BBA - JNU - 103 Principles of Management PDF
BBA - JNU - 103 Principles of Management PDF
BBA - JNU - 103 Principles of Management PDF
MANAGEMENT
(BBA 103)
Nature of Management: Meaning, Definition, it's nature purpose, importance & Functions, Management as
Art, Science & Profession- Management as social System, Concepts of management-Administration-
Organization
Organization: Structure, importance, process and principles. Types of organization. Organization design,
Types of authority, Delegation of authority.
Direction: Concept, nature, importance and principles, Importance, type process and techniques, Nature,
process, techniques and essentials of effective control.
Authority: Delegation , Decentralization, Difference between authority and power, Uses of authority,
Distinction between Centralization and Decentralization, Responsibility
Business Organization: Significance and establishment of business organization, Different types of business
organization.
Finance: Need and importance of Finance. Sources of Finance. SIDBI, RFC and RIICO.
Evolution of Management Thought: Contribution of F.W.Taylor, Henri Fayol ,Elton Mayo , Chester Barhard
& Peter Drucker to the management thought. Various approaches to management (i.e. Schools of management
thought) Indian Management Thought
Strategic Management: Definition, Classes of Decisions, Levels of Decision, Strategy, Role of different
Strategist, Relevance of Strategic Management and its Benefits, Strategic.
Objectives
After studying this chapter, you will be able to:
Explain the concept of management
Define nature of management
Understand the objective of management
Describe the principles of management
Discuss about the importance of management
Explain the process and functions of management
Define management by objectives (MBO)
Introduction
Management means managing an activity. When we talk of managing an activity, we really mean to make the
activity a success. In other words, we have in mind some goal and we decide about the ways of carrying out
the activity so as to achieve the goal. Consider a situation. When a person goes for shopping, his primary aim
is to buy what he requires at a reasonable price. He has a number of questions in his mind what should he buy?
How will he reach there? Will he be able to come back at the right time? And so on. To make his shopping a
success, he should think of these questions in advance.
Take another example of a housewife. When she gets up in the morning, she has in her mind a number of
activities to be performed, e.g., house is to be cleaned, clothes are to be washed, young children are to be
helped in getting ready for the school, breakfast is to be prepared, food is to be cooked and packed and handed
over to the children while they leave for school and so on. In the family, she may have three persons to help
her servant, her eldest daughter and her mother-in-law. Her aim is to divide the work in such a way that all the
work gets completed in the right way at the appropriate time. What the housewife does in this example, taken
together, to achieve her aim, means management.
Thus, management as a science would indicate that in practice, managers use a specific body of information
and facts to guide their behaviours, but that management as an art requires no specific body of knowledge,
only skill. Conversely, those who believe management are an art are likely to believe that there is no specific
way to teach or understand management, and that it is a skill borne of personality and ability. Those who
believe in management as an art are likely to believe that certain people are more predisposed to be effective
managers than are others, and that some people cannot be taught to be effective managers. That is, even with
an understanding of management research and an education in management, some people will not be capable
of being effective practicing managers.The term management has been interpreted in several ways; some of
which are given below:
Management as an Activity
Management is an activity just like playing, studying, teaching etc. As an activity management has been
defined as the art of getting things done through the efforts of other people. Management is a group activity
wherein managers do to achieve the objectives of the group.
The activities of management are:
Interpersonal activities
Decisional activities
Informative activities
Management as a Process
Management is considered a process because it involves a series of interrelated functions. It consists of getting
the objectives of an organization and taking steps to achieve objectives. The management process includes
planning, organizing, staffing, directing and controlling functions.
Management as a process has the following implications:
Social Process: Management involves interactions among people. Goals can be achieved only when
relations between people are productive. Human factor is the most important part of the management.
Integrated Process: Management brings human, physical and financial resources together to put into
effort. Management also integrates human efforts so as to maintain harmony among them.
Continuous Process: Management involves continuous identifying and solving problems. It is repeated
every now and then till the goal is achieved.
Interactive Process: Managerial functions are contained within each other.
For example, when a manager prepares plans, he is also laying down standards for control.
Management is Continuous
Management is an ongoing process. It involves continuous handling of problems and issues. It is concerned
with identifying the problem and taking appropriate steps to solve it. For achieving this target various policies
have to be framed but this is not the end. Marketing and Advertising is also to be done. For this policies have
to be again framed. Hence this is an ongoing process.
Management is all Pervasive
Management is required in all types of organizations whether it is political, social, cultural or business because
it helps and directs various efforts towards a definite purpose. Thus clubs, hospitals, political parties, colleges,
hospitals, business firms all require management. Whenever more than one person is engaged in working for a
common goal, management is necessary. Whether it is a small business firm which may be engaged in trading
or a large firm like Tata Iron and Steel, management is required everywhere irrespective of size or type of
activity.
Organized Activities
Management is a process of organized activities. Groups of people cannot be involved in the performance of
activities without organized activities. Management comes into existence where a group of people are involved
in achieving a common objective. The organized activities may take a variety of forms ranging from a tightly
structured organization to a loosely-knit organization.
Management is Dynamic
Management has framed certain principles, which are flexible in nature and change with the changes in the
environment in which an organization exits.
Caution
Be Aware about the external resources while developing the management for an organization.
Encourages Innovation
Management also encourages innovation in the organization. Innovation brings new ideas, new technology,
new methods, new products, new services, etc. This makes the organization more competitive and efficient.
Facilitates Growth and Expansion
Management makes optimum utilization of available resources. It reduces wastage and increase efficiency. It
encourages team work and motivates employees. It also reduces absenteeism and labour turnover.
Management, it should be noted, is a social process because it is concerned with relations among people at
work. A manager sets the objectives of an organization. He provides an environment that is helpful for group
action. He offers incentives to those who perform well and thus helps the organization realize its goals.
The term ‗management‘ is used to denote individuals who manage the affairs of an organization. Expressions
such as management has declared a lockout, management takes a tough stand against workers, often hit
newspaper headlines. When such statements are made, the reference is actually made to the people who
manage the affairs of an organization. Thus, as a group of people, management includes all those who are
accountable for making decisions and supervising the work of others
Planning
Planning involves mapping out the process of achieving a given goal. It looks ahead and prepares for the
future. It is a process of settling on the business objectives and charting out the methods of attaining those
objectives.
Organizing
To organize a business is to equip it completely. This includes its functioning, employees, raw materials, tools,
capital etc. All this may be divided into two main sections, the human organization and the material
organization.
Staffing
Staffing is a continual process since people may leave, be terminated, retire or die. Often, changes in the
organization generate new positions, which must be filled.
Directing
After planning, establishing and staffing the organization, the next step is to define its objectives. This function
can be termed as leading,
Controlling
The manager must ensure that everything happens in consistency with the plans, the instructions provided and
the principles established.
Innovation
Innovation means developing new thoughts that may also bring about the creation and innovation of new
products or identifying new uses for the old ones
In order to set the objectives for the employees, the following steps are followed:
1. The management chunks down the organizational goals and assign chunks to senior managers.
2. Senior managers then derive objectives for them to achieve the assigned organizational goals. This is
where senior managers assign the objectives to the operational management.
3. Operational management then chunk down their objectives and identify the activities required for
achieving the objectives. These sub-objectives and activities are then assigned to rest of the staff.
4. When objectives and activities are assigned, the management gives strong inputs to clearly identify the
objectives, time frame for completion, and tracking options.
5. Each objective is properly tracked and the management gives periodic feedback to the objective owner.
6. In most occasions, the organization defines processes and procedures in order to track the objectives and
feedback.
7. At the end of the agreed period (usually a year), the objective achievement is reviewed and an appraisal is
performed. Usually, the outcomes of this assessment are used to determine the salary increments for year
ahead and relevant bonuses to employees.
Activity trap is one of the issues that prevent the success of MBO process. This happens when employees
are more focused on daily activities rather than the long-term objectives. Overloaded activities are a result
of a vicious cycles and this cycle should be broken through proper planning.
For many people working in modern business environments, it is hard to remember a time when non-
managerial employees were not involved with, and interested in, corporate strategy and goals. We are
regularly reminded about the corporate mission statement, we have strategy meetings where the ―big
picture‖ is revealed to us, and we are invited to participate in some decisions. And we are aware of how
our day-to-day activities contribute to these corporate goals.
Signing On
The migration from paper to pixels has flummoxed more than a few companies. The task can involve major
changes to workflow and create enormous challenges related to approvals and compliance.
At P&G, any possibility of slowing an already complex R&D process and interfering with the approval and
introduction of a product could wreak havoc on the bottom line. For example, a successful over-the-counter
medication can generate sales of upward of Rs50 million per day.
Typically, researchers, clinicians, quality-control staff, marketing specialists, and dozens of other internal P&G
staff and external partners must exchange and share documents. In the past, storing all those documents meant
stuffing filing cabinets internally, producing microfiche, managing indexes and renting warehouses to store
reams of documents off-site.
―Digging through all the records is a long, laborious process,‖ Bross notes. ―If a court case comes up, the
process of pinpointing a document and pulling it out is extremely time-consuming and painful.‖
Not surprisingly, the perils of paper have exacted a toll. In the past, some indexes were not entirely accurate
and manually searching for a particular section of a document—or associated documents—devoured even
more time. And outsourcing records management had its own problems. In one instance, a London warehouse
operated by an outside service provider burned to the ground, and P&G permanently lost hundreds of boxes of
records. Although P&G has considered migrating to an electronic record-keeping system for the last several
years, Bross and other executives felt that key pieces were not in place at that time. After all, the company had
to ensure that it could authenticate digital signatures and build signing and storage processes into its everyday
workflow. In addition, P&G‘s legal department wanted to be sure it had a legally enforceable signature on file.
Designing an electronic system with backups was too expensive and did not offer an adequate return on
investment. Then, in 2005, all the pieces began to fall into place. That is when P&G embraced the
pharmaceutical industry‘s SAFE (Signatures and Authentication for Everyone) BioPharma Association
standard. It was established to help companies go less and still interact with regulatory authorities on a global
scale. The initiative not only focused on ways to manage digital signatures, it also created a method to confirm
the identity of the signer. The SAFE ―was the only digital signature approach that offered an identity-proofing
scenario,‖ Bross says. ―It provided a legally enforceable component within the overall liability framework.‖
P&G‘s IT and legal departments examined the initiative and agreed that it met the company‘s business needs
and risk requirements.Today, once a digital signature is added to a file, an auditor can examine it in a tracking
bin or view a validation report. It is immediately possible to view all the activity related to the document.
―You simply right-click on the signature and view the entire audit trail‖ Bross explains. ―The signature can
also be exposed and appended as a last page of the file so that it can be shared appropriately on an external
basis, such as in a court of law or if there were a sale of the product.‖
Questions
1. Write the sort not of Adobe Live Cycle software.
2. Discuss about the R&D process.
1.8 Summary
Management reduces the wastage of human, material and financial resources. Wastage is reduced by
proper production planning and control. If wastage is reduced then productivity will increase.
Management encourages employees to work as a team. It develops a team spirit in the organization.
The core aim of management by objectives is the alignment of company goals and subordinate objectives
properly, so everyone in the organization works towards achieving the same organizational goal.
The main objective of management is to secure maximum outputs with minimum efforts and resources.
Management is required in all types of organizations whether it is political, social, cultural or business
because it helps and directs various efforts towards a definite purpose.
1.9 Keywords
Controlling: Controlling is an important function because it helps to check the errors and to take the corrective
action so that deviation from standards are minimized and stated goals of the organization are achieved in a
desired manner.
Leading: Leading refers to motivating, directing and guiding people in the organization it involves ensuring
that the people in the organization are willing and capable of performing the required tasks.
Management: Management is the act of getting people together to accomplish desired goals and objectives
using available resources efficiently and effectively.
Organizing: An organizing is the managerial function of arranging people and resources to work toward a
goal.
Planning: Planning in organizations and public policy is both the organizational process of creating and
maintaining plan
Objectives
After studying this chapter, you will be able to:
Understand the meaning and definition of nature of management
Define the purpose of management
Describe importance and functions of nature of management
Discuss management as art, science and profession
Explain management as social system
Describe the concepts of management-administration and management organization
Introduction
People working in organizations need to have their activities co-ordinate, controlled and directed toward the
objectives of the organization. Effective management is essential if the organization is to succeed in the
achievement of its objectives. It is therefore prudent for students to have a knowledge and understanding of the
principles, functions and roles of managers so that they can identify appropriate strategies for the management
of their own particular organization.
Various contributions to the field of management have changed its nature. The nature of management can be
described as follows:
Multidisciplinary: Management is multidisciplinary because it includes knowledge/information from
various disciplines- economics, statistics, maths, psychology, sociology, ecology, operations research,
history, etc. Management integrates the ideas and concepts taken from these disciplines and presents newer
concepts which can be put into practice for managing the organizations.
Management is Dynamic: Management has framed certain principles, which are flexible in nature and
change with the changes in the environment in which an organization exits.
Relative, Not Absolute Principles: Management principles are relative, not absolute, and they should be
applied according to the need of the organization. A particular management principle has different
strengths in different conditions. Therefore, principles should be applied according to the prevailing
conditions.
Management: Science or Art: Management likes other practices- whether medicine, music composition, or
even accountancy- is an art. It is know-how. Yet managers can work better by using the organized
knowledge about management. It is this knowledge that constitutes science. Thus, managing as practice is
an art; the organized knowledge underlying the practice may be referred to as science.
Management as Profession: Management has been regarded as a profession by many while many have
suggested that it has not achieved the status of a profession. Schein concluded that by some criteria
management is indeed a profession, but by other criteria it is not. Today we can see many signs that
management is working towards increased professionalism.
Management is Universal: Management is a universal phenomenon. However, management principles are
not universally applicable but are to be modified according to the needs of the situation.
Management has been defined by different authors in a number of ways. Some call it a process of managing.
Some call it a coordination of resources, some call it body of personnel challenged in the task of managing
while others call it as an organized distinct discipline. The following are some of the main definitions of
management:
This approach is advocated by management authorities like Taylor, Wilson and others. They have defined
management as following. As per F.W. Taylor's approach, "Management is the art of knowing exactly what
you want your men to do and then seeing that they do it in the best and cheapest way."
Planning
Planning function determines the objectives to be achieved and the course of action to be followed to achieve
them. It is a mental process requiring the use of intellectual facilities, for sight and sound judgment. It is
selecting and relating of facts and making and using of assumptions regarding the future in the visualization
and formation of proposed activities believed necessary to achieve the desired results. It involves deciding in
advance what to do, when to do it, where to do it, how to do it and who is to do it and how the results are to be
evaluated. Thus, planning is the systematic thinking about the ways and the man‘s for the accomplishment of
predetermined objectives.
Staffing
Staffing is an executive who involves the recruitment, selection, training, placement, compensating promotion
and demotion and finally the retirement of an employee. Thus, staffing is a process of managing the
organization and keeping it manned. The sole aim of staffing is to take right man for the right job. It needs
manpower planning, job analysis and such other staff functions. It is the capacity of hired personnel which
governs the future of the business enterprise.
Co-ordination
Some others consider co-ordination as a separate function of management while many others call it as "essence
of manager-ship". The process of co-ordination involves synchronizing individual actions with the goals of the
enterprise. Today, organizations have grown in size and in character. A large number of people work there in.
So co-ordination has become very necessary. In the words of Koonty and O Donnell "The best co-ordination
occurs when individuals see how their jobs contribute to the dominant goals of the enterprise. This implies
knowledge and understanding of enterprise objectives."
Controlling
The next function of management is controlling. In the words of Henry Fayol, "In an undertaking control
consists in verifying whether everything occurs in conformity with the plan adapted, the instructions issued
and principles issued." Thus, the control is a measuring and corrective device. It measures performance against
goals and plans. Whereas planning guides the management in the timely use of resources to accomplish
specific goals, the control ensures the effective planning.
Motivation
The term, motivation, is derived from the word ―motive‖ which means a need or an idea emotion that prompts
an individual into action. It is a psychological process of creating urge among the subordinate to do certain
things or behave in a desired manner.
Motivation is an activity for behave in a desired manner. Motivation is an act of providing personnel an
inspiration to get to their hobs with zeal and enthusiasm and perform efficiently the work assigned to the
management. Management has responsibility to utilize the capacity of its task force to the maximum. This
could only be possible with the help of motivated personally who, if satisfactorily and effectively motivated,
would pull their respective weigh in right direction and gave their loyalty to the enterprise wholeheartedly.
They would then carry out the activities allocated to them with purposeful sincerity.
Management as a Science
Science is an organized or systematized body of knowledge pertain-ing to a particular field of enquiry. Science
is systematized in the sense that it establishes cause and effect relationship between different vari-ables.
Such systematized body of knowledge contains concepts, prin-ciples and theories which help to explain past
events and to predict the outcome of specific actions. These principles are capable of universal application, i.e.,
they can be applied under different situations. They rep-resent fundamental truths derived through empirical
results. These principles or basic truths are developed through scientific methods of continuous observation,
experiment and testing.
When generalizations or hypotheses are empirically verified for accuracy through continuous observation and
experimentation they become principles. Science explains 'why' of human behavior. Management is a science
because it contains all the characteristics of science. Firstly, there is a systematized body of knowledge in
manage-ment. Principles are now available in every function of management and these principles help to
improve managerial effectiveness. For instance, there are a number of principles which serve as guidelines for
delegating authority and thereby designing an effective organization structure. Similarly, there are several
techniques (ways of doing things) in the field of management. Budgeting, cost accounting, ratio analysis, rate
of return on investment, critical path method (CPM), programmer evalua-tion and review technique (PERT)
are some of these techniques which facilitate better management.
Secondly, principles of management have been developed through continuous observations and empirical
veri-fication. Thirdly, management principles are capable of universal application.
Management as a profession
Management developed as since the days of F.W. Taylor the advancement of science of manage-ment has been
very fast. Management as a science should be differen-tiated from the term 'management science which is used
to refer to the application of quantitative techniques in solving managerial pro-blems. Management is a social
science as it involves the study of human behavior. It is a comparatively young and growing behavioral
science. Being an in-exact social science, management cannot be as perfect as natural sciences like Physics,
Chemistry and Biology.
It is not possible to study and predict human beings under controlled laboratory con-ditions. Human behavior
is ever changing and unpredictable. There-fore, we cannot have the same kind of experimentation in
management as is possible in natural sciences.
The concepts, principles and techni-ques of management are still in a developing stage. Therefore, the
prin-ciples of management are flexible guidelines rather than hard and fast rules or absolute truths. That is why
management has been described as a 'soft science'. Management is also an inter-disciplinary science be-cause
it draws freely on Economics, Mathematics, Sociology, Psycho-logy and Anthropology. There are no full proof
rules in management that do away with judgment and common sense. Management is an applied science.
Thus, management is both an art as well as a science. "Essentially, managing is the art of doing and
management is the body of knowledge which underlies the art". It is said that management is the oldest of arts
and the youngest of sciences.
It must, however, be noted that science and art are not mutually exclusive but complementary to each other.
They are two faces of the same coin. Science without art is sterile and art without science is blind. According
to Barnard, "it is the function of the arts to accomplish concrete ends, effect results, produce situations that
could not come about without the deliberate efforts to ensure them. These arts must be mastered and applied
by those who deal in the concrete and for the future. The function of the sciences, on the other hand, is to
explain the phenomena, the events, the situations of the past. Their aim is not to produce specific events,
effects or situations but to provide explanations which one can call knowledge". Every art is based on an
underlying body of knowledge and with every advancement in science; art is improved by reducing
dependence on intention and judgment. For example, a physician without the knowledge of medical science
becomes a 'witch doctor or 'quack' with science an artful surgeon. Similarly, an executive without principles of
manage-ment has to depend on luck or intuition. But with formal knowledge and training in management, he
has a better guide to design workable solution to managerial problems of his firm.
There is a systematic body of knowledge that underlines the competent practice of management. Managers are
not always born. They can be made through education and training. However, mere knowledge of theory
cannot lead to success unless one knows how to apply the theory. A person with a degree in management
cannot necessarily be an effective manager just as a person with a merely cookery book cannot be a good
cook.
No amount of reading books on medical science will make a man a good physician or surgeon. Theoretical
knowledge must be supplemented and perfected by practical skills. Theory and practice supplement each other.
Use of judgment and experience is essential for efficient application of science. The art and science of
management go hand in hand. As an artist, a manager has to depend on his intuition, judgment and experience
while as a scientist he relies on the theory of management. A successful manager must not only acquire the
knowledge of the science of management but learn to apply this knowledge. Competence in management
requires mastery of scientific knowledge as well as practice in the use of knowledge.
Caution
The principal object of management should be to secure the maximum prosperity for the employer, coupled
with the maximum prosperity for each employee.
Systems Theory is based upon the analytic division of the natural world into environment and systems. This
division constitutes the major foundational, axiomatic philosophical assumption of Systems Theory. On the
one hand there is an infinitely complex ‗environment‘, and on the other hand there are self-replicating systems.
Systems are engaged in processing information. Systems also model the environment, and can respond
adaptively to environmental changes. The planet earth presumably began as pure ‗environment‘ with only
simple, self-organising physical and chemical systems which arose by the chance contiguity of components
and energy. For instance, the water cycle is a system by which water molecules associate and dissociate in
processes such as evaporation and condensation.
More complex systems can only be built incrementally, so that over time, simple physical and chemical
systems must have evolved into complex biological systems such as those observable and biological systems
eventually led to the social systems generated by human culture. A system might therefore include entities
such as a single cell, a multicellular organism such as human or social organisations of varying sizes from a
corporation, to the UK National Health Service, to a whole nation. For any given analysis, the 'environment' is
everything that is external to such a system under consideration. Systems are actually defined in terms of
processes, but sometimes processes coincide closely with physical structures so that a cell's environment might
(approximately) consist of everything outside the cell, including other systems such as other cells, the whole
organism and other organisms. For a human organisation such as an autonomous hospital, the environment
external to the system might include physical aspects such as climate and geography, but also other
organisational systems such as politics, the law and the media. Management systems (where they occur) are a
form of social organisational system which is engaged in modelling the organisation it manages. For a system
of management, everything other than itself is ‗environment‘, but the organisation that is being managed
constitutes the most immediate environment.
Caution
One should be careful that technological effects on members of the society in turn affect business practices.
A management system is a proven framework for managing and continually improving your organization's
policies, procedures and processes. The best businesses work as complete units with a shared vision. This may
encompass information sharing, benchmarking, team working and working to the highest quality and
environmental principles. A management system helps your organization to achieve these goals through a
number of strategies, including process optimization, management focus and disciplined management
thinking.
Management organization is the foundation upon which the whole structure of management is built.
Organization is related with developing a frame work where the total work is divided into manageable
components in order to facilitate the achievement of objectives or goals. Thus, organization is the structure or
mechanism (machinery) that enables living things to work together. In a static sense, an organization is a
structure or machinery manned by group of individuals who are working together towards a common goal.
Alike 'management', the term 'organization' has also been used in a number of ways. Broadly speaking, the
term 'organization' is used in four different senses: as a process, as a structure of relationship, as a group of
persons and as a system, as given below:
Organization as a Process: In this first sense, organization is treated as a dynamic process and a
managerial activity which is essential for planning the utilization of company's resources, plant and
equipment materials, money and people to accomplish the various objectives.
Organization as a Framework of Relationship: In the second sense organization refers to the structure of
relationships and among position jobs which is created to release certain objectives. The definitions of
Henry, Urwick, Farland, Northcourt, Lansburgh and Spriegel Breach, Davis, Mooney and Reily etc., come
under this group. For example: According to Mooney and Reily, "Organization is the form of every human
association for the attainment of a common purpose."
Organization as a Group of persons: In the third sense, organization is very often viewed as a group of
persons contributing their efforts towards certain goals. Organization begins when people combine their
efforts for some common purpose. It is a universal truth that an individual is unable ability and resources.
Barnard has defined 'Organization' as an identifiable group of people contributing their efforts towards the
attainment of goals.
Organization as a System: In the fourth sense, the organization is viewed as system. System concepts
recognize that organizations are made up of components each of which has unique properties, capabilities
and mutual relationship. The constituent element of a system is linked together in such complex ways that
actions taken by one producer have far reaching effect on others.
Organizing is the determining, grouping and arranging of the various activities deemed necessary for the
attainment of the objectives, the assigning of people to those activities, the providing of suitable physical
factors of environment and the indicating of the relative authority delegated to each individual charged with
the execution of each respective activity. Administrative management is about managing information through
people. Information is central to all management processes and people are the resources who make best use of
that information to add value.
Most working professionals and all managers have some element of administrative management in their jobs.
Evidence of good administration is when you don‘t know it is happening!‖ Officiating at an Institute of
Administrative Management Graduation Ceremony in London he was addressing an audience of over two
hundred graduates and their guests. He was impressed by the organization of the event combining the
formality and gravitas of the ceremony with informal social mingling to ensure everyone enjoyed the occasion.
Management of information, whether based or computerized, is central to the effective running for any
organization in a competitive global marketplace. Many administrative processes are repetitive and require to
be regularly reviewed. A good administrative manager can add value to the company by challenging the
efficiency and reliability of procedures that have been running for a period of time whilst striving to look for
continuing improvements and identifying and cutting out any outdate practices. With the speed of change in
business today the manager has to value the people who are expected to operate often complex systems.
Software aids all aspects of administration, it has to be remembered it is just a tool for collection and
dissemination of data. The information produced needs to be clear and concise to be of value to a manager.
Many quality controls have been put in place by companies over recent years and should not just be viewed as
just another ― pushing exercise‖. If controls are not working then it is up to the company to review why the
procedure was implemented in the first place. In the drive for efficiency if the implementation of a new
procedure prevents the staff member from actually getting on with the job, impedes production or hampers
service output, then obviously rethinking the whole strategy is part of the administrative process.
Recent controversial thinking in some quarters suggests that highly trained freelancers and software may
replace administrative managers within organizations. With the increasing use of tale-workers and outsourcing
by companies the role of the administrative manager becomes even more necessary than ever before. We
therefore have to ensure that all administrative managers are given the essential training required to be able to
make the best use of their own technical skills and those of their staff to full potential. The 1990‘s saw most
office functions being revolutionized by the improvements in information technology. To keep pace with
business changes each individual needs to keep their management skills up to date to ensure their continued
employability.
Whilst it is very feasible to accept that as more people have access to computers and the need to employ
clerical and secretarial support lessens, the role of an administrative manager becomes even more important.
They are crucial to the smooth running of any office. Computers will never take the place of a committed well-
trained individual who has the empathy for staff of all abilities who make up the lifeblood of an organization.
All companies and organizations are only as good as the people they employ. If an organization has to run
―lean and mean‖ then the selection and recruitment of the right administrative manager, who can make the best
use of the tools at his or her disposal, is truly a valuable asset. There will always be a necessity for good
administration in any organization; the American government is run by ―The Administration‖. In the UK there
is not a great deal of importance placed on the use of the word ―administration‖, but which company can be
successful without its existence?
In 2006, as part of its partnership with the Library of Congress's National Digital Information Infrastructure
and Preservation Program (NDIIPP), the Council launched a digital archiving case study project to examine
the practical realities of various digital archiving strategies and technologies. Using the Standard Test and
Evaluation Material co-produced in 2003 by the American Society of Cinematographers and the major
Hollywood studios and deposited in the Academy Film Archive in 2004, the Council developed requirements
and design specifications for a digital preservation system based on motion picture film archiving best
practices and current digital data management theory. The Academy Case Study System was built to these
specifications, and the Council is now using the system to test the design assumptions.
Long-Term Management and Storage of Digital Motion Picture Materials: A Digital Motion Picture Archive
Framework Project Case Study documents the Council's experiences in researching, specifying and building
For audiovisual archives, the report provides practical information arising from real-world experience with a
digital motion picture collection. For equipment manufacturers and service providers, the report provides
detailed end-user requirements that may guide future product development.
Question
1. What is the concept of science and technology council?
2. What is the long-term management?
2.7 Summary
People working in organizations need to have their activities co-ordinate, controlled and directed toward
the objectives of the organization
Management is a continuous, lively and fast developing science. Management is needed to convert the
disorganized resources of men, machines, materials and methods into a useful and effective enterprise.
Art involves the systematic application of theoretical knowledge and personal skills to achieve desired
results
Science is an organized or systematized body of knowledge pertain-ing to a particular field of enquiry.
Science is systematized in the sense that it establishes cause and effect relationship between different
vari-ables
Management organization is the foundation upon which the whole structure of management is built.
Organization is related with developing a frame work where the total work is divided into manageable
components
Administrative management is about managing information through people. Information is central to all
management processes and people are the resources who make best use of that information to add value.
2.8 Keywords
Controlling: Controlling is an important function because it helps to check the errors and to take the corrective
action so that deviation from standards are minimized and stated goals of the organization are achieved in a
desired manner.
Leading: Leading refers to motivating, directing and guiding people in the organization it involves ensuring
that the people in the organization are willing and capable of performing the required tasks.
Management: Management is the act of getting people together to accomplish desired goals and objectives
using available resources efficiently and effectively.
Planning: Planning in organizations and public policy is both the organizational process of creating and
maintaining a plan and the psychological process of thinking about the activities required to create a desired
goal on some scale
Organization: Organization (or organisation) is a social group which distributes tasks for a collective goal.
3. Management is a process which refers to various functions which a manager performs in an organization
(a)True (b) False
4. ….is an executive who involves the recruitment, selection, training, placement, compensating promotion
and demotion
(a)Controlling (b) Staffing
(c)Direction (d) Organizing
5……. function determines the objectives to be achieved and the course of action to be followed to achiev
them
(a)Controlling (b) Staffing
(c)Planning (d) Organizing
6. The process of ……..involves synchronizing individual actions with the goals of the enterprise
(a) controlling (b) staffing
(c) direction (d) co-ordination
8. ..........is the form of every human association for the attainment of a common purpose
(a) Planning (b) Controlling
(c) Managing (d) Organization
9. All companies and organizations are only as good as the people they employ
(a) True (b) False
10. A good administrative manager can add value to the company by challenging the efficiency
(a) False (b) True
Objectives
After studying this chapter, you will be able to:
Understand structure of organization
Discuss importance of organization
Explain process and principles of organization
Define types of organization. organization design
Explain the types of authority and delegation of authority
Introduction
The environment in which organizations operates is constantly changing. Occasionally, organizations process
rational reorganizations to meet new demands. A new organizational design is then rationally developed;
establishing the formal organization. Simultaneously, the informal organization develops in accordance with
individuals‘ interpretations and behaviour. The organization studied had a large focus on organizational
objectives and requirements but neglected the importance of enabling individuals to construct their own
realities, in the new organizational design, resulted in organizational stress. When individuals‘ attitudes and
behaviour have common characteristics with organizational expectations of roles, performance, processes and
overall structure, a win-win situation is created where employees are satisfied and the organization is efficient.
Consider an organization with an explicitly coordinated structure. Individuals are merely functional parts of
this overall structure and their roles are strictly defined to fulfil business purposes. Moreover, procedures are
formally and rationally planned by top management according to organizational directives. In this web of roles
and procedures, there is no question about who is doing what, when or how. The organizational set-up is
maintained through supervision and control. The organization functions as clockwork.
Now consider an organization formed by the employees. It is designed in accordance with individuals‘
preferences, values and beliefs. Every member of the organization gets listened to, appreciated and stimulated
to do what they are best suited for. When questions and challenges arise, employees discuss and participate in
the search for answers and solutions. The organizational set-up is dynamic and continuously changing
according to its members and the environment in which it operates. The people are the organization.
The two types of organizations just described, characterize two extremes of organizational design.
1. The first has its origin in old-school organizational theory, where organizations generally are seen as
machines and the people as components in this machine.
2. The second approach reflects the human relations view, where the organization is seen as an organism
where individuals signify the essential parts.
Organization Structure
Structure refers to the arrangement of parts and interrelationships among activities and people.
The structure of an organization mainly involves the following
(a) The number of departments, sections and positions in which an organisation has been divided.
(b) The levels of management.
(c) The relationships among different parts and levels.
In most organizations, structure is created on the basis of functions. A small manufacturing organization may
have only two departments to perform the functions of production and sale.
These two functions are known as line functions. In large organizations, there are staff officers and staff
departments to help the line departments. Staff departments may be created at any level in the organization.
The principle of span of control states that there is a limit to the number of subordinates who can be
effectively supervised by a manager. The span of control gives rise to management levels.
There are three types of authority relationships viz. line, staff and functional.
(a) Line authority is the authority to issue orders and to see that these orders are carried out.
(b) Staff officers are appointed to help line managers. Their main job is to give advice.
(c) Functional authority is the authority of a manager over a person who is not his immediate subordinate. The
main reason of using functional authority is to take advantage of the special knowledge and skill of functional
specialists
The first thing that getting organized can do for us is to give we help with our paperwork. Keeping track of
income, expenditures and taxes is all a part of running a successful business. Coming up with an organizational
system can help obliterate confusion. Plus, when we need to find something, we can go right to the items we
are looking for because they are well organized. There are several systems out there that we can put into place
for our concession business. There are electronic tracking systems available or we can come up with a system
that is all our own that can work for us. Taxes are something we must keep very close track of or it becomes
difficult to prepare them when the time comes. Payroll is something else that organization can aid with if we
have employees.
Organization does not just come in handy with regard to paperwork. It can also help when we are dealing with
inventory and daily and weekly business routines. Listing the things we expect from our business operations
and from our employees is a great way to make sure everything gets done when it is supposed to. Also, having
a system for the stocking and restocking of inventory can make the business run a lot more smoothly? If we do
not have a system in place, do some research? The internet is a fantastic source of information.
Organization is not simply for the business world. It can make our overall life better in general. Organizing our
life will make things easier to find, save we time, and could even save us money. Wasting time looking for
things we have misplaced and forgetting to take that defective product back to the store can cost us two of the
most valuable commodities that exist. Time and money do not grow on trees and if we take the time to
organize and then we keep it that way, they are two commodities we do not have to worry about losing.
Organizing our business can bring us the same benefit, in a much bigger way. The value of our time is more
and the money we stand to lose is a much higher amount.
Modern organizational structures have evolved from several organizational theories, which have identified
certain principles as basic to any organization structure.
Departmentalization
Departmentalization is a process of horizontal clustering of different types of functions and activities on any
one level of the hierarchy. Departmentalization is conventionally based on purpose, product, process, function,
personal things and place.
Staff Authority
Staff authority consists of the right to advise or assist those who possess line authority as well as other staff
personnel. Staff authority enables those responsible for improving the effectiveness of line personnel to
perform their required tasks.
Line and Staff personnel must work together closely to maintain the efficiency and effectiveness of the
organization. To ensure that line and staff personnel do work together productively, management must make
sure both groups understand the organizational mission, have specific objectives, and realize that they are
partners in helping the organization reach its objectives.
Size is perhaps the most significant factor in determining whether or not an organization will have staff
personnel.The larger the organization, the greater the need and ability to employ staff personnel.
As an organization expands, it usually needs employees with expertise in diversified areas. Although small
organizations may also require this kind of diverse expertise, they often find it more practical to hire part time
consultants to provide it is as needed rather than to hire full time staff personnel, who may not always be kept
busy.
Functional Authority
Functional authority consists of the right to give orders within a segment of the organization in which this right
is normally nonexistent. This authority is usually assigned to individuals to complement the line or staff
authority they already possess. Functional Authority generally covers only specific task areas and is
operational only for designated amounts of time. It is given to individuals who, in order to meet
responsibilities in their own areas, must be able to exercise some control over organization members in other
areas.
Delegation of Authority
Delegation of authority is one vital organizational process. It is inevitable along with the expansion and growth
of a business enterprise. Delegation means assigning of certain responsibilities along with the necessary
authority by a superior to his subordinate managers. Delegation does not mean surrender of authority by the
higher level manager. It only means transfer of certain responsibilities to subordinates and giving them the
necessary authority, which is necessary to discharge the responsibility properly. Delegation is quite common in
all aspects of life including business. Even in the college, the principal delegates some of his authority to the
vice-principal.
In delegation, an attempt is being made to have meaningful participation and cooperation from the
subordinates for achieving certain well-defined results. Due to delegation, the routine responsibilities of the
superior are reduced. As a result, he concentrates on more urgent and important matters. Secondly, due to
delegation, subordinate becomes responsible for certain functions transferred to him. Delegation is a tool,
which a superior manager uses for sharing his work with the subordinates and thereby raising his efficiency.
According to Koontz and O‘Donnell ―the cement that binds the organization together is called delegation.‖
According to Brech, ―delegation means the passing on to others of a share in the essential elements of
management process‖. Delegation involves three important aspects like assigning duties by the executives,
granting of authority and creation of obligation or accountability. Delegation is not a process of abdication.
The person who delegates does not divorce himself from the responsibility and authority with which he is
entrusted. He remains accountable for the overall performance and also for the performance of his
subordinates. Delegation is needed when the volume of work to be done is in excess of an individual‘s
physical and mental capacity.
Delegation of Authority is defined as the specific written transfer of authority from one official in ED
(delegator) to another official in ED (delegate). The transfer of authority must be signed
By the official authorized to delegate the authority (See Figure 3.3).
Figure 3.3: Delegations in organization.
Caution
Lack of understanding in the staff may be the cause of failure of the proper organization.
The system‘s calculation of tax obligation does not always match the regulations as written and the business
people cannot explain why. This results in the inability to accurately assess taxes. When citizens prove they are
right their tax obligation is put on an exclusion list. When the tax authority discovers individuals or businesses
have more obligations this is put on an inclusion list. But the incorrect rules that caused the problem cannot
readily be identified and corrected ensuring similar inconsistencies in the future. And the authority cannot
adopt more sophisticated tax policies, something that has become a critical issue. In particular the ability to
adapt the systems to detect potential fraud has been identified as crucial to future tax revenue stability.
To address these issues the authority determined that it must improve the communication between business
people and IT staff. Given the need for business experts to interpret the legislation and for IT to develop
systems to collect taxes, such communication has a direct impact on revenue collected and the fairness of the
tax code. As citizens naturally focus on attempts to collect too much tax, any problems tend to reduce the
amount of tax collected.
To succeed, the authority had to create a conscious and accurate linkage between the regulations and the
current implementation. And it had to create an effective process for the ongoing improvement of the tax
regulations. A precise language that could describe the implementation of the tax code without technical jargon
was essential. Only then would the business people be able to take on their legal responsibility to manage the
implementation of the tax code.
Attempts to use documents to document the rules were unsatisfactory because they did not allow the rules to
be managed. Similarly the use of a business rules management system alone did not offer enough in terms of
business user understanding. In particular the business users wanted to be able to write their rules in perfect
natural language. Those who work with the legislation take language seriously and do not like to work with
artificial words or phrasing. Business users would see pseudo code as a sign that this was IT work and that
would undermine the kind of collaboration that was required.
Solution
The authority adopted Rule press and the Rule Speak approach to writing rules. Using RuleXpress, business
users document the terms, facts and rules of the tax code. Each case or element of the tax code is considered.
First a business user documents the rules and terms for the case working directly from the current legislation.
RuleXpress allows these rules and terms to be defined in the local language exactly as the business user
understands them. The rules and terms created are linked back to the original in the legislation so that it is clear
which rules come from which in which pieces of legislation. A group of business experts then reviews these
rules, seeking a consensus. Management criteria can be added to the original legislation to document exactly
how it should be applied. The code in the legacy system is now reverse engineered and compared with the
rules in RuleXpress. Sometimes the code reflects additional guidelines or criteria that need to be added to the
specification. At this point RuleXpress contains an exact specification of the rules required and final decisions
can be made about the logic required to implement the particular in the tax code.
Documenting all the business logic for the regional tax code in this way has taken just twelve months
including a significant amount of training, adoption and change management effort. Both the external
knowledge management consultant and business users in the group tasked with coordinating with IT use Rule
press. Rule press allows non-technical users to access and update the rules and generate the reports that the IT
and business departments need.
Derived terms
The tool allows for effective connections between derived terms and the rules that derive them. This ensures
that users can easily find out exactly how a term is derived.
Besides these improvements in accuracy they also see a dramatic reduction in implementation complexity. For
example, one piece of transformed legislation showed a 95% reduction in descriptive complexity. Where the
traditional approach had required 4,700 words to describe the design and nearly 60,000 words to implement it,
the complete rules based approach required just 2,800 words to describe and implement the rules.
Questions
1. Describes the tax authority.
2. Explain the challenge of tax authorities.
3.6 Summary
Organizing refers to the way in which the work of a group is arranged and distributed among members to
efficiently achieve the objectives of an organization.
Properly designed organization can help improve teamwork and productivity by providing a framework
within which the people can work together most effectively.
Departmentalization is a process of horizontal clustering of different types of functions and activities on
any one level of the hierarchy.
Organizing refers to the way in which the work of a group is arranged and distributed among members to
efficiently achieve the objectives of an organization.
Authority is defining as the right to give orders and provides to exact obedience.
Delegation means the passing on to others of a share in the essential elements of management process.
The key to effective delegation of tasks is the transference of decision-making authority and responsibility
from one level of the organization to the level to which the tasks have been delegated.
3.7 Keywords
Accountability: It means giving explanations for any variance in the actual performance from the expectations
set.
Authority: It is a force that is essential to the functioning of any organization.
Delegation: It means assigning a certain task to other person providing proper authorization keeping in mind it
should be effective and result oriented.
Productivity: Productivity is a ratio of production output to what is required to produce.
Organizing: It refers to the way in which the work of a group is arranged and distributed among members to
efficiently achieve the objectives of an organization
3. Organizing refers to the way in which the work of a group is arranged and distributed among members to
efficiently achieve the objectives of an organization.
(a) True (b) False
4. ……… is the authority to issue orders and to see that these orders are carried out
(a) Staff authority (b) Line authority
(c) Functional authority (d) both a and b
5. Delegation means the passing on to others of a share in the essential elements of management process.
(a) True (b) False
9. Exists when a person has information that others need to accomplish certain goals
(a) Informational power (b) Democratic leadership
(c) Laissez-faire leadership (d) Democratic leadership
Objectives
After studying this chapter, you will be able to:
Understand significance of communication
Explain channels of communication
Describe types and process of communication
Define barriers and remedies
Introduction
The word ―communication‖ derived from the Latin word ―communicare‖ that means to impart, to participate,
to share or to make common. It is a process of exchange of facts, ideas, and opinions and as a means that
individual or organization share meaning and understanding with one another. In other words, it is a
transmission and interacting the facts, ideas, opinion, feeling and attitudes.
It is the ability of mankind to communicate across barriers and beyond boundaries that has ushered the
progress of mankind. It is the ability of fostering speedy and effective communication around the world that
has shrunk the world and made ―globalization‖ a reality. Communication had a vital role to play in ensuring
that people belonging to a particular country or a culture or linguistic group interact with and relate to people
belonging to other countries or culture or linguistic group. Communication adds meaning to human life. It
helps to build relationship and fosters love and understanding. It enriches our knowledge of the universe and
makes living worthwhile.
Example: Look at the situation given here. You come to National Institute of open schooling for taking
admission to class X. You need information regarding conditions and procedures for admission. So you
approach to the officer at the inquiry counter. The officer looks at you. His look seems to be asking ―How can
we help you?‖ You greet him and tell him that you have come for admission (words). The officer explains the
procedures and gives you a printed form to fill in information about yourself. You fill in the form and give it
back to him and say ―Is it O.K.?‖ he may say ―Yes‖ (words) or he may nod his head (gesture).
Thus you see that communication is a continuous process of giving and receiving information, of building up
social relationships. We make use of speech, writing, printed and pictorial matter, gestures and expressions and
also of technical media like telegraphy, radio, television, computer etc. for communication. Let us define
communication. It can be defined as ―a process by which two or more people exchange ideas, facts, feelings or
impressions in ways that each gains a common understanding of the message‖.
There is more to communication than just talk and gesture. Listening, understanding and interpreting are as
much integral to communication as words verbal, written or gestured.
4.1.2 Communication Process
The communication process involves a sender or communication source, the subject matter of communication,
expressions used for communicating (encoding), the medium of communication, receiver(s) of the
communication and the interpretation thereof (decoding) and feedback.
This can be diagrammatically represented as follows:
I.e. feedback is crucial in determining whether the communication has been understood by the receiver in the
same light as intended by the sender. Let us try and understand the Significance of communication in different
walks of our daily lives.
Caution:
Always remember what you say in public could end up in the press, or on a blog or social media site.
Interpersonal Speaking
Verbal communication is an essential part of business and when it is executed correctly, good things happen.
Here are a few different ideas and styles to remember when speaking to anyone in a business setting. Because
speaking is such an indelible activity, we tend to do it without much thought. But, that casual approach can be
a problem in business.
Here are some things which will make you an effective communicator:
Remember to become aware of what you are saying.
Apply the same process you use in written communication when you are communicating orally.
Before you speak, think about your purpose, your main idea, and your audience.
Organize your thoughts in a logical way.
Decide on a style that that suits the occasion and then edit your remarks mentally.
As you speak, watch the other person to see whether your message is making the desired impression. If
not, revise it and try again.
Hierarchical Communication
People communicate in businesses with each other most often by oral communication. This talking takes place
between mangers, co-workers and subordinates alike. In organizations, communication skill is used to send
messages 34% of the time. That is why it is important to understand all the concept of communication.
Communication from a manager to a subordinate is also different. One reason for this may be because of the
arising concern by managers not to offend their workers or say the wrong thing. In today‘s society, lawsuits
run rapid over conversations that some employees may take offensive from their bosses. Managers have a
responsibility to know and follow guidelines of good business communication etiquette.
Etiquette
Competitive business environment, social skills and proper etiquette can mean the difference between finding
and winning the job of your career and standing still in your career.
The confidence of knowing you can hold your own in any social setting, from the white-knuckled nervousness
of a first interview to a casual business lunch, can change the way people perceive and judge you. The key to
proper business etiquette is: ―Do unto others as they would want you to do unto them.‖
Learning the basics - and they are not very difficult - is the first step.
Public Speaking
Seven Steps to Creating an Effective Speech
The first step in making a speech is choosing a topic. We will assume you already have a topic since your
qualifications, the audience, or the occasion usually determines it. If you do not have a topic, your most
effective speeches will come from a topic you are familiar with or that you want to learn more about.
The second step is to define the purpose of your speech. Are you speaking to persuade your audience, inform
your audience, or a combination of the two? And, what are you persuading your audience to do, or what are
you informing them about? The answers to these questions will define the purpose of your speech.
The third step is to get to know your audience. Get to know the demographic features of your audience. You
want to know how large the audience will be, what sort of setting or conditions you will be speaking in, how
the audience feels about the topic, and how the audience feels about you as the speaker. Gauge how important
these factors will be on the speaking situation and adjust your speech accordingly. Keep in mind the audience
is the focus of your speech, and you are looking for a positive response from them.
The fourth step is to gather information for your speech. There are countless sources of information, but here
are a few: interviews, the Internet, scholarly journals, government documents, newspapers, and magazines.
This information can be used in your speech in a variety of ways. It may be used to supply examples for
supporting your ideas, or as statistics to quantify your ideas.
The fifth step is to organize your speech. Start by identifying the main points you want to make, and then put
them in an order that makes sense to your topic. You can order them chronologically if your topic covers a
sequence of events; spatially if you are describing something from top to bottom, east to west, or according to
some other avenue; or, problem-solution order if you are presenting a problem followed by a solution.
The sixth step is adding an introduction to your speech. The introduction is aimed at getting the attention of
your audience. There are several ways to accomplish this, the most common are: relating the topic to the
audience, shocking the audience with an intriguing or astonishing statement, questioning the audience, or
telling a suspenseful or provocative story.
The next phases of the introduction are to state the topic of your speech so the audience will know what you
are going to talk about, and to preview the main points of your speech so the audience will know what to listen
for.
The seventh step is adding a conclusion to your speech. First, signal to the audience that your speech is coming
to a close by using phrases such as ―In conclusion,‖ In closing, and ―Let me end by saying.‖ Second, reinforce
the main point of your speech. You can do this by simply restating your main points, ending with a quotation
that summarizes your main points, or by making a dramatic statement that emphasizes your main points.
Non-verbal Communication
It has been written on the Significance of non-verbal messages. Some studies suggest that from 30% to 90% of
a message‘s effect comes from nonverbal cues.
This chapter presents a brief overview of nonverbal communication:
Body language
Sign language
Paralanguage
Circumstantial language – space, surroundings and time
Body Language
Body language is the way the body communicates by its physical movements. When we study body language,
we specifically look for inner states of emotion as expressed through different parts of the body and their
physical movements. Body language mainly includes following subparts:
Facial Expressions
The facial expressions can divulge hidden emotions – anger, annoyance, confusions, enthusiasm, fear, hatred,
joy, love, interest, sorrow, surprise, uncertainty and others. They can also contradict verbal statements.
Eye Contact
Within the facial area, the eyes tell us much than other facial features. The eyes, along with the eyebrows,
upper and lower eyelids, and size of pupils, convey some inner body state. In fact, eye contact may be the best
indicator of how involved a person is in the situation.
Posture
Posture is the way we carry ourselves. Like we may choose to stand or sit erect, or lean forward or backward,
or slouch haphazardly. Postures non-verbally convey impressions of self-confidence, status and interest.
Gestures
Gestures are the physical movements of the arms, legs, hands, torso and head. When you are speaking some
gestures have standard meanings – for example, touching and tapping your forefinger to the top of your head
means you are thinking, a slight variation with a single rapid tap means you have an idea.
Body Shape
The physical shapes of our body also communicate to others. Like tallness usually equates with dominance.
We cannot do much about the shape of our body, but by adopting right kind of postures and dressing style, we
can improve the impact of our physical appearance.
Sign Language
The most basic element of communication is the sign. A sign is a symbol. A symbol is something that stands
for something else. Everything in our world that we can visualize or sense has symbolic meaning and can be
used in communication. For example, a map is a symbol that represents an actual physical geographic territory,
and the 21 gun salute is a symbol of respect.
Paralanguage
Another type of non-verbal communication is known as paralanguage or paralinguistic. Of all non-verbal
types, it is the closest to the actual communication. ―Para‖ means ―like‖; thus paralanguage literally means
―like language‖. This ―like language‖ is the where we use our voice in uttering words.
It is everything other than words-intonation, pitch, regional accent, sarcasm, hesitations, truthfulness, emotion,
etc.
(a) Pitch variation – how high or low your vocal tones are.
(b) Volume – refers to the loudness of the voice.
(c) Speed and pause – speaking in a very high speed may make the matter incomprehensible and at too low
speed may make the matter boring. Thus a speaker should use normal pace.
(d) Stress on words – by emphasizing different key words in a sentence you can purposely indicate your
feelings about what is important.
4.4.1 Barriers
Communication is fruitful if and only if the messages sent by the sender are interpreted with same meaning by
the receiver. If any kind of disturbance blocks any step of communication, the message will be destroyed. Due
to such disturbances, managers in an organization face severe problems. Thus the managers must locate such
barriers and take steps to get rid of them. There are several barriers that affect the flow of communication in an
organization. These barriers interrupt the flow of communication from the sender to the receiver, thus making
communication ineffective. It is essential for managers to overcome these barriers. The main barriers of
communication are summarized below.
Following are the main communication barriers:
1. Perceptual and Language Differences: Perception is generally how each individual interprets the world
around him. All generally want to receive messages which are significant to them. But any message which
is against their values is not accepted. A same event may be taken differently by different individuals.
Example: A person is on leave for a month due to personal reasons (family member being critical). The HR
Manager might be in confusion whether to retain that employee or not, the immediate manager might think of
replacement because his team‘s productivity is being hampered, the family members might take him as
emotional support. The linguistic differences also lead to communication breakdown. Same word may mean
different to different individuals. For example: consider a word ―value‖.
a. What is the value of this Laptop?
b. I value our relation?
c. What is the value of learning technical skills?
―Value‖ means different in different sentences. Communication breakdown occurs if there Is wrong perception
by the receiver.
2. Information Overload: Managers are surrounded with a pool of information. It is essential to control this
information flow else the information is likely to be misinterpreted or forgotten or overlooked. As a result
communication is less effective.
3. Inattention: At times we just not listen, but only hear. For example a traveler may pay attention to one ―NO
PARKING‖ sign, but if such sign is put all over the city, he no longer listens to it. Thus, repetitive
messages should be ignored for effective communication. Similarly if a superior is engrossed in his paper
work and his subordinate explains him his problem, the superior may not get what he is saying and it leads
to disappointment of subordinate.
4. Time Pressures: Often in organization the targets have to be achieved within a specified time period, the
failure of which has adverse consequences. In a haste to meet deadlines, the formal channels of
communication are shortened, or messages are partially given, i.e., not completely transferred. Thus
sufficient time should be given for effective communication.
5. Distraction/Noise: Communication is also affected a lot by noise to distractions. Physical distractions are
also there such as, poor lightning, uncomfortable sitting, unhygienic room also affects communication in a
meeting. Similarly use of loud speakers interferes with communication.
6. Emotions: Emotional state at a particular point of time also affects communication. If the receiver feels
that communicator is angry he interprets that the information being sent is very bad. While he takes it
differently if the communicator is happy and jovial (in that case the message is interpreted to be good and
interesting).
7. Complexity in Organizational Structure: Greater the hierarchy in an organization (i.e. more the number of
managerial levels), more is the chances of communication getting destroyed. Only the people at the top
level can see the overall picture while the people at low level just have knowledge about their own area
and a little knowledge about other areas.
8. Poor retention: Human memory cannot function beyond a limit. One cannot always retain what is being
told specially if he is not interested or not attentive. This leads to communication breakdown.
Caution
Every person has a unique body language so be careful not to make decisions based solely on body language.
On one fine night, Satish who was on night-duty at Mumbai airport observed that neither any pre-alert has
been received from Bangalore. Nor Bangalore office had sent any load to them. He tried calling Bangalore
office. But it was well past midnight and there was no response from Bangalore office. Security guard on duty
told to the Airport Executive that nobody is available in the Bangalore office and staff on duty had left already.
Satish knew that generally Ravi works in the night time. He tried calling on Ravi‘s mobile number but it was
switched off. Satish had no other option except calling Asst Manager Operations of Bangalore. Charles tried
calling other operations staffs to find out whether anybody knew home of Ravi. But none of them knew where
Ravi‘s house was. Charles was disappointed. Though he had disturbed couple of staffs in the dead of the night,
there was no much headway. Charles was on the horns of dilemma. As a last resort, Charles called Hari, HR
Executive. Documents of Ravi. By the time it was 01:30 hours and Hari was aghast to find out that he was told
to go to office at dead of the night. Willy-nilly, Hari went to his office, pulled out personal documents of Ravi
and noted his address. Later he confirmed the address to Charles.Charles had no option but to commute 15 km
in order to go to house of Ravi. He reached Ravi‘s home at 02:15 hours. For Ravi, it was a strange experience
to find out that his manager was knocking his door at well past midnight.
Questions
1. What are the problems of communication?
2. Does communication plays a vital role in an organization?
4.5 Summary
Communication is a process of interaction with people and environment.
A leader is expected to represent his/her followers and motivate them to reach heights of success through
individual and collective effort.
Communication is necessary to issue directions by the top management or manager to the lower level.
Decoding is the process of interpretation of an encoded message into the understandable meaning.
The communication theory is the necessary key in order to make all transactions and business connections
successful.
4.6 Keywords
Body Language: Body language is a form of mental and physical ability of human non-verbal communication,
which consists of body posture, gestures, facial expressions, and eye movements.
Communication: It is exchange of thoughts, messages, or information, as by speech, visuals, signals, writing,
or behaviour.
Feedback: Feedback is a process in which information about the past or the present influences the same
phenomenon in the present or future.
Message: It is a subject matter of any communication. It may involve any fact, idea, opinion or information.
Non-verbal Communication: Non-verbal communication is usually understood as the process of
communication through sending and receiving wordless messages between people.
10. The person who desires to convey the message is known as:
(a) Receiver (b) Sender
(c) Both a and b (d) None of these.
Objectives
After studying this chapter, you will be able to:
Define meaning of leadership
Discuss about characteristic and features of leadership
Explain leadership styles and skills
Understand the importance of leadership
Explain the functions and types of leaders
Introduction
Our introduction to management and leadership is a comprehensive two day management and leadership
training course that will give delegates an insight into the management and leadership of people. This is one of
the key areas that effects motivation and productivity in business today and will make delegates aware of
different management and leadership styles and the affect they can have on others.
Successful managers are able to develop and use a range of management and leadership styles and to apply the
most appropriate one for the task facing them. The management style chosen may also need to be adapted to fit
with different teams and individuals and this course will provide delegates with a range of management and
leadership styles to employ in the workplace plus the ability to judge which the best one to use
According to Louis A Allen––A leader is one who guides and directs other people. He gives the efforts to his
followers a direction and purpose by influencing their behaviour‖.
In the words of Theo Haimann––: Leadership is the process by which an executive imaginatively directs
guides and influences the work of others in choosing and attaining specified goals by mediating between the
individuals and the organization in such a manner that both will obtain maximum satisfaction‖.
In the words of James Gibbon––Leadership is a process of influencing on a group in a particular situation at a
given point of time and in a specific set of circumstances that stimulates people to strive willingly to attain
organizational objectives, giving them the experience of helping attain the common objectives and satisfaction
with the type of leadership provided‖.
The situations approach to leadership provides a corrective to the traitist approach which regarded leaders as
uniquely superior individuals who would lead in whatever situation or time they might find themselves. This
approach emphasizes that leadership is specific to a specific situation. It is a way of behaving exhibited by
individuals in differing degrees in different situations. A leader in one group is not necessarily a leader in
another. A leader in the class may not be a leader in the playground. Though leadership may be considered as
behaviour specific to a given situation yet it does not mean that there is no generality of traits on the basis of
which certain persons may be rated leaders.
Leadership is absolutely specific to a given situation then it cannot be a subject of scientific analysis and
generalization. Leader is necessarily a part of a group and leadership is status and role in that group. It is
obvious that leadership can occur only in relation to other people. No one can be a leader all by himself. The
relationships which the leader bears to other individuals are status and role relationships. He is part of the
group structure and as such he carries on reciprocal relationship with other members of the group. These
relationships define his role in the group. When leadership is viewed as a status in a group structure and a role
defined by reciprocal relations with others in the particular structure it is easy to understand why there cannot
be a generalization of traits characteristic of leaders.
Leadership Involves A Community Of Interest Between The Leader And His Followers: In other words, the
objectives of both the leader and his men are one and the same. If the leader strives for one purpose and his
team work for some other purpose, then it is not a leadership.
Leadership Involves An Unequal Distribution Of Authority Among Leaders And Group Members: Leaders
can direct some of the activities of group members, i.e., the group members are compelled or are willing to
obey most of the leader‘s directions. The group members cannot similarly direct the leader‘s activities, though
they will obviously affect those activities in a number of ways.
Leadership Is A Process Of Influence: Leadership implies that leaders can influence their followers or
subordinates in addition to being able to give their followers or subordinates legitimate directions.
Leadership Is The Function Of Stimulation: Leadership is the function of motivating people to strive
willingly to attain organizational objectives. A successful leader allows his subordinates (followers) to have
their individual goals set up by themselves in such a way that they do not conflict with the organizational
objectives.
A Leader Must Be Exemplary: In the words of George Terry ―A Leader shows the way by his own example.
He is not a pusher, he pulls rather than pushes‖.
According to L.G. Urwick ―it does not what a leader says, still less what he writes, that influences
subordinates. It is what he is. And they judge what he is by what he does and how he behaves‖.
A Leader Ensures Absolute Justice: A leader must be objective and impartial. He should not follow unfair
practices like favouritism and nepotism. He must show fair play and absolute justice in all his decisions and
actions.
Issue of Power
The concepts of power and leadership have much in common. Certain people are leaders because they exercise
power. It is unthinkable that a leader should not have power. Consequently the exercise of influence is a central
part of most definitions of leadership. According to La-Pierre, leadership is a behaviour that affects the
behaviour of other people more than their behaviour affects that of the leader. Pigor also says leadership is a
concept applied to the personality to describe the situation when a personality is so placed in the environment
that it directs the feeling and insight and controls others in pursuit of a common cause. According to Allen
leadership is the activity of persuading people to cooperate in the achievement of a common objective. Terry
defines it as the activity of influencing people to strive willingly for mutual objectives.
Leadership always involves attempts on the part of a leader to affect the behaviour of a follower or followers
in a situation. Power is not equivalent with influence or with initiating change in another person‘s behaviour
without regard to the situation in which it occurs. A new born infant can influence and change the behaviour of
his parents but this influence is not equivalent with power in the family.
Issue of Headship
Leadership is not necessarily headship. Gibb has noted that there is almost general agreement in the literature
of the last few years that leadership is to be distinguished by definition from domination or headship. Headship
means a position in the official hierarchy.
A person who is the head of an organization may not have any influence over the members. He may be a head
without an influence. But as he gains influence he becomes a leader because leadership basically involves the
capacity to influence.
The Manager Makes Decision And Announces: It is an extreme form of autocratic leadership where by
decisions are made by the boss who identifies the problem, considers alternative solutions, selects one of them
and then reports his decision to his subordinates for implementation.
The Manager Sells His Decisions: It is a slightly improved form of leadership wherein the manager takes the
additional step of persuading the subordinates to accept his decision.
The Manager Presents His Ideas and Invites Questions: There is greater involvement of the employees in
this pattern. The boss arrives at the decision, but provides a full opportunity to his subordinates to get fuller
explanation of his thinking and intentions.
The Manager Presents A Tentative Decision Subject To Change: Herein the decision is tentatively taken by
the manager but he is amenable to change and influence from the employees.
The Manager May Present The Problem, Get The Suggestions And Then Take His Own Decision: Herein
sufficient opportunity is given to the employees to make suggestions that are coolly considered by the
Manager.
The Manager May Define The Limits And Request The Group to Make a Decision: A manager of this style
of management lets the group have the right to make the decision. The subordinates are able to take the
decision to the limits defined by the manager.
The Manager May Permit Full Involvement of the Subordinates in the Decision Making Process: It is often
designated as ‗Democratic‘ leadership.
Leadership style refers to the behaviour pattern adopted by a leader to influence the behaviour of his
subordinates for attaining the organizational goals. As different leadership styles have their own merits and
demerits, it is difficult to prefer one leadership styles to another. The selection of a leadership style will depend
on the consideration of a number of factors. Tannenbaum and Schmidt have pointed out the important factors
that affect the choices of a style of leadership are:
Forces in the manager i.e., the manager‘s personality, experience, and value system.
Forces in the subordinates i.e., the subordinates readiness for making decisions, knowledge, interest, need
for independence etc.
Forces in the situation i.e., complexity of the problem, pressure of time etc.
Objectivity: A good leader is fair and objective in dealing with subordinates. He must be free from bias and
prejudice while becoming emotionally involved with the followers. His approach to any issue or problem
should be objective and not based on any pressure, prejudice or preconceived notions. Objectivity is a vital
aspect of analytical decision making. Honesty, fair play, justice and integrity of character are expected of any
good leader.
Communication Skill: A leader should have the ability to persuade, to inform, stimulate, direct and convince
his subordinates. To achieve this, a leader should have good communication skill. Good communications seem
to find all responsibilities easier to perform because they relate to others more easily and can better utilize the
available resources.
Teaching Skill: A leader should have the ability to demonstrate how to accomplish a particular task.
Social Skill: A leader should understand his followers. He should be helpful, sympathetic and friendly. He
should have the ability to win his followers confidence and loyalty.
A leader should have the ability to look at the enterprise as a whole to recognize that the various functions of
an organization depend upon one another and are interrelated, that changes in one affect all others. The leader
should have skill to run the firm in such a way that overall performance of the firm in the long run will be
sound.
Intelligence: Intellectual capacity is an essential quality of leadership. Leaders generally have somewhat
higher level of intelligence than the average of their followers.
Emotional Maturity: A leader should act with self-coincidence, avoid anger, take decisions on a rational basis
and think clearly and maturely. A leader should also have high frustration tolerance.
According to Koontz and O‘Donnell ―Leaders cannot afford to become panicky, unsure of themselves in the
face of conflicting forces, doubtful of their principles when challenged, or amenable to influence‖.
Personal Motivation: This involves the creation of enthusiasm within the leader himself to get a job done. It is
only through enthusiasm that one can achieve what one wants. Leaders have relatively intense achievement
type motivational drive. He should work hard more for the satisfaction of inner drives than for extrinsic
material rewards.
Integrity: In the words of F.W Taylor ―integrity is the straight forward honesty of purpose which makes a man
truthful, not only to others but to himself; which makes a man high-minded, and gives him high aspirations
and high ideals‖.
Flexibility of Mind: A leader must be prepared to accommodate other‘s viewpoints and modify his decisions,
if need be. A leader should have a flexible mind, so that he may change in obedience to the change in
circumstances. Thomas Carle has said ―A foolish consistency is the hobgoblin of a little mind‖.
The history of business is full of instances where good leaders led their business concerns to unprecedented
peaks of success .To quote George R. Terry ― The will to do is triggered by leadership and lukewarm desires
for achievement are transformed into burning passé for successful accomplishments by the skilful use of
leadership.‖
Leadership is an important function of management which helps to maximize efficiency and to achieve
organizational goals. The following points justify the importance of leadership in a concern.
Initiates Action: Leader is a person who starts the work by communicating the policies and plans to the
subordinates from where the work actually starts.
Motivation: A leader proves to be playing an incentive role in the concern‘s working. He motivates the
employees with economic and non-economic rewards and thereby gets the work from the subordinates.
Providing Guidance: A leader has to not only supervise but also play a guiding role for the subordinates.
Guidance here means instructing the subordinates the way they have to perform their work effectively and
efficiently.
Creating Confidence: Confidence is an important factor which can be achieved through expressing the work
efforts to the subordinates, explaining them clearly their role and giving them guidelines to achieve the goals
effectively. It is also important to hear the employees with regards to their complaints and problems.
Building Morale: Morale denotes willing co-operation of the employees towards their work and getting them
into confidence and winning their trust. A leader can be a morale booster by achieving full co-operation so that
they perform with best of their abilities as they work to achieve goals.
Builds Work Environment: Management an efficient work environment helps in sound and stable growth.
Therefore, human relations should be kept into mind by a leader. He should have personal contacts with
employees and should listen to their problems and solve them. He should treat employees on humanitarian
terms.
Co-ordination: Co-ordination can be achieved through reconciling personal interests with organizational
goals. This synchronization can be achieved through proper and effective co-ordination which should be
primary motive of a leader.
To Take the Initiative: A leader initiates all the measures that are necessary for the purpose of ensuring the
health and progress of the undertaking in a competitive economy. He should not expect others to guide or
direct him. He should lay down the aims and objectives, commence their implementation and see that the goals
are achieved according the predetermined targets.
He Identifies Group Goals: A leader must always help the group identify and attain their goals. Thus, a leader
is a goal setter.
He Represents The Organization: A leader represents the organization and its purpose, ideals, philosophy and
problems to those working for it and to the outside world .In other words, leaders is true representative of the
entire organization.
He Acts As Arbitrator: When groups experience internal difference, whether based on emotional or intellectual
clashes, a leader can often resolve the differences. He acts as an arbitrator to prevent serious group difference.
To Assign Reasons for His Action: It is a delicate task of leaders to assigns reason to his every command. He
has to instruct things in such a way that they are intelligible to all concerned and their co-operation is readily
forthcoming.
To Interpret: He interprets the objectives of the organization and the means to be followed to achieve them; he
appraises his followers, convinces them, and creates confidence among them.
To Guide and Direct: It is the primary function of the leader to guide and direct the organization. He should
issue the necessary instructions and see that they are properly communicated.
To Encourage Team Work: A leader must try to win the confidence of his subordinates. He must act like the
capital of a team.
He Manages the Organization: Last, but not the least, he administers the undertaking by arranging for the
forecast, planning, organization, direction, coordination and control of its activities.
In other words, an autocratic leader is one who centralizes the authority in himself and does not delegate
authority to his subordinates. He is dictatorial by nature, and has no regard for the subordinates. He drives
himself and his subordinates with one thought uppermost in his mind action must produce results.
An Autocratic leader operates on the following assumptions:
An average human being has inherent dislikes of work and will avoid it if he can.
His assumption is that if his subordinate was intelligent enough, he would not be in that subordinate
position.
He assumes that unintelligent subordinates are immature, unreliable and irresponsible persons. Therefore,
they should be constantly watched in the course of their work.
As he has no regard for his subordinates, he gets the work done by his subordinates through negative
motivation i.e. through threats of penalty and punishment.
Benevolent Autocrat: The benevolent is effected in getting high productivity in many situations and he can
develop effective human relationship. His motivational style is usually positive.
Manipulative Autocrat: A manipulative autocratic leader is one who makes the subordinates feel that they are
participating in decision making process even though he has already taken the decision.
This mode of direction can produce good and quick results if the subordinates are highly educated and brilliant
people who have a will to go ahead and perform their responsibility.
The leader works to help to work, guide, protect and keep his followers happily working together as members
of a family. He provides them with good working condition, fringe benefits and employee services. It is said
that employees under such leadership well work harder out of gratitude.
Caution
A strict autocratic leader relies on negative influence and gives orders which the subordinates must accept.
Did You Know?
The managerial grid model was developed by Robert Blake and Jane Mouton in 1964 and suggests five
different leadership styles, based on the leaders.
• Builds on man‘s need to get a job done and make a • Builds on a man‘s need for meaning
living • Is preoccupied with purposes and values,
• Is preoccupied with power and position, politics morals, and ethics
and perks • Transcends daily affairs
• Is mired in daily affairs • Is orientated toward long-term goals without
• Is short-term and hard data orientated compromising human values and principles
• Focuses on tactical issues • Focuses more on missions and strategies
• Relies on human relations to lubricate human • Releases human potential identifying and
interactions developing new talent
• Follows and fulfils role expectations by striving to • Designs and redesigns jobs to make them
work effectively within current systems meaningful and challenging
• Supports structures and systems that reinforce the • Aligns internal structures and systems to
bottom line, maximize efficiency, and guarantee reinforce overarching values and goals.
short-term profits.
―The goal of transformational leadership is to ‗transform‘ people and organizations in a literal sense to change
them in mind and heart; enlarge vision, insight, and understanding; clarify purposes; make behaviour
congruent with beliefs, principles, or values; and bring about changes that are permanent, self-perpetuating,
and momentum building‖
Caution
Leadership technique should good working condition, fringe benefits and employee services to organisation.
Coco Raynes Associates, Inc. is a leader in the field of Environmental Graphics and Coco has lectured
worldwide on the subject. Her philosophy to work beyond minimum requirements with regard to quality,
aesthetics, ADA-Americans with Disabilities Act, and client expectations has resulted in innovative designs
and solutions. The firm‘s design excellence has been acknowledged with many prestigious awards, including
the Gold Awards from the industrial Designers Society of America (IDSA) in 1994, Honor Awards from the
society of Environmental Graphic Design (SEGD) in 1994 and 2002, and the CLIO Award in 2003.
For her career achievements, Coco Raynes was honored with the 2006 Women in Design Award of Excellence
from the Boston Society of Architects.
Question
1. Explain about the Coco Raynes.
2.What is the problem create in Coco Rayne association?
5.10 Summary
Leadership is a process of influencing on a group in a particular situation at a given point of time and in a
specific set of circumstances that stimulates people to strive willingly to attain organizational objectives,
Leadership style refers to the behaviour pattern adopted by a leader to influence the behaviour of his
subordinates for attaining the organizational goals.
The importance of leadership in an organization cannot be denied. People working in an organization
needs individuals (leaders) who could be instrumental in guiding the efforts of groups of workers to
achieve goals and objectives of both the individuals and the organization.
The subject of leadership is so vast and perceived to be so critical; there are four distinct approaches to
leadership, viz. Traits theory, Behaviouristic theory, Contingency theory and Charismatic theories of
leadership.
The dynamics of the relationship change when two people go from uncommitted companionship to
making a lifelong promise in front of God and a few of their closest friends.
5.11 Keywords
Communication Skill: A leader should have the ability to persuade, to inform, stimulate, direct and convince
his subordinates. To achieve this, a leader should have good communication skill. Good communications seem
to find all responsibilities easier to perform because they relate to others more easily and can better utilize the
available resources.
Conceptual Skill: Conceptual skills are skills that utilize the ability of a human to form concepts. Such skills
include thinking creatively, formulating abstractions, analyzing complex situations, and solving problems.
Leadership: Leadership has been described as the ―process of social influence in which one person can enlist
the aid and support of others in the accomplishment of a common task‖.
Social Skill: A social skill is any skill facilitating interaction and communication with others. Social rules and
relations are created, communicated, and changed in verbal and nonverbal ways. The process of learning such
skills is called socialization.
Teaching Skill: A leader should have the ability to demonstrate how to accomplish a particular task.
3. There are five possible bases of power which are: reward power, coercive power, legitimate power,
referent power, and expert power.
(a). True (b). False
4. Referent power is based on the subordinate‘s identification with the leader. The leader is able to influence
the followers because of the interpersonal attraction and his personal charisma.
(a). True (b). False
7. A leader should act with........................ avoid anger, take decisions on a rational basis and think clearly
and maturely.
(a) Self-coincidence (b) decision making
(c) self- act (d) All of these.
8. It is closer to the prototype of leadership that people have in mind when they describe their ideal leader,
and it is more likely to provide a role model with which subordinates want to identify‖.
(a) Transactional Leadership (b) Transformational leadership
(c) Both (d) None of these
10. Leaders are people of exceptional character who are capable of bringing others through a crisis.
(a) True (b) False
Objectives
After studying this chapter, you will be able to:
Define definition of co‐ordination.
Explain co-ordination as essence of management,
Explain the principles of co‐ordination
Introduction
An element in construction with a coordinate constituent must be syntactically construable with each conjunct,
the term co-ordination refers to syntactic constructions in which two or more units of the same type are
combined into a larger unit and still have the same semantic relations with other surrounding elements. Co-
ordination is a construction consisting of two or more members which are equivalent as to grammatical
function and bound together at the same level of structural hierarchy by means of a linking device.
Co ordination is the unification, integration, synchronization of the efforts of group members so as to provide
unity of action in the pursuit of common goals. It is a hidden force which binds all the other functions of
management. Co ordination is orderly arrangement of group efforts to provide unity of action in the pursuit of
common goals. According to Charles Worth, ―Co-ordination is the integration of several parts into an orderly
hole to achieve the purpose of understanding ―. Management seeks to achieve co ordination through its basic
functions of planning, organizing, staffing, directing and controlling. That is why; co ordination is not a
separate function of management because achieving of harmony between individuals efforts towards
achievement of group goals is a key to success of management. Co-ordination is the essence of management
and is implicit and inherent in all functions of management. A manager can be compared to an orchestra
conductor since both of them have to create rhythm and unity in the activities of group members.
Co-ordination through Organizing: Mooney considers co ordination as the very essence of organizing. In fact
when a manager groups and assigns various activities to subordinates, and when he creates department‘s co
ordination uppermost in his mind.
Co-ordination through staffing: A manager should bear in mind that the right no. of personnel in various
positions with right type of education and skills are taken which will ensure right men on the right job.
Co-ordination through directing: the purpose of giving orders, instructions and guidance to the subordinates
is served only when there is a harmony between superiors and subordinates.
Co-ordination through Controlling: Manager ensures that there should be co ordination between actual
performance and standard performance to achieve organizational goals.
Caution
In leadership technique manager should bear in mind that the right no. of personnel in various positions with
right type of education and skills are taken.
6.2 Co-Ordination As Essence Of Management
The need for co-ordination arises because of the following factors:
Division of Labour
When managers divide work into specialized functions or departments, they, at the same time create a need for
the co-ordination of these activities If all the work of an organization is done by two people in one unit, it is
clear that there is little need for co-ordination. But if the work has been divided into 10 units with 100
employees, the need for co-ordination is much greater. Co-ordination ensures proper synchronization between
activities of different units, avoids interruptions in operations due to reasons such as delay in the supply of
materials, tools, or vague directions or omissions, or wrong allocation of duties, and eliminates overlapping or
duplication of work.
Interdependence of Units
The need of co-ordination in an organization also arises because of the interdependence of various units. The
greater the interdependence of the units, the greater the need for co-ordination, this is illustrated by James
Thompson‘s typology of interdependence. Thompson points out that unit can be linked in any of three ways.
Pooled interdependence
Units linked by pooled interdependence make contributions to the total organization but are not directly
related. Hindustan Zilic smelter plants in Udaipur and Visakhapatnam both contribute to the company‘s profits,
but they are not directly interrelated. The need for co-ordination between them is minimal. All product based
departmentalization‘s, where there are separate self contained units for the manufacturing and marketing of
each product, are examples of pooled interdependence.
Sequential Interdependence
In this kind of linkage, one organizational unit must act before the next can. For example, in a beer company
its distribution unit will have nothing to distribute until the beer has been brewed and bottled. Similarly in a
textile company having ginning, spinning, weaving and printing units later units depend on earlier ones.
Greater co-ordination is necessary in sequential than in pooled interdependence, though here also the
dependence of units can be reduced by creating buffer inventories.
Reciprocal Interdependence
In this relationship, the input of one unit becomes the output of the other and vice versa. The maintenance and
operations departments of an airline company provide an example of this kind of relationship. When the
maintenance department finishes servicing an aero plane, the aero plane is an output of maintenance. The
serviced aero plane then becomes an input to operations. When the operations department sees that an aero
plane needs maintenance, the aero plane is an output of operations and becomes an input to maintenance.
Obviously, this close interrelationship leads to the strongest need for co-ordination between maintenance and
operations.
Unity of Direction
Co-ordination helps to ensure unity of action in the face of disruptive forces. It helps unity of action and helps
to avoid conflicts between line and staff elements.
Human Relation
Co-ordination helps to improve team spirit and morale of employees. In a well coordinated organization,
organizational goals and personal goals of people are reconciled.
Quintessence of Management
Co-ordination is all inclusive concepts and the end result of management process. Co-ordination helps in the
accomplishment of organizational goals.
Simplified Organization
A simple and sound organization is an important means of co-ordination. The line of authority and
respon-sibility from top to the bottom of the organization structure should be clearly defined. Clear cut
definition of authority and responsibility of ach department and individual helps to avoid conflicts. Clear cut
authority relationships help to reduce conflicts and to hold people res-ponsible. Related activities should be
grouped together and jobs should properly inter relate. Well drawn organization charts, organizational manuals
and proper allocation of work make for uniform action. Some cases, rearrangement of departments may be
necessary to chief co-ordination of thought and action.
Effective Communication
Open and regular communication is they to co-ordination. Effective inter change of opinions and information
helps in resolving differences and in creating mutual understanding. Personal or face to face contacts are the
most effective means of communication and co-ordination. Committees help to promote unity of purpose and
uniformity of action. They provide an opportunity for free and frank exchange of views. Co-ordination
becomes easier when different functional groups are represented in the decision making process. Committees
are helpful in integrating the activities of different departments. Committee decisions are collective decisions
and such group decisions themselves provide co-ordination among different departments or func-tions in the
enterprise. Personal or face to face communication may be supplemented by written communication. Informal
communication can also be utilized for the purpose of co-ordination.
Chain Of Command
Authority is the supreme coordinating power in an organization. Exercise of authority through the chain of
command or hierarchy is the traditional means of co-ordination. Chain of command brings together the
different parts of an organization and relates them to a central authority. Co-ordination between interdependent
units can be secured by putting them under one boss. Because of his organizational position, a superior has the
authority to issue orders and instructions to subordinates.
He can resolve inter positional and intergroup conflicts. However, behavioral scientists have warned against
over dependence on chain of command. According to Chris Argyrols, the hierarchy techni-que of co-ordination
makes individuals dependent upon and passive towards the leader. It is inconsistent with the needs of mature
per-sonality. The hierarchical structure may impair communication and decision making.
Indoctrination and Incentives
Indoctrinating organizational members with the goals and mission of the organization can transform a neutral
body into a committed body. Similarly, incentives may be used to rebate mutuality of interest and to reduce
conflicts. For instance, profit sharing is helpful in promoting team spirit and cooperation between employers
and workers. Such mutuality of interest reduces strife and insures better co-ordination.
Liaison Departments
Where frequent contact between different organizational units is necessary, liaison officers may be employed.
For instance, a liaison department may ensure that the production depart-ment is meeting the delivery dates
and specifications promised by the ales department. Special coordinators may be appointed in certain assets.
For instance, a project coordinator is appointed to coordinate the activities of various functionaries in a project
which is to be completed it in a specified period of time. Liaison officers act as ‗linking pins‘ in organization
and compensate for lack of face to face contacts.‘
General Staff
In large organizations, a centralized pool of staff experts is used for co-ordination. A common staff group
serves as the clearing house of information and specialized advice to all the depart-ments of the enterprise.
Such general staff is very helpful in achieving inter departmental or horizontal co-ordination.
Voluntary Co-ordination
When every organizational unit appreciates the working of related units and modifies its own functioning to
suit them, there is self co-ordination. Self co-ordination or voluntary co-ordination is possible in a climate of
dedication and mutual cooperation. It results from mutual consultation and team spirit among the members of
the organization. It arises when every member of the group takes cognizance of the effects of his actions on
others. Under self co-ordination, members of an organization voluntarily adjust their behaviour according to
the needs of the situation. Self co-ordination is the voluntary efforts of independent units or subunits of an
organization to achieve the harmonious performance of their respective responsibilities. But self co-ordination
requires that individuals have sufficient knowledge of organizational goals, adequate information concerning
the specific problem of co-ordination, and the motivation to do something on their own. Managers cannot rely
on self co-ordination as these con-ditions are not always fulfilled. Self co-ordination cannot be a substitute for
co-ordination from above. Managers have to make deliberate efforts to bring unity of purpose in the activities
of subordinates. In the words of Harman, ―neither the principle of self co-ordination nor the concept of self
adjustment is a substitute for co-ordination.
It used to be thought that primitive reflexes could not persist in their crude form amongst normal children. A
growing body of research now suggests that vestiges of early reflex patterns can and do persist amongst some
normal schoolchildren, and continue to hamper these children in the development of basic skills. An
inadequate vocabulary of voluntary movement patterns will limit a child‘s expressive abilities. Children who
are motor-impaired find it difficult to integrate their personalities into the environment because they do not
have a complete repertoire of appropriate reactions. Lack of atomization in motor skills will impede cognitive
processing, so that a child may know what he wants to say, but be unable to combine the motor actions of
writing with fluent expression of ideas.
Movement helps to develop spatial awareness, directionality and control of balance. The balance mechanism is
linked to the muscles that control eye movements via a circuit called the vestibular-ocular-reflex arc. Children
with poor balance frequently also show impaired eye movements which in turn can affect reading ability and
simple tasks such as aligning columns for calculation in maths.
Less and less is movement a part of our children‘s daily lives. From birth they often go into molded baby seats
for their waking hours. Whilst these are invaluable for the modern mother, they should never replace the floor
as the first exercise ground. Crawling represents a crucial stage in the integration of motor patterns, for in the
process of crawling the infant learns to synchronies this balance, motor, kinetic and visual systems for the first
time. Then hand-eye co-ordination involved in crawling is carried out at exactly the same visual distance that a
child will use to read and write.
The two-to-three-year-old needs plenty of time to run, to hop, skip and jump; to roll and tumble. These
activities help to prime the motor system in preparation for fine muscle skills. Hours spent in front of the
television are hours of passive learning – they do not integrate new material into existing systems. The child
under the age of 7 learns best when he relates physically and emotionally to material.
The old-fashioned system of ―sounding out‖ as a class was an example of an active method of learning. It
helped to build auditory memory,. Before we learn to sub vocalize, something many of us do when trying to
commit something to memory, and we first need to vocalize. The school-age child needs time to move as well
as time to sit still – not all difficulties with reading, writing and attention reside in the head; some are linked to
the body.
Simplified organization
A simple and sound organization is an important means of coordination. The line of authority and respon-
sibility from top to the bottom of the organisation structure should be clearly defined. Clear-cut definition of
authority and responsibility of ach department and individual helps to avoid conflicts.
Clear-cut authority relationships help to reduce conflicts and to hold people responsible. Related activities
should be grouped together and jobs should properly inter-related. Well-drawn organization charts,
organizational manuals and proper allocation of work make for uniform action.
Effective communication
Open and regular communication is they to coordination. Effective inter-change of opinions and information
helps in resolving differences and in creating mutual understanding. Personal or face-to-face contacts are the
most effective means of communication and coordination.
Committees help to promote unity of purpose and uniformity of action. They provide an opportunity for free
and frank exchange of views.
Coordination becomes easier when different functional groups are represented in the decision-making process.
Committees are helpful in integrating the activities of different departments.
Committee decisions are collective decisions and such group decisions themselves provide coordination
among different departments or functions in the enterprise.
Personal or face-to-face communication may be supplemented by written communication. Informal
communication can also be utilized for the purpose of coordination.
Coordination is a human task and a manager can accomplish it through interpersonal relations. Informal
contacts with subordinates help to create climate of mutual trust and cooperation which is the foundation of
coordination, Luther Gallic has called coordinating by ideas to describe the use of leadership in coordination.
Chain of Command
Authority is the supreme coordinating power in an organization. Exercise of authority through the chain of
command or hierarchy is the traditional means of coordination. Chain of command brings together the
different parts of an organization and relates them to a central authority.
Coordination between interdependent units can be secured by putting them under one boss. Because of his
organizational position, a superior has the authority to issue orders and instructions to subordinates. He can
resolve inter-positional and intergroup conflicts.
However, behavioral scientists have warned against over-dependence on chain of command. According to
Chris Argyrols, the hierarchy technique of coordination makes individuals dependent upon and passive
towards the leader. It is inconsistent with the needs of mature personality. The hierarchical structure may
impair communication and decision-making.
Liaison departments
Where frequent contact between different organizational units is necessary, liaison officers may be employed.
For instance, a liaison department may ensure that the production department is meeting the delivery dates and
specifications promised by the ales department.
Special coordinators may be appointed in certain assets. For instance, a project coordinator is appointed to
coordinate the activities of various functionaries in a project which is to be completed it in a specified period
of time. Liaison officers act as 'linking pins' in organization and compensate for lack of face-to-face contacts.'
General staff
In large organizations, a centralized pool of staff experts is used for coordination. A common staff group serves
as the clearing house of information and specialized advice to all the departments of the enterprise.
Such general staff is very helpful in achieving inter-departmental or horizontal coordination.
Voluntary coordination
When every organizational unit appreciates the working of related units and modifies its own functioning to
suit them, there is self-coordination. Self-coordination or voluntary coordination is possible in a climate of
dedication and mutual cooperation. It results from mutual consultation and team-spirit among the members of
the organization. It arises when every member of the group takes cognizance of the effects of his actions on
others. Under self-coordination, members of an organization voluntarily adjust their behavior according to the
needs of the situation. Self-coordination is the voluntary efforts of independent units or subunits of an
organization to achieve the harmonious performance of their respective responsibilities.
But self-coordination requires that individuals have sufficient knowledge of organizational goals, adequate
information concerning the specific problem of coordination, and the motivation to do something on their own.
Managers cannot rely on self-coordination as these conditions are not always fulfilled. Self-coordination
cannot be a substitute for coordination from above. Managers have to make deliberate efforts to bring unity of
purpose in the activities of subordinates.
In the words of Harman, "neither the principle of self-coordination nor the concept of self-adjustment is a
substitute for coordination. It takes the efforts of the leader or the manager to bring about coordination, and the
goal of the enterprise cannot be successfully obtained without it."
Caution
Every member of the organization must understand fully how his job contributes to the overall objectives.
Planning is the ideal stage for coordination.
Case Study-Theory and Practice of Co-ordination and Ownership
The case shows that main actors in the Bangladesh health SWAP interpret ownership and co-ordination,
fundamental aspects of SWAP, differently. As long as work ran smoothly, the different definitions did not
create any problems, but when disagreements arose they became an obstacle. It is concluded that partners in
development should devote more effort to their working relationships and that responsibilities within a SWAP
need to be more clearly delineated. During the study period the Government of Bangladesh decided to reverse
a decision to unify the two wings of the Ministry of Health and Family Welfare. The decision led to
disagreements with development partners, which had serious implications for cooperation between key actors
in the Bangladesh health sector leading to deteriorated relationships and suspension of donor funds. The donor
community in itself was also in disagreement which led to inconsistencies in the dialogue between the
development partners and the Government of Bangladesh.
The population in Bangladesh was at very high growth levels in the 1970s and 1980s. In spite of increasing
efforts, it stubbornly refused to come down. The urgent need for population control led to donor demand on the
Government of Bangladesh to create a separate directorate within the Ministry of Health and Family Welfare
(Ministry of Health) responsible for all family planning activities. During the four health and population
programs that were undertaken following independence in 1969, Bangladesh experienced a rapid growth in
both number of donors as well as the amount of money available. The large aid presence resulted in a
fragmented sector with little co-ordination and a large number of projects. The Fourth Health and Population
Program alone accounted for around 75 different projects.
This was partly due to the fact that there was no mechanism established for co-ordination of donors. During
the 1990s, it was recognized that increased co-ordination and comprehensive reform of civil service was
needed, which led to emphasis being placed on developing a sector wide development program that would
initiate reforms and increase efficiency. After reviewing and evaluating the Fourth Population and Health
Project in Bangladesh, it was concluded that the focus on carrying out activities in the form of projects was
inefficient. The Health and Population Sector Program (HPSP), which commenced in 1998, therefore marked a
change in the way health sector development was designed in Bangladesh. In the HPSP, a model of sector wide
management was adopted to plan the health and population sectors jointly. With the HPSP major structural
changes were introduced to strengthen the health system. Up until the inception of the HPSP, there had been
different structures for management and delivery of family planning services and regular health services. There
had also, at every level, been very little collaboration between the two. In the design of the HPSP it was agreed
that stronger integration in service delivery was needed in order to increase efficiency.
Situation
The study object was a process of decision making in the Government of Bangladesh in 2003. In the past
decade the sector wide approach (SWAP) model has been promoted by donors and adopted by governments in
several countries. The purpose of this study is to look at how partners involved in the health SWAP in
Bangladesh define ownership and co-ordination, in their daily work and to analyse the possible implications of
these definitions.
Questions
1. Discuss the health and population sector program.
2. What is SWAP model?
6.7 Summary
Mooney considers co ordination as the very essence of organizing. In fact when a manager groups and
assigns various activities to subordinates, and when he creates department‘s co ordination uppermost in his
mind.
Manager ensures that there should be co ordination between actual performance and standard performance
to achieve organizational goals.
Co ordination is the basic responsibility of management and it can be achieved through managerial
functions. No manager can evade or avoid this responsibility.
Co-ordination may be variously classified as internal or external, vertical or horizontal and procedural or
substantive.
Procedural co-ordination implies the specification of the organization in itself. Substantive co-ordination is
concerned with the content of the organizations activities.
Co-ordination is defined with respect to all parties who are in any way affected by a venture, and not just
those who join in voluntarily.
6.8 Keywords
Co–operative Venture: The term cooperative venture is often used merely to signify some alternative to 100%
equity ownership of a foreign affiliate.
Co–ordination through Planning: It is co ordination by integrating the various plans through mutual
discussion, exchange of ideas,
Directing: Directing means giving necessary information, proper instructions and guidance to sub-ordinates.
This results in co-ordination.
Division of Labor: When managers divide work into specialized functions or departments, they, at the same
time create a need for the co-ordination of these activities.
Internal and External Co-ordination: Co-ordination between the different units of an organization is known
as internal co-ordination. External co-ordination refers to co-ordination between an organization and its
external environment customers, investors.
4. When information is exchanged between superiors and subordinates of an organization then it is known as:
(a) Vertical communication (b) Horizontal communication
(c) Both a and b (d) None of these.
5. Giving necessary information, proper instructions and guidance to sub-ordinates is termed as:
(a) Directing. (b) Division of Labour.
(c) Internal Co-ordination. (d) External Co-ordination.
8. Co-operation is broader than co-ordination which includes as well because it harmonizes the group efforts
(a) True (b) False
Objectives
After studying this chapter, you will be able to:
Understand concept of directing
Describes nature of direction
Explain importance of direction
Discuss about principle of direction
Describes the process of direction
Define techniques and essentials of effective control
Introduction
The managerial function of directing is like the activities of a teacher in a classroom. In order to teach, a
teacher has to guide his students, maintain discipline, inspire them and lead them to the desired goal. It is a
very important function in the management of any enterprise. It helps the managers in ensuring quality
performance of jobs by the employees and achievement of organizational goals. It involves supervision,
communication and providing leadership to the subordinates and motivating them to contribute to their best of
capability.
Directing means giving instructions, guiding, and counselling, motivating and leading the staff in an
organization in doing work to achieve Organizational goals. Directing is a key managerial function to be
performed by the manager along with planning, organizing, staffing and controlling. From top executive to
supervisor performs the function of directing and it takes place accordingly wherever superior – subordinate
relations exist. Directing is a continuous process initiated at top level and flows to the bottom through
organizational hierarchy.
Someone who directs is one who delegates work and responsibility, but they keep ultimate responsibility for
the final result. They often give work to others and keep all of those involved on track - making sure they meet
their goals and that they meet them on time. While they expect individuals to do their part, they often allow
those individuals to do things their way - basically allowing them the freedom to decide how they will achieve
their goals. The director only gets involved in the smaller details if something goes wrong.
―Management is the art and process of getting things done through and with the people.‖ The managers have,
therefore, the responsibility not only of planning and organizing the operations but also of guiding and
directing the subordinates. Thus, direction, in simple words, is guiding the subordinates in doing work. In this
way, direction is an important managerial function performed by all the managers at all levels of organization.
Direction is concerned with directing human efforts towards the achievement of organizational goals and
objectives. A superior or boss in an organization gives direction to his subordinates and the subordinates
receive directions from their superiors or bosses.
Directing is said to be a process in which the managers instruct, guide and oversee the performance of the
workers to achieve predetermined goals. Directing is said to be the heart of management process. Planning,
organizing, staffing has got no importance if direction function does not take place.
Directing initiates action and it is from here actual work starts. Direction is said to be consisting of human
factors. In simple words, it can be described as providing guidance to workers is doing work. In field of
management, direction is said to be all those activities which are designed to encourage the subordinates to
work effectively and efficiently. ―Directing consists of process or technique by which instruction can be issued
and operations can be carried out as originally planned‖ Therefore, Directing is the function of guiding,
inspiring, overseeing and instructing people towards accomplishment of organizational goals.
While managing an enterprise, managers have to get things done through people. In order to be able to do so,
they have to undertake many activities, like guide the people who work under them, inspire and lead them to
achieve common objectives. An office manager, for instance, has to supervise the activities of his subordinates,
i.e., typists, office assistants, dispatchers, accounts clerks, etc. He has to issue instructions to them and describe
and illustrate the work and related activities. He has to tell them what to do, and how to do it.
The office manager can plan, organize and appoint people, but he cannot get things done, unless he assigns
specific duties to his subordinates and motivates them to perform well. All these activities of a manager
constitute the directing function. Thus, directing is concerned with instructing, guiding, supervising and
inspiring people in the organization to achieve its objectives. It is the process of telling people what to do and
seeing that they do it in the best possible manner.
The directing function thus, involves:
Telling people what is to be done and explaining to them how to do it
Issuing instructions and orders to subordinates to carry out their assignments as scheduled
Supervising their activities
Inspiring them to meet the mangers expectation and contribute towards the achievement of organizational
objectives
Providing leadership
Managers plan and take decisions. They organize to define the work and create suitable positions in the
enterprise. People are employed to perform the jobs, but the actual work of getting the job done comes
under the directing function. Thus, directing is ‗management in action‘. It is through the exercise of this
function that managers get things done through people.
It is that part of managerial function which actuates the organizational methods to work efficiently for
achievement of organizational purposes. It is considered life-spark of the enterprise which sets it in motion the
action of people because planning, organizing and staffing are the mere preparations for doing the work.
Direction is that inert-personnel aspect of management which deals directly with influencing, guiding,
supervising, motivating sub-ordinate for the achievement of organizational goals.
Direction has following elements:
Supervision
Motivation
Leadership
Communication
Supervision- implies overseeing the work of subordinates by their superiors. It is the act of watching and
directing work and workers.
Motivation- means inspiring, stimulating or encouraging the sub-ordinates with zeal to work. Positive,
negative, monetary, non-monetary incentives may be used for this purpose.
Leadership- may be defined as a process by which manager guides and influences the work of subordinates in
desired direction.
Communications- is the process of passing information, experience, opinion etc from one person to another. It
is a bridge of understanding.
Communication
Communication is a basic organizational function. Communication is the process by which a person transmits
information or messages to other persons. In an organization, supervisors transmit information to subordinates.
Proper communication results in securing the cooperation of subordinates. Faulty communication may create
problems due to misunderstanding between the superior and subordinates. The purpose of communication is to
convey orders, instructions, or information so as to bring desired changes either in the performance or attitude
of employees. When a message is conveyed to subordinates and it is correctly understood, supervisors are said
to have communicated it effectively to the subordinates.
Sometimes due to the use of faulty language by the sender, or wrong perception of either the sender or
receiver, the communication is not understood properly. For instance, the office manager may issue
instructions to the typist to type certain documents by lunch time. The typist may understand it to mean typing
after 2 o‘clock in the afternoon. Here, communication is not effective and the manager may not get the typed
material in time. This may result in delaying related actions or postponing the action. It may also create
misunderstanding between the superior and subordinates. The message in the communication must, therefore,
be clear. The method adopted to communicate the message should be simple and effective. It is only through
effective communication that managers could direct the subordinates, and get things done.
In oral communication, the receiver should pay attention to what is being said, avoid not to get influenced by
one‘s personal feelings and listen to the main points. While communicating a message the sender should take
into account people‘s feelings, convey the message clearly and in steps and control his voice and tone.
Communication is not merely interchange of words. It may also be nonverbal. It includes use of facial
expressions, gestures, emphasis etc. that suggest real meaning to the receiver. The sender should use all these
elements effectively in order to add meaning to his words. Such qualities enhance the effectiveness of
communication.
Importance of Communication
In their daily routine managers spend a lot of time communicating with their subordinates in the form of
listening, speaking, reading and writing. They are to establish an understanding with the employees to get
things done through and with their help. In the absence of orders and instructions work cannot be performed.
Managers must also be informed about the progress of work, for which subordinates must communicate with
their superiors. If the employees are not properly informed about the work to be performed during a specified
period and how every job is related with other jobs, they may not realize the importance of their jobs in
achieving the goals of the business. Thus, communication not only helps in developing mutual understanding
among the employees but also unifies their activities into a team work.
Facts and figures are the basis of decision making. Communication of information is necessary for all types of
decisions. After any decision is made the same must be communicated to those who are to implement it.
Communication also plays an important role in motivating employees. Supervision depends upon effective
communication. When instructions are passed on, the same must be understood by the subordinates in the
same sense in which the supervisors want to convey it.
Effective communication builds up mutual trust and confidence between management and employees. It
establishes a chain of understanding that binds an enterprise vertically and horizontally.
Leadership
While motivation is the process through which employees are made to contribute voluntarily to work,
leadership is the ability to persuade and motivate others to work in a desired way for achieving the goal. Thus,
a person who is able to influence others and make them follow his instructions is called a leader. For example,
in an organization the management decides to install some new machines to which the workers are resisting.
However, one of the workers takes the initiative, explains the fellow workers the benefits of working with the
new machines and moulds them to accept the management‘s decision. Now he is said to be leader as he is able
to influence a group of workers who followed him. In practice, the managers have to guide and lead their
subordinates towards the achievement of goals, and so, to be an effective, a manager has to be a good leader.
Leadership is the process, which influences the people and inspires them to willingly accomplish the
organizational objectives. The main purpose of managerial leadership is to get willing cooperation of the
workgroup in pursuit of the goals.
Importance of Leadership
The objectives of any organization can only be fulfilled if its employees are working towards accomplishment
of such objectives. To make people work in the desired manner, proper instructions and guidance are
necessary. And this direction process becomes effective when the persons who give such direction have
leadership qualities. Leadership is essential in functioning of any organization and its importance and benefits
are varied.
When they are rewarded with additional pay or increments, they are all the more willing to contribute their
maximum efforts. Thus, motivation is the internal feeling of individuals, which is activated through external
factors like increase in pay or appreciation of work they have performed. The internal feeling generally relates
to the felt needs and desires of individuals which influence their behaviour. Individuals then adopt an
appropriate behaviour so as to satisfy the desires and needs.
They may decide to work seriously on the job or may adopt an indifferent attitude towards it depending on
their expectations about the fulfilment of needs and desires through job performance. For instance, a worker
who earns wages for his work and satisfies his basic needs may work more efficiently if he gets higher wages
for his performance. But for the same worker, other needs may become more important once his basic needs
are satisfied. He may seek recognition and appreciation for the good work done and if these needs are not
satisfied, he may not devote himself full to the work. His earlier needs and desires may no longer be effective
as motivating factors at that stage. In order to motivate the employees, it is, therefore, necessary that managers
should ascertain the needs and desires of those working under them.
But merely knowing about the needs and desires of people is not enough. It is also necessary to find out
whether people are work minded. It is also possible that in spite of the manager‘s initiative to satisfy their
needs the work situation may not be favourable for motivating employees.
Employees may be given monetary rewards in the form of higher wages or salaries; or promoted to higher
position or awarded certificates of merit in recognition of good work they have done. These are known as
incentives. Although needs differ from individual to individual, there are certain common needs which are
known to exist in most cases.
For instance, people have basic needs like the needs for food, clothing and shelter. These are known as
Physiological needs. People generally work so as to be able to earn money to satisfy such needs. Once the
basic needs are satisfied, people wish to satisfy higher category of needs. They want safety and security and
desire to be protected against loss of employment, sickness, accident etc. These are known as Safety and
Security needs. Thereafter, people want to have a sense of belonging to the organization and to be accepted by
fellow workers. These are known as social needs. Similarly, there are people who wish to be considered
important and expect that their opinions should be recognized by others. These needs are known as ego needs.
Further, a person may wish to achieve what he thinks is due to him, i.e., he wants to realize his ambition fully.
These needs are known as self-actualization needs.
Importance of Motivation
Motivation helps managers in getting things done more efficiently by the employees. If employees are not
motivated, they may not fully utilize the production facilities and put their best efforts in performing the job.
Motivation is thus one of the important factors which determine organizational efficiency.
Motivated employees are likely to stay with the organization and try to achieve their own goals along with the
goals of the organization. They accept change in the work routine more easily than no motivated employees.
Hence, motivation is regarded as an important function of managers. The importance of studying it is related
with observing, understanding and influencing human behaviour in the organization for improving the
performance of employees.
Caution
If the employees are not properly informed about the work to be performed during a specified period and how
every job is related with other jobs, it may be cause of delay in the project.
Management Function
Direction is a managerial function performed by all the managers or supervisors at all the levels of an
enterprise.
Guiding Process
Direction is not limited to the issuing of orders as well as instructions but it also includes the process of
guiding and inspiring subordinates.
Continuous Activity
Direction is the continuous activity. It starts from planning function throughout and there is no end to it and
directing function continues at all the levels of the management process till the end.
Flow of Direction
The flow of direction in an organisation initiates from the top level to the bottom level.
Caution
Direction should be such which is readily acceptable to the subordinates.
Harmony Objectives
Individuals join the organisation to satisfy their physiological and psychological needs. They are expected to
work for the achievement of organisational objectives. They will perform their tasks better if they feel that it
will satisfy their personal goals. Therefore, management should reconcile the personal goals of employees with
the organisational goals.
Unity of Command
A subordinate should get orders and instructions from one superior only. If he is made accountable to two
bosses simultaneously, there will be confusion, conflict, disorder and indiscipline in the organisation.
Therefore, every subordinate should be asked to report to only one manager.
Appropriate Techniques
The managers should use correct direction techniques to ensure efficiency of direction. The techniques used
should be suitable to the superior, the subordinates and the situation.
Direct Supervision
Direction becomes more effective when there is a direct personal contact between a superior and his
subordinates. Such direct contact improves the morale and commitment of employees. Therefore, wherever
possible direct supervision should be used.
Managerial Communication
A good system of communication between the superior and his subordinates helps to improve mutual
understanding. Upward communication enables a manager to understand the subordinates and gives an
opportunity to the subordinates to express their feelings.
Comprehension
Communication of orders and instructions is not sufficient. Managers should ensure that subordinates correctly
understand what they are to do and how and when they are to do. This will avoid unnecessary queries and
explanations.
Effective Leadership
Managers should act as leaders so that they can influence the activities of their subordinates without
dissatisfying them. As leaders, they should guide and counsel subordinates in their personal problems too. In
this way, they can win the confidence and trust of their subordinates.
Koontz and O‘Donnell explained five functions of management. They are; Planning, Organizing, Staffing,
Directing and Controlling.
The analysis of definition reveals that direction function consists of three elements
Motivation
Leadership
Communication
Direction has the following characteristics
Direction is an important managerial function. Through direction management can initiates actions in the
organization.
Direction function is performed at every level of management.
Direction is a continuous process and it continuous throughout the life of the organization.
Direction initiates at the top level in the organization follows and bottom through there hierarchy. It
emphasizes that a subordinates is to be directed by his own superior only
1. Reflecting Organizational Needs; all control systems and techniques should reflect the jobs they are to
perform.
2. Forward Looking: Control should be forward looking. Though many of the controls are instance, they must
focus attention as to how future actions can be conformed with plans.
3. Promptness in Reporting Deviations The success of a thermostat lies in the fact that it points the deviation
promptly and takes corrective actions immediately.
4. Pointing out Exceptions at Critical points: Control should point exception at critical points and suggest
whether action is to be taken for deviations or not.
5. Objectives: The control should be objective, definite and determinable in a clear and positive way.
6. Flexible Control system should be flexible so that it remains workable in the case of changed plans,
unforeseen circumstances or failures.
7. Economical Control should be economical and must be worth its costs. Economy is relative since the
benefits vary with the importance of the activity, the size of the operation the expense that might be incurred in
the absence of control and the contribution the control system can make.
8. Simple Control system must be simple and understandable so that all managers can use it effectively.
9. Motivating: Control system should motivate both controller and controlled10.Reflecting Organizational
Pattern: The control should reflect organizational pattern by focusing attention on positions in organization
structure through which deviations are corrected
Figure 7.1: Feedback loop of management control
Traditional Techniques
Traditional techniques are those which have long been used by the managers. Some of the important
techniques under this heads are budgetary control, financial statement and ratio analysis, auditing, break-even
analysis and report writing etc.
―Budgetary control is a process of comparing the actual results with the corresponding budgeting detains order
to approve accomplishments or to remedy differences by either adjusting the budget estimates or correcting the
cause of the difference.‖ The different budgets such as production budget, sales budget, overhead budget,
labour budget etc.clearly indicate the limits for expenses and also the results to be achieved in a given period.
It ensures effective co-ordination of the work of the entire organization.
It promotes co-operation and team spirit among the employees Standard Costing is one of the techniques of
cost control and it is being increasingly used by modern business concerns for the purpose of cost reduction
and cost control. It involves a comparison of actual with the standards and the discrepancy is called
variance.Break-even analysis is useful in planning and control because it emphasizes the marginal cost and
benefit concept. It helps to make profit estimation at the different levels of activity, ascertaining turnover for
desire profit and estimating the impact of the variations of fixed and variable costs. It magnifies a set of
relationships of fixed costs, variable cost, price, level of output and sales mix to the profitability of the
organization.
Financial statement analysis such as Found Flow analysis, Cash Flow analysis and Ratio analysis help to know
the financial performance and financial position of the business unit. The liquidity, profitability and solvency
position of the business unit can be ascertained and efforts can be taken to maintain these factors in an
optimum proportion, Auditing is the process of investigating financial and other operation of a business
establishment.
It may be carried out by internal and external members. It helps to scrutinize the applicability and relevance of
policy, procedure and method which have a tendency to become obsolete. This it helps in choosing a suitable
working procedures and methods. Adoption of reporting system helps to analyses a particular problem and to
take necessary corrective action over it.
Reports may be prepared regarding taxation, legislation and its effect on profit, make or buy decisions,
replacement f capital equipment, social pricing analysis etc. A manager can also exercise effective control over
his subordinates by observing them while they are engaging in work. Personal observation helps the managers
not only in knowing the workers attitude towards work but also n correcting their work and method, if
necessary.
Modern Techniques
These are of recent origin, which provide information not readily available with traditional methods. These
techniques help to give sharper focus and promise increasingly to improve the quality of control. Program
Evaluation Review Technique (PERT) and Critical Path Method (CPM) are two major techniques coming
under this head.
System and is credited with reduction the completion time of the program by two years.CPM has been jointly
developed by DuPont and Remington Rand USA in order to facilitate the control of large, complex industrial
projects. These techniques are used to minimize total time, minimize to cost, minimize idle resources etc. It is
helpful in solving problems of scheduling the activities of on-time projects. These tools are widely being used
in construction industry, planning and launching new projects, scheduling ship construction etc. It ensures
improved management of resources by facilitating better decision-making. It aims to have future oriented
control mechanism for the organization.
Management Information System provides needed information to each manager at the right time, in right form
which aids his understanding and stimulates his action. MIS is a refined form of traditional information
collection and supply to the organization points.
Management Audit is an evaluation of management as a whole. It examines the total managerial process of
planning, staffing, directing and controlling. To evaluate the management achievement, the organization plans,
policies, procedures, organization structure, system of control personnel relation should be measure with its
end results.
The Problem
The coaching client, June (not her real name), was experiencing frustration in leading her team of 6
subordinates. She saw that they were not taking initiative. She felt all the responsibility for the quality of their
work fell to her. Consequently she was taking on more organizational duties than she desired and she did not
have time to focus on the bigger picture issues that her leadership role demanded.
June knew that she had to let her subordinates take initiative for the tasks within their roles, but she was not
able to effectively make this change. Every time she let go of her usual responsibility, the subordinates still did
not step forward and the team‘s results suffered.
The Insight
June‘s coach suggested a new strategy of focusing her attention on positive actions that would contribute to the
solution without taking responsibility away from the subordinates. Using the Harrison Traits and Definitions
Report and the Paradox Report, June realized that she could use her strengths in ‗enlisting cooperation‘ and
‗forthright diplomacy‘ to move the team forward without taking over their roles.
The Solution
With this insight, June experienced an immediate shift in her attitude towards the team and her leadership role.
Since the actions she chose to focus on were her preferred traits, the change was easy for her and enjoyable.
Her team responded immediately to her requests for cooperation and her clear communication about their
behaviours and results. By continuing to focus on her strengths, June was confident she could move her team
to learn how to do their jobs, while still retaining control of the results.
Conclusions
It is more effective to focus on taking positive actions, rather than on stopping behaviours.
People can more easily begin actions that rely on their preferred traits.
Different preferred traits can be used in different situations to get the desired results.
Therefore it is possible to customize behavioural solutions for different personalities, based on their personal
preferences, as identified by Harrison Assessments.
Question
1. Explain the leadership development using personality assessments.
2. What are the problems of leadership development using personality assessments?
7.7 Summary
Directing is a continuous process initiated at top level and flows to the bottom through organizational
hierarchy.
Directing involves supervision, which is essential to make sure that work is performed according to the
orders and instructions.
Verbal communication is supported by non verbal communication such as facial expressions and body
gestures
Leadership is essential in functioning of any organization and its importance and benefits are varied. in
organisation.
Motivation requires the use of means to fulfil the needs and desires that may induce individuals to apply
their best abilities in work. People want to satisfy their needs for food, clothing and shelter.
7.8 Keywords
Communication: Communication is the process by which a person transmits information or messages to other
persons.
Directing: It is a key managerial function to be performed by the manager along with planning, organizing,
staffing and controlling.
Job Enlargement: It workers being given a greater variety of tasks to perform which should make the work
more interesting.
Leadership: It is the process, which influences the people and inspires them to willingly accomplish the
organizational objectives.
Motivation: It is the process through which employees are made to contribute voluntarily to work, leadership
is the ability to persuade and motivate others to work in a desired way for achieving the goal.
5. Leaders can motivate the followers to work and increase their performance level.
(a) True (b) False
6. Direction process includes ……………….. of subordinates.
(a) communication (b) motivation
(c) supervision (d) All of these
10. Implementation of plans is, thus, largely the concern of directing function.
(a) True (b) False
Objectives
After studying this chapter, you will be able to:
Introduction
Decision-making increasingly happens at all levels of a business. The Board of Directors may make the grand
strategic decisions about investment and direction of future growth, and managers may make the more tactical
decisions about how their own department may contribute most effectively to the overall business objectives.
But quite ordinary employees are increasingly expected to make decisions about the conduct of their own
tasks, responses to customers and improvements to business practice. This needs careful recruitment and
selection, good training, and enlightened management. For better or worse, our decisions and those of the other
members of our organization define today‘s realities and tomorrow‘s outcomes. In a world that is becoming
increasingly knowledge based, more and more members of an organization are making impactful decisions
every day; thereby extending decision-making‘s importance from the executive suites to the desks of the vast
majority of professionals. Every day people are posed with options and choices to make. In the many actions
and situations that individuals face each day, decisions have to be made.
One part of the answer is good information, and experience in interpreting information. Consultation i.e.
seeking the views and expertise of other people also helps, as does the ability to admit one was wrong and
change one‘s mind. There are also aids to decision-making, various techniques which help to make information
clearer and better analyzed, and to add numerical and objective precision to decision-making (where
appropriate) to reduce the amount of subjectivity. Managers can be trained to make better decisions. They also
need a supportive environment where they would not be unfairly criticized for making wrong decisions (as we
all do sometimes) and will receive proper support from their colleague and superiors. A climate of criticism
and fear stifles risk-taking and creativity; managers will respond by playing it safe to minimize the risk of
criticism which diminishes the business effectiveness in responding to market changes. It may also mean
managers spend too much time trying to pass the blame around rather than getting on with running the
business.
According to studies, a lot of people are poorer in coming up with decisions than they think. That is why
leaders exist to take the role of decision makers for the group or team. Yet, a good knowledge of the concept of
decision making, the skills needed, and some tools or techniques to be used will help in developing sound
decisions.
People often find it hard to make decisions. We cannot decide if this is an introduction or outline! Some people
put off making decisions by endlessly searching for or getting other people to offer their recommendations.
Others resort to decision making by taking a vote, sticking a pin in a list or tossing a coin.
Regardless of the effort that is put into making a decision, it has to be accepted that some decisions will not be
the best possible choice. This is the technique that can be used in decision making that should help we to make
effective decisions in the future. Although the following technique is designed for an organizational or group
structure, it can be adapted to an individual level.
The concept of irrevocability means commitment: putting time, money, and/or resource on the line to put your
decision into action. Having decided, you‘re not going to re-litigate your decision every time someone has a
new thought. Getting to that point with confidence is what separates low quality decisions from high quality
decisions, and mediocre decision makers from good and great ones.
Decision-making is a process of selection from a set of alternative courses of action, which is thought to fulfill
the objectives of the decision problem more satisfactorily than others. It is a course of action, which is
consciously chosen for achieving a desired result. A decision is a process that takes place prior to the actual
performance of a course of action that has been chosen. In terms of managerial decision-making, it is an act of
choice, wherein a manager selects a particular course of action from the available alternatives in a given
situation. Managerial decision making process involves establishing of goals, defining tasks, searching for
alternatives and developing plans in order to find the best answer fo the decision problem.
Irreversible: These decisions are permanent. Once taken, they can't be undone. The effects of these decisions
can be felt for a long time to come. Such decisions are taken when there is no other option.
Reversible: Reversible decisions are not final and binding. In fact, they can be changed entirely at any point of
time. It allows one to acknowledge mistakes and fresh decisions can be taken depending upon the new
circumstances.
Delayed: Such decisions are put on hold until the decision maker thinks that the right time has come. The wait
might make one miss the right opportunity that can cause some loss, specially in the case of businesses.
However, such decisions give one, enough time to collect all information required and to organize all the
factors in the correct way.
Quick Decisions: These decisions enable one to make maximum of the opportunity available at hand.
However, only a good decision maker can take decisions that are instantaneous as well as correct. In order to
be able to take the right decision within a short span of time, one should also take the long-term results into
consideration.
Experimental: One of the ways of decision making is the experimental type in which the final decision cannot
be taken until the preliminary results appear and are positive. This approach is used when one is sure of the
final destination but is not convinced of the course to be taken.
Trial and Error: This approach involves trying out a certain course of action. If the result is positive it is
followed further, if not, then a fresh course is adopted. Such a trial and error method is continued until the
decision maker finally arrives at a course of action that convinces him of success.
Conditional: Conditional decisions allow an individual to keep all his options open. He sticks to one decision
as long as the circumstances remain the same. Once the competitor makes a new move, conditional decisions
allow a person to take up a different course of action.
Authoritative: In authoritative type the leader is the sole decision maker which subordinates follow. The leader
has all the information and expertise required to make a quick decision. It is important that the leader is a good
decision maker as it is he who has to own up to the consequences of his decision. Though effective, in case the
leader is an experienced individual, it can harm the organization if the leader insists on an authoritative type of
decision making even when there is expertise available within the team.
Facilitative: In facilitative type of decision making, both the leader and his subordinates work together to
arrive at a decision. The subordinates should have the expertise as well as access to the information required to
make decisions. Such an approach could be useful when the risk of wrong decision is very low. It is also a
great way of involving and encouraging subordinates in the working of the organization.
Consultative: consultative decisions are made in consultation with the subordinates. However, the fact remains
that unlike in the facilitative decision-making style, in consultative decision making it is the leader who holds
the decision-making power. A wise leader tends to consult his subordinates when he thinks that they have
valuable expertise on the situation at hand.
Delegative: As per the term, the leader passes on the responsibility of making decisions to one or more of his
subordinates. This type is usually adopted by the leader when he is confident of the capabilities of his
subordinates.
It would have been so good had there been a universal model for decision making. However, due to the
dynamic nature of conditions, be it our workplace or our personal lives, we have to resort to different types of
making decisions.
Caution
The relative must be over 18 years of age, be available and willing to make the decision and have been in
contact with the adult within the past 12 months.
The term decision tree comes from the graphic appearance of the technique that starts with the initial decision
shown as the base. The various alternatives, based upon possible future environmental conditions, and the
payoffs associated with each of the decisions branch from the trunk.
Decision trees force a manager to be explicit in analyzing conditions associated with future decisions and in
determining the outcome of different alternatives. The decision tree is a flexible method. It can be used for
many situations in which emphasis can be placed on sequential decisions, the probability of various
conditions, or the highlighting of alternatives.
To decide which cars to purchase, a manager should consider some factors, such as the expected useful life of
the car, its warranty and repair record, its cost of insurance, and, of course, the rental demand for the car. Based
on the information gathered, a manager can then rank alternatives based on the cost of each car. A higher-
priced car may be more appropriate because of its longer life and customer rental demand. The strategy, of
course, is for the manager to choose the alternative that has the quickest payback of the initial cost. Many
individuals use payback analysis when they decide whether they should continue their education.
They determine how much courses will cost, how much salary they will earn as a result of each course
completed and perhaps, degree earned, and how long it will take to recoup the investment. If the benefits
outweigh the costs, the payback is worthwhile.
8.3.3 Simulations
Simulation is a broad term indicating any type of activity that attempts to imitate an existing system or
situation in a simplified manner. Simulation is basically model building, in which the simulator is trying to
gain understanding by replicating something and then manipulating it by adjusting the variables used to build
the model.
Simulations have great potential in decision making. In the basic decision-making steps, Step 4 is the
evaluation of alternatives. If a manager could simulate alternatives and predict their outcomes at this point in
the decision process, he or she would eliminate much of the guesswork from decision making.
The reality seems to be that most organizations aren‘t overrun by good decision makers, yet alone great ones.
When asked, people don‘t easily point to what they regard as great decisions. Stories of bad decisions and bad
decision-making come much more readily to mind.
Some of that is due to our tendency to notice and recall exceptions vs. all the times things go as planned. For
example, you‘ve walked along side buildings more times than you could possibly count. Yet you remember
vividly the one time you got nailed by a pigeon overhead.
That‘s how we are about bad decisions. We‘re also that way because the really bad ones tend to really hurt.
It is not that people don‘t have the capacity to make high-quality decisions in them. Decision-making is a
distinctly human activity. It is what that great, big frontal lobe is for. We all make decisions all the time.
But the fact that we‘re hard-wired to make decisions doesn‘t by itself make us good decision-makers. That
takes discipline:
discipline to do at least four things all the time and well.
1. Realize when and why you need to make a decision.
2. Declare the decision: decide what the decision is, how you‘ll work it, and who should be involved.
3. Work the decision: generate a complete set of alternatives, gather the information you need to understand
the possibilities and probabilities, and ultimately make a choice that best fits your values.
4. Commit resources and act.
Everyone does those four things consistently or consistently well. We‘ve worked with a lot of leaders and
managers in some of the most widely regarded companies in the world and our observation is that most people
don‘t. In fact, the distribution generally looks something like this:
There are some really wretched decision makers. For them, a good outcome is usually a matter of luck.
There are a lot of people who are reasonably competent decision makers. Their decision processes aren‘t
great, but they‘re not bad, and the outcomes they experience track accordingly.
There is a small group of people who could be described as ―good decision makers‖ These people are
proactive and decision oriented. They‘re able to focus attention on what‘s important and critical. They
know how to break a decision down into logical parts. They know how to work each of those parts in a
high quality way. They know how to deal with possibilities and probabilities. They‘re able to see
opportunities where others see problems. They‘re able to make quality choices in the face of uncertainty.
They‘re able to turn thought into action.
There is a sprinkling of people we‘d describe as great decision makers. Like other good decision makers,
these people consistently make high quality decisions. Their ―greatness‖, a word that is probably way
overused, comes from their ability to create the dynamics needed to ensure that the people in their
organizations can do the same.
Good and great decision makers expect high quality outcomes and they‘re generally not disappointed. When
they are, it is usually because of some random thunderbolt or some unforeseen dynamic, not because they
didn‘t do a good job of working the problem. There are exceptions to this syllogism. But over the long-term,
we think the good decision/good outcome connection holds up, and the outliers have either not been in the job
long enough for their bad decisions to catch up, or have been extraordinarily lucky.
Caution
The decision tree is a flexible method. It can be used for many situations, in which emphasis can be placed on
sequential decisions.
It has been raining for 12 hours, and the National Weather Service has forecast severe flooding conditions
through most of the upper Midwest. The Missouri River and the rivers and streams that feed it are on the rise
and are expected to continue to rise over the next several days as the storm is held in place by a large high-
pressure area that is currently stationary over the Ohio Valley. Despite the fact that sandbagging crews have
been supporting all local levees, severe flooding is a near certainty.
The mayor and all emergency management professionals from Fort Rice have been keeping abreast of the
situation since before the rain began. They have been communicating with the local Weather Forecast Office,
as well as county and State emergency management personnel.
The question on the table at this point is not whether to issue an evacuation order but whether to make the
evacuation mandatory. Historically, farmers and ranchers have been unwilling to evacuate, even when flooding
is severe. Most have grown up in the area and are aware of the damage that flooding can cause, but they are
also aware of their investment in their land and livestock and will fight to save what they can.
After considerable discussion, the mayor, with the emergency management group‘s concurrence, makes the
decision to activate the Emergency Alert System and issue the evacuation order. But although they decide to
word the message strongly, they do not make the evacuation mandatory
Questions
1. What is the potential impact of the decision not to make the evacuation mandatory?
2. What is the importance of forecasting?
8.5 Summary
Decision making is the process of identifying and selecting a course of action to solve a specific problem.
A number of characteristics have been exhibited by decision makers, and those decisions can be timed
right or off centered.
The entire decision-making process is dependent upon the right information being available to the right
people at the right times.
When deciding on the most suitable decision-making method, it is important to consider that full
participation is not required in every occasion.
Making decisions in our daily lives and in the workplace can be one of the most overlooked processes.
A rational decision making model provides a structured and sequenced approach to decision making.
8.6 Keywords
Decision Making: The process of deciding about something important, especially in a group of people or in an
organization.
Quantitative Techniques: Quantitative techniques help a manager improve the overall quality of decision
making.
Decision Tree: A decision tree shows a complete picture of a potential decision and allows a manager to graph
alternative decision paths.
Payback Analysis: Payback analysis is simply a calculation of how long it will take to recover our investment.
Simulation: Simulation is a broad term indicating any type of activity that attempts to imitate an existing
system or situation in a simplified manner.
7. Simulation is a broad term indicating any type of activity that attempts to imitate an existing system or
situation in a simplified manner?
(a) False (b) True
8. Decision making means to select a course of action from two or more alternatives. It is done to achieve a
specific objective or to solve a specific problem.
(a)True (b) False
Objectives
After studying this chapter, you will be able to:
Understand the delegation
Explain the concept of decentralization
Discuss difference between authority and power,
Define t uses of authority
Discuss the distinction between centralization and decentralization,
Explain the responsibility
Introduction
Authority is the power to manage the sub-ordinates to control them and to instruct them according to the rules
norms and standards of the organization. Authority of managers helps to keep the sub-ordinates in obedience.
According to Henry Fayol, ―Authority can be defining as the right to give orders and provides to exact
obedience.‖ According to Theo Haimann, ―Authority is the rightful legal power to request subordinates to do a
certain thing for refrain from doing so, If he does not follow this instructions, the manager is in opposition, if
need be, to take displinery action.‖
Authority signifies hold over knowledge, skill or position. First two are expert. The role of authority is like
soul to the body. Administrators do not actually perform duty directly but they get things done. The right to get
things done is called authority. Authority is legal or rightful power, a right to command or to act. In formal
organization it is vested with job position and not to the person. Hence it is a bureaucratic concept.
Organizations where authority and responsibility are clearly defined are good and less corrupt and hence
termed as: Two Pillars on which organization is sustained. Authority is the formal and legitimate right of a
manager to make decisions, issue orders, and allocate resources to achieve organizationally desired outcomes.
A manager's authority is defined in his or her job description.
Authority is a conceptual framework and, at the same time, an enigma in the study of organizations. The
authority patterns in an organization, most commentators agree, serve as both a motivating and a tempering
influence. This agreement, how-ever, does not extend to the emphasis that the different commentators place on
a given authority concept. Early theories of management regarded authority more or less as a gravitational
force that flowed from the top down. Recent theories view authority more as a force which is to be accepted
voluntarily and which acts both vertically and horizontally. Although authority is one of the keys to the
management process, the term is not always used in the same way. Authority is usually defined as a legal or
rightful power to command or act. As applied to the manager, authority is the power to command others to act
or not to act. The manager‘s authority provides the cohesive force for any group. In the traditional theory of
management, authority is a right granted from a superior to a subordinate
9.1 Delegation
Delegation of authority is one vital organizational process. It is inevitable along with the expansion and growth
of a business enterprise. Delegation means assigning of certain responsibilities along with the necessary
authority by a superior to his subordinate managers. Delegation does not mean surrender of authority by the
higher level manager. It only means transfer of certain responsibilities to subordinates and giving them the
necessary authority, which is necessary to discharge the responsibility properly. Delegation is quite common in
all aspects of life including business. Even in the college, the principal delegates some of his authority to the
vice-principal.
Delegation, an attempt is being made to have meaningful participation and cooperation from the subordinates
for achieving certain well-defined results. Due to delegation, the routine responsibilities of the superior are
reduced. As a result, he concentrates on more urgent and important matters. Secondly, due to delegation,
subordinate becomes responsible for certain functions transferred to him. Delegation is a tool, which a superior
manager uses for sharing his work with the subordinates and thereby raising his efficiency.
According to Koontz and O‘Donnell ―the cement that binds the organization together is called delegation.‖
According to Brech, ―delegation means the passing on to others of a share in the essential elements of
management process‖. Delegation involves three important aspects like assigning duties by the executives,
granting of authority and creation of obligation or accountability.
Delegation is not a process of abdication. The person who delegates does not divorce himself from the
responsibility and authority with which he is entrusted. He remains accountable for the overall performance
and also for the performance of his subordinates. Delegation is needed when the volume of work to be done is
in excess of an individual‘s physical and mental capacity.
Caution:
Proper authority should be provided at each level of management for proper coordination.
9.2 Decentralization
Decentralization is a systematic delegation of authority at all levels of management and in all of the
organization. In a decentralization concern, authority in retained by the top management for taking major
decisions and framing policies concerning the whole concern. Rest of the authority may be delegated to the
middle level and lower level of management. The degree of centralization and decentralization will depend
upon the amount of authority delegated to the lowest level. According to Allen, ―Decentralization refers to the
systematic effort to delegate to the lowest level of authority except that which can be controlled and exercised
at central points.
Decentralization is not the same as delegation. In fact, decentralization is all extension of delegation.
Decentralization pattern is wider is scope and the authorities are diffused to the lowest most level of
management. Delegation of authority is a complete process and takes place from one person to another. While
decentralization is complete only when fullest possible delegation has taken place.
For example, the general manager of a company is responsible for receiving the leave application for the
whole of the concern. The general manager delegates this work to the personnel manager who is now
responsible for receiving the leave applicants. In this situation delegation of authority has taken place. On the
other hand, on the request of the personnel manager, if the general manager delegates this power to all the
departmental heads at all level, in this situation decentralization has taken place.
There is a saying that ―Everything that increasing the role of subordinates is decentralization and that
decreases the role is centralization‖. Decentralization is wider in scope and the subordinate‘s responsibility
increase in this case. On the other hand, in delegation the managers remain answerable even for the acts of
subordinates to their superiors.
Caution:
Management should be decentralized to the lowest appropriate level.
9.3 Difference between authority and power
Authority
Authority is seen as the legitimate right of a person to exercise influence or the legitimate right to make
decisions, to carry out actions, and to direct others. For example, managers expect to have the authority to
assign work, hire employees, or order merchandise and supplies. As part of their structure, organizations have
a formal authority system that depicts the authority relationships between people and their work. Different
types of authority are found in this structure: line, staff, and functional authority. Line authority is represented
by the chain of command; an individual positioned above another in the hierarchy has the right to make
decisions, issue directives, and expect compliance from lower-level employees.
Staff authority is advisory authority; it takes the form of counsel, advice, and recommendation. People with
staff authority derive their power from their expert knowledge and the legitimacy established in their
relationships with line managers. Functional authority allows managers to direct specific processes, practices,
or policies affecting people in other departments; functional authority cuts across the hierarchical structure. For
example, the human resources department may create policies and procedures related to promoting and hiring
employees throughout the entire organization. Authority can also be viewed as arising from interpersonal
relationships rather than a formal hierarchy. Authority is sometimes equated with legitimate power. Authority
and power and how these elements are interrelated can explain the elements of managing and their
effectiveness. What is critical is how subordinates perceive a manager's legitimacy. Legitimate authority
occurs when people use power for good and have acquired power by proper and honest means. When people
perceive an attempt at influence as legitimate, they recognize it and willingly comply. Power acquired through
improper means, such as lying, withholding information, gossip, or manipulation, is seen as illegitimate. When
people perceive the authority of others as illegitimate, they are less likely to willingly comply.
Power
Power stems from a variety of sources: reward power, coercive power, information power, resource power,
expert power, referent power, and legitimate power. Reward power exists if managers provide or withhold
rewards, such as money or recognition, from those they wish to influence. Coercive power depends on the
manager's ability to punish others who do not engage in the desired behavior. A few examples of coercion
include reprimands, criticisms, and negative performance appraisals.
Power can also result from controlling access to important information about daily operations and future plans.
Also, having access to and deciding to limit or share the resources and materials that are critical to
accomplishing objectives can provide a manager with a source of power. Managers usually have access to such
information and resources and must use discretion over how much or how little is disseminated to employees.
Expert power is based on the amount of expertise a person possesses that is valued by others. For example,
some people may be considered experts with computers if they are able to use several software programs
proficiently and can navigate the Internet with ease. Those who do not have the expert knowledge or
experience need the expert's help and, therefore, are willing to be influenced by the expert's power. When
people are admired or liked by others, referent power may result because others feel friendly toward them and
are more likely to follow their directions and demonstrate loyalty toward them. People are drawn to others for
a variety of reasons, including physical or social attractiveness, charisma, or prestige. Such politicians as John
F. Kennedy were able to use their referent power to effectively influence others.
Legitimate power stems from the belief that a person has the right to influence others by virtue of holding a
position of authority, such as the authority of a manager over a subordinate or of a teacher over a student.
In some respects, everyone has power he power to either push forward or obstruct the goals of the organization
by making decisions, delegating decisions, delaying decisions, rejecting decisions, or supporting decisions.
However, the effective use of power does not mean control. Power can be detrimental to the goals of the
organization if held by those who use it to enhance their own positions and thereby prevent the advancement
of the goals of the organization.
Truly successful managers are able to use power ethically, efficiently, and effectively by sharing it. Power can
be used to influence people to do things they might not otherwise do. When that influence encourages people
to do things that have no or little relationship to the organization's goals, that power is abused. Abuses of
power raise ethical questions. For example, asking a subordinate to submit supposed business-trip expenses for
reimbursement for what was actually a family vacation or asking a subordinate to run personal errands is an
abuse of power. People who acquire power are ethically obligated to consider the impact their actions will
have on others and on the organization.
Employees may desire a greater balance of power or a redistribution of authority within the existing formal
authority structure. People can share power in a variety of ways: by providing information, by sharing
responsibility, by giving authority, by providing resources, by granting access, by giving reasons, and by
extending emotional support. The act of sharing information is powerful. When people don't share information,
the need to know still exists; therefore, the blanks are filled in with gossip and innuendo. When people are
asked to take on more responsibility, they should be provided with tasks that provide a challenge, not just with
more things to increase their workload that don't really matter. People need the legitimate power to make
decisions without having to clear everything first with someone higher up in the organization. People who
have power must also have the necessary range of resources and tools to succeed. Access to people outside as
well as inside the organization should be provided and encouraged. People should be told why an assignment
is important and why they were chosen to do it. Emotional support can come in the form of mentoring,
appreciation, listening, and possibly helping out.
The third source of authority, based on rational-legal precepts, is exactly what Weber identified as the heart of
bureaucratic organizations. People obey orders rationally because they believe that the person giving the order
is acting in accordance with a code of legal rules and regulations. Members of the organization obey its rules
as general principles that can be applied to particular cases, and which apply to those exercising authority as
much as to those who must obey the rules. People do not obey the rules because of traditional deference or
submission to charismatic authority; they do not obey the person but the office holder. Whether one likes the
office holder or not is supposed to be unimportant; police officers might sometimes be disagreeable, but they
hold an office that legitimizes their actions.
Weber's view of bureaucracy was as an instrument or tool of unrivalled technical superiority. ‗Precision, speed
and un-ambiguity, knowledge of the files, continuity, discretion, unity, strict subordination, reduction of
friction, and of material and personal cost, these are raised to the optimum point in the strictly bureaucratic
administration‘. Weber saw modern bureaucratic organizations as resting on a set of ‗rational‘ foundations.
These include the existence of a ‗formally free‘ labor force; the appropriation and concentration of the physical
means of production as disposable private property; the representation of share rights in organizations and
property ownership; and the ‗rationalization‘ of various institutional areas such as the market, technology and
the law.
The outcome of this process of rationalization, Weber suggests, is the production of a new type of person: the
specialist or technical expert. Such experts gained control of reality by means of increasingly precise and
abstract concepts. Statistics, for example, began in the nineteenth century as a form of expertly compiled
information about everyday life and death, which could inform public policy. The statistician emerged as a
paradigm of the new kind of expert, dealing with everyday things, but in a way that was far removed from
everyday understandings. Weber sometimes referred to the results of this process as disenchantment, meaning
the process whereby all forms of magical, mystical, traditional explanation is stripped away from the world.
The world is laid bare, open and amenable to the calculations of technical reason. While Weber believed that
the technical superiority of bureaucracy was irresistible, this irresistibility alarmed him. It seemed that
achieving the benefits of modernity involved reducing everything to rational calculation irrespective of other
values and pleasures. Yet bureaucracy seemed to be a necessary and unavoidable feature of organizing in the
modern world: if you wanted modernity.
In another way, the sources of authority are:
1. Position or Post: The position or post or leave of the managers or employees may have shortened
authorities. The personal capacity can defer actual practice of such authorities.
2. Formal Sources of Authorities: According to this sources or theory authorities is created or originated
from the real owners and it is transfer to the top level management. For e.g. CEO can receive authority from
BOD, and delegates such authorities to be lower levels.
3. Acceptance Theory of Authority: Another source of authority is acceptance from the sub-ordinates. If the
ideas, activities, opinions and procedures followed by the superiors are accepted by the sub-ordinates than only
the authorities than only the authorities can be practice such sources or authorities is known as acceptance
theory.
4. Competence Theory: According to this theory, Authorities also dirges from the personal skills, knowledge
experience, extra-ordinary academic excellence such factors shown the competency of the managers.
5. Environmental Factors: The authorities is also creates or formed the external environmental forces in
another words degree of authority can be increased or decreased based on favor and unflavored situation of
environment. It the environment is favorable then the manager can use maximum degree of authorities.
On the other hand, decentralization refers to the transfer of decision making authority to the different unit of an
organization. It is basically the procedure of spreading out the decision making, getting it closer to the point of
action. Basically, it is delegation on a larger level so as to disperse the work and give each unit its own
freedom and authority, instead of there being one centralized entity to which everyone reports.
Some differences Delegation and Decentralizations are:
1. Delegation is a compulsory act because no individual can perform all tasks on his own while
decentralization is an optional policy decision as it is done at the discretion of the top level mgmt.
2. In delegation there is more control by superiors hence less freedom to take own decisions while in
decentralization less control over executives hence greater freedom of action.
3. Delegation is a process followed to share tasks while Decentralization is the result of the policy decision of
the top mgmt.
4. Delegation has a narrow scope as it is limited to superior and his immediate subordinate while
decentralization has a wide scope as it implies extension of delegation of the top mgmt.
5. Delegation is to lessen the burden of the managers while delegation is to increase the role of the
subordinates in the organization by giving them more autonomy. (See Table 9.1)
9.6 Responsibility
Responsibility is the obligation to accomplish the goals related to the position and the organization. Managers,
at no matter what level of the organization, typically have the same basic responsibilities when it comes to
managing the work force: Direct employees toward objectives, oversee the work effort of employees, deal with
immediate problems, and report on the progress of work to their superiors. Managers' primary responsibilities
are to examine tasks, problems, or opportunities in relationship to the company's short-and long-range goals.
They must be quick to identify areas of potential problems, continually search for solutions, and be alert to
new opportunities and ways to take advantage of the best ones. How effectively goals and objectives are
accomplished depends on how well the company goals are broken down into jobs and assignments and how
well these are identified and communicated throughout the organization.
Questions
1. How should Jennifer plan her delegation approach?
2. Who could be handling their support and approach?
9.7 Summary
Authority is the power to manage the sub-ordinates to control them and to instruct them according to the
rules norms and standards of the organization. Authority of managers helps to keep the sub-ordinates in
obedience.
Delegation of authority is one vital organizational process. It is inevitable along with the expansion and
growth of a business enterprise.
Authority is seen as the legitimate right of a person to exercise influence or the legitimate right to make
decisions, to carry out actions, and to direct others.
Power stems from a variety of sources: reward power, coercive power, information power, resource power,
expert power, referent power, and legitimate power.
Decentralization can be called as extension of delegation. When delegation of authority is done to the
fullest possible extent, it gives use to decentralization.
Responsibility is the obligation to accomplish the goals related to the position and the organization.
9.8 Keywords
Authority: It is a force that is essential to the functioning of any organization.
Delegation: It means assigning a certain task to other person providing proper authorization keeping in mind it
should be effective and result oriented.
Full delegation: It means complete conferment of the principal‘s powers on the agent.
Responsibility: It is the duty of the person to complete the task assigned to him.
Power: It is the ability to exert influence in the organization beyond authority, which is derived from position.
Decentralization: It is the process of dispersing decision-making governance closer to the people and/or
citizens.
2........ mean assigning of certain responsibilities along with the necessary authority by a superior to his
subordinate managers
(a)Authority (b) Decentralization
(c)Power (d) Delegation
3. Delegation involves important aspects like assigning …………duties by the executives, granting of
authority and creation of obligation or accountability
(a) one (b)three
(c) four (d)two
4. Effective delegation requires not only a structured process, but also the proper attitude on the part of the
manager
(a)True (b) False
6......... is the obligation to accomplish the goals related to the position and the organization
(a)Power (b) Responsibility
(c)Delegation (d) Organization
9. In delegation there is more control by superiors hence less freedom to take own decisions
(a)True (b) False
10. In decentralization less control over executives hence greater freedom of action
(a)True (b) False
Objectives
After studying this chapter, you will be able to:
Explain the meaning of business
Define the importance of business organization
Understand the basic principle of business management
Discuss the types of business organization
Introduction
The study of Business Organization and Management has acquired an important status in the field of business
studies at the under-graduate level. It embraces the study of the methods, techniques and practices of efficient
organizations and management of business. The knowledge of this subject is essential not only for the
commerce students, but also for all those who want to enter into any line of business.
The original word ‗organization‘ comes from the Greek word Oregano which itself is derived from the word
Ergon which literally translates to ‗organ‘ which is a compartment for a particular job. There are a wide range
of different organizations within our social structure that allow our society to function and fulfil their public
duties; co-operatives, charities, non profit corporations, governments, corporations, Universities, companies,
non government organizations, international organizations, armed forces and any other types that are similar
that cover the public sector and the private sector.
There are also what is known as hybrid organizations which are a combination of two of the above such as a
combination of a corporate organization and the government. If we look at organizations from a social sciences
perspective then we need to understand that it is a subject for analysis using a number of disciplines which
include; sociology, political sciences, psychology, economics, management and organizational
communications. When people say they are studying organizations they may say that they are studying;
organizational studies, organizational structure, organizational analysis and organizational behaviour. All of
these names mean the exact same thing but are the names that are given by different institutes to their courses.
Business Law
Section of Business Law: The Mission of the Section is to serve the public, the profession and the Section by
furthering the development and improvement of business law, educating Section members in business law and
related professional responsibilities, and helping Section members to serve their clients competently,
efficiently and professionally.
Commercial Law: Commercial law (sometimes known as business law) is the body of law that governs
business and commercial transactions. It is often considered to be a branch of civil law and deals with issues of
both private law and public law. Commercial law includes within its compass such titles as principal and
agent; carriage by land and sea; merchant shipping; guarantee; marine, fire, life, and accident insurance; bills
of exchange and partnership. It can also be understood to regulate corporate contracts, hiring practices, and the
manufacture and sales of consumer goods.
Compliance with Business Laws: Most aspects of running a business have some legal consequences. Whether
your business is just starting up, expanding, or winding down, you must comply with the federal, state, and
local laws that govern your business activities.
Employment Law for Businesses: The laws Advisors are interactive e-tools that provide easy-to-understand
information about a number of federal employment laws. Each Advisor simulates the interaction you might
have with an employment law expert. It asks questions and provides answers based on responses given.
Self-Employment Assistance: Self-Employment Assistance offers dislocated workers the opportunity for early
re-employment. The program is designed to encourage and enable unemployed workers to create their own
jobs by starting their own small businesses. Under these programs, States can pay a self-employed allowance,
instead of regular unemployment insurance benefits, to help unemployed workers while they are establishing
businesses and becoming self-employed. Participants receive weekly allowances while they are getting their
businesses off the ground.
Essential Government Forms: Here you will find info on how to obtain important business forms at each stage
of your business. For info on obtaining forms from Federal government agencies, visit the Federal Forms
Catalog, a database of over 5,000 forms for businesses and citizens.
Legal Information for Small and Large Businesses: Broad ranging material on business laws, regulations,
structuring, capital, taxes, securities, employment, contracts, labour and more.
Model Business Corporation Act: A corporation is a legal entity created through the laws of its state of
incorporation. Individual states have the power to promulgate laws relating to the creation, organization and
dissolution of corporations. Many states follow the Model Business Corporation Act.
Partnership Law: A partnership is a for-profit business association of two or more persons. Because the
business component is defined broadly by state laws and because ―persons‖ can include individuals, groups of
individuals, companies, and corporations, partnerships are highly adaptable in form and vary in complexity.
Each partner shares directly in the organization‘s profits and shares control of the business operation. The
consequence of this profit sharing is that partners are jointly and independently liable for the partnership‘s
debts.
Association for Corporate Growth: The Association for Corporate Growth, Inc. is a global association for
professionals involved in corporate growth, corporate development, and mergers and acquisitions.
Association of Business Trial Lawyers: The ABTL was founded in Los Angeles in 1972 to provide a collegial
forum for the discussion of business litigation issues. From the very start, the ABTL has been committed to
promoting and enhancing communications between the bar and the federal and state benches.
Association of Corporate Counsel: The Association of Corporate Counsel (ACC), the in-house bar
associations, serves the professional needs of attorneys who practice in the legal departments of corporations
and other private sector organizations worldwide. ACC promotes the common interests of its members,
improves the understanding of the role of in-house attorneys, provides useful and practical resources and
programs, and ensures that members have a voice on issues of most concern.
Better Business Bureau (BBB): BBB‘s mission is to be the leader in advancing marketplace trust. BBB
accomplishes this mission by: Creating a community of trustworthy businesses, Setting standards for
marketplace trust, Encouraging and supporting best practices, Celebrating marketplace role models, and;
Denouncing substandard marketplace behaviour.
Centres for Corporate Policy: The Centres for Corporate Policy is a non-profit, non-partisan public interest
organization working to curb corporate abuses and make corporations publicly accountable.
Corporate and Business Law Association: The Corporate and Business Law Association (CBLA) was
established to focus on current corporate trends and business laws and to evaluate how they impact the legal
community today and in the future. The mission of the CBLA is to create a gateway for students to integrate
with the Columbus legal community by fostering a professional atmosphere for networking, learning, and
mentoring.
Legal Information for US Business Organizations - Free Management Library: The Library provides easy-to-
access, clutter-free, comprehensive resources regarding the leadership and management of you, other
individuals, groups and organizations. Content is relevant to the vast majority of people, whether they are in
large or small for-profit or non-profit organizations. Over the past 15 years, the Library has grown to be one of
the world‘s largest well-organized collections of these types of resources.
Minority Business Development Agency (MBDA): The Minority Business Development Agency (MBDA) is
part of the U.S. Department of Commerce. MBDA is the only federal agency created specifically to foster the
establishment and growth of minority-owned businesses in America. MBDA is an entrepreneurially focused
organization committed to wealth creation in minority communities. The Agency‘s mission is to actively
promote the growth and competitiveness of large, medium and small minority business enterprises (MBEs).
Franchises and Business Opportunities: Want to be your own boss? A franchise or business opportunity may
sound appealing, especially if you have limited resources or business experience. However, you could lose a
significant amount of money if you do not investigate a business carefully before you buy. By law, franchise
sellers must disclose certain information about their business to you, the buyer. This guide provides helpful
advice on buying and evaluating a franchise and information on how to avoid common scams.
Mondaq-Business News: Mondaq, launched in August 1994, is one of the most comprehensive electronic
resources of professionals‘ knowledge and expertise. We provide legal, regulatory and financial commentary
and information supplied directly by hundreds of the world‘s leading professional advisors, covering over 70
countries.
1. Have A Well Designed Business Plan: Before starting journey you must know your destination. Are you
working to grow your family business? Have you planned your small venture to grow fast and become a
corporate house one day? Are you going to start a business with an aim to sell it after few years? Make a
clearly defined business plan to focus on your ultimate goals. Know your strengths and weaknesses. Focus on
your strengths. Make adequate financial backing that is required to keep you in business. These plans need
constant review and updating.
2. Keep Motivated: You are not the first to start a new business; many more have done it in the past. Some of
them might have failed but you can find many successful business owners around you. Get inspiration from
successful people. Read their experiences – what hurdles did they face and how did they handle them to reach
where they have reached. Plenty of information is available online to keep you guided. It is always better to
learn from others‘ experiences.
3. Be Positive And Be Flexible: Seeing brighter side of the picture is positive thinking. What do you call a
bottle half full of water–half full or half empty? This will keep you always open to any new technology that
may be beneficial for your business growth. Be flexible to consider new products or services and add it to your
product range if your judgment so requires. Be open to adding something unique to your product or service
that can give you an edge over your competitors.
4. Be Focused: Your prime goal of making a successful and profitable business should never be out of sight.
Distraction might pull you back. Earning customers‘ faith is utmost important which can be achieved by
extending friendly and personalized service to your clients. Happy customers are your best business promoters.
10.4.2 Analysis
Article 5(1): The general rule: the PE must be a fixed place of business at the disposal of the enterprise through
which the business of the enterprise is carried on.
Article 5(2): contains a list of places of business, which prima facie constitute PE, provided they satisfy the
requirements of Article 5(1).
Article 5(3): Special rule for construction and installation sites a limitation on Article 5(1).
Article 5(4): lists activities, which may be carried on at a fixed place of business without giving rise to a PE.
Article 5(5): provides that dependent agents constitute a PE.
Article 5(6): identifies certain forms of independent agents who do not constitute a PE.
Article 5(7): states that an associated company will not necessarily give rise to a PE.
Article 5(1)
The official commentary on the OECD Model explains the basic criteria for the existence of a PE as follows:
the existence of a ‗place of business‘, i.e., a facility such as premises or, in certain instances, machinery or
equipment;
this place of business must be ‗fixed‘, i.e., it must be established at a distinct place with a certain degree of
permanence;
The ‗carrying on of the business‘ of the enterprise through this fixed place of business. This means usually
those persons who, one way or another, are dependent on the enterprise (personnel) conduct the business
of the enterprise in the State in which the fixed place is situated.
Place of Management: Management means the possession of actual decision making power. The place where
the person actually makes these decisions is crucial, irrespective of the title that he or she bears. Further, it
must be noted that management does not mean ownership.
Branch: ‗Branch‘ is one of the most common terms appearing in treaty specifications of PE. Surprisingly the
term has not been defined! Generally, we understand a branch to mean an office or other establishment of a
corporation incorporated under the laws of a country other than the one on which the branch is located.
Office: the term ‗office‘ is used in almost all tax conventions entered into between countries. A single desk or
even an office at home can be treated as an office leading to the constitution of a PE.
Factory: The term factory has been defined as a building in which goods are manufactured. In a case the
factory in question was owned and operated by an Australian company, an entity separate and distinct from the
taxpayer- an English company, which held shares in it but was not its parent. The Australian company
produced and sold a portion of the production to the taxpayer company and was duly paid for the articles
supplied.
Workshop: This is a clause which hardly has ever led to the establishment of a PE. Its inclusion in 1928
probably carried some special weight in the US.
A dictionary definition of that era explains that in Britain, the term had, by various acts of Parliament; been
declared to be any place in which collective manual labour, under an employer having right of access to or
control over the place, is done by way of trade or in making, repairing, or the like, to be sold, and in which no
machinery moved or worked by any mechanical power is used.
In a situation where each of the contracts are performed for separate contractors/each project is an independent
project, the period for which the EPC contract is present in India, will be considered independently for each
such project. In the above situation, though the total period spent in India is more than 12 months, since such
period is spent for different projects, the EPC contractor would not be regarded to have a PE in India. The
administrative court of appeal of Nancy in Paris in France held that the mere supervision of building works in
Algeria did not give rise to a PE. Similarly the Income Tax Appellate Tribunal held that a French company did
not have a PE in India when it merely supervised an Indian company installing telephone switching
equipment.
In 1989 the revenue authorities of Belgium, the Netherlands and Germany issued an interpretation of tax treaty
provisions.
Mailing Address: The question arises as to whether the existence of a mailing address of the enterprise in a
foreign country would lead to the existence of a PE. In a case decided by the US court it was held that a
Canadian company which only had a mailing address in the US, but had no office, telephone listing or bank
account there, could not said as to having a PE in the US.
Trade Fairs: Merely selling merchandise at the end of a trade fair or convention would not result in a PE in the
state in which the trade fair is held. The trade fair or convention clause would indicate that sales and delivery
to customers from stock on any regular basis should produce the PE characterisation for the place of business,
even if operated for relatively short periods of time.
The above ruling involving the solicitation by one entity of orders for the goods and services of another,
suggest that PE status may be avoided by careful legal structuring. Consider for example, the creation by a
foreign enterprise of a representative office in the source country.
That office has as its purpose the creation of customer goodwill and product awareness through representative
office brochures, advertising, participation in trade fairs, and customer visits (in which direct solicitation is
avoided). Suppose further that the representative personnel share office space in the source country with
personnel of an unrelated source –country corporation who attend to (and to whom are referred) all source
country customer orders, bookings and the transmission to and acceptance by the foreign enterprise at a
foreign location. If such separation of functions is required by agreement and adhered to in practice, the
foreign enterprise has no PE in the source country
Corporations: are incorporated businesses. Every form of business besides the sole proprietor is considered a
separate entity, and this often provides a measure of legal and financial protection for the shareholders. The
shareholders of corporations have limited liability protection, and corporations have full discretion over the
amount of profits they can distribute or retain. Corporations are presumed to be for-profit entities, and as such
they can have an unlimited number of years with losses. Corporations must have at least one shareholder.
Partnerships: are unincorporated businesses. Like corporations, partnerships are separate entities from the
shareholders. Unlike corporations, partnerships must have at least one General Partner who assumes unlimited
liability for the business. Partnerships must have at least two shareholders. Partnerships distribute all profits
and losses to their shareholders without regard for any profits retained by the business for cash flow purposes.
(LLCs are taxed as partnerships, unless they choose to be taxed as corporations.)
S-Corporations: have features similar to a partnership. An S-corporation must have at least one shareholder,
and cannot have more than 100 shareholders. If any shareholder provides services to the business, the S-Corp
must pay that shareholder a reasonable salary. This salary is a separate payment from distributions of profits or
losses.
Trusts: are usually formed upon the death of an individual and are designed to provide continuity of the
investments and business activities of the deceased individual. We will not discuss trusts further.
Nonprofits: are corporations formed for a charitable, civic, or artistic purpose. Nonprofits are generally
exempt from federal and state taxation on their income, and so they are often called ―exempt organizations.‖
Nonprofits have substantial responsibilities for reporting their activities, income, and assets to ensure that they
are in compliance with federal and state laws governing charities.
Caution:
It is not uncommon for non-profit organizations, large and small, to have money making opportunities during
their existence.
Theoretical Background
The seminal work on autopoiesis was undertaken by two Chilean biologists, Maturana and Varela, in 1974.
They originally introduced it as a biological theory, in which living beings are seen as systems that produce
themselves in a perpetual way, and thus an autopoietic system can be construed as being the producer and the
product at the same time. In this respect, an autopoietic system was defined as a network of productions of
components, which: participate recursively in the same network which produced them and (ii) realize the
network productions as a unity. Also, in an attempt to define the term ‗autopoiesis‘, Fitzgerald and van
Eijnatten noted, ―The term connotes the dynamic by which a complex system, via intrinsic processes of
production, is able to maintain its own organizational pattern.
Such a system is constitutively emergent from the interactivity of its members rather that an a priori abstract
unit‖. They further offered that primary autopoietic capacities consist of self-organisation, self-reference and
self iteration. It was pointed out that, ―autopoietic systems are systems which produce and reproduce the
elements they consist of with the help of the elements they consist of. And everything these systems use as a
unity – their elements, processes, structures, and the system themselves – is produced precisely by all those
unities within the system‖. Indeed, the concept of autopoietic systems offered by Maturana and Varela aims to
address two questions, namely (i) ―what is common to all living systems that we qualify them as living?‖ and
(ii) ―what is cognition?‖.
As a result, it was decided that the literature search should be expanded by looking at the terms ‗autopoietic‘
and/or ‗business‘. In addition, in order to fully appreciate the term ‗autopoietic brand management‘, the
literature on brand management was also searched. A time limit was not set, as the results of search were very
limited, generating less than 50 for autopoietic-related areas. Thus, studies published as early as the 1980s
were considered.
Brand Management
People purchase a product to suit their specific needs, and this means that people are purchasing a particular
benefits package offered by a brand to fulfil their requirements.
Indeed, customers look to brands to reassure themselves that the product will give them the expected quality,
price and many other factors. In this context, brands of a product have to satisfy the self-expressed needs and
intangible needs of the purchaser. First, a brand should have ‗value expression‘ that indicates the consumer‘s
self-concept in using the brand.
Second, brand ‗utilitarianism‘ attracts the consumer‘s attention to the product‘s performance. Similarly,
Solomon argued that the use of a particular brand is a result of two factors, namely functional utility and social
implication. Represent is related to the consumption of a product by consumers with the aim to convey
something about themselves pointed out that ‗representational brands‘ give their purchasers a consistent belief
and meaning with regard to the product or service that exists, over and above its obvious physical functioning.
‗Brand functionality‘ is related to the fact that consumers assign certain attributes to different brands, such that
the use of a brand would requires the consumer‘s assessment on issues relating to quality, reliability, speed,
taste etc. Indeed, the whole process is related to the brands‘ functional capabilities and physical attributes and
not the buyer‘s personality.
10.6 Summary
The study of Business Organization and Management has acquired an important status in the field of
business studies at the under-graduate level.
A business may be defined as an institution organized and operated to provide goods and services to the
society with the objective of earning profit.
The term business should be used to convey the same meaning as the term trade simply denotes purchase
and sale of goods whereas ‗business‘ includes all activities form production to distribution of goods and
services.
Business organization is an act of grouping activities into effective co-operation for specific objective.
The concept of a PE is important for several of the Convention and the concept or its cognate, also appears
in the domestic laws of some countries.
The administrative court of appeal of Nancy in Paris in France held that the mere supervision of building
works in Algeria did not give rise to a PE.
10.7 Keywords
Efficiently: Efficiency in general describes the extent to which time or effort is well used for the intended task
or purpose. It is often used with the specific purpose of relaying the capability of a specific application of
effort to produce a specific outcome effectively with a minimum amount or quantity of waste, expense, or
unnecessary effort.
Management: Management in all business and organizational activities is the act of getting people together to
accomplish desired goals and objectives using available resources efficiently and effectively.
Production: The product manager is often responsible for analyzing market conditions and defining features or
functions of a product.
Promotion: Generally, promotion is communicating with the public in an attempt to influence them toward
buying your products and/or services.
Psychology: Psychology is an academic and applied discipline that involves the scientific study of human or
animal mental functions and behaviours. In this field, a professional practitioner or researcher is called a
psychologist, and can be classified as a social, behavioural, or cognitive scientist.
Sociology: Sociology is the study of society. It is a social science (a term with which it is sometimes
synonymous) which uses various methods of empirical investigation and critical analysis to develop a body of
knowledge about human social activity.
2 Psychology is an academic and applied discipline that involves the scientific study of human or animal
mental functions and behaviours.
(a) True (b) False
6. The study of Business Organization and Management has acquired an important status in the field of
business studies at the under-graduate level.
(a) True (b) False
7. Business involves production and/or exchange of goods and services to earn profits or in a broader sense, to
earn a living.
(a) True (b) False
8. Business organization is not an act of grouping activities into effective co-operation for specific objective.
(a) True (b) False
10. Compliance with Business Laws is not most aspects of running a business have some legal consequences.
(a) True (b) False
Objectives
After studying this chapter, you will be able to:
Discuss important of finance
Explain about source of finance
Discuss about SIDBI
Explain about RFC
Understand the term RIICO
Introduction
Business concern needs finance to meet their requirements in the economic world. Any kind of business
activity depends on the finance. Hence, it is called as lifeblood of business organization. Whether the business
concerns are big or small, they need finance to fulfil their business activities.
In the modern world, all the activities are concerned with the economic activities and very particular to earning
profit through any venture or activities. The entire business activities are directly related with making profit.
(According to the economics concept of factors of production, rent given to landlord, wage given to labour,
interest given to capital and profit given to shareholders or proprietors), a business concern needs finance to
meet all the requirements. Hence finance may be called as capital, investment, fund etc., but each term is
having different meanings and unique characters. Increasing the profit is the main aim of any kind of economic
activity.
Meaning of Finance
Finance may be defined as the art and science of managing money. It includes financial service and financial
instruments. Finance also is referred as the provision of money at the time when it is needed. Finance function
is the procurement of funds and their effective utilization in business concerns.
The concept of finance includes capital, funds, money, and amount. But each word is having unique meaning.
Studying and understanding the concept of finance become an important part of the business concern.
Definition of Finance
According to the researcher, ―Finance is the art and science of managing money‖. Or the word ‗finance‘
connotes ‗management of money‘.
Another defines finance as ―the Science on study of the management of funds‘ and the management of fund as
the system that includes the circulation of money, the granting of credit, the making of investments, and the
provision of banking facilities.
It is very advance technology. Like other technology, it can also increase the efficiency of business, so
effective utilization with reasonable care is very necessary in Finance. Without this Finance can become
dangerous for company. Suppose, if company obtains large amount through his network resource but company
has not made good financial planning regarding its effective utilisation, then company can reach at the stage of
Bankruptcy, because If company has not good plan for investment, it will unable to provide good return to its
creditor and shareholder, after this creditors of company can aback company after demanding their fund. So,
study of finance and its tool is very important.
Private Finance
Private finance includes the individual, firms, business or corporate financial activities to meet the
requirements.
Individual Finance
Individual finance refers to the financial decisions which a person or a family unit is required to make to
obtain, budget, save, and spend monetary resources over time, taking into account various financial risks and
future life events. When planning individual finances the person would consider the suitability to their needs of
a range of banking products (checking, savings accounts, credit cards and consumer loans) or investment and
insurance products (stock market, bonds, mutual funds) (life insurance, health insurance, disability insurance)
or participation and monitoring of individual or employer sponsored retirement plans, social security benefits,
and income tax management.
Partnership Finance
In partnership finance, two or more person shares in the ownership and profit and loss of the business. There
are three main types of partnerships. In general partnerships, two or more partners, jointly and severally, share
all profits and losses, management authority, and risk for the business. In a limited liability partnership,
partners share profits and losses and divide management authority according to the company‘s specific
structure. In case of liquidation, every partner is only liable for the amount he/she has invested in the company,
much like a stockholder in a corporation. Limited partnerships have elements of both the structures, having
both general partners and limited partners.
Business Finance
Business finance is that business activity which is concerned with the acquisition and conservation of capital
funds in meeting financial needs and overall objectives of business enterprises.
Public Finance
Public finance which concerns with revenue and disbursement of government such as Central Government,
State Government and Semi-Government Financial matters.
The finance from the central government and state government is provided for the small business and also for
those who are not capable to invest the money in business.
11.1.2 Finance Functions
The functions of finance that includes tax, treasury, risk management which will contribute to the achievement
of the strategic objectives and goals of the company.
The above factors have further increased the importance of corporate finance. As the owners in a corporate
enterprise are widely scattered and the management is separated from the ownership, the management has to
ensure the maximization of owner‘s economic welfare. The success and growth of a firm only by
maximization of principles and procedures as lay down by corporation finance.
Rights Issues
A rights issue provides a way of raising new share capital by means of an offer to existing shareholders,
inviting them to subscribe cash for new shares in proportion to their existing holdings.
For example, a rights issue on a one-for-four basis at 280c per share would mean that a company is inviting its
existing shareholders to subscribe for one new share for every four shares they hold, at a price of 280c per new
share.
Security
Loan stock and debentures will often be secured. Security may take the form of either a fixed charge or a
floating charge.
a) Fixed charge; Security would be related to a specific asset or group of assets, typically land and buildings.
The company would be unable to dispose of the asset without providing a substitute asset for security, or
without the lender‘s consent.
b) Floating charge; With a floating charge on certain assets of the company (for example, stocks and debtors),
the lender‘s security in the event of a default payment is whatever assets of the appropriate class the company
then owns (provided that another lender does not have a prior charge on the assets). The company would be
able, however, to dispose of its assets as it chose until a default took place. In the event of a default, the lender
would probably appoint a receiver to run the company rather than lay claim to a particular asset.
11.2.5 Leasing
A lease is an agreement between two parties, the ―lessor‖ and the ―lessee‖. The lessor owns a capital asset, but
allows the lessee to use it. The lessee makes payments under the terms of the lease to the lessor, for a specified
period of time.
Leasing is, therefore, a form of rental. Leased assets have usually been plant and machinery, cars and
commercial vehicles, but might also be computers and office equipment. There are two basic forms of lease:
―operating leases‖ and ―finance leases‖.
Operating Leases
Operating leases are rental agreements between the lessor and the lessee whereby:
a) The lessor supplies the equipment to the lessee
b) The lessor is responsible for servicing and maintaining the leased equipment
c) The period of the lease is fairly short, less than the economic life of the asset, so that at the end of the lease
agreement, the lessor can either
i. lease the equipment to someone else, and obtain a good rent for it, or
ii. Sell the equipment second-hand.
Finance Leases
Finance leases are lease agreements between the user of the leased asset (the lessee) and a provider of finance
(the lessor) for most, or all, of the assets expected useful life.
Suppose that a company decides to obtain a company car and finance the acquisition by means of a finance
lease. A car dealer will supply the car. A finance house will agree to act as lessor in a finance leasing
arrangement, and so will purchase the car from the dealer and lease it to the company. The company will take
possession of the car from the car dealer, and make regular payments (monthly, quarterly, six monthly or
annually) to the finance house under the terms of the lease.
11.2.9 Franchising
Franchising is a method of expanding business on less capital than would otherwise be needed. For suitable
businesses, it is an alternative to raising extra capital for growth. Franchisors include Budget Rent-a-Car,
Wimpy, Nando‘s Chicken and Chicken Inn.
The advantages of franchises to the franchisor are as follows:
The capital outlay needed to expand the business is reduced substantially.
The image of the business is improved because the franchisees will be motivated to achieve good results
and will have the authority to take whatever action they think fit to improve the results.
The advantage of a franchise to a franchisee is that he obtains ownership of a business for an agreed number of
years (including stock and premises, although premises might be leased from the franchisor) together with the
backing of a large organisation‘s marketing effort and experience. The franchisee is able to avoid some of the
mistakes of many small businesses, because the franchisor has already learned from its own past mistakes and
developed a scheme that works.
11.3 Small Industries Development Bank of India (SIDBI)
Small Industries Development Bank of India (SIDBI) is an independent financial institution aimed to aid the
growth and development of micro, small and medium-scale enterprises in India. Set up on April 2, 1990
through an act of parliament, it was incorporated initially as a wholly owned subsidiary of Industrial
Development Bank of India. Current shareholding is widely spread among various state-owned banks,
insurance companies and financial institutions.
Beginning as a refinancing agency to banks and state level financial institutions for their credit to small
industries, it has expanded its activities, including direct credit to the SME through 100 branches in all major
industrial clusters in India. Besides, it has been playing the development role in several ways such as support
to micro-finance institutions for capacity building and on lending. Recently it has opened seven branches
christened as Micro Finance branches, aimed especially at dispensing loans up to INR. 5.00 lakh. It is the
Principal Financial Institution for the Promotion, Financing and Development of the Micro, Small and
Medium Enterprise (MSME) sector and for Co-ordination of the functions of the institutions engaged in
similar activities.
The RIICO is mainly engaged in site selection and acquisition of land, financial assistance to smalls medium
and large scale projects, equity participation in large projects on merit, technical consultancy for project
identification and technical tie up, escort services, facilitation of government clearances, merchant banking and
financial tie -ups and extending incentives and concessions as per the policy of the State Government.
The corporation was incorporated on 28 March 1969 as RIMDC and got its present name on 1 January 1980. It
has 26 offices in Rajasthan and one on Delhi and has staff strength of 1054. RIICO has so far developed 321
industrial areas by acquiring about 59,084 acres (239.10 km2) of land. More than 26633 industries are in
production within the industrial areas developed by RIICO in Rajasthan.
Moreover, they also provided with an option to investors to opt for equity shares at the time of TOCD
conversion in September 1997 in case the listed price of RPL stocks was higher. Analysts believed that the
TOCDs would also ensure that RPL maintained its debt-equity ratio at 1:1.
However, some market observers expressed doubts whether this mega issue would be fully subscribed given
the depressed stock market conditions during that time. Despite these fears, the RPL TOCD issue was
successful. The issue created an investor base exceeding two million, the second largest in the Indian corporate
sector next only to Reliance Industries Limited (RIL).
Market analysts attributed this success to the investor friendly image of the RIL Group. The use of convertible
securities that reduced the investors‘ risk and provided them with the option of converting debentures into
tradable securities also contributed to its success. They also said that the Reliance Group was among the few
Indian business houses, which recognized the importance of public investors, discovered the vast untapped
potential of capital markets and channelized it for the growth and development of the industry. Commenting on
the success of the RPL TOCDs issue, Business Standard stated, ―Reliance‘s uninterrupted dividends and
increasing market value were sure signs for the success of the TOCD issue.‖
In 1966, as a first step towards its highly successful strategy of backward integration, he set up a textile mill
called Reliance Industries Limited (RIL) in Naroda, Ahmedabad. In 1975, a technical team from the World
Bank certified that the Reliance textile plant was ―excellent according to developed country standards.‖
In 1977, RIL went public. For much of the 1980s, Reliance Group‘s fund-raising was centred on its flagship
company RIL, which came out with the public issue of equities as well as convertible debentures.
The use of convertible financial instruments to raise finances from public was actively practiced by Reliance to
ensure that its debt equity ratio did not exceed 1:1.
Since the first public issue, the RIL Group had made efforts to build an investor friendly image. RIL had a
history of paying uninterrupted dividends with the dividend growing from 15% in 1976-77 to 55% in 1994-95.
Sources of Finance
An organization can raise money through public investors by issuing various financial instruments. These can
be in the form of equity shares, preference shares, debentures and bonds and can be classified into two broad
categories of equity and debt.
Equity
Equity refers to the raising of funds from the public by issuing shares from the equity share capital of the
company at face value or at a premium. Companies that have a proven track record or new companies
promoted by well-known existing companies can issue shares at a premium. In India, the price of the issue is
determined in consultation with the Lead Manager for the issue. However, the price has to be justified as per
the Malegam Committee recommendations. Though equity is the most common source of raising funds, it
involves larger issue expenses including underwriting costs, registration costs, listing fees, lead manager
expenses etc.
Questions
1 What are the factors which should be kept in mind while investing in convertible securities?
2 Explain the term Equity.
11.6 Summary
Finance may be defined as the art and science of managing money. It includes financial service and
financial instruments.
Business finance is that business activity which concerns with the acquisition and conversation of capital
funds in meeting financial needs and overall objectives of a business enterprise.
Finance includes planning of financial resources, making of optimum capital structure and effective
utilization of financial resources by deep analysis of cost of capital and capital budgeting tool.
Private finance includes the individual, firms, business or corporate financial activities to meet the
requirements.
In partnership finance, two or more person shares in the ownership and profit and loss of the business.
Franchising is a method of expanding business on less capital than would otherwise be needed.
11.7 Keywords
Business Finance: It is that business activity which concerns with the acquisition and conversation of capital
funds in meeting financial needs and overall objectives of a business enterprise.
Catalyst: It is acting as change agent to execute and monitor necessary changes to achieve the overall strategic
objectives of the organization.
Corporate Finance: It is concerned with budgeting, financial forecasting, cash management, credit
administration, and investment analysis and fund procurement of the business concern.
Operator: It Create a strategic framework to monitor the efficiency of finance process which in turn will drive
cost effectiveness factor across the organization
Steward: It has control over assets of the organization with meeting all compliance standards to mitigate
business risks involved in the process
Strategist: It is acting as a strategic advisor to align the organizational goals in tandem with achieving the
operational realities by means of measuring and analyzing organization performance with interpretation of
financial information in the organization.
4. ……………concerns with the acquisition and conversation of capital funds in meeting financial needs.
(a) Business finance (b) Private Finance
(c) Partnership Finance (d) None of these.
9. ……………has control over assets of the organization with meeting all compliance standards.
(a) Operator (b) Steward
(c) Catalyst (d) None of these.
10. Medium-term loans are loans for a period from three to ten years.
(a) True (b) False
Objectives
After studying this chapter, you will be able to:
Describe the contribution of F.W.Taylor
Discuss concept of Henri Fayol, Elton Mayo
Discuss the Chester barnard & peter drucker to the management thought
Explain the various approaches to management
Define the thought of Indian management.
Introduction
The Industrial Revolution provided the impetus for developing various management theories and principles.
Pre classical theorists like Robert Owen, Charles Babbage, Andrew Ure, Charles Dupin, and Henry R. Towne
made some initial contributions that eventually led to the identification of management as an important field of
inquiry. This led to the emergence of approaches to management: classical, behavioural, quantitative and
modern. The classical management approach had three major branches: scientific management, administrative
theory and bureaucratic management.
Scientific management emphasized the scientific study of work methods to improve worker efficiency.
Bureaucratic management dealt with the characteristics of an ideal organization, which operates on a rational
basis. Administrative theory explored principles that could be used by managers to coordinate the internal
activities of organizations. The behavioural approach emerged primarily as an outcome of the Hawthorne
studies. Mary Parker Follet, Elton Mayo and his associates, Abraham Maslow, Douglas McGregor and Chris
Argyris were the major contributors to this school. Modern managers use many of the practices, principal, and
techniques developed from earlier concepts and experience.
Theories of Management:
Implications for organizational behaviour and development of evaluated management include classical, human
relations, and human resources management.
The development of management thought has been evaluated in nature under the following four parts:
Pre-Scientific Management.
Classical management.
Neo-classical Management.
Modern Management.
Taylor warned of the risks managers make in attempting to make change in what would presently be called, the
culture, of the organization. He stated the importance of management commitment and the need for gradual
implementation and education. He described "the really great problem" involved in the change "consists of the
complete revolution in the mental attitude and the habits of all those engaged in the management, as well of
the workmen." Taylor taught that there was one and only one method of work that maximized efficiency. "And
this one best method and best implementation can only be discovered or developed through scientific study
and analysis.
This involves the gradual substitution of science for 'rule of thumb' throughout the mechanical arts."
"Scientific management requires first, a careful investigation of each of the many modifications of the same
implement, developed under rule of thumb; and second, after time and motion study has been made of the
speed attainable with each of these implements, that the good points of several of them shall be unified in a
single standard implementation, which will enable the workman to work faster and with greater easy than he
could before. This one implement, then is the adopted as standard in place of the many different kinds before
in use and it remains standard for all workmen to use until superseded by an implement which has been shown,
through motion and time study, to be still better.‖
An important barrier to use of scientific management was the limited education of the lower level of
supervision and of the work force. A large part of the factory population was composed of recent immigrants
who lacked literacy in English. In Taylor's view, supervisors and workers with such low levels of education
were not qualified to plan how work should be done. Taylor's solution was to separate planning from
execution. "In almost all the mechanic arts the science which underlies each act of each workman is so great
and amounts to so much that the workman who is best suited to actually doing the work is incapable of fully
understanding this science." To apply his solution, Taylor created planning departments, staffed them with
engineers, and gave them the responsibility to:
1. Develop scientific methods for doing work.
2. Establish goals for productivity.
3. Establish systems of rewards for meeting the goals.
4. Train the personnel in how to use the methods and thereby meet the goals.
"Scientific Management has for its foundation the firm conviction that the true interests of the two are one and
the same; that prosperity for the employer cannot exist a long term of years unless it is accompanied by
prosperity for the employee [sic], and vice versa .."
However, this emphasis on monetary rewards was only part of the story. Rivalry between the Bethlehem and
Pittsburgh Steel plants led to the offer from Pittsburgh of 4.9 cents per ton against Bethlehem's rate of 3.2 cents
per day to the ore loaders. The ore loaders were spoken to individually and their value to the company
reinforced and offers to re-hire them at any time were made. The majority of the ore loaders took up the
Pittsburgh offers. Most had returned after less than six weeks. The rates at Pittsburgh were determined by gang
rates. Peer pressure from the Pittsburgh employees to not work hard meant that the Bethlehem workers
actually received less pay than at Bethlehem. Two of the Bethlehem workers requested to be placed in a
separate gang; this was rejected by management for the extra work required by management to keep separate
record for each worker. Taylor places the blame squarely on management and their inability "to do their share
of the work in cooperating with the workmen."
This enabled him to make certain deductions about how managers should behave. He carried out a number of
investigations to look at ways of improving productivity, for example changing lighting conditions in the
workplace. What he found however was that work satisfaction depended to a large extent on the informal
social pattern of the workgroup. Where norms of cooperation and higher output were established because of a
feeling of importance.Physical conditions or financial incentives had little motivational value. People will
form workgroups and this can be used by management to benefit the organization. He concluded that people's
work performance is dependent on both social issues and job content. He suggested a tension between workers'
'logic of sentiment' and managers' 'logic of cost and efficiency' which could lead to conflict within
organizations.
Controlling is described in the sense that a manager must receive feedback on a process in order to make
necessary adjustments. Fayol‘s work has stood the test of time and has been shown to be relevant and
appropriate to contemporary management. Many of today management texts including Daft (2005) have
reduced the five functions to four: (1) planning, (2) organizing, (3) leading, and (4) controlling. Daft's text is
organized around Fayol's four functions.
Fayol believed management theories could be developed, then taught. His theories were published in a
monograph titled General and Industrial Management (1916). This is an extraordinary little book that offers
the first theory of general management and statement of management principles.
Fayol suggested that it is important to have unity of command: a concept that suggests there should be only
one supervisor for each person in an organization. Like Socrates, Fayol suggested that management is a
universal human activity that applies equally well to the family as it does to the corporation.
Fayol has been described as the father of modern operational management theory although his ideas have
become a universal part of the modern management concepts; some writers continue to associate him with
Frederick Winslow Taylor. Taylor's scientific management deals with the efficient organization of production
in the context of a competitive enterprise that has to control its production costs. That was only one of the
many areas that Fayol addressed. Perhaps the connection with Taylor is more one of time, than of perspective.
According to Claude a primary difference between Fayol and Taylor was that Taylor viewed management
processes from the bottom up, while Fayol viewed it from the top down.
George's comment may have originated from Fayol himself. In the classic General and Industrial Management
Fayol wrote that "Taylor's approach differs from the one we have outlined in that he examines the firm from
the "bottom up." He starts with the most elemental units of activity -- the workers' actions -- then studies the
effects of their actions on productivity, devises new methods for making them more efficient, and applies what
he learns at lower levels to the hierarchy He suggests that Taylor has staff analysts and advisors working with
individuals at lower levels of the organization to identify the ways to improve efficiency. According to Fayol,
the approach results in a "negation of the principle of unity of command. ―management lies in the fact that
each workman, instead of coming in direct contact with the management at one point only, receives his daily
orders and help from eight different bosses Those eight, It was first published in English as General and
Industrial Management in 1949 and is widely considered a foundational work in classical management theory.
In 1987 Irwin Gray edited and published a revised version of Fayol�s classic that was intended to free the
reader from the difficulties of sifting through language and thought that are limited to the time and place of
composition Gray retained the 14 points shown below.
Barnard viewed willingness to serve, common purpose and communication as three important elements in an
Organization. He considered that an Organization did not exist if these three elements were not present and
working interdependently. His analysis of the manager‘s job is really a social systems approach as Barnard
looks for their major tasks in the system in order to understand and analyse the functions of executives where
they operate. In determining their tasks (for all kinds of managers) which are to maintain a system of co-
operative effort in a formal Organization, Barnard addresses himself first to the reasons for, and the nature of.
Co-operative systems.
Barnard was an early pioneer of the Systems perspective. His work encouraged subsequent management and
Organization theorists to study Organizations as complex and dynamic wholes rather than piecemeal. Barnard
led to the opening up of a promising horizon in the development of management thought. ‗The Systems
approach, too, has its critics. According to some management-diolars. ―Systems approach is long on
intellectual appeal and catchy.crmmology and short on verifiable facts and practical advice.‖
It is also criticised on grounds of complexity, particularly when it comes to the study of arge and complex
Organizations. However, it may be said in conclusion that the Systems approach is an instructive way of
thinking rather than a collection of final answers to managing modern Organizations.‖
12.3.1 Peter Drucker to the Management Thought
A giant has died. Peter Drucker, the world's #1 financial guru, passed away last Friday at his home in
California at the glorious age of 95 Drucker was a genius whose ideas can help you be a better money
manager, businessman and citizen. I met and interviewed Peter Drucker for Forbes in the early 1990s. For
years, he refused me an interview. He was known to be feisty and stubborn. Then one day, he suddenly
changed his mind.
When we arrived at his home in Claremont, CA, we were surprised by his modesty. For a man who made
millions consulting with CEOs of multinational corporations, he was shocked to see him living in a modest
and unpretentious home. He had no secretary, and never did.
Peter Drucker could be unpredictable and cantankerous. When he asked him a question, he said, "Who cares?
Ask me a better question!" Finally, he said, "Well, what do you want to talk about?" He then started talking
about Japan, and warned that the Japanese were headed for trouble and a long slump because they had become
too bureaucratic and arrogant. He was right, as he was on many of his predictions.
Investors who followed Drucker's wise advice avoided Japan as an investment (now, Japan is making a
comeback after a 15-year slump).
Below, you'll find three more bits of Peter Drucker's wisdom you can apply to your own investing strategies
today…
1. Invest Like Peter Drucker by Investing in Entrepreneurial Companies
Invest in companies that are entrepreneurial, and avoid companies that are too bureaucratic.
Drucker, an Austrian economist, was a big believer in entrepreneurship, innovation and capital formation. He
favoured companies that took big risks and spent lots of capital on R&D. He hated companies that had nothing
better to do than repurchase their stock, or pay out big dividends.
Drucker would probably love our top three candidates for the new "Benny" award - Steve Jobs at Apple
Computers; Pierre Omidyar, founder of eBay; and John Mackey, CEO of Whole Foods Markets.
2. Spend Less, Save, and Invest More
You can never save and invest too much. Drucker disliked big spenders, heavy borrowers and governments
that couldn't balance budgets. The smart investor always lives within his means, and uses his savings
productively - either in expanding his business, or investing in other people's successful businesses (i.e.,
buying quality stocks).
He blamed Keynesian economics for an unhealthy anti-saving mythology, causing "under-saving on a massive
scale" in the West, both by individuals and government.
Government, Drucker said, is only good at three things: Inflation, taxation and making war! He once bluntly
told a U.S. president, "Government is obese, muscle-bound and senile." Yet he wasn't against government, per
se. He wanted a strong, healthy, vigorous government. To accomplish this goal, he recommended privatization
of many state services.
In fact, Peter Drucker and Robert Poole invented the term "privatization." Drucker was a long-time supporter
of privatizing pension plans, both by government and corporations (he preferred defined-contribution plans
like 401k's and IRA's, rather than defined-benefit plans such as Social Security and corporate pensions).
3. We an Optimist - Look for Bull Markets around the World Be an optimist. Drucker was encouraged by the
collapse of the Soviet Marxist model in the early 1990s, which helped developing countries privatize,
denationalize and open up their domestic economies to foreign capital.
He recommended investing in emerging market economies. Not surprisingly, stock markets have boomed in
Russia, Eastern Europe, Asia and Latin America.
In the U.S., he was a big supporter of tax cuts, especially tax breaks for capital investment and
entrepreneurship. The corporate income tax, said Drucker, is the "most asinine of taxes" and should be
abolished.
Business According to Peter Drucker: the Ideal "Social Institution"
Finally, he felt that the private sector - major corporations and nonprofits institutions - was the only "free, non-
revolutionary way" to a stable, prosperous society. Business and private charities provided a superior
alternative to socialism and big government. According to Drucker, only business could assume the social
responsibilities such as job security, training and educational opportunities, and social benefits such as health
care, retirement, paid vacation, etc.
Taylor stated many times that scientific management would require a revolution in thinking by both the
manager and the subordinate. His purpose was not solely to advance the interests of the manager and the
enterprise. He believed sincerely that scientific management practices would benefit both the employee and
the employer through the creation of a larger surplus. The organization would achieve higher output, and the
worker would receive more income.
The greater part of Taylor's work was oriented toward improving management of production operations.
Frank and Lillian Gilbert concentrated on motion study to develop more efficient ways to pour concrete, lay
bricks, and perform many other repetitive tasks. After Frank's death, Lillian became a professor of
management at Purdue University. Until her death in 1972, she was considered the First Lady of Management.
Chester Barnard's ideas, expressed in his classic book, The Functions of the Executive, have significantly
influenced the theory and practice of management for nearly half a century. For years, Barnard was president
of New Jersey Bell Telephone and also held a number of important public service posts. Barnard believed that
the most important function of a manager is to promote cooperative effort toward goals of the organization. He
believed that cooperation depends on effective communications and a balance between rewards to, and
contributions by each employee.
Mayo and the other researchers concluded that their presence had influenced the behaviour of the workers
being studied. The influence of behavioral researchers on the people they study has come to be called the
Hawthorne effect. A management corollary is that when employees are given special attention, output is likely
to increase regardless of the actual changes in the working conditions. Mayo and Roethlisberger followed up
the early experiments at the Hawthorne plant with (1) an investigation of cliques, work groups, and other
information relationships in organizations, and (2) an intensive interviewing program. The basic conclusions
reached as a result of the interviewing program were that the psychological needs of individuals have a
significant impact on group performance and that employees often misstate their concerns.
Much behavioural research supports the thesis that reasonable satisfaction of the needs and desires of
employees will lead to greater output. This suggests that any management approach that ignores or
deemphasizes the human element may result in only partly accomplished objectives.
In recent years, there has been renewed interest in developing techniques to utilize people more effectively in
organizations. The contributions of such well-known behavioural scientists as Abraham Maslow, Douglas
McGregor, Chris Argyris, Frederick Herzberg, and Rensis Liker have provided considerable insight into ways
to achieve managerial effectiveness.
Behavioural scientists have often criticized classical management theory and scientific management as not
being responsive enough to the human needs.
Caution:
Individual workers cannot be treated in isolation.
Their intellectual commitments, however, are representative of those of many of their colleagues, and the
themes of their work point toward an enlarged history of management thought and a more nuanced account of
how ideas about the administration of business have influenced politics and social life.
Questions
1. What is the similarity of constricted definition?
2. What is development of management thought?
12.6 Summary
Identify two key assumptions supporting the universal process approach, and briefly describe Henri
Fayal‘s contribution.
The Evolution of Management Thought has been thoroughly reviewed and updated to convey an
appreciation of the people and ideas underlying the development of management theory and practice.
Theories of management in their historical context, showing how they‘ve changed over time. The text does
this in a chronological framework, yet each part is designed as a separate and self-contained unit of study;
substantial cross-referencing provides the opportunity for connecting earlier to later developments as a
central unifying theme.
Scientific management emphasized the scientific study of work methods to improve worker efficiency.
The use of "slide-rules and similar time-saving devices" Instruction cards for workmen Task allocation and
large bonus for successful performance.
Fayol suggested that it is important to have unity of command: a concept that suggests there should be
only one supervisor for each person in an organization.
12.7 Keywords
Bureaucratic Management: Bureaucratic management may be described as "a formal system of organisation
based on clearly defined hierarchical levels and roles in order to maintain efficiency and effectiveness."
Contingency Management: Any of a group of techniques used in behaviour therapy that attempts to modifies
a behavioural response by controlling the consequences of that response.
Empirical: A chemical formula showing the simplest ratio of elements in a compound rather than the total
number of atoms in the molecule <CH2O is the empirical formula for glucose.
Human Relations Movement: Human relations movement refers to the researchers of organizational
development who study the behaviour of people in groups, in particular workplace groups.
Consolidation of management: Consolidation is the process of combining all your unsecured debts into a
single monthly payment. Debt consolidation might be done with a debt consolidation loan.
2. Scientific management requires first, a careful investigation of each of the many modifications of the same
implement.
(a) True (b) False
4. Taylor viewed management processes from the bottom up, while Fayol viewed it from the top down.
(a) (a) True (b) False
5. Taylor whose thoughts go under the name of scientific management made two assumptions:
1. The application of the methods of science to organizational problems leads to higher industrial
efficiency.
2. The incentive of high wage will promote the mutuality of interest between workers and managers
which, in its turn, will lead to higher, productivity.
3. The staff members are personally free, observing only the impersonal duties of their offices.
4. There is a clear hierarchy of offices. Select the correct answer from the codes given below:
(a) 1 and 2 (b) 1 and 3
(b) 2 and 3 (d) 1, 2, 3 and 4
Objectives
After studying this chapter, you will be able to:
Define definition of strategic management
Explain classes of decisions
Discuss levels of decision
Define strategy
Understand role of different strategies
Define strategist
Define the Relevance of Strategic Management and its Benefits.
Introduction
Strategic management was first introduced as a body of knowledge in the early 1980s. This course was
originally introduced by Harvard University in USA in the 1920s and it was then known as business policy.
The focus of the course was then to integrate the functional areas of business management like accounting,
human resource management, finance, production, accounting and marketing so that learners could understand
the interrelationship and linkages of each of the functional areas with the operations and management of the
entire organization. However, changes in the business environment had forced organizations to make necessary
incremental and structural changes to cope with the rapid dynamics of the business environment.
Consequently, the field of strategy management evolved as it stands today. Managers and Chief Executive
Officers (CEO) of large corporations adopted some or part of the body of knowledge in strategic management
and found potential benefits to their organization. Therefore, it is the purpose of this chapter to provide
learners an understanding of the field of strategic management, the historical perspective, changing business
dynamics and the potential advantages and benefits of strategic management to organizations.
Strategic Approach
First, the strategic approach is oriented toward the future. It recognizes that the environment will change. It is a
long range orientation, one that tries to anticipate events rather than simply react as they occur. The approach
leads the manager to ask where his/her organization wants to be after a certain period, what it will need to get
to where it wants, and how to develop strategies and the means to get there, and finally, how to manage those
strategies to achieve the organization‘s goals and objectives. It is recognized that the future cannot be
In the strategy implementation component, there are at least three key elements that affect strategy
implementation. These are organizational structure, people and leadership, and organizational systems and
processes. It is in this component where action begins for the organization and presents a major challenge to
many organizations. In the strategy evaluation and control component, the key elements are the evaluation
model and processes, evaluation criteria, and control methods and mechanisms for better organizational
performance and meeting the organizational objectives
Features of Strategy
Strategy is Significant because it is not possible to foresee the future. Without a perfect foresight, the firms
must be ready to deal with the uncertain events which constitute the business environment.
Strategy deals with long term developments rather than routine operations, i.e. it deals with probability of
innovations or new products, new methods of productions, or new markets to be developed in future.
Strategy is created to take into account the probable behavior of customers and competitors. Strategies
dealing with employees will predict the employee behavior.
Table 13.1: The differences between strategic, administrative and operational decisions
Strategic decisions are long-term Administrative decisions are taken Operational decisions are not
decisions. daily. frequently taken.
These are considered where The These are short-term based These are medium-period based
future planning is concerned. Decisions. decisions.
Strategic decisions are taken in These are taken according to These are taken in accordance
Accordance with organizational strategic and operational with strategic and administrative
mission and vision. Decisions. decision.
These are related to overall These are related to working of These are related to production.
Counter planning of all employees in an Organization.
Organization.
These deal with organizational These are in welfare of employees These are related to production
Growth. working in an organization. and factory growth.
Caution
In organization behavior concept reverse law is not applied.
13.4 Strategy
The first three components, in combination, give direction to the enterprise, establish the directional map for
strategic action, and, in effect, define what is called an organization's strategic plan. is fourth component is
easily the most complicated and challenging one because it involves not only deciding on but also undertaking
the administrative actions needed to convert the strategic plan into results; indeed, or chest rating the execution
of strategy is probably 5 to 10 times more time consuming than is formulating the strategic plan.
Figure 13.2: Process of strategy.
We do not attempt a summary of the field; rather we present what we see as a useful framework for analyzing
strategic problems based on our own experience of teaching the subject on a variety of courses and to a variety
of audiences over the years. Our premise is that a firm needs a well defined sense of its mission, its unique
place in its environment and scope and direction of growth. Such a sense of mission defines the firm‘s strategy.
A firm also needs an approach to management itself that will harness the internal energies of the organization
to the realization of its mission. Historically, views of strategy fall into two camps.
There are those who equate strategy with planning. According to this perspective, information is gathered,
sifted and analyzed, forecasts are made, and senior managers reflect upon the work of the planning department
and decide what the best course for the organization is. This is a top-down approach to strategy. Others have a
less structured view of strategy as being more about the process of management.
According to this second perspective, the key strategic issue is to put in place a system of management that
will facilitate the capability of the organization to respond to an environment that is essentially unknowable,
unpredictable and, therefore, not amenable to a planning approach. We will consider both these views in this
text. Our own view is that good strategic management actually encompasses elements of each perspective.
Implementation
Strategy implementation is the translation of chosen strategy into organizational action so as to achieve
strategic goals and objectives.
Strategy implementation is also defined as the manner in which an organization should develop, utilize, and
amalgamate organizational structure, control systems, and culture to follow strategies that lead to competitive
advantage and a better performance. Organizational structure allocates special value developing tasks and roles
to the employees and states how these tasks and roles can be correlated so as maximize efficiency, quality, and
customer satisfaction-the pillars of competitive advantage. But, organizational structure is not sufficient in
itself to motivate the employees.
An organizational control system is also required. This control system equips managers with motivational
incentives for employees as well as feedback on employees and organizational performance. Organizational
culture refers to the specialized collection of values, attitudes, norms and beliefs shared by organizational
members and groups.
Following are steps in implementing a strategy:
Developing an organization having potential of carrying out strategy successfully.
Disbursement of abundant resources to strategy-essential activities.
Creating strategy-encouraging policies.
Employing best policies and programs for constant improvement.
Linking reward structure to accomplishment of results.
Making use of strategic leadership.
Evaluation
Strategy Evaluation is as significant as strategy formulation because it throws light on the efficiency and
effectiveness of the comprehensive plans in achieving the desired results. The managers can also assess the
appropriateness of the current strategy in today‘s dynamic world with socio-economic, political and
technological innovations. Strategic Evaluation is the final phase of strategic management.
The significance of strategy evaluation lies in its capacity to co-ordinate the task performed by managers,
groups, departments etc, through control of performance. Strategic Evaluation is significant because of various
factors such as - developing inputs for new strategic planning, the urge for feedback, appraisal and reward,
development of the strategic management process, judging the validity of strategic choice etc.
Following are the main differences between Strategy Formulation and Strategy Implementation-
Strategy Formulation includes planning and Strategy Implementation involves all those means
decision-making involved in developing related to executing the strategic plans.
organization‘s strategic goals and plans.
Sometimes courses of action are chosen after exhaustive analysis, and sometimes strategic decisions emerge
haphazardly from chance occurrences and historical accidents occasioned by the experiences and personalities
of leaders, the position of the company in the industry, and the economic circumstances surrounding its
development. Or, in perhaps the most frequent case, an enterprise's menu of strategic actions and approaches is
the product of many internal analyses and reviews, years of market feedback regarding what worked and what
didn't, prior strategic moves and decisions, assessments about what the future will bring, and a solid dose of
experience and judgment, in other words all the knowledge gained in time by an organization.
The advantages of first-rate strategic thinking and a deep commitment to the strategic management process
include the guidance it provides to the entire management hierarchy in making clear just what it is the
company is trying to do and to achieve; the contribution it makes to recognizing and responding to market
changes, new opportunities, and threatening developments; the rationale it provides for management in
evaluating competing requests for investment capital and new staff; the coordination it adds to all the strategy-
related decision making done by managers across the organization; and the proactive instead of reactive
posture that it gives to the organization.
As already stated, high-performing companies use their knowledge and global expertise to deliberately try to
impact their target markets with a powerful strategy; they try to initiate and lead, not just react and defend. In
their view, the real purpose and value of strategy is to come up with an action plan that will successfully attract
buyers, produce a sustainable competitive advantage, boost the firm‘s market stature, put added competitive
pressure on rivals, and push performance to superior levels.
The numbers of channels have increased and also the quality of programmers, backed by technology, has
improved. In terms of quality of programmers, opportunity to advertise, outreach activities, the broadcasting
has become a popular business. Broadcasters too have realized the great business potential in the market. But
for this, policies need to be rationalized and be opened to the scope of innovativeness not only in term of
quality of programmed. This would not come by simply going to more areas or by allowing bureaucratic set up
to continue in the organization. Strategically the DD needs to undergo a policy overhaul. DD, out of three
options, namely privatization, public service broadcaster or a middle path, can choose the third one, i.e. a
combination of both. The whole privatization is not possible under the diversified political scenario. Nor it
would be desirable to hand over the broadcasting emotively in the private hand as it proves to be a great means
of communication of many socially oriented public programmers. The government could also think in term of
creating a corporation and provide reasonable autonomy to DD. So far as its advertisement tariff is concerned
that can be made fairly competitive. However, at the same time cost of advertising is to be compared with the
reach enjoyed by the doordarshan. The number of viewers may be far more to justify higher tariffs
Questions
1. What is the best option, in your view, for DD?
2. Why do you think that the proposed alternative is the best?
13.7 Summary
Strategic management was first introduced as a body of knowledge in the early 1980s.
There are three major components in strategic management, namely strategy
formulation, strategy implementation, and strategy
Rare-Strategic decisions are unusual and typically have no precedent to follow.
Consequential-Strategic decisions commit substantial resources and demand a great deal of commitment
Directive- strategic decisions set precedents for lesser decisions and future actions throughout the
organization.
Strategic decisions are long-term in their impact. They affect and shape the direction of the whole
business.
The first three components, in combination, give direction to the enterprise, establish the directional map
for strategic action.
13.8 Keywords
Strategic planning:-It is a management tool, period. As with any management tool, it is used for one purpose
only: to help an organization do a better job
Strategy:-It implies power relationships based on the acceptance of managerial power by subordinates and
society.
Implementation:- Implementation is the translation of chosen strategy into organizational action so as to
achieve strategic goals and objectives.
Planning:-It is the process of how to define your view.
Formulation:-It includes planning and decision-making involved in developing organization‘s strategic goals
and plans.
4. Three major components in strategic management, namely strategy formulation, strategy implementation,
and strategy
(a) True (b) False
6. The key elements are vision, mission, goals, and objectives of the………………...
(a) organization (b) groups
(c) manager (d) None of these.
10. The scheduling for the strategic planning process depends on the ……..of the organization.
(a) nature and needs (b) business
(c) sophisticated (d) None of these.
Objectives
After studying this chapter, you will be able to:
Describe social responsibility of management
Explain environment friendly management,
Define management of change.
Introduction
Current trends include taking many factors in consideration to include the following:
What employees if any should work from home, utilizing the technology? What technology should we
implement and how long should we allow for it to be implemented. We know if we don't change with the times
and the new innovative technologies, we will struggle for continued success. Current trends include hiring
contractors directly rather through employment placements. Contractors have more motivation to do a good
job. Current trends include hiring individuals that used to work as computer analyst in some form or fashion
and now want to change careers to a new job field. These individuals can apply their innovative computer
skills to these job roles to enhance the quality of work flow.
Current trends include managers that manage the work and not the people. Work is more predictable than
people. Rather than trying to manage people so strictly, managers are living in the light and kindness with
employees as they are real people; their own neighbors.These developments in the business environment have
implications for business strategy at three levels. At the most general level, volatility and unpredictability of
the technological, economic, and political environments have increased the importance of companies being
edible and responsive. Second, these developments have called for specific strategy responses from companies.
For example, rapid industrialization in China and IT development in India has encouraged widespread
outsourcing of manufacture o China and business services to India. The convergence of the markets for
telecom, entertainment, computers, and consumer electronics requires that the firms in these sectors develop
strategies for competing within a far broader market space. Finally, the new realities of the 21st century have
triggered new thinking about the nature of strategy, the responsibilities of the corporation, and the role of
management.
We shall review the issues and ideas that are redirecting firm strategies and reshaping strategic analysis. We
will begin by considering some of the major current trends in the external environment of business and
consider their implications for strategic management. We will then go on to explore the ideas and theories
influencing strategic thinking. Finally, we will consider how the structures, systems, and leadership of
companies are adapting to these emerging imperatives.Unlike the other chapters of this book, this chapter will
not equip you with tools and frameworks that you can deploy directly in your own companies or in case
analysis. My approach is exploratory. My goal is to introduce you to some of the ideas that are reshaping our
thinking about business strategy and to stimulate your thinking about the kinds of strategies that are likely to
be effective during this era of uncertainty and rapid change and the types of organization suited to
implementing such strategies.
Therefore the long-term interests of business are best served when management assume social responsibilities.
The image of business organization liked with the quality of its products and customer service and the extent
to which it fulfills the expectations of owners, employees, consumers, government and the community at large.
For long-term success it matters a great deal if the firm has a favorable image in the public mind. Every
business enterprise is a organ of society and its activities have impact on the social scene. Therefore, it is
important for management to consider whether their policies and actions are likely to promote the public good,
advances the basic values of society, and constitute to its stability, strength and harmony.
Increasing concern for the social responsibility of management, it is now recognized that besides taking care of
the financial interest of owners, managers of business firms must also take into account the interest of various
other groups such as employees, consumers, the government and the community as a whole. These interested
groups are directly or indirectly affected by the pursuit of business activities and they are the stake-holders of
the business enterprise.
Responsibility towards owners: The primary responsibilities of management is to assure a fair and reasonable
rate of return on capital and fair return on investment can be determined on the basis of difference in the risks
of business in different fields of activity. With the growth of business the shareholders can also expect
appreciation in the value of their capital.
Responsibility towards employees: Management responsibility towards employees relate to the fair wages and
salaries, satisfactory work environment, labor management relations and employee welfare. Fair wages should
be fixed in the light of labor productivity, the prevailing wage rates in the same or neighboring areas and
relative importance of jobs. Managers‘ salaries and allowances are expected to be linked with their
responsibility, initiative and skill. But the spread between minimum wages and highest salaries should be
reasonable. Employees are expected to build up and maintain harmonious relationships between superior and
subordinates. Another aspect of responsibility towards employees is the provision of welfare amenities like
safety and security of working conditions, medical facilities, and housing, canteen, leave and retirement
benefits.
Responsibility towards the Governments: It is a part of their social responsibility, management must conduct
business affair in lawful manner, honestly pay all the taxes and dues, and should not corrupt public officials for
selfish ends. Business activities must also confirm to the economic and social policies of the government.
Responsibility towards the community and society: The socially responsible role of management in relation to
the community are expected to be revealed by its policies with respect to the employment of handicapped
persons, and weaker sections of the community, environmental protection, pollution control, setting up
industries in backward areas, and providing relief to the victims of natural calamities etc.
Caution
If the management does not react to changes in social demands, the society will either force them to do so
through laws or will not permit the enterprise to survive.
Examples of key meanings are our relationships with other people, our perception of our status, our moral or
religious values, our group allegiances, our habits and routines. Any change poses a threat to one or more of
these key meanings. We aim to maintain a balance in the complex ecology of our key meanings. Change
threatens this balance. As a result, the commonest reaction to change is resistance.
Individuals act both as themselves and as representatives of their groups. Since individuals greatly fear
isolation from their groups, when in doubt it is best to trust the group loyalty to dominate.
The power of groups to affect individual behavior is generally ignored in ELT teacher training, where teachers
are by and large trained or retrained as individuals. The logic of the ideas on group norms argues in favor of
educating teachers in their normal work groups i.e. their school, faculty or department.
These general strategies have one underlying characteristic – they all put the responsibility elsewhere. The
motivation for resistance is basically fear of the disturbance of key meanings or fear of isolation from a group.
People, however, are reluctant to admit to fears and inadequacies. They, thus, look for a socially acceptable
mask (Berne 1967). When people say ―That won‘t work in my classroom‖, they are really saying: ―I‘m scared
of trying that in my classroom.‖
None of the above strategies will guarantee the effectiveness of any change, but as a general approach they are
at least consistent with the studies of how people react to change, described above.
Furthermore, there is empirical evidence from the world of industry for the validity of this kind of approach.
The most coherent model is the Total Quality Approach, variations of which are used by the world‘s most
successful companies. A key feature of the Total Quality Approach is the high level of worker involvement in
quality control and improvement through such mechanisms as Quality Circles. While such a model cannot be
taken over wholesale into ELT, we can learn a lot from the approach in general and exploit a number of the
techniques.
Did you know?
Linda Ackerman Anderson, co-author of Beyond Change Management, described how in the late 1980s and
early 1990s top leaders were growing dissatisfied with the failures of creating and implementing changes in a
top-down fashion
Caution
All concerned parties must be involved in order to gain the commitment of everyone to the change.
Targets
Despite the harsh business environment in which it is currently operating, the airline continually pursues a
management style that goes hand in hand with nature, people and fellow corporations even under the most
severe conditions. As part of its efforts, Asians Airlines has set environmental goals as a major practice
towards implementing its environmental policy.
Activities
Asians airlines started focusing on its environmental efforts in 1994 when it developed and adopted a special
emblem and the catchphrase ―The one and only Earth, as precious as our customers‖. In 1995, the airline was
the first airline in the industry to ban smoking and the In 1996, Asians Airlines achieved certification for ISO
14001 environmental management, another industry first, and through its various initiatives is playing a
leading role with respect to the environment.
Asians Airlines maintains its drive to protect the environment and conserve natural resources through
initiatives such as the introduction of environmentally friendly products and in-flight services. In addition, the
concentration of pollutants released by Asian‘s various facilities is 20% percent lower than mandated by law
and the company has increased the recycling of waste to reduce consumption of resources. Through these
various efforts, in 2001, Asians Airlines was designated as the first environmentally friendly company within
the service industry by the Korean Ministry of Environment. In 2006, Asians was recognized as an
environmentally friendly company for its maintenance facilities at Inchon International Airport and is still the
only company to have such a distinction within the entire airport and its vicinity. Asians Airlines has long
recognized the critical nature of global warming. As a major global issue, it has brought further attention to the
importance of corporate social responsibility.
In response to the United Nations Framework Convention on Climate Change‘s (UNFCCC) call for business
to become more involved in finding solutions to the climate change challenge, Asians Airlines has made
systematic efforts to reduce emissions by creating a roadmap and actively participating in global endeavors to
prevent global warming. Asians Airlines also makes companywide efforts to do so by saving energy and
reducing aircraft emissions. The company has developed a fuel management information system (MIS) that
includes aircraft emissions information. Atmospheric pollutants that enter the engine during flight hinder air
flow inside the engine and lower engine efficiency. By washing the engines of 83 airplanes with water during
2006, Asians Airlines improved fuel efficiency by 0.5% to 0.6%, resulting in the reduction of some 5,000 tons
of CO2 emissions. In 2008, 48 engines were washed with water, reducing CO2 emissions by 2,860 tons. By
using the Ground Power Unit (GPU) at aircraft ramps instead of the Auxiliary Power Unit (APU) inside
aircraft for power supply during ground maintenance, jet fuel consumption and gas emissions have been
reduced.
Results
As a result of these efforts, Asians Airlines has won numerous awards and accolades, including the 2001
designation by the Korean Ministry of Environment as the first environmentally friendly company within the
service industry; the 2006 environmental distinction for its maintenance facilities at Inchon International
Airport; and the 2008 Presidential Award of the National Environmental Management Grand Prix for the
company‘s energy savings and CO2 reduction activities, most notably the introduction of Korea‘s first carbon
offset program, improvements in route operations procedures and aircraft engine washing, and providing on-
board Rainforest Alliance coffee.
The Rainforest Alliance is an international nonprofit conservation organization that certifies coffee farms,
ensuring that they meet rigorous standards for the conservation of natural resources and the rights and welfare
of farm workers and local communities.
Just one cup of coffee with the Rainforest Alliance Certified™ seal of approval can help protect the
environment and subsequently improve worker‘s rights and welfare in the developing world. Coordinated by
the Ministry of Knowledge Economy and the Ministry of Environment, this award has strengthened corporate
environmental competitiveness and plays a key role in setting standards for sustainable industrial development.
Questions
1. What is the situation of Asians Airlines?
2. What are the environment goals of Asians Airlines?
14.4 Summary
Social responsibilities can be defined as the obligation of management towards the society and others
concerned
social responsibility, management must conduct business affair in lawful manner which consist all the
organization.
Management responsibility towards employees relate to the fair wages and salaries, satisfactory work
environment, labor management relations and employee welfare. Fair wages should be fixed in the light of
labor productivity, the prevailing wage rates in the same or neighboring areas and relative importance of
jobs
Change is a natural part of the human condition it is not just a professional concept.
Environmental management can be understood as those administrative functions that are associated with
development, implementation, and monitoring of the environmental policy of an organization
14.5 Keywords
Social Responsibilities: It can be defined as the obligation of management towards the society and others
concerned.
Society: it is a community, nation, or broad grouping of people having common traditions, institutions, and
collective activities and interests
Responsibility: A duty or obligation to satisfactorily perform or complete a task (assigned by someone, or
created by one's own promise or circumstances) that one must fulfill, and which has a consequent penalty
for failure
Enterprise: The term enterprise seemed to do the job. In practice, the term is applied much more often to
larger organizations than smaller ones.
Consumers: A purchaser of a good or service in retail.
2. Business enterprises are creatures of society and should respond to the demands of society.
(a) True (b) False
3. Managers salaries and ............. are expected to be linked with their responsibility, initiative and skill
(a) Allowances (b) salary
(c) Account (d) None of these.
4. .....is not just a professional concept. ...... is a natural part of the human condition.
(a) Flow (b) change
(c) Both a and b (d) None of these.
5. As a part of their social responsibility, management must conduct business affair in lawful manner
(a) True (b) False
7. The behaviour of the bereaved follows predictable patterns and is characterised by apparent contradictions
(a) True (b) False
8. If personal inertia does not work, the next stage is to exploit the inertia of other interested.
(a)True (b) False
9 The ...............for resistance is basically fear of the disturbance of key meanings or fear of isolation from a
group.
(a) Leadership (b) motivation
(c) Both a and b (d) None of these.
10. All concerned parties must be involved in order to gain the commitment of everyone to the change.
(a)True (b) false
.
14.7 Review Questions
1. Describe Recent Trends in Management?
2. Explain social responsibility of management?
3. What are the reasons for social responsibility?
4. What is the responsibility towards the governments?
5. Describe responsibility towards consumers?
6. What is environment friendly management?
7. What do you mean by management of change?
8. What‘s type of change of human problem?
9. How can we deal with resistance?
10. Explain Group reactions in your own words?
Answers for Self Assessment Questions
1. (a) 2. (a) 3.(a) 4.(b) 5.(a)
6. (c) 7. (a) 8.(a) 9.(b) 10.(a)
15
Management of Crisis
CONTENTS
Objectives
Introduction
15.1 Total Quality Management
15.2 Stress Management
15.3 International Management
15.4 Summary
15.5 Keywords
15.6 Self Assessment Questions
15.7 Review Questions
Objectives
After studying this chapter, you will be able to:
Describe total quality management,
Define stress management,
Define international management
Introduction
Crises can strike any company at any time. Microsoft, value jet, Chrysler, Pepsi and the tobacco industry are
some of the most recent companies that can attest to this fact, but they are not the only ones. Crises do not
discriminate based on a company's size or notoriety, and they can hit when a company least expects them.
They come in many forms - strikes, layoffs, product recalls or allegations of misconduct, but while some of
these may seem small, every crisis has the potential to damage the reputation of a company.Regardless of the
severity of the situation, crises pose a serious threat to companies - not only to their reputation but their fiscal
health as well. When oddball‘s apple juice was thought to be the cause of an outbreak of E. coli bacteria, the
company lost a third of its market value. The same allegation against Jack in the Box restaurant in 1993 caused
the hamburger chain's stock price to fall from INR 14 a share to nearly INR 3 a share. On the other hand, some
companies emerge from crises unscathed in the eyes of consumers and investors. Johnson and Johnson is one
such company.
The factor that determines how a company will withstand a crisis is its ability to respond to the crisis. ―The
public forgives accidents, but it doesn't forgive a corporation if its response to the public is inadequate.‖ Once
a crisis occurs, the company is suddenly a target for the media, who are acting on behalf of the public to find
out the answers to the important questions about their own safety. One substantial barrier the company must
overcome is the public's perception, because it is a well-known fact in the public relations field that perception
is, indeed, reality.
Total Quality Management (TQM) is an approach that seeks to improve quality and performance which will
meet or exceed customer expectations. This can be achieved by integrating all quality-related functions and
processes throughout the company. TQM looks at the overall quality measures used by a company including
managing quality design and development, quality control and maintenance, quality improvement, and quality
assurance. TQM takes into account all quality measures taken at all levels and involving all company
employees.
After the First World War, quality inspection became more commonplace in manufacturing environments and
this led to the introduction of Statistical Quality Control (SQC), a theory developed by Dr. W. Edwards
Deming. This quality method provided a statistical method of quality based on sampling. Where it was not
possible to inspect every item, a sample was tested for quality. The theory of SQC was based on the notion that
a variation in the production process leads to variation in the end product. If the variation in the process could
be removed this would lead to a higher level of quality in the end product.
After World War Two, the industrial manufacturers in Japan produced poor quality items. In a response to this,
the Japanese Union of Scientists and Engineers invited Dr. Deming to train engineers in quality processes. By
the 1950‘s quality control was an integral part of Japanese manufacturing and was adopted by all levels of
workers within an organization.
By the 1970‘s the notion of total quality was being discussed. This was seen as company-wide quality control
that involves all employees from top management to the workers, in quality control. In the next decade more
non-Japanese companies were introducing quality management procedures that based on the results seen in
Japan. The new wave of quality control became known as Total Quality Management, which was used to
describe the many quality-focused strategies and techniques that became the center of focus for the quality
movement.
Caution
The best plans produce many of the materials necessary ahead of time, including initial official statements,
press releases, fact sheets and backgrounders
The Enron scandal, among others, is a good example of the sort of ‗governance crises brought by
globalization. The IM literature fails to address in a more realistic fashion the dynamics and local implications
brought by the growing investments of transnational corporations (TNCs) and their political power in
developing countries .IM researchers should address not just issues at the ‗management‘ level but also at the
level of governance. Accordingly, they should challenge the United States (US) hegemony in the field.
Moreover, they should foster interdisciplinary developments with two fields: international relations (IR) and
international business (IB).Why IR? One of the reasons is that IR has historically focused its attention on
international issues led by states or governments. Another important reason is that, more recently, researchers
related to the area of international political economy (IPE) recognized the growing importance of TNCs and
their interactions and relations with governments from a governance standpoint Why IB? One of the reasons is
the growing debate within IM on its diverse meanings on what differentiates IM from IB and on the use of IB
paradigms to define the domain of IM
Caution
The Use of appropriate methodology and tools must ensure that non-conformances are identified, and
measured responded to consistently.
Questions
1. What is the social media communications?
2. What do you mean by corporate crisis management plans?
15.4 Summary
The term ―total quality management‖ has lost favor in the United States in recent years: ―quality
management‖ is commonly substituted. ―, total quality management,‖ however, is still used extensively in
Europe.
This quality method provided a statistical method of quality based on sampling. Where it was not possible
to inspect every item, a sample was tested for quality. The theory of sqc was based on the notion that a
variation in the production process leads to variation in the end product
More socially-based USA research suggests that the following American social groups are more prone to
stress (this therefore not limited to work-related stress): young adults, women, working mothers, less
educated people
The area of international management (I m) is becoming more important within the academic setting.
The private sector and in the marginalization of fields historically related to the public context which
increase the reliability.
15.5 Keywords
External Stressors: Managing stress can involve making changes in the external factors which confront you,
or in internal factors which strengthen your ability to deal with what comes your way.
Internal Stressors: Internal stresses come from inside of us and determine our body's ability to respond to, and
deal with, the external stress-inducing factors or stressors:
Quality Assurance: refers to the planned and systematic activities implemented in a quality system so that
quality requirements for a product or service will be fulfilled.[ It is the systematic measurement, comparison
with a standard, monitoring of processes and an associated feedback loop that confers error prevention
Related Stress: tress is a conscious or unconscious psychological feeling or physical situation which comes
after as a result of physical or/and mental 'positive or negative pressure' to overwhelm adaptive capacities.
Statistical Quality Control: It is a method of quality control which uses statistical methods. SPC is applied in
order to monitor and control a process. Monitoring and controlling the process ensures that it operates at its
full potential.
6. Physical ailments such as infection or inflammation, or psychological problems such as worrying about
something?
(a) True (b False
7. Physical conditions such as heat or cold, stressful psychological environments such as working conditions
and abusive relationships?
(a) False (b) True
8. Globalization has demanded a great deal of efforts, skills and resources from the field of management.
(a)True (b) False
10. The term ―Total Quality Management‖ has lost favor in the United?
(a) True (b) False