1.

INTRODUCTION
 Why do we study Management?
The knowledge of management
is vital in all areas everywhere people are working in group.
is important in
 families, social life, politics, public sectors,
 manufacturing or services rendering organizations,
 for individuals/ personal life.
Mgt is as old as man himself. i.e. as a practice as old as human civilization, but as a discipline
young,
Mgt is key to the success all sectors.
Mgt is the main cause for the difference between developed (wealthy) and underdeveloped (poor)
countries
Mgt is highly recognized by developed countries than underdeveloped ones.
Mgt is performed in our day to day activities.
1.1 Definition of Management
Management is:
 The art of getting things done through/ with people in a formally organized group.
 The process of planning, organizing, staffing, directing/ leading and controlling the use of
resources effectively and economically to attain objectives.
 The art of knowing what you want to do in the best and cheapest way.
 The art of securing maximum results with minimum efforts
 The process of working with/ through others to effectively achieve organizations objectives by
efficiently utilizing scarce resources of the organization in this changing environment.
 Management is the process of designing and maintaining an environment in which individuals
working together in groups efficiently accomplish selected aims. (Weihrich and Kuontz)
 The use of people and other resources to accomplish objectives. (Boone and Kurtz)
 The process by which managers create, direct , maintain and operate purposive organizations
through systematic, coordinated, cooperative human effort. (Mc. Farland)
 Management is a multi-purpose organ that manages a business, manages a manager and
manages workers and work. (Peter Drucker)
1.2 Features and Significance of Management
1. Utilization of resources
2. Best performance is a given situation
3. To achieve pre-determined objectives
4. Internal and External Environmental factors affecting business
5. For formulating corporate strategy
6. To face competitive challenges
7. For Research & Development
8. To understand the impact of change
9. To understand the importance of quality
10. To understand how it can be applied to solve any business problem
11. The more efficient and effective use of scarce resources that organizations make of those
resources, the greater the relative well-being and prosperity of people in that society
12. Helps people deal with their bosses and coworkers
13. Opens a path to a well-paying job and a satisfying career
1.3 Managerial Functions an Overview
Five major functions
1. Planning - Setting objectives and determining in advance exactly (?) how the objectives will be met,
Monitor for Change and Anticipate or React and PDCA – Plan – Do – Check – Act
2. Organizing - Delegating and coordinating tasks and allocating resources to achieve objectives.
3. Staffing - Staffing involves manning the various positions of the organization. It includes manpower
planning, recruitment and selection of the right people, training and developing them, deciding
financial compensation, appraising their performance periodically
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 4. Leading / directing- Influencing employees to work toward achieving objectives.
5. Controlling - Establishing and implementing mechanisms to ensure that objectives are achieved.
1.4 Is Management an art, Science, or profession?
Management as an art or a science has been an issue of debate for a long period of time.
Science is a systematized/ systematically organized knowledge
 derived from observation, study, and experimentation
 Carried out to determine the nature and principle of the subject under study.
Art is the application of knowledge that constitutes (comprises) science.
The science of Management
Managers gather data, facts, and objective information, and also can use quantitative methods and
decision making techniques to arrive at correct decision,
Managers need to take such scientific approach to solve problems whenever possible
Management as science is the structured body of knowledge with its own distinct concepts and
principles developed with reference to the general truth underlying the management practices and is not
as comprehensive or as exact as other sciences because management mostly deals with human elements
which are very complex variables, i.e. Human beings are not standardize and their behavior is
unpredictable.
The art of Management
Managers must make decisions and solve problems on the basis of
 intuition,
 experience,
 instinct and
Must blend elements of intuition and personal insight with hard data and objective facts.
Management as art is the application of knowledge and is doing things based on realities of the
situation. Therefore, Management is both art and science b/c as a practice is an art, and as an organized
knowledge is a science.
1.5 Levels of Management and areas of management
Managers can be differentiated/ classified within the organization by:
Scope of activities they manage Functional managers and General Managers.
Functional managers: Are managers with specialized skills in a single area of operation. e.g.
Accounting; Personnel; Marketing; Finance; Production; …
General Managers: are managers responsible for overall operation of a complex organization and
usually coordinate two or more departments
Levels are hierarchies/ managerial positions in an organization. Depend on the size of the organization
1. Top level management- CEO, president, or vice president-
2. Middle level management Sales manager, branch manager, or department head
3. Lower level management Crew leader, supervisor, head nurse, or office manager
Areas
 Marketing manages
 Financial managers
 Operation managers
 Human resource managers
 Public relation manager
 Research & development manager
1.6 Managerial Roles and Skills
According to Henry Mintezberg, there are ten basic managerial roles those grouped under three basic
categories.

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 1. Interpersonal roles፡- dealing with other people
a. Figurehead role
 Acting/ playing as public official for the organization.
 is the most basic and the simplest of other roles.
b. Leadership role directing and coordinating the activities of subordinates to accomplish
objectives.
c. Liaison role
 Horizontal relationship – network relation outside the organization
 serving as a coordinator or link between people, groups or organizations
 to seek support from people who can affect the organization’s success
2. Informational roles is processing information - collecting, disseminating & transferring information.
a. Monitor role receiving information about both internal & external and transmitting it to other
b. Disseminator role is transmitting relevant information back to others in the workplaces.
c. Spokesperson role communicating information to people outside the organization.
3. Decisional/ decision making roles is Crucial part of management activity
a. Entrepreneurial role acting as designer and initiator of change within the group to improve
organization’s position.
b. Disturbance handler role deals with problems and changes caused by other factor.
c. Resource - allocator role is both protecting and using organizations assets/ money, material, HR
equipment, data reputation, time/.
d. Negotiator Role focuses on reaching an agreement with others outside the work group.

Managerial skills are abilities to do something expertly and well, and they are necessary to operate
activities successfully. The most common ones are:
1. Technical Skills The ability to use a special proficiency or expertise to perform particular tasks.
2. Conceptual Skills The ability to think critically and analytically.
3. Human Skills The ability to work with others. A high level of emotional intelligence
1.7 Universality of management
Management is universal in its nature, i.e. the functions performed by every manager are nearly the
same and is universal activity because in all organizations the basic managerial function are used, i.e.
management is applied to all type of organization.
Universality of management is the applicability of the principals of management in all kind of
organizations, and in all different countries of the world.
Administration and Management
Administration involves policy formulation, objective determination and
Management deals with policy execution and achieving objectives.

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 Chapter three
Planning and Decision making
1 Nature and Importance of planning
2 Organizational goals/ objectives
3 Important characteristics of planning
4 Types/ Classification of plans
5 The planning process
6 Principles of planning
7 Forecasting
8 Decision making methods and process
9 Nature and Importance of planning
What is planning?
• All managers share in the execution of the management functions i.e. planning, organizing,
staffing, directing & controlling.
Planning Terminologies
The key terms are: Vision: Mission or purpose:Goals: Objectives: StrategiesTactics
• Vision:
1. Nonspecific directional and motivational guidance for the entire organization.
2. Top managers normally provide a vision for the business.
3. It is the most emotional of the four levels in the hierarchy of purposes.
• Mission or purpose:
1. Is an organization's reason for being established?
2. It is concerned with scope of the business and what distinguishes this business from
similar businesses.
3. It reflects the culture and values of top management.
4. Defines the basic task of an organization.
• Goals:
1. Goals refine the mission and address key issues within the organization such as market
standing, innovation, productivity, physical and financial resources, profitability,
management and worker performance and efficiency.
2. They are expected to be general, observable, challenging, and untimed.
3. A goal is a desired future state that the organization attempts to realize.
4. Are important because an organization exists for a purpose, and goals define and state
that purpose.
5. Specify future ends; plans specify today’s means.
• Objectives:
1. Objectives are the ends towards which activity is aimed.
2. Are specific statements of anticipated results that further define the organization's goals.
3. Are expected to be SMART: Specific, Measurable, Attainable, Rewarding, and Timed.
• Strategies:
1. Determine the purpose and kind of operation and the means of achieving the aim of an
enterprise.
2. Are major plans that commit large amounts of the organization's resources to proposed
actions, designed to achieve its major objectives and goals.
3. Define the business the firm is in, the criteria for entering the business, and the basic
actions the organization will follow in conducting its business. (Higgins)
4. are the outcome of strategic planning. Strategic planning is one specific type of
planning.
5. Strategic planning is the process by which the organization's strategies are determined.
6. In the process, three basic questions are answered:
1. Where are we now?
2. Where do we want to be?
3. How do we get there?
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 • Tactics
1. The most specific and narrow plans.
2. Describe who, what, when, where and how activities will take place to accomplish
a goal.
3.1 Definition of Planning
In the business world, organizations should achieve their objectives. In order to achieve objectives, they
should plan. Plan is a blueprint for goal achievement that specifies the necessary resource allocations,
schedules, tasks, and other actions, prescribes activities necessary for an organization to realize its goals
Planning
Planning is the primary and the most fundamental function of management. Nothing can be
performed without planning. Planning is a process of determining how the organization can get where
it wants to go. Planning outlining the activities that are necessary to achieve organization’s goals.
Planning process produces the plan. Bridges the gap from where we are, to where we want to go.
Planning is the process of preparing for change & the dynamics of the environment. Planning means
determining the organization’s goals and defining the means for achieving them. Planning is
preparing for tomorrow, today. Planning is constructive reviewing of the future needs so that present
situations can be adjusted in the view of the established goal. (Terry). Planning helps managers to
determine how organizational resources are allocated, and how the activities of the organization are
assigned to individuals and the work groups. It’s the activity that allows managers to determine what
they want and how they will achieve it. Allows managers the opportunity to adjust to the environment
instead of merely reacting to it. Planning increases the possibility of survival in business by actively
anticipating and managing the risks that may occur in the future. Helps managers to determine how
organizational resources are allocated, and how the activities of the organization are assigned to
individuals and the work groups. Planning is a continuous process of making present entrepreneurial
decisions systematically and with best possible knowledge of their futurity, organizing systemically
the efforts needed to carry out these decisions and measuring the results against expectations through
feedback system. (Peter Drucker). Planning is the selection and relating the facts and making use of
assumptions regarding the future in the visualization and formalization of proposed activities believed
necessary to achieve the desired result. (Terry)
Planning involves determination of objectives/ goals; establishment of overall strategy;
formulation of programs; maps the courses of action for their attainment; development of
schedules, timing of action & assignment of responsibilities for their implementation.
Basic questions in Planning
• Planning answers six basic questions in regard to any intended activity.
1. What- the goal that we want to achieve.
2. When- timing to achieve the goal.
3. Where- the place at which the plan is put into practice.
4. Who -the individual/ unit supposed to undertake specific tasks
5. How -the strategy/ method or steps for achieving the goal
6. How much - concerns with the expenditure of resources essential to reach goals,
resources required to accomplish this goal
 Why planning? Or why managers need to plan?
• Failing to plan is planning to fail.
• Planning bridges the gap from where we are, to where we want to go.
• Planning is the process of preparing for change & the dynamics of the environment.
• Planning is important for every organization irrespective of its size, objectives, and
location; because decisions without planning would become random and
inconsistent, this may lead to failure of entire organization.
 Planning is important for several reasons.
1. Provides direction by specifying objectives.
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 2. Reduces/ minimize risk and uncertainty for the future.
3. Allows workforces to concentrate on common organizational objectives.
4. Provides the criteria for decision making.
5. Provides basis for control/ facilitates control.
6. Helps organizations to succeed/reach their objectives.
7. Promotes efficient utilization of resources.
8. Enables to use opportunities and face challenges.
9. Contributes to the performance of other managerial functions.
10. Promote foreword thinking/ planning forces managers to think ahead.
- Significance of Planning: Focuses attention on objectives, Offsets uncertainty and risk,
Provides sense of direction, Provides guidelines for decision making, Increases organizational
effectiveness, Provides efficiency in operations, Ensures better coordination, Facilitates controls,
Encourages innovation and creativity, Facilitates delegation
– Nature of Planning is goal oriented, Planning is an intellectual or rational process, Planning is a
primary function, Planning is all pervasive, Planning is forward looking ,Planning is a
perpetual process, Planning is an integrated process, Planning involves choice
- Planning process
 Planning process produces the plan. A plan is a blueprint for action & prescribes activities
necessary for an organization to realize its goals. Organizational tasks can’t be performed
without plans. Understanding of planning process requires knowing the relationship between
goals, plans & controls as shown below. Goals, Plans and Controls, Goals, plans & controls
are inextricably intertwined & must be well integrated so as to make the planning process
successful.
 Approaches to planning where does planning start?
• Organizations should plan. Planning is carried out at the various levels of the
organization.
• There are two basic approaches to planning:
1. The top - down approach Planning efforts begin at the top level [Link] level
managers determine the direction and establish a master plan to achieve overall goals. The
master plan provides direction based on which other groups develop their plans.
2. The bottom - up approach: Planning is initiated at the lowest level of hierarchy, Both the
managers and employees at the operational level involve in the planning process, finally
the top levels bring together all the plans to develop a cohesive & well integrated master
plan.
• These planning modes are not mutually exclusive. By being flexible, mangers can capitalize on
the benefits of both approaches. The current trend is towards integrating the aspects of both top
down & bottom up planning approaches.
Requirements of planning
• Planning requires time, thought, paper work, forecasts, and commitment.
Organizational Objectives
• The critical phase of planning is determining goals/ objectives.
• Goals and objectives are commonly used interchangeably, are closely related to planning, are
towards which all management functions are aimed, are the ends or end, points towards which
activity is aimed, are the desired future outcomes/state end results, represent the end point
towards which all management functions aimed i.e. represent not only the end point of planning
but also the end towards which organizing, staffing, leading and controlling are aimed, specify
the expected results and indicate the end point of what is to be done, where the primary
emphasis is to be placed and what is to be accomplished by the network of strategies, policies,
procedures, rules, budgets and programs.

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 Purposes of goals
• Goals serve four important purposes.
1. To provide guideline and direction.
2. To facilitate planning.
3. To inspire motivation and commitment.
4. To promote evaluation and control.
1. To provide guideline and direction
– They provide guidance and a unified direction for people in the organization.
– Goals can help everyone understand
• where the organization is going and
• why getting there is important
2. To facilitate planning
– Goal setting practices strongly affect other aspects of planning; and good planning facilitates
future goal setting.
– Goal settings &developing plans to reach the goals should be seen as complimentary
activities.
3. To inspire motivation and commitment
– Goals can serve as sources of motivation to employees of the organization. Goals motivate
peoples to work harder if attaining the goal is likely to result in rewards.
4. To promote evaluation and control
– Goals provide an effective mechanism for evaluation and control. This means that
performances can be assessed in the future in terms of how successfully today’s goals are
accomplished.
Difference between goals and objectives
• Goals are
– the refinements of an organization’s mission i.e. long-term
– Open-ended statements of purpose which help to describe an organization’s
philosophy.
• Objectives
– state end-results and they are more specific i.e. short-term than goals
– Need to be supported by sub-objectives, i.e. they form a hierarchy & a network.
• Goals Vs objectives
– Goals are broad objectives are narrow.
– Goals are general intentions; objectives are precise.
– Goals are intangible; objectives are tangible.
– Goals are abstract; objectives are concrete.
– Goals can't be validated; objectives can be validated.
– Goals can be likened to a mission and to complete your mission you have to
complete certain tasks which are the objectives.
– Objectives make up your goal.
– Objectives are SMART (specific; measurable; attainable/ achievable; relevant and
time bound)
– Example:
– Goal: To speak English fluently
Objective: Take two college English courses
Objective: Work with a language tutor once a week
Hierarchy of objectives.
• Organizations establish different kinds of goals. Hierarchy of goals/objectives is a series of
objectives linked to one another.
• Hierarchy of objectives is a series of objectives linked to one another
• Each higher level objective is supported by one or more lower level ones.
• Overall objectives need to be supported by sub-objectives.
• Managers at different level are concerned with different kinds of objectives.

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 – The top levels - very much involve in determining the purpose/ mission & the overall objectives
of the firm as well as the more specific overall objectives in the KRAs (Key result areas).
– Middle levels - are involved in setting objectives, division & department objectives.
– Lower levels - primarily concerned in setting objectives of department & units as well as of
their subordinates.
– Individual objectives - consisting of performances & development of goals. Managers at the top
level should set objectives for their performance & development.
3.2 Important characteristics of planning
• The essential nature of planning can be understood by focusing on the following aspects.
1. Planning is the primary management/ managerial function
2. Planning is pervasive (spreading everywhere, universal)
3. Planning is a continuous process
4. Planning concerns all managers
5. Plans are arranged in hierarchy
6. Planning commits (places) the organization into the future.
7. Planning is antithesis (direct opposite) of status quo.
8. Ability to adjust
9. The efficiency of plans
10. Planning is anticipatory in nature.
11. planning is a system of decision
12. Planning is focused on desired future results.
• Planning is the primary management/ managerial function
– Planning lays foundation/ sets the stage to pursue other managerial function i.e.
planning occurs before organizing, staffing, leading/ directing & controlling
• Planning is pervasive
– Planning doesn't end as a first managerial function, exists in other managerial
functions and practiced everywhere i.e. planning doesn't stop. We plan when we
organize, staff, direct, or control
• Planning is a continuous process
– Plans don’t acquire finality. They need revisions in response to changes taking
place in the internal & external environment
• Planning concerns all managers
– Every manager is expected to set his goals and operating plans. Planning is not
the only responsibility of the top management or the staff of planning department
only but those who are responsible for the achievement of results have an
obligation to plan into the future
• Plans are arranged in hierarchy
– Plans can be arranged in a hierarchy. They are purpose or mission; goals/
objectives; strategies; policies; procedures; rules; programs; budgets.
• Planning commits the organization into the future.
– The past, the present & the future are tied in chain. Some plans affect the long
run, while others affect the near future.
• Planning is antithesis of status quo.
– Planning is a process or non-stopping. It is the exact opposite of status quo. It
needs examination, re-examination, and continuous reconsideration of the future
and searching for more effective methods & improved results.
• Ability to adjust
– Planning allow managers the opportunity to adjust the organization to the
environment instead of reacting to it. It provides for the chance to adapt rather
than to react
• The efficiency of plans
– Plans are efficient if they achieve their purpose at a reasonable cost
• Planning is anticipatory in nature.
– Decisions has to be made now as to what to do and how, before it is actually done.
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 • planning is a system of decision
– It involves the system of decision making.
• Planning is focused on desired future results.
– It ensures important when organizational objectives are achieved as & when
desired.
3.3 Types/ Classification of plans
• Plans can be classified on different bases or dimensions. The most important ones are:
1. Based on repetitiveness (frequency of use)
– Standing plans
– Single – use plans
2. Based on time
– Long – range planning:
– Intermediate – range planning
– Short – range planning
3. Based on scope/ breadth
– Strategic planning
– Tactical planning
– Operational planning
• Other types of plans
1. Contingency planning
2. Management by objectives (MBO)
• All kinds of plans are interrelated and one is the derivative of the other.
Based on repetitiveness (frequency of use)
1. Standing plans
• provide guidelines for further course of action and are used over a period of time.
• Standing plans are plans that are used again & again or that handles repetitive problems. They
are followed each time, such as:
– Mission/purpose; goals/ objectives; strategy; policy; procedure; method and rule
• Purpose or mission
– Purpose/ mission indicate the basic function or task of an enterprise. Every
organization to be meaningful should have a purpose/mission
• Goals or objectives:
– Objectives/ goals are the ends towards which an activity is aimed.
• Strategies:
– Strategies are ways/ means in order to achieve the established objectives.

• Policies:
– Policies are general statements or understandings that guide or channel thinking
and action in decision making. They provide guideline to managers who must
make decisions about circumstances that occurs frequently within the
organization. They exist at all levels of the organization.
– Policies are guides to decision making, they must allow discretion or room for
exercising power & be flexible to handle situations.
• If there is no room for flexibility, the guideline is rule that tells the Dos & the
don't Dos. The degree of flexibility can be narrow or broad depending on the
position and authority of the manager in the organization. The narrower the
room of flexibility, the lower is the authority, and the broader is the room for
flexibility, the higher is the position/authority in the organization.
• Procedures:
– Procedures are outlining chronological sequences of required actions. They are
sequentially arranged rules or actions that need to be done in orderly manner to
complete recurring tasks. They are more specific & action oriented than policies,
and designed to give explicit instructions on how to complete a recurring task, e.g.
the university handout book.
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 • Methods:
– Methods are more detailed than procedures. Procedure shows a series of steps to
be taken; a method is only concerned with a single operation, with one particular
step, and tells exactly how this particular step is to be performed.
• Rules:
– Rules are the simplest and strictest type of standing plan found in organizations.
They provide detail & specific regulations for action; reflect managerial decisions
that certain actions must or must not be done. They serve as guidelines, but allow
no discretion in their application. They allow no deviation from the stated course
of action. e.g. “No smoking” is a rule unrelated to any procedure.
– They are already decided measures that are applied in response to a certain action.
• Rules, procedures & methods, by their nature, are designed to repress thinking.
2. Single – use plans
• are developed to address a specific organizational situation. They used up only once but not
over & over again. They commonly three types, namely: programs; projects and budgets.
• Programs:
– Programs are a set of activities designed/ intended to accomplish a specific/
particular set of objective with a fixed time. They are complex and encompasses
goals, policies, procedures, rules, task assignments, steps to be taken, resources to
be employed, and other elements necessary to carry out a given course of action;
supported by budget; vary in size & duration.
• Projects
– Projects are a part of a general program and direct the efforts of individuals or
work groups towards the achievement of well defined goals. They are typically
less comprehensive & narrower in focus than programs as well as a subset of a
specific program and smaller portion of a program.
• Budgets
– Budget is a fundamental planning instrument that deals with the future allocation
and utilization of various resources to different activities over a given time period.
It expresses in numeric terms the resources that are to be spent or gained in
accomplishing a project, such as financial terms; labor units; products/ unit of
product; machine hours; or in any other numerically measured term
• Programs are comprehensive, projects have narrower scope. Budgets are developed to support
programs & projects.
 Based on time
• All planning deals with the future; and the future are measured in time.
• Plans in terms of time periods are classified into three.
1. Long – range planning:
– Long – range planning has longer time horizon and the time usually ranges from
5-10 years.
2. Intermediate – range planning
– Intermediate – range planning ranges between long & sort range planning. It is
usually developed for 1-5 years.
3. Short – range planning
– Short – range planning are also taken as operational plans derived from the long
ranging or intermediate plans. The time length is commonly taken as less than 1
year.
• What is long or short range in most cases depends on the size & the nature/ type of business of
the organizations.
• Long term Plans are strategic in nature. They focus on changing the competitive position & the
overall performance of the organization.
 Based on scope/ breadth
• Based on scope, plans are classified into 3 categories.
Strategic planning
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 • Strategic plan is a type of planning that provides a general direction to the organization. It is a
process of analyzing & deciding the organization’s mission, objective; strategy (major courses
of action) and the major resource allocations.
• It is undertaken by considering environmental threats & opportunities, and internal strengths &
weaknesses; and also developed by top level managers; mostly long –range in its time horizon;
expressed in relatively general, non-specific terms
Tactical planning
• Tactical plan is a plan aimed at achieving tactical goals and developed to implement specific
parts of strategic plan. It refers to the process of developing action plans through which
strategies are executed. It is concerned with shorter time frame & narrower scopes than strategic
planning.
Operational planning
• Operational plans focuses on carrying out technical plans to achieve operational goals. They are
mainly short range; more specific & detailed, as well as made at operational level & concerned
with day- to - day; week - to - week activities of the organizations
 Contingency planning
• Contingency planning is the determination of alternative courses of action to be taken if the
original plans are disrupted or become inappropriate due to the changed circumstances. It is an
approach that has become very popular in today's rapidly changing business envelopment. It is
proactive in nature.
• It is necessary at each level of management and for strategic, tactical, and operational plantings.
Management by objectives (MBO):
– is a method whereby managers and employees define goals for every department,
project, and person and use them to monitor subsequent performance.
– MBO Process
1. Set goals
2. Develop action plans
3. Review progress
4. Appraise overall performance
1. Set goals.
– This step is the most difficult in MBO.
– Setting goals involves employees at all levels and looks beyond day-to-day
activities to answer the question: “What are we trying to accomplish?”
– A good goal is concrete and realistic, provides a specific target and timeframe,
and assigns responsibility.
– Goals may be quantitative or qualitative.
2. Develop action plans.
– An action plan defines the course of action needed to achieve the stated goals.
– Action plans are made for individuals as well as departments.
3. Review progress.
– A periodic progress review is important to ensure that action plans are working.
– These reviews can take place informally between managers and subordinates, and
the organization may wish to conduct three, six, or nine month reviews during the
year.
– This periodic checkup allows managers and employees to see whether they are on
target or whether corrective action is needed.
– Managers and employees should not be locked into predefined behavior and must
be willing to take whatever steps are necessary to produce meaningful results.
– The point of MBO is to achieve goals.
– The action plan can be changed whenever goals are not being met.
Barriers for effective Planning
• Effective planning is important for success of organizations. Some of the barriers for effective
planning are
– Inability to plan or inadequate planning.
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 – Lack of commitment to the planning process.
– Inferior information.
– Focusing on the present at the expense of the future.
– Too much reliance on the organization’s planning department.
– Concentrating on controllable variables.
• Demand on manager's time
• ambiguous & uncertain operating environment
• Resistance of change
Inability to plan or inadequate planning.
– Managers are not born with the ability to plan.
– Some managers are not successful planners because they lack the background,
education, and/or ability.
– Others may have never been taught how to plan.
– When these two types of managers take the time to plan, they may not know how
to conduct planning as a process.
Lack of commitment to the planning process.
– The development of a plan is hard work; it is much easier for a manager to claim
that he or she doesn’t have the time to work through the required planning process
than to actually devote the time to developing a plan.
– The latter, of course, would save them more time in the long run!
– Another possible reason for lack of commitment can be fear of failure. As a result,
managers may choose to do little or nothing to help in the planning process.
Inferior information.
– Facts that are out-of-date, of poor quality, or of insufficient quantity can be major
barriers to planning.
– No matter how well managers plan, if they are basing their planning on inferior
information, their plans will probably fail.
Focusing on the present at the expense of the future.
– Failure to consider the long-term effects of a plan because of emphasis on short-
term problems may lead to trouble in preparing for the future.
– Managers should try to keep the big picture — their long-term goals — in mind
when developing their plans.
Too much reliance on the organization’s planning department.
– Many companies have a planning department or a planning and development
team.
– These departments conduct studies, do research, build models, and project
probable results, but they do not implement plans.
– Planning department results are aids in planning and should be used only as such.
– Formulating the plan is still the manager’s responsibility.
Concentrating on controllable variables.
– Managers can find themselves concentrating on the things and events that they
can control, such as new product development, but then fail to consider outside
factors, such as a poor economy.
– One reason may be that managers demonstrate a decided preference for the
known and an aversion to the unknown.
• Demand on manager's time
– Managers play different managerial roles. They spend much of their time on
ordinary/ routine and continual stream of problems. They are busy mostly on
routine activities all the day from the time they arrive at work until they leave.
• ambiguous & uncertain operating environment
– Environmental dynamism & complexity are other commonly cited problems for
planning. It is with plan that manager's can assess environment and predict the
possible changes. Planning will reduce the challenge that arise from changing
environment.
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 • Resistance of change
– Managers hesitate to plan because they are resistant to change. Organizational
members may associate planning with change to the way they do their jobs. The
resistance of employees with respect to implementing plans can be overcome
through involving them in the planning process.
Overcoming the barriers
These barriers can all be overcomed. To plan successfully, managers need to use
– effective communication,
– acquire quality information, and
– solicit the involvement of others.
3.4 The planning process
• The planning process indicates the major steps taken in planning. And generally there are 10
steps of planning process
Step 1: Understanding the existing situation
Step 2: Forecasting
Step 3: Establishing objectives
Step 4: Determining the alternative courses of action
Step 5: Evaluating alternative courses of action
Step 6: Selecting a course of action
Step 7: Formulating derivative plans
Step 8: Numbering plans by budgeting
Step 9: Implementing the plan
Step 10: Controlling & evaluating the results
• Step 1: Understanding the existing situation
– Awareness to the external and internal environment of the organization is great
important in planning to identify opportunities (O) & threats (T); and strength (S)
& weaknesses (W) of the organization.
• Step 2: Forecasting
– Forecasting is assumption what the future looks like. Planning is deciding what is
to be done in the future. To decide where one wants to go, it is necessary to have
information about what the future looks like.
• Step 3: Establishing objectives
– Objectives have to be established for the entire enterprise and then for each
subordinate work unit. Organizational objectives give direction to the major plans,
by reflecting these objectives departmental objectives defined, departmental
objectives intern control objectives of subordinate departments, etc. down the line.
– specify the expected results and indicate the end points
• what is to be done,
• where the primary emphasis to be located
• what is to be accomplished by the network of strategies, policies,
procedures, rules, budgets, & programs
• Step 4: Determining the alternative courses of action
– Determining the alternative courses of action is seeking out alternative courses
and examining their strong & weak points. The more common problem is not
finding alternatives but reducing the number of alternatives.
• Step 5: Evaluating alternative courses of action
– is assessing the alternatives by weighing them in light of premises and goals.
• Step 6: Selecting a course of action
– is the point at which the plan is adopted. It is the real point of decision making.
• Step 7: Formulating derivative plans
– Derivative plans are that supports the basic or main plan.
• Step 8: Numbering plans by budgeting
– After decisions are made & plans are set, the final step is giving them meaning.
– Budgeting is to number plans by converting them into budgets.
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 • Step 9: Implementing the plan
– After selecting optimum alternative, the manager has to develop an action plan to
implement it. The manager must decide these issues
• Who will do what
• By what date will the tasks be initiated & completed
• What resources will be available for the process (human &
material)
• How will the plan be evaluated
• What reporting procedures are to be used
• What type & degree of authority will be granted to achieve these
ends
• Step 10: Controlling & evaluating the results
– Once the plan is implemented, the manager must monitor the progress, i.e.
evaluate the reported results, and make any modifications necessary
Forecasting
• Forecasting is
– one of the main tools for planning and decision making.
– to plan managers must make assumptions about future events.
– the process of developing assumptions or premises about the future that managers/
planners can use in planning and decision making
• Forecasting techniques are
– the quantitative forecasting techniques and
– the qualitative forecasting techniques
The quantitative forecasting techniques
• is using mathematical analysis
• are
1. Time-series analysis is
2. Casual modeling
• Time-series analysis is
1. a forecasting technique that extends past information into the future through
calculation of a best fit line
2. The underlying assumption is that the past is the good predicator of the future.
3. most useful when historical data are available, trends are stable, and patterns are
apparent.
• Casual modeling
1. is a group of different techniques that determine casual relationships between
different variables
2. The common casual modeling forecasting techniques are
• regression modes;
– are equations that use one set of variable to predict
another variable
• econometric models and
– models that predict major economic shifts and the
potential impact of those shifts on the organization
• economic indicators
– e.g. include cost of living index, inflation rate, and
level of unemployment
The qualitative forecasting techniques
• Organizations also use several qualitative techniques to develop their forecasts.
• are the techniques that rely on individual or group judgments or opinions rather than on
mathematical analysis.
• widely used are
– The Delphi method/ procedure
– The jury-of-executive/ expert-opinion approach
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 – The sales-force-composition method
– The customer evaluation/ expectation
– The Delphi method/ procedure
• A mechanism for managing group decision making activities.
• is a technique that seeks to eliminate the effect of personal
relationship & domination by strong personalities. A coordinator
sends written questions to each relevant expert, who then replies in
writing. The replies are edited and summarized, and then other
questions are asked again till satisfied answers are found.
– The jury-of-executive/ expert-opinion approach
• involves using the basic Delphi process with members of top
management. In this instant top management serves as a collection
of experts asked to make prediction about something.
– The sales-force-composition method
• is the opinion of sales persons. The pooling of the predictions and
opinions of experienced sales people. Their experience enables to
forecast quite accurately what various customers will do.
– The customer evaluation/ expectation
• Involves a survey of customers and their future needs. The
customers provide estimate of their future needs for the goods and
services that the organization supplies. And then the managers
combine, interpret and act on their information.
3.6 Decision making
‘If there is no option, there is no choice & no decision’
What is decision making?
– It Is a rational choice among alternatives.
– A decision is a choice made from available alternatives.
– It is the process of identifying problems and opportunities and then resolving
them.
– It is a process, but not a lighting – bolt (rush away) occurrence
– It is universal and core to other functions
– It is a part of all managers job. Managers at all levels are engaged in decision
making. Managers make big & small decisions daily.
• Managements make decisions constantly while performing management functions.
• In decision making manager is making judgments, reaching conclusion from a list of known
activities
Types of decisions
• Managers face situations involving several alternatives & evaluation of the outcome in
organizations.
• Types of decisions are
1. Programmed decisions
2. Non – programmed decisions
3. Strategic and operational decisions
4. Dependent or Independent
Programmed decisions
– decisions made in response to repetitive & routine problems.
– made without expending unnecessary time & effort
– handled through policies; if situation occurs often, managers will develop a
routine procedure for handling it.
Non – programmed decisions
– are decisions made for novel and unstructured problems.
– are more complicated
– require the expenditure of lots of money, worth of resources every year.
– Very little is known about this type of decision making
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 – usually handled by general problem solving processes, judgments, intuitions, and
creativity
Strategic decisions
– have greater implications for the organization than operational ones.
– relate to the world outside the organization – to develop a new product, acquire a
competitor, enter an overseas market or increase a price.
– affect the future of large parts of the organization.
Operational (or activity-related) decisions
– are shorter term, often on day-to-day matters, and within established policy:
whether to recruit staff, to replace a machine or to offer a discount to a customer.
Dependent or Independent
• Another way to categorize decisions is in terms of their links to other decisions.
• People make decisions in a historical and social context and so are influenced by past and
possible future decisions and the influence of other parts of the organization.
• Many decisions are influenced by previous decisions – that constrain, or enable, what can be
done now. Some decisions have few implications beyond their immediate area, but others have
significant ripples around the organization.
The decision making process
• To improve the quality of decision making follow conscious, rational decision making process.
• has seven (7) steps
1. Define the problem
2. Identify the limiting or critical factors
3. Develop potential alternatives
4. Analyze the alternatives
5. Select the best alternative
6. Implement the solution
7. Establish a control & evaluation system.
• Define the problem
– is the critical step.
– is the particular problem you have to solve.
– The accurate definition of a problem affects all steps that follow.
– The good method to define the problem is to focus on the problem rather than on
the symptoms.
– The most common source of mistake in management decision is the emphasis on
finding the right answers rather than the right questions.(Peter Drucker)
– The consequence of not properly defining the problems is wasted time & energy.
• Identify the limiting or critical factors
– Limiting factors are the constraints those rule out certain alternative solutions.
They narrow down the range of possible alternatives. The common limitations are
time, resources, personnel, money, facilities, and equipment.
• Develop potential alternatives
– is looking for, developing & listing as many possible alternative solutions to the
problem. These alternatives eliminate, correct, or neutralize the problem.
– Sources for alternatives include:
1. Experience
2. Persons (whose opinions & judgments are respected)
3. The practice of successful manager
4. Group opinions through the use of task forces & committee
5. The use of outside sources, including managers in other
organizations.
• Analyze the alternatives
– is deciding the relative merits & demerits of each of the alternatives. lf the
alternatives conflict with critical (limiting) factors, they must be automatically
discarded
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 • Select the best alternative
– Here all the alternatives are listed along with their corresponding advantages and
disadvantages. To select the alternatives, find a solution that appears to offer the
fewest serious disadvantages & the most advantages
• Implement the solution
– A decision has to be put into effect. Like plans, decisions need effective
implementation to yield the desired results. Managers are paid to make decisions
and to get results from these decisions.
• Establish a control & evaluation system
– is the final stage of decision making process
– Ongoing actions need to be monitored and should provide a feedback.
Tasks in Making Decisions
Recognizing a Problem and Setting Objectives
– Problem
– Symptom
– Objective
Setting and Weighting the Decision Criteria
– Decision criteria define the factors that are relevant in making a decision.
– Like problem recognition, setting criteria is subjective: people vary in the factors
they wish to include, and the weights they assign to them.
– Changing the criteria or their relative weights will change the decision
Developing Alternatives
Comparing Alternatives and Making a Choice
Types of decisions & level of management
• The nature of the problem how frequently it occurs, and the degree of certainty surrounding it
should dictate at what level of management the decision should be taken/ made.
– Problems that arise infrequently & having a great deal of uncertainty surrounding
them are often strategic in nature and should be the concern of top management
– Problems that arise frequently & have fairly certain outcomes should be the
concern of lower level management
– Middle managers in most organizations concentrate on programmed decisions.
The decision making environment
• As there are different kinds of decisions, there are also different conditions in which decisions
must be made.
• The manager must be aware of the environment in which s/he makes decisions.
• Decision making doesn’t take place in vacuum.
• There are factors in the environment that affect
– the process & the decision maker
• In some situations one manager can have perfect knowledge/ understanding of what to do &
what the consequence of the action will be, where as in others has no such knowledge or have
few clues.
• In general the circumstances/ environments that exist for the decision makers are the conditions
of
– certainty,
– risk &
– uncertainty
Decision making under conditions of certainty
• a situation where a manager can make accurate decisions because the outcome of every
alternative is known.
• Certainty is when the decision maker has all the information they need – are fully informed
about the costs and benefits of each alternative.
• the manager has perfect knowledge i.e. the manager
– had had this decision before;
– the alternatives are known; and
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 – the consequences of each alternative are fully understood
• Few decisions are that certain, and most contain risk and/or uncertainty.
Decision making under conditions of risk
• a more difficult decision making environment than the certainty situation
• In this situation the manager
– knows what the problem is; what the alternative are; but doesn’t know how each
alternative will work out to know the odds (probabilities) of possible outcomes.
– The manager is faced with dilemma of choosing the best alternative available.
• Risk refers to situations in which the decision maker can estimate the likelihood of the
alternative outcomes, possibly using statistical methods.
• Under risk, managers have historical data from past personal experiences or secondary
information that lets them assign probabilities to different alternatives.
Decision making under conditions of uncertainty
• is the most difficult situation for managers
• In this situation, the manager
– is not able to determine the exact odds of the potential alternatives available
– deal with too many variables, or perhaps too many unknown facts
• The management is unable to accurately predict the probable results of choosing anyone of the
alternatives.
• Reliance on experience, judgment & other people’s experience can assist the manager in
assessing the value of the alternatives.
• What happens if you face a decision where you’re not certain about the outcomes and can’t
even make reasonable probability estimates? We call this condition uncertainty.
• Uncertainty means that people know what they wish to achieve but do not have enough
information about alternatives and future events to estimate the risk confidently.
Ambiguity
– Ambiguity is by far the most difficult decision situation.
– Ambiguity means that the goals to be achieved or the problem to be solved is
unclear, alternatives are difficult to define, and information about outcomes is
unavailable.
– Students would experience ambiguity if their teacher created student groups, told
each group to complete a project, but gave them no topic, direction or guidelines.
– Ambiguity has been called a wicked decision problem.
– Managers have a difficult time coming to grips with the issues.
– Wicked problems are associated with manager conflicts over goals and decision
alternatives, rapidly changing circumstances, fuzzy information, and unclear
linkages among decision elements.
– Sometimes managers will come up with a “solution” only to realize that they
hadn’t clearly defined the real problem to begin with.
Personal Decision-Making Styles
• The three most common decision models
– Rational/ logical
– Intuitive
– Predisposed
Rational/ Logical decision model
– This approach uses a step-by-step process, similar to the seven-step decision-
making process described earlier in this chapter.
– The rational/ logical decision model focuses on facts and reasoning.
Intuitive decision model
– The managers who use this approach avoid statistical analysis and logical
processes.
– These managers are “gut” decision makers who rely on their feelings about a
situation.

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 – This definition could easily lead one to believe that intuitive decision making is
irrational or arbitrary.
– Although intuition refers to decision making without formal analysis or conscious
reasoning, it is based on years of managerial practice and experience.
– These experienced managers identify alternatives quickly without conducting
systematic analyses of alternatives and their consequences.
– When making a decision using intuition, the manager recognizes cues in the
situation that are the same as or similar to those in previous situations that he or
she has experienced; the cues help the manager to rapidly conduct subconscious
analysis. Then a decision is made.
Predisposed decision model
– A manager who decides on a solution and then gathers material to support the
decision uses the predisposed decision model approach.
– Decision makers using this approach do not search out all possible alternatives.
– Rather, they identify and evaluate alternatives only until an acceptable decision is
found.
– Having found a satisfactory alternative, the decision maker stops searching for
additional solutions.
– Other, and potentially better, alternatives may exist, but will not be identified or
considered because the first workable solution has been accepted.
– Therefore, only a fraction of the available alternatives may be considered due to
the decision maker’s information-processing limitations.
– A manager with this tendency is likely to ignore critical information and may face
the same decision again later.
Group Problem Solving and Decision Making
– We have described how individuals go about solving problems and making
decisions. However, groups make most major decisions in organizations.
– Group decisions result when several people contribute to a final decision.
– Because so much emphasis has been placed on teams and participative decision
making, an increasing number of decisions are made by groups rather than
individuals.
– Group decision making is often used in complex and important situations such as
developing a new product or recommending employees with the best potential for
promotion.
– We will examine the advantages and disadvantages of group decision making,
describe when it is useful, present a general problem-solving method for groups,
and follow that with a specific technique.
– Advantages
– the quality of the decision might be higher because of the combined wisdom of
group members.
– Group members evaluate each other’s thinking, so major errors are likely to be
avoided.
– helpful in gaining acceptance and commitment. People who participate in making
a decision will often be more committed to the implementation than if they had
not been consulted.
– groups can help people overcome blocks in their thinking, leading to more
creative solutions to problems.
• Disadvantages.
– The group approach consumes considerable time and may result in compromises
that do not really solve the problem.
– An intelligent individual might have the best solution to the problem; relying on
his or her judgment could save time.

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 Chapter Four
Organizing
1. What is organizing?
2. Formal and informal organization
3. Planning and organizing
4. The importance of organizing
5. The organizing process
6. Departmentalization
7. Major concepts of organizing
8. Principles of organizing
Without people organizations are simply empty buildings and unused equipment.
No single organizational structure can be effective in all situations.
– A structure suitable to one organization may be ineffective to another because two
different organizations cannot have the same people, resources or objectives.
– Organizations those do not revise their structures periodically to meet the ongoing global
competition will face extinction.
– Organizations should continuously adapt the challenges of competition.
• Planning process already determines
– what and how to do,
– what actions to be taken to accomplish predetermined objectives,
– how long it will take and where it will take.
• After planning comes organizing and organizing is highly related with planning.
What is organizing?
• Grouping the work of organization and assigning workers to carry out the work with the provision of
appropriate authority are undertaken in the organizing function.
• In organizing, managers must match
– the work,
– the workers, and
– the resources necessary to carry out the work.
• Organizing are boldly exploring new approaches to
– designing work,
– linking jobs, and
– coordinating activities.
– i.e. changing the ways jobs, businesses & relationship between businesses are structured.
• Organization is the process of
– defining and grouping activities and
– establishing the authority relationship among them.
In performing organizing function,
– the manager differentiates and integrates activities of an organization.
• Differentiation means
– the process of departmentalization or segmentation of activities on the basis of some
homogeneity; or
– segmentation of the organizational system into subsystems.
• Integration is
– the process of achieving unity of effort among different departments, or various
subsystems while achieving the stated goals.
Organizing is
• deciding how best to group organizational activities & resources.
• the identification, classification and grouping of tasks that are necessary to achieve objectives and
assigning of work to individuals and designing hierarchy of decision making relationship.
• dividing duties of an organization into specific tasks or jobs; determining appropriate bases for
departmentalization jobs; delegating authority; and deciding the optimal number of jobs in particular
department.
Organizing is the process of
– identifying and grouping tasks to be preformed
– assigning responsibility and delegating authority, and
– establishing relationships to enable work efficiently & effectively in the accomplishment
of objectives.
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 Organizing function has four distinctive activities/ components
1. It determines work activities to be done to accomplish organizational
objectives
2. It classifies types of work needed and groups the work into
manageable work units.
3. It assigns work to individuals and delegates the appropriate authority
4. It designs a hierarchy of decision making relationships.
• The main objectives of organizing is
– Determining what kind of activities should be performed to materialize objectives
– Classifying those activities and grouping them based on certain criteria
– Assigning the work to individuals and delegating authority
– Creating hierarchy of decision making
Elements of organizing
• There are 6 building blocks that managers can use in constructing an organization.
1. designing jobs
2. grouping jobs
3. establishing reporting relationships between jobs
4. distributing authority among jobs
5. coordinating activities between jobs &
6. differentiating between jobs
• Managers should understand the basic building blocks of organization structure and recognize that part
of organizing function is knowing how best to assemble these building blocks in to an effective overall
structure for the firm.

Designing jobs
– The logical starting point and the first building block i.e. designing jobs for people within
the organization.
– is the determination of an individual’s work-related responsibilities.
– The natural starting point for designing jobs is determining the level of desired
specialization.
– Job design is a fundamental corner stone of organizing.
Job specialization
– is the degree to which the overall task of the organization is broken dawn & divided in to
smaller component parts.
– evolves from the concept of division of labor
– Specialization taken too far results in boredom and lower self esteem
To counter or minimize problems (limitations) associated with specialization, the 5 alternative approaches
are:
1. Job rotation
2. Job enlargement
3. Job enrichment the
4. Job characteristics approach and
5. the work team
• They are structural techniques.
Job rotation
• is an alternative to job specialization that involves systematically moving employees from one job to
another. i.e. moving from job to job.
Job enlargement
• is an alternative to job specialization that involves increasing the total number of tasks workers
perform.
Job enrichment
• is an alternative to job specialization that evolves increasing both the number of tasks the workers
does and the control the worker has over the job.
Job characteristics approach
– is an alternative to job specialization that suggests that jobs should be diagnosed and
improved along five core dimensions, taking into account both the work system and
employee preference.
– the five core dimensions
• skill variety
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 – the number of tasks a person does a job
• task identity
– the extent to which the worker does a complete or
identifiable portion of the total job.
• task significance
– the perceived importance of the task
• autonomy
– the degree of control the worker has how the work is
performed,
• feed back
– the extent to which the worker knows how well the job is
being performed.
Work teams
– is an alternative to job specialization that allows an entire group to design the work
system it will use to perform an interrelated set of tasks.
– Under this arrangement, a group is given responsibility for designing the work system to
be used in performing an interrelated set of jobs.
– In a work team the group itself decides how jobs will be allocated
Formal Vs informal organization
• Organizations can be classified into formal and informal types.
• Formal organization
– an organization that is deliberately and rationally designed/ created and approved by management
through organizing process to achieve organizational goals/ objectives.
– a system of well-defined jobs, each bearing a definite measure of authority, responsibility, and
accountability.
• Common characteristics of formal organization are
– Consciously designed
• Formal organization are purposefully designed and established to attain
certain end results.
– Based on delegated authority
• In a formal organization each employee has delimited authority; therefore,
there is superior-subordinate relationship.
– Organizational chart is drawn
• Organizational chart shows jobs and departments and it is the most
tangible depiction of an organizational structure.
– Deliberately impersonal
• Positions in an organization are not personal properties. They are
always open to some one who fit the position. People who meet the
requirements of the job can fulfill the position.
Informal organization
– refers to people in-group associations, but these associations are not specified in the
structure of the formal organization.
– a network of social relationships that arise between people working together.
– are not included or established deliberately/ officially in the formal organization channel
but formed adjacent to the formal organization.
– always exist in the formal organization; nothing can destroy/ vanish it; it can not be
avoided.
– are formed following the core behavior and the interaction dynamism.
– are natural grouping of people in the work situation based on their behavioral patterns;
interests; beliefs; objectives; etc..
– No conscious attempt is made to create it.
– are established as a result of the social needs of belongingness – the need of people to
associate with others.
– are inherent characteristics of any organization.
– may affect formal organizations positively or negatively.
• Managers should recognize that it exists in a formal organization; and
should try to use it for the benefit of the formal organization
• Reasons for the formation of informal organization are
– Mutual benefit
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 • Members of an organization have their own personal interests that tied
them to their colleagues so as to meet these interests. Hence the
communality of people interest in the formal organizations leads to the
formation of informal organization.
– Friendship
• Members of an organization establish friendship among themselves due to
different reasons. This friendship among the members paves the way for
the formation of informal organization.
– The need to fulfill social needs
• A need to be the member of a society put the workers in the organization
together. Therefore, one of the mechanisms through which people in the
organization meet their social needs is being the member of informal
organization.
– Physical work condition
• People working in the same unit are closely related. Hence, working in
proximity/ near by or together is one of the reasons for the formation of
informal organization.
– Administrative practice
• Some managers encourage while others suppress the formation of
informal organization. Thus the type of management entertained by
managers is the result for the establishment of informal organization.
Characteristics of Informal organization
Informal organization has the following characteristics
– Group norms
• This is the core behavior among the workers in the informal organization.
There are agreements/ rules and regulations which may not be written that
govern the behavior of members. The members act accordingly with out
showing any deviation.
– Group cohesiveness
• Members of the informal organizations are basically stickiness together/
having strong relationships. The more the group stick together the more
they will be successful in attaining the objectives.
– Group leadership
• Members in the informal organization select someone as a leader who is
highly articulate, and such people are conventional leaders. It is having
informal leader and s/he is the most active one among the others.
– Communication network
• Communication network outside the formal communication channel
established by the organization; it is also called grapevine.
– Lifespan and purpose
• Informal organizations have short life span in comparison with formal
organization. Therefore they cease to exist when the members meet their
interests and re-established when another need arises.
– Existence of informal organizations in a formal organization
• The divergent nature of people’s interest, their feeling, tradition, attitude,
etc, lead to the formation of different informal organizations into a big
formal organization
– Informal organizations gradually con develop to formal organization
• Informal organizations gradually emerged as formal organization.
Advantages and disadvantages of informal organizations
Advantages
• They are additional assets for the formal organization.
– If informal organizations are properly associated to the formal organization, they are
additional assets for the formal organization because they may come up with innovative
ideas to promote the work of the organizations.
• They are useful channels of communication.
– In the informal organization information can easily and rapidly reach the members of the
organization through their informal ways of communication.
• They provide satisfaction and stability in the organization
23
 – When workers are given opportunity to establish the informal organizations, they
entertain their idea that leads them to be satisfied and stable in the organization.
• Their existence alerts managers to plan and act accordingly than otherwise.
– A manager becomes watchful more than any other time when there are informal
organizations to check whether they are out of line or not. If the activities of informal
organization seem against the interest of the formal organization, necessary measures be
taken to normalize or reverse the condition.
• They inform managers sensitive issues that would be embarrassing if formally released.
– Some information may destruct the normal organizational climate if formally released. In
such cases, informal organizations informally disseminate the information to the groups
endurance and then the manager also becomes aware of the consequences if formally
communicated.
Disadvantages
• Resistance to change
– There is often a tendency to resist changes. Especially when informal organizations filled
with elderly and senior members, they promote old fashion which hinders change and
development in the organization.
• Role conflict
– Bothe types of organizations have their own objectives. And these objectives will not be
the same and this may arises role conflict in the organization.
• Rumor
– Managers may not equally release information to the members of the organization. When
there is too much secrecy or ambiguous situations exist informal organizations
disseminate distorted information.
• Conformity/ compliance
– Some leaders of informal organizations may have hidden motto or promote destructive
actions, hence such leaders may use the members as an instrumental to create challenge
to the leaders of formal organization. Accordingly, when different clicks are misguided,
they hinder the attainment of objectives of the formal organization
The importance of organizing
• The purpose of organization function is to achieve coordinated effort through the design of a structure of
task and authority relationships.
• Effective organization contributes greatly to:
• Facilitate administration
– If the organization is not well designed, it makes management difficult and ineffective.
– In a poorly organized firm, works will be overlapped and important work may be
subordinated or may be overlooked totally.
– Sound organization allows management to relate resource flow continually to overall
objectives; provides an appropriate platform where management can perform the
functions of planning, directing, controlling, etc, in a smooth way.
• Facilitate growth and diversification
– Sound organization permits organizational elaboration/ expansion.
– Under the functional organization, growth and diversification of activities is facilitated by
clear division of work; proper delegation of authority; etc.
• Permits optimum use of resources
– Sound organization structure permits optimum use of technical and human resources.
– The organization takes into account the latest technological improvement and
incorporates it in carrying out organizational activities.
– The right persons are placed in the right positions on the bases of their knowledge and
experience.
• Stimulates creativity
– Specialization provides individuals with well defined duties; clear lines of authority and
responsibility.
– Where there is no sound organization, work is divided by force and aggressiveness
affecting the moral of the employees seriously.
– Sound organizational structure enables managers to turn over routine and repetitive jobs
to supporting positions and concentrate on important issues where they can exploit their
potential better.
The organizing process
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 • Organization is one of the important functions of management and refers to certain dynamic aspects like
– what tasks are to be done;
– who are to do them;
– how the tasks are grouped;
– who is to report to whom; and
– where the decisions have to be made.
• Organizing process allows organizations to organize their activities. It has five steps
Step 1. Consider plans and goals
Step 2. Determine the work activities necessary to accomplish objectives
Step 3. Classifying and grouping activities
Step 4. Assign work and delegate appropriate authority
Step 5. Design a hierarchy of relationships
Step 1. Consider plans and goals
– Organizing process should consider this step before attempting to perform other steps.
– Plans and their goals/ objectives/ mission / vision affect organizing and the results of the
organization.
– Plans dictate the purposes and activities that the organization will have.
– Organization is formed to achieve the goals already formulated during planning process.
– Organizing will create new structure, relationship and modify the existing ones.
Step 2. Determine the work activities necessary to accomplish objectives
– This is identifying/ knowing all works/ activities necessary that are going to be
performed.
• Creating a list of tasks to be accomplished beginning with those ongoing
tasks and end with the unique tasks.
– Ones the manager knows what tasks should be performed, and then the next is to classify
and group these activities into manageable work units based on certain criteria.
Step 3. Classifying and grouping activities
– To provide a smooth flow of work, all closely related and similar activities must be
grouped together.
– This step requires managers to perform three activities.
• Examine each activity identified to determine its nature (marketing,
Production, finance, etc…)
• Group activities into related areas
• Establish basic department design for organization structure.
– Work that is similar /homogeneous in nature is grouped/ placed together to achieve
organizational objectives.
– Grouping similar activities is based on the concept of division of labor and specialization.
• Division of labor is a breaking down the work into its basic components/
basic activities, assigning them to individuals/ specialists and performing
the job more efficiently and effectively.
– After classifying and grouping tasks into related work units comes departmentalization.
Step 4. Assign work and delegate appropriate authority
– Activities that are departmentalized has to be assigned to individuals by giving
appropriate authority to accomplish the tasks.
– This step is based on the principle of the functional definition
• i.e. the activity performed by each unit determines the amount of authority
the manager needs to be able to function. The authority should be
equivalent to the responsibility of the unit.
– This principle in business means that the activities determine the type and quality of
authority necessary.
– Authority doesn’t come first; assignment of activities establishes the basis for authority.
– In establishing departments the nature, purpose, tasks and performance of the
department helps to determine the bases for authority,
• i.e. the nature, purpose, tasks and expectation dictate the amount and type
of authority the manager needs to be able to function.
– The authority should be equivalent to the responsibility of the unit.
Step 5. Design a hierarchy of relationships
– This step requires the determination of both vertical and horizontal operating
relationships of the organization as a whole.
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 • Vertical structuring of the organization results in decision making
hierarchy/ level showing who is in charge of each task.
– The levels create the chain of command or hierarchy of
decision making levels in the company.
• Horizontal structuring has two important effects.
– It defines the working relationships between operating
departments
– It makes the final decision on the span of control –(the
number of subordinates under the direction) of each
manager.
– The result of this step is to complete organizational structure.
Organizational structure
• Organizing process is an ongoing and should not be viewed as a onetime process. It results organization
structure and organization chart.
• Organizational structure
– apportionment of responsibility and authority among the members of an organization
– The arrangement of the work of an organization into different functional roles and
management roles.
– shows the authority and responsibility relationship between the various positions of
the organization by showing who reports to whom.
– is shown usually by an organization chart.
• Organization chart
– a job task pyramid
– A chart showing the interrelationships of positions within an organization in terms of
authority and responsibility.
– A chart outlining the relationships between the direct functions, responsibilities and
titles in an organization and often the people who actually perform them.
– This is an important guide to the workings of the formal organization.
• Organization chart
– Depicts/ represents basic framework of the organization and tells us:
• who reports to whom – the chain of command
• how many subordinates work for each manager – span of control
• channel of communication – solid line indicates official communication
• how the company is structured – e.g. by function, customer or product
• the work being done in each job – the levels on the box
• the hierarchy of decision making – where the decision maker is located
• when the existing structure is formulated - how current the present
organization structure is
• types of authority and relationship – solid line connect line of authority;
doted lines show staff and functional authority
Importance of organizing process
It creates/ enables
– A clarified work environment:
• enables each individual and different unit to know their responsibilities
and authority, channels of communication
– A coordinated environment:
• The interrelationship of various units will be developed;
• guidelines for interaction among personnel will be defined;
• the principle of unity of direction should be achieved.
• These create a coordinated effort among parts of an organization and
avoid the possible confusion that hinders the organization performance.
– Formal decision structure:
• Through organization chart, the formal superior-subordinate relationship
has been developed.
• This allows the orderly relation through the hierarchy for decision making
and communication.
Departmentalization
• Groups, departments and divisions are formed on the basic objectives of the organization.
• Departmentalization
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 – is the process of grouping/ combining jobs/ activities into groups or manageable units.
• A manager must have basis for combining jobs. Whatsoever ways employed by a manager to group
activities, they should ensure the most effective and efficient use of resources so as to attain the desired
objectives.
• The main basis for departmentalization are
– Function
– Geography or location/ territory
– Product
– Customer
– process
• Types of departmentalization / departments are
– Functional departmentalization
– Geographic departmentalization
– Product departmentalization
– Customer departmentalization
– Process departmentalization and
– Multiple departmentalization
Advantages and disadvantages
• Advantages
– It promotes specialization and organizational efficiency.
• It makes use of the benefits of specialization, i.e. departments are
logically setup that consists of experts in particular fields
– Avoid overlap performing basic businesses
– It provides chance for occupational specialization
• because people with specialization work gather in one department
– It provides unity of direction.
• Among members of the department there is job interrelation.
– Lines can clearly be drawn between the functional areas
– It facilitates staffing and training.
• If there are highly qualified staffs in a department other workers will be
initiated or encouraged to fill the position.
– It promotes communication within departments
– Create strong team sprit among people working in one department
• Disadvantages
– It has problems of horizontal coordination.
• It is very difficult to achieve coordination between and among functions
because workers in one department are hardly concerned in what happens
in other departments.
– The tendency of “empire building”.
• In order to become more important unnecessary rivalry/ unhealthy
competition will occur between/ among departments.
– It frustrates the development of managerial talents from the organization as a whole to
top managerial position.
• There is a tendency for the manager who comes to the position of
organization’s to favor the workers in his department.
– It lets organizational objectives take a back seat to departmental objectives
– Identify and focuses on departmental problems and objectives; and ignores organizational
issues and objectives
– Create communication barrier among people with different specialization (people in
different department)
– Narrows the understanding of employees about the organization at large
– Department managers can not develop general managerial skills to take up higher
managerial position
– Lack of understanding of interrelationship and dependency between all functions
– Lack of generalism and internal destructive competition among different departments
reduces the success of the entire organization
Geographic departmentalization
• Departmentalization by geographic area
• is also known as departmentalization by territory or location departmentalization.
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 • is grouping of jobs/ activities on the bases of geographic areas.
• is established when accompany has different branches that are geographically dispersed.
Advantages and Disadvantage
Advantages
– provides a training ground for new managers,
• i.e. place managers out of territory and then asses their progress.
– enables the firm to develop local market areas and adjust quickly to local customers’
needs
– helps the company to reach close to raw materials.
– saves a substantial amount of transport costs.
– provides chance to local people employment opportunity.
– Create customers good will and awareness of local feeling and desire.
– Creates conducive environment to develop general managers.
– Facilitate decision making
– can provide a high level of service as local employees know the local culture and
language.
– enables managers to consider an integrated view of the total organization as a whole
rather than restricting their interest to their respective function or product.
Disadvantage
– Duplication of effort
– The necessity of having a relatively large number of managers
– Difficulties in maintaining consistent adherence to company policy and practices
– Creates serious problems of coordination and control.
– may create gaps between head offices and branch offices.
– costly to host many geographically dispersed departments.
– can create gaps to communication between departments located in different areas.
• The problem of distance makes communication difficult.
A company that uses territory as basis for departmentalization often needs a large head quarter’s staffs to
control dispersed operation.
Product departmentalization
• is product based departmentalization
• is grouping on the bases of products (goods/ services).
• is best to large and multiple product organizations. All activities needed to produce and market are
usually under a single manager.
• allows workers to identify with a particular product and develop team sprit.
• The product structure is organized according to organizational output.
Advantages and disadvantages
• Advantages
– It results in high product visibility.
– It facilitates innovation; and also enhances specialization of production.
– Stem from the need to create relatively independent division
– Each division have resources and types jobs necessary to be in business
– Each division has its appropriate personnel
• Disadvantages
– Employees’ insecurity during time of turmoil.
– Pressure for highly qualified managerial resources.
– It results in poor coordination across the product lines.
– Duplication of efforts among divisions
Customer based departmentalization
– is grouping of tasks based on the type of customers served.
– Grouping activities reflecting the primary interest of customers
– Customers are the key to the way activities are grouped.
– Such organization helps managers to satisfy the customer’s requirements more
conveniently and successfully.
– Business owners and managers often arrange activities on the bases to cater/ serve the
requirements of clearly defined customer groups.
– Customers are highly respected and their interest is served in a better way.
– Such forms of departmentalization are more common in banking, book publishing and
food industry
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Advantages and disadvantages
• Advantages
– Customers’ interest and priority is respected; and widely varied customers will be
satisfied.
– Address special and widely needs of customers for clearly defined services
– Helps to meet customers’ special needs by setting up separate departments
– Indicate the willingness to understand the business of its clients
– Workers are identified with a particular group of customers that create team sprit
• Disadvantages
– It is almost impossible to consider all the customers, b/se of their interests, habits and
customs.
– In the period of no or little demand for goods and services of an organization, some
sections may not be profitable.
– There is a problem of duplication of resources
– Creates difficulty in coordination between departments
– High competition among departments may deter/prevent or discourage the overall
organizational performance
– Requires manager and staff specialists similar with the customers’ situation
– Differentiation among the various customer groups might be difficult
– Possibility of underemployment of facilities and labor-specialized workers in customer
groups
Departmentalization by process
– It is appropriate when departmentalization by production is inflow.
– activities are grouped on the basis of various manufacturing process.
Advantages and disadvantages
• Advantages
– It is appropriate for organizing certain types of work.
– It helps to group production facilities.
– It puts full responsibility of completing each stage of the job.
• Disadvantages
– Failure in one of the process may adversely/badly affect the whole job.
– Profit responsibility can not be assigned to departmentalization by process.
– Due to a sub specialization, a worker can not be shifted to another departments/ it
restricts flexibility.
Multiple bases for departmentalization
– is the combination of two or more departments discussed above.
– helps to divide work exhaustively/ in detail.
– is also a way of combining jobs into departments.
– E.g. matrix organizations
Matrix organization
– also called grid organizations or project management.
– are combining functional and project or product patterns of departmentalization in the
same organization.
– are common in engineering and R& D, and also in product-marketing organization.
Limitations of matrix organizations
• Typical problems of matrix organizations are
– Conflict exists between functional and project managers due to competition for limited
resources and encountering of roles of ambiguity
– Role conflict, role ambiguity and role overload may result
– Imbalance of authority and power, and may result inefficiencies
– Managers protect themselves against blame by putting everything in writing which
increases administration cost because of potential conflicts
– Requires many time-consuming meetings
• Guidelines to make matrix management effective
– Define the objectives of the task/ project clearly
– Clarify the roles, responsibilities & authority of managers & team members
– Ensure influence based on knowledge and information rather than rank
– Balance the power of functional and project managers
– Select experienced manager who can provide leadership
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 – Undertake organization and team development
– Install appropriate cost, time and quality control that report deviations from standards
in timely manner
– Reward project managers and team members fairly
Major concepts of organizing
• In the process of management conceptualization and application of certain major organizational
concepts are necessary.
• Some major organizational concepts and principles that managers must be familiar are
– Authority
– Power
– Delegation
– Accountability
– Unity of Command
– Span of control; and
– Centralization Vs Decentralization
Authority
• All managers in an organization have authority. They have different authorities based on the
management position they occupy.
• Authority
• is the right to act, or to issue order or command, or deploy resources in an organization.
• is the right to give order to organization members.
• is described as institutional power.
• represents legitimate exercise of power in the organization structure.
• The source of authority is the position that an individual has in the organization
• Without authority a manager may not be able to perform the tasks with confidence and show results.
• A person who occupies the position has formal authority as long as s/he remains on the position.
• The essential features of authority are:
– It is the relationship between two individuals, i.e. superior and subordinate.
– It is the right to act.
– It is the power to make decisions and seeing that they are carried out.
– It is used to achieve organizational goals.
Types of authority
• The process of accomplishing organizational objectives through people
– entails the establishment of relationship among the members of the organization and
different hierarchies of the management.
– This again results the presence of the three distinct types of authority in business
organization, namely
1. Linear authority
2. staff authority
3. functional authority
1. Line authority
• is the relationship between superior and subordinates.
• is directed supervisory relationship.
• enables the manager to tell subordinates what to do.
• Line managers authority over their subordinates.
• is represented by the chain of command which links superiors and subordinates form top to bottom in an
organization.
• extends all the way to the lowest level in an organization
– it flows downward in an organization.
– E.g. the general manager has line authority over the marketing manager, production
manager, finance manager, personnel manager…
• A manager supervising employees or other managers has line authority.
2. Staff authority
• is the right to give advice.
• is advisory in nature.
– people in the staff position assist and advise the line manager.
– relive the line manager’s burden by giving them information needed to make operational
decisions.
• People in these positions have the authority to offer advice and recommendations.
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 – E.g. legal service exercises staff authority by advising general manager of the
organization; public Relation service exercises staff authority by releasing information
about the organization on the behalf of the general manager or other managers.
• It is an advisory authority for the staff to provide advice or technical assistance for manager.
• Advisory authority doesn’t provide any basis for direct control over subordinates or activities of other
departments.
3. Functional authority
– is an authority exercised over activities in other departments.
– is the right to control activities of other departments as they are related to specific staff
responsibilities.
– is an authority delegated to an individual or department over specific activities
undertaken by personnel in other departments.
– is usually limited in scope and duration.
– is exercised one level below the person who has it.
• In case, the general manager doesn’t have the skills and knowledge to
handle a given problem or situation, s/he gives the authority to those who
have the expertise.
Line and staff departments
• Line departments
– Departments are normally designated as line departments.
– are departments established to meet the major objectives of the organization.
– are headed by line managers. Line managers exercise line authority.
• Staff departments
– Staff departments provide assistance to the line departments and to each other.
– are viewed as making money indirectly for the company through advice, service and
assistance.
– are created on the basis of the special needs of the organization.
– play vital role in the success of a company. include: PRs; legal service; personnel
service; and computer service
• Power
– is ability to exert influence on others, or the ability to do something.
– ability to influence the behavior of subordinates.
– is the ability to exert influence in the organization
– having power can multiply managers’ effectiveness to influence people beyond what they
can attain through formal authority alone.
– Authority is positional—it will be there when the incumbent leaves; and, it is part of the
power.
– Power is personal; it exists because of the person.
– A person does not need to be a manager to have power.
– Some administrative assistants of top managers have considerable power, but no
authority.
– Managers can acquire power from several different sources.
• The source of power can be
– competency, expertise, position, knowledge, skills, charisma and ability to reward and
punish.
Sources / types of Power
• Legitimate or Position Power
– Holding a managerial position with its accompanying authority provides a manager with
a power base.
– The manager has the right to use this legitimate power because of the position.
– The higher a manager sits in the organization hierarchy, the greater is the perceived
power (or, power thought by the subordinates to exist—whether or not it really does).
Vice presidents wield or can wield a lot of power.
• Coercive Power
– Coercive power is dependent on fear.
– A person reacts to this power out of the fear of the negative results that may happen if one
fails to comply.

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 – Managers, because of their position, have the ability to punish by assigning unpleasant or
boring work, withholding raises or promotions, and suspending or dismissing an
employee.
• Reward Power
– The opposite of coercive power, reward power comes from the ability to promise or grant
rewards.
– Managers have the ability to decide on raises, promotions, favorable performance
appraisals, and preferred work shifts.
• Referent Power
– Referent power is based on the kind of personality or charisma an individual has and how
others perceive it.
– A manager who is admired by others—the latter perhaps demonstrating this admiration
by their desire to identify with or emulate the manager—has referent power.
– The manager can use this power effectively to motivate and lead others.
• Expert Power
– Persons who have demonstrated their superior skills and knowledge possess expert
power.
– They know what to do and how to do it.
– Others hope to stay on this expert’s good side to be able to benefit from his or her
expertise.
– A seasoned manager exercises power with newcomers.
– Knowledge of budgets, systems, or company culture that others need provides a basis for
the manager’s power
The relationship between power and authority
– Authority is the power that has been legitimized by the organization where as Power is
ability to exert influence on others, or the ability to do something.
– Like authority, power is institutionalized and impersonal.
– In organizations, it is necessary to keep a balance between power and authority.
• In some cases a manager may have the authority (the right to do
something), but may lack the power (ability to do something) and vice
versa.
– Power without authority is an abused and authority without power is totally
meaningless.
– Failure to equate power and authority at all organization levels may lead to disastrous
consequence.
Unit of command
– is a principle describing that each person within an organization should take orders from
and reports to only one person.
– is a guiding principle to develop operating relationships.
Delegation
– describes the transfer of formal authority to another person.
– is authorizing subordinates to act in a certain manner independently.
– Is passing of formal authority to another person, i.e. passing authority downward to
subordinates.
– Every manager must delegate tasks/ duties to subordinates since management means
getting work done through others.
– helps managers to concentrate their efforts on core managerial tasks.
– is a two side relationship, i.e. the assigner and assignee.
– It is an act of trust; an expression of confidence; requires necessary skills & strength.
• Delegation occurs for two purposes
– When managers are absent from their jobs
• Subordinates act on behalf and exercise authority.
– To develop subordinates and facilitate decision making process
Process of delegation
Steps for delegation are
• Assignments of tasks
– Kinds of tasks to be performed by subordinate are identified and assigned.
• Delegation of authority

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 – for a subordinate to carry out the activity, the necessary and adequate authority should be
given by the manager. “no more no less authority”.
• Acceptance of responsibility
– When subordinates are assigned with duties and delegated authority, then they will be
responsible to perform the tasks to the maximum ability they can perform.
– Responsibility is an obligation to carry out ones assigned duties to the best of one’s
ability.
– It is not delegated by the manager to the subordinate. The employee is obliged when the
assignment is accepted.
• Creation of accountability
– When subordinates are assigned for certain tasks and delegated a certain authority, and
then they will be accountable for the actions taken.
• While delegating, a manager must consider the following issues.
– Analyze how the manager spends his/her time.
• This enables to list out the duties that the manager undertakes.
– Determine the tasks that can be assigned.
• All duties of the manager cannot be delegated
– Decide by whom the tasks can be handled among the subordinates.
– Delegate the authority and create the responsibility.
– Control whether the delegated subordinates are performing the tasks to the expected
standard or not.
• In delegation, managers are required to think the principle of parity that states “authority and
responsibility must coincide”; i.e. responsibility created should be equivalent to the authority granted.
• If employees are without authority, they cannot perform tasks as expected; therefore, it creates
frustration and anxiety. if delegated more authority, they will interfere/ hinder others job.
Accountability
• Having answer to someone/ somebody for your action.
– Answer for the actions taken with regard to the tasks assigned and authority delegated.
• means taking the consequence - either credit or blame.
• If one accepts assignments and authority, s/he is accountable (answerable) for the actions taken.
• A manager is accountable for the use of his/her authority and performance and the performances and
actions of subordinates.
Responsibility
– duty to perform
– Authority without responsibility is dangerous and responsibility without authority is an
empty vessel.
Span of control/ management
– refers to the number of subordinates that single manager can effectively supervise or
should have to direct.
– Manager cannot supervise unlimited number of employees. There should be a limited
capacity to control the work of different subordinates.
– The manager’s ability to supervise a large number of subordinates is constrained by
knowledge, experience, time, energy, etc.
– to overcome the limitation, every manager has to delegate work to subordinates.
– There is no correct number for the span of control or there is no exact formula to
determine the span of control. It varies from one situation to another.
– The variation at different organizational levels results from
• complexity & diversity of jobs;
• the need for personal interaction;
• leadership philosophies, etc..
• Span of control determined for each manager based on
1. the complexity and variety of the subordinates’ work.
2. the ability and training of the subordinates
3. the ability of the manager and
4. the company philosophy for centralization and decentralization of decision making
• As a general rule
1. The more complex a subordinate’s job, the fewer will be the manager’s number of
subordinates.

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 2. The more routine the work of subordinates, the grater will be the number of subordinates
that can be effectively directed and controlled.
• Organizations have a narrow span of control at the top and wider span at the lower levels.
• Factors those influence spans of control of a manager are
1. the ability & the experience of a manager;
2. the complexity & variety of the subordinates’ work
3. the qualification of the manager and subordinates;
4. growth in competence and experience in personnel
5. the company’s philosophy towards centralization or centralization in decision
making.
• If the manager has
1. Too many people to supervise,
• the subordinates will be frustrated by their ability to get immediate
assistance from their boss; time & other resources could be wasted; plans,
decisions & actions be delayed or made without proper control or
safeguard.
2. Too few people to supervise,
• the subordinates could become overloaded or over supervised; and
frustrated & dissatisfied.
Centralization Vs decentralization
• Both centralization and decentralization refers to the nature of authority within an organization structure.
• are merely the results of circumstances. Absolute centralization or decentralization is impossible in
practice.
Centralization
– is a systematic & consistent reservation of authority at central point within the
organization.
– is the concentration of authority for decision making within the hands of one or few.
• In centralization
– Little delegation of authority
– Rules, power & discretion are concentrated at the top level
– Control & decision making reside at the top level of management
• The more highly centralized the organization, the more control and decision making will be exercised at
the top.
• Factors forcing managers to reserve authority and centralize decision making power are
– To facilitate personal leadership
• Centralization generally works well in the early stages of organizational
growth.
• is essential in case of small organizations to survive in a highly
competitive world.
– To provide for integration
• It keeps all parts of the organization moving together harmoniously
toward a common goal.
• It assures uniformity of standards and policies among organizational units.
• The manager acts like a unifying force and provides direction to the
activities.
• Duplication of effort and activity are also avoided.
• Under centralization the organization moves as a unit.
– To handle emergencies
• Centralization is highly suitable in the time of emergency.
– The resources & information can be mobilized quickly.
• Centralization of decision making ensures prompt action necessary to
meet the emergencies.
Limitations of Centralization
It makes
• difficult for managers to process the bundles of data in time and take decision in an appropriate manner
• the manager burdened with a great amount of detailed & exhaustive work
• managers to work painfully long hours
• forces top management to posses a broad view they may have beyond their capacity
• the vast amount of power given to a few people may be abused
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 • the organization is highly vulnerable to what happens to its dynamic and talented top management
people
• It floods communication lines to a few individuals at the top of the organization. As a result the speed of
communication upward and decision processes are slow.
• It kills the initiative; self reliance and judgment of lower level personnel.
Decentralization
• is a systematic effort to delegate to the lowest levels all authority except that which can be exercised at
central point.
• It is pushing down of authority and power of decision making to the lower levels of organization
• dispersal of authority for decision making down the organization structure into the hands of many.
• The centers of decision making are also dispersed throughout the organization.
• The essence of decentralization is the transfer of authority from a higher level to the lower level.
• Nowadays decentralization has become to be the fundamental principle of democratic management
• Some suggestions to identify the degree of decentralization in a company
– The greater the number of decisions made at the lower level of management, the more the
company is decentralized.
– The more important the decisions made at the lower level, the greater the
decentralization.
– The more flexible the interpretation of the company policy at the lower levels, the greater
the degree of decentralization.
– The more widely dispersed the operations of the company geographically, the greater the
degree of decentralization.
– The less the subordinate has to refer to his/her manager prior to decision, the greater the
decentralization.
Advantages and disadvantages of decentralization
• Decentralization is extremely beneficial but also dangerous unless it is carefully constructed and
constantly monitored.
Advantages
• It reduces the work load on overburdened manager.
• It brings the decision making process closer to the scene of the action.
• It facilitates product diversification, i.e. it treats each product lines as separate and important.
• It gives individuals an opportunity to learn by doing.
• It facilitates effective control. i.e. it often results in improved controls and performance measurements.
• It ensures participative management.
Disadvantages
• Conflict
– Decentralization puts increased pressure on each heads to realize profit at any cost.
– To meet this each deviate or veer away form corporate objective. i.e. leads to competition
that may ultimately result in bitter individual rivalries.
• Cost or duplication
– Decentralization results in duplication of staff effort.
– To be independent, each division should have access to purchasing, personnel, etc. hence
each carry a large group of specialists at numerous cost.
Relationship of centralization and span of control
• Centralization or decentralization in decision making influences the span of control.
• Decentralized decision making means the span of control should be wider for each manager;
– i.e. decision making is forced down to subordinates, thus freeing up a manager’s time and
commitments.
• Centralized decision making results in narrower span of control and higher levels of management.
• Top managers make the majority of decisions and closely supervise their subordinates and delegate little.
Principles of organizing
1. The principle of objectives
2. The principle of specialization
3. The principle of coordination
4. The principle of authority
5. The principle of responsibility
6. The principle of span of control
7. The principle of balance
8. The principle of correspondence
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 9. The principle of continuity
10. The principle of definition
11. The principle of exception
12. The principle of delegation
13. The principle of scalar principles/ chain of command
14. The principle of unity of command
15. The principle of efficiency
16. The principle of simplicity
17. The principle of flexibility
18. The principle of unity of direction
19. The principle of personal ability
• The principle of objectives
– Every organization should be geared to the achievement of the organizational objectives.
• The principle of specialization
– The activities of every member as far as possible should be confined to the performance
of a single function.
• The principle of coordination
– The purpose of organization by itself is to facilitate coordination; unity of effort.
• The principle of authority
– There should be a clear line of authority to every individual in the group.
• The principle of responsibility
– The responsibility of the superior for the acts of the subordinate is absolute. The superior
should be held responsible for the act of his subordinates.
• The principle of span of control
– No one should supervise more than five or, at most, six direct subordinates whose work
interlocks.
• The principle of correspondence
– In every position, the responsibility and the authority should correspond.
• The principle of balance
– The various units of an organization should be kept in balance. Such as in the size of
various departments; between centralization and decentralization; between the principles
of span of control and the chain of command; and among all types of factors such as
human, technical and financial.
• The principle of continuity
– Re-organizing is a continuous process. In every undertaking specific stipulation should be
made for it.
• The principle of definition
– The content of each position, the duties involved, the authority & responsibility
contemplated and the relationships with other positions should be clearly defined in
writing and published to all concerned.
• exception
– Top managers have limited time. Only exceptionally complex problems should be
referred. The subordinates should deal with routine matters. This enables tops to devote
time on more important and crucial issues.
• delegation
– Authority should be delegated properly to the lower levels. The authority delegated
should be equal to responsibility. Each manager must have enough authority to
accomplish the task assigned to him.
• scalar principles/ chain of command
– The line of authority from the top to the first-line at the bottom must be clearly defined.
• unity of command
– Each subordinate should have one superior whose command to be obeyed. Dual
subordination should be avoided. Because it causes uneasiness, disorder, indiscipline, and
undermining authority.
• efficiency
– The organization’s structure should enable the firm to function efficiently and accomplish
objectives with the lowest cost.
• simplicity

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 – The organization’s structure should be as simple as possible and the organizational levels
as far as possible should be minimum. A large number of levels mean difficulty of
effective communication and coordination.
• flexibility
– The organization should be flexible, be adaptable to the changing circumstances and
permit expansion and replacement without dislocation and disruption of the basic design.
• unity of direction
– There should be one head and one plan for a group of activities having the same
objectives. It facilitates unification and coordination of activities at various levels.
• personal ability
– Since people constitute an organization, there is need for proper selection, placement, and
training of staff. Moreover, the organization structure must ensure optimum use of human
resources and encourage management development programs.
Thank you!!!

37
 Chapter five
Staffing an organization
1. Staffing and the Staffing Process
2. Human Resource Planning
3. Recruitment and Selection
4. Decision making and Placement
5. Induction and Orientation (Socialization)
6. Training and Development
7. Compensation and Performance appraisal
8. Separation, promotion, transfer and layoffs
9. Employment Relationships
10. Major principles (guides) of staffing
Why staffing?
Human Resource (HR) and Human Resource Management (HRM)
Human Resource (HR)
– Organizations are made up of people and function through people. without people
organizations cannot exist.
– Organizations possess & utilize different kinds of resources. Among these HR is
the most important one
– Without HR
• is impossible for organizations to accomplish their objectives &
utilize other resources.
• other resources remain futile (useless, fruitless).
• organizations are said to be lifeless.
– "Human resource is the most important resource of an organization which
deserves special treatment, respect & dignity." (Robert Own)
– Is defined as:
• The knowledge, skills, creative abilities, talents and aptitudes of an
organization’s workforce.
• Represents the people at work.
• Human resources of an organization can be motivated.
• Human resource is mobile.
• It is the only factor of production which produces more than its input.
• It is the only resource which gains more knowledge and skilled in the long run, where the other
resources goes depleting
Human Resource Management (HRM)
• HRM is a set of policies, practices and programs defined to maximize both personal and
individual goals.
• It is the process of binding people and organizations together so that the objectives are achieved.
• It is the field of management which has to do with planning, organizing, and controlling the
functions of procuring, developing, maintaining and utilizing a labor force such that the a)
objectives for which the company is established are attained economically and effectively; b)
objectives at all levels of HR are served to the highest possible degree; and c) objectives of
society are duly coincide and served. (Jucius)
• It is the planning, organizing, directing and controlling of procurement, development,
compensation, integration, maintenance and separation of Human recourses to the end that
individual, organizational and Societal objectives are accomplished. (Fippo)
• It is concerned with people at work and with their relationship within the organization.
• It seeks to bring together men and women who make up an enterprise, enabling each to make
his/her own best contribution to its success both as individual, and as a member of a working
group.
• HRM is the Nervous system of an organization.
Objectives of HRM
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 • Organization objective
– The goal of human resource function is to create a work force with the ability and
motivation to accomplish the basic organizational goals.
• Personal objective
– they relate to the satisfaction of the personal objectives of the members of an
organization through monetary and non monetary devices.
• Societal objective
– Human Resource management relate to the satisfaction of social and community
objectives, such as
 serving the customers honestly,
 providing a higher standard of living in the community,
 bringing comfort and happiness to society,
 using resources to the society benefit,
 being responsive to the needs & challenges of the society.
Staffing
• Once organizational objectives are defined & activities to be carried out to accomplish the
objectives are determined by planning; and the overall tasks are broken down & grouped in to
specific job along with the required authority to do by organizing, then the next concern is
filling the organizational structure with the necessary HRs. i.e. staffing.
• Organizations require people who have different knowledge, skills & experiences to fill various
positions to attain organizational objectives. Hence selection of the right person & placement in
the right position are the main aspects of staffing.
Staffing is
• filling the organizational structure with the necessary HRs
• selecting and placing the right people at right position.
• the process of obtaining & maintaining capable & competent people to fill positions in
organizational structure.
• the other managerial task/ function
• comes after organizing
• serves to obtain essential HR to of an organization
• managing HR in an organization.
• the process of identifying HR needs, procuring the necessary employee, training, utilizing and
separation of these employees.
• Major objective of staffing function is enabling an organization to attract, to develop, to
maintain, and to utilize efficient and effective workforce.
Staffing Functions
• Staffing involves the determination of manpower requirements of the enterprise and providing it
with adequate competent people at all levels.
• are operative or service functions.
1. Procurement
2. Development
3. Compensation
4. Integration
5. Maintenance
6. Separation
The staffing process
The staffing function performs the following sub functions or staffing involves a series of steps, namely
1. HR planning (manpower planning)
2. Recruitment and selection
3. placement & Employment decision
4. Induction & orientation (socialization)
5. Training and development
6. Compensation & performance appraisal (PA)
7. Separation, Promotion, Transfer & Layoffs
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Human Resource Planning (HRP)
• HRP is
– an integral part of corporate planning.
– the starting point in the process of staffing ; and refers to the determination in
advance the number & quality of people to be employed.
– the means for acquiring, using, improving, and preserving organizations HR.
– involves assessing
• current HR of the organization (HR inventory),
• future needs (forecasting personnel requirement) &
• ways to fill the gap (planning to procure new employees).
– it involves three distinct activities.
• Evaluating the existing work forces
• Forecasting the future needs of HR and
• Ensuring the availability of workers when needed.
– HRP
– is the process of systematically reviewing HR requirements to ensure that the
required number of employees with required skills are available when and where
they are needed.
– tries to obtain the right people (with right knowledge, skills and experience), at
the right numbers, in the right jobs, at the right time, and at the right cost.
• HRP includes four factors:
– Quantity: How many employees do we need?
– Quality: Which skills, Knowledge and abilities do we need?
– Space: Where do we need the employees?
– Time: When do we need the employees? How long do we need them?
• The quality of goal depends on
– The extent that productive HR exists in an organization.
– Getting the right people at the right time on the right position.
Main aims of HRP
– to obtain & retain quality of manpower that the organization needs.
– To make the best use of the organizations manpower resource.
– to anticipate the problems arising from potential surpluses or deficits of
manpower.
• Purposes of HR Planning
– To expand the operation of the organization
– To reduce labor cost
– To utilize HRs efficiently and effectively
– To avoid disruption in operation
– For effective employee development program
– To maintain good industrial relation
• Importance of HRP
– Uncertainty Reduction
– Objectives achievement
– Environmental Adaptation
– Effective and Efficient Utilization of HRs
– HR Development
– Control
Why HR planning needed?
– Scarcity of personnel in some specialized areas
– high expenses involve to hire, develop & maintain employees,
– rapid technological changes make knowledge & skills get obsolete.
– need of skilled & qualified manpower to carry out the work of an organization
– labor turnover & absenteeism among workers

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 • People leave organizations for a number of reasons, such as
retirement, transfer, better opportunities.
– to meet the requirements of expansion & diversification programs of the
organization.
– the presence of fast change in technology & the needs of workers
– to cope with the future uncertainties &
– to identify areas of surplus personnel and then to transfer it to other departments.
• HRP helps management to strive for the right number and the right people at the right places &
at the right time to do things that help or result to achieve maximum benefit for both the
individual & the organization.
Factors to be considered in HR planning
HR planning is accomplished through the analysis of
• internal factors/ environment
– current & expected skills needs, vacancies and departmental expansions &
reductions
• External factors/ environment
– Labor market, government regulations, labor unions, etc.
• As a result of these analysis plans are developed to execute other steps.
Therefore, the main points to be considered in HR planning are
1. Current assessment
• reviewing the current human resource or status of HR.
– HR inventory or skill inventory
– job analysis
2. Future assessment
• estimating the future personnel requirements i.e. HR forecasting.
– Forecasting depends on the nature of the organization, products it produces and
the state of growth of an organization.
3. Development of future program
• comparing the current capabilities, skills of the employees with the future requirements to
design future program & fill the gap.
• Comparison of the inventory & the forecast enable the manager to make decision on the future
HR needs of the organization
– shortage of employees’ calls for new employment and
– surplus in the contrary requires attrition (early retirement, termination, etc.)
4. Career development
• is an essential step in HR planning.
• prepares management to deal with dynamic changes that takes place overtime in organizations.
• To cope with these changes a manager required to plan for employee career development.
Job analysis
• Skill inventory is assessing what talents & skills are currently available.
Job analysis
– examining and appraising jobs and skills.
– assessing total jobs within the organization and the required skills & behavior
necessary to perform these jobs.
– is the process of determining and reporting pertinent information relating to the
nature a specific job.
– is the determination of the tasks which comprise the job and the skills,
knowledge, abilities, and responsibilities of the jobholder for successful job
performance.
– is the process of determining the duties and skill requirements of a job and the
kind of person who should be hired for it.
– Is needed when
• an organization is formed.
• new jobs are created in the organization
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 • jobs are changed (change in nature of jobs), because of new
technologies, working methods, procedures or systems.
Components of job analysis
• Job analysis has two components.
1. Job specification and
2. Job description
Job description
– the statement depicting/ describing what the job holder does; how he does, and
why he does a particular job.
– accurately portrays the job content; working environment, and the terms &
conditions of employment, etc…
– describes the purpose of the job and its relation with other jobs.
– Lists the duties of a job; job’s working condition, and the tools, materials and
equipments used to perform it.
Job specification
– Employee specification
– states the maximum acceptable qualifications of the incumbent (employee) that
will be assigned to the particular task.
– Identifies the skills & knowledge, and abilities required to perform particular jobs
effectively.
– Describes the acceptable human qualities.
– Focuses on personal qualities – physical. Mental, skill/talent , qualification
– Lists the skills, abilities, and other credentials needed to do the job.
Process of HR planning
HR plan consists of the following steps
1. Analyzing organizational objectives & plans
2. Determining the overall HR needs
3. Taking inventory/ auditing of existing personnel
4. Determining net new personnel requirements
5. Developing action plans
1. Analyzing organizational objectives & plans
– the main use of HR planning is to provide the organization with workforces
needed to achieve organizational objectives.
– The base for HR planning is the corporate plan of the organization.
2. Determining the overall HR needs
– determining the total HR requirement
– determining the future HR requirement
– predicting the need for & the availability of people with required qualities to
perform the current & the future jobs
– assessing the overall needs, i.e. the job needs and the job volume
– assessing the Demand & Supply aspect of HRM
• Demand
– Organizations future demand for employees is central to HR planning.
– Demand forecasting is predicting an organizations future demand for employees
and an essential part in HR planning process,.
– HR is influenced by
• external challenges (PEST)
• organizational/ internal factors such as strategic plan on growth,
production, marketing, etc, and
• workforce factors such as retirement, resignation, termination, and
death.
• HR demand forecasting involves predicting the quantities and kinds of
HRs the organization will require at some future point in time to achieve
its strategic objectives.
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 • Supply
– the labor demand forecast projects HR needs of an organization,
– the labor supply forecast projects HR availability.
– Labor supply forecasts are typically broken down into two categories:
• Internal supply
– consists of present employees which can be
promoted, transferred to meet the anticipated needs.
– needs to carry out HR audit/ inventory to summarize
workers skills & abilities.
• External supply
– important when there is no replacement or opening
for an entry-level job.
– labor market analysis is very important activity to
estimate future supply of HR.
3. Taking inventory/ auditing of existing personnel
– important to know & decide the quality & quantity of workers that might stay
with the organization for the future plan
– important to know to what extent the organization can meet its personnel needs
within
– inventory has to take into account the expected changes like promotion, transfer,
retirement, deaths, quits, resignation, etc.
– helpful to determine future HR requirements.
4. Determining net new personnel requirements
– comparing overall personnel requirements with personnel inventory, then the
difference is net new requirement.
– Gap Analysis
– Net HR requirement is determined by comparing the labor demand forecasts and
the internal labor supply forecasts.
– The difference of the total HR needed for an organization and the total HR
available in the organization will result in the net HR requirement.
– Net HR requirement = HR demand forecast – internal HR supply forecast
• If HR demand is greater than internal HR supply, the net HR
requirement is positive (deficit supply of HR, i.e., additional HR is
needed).
• But when HR demand is less than internal HR supply, the net HR
requirement is negative (surplus supply of HR, i.e., there are excess
of HRs in an organization).
• If HR demand is equal to internal HR supply, the net HR
requirement is zero (in a state of equilibrium).
5. Developing action plans
– Once the supply & demand of HR are estimated, adjustment is needed.
• If internal supply exceeds the firm's demand, surplus of HR exists.
• If internal supply can't fulfill the organizations needs, shortage of
HR exists.
• Therefore, recruitment, retirement, promotion, transfer, training,
downsizing, etc can be the part of action plan.
– If Net HR Requirement is Positive
• HR Deficit Supply
• HR department must design and implement techniques to overcome
the shortage of HRs.
– Recruitment and Selection
– Improve Retention Rates
– Training and Development
– Overtime
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 – Outsourcing
– If Net HR Requirement is Negative
• HR Surplus supply
• When this happens, the HR department must make decision to
reduce the number
– Downsizing (outplacement):
– Layoffs
– Early Retirement
Recruitment and selection
• Recruitment
– is searching for prospective employees and stimulating & encouraging them to
apply for the job vacancies in the organization.
• seeking & attracting a pool of people from which qualified
candidates for job vacancies can be chosen.
– the process of generating a pool of qualified candidates for a particular position.
– the art of attracting a pool of applicants from among whom the most suitable ones
may be selected.
– act as a bridge between the prospective employees & the organization.
• recruitment is the process of attracting individuals
– just in time,
– in sufficient number and
– with appropriate qualifications,
– and encouraging them to apply for the jobs
Factors affecting Recruitment
– Internal Factors
• Working conditions of the organization
• Promotional Opportunities
• Salary level, and type and extent of benefits
• Other Personnel policies and practices
• Image of the organization
• Ability and skill of the management to stimulate the candidates
• Quality of the recruitment process.
– External Factors
• Personnel policies and practices of other organizations regarding
working conditions, salary scale, benefits, promotional
opportunities, employee relations etc.
• Career opportunities in other organization.
• Government regulations
• Labor market conditions
Reasons for Recruitment
– Company expansion
• When the operation of the organization is expanding, new jobs are
created and additional employees are required.
– Turnover
• because of employees leaving the organization, such as natural
attrition, voluntary and involuntary turnover.
Sources of staff recruitment
– Organizations can attract candidates from internal & external sources, i.e.
candidates within and outside the organization.
1. Internal sources
2. External sources
Internal sources
– filling a vacancy by a person already employed by the organization

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 • Whenever any new vacancy arises, people within the organization
will be upgraded, promoted a transferred to fill the vacancy.
– include
• the existing employees (permanent & temporary) and
• ex-employees who left the organization for various reasons.
– Most large organizations attempt to develop their own employees for positions
beyond the lowest level.
– The internal source is one of the best sources of recruitment if an organization has
been effective in recruiting and selecting employees in the past and has a strong
employee development program.
Advantages/ merits
– enhances employees moral
– easy to evaluate existing employee than the new one.
– minimum time is spent on training
– less costly (costliness) or much cheaper getting familiar employees
• less expensive when compared to outside source of recruitment.
– ensures job security & opportunity for advancement that enhances employees
loyalty towards the organization
– make employees more reliable
• It is a relatively cheap way of recruiting, vacancies can be advertised at little cost and it can also
save time.
• Organizations typically have a better knowledge of internal applicants’ skills, knowledge and
abilities.
• Inside job candidates have better knowledge of the organization’s policies, procedures and other
special characteristics and its operation - orientation and training
• have a significant positive effect on employee motivation and morale when it creates promotion
opportunities.
• enhances employee commitment and job satisfaction
• The return on investment that an organization has on its present workforce is increased.
– Most organizations have a sizeable investment on their employees in the form of
training and development, fringe benefits, etc. being able to use this workforce to
its maximum capability improves the organization’s return on its investment.
Disadvantages/ demerits
• results organizational in-breeding
– prevent new ideas from coming in & discourages people with fresh ideas, more
qualification, and more creativity from entering the organization.
– restrict the nourishment of new ideas
• the existing employees become outdated and ultimately these sources may dry up
– The internal source is never sufficient so excessive reliance on internal source
may be dangerous.
• narrow down selection options
– Promotions are limited to seniority, ignoring merit.
• This leads to ill-feeling and conflict in the organization.
• Internal recruiting simply promulgates the old ways of doing things; that creative problem
solving may be hindered by lack of new blood or a sort of “managerial inbreeding.”
– Inbreeding of ideas can stifle new ideas and innovations.
– When an entire management team has been brought up through the ranks, there
may be a tendency to make decisions “by the book” and to maintain the status
quo.
• Infighting for promotions can become overly intense and have a negative effect on the morale
and performance of employees who are not promoted.
• An organization can suffer if it uses inferior internal sources just for the reason of boosting the
morale of current employees (promotion based on seniority)
External source
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 – potential candidates totally come from the external environment (outside the
organization).
• the sources of job application from outside of an organization.
– External recruiting is attracting applicants from various outside organizations.
– are
• new entrants/ fresh products,
• educated but unemployed section of the society,
• employees of other organizations,
• retired persons, etc
– used if HR needed is not available (on hand)
– It is needed in organizations that are growing rapidly or have a large demand for
technical, skilled, or managerial employees.
– External sources provide large pool of candidates.
• Commonly used external sources are:
1. Educational institutions
2. Employment agencies
3. Advertising for vacancies
Educational institutions
• recruiting from college & university.
• Organizations send employment circular to the various professional, and educational institutions
display the circular on the notice board so that the potential candidates (students) come to know
about the vacancies.
Employment agencies
• employment exchanges & private employment agencies. They maintain a detailed record of job
seekers and refer the candidates with appropriate qualification to the required employers.
Advertising
• Commonly placed in daily news papers, magazines, trade & professional publications.
• Popular method, but time consuming and heavy expenditure is involved in recruiting.
• Advertising for vacancy should include
– The name of the organization.
– Position
– Qualification
– Job experience
– Place of work
– Other requirements
– Terms of employment
– Salary
– Application deadline &
– different documents required for application.
– Address of the organization.
Employers require external sources
– To fill entry-level jobs (jobs for the beginners).
– To acquire skills not possessed by current employees.
– To obtain employees with different background, to provide new ideas.
Sources of external recruitment include
– Schools, colleges and Universities
– The unemployed
– Competitors and other organizations
– Private and public employment agencies
– Professional Associations
• Advantages of external recruitment
– helps to get best professionals available in the market with required experience,
skills, education, etc.
– recruitment is done including all sections of the society
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 – provides new or fresh blood to be pumped into the organizations personnel who
are creative
– helps to attract specialists
– Large number of applicants (a pool of talent is much larger than the internal
sources).
– It is often cheaper and easier (low training cost) to hire technical, skilled, or
managerial people from the outside rather than training and developing them
internally.
– Can bring new ideas (insights and perspectives) to organization
– Expand external relation of an organization.
– Avoid internal promotion polities
• Disadvantages of external recruitment
– more expensive
• needs adequate time & money on training and induction
– chance of brain drain or to be recruited by other organization
– Attracting, contacting and evaluating potential employees can be more difficult
and can be very costly.
• This is especially true for higher-level jobs.
– Employees hired from the outside need a longer adjustment or orientation period.
• As a result, it might take a significant time before they can perform
with their full potential.
– It can be one reason for the reduction of morale of internal employees who feel
qualified to do the job.
• During recruitment, potential candidates pooled together through advertising vacancies.
• Vacancies can be filled
– by internal recruitment
• the existing workers through transfer, promotion, demotion and
recall from layoff
– from external sources
• labor market through vacancy announcements, and unsolicited
applicants, educational institutions, employment agencies, labor
unions, etc
• The vacancy announcement incorporate
– Job description
• written record of duties, responsibilities & requirements of a
particular job.
• is the description of job quality characteristics.
• gives information about: the title, location, duties, working
conditions, etc.
– Job specification
• depicts the requirements of personnel who should be made
responsible for a given job
• gives/ specify information regarding
– characteristics,
– qualities (physical & mental/ psychological),
– qualifications,
– experiences, etc of the worker who is most suitable
to carryout the activities mentioned in the job
description
Methods of Recruitment
• Direct method of recruitment
– Recruiters directly contact the prospective employees and attract them.
• contact graduating students & select the best among them

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 • hold conferences/ seminars for perspective employees and
encourage them to apply for vacancies
• participate in job exhibitions or job fairs to attract prospective
employees
• Indirect method
– encouraging prospective employees to apply for vacancies through advertisements
in newspapers, magazines, journals, etc..
• Third party method
– Private employment agencies, those carry out recruitment process of an
organization for a fee.
Recruitment Methods
• Internal Methods
– Job Posting and Bidding
• Job posting and bidding is an internal method of recruitment in
which notices of vacant positions are posted in central locations
throughout the organization and existing employees are given a
specified length of time to apply for the available positions.
• External Method
– Job Advertisement
– College Recruiting
– Employment Agencies
– Employee referrals
– Walk-ins /Write-ins or Unsolicited application
– Internet (websites)
– Apprenticeship/Internship
Selection
Selection is
– Identifying and choosing applicants/ individuals who can successfully perform a
job from the available candidates.
• choosing from the pool of applicants, the person best meeting/
fitting job specification
• a procedure concerned with securing & extracting relevant
information about an applicant.
• ascertaining whether or not the candidates possess qualifications for
the specified job
– is the process of choosing from a group of applicants those individuals best suited
for a particular position and an organization.
– is the process of making a “hire” or “no hire” decision regarding each applicant
for the job.
– Selection decision is always made within the legal frame work.
– Effective selection is highly important for an organization future success because
selection is more powerful way of improving productivity.
– is crucial process & requires constant attainment, interest and concerns of
management.
The ultimate of objective of selection is
– to match the requirement of the job and the qualification, knowledge, skill &
experience of the individual applicant.
Factors affecting the selection process
• Legal considerations:
– HRM is influenced by legislation, executive orders and court decision.
• Applicants pool (labor market):
– The number of qualified applicants for a particular job can also affect the
selection process.
• Probationary period:
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 – many firms use a probationary period that permits them to evaluate an employee’s
ability based on established performance.
Selection processes
• The main objective of selection process
– is to help the organization in determining whether the applicant has the required
qualification for a specific job position and is hiring the best candidate among all
the applicants.
• To select the best worker who best fit to the position from the potential candidates, there are
various stages/ steps that one should follow.
• The commonly used procedures are:
– Filling/ Completion of the formal application form or Application blank
– Preliminary Screening/ interview
– Employment interview/ Final interview
– Employment tests/ Selection tests
– Physical examination
– Reference letters/ Reference check & back ground investigation
– Final selection & communication (Job offering)
Filling/ Completing the formal application form or Application blank
– the applicants are made to fill up a pre-designed application form
• It helps to extract detailed information about the applicants
– personal information/ identification or personal
history
– physical characteristics
– educational background/ qualification,
– training program undergone,
– work experience,
– salary expected,
– future career plans,
– self assessment of previous work,
– reasons for leaving the current or previous employer,
etc
– the applicant is asked to submit his bio-data /CV/ instead of feeling up the form.
– the information is used for the interviewer during the final interview and to fill the
employee record if the applicant is selected.
• to screen out unqualified & to check expectations & interests
Preliminary Screening/ selection/ interview
– to screen out applicants who are obviously unqualified or overqualified to the job.
– Short listening using (if the № of applicants is large for employment test )
• Document review: Application form or CV
• Preliminary interview
Employment interview/ Final interview
– a selection technique that enables employer to view & assess the whole
“personality” of prospective employees.
• enables interviewers to gain additional information which is not
included in the application form.
• helps interviewer to have good overview of the candidate’s
motivation, personality & overall attitude.
– used as a single screening mechanism
– provides an opportunity to have face-to-face contact
– enables the employer to investigate the candidates’ ability in work related areas
– mainly done by HR department
Employment tests/ Selection tests
– practical examination of candidates abilities and knowledge in the area of the
future job assignments
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 – Offers opportunity to gather additional information about a person outside of the
limitation of application forms & preliminary interview.
– helps to gather information about applicants and thus be able to assess their
suitability to the job
– Common selection tests are:
• Intelligence test
– assessing the person’s general mental capacity in
respect to memory, verbal comprehension &
quantitative skills.
– test of general intellectual abilities (IQ).
• Attitude test
– assessing the person’s specific job skill & abilities,
and the potential for acquiring such competencies.
• Personality test
– Assessing variety of personal traits & characteristics
including attitudes, values & beliefs.
• Interest test
– assessing person’s occupational interests in terms of
likes & dislikes for different job opportunities.
Physical examination
• checking the physical fitness of the candidates.
• Medical examination of the candidate before employment.
• also needed to identify the disabilities the candidates have so as to help the management in
allocation of the jobs.
• This step is necessary for 3 vital reasons:
1. to assure the applicant is fit to work in the organization.
2. to assure the candidate is physically fit for placement in a particular job.
3. to provide base against which later physical examination may be compared.
(important in the disability claims that may occur during the job assignments).
Reference letters/ Reference check & back ground investigation
• Background Investigation
• Verification of information obtained from the candidates application form & selection interview.
• After a candidate has passed successfully all the above stages in the process of selection, a
reference check is made where in the HR manager gets in touch with the current or previous
employer of the candidate and find out relevant details.
• This is done to see whether the candidate has furnished correct details & also to cross check the
suitability of the candidate for the given position.
• Include:
– letter of recommendation
– references;
– testimonials, etc… from the former employers so that it is possible to know the
competence of the candidates.
Final selection & communication (Job offering)
• Selection Decision
• After getting a positive reference, a final list of selected candidates is made.
– The selection results should be made known to both the successful and the
unsuccessful candidates as soon as possible.
• The information is passed on to the candidates, the concerned line managers & other people.
• The final step, giving the employment letter to the candidate specifying the place of work,
working hours, etc…
Interview/ job interview
– is the most widely used selection tool.

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 – It is a process in which the interviewer tries to form an opinion about the
interviewee's personality, intelligence, technical competence, interests, attitudes,
etc…. through face to face interaction.
– is an attempt to secure maximum amount of information from the candidate
concerning his/her suitability for the job under consideration.
The basic objectives of interviews
– to properly judge an applicant’s qualification & characteristics
– to give important & relevant information for the applicant about the job & the
organization.
– to establish good rapport with all the candidates attending the interview.
– to promote the goodwill of an applicant towards the organization, immaterial of
the outcome of the selection process.
– to help the management in grievance handling, in conditions of disciplinary
action, in interactions with the workers union.
– to observe the applicants appearances, personality, confidence level, etc.
– to solve the problems arising out of the various interactions seen inside the
organization.
Types of interviews
1. Patterned or structured interview
2. Non-directive or free interview
3. Depth or action interview.
4. Group or discussion interview
5. Panel or board interview
6. Stress interview
Patterned or structured interview
• is a very common type of interview which focuses on asking structured predetermined questions
in a strict sequence.
• There is little or no deviation of the sequence of the questions & most of them are job/skill
oriented.
Non-directive or free interview
• is unstructured & unplanned. General & unstructured questions are asked and the candidate is
given adequate time to answer in detail. The discussion in the interview may be regarding
various subjects unrelated to the job under consideration.
• The basic aim of this type of interview is to judge the real nature of the applicant.
Depth or action interview
• is a combination of patterned & free interview styles
• is semi structured, where structured questions are asked in intervals unstructured questions or
conversations are asked.
• its aim is to obtain detailed information about both the personal as well as the professional life
of the interview.
Group or discussion interview
• The interview held for more than one candidate. The group of candidates is given a topic or a
problem for discussion and then the observers identify the persons
– who have good leadership skills,
– who influence the discussion,
– who are good analyzers
– who have good communication skills, etc, and select the one most suitable for the
given job.
Panel or board interview
• An interview in which the number of interviewers would be many and the interviewee will be
one.
• The panel (board) consists of expertise of different areas.
• Has advantage b/se a range of questions asked and the area of discussion covered.
Stress interview
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 • is in which the interviewer pretends to be hostile & provokes the candidate by asking questions
rapidly by criticism & trying to annoy him.
• conducted to find out the reaction of the candidate under pressures & to observe the presence of
mind of the candidate when he is angry or confused.
Decision making and Placement
– The candidates who have been selected should be given placement letters that
state their employment and specific positions, and other employment related
matters.
• Induction & orientation (socialization)
– When the candidate is selected and offered a job, it is necessary to introduce the
new employee to the organizations philosophy, rules, policies, etc….. Therefore,
the new employee begins his work, he should be assimilated to the job &
organizational environment.
Induction & orientation
– are familiarizing the new employee with the organization.
– done by
• oral communication and
• physical observation,
• written media like manuals, guidelines and others.
– giving information to the employee on the organization’s history, products,
operations, policies & rules, services available, opportunities & other issues.
– introducing the new employee to the organizations philosophy, rules, policies,
etc…..
– are tasks to be accomplished to ensure smooth organizational membership of a
new employee.
– are assimilation & socialization of a new employee.
Induction
• is important when one first join an organization. it is the one which passes a person settle into
the job.
• Refers to the process of familiarizing a new employee with the overall organizational
environment through provision of adequate information to bring about change in new
employee’s expectation, behavior, and attitude to assure the best match with organizational
interest.
• Providing information about the organization’s history, purpose, operations, products/services
and his contribution to the organization and needs & benefits for the new entry.
• Done through the interaction of the employee, the immediate supervisors & personnel.
Orientation
• enables new employee to familiarize with working environment through the provision of
adequate information.
• Involves discussion between a manager & employee regarding the job assignment including
– specific location,
– rules and procedures of the work and
– the materials, equipments needed to do the job.
• official orientation provided by the organization to the new employee avoids misleading and
inaccurate information.
Regardless of the type of organization, orientation should usually be conducted at two distinct levels:
– Organizational orientation - presents topics of relevance and interest to all
employees.
– Departmental and job orientation - describes topics that are unique to the new
employee's specific department and job.
Possible Topics for Organizational Orientation Programs
– Company overview
– Policies and procedures review
– Compensation
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 – Benefits
– Safety and accident prevention
– Employees and union relations
Possible Topics for Departmental and Job Orientation Programs
– Department functions
– Job duties and responsibilities
– Policies and procedures
– Department tour
– Introduction to department employees
The purposes of induction & orientation
• Reduce the stat-up cost.
– Enable a new employee to meet performance standards sooner.
• Reduce anxiety
– Employee fear of failure on the job can be avoided, and he develops self
confidence.
• Decrease turn over
– provision of all kinds of information during the entry time make new employee
stable in the organization.
• Save time to supervision
– Reduce the time of a supervisor to supervise and observe the performance of an
employee.
Benefits of Orientation
– It creates favorable attitude in the mind of the employee and this improves his
morale and performance.
– It aids learning and also saves time and trouble since the employee knows his jobs
and what is expected of him.
– Orientation leads to reduction of anxieties, frustration of the new employee and
reduces reality shock.
– It gives accurate information to the employee who may not get it otherwise or
may get it from disgruntled employees.
– It reduces the rate of employee turnover. As many new employees can be
introverts they may find it difficult to seek knowledge and acquaintance on their
own.
– It makes the beginning of socialization, the process by which an employee is
indoctrinated to the organizations culture its norms, values, and ways of doing
things.
•
Training and Development
• Having qualified & well trained personnel to perform various jobs is a basic necessity for any
organization.
• Through recruitment & selection, and placement, competent employees can be brought into the
organization, but they need continuous trainings & developments so that their needs and the
objectives of the organization can be met.
• Employees’ skills, knowledge & attitude become obsolete unless continuously polished &
updated. Therefore, training and staff development should be the concern of managers &
organizations.
• Training & development seem to indicate the same meaning and commonly used
interchangeably, but a detailed examination would reveal some differences.
• Training programs are primarily directed towards maintaining and improving current job
performances while development programs are primarily intended to develop skills for the
future jobs.
• Training is a learning activity provided by employers to employees to help them perform their
current jobs more efficiently; and development focuses on providing knowledge or skills within
a specified area, but is not necessarily job related.
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 • Training is learning related to the present job and development is learning for growth of the
individual but not related to a specific present or future job.
• Training is a learning activity provided by employers to employees to help them perform their
current jobs more efficiently; and development focuses on providing knowledge or skills within
a specified area, but is not necessarily job related.
• Training is learning related to the present job and development is learning for growth of the
individual but not related to a specific present or future job.
• Training usually takes place at working places.
Training
– becomes necessary because of the changing technology, up growth of skills &
knowledge of workers, the need to increase the productivity of the workers, etc.
– is any process by which the aptitudes, skills and abilities of employees to perform
specific jobs are increased.
– improves a person’s skills to do the current job at high level from the first day
they start working.
– Training usually takes place at working places.
– Training as an activity designed to teach skills and knowledge required for
particular kind of work.
– Training is relatively narrow to specific skills and operations; immediate
application, and shorter time scale.
Development
– covers not only performance improvement activities but also those which enhance
personality, gain better attitudes, values and behavior.
– The scope of development is wider than training.
– It is given for managers.
– Executives a quire conceptual and theoretical knowledge
– For general development.
– It is career oriented or growth oriented - for all activity of job.
– It is long term process.
Importance of training
• training programs improve employee knowledge, skills and job performance.
• The need for proper training is increased by the following reasons.
– increased productivity
– improvement in employee moral
– availability for the future personnel needs of the organization
– improvement in health and safety
– reduced supervision
– personal growth
– organizational stability
– Reduction in learning time
– Boost Performance of employees
– Boost employees morale
– Reduction in operational problems
– Fulfill manpower needs of the organization
– Increases organizational stability and flexibility
– Beneficial employees
– Increase capacity to adapt new technologies and methods.
– Increase innovations of new strategies and products.
Objectives of training
– To provide knowledge, skills & attitudes for individuals to undertake their current
jobs more effectively.
– To assist employees at all levels to extend their untapped talents and to understand
the implications & significance of that roles.
– To reduce waste & increase efficiency.
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 – To minimize input use & maximize output.
– To assist employees at all levels to become capable of assessing other
responsibilities within an organization at more senior level or at their current level
(to develop their potential).
– To help management in developing personnel for future expansion or
diversification.
– To assist employees at all levels to adapt to the changing circumstances facing
organizations, such as new technologies, new business environment, new
products, etc.
– To relive supervisors from close supervision and get time for other duties.
– To make workers more perfect in their work.
– to help the worker in avoiding them from being obsolete.
The training process
• To ensure improvement in person’s skills & knowledge to perform the work through training,
effective training system should be designed.
• Training is usually related to
– operational or technical employee while
• Development is
– for managers & professionals,
• Development program needs to be planned for maximum utilization of human capital potential
so as to ensure continuous development of the organization.
Steps in designing effective training
• Need assessment
– assess the needs for training based an
• organizational analysis,
• person analysis &
• task analysis.
• Assessment of employee readiness
– Consider whether employees are motivated to learn.
• Creation of learning environment
– lay a foundation for successful training by creating the conditions under which
employee will learn best.
• Ensuring transfer of training
– be able to apply what employees have learned to their jobs.
• Selection of training methods
– Consider the possible training methods & select the most appropriate.
• Evaluation of the training program
– Evaluate the outcome of the training program.
The training process
1. Assessing training need
• Who needs to be trained?
• What do they need to know?
• What they already know?
2. Set training objectives
• SMART
3. Plan training evaluation
• Do trainees like training?
• Can they meet training objectives?
• Do they perform better on the job?
4. Developing training program
• Content
• Methods
• Duration
• Location
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 • trainers
5. Conduct training
6. Evaluate training
7. Modify training program based on evaluation
Methods/ approaches of training
– Organizations can use training methods that they believe appropriate to satisfy
their training needs & accomplish objectives.
– The commonly used training methods are classified into:
• On-the- job training
• Off- the-job training
• Vestibule/ simulated training
On the- job- training
– is putting the worker on the job under close supervision of the trained instructor.
– In support, there are a variety of training aids and techniques such as lecture
manual, producer charts, sample problems, demonstrations, and so on…
– the most commonly used method of training carried out on the job.
– occurs in the work setting & during the actual performance, i.e. within the actual
work environment.
On the- job- training approaches
Job rotation/ position rotation
– is rotating key personnel in different positions, dept’s, etc.
– offers opportunities for persons to spend time in different jobs and expand the
range of their job capabilities.
Coaching
– the communication of specific technical advice to an individual through the
assignment of specific person to act as either an instructor or resource person for
the trainee
– the trainee is placed under a close guidance & supervision of trainer and he give
an opportunity to perform an increasing range of management tasks, and share the
experience of the coach.
Apprenticeship
– involves learning from more experienced employees.
– is generally followed by technical field in which proficiency is acquired in direct
association with work & direct supervision.
– involves an assignment to serve as under study or assistant to a person already
having the desired job skills.
Modeling
– a process of demonstrating through personal behavior what is expected of others
& it is an influential means for building appropriate job skills.
Internship
– refers to joint program of training where school & business corporate in order to
train students by assigning them to jobs.
Off-the- job training
– takes place outside the actual workplace but attempts to stimulate actual working
conditions.
– refers to training conducted away from the actual work setting.
– approaches/ techniques or the most popular kind of off-the-job training are
• lectures
• conferences
• group discussions
• case studies
• role play
• programmed instruction etc….
Lecture or class room instruction;
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 – Class training
• The most familiar method.
• is an effective method of imparting the information & knowledge
quickly to a large numbers.
– Lecturing
• Is a semi-formal discourse in which the instructor presents a series
of events, concepts, principles & theories and express problems or
explain relationships.
• useful for teaching the factual material, concepts, principles,
theories & their application to job situations.
conferences, seminars & workshops
– Conference.
• a common platform for intensive & through group discussion &
results in suggesting the involved methods of performing work in
organizations
• brings together individuals with common interests to discuss &
attempt to solve a problem.
– Seminar
• a group of persons gathered together for the purpose of studying a
subject under the leadership of an expert.
– Workshop
• A group of persons with common interest or problem after
performing professional & vocational work meet for an extended
period of time to improve their individual proficiency, ability, or
understanding.
Case studies
– this method utilizes simulated or actual business problems experienced before for
trainees to solve where the trainee will be expected to study the information given
and to make decision
– a method through which the trainees are given a case & are asked to identify basic
problems and suggest solutions.
Sensitivity training
– a process in which several individuals work together for several days for the
purpose of building sell awareness, understanding group processes, and greater
understanding of inter-personal relationships.
Role playing
– is a mechanism that forces trainees to assume different identities, e.g. a male
worker may assume the role of a female supervisor, and vice versa.
Vestibule/ Simulated training
– is a combination of on-the-job training methods.
– is a method where the identical machines & equipments that are used on the work
floor are installed in the training center and also an effort is made to implicate
work atmosphere found on the actual floor.
– tries to give the trainee a chance of getting trained in a situation that is as close as
the original work situation as possible.
– here the work environment is almost similar to the actual environment but not the
rest environment.
• e.g. training given for a pilot.
Conducting training
– Training can be given either by the people from the organization itself or by those
outside the organization.
– It should be based on the appropriate content, trainers & trainees, training
methods, facilities & places, and appropriate time schedule.

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 To develop employee’s competency, organization can use the combination of formal education,
assessment, job experience & interpersonal relationships.
Formal education
– Programs that look a lot like training programs, incorporating lectures,
simulations & group building.
Assessment
– Refers to collecting information about employee’s behavior, communication style
or skills & providing them with feedback.
Job experience
– Major part of employee development. Organizations should support this
development by planning job experiences that will stretch employee’s skills by
promotions & lateral moves through job rotation & transfer.
Interpersonal relationship
– Employee’s or manager’s relationships with more experienced members of the
organization can help them develop the ability to meet the job requirement.
– The productive senior employee can help in the development of less experienced
employee through establishing and mentoring relationships.
•
Compensation & Performance appraisal
Compensation
• People work is organizations for the sole purpose of earning enough money to live comfortably
& satisfy all their needs.
Wages & Salary administration
• the establishment and implantation of sound policies & practices of employee compensation.
• should be balanced so as to keep the parties, the employer and the employee happy & satisfied.
• includes the money paid as reimbursement.
Factors affecting compensation policies
Factors affecting compensation policies of the organization are
• organizational ability to pay
– the organization should have enough funds to pay enough salary or wage to the
employee
• supply & demand of labor
– If supply is more than the requirement, then the management can pay less wages
& salaries and reverse in case of less supply.
• Prevailing market rate
– the group wage rate or salary in the industry also influence the wage & salary than
the average salary of the industry.
– An organization can not give less salary/ wage than the average salary of the
industry.
• Cost of living
– the cost of living difference in different cities.
• Productivity
– the productivity of workers has an impact on the kind of wage/ salaries they get.
– More productive workers get more salaries.
• Bargaining power of the workers union
– Powerful worker's unions generally have a lot of influence on kinds of wages &
salaries given by the organization.
• job requirements
– Some jobs are more hazardous & dangerous than others, and employees
understanding them would get more pays than other who are in relatively safer
positions.
• Managerial attitude
– The top management has a lot of influence on wage/ salary administration.

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 – They can choose whether to pay the industry average salary; above or below the
average salary, the kind of working conditions to be provided to the employees,
the length of work hour, etc…
Types of incentives
– Intrinsic rewards
– Extrinsic rewards
• Intrinsic rewards
– rewards which a worker receives for himself and are totally dependent on the kind
of work done by him. i.e. self/ individual incentives.
– could be in the form of participation in decision making, job freedom, more
responsibility, more interesting work assignment, opportunity for personal growth,
etc …
• Extrinsic rewards
– are incentives given for all employees of the organization
– can be
• direct compensation
• Indirect compensation
– direct compensation
• basically monetary in nature
• the payment is made immediately like
– salaries or wages paid to the employees
– overtime earning's
– holding premiums
– performance bonus
– profit-sharing
– stock options, etc…
– Indirect compensation
• are incentives realized at a later period of time
– generally once in a year or
– at the time of retirement
 like group insurances schemes,
contributions for provident fund
services, etc…
Modes of payment
There are two basic methods of payment.
– payment by time and
– payment by output
Payment on a time basis
• is more satisfactory when
– unity of outputs are not distinguishable & measurable
– employees have little control over the quality of output or there is no clear-cut
relation between effort and output
– work delays are frequent & beyond employee control.
Payment on the basis of output
• is more satisfactory when
– units outputs are measurable.
– a clear relation exists between employee effort and quality of output
– the job is standardized , the flow of work is regular , and break downs are few or
if many consistent.
Performance Appraisal (PA)
– is the process of determining & communicating to an employee how he is
performing the job.
– evaluating employee’s performance of the job assigned. the formal evaluation of
an employee performance.
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 – is used to determine the extent to which an employee is performing the job
effectively.
– provides highly useful information for making decisions about the employee &
the organization.
– It helps:
• To determine who shall receive merit increases.
• To determine training needs
• To identify employee to be transferred.
• To provide adequate feedback to each individuals for his
performance.
• To improve or change behavior toward some more effective
working habits.
• To provide useful information & data for the manager to judge the
future job assignment of employee.
• To improve the efficiency of an organization through improved
work performance.
• To reduce favoritism in making managerial decision.
– Performance is a result of employee’s efforts, abilities and role perception.
Objectives of PA
• to provide information towards strength & weakness of employees in their job performance
– to improve performance by developing strength & dealing with weakness.
• to provide data/ information for management for judging future job assignments, promotions &
compensation.
• to help better allocation of Rs.
• To improve motivation by increased understanding of goals, the means of attaining those goals
& the rewards associated with the achievement.
Methods of PA
• There are different methods to carryout PA. Managers use a variety of methods to formally
appraise employee performance. Some of the methods are:
1. Ranking method
2. Person to person comparison
3. grading
4. Forced distribution system
5. Graphic Scales
6. Check List
7. Forced – choice description
8. Descriptive essay
9. Field review Method
10. Selection critical incidents
Ranking method:
– Places all employees in rank according to the job performance.
– The management normally selects some acceptable denominators on the basis of
which it ranks.
– In this method the element of subjectivity can’t be eliminated & it can’t indicate
the degree of difference between the first & the second employee, and so on.
Grading
– placing the worth of an employee in a system of grading, i.e. outstanding,
excellent, good, satisfactory, poor. And the employee is assigned the grade which
best describes his level of performance.
Person to person comparison
– Comparing the employees within the organization with some key people.
– The rater develops certain scales for each & every factor such as leadership,
dependability, initiative, drive, etc.
– This method is complex & limited in use.
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Forced distribution system
– is a modified version of grading system.
– is in which certain percentage of marks are assigned for each grade
– The appraiser is forced to put individuals in predetermined range of scale like
outstanding, above average, below average & poor.
Graphic Scales
– is in which numerical values are assigned to points on scale, unsatisfactory may
be assigned the value of 1, while excellent may be given the value of 5.
– The chart that presents the list of qualities of the range of degrees for each quality.
– is easy to interpret but difficult to establish its true validity.
Check List
– is in which various statements are made describing various types of behavior for
particular factor for the job. Each statement has the scale value & the rater is
asked to list out the statements which describes the rates at best, afterwards the
statements and their values are averaged.
– responded by “ yes” or “ No”
– the appraiser is hardly evaluate employee performance, rather simply report the
fact.
Forced – choice description
– is in which the rater is forced to choose among several descriptive statements
which appears favorable or equality favorable.
– The questions are stated & don’t give scope to the rates to use his bias.
Descriptive essay
– is in which the evaluator are required to write essays about the strong & weak
points of evacuees.
– is used to supplement precise gating given to other performance evaluation
methods.
– Its limitation is the evaluators may have unequal skill in writing.
Field review Method
– is in which HR department interviews the line supervisor about their subordinates.
– the supervisors are required to provide information about the performance of their
subordinated.
– HR department takes detailed note of the opinion of superior about their
subordinates & place these notes in the respective personnel folders of employee
& later can be used to rate employees.
Selection critical incidents
– A method in which certain key factors or acts of behavior that makes the
difference between success & failure are identified.
– A supervisor obtains a list of all critical factors and evaluated the employee’s
performance according to these factors.
– Critical incidents are converted in to scales, and employee’s performance is
compared in the light of this critical factors.
– During evaluation session, the supervisors will discuss these critical incidents
with subordinates.
– Major problem is the supervisor & other managers may not be around when the
employee did something.
Performance appraisal processes
They are steps to be followed during the evaluation of workers performance.
1. Establishing performance Standards
2. Communication of Standards to employees
3. Measurement of the actual performance
4. Comparison of the actual performance with the established standards
5. Communication of the results
6. Corrective actions
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Establishing performance Standards
– Performance Standards are developed at the time of developing job descriptions &
job specifications. They should be clear, precise & objective oriented.
Communication of Standards to employees
– Performance standards should be communicated to all the concerned employees,
unless the employee are aware of the standards, they will not be in a position to
meet them.
Measurement of the actual performance
– is in which the actual performance of employees noted & the information about
the employee’s performance is collected through personal observation, written
report, oral report, etc…
Comparison of the actual performance with that of the standards
– is used to identify the most promising employees who have the potential for
growth & advancement.
– Objective & impartial competition of actual performance with the standard
performance is carried out .
Communication of the results
– Results have to be communicated to the concerned employees & discussions are
held with them to identify their strengths & weaknesses and also to identify the
difficulties in carrying out their activities.
Corrective actions
– If there are any shortfalls in the performance of the employees the management
along with the concerned employee should identify the reasons of the shortfalls.
– After the reasons are properly identified, the ways & means of overcoming these
difficulties are devised & implemented.
Who does the appraisal?
• In most cases the immediate supervisor does the appraisal. But an organization can use
different appraisers.
• Appraisal could be
– group appraisal
– peer appraisal &
– self appraisal
Who Conducts Appraisals?
– Supervisors rating their employees
– Employees rating their superiors
– Team members rating each other
– Employees rating themselves
– Outside sources rating employees
– A variety of parties providing multisource, or 360-degree, feedback
Problems in PA
Some of the problems of PA are
– Rater’s lack of knowledge, experience & skill,
– rating an employee based on an overall impression resulting from one or few
incidents, bad or good and without taking into account the whole performance
during the evaluation period,
– providing a rating of average or around the midpoint for all qualities,
– rating influenced by the most recent behaviors,
– allowing past performance of appraisal rating to unjustly influence current ratings,
– rater’s ineffectiveness in observing & documenting performance, and
– vagueness of the criteria & standards of performance.
•
Promotion, Transfer, Separation & layoffs
Promotion
– is the advancement of an employee to a better job.
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 – is a reward for efficiency.
– characteristics of ‘better job' to which an employee seeks promotion - for
• greater responsibilities ,
• higher opportunities/challenges and responsibilities,
• more prestige or status,
• greater skill,
• increased rate of pay or salary,
• better hours of work or
• better locations or working conditions , facilities,…
– way of recognizing & developing the abilities of employees within the
organization instead of filling skilled and responsible positions from outside.
– If the job doesn’t involve greater skill or responsibilities & high pay, it should not
be considered as promotion.
– should be distinguished from transfer.
Types of Promotion
• Dry Promotion
– where a person is moved to a higher level job without increase in pay.
• Up grading
– means elevating the place of the job in the organizational hierarchy (a better title
is given now) or including the job in higher grade (minor enhancement in pay in
tune with the limits imposed within a particular grade).
– refers to a practice related to promotion, but it amounts to a small scale advance in
status.
– is the movement of an employee to a more responsible job within the same
occupational unit & with a corresponding increases in pay.
• Vertical promotion
– are made under which employees are promoted from one rank to the next rank in
the same department
• Horizontal promotion
– are made under which employees are promoted from one rank to the next rank in
other department
• Promotion that provides additional privileges, comfort, & Prestige
– is a reward for long experience
– May be little working hour , less attendance
– No additional responsibility
– Without decreasing payment and benefits
Advantages of Promotion
– has powerful motivational value.
– It forces an employee to use his knowledge, skills and abilities fully and become
eligible for vertical growth.
– It inspires employees to compete and get ahead of others.
– paves the way for employee self-development.
– It encourages employees royalty and commitment to their jobs and the
organization.
– Interest in training and development programs would improve.
– The organization would be able to utilize the skills and abilities of its personnel
more effectively.
Bases of Promotion
– Merit-based promotions
– Seniority-based promotions
Merit-based promotions…….
– occur when an employee is promoted because of superior performance in the
current job.

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 – Merit here denotes an individual's knowledge, skills, abilities and efficiency as
measured from his educational qualifications, experience, training and past
employment record.
• Advantages
– motivates employees to work hard, improve their knowledge, acquire new skills
and contribute to organizational efficiency.
– helps the employer to focus attention on talented people, recognize and reward
their meritorious contributions in an appropriate way.
– also inspires other employees to improve their standards of performance through
active participation in all developmental initiatives undertaken by the employer
(training, executive development, etc.)
• Disadvantages
– It is not easy to measure merit.
– When young employees get ahead of other senior employees in an organization
(based on superior performance), frustration and discontentment may spread
among the ranks. They may feel insecure and may even quit the organization.
– Also, past performance may not guarantee future success of an employee. Good
performance in one job is no guarantee of good performance in another (as a
supervisor).
Seniority-based promotions
– Seniority refers to the relative length of service in the same organization.
– It is easy to measure the length of service and judge the seniority.
– There is no scope for favoritism, discrimination and subjective judgment.
– Everyone is sure of getting the same, one day.
• Limitations
– The assumption that the employees learn more with length of service is not valid
– It demotivates the young and more competent employees and results in greater
employee turnover.
– It kills the zeal and interest to develop, as everybody will be promoted without
showing any all-round growth or promise.
– Judging the seniority, though it seems to be easy in a theoretical sense, is highly
difficult in practice as the problems like
• job seniority,
• company seniority,
• zonal/regional seniority,
• service in different organizations,
• experience as apprentice trainee, trainee, researcher, length of
service not only by days but by hours and minutes will crop up.
Transfer
– the movement of an employee from one job to another on the same occupational
level of wage/ salary.
– No appreciable increase or decrease in duties and responsibilities involved but
there may be a change in their specific nature and in working conditions.
– is the lateral movement of employees from one position, division, department or
unit to another.
– does not involve any significant change in compensation, duties responsibilities or
even status.
– is with the same level of hierarchy, requiring similar skills, involving
approximately same level of responsibility, same status and same level of pay.
– Some transfers entail a decrease in job duties and especially in pay, and called
downgrading or bumping.
• It is more frequently used to protect employment opportunities for
employees displaced from higher rated jobs.
• It is moving to less desirable jobs.
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Purposes of Transfer
– To meet the organizational requirements
– To satisfy the employee needs
– To utilize employees better
– To make the employee more versatile
– To adjust the workforce… less work to more work.
– To provide relief for employees
– To reduce conflicts
– To punish employees
Types of Transfers
– Production transfers
• For the company need
• Transfers caused due to changes in production.
– Replacement transfers
• Transfers caused due to replacement of an employee working on the
same job for a long time.
– Rotation transfers
– Transfers initiated to increase the versatility of employees
– Shift transfers
• Transfers of an employee from one shift to another.
– Remedial transfers/personal transfer
• Made to meet needs of employees
• Transfers initiated to correct the wrong placements/primary concern
of employees
– Penal transfer
• Transfers initiated as a punishment for in disciplinary action of
employees
Benefits of Transfers
– Improve employee skills
– Reduce monotony, boredom
– Remedy faulty placement decisions
– Prepare the employee for challenging assignments in future
– Stabilize changing work requirements in different departments/ locations
– Improve employee satisfaction and morale
– Improve employer-employee relations
Limitations of Transfers
– Inconvenient to employees who do not want to move
– Employees may or may not fit in the new location/department
– Shifting of experienced hands may affect productivity
– Discriminatory transfers may affect employee morale.
Separation/ employee separation
– the discontinuation of the relation between employee & the employer.
– occurs when an employee ceases to be a member of an organization.
– The turnover rate is a measure of the rate at which employees leave the firm.
– can and should be managed. Managing employee separations requires preparation
& planning.
– Separation can be initiated by
• the employers such as
– mandatory retirement
– dismissal
– layoff
• the employees such as
– resignation
– voluntary retirement
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 – quit
• Agreement
– when the contract ends; or
– they can also be caused by things outside the will of
both the employer & the employee (accidents, death)
Causes for separation
• Causes for separation of employee from the organization mainly are
– retirement; layoff; dismissal; permanent disability; resignation; quit; outplacement
The Costs of Employee Separations
• Recruitment Costs
– Advertising; Campus visits; Recruiter time; Search firm fees
• Selection Costs
– Interviewing; Testing; Reference checks; Relocation
• Training Costs
– Orientation; Direct training costs; Trainer’s time; Lost productivity during
training
• Separation Costs
– Separation pay; Benefits; Unemployment insurance cost; Exit interview;
Outplacement; Vacant position
The Benefits of Employee Separations
– Reduced Labor Costs;
– Replacement of Poor Performers;
– Increased Innovation;
– The Opportunity for Greater Diversity
Types of employee Separations
1. Voluntary separations
2. Involuntary separations
• Voluntary separations
– initiated by the employee.
– occur when an employee decides, for personal or professional reasons, to end the
relationship with the employer.
– can be either avoidable or unavoidable.
– are such as: Retirement, quits,…
• Involuntary separations
– initiated by the employer.
– occurs when management decides to terminate its relationship with an employee
– are the result of very serious and painful decisions that can have a profound effect
on the entire organization and especially on the employee who loses his or her
job.
– To protect themselves against legal challenges by former employees, employers
must manage involuntary separations very carefully with a well-documented
paper trail.
– due to
• economic necessity or
• a poor fit between the employee and the organization.
– are such as layoffs, discharge,…
Layoff/ Layoffs
– is forced reduction of the number of employees.
– occurs when there is lack of business or budget curtailments/ shortage
– most frequent type of separation of employees from the employed workforce.
– doesn’t necessarily involves a permanent separation from the payroll.
• laid off employees normally expect to be rehired by their employer
when conditions improve.
– are a means for an organization to cut costs.
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 – can affect the morale of the organization’s remaining employees, who may fear
losing their jobs in the future.
– Investors may be affected by layoffs as well.
– unlike quits, retirements or deaths
Quits
– refers to the voluntary movement of the worthier from the organization.
• health problem resignation
– some employers have been using pay incentives to encourage employees to quit
voluntarily.
– Employers use these voluntary severance plans, or buyouts, to reduce the size of
their workforce while avoiding the negative factors associated with a layoff.
– The pay incentive may amount to a lump-sum cash payment of six months to two
years of salary, depending on the employee’s tenure with the company and the
plan’s design
Retirements
– differs from a quit
• b/c a retirement usually occurs at the end of an employee’s career…..but a quit can
occur at any time.
• b/c retirements usually result in the individual receiving retirement benefits from
the organization.
• b/c the organization normally plans retirements in advance…..Quits are much more
difficult to plan for.
Discharges
– takes place when management decides that there is a poor fit between an
employee and the organization.
– is a result of either poor performance or the employee’s failure to change some
unacceptable behavior that management has tried repeatedly to correct.
Employment Relationships
• Employment relation is one of the important areas in HRM.
• mainly concerns with the relationships existing between employees & employers.
• The contents of employer-employee relations are expressed in employment contract which may
include elements such as
– amount & method of payment
– hours of work
– holidays & holiday pay
– provisions for sickness, injury, and entitlement to pay
– terms & conditions of pensions rights
– disciplinary rules & procedures
– institutional rights of inions & management
– terms and conditions of termination of the contract
– enforcement & administration of agreements, and others
The three principal actors in employee relations are
– employee,
– employer and
– the government
These parties are represented by other bodies such as
– the labor union,
– manager/ employer association &
– specialized government unit
The three elements of the subject of employee relations are
• Collective bargaining
– A two-way negotiation process between employees and employers to reach an
agreement on matters of employment.

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 – Its successful end result is collective agreement i.e. binding document governing
employee relations during a specified period of time.
• grievance (complaint) handling
– employees should have established grievance procedures and also known methods
of processing grievances.
– Grievance procedure consists of an orderly series of steps followed to resolve
disputes.
– employees should know where they stand in matters pertaining to the justice &
injustice of their treatment.
• Disciplinary action
– refers to the application of penalties that lead to the inhibition of undesired
behavior.
– Among the penalties available are
• oral reprimand / warning;
• written reprimand;
• loss of privileges;
• fines;
• layoff;
• demotion;
• suspension, &
• dismissal

chapter Seven: Controlling

1. An overview of Controlling
– Management control/ controlling
– Needs for control/ the purpose of controlling
2. The control process
3. Types and Characteristics of Control
4. Making control Effective
5. Principles of Controlling
• What and why controlling?
• Organizational resources are limited. Their acquisition & use are critical to one survival of the
organization.
• Planning, organizing, staffing & directing must be monitored to maintain their effectiveness &
efficiency.
• Managerial control is an important tool to ensure organization is making progress towards its goal
and efficient use of the available recourses.
• Controlling is the last management function and it affects or is affected by the other four functions.
• In the controlling function, a manager undertakes activities that enable him ensure whether the actual
results conform to planned results.
• To make control more effective standards must be established and corrective actions should be taken
when there is deviation so as to make the necessary adjustment.
• Managers must continually monitor whether organizations perform their tasks per the plan.
• Mangers review performances of employees daily, weekly, and monthly to determine actual
performances.
• Control is checking current performance against predetermined standards.
• Control is the regulation of organizational activities so that some targeted elements of performance
remains within acceptable limits.
• Without this regulation organizations have no indication how well they perform in relation to their
goals.
• Control, like a ship rudder, keeps the organization moving in the proper direction; provides an
organization with a mechanism for adjusting its course if performance fails outside of acceptable
boundaries.
• An organization without effective control procedures is not likely to reach its goals.
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 • Controlling acts in relation to other management functions.
– Planning sets directions and allocates resources;
– Organizing and staffing bring people and material resources together in working condition;
– Leading directs people in the utilization of these resources; and
– Controlling sees that the right things happen in the right way and at the right time as a result
of those functions of management.
• In general, the control function involves and provides answers to the three basic questions.
1. How the actual results compared against planned results?
2. What corrective actions are appropriate? and
3. Who is to take it?
• Task of managers is to evaluate how well an organization has achieved its goals and to take any
corrective actions needed to maintain or improve performance
– The outcome of the control process is the ability to measure performance accurately and
regulate organizational efficiency and effectiveness
Management control/ controlling
– is the measurement and correction of performance in order to ensure that the objective of the
organization and the plans devised to attain them are accomplished.
– is a systematic effort
• to set performance standards with planning objectives
• to design information feedback systems,
• to compare actual performances with those predetermined standards,
• to determine whether there are any deviations & to measure their significance, &
• to take any action required to assure that all organizational resources are being used in
the most effective & efficient way in achieving organizational objectives.
the purpose of controlling
– Proper controls help managers make sure that the people in the organizations do what is
necessary, when it is necessary, and in the way it is required.
– Controlling determines whether people & the various parts of an organization are on target,
achieving the progress towards their objectives that they planned to achieve.
– Control has four basic purposes
• Control provides an organization with ways:
• To adapt to environmental change.
• To limit the accumulation of errors.
• To cope with organizational complexity, and
• To minimize costs.
– It also fulfills the following purposes in the organizations.
• Control helps to ensure that the overall direction is consistent with short and long
range plans.
• It also provides a means for monitoring performance under plans as time passes.
• It helps to ensure that objectives and accomplishments throughout are consistent with
one another in proper means – end fashion.
• It helps to ensure individual compliance with basic organizational rules and policies.
Situations those make controlling importance
• Uncertainty
– Plans and objectives deal with the future which is uncertain. There is a need for control points
and control systems that allow for constructive adjustments in activities, plans, and even
objectives overtime.
• Complexity
– As organization grows in size and diversity, it becomes increasingly complex. Adequate
controls are required to coordinate activities and accomplish integration in the face of such
complexity.
• Human limitation

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 – People make mistakes. Forecasting errors are common in complex and unpredictable
environments; errors in judgment can occur in any problem situation. Therefore, control helps
to identify such mistakes.
• Delegation and decentralization
– Both increase the decision making authority of the lower personnel. As authority to act moves
from top to bottom level, control mechanisms are required to ensure that accountability for
results will be in place. Control helps managers delegate and decentralize while accountability
for results.
The control process
• The emphasis of control is on action designed to prevent problems, correct problems and explore
opportunities.
• The process of controlling involves the following steps.
1. Establishing Standards
2. Measuring and comparing actual performance with standards
– Measuring Performance and
– Comparing performance and standards
3. Taking corrective action
Steps in controlling
Establishing Standards/ Performance standards
• The first step in control involves establishing performance standards and methods for measuring
performance.
• Standards are measuring devices, qualitative or quantitative, designed to help monitor the
performance of people, capital goods, or processes.
• Standards can be:-
– Managerial Standards
• are such as reports, regulations, and performance evaluations.
• focus only on the key areas & the kind of performance required reaching specific goals.
– Technical Standards
• specify what & how of the business; and applied to production methods & processes; to materials,
machinery, safety equipment’s, parts & supplies.
• can come from internal & external sources control system.
• Performance standard summarized into four categories: Quality; Quantity; Time and Cost.
– Physical standards (quality and quantity)
• include quantity of products; number of customers; and quality of products
– Monetary standards (cost)
• Standards expressed in terms of money. Includes material/ production cost; selling
cost; net profit; etc..
– Time standard
• Refers to the speed with which the job is done, e.g. fixing the dead line with in which
the job is to be performed or completed.
• Standards must not be rigid but rationally flexible.
• Every objective, goal, policy, procedure and budget becomes a standard against which actual
performance might be measured.
• However, in practice different types of standards used are:
– Physical standards such as units of production per hour.
– Cost standards, such as direct and indirect cost per unit.
– Revenue standards such as sales per customer.
– Capital standards such as rate of return of capital invested.
– Intangible standards such as competency of managers and employees.
Measuring Performance
– It is measuring the performance & determining the performance in line with the set of
standards.
– It is comparison between ‘what is’ & ‘what should be’.
– It is discovering the deviation.
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Taking corrective action
– Determining precise action to be taken depends on three things.
1. the standard
2. accuracy of the measurements that determine the existence of deviation &
3. the diagnosis of the person or device investigating the causes of deviation.
• Control process would be incomplete if corrective action would not be taken.
Areas of control
• Organizations practice control in a number of different areas and different levels.
• Control focuses on any areas of an organization. most organizations define areas of control in terms
of four basic types of resources they use as:
1. Control of Physical Resources
2. Control of Human Resources
3. Control of Financial Resources
4. Control of Information Resources
• Control of Physical Resources
– include inventory management (stocking); quality control (maintaining appropriate levels of
output quality) and equipment control (supplying necessary facilities and machinery)
• Control of Human Resources
– include selection and placement; training and development; performance appraisal and
compensation
• Control of Financial Resources
– Involve managing organizational debt so that it doesn’t become expensive; ensuring that the
organization has enough cash on hand to meet its obligation.
• Control of Information Resources
– Include sales and marketing forecasting; environmental analysis; economic forecasting; public
relations and production scheduling.
Levels of control
• Strategic control
– Focuses how effective the organization’s corporate, business and functional strategies are
succeeding in helping the organization to meet its goals and objectives.
• Structural control
– Concerned with how the elements of the organization’s structure are serving their intended
purposes.
• Financial control
– Concerned with the organization’s financial resources.
• Operations control
– Focuses on the processes an organization uses to transform resources into product and
services.
Types of Controls
• Work performed by organizations & their employees has
– a starting point (Where inputs takes place)
– a period of performance (where inputs are processed) &
– a final product (output)
• Based on the nature of work & work flow, various types of control have been developed.
• Depending on the time applied and focuses of corrective actions, control is classified into three
categories.
– Prevention control
– feed forward control
– feedback control
• Prevention control
– It is sometimes called pre-action control.
– It is established to prevent problems from occurring rather than to fix them after they happen.
• feed forward control

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 – It is designed to detect deviations from some standard or goal to allow corrections to be made
before a particular sequence of action completed.
– The focus of control is on the ongoing activities in feed forward control.
• feedback control
– it is sometimes called post-action control
– it focuses on end results as opposed to input and activities.
– It takes place after an action is completed.
– In feedback control the focus is on the end results.
Control methods
• Control methods are broadly classified into two types namely
– Past-oriented controls and
– Future oriented controls
• Past-oriented control measure results after the process. These are also known as post action controls.
They examine what has happened in the past for a particular period. Examples of past-oriented
controls are accounting records, school grade reports etc. These controls are used to plan future
behavior in the light of post errors or successes. They can also be used for rewarding, disciplining,
training or promoting individuals.
• Future-oriented controls also known as feed-forward controls or steering controls. These controls are
designed to measure results during the process, so that action can be taken before the job is done or
the period is over. Feed-forward control serve as warning-posts principally to direct attention rather
than to evaluate examples of such controls are cash flow and funds flow analysis, network planning
etc which help managers to see that they will have problems in such areas of cash or on time delivery
unless they take prior action.
Characteristics of Control
• Managers are required to design a control system that provides accurate feedback timely, which are
economical and acceptable by the members of the organization.
• Control characteristics help managers in designing a control system.
• To use the control process, managers must recognize the characteristics of effective control and
understand how to identify and overcome occasional resistances to control.
• Control systems are effective when they are
– integrated with planning
– Flexible
– Accurate
– Timely and
– Objective
• Therefore, the characteristics of effective control are
– Integration with planning
– Flexible
– Accurate
– Timely and
– Objective
• In addition, other important characteristics of control are
– It is an end function
– It is a continuous process
– it is mainly a forward-looking
– it is a universal function
– it is a normative and positive force
– It guides behavior
– it allows all organization to cope with uncertainty
– acceptance by members of the organization
– Focus on critical control point.
– economic feasibility
– timeliness
– easy to understand
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Making control effective
• Good plan cannot guarantee the attainment of the desired results unless effective control system is
designed and implemented.
• An effective control system requires the following essentials.
– control must be understandable
– control must be flexible
– control must be economical
– control must be objective
– control should recognize the importance of time element
– control system should provide useful and understandable information
– Control should be forward-looking
– control should be selective
– control should reflect the organization structure and needs
– control should lead to corrective action
Resistance to control
– Over control
• Controlling too many things
– Inappropriate focus
– Reward for inefficiency and
– Too much accountability
Overcoming resistance to control
– Encouraging employee participation
– developing verification process

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