Module 2

Planning is a blueprint of the course of action to be followed in the future. It is also a mental
exercise that requires imagination, foresight, and sound judgment. It is thinking before doing.
It is a preparatory step and refers to detailed programs regarding the future course of action.
Simply put, planning is the basic management function that involves forecasting, laying down
objectives, analyzing the different courses of action, and deciding the best alternative to
perform different managerial functions to achieve pre-determined goals. Thus, it is a
continuous process that involves decision-making; i.e., deciding the course of action for
framing and achieving objectives.
Features of Planning
1. Planning Focuses on Achieving Objectives: Planning is a goal-oriented work because its
purpose is to achieve organizational objectives quickly and economically. These objectives
are purposeful, as they provide basic guidelines for planning activities by identifying the
actions which lead to desired results.
2. Planning is a Primary Function of Management: Planning is the primary function of
management as it serves as a base for all other management functions because it provides the
basic framework within which all other management functions are performed. We consider it
to be a blueprint, as it provides the foundation for managerial actions.
3. Planning is Pervasive: It is pervasive as it is required at all levels of management and in
all types of organizations. However, the scope of planning varies from one level to another,
while supervisors at the lowest level formulate day-to-day operational programs and
middle-level managers prepare departmental plans, and the top management plans for the
organization as a whole.
4. Planning is a Continuous Process: Planning is an ongoing process. Plans are prepared for
a specific period and at the end of that period, there is a need for a new plan based on the new
situation. Since the future is uncertain, there are various assumptions about the future that
may change. Therefore, the original plan may have to be revised in light of changing
conditions.
5. Planning is Futuristic: Planning involves looking into the future, and it predicts the best
advantage of an organization. Managers plan to manage future events to the best of their
capacity. Planning also involves thinking about the future. It essentially involves scientific
anticipation of future events; i.e., forecasting.
6. Planning involves Decision-Making: Planning is the process of making choices from
various alternatives to achieve the specified objectives. The need for planning arises only
when alternatives are available, and in actual practice, planning presupposes the existence of
alternatives. Thus, decision-making is an integral part of planning, as it involves a choice
from various alternative courses of action. But, if there is only one alternative, then there is
no need for planning.
7. Planning is a Mental Exercise: Planning is an intellectual process that is related to
thinking before doing involving imagination and creativity. It is an activity of thinking based
on logical reasoning rather than guessing and doing work. The success of planning depends
on the performance of a planner. So, a planner must have an intelligent imagination and
sound judgment capacity.
Importance of Planning

1. Planning Provides Direction: Planning is involved in deciding the future course of action.
Fixing goals and objectives is the priority of any organization. By stating the objective in
advance, planning provides unity of direction. Proper planning makes goals clear and
specific. It helps the manager to focus on the purpose for which various activities are to be
undertaken. It means planning reduces aimless activity and makes actions more meaningful.
2. Planning Reduces the Risk of Uncertainty: Every business enterprise has to operate in
an uncertain environment. Planning helps a firm to survive in this uncertain environment by
eliminating unnecessary action. It also helps to anticipate the future, and prepare for the risk
by making necessary provisions.
3. Planning Reduces Overlapping and Wasteful Activity: Plans are formulated after
keeping in mind the objective of the organization. An effective plan integrates the activity of
all the departments. In this way, planning reduces overlapping and wasteful activities.
4. Planning Promotes Creativity and Innovative Ideas: Planning encourages creativity,
and helps the organization in various ways. Managers develop new ideas and apply the same
to create new products and services leading to overall growth and expansion of the business.
Therefore, it is rightly said that a good planning process will promote more individual
participation by throwing up various new ideas and encouraging managers to think
differently.
5. Planning Facilitates Decision-Making: Decision-making means searching for various
alternatives and selecting the best one. Planning helps the manager to look into the future,
and choose among various alternative forces of action. Planning provides guidelines for
sound and effective decision-making.
6. Planning Establishes a Standard for Controlling: Planning lays down the standards
against which actual performance can be evaluated and measured. Comparison between the
actual performance and pre-determined standards help to point out the deviation, and take
corrective actions to ensure that events confront plans. In case of any deviation, the
management can take remedial measures to improve the results.
Elements of Planning
1. Objectives:
The important task of planning is to determine the objectives of the enterprise. Objectives are
the goals towards which all managerial activities are aimed at. All planning work must spell
out in clear terms the objectives to be realised from the proposed business activities. When
planning action is taken, these objectives are made more concrete and meaningful. For
example, if the organisational objective is profit earning, planning activity will specify how
much profit is to be earned looking into all facilitating and constraining factors.

2. Forecasting: It is the analysis and interpretation of the future in relation to the activities
and working of an enterprise. Business forecasting refers to analysing the statistical data and
other economic, political and market information for the purpose of reducing the risks
involved in making business decisions and long range plans. Forecasting provides a logical
basis for anticipating the shape of the future business transactions and their requirements as to
man and material.

3. Policies: Planning also requires laying down policies for the easy realisation of the
-objectives of business. Policies are statements or principles that guide and direct different
managers at various levels in making decisions. Policies provide the necessary basis for
executive operation. They set forth overall boundaries within which the decision-makers are
expected to operate while making decisions. Policies act as guidelines for taking
administrative decisions.

In a big enterprise, various policies are formulated for guiding and directing the subordinates
in different areas of management. They may be production policy, sales policy, financial
policy, personnel policy etc. But these different policies are co-ordinated and integrated in
such a way that they ensure easy realisation of the ultimate objectives of business. Policies
should be consistent and must not be changed frequently.

4. Procedures: The manner in which each work has to be done is indicated by the procedures
laid down. Procedures outline a series of tasks for a specified course of action. There may be
some confusion between policies and procedures. Policies provide guidelines to thinking and
action, but procedures are definite and specific steps to thinking and action. For example, the
policy may be the recruitment of personnel from all parts of the country; but procedures may
be to advertise and invite applications, to take interviews and offer appointments to the
selected personnel.

Thus, procedures mean definite steps in a chronological sequence within the area chalked out
by the policies. In other words, procedures are the methods by means of which policies are
enforced. Different procedures are adopted in different areas of business activities. There may
be production procedure, sales procedure, purchase procedure, personnel procedure etc.

Production procedure involves manufacturing and assembling of parts; sales procedure

relates to advertising, offering quotations, securing and execution of orders; purchase
procedure indicates inviting tenders, selecting quotations, placing orders, storing the goods in
go-down and supplying them against requisition to different departments and personnel
procedure is the recruitment, selection and placement of workers to different jobs.

5. Rules: A rule specifies the necessary course of action in a particular situation. It acts as a
guide and is essentially in the nature of a decision made by the management authority. This
decision signifies that a definite action must be taken in respect of a specific situation. The
rules prescribe a definite and rigid course of action to be followed in different business
activities without any scope for deviation or discretion.

Any deviation of rule entails penalty. Rule is related to parts of a procedure. Thus, a rule may
be incorporated in respect of purchase procedure that all purchases must be made after
inviting tenders. Similarly, in respect of sales procedure, rule may be enforced that all orders
should be confirmed the very next day.

6. Programmes: Programmes are precise plans of action followed in proper sequence in

accordance with the objectives, policies and procedures. Programmes, thus, lead to a concrete
course of inter-related actions for the accomplishment of a purpose. Thus, a company may
have a programme for the establishment of schools, colleges and hospitals near its premises
along with its expanding business activities.

Programmes must be closely integrated with the objectives. Programming involves dividing
into steps the activities necessary to achieve the objectives, determining the sequence
between different steps, fixing up performance responsibility for each step, determining the
requirements of resources, time, finance etc. and assigning definite duties to each part.

7. Budgets: Budget means an estimate of men, money, materials and equipment in numerical
terms required for implementation of plans and programmes. Thus, planning and budgeting
are inter-linked. Budget indicates the size of the programme and involves income and outgo,
input and output. It also serves as a very important control device by measuring the
performance in relation to the set goals. There may be several departmental budgets which
are again integrated into the master budget.

8. Projects: A project is a single-use plan which is a part of a general programme. It is part of

the job that needs to be done in connection with the general programme. So a single step in a
programme is set up as a project. Generally, in planning a project, a special task force is also
envisaged. It is a scheme for investing resources which can be analysed and appraised
reasonably and independently. A project involves basically the investment of funds, the
benefits from which can be accrued in future. Examples of such investment may be outlays
on land, building, machinery, research and development, etc. depending upon the situation.

Process of Planning
•Establishing Objectives: Establishing the objectives is the first step in planning. Plans are
prepared with a view to achieve certain goals. Hence, establishing the objectives is an
important step in the process of planning. Plans should reflect the enterprise’s objectives.
Objectives should clearly define what is to be achieved by policies, procedures, rules,
strategies, budgets and programmes. The plan must make sure that every activity undertaken
contributes to the achievement of objectives.
•Determining Planning Premises: This is the second step in planning. Premises include
actual forecast data, policies and plans of the enterprise. Planning involves looking into the
future which necessitates the enterprise to know how future conditions will affect its
activities. Thus, forecasting is an important step in planning.
•Determining Alternative Courses: Determining alternative courses is the third step in the
planning process. The planner should study all the alternatives, consider the strong and weak
points of them and finally select the most promising ones.
•Evaluating Alternative Courses: Alternative courses so selected should be evaluated in the
light of premises and goals. Evaluation involves the study of performance of various actions.
Various factors such as profitability, investment requirements, etc., of such alternatives
should be weighed against each other. Each alternative should be closely studied to determine
its suitability.
•Selecting the Best Course: After having evaluated the various alternatives, the most
suitable alternative is selected. With this, the plan can be considered to have been adopted. It
is exactly the point at which decisions are made. Sometimes, in the best interests of the
enterprise, several alternative courses can be adopted.
•Formulating Derivative Plans: Planning is not complete as soon as the best course is
selected. The main plan should be supported by a number of derivative plans. Within the
framework of a basic plan, derivative plans are formulated in each functional area.
Segregation of master plan into departmental, sectional and individual plans, helps to
understand the real nature of future uncertainties. To make the planning process more
effective, it should also provide for a feedback mechanism. These plans are meant for the
implementation of the main plan.
•Implementation of Plans: Implementation of plans is the final step in the process of
planning. This involves putting the plans into action so as to achieve the business objectives.
Implementation of plans requires establishment of policies, procedures, standards, budgets,
etc.
Types of Planning
•Strategic Planning: This type of planning is long-term and focuses on defining an
organization's mission, vision, goals, and objectives. It involves analyzing the external
environment and internal capabilities to develop strategies for achieving these goals. Strategic
planning typically covers a period of three to five years or even longer.
•Operational Planning: Operational planning is concerned with day-to-day activities and
short-term objectives. It involves setting specific targets, allocating resources, and defining
tasks to achieve those objectives. Operational plans are usually developed for a one-year
period or less.
•Tactical Planning: Tactical planning bridges the gap between strategic and operational
planning. It involves developing plans and strategies that help implement the broader
strategic goals. Tactical plans are often created for a one to three-year timeframe.
•Contingency Planning: Contingency planning is a type of planning that focuses on
preparing for unexpected events, crises, or disasters that could disrupt normal operations or
threaten an organization's ability to achieve its goals. The primary goal of contingency
planning is to ensure that an organization can respond effectively to unforeseen
circumstances, minimize negative impacts, and recover quickly.
Limitations of Planning
(1) Planning Creates Rigidity: Although the quality of flexibility is inherent in planning,
meaning thereby that in case of need changes can be brought in, but it must be admitted that
only small changes are possible. Big changes are neither possible nor in the interest of the
organisation. Since it is not possible to introduce desired changes according to the changed
situations, the organisation loses many chances of earning profits. For this limited flexibility
in planning, both the internal as well as external factors are responsible. These facts are called
internal and external inflexibility.

They are the following:

(i) Internal Inflexibility:

At the time of planning the objectives of the organisation, its policies, procedures, rules,
programmes, etc. are determined. It is very difficult to bring in changes time and again. It is
known as internal inflexibility,

(ii) External Inflexibility:

External inflexibility means various external factors that cause limited flexibility in planning.
These factors are beyond the control of the planners. The chief among them are: political
climate, economic changes, technical changes, natural calamities, policies of the competitors,
etc. For example, in political context, as a result of change, a new government brings up a
new trade policy, policy of taxation, import policy, etc. All these changes make every sort of
planning a meaningless waste. Similarly, a change in the policies of the competitors suddenly
makes all types of planning ineffective.

(2) Planning Does Not Work in a Dynamic Environment:

Planning is based on the anticipation of future happenings. Since the future is uncertain and
dynamic, therefore, the future anticipations are not always true. Therefore, to consider
planning as the basis of success is like a leap in the dark. Generally, a longer period of
planning makes it less effective. Therefore, it can be said that planning does not work in a
dynamic environment. For example, a company anticipated that the government was thinking
about allowing the export of some particular product. With this hope the same company
started manufacturing that product. But the government did not allow the export of this
product. In this way, the wrong anticipation proved all planning wrong or incorrect. It
brought loss instead of profit.

(3) Planning Reduces Creativity:

Under planning all the activities connected with the attainment of objectives of the
organisation are pre-determined. Consequently, everybody works as they have been directed
to do and as it has been made clear in the plans. Therefore, it checks their incisiveness. It
means that they do not think about appropriate ways of discovering new alternatives.
According to Terry, “Planning strangulates the initiative of the employees and compels them
to work in an inflexible manner.”

(4) Planning Involves Huge Costs:

Planning is a small work but its process is really big. Planning becomes meaningful only after
traversing a long path. It takes a lot of time to cover this path. During this entire period the
managers remain busy in collecting a lot of information and analysing it. In this way, when so
many people remain busy in the same activity, the organisation is bound to face huge costs.

(5) Planning is a Time-consuming Process:

Planning is a blessing in facing a definite situation but because of its long process it cannot
face sudden emergencies. Sudden emergencies can be in the form of some unforeseen
problem or some opportunity of profits and there has been no planning for all these situations
beforehand which now requires immediate decision. In such a situation, if the manager thinks
of completing the planning process before making some decision, it may be possible that the
situation may worsen or the chance of earning profit may slip away. Thus, planning is time
consuming and it delays action.

(6) Planning Does Not Guarantee Success:

Sometimes the managers think that planning solves all their problems. Such thinking makes
them neglect their real work and the adverse effect of such an attitude has to be faced by the
organisation. In this way, planning offers the managers a false sense of security and makes
them careless. Hence, we can say that mere planning does not ensure success; rather efforts
have to be made for it.

Management by Objectives(MBO)
Management by Objectives (MBO) is a goal-setting methodology that helps organizations
align day-to-day execution with strategic outcomes. Initially introduced by Peter Drucker in
his 1954 book The Practice of Management, MBOs remain a staple in performance
management because they foster clarity, accountability, and alignment across every level of
the business. MBOs work by defining clear, measurable goals for individuals and teams that
directly support broader company objectives. Unlike top-down directives or open-ended
OKRs, MBOs are structured around shared ownership. Employees participate in shaping their
objectives, which enhances motivation and commitment.

The core components of MBOs are:

●​ Alignment: Objectives at every level map back to organizational goals.

●​ Clarity: Each objective is specific, measurable, and time-bound.
●​ Ownership: Individual contributors understand how their work adds up to bigger
outcomes.
●​ Accountability: Progress is tracked regularly, and results are tied to compensation
where appropriate.

MBOs are particularly effective in outcome-driven functions like Sales, Revenue Operations,
Customer Success, and Finance, where performance can be clearly measured and rewarded.

Decision Making: Meaning

Decision-making can be defined as the process of selecting a right and effective course of
action from two or more alternatives for the purpose of achieving a desired result.
Decision-making is the essence of management. The entire managerial process is based on
decisions. Decisions are needed both for tackling the problems as well as for taking
maximum advantages of the opportunities available. Correct decisions reduce complexities,
uncertainties and diversities of the organisational environments.
Importance of Decision Making

1. Guides Actions and Direction​

Decision making helps individuals choose the best course of action among different options.
It gives direction and purpose, ensuring that efforts are focused toward achieving specific
goals.

2. Improves Problem Solving​

Good decision-making skills allow a person to analyze situations, evaluate alternatives, and
select effective solutions. This is essential for overcoming challenges and avoiding
unnecessary mistakes.

3. Saves Time and Resources​

Making timely and well-thought-out decisions prevents delays, reduces confusion, and
avoids wasting resources like money, energy, and effort.
4. Builds Confidence and Responsibility​
When people make decisions and see positive outcomes, it boosts their confidence. It also
teaches responsibility, as individuals learn to accept the consequences of their choices.

5. Enhances Leadership and Management​

In leadership roles, decision making is critical. Good leaders make informed decisions that
benefit teams, organizations, or communities.

Process of Decision Making

Process of Decision-making

a) Identify the problem: The first step of a decision-maker is to identify, define and state the
problem in precise terms. A problem is a felt need, a question thrown forward for solution. A
problem can be identified much more clearly, if managers go through diagnosis and analysis
of the problem.

Example: A supervisor in a retail shop may realize that he has too many employees on the
floor compared with the day’s current sales volume, for example, requiring him to make a
decision to keep costs under control.

b) Gather information: The analysis of the problem requires to find out who would make the
decision, what information would be needed and from where the information is available.
The real trick in this step is to know what information is needed, the best sources of this
information, and how to go about getting it. Some information must be sought from within
yourself through a process of self-assessment; other information must be sought from outside
yourself-from books, people, and a variety of other sources. This step, therefore, involves
both internal and external “work”.

Example: The supervisor collects relevant data such as:

●​ Daily sales reports for the past few weeks

●​ Number of customers visiting during different hours
●​ Employee work schedules and wages
●​ Peak vs. non-peak hours

He may also talk to staff and review past records to understand staffing patterns and demand
fluctuations.

c) Identify Alternatives: A decision maker can use several sources for identifying alternatives
i.e. his own past experience, practices followed by others, and using creative techniques.
Copying from the experience of others is another way of generating alternatives.

Example: Based on the information, the supervisor considers several alternatives:

●​ Reduce the number of employees per shift

 ●​ Introduce flexible or part-time shifts
●​ Assign some employees to back-end tasks (inventory, stocking) during low sales
periods
●​ Keep current staffing but focus on increasing sales through promotions

d) Evaluation of the Alternatives:- After the alternatives are identified, the next step is to
evaluate them and select the one that will meet the choice criteria. However, all the
alternatives available for decision making will not be taken for detailed evaluation because of
the obvious limitations of managers in evaluating all alternatives. In narrowing down the
number of alternatives, two approaches can be followed: constraint on alternatives and
grouping of alternatives of similar nature.

Example: The supervisor evaluates each option:

●​ Reducing staff may cut costs but could affect customer service if footfall suddenly
increases
●​ Flexible shifts may balance cost and efficiency but require scheduling adjustments
●​ Reassigning staff improves productivity without layoffs
●​ Increasing sales may take time and may not immediately solve cost issues

He narrows down to the most feasible options considering cost, efficiency, and service
quality.

e) Make the best choice: A comparison is made among the likely outcomes of various
alternatives and the best one is chosen. Choice aspect of decision making is related to
deciding the most acceptable alternative which fits with the organizational objectives. it may
be seen that the chosen alternative should be acceptable in the light of the organizational
objectives.

Example: The supervisor decides to:

●​ Implement flexible shifts

●​ Reassign excess staff to inventory management during slow hours

This option maintains service quality while controlling costs.

f) Action: Once the alternative is selected, it is put into action. The actual process of decision
making ends with the choice of an alternative through which the objectives can be achieved.
Once the creative and analytical aspects of decision making through which an alternative has
been chosen are over, the managerial priority is one of converting the decision into something
operationally effective.

Example: The supervisor:

●​ Revises employee schedules

 ●​ Communicates changes to staff
●​ Assigns new roles and responsibilities
●​ Monitors daily operations after implementation

g) Results: When the decision is put into action, it brings certain results. These results must
correspond with objectives, the starting point of the decision process, if a good decision has
been made and implemented properly. Thus, results provide indication whether the decision
and its implementation is proper. Therefore, managers should take up a follow-up action in
the light of feedback received from the results.

Example: After implementation:

●​ Labour costs decrease

●​ Employee productivity improves
●​ Customer service remains stable

The supervisor reviews performance regularly and makes further adjustments if required.

Techniques of Decision-Making

A. Brainstorming:- Developed by Alex Osborn in 1938 to stimulate idea generation for

decision making. It is a conference technique involving 10-15 people by which a group
attempts to find a solution for a specific problem by amassing all the ideas spontaneously
contributed by its members. In this group the leader states the problem in a clear manner so
that it is understood by all participants. After that each member is asked to give ideas through
which the problem can be solved. The members are expected to put their ideas for problem
solutions without taking into consideration limitations – financial, legal etc. Idea evaluation is
deferred to a later stage because it does not flow in the direction of idea generation.
Brainstorming technique is very effective when the problem is comparatively specific and
can be simply defined. A complex problem can be broken up into parts and each part can be
taken separately at a time.

B. Nominal Group Technique (NGT):- A technique which is developed by Andre Delbecq

and Andrew Van de Ven. It is a structured group meeting which restricts verbal
communication and discussion among the members during the decision-making process.
Group members are all physically present but members operate independently. It is a group
decision-making process that can be used by decision-making groups when the individual
members are in different physical locations. Developed by Norman Dalkey and Olaf Helmer
at Rand Corporation. In this technique, members do not have face-to-face interaction for
group decisions. The decision is arrived at through written communication in the form of
filling up questionnaires often through mails.
C. Delphi Technique: The Delphi Technique is a structured decision-making method that
uses a panel of experts to reach a consensus through multiple rounds of questionnaires.
Experts respond independently and anonymously, which helps avoid bias, group pressure, or
dominance by any individual. After each round, a facilitator summarizes the responses and
shares the feedback with the group, allowing participants to reconsider and refine their
answers in subsequent rounds. This iterative process continues until a reasonable level of
agreement is achieved. The technique is particularly useful for complex problems,
forecasting, policy-making, and situations where direct interaction among experts may lead to
biased outcomes, ensuring more objective and reliable decisions.

D. Electronic Meetings:- The most recent approach to group decision making blends the
nominal group technique with sophisticated computer technology. It is called the electronic
meeting. Members of the group interact with the help of computers through connected
computer terminals. The projector screen is used to show the individual comments and votes
on the issue. This method reduces group think and the time wasted in socializing the meeting.

E. Dialectic Decision Technique: The Dialectic Decision Technique is a group

decision-making method that involves developing and evaluating two or more opposing
viewpoints to arrive at the best possible solution. In this approach, individuals or teams are
assigned to propose alternative solutions to the same problem, often with contrasting
assumptions or strategies. These opposing ideas are then critically analyzed, debated, and
challenged through structured discussion. The purpose is to uncover hidden assumptions,
identify strengths and weaknesses of each alternative, and encourage deeper thinking. By
synthesizing insights from conflicting perspectives, decision-makers can arrive at a more
balanced, creative, and well-informed final decision. This technique is especially useful for
complex, strategic, and non-routine problems where multiple viewpoints can improve the
quality of decisions.

Concept of Organizing
Organizing is a fundamental function of management that involves arranging and structuring
work, resources, and activities to achieve organizational goals efficiently. It includes
identifying tasks, grouping them into departments, assigning responsibilities, and establishing
authority relationships. Through organizing, managers ensure that all resources—human,
financial, and physical—are used in a coordinated manner. It transforms plans into actionable
structures by defining who does what, how tasks are performed, and how different roles are
interconnected within the organization.

Structure of Organization

a) Formal Organization Structure

A formal organization structure is the officially defined system of roles, responsibilities,

authority, and communication within an organization. It is deliberately designed by
management and documented in organizational charts and manuals. This structure clearly
specifies reporting relationships, job roles, and procedures to ensure discipline and
accountability. It helps in maintaining order, consistency, and clarity in operations, making it
easier to achieve organizational objectives systematically.

b) Informal Organization Structure

An informal organization structure arises naturally from social interactions among

employees. It is not officially defined but develops due to personal relationships, shared
interests, and social networks within the workplace. Informal structures play a crucial role in
communication, motivation, and cooperation. They often help in faster information flow and
can influence employee behavior positively or negatively. Managers must recognize and
manage informal networks to ensure they support rather than hinder organizational goals.

c) Line Organization Structure

In a line organization structure, authority flows directly from top management to lower levels
in a clear chain of command. Each employee reports to only one superior, ensuring unity of
command and simplicity. This structure is commonly found in small organizations due to its
clarity and ease of decision-making. However, it may lead to overburdening of managers and
lack of specialization since authority is concentrated in a few hands.

d) Line and Staff Organization Structure

The line and staff organization structure combines the features of line organization with
specialized staff support. While line managers have direct authority over operations, staff
specialists provide expert advice and assistance in areas like finance, human resources, or
marketing. This structure enhances efficiency by allowing specialization while maintaining
clear authority relationships. However, conflicts may arise between line and staff personnel
due to differences in roles and authority.
e) Matrix Organization Structure

A matrix organization structure is a hybrid system that combines functional and project-based
structures. Employees report to both a functional manager and a project manager. This
structure is widely used in dynamic and complex environments where flexibility and
collaboration are essential. It allows efficient use of resources and promotes teamwork across
departments. However, dual reporting can create confusion, conflicts, and stress among
employees if not managed properly.

Significance of Organizing

1.​ Optimum Utilization of Resources​

Organizing ensures that human, financial, and physical resources are used efficiently.
By assigning the right job to the right person, it avoids wastage and improves
productivity.
2.​ Clarification of Authority and Responsibility​
It clearly defines who is responsible for what work and who has the authority to make
decisions. This reduces confusion and ensures accountability.
3.​ Facilitates Specialization​
Organizing promotes division of work, allowing employees to focus on specific
tasks. This increases efficiency, expertise, and overall performance.
4.​ Improves Coordination​
It brings together different departments and activities in a structured manner,
ensuring that all efforts are directed toward common organizational goals.
5.​ Ensures Effective Communication​
A well-defined structure establishes clear communication channels, helping
information flow smoothly across different levels of management.
6.​ Avoids Duplication of Work​
By properly dividing and assigning tasks, organizing prevents overlapping
responsibilities and repetition of work.

Departmentation

Departmentation is the process of dividing an organization into different departments or units

based on certain criteria, such as functions, products, geography, customers, or processes.
This division helps in organizing various activities and resources efficiently, ensuring that
tasks are allocated to specific departments according to their expertise and specialization.
Departmentation is an essential aspect of organizational structure and design, and it has
several benefits, including:

· ​ Specialization: Each department can focus on specific tasks or functions, allowing

employees to develop specialized skills and expertise.

· ​ Efficient Workflow: Departmentation ensures that similar tasks and functions are grouped
together, leading to smoother workflow and improved efficiency.
· ​ Clearer Communication: Departments facilitate better communication and coordination
among employees who work on similar tasks or projects.

· ​ Accountability: Departmentation helps in defining clear roles and responsibilities for each
department, making it easier to hold employees accountable for their performance.

· ​ Flexibility: Organizational departments can adapt and respond more effectively to

changes in their specific areas, leading to greater overall flexibility in the organization.

BASES OF DEPARTMENTATION

Functional Departmentation: This is one of the most common methods, where departments
are created based on functions or specialized activities. For example, an organization might
have departments such as marketing, finance, human resources, production, and research and
development. Each department focuses on a specific aspect of the business.

· ​ Product Departmentation: Departments are formed based on different product lines or

product categories. This approach is often used by organizations with a diverse range of
products. Each product department is responsible for the development, production, and
marketing of a specific product or product line.

· ​ Customer Departmentation: In this method, departments are organized around specific

customer groups or types. For example, a retail company might have departments catering
to wholesale customers, retail customers, and online customers. Each department tailors
its services to the needs of its respective customer group.

· ​ Geographic Departmentation: This approach involves creating departments based on

geographic regions or locations. Organizations with a global or multi-location presence
often use this method to manage operations in different locations more effectively.

· ​ Process Departmentation: Departments are organized around specific processes or

stages in a production or service delivery process. This is common in manufacturing
industries where various stages of production (e.g., assembly, quality control) are separate
departments.

· ​ Matrix Departmentation: In a matrix structure, employees report to both a functional

manager (e.g., in marketing, finance) and a project or product manager. This dual
reporting structure allows for flexibility and cross-functional collaboration.

· ​ Hybrid Departmentation: Some organizations use a combination of the above methods

to create a structure that best suits their needs. For example, a large multinational
corporation might have a combination of functional, geographic, and product-based
departments.

Span of Control
The Span of Management/Control refers to the number of subordinates who can be managed
efficiently by a superior. Simply, the manager having the group of subordinates who report
him directly is called the span of management.

The Span of Management/Control has two implications:

· Influences the complexities of the individual manager’s job.

· Determine the shape or configuration of the Organization.

The span of management is related to the horizontal levels of the organization structure.
There is a wide and a narrow span of management. With the wider span, there will be less
hierarchical levels, and thus, the organizational structure would be flatter. Whereas, with the
narrow span, the hierarchical levels increase, hence the organizational structure would be tall.

Types of Span of Control/Management

There are two basic types when it comes to discussing the span of management:

Wider Span of Management: It refers to situations when the organizational hierarchy

consists of one manager and many subordinates. For this span of management type, the
manager supervises many subordinates who are themselves skilled to conduct duties
without much directing and controlling.

Narrow Span of Management: This is the opposite situation when there is more than one
manager in an organization to handle a few subordinates. One of the best advantages here
is that the subordinates get thoroughly supervised and the manager can exercise their
duties more efficiently.

Importance of Span of Management

The span of management, also known as the span of control, refers to the number of
subordinates or employees that a manager can effectively supervise or manage. The
importance of the span of management is evident in several key areas:

Efficient Resource Utilization: A well-determined span of management ensures that

resources, including human resources, are used efficiently. It strikes a balance between
having too many managers, which can lead to excessive bureaucracy and costs, and
having too few, which can result in overworked managers and a lack of supervision.

Effective Communication: The span of management affects communication within an

organization. With a wider span, communication may become more challenging, as
managers have more subordinates to oversee. Conversely, with a narrower span,
communication may be more direct and frequent, but this can also lead to inefficiencies
and delays in decision-making.
 Decentralization vs. Centralization: A wider span of management often implies a more
decentralized organizational structure, where decision-making authority is pushed down
to lower levels. In contrast, a narrower span may suggest a more centralized structure.
The choice between centralization and decentralization can have a significant impact on
an organization's flexibility and responsiveness.

Employee Empowerment: A wider span of management can empower employees by giving

them more autonomy and decision-making authority. This can lead to increased job
satisfaction and motivation. However, it also requires a high level of trust in employees
and the need for effective delegation skills on the part of managers.

Leadership and Supervision: The span of management affects how managers lead and
supervise their teams. With a wider span, managers may rely more on delegation, trust,
and coaching. In a narrower span, they might have a more hands-on and direct
supervisory role. The choice can depend on the nature of the work and the skills of the
manager.

· Adaptability and Responsiveness: In dynamic and fast-changing environments, a wider

span of management can lead to quicker decision-making and greater adaptability. In
contrast, a narrower span may be suitable in stable, highly regulated industries where
strict supervision is necessary.

· Costs and Overhead: A narrower span of management can lead to higher managerial
and administrative costs due to the need for more managers. Conversely, a wider span can
reduce these costs but may require increased investments in training and development to
ensure that managers can handle larger teams effectively.

Factors affecting Span of Management

1. Competence of managers: If managers are competent in their jobs, they can have a wide
span of management. The competence of managers is judged by their ability to make
decisions related to motivational plans, leadership styles, communication channels and
chains, techniques of control etc. Managers who rank high on these parameters can
effectively supervise a larger number of subordinates.

2. Nature of work: If employees perform similar and repetitive work, managers can
supervise a large number of subordinates and, thus, have a wide span of control.
Non-repetitive and challenging work requires a narrow span of control. Changes in the
nature of work also affects the span of management.

3. Assistance to managers: If managers have access to technical or secretarial assistance,

a larger group of subordinates can be managed. The span of control can, therefore, be
wide. Staff assistance can be useful for collecting and processing information related to
various decisions and issuing orders to the subordinates. Managers save time in
communicating with subordinates, direct the activities of larger number of subordinates
and focus on other strategic organisational matters.
4. Competence of subordinates: If subordinates are competent to manage their jobs
without much assistance from the superiors, the span of control can be wide. Competent
subordinates do not require frequent directions from the superiors with respect to various
organisational activities. Superiors can thus manage a larger group of subordinates.

5. Plans and policies: If plans clearly define the organisational/individual goals and
policies, superiors can supervise a larger group of subordinates and have a wide span of
control. Clearly defined plans include well-formulated policies, procedures, methods etc.
Particularly, if standing plans are well defined, subordinates know the broad guidelines
within which they have to make decisions in similar and repetitive situations.

Graicunas Theory

A French management consultant, V.A. Graicunas, introduced a theory on span of

management which explains three kinds of relationships that a superior can have with
subordinates. He formulated a theory and suggested the number of subordinates under one
superior based on mathematical calculations. Superior-subordinate relationships are based on
mathematical formulae.

Graicunas identified three types of relationships:

1. Direct single relationships,

2. Direct group relationships, and

3. Cross relationships.

· Direct single relationship: This is the relationship between the superior and his
immediate subordinates. It represents direct contact of the superior with his subordinates.
If there are 3 subordinates (A, B and C) under one superior (X), there will be three direct
single relationships, represented by the formula n. These are relationships between X and
A, X and B, and X and C.

· Direct group relationships: This is the relationship of superior with subordinates in the
presence of other subordinates. All possible combinations of superior and subordinate
relationships-exist in group relationships. It represents contact of the superior with one or
more subordinates while others (one or more) assist the relationships.

(Example for understanding purpose) For one superior (X) and three subordinates (A, B,
C), there will be 9 direct group relationships as follows:

1. X and A with B providing assistance

2. X and A with C providing assistance

 3. X and B with C providing assistance

4. X and A with BC providing assistance

5. X and B with AC providing assistance

6. X and C with AB providing assistance

7. X and AB with C providing assistance

8. X and AC with B providing assistance

9. X and BC with A providing assistance

· Cross relationships: While the subordinates work under the same superior, they also
interact amongst themselves. These are the relationships amongst subordinates. A’s
interaction with B and B’s interaction with A will be different as viewed by the managers
and, therefore, this relationship will also be different.

(Example for understanding purpose) These are between:

A and B

Band A

A and C

C and A

B and C

C and B

With every increase in the number of subordinates by one, an increase in the number of
relationships is by more than one. While, with 2 subordinates, the total number of
relationships is 6, with 3 subordinates, it is 18.

Limitations of Graicunas Theory

Though Graicunas gave mathematical formula for finding out the number of
relationships, his approach suffers from the following shortcomings:

●​ The mathematical precision of the formula is debatable. Relationships increase

with the increase in the number of subordinates but not in a precise formula.
●​ Graicunas has ignored the frequency of relationships and the strain they
generate.
●​ He has left out certain possible relationships.
 ●​ He has failed to identify the factors which govern or determine the span of
management.

Centralization of Delegation of Authority

Centralization is a form of organizational structure where the decision-making capability

rests with the top management. A couple of hand-picked members are entitled to create
strategies, determine the goals and objectives based on which an organisation will function.

In a centralized organisation, the top management sets rules and procedures which are then
communicated to the lower-level employees, who are expected to carry out the same without
questioning the authority.

The advantage of such a structure is, it allows employees to have a well-defined framework
within which all work needs to carry out.

The disadvantage of such a structure is that it increases the time taken to arrive at a decision.
As decision-making authority lies with selected people from top management, it may result in
biased decision making.

Decentralization of Delegation of Authority

Decentralization is another form of organizational structure that functions by delegating
decision-making capabilities to multiple teams across geographies.

In such an organization, most of the planning, strategy and decision to implement them are
taken by the people in the middle and lower levels of management.

The advantage of decentralization is that the employees are empowered to make their own
decisions that will benefit the organization, which results in a high level of employee
satisfaction and boosts the productivity of an organization.

Decentralization enables low-level employees to gain leadership skills, which can contribute
to the growth of the organization in the long run.

Delegation of Authority

The Delegation of Authority is an organizational process wherein, the manager divides his
work among the subordinates and gives them the responsibility to accomplish the respective
tasks. Along with the responsibility, he also shares the authority, i.e., the power to take
decisions with the subordinates, such that responsibilities can be completed efficiently.

In other words, a delegation of authority involves the sharing of authority downwards to the
subordinates and checking their efficiency by making them accountable for their doings. In
an organization, the manager has several responsibilities and work to do. So, to reduce his
burden, certain responsibility and authority are delegated to the lower level, i.e., to the
subordinates, to get the work done on the manager’s behalf.

Elements of Delegation of Authority

There are three major elements of delegation of authority:

1. Responsibility: The responsibility means, assigning the work to an individual. The

managers assign certain responsibility to the subordinates for the completion of certain
tasks on his behalf. An individual must apply all his physical and mental ability to get the
task completed efficiently. Here it is to be noted, that manager can only assign the
responsibility, and in the case of the subordinate fouls, the manager will be answerable to
his seniors. Thus, the responsibility flows upwards.

2. Authority: To fulfil the responsibility, certain authority is delegated to the subordinate.

Authority means the power to make decisions. Hence, the manager along with the
responsibility also delegates authority to enable the subordinate to take decisions
independently and accomplish the task efficiently. The authority must be equal to the
responsibility, this means, a certain level of authority is delegated which is sufficient to
 complete the responsibility. The authority also flows upward, as we go up in the scalar
chain, the authority increases.

3. Accountability: Accountability means to check whether the subordinates are

performing their responsibilities in an expected manner or not. Accountability cannot be
delegated which means, in the case of non-completion of the task, the manager will only
be held responsible for it, not the subordinates. The accountability also flows upward, i.e.,
subordinates will be accountable to the manager and the manager to his superior.

Process of delegation of authority

1.​ Assignment of Duties to Subordinates: Before the actual delegation of authority, the
delegator must decide on the duties which he wants the subordinate or the group of
subordinates to perform. Here, the manager lists the activities to be performed along
with the targets to be achieved, and the same is spelled out to the subordinates. Thus,
in the first stage, the duties are assigned to the subordinates as per their job roles.
2.​ Transfer of Authority to perform the duty: At this stage, an adequate authority is
delegated to the subordinate which is essential to perform the duty assigned to him. A
manager must make sure; that authority is strictly delegated just to perform the
responsibility, as more authority may lead to its misuse by the subordinate.
3.​ Acceptance of the Assignment: At this stage, the subordinate either accepts or
rejects the tasks assigned to him by his superior. If the subordinate or the delegate
refuses to accept the duty and the authority to perform it, then the manager looks for
the other person who is capable of and is willing to undertake the assignment. Once
the assignment gets accepted by the subordinate, the delegation process reaches its
last stage.
4.​ Accountability: The process of delegation of authority ends at the creation of an
obligation on the part of the subordinate to perform his responsibility within the
powers assigned to him. Once the assignment is accepted by the subordinate, then he
becomes responsible for the completion of the duty and is accountable to the superior
for his performance.

Barriers To Delegation of Authority

The following are the common barriers in delegation of authority:

· ​ Reluctant to Delegate – Some managers are reluctant to delegate authority to

subordinates. They believe that they can take a better decision than their subordinates.
This belief is often found among those managers who have been recently promoted and
those having superiority complex. They have no proper plan to delegate authority. In such
a situation, subordinates will have less work and lose the commitment to implement the
manager's decisions.
· ​ Fear of Losing Importance – Managers who feel comfortable with authority, fear to
delegate authority. They feel that it will diminish their importance. Such managers
delegate only that part of authority to subordinates which relates to their job
responsibility. They retain their authority as a positional superior of an organization.

· ​ Loss of Control – Some managers opine that they will lose control by delegating
authority to their subordinates. They feel that if they delegate authority to their
subordinates, they would not be sure to achieve assigned responsibilities from
subordinates. Such fear is reasonable in case managers are incapable of getting the jobs
done from others.

· ​ Mutual Distrust – Managers are often reluctant to delegate authority to subordinates if

there is an environment of distrust in the organization. A manager must have confidence
in his own ability to help, guide and control his subordinates before delegating authority.
If a manager does not have the ability to make a sound decision he does not believe in his
subordinates. He does not want to take risks to get jobs from others.

· ​ Fear of Subordinates – Managers are reluctant to delegate authority if they fear that it
will expose their shortcomings. They feel that their subordinates will perform better and
may create problems in their own career. They have no self-confidence and do not want to
face the competitive environment.

· Incompetent Subordinates – Some subordinates are often unwilling to accept

delegated authority because of lack of self-confidence. They fear making mistakes in their
performance. It is the responsibility of the superior to develop their self-confidence by
guiding them and also creating a supportive environment.