SMS106 PDF

NATIONAL OPEN UNIVERSITY OF NIGERIA
SCHOOL OF MANAGEMENT SCIENCES
COURSE CODE:SMS106
COURSE TITLE: ELEMENTS OF MANAGEMENT II

SMS106
COURSE
GUIDE
SMS106
ELEMENTS OF MANAGEMENT II
Course Team Mrs. Caroline Aturu-Aghedo (Developer/Writer) - NOUN

Dr. S.S. Maimaka (Editor) - UNIJOS
Dr. Dimis I. Mai-Lafia (Programme Leader) - NOUN
Mrs. Caroline Aturu-Aghedo (Coordinator) - NOUN
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National Open University of Nigeria

Headquarters
14/16 Ahmadu Bello Way
Victoria Island
Lagos
Abuja Office
No. 5 Dar es Salaam Street
Off Aminu Kano Crescent
Wuse II, Abuja
Nigeria
e-mail: centralinfo@nou.edu.ng
URL: www.nou.edu.ng
Published By:
First Printed 2010
ISBN:
All Rights Reserved
iii
SMS106
CONTENTS PAGE
Introduction ……………………………………………………… 1
What You Will Learn in This Course ………………….………… 1
Course Aims ………………………………………..…………….. 1
Course Objectives …………………………………………………
1
Working through This Course………………..……………………
2
Course Materials……………………………………………………
2
Study Units …………………………………………………………
2
Assignment File ……………………………………………………. 3
Presentation Schedule ……………………………………………… 3
Assessments ………………………………………………………… 3
Tutor-Marked Assignment (TMAs) …………………………………
4
Final Examination and Grading ……………………………………...
4
Course Marking Scheme …………………………………………….
4
Course Overview …………………………………………………….
5
Facilitators/Tutors and Tutorials……………………………………. 5
Summary………………………………………………………….….
6
Introduction
SMS106….: Principles of Management is a two credit course for

students offering programmes in the School of Business and Human
Resources Management Programme.
The course will consist of fifteen (15) units i.e. three (3) modules at five
(5) units per module. The material has been developed to suit
undergraduate students in Management at the National Open University
of Nigeria (NOUN) by adopting an approach that highlights the key
areas of Management in private and public enterprises.
A student who successfully completes the course will surely be in a

better position to manage different sections in private and public
organisations.
The course guide tells you briefly what the course is about, what course
materials you will be using and how you can work your way through
these materials. It suggests some general guidelines for the amount of
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time you are likely to spend on each unit of the course in order to
complete it successfully. It also gives you some guidance on your tutor-
marked assignments. Detailed information on tutor-marked assignment
is found in the separate assignment file which will be available in due
course.
What You Will Learn in This Course
This course will introduce you to the major aspects of hotel and catering
as well as tourism management generally. During the course, you will
learn about what research is all about:
Course Aims
The course aims to give you an understanding of the techniques of

managing private and public enterprises.
Course Objectives
By the end of this Course, You should be able to:
1. Define the Concept of management

2. Discuss planning for the advancement and development of
Employees, Satisfaction of the needs of the employees.
3. Highlight the Stages in decision making
4. Describe the relationship between leadership and power.
Working through This Course
To complete this course, you are required to read the study units, read
set books and read other materials provided by the National Open
University of Nigeria (NOUN). You will also need to undertake
practical exercises for which you need access to a personal computer
running Windows 95. Each unit contains self-assessment exercises, and
at certain points during the course, you will be expected to submit
assignments. At the end of the course is a final examination. The
course should take you about a total 17 weeks to complete. Below are
the components of the course, what you have to do, and how you should
allocate your time to each unit in order to complete the course
successfully on time.
Course Materials
Major components of the course are:
(1) Course Guide
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(2) Study Units

(3) Textbooks
(4) Assignment file
(5) Presentation Schedule.
Study Units
The study units in this course are as follows:
Module 1
Unit 1 Evolution of Management Theory

Unit 2 Management Functions and Behaviour
Unit 3 Decision making in Business
Unit 4 Planning
Unit 5 Controlling Function
Module 2
Unit 1 Organizing
Unit 2 Communication
Unit 3 Directing and Leading Function
Unit 4 Staffing Function
Unit 5 Recruitment and Selection
Module 3
Unit 1 Employee Training and Development

Unit 2 Motivation
Unit 3 Forecasting
Unit 4 Delegation and Decentralisation of Authority
Unit 5 Social Responsibility
Assignment File
In this course, you will find all the details of the work you must submit
to your tutor for marking. The marks you obtain for these assignments
will count towards the final mark you obtain for this course. Further
information on assignments will be found in the assignment file itself
and later in the section on assessment in this course guide. There are 15
tutor-marked assignments in this course; the student should attempt all
the 15.
Presentation Schedule
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The presentation schedule included in your course materials gives you

the important dates for this year for the completion of tutor-marked
assignments (TMAs) and attending tutorials. Remember, you are
required to submit all your assignments by the due date. You should
guard against falling behind in your work.
Assessments
There are two aspects to the assessment of the course: first are the tutor-
marked assignments; and second is a written examination.
In tackling the assignments, you are expected to apply information,

knowledge and techniques gathered during the course. The assignments
must be submitted to your tutor for formal assessment in accordance
with the deadlines stated in the Presentation Schedule and the
Assignment File. The work to be submitted to your tutor will count for
30% of your total course mark.
At the end of the course, you will need to sit for a final written
examination of ‘three hours’ duration. This examination will also count
for 70% of your total course mark.
Tutor-Marked Assignment (TMAs)
There are fifteen tutor-marked assignments in this course and you are
advised to attempt all. Aside from the course material provided, you are
advised to read and research widely using other references which will
give you a broader viewpoint and may provide a deeper understanding
of the subject. Ensure all completed assignments are submitted on
schedule before set deadlines. If for any reasons, you cannot complete
your work on time, contact your tutor before the assignment is due to
discuss the possibility of an extension. Unless in exceptional
circumstances, extensions may not be granted after the due date.
Final Examination and Grading
The final examination for this course will be of three hours’ duration
and have a value of 70% of the total course grade. All areas of the
course will be assessed and the examination will consist of questions,
which reflect the type of self-testing, practice exercises and tutor-
marked problems you have previously encountered. All areas of the
course will be assessed.
Utilise the time between the conclusion of the last study unit and sitting
for the examination to revise the entire course. You may find it useful
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to review your self-assessment tests, tutor-marked assignments and

comments on them before the examination.
Course Marking Scheme
The work you submit will count for 30% of your total course mark. At
the end of the course, you will be required to sit for a final examination,
which will also count for 70% of your total mark. The table below
shows how the actual course marking is broken down.
Table 1: Course Marking Scheme
ASSESSMENT MARKS
Assignment 6 (TMAs) 4 assignments, best 3 will be used
for C.A = 10 x 3 = 30%
Final Examination 70% of overall course marks
Total 100% of course marks
Course Overview
This table brings together the units and the number of weeks you should
take to complete them and the assignment that follow them.
Unit Title of work Weeks Assessment

Activity (end of unit)
Course Guide
Module 1
1 Evolution of Management Theory 1
2 Management Functions and 1
Behaviour
3 Decision Making in Business 1
4 Planning 1
5 Controlling Function 1
Module 2
1 Organizing 1
Commun2ication 1
Directing3and Leading Function 1
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4 Staffing Function 1
5 Recruitment and Selection 1
Module 3
1 Employee Training and 1
Development
2 Motivation 1
3 Forecastig 1
4 Delegation and Decentralisation of 1
Authority
5 Social Responsibility 1
Revision
Total 15
Facilitators/Tutors and Tutorials
There are 15 hours of tutorials provided in support of this course. You

will be notified of the dates, times and location of these tutorials,
together with the names and phone number of your tutor, as soon as you
are allocated a tutorial group.
Your tutor will mark and comment on your assignments, keep a close
watch on your progress and on any difficulties you might encounter as
they would provide assistance to you during the course. You must mail
your tutor-marked assignments to your tutor well before the due date (at
least two working days are required). They will be marked by your tutor
and returned to you as soon as possible. Do not hesitate to contact your
tutor by telephone, e-mail, or discussion board if you need help. The
following might be circumstances in which you would find help
necessary: when
(6) you do not understand any part of the study units or the assigned
readings.
(7) you have difficulty with the self-tests or exercises.
(8) you have a question or problem with an assignment with your
tutor’s comment on an assignment or with the grading of an
assignment.
You should try your possible best to attend the tutorials. This is the only
chance to have face-to-face contact with your tutor and to ask questions
which are answered instantly. You can raise any problem encountered
in the course of your study. To gain the maximum benefit from course
tutorials, prepare a question list before attending them. You will learn a
lot from participations in discussions.
Summary
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SMS106..: Principles of Management intends to expose the graduate

student to the nitty-gritty of managing enterprises, be it private or
public, corporate or small business enterprises, government or non-
governmental organisations. Upon completing the course, you will be
equipped with the knowledge required to produce a good research work.
You will be able to answer questions such as:
We hope you enjoy your acquaintances with the National Open

University of Nigeria (NOUN). We wish you every success in the
future.
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Course Code SMS106

Course Title Principles and Practice of Management II
Course Team Mrs. Caroline Aturu-Aghedo (Developer/Writer) - NOUN

Dr. S.S. Maimaka (Editor) - UNIJOS
Dr. Dimis I. Mai-Lafia (Programme Leader) - NOUN
Mrs. Caroline Aturu-Aghedo (Coordinator) - NOUN
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Headquarters
14/16 Ahmadu Bello Way
Victoria Island
Lagos
Abuja Office
No. 5 Dar es Salaam Street
Off Aminu Kano Crescent
Wuse II, Abuja
Nigeria
e-mail: centralinfo@nou.edu.ng
URL: www.nou.edu.ng
Published By:
First Printed 2010
ISBN:
All Rights Reserved
xii
SMS106
CONTENTS PAGE
Module 1 ……………………………………………………… 1
Unit 1 Evolution of Management Theory ………………… 1

Unit 2 Management Functions and Behavior …………….. 10
Unit 3 Decision Making in Business ……………………… 28
Unit 4 Planning ……………………………………………. 43
Unit 5 Controlling Functions ………………………………. 69
Module 2 ……………………………………………………… 90
Unit 1 Organizing ……………………….…………………. 90

Unit 2 Communication ……………………….……………. 103
Unit 3 Directing and Leading Function …………………… 123
Unit 4 Staffing Functions ……………………….…………. 148
Unit 5 Recruitment and Selection ……………………….…. 172
Module 3 ……………………………………………………… 200
Unit 1 Employee Training and Development……………… 200

Unit 2 Motivation ……………………….…………………. 221
Unit 3 Forecasting ……………………….…………………. 234
Unit 4 Delegation and Decentralization of Authority………. 246
Unit 5 Social Responsibility……………………..……….…. 259
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MODULE 1
Unit 1 Evolution of Management Theory

Unit 2 Management Functions and Behavior
Unit 3 Decision Making in Business
Unit 4 Planning
Unit 5 Controlling Functions
UNIT 1 EVOLUTION OF MANAGEMENT THEORY
CONTENTS
1.0 Introduction
2.0 Objectives
3.0 Main Content
3.1 Evolution of Management Theory
3.2 Pre-Industrial Period
3.3 Industrial Revolution
3.3.1 The Scientific Management Movement
3.3.1.1 Frederick Winson Taylor
3.3.1.2 Taylor’s Principles of Management
3.3.1.3 Charles Babbage
3.3.1.4 Frank Gilbreth
3.3.1.5 Henri Fayol’s Emphasis on Administration
3.4 Modern Approaches to Management
3.4.1 The Management Process
3.4.2 Empirical School
3.4.3 Human Relations School
3.4.4 Decision Theory School
3.4.5 Mathematical School
4.0 Conclusion
5.0 Summary
6.0 Tutor-Marked Assignment
7.0 References/Further Reading
1.0 INTRODUCTION
Management is as old as human organization. There are several theories

and principles under which the discipline operates. The principles
guiding operations of managers evolved over time. In this unit, we shall
be studying the evolutionary process of management as a discipline.
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2.0 OBJECTIVES
At the end of this unit, you should be able to:
discuss the evolutionary process of management as a discipline from the

pre-industrial period to the modern-day
list and discuss the contributions of the various authors and authorities
in management
explain the modern approaches to management
state and explain management process as propounded by the various
schools.
3.0 MAIN CONTENT
3.1 Evolution of Management Theory
The evolutionary or development of management is divided into several

periods.
3.2 Pre-Industrial Period
In the pre-industrial period, management was practiced by various parts

of the world including Africa. The well-known kingdom of Ghana, Mali
and Songhai are known to have had a wonderful administrative system.
Ghana’s judicial system, for example, was well organised and managed
and had both a lower court and a court of appeal. The army was very
efficient and well disciplined that the King of Ghana put up 200,000
warriors in the field within a short notice. The importance attached to
commerce and craftsmanship was evidenced by the lucrative trade
between Ghana and other countries such as Spain, Morocco, and all
North African countries. The shops of the local craftsmen dotted the
market places. Cloth weavers, potters and shoemakers were abundant,
and some employed more than two scores of men and apprentices.
What is said of Ghana can be said of Mali. Taxes were very efficiently
collected from businessmen and craftsmen, wood carvers, silversmiths,
goldsmiths, copper smiths, weavers, tanners and dyers. The King’s
affairs were so well organised and so efficiently and effectively run that
it was devoid of bureaucracy. The Kings planned, organised, and
coordinated the international trade that existed between their kingdoms /
countries and foreign countries.
Another well documented, properly organised management system was

that of the Egyptians who carried out organised activities such as the
construction of pyramids, irrigation projects and the building of canals.
The Pharaohs and their viziers were the managers who planned,
organised and directed and controlled the work of the subordinates.
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Management of enterprises was also practiced by the Babylonians, the

Romans and the Greeks who were engaged in commerce.
3.3 Industrial Revolution
This was the period of intellectual awakening when the scientific and
technological discoveries of Galileo, Watt, Gilbert and Harvey, and
other prominent geniuses gave rise to the industrial revolution. One of
the major advantages of the industrial revolution is that it gave birth to
accelerated rate of resources accumulation and the growth of large scale
enterprises. It brought under one roof hundreds of employees working
together.
This created its own management problems for the entrepreneurs. It

made the division of labour, specialization and delegation of
responsibilities necessary as the owner-manager could no longer
supervise all his operations alone. The entrepreneur was forced by
competition to engage in crude performance of managerial functions.
He still regarded his employees as part of his “tools”. Employees
resented the factory conditions and the meager wages while employers
fought back with “blacklist”, dismissal and threats. There were series of
pools, mergers and trusts as a way of adapting to the environment.
With this, emerged different concepts and principles on how to manage

a business effectively. These are conveniently divided here into four
groups:
(a) The scientific management movement;

(b) The human relations school;
(c) The administrative school, and
(d) The modern approaches to management
3.3.1 The Scientific Management Movement
The scientific management school placed special emphasis upon

production. Their main pre-occupation was what to do in order to
increase employee productivity so that the entrepreneur could realize
enough revenue. Scientific management was intended to bring about “a
complete mental revolution”, which must occur in the minds of the
workmen and management.
3.3.1.1 Frederick Winston Taylor
Frederick W. Taylor is often referred to as the father of Scientific

Management. According to Taylor:
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Scientific management is not any efficient device, nor a

device of any kind for securing efficiency; it is not a new
system of figuring cost; it is not a new scheme of paying
men, it is not a piece work system, it is not a bonus
system; it is not a premium system, it is not a scheme for
paying men; it is not holding a stop watch on a man
writing things down on him.
According to Taylor, the essence of scientific management was to:
(a) increase the output of the average employee, and

(b) improve the efficiency of management.
Taylor believed that each worker was motivated by financial need and
that his tendency for restricting output was fear of replacement. To
solve this, he advocated complete education of employees to the fact
that their need for more money and job security could only solved by
increased output at a low cost. He advocated placing workers on a piece
work in order to encourage them to earn more.
3.3.1.2 Taylor’s Principles of Management
Taylor’s principles of management could be summarized thus:
(a) the gathering, analysis and codification of all “rule of thumb” and
data existing in business;
(b) careful selection of employees and development of employees to
enable them attain their optimum potential;
(c) educating men to scientific method that has been tested and
proved to be effective;
(d) management should reorganize these in order to carry out their
duties properly.
Thus, Taylor insisted that management should not rely on tradition or

intuition, but rather should subject every job to a critical analysis,
inventive experiments and a thorough objective evaluation which he
applied in the machine shop in order to attain best results. Taylor was
criticised for his lack of humanitarian concept.
3.3.1.3 Charles Babbage
One of the fore-runners of Frederick Taylor was Babbage who spent his
life working on the “Difference Engine”, a project considered to be a
fore-runner of our modern data processing equipment. His major
contributions to the field of management include:
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(a) Division of lab our and specialization. He stressed the need for
dividing and assigning labour on the basis of skill. He used pin
production to illustrate the benefits of division of labour pointing
out the savings in time and the acquisition of skill within a
relatively short time as a person concentrates on only one
operation.
(b) Automatic operation. He stressed the need for replacing manual

operations by automatic machinery.
3.3.1.4 Frank Gilbreth
Gilbreth is known for his work on time and motion studies. His book
Cheaper by the Dozen, made him very popular. Gilbreth believed that
there was one best way which was believed to be the way that required
the least motion.
He identified seventeen basic elements in on-the-job motions which he

called “Therblings”. (Gilbreth spelt backwards):
(1) Search
(2) Find
(3) Select
(4) Grasp
(5) Position
(6) Assemble
(7) Use
(8) Disassemble
(9) Inspect
(10) Transport loaded, moving hand or body with a load
(11) Pre-position
(12) Release load
(13) Transport empty
(14) Wait-unavoidable
(15) Wait-avoidable
(16) Rest-necessary for overcoming fatigue, and
(17) Plan.
His other contribution was the development of a flow chart which

highlighted the need for breaking an operation into units and steps for
different employees to perform.
3.3.1.5 Henri Fayol’s Emphasis on Administration
The first principles of management were advocated by a French

engineer and geologist, Henri Fayol. He isolated a set of principles that
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have been taught to other managers and students of management over

the years. The fourteen (14) principles of management cover all aspects
of management – human relations, scientific management as advocated
by Babbage and Taylor. Fayol’s principles of management are:
(1) Division of labour

(2) Authority
(3) Discipline
(4) Unity of command
(5) Unity of direction
(6) Subordination of the individual interest to the general interest
(7) Remuneration
(8) Centralisation
(9) Scalar chain (line authority)
(10) Order
(11) Equity
(12) Stability of tenure of personnel
(13) Initiative
(14) Espirt-de-corps.
In the development of management concept over the years, no nation

appears to have a monopoly.
Charles Babbage and Frederick W. Taylor are from the United States of
America, Robert Owen is a Scott, while George Elton Mayo is from
Australia. They worked to find the best way of increasing the
productivity of workers and improving their economic, social and
psychological well being.
3.4 Modern Approaches to Management
After a scholarly review of management concept over the years, Harold

Koontz in his article “The Management Theory Jungle” has classified
the major “schools” of management into six broad areas:
(1) The Management Process

(2) Empirical School
(3) Human Relations School
(4) Decision Theory School
(5) Mathematical School
3.4.1 The Management Process
This school of thought perceives management as a process of getting

things done through and with people operating in organized groups. The
management process school attempts to establish a conceptual
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framework, identify the principles and formulate a theory of

management based on it. This group believes in the universality of
management. He grouped Henri Fayol, and Frederick Taylor as belong
to the same school. This school, he believes, looks to the function of
managers.
3.4.2 Empirical School
This is Koontz’s second classification. He groups in this section those

who studied management through the analysis of the experience of
successful manages. An attempt was made by examining the successful
operation to form generalization concerning the nature of management
and be able to apply the best management techniques. Ernest Dale, the
Great Organizers typify this group. The criticism for this school is the
danger of using the past to judge the present or believing that what
appeared to be right in the past may fit a situation in the present or
future.
It could be argued that the empirical school is identical to the

management process school. Taylor and Fayol were men with many
years of practical experience on the job and what they postulated were
based on their own experiences. Dale’s Comparative Approach is based
on structure less experience. Both aim at deriving concepts or principles
to be used as a guide for the practice of management.
3.4.3 Human Relations School
This group concentrates on the interpersonal relationship between

management and workers. This group places emphasis on the
understanding of employees by management. It stresses motivation,
meeting workers needs and aspirations. The school believes that
effective use of human relationship will aid management in realizing the
organizational goals. The criticism for this school is that it tries to link
management too loosely to the field of psychology and sociology. The
study of group dynamics and interpersonal relationship is not limited to
management.
3.4.4 Decision Theory School
This group believes in rational decision making. They perceive

management as engaged in constant selection of courses of action from
available alternatives. The group engages in the analysis of decision
from varying viewpoints – the economic rationale of the decision,
decision makers and psychological aspects of decisions and decision
making. Most of the members of this school are economists and they
tailor their analysis to include utility maximization, indifference curve,
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marginal curve and economic behaviour under uncertainty. They have

broadened the area of decision making to include every aspect of the
organisation and all the factors that influence the enterprise.
3.4.5 Mathematical School
There is a class relationship between the mathematical school and the

decision theory school. These people classify themselves as
“Management Scientists”. They attempt to quantify some areas of
management such as planning, decision making and control in the form
of mathematical symbols and models. In recent times, this field is called
operations research. With the advent of computers, this school has
gained recognition and has extended its activities to include simulation
and game theories requiring sophisticated algebraic symbols and
equations.
It can be seen from this management jungle that this field is approached
by many experts in different ways. As Scott points out, it is best to use
the systems concept as a way of describing the total organization rather
than emphasizing a specific function such as enunciated by the various
schools.
4.0 CONCLUSION
The discussion in this unit have taking us through the evolutionary

process of management from the pre-industrial period through medieval,
industrial revolution to the modern-day management. We also
attempted to discuss the approaches to modern management and various
schools of management.
5.0 SUMMARY
In this unit, we treated the evolution of management theory touching on

the contributions of the various management experts or practitioners to
the development of management principles.
6.0 TUTOR-MARKED ASSIGNMENT
1. What are the major contributions of scientific management

movement?
2. Write short notes on the following and show their relationship:
(a) Division of labour

(b) Specialisation
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7.0 REFERENCES/FURTHER READING
Aturu-Aghedo C. (2009). Principles and Practice of Management.
Nwachukwu, C.C. (1992). Management Theory and Practice. Pg. 32.
Drucker, P (1989). The Practice of Management. Jordan Hill Oxford,

Butterworth-Heinemann.
Jones, G. R and George, J. m. (2003). Contemporary Management 3rd

(ed.). New York: McGraw Hill.
Leavitt, H. J. (1978). Management Psychology (4th ed.). Chicago:

University of Chicago Press Ltd.
Robbins, S. P. and Coulter, M. (1996). Management. New Jersey:

Prentice Hall.
Stoner, J. A. Fr; Freeman, R. E. and Gilbert, D. R. Jr. (1995).

Management (6th ed.). New Jersey: Prentice-Hall.
Udo, S. U. and Akpa, G. O (2007). Educational Administration in

Nigeria Theory and Practice. Jos: M. P. Ginac Concept, Ltd.
Management .http://en.wikipedia.org/w/index.php? Retrieved :18th

September, 2009
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UNIT 2 MANAGEMENT: FUNCTIONS AND

BEHAVIOUR
CONTENTS
1.0 Introduction
2.0 Objectives
3.0 Main Content
3.1 Management Functions and Behaviour
3.2 Meaning of Management
3.2.1 Management as Art
3.2.2 Management as Science
3.3 Principles of Management
3.4 Concept and Theory of Management
3.5 Management as a System
3.6 Universality of Management
3.7 Organisational Goals/Objectives
3.7.1 Characteristics of Good Goals
3.7.2 Advantages of Organisational Objectives
3.7.3 Common Organisational Goals
3.7.4 Personal and Organisational Objectives
3.8 Nigerian Civil Service
3.9 Objectives of Nigerian Businessmen
3.9.1 Multiple Objectives
3.9.2 Business and Ethics
3.9.3 Conflict of Interest
3.10 Unethical Business Practices in Nigeria
3.11 Factors that determine Ethical Conduct–Socially
Accepted Ethics
3.12 Ethical Climate in the Industry
3.12.1 A Man’s Personal Code of Behaviour
3.13 The Behaviour of Management
3.13.1 Factors Determining Ethical Decision
3.13.2 Factors Determining Unethical Decisions
4.0 Conclusion
5.0 Summary
1.0 INTRODUCTION
There is no human endeavour that does not require proper management

for its proper functioning. All types of organizations government
establishments, business enterprises, hospitals, cooperatives, churches,
whether profit making or non-profit making, require good management
to function effectively.
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Managing is one of the most important human activities that permeate

all organizations. Whenever people work together for the attainment of a
predetermined objective, there is a need for management that is charged
with the responsibility of ensuring that the aims and objectives of the
organization are realized. It is the manager's responsibility to ensure that
every member of the group contributes his best. To get people put in
their best efforts, the manager has to understand people, their emotional,
physical and intellectual needs. He has to appreciate that each member
of the group has his own personal needs and aspirations and that these
are influenced by such factors as ethnic, social, political, economic and
the technological environment which he is part of.
2.0 OBJECTIVES
define management as a concept

differentiate between management as an art and as science
state and explain the principles of management
state the concepts and theories of management
describe the universality of management and management as a
system
discuss organisational goals and objectives.
SELF ASSESSMENT EXERCISE 1
What are the major functions of management? Illustrate your answer

with examples.
3.0 MAIN CONTENT
3.1 Management Functions and Behaviour
Not all people can manage effectively or aspire to management position.

Whenever people work together, there is generally a need for the co-
ordination of efforts in order to attain expected results in reasonable
time, and with minimum amount of money, discomfort or energy. All
people who oversee the function of other people who must work in
subordinate position are managers. Managers are people who are
primarily responsible for the achievement of organizational goals. Any
organization that fails to realize its objective often blames it on
management. In those enterprises that the stock-holders feel that they do
not attain their objectives, there is a tendency to blame it. On those
responsible for piloting the affairs of the organization management.
Thus management is often accused of lack of initiative; ineptitude,
misconduct or are said to be unqualified and are called upon to resign.
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The manager is the individual to provide the dynamic force or direction.

He is the person in charge or expected to attain results.
The manager does not spend all his time managing. He is like a football
coach. He does not play the game but directs the players on how to play.
Like a vice-chancellor of a university, he does not have to teach in the
classroom but must plan admission, develop committees, represent the
university, have budgets and reports prepared and ensure that students
are properly housed. A manager that fails to achieve the objectives as
expected, is either dismissed or asked to resign. In large organizations,
such as the civil service or Government Corporation, there are often
many instances of dismissals, transfers, demotions and promotions. A
manager is expected to possess special talents or abilities, quite different
from non-managers. In all countries, management has emerged as a
leading group in our economic society. They are a class by themselves,
distinct from ownership and labour. According to Peter Drucker, "rarely,
if ever, has a. new basic institution; or new lending group, a new central
function, emerged as fast as has management since the turn of the
century.”
Discuss the concept of management.
3.2 Meaning of Management
Different meanings have been attributed to the word "Management".

Some people see it as referring to a group of people. They think of a
management team or a group of individuals in an organization.
Management is also seen as a process demanding the performance of a
specific function. Here management is a. profession. To a student,
management is an academic discipline. In this instance, people study the
art of managing or management science. According to the American
Institute of Management:
It is used to designate either a group of functions or the

personnel who carry them out; to describe either an
organization's official hierarchy or the activities of men
who compose it: to provide antonym to either labour or
ownership.
Management is defined as "getting things done through others." It can

be more scientifically defined as the co-ordination of all the resources of
an organization through the process of planning, organizing, directing,
and controlling in order to attain organizational objectives. Management
is the guidance or direction of people towards organizational goals or
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objectives. It can also be seen as the supervising, controlling and co-

coordinating of activity to attain optimum results with organizational
resources.
3.3 Management as Art
According to C.C NWACHUKWU (1992) Pages 4
Art is the imposition of a pattern, a vision of a whole, on

many disparate parts so as to create a representation of
that vision; art is an imposition of order on chaos. The
artist has to have not only the vision that he or she wants
to communicate, but also skills or craft with which to
present the vision. This process entails choosing the
correct art form, the correct techniques. In good art, the
result is a blending of vision and craft that involves the
viewer, reader, or listener without requiring that he
separates the parts in order to appreciate the whole.
Art requires technical skill, and conceptual ability. An artist must

possess the know-how in. order to create a desired object. To be a
successful or creative artist, one has to understand the fundamental
principles governing it. In the same manner, to be a successful manager,
or top flight executive, one has to master the art of managing. When
one sees management as an art, one thinks of creative ability and special
aptitude to design or effect a desired result.
There are special areas of management that are not subject to the rigours
of science. The manager as a result has to depend on past experience
and judgement instead of depending on any testable technical
knowledge as is the case in engineering, physics or survey. In special
areas as human behaviour, instances abound where the manager will
rely on experience collected over the years through practical experience.
The application of this knowledge to individual situation is seen as an
art for the acquisition was not subject to the rigours of science.
3.3.1 Management as Science
Frederick W. Taylor is known as the father of scientific management.

This title he earned by his pioneering efforts in attacking the traditional
approach to management that tended to depend on intuition; past
experiences or hunches. Scientific management uses the methods of
science in making decisions and evaluating its consequences. Science
attempts through systematic procedure to establish the relationships
between variables and the underlying principles. Management is
science, when it employs systematic procedure or scientific methods to
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obtain complete information about a problem under consideration and

the solution is subjected to rigorous control procedures to ensure the
correctness and establish validity.
It must be observed that the two are not mutually exclusive but
complementary. A good manager must know the concepts and principles
of management (management science) and also how to apply them in
unique situations. A successful manager blends experience with science
in order to achieve a desired result. One decision could involve both
science and art in order to attain total result desired. The ability to use
both judiciously makes for a successful manager.
3.4 Principles of Management
Principles are best seen as fundamental or general truth on which other

truths depend. This implies a dependent and independent relationship. It
is either descriptive, prescriptive or normative. Thus, a principle
describes a relationship or what should be done if something else
happens.
It is often difficult to formulate principles in management because of the

difficulty in conducting controlled experiments. One of the most
important variables – people, is not easy to control. Most of the
principles of management in use today were developed by observation
and deduction. The major reason being that management principles are
subject to change and interpretation than are the laws in the physical
sciences. One of the principles of management, “unity of command,"
states that "each subordinate should be accountable to one, and only one
superior.” Sometimes this principle is violated especially when an
organization has established well-defined superior – subordinate
relationships. There is a need for principles of management. It helps to
increase efficiency since the manager uses established guidelines to help
solve his everyday problems.
Principles of management help in subordinate development. Without

these principles, development wou1d depend on trial and error. A
Course in management development stresses the time tested principles
formulated over the years by experience and experimentation. Fayol,
after more than 40 years of practical business experience drew up his
principles of management. The same is true of Taylor, Chester Barnard
and Alvin Brown. Without principles, the understanding and
development of management would be an arduous task.
One of the most important impacts of principles is that it has helped to

promote research in management. Management is not 'an exact science;
it deals with people whose behaviour is unpredictable and complex.
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Research is often difficult without some established principles. Most

researches in management deal with tested facts to establish validity and
reliability.
3.5 Concept and Theory of Management
Concepts are abstractions formed from generalizations .Concepts are the

corner stone for the development of principles and theory. In reality, a
concept is a commonly agreed upon definition of an object, event or
process. The importance of concept can be illustrated by the fact that
unless a concept is very clear to those who must Use them, knowledge
cannot be effectively transferred to another person. The same word must
mean the same thing to all the people. The words "management" and
"organization" are typical examples. They do not appear to imply the
same phenomena among various persons.
A scholarly grouping of concepts and principles creates a theory. A

theory presents a framework of principles and concepts for the
clarification of a theory. A theory presents in a formal manner
interrelated principles. Thus the theory of management is the synthesis
of the concepts and principles of management. We have as a result of
this systematic synthesis many theories – organization theory, theories
of leadership, theories X and Y, Graicunas theory and the like.
Management theory attempts to present in a concerted manner loose
facts about human behaviour in organisation.
3.6 Management as a System
The systems approach to management encourages management to

perceive the internal and external environmental factors as an integrated
whole. As a result of this systems concept, the manager views the
physical, human, environmental and psychological facets of the job as
linking to form an integrated whole. An example of a system is the
motor car. The parts are assembled in a manner to produce a unified
whole. Every system is made up of subsystems. For the system to
function effectively, the subsystems must function effectively. In a
general sense, the human being is a complex system made up of sub-
systems such as the circulatory system, the auditory system, the
locomotive system, and so on. These sub-systems are inter-dependence.
When any of them fails to function effectively, the entire system
experiences a severe setback.
The systems concept is often used in business to highlight the

interrelationship between the functional areas of management. These
functional areas such as production, marketing, finance, procurement
and personnel could be seen as the sub-systems. These functions must
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be properly coordinated for the enterprise to attain its desired objectives.

The functions of the manager could be perceived as managing the
system. He is to create and define the objective of each sub-system and
integrate the subsystems. The success of a manager goes beyond the
"effective" management of any of the functional areas – (finance,
marketing, or production). He must not only strive to achieve the
objectives of .each of the functional areas, but also attain integrated
balanced company objectives. Failure to recognize this fact could make
each system pull in the opposite direction and a common objective could
not be attained. The interrelationship in a system could be demonstrated
by a simple illustration. For the sales department to meet delivery dates
promised to customers it has to rely on the production target, the
purchases department must order enough raw materials. For the
purchases department to order enough raw materials, the accounts
department must make enough money available in time for the order to
be placed and received on schedule.
The success of any system depends on the relationship between the

system and its sub-systems. In a business organization, factors such as
goal clarity authority relationships and the structuring of the sub-
systems could affect the performance of the entire system.
The systems approach to management recognises that management

system is a complex formal system organized to functional effectively
and efficiently to achieve a desired goal. Where the system does not
function as expected as a result of poor communication, personality
clashes, poor or lack of goal congruency, the entire organization suffers.
3.7 Universality of Management
Management function is identical in all formal organizations whether it

is a profit-making organization or a "non-profit-making organization.
All people who occupy management positions perform the same type of
functions. They plan, organize, staff, direct and control. They get things
done through and with subordinate. Their principal responsibility is to
achieve organizational objectives through group efforts. .
The concept of the universality of management implies that all managers

irrespective of their position in the organizational hierarchy perform at
one time or the other identical functions. The concept also connotes that
management know-how is transferable from one organization to
another. Managers seldom perform the actual activities themselves.
Their functions are managerial, not technical.
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What managers do in organizations are the same –
1. Managers make decisions.

2. Managers focus on objectives.
3. Managers plan and set policies.
4. They organize and staff.
5. They communicate with subordinates, colleagues and superiors.
6. They direct and supervise by secure actual performance from
subordinates.
7. They control organizational activities.
It is as a result of all these multiple functions that management has

grown into a big profession. The professional manager who occupies an
important position in the organisation, who thinks about the corporation
and its health and growth. The chief executive is, for example, a
professional manager who .owes no allegiance to a function or specialty
for his function is to guide and direct the company as an integrated unit,
not in managing its separate parts.
3.8 Organisational Goals/Objectives
All organizations are purposive. They are established to accomplish an

objective. Individuals in an organisation work in order to help
accomplish these objectives. These individuals wish to accomplish their
own goals through the organisation. When the goals of the individual
and the goals of the organisations are the same, we have goal
congruency. An organisation’s goal could be implicit and require
explicit formulation before they could be realised. Goals can be
differentiated between official and operative goals. The official goals
are mainly for “public consumption” while operative goals are those that
are in fact pursued by the organisation and this influences its operation.
It could be the official goal of the Nigerian National Petroleum
Corporation to protect the environment while the company dumps
pollutants into rivers, streams and lakes. Here the official goal reflects
societal expectations from it. In some instances, the official goal and
operative goals could be the same and only differ by the degree of
specificity.
3.8.1 Characteristics of Good Goals
Certain basic characteristics distinguish good goals from "wishes".

Good goals must possess the following qualities:
(a) They must be specific and clearly stated.

(b) Their achievement must be measurable or verifiable.
(c) They must be realistic.
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(d) They must specify period of achievement.

(e) They must include intermediate targets or goals that will facilitate
the attainment of the major objectives.
(f) Objective must be modern and up to date.
(g) They must be ranked according to relative importance.
Thus a good objective is measurable, specific, verifiable and attainable.
3.8.2 Advantages of Organizational Objectives
The importance of organizational objective in a developing country can

hardly be overstated. As pointed out earlier, management personnel in
developing countries are young, inexperienced and often have a shallow
concept of organizational principle. It is not unusual for the owner not to
have clearly stated objectives except "to maximize profit". In public
corporations, for example, their objectives are general at best. Often one
hears such phrases as "make profit," "be self supporting," etc. and these
objectives move from profit making to social welfare redistribution. In
civil service the situation is worse. There are no targets, no deadlines or
definite expectations from management. It is important to highlight the
need for goals.
(i) Organizational Goals help the Organization to orient itself to

its environment: A typical environment presents management
with risks and opportunities. A good goal makes the organization
while helping to exploit the opportunities to minimize the impact
of the risks.
(ii) Good organizational goals .help in policy formulation and

administration: All policy issues such as marketing policy,
production and purchasing policy, personnel policy and financial
policy are influenced by company objectives. If a pharmaceutical
company wishes to be a leader in rheumatic muscular and
neuralgic pain tablets and research, the personnel policies and
practices must provide for the recruitment of quality scientists for
its research work, production policies must be highly imaginative
and flexible to adapt to the attainment of the objectives and the
financial policy must .be such as to allow adequate funds for
creative research and liberal remuneration to attract seasoned
researchers and salesmen.
(iii) Clearly stated objectives help all sub-systems to pull in the

same direction thus making for easy co-ordination of activities.
Sales department and production department will complement
each other. Production will insist on quality products to reduce
rejects and returns and allowances, the sales department will not
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promise unrealistic delivery dates, or insist on allowing discounts

on high quality items. Advertising will stress quality and service
and not price.
(iv) Clear objectives make for consistency and unity of purpose and
direction. It prevents management from stressing short-run gains
at the expense of long-run company objectives. Objectives serve
as motivators and provide a definite direction.
3.8.3 Common Organizational Goals
There was a time economists believed that 'the sole purpose of any
business was to maximize profit". This concept is still shared by in
many people developing countries. These organizations stress short-run
objectives. In their recruitment policy, they will hire poorly qualified
employees who use their companies as a training ground to gain
experience; they insist on high mark-up, and low-rent stores. In the
long-run, they lose business to bigger organizations that insist on well
trained, experienced employees with its attendant low cost as a result of
reduction in the number of rejects and returns, customers loyalty, and
the advantages that accrue from high volume turnover of products.
The major organizational goals include:
(a) Profitability
(b) Survival
(c) Growth
(d) Market-share
(e) Productivity
(f) Innovation
(g) Employee welfare
(h) Service to customers and
(i) Social responsibility.
It must be emphasized that objectives must be set for every department,

for each supervisor and for every employee. “It is important that every
human being has one or more goals towards which he is striving. It is
supreme in his thoughts and serves as the pinnacle of this hopes and
ambition".
3.8.4 Personal and Organizational Objectives
As pointed out, all individuals have personal objectives which they plan
to achieve through the organization. People act in a manner that will
help them to attain the desired objectives. A. typical employee goals can
be divided into two main groups. There are certain objectives that he
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aims at achieving in the short-run and those that he looks forward to

achieving sometimes in the future. Some of these objectives could
include money, excitement, security, happy life, leadership position,
recognition in the society and many other broad objectives. Sometimes
no clear-cut distinction is made as to the best way to attain them and no
real priority is placed on them. Somehow, in his head, even if not
properly articulated, there is some form of hierarchy of objectives. As a
rational being, he will behave in a way that will lead to the attainment of
valued goals.
An employee is consistently evaluating whether the organization is the

instrument through which he can attain his own goals, and trying to
determine whether his objectives are consistent with the goals of the
organization and others in the organization. Where these differ
remarkably, there is a conflict. The degree of this disparity in objectives
determines the intensity of the conflict. If the individual discovers that
the objectives are diametrically opposed, he may elect to withdraw his
services if he has an alternative opportunity. If he has none, he may
decide to reorient his objectives to arrive at a reasonable compromise
between his objectives and organizational goals. Every person has zones
of indifference. This zone is said to be narrow if a person is relatively
intolerant of disagreements between his goals and those of the
organization, or wide if the person remains a loyal irrespective of
disagreements.
Individual objectives should be incorporated in organizational

objectives, and sincere efforts should be made in order to realize both.
An individual who finds his objectives in serious conflict with
organizational objectives should withdraw his services from the
organization. Organizations and individuals function better when there
is goal congruency. Each then works toward the realization of the
common objective for his survival depends on it.
Figure 15.1 CHART OF OBJECTIVES
Company Objective
capture 70% of the
Market
Production Objective: Marketing Company Objective

Produce 8,750, Reduce Objectives increase capture 70% of the
Reject by 10% Sales by 25% Market
SOURCE .C. C NWACHUKWU (1988) PAGE 13
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From the chart, one has to conclude that every department in the
organisa1ion should have well spelt out goals. This should layout the
contribution expected from each department. It should also spell out
what contributions each unit expects from other departments towards the
achievement of its goals.
As According to C.C NWACHUKWU (1992) Pages 13 summarized it:
To obtain balanced efforts the objectives of all managers

on all levels and in all areas should also be keyed to both
short-range and long-range considerations. And, of course
all objectives should always contain both the tangible
business objectives and the intangible objectives for
manager, organization and development, worker
performance and attitude, and public responsibility.
Anything else is short sighted and impracticable.
Well articulated organization objective eliminates management by

"crisis" and "drives". Many executives in Nigeria, 62%, claim that there
are no well written .organizational objectives either for the entire
organization or for the departments or units. The civil service is
characterized by management by drive or crisis. Whenever a project is
envisioned, employees are driven to accomplish the objective only to
relax thereafter. Management by drive is an admission of lack of
planning and betrays incompetency.
Organizations must make it possible for each unit to measure its

performances quantitatively' or qualitatively. This acts as a feedback for
the manager who periodically evaluates his own performance as a self-
imposed appraisal.
3.9 Nigerian Civil Service
One of the major problems as identified earlier confronting the Nigerian

Civil Service is the lack of clear objectives. The objectives of the civil
service are intangible so are their results. The aim of the civil service is
"to serve the people". This sounds ambiguous and cannot easily be
subjected to any quantitative or qualitative evaluation. To determine
when a civil service has become result oriented entails having specific,
limited, clearly defined targets to be accomplished within a given time.
As Drucker puts it, "only if targets are defined can resources be
allocated to their attainment, priorities and deadlines be set, and
somebody be held accountable for results".
The Nigerian Civil Service does not have definite expectation from
employees because the goals are at best hazy even to the key
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management personnel who end up becoming "administrators” instead

of managers. Lack of clear cut objectives and goals is in part responsible
for the constant personality clashes, excessive red-tapism and
bureaucracy. Many key executives, "push files" and lack initiative and
ingenuity.
3.10 Objectives of Nigerian Businessmen
One of the' criticisms often voiced against Nigerian indigenous

businessmen is their lack of clearly stated objectives and the fact that
they adopt a very narrow concept of their function and often stress the
wrong objectives in their enterprises. Below is given the business
objectives of some Nigerian indigenous businessmen:
Table 15.1 Objectives of Nigerian Businessmen
Factors 1st Choice n = 108

n%
To make money or profit - 47
To grow larger - 6
To be very successful in business - 10
To provide a good product - 5
To contribute to community development - 10
To provide jobs for relations and friends - 9
To be independent - 5
To leave something for my children - 4
Others - 4
100
The table above shows that in this study, 47% of the respondents gave
the making of money or profit as their first choice whereas to grow
larger and to be- successful in business come in with 6% and 10%
respectively. The selection of good objective is an aid to the successful
operation of an enterprise.
3.10.1 Multiple Objectives
From the foregoing analysis, it could be inferred that each organization

has multiple objectives. There should be no conflict in the various
objectives. These objectives should form a logical network for the
optimal attainment of organizational goals. One objective should be
instrumental in the realization of another objective. The higher the
company's share of the market, other things being equal, the higher the
overall profit. The more qualified and aggressive the salesmen, the
higher the volume of sales per salesman.
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Below is a summary of the importance attached to each goal by

company man’s directors. The questionnaire was adapted from George
E. England.
Table 15.2 Responses for 365 Managers to Importance of Various

Goals
N = 365
Goals of Business Organisation % of total group indicating
very important
High Productivity - 85
Profit Maximization - 72
Efficiency - 68
Organisational Stability - 65
Organisational Growth - 60
Industrial Leadership - 40
Employee Welfare - 52
Social Welfare - 10
3.10.2 Business and Ethics
The discussion on business and ethics is very important in Nigeria than

in many other countries because of many instances of unethical business
practices in the country. It is widely discussed in the news media and the
press that there is corruption in all aspects of Nigerian life. You have to
bribe a cashier to get paid, you have to offer money to a file clerk to
make sure that your file is not wrongly filed, you have to bribe a doctor
in a public hospital to receive treatment and you cannot renew your
driving licence unless you offer a gift to the officer In charge.
In the government, the demand for l0% kickback of the contract sum is
the accepted norm. Businessmen are not left out in the corrupt practices.
Executives are known to have made some decisions in order to benefit
them rather than to optimize government or enterprise interest. An
executive in any decision to purchase equipment is expected to take
such factors such as availability of parts, cost, quality, delivery time and
operating cost into serious consideration before a decision to purchase is
reached. Some executives ignore these important facts in order to
receive “kickbacks” of 10 – 20% of the cost of the equipment.
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3.10.3 Conflict of Interest
Conflict of interest arises when an executive deals with a company in

which it has vested interest. An executive who is a majority shareholder
in a company that is their major supplier of raw material is "likely to'
have a conflict of interest. The same fact is true when a manager is the
owner of a company that contracts to construct roads, buildings, or
offers any other contract for the organization. The manager will find it
difficult to enforce quality or engage in hard bargaining. He will most
likely supply inside information to his company on the lowest and
highest bids already received. In order to avoid a conflict of interest,
some companies have rules that state:
No member of management of the company is allowed to

accept any gift or gratuities from third persons which
might conceivably tend to induce him to violate his duties
to the company or to have any appreciable interest in any
business enterprise which is a supplier or has business
relationships with the company.
The punishment for the violation of such rules is immediate dismissal.
3.11 Unethical Business Practices in Nigeria
The most common unethical business practices in Nigeria are presented

below:
1. Outright bribe
2. Unfair practices in pricing
3. Price discrimination
4. Dishonest advertising
5. Price collusion by competitors
6. Unfair and prejudice in hiring
7. Cheating of customers
8. Dishonest advertising
9. Unfair credit practices
10. Overselling
11. Collusion by competitors
12. Dishonesty in making and keeping to contracts.
3.12 Factors that determine Ethical Conduct-Socially

Accepted Ethics
An organization is an integral part of the society and is influenced by

social, political, economic and technological factors prevailing in a
society. The ethical conduct of an organization is in part determined by
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the moral ethics prevailing in the society as a whole. If the society

condones general laxity that will influence the organization, the society
sets the ethical climate.
3.13 Ethical Climate in the Industry
The ethical climate in an industry influences the behaviour of a

company. As 10-20% commission appears to be the accepted bribe for
an award of a contract in Nigeria, every company competing for a
contract has to build in such a commission in its quotation if it has to
obtain the contract. The general feeling shared by many company
executives is "if you can't beat them, join them". Thus, gari sellers, and
rice sellers have the "magic cup" to sell their commodities to a customer
unless the customer is vigilant. The general attitude seems to be caveat
emptor (let the buyer beware.)
3.13.1 A Man’s Personal Code of Behaviour
There are many honest and sincere people in organizations who will
eschew riches if the only way to be rich is through unethical practices.
They are guided by their personal conviction and conscience. If they are
company executives, they set the tone and get others to follow. In
general, the ethical standard of an organization is dependent upon the
ethical standard of each member of the group.
3.14 The Behaviour of Management
The ethical standards of a company are determined by the ethical

standards of the executive. They set the ethical behaviour patterns to be
emulated by the subordinates. If they resent and firmly condemn
unethical practices in the company, the subordinates will toe the line.
The subordinates' ethical behaviour is reinforced and influenced by the
behaviour of management. The two factors, individual personal code of
conduct and the organization's ethical conduct determine the
organization's code of conduct for each reinforces the other. In a
company where management are men of integrity, ethical standards are
likely to prevail. If management gets out good company policies
governing the relationship with their customers, competitors and the
general public, ethical behaviour will prevail.
Baumhart aptly summarized the factors determining ethical conduct and

unethical conduct thus:
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3.14.1 Factors Determining Ethical Decision
1. A man's personal code of behaviour

2. Behaviour of a man's superior in the company
3. Formal company policy
4. Ethical climate of the industry
5. Behaviour of a man's equals in the company
3.14.2 Factors Determining Unethical Decisions
1. The behaviour of a man's superior in a company

2. Ethical climate of the industry
3. Behaviour of a man's equals in the company
4. Lack of company policy
5. Personal financial needs.
4.0 CONCLUSION
We have tried to discuss in a comprehensive form management

functions and behaviour, definition of and reasons for management.
5.0 SUMMARY
In this unit, we have defined management, differentiated between

management and managing, explained the reasons for management,
discussed the position of various authors on management as an art and
as a science, highlighted the principles of management, listed and
described the concepts and theory of management. We have also
discussed the universality of management, listed organisational goals
and objectives as well as the characteristics of good goals, etc.
Write short notes on the following:
(a) Multiple goals objectives

(b) Concept and Theory of management
(c) Principles of management.
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Nwachukwu, C.C. (1992). Management Theory and Practice.
Drucker, P (1989). The Practice of Management. Jordan Hill Oxford:

Jones, G. R and George, J. M. (2003). Contemporary Management (3rd

ed). New York: McGraw Hill.


Prentice Hall.
Management .http://en.wikipedia.org/w/index.php? Retrieved :18th

September, 2009.
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UNIT 3 DECISION MAKING
CONTENTS
1.0 Introduction
2.0 Objectives
3.0 Main Content
3.1 Decision in Business
3.2 Decision Making Process
3.3 Nature of Decision Making
3.4 Classification of Decision
3.4.1 Decision Making Under Certainty
3.4.2 Decision Making Under Risk
3.4.3 Decision Making Under Uncertainty
3.5 Stages in Decision Making
3.6 Group Decision Making
3.6.1 Committee Decision
3.6.2 Selection of Committee Members
3.6.3 Committee Chairman
3.6.4 Benefits and Limitations of Committees
3.6.5 Use of Committees in Nigerian Organisations
3.7 Creativity in Decision Making
3.8 Steps in Creative Thinking
3.9 Qualitative Methods in Decision Making
3.9.1 Operations Research (OR)
3.9.2 Linear Programming
3.9.3 Queuing Theory
4.0 Conclusion
5.0 Summary
1.0 INTRODUCTION
Decision making is one of the most crucial activities of management.

The necessity to decide is the everyday preoccupation of management in
all types of organisations, whether small enterprises or multi-national
corporations. The decisions that management faces are sometimes
simple and in other instances, complex and overwhelming. A decision to
increase production in a particular industry could necessitate the
employment of more labour, increase in plant capacity, acquisition of
more equipment, borrowing of money and the mastering of new
technological know-how. This decision could affect the entire economic
climate resulting in full employment, with its attendant consequences –
increase in money circulation and inflation.
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In this unit, you will be introduced to decision making and all that is
entailed in decision making.
2.0 OBJECTIVES
define decision making

identify the process involved in decision making
classify decisions
highlight the stages in decision making
describe group decision making
discuss creative thinking and steps involved in creative thinking.
3.0 MAIN CONTENT
3.1 Decision in Business
In business, there are absolutely no right or wrong decisions but

intelligent choices. What one considers a right decision in a particular
time frame may turn out to be an unintelligent decision if the
circumstances change. This is particularly true in developing countries
where most of the variables required for intelligent decision are lacking.
In some industries, the total production is unknown, the consumption
pattern is not clear, the total population is a guess work, supply of raw
materials is influenced by political consideration and the lead time for
the supply of raw material is most unpredictable.
An entrepreneur may decide to import large quantities of raw material

because it is under licence. The restriction could be lifted within a
month after the importation, purely on political grounds without giving
consideration to its consequences on the successful operation of the
businessmen in the industry.
3.2 Decision Making Process
Definition
A decision is the selection of alternative course of action from available

alternatives in order to achieve a given objective. The decision process
is influenced by the unique environment of the decision maker, his
organisational position, available knowledge and experience in decision
making. A decision is a choice aimed at achieving optimum result in a
given situation.
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Decisions are made when a person finds himself in a situation where he

must act and he is not quite sure of the choice that will give the best
result. A decision could be seen as a mental process that forces us to
analyse the situation in order to master it, or increase our knowledge on
the area in which decision is to be made. An intelligent decision is one
which yields the best intelligent response to a situation. Decisions aim
at making things happen – in order to achieve an objective. Absence of
a decision is a decision. A decision not to act or to postpone a major
decision is a decision.
3.3 Nature of Decision Making
As pointed out earlier, decision making presupposes the existence of

alternatives. From these alternatives, the decision maker selects the one
that will yield the desired result. This entails the existence of some
criteria for measuring or comparing the desirability of the alternatives in
relation to the purpose. Figure 1.1 shows the structure of decision
making. According to Buffa1, all decisions go through this process.
Table 1.1 Structure of Decision Making
System for
forecasting
performance
of
alternatives
DATA
Decision
criterion
Decision course of
action which
maximises desirability
Criteria and values
which measure
alternatives
Each alternative could have desirable and undesirable aspects. The

alternative that appears to have the most desirable result based on our
DECISION CRITERION is the one to be selected. Every decision is
based on a probability that the anticipated event will occur. If a
quantitative method is used, the value of each alternative is computed.
The course of action that maximises the final desirability is the rational
decision.
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3.4 Classification of Decision
Decision making can be classified into three major groups:
(1) Decision making under certainty

(2) Decision making under risk
(3) Decision making under uncertainty.
3.4.1 Decision making under Certainty
Certainty – it is assumed that there is a single-space, complete and

accurate knowledge of the consequence of each event.
A decision made with full knowledge of the occurrence of an event is

said to be decision under certainty. In this situation, the decision maker
knows what the stated value of the pay-off is expected to be. If for
instance the value is 1.00, in making the decision one has to select the
alternative that gives the expected pay-off of 1.00. Assuming that a
service organisation wishes to determine the cheapest way of handling
its security services and finds out that:
(a) if it subcontracts security service, it would cost N7,000 per

annum;
(b) if it handles its own security by hiring 4 security-men, it would
cost N10,000 per annum;
(c) if it installs burglary proof and other security measures it would
cost N12,000 per annum.
In this situation, it is easy to select plan (a) since it entails the lowest
cost.
3.4.2 Decision Making Under Risk
Uncertainty – the consequence of each choice cannot be defined by a

correspondence relationship even within a probabilistic framework.
3.4.3 Decision Making Under Uncertainty
Risk – it is assumed that accurate knowledge about the probability

distribution of the consequence of each alternative exists.2
3.5 Stages in Decision Making
Every decision making process has some basic elements in order to be

effective. They include:
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(1) the formulation of goal or goals

(2) mental process to acquire knowledge on the situation
(3) analysis to determine alternative course of action
(4) choice procedure
(5) implementation.
Table 1.2 Elements in Decision Making
Formulation of goals
Acquire knowledge of the problem
Analyse the situation to determine alternatives
Select alternative
Implementation
3.5.1 Formulation of Goals
For one to make a decision, one must have goals that one expects to
achieve. The goals to be achieved may be determined by the
organisation and could aim at minimizing cost or maximizing profit. In
the case of the production manager, the decision at that level could be to
reduce rejects by 20 percent or increase average output by 10 percent.
3.5.2 Acquire Knowledge
A rational decision requires the decision maker to acquire a thorough

understanding of the problem in order to make an intelligent choice.
This demands that the decision maker saturates himself with facts about
the situation. At this stage he seeks information from employees who
have expert knowledge about the situation understudy. When vital
decisions are to be made, “brainstorming” is encouraged in order to
avoid costly, hasty decisions. It is advisable to hear both from those
who are interested in the problem and those who are opposed to it. The
step is likened to a situation where a “car won’t start” in the morning.
Why? What is the cause of the problem?
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3.5.3 Analysis to Determine Alternatives
The essence of analysis at this stage is to determine possible courses of

action – the search for alternatives. The number of alternative ways of
solving the problem that could be thought out depends on the effort
expended by the decision maker in the search for alternatives. This is
one of the crucial steps in rational decision making. It involves the
utilisation of the vital information gathered through the process of
defining the problem. The decision maker could tap the brain of experts
and engage in creative logical reasoning. This will help to achieve the
objective with cost effectiveness in mind.
3.5.4 Decision
Decision is the selection of the course of action believed by the decision

maker to yield the best result under the circumstances. The final
selection is influenced by the decision maker’s past experience, his
value judgement, the logical process that has been established and
followed in the previous steps 1 – 4 above.
It has to be pointed out that the selected solution may not necessarily be
the most satisfactory solution but the most intelligent decision under the
circumstance. This has often been called SATISFICING. An
entrepreneur may decide in the circumstance to select the alternative that
“minimises his risk or involves “minimum regret” or gives him optimum
result in the short-run. There is a tendency for Nigerian entrepreneurs to
seek short-run instead of long-run growth.
It is important at this stage to ask four vital questions:
(a) Did I consider all possible alternatives that bear on the question?
(b) Does the selected alternative contribute to the realisation of the
intended objective?
(c) Will the decision lead to the attainment of the preferred solution?
(d) Is this alternative capable of implementation?
3.5.5 Implementation
A decision process is not completed until it is implemented. The

essence of any decision is to secure action. If this stage is not properly
carried out, the entire process is a waste of time and resources. For
some important decision to be implemented effectively, the decision
maker has to seek and obtain the willingness of operation of all
involved. He has to “sell” the decision to the workforce. Factors
involved in securing acceptance include effective communication,
motivating the employees into accepting the decision and pointing out
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the advantages to be achieved, effective control of the process for the

implementation of the decision and, promote timing of events to aid
coordination.
3.6 Group Decision Making
An organisation is not better than the people that make it up. The
success or failure of an organisation depends on the creativity of its
human resources. Efficient and effective utilisation of these people to
make use of their intellectual abilities, in part, helps the growth of the
organisation. There is a popular saying that “two heads are better than
one, even if they are ‘coconut’ heads”. This illustrates the importance of
participative decision making.
One of the major problems encountered in retaining young university

graduates in many indigenous enterprises is the absence of participative
decision making. The entrepreneur is reluctant to involve the young
graduates in areas they believe they could contribute their best in the
organisation. Thus, only 20 percent of the graduating class of the
professional schools of the University of Nigeria would elect to work for
indigenous enterprises. 65.8 percent of the graduates who left their
employment with small businessmen gave lack of participation as one of
the key reasons why they gave lack of participation as one of the key
reasons why they changed employment. Other key reasons include lack
of future prospect, lack of prestige and inability to use their expertise.
Employees like to be involved in decisions that affect the organisation
especially those that affect them directly.
Decisions are expected to be made in a social environment. It is a

situation in which each participant contributes his ideas towards the
realisation of a predetermined goal. No idea is useless no matter how
stupid it sounds. In many instances, what some people call “stupid” or
“crazy” ideas are those that disagree with their own. There is a popular
saying that “where the people always agree, only one person is doing the
thinking.” Group decision calls for varied views, some optimistic and
some pessimistic.
In the final analysis, what determines whether a decision is to be made

by an individual or group is the type of decision to be made, and the
importance of the decision to the immediate attainment of organisational
objectives.
3.6.1 Committee Decision
In modern organisations, committees are increasingly being used as

effective administrative tools. In large and small organisations,
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committees are used for a variety of reasons. In large decentralized

organisations, a committee is the device for achieving coordination of
activities and sharing information among the various departments and
divisions of a company.
A committee could be seen as a group of people assembled together to

take action on an administrative task. In some organisations, there are
committees for each key functional area such as finance, production,
sales, auditing, purchasing, and engineering. These are generally
permanent committees. These committees often meet regularly once or
twice a month to discuss general problems affecting their operation.
There are instances where committees are appointed to study and offer
solution to a specified organisational problem. They stop functioning as
soon as the assignment is completed. This is generally called an ad hoc
committee. Committees such as salary adjustment committee, tenders
board committee, employee grievance committee or question box
committee could be ad hoc committees. They could also be permanent
committees. The government makes use of some committees in dealing
with specific assignments. In Imo State, the government appointed the
University Planning Committee to help plan the State University.
Anambra State appointed the Television Planning Committee, whereas
the Federal Government appointed the Revenue Allocation Committee.
These are ad hoc committees which fail to exist as soon as their
functions are completed.
3.6.2 Selection of Committee Members
The effective use of committees in the solution of organisational

problems depends on the selection of the right people to serve in the
committee. Most of the criticisms often voiced in the use of a
committee as an effective device in decision making depend on the
quality of people appointed to serve on them. Committees are often
seen as “a group of people who keep minutes and waste time and
money”. Hudson writing on this important issue observed that:
“Equally sad and costly are the “good” people who are un-
trained to the rigours of sound committee working – the
people who debate on ideas, who lack a gift for
negotiation, the people who are spineless, irrational,
hyper-sensitive and over emotional people who are blindly
devoted to an ideology, blindly loyal, or blindly
combative.3
The selection of members of a committee should be based on

qualifications such as knowledge of the subject matter to be assigned to
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the committee, interests, responsibility, availability and emotional

maturity.
The number of people to serve in a committee is to be determined by the

nature of the assignment. A large number is sometimes very
cumbersome to manage and makes it often difficult to agree on a
specific time and date for meetings.
3.6.3 Committee Chairman
The success or failure of a committee in most instances depends on the

chairman. The chairman is expected to be a mature, intelligent, skillful,
versatile person who is capable of accommodating varied opinions. A
committee succeeds when the members believe that the chairman is
equal to the task and is capable of leading the committee to arrive at
mature conclusions. A capable chairman is in a position to help reduce
some of the major disadvantages associated with committees such as
cost, idle debates, danger of compromise and slow action.
3.6.4 Benefits and Limitations of Committees
Almost all formal organisations have committees because it has been

very useful as one of the basic democratic ways of operation and the
realisation that the concentration of tasks in one individual does not
make for efficient and effective control. The following are the basic
advantages:
(a) Makes different view points available. The interaction between

members brings out different viewpoints that could not have been
considered or given due weight if the decision was made by one
person. Collective views make for thorough and complete
analysis. Thus it provides a forum whereby knowledge,
experience and abilities of several experts are brought together.
(b) Better coordination. Committee decision helps to promote

better coordination in the company. In any type of organisation,
there is often constant need for coordination in order for everyone
to pull in the same direction. The coordination of sales
department with production, purchases and advertising
departments brought about by their being in the same committee
will help to achieve optimum results.
(c) Committee as Advisers. A committee could be advisory in

nature. This type of committee is created to advise, counsel and
make recommendations to the managing director to help him
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make an intelligent decision. An administrative commission of

inquiry is a typical example of an advisory committee.
(d) Collective responsibility for decision. When the chairman of

the committee takes a decision, it becomes a collective decision
of the committee irrespective of whether a member likes it or not.
The decision becomes the decision of the “group” who they
cannot afford to disagree with. In some instances, there is an
“overtone” which suggests to members that he would like them to
“go along”. What he really demands from them is support.
(e) Lack of Accountability. One of the major disadvantages of a

committee decision is that many committees only recommend or
advise. To advise is not to decide as the decision lies with the
chief executive who is accountable for the outcome of the
decision. In a committee decision, no one is held accountable or
responsible for the decision because of the nature of the
impersonality that characterises all committees. It has to be
observed here that depending on the nature and authority a
committee may serve in a service, advisory, coordinating
information or final decision-making capacity.
3.6.5 Use of Committees in Nigerian Organisations
Committees, standing and ad hoc, are extensively used in Nigerian

organisations. All organisations with more than 50 employees have one
form of committee or the other. In a study of Nigerian establishments,
78 percent of the organisations reported the existence of one committee
or the other with varying degrees of authority and life span.
Interestingly, 58 percent of the respondents in industry, commerce and
service organisations advocated the use of more committees while 28
percent of the respondents in the public service advocate for the use of
more committees. Some managers, 68 percent, serve in more than four
committees at a time. Only 2 percent serve in only one committee.
The most popular committees in Nigerian organisations are given on

Table 1.3 below: 1987
Table 1.3 Committees in Nigerian Organisations N = 240

No. of Companies Percentage of total
Functional Areas with the Committee frequency of mention
General Management 204 85
Finance 96 40
Marketing 156 65
Production 84 35
Labour and Personnel 132 55
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R & D New Products 108 45

Public Relations 132 55
Others 60 25
It is interesting to observe that a large percentage (55 percent) have

labour and personnel committees. It is equally revealing to note that 40
percent of the respondents believe that committees are very efficient and
only 28 percent believe that they are not efficient. The summary is on
the table 1.4 below:
Table 1.4 Efficiency of Committees in Nigerian Organisations N

= 240
Degree of Efficiency No. of Respondents Percentage
Very efficient 48 20
Efficient 96 40
Not efficient 72 30
No opinion 24 10
Total 100
A cursory analysis of respondents by occupation shows that 55 percent

of those in the public service reported that committees were very
efficient as a device for decision making. The reasons given ranged
from the inability of committees to implement their decisions to
committees serving as “rubber stamp” for management, to the
entrenchment of highly centralized structures that cannot accommodate
the decision of committees. It is true that the potential benefits of group
participation in decision making are seldom achieved in many instances.
Nevertheless, this should not be seen as sufficient reason to
underestimate the importance of committee decision. The quality of
decision making by committee is a function of the environment for
decision, the quality of leadership and the calibre of people in the
committee.
3.7 Creativity in Decision Making
A good committee could be very creative. A creative committee is one

that comes up with new ideas, new approaches, and new ways of doing
old things, doing a common thing in an uncommon way, a new product,
or new application or a combination of existing knowledge. Creative is
one of the highly sought after talents in management. A creative
manager seeks original solutions to existing problems. Creative thinking
is necessary in business for the organisation is constantly in search of an
imaginary solution to problems posed by its competitors and the total
environment. Many organisations have in their midst individual great
inventiveness, and the unusual ability to create new ideas is the
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realisation that some people are more creative than others, that
committees are often used in the solution of some of organisational
problems.
An ideal environment that is supportive of and promoting creative

thinking is necessary for individuals to challenge that imagination. The
recruitment of people who are creative is a necessary precondition in
encouraging creativity in an organisation.
3.8 Steps in Creative Thinking
Studies have shown that certain steps are necessary in creative thinking.
These can be summarised as follows:
(1) Problem identification

(2) Investigation
(3) Incubation
(4) Illumination
(5) Verification
3.8.1 Problem Identification
The first step in creative thinking is the perception that a problem exists.
This could be in production, sales, customer relations or advertising.
The discovery of this problem launches the creative individual
immediately to seek for suitable solution. No creative work has been
achieved without dissatisfaction with the existing situation which forces
the “genius” to seek new ways.
3.8.2 Investigation
Investigation is the second step in creative thinking. In this step, the

individual examines the problem and analyses old ways of performing
the task. This could call for intensive research into existing knowledge
on the subject. There could be an exploration into all the possible
avenues that will lead to the discovery of such things as the
interrelationships, and associations. This step involves the accumulation
of facts and figures that bear on the subject. A thorough examination
which helps the individual to saturate himself with facts and figures on
the problem will help to develop a creative solution.
3.8.3 Incubation
This is a very important stage in the process. Here, the entire mind
reflects on the problem. Sometimes, a creative solution is not easily
available and the individual leaves the subject for more reflection.
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Creative thinking is not a choice of alternatives as in decision making.

It is a process of mulling the problem over. It may involve the use of
the unconscious mind. The creative person is at this time in a special
state of mental “stress”, and detaches himself from things around him.
He could go around the circles with a real solution arising and he could
at this stage leave the problems for a while to avoid mental fatigue. This
period is characterized by frustration and helplessness. This is often
referred to as the gestation period. Rest is recommended. The rest period
would refresh the mind.
3.8.4 Illumination
An ideal brainstorming session highlights the importance of new ideas.

The rules for successful brainstorming session include:
(1) Criticism of ideas must be withheld until after the session;

(2) The group must welcome free-wheeling and encourage the
wildest of ideas;
(3) Developing a greater quality of ideas increases the likelihood of
having one really useful idea;
(4) Each member of the group should improve and relate his own
ideas to the ideas of others.7
3.8.5 Verification
Some of the major criticisms of brainstorming are that it is time

consuming. Many man-hours are spent in generating ideas and also in
crystallizing them. It also produces many superficial ideas.
Nevertheless, its usefulness in creative thinking can hardly be

overstated. In many organizations, it is indispensable in determining the
name of a new product and determining a new advertising slogan.
Political parties in Nigeria use it very extensively.
3.9 Qualitative Methods of Decision Making
The use of qualitative methods as aid in the decision making is well

recognized in large organizations in developing countries, and to a less
extent, in small industries. One of the major reasons for this is the
limited education of the owners of small businesses. With increased
education and the separation of owner-manager, these techniques will be
increasingly found useful by small businessmen.
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3.9.1 Operations Research (OR)
The mathematical techniques used as aid to decision making are often

called operations research. Churchman et al defined operations research
as:
“an application of the scientific method to problems arising in the

separation of a system which may be presented by means of a
mathematical model and in solving of these problems by resolving the
equation representing the system”.
Operations research has gained wide acceptance because of its use in

modern high speed electronic computers. Basically, operations research
is the application of scientific method in the solution to business
problems; OR is applied in a variety of business problems which
include:
(1) Productive scheduling

(2) New product development
(3) Long-range planning
(4) Warehouse location selection
(5) Retail outlet selection
(6) Product mix selection
(7) Air and highway traffic control
(8) Portfolio management.
The use of OR entails the building of models called equations to

represent the system.
3.9.2 Linear Programming (LP)
Linear programming is a relatively new mathematical technique in

situations requiring the optimum allocation of resources, money, capital
equipment, raw material and personnel. It is useful in production
management because allocation problem pose great complexity
involving a large number of variables can equally be solved through
linear programming techniques. If the Nigerian Bottling Company
wishes to determine the best cost method of distributing its products
from its four bottling plants to a number of warehouses located all over
Nigeria, linear programming technique will be employed.
3.9.3 Queuing Theory
Queuing theory is often called waiting-line theory. The system is used

in determining the optimal utilisation of a facility in an intermittent
service. In the use of the queuing theory.
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4.0 CONCLUSION
We have discussed decision making as one of the most crucial activities

of management. We have also emphasized that there is the need to
make decisions in all types of organizations, whether small enterprises
or multi-national corporations. The decisions that management faces are
sometimes simple and in other instances, complex and overwhelming.
5.0 SUMMARY
In this unit, we have defined decision making, identified the process

involved in decision making and classification of various decisions.
Also, we have highlighted the stages in decision making, described what
is understood by group decision making and finally, we discussed
creative thinking and the steps involved in creative thinking.
What do you understand by the term decision making in management?

List and discuss the process involved in decision making.
These Factors are Based upon and Adapted from Satya Saran Chatterjee,
(1966). “An Introduction to Management: Its Principles and
Techniques”, The World Press, pp. 184 – 186.
Hofstede, G. (1980). “Motivation, Leadership and Organisation: Do

American Theories Apply Abroad: Organisational Dynamics,
Vol. 9, Summary, p. 43.
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UNIT 4 PLANNING ‘ORGANISATIONAL’
CONTENTS
1.0 Introduction
2.0 Objectives
3.0 Main Content
3.1 Organizational Planning
3.2 Planning Defined
3.3 The Six P’s of Planning
3.4 Reasons for Planning
3.5 Characteristics of Good Planning
3.6 Contributions and Benefits of Planning
3.7 Steps in Formal Planning
3.8 Problems and Limitations in Planning
3.9 Resistance to Change
3.10 Provision for Contingency Plans
3.11 Principles of Effective Planning
3.12 Levels of Planning
3.13 Strategic Planning
3.14 Strategic Planning Process
3.15 Types of Strategies
3.16 Policies Procedures and Rules
3.16.1 Characteristics of Sound Policy
3.16.2 Procedures
3.16.3 Rules
3.17 Organisational Objectives
3.18 Hierarchy of Objectives
3.19 Characteristics of Sound Goals
3.20 Advantages of Objectives
4.0 Conclusion
5.0 Summary
1.0 INTRODUCTION
Planning has been defined previously as one of the five major functions
of management. However, since planning is a bridge between the
present and the future, it has been called the primary management
function. Planning is particularly important because of scarce resources
and uncertain environment with a fierce competition for these resources.
In this unit, you will be guided through to the rudiments of planning so
as to be able understand and comprehend what the topic is all about.
Happy reading.
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2.0 OBJECTIVES
define the concept planning, discuss the six P’s of planning and
reasons for planning
list and explain the characteristics, contributions and benefits of
planning as well as steps in formal planning
explain the problems and limitations in planning, resistance to
change and provision of contingency plans
examine the principles of effective planning, levels of planning,
strategic planning and strategic planning process
state and explain types of strategies, policies, procedures and rules
highlight the characteristics of sound policy, explain what we mean
by procedures and rules and organisational objectives
finally, discuss the characteristics of sound goals and advantages of
objectives.
3.0 MAIN CONTENT
3.1 Organisational Planning
Planning is a decision making activity requiring the process of

ascertaining objectives and deciding on activities to attain these
objectives. It is also a process of preparing for change and coping with
uncertainty by formulating future courses of action. The basic purpose
of planning is to reduce the risk of uncertainties, and to initiate a
coordinated effort within the organisation for the purpose of
organisational success.
Do you agree that “planning is a bridge between the present and the
future”? if so, why?
3.2 Planning Defined
As such the planning process has three characteristics (Boone, 1981).

These are:
1. Planning is anticipatory in nature. A decision must be made now

as to what to do and how, before it is actually done.
2. Planning is a system of decisions. It involves a process of making

decisions which will define what is to be achieved in the future and
the formulation of action plans for achievement of goals.
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3. It is focused on desired future results. Planning is a means of

ensuring that the important organisational objectives are
accomplished as and when desired.
The most comprehensive definition of planning is given by Cyril L.

Hudson (1970), who states in the following terms:
To plan is to produce a scheme for future action; to bring about

…………………. a deliberate attempt to influence, exploit, bring about
and control the nature, direction, extent, speed, and effects of change. It
may even attempt deliberately to create change, remembering always
that change (like decision) in any one sector will some way affect other
sectors.
Since Peter Drucker is supposed to be a pioneer of modern management,

it will be interesting to note how he defines it. His definition as quoted
by George A. Steiner (1969) is:
Planning is the continuous process of making present entrepreneurial

decisions systematically and with best possible knowledge of their
futurity, organising systematically the efforts needed to carry out these
decisions and measuring the results of these decisions against the
expectation through organised, systematic feedback.
Peter Drucker thus encompasses the element of feedback that would

ascertain the quality of decisions and the accuracy of planning.
3.3 The Six P’s of Planning
They are as follows:
1. Purpose. An effective planning system requires a clear

understanding of the organisation’s purpose. What are the
reasons for the organisation’s existence? Is it to increase profit or
increase market share or generate more employment or introduce
more products, etc? This purpose must be clear and elaborate.
2. Philosophy. Philosophy incorporates the fundamental beliefs as

to how the organisation’s purpose is to be achieved. For long-
term survival and growth, a philosophy of ethical conduct must
be adopted. For example, General Motor’s philosophy is based
upon profitability through quality, service and ethical behaviour.
IBM’s philosophy was to elevate the level of the salesman to an
executive, etc.
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3. Premise. This involves the strengths and weaknesses of the

organisation and its knowledge and assumptions about its
environment. By forecasting and other methods, the management
can make some conclusions about the environment trends and by
knowing its own strengths and weaknesses it can deal with the
changing environment in a more intelligent way.
4. Policies. Policies are general guidelines or constraints that aid in

managerial thinking and action. In a typical organisation, there
are production policies, financial policies, accounting policies,
marketing policies, personnel policies, than the philosophy and
form a basis for planning and necessary operational actions.
5. Plans. Plans represent specific objectives and action statements.

Objectives are the goals to be met and the action statements are
the means to achieve these ends. These plans guide us step by
step as to how to reach the objectives and also at what stage the
progress is at a given time.
6. Priorities. A particular organisational goal must be given a

particular priority. Limited resources of time, finances, materials,
etc. must be proportionally allotted to goals of priority. The
priorities will determine an appropriate allocation of resources.
Goal priorities would determine what is relatively more
important. A goal of higher priority would receive more attention
and more resources. For example, a research-oriented
organisation will get different priorities and resources than a
profit-oriented organisation. The priorities of goals would be
established on the basis of philosophy and premises of the
organisation as well as social, political, and economic measures
and value conflicts. In any case, such priorities would affect the
planning process.
Explain some of the reasons for planning. Are there “good plans” and
“bad plans”? Describe some of the characteristics of good planning.
3.4 Reasons for Planning
The reasons for planning are itemised below:
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1. Planning is essential in modern business. The growing

complexity of the modern business with rapid technological
changes, rapid changes in consumer tastes and growing tough
competition necessitates orderly operations not only in the
current environment but also in the future environment. Since
planning takes a future outlook, it takes into account the possible
future developments.
2. Planning is related to performance. It can be expected and

there is evidence to support the hypothesis that companies that
engage in formal planning consistently performed better than
those with no formal planning, and improved their own
performance over a period of time. The performance was
measured by such factors as return on investment, sales volume,
growth in earnings per share, etc. (Thune et. al. 1972).
3. Planning puts a focus on objectives. The effectiveness of

formal planning is primarily based upon clarity and specificity of
objectives. Objectives provide a direction and all planning
decisions are directed towards achievement of these objectives.
This ensures maximum utility of managerial time and efforts.
4. Planning anticipates problems and helps in the smooth flow

of operations. Since planning is involved in forecasting the
future, it needs of the organisation are anticipated in advance, the
proper acquisition and allocation of resources can be planned thus
minimizing wastage ensuring optimal utility of these resources.
5. Planning is necessary to facilitate control. Since plans are

made to achieve objectives, periodic reviews of operations can
determine whether the plans are being implemented correctly.
Well developed plans can aid the process of control in the
following ways (Boone et. al 1981):
(a) Establish advanced warning of possible deviations from the

expected performance. The deviations in production, sales,
profits, etc. may come to light during periodic investigations and
remedial action can be taken.
(b) Provide quantitative data. There may be provision in plans to

compare the actual performance, in quantitative terms,
concerning production of sales, with industry statistics or market
forecasts.
6. Planning helps in the process of decision-making. Since

planning specifies the actions and steps to be taken in order to
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accomplish organisational objectives, it serves as a basis for

decision-making about future activities. It also helps managers to
make routine decisions about current activities since the
objectives, plans, policies, schedules, etc. are clearly laid down
(Asthana and Misra, 1983).
3.5 Characteristics of Good Planning
A good plan can be identified by certain characteristics. Some of these

characteristics are given below:
1. A good plan is based upon clear, well-defined and easily

understood objectives. General objectives like improving morale
or increasing profits are ambiguous in nature and do not lend to
specific steps and plans. If possible, objectives must be
quantified for the sake of simplicity.
2. A good plan must be simple and comprehensive. It should be

simple so that all employees can grasp its significance and it can
be easily put into operation. It should be detailed enough so that
it covers all aspects of the operations that are necessary to
achieve objectives.
3. It should be well-balanced, but flexible. A good plan should be

well-balanced so that the existing resources are properly utilised
for all functions and that short-term gains are not at the cost of
long-term gains and vice-versa. Similarly, it should be flexible
enough to incorporate any changes in these resources, if
necessary. Additionally, it should be responsive to changed
conditions so that if future events do not follow the anticipation,
the same plan can be modified and ………….
4. Every plan should be time-bound. Even though planning is an

attempt to anticipate the future, the time period allowed for
achieving goals should be reasonable. Long-range planning has
more uncertainties built into it due to difficulty in correctly
anticipating events for a longer period of time. Hence, the time
period covered should be reasonable and reasonably stable.
5. The plans should involve participation by subordinates. Planning

should not be an exclusive responsibility of top management.
Subordinates will not be responsible if a plan is imposed upon
them. Also, subordinate participation generally ensures the
sincere and serious effort on their part to make the plan
successful.
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6. Characteristics of unity, planning is initiated by different

managers of different divisions at different times. It is necessary
that a good plan should incorporate all these departments,
maintaining consistency, and unity of purpose at all times and
focusing on the overall objective.
A good plan strives for optimal utility of physical as well as human

resources in unison and harmony. According to David W. Ewing
(1967), “planning is a two-sided affair. Planners may think only of the
formal, economic, physical and technical resources side when they
develop a program. But if the human side is not attended to properly,
then chances are that the planning will not be successful”.
3.6 Contributions and Benefits of Planning
The contributions or benefits of planning are as stated below:
1. Planning gives managers some purpose and direction. Since

planning is future oriented, it forces managers to look beyond the
present. Also it creates a unity of purpose, since the objectives
are formally expressed and the methods and procedures to obtain
these objectives clearly defined.
2. Proper planning helps in the process of motivation. If plans

are properly communicated to all levels of the organisation, then
everyone can feel involved in carrying them out. When people
get involved, their sense of belonging increases and thus they are
highly motivated.
3. Planning provides a framework for decision making.

Knowing the organisational objectives and the methods to
achieve these objectives eliminates ambiguity in the decision
making process. Also planning provides for feedback, periodic
evaluation of programs and indication for any deviation so that
corrective action can be taken, hence making the decision making
process a little easier. Also systematic planning requires an
understanding and evaluation of many variables that influence
events, hence it is highly unlikely that an important variable
would be overlooked which could adversely affect either the
decision process or the operation.
4. Proper planning results in proper and effective utilisation of

organisational resources. Since planning involves the
identification of such resources for optimum utility, there is no
waste or minimum waste of resources. This will also reduce
unproductive work, idle time for workers, downtime for
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machines, which would logically result in minimum cost of

operations.
5. Since accurate forecasting of future events is an integral part

of effective planning, it reduces the elements of risk and
uncertainty. Also, since planning is done in advance of actions,
it prevents hasty judgements and haphazard decisions and results
in disciplined thinking.
6. It improves the competitive strength of the company in two

ways. First, since the operations are planned in advance, the
company is able to take its time in shopping around for best and
competitive rates for raw materials, equipment and parts and for
human resources. Secondly, proper planning gives the company
an advantageous edge if it decides to make changes in its line of
products, or expansion in plant capacity or changes in
methodology (McFarland) etc. Studies have shown companies
with formal planning system have performed significantly better
overall, than those with informal planning or no planning
(Krager, 1973).
7. Formal planning forces managers to examine all areas of the

organisation from all angles and efficiently coordinate the
activities of all these areas. Without this process these managers
may ignore or overlook some critical aspect due to time pressures
or other factors thus affecting the outcome of the efforts
negatively (Camilius, 1975).
8. Planning provides performance standards and standards for

measuring the progress of the organisations. Well developed
plans can aid the controlling process. By establishing advanced
warning of possible plan deviation, remedial action can be taken
if these deviations occur. Performance standards and
performance appraisal methods assist in the development of
human potential and an equitable reward system. Thus it can be a
good training ground for future managers and career-oriented
executives.
3.7 Steps in Planning
Planning can be considered as a series of sequential steps. These steps

are:
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Steps (1): Establish and define clearly the central and overall
objectives of the organisation. A well-defined objective
can make the difference between success and failure of an
enterprise. It clearly defines the product or service as well
as the purpose of the company. Along with the overall
mission of the company, it is also necessary to establish
the specific objectives and goals. For example, the overall
objective of a hospital is to provide quality healthcare.
Step (2): Determine your current position relative to your

objectives. Make an assessment of your strengths and
weaknesses. This will show the distance the company has
to cover before reaching its goals. The analysis of current
strengths and weaknesses would determine if the goals are
realistic and achievable and whether they need to re-
evaluated and modified.
Step (3): Develop forecasts and future conditions. In order to

effectively plan, it is important and necessary to forecast
as accurately as possible, the future trends that will affect
the company’s standing and operations. The factors of
forecast will include general economic conditions, changes
in consumer attributes, new technological and product
developments, possible competitive strategies and any
adverse legal developments.
Step (4): Preparation of derivative plans. Once an overall plan has

been adopted, it is necessary to develop other derivative
plans for each segment of the company, to support the
formal plan. Derivative or sectional plans are developed
in each area of the business, but within the framework of
the primary plan in order to coordinate and integrate
programs and policies of all sections of the enterprise.
Step (5): Implement plan and evaluate its results. The success of
the plan would depend upon how effectively the plan is
implemented. This implementation is going to require a
combination of all skills and coordination of all factors.
Also in this ever-changing dynamic environment, it is
necessary to keep the plan open to evaluation and
modification. The plans should be periodically re-
evaluated to measure its progress and effectiveness so that
any deviations can be corrected and any adjustments can
be made.
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What are some of the problems encountered in the process of planning?

Which of these problems generally contribute heavily towards failure of
some plans?
3.8 Problems and Limitations in Planning
There are situations in which sometimes even well-designed plans fail to

bring the desired results. There are some established reasons as to why
plans fail. Some of these reasons are based upon K.A. Ringbakk (1970).
These are:
1. Corporate planning is not integrated into the total

management system. The top management fails to identify and
associate properly the formal planning with the central concept of
the organisation’s mission.
2. There is a lack of understanding of the different steps of the

planning process. The management may not be knowledgeable
or skilled in understanding all steps of the planning requirements.
3. Management at different levels in the organisation has not

properly contributed to planning activities. Since all strategic
planning is generally formulated and conducted at top
management level, the middle management and lower
management which is closer to the operations may not understand
all aspects of planning and thus may not be able to contribute
some necessary key factors as inputs.
4. Poor information and inadequate inputs may have formed

the basis for planning. Since reliable data and information is the
backbone of formal planning, such information may not be
available or procurable. Poor information may also be due to
faulty forecasting or poor judgements.
5. In starting formal planning, too much is attempted at once.

Due to excitement and emotional expectations, the plans may be
implanted too quickly and with too high expectations.
6. The management is not always willing to cancel or modify

poor plans. A poor plan may adversely reflect on management’s
ability and understanding, and hence they may be unwilling to
accept that the plan was poorly formulated, thus their
unwillingness to modify it.
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7. Management fails to operate by the plans. This may be

because of lack of full understanding of all the aspects of the plan
or it may be due to some inherent resistance to the plan, or it
could be due to some effect of unforeseen events and
circumstances which could disrupt the effectiveness of the plans.
8. Resistance to change by organisational members.
9. Lack of contingency plans.
While all these factors contribute to the failure of otherwise well-

developed plans, the resistance to change by the management and the
absence of contingency plans contribute heavily and hence require
further abortions.
Resistance to change is considered to be one of the major problems in

implementing any innovative plans. What are the possible causes for
this resistance and how can these be remedied?
3.9 Resistance to Change
Even though planning and plans are so important to organisational

success, a study in the 1970’s revealed that about 50 percent of the line
managers were very reluctant to actively participate in the planning
process (Martin, 1979). Sometimes, even top managers show lukewarm
support for the process thus serving as poor role models for the junior
management.
Resistance to change is often emotionally based and is not

easily overcome by rational argument. The resistance may
be based upon such feelings as loss of status, implied
criticism of present competence, fear of failure in the new
situation, annoyance at not being consulted, lack of
understanding of need for change or insecurity in
changing from well-known and fixed methods.
Since most of the resistance is emotionally oriented, it is necessary to

take steps that would build confidence in the management’s ability to
work as a team under a participative management system. Renato
Targiuri (1979) has suggested some steps which would inspire that
confidence in the management. These steps are:
1. All managers must be made aware of the benefits derived both at

individual as well as the organisational level.
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2. Communication lines among all level managers and any staff

specialists should be kept open and accessible.
3. Set up a system of recognition and rewards to encourage all to

participate in the planning process and contribute uniquely to its
success.
4. Perhaps, a seminar and a lecture by a trained industrial psychologist

in an informal, small group session would assist in positive thinking.
5. An honest discussion among the participants about the reasons for

resistance and suggestions to overcome it, would be helpful.
6. The lower management should not be left to implement the plan, but
should be encouraged to join in the design of the plan as well.
7. All managers should be trained in the mechanics and techniques of

planning.
3.10 Provision for Contingency Plans
Contingency plans are alternative methods to either take over the earlier
plans if they seem to fail due to unexpected circumstances or modify
them as the situation demands. Contingency plans help the management
to respond quickly to unpredicted changes thus avoiding panic in crisis
situations (Linneman, 1981).
The contingency plans should also be consistent with the general

mission and policies of the organisation and should be as simple as
possible. However, it is very important to keep a close watch on the
development and progress of the original plans, so that if there are any
early signals of the possibility of failure of the original plans, then the
contingency plans can be put into practice without delay. For example,
when the aviation controllers in America went on strike affecting the
operations of the airlines, such contingency measures were effectively
taken. A new force of controllers was already ready to take their place
immediately and many went through a quick and concentrated form of
training.
In addition to the reasons that contribute to the failure of some planning

processes, there are some other limitations that inhibit the successful
formulation of formal plans. These are:
1. Planning is expensive. A good deal of time, energy, and money is

involved in setting up the planning machinery for the purpose of
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gathering and analysis of data and testing of various alternatives in

about long-range planning. Accordingly, the cost of planning and
the benefit derived from it must be adequately balanced.
2. Planning is time-consuming. Planning is time-bound and

sometimes advanced planning might delay immediate action that
may be necessary and hence lose a valuable opportunity. Certain
situations do pop up where prompt action is so urgent and
unavoidable that no time could be devoted to advance planning.
This is especially true in sudden and unexpected emergencies.
3. Planning is a hindrance to innovation. In a planned set-up,

everything is pre-conceived and every operation pre-planned. This
means simply proceeding according to plans and following the rules
mechanically. This does not leave any ground for a manager’s
initiative and innovation. This is a big handicap for imaginative and
creative managers. This problem can be overcome, however, by
making the plans less rigid and more flexible in order to
accommodate any new and relevant suggestions.
4. Mental ability. Planning can be highly frustrating sometimes,

because it requires an extremely detailed, careful and analytical
thought process. Accordingly, it is more of an intellectual exercise.
The conceptual skill required in planning is in short supply.
According to George Steiner (1969), “Planning is hardwork. It
requires a high level of imagination, analytical ability, creativity and
fortitude to choose and become committed. The management must
exert pressure to demand the best efforts in managers and staff. Both
the talents required and the maintenance of high quality planning is
difficult to achieve”.
3.11 Principles of Effective Planning
These principles are primarily based upon Gary Dressler (1985). They
are as follows:
1. Keep aims crystallised (Hudson, 1967). These aims must be

clear, unambiguous, solid, reasonable and attainable. Badly
defined objectives do not lend to accurate planning.
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2. Develop accurate forecasts. Accurate events and trends are the

most important input into planning. Accordingly, the managers
making the forecasts must be highly skilled and must use
forecasting methods that are suitable.
3. Involve subordinates in the planning process. This will ensure

the acceptance of the plans by those who are going to implement
it. Studies have indicated that the people who put the plan into
operation, do it much better when they participate in the
formulation of the plan, than when the plans are assigned to them
(Bass, 1970).
4. The plan must be a sound one. The plan must be a sound one in
order to be effective. There are many examples of companies
who spent large amounts of money on plans that turned out to be
unsound ones and hence less effective. Mitroff and Emshoff
(1979) suggest a devil’s advocate approach, in which someone
deliberately criticises the plan in order to eliminate any bugs in
the plan and further refine it.
5. Assign planning responsibility to the right people (Lorange

and Vancil, 1976). Basically, the right people are those who are
directly involved with the operation and who will be
implementing the plan. These are primarily the “line” people,
even though the “staff” specialists are encouraged to assist in the
formulation of plan.
6. Don’t be over-optimistic. Objectivity is an essential ingredient

of effective planning. Over-optimism is based on feelings and
intuition. Don’t see what you want to see but see what there is.
7. Decide in advance the criteria for abandoning a project (Paul

et. al, 1978). There is no need to continue to stick to the plan if it
is not working out as expected. However, the criteria for
abandoning a particular project should be established at the
beginning. For example, if a particular advertisement commercial
does not increase sales by 10 percent in 6 months, it will be
replaced.
8. Keep your plan flexible (Pau, et. al.). Keep the progress of your
plan under constant review so that it can be revised and modified
as the situation demands. The future trends should also be
assessed by continuously monitoring economic, social, political,
technological, and competitive trends. Any changes in these
variables may require changes in the original plans.
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9. Review long-range plans on a short-range basis. Long range

plans are more risky due to dynamic environment. Accordingly,
long-range strategic plans should be split up into manageable
periods and the basic assumptions underlying the strategic plan as
well as its progress be measured and reviewed at such set
intervals and identify reasons for under-performance or over-
performance as the case may be, and new decisions be made
about the plans.
10. Fit the plan to the environment. Assess the environment –

current as well as future. If the environment is comparatively
stable, a plan can be more rigid. However, if the environment is
volatile, the plan must remain highly flexible to accommodate for
change.
3.12 Levels of Planning
There are basically three levels of planning associated with the different
managerial levels. These levels are:
1. Strategic planning. The strategic planning is conducted by the

top management which includes Chief Executive Officer,
President, Vice-Presidents, General Managers, etc. and is the
process of determining overall objectives of the organisation and
the policies and strategies adopted to achieve those objectives. It
is a long-range planning and may cover a time period of up to 10
years. It basically deals with the total assessment of the
organisation’s capabilities, its strengths and its weaknesses and
an objective evaluation of the dynamic environment. The
planning also determines the direction the company will be taking
in achieving these goals.
2. Intermediate planning. This planning covers a time frame of

about 6 months to 2 years and is contemplated by middle
management who includes functional managers, department,
heads and product-line managers. They also have the task of
polishing the top management’s strategic plans. The middle
management will have a critical look at the resources available
and they will determine the most effective and efficient mix of
human, financial, and material factors. They refine the broad
strategic plans into more workable and realistic plans.
3. Operational planning. These plans are the responsibility of

lower management and are conducted by unit supervisors,
foremen, etc. These are short-range plans covering a time span
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from one week to one year. These are more specific and they
determine how a specific job is to be completed in the best
possible way. Most operational plans are divided into functional
areas such as production, finance, marketing, personnel, etc. For
example, the production plans would require an analysis and
decisions covering inventory levels of raw materials as well as
finished product; flexibility of current production facilities, how
to cope with changing technology, etc. These plans are relatively
stable and are linked with the planning objectives of the middle
management levels and the top management levels.
Even though planning at all levels is important, since all levels are
integrated into one, the strategic planning requires closer observation
since it establishes the direction of the organisation.
3.13 Strategic Planning
Strategic planning, as defined earlier, is the process of planning as to

how to achieve the organisational goals with the available resources and
is undertaken by the central management of the organisation. Strategic
planning is necessary and important for the following reasons (Herkhuis,
1979):
1. First, there are a large number of external variables – whose

values do not remain constant – that affect the operations of the
organisation. These variables include: changing international
environment, political and governmental policies and forces,
economic trends, competition tactics, technological changes and
social dynamism. Strategic plans must have provisions to cope
with these situations.
2. Secondly, all natural resources are becoming scarce. The

management must decide on how to compete for these resources
and how to allocate them properly. The human resources are
constantly changing in nature. There is more and more of an
educated workforce and most of the routine and repetitious work
is being taken over by computers and robotics. Hence a proper
redistribution of human resources must be properly put into
focus.
3. Thirdly, there has been an information explosion which has

necessitated increase in knowledge and ability to plan effectively.
Since, effective strategic planning ensures success; all
competitive forces are contributing a lot of their energies in
perfecting these plans thus generating an absolute necessity to
introduce strategic planning in most companies.
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3.14 Strategic Planning Process
Similar to the formal planning process, the process of strategic planning

can be considered to constitute the following steps:
1. Define and express clearly the mission of the organisation.

The mission must be clearly understood. It could be high quality
product at low cost. It could be high quality product at high cost
to have and keep a quality-oriented image like Rolls Royce or
Mercedes Benz automobiles.
2. Determine long-range goals and objectives. These would be

more specific in nature, but in accordance with the general
mission of the organisation. These could include the types of
products the company wants to produce and promote and the
long-term profit potential.
3. Make predictions about the economic environment in the

future. This would involve the use of some forecasting
techniques to predict the growth of the company’s market share.
4. Develop a long-range plan. This may extend to 10 years in time.

This strategic plan would involve the definition and description
of all actions that would be taken in order to achieve the company
objectives.
5. Develop short-range plans. Within the structure of strategic

plans, it is important to break it up into short periods, e.g., a plan
for a period of one year. These plans would also provide for
periodic evaluation of the strategic plans so that corrective action
can be taken if there are any deviations. Such a revised long-
range strategic plan would reflect the effect of current conditions
on the plan.
3.15 Types of Strategies
A strategy is an action plan which sets the direction that a company will
be taking. A strategy is a decision making choice and would involve
consideration for external environment affecting the company as well as
the internal environment of strengths and weaknesses of the company.
According to William F. Guelick (1972), there are four strategies:
stability, growth, retrenchment or a combination of approach.
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1. Stability strategy. Stability strategy implies, “to leave the well

enough alone”. If the environment is stable and the organisation
is doing well, then it is better to make no changes. This strategy
is exercised most often and is less risky as a course of action. An
example of stability strategy would be an organisation that would
be satisfied with the same product, serving the same consumer
groups and maintaining the same market share. The organisation
may not be motivated and adventurous to try new strategies to
change the status quo.
2. Growth strategy. Growth means expansion of the operations of

the company and addition of new areas of operations. Growth
strategy can be risky and involves forecasting and analysis of
many factors that affect expansion, like resource availability and
market availability. However, growth is necessary due to
volatility of businesses and industries. Growth must be properly
planned and controlled, otherwise organisation can fail. This is
evident from failures of Laker Airways and W.T. Grant
Company. However, growth is not only necessary but also
desirable since growth is an indication of effective management
and it attracts quality employees as a result. The growth can
come due to expansion or diversification or merger with similar
firms.
A classic example of growth of existing services is that of McDonald’s

Hamburger chain. Starting from scratch in the 1950’s, it developed into
a franchise chain of 6,000 outlets in 1979 with a sale of over 5 billion
dollars per year (Rowan, 1979).
Diversification of services or products is another example of growth and

strategy. Banks are going into stocks brokerage. Potamkin Cadillac car
dealer in New York City is also dealing in Japanese imported cars.
Avon products, primarily a cosmetics company, have gone into the
jewellery business. Similarly, General Motors acquired Electronic Data
Systems (EDS), a computer company and Philips Morris, a company
producing tobacco products acquired Miller Brewing Company
producing beer and also acquired a soft drink, Seven-Up.
3. Retrenchment strategy. Retrenchment primarily means
reduction in product, services, and personnel. This strategy is
many times useful in the face of tough competition, scarcity of
resources and reorganisation of the company to reduce waste.
Most airlines have streamlined their operations. Most automobile
manufacturers had closed down many plants and retrenched
personnel during the economically difficult period of 1979 –
1980. The City University of New York (CUNY) had a major
cutback on faculty during the financial crisis of the late 1960’s.
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Retrenchment strategy, though reflecting failure of the company

to some degree, becomes highly necessary for the very survival
of the company.
4. Combination strategy. Combination strategy means using a

combination of other strategies and is primarily used by large
complex organisations who may want to cut back in some areas
and expand in others. Also, in time of financial difficulties, a
company may employ Retrenchment Strategy and resort to
Growth Strategy, if the economic situation improves. In order to
make Strategic Planning effective, it is necessary to have the right
people involved who would objectively and intelligently look at
all angles and all factors involved in the success of these plans
and strategies. It is important to draw correct conclusions about
the following:
(a) The mission and the goal of the organisation.

(b) The environment, both external and internal.
(c) The strengths and weaknesses of the organisation.
(d) Management ethics and values.
3.16 Policies Procedures and Rules
3.16.1 Policies
It is necessary to frame some policies for successful planning. A policy

is a statement and a predetermined guideline that provides direction for
decision making and taking action. Policies are usually general enough
to give the manager sufficient freedom to make judgements, while at the
same time they are specific enough to establish constraining boundaries.
For example, regarding employment, a company policy may be to
employ personnel without regard to race, religion, sex, or age and within
the bounds of this policy, a manager can make decisions. Policies must
be based upon a thorough analysis of objectives and should be
consistent with the company’s mission and philosophy.
Policies, being formal statements, serve as ready guides for answering

numerous questions, and making many routine day-to-day decisions,
especially about recurring problems, thus freeing management’s time for
more important and unique decisions. This helps improve the efficiency
of operations. If the policies are clearly understood and adhered to by
all, there will be fewer problems and fewer complaints to start with.
There may be separate policies for separate functions, but they must be
all coordinated around a common theme, serving a consistency of
purpose.
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Appropriate policy guidance enables managers to anticipate and predict

action for a given set of situation variables. There are organisational
policies formulated for all types of situations and functions. There may
be sales policies, production policies, personnel policies, accounting
policies, etc. These policies cover all aspects of these functions. For
example, personnel policies would specify decisions regarding selection,
training, remuneration, labour relations, firing and promotion of
personnel, etc.
According to Newman Sumener, and Warren (1970), a policy may:
(i) Be specific or broad in nature.

(ii) Deal with one or many aspects of a problem or situation.
(iii) Place wider or narrow limits within which action is to be taken.
(iv) Specify the steps to be taken when a decision is to be made.
Characteristics of Sound Policy
The characteristics of sound policy are that:
(1) It should be subject to one interpretation and the intent and the
content of the policy must be clearly expressed and preferably in
writing.
(2) It should be stable but sufficiently flexible. Stability implies that

no changes in the policy are to be made except in response to
fundamental and basic identifiable changes in the conditions.
Flexibility provides enough room for the manager to use his own
discretion within the broad boundaries of the policy.
(3) It should be comprehensive in scope. It should be capable of

being applied to different situations in a given area, so that most
cases can be handled at lower levels of the management, and only
some exceptional cases, which are unique and are not covered by
the policy, are referred to the higher management. For example,
personnel policies should cover guidance for answering all
questions that may arise in that area. These may be in reference
to hiring, firing, promotions, transfers, training, remuneration,
etc.
(4) A sound policy should be related to the objectives of the

company and be in harmony with the economic, political and
social environment for the company. Policies are instruments for
moving towards the objectives. Sound policies, understood by
all, will leave little room for discontent and grievance, hence
assisting in smooth operations necessary for achieving objectives.
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Additionally, if the law demands equal opportunities for all and

the society expects it, then the policy should be consistent with
these requirements.
(5) A sound policy should help coordinate multiple activities. Even

though different work groups and divisions will have different
functional policies, they must be bonded together with the
common theme of the organisational goals. These sub-policies
should not contradict teach other.
(6) A sound policy, not only prescribes general guidelines for

conduct, but also establishes criteria for current and future action
for a given set of circumstances and given decision variables, and
methods and procedures for accomplishment.
(7) It must be based on known principles, facts and truth. For

example, a policy, “The customer is always right”, may be a good
policy, but it is not based on truth. Similarly, a policy based on
assumption that older people are less efficient, may not be based
on facts and hence will not be a sound one.
(8) A sound policy should establish the desired image of the

company. Policies are useful indicators of the conduct and
philosophy of the company and about what the company stands
for. These policies being formal statements can easily be
communicated to the organisational members as well as the
outside public.
3.16.2 Procedures
While policies cover a broad area of action, procedures prescribe the

exact manner in which an activity is to be completed. It is a series of
steps established to accomplish a specific project. They generally
indicate how a policy is to be implemented and carried out. They are
more precise guidelines permitting little or no individual discretion.
George R. Terry (1961) has defined a procedure, “as a series of related
tasks that make up the chronological sequence and the established way
of performing the work to be accomplished”.
As an example, let us assume that a company policy is to promote from

within whenever possible. It must lay down procedures for such
promotion as to the type of position to be filled, credentials required,
method of interviewing, etc.
3.16.3 Rules
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Whereas procedures specify a chronological sequence of steps to be

performed, a rule is very specific and narrow guide to action. For
example, a company may prescribe a number of safety rules, such as “no
smoking on company premises”. Wearing safety belts in cars and
airplanes is another of safety rules. “No eating in the classroom” is a
rule in all schools and colleges, etc.
A rule is meant to be strictly followed and is generally reinforced by

invoking penalties. For example, if it is a rule to report on duty at 9.00
a.m., then any person who consistently breaks this rule can be fired. A
recent New York State law requires that all car drivers not wearing the
safety belt while driving are subject to fine.
All policies, procedures, rules and regulations, methods and strategies

are designed to implement and support the planning process so that the
goals and objectives of the organisation are achieved in an orderly way.
Planning is a very important and critical ingredient of organisational
operations and decision making. It is not a panacea for all ills. Perhaps
the following observation made by George Steiner is a good indication
of the significance of planning.
“Planning will not solve all the problems of a manager. Nor will
planning per se guarantee business success. For some companies, a
continuous flow of imaginative ideas is the only thing that can bring
success. For some companies, completely unexpected and unpredictable
events will bring failure despite sophisticated corporate planning. Some
companies will succeed without planning, largely through a benevolent
environment. But what has been said here is that, other things being
equal, comprehensive corporate planning will bring much better results
than if it is not done. It will provide a useful framework for better
innovations, creativity, vision and decision making. All things
considered, managers will be considerably better off with
comprehensive planning than without it”
3.17 Organisational Objectives
Planning, plans and strategies are all means to an end. Accordingly, the
end or the objective must be very clear. These objectives are “those
ends which the organisation seeks to achieve by its existence and
operations” (Glueck, 1976).
Objectives, which are desired outcomes and goals which are more
concrete aims, both provide direction for the organisation. They direct
the efforts of the management towards the end. They also provide a
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standard against which the organisation can measure its performance

and results. Accordingly, these objectives must be specific, clear,
precise, easy to understand, and goals should be consistent with the
long-range mission of the organisation, and should be established with
the following considerations:
(a) Environmental conditions. These conditions include the

availability of raw materials, skilled labour, energy and other
resources. The long-range objectives must ensure that these
resources will not become scarce. Additionally, the objectives
must keep abreast with the new technological developments.
(b) Economic conditions. The current economic conditions and

economic trends must be seriously considered while setting
objectives. The objective of expansion during recession may not
be advisable. The economic fluctuations must be assessed and
predicted accurately.
(c) Internal resources. There is no point in establishing an objective

if we do not have the means to achieve it. Accordingly, the
objectives should be set relative to the company’s resources of
capital, skilled personnel, physical equipment, etc.
(d) Anticipating the future. Future events, being most

unpredictable, have a major impact on the realisation of
objectives. Future opportunities and threats must be identified
and as far as possible, they must be incorporated in the
organisational plans (Klein, 1980).
3.18 Hierarchy of Objectives
The organisational objectives typically exist in a hierarchy. The broader

aims of the company are broken down into hierarchical segments of
divisional objectives, work group objectives and individual employee
objectives. Each higher level objective is supported by one or more
lower level objectives. This process enables each member of the
organisation to relate his contribution to the overall objectives (Granger,
1963). This helps the proper alignment of all organisational levels with
the central aim of the organisation.
3.19 Characteristics of Sound Goals
The characteristics of sound goals are:
1. Goals and objectives should be realistic and attainable.

Overly optimistic but unrealistic goals serve as morale-deflators
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and hence ineffective. Realistic goals provide a sense of

accomplishment and thus act as motivators.
2. Goals should be specific and measurable. General goals are

difficult to interpret and difficult to measure. For example,
“improving employee safety” is more difficult to define and
measure than, “reducing work accident by 20 percent”.
Similarly, morale can be measured in terms of employee
tardiness and absenteeism which are quantifiable. Similarly, a
goal of increasing the market share of the company by 5 percent
allows a manager to measure the progress as the time passes.
3. Goals should be time-bound. The goals can be set on a daily,

weekly, monthly, or yearly basis. In many situations, there are
five-year plans and ten-year plans. The time frame in which the
given goals and objectives are to be achieved must be realistically
established.
4. Goals should be result-oriented. The focus should always be

on ends and not on means. The means must be modified, if
necessary, by retraining employees or changes in methods or
equipment, but the end must remain in focus.
5. Goals should be set in a participative manner. Goals should

not be imposed upon the employees. The people who are
responsible for accomplishing these goals should be encouraged
to participate in formulating them.
3.20 Advantages of Objectives
Peter Drucker (1954) has identified eight areas where objectives are
necessary and useful. These are: market standing, innovations,
productivity, physical and financial resources, profitability, managerial
performance and development, workers’ performance and attitudes and
public responsibilities. Thus, objectives contribute to every area of
management and operations. Specially, objectives are beneficial in the
following ways (Prasad, 1979):
1. They make the integration of activities possible. It encourages

unified planning. Thus the operations of the organisation are not
disoriented and haphazard but are unidirectional towards a
common goal. This helps in coordination of different departments
and activities resulting in a sense of unity and harmony.
2. Objectives serve as guides for decision making. A clear

understanding of organisational objectives gives managers the
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direction as well as the tools for effective decision making. They

no longer grope in the dark but have a clear-cut basis for problem
solving and making pertinent decisions.
3. Well-defined and clearly understood objectives are

motivating elements. Very often when the individuals
participate in goal setting or accept them as desirable, then
achieving them presents a challenge and becomes a source of
satisfaction to the employee. This is especially true if the
individual goals are integrated with the organisational goals.
4. Objectives act as standards for control. Organisational goals

serve as a criteria or standards against which the progress can be
measured. Any deviations can be corrected in a timely manner.
This reduces costly waste of human efforts and resources, thus
increasing the organisational efficiency.
5. Sound objectives serve as a basis for decentralization. If the

objectives and the process and policies to achieve them are
clearly identified, then the decision making authority can be
delegated and assigned to lower level operational management.
This would free the top management for policy making and
growth decisions.
4.0 CONCLUSION
Planning is the first in the management functions and precedes all other
functions. Planning is particularly important because of scarce resources
and uncertain environment with a fierce competition for these resources.
We have in this unit taken you through the subject matter from the
concept through to the reasons, levels, steps, and types of planning. We
also mentioned and discussed strategic planning and the different levels
of strategies, etc.
5.0 SUMMARY
In this unit, we defined planning, discussed the six P’s of planning and
reasons for planning. We listed and explained the characteristics,
contributions and benefits of planning as well as steps in formal
planning. We examined the principles of effective planning, levels of
planning, strategic planning and strategic planning process. Also
explained are the problems and limitations in planning, resistance to
change and provision of contingency plans. We stated and explained
types of strategies, policies, procedures and rules, highlighted the
characteristics of sound policy, explained what is meant by
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organisational objectives and finally discussed the characteristics of

sound goals and advantages of objectives.
Explain in detail the concept of “policies, procedures and rules”
Nwachukwu, C.C. (1992). Management Theory and Practice. Onitsha,

Nigeria: African-FEP.
Drucker, P. (1989). The Practice of Management. Jordan Hill Oxford:

Butterworth-Heinemann
Jones, G. R and George, J. m. (2003). Contemporary Management (3rd

ed.). New York: McGraw Hill.
Leavitt, H. J. (1978). Management Psychology (4th ed.). Chicago.


Prentice Hall.
Stoner, J. A. Fr, Freeman, R. E. and Gilbert, D. R. Jr. (1995).

Management. (6th ed.). New Jersey: Prentice-Hall.
UNIT 5 FUNCTION OF CONTROLLING
CONTENTS
1.0 Introduction
2.0 Objectives
3.0 Main Content
3.1 Control
3.2 Managerial Control
3.3 Requirements and Characteristics of an Effective Control
System
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3.4 The Control Process

3.5 Types of Managerial Controls
3.6 Types of Control Methods
3.7 Behavioural Guidelines for Effective Control
4.0 Conclusion
5.0 Summary
1.0 INTRODUCTION
Control is very important both in organised living as well as “living”

organisation. When things go smoothly and as planned, they are under
control. “Self-control” is a word we are all very familiar with which
simply means that we discipline ourselves in such a manner that we
strictly adhere to our plans for our lives and do not deviate from it.
“Diet control” means control our input of food to a prescribed level in
order to achieve a goal of physical fitness. Any deviations would make
the process out of control affecting the goal achievement.
Control has very broad applications both in the personal as well as the
industrial world. Controls are there to ensure that events turn out the
way they are intended to. Control is a powerful force if applied properly.
Controlling your emotions sometimes can save your life: Nuclear power
is both useful and destructive. Its usefulness will depend upon our skill
in controlling it. Controlled air and controlled water run machines and
industries.
In this unit, we shall examine this important aspect of management

functions.
2.0 OBJECTIVES
define control
describe managerial control
list the requirements and characteristics for an effective control
discuss the control process
highlight and discuss the types of managerial control
list and describe types of control methods
discuss the behavioural guidelines for effective control.
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3.0 MAIN CONTENT
3.1 Control
Control is one of the most important functions of management, second

perhaps, only to the function of decision making. There is more to
control than mere measurement and reporting of activities. It is a
dynamic process, requiring deliberate and purposeful actions in order to
ensure compliance with the plans and policies previously developed.
Explain the basic meaning and necessity for control.
3.2 Managerial Control
The best known definition of management control is given by Anthony

(1965) who says:
“It is the process by which managers assure that resources

are obtained and used effectively and efficiently in the
accomplishment of the organisation’s objectives”.
Basically, the definition stresses that the function of control is to

accomplish organisational goals by implementing previously determined
strategies and policies so that whatever needs to be done, is done
properly. In other words, control maintains an equilibrium between
means and ends or between efforts and output. It makes sure that the
actual performance is in conformity with the intended and planned
performance leading towards achievement of objectives. The process of
controlling ensures that right things happen at the right time in the right
way and by the right people.
The importance of control function cannot be overemphasised. Its

significance is heightened specially because of the following factors
which are common to all organisational situations:
1. Size of business: As the organisations grow in size and diversity,

they become increasingly complex to manage and hence the need
for an efficient system of controls which is required to coordinate
activities and accomplish integration.
2. Uncertainty: Control forms a basis for future action. Today’s

world of rapid and sometimes unpredictable changes makes the
future very uncertain. This makes planning very difficult. Hence
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control points are necessary to check the progress of activities

and plans and make the necessary and constructive adjustments
so as to accommodate any environmental changes.
3. Decentralization trends: The current trends in decentralization

have brought the decision making authority at lower level
management while accountability for results remains with the
upper management. Controls serve the purpose of monitoring
and ensuring performance results while delegating authority to
subordinates.
4. Control is vital for morale. Workers are happier when things are
under control. People make mistakes. Intuitive decisions can
result in errors of judgement, especially when there are so many
variables involved. Such wrong decisions can result in lowering
of morale. Control techniques reduce the chances of errors in
judgement thus making the organisational environment more
stable which is morale-boosting.
3.3 Requirements and Characteristics for an Effective

Control System
Effective controls have certain common characteristics. Some of these

requirements and characteristics are discussed below:
1. Controls must provide useful and understandable information.

Misunderstood controls will not be applied properly. The control
system format must be simple, clear, unambiguous so that
irrelevant information is excluded and only useful and necessary
data is utilised. This would make it easier for the people who are
responsible for monitoring operations. Furthermore, the
information must be accurate in order for control systems to work
properly. Additionally, information should cover all aspects of
business so that no aspect that needs to be controlled is
overlooked.
2. Controls should report deviations quickly so as to minimise the ill

effects of these deviations. A well designed control system
should be capable of identifying potential problem areas before
they arise so that corrective action can be taken before the
problem becomes serious and unmanageable. The system should
be sufficiently efficient, so that any deviations or control
information is relayed to the management immediately after any
significant event occurs, so that decisions on this information can
be taken without delay.
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3. Controls must be designed so that the right people monitor the

activities of their own fields. The sales manager, for example,
should be concerned with only sales activities including output of
sales representatives, product sales by territories, any price
changes that would affect sales and any new products introduced.
Similarly, the production manager must control the output as well
as the quality of the output etc. However, the total control system
of the organisation must be delicately balanced. The control
program must be set up by individuals who have a total view of
the organisation so that the program does not reflect the biases of
one group over the other. For example, the financial reports may
be excellent but still the company may be facing a strike because
the feedback about personnel satisfaction was inadequate.
4. The focus should be on strategic control points. The control

system must reflect and support the organisation’s established
overall priorities so that the activities of strategic significance
where deviations would lead to greatest harm, receive the
immediate corrective action and minor activities get lower
priority for control purposes.
5. Control should focus on results. The ultimate aim of the control

process is to attain objectives. Gathering information, setting
standards, identifying problems, measuring deviations and reports
are simply means to the end. The controls must not fail to work.
Whether it is the fault of measuring mechanisms or the authority
structure it must be modified and corrected.
6. Controls should be economically realistic. A control system must

be worth the expense. The cost of implementing the control
system must be less than the benefits derived from the control
system. A control is not desirable, if an increment in
improvement involves a disproportionate increase in cost and
effort. For example, checking every unit in mass produced items
would be costly and ineffective. A small percentage of these units
can be taken at random, inspected and decisions made about the
entire lot of that item. On the other hand, each part that goes into
a space capsule must be thoroughly examined and tested.
7. Controls should be flexible enough to absorb change. Since most

organisations operate under dynamic and changing environment,
a rigid set of controls would not be appropriate. Flexible controls
can adjust for the uncertainties of the situation. The value of
flexible control can be readily seen in the use of flexible budgets
which expand or contract on the basis of volume of business.
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8. Controls should not only indicate deviations, but should also lead
to corrective action. Simply uncovering and measuring deviations
is not enough, so the control system must lead to corrective
action quickly. The system must also disclose where the problem
areas are and what factors are responsible for them so that the
management can take immediate action.
9. Controls should be simple, but difficult to manipulate. Simple

controls absorb less effort and are more economical. Excessive
complexity leads to confusion. It must be designed in accordance
with the needs and the abilities of the people who implement it,
but it should not be subject to misrepresentation or distortions
which can be manipulated to suit somebody’s purpose, or to
sabotage the operations.
10. Controls should be acceptable to organisation’s members. Too

rigid controls might cause resentment resulting in lower morale
and inefficient performance. Effective controls require:
(a) Support of top management.

(b) Participation of all managers in setting up the control system.
(c) Acceptance and understanding of the control process by all
workers.
(d) Information and feedback on actual performance must be
timely and accurate.
(e) The control system must be well communicated.
11. Control system must have outside support. The system should
facilitate the organisation’s dealings with its customers and
suppliers. It will be helpful to acquire commitment and support
from the people who deal with the organisation.
12. Control system should be designed by a mix of individuals with

specialisation in various and diversified fields of accounting,
organisational analysis, strategic planning, management
information systems and other related areas. This would ensure
balance and eliminate over-domination by any one area.
13. The exception principle. A good system of control should work

on the exception principle, so that only important deviations are
brought to the attention of management. In other words, the
management does not have to bother with activities that are
running smoothly. This will ensure that the managerial attention
is directed towards error and not towards conformity. This would
eliminate unnecessary and uneconomic supervision, reporting and
a waste of managerial time.
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3.4 The Control Process
Control is a process that measures current performance on a continuous

basis and ensures that the performance leads to some pre-determined
goal. The desired results are established through the planning process
and the performance is measured by established standards.
The elements of the control system are universal in nature. These

elements basically fall under four distinct steps. These are:
(a) Pre-determined goals,

(b) Measuring performance,
(c) Comparing actual performance with expected performance, and
(d) Taking correction action.
(a) Predetermined Goals
It is a part of the planning process and involves setting a standard of

expected performance. The goal must be clearly specified and
understood without ambiguity. General goals like “better education” or
“high profits” are difficult to interpret and hence lead to confusion and
conflict. The goals should be specific as well as meaningful. For
example, the goal of a real estate broker may be to sell four houses per
month. He can then plan the month and monitor his performance. A
Vice-President in charge of production may have a goal of keeping the
production costs within assigned budget over a period of time. He will
be able to monitor the costs and take corrective action wherever it is
necessary. Similarly, a college professor may have the goal of covering
ten chapters from a book over a period of one semester. He will plan his
schedule of teaching accordingly to meet that goal.
The goals and objectives should be defined in measurable terms,

wherever possible. These should be expressed in quantitative terms,
such as physical units produced per period of time, profit to be made per
unit etc. Where it is not possible to quantify goals such as in the case of
high morale, community relations, discipline or creativity, all efforts
should be made to fully understand these qualitative goals and design
control mechanisms that would be useful in measuring performance in
these situations. Most of these control mechanisms that would be
subjective in nature and the decisions would be made on the basis of
personal judgements.
Quantitative Standards: Some of the quantitative standards against

which performance can be measured are:
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1. Time standards. The goal will be set on the basis of time lapse in
performing a particular task. It could be units produced per hour,
number of pages typed per hour or number of telephone calls made
per day.
2. Cost standards. These indicate the financial expenditures involved

per unit of activity. These could be material cost per unit, cost per
person, cost of distribution per unit etc.
3. Income standards. These relate to financial rewards received due to

a particular activity. Examples would be sales volume per month or
sales generated by a salesperson per year etc.
4. Market share standard. This goal would be oriented towards the

percentage of the total market that a company wants to retain or
further acquire. A company may want to increase its share of the
market by 4 percent next year.
5. Productivity. Productivity goals are the key to operational efficiency

and should be set on the basis of past performance, degree of
mechanisation, employee skills and training required, and achieved
motivation of employees. The productivity can be measured on the
basis of units produced per man hour etc.
6. Profitability. Profitability can be expressed as a ratio of net profits

to sales. These goals will be set with the consideration of cost per
unit, market share, volume of business etc.
7. Return on investment (ROI). Return on investment is much more

comprehensive and useful standard as it involves all facets of the
business such as turnover, sales, working capital, invested capital,
inventory levels at given times, production costs, marketing cost,
transportation costs etc. It is a ratio of net income to invested capital.
It is superior to market share as standard because a large share of
market does not necessarily mean higher profits.
8. Quantitative personnel standards. The worker morale and

dedication can be measured to some degree by some quantitative
standards. The standards may be the extent of employee turnover,
number of work related accidents, absenteeism, number of
grievances and quality of work.
(b) Measuring Performance
Once the standards and goals have been established, the second step in
the controlling process is to monitor and measure the actual
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performance. Monitoring and measurement is a continuous activity and

involves collection of the data that represents the actual performance of
the activity so that a comparison can be made between what is
accomplished and what was intended to be accomplished. The
measurement of actual performance must be in the units similar to those
of predetermined criterion. The unit or the yardstick thus chosen should
be clear, well defined and easily identified and should be uniform and
homogenous throughout the measurement process. The choice of the
unit would also depend upon the speed with which the control
information is required; otherwise delay in measurement would delay
the corrective action.
What to Evaluate? According to Suchman (1967), there are five types of

evaluations. These are:
(i) Effort. Effort reveals the extent of input and the idea is to
measure input to see if it is adequate in meeting objectives. For
example, the number of courses offered in the Business Division
at the college would indicate the extent of the business program.
Similarly, the number of patient beds in a hospital would be a
measure of input for providing health care. A salesman’s
performance may be measured by the number of calls he makes
per day. Blau (1956) gives an example of an employment agency
where performance was evaluated by the number of applicants
interviewed and counseled. However, the measurement of input
is a poor indicator of results since simply counselling applicants
does not mean that they all get jobs. Similarly, the number of
beds in a hospital does not means quality health care which is the
ultimate.
(ii) Effectiveness. As we have seen above, the evaluation of input

elements does not adequately convey the degree of effectiveness
and results. This problem can be eliminated by measuring
outputs, such as the number of clients placed in jobs, in the case
of the employment agency. However, the degree of effectiveness
is relative in nature, since there is no definite value attached to
effectiveness. For example, any number of clients placed in jobs
could be considered as output.
(iii) Adequacy. Adequacy is the ratio of output to need and is a useful

measure if the need and the output can be clearly identified and
related. If the needs are satisfied then the performance is
adequate. However, defining specific needs is a difficult job.
What the need is for a specific product would be very difficult to
evaluate.
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(iv) Efficiency. Efficiency relates output to input. According to

Euske (1984), “in terms of efficiency, it is better, if more can be
done with the same amount if input or same output can be
generated with less input. Efficiency measures are useful for
comparing the same process at two points in time or two different
processes with the same output”.
(v) Process. It relates to the underlying processes which convert

effort into outcome or input into output. It treats output as a
function of input so that the focus is on evaluation of mechanisms
that convert efforts into results, rather than the effort itself. This
understanding of mechanism will assist in predicting the output
of the organisation for a given input. However, the process must
be well understood and be mechanistic in nature in order to be
effective. For example, a salesperson cannot know if his
presentation, even though it is well understood, will result in a
sale. Hence, the output can be a direct function of input, if the
process involved is fully understood and measured.
Steps in Measuring Performance: The performance can be measured

by the following steps:
2. Since it is not possible to check everything that is being done, it is

necessary to pick strategic control points for measurement. Some of
these control points are:
(a) Income. It is a significant control point and must be as much per

unit of time as it was planned and expected. If the income is
significantly off from the expectation, then the reason should be
investigated and a corrective action taken.
(b) Expenses. Total and operational cost per unit must be computed
and must be adhered to. Key expense data must be reviewed
periodically.
(c) Inventory. Some minimum inventory of both the finished

product as well as raw materials must be kept in stock as a buffer.
Any changes in inventory level would determine whether the
production is to be increased or decreased. This is especially true
about the airline and hotel industry. They are always concerned
about empty rooms and empty seats. Steps must be taken to
reduce these unused facilities.
(d) Quality of the product. Standards of established quality must be

maintained especially in food processing, drug manufacturing,
automobiles etc. The process should be continuously observed
for any deviations.
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(e) Absenteeism. Excessive absenteeism of personnel is a serious

reflection on the social environment and the working conditions.
This is especially effective in the airline industry and construction
projects, where absenteeism can cause delay and severe
problems. Absenteeism in excess of chance expectations must be
seriously investigated.
3. Mechanised Measuring Devices. This involves a wide variety of

technical instruments used for measurement of machine operations,
product quality for size and ingredients and for production processes.
These instruments may be mechanical, electronic or chemical in
nature. Some electronic devices are used to check passengers at the
airport for carrying prohibited items; some others are used to detect
shoplifting and unchecked books from the library. Polygraph tests
are used to check people’s explanations for certain acts.
4. Ratio Analysis. Ratio analysis is one of the most important

management tools. It describes the relationship of one business
variable to another. The following are some of the more important
ratios:
(a) Net sales to working capital. The working capital must be

utilised adequately. If the inventory turnover is rapid, then the
same working capital can be used again and again. Hence, for
perishable goods, this ratio is high. Any change in ratio will
signal a deviation from the norm.
(b) Net sales to inventory. The greater the turnover of inventory,

generally, the higher the profit on investment.
(c) Current ratio. This is the ratio of current assets (cash,

receivables etc.) to current liabilities and is used to determine a
company’s ability to pay its short term debts.
(d) Net profits to tangible net worth. Net worth is the difference
between tangible assets (not goodwill etc.) and total liabilities.
This ratio of net profits to net worth is used to measure
profitability over a long period of time.
(e) Net profits to sales. This ratio measures the short run
profitability of a business.
(f) Net profits to net working capital. The net working capital is
the operating capital on hand. This ratio would determine the
ability of the business to finance day-to-day operations.
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(g) Collection period on credit sales. The collection period should

be as short as possible. Any deviation from established collection
period should be promptly investigated.
(h) Inventory to net working capital. This ratio is to determine the

extent of working capital tied up in inventory. Generally, this
ratio should be less than 80 percent.
(i) Total debt to tangible net worth. This ratio would determine
the financial soundness of the business. This ratio should remain
as low as possible.
5. Comparative Statistical Analysis. The operations of one company

can be usefully compared with similar operations of another
company or with industry averages. It is very useful performance
measuring device. For example, farmers can compare output per
acre with farmers of other locations. Any differences can be
investigated and the reasons ascertained. Similarly, hospitals at one
location can measure their medical costs against those of other
hospitals. Similarly, the performance of police departments can be
measured by comparison of crime rates in their locality as compared
to other localities.
6. Personal Observation. Personal observation both formal and

informal can be used in certain situations as a measuring device for
performances, especially the performances of personnel. The
informal observation is generally day-to-day routine type. A
manager may walk through a store to have a general idea about how
people are working. An airline officer may fly incognito to evaluate
the performance of in-flight attendants.
Formal observation is properly planned and requires preparation. For

example, professors are periodically evaluated by their peers and their
students. The in-flight performance of commercial airline pilots is
regularly measured by representatives of Federal Aviation Agency.
(c) Comparing Actual Performance with expected Performance
This comparison is the active principle of the process. The previous two
– setting the goals and the measurement format – are the preparatory
parts of the process. It is the responsibility of the management to
compare the actual performance against the standards established. This
comparison is less complicated if the measurement units for the
standards set and the performance measured are same and quantified.
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The comparison becomes more difficult when these require subjective

evaluations.
This comparison tells us if anything has gone wrong, if there is any

deviation; negative or positive, and what must be done as a restorative
process for correcting the deviation. Also, this comparison not only
results in the correction of the divergence, but also ensures the
application of the preventive steps guiding the conduct in the future.
Evaluation of deviation. Before a deviation is corrected, a thorough

investigation should be undertaken as to the reasons of such deviations,
for not only the symptoms but also the roots of the problem are to be
examined. Were these deviations due to unrealistic standards set, or
were these due to lack of efficient performance? There are many
instances where projects went over budget and over time. These
projects should be examined in their entirety and from all angles.
(a) Negative deviation. Negative deviations are those that have negative
repercussions as a result and may be in the form of cost overruns or
the project being behind schedule or the quality or the quantity being
below the expected levels. This underperformance must be
evaluated to determine whether goals should be changed or any other
corrective action is needed. For example, if there has been a delay in
completing the project, the reason may be the morale of the workers
which may be evident by excessive absenteeism, resignations or
inefficient performances. Or it could be due untrained personnel. A
cost overrun could be price increase initiated by outside vendors, or
excessive machinery breakdown. These deviations must be detected
and evaluated.
(b) Positive deviations. Positive deviations indicate that the

performance was better than expected and the goals achieved were
either sooner than anticipated or less costly than planned. These
deviations should also be fully investigated as to why
underestimations were made and new revised estimations should be
made.
Method of Presentation of Comparison and Results
There are four methods and techniques for presenting the results of these
comparisons for managerial attention and action. These are:
(i) The narrative method

(ii) The tabulation method
(ii) The graphical method
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(iii) Mathematical model presentation with relationships of interactive

variables clearly defined.
(i) The narrative method. This method of comparison is more

desirable and useful where subjective evaluations and
assessments are necessary. This is in the form of a written report
and an assessment of affecting variables such as morale,
dedication and effectiveness of human resources. The variables
are difficult to quantify and an objective evaluation is difficult to
obtain. The narrative method is also unavoidable when measuring
and controlling the environmental variables, such as general
economic conditions, governmental policies and their effects on
strategically planned business policies. These written reports
may include visual diagrams and other supporting illustrations.
These written reports are very common when recommending a

subordinate for promotion or when recommending a student for
admission into graduate studies. The letters of reference that most
companies demand from new employees are primarily in the form of
written reports from previous employer or other acceptable persons.
(ii) The tabulation method. This method is the simplest and the
most common in which the measures of the goal and the
performance evaluations, both in terms of chosen unit are
exhibited side-by-side and the deviations between the two may be
represented as percentages. This method is specifically useful
when the number of variables affecting are limited and their
effects can be measured in simple manner. For example, if we
are measuring waste per unit produced, we can easily make a
table of exact waste experienced as against what was expected as
a goal.
(iii) The graphical method of comparison. This method portrays the

relationship between the variables under comparison, which are
primarily the aimed and actual values. Trends over time and
certain relationships are better portrayed when assimilated and
presented in the form of charts, graphs or diagrams.
(iv) Mathematical representation. Mathematical models are highly

effective and useful when the variables of comparison are related
by complex and non-linear relationships. These models are
helpful in reducing the complex relationships among many
variables into manageable equations that can be measured and
solved.
(d) Taking Corrective Action
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Once the deviations have been established and presented, the decisions
must be taken as to what corrective actions are needed or necessary to
remedy the situation and to force events to prescribed or prearranged
plans. However, these corrective actions must be taken within the
constraints of acceptable tolerance levels, outside environmental
constraints (such as those imposed by custom, organisational guidelines,
labour unions, political and economic considerations) and internal
constraints of costs and personnel. Since the actual results do not
always conform to the desired results, some deviations may be expected
and provided for and hence no corrective action may be needed.
However, when the deviations are of sufficiently serious considerations,
the following guidelines may be adopted and looked into.
(i) The management must deal with the roots of the problems and
not the symptoms.
(ii) Any corrective action should be taken promptly in order to make

it most effective.
(iii) Whenever and wherever possible, the corrective action should be

built into the existing plans and these controls should be
automatic and self-monitoring like a thermostat in controlling the
heat. (This field is known as cybernetics).
(iv) It must be understood that the goal itself is not a static

phenomenon, but is a function of the dynamic environment,
hence a look into the need for altering the target itself caused by
shifts in the environments may be necessary.
3.5 Types of Managerial Controls
The following classifications may result from the different uses of the
concepts of control:
(1) Controls used to standardise performance in order to

increase efficiency, lower costs and optimize performance.
The standards for performance can be set by using time and
motion studies. This would standardise the time utilised for a
particular operation and the best method of completing that
operation with minimum number of movements.
(2) Controls devised to safeguard company assets. These are

partly performance controls which reduce losses due to waste and
misuse of raw materials. Some controls may be exercised to
reduce losses due to thefts. This would require strong
supervisory and accounting procedures.
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(3) Controls used to standardise quality. The quality of products

may be in terms of size, weight, colour, finish or ingredients.
These must be as prescribed. Statistical quality control methods
can be used for testing purposes. Some characteristics may be
judged by visual observations and inspections.
(4) Controls designed to set limits for the delegated authority.

Some decisions and actions must be taken by the central
management and some operational decisions can be delegated to
lower management levels. However, the extent of the use of this
authority must be fully described and communicated. These
limits are specified through directions and policy manuals.
(5) Controls designed to measure the worker performance. This

is to ensure that the workers are performing according to
standardised performance. Performance standards set may be
output per hour or output per employee and these standards may
be evaluated against set quotas of production.
(6) Controls designed to measure and enhance worker attitudes.

Some of the areas considered are absenteeism, labour turnover
and safety records. The contentment of workers can be gauged by
using attitude surveys and close friendly supervision and
participative management wherever possible.
(7) Controls used to monitor total performance and operations.

Some of the factors included are sales and production forecasts,
profitability and market position, personnel development and
work environment, etc.
(8) Controls designed to synchronise all operational activities of

the enterprise. This would allow the central management to keep
a balance among various aspects of the company. This could be
achieved by prescribing and using master plans, organisational
manuals and procedures.
3.6 Types of Control Methods
Most methods of control can be grouped into four basic types which
may be applied individually or in combination with each other. These
are:
1. Pre-controls. These are sometimes called “Feed-forward”

controls and are preventive in nature. They are designed to
eliminate the cause of any deviation that might occur later and are
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established before the activity takes place. For example, if a

student is doing poorly in a course at the beginning of the
semester, he should not wait until the end of the term to make
changes in his study habits. He must make adjustments before it
is too late. These controls are meant to make sure that
performance objectives are clear and all resources are available,
at the time when needed, to attain these objectives. Most often,
deviations occur because proper planning was not initiated and
enforced and proper resources were not available. An example of
“feed-forward” controls would be the use of capital budgeting
techniques for evaluating capital investments.
2. Steering controls. The key feature of this control is the

capability to take corrective action when the deviation has taken
place but the task has not been completed. Some of the examples
are in-flight corrections of off-course airplanes and guided
missiles or steering the car into the lane when it is off the lane.
The great advantage of steering control is that corrective actions can be

taken early. An early start with steering controls increases the chances
that we will achieve a favourable outcome. The sooner the failing
student gets tutoring in his course, the better are his chances of passing
the course.
Steering a course in business is like steering an ocean-liner where

several adjustments enroute are necessary. These steering controls are
based on forecasts about where one course of action will land as
compared to another course of action. The corrective actions are based
on the prediction of results. Of course, the longer the time span between
action and results and higher the volatility of the environment, the more
uncertain these predictions can be.
Since effective steering controls require prediction of outcomes, it is

necessary to find some indicators that will assist in correctly predicting
the results. Some of the indicators are:
(a) Input indicators. The level of some key inputs may predict the
response to them. For example, inquiries from customers can
result in actual orders to a predictable degree. Similarly, orders
received would be a good indicator of future shipments.
(b) Success of early steps. The early attempts and successful results
of those attempts can indicate the degree of success of the final
project. For example, early receptions of a new product give
strong clues to the long run success of the product. Same idea
goes for early reviews of a new book or a new play.
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(c) The skill and sophistication of the process. The skill and
precision with which an operation is completed can predict the
success of the outcome. For that reason, a Rolls Royce car lasts
much longer than other mass produced assembly line cars.
Similarly, the number of good contacts an insurance agent makes
is an indication of how many policies he will sell later etc.
(d) Symptoms. Some symptoms are clear indications of necessity for

steering. For example tardiness and absenteeism is a good
indicator of low morale which could affect labour efficiency and
hence requires some steering to be done. Similarly, traffic
conditions are good symptoms of whether you will reach your
destination on time or not.
(e) Unexpected events. Most processes and expectations of results

are based upon certain key assumptions about the environment
such as economic conditions, social environment, governmental
actions etc. These factors should be carefully monitored so that
any unexpected changes can be dealt with carefully and in time.
3. Yes/No controls. These controls are designed to check at each

checkpoint whether the activity should be allowed to proceed
further or not. These controls are necessary and useful where a
product passes sequentially from one point to another with
improvements added at each step, along the way. These controls
stop errors from being compounded. Quality control checkpoints
where inspection would determine whether the activity should
continue or not is an example. Safety checks and legal approvals
of contracts before they are immediately noticeable and traceable
so that immediate and effective remedial action can be
undertaken. There are other types of symptoms that reflect the
inadequacy of control process which requires indepth analysis
and reorganisation and re-evaluation of the system. These
symptoms of inadequate control are generally due to
organisational defects, rather than mechanical defects and can be
traced to morale problems.
Some of the symptoms of inadequate controls are:
(1) An unexpected decline in revenues or profits. This may be an

accounting problem or unaccountable responsibility or simply
that the quality, quantity and promotional elements have not been
adhered to, resulting in low sales.
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(2) A degradation of service and customer complaints. Excessive

customer complaints either about the quality of the product or the
service are hardly conducive to the company’s survival and
growth. How the company handles the customer complaints is
further indication of whether the control process is working or
not. That is one reason why some companies have a policy of
“The customer is always right” and attend to their complaints in
immediate and satisfactory manner. A personalized service is
always welcome.
(3) Employee dissatisfaction. This may be evident by increase in

turnover, number of grievances filed and rate of absenteeism.
While the secret of life is, “not to do what you like, but to like
what you do”, it is important to create an environment, both
physically and conceptually, which will be conducive to worker’s
dedication to work.
(4) Unnecessary working capital shortages. These are the

shortages that are caused by excessive and unused inventories
and accounts receivable delinquencies. These symptoms indicate
that things are getting out of control and the reasons for these
symptoms must be carefully examined. Is the excessive
inventory a quality oriented problem or a sales oriented problem?
Why are the receivable accounts not received in the prescribed
time? Is it a bad choice of credit customers or is it a negligence
on the part of the accounting people in the organisation? These
problems must be investigated and solved so that the working
capital is optimally used.
(5) Idle facilities or personnel. These symptoms are also tied in

with other symptoms. For example, idle facilities may be due to
already excessive inventory which ties up the working capital that
is required to operate the facilities. Similarly, idle personnel may
be due to idle facilities or due to improper hiring policies of the
organisation.
(6) Disorganized operations. These may be evident by workflow

bottlenecks, lack of operational efficiency thus increasing the cost
and time of production. Proper control checkpoints must be
established. Excessive paperwork reduces clarity of instructions
and operations so that paperwork should be minimum and to the
point.
(7) Evidence of waste, inefficiency and excessive costs. These

symptoms may partly be the result of mechanical obsolescence
but perhaps, these may primarily be due to lack of worker
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commitment and low morale which may have deeper roots in the
whole organisational control system.
All these symptoms signify a deviation from what the system should be
and all efforts should be directed to the creation of work environment in
which these symptoms should disappear.
3.7 Behavioral Guidelines for Managerial Controls
Some of the basic means to make the control process more effective and
acceptable are:
1. Set meaningful, acceptable and attainable standards. The

control system would work effectively, if there has been an
appropriate input from workers who are expected to meet these
standards, in setting up these standards. Also, control standards
should be relevant to the job and the reasons for a particular
control system should appear justifiable to those who must
comply. The workers work harder, for example, to produce a
better quality unit (a control process), if such improvement would
get future contracts for the company which would mean more
profits for all. Also, while administering controls, management
should recognize and take into account feelings and attitudes of
individual employees. Management should humanize
administration of control.
2. Establish an effective, accurate and timely two-way

communication. For any control system to be effective,
information regarding deviations must be communicated to
management and workers as quickly as possible. This
information and feedback must be accurate, for the outcome is
dependent upon the accuracy of informational input. The
information about the deviation should be gathered quickly
because some time elapses between the occurrence of the
deviation and taking of a corrective action since managers gather
control related information, make an investigative analysis,
develop necessary reports, choose a course of corrective action
and actually employ this correct decision. This entire time period
should be minimised as much as possible.
3. Reward attainment of standards. The control system would

work much better, if the employees directly responsible for
attaining the set standards are recognised for their contribution,
for this recognition would boost he employee morale and induce
them to move even more positively towards attainment of higher
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goals. This recognition could be in the form of financial rewards

or other forms of status improvement.
4. The best means of effective managerial controls are the

development of voluntary cooperation, participation, sense of
responsibility, self-control and self-discipline. Self-control adds
higher value to a person’s self, resulting in higher internal
satisfaction and self-actualisation induces personal involvement
in work and the employee becomes interested in effective work
performance.
4.0 CONCLUSION
In this unit, we have discussed the importance of control as a

management function. We emphasized the need to embark on control in
order to determine whether prescribed procedures were followed or that
the set target had been achieved. Where deviation is observed, effort
could be made to investigate the cause and institute measures to
corrective the anomaly.
5.0 SUMMARY
In this unit, we have defined control as a function of management,

described management control, and listed the requirements and
characteristics for an effective control. We have also discussed the
control process, highlighted and discussed the types of managerial
control, listed and described types of control methods and discussed the
behavioral guidelines for effective control.
1. What part should the employees play in setting up the

requirements for an effective control system?
2. What are some of the symptoms of inadequate control? Are all
these symptoms traceable to certain well defined causes? Explain.

Drucker, P (1989). The Practice of Management. Jordan Hill Oxford,

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Jones, G. R and George, J. M. (2003). Contemporary Management. (3rd

Leavitt, H. J. (1978). Management Psychology (4th ed.), Chicago.


Prentice-Hall.

MODULE 2
Unit 1 Organizing
Unit 2 Communication
Unit 3 Directing and Leading Function
Unit 4 Staffing Functions
Unit 5 Recruitment and Selection
UNIT 1 ORGANISING
CONTENTS
1.0 Introduction
2.0 Objectives
3.0 Main Content
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3.1 Organising
3.2 Meaning of Organisation
3.3 Kinds of Organisation
3.3.1 Formal Organisation
3.3.2 Informal Organisation
3.4 Organisation Charts
3.5 Organisation Structure
3.5.1 Types of Organisation
3.5.2 Line Organisation
3.5.3 Staff Organisation
3.6 Authority Relationships
3.6.1 Functional Authority
3.6.2 Line Authority
3.7 Authority and Responsibility
3.8 Power and Influence
3.9 Source of Authority
3.10 Limits of Authority
3.11 Level in Organisation
3.12 Superior Authority
3.13 Subordinate Acceptance
3.14 Responsibility
4.0 Conclusion
5.0 Summary
1.0 INTRODUCTION
Every organisation is made up of human and physical resources. These

resources are brought together in order to accomplish a predetermined
goal. In order to accomplish these objectives, tasks must be identified,
the tools and technology required must be provided and a structure of
relationships must be identified. It is the function of management to
determine the best structure that will optimize the utilisation of
resources. Management organises these resources. The organisation is
a means of achieving the best result from concerted effort. Organisation
deals with people and their relationship in an enterprise. It is the
organisation that determines the types of people required and their
relationships. Thus the type of personnel and structure required in a
hospital different from the personnel and structure required in a weaving
enterprise or a university. In this unit, efforts would be made to take
you through this topic with the sole aim of giving you a complete
overview of this important and the first management function.
2.0 OBJECTIVES
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define the concept organisation

list the kinds of organisation and differentiate between formal and
informal organisation
describe organisation charts, structure, line and staff organisation
explain what is meant by authority and relationship, power and
influence and sources and limits of authority
state and discuss levels in organisation, superior authority,
subordinate acceptance and responsibility.
3.0 MAIN CONTENT
3.1 Organising
3.2 Meaning of Organisation
An organisation can be seen as an entity. This is true of all business

enterprises, churches, hospitals, or clubs. It can be as a process of
coordinating individuals’ efforts to accomplish a common objective. An
organisation is a group of people bound together to provide unity of
action for the achievement of a predetermined objective. All
management theorists – Fayol, Follet, etc., recognise this important
management function. Organisation is very fundamental to human
nature. Man is a social animal and shares relationship with his
neighbours. The subject of organisation is central to sociology,
psychology and even anthropology.
3.3 Kinds of Organisation
Organisations can be classified into two broad headings :(a) formal and
(b) informal organisations.
3.3.1 Formal Organisation
Formal organisation can be seen as a direct opposite of informal

organisation. It is a planned pattern of group behaviour designed to
achieve an objective.
Most relationships found in many business enterprises are formal. The

main reasons for formal organisations are:
1. to establish logical patterns of interrelationships among members of

the group;
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2. to secure advantages of specialisation or division of labour whereby

the optimum utilisation of talents can be realised;
3. to coordinate activities of the component parts in order to facilitate

the realisation of the goals of the organisation (Massie and Douglas,
1977).
In Nigeria, the problem of formal organisation is not so acute because of

the nature of Nigerian businesses. As an organisation grows, the
component parts become more complex, the technology changes and
requires special expertise and consequently, more attention. Small
enterprises do not require the same magnitude of tasks as large ones and
are therefore easier to design.
3.3.2 Informal Organisation
The informal organisation can described as the human interaction that

occurs simultaneously and naturally without overt influence.
3.4 Organisation Charts
An organisational chart is a visual device that shows the various

departments and how they relate to one another. The organisation chart
helps the employees, the board of directors and stockholders to see at a
glance, the division of responsibility and lines of authority. One of the
major advantages of an organisation chart is that it helps in studying
how to modify or improve the relationships and areas of responsibilities
within the organisational structure. An organisation can operate without
a formal, drawn organisation chart, but the presence of the chart gives
evidence of a thoughtful planned structure. The chart does in no way
indicate the existence of certain pos itions identified by boxes and line of
Board of Directors
authority shown by solid straight l ines connection. Figure below shows
an example of an organisation chart:
Managing Director
Organisation char t
Manager Manager Manager Manager

Sales Products International Industrial
Division Division
Supervisor Manager Director Workers

Eastern Product A E. Mk
Zone
Manager Director Workers

92 Supervisor Product A W. Mk
Western
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3.5 Organisation Structure
Sound organisation structure involves dividing activities into

departments, divisions, units and sub-units, defining relationships
between the heads and members that make up the units. A good
structure:
(a) identifies the operating departments (sales department,

production department and finance department).
(b) isolates the service department (Personnel, Research).
(c) places emphasis on balancing the structure.
(d) shows the role of committees in the organisation.
One of the major problems confronting management is to decide the

organizational structure to be adopted. Important questions relating to
duties and role of each department and line executive have to be clearly
defined. A decision has to be made if the organisation is to be
decentralised or centralised and the number of staff required for each
task has to be determined. As experts succinctly summarised, it, the
important features of an organisation to be designed include:
(a) division into sections and units, number of levels, locations of

decision-making authority, distribution of and access to
information, physical layout of building, type of people recruited,
what behaviours are rewarded and so on (Robert, Simon, 1960).
A good organisation design is one that leads to the attainment of

organisational objectives. A good organisational design is one that is
fixed and will never require a change. The system is created to change
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when the environment in which it operates contracts or when the

company is expanding its operations or reduces; its objectives or during
the process of re-organisation. A good organisation is judged by its
economic performance, ability to operate in a dynamic environment and
the growth and satisfaction of the members.
Types of Organisation
Organisation structure could be subdivided into two: namely, line

organisation and staff organisation. This is described further below.
Line organisation
In a typical line organisation, authority is divested downward in a

straight line from the Board of Directors to the Managing Director and
to lower management levels. Every line executive has assigned
responsibilities and authority assigned to him and has its supporting staff
to execute the functions. A manager with line authority is answerable
for the performance of his subordinates. The employees with line
function are responsible for the immediate attainment of organisation’s
objective. The flow of authority and responsibility is usually straight or
direct and accountability is established. There are three basic
advantages:
(1) This structure is simple and easily understandable by all,

accountability is easily established. Conflict of authority is
reduced to a minimum.
(2) It lends itself to quick decision-making. Decision making is

vested in one person who is in charge of the department.
(3) Expenses related to overhead are reduced to a minimum as the

role of executive specialists is eliminated.
Line and Staff Organisation
This form of structure resembles the line structure only that specialists
are included in the organisational arrangements. Decisions are made by
line executives with the advice of staff executives. Staff executives are
experts in their fields – (accountants, lawyers, personnel specialists,
engineers etc.) they advise the line executives who are directly
responsible for the immediate attainment of the organisational goals.
Figure below shows the line and staff structure.
Figure Line and Staff Organisation Structure
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Director General
Manager Manager Manager

Production Finance Marketing
Plant Chief Advertising Field Sales

Supervisor Engineer Manager Manager
Controller Treasurer Salesmen
In this chart, the solid lines represent the flow of authority and dashed or
broken lines indicate a staff or advisory relationship. The advertising
manager can advise salesmen but he has no direct control over them.
Authority relationships are discussed in full below. Line and staff
structure is best used when the organisation is relatively large and
serving a big market.
3.6 Authority Relationships
This is further divided in three namely: line authority, staff authority and
functional authority.
3.6.1 Line Authority
As pointed out, line authority connotes “command” relationship. This is

the authority that makes one expect obedience from subordinates. Line
authority has been described as the chain of command as it flows from
the stockholders to the Board of Directors, to the Managing Director all
the way to the operative employees. As Fox observed, “line positions in
an organisation are those concerned directly with the creation and
distribution of salable utilities or with the management of such activity
3.6.2 Staff Authority
This position is advisory in nature. Generally, staff executives are

specialists who study a problem, identify the alternatives and make
recommendations to the chief executive for decision. He advises, and to
advise is not to decide – only the line executive is vested with that
authority unless this power is delegated to him.
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3.6.3 Functional Authority
This process allows a staff executive (engineers, lawyers, accountants,

advertising managers) to make decisions and implement them within
clearly defined guidelines. This process reduces the workload of line
executive by taking advantage of the expertise of the staff executive.
The staff authority aims at supplementing the activities of line authority.
This process helps to reduce the usual conflict between line and staff
executives.
Table Summary of Line, Staff and Functional Authority
S/N ADVANTAGES DISADVANTAGES

LINE AUTHORITY
1. Maintains simplicity. Neglects specialists in planning.
2. Makes clear division of Over-works key men.
authority. Depends on retention of a few
3. Encourages speedy action. key men.
STAFF AUTHORITY
1. Enables specialists to give Confuses organisation if
expert advise. functions are not clear.
2. Frees the line executive of Reduces power of experts to
detailed analysis. place recommendations into
3. Affords young specialists a action.
means of training. Tends towards centralization of
organisation.
FUNCTIONAL AUTHORITY
1. Relives line executives of Makes relationships more
routine specialised decisions. complex.
2. Provides framework for Makes limits of authority of each
applying expert knowledge. specialist a difficult cooperation
3. Relieves pressure of need for problem.
large numbers of well rounded Tends towards centralization of
executives. organisation.
3.7 Authority and Responsibility
Authority as used in the text is the right to act or decide. It describes the
relationship between and among people or groups. A person has
authority if he has the right to command and expect obedience from the
subordinate.
No organisation could survive if authority had not been vested in some

people. In fact, an organisation is nothing but a structure of authority
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relationships. In business organisations, authority flows from the top

downward. In designing an organisation, the authority relationship is
clearly defined. It is the responsibility of those in whom authority is
vested to coordinate the activities of the organisation in order to
accomplish organisational goals.
Organisational authority is vested in the position not on individuals.

The authority is given to an employee because he needs the degree of
authority in order to achieve a given level of productivity or sales.
When the individual resigns, the authority is inherited by another
employee who occupies the position. In this case, we speak of the
authority of the manager, the powers of the president or the governor.
3.8 Power and Influence
At this juncture, it is necessary to distinguish between power and

influence in order to contrast them with authority. Power is the ability
an individual has to compel another to do something against his will
despite any resistance. A man who holds a businessman at gunpoint
demanding that the businessman should surrender his goods has power
to take possession of the goods. Power is evident in a situation when A
has control over B or can force B to do something he does not want to
do despite resistance.
Influence, unlike authority, is not vested in an individual. A has

influence over B if he can modify or affect B’s behaviour. Thus
influence is a very moderate form of power. A person influences his
friend because of the rapport they have established over the years. One,
who influences, uses persuasion and suggestion to achieve a desired end.
Influence takes place in all interpersonal relationships. Unlike power
which implies a fear of punishment, harm or loss of status, influence
does not.
In an organisation, the interpersonal relationship sometimes dictates the

use of authority, power of influence. A supervisor has power over an
employee because he has authority to use reward or punishment. A
supervisor can also influence an employee to accept a position.
Authority is a source of influence and a potential source of power.
A physician may persuade a patient to submit himself to operation. He

has in this instance knowledge-based influence just as personal
characteristics such as self-confidence, honesty, appearance, or
dynamism can give one charisma-based influence. In Nigeria, a
person’s appearance influences the receptionist to decide whether the
visitor will see a manager without waiting or not. So it is in service
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establishments such as the post-office, banks, and even restaurants and

hotels.
3.9 Sources of Authority
As pointed out, organisational authority is a right to act, to punish and to

reward. A person who possesses this authority has number of steps into
it:
1. Positional Source
It is often said that authority is derived from the ownership of property.

This is the case because, in Nigeria, the constitution allows the
ownership of private property and its management. An entrepreneur has
been given a licence to operate a business, he has authority from the
country to own and manage the enterprise. This authority he can
delegate to his agents or sub-agents as he deems fit. Any person who
accepts employment with the organisation is subject to the authority of
the owner or his representatives.
In organisations, people often refer to responsibility being used instead

of authority because authority and responsibility go hands-in-gloves.
One cannot operate without the other. An entrepreneur cannot operate
his business without authority to use it. In the use of this labour he owes
them a reasonable wage and has authority to enforce compliance with
the rules and regulations that govern interpersonal relationships. The
origin of authority, whether in economic institution or in social
institution where private property is non-existent – may be traced to the
rules of basic group behaviour. As these elements change, the position
must change.
This authority transmitted from the basic social institution to

entrepreneurs and managers is aptly called formal authority. This
authority so granted could be called institutional or private.
2. Subordinate Acceptance Source
The acceptance of authority theory postulates that the source of

managerial authority emanates from the subordinate acceptance of
authority that the manager holds over them. One of the authorities in the
field of management, Chester I. Barnard made the following observation
on the acceptance of theory:
………. Disobedience of such a communication is a

denial of its authority for him. Therefore, under this
definition the decision as to whether an order has authority
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or not lies with the person to whom it is ad dressed, and

does not reside in “person of authority” or those who
issue these orders.
The acceptance theory places great emphasis on subordinate acceptance

of the authority of the superior. Generally, a subordinate will recognise
and accept his supervisor’s authority if he perceives that his directives
are in keeping with organisational purposes and will lead to the
attainment of his own objectives. The authority an individual has to
effect compliance could be reinforced by other means such as
persuasion, coercion, use of power, economic or special sanctions. A
manager does not depend on acceptance for the execution of his
functions; if he did, there would be conflicts and organisational
objectives would suffer.
The basic error of acceptance theorists consists not only in conceiving

authority, without sanctions, but also in overlooking the powerful effect
of social institutions, which confer powers that supersede individual
desires.
The effectiveness of one’s authority could be influenced by acceptance

but may not necessarily be nullified by the accepting agent’s attitude.
Acceptance theory appears to place emphasis on leadership which deals
with the ability to influence others’ behaviour in order to achieve a
given objective. Management has authority and if this authority is not
fully accepted by subordinates, it could use power or sanctions to secure
compliance. The acceptance of employment in an organisation implies
the acceptance of authority in the establishment.
The acceptance of authority is enhanced by the personal qualities of the
manager, such as technical competence, supportive behaviour and
dynamism. These qualities of leadership are fundamental to the
effectiveness of management and not necessarily in the source of
authority.
3.10 Limits of Authority
Formal authority is very fundamental to the attainment of organisational

objectives. All managers who occupy positions of responsibility are
vested with it. Effective utilisation of authority promotes organisational
harmony and consequently the realisation of intended goals. Certain
factors limit the amount of authority a particular executive possesses.
These factors include one’s level in the organisation, superior authority
and subordinate acceptance.
3.11 Levels in Organisation
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As discussed previously, authority is delegated from top to bottom. The

higher a manager is within the organisational hierarchy, the more
authority he possesses. The managing director has more authority than
his deputy and the deputy possesses more authority than the managers
and supervisors. The higher the functions a manager has, the more the
authority that is vested in him for the effective execution of these
functions.
3.12 Superior Authority
The authority an executive has is influenced by the authority of those

above him. A superior authority influences the authority delegated to
lower executives in any organisation. The production manager’s
authority to produce is influenced by the organisation’s established
policies and procedures. He cannot recruit employees in order to
achieve production quota without following the guidelines for
recruitments. He could also be asked by a superior authority to stop
production until certain conditions are fulfilled.
Closely allied to the influence of the superior authority that limit his
authority, is overlapping authority. Where authority overlaps, authority
is held in abeyance until it is resolved. Situations arise in an organisation
where two executives engage in a dispute as to who has the authority to
approve expenditure, to authorise the purchase of equipment or to hire
employees. A labour union on strike has the ability to frustrate the
efforts of management to function effectively. It has to be noted that
authority is not cancelled by power conflict between executives,
management or labour unions, or government and entrepreneurs. When
conflicts arise, authority is held in abeyance until the conflict is
resolved.
3.13 Subordinate Acceptance
The acceptance of authority by subordinates helps in the expeditious

attainment of desired goals. Failure to accept one’s authority produces
the opposite effect. Refusal to accept one’s authority does not cancel
one’s authority; it only reduces one’s effectiveness in the given
situation. The degree to which the manager is rendered ineffective
depends on the amount of power he has to evoke penalties to effect
compliance. Ability to evoke punishment and to reward is implicit in all
formal authority.
A good executive does not have to punish all the time but when the need
arises, it is reassuring to know that tone could exact compliance. Four
conditions must be met before a message is accepted as authoritative:
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1. It must be understood by the recipient.

2. It must be consistent with the purpose of the organisation.
3. It is not incompatible with the personal interests of the
recipient.
4. It is within the mental and physical abilities of the recipient.
Many experts have stressed the fact that the acceptance theory could be
misleading as the manager could be tempted to manipulate the situation
in order to obtain acceptance from subordinates.
Other factors that limit effectiveness of authority include technological

constraints, economic limitations, social limitations and organisational
constraints.
3.14 Responsibility
People in authority are answerable to somebody for their use of

authority. This is responsibility. Responsibility implies obligation. A
person to whom one delegates authority is obliged to execute
satisfactorily the assigned duty. Responsibility originates from a
superior – subordinate relationship. A subordinate must answer to his
boss for the use of formal authority just as a man answers to his friends
for informal authority. In organisations, responsibility is shared. When
a manager authorises an employee to execute a task, the obligation
created by this delegation from the supervisor to subordiante is shared.
4.0 CONCLUSION
Organising is the second in the hierarchy of functions exercised by

management after planning. In this unit 6, we gave a complete overview
of organisation as it affects mobilisation of human and material
resources and structuring of relationships within an organisational set
up.
5.0 SUMMARY
In this unit, we defined the concept organisation, listed the kinds of

organisation and differentiate between formal and informal organisation;
described organisation charts, structure, line and staff organisation;
explained what is meant by authority and relationship, power and
influence and sources and limits of authority; stated and discussed levels
in organisation, superior authority, subordinate acceptance and
responsibility.
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The questions are in tardy form, so could not make any sense out of the
photocopies matter.
Joseph, L. Massie and John Douglas (1977). Managing: A

Contemporary Introduction. (2nd ed.). New Jersey: Prentice Hall,
p. 131.
Chandan, J.S. (2004). Management Theory and Practice.
Robert Simon (1960). The New Science of Management Decision. New

York: Harper and Brothers, p. 78



UNIT 2 COMMUNICATION
CONTENTS
1.0 Introduction
2.0 Objectives
3.0 Main Content
3.1 Communication
3.2 Objectives of Communication
3.3 Communication Process Model
3.4 Superior-Subordinate Communication
3.5 Oral and Written Communication
3.6 Communication Grapevines
3.7 Barriers to Effective Communication
3.8 Overcoming Communication Barriers
3.9 Guidelines for Effective Communication
4.0 Conclusion
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5.0 Summary
1.0 INTRODUCTION
Communication is considered to be the most important and most

effective ingredient of the management process. Interpersonal
communication is fundamental to all managerial activities. All other
functions involve some form of directions and feedback. Effective
management is a function of effective communication. Many operations
have failed because of poor communication, misunderstood messages
and unclear instructions. Even in life, in general, communication plays
a very important role among friends, within the family and in all social
circles. “Failure to communicate” is many times the cause for lost
friendships, divorces and distances between parents and children. “My
father does not understand me” is the common cry of a teenager.
Accordingly, communication plays an important role in all walks of
human life as well as organisational life.
2.0 OBJECTIVES
define the concept communication state the

objectives of communication examine
communication process model describe
superior-subordinate communication discuss
oral and written communication explain
communication grapevines
state and discuss the barriers to effective communication
highlight and explain how to overcome communication barriers
discuss the guidelines for effective communication.
Define communication and explain each of the objectives of

communication.
3.0 MAIN CONTENT
3.1 Communication
Communication is defined as “the process of passing information and

understanding from one person to another” (Kazmier, 1977). It means
transmitting and sharing of ideas, opinions, facts and information in a
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manner that is perceived and understood by the receiver of the

communication. It is a meaningful interaction among people where the
thoughts are transferred from one person to another in a manner such
that the meaning and value of such thoughts is same in the minds of both
the sender as well as the receiver of the communication.
Effective communication is every essential for management to

successfully perform its functions. It is an essential ingredient in
management-employee relations. According to W.R. Spriegal, “most of
the conflicts in business are not basic but are caused by misunderstood
motives and ignorance of facts. Proper communications between
interested parties reduce the points of friction and minimise those that
inevitably arise”. Accordingly, by proper communication and sharing of
information, the management takes the employees into confidence and
makes them more knowledgeable about problems and policies of the
enterprise. According to Prof. A. Dasgupta (1968), the scope for a two-
way means of consulting and changing facts, opinions and ideas
between management and employees pertain to:
- knowledge of policies and objectives of an enterprise;

- knowledge of results and achievements from these policies;
- knowledge of plans and prospects for the future;
- knowledge of conditions of service;
- knowledge of ways and means of improving efficiency and
productivity;
- knowledge of all aspects of industrial safety, health and welfare.
Information and knowledge about all these aspects makes the operations
of the organisation comparatively trouble free and it is the
management’s responsibility to ensure that employees have obtained all
the necessary feedback relative to it. According to Peter Drucker
(1954), a manager does not handle people; he motivates guides and
organises people to accomplish their goals. His effectiveness depends
upon his ability to communicate well with the employees. Good
communication is the foundation of sound management. It is through
communication that workers become aware of their own duties and
responsibilities as well as the instructions and orders from the upper
levels of management hierarchy and also their own suggestions,
misunderstanding, confusion, distortions and bottlenecks and improves
coordination and control. It improves productivity by developing and
maintaining good human relations in the organisation. It is a basic tool
for motivation and improved morale. Supervision and leadership are
impossible without it.
It was largely the work of Chester Barnard in the late 1930s which
highlighted communication as a dynamic force in shaping the
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organisational behaviour. He considered it as one of the three important

elements of an organisation along with common purpose and
willingness to serve. He also linked communication with his concept of
authority. The authority flows down through the channel of
communication. The authority can lose its meaning if the channels of
communication are blocked or if the communication is misunderstood or
if the strength of communication is diluted. Accordingly, he proposed
seven communication factors which are a function of objective
authority. These are (Barnard, 1938):
1. The channels of communication must be clearly set and be

known to all.
2. Every member of the organisation should be reached by some
channel of communication.
3. The line of communication should be as direct as possible.
4. There should be no blockage in the line of communication and
the complete formal line should be used.
5. The communicator should be highly skilled in the art of
communication.
6. The line of communication should be constantly kept open.
7. Every communication should be authenticated.
3.2 Objectives of Communication (Mamoria, 1982)
The objectives of communication are as stated below:
1. To develop information and understanding among all workers.

2. To foster any attitude which is necessary for motivation,
cooperation and job satisfaction.
3. To discourage misinformation, ambiguity and rumours.
4. To prepare workers for a change in methods or environment by
giving them the necessary information in advance.
5. To encourage subordinates to supply ideas and suggestions for
improving upon the product or work environment, and taking
these suggestions seriously.
6. To improve labour-management relations by keeping the
communication channels open.
7. To encourage social relations among workers by encouraging
inter-communication.
3.3 Communication Process Model
A simple communication model which reflects communication as a

dynamic interactive process has been proposed by David Berdo (1960).
His approach is based upon the following idea:
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If we accept the concept of process, we view events and

relationships as dynamic, ongoing, ever-changing,
continuous. When we label something as a process, we
also mean that it does not have a beginning, an end, a
fixed sequence of events. It is not static, at rest. It is
moving. The ingredients within a process interact, each
affects all the others.
This model described as a series of steps, consists of the following

components:
1. Message sender. This is the source of information or the initiator

of communication. This source may want to communicate his
ideas, needs, intentions or other pieces of information.
2. Encoder. This is the process inside the human mind in the form
of motor skills, muscle system or sensory skills that encode the
ideas to be conveyed into a series of symbols or gestures or some
other format of expression.
3. The message. The message is a physical form of the thought

which can be experienced and understood by one or more senses
of the receiver. It could be in the form of hearing, reading or
other physical gestures.
4. Channel of Communication. It is a vehicle used for the

transmission of the message. It is a medium carrier and bridges
the gap between the sender and the receiver. It may be a face-to-
face conversation, telephone conversation, in written form or
through any form of gesture.
5. Perception of the message. The message is received by the

person for whom it was meant and he becomes the receiver of the
message.
6. Decoding process. Decoding is also done in the same manner as

encoding by motor skills, muscle system or sensory skills and the
receiver decodes the message for the purpose of interpreting and
understanding the meaning of the message. The more the
receiver’s intended message the more effective the
communication is.
7. Action. This is a response from the receiver who has received

and accepted the communication. This may be compliance with
an instruction or simply filing of the message for future
references.
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8. Feedback. A feedback determines whether the message was

clearly understood and the required action taken. The feedback
to the sender completes the process of communication.
3.3 Superior-Subordinate Communication
One of the basic foundations of the organisational operations is the

communication between superiors and subordinates in the hierarchical
system. Traditionally, the dominant theme in this type of organisational
communication has been the “downward” communication as far as the
directions are concerned and “upward” communication as far as
operational reports and other feedback is concerned.
The downward communication is from the superior to the subordinate or

from the top management filtered down to workers through the various
hierarchical communication centres in between and may include such
standard managerial tools as statement of the organisational philosophy
and organisational objectives, standard operating and other relevant
material. Downward channels are used to give employees work
instructions and other information needed to exercise the delegated
authority.
In order for this communication to be effective, the workers should not

only be told what to do but also why they are doing it and why their jobs
are important. This increases a feeling of acceptance on the part of
workers. It is also important that the communication be transmitted to
workers in the language that they can understand. For example, a
machine operator may not understand much about the organisational
philosophy or any specialised terminology about strategic planning or
technological dynamics. They must be communicated in their own
words and perceptions. Also most workers are conditioned to accept
communication from their immediate superiors and hence the message
must be filtered down through normal channels and edited on the way
down wherever necessary without losing the content or intent of the
message. It is important, however, that there is no communication
breakdown at any level or from any source. This breakdown may occur
due to failure of the message to get through, failure to deliver the
message at the proper time or proper place or improper coding of the
message (Schneider, et. al., 1976). The message must be coded in the
language of the receiver, rather than the language of the sender.
The “upward” communication moves in the opposite direction and is

based upon the communication demand system, designed by the
management to receive information from operational levels. This
information may consist of standard reporting items such as production
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reports, sales reports, customer complaints, quality control reports etc.

According to Ester R. Becker, upward communication provides a clear
channel for funnelling information, opinion and attitudes up through the
organisation. The organisation must provide a climate and an incentive
system which is necessary to encourage such communication. This
climate can be generated by an “open door” policy where the workers
know that their superiors are always available for discussion of
problems. The system must ensure that the superiors have developed
listening skills as well as a sincere and sympathetic attitude towards
workers problems. This opportunity for upward communication
encourages employees to contribute valuable ideas for improving
organisational efficiency (Dooher and Vivienne, 1957).
In addition to upward and downward communication, there is horizontal

or lateral communication between equals. This is more informal in
nature and is necessary in promoting a supportive organisational
climate. For example, supervisors at the same level but from different
departments, having lunch together or coffee together can discuss and
organise their activities in such a manner that they complement each
other and the process is beneficial to the company as a whole.
Wenburg and Wilmont (1973) suggest that instead of communication

being “upward” or “downward” which is inter-communication, it should
be “transactional” communication which is mutual and reciprocal
because, “All persons are engaged in sending (encoding) and receiving
(decoding) messages simultaneously. Each person is constantly sharing
in the encoding and decoding process and each person is affecting the
other”. In the transactional process, the communication is not simply
flow of information, but it develops a personal linkage between the
superior and the subordinate.
According to Katz and Kahn (1966), there are five purposes served by
superior-subordinate communication process. These are:
1. To give specific job instructions and directions.

2. To give information about organisational procedures and
practices.
3. To educate employees as to why their jobs are important.
4. To give feedback to subordinates about their performance, as to
how well they are doing and how they can improve.
5. To provide ideological type information to facilitate the
indoctrination of goals.
It has been found that in most classical types of organisations only the
first two of these five purposes are generally accomplished. Attention to
the other three purposes has a very positive impact upon the
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organisational climate. As Katz and Kahn point out, “If the man knows
the reasons for his assignment, this would often ensure his carrying out
the job more effectively; and if he has an understanding of what his job
is about in relation to his sub-system, he is more likely to identify with
organisational goals.
In order to achieve these five communication purposes effectively, it is

necessary to have effective superior-subordinate communication, which
requires a careful attention to the needs and the psychology of the
receiver. The importance of the receiver should not be ignored. Donald
Roberts has suggested the following ways in which the downward flow
of communication can affect the receiver:
1. People’s interpretations of communications coincide with the
already held beliefs and attitudes.
2. People usually resist messages and communications that require
sudden changes because most people follow the path of least
resistance.
3. Messages that require some kind of change are more easily
acceptable if the entire surrounding environment is also changing
alongside.
4. Messages that conflict with values of the receivers will not be
acceptable even if these messages are rational and logically
desirable.
5. Messages that fulfill some needs of the receiver will be more
easily acceptable.
Based on these observations, it is important that the superior and
subordinate work together and have a personal linkage along with
professional relationship so that they can discuss the problems more
amicably and arrive at solutions.
3.4 Oral and Written Communication
Communication may be divided into two, namely: oral and written.

They are discussed below.
3.4.1 Oral Communication
An oral communication is known as face-to-face communication and

may be in the form of direct talk and conversation or the public address.
It also includes telephone calls or talking on the intercom system. It is
most effective when settling a dispute among employees or
reprimanding a worker. In one-way form of communication, it is very
effective for leaders to address the followers via public address system
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or audio-visual media. The human voice can impart the message much
more forcefully and effectively than written words and is an effective
way of changing attitudes, beliefs and feelings, since faith, trust and
sincerity can be much better measured in a face-to-face conversation
rather than in written words.
Advantages:
1. It is direct, simple, time saving and least expensive form of

communication.
2. It allows for feedback and spontaneous thinking.
3. It helps in avoiding delays, red tape and other formalities.
4. It conveys personal warmth and friendliness and it develops a
sense of belonging because of personalized contacts.
5. Any misunderstanding can be cleared immediately.
Disadvantages:
1. There is no formal record of transaction.

2. If the verbal message is passed on along the hierarchical chain of
command then some distortions can occur during the process.
3. Lengthy and distant communications cannot be effectively
conveyed verbally.
4. The receiver may receive the message in his own perception and
thus misunderstand the intent of the message.
5. Spontaneous responses may not be carefully thought about.
6. The spirit of authority cannot be transmitted effectively in verbal
transactions.
3.4.2 Written Communication
A written communication is put in writing and is generally in the form

of instructions, letters, memos, formal reports, rules and regulations,
policy manuals, information bulletins etc. These areas have to be
covered in writing for efficient functioning of an organisation. It is most
effective when it is required to communication information that requires
action in the future and where the communication is that of general
informational nature. It also ensures that every one concerned has the
same information.
Advantages:
1. It serves as evidence of events and proceedings.

2. It provides a permanency of record for future references.
3. It reduces the possibility of misunderstanding and
misinterpretation.
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4. It can save time when many persons must be contacted at the

same time.
5. It is reliable for transmitting lengthy statistical data.
6. It appears formal and authoritative for action.
7. It can be checked for accuracy, which may not be always possible
in verbal communication.
Disadvantages:
1. It can be very time-consuming for lengthy reports.

2. There is no feedback opportunity to be sure that the receiver has
understood the message.
3. Written material may leak out before time, causing disruption in
its effectiveness.
4. It leads to excessive formality in personal relations.
What is communication grapevine?
3.5 Communication Grapevines
While it is necessary to have a formal organisational structure for

communication channels, since an effective network and flow of
communication may, “regulate behaviour, encourage innovation,
integrate or coordinate activities and inform or instruct employees,
(Leavitt, 1951), it is also very beneficial to attend to informal channels
of communication, commonly known as grapevine which can
communicate important operational matters to the management, that
would not be feasible through formal channels.
This type of communication is more lateral in nature and is built around

the social relationship and social interaction among the members of the
organisation. This informal communication can be considered as a
beneficial safety valve capable of carrying important information
quickly and accurately. It can also be considered as destructive,
focusing on its capacity to spread rumours, destroy morale, misinform
and create interpersonal problems. Such consideration will depend upon
the type of climate that exists in the organisation (Davis, 1953).
There are some problems with the hierarchical channels of

communication that can be minimised through informal channels of
communication. According to Mazumdar (1970), such problems are as
follows:
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1. The mass of information that is generated every day, if

communicated through formal channels, will create a bottleneck in
the speedy flow of information at any level in the hierarchical
structure.
2. Due to several levels in the hierarchical process, much of the

information is lost or distorted at each step, since each person at each
level may perceive the information in a different perspective.
According to Nichols (1962), “There is a tremendous loss of
information – 37 percent between the Board of Directors and the
Vice Presidential level. General supervisors got 56 percent of the
information, plant managers and general foremen received only 30
percent of what had been transmitted downward to them. An
average of only 20 percent of the communication sent downwards
through the five levels of management finally gets to the worker
level”.
3. There can be some distortion in information to be communicated in

what is known as “protective screening”. A subordinate is likely to
report to his superior only that portion of the information which is
favourable and either ignores or distorts the information that is
unfavourable to him. Keth Davis (1960) has suggested that
grapevine channel of information should complement the formal
channel of communication so that they both have a synergetic effect
for the benefit of the organisation.
3.6 Barriers to Effective Communication
The communication must be interpreted and understood in the same

manner as it was meant to be sent by the sender, otherwise it will not
achieve the desired results and a communication breakdown will occur.
There are certain external roadblocks to effective communication like
noise, poor timing, incomplete, inadequate or unclear information, poor
choice of channel of transmission of information, etc. which can affect
the proper reception of the communication. In addition, there are
personal factors which may interpret the communication not in the same
manner as it was intended by the sender but in a way that the receiver
wants to receive, depending upon the stimuli present, emotions or
prejudices for or against a concept or ideology or personal conflicts so
that instead of interpreting the content of the communication, the intent
of the sender may be interpreted.
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According to Rogers and Roethlisberger (1952), the communication

effectiveness is always influenced by “our very natural tendency to
judge, to evaluate, to approve or disapprove the statement of the other
person or other group”. This evaluation tendency may alter the meaning
of the entire communication. Accordingly, the management should not
only attempt to eliminate all external barriers so that the communication
is clear and to the point, but also try to understand the perceptions and
attitudes of the receiver. Only then can the communication have its
maximum effect.
Some of the organisational barriers and some of the interpersonal

barriers to effective communication are discussed below:
1. Noise Barriers. Noise is any external factor which interferes

with the effectiveness of communication. The term is derived
from noise or static effects in telephone conversions or radio
wave transmission. It may cause interference in the process of
communication by distracting or by blocking a part of the
message or by diluting the strength of the communication. Some
of the sources contributing towards noise factors are:
(a) Poor timing. The manager must know when to communicate. A

message that requires action in the distant future may be
forgotten by the time action is to be taken. Similarly, a last
minute communication with a deadline may put too much
pressure on the receiver and may result in resentment. A
message must be sent at an appropriate time to avoid these
problems.
(b) Inappropriate channel. Poor choice of channel of

communication can also be contributory to the misunderstanding
of the message. The manager must decide whether the
communication would be most effective if it is written or by a
telephone call or a face-to-face conversation or a combination of
these modes. If the communication has been initiated through a
telephone call, then it may be necessary to confirm the message
of the call by putting it in writing. The face-to-face
communication generally emphasises the strength of the message
because it is supported by non-verbal gestures of eye contact,
hand gestures, facial expressions, tone of voice etc.
(c) Improper or inadequate information. The information must be

meaningful to the employee. It must be precise and to the point.
Too little or too much information endangers effective
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communication. Ambiguity or use of words that can lead to

different interpretations should be avoided.
(d) Physical distractions. The manager must recognise that in the

case of face-to-face communications, any distractions can
interfere with the process. Telephone interruptions, walk-in
visitors or attending to other matters can interfere with the
effective communication process. These external disturbances
must be avoided.
(e) Organisational structure. The organisational structure should

be such that the chain of command and channels of
communication are clearly established and the responsibility and
authority are clearly assigned. Communication may be blocked,
chaotic or distorted if the channels are not clear and if the
passages are blocked or if there are bottlenecks or dead ends.
(f) Information overloads. As dynamic changes are continuously

occurring in our life, in our society and in our organisations, they
create a mass of information to be processed (O’Reilley, 1980).
Overload occurs when individuals receive more information than
they are capable of processing. The result could be confusion in
processing of information or some important information may be
laid aside for the purpose of convenience (Bacharach and Aikeu,
1977).
(g) Network breakdown. Network breakdown may be intentional or

due to information overload and time pressures under which a
communication has to be acted upon. Some factors contributing
to such disruptions are:
Important negative information may be withheld by the managers.

The secretary may forget to forward a memo.
There may be professional jealousy resulting in closed channels etc.
2. Semantic Barriers. These barriers occur due to differences in

individual the words interpretations of words and symbols. The
words and paragraphs must be interpreted with the same meaning
as was intended. The choice of a wrong word or a comma at a
wrong place in a sentence can some times alter the meaning of
the intended message. Many times, we have to explain that “it
was not what I meant” or “you misunderstood my message” etc.
due to poor choice of words. For example, a night club
advertisement sign, “clean and decent dancing every night except
Sunday”, could lead to two interpretations. First, that there is no
dancing on Sundays and second, that there is dancing on
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Sundays, but it is not clean and decent (Haney, 1979).

Accordingly, it is advised that if there is any ground for
misunderstanding in a message, that it be reconfirmed with the
sender. For example, if you are giving your address to someone
on the telephone, it is advisable that the receiver repeat this
address so that the sender can verify it right away to reassure its
effectiveness.
3. Feedback Barriers. Feedback is the only way to ascertain as to

how the message was interpreted. Feedback closes the
communication loop and is important for effective
communication. It is equally important to pay attention to the
feedback. The feedback may be for the purpose of
communicating the results of an action or it may be for asking
questions about the communication for further clarifications. A
student who misunderstands a question in the exam, but does not
have the provision to ask for clarification may end up giving the
wrong answer.
4. Cultural Barriers. The cultural differences can adversely affect

the communication effectiveness, especially for multinational
companies and enterprises with multi-ethnic workforce. Some
examples are as follows:
(a) Advertisement about Action Man Soldier toys, where toy soldiers
were in tanks holding machine guns, were not permitted in West
Germany where they were interpreted as promoting violence (Alsop,
1984).
(b) In Austria and France, the children are not permitted to television
commercials.
(c) Most Jewish people will not work on Saturdays and most Muslims
will not work on Friday afternoons.
(d) Establishing deadlines to accomplish work assignment is considered

rude in most Middle East countries.
(e) Punctuality in some countries is not considered important.
(f) Many important meetings and actions are contemplated after

consultations with astrologers in India.
(g) “Coke adds life” may be misinterpreted as a device for long life.
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Accordingly, management must recognise these barriers as culturally

oriented and identify these cultural differences and attempt to minimise
any adverse effects on communication effectiveness due to these
differences.
5. Perception. Perception relates to the process through which we

receive and interpret information from our environment and
create a meaningful word out of it. Different people may
perceive the same situation differently. Hearing what we want to
hear and ignoring information that conflicts with what we know
can totally distort the intent or content of the message. Some of
the perceptual situations that may distort a manager’s assessment
of people resulting in reduced effectiveness of the
communication are:
(a) A manager may perceive people to belong to one category or another

as stereotypes, rather than individuals. For example he may perceive
women to be less efficient managers or old people less hard working
or lacking drive and creativity.
(b) A manager may make a total assessment of a person based on a

single trait. A pleasant smile may make a positive first impression.
Punctuality alone or loyalty alone may cause a favourable perception
in the mind of the manager. This is known as the halo effect.
(c) A manager may assume that his subordinate’s perception about

things may be similar to his own. A manager who accepts added
responsibility and challenges with enthusiasm may expect the same
from his subordinates. This perception limits the manager’s ability
to effectively respond to and deal with individual differences and
differing views of work situations.
The management must realise these differences in perceptions and take

steps to understand the environment. A successful manager must be
aware of the impact of factors that affect perception by interaction with
others and should also possess the ability to influence or change the
perceptions of others where necessary so that events and situations are
interpreted as accurately and objectively as possible. For example, an
employee may resist a message simply because the employee has not
developed a trust in the manager due to past experiences. If the
employee was promised a bonus or promotion on certain
accomplishments and did not receive the promised rewards, he may tend
to ignore the communication wherever possible. Accordingly, the
manager must take steps to eliminate such negative perceptions among
the employee.
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6. Sender Credibility. When the sender of the communication has

high credibility in the eyes of the receiver, the message is taken
much more seriously and accepted at face value. If the receiver
has confidence, trust and respect for the sender, then the decoding
and the interpretation of the message will lead to a meaning that
would be closer to the intended meaning of the sender.
Conversely, if the sender is not trusted, then the receiver will
scrutinise the message heavily and deliberately look for hidden
meanings or tricks and may end up distorting the entire message.
7. Multi-meaning words. Many words in English language have

different meaning when used in different situations.
Accordingly, a manager must not assume that a particular word
means the same thing to all people who use it (Pancrazio and
Pancrazio, 1981). A study by Lydia Strong (1956) concluded
that for the 500 most common words in English, there are 4,070
different dictionary definitions. For example, the word “run” can
be used in 15 different ways. Some of the examples are:
Babe Ruth scored a run.

I have a run in my stocking.
Did you see him run?
What headline do you want to run today?
There was a run on the bank today.
Who will run for President this year?
Please run my bath water etc. etc.
Accordingly, the managers must make sure that they use the word n the
same manner as the receiver is expected to understand it, otherwise it
will create a barrier to proper understanding of the message.
3.7 Overcoming Communication Barriers
It is very important for the management to recognise and overcome

barriers to effective communication for operational optimization and this
would involve diagnosing and analysing situations, designing proper
messages, selecting appropriate channels for communicating these
messages, assisting receivers in decoding and interpreting and providing
an efficient and effective feedback system. Some of the steps taken are
as follows:
1. Feedback and upward communication. Feedback helps to

reduce misunderstandings. The information is transferred more
accurately when the receiver is given the opportunity to ask for
clarifications and answers to any questions about the message.
Two-way communication even though more time consuming,
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avoids distrust and leads to trust and openness which builds a

healthy relationship contributing to communication effectiveness.
Upward communication is strengthened by keeping an open-door policy

and providing opportunities for workers to give suggestions which
should be taken seriously by the management by acknowledging them
and taking appropriate action.
2. Improve listening skills. According to Stuart Chase (1954),

“listening is the other half of talking” and is a very important part
of the total communication process. Listening is an active mental
process and goes beyond simply hearing. Good listening habits
lead to better understanding and good relationships with each
other. Some guidelines for effective listening are:
(a) Listening requires full attention to the speaker. Do not let your mind
wander or be preoccupied with something else, otherwise you would
not grasp the meaning of the message in its entirety.
(b) The language used tone of voice, expression and emotions content
and respond positively to these feelings.
(c) Ask questions to clarify any point that you do not understand clearly
and reflect back to the speaker your understanding of what has been
said.
(d) Make sure that there are no outside interruptions and interferences
during the course of conversation.
(e) Do not prejudge or value the importance of the message due to your
previous dealings and experiences with the sender or your
perceptions about him, positive or negative.
(f) Don’t jump to conclusions before the message is over and is clearly
understood.
(g) Summarise and restate the message after it is over to doubly make
sure about the content and the intent of the message.
3. Develop writing skills. Clearly written messages can help avoid

semantic and perception barriers. A well written communication
eliminates the possibility of misunderstanding and
misinterpretation. In writing messages, it is necessary to be
precise, making the meaning as clear as possible so that it
accomplishes the desired purpose. Some helpful hints in written
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communications are suggested by Robert DeGise (1976) as

follows:
(a) Keep words simple. This will reduce your thoughts to essentials and
will be easier to understand by the receiver. The message will be
lost if the words are complex and do not lend to clear single
meaning.
(b) Do not be bogged down by rules of composition. While the rules of

grammar and composition must be respected, they should not take
priority over the ultimate purpose of the communication.
(c) Write concisely. Use as few words as possible. Do not be brief at

the cost of completeness, but express your thoughts, opinions and
ideas in the fewest number of words.
(d) Be specific. Vagueness destroys accuracy which leads to

misunderstanding of the meaning or intent of the message.
Accordingly be T and to the point.
(e) Avoid credibility gaps. Communication is a continuing process and

the goal of the communication is complete understanding and trust.
Accordingly, the management must be sincere and earn the trust of
the subordinates. Management should not only be sensitive to the
needs and the feelings of the workers, but also its promises should be
supported by actions. The word of the management should be as
good as a bond. Only then would an atmosphere of congeniality
accrue, which would enhance the communication process.
According to studies conducted by J. Luft (1969), openness and an
atmosphere of trust builds healthy relationship and closes any
credibility gaps, thus contributing to communication effectiveness.
Is the upward communication and improvement or a hindrance to

effective organisational operations? List and explain some general
guidelines that will help improve general communication.
3.8 Guidelines for Effective Communication
These guidelines are designed to help management improve their skills

in communicating so as not only to avoid any barriers to effective
communication but also to strengthen the basis for optimum results
which depend upon the clear understanding of the desired
communication. These guidelines are partially based upon the
principles proposed by American Management Association. These are:
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1. The ideas and messages should be clear, brief and precise.

The ideas to be communicated must be well planned and clearly
identified. This will eliminate ambiguity so that the message
subject to more than one interpretation. The message must be
clear, precise and to the point and free from distortions and noise.
It should also be brief so that it is just necessary and sufficient
and should avoid loose ends or meaningless and unnecessary
words.
2. Sense of timing. The message should not only be timely so that

the decisions and actions can be taken in time and when
necessary, but also the timing of the message and the
environmental setting in which the message is delivered and
received is equally important. An important message delivered at
the wrong time or in a non-conducive environment may lose its
effectiveness. The environment involves physical setting, i.e.,
whether the communication is conveyed in private, and also it
involves the social climate which determines the work setting as
well as interpersonal relationships.
3. Integrity. The communication must pass through the proper

channels to reach the intended receiver. The communication
flow and its spread must avoid by-passing levels or people.
When these concerned levels are omitted or by-passed, it creates
bickering, distrust, confusion and conflict. Accordingly, the
established channels must be used as required.
4. Consult with others who are involved in planning the

communication. If people have participated in the planning
process, they would be highly motivated to give active support to
such communication and carry it through. Also such
participation would widen the scope and the objectivity of
communication. The people who are concerned must know;
know exactly what they need and when they need the
communication. The purpose of the communication must be
clearly known by all as to what is to be achieved and how.
5. Be prepared to help the receiver. Take the receiver’s interests

into account, and then the receiver will be more responsive to the
communication. The management must clarify any part of the
communication that may be necessary and must encourage
comments, questions and feedback the management must always
be helpful in carrying out the intended message of
communication.
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6. Mode of delivery. Not only the clarity on intent and the content
of the message is important and necessary, but also the method of
delivery. Avoid negative statements like, “I am not sure, it will
work” but be confident and definitive. The success of the
communication also depends upon the tone of voice if the
communication is verbal, expressions and emotions exhibited
attentiveness to the receiver etc. The written communication
should be polite and unambiguous.
7. Use proper follow-up. Unless it is a one-way communication,

which is simply meant to inform, all communications need a
follow up to ensure that it was properly understood and carried
out. A verbal communication may need to be followed up by
written confirmation. The response and feedback to the
communication would determine whether the action to the
communication has been prompt, appropriate and accurate.
Inappropriate or delayed responses should be immediately
investigated and corrective measures instituted.
8. Communication should be comprehensive. Communication

should be complete so as not only to meet the demands of today
but should also be based on the future need of the organisation as
well as individuals. A reasonable projection and assessment of
future needs and environments – both work and social – should
be incorporated, when planning and executing communication.
4.0 CONCLUSION
We have discussed communication in its entirety in this unit defining it,

and emphasising its importance in management process. We have listed
and discussed the types of communication, barriers to effective
communication and how to overcome these barriers.
5.0 SUMMARY
In this unit, we have defined the concept communication, stated the

objectives of communication examined communication process model
and described superior-subordinate communication. Also, we discussed
types of communication, explained what is known as communication
grapevines, stated and discussed the barriers to effective
communication. Finally, we highlighted and explained how to
overcome communication barriers while we have also discussed the
guidelines for effective communication.
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In what way does the horizontal communication help in creating team

spirit and organisational integration?





Prentice Hall.
Stoner, J. A. Fr, Freeman, R. E. and Gilbert, D. R.Jr. (1995).

UNIT 3 THE DIRECTING AND LEADING FUNCTION
CONTENTS
1.0 Introduction
2.0 Objectives
3.0 Main Content
3.1 Directing and Leading
3.1.1 Organisational Climate
3.1.2 Human Relations
3.1.3 Principles of Direction
3.2 Leadership
3.3 Types of Leadership
3.3.1 Formal Leadership
3.3.2 Informal Leadership
3.4 Traits of Leadership
3.5 Theories of Leadership
3.6 Leadership Styles
3.7 Personal Characteristics of Leaders
3.8 Leadership and Power
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4.0 Conclusion
5.0 Summary
1.0 INTRODUCTION
Direction is concerned with directing the human efforts towards

organisational goal achievement. The success of these directional efforts
is going to determine the satisfactory or unsatisfactory performance
within the organisation. Accordingly, the directing function is the action
function that tests the managerial capability in running the organisation.
The satisfactory performance of workers is going to be partly dependent

upon the “directional” ability of the management, but primarily it is a
function of the organisational environment. If the environment is not
conducive to optimum performance, the managerial directing in itself
cannot bring in the optimum results. Accordingly, favourable conditions
must exist which would provide for enthusiastic cooperation among all
people to work together to achieve both individual and group goals.
Since the purpose of directing is to make effective use of employees, it

is usually initiated by the higher echelons of management. However,
the employee input into directing decisions would be highly useful, thus
creating an organisational climate where workers enhance the quality of
working life.
In this unit, you will be guided through the functions and roles of
directing and leading in management and how these functions relate to
the attainment of organisational goals or objectives.
2.0 OBJECTIVES
describe the factors that enhance the quality of performance in an

organisation
define and discuss what leadership is all about
list and describe the types and traits of leadership
highlight and discuss the theories of leadership
describe leadership styles and personal characteristics of a leader
determine the relationship between leadership and power.
Explain the directing function of management in a critical sense and

analyse some of the principles of the directing function.
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3.0 MAIN CONTENT
3.1 Directing and Leading
Directing and leading comprise the managerial function of guiding,

overseeing and leading people. The primary element in this function is
the human element and deals in personal relationships. This area is
primarily geared towards leadership, motivation, and communication.
Since human element is the central element in the art and science of
managing, the study of human relations has been of major interest to
management.
3.1.1 Organisational Climate
Schneider (1975) refers to organisational climate as the entire internal

environment of the organisation. What is the organisational climate or
the internal environment? Does it have any physical characteristics or is
it primarily the way it is perceived by its members? The climate reflects
the needs, desires and aspirations of the people who form the
environment. In that context, an environment has about it a set of
characteristics that are perceived by the organisational members.
According to Litwin and Stringer (1966), some of these characteristics
include:
(a) The extent of individual autonomy allowed to members.

(b) The degree to which superiors establish and communicate
objectives, rules and methods to their subordinates.
(c) The types of behaviours rewarded by the organisation and the
types of rewards offered.
(d) The consideration, warmth and support expressed by superiors to
their subordinates.
(e) The extent of conflict and how it is managed.
(f) The extent to which the members are allowed to participate in the
decision making process.
Each organisation will be different in the climate as well as in the

direction style. The directional style will depend upon the philosophy,
culture and outlook of the manager. Similarly, the organisational
climate is also identified by its culture, its traditions, history of the
organisation (Gellerman, 1959) etc. There are a number of categories
that define the climate of many organisations. According to Harrison
(1972), there are four broad categories. These are:
1. Power-oriented climate. These are organisations that are

dominated by autocratic leadership. These may be family
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dominated businesses or an organisation which was started by

one person who is still influential in organisational policy
decisions. The power structure is highly visible and the
subordinates are highly dependent upon their superiors for job
security and job advancement. Decisions are made at the top and
the instructions for implementing such decisions pass down along
the chain of command.
2. Role-oriented climate. In this type of organisation, all managerial

and worker roles are clearly defined. The operative rules and
procedures regulate actions and operations resulting in order and
rationality. These organisations are highly stable and changes are
difficult to implement. Responsibility and accountability are
adequately traceable. Individual judgements are influenced by
established rules and regulations.
3. Task-oriented climate. In a task-oriented organisation, all efforts

are directed towards goal achievement. For example, if the goal
is quality healthcare in a hospital, all decisions and efforts are
directed towards that goal. All performances are measured
relative to the goal standards. All rewards are based on the
degree of contribution towards that goal. All activities, all rules
and regulations are designed with only the goal in mind. All
unskilled people relative to that particular goal are replaced or
retrained. Any deviations are taken very seriously. The goals are
highlighted. These goals may be profit-making, capturing a
market share, imparting high quality education in a university etc.
Some innovative business companies who hire only the most
professional workers would fall into this category.
4. People-oriented climate. These are organisations where people

are given a lot of freedom to be their own bosses. The primary
purpose of such organisations is to serve the needs of its
members. Within the general guidelines of the organisations, the
rules and regulations are flexible an consistent with the values as
well as the aspirations of the employees. For example, a person
associated with a consulting firm takes up only those jobs that he
likes to do. Similarly, voluntary work with some civic groups is
directed towards self-satisfaction and self-actualisation.
While all organisations may not necessarily fit into any one of these
categories and some organisations may have an integration of more than
one type of climate, the specific directing process is highly dependent
upon the organisational environment. For example, in an organisation
with power-oriented climate, the directing function is highly important
and visible, where workers are continuously directed towards certain
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functions. On the other hand, the people-oriented climate needs

minimum of direction from the top.
3.1.2 Human Relations
Direction is concerned with securing the cooperation of workers for the

realisation of organisational objectives. Such operation is easier to
obtain, if personal objectives are integrated with organisational
objectives. While organisational objectives are well established and
defined for a given organisation, the individual objectives are highly
diversified and depend upon the workers’ beliefs, perceptions and
emotions. Hence, the characteristics of human behaviour as well as the
field of human relations must be fully realised by the management.
Human relation is a highly diverse field. Human beings can interact

with each other in a number of ways – everything from helping and
cooperation on one extreme to conflict and aggression on the other
(Baron, 1984). Studies by psychologists and cultural anthropologists
have provided important insights into the patterns of human behaviour.
Some of the factors affecting the human behaviour are (Chatterjee,
1966):
1. Cultural influences. Culture is a learned phenomenon from the very

childhood and is influenced by the family environment as well as the
external environment. It consists of a common way in which people
live, think and work in a society and interact with each other. It is a
shared set of beliefs, customs and habits within a group. It is
crystallised in the institutions that people have built together with
grassroots in religion, family, community, education, etc (Hofstede,
1980).
Business operations and managerial actions are always affected by the

cultural setting of its organisational members. Some cultures expect
participative style of managerial leadership, while members of other
cultures believe in personality cult thus expecting authoritarian style of
leadership. Accordingly, the function of directing must ensure that all
directions are in accordance with the cultural values of the people and
any possible conflicts are minimised.
2. Role and status. Status implies standing in the community and is

determined by the role of a person. A police commissioner or a
judge has a high status in the society because of the role he plays.
For example, a police commissioner who is fired from the job loses
his status because he is no longer in the role of the police
commissioner.
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Similar status differences exist within the organisation. These

differences may be due to the positions in the scalar chain of the
hierarchical structure or these may be due to performance of different
functions, where respect is earned due to skill in a given function.
Chatterjee (op.cit) suggests that these status differences serve four
purposes in a formal organisation.
First, the status system in a hierarchical chain of command influences

the directing function of management by facilitating effective and
authoritative communication from the top management down to
workers.
Secondly, the position of higher status is in itself a motivation to persons

of lower status who expects to move up through their contributions
towards the organisational goal.
Thirdly, it infuses a sense of responsibility among people of all statuses

who want to continue to prove that they deserve that status.
Fourthly, it identifies and differentiates between persons of superior

ability from persons of inferior ability but similar positional status.
Care must be taken, however, that these status differences do not

become the cause of conflicts among people.
3. Informal social groups. Informal social groups develop and emerge

due to spontaneous informal relationships among people and workers
who work together as a unit in a given environment. For example,
people of similar nature eat together, and take a break together. This
results in opportunities for friendship and internally rewarding
relationships on the job. Members of these informal groups assist
each other and get satisfaction from it. They also supplement the
formal channels of communication and are a good source of
information about the psychological set up of the group and its
behaviour, which the formal communication route may not uncover.
Accordingly, management must seek out these groups, come to
understand them, recognise their importance, and utilise them
constructively.
4. Perception. There is an old saying, “that everyone sees the world

through different eyes”. Also there is a poem that suggests
something like, “As in cloud and fire, a man sees the image of his
own desire”. Even when exposed to the same situation or
information, different persons react differently, each person
believing himself to be correct. The process through which we
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interpret the meaning of the world around us is termed “perception”

and it plays a very important role in behaviour (Martlin, 1983).
Accordingly, the management must understand that how the worker

views and interprets the environment around him is very important. It
will aid the function of directing, if the management directs its efforts in
accordance with the worker’s view of the organisational climate and in
addition tries to modify the worker behaviour so that the worker
viewpoint coincides with the management’s viewpoint regarding
organisational operations.
5. Logic and emotions. Man is logical to a point but he is much more

emotional in nature. Even his logic, sometimes, is directed towards
justifying what his emotions believe in. if a man loves a woman he
would not listen or believe anything said against her. The logical
aspect of human beings provide for economic rationality or
utilitarian concept, which forms the basis for decisions and actions in
choosing careers and work conditions and exercising many other
responsibilities and duties of life. However, emotions play a greater
part in shaping up the behaviour, especially when the feelings are
affected.
The measure of success of the directing function would depend upon,

not only the logical aspect of the human thought process, but also on
how it harnesses the emotions of the worker in a positive manner,
favourable to organisational objectives. This will create loyalty –
sometimes blind loyalty – and dedication among workers.
3.1.3 Principles of Direction
Some of the principles of direction are:
1. Integrated objectives. Effective directing requires that the goals

of the organisation and the individuals in the organisation should
be integrated so that all subordinates develop a sense of
belonging to the organisation and hence the contributions of the
subordinates to the company goals will be maximum.
2. Direct supervision. The superiors should maintain direct contact

with subordinates. Informal relationships facilitate the function of
directing. It also makes communication easier, encourages
feedback and faster decisions. Also, when the direction and
communication is properly understood and comprehended, there
would be fewer misunderstandings and mistakes leading to
efficiency in quality and productivity.
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3. Participative managerial style. The subordinates’ morale will be

higher when their views are seriously incorporated into the
managerial decision making. This will assist the formation of
democratic management. The democratic process makes the
direction process easier since the direction, then, is not taken as a
command but as a form of guidance for improvements.
4. Unity of direction. The direction must be clear and unambiguous

and from a single chain of command, otherwise the authority will
be undermined resulting in disorder and confusion.
5. Follow-through. Effective direction demands achievement of

results. The results can only be achieved by being constantly in
touch with the developments. This requires continuous
supervision, guidance, advice and coaching of subordinates in
their activities to attain the desired goals.
The directing function can be conceived as a vector with two

dimensions, namely: (1) magnitude, and (2) aim or direction. Hence,
there must be a goal to be reached a movement towards that goal. The
management must steer the organisation towards that goal by directing
the efforts of the subordinates in the right direction with magnitude or
efficiency.
Since handling people is central to directing and leading, some of the

major factors that contribute towards effective leadership are discussed
in detail.
3.2 Leadership
Leadership is an integral part of management and plays a vital role in

managerial operations. If there is any single factor that differentiates
between successful and unsuccessful organisations, it could be
considered as dynamic and effective leadership. Peter Drucker (1954)pp
34 points out that “managers (business leaders) are the basic and
scarcest resources of any business enterprise”. George Terry (1960)
Page 78 points out that, “off every one hundred new business
establishments started, approximately 50 or one half go out of business
within two years. By the end of 5 years, only one-third of the original
one hundred will still be in business”. Perhaps it would be a valid
assumption to state that the major cause of these failures would be
ineffective leadership.
Leadership is not an attribute of business alone. In the army, in the

government, in universities, in hospitals, etc. and any where, where
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people work in groups, the leadership function emerges. There must be

somebody to guide that group.
Leadership may be defined as the art of influencing and inspiring

subordinates to perform their duties willingly, competently and
enthusiastically for achievement of group objectives. Most management
writers agree that, “leadership is the process of influencing the activities
of an individual or a group in efforts towards goal achievement in a
given situation” (Hersey and Blanchard, 1982).
It is important to add the element of “willingness” in the above

definition. This element differentiates successful and effective leaders
from the “common run of the managers”. Motivating and influencing
people to move towards a common goal, are all essential elements of
management, but the “willingness” of the followers to be led highlights
a special quality that puts a leader high above others.
Based on these elements of a leadership function, the leadership may be

defined as:
L = F (f, g, w, s)
where leadership (L) is a function (F) of:
f = followers
g = goal
w = a measure of willingness on the part of subordinates, and
s = a given situation.
3.3 Types of Leadership
There are mainly two types of leadership, namely: formal and informal
leadership.
3.3.1 Formal Leadership
The formal leadership occurs when a person is appointed or elected as

an authority figure. For example, anyone who is appointed to the job of
a manager is also given the authority to exercise formal leadership in
relationship to his subordinates. Similarly, a formally elected leader of a
country or a state, acquires the authority of leadership and giving
direction to the country or state.
3.3.2 Informal Leadership
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The informal leadership emerges when a person uses interpersonal

influence in a group without designated authority or power. These
leaders emerge in certain situations, because of their charm, intelligence,
skills or other traits, and to whom other people turn to for advice,
direction and guidance. Religious and civic leaders fit into this
category. Successful managers, who exercise their given authority in a
formal way, are also capable of exercising informal leadership
relationships with people both within as well as outside the organisation.
3.4 Traits of Leadership
A leader has certain inherent qualities and traits which assist him in
playing a directing role and wielding commanding influence over others.
Some of these traits according to Jago (1982) are:
1. Energy, drive
2. Appearance, presentability
3. A sense of cooperativeness
4. Enthusiasm
5. Personality – height and weight
6. Initiative
7. Intelligence
8. Judgement
9. Self-confidence
10. Sociability
11. Tact and diplomacy
12. Moral courage and integrity
13. Willpower and flexibility
14. Emotional stability
15. Knowledge of human relations.
These traits are not universal in nature. Not all leaders have these traits.
Not all of these traits work at all times. While some of these traits
differentiate successful managers and leaders from unsuccessful ones, it
is the behaviour of leaders, either as a result of these traits or otherwise,
which is more tangible and obvious and less abstract than traits. The
leadership behaviour is directly related to individual worker activity and
group activity, absences, turnover, and employee morale. These are
indicators, to some degree, of the effectiveness of leadership behaviour.
Many studies have been conducted in order to identify and separate such
characteristics and personal traits that reflect the behaviour of successful
leaders. These traits then could be set up as standards against which the
profiles of leaders could be matched and judged. However, such
attempts have not been successful. According to Stagdill (1957), who
studied the subject of leadership most extensively, “a person does not
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become a leader by virtue of the possession of some combination of the

traits, but the pattern of personal characteristics of the leader must bear
some relevant relationship to the characteristics, activities and goals of
the followers.
Some of the approaches to the study of leadership including trait theory

and behaviour are explained in detail.
3.5 Theories of Leadership
1. The Trait Theory. The traditional approach has been to describe

leadership in terms of personal traits and special characteristics of
leaders. These traits are not acquired, but are inherent personal
qualities. The trait theory emphasises that leaders are born and
not made. This theory proposes that leadership is a function of
these inborn traits. Some of these traits include intelligence,
understanding, perception, high motivation, socio-economic
status, initiative, maturity, need for self-actualisation, self-
assurance and understanding of interpersonal human relations.
The existence of these traits becomes a measure of leadership. It
holds that the possession of certain traits permits certain
individuals to gain position of leadership. This relationship
between successful leadership and traits was extensively studied
by Stogdill (1948). Stogdill (1974) believed that the pattern of
leadership trait is different from situation to situation. A person
who becomes a leader in one situation may not become one in a
different situation. There is no single personality trait that would
typify a leader and be applicable in all situations.
Leadership implies activity movement and getting the work done. The
leader is a person who occupies a position of responsibility in
coordinating the activities of the members of a group. Hence, leadership
must be conceived of in terms of interactions – for one to lead – and
others who want to be led.
The trait theory of leadership has suffered from lack of conclusiveness

and over-simplifications. The critics have charged that the theory
focuses attention only on the leader and disregards the dynamics of the
leadership process. Also, the theory ignores the situational
characteristics which may result in the emergence of a leader. Some of
the other weaknesses and failures of the trait theory are:
1. All the traits are not identical with regard to the essential
characteristics of a leader.
2. Some traits can be acquired by training and may not be inherited.
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3. It does not identify the traits that are most important and those
that are least important in identifying a successful leader.
4. The traits required to attain leadership may not be the same that
are required to sustain leadership.
5. It fails to explain the many leadership failures in spite of the
required traits.
6. It has been found that many traits exhibited by leaders are also
found among followers without explaining as to why followers
could not become leaders.
7. It ignores the environmental factors, which may differ from
situation to situation.
2. Behaviour Theory. This theory studies leadership by looking at

leaders in terms of what they do. The leader effectiveness is
judged in terms of individual subordinate outcome. Research
studies conducted by Katz, Maccoby and Morse (1957) suggested
that leadership behaviour be defined along employee-centred
dimension and production centred dimension, both
complementing each other. This style is expected to show
improvements in productivity.
Further in-depth investigations into this approach have been conducted

at Ohio State University (Stogdill and Coons (1957). These studies
isolate two particular factors affecting the leadership dimension. These
are:
(a) Consideration (of employees)
(b) Initiating structure (giving directions and orders).
Consideration connotes rapport between the leader and the group, a
mutual warmth and trust, a concern for the needs of the members of the
work group, an attitude that encourages participative management, two-
way communication and respect for the feedback of the followers.
Initiating structure involves creating a work environment, so that the

work of the group is organised, coordinated, sequential, organizationally
relevant so that people know exactly what is to be done and how it is to
be done. The structure involves having the leader organise and define
the role each member is to assume, assign tasks to them and push for the
realisation of organisational goals. An important discovery made by the
Ohio studies was that the leader does not necessarily have to rate high
both on consideration as well as structure element. He could be high on
one and low on the other and still lead the group successfully.
Studies conducted by House, Filley and Kerr (1971) concluded that both
structure and consideration were related to satisfaction and they affect
grievances and employee turnover. Groups with medium and high
considerations and low structure are lowest in grievances and turnover.
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One advantage of this theory is that these two dimensions of leadership

behaviour are tangible and observable and do account for a major part of
the leader behaviour. Even though a causal connection of these two
dimensions has not been demonstrated, their relationship to leadership
effectiveness has been quite obvious.
3. Contingency Theory. This theory states, that an analysis of

leadership involves not only the individual traits and behaviour
but also a focus on the situation. The leadership behaviour is
used in combination with work group contingencies to predict
outcomes. The effectiveness of the leader behaviour is
contingent upon the demands imposed by situation. There are
three major components that are significant for leadership
effectiveness. These include individual differences among
leaders, differences among situations and the manner in which
these two variables are related.
(a) Fiedler’s contingency theory. Fiedler conducted extensive studies

in this area and developed a scale to identify different types of
leaders. This scale is called Least Preferred Co-worker Scale
(LPC). The LPC reflects primarily the style of leadership. The
scale assesses how favourably or unfavourably the leader
describes his least preferred co-worker. A high LPC score leader
is the one who sees even the least preferred co-worker in
relatively favourable terms and is more relationship-oriented and
a low LPC leader is more task-oriented.
Fiedler selected three components that affect the situation and also could
be manipulated to bring about the changes. First was the leader-group
relationship which examines the degree of trust that the group members
place in the leader. The second was task structure that focused upon the
number of steps needed to complete the task. The third was the leader’s
positional power involving the extent of legitimate power the leader
possesses.
The most favourable situation for a leader then would be where the
leader-group relations are positive, the task is highly structured and the
leader has substantial authority to take decisive actions.
(b) The situational leadership approach. Similar to Fiedler’s

contingency model, the situational approach, developed by
Hersey and Blanchard, is based upon the premise that different
types of situations demand different types of leadership. The
focus is on the situation in which the leadership is exercised and
not upon the leader. A successful leader under one set of
circumstances may be a failure under a different set of
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circumstances. For example, Winston Churchill was considered

a successful Prime Minister and a leader of England during
World War II. However, he turned out to be much less
successful after the war when the situation changed.
The situational approach defines leadership in terms of his ability to

handle a given situation and is based on his skill in that given area.
Heresy and Blanchard define the major situation variable as “task
maturity”, which is the ability and willingness to perform the task. This
approach can best be described by a hypothetical example developed by
Robert A. Baron (1985). Imagine the following scene:
The top executives of a large corporation are going in their limousine to

meet the president of another large company at a distance. On the way,
their limousine breaks down many miles from any town. Who takes
charge of the situation? Who becomes the situational leader? Not the
president or the vice-president of the company, but the driver of the car
who know enough about the motor to get the car started again. As he
does or oversees the repairs, he gives direct orders to these top echelons
of the organisation, who comply. But once they arrive at the meeting,
the driver surrenders his authority and becomes a subordinate again.
This example suggests that in a given situation, the person most likely to
act as a leader is the one who is most competent for that situation or for
a given group as the case may be. Thus in defiance of the trait theory,
some shy and introvert person may take command of leadership, if he
meets the group’s requirements under given circumstances. However, it
must be understood that it would require the leaders to change their
behaviour to fit the changed situation, if necessary, rather than having to
change the situation to suit the leadership behavioural style. This means
that the leaders must remain flexible and sensitive to the changing needs
of the given group (Graef, 1983).
While this approach emphasises that external pressures and situational

characteristics determine the emergence and success of leaders in
performing a given role, it is probably a combination of both types of
characteristics that sustains a leader over a long period of time. A leader
is more successful when his personal traits complement the situational
characteristics.
4. The Path-Goal Theory. The Path-Goal model of leadership

behaviour has been propounded by House and Mitchell (1974).
This model emphasises that the leader behaviour be such as to
complement the group work setting and aspirations. This
approach is based upon the expectancy theory of motivation and
reflects the worker’s beliefs that efforts will lead to successful
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results. The leader sets up clear path and clear guidelines through
which the subordinates can achieve both personal and work-
related goals and assists them in achieving these goals. This will
make the leader behaviour acceptable and satisfying to
subordinates since they see the behaviour of the leader as an
immediate source of satisfaction or as a source of obtaining
future satisfaction.
This approach is largely derived from the path-goal approach to
motivation (Hellreigel and Slocum, 1974). To motivate workers, the
leaders should:
(a) Recognise the subordinate’s needs.
(b) Arrange for appropriate rewards to his followers for goal
achievement.
(c) Help subordinates in clearly establishing their expectations.
(d) Demolish, as far as possible, the barriers in their path of goal
achievement.
(e) Increase opportunities for personal satisfaction which are
contingent upon satisfactory performance.
The path-goal model takes into consideration the different types of

leadership behaviour. There are four such types of behaviour that would
support this approach, depending upon the nature of the situation. These
are:
(a) Directive. When the demands of a task on hand are ambiguous,

directive leadership is needed. But when the task is inherently
clear or clarification is otherwise available, then a high level of
directive leadership is not required and may, in fact, impede
effective performance.
(b) Supportive. Supportive leadership is friendly and approachable

and has the most positive effect on the satisfaction of the
followers working on unpleasant, stressful or frustrating tasks
that are highly repetitive.
(c) Achievement oriented. This type of support helps the

subordinates to strive for higher performance standards and
increases confidence in their ability to meet challenging goals.
This is especially true for followers who have clear cut, non-
repetitive assignments.
(d) Participative. This leadership approach encourages subordinate’s

participation in the decision making process. The leader solicits
subordinate’s suggestions and takes the suggestions seriously into
consideration before making decisions.
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In addition to the various patterns of leadership, certain characteristics of

subordinates themselves such as their ability, experience, motives,
dedication etc. and various aspects of the situation such as the structure
of the work tasks, openness of communication, extent of feedback
provided etc., form important ingredients of the path-goal model.
5. Vroom-Yetton Model (1974). This is a normative theory for it

simply tells the leaders how they should behave in decision
making. The focus is on the premise that different problems have
different characteristics and should therefore be solved by
different decision techniques. The effectiveness of the decision is
a function of leadership which ranges from the leader making
decisions himself to a totally democratic process in which the
subordinates fully participate and the contingencies which
describe the attributes of the problem to be dealt with. For a
successful leader, it is imperative to know the best approach to
solving the problem at hand and to know how to implement each
decision making method well when required.
The model dictates that the decision reached should be high in quality,
should be accepted by the people who have to implement it and should
be time efficient. The leader, while choosing a strategy, decides which
element he will focus on and which may be neglected to some extent.
Studies performed to test the validity of this theory concluded that the
participative and democratic style of leadership was more appropriate
and successful at higher levels of an organisation, whereas directive
decision making style were utilised at lower levels.
6. The Managerial Grid. The managerial grid was developed by

Robert Blake and Jane Mouton (1978) and plays an important
part in managerial behaviour in organisational development. It is
built on two axes, one representing the “people” and the other the
“task”. Both the horizontal as well as the vertical axis are treated
as a scale from 1 to 9 where 1 represents the least involvement
and 9 the most involvement, so that the coordinates (1, 1) would
indicated minimum standards and coordinates (9, 9) would
indicate maximum dedication of the workers and highly
structured operations. Such an involvement would reflect upon
the managerial orientation towards task and towards workers who
are expected to perform such tasks. Blake and Mouton have
identified five coordinates that reflect various styles of leader
behaviour. The managerial grid figure and these styles are shown
in the figure below:
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Coordinates (1, 1). The manager makes minimum efforts to get work
done. Minimal standards of performance and minimum worker
dedication.
Coordinates (9, 1). Excellent work design. Well established procedures.

Minimum worker interference. Orderly performance and efficient
operation.
Coordinates (1, 9). Personal and meaningful relationships with people.

Friendly atmosphere and high morale. Loosely structured work design.
Coordinates (5, 5). Satisfactory performance achieved by equating the

necessity for performance and reasonable morale.
9 (1, 9) (9, 9)
5 (5, 5)
1 (1, 1) (9, 1)
1 2 3 4 5 6 7 8 9
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Coordinates (9, 9). Ultimate in managerial efficiency. Thoroughly

dedicated people. Trustworthy and respectable atmosphere. Highly
organised task performances.
This grid provides a reasonable indication of the health of the

organisation as well as the ability of the managers. It is the objective of
all management to move as close to coordinates (9, 9) as possible.
Accordingly, managers should be carefully selected on the basis of their
ability to coordinate people and tasks for optimum benefit.
Under what circumstances are the following types of leadership more

desirable and why?
(a) Autocratic leadership

(b) Participative leadership
(c) Free-reign leadership.
3.6 Leadership Styles
The leadership styles can be classified according to the philosophy of

the leaders. What the leader does determines how well he leads. A style
leadership is a “relatively enduring set of behaviours which is a
characteristic of the individuals, regardless of the situation” (Fiedler, et.
al). Some of such styles are discussed below:
1. Autocratic or Dictatorial Leadership
Autocratic leaders keep the decision making authority and control in

their own hands and assume full responsibility for all actions. Also,
they structure the entire work situation in their own way and expect the
workers to follow their orders and …….. from their orders. The
autocrat ranges from tough to paternalistic, depending upon whether his
motivational approach is threat and punishment or rewards. The
autocratic leader believes that his leadership is based upon the authority
conferred upon him by some source, such as his position, knowledge,
strength or the power to punish and reward.
Advantages:
(a) Autocratic leadership is useful when the subordinates are new on

the job and have had no experience either in the managerial
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decision making process or performing without active

supervision.
(b) It can increase efficiency, when appropriate, and get quicker

results, especially in a crisis or emergency situation when the
decision must be taken immediately.
(c) The paternalistic autocrat is useful when the subordinates are not
interested in seeking responsibility or when they feel insecure at
the job or when they work better under clear and detailed
directives.
(d) It is useful when the chain of command and the division of work
is clear and understood by all.
Disadvantages:
(a) One way communication without feedback leads to

misunderstanding and communication breakdown.
(b) An autocratic leader makes his own decisions which can be very
dangerous in this age of technological and sociological
complexity.
(c) Since it inhibits the worker’s freedom, it fails to develop his

commitment to the objectives of the organisation.
(d) Since it provides for worker resentment, it creates problems with

their morale resulting in poor productivity in the long run.
(e) It is unsuitable when the work-force is knowledgeable about their

jobs and the job calls for team work and cooperative spirit.
2. Participative or Democratic Leadership
In this type of leadership, the subordinates are consulted and their

feedback is taken into decision making process. The leader’s job is
primarily of a moderator, even though he makes the final decision and
he alone is responsible for the results. The group members are
encouraged to demonstrate initiative and creativity and take intelligent
interest in setting plans and policies and have maximum participation in
decision making. This ensures better management-labour relations,
higher morale and greater job satisfaction. This type of leadership is
especially effective when the workforce is experienced and dedicated
and is able to work independently with least directives.
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Advantages:
(a) Active participation in the management by labour assures rising

productivity and satisfaction.
(b) Workers develop a greater sense of self-esteem, due to

importance given to their ideas and their contribution.
(c) They become more committed to changes that may be brought

about by policy changes, since they themselves participated in
bringing about these changes.
(d) The leadership induces confidence, cooperation and loyalty

among workers.
(e) It results in higher employee morale.
Disadvantages:
(a) The democratic leadership requires some favourable conditions in

that the labour must be literate, informed and organised. This is
not always possible.
(b) This approach assumes that all workers are genuinely interested
in the organisation and that their individual goals are successfully
fused with the organisation goals. This assumption may not
always be valid.
(c) There must be a total trust on the part of management as well as
employees. Some employees may consider this approach simply
as an attempt to manipulate them. Accordingly, the employees
must be fully receptive to this approach to make it meaningful.
(d) Some group members may fell alienated if their ideas are not
accepted for action. This may create a feeling of frustration and
ill-will.
(e) This approach is very time consuming and too many viewpoints
and ideas may take the solid decision more difficult and may be a
source of frustration to impatient management.
(f) Some managers may be uncomfortable with this approach

because they may fear an erosion of their power-base and their
control over the labour.
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(g) This approach relies heavily on incentives and motivation of

recognition, appreciation, status and prestige. The labour may be
more interested in financial incentives instead of prestige.
3. Laissez-faire or Free-reign Leadership
In this type of leadership, the leader is just a figurehead and does not
give any direction. He acts principally as a liaison between the group
and the outside elements and supplies necessary materials and provides
information to group members. He lets the subordinates plan and
organises and develops their own techniques for accomplishing goals
within the generalised organisational policies and objectives. The leader
participates very little and instead of leading and directing, he becomes
just one of the members. He does not attempt to intervene or regulate or
control and there is complete group or individual freedom in decision
making. This type of leadership is highly effective when the group
members are highly intelligent and are fully aware of their roles and
responsibilities and have the knowledge and skills to accomplish these
tasks without direct supervision.
This type of leadership is evident in research laboratories where the

scientists are fairly free to conduct their research and make their
decisions. Similarly, in a university or a college, the Chairperson does
not interfere in the professor’s teaching methods, but only assigns the
courses to be taught. From then onwards, the professors are very much
their own leaders.
Advantages:
(a) It creates an environment of freedom, individuality as well as the

team spirit.
(b) It is highly creative, with a free and informal work environment.
(c) This approach is very useful where people are highly motivated
and achievement-oriented.
Disadvantages:
(a) It may result in disorganized activities which may lead to

inefficiency and chaos.
(b) Insecurity and frustration may develop due to lack of specific

decision making authority and guidance.
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(c) The team spirit may suffer due to possible presence of some
uncooperative members.
(d) Some members may put their own interests above the group and
team interests.
3.7 Personal Characteristics of Leaders
Leadership is an intangible quality and its effectiveness can best be

judged by the behaviour and attitudes of followers. Even though
personal backgrounds and personalities differ widely, simply education,
social status etc., are poor indicators of judgement of successful leaders.
However, some behavioural characteristics may be common to most
effective leaders. Some of these characteristics are:
(1) Ability to inspire others. This may be an internal “charisma”

which is an inborn trait and may not be a learnable factor.
(2) Problem solving skills. An effective leader has developed the

patience and ability to look at the problem from various angles
and get down to the cause of the problem and tries to solve the
problem rather than the symptoms of the problem.
(3) Emotional maturity. They are self-confident, rational and

emotionally mature. They do not lose temper quickly and are
open hearted towards differences in opinions and opposing
viewpoints. They are warm and sensitive and not vindictive in
nature.
(4) Ability to understand human behaviour. He must understand the
needs, desires and behaviour of their subordinates and show
respect for such desires. He is emotionally supportive and is
careful enough to avoid ego threatening behaviour. He must give
credit to subordinates when the efforts are successful.
(5) Verbal assertiveness. A leader must be an effective orator and

must be confident of his opinions and views. He must
communicate his views honestly and in a straight forward manner
without fear of consequences.
(6) Willingness to take risks. Routine work, no matter how well done
never makes a leader. Good leaders always charter the unknown.
They must accept and seek new challenges. However, the risks
must be calculated ones and the outcomes of actions be
reasonably predicted. Should these risks result in failure, a leader
must take full blame and responsibility and not shift blame on
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others, even though they may be operative factors. He must be

willing to tolerate frustration and defeat and learn from it.
(7) Dedication to organisational goals. A leader must demonstrate

his dedication and commitment to the organisation’s mission,
goals and objectives by hard work and self-reliance. He must
make sure that his followers fully understand the organisational
objectives and are equally dedicated and willing to work for these
objectives.
(8) Skill in the art of compromise. Settling differences is a vital part

of leadership and genuine differences must be solved by
compromise and consensus. This will induce faith in the fairness
of the leader. He must be willing to give in where necessary and
must be able to take criticism and defeat with grace. However,
he must not compromise for the sake of compromising for
smooth sailing only and must be willing to take a stand on
controversial issues and accept the consequences.
3.8 Leadership and Power
A formal leader cannot function without the authority and the power to
make decisions and take actions. Some of the functions of the formal
leaders that require the power and authority to perform are (Krech, et. al,
1962):
(a) Setting of organisational goals within constraints of internal

needs and external pressures.
(b) Integrates the activities of his group and develops its team spirit
cohesiveness.
(c) Serves as a representative of group members and an official

contact with other parts of the organisation and facilitates group
interaction.
(d) Gives out rewards and punishments or recommendations.
(e) Serves as a father figure and sometimes has a major impact on

the norms, beliefs and values of the group.
(f) He is instrumental in resolving internal conflicts by bringing

about a balance among conflicting interests.
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(g) Serves as a model of behaviour for other members. These

functions can only be exercised with a power base. Some of the
power bases classified by French and Raven (1960) are:
(1) Legitimate Power. This is the power that is vested in the

leadership to take certain actions. This power may be designated
by a legitimizing agent, for example, the President of a company
designating his assistant to make certain decisions. Similarly, the
power may be given to a particular leader who has been elected
by the populace. For example, the President of a country or an
elected Mayor of a city has certain power and authority. This
power may also be culturally specified. In many cultures,
children simply “obey” their parents. In some other cultures,
people of certain casts are highly respected. In India, old age
brings with it the power to command respect.
(2) Reward Power. This power is based upon the ability to give or
influence the rewards and incentives for the subordinates. These
may be in the form of promotions, increase in pay, bonuses or
other form of recognition for a job well done.
(3) Coercive Power. On the other end of the reward power is the
coercive power which is the ability to influence punishment.
This is the power to reprimand, demote or fire for unsatisfactory
execution of duties.
(4) Referent Power. This power is more of personal nature than a

positional nature, in the sense that this power is not designated or
acquired because of a position, but because of personal
“charisma”, leader. This is especially true in the case of film
stars and celebrities whose followers and fans follow what the
celebrities do.
(5) Expert Power. This is also a personal power acquired by

expertise in a field or area. For example, we generally follow our
doctor’s or our accountant’s instructions, because we believe in
their ability and knowledge in those specified areas. If the
subordinates view their leaders as competent, they would follow
him (Organ and Hammer, 1982).
(6) Connections. Some people have a lot of influence over others

simply because of their “connections” with the right people. A
person knowing the manager of a company can get a job for
somebody or recommend a promotion for somebody and hence
commands considerable influence. Hence, this “connected”
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person has “clout” via the resources of his friendship with the
right people.
4.0 CONCLUSION
In this unit, you have been be guided through the functions and roles of
directing and leading in management and how these functions relate to
the attainment of organisational goals or objectives.
5.0 SUMMARY
In this unit, we have described the factors that enhance the quality of
performance in an organisation, listed and described the types and traits
of leadership, highlighted and discussed the theories of leadership,
described leadership styles and personal characteristics of a leader and
determined the relationship between leadership and power.
1. If you were asked to give a lecture on “how you become an

effective leader” – what would you say?
2. Differentiate between Trait theory and Behavioural theory of
leadership.
3. “Leaders are born, not made”. Comment on it.
Schneider, B. (1975). “Organisational Climates: An Essay”, Personal

Psychology, Vol. 28.
Litwin, G.H. and R. Stringer (1966). “The Influence of Organisational

Climate on Climate, Foundation for Research on Human
Behaviour, Ann Arbor, March.
Schneider, B. and C.J. Barlett (1968). “Individual Differences and

Organisational Climate: The Research Plan and Questionnaire
Development”, Personal Psychology, Vol. 21.
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UNIT 4 THE STAFFING FUNCTION

CONTENTS
1.0 Introduction
2.0 Objectives
3.0 Main Content
3.1 Staffing Function
3.2 Human Resources Planning
3.3 Staffing Process
3.4 Selection
3.5 Retention
3.6 Training and Development
4.0 Conclusion
5.0 Summary
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1.0 INTRODUCTION
There are a number of factors that contribute towards the success of an
enterprise. These factors include capital, equipment, manpower, etc.
While all these factors are important, the human factor is the most
significant one, since it is the people who have to use all other resources.
Without the productive efforts of its workers, the materials and
resources would be of no use. Also, if the people who are in charge of
these resources are not sufficiently qualified, then the utilisation of these
resources would not be optimum.
Accordingly, the staffing function of management is a very significant
one, especially in the light of continuous and dynamic developments in
the field of technology, increase in the size of organisations due to
expansion, acquisitions, and mergers and due to changes in the social
structure which makes the group behaviour of the workers more
complicated.
In this unit, we shall focus on this aspect of management function.
2.0 OBJECTIVES
define staffing
discuss human resources planning
highlight the staffing process
expatiate selection
describe retention
point out the importance of training and development in an
organisation.
3.0 MAIN CONTENT
3.1 Staffing Function
Staffing is the traditional management function of attraction and

selection of the best people and putting them on jobs where their talents
and skills can best be utilised, and retention of these people through
incentives, job training and job enrichment programs in order to achieve
both individual and organisational objectives. This emphasises
managing human and not material or financial resources. This function
is becoming extremely specialised due to unique importance and
complexity of human nature and ever changing psychology, behaviour
and attitudes.
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The staffing function is generally handled by Personnel Department

where the Personnel Management is concerned with “planning,
organising, directing and controlling of the procurement, development,
compensation and integration of people into the system for the purpose
of contributing to organisational, individual and social goals”.
The Personnel Management is a continuous phenomenon and requires a

constant alertness and awareness of the organisational needs and the
personnel policies should be such that there is a continuous monitoring
of the system, since the unanticipated shortages or excess of qualified
people in any organisation signal a defect in the planning system. Also,
personnel policies and decisions are constantly changing due to the
following considerations:
(1) The social and legal pressure is high to increase the proportion of
minority workers. This may sometimes results in less than optimal
compatibility of job and the worker.
(2) Affirmative action. Some organisations are obliged to give special

considerations to minorities including women workers in order to
compensate for past discriminations against them. This has been a result
of special upheaval against a male-dominated society and businesses
where women and minorities were not treated at equal level. This
affirmative action may require more pre-assigned jobs for minorities and
women, faster promotions for them and lowering of performance
appraisal standards for them. In India, for example, the scheduled caste
people have been allotted some reserved places in most medical colleges
and other professional universities and in many government jobs to
compensate for the discrimination that these minorities have suffered
over many years.
(3) The workers are shifting their idea of success. Where success always
meant a job with good pay, now it is more and more measured by the
degree of challenge at the job, new opportunities and job enrichment and
self-fulfillment.
(4) The number of people who prefer to work only part-time is increasing.
Even the full-time workers are trying to get fewer work week hours so
that they can have more leisure time.
(5) Education level of the total workforce is rising. This also implies to
blue collar workers due to compulsory education to a certain age as well
as social awareness about the benefits of a good education.
(6) There is a shift towards more skilled jobs. Due to advent of

mechanisation and specialisation and technological innovations, the
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number of unskilled jobs have been steadily decreasing giving rise to

more skilled jobs requiring training and adaptation.
(7) Labour unions are becoming stronger and highly protective of the
workforce. The objectives of the unions are to protect their workers
from discriminatory treatment, increase their pay and fringe benefits,
improve their working conditions and help all employees in general.
Accordingly, Personnel Management policies are affected by union’s
objectives and goals.
(8) There are continuous social and technological changes. The social
values are constantly changing due to amalgamation of many cultures
and ideologies and emphasis on rationalisation and objective thinking
rather than adherence to traditional social values. Similarly, automation
and computerisation of industries have changed the requirements of jobs
and employees requiring continuous monitoring of job descriptions and
policies about personnel requirements.
Since a number of factors affect the formulation and execution of

personnel policies, it is important that these policies be based upon
sound principles which would ensure that equity and justice are
accorded to all employees, “a fair day’s pay for a fair day’s work” is
adopted and opportunities are offered to all employees for job
satisfaction and job enrichment. Some of the essential characteristics of
a sound personnel policy programme are given below:
(1) The policy statement should be clear and easily understood so

that what it proposes to achieve is evident.
(2) It should be formulated after careful consideration, discussion

and review and preserved in writing in order to provide a
definitive meaning to policies and procedures.
(3) It should be reasonably stable and should be continuously

monitored and periodically reviewed and revised so as to adjust
to changing social, legal and technical environment and changing
constitution of the workforce.
(4) It must be consistent with the missions and general goals of the
organisation without violating the individual goals and objectives
so that due regard is given to all concerned parties – the
employers, the employees, the government and the community.
(5) The policies should have the full support of all employees and be
preferably evolved after full consultations with the trade unions
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so that the interests of the union members are inherently

protected.
(6) It should provide for two-way communications so that the

employees are continuously informed of any developments in the
organisation and the management gets the necessary feedback.
(7) It must make a measurable impact on the process of recruitment,

retention and retirement which can be evaluated and qualified.
3.2 Human Resource Planning
Human resource planning involves objective and systematic assessment

of present staffing needs of an organisation, identifying the available
personnel to satisfy the current needs, forecasting the future demand and
supply of employees, formulating staffing strategies with a view to both
short range as well as long range strategic plans and continuously
monitoring, evaluating and updating these needs and resources of
supply.
In today’s complex organisational structure, operating in highly

involved and complex economic, political, socio-cultural and technical
environment, the most suitable employees are becoming more and more
crucial and indispensable assets for effective performance. As a result,
the price of poor staffing will be very high requiring improved
manpower planning as an economic necessity.
Human resource planning is important in providing the following direct

benefits to the organisations:
(1) It improves the utilisation of human resources by helping the

management forecast the recruitment needs in terms of both numbers
as well as the types of skills required and develop ways to avoid or
correct problems before they become serious and disrupt operations.
(2) It helps focus the recruitment efforts on the most likely sources of
supply. This will cut down the total costs of hiring and training
personnel and reduce costs associated with hiring mistakes.
(3) It makes provisions for replacement or back-up staff from either

inside or outside the organisation whenever the need arises either on
a temporary or permanent basis. These available sources of supply
are important to identify specially in the case of any emergencies that
might occur.
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(4) It helps achieve an integration of personnel plans with other

operating as well as strategic plans by making available the
personnel management information base to other organisational
activities.
3.2.1 Forecasting Manpower Needs
Manpower forecasting is defined as, “the process of collecting and

analysing information to determine the future supply of, and demand
for, any given skill or job category”. The primary purpose for
manpower forecasting is to prepare for employment, training and
development and proper use of human resources. Forecasting has
become very important due to complexity of organisations requiring
more skilled personnel which are in short supply.
In addition to assessing the current situation relevant to personnel, in the

organisation, an effective human resource planning program takes into
consideration the future needs and trends in both job and personnel
availability. This would require reliable forecasting of both the demand
and supply. The key to any forecasting procedure is to determine what
causes things to happen the way they do. If we could know what
determines the supply and demand for people, we can predict the needs,
making the planning for changes in personnel easier.
1. Opinion of expert forecasters. The expert forecasters are those who

are knowledgeable to estimate future human resource needs. These
may be the personnel managers or the outside consultants who are
asked to assess the future needs. These forecasts can be further
sophisticated by using the “Delphi Technique”, where the experts are
anonymously surveyed, their opinions refined, and these opinions
sent back to experts for further evaluation. The process is repeated
until a consensus is reached.
2. Trend projection forecasts. The past trends in the employee needs

can be projected into the future. One method used is known as
extrapolation where, if the past trend is linear in nature, it can simply
be extended into the future. For example, if in the past the company
has been consistently growing, requiring on the average 10
additional workers per month, then by extrapolation, our future
needs will be 120 workers per year.
Another method of trend projection is known as “Indexation”. This

method relies upon matching employment growth with some index. For
example, the growth in the number of employees in the production area
may be tied in with the volume of sales, so that for a certain increase in
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sales, there is a corresponding increase in the number of employees in

production.
Both these methods of extrapolation and indexation are simple and

appropriate. However, in long range human resources projection, more
sophisticated statistical analysis techniques are available and employed,
taking into consideration external, organisational and workforce factors,
which may not remain constant from time to time.
3. Other forecasting techniques. Some of the other forecasting

methods include:
(a) Budget and planning analysis. The short term human resource
needs can be estimated by looking into the departmental budgets
and financial allocations for more employees as well as any
anticipated changes in the workforce like terminations,
resignations, promotions, transfers, etc.
(b) New ventures analysis. The human resources needs for new
ventures or organisational expansion can be calculated by
comparison with similar operating functions. The growth of the
new venture can also be established by past trends of similar
operating companies.
(c) Computer models. These are most sophisticated approaches

involving solutions of mathematical formulae and equations,
taking into consideration the relationship and effect of all relevant
variables are extrapolation, indexation, survey results and other
estimates.
The factors to be considered for forecasting demand and supply are as

follows:
(a) Forecasting Demand
(2) Anticipated growth of the organisation. This growth rate can be

calculated from the past trends on the assumption that all variables
affecting this growth will remain constant.
(3) Budget constraints and allocations. The budget allocation

specifically for the purpose of new employees will determine the
number of new workers that can be hired, thus putting a ceiling on
the maximum number.
(4) Anticipated turnover in personnel due to retirement, death, transfers,

termination of service, promotions etc. Some of these can be
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anticipated or calculated to some extent accurately in advance by

taking information about individuals, especially the loss due to
retirement and promotion can be calculated quite accurately by
preparing a retirement and promotion or transfer profile. This makes
the projection of future demand easier and more accurate.
(5) Introduction of new technology. With continuous technological

developments, innovation and automation, the personnel needs are
constantly changing. At many places, computers are either replacing
workers or reducing their numbers. The type of new technology
introduced would determine the number as well as qualifications of
the people that may be hired or transferred.
(6) Minority hiring goals. The goals established by the organisation

about hiring minorities or the handicapped, as a part of the
affirmative action policies may affect the demand for the total
number of employees, especially when it is difficult to match the
skilled, semi-skilled or unskilled minority workers to the specific job
requirements.
(b) Forecasting Supply
(a) Promotions of employees from within the organisation.

Promotions are a good and a reliable source of supply of experienced
and skilled personnel, who do not need to be extensively trained and
who are also familiar with the organisational goals, policies, and
philosophy.
(b) Availability of required talent in the external labour market.

This may be assessed by unemployment figures, a survey of private
and public employment agencies and other sources.
(c) Competition for talent within the industry. If the competition is

very tough then it will be more difficult to tap the supply and the cost
of additional workers will become very high. Conversely, if the
need for a particular talent is not very high in the competitive
industry, then the supply will remain flexible.
(d) Population movement trends. The demographical changes will also

affect the sources of supply. For example, if there is a tendency for
people to move from rural areas to urban areas then the supply in the
rural areas will dry up. Similarly, most new immigrants from
outside have a tendency to settle in cities, thus increase the supply in
the urban areas.
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(e) Enrolment trends in vocational schools and colleges and

universities. If there is a marked increase in the number of students
in training programmes as well as colleges, this will improve the
supply of skilled personnel and personnel with specialised
educational backgrounds. On the other hand, due to high cost of
education, there may be a decline in college enrolment, signifying a
trend in scarcity of educated people.
This forecasting of supply and demand of human resources should result

in the preparation of a detailed file on future staffing needs.
3.3 The Staffing Process
The staffing function consists of the following sequential steps:
Step 1: Analyze the job by preparing job description, job

specification and job analysis.
Step 2: Actual recruitment. This would explore all the internal and
external sources from where the required personnel can be
recruited.
Step 3: Employee selection. This crucial step involves using such

techniques as would identify and isolate the suitable
people who would eventually be selected.
Step 4: Retention. When the right people have been hired, they
must be retained so that they stay with the organisation for
a long time. This step discusses such factors that are
influential in maintaining the workforce.
Step 5: Training and development. This consists of all such

programmes that assist in continuous growth and
development of the employees.
Step 6: Performance appraisal and career development. This step

involves devising methods that would judge an
employee’s performance over a period of time and
providing opportunities to employees to develop their
careers and managerial talents.
All these steps are discussed in detail below.
3.3.1 Job Analysis
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Job analysis is an orderly study of job requirements and involves

systematic investigation relating to the operations and responsibilities
including knowledge, skills and abilities required for the successful
performance of a job. The process of job analysis provides the
following information:
(a) Work activities. Exactly what is being done and achieved

including processes and procedures being used.
(b) Job context. This specifies the working conditions, including

physical setting, supervision, work schedule, incentives and
motivations, social environment of workplace, job hazards or any
other discomforts.
(c) What equipment, tools or machines are used. Is it dealing with

plastics, metals etc? Is using milling machines, punch presses
etc?
(d) Performance expected. This may be expected output in quantity

or quality. The performance may also be measured in terms of
error analysis, as to the percentage of errors (as in typing, for
example), work standards, time required to complete each unit of
the job, knowledge used or services performed.
(e) Required personal attributes. This involves required educational

background, skills, training, experience, physical strength
coordination or dexterity, aptitude and any other attributes
required for the job.
(f) Job analysis. It is the process for obtaining all pertinent facts
about the job and forms a basis for creating job description and
job specification.
3.3.2 Job Description
Job specification is a systematic, organised and written statement of

“who does what, when, where, how and why,” and is a tangible outcome
of job analysis. It describes the work to be performed, the
responsibilities and duties involved, conditions under which the work is
performed, the relationship of one job with other similar or dissimilar
jobs and the skill, education, and experience required. A job description
is used for a variety of purposes such as recruitment and selection, job
evaluation etc. A job description generally contains the following data:
(a) Job Specification. It includes job title, code number of the job if any,
the department or division to which the job belongs etc.
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(b) Job summary. It is a brief summary, in a sentence or two, explaining

the contents of the job, its hazards or any other specific aspects.
(c) Duties performed. It is a comprehensive listing of the duties together
with the importance of each duty and the percentage of time devoted
to each major duty. Included are any other additional responsibilities
like custody of money, training of subordinates etc.
(d) Supervision. If supervision is required, then it gives the number of
persons to be supervised along with their job titles and the extent of
supervision involved and whether it is general supervision or close
supervision.
(e) Machines, tools and equipment used. This will include the type of
machinery handled and the type of raw materials used.
(f) Working conditions. It gives us the working environment in which
the job holder must work. Here are listed any special working
conditions in terms of cold, heat, noise levels, dust, fumes and any
other hazards that might pose a risk to life and the probability of
such a hazard occurring.
Job descriptions are freely used in educating the new employees about
their duties and responsibilities. According to Burack and Smith:
- Job descriptions reduce confusions and misunderstandings. They

communicate to workers in clear terms as to what they are
required to do.
- Since it gives a clear picture of duties and responsibilities, it
gives a greater job satisfaction as the worker knows what is
expected of him.
- Good job descriptions are effectively used in recruiting, training
and placement of right workers to the right jobs.
- They reduce discrimination and assist in objective performance
appraisal.
Job Description Guidelines
Although there is no set way of writing a job description or any specific

principles for developing a job description, some general guidelines are
proposed by Cascio. These are:
(a) Give a clear, concise and readily understandable picture of the

whole job with clearly defined duties to be performed.
(b) Brevity is usually considered to be important depending upon the

type of job being analyzed, specifying simplicity and accuracy.
(c) Select the most specific words to show, (1) the kind of work; (2)
degree of complexity; (3) degree of skills required; (4) specific
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assigned responsibility to a particular worker and its

accountability. Use action words like “types letter” or
“collecting, sorting out, routing and distribution mail” etc.
(d) When job descriptions are written for supervisory jobs, the main
factors should be identified and listed. Included along with this is
a description as to whether the supervisor delegates any of his
responsibilities or not and to what extent.
The job description should be such that even a new employee would
clearly understand the job and his duties and responsibilities by reading
the job description.
3.3.3 Job Specification
Job specification specifies personality requirements and lists

qualifications both physical and mental, necessary to perform the job
properly. It is used in informing the prospective employees about
minimum acceptable qualities required to get the job and perform it
well. It may be a specific period of experience, a specific educational
degree or specific physical requirements such as height, weight etc.
These specifications specifically relate to:
(a) Physical characteristics. These include general health, height,

endurance level, vision, hearing, colour discrimination, motor
coordination, reflexes etc.
(b) Psychological characteristics. These include mental dexterity,

analytical ability, intuitive judgement, alertness and ability to
concentrate.
(c) Personal characteristics. These include personal appearance,

emotional stability, maturity, patience, aggressiveness, outgoing
nature, poise, initiative and drive, leadership qualities, cooperative
spirit, conversational ability etc.
(d) Responsibilities. These include supervision of others, responsibility

for safety of others etc.
(e) Other characteristics. These may include age, sex, education,

experience, training required, fluency in languages and other sensory
demands such as sense of sight, smell or hearing etc.
3.3.4 Recruitment
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After manpower needs have been determined, the next step in the
staffing function is recruitment of candidates for the jobs to be filled.
Recruitment is the process of attracting qualified personnel, matching
them with specific and suitable jobs, and assigning them to these jobs.
Its aim is to develop and maintain adequate manpower resources upon
which an organisation can depend, when it needs additional employees.
There are basically two sources of supply from where the potential
employees can be drawn, both at managerial as well as operative levels.
These are:
(iv) Internal sources

(v) External sources.
To what extent the internal sources or the external sources would be

used would depend upon the specific environment of the organisation as
well as its philosophy of operations. Some companies prefer to promote
from within for key positions because these personnel know the
company well. Others prefer to hire from outside, because these
personnel do not know the company at all so that they can bring some
new and fresh ideas into the company. Both of these sources are
explained below.
(i) Internal Sources
Internal sources are the most obvious sources and are primarily within
the organisation itself, and include its present working force. Most
organisations have procedures for announcing vacancies through
bulletin boards, newsletters or word of mouth or personal
recommendations. Some promotions may be built in the hierarchical
structure and take place automatically on the basis of seniority or when a
position at the upper level becomes available. Whenever a vacancy
occurs, someone from within the organisation is upgraded, promoted or
transferred to another department or location.
Occasionally, a person may be demoted to fill a job. The internal

recruitment process can be very encouraging and motivating to
employees; since they are assured that they will be preferred over
outsiders when the opportunities occur. This reinforces a sense of
loyalty among employees, for it provides them an opportunity for
advancement. This also helps the management to be assured of the
quality of performance of employees since the organisation generally
keeps a record of the employees’ performance and progress. Also,
internal recruitment is economical in terms of time and money, since all
the energies expended in the process of hiring new candidates from
outside are avoided. Additionally, the new employees from outside
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always have to go through a period of indoctrination during which the

contribution of the employee to the organisation is limited. This
problem can be avoided through internal recruitment.
One of the drawbacks of the internal source of recruitment is that the

promotions may be biased in nature and may be based on seniority
rather than merit, resulting sometimes in unqualified personnel in more
responsible jobs. Also it discourages new blood from entering the
organisation which may be more innovative and creative.
(ii) External Sources
The external sources are varied and many. Most organisations cannot
fill their manpower needs from sources within and hence they must look
for outside sources, especially for lower entry jobs, for expansion and
for positions whose specific requirements cannot be met by people
within the organisation. This outside pool of potential candidates
includes:
(a) New entrants to the workforce. These may be college student

who ha just finished studies and are entering the job market.
(b) The employed. These are the people who may be temporarily out
of a job. These may be people with skills and abilities. These
may be people who are currently at jobs that are unsuitable to
them and who may be looking for better opportunities.
(c) Retired experienced persons. These may be accountants,
mechanics, security guards etc. They have the necessary
experience and may be hired as consultants or supervisors.
Some of the sources of external recruitment include:
(1) Active files of potential candidates kept at the organisation.

These are the resumes of the candidates who had earlier applied
but not selected. Similarly, unsolicited applications may
constitute a much used source of personnel. Such records can
prove to be a good source if they are kept up to date.
(2) Walk-ins and gate hiring. These are potential candidates,

generally for lower level jobs who simply walk into the office
and ask for a job. This method is especially useful for mass
hiring of unskilled and semi-skilled workers.
(3) Employment agencies. These employment agencies may be

public or private. The public employment agencies are
subsidized by the local governments and may provide a variety of
services. These services include:
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(i) Placement services;

(ii) Employment counselling on occupational choices;
(iii) Services to special groups, such as war veterans, handicapped
personnel, released criminals in order to rehabilitate them etc.
These agencies are a major source of hourly blue collar workers. The
major reason for this is that the unemployed workers are generally
required to register with these agencies and be available for work, in
order to collect the unemployment insurance.
Private employment agencies have a pool of applicants, specializing in

different areas and supply them to the organisations for a fee charged
either to the applicant or to the organisation. Some agencies specialise
in temporary help, others in executive recruitment. They supply general
office help, secretaries, sales people, technical workers, accountants,
computer personnel, engineers etc. They generally interview and screen
the candidates and match their skills with the job requirements on file,
before sending them to the organisations. This makes it easier and time
saving device for the organisations who would otherwise be spending a
lot of energy in the recruiting and the selection process.
(4) Advertising. Advertising is a powerful technique reaching a wide

audience and generally a potential target market. It is a most
frequently used method and consists of a brief statement of the
nature of the job and its requirements and the compensation paid.
Want ads in the newspapers may be for ordinary jobs or for
highly skilled and executive positions. More highly specialised
recruiting ads that are not immediate in nature, are placed in the
technical and professional journals which reach a targeted
market. One of the disadvantages of this method of recruitment
is that there may be a large number of applicants for a few jobs,
making the screening process very costly.
(5) Colleges, universities, and other educational institutions. These

include the technical and trade schools as well as alumni
placement offices at colleges and universities. Some colleges
have work study programs which provide an opportunity for
students to work part-time while they finish college, after which,
most often, these students are absorbed by the companies. These
sources are specifically useful for recruiting into middle
management positions like accountants, financial analysts,
systems analysts etc. Many colleges have career day forums at
least once every semester where representatives of recruiting
companies visit the campus to discuss matters of employment
with potential graduates.
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College recruitment is one of the least expensive techniques of attracting

white collar employees into junior level managerial and executive
positions and other technical and career oriented jobs, because a lot of
potential candidates can be interviewed in a short period of time.
Colleges are also a target market where it is possible to narrow in on the
potential candidates, thus saving a lot of time that would otherwise be
spent in screening out the unsuitable candidates.
(6) Professional associations. Professional associations keep their

members informed about job opportunities through their technical
newsletters and professional journals. Some of them have their
own time and especially at the time of their annual meetings,
conventions and conferences.
(7) Labour unions. Labour and trade unions are a useful source,
especially for manual workers, including unskilled, semi-skilled
and skilled workers. These workers may be plumbers or
electricians. In the construction industry, many contractors get
their labour force from the local labour unions.
(8) Military processing centres. This is an excellent source for highly

disciplined veterans who have been trained as mechanics,
welders, pilots etc. These veterans may be retired officers or
personnel who want to leave the army for civilian jobs. Many of
the technicians and pilots for commercial jetliners were initially
trained in the armed forces.
(9) Employees’ referrals. These are friends and relatives of the

present employees of the company. It is a useful source of
recruitment, since the employees, for the sake of their own
reputation, would only recommend people who they believe to be
adequately qualified. If the current employees are highly
satisfied in their jobs with an organisation, they generally convey
their feelings to many persons in the community, which will
make it easier to attract employees from the community when the
need arises. One drawback of the referral technique is that it
encourages nepotism which may be at the cost of quality.
(10) Billboards at social and community centres. These are primarily

for non-professional lower level jobs, sometimes of temporary
nature. These may be for babysitters, typists, waitresses etc.
(11) Scouting. Some company representatives are continuously out in

search for talent. Some recruiting firms have head hunters who
specialise in pirating executives from one organisation to another.
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(12) Foreign consulates. Many multinational companies, which are

starting to operate in another country, advertise in that country’s
consulate here to recruit native personnel who could be trained
and sent to their own country. For example, a company in India
which is looking for an American trained executive may advertise
through the Indian Embassy, here in America, either through a
bulletin board at the Embassy or through the Embassy newsletter.
(13) Open house. It is relatively a new technique of recruitment,

where a company has an open house and it invites the members
of the community to see the company facilities in an informal and
social manner. This helps create a positive image of the company
for any future personnel needs.
3.3.5 Pros and Cons of various Recruiting Sources
Which of these sources, as discussed above, provide the best candidates?

While some sources are identifiably more suitable for certain types of
jobs, for example, walk-ins for hourly paid workers, other sources must
be studied for their contribution as economically and technically the
“best” sources. It has been found that employee referrals are perhaps the
best source of employees while newspaper ads and employment
agencies among the worst.
A study conducted by James A. Breaugh, focusing on research

scientists, showed that on the basis of quality and dependability factors,
the applicants recruited through college placement offices and
newspaper ads were inferior in performance to those recruited directly
or through professional journals. Accordingly, it is very important that
companies study all the different sources for the purpose of optimizing
the recruitment process and get the best candidates with minimum costs.
3.4 Selection
Selection is a process of choosing the right candidate from a pool of

applicants. This process is established to achieve a good match between
the job requirements and the candidate’s skills and motives. A good
match results in increased productivity and quality performance. A bad
match is extremely costly to the company due to cost of training the
candidates, the cost of mistakes made by the candidate and the cost of
replacement.
McMurray has listed some comprehensive steps that can be taken in the
selection process.
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The first step for the management is to be thoroughly familiar with the
requirements of the job as well as the qualifications and expectations of
the candidate. This would include any leadership qualities or decision
making authority inherent in the job. After looking at the resumes of the
candidates, those candidates whose qualifications do not adequately
match the requirements of the job are rejected outright. This leaves a
pool of more suitable candidates.
The second step is to conduct a preliminary screening interview, before

a more comprehensive interview is conducted, to have an initial
assessment of the candidate’s abilities and motives. This interview
would generally establish a candidate’s goals and aspirations and
general attitudes towards the organisation
The third step is the completion of a formal application form which

summarily lists a person’s background, education, experience and any
special abilities. The data submitted in the application form determines
the suitability of the candidate, as well as predicting his chances of
success at the job. The information asked for and provided should be
relevant to the selection, factual, legal and not unduly sensitive or
personal.
The fourth step is to check the candidate’s references and seek opinion
from his previous employers or instructors if he is fresh out of college.
This should be done prior to the comprehensive interview so as to have
a better idea about the candidate, especially in the area of those
characteristics that do not show up on application forms. These
characteristics include leadership qualities, ability to act assertively and
decisively, ability to communicate well and attitude towards
subordinates as well as superiors.
The fifth step is to give certain tests to the candidate, if necessary, to

make judgements about certain specific aspects of the candidate. These
tests may be classified in many ways and the type of test would depend
upon the type of job required to be filled. For example, “intelligence
tests” are given to measure the mental ability, mental capacity, and
general intelligence of the candidate. The test usually includes verbal
comprehension, memory, inductive reasoning, perception etc. Most of
these tests are framed by psychologists. Similarly, “aptitude tests are
meant to measure an individual’s capacity to learn a given job, if the
candidate is given proper training. IQ tests are one kind of an aptitude
test. “Performance tests” are given to evaluate the candidate’s ability to
do a job. A typist may be asked to type a letter, for example. Similarly,
the classroom examinations at the end of the semester are kind of
performance tests. “Personality tests” are used to measure fundamental
aspects of a candidate’s personality such as self confidence, emotional
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stability and behaviour under stress. “Ink blot tests” are a kind of
personality tests.
The sixth step is the in-depth interview which is conducted to evaluate

the applicant’s acceptability in terms of his ability to fit into the
company’s culture and his “motives” in joining the company. An
interview can be structured in which well designed questions are asked
that are pertinent to the job and their answers analysed, or it could be
unstructured which is a free thought flowing two-way communication.
In order to make the best of an interview, it is essential that both the
candidate and the interviewer be fully present Good grooming, a choice
of clothing, a firm handshake, the manner of sitting and general
enthusiasm will give good initial impression. It is also important for the
candidate to know about the company as much as possible and be
prepared to answer questions thoroughly and precisely.
The seventh step is to establish the applicant’s physical health. This can
be checked from his medical records as well as a thorough physical
examination conducted by the company physician. This will ensure that
the candidate is physically fit and capable to exercise his
responsibilities.
The final step is the process of hiring itself. In some responsible

executive positions, the management may want to get socially
acquainted before the final decision is made.
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3.5 Retention
The hiring process and the training process is very costly. It requires a
lot of time, effort and money during the process of selecting the right
person who would be most suited to the job. It would be even more
costly if the right person once hired, leaves the organisation because the
work environment was not such where his potential would be most
utilised and recognised. Accordingly it is necessary to create a working
environment which will be conducive to maintaining the workforce and
keeping them in high morale. The employees should be fairly paid for
their work and a conceptual environment created in which the
employees feel a sense of belonging with the company. Some of the
factors involved in retention of workforce are:
(a) Compensation administration. This involves a fair compensation

on the basis of time spent, units produced, hazards of the job,
skills required etc. In addition, it is necessary to provide fringe
benefits as well as incentive programs where fringe benefits
include medical and life insurance, paid vacation, profit sharing,
stock options, sick leave etc., and the incentive programs include
opportunities for advancement, promotion, added responsibility,
recognition for contribution etc.
(b) Labour relations. Good labour relations and fair union

representation provide for proper channels for processing
grievances as well as mutually beneficial negotiations with the
management which provide for job security and job
advancement.
(c) Health and safety. If there are any job related health and safety
hazards, then it is necessary to provide safeguards against any
such occurrences or the ill-effects of any such occurrences. This
is especially important in the chemical and mining industries. All
mechanical operating machinery must have protective shields,
where necessary. Extra compensation should be paid to night
shift workers because of the inconvenience caused due to night
work. All efforts should be made to make the work environment
physically and mentally safe and healthy.
(d) Auxiliary employee services. These include recreational facilities,

food services, company newspaper, athletic facilities for the
employees and their families. Other factors such as common
cafeteria for workers and managers, visiting worker homes
occasionally and periodic company picnics and Christmas parties
etc., would help to bring the employees closer to each other,
creating a family environment.
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3.6 Training and Development
Training, generally designed for non-managers refers to technical and

mechanical skills. Training is defined as “a short term process utilising
a systematic and organised procedure by which non-managerial
personnel learn technical knowledge and skills for a definite purpose”.
The term ‘development’ refers broadly to the nature and direction of
change induced in the employees as a result of educational and training
programs. The ‘development’ is managerial in nature and is career
focused. According to National Industrial Conference Board,
“Management development is all those activities and programs which,
when recognised and controlled, have a substantial influence in
changing the capacity of the individual to perform his present
assignment better and in so doing, are likely to increase his potential for
future management assignment”. In that respect, training and
development seem to be a continuous phenomenon, training
emphasising manual skills at one extreme and development emphasising
philosophy at the other extreme.
According to Planty, McCord and Efferson, the training:
(1) must be a continuous process;

(2) must be planned systematically in order to accomplish the desired
results efficiently;
(3) must be aimed at all employees of the firms;
(4) must result in benefits both to the organisation as well as the
employees.
In order for the training programs to be most effective, the following

principles must form the basis for training programs:
(a) Training is most effective when the learning experience occurs

under conditions that are identical to the actual conditions that
occur at the job.
(b) Training is most effective if the superior who is training the
employee is made responsible for the progress of the candidate
and overall results of the training program.
(c) Training is most effective if the learner is given helpful, friendly
and personal attention and instruction. This would create self-
confidence in the employee and the desire to do better.
3.6.1 The Need for Training
It is important that employees be inducted into training programs to

improve their job knowledge; skills and future performance. The need
for proper training is emphasised by the following factors:
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1. Increased productivity. Adequate training increases skill which

improves both the quality as well as the quantity of the product due
to increase in the level of performance.
2. Improvement in employee morale. Training improves needed skills

which build up confidence and satisfaction. This, in turn, develops
enthusiasm and pride which are indicative of high morale.
3. Availability for future personnel needs of the organisation. Good

training programs develop the employees and prepare them for future
managerial and executive positions. Accordingly, when the need
arises for personnel changes, the internal sources can be utilised
more effectively. This will ensure the organisation’s ability to
sustain its effectiveness despite the loss of key personnel.
4. Improvement in health and safety. Proper training can help prevent

industrial accidents and create a safer work environment. Accidents
are generally caused either by deficiencies in machines and
equipment or due to deficiencies in people who are not properly
trained to handle and maintain such equipment. Skilled and
knowledgeable workers are less prone to accidents due to training in
job skills and safety attitudes.
5. Reduced supervision. A trained employee supervises himself. He

accepts responsibility and expects more freedom and autonomy and
less supervision. This creates a spirit of participation and teamwork.
Additionally, it can result in crease of span of supervision, reducing
the costs associated with supervision.
6. Personal growth. The training programs give the participants a wider

awareness, a sense of self-satisfaction and fulfillment, an enlightened
philosophy and a value system that are the apex of the personal
growth.
7. Organisational stability. Training and development programs foster

the initiative and creativity of employees which increases a sense of
belonging, thus preventing manpower obsolescence.
3.6.2 Steps in the Training Program
An effective training program consists of the following steps:
1. Discover the training need. Training needs can be identified by

assessing the current and future business conditions and by
matching with the skills and resources available and by
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evaluation of the performance of the people with specific

emphasis on areas of improvements.
2. Establish objectives of the training programs. A full assessment

must be made of the potential achievements following the
training program and those that are directly attributable to these
programs.
3. Getting ready for the job. This step would specify the type of
workers who need to be trained. Are they newcomers into the
organisation? Are they older employees who need to be
retrained? Are they supervisory staff who needs to be trained in
the art of behaviour modification? As much as possible, the
training programs should be custom-designed to fit individual
needs.
4. Presentation of operations. This step involves the selection of

qualified trainees and the identification of training methods. The
trainer should build a rapport with the learner and clearly guide
him into learning and digesting new knowledge and techniques.
Instructions should be given completely, clearly and patiently and
a free flow of communication and participation should be
encouraged.
5. Evaluating the effectiveness of the training program and follow

up. The effectiveness of the program can be appraised by written
and oral tests, by observing the trainees when put on jobs
independently and comparing the results after the training
program were initiated. This should continue until the
performance of the worker is up to the expectation of the trainee
and then the trainer can be put on his own with reduced
supervision.
3.6.3 Training Methods
There are basically two ways by which non-managerial workers

including those in supervisory roles can be trained for a particular job.
These are:
1. On-the-job training. This method is the most widely used method

and it simply means putting the worker on the job under close
supervision of a trained instructor. In support, there may be a
variety of training aids, techniques, such as procedure charts,
lecture manuals, sample problems, demonstrations etc. This
training continues until the supervisor is satisfied that the
employee can perform the job without supervision.
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In order to train employees in a variety of jobs, some trainers will move

employees from job to job. This process is known as job rotation. It
helps the organisation to have a pool of multi-job trained workers in
case of absences, vacations or resignations of some workers.
2. Off-the-job training (vestibule training). This training is

conducted in a company classroom with on-the-job situation to
work with. Some companies prefer this technique, since it does
not disrupt the normal operations. Training is generally given in
the form of lectures, discussions, case studies and
demonstrations.
4.0 CONCLUSION
Staffing function of management is a very significant one, especially in

the light of continuous and dynamic developments in the field of
technology, increase in the size of organisations due to expansion,
acquisitions, and mergers and due to changes in the social structure
which makes the group behaviour of the workers more complicated. In
any organisation whether small or big management must under take
staffing functions of recruitment, selection, training, and retention.
5.0 SUMMARY
In this unit, you have been taken through the process of staffing in an
organisation. We have discussed recruitment, selection, placement,
training and retention. Learners could do more research in order to
properly get the gist of this topic.
1. Should staffing be considered as the most important function of

management, since the other factors are automatically taken care
of, if we hire the right people? Explain.
2. What are some of the considerations which are continually
impacting the personnel policies and decision?
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Flippo, Edward B. “Principles of Personnel Management” McGraw Hill,

Kogakusha, Tokyo, 1976, p.11.
These Factors are Based upon and Adapted from Satya Saran Chatterjee,
(1966). “An Introduction to Management: Its Principles and
Techniques”, The World Press, pp. 184 – 186.
Hofstede, G. (1980). “Motivation, Leadership and Organisation: Do

American Theories Apply Abroad: Organisational Dynamics,
Vol. 9, p. 43.



Leavitt, H. J. (1978). Management Psychology (4th ed.). Chicago.

Robbins, S. P. and Coulter, M. (1996). Management. New Jersey

Prentice-Hall.

UNIT 5 RECRUITMENT AND SELECTION
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CONTENTS
1.0 Introduction
2.0 Objectives
3.0 Main Content
3.1 Recruitment
3.1.1 Definitions
3.1.2 Subsystems of Recruitment
3.1.3 Complexity of the Functions of Recruitment
3.1.4 Recruitment Policy
3.2 Impact of Personnel Policies on Recruitment
3.3 Centralised versus Decentralised Recruitment
3.3.1 Merits of Centralised Recruitment
3.4 Sources of Recruitment
3.4.1 Internal Sources
3.4.2 Why Organisations prefer internal source?
3.4.3 External Sources
3.5 Recruitment Techniques
3.6 Types of Recruitment Appeal
3.7 Recruitment Practices
3.8 Selection
3.8.1 Meaning and Definition
3.8.2 Essentials of Selection Procedure
3.9 Organisational Relationships
3.10 Using Selection Agencies/Consultants
3.11 Factors Affecting Selection Decisions
3.12 Need for Scientific Selection Systems
3.12.1 Selection Procedure
3.12.2 Steps in Scientific Selection Process
3.13 Placement
3.14 Induction
4.0 Conclusion
5.0 Summary
1.0 INTRODUCTION
Recruitment is Distinct from Employment and Selection:
Once the required number and kind of human resources are determined,
the management has to find the places where required human resources
are/will be available and also find the means of attracting them towards
the organisation before selecting suitable candidates for jobs. All this
process is generally known as recruitment. Some people use the term
‘recruitment’ for employment. These two are not one and the same.
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Recruitment is only one of the steps in the entire employment process.

Some others used the term recruitment for selection. These two terms
are not one and the same either. Technically speaking, the function of
recruitment precedes the selection function and it includes only finding,
developing the sources of prospective employees and attracting them to
apply for job in an organisation, whereas the selection is the process of
finding out the most suitable candidate to the job out of the candidates
attracted (i.e., recruited). Formal definition of recruitment would give
clear cut idea about the function of recruitment.
2.0 OBJECTIVES
define the terms recruitment and selection, list the subsystems of

recruitment, describe the complexity of the functions of recruitment
and state what is meant by recruitment policy;
discuss impact of Personnel Policies on Recruitment and
differentiate between centralised and decentralised recruitment;
highlight the main sources of recruitment and state reasons why
different people or organisations prefer different sources;
list and explain recruitment techniques, types of recruitment appeal,
recruitment practices;
define the term selection and state the essentials of selection
procedure;
discuss organisational relationships and factors that promotes the use
of selection agencies/consultant as well as factors affecting selection
decisions;
the justification for scientific selection systems, the procedure and
steps in selection process;
define and discuss the terms placement and induction.
What is recruitment? What is the most important source of recruitment

for sons of the soil? Which of the sources is most appropriate in
Nigeria?
3.0 MAIN CONTENT
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3.1 Definition of Recruitment
Recruiting refers to those sets of activities an organisation uses to attract

job candidates possessing the appropriate characteristics to help the
organisation reach its objectives (Glueck, 1978). According to Byars
and Rues (1984), recruitment involves seeking and attracting a pool of
people from which qualified candidates for job vacancies can be chosen.
The basic purpose is to develop a group of potentially qualified people.
These definitions can be analysed by discussing the processes of
recruitment through systems approach:
3.1.1 Subsystems of Recruitment
There are four subsystems in recruitment which can be divided into

further subsystems as shown in the figure below.
(a) Finding out and developing the sources where the required
number and kind of employees are/will be available.
(b) Developing suitable techniques to attract the desirable candidates.
(c) Employing the techniques to attract candidates, and
(d) Stimulating as many candidates as possible and making them to

apply for jobs irrespective of number of candidates in order to
increase selection ratio (i.e., number of applications per one job
vacancy) in order to select the most suitable candidates out of the
total candidates available and due to lower yield ratio.
Recruitment is positive as it aims at increasing the number of
applicants and selection is somewhat negative as it selects the
suitable candidates in which process; the unsuitable candidates
are automatically eliminated. Though, the function of
recruitment seems to be easy, a number of factors make
performance of recruitment a complex one.
3.1.2 Complexity of the Function of Recruitment
Performing the function of recruitment, i.e., increasing the selection

ratio is not as easy as it seems to be. This is because of the hurdles
created by the internal factors and external factors which influence an
organisation. The first activity of recruitment i.e., searching for
prospective employees is affected by many factors like:
(i) organisational policy regarding filling up of certain percentage of

vacancies by internal candidates;
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(ii) local candidates (sons of soil);

(iii) influence of trade unions;
(iv) government regulations regarding reservations of certain number
of vacancies to candidates based on community/region/caste/sex;
and
(v) influence or recommendations, nepotism etc.
As such, the management is not free to find out or develop the sources
of desirable candidates and alternatively it has to divert its energies for
developing the sources within the limits of those factors though it cannot
find suitable candidates for the jobs as shown in the above figure. The
other activity of recruitment is consequently affected by the internal
factors such as:
(i) working conditions;

(ii) promotional opportunities;
(iii) salary levels, type and extent of benefits;
(iv) other personnel policies and practices;
(v) image of the organisations; and
(vi) ability and skill of the management to stimulate the candidates.
It is also affected by external factors like:

Searching for prospective Stimulating the prospective
employees employees to apply for jobs
(i) personnel policies and practices of various organisations
regarding working conditions, salary, benefits, promotional
opportunities, employee relations etc;
(ii)
Policy regarding
career opportunities in othe r organisati ons;Working
and
( iii) gov ernment rGovernment
egulations r.egulations
internal candidates conditions
reservations
However, the degree of complexity of recruitment function can be

minimised by formulating sound policies.
Policy regarding
sons of soil Promotional
opportunities
Recommendations
Influence of
Trade Unions
Salary and benefits
Image of the
organisation
Career opportunities in the

H.R. market
Figure: Challenges to the Recruitment functions
Government
regulations
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Sources of suitable conditions

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Ability and skill to

stimulate
Personal policies and

practices in completing
organisations
Suggest an ideal induction procedure for sales executives in an

Electronic Organisation.
3.1.3 Recruitment Policy
Recruitment policy of any organisation is derived from the personnel

policy of the same organisation. In other words, the former is a part of
the latter. However, recruitment policy by itself should take into
consideration the government’s reservation policy, policy regarding sons
of the soil etc. personnel policies of other organisations regarding merit,
internal sources, social responsibility in absorbing minority sections,
women etc. Recruitment policy should commit itself to the
organisation’s personnel like enriching the organisation’s human
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resources or serving the community by absorbing the worker sections

and disadvantaged people of the society, motivating the employees
through internal promotions, improving the employee loyalty to the
organisation by absorbing the retrenched or laid off employees or casual
/ temporary employees or dependants of present/former employees etc.
The following factors should be taken into consideration in formulating

recruitment policy. They are:
(a) government policies;

(b) personnel policies of other competing organisations;
(c) organisation’s personnel policies;
(d) recruitment sources;
(e) recruitment needs;
(f) recruitment cost;
(g) selection criteria and preference etc.
3.2 Impact of Personnel Policies on Recruitment
Recruitment policies are mostly drawn from personnel policies of the

organisation. According to Dale Yadar and Paul D. Standohar (1984),
general personnel policies provide a variety of guidelines to be spelt out
in the recruitment policy. Important among them are:
(a) abiding by the public policy and relevant law on selection;

(b) providing the employees the security and continuous
employment;
(c) integrating the organisational needs and individual needs;
(d) providing the freedom and opportunity to employees to utilise
their talents, skill and knowledge to the maximum extent;
(e) treating all the employees fairly and equally in all employment
relationships including salary, benefits, promotions and transfers;
(f) protecting women and minority candidates;
(g) providing suitable jobs which can be handled easily by
physically-handicapped and to those employees who are partially
disabled due to accidents during the course of duty and to those
who cannot do their present jobs due to health reasons.
After formulation of the recruitment policies, the management has to

decide whether to centralise or decentralise the recruitment function.
3.3 Centralised versus Decentralised Recruitment
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Recruitment practices vary from one organisation to another. Some

organisations like commercial banks resort to centralised recruitment,
while some organisations like the Indian Railways (for Group III and
Group IV positions) resort to decentralised recruitment practices.
Personnel department at the central office performs all the functions of
recruitment in case of centralised recruitment and personnel departments
at unit level (zonal level performs all the functions of recruitment
concerning the jobs of the respective unit or zone.
3.3.1 Merits of Centralised Recruitment
1. Average cost of recruitment per candidate/unit should be relatively

less due to economies of scale.
2. It would have more expertise available to it.
3. It can ensure broad uniformity among human resources of various

units/zones in respect of education, skill, knowledge, talent, etc.
4. It would generally be above malpractices, abuse of powers,

favouritism, bias etc.
5. It would facilitate interchangeability of staff among various

units/zones.
6. It enables the line managers of various units and zones to concentrate

on their operational activities by relieving them from the recruitment
functions.
7. It enables the organisation to have centralised selection procedure,

promotional and transfer procedure etc.
8. It ensures the most effective and suitable placement to candidates.
9. It enables centralised training programmes which further brings

uniformity and minimises average cost of staff.
Despite these advantages of centralised recruitment, some organisations

resort to decentralised recruitment for the following reasons:
3.3.2 Merits of Decentralised Recruitment
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1. The unit concerned concentrates only on those sources/places

where it normally gets the suitable candidates. As such, the cost
of recruitment would be relatively less.
2. The unit gets most suitable candidates as it is well aware of the

requirements of the jobs regarding cultural, traditional, family
background aspects, local factors, social factors etc.
3. Units can recruit candidates, as and when they are required,

without any delay.
4. The units would enjoy freedom in finding out, developing the

sources, in selecting and employing the techniques to stimulate
the candidates.
5. The unit would relatively enjoy advantage about the availability

of information, control and feedback and various
functions/processes of recruitment.
6. The unit would enjoy better familiarity and control over the
employees it recruits rather than on employees selected by the
central recruitment agency.
Both systems of recruitment have their own merits and demerits. Hence,
the management has to weigh both the merits and demerits of each
system before making a final decision about centralizing or
decentralizing the recruitment. Alternatively, management may
decentralise the recruitment of certain categories of employees,
preferably middle and top level managerial personnel and centralise the
recruitment of other categories of employees, preferably lower level
positions, in view of the nature of the jobs and suitability of those
systems for those categories of positions. The management has to find
out and develop the sources of recruitment after deciding upon
centralizing or decentralizing the recruitment function.
3.4 Sources of Recruitment
Sources are distinct from techniques. Where are suitable candidates

available in required number? How can they be informed about the
availability of jobs and about the jobs and organisation? Now we deal
with the first question as the answer to it deals with the sources of
recruitment and answer to the second question deals with the techniques
of stimulating the prospective candidates (or techniques of recruitment).
Generally, the learners of human resource management may feel that
sources and techniques of recruitment are one and the same. But they
are different. Sources are those where prospective employees are
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available like employment exchanges, while techniques are those which

stimulate the prospective employees to apply for jobs like nomination by
employees, advertising, promotion etc.
Now we propose to discuss about the sources of recruitment. When a

person is needed to fill a vacant organisational position, this individual
may come from inside or outside the company. Some companies prefer
to recruit from within, since this aids employee morale, loyalty and
motivation. Other companies prefer to recruit externally to prevent
inbreeding and to encourage new ways of thinking. Although
recruitment policies vary significantly from company to company, some
authorities feel it is a good practice to promote from within whenever
anyone in the company has the requisite qualifications needed to fill a
vacancy (Menk, 1979).
3.4.1 Internal Sources
Internal sources include:
(a) present permanent employees;

(b present temporary/casual employees;
(c) retrenched or retired employees;
(d) dependents of deceased, disabled, retired and present employees.
(a) Present permanent employees. Organisations consider the

candidates from this source for higher level jobs due to:
(i) availability of most suitable candidates for jobs relatively or

equally to the external source;
(i) to meet the trade union demands;
(ii) to the policy of the organisation to motivate the present
employees.
(b) Present temporary or casual employees. Organisations find this

source to fill vacancies relatively at the lower level owing to the
availability of suitable candidates or trade union pressures or in
order to motivate them on the present job.
(c) Retrenched or retired employees. Generally, a particular

organisation retrenches the employees due to lay off. The
organisation takes the candidates for employment from the
retrenched employees due to obligation, trade union pressure and
the like. Sometimes the organisations prefer to re-employ their
retired employees as a token of their loyalty to the organisation or
to postpone some interpersonal conflicts for promotion etc.
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(d) Dependent or deceased, disabled, retired and present employees.

Some organisations, in an attempt to show their loyalty, provide
employment to the dependant(s) of deceased, disabled and
present employees. Such organisations find this source as an
effective source of recruitment.
3.4.2 Why Organisations prefer internal source?
Organisations prefer this source to external source, to some extent, for

the following reasons:
(i) Internal recruitment can be used as a technique of motivation;

(ii) Morale of the employees can be improved;
(iii) Suitability of the internal candidates can be judged better than the
external candidates as “known devils are better than unknown
angels”;
(iv) Loyalty, commitment, a sense of belongingness, and security of
the present employees can be enhanced;
(v) Employees’ psychological needs can be met by providing an
opportunity for advancement;
(vi) Employees economic needs for promotion, higher income can be
satisfied;
(vii) Cost of selection can be minimised;
(viii) Cost of training, induction, orientation, period of adaptability to
the organisation can be minimised;
(ix) Trade unions can be satisfied;
(x) Social responsibility towards employees may be discharged;
(xi) Stability of employment can be ensured;
But organisations do not excessively rely on internal source as too much

consumption of even sugar tastes bitter. The excessive dependence on
this source results in in-breeding, discourages flow of new blood into the
organisation; organisation would become dull and back number without
innovations, new ideas, excellence and expertise.
3.4.3 External Sources
Organisations have at their disposal a wide range of external sources for

recruiting personnel. External recruiting is often needed in organisations
that are growing rapidly, or that have a large demand for technical,
skilled, or managerial employees. External sources provide a larger
pool of talent, and they prove to be cheaper, especially when dealing
with technical or skilled personnel who need not be offered any training
in the organisation, in the long run.
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Organisations usually try to dig up external sources of recruitment for

the following reasons:
(i) The suitable candidates with skill, knowledge, talent, etc., are
generally available;
(ii) Candidates can be selected without any pre-conceived notion or
reservations;
(iii) Cost of employees can be minimised because employees selected
from this source are generally placed in minimum pay scale;
(iii) Expertise, excellence and experience in other organisations can
be easily brought into the organisation;
(iv) Human resources mix can be balanced with different background,
experience, skill etc;
(v) Latest knowledge, skill, innovations or creative talent can also be
flowed into the organisation;
(vi) Existing knowledge, skill and experience will also broadens their
personality;
(vii) Long-run benefit to the organisation in the sense that qualitative
human resources can be brought.
External sources include:
(a) Educational and Training Institutes;

(b) Private Employment Agencies/Consultants;
(c) Public Employment Exchanges;
(d) Professional Associations;
(e) Data Banks;
(f) Casual Applicants;
(g) Similar Organisations;
(h) Trade Unions.
(a) Educational and Training Institutes. Different types of

organisations like industries, business firms, service
organisations, social or religious organisations can get
experienced candidates of different types from various
educational institutions like Colleges and Universities imparting
education in Science, Commerce, Arts, Engineering and
Technology, Agriculture, Medicine, Management Studies etc.,
and trained candidates in different disciplines like vocational,
engineering, medicine from the training institutes like Vocational
Training Institutes of State Governments in various trades,
National Industrial Training Institute for Engineers, etc. Most of
the Universities and Institutes imparting technical education in
various disciplines like engineering, technology, management
studies provide facilities for campus recruitment and selection.
They maintain the bio-data and performance required of the
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candidates. Organisations seeking to recruit candidates from this

source can directly contact the institutes either in person or by
post and stimulate the candidates to apply for jobs. Most of the
organisations using this source perform the function of selection
after completing recruitment in the campus of the Institute itself
with a view to minimizing time lapse and to securing the cream
before it is attracted by some other organisations.
(b) Private Employment Agencies/Consultants. Public employment

agencies or consultants like ABC Consultants in India perform
the recruitment functions on behalf of a client company by
charging fee. Line managers are relieved from recruitment
functions so that they can concentrate on their operational
activities and recruitment function is entrusted to a private agency
or consultants. But due to limitations of high cost,
ineffectiveness in performance, confidential nature of this
function, managements sometimes do not depend on this source.
However, these agencies function effectively in the recruitment
of executives. Hence, they are also called executive search
agencies. Most of the organisations depend on this source for
highly specialised positions and executive positions.
(c) Public Employment Exchanges. The Government set up Public

Employment Exchanges in the country to provide information
about vacancies to the candidates and to help the organisations in
finding out suitable candidates. The Employment Exchange
(Compulsory Notification of Vacancies) Act, 1959 makes it
obligatory for public-sector and private-sector enterprise in India
to fill certain types of vacancies through public employment
exchanges. These industries have to depend on public
employment exchanges for the specified vacancies.
(d) Professional organisations. Professional organisations or

associations maintain complete bio-data of their members and
provide the same to various organisations on requisition. They
also act as an exchange between their members and recruiting
firms in exchanging information, clarifying doubts etc.
Organisations find this source more useful to recruit the
experienced and professional employees like executives,
managers and engineers.
(e) Data banks. The management can collect the bio-data of the
candidates from different sources like Employment Exchange,
Educational Training Institutes, candidates etc. and feed them in
the computer. It will become another source and the company
can get the particulars as and when it needs to recruit.
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(f) Casual applicants. Depending upon the image of the

organisation, its prompt response, participation of the
organisation in the local activities, level of unemployment,
candidates apply casually for jobs through mail or hand over of
the applications in Personnel Department. This would be a
suitable source for temporary and lower level jobs.
(g) Similar organisations. Generally, experienced candidates are

available in organisations producing similar products or are
engaged in similar business. The management can get most
suitable candidates from this source. This would be the most
effective source for executive positions and for newly established
organisation or diversified or expanded organisations.
(h) Trade unions. Generally, unemployed or under-employed

persons or employees seeking change in employment put a word
to the trade union leaders with a view to getting suitable
employment due to the latter’s intimacy with management. As
such, the trade union leaders are aware of the availability of
candidates. In view of this fact and in order to satisfy the trade
union leaders, management enquires trade unions for suitable
candidates.
It is not necessary, however, to tap all these sources in order to recruit

people. Usually, management decides about the sources to be exploited
well in advance depending on the nature of the vacancy to be filled in,
the time required to fill the vacancy, the availability of a larger pool of
candidates etc. Immediately after this, management has to decide about
the techniques to be followed while recruiting candidates for various
organisational positions.
3.5 Recruitment Techniques
Recruitment techniques are the means or media by which management

contacts prospective employees or provides necessary information or
exchanges ideas or stimulates them to apply for jobs. Management uses
different types of techniques to stimulate internal and external
candidates. Techniques useful to stimulate internal candidates are:
(1) Promotion. Most of the internal candidates would be stimulated

to take up higher responsibilities and express their willingness to
be engaged in the higher level jobs, if management gives them
the assurance that they will be promoted to the next higher level.
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(2) Transfers. Employees will be stimulated to work in the new

sections or places, if management wishes to transfer them to the
places of their choice.
(3) Recommendations of the present employees. Management can

contact, persuade the outsiders to apply for job in the organisation
through the recommendations to the candidates by the present
employees, trade union leaders etc.
(4) Scouting. Scouting means sending the representation of the

organisations to various sources of recruitment with a view to
persuading or stimulating the candidates to apply for jobs. The
representatives provide information about the company and
exchange information and ideas and clarify the doubts of the
candidates.
(5) Advertising. Advertising is a widely accepted technique of

recruitment, though it mostly provides one way communication.
It provides the candidates in different sources, the information
about the job and company and stimulates them to apply for jobs.
It includes advertising through different media like newspapers,
magazines of all kinds, radio, television etc.
The technique of advertising should aim at (a) attracting attention of the

prospective candidates, (b) creating and maintaining interest, (c)
stimulating action by the candidates.
Management, in order to achieve these objectives of advertising, has to:
(i) analyse job requirements;

(ii) decide who does what;
(iii) write the copy;
(iv) design the advertisement;
(v) plan and select the media, and
(vi) evaluation response.
The management, after selecting the recruitment techniques, has to

decide upon the type of appeal in order to make the recruitment efforts
effective.
Explain the importance and types of recruitment appeal.

3.6 Types of Recruitment Appeal
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The recruiter should know what his organisation can offer and what the
potential candidate wants (Milton, 1970). Different candidates like
young, old, women, men – have different needs. An appeal’s
effectiveness depends upon applicant’s fundamental and immediate
needs and those needs which are not met by his present job. Recruiters
should have the talents of an advertising expert, the skills of a salesman
and a market research specialist. They should also know that an
organisation’s appeal may be effective in hiring employees but not in
retaining them. They should use those features in recruiting the
candidates that are desired by the prospective candidates. Research
studies show that male workers desire security, opportunity for
advancement, self-determination, freedom in the job etc. whereas
women employees desire personal relations with people at work, good
supervision, pleasant working conditions etc.
Do you think that recruitment practices in India differ from those of

theoretical concepts? If yes, explain the context and reasons for such
differences.
3.7 Recruitment Practices
Findings of the various surveys conducted in foreign countries reveal

that various organisations use the following sources of recruitment in the
order of the relative practice – employee referrals, casual applicants,
advertising, local educational institutions, public employment
exchanges, private employment agencies and unions.
Industries in India depend on the following sources:
1. Internal sources;
2. Badli lists or a central pool of candidates from which vacancies
are filled;
3. Public employment exchanges;
4. Casual labourers;
5. Labour contractors;
6. Candidates introduced by friends and relatives;
7. Private employment agencies/consultants;
8. Campus recruitment like Indian Institutes of Management, Indian
Institutes of Technology, Indian Institute of Science, National
Institute for Training Industrial Engineers.
9. Sons of the soil. Recently there has been a move in India that the
vacancies at the lower level should be filled by local people (sons
of soil). Some organisations, including public sector
organisations, have started providing jobs to sons of soil on
priority basis. The National Committee on Labour, in this
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connection, recommended for providing employment to the local

persons. Further, the Government of India issued directives to
the public sector enterprises to recruit local candidates on priority
basis.
10. Specified communities and categories. According to the

Government directive, the organisations, particularly public
sector have to recruit candidates to the specified extent from the
scheduled castes, scheduled tribes, backward communities and
from specified classes like physically handicapped, ex-
servicemen and the like.
3.8 Selection
After identifying the sources of manpower, searching for prospective

employees and stimulating them to apply for jobs in an organization, the
management has to perform the function of selecting the right
employees at the right time. The obvious guiding policy in selection is
the intention to choose the best qualified and suitable candidate for each
unfilled spot and to avoid commitments to those who will not work well
(Yoda and Standohar, 1984).
3.8.1 Meaning and Definition
The objective of the selection decision is to choose the individual who

can most successfully perform the job from the pool of qualified
candidates. The selection procedure is the system of functions and
devices adopted in a given company to ascertain whether the candidates’
specifications are matched with the jobs specifications and requirements
or not. The selection procedure cannot be effective until and unless:
1. requirements of the job to be filled, have been clearly specified

(job analysis, etc.);
2. employee specifications (physical, mental, social, behavioural,
etc.) have been clearly specified;
3. candidates for screening have been attracted.
Thus the development of job analyses, human resource planning and

recruitment are necessary prerequisites to the selection process. A
breakdown in any of these processes can make even the best selection
system ineffective.
3.8.2 Essentials of Selection Procedure
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The selection process can be successful if the following preliminaries

are satisfied:
1. Someone should have the authority to select. This authority

comes from the employment requisition, as developed by an
analysis of the workload and workforce.
2. There must be some standard of personnel with which a

prospective employee may be compared, i.e., there should be
available before hand, a comprehensive job description and job
specification as developed by a job analysis.
3. There must be a sufficient number of applicants from whom the

required number of employees may be selected.
3.8.3 Significance of Selection Process
Selection of personnel to man the organisation is a crucial, complex and

continuing function. The ability of an organisation to attain its goals
effectively and to develop in a dynamic environment largely depends
upon the effectiveness of its selection programme. If right people are
selected, the remaining functions of personnel management become
easier; the employee contribution and commitment will be at optimum
level and employee-employer relations will be constructive, cooperative
and congenial. In an opposite situation, where the right person is not
selected, the remaining functions of personnel management, employee-
employer relations will not be effective. If the right person is selected,
he is a valuable asset to the organisation and if faulty selection is made,
the employee will become a liability to the organisation.
3.9 Organisational Relationships
Before designing a selection procedure, the manner in which tasks and

responsibilities for accepting or rejecting candidates should be shared by
line and staff executives, must be laid down. The personnel department
should eliminate all unsuccessful candidates, so that the time of the line
executives need not be spent on such people. Secondly, candidates who
can meet job requirements should be made available promptly. Line
executive is ultimately vested with the authority either to accept or to
reject a candidate. However, the personnel officer has a duty to see that
the right types of personnel are selected and placement done wisely. If
he is not satisfied in this regard, he should give his views to the superior
and should avoid involving himself in argument with departmental head
on methods of selection.
3.10 Using Selection Agencies/Consultants
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Some private agencies/consultants in India perform the function of

recruitment and selection so as to enable the organisations to concentrate
on their main functions. They advertise, conduct tests and interview and
provide a shortlist. Some companies have started using the services of
these agencies as they provide expertise and reduce workload. The
organisation has to take these following factors into consideration in
selecting an agency or a consultant:
1. reputation, effectiveness, sincerity and punctuality of the

organisation;
2. advertisement copy, design, media of various agencies;
3. amount of fee, payment period and mode;
4. objectivity, fair and justice in selection;
5. selection techniques to be adopted, particularly psychological
tests, interview methods etc.
6. competence of the human resources of the agency/consulting
firm.
The company has to do the following in case of using an agency or a

consultant:
1. briefing the agency about the requirements, terms and conditions

of employment;
2. providing job and employee specifications and helping the
consultant in modifying them;
3. checking and reviewing the draft of the advertisement;
4. ensuring that all arrangements are made for conducting test and
interview.
3.11 Factors Affecting Selection Decisions
The goal of selection is to sort out or eliminate those judged unqualified

to meet the job and organisational requirements, whereas the goal of
recruitment is to create a large pool of persons available and willing to
work. Thus is it said that recruitment tends to be positive, while
selection tends to be somewhat negative. A number of factors affect the
selection decision of candidates. The important among them are:
1. Profile matching. Tentative decision regarding the selection of

the candidates (who are known) is taken in advance. The scores
secured by these known candidates in various tests are taken as a
standard to decide the success or failure of other candidates at
each stage. Normally the decision about the known candidates is
selected at interview stage. Possible care is also taken to match
the candidate’s bio-data with the job specifications.
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2. Organisational and social environment. Some candidates, who

are eminently suitable for the job, may fail as successful
employees due to varying organisational and social environment.
Hence candidates’ specifications must match with not only job
specifications but also with organisational and social
environmental requirements.
3. Successive hurdles. Multiple correlations are based on the

assumption that a deficiency in one factor can be counter-
balanced by an excess amount of another. A candidate is routed
through all the selection steps before a decision is made. The
composite test score index is taken into account in the selection
tests. Hence for broader line cases, multiple correlation method is
useful and for others, successive hurdles method is useful.
Employment
Line Manager’s
Decisions R
Reference
Checks R
Medical
Examination R
Final
Interview
R
Tests
R
Group
Interview
R
Preliminary
Interview
R
Written
Examination
R
Application
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Form
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(R = Rejection)
Figure: Successive Hurdles in Selection Process
3.12 Need for Scientific Selection Systems
Every organisation has to follow a systematic selection procedure, since

problems with the employee start after his selection and employment. In
other words, if an organisation selects a wrong person, it has to face a
number of problems with him. In addition to the cost of selection,
training and other areas will become a recurring expenditure to the
company owing to employee turnover caused due to improper selection
technique. Every organisation is influenced by the social factors as it is
part and parcel of the society. Hence it has to do justice to all sections
of the people in providing employment opportunities. To that extent,
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organisations should have an objective system of selection that should

be impartial and provide equal opportunity. Above all, the organisation
should also follow the Government rules and regulations regarding
filling up of certain number of vacancies by the candidates belonging to
certain communities and certain regions.
3.12.1 Selection Procedure
There is no standard selection process that can be followed by all the

companies in all the areas. Companies may follow different selection
techniques or methods depending upon the size of the company, nature
of the business, kind and number of persons to be employed,
government regulations to be followed etc. Thus, each company may
follow any one or the possible combinations of methods of selection in
the order convenient or suitable to it. Following are the selection
methods generally followed by the companies:
Selection procedure employs several methods of collecting information

about the candidate’s qualifications, experience, physical and mental
ability, nature and behaviour, knowledge, aptitude and the like for
judging whether a given applicant is or is not suitable for the job.
Therefore, the selection procedure is not a single act but is essentially a
series of methods or stages by which different types of information can
be secured through various selection techniques. At each step, facts
may come to light which are useful for comparison with the job
requirement and employee specifications.
3.12.2 Steps in Scientific Selection Process
The steps are as follows:
1. Job analysis. Job analysis is the basis for selecting the right
candidate. Every organisation should finalise the job analysis,
job description, job specification and employee specifications
before proceeding to the next step of selection.
2. Recruitment. Recruitment refers to the process of searching for

prospective employees and stimulating them to apply for jobs in
an organisation. Recruitment is the basis for the remaining
techniques of the selection and the latter varies depending upon
the former.
3. Application form. Application form is also known as application

blank. The technique of application blank is traditional and
widely accepted for securing information from the prospective
candidates. It can also be used as a device to screen the
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candidates at the preliminary level. many companies formulate

their own style of application form depending upon the
requirement of information based on the size of the company,
nature of business activities, type and level of the job etc. They
also formulate different application forms for different jobs, at
different levels, so as to solicit the required information for each
job. But a few companies in our country do not have prescribed
application forms. But they ask the prospective applicant to
apply on white paper giving particulars about his name, date of
birth, mailing address, educational qualifications, experience etc.
Applications of some of the organisations are brief, general and
easily securable while those of others are quite elaborate,
complex to answer and require detailed information about the
applicant. Some firms ask the candidates to fill up the
application forms in their own handwriting so as to draw tentative
inferences about their suitability for employment. This is so
particularly for the clerical positions.
4. Written examination. The organisations have to conduct written

examination for the qualified candidates after they are screened
on the basis of the application blanks so as to measure the
candidate’s ability in arithmetical calculations, to know the
candidates’ aptitude towards the job, to measure the candidates’
aptitude, reasoning, knowledge in various disciplines, general
knowledge and English language.
5. Preliminary interview. The preliminary interview is to solicit

necessary information from the prospective applicants to assess
the applicant’s suitability to the job. This may be conducted by
an assistant in the personnel department. The information thus
provided by the candidate may be related to the job or personal
specifications regarding education, experience, salary expected,
aptitude towards the job, age, physical appearance and other
physical requirements etc. If the information supplied by the
candidate is below/above the requirements of the job, the
candidate may be eliminated depending upon the availability of
number of suitable candidates. Thus, preliminary interview is
useful as a process of eliminating the undesirable and unsuitable
candidates. If a candidate satisfies the job requirements
regarding most of the areas, he may be selected for further
process.
Preliminary interviews are short and known as stand-up interviews or

sizing-up of the applicants or screening interviews. However, certain
required amount of care is to be taken to ensure that the desirable
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workers are not eliminated. This interview is also useful to provide the
basic information about the company to the candidate.
6. Group discussion. The technique of group discussion is used in

order to secure further information regarding the suitability of the
candidate for the job. Group discussion is a method where
groups of the successful applicants are brought around a
conference table and are asked to discuss either a case study or a
subject matter. The candidates in the group are required to
analyse, discuss, find alternative solutions and select the sound
solution. A selection panel thus observe the candidates in the
areas of initiating the discussion, explaining the problem,
soliciting unrevealing information based on the given information
and using common sense, keenly observing the discussion of
others, clarifying controversial issues, influencing others,
speaking effectively, concealing and mediating arguments among
the participants and summarizing or concluding aptly. The
selection panel, basing on its observation, judges the candidates’
skill and ability and ranks them according to their merit. In some
cases, the selection panel may also ask the candidates to write the
summary of the group discussion in order to know the
candidates’ writing ability as well.
7. Tests. The next stage in the selection process is conducting

different tests as given below. The objective of tests is to solicit
further information to assess the employee suitability to the job.
The important tests are:
(i) Intelligence test. This test measures various factors like capacity
for comprehension and reasoning, word-fluency, verbal
comprehension, numbers, memory, space, picture arrangements
etc.
(ii) Aptitude test. This test measure whether an individual has the
capacity to learn a given job if he is given adequate training.
Examples of specific aptitudes are mechanical, clerical, academic
etc.
(iii) Achievement test. Aptitude is a capacity to learn in future, while

achievement is what one has accomplished. When applicant’s
claim to know something on achievement test is administered to
measure how well he knows it.
(iv) Interest test and personality test. The purpose of these tests is to
find out the types of work in which a candidate is interest (likes
and dislikes) personality tests are similar to interest tests, in that,
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they involve a serious problem of obtaining honest answers.

These tests probe deeply to discover clues to an individual’s
value system, his emotional reactions and maturity and
characteristic mood. They are expressed in such traits as self-
confidence, tact, emotional control, optimism, decisiveness,
conformity, objectivity, patience, fear, distrust, initiative,
judgement, dominance, impulsiveness, sympathy, integrity and
stability.
(v) Judgement test. These tests seek to evaluate the applicant’s

ability to apply knowledge judiciously in solving a problem.
(vi) Projective test. This test measures a candidate’s ability to project

his personality into free responses about ambiguous pictures
shown to him. Administration of this test requires great skill.
8. Final interview. Final interview is usually followed by testing.

This is the most essential step in the process of selection. In this
step, the interviewer matches the information obtained about the
candidate through various means to the job requirements and to
the information obtained through his own observation during
interview.
Types of interviews. The types of interviews are:
(i) Informal interview;

(ii) Formal interview;
(iii) Planned interview;
(iv) Patterned interview;
(v) Non-directive interview;
(vi) Depth interview;
(vii) Stress interview;
(viii) Group interview; and
(ix) Panel interview.
9. Medical examination. Certain jobs require certain physical

qualities like clear vision, perfect hearing, unusual stamina,
tolerance of hard working conditions, clear tone, etc. Medical
examination reveals whether or not a candidate possesses these
qualities.
10. Reference checks. After completion of the final interview and

medical examination, the personnel department will engage in
checking references. Candidates are required to give the names
of reference in their application forms. These references may be
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from the individuals who are familiar with the candidate’s

academic achievement or from the applicant’s previous
employer, who is well versed with the applicant’s job
performance, and sometimes from co-workers. In case the
reference check is from the previous employer, information for
the following areas may be obtained. They are: job title, job
description, period of employment, pay and allowances, gross
emoluments, benefits provided, rate of absence, willingness of
the previous employer to employ the candidate again etc.
Further, information regarding candidate’s regularity at work,
character, progress etc, can be obtained. Often a telephone call is
much quicker. The method of mail provides detailed information
about the candidate’s performance, character and behaviour.
However, a personal visit is superior to the mail and telephone
methods and is used where it is highly essential to get the
detailed, actual information which can also be secured by
observation. Reference checks are taken as a matter of routine
and treated casually or omitted entirely in many organisations.
But a good reference check used sincerely will fetch useful and
reliable information to the organisation.
11. Final decision by the Line Manager. The line manager

concerned has to make the final decision whether to select or
reject a candidate after soliciting the required information
through different techniques discussed earlier. The line manager
has to take much care in taking the final decision not only
because of economic implications of the decisions but also
because of behavioural and social implications. A careless
decision of rejecting a candidate would impair the morale of the
people and they suspect the selection procedure and the basis of
selection of this organisation. A true understanding between line
managers and personnel managers should be established to take
proper final decisions.
12. Employment. Thus, after taking the final decision, the

organisation has to intimate this decision to the successful as well
as unsuccessful candidates. The organisation sends the
appointment orders to the successful candidates, either
immediately or after sometime, depending upon its time
schedule. The model appointment order is given in the figure
below. The organisation communicates the conditions of
employment to the successful candidates along with appointment
order. Sometimes some candidates may negotiate with the
organisation for modification of the terms of employment.
Organisations, sometimes, accept the request of the candidates.
The candidates, who accept the conditions of employment of the
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organisation (original or modified) report for duty. Organisations

prepare contracts of employment and the organisation and the
candidates enter into the contract, after giving their consent to
various items of contract. Then the candidate is employed by the
organisation by receiving the joining report from the candidate
formally. After this stage, the candidate becomes the employee
of the organisation.
The management places the new employee, preferably on probation,

before placing on the right job.
3.13 Placement
When once the candidate reports for duty, the organisation has to place
him initially in that job, for which he is selected. Immediately the
candidate will be trained in various related jobs during the period of
probation of training or trial. The organisation, generally, decides the
final placement after the initial training is over, on the basis of
candidate’s aptitude and performance during the training/probation
period. Probation period generally ranges between six months and two
years. If the performance is not satisfactory, the organisation may
extend the probation or ask the candidate to quit the job. If the
employee’s performance during the probation period is satisfactory, his
services will be regularized and he will be placed permanently on a job.
Placement is “the determination of the job to which an accepted

candidate is to be assigned and his assignment to that job. It is a
matching of what the supervisor has reason to think he can do with the
job demands (job requirements). It is a matching of what he imposes (in
strain, working conditions) and what he offers in the form of payroll,
companionship with others, promotional possibilities etc (Pigors and
Myers, 1970). It is not easy to match all the factors to the new
employee who is still unknown to many. So the new employee is placed
as a probationer until the trial period is over.
3.14 Induction
Introducing the new employee who is designated as a probationer to the

job, job location, surroundings, organisation, organisational
surroundings, various employees is the final step of employment
process. Some of the companies do not lay emphasis on this function as
they view that this function will be automatically performed by the
colleagues of the new employees. This is more so in educational
institutions. This process gains more significance as the rate of turnover
is high among new employees compared to that among senior
employees. This is mainly because of the problem of adjustment and
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adaptability to the new surroundings and environment. Further, absence

of information, lack of knowledge about the new environment, cultural
gap, behavioural variations, different levels of technology, variations in
the requirements of the job and the organisation also disturb the new
employee. Further induction is essential as the newcomer may feel
insecure, shy, nervousness and disturbing. This situation leads to
instability and turnover. Hence, induction plays pivotal role in
acquainting the new employee to the new environment, company rules
and regulations.
Generally the newcomer may expect opportunities for advancement,

social status and prestige, responsibility, opportunities to use special
aptitudes and educational background, challenges and adventure,
opportunity to be creative and original and lucrative salary. But jobs
with low initial challenge, inadequate feedback, inadequate performance
appraisal result in reality shock. Induction is necessary to reduce reality
shock.
“Induction is the process of receiving and welcoming all employees

when they first join a company and giving them the basic information
they need to settle down quickly and happily and start work”.
Lecture, handbook, film, group seminar are used to impart the

information to new employees about the environment of the job and the
organisation in order to make the new employee acquaint himself with
the new surroundings.
4.0 CONCLUSION
In this unit, we have defined recruitment, selection, placement and

induction. We have also explained the procedures, methods and
techniques of recruitment and selection. You have also learnt the various
sources of recruitment, impact of personnel policies on recruitment,
types of recruitment and factors to consider in recruitment, selection,
placement, and induction process.
5.0 SUMMARY
This unit defines recruitment, selection, placement and induction. Also,

we highlighted the subsystems of recruitment, listed the complexity of
functions of recruitment, centralised and decentralised recruitment,
internal and external sources of recruitment. We explained recruitment
policy, impact of personnel policies on recruitment, discussed the
sources of recruitment, why organisations prefer internal source,
external source, recruitment techniques; types of recruitment appeal,
recruitment practices, and essentials of selection procedure. We also
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explained the steps in selection process, induction and placement of new

employees in organisations.
What is interview? Explain its validity and reliability. What are

different types of employment interview?
Glueck, William F. (1978). Personnel: A Diagnostic Approach, Business

Publications. Dallas, p. 150.
Byars, Lloyds L. and Rue, Leslie W. (1984). Human Resource and

Personnel Management. Homewood, Illinois: Richard D. Irwin,
p.115.
J.S. Chandan (2004). Management Theory & Practice.
MODULE 3
Unit 1 Employee Training and Development

Unit 2 Motivation
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Unit 3 Forecasting
Unit 4 Delegation and Decentralization of Authority
Unit 5 Social Responsibility
UNIT 1 EMPLOYEE TRAINING AND DEVELOPMENT
CONTENTS
1.0 Introduction
2.0 Objectives
3.0 Main Content
3.1 Employee Training and Development
3.2 Employee Training
3.3 Conditions Requiring Training
3.4 Objectives of Training
3.5 Determining Training Needs
3.5.1 Who Should Do the Training?
3.5.2 The Trainer
3.5.3 Methods and Techniques of Training
3.5.4 Evaluation
3.6 Employee Development
3.6.1 Importance of Qualified Manpower
3.7 Management Development
3.7.1 Human Asset Accounting
3.7.2 Nature of Management Development
3.7.3 Determination of Employee Development Needs
3.7.4 Problems Associated with Management
Developments in Nigeria
3.7.5 Management Development Methods
3.8 Self Development
3.9 Performance Appraisals
3.9.5 Personal Characteristics in the Appraisal Form
3.9.6 Performance Appraisal Methods
3.9.7 Steps in Employee Performance Rating
3.9.8 Pitfalls in Performance Rating
3.9.9 Purposes of Performance Evaluation
3.9.10 Periodic Appraisal
4.0 Conclusion
5.0 Summary
1.0 INTRODUCTION
In the previous units we discussed employee recruitment and selection.

This unit will deal with employee training and development. Employee
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training and development are at the heart of employee utilization,

productivity, commitment, motivation and growth. Many employees
have failed in organizations because their need for training was not
identified and provided for as an indispensable part of management
function. In this unit a distinction is made between training and
development. Training is organizational effort aimed at helping an
employee to acquire basic skills required for the efficient execution of
the functions for which he was hired. Development deals with the
activities undertaken to expose an employee to perform additional duties
and assume positions of importance in the organizational hierarchy.
2.0 OBJECTIVES
discuss employee training and development

list and explain the conditions requiring training, objectives of
training and how to determine training needs
discuss the importance of qualified manpower and management
development
define self development and performance appraisals
describe the personal characteristics in the appraisal form,
performance appraisal methods, steps in employee performance
rating, pitfalls in performance rating, purposes of performance
evaluation and periodic appraisal.
Distinguish between training and development. Why is this distinction

important?
3.0 MAIN CONTENT
3.1 Employee Training and Development
Employee productivity is a function of ability, will and situational

factors. An organization may have employees of ability and
determination, with appropriate equipment and managerial support yet
productivity falls below expected standards. The missing factor in many
cases is the lack of adequate skills, and knowledge, which are acquired
through training and development.
3.2 Conditions Requiring Training
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There are certain conditions that will serve as pointers for the need for
training. These symptoms manifest themselves in a variety of ways. The
most common ones are listed below:
(1) Lack of interest in one's job;

(2) Negative attitude to work;
(3) Low productivity;
(4) Tardiness;
(5) Excessive absenteeism rate;
(6) Excessive complaints;
(7) High rejects or low quality output;
(8) High incidence of accidents;
(9) Insubordination.
When a company starts experiencing some of these warning signs, it

should consider training. An employee will not complain to
management that he requires training; instead he would hide his
frustration and use money, for example, as it scapegoat by demanding
more wages; he may complain of the lack of fringe benefits and use one
or two isolated examples to justify his complaint.
3.3 Objectives of Training
Some of the main objectives of training employees include:
Increased Productivity: From the company's point of view, productivity

is at the apex of all training programmes. A well trained employee is
capable of producing more than an untrained employee of equal physical
ability. The success or failure of an organization depends on employees'
productivity. A well trained salesman produces more than his
counterparts of lesser training (other things being equal).
Lower Turnover Rate: An employee who is incapable of producing is

frustrated by failure and is more likely to abandon his work than those
who are capable of producing. An untrained employee is like a dull
school pupil; he hates school and likes to absent himself and is likely to
be a school drop-out unlike other pupils who enjoy school because they
are doing very well. The same situation applies to an unproductive
employee. He hates his work and abandons it at the smallest provocation
from any source.
Higher Morale: A man who is trained has confidence in his ability to

perform. He believes that he has control of his environment and is
equipped to tolerate occasional disappointments, frustrations and
inconveniences. He learns to rationalize and to accept blame for his own
failures instead of blaming the organization. A trained employee derives
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intrinsic satisfaction from his work which promotes his morale.

Organizations that have regular training programmes give employees the
feeling of being wanted and something to look up to.
Better coordination: Training helps in the coordination of men and

material. During the training programme, employees are taught
company expectations and objectives. They are shown the ladder
through which they can attain their own objectives. This gives rise to
goal congruency and, consequently, everyone pulls in the same
direction. Coordination becomes easy.
On the whole, training reduces cost as it increases productivity, reduces

employee turnover and promotes goal congruency. Lack of training
increases absenteeism rate, low output, poor quality and rejects and
results in high cost.
3.4Determining Training Needs
Before any training programme is undertaken, the need for training has
to be identified. The need for training increases as a result of new
technology, new products, variety of new customers and other factors
such as competitive strategy of competitors. To mount a training
programme requires systems analysis. The manager tries to identify the
problems encountered by different employees-salesmen, production
employees, accounting staff and others. It could be discovered that in
sales, for example, the company is picking poor prospects which means
that additional training on prospecting is required. Or, analysis could
reveal that low productivity in the operations department is due to work
scheduling. Training in tec1miques of scheduling would be ideal.
Training could be a waste of time and resources if the area of emphasis

in training is not properly isolated. Nothing can be more frustrating and
demoralizing as teaching a person what he already knows. Concerted
effort must be made to clearly identify areas of stress in a training
programme.
PRAXEONOMY: According to Gilbert (1967), the best common sense

approach to identify areas of training is to use the formula
D = M–I
D = inefficiency in the employee

M = complete list of behaviour necessary for mastery of the job
I = for all the knowledge of behaviour necessary for the job which
the employee already possesses. .
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By identifying the behaviour or traits required to perform a job and

finding out what an employee lacks, training can then be concentrated in
areas of deficiency.
3.5 Who Should Do The Training?
It is very important in all organizations to identify people who can carry

out-training in the organization. The arrangement for training is
generally the function of the personnel department. In the organization,
training resource personnel could be drawn from:
(1) company regular line executives

(2) staff personnel in the organization
(3) outside specialists or consultants.
Company line executives could be, in the case of sales, senior salesmen,
field supervisors, territorial or area managers or sales managers who
have proven knowledge of the subjects to be covered. Staff personnel
could be used in their areas of expertise. The chief accountant, or
accounts supervisors could mount training programme for production
managers, salesmen, etc. on how to manage their budgets effectively.
The personnel officer could give a lesson to all executives on employee
motivation, participative management or on provisions of company
labour contract to avoid constant management-labour conflict.
Outside specialists are used when the required expertise is not available
in the organization. In some instances, in-plant programmes could be
arranged and effectively executed by specialists from outside. Many
institutions – universities, colleges and correspondence schools offer
evening classes for the training of employees on specific skills.
3.5.1 The Trainer
It must be observed here that employee training should be seen as a right

not a privilege and should start soon after employment. The selection of
the trainers is very essential to ensure maximum result. A good trainer
should be identified before training commences. A' good trainer is one
who encourages maximum participation of employees, has a positive
attitude, shows enthusiasm in what he is doing and has confidence in
himself. Above all, he must have thorough knowledge of his subject. A
good trainer judiciously combines the lecture method of instruction with
discussions, role playing and demonstrations. A trainer can be likened
to an actor. He conveys his message artistically utilising his entire
person.
3.5.2 Methods and Techniques of Training
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There is no hard and fast rule as to how to select methods and

techniques of training. New training methods are constantly being
experimented upon and each produces the desired effect. A manager can
achieve his desired objective without knowing exactly what method has
been employed. The most popular training methods in use are discussed
below.
On the Job Training: -This is the most popular and in some cases, the
only form of training programme used by some organizations. Of the
210 employers responding to the question of training, 90% use on the
job training and believe that it is the most effective for their
organizations. One of the advantages of on the job training is that it
minimizes the problem of transfer of learning associated with other
methods of training. On the job training could be an ongoing process
that does, not excessively disrupt normal company operation.
The major disadvantage is that the trainer could pick up bad habits
(Foreman, 1967).
Apprenticeship Programmes: - This method of training is employed

when extensive practice or technical knowledge is required to perform a
job. The training combines on the job training with classroom lectures.
Job Rotation: - This is a training device that makes it necessary to

move the trainee from one department or unit to another to master what
goes on in that section. The essence of this programme is to broaden his
experience in different jobs.
Vestibule Training: - This is a training device that trains the employ off
his regular work area but in an environment closely 'resembling his
work place. He practices his skill with identical equipment that he uses
at his regular workplace. One of the advantages is that costly mistakes
are avoided and the problem of transfer of training is enhanced as the
trainee practices with identical equipment and tools.
Role Playing: - Is a technique of training where the trainee plays the

part of a certain character or acts in an event. He is taught to do a job or
make decisions the way he thinks his boss could have made it. Role
playing is very exciting as it challenges the imagination of the
employee. Role playing promotes retention as it heightens imagination,
ingenuity and resourcefulness.
Table 9.1 shows the most popularly used training methods in Nigeria.
Table 9.1
Modes of Training in Selected Nigerian Organizations
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Type of Enterprise
Training Techniques Service

Manufacturing
% n = 75 % n = 62
On-the-job Training - 85 95
Job Rotation - 87 82
Coaching - 10 65
Lecture - 75 85
Role Playing - 68 45
Vestibule Training - 40 68
Conference - 72 61
As pointed out earlier, training should be an on-going affair. Training

should not always be very formal. A good training can last for only a
few hours or weeks; duration does not determine the quality of training.
It is important to prepare the employee to be trained. He should be
motivated to achieve mental preparedness, and he must exhibit the
desire to learn, by being made to see the usefulness and applicability of
the training. Every employee should know the training circle which
should come after his performance appraisal. Figure 9.1 shows how
training is an on-going process:
Figure 9.1
The Training Circle
APPRAISAL
IDENTIFICATION
APPLICATION OF TRAINING NEEDS
TRAINING PLANNING THE TRAINING

PROGRAMME
PREPARATION FOR
3.5.3 Evaluation TRAINING
The purpose of evaluating a training programme is to determine its

effectiveness. A training programme is effective if it has achieved the
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purpose for which it was designed. The information collected in the

evaluation process should enable the company to improve on the
programme for future trainees, and enable the trainers appraise
themselves in terms of method and content. The most objective way of
evaluating a programme is to:
(1) obtain the honest and unbiased assessment from the trainees;
(2) determine if in fact learning occurred by administering tests –
oral or written;
(3) determine if the company has benefited by it through reduction in
costs, better morale, increased productivity, reduced absenteeism
rate or reduced rate of staff turnover.
Catalanello and Kirkpatrick (1968) have summarized the basic criteria

of evaluation as:
Reaction - Do the trainees like the programme?

Learning - Did the trainees learn the facts, principles,
techniques and concepts presented?
Behaviour - Did their job behaviour change because of the
programme?
Result - What tangible results were achieved (reduction in staff

turnover, better quality, increased production)?
One of the major pitfalls of training programmes in Nigeria is the lack

of positive reinforcement and the lack of opportunity for the trainee to
actively practise what he has learnt. These have to be corrected. Above
all, the objectives of the training programme must have been clearly
articulated.
3.6 Employee Development
3.6.1 Importance of Qualified Manpower
The importance of qualified manpower in the social, political and

economic development of any nation can hardly be overstated. No
nation is known to have attained sustained high level of economic
growth and development without an ample supply of qualified
manpower. Of all the factors that unlock the forces of economic growth
and development, a country's human resources is the most vital, for
without it, all the other factors have to wait. Changes in the quality of
work force account for the rapid economic development that has taken,
place in the advanced countries than any other factor.
Kuznet once observed that:
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The major capital stock of an industrially advanced

country is not its physical equipment; it is the body of
knowledge amassed from tested findings and discoveries
of empirical science, and the capacity and training of its
population to use this knowledge (Kuznet, 1955).
The essence of any manpower programme is to "enhance the welfare of

workers by maximizing their skills and the quality and quantity of then
employment opportunity and in so doing, add to the rtf' country's
economic strength.” (Manpower Report, 1969)
Thus all manpower programmes are aimed at human resources

development and utilization. Professor Harbison saw human resources
development as the process of increasing the knowledge, the skills, and
the capacities of all the people in a society. "In economic terms, he
states, "it is the accumulation of human capital and its effective
investment in the development of an economy" (Harbison, 1964).
Countries such as Japan, Korea, W. Germany, Italy etc., are known to

have attained high levels of development despite the absence of mineral
wealth of any significance. Thus, the manpower programme of any
nation is intricately interwoven with her economic and social
development. The Nigerian government is cognisant of this fact and has
overtly encouraged the establishment of many institutions and
organizations for the training and development of her manpower. Over
twenty universities have been founded and many more are planned.
Many colleges of technology have been established for the training of
intermediate level manpower.
The educational system of the lower levels is being re-oriented to give

adequate emphasis to the acquisition of practical skills. There are over
ten federal/state trade schools now in the nation with emphasis on the
acquisition of rudimentary skills necessary for successful careers in
many organizations.
The government has also set up many institutions to help in

management education in the country. The National Manpower Board is
responsible for the periodic appraisal of requirements for manpower in
all occupations and the development of measures for in-service training
of employed manpower both in the public and private sectors. The
Administrative Staff College of Nigeria (ASCON) was established to
provide diverse training facilities for senior managers of the economy.
The Nigerian Institute of Management, the Centre for Management
Development (C.M.D.), have also been established for manpow6r
development, training and coordination. The Industrial Training Fund
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(I.T.F.) was established to promote and encourage the acquisition of

skills in industry and .commerce with a view to generating a pool of
indigenous trained manpower sufficient to meet the needs of the
economy. The Nigerian government has also entered into bilateral
agreements with some foreign countries for the training of Nigerians in
practical skills. Each year, many scholarships are offered, to deserving
Nigerians to study in foreign countries. All these notwithstanding, the
manpower problems of this country are far from being contained.
3.7 Management Development
A national survey reveals that promotion is the most valued

organizational reward by senior staff. Management development gets an
employee ready for a rise in the organizational hierarchy. Promotion
gives a sense of self-fulfillment and its denial especially when one
thinks one merit it deflects one's ego. Every organization should identify
and encourage employees who have the potential to contribute their
quota in the organization and the society as a whole. No organization
can continue to survive and grow in our dynamic environment that
forgets to develop its managerial cadre.
3.7.2 Human Asset Accounting
The importance of quality manpower in an organization has been

sufficiently highlighted by Likert ( ) who is one of the greatest
proponents of Human Asset Accounting. The postulate is that human
asset should be quantified and placed on the balance sheet of the
organization. This would imply that the value of the organization would
improve as qualified employees are attracted, trained and developed in
the organization. The asset value of the organization would decrease as
skilled staff leave the organization or become irrelevant.
Likert pointed out that the following factors should be used in
determining the value of human assets:
(1) Intelligence and aptitude
(2) Training
(3) Level of performance
(4) Motivation
(5) Quality of leadership
(6) Degree of team work
(7) Communication system and
(8) Coordination of efforts. "
While some of these items 'are difficult to be given cash value, one thing
is certain: the concept shows the importance of quality personnel.
3.7.2 Nature of Management Development
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One of the functions of management is self development and employee

development. Before an organization starts an employee development
programme, certain factors must be considered.
Organizational Objective: The development of objectives is the first

step required in the preparation for management development. As
discussed by Drucker, an objective is like a compass hearing by which a
ship navigates. The compass bearing itself is firm, pointing in a straight
line towards the desired post ( ). Objectives give a sense of purpose
and direction. This will help the organization to analyse its long-range
goals and strategic plans for the future.
3.7.3 Determination of Employee Development Needs
Based on the organizational objectives, the company can determine its

high-level or other manpower needs by taking an inventory of the
manpower at the present and finding out the skills and traits still
required to achieve pre-determined goals. An objective analysis of this
situation leads management to state what specific areas development has
to concentrate on.
Implementation – Implementation involves a systematic procedure to

develop the manpower required. This could take the form of job
rotation, getting the staff to "assist” higher staff, attendance at
University Executive Programmes, Conferences, promotions and role
playing.
Evaluation – There is a need for constant evaluation to ensure that the

needs are being met. Figure 9.2 illustrates this commonsense approach
to Management Development Process.
Figure 9.2
Commonsense Approach to Management Development Process
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Management establishes Development process Map out Management

organisation objectives – isolate Management Development Objectives
Development Needs
Evaluate isolated Implement Management

Management Development Programme
Programmes
One of the major purposes of management development is to avoid

managerial obsolescence. Management development programmes are
growing very rapidly in Nigeria. All major corporations and companies
(with over 100 employees) have regular management development
programmes especially for those in the upper and middle organizational
hierarchy. A study of 102 companies indicated: that 85%% had annual
management development programmes in one form or the other. The
duration of the programmes varies from three days to one month. 40%
of these have sent at least three employees overseas in the last two years
for courses of three months to one year duration. The techniques used in
management development programmes in Nigeria are lectures, role
playing, attendance at conferences, short courses overseas, University
evening programmes, in-plant training courses and workshops.
The selection of participants is determined by top management. All

management development programmes in Nigeria are optional;
nevertheless, pressure is exerted on some employees who show little or
no interest in sell development. Employees perceive the opportunity to
attend short management development programmes overseas as a
special recognition and nobody misses the opportunity except in very
rare cases.
3.7.4 Problems Associated with Management Development in

Nigeria
The following are some of the problems associated with management

development in Nigeria as identified by organizations and employees: -
(1) The objective of the training programme is not clearly stated to

the participants. There is no mental preparedness.
(2) Some employees see some development programmes as a few
days off work that are meant for relaxation.
(3) There is no positive reinforcement after the training.
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(4) Some of the programmes are not related to employee needs for
self development and self actualization.
(5) The company does not evaluate the outcome of the programmes.
There are in many instances no examinations – written or oral or
feedback.
(6) The employee does not have the opportunity to put what he has
learnt into practice.
(7) Many management development programmes are boring as the

lecturers speak in general terms.
(8) There is the problem of transfer of learning. Some of the concepts

and principles taught are too academic and very difficult to apply
in real life situations.
(9) Many management development programmes are not properly

played and there are no sequences to the courses offered from
year to year.
(10) There is inadequate support from the executives.
(11) The consultants are not properly selected and do not adapt their
lectures to suit specific organizational needs.
What are the different ways of developing managers? Which of these

methods do you consider most effective and why?
3.7.5 Management Development Methods
Some of the methods of management development have been discussed

in the previous section on employee training. Some more techniques are
mentioned below.
Coaching: This method is ideal for both employee training and

management development. In this method employees are attached to a
supervisor who coaches them on specific concepts. Instant feedback is
given as to how well the employee performs. The advantage is that the
employees are attached to experienced teachers.
Assisting: This is a method of developing subordinates aspiring for

management positions. As "assistant” to a higher office, the employee
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gets assigned duties that expose him to different management functions.

He learns the procedure for handling, specific tasks assigned to him. He
gets a feedback from the manager on how well he performs in his
department or office.
Special Assignments: Special assignments have been used as

successfully as a training technique. Management trainees are often
assigned to special projects such as membership – of a taskforce, given
special board or committee assignments, or asked to resolve problems
originating in any departments – production, personnel or finance.
Conferences, Seminars and Workshops: These are effective method of

development. Management personnel is allowed to attend well
organized seminars, conferences or workshops organized by colleges
and universities. In such conferences scholarly papers are presented by
experts and discussions are centred on them. New techniques and
concepts are examined and participants are encouraged to ask questions
and express their views. Nigerian universities organize many national
seminars, conferences and workshops every year for the enhancement of
management.
Other useful methods in management development include case studies

in which written descriptions of situations are analyzed, problems are
identified and solutions are sought. Another is simulation in which
simulators are used to represent the actual situation as is the case in
training of pilots.
There are also executive games in which problems of top management

are presented in the form of games. The executive game forces the
participants to deal simultaneously with all factors in a business
situation – production, marketing, finance, competition, inflation and so
on.
Detailed discussion on these methods is found in any standard textbook

on Personnel Administration.
3.8 Self Development
At the root of all organizational employee development is I self

development. The desire for an individual to better his lot in an
organization and attain self fulfillment is necessary for the success of
any organizational or group effort. An executive owes I it to himself to
ensure in self development. A manager must want to develop and grow
in ability for any programmes to be successful. An executive does not
have to wait for the organization to force him to grow; those who do,
become obsolete. If a manager wishes to excel, especially in Nigeria, he
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must engage in activities that will identify him as a potential candidate

for success in the organization. Not all managers can reach the top nor
can all be exposed to formal management development programmes
given the limited facilities in Nigeria. It is therefore expected that
management should use their own initiative to enroll in executive
development programmes. As Levinson astutely put it, "Every person
who pursues a career, as distinct from a job holder should expect to
continue his education for the rest of his professional life”. Levinson I
advocated that every manager should establish alternative competence to
increase his sense of independence.
Many indigenous organizations in Nigeria are comparatively small to

offer more than moral support to an executive who wishes to better
himself. Executive obsolescence is here to stay. New technology
breakthroughs are eroding into several professions–making the
conservative executive obsolete. An accounting executive who does not
know that high speed electronic data processing procedures are about to
make him obsolete needs to wake up. The physician who does not know
the inroad that new medical technology is making in his profession is
already obsolete. Whatever the' excuse for inaction, the problem remains
how to build in and maintain adaptive flexibility that will serve a
lifetime.
3.9 Performance Appraisals
One of the key responsibilities of the manager is to evaluate the

performance of his subordinates. The: essence of the evaluation is to
assess their character, attitude, potentials and past performance on the
job. Employee evaluation has .often been called performance appraisal,
performance rating or performance evaluation. Whatever name it is
called, the essence of the rating is to evaluate the employee's strength
and weaknesses.
One of the major reasons for employee appraisal is to obtain information

for promotion, demotion, transfer, pay increase, training and
development and discharge. For the employee, an appraisal gives him a
feedback as to how management perceives his contribution to the
organization. If an employee perceives that he is poorly evaluated, it
could affect his morale; increase his absenteeism rate and tardiness and,
consequently, his overall production. This is why employee evaluation
is expected to be done in the spirit of objectivity, honesty and fair play.
When an official evaluates, he is in effect passing judgement that he has
the competence to evaluate; he knows the employee and has observed
him at work for a long time. Many employees are afraid of evaluation
and have negative feelings about it. Everyday in an organization,
employees informally evaluate one another; even the supervisor is not
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left out. When the official evaluation comes out, employees compare
opinions they hold with the formal evaluation result from their
supervisors. A supervisor is said to be fair or unfair based on
employees’ preconceived opinion of themselves and one another.
3.9.1 Personal Characteristics in the Appraisal Form
There is a litany of personal characteristics that are evaluated during an

appraisal exercise. Some of the major characteristics often included are:
Honesty Judgement Loyalty

Personality Industriousness Attitude
Dependability Persistence Tactfulness
Cooperativeness Resourcefulness Maturity
Adaptability Imaginative ability Motivation
Initiative Enthusiasm
Leadership Aggressiveness
Creativity Skill competency
Certain basic characteristics are emphasized more in certain jobs than in

others. In a sales job, for example, traits such as aggressiveness,
persistence, resourcefulness, creativity, etc. will be emphasized.
Organizations should design their appraisal forms to suit their special
needs.
3.9.2 Performance Appraisal Methods
The most common appraisal methods are discussed below.
The Ranking Method: This is the oldest and the most common
appraisal method in use. The supervisor ranks his subordinates from the
most productive to the least productive.
Graphic Rating Method: This is one of the most popular rating
methods. This technique measures two major areas of employee work
characteristics:
(1) the basic work characteristics such as knowledge, initiative,
dependability, leadership, loyalty, etc.
(2) the employee's contribution to the organization such as quality
and volume of work done.
Paired Comparison Method: This closely resembles the ranking

method. Two employees are compared at' a time and the better one is
noted; then those that are noted are paired again. This is not a popular
method because there: are usually many traits to be evaluated.
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Forced Choice Method: The forced choice method forces the

supervisors to make use of retards. The rater is forced to select a pair of
sentences that best describe the employee. The purpose of this technique
is to minimize bias as his lack of knowledge or inconsistency is easy to
detect from his choices.
Critical Incident Method: In this method the rater is expected to show

incidents in the work situation in which the employee being evaluated
has shown positive or negative influences in work situations. Factors
such as initiative, judgment, creativity, etc. are to be shown.
Field Review Technique: This method allows outside specialists to

evaluate the employee. Because of the cost involved, this technique is
used very sparingly. One of its setbacks is that the outside specialist
does not know the employee nor does he have the necessary information
for an objective evaluation.
Other employee review techniques include peer rating where the

employee's co-workers evaluate his performance. Surprisingly, peer
rating does not differ a great deal from an objective supervisor's rating.
An employee can also evaluate himself. Good motivation can make an
employee to evaluate himself, bring out his strengths and weaknesses
and even suggest ways of improvement.
Evaluation should, at least, be a yearly activity of management. It does

not require a man of exceptional ability to evaluate another. Although
Taft believes that people who make good raters are characteristically
intelligent, emotionally stable and socially skilled, any objective
supervisor who knows the employee and what is expected of him is
capable of giving a valid employee evaluation.
3.9.3 Steps in Employee Performance Rating
The .following steps are recommended as effective steps for an

employee appraisal system:
(1) Prepare the performance requirements. Determine how well you

expect the employee to do his work.
(2) Discuss the performance requirement with the employee and
adjust them as needed.
(3) Observe what the employee doing.

(4) Evaluate his performance against requirements.
(5) Discuss evaluation with employee.
(6) Take appropriate action.
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3.9.4 Pitfalls in Performance Rating
Some of the key pitfalls in performance rating are given below.
(1) Halo Effect –The rater allows one outstanding negative or

positive incident or trait to influence his rating of the employee.
(2) Rating the man and not the job – Subjective evaluation of the
employee based on the rater's likes and dislikes or whether he
gets along with the subordinate or not, or whether he likes his
tribe, religion or language
(3) Rating every employee average –This is the error of central

tendency where the rater sees every employee as average. This
problem often is an escapist attitude. He believes it is the most
convenient and least contestable way out.
(4) Pressure of Time –This is associated with the lack of time that
induces management to rush the appraisal.
(5) Not sharing the result – Here the rater refuses to discuss the
rating with the subordinate. In Nigeria, the open reporting system
makes this a thing of the past.
(6) Recency –Tendency to rate one positively or negatively because

of latest events that took place before the rating.
An analysis 9f 402 respondents in Nigeria shows that on the average,

42% are victims of these pitfalls. 27% conceded that they often
committed the error of rating the man and not the job. Only 42.5% of
Nigerian employees responding to a questionnaire on the subject (n -
402) believe that employee appraisal is useful. A larger percentage,
57.5%, believes that it is useless. The reasons given range from its being
superficial, the lack of knowledge on - the part of the supervisor to give
an informed opinion to "god-fatherism" in the organization.
3.9.5 Purposes of Performance Evaluation
Performance evaluation is not an end in itself; it is a means to an end.

The end is, as pointed out, to help the employee know his weaknesses
and strengths, and help the employer make some basic decisions on how
to distribute organizational favours. Ordinarily, employees who
contribute most to organizational efforts should benefit more than those
who contribute little – that is equity. Perceived inequity forces an
employee to withhold a measure of his efforts toward the attainment of
organizational goal.
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Purpose 9.4
Purposes of Merit Rating Programmes
Blue Collar White Collar Both Blue and

Purpose Employees Employees White Collar
Only only Employees
No % No % No %
Wage and Salary 13 76 93 90 114 69
Administration
Promotion 10 59 82 80 112 73
Training and Development 7 41 72 70 102 61
To help supervisors know
employees 4 41 67 65 101 61
Transfer 7 41 76 74 102 61
Follow-up Interview 5 29 50 49 57 34
Discharge 1 6 39 38 77 46
Layoff 4 24 26 25 44 27
Personnel Research 3 18 28 27 48 29
Total company with merit
rating Programmes 17 100 103 100 166 100
Source: National Industrial Conference Board; Personnel Practices

in factory and office manufacturing studies in personnel policy (New
York, 1964).
3.9.6 Periodic Appraisal
Employees should be appraised periodically. Most organizations in

Nigeria have annual appraisal systems. The formal annual evaluation
should not be a substitute for periodic informal employee appraisal. The
periodic appraisal gives the employee the opportunity to correct
deficiencies before the formal annual evaluation. The main purpose of
an evaluation is not punitive but corrective.
The "periodic" appraisal can assist the supervisor in judging the degree
of trust he can place in his subordinate, and trust in his punctual and
effective performance ( ). Employees have always held it against their
supervisors if they were never told of their in-competency until the last
appraisal. Periodic evaluation helps the supervisor to determine when an
employee's task should be enlarged or diluted. Periodic evaluation
makes the annual formal evaluation easy and predictable as the
subordinate has been receiving feedbacks throughout the year on his
performance. As pointed out, one of the objectives of employee
evaluation is to enable the supervisor to know the employee better. The
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more the number of times an employee is evaluated, the more the

supervisor knows him and the more reliable will be his subordinate's
evaluation. In the Nigerian civil service where it takes at least nine
months to dismiss an employee because of the number of steps required
in dismissal proceedings, in which the burden of proof seems to be on
the supervisor to prove that the subordinate is in fact subject to
dismissal, periodic evaluation is necessary to make the task easier for
the supervisor.
4.0 CONCLUSION
In this unit, you have learnt about employee training and development,
conditions requiring training, objectives of training and how to
determine training needs. You also learnt about the importance of
qualified manpower and management development, self development
and performance appraisals, personal characteristics in the appraisal
form, performance appraisal methods, steps in employee performance
rating, pitfalls in performance rating, purposes of performance
evaluation and periodic appraisal.
5.0 SUMMARY
In this unit, we have discussed employee training and development;

listed and explained the conditions requiring training, objectives of
training and how to determine training needs; discussed the importance
of qualified manpower and management development. We have also
defined self development and performance appraisals; described the
personal characteristics in the appraisal form, performance appraisal
methods, steps in employee performance rating, pitfalls in performance
rating, purposes of performance evaluation and periodic appraisal.
Distinguish between:
(a) Recruitment
(b) Selection
(c) Job design
(d) Job specification
(e) Job description and job analysis.
Gilbert Thomas I. (1961). "Praxeonomy: A Systematic Approach to

Identify Training Needs," Management of Personnel Quarterly.
Vol. vi, No.3, Fall, p. 20.
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Wayne J. Foreman (1967). "Management Training in Large

Corporations, Training and Development Journal. Vol XXI, No.
5, May, pp. 12 – 13.

Drucker, P. (1989). The Practice of Management. Jordan Hill Oxford:




Prentice-Hall.

Management. (6th ed.). New Jersey: Prentice-Hall.
UNIT 2 MOTIVATION
CONTENTS
1.0 Introduction
2.0 Objectives
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3.0 Main Content

3.1 Motivation
3.2 The Motivation Process
3.3 Maslow’s Need Hierarchy
3.4 McGregor’s Postulates
3.5 Need for Achievement
3.6 Herzberg’s Two-factor Theory of Motivation
3.7 What Motivates Employees?
3.8 Herzberg’s and Maslow’s Compared
3.9 Management by Objectives (MBO)
4.0 Conclusion
5.0 Summary
1.0 INTRODUCTION
One of the major problems confronting management is that of

motivating workers to perform assigned tasks to meet or surpass
predetermined standards. It is not easy to motivate an individual, for the
success of any motivational effort depends on the extent to which the
motivator meets the needs of the individual employees for whom it is
intended.
In this unit, we shall be discussing motivation, its process, types of

motivation as propounded by various authorities to enable learners to
comprehend and understand the concept.
2.0 OBJECTIVES
define motivation
list and discuss the hierarchy of needs as propounded by Abraham
Maslow; McClelland, Herzberg and McGregor
explain Herzberg’s two-factor theory of motivation
distinguish between Maslow, McClelland and Herzberg’s theories of
motivation.
3.0 MAIN CONTENT
3.1 Motivation
Motivation is that energizing force that induces or compels and

maintains behaviour. Human behaviour is motivated, it is goal directed.
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It can also be defined as an internal psychological process whose

presence or absence is inferred from observed performance. Motivated
behaviour has three basic characteristics, which are stated as follows:
(1) It is sustained – it is maintained for along time until satisfied;

(2) It is goal-directed – it seeks to achieve an objective;
(3) It results from a felt need – an urge directed towards a need.
3.2 The Motivation Process
A need creates a tension in the individual who moves in a certain

direction in order to achieve the desired objective which reduces the
tension. A satisfied need does not motivate; conversely, an unsatisfied
need motivates. Figure 11.1 below shows the process of motivation:
Figure 11.1 The Process of Motivation
REDUCTION OF
TENSION GOAL TENSION
NEED MOTIVATING ORIENTED SATISFACTION
BEHAVIOUR BEHAVIOUR OF NEED
The process starts with a perceived need, then a tension is created which
starts the motivating behaviour; then there is a move towards the
realisation of the need – a goal oriented behaviour. As soon as the need
is satisfied, the tension relaxes. To motivate an employee, management
must create real or imagined need for the employee to aspire. A real
need could be a desire to achieve through promotion, increase in wages
or enjoyment of increased organisational favours, such as company cars
with a chauffeur. Imagined needs of a staff could be an aspiration to
have coffee at 10.00 a.m. which is the entitlement of successful
executives, to have a secretary, have someone to carry his brief-case
upstairs, have someone to run the office at the sound of the bell or
visitors fill papers before they enter into his office.
For the purposes of this course, terms such as need, desire, aspiration
and drive are used interchangeably. Since every employee has needs, he
is capable of being motivated. The task of management is to determine
what are the valued needs that will make him react according to
organisational desires – increased productivity.
3.3 Maslow’s Need Hierarchy
A hierarchy of needs theory was advocated by Abraham H. Maslow.

According to him, man always has needs to satisfy. These needs can be
classified in a hierarchical order starting from the basic needs to the
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higher order needs. Once a particular need is satisfied, it ceases to be a

motivator of behaviours and another need emerges.
According to this psychologist, these needs can be classified into five as

shown in figure 11.2 below. These are physiological need, safety need,
social need, esteem need and self-actualisation need.
5
Self Actualisation
Esteem
Need
4
Social
Need
3
Safety
2 Need
Physiological
1 Need
Figure 11.2 Classification of Maslow’s Hierarchy of Need
(a) Physiological Need
This is the basic need of people – food, clothing and shelter. These
needs are strongest in man’s life and must be satisfied before other
needs. This need can be satisfied with money. A man who is starting
life needs money to obtain shelter, buy food and clothing. His major
preoccupation will be to ensure that these basic needs are substantially
satisfied. It appears to have a dominating influence than any other need
at this stage of a person’s career. At every stage in the organisation,
management is to recognise that every kobo means much to the
employee. He would trade some comfort for money.
(b) Safety Need

As soon as the physiological needs are satisfied, safety need appears.
An individual’s safety becomes very important to him. Question such as
what happens to me when I get sick? How am I protected from
organisational hazards?; becomes his major concern. Safety need is a
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protection against bodily harm, danger, loss of employment, deprivation

or threat. An employee likes to know that his employment is permanent.
The loss of his job could induce him to seek ways of satisfying his
physiological need. To encourage productivity, management may
threaten him with the possibility of loss of employment. The
organisation should help to solve a person’s dependency need. The
employee gets worried if he is not a confirmed staff or is subjected to
discrimination or arbitrary managerial action. Safety need could indeed
be very strong in an individual.
(c) Social Need
This need is often referred to as acceptance need. The individual has
satisfied his two basic needs and wants acceptance, to love and be loved.
He values friendship, affection and the sense of belonging. Affection
need, esteem need and self-actualisation are secondary needs. They are
seldom satisfied by money. At this stage, the individual belongs to
small clubs or informal groups at the workplace.
(d) Esteem Need
This is the fourth need. At this stage, the individual has need for
recognition, accomplishment, achievement and the need for self-respect.
He loves to take responsibilities and prove himself. The esteem need is
the “ego” need. He wants his contributions to be recognised and
appreciated by management and co-workers.
The feeling of independence, professionalism and confidence is highest
at this stage. It is important for management to recognise and reward
him for his contribution to the organisational effort. When people who
work with him, and management, appreciate him by helping to build up
his ego, self-esteem, confidence, power and prestige need are satisfied.
(e) Self-actualisation Need
This is the last in Maslow’s hierarchy of needs. This need is often
called fulfillment need. This is the need for an employee to reach his
highest potential at workplace or in conquering his environment. As
Maslow succinctly puts it, “what a man can be, he must be”. A man is
actualised when he feels he has reached the highest he is capable of
reaching in organisation or life. The feeling of competency, being the
best or having achieved manifests itself.
Maslow believes that an average citizen satisfies perhaps 85 percent of

his physiological needs, 70 percent of his safety needs, 50 percent of his
love needs, 40 percent of his esteem needs, and 10 percent of his self-
actualisation needs. This means that a majority of people do not satisfy
their self-actualisation needs. The need for self-actualisation manifests
itself in many ways in Nigeria. People like to be seen and referred to as
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professionals. For example, many people who have achieved status

through the accumulation of wealth like to be called Chiefs, or Alhajis,
teachers who hold Ph.D like to be called “Doctor”, those who do not,
become ashamed of being called “Mr” and opt for “Professor”,
professionals like to be called Engineer…Architect…Barrister…. Even
women who have earned these titles, like to be addressed as Dr., Mrs….;
Barrister Mrs…, etc. These are because of the prestige that the titles
carry.
Maslow has succeeded in classifying human needs at least as an aid in

thinking for management. What is being disputed in Maslow’s theory is
the issue of successive saturation. One can easily see the interrelatedness
in human needs. In fact, by satisfying one need, the other needs are
apparently receiving attention for the dignity of human beings is
predicated on the satisfaction of all the needs.
Figure 11.3 shows the different behaviours associated with need cycles.
Figure 11.3 Behaviour Associated with Need Cycle
Success
Need (Motives) Reinforced Tension
Physiological, Safety, Social, Behaviour Released
Esteem (EGO), Self-
Actualisation
Tension Goal Goal
and Drive Oriented (Incentives)
Behaviour
Constructive
Substitute Behaviour
Goal
Aggression
Failure
Withdrawal
Displacement
Rationalisation Defensive
Repression Behaviour
Projection
Apathy, etc.
Source: Howard M. Carlisle: Management: Concepts and Situations,

Chicago: Science Research Associates, Inc., 1976, p. 272
As shown in the table, the needs or goals are the drives that create the
tension that are fulfilled by goal oriented behaviour. Should the need
remain unfulfilled as the lower part of the loop shows, new tension is
created and a new goal oriented behaviour is made to satisfy the need.
If the need is satisfied as in the upper loop, tension is released, a new
goal emerges and tension is created.
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Failure to achieve an objective gives rise to a series of defensive

behaviour such as aggression, withdrawal, depression and projection.
These are discussed later.
3.4 Need for Achievement
Closely related to Maslow’s hierarchy of needs is McClelland et. al’s

need for achievement postulate (n – achievement). According to
McClelland, some people achieve more than others because they have a
greater desire to achieve. McClelland and his colleagues discovered that
those who had a greater need for achievement were neither high risk
takers, nor low risk takers. They appeared to be realistic about their
goals and set moderate challenges for themselves. They were motivated
by achievement and saw money as a measure of their progress; so were
status and power which were not by themselves needs but were socially
accepted measures of success in the satisfaction of the need to achieve.
A supervisor who has a need for recognition among his peers or

colleagues will strive for status and recognition. All people who have n-
achievement are constantly interested in feedback as to the extent that
they are realizing their objectives.
3.5 McGregor’s Postulates
McGregor has some basic assumptions regarding human behaviour. An

understanding o these assumptions are important for managers in
directing human beings. These assumptions are classified into Theory X
and Theory Y.
Theory X – The basic assumptions of this are:
1. Work, if not downright distasteful, is an onerous chore to be

performed in order to survive;
2. The average human being has an inherent dislike of work, and

will avoid it if he can;
3. Because of this human characteristic dislike of work, most people

must be coerced, controlled, directed or threatened with
punishment to get them to put forth adequate effort toward the
achievement of organizational objectives;
4. The average human being prefers to be directed, wishes to avoid

responsibility, has relative little ambition, wants security above
all.
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Theory Y – the postulates of this theory are:
1. The expenditure of physical energy and mental effort in work is

as natural as play or rest;
2. External control and the threat of punishment are not only means
for bringing about effort towards organisation’s objectives. Man
will exercise self-direction and self-control in the service of
objectives to which he is committed;
3. Commitment to objectives is a function of the rewards associated

with their achievement;
4. The average human being learns, under proper conditions, not

only to accept but seek responsibility;
5. The capacity to exercise a relatively high degree of imagination,

ingenuity and creativity in the solution of organizational
problems is widely, not narrowly distributed in the population;
6. Under the conditions of modern life, the intellectual potentialities

of the average human being are only partially utilized.
As McGregor notes, behind every management action or decision are

assumptions about human nature and human behavior. Those managers
who subscribe to theory Y behave according to the postulates in theory
Y. They believe that human beings like to take responsibilities and that
commitment to an objective is a function of the rewards associated with
it. These rewards are the needs that will motivate them to act. The
rewards create the tension in the individual that subsides when realised.
How we act or react to other people is influenced by our assumptions
about those people. If we believe that an employee has special dislike
for work and will avoid it if he can; if we believe that he is at work
because he needs money to satisfy his physiological needs, we will
attempt to motivate him with money and threaten him with loss of
employment (security need) if he does not put in a measure of his effort.
A person’s attitude towards work is not inherent, it is a learned
behaviour. Need appears to be universal; even people whose basic
needs are satisfied, still have the need for achievement, status and
acceptance. It is not surprising that people whose parents have amassed
wealth for them and their entire lineage still struggle to achieve and gain
individual recognition, status and power.
A motivated employee has adult characteristics. He enjoys

independence, has longer, deeper and more consistent interest in what he
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does. But a frustrated employee is forced to act like a child. He has

dependency syndrome with erratic, casual or shallow interest.
3.6 Herzberg’s Two-factor Theory of Motivation
Herzberg’s two-dimensional theory of motivators and dissatisfiers has

received enough publicity in the area of motivation. These two-factor
theories have often been called “Motivation Maintenance Theory”,
“Motivation-hygiene Theory”, or “Dual Factor Theory”.
Motivators: According to Herzberg, the motivators are:
1. Achievements
2. Recognition
3. Responsibility
4. Advancement
5. Work itself.
These are factors that will induce an individual to put forth adequate
effort in the accomplishment of organisational goals.
Hygiene Factors or Dissatisfiers: The dissatisfiers are:
1. Relationship with supervisors

2. Working condition
3. Relationship with peers
4. Personal life
5. Compensation (money).
Herzberg et. al, observed that an improvement in the hygiene factors,

(company policies and administration, supervision, working condition,
interpersonal relations, personal life, money, status and security) would
serve to remove the impediments to positive work attitudes. When these
factors deteriorate to levels below that which the employee considers
acceptable, then job dissatisfaction ensures. However, the reverse does
not hold true. When the job context can be characterised as optimal, we
will not get dissatisfaction, but neither will we get much in the way of
positive attitudes.
Herzberg did not advocate the elimination of hygiene factors; instead he

feels that they are “housekeeping chores” that must be done. If they are
absent, motivators will not work as employees will complain and find
unnecessary faults.
To encourage motivation, it is advocated that employers must encourage

job enrichment. This involves making job meaningful to the job holder
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so as to enable him derive satisfaction from the work. Good job design
helps the employee to derive recognition, a sense of achievement,
growth, and responsibility.
3.7 What Motivates Employees?
Evidence from different empirical studies point to the fact that there is
no single motivator for everyone. It is equally true that no single force
motivates an individual every time. Needs differ and the importance
attached to needs by different people also differ.
M. Scott Myers raised three important questions about motivation.

These three questions and the answers are as follows:
(9) What motivates employee to work effectively?
A challenging job which allows a feeling of achievement, responsibility,

growth, advancement, enjoyment of work itself and earned recognition.
(10) What Dissatisfies Workers?
Most factors peripheral to the job – work rules, lighting, coffee breaks,
titles, seniority rights, wages, fringe benefits, and the like.
(11) When do workers become dissatisfied?
When opportunities for meaningful achievement are eliminated and they

become sensitized to their environment and begin to find fault.
The study corresponds to Herzberg’s study. The answers to his first

question correspond with Herzberg’s motivators while the answer to his
second question corresponds to his dissatisfiers. Although Herzberg’s
theory is widely discussed, it has been seriously contested. For
example, Herzberg listed money as a dissatisfier, evidence points to the
fact that money can be either a motivator or a dissatisfier depending on
the individual’s pressing need to accept a job and work hard at it. As
long as the need persists, it will continue to be a motivator of behaviour.
If the individual works hard but does not receive what he considers as
adequate remuneration for the effort expended, he could be dissatisfied.
It is evident that management can motivate people by designing jobs so
as to satisfy motivational needs. It is clear that any job that robs people
of their needs for achievement, recognition, acceptance and self-
fulfillment will tend to dissatisfy. Money, for example, is not an end
itself. People need money to achieve independence, recognition from
the society, status or privileges bestowed on people by society because
of their wealth. When a person has special need for these, he works
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hard to earn more money for the attendant blessing not for the money
itself.
3.8 Herzberg’s and Maslow’s Compared
Herzberg’s two dimensional theory and Maslow’s hierarchy of needs

have much in common. A comparison of the two theories points out
that the high order needs of Maslow (affection, esteem and self-
actualisation needs) correspond with Herzberg’s motivators while the
dissatisfiers (Hygiene factors) correspond with Maslow’s basic needs.
A person who is in need of esteem will be motivated to achieve it which
could be made possible by amassing wealth, and gaining recognition;
success breeds success and reinforces a person’s esteem of his capability
to achieve greater success. When a person achieves, he develops a sense
of importance and power and gets a feeling of self-actualisation as he
perceives that he has full control of his destiny or environment and has
perhaps achieved all that he is capable of achieving in life or a feeling of
being “the greatest”.
It is through the linkage of performance and reward that an individual

achieves individual motivation. The identification of need and reward is
a pre-condition for achieving sustained motivation and consequently
increased productivity. Table 11.4 shows the relationship between the
two theories.
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Figure 11.4 Comparison of Maslow’s need Theory and Herzberg’s

Motivator/Hygiene Factors
Maslow Needs Herzberg’s

Motivators
Motivation
Self Actualisation Achievement
Need Work itself
Advancement
Maintenance
Ego (Esteem) Responsibility
Need Recognition
Social
Need Relation with co-workers
& Peers Supervisors
Safety Company Policy
Need Working Conditions
Salary/Compensation
Physiological Personal Life
Need
Path-Goal Theory
This theory states that an employee will behave in a way that will lead to
the attainment of valued, desired goals which he believes, is attainable.
Need creates a tension which an employee tries to reduce by a goal
oriented behaviour. An employee in this circumstance assumes three
major things, namely:
(1) Goal availability. The employee believes that his goal can be
attained through the instrumentality of the organisation.
(2) Goal Values. The reward offered by the enterprise is one the
employee desires or values.
(3) Perceived Effort. Reward probability.
It is believed that equity will prevail in the organisation. It is hoped that

the organisation will consistently reward the behaviour it values. As
pointed out, it is left for management to activate or create needs – real or
imaginary to induce the tension. A manager that identifies valued needs
and rewards effort, will motivate employees.
3.9 Management by Objectives (MBO)
Employees are also motivated when management integrates their goals

into the organisational goal through MBO. Management by Objectives
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is one of the latest methods advocated by Peter Drucker et al for

achieving organisational objectives. The basic concept is that top
executives and managers should all be involved in determining company
objectives and define major areas of responsibility, and integrate into
them the goal of the employees.
Odiorne defines MBO as:
A process whereby superior and subordinate managers of an

organisation jointly identify its common goals, define each individual’s
major areas of responsibility in terms of the results expected of him and
use these measures as a guide for operating the unit and assessing the
contribution of each of its members.
Carroll sees MBO as a process by which managers and their

subordinates participate jointly in setting goals, activities, and target
dates as well as the evaluation of performance as it relates to established
objectives.
Management by Objective is one of the most effective ways of

integrating activities and balancing organisational objectives. Peter
Drucker be consistent postulates that company objectives should be set
in all the major areas such as:
1. Productivity
2. Market standing
3. Innovation
4. Physical and financial resources
5. Profitability
6. Manager performance and development
7. Public relations or responsibility, and
8. Worker performance and attitude.
MBO converts company objectives into individual goals and as a result,

it contributes to higher levels of job satisfaction. By integrating
employee goals to company goals, there is goal congruency which will
help to elicit employee commitment with resultant increase in
productivity. MBO is often called “management by results”. By this
method, both the manager and employees are evaluated by results
achieved.
Setting the Objective
Figure 11.5 below presents the different steps to be taken to draw up the
organisation goals.
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4.0 CONCLUSION
Motivation as a management tool to getting jobs done for the attainment

of organisation’s objective are treated. We define motivation, listed and
discussed the motivation process while the various theories propounded
by authors such as Maslow, McClelland, Herzberg and McGregor were
also explained.
5.0 SUMMARY
In this unit, we have defined motivation and discussed motivation from

the perspectives of Abraham Maslow, McClelland, Herzberg and
McGregor. Graphic descriptions were made of the various theories
propounded these authors for easy comprehension and understanding.
We also distinguished between the various theories while MBO as a
motivating factor was also discussed.
1. Give a lucid definition of motivation as you understand it.

2. Distinguish between Maslow’s, McClelland’s, Herzberg’s and
McGregor’s theories of motivation.

Drucker, P (1989). The Practice of Management. Jordan Hill Oxford;

Jones, G. R and George, J. m. (2003). Contemporary Management (3rd



Prentice Hall.

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UNIT 3 FORECASTING
CONTENTS
1.0 Introduction
2.0 Objectives
3.0 Main Content
3.1 Forecasting
3.2 Need for Forecasting
3.3 Essential Elements of the Forecasting Process
3.4 Importance of Forecasting
3.5 Forecasting Techniques
4.0 Conclusion
5.0 Summary
1.0 INTRODUCTION
Since planning is “a systematic, economic and rational way of making

decisions today that will affect tomorrow”, then forecasting becomes an
integral part of the planning process especially strategic planning which
is long-range in nature. Accordingly, it is necessary to make accurate
forecasts in the following areas:
(a) Economic developments. The economic conditions of the country

as well as those of the whole world would have significant effect
on the operations of an organisation. This will include predictions
relating to gross national product (GNP), currency strength,
industrial expansion, job market, inflation rate, interest rate,
balance of payments, etc. Good economic trends assist in the
growth of the company. On the other hand, depression of 1929 –
1930 put many companies out of business. The knowledge about
economic trends would assist the management in making plans
for their organisation as befitting response to such trends.
(b) Technological forecasts. These forecasts predict the new

technological developments that may change the operations of an
organisation. The advent of the transistor put the vacuum tube
totally out of business. The age of the electronic calculator
totally wiped out the market for slide rules. An aggressive
organisation keeps up to date with new technological
developments and readily adopts new methods to improve
performance.
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(c) Competition forecasts. It is equally necessary to predict as to

what strategies your competitors would be employing to gain in
the market share, perhaps at the cost of your market share. This
is constantly happening in the airline business. The competitor
may be working to employ a different marketing strategy for the
product or bringing out a substitute for the product which could
be cheaper and easily acceptable.
(d) Social forecasts. These forecasts involve predicting changes in

the consumer tastes, demands and attitudes. Consumers have
already established a trend for convenience, comforts and for
products that are easy to use and easily manageable. In the
1970’s, the trend was to buy small economic cars. In the 1980’s,
the trend is back to luxury and comfort. Partly, it may depend
upon the general economic trends and partly on the consumer
tastes. Diesel cars were very popular in 1979 – 1980 and they
have totally lost popularity in 1984 – 1985. Jacket, highly
popular in the 1960’s is unheard of today.
(e) Other forecasts. In addition to the above major aspects, there are
other critical areas with impacts on the planning process, where
forecasting is equally important. These areas include:
(i) New laws and regulations. Organisations are on a constant watch

for any new laws passed relating to consumer protection or
dumping of chemical wastes, anti-trust laws, laws about truth in
advertising have all had a major impact on the operations of
many organisations which had to make extensive changes in their
operational style.
(ii) Political events. In politically stable countries, there may not be

any dramatic political changes except that a different party in
power may be more socialistic in nature, as in France currently,
and may interfere in private business maters. In more volatile
political situations, the organisations must be prepared for the
worst. The cases of Kennecot copper and ITT in Chile, during
the communist takeover are classical examples of being caught
unaware. Additionally, most countries have become so
interdependent and organisations so multinational that political
events in one country affect the organisational events in others.
The oil embargo by some Middle East countries in 1973 affected
almost all other countries.
(iii) Labour supply. The labour force is changing in its structure.

There is demand for more and more skilled and professional
personnel. Unskilled and repetitive tasks are being taken over by
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computers and robotics. People are becoming more educated.

More women are in the workforce. Workers want more leisure
time. All these developments and their trends affect the labour
supply and may increase competition in its procurement.
Accordingly, organisations must be adequately prepared to meet
these challenges if they plan on expansion or modernisation of
their plants and operational activities.
2.0 OBJECTIVES
define forecasting
why forecasting was necessary
discuss the importance of forecasting
list and explain the various forecasting techniques.
3.0 MAIN CONTENT
3.1Forecasting
Forecasting, as defined by Webster’s New Collegiate Dictionary “is a

prediction and its purpose is to calculate and predict some future event
or condition”. Forecasting implies the act of making a detailed analysis
of the future and this knowledge is an essential and important ingredient
of the planning process. Planning is impossible without either predicting
the future or making intelligent assumptions about it. This importance
was emphasised by Henry Fayol (1949), who observed that “plans are a
synthesis of various forecasts: annual, long-term, short-term, and
special”.
Forecasting may be defined as a form of intuitional and considered

judgements based on feelings and opinions known as “guessing” or it
could be based upon a rational study and analysis of pertinent data,
known as “scientific forecasting”. Forecasting depends upon an analysis
of past events and current conditions with a view to drawing inferences
and conclusions about future events. These view points lead to the
following characteristics of forecasting:
3. It involves future events. The impact of these future events has to

be considered in the process of planning.
4. Scientific forecasts are inferences drawn from past and present

relevant events which mean all the factors that affect
organisational functions. The assumption is made that these
events are likely to occur in the future, if the conditions remain
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similar or the anticipated changes in the conditions are

incorporated in the analysis and conclusions.
5. The analysis of past and present events is conducted by scientific,

mathematical, and statistical techniques, rather than opinions,
because they are much reliable than simple judgements.
3.2 Essentials of the Forecasting Process
Whether the forecasting is contemplated on a short-term or long-range

basis, there are some common elements of the forecasting process as
described by J.W. Redfield (1953). These are:
1. Prepare the groundwork. The groundwork preparation requires a

thorough study, investigation and analysis of the company, its
products, its market share, its organisational structure and the
industry. The investigation will involve the past performance of
all these factors, their growth over a period of time and the extent
of their interrelationships and interdependence. The aim is to
build a foundation on which future estimates can be based.
2. Establishing future business. The future expectancy of the

business can be reasonably computed from the past data as well
as the input from the key executives of the organisation, sales
personnel and other specialists. This forecast is developed with
the participation of the key personnel and is officially
communicated to all. Thus, all these people assume
responsibility for meeting these forecasts and accountability for
any deviations from this forecast.
3. Comparing actual with estimated results. The forecast estimates

……. growth and results can be measured and compared. If there
are significant variations between the two, one way or another,
the reasons for such deviations can be investigated and analysed.
4. Refining the forecasts. In the light of any deviations found, the

forecast can be refined to be more realistic. If some conditions
have changed during the periodic evaluation, then the new values
of the variables can be incorporated in the estimates. Thus, these
constant revisions and refinements and improvements would add
to the experience and skill in forecasting, since proficiency in
forecasting can only be gained through practice and experience.
Why is forecasting so important? Give reasons.
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3.3 The Importance of Forecasting
Forecasting plays a pivotal role in the process of modern management.

It is an important and necessary aid to planning and planning is the
backbone of effective operations. Many organisations have failed
because of lack of forecasting or faulty forecasting on which the
planning was based. The more accurately the future conditions can be
predicted, the better and sounder are the plans and high probability of
success of these plans. This importance is comprehensively stated by
Louis A. Allen (1964), as follows:
A systematic attempt to probe the future by inference from known facts

helps integrate all management planning so that unified overall plans can
be developed into which divisional and departmental plans can be
meshed. It enables a company to commit its resources with greatest
assurance to profit over the long term. By helping to identify future
demand patterns, it facilitates development of new products.
Forecasting is widely used today, and some of these forecasts, especially

the short-term ones are fairly reliable. Some forecasts, using scientific
methods or instrumentation can be accurately made. Short-range
weather forecasting, forecasting the path of meteorites and comets or
solar and lunar eclipses is quite accurate. However, accuracy becomes
less dependable if we extend forecasting farther into the future.
Forecasting about human behaviour or situational trends is much more

difficult to assess and may result in faulty estimates. How people will
respond to certain actions taken by the organisation is very difficult to
predict. Perhaps, one of the classical examples of failure in correctly
forecasting the economic trends and people’s attitude is the total failure
of Ford Motor Company’s “Edsel” car, which was built after a thorough
investigation of all the factors that determine future events. Bulova
Watch Company suffered huge losses when it failed to accurately
forecast the full impact of digital watches. IBM’s correct forecast of the
impact of its third generation computer system 360 was a major
benchmark in the continuing success story of IBM.
The uncertainty of future events overshadows the fact that even the most
skilled forecasters using the most sophisticated tools and techniques
make major mistakes in making predictions. An interesting example
would be the faulty predictions about the populations of America for the
1970’s and the 1980’s, made in the 1950’s. The actual population was
much less than anticipated. Some of the assumptions upon which these
predictions were based did not include variables that became apparent
later on in time. These variables were legal abortions, social attitudes
towards birth control, and a decline on social pressures to have children.
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It will be interesting to look at some of the historical forecasting errors:
1. Daniel Webster (Senate speech, 1848), about acquiring the West,

“I have never head of anything and I cannot conceive of anything
more ridiculous, more absurd and more affrontive to all sober
judgement than the cry that we are profiting by the acquisition of
New Mexico and California. I hold that they are not worth a
dollar”.
2. Henry Adams (1903) – on world collapse. “My figures coincide

in fixing 1950 as the year when the world must go to smash”.
3. Admiral William D. Leahy to President Truman (1945) on the

atomic bomb, “That is the biggest foolish thing we have ever
done…. The bomb will never go off, and I speak as an expert on
explosives”.
All these aspects show how important forecasting is to the world,

sometimes when it is correct and acted upon and sometimes when it is
incorrect and not acted upon.
3.4 Forecasting Techniques
The future can never be known with certainty but there are some
techniques that have proved effective in reducing the degree of
uncertainty. There are basically two broad categories of forecasting
techniques. These are:
1. Qualitative techniques
2. Quantitative techniques
1. Qualitative techniques. These techniques are primarily based

upon judgement and intuition and especially when sufficient
information and data is not available to that complex quantitative
techniques cannot be used. Secondly, quantitative methods are
based on the analysis of the past data and its trends which may or
may not remain the same. Thirdly, they follow a certain pattern
and do not provide for accommodating any unexpected
occurrences. On the other hand, qualitative forecasting
techniques emphasise human judgement which may identify
unexpected future threats or opportunities. Some of the widely
used qualitative methods are (Chambers et. al., 1971):
(a) Jury of executive opinion. This is the method by which the

relevant opinions of experts are taken, combined and averaged.
For example, the managers of various divisions could be asked
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about the profitability of introducing a new product and a

judgement made on the basis of their opinions. These opinions
could be taken on an individual basis or there could be a
brainstorming group session in which all members participate in
generating new ideas that can later be evaluated for their
feasibility and profitability. This method is fast, less expensive
and does not depend upon any elaborate statistics and brings in
specialised viewpoints. Its main disadvantage is that it is based
on subjective opinions which may be overly optimistic if the
business conditions are good and may be overly pessimistic if
economic conditions are not favourable.
(b) Opinions of salespersons. This approach involves the opinions of

the sales force and these opinions are primarily taken into
consideration for forecasting future sales. The sales people,
being closer to consumers, can estimate future sales in their own
territories more accurately. Based on these and the opinions of
sales managers, a reasonable trend of the future sales can be
calculated. These forecasts are good for short range planning
since sales people are not sufficiently sophisticated to predict
long term trends. This method, known as the “grass roots”
approach lends itself to easy breakdowns of product, territory,
customer, etc. which makes forecasting more elaborate and
comprehensive.
(c) Consumer expectations. This method involves a survey of the

customers as to their future needs. This method is especially
useful where the industry serves a limited market. Based on the
future needs of the customers, a general overall forecast for the
demand can be made. These surveys are less costly even though
the future needs do not necessarily mean future commitments to
buy, since the needs may change depending upon circumstances.
This is also known as the “Survey method” or the “Marketing
research method” where information is obtained concerning
consumer buying preferences, advertising effectiveness and is
especially useful where the target market is small such as buyers
of industrial products, and where the customers are cooperative.
(d) The Delphi method. The Delphi method, originally developed by

Rand Corporation in 1969 to forecast military events, has become
a useful tool in other areas also. It is basically a more formal
version of the Jury of Opinion Method. A panel of experts is
given a situation and asked to make initial predictions about it.
On the basis of a prescribed questionnaire these experts develop
written opinions. These responses are analysed and summarised
and submitted back to the panel for further considerations and
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evaluations. All these responses are anonymous, so that no

member is influenced by other’s opinions. This process is
repeated until a consensus is obtained. This method is very
useful where either the past patterns are not available or where
the past data is not indicative of future events. This technique is
highly useful in problems like future energy needs, possible after-
effects of a nuclear war or probable expected social changes, etc.
2. Quantitative techniques. These techniques use statistical analysis

and other mathematical models to predict future events, primarily
based upon past activities. Some of the typical techniques
employed are:
(a) Time series analysis. This analysis is based on the assumption

that past activities are good indication of future activities. The
past trends are extended into the future barring any unforeseen
circumstances. This method is quite accurate where future is
expected to be similar to the past. These techniques are fairly
sophisticated and require experts to use these methods.
3. Seasonal variation (S). These are changes–up or down

movements in respect to secular trend, occurring within a period
of 12 months – and recurring annually, brought about by certain
events. For example, sales of consumer items increase prior to
Christmas due to gift giving tradition. The sales of automobiles
in America are much higher during the last 3 – 4 months of the
year due to the introduction of new models. This data may be
measured monthly or quarterly.
Since these variations repeat during a period of 12 months, they

can be predicted fairly accurately. Some factors that cause
seasonal variations are:
(i) Season and climate. Changes in the climate and weather

conditions have a profound effect on sales. The sale of umbrellas
increases on a rainy day. During winter, there is a greater
demand for woollen clothes and hot drinks while summer
indicates sales increases in fans and air conditioners.
(ii) Customs and festivals. Customs and traditions affect the pattern
of seasonal spending. Mother’s day, Valentine day in America
see increase in gift sales preceding these days. In India, festivals
like Baisakhi and Deewali mean a big demand for sweets. It is
customary all over the world to give presents to children when
they graduate …………most students graduate, is time for
presents benefiting the young.
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An accurate assessment of seasonal behaviour is an aid in

business planning and scheduling as in the area of production,
inventory, personnel, advertising, etc.
4. Cyclical variations (C). These are the changes that have taken
place as a result of economic booms or depressions. These may
be up or down and are recurrent in nature and have a duration of
several years. The cyclical movements vary in length – usually
lasting from 2 to 10 years – and also differ in intensity or
amplitude and each phase of movement changes gradually into
the phase which follows it. Some economists believe that the
business cycle completes four phases every 12 or 15 years.
These four phases are: prosperity, recession, depression, and
recovery. However, there is no agreement on the nature or causes
of these cycles.
Even though, measurement and prediction of cyclical variations

is very important for strategic planning, the reliability of such
measurements is highly questionable for the following reasons:
(i) These cycles do not occur in regular intervals. In the past 25

years in America, it is estimated that the peaks in the cyclical
activity of the overall economy occurred in August in 1957, April
in 1960, December in 1969, November in 1973, and January in
1980 (Berenson and Levine, 1983). This shows that they differ
widely in timing, intensity and pattern, making reliable
evaluations of trends very difficult.
(ii) The cyclic variations are affected by many erratic, irregular and
random forces which cannot be isolated and identified separately,
nor can their impact be measured accurately.
5. Irregular movements (I). These variations are accidental, random,

and due to chance factors, thus wholly unpredictable. These
variations are those that can be ascribed to general trend, seasonal
variations or cyclical changes. The irregular variations may be
caused by such isolated incidents as floods, famines, strikes, or
wars. Sudden changes in demand or a breakthrough in
technological development may be included in this category.
Accordingly, it is almost impossible to isolate and measure the
value and impact of these erratic movements on forecasting
model or technique.
It is traditionally acknowledged that the value of the Time series

variable (Y) is a function of the impact of variables trend (T), seasonal
variation (S), cyclical variation (C), and irregular variation (I). These
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relationships may vary depending upon assumptions and purposes. The

effects of these four components might be additive, multiplicative or a
combination thereof in a number of ways. However, the traditional time
series analysis model is characterised by multiplicative relationship, so
that:
Y=TxSxCxI
This model is appropriate for those situations where percentage changes

best represent the movement in the series and the components are not
viewed as absolute values but as relative influences. Another approach
to define the relationship may be additive, such as:
Y=T+S+C+I
This is useful when the variations in the time series can be separated and
traced to each of these four parts, and measuring each part
independently.
(b) Causal models. These models are more complex in nature and
involve interrelationships of many variables tied together in a
quantitative model. The sales, for example, are not only a
function of time but also depend upon many other variables like
changes in personal disposable income, credit availability, etc.
All these variables, in addition to past sales, would have some
causal effects on sales. Some of the more sophisticated causal
models are the econometric models which are based upon
complex relationships of many variables that would affect the
outcome in the future. These models are primarily used to
predict economic trends and are based on a multitude of factors,
probabilities and assumptions. Various related variables are
taken to develop various simultaneous equations which are
solved for different values of variables. This technique is
particularly used in projecting Gross National Product, and other
complicated economic trends.
Duncan (1975) has indicated that econometric models are used in

predicting the student enrolment at universities. The variables that
affect the size of student enrolment is determined. These variables may
include state and city population, average family size, average family
income, population movement trends and the current enrolment size.
Econometric models would use past data to show the degree of
relationship among these variables. The values of these variables and
their relationships would be projected into the future to determine the
student enrolment for the new few years.
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According to Chakravarti (1968), the quantitative techniques of

forecasting have the following limitations:
(a) The conclusions derived from quantitative models are only as

good as the assumptions and judgements made about the
variables that are put into the model. Faulty assumptions will
yield inaccurate results.
(b) It is very unlikely that the set of causes that existed in the past
will continue to persist in the future. The current and continuing
dynamic and volatile social and technological environment makes
the assumption of consistency even more invalid. Additionally,
the causes may simply be an association of facts rather than
provable reasons.
No matter what model or method is used, forecasting basically rests on

human judgement. So, forecasts should not be considered as scientific
instruments for being accurate and reliable. The forecasts should serve
as guidelines and not as indicators of certainty. Henry Albers (1969)
has summarised his assessment of forecasting:
A successful forecast is something of a miracle and often occurs for the

wrong reasons. However, it should not lead to the assumption that
nothing has been accomplished. There are some good “rule of thumb”
forecasts. A part of the problem is that too much is expected from
forecasting. People want more precise answers than are possible in an
environment characterised by uncertainty.
While forecasting is as much an art as science, some steps can be taken

to improve the quality of forecasts. The assumptions, upon which the
model is based, must be objective and realistic. Over-optimism and
over-pessimism could distort the validity of assumptions. The collection
of relevant information and facts is equally important. Lack of adequate
information is as undesirable as redundant information. Forecasting
requires high degree of skill and hence the process must be undertaken
by specialists. However, there should be total and complete
communication between the preparer of the forecast and the user of the
forecast. All assumptions and elements should be completely
understood by both. Finally, the forecasting technique must fit the task.
The technique should not be complicated if the situation demands a
simpler assessment.
4.0CONCLUSION
We have discussed forecasting and its importance to management

functions. We have also highlighted, itemised and explained the
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essential elements of forecasting process and forecasting techniques. It

is believed that you will do well to research into more literatures on this
topic for better understanding and comprehension.
5.0 SUMMARY
In this unit, we have defined forecasting and identified the essential

elements of forecasting process. We also emphasised the importance of
forecasting while the techniques used in forecasting were also discussed
in detail.
Explain in detail the time series analysis as applied to forecasting. What

are the specific situations in which the time series analysis can be
effectively applied?
Howard M. Carlisle: Management: Concepts and Situations, Chicago:

Science Research Associates, Inc., 1976, p. 272.



University of Chicago Press Ltd

Prentice-Hall

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UNIT 4 DELEGATION AND DECENTRALISATION OF

AUTHORITY
CONTENTS
1.0 Introduction
2.0 Objectives
3.0 Main Content
3.1 Delegation and Decentralisation of Authority
3.2 Delegation
3.2.1 Key Principles of Delegation
3.2.2 Absoluteness of Accountability
3.2.3 Principles of Unity of Command
3.2.4 Failure to Delegate
3.2.5 Effective Delegation
3.2.6 Combating Barriers to Delegation
3.3 Decentralisation
3.3.1 Task Specialisation
3.3.2 Span of Control
3.3.3 Factors that affect Span of Management
3.4 Graicunas Theory
3.5 Empirical Research Findings
4.0 Conclusion
5.0 Summary
1.0 INTRODUCTION
In this unit, you will be introduced to delegation of responsibilities and
decentralization of authority. You will learn about the key principles of
delegation, why executives find it difficult to delegate, overcoming
barriers to delegation. You will also learn about task specialization,
span of control, factors that affect span of management as well as
graicunas theory.
2.0 OBJECTIVES
define delegation and decentralisation
list and discuss the key principles of delegation
explain the reasons why people fail to delegate and how to combat
the barriers to delegation
highlight and describe the factors that affect span of management
discuss graicunas their and empirical research findings on
decentralisation.
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3.0 MAIN CONTENT
3.1 Delegation and Decentralisation of Authority
3.2 Delegation
Delegation is the organizational process that permits the transfer 'of

authority from a superior to a subordinate. Delegation of authority
empowers a subordinate to make commitments, use resources and take
action in relation to duties assigned to him. No organization can function
effectively without delegation. The division of 'an organization into
units (departmentalization) involves delegation. Delegation originates
from the fact that one person alone cannot successfully discharge all the
responsibilities in an organization. "In essence delegation of authority
means that a subordinate has the power to make decisions and to act
within explicit limits without checking with superiors”.
Delegated authority enables the superior to share responsibility with his

subordinate. When one delegates, three major factors are implicit:
(a) There is assignment of responsibility.

(b) There is a delegation of authority.
(c) There is a creation of accountability.
Delegation involves accountability. Accountability means answering for

the use of your formal authority by someone else. Delegation of formal
authority to another person does not relieve one of the necessities of
accounting for it. A subordinate must account for the use of delegated
authority because an obligation is created. A subordinate is held
responsible for assigned tasks and he is accountable for the satisfactory
completion of the duty.
3.2.1 Key Principles of Delegation
Parity of Authority and Responsibility: One of the problems often

associated with delegated authority is that 'people like to delegate
responsibility but not authority. One of the major principles of
delegation states that for effective delegation, authority granted to a
subordinate must be equal to the responsibility assigned to him – no
more no less. .
It is to be expected that when responsibility is given to a subordinate, he

is to have commensurate authority to discharge it. Failure to equate
responsibility with authority leads to inefficiency. In Nigeria,
subordinates often complain of having no appropriate authority to
discharge assigned duties. Lack of authority denies the subordinate.
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position-based influence to gain the necessary co-operation from others.

In some instances, the subordinate does not understand the limit of his
authority. A production manager cannot force an obsolete equipment to
be as effective as a new machine, and a sales manager cannot force
customers to buy. These are limitations imposed by circumstances.
Parity of authority and responsibility is not, however, a panacea for the
achievement of assigned duties.
3.2.2 Absoluteness of Accountability
This principle states that "although responsibility may be assigned and

authority may be delegated to subordinates accountability to one's
superior can neither be assigned nor delegated." When one delegates
one's assigned responsibility to someone else, one is still fully
accountable to one's superior for its execution. When the managing
director delegates to the production manager, for instance, the
production manager delegates to his plant supervisor; if the production
quota is not met, the managing director's accountability to his superior
cannot be delegated or assigned. It is as a result of this that if the
organization is not being productive, the managing director is replaced
while the lower executives keep their position. This principle prevents
the executive from "passing the buck." In order to delegate properly, one
has to retain a reservoir of authority to ensure that the task is properly
carried out. Accountability to one's superior is absolute and not
transferable.
3.2.3 Principles of Unity of Command
This principle states that "a subordinate should be accountable to one

and only one; superior at a time”. It is important for the subordinate to
report to only one superior in order to maintain the chain of command.
The essence of unity of command is to avoid conflicting instructions. It
is essential in all organizations for an employee to receive delegated
authority from one boss and is accountable to the same boss for the
assigned task.
The principle of unity of command is sometimes violated where

functional authority exists. The subordinate receives instruction from his
line superior and also from his staff executive. This could happen
without any major consequence if the authority of the staff executive is
clearly defined. The principle could is also be violated each time one
bye-passes a level of intermediate supervision. A managing director who
for instance, usually ignores the sales manager and speaks directly to the
salesmen is violating the unity of command principle.
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3.2.4 Failure to Delegate
Despite the fact that delegation is a very important organizational

process, some executives. find it difficult to delegate. Some of the
major reasons are summarized below:
(1) Some executives get trapped in the "I can do it better myself
fallacy”.
(2) (2) Lack of ability to direct or encourage co-operation among
subordinates.
(3) Fear that delegation diminishes managerial authority.
(4) Absence of selective controls to warn of impending difficulties.
(5) Lack of confidence in subordinates.
(6) A temperamental aversion to taking a chance.
A supervisor who refuses to delegate frustrates his subordinates as he

denies them the intrinsic and extrinsic satisfaction derived from
accomplishing a task:' Delegation helps in training employees to assume
responsibility and learn to be accountable for assigned tasks. Failure to
delegate makes the executive indispensable in an organization and
should he resign, die or is dismissed, a vacuum is created. Delegation
does not relieve managers of their original responsibility. They could
withdraw delegated authority at any time.
3.2.5 Effective Delegation
Effective delegation helps managers to spend less time on specific

technical activities or routine decision making and concentrate their
efforts on other strategic management problems. This is summarized in
Figure 6.1 below.
Figure 6.1: Delegating Characteristics
Technical Duties or (Routine

decision making)
Performance of strategic
management functions.
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Low Degree of Delegation High
To accomplish effective delegation, it is important that the subordinate

should understand the purpose of delegated function and the objectives
to be achieved. The determination of objectives helps the subordinate to
relate the assigned task to the accomplishment of the overall company
objectives and his own personal interest. This is also in keeping with the
principle of objectives which states that "before initiating any course of
action, the objectives in view must be clearly determined, understood,
and stated."
Secondly, the duties assigned must be commensurate with authority

delegated. An employee who is assigned plenty of tasks but little
authority gets easily frustrated especially as he seeks and fails to obtain
the willing co-operation of his peers or even subordinates. It is important
that management assigns the whole task not the routine or portions of it
since this could create conflict. The ideal manager is one who does not
only delegate authority and assign responsibility but also wishes to add
to them always. Many: managers especially in small organizations and
sole proprietorships in Nigeria assign only routine or details of a job and
retain the main decision-making aspect of it. This is one of the major
reasons why indigenous entrepreneurs find it difficult to recruit
university graduates.
Thirdly, the employees to whom responsibility is to be assigned and

authority delegated must be judiciously selected. Not every employee is
expected to have the mental preparedness and competence to be
assigned a task and held accountable. Employees who lack skill,
knowledge, experience or are poorly motivated should not be selected
until they are ready. As a guide, employees' who exhibit the following
traits should not be chosen until they are ready:
(1) Employees who cannot accept criticisms for their mistakes.
(2) Employees who lack self confidence.
(3) Employees who lack initiative or take undue pleasure in being

told than finding solutions to their problems.
(4) Employees who cannot easily be motivated by the usual company

incentives.
(5) Employees who like to follow rather than lead.
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Fourthly, the supervisor must have built-in checks to ensure that

delegated tasks are being carried out. As pointed out delegated
responsibility is shared. A manager does not abdicate his responsibility
and accountability by delegation. The best manager is one who knows
how much responsibility to delegate and how to be in control at all
times. Constant feedback is necessary in order to avert costly mistakes
of subordinates. 'It has to be re-emphasized here that delegation of
authority does not relieve managers of their original responsibilities, nor
does it reduce their overall authority in the organization. The essence of
all delegated function is to share the task in order to achieve greater
overall efficiency.
3.2.6 Combating Barriers to Delegation
To overcome the barriers to delegation, the following guidelines are

suggested as shown in Table 6.1 below.
Table 6.1: Overcoming Barriers to Delegation.
1. Realize that subordinates have much to contribute to decision

making in their areas of specialization.
2. Learn to plan ahead so that delegation can take place before

rather than after, the act.
3. Build confidence in employees through training, recognition, and

counseling.
4. Develop control systems that will point out impending problems.

5. Be willing to take a chance on subordinates.
6. Force subordinates to make decisions while giving them help
when needed.
7. Do not be overly critical when subordinates make mistakes.
8. Let subordinates know what is to be done and the results that are
expected.
9. Supply subordinates with adequate resources to fulfill their
responsibilities.
10. Provide adequate incentives so that employees are willing to
accept increased delegation.
11. Develop an organization structure that provides for personal
growth and challenge, thereby helping subordinates become more
self reliant.
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Source: Robert L. Trentha and M. Gene Newport. Management,

Functions and Behaviour Dallas, Texas Business
Publications, Inc., 1976; pp. 353-354.
3.3 Decentralization
An organization is said to be decentralized if authority to make

decisions is delegated to managers at the lower ladders of the
organizational hierarchy. What really constitutes decentralization is
relative. In contrast to a centralized organization; top management is
either fully centralized or fully decentralized. Certain decisions are often
centralized and others are decentralized. As a general rule, factors such
as the size of the organization, the degree of interaction between
members, management philosophy and the personality of the members
determine the degree of decentralization.
Decentralization is encouraged in all modern organizations because it

promotes initiative and flexibility and helps in the development of
subordinates by helping them to participate in decision making.
Centralization, on the other hand, promotes directional control,
coordination, specialization, standardization, economies of scale and the
use of various cost saving devices.
It is impossible to look at an organization chart and determine whether

an organization is centralized or decentralized. It is the practice that
determines that. One of the major criticisms often brought against the
Nigerian civil service is that it is over centralized thus denying middle
management of initiative and independent thought. It is not unusual for
letters originating even from key personnel in the organization to start
with "I am directed. .." The civil service develops "administrators"
instead of managers. Large business enterprises have a greater tendency
to be decentralized than small enterprises. Companies with different
product lines and services decentralize their operations to encourage
profit centres – a practice which is often referred to as profit
decentralization. A company like the UAC of Nigeria Ltd with very
many divisions and subsidiaries is an example of a company with
decentralized product division – with each manager responsible .for
profits in his own division.
Decentralization of operations to small units facilitates decision making

and brings the decision making authority very close to the point of
operation. In a sales operation, credits of it very reasonable sum of
money could be approved on the spot without referring to the
headquarters. It gives the divisional managers the opportunity to tailor
their decisions to suit the local environment in which they serve.
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.As a general rule, decisions that affect only one department such as
sales could be decentralized as it involves the customer, the salesman
and the area manager. Decisions that would affect more than one
department located in different geographical areas are best centralized
for easier coordination. A decision involving promising delivery dates to
key customers on contractual obligation would involve production,
sales, supplies and finance departments and is best handled at the top
level to avoid costly mistakes that may involve millions of naira and loss
of goodwill.
There is no single criterion to use in deciding whether to be fully

centralized or completely decentralized. Each situation is to be evaluated
on its own merit. .As a guide, research findings show that the following
factors must be considered before decentralization is undertaken:
(1) Where there is a need for speed and flexibility in decision

making, decentralization is necessary.
(2) When divisional or area managers require initiative or creativity

in order to achieve profit quotas, decentralization is necessary.
(3) In companies with differentiated product lines, that are

independent of one another and are capable of becoming profit
centres, decentralization could be instituted.
(4) Where there is ample supply of capable managers with

knowledge, experience and dedication, decentralization is
recommended to motivate them. Middle managers are the most
frustrated in centralized organizations as achievement is not
easily recognised and there is the paucity of opportunity for
advancement or even of intrinsic or extrinsic reward.
(5) Research shows that the size of business organization, products,

location of customers and the size of the market have a definite
relationship to the degree of decentralization.
(6) Where there is a desire to improve the communication channel in

an organization there is a reason for greater decentralization.
A study of top and middle management executives reveals that of the

205 executives who responded, 65% believe that Nigerian organizations
are too centralized. The situation is worse in the civil service where 85%
of the respondents believe that the organization is 'too centralized. What
appears very disturbing is the pessimism expressed by all to the effect
that this situation is bound to continue. In the more advanced, countries,
the advent of computerization which has made possible more refined
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management information systems, is leading to greater centralization

and making many middle management positions increasingly obsolete.
For the less advanced countries where centralization is being justified on

the grounds that there is a paucity of qualified management to make
decisions, there is need for decentralization. This appears to be one of
the most expeditious ways of enhancing the decision making skills of
managers – thus giving them the opportunity to learn from their
mistakes. Experience has shown that the cost of poor decisions in a
decentralized organization is less 'than the cost of frustration arising
from referring all decisions to the company headquarters (in a
centralized situation).
3.3.1 Task Specialization
One of the major factors that promote decentralization is task

specialization. Each department deals with a defined group of
organizational activity. It is believed that the specialization of activities
would lead to increased production. This, in turn, would give rise to the
design of specialized equipment, labour and facilities. It has even been
carried further to include specialization in other levels of an industrial
economy such as geographical specialization, specialization by process
and work specialization.
It has many salutary effects in our economic life which include that:
(a) It makes training of employees easy as it takes less time to train

an employee on a specific task.
(b) It is easier to replace an employee who must leave the

organization or be transferred since the-employee executes a
small task requiring a small skill.
(c) Because the task discharged by an employee is small, his total

compensation is relatively small too.
(d) Because of the small skill, and the limited time retired for
training, no, single employee is considered indispensable in the
organization.
(e) Specialization promotes delegation and supervision with

predictable results.
(f) Specialization permits the use of special equipment and machines

which help to reduce duplication to a minimum.
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3.3.2 Span of Control
Span of control deals with the number of subordinates that an executive

can' manage effectively. There is a positive relationship between the
span of control and delegation. A broad span of control forces manager's
to allow their subordinates to enjoy the full benefits of the delegated
responsibility. There is also a close relationship between the number of
employees answerable to an executive and the number of management
levels. It is as a result of this that Graicunas believes that tall
organizational structures improve management supervisory efficiency
because they entail a narrow span.
Narrow span of management has been advocated by most of the

classical management writers. Fayol in support of narrow span of
management states that:
whatever his rank, a man has only to command a very

small number of direct subordinates, usually less than 6,
except that a foreman, who is dealing with quite a simple
operation, is in direct command of 20 or 30 men.
In support of this statement, L. Urwick stated that:

.
No superior can supervise directly the 'work of
more than five or at the most, six subordinates
whose work interlocks.
Despite all these, it appears that the number of people a person can
effectively manage cannot be determined by an arithmetical precision.
It requires common sense approach that takes many variables into
consideration.
3.3.3 Factors that affect Span of Management
There are many factors that determine the span of management. These
factors are discussed below:
(1) Ability of the Supervisor. Individuals differ in their ability to

execute tasks successfully. Some supervisors are capable of
controlling more subordinates than others even if their work
“interlocks." Generally, in designing the organization, it is the
ability of the average supervisor that will be used to determine
the span of control.
(2) Ability of the employees. Employees with adequate skill,

experience and training require little or no supervision in the
256
II
(3) Type of work. The type of work employees are doing will
influence the span of control. For employees working in an
assembly line, there will be limited supervision compared to
\when they are working individually in a service oriented task.
(4) Geographical Location. It is easier to supervise people working

together than people scattered all over a large geographical
region. A sales executive can supervise more salesmen all in
Lagos than if the same number of Salesmen is located in the
nineteen states of Nigeria.
(5) Congruency of GoaIs. Employees who believe in the

organization and see it as the ladder through which they will
attain their goals, are self motivated to work without supervision.
It is different from a group of dissatisfied employees who will
work hard only in the presence of the supervisor.
(6) Importance of the work. Some jobs require closer supervision

than others. A man supervising people working in the field of
agriculture picking tomatoes, onions or cotton will not need to
give them as close supervision as a man supervising employees
producing high precision equipment. In the latter case, quality
control is important while in the former it is only general
supervision that is required.
3.4 Graicunas Theory
Graicunas used a mathematical equation to arrive at the conclusion that

only a narrow span of management would make for efficient
management. He postulates that as a supervisor deals with subordinates,
not only will the number of direct relationships increase, but also the
number of group relationships and cross relationships will rise.
Table 6.2 shows Graicunas direct cross and group relationships. Many
research findings have shown that Graicunas was wrong.
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II
Table 6.2 Graicunas Direct,

discharge ofCross
their and Group
regular Relationships
functions. A supervisor in charge of
No. of No. of Direct
these Simple can No.
professionals of Cross
supervise a large No. of Direct
number Group No. of Total
of employees.
Subordinates Relationships Relationship Relationship Relationship
1 1 0 0 1
2 2 2 2 6
3 3 6 9 18
4 4 12 28 44
5 5 20 75 100
6 6 30 186 222`
7 7 42 441 490
8 8 56 1016 1080
3.5 Empirical Research Findings
Empirical research findings how that to limit the span of management to

five or six is rather too restrictive. Instead research findings show that:
(1) Span of control of executive and supervisors varied with 'the nature
of the production process.
(2) Mass-production companies have a higher span of management than

process firms.
(3) Successful firms have spans at or near the medium while less
successful firms had spans which were either too low or too high for
their production system.
(4) Spans of 10 to 11 are indicative of low structure; spans of 3 are

indicative of high structure.
(5) Spans tend to increase with increasing task certainty.
(6) There is a positive correlation between span or control and

geographical separation of subordinates.
(7) There is a positive correlation between span and the use of personal
assistants by supervisors.
(8) Similarity of functions supervised influences subordinates

experience on the job.
In summary, because of the preponderance of evidence from empirical

research on this subject, it is now believed that the span of control
depends on the complexity of the task; ability of the supervisor,
proximity of the tasks, variety of the jobs, quality of personnel and the
258
II
4.0 CONCLUSION
You have learned about delegation and decentralisation in this unit.
5.0 SUMMARY
In this unit, we defined delegation and decentralisation as a tool for

managerial control and increase in productivity. We discussed the key
principles of delegation, reasons why executives do not delegate and
how to overcome the barrier to effective delegation. We also explained
factors that affect span of management and span of control and finally
we discussed Graicunas theory and his empirical research findings on
decentralisation.
1. What is delegation? Why is delegation not effective in many

Nigerian organisations?
2. Discuss the three key principles of delegation. Are these
applicable in Nigerian organisations? Why?
Massie, J.L. and J. Douglas (1977). Managing: A Contemporary

Introduction; (2nd ed.). New Jersey: Prentice Hall, p.l07.
Dessler, Gary (1976). Organization and Management: A Contingency

Approach. New Jersey: Prentice Hall, p. 113. '
Ehrie, R.A. (1970). "Management Decentralization: Antidote to

Bureaucratic Ills" Personnel Journal. May, pp. 396.
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II
UNIT 5 SOCIAL RESPONSIBILITY

use of personal assistants. All repetitive jobs require large spans of
management whereas the reverse is the case for highly technical work.
CONTENTS
1.0 Introduction
2.0 Objectives
3.0 Main Content
3.1 Social Responsibility
3.1.1 Definition of Social Responsibility
3.2 Areas of Social Responsibility
3.3 Neglect of Social Responsibility
3.4 Social Responsibility and the Nigerian Entrepreneur
4.0 Conclusion
5.0 Summary
1.0 INTRODUCTION
The pervasive influence of large business organizations in the society

makes the issue of social responsibility very important to management.
No social institution will endure that fails to contribute to the needs of
the society. The privilege given to organizations to operate in the society
stems from the fact that society believes that there is mutual inter-
dependence existing between the two. In this unit, you will be
introduced to social responsibility as it affects business operation in
Nigeria.
2.0 OBJECTIVES
define and explain what is meant by social responsibility

list and discuss the areas of social responsibility
give reasons why social responsibility is being neglected
discuss the role of Nigerian entrepreneurs in social responsibility.
3.0 MAIN CONTENT
3.1 Social Responsibility
3.1.1 Definition of Social Responsibility
Social responsibility is seen as:
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II
behaviour from ultimately destructive activities, no matter

how immediately profitable and which leads in the
direction of positive contributions to human betterment.
At present, many Nigerian businessmen's attitude to social responsibility

is one of the 17th century America and Europe characterised by rugged
individualism – “I'm my own boss, and I'll manage my business as .I
please." They believe in the doctrine of laissez-faire “that government is
best which governs the least."
An organization is made up of people and a typical executive is a

member of the society. In his dual role as the owner of an enterprise and
a member of the greater society to which he is a part, whatever type of
society he helps to create, he will participate in. In the U.S.A., the unrest
and the attack on all facets of “the establishment" in the early seventies
inevitably included business and gave added impetus for executives .to
think through the social role of the enterprise they direct.
Today, American business leaders believe that “business must learn to

look upon its social responsibilities as inseparable from its economic
function. If it fails to do so, it leaves a void that will quickly be filled by
others -usually by the government. If business fails to recognize this
social responsibility, the government must step in to regulate them.
What affects the society as a whole affects the businessmen. Like
everyone else in the society, they will breathe foul air, drink polluted
water, be part of the crowded city, use unsafe products, be misled by
false advertising and could be denied of some of their social benefits of
their political party, ethnic group or religious beliefs.
Those organisations that believe that government, not business, is the

institution best suited for solving social problems are living in the past.
It is true that businesses must be concerned with their primary objectives
– profit, but the same society expects organisations to make a positive
social impact on the society on which its economic well-being depends.
3.2 Areas of Social Responsibility
Business social responsibility exists in all the enterprises with their

customers, owners, employees, suppliers, creditors, management,
government and the society as a whole. Thus any person who shares the
environment with the enterprise has a relationship with it.
In the following areas, business owes most of its social responsibility to

the society:
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II
5. Pollution problems – water, air

The intelligent andand solid waste,
objective landfor
concern andthe
noise.
welfare of
6. Poverty andsociety
discrimination – ethnicindividual
which restrains discrimination
and and
corporate
parochial interest.
7. Consumerism – product safety, misleading advertising,
consumer complaints, smuggling.
In Nigeria, one of the major social problems is smuggling. Many

businessmen are directly involved in smuggling goods into the country
or buying smuggled goods. Contraband goods flow freely into Nigerian
markets but become articles of ostentation or exclusiveness. The textile
industry, shoe industry and distilling and pharmaceutical industries have
loudly and eloquently protested to the government about the evils
smuggled goods bring to their organisations. Instances of retrenchment
abound as some of the younger industries find it difficult to compete
effectively with the cheap goods from Europe, Asia and America.
Nigerian businessmen have also been relatively insensitive or have

overtly isolated themselves from the problems peculiar to areas in which
they live and amass their wealth. Oil companies are known to have
polluted farmlands and fish ponds with their oil spills and made no
serious effort to pay adequate compensation to the affected poor
citizens.
In the U.S.A. and Britain, businessmen, scholars, people of the media

have made numerous speeches, reports, conferences on the very
important issue of social responsibility. Epstein reported that some large
U.S.A. corporations have started to include "Social Audits," "Social
Action Reports," or "Social Balance Sheets" in their annual reports.
These include company performances with regard to societal pressing
social issues such as racial or ethnic minorities, women, the physical
environment, underdeveloped nations, consumers, employees and the
general community. Because of the sensitivity to this problem, big
corporations have established departments such as Public Affairs and
Environmental Relations under the leadership of a top executive who
appraises the managing director of what society expects from business
and ensures that they are implemented. Schools of Business
Administration in the U.S.A., have established courses earmarked to
bring about the awareness of social responsibility to future managers.
Courses such its "Business and Society”, “Social-Responsibility of
Modern Organizations" are required courses.
As Epstein succinctly points out, business enterprises give adequate

attention to the issue of social responsibility because they want to
achieve social harmony between themselves and their environment and
the companies see the expenses associated with social responsibility as
tax or licence fee they pay to society so that the latter can allow them to
262
II
carryofout
department theiraffairs,
public everyday economic
or of functions.
social welfare This
in any is the way Nigerian
Nigerian
businessmen should see their social functions.
3.3 Neglect of Social Responsibility
Many factors account for the apparent neglect of social responsibilities

by Nigerian organizations. Some of the major reasons include:
(1) The relative small size of Nigerian business enterprises. Many

Nigerian enterprises are very small in size and their financial
strength precludes the consideration of social responsibility as a
task that must be seriously considered.
(2) Many of the large enterprises are owned by foreign firms whose
main pre-occupation is profit maximization. Some of these firms
'see social responsibility as a patriotic gesture best undertaken by
indigenous businessmen to help their country.
(3) Some of the foreign entrepreneurs come from countries where the
consciousness for social responsibility is at best in its basic
infancy. This is the case in Britain, a country that Nigeria had a
Iong time standing relationship.
(4) Nigeria has over the years placed much reliance on publicly
owned enterprises. The major organizations in this country are
either owned by the government or foreign companies. The
government owns major transportation network -rail, air, and port
facilities, broadcasting, (radio and television), health and postal
services, production and distribution of coal and electricity, even
the construction of iron and steel industry, oil drilling, refining
and distribution. Since these large enterprises belong to the
society, it is assumed that they are socially responsible since
profit is not their pre-occupation; instead they engage in social
welfare redistribution.
(5) The lack of professionalism in management style. Many Nigerian

managers do not perceive social responsibility as one pf the key
functions of management. Their training and experience have not
exposed them to be conscious of this issue. To many, it is novel,
or at best an informal and intuitive managerial function.
(6) The society expects little in the way of social responsibility from
businessmen. The laws on environmental protection are not
seriously enforced. At best, the only effective tool that the
government uses to obtain compliance is persuasion. There are
scarcely any groups of individual bodies that are scrutinizing
corporate social responsibility. There is no well established
263
II
business organization.
In the U.S.A. for example, many oil corporations have been taken to
court by either the government or concerned citizens for the violation of
Environmental Protection Act. The Chevron Oil Company was sued by
a group of Louisiana Shrimp and Oyster Fishermen for damaging their
means of livelihood. This was because the company's rig in the Gulf of
Mexico caught fire and caused the oil to spill into the water, causing a
disturbance to the fishermen.
Nigeria has no powerful agency like the U.S. Environmental Protection

Agency (E.P.A.), which is an independent regulatory agency charged
with the responsibility of striking a balance between the protection of
the natural environment and securing for the citizens the benefits of
economic and technological progress.
For our society to survive, not lip service but practical importance must
be attached to business social responsibility. Unless the same
importance that is attached to profit by organizations is attached to
social responsibility, the society will decay. Emphasizing on the
importance of social responsibility, Uzoaga has observed that:
The needs of society, if unattended turn into social

diseases. And no institution whether business or
university, or government agency is likely to thrive in a
deceased society. Business executives can no longer
ignore with impunity the sufferings of human society with
the slogan that the business of business is profit and
nothing else.
Entrepreneurs and shareholders in corporations must show special

concern for social responsibility by supporting social needs with
company revenue. Only then will enterprise social policies move from
mere platitudes and achieve credibility. We expect Nigerian enterprises
to have charitable and cultural programmes, be involved in youth
projects, make liberal donations to educational institutions and be keenly
interested in the present needs of the individuals who participate directly
or indirectly in their organisations.
Businesses could show greater concern for employees by eliminating

their dissatisfaction resulting from co-workers, supervisors, the work
itself and the unique environmental factors of the organisation.
264
II
3.4 ofSocial
department public Responsibility andwelfare
affairs, or of social the Nigerian Entrepreneur
in any Nigerian
In the study conducted by the author which involved 205 Nigerian

business organisations employing more than 50 employees each, it was
found that 57.4% of the respondents were fully aware of the need for
social responsibility of businesses. The frequently mentioned social
responsibility included:
(1) avoiding of smuggling

(2) fair advertising
(3) fair advertising
(4) price control
(5) environmental sanitation, and
(6) product safety.
A majority of Nigerian business organisations (85.6%) believed that

business enterprises had not shown sufficient interest to their social
responsibility. It is interesting to note that 42.5% believed that social
responsibility should be undertaken by the large and successful
organisations. Many believed that the lack of active involvement in
social welfare was due to:
(1) the dishonesty of businessmen

(2) ignorance of the role they should play in the area of social
responsibility
(3) the limited educational background of many entrepreneurs, and
(4) the lack of initiative on the part of government.
Nigerian managers believe that the government should get businesses

involved in its social programmes and have stiff penalties for non-
compliance.
It is believed that the only way of reducing smuggling, air and water
pollution, and a total disregard for consumers is by creating an
independent, effective regulatory agency.
The areas in which business organisations should play a prominent role

in Nigeria are limitless. In Nigeria, where resources are very much
limited, organisations should be involved in the setting and attainment
of national priorities. It is a waste for government and businesses to pull
in opposite directions. Government should with the cooperation of
organisations set priorities. Businesses then should use their resources
to ensure that the objectives are realised. In the Green Revolution
Programme, professional farmers should work very closely with the
government in helping to identify the major problems inhibiting large
scale production and distribution of farm products. The banking
265
SMS106
II
credit facilities available to qualified farmers and offering them expert

advice. Organisations that import or manufacture farm equipment
should make them available to cooperative farmers at reasonable prices
or lease them to farmers at reasonable conditions. The situation is
different where the government advocates Green Revolution and the
businessman who supplies farm equipment engages in exploitation of
farmers or short-run opportunities characteristic of Nigerian avaricious
business tycoons.
It is part of corporate social responsibility for the organisation to help

the employee to achieve his personal needs. Employment opportunity is
created by organisations. Enterprises that start to lay off employees at a
time the government is fighting to reduce unemployment are working
against national interests.
Nigerian managers should help in formulating and articulating ethical

norms as part of their social responsibility.
4.0 CONCLUSION
We have taken you through this unit by defining and explaining the role
of Nigerian businesses or entrepreneurs in social responsibility.
5.0 SUMMARY
In this unit, you have learnt the definition of social responsibility, the
areas of social responsibility, reasons why social responsibility is
neglected by businesses and finally, the role of Nigerian entrepreneurs
in implementing social responsibility.
In your own understanding, how would you define and explain the
concept social responsibility?
7.0 REFERENCES/FURTHER READING.



266
SMS106
II
Leavitt,
institutions ought H. J.the(1978).
to assist Management
government Psychology
by identifying (4th ed.). Chicago:
and making
University of Chicago Press Ltd

Prentice-Hall.

267

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NATIONAL OPEN UNIVERSITY OF NIGERIA

SCHOOL OF MANAGEMENT SCIENCES

COURSE TITLE: ELEMENTS OF MANAGEMENT II

Course Team Mrs. Caroline Aturu-Aghedo (Developer/Writer) - NOUN

NATIONAL OPEN UNIVERSITY OF NIGERIA

National Open University of Nigeria

First Printed 2010

All Rights Reserved

SMS106….: Principles of Management is a two credit course for

A student who successfully completes the course will surely be in a

What You Will Learn in This Course

The course aims to give you an understanding of the techniques of

By the end of this Course, You should be able to:

1. Define the Concept of management

Working through This Course

Major components of the course are:

(1) Course Guide

(2) Study Units

The study units in this course are as follows:

Unit 1 Evolution of Management Theory

Unit 1 Employee Training and Development

The presentation schedule included in your course materials gives you

In tackling the assignments, you are expected to apply information,

Tutor-Marked Assignment (TMAs)

Final Examination and Grading

to review your self-assessment tests, tutor-marked assignments and

Course Marking Scheme

Table 1: Course Marking Scheme

Unit Title of work Weeks Assessment

Facilitators/Tutors and Tutorials

There are 15 hours of tutorials provided in support of this course. You

SMS106..: Principles of Management intends to expose the graduate

We hope you enjoy your acquaintances with the National Open

Course Code SMS106

Course Team Mrs. Caroline Aturu-Aghedo (Developer/Writer) - NOUN

NATIONAL OPEN UNIVERSITY OF NIGERIA

National Open University of Nigeria

First Printed 2010

All Rights Reserved

Unit 1 Evolution of Management Theory ………………… 1

Unit 1 Organizing ……………………….…………………. 90

Module 3 ……………………………………………………… 200

Unit 1 Employee Training and Development……………… 200

Unit 1 Evolution of Management Theory

UNIT 1 EVOLUTION OF MANAGEMENT THEORY

Management is as old as human organization. There are several theories

At the end of this unit, you should be able to:

discuss the evolutionary process of management as a discipline from the

3.0 MAIN CONTENT

3.1 Evolution of Management Theory

The evolutionary or development of management is divided into several

3.2 Pre-Industrial Period

In the pre-industrial period, management was practiced by various parts

Another well documented, properly organised management system was

Management of enterprises was also practiced by the Babylonians, the

3.3 Industrial Revolution

This created its own management problems for the entrepreneurs. It

With this, emerged different concepts and principles on how to manage

(a) The scientific management movement;