles as well as on human
approach to management. Efforts are being made to create favorable organization climate
for achieving organizational goals. Taylor's approach is comparatively old and was
popular in the early decades of 19th century the human relations approach (suggested by
Elton Mayo) is comparatively new and got popularity by 1930s.

Systems Approach to Management Thought

Contributions to management thought/theory after 1960s are covered by modem

management theories. Modem theories are based on classical and neo-classical theories
but consider the management problems as they developed in the recent years. There are
three streams under modern management theory. These are:-

a. Quantitative / Mathematical Approach to Management,

b. Systems Approach to Management, and
c. Contingency Approach to Management.

Systems Management School

A system is an organized entity i.e. a company or a business enterprise made up of parts

connected and directed to some purpose. Each system has an input, a process and an
output. It acts as a self sufficient unit. Every system is interlinked with its subsystems.
Any organization is looked upon as an artificial system, the internal parts of which work
together to achieve established goals and the external parts to achieve interplay with the
environment including customers, the general public, suppliers and government. The
manager integrates available facilities to achieve a goal by means of systems that relate
activities required for the end result. The system serves as the media through which the
manager operates. An integrated system can be used purposefully for the conduct of
production, marketing, distribution and other activities relating to business in an orderly
manner. A manager can conduct various activities in an orderly manner with the help of
the systems established. A system is a set of interrelated and interdependent parts
arranged in a manner that produces a unified whole. Almost anything can be viewed as a

As per systems management school, an organization is looked upon as an artificial

system. Its internal parts work together to achieve established goals and the external parts
to achieve interplay with the environment including customers, the general public,
suppliers and government. The manager integrates available facilities to achieve a goal
by means of systems that relate activities required for the end result. In this way, the
systems management school helps in achieving the established goals of the organization.

It is possible to establish such systems management organization in a business enterprise.

For this authority, departments, etc. will be created. The work will be properly distributed
and various departments (sub-systems) will operate as per the work assigned under the
project. The computer can be used extensively for the execution of systems management
Data processing work will become easy and quick. Systems management enables a
manager to work more efficiently because of easy availability of information in different
aspects of business.

Features of Systems Approach to Management

1. Open or Closed Systems: Systems may be either open or dosed. An open system
is one that is dependent on the outside environment for survival e.g., human body
as a system is composed of many subsystems. This is an open system and it must
depend on outside input and energy for survival. A system is considered closed if
it does not interact with the environment. Physical and mechanical Systems are
closed system because they are insulted from their external environment.
Traditional organization theorists regarded organizations as closed systems while
according to the modern view organizations are open systems, always interacting
with the environment.
2. Interdependent parts: A system is a set of interdependent parts which together
form a unitary whole that perform some function. An organization is also a
system which consists of four interdependent parts viz., task, structure, people and
3. Consideration of whole system: No part of the system can be precisely analyzed
and under-stood apart from the whole system. Conversely, the whole system
cannot be exactly evaluated without understanding all its parts. Each part is
related to every other part. It means rather than dealing separately with the various
parts of one organization, the systems approach attempts to give the manager a
way of looking at the organization as a whole. For example, in order to
understand the operations of the finance or production or marketing departments,
he must understand the company as a whole. It is because activity of any one part
of the company affects the activity of every other part.
4. Information, energy and material: Generally, there are three basic inputs that
enter the processor of the system viz., information (technology), energy (motive
power) and materials to be transformed into goods. If the output is service,
materials are not included in the inputs. If we have manufacturing company,
output is goods or materials. If we have a consultancy firm, output is information
or advice. if we have a power generating company, output is energy.
5. Defined boundaries: Each system including an organization has its own
boundaries which separate it from other system in the environment. For open
systems the boundaries are penetrable whereas for closed systems, they are not.
The boundaries for closed systems are rigid. In a business organization, it has
many boundary contacts or 'interfaces' with many external system like creditors,
suppliers, customers, government agencies etc. The system is inside the boundary,
the environment is outside the boundary'.
6. Synergy: Output of a system is always more than the combined output of its
parts. This is called 'synergy’. In organizational terms, synergy means when
separate departments within an organization cooperate and interact, they become
more productive than if they had acted in isolation e.g., it is certainly more
efficient for each department to deal with one secretarial department than for each
department to have a separate secretarial department of its own.
7. Feedback mechanism: A system can adopt and adjust itself to the changing
environment through the feedback mechanism. As operations of the system
proceeds information in feedback to the appropriate people. This helps to assess
the work and if need be, to get it corrected.
8. Multidisciplinary approach: Systems approach integrates and uses with profit
ideas emerging from different schools of thought. Management freely draws
concepts and techniques from many fields of study such as psychology,
sociology, ecology, economics, mathematics, statistics, operations research,
systems analysis etc.

Important contributors to systems school of management include Chester Barnard,

Ludwig Von Bertalanffy, Russell Ackoff, Kenneth Boulding and William Scott.

From 1960s onwards, the management theorists and practitioners are referring
management concepts in systems phraseology. A system means to bring together or to
combine. When viewed from the systems angle, the organization is seen as operating in
an open system constantly interacting with its environment. It receives external inputs in
a continuous manner and transforms them into outputs. Suitable adjustments and
rectifications are also made as per the feedback available. An organization which is not
adaptive and responsive to its environment will not survive or grow. An organization will
have individuals, groups, formal structures, goals and resources. A manager has to see
that all these parts work in co-ordination in order to achieve organizational goals.
Absence of co-ordination will hamper the performance of the organization. The systems
approach suggests that the total performance of the organization will be effective only
when the different systems/units/activities are coordinated and integrated in an efficient
manner. For example, efficient manufacturing division needs the support of efficient
marketing division for achieving organizational objectives. If not, the total performance
of the organization will be jeopardized. The managers, as decision-making entities, have
to regulate the sub-systems of the Organization. They should not work in isolation but
operate in co-ordination with others.

This will avoid shortfalls in different components and bring success to the organization.
The emphasis of systems approach is on interrelatedness of the parts of an organization.
The introduction of integrated approach is treated as major contribution of systems

The systems approach developed only after 1950 and is the recent contribution to
management thought. It stresses the interrelatedness and interdependence of all activities
within an organization. The systems theory considers organization as an open, adaptive
system which has to adjust changes in its environment. It defines organization as a
structured process in which individuals interact for attaining objectives.

Merits Of Systems Approach

Systems approach to management is comparatively new to the management thought. This

approach represents a refreshingly new thinking on organization and management. It
stresses that managers should avoid analyzing problems in isolation but should develop
the skills for integrated thinking on management problems. The systems approach
provides a unified focus to organizational efforts. It provides a strong conceptual
framework for meaningful analysis and understanding of organizations. Systems
approach provides clues to the complex behavior of organization.

The systems theory suggests to practicing manager to study/analyze a particular element

by taking into consideration its interacting consequences with other elements. A variety
of systems concepts and perspectives have been developed for managers.

The systems approach rightly points out the role of 'synergy' in management. Each
subsystem derives strength by its association and interaction with other sub-systems. As a
result, the overall outcome is more than the sum total of individual contributions. The
other contribution of systems theory is its treatment of organization as an open system.
The Organization exhibits a 'holistic' character.

Limitations of Systems Approach

1. The systems approach is criticized on the ground that it is too abstract and vague.
It is difficult to apply it to practical problems directly and easily.
2. The systems theory/approach fails to provide specific tools and techniques for the
practicing executives/managers.
3. The systems approach does not recognize differences in systems. It fails to clearly
identify the nature of interactions and interdependencies between an Organization
and its external environment it also fails to offer a unified body of knowledge.

Contingency Management School / Contingency Approach to Management

/ Situational Approach

A common deficiency of the classical, behavioral and quantitative schools is that they
have stress one aspect of the organization at the cost of others. The classical approach
emphasizes on 'task' while behavioral approach emphasizes on 'people’. The stress of
quantitative approach is on 'mathematical decision-making’. However, it is difficult to
understand precisely which aspect is most useful and appropriate in a given practical
situation. This brings the need to develop me broad conceptual framework that can help a
manager diagnose a problem and decide which tool or tools will best do the job. The
systems approach as well as contingency approach provides one integrated approach to
management problems. The contingency/situational approach is the second approach (the
first being the systems approach) which attempts to integrate the various schools of
management thought in an orderly manner. The contingency management approach is
similar to known leadership theory called situational leadership theory. The contingency
approach is applicable to leadership as well as to business management. This situational
management approach is relatively a new approach to management and is an extension of
systems approach. The basic theme of contingency approach is that organizations have to
deal with different situations in different ways. There is no single best way of managing
applicable to all situations. In order to be effective, the internal functioning of the
organization must be consistent with the needs and demands of the external environment.
In other words internal organization should have the capacity to face any type of external
situation with confidence.

Features of the Contingency / Situational Approach

1. Management is entirely situational. The management has to use the

measures/techniques as per the situation from time to time.
2. Management should match its approach as per the requirements of the situation.
The policies and practices used should be suitable to environmental changes.
3. The success of management depends on its ability to cope up with its
environment. Naturally, it has to make special efforts to anticipate and
comprehend the possible environmental changes. Managers should realize that
there is no one best way to manage. They have to use management techniques as
per the situation which they face.

According to contingency approach, management principles and concepts of different

schools have no universal/general applicability under all situations. This means these
schools have not suggested one best method of doing things under all situations and at all
times. The contingency approach has provided a solution to this situation.

As per the contingency approach, the task of managers is to try to identify which
technique or method will be most suitable for achieving the management objectives under
the available situation. Managers have to develop a sort of situational sensitivity and
practical selectivity in order to deal with their managerial problems as they develop from
time to time.

Contingency approach views are applicable in designing organizational structure and in

deciding the degree of decentralization in establishing communication and control
systems and also in deciding motivational and leadership approaches. In brief, the
contingency approach is applicable to different areas of organization and management it
is an attempt to integrate various viewpoints and to synthesize various fragmented
approaches to management.

The contingency approach is the outcome of the research studies conducted by Tom
Burns and G. W. Stalker, James Thompson and others.

Merits of Contingency Approach

1. Contingency approach is pragmatic and open minded It discounts preconceived

notions, and universal validity of principles.
2. Theory relieves managers from dogmas and set principles. It provides
freedom/choice to manage to judge the external environment and use the most
suitable management techniques. Here, importance is given to the judgment of the
situation and not the use of specific principles.
3. The contingency approach has a wide-ranging applicability and practical utility
in, organization and management. It advocates comparative analysis of
organizations to bring suitable adjustment between organization structure and
situational peculiarities.
4. The contingency approach focuses attention on situational factors that affect the
management strategy. The theory combines the mechanistic and humanistic
approaches to fit particular/specific situation. It is superior to systems theory as it
not only examines the relationships between sub-systems of an organization but
also the relationship between the organization and its external environment.

Limitations of Contingency Approach

1. It is argued that the contingency approach lacks a theoretical base.

2. Under contingency approach, a manager is supposed to think through all possible
alternatives as he has no dried principles to act upon. This brings the need of more
qualities and skills on the part of managers. The responsibility of a manager
increases as he has to analyze the situation, examine the validity of different
principles and techniques to the situation at hand, make right choice by matching
the technique to the situation and finally execute his choice. The areas of
operation of a manager are quite extensive under this theory.

Contingency approach/theory is the latest addition to existing management theories. It

was observed that different theories developed earlier are not applicable to all real world
situations developed since 1970. An open and adaptable systems approach (also called
contingency approach) is more convenient to deal with complex management problems.
Contingency/ situational approach appears to be better suited to lead management out of
the present management theory jungle.

Contingency theories do not give special importance to any specific theory. It suggests
that there is no one best way to management. In the Contingency approach, what is best
for a particular business unit or organization or under the available situation is given
special attention. Each situation (before the management) is different and calls for a
Contingency / situational approach. A manager has to study the complexity under each
situation. He has to adjust his policies/decisions as per his awareness. He has to decide
what is best under the available total situation and act accordingly. He (manager) has to
identify the technique which will be most effective for achieving organization objectives
under particular situation/ circumstances and act accordingly. This is the practical aspect
of contingency approach. What constitutes best/effective management varies with the
organizations internal and external environment and the make-up of the organizational
sub-systems. The best management pattern depends on a number of interrelated internal
and external variable factors around the specific organization/business unit.

The contingency approach falls somewhere in between the classical theory and systems
theory. It provides a synthesis that brings together the best of aft segments of what
Koontz has termed "management theory jungle". Contingency approach is practical
progressive and action oriented. It considers each organization as unique and gives
special attention to situation around it. Finally, it integrates theory with practice in a
systems framework. The other theories (classical or systems) are not rejected in the,
contingency approach. However, they are viewed as incomplete, vague and unsuitable to
all organizations and situations.

Question Bank

1. Discuss the functions and nature of management.

2. Explain the nature of management process. Why management process is called
social and consequential process?
3. What are the principles and features of scientific management of Taylor? Why did
trade unions oppose scientific management?
4. Discuss contributions of Elton Mayo to the development of management thought?
5. Discuss features of systems approach to management.
6. What is management? Explain the characteristics of management.
7. Explain the importance of management in the present day business world.

Planning First Primary Important

Function Of Management
1. What is planning?
A plan is a determined course of action for achieving a specific objective. An individual
may prepare a plan for his journey or tour or for a family function. Similarly, a business
unit may prepare a plan to achieve a particular objective. It is called a business plan
which includes production plan, sales plan, and so on. A business unit prepares a master
plan for the whole unit. Such master plan is again divided into departmental plans for
actual execution. Planning is a process of thanking to action. It is a means to achieve well
defined objectives. Business plan and business planning move together.

Planning is the primary function of management and occupies the first position in the
management process. It is the starting point of the whole management process as other
management functions are related to planning function. Planning, in simple words, means
to decide the objectives clearly and to prepare a plan. Thereafter to take suitable steps for
the execution of the plan. Planning function is performed by managers at all levels. It is
deciding the objective to be achieved and taking suitable follow-up steps for achieving
the same.

Planning is, now, universally accepted as a key/passport to success, progress and

prosperity in business as well as in all other aspects of life. It acts as a base of all
purposeful human activities. The concept of planning is old enough. Planning was
advocated by Confucius almost 2500 years ago. He said "A man who does not think and
plan long ahead will find trouble right at his door". Thus, planning is the centre around
which all business activities move.
In planning, various business problems are studied, decisions are taken regarding the
future course of action and business activities are adjusted accordingly. Thus, planning
means deciding in advance the objectives to be achieved and preparing
plans/programmes for achieving them. In other words, planning is the process of
foreseeing desired objectives - anticipating problems and developing solutions. It serves
as a core of the whole management process.

Planning bridges the gap from where we are to where we want to go. In the absence of
planning, events are left to chance. A plan is to-day's projection for tomorrow's activity.

2. Definitions of Planning

1. According to Koontz and O'Donnell, "Planning is deciding in advance what to do,

how to do it, when to do it, and who is to do it. Planning bridges the gap between
where we are and where we want to go. It makes it possible for things to occur
which would not otherwise happen”.
2. According to George R Terry, "Planning is the selecting and relating of facts and
the making and using of assumptions regarding the future in the visualization and
formulation of purposed activities believed necessary to achieve desired results".
3. According to Philip Kotler, "Planning is deciding in the present what to do in the
future. It is the process whereby companies reconcile their resources with their
objectives and opportunities".

3. Need of Planning
The need of planning is universally accepted in the business as well as in other aspects of
life. The following points justify the need of business planning/planning in business:

1. Planning is needed for survival and growth of a business unit in an orderly

2. Planning is needed in order to face new problems/difficulties developed due to
growth of markets, market competition, changes in consumer expectations and so
3. Planning is needed in order to face challenges created by changing environmental
4. Planning is needed as it acts as a pre-requisite to good management. It is needed
as it is the core of the whole management process.
5. Planning is needed in order to achieve the objectives decided by the management.
It is also needed as it ensures accuracy, economy and operational efficiency in
busin6s management.

4. Importance of Planning in Business Management

The importance of planning as an element in the management process is universally

accepted. It plays a positive role in the management of a business unit. Planning brings
stability and prosperity to a business unit. It brings unity of purpose and diverts all efforts
in one direction for the achievement of certain well defined objectives. Planning also
improves the performance of a business unit. In fact, in the absence of planning there will
be disorder, confusion, inefficiency, wastage of human efforts and material resources.
Planning is rightly treated as the pre-requisite to efficient management. The fact that large
majority of business units use planning as a tool of management indicates its utility and
importance. Planning brings safety to business operations. It is the only way for survival
in the competitive business world.

Planning is important as it is more than a mere theoretical exercise or paperwork. It has

practical utility and creative value. Planning is also a rational and intelligent activity. It is,
now, rightly treated as a highly professionalized aspect of business management.

Planning is important but planning alone is not adequate. It should be supplemented by

suitable follow-up actions on the part of managers. Planning may not be able to solve all
managerial problems, but it certainly helps the thoughtful managers in overcoming
various managerial problems. A plan will remain on paper if suitable follow-up steps are
not taken at different levels for its execution. Thus, planning is a means and not the end
in itself

5. Advantages of Planning
1. Facilitates quick achievement of objectives: Planning facilitates quick
achievement of business objectives. In the planning process, the objectives to be
achieved are clearly decided / finalized and plans are prepared and executed for
achieving such well defined objectives. Planning ensures achievement of
objectives in an orderly and quick manner.
2. Brings unity of purpose and direction: Planning brings unity of purpose and
direction before the entire organization as it is for achieving certain well defined
goals. Planning diverts all resources in one direction for achieving well defined
3. Ensures full utilization of resources: Planning ensures effective/maximum
utilization of available human and material resources. It eliminates wastages of all
kinds (of material resources and human efforts) and this ensures fuller utilization
of available resources.
4. Avoids inconsistency in efforts: Planning avoids inconsistency in efforts and
also avoids possible frictions and duplications. It ensures economy in business
5. Raises competitive capacity/strength: Planning raises competitive potentialities
of a business unit. It enables a business unit to stand with confidence in a
competitive market. It keeps ready solutions for possible problems and enables a
business unit to function with confidence.
6. Promotes managerial efficiency: Planning promotes managerial efficiency. It
covers all managerial functions and helps management to execute future
programmes in a systematic manner. It makes managerial direction and control
7. Avoids hasty decisions and actions: Due to planning, hasty decisions and
haphazard actions by managers are avoided. It also encourages systematic
thinking by the managers. Planning facilitates effective delegation of authority,
removes communication gaps and thereby raises overall efficiency. It even
encourages innovative thinking among managers.
8. Ensures effective control on the Organization: Planning ensures effective
control on the whole organization. It fixes targets in clear terms and draws plans
and programmes for achieving them. This facilitates effective control on the
functioning of the business unit.
9. Acts as an insurance against future uncertainties: Planning acts as an
insurance against future uncertainties. It takes care of all business uncertainties. In
fact, in planning, future problems and situations are studied in advance and
alternative solutions are kept ready. This enables management to face any type of
critical situation with ease and confidence.
10. Facilitates other managerial functions: Planning facilitates other managerial
functions. It is the basic managerial function and other managerial functions such
as organizing, etc. move as per the plans prepared. It acts as a motivating force
behind other managerial functions.
11. Improves motivation: Planning facilitates participation of managers and workers
in the normal functioning of an enterprise. It develops team spirit and raises
morale and motivation of employees. Workers know what is expected from them.
This ensures high degree of efficiency from them. Planning also provides training
to managers. It serves as a tool for manpower development in an Organization.
1. Planning ensures survival, stability and progress of a business unit.
2. Ensures uniform decision-making.
3. Acts as a key to solve problems and challenges faced by a business unit.
4. Sets performance standards for functional departments.
5. Planning enables a business unit to adjust itself with ever changing
business environment.

6. Limitations of Planning
1. Time-consuming and costly: It is argued that planning is a lengthy process as it
involves collection of data, forecast, research and analysis. Similarly, planning is
essentially the job of highly paid experts. As a result, planning is a time-
consuming and costly activity. Only large firms can undertake planning due to
heavy cost and lengthy procedure involved in it.
2. Ineffective due to environmental changes: Business environment changes
frequently and plans are required to be adjusted as per the changes in the situation
through suitable modifications. However, such revision/modification creates a
number of problems. Such adjustments in the operational plan are always costly,
3. Dangers of unreliable data: Planning needs accurate data from internal and
external sources. The quality of planning depends on such accurate feedback. If
the information supplied by various departments is unreliable, the planning
process will be adversely affected. Planning based on incomplete information
may prove to be even dangerous. In brief, plans based on unreliable data are not
useful /effective. Securing reliable information is always difficult and this brings
deficiencies in the entire planning process.
4. Encroachment on individual freedom and initiative: Planning is a centralized
process. At the lower levels, plans are to be executed as per the directives issued.
This affects individual freedom and initiative at the lower levels. Employees at
the lower levels act as instruments for the execution of plan prepared by the top
level managers. People are asked to become cogs in the machine with little scope
for initiative or independent thinking.
5. Delays actions: Planning is a lengthy process. As a result, the actions to be taken
for execution are delayed. Planning is not useful when quick decisions and actions
are required.
6. Unsuitable to small firms: Small firms prefer to function without long term
comprehensive planning as they find planning rather costly and time-consuming.
They prefer to face the situations as they come. Similarly, quick decisions and
prompt actions are necessary in the case of certain business activities. Here, long
term planning is not suitable.
7. Limited practical value: It is argued that planning is too theoretical and has
limited practical utility. Planning takes long time for preparation and the situation
changes when such plans are ready for execution. Planning for example, is not
suitable in the case of speculative business. It is also not useful for taking quick
benefits of business opportunities. In brief, planning has limited practical value.
8. No guarantee of expected results: Planning is for achieving certain well defined
objectives. However, there is no guarantee that the objectives will be achieved
within the specific time limit by using planning as a tool. Actual performance may
not be as per the expectation due to various reasons. Thus planning has an
element of uncertainty. Planning leads to probable results and not the expected
results. It gives benefits but may not be exactly as per the expectation. Thus, there
is no guarantee that planning will give 100 per cent positive/expected results.
9. Generates frustration: At the lower levels, plans are imposed on the employees.
No consideration is given to their difficulties, views and opinions. The targets
may be too ambitious and the employees may not be able to achieve them in spite
of best efforts. This leads to frustration among employees at lower levels.
10. Involves huge paper work: Planning involves huge paper work in the
preparation of master plan and departmental plans.
11. Danger of overdoing: Sometimes, planners overload the work. Elaborate reports
are prepared without practical utility.

The advantages of planning are more important/significant while its limitations are few
and also not of serious nature. Moreover, these limitations can be minimized. The
practical utility of planning is universally accepted. It is not fair to give up the concept of
planning due to certain limitations. The better alternative is to make it more effective,
purposeful and result oriented.
7. Steps in Planning Process

Planning is a lengthy process which moves gradually and step by step approach is usually
adopted. These steps are like stations in the journey of planning process. Usual steps in
the planning process are as briefly explained below:

1. Classifying the problems: The planning process starts with clear understanding
and classifying business problems faced by a business unit. Identification of
problems or opportunities by managers justifies the need for action. It is like the
diagnosis of the health problem of a patient by his doctor. Planners have to
understand the problems of the Organization first and, then, prepare a plan to deal
with the problems in the light of the prevailing business environment.
2. Determining the objectives: In this second stage in the planning process, the
planners decide the overall objectives to be achieved. Planning is always for
achieving certain well defined objectives and naturally objectives must be spelt
out precisely. Objectives act as pillars of the entire planning process. Business
objectives may be decided in terms of profit, sales, production or market
reputation. Objectives may be defined in quantitative or qualitative terms.
3. Collecting complete information and data: The planners have to collect
information relating to problems facing the business unit. Such information is
necessary and useful for analyzing the problems in depth and also for accuracy in
planning. Information can be collected from internal and external sources.
Reliable, updated and adequate data make planning process result-oriented.
4. Analyzing and classifying the information: At this stage, the information
collected is analyzed and interpreted systematically for drawing specific
conclusions. This facilitates purposeful use of information, while preparing
alternative plans. Irrelevant information can be discarded through such analysis.
5. Establishing planning premises: Planning premises are various assumptions and
predictions about the future business situation. Such premises act as background
for planning activities. The planning premises are expected to supply relevant
facts, information and data on the basis of which forecasts are prepared and future
trends are indicated. Planning premises reduce uncertainties in the planning
process. Planning premises are three in number viz., (a) Controllable premises, (b)
Semi-controllable premises, and (c) Uncontrollable premises.
6. Determining alternative plans: Here, the planners prepare and keep ready
alternative plans suitable for use under different situations. The best among the
available alternative plans is used for actual execution. The preparation of
alternative plans is essential as one plan is normally not adequate under all types
of situations. It is a type of stand-by arrangement useful for meeting any
emergency situation.
7. Selecting operating plan and preparing derivative plans: After study of the
business environment and the alternative plans available, the planners select the
best plan for actual execution. This decision is a delicate one and must be made
with proper care. After the selection of operating plan, the planners have to
prepare derivative plans. Such plans are related to different departments/activities
and constitute sub-sections of the operating plan. The division of overall plan into
derivative plans is necessary for effective execution.
8. Arranging timing and sequence of operations: Timing involves fixation of
starting and finishing time for each job or piece of work. Sequence of operations
ensures proper flow of work. This step in planning process is important as it
brings coordination in the activities of different departments. The timings and
sequence of operations must be communicated to concerned departments,
managers and staff for implementation of the plan.
9. Securing participation of employees: Planning needs willing participation of all
employees and departments. For this, information regarding the operative plan
should be given to employees well in advance. Here, the internal communication
system should be used extensively. For such participation, employees should be
associated with the planning process.
10. Follow-up of the proposed plan: The purpose of follow-up is to make periodical
review of the execution process. It is useful for understanding actual progress and
deficiencies in the process of execution of the plan. This also facilitates adoption
of suitable remedial measures as and when required.

Management By Objectives (MBO) -

Peter Drucker MBO
The Concept of Management By Objectives (MBO)

The concept of MBO is closely connected with the concept of planning. The process of
planning implies the existence of objectives and is used as a tool/technique for achieving
the objectives. Modern managements are rightly described as 'Management by
Objectives' (MBO). This MBO concept was popularized by Peter Drucker. It suggests
that objectives should not be imposed on subordinates but should be decided collectively
by a concerned with the management. This gives popular support to them and the
achievement of such objectives becomes easy and quick.

Management by Objectives (MBO) is the most widely accepted philosophy of

management today. It is a demanding and rewarding style of management. It concentrates
attention on the accomplishment of objectives through participation of all concerned
persons, i.e., through team spirit. MBO is based on the assumption that people perform
better when they know what is expected of them and can relate their personal goals to
organizational objectives. Superior subordinate participation, joint goal setting and
support and encouragement from superior to subordinates are the basic features of MBO.
It is a result-oriented philosophy and offers many advantages such as employee
motivation, high morale, effective and purposeful leadership and clear objectives before
all concerned per-sons.

MBO is a participative and democratic style of management. Here, ample a scope is

given to subordinates and is given higher status and positive/participative role. In short,
MBO is both a philosophy and approach to management. MBO concept is different from
MBC (Management by Control) and is also superior in many respects. According to the
classical theory of management, top management is concerned with objectives setting,
directing and coordinating the efforts of middle level managers and lower level staff.
However, achievement of organizational objectives is possible not by giving orders and
instructions but by securing cooperation and participation of all persons. For this, they
should be associated with the management process. This is possible in the case of MBO
and hence MBO is different from MBC and also superior to MBC.

MBO is an approach (to planning) that helps to overcome these barriers. MBO involves
the establishment of goals by managers and their subordinates acting together, specifying
responsibilities and assigning authority for achieving the goals and finally constant
monitoring of performance. The genesis of MBO is attributed to Peter Drucker who has
explained it in his book 'The Practice of Management'.

Definitions of Management By Objectives (MBO):

1. According to George Odiome, MBO is "a process whereby superior and
subordinate managers of an Organization jointly define its common goals, define
each individual's major areas of responsibility in terms Of results expected of him
and use these measures as guides for operating the unit and assessing the
contribution of each of its members."
2. According to John Humble, MBO is "a dynamic system which seeks to integrate
the company's needs to clarify and achieve its profits and growth goals with the
manager's need to contribute and develop himself. It is a demanding and
rewarding style of managing a business."

Features of Management By Objectives (MBO):

1. Superior-subordinate participation: MBO requires the superior and the
subordinate to recognize that the development of objectives is a joint
project/activity. They must be jointly agree and write out their duties and areas of
responsibility in their respective jobs.
2. Joint goal-setting: MBO emphasizes joint goal-setting that are tangible,
verifiable and measurable. The subordinate in consultation with his superior sets
his own short-term goals. However, it is examined both by the superior and the
subordinate that goals are realistic and attainable. In brief, the goals are to be
decided jointly through the participation of all.
3. Joint decision on methodology: MBO focuses special attention on what must be
accomplished (goals) rather than how it is to be accomplished (methods). The
superior and the subordinate mutually devise methodology to be followed in the
attainment of objectives. They also mutually set standards and establish norms for
evaluating performance.
4. Makes way to attain maximum result: MBO is a systematic and rational
technique that allows management to attain maximum results from available
resources by focusing on attainable goals. It permits lot of freedom to subordinate
to make creative decisions on his own. This motivates subordinates and ensures
good performance from them.
5. Support from superior: When the subordinate makes efforts to achieve his goals,
superior's helping hand is always available. The superior acts as a coach and
provides his valuable advice and guidance to the subordinate. This is how MBO
facilitates effective communication between superior and subordinates for
achieving the objectives/targets set.

Steps In Management By Objectives Planning :-

1. Goal setting: The first phase in the MBO process is to define the organizational
objectives. These are determined by the top management and usually in
consultation with other managers. Once these goals are established, they should
be made known to all the members. In setting objectives, it is necessary to
identify "Key-Result Areas' (KRA).
2. Manager-Subordinate involvement: After the organizational goals are defined,
the subordinates work with the managers to determine their individual goals. In
this way, everyone gets involved in the goal setting.
3. Matching goals and resources: Management must ensure that the subordinates
are provided with necessary tools and materials to achieve these goals. Allocation
of resources should also be done in consultation with the subordinates.
4. Implementation of plan: After objectives are established and resources are
allocated, the subordinates can implement the plan. If any guidance or
clarification is required, they can contact their superiors.
5. Review and appraisal of performance: This step involves periodic review of
progress between manager and the subordinates. Such reviews would determine if
the progress is satisfactory or the subordinate is facing some problems.
Performance appraisal at these reviews should be conducted, based on fair and
measurable standards.

Advantages of Management By Objectives (MBO):

1. Develops result-oriented philosophy: MBO is a result-oriented philosophy. It

does not favor management by crisis. Managers are expected to develop specific
individual and group goals, develop appropriate action plans, properly allocate
resources and establish control standards. It provides opportunities and motivation
to staff to develop and make positive contribution in achieving the goals of an
2. Formulation of dearer goals: Goal-setting is typically an annual feature. MBO
produces goals that identify desired/expected results. Goals are made verifiable
and measurable which encourage high level of performance. They highlight
problem areas and are limited in number. The meeting is of minds between the
superior and the subordinates. Participation encourages commitment. This
facilitates rapid progress of an Organization. In brief, formulation of realistic
objectives is me benefit of MBO.
3. Facilitates objective appraisal: NIBO provides a basis for evaluating a person's
performance since goals are jointly set by superior and subordinates. The
individual is given adequate freedom to appraise his own activities. Individuals
are trained to exercise discipline and self control. Management by self-control
replaces management by domination in the MBO process. Appraisal becomes
more objective and impartial.
4. Raises employee morale: Participative decision-making and two-way
communication encourages the subordinate to communicate freely and honestly.
Participation, clearer goals and improved communication will go a long way in
improving morale of employees.
5. Facilitates effective planning: MBO programmes sharpen the planning process
in an Organization. It compels managers to think of planning by results.
Developing action plans, providing resources for goal attainment and discussing
and removing obstacles demand careful planning. In brief, MBO provides better
management and better results.
6. Acts as motivational force: MBO gives an individual or group, opportunity to
use imagination and creativity to accomplish the mission. Managers devote time
for planning results. Both appraiser and appraise are committed to the same
objective. Since MBO aims at providing clear targets and their order of priority,
employees are motivated.
7. Facilitates effective control: Continuous monitoring is an essential feature of
MBO. This is useful for achieving better results. Actual performance can be
measured against the standards laid down for measurement of performance and
deviations are corrected in time. A clear set of verifiable goals provides an
outstanding guarantee for exercising better control.
8. Facilitates personal leadership: MBO helps individual manager to develop
personal leadership and skills useful for efficient management of activities of a
business unit. Such a manager enjoys better chances to climb promotional ladder
than a non-MBO type.

Limitations of Management By Objectives (MBO):

1. Time-consuming: MBO is time-consuming process. Objectives, at all levels of

the Organization, are set carefully after considering pros and cons which
consumes lot of time. The superiors are required to hold frequent meetings in
order to acquaint subordinates with the new system. The formal, periodic progress
and final review sessions also consume time.
2. Reward-punishment approach: MBO is pressure-oriented programme. It is
based on reward-punishment psychology. It tries to indiscriminately force
improvement on all employees. At times, it may penalize the people whose
performance remains below the goal. This puts mental pressure on staff. Reward
is provided only for superior performance.
3. Increases paper-work: MBO programmes introduce ocean of paper-work such
as training manuals, newsletters, instruction booklets, questionnaires,
performance data and report into the Organization. Managers need information
feedback, in order to know what is exactly going on in the Organization. The
employees are expected to fill in a number of forms thus increasing paper-work.
In the words of Howell, "MBO effectiveness is inversely related to the number of
MBO forms.
4. Creates organizational problems: MBO is far from a panacea for all
organizational problems. Often MBO creates more problems than it can solve. An
incident of tug-of-war is not uncommon. The subordinates try to set the lowest
possible targets and superior the highest. When objectives cannot be restricted in
number, it leads to obscure priorities and creates a sense of fear among
subordinates. Added to this, the programme is used as a 'whip' to control
employee performance.
5. Develops conflicting objectives: Sometimes, an individual's goal may come in
conflict with those of another e.g., marketing manager's goal for high sales
turnover may find no support from the production manager's goal for production
with least cost. Under such circumstances, individuals follow paths that are best in
their own interest but which are detrimental to the company.
6. Problem of co-ordination: Considerable difficulties may be encountered while
coordinating objectives of the Organization with those of the individual and the
department. Managers may face problems of measuring objectives when the
objectives are not clear and realistic.
7. Lacks durability: The first few go-around of MBO are motivating. Later it tends
to become old hat. The marginal benefits often decrease with each cycle.
Moreover, the programme is deceptively simple. New opportunities are lost
because individuals adhere too rigidly to established goals.
8. Problems related to goal-setting: MBO can function successfully provided
measurable objectives are jointly set and it is agreed upon by all. Problems arise
when: (a) verifiable goals are difficult to set (b) goals are inflexible and rigid (c)
goals tend to take precedence over the people who use it (d) greater emphasis on
quantifiable and easily measurable results instead of important results and (e)
over-emphasis on short-term goals at the cost of long-term goals.
9. Lack of appreciation: Lack of appreciation of MBO is observed at different
levels of the Organization. This may be due to the failure of the top management
to communicate the philosophy of MBO to entire staff and all departments.
Similarly, managers may not delegate adequately to their subordinates or
managers may not motivate their subordinates properly. This creates new
difficulties in the execution of MBO programme.

Essential Conditions for Successful Execution / Implementation of MBO


Q. How To Make MBO Effective?

1. Support from all: In order that MBO succeeds, it should get support and co-
operation from the management. MBO must be tailored to the executive's style of
managing. No MBO programme can succeed unless it is fully accepted by the
managers. The subordinates should also clearly understand that MBO is the policy
of the Organization and they have to offer cooperation to make it successful. It
should be a programme of all and not a programme imposed on them.
2. Acceptance of MBO programme by managers: In order to make MBO
programme successful, it is fundamentally important that the managers
themselves must mentally accept it as a good or promising programme. Such
acceptances will bring about deep involvement of managers. If manages are
forced to accept NIBO programme, their involvement will remain superfluous at
every stage. The employees will be at the receiving-end. They would mostly
accept the lines of action initiated by the managers.
3. Training of managers: Before the introduction of MBO programme, the
managers should be given adequate training in MBO philosophy. They must be in
a position to integrate the technique with the basic philosophy of the company. It
is but important to arrange practice sessions where performance objectives are
evaluated and deviations are checked. The managers and subordinates are taught
to set realistic goals, because they are going to be held responsible for the results.
4. Organizational commitment: MBO should not be used as a decorative piece. It
should be based on active support, involvement and commitment of managers.
MBO presents a challenging task to managers. They must shift their capabilities
from planning for work to planning for accomplishment of specific goals. Koontz
rightly observes, "An effective programme of managing by objective must be
woven into an entire pattern and style of managing. It cannot work as a separate
technique standing alone."
5. Allocation of adequate time and resources: A well-conceived MBO programme
requires three to five years of operation before it provides fruitful results.
Managers and subordinates should be so oriented that they do not look forward to
MBO for instant solutions. Proper time and resources should be allocated and
persons are properly trained in the philosophy of MBO.
6. Provision of uninterrupted information feedback: Superiors and subordinates
should have regular information available to them as to how well subordinate's
goal performance is progressing. Over and above, regular performance appraisal
sessions, counseling and encouragement to subordinates should be given.
Superiors who compliment and encourage subordinates with pay rise and
promotions provide enough motivation for peak performance.

Decision Making Process In Management - Problem Solving

1. What is Decision Making?

Decision-making is an essential aspect of modern management. It is a primary function of

management. A manager's major job is sound/rational decision-making. He takes
hundreds of decisions consciously and subconsciously. Decision-making is the key part
of manager's activities. Decisions are important as they determine both managerial and
organizational actions. A decision may be defined as "a course of action which is
consciously chosen from among a set of alternatives to achieve a desired result." It
represents a well-balanced judgment and a commitment to action.
It is rightly said that the first important function of management is to take decisions on
problems and situations. Decision-making pervades all managerial actions. It is a
continuous process. Decision-making is an indispensable component of the management
process itself.

Means and ends are linked together through decision-making. To decide means to come
to some definite conclusion for follow-up action. Decision is a choice from among a set
of alternatives. The word 'decision' is derived from the Latin words de ciso which means
'a cutting away or a cutting off or in a practical sense' to come to a conclusion. Decisions
are made to achieve goals through suitable follow-up actions. Decision-making is a
process by which a decision (course of action) is taken. Decision-making lies embedded
in the process of management.

According to Peter Drucker, "Whatever a manager does, he does through decision-

making". A manager has to take a decision before acting or before preparing a plan for
execution. Moreover, his ability is very often judged by the quality of decisions he takes.
Thus, management is always a decision-making process. It is a part of every managerial
function. This is because action is not possible unless a firm decision is taken about a
business problem or situation.

This clearly suggests that decision-making is necessary in planning, organizing, directing,

controlling and staffing. For example, in planning alternative plans are prepared to meet
different possible situations. Out of such alternative plans, the best one (i.e., plan which
most appropriate under the available business environment) is to be selected. Here, the
planner has to take correct decision. This suggests that decision-making is the core of
planning function. In the same way, decisions are required to be taken while performing
other functions of management such as organizing, directing, staffing, etc. This suggests
the importance of decision-making in the whole process of management.

The effectiveness of management depends on the quality of decision-making. In this

sense, management is rightly described as decision-making process. According to R. C.
Davis, "management is a decision-making process." Decision-making is an intellectual
process which involves selection of one course of action out of many alternatives.
Decision-making will be followed by second function of management called planning.
The other elements which follow planning are many such as organizing, directing,
coordinating, controlling and motivating.

Decision-making has priority over planning function. According to Peter Drucker, it is

the top management which is responsible for all strategic decisions such as the objectives
of the business, capital expenditure decisions as well as such operating decisions as
training of manpower and so on. Without such decisions, no action can take place and
naturally the resources would remain idle and unproductive. The managerial decisions
should be correct to the maximum extent possible. For this, scientific decision-making is
2. Definitions of Decision-making

1. The Oxford Dictionary defines the term decision-making as "the action of

carrying out or carrying into effect".
2. According to Trewatha & Newport, "Decision-making involves the selection of a
course of action from among two or more possible alternatives in order to arrive
at a solution for a given problem".

3. Characteristics of Decision Making

1. Decision making implies choice: Decision making is choosing from among two
or more alternative courses of action. Thus, it is the process of selection of one
solution out of many available. For any business problem, alternative solutions
are available. Managers have to consider these alternatives and select the best one
for actual execution. Here, planners/ decision-makers have to consider the
business environment available and select the promising alternative plan to deal
with the business problem effectively. It is rightly said that "Decision-making is
fundamentally choosing between the alternatives". In decision-making, various
alternatives are to be considered critically and the best one is to be selected. Here,
the available business environment also needs careful consideration. The
alternative selected may be correct or may not be correct. This will be decided in
the future, as per the results available from the decision already taken. In short,
decision-making is fundamentally a process of choosing between the alternatives
(two or more) available. Moreover, in the decision-making process, information is
collected; alternative solutions are decided and considered critically in order to
find out the best solution among the available. Every problem can be solved by
different methods. These are the alternatives and a decision-maker has to select
one alternative which he considers as most appropriate. This clearly suggests that
decision-making is basically/fundamentally choosing between the alternatives.
The alternatives may be two or more. Out of such alternatives, the most suitable is
to be selected for actual use. The manager needs capacity to select the best
alternative. The benefits of correct decision-making will be available only when
the best alternative is selected for actual use.
2. Continuous activity/process: Decision-making is a continuous and dynamic
process. It pervades all organizational activity. Managers have to take decisions
on various policy and administrative matters. It is a never ending activity in
business management.
3. Mental/intellectual activity: Decision-making is a mental as well as intellectual
activity/process and requires knowledge, skills, experience and maturity on the
part of decision-maker. It is essentially a human activity.
4. Based on reliable information/feedback: Good decisions are always based on
reliable information. The quality of decision-making at all levels of the
Organization can be improved with the support of an effective and efficient
management information system (MIS).
5. Goal oriented process: Decision-making aims at providing a solution to a given
problem/ difficulty before a business enterprise. It is a goal-oriented process and
provides solutions to problems faced by a business unit.
6. Means and not the end: Decision-making is a means for solving a problem or for
achieving a target/objective and not the end in itself.
7. Relates to specific problem: Decision-making is not identical with problem
solving but it has its roots in a problem itself.
8. Time-consuming activity: Decision-making is a time-consuming activity as
various aspects need careful consideration before taking final decision. For
decision makers, various steps are required to be completed. This makes decision-
making a time consuming activity.
9. Needs effective communication: Decision-taken needs to be communicated to
all concerned parties for suitable follow-up actions. Decisions taken will remain
on paper if they are not communicated to concerned persons. Following actions
will not be possible in the absence of effective communication.
10. Pervasive process: Decision-making process is all pervasive. This means
managers working at all levels have to take decisions on matters within their
11. Responsible job: Decision-making is a responsible job as wrong decisions prove
to be too costly to the Organization. Decision-makers should be matured,
experienced, knowledgeable and rational in their approach. Decision-making need
not be treated as routing and casual activity. It is a delicate and responsible job.

4. Advantages of Decision Making

1. Decision making is the primary function of management: The functions of

management starts only when the top-level management takes strategic decisions.
Without decisions, actions will not be possible and the resources will not be put to
use. Thus decision-making is the primary function of management.
2. Decision-making facilitates the entire management process: Decision-making
creates proper background for the first management activity called planning.
Planning gives concrete shape to broad decisions about business objectives taken
by the top-level management. In addition, decision-making is necessary while
conducting other management functions such as organizing, staffing, coordinating
and communicating.
3. Decision-making is a continuous managerial function: Managers working at all
levels will have to take decisions as regards the functions assigned to them.
Continuous decision making is a must in the case of all managers/executives.
Follow-up actions are not possible unless decisions are taken.
4. Decision-making is essential to face new problems and challenges: Decisions
are required to be taken regularly as new problems, difficulties and challenges
develop before a business enterprise. This may be due to changes in the external
environment. New products may come in the market, new competitors may enter
the market and government policies may change. All this leads to change in the
environment around the business unit. Such change leads to new problems and
new decisions are needed.
5. Decision-making is a delicate and responsible job: Managers have to take
quick and correct decisions while discharging their duties. In fact, they are paid
for their skill, maturity and capacity of decision-making. Management activities
are possible only when suitable decisions are taken. Correct decisions provide
opportunities of growth while wrong decisions lead to loss and instability to a
business unit.

5. Steps Involved In Decision Making Process

Decision-making involves a number of steps which need to be taken in a logical manner.

This is treated as a rational or scientific 'decision-making process' which is lengthy and
time consuming. Such lengthy process needs to be followed in order to take
rational/scientific/result oriented decisions. Decision-making process prescribes some
rules and guidelines as to how a decision should be taken / made. This involves many
steps logically arranged. It was Peter Drucker who first strongly advocated the scientific
method of decision-making in his world famous book 'The Practice of Management'
published in 1955. Drucker recommended the scientific method of decision-making
which, according to him, involves the following six steps:

1. Defining / Identifying the managerial problem,

2. Analyzing the problem,
3. Developing alternative solutions,
4. Selecting the best solution out of the available alternatives,
5. Converting the decision into action, and
6. Ensuring feedback for follow-up.

The figure given below suggests the steps in the decision-making process:-
1. Identifying the Problem: Identification of the real problem before a business
enterprise is the first step in the process of decision-making. It is rightly said that
a problem well-defined is a problem half-solved. Information relevant to the
problem should be gathered so that critical analysis of the problem is possible.
This is how the problem can be diagnosed. Clear distinction should be made
between the problem and the symptoms which may cloud the real issue. In brief,
the manager should search the 'critical factor' at work. It is the point at which the
choice applies. Similarly, while diagnosing the real problem the manager should
consider causes and find out whether they are controllable or uncontrollable.
2. Analyzing the Problem: After defining the problem, the next step in the
decision-making process is to analyze the problem in depth. This is necessary to
classify the problem in order to know who must take the decision and who must
be informed about the decision taken. Here, the following four factors should be
kept in mind:
1. Futurity of the decision,
2. The scope of its impact,
3. Number of qualitative considerations involved, and
4. Uniqueness of the decision.
3. Collecting Relevant Data: After defining the problem and analyzing its nature,
the next step is to obtain the relevant information/ data about it. There is
information flood in the business world due to new developments in the field of
information technology. All available information should be utilized fully for
analysis of the problem. This brings clarity to all aspects of the problem.
4. Developing Alternative Solutions: After the problem has been defined,
diagnosed on the basis of relevant information, the manager has to determine
available alternative courses of action that could be used to solve the problem at
hand. Only realistic alternatives should be considered. It is equally important to
take into account time and cost constraints and psychological barriers that will
restrict that number of alternatives. If necessary, group participation techniques
may be used while developing alternative solutions as depending on one solution
is undesirable.
5. Selecting the Best Solution: After preparing alternative solutions, the next step in
the decision-making process is to select an alternative that seems to be most
rational for solving the problem. The alternative thus selected must be
communicated to those who are likely to be affected by it. Acceptance of the
decision by group members is always desirable and useful for its effective
6. Converting Decision into Action: After the selection of the best decision, the
next step is to convert the selected decision into an effective action. Without such
action, the decision will remain merely a declaration of good intentions. Here, the
manager has to convert 'his decision into 'their decision' through his leadership.
For this, the subordinates should be taken in confidence and they should be
convinced about the correctness of the decision. Thereafter, the manager has to
take follow-up steps for the execution of decision taken.
7. Ensuring Feedback: Feedback is the last step in the decision-making process.
Here, the manager has to make built-in arrangements to ensure feedback for
continuously testing actual developments against the expectations. It is like
checking the effectiveness of follow-up measures. Feedback is possible in the
form of organized information, reports and personal observations. Feed back is
necessary to decide whether the decision already taken should be continued or be
modified in the light of changed conditions.

Every step in the decision-making process is important and needs proper consideration by
managers. This facilitates accurate decision-making. Even quantitative techniques such as
CPM, PERT/OR, linear programming, etc. are useful for accurate decision-making.
Decision-making is important as it facilitates entire management process. Management
activities are just not possible without decision-making as it is an integral aspect of
management process itself. However, the quality of decision-making should be always
superior as faulty/irrational decisions are always dangerous.

Various advantages of decision-making (already explained) are easily 'available when the
entire decision-making process is followed properly. Decisions are frequently needed in
the management process. However, such decisions should be appropriate, timely and
rational. Faulty and hasty decisions are wrong and even dangerous. This clearly suggests
that various advantages of decision-making are available only when scientific decisions
are taken by following the procedure of decision-making in an appropriate manner.

For accurate/rational decision-making attention should be given to the following points:

1. Identification of a wide range of alternative courses of action i.e., decisions. This

provides wide choice for the selection of suitable decision for follow-up actions.
2. A careful consideration of the costs and risks of both positive and negative
consequences that could follow from each alternation.
3. Efforts should be made to search for new information relevant to further
evaluation of the alternatives. This is necessary as the quality of decision depends
on the quality of information used in the decision-making process.
4. Re-examination of the positive and negative effects of all known alternatives
before making a final selection.
5. Arrangements should be made for implementing the chosen course of action
including contingency plans in the event that various known risks were actually to
6. Efforts should be made to introduce creativity and rationality in the final decision

6. Why Rational and Right Decisions Are Not Possible?

Rational decisions are the best decisions under the available circumstances. All decisions
should be rational as such decisions facilitate expansion of business and give more profit,
goodwill and prosperity to a business unit. Rationality and decision-making are closely
related concepts. Rationality principle is applicable to all types of decisions. All decisions
(business, economic, social etc.) should be fair and rational. They should serve as
examples over a long period. For such decisions, rational/scientific/balanced approach is
essential while making decisions. In the absence of such approach, decisions are likely to
be faulty and dangerous to the Organization and also to all concerned parties.

Rationality in decision-making is possible through human brain which has the ability to
learn, think, analyze and relate complex facts and variables while arriving at a decision.
A manager has to introduce rationality in his decision-making by using his skills,
experience, knowledge and mental abilities.

On some occasions, such rational and right decisions are not taken due to variety of
possible reasons. It is also possible that the decision taken may be rational when taken but
is treated as wrong/irrational/faulty because' the results available from the decision taken
are not as expected/positive/encouraging. Rational decisions may not be possible when
the approach of the decision-maker is casual and superficial. He may not be alert, careful
and cautious while taking the decisions or he might not have followed the decision-
making process in a scientific manner. In brief, all business decisions should be rational
as far as possible as such rational decisions offer many benefits/advantages. However,
rational decisions may not be taken on certain occasions. According to Herbert A. Simon,
human beings are not always rational in the decisional process.

7. Reasons Why Rational and Right Decisions May Not Be Possible?

1. Inadequate information, data and knowledge: For rational decision-making

accurate, reliable and complete information about various aspects of the problem
under investigation is necessary. The possible future trends can be estimated with
the help of such information. This facilitates rational decision-making. However,
adequate and reliable information may not be available at the time of decision-
making. As a result, the decisions become defective or irrational. Such decision
may prove to be faulty in the course of time. This is how the decisions become
irrational to certain extent.
2. Uncertain environment: Decisions are taken on the basis of information
available about various environmental variables. However, the variables are many
and complex in nature. They may be related to political, economic, social and
other aspects. It is not possible to study all such variables in depth due to
inadequate information/data. This leads to inaccuracy in decision making and the
decisions taken are not fully rational.
3. Limited capacity of decision-maker: A decision-maker should be expert,
knowledgeable, intelligent and matured. He needs vision and capacity to imagine
possible future situation. In the absence of such qualities, the decision-maker may
not be able to take rational decisions. Similarly, the decision taken may not be
rational if the decision-maker fails to follow all necessary steps required for
scientific decision-making. A hasty decision or decision taken without full use of
all mental faculties may not be fully rational. Thus, decisions are likely to be less
rational if the decision maker lacks capacity to take rational decisions.
4. Personal element in decision-making: Decision-making should be always
impartial and also favorable to the Organization. Decision against Organization
but favorable to decision maker or other employees will be unfair. Such decision
will not be rational. Similarly, every decision-maker has his own personal
background in the form of personal beliefs, attributes, preferences, likes and
dislikes and so on. A decision-maker is expected to keep these elements away
while taking management decisions. This may not be possible in the case of all
decision-makers and on all occasions. However, decisions are not fully rational
when such personal element comes in the picture.
5. A decision cannot be fully independent: Managerial decisions are interlinked
and interdependent. A manager has to make adjustments or compromises while
making decisions. For example, for reducing price, some compromise with the
quality may be necessary. A manager gives more importance to one and less to
the other. He takes one decision which is rational at the same time makes some
compromise in the other decision. As a result, other decision is not likely to be
fully rational. In short, business decisions are interlinked. This brings an element
of irrationality in some decisions.

The points noted above suggest why it is not possible to take rational and right decisions
on all occasions.

8. Relationship between Planning and Decision-making

There is close relationship between planning and decision-making. Decision-making has

priority over planning function. It is the starting point of the whole management process.
In fact, decision-making is a particular type of planning. A decision is a type of plan
involving commitment to resources for achieving specific objective. According to Peter
Drucker, it is the top management which is responsible for all strategic decisions such as
the objectives of the business, capital expenditure decisions as well as operating decisions
such as training of manpower and so on. Without management decisions, no action can
take place and naturally the resources would remain idle and unproductive. The
managerial decisions should be correct to the maximum extent possible. For this,
scientific decision-making is essential.

Authority, Responsibility and Accountability In

It is necessary to have brief understanding of three terms intimately connected with the
concept and process of delegation.

These terms are: 1) Responsibility, 2) Authority, and 3) Accountability.


Responsibility indicates the duty assigned to a position. The person holding the position
has to perform the duty assigned. It is his responsibility. The term responsibility is often
referred to as an obligation to perform a particular task assigned to a subordinate. In an
organization, responsibility is the duty as per the guidelines issued.
Definitions of Responsibility

According to Davis, "Responsibility is an obligation of individual to perform assigned

duties to the best of his ability under the direction of his executive leader." In the words
of Theo Haimann, "Responsibility is the obligation of a subordinate to perform the duty
as required by his superior".

McFarland defines responsibility as "the duties and activities assigned to a position or an


Characteristics of Responsibility

1. The essence of responsibility is the obligation of a subordinate to perform the

duty assigned.
2. It always originates from the superior-subordinate relationship.
3. Normally, responsibility moves upwards, whereas authority flows downwards.
4. Responsibility is in the form of a continuing obligation.
5. Responsibility cannot be delegated.
6. The person accepting responsibility is accountable for the performance of
assigned duties.
7. It is hard to conceive responsibility without authority.


Authority is the right or power assigned to an executive or a manager in order to achieve

certain organizational objectives.

A manager will not be able to function efficiently without proper authority. Authority is
the genesis of organizational framework. It is an essential accompaniment of the job of
management. Without authority, a manager ceases to be a manager, because he cannot
get his policies carried out through others. Authority is one of the founding stones of
formal and informal organizations. An Organization cannot survive without authority. It
indicates the right and power of making decisions, giving orders and instructions to
subordinates. Authority is delegated from above but must be accepted from below i.e. by
the subordinates. In other words, authority flows downwards.

Definitions of Authority

According to Henri Fayol, "Authority is the right to give orders and the power to exact

According to Mooney and Reily, "Authority is the principle at the root of Organization
and so important that it is impossible to conceive of an Organization at all unless some
person or persons are in a position to require action of others."

Every employee/manager is accountable for the job assigned to him. He is supposed to

complete the job as per the expectations and inform his superior accordingly.
Accountability is the liability created for the use of authority. It is the answerability for
performance of the assigned duties.

Definition of Accountability

According, to McFarland, "accountability is the obligation of an individual to report

formally to his superior about the work he has done to discharge the responsibility."

When authority is delegated to a subordinate, the person is accountable to the superior for
performance in relation to assigned duties. If the subordinate does a poor job, the superior
cannot evade the responsibility by stating that poor performance is the fault of the
subordinate. A superior is normally responsible for all actions of groups under his
supervision even if there are several layers down in the hierarchy. Simply stated,
accountability means that the subordinate should explain the factors responsible for non-
performance or lack of performance.

Authority, Responsibility and Accountability are Inter-related

They need proper consideration while introducing delegation of authority within an

Organization. In the process of delegation, the superior transfers his
duties/responsibilities to his subordinate and also give necessary authority for performing
the responsibilities assigned. At the same time, the superior is accountable for the
performance of his subordinate.

Delegation of Authority Principles and

Importance of Delegation
Meaning of Delegation of Authority ↓

Delegation of authority is one vital organizational process. It is inevitable along with the
expansion and growth of a business enterprise. Delegation means assigning of certain
responsibilities along with the necessary authority by a superior to his subordinate
managers. Delegation does not mean surrender of authority by the higher level manager.
It only means transfer of certain responsibilities to subordinates and giving them the
necessary authority, which is necessary to discharge the responsibility properly.
Delegation is quite common in all aspects of life including business. Even in the college,
the principal delegates some of his authority to the vice-principal.

In delegation, an attempt is being made to have meaningful participation and cooperation

from the subordinates for achieving certain well-defined results. Due to delegation, the
routine responsibilities of the superior are reduced. As a result, he concentrates on more
urgent and important matters. Secondly, due to delegation, subordinate becomes
responsible for certain functions transferred to him. Delegation is a tool, which a superior
manager uses for sharing his work with the subordinates and thereby raising his

Delegation is not a process of abdication. The person who delegates does not divorce
himself from the responsibility and authority with which he is entrusted. He remains
accountable for the overall performance and also for the performance of his subordinates.
Delegation is needed when the volume of work to be done is in excess of an individual's
physical and mental capacity.

Delegation involves the following three basic elements:

a. Assignment of duties to subordinates,

b. Granting of authority to enable the subordinates to perform the duties assigned,
c. Creation of obligation on the part of subordinate to perform duties in an orderly

Definitions of Delegation of Authority ↓

i. According to F.C. Moore, "Delegation means assigning work to the others and
giving them authority to do so."
ii. According to O. S. Miner, "Delegation takes place when one person gives
another the right to perform work on his behalf and in his name and the second
person accepts a corresponding duty or obligation to do that is required of him."
iii. According to Louis Allen, "Delegation is the dynamics of management, it is the
process a manager follows in dividing the work assigned to him so that he
performs that part which only he, because of his unique organizational placement,
can perform effectively, and so that he can get others to help him with what

Objectives of Delegation of Authority ↓

1. To reduce the excessive burden on the superiors i.e., executives and managers
functioning at different levels.
2. To provide opportunities of growth and self development to junior executives.
3. To create a team of experienced and matured managers for the Organization. It
acts as a technique of management and human resource development.
4. To improve individual as well as overall efficiency of the Organization.
Process of Delegation of Authority ↓

Delegation process involves four distinct stages. The process of delegation moves
through these stages. The following figure shows the stages in the process of delegation
of authority.

Four Stages In Process of Delegation of Authority ↓

(A) Assignment of duties to subordinates ↓

Before delegating, the delegator has to decide precisely the duties which are to be
delegated to the subordinate or a group of subordinates. The authority is delegated
accordingly and the subordinate is told what is expected from him. The usual practice is
to list the functions to be performed by the subordinate. If necessary, targets to be
achieved by the subordinate are also spelt out. Subordinates may be assigned tasks either
in terms of activities or results. The manager (delegator) must communicate clearly his
expectations. Competent and responsible employees may be given general guidelines
about what needs to be accomplished. Their less competent and responsible counter-parts
need more specific guidelines. In brief, in the first stage of delegation process, duties are
assigned to the subordinate.

(B) Transfer of authority to perform the duty ↓

In the second stage of delegation process, the authority is granted by the delegator to his
subordinate (delegate). Authority must be delegated strictly to perform the assigned duty.
The performance of duties suffers serious setback when required authority is not
delegated along with the duty. In brief, the transfer of authority should be adequate
considering the duties assigned to the subordinate.

(C) Acceptance of the assignment ↓

In this third stage of delegation process, the subordinate/delegate has to accept or reject
the task assigned to him in the first stage along with the authority given in the second
stage. If the delegates refuse, the delegator has to make fresh plan of delegation or may
consider some other subordinate who is capable and is willing to accept the assignment.
On the other hand, the process of delegation will move to the fourth and the last stage, if
the first delegates accept the assignment of work accompanying the authority.

(D) Creation of Obligation / Accountability / Responsibility ↓

The fourth stage in the, delegation of authority is the creation of obligation on the part of
the subordinate to perform duties assigned to him in a satisfactory manner by using the
authority given. When subordinate accepts a task and the authority is given, an
obligation is created. He has to perform the assigned task by using the authority granted
to him. A subordinate is also responsible/accountable for completing the assigned work.
He is held answerable to a superior for the satisfactory performance of that work
assigned. The delegator has to help his subordinate as and when necessary as he is
responsible to his superior/organization.

Advantages / Importance of Delegation of Authority

1. Relieves manager for more challenging jobs: Delegation makes it possible for the
managers to distribute their workload to others. Thus, managers are relieved of
routine work and they can concentrate on higher functions of management like
planning, organizing, controlling, etc.
2. Leads to motivation of subordinates: Subordinates are encouraged to give their
best at work when they have authority with responsibility. They take more
initiative and interest in the work and are also careful and cautious in their work.
Delegation leads to motivation of employees and manpower development.
3. Facilitates efficiency and quick actions: Delegation saves time enabling tile
subordinates to deal with the problems promptly. They can take the decisions
quickly within their authority. It is not necessary to go to the superiors for routine
matters. This raises the overall efficiency in an Organization and offers better
results in terms of production, turnover and profit.
4. Improves employee morale: Delegation raises the morale of subordinates as they
are given duties and supporting authority. They feel that they are responsible
employees. The attitude and outlook of subordinates towards work assigned
becomes more constructive.
5. Develops team spirit: Due to delegation, effective communication develops
between the superiors and subordinates. The subordinates are answerable to
superiors and the superiors are responsible for the performance of subordinates.
This brings better relations and team spirit among the superiors and subordinates
6. Maintains cordial relationships: The superiors trust subordinates and give them
necessary authority. The subordinates accept their accountability and this
develops cordial superior-subordinate relationships.
7. Facilitates management development: Delegation acts as a training ground for
management development. It gives opportunity to subordinates to learn, to grow
and to develop new qualities and skills. It builds up a reservoir of executives,
which can be used as and when required. Delegation creates managers and not
mere messengers.
The advantages of delegation will not be available easily and automatically. They will be
available only when the process of delegation moves smoothly. Problems may develop, if
the delegation is not introduced with proper planning and in proper spirit. For example,
the authority given to subordinate is inadequate or the subordinate is not competent to
discharge the responsibilities assigned or the superior fails to monitor the whole process
of delegation effectively. In all such cases, the delegation will be ineffective and the
expected advantages will not be available to the Organization and also to concerned

Obstacles / Barriers to Effective Delegation of Authority ↓

(A) Obstacles / Barriers on the Part of Manager / Superior / Delegator

1. Unwillingness of the manager to delegate authority: Some superiors/managers

tend to think that they can do the job better when they themselves handle the job.
The attitude that 'I can do it better myself' on the part of superior acts as an
obstacle to delegation. Some managers (superiors) who are autocratic and power
worshippers feel that delegation will lead to reduction of their influence in the
Organization. A manager may feel that if he has a competent subordinate and if
he delegates authority to the subordinate, quite likely he will outshine him
(manager) and may be promoted.
2. Fear of competition: A manager may feel that if he has a competent subordinate
and if he delegates authority to the subordinate, quite likely he will outshine him.
Fear of subordinate's excellence may come in the way of delegation.
3. Lack of confidence in subordinates: A manager may hesitate to delegate
authority, if he feels that his subordinate is not competent to deal with the
problem and take decisions. Even fear of losing control over the subordinates acts
as an obstacle to delegation. In addition, fear of being exposed due to personal
shortcomings may act as an obstacle in the process of delegation.
4. Lack of ability to direct: Sometimes, a manager may experience difficulty in
directing the efforts of his subordinates because of his inability to identify and
communicate the essential features of his long-range plans and programmes.
5. Absence of controls that warn of coming troubles: An Organization might not
have developed the controlling techniques to know in advance the serious
problems lying ahead. It may happen due to concentration of power in the hands
of few people. As a result, manager may resist delegation.
6. Conservative and cautious temperament of the manager: If a manager has a
conservative and over-cautious approach, there will be psychological barrier in
the way of delegation. A manager avoids delegation as he feels that something
may go wrong even when the instructions given are clear and the subordinates are
7. Desire to dominate subordinates: Managers (Superiors) normally, have a desire
to dominate the subordinates functioning under their control. They feel that their
domination will reduce if the powers are delegated to subordinates. They also feel
that due to delegation, the subordinates will know their managerial deficiencies.
In order to maintain their superior status and in order to dominate the
subordinates, they avoid delegation itself.

(B) Obstacles / Barriers on the Part of Subordinates (Why Subordinates

Resist Delegation?)

1. Too much dependence on the manager for decisions: Some subordinates avoid
responsibility even when the superior/manager is prepared to delegate authority.
They want the manager to tackle problems and take decisions. A subordinate who
is not confident about his performance/ability will certainly try to shirk
responsibility even though his superior is prepared to delegate functions and
2. Fear of criticism: Subordinates express unwillingness to accept delegated
authority because of the fear of criticism in the case of mistakes. They fear that
they may be criticized by others if they commit mistakes. Such subordinates have
the following feeling in their mind, "Why should I stick my neck out for my boss?"
3. Lack of information: A subordinate may hesitate to accept a new assignment,
when he knows that necessary information to perform the job is not likely to be
made available to him. He is reluctant to accept delegated functions and authority
as he feels that he will not be able to perform well due to inadequate information
4. Absence of positive incentives: Positive incentives like recognition of work and
rewards go a long way in building up the morale of subordinates. In the absence
of such incentives in the form of recognition, appreciation or monetary benefit, a
subordinate may not be prepared to accept delegation of authority.
5. Absence of self-confidence: A subordinate may lack self-confidence about his
ability to take quick and correct decisions. He may not like to accept new
challenging functions as he lacks self-confidence. Thus, lack of self-confidence
on the part of subordinates is one obstacle which comes in the way of delegation
of authority.
6. Difficulty in decision-making: A subordinate may not have the skill and the
expertise to take quick and correct decisions. He prefers to go to his superior
(boss) and ask for his guidance or opinion. Such psychology acts as a cause for
non-acceptance of delegation. A subordinate avoids delegation due to such mental
tension or inferiority complex.
7. Poor superior-subordinate relations: Absence of cordial relations in between
the superior and the subordinates hampers the process of delegation of authority.
The attitude of the superior towards subordinate may not be friendly but hostile.
There may be undue interference in the work assigned to the subordinate. Even
the good work of subordinate may not be appreciated by the superior. Such
situation creates unfavorable attitude of subordinate towards delegation. He
avoids delegation as and when offered.
8. Undue interference by superior: A superior should not interfere in the duties
delegated to the subordinate. He may offer guidance as and when asked for. Some
superiors interfere in the work of his subordinate and try to control him often and
again. In the absence of legitimate freedom, the subordinate becomes uneasy and
prefers to remain away from the process of delegation.
9. Fear of being exposed: Some subordinates may have inferiority complex. They
feel that they have limited capacity to accept the challenges which are bound to
come out to delegation. They feel that their inability to deal with new problems
will be exposed due to delegation. This fear acts as an obstacle to delegation.

Principles of Effective Delegation of Authority ↓

1. Knowledge of Objectives: Before delegating authority, the subordinates should

be made to understand their duties and responsibilities. In addition, knowledge of
objectives and policies of the enterprise should be provided to them. This will
enable them to discharge their roles purposefully in the process of delegation.
2. Parity of Authority and Responsibility: This principle of delegation suggests
that when authority is delegated, it should be commensurate with the
responsibility of the subordinate. In fact, the authority and responsibility should
be made clear to the subordinate so that he will know what he is expected to do
within the powers assigned to them. There should be proper balance/parity or co-
existence between the authority and responsibility. A subordinate will not
function efficiently, if authority given to him is inadequate. On the other hand, if
the excess authority is given, he may misuse the same. For avoiding this, the
subordinates who are assigned duties should be given necessary/ adequate
authority enables them to carry out their duties.
3. Unity of Command: This principle of delegation suggests that everyone should
have only one boss. A subordinate should get orders and instructions from one
superior and should be made accountable to one superior only. This means 'no
subordinate should be held accountable to more than one superior'. When a
subordinate is asked to report to more than one boss, it leads to confusion and
conflict. Unity of command also removes overlapping and duplication of work. In
the absence of unity of command, there will be confusion and difficulty in fixing
4. The Scalar Principle: The scalar principle of delegation maintains that there
should be clear and direct lines of authority in the Organization, running from the
top to the bottom. The subordinate should know who delegates authority to him
and to whom he should contact for matters beyond his authority. They
(subordinates) should also know what is expected from them. This principle
justifies establishment of the hierarchical structure within the Organization.
5. Clarity of Delegation: The principle of clarity of delegation suggests that while
delegating authority to subordinates, they should be made to understand the limits
of authority so that they know the area of their operation and the extent of
freedom of action available to them. Such clarity guides subordinates while
performing their jobs.
6. Absoluteness of Responsibility: This principle of delegation suggests that it is
only the authority which is delegated and not the responsibility. The responsibility
is absolute and remains with the superior. He cannot run away from the same
even after delegation. Even when the manager delegates authority to his
subordinate, he remains fully accountable to his superiors because responsibility
cannot be divided between a superior and his subordinate. No superior can
delegate responsibilities for the acts of his subordinates. He is responsible for the
acts and omissions of his subordinates.
7. Use of Exception Principle: This principle of delegation indicates that when
authority is delegated, it is expected that the subordinate will exercise his own
judgment and take decisions within the purview of his authority. He is to be given
adequate freedom to operate within his authority even at the cost of mistakes. He
should refer the problems to the top level management only when he is unable to
take decisions. Unnecessary interference in the work of delegates should be
avoided. This normal rule can be given up under exceptional circumstances. Here,
the superior can interfere in the work of his subordinate and even withdraw the
delegated duties and authority. The superior takes this decision under exceptional
8. Completeness of Delegation: This principle of delegation suggests that there
should be completeness in the process of delegation. The process of delegation
should be taken to its logical end. Otherwise, there will be confusion of authority
and accountability.
9. Effective Communication Support System: This principle suggests that there
should be continuous flow of information between the superior and the
subordinates with a view to furnishing relevant information to subordinate for
decision-making. This helps him to take proper decisions and also to interpret
properly the authority delegated to him. Delegation system may not work
smoothly in the absence of effective communication between the superior and
10. Reward for Effective Delegation: This principle suggests that effective
delegation and successful assumption of authority should be rewarded. This will
facilitate fuller delegation and effective assumption of authority within the
Organization. Reward for effective delegation will provide favorable
environmental climate for its fair introduction.

Organisation - Organizational Structure -

Organisational Chart
1. Introduction To Organization

Organization is one important element of the management process. It is next to planning.

In management, organization is both the process as well as the end-product of that
process which is referred to as organization structure. Such structure acts as the
foundation on which the whole super-structure of management is built. Sound
organization structure is essential for the conduct of business activities in an efficient
manner. It is within the framework of the organization that the whole management
process takes place. The success of the management process will be determined by the
soundness of the organization structure. Organizing involves integration of resources in
order to accomplish the objectives.
The term 'Organization' is derived from the word 'organism' which means a structure of
body divided into parts that are held together by a fabric of relationship as one organic
whole. In an enterprise, many managers and employees work together for achieving
common objectives. It is the organization structure which binds them together and brings
proper adjustment and coordination in their work. The division of work and authority and
the establishment of relationship among individuals or groups are possible due to the
organization structure.

In simple words, organizing means arranging the ways and means for the execution of
business plan. It is the creation of administrative set-up for the execution of the plan. It
suggests the framework within which the management functions. The term organization
suggests a functional group working together for achieving common purposes/objectives.
Organization provides mechanism for integrated and co-operative action by two or more
persons with a view to implementing any plan. Organization facilitates efficient
administration, direction and control. It avoids wastage of raw materials and human
efforts. Every management has to establish its own organization structure for efficient
conduct of business activities

There are different structures which can be given to an organization. They include line,
functional and so on. An organization deals with a number of elements which defines the
relationships between the members of a group. It is concerned with the channels of
communication and lines of authority. It also defines the degree of authority and
responsibility of each person in the organization. In short, organization clarifies
relationships and provides a framework within which all managerial actions take place.

Organization involves the following aspects:-

a. Identifying the activities required to achieve organizational objectives.

b. Grouping up of these activities into workable units (Departmentation).
c. Assigning duties and responsibilities to subordinates in order to achieve the tasks
d. Delegating authority necessary and useful for the accomplishment of tasks
e. Establishing superior-subordinate relationship.
f. Providing a system of co-ordination for integrating the activities of individuals
and departments.

2. Definitions of Organization

1. An Organization has been defined by E. F. L. Breach as "a system of structural

interpersonal relationships. In it, individuals are differentiated in terms of
authority, status and roles with the result that personal interaction is prescribed,
and anticipated reactions between individuals tend to occur while ambiguity and
spontaneity are decreased".
2. According to Louis A. Allen, Organization is "the process of identification and
grouping the work to be performed, defining and delegating responsibility and
authority and establishing relationships for the purpose of enabling people to
work most effectively together in accomplishing objectives".
3. James Mooney defines organization as "the form of every human association for
attainment of a common purpose".

3. Importance of Organization

1. Ensures optimum utilization of human resources: Every enterprise appoints

employees for the conduct of various business activities and operations. They are
given the work according to their qualifications and experience. Organization
ensures that every individual. Is placed on the job for which he is best suited.
2. Facilitates coordination: It acts as a means of bringing coordination and
integration among the activities of individuals and departments of the enterprise.
It establishes clear-cut relationships between operating departments and brings
proper balance in their activities.
3. Facilitates division of work: Different departments are created for division of
work, specialization and orderly working of the enterprise. Similarly, delegation
relieves top level managers from routine duties.
4. Ensures growth, expansion and diversification: Sound Organization structure
facilitates expansion/diversification of an enterprise. Organization structure has
in-built capacity to absorb additional activities and also effective control on them.
A business enterprise brings diversification in its activities within the framework
of its Organization.
5. Stimulates creativity: Organization provides training and self-development
facilities to managers and subordinates through delegation and departmentation. It
also encourages initiative and creative thinking on the part of managers and
6. Facilitates administration: Effective administration of business will not be
possible without the support of sound organization structure. Delegation,
departmentation and decentralization are the tools for effective administration.
7. Determines optimum use of technology: Sound Organization structure provides
opportunities to make optimum use of technology. It facilitates proper
maintenance of equipment and also meets high cost of installation.
8. Determines individual responsibility: Responsibility is an obligation to perform
an assigned work. In a sound Organization, the manager finds it easy to pinpoint
individual responsibility when the work is spoilt.

4. Organization As A Structure

The term organization can be studied as a structure and also as a process. In a static
sense, organization is a structure. A group of people functions within this structure and
try to accomplish certain objectives. Organization is a structure for the conduct of
business activities efficiently. In the words of Kast and Rosenzweig, "structure is the
established pattern of relationships among the component parts of the organization" . In this sense,
Organization structure refers to the network of relationships among individuals and
positions in an Organization.
5. Organization Structure Suggests Its Framework

Just as human beings have skeletons that define their parameters likewise organizations
have structures that define their parameters. While preparing an architectural plan, an
architect considers different factors such as space, cost, time, special features and
resources. In the same way, a manager is expected to take into account factors such as
channels of communication, before designing Organization structure.

Organization structure specifies which individuals will work as subordinates to which

superiors. It defines the interpersonal relationships that should exist between individuals
and work. Such invisible framework is intended to promote co-ordination in the functions
and activities of members of the group. Because of specific assignments of authority and
responsibility, each person will look after his part of pre-established plans in proper
relation to the parts of others in the group. Organization suggests the structure within
which people associate for the attainment of an objective

6. Organization As A structure - Implies 4 Elements

a. Intentionally created: In order to attain specific goals, Organization structure is

deliberately created which converts resources (of management) into a productive
b. Provides framework: Organization structure usually takes the shape of a pyramid.
Once established, it acts as a framework that can either constrain or facilitate
managerial actions.
c. Use of Chart: In an Organization, the structural relationships are normally shown
through Organization charts. These charts indicate the intended final relationships
at a given time.
d. Provides formal picture: Organization structure may be horizontal or vertical. The
horizontal aspects display basic departmentalization and vertical aspects display
creation of hierarchy of superiors and subordinates.

7. Principles of Organization / Organizing

There are some principles which are common to all organizations that are established in a
classical form i.e. the form where there is hierarchy of authority and responsibility and it
flows downwards. The principles of Organization offer guidance for the creation of a
sound, efficient and effective Organization structure. In other words, these principles are
the sound criteria for efficient organizing. They ensure smooth and orderly working of a
business enterprise.

Principles of organizing are not given in a serial order by any authority on management.
Management thinkers (Henry Fayol, F. W. Taylor, U. L Urwick and others) have laid
down certain statements regarding organizing function of management. Such statements
are treated as principles of organization. Well accepted principles of organization
/organizing are as explained below.
1. Unity of Objectives: Objectives of the enterprise influence the Organization
structure and hence the objectives of the enterprise should first be decided clearly
and firmly. In addition, there should be unity among the objectives decided. This
gives clear direction to the whole Organization and it will be geared for the
achievement of such objectives. The Organization acts as a tool for achieving the
objectives. The objectives may be divided into departmental objectives and
organizational objectives. There should be unity of objectives as such unity gives
one clear direction to the whole Organization. In addition, objectives should be
made clear to all concerned persons so as to enable them to do their best to
achieve the objectives.
2. Division of Work and Specialization: Division of work leads to specialization. Every
department of an Organization should be given specialized functions. This will
raise the overall efficiency and quality of work of an Organization. At the same
time, specialization and departmentation should not have any adverse effect on
the total integrated system. Coordination must be established among the
departments and activities. Specialization is necessary for raising the efficiency of
the whole Organization structure. The functions given to each department should
be preferably only of one category. Employees should be assigned duties to
different departments as per their qualifications, qualities and so on.
3. Delegation of Authority: There should be proper delegation of authored in every
Organization, particularly in large organizations. The basic idea behind delegation
is to see that decision-making power is placed at a proper place. Delegation
should go to the lower levels of management. Every one should be given authority
which is adequate to accomplish the task assigned to him. Delegation is useful for
getting the things done through others. A successful manager normally does not
perform the jobs by himself. He delegates the authority and responsibility to his
subordinates. He also motivates his subordinates and see that they take initiative,
work efficiently and contribute for achieving organizational objectives.
4. Coordination: Organization involves division of work and departmentation. This
naturally suggests the need of proper coordination among the departments and
efforts of people working in an Organization. Due to coordination one clear-cut
direction is given to people/ departments and efforts will not be wasted or
misdirected. Coordination also brings integration in the basic functions of
management. The principle of coordination is important as it facilitates
achievement of overall objectives of a business Organization. It also brings unity
of action in the Organization. Coordination will not be available automatically.
For this, working relationships need to be established within the Organization.
5. Unity of Command: Unity of command principle suggests that each subordinate
should have only one superior whose command he has to obey. Dual
subordination is undesirable as it leads to confusion, disorder, uneasiness and
indiscipline. An employee should not have more than one boss to whom he has to
report and also function as per his orders and instructions. Reporting to more than
one boss leads to confusion.
6. Flexibility: According to the principle of flexibility, the Organization structure
should be flexible and not rigid. Such structure is adaptable to changing situations
and permits expansion or replacement without any serious dislocation and
disruption. There should be an in-built arrangement to facilitate growth and
expansion of an enterprise.
7. Simplicity: The Organization structure should be simple for clear understanding
of employees. The structure should be easy to manage. Internal communication
will be easy due to simplicity of Organization. The Organization structure should
be simple as far as possible. The levels of management should also be limited.
8. Span of Control: The span of control, as far as possible, should be small and fair.
This means a manager should not be asked to keep supervision on large number
of subordinates. The span of control should be narrow and manageable. It should
be properly balanced.
9. Scalar Principle (Chain of Command): The principle of chain of command
suggests that the line of authority from the chief executive to the first line of
superior should be clearly defined. The line of authority should be properly
defined so as to avoid any confusion as regards the line of authority. This
principle suggests that as far as possible, the chain of authority should be short
and should not be broken.
10. Exception Principle: The executives at the higher level are busy in important
matters and have limited time for the study of routine administrative matters. It is
not desirable to take routine matters to the top level managers frequently. Very
crucial and exceptionally complex problems should be referred to the top
executives and routine matters should be dealt with by the junior executives at the
lower levels. Moreover, time of top executives is saved. They can use their time
for dealing with more important and complex problems.
11. Authority and Responsibility: Authority acts as a powerful tool by which a
manager can achieve a desired objective. Authority of every manager should be
clearly defined. Moreover, it should be adequate to discharge the responsibilities
assigned. The superior should be held responsible for the acts of his subordinates.
He cannot run away from the responsibility simply by delegating authority to his
subordinates. In fact, the responsibility of the superior for the acts of his
subordinates is absolute.
12. Efficiency: The Organization structure should enable the enterprise to function
efficiently. This will enable the enterprise to accomplish its objectives quickly and
also at the lowest cost. For this, the structure introduced should be suitable to the
nature, size, activities etc. of the Organization. A suitable Organization structure
ensures full and purposeful utilization of available human and material resources
and ensures efficiency.
13. Proper Balance: Proper balance is necessary in different aspects of the
Organization. This means there should be reasonable balance in the size and
functions of departments, centralization and decentralization of the Organization,
span of control, chain of command and finally in between human and material
resources. This principle of balance suggests that the top management should see
that the vertical and horizontal dimensions of the Organization are fairly balanced.
14. Separation of line and staff functions: Line functions should be separated from
the staff functions even when they are supplementary in character. Line functions
are directly connected with operations while staff functions are auxiliary to the
line functions. These functions should be coordinated when necessary but
normally they should be kept separate.

8. Types of Organization Structure

Organization structure is defined as "The logical arrangement of task and the network of
relationships and roles among the various positions established to carry out the activities
necessary to achieve the predetermined objectives of business". Internal Organization
structure constitutes the arteries and veins through which the blood of work flows in the
body of Organization.

Internal Organization structures can be broadly classified into the following types/forms:

1. Line Organization structure.

2. Functional Organization structure.
3. Line and staff Organization structure.
4. Product Organization structure.
5. Committee and Matrix Organization structure.

8.1 Line Organization Structure

Line Organization (also called Military/Scalar Organization) is the oldest and the
simplest form of internal Organization structure. It was first developed by the Roman
army and later adopted by armies all over the world. Factory owners also used line
Organization structure in its purest form in the nineteenth century in England.

In the line Organization, the line of authority moves directly from the top level to the
lowest level in a step-by-step manner. It is straight and vertical. The top-level
management takes all major decisions and issues directions for actual execution. The
general manager, for example, issues order to various departmental managers. Thereafter,
the departmental manager issues instructions to works manager. The works manager will
issue instructions to foreman. In this manner, the orders and instructions will be issued to
the workers working at the lowest level. Thus authority moves downward and also step-
by-step. The responsibility, on the other hand, moves in the upward direction.

Line Organization structure is given in the following chart:

8.1.1 Advantages of Line Organization Structure

1. Simplicity: Line Organization structure is easy to understand and follow by

superiors and subordinates. It is simple and clear as regards authority and
2. Prompt decisions: Line Organization facilitates prompt decision-making at all
levels as the authority given is clear and complete.
3. Discipline: It brings discipline in the Organization due to unity of command,
delegation of authority and direct accountability.
4. Economical: Line Organization is economical as experts are not appointed.
5. Attraction to talented persons: Line Organization brings out talented workers
and develops in them quality of leadership. It offers opportunities of self-
development to employees.
6. Quick communication, high efficiency, flexibility and high employee morale are
some more advantages of line Organization structure.

8.1.2 Limitations of Line Organization Structure

1. Heavy burden on line executives: The line executives are given too many duties
and responsibilities. Even the quality of the decisions of executives may suffer
due to heavy burden of duties and responsibilities.
2. Non-availability of services of experts: There is absence of skilled experts in
line organization. Expert assistance is not available promptly when needed by line
3. Favoritism: There is wide scope for favoritism and nepotism in the line
organization. Leadership of departmental executive is autocratic due to heavy
concentration of powers. He may favor some employees at the cost of others.
4. Too much dependence on limited executives: In the line organization, all
powers are concentrated in the hands of a few executives. Naturally, the success
and stability of the entire organization depends on their personal skill, initiative
and interest. Special difficulties arise when one executive is to be
5. Rigidity: There is rigidity in the working of line organization.
6. Delays in communication, limited freedom to employees and unsuitability to
modern large business units are some more demerits of line Organization.

8.2 Functional Organization Structure

F.W.Taylor, founder of scientific management, conceived the functional Organization

structure. According to him, it is unscientific to overload a foramen with the entire
responsibility of running a department. He introduced a system of functional foremanship
in his Organization. In his functional foremanship, there will be eight specialists' foremen
who will be required to guide, direct and control the work. Workers at the plant level will
have to follow the instructions of all these eight specialists called bosses.

In the functional Organization suggested by F.W.Taylor, the job of management is

divided according to specialization. As a result, functional departments are created. For
example, the personnel department will look after the recruitment, selection, training,
wage payment, etc. of all persons of the Organization. Similar will be the position of
other departments like production, sales, etc. The scope of work of the department is
limited but the area of authority is unlimited.

In the functional Organization structure, there will be separation of planning of work and
execution of the plan prepared. The basis of division is the function and naturally the
Organization structure created will be called "Functional Organization".

In the functional foremanship, there will be eight specialists/functional heads called

bosses. Out of eight bosses, four bosses will be at the planning level and the remaining
four will be at the slop floor level.

8.2.1 Foremen At Planning Level (Planning Dept.)

1. Time and Cost Clerk: He is concerned with preparing standard time for the
completion of certain piece of work and compiling the cost of that work.
2. Instruction Card Clerk: He lays down the exact method of doing the work. He
specifies the tools to be used for conducting the production and also gives other
instructions on the instruction cards prepared by him.
3. Route Clerk: The route clerk lays down the exact route through which each and
every piece of work should move through various stages till completion. He
decides the production schedule and the sequence of steps by which the
production process is to move.
4. Shop Disciplinarian: He is concerned with the discipline, insubordination,
violation of rules of discipline and absenteeism. All cases relating to these matters
will be managed by the shop disciplinarian.

8.2.2 Foremen At Shop Floor Level (Shop Floor)

1. Gang Boss: He assembles and sets up various machines; and tools for a particular
piece of work. He is in-charge of assembling line of production.
2. Speed Boss: He is concerned with the speeding of machines used for production.
He keeps proper speed of the machines and see that workers complete the
production work as per the schedule time.
3. Repair Boss: The repair boss looks after the proper maintenance of machines,
tools and equipments required during the production process.
4. Inspector: The inspector controls quality of the products by keeping adequate
check/control when the production work is in progress.

The functional Organisation structure is given in the following chart:-

8.2.3 Merits of Functional Organization Structure

1. Facilitates specialization: Functional Organization structure facilitates division

of work and specialization. Each boss has specialized knowledge of his functional
area. He is in a better position to guide and help the workers.
2. Benefits of large-scale operations: Functional Organization offers the benefit of
economy of large-scale operation. In this Organization, one administrative unit
manufactures all products. The available machinery, equipment and facilities are
used fully for large-scale production.
3. Facilitates effective coordination: Functional Organization facilitates effective
coordination within the function. This is possible as one boss is in-charge of a
particular function and he looks after all activities, which come within that
4. Operational flexibility: Functional Organization possesses operational
flexibility. Necessary changes can be introduced easily to suit the needs of the
situation without any adverse effect on the efficiency.
5. Ensures effective supervision: Functional Organization facilitates effective
supervision by the functional heads and foremen. Due to specialization, they
concentrate on the specific functional area and also keep effective supervision on
their subordinates.

8.2.4 Demerits of Functional Organization Structure

1. Absence of unity of command: Unity of command is absent in the functional

Organization as each worker gets orders and instructions from several bosses.
2. Fixing responsibility is difficult: In functional Organization, responsibility is
difficult to fix on a specific person. This is because the responsibility itself is
divided among many.
3. Unsuitable to non-manufacturing activities: Functional Organization can be
introduced in the case of manufacturing activities. However, its application to
non-manufacturing activities such as marketing, etc. has not been successful.
4. Costly: Functional Organization is costly, as more specialists are required to be
5. Creates confusion among workers: Functional Organization is based on
specialization as function is taken as a base for dividing the work. The authority is
overlapping the responsibility is divided. This confuses workers.
6. Conflicts among foremen, delays in decision-making and limited discipline within
the departments are some more demerits of functional Organization.

9. Line and Staff Organization Structure

In the line and staff Organization, line executives and staff (specialists) are combined
together. The line executives are 'doers' whereas staff refers to experts and act as
'thinkers'. The following chart shows line and staff Organization structure:
The line executives are concerned with the execution of plans and Policies. They do their
best to achieve the organizational objectives. The staff concentrates their attention on
research and planning activities. They are experts and conduct advisory functions.

Staff specialists are regarded as 'thinkers" while execution function is given to line
executives who are "doers". The staff is supportive to line. The staff specialists offer
guidance and cooperation to line executives for achieving organizational objectives. This
reduces the burden of functions on the line executives and raises overall efficiency of the
Organization. For avoiding the conflicts between line and staff, there should be clear
demarcation between the line and staff functions. This avoids overlapping of functions
and possible conflicts. In short, the line and staff functions are different but are
supportive and can give positive results if adjusted properly i.e. by avoiding the conflicts.
They suggest/recommend but have no power to command the line executive. However,
their advice is normally accepted because of their status in the Organization.

According to Louis Allen, "Line refers to those positions and elements of the
Organization, which have the responsibility and authority and are accountable for
accomplishment of primary objectives. Staff elements are those which have responsibility
and authority for providing advice and service to the line in attainment of objectives".

9.1 Characteristics of Line and Staff Organization

1. Planning and execution: There are two aspects of administration in this

Organization, viz., planning and execution.
2. Combining line and staff: Planning function is entrusted to staff specialists who
are 'thinkers' while execution function is given to line executives who are 'doers'.
The staff is supportive to line.
3. Role of authority: The line managers have authority to take decisions as they are
concerned with actual production. The staff officers lack such authority.
4. Guidance from staff: The staff provides guidance and advice to line executives
when asked for. Moreover, line executives may or may not act as per the guidance
5. Exercising control: The staff manager has authority over subordinates working
in his department.
6. Scope for specialization: There is wide scope for specialization in this
Organization as planning work is given to staff and execution work is given to
line executives.
7. Possibility of conflicts: Conflicts between line and staff executives are quite
common in this Organization but can be minimized through special measures.
8. Suitability: Line and staff Organization structure is suitable to large-scale
business activities.

9.2 Merits of Line and Staff Organization

1. Less burden on executives: Line executives get the assistance of staff specialists.
This reduces the burden of tine executives. This raises overall efficiency and
facilitates the growth and expansion of an enterprise.
2. Services of experts available: The benefits of services of experts are provided to
line managers. Highly qualified experts are appointed and they offer guidance to
line executives.
3. Sound decision-making: Line and staff Organization facilitates sound
management decisions because of the services of experts and specialists. The
decisions are also taken in a democratic method i.e. in consultation with the
4. Limited tension on line managers: The pressure of work of line bosses is
brought down as they are concerned only with production management.
5. Benefits of specialization: There is division of work and specialization in this
Organization. Naturally, the benefits of division of work and specialization are
easily available.
6. Training opportunities to employees: Better opportunities of advancement are
provided to workers. The scope for learning and training for promotions are

9.3 Demerits of Line and Staff Organization

1. Delay in decision-making: The process of decision-making is delayed, as line

executives have to consult staff experts before finalizing the decisions. The
decisions of line managers are likely to be delayed due to this lengthy procedure.
2. Buck passing among executives: The line bosses are concerned with actual
execution of work. However, they depend on staff experts for guidance. If
something goes wrong, the attempt is made to pass on the blame by one party to
the other. Thus, there is shifting of responsibility or buck-passing.
3. Conflicts between line and staff executives: In this Organization, quarrels and
conflicts between line managers and staff specialists are quite common. The line
managers are generally not interested in the advice offered by experts. Secondly,
specialists feel that the line bosses lack knowledge of new ideas. Such conflicts
lead to bitterness.
4. Costly Organization: Line and staff Organization is a costly Organization as the
line executives are supported by highly paid staff executives who are experts. All
this adds to the overhead expenses and the cost of production increases.
5. Complicated operation: This Organization is too complicated in actual operation
because of dual authority, division of functions and too much dependence on
staff. The unity of command principle is violated.
6. Internal discipline is affected adversely: The internal discipline is likely to be
affected adversely due to decentralization and division of loyalty of subordinates.

9.4 Conflict between Line and Staff Managers

One serious problem in the line and staff Organization is the possible conflict between
the line executives and staff specialists.

Line executives have complaints against staff officers and staff officers have complaints
against line executives.

9.5 Conflict between Line and Staff Executives.

9.6 Arguments of Line Executives against Staff Managers / Officers

1. Dilution of authority: Line executives argue that the introduction of staff

managers dilutes their authority and also leads to interference in their work. They
feel that their jobs become less important.
2. Stealing show: Line managers feel that the staff executives tend to steal show for
the work that turns out to be successful. On the other hand, when things go wrong,
they alone have to face the blame and criticism.
3. Lacks practical knowledge: Line executives argue that staff executives are not
familiar with the situation where actual work is carried out. The services offered
by the staff executives are rather theoretical and not practical.
4. Lacks human skills: Line executives argue that staff managers with human
relations skills are rarely available. Staff presents matters mechanically.
5. Domination of staff managers: Line executives argue that staff managers always
feel that they are superior as regards education and skills. They dominate line
executives. This is treated as unwanted interference.
6. Easy access to top management: The staff managers work at the head office and
have easy access to top level management. They try to show their superiority to
top level management by making new plans and suggestions which may not be
acceptable to line executives. The top management feels that the line executives
are incompetent due to which the services of staff officers are required. This is a
source of agony for line managers.
7. Stress on paper work: The staff executives are engaged in the paper work. In
addition, they need information and various details from the line executives. As a
result, there is increase in the paper work of line executives, which they resent.

9.7 Arguments of Staff Managers against Line Executives

1. Resistance to new plans and ideas: According to staff managers, the line
managers usually oppose/resist new plans/ideas. They treat this as interference in
their routine work. A staff manager is a professional critic. He suggests
modifications, which are useful, but the suggestions are opposed as unnecessary
interference. This leads to conflicts.
2. Inadequate support from line executives: Staff managers argue that line
Managers do not take benefit of their services. Their services are used only as a
measure of last resort.
3. Inadequate scope for the use of authority: Staff managers argue that line
managers do not give importance to suggestions given by them. This reduces the
scope of activities of staff managers. Moreover, the suggestions of staff managers
are not binding on line executives and this affects their importance and
4. Lack of support from top management: Staff managers also feel that they do
not get full support from the top management. The top management is more
concerned with regular production. As a result, it gives better treatment to line
5. Limited cooperation from line executives: Staff managers argue that line
executives adopts negative approach towards them even when both are working in
the same Organization with identical objectives. Line executives do not take the
advice/suggestions of staff managers in the right spirit. They reject suggestions on
the ground that they are not practicable even without giving fair trail. This
indicates limited co-operation from line executives.
6. Supply of inadequate information: Staff managers argue that line executives do
not approach them well in advance with all necessary details of the problems
faced by them. They do not supply relevant information but want the solution
quickly. If solution is suggested within the time limit, it is again rejected on the
ground that it is not workable. This leads to dissatisfaction and conflicts.
7. Absence of authority: Staff managers feel frustrated as they offer suggestions for
solving the problem through hard work and also by using their skills and
experience. However, they do not have commanding authority to execute their

10. Organization Chart

Organization structure of a company can be shown in a chart. Such chart indicates how
different departments are interlinked on the basis of authority and responsibility. It is a
simple diagrammatic method of describing an Organization structure. It indicates how the
departments are linked together on the basis of authority and responsibility. Such
Organization chart provides information of the Organization structure at a glance.
Organization chart is like a blue print of a building. It indicates the number and types of
departments, superior-subordinate relationship, chain of command and communication.

10.1 Definition of Organization Chart.

According to George Terry, Organization chart is "a diagrammatical form which shows
important aspects of an Organization, including the major functions and their respective
relationships, the channels of supervision and the relative authority of each employee
who is in-charge of each respective function".

10.2 Features of Organization Chart

The definition noted above indicates the following features of Organization charts:
1. Organization chart is a diagrammatical presentation.
2. It represents the formal Organization structure.
3. It shows the lines of authority in the Organization.
4. It indicates the channel of communication.
5. It indicates who supervises whom and how various units are inter-related.

10.3 Advantages of Organizational Chart.

1. Brings clarity to the Organization: The very process of preparing a chart makes
the executive think more clearly about the Organization relationships.
2. Provides dear picture of the Organization: Once the charts are prepared, they
provide lot of information about the Organization, both to the members of the
Organization as well as to the outsiders. This information relates to number and
types of departments, superior subordinate relationships, chain of command and
communication and job titles of each employee.
3. Facilitates training of employees: Organization charts are useful in familiarizing
and training new employees.
4. Ensures organizational changes: Organization charts provide a starting point for
planning organizational changes after having discovered the weaknesses of the
existing structure.
5. Provides quick understanding: A chart serves as a better method of visualizing
an Organization than a lengthy written description of it.

10.4 Limitations of Organizational Chart

1. Details are not provided: The Organization chart does not provide all the details
of Organization structure created. For example, the chart will show the line of
authority but not the extent of authority.
2. Informal relationship is not shown: The chart fails to give details of informal
relationship available in a firm. In fact, human relationships cannot be shown on a
3. Updated position is not available: The chart shows the position of Organization
structure when it was formed. It gives a static picture of the Organization.
Changes made thereafter may not be available in such charts.
4. Fosters buck-passing: The charts tend to foster 'buck-passing' and emphasize
only formal channels of communication.
5. Lacks flexibility: Organization chart lacks an element of flexibility. Such chart
also brings an element of rigidity in the working of an Organization.
6. Creates rank consciousness: An Organization chart leads to rank consciousness
among the staff. It destroys team spirit and collective approach on the part of the
10.5 Types of Organization Chart

1. Vertical chart: One of the most popular methods is the vertical chart in which the
highest job is shown at the top with other jobs shown in a descending order,
connected by lines to show the authority and the line of communication.
2. Horizontal chart: This chart shows the Organization structure in the form of a
3. Circular chart: The top management is shown at the centre of the circle and
other management levels are shown in concentric circles.
4. Departmental chart: This chart is devoted exclusively to particular department
and gives details of relationships, authority, responsibility, etc. within the

10.6 Uses of Organization Chart

1. An Organization chart facilitates ready reference. It enables the management to

find out different positions of authority and their relationships in the Organization
2. It provides proper guidance to managers in executing, their assignments and helps
them to avoid overlapping and duplication of work.
3. It provides complete information to understand the character of an Organization.
4. An Organization chart indicates ways to better utilization of available manpower.
5. An organization chart points out the consistencies and deficiencies of an
Organization and enables the management to correct them.

Decentralisation Advantages and

Limitations of Decentralization
Introduction To Decentralization

Decentralization of authority is another concept closely related to centralization. The

delegation of authority by an individual manager is closely related to organization’s
Decentralization of authority.

Decentralization of authority means conscious/systematic effort to bring dispersal

(spreading) of decision making power to the lower levels of the Organization. In
decentralization, only broad powers will be reserved at the top level. Such powers include
power to plan, organize, direct and control and maximum powers will delegated to the
authority at the lower level.

Decentralization is just opposite to centralization. Under centralization, authority is

mostly concentrated at the top level management. Centralization and decentralization are
mutually dependent. In a large Organization, the process of centralization and
decentralization co-exist and reinforce each other.
Decentralization is a natural development when the Organization grows large and
complex. Here, centralization of management is neither possible nor desirable. The only
practical solution is to divide the Organization into decision-making units and giving the
powers to take routine types of decisions in regard to the functioning of those units. This
is decentralization in practice.

In decentralization, systematic efforts are being made to delegate to the lowest levels all
authority except that which can only be exercised at the central points. Decentralization is
delegation not from one individual to another but delegation to all units in an
Organization. A company is said to be highly decentralized, when the delegation is
company-wide in all functions and divisions of the company and also for a wide range of
authorities and responsibilities.

Decentralization is different from centralization as in centralization, the decision making

power is in the hands of one person only. We observe such centralization in sole trading
concerns. It is also noted that centralization is one feature of traditional management in
India while decentralization is a normal practice under professional management.

Definitions of Decentralization

According to Henry Fayol, "Everything that goes to increase the importance of the
subordinate’s role is decentralization; everything that goes to reduce it is centralization."

According to Louis Allen, "decentralization refers to the systematic effort to delegate to

the lowest levels all authority except that which can only be exercised at central point."

This definition makes it clear that even in decentralization; delegation to the lowest levels
is not complete as the basic functions in the management process are centralized.

Advantages / Importance of Decentralization

1. Decentralization helps to improve the quality of decisions/decision-making at

the top level management: Decentralization of authority among other executives
at all levels in the Organization relieves the top executive of the excessive burden
saving his valuable time, which he can devote to more important and long-term
problems. This is bound to improve the quality of his decisions regarding such
2. Decentralization facilitates diversification of activities: It is a matter of
common experience that an Organization with departmentation on the basis of
products facilitates diversification of products or market even when the authority
is centralized. Decentralization takes this process a step further. Managers of
semi-autonomous product divisions are able to utilize their skills and experienced
judgment. This has a bearing on their products and the market. The enterprise also
attains maximum possible growth. Decentralization is beneficial when new
product lines or new activities are introduced in an Organization. Such policy
creates self sufficient units under overall co-ordination of top level management.
3. Decentralization encourages development of managerial personnel: Most
companies find lack of managerial talent as a limiting factor in their growth. A
company cannot expand effectively beyond the scope and abilities of its
managerial personnel. Capable managers, however, can be developed only by
giving managerial jobs to suitable persons and delegating them the authority to
make important decisions. Such wide exposure gives them opportunity to grow
and to have self development for higher positions. The more talented and capable
persons will learn and improve and qualify themselves for higher managerial
positions. Only a decentralized Organization can offer such opportunities to future
managers without involving additional expenditure. A decentralized Organization
also allows its managers adequate freedom to try new ideas, methods or
techniques. In brief, decentralization creates a team of competent managers at the
disposal of the company.
4. Decentralization improves motivation: Research conducted by social scientists
has proved that the Organization structure itself exercises some influence on the
motivation of the people working within it. An Organization structure which
facilitates delegation, communication and participation also provides greater
motivation to its managers for higher productivity. Decentralized Organization
structure is most favorable for raising the morale and motivation of subordinates
which is visible through better work performance.
5. Decentralization makes decision-making quicker and better: Since decisions
do not have to be referred up through the hierarchy, quicker and better decisions
at lower levels can be taken. Divisional heads are motivated to make such
decisions that will create the maximum profit because they are held responsible
for the effect of their decisions on profits. Thus decentralization facilitates quick
and result-oriented decisions by concerned persons.
6. Decentralization provides opportunity to learn by doing: Decentralization
provides a positive climate where there is freedom to make decisions, freedom to
use judgment and freedom to act. It gives practical training to middle level
managers and facilitates management development at the enterprise level.

Limitations of Decentralization

1. Decentralization may lead to the problem of co-ordination at the level of an

enterprise as the decision-making authority is not concentrated.
2. Decentralization may lead to inconsistencies (i.e. absence of uniformity) at the
Organization level. For example, uniform policies or procedures may not be
followed for the same type of work in different divisions.
3. Decentralization is costly as it raises administrative expenses on account of
requirement of trained personnel to accept authority at lower levels. Even the
services of such highly paid manpower may not be utilized fully, particularly in
small organizations.
4. Introduction of decentralization may be difficult or may not be practicable in
small concerns where product lines are not broad enough for the creation of
autonomous units for administrative purposes.
5. Decentralization creates special problems particularly when the enterprise is
facing number of uncertainties or emergency situations. The decision-making
process gets delayed and even correct decisions as per the changing situations
may not be possible.

Decentralization Is Not An Unmixed Blessing

The advantages of decentralization are more significant as compared to its limitations.

The limitations suggest possible problems relating to decentralization. Efforts should be
made to solve these problems. It is certainly not desirable to have centralization (in place
of decentralization) only because of certain limitations. However, to what extent the
organization should be decentralized is a delicate issue. Here, certain factors such as size
of the organization and the abilities of lower level managers need careful consideration.

Managerial Leadership - Leader Qualities

- Leadership Theories
1. Meaning of Leadership.

Leading is one important function of management only next to planning and organizing.
It is the liveliest element in the management process. It initiates actions to translate the
decisions into concrete actions. Managers have to lead their subordinates through guiding
and motivating. Leading involves directing, influencing and motivating employees to
perform essential tasks.

Every manager has to act as a leader in his area of operation. This means he has to guide,
instruct, lead and motivate his subordinates so as to use their skills, efficiency, capacity
etc. for the benefit of his Organization. He has to influence the behavior of his
subordinates and get the work done through their collective efforts. Leadership qualities
are required in order to conduct various managerial functions effectively. Each and every
group of people engaged in a particular activity needs a leader in order to guide, co-
ordinate and control their efforts. In this sense, leadership is required for the conduct of
economic, social, political or cultural activities. A college principal, secretary of a co-
operative society or of a sports club or cultural association acts as leaders in their
respective fields. George Washington, Abraham Lincoln, Winston Churchill, Dr.
Babasaheb Ambedkar, Mahatma Gandhi, Nelson Mandella, John F. Kennedy are
world known political leaders while Henry Ford, J. R. D. Tata and S. L. Kirloskar are
known leaders in the business world. Here, we are concerned only with the managerial
leadership. Managerial leadership is that part of a manager's activities by which he
influences the behavior of his subordinates towards a desired objectives or results.
Leadership is follower ship. A good leader leads but does not push. Effective leadership
can guide a group towards certain ideals without exerting much force. Managers who
possess the quality of guiding and directing the subordinates under inspired impulses can
be called business leaders. Leadership is concerned with getting results through people
and implies the Organization of staff into productive teams, groups and departments.
Leadership entrails the creation of human structures, their motivation and direction; the
resolution of conflicts at the workplace, creating vision for the entire business and
providing resources in support of this.

Manager can perform various managerial functions more effectively by providing proper
leadership to his subordinates. This makes leadership an inevitable aspect of management
process itself. Leadership is essential for the success and stability of a business enterprise.
Managers possessing leadership qualities are called business leaders.

2. Definitions of Leadership.

1. According to Koontz and O'Donnell, "Leadership is the ability of a manager to

induce subordinates (followers) to work with confidence and zeal."
2. According to George Terry, "Leadership is the activity of influencing people to
strive for mutual objectives."
3. According to Peter Drucker, "Leadership is the shifting of owns vision to higher
sights, the raising of man's performance to higher standards, the building of
man's personality beyond its normal limitations."

3. Characteristics of Leadership.

1. Involves guiding and motivating: Leadership is a managerial process of guiding

and motivating the subordinates for achieving organizational goals/objectives. For
motivating, communicating is necessary. Leadership is described as an art of
influencing and inspiring subordinates to perform their duties efficiently.
2. Needs subordinates and common interests: It pre-supposes the existence of
subordinates. There must be common interest for the leader and his followers due
to which they cooperate and participate for achieving common objectives.
3. Promotes interest in the work: The purpose of leadership is to influence,
motivate and encourage subordinates to take active interest in the work assigned
and give the best results.
4. Needs support from all: The leader must recognize the presence of all
employees irrespective of their position. The leader cannot become successful
unless he obtains support from all.
5. Influences subordinates through personal qualities: A leader understands the
problems of his subordinates and influences them by his personal qualities.
6. Dynamic and continuous process: Leadership is a dynamic and continuous
process. It is a regular activity of guiding and motivating subordinates for
improving their performance and contribution towards organizational objectives.
7. Leadership is situational: An ideal leadership is always situational. A leader has
to study the prevailing situation and provide appropriate leadership to his
8. Assumes obligation: A leader always inspires followers. In the event of failure,
he does not shift the responsibility to his subordinates but accepts his personal
weaknesses in performance. A leader leads by setting good example.
9. Needs interaction with followers: The objective of the leader and his
subordinates should be the same. If the leader attempts for one purpose and his
subordinates for some other purpose, it is no leadership. Their interest must be
10. Achievement of objectives: The success of a leader largely depends on his ability
to achieve organizational objectives. When a leader fails to attain the objectives,
he is of no utility to the management.

4. Qualities of a Good Leader / Leadership Qualities.

A leader needs sound health and physical capacity to perform his functions or duties
assigned in an efficient manner. In addition to physical qualities, an ideal leader needs
certain qualities of head and heart. The main qualities include Personal Traits and
Managerial Traits which are shown in the following chart:

5. Styles of Leadership.

There are different styles of leadership. This classification is based on the methods used
by the leaders.

Edwin Flippo has defined leadership style as "a pattern of behavior designed to
integrate organizational and personal interest in pursuit of some objectives."

Basically, the styles of leadership can be divided into two broad groups. These are: (a)
Task-oriented styles, and (b) People-oriented styles.
a. In the task oriented styles of leadership, more importance is given to getting the
work done by subordinates. Task-oriented leaders are interested in the completion
of work and do not give importance/attention to subordinates or their desires,
interests and so on. Dictatorial leader and autocratic leader are the examples of
this category.
b. People-oriented style of leadership is basically democratic. Here, the leader gives
importance to the interests, thoughts, problems, etc. of subordinates. He tries to
achieve objectives with their support and co-operation. Participative or
democratic leader comes under this category.

6. Theories of Leadership.

1. Trait Approach Theory (The Traits Approach),

2. Behavioral Approach Theory, and
3. Contingency / Situational Approach Theory.

7. Trait Approach Theory (The Traits Approach).

The traits approach theory was one of the first attempts to explain the leadership based on
personal traits. Traits are inborn or acquired personal qualities of an individual. They
include physical qualities and the qualities of head and heart.

Traits theory refers to certain traits/characteristics which separate leaders from non-
leaders. Such traits enable some to rise above their followers.

The basic traits useful for leadership include height, energy, looks, knowledge and
intelligence, imagination, self-confidence, integrity, fluency of speech, mental balance,
enthusiasm, courage, sociability, and friendliness and so on.

According to the traits theory, an individual possessing such traits is usually able to
influence others and gets the status of a leader. This suggests that a leader is quite
different from an average person in regard to personal qualities such as intelligence,
perseverance and overall personality including physical features.

The traits theory suggests that leaders are above the followers in regard to personal traits.
A fair combination of such traits makes them influential and impressive as compared to

Traits theory indirectly supports the view that leaders are born and not made. Researchers
have suggested different traits of leaders. Such traits are similar to physical,
psychological, mental, intellectual and other qualities which are normally treated as
essential in the case of an ideal leader. It may be noted that some traits are innate while
some others can be acquired through special efforts.

The traits theory is based on the personal qualities (inborn/acquired) of an individual.

Such qualities play a positive role in building leadership. A person becomes leader due to
such traits. The theory is based entirely on personal traits and their contribution in
developing leadership.

7.1 Limitations of Traits Approach Theory / Criticism of Traits Theory.

1. Examples of leaders without certain traits are common: According to this

theory, leadership is based on certain traits such as personality, intelligence, self-
confidence, courage and so on. However, it is very difficult to find out a particular
leadership trait in the greatest leaders of the world. Some known world leaders
have had quite different traits. People with limited education, limited training and
without well developed personality have proved to be great leaders. History is full
of such examples of leaders.
2. Traits are not absolutely essential for leadership: As per the theory, many traits
are desirable in the case of leaders. However, none seems to be absolutely
essential. Many leaders are extremely popular even without certain useful traits.
3. Situational aspect is ignored: The theory fails to take into consideration the
situation within which the leaders have to function. There are instances in which a
leader is successful in one situation but may not be in another even when traits are
same on both the occasions. For example, Winston Churchill was Prime Minister
of England and was also war hero during the Second World War but was defeated
in the general elections under new situation i.e., after the end of World War II.
4. No reference to essential qualities: The theory fails to give the list of essential
qualities (innate and acquired) required for leadership purpose.
5. Superiority is not clearly stated: The theory states that a leader has superior
personal traits as compared to his followers. However, the nature or extent of
superiority is not given in a clear manner.

8. Behavioral Approach Theory.

The behavioral approach theory is an extension of the traits theory and is superior in
certain respects. The traits theory failed to explain what caused effective leadership. The
behavioral approach is based on the study of behavior of a leader.

Leadership grows/develops not by traits but by the acts or experience of a person. The
behavioral theory is based on the assumption that leaders are not born but they develop
gradually by experience and maturity. The attention is given to what leaders do (i.e., their
behavior) rather than to what they are. A leader learns new traits through his experience
(behavior or acts). The focus point, here, is on what the leader does while leading.

This behavioral theory suggests that a leader do not behave in the same manner under all
situations. Similarly, his actions are not identical under all situations which he faces. He
adjusts his behavior as per the need of the situation. There is an element of flexibility in
his approach and behavior. He studies the situation and adjusts his leadership style
accordingly. He adopts different leadership styles to meet the need of different situations.

The most popular behavioral theories are:

a. Douglas McGregor's Theory 'X' and Theory 'Y', and
b. Dr. Rensis Likert's Four Management Systems.

The behavioral approach theory is practical in nature. It gives more attention to acts and
behavior of a person and not to the personal traits. Leadership develops by experience
and not by inborn traits. A leader has to acquire certain qualities by experience only.

Like the traits theory, the behavioral approach oversimplifies the complexities of the
leadership process. However, the behavioral approach is responsible for the development
of a classification of leadership styles which has provided managers suitable
opportunities to secure greater insight into their own behavior.

9. Contingency / Situational Approach Theory or Blanchard's Situational

Leadership Theory.

Situational/Contingency Theory is a new addition to the existing theories of leadership. It

is a combination of different leadership styles such as autocratic, democratic and so on.
An ideal leader studies the overall prevailing situation, draws conclusions about the
whole situation and adopts the leadership style which is most appropriate to the
prevailing situation. He is not concerned with one specific leadership style but will use
any style as per the available situation. He is interested in achieving his objectives and is
willing to use suitable means for this purpose. Sometimes he may be democratic but may
be autocratic on some other occasions. "Different strokes for different folks" is his
leadership approach. He will consider the group of employees (skilled, unskilled,
supervisory, etc.) to be handled and adjust his leadership style accordingly. He will not
use one leadership style for controlling/motivating all categories of employees. On the
other hand, he will be democratic with some categories of employees and autocratic with
the employees working at the other level. In other words, adjusting the leadership style as
per the need of the situation or as per the group of employees/subordinates to be handled
is the essence of situational leadership style. In brief, he studies the situation and adjusts
his leadership style accordingly. He adopts a practical approach in order to get his work
done i.e. achievement of organizational objectives. In brief, in the situational leadership
style, the leader adopts practical and flexible approach in decision-making. This is the
essence of situational/contingency theory or approach.

Contingency approach concludes that there is no "one best style" of leadership under all
conditions. Efficient leadership style varies with situations and an efficient leader is one
who studies the prevailing situation and finds out the leadership style which would be
most suitable for the given situation. This is natural as a simple cookbook approach for
selecting the best leadership style does not exist. A good leader has to study the situation
and adjust his leadership style accordingly. Here, the focus is on the situation and not on
the personal qualities and behavior of a leader.

Situational leadership style is flexible/adjustable and is normally more effective as

compared to other types of leadership. The situational theory of leadership was developed
by Hersey and Blanchrd at the Centre for Leadership Studies in Ohio State University.
9.1 Important Features of Situational Leadership.
1. Situational leadership is new addition to the existing styles of leadership.
2. An ideal leader (according to this theory) studies the overall situation, draws
conclusions and adopts the leadership style which is most appropriate to the
prevailing situation. This is the essence of situational leadership theory.
3. The best leadership style according to this theory is situational.
4. An ideal leader is one who can adjust his style of functioning as per the situation
within which he has to operate. This means the internal and external environment
to the enterprise.
5. A leader may act as a dictator at one time and also as a democratic leader on some
other occasion. A good leader is one who studies the situation around him and
adopts the most suitable leadership style.
6. A situational leadership is a combination of all types of leadership.
7. A situational leader knows different leadership styles but selects one particular
style, which is most, appropriate to a given situation/environment.
8. A situational leader adopts flexible approach in his style of functioning. This
makes his leadership effective and result-oriented. A situational leader knows
when to use autocratic style and when to use democratic style. He makes
corresponding adjustment in his style. This makes him effective/successful as a

The situational theory suggests that a manager's leadership style should vary with the
situation. This leadership model is simple and appealing. However, it ignores several
other critical elements that determine leadership style and it does not have a wide
accepted research base. In spite of the limitations, this leadership model achieved
considerable popularity and also awakened many managers to the idea of contingency
approaches to leadership style.

9.2 Merits of Situational Leadership.

1. The situational leadership theory is a practical one and is based on real facts of
life. The best leadership style is situational.
2. The situational theory has universal acceptance.
3. It focuses attention not on the personality of the leader, but on the personality of
the Organization as a whole.
4. The situational leadership theory is flexible and adaptable. It can operate in any
style (autocratic, democratic, etc.) as per the need of the situation.

9.3 Limitations of Situational Leadership.

1. In situational leadership, more importance is given to the situation and less to

personal traits. Leadership should involve both traits and situations. However, the
theory gives importance to situation only.
2. The theory offers an incomplete explanation of the leadership process.
10. Question Bank On Leadership.

1. What is leadership? Explain its functions.

2. Explain the importance of or role of leadership in business.
3. State and explain the qualities of a good leader.
4. "Best type of leadership is situational" Explain.
5. Write short notes on:
i. Blanchard’s situational leadership theory
ii. Qualities of an ideal leader
iii. Leadership is situational

Human Resource Management and

Development - HRM Notes
Introduction To Human Resource Management ↓

Every business unit needs human resource (manpower) for the conduct of different
business activities. In fact, no organization can exist or operate efficiently without the
support of human resource. Such human resource includes top level managers,
executives, supervisors and other subordinate / lower level staff / employees. A business
organization has to estimate its future manpower needs and adjust its manpower planning
and development programmes accordingly. This is called 'staffing' function of
management. Human resource management is also described as personnel management
or manpower management.

According to Edwin Flippo, "Personnel Management is the planning, organizing,

directing and controlling of the procurement, development, compensation, integration and
maintenance of people for the purpose of contributing to organizational, individual and
social goals".

Various areas such as recruitment and selection, wage payment and industrial relations
are covered under human resource management.

Meaning of Human Resource ↓

In an industrial unit, large number of persons is employed in order to conduct various

operations and activities. This is treated as human resource or manpower employed. A
business unit needs material resources as well as human resource for the conduct of
various activities. Of all the "M"s in management (such as Materials, Machines, Methods
and Money) the most important "M" stands for Men i.e., manpower working in the
organization. It is through manpower/employees that all other ingredients of an
enterprise-money, machines, materials, marketing, etc., are managed. In brief, Human
Resource (HR) constitutes the most important and the most productive resource of an
industrial / business unit.
It is rightly said that "machines are important in the production process but the man
behind the machines is more important". He transforms the lifeless factors of production
into useful products. Human resource (HR) is an important asset of a business unit. Well-
trained, loyal and efficient team of workers brings success and stability to a business unit.
This suggests the importance of human resource in business. People and the organization
in which they work are inter-related and interdependent. Organization moves towards
prosperity only by using its available human resource purposefully. Similarly, employees
get various monetary and other benefits through the prosperity of their organization.

What is Human Resource Development? HRD ↓

Human Resource Development (HRD) means to develop available manpower through

suitable methods such as training, promotions, transfers and opportunities for career
development. HRD programmes create a team of well-trained, efficient and capable
managers and subordinates. Such team constitutes an important asset of an enterprise.
One organization is different from another mainly because of the people (employees)
working therein. According to Peter F. Druker, "the prosperity, if not the survival of any
business depends on the performance of its managers of tomorrow." The human resource
should be nurtured and used for the benefit of the organization.

Importance of Human Resource in Management ↓

Human resource is most important resource in management and needs to be used

efficiently. This is because success, stability and growth of an organization depend on its
ability in acquiring, utilizing and developing the human resources for the benefit of the
organization. In the final analysis, it is the people (i.e employees) who produce promising
results and generate a climate conductive to the growth and development of an
organization. HR is a highly productive corporate asset and the overall performance of
companies and corporations depends upon the extent to which it is effectively developed
and utilized. It is the most delicate factor of production and need not be treated merely as
a commodity to be bought and used in factories.

According to Peter Drucker, "The function of management is to manage managers,

workers and work". The importance of manpower in business management is now
universally accepted. Employees have a capacity to grow and develop, if suitable
opportunities are offered. They give positive response to monetary and non-monetary
incentives, training opportunities, favorable work environment and motivation.
According to Pigors and Myers, "Good management means getting effective results
with people". This suggests the importance of human resource.

Human resource is certainly important even in this age of extensive use of computer
technology. This is because machine cannot be used as a substitute for human brain
which has capacity to think, assess and react. It is correct to say that man is a power
rather than man has a power. Progressive / professional managements invest huge funds
on training and development of human resource and this suggests the importance of
human resource and its contribution in industrial and economic development.
Professionally managed companies in India such as Larsen and Toubro Ltd, TELCO,
Reliance, etc., give special importance and good attention to HRD.

The following remark of Shri Dhirubhai Ambani, former chairman of Reliance

Industries Ltd. (made in the 21st AGM held on 3/8/95), is worth noting in this regard.
"Our People: People are assets you can never show on a balance sheet. Our company has
a human resource asset of around 12,500 people; 3,000 of which constitute scientific and
technical manpower. Every year we add over 450 young professionals. These motivated
and well-trained people are the backbone of our business. The team is young in spirit,
conscious of its responsibilities and committed to building world class assets for the

Definitions of Human Resource Planning - HRP ↓

1. Colemn has defined human resource planning as "the process of determining

manpower requirements and the means for meeting those requirements in order to
carry an integrated plan at the organization".
2. Stainer defines manpower planning as "strategy for the acquisition, utilization,
improvement and preservation of an enterprise's human resources. It relates to
establishing job specifications or the quantitative requirements of jobs
determining the number of personnel required and developing resources of

Objectives of Manpower / HR Planning ↓

1. To ensure optimum utilization of human resources currently employed in the

2. To determine the future manpower requirements of the Organization as per the
need for renovations, modernization, expansion and growth programmes.
3. To determine the recruitment level.
4. To ensure that necessary human resources are available as and when required.
5. To assess future accommodation requirements.
6. To design the basis for management development programmes so as to develop
the required talents among the employees selected.

Advantages / Importance of HRP ↓

1. Meeting manpower needs: Every Organization needs adequate and properly

qualified staff for the conduct of regular business activities. Imaginative HRP is
needed in order to meet the growing and changing human resource needs of an
2. Replacement of manpower: The existing manpower in an Organization is
affected due to various reasons such as retirement and removal of employees and
labor turnover. HRP is needed to estimate the shortfall in the manpower
requirement and also for making suitable arrangements for the recruitment and
appointment of new staff.
3. Meeting growing manpower needs: The expansion or modernization
programme may be undertaken by the enterprise. Manpower planning is needed in
order to forecast and meet additional manpower requirement due to expansion and
growth needs through recruitment and suitable training programmes.
4. Meeting challenges of technological environment: HRP is helpful in effective
use of technological progress. To meet the challenge of new technology existing
employees need to be retrained and new employees may be recruited.
5. Coping with change: HRP enables an enterprise to cope with changes in
competitive forces, markets, products, and technology and government
regulations. Such changes generate changes in job content, skill, number and type
of personals.
6. Increasing investment in HR: An employee who picks up skills and abilities
becomes a valuable resource because an organization makes investments in its
manpower either through direct training or job assignments.
7. Adjusting manpower requirements: A situation may develop in; an
organization when there will be surplus staff in one department and shortage of
staff in some other department. Transfers and promotions are made for meeting
such situations.
8. Recruitment and selection of employees: HRP suggests the type of manpower
required in an organization with necessary details. This facilitates recruitment and
selection of suitable personnel for jobs in the Organization. Introduction of
appropriate selection tests and procedures is also possible as per the manpower
9. Placement of manpower: HRP is needed as it facilitates placement of newly
selected persons in different departments as per the qualifications and also as per
the need of different departments. Surplus or shortage of manpower is avoided
and this ensures optimum utilization of available manpower.
10. Training of manpower: HRP is helpful in selection and training activities. It
ensures that adequate number of persons is trained to fill up the future vacancies
in the Organization.

Meaning of Personnel Management ↓

Personnel refer to the employees working in an organization. They represent the

manpower which is an important asset of a business unit. Employees are the real
supporters of a business unit and they contribute substantially for the stability and
prosperity of a business unit. Employees have various problems relating to wage
payment, promotions, transfers, working conditions, welfare facilities, training and so on.
All such problems are treated as personnel problems. These problems come within the
scope of personnel management which is one important area of total business
management. Naturally, a separate department called 'Personnel Department' is created in
every organization. It looks after the personnel problems. The manager in charge of this
department is called personnel manager. He has to perform various functions which are
responsible in nature and also delicate. He needs tact and imagination while dealing with
personnel problems. He also needs active support of the top management for dealing with
personnel problems effectively.
A personnel manager must be a specialist in organization theory. In addition, he should
be an expert in the personnel administration with knowledge of relevant Labor laws,
procedures and so on. A personnel manager needs sound academic qualifications,
communication skill, broad social outlook, sympathy and consideration for employees.
Knowledge of subjects like philosophy, logic, sociology and ethics is also useful while
discharging his duties and responsibilities. He needs a keen sense of social justice and
also rights and interest of men (employees) at work. A personnel manager also needs
other qualities which are normally required by a successful manager.

In short, personnel management deals with the people working in an organization. It

studies and solves their problems in order to create an efficient, loyal and co-operative
labor force for the benefit of a business enterprise.

Personnel management deals with "personnel" of the organization. It is concerned

primarily with the manpower resource inputs.

Definitions of Personnel Management ↓

1. According to Edwin Flippo, "Personnel management is the planning, organizing,

directing and controlling of the procurement, development, compensation,
integration and maintenance of the people for the purpose of contributing to
organizational, individual and social goals."
2. According to George R. Terry, "Personnel management is concerned with the
obtaining and maintaining of a satisfactory and a satisfied, workforce."
3. According to British Institute of Personnel Management, in London,
"Personnel management is that part of management which is concerned with the
people at work and with their relationship within an enterprise."

Features of Personnel Management ↓

1. Personnel management relates to managing people at work. It covers all levels of

personnel’s and their needs, expectations and so on. In this sense, it is a
comprehensive function and is basically concerned with managing people at
2. Personnel management is concerned with employees, both as individuals as well
as a group. The aim of personnel management is to get better results (for the
Organization) through their involvement, motivation and co-operation. It is a
people-oriented process of bringing people and organizations together so that the
goals of each are met property.
3. Personnel management is concerned with helping the employees to learn and
develop their potentialities to the highest level for their benefits as well as for the
benefits of their Organization.
4. Personnel management is inherent in all organizations as all organizations
(including industrial and commercial) need manpower for the conduct of their
activities. They are concerned with recruitment, selection, utilization and
development of manpower available. Personnel management is an integral aspect
of total business management.
5. Personnel management is a continuous activity/function in an Organization as
personnel problems continue to exist as long as employees are working in an
Organization. They need constant attention as they may disturb normal working
of an Organization, if neglected.
6. Personnel management aims as securing willing co-operation of employees for
achieving organizational objectives. This is natural as industrial and other
activities can be conducted only with the support of human resources.

Objectives / Purposes of Personnel Management ↓

1. To attain maximum individual development (self development) of the members of

an Organization and also to utilize available human resources fully and
2. To mould effectively the human resources.
3. To establish desirable working relationships between employer and employees
and between groups of employees.
4. To ensure satisfaction to the workers so that they are freely ready to work.
5. To improve the service rendered by the enterprise to the society through better
employee morale which leads to more efficient individual and group performance.
6. To establish and maintain a productive and self respecting relationship among the
members of an Organization.
7. To ensure the availability of a competent and willing workforce to the
Organization for its progress and prosperity.
8. To help Organization to achieve its goals by providing well trained, efficient and
property motivated employees.
9. To maintain high morale and good human relations within the Organization for
the benefit of employer and employees.
10. To secure the integration of all the individuals and groups with the Organization
by reconciling individual/group goals with those of an Organization.

Functions of Personnel / HR Management ↓

The functions of HRM are directly or indirectly related to the human resource available
in the organization. HR manager has to perform the basic functions of management in the
area of HRM. These managerial functions include planning, organizing, directing and
controlling the manpower of his department. The operative functions of the HRM include
procurement of manpower, development of manpower, and payment compensation to
manpower and so on. In short, HRM involves the following functions and these functions
are to be performed by the HRM department of the Organization:

Functions of Personnel / HR Management are:-

1. Procurement of manpower: Procurement means acquiring or resourcing the

human resources or the manpower required by an Organization from time-to-time.
Such procurement will be from the employment market. The basic principle in
procurement is "right man for the right job". The procurement function includes
manpower planning and forecasting, recruitment, selection, appointment,
placement and induction of employees so as to have a team of efficient and
capable employees for the benefits of the Organization. Even promotions and
transfers are covered by this broad personnel function. At present, scientific
methods are used for recruitment and selection of most suitable manpower for the
benefit of the Organization.
2. Training and Development of manpower: Development of manpower (human
resource development) means planning and execution of the training programmes
for all categories of employees in order to develop new skills and qualities
required for working at the higher level. Manpower development is possible
through training programmes and not simply by offering attractive wages to
workers. Such manpower development (possible through systematic training
programmes) is required for meeting the growing and changing needs of
manpower along with the expansion and diversification of business activities.
Executive development programmes are introduced for the benefit of higher level
managers. Promotions and transfers are possible when manpower development
programmes are introduced regularly. Similarly, future manpower requirement
will be met properly through such manpower development programmes. This
suggests the importance / significance of human resource development. It aims at
educating and training employees for the improvement of overall performance of
an Organization. HRD programmes are for education, training and development
of existing manpower in an Organization. This is for facing new problems and
challenges likely to develop in the near future.
3. Compensation payment and reward to manpower employed: One function of
HRM department is to pay compensation (in monetary form) to employees for the
services rendered. For this, a fair system of remuneration payment (wages and
salaries) needs to be introduced. Remuneration to employees should be attractive
so that the labor force will be satisfied and disputes, etc., will be minimized. Fair
wage payment acts as a motivating factor. Along with compensation payment,
HRM also deals with reward system. It is a type of appreciation of exceptional
good work and offers some monetary or non-monetary incentive to suitable
4. Integration of interests of manpower and the Organization: Manpower is
interested in wage payment while Organization is interested in higher profits,
consumer loyalty market reputation and so on. Personnel management has to
reconcile the interests of the individual members of the Organization with those of
the Organization. This will ensure cordial industrial relations. Reconciliation of
individual, social and organizational goals and interest is one challenge before
5. Maintenance of manpower: This HRM function relating to maintaining of
satisfied manpower in the Organization through the provision of welfare facilities.
For this attention needs to be given to health and safety measures, maintenance of
proper working conditions at the work place, provision of welfare facilities and
other non-monetary benefits so as to create efficient and satisfied labor force with
high morale. Even collective bargaining and workers participation come within
this broad personnel function. Maintenance of stable manpower is difficult due to
the availability of ample employment opportunities.
6. Provision of welfare facilities: Employees are offered various welfare facilities.
They include medical, educational, recreation, housing, transport and so on. These
facilities are given for raising their efficiency and also for making their life happy.
Welfare facilities create efficient and satisfied Labor force. To introduce new
labor welfare facilities and to maintain the existing facilities is one of the
functions of HRM.
7. Miscellaneous functions: Misc. functions performed under personnel
management are :-
i. Maintenance of service records of employees,
ii. Promotions and transfers of employees,
iii. Maintaining cordial industrial relations,
iv. Introduction of rational grievance procedure,
v. Performance evaluation of employees,
vi. Career planning of employees,
vii. Maintenance of discipline, administering the policies with regard to
disciplinary action and compliance of various labor laws,
viii. Restructuring of the Organization,
ix. Formulating HRM strategy, etc.

These HRM functions need to be performed regularly for the benefit of employees and
also for continuity in the production activities of the Organization.

W.R. Spriegel has divided the functions of personnel management / HRM department
into the following six broad categories :-

a. Employment
b. Promotion, Transfer and Termination.
c. Training.
d. Wages and other incentives.
e. Service activities (welfare activities).
f. Collective bargaining and workers' participation.

As per Indian Institute of Personnel Management (IIMP now called NIPM), the
Personnel / HRM functions are classified as noted below:-

i. Improvement of industrial relations,

ii. Promotion of joint consultation,
iii. Helping management to formulate a labor policy and improving communication
between management and employees,
iv. Advising management on the fulfillment of statutory obligations relating to
safety, health and welfare of the employees,
v. Improving factory amenities and welfare provisions, and
vi. Advising the management on the training and future education of employees.
In the HRM department, various sections are created in order to give attention to various
functions which are basically HRM functions. The functions (as noted above) are varied
in character. These are functions of HRM and also the functions of personnel
management. They are important and needs constant attention. Efficient, satisfied and co-
operative labor force can be created by giving proper attention to various personnel

Recruitment And Selection ↓

Recruitment and selection constitute staffing function of management. Scientific

selection ensures right man for the right job. For creating a team of efficient, capable and
loyal employees, proper attention needs to be given to scientific selection of managers
and other employees. The conventional approach of selecting managers in a casual
manner is now treated as outdated and is being replaced by scientific and rational
approach. The basic principle in selection is "right man for the right job" and can be
achieved only through scientific recruitment and selection.

Meaning of Job Analysis ↓

Job analysis is prior to recruitment. Job means a task or a specific activity to be

performed in one or the other department of a production unit. Clear understanding of the
job is called job analysis. It creates a proper background for recruitment and selection.
Job analysis is the process of collecting all relevant information relating to the job. This
information relates to the nature and features of a job and the qualities and qualifications
required for performing the job efficiently. Job analysis provides basic information which
facilitates scientific recruitment and selection.

According to Edwin Flippo, "Job analysis is the process of studying and collecting
information relating to the operations and responsibility of a specific job."

Benefits of Job Analysis ↓

1. Facilitates proper publicity of jobs: Exact details of the job and the
qualifications, qualities, etc., required can be notified in the advertisement
because of job analysis. Scrutiny of applications and selection of suitable
candidates is made manageable, easy and quick.
2. Facilitates appropriate selection of psychological tests: Psychological tests can
be adjusted exactly as per the need of the job due to the availability of details
from job analysis.
3. Facilitates purposeful interviews: Interviewers should be given the details of job
analysis before interviewing the candidates. This makes the interviews relevant as
the candidates are judged accurately in the light of details of job analysis.
4. Facilitates appropriate medical examination: Even the medical examination is
adjusted as per the information available from job analysis.
5. Facilitates scientific selection and placement of candidates: Job analysis makes
the selection work accurate. The tragedy of misfit is avoided. In addition, proper
placement (as per qualifications and qualities) of employees is possible due to job
6. Facilitates scientific promotions and transfers: Promotions and transfers
become easy, quick and accurate on the basis of data of job analysis.
7. Facilitates impartial performance appraisal: A company can make scientific
and impartial performance appraisal of its employees with the help of job analysis
8. Useful for providing training: Job analysis suggests the qualities necessary for
performing specific job. This information can be used in a purposeful manner
while framing training programmes for jobs.
9. Useful for fixing wage structure: Job analysis indicates relative worth of each
job within the Organization. This information is useful for fixing wage rates for
different categories of workers.
10. Facilitates redesigning of jobs: Job analysis gives the details of different jobs
and facilitates redesigning of jobs so as to improve operational performance or to
enrich job content and employee improvement.

Meaning of Recruitment ↓

Recruitment means to estimate the available vacancies and to make suitable arrangements
for their selection and appointment. In the recruitment process, the available vacancies
are given wide publicity and suitable candidates are encouraged to submit applications so
as to have a pool of eligible candidates for scientific selection.

In recruitment, information is collected from interested candidates. For these different

sources of recruitment such as newspaper advertisement, employment exchanges, internal
promotions, etc., are used. In the recruitment, a pool of eligible and interested candidates
is created for the selection of most suitable candidates. Recruitment represents the first
contact that a company makes with potential employees.

Recruitment is a positive function in which publicity is given to the jobs available in the
organization and interested candidates (qualified job applicants) are encouraged to submit
applications for the purpose of selection.

Definition of Recruitment ↓

According to Edwin Flippo, "Recruitment is the process of searching for prospective

employees and stimulating them to apply for jobs in the Organization."

Need for Recruitment ↓

The need for recruitment may be due to the following reasons / situations:-

a. Vacancies: due to promotions, transfers, retirement, termination, permanent

disability, death and labor turnover.
b. Creation of new vacancies: due to growth, expansion and diversification of
business activities of an enterprise. In addition, new vacancies are possible due to
job respecification.

Meaning of Selection ↓

Selection is next to recruitment. It is the process of choosing the most suitable candidates
(Properly qualified and competent) out of many interested candidates. It is a process of
selecting the best and rejecting the rest. In this selection process, interested applicants are
differentiated in order to identify those with a greater likelihood of success in a job. Such
candidates are selected and appointed.

Selection is a negative function as it relates to elimination of unsuitable candidates. 'Right

man for the right job' is the basic principle in selection. Selection of suitable candidates is
a responsible type of work as selection of unsuitable persons for jobs creates new
problems before the business unit. For appropriate selection, scientific procedure needs to
be followed.

Recruitment and selection are Supplementary Activities ↓

In recruitment prospective employees are encouraged to apply for the jobs and in the
selection; the most suitable candidates are selected out of the pool of applicants. The
purpose of both is to have the most suitable and most capable candidates for the
Organization out of a pool of available and interested candidates. The recruitment process
widens the scope for selection and provides wide choice for the selection of best
candidates out of many interested. Recruitment and selection need lengthy and scientific
procedure particularly in the case of managerial posts. Such lengthy procedure must be
followed for scientific selection of employees.

Sources of Recruitment and selection are Supplementary Activities ↓

Sources of recruitment are the outlets through which suitable candidates are available.
The Following chart shows the sources of recruitment at supervisory and managerial
Steps In The Scientific Selection Process ↓

In the selection procedure, out of the available / interested candidates, the best one is
selected through written test, psychological tests, personal interview and medical
examination. Such lengthy procedure is followed in order to select the most suitable
candidate. Selection process is a screening process. It is a type of hurdle race to the
candidates. Final selection is possible only when the candidate completes this hurdle race
successfully. Lengthy selection procedure is needed for scientific selection of candidates.

Steps involved in the selection procedure are:-

1. Job Analysis: job analysis prepares proper background for recruitment and
selection. It gives details of a job to be performed and the human qualities and
qualifications required for performing that job efficiently. Scientific selection is
possible only when it is made in the light of the details available from job
analysis. Job means an activity performed in one or the other department of a
business unit. A job includes various positions. Clear and detailed understanding
of the job is called job analysis or job study.
2. Advertisement: This medium is widely used for recruitment of all categories of
personnel. Though quite costly, it provides a wide choice as it attracts large
number of candidates from all over the country. The qualities and qualifications
expected from the candidates are usually mentioned in the advertisement.
3. Collection of Applications Blanks: In this step, applications with necessary
details are collected from interested candidates. Some companies give
advertisement in the press and ask interested candidates to submit applications on
a prescribed form.
4. Scrutiny of Applications Received: After the last date fixed for the receipt of
applications, officer from the personnel department starts the scrutiny of
applications received. Incomplete applications are normally rejected. Applicants,
who do not possess required qualifications, experience, etc., are also rejected.
Along with this, the certificates, testimonials and references are checked.
5. Written Tests: After the scrutiny of applications, a final list of candidates for
written tests is prepared. The purpose of such tests is to judge the knowledge of
the candidate and also to find out his :-
a. Intelligence,
b. Aptitude,
c. Capacity,
d. Interests and
e. Suitability for a specific job.

Trade test is particularly necessary in the case of technical jobs such as junior
engineer, computer engineer and research assistant and so on. At present, such
test is given in the case of all types of jobs. For example, written tests are used by
Banks and public sector organizations for selection purpose.

6. It is also possible to reject candidates whose performance in such written tests is

not up to the mark. Testing of candidates is a lengthy process particularly when
the number of applicants is large. In such testing, the process of elimination can
be introduced. For example, all candidates may be invited for the first test and' the
candidates with poor performance in the first test need not be called for the
second test.
7. Psychological Tests: The psychological tests given to candidates include the
following tests :-
a. Intelligence test,
b. Aptitude test,
c. Interest test,
d. Achievement test,
e. Analytical test,
f. Performance test,
g. Synthetic test and
h. Personality test.

Each test needs to be given separately and each test is useful for judging specific
quality of a candidate to be selected for the executive post.

8. Personal Interview: The candidates who have shown reasonably good

performance in the written examination and psychological tests are called for
personal interview. Interview technique is used extensively for the selection of
managerial posts. This interview is conducted by one interviewer or by a group of
interviewers including top officers of the company and other professional experts.
The candidate is asked various questions about his qualifications, experience,
family background and performance in the written test and psychological tests by
the interviewers during the course of the interview. In this final interview, an
attempt is made to judge overall personality of the candidate. The selection
committee notes the plus and minus points of every candidate and selects the best
candidates for appointment by applying certain uniform norms. Here, 'short-
listing of candidates' is done for final selection as per the need of the organization.
The final selection depends partly on the performance of the candidate in the tests
and also on the performance in the personal interview.
9. Reference Check: The candidate is required to give at least two references which
may be :-
a. Educational,
b. Social and
c. Employment.

These references help to cross check the information provided by the candidate.
10. Medical Examination: The purpose of medical examination is to judge the
general health and physical fitness of the candidate. Candidates who are not
physically fit for the specific job are rejected even when they show good
performance in the tests and personal interview. Medical test is taken in the case
of all candidates before appointment. In case of certain jobs, the test is of a
general nature. However, medical examination has special importance in armed
11. Final Selection for Appointment: The selection procedure comes to an end
when the final appointment letter is sent to the candidate with a request to join the
organization on a particular date. This means the 'job is offered to the selected
candidate' and he is asked to join the organization within a specific time limit.

Psychological Tests / Selection Tests ↓

For scientific selection of candidates (particularly for higher level / executive level posts)
different types of tests are given to candidates as per the requirements of the post for
which selection is required to be made. Such tests include written test, trade test and
psychological tests. The basic purpose is to judge the knowledge, skills, intelligence,
aptitude, etc., of the candidate before his selection. It is also possible to reject the
candidates who show poor performance in such tests. The possible performance of the
candidate in the future can be judged with the help of such tests. Such tests need to be
conducted in a systematic manner and not as a mere formality. The assistance of experts
should be taken while conducting such tests. In addition, the results of such tests should
be used while taking final decision regarding selection of the candidate. Such tests are
particularly useful for the selection of supervisory staff in an Organization.

Important Psychological Tests ↓

1. Intelligence test: Intelligence test is useful for judging the intelligence of a

candidate. According to the industrial psychologist, "General intelligence is the
capacity of a person for comprehension and logical reasoning." Previously only
the passing certificates of certain examinations were universally accepted as
evidence of intelligence. After long experience, employees discovered that such
certificates were not always very reliable as they indicate only paper
qualifications. Fortunately for them, two French psychologists. Simon and Binet
had developed in 1916 suitable Intelligence Tests to measure general intelligence.
According to these tests, intelligence of a person or his intelligence quotient (I.Q.)
can be measured by his performance in the test.
2. Vocational aptitude test: Vocational aptitude has been defined as "the capacity
or latent ability of an individual to learn a job, given the necessary training." It has
been claimed that vocational aptitude is as important and perhaps more important
than general intelligence for success on a job. It is, therefore necessary to
ascertain the vocational aptitude of a candidate before final selection.
3. Analytical test: For the purpose of analytical tests, a job is first analyzed in terms
of such qualities as speed, dexterity, observation, etc. Terms are then devised to
measure the degree to which a candidate possesses these qualities. Dr.
Munsterberg, an industrial psychologist in the US, had first devised such tests
for the selection of telephone operators for the American Telephone and
Telegraph Company. He had also devised similar tests for the selection of
inspectors for inspection of ball bearings for an American bicycle manufacturer.
These tests had produced satisfactory results.
4. Synthetic test: In case of jobs which are complex and so cannot be analyzed and
for which analytical tests cannot be developed, synthetic tests have been evolved.
The essence of these tests is that the candidate is presented a complex situation,
more or less similar to the one which he will have to face in his job but on a
miniature scale and he is asked to handle the situation. His performance in such a
test indicates his aptitude for the job. Dr. Munsterberg had devised such a test for
the selection of tram drivers for a Tram Company in the United States. Today, a
similar test is being used for the selection of motor and truck drivers.
5. Trade test: Trade test is necessary and useful in the case of jobs which involve
technical work. For example, a stenographer or a typist should be given suitable
test in order to judge his ability to take dictation or type. Similar trade tests can be
given to welders, machine operators and so on. Workers can be given such tests in
order to find out their capacities for the type of job for which they are being
6. Personality test: Personnel managers have come across many individuals with
the necessary intelligence and the vocational aptitude, and yet did not prove
successful in the jobs for which they are selected. Industrial psychologists felt that
they might not have a suitable personality or temperament and began to develop
tests to measure personality traits. Protective test is one such test. Its essential
feature is that it induces a candidate to reveal his inner or real personality.

Advantages Of Psychological Tests In SP ↓

Note:- Here, SP = Selection Procedure

1. Objective comparison of candidates possible.

2. Incompetent candidates are eliminated.
3. Suitable candidates are given proper placement.
4. Right man to the right job is achieved.
5. Achievements of the candidates are verified.
6. Compatibility of the candidate can be found out.
7. Mental qualities of candidates are evaluated.
8. Overall ability of the candidates is measured.
9. Application of knowledge is found out.
10. Accuracy in selecting employees.

Importance / Role of Personal Interview In SP ↓

Interviewing is the most 'popular element in the selection procedure'. It plays a crucial
role in the selection procedure. For majority of executive posts, it is supplemented by
written and other tests. Personal interview offers many benefits to the company and also
to the candidates.

Management Development Training and Methods ↓

Meaning of Employee Training ↓

Training is next to selection. A worker selected / appointed in an Organization needs

proper training. This enables him to perform the job correctly and also with efficiency.
Similarly, a manager needs training for promotion and for his self improvement.
Employees are now given training immediately after appointment and thereafter from
time to time. Training is used as a tool / technique for management/executive
development. It is used for the development of human resource working in an
Organization. In fact, training is the watchword of present dynamic business world.

Training means giving information, knowledge and education in order to develop

technical skills, social skills and administrative skills among the employees. According to
Edwin Flippo, training is "the act of increasing the knowledge and skill of an employee
for doing a particular job."

Training is necessary due to technological changes rapidly taking place in the industrial
field. It is also essential along with the introduction of new techniques, new methods and
so on. It is necessary for developing overall personality of employees and also for
developing positive attitude towards fellow employees, job and Organization where he is

Training of employees is the responsibility of the management / employer. Expenditure

on such training is an investment for manpower development and gives good dividend in
the long run. Employees should take the benefit of training facilities provided for raising
their efficiency and also for self-development. Training need not be treated as a
punishment but an opportunity to learn, to grow and to develop for jobs at the higher

Types of Training ↓

Different types of training are:-

1. Induction training,
2. Job training,
3. Training for promotion,
4. Refresher training,
5. Training for managerial development, etc.

Induction training aims at introducing the organization to a newly appointed employee. It

is a short and informative training given immediately after joining the organization. The
purpose is to give "bird's eye-view" of the organization to an employee. Job training
relates to specific job and the purpose is to give suitable information and guidance to a
worker so as to enable him to perform the job systematically, correctly, efficiently and
finally with confidence.

Training for promotion is given after the promotion but before joining the post at the
higher level. The purpose is to enable an employee to adjust with the work assignment at
the higher level. The purpose of refresher training is to update the professional skills,
information and experience of persons occupying important executive positions. Training
for managerial development is given to managers so as to raise their efficiency and
thereby to enable them to accept higher positions. A company has to make provision for
providing all types of training.

Objectives of Training ↓

1. To raise efficiency and productivity of employees and the Organization as a

2. To create a pool of well-trained, capable and loyal employees at all levels and
thereby to make arrangement to meet the future needs of an organization.
3. To provide opportunities of growth and self-development to employees and
thereby to motivate them for promotion and other monetary benefits. In addition,
to give safety and security to the life and health of employees.
4. To avoid accidents and wastages of all kinds. In addition, to develop balanced,
healthy and safety attitudes among the employees.
5. To meet the challenges posed by new developments in science and technology.
6. To improve the quality of production and thereby to create market demand and
reputation in the business world.
7. To develop cordial labor management relations and thereby to improve the
organizational environment.
8. To develop positive attitude and behavior pattern required by an employee to
perform a job efficiently. In other words, to improve the culture of the
9. To prevent manpower obsolescence in an organization.
10. To develop certain personal qualities among employees which can serve as
personal assets on long term basis.

Importance of Training ↓

(A) Benefits of Training To Employer / Management

1. Training raises the efficiency and productivity of managers. It also improves the
performance of workers due to their motivation.
2. Training improves the quality of production. It also reduces the volume of spoiled
work and wastages of all kinds. This reduces cost of production and improves
3. It reduces accidents as trained employees work systematically and avoid mistakes
in the work assigned.
4. Training reduces expenditure on supervision as trained employees take interest in
the work and need limited supervision and control.
5. Training brings stability to labor force by reducing turnover of managerial
6. Training raises the morale of employees.
7. Training creates skilled and efficient manpower which is an asset of an industrial
8. Training moulds attitudes of employees and develops cordial industrial relations.
9. Training reduces absenteeism as trained managers find their job interesting and
prefer to remain present on all working days.
10. Training facilitates the introduction of new management techniques and also new
production techniques including automation and computer technology.
11. Training creates a pool of trained and capable personnel from which replacements
can be drawn to fill up the loss of key personnel due to retirement, etc.
12. Training provides proper guidance and instructions to newly appointed executives
and assists them to adjust properly with the job and the organization.

(B) Benefits of Training to Managers / Employees ↓

1. Training creates a feeling of confidence among the employees. It gives personal

safety and security to them at the work place.
2. Training develops skills which act as valuable personal assets of employees.
3. Training provides opportunity for quick promotion and self-development to
4. Training provides attractive remuneration and other monetary benefits to
5. Training develops adaptability among employees. It updates their knowledge and
skills and keeps them fresh. It actually refreshes the mental outlook of employees.
6. Training develops positive attitude towards work assigned and thereby creates
interest and attraction for the job and the work place.
7. Training creates an attitude of mutual co-operation and understanding among the
managers. Such attitude is useful not only at the work place but also in the social

Meaning of Management Development / Managerial Training ↓

In addition to training for operative staff, an organization has to take steps for training
managers. Such training programmes are called 'managerial development / executive
development programmes. Managerial talent is the most important asset that a company
can possess. Management development ensures that as and when the demand for
managers arises, suitably qualified persons are ready to fill the vacancies.

Managerial development consists of all means by which executives learn to improve their
performance. It is designed to improve the effectiveness of mangers in their present jobs
and to prepare them for higher jobs in future. Managerial development aims at helping
the mangers to realize their full potential.
Management development is a way to improving the culture of the Organization so that it
could be geared to excellence. "People move organizations not machines."

According to P. N. Singh, "Management development is an activity designed to improve

the performance of existing managers, provide a supply of managers to meet the need of
organizations in future and extend the understanding of the management activity by
drawing from the following three resource areas :- (a) Knowledge, (b) Experience, and
(c) Trainee himself."

Need / Importance of Management Development ↓

According to Edwin Flippo, "No organization has a choice of whether to develop

employees or not, the only choice is that of method." The need for management
development is well accepted in the present business, which is fast changing due to
technological and social developments.

1. Shortage of trained managers: Talented and matured managers are not easily
available. It is not possible to appoint managers from outside for the key
managerial posts. The better alternative is to select talented persons as trainee
managers and develop their qualities through special training and wider
exposures. In this way, the organization can create its own team of talented
managers to lead the whole Organization.
2. Complexity of management jobs: The jobs of managers are now complicated
and more challenging. They need varied skills for dealing with the complex
organizational problems. For this, talented persons should be selected and proper
training should be given to them.
3. Technological and social changes: Rapid technological and social changes are
taking place in the business world. In India, such developments are fast taking
place along with the liberalization and globalization of business. Managers should
be given proper training and exposure in computer applications and information
4. Management obsolescence: Executive obsolescence occurs due to mental
deterioration and aging process. This can be corrected by offering self-
development opportunities to managers. In fact, self-development must continue
throughout the career of an executive.
5. Complexity of business management: Business management is becoming very
complicated due to government legislations, market competition, social pressures
and consciousness among consumers. Well-trained and matured managers are
therefore required. Such managers are not available easily. The best way is to
train existing managers through management development programmes.

(B) Methods of Management Development / Managerial Development ↓

For management development, several methods / techniques are used. These methods can
be divided into two broad categories, namely,
i. Internal or On the job methods, and
ii. External or Off the job methods.

(A) Internal Training Methods / On The Job Methods

1. Coaching: Coaching on the job coaching is a method by which a superior teaches

job knowledge and skills to a subordinate manager. He briefs the trainee
executive about what is expected of him and how it can be done. The superior
also checks the performance of his subordinate and guides him to improve his
shortfalls and deficiencies. The superior acts as a friend and guide of his
subordinate. Coaching method favors learning by doing. Its effectiveness depends
on the capacity and the interest taken by the superior and also by the subordinate.
The superior should adopt a positive approach in the coaching process and help
the subordinate in achieving self-development. Coaching has certain limitations.
For example, a trainee manager cannot develop much beyond the limits of his
own superior's abilities. Similarly, the success of coaching method depends on the
interest and initiative taken by the trainee - manager.
2. Counseling: Under this method, the subordinate wanting advice approaches his
superior. Counseling is provided in matters relating to the job. However, on
request from the subordinate, counseling may also be offered on matters not
directly related to the job. There is two-way dialogue between the subordinate and
the superior to find solution to his problem. Counseling provides emotional
stability to trainee - subordinate.
3. Understudy assignment: An understudy is a trainee-manager who is to assume
the full duties and responsibilities of the position currently held by his superior,
when the later leaves his post due to retirement, transfer or promotion. Here, a
departmental manager (head) selects one of his suitable subordinates to become
his understudy. As an alternative, the personnel department may make the
selection of understudy. The departmental manager will guide him (i.e.
understudy) to learn his job and deal with the problems that confront the manager
daily. The understudy will learn the job of his superior through observation and
participation in the decision making. He may be given specific problems to study
and to make recommendations for solving them. The understudy will be given
wider exposure and an opportunity to develop capacity to deal with difficult
problems and complex situations.
4. Job Rotation: It involves transfer of executives from one job to another. The aim
of job rotation is to broaden the knowledge, skills and outlook of executives. This
method can be used in the case of management trainee and also in the case of an
existing manager due for promotion. Job rotation method is also useful for
providing variety of job experience to managers.

Advantages of Job Rotation

1. It brings all departments on the same footing as executives move from one
department to other.
2. Job rotation facilitates inter-departmental cooperation. New procedures are
introduced in departments along with the rotation of managers.
3. The benefit of wider exposure is available to trainee manager.
4. There is absence of monotony in the training process due to job rotation.

Limitations of Job Rotation are:-

5. The work of departments is affected due to frequent changes of executives

for training purpose.
6. The trainee manager finds it difficult to adjust himself to his new bosses.
7. Even the executives are not in a position to have specialized knowledge
and training in one particular branch of work.
8. Frequent changes of position of executives may also affect their morale.
5. Delegation: Delegation is one more internal method of management
development. The performance of subordinates may not improve unless additional
responsibility and authority are delegated to them. Making the subordinates to
achieve a particular target through delegation is one way by which subordinates
will learn to grow and develop independently. They will develop leadership
qualities and decision-making skills, which are necessary for a good manager.
6. Appointment as 'Assistant to’: A junior executive may be appointed as
'Assistant to' senior executive for the purpose of training and practical experience.
Here, the junior executive is given exposure to the job of senior executive and he
teams new techniques while providing assistance to his boss. This broadens his
viewpoint and makes him ready for future promotions. The superior executive
also gets the benefit as he can delegate some of his responsibilities to the assistant
and also acts as guide of his assistant.
7. Membership of Committees: Inter-departmental committees are normally
created for bringing co-ordination in the activities of different departments.
Managers from different departments are taken on such committees. Junior
managers are also given membership of such committees so as to give them a
broader exposure to the viewpoints of other departmental heads. Ad hoc
committee of executives is also constituted and is assigned a specific problem for
study. Such committee assignments offer opportunity of training to junior
executives, as they have to study the problem in depth and make
8. Project Assignment: In the project assignment method, a trainee manager is
given a project that is closely related to the work of his department. The project
relates to specific problem faced by the department. Here, the executive has to
study the project on his own and make recommendations for the consideration of
the departmental head. Such assignment provides valuable experience to the
trainee and develops problem-solving attitude, which is one essential requirement
of an executive.
9. Promotions and Transfers: Promotions and transfers are two more internal
methods of management development. Promotion gives an opportunity to a
manager to acquire new skills required for the job at the higher level. It motivates
him for self-improvement. Transfer also facilitates the broadening of viewpoint
required for higher positions. It gives an opportunity to work at different positions
and develop.
(B) External Methods of Management Development / Off The job
Methods ↓

1. Universities and Colleges: The universities and colleges, now, provide facilities
of management education. Here, education is given through lectures, discussions,
home assignments, tests and examinations. In India, Mumbai University (MU)
has its Jamnalal Bajaj Institute of Management Studies (JBIMS) for various
management development courses. Colleges affiliated to the Universities also
conduct DBM, MBA and other management development programmes for the
executives from business sector. Candidates working at managerial levels in
companies are normally selected for such training programmes.
2. Management Institutions: Along with the universities and colleges, there are
management training institutions such as NITIE, Bombay Management
Association, and Productivity Councils and so on. These institutes run special
training courses for graduates interested in management education and also
orientation programmes for existing managers from public and private sector
enterprises. Companies can depute their managers for short orientation courses
and update the knowledge and information of their managers in specific areas.
Even seminars, workshops and conferences are arranged for the training of
managers by various associations such as chambers of commerce and export
promotion councils.
3. Role-playing: Role-playing has been defined as "A method of human interaction,
which involves realistic behavior in the imaginary situations." It is particularly
useful for learning human relations and leadership training. Its objective is to raise
the ability of trainee manager while dealing with others. In the role playing, a
conflict situation is artificially created and two or more trainees are assigned
different roles to play. For example, a male employee may assume the role of a
female supervisor and the female supervisor may assume the role of a male
employee. Then, both may be given a typical work situation and asked to respond
as they expect others to do. Such role playing results in better understanding
among individuals. It helps to promote interpersonal relations and attitude change.
4. Case Study: Case study method was first developed by Christopher Langdell at
Harvard Law School. A case is a written account giving certain details of the
situation is relation to a specific matter. Such case study may be related to any
aspect of management such as production, marketing, personnel, finance and so
on. The case presented is always incomplete. This means the solution to the
problem is not provided. The participants are supposed to identify the best
available solution.

A small group of managers are asked to study the case in the fight of theoretical
study already completed and is followed by open discussion in the presence of
capable instructor, who can guide intelligent discussion and analysis. There is
nothing like one correct answer to the case study.
Case study method has certain advantages like, (a) in-depth thinking about the
matter by managers, (b) more perception in situation and greater respect for the
opinions of others.
5. Conferences and Seminars: Deputing officers for conferences and seminars is a
method available for management development. Various matters are discussed
systematically in such conferences and seminars. This provides new information
and knowledge to the managers. The participants in such conferences and
seminars are limited. As a result, more persons get an opportunity to participate in
such conferences for self-development. Conferences may be directed or guided or
may be for consultation and finally for problem solving.
6. Simulation: Here, an executive or trainee is given practical training by creating
situation / environment, which closely represents the real life situation at the work
place. For example, activities of an organization may be simulated and the trainee
may be asked to make a decision in support of those activities. The results of
those decisions are reported back to the trainee with an explanation. The report
illustrates what would have happened if that decision was taken. The trainee
teams from this feedback and improves his subsequent simulation.
7. Management / Business Games: A variety of computer and non-computer
management / business games have been devised for training of managers. This
training method is used in management development. It is a type of classroom
method of training. The game is designed to represent real life situation.
Employees for managerial positions are put in an exercise of actual decision-
making. A problem is provided to them along with all the necessary information
and constraints. The employee is asked to make a decision. The quality of this
decision is judged by how well the applicant has processed the information
provided to him. The processing of information is supposed to be guided by
knowledge of the goals and policies of the organization. Even if mistake is made
in the game, the trainee can learn a lot out of his mistake. This avoids possible
mistakes while taking decisions for his company. This method develops capacity
to take rational decisions by managers.
8. TV and Video Instructions: TV and Video instructions are used for training and
management development programmes. At present, programmes on management
problems are arranged on TV network regularly. Videotapes are also available on
management training. Books and periodicals are published regularly on
management. Audio-visual aids (film strips, Video, tape recorders, TV, overhead
projectors, etc.) are now used for training of managers.

Question Bank On Human Resource Management and Development -


1. Explain the meaning, nature and features of human resource.

2. Explain, in brief, the steps in the selection procedure.
3. Explain the significance scientific selection of supervisory staff.
4. State and explain the different methods of training of managerial personnel.
5. What are the objectives and benefits of training of managers?
6. Write short notes on:
i. Recruitment and selection
ii. Sources of recruitment
iii. Meaning and objectives of employee training
iv. Advantages of training of employees

Motivation Motivational Factors

Incentives Theories of Motivation
What is Motivation? Meaning

Motivation is next to directing / leading. Managers can motivate their subordinates while
guiding them. Motivating means encouraging people to take more initiative and interest
in the work assigned. It is an art of getting things done willingly from others.

Motivation avoids clashes and non-cooperation and brings harmony, unity and co-
operative outlook among employees. Managers have to work as motivators of their
subordinates. For this, effective communication, proper appreciation of work done and
positive encouragement are necessary and useful. Motivation is inspiring and
encouraging people to work more and contribute for achieving the objectives of the
company. The creation of the desire and willingness to perform the job efficiently is
known as motivation.

Motivation is a psychological and sociological concept as it relates to human behavior

and human relations. It is the most fundamental and all pervasive concept of psychology.
For motivation, sweet words are useful but are certainly not adequate. Motivation
basically relates to human needs, desires and expectations. In other words, these factors
suggest the measures which can be used for the motivation of employees.

In motivation, efforts should be made to satisfy the different needs of employees so that
they will be satisfied, happy and away from tensions. This creates favorable environment
because of which employees take more interest and initiative in the work and perform
their jobs efficiently. Motivation is a technique of creating attraction for the job. It is
encouraging employees for better performance in order to achieve the goals of an
Organization. The process of motivation is a continuous one (circular one) and is
beneficial to both - employer and employees. It is a key to improve work performance of

The term 'motive' is derived from the Latin word 'emovere' which means to move or to
activate. Motivation is the act of making someone to act in the desired manner through
positive encouragement. It is through motivation that employees can be induced to work
more, to earn more and to give better results to the Organization.
Definition of Motivation

1. According to W. G. Scot, "Motivation means a process of stimulating people to

action to accomplish the desired goals."
2. According to Michael J. Jucius, "Motivation is the act of stimulating someone or
oneself to get a desired course of action, to push the right button to get a desired

Features of Motivation

1. Psychological Process: Motivation is a psychological process useful for

encouraging employees to take more interest in the work assigned. It relates to
human relations.
2. Initiative by Manager: The initiative for motivation is by the manager by
offering guidance and also by other methods like appreciation of good work or
offering incentives. Management has to adopt special measures for motivating
employees. They include monetary as well as non-monetary.
3. Continuous activity: It is a continuous and circular process. Subordinates need
motivation in a continuous manner as their needs and expectations change from
time to time. A manager has to study the needs of workers and use the technique
of motivation accordingly. The process of motivation must be made a regular and
continuous one.
4. Goal-oriented and action-oriented: Motivation diverts human behavior towards
certain goals. Attainment of organizational and individual goals depends on the
motivational plans.
5. Broad concept: Motivation covers needs, human relations and satisfaction of
employees. For employee motivation, monetary and other incentives need to be
offered. Job satisfaction is one such need and is useful for their motivation.
6. Essence of management process: Motivation is an essential function of a
manager. He has to motivate his subordinates for achieving organizational
objectives. Motivated labor force is an asset of a business unit. Motivated
employees bring prosperity to a business unit.
7. Beneficial to employees and management: Motivation offers benefits to
employees and Organization. It avoids crashes and encourages cooperative
outlook among employees. Motivation leads to cordial labor-management
relations. It provides more profit to management and better welfare to employees.
8. Varied measures available for motivation: For motivation, various monetary
and non monetary incentives can be offered to employees by the management.
Attractive wages, welfare facilities, job satisfaction, appreciation of good work,
encouragement to self-development, job security and fair treatment are some
measures of motivating employees.
9. Motivation is different from satisfaction: Motivation implies a drive towards a
result while satisfaction involves result already experienced and achieved. 'When
desire is satisfied, employee is motivated'.
10. Related to a person in totality: An employee is motivated in totality and not in
part. Employee's basic needs are interrelated. Management must fulfill all the
needs through monetary and non-monetary incentives.

Importance of Motivation

Motivation occupies an important place and position in the whole management process.
This technique can be used fruitfully for encouraging workers to make positive
contribution for achieving organizational objectives. Motivation is necessary as human
nature needs some sort of inducement, encouragement or incentive in order to get better
performance. Motivation of employee’s offers may benefits to the Organization and also
to the employees. This suggests the importance of motivating employees. Motivation acts
as a technique for improving the performance of employees working at different levels.

Motivation of employees is one function which every manager has to perform along with
other managerial functions. A manager has to function as a friend and motivator of his
subordinates. Motivation is useful in all aspects of life and even our family life. The same
is the case with business. This dearly suggests that motivation is extremely important. It
is an integral part of management process itself.

Advantages of Motivation

(A) Advantages of Motivation to Management / Organization

1. Increase in the efficiency and productivity of employees. Motivation ensures a

high level performance of employees.
2. Better co-operation from employees and cordial labor-management relations.
3. Reduction in the rate of labor absenteeism and turnover.
4. Reduction in the wastages and industrial accidents.
5. Improvement in the morale of employees.
6. Quick achievement of business/corporate objectives and favorable corporate

(B) Advantages of Motivation to Employees / Workers

1. Employees get various monetary and non-monetary facilities/benefits which

provide better life and welfare to them.
2. Security of employment and other benefits due to cordial relations with the
3. Job attraction and job satisfaction.
4. Higher status and opportunities of participation in management.
5. Positive approach and outlook of employees towards company, management and
6. Reduction in the rate of labour turnover which is harmful to employees and
7. Better scope for improvement in knowledge and skills of employees.
Motivational Factors / Incentives

(A) Monetary or Financial Incentives

Monetary incentives are offered in terms of money. Such incentives provide more cash or
purchasing power to employees. Monetary incentives are extremely attractive to
employees (particularly those working at lower levels) as they get the benefit quickly and
in concrete terms. At the higher levels of management, non-monetary incentives are more
important than monetary incentives. Workers prefer monetary incentives as compared to
non-monetary incentives. Managements also offer liberal monetary incentives to all
categories of workers.

Monetary incentives may be further classified as following:-

1. Individual Monetary Incentives: The benefit of individual monetary incentive is

available to concerned worker only. For example, F. W. Taylor suggested
differential piece rate system which offers different wage rates to different
workers as per their production efficiency. Different incentive wage plans are the
examples of individual monetary incentives as the benefit is offered individually
to every worker. Here, a worker is paid as per his efficiency, productivity or as
per the production given by him. Efficient/sincere workers give more production
and get higher reward in terms of wage payment.
2. Group Monetary Incentives: In the group monetary incentives, the monetary
benefit is not given individually but to a group of workers or to all workers in the
Organization. Workers have to work jointly/collectively as a team in order to
secure the benefits of group monetary incentives. Bonus payments, pension, P.F,
production/productivity bonus, profit sharing, etc. are the examples of group
monetary incentives. For the employer/management, group incentives are more
important as they offer many benefits to the management.

(B) Non-monetary Incentives for Employee Motivation

1. Job security and job enrichment: Job security is useful for the motivation of
employees. Such security keeps the employee away from the tension of becoming
unemployed. Job enrichment provides an opportunity for greater recognition and
advancement. Job enrichment refers to redesign of jobs.
2. Fair treatment to employees: Employer should give attention to the needs,
difficulties and grievances of employees. Small work groups and effective
communication are useful for solving the problems of workers. Employees must
be given decent treatment. They will be co-operative only when they are treated
with sympathy and love, affection and dignity. Employees should also be given
help in personal matters.
3. Recognition of good work: Recognition of good work at an appropriate time
gives encouragement to employees to show better performance in future. As an
appreciation of good work, prizes, rewards, promotions, etc. should be given.
4. Encouragement to self-development and career development: Employees
should be given varied training facilities. Training facilitates self-development
and also provides opportunities for career development. Every employee has a
desire to grow, develop and rise higher. This desire should be exploited fully for
motivating employees. For this, training as well as management development
programmes should be introduced.
5. Delegation of authority: Due to delegation of authority, a subordinate employee
feels that superior has faith in him and also in his ability to use authority in a
proper manner. Employees get mental satisfaction when authority is given to
them. They take interest and initiative in the work and try to prove that they are
competent to work at the higher levels. Thus, delegation of authority becomes a
motivating factor.
6. Congenial working conditions: It is a non financial incentive for motivation.
Employees should be given various facilities and conveniences at the work place.
The work environment should be pleasant and safe. This creates desire to work
7. Helpful attitude of management: The helpful attitude of management towards
its employees creates a sense of affinity for the Organization. Fair treatment to
workers creates better understanding among workers. Cordial industrial relations
also motivate employees. Thus, enlightened and pro-employee attitude of
management acts as a motivating factor.
8. Fair opportunity of promotion: Fair opportunity of promotion to all eligible
workers is one more method useful for motivating employees. They take interest
in the work as they feet that they will be rewarded in the form of promotions.
Training facility should be provided to employees in order to make them eligible
for promotion.
9. Labour participation in management: Labour participation in management is
useful for the motivation of employees. Workers get higher status and better
scope for expressing their views through such participation. Even the formation of
quality circles or joint management councils is useful for motivating employees.
10. Designation and status: When an employee is provided with a better designation,
it adds to his status. Employees are proud to reveal their attractive and high-
sounding designations.

Theories of Motivation

Main theories of motivation are:-

1. Maslow's Hierarchy of Needs Theory.

2. Hertzberg’s Two Factor Theory.
3. Douglas McGregor's Theory X Theory Y.
4. McClelland's Achievement Motivation Theory.

Hawthorne Studies in Motivation

The most famous of all human relations movement and research were Hawthorne
Experiments. So named because they were carried on in Hawthorne plant of western
Electric Company of Chicago in USA.

Dr. Elton Mayo led a team from Harward University which cooperated with western
electric co. in the period 1927-1936 to carry out Hawthorne Experiments. They identified
following details.

1. Recognized the importance of employee attitudes such as understanding voluntary

co-operations and willing dedication in accomplishment of organizational goals.
2. Found that employee performance is very much influenced by his attitude towards
his job, associates and management.
3. Proved that organizational firm can gain only when its employees are satisfied
contented in their jobs.
4. Pointed out that any change to be should be made should be explained and its
meaning should be clear to employees. The fact that change is logical is not
enough because employees may not appreciate the logic.
5. Explored much of information on group behavior.
6. Thus have provided the basis for much of what we know about getting along with
all, problem employees in particular.
Maslow's Hierarchy of Needs - Theory of
Human Motivation
Maslow's Hierarchy of Needs Theory

It was in 1943 a Psychologist Mr. Abraham Harold Maslow suggested his Theory of
Human Motivation. His theory is one popular and extensively cited theory of
motivation. Maslow's theory is based on the Hierarchy of Human Needs. According to
Maslow, human behavior is related to his needs. It is adjusted as per the nature of needs
to be satisfied. In hierarchy of needs theory, Maslow identified five types / sets of human
need arranged in a hierarchy of their importance and priority. He concluded that when
one set of needs is satisfied, it ceases to be a motivating factor. Thereafter, the next set of
needs in the hierarchy order takes its place. These needs in hierarchy can be compared to
a pyramid. At the lowest level, there will be first set of needs which can be described as
basic needs and are universal in character. This will be followed by other sets of needs.

Assumptions in Hierarchy of Needs Theory

Maslow's Assumptions in Hierarchy of Needs Theory are :-

1. Man is a wanting being, i.e. his wants are growing continuously even when some
wants are satisfied. Human needs are of varied and diversified nature. They can
be arranged in a hierarchy of importance progressing from a lower to a higher
order of needs.
2. Needs have a definite hierarchy of importance. As soon as needs on a lower level
are fulfilled, those on the next level will emerge and demand satisfaction. This
suggests that bread (food) is essential and is a primary need of every individual.
According to Maslow, "Man lives by bread alone when there is no bread."
However, he feels the other needs when his physiological needs are fulfilled. In
brief, bread is important but man does not live by bread alone. There are other
needs (security / safety, social, esteem and self actualization which influence
behavior of people (employees) to work. This is the basic feature of Maslow's
need hierarchy. Attention to all human needs is essential for motivation of
employees. Attention to the provision of bread alone is not adequate for
motivating employees. Bread can act as motivating factor when there is no bread
but when it is available, its use as motivator comes to an end. Here, other
motivators (e.g. security of job, social status, etc.) will have to be introduced for
motivating employees. Attention to other needs such as security needs, social
needs, esteem needs and self actualization needs is equally important and essential
for the motivation of different categories of employees. Maslow, in his theory, has
referred to different needs and suggested that attention needs to be given to all
such needs as attention to physiological needs alone is not adequate for
motivating employees. According to Maslow, "Man does not live by bread
alone". This conclusion of Maslow is a practical reality and needs to be given
adequate attention while motivating employees.
3. A satisfied need does not act as a motivator.
4. As one need is satisfied, another replaces it.

Maslow's Pyramid of Human Needs

Maslow's Pyramid of Human Needs is shown in the following diagram.

The Maslow's Pyramid of Human Needs is explained below:-

1. Physiological Needs: Physiological needs are the basic needs for sustaining
human life. These needs include food, shelter, clothing, rest, air, water, sleep and
sexual satisfaction. These basic human needs (also called biological needs) lie at
the lowest level in the hierarchy of needs as they have priority over all other
needs. These needs cannot be postponed for long. Unless and until these basic
physiological needs are satisfied to the required extent, other needs do not
motivate an employee. A hungry person, for example, is just not in a position to
think of anything else except his hunger or food. According to Maslow, 'man lives
by bread alone,' when there is no bread. The management attempts to meet such
physiological needs through fair wages.
2. Security / Safety Needs: These are the needs connected with the psychological
fear of loss of job, property, natural calamities or hazards, etc. An employee
wants protection from such types of fear. He prefers adequate safety or security in
this regard i.e. protection from physical danger, security of job, pension for old
age, insurance cover for life, etc. The safety needs come after meeting the
physiological needs. Such physiological needs lose their motivational potential
when they are satisfied. As a result, safety needs replace them. They begin to
manifest themselves and dominate human behavior. Safety needs act as
motivational forces only if they are unsatisfied.
3. Social Needs: An employee is a human being is rightly treated as a social animal.
He desires to stay in group. He feels that he should belong to one or the other
group and the member of the group should accept him with love and affection.
Every person desires to be affiliated to such groups. This is treated as basic social
need of an individual. He also feels that he should be loved by the other members.
He needs friends and interaction with his friends and superiors of the group such
as fellow employees or superiors. Social needs occupy third position in the
hierarchy of needs.
4. Esteem Needs: This category of needs include the need to be respected by others,
need to be appreciated by others, need to have power and finally prestigious
position. Once the previous needs are satisfied, a person feels to be held in esteem
both by him and also by others. Thus, esteem needs are two fold in nature. Self
esteem needs include those for self confidence, self-respect, competence, etc. The
second groups of esteem needs are those related to one's status, reputation,
recognition and appreciation by others. This is a type of personal ego which needs
to be satisfied. The Organization can satisfy this need (ego) by giving recognition
to the good work of employees. Esteem needs do not assume the motivational
properties unless the previous needs are satisfied.
5. Self-actualization Needs: This is the highest among the needs in the hierarchy of
needs advocated by Maslow. Self actualization is the desire to become what one is
capable of becoming. It is a 'growth' need. A worker must work efficiently if he is
to be ultimately happy. Here, a person feels that he should accomplish something
in his fife. He wants to utilize his potentials to the maximum extent and desires to
become what one is capable of becoming. A person desires to have challenges and
achieves something special in his life or in the area of his specialization. Though
every one is capable of self-actualization, many do not reach this stage. This need
is fully satisfied rarely.

Limitations of Hierarchy of Needs Theory

Maslow's theory of motivation (Hierarchy of Needs Theory) is very popular all over the
world and provides guidelines to managers / managements for motivating employees.
However, Maslow's theory has many limitations.

Limitations of Maslow's Hierarchy of Needs Theory are noted below:-

1. Maslow's theory is over simplified and is based on human needs only. There is
lack of direct cause and effect relationship between need and behavior.
2. The theory has to refer to other motivating factors like expectations, experience
and perception.
3. Needs of all employees are not uniform. Many are satisfied only with
physiological needs and security of employment.
4. The pattern of hierarchy of needs as suggested by Maslow may not be applicable
uniformly to all categories of employees.
5. Maslow's assumption of 'need hierarchy' does not hold good in the present age as
each person has plenty of needs to be satisfied, which may not necessarily follow
Maslow's need hierarchy.
6. Maslow's theory is widely accepted but there is little empirical evidence to
support it. It is largely tentative and untested. Maslow's writings are more
philosophical than scientific.

Importance of Hierarchy of Needs Theory

Although Maslow's Hierarchy of Needs Theory has been criticized on above grounds,
still it holds many advantages or merits. It helps the managers to understand the behavior
of their employees. It also helps the managers to provide the right financial and non-
financial motivation to their employees. This overall helps to increase the efficiency,
productivity and profitability of the organization.

Frederick Herzberg's Two Factor Theory

- Motivation Hygiene
1. Frederick Herzberg Theory of Human Motivation

Frederick Herzberg's theory of motivation is also called 'Two Factor Theory', 'Dual
Factor Theory' and 'Hygiene / Maintenance Theory of Motivation'. This theory is based
on the information collected by him and his associates (in the USA in 1959) by
interviewing two hundred engineers and accountants. The information collected relates to
the attitude of people towards work. This attitude towards work depends on two sets of
factors namely hygiene or maintenance factors and the motivating factors.

2. Hygiene Factors of Two Factor Theory

According to Frederick Herzberg, the Hygiene Factors do little contribution to provide

job satisfaction. He called them "dissatisfiers' as their absence cause dissatisfaction but
their presence is not motivating but only prevent dissatisfaction. The hygiene factors
meet man's needs to avoid unpleasantness but do not motivate them to take more interest
in the work. Hygiene factors (when provided) create a favorable environment for
motivation and prevents job dissatisfaction. They are not an intrinsic part of a job, but
they are related to the conditions under which a job is performed. When employer is
unable to provide enough of these factors to his employees, there will be job
dissatisfaction. However, if they are provided, they will not necessarily act as motivators.
They will just lead employees to experience no job dissatisfaction. Such hygiene factors
are as noted below.

Hygiene / Maintenance Factors are:-

1. Company's Policies and Administration,

2. Supervision,
3. Working Conditions,
4. Interpersonal Relations with superiors and other subordinates,
5. Salary,
6. Job Security,
7. Status,
8. Personal Life, and
9. Employee Benefits.

3. Motivating Factors of Two Factor Theory

Motivating Factors act as forces of job satisfaction. They create positive and a longer
lasting effect on employee’s performance and are related to work itself. Adequate
provisions of such factors called are 'Satisfiers'. They make people happy with their jobs
because they serve man's basic needs for psychological growth. In addition, they also
motivate employees in their work. Such factors are five and are called motivators by
Herzberg. The motivating factors are:

Motivating Factors are:-

1. Achievement,
2. Recognition for Accomplishment,
3. Increased Responsibility,
4. Opportunity for Growth and Development, and
5. Creative and Challenging Work.

Motivating factors motivate subordinates to take more interest in the work. They raise
efficiency and productivity of employees. According to Frederick Herzberg, motivating
factors are essential in order to provide job satisfaction and in order to maintain a high
level of job performance. Employees will not have job satisfaction if the motivating
factors are not provided in sufficient quality by the employer.

According to Frederick Herzberg, these two sets of factors are quite independent of each
other. It may be noted that hygiene factors, when satisfied, tend to eliminate
dissatisfaction but do not motivate an individual employee for better performance. The
motivating factors will permit an individual to grow and develop in a natural way. In
brief, hygiene factors affect an individual's willingness to work while motivating factors
affect his ability and efficiency to work. This theory can be compared to Maslow's theory
of human needs as both the theories refer to needs and their role in motivation. In
addition, the assumptions in both the theories are identical.

Frederick Herzberg's theory has many limitations. They are related to research
methodology used, empirical validity and assumptions in the theory. His theory is
criticized on many grounds. Many have found the theory to be an oversimplification.
Despite such criticism, Herzberg's two factor theory has made a significant contribution
towards improving manager's basic understanding of human behavior. His theory is
simple to grasp, based on some empirical data and guides managers to improve employee
motivation. Herzberg provided stimulus to other researchers to develop alternative
theories of motivation.

4. Compare Maslow and Herzberg Theory

Distinction between Maslow and Herzberg's Theory of Motivation.

Douglas McGregor's Theory X & Theory
Y - Employee Motivation
1. Douglas McGregor's - Theory of Motivation

The eminent psychologist Douglas McGregor has given his theory of motivation called
Theory X and Theory Y. He first presented his theory in a classic article titled 'The
Human Side of Enterprise'. He treated traditional approach to management as 'Theory
X' and the professional approach to management as 'Theory Y'. His theory refers to two
sets of employees based on the perception of human nature. Here, theory X and theory Y
are two sets of assumptions about the nature of employees. His theory is based on human

2. Theory X.

Theory X is based on traditional assumptions about people (employees). Here, the

conventional approach of management is used as a base. It suggests the following
features of an average human being/employee (assumptions about human nature):

2.1 Assumptions of Theory X.

1. The average human being is inherently lazy by nature and desires to work as little
as possible. He dislikes the work and will like to avoid it, if he can.
2. He avoids accepting responsibility and prefers to be led or directed by some other.
3. He is self-centered and indifferent to organizational needs.
4. He has little ambition, dislikes responsibility, prefers to be led but wants security.
5. He is not very intelligent and lacks creativity in solving organizational problems.
6. He by nature resists changing of any type.

In the case of such employees, self-motivation is just not possible. They will work only
when there is constant supervision on them. A manager has to persuade, punish or reward
such workers in order to achieve organizational goals.

3. Theory Y.

Theory Y is based on modern or progressive or professional approach. Here, the

assumptions about people i.e. employees are quite different.

3.1 Assumptions of Theory Y.

1. Work is as natural as play, provided the work environment is favorable. Work

may act as a source of satisfaction or punishment. An average man is not really
against doing work.
2. People can be self-directed and creative at work if they are motivated properly.
3. Self-control on the part of people is useful for achieving organizational goal.
External control and threats of punishment alone do not bring out efforts towards
organizational objectives.
4. People have capacity to exercise imagination and creativity.
5. People are not by nature passive or resistant to organizational needs. They have
become so as a result of experience in organizations.
6. An average human being learns under proper conditions. He is also willing to
accept responsibility.
7. The intellectual capacity of an average human being is utilized partially under the
conditions of modern industrial life.

4. Final Glance On Theory X and Theory Y.

Such types of people (employees) are self-motivated and McGregor recommends that
they be motivated by encouraging participation so as to get team work. Theory Y
assumes that people are not by nature, lazy and unreliable. They can be self-directed and
creative at work, if properly motivated. It is for the management to unleash this potential
in individuals (employees). Theory Y emphasizes creating opportunities, removing
obstacles, providing guidance and encouraging growth. By using these tools, the
management can integrate individual goals of employees with those of the Organization.

The assumptions in Theory X and Theory Y are fundamentally distinct. Theory X is

static, rigid, conservative and pessimistic. Theory Y is optimistic, dynamic, flexible and
progressive. It suggests self direction and the integration of individual needs with
organizational needs. On the other hand, more importance is given to external control
imposed by the superior on the subordinate in the Theory X.

David McClelland’s Achievement

Motivation, Manifest Need Theory
1. McClelland’s Manifest Need Theory of Motivation.

Some people have an intense desire to achieve while others are not so keen about
achievement. David C. McClelland had studied this phenomenon for over twenty years
at Harvard University and proposed his Achievement Motivation Theory (Also called
Manifest Need Theory). According to him, there are certain needs that are learned and
socially acquired as the individual interacts with the environment. McClelland classified
such needs into three broad categories. These are (a) Need for power, (b) Need for
affiliation, and (c) Need for achievement.

(a) Need For Power.

This need is indicated by a person's desire to control and influence the behavior of others.
A person with desire for power likes to compete with others when the situation is
favorable for such domination. Such persons prefer jobs that provide them an opportunity
to acquire leadership with power. There are two aspects of power accordingly to
McClelland. These are: positive and negative. Positive use of a power is necessary when
a manager desires to achieve results through the efforts of others. The negative use of
power is possible when a person uses power for personal aggrandizement. Such use of
power may prove to be harmful to the Organization.

(b) Need For Affiliation.

Here, the person has a need/desire for affection and wants to establish friendly
relationships. A person with high need for affiliation seeks to establish and maintain
friendships and dose emotional relationships with others. He wants to be liked by others
and develops a sense of belonging by joining informal groups in the Organization. Such
persons (managers) prefer tasks that require frequent interaction with subordinates/co-

(c) Need For Achievement.

Here, the person desires to succeed in competitive situations. He desires to prove his
superiority over others. Such person sets reasonably difficult but potentially achievable
goals for himself. He accepts moderate degree of risk. He is more concerned with
personal achievement than with the rewards of success. Moreover, he feels that he can
achieve the goal with his efforts and abilities. He also desires to have concrete feedback
(social or attitudinal) on his performance. Such person has high level of energy and
capacity to work hard. He naturally prefers jobs which tax his abilities and skills fully.
This again is for achieving the objectives set. According to McClelland, the need for
achievement is the most important need which can be used effectively for the economic
progress of a nation.

Persons with achievement needs tend to be motivated by difficult, challenging and

competitive work situations and not by routine and non-competitive situations. They
habitually spend their time thinking about doing things better. They are not motivated by
money but in their future achievements. Such employees are better achievers and
naturally get promotions faster. An Organization also grows faster and moves towards
prosperity with the support of such achievement seekers employees.

2. Importance of Achievement Motivation Theory.

McClelland's theory is important as he argues that the achievement motive can be taught.
It can be achieved by learning. A manager can raise achievement need level of his
subordinates by creating a healthy work atmosphere, provision of reasonable freedom to
subordinates, provision of more responsibilities and by making tasks more interesting and
challenging. Even reward and appreciation of high performance of subordinates is useful
for raising their achievement need level. This is how motivation of employees is possible
by developing the desire for higher achievement in their mind. Such achievement
motivation is necessary and useful for the success of an enterprise.
McClelland's theory of motivation is quite extensive. He developed achievement motive
for motivation. His assertion that achievement motive can be developed among the
employees is important. This is possible through well-conceived and deliberate learning
process. This he (McClelland) proved in an experiment carried out in a large U.S.

According to McClelland, every person has an achievement motive to some extent.

However, some are constantly more achievement-oriented than others. Most people will
put more efforts into their work if they are challenged to do better. However, the
achievement-motivated person is likely to outstrip all others in his zeal to improve
performance when he is challenged. He makes more efforts and accomplishes more. This
background can be used for motivation of employees. In fact, McClelland's achievement
motivation theory is based on this experience which he gained while working with
Harvard University.

Achievement motivation is very essential for the success of an entrepreneur or

enterprise. Every employee should have some objective which he desires to achieve.
Such desire for achievement acts as a motivating factor. According to McClelland, the
need for achievement is the most important need. It can be used as motivating factor for
economic progress of a nation and even for the success of an enterprise or entrepreneur.
An entrepreneur or a manager has to put forward some objective before every employee
and encourage the employee to achieve the same. To create the desire for achievement of
objective is a way to motivate employee. In this way, achievement motivation is useful
for the success of an enterprise/entrepreneur.

Quality Control Total Quality

Management TQM Quality Circles
1. Introduction to Quality

Every manufacturing organization is concerned with the quality of its product. While it is
important that quantity requirements be satisfied and production schedules met, it is
equally important that the finished product meet established specifications. Because,
customer's satisfaction is derived from quality products and services. Stiff competition at
national and international level and consumer's awareness require production of quality
goods and services for survival and growth of the company. Quality and productivity are
more likely to bring prosperity into the country and improve quality of work life.

However, the management looks to achieve customer satisfaction by running its business
at the desired economic level. Both these can be attained by properly integrating quality
development, quality maintenance and quality improvement of die product. The
integration of these three aspects of a product can be achieved through a sound quality
control system.
2. The Meaning of Quality

Quality is a relative term and it is generally used with reference to die end use of the
product. For example, a gear used in sugarcane juice extracting machine may not possess
good surface finish, tolerance and accuracy as compared with the gear used in the head
stock of a lathe, still it may be considered of good quality if it works satisfactorily in die
juice extracting machine. The quality is thus defined as die fitness for use/purpose at die
most economical level.

The quality depends on die perception of a person in a given situation. The situation can
be user-oriented, cost-oriented or supplier-oriented. Since, die item is manufactured for
me use of die customer, die requirements of die customer dictates die quality of die
product. Quality is to be planned, achieved, controlled and improved continuously.

The word "Quality" has variety of meanings:-

1. Fitness for purpose: The component is said to possess good quality, if it works
well in the equipment for which it is meant. Quality is tiius defined as fitness for
2. Conformance to requirements: Quality is die ability of the material/component
to perform satisfactorily in an application for which it is intended by die user.
Quality of a product, thus, means conformance to requirements. Customer needs
have to be assessed and translated into specifications depending upon die
characteristics required for specific application. Just as every human has his own
characteristics every application has its own characteristics.
3. Grade: Quality is a distinguishing feature or grade of the product in appearance,
performance, life, reliability, taste, odor, maintainability etc. This is generally
called as quality characteristics.
4. Degree of preference: Quality is the degree to which a specified product is
preferred over competing products of equivalent grade, based on comparative test
by customers, normally called as customer's preference.
5. Degree of excellence: Quality is a measure of degree of general excellence of the
6. Measure of fulfillment of promises: The quality of a product is a measure of
fulfillment of the promises made to the customers.
1. Suitability: For specific application.
2. Reliability: It should give efficient and consistent performance.
3. Durability: It should have desired life.
4. Safety: Safe and foolproof workability.
5. Affordability: It should be economical.
6. Maintainability: It should be easy to maintain.
7. Aesthetic look: It should look attractive.
8. Satisfaction to customers: It should satisfy the customers' requirements.
9. Economical: It should have reasonable price.
10. Versatility: It should serve number of purposes.
A product can be said to possess good quality if all the above requirements are
properly balanced while designing and manufacturing it.

3. Quality Control

Control can be defined as "a process by means of which we observe the actual
performance and compare it with some standard".

If there is a deviation between the observed performance and the standard performance
then it is necessary to take corrective action.

The term "Quality Control" has variety of meanings:

1. Quality control is the process through which we measure the actual quality
performance, compare it with the standards and take corrective action if there is a
2. It is a systematic control of various factors that affect the quality of the product. It
depends on: Material, Tools, Machines, type of labour, working conditions,
measuring instruments, etc.
3. Quality control can be defined as the entire collection of activities which ensures
that the operation will produce the optimum quality products at minimum cost.
4. It can also be defined as the tools, devices or skills through which quality
activities are carried out.
5. It is the name of the department which devotes itself full time to quality functions.
6. The procedure for meeting the quality goals is termed as quality control.
7. It is a system, plan or method of approach to the solution of quality problems.
8. As per A.Y. Feigorbaum
Total Quality control is "An effective system for integrating the quality
development, quality maintenance and quality improvement efforts of the various
groups in an organization, so as to enable production and services at the most
economical levels which allow full customer satisfaction."

4. Steps In Quality Control Programme

1. Formulate quality policy.

2. Work out details of product requirements, set the standards (specifications) on the
basis of customer’s preference, cost and profit.
3. Select inspection plan and set up procedure for checking.
4. Detect deviations from set standards or specifications.
5. Take corrective action through proper authority and make necessary changes to
achieve standards.
6. Decide on salvage method i.e. to decide how the defective parts are disposed of,
entire scrap or rework.
7. Co-ordination of quality problems.
8. Developing quality consciousness in the organization. Quality control is not a
function of any single department or a person. It is the primary responsibility of
any supervisor to turn out work of acceptable quality.

Quality control is one aspect of production planning and control. It is basically concerned
with the quality production through regular inspection technique. Quality is a
combination of characteristics pertaining to the manufacture of the product and control is
the correction in the quality of the product, when the deviations in the product are more
than expected. A good quality item is one which conforms to some standard
specifications. These specifications are determined by the expectations of consumers and
also by the availability and costs of processes and materials.

To most people, quality is variable. It is subjectively judged because it deals with the
relative goodness of a product. When a buyer boasts that his house or car is the best, it
implies high quality. Quality is thus subjective and vaguely measurable.

In the words of Broom,

"subjective quality refers to degree of goodness of a product and objectively it consists of

a set of measurable characteristics for which standard dimensions together with small,
allowable departures, up and down, may be prescribed."

All manufacturing processes face a basic difficulty. It is physically impossible to make all
items or units exactly alike. There is always variability in the product. With precision
manufacturing, the variability may be difficult to see but nevertheless it is there. When
variability becomes obvious it results in scraps, re-work and losses, thus adding to the

5. Objectives of Quality Control

1. Establishment of quality standard: The main objective of quality control is the

economical production of a high quality product at the quality level the customer
wants. It is basically for eliminating variations in production and in order to have
uniformity in production.
2. Locating quality deviations: It is necessary to analyze the trend and extent of
quality deviations in a manufacturing process. Such deviations should be
explained by statistical techniques when they cannot be attributed to the element
of chance.
3. Evaluating methods and processes of production: By evaluating methods and
processes of production, quality control helps to take corrective measures to
maintain the quality of the product during the process of manufacture.
4. Quick sale of quality goods: Quality control accelerates the sale of the goods by
supplying only the quality goods in the market. Consumers also support quality
5. Production of standard quality goods: Quality control aims at manufacturing
standard quality products and avoids the production of inferior quality goods.
Such standard quality goods give satisfaction to consumers and also create
goodwill in the market.
6. Improvement in quality: One objective of quality control is to find out high
quality standards and to make constant efforts to reach those standards. Quality
control aims at creating quality consciousness at all levels in the Organization.

6. Steps In Quality Control Process

1. Devising control over raw materials: The quality of the finished product is
determined mostly by the quality of raw materials. It calls for close connection
between the raw material purchase department of the company and the vendors.
As and when necessary, a resident inspector may be deputed by the Quality
Control Department in the vendor's place to see that only goods in accordance
with specifications are supplied. It is advisable to re inspect the raw materials
before putting them to actual use.
2. Fixing standards and specifications: In order to make any scheme of quality
control successful, it is essential to predetermine standards and specifications. The
practice should be to provide quality instructions in the form of drawings,
showing shapes, dimensions and specifications describing color, strength,
thickness, chemical composition, etc.
3. Exercising control over production operations: In order to execute efficient
practices, the technical expert of the Quality Control Department must investigate,
from time to time, the operating methods. Such investigation helps to eliminate all
possible variables.
4. Locating inspection points: When the points at which defects occur are wrongly
located or located with delay, it hinders quality control. Therefore there should
first inspection of the raw materials at the vendor's places, then at the company's
plant, then at the various points during the process of production and finally at the
time of packing. The defects are likely to occur at these points. The finished
goods can be cleared after obtaining 'O.K.' or 'All Correct' from the Quality
Control Department.
5. Maintaining quality of equipments: The final quality of the products is
conditioned by the quality of the equipments and other devices used. The Quality
Control Department is responsible for testing the equipment used in inspection
such as gauges, which measure dimensions, electronic devices, magnetic devices
and industrial radio graphical instruments.
6. Maintaining records: The Quality Control Department is responsible for
maintaining all records relating to quality inspection and control and the number

7. Advantages of Quality Control

Quality control is important as it offers certain advantages to the manufacturer. Such

advantages are: stability to sale, goodwill in the market, ability to face market
competition effectively, reduction in production costs, and elimination of wastage due to
rejections and uniformity in production. These benefits are important for sales promotion
and profit maximization. Manufacturers now give special attention to quality control
techniques for long term benefits. Attention is given to research and development
activities for this purpose. Even foreign collaborations are made for raising the quality
standards of products manufactured. In brief, quality control is a matter of great
importance in production management.

The benefits of quality control to consumes are: Availability of standard quality and
reliable goods, proper reward for the price paid, safety to life and health, better standard
of living and protection against substitution or adulteration and quick shopping of goods.
Consumers always purchase standard quality goods even by paying a little higher price as
they get full satisfaction over a long period from quality goods. Consumers, particularly
educated consumers, support quality products as they know the benefits available from
such standard quality products. This suggests the importance of quality control from the
point of view of consumers.

The importance of quality control is, now, accepted even at the global level. Consumers
now insist for superior quality goods. Expenditure on quality control is an investment for
more sale and satisfaction to consumers. Quality control is a must for export promotion.
Companies can capture foreign markets only by manufacturing superior quality goods at
reasonable cost of production. Japan is a leading world exporter. This is mainly due to
superior quality of goods manufactured in Japan. Governments in many countries support
quality control measures. They provide all possible help for maintaining superior quality
of goods. Restrictions are also imposed on the manufacturing of cheap goods. Even
associations of manufacturers and traders support quality control measures. This suggests
the importance of quality control in business.

In addition, the following advantages of quality control also suggest its importance:

1. Improvement in the quality of production and reduction in the production cost.

2. Uniformity in the production and supply of standard quality goods to consumers.
3. Offering full return of the price paid by consumers and giving convenience and
satisfaction to consumers. This also develops cordial relations with consumers.
4. Reduction in spoiled production and rejection from consumers and dealers.
5. Promotion of exports due to superior and standard quality production.
6. Sales promotion in the internal market and facing market completion with
7. Reduction in the inspection cost.
8. Improvement in the productivity and motivation of employees.
9. Making the products popular in the market and thereby to develop market

8. Cost of Quality

The costs of carrying out company quality program are known as "Cost of Quality". It
1. Market research cost of discovering quality needs of customer.
2. Product research and development cost of creating a product concept, which will
meet quality needs.
3. The design cost of transmitting product concept into information which represents
planning for manufacturer.
4. Cost of inspection and test.
5. Cost of defect prevention.
6. Cost of quality assurance.
7. Cost of scrap and quality failure.
8. The quality cost can be defined in four categories :-
a. Cost of prevention.
b. Cost of appraisal.
c. Cost of internal failures.
d. Cost of external failures.

8.1 (a) Cost of Prevention

It consists of costs associated with person engaged in designing, implementing,

maintaining the quality system. Cost of prevention includes:-

i. Cost of Quality planning: It includes the cost associated with creating a overall
quality plan, the cost of market research and product development, inspection
plan, reliability plan etc.
ii. Cost of Documenting: It includes cost of preparation of manuals and procedures
to communicate these costs.
iii. Process control cost: Used with quality plans procedure to achieve fitness for
iv. Cost of training: Cost associated in preparing any programs for attaining,
improving, maintaining quality programs.
v. Cost associated with preventing recurring defects: Engineering, technical,
supervisory, cost of preventing recurring defects.
vi. Cost of investigation, analysis of correction of causes of defects by quality central
vii. Cost of investigation, analysis of correction of causes of defects by engineering
control department.
viii. Cost of consciousness programs.

8.2 (b) Cost of Appraisal

Costs associated with measuring, evaluating or auditing the products, component and
purchase materials to assure conformance with quality standard and performance
requirement are called as "Cost of appraisal".

In other words, the cost of evaluating, quality and of identifying and segregating non-
conforming part and assemblies.
This consist costs of :-

1. Receiving or incoming tests and inspection.

2. Laboratory and acceptance test.
3. Inspection and test.
4. Checking labor.
5. Set up for inspection and test.
6. Inspection of test material.
7. Quality Audits.
8. Review of test and inspection data.
9. Evaluation of field stocks, spare parts.

8.3 (c) Cost of internal failures

The costs associated with defective products, components, materials that fail to meet
quality requirements and results in manufacturing losses are called as "Cost of internal

Costs associated with scrap i.e. Cost of material, labor. Cost of rework, repair i.e. Cost of
making defective parts and assembly rules.

Cost of re-inspection and re-test after defective parts are repaired. Costs associated with
material review activity.

Cost of processes yield lower that might be attainable by improved controls. Trouble

8.4 (d) Cost of External Failures

Cost because of defective products being shifted to the customer.

1. Cost of processing complaints from the customer.

2. Cost of service to customer to receive defective items.
3. Cost of inspecting, preparing defective items.
4. Cost of replacing defective products.

9. The Concept of Total Quality Management (TQM)

Total quality management is a comprehensive concept and not related only to the quality
of goods and services. It suggests that high quality standards (e.g., ISO 9000) should be
maintained in other aspects of management such as production cost, marketing, sales
promotion, etc. For such quality/efficiency in all aspects of business management,
consciousness/awareness needs to be developed at all levels and among employees
working in all departments of the enterprise. Employees must be motivated for
maintaining high quality standards. In addition, their cooperation/involvement is
necessary for maintaining efficiency in all aspects of business management. In brief,
quality management is not the responsibility of management alone.
Participation/involvement of both parties (management and employees) is essential for
achievement of quality and other benefits.

The concept of TQM is closely related to the concept of quality circles which is very
popular and also successful in Japan. Quality circles are work groups that meet frequently
to study the ways and means to improve quality, reduce cost, eliminate wastages and
solve other production problems. Here, employees are associated with quality, cost,
efficiency, productivity, consumer service and satisfaction. This creates background for
the concept of TQM.

TQM aims at improving the total performance at the work place. It covers all functions,
activities and people who are responsible for competitiveness of an Organization. The
employees are expected to participate not only in maintaining quality but also in
improving their total performance so that the wastages will be avoided, production cost
will go down and the enterprise can earn more profit.

TQM means strategic commitment to improving quality by combining statistical quality

control methods with a cultural commitment to seeking incremental improvements that
increase productivity and lower costs.

Total quality management reflects the culture of an Organization. It indicates consumer

oriented, quality-oriented management philosophy. It is a commitment to quality by all
managers and workers. TQM is a philosophy for achieving customer satisfaction which
involves all - managers, employees and users. It is management by commitment and not
management by control. This technique is to be introduced through quality circles. The
route to TQM is through application of simple tools followed by Organization change
and culture change.
Total quality management is based on the following four powerful elements:

i. Focus on customer expectations,

ii. Employees' involvement,
iii. Mastery of processes,
iv. Team work.

9.1 Definition of TQM

According to John Gilbert,

Total Quality Management is "A process designed to focus on customer expectations,

preventing problems, building commitment to quality in the workforce and promoting
open decision-making."
9.2 Origin of TQM

1. Stress on quality management: In TQM, collective efforts are being made for
improving quality of goods and services so as to give more satisfaction to
consumers. Quality improvement is also useful for facing market competition and
for creating market reputation. In brief, TQM involves steps for improving quality
and productivity. There is total commitment to quality on the part of entire
Organization. TQM covers all functions, activities and people who are
instrumental for raising the competitiveness.
2. Continuous process: TQM is a continuous process/activity as there is ample
scope for using new methods and techniques for improvement in the quality
standards and performance. "Steal ideas constantly and shamelessly" is the rule in
TQM. Implementation of innovative ideas or taking benefit of new opportunities
is an integral aspect of TQM. In fact, TQM is a never ending quest for achieving
new levels of performance.
3. Stress on quality assurance system: The aim of TQM is to give maximum
satisfaction to consumers by providing goods which are best in quality (zero
defects). The present ISO9000 series is a set of well recognized standards for
quality assurance system. The Japanese have been using quality assurance
concepts and principles as a part of their TQM implementation programme even
when specific name or number was not used. Thus, quality assurance system is an
integral part of TQM.
4. Linkage of quality and productivity: The TQM technique is useful for
improving quality as well as productivity. In a TQM programme, the focus is on
quality improvement. However, such programme also raises productivity. The
methods used in TQM programmes. E.g. stress on quality improvement, zero
defects production, making all employees responsible for quality maintenance and
improvement) are likely to bring quality improvement as well as yield
improvement. Similarly, the TQM programme creates a feeling of participation
among the employees. There is also positive improvement in the morale of
5. TQM is a gradual process: Introduction of TQM is a gradual process. It is self
improvement and group improvement programme through team building for
raising quality and productivity. TQM is about the gradual change of people's
behavior towards the tasks they perform and their attitude towards other people. A
mental revolution among the employees is required for the execution of TQM.
However, such change in the mental make-up of managers and employees
requires long period. This suggests that TQM is a gradual process. There are, in
fact, four broad phases in the introduction of TQM.

These are:
a. Awareness Phase,
b. Planning Phase,
c. Implementation Phase, and
d. Institutional Phase.
6. Focus on customers: Customers are the source of all the revenue that flows
through the corporation. Their satisfaction keeps the money flowing especially in
an open market where competitors are wooing them too. The focus of TQM is on
customer satisfaction on quality, cost and delivery through improved
organizational quality of processes. According to British Quality Association
(BQA), TQM is a corporate business management philosophy which recognized
that customers' needs and business goals are inseparable.
7. Employee involvement: Employees involvement is the most important
recognized feature of TQM. In fact, quality's a team work of all employees. Their
participation and co-operation are required to be taken at all levels. TQM is
possible only through participative management. Under TQM, employees will be
motivated to participate actively in the process of quality improvement through
incentives and recognition of contribution for achieving quality standards.
8. Formation of quality improvement teams: A cornerstone of TQM is the team
building that leads to commitment to improvement. Such teams include quality
steering teams, corrective actions teams and so on. Such teams motivate
employees and facilitate quality improvement.
9. Management's involvement: TQM is a systems approach in managing business
and improving overall performance. It needs total commitment from the top
management to provide viable leadership to the whole approach. Top level
management has to take number of initiatives in order to start the process of
TQM. In fact, TQM cannot have a good take off without total commitment of
CEO and other senior executives.

9.3 Advantages of TQM

1. Customer satisfaction: TQM is basically for the satisfaction and welfare of

customers. Needs and expectations of customers are given special attention in
TQM. The attention is on customers and zero defect goods will be supplied to
them. As a result, there will be reduction in the complaints of
consumers/customers. TQM is not for profit-making at the cost of customers but
it is for giving satisfaction and welfare to them.
2. Quality improvement: One major advantage of a TQM is quality improvement
at all levels and in all activities. There is a systematic attempt to eliminate
deficiencies such as production scrap or rework, customer complaints and
material shortages. The cornerstone of any successful TQM system is the
organized elimination of waste. The rejection rate in the production process will
be low and this minimizes waste of materials and human efforts. Due to quality
improvement, the sales and profits will also increase. The company will also
develop goodwill and market recognition as supplier of quality goods.
3. Absence of additional investment: One advantage of TQM is that TQM does not
require any additional investment. It improves operational quality as well as
reduces cost. This technique is quite convenient to developing countries which are
facing financial difficulties due to various reasons. TQM gives many benefits but
without additional financial burden.
4. Raises competitiveness: TQM technique is useful for raising quality and
reducing costs. This naturally raises competitiveness in the domestic as well as
global markets. TQM technique is useful for exports by raising global
5. Facilitates expansion and diversification: TQM leads to large turnover and high
profits along with market reputation and consumer support. The company can use
this profit for the execution of its expansion and diversification programmes. In
brief, TQM facilitates expansion and diversification of business.
6. Provides trained and motivated employees: TQM philosophy has its positive
impact on employees. They are given proper training, monetary and non-
monetary incentives, attractive working conditions and proper treatment. Workers
take pride in manufacturing defect-free products.
7. Miscellaneous Advantages : TQM technique offers other advantages as noted
a. Long-term consumer support,
b. Prestigious position in international marketing,
c. High standard of living to employees, and
d. Cost control.

10. Quality Circle (QC)

Dewar, President of the International Association of QCs, defines QCs as "a way of
capturing the creative and innovative power that lies within the work force".

A quality circle is a small group of volunteers (usually 3 to 12 employees) doing similar

work. They meet regularly under the leadership of their immediate supervisor, or some
one chosen among the circle to identify problems, set priorities, discover causes and
propose solutions. These may concern quality, productivity, safety, job structure, process
flow, control mechanism, aesthetics of the work area etc.

According to Maurice Alston,

"Quality Circles are small groups of people doing similar work who, together with their
supervisors volunteer to meet for an hour a week to study and solve work related
problems which affect them. Circle leaders and members are trained in simple problem
solving techniques which identify causes and develop solutions. At an appropriate time,
presentations are made by the quality circles to the management who decide whether to
accept, modify or decline the proposals".

Quality Circle is a participative management system in which workers make suggestions

and improvements for the betterment of organization.

10.1 Concept of Quality Circle

The Quality Circle concept has three major attributes; these are:

1. QC is a form of participative management.

2. QC is a human resource development technique.
3. QC is a problem solving technique.

10.2 Objectives of Quality Circles

Objectives which contribute to the improvement and development of the enterprise and
indirectly the interest of the employees are:

1. To improve the quality and productivity and thus contribute to the improvements
and development of the enterprise.
2. To reduce the cost of products or services by waste reduction, safety, effective
utilization of resources, avoiding unnecessary errors and defects.
3. To identify and solve work related problems that interferes with production.
4. To tap the creative intelligence of the persons working in the organization and to
make full use of its human resources.
5. To permit employees to develop and use greater amount of knowledge and skill
and motivate them to apply to a wide range of challenging tasks.
6. To improve communication within the organization.
7. To increase employees' loyalty and commitment to the organization and its goals.
8. To respect humanity and build a happy bright work place environment which is
meaningful to work in.
9. To enrich human capability, confidence, moral, attitude and relationship.
10. To satisfy the human needs of recognition, achievement and self-development.

10.3 Advantages of Quality Circles

The organization can accomplish one or more of the following advantages by establishing
quality circles:

1. Promote high level of productivity and quality-mindedness.

2. Self and mutual development of employees.
3. Creating team spirit and unity of action.
4. Increased motivation, job satisfaction and pride in their work.
5. Reduced absenteeism and labour turnover.
6. Developing sense of belongingness towards a particular organization.
7. Waste Reduction.
8. Cost reduction.
9. Improved communication.
10. Safety improvement.
11. Increased utilization of human resource potential.
12. Enhancement in consciousness and moral of employees through recognition of
their activities.
13. Leadership development.
14. Trained staff.

Importance of Planning
The need and importance of planning is depicted in the following image.

The main advantages or importance of planning is listed as follows:

1. Planning increases the efficiency of an organization.

2. It reduces the risks involved in modern business activities.
3. It facilitates proper coordination within an organization.
4. It aids in organizing all available resources.
5. It gives right direction to the organization.
6. It is important to maintain a good control.
7. It helps to achieve objectives of the organization.
8. It motivates the personnel of an organization.
9. It encourages managers' creativity and innovation.
10. It also helps in decision making.

Top ten points highlighting importance of planning are discussed below.

Why Planning is Important?

Now let's understand why planning is important for every organization.

1. Increases efficiency

Planning makes optimum utilization of all available resources. It helps to reduce wastage
of important resources and avoids their duplication. It aims to give highest returns at the
lowest possible cost. Planning thus increases the overall efficiency.

2. Reduces business-related risks

There are many risks involved in any modern business. Planning helps to forecast these
business-related risks. It also helps to take the necessary precautions to avoid these risks.
Thus, planning reduces business risks.

3. Facilitates proper coordination

Often, the plans of all departments of an organization are well coordinated with each
other. Similarly, the short-term, medium-term and long-term plans of an organization are
also coordinated with each other. Such proper coordination is possible only because of
efficient planning.

4. Aids in organizing

Organizing means to bring together all available resources, i.e. 6Ms. Organizing cannot
be done without planning. This is because planning tells us how much resources are
required, when it is required, so on. This means that planning aids in organizing.

5. Gives right direction

Direction means to give proper information, accurate instructions and right guidance to
the subordinates. Direction cannot be done without planning. This is because planning
tells us what to do, how to do it and when to do it. Therefore, planning helps to give right

6. Keeps good control

In control, the actual performance of an employee is compared with the plans, and
deviations (if any) are found out and corrected. It is impossible to achieve such a control
without right planning. Therefore, planning becomes important to keep a good control.

7. Helps to achieve objectives

Every organization has certain goals or objectives or targets. It keeps working hard to
fulfill these objectives. Planning helps an organization to achieve these objectives but
with some ease and promptness. Planning also helps an organization to avoid doing some
random (done by chance) activities.

8. Motivates the personnel

A good plan provides various financial and non-financial incentives to both managers and
employees. These incentives motivate them to work hard and achieve the objectives of
the organization. Thus, planning through various incentives helps to motivate the
personnel of an organization.

9. Encourages creativity and innovation

Planning encourages managers to express and/or use their creativity and innovation. This
brings satisfaction to the managers and success to the organization.

10. Helps in decision making

A manager makes many different plans. Then manager selects or chooses the best of all
available plans. Doing a selection or choosing something means to take a decision. So,
decision making is facilitated by planning.