DEPARTMENT OF AGRICULTURAL EXTENSION, UAS, GKVK, BANGALORE-65

AEX-506 (1+1)
Entrepreneurship Development and Management in Extension

Unit – 1
Entrepreneurship: concept, Characteristics, Approaches, theories and needs for
entrepreneurship development

A teacher teaches in a school, a worker works in a factory, a doctor practice in a

government hospital, a clerk serves in a bank, a manager works in a business concern to earn
their living. These are the examples of people who are employees and earn money through
salary or wages given by their employers. This is known as wage-employment. On the other
hand, a shopkeeper, a factory owner, a businessman, a doctor having his own clinic, earn
money by running their own concerns. These are the examples of people who are self-
employed. However, there are several self-employed individuals who not only create jobs for
themselves but also generate jobs for many others. For example, Tatas, Birlas, etc. who are
innovators and job generators. They may be termed as ‘entrepreneurs’.
Now a day’s entrepreneurship is getting a great deal of attention, as it contributes
positively to nation building in a number of ways by generating employment and wealth.
Entrepreneurship plays an important role in increasing national productivity, distribution of
economic power, balancing regional development, providing avenues for creativity and idea
generation. Entrepreneurship is considered as an important part of the national economy for
creating and increasing employment opportunities and fuelling economic growth. For many
years, policymakers have identified entrepreneurs as important drivers for employment,
innovation and economic growth.
Entrepreneurship is viewed as a critical activity to regenerate and sustain economic
growth in strong economies and also as a means of boosting employment and productivity in
deprived regions or in developing countries, as it is an important source of job creation,
career opportunities and poverty reduction for both men and women
Importance of entrepreneurship.
 To improve backwardness of the people.
 Economic development of the region.
 To analysis resource utilization
 Proper utilization of human potentiality.
 Reducing unrest and social tension among youth
 Special attention to take up new activities.
 To create self employment and generation of employment opportunity.
 Eradication of regional imbalances.
 Better economic gain.

Entrepreneurship Development: the infrastructure of public and private support that

facilitates entrepreneurship.
Social entrepreneurship is the work of a social entrepreneur. A social entrepreneur is
someone who recognizes a social problem and uses entrepreneurial principles to organize,
create, and manage a venture to make social change. Whereas a business entrepreneur
typically measures performance in profit and return, a social entrepreneur assesses success in
terms of the impact s/he has on society. While social entrepreneurs often work through
nonprofits and citizen groups, many work in the private and governmental sectors.
The term entrepreneurship is derived from the 17 th century French verb
‘Entrependre’, referring to individuals who are ‘undertakers’, i.e., those who undertake the
risk of new enterprise.
The entrepreneurship is usually understood with reference to individual business.
Entrepreneurship has rightly been identified with the individual, as success of enterprise
depends upon imagination, vision, innovativeness and risk taking. The production is possible
due to the cooperation of various factors of production, popularly known as land, labor,
capital, market, management and of course entrepreneurship.
Entrepreneurship is a process through which entrepreneurs create and grow enterprises to
provide new services or products, or add value to services or products.
According to Schumpeter “the entrepreneurship is essentially a creative activity or it
is an innovative function”.
The entrepreneurship is a risk taking factor, which is responsible for the end result in
the form of profit or loss
Entrepreneurship is the study of taking calculative risks in both creating new
enterprise and managing as enterprise when already created requiring effective operation.
Entrepreneurship is the practice of starting new organizations or revitalizing mature
organizations, particularly new business generally in response to identified opportunities.
"A force that mobilizes other resources to meet unmet market demand", "the ability to create
and build something from practically nothing", "the process of creating value by pulling
together a unique package of resources to exploit an opportunity”.
"Entrepreneurship can be described as a creative and innovative response to an environment.
Such responses can take place in any field of social Endeavour – business, agriculture,
education, social work and the like. Doing new things or doing things that are already being
done in a new way is, therefore, a simple definition of entrepreneurship.
In conceptualizing entrepreneurship we could differentiate between concepts.
1) Entrepreneur= individual actor in the market.
2) Entrepreneurial= behavior in the market , and
3) Entrepreneurship = combines the actor and the behavior in the market

Meaning of an Enterprise
 A project undertaken or to be undertaken, especially one that is important.
 A company organized for commercial purposes; business firm.
 Joint venture: Activity undertaken together by two or more entities, so that each has
equal rights to control and benefit from it and is equally liable for obligations arising
out of it.

Entrepreneur
The word “entrepreneur” is French origin, meaning “one who takes between”
“A person who organizes, operates, and assumes the risk for a business venture.”
-(The American Heritage® Dictionary of the English Language, Fourth
Edition)
“One who undertakes an enterprise; one who owns and manages a business; a person
who takes the risk of profit or loss.”
-Oxford English Dictionary – Political, Economical
An entrepreneur may be defined as the owner or manager of an enterprise, its
executive director, or a member of its managing board.
An entrepreneur is a person, who has entrepreneurial mind with a strong need for
achievement motivation.
An entrepreneur is a person who starts an enterprise, searches for change and
responds to it.
An entrepreneur is a person who pays a certain price for a product to resell it at an
uncertain price, thereby making decisions about obtaining and using the resources while
consequently admitting the risk of enterprise.
An entrepreneur is a person who develops a new idea and takes the risk of setting up
an enterprise to produce a product or service which satisfies customer needs.

All entrepreneurs are business persons, but not all business persons are entrepreneurs.
Let us now think of why all business persons are not entrepreneurs. Think of a woman who
sits by the roadside leading to your home and who has been selling the same type of food,
from the same size of game articles/ cooking items or pots, from the same table top, and may
not have been able to change her standard of living to any appreciable extent. Such a woman
may be a business person but not an entrepreneur. The entrepreneur on the other hand is the
business person who is not satisfied with his/her performance and therefore always finds
ways to improve and grow.

Characteristics of an Entrepreneur
• He is a person who develops and owns his own enterprise
• He is a moderate risk taker and works under uncertainty for achieving the goal.
• He is innovative
• He peruses the deviant pursuits
• Reflects strong urge to be independent.
• Persistently tries to do something better.
• Dissatisfied with routine activities.
• Prepared to withstand the hard life.
• Determined but patient
• Exhibits sense of leadership
• Also exhibits sense of competitiveness
• Takes personals responsibility
• Oriented towards the future.
• Persist to face adversity
• Convert a situation into opportunity.
Successful entrepreneur possesses the following important characteristics:
 Initiative: An entrepreneur takes actions that go beyond job requirements or the demand of
the situation.
 Opportunity seeking: An entrepreneur is quick to see and seize opportunities. He/she does
things before he/she is asked to work by people or forced by situation.
 Persistence: An entrepreneur is not discouraged by difficulties and problems that come up
in the business or his/her personal life. Once she sets a goal she is committed to the goal
and will become completely absorbed in it.
 Information seeking: An entrepreneur undertakes personal research on how to satisfy
customers and solve problems. He/she knows that different people have different
capabilities that can be of help to them. He/she seeks relevant information from his/her
clients, suppliers, competitors and others. He/she always wants to learn things which will
help the business to grow.
 Demand for quality and efficiency: An entrepreneur is always competing with others to
do things better, faster, and at less cost he/she strives to achieve excellence.
 Risk taking: Are you afraid of uncertainties? Then you cannot be an entrepreneur.
Entrepreneurs are not high risk takers. They are also not gamblers; they calculate their risks
before taking action. They place themselves in situations involving moderate risk so they
are moderate risk takers.
 Goal setting: An entrepreneur sets meaningful and challenging goals for him/herself. An
entrepreneur does not just dream. Him/she thinks and plans what he/she does. He/she is
certain or has hope about the future.
 Commitment to work: An entrepreneur will work long hours after into the night just to be
able to keep his/her promise to his/her client. He/she does the work together with his/her
workers to get a job done. He/she knows how to make people happy to work for him/her
due his/her dynamic leadership.
 Systematic planning and monitoring: An entrepreneur plans for whatever he/she expects
in the business. He/she does not leave things to luck. He/she plans by breaking large tasks
down into small once and puts time limits against them. Since and entrepreneur knows what
to expect at anytime he/she is able to change plans and strategies to achieve what he/she
aims at.
 Persuasion and networking: An entrepreneur acts to develop and maintain business
contacts by establishing good working relationship. Uses deliberate strategies to influence
others.
 Independence and self confidence: Most entrepreneurs start business because they like to
be their own boss. They are responsible for their own decisions.

Universal four approaches to entrepreneurship

 Learn to recognize an opportunity: A successful entrepreneur is one who sees a gap in
demand and supply or one who thinks he can supply the best in a market crowded with
supplies.
 Recognize the potential of your idea: Universally, if there’s one thing that sets successful
entrepreneurs apart from would-have-been success stories is this simple skill to know
where an idea can take you.
 Stay Motivated: enough belief in yourself and continue to put in the effort and work it
takes will serve the purpose of staying motivated.
 Follow your passion: if you’re really good at what you do, there’s no need to trade money
for following your passion.
The four approaches to entrepreneurship described above are so universal in nature
that they can be applied to any business, in any part of the world. They are simple as
philosophies, strong as ideas and enduring as steps to entrepreneurial success.

Theories of entrepreneurship:
Researchers use the theories to explain phenomena. These theories consist of concepts
and constructs related to entrepreneurship development.
1. Psychological theories such as those developed by McLelland pay attention to personal
traits, motives and incentives of an individual and conclude that entrepreneurs have a
strong need for achievement.
Entrepreneurship gets a boost when society has sufficient supply of individuals
with necessary psychological characteristics. The psychological characteristics include
need for high achievement, a vision or foresight, ability to face opposition
2. Motivation theory by McClelland (Acquired Needs theory) According to McClelland, a person
has three types of needs at anygiven time, which are:–Need for achievement (get success
with one’s own efforts)–Need for power (to dominate, influence others)–Need for
affiliation (maintain friendly relations with others). The need for achievement is the
highest for entrepreneurs.
3. Sociological theories that start from ethnic identification try to explain entrepreneurship
as a process where the individual’s sociological (disadvantageous) background is one of
the decisive “push” factors to become an entrepreneur.
4. Economic Theory profound that, Entrepreneurship and economic growth take place
when the economic conditions are favorable. Economic incentives are the main motivators
for entrepreneurial activities. Economic incentives include taxation policy, industrial
policy, sources of finance and raw material, infrastructure availability, investment and
marketing opportunities, access to information about market conditions, technology etc

The Kakinada Experiment: Conducted by McClelland in America, Mexico and Mumbai.

Under this experiment, young adults were selected and put through a three month training
program. The training aimed at inducing the achievement motivation. Trainees were asked to
control their thinking and talk to themselves, positively–They imagined themselves
challenges and success and they had to set planned and achievable goals.
Conclusions of the experiment:–Traditional beliefs do not inhibit an entrepreneur–Suitable
training can provide necessary motivation to an entrepreneur–The achievement motivation
had a positive impact on the performance of the participants. Kakinada experiment that made
people realizes the importance of EDP (Entrepreneurial Development Program) to induce
motivation and competence in young, prospective entrepreneurs.
Unit-2
Agri-entrepreneurship- Concept, Characteristics, Nature and Importance for
Sustainable Livelihoods
Agriculture is extremely important occupation in India for the rural population as it provides
food and contributor to the economy. The agricultural sector contributes around 19% of the
Gross Domestic Product of India, and it is a significant sector provides about 65% of the
population of India with employment and a livelihood. For India to achieve 8-10% growth,
agriculture must improve its growth rate to over 5%. If more than 7% is not reached, no
serious reduction of poverty can be achieved. On the supply side, India has a large pool of
research manpower, large marketable surpluses and abundant raw materials for agribusiness.
On the demand side, there is a huge growing market with consumption growth predicted to
increase to 7.8%. The problems of the agricultural sector include low levels of productivity,
infrastructure and investment. The government is trying to improve the environment for
investment. It intends to spend Rs 15,000 crores in the perishable sector on the backward and
forward production linkages in horticulture. Priority sector lending and credit are expected to
double in three years. The government is bringing 10 million hectares of additional land
under irrigation. India is on track to becoming the world’s leading food producer through a
number of cross-sectoral initiatives and investment opportunities. The biggest potential in
India is to mobilize 350 million people who live on less than one dollar a day. Mobilizing
them into entrepreneurship will make a tremendous difference to India’s economy.

Why India is promoting Agripreneurship:

In India, 52% of total land is cultivable as against 11% in the world. All 15 major climates of
the world, snow bound Himalayas to hot humid southern peninsula; Thar Desert to heavy rain
areas all exist in India. There are 20 agro-climatic regions and nearly 46 out of 60 soil types
in the country. Sunshine hours and day length are ideally suited for round the year cultivation
of crops. India is the centre for biodiversity in plants, animals, insects, micro-organism and
accounts for 17% animal, 12% plants and 10% fish genetic resources of the globe. In the live
stock sector, India has 16% of cattle, 57% of buffalo, 17% of goats and 5 % of sheep
population of the world. Agriculture contributes 24.2% to GDP, 15.2% of total exports and
provides employment to 58.4% of country’s work force.

Agripreneurs and Agripreneurship Development

An entrepreneur in agricultural sector is agripreneur. An agripreneur is a strategic thinker, in
the discipline of agri-business with an academic or professional training in agricultural
sciences; they are recognized based on the agro-tech knowledge. They take up strategic
planning in the area of supply chain management.
There is no single definition of the term “Agripreneur”. However, an agripreneur may be
thought of someone who undertakes a variety of activities in agricultural to be agripreneur.
For example an agripreneur may start an agri-business, change a business’s direction, acquire
a business or be involved in innovatory activity in agricultural value addition. Thus an
agripreneur may undertake a range of different activities which have a common link - the
perception of an opportunity and the willingness to do something to take advantage of it.
Explicit in this is that the agripreneur is a risk-taker and has the opportunity to initiate and to
implement decisions which deal with the uncertain agricultural business environment within
which the firm operates.
Agricultural entrepreneur are the ones who undertake agricultural activities such as raising
and marketing of crops, fertilizers and other inputs of agriculture. They are motivated to
improve agriculture through mechanization, irrigation, and application of technologies for dry
land agricultural products.

An agripreneurship is any business in the agricultural industry which includes production

agriculture, food, fiber, the environment and natural resources. Agri entrepreneurs avoid low-
risk situations because there is a lack of challenge. They avoid high risk situations because
they want to succeed. They like achievable challenges. A risk situation occurs when Agri-
entrepreneur is required to make a choice between two or more alternatives whose potential
outcomes are not known and must be evaluated in advance, with limited information. A risk
situation involves potential gain and potential loss.
Agripreneurship: It is defined as generally sustainable, community oriented, directly
marketed agriculture. Sustainable agriculture denotes a holistic, systems oriented approach to
farming that focuses on the interrelationships of social, economic and environmental process.

Need for Agripreneurship:

• Increasing demand of organic and quality food both in India and abroad
• Competitive advantages for many primary production activities in agriculture. Ex:
Rainfed farming, livestock and wild craft production is through low cost production
technologies only.
• Private sector is willing to enter in to agribusiness at all levels of operation.
• To reduce mall nutrition as majority of women and children in the country are mall-
nourished.

Scope for entrepreneurship development in Agriculture:

There is a vast scope for entrepreneurial activities in the agricultural sector. By
establishing a link between agriculture and allied industries, the rural entrepreneur can exploit
opportunities in areas of farming, agricultural processing and marketing. The government has
given priority to agriculture related program and ensured adequate flow of credit to small and
marginal farmers
• Technologies those reduce the cost of production and increase the benefit of the
farmers will open new opportunities for Agri-entrepreneurship.

• New technologies that are simple and time saving and keep away farmers from
drudgery of labour will also provide opportunity for entrepreneurship in agriculture.

• Technologies that provide social and psychological benefits to farmers will also
provide opportunity for entrepreneurship in agriculture.
Depending upon the geographical situation and resources availability, the possible
areas of entrepreneurship in agriculture are:

(1) Agro produce processing units: These units do not manufacture any new product. They
merely process the agriculture produce. e.g., Rice mills, Dal mills, Decorticating mills etc.
(2) Agro produce manufacturing units: These units produce entirely new products based on
the agricultural produce as the main raw material. e.g., Sugar factories, Bakery, Strawboard
units etc.
(3) Agro-inputs manufacturing units: These units produce goods either for mechanization of
agriculture or for increasing productivity. E.g., Fertilizer manufacturing plants, insecticides
production units, food processing units, agricultural implements etc.
(4) Agro-service centers: These include the workshops and service centers for repairing and
serving the agricultural implements used in agriculture.

Role of agri-prenuer
The agricultural graduate to be a good agripreneur should have knowledge of different
roles to be performed in the agriculture business. Agricultural exports, Food Park, indigenous
business, contract farming, dealership ABAC, retail shop, merchant, etc. he plays an
important role in supply chain management like; Supplier, Purchases production and
processing, Distributional market, Customer. An agri entrepreneurship can under takes the
following ventures; a. Land development, b. Irrigation, c. Soil- conservation, d. Fertilizers,
and e. Seeds etc.

Functions of Agri entrepreneurship:

 Undertakes a farming venture
 Assumes risk and
 Earns profits
 Identifies Agriculture business and related opportunities to start business either as a
farmer or distributor.

Managerial Functions: - The entrepreneur performs the managerial functions such as

a. Formulating production plans
b. Overseeing finances
c. dealing with the purchases of raw materials
d. Providing production facilities
e. Organizing sales
Agripreneurship requires more than just the identification of new opportunities. Additional
qualities such as imagination, commitment, decisiveness and self confidence are also
important elements of the entrepreneurial process. Thus the agrirepreneur introduces change
into the market place but must also be aware of the outside pressures for change which are
being experienced as the result of other entrepreneurial activity.

Holistic approach
Entrepreneurship in sustainable agriculture is a key factor which has the potential to
transform the face of rural India, the prime driver of our economy. Cultivating
entrepreneurship amongst rural communities at large is essential. This can be done through
sustainable livelihoods that can be generated in the agriculture sector by providing business
solutions that envelop natural resource management and innovative eco-technological
Principles. The ‘Sustainable Livelihoods’ approach, values wide range of activities people to
make a living, as well as assets and capabilities, they possess. In other words, the root of
human development and economic growth is “livelihoods” rather than “jobs.”
Entrepreneurship has widely been viewed by policy makers and educators alike as the
creative act of an independent businessperson.

Unit-3
Traits of Entrepreneurs
CHARACTERISTICS OF ENTREPRENEUR
Entrepreneur is a key figure in economic progress. He is the person who introduces new
things in the economy. He is considered as the business leader and not as simple owner of
capital. He is a person with telescopic faculty, drive and talent who perceives business
opportunities and promptly seizes them for exploitation. M.M.P. Akhouri, formerly
Executive Director, National Institute for Entrepreneurship and Small Business Development
(NIESBUD), New Delhi, describes entrepreneur “as a character who combines
innovativeness, readiness to take risk, sensing opportunities, identifying and mobilizing
potential resources, concerns for excellence and who is persistent in achieving the goal.” To
be successful, an entrepreneur should have the following characteristic features.
1. Need to achieve: Entrepreneurs have got strong desire to achieve higher goals. Their inner
self motivates their behaviour towards high achievement: most of the people dream of
success but do not take any action towards achieving these dreams. Entrepreneurs with high
n-Ach factor act continuously to achieve the goal and make their dreams come true. For
them, winning is achievement.
2. Independence: Most of the entrepreneurs start on their own because they dislike to work
for others. They prefer to be their own boss and want to be responsible for their own
decisions.
3. Risk-bearing: Entrepreneurs are the persons who take decisions under uncertainty and
thus they are willing to take risk, but they never gamble with the results. They choose
moderate risk rather than play wild gamble. They, therefore, undertake calculated risk which
is high enough to be exciting, but with a fairly reasonable chance to win.
4. Locus of control: According to Rotter’s locus of control theory, an individual perceives
the outcome of an event as being either within or beyond his personal control. Entrepreneurs
believe in their own ability to control the consequences of their endeavour by influencing
their socio-economic environment rather than leave everything to luck.
5. Perseverance: Entrepreneur has got the quality of sticking to job he decides to undertake.
Once committed to a specific goal and course of action, entrepreneurs become absorbed to it.
They personally solve the problems that come across their way while setting up the project.
They also work sincerely until the whole project is successfully implemented.
6. Positive self-concept: Entrepreneurs are always positive in their action. Being an achiever,
he directs his fantasies and dreams towards achievement of worthwhile goals and sets
extraordinary standard of excellence in what he is doing. This is based upon his awareness of
SWOT analysis, i.e. his strengths, weaknesses, opportunities and threats. He utilizes his
positive knowledge to support his thinking. He never exhibits any negative attitude.
7. Ability to find and explore opportunities: Entrepreneurs are always alert to
opportunities. They are very much quick to see and grab opportunities. They exhibit an
innovative turn of mind and convert the problems into viable opportunities. They plan
intellectually and anticipate carefully how to achieve their goals in realizing an opportunity.
8. Hope of success: Hope of success is a significant quality of entrepreneurial personality.
Entrepreneurs set their goals with a hope of success rather than fear of failure. This is because
they set their goals on the basis of facts and their ability to maneuver them to their advantage.
9. Flexibility: Most of the successful entrepreneurs measure the pros and cons of a decision
and tend to change if the situation demands. They never feel reluctant to revise their
decisions. They are the persons with open mind without rigidity.
10. Analytical ability of mind: Entrepreneurs are unaffected by personal likes and dislikes.
They stand beyond these types of prejudices as they are realistic in their approach. At the
time of their need they select experts rather than friends and relatives to assist them. They
usually avoid emotional and sensitive attitude towards their business or problem.
11. Sense of efficacy: Entrepreneurs are always oriented towards action for accomplishment
of their goals. Being confident of their abilities, they find themselves as problem solvers
rather than problem avoiders. They chalk out their goals for future and make planning to
achieve them.
12. Openness to feedback and learning from experience: Successful entrepreneurs like to
have immediate feedback of their performance. They modify their plans on the basis of the
feedback they receive from the environment around them. They learn from their experience
and never get discouraged having received unfavorable information. On the contrary, they are
stimulated by unfavorable information to involve themselves sincerely in their own tasks to
reach their desired goals.
13. Confronting uncertainty: Successful entrepreneurs are always optimistic and take every
odd as the opportunity. They maneuver their environment in such a way that the works get
accomplished rationally. Thus, they win by the application of their extraordinary insight and
skill.
14. Interpersonal skills: Entrepreneurs are always comfortable while dealing with people at
all levels. They interact with raw material suppliers, customers, bankers, etc. for different
activities. As successful entrepreneurs, they should be persons who like working with others
possessing the much needed quality of interpersonal skill to deal with people.
15. Need to influence others: Once the entrepreneurs set their goals, they have to play the
roles of manager too. For influencing others (n Power), a low need to establish emotional
relationship (low n Affiliation), and a high need to discipline one’s own self (to
inhibit over expression of their personality) are essential.
16. Stress takers: Entrepreneurs are capable of working for long hours and solving different
complexities at the same time. As the captain of an industry or an enterprise, an entrepreneur
faces a number of problems and in right moment he takes right decisions which may involve
physical as well as mental stress. He can face these challenges if he has the capability to work
for long hours and keep himself cool under monotony.
17. Time orientation: Entrepreneurs anticipate future trends basing upon their past
experience and exposure. They stick to the time pragmatically while doing their jobs.
18. Innovators: Successful entrepreneurs are innovators. They constantly put their efforts in
introducing new products, new method of production, opening new markets and recognizing
the enterprise.
19. Business communication skill: In order to motivate others in the business entrepreneurs
must possess good communication skill. Both written and oral communication skills are
necessary for the entrepreneurs for running enterprise efficiently.
20. Telescopic faculty: Successful entrepreneurs always tend to think ahead. They have got
telescopic faculties which make them think for the future. Future orientation makes them
quite alert to the changing conditions of the time and they tend to produce goods and
commodities as per the changing demands.
21. Leadership: Entrepreneurs should possess the quality of leadership. Leadership is the
ability to exert interpersonal influence by means of communication towards the achievement
of goals. Entrepreneurs as the leaders should provide the necessary spark to motivation by
guiding, inspiring, assisting and directing the members of the group for achievement of unity
of action, efforts and purpose. Hence, entrepreneurs by their own leadership styles and
behaviour reduce the problems by proper handling of situations. Good administrative work
depends upon effective leadership of the entrepreneur.
22. Business planning: Planning implies deciding in advance what, when and how to do a
thing. Entrepreneurs should be equipped with skill and knowledge to prepare their business
plan. A successful entrepreneur always follows the principles of management while planning
for his business. The planning can act as a bridge between the present position and expected
future shape of the enterprise. It provides a sense of vision to the entrepreneurs to cope with
risky and uncertain situation.
23. Decision making: Decision-making skill is a fundamental characteristic of an
entrepreneur. This implies the function of choosing a particular course of action at every
stage of creation of an enterprise out of several alternative courses for the purpose of
achieving specified goals. Hence, decision making is necessary at all times and mostly at
conditions of uncertainty and risk.
24. Ability to mobilize resources: Entrepreneurs must have the ability to marshal all the
inputs to obtain the end product. They have to mobilize 6Ms, i.e. Man, Money, Material,
Machinery, Market and Method effectively to realize the final product as entrepreneurship is
a function of gap filling and input completing.
25. Self-confidence: Entrepreneurs must have self-confidence to accomplish the task
effectively and efficiently. They must take decisions on their own in uncertain and risky
situation and should stick to it confidently even if there occurs initial setbacks.

TYPES OF ENTREPRENEURS
Following are the classification of entrepreneurs on the basis of common characteristics
A. Clarence Danhof Classification:
Clarence Danhof classifies entrepreneurs into four types.
1. Innovative: Innovative entrepreneur is one who assembles and synthesis information
and introduces new combinations of factors of production. They are characterized by
the smell of innovativeness. These entrepreneurs sense the opportunities for
introduction new ideas new technology, new markets and creating new organizations.
Innovative entrepreneurs are very much helpful for their country because they bring
about a transformation in life style.
2. Imitative/ Adoptive: Imitative entrepreneur is also known as adoptive entrepreneur.
He simply adopts successful innovation introduced by other innovators. These
entrepreneurs imitate the existing entrepreneurs and setup their enterprise in the same
manner. Instead of innovating, they just imitate the technology and methods innovated
by others. These entrepreneurs are very helpful in less developed countries as they
contribute significantly in the growth of enterprise and entrepreneurial culture in these
countries. Further by adopting the technology, which is already tested, they generate
ample employment avenues for the youth and therefore they are treated as agent of
economic development.
3. Fabian: The Fabian entrepreneur is timid and cautious. He imitates other innovations
only if he is certain that failure to do so may damage his business. They are very much
skeptical in their approach in adopting or innovating new technology in their enterprise.
They are not adaptable to the changing environment. They love to remain in the
existing business with the age-old techniques of production. They only adopt the new
technology when they realize that failure to adopt will lead to loss or collapse of the
enterprise.
4. Drone: These entrepreneurs are conservative or orthodox in outlook. They never like
to get rid of their traditional business and traditional machinery or systems of the
business. They always feel comfortable with their old fashioned technology of
production even though the environment as well as the society have undergone
considerable changes. Thus, drone entrepreneurs refuse to adopt the changes. They are
laggards as they continue to operate in their traditional way and resist changes. His
entrepreneurial activity may be restricted to just one or two innovations. They refuse to
adopt changes in production even at the risk of reduced returns.

B. Arthur H. Cole Classification:

Arthur H. Cole classifies entrepreneurs as
 1. Empirical: He is an entrepreneur hardly introduces anything revolutionary and follows
the principle of rule of thumb.
2. Rational: The rational entrepreneur is well informed about the general economic
conditions and introduces changes which look more revolutionary.
3. Cognitive: Cognitive entrepreneur is well informed, draws upon the advice and services
of experts and introduces changes that reflect complete break from the existing scheme
of enterprise.

C. Classification on the Basis of Ownership:

1. Private: Private entrepreneur is motivated by profit and it would not enter those sectors
of the economy in which prospects of monetary rewards are not very bright.
2. Public: In the underdeveloped countries government will take the initiative to share
enterprises.

D. Classification Based on the Scale of Enterprise:

1. Small scale: This classification is especially popular in the underdeveloped countries.
Small entrepreneurs do not posses the necessary talents and resources to initiate large
scale production and introduce revolutionary technological changes.
2. Large scale: In the developed countries most entrepreneurs deal with large scale
enterprises. They posses the financial and necessary enterprise to initiate and introduce
new technical changes. The result is the developed countries are able to sustain and
develop a high level of technical progress.

In recent years, some new classifications have been made regarding entrepreneurs, which are
discussed further.
1. Solo operators: These entrepreneurs prefer to set up their business individually. They
introduce their own capital, intellect and business acumen to run the enterprise successfully
They operate their business mainly in the form of proprietorship type of concern.
2. Active partners: Entrepreneurs of this type jointly put their efforts to build enterprise
pooling together their own resources. They actively participate in managing the daily routine
of the business concern. As such, the business houses or the firms which are managed by the
active partners become more successful in their operation.
3. Inventors: These entrepreneurs primarily involve themselves in Research and
Development (R and D) activities. They are creative in character and feel happy in inventing
new products, technologies and methods of production
4. Challengers: Entrepreneurs of this type take challenges to establish business venture as
mark of achievement. They keep on improving their standard and face boldly the odds and
adversities that come in their way. They use their business acumen and talent to convert the
odds into opportunities thereby making profit. According to them, if there is no challenge in
life, there is no charm in life. Challenges make them bold, and thus, they never hesitate to
plunge themselves into uncertainties for earning profit.
5. Buyers (entrepreneurs): These entrepreneurs explore opportunities to purchase the
existing units which may be seized or are in running condition. If the units they purchase are
sick they turn them around using their experiences, expertise and business acumen. By
purchasing these units they make themselves free from the hassles of building infrastructures
and other facilities.
6. Life timers: These entrepreneurs believe that business is the part and parcel of their life.
They take up the business to reunite successfully as a matter of ego satisfaction. They have a
strong desire for taking personal responsibility. Family enterprises which thrive due to high
personal skill are included under this category.

Unit-4
Stages of establishing enterprises

ESTABLISHMENT OF AN ENTERPRISE
1. IDENTIFICATION OF OPPORTUNITIES :
The product to be produced or service to be provided should be carefully selected. Thus the
idea to select such a product may originate from different sources. The important sources of
business idea are as follows:
a) Market observation: analysis of demand &supply for goods, availability of raw materials,
profit range, likely change in future demand.
b) Consumer survey: taste & preferences of consumers, considerable no of consumers
c) Competing alternative product: No of manufacturers, Degree of competition, to
manufacture either better quality goods at same price or even to provide same quality goods
at a cheaper rate
d) Development in other countries: borrowing business ideas attending trade fairs in
foreign countries through trade delegation sponsored by Chambers of commerce/ government
or collaboration/ joint venture with foreign producer.
e) Product profiles: Various government & non-government agencies prepare & publish
product profiles which can be a basis for business idea generation.
f) Trade fairs and Exhibitions:
g) Government policies: Announcement of concession, grants to manufacture certain
products
h) Research institutes: Many research Institutes like private government help in
borrowing patents from them (private /government) and produce the product
.i) Research & development: In case of big companies , to develop new products, or to
modify existing products.
j) Brain storming sessions: In case of large and multinational companies to come out with
new ideas-by forming groups of employees of different levels and allowing them to
deliberate & suggest some new ideas.
Project feasibility: whether some idea will work or not.
Feasibility study involves an examination of the operations, financial, HR and marketing
aspects of a business on ex ante basis.
Feasibility is a multivariate concept to understand a project has to be viable not only in
technical terms but also in economic and commercial terms too.
Organizations supporting entrepreneurs on feasibility: TCOs like HARDICO, SSIDCs, DICs
and private consulting firms
Market analysis: it is the arena for interaction among buyers and sellers.
From seller’s point of view, marketing analysis is primarily concerned with the aggregate
demand of the proposed product / service in future and the market share expected to be
captured.
Information required for market analysis are:
 • Consumption trends
• Past and present supply and position
• Production possibilities and constraints
• Imports and exports
• Competition
• Cost structure
• Distribution channels and marketing policies in use etc,.
• b) Economic viability: refers to cost benefit analysis to know whether the product
would yield expected rate of return.

2. PROCESSING & SELECTION OF IDEA

a) Technical feasibility: the product chosen should be technically feasible ie., should be
capable of being manufactured using some technology. The proposed project may be
classified on the basis of input analysis, throughputs and outputs.
b) Economic viability: refers to cost benefit analysis to know whether the product would
yield expected rate of return.
c) Financial & managerial considerations: Amount of finance required, sources of finance
to be worked out : financial appraisal has to be done considering the aspects like; investment
outlay and cost of project, means of financing, projected profitability, break-even point, cash
flow of the project etc,. Managerial sources, its availability & its cost.
Ecological analysis: In recent years, environment concerns have assumed a great deal of
significance especially for projects, which have significant ecological implications like power
plants and irrigation projects and environment polluting industries. Points to be considered:
under EA
• Likely damage caused by the project to the environment
• Cost of restoration measures
Business plan: is a blue print of entrepreneurial intentions. It is a written document that
serves as a road map in the entrepreneur’s journey form start-up to project implementation. It
describes all the relevant elements involved in starting a mew business enterprise. Importance
of business plan:
1. It helps the entrepreneur to decide where he wants to go.
2. It helps to determine the viability of the venture.
3. It provides guidance to the entrepreneur in planning realistic goals and targets.
4. It is a prerequisite to obtain finance
Points to be considered while making a business plan:
1. The target audience
2. Business strategy
3. Competition
4. Be realistic
5. Involvement of people for creating the business plan
6. Keep the business plan factual and brief
Out line of a business plan:
1. Introductory page
2. Executive summary
 3. Industry analysis
4. Description of venture
5. Production plan
6. Marketing plan
7. Organization plan
8. Assessment of risk
9. Financial plan
10. appendix
d) Final selection: products which pass through all the tests. Be technically feasible,
commercially viable are considered for final selection. Some points may be allotted
for each test and that product which gains highest points may be selected for production.

3. DECIDING THE LOCATION

Many factors influence the location of the unit.
1) Availability of raw materials.
2) Market accessibility
3) Human resource
4) Supply of power
5) Fuel & water
6)Transportation
7) Government policies-subsidies &incentives.
8) Climate.
9) Scope for further expansion.

4. DECIDING THE FORM OF OWNERSHIP

Factors affecting ownership forms are:
1) Ease of formation-sole proprietorship is easy to form.
2) Capital required-small business less capital required then sole proprietorship is applied.
If the business requires high capital joint venture is applied
3) Extent of liability- unlimited liability in case of sole proprietorship &partnership, limited
liability in case of joint stock company and cooperatives.
4) Control- the complete control lies with the proprietor in case of sole proprietor. In case
of partnership control is as per partnership deal. Incase of joint companies &cooperatives,
control is different from ownership.
5) Continuity of business: joint stock companies enjoy continuity of business because
ownership is different from management.
6) Flexibility: sole proprietorship is more flexible
7) Maintenance of secrecy: secrecy can be maintained by sole proprietorship
8) Government regulations: Sole proprietorship is subject to minimum regulations &
interference. Partnership comes under partnership act, societies under cooperative societies
act &companies under company act.
9) Taxliability: the tax structure of the government is to be considered to decide the type of
organization
5. REGISTRATION & LICENSING:
it is necessary in case of starting industrial units.
Certificate of registration will be issued in two stages.
1)Provisional Registration Certificate:
It is the initial registration to starting a small scale industry. It is issued for first one
year which can be extended for another six months.
1) Provisional Registration Certificate is important:
• To get an industrial plot or industrial shed.
• To avail bank loan.
• To get license from local administration.
• To get water & power supply.
• For procuring plant machinery & rawmaterials.
• To get NO C from P C board.
2) Permanent Registration Certificate:
• It is issued when all the formality of establishing the unit is over.
This certificate will be useful for :
a) To apply for subsidies & incentives
b) To avail bank loan
c) To get income tax & sales tax concession
d) To avoid central excise duty concession

6. SPECIFIC CLEARANCES
1) Conversion of agricultural land: through an application to concerned local authority.
2) Urban land ceiling clearance: taking permission to hold vacant land beyond the limit
through special permission.
3) Building plan approval: to be approved by local authority.
4) Factories Act: obtain permission from authorities ex-permission from inspectorate
of factories to start factory.
5) Trade license: from local authority ex-certificate from local municipality for a hotel
industry.
6) Pollution control board clearance: getting NOC from P C board.
7) Sales tax registration: from the state &centre authorities to sell & purchase goods.
8) Central Excise Registration: to get registration from central excise authorities if the
goods are excisable.
9) Bureau of Indian Standard(BIS) certificate:
10) Fruit product order 1955 : License through ministry of food processing
11) Food Adulteration Act: that can get from local authorities in case of sale of food &
food articles.
12) Power Loom Registration:
13) Drugs &cosmetics license: incase of manufacturing drugs &cosmetics.
14) Approval for Hotels: from department of tourism in case of big hotels.
15) 100% Export oriented units: to get permission from the concerned expert council

7. ASSEMBLING NECESSARY RESOURCES

1) Finance- getting finance from Banks/financial institutions
 2) Building- to be constructed in case no industrial shade is allotted.
3) Plant &machinery-placing purchasing order for plant & machinery.
4) Raw materials-get the raw materials through private party or through government.
5) Human resources- Appointment of workers & management personnel

Family Business
• Major portion of capital is contributed by family.
• Family members take major decisions & they occupy decision making post.
• Number of generations involved in management & ownership.
• Management is controlled by direct successor of founders.
• Intention to maintain family involvement
Advantages
• It imparts training to younger ones.
• Family & non-family members are treated alike.
• Orientation given by old generation to new generation.
• Can overcome finance difficulties .
• It functions less in a bureaucratic manner.
• Personal dealing with employees & customers.
Disadvantage
• Role of family members are not clearly defined and therefore there may be confusing
structure.
• There may be battle among members for succession.
• Younger generation may not be worthy of position.
• Finance may be drained by some selfish members

PROJECT MANAGEMENT
Project management is the discipline of planning, organizing, securing and managing
resources to bring about the successful completion of specific project goals and objectives
(Wikipedia, 2009)
Project management is the science (and art) of organizing the components of a
project, whether the project is development of a new product, the launch of a new service, a
marketing campaign, or a wedding.

Project manager
Project managers are the point people responsible for coordinating activities of project
team members to achieve project objectives. Whereas project team members tend to have
narrowly focused skills and expertise, and are primarily concerned with day-to-day functions,
Project Managers focus equal attention on near- and long-term activities.

A true Project Manager is responsible for effectively and efficiently:

 Defining the scope of projects;
 Developing project schedules;
 Estimating project costs;
 Gaining stakeholders’ approvals;
 Measuring project progress;
 Controlling project changes;
 Closing out projects.

Project Management Steps

1. Understand the context of the project
a. The organization ultimately gains from the successful completion of the project.
b. Without a clear context a project can be difficult to complete successfully.
2. Identify stakeholders and sponsors
3. Develop an objectives document
a. Fundamental, top-level, documentation for the project
b. Defines the scope of the project
c. Provides the definition of success for the project
d. Contents are public and agreed upon by all involved parties
e. Key components
i. Project goal statement
(1) Identifies constraints
(2) Answers questions of What? When? Why? Who and Where?, but not How?
ii. List of project deliverables
(1) Tangible
(2) Measurable
(3) Meets all valid expectations of stakeholders
(4) List only essential deliverables, not “nice to have” items
iii. Enough information to generate milestones and to assign roles and responsibilities
f. Everyone (stakeholders and, in effect, sponsors) signs off on the document
4. Planning the project (6 steps)
a. Define objectives of the project
b. Identify the work and how to break it down into smaller tasks
c. Estimate time and cost for doing the tasks
d. Sequence and schedule the tasks, determine the critical path
e. Optimize the assigning of resources to the tasks
f. Review for risks and set the baseline plan
5. Obtain permission to proceed
6. Implement the project plan
a. Three step control process of monitoring, analyzing and correcting is repeated
over and over during the project’s life
b. Monitor
c. Analyze
d. Correct
e. Project reporting
i. Expect reports
ii. Make use of milestones
7. Evaluate project
a. Make this part of the project plan
 b. Learn from experiences
c. Evaluate at end of each phase, not just at the end of the project
d. Product project closure report
e. Give feedback to team members
f. Formal hand-over to support group
g. Celebrate

Project appraisal
Project appraisal is the process of examining the various
d i m e n s i o n s o f a p r o j e c t b e i t T e c h n i c a l , financial, social, Environment etc and
providing an assessment of the projects likelihood for success andits viability. It is the
process of assessing and questioning proposals before resources are committed. Itevaluates a
project’s ability to meet its stated objectives and to provide long term Economic growth in
thelarger framework of local and National needs ( renewal.net overview).

Project appraisal is a generic term that refers to the process of assessing, in a

structured way, the case for proceeding with a project or proposal. In short, project appraisal
is the effort of calculating a project's viability

There are two types of project appraisals;

•Economic appraisal; which consists of Cost-benefit analysis, Cost-effectiveness
analysis andScoring and weighting
•Multi-criteria analysis
An example of where an economic appraisal is that written for the World Bank ( Devarajan,
1995) which cites three areas critical for proper project appraisal. These are;
(1). Counterfactual private sector supply response. Any type of cost-benefit analysis requires
the project evaluator to specify the counterfactual: what would the world have
looked like in the absence of the project?
(2). Fiscal impact. Applying the private sector counterfactual would lead the Bank to
undertake projects with a reasonable case for public intervention, such as basic infrastructure,
primary education, and rural health.
(3). Lending. Project-specific appraisal can at best assess only the rate of return and the
acceptability of the project being appraised

Roles of project appraisal

Project appraisal helps a partnership’s management to;
•Be consistent and objective in choosing projects
•Make sure its programme benefits all sections of the community, including
those from ethnic groups who have been left out in the past
•Provide documentation to meet financial and audit requirements and to explain decisions
to local people.
1. Appraisal justifies spending money on a project.
Appraisal asks fundamental questions about whether funding is required and whether a
project offers good value for money. It can give confidence that public money is being put
to good use, and help identify other funding to support a project. Getting it right may help
a partnership make its resources go further in meeting local need.
2. Appraisal is an important decision making tool.
 Appraisal involves the comprehensive analysis of a wide range of data, judgements and
assumptions, all of which need adequate evidence. This helps ensure that projects selected
for funding:
•Will help a partnership achieve its objectives for its area
•Are deliverable
•Involve local people and take proper account of the needs of people from ethnic
minorities and other minority groups
•Are sustainable
•Have sensible ways of managing risk.
3. Appraisal lays the foundations for delivery
Appraisal helps ensure that projects will be properly managed, by ensuring appropriate
financial and monitoring systems are in place, that there are contingency plans
to deal with risks and setting milestones against which progress can be judged

Unit-5
Micro enterprises
Micro enterprise
The term “micro-enterprise” refers to a very small business that produces goods or services
for cash income (Allerdice and Rogers, 2000)
Micro-enterprise can be identified on the basis of a number of characteristics. For
example, they usually operate in the informal sector of the economy, require as less than ten
(CBS et al, 1999).
Micro-enterprises are often home based (Karekezi and Majoro, 2002) and as a result
the employees are usually family or household members working on a casual basis.
Opportunity
The opportunity in the small scale sector are enormous due to the following factors:
1. Less capital intensive
2. Extensive promotion and support by government
3. Reservation for exclusive manufacture by small scale sector
4. Funding-finance & subsidies,
5. Machinery procurement
6. Raw material procurement
7. Manpower training
8. Technical & managerial skills
9. Tooling & testing support
10. Reservation for exclusive purchase by government
11. Export promotion

Through micro enterprises it is possible to generate wealth and large internal market
Micro-enterprises need:
 Finance
 Knowledge, training & support
 Quality control, packaging
 Buying, selling & logistics
 Risk sharing
Rural micro enterprises are wealth creators. These include:
 Agriculture
 Animal husbandary
 Agricultural processing
 Industry and handicrafts
 IT based services
 Trade and commerce

Definitions of Micro, Small & Medium Enterprises

In accordance with the provisions of Micro, Small & Medium Enterprises Development
(MSMED) Act, 2006, the Micro, Small and Medium Enterprises (MSME) are classified into
two Classes:

(a) Manufacturing Enterprises: The enterprises engaged in the manufacture or production

of goods pertaining to any industry specified in the first schedule to the industries
(Development and regulation) Act, 1951). The Manufacturing Enterprise are defined in
terms of investment in Plant & Machinery.
(b) Service Enterprises: The enterprises engaged in providing or rendering of services
defined in terms of investment and are in equipment.

Manufacturing Sector
Enterprises Investment in Plant & Machinery
Micro Enterprises Does not exceed twenty five lakh rupees.
Small Enterprises More than twenty five lakh rupees but does not
exceed five crore rupees.
Medium Enterprises More than five crore rupees but does not exceed
ten crore rupees.
Service Sector
Enterprises Investment in Equipments
Micro Enterprises Does not exceed ten lakh rupees.
Small Enterprises More than ten lakh rupees but does not exceed
two crore rupees.
Medium Enterprises More than two crore rupees but does not exceed
five core rupees.
Agro processing
Agro processing could be defined as set of techno economic activities carried out for
conservation and handling of agricultural produce and to make it usable as food, feed, fibre,
fuel or industrial raw material.

Agribusiness
ASF defines Agribusiness as “ all enterprises that assemble, process and transform raw
agricultural commodities into final products for distribution to local and international
consumers”. Following sub sectors are considered under agribusiness:
 Fresh horticulture (all fruits & vegetables-processed to increase shelf life)
 Floriculture (ornamental) products.
 Processed dairy products
 Processed meats & livestock products
 High value agricultural products suited to small farms (including high quality wood,
vanilla, black pepper, saffron and other spices)

Swot Analysis of Agro-Processing Industry Infrastructure in India

Strengths
1. Round the year availability of raw materials.
2. Social acceptability of agro-processing as important area and support from the central
government.
3. Vast network of manufacturing facilities all over the country.
4. Vast domestic market.

Weaknesses
1. High requirement of working capital
2. Low availability of new reliable and better accuracy instruments and equipments
3. Inadequate automation w. r. t. Information management.
4. Remuneration less attractive for talent in comparison to contemporary disciplines.
5. Inadequately developed linkages between R&D labs and industry.

Opportunities
1. Large crop and material base in the country due to agro-ecological variability offers vast
potential for agro processing activities.
2. Integration of developments in contemporary technologies such as electronics, material
science, computer, bio-technology etc. offer vast scope for rapid improvement and
progress.
3. Opening of global markets may lead to export of our developed technologies and facilitate
generation of additional income and employment opportunities.

Threats
1. Competition from global players
2. Loss of trained manpower to other industries and other professions due to better working
conditions prevailing there may lead to further shortage of manpower.
3. Rapid developments in contemporary and requirements of the industry may lead to fast
obsolescence.

Kind of micro-units
 Fruit and vegetables- beverages, juices, concentrates, pulps, slices, frozen & dehydrated
products, wine, potato wafers/chips etc
 Fisheries-frozen and canned products mainly in fresh form
 Meat & poultry- frozen and packed mainly in fresh form
 Milk and dairy- whole milk powder, skimmed milk powder, condensed milk powder, ice
cream, butter and ghee
 Grain and cereals- flour, bakeries, biscuits, starch, glucose, cornflakes, malted foods,
beer, malt extract, grain based alcohol
 Consumer industry-chocalates, confectioneries, soft/aerated beverages/drinks
 KVIC: The Khadi and Village Industries Commission (KVIC) is a statutory body
formed by the Government of India, under the Act of Parliament, 'Khadi and Village
Industries Commission Act of 1956'. It is an apex organization under Ministry of Micro,
Small and Medium Enterprises (Govt. of India), with regard to khadi and village
industries within India, which seeks to - "plan, promote, facilitate, organise and assist in
the establishment and development of khadi and village industries in the rural areas in
coordination with other agencies engaged in rural development wherever necessary. In
April 1957, it took over the work of former All India Khadi and Village Industries Board.
The KVIC has broadly re-grouped various village Industries under seven heads for the
purpose of implementation of its programmes. The list of industries including the newly
added ones is as under.
 Mineral Based Industry: Pottery,Lime
 Agro Based & Food Processing Industry (ABFPI): Pulses & Cereals Processing
Industry, Gur & Khandsari Industry, Palmgur Industry, Fruit & Vegetable Processing
Industry, Village Oil Industry.
 Polymer & Chemical Based Industry (PCBI): Leather Industry, Non Edible Oils &
Soap Industry, Cottage Match Industry and Plastic Industry
 Forest Based Industry (FBI): Medicinal Plants Industry,Bee Keeping
Industry,Minor Forest Based Industries
  Hand Made Paper & Fibre Industry (HMPFI): Hand Made Paper Industry, Fibre
Industry
 Rural Engineering & Bio Technology Industry (REBTI): Non Conventional
Energy, Carpentry & Blacksmithy, Electronics
 SEP/Service Industry:V. I. Co-ordination

MICRO-FINANCE
"Microfinance is the supply of loans, savings, and other basic financial services to the poor."
“Microcredit, or microfinance, is banking the unbankables, bringing credit, savings
and other essential financial services within the reach of.millions of people who are too poor
to be served by regular banks, in most cases because they are unable to offer sufficient
collateral. In general, banks are for people with money, not for people without.” (Gert van
Maanen, Microcredit: Sound Business or Development Instrument, Oikocredit , 2004)
Microfinance is the provision of a broad range of financial services such as – deposits,
loans, payment services, money transfers and insurance products – to the poor and low-
income households, for their microenterprises and small businesses, to enable them to raise
their income levels and improve their living standards.

Sources of micro-finance:
Microfinance lending sources, which differ in terms of where their funds are sourced from,
and how the money is governed.
Associations: An association is formed by the poor in the target community to
offer microfinance services (micro savings, microcredit, micro-insurance, etc.) to themselves.
The association, which can form on the basis of gender, religion, or political and cultural
orientation of its members, then gathers capital and intermediates between banks, MFIs and
its members.
Example: Self Help Groups, SHGs (India)
Bank Guarantees: A donor or government agency guarantees microloans made by a
microfinance/commercial bank to an individual or group of borrowers. Compulsory deposits
by borrowers in such banks are also included in this model.
Examples: AfriCap Microfinance Fund (Mauritius), Bellwether Microfinance Fund (India),
Latin America Bridge Fund
Community Banking/ Grameen Bank/ Village Banking: Community Banks/Village Banks
are formal versions of ‘associations’ and are created by members of a target community who
wish to improve their living standards and to generate employment. By offering microfinance
services, these banks seek to develop their communities.
Guarantees are provided by social collateral (peer-pressure) as services are distributed
through 5-member groups where each member’s eligibility for loans is based on his/her
peer’s performance.
Examples: Grameen Bank
Cooperatives: Cooperatives are very much like ‘associations and Community Banks’ except
that their ownership structure does not include the poor. A group of middle or upper class
individuals may form a co-op to offer microfinance services to the poor.
Examples: Co-operative Bank
Credit Unions : In a credit union, members of a target community gather their money and
make loans to one another at low interest rates. Compared to community banks, credit unions
are smaller and non-profit oriented, charging interest rates that merely allow sustainability
(read 10 determinants of interest rates in microfinance).
Example: Vancity Credit Union (Canada)
Non-Governmental Organizations (NGOs): Unlike community-based models, NGOs are
‘external organizations’ and their activities range from offering microfinance services (loans,
insurance, savings, etc.) to improving credit rating of the poor, training, education and
research. NGOs may also act as intermediaries between the poor and donor agencies (UN,
ADB, World Bank) and operate locally, as well as globally (through a physical or online
presence).
For-profit Banks: Commercial Banks, as well as specialized Microfinance Banks offer
various financial services to the poor but the main purpose may be to secure a high return on
investment. Unlike other models, the aim is social development as well as financial progress,
beyond institutional sustainability. Read about a bank that exploited the poor under the guise
of microfinance. Examples: Bank Compartamos (Mexico)
ROSCAs Rotating Savings and Credit Associations (ROSCAs): ROSCAs are small
groups, typically composed of women, where each member makes ‘regular cyclical
contributions into a common fund’, which is given entirely to one member at the start of each
cycle (weekly, monthly, quarterly). The benefit of this model is the matching of a client’s
cash flows with the loan, the ability to structure the deal without interest rates, and the
absence of over-head costs

SMALL INDUSTRIES DEVELOPMENT ORGANIZATION (SIDO)

Small industries are back bone of any nation. Development of SSI means bringing all way
prosperous and growth of the nation. This is so as it directly or indirectly generate wealth,
improves the economic condition of people by generate employment, contributes to GDP and
so on. Thus realizing the importance of this sector, government has come forward with
extending many a facilities and supports for the development of SSI in the country. SIDO is
one amongst them. International Perspective Planning Team in 1955 made its
recommendations and the Government of India set up following institutions for the
development of village and small industries.
 Central Small Industry Organisation (CSIO)
 National Small Industry Corporation (NSIC)
 Small Industry Extension Training Institute (SIETI)
 Khadi and Village Industry Commission (KVIC)
At the heart of all agencies dealing with the development of small industry is the
CSIO—now renamed as Small Industries Development Organisation (SIDO), SIDO has
grown into vast organization with:
 Network of more than 33 SISIs;
 Branch Service Institutions (37);
 Extension Centre’s (37)
 Regional Testing Centre’s
 Process-cum-product Development Centre’s
 Training centers
 Production Centre’s
 Field Testing Stations
SIDO is as apex body and nodal agency for formulating, policy-making, coordinating
and monitoring agency for the development of small scale entrepreneurs.
It is headed by Additional Secretary and the Development Commissioner, small Scale
Industry; who maintains a close liaison with government, financial institutions and other
agencies which are involved in the promotion and development of small scale units.
SIDO is the nodal agency that advises the Ministry of Industry (and other Ministries) in
formulating policies and programmers for the development of SSIs.
It also overseas the ‘package of services’ rendered by the SISIs at field level and provides
comprehensive range of consultancy services and technical, managerial and marketing
assistance to SSI units over the years, it has sun its role evolve into an agency for advocacy,
hand holding and facilitation for the small industries sector.
It has over 60 offices and 21 autonomous bodies under its management. SIDO provides a
wide spectrum of services to the small industries sector like testing, training for
entrepreneur’s preparation of projects and product profiles, technical and managerial
consultancy, export assistance, etc.
SIDO provides economic information services and advises to the government in policy
formulation for the promotion and development of SSIs.

Functions of SIDO
 To formulate policies regarding the promotion and development of SSI at national
level.
 The implement those plans, programmers and policies of the government in respect of
industrial development of the country.
 To coordinate the activities of all departments, institutions and agencies involved in
promoting the SSI.
 To render all way support and encourage the entrepreneurs to set up and sort out the
hurdles.
 To conduct regular and ad hoc training courses through SISI’s, Branch SISI’s and
extension/production centers;
 To organize EDPs, motivational campaigns etc. for rural artisans, educated
unemployed, women entrepreneurs, and physically handicapped persons;
 To secure reservations of certain products to be manufactured only by SSI’s.
 To assist and encourage entrepreneurs to set up industrial units in rural and
industrially backward areas and industrially backward areas;
 To estimate the requirements of raw materials of SSI units and to arrange their
supplies.

Other than this, SIDO conducts the following types of management courses.
 Training in Technical grades
 Training in Management Disciplines.
 Training of SIDO Officers.
SIDO keeps its officers abreast of the latest developments in their respective fields of
specialization. Global trends and national developments have accentuated SIDO’s role as a
catalyst of growth of small enterprises in the country
Unit-6
Marketing for enterprises- Concept, Planning for marketing, target marketing,
Competition, market survey and strategies, Product sales and promotion

Introduction
The objective of all business enterprises is to satisfy the needs and wants of the society.
Marketing is, therefore, a basic function of all business firms. When a salesperson sells
washing machines, a doctor treats a patient or a Government asks people to take their
children for getting polio drops, each is marketing something to the targets. Traditionally,
small firm owners did not give as much importance to marketing as to other functions such as
accountancy, production and selling. Modern business concerns lay emphasis on ‘selling
satisfaction’ and not merely on selling products. The activities have to be coordinated so as to
develop the marketing mix, which provides maximum satisfaction to the customers. That is
why marketing research and product planning occupy an important role in marketing.

Importance of marketing in small business:

Since marketing is consumer oriented, it has a positive impact on the business firms. It
enables the entrepreneurs to improve the quality of their goods and services. Marketing helps
in improving the standard of living of the people by offering a wide variety of goods and
services with freedom of choice, and by treating the customer as the most important person.
Marketing generates employment both in production and in distribution areas. Since a
business firm generates revenue and earns profits by carrying out marketing functions, it will
engage in exploiting more and more economic resources of the country to earn more profits.
Marketing makes or breaks a small enterprise. An enterprise grows, stagnates, or perishes
with the success or failure, as the case may be, of marketing. “Nirma” is an appropriate
example of the success of small scale enterprise.

Definitions of marketing
1. The chartered Institute of marketing define marketing as’ management process
responsible for identifying, anticipating and satisfying customer requirements
profitably’
2. P.Tailor defines ‘marketing is not about providing products or services it is
essentialy about providing changing benefits to the changing needs and demands of
the customer’
3. Philip Kotler ‘satisfying needs and wants through an exchange process’
Therefore marketing consists of strategies and tactics used to identify, create and maintain
satisfying relationship with the customers that result in value.
A market is defined as any place where the seekers of a particular good or service can meet
with the buyer, where there is a potential for a transaction to take place.

Marketing as a concept
concept is a customer orientation, customer is the king of market ( said by mahatma Gandhi).
The organizations have to bring the goods to the market to satisfy their needs without any
obligation.
The marketing concept involves:
1. customer orientation
2. competition orientation
3. the ability to respond to the environmental changes(changes in consumer needs,
environment, govt policy, technology)
Marketing (company) orientation towards the market
it involves six dimensional approaches:
1. consumer orientation
2. An integrated approach to exploiting market: integrate all marketing mix, e.g is maggi
noodles found success, whereas the Lipton with the same product failed.
3. Futuristic approach: money spent is not an expenditure but investment for long term.
4. Highly developed marketing systems: they are market information system like customer
feedback, complaint managements, customer relationship management (CRM).Helps
enhancing their effectiveness.
5. Marketing culture in the organization: the strucure of orgn from top to bottom aimed at
market orientation. E.g hospitality industries – Windsor and Manner promised to pay penalty
incase customer not satisfied.
6. Speed in responding customers’ problems: fast relief and toll free communication. Eg LG,
ONIDA,ICICI,JDFC etc.

Marketing and selling orientation:

Selling is sales promotion with the intention to close the sales to increase the profit of the
orgn.
Marketing is integration of all marketing plan concentrating on customer and selling to
maximize the profit.
Successful marketers think about tomorrow and not just today.
Difference between marketing and selling
Marketing selling
 focuses on customers’ needs sellers needs
 Begins before production after production
 Continues after sale comes to an end with sale
 Broader meaning narrow meaning
 Profit through customer satisfaction through sales
 Let the seller be aware buyer aware
 Long term prospective short term prospective
 Customer first then product product then customer
Marketing management; is an important functional area of business management where
planning, organizing, directing, coordinating, motivating and controlling the marketing
activities under customer oriented marketing activities
Market segmentation
A market consists of large number of individual customers who differ in terms of their needs,
preferences and buying capacity. Therefore, it becomes necessary to divide the total market
into different segments or homogeneous customer groups. Such division is called market
segmentation. They may have uniformity in employment patterns, educational qualifications,
economic status, preferences, etc. Market segmentation enables the entrepreneur to match his
marketing efforts to the
requirements of the target market. Instead of wasting his efforts in trying to sell to all types of
customers, a small scale unit can focus its efforts on the segment most appropriate to its
market.

A market can be segmented on the basis of the following variables:

1. Geographic Segmentation: The characteristics of customers often differ across nations,
states, regions cities or neighborhoods. The entrepreneur can decide to operate in one or a
few or all the geographic areas, but pay attention to differences in geographic needs and
preferences.
2. Demographic Segmentation: Variables such as age, sex, family size, income, occupation,
education, religion, race and nationality are widely used for market segmentation.
3. Psychological variables: Personality, life style, social class, etc. can also be used for
market segmentation. For example, some products like pens, watches, cosmetics and
briefcases are designed differently for common men and status seekers.
4. Behavioral Segmentation: Buyers are divided into groups on the basis of their knowledge,
attitude, use or response to a product.

Marketing mix
In order to cater to the requirements of identified market segment, an entrepreneur has to
develop an appropriate marketing mix. Marketing mix is a systematic and combination of the
four inputs which constitute the core of a company’s marketing system – the product, the price
structure, the promotional activities and the place ordistribution system”. These are popularly
known as “Four P’s” of marketing. An appropriate combination of these four variables will
help to influence demand. The problem facing small firms is that they sometimes do not feel
themselves capable of controlling each of the four variables in order to influence the demand.

Target marketing
Consumers can be divided into so many different consumer groups. Based on which
consumer groups they lie in, the consumers will have different needs. Also they will find
different things that appeal to them. So before you launch a marketing campaign, you need
to identify which set of people does your business cater to?
What we mean by this is, that you need to know who your customers are? What kind of
life do they live? Who influences their buying decision? What kinds of media are they
exposed to? How much purchasing power do they have? Etc.
Knowing this information, you can target your marketing campaign to appeal especially
to this group of customers you have chosen.

Your marketing strategy will fail if you try to be everything to everybody. When
you make a marketing strategy you have to choose only one group of people and design
your marketing strategy so that it appeals to the group you have selected.
If you have many groups of people to choose from, choose only the group of people
that you can best cater too and will offer you the best opportunities to grow.
 If you come up with a marketing strategy to appeal to more than one target group of
customers, your strategy will not be effective. Your sales will be eaten away by specialist
products or specialist marketing strategies.
The thing to understand is that the first step to making a marketing strategy is to
select the “target market” for whom the marketing campaign is to be designed.
There are three targeting strategies an organization can adopt:-

1. Undifferentiated Marketing: - It is a standardization strategy option, where the firm offers

the same product, uses the same advertising, promotional, distribution, publicity, public
relations and pricing strategies to different market segment. E.g.: - Pepsi and Coca-Cola.

2. Differentiated Marketing Strategy: - It contradicts the Undifferentiated Marketing Strategy

where the firm develops different products / services to suit the need of varying groups which
increases their marketing and operational expenditures. E.g.: - Airline Industry.

3. Concentrated Marketing: - This is a “focused” approach of the firm to target only one
particular segment and create a niche market of that particular segment. In other words
instead of targeting a small share of a large group, the company aims at a large share of a
small group.

Market survey:
A market survey is an objective and systematic collection, recording, analysis and
interpretation of data about existing or potential markets for a product/service. This definition
will be better understood by looking at the objectives of a market survey. During a market
survey, one needs to focus on:
a) Size of the market and the anticipated market share in terms of volume and value
b) Pattern of demand—seasonal or fluctuating in time (in a month, day, etc)
c) Market structure

Market Survey Tools, Preparation of Schedule and Techniques of Data Collection

Market survey is a valuable tool to help minimize risks and increase the probability of
success. However, that doesn’t mean it is a sure-shot way to eliminate risk and guarantee
complete success. You should undertake market assessment with a survey before you finalize
marketing plans for your product or service. This chapter aims to explain what a market
survey is and how to conduct it. Markets are changing rapidly, becoming complex and
competitive. It is difficult to keep pace with the rapidly changing demand and supply patterns
as an entrepreneur is unable to respond quickly to a new environment. He needs better market
understanding and a market survey puts him in contact with the market. A systematic use of
this tool can reduce risks in decision-making.
 Market survey is a tool used to gather information about existing or potential
customers in a certain market or population. Researchers select a sample of customers
from the population. The information from the survey is then used to assess attitudes and
beliefs, and in turn predict market behavior, such as buying intention

Through a market survey we can obtain information in the following areas:

 size of market
 pattern of demand
 buying habits and motives
 past and present trends for this or other products

Process of conducting a market survey

A systematic 5-point process is involved in a market survey:
1. Defining objectives and specific information needed:
a) Identifying source to obtain information
b) Assessing time and cost for the study
c) Working methodology and action plan
2. Selecting a sample size by determining whom to contact and when
3. Preparing questionnaires for the survey
4. Collecting data and analysing it
5. Preparing a report, based on analysed data

Schedule for market survey

A market survey is not restricted to collecting information on the market for a product, but
also about marketing infrastructure and existing market conditions. Designing a market
survey schedule could fetch a lot of data. Questions may be designed on these areas:
a) Existence of competitors, their products and marketing strategies
b) Information on all consumer groups
c) Information on competing products/ similar products
d) Attitude of existing/potential consumers, including buying preferences,
behaviour etc.

Marketing problems of small scale units

All types of business enterprises face marketing problems, but these problems are more
severe in case of small scale units because of lack of knowledge, adequate funds and lack of
experience. Some of the marketing problems commonly faced by the small scale
entrepreneurs in India are:
a. Competition from large scale sector: Because of scarcity of resources, small entrepreneurs
usually use inferior technology. As a result their products are not standardized. The
obsolete technology used by them gets translated into inferior quality of products.
b. Lack of marketing knowledge: Most of the small scale entrepreneurs are not highly
educated or professionally qualified to have knowledge of marketing concept and strategy.
Their lack of expertise further inhibits their understanding of the prevailing trends in the
market.
c. Lack of sales promotion: Small units lack the resources and knowledge for effective sales
promotion. Large scale units mostly have well-known branded names.
d. Weak bargaining power: At the time of purchase of inputs, large scale entrepreneurs
manage to get huge discounts and credit. Such facilities are not available to small units.
e. Product quality: It is costly and difficult for a small unit to have quality testing and
evaluating equipment.
f. Credit sales: The small scale enterprise is invariably called upon to sell on credit. However,
when it comes to purchasing inputs, they are denied liberal credit facilities. As a result,
they have to borrow excessive working capital than actually needed. This increases the
general cost of production and prices, making it non-competitive.

Unit-7
Gender issues in entrepreneurship development

Concept of gender

‘Sex’ refers to the biological characteristics that categorise someone as either female
or male; whereas ‘gender’ refers to the socially determined ideas and practices of what it is
to be female or male Whilst often used interchangeably, ‘sex’ and ‘gender’ are in fact distinct
terms. ‘Sex’: a person’s sex is biologically determined as female or male according to certain
identifiable physical features which are fixed. Women’s marginalisation has often been seen
as ‘natural’ and a fact of their biology. However these biological differences cannot explain
why women have less access to power and lower status than men. To understand and
challenge the cultural value placed on someone’s biological sex, and unequal power
hierarchies, we need the relational concept of ‘gender’.
‘Gender’: how a person’s biology is culturally valued and interpreted into locally
accepted ideas of what it is to be a woman or man. ‘Gender’ and the hierarchical power
relations between women and men based on this are socially constructed, and not derived
directly from biology. Gender identities and associated expectations of roles and
responsibilities are therefore changeable between and within cultures. Gendered power
relations permeate social institutions so that gender is never absent.

Definitions
Biological Determinism
A theory that biological differences between women and men dictate a difference in social
roles and personality, and that these differences reinforce the notion that men are superior and
women are inferior.
Discrimination
 Overt behavior in which people are given different and unfavorable treatment on the
basis of their race, class, sex, and cultural status.
 Any practice, policy or procedure that denies equality of treatment to an individual or
group
  In the terminology of the United Nations Convention on the Elimination of All Forms
of Discrimination Against Women, it is any distinction, exclusion or restriction made
on the basis of sex, which has the purpose or effect of denying equal exercise of
human rights and fundamental freedoms in all fields of human endeavor.
Feminism
 A worldwide movement that seeks to raise women's political, economic and social
status and fights for gender equality in all aspects of life in all societies. The concepts
underlying feminism continue to evolve according to the socioeconomic, political and
cultural context in which the movement is taking place
Gender and Sex
 Sex refers to the natural distinguishing variable based on biological characteristics of
being a woman or a man. It refers to physical attributes pertaining to a person's body
contours, features, genitals, hormones, genes, chromosomes and reproductive
organs. Gender refers to roles, attitudes and values assigned by culture and society to
women and men. These roles, attitudes and values define the behaviors of women and
men and the relationship between them. They are created and maintained by social
institutions such as families, governments, communities, schools, churches and media.
Because of gender, certain roles, traits and characteristics are assigned or ascribed
distinctly and strictly to women or to men
Gender Awareness
 The ability to identify problems arising from gender inequality and discrimination,
even if these are not evident on the surface and are "hidden," or are not part of the
general and commonly accepted explanation of what and where the problem lies.
Gender awareness means a high level of gender conscientization.
Gender Division of Labor
 The allocation of differential tasks, roles, responsibilities and activities to women and
men according to what is considered socially and culturally appropriate.
Gender Equality vs Gender Equity
 Gender equality means that women and men enjoy the same status and conditions and
have equal opportunity for realizing their potential to contribute to the political,
economic, social and cultural development of their countries. They should also benefit
equally from the results of development. Gender equity moves beyond a focus on
equal treatment. It means giving to those who have less on the basis of needs, and
taking steps to compensate for historical and social disadvantages that prevent women
and men from otherwise operating on a level playing field. Equity can be understood
as the means, and equality is the end. Equity leads to equality.
Gender Gap
 The gap between women and men in terms of how they benefit from education,
employment, services, and so on.
Gender Ideology
 Ideology is a complex structure of beliefs, values, attributes, and ways of perceiving
and analyzing social reality based on religious doctrines, pseudoscientific theories,
and political aims. It serves two distinct purposes: a) to justify the existing social
order; and b) to co-opt and obtain the consent and participation of all members of
society, including the oppressed, in their predetermined purposes. Gender ideology is
based on the pseudoscientific theory of biological determinism.
Gender Roles vs Sex Roles
 Gender roles are culturally defined attitudes, behaviors and social positions that are
based on sex. Sex roles are those that are based on an occupation, such as being a
housewife, or a biological function, such as motherhood.
Gender Stereotyping
 Society's perceptions and value systems that instill an image of women as weak,
dependent, subordinate, indecisive, emotional and submissive. Men, on the other
hand, are strong, independent, powerful, dominant, decisive and logical. ·
Unexamined images, ideas or beliefs associated with a particular group that have
become fixed in a person's mind and are not open to change. For example, women's
roles, functions and abilities are seen to be primarily tied to the home.
Gender Analysis
 A tool to identify the status, roles and responsibilities of women and men in society,
as well as their access to and control of resources, benefits and opportunities.
 A framework to compare the relative advantages and disadvantages faced by women
and men in various spheres of life, including the family, workplace, school,
community and political system. It also takes into account how class, race, ethnicity,
cultural, social and other factors interact with gender to produce discriminatory
results.
 A set of standards to judge the potential impacts of gender on policies, programs and
projects.
 A systematic way of looking at the gender division of labor, and the access and
control women and men have over inputs or resources required for their labor, and
their benefits or outputs from it.
Gender and Development
 An approach to or paradigm of development focusing on social, economic, political
and cultural forces that determines how differently women and men participate in,
benefit from, and control resources and activities. It shifts the focus from women as a
group to the socially determined relations between women and men.
Gender Issues and Concerns
 Issues, concerns and problems arising from the distinct roles of women and men and
the relationships between them;
 Affairs and involvement arising from societal expectation and perception on the roles
of women and men reflected in and perpetuated by law, policies, procedures, systems,
programs, activities and projects of the government. These impede the opportunities
for women to participate in the development process and enjoy its benefits.
Gender Mainstreaming or GAD Mainstreaming
 A set of processes and strategies that aims to ensure the recognition of gender issues
on a sustained basis.
 An assessment of the implications for women and men of planned government actions
such as policies, legislation, programs and projects.
 A strategy to integrate women's and men's concerns and experiences in the design,
implementation, monitoring and evaluation of policies, programs and projects in all
political, economic and social agenda.
 An approach that situates gender equality issues at the center of broad policy
decisions, institutional structures and resource allocations, and includes women's
views and priorities in making decisions about development goals and processes.
Women's Empowerment
In the context of development, a tool and a framework where development allows women to
be participants in development efforts, and not just beneficiaries. More than this, their level
of participation enables them to make decisions based on their own views and perspectives.·
In the Gender Equality and Women's Empowerment Framework, the goal and the essential
process for women's advancement. It is the process by which women mobilize to understand,
identify and overcome gender discrimination so as to achieve equality in welfare and equal
access to resources

Gender Stereotypes
Gender stereotypes are simplistic generalizations about the gender attributes, differences,
and roles of individuals and/or groups. Stereotypes can be positive or negative, but they
rarely communicate accurate information about others. When people automatically apply
gender assumptions to others regardless of evidence to the contrary, they are perpetuating
gender stereotyping. Many people recognize the dangers of gender stereotyping, yet continue
to make these types of generalizations.

Common Gender Stereotypes

Below are lists of common female and male stereotypes.

Women are: - Men are:

Dependent Independent
Weak Powerful
Incompetent Competent
Less important More important
Emotional Logical
Implementers Decision-makers
Housekeepers Breadwinners
Supporters Leaders
Fearful Brave
Peace-makers Aggressive
Cautious Adventurous
Flexible Focused
Warm Self-reliant
Passive Active
Followers Leaders
Spectators Doers
Modest Ambitious
Subjective Objective
Soft-spoken Out-spoken
Secretaries Bosses
Nurturing Assertive
Gentle Strong
Cheerful Forceful
Caretakers Achievers

GENDER ROLES
The biological differences between men and women do not normally change; people are
either male or female. However, the characteristics they are perceived to have, and the roles
and responsibilities assigned to them, differ among societies, cultures, and historical periods.
Gender roles are the activities ascribed to men and women on the basis of perceived
differences. "Division of labor" is a term used in gender literature to mean the roles and tasks
assigned to women and men on the basis of perceived gender characteristics and attributes,
instead of ability and skills.

Men's Roles
Today, in the world's more industrialized countries there are few lines of demarcation
between men's and women's occupations. However, in many less industrialized societies men
have more visible and recognized roles than women, largely because men are paid for their
productive work and women are not. In these societies, men's roles usually involve jobs
which are assessed and counted in national censuses and accounting systems. Men do not
usually perform domestic or household tasks.
If they have community management roles, these tend to involve political
organization and leadership. Women handle community organization and hands-on activities.
Women's Roles
Women's roles in most societies fall into three categories: productive (relating to production
of goods for consumption or income through work in or outside the home), reproductive
(relating to domestic or household tasks associated with creating and sustaining children and
family), and community management (relating to tasks and responsibilities carried out for the
benefit of the community). Women must balance the demands of these three different roles
and should be recognized for their contributions.
Reproductive role: Childbearing/rearing responsibilities, and domestic tasks done by women,
required to guarantee the maintenance and reproduction of the labour force. It includes not
only biological reproduction but also the care and maintenance of the work force (male
partner and working children) and the future work force (infants and school-going children).
Productive role: Work done by both men and women for pay in cash or kind. It includes both
market production with an exchange-value, and subsistence/home production with actual use-
value, and also potential exchange-value. For women in agricultural production, this includes
work as independent farmers, peasant wives and wage workers.
Community managing role: Activities undertaken primarily by women at the community
level, as an extension of their reproductive role, to ensure the provision and maintenance of
scarce resources of collective consumption, such as water, health care and education. This is
voluntary unpaid work, undertaken in 'free' time
The tasks women usually perform in carrying out their different roles do not generally
earn them an income. Women are often defined exclusively in terms of their reproductive
roles, which largely concern activities associated with their reproductive functions. These
reproductive roles, together with their community management roles, are perceived as
natural. But because these roles do not earn income, they are not recognized and valued as
economically productive. Women's contributions to national economic development are,
therefore, often not quantified and invisible.
In many societies, women also carry out productive activities such as maintaining
smallholder agricultural plots in farming systems. These tasks are often not considered work
and are often unpaid. Women may also perform many roles which attract wages in both the
formal and informal economic sectors. But women's economically productive roles,
in contrast to men's, are often undervalued or given relatively little recognition.
Gender roles and responsibilities vary among cultures and can change over time. For
example, in India, unskilled labor is considered "women's work" while in Africa it is "men's
work." In Europe and the United States, the contribution men make to domestic activities is
becoming increasingly important and visible.

Gender mainstreaming is the recognition of gender-based divisions in labour, rights,

resources and voice. It is not about adding a woman’s component or even a gender equality
component into activities or projects. Mainstreaming a gender perspective “is the process of
assessing the implications for women and men of any planned action, including legislation,
policies or programmes, in any area and at all levels. It is a strategy for making the concerns
and experiences of women as well as of men an integral part of the design, implementation,
monitoring and evaluation of policies and programmes in all political, economic and societal
spheres, so that women and men benefit equally, and inequality is not perpetuated. The
ultimate goal of mainstreaming is to achieve gender equality"(ECOSOC, 1997).
Gender mainstreaming is an intrinsically time consuming activity. It involves changes in
norms and values, cultural styles and normal ways of doing things, traditions and beliefs,
people’s sense of self and their understanding of others.
Objectives of gender mainstreaming are as follows:
 Overcome gender subordination, i.e., reduce and eliminate gender-based inequalities
 Consider gender mainstreaming in all programme activities to attain gender equity
 Develop a gender-sensitive monitoring parameters
Attention to women’s concerns and priorities in development policy and activity has evolved
since the early 1970s. The issues were first discussed with a focus on projects designed only
for women (women specific). Gradually, efforts were made to integrate women’s concerns
into the projects without reference to gender equality (women’s component and
integration). The current perspective is that the attention to women’s concerns
is mainstreamed, and it requires a thoroughgoing re-evaluation of development priorities
(UNDP, 2001).

Women Specific: Projects exclusively designed for women. Historically, such approaches
were critiqued, as there was a tendency for women’s needs to be analysed as discrete from
those of the rest of society. However, a full analysis of gender relations can indicate the need
for women-specific interventions to compensate for past inequalities. A fully mainstreamed
approach sometimes requires women-specific activities.

Women’s Component: Projects/activities provide separate resources and activities for

women: generally formulated as an “add-on” after regular project planning. Such an approach
is usually based on the assumption that women’s needs are broadly the same as men’s, and
can be met through the same intervention. Women still perceived analytically as a discrete
social category.
Integrated: Include women on an equal footing with men in all project activities. This is a
further and more thorough implementation of the “add-on” approach. Women’s and men’s
situation are typically analysed in a relational manner. However, interventions are based on
the fallacy that issues of gender equality can be incorporated into a “business as usual”
approach to development, which unless rigorously interrogated reflects the gender biases of
society.

Mainstreamed: Awareness of, and commitment to women’s concerns and priorities infuse
all the processes that determine development agendas. There is a conscious attempt to
eliminate gender bias from project activities. All decision-making reflects the outcomes of
socio-economic and policy analysis that is fully “gendered”. Analysis focuses on social
relations, and particularly on the power relationships through which gender biases are
protected and maintained.

Women are a vital part of Indian economy. Over the years, there is a gradual
realization of the key role of women in agricultural development and their vital contribution
in the field of agriculture, food security, horticulture, processing, nutrition, sericulture,
fisheries, and other allied sectors. Women form the backbone of agriculture, in India,
Comprising the majority of agricultural laborers, women have been putting in labour not only
in terms of physical output but also in terms of quality and efficiency. Women are critical to
the well-being of farm households. Aside from raising children, women are expected to
prepare all meals, maintain the homestead, and assist in crop and animal production, all the
while tending to the general health of their families. Perhaps, ironically, it is because women
have so many responsibilities that they have been over-looked by agriculturalists and policy
makers – it has been more convenient to label men as farmers and women as child raisers and
cooks. In truth, women are involved in all aspects of agriculture, from crop selection to land
preparation, to seed selection, planting, weeding, pest control, harvesting, crop storage,
handling, marketing, and processing. Whatever the reason for this neglect, the importance of
developing farming technologies relevant to women has only recently been recognized.
Rural Women form the most important productive work force in the economy of
majority of the developing nations including India. Agriculture, the single largest production
endeavour in India, contributing about 18% of GDP, is increasingly becoming a Female
Activity. Agriculture sector employs 4/5th of all economically active women in the country.
48% of India’s self-employed farmers are women. There are 75 million women engaged in
dairying as against 15 million men and 20 million in animal husbandry as compared to 1.5
million men.
Beyond the conventional market-oriented narrower definition of ‘productive
workers’, almost all women in rural India today can be considered as ‘farmers’ in some
sense, working as agricultural labour, unpaid workers in the family farm enterprise, or
combination of the two. Moreover, several farm activities traditionally carried out by men are
also being undertaken by women as men are pulled away into higher paying employment.
Thus, Rural India is witnessing a process which could be described as Feminization of
Agriculture.

CONCEPT OF WOMEN ENTREPRENEURS

Women Entrepreneurs may be defined as the women or a group of women who initiate,
organize and operate a business enterprise. The Government of India has defined women
entrepreneurs as ―an enterprise owned and controlled by women having a minimum
financial interest of 51 per cent of the capital and giving at least 51 per cent of the
employment generated in the enterprise to women‖. Women entrepreneurs engaged in
business due to push and pull factors which encourage women to have an independent
occupation and stands on their on legs. A sense towards independent decision-making on
their life and career is the motivational factor behind this urge. Saddled with household
chores and domestic responsibilities women want to get independence. Under the influence
of these factors the women entrepreneurs choose a profession as a challenge and as an urge to
do some thing new. Such a situation is described as pull factors. While in push factors women
engaged in business activities due to family compulsion and the responsibility is thrust upon
them.
Furthermore, mainstream research, policies and programmes tend to be “men
streamed” and too often do not take into account the specific needs of women entrepreneurs
and would-be women entrepreneurs. As a consequence, equal opportunity between men and
women from the perspective of entrepreneurship is still not a reality. To facilitate progress,
more work needs to be done in order to:
• Better understand the function of women’s entrepreneurship in society and for economic
development. We know that women entrepreneurs play a non-trivial role in the economy, that
they face challenges and obstacles different from those faced by men and that they will act
differently. The larger the difference is between men and women in a society, the larger we
can expect the difference to be between men and women entrepreneurs and the more different
we can expect their relative contribution to economic development to be.
• Better understand the impact of women’s entrepreneurship in different economic contexts.
By contexts we mean both the economic level of development and the societal level of
development when it comes to the role of women in society. For example, we know that
women’s entrepreneurship in transition and developing countries is qualitatively different
from women’s entrepreneurship in developed countries. For example the problems of Eastern
Europe are different because these economies have gone through and are still undergoing
changes to adapt to a market economy. These changes have also had important (and often
negative) effects on women’s position in society (Stoyanovska, 2001). In these countries,
women and men were, under the communist regime, supposedly equal in all aspect of
society. However, with the fall of the communist regime structural inequalities between men
and women became evident, coupled with the challenge to rediscover and learn the function
of the market economy. This has put many women (often highly educated) in very difficult
positions. In developing countries the combination of poverty, low levels of formal education
and women having a very low social status creates special challenges for women engaging in
entrepreneurship. In developed economies women have access to the same education and
jobs as men, but important differences still exist and they seem to be shrinking at a very slow
pace.
REASONS FOR SLOW PROGRESS OF WOMEN ENTREPRENEURS IN INDIA
The problems and constraints experienced by women entrepreneurs have resulted
in restricting the expansion of women entrepreneurship. The major barriers encountered by
women entrepreneurs are:
 The greatest deterrent to women entrepreneurs is that they are women. A kind of
patriarchal- male dominant social order is the building block to them in their way
towards business success. Male members think it a big risk financing the ventures run
by women.
 Male chauvinism is still prevalent in many parts of the country yet. Women are
looked upon as “abla” i.e. weak in all respects. In a male dominated society, women
are not treated equal to men that act as a barrier to woman‘s entry into business.
 Women entrepreneurs have to face a stiff competition with the men entrepreneurs
who easily involve in the promotion and development area and carry out easy
marketing of their products with both the organized sector and their male
 counterparts. Such a competition ultimately results in the liquidation of women
entrepreneurs.
 Lack of self-confidence, will-power, strong mental outlook and optimistic attitude
amongst women creates a fear from committing mistakes while doing their piece of
work. The family members and the society are reluctant to stand beside their
entrepreneurial growth.
 Women in India lead a protected life. They are even less educated, economically not
stable nor self-dependent which reduce their ability to bear risks and uncertainties
involved in a business unit,
 The old and outdated social outlook to stop women from entering in the field of
entrepreneurship is one of the reasons for their failure. They are under a social
pressure which restrains them to prosper and achieve success in the field of
entrepreneurship.
 Unlike men, women mobility in India is highly limited due to many reasons. A single
women asking for room is still looked with suspicion. Cumbersome exercise involved
in starting with an enterprise coupled with officials humiliating attitude towards
women compels them to give up their spirit of surviving in enterprise altogether.
 Women's family obligations also bar them from becoming successful entrepreneurs in
both developed and developing nations. The financial institutions discourage women
entrepreneurs on the belief that they can at any time leave their business and become
housewives again.
 Indian women give more emphasis to family ties and relationships. Married women
have to make a fine balance between business and family. The business success also
depends on the support the family members extended to women in the business
process and management.
 Women‘s family and personal obligations are sometimes a great barrier for
succeeding in business career. Only few women are able to manage both home and
business efficiently, devoting enough time to perform all their responsibilities in
priority.
 The educational level and family background of husbands also influences women
participation in the field of enterprise.
 Absence of proper support, cooperation and back-up for women by their own family
members and the outside world people force them to drop the idea of excelling in the
enterprise field. They are always making many pessimistic feelings to be aroused in
their minds and making them feel that family and not business is a place meant for
them.
 Many women take the training by attending the Entrepreneurial Development
programme without an entrepreneurial bent of mind. Women who are imparted
training by various institutes must be verified on account of aptitude through the tests,
interviews, etc.
 High production cost of some business operations adversely affects the development
of women entrepreneurs. The installations of new machineries during expansion of
the productive capacity and like similar factors discourage the women entrepreneurs
from venturing into new areas.
  Lack of awareness about the financial assistance in the form of incentives, loans,
schemes etc. by the institutions in the financial sector. So the sincere efforts taken
towards women entrepreneurs may not reach the entrepreneurs in rural and backward
areas.
 Achievement motivation of the women folk found less compared to male members.
The low level of education and confidence leads to low level achievement and
advancement motivation among women folk to engage in business operations and
running a business concern.

Unit-8
Success and failure stories for enterprises-issues relating to success and failure of
enterprises

Unit-9
Management
Meaning, concept, nature and importance, Approaches to management, levels of
management, qualities and skills of a manager
The concept of management has acquired special significance in the present
competitive and complex business world. Efficient and purposeful management is absolutely
essential for the survival of a business unit. Management concept is comprehensive and
covers all aspects of business. In simple words, management means utilizing available
resources in the best possible manner and also for achieving well defined objectives. It is a
distinct and dynamic process involving use of different resources for achieving well defined
objectives. The resources are: men, money, materials, machines, methods and markets. These
are the six basic inputs in management process (six M's of management) and the output is in
the form of achievement of objectives. It is the end result of inputs and is available through
efficient management process.
CONCEPTS OF MANAGEMENT
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, organising, staffing, directing and controlling
functions. Management as a process has the following implications:
(i) 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.
(ii) 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.
(iii) Continuous Process: Management involves continuous identifying and solving problems.
It is repeated every now and then till the goal is achieved.
(iv) 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 as an Economic Resource

Like land, labour and capital, management is an important factor of production. Management
occupies the central place among productive factors as it combines and coordinates all other
resources.

Management as a Team

As a group of persons, management consists of all those who have the responsibility of
guiding and coordinating the efforts of other persons. These persons are called as managers
who operate at different levels of authority (top, middle, operating). Some of these managers
have ownership stake in their firms while others have become managers by virtue of their
training and experience. Civil servants and defence personnel who manage public sector
undertakings are also part of the management team. As a group managers have become an
elite class in society occupying positions with enormous power and prestige.
Management as an Academic Discipline

Management has emerged as a specialized branch of knowledge. It comprises principles and

practices for effective management of organizations. Management has become as very
popular field of study as is evident from the great rush for admission into institutes of
management. Management offers a very rewarding and challenging career.

Management as a Group

Management means the group of persons occupying managerial positions. It refers to all
those individuals who perform managerial functions. All the managers, e.g., chief executive
(managing director), departmental heads, supervisors and so on are collectively known as
management.

APPROACHES TO MANAGEMENT
The concept of management is originated as a result of World War I and World War 11. The
result of these wars was destruction of lot of resources in general and military materials in
particular. So resources were made very scarce. People started thinking of making optimum
use of available resources. This led to the need for professional thinking in resource
allocation and utilization. The scientific and technological developments, industrial
revolutions, competitions etc., has added the need for management discipline and made it
more complex. Plantation sector is not an exception to the application of management
discipline. Therefore, you need to know the early contribution to the field of management in
the form of principles and theories by different authors.
The management thought in the current economic situation can best be understood in
the light of its historical growth particularly since 1900. There were different phases for the
evolution of management thought. These can be classified into three: as Classical Theory,
Neo-Classical Theory and Modern Theory.
For understanding of these theories and principles it is more appropriate to divide it
as per the different schools of thought. They are
a) Scientific approach,
b) Administrative approach, and
c) Behavioural approach.

a) Scientific Approach
F.W.Taylor, Frank Gilbreth, Lillian Gilbreth, Gantt and others launched what they called
scientific management. According to these experts it was not proper to just find a way of
doing something. A manager had to find the one right way. They used time and motion study
for developing a right way. Among all, F.W.Taylor (1856 - 1915) eventually acclaimed as the
'Father of Scientific Management'. Some of the basic features of Taylor's contribution to
scientific management are: Separation of planning function from doing function. He said
planning function to be given to managers and doing to the workers, Scientific selection and
training of workers, Time and motion studies to determine standard of work, Differential
piece wage rate system. That is wage based on output by a labour, Functional foremanship.
That is labours should be allotted to the supervisor based on his specialization, and
Standardization of methods, procedures, tools and equipment.
The five basic principles contributed by F.W.Taylor are:
 Replacing the rule of thumb with science. For instance, if you want to put fertilizer to
your crops, the scientific method should be soil testing, and deciding about the type of
fertilizer, quantity and time. It is not based on trial and error method.
  Harmony in group action rather than discord.
 Cooperation rather than chaotic individualism.
 Working for maximum output rather than restricted output.
 The development of each individual to his greatest efficiency and prosperity.

b) Administrative Approach
Henri Fayol, a French industrialist is considered as the father of modern theory of general and
industrial management. He divided the industrial management activities into six groups and
contributed fourteen principles to management.
Following are the six activities:
 Technical activities - method of doing work.
 Commercial activities - buying and selling.
 Financial activities - use of capital.
 Security - protection for property and persons.
 Accounting activities - statistics and records.
 Managerial activities -planning, organizing, command, coordination and control.
These six functions had to be performed to operate successfully any kind of organization.
There is n o doubt that Fayol established the pattern upon which our modern concepts of
management are built.
In 1916, Henri Fayol in his book described 14 management principles. These principles
constitute the theory of management or administration of business enterprises. They are
enumerated below briefly.
i ) Division of work: Specialization alone can give maximum productivity and efficiency.
ii) Authority and responsibility: Authority is the power in the position and the right to give
orders, responsibility is the obligation to perform . He said there should be parity
between authority and responsibility.
iii) Discipline : The objectives , rules and regulations , the policies and procedures must
be honoured by each member of the organization.
iv) Unity of command: In order to avoid any possible confusion and conflict, each member of
an organization must receive orders and instruction only from one superior or boss.
v) Unity of direction: All members of an organization must work together to accomplish
common goals.
vi) Subordination of individual interest to general interest: Common interest of the
organization i s given priority and not the individual interest.
vii) Remuneration: Fair pay to the labours is the best motivator.
viii) Centralization: Power to take decision must be decentralized. Extreme decentralization
or centralization must be avoided.
ix) Scalar chain: Hierarchy of command linking all members from top to bottom.
x ) Order: Proper system alone can create a sound organization. Disorder leads to chaos and
confusion.
xi) Equity: Justice and kindness must be given to everyone.
xii) Stability of tenure: Employees must be given job security and sufficient time to adjust
with new work.
xiii) Initiative: Creative thinking and capacity to take initiative can give as sound managerial
planning.
xiv) Esprit de corps: It means unity is strength

c) Behavoiural Approach
Behavioural or human relations approach is built on the base of classical theory. It pointed
out the role of psychology and sociology in the understanding of individual as well as group
behaviour. It advocates the importance of human values in business. Among those who
contributed to behavioural approach, the contribution made by Elton Mayo and his
associates found to be more appropriate and interesting. Mayo and his associates conducted a
famous study in General Electric Company at Hawthorne between 1927 and 1932. Based on
their study to find out the reasons for low productivity, they formulated following principles.
 To meet the socio-psychological need workers form informal groups.
 This influence their group conduct and behaviour.
 Mental attitudes and emotions influence considerably employees' behaviour.
 Freedom at work to take decision will develop sense of belongingness.
 Human and social motivation can play even a greater role than monitory incentives.

NATURE AND CHARACTERISTICS OF MANAGEMENT

The salient features which highlight the nature of management are as follows:

(i) Management is goal-oriented: Management is not an end in itself. It is a means to

achieve certain goals. Management has no justification to exist without goals.
Management goals are called group goals or organisational goals. The basic goal of
management is to ensure efficiency and economy in the utilisation of human, physical
and financial resources. The success of management is measured by the extent to which
the established goals one achieved. Thus, management is purposefull.
(ii) Management is universal: Management is an essential element of every organised
activity irrespective of the size or type of activity. Wherever two or more persons are
engaged in working for a common goal, management is necessary. All types of
organisations, e.g., family, club, university, government, army, cricket team or business,
require management. Thus, management is a pervasive activity. The fundamental
principles of management are applicable in all areas of organised effort. Managers at all
levels perform the same basic functions.
(iii) Management is an Integrative Force: The essence of management lies in the
coordination of individual efforts in to a team. Management reconciles the individual
goals with organizational goals. As unifying force, management creates a whole that is
more than the sum of individual parts. It integrates human and other resources.
(iv) Management is a Social Process: Management is done by people, through people and
for people. It is a social process because it is concerned with interpersonal relations.
Human factor is the most important element in management. According to Appley,
“Management is the development of people not the direction of things. A good manager
is a leader not a boss. It is the pervasiveness of human element which gives management
its special character as a social process”.
(v) Management is multidisciplinary: Management has to deal with human behaviour
under dynamic conditions. Therefore, it depends upon wide knowledge derived from
several disciplines like engineering, sociology, psychology, economics, anthropology,
etc. The vast body of knowledge in management draws heavily upon other fields of
study.
(vi) Management is a continuous Process: Management is a dynamic and an on-going
process. The cycle of management continues to operate so long as there is organised
action for the achievement of group goals.
(vii) Management is Intangible: Management is an unseen or invisible force. It cannot be
seen but its presence can be felt everywhere in the form of results. However, the
managers who perform the functions of management are very much tangible and visible.
(viii) Management is an Art as well as Science: It contains a systematic body of
theoretical knowledge and it also involves the practical application of such knowledge.
Management is also a discipline involving specialised training and an ethical code
arising out of its social obligations.

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

ROLE AND IMPORTANCE OF MANAGEMENT

Management is indispensable for the successful functioning of every organisation. It is all the
more important in business enterprises. No business runs in itself, even on momentum. Every
business needs repeated stimulus which can only be provided by management. According to
Peter Drucker,“ management is a dynamic lifegiving element in an organisation, without it
the resources of production remain mere resources and never become production”. The
importance of management has been highlighted clearly in
the following points:
(i) Achievement of group goals: A human group consists of several persons, each
specialising in doing a part of the total task. Each person may be working efficiently, but
the group as a whole cannot realise its objectives unless there is mutual cooperation and
coordination among the members of the group. Management creates team-work and
coordination in the group. He reconciles the objectives of the group with those of its
members so that each one of them is motivated to make his best contribution towards the
accomplishment of group goals. Managers provide inspiring leadership to keep the
members of the group working hard.
(ii) Optimum utilisation of resources: Managers forecast the need for materials, machinery,
money and manpower. They ensure that the organisation has adequate resources and at
the sametime does not have idle resources. They create and maintain an environment
conducive to highest productivity. Managers make sure that workers know their jobs well
 and use the most efficient methods of work. They provide training and guidance to
employeers so that they can make the best use of the available resources.
(iii) Minimisation of cost: In the modern era of cut-throat competition no business can
succeed unless it is able to supply the required goods and services at the lowest possible
cost per unit. Management directs day-to-day operations in such a manner that all wastage
and extravagance are avoided. By reducing costs and improving efficiency, managers
enable an enterprise to be competent to face competitors and earn profits.
(iv) Survival and growth: Modern business operates in a rapidly changing environment. An
enterprise has to adapt itself to the changing demands of the market and society.
Management keeps in touch with the existing business environment and draws its
predictions about the trends in future. It takes steps in advance to meet the challenges of
changing environment. Changes in business environment create risks as well as
opportunities. Managers enable the enterprise to minimise the risks and maximise the
benefits of opportunities. In this way, managers facilitate the continuity and prosperity of
business.
(v) Generation of employment: By setting up and expanding business enterprises, managers
create jobs for the people. People earn their livelihood by working in these organisations.
Managers also create such an environment that people working in enterprise can get job
satisfaction and happiness. In this way managers help to satisfy the economic and social
needs of the employees.
(vi) Development of the nation: Efficient management is equally important at the national
level. Management is the most crucial factor in economic and social development. The
development of a country largely depends on the quality of the management of its
resources. Capital investment and import of technical knowhow cannot lead to economic
growth unless wealth producing resources are managed efficiently. By producing wealth,
management increases the national income and the living standards of people. That is
why management is regarded as a key to the economic growth of a country

LEVELS OF MANAGEMENT
Every business organisation, irrespective of its size, has many managerial positions in its
structure. These positions are created through the process of delegation of authority from top
to lower levels. Each position is marked by authority, responsibility, functions, roles and
relationships. The contents and nature vary, depending in the level at which the position lies.
As one moves upward in the organisation, the managerial position plays an important role,
larger the contribution, greater the authority and higher the responsibility. These managerial
positions lying in the chain of command may be classified into various groups or levels of
management. Broadly speaking, an organisation
has two important levels of management, namely functional and operative. The functional
level is concerned with the process of determining primary objectives, formulating basic
policies, making
vital decisions and controlling and coordinating activities of personnel. The operative level of
management is related to implementation of plans and decisions, and pursuit of basic policies
for achieving the objectives of the organisation. Generally, the levels of management
consisting of various managerial positions in the structure of an organisation, differ from one
organisation to another, depending on the size of business activity, philosophy of
management, span of control and other related factors. But, in a joint stock company, for
conducting its business efficiently, managerial personnel may be placed in three levels, that
is, top, middle and lower or supervisory level.

Top Level Management

The top level management is generally occupied by the ownership group. In a joint stock
company, equity shareholders are the real owners of the company. Thus, they elect their
representatives as directors, form a board, known as board of directors, which constitutes the
top level of management. Besides the board, other functionaries including managing
director, general manager or Chief executive to help directors, are included in this level. It is
the highest level in the managerial hierarchy and the ultimate source of authority in the
organisation. The top level managers are accountable to the owners and responsible for
overall management of the organisation. The major functions of the top level management are
as under:
(i) To make a corporate plan for the entire organisation covering all areas of operations.
(ii) To decide upon the matters which are vital for the survival, profitability and growth of the
organisation such as introduction of new product, shifting to new technology and opening
new plant
etc.
(iii) To decide corporate goals.
(iv) To decide structure of organisation, creating various positions there in.
(v) To exercise overall managerial control through the process of reviewing over all financial
and operating results.
(vi) To make decisions regarding disposal and distribution of profits.
(vii) To select key officials and executives for the company.
(viii) To coordinate various sub-systems of the organisation.
(ix) To maintain liaison with outside parties having a stake in business such as government,
trade union and trade associations etc.
(x) To formulate basic policies and providing direction and leadership to the organisation as a
whole.

Middle Level Management

In order to fill up the gap which exists between functional and operative level, some
managerial positions are created at the middle level of management. Middle level
management consists of departmental managers, deputy managers, foreman and
administrative officers etc. These executives are mainly concerned with the over all
functioning of their respective departments. They act as a link between top and lower level
managers. The activities of middle level managers centres around determining departmental
goals and devising ways and means for accomplishing them. The main functions performed
by these managers are as under:
(i) To prepare departmental plan covering all activities of the department within the basic
framework of the corporate plan.
(ii) To establish departmental goals and to decide upon various ways and means for achieving
these goals to contribute to organizational goals.
(iii) To perform all other managerial functions with regard to departmental activities for
securing smooth functioning of the entire department.
(iv) To issue detailed orders and instructions to lower level managersand coordinate the
activities of various work units at lower level.
(v) Middle level managers explain and interpret policy decisions made at the top level to
lower level managers.

Lower Level or Supervisory Level Management

Lower-level management is known as supervisory management, because it is concerned
mainly with personal oversight and direction of operative employees. It consists of factory
supervisors, superintendents, foremen, sales supervisors, accounts officers etc. They directly
guide and control the performance of rank and file workers. They issue orders and
instructions and guide day to-day activities. They also represent the grievances of the workers
to the higher levels of management. Supervisory management performs the following
functions:
(i) Planning of day to day work
(ii) Assignment of jobs and issuing orders and instructions
(iii) Supervising and guiding workers
(iv) Maintaining close personal contacts with workers to ensure discipline and team-work
(v) Evaluating operating performance
(vi) Sending reports and statements to higher authorities
(vii) Communicating the grievances and suggestions of workers to higher authorities.

SKILLS OF MANAGEMENT
In modern business the job management has become very difficult. Several skills are required
to manage successfully a large organization in a dynamic environment. These skills of
managers have been classified into four categories, namely technical, human, diagnostic and
conceptual skills.
(i) Technical Skills: Technical skills refer to the ability and knowledge in using the
equipment,
technique and procedures involved in performing specific tasks. These skills require
specialized knowledge and proficiency in the mechanics of particular job. Ability in
programming and operating computers is, for instance, a technical skill. There are two things
a manager should understand about technical skills. In the first place, he must know which
skills should be employed in his particular enterprise and be familiar enough with their
potentiality to ask discerning questions
of his technical advisors. Secondly a manager must understand both the role of each skill
employed and interrelations between the skills.
(ii) Human Skills: Human skills consists of the ability to work effectively with other people
both as individual and as members of a group. These are required to win cooperation of
others and to build effective work teams. Such skills require a sense of feeling for others and
capacity to look at things from others point of view. Human skills are reflected in the way a
manager perceives his superiors, subordinates and peers. An awareness of the importance of
human skills should be part of a managers orientation and such skills should be developed
throughout the career. While technical
skills involve mastery of ‘things’ human skills are concerned with understanding of ‘People’.
(iii) Conceptual Skills: Conceptual skills comprise the ability to see the whole organization
and the interrelationships between its parts. These skills refer to the ability to visualise the
entire picture or to consider a situation in its totality. Such skills help the manager to
conceptualise the environment,
to analyse the forces working in a situation and take a broad and farsighted view of the
organisation. Conceptual skills also include the competence to understand a problem in all its
aspects and to use original thinking in solving the problem. Such competence is necessary for
rational decision-making. Thus technical skills deal with jobs, human skills with persons and
conceptual skills with ideas. These types of skills are interrelated. But the proportion or
relative significance of these skills varies with the level of management as shown in the
figure

Top Management
Conceptual skills

Human skills
Middle management

Technical skills
Operating Management

Fig: Managerial Skills of Various Skills

Technical skills are most important at the supervisory or operating level where a close
understanding of job techniques is necessary to guide workers. As one moves up the
management hierarchy, technical skills become less important. Higher level managers deal
with subordinate managers and specialised technical knowledge is comparatively less
important for them. Conceptual skills are very important for top management in formulating
long-range plans, making broad policy decisions, and relating the business enterprise to its
industry and the economy. Thus, the relative importance of conceptual skills increases as we
move to higher levels of management. This would be self evident as management is the
process of getting things done through people. Human skills are equally important at all
levels of management because every manager has to deal with people.
(iv) Diagnostic Skills: Diagnostic skills include the ability to determine by analysis and
examination the nature and circumstances of particular conditions. It is not only the ability to
specify why something happened but also the ability to develop certain possible outcomes. It
is the ability to cut through unimportant aspects and quickly get to the heart of the problem.
Diagnostic skills are probably the most difficult ones to develop because they require the
proper blend of analytic ability with common sense and intelligence to be effective.

UNIT-10
EXTENSION MANAGEMENT
Meaning, Concept, Importance, Principles, of management, Classification of functions
of Management

Extension is a process of extending information and ideas pertaining to specific knowledge

and skills to its targeted audience. Management is the art of knowing what you want to do
and then seeing that it is done in the best and cheapest way.
Extension management is the application of management principles, techniques and
tools in extension system for its purposeful and meaningful transfer to suit the present needs
of audience/farmers

PRINCIPLES OF MAANGEMENT
Management Principles developed by Henri Fayol:
1. Division Of Work: Work should be divided among individuals and groups to ensure
that effort and attention are focused on special portions of the task. Fayol presented
work specialization as the best way to use the human resources of the organization.
2. Authority: The concepts of Authority and responsibility are closely related. Authority
was defined by Fayol as the right to give orders and the power to exact obedience.
Responsibility involves being accountable, and is therefore naturally associated with
authority. Whoever assumes authority also assumes responsibility.
3. Discipline: A successful organization requires the common effort of workers. Penalties
should be applied judiciously to encourage this common effort.
4. Unity Of Command: Workers should receive orders from only one manager.
5. Unity Of Direction: The entire organization should be moving towards a common
objective in a common direction.
6. Subordination Of Individual Interests To The General Interests: The interests of
one person should not take priority over the interests of the organization as a whole.
7. Remuneration: Many variables, such as cost of living, supply of qualified personnel,
general business conditions, and success of the business, should be considered in
determining a worker’s rate of pay.
8. Centralization: Fayol defined centralization as lowering the importance of the
subordinate role. Decentralization is increasing the importance. The degree to which
centralization or decentralization should be adopted depends on the specific
organization in which the manager is working.
9. Scalar Chain: Managers in hierarchies are part of a chain like authority scale. Each
manager, from the first line supervisor to the president, possess certain amounts of
authority. The President possesses the most authority; the first line supervisor the least.
Lower level managers should always keep upper level managers informed of their work
activities. The existence of a scalar chain and adherence to it are necessary if the
organization is to be successful.
10. Order: For the sake of efficiency and coordination, all materials and people related to a
specific kind of work should be treated as equally as possible.
11. Equity: All employees should be treated as equally as possible.
12. Stability of Tenure of Personnel: Retaining productive employees should always be a
high priority of management. Recruitment and Selection Costs, as well as increased
product-reject rates are usually associated with hiring new workers.
 13. Initiative: Management should take steps to encourage worker initiative, which is
defined as new or additional work activity undertaken through self direction.
14. Espirit De Corps: Management should encourage harmony and general good feelings
among employees.

Taylor’s Principles of Management

1. Develop a scientific way for each element of an individual’s work, which replaces the
old rule-of-thumb method.
2. Scientifically select and then train, teach, and develop the worker.
3. Heartily cooperate with the workers so as to ensure that all work is done in
accordance with the scientific way that has been developed.
4. Divide work and responsibility almost equally between managers and workers.
Managers take over all work for which it is better fitted than the workers.

FUNCTIONS OF MANAGEMENT
Management has been described as a social process involving responsibility for economical and
effective planning & regulation of operation of an enterprise in the fulfillment of given purposes. It is
a dynamic process consisting of various elements and activities. These activities are different from
operative functions like marketing, finance, purchase etc. Rather these activities are common to each
and every manger irrespective of his level or status.
Different experts have classified functions of management.
According toGeorge & Jerry, “There are four fundamental functions of management i.e. planning,
organizing, actuating and controlling”.
According to Henry Fayol, “To manage is to forecast and plan, to organize, to command, & to
control”. Whereas Luther Gullick has given a keyword ’POSDCORB’ where P stands for Planning, O
for Organizing, S for Staffing, D for Directing, Co for Co-ordination, R for reporting & B for
Budgeting.
But the most widely accepted are functions of management given by KOONTZ and O’DONNEL
i.e.Planning, Organizing, Staffing, Directing and Controlling.

For theoretical purposes, it may be convenient to separate the function of management but
practically these functions are overlapping in nature i.e. they are highly inseparable. Each
function blends into the other & each affects the performance of others.
1. Planning
It is the basic function of management. It deals with chalking out a future course of
action & deciding in advance the most appropriate course of actions for achievement
of pre-determined goals. According to KOONTZ, “Planning is deciding in advance -
what to do, when to do & how to do. It bridges the gap from where we are & where
we want to be”. A plan is a future course of actions. It is an exercise in problem
solving & decision making. Planning is determination of courses of action to achieve
desired goals. Thus, planning is a systematic thinking about ways & means for
accomplishment of pre-determined goals. Planning is necessary to ensure proper
utilization of human & non-human resources. It is all pervasive, it is an intellectual
activity and it also helps in avoiding confusion, uncertainties, risks, wastages etc.

2. Organizing
It is the process of bringing together physical, financial and human resources and
developing productive relationship amongst them for achievement of organizational
goals. According to Henry Fayol, “To organize a business is to provide it with
everything useful or its functioning i.e. raw material, tools, capital and personnel’s”.
To organize a business involves determining & providing human and non-human
resources to the organizational structure. Organizing as a process involves:
 Identification of activities.
 Classification of grouping of activities.
 Assignment of duties.
 Delegation of authority and creation of responsibility.
 Coordinating authority and responsibility relationships.
3. Staffing
It is the function of manning the organization structure and keeping it manned.
Staffing has assumed greater importance in the recent years due to advancement of
technology, increase in size of business, complexity of human behavior etc. The main
purpose o staffing is to put right man on right job i.e. square pegs in square holes and
 round pegs in round holes. According to Kootz & O’Donell, “Managerial function of
staffing involves manning the organization structure through proper and effective
selection, appraisal & development of personnel to fill the roles designed un the
structure”. Staffing involves:
 Manpower Planning (estimating man power in terms of searching, choose
the person and giving the right place).
 Recruitment, selection & placement.
 Training & development.
 Remuneration.
 Performance appraisal.
 Promotions & transfer.
4. Directing
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 & directing work & 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.

5. Controlling
It implies measurement of accomplishment against the standards and correction of
deviation if any to ensure achievement of organizational goals. The purpose of
controlling is to ensure that everything occurs in conformities with the standards. An
efficient system of control helps to predict deviations before they actually occur.
According to Theo Haimann, “Controlling is the process of checking whether or not
proper progress is being made towards the objectives and goals and acting if
necessary, to correct any deviation”. According to Koontz & O’Donell “Controlling is
the measurement & correction of performance activities of subordinates in order to
 make sure that the enterprise objectives and plans desired to obtain them as being
accomplished”. Therefore controlling has following steps:
 Establishment of standard performance.
 Measurement of actual performance.
 Comparison of actual performance with the standards and finding out deviation if
any.
 Corrective action.
Unit-11
Planning- Concept, Nature, Importnace, Types, Making planning effective
Planning means looking ahead and chalking out future courses of action to be
followed. It is a preparatory step. It is a systematic activity which determines when, how and
who is going to perform a specific job. Planning is a detailed programme regarding future
courses of action. It is rightly said “Well plan is half done”. Therefore planning takes into
consideration available & prospective human and physical resources of the organization so as
to get effective co-ordination, contribution & perfect adjustment. It is the basic management
function which includes formulation of one or more detailed plans to achieve optimum
balance of needs or demands with the available resources.
According to Urwick, “Planning is a mental predisposition to do things in orderly way, to
think before acting and to act in the light of facts rather than guesses”. Planning is deciding
best alternative among others to perform different managerial functions in order to achieve
predetermined goals.

“Planning is deciding in advance what to do, how to do and who is to do it. Planning bridges
the gap between where we are to, where we want to go. It makes possible things to occur
which would not otherwise occur”. -Koontz & O’Donell,

NATURE OF PLANNING
The nature of planning can be highlighted by studying its characteristics. Theyareasfollows
:(a) P l a n n i n g i s a m e n t a l a c t i v i t y : . Planning is not a simple process. It is an intellectual
exercise and involves thinking and forethought on the part of the manager.
(b) P l a n n i n g i s g o a l - o r i e n t e d : . Every plan specifies the goals to be attained in the future and the
steps necessary to reach them. A manager cannot do any planning, unless the goals are known
(c) Planning is forward looking:. Planning is in keeping with the adage, “look before you leap”. Thus
planning means looking ahead. It is futuristic in nature since it is performed to accomplish some objectives in
future.
(d) P l a n n i n g p e r v a d e s a l l m a n a g e r i a l a c t i v i t y : . Planning is the basic function of
managers at all levels, although the nature andscopeofplanningwillvaryateachlevel
(e) P l a n n i n g i s t h e p r i m a r y f u n c t i o n : . Planning logically precedes the execution of all other
managerial functions, since managerial activitiesinorganizing; staffing,directing and controlling are designed to support
the attainment of organizational goals.Thus,management isa circular process beginning with planning and returning to
planning for revision and adjustment.
(f) P l a n n i n g i s b a s e d o n f a c t : Planning is a conscious determination and projection of a course
of action for the future. It is based on objectives, facts and considered forecasts. Thus planning is not a guess
work.
(g)Planning is flexible: Planning is a dynamic process capable of adjustments in accordance with the needs
and requirements of the situations. Thus planning has to be flexibleandcannotberigid.
(h)P l a n n i n g i s e s s e n t i a l l y d e c i s i o n m a k i n g : Planning isa choice activity as the planning process
involves finding the alternatives and the selection of the best. Thus decision making is the cardinal part
of planning.
.
IMPORTANCE OF PLANNING

The importance of the planning function should have be clear to you. We can outline the
importance of planning function as follows:

Provides Direction: Planning provides a clear sense of direction to the activities of the
organization and to the job behavior of managers and others. It strengthens their confidence
in understanding where the organization is heading and what for, how best to make the
organization move along the chosen path, and when should they take what measures to
achieve the goals of the organization.

Provides opportunity to analyze alternative courses of action: Another source of

importance of planning is that it permits managers to examine and analyze alternative course
of action with a better understanding of their likely consequences. If managers have an
enhanced awareness of the possible future effects of alternative courses of action, for making
a decision or for taking any action, they will be able to exercise judgment and proceed
cautiously to choose the most feasible and favorable course of action.

Reduces uncertainties: Planning forces managers to shake off their inertia and insular
outlook; it induces them to look beyond those noses, beyond today and tomorrow, and
beyond immediate concerns. It encourages them to probe and cut through complexities and
uncertainties of the environment and to gain control over the elements of change.

Minimizes impulsive and arbitrary decisions: Planning tends to minimize the incidence of
impulsive and arbitrary decisions and ad hoc actions; it obviates exclusive dependence on the
mercies of luck and chance elements; it reduces the probability of major errors and failures in
managerial actions. It injects a measure of discipline in managerial thinking and
organizational action. It improves the capability of the organization to assume calculated
risks. It increases the freedom and flexibility of managers withing well-defined limits.

King-pin function: As stated earlier, planning is a prime managerial function which

provides the basis for the other managerial functions. The organizational structure of task
and authority roles is built around organizational plans. The functions of motivation,
supervision, leadership and communication are addressed to implementation of plans and
achievement of organizational objectives. Managerial control is meaningless without
managerial planning. Thus, planning is the king-pin function around which other functions
are designed.

Resource Allocation: Planning is means of judicious allocation of strategic and scarce

resources of the organization in the best possible manner for achieving strategic goals of the
organization. The strategic resources include funds, highly competent executives,
technological talent, good contacts with government, exclusive dealer network and so on. If
the organization enjoys a distinct advantage in possession of such resources, a careful
planning is essential to allocate them into those lines which would strengthen the overall
competitive position of the organization.
Resource use efficiency: For an ongoing organization, planning contributes towards a more
efficient functioning of the various work units. There is better utilization of the
organization's existing assets, resources and capabilities. It prompts managers to close gaps,
to plug loopholes, to rectify deficiencies, to reduce wastage and leakages of funds, materials,
human efforts and skills so as to bring about an overall improvement in resource use
efficiency.

Adaptive responses: Planning tends to improve the ability of the organization to effectively
adapt and adjust its activities and directions in response to the changes taking place in the
external environment. An adaptive behavior on the part of the organization is essential for its
survival as an independent entity. For a business organization, for example, adaptive
behavior is critical in technology, markets, products and so on.

Anticipative action: While adaptation is a behavior in reaction and response to some

changes in the outside world, it is not enough in some situations. In recognition of this fact,
planning stimulates management to act, to take hold initiatives, to anticipate crises and threats
and to ward them off, to perceive and seize opportunities ahead of other competitions, and to
gain a competitive lead over others. For the purpose, some enterprises establish
environmental scanning mechanism as part of their planning systems. Thereby such
enterprises are able to direct and control change, instead of being directed and controlled by
the pervasive external forces of change.

Integration: Planning is an important process to bring about effective integration of the

diverse decisions and activities of the managers not only at a point of time but also over a
period of time. It is by reference to the framework provided by planning that managers make
major decisions on organizational activities, in an internally consistent manner.

TYPES OF PLANNING

Dimensions Types of planning

 Coverage of activities Corporate and functional planning

 Importance of contents Strategic / functional planning

 Time period involved Long term /short term planning

 Approach adopted Proactive and reactive planning

 Degree of formalization Formal and informal planning

Based on Coverage of activities

Corporate planning: Corporate planning is defined as the process of drawing up detailed
action plans in order to achieve the aims and objectives of an organization. It takes into
account organizational resources and the environment within which a company operates.
Corporate planning is the responsibility of senior management, and there should be a
structured approach to achieving objectives and implementing corporate strategy. Corporate
planning represents a formal, structured approach to achieving objectives and to
implementing the corporate strategy of an organization. Success of the Plan depends how best
the resources (strength and weakness) of the organization and the environment (opportunity
and threats) have been critically analysed.

Functional planning: Functional planning refers to medium term planning carried out by
middle management and at times with assistance of top management as well. Functional
planning is undertaken by various departments (functions) in the organization to determine
their respective objectives, derived from the long-term goals and objectives, as well as for
putting in place strategies and action plans. Functional planning may also be of a long term
nature where the business organization is subjected to an uncertain and highly volatile
business environment.

Based on importance of contents

Strategic planning: Strategic planning is a tool for organizing the present on the basis of the
projections of the desired future. That is, a strategic plan is a road map to lead an
organization from where it is now to where it would like to be in five or ten years.
Functional planning: Functional planning refers to medium term planning carried out by
middle management and at times with assistance of top management as well. Functional
planning is undertaken by various departments (functions) in the organization to determine
their respective objectives, derived from the long-term goals and objectives, as well as for
putting in place strategies and action plans. Functional planing may also be of a long term
nature where the business organisation is subjected to an uncertain and highly volatile
business environment.

Based on time period involved

Long term planning: Long term planning cover a longer time including various short term
planning to achieve a common goal of organization. It may include a variety of different
types of training
Short term planning: Short term planning meet a particular objective in the near future. It
covers a limited area of a common organizational planning. Short term planning fit well
within and contributes to long-range plans.

Based on Approach adopted

Proactive planning: In proactive planning you must think about what to do before events
happen, like planning your finances for a possible lay-off. You make choices and decisions
based on your thinking. Proactive planning is the concept of planning AHEAD of the actual
event, to be prepared for it (whatever it is). By being proactive you avoid being over-run by
the event, and have plans and procedures in place to cope with it (whatever it is). Emergency
organizations, like police and EMS have plans for future events like riots, floods or
earthquakes, you should, too. In business, it is always good to be prepared.
Proactive action plans focus on personal value development. They allow you to
strengthen the foundation that is responsible for driving your life's vision. They allow the
scattered mind to focus and the chronically disorganized to remain organized.
Reactive planning: Reactive planning is the process whereby future action is dictated as a
response to whatever has already, or is now, occurring--- it is "reflex" or "knee-jerk" in
nature. The opposite side of the coin is proactive planning, which sets in motion actions as a
function of what is anticipated or probable; it is preemptive in nature. Reactive Action Plans
are used in response to a particular situation that you must react to. Common in recovery are
reactive action plans that focus on the specific rituals that you have engaged in, or that you
are likely to engage in. You have an urge: you call your sponsor.

Based on usage
Single use pans: Those which are designed to meet specific, non-repetitive and unique
situations
Standing Plans: Those which are fairly stable and are meant to handle a wide range of
repetitive situations over a period of time

Based on Degree of formalization

Formal planning: Structured and formal plans, used by multiple people, are more likely to
occur in projects, diplomacy, careers, economic development, military campaigns, combat, or
in the conduct of other business
Informal planning: Informal or ad-hoc plans are created by individuals in all of their
pursuits.

METHODS OF MAKING BUSINESS PLANNING EFFECTIVE

The management at different levels should take measures to make the business plan effective
due to the possibility of limitations. These measures include:
 Establishment of co-ordination between long-terms plans and short-term plans
 Bringing co-ordination among all the departments in the organization in formulating and
implementing plans.
 Formulating a comprehensive plan linking all the departmental plans with the corporate
level plans.
 Giving proper attention to the departmental level plants.
 Ensuring the commitment and involvement of all managers at all levels in the
organization.
 Train and develop the managers in analyzing and understanding external environment,
formulate the plans effectively.
 Foresee the environmental changes; feed the information forward to all the levels in the
organization.
 Ensuring effective team work and empower the mangers to formulate effective plans.

Unit-12
Change Management
Factors, Process and Procedures

Change management is a systematic approach to dealing with change, both from the
perspective of an organization and on the individual level. A somewhat ambiguous term,
change management has at least three different aspects, including: adapting to change,
controlling change, and effecting change. A proactive approach to dealing with change is at
the core of all three aspects. For an organization, change management means defining and
implementing procedures and/or technologies to deal with changes in the business
environment and to profit from changing opportunities.
Nature of changes
• Human process interventions at the individual, group and total system level
• Interventions that modify an organizations structure and technology
• Human resource interventions that seek to improve member performance and
wellness
• Strategic interventions that involve managing the organization’s relationship to its
external
Change management is a basic skill in which most leaders and managers need to be
competent. There are very few working working environments where change management is
not important. This article takes a look at the basic principles of change management, and
provides some tips on how those principles can be applied. When leaders or managers are
planning to manage change, there are five key principles that need to be kept in mind:
1. Different people react differently to change
2. Everyone has fundamental needs that have to be met
3. Change often involves a loss, and people go through the "loss curve"
4. Expectations need to be managed realistically
5. Fears have to be dealt with

FACTORS EFFECTING CHANGE

There can be many factors affecting change depending upon the situation and the issue at
hand. Broadly these factors are of three types which are given below:

Radiant Causes
The changes related to technology induction are affected by the following factors which are
known as Radiant causes.
 The change in technology is administratively less feasible.
 Costs of changes are high.
 Leads to skill downgrading or either undesirable conditions.
 Requires extra efforts to learn and relearn.
When there is change in technology in an organisation, often there will be resistance from the
employees/workers. Because they are so used to the routine way of doing things, they fear
when there is a change in the way they work. For example, when computer was introduced in
many organisations, it was resisted by employees because they thought they would loose their
jobs. When it was explained properly by authorities, employees accepted it. The source of
such fears which provoke resistance is the lack of awareness. It follows that before significant
changes are introduced in the work patterns, the employees who are likely to be affected by
the change should be taken into confidence and conditions created in which the level of
resistance is rninimised.

Psychological Causes
People who have introduced innovations in one field or another know what type of
psychological factors crop up during implementation. The major ones are:
 Lack of appreciation or tolerance.
 Conflict between the employees and the management.
 Fear of the unknown or uncertain outcomes of the change.
 Lack of trust in others.
 Need for security.
 Desire for existing position.
Whenever there is any change, the first reaction from those likely to be affected is "fear" to
accept it. There are several reasons for not accepting change. There might be some false
impressions set in the mind that change outcomes are not positive, and an insecure feeling
that change is not good or comfortable. For example, in a university if any examination
reforms are contemplated, immediate reaction is negative both from the students and
teachers. If both teachers and students are consulted before hand on the proposed changes
and their usefulness in the long run is explained to them, then they are likely to accept the
change relatively in an easy manner. So any change required should not be initiated without
consulting all the parties concerned. Even after consultation, hastiness in execution of change
(without well thought-out plan), and implementation of acceptable change coaxed by an
unacceptable strategy result in negative attitude towards change.

Sociological Causes
Every organisation has to operate in a society, and therefore, various sociological issues
influence the organization, and at times affect the implementation of innovation due to
interests/disinterests of various groups in the society. The main causes that affect changes are:
 Vested interest of some social groups and employees to continue in the present
position.
 Desire to maintain the existing formal and informal relationship.
 Narrow outlook of the employees and others in society.
 Social group values are opposite to the values of the proposed change and policies and
power alliances are in conflict with the change situation.
If change is not suitable to group norms, or deviates from what is expected, then there is
resistance. If change is not acceptable to the entire group, each individual starts showing
resistance, at times out of fear from the group also. Acceptance of change by the society plays
a major role in implementation of the change. For example, till a decade back
correspondence education was looked down upon by society as a second rate and second
chance education mainly for dropouts. Gradually, there is a significant change in the thinking
of the society towards correspondence and distance education in positive terms, and with that,
demand for distance education programmes and courses has been increasing from all sections
of the society.

JOHN P KOTTER'S 'EIGHT STEPS TO SUCCESSFUL CHANGE

American John P Kotter (b 1947) is a Harvard Business School professor and leading thinker
and author on organizational change management. Kotter's highly regarded books 'Leading
Change' (1995) and the follow-up 'The Heart Of Change' (2002) describe a helpful model for
understanding and managing change. Each stage acknowledges a key principle identified by
Kotter relating to people's response and approach to change, in which people see, feel and
then change.
Kotter's eight step change model can be summarized as:
1. Increase urgency - inspire people to move, make objectives real and relevant.
2. Build the guiding team - get the right people in place with the right emotional
commitment, and the right mix of skills and levels.
3. Get the vision right - get the team to establish a simple vision and strategy, focus on
emotional and creative aspects necessary to drive service and efficiency.
4. Communicate for buy-in - Involve as many people as possible, communicate the
essentials, simply, and to appeal and respond to people's needs. De-clutter
communications - make technology work for you rather than against.
5. Empower action - Remove obstacles, enable constructive feedback and lots of
support from leaders - reward and recognise progress and achievements.
 6. Create short-term wins - Set aims that are easy to achieve - in bite-size chunks.
Manageable numbers of initiatives. Finish current stages before starting new ones.
7. Don't let up - Foster and encourage determination and persistence - ongoing change -
encourage ongoing progress reporting - highlight achieved and future milestones.
8. Make change stick - Reinforce the value of successful change via recruitment,
promotion, new change leaders. Weave change into culture.

Fast changing environments

Planning, implementing and managing change in a fast-changing environment is increasingly
the situation in which most organizations now work.
Dynamic environments such as these require dynamic processes, people, systems and culture,
especially for managing change successfully, notably effectively optimising organizational
response to market opportunities and threats.
Key elements for success:
 Plan long-term broadly - a sound strategic vision, not a specific detailed plan (the
latter is impossible to predict reliably). Detailed five years plans are out of date two weeks
after they are written. Focus on detail for establishing and measuring delivery of immediate
actions, not medium-to-long-term plans.
 Establish forums and communicating methods to enable immediate review and
decision-making. Participation of interested people is essential. This enables their input to
be gained, their approval and commitment to be secured, and automatically takes care of
communicating the actions and expectations.
 Empower people to make decisions at a local operating level - delegate responsibility
and power as much as possible (or at least encourage people to make recommendations
which can be quickly approved).
 Remove (as far as is possible) from strategic change and approval processes and
teams (or circumvent) any ultra-cautious, ultra-autocratic or compulsively-interfering
executives. Autocracy and interference are the biggest obstacles to establishing a successful
and sustainable dynamic culture and capability.
 Encourage, enable and develop capable people to be active in other areas of the
organization via 'virtual teams' and 'matrix management'.
 Scrutinise and optimise ICT (information and communications technology) systems to
enable effective information management and key activity team-working.
 Use workshops as a vehicle to review priorities, agree broad medium-to-long-term
vision and aims, and to agree short term action plans and implementation method and
accountabilities.
 Adjust recruitment, training and development to accelerate the development of people
who contribute positively to a culture of empowered dynamism.

UNIT-13
DECISION MAKING
Concept, Types of decisions, styles and techniques of decision making, steps in
DM process, guidelines for making effective decisions

Decision making is a process of identifying and choosing alternative courses of action

in a manner appropriate to the demand of the situation. Decision making plays an important
role in all phases of management, ie., planning, organizing, directing, controlling, staffing,
etc. Managers often find themselves facing alternative courses of action, out of which they
are expected to choose or decide upon a single course of action. The decisions they make are
influenced by various factors like past experience, the external environment, human
relationships within the organization and the cognition levels of the decision makers
themselves. These decisions made by the managers are expected to lead the organization
towards the achievement of its objectives. The decision making process is a key determinant
of the success of both the management and the organization.
The process of examining your possibilities, options, comparing them and choosing a
course of action
"Decision-making involves the selection of a course of action from among two or
more possible alternatives in order to arrive at a solution for a given problem“.
- Trewatha & Newport

Nature of Decision Making

The process of decision making involves selecting a particular course of action from all the
alternatives available. The process of decision making helps an individual to narrow down the
choices available to him in order to arrive at the most suitable option.

Types of Decisions
There are two types of decisions depending upon the frequency at which decisions have to be
made. They can be classified into programmed and non-programmed decisions.

Programmed Decisions: A decision is said to be programmed when adequate information

about the decision situation is available with the decision maker. In certain situations, due to
the frequent occurrence of the situation, making a decision rule is easy. The presence of such
decision rules guides the decision maker as to which is the most appropriate alternative that
can be chosen under the prevailing conditions. This enables him in making programmed
decisions. The same rule is used to make a decision whenever such a situation arises in the
future. If the situation is the same, the rule applied has to be the same.

Non-Programmed Decisions: A new problem or decision making situation which involves

the development and evaluation of alternatives without the aid of a decision rule is generally
called a non-programmed decision. Non-programmed decisions are characterized by a poorly
defined structure and lack of goal clarity. They are made in the absence of reliable and well
defined sources of information and lack an explicit procedure for decision making which,
thus, is responsible for the poorly defined structure of non-programmed decisions.

Programmed V/S Non-Programmed Decisions

Characters Programmed decisions Non-programmed decisions

Type of Problem Structured Unstructured
Managerial level Lower level Upper level
Frequency Repetitive New, Usual
Information Readily available Ambiguous/incomplete
Time frame for solution Short Relatively long
Solution relies on Procedures, rules & policies Judgment & creativity

The Decision-Making Process

 The decision-making process is the eight steps that one-goes through to make a
decision: recognizing the problem or opportunity, gathering information, considering
alternative courses of action, analyzing alternatives, choosing an alternative, implementing
the decision, evaluating the results, and implementing changes.
 Recognizing the Problem or Opportunity: A business opportunity: must be
recognized before it can be explored. Similarly, a problem must be recognized before it
can be attacked. It is important to define the problem and to decide whether to do anything
about it.
 Gathering Information : The second step in the process is to gather information.
This might involve talks with personnel and with outsiders who can provide insight.
Internal records and secondary sources of information such as libraries also might be used.
 Considering Alternative Courses of Action: The third step in the process is to
consider alternative courses of action. Some firms use brainstorming sessions. In these
sessions, people are encouraged to suggest alternatives freely as they come to mind.
Creativity is important, so no evaluation is made of the suggestions at this stage. The aim
is to produce new ways of looking at the opportunity or problem. Then alternative ways of
dealing with it are developed.

Decision making stages

There are four stages that should be involved in all group decision making. These stages, or
sometimes called phases, are important for the decision-making process to begin
Orientation stage- This phase is where members meet for the first time and start to get to
know each other.
Conflict stage- Once group members become familiar with each other, disputes, little fights
and arguments occur. Group members eventually work it out.
Emergence stage- The group begins to clear up vague opinions by talking about them.
Reinforcement stage- Members finally make a decision, while justifying themselves that it
was the right decision.

Decision-Making Styles
• No decision: Some boards may consciously or unconsciously avoid making decisions and
thus make the decision not to decide. The "no decision" style can be displayed by topic
jumping-allowing members to shift the topic before a decision is reached and by the "plop".
The "plop" happens when one member initiates an idea, action, or decision, but the group
gives no response. Essentially the plop is a board decision by omission. Avoiding or ignoring
actions or decisions is a decision, it is just a decision not to decide.
• Self-Appointed Decision-Maker: A decision or course of action is initiated by only one
member under the assumption that other members consented. One member states a decision,
no one else agrees or disagrees with the decision, and so one member makes the decision for
the entire board. Although this decision-making style is very timely, decisions are not based
on the boards input and therefore do not reflect the collective opinion of the board.
• Minority Rule: Minorities of board members (3 to 4) agrees to a course of action or make a
decision while the other members remain silent. A vote is usually not taken but based on
dominant member's discussion; a few people make a decision for the entire board. This style
does not consider other member's opinions or values in the decision reached. Minority rule
can cause frustration among silent members creating the impression their opinion does not
count.
• Majority Rule: Requires the agreement of at least 51% (or more) of board members to
reach a decision. Groups often reach majority rule through a brief and somewhat formal
discussion, then a final vote is taken usually through a show of hands. When used for
complex or high stake decisions
this style often produces a win/lose solution and is considered a competitive style of decision
making.. Although this style moves a group forward quickly, it can result in group
divisiveness and
frustration for those members whose opinions were not part of the majority decision.
• Consensus: Board members make a decision based on all members supporting the decision
or action. Consensus is not a compromise because members work to seek mutual agreement
on the decision. Consensus building incorporates all members' opinions and values into the
decision. This style is very difficult because it builds off of the tension caused by a diversity
of opinions to develop creative agreements. This style can become quite time consuming. The
benefit of building consensus on complex, high stake decisions is that it fosters board
empowerment, builds group cohesion, and improves interpersonal relationships and
accountability.

How to Decide on Which Style to Use?

Obviously the "no decision", "self-appointed decision-maker" and "minority support" are not
recommended as organized procedures for your board to follow. These styles really refer to
common situations that many boards may fall into when decision-making is required.
However majority support and consensus are styles to which procedures and helpful
techniques can be applied. When deciding whether to use majority support or consensus, the
board should consider the following factors:

• Timeliness: How much time has the board been given to make a decision. If the board has
been allocated one meeting to reach a decision, they may have to choose the most timely
method possible.

• Appropriateness: How complex is the decision? If the decision is to take an hour or 45

minutes for lunch, you don't need to reach consensus to make a decision. However, if the
board were to approve a development plan for their community, they would want to spend
more time gathering concerns.

• Relationship: How will the decision affect board members relationship? If the decision-
making style could jeopardize or place the relationship in peril, maybe a more collective
approach to decision making should be considered.

Six C’s of Decision Making

1. Construct a clear picture of precisely what should be decided

2. Compile a list of requirements that must be met

3. Collect information on alternatives that meet the requirements

 4. Compare alternatives that meet the requirements

5. Consider the “what might go wrong” for each alternative

6. Commit to a decision and follow through with it

Guidelines for making effective decisions

The following 13 tips are designed to help you make powerful and effective decisions.
1) There is no right or wrong when you are making a decision. The only outcome is the
decision that you make. A decision is a choice between alternatives.
2) Never make a snap decision about anything. If the decision is one you can quickly change,
such as where to go for lunch, then you can make a quick decision. If it's a bigger decision
such as moving house or quitting your job, then take time to think it out.
3) Make written notes when you are making a decision - perform a SWOT (Strength,
Weakness, Opportunities, Threats) analysis if you have to. Write down all the possible
solutions and information, including how each option will effect both yourself and the
people around you. Often by writing the options down the solution becomes clear to you.
4) Avoid allowing your decisions to stack up. Making decisions one at a time is so much
easier than dealing with the pressure of lots of decisions all at one.
5) If your decision is going to affect other people then talk to them and find out what their
opinions and needs are. It may help you make the decision easier.
6) When you've made a decision, stick to it. You can never be totally sure you've made the
right decision, but when you've made one stick with it unless there are extremely valid
reasons to change it.
7) When you have made your decision, and before you take any action on it, think about what
will happen if you take this course of action and ask yourself if anything could potentially
go wrong if you followed through with this decision.
8) When you have made a decision, commit yourself to it 100% and don't let the what if's
bother you.
9) Visualise the outcome of your decision and follow it through in the comfort of your own
mind. Visualise all the possible outcomes before you actually take action and follow
through on the decision.
10) Believe in yourself and in your ability to not only make a good decision, but to follow it
through. This belief will help you to trust your decisions.
11) Before you make any decision, review the facts that you have relating to the decision. If
necessary, go and find any more information you need in order to make a good decision.
Remember to give yourself time to analyse and absorb the facts before making your
decision.
12) Base your decisions on what feels right to you - your gut instinct will usually guide you
extremely well.
13) Look at the objective of the decision, the alternatives and any risks before making the
decision

UNIT-14
ORGANIZING
Meaning of organization, Concept, principles, organizational structure, Span of
management, Departmentalization, Authority and responsibility, Delegation and
decentralization, line and staff relations

Meaning of Organisation:
Organisation is the foundation upon which the whole structure of management is
built. Organisation 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, organisation is the structure or mechanism (machinery)
that enables living things to work together. In a static sense, an organisation is a
structure or machinery manned by group of individuals who are working together
towards a common goal.
According to keith Davis, "Organisation may be defined as a group
of individuals, large of small, that is cooperating under the direction of executive
leadership in accomplishment of certain common object."
According to Chester I. Barnard, "Organisation is a system of co-operative
activities of two or more persons."
According to Mooney and Railey, "Organisation is the form of every human
association for the attainment of a common purpose.
Organising is the process of defining and grouping activities and establishing
authority relationships among them to attain organizational objectives.

PRINCIPLES OF ORGANISATION
There is no unanimity as to number of principles of organisation amongst the leading authors
on the subject. The main principles of organisation are as follows:
The Principle of Objective
Every enterprise, big or small, prescribes certain basic objectives. Organisation serves as a
tool in attaining these prescribed objectives. Every part of the organisation and the
organisation as a whole should be geared to the basic objective determined by the enterprise.
Principle of Specialization
Precise division of work facilitates specialization. According to this principles division of
work between the employees must be based on their ability, capability, tasks, knowledge and
interest. This will ensure specialization and specialization will lead to efficiency, quality and
elimination of wastage etc.
The Scalar Principle
The principle is sometimes known as the 'chain command'. There must be clear lines of
authority running from the top to the bottom of the organisation.
The Principle of Authority
Authority is the element of organisation structure. It is the tool by which a manager is able to
create an environment for individual performance.
The Principle of Unity of Command
One subordinate should be kept in the supervision of one boss only. This principle avoids the
possibility of conflicts in instructions and develops the feeling of personnel responsibility for
the work.
The Principal Span of Control
It is also known as 'span of management', 'span of supervision' or 'levels of organisation', etc.
The Principle of Definition
The contents of every position should be clearly defined. The duties, responsibilities,
authorities and organizational relationship of an individual working on a particular position
should be well defined.
The Principle of the Unity of Direction
The basic rationale for the very existence of organisation is the attainment of certain
objectives. Major objective should be split into functional activities and there should be one
objective and one plan for each group of people.
The Principle of Supremacy of Organisation Objectives
The organisation goals and objectives should be given wide publicity within the organisation.
The people contributing to it, should be made to understand that enterprise objectives are
more valuable and significant and one should place one's personal motives under it.
The Principle of Balance
In every organisation structure there is need for balance. For effective grouping and assigning
activities, this principle calls for putting balance on all types of factors human, technical as
well as financial.
The Principle of Human Element
This principle indicates that the success or failure of an enterprise largely depends on the
handling of human element. If the organisation has sound labor policies along with a number
of welfare activities it is bound to succeed.
The Principle of Discipline
According to his principle, it is the responsibility of the management to maintain proper
discipline in the enterprise. Fayol considered discipline as 'respect for agreements which are
directed at achieving obedience, application, energy and outward mark of respect."

ORGANIZATIONAL STRUCTURES
Org structures are defined by using different criteria. Things to think about are what is the
functional grouping of work processes and are there natural groupings of teams, work groups
or units. This is a decision from senior management on how they would like work activities
to be organized and carried out. This also identifies natural reporting relationships and chain
of command. Reporting relationships can be both vertical as well as horizontal. The different
structures are:

Matrix Structure
When it comes to matrix structure, the organization places the employees based on the
function and the product. The matrix structure gives the best of the both worlds of functional
and divisional structures. In this type of an organization, the company uses teams to complete
tasks. The teams are formed based on the functions they belong to (ex: software engineers)
and product they involved in.
 Functional Structure
The organization is divided into segments based on the functions when managing.
This allows the organization to enhance the efficiencies of these functional groups. As an
example, software company. Functional structures appear to be successful in large
organization that produces high volumes of products at low costs. The low cost can be
achieved by such companies due to the efficiencies within functional groups. In addition to
such advantages, there can be disadvantage from an organizational perspective if the
communication between the functional groups is not effective. In this case, organization may
find it difficult to achieve some organizational objectives at the end.

Divisional Structure
These types of organizations divide the functional areas of the organization to divisions. Each
division is equipped with its own resources in order to function independently. There can be
many bases to define divisions. Divisions can be defined based on the geographical basis,
products / services basis, or any other measurement. As an example, take a company such as
General Electric’s. It can have microwave division, turbine division, etc., and these divisions
have their own marketing teams, finance teams etc. In that sense, each division can be
considered as a micro-company with the main organization.
Product
Another common structure is to be organized by specific product type. Each product group
falls within the reporting structure of a senior leadership person and that person oversees
everything related to that particular product line.

Customer
Certain industries will organize by customer type. This is done in an effort to ensure
specificcustomer needs are met by specific customized service approaches. An example of
this would be in healthcare. A different customer type might be outpatient and their needs are
very different than inpatient customers.

Geographic
For organizations that cover a span of geographic regions, it sometimes makes sense to
organize by the region. This is done to better support logistical demands and differences in
geographic customer needs. Typically a structure that is organized by geographical regions
reports up to a central oversight structure.
 Deliberate time and thought should always go into the design of an organization’s
structure. This is important so employees have a visual of how the organization functions and
understands the chain-of-command. Operating within a defined structure with good
communication processes and work-flows help to ensure more efficient management of
resources – people, time and money.

SPAN OF MANAGEMENT
Span of management refers to the number of subordinates that a manger can efficiently
manage. Number of subordinate directly reporting to a manager is known as span. Span of
management is important for
 Determining the complexity of an individual manager’s job and
 Determining shape and structure of the organisation
Fewer the number of subordinates reporting to a manger larger the number of managers
required. Therefore span for control should be fixed.

Factors determining the span of management:

Capacity of manager: Each manager has different capacity and ability in terms of decision
making, leadership, communication, judgment, guidance and control etc. mangers having
more abilities in respect to these factors may have more number of subordinates.
Capacity of subordinates: capacity of subordinates also affects the span of a manager.
Efficient and trained subordinates may work without much help of their manager. They may
just need broad guidelines and they will perform accordingly. They would require lesser time
from their superior due to which manager can have large number of subordinates under him.
Nature of work: If subordinates are performing similar and repetitive routine work they can
do their work withouthaving much time of the manager. Frequent changes in work would
require more detailed instructions from manager whenever there is change in work. Type
of technology used also affects the span of control.
Degree of Decentralization: degree of centralization or decentralization affects the span
by affecting the involvement in decision making process. If manager clearly delegates his
authority and defines it fully this would require less time to devote to manage his
subordinates as subordinates will take most of the actions by their own. Hence manager can
have wider span.
Degree of Planning: If the planning is effectively done particularly if standing plans
procedures rules methodsare clear then subordinates can make their decisions on their own. If
they have to make their own plans they would require more guidelines by superiors and
manager can handle narrow span in the case of improper planning.
Communication System: If communication system is modern i.e. tools like electronic
devices will save time of face to face interaction, which require more time, span of manager
can be increased
Level of Management: level of management also affects the span. Higher the level of
management lesser the number of subordinates as higher level management does not have
much time to supervise. They spend their most of time in planning and other
functions. Lower level managers can have wider span than the higher levelmanagers.
Physical location: If all the persons to be supervised are located at same place within the
direct supervision of manager, he can supervise more number of people. If subordinates are at
different locations then manager can supervise less number of spans.

DEPARTMENTALIZATION

The basis on which individuals are grouped into departments and departments into total
organizations. Another fundamental characteristic of organization structure is
departmentalization, which is the basis for grouping position into departments and
departments into the total organization. Managers make choices about how to use the chain
of command to group people together to perform their work. There are five approaches to
structural design that reflect different uses of the chain of command in departmentalization.
The functional, divisional, and matrix are traditional approaches that rely on the chain of
command to define departmental groupings and reporting relationships along the hierarchy.
Two approaches have emerged to meet organizational needs in a highly competitive global
environment. A brief illustration of the five alternatives is presented in the chart on the other
side .

1. Vertical functional approach. People are grouped together in departments by common

skills and work activities, such as in an engineering department and an accounting
department.

2. Divisional Approach. Departments are grouped together into separate, self-contained

divisions based in a common product, program, or geographical region. Diverse skills rather
than similar skills are the basis of departmentalization.

3. Horizontal matrix approach. Functional and divisional chains of command are

implemented simultaneously and overlay one another in the same departments. Two chains
of command exist, and some employees report to two bosses.

4. Team-based approach. The organization creates a series of teams to accomplish specific

tasks and to coordinate major departments. Teams can exist from the office of the president
all the way down to the shop floor.

5. Network Approach. The organization becomes a small, central hub electronically

connected to other organizations that perform vital functions. Departments are independent,
contracting services to the central hub for a profit. Departments can be located anywhere in
the world.

Each approach to structure serves a distinct purpose for the organization, and each has
advantages and disadvantages. The basic difference among structures is the way in which
employees are departmentalized and to whom they report. The differences in structure
illustrated here have major consequences for employee goals and motivation. Let us now
turn to each of the five structural designs and examine their implications for managers.
AUTHORITY AND RESPONSIBILITY
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. 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.
Power is the ability to get things done by others. The principle of power is to punish
and reward. Power can exist with or without authority. For instance an armed robber has
power but no authority. Whereas authority is the power to enforce law and take command,
and to expect obedience from those without authority. Authority can exist with or without
power, for example a teacher has authority over the pupils but no real power. Steven Lukes
states that there is three dimensions of power, decision, non decision making and
manipulating desires. In parliament when a law is being discussed by MP's and any other
form of political group there must be a body which has power so that they can actually come
to a decision.

DELEGATION AND DECENTRALIZATION

Delegation involves handing out responsibility to individuals in an organisation to make
decisions rather than everyone having to be told what to do by top managers in a hierarchical
way. This is coupled with the decentralisation process whereby instead of all decisions being
made at the centre (e.g. Head Office) of an organisation, they are made throughout the
organisation. In the modern competitive business world big companies have to accept the
paradox that to stay big they have to act small. In this new way of viewing the organisation,
self-contained teams are responsible for a specific part of the business or for a particular
project. They work to targets set by central management. They take advice and assistance as
necessary from the specialist departments such as Research and Development, Finance,
Personnel and Public Relations - although sometimes they may have their own specialists.
They also take goods and services from outside suppliers when these are judged to be more
cost-effective. Occasionally, central management, or one of its teams, may decide to
subcontract an entire project to an outside supplier.
Top-down structure
Organisations have tended to move away from old hierarchical, top-down structures to ones
in which employees are empowered to make decisions and think for themselves, often in
matrix type structures.
Hierarchy - a pyramid-like personnel structure in which people mainly or only report
upwards.
Matrix - a personnel structure based on 'teams' across specialist boundaries, with upward
reporting reduced to a minimum. Individuals take responsibility for improving their own
work and helping fellow team members improve the quality of their work. The role of senior
management is to guide and integrate rather than direct.
 LINE – STAFF RELATIONSHIPS :
e.g. A plant manager has line authority over each immediate subordinate, human resource
manager, the production manager and the sales manager. However, the human resource
manager has staff authority in relation to the plant manger, meaning the human resource
manager possesses the right to advise the plant manager on human resource matters. Still
final decisions concerning human resource matters are in the hands of the plant manager, the
person holding the line authority.
Role of staff personnel:
Harold Stieglitz has pinpointed 3 roles that staff personnel typically perform to assist line
personnel:
1. The Advisory or Counseling Role : In this role, staff personnel use their
professional expertise to solve organizational problems. The staff personnel are, in effect,
internal consultants whose relationship with line personnel is similar to that of a
professional and a client.
2. The Service Role : Staff personnel in this role provide services that can more
efficiently and effectively be provided by a single centralized staff group than by many
individuals scattered throughout the organization. This role can probably best be
understood if staff personnel are viewed as suppliers and line personnel as customers.
3. The Control Role : Staff personnel help establish a mechanism for evaluating the
effectiveness of organizational plans.
The role of staff in any organization should be specifically designed to best meet the needs
of that organization.
Conflict in Line – Staff Relationship:
From the view point of line personnel, conflict is created because staff personnel tend to
 Assume Line Authority
 Do not give Sound Advice
 Steal Credit for Success
 Fail to Keep line personnel informed of their activities
 Do not see the whole picture.
From the view point of Staff Personnel, conflict is created because line personnel do
not make proper use of staff personnel, resist new ideas and refuse to give staff personnel
enough authority to do their jobs. Staff Personnel can often avert line-staff conflicts if they
strive to emphasize the objectives of the organization as a whole, encourage and educate line
personnel in the appropriate use of staff personnel, obtain any necessary skills they do not
already possess, and deal intelligently with the resistance to change rather than view it as an
immovable barrier. Line personnel can do their part to minimize line staff conflict by sing
staff personnel wherever possible, making proper use of the staff abilities, and keeping staff
personnel appropriately informed.
 UNIT-15
COORDINATION
Concept, need, Types, Techniques of Coordination, Interpersonal relations in the
organization

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.
According to Mooney and Reelay, “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.

Need for coordination

Coordination is required whenever and wherever a group of persons work together to achieve
common objectives. It is the basic cementing force in an organisation. Coordination becomes
necessary because of the following disintegrating forces.
1. Increase in size and complexity of operations: Growth in the number and complexity of
activities is the major factor requiring coordination. Need for coordination arises as soon
as the operations become multiple, diversified and complex. In a large organisation, a
large number of individuals are employed. These people may work at cross purposes if
their efforts and activities are not properly coordinated. Increasing scale of operations may
also increase geographical distance among the members of the organisation. Several layers
of authority create problem of communication. Personal contact is not possible and formal
methods of coordination become essential. Operations are multifarious and there are too
many centrifugal forces. Therefore, constant efforts are requited to ensure harmonious
functioning of the enterprise. As the size of organisation increases, the task of coordination
becomes increasingly difficult.
2. Specialization: Division and subdivision of work into specialized functions and
departments leads to diversity; of tasks and lack of uniformity. Specialists in charge of
various departments focus on their own functions with little regard to other functions. For
example, production department may insist on the manufacture of those products which
are convenient and economical to produce overlooking their suitability to consumers. It
becomes necessary to synchronies the diverse and specialized activities of different units
to create unity in the midst of diversity. Generally, greater the division of labor. More is
the need for coordination. Specialization will not yield desired results unless specialized
efforts are 'effectively integrated. Where division of labor is inevitable, coordination
becomes mandatory. Need to specialize leads to horizontal and vertical differentiation of
organizational activities. The greater the differentiations, more serious are the problems of
communication and coordination.
3. Clash of interests: Individuals join an organisation to fulfill their personal goals, i.e., their
physiological and psychological needs. Often individuals fail to appreciate how the
 achievement of organizational goals will satisfy their own goals. They may pursue their
own specialized personal interests often at the expense of the larger organizational goals.
They tend to work at cross-purposes. Coordination helps to avoid conflict between
individual and organizational goals. It brings about harmony between the two types of
goals by making individuals see how their jobs contribute to the common goals of the
organisation. Coordination avoids all splintering efforts that may destroy the unity of
action.
4.Different outlook: Every individual in the organisation has his own way of working and
approach towards problems. Capacity, talent and speed of people differ widely. It becomes
imperative to reconcile differences in approach, timing and effort of different departments
to secure unity of action. Cooperation serves as the binding force in an organisation in the
face of narrow and sectional outlook. Coordination becomes difficult due to differences in
the attitudes and working styles of personnel.
5. Interdependence of units: Various units of an organisation depend upon one another for
their successful functioning. For instance the spinning plant supplies yarn to the weaving
plant. The output of one unit serves as the input of another unit. James D. Thompson has
identified three types of interdependence, namely, (a) pooled interdependence, (b)
sequential interdependence, and (c) reciprocal interdependence. Pooled interdependence
refers to the situation wherein the various departments of an organisation function as
autonomous units and do not depend on each other for the performance of their day-today-
activities. In sequential interdependence, the work of different units forms a sequence and
one unit cannot do its work until the work in preceding unit has been com pelted. In
reciprocal interdependence, different units are reciprocally related and there is a give and
take relationship among them. The need for coordination increases with an increase in the
interdependence between organizational units. It is highest in reciprocal interdependence,
higher in sequential interdependence and high in pooled interdependence.
6. Conflicts: In an organisation, conflicts may arise between line managers and staff
specialists or between management and workers. Human nature is such that a person
emphasizes his own area of interest and does not want to get involved in the activities of
others. Coordination avoids potential sources of conflict.
7. Empire-building: In order to boost up self-importance and personal ego, some members
of the organisation tend to over-emphasize their own activities. Such empire-builders try
to get maximum possible share of the total resources for their own units as if the units
were separate entities. This empire building tendency does not allow cooperation and self-
coordination. Special efforts become necessary to coordinate the activities and efforts of
empire-builders.
8. Personal jealousies and rivalries: Personality clashes are quite common in human
organizations. Members of rival groups deliberately sabotage coordination. In their efforts
to settle personal scores, some persons do not permit harmonious action or team work.
Such rivalry is often accentuated by lack of clear-cut goals and specific authority limits.

Types of co-ordination:
The co-ordination may be divided on different bases, namely;
1. Scope – on the basis of scope or coverage, co-ordination can be.
 Internal – refers to co-ordination between the different units of an organisation
within and is achieved by integrating the goals and activities of different departments of
the enterprise.
  External – refers to co-ordination between an organisation and its external
environment comprising government, community, customers, investors, suppliers,
competitors, research institutions, etc. It requires proper match between policies and
activities of the enterprise and the outside world.
2. Flow – on the basis of flow, co-ordination can classified into:
 Vertical – implies co-ordination between different levels of the organisation and has
to ensure that all the levels in the organisation act in harmony and in accordance with the
goals and policies of the organisation. Vertical co-ordination is assured by top
management through delegation of authority.
 Horizontal or lateral – refers to co-ordination between different departments and
other units at the same level of the management hierarchy. For instance, co-ordination
between production department and marketing department is horizontal or lateral co-
ordination.
3. Procedural and substantive – which according to Herbert A. Simon, procedural co-
ordination implies the specification of the organisation in itself, i.e. the generalised
description of the behaviour and relationship of the members of the organisation. On the
other hand, substantive co-ordination is concerned with the content of the organisation’s
activities. For instance, in an automobile plant an organisation chart is an aspect of
procedural co-ordination, while blueprints for the engine block of the car being
manufactured are an aspect of substantive co-ordination.
Techniques of co-ordination:
The main techniques of effective co-ordination are as follows.
1. Sound planning – unity of purpose is the first essential condition of co-ordination.
Therefore, the goals of the organisation and the goals of its units must be clearly defined.
Planning is the ideal stage for co-ordination. Clear-cut objectives, harmonised policies
and unified procedures and rules ensure uniformity of action.
2. Simplified organisation – a simple and sound organisation is an important means of
co-ordination. The lines of authority and responsibility from top to the bottom of the
organisation structure should be clearly defined. Clear-cut authority relationships help to
reduce conflicts and to hold people responsible. Related activities should be grouped
together in one department or unit. Too much specialisation should be avoided as it tends
to make every unit an end in itself.
3. Effective communication – open and regular communication is the key to co-
ordination. Effective interchange of opinions and information helps in resolving
differences and in creating mutual understanding. Personal and 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 among different departments.
4. Effective leadership and supervision – effective leadership ensures co-ordination
both at the planning and execution stage. A good leader can guide the activities of his
subordinates in the right direction and can inspire them to pull together for the
accomplishment of common objectives. Sound leadership can persuade subordinates to
have identity of interest and to adopt a common outlook. Personal supervision is an
important method of resolving differences of opinion.
5. Chain of command – authority is the supreme co-ordinating power in an
organisation. Exercise of authority through the chain of command or hierarchy is the
traditional means of co-ordination. Co-ordination between interdependent units can be
secured by putting them under one boss.
6. Indoctrination and incentives – indoctrinating organisational members with the
goals and mission of the organisation can transform a neutral body into a committed
body. Similarly incentives may be used to create mutuality of interest and to reduce
 conflicts. For instance, profit-sharing is helpful in promoting team-spirit and co-operation
between employers and workers.
7. Liaison departments – where frequent contacts between different organisational
units are 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 sales department. Special co-ordinators may be appointed in certain
cases. For instance, a project co-ordinator is appointed to co-ordinate the activities of
various functionaries in a project which is to be completed within a specified period of
time.
8. General staff – in large organisations, a centralised pool of staff experts is used for
co-ordination. A common staff group serves as the clearing house of information and
specialised advice to all department of the enterprise. Such general staff is very helpful in
achieving inter-departmental or horizontal co-ordination. Task forces and projects teams
are also useful in co-ordination.
9. Voluntary co-ordination – when every organisational unit appreciates the workings
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 co-operation. It results from mutual consultation and team-spirit among the
members of the organisation. However, it cannot be a substitute for the co-coordinative
efforts of managers.

Principles of co-ordination (requisites for effective co-ordination)

Mary Parker Follett has laid out four principles for effective co-ordination;
 Direct personal contact – according to this principle co-ordination is best achieved
through direct personal contact with people concerned. Direct face-to-face
communication is the most effective way to convey ideas and information and to remove
misunderstanding.
 Early beginning – co-ordination can be achieved more easily in early stages of
planning and policy-making. Therefore, plans should be based on mutual consultation or
participation. Integration of efforts becomes more difficult once the uncoordinated plans
are put into operation. Early co-ordination also improves the quality of plans.
 Reciprocity – this principle states that all factors in a given situation are
interdependent and interrelated. For instance, in a group every person influences all others
and is in turn influenced by others. When people appreciate the reciprocity of relations,
they avoid unilateral action and co-ordination becomes easier.
 Continuity – co-ordination is an on-going or never-ending process rather than a once-
for-all activity. It cannot be left to chance, but management has to strive constantly.
Sound co-ordination is not fire-fighting, i.e., resolving conflicts as they arise.

Interpersonal relations in the organization

Good interpersonal relationships among the employees in an organization can help
attain organizational objectives within a specific time period, with accuracy and
effectiveness. Interpersonal relations have their own importance in a multi-cultured
corporation or organization as it enhances better communication and thus a better
understanding among the co-workers, as a result they learn to respect each other's cultural
values and the style of working that is majorly influenced by one's culture and tradition.
Thus, effective interpersonal relations should be encouraged in an organization so as to derive
maximum output form your workforce.
Interpersonal relationship refers to a strong association among employees either working
together in the same team or same organization. Employees must get along well for a positive
and healthy ambience at the workplace.
Some tips to improve interpersonal relationship at workplace.
 Do not treat office as your home. There is a certain way of behaving at the
workplace. It is essential to be professional at work. Never misbehave with any of your
colleagues. Legpulling, criticism, backbiting are a strict no no. It is better to avoid
someone you don’t like rather than fighting or arguing with him/her. Your office
colleagues can be your friends as well but one must know where to draw the line. Too
much of friendship is harmful and spoils relationship among employees
 An individual should not interfere in his colleague’s work. Superiors must
formulate specific KRAs for all the employees and make sure job responsibilities do not
overlap. Overlapping of job responsibility leads to employees interfering in each other’s
tasks and eventually fighting over small issues. One should be concerned only with his
work rather than trying to find out what the other employee is up to.
 Give space to your fellow workers. Giving space infact is essential in all
relationships. Overhearing anyone else’s personal conversation is strictly unprofessional.
An employee must not open envelopes, couriers or letters not meant for him. Such
practices lead to severe displeasure among employees and eventually spoil relationships.
 Do not spread baseless rumours at workplace. Even if you know something
about someone, learn to keep things to yourself. Discuss it with the individual concerned
in private rather than publicizing the whole thing. Organization has nothing to do with
anyone’s private matters.
 Pass on correct information to others. If your superior has asked you to share
some information with any of your colleagues, make sure it is shared in its desired form.
Data tampering and playing with information spoil relationships among colleagues and
lead to confusions at the workplace.
 Do not share all your secrets with your co workers. You never know when they
might misuse them. Even if you do, make sure you are doing it with someone you trust
blindly.
 Leave your ego behind. Do not bring your personal tensions to work. Think before
you speak. Making fun of colleagues is something which is not at all expected out of a
professional.
 A team leader should not scold any of his team members in front of others. It
might insult him/her. Call the individual concerned either to your cabin or conference
room. Avoid comparisons among team members. The employees must be strictly judged
according to their work and nothing else. Employees doing well should be suitably
rewarded.
 Stay away from nasty politics at workplace. Do not try to harm anyone. It
is absolutely okay to appreciate someone who has done something exceptionally well.
Avoid being jealous. It will harm you in the long run. There should be healthy
competition among the employees for a healthy environment at the workplace.
UNIT-16
DIRECTION
Concept, Principles, Requirements of effective direction, Giving orders, Techniques of
direction

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 have 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.
According to Human, “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.

Direction has got following characteristics:

1. Pervasive Function - Directing is required at all levels of organization. Every
manager provides guidance and inspiration to his subordinates.
2. Continuous Activity - Direction is a continuous activity as it continuous throughout
the life of organization.
3. Human Factor - Directing function is related to subordinates and therefore it is
related to human factor. Since human factor is complex and behaviour is
unpredictable, direction function becomes important.
4. Creative Activity - Direction function helps in converting plans into performance.
Without this function, people become inactive and physical resources are
meaningless.
5. Executive Function - Direction function is carried out by all managers and
executives at all levels throughout the working of an enterprise, a subordinate receives
instructions from his superior only.
6. Delegate Function - Direction is supposed to be a function dealing with human
beings. Human behaviour is unpredictable by nature and conditioning the people’s
behaviour towards the goals of the enterprise is what the executive does in this
function. Therefore, it is termed as having delicacy in it to tackle human behaviour.

PRINCIPLES OF DIRECTING
Direction is a complex function as it deals with people whose behaviour is
unpredictable. Effective direction is an art which a manager can learn and perfect through
practice. However, managers can follow the following principles while directing their
subordinates:
1 Harmony o 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.
2. Maximum individual contribution. Organisational objectives are achieved at the
optimum level when every individual in the organisation makes maximum contribution
towards them. Managers should, therefore, try to elicit maximum possible contribution from
each subordinate.
3.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.
4.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.
5 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.
6. Strategic use of informal organisation. Management should try to understand and make
use of informal groups to strengthen formal or official relationships. This will improve the
effectiveness of direction.
7 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.
8 Comprehensions. 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.
9 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.
10. Principle of follow through. Directing is a continuous process. Therefore, after issuing
orders and instructions, a manager should find out whether the subordinates are working
properly and what problems they are facing.

ELEMENTS IN DIRECTING
Communication, Supervision, Motivation and Leadership are the four essential
elements of directing. In the subsequent sections we shall discuss about the nature and
significance of each of these components
Communication is a basic organisational function, which refers to the process by
which a person (known as sender) transmits information or messages to another person
(known as receiver). The purpose of communication in organisations is to convey orders,
instructions, or information so as to bring desired changes in the performance and or the
attitude of employees. In an organisation, supervisors transmit information to subordinates.
Proper communication results in clarity and securing the cooperation of subordinates.
Faulty communication may create problems due to misunderstanding between the
superior and subordinates. The subordinates must correctly understand the message conveyed
to
them. Thus, in communication:
• there are two parties, one is known as the sender and the other is known as receiver;
• there is a message sent by the sender to the receiver; and
• the receiver receives the message and understands it.
Communication does not always flow from supervisor to subordinate. It can also be from a
subordinate to a supervisor. For example, subordinates can pass information to the supervisor
about the faults/problems at the assembly line. Thus, it is a two way process.

IMPORTANCE OF COMMUNICATION
Communication in organisations is so important that it is said to be the lifeblood of the
organisation. Success of direction largely depends on how effectively the manager can
communicate with his subordinates. Proper communication in organisations at all levels and
between all levels can improve both the quantity and quality of output. Some of the benefits
of communication are as follows:
• Communication helps employees to understand their role clearly and perform effectively.
• It helps in achieving co-ordination and mutual understanding which in turn, leads to
industrial harmony and increased productivity.
• Communication improves managerial efficiency and ensures cooperation of the staff.
• Effective communication helps in moulding attitudes and building up employees’ morale.
• Communication is the means through which delegation and decentralisation of authority
is successfully accomplished in an organisation.

TYPES OF COMMUNICATION
In an organization communication can be made from supervisor to subordinate, from
subordinate to supervisor and also between two supervisors at the same level.
Communication can be done orally or in writing or even through gestures. Communication
may be made through formal or informal channels. Thus, the various types of communication
are as follows.

On the basis of channel used

(i) Formal
(ii) Informal
The path through which information flows is called channel of communication. In
every organisation we have both formal and informal channels. The paths of communication
which are based on relationship establish formally by management are the formal channels.
For example, the General Manager communicates a decision to the production manager who
may then issue orders or instructions to the foremen. It may also be like a worker applying to
his supervisor for a loan from the GPF account. He/she forwards it to the Manager Accounts
who finally sends it to the General Manager (Finance) for approval. Communication, which
takes place on the basis of informal or social relations among staff, is called informal
communication. For example, any sharing of information between a production supervisor
and an accountant, as they happen to be friends or so. Mostly informal channels are used due
to friendly interaction of members of an organization. In fact, it may be purely personal or
related to organizational matters.

On the basis of direction

(i) Upward
(ii) Downward
(iii) Horizontal
(iv) Diagonal
On the basis of the flow or direction of communication in organisations, it can be classified
as upward, downward, horizontal or diagonal. When employees make any request, appeal,
report, suggest or communicate ideas to the superior, the flow of communication is upward
i.e., from bottom to top. For instance, when a typist drops a suggestion in the suggestion box,
or a foreman reports breakdown of machinery to the factory manager, the flow of
communication is upward. Upward communication encourages employees to participate
actively in the operations of their department. They get encouraged and their sense of
responsibility increases when they are heard by their supervisors about problems affecting the
jobs. When communication is made from superiors down the hierarchy it is called a
downward communication. For instance, when superiors issue orders and instructions to
subordinates, it is known as downward communication. When the General Manager orders
supervisors to work overtime, the flow of communication is downward i.e., from top to
bottom. Similarly, communication of work assignments, notices, requests for performance,
etc. through bulletin boards, memos, reports, speeches, meetings, etc, are all forms of
downward communication. Communication can also be amongst members at the same level
in the organisation. For instance, production manager may communicate the production plan
to the sales manager. This is known as horizontal flow of communication. Here, the
communication is among people of the same rank and status. Such communication facilitates
coordination of activities that are interdependent. When communication is made between
people who are neither in the same department nor at the same level of organisational
hierarchy, it is called diagonal communication. For example, cost accountant may request for
reports from sales representatives not the sales manager for the purpose of distribution cost
analysis. This type of communication does take place under special circumstances.

On the basis of mode used

(i) Verbal - (a) oral, (b) written
(ii) Non-verbal (gestural)
On the basis of the mode used, communication may be verbal or non-verbal. While
communicating, managers may talk to their subordinates either face to face or on telephone
or they may send letters, issue notices, or memos. These are all verbal communication. Thus,
the verbal modes of communication may be oral and written. Face to face communication, as
in interviews, meetings and seminars, are examples of oral communication. Issuing orders
and instructions on telephone or through an intercommunication system is also oral
communication. The written modes of communication include letters, circulars, notices and
memos. Sometimes verbal communication is supported by non-verbal communication such
as facial expressions and body gestures. For example – wave of hand, a smile or a frown etc.
This is also termed as the gestural communication.

UNIT-17
LEADERSHIP
Concept, Characteristics, Functions, Approaches to leadership, Leadership styles

Leadership is a process by which a person influences others to accomplish an

objective and directs the organization in a way that makes it more cohesive and coherent.
This definition is similar to Northouse's (2007) definition — Leadership is a process
whereby an individual influences a group of individuals to achieve a common goal.

Four Factors of Leadership

There are four major factors in
Leader
You must have an honest understanding of who you are, what you know, and what you can
do. Also, note that it is the followers, not the leader or someone else who determines if the
leader is successful. If they do not trust or lack confidence in their leader, then they will be
uninspired. To be successful you have to convince your followers, not yourself or your
superiors, that you are worthy of being followed.

Followers
Different people require different styles of leadership. For example, a new hire requires more
supervision than an experienced employee. A person who lacks motivation requires a
different approach than one with a high degree of motivation. You must know your people!
The fundamental starting point is having a good understanding of human nature, such as
needs, emotions, and motivation. You must come to know your employees' be,
know, and do attributes.

Communication
You lead through two-way communication. Much of it is nonverbal. For instance, when you
“set the example,” that communicates to your people that you would not ask them to perform
anything that you would not be willing to do. What and how you communicate either builds
or harms the relationship between you and your employees.

Situation
All situations are different. What you do in one situation will not always work in another.
You must use your judgment to decide the best course of action and the leadership style
needed for each situation. For example, you may need to confront an employee for
inappropriate behavior, but if the confrontation is too late or too early, too harsh or too weak,
then the results may prove ineffective.
Also note that the situation normally has a greater effect on a leader's action than his or her
traits. This is because while traits may have an impressive stability over a period of time, they
have little consistency across situations (Mischel, 1968). This is why a number of leadership
scholars think the Process Theory of Leadership is a more accurate than the Trait Theory of
Leadership.
Various forces will affect these four factors. Examples of forces are your relationship with
your seniors, the skill of your followers, the informal leaders within your organization, and
how your organization is organized.

Characteristics of leadership
 Empathy: Creating a legitimate rapport with your staff makes it less likely that
personal issues and resentment can creep in and derail the group. When your team knows
that you are empathetic to their concerns, they will be more likely to work with you and
share in your vision, rather than foster negative feelings.
 Consistency: Being a consistent leader will gain you respect and credibility, which is
essential to getting buy-in from the group. By setting an example of fairness and credibility,
the team will want to act the same way.
 Honesty: Another characteristic of leadership that lends itself to credibility. Those
who are honest, especially about concerns, make it far more likely that obstacles will be
addressed rather than avoided. Honesty also allows for better assessment and growth.
 Direction: Having the vision to break out of the norm and aim for great things --then
the wherewithal to set the steps necessary to get there-- is an essential characteristic of good
leadership. By seeing what can be and managing the goals on how to get there, a good
leader can create impressive change.
 Communication: Effective communication helps keep he team working on the right
projects with the right attitude. If you communicate effectively about expectations, issues
and advice, your staff will be more likely to react and meet your goals.
 Flexibility: Not every problem demands the same solution. By being flexible to new
ideas and open-minded enough to consider them, you increase the likelihood that you will
find the best possible answer. You will set a good example for your team and reward good
ideas.
 Conviction: A strong vision and the willingness to see it through is one of the most
important characterizes of leadership. The leader who believes in the mission and works
toward it will be an inspiration and a resource to their followers.

Functions of Manager leader

1. To act as a representative of the work-group: Leader is the link between the top
management and the work group. He has to communicate the problems and difficulties of
the work group to the management and the expectation of the management to the work
group. He act as a link between the top management and the work group.
2. To develop team spirit: One of the core function of the Leader manager is that to create a
team spirit in between the members of the group. They should act as a team rather than
performing as individuals. It is his responsibility to create a pleasant atmosphere keeping
in view the subordinates needs, potential abilities and competence.
3. To act as a counselor of the people at work: When the subordinates face problems at
work, which may be technical or emotional, the leader has to guide and advise the
subordinate concerned. There may be situation which are out of control, in that situation,
leader must stand behind the subordinate to encourage and support and find a solution for
the problem.
4. Proper use of Power: Leader must be careful while exercising his power or authority in
relation to his subordinates. According to the situation he may exercise different types of
powers like reward power, corrective power, coercive power, expert power, formal or
informal power etc., for the positive response from his subordinate. Make sure that while
using the power the response from his subordinate should not yield a negative response to
the group work. Leader must analyze the situation before exercising his power.
5. Time Management: Leader must ensure the timely completion of the work while ensuring
the quality and efficiency of the work. At different stages, the work should be complete
according to the plan. The timely completion of the individual tasks will ensure the
completion of the group work. Leader should monitor and ensure the individual task at
different stages are accomplished as per the plan.
6. Secure effectiveness of group-effort: To get the maximum contribution towards the
achievement of objectives the leader must delegate authority, ensure the availability of the
adequate resources, provide for a reward system to improve the efficiency of capable
workmen, invite participation of employees in decision making and communicate
necessary information to the employees

THE EVOLUTION OF LEADERSHIP

Leadership thinking has moved rapidly from one theory to another. The main schools of
thought can be divided into nine theories.
Great Man Theory
Great Man theories were the stuff of the late nineteenth and early twentieth centuries, though
their residue remains in much popular thinking on the subject. The Great Man theory is based
round the idea that the leader is born with innate, unexplainable and, for mere mortals,
incomprehensible leadership skills. They are, therefore, elevated as heroes.
Trait Theory
This theory continues to fill numerous volumes. If you know who the Great Men are, you can
then examine their personalities and behaviour to develop traits of leaders. This is plausible,
but deeply flawed. For all the books attempting to identify common traits among leaders
there is little correlation.
Power and Influence Theory
This approach chooses to concentrate on the networks of power and influence generated by
the leaders. It is, however, based on the assumption that all roads lead to the leader and
negates the role of followers and the strength of organisational culture.
Behaviourist Theory
In some ways the behaviourist school continues to hold sway. It emphasizes what leaders
actually do rather than their characteristics. Its advocates include Blake and Mouton (creators
of the Managerial Grid) and Rensis Likert.
Situational Theory
Situational Theory views leadership as specific to a situation rather than a particular sort of
personality. It is based round the plausible notion that different circumstances required
different forms of leadership. Its champions include Kenneth Blanchard and Paul Hersey
whose influential book, Situational Leadership Theory, remains a situationalist manifesto.
Contingency Theory
Developing from Situational Theory, contingency approaches attempt to select situational
variables which best indicate the most appropriate leadership style to suit the circumstances.
Transactional Theory
Increasingly fashionable, Transactional Theory places emphasis on the relationship between
leaders and followers. It examines the mutual benefit from an exchange-based relationship
with the leader offering certain things, such as resources or rewards, in return for others, such
as the followers’ commitment or acceptance of the leader’s authority.
Attribution Theory
This elevates followership to new importance, concentrating on the factors which lie behind
the followers’ attribution of leadership to a particular leader.
Transformational Theory
While transactional leadership models are based on the extrinsic motivation of an exchange
relationship, transformational leadership is based on intrinsic motivation. As such, the
emphasis is on commitment rather than compliance from the followers. The transformational
leader is, therefore, a proactive, innovative visionary. Kouzes and Posner have identified and
written about five exemplary practices that transformational leaders utilize. These are
“encouraging the heart,” “challenging the process,” “inspiring a shared vision,” “modelling
the way” and “enabling others.”
DOUGLAS MACGREGOR’S THEORY
X AND THEORY Y
Two assumptions – X and Y
The way in which leaders operate will depend on the assumptions they make about people
and their attitudes to work. Douglas McGregor, an early industrial psychologist posed two
extreme sets of assumptions as Theory X and Theory Y.
The Theory X Manager Believes That:
● the average human being has an inherent dislike of work and will avoid it if she/he can.
● because of this dislike of work, most people must be coerced, controlled, directed,
threatened or bribed to work adequately for the organisational objectives.
● the average human being prefers to be directed, wishes to avoid responsibility, has
relatively little ambition and wants security above all.
The Theory Y Manager Believes That:
● to the average human being, work is as natural as play or rest.
● control by threats or bribes is not the only means of getting people to work for
organisational objectives. People will direct themselves in whatever activity they have
committed themselves.
● commitment to objectives is a function of the rewards offered for their achievement.
● the average human being learns, under proper conditions, not only to accept but to seek
responsibility.
● the capacity to exercise imagination, ingenuity and creativity in solving organisational
problems is widely, not narrowly, distributed in the population.
● under modern conditions of industrial and commercial life the intellectual potentialities of
the average human being are only partially used.
From assumptions to behaviour
Theory X assumptions underlie the behaviour of autocratic managers who make all the
decisions, tell people exactly what to do and how to do it. Theory Y assumptions underlie the
behaviour of democratic managers who share leadership responsibilities with subordinates
and involve them in the planning and execution of tasks.
Managers recognise these two extremes readily, Theory X is sometimesassociated with
‘tough-minded management’ and Theory Y with ‘soft management’. In practice Theory Y is
better described as open and honest management which treats people as adults and deals with
them according to their contributions and achievements. To allow individuals freedom
demands a high-degree of self-control and willingness to take risks. The fear of losing control
and, in effect, having to trust people is common amongst many managers.
McGregor carried out a number of experiments to test the relative effectiveness of Theory X
and Theory Y and found that in certain circumstances both could work! But perhaps the most
important conclusion from McGregor’s work is the need for consistency. McGregor found
that staff were confused by managers who talked ‘Y’ but behaved ‘X’. (But they could live
with managers who were consistently ‘X’)
A great deal of management and leadership theory has drawn on MacGregor’s work.

CHRIS ARGYRIS
IMMATURITY / MATURITY THEORY
The fact that bureaucratic/ pyramidal values still dominate most organizations, according to
Argyris, has produced many of our current organizational problems.
While at Yale, he examined industrial organizations to determine what effect management
practices have had on individual behavior and personal growth within the work environment.
Personality changes
According to Argyris, seven changes should take place in the personality of individuals if
they are to develop into mature people over the years.
 First, individuals move from a passive state as infants to a state of increasing activity
as adults.
 Second, individuals develop from a state of dependency upon others as infants to a
state of relative independence as adults.
 Third, individuals behave in only a few ways as infants, but as adults they are capable
of behaving in many ways.
 Fourth, individuals have erratic, casual, and shallow interests as infants but develop
deeper and stronger interests as adults.
 Fifth, the time perspective of children is very short, involving only the present, but as
they mature, their time perspective increases to include the past and the future.
 Sixth, individuals as infants are subordinate to everyone, but they move to equal or
superior positions with others as adults.
 Seventh, as children, individuals lack an awareness of a "self," but as adults they are
not only aware of, but they are able to control "self."
Argyris postulates that these changes reside on a continuum and that the "healthy" personality
develops along the continuum from "immaturity" to "maturity.
These changes are only general tendencies, but they give some light on the matter of

maturity. Norms of the individual's culture and personality inhibit and limit maximum
expression and growth of the adult, yet the tendency is to move toward the "maturity" end of
the continuum with age.

RENSIS LIKERT
MANAGEMENT SYSTEMS AND STYLES
Dr. Rensis Likert has conducted much research on human behavior within organizations,
particularly in the industrial situation.
He has examined different types of organizations and leadership styles, and he asserts that to
achieve maximum profitability, good labor relations and high productivity, every
organization must make optimum use of their human assets.
The form of the organization which will make greatest use of the human capacity, Likert
contends, is;
 highly effective work groups linked together in an overlapping pattern by other
similarly effective groups.
Organizations at present have widely varying types of management style and Likert has
identified four main systems:

Management Styles
The exploitive - authoritative system, where decisions are imposed on subordinates, where
motivation is characterized by threats, where high levels of management have great
responsibilities but lower levels have virtually none., where there is little communication and
no joint team work.
The benevolent - authoritative system where leadership is by condensing form of master-
servant trust, where motivation is mainly by rewards, where manager personnel feel
responsibility but lower levels do not, where there is little communication and relatively little
teamwork.
The consultative system, where leadership is by superiors who have substantial but not
complete trust in their subordinates, where motivation is by rewards and some involvement,
where a high proportion of personnel, especially those at the higher levels feel responsibility
for achieving organization goals, where there is some communication (both vertical and
horizontal) and a moderate amount of teamwork.
The participative - group system, which is the optimum solution, where leadership is by
superiors who have; complete confidence in their subordinates, where motivation is by
economic rewards based on goals which have been set in participation, where personnel at all
levels feel real responsibility for the organizational goals, where there is much
communication, and a substantial amount of cooperative teamwork.
This fourth system is the one which is the ideal for the profit oriented and human-concerned
organization, and Likert says (The Human Organization, Mcgraw Hill, 1967) that all
organizations should adopt this system. Clearly, the changes involved may be painful and
long-winded, but it is necessary if one is to achieve the maximum rewards for the
organization.
To convert an organization, four main features of effective management must be put into
practice:

Features of Effective Management

 The motivation to work must be fostered by modern principles and techniques, and
not by the old system of rewards and threats.
 Employees must be seen as people who have their own needs, desires and values and
their self-worth must be maintained or enhanced.
 An organization of tightly knit and highly effective work groups must be built up
which are committed to achieving the objectives of the organization.
 Supportive relationships must exist within each work group. These are characterized
not by actual support, but by mutual respect.
The work groups which form the nuclei of the participative group system are characterized by
the group dynamics:
 Members are skilled in leadership and membership roles for easy interaction.
 The group has existed long enough to have developed a well established relaxed
working relationship.
 The members of the group are loyal to it and to each other since they have a high
degree of mutual trust.
 The norms, values and goals of the group are an expression of the values and needs of
its members.
 The members perform a "linking-pin" function and try to keep the goals of the
different groups to which they belong in harmony with each other.

FREDERICK HERZBERG
2 FACTOR HYGIENE AND MOTIVATION THEORY
Frederick Herzberg, contributed to human relations and motivation two theories of
motivation as follows:
 Hygiene Theory
 Motivation
Herzbergs' first component in his approach to motivation theory involves what are known as
the hygiene factors and includes the work and organizational environment. These hygiene
factors include:
 The organization
 Its policies and its administration
 The kind of supervision (leadership and management, including perceptions) which
people receive while on the job
  Working conditions (including ergonomics)
 Interpersonal relations
 Salary
 Status
 Job security
These factors do not lead to higher levels of motivation but without them there is
dissatisfaction.
The second component in Herzbergs' motivation theory involves what people actually do on
the job and should be engineered into the jobs employees do in order to develop intrinsic
motivation with the workforce. The motivators are
 Achievement
 Recognition
 Growth / advancement
 Interest in the job
These factors result from internal instincts in employees, yielding motivation rather than
movement.
Both these approaches (hygiene and motivation) must be done simultaneously. Treat people
as best you can so they have a minimum of dissatisfaction. Use people so they get
achievement, recognition for achievement, interest, and responsibility and they can grow and
advance in their work.
Therefore, the hygiene and motivation factors can be listed as follows:
Hygiene
 Company policies and administration
 Supervision
 Working conditions and interpersonal relations
 Salary, status and security
Motivators
 Recognition
 Growth / advancement
 Interest in the job

LEADERSHIP STYLES
Leadership style is the manner and approach of providing direction, implementing plans, and
motivating people. Kurt Lewin (1939) led a group of researchers to identify different styles of
leadership. This early study has been very influential and established three major leadership
styles. The three major styles of leadership are:
o Authoritarian or autocratic
o Participative or democratic
o Delegative or Free Reign
Although good leaders use all three styles, with one of them normally dominant, bad leaders
tend to stick with one style.
Authoritarian (autocratic;
I want both of you to. . .
This style is used when leaders tell their employees what they want done and how they want
it accomplished, without getting the advice of their followers. Some of the appropriate
conditions to use it is when you have all the information to solve the problem, you are short
on time, and your employees are well motivated. Some people tend to think of this style as a
vehicle for yelling, using demeaning language, and leading by threats and abusing their
power. This is not the authoritarian style, rather it is an abusive, unprofessional style called
“bossing people around.” It has no place in a leader's repertoire. The authoritarian style
should normally only be used on rare occasions. If you have the time and want to gain more
commitment and motivation from your employees, then you should use the participative
style.

Participative (democratic)
Let's work together to solve this. . .
This style involves the leader including one or more employees in the decision making
process (determining what to do and how to do it). However, the leader maintains the final
decision making authority. Using this style is not a sign of weakness, rather it is a sign of
strength that your employees will respect. This is normally used when you have part of the
information, and your employees have other parts. Note that a leader is not expected to know
everything — this is why you employ knowledgeable and skillful employees. Using this style
is of mutual benefit — it allows them to become part of the team and allows you to make
better decisions.

Delegative (free reign)

You two take care of the problem while I go. . .
In this style, the leader allows the employees to make the decisions. However, the leader is
still responsible for the decisions that are made. This is used when employees are able to
analyze the situation and determine what needs to be done and how to do it. You cannot do
everything! You must set priorities and delegate certain tasks. To measure inequality or
Power Difference, Hofstede studied three survey questions from a larger survey that both
factored and carried the same weight:
o Frequency of employees being afraid to express disagreement with their managers.
o Subordinates' perception of their boss's actual decision making style (paternalistic
style was one choice).
o Subordinates' preference for their boss's decision-making style (again, paternalistic
style was one choice).
 Paternalism has at times been equated with leadership styles. Yet most definitions of

leadership normally state or imply that one of the actions within leadership is that
of influencing.
Leadership is all about getting things done for the organization. And in some situations, a
paternalistic style of decision-making might be required; indeed, in some cultures and
individuals, it may also be expected by not only those in charge, but also the followers. That
is what makes leadership styles quite interesting — they basically run along the same
continuum as Hofstede's PDI, ranging from paternalistic to consultative styles of decision
making. This allows a wide range of individual behaviors to be dealt with, ranging from
beginners to peak performers. In addition, it accounts for the fact that not everyone is the
same.
o However, when paternalistic or autocratic styles are relied upon too much and the
employees are ready and/or willing to react to a more consultative type of leadership
style, then it normally becomes quite damaging to the performance of the
organization.
UNIT-18
ORGANIZATIONAL COMMUNICATION
Concept, Process, Types, and Net works, Barriers to communication,
Managing work motivation- concept, Motivation and Performance, Approaches to
motivation

System of pathways through which messages flow Patterns of interaction among

people who comprise the organization is organizational communication.
How one defines organizational communication depends on one’s view of the
relationship between communicating and organizing. According to the container approach,
organizational communication can be defined as the transmission of a message through a
channel to a receiver. In the social constructionist approach, organizational communication
can be defined as the way language is used to create different kinds of social structures, such
as relationships, teams, and networks. The former definition emphasizes the constraints that
are placed on communication given pre-existing organizational structures and the latter
definition highlights the creative potential of communication to construct new possibilities
for organizing. However, organizational communication may be viewed more profitably as
balancing creativity and constraint, as it is never entirely either constrained or creative. The
definition of organizational communication as balancing creativity and constraint focuses on
how individuals use communication to work out the tension between working within the
constraints of pre-existing organizational structures and promoting change and creativity. For
example, assume that an organization was undergoing a major change initiative. An
information transfer approach to organizational communication would require change
messages to be sent clearly to all members in the organization. A social constructionist
approach would focus on creating patterns of language use that would generate the desired
change (i.e., to create a team-based organization, organizational members need to talk in the
language of teamwork). An approach to organizational communication that emphasizes
balancing creativity and constraint would focus on achieving a balance between using
communication that fosters the desired change and being sensitive to the existing constraints
of the organization.
Organizational communication can be defined as the process by which individuals
stimulate meaning in the minds of other individuals by means of verbal or nonverbal
messages in the context of a formal organization

Communication process in an organization

A Communication Process, or Communications Management Process, is a set of steps
that are taken every time formal communications are undertaken in an organization. A
Communications Process is undertaken as part of Communications Management and helps to
ensure that your stakeholders are kept regularly informed. For example as part of the project
life cycle, the team implement a Communication Process to make sure that the entire team is
kept informed of the status of the project.
Process of communication is between two or more people which involves the transfer
of information (or message) from one person to the other(s). The person transferring the
information is called the sender or transmitter. The people receiving the message are known
as receivers. The transmitter will need to send the information in a format that the receiver(s)
will understand. Converting the information into a format that the receivers will understand is
known as Encoding.

1. Context - Communication is affected by the context in which it takes place. This

context may be physical, social, chronological or cultural. Every communication proceeds
with context. The sender chooses the message to communicate within a context.
2. Sender / Encoder - Sender / Encoder is a person who sends the message. A sender
makes use of symbols (words or graphic or visual aids) to convey the message and
produce the required response. For instance - a training manager conducting training for
new batch of employees. Sender may be an individual or a group or an organization. The
views, background, approach, skills, competencies, and knowledge of the sender have a
 great impact on the message. The verbal and non verbal symbols chosen are essential in
ascertaining interpretation of the message by the recipient in the same terms as intended
by the sender.
3. Message - Message is a key idea that the sender wants to communicate. It is a sign
that elicits the response of recipient. Communication process begins with deciding about
the message to be conveyed. It must be ensured that the main objective of the message is
clear.
4. Medium - Medium is a means used to exchange / transmit the message. The sender
must choose an appropriate medium for transmitting the message else the message might
not be conveyed to the desired recipients. The choice of appropriate medium of
communication is essential for making the message effective and correctly interpreted by
the recipient. This choice of communication medium varies depending upon the features
of communication. For instance - Written medium is chosen when a message has to be
conveyed to a small group of people, while an oral medium is chosen when spontaneous
feedback is required from the recipient as misunderstandings are cleared then and there.
5. Recipient / Decoder - Recipient / Decoder is a person for whom the message is
intended / aimed / targeted. The degree to which the decoder understands the message is
dependent upon various factors such as knowledge of recipient, their responsiveness to the
message, and the reliance of encoder on decoder.
6. Feedback - Feedback is the main component of communication process as it permits
the sender to analyze the efficacy of the message. It helps the sender in confirming the
correct interpretation of message by the decoder. Feedback may be verbal (through words)
or non-verbal (in form of smiles, sighs, etc.). It may take written form also in form of
memos, reports, etc.

Messages can be encoded into a variety of formats oral, written or visual. After
encoding the message is transferred via a medium called a channel, for example a letter, fax,
phone call, or e-mail. After transference the information will need to be interpreted by the
receiver. This process of interpretation is known as decoding. Finally the receiver will send a
message back to the transmitter confirming whether the information sent has been
understood. This back check is known as feedback.

The communication process involves seven key elements as illustrated in the diagram.

Types of Organizational Communications

1. Down ward communication: this is also known as superior – subordinate communication.
In this type, a superior communicates with his subordinates. The main purposes of
downward communication are:
a. To establish and disseminate goals of an organization.
b. To give information about organizational policies and procedures.
c. To develop plans for achievement of the organizational goals.
d. To select, develop and motivate members of organization.
e. To organize goals in an effective manner.
Types of messages: job instructions, job rationales, procedures and practices
information, feedback, and indoctrination.
 An important requirement of effective downward communication is that it needs to
be translated into more operational and practical terms as it passes down the levels of
hierarchy. Unless this translation makes the message relevant for the receiver, it defeats
its intended purpose. For example, if the corporate objectives which are phrased in very
generic terms, are presented to the worker without specifying his targets, they would
convey no message to him to act upon

2. Up ward communication: this is also known as subordinate – superior communication. In

this type, a subordinate communicates with his superior. The main purposes of upward
communication are:
a. To give reports on various projects.
b. To enhance understanding.
c. To clarify one's situation.
d. To seek help.
e. To request for facilities.
Types of messages: performance on the job, job related problems, fellow employees
and their problems, subordinates perceptions of org policies and practices, tasks and
procedures.
Both management and employees often neglect the role of upward communication in
an organization. However, many of the decisions regarding the policies and targets, made
at the upper levels of hierarchy, depend heavily on the information received through the
upward channels of communication.

3. Horizontal communication: this is also known as interactive communication. In this type

a person communicates with individuals of relatively equal status in the organization.
Individuals at each level, giving social support to one another, may freely communicate
among themselves, but fail to communicate upward or downward. The
main purposes of horizontal communication are:
a. To inquire something.
b. To convey some information.
c. To seek help.
d. To help others.
e. To coordinate with each other.
Type of messages: facilitates problem solving, info sharing across different work
groups, task coordination between departments and project teams.
It must, however, be noted that the horizontal communication to be useful, requires
going beyond the petty feelings of one-upmanship, jealousies, favouritism etc.

Organizational Communication Network

Organizational communication addresses how information circulates among the
employees of a company. Generally speaking, knowledge passes from one person to another
within a corporation by one of two ways: via an informal or a formal communication
network. Both methods are used concurrently, with lower-level employees usually directing
the informal network while top supervisors control the formal patterns of communication.
Grapevine Network
The “grapevine” exemplifies the informal organizational communication network. It is
present in every business, carrying rumors about upcoming layoffs, promotions and mergers.
The grapevine network reflects people’s knowledge about their company and their desire to
share what they know. The information that circulates through the grapevine is often
impending news surfacing ahead of an official announcement through a formal channel.
Downward Network
Organizations have various formal methods of communication available, including the
downward network. In this pattern, the uppermost manager initiates the delivery of
information, sending it down the different ranks of staff.
Horizontal Network
It serves to foster relationships among staff with similar ranking in the company. This
horizontal communication network serves as a support system for employees to help each
other to succeed in the workplace. In organized meetings and without the presence of top
management, the staff shares tips and works through stress together, strengthening the bond
to one another and making the organization stronger.
Wheel Network
If you are in a wheel network, information flows from one central member of the group to the
rest of the members. Other group members may not have to communicate with each other to
perform well. An example would be a group of independent makeup consultants who report
to one regional mentor. The independent makeup consultants do not need to interact with one
another in order to perform. Wheel networks do not exist in teams, since teams signify
intense interaction between all members of a group.
Chain Network
If you are a part of a chain network, members communicate with each other in a pre-planned
sequence. An example of a chain network is an assembly-line group. In an assembly line,
employees only communicate with those whose work precedes or follows their own. Like
wheel networks, chain networks do not exist in teams.
Circle Network
If you are in a circle network, members communicate if they share something in common,
such as experiences, beliefs, areas of expertise, background or office location. For example,
the people who you may informally socialize with in your office area may be a part of your
circle network. Circle networks are not described as teamwork.
Diagonal Network
Diagonal communication cuts across vertical and horizontal dimensions. For example, a
junior staff member may ‘go over the head’ of his or her immediate superior and telephone,
email or visit a senior technical expert in another area to get information
All-Channel Network
An all-channel network is found in teams. Teamwork is characterized with high levels of
intense communication. Each team member communicates with every other team member.
Information flows in all directions. Computer programs are often utilized to maintain
effective communication in teams due to their efficiency.

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. For 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 teams productivity is
being hampered, the family members might take him as an 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?
What is the value of learning technical skills?
2. “Value” means different in different sentences. Communication breakdown occurs if
there is wrong perception by the receiver.
3. 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.
4. 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.
5. 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.
6. 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.
7. 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).
8. 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.
9. Poor retention: Human memory cannot function beyond a limit. One cant always
retain what is being told specially if he is not interested or not attentive. This leads to
communication breakdown.

Motivation
Motivation is the combination of a person's desire and energy directed at achieving a
goal. It is the cause of action. Motivation can be intrinsic, such as satisfaction and feelings of
achievement; or extrinsic, such as rewards, punishment, and goal obtainment. Not all people
are motivated by the same thing and over time their motivations might changes.
 Luthans (1998) asserts that motivation is the process that arouses, energizes, directs,
and sustains behaviour and performance. That is, it is the process of stimulating people to
action and to achieve a desired task. One way of stimulating people is to employ effective
motivation, which makes workers more satisfied with and committed to their jobs. Money is
not the only motivator. There are other incentives which can also serve as motivators.

Approaches to Motivation
Instinct Approach
This approach upholds instincts, or inborn patterns of behavior that are biologically
predetermined, as the factors that influence behavior. This approach provides an explanation
to the food-seeking and mate-seeking behavior displayed by all organisms as hunger and sex
are primary instincts. The Psychoanalytic School of Psychology also believes the primary
instincts play an important role in determining behavior.
However, this approach fails to explain the complex behavioral patterns displayed by
humans. The instinct to survive does not influence the behavior of an individual saving a
friend from a car accident. Hence, there are factors different from instincts that influence
behavior.

Drive-Reduction Approach
Proposed by Clark C Hull, this approach seeks to establish a relationship between needs and
the fulfillment of needs. This approach believes every organism has certain Drives or arousals
that create a feeling of tension and anxiety. To reduce this feeling, the organism behaves in
certain ways, exploring the actions that will cease the anxiety. The tension usually arises from
the deprivation of a need, physiological or psychological, and satisfying this need leads to the
reduction of the anxiety. This stems from the organisms need to maintain Homeostasis or
internal body balance. This approach is similar to the instinct approach, and it too, fails to
explain complex behaviors.

Incentive Approach
This approach believes that motivation stems from the desire to obtain valued external goals
or incentives. The incentive can be a tangible reward like money, food, grades or in the form
of intangible compliments, love and recognition. However, this approach does not determine
why certain incentives direct behavior. The value of an incentive cannot be scientifically
determined.

Cognitive Approach
This is a modern approach that is widely accepted by psychologists. It focuses on the
individuals’ understanding of the world, thoughts, beliefs and perceptions. Toleman, in his
Cognitive Theory of Motivation says that, behavior is determined by an individual’s
expectation of the behavior and the value attached to its consequences. Motivation is thus a
function of Expectancy and Value.
This theory also seeks to differentiate between Intrinsic Motivation and Extrinsic
Motivation. Intrinsic motivation is the process in which people participate in an activity for
their own enjoyment. For example, reading a book. Extrinsic motivation is the process in
which people participate in an activity for a tangible reward. For example, working long
hours at office in order to obtain a higher salary.
Maslow’s Hierarchy of Needs
Abraham Maslow studied leading personalities of his time- Eleanor Roosevelt, Abraham
Lincoln and Albert Einstein to determine the factors that influence people explore beyond
their horizons.
In 1970, he formulated his theory of Hierarchy of Needs. This theory believes there are five
needs that dominate all individuals. They are biological, safety, love and belongingness, self-
esteem and self-actualization.
He believed that each of these needs is to be fulfilled, in the same order as he proposed to
attain self-actualization, which is a state of self-fulfillment in which people realize their
highest potential.
Although criticized for being unscientific and philosophical, this theory is one of the
most popular explanations of motivation. Motivation is universal but its process varies in
purpose and pattern while influencing an individual’s behavior.

UNIT-19
SUPERVISION
Meaning, Responsibilities, Qualities and functions of supervision, Essentials of effective
supervision
When a group of people interacts together within an organisation to achieve a purpose, there
is need for coordination of activities to ensure that activities go on as planned and that
interpersonal interactions are mediated for smooth running of the organisations. Persons
responsible for such functions will also need to understand the principles guiding their
interaction with their subordinates. Leading or supervision involves influencing people so
that they all contribute to organization and group goals. It has to do predominantly with the
interpersonal aspect of managing. Leadership involves motivation, leadership styles,
approaches and communication.
‘Supervision is a process by which one worker is given responsibility by the
organisation to work with another worker(s) in order to meet certain organisational,
professional and personal objectives which together promote the best outcomes for service
users’ (M.Harries, 1987, Discussion Paper on Social Work Supervision).
The purposes of supervision are to:
• ensure that the supervisee is clear about their roles, responsibilities and accountabilities
• ensure that the best interests of the user are promoted
• ensure that worker meets the agency’s objectives and standards
• ensure that the worker has a manageable and appropriate workload
• develop a supportive and positive climate for practice and performance
• enhance the worker’s development
• support the worker in managing the demands (task and emotional) of the work
• promote clear communication between the organisation and the worker.
The work of the organization is done by the subordinates/workers who are supervised
by supervisors. If the supervisor is not able to guide and control subordinates, then the
policies of management cannot be translated into action. Effective coordination between
efforts of different subordinates can be maintained by proper supervision only.
The efforts of working force can be made fruitful only when they are properly
supervised. Supervision raises the morale and confidence, stimulates better cooperation and
coordination, and increases the productivity of the employees. Thus prosperity of both
employer and employees can be secured through effective and efficient supervision. In the
absence of supervision each worker will do what he likes.

Supervision –Concept and principles

Supervision is defined as the art of working with a group of people over whom authority is
exercised in such a way as to achieve their greatest combined effectiveness in getting work
done. It involves the provision of administrative leadership, guidance and delegation of
authority necessary for the satisfactory attainment of both organizational objectives and
employee goals. Traditionally the supervisor defines standard and regulates reward and
punishment. He interprets government policies, coordinates budget and gives enough room
for the individual worker to perform the task of his job. Supervision entails helping workers
to greater competency and growth as individuals. The two major functions of supervision are
therefore task orientation (direction and organization of activities,) and concern for
employees (motivation of employees and management of work groups). Supervision is a
purposeful activity. This purpose makes it imperative that principles necessary to guide their
attainment be developed. Principles upon which effective supervision is based includes
1. A clear understanding of the objectives and roles of supervision in the whole organization
by all extension staff
2. Supervisor must have authority to carry out his responsibilities
3. Supervisory role must be democratic and exercise authority only when situation demands
4. Supervisor must be confident, shows enthusiasm and takes initiative in directing the efforts
of others in striving towards organizational objectives
5. Delegation of appropriate authority to individuals who are in the best position to make
decisions appropriate at that level.
6. All supervisors within the organization must share common insight and willingly accept
the team work pattern in supervision
7. Vertical and horizontal communication must be maintained between supervisors and those
with whom they work.
Roles of the supervisor
The following are some of the roles of the supervisor
1. The coordination of staff and work in different locations and at different levels of the
organization.
2. providing information and communication link between supervisee and management
3. providing administrative and logistic support to staff
4. Interpreting programs and project policies at intermediate level and providing information
for policy formulation at management level.
5. monitoring and appraising production, performance of staff and project
6. planning staff development and training programs
7. providing conducive environment for work
8. Applying sanctions, rewards and punishment where necessary to ensure compliance and
performance in accordance with agreed standards.
Functions of supervisors-Direction and organization
Two major functions of supervision are task orientation and concern for employees.
Therefore, direction and organization of activities, motivation of employees, and
management of work groups are the important functions of extension supervisors.
1. Direction and organization: Extension supervisors have to plan the work and maintain a
high standard of performance. The whole process of job analysis, identification of key
performance areas, and performance appraisal will help in planning and organizing
extension work. The training and visit system of extension has introduced mechanisms for
defining goals, planning, and scheduling work at the field level with provisions for
 monitoring and evaluation. Some of the management techniques used by extension
organizations in overall planning and management of programmes are the programme
evaluation and review technique (PERT/critical path method (CPM), management by
objectives (MBO), programme and performance budgeting system (PPBS), and time
management techniques. Personal computers offer good scope for extension managers to
increase certain managerial skills.
2. Motivating the extension personnel The work motivation and morale of extension staff, as
reported earlier, are very poor in many countries. The reasons are many. The bureaucratic
structure of extension administration, lack of rewards and incentives, poor facilities, poor
promotional avenues, and the low esteem given to extension are the major causes of poor
motivation and morale. Extension supervisors should have the ability to motivate and lead
the field extension workers so that the field agents perform more than routine jobs, and
supervisors should be involved in attaining excellence in extension work. This calls for
extension managers having an understanding of various theories of motivation as
applicable to frontline extension agents. Therefore, knowledge of major theories of
motivation such as Maslow's hierarchy of needs theory, Herzberg's two-factor theory,
McClelland's need theory, theory X and theory Y, and expectancy theory of motivation is
essential. Special training for developing motivation among field-workers has to be
undertaken by supervisors.
3. Work group management: Every organization has formal and informal groups. Formal
groups are established by the management, while informal groups are spontaneous and
developed to satisfy mutual interest of the members. Because work groups have a
considerable influence on the work situation, supervisors should be sensitive to the needs
of the group and develop skills to guide and achieve the group's goal, which will benefit
the organization and the members. Effective extension supervision can use work groups in
problem solving because they can provide many creative solutions. One way to improve
supervisory effectiveness in extension work is to develop a leadership style, which
represents the extension workers' group interest at the higher level of organization. This
will increase the confidence and morale of the work group. An understanding of group
dynamics and their implications for increasing work-group performance is essential for
extension supervisors. For example, in the "Hawthorne Effect‖, increased performance due
to special treatment of the group can be effectively used in extension organizations Studies
have also pointed out that well-developed group dynamics result in increased extension
performance.

The 10 Keys to Effective Supervision:

With this developmental perspective in mind, we recommend the following 10 keys to
effective supervision:
1. Support Growth - Provide support for employees professional development through:
• Professional Development Plans
• Strength Based Performance Appraisal Systems
2. Supervisor should unite With Your Team - availability/accessibility to employee by
maintaining:
• Open door policy
• Regular one-on-one supervisory meetings
3. Praise Others - Provide praise and encouragement through:
• Formal recognition systems
• Informal compliments - Catching them doing things right
4. Expect Excellence - Set high expectations for employees through:
• Clear position descriptions
 • Regular feedback sessions with staff
5. Require Accountability - Uphold individual responsibility by:
• Creating a culture where staff hold each other accountable
• Creating a culture where staff hold themselves accountable
6. Verify Potential - Develop an atmosphere of hope and confidence by:
• Providing staff opportunities to succeed
• Having high expectations for employees
7. Instill Independence - Allow autonomy of employee through:
• Appropriate delegation
• Encouraging risk taking
8. Share Continuously - Establish two-way communication through:
• Active listening
• Being transparent
9. Optimize Ownership - Create opportunities for employees to contribute by:
• Participatory strategic planning sessions
• Encouraging risk taking
10. Reinforce Relationships - Share with and care about employees by:
• Getting to know what motivates individual employees
• Creating opportunities for staff to share personal/family accomplishments

UNIT-20
MANAGERIAL CONTROL
Nature, Process, Types of Control, Budgeting, Observation, PERT and CPM, MIS

It is customary to think that management control is a process by which an

organization ensures that implementation is consistent with the planning. In any case, this
type of management control, allows knowing the possible deviations between planned and
actual, in order to devise corrective measures for the implementation of planned goals and
objectives. Nevertheless we can define that managerial control is the process by which
managers ensure that the collection and use of resources are carried out effectively and
efficiently in achieving the objectives of the organization. The management control process
tends to be rhythmic and follows a pattern recurs month after month and year after year.
Usually a management control system is a total system in the sense that encompasses all
aspects of the operation of the company. A management control system is, or should be
coordinated and integrated system. This means that although the information collected for a
particular purpose (budget) may differ from the information collected for another purpose
(cost), must be reconciled with each other. In a sense, the management control system is a
unique system, but perhaps more accurate to think of it as a series of interrelated subsystems.

Definition
A management function aimed at achieving defined goals within an established timetable,
and usually understood to have three components: (1) setting standards, (2) measuring
actual performance, and (3) taking corrective action.

A typical process for management control includes the following steps: (1) actual
performance is compared with planned performance, (2) the difference between the two is
measured, (3) causes contributing to the difference are identified, and (4) corrective action is
taken to eliminate or minimize the difference.
 Control is a fundamental managerial function. it is the process of regulating
organizational activities so that actual performance conforms to expected organizational
standards and goals and ensures that necessary corrective action is taken. There are different
concepts of control which are used in different contexts. In the first concept control is an
executive function. In the second concept it is intimately connected with planning. In the
third concept it is a process which guides activity towards some pre-determined goals. In
managerial terminology, control is ensuring work accomplishment according to plans. It is a
process of ensuring that activities are producing desired results. In short, control is an
executive function involving three elements, i.e., standards, evaluative and corrective action.

Definitions of Control

Some important definition of control is as follows:

In the words of Dalton E. macfarland, "Control, in its managerial sense, can be
defined as the presence in a business of that force which guise to a pre-determined objective
by means of pre-determined policies and decisions."
In the words of Koontz and O'Donnell, "Controlling is the measuring and correcting
the activities of subordinates to ensure that events conform to plans."
In the words of E.F.L. Brech, "Control is the process of checking actual performance
against the agreed standards or plans with a view to ensuring adequate progress and
satisfactory performances."
According to Henry Fayol, "Control consists in verifying whether everything occurs
in conformity with the plans adopted, the instructions issued and principles established. It has
for object to point out weaknesses and errors in order to rectify them and prevent recurrence."
In the words of Theo haimann, "Control is the process of checking to determine
whether or not plans are being adhered to, whether or not proper progress is being made
towards the objectives and goals and acting. It is necessary to correct any deviation."

Characteristics / Nature / Features of Control

 Managerial Function: Control is a basic managerial function of every manager and the
responsibility of line authority.
 Continuing and Never Ending Activity: Control is a continuing and never ending
activity. It involves constant analysis of objectives, policies, procedures, positions,
performance standards etc. It starts from planning and continues till so long the enterprise
survives.
 Exercise at all levels: Control is an exercise at all levels of management, i.e., top level,
middle level and bottom level.
 Forward Looking: Control is a forward looking activity and not a past activity. Control
initiates remedial measures to minimize the mistakes that had happened in the past.
 Dynamic Process: Control is a dynamic process. It is flexible and not rigid. Control
results in corrective actions which may lead to change in the performance of other
functions of management. Since management is handling a business entity which keeps on
changing, managerial control is also dynamic. Management will be failing in its duty if its
approach is not dynamic.
 Corrective Action: The purpose of control is achieved only when corrective action is
taken on the basis of feedback information. It is the action which adjusts performance to
predetermined standards whenever deviations occur. A good system of control facilitates
timely action so that there is minimum waste of time and energy.
 Control is People-oriented: The approach to managerial control is people-oriented.
Control is attained thought people and not thought things. It is people who exercise
control.

Scope or Areas of Control or Managerial Control

The scope or areas of control or managerial control are very wide. A well-designed plan of
managerial control includes all management activities. According to Holden, Fish and Smith,
the main areas of control or scope of control are as follows:
 Control over Policies: The success of any business organization, to a large extent,
depends on how far its policies are implemented. In many enterprises, policies are
controlled through policy manuals.
 Control over Organisation: Control over organisation is a accomplished through the
development of organisation chart and organisation manual.
 control over Personnel: The statement that management is getting the work done
through people, underlines sufficiently the importance of control of personnel.
 Control over Wages and Salaries: Such type of control is done by having
programmes of job evolution and wage and salary analysis. This work is done either by
personnel department or industrial engineering department.
 Control over Costs: Cost control is exercised by the cost accountant by setting cost
standards for material, labor and overheads and making comparison of actual cost data
with standard cost. Cost control is supplemented by budgetary control system.
 Control over Methods: control over methods is accomplished by conducting
periodical analysis of activities of each department. The functions performed, method
adopted and time devoted y every employee is studied with a view to eliminating non-
essential motions, functions and methods.
 Control over Capital Expenditure: It is exercise through a system or evolution of
projects, ranking of projects in terms of their ranking power and appropriating capital to
various projects.
 Control over Production: Control over production is effected through studies about
market needs, attitude of customer and revision in product lines. Efforts are made to
simplify and rationalize the line of products.
 Control over Research and Development: Such activities are highly technical in
nature, so no direct control is possible over them.
 Control over External Relations: Public relations department is responsible for
controlling the external relations of the enterprise. It may prescribe certain measures for
other operating departments which are instrumental in improving external relations.
 Overall Control: It is effected the through budgetary control. Master plan is prepared
for overall control and all the departments are made to involve themselves in this
procedure. For effective control through the master plan, active support of top
management is essential.

Basic steps in the process of controlling

Managerial control system involves four steps. First of all, the manager establishes the
standards of performance to ensure that performance is in accordance with the plans. After
this under the second step, the manager will measure the performance, and under the third
step he will compare it with predetermined standards. This will lead the manager to know
whether the actual performance has come up to the expected standards or if there is any
deviation. In case of any deviation, the manager will take immediate corrective action which
is the final step in the step of controlling.
 Establishing Standards of Performance: The first and the foremost step in the
control process is the establishment of standards for the measurement of performance.
They are the expression of goals of the enterprise or the department. Standards may be
tangible or intangible, vague or specific. But they must be established and expressed in
such a way that people concerned can easily understand them and the accomplishment can
be measured without any difficulty. standards of performance should be simple, accurate,
precise, flexible, acceptable, workable and capable of achievement with reasonable
amount of cost, effort and time.
 Measure of Performance: The second step in the control process is the measurement
of actual performance. In this connection, the management should not depend upon
guesswork as far as meeting of standards is concerned. It should measure the actual
performance and compare it with the standards. The quantitative measurement should be
done in cases where standards have been set in numerical terms. This will make the
evaluation quite easy and simple. In other cases, the performance should be measured in
terms of qualities factors.
 Comparing Performance with Standards: The third step in the control process is
the comparison of performance with established standards. Managers often base their
comparisons on information provided in reports that summarize planned versus actual
results. Such reports may be presented verbally or in written form or through
computerized process. Management by exception principle suggests that managers should
be informed of a situation only when control data shows a significant deviation from the
set standards. It will save manager's time by bringing to their attention only those
conditions which need their attention.
 Taking Corrective Action: The fourth and final step in the control process is taking
corrective action. When significant deviation from standards are detected, corrective
action obviously called for. This involves taking certain decisions by the management like
re-planning or redrawing of goals or standards, reassignment or reclassification of duties.
It may also necessitate reforming the process of selection and training of workers. Thus,
control function may require change in all other managerial functions. If the standards are
found to be defective, they will be modified or set up again in the light of observations.
Joseph massie has pointed out that a manager may commit two types of mistakes at this
stage: (i) taking action when no action is needed. (ii) failing to take action when some
corrective action is needed. A good and effective control system should provide some
basis for helping the manager estimate the risks of making either of these types of errors.
Of course, the final test of control system is whether correct action is taken at the correct
time.

Types of Control Techniques

1. Direct Supervision and Observation: 'Direct Supervision and Observation' is the oldest
technique of controlling. The supervisor himself observes the employees and their work.
This brings him in direct contact with the workers. So, many problems are solved during
supervision. The supervisor gets first hand information, and he has better understanding
with the workers. This technique is most suitable for a small-sized business.
2. Financial Statements: All business organisations prepare Profit and Loss Account. It
gives a summary of the income and expenses for a specified period. They also prepare
Balance Sheet, which shows the financial position of the organisation at the end of the
specified period. Financial statements are used to control the organisation. The figures of
the current year can be compared with the previous year's figures. They can also be
compared with the figures of other similar organisations. Ratio analysis can be used to find
 out and analyse the financial statements. Ratio analysis helps to understand the
profitability, liquidity and solvency position of the business.
3. Budgetary Control: A budget is a planning and controlling device. Budgetary control is a
technique of managerial control through budgets. It is the essence of financial control.
Budgetary control is done for all aspects of a business such as income, expenditure,
production, capital and revenue. Budgetary control is done by the budget committee.
4. Break Even Analysis: Break Even Analysis or Break Even Point is the point of no profit,
no loss. For e.g. When an organisation sells 50K cars it will break even. It means that, any
sale below this point will cause losses and any sale above this point will earn profits. The
Break-even analysis acts as a control device. It helps to find out the company's
performance. So the company can take collective action to improve its performance in the
future. Break-even analysis is a simple control tool.
5. Return on Investment (ROI): Investment consists of fixed assets and working capital
used in business. Profit on the investment is a reward for risk taking. If the ROI is high
then the financial performance of a business is good and vice-versa. ROI is a tool to
improve financial performance. It helps the business to compare its present performance
with that of previous years' performance. It helps to conduct inter-firm comparisons. It
also shows the areas where corrective actions are needed.
6. Management by Objectives (MBO): MBO facilitates planning and control. It must fulfill
following requirements:-
 Objectives for individuals are jointly fixed by the superior and the subordinate.
 Periodic evaluation and regular feedback to evaluate individual performance.
 Achievement of objectives brings rewards to individuals.
7. Management Audit: Management Audit is an evaluation of the management as a whole.
It critically examines the full management process, i.e. planning, organising, directing,
and controlling. It finds out the efficiency of the management. To check the efficiency of
the management, the company's plans, objectives, policies, procedures, personnel
relations and systems of control are examined very carefully. Management auditing is
conducted by a team of experts. They collect data from past records, members of
management, clients and employees. The data is analysed and conclusions are drawn
about managerial performance and efficiency.
8. Management Information System (MIS): In order to control the organisation properly
the management needs accurate information. They need information about the internal
working of the organisation and also about the external environment. Information is
collected continuously to identify problems and find out solutions. MIS collects data,
processes it and provides it to the managers. MIS may be manual or computerised. With
MIS, managers can delegate authority to subordinates without losing control.
9. PERT and CPM Techniques: Programme Evaluation and Review Technique (PERT) and
Critical Path Method (CPM) techniques were developed in USA in the late 50's. Any
programme consists of various activities and sub-activities. Successful completion of any
activity depends upon doing the work in a given sequence and in a given time. CPM /
PERT can be used to minimise the total time or the total cost required to perform the
total operations. Importance is given to identifying the critical activities. Critical
activities are those which have to be completed on time otherwise the full project will be
delayed. So, in these techniques, the job is divided into various activities / sub-activities.
From these activities, the critical activities are identified. More importance is given to
completion of these critical activities. So, by controlling the time of the critical activities,
the total time and cost of the job are minimised.
10. Self-Control: Self-Control means self-directed control. A person is given freedom to set
his own targets, evaluate his own performance and take corrective measures as and when
required. Self-control is especially required for top level managers because they do not
like external control. The subordinates must be encouraged to use self-control because it
is not good for the superior to control each and everything. However, self-control does
not mean no control by the superiors. The superiors must control the important activities
of the subordinates.