Management Entrepreneurship & Cyber Law 17CS51

MODULE I: INTRODUCTION
Management

In today‘s tough and uncertain economy, a company needs strong managers to lead its staff
toward accomplishing business goals. But managers are more than just leaders — they‘re
problem solvers, cheerleaders, and planners as well. And managers don‘t come in
one-size-fits all shapes or forms. Managers fulfil many roles and have many different
responsibilities at each level of management within an organization. In this chapter, you
not only discover those roles and functions, but you also find out the truth about several
common misconceptions about management.

―Management‖ (from Old French management ―the art of conducting, directing‖, from
Latin manuagere ―to lead by the hand‖) characterizes the process of leading and directing
all or part of an organization, often a business, through the deployment and manipulation
of resources (human, financial, material, intellectual or intangible)

Why to Study Management?

∙ The study of management builds the skills needed in today‘s workplace to succeed in:
✔ Becoming a partner in managing your organization through participative
management.
✔ Working in a team and sharing in decision making and other management
tasks.
∙ The study of management also applies directly to your personal life in helping you to:
✔ Communicate with and interact with people every day.
✔ Make personal plans and decisions, set goals, prioritize what you will do, and
get others to do things for you.
∙ Society Needs Leaders and Team Players
✔ Be Successful in our Community, Religious, Social, Professional, Recreational
and Other Organizations.
✔ Become Leaders for a ―Just and Humane World‖

Management is a critical element in the economic growth of a country. Management is the

dynamic, life giving element in every organization.

Definition of Management

For example economists have treated management as ‗a factor of production‘;

Sociologists treated it as ‗a group of persons‘. Hence, taking all these view points, it
becomes difficult to define management in a comprehensive way and no definition of
management has been universally accepted.
∙ According to Marry Follet ―Management is the art of getting things done through
people‖.
∙ George R Terry, ―Management is distinct process consisting of planning, organizing,
actuating & controlling performance to determine & accomplish the objectives by the
use of people & resources‖. ‗Planning‘ means thinking of the manager‘s action in
advance. The actions of the managers are based on logic, plan or some method rather
than hunch. ‗Organizing‘ means coordinating machines, materials and human
resources of the organization. ‗Actuating‘ means motivating,

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 directing the subordinates. ‗Controlling‘ means that manager must ensure that there
is no deviations from plans.
∙ According to Koontz and O‘Donnel ―Management is the direction and maintenance of
an internal environment in an enterprise where individuals working in groups can
perform efficiently and effectively towards the attainment of groupgoals‖.
∙ According to F.W. Taylor ―Management is the art of knowing what you want to do and
then seeing that it is done in the best and cheapest way‖.
∙ According to Donald J Clough ―Management is the art and science of decision making
and leadership‖.
∙ John F Mee states ―Management is the art of securing maximum results with
minimum efforts so as to secure maximum prosperity for employer and employee
and give the public the best possible service.‖
∙ According to William Spriegal, ―Management is that function of an enterprise which
concerns itself with the direction and control of various activities to attain business
activities‖.
∙ The four views of management: Management is a process, Management is a
discipline, Management is a human activity and Management is a career.

Nature of Management

The principles, concepts and techniques of management have changed over the period of
time. Various contributions to the field of management have changed its nature. The
nature of management can be described as follows:
1) Multidisciplinary: Management is multidisciplinary. It draws freely ideas and concepts
from the disciplines like economics, sociology, psychology, statistics, operations
research etc. Management integrates the ideas taken from various disciplines and
presents newer concepts which can be put into practice. The integration of these ideas
is the major contribution of management.

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2) Dynamic nature of principles: A principle is truth which establishes cause and effect
relationships of a function. Principles are developed by integration of ideas from
various disciplines supported by practical evidence. These principles are flexible and
change with the environment in which organization works. Continuous researches are
being carried on to establish new principles; many older principles are changed by new
principles. There is nothing permanent in management.
3) Relative not absolute principles: Management principles are relative and not absolute.
They must be applied according to the need of the organization. Each organization is
different from other. The principles of management should be applied in the light of
prevailing conditions.
4) Management – science, art or profession: Management is perhaps the only subject in
academics which enjoys the distinction of being a science as well as an art and a
profession. This is so because the contributions in the evolution of this subject have
come from all the directions— artists, social scientists, economists, engineers,
administrators, and practicing managers. Management is an art because it requires the
creativity and subjective skills of a manager like the communication skills, negotiation
skills, motivational skills, etc. Every individual manager has his own personal
traits—attitude, ethics, values and style, which constitute an art form. Management is
also a science as it requires a systematic study based upon scientific methods to analyze
business problems and to find optimal solutions. Management is undoubtedly one of
the most sought after professions, which is evident from the immense achievements of
successful managers in creating new enterprises, growing existing enterprises, and the
lucrative pay packages offered by organizations worldwide to its managers.
5) Universality of management: Management is universal phenomena. Thoughuniversal yet
management principles are not universally applicable but are to be modified according
to the needs of the situation.

Characteristics of Management

The critical analysis of the above definitions, the following characteristics of management
evolve.
1) Management is a continuous process: The process of management consists of planning,
organizing, directing and controlling the resources to ensure that resources are used
to the best advantages of the organization. A single function alone cannot produce the
desired results. Management involves continuous planning, organizing, directing and
controlling.
2) Management is an art as well as science: Management is an art in the sense of possessing
managing skill by a person. Management is science because certain principles, laws
are developed which are applicable in place where group activities are coordinated.
This will be discussed in detail later in this chapter.
3) Management aims at achieving predetermined objectives: All organizations have
objectives that are laid down. Every managerial activity results in achievement of
these predetermined objectives.
4) Management is a factor of production: An enterprise produce goods or services using
resources like land, labour, capital, machines etc. These resources themselves cannot
realize the organizations goals. The goals are achieved when these are effectively
coordinated by the entrepreneur. In case of small enterprises an individual can do
such type of job where as in large enterprises the coordination job is done by
management. Therefore, management is a factor of production.

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5) Management is decision-making: Decision-making is selecting the best among

alternative courses. Decision-making is an important function of a manager. Whatever
a manager does, he does it by making decisions. The success or failure of an
organization depends upon the quality of decision. A manager must make a right
decision at right time.
6) Universal application: The principles and concepts of management are applicable to
every type of industry. The practice of management is different from one organization
to another according to their nature.
7) Management is needed at all levels: The functions of management are common to all
levels of organization. The functions of planning, organizing, directing, controlling,
decision-making are performed by top level as well as lower level supervisors.
8) Management aims at maximum profit: The resources are properly utilized to maximize
profit. Maximizing the profit is the economic function of a manager. 9) Dynamic:
Management is not static. Over a period of time new principles, concepts and techniques
are developed and adopted by management. Management is changed accordingly to the
social change.
10) Management as a career: Today management is developed as a career focused on
specialization. Marketing management, finance management, personal management,
industrial management, production management, quality management are some of
the specializations in management. Specialists are appointed at various positions of
the organizational hierarchy. Hence management is career.
11) Management is a profession: Management is a profession because it possesses the
qualities of a profession. The knowledge is imported and transferred. The established
principles of management are applied in practice. This is discussed in detail later in
this chapter.
12) Management is a discipline: Discipline refers to the field of study having well defined
concepts and principles. Classifying management as disciplines implies that it is an
accumulated body of knowledge that can be learnt. Thus, management is a subject
with principles and concepts. The purpose of studying management is to learn how to
apply these principles and concepts at right circumstances, at the right time to
produce desired result.

Management Functions or the Process of Management

A function is a group of similar activities. There is divergence of view on ―What

functions are undertaken by managers in organizations?‖ Some management experts
classify these functions into four types and others classify into five types and some others
classify them as seven items. The following Table presents the management functions
identified by various writers.

1) Planning: Planning is the primary function of management. It is looking ahead and

preparing for the future. It determines in advance what should be done. It is conscious
determination of future course of action. This involves determining why to take
action? What action? How to take action? When to take action? Planning involves
determination of specific objectives, programs, setting policies, strategies, rules and
procedures and preparing budgets. Planning is a function which is performed by
managers at all levels – top, middle and supervisory. Plans made by top management
for the organization as a whole may cover periods as long as five to ten years, whereas
plans made by low level managers cover much shorter periods.

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2) Organizing: Organizing is the distribution of work in group-wise or section wise for
effective performance. Once the managers have established objectives and developed
plans to achieve them, they must design and develop a human organization that will
be able to carry out those plans successfully. Organizing involves dividing work into
convenient tasks or duties, grouping of such duties in the form of positions, grouping
of various positions into departments and sections, assigning duties to individual
positions and delegating authority to each position so that the work is carried out as
planned. According to Koonz O‘Donnel,
―Organization consists of conscious coordination of people towards a desired goal‖.
One has to note that different objectives require different kinds of organization to
achieve them. For example, an organization for scientific research will have to be very
different from one manufacturing automobiles.
3) Staffing: Staffing involves managing various positions of the organizational structure. It
involves selecting and placing the right person at the right position. Staffing includes
identifying the gap between manpower required and available, identifying the sources
from where people will be selected, selecting people, training them, fixing the financial
compensation and appraising them periodically. The success of the organization
depends upon the successful performance of staffing function.
4) Directing: Planning, organizing and staffing functions are concerned with the
preliminary work for the achievement of organizational objectives. The actual
performance of the task starts with the function of direction. This function can be
called by various names namely ―leading‖, ―directing‖, ―motivating‖, ―activating‖
and so on. Directing involves these sub functions:
a. Communicating: It is the process of passing information from one person to
another.
b. Leading: It is a process by which a manager guides and influences the work of his
subordinates.
c. Motivating: It is arousing desire in the minds of workers to give their best to the
enterprise.
5) Controlling: Planning, organizing, staffing and directing are required to realize
organizational objectives. To ensure that the achieved objectives confirm to the pre
planned objectives control function is necessary. Control is the process of checking to
determine whether or not proper progress is being made towards the objectives and
goals and acting if necessary to correct any deviations. Control involves three
elements:
∙ Establishing standards of performance.
∙ Measuring current performance and comparing it against the established
standard.
∙ Taking action to correct any performance that does not meet those standards. 6)
Innovation: Innovation means creating new ideas which may be either results in the
development of new products or finding new uses for the old ones. A manager who
invents new products is an innovator. A salesman who persuades Eskimos to purchase
refrigerator is an innovator. One has to note that innovation is not a separate function but
a part of planning.
7) Representation: A manager has to spend a part of his time in representing his
organization before various groups which have some stake in the organization. A
manager has to be act as representative of a company. He has dealings with customers,
suppliers, government officials, banks, trade unions and the like. It is the duty of every
manager to have good relationship with others.

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Functional Areas of Management

Management process involves several functions. A distinction should be maintained

between management functions (planning, organizing, staffing, directing and controlling)
and the organizational functions (productions, finance etc.) Organizational functions
differ from organization to organization depending upon their nature while management
functions are common to all. A manager may be put either in production or finance or
marketing, he performs all the managerial functions. These organization functions are
called functional areas of management. There are four functional areas of management
namely production, finance, marketing and finance and personnel. Each functional area
may have a number of sub-activities.

Production: This is generally put under production manager and he is responsible for all
production related activities. This area has a number of activities, few of them are given
below:
1) Purchasing: This is related with the purchase of various materials required by the
organization. Purchasing involves procuring right quantity of materials at the right
quality, at the right time and at the right price from the right supplier.
2) Materials management: This involves storing of materials, issue of materials to
various departments.
3) Research and Development: It deals with improving the existing products and process
and developing new products and process.

Marketing: This area involves the distribution of organizations‘ products to the buyers.
The sub-activities are:
1) Advertising: Involves giving information about products to buyers. 2) Marketing
research: It is related with the systematic collection, analysis of data relating to the
marketing of goods and services.
3) Sales management: It involves management efforts directed towards movement of
products and services from producers to consumers.

Finance and accounting: It deals with intelligent investment of financial resources and
record-keeping of various transactions. The various sub-functions are 1) Financial
Accounting: Deals with record keeping of various transactions. 2) Management
Accounting: Deals with analysis and interpretation of financial records so that
management can take certain decision.
3) Costing: It deals with recording of costs, their classification and analysis for cost
control.
4) Investment Management: Takes care of how financial resources can be invested in
various alternatives to maximize returns.
5) Taxation: Deals with various direct and indirect taxes to be paid by the organization.

Personnel: It deals with the management of human resources with the following sub
activities:
1) Recruitment and Selection: It deals with recruitment and selection of employees. 2)
Training and Development: It deals with training of employees and making them
more efficient.
3) Wage and Salary Administration: Deals with fixing of salaries, job evaluation,
promotion, incentives etc.
4) Industrial Relations: Deals with maintenance of good employee relations.

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Management and Administration

The term administration and management are used synonymously. Some writers urge
that running of a business requires skills, which is known as management and functioning
of government departments and non-profit institutions requiring skill is known as
administration.
Administration is the force which lays down the object for which an organization and its
management are to strive and the broad policies under which they are to operate. An
organization is the combination of the necessary human beings, materials, tools,
equipment, working space, and appurtenances (accessories) brought together in
systematic and effective correlation, to accomplish some desired object. Management is the
force which leads guides and directs an organization in the accomplishment of the
predetermined object.
Following table shows the distinction between administration and management.

Role of Management
A manager performs planning, organizing, directing and controlling to achieve the
organizational objectives. It has been questioned whether these functions provide an
adequate description of the management process. As against these management
functions Henry Mintzberg has defined the role of managers to identify what managers
do in the organizations. Mintzberg has identified ten roles of manager which are classified
into three broad categories as shown in fig.
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Interpersonal role: This role is concerned with his interacting with people both
organizational members and outsiders. There are three types of interpersonal roles: 1)
Figure head role: In this role manager has to perform duties of ceremonial nature such as
attending social functions of employees, taking an important customer to lunch and so on.
2) Leader role: Manager‘s leader role involves leading the subordinates motivating
and encouraging them.
3) Liaison: In liaison role manager serves as a connecting link between his
organization and outsiders. Managers must cultivate contacts outside his vertical
chain to collect information useful for his organization.
Information roles: It involves communication. There are three types of informational
roles:
1) Monitor: In his monitoring role, manager continuously collects information about
all the factors which affects his activities. Such factors may be within or outside
organization.
2) Disseminator: In the disseminator role, manager possesses some of his privileged
information to his subordinates who otherwise not be in a position to collect it. 3)
Spokesperson: As a spokesperson manager represents his organization while
interacting with outsiders like customers, suppliers, financers, government and other
agencies of the society.
Decisional roles: Decisional role involves choosing most appropriate alternative among all
so that organizational objectives are achieved in an efficient manner. In his decisional role
manager perform four roles:
1) Entrepreneur: As an entrepreneur, a manager assumes certain risks in terms of
outcome of an action. A manager constantly looks out for new ideas and seeks to
improve his unit by adopting it to dynamic environment.
2) Disturbance handler: In this role manager works like a fire-fighter manager contains
forces and events which disturb normal functioning of his organization. The forces
and events may be employee complaints and grievances, strikes, shortage of raw
materials etc.
3) Negotiator: In his role of negotiator, manager negotiates with various groups in the
organization. Such groups are employees, shareholders and other outside
agencies.
4) Resource allocator: Disposing the available resources in the organizational project
according to requirement.

Levels of Management
People in an organization are arranged in an hierarchy and they all have the relationship
of superior-subordinates. Every manager in an organization performs all

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five management functions. The relative importance of these functions varies alongthe
managerial levels. There may be as many levels in the organization as the number of
superiors in a line of command. Some of these levels are merged into one on the basis of
nature of functions performed and authority enjoyed. E.F.L. Brech has classified
management levels into three categories – Top Management, Middle Management and
Supervisory/Lower Level as shown in fig

The process of dividing authority & responsibility among the various executives is called
the creation of level of management.

Top Management: It consists of board of directors, chief executive or managing director.

The top management is the ultimate source of authority and it manages goals and policies
for an enterprise. It devotes more time on planning and coordinating functions.

Functions of Top Management:

a. Determine objective of the organization. They relate to profit, business growth,
survival, prestige, competitive pricing, marketing method.
b. Frame the policy: To frame policies & check out plans to carry out the objectives &
policies, policies may relate to different aspects of the organization. c. Organizational
frame work: Top management determines the organization structure for the purpose of
executing the plans.
d. Assemble the resource: Execute the plans; the resources of men, machines, materials &
money have to assemble.
e. Control the operations the organization: Top management also controls operations
their budget cost & statistical quality control & accounting device.

Middle management: It consists of departmental divisional or sectional heads other

executive officers attached to the different departments. This department is responsible
for implementing policies & plans decided by management.

Functions of Middle Management:

a. To execute the various functions of organization so that the top management gets
enough time to look after their responsibilities.
b. To cooperate among themselves, with the top management & the supervisors so
that the organization functions smoothly
c. To achieve coordination between the different parts of organization d. To develop &
train employers in the organization for better functioning & for filling up vacancies that
may arise in future.
e. To build company spirit where all are working to provide a product or service
wanted by consumer.
Supervisory/Lowlevelmanagement:It consists of senior supervisors. The executives atthis
level are in direct touch with the workers & have to see the work is properly carried out.
The effective implementation of the plans & policies, the quality of coordination

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ship quality of output & overall success of the organization very much dependent on the
hard labor, discipline, loyalty of the personal at this level of management

Functions of supervisors:
a. To issue order & instructions to the workers & to supervise & control their work. b.
To plan activities of the section.
c. To assign jobs to the workers.
d. To direct & guide the workers about work procedure.
e. To arrange for the necessary tools, equipment, material etc.
f. To solve the problems of workers
g. To maintain discipline among the workers & to develop them the right approach to
work.
h. To inform the management about the problems of workers which are not solved at this
level?
i. To maintain good human relations.
j. To build a high group morale among workers.

Skills Needed by Managers

Not everyone can be a manager. Certain skills, or abilities to translate knowledge into
action that results in desired performance, are required to help other employees become
more productive.
These skills fall under the following categories:

Technical: This skill requires the ability to use a special proficiency or expertise to perform
particular tasks. Accountants, engineers, market researchers, and computer scientists, as
examples, possess technical skills. Managers acquire these skills initially through formal
education and then further develop them through training and job experience. Technical
skills are most important at lower levels of management.

Interpersonal/ Human relations: This skill demonstrates the ability to work well in
cooperation with others. Interpersonal skills emerge in the workplace as a spirit of trust,
enthusiasm, and genuine involvement in interpersonal relationships. A manager with
good interpersonal skills has a high degree of self awareness and a capacity to understand
or empathize with the feelings of others. Some managers are naturally born with great
interpersonal skills, while others improve their skills through classes or experience. No
matter how human skills are acquired, they‘re critical for all managers because of the
highly interpersonal nature of managerial work.

Conceptual: This skill calls for the ability to think analytically. These skills enable
managers to break down problems into smaller parts, to see the relations among the
parts, and to recognize the implications of any one problem for others. As managers
assume ever higher responsibilities in organizations, they must deal with more ambiguous
problems that have long term consequences. Again, managers may acquire these skills
initially through formal education and then further develop them by training and job
experience. The higher the management level, the more important conceptual skills
become.
Although all three categories contain skills essential for managers, their relative
importance tends to vary by level of managerial responsibility. Business and management
educators are increasingly interested in helping people acquire technical, human, and
conceptual skills, and develop specific competencies, or specialized skills

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that contribute to high performance in a management job. Skills required versus

management matrix shown in fig.

Development of Management Thought

Development has emerged as a powerful & innovative force on which the today‘s society
depends for material support from an unrecognized situations in the past one or two
centuries. This is the area of management which is responsible for undertaking activities
such as industrial & technical surveys, taking up research work, suggesting ways & means
for innovations for reacting the taken up for improving methods of production, finding
out best ways of doing things, raising productivity in the firm. The innovative methods of
production & marketing will help the firm to grow. Seventeen and eighteen centuries had
seen industrial revolution. Lots of inventions & new technologies had emerged. The
importance of management was focused division of lab our concept was evolved
importance of planning was identified. But the management on a separate field of study
had emerged only durum‘s early 20th century when new industrial era began. Business
organizations had a stage shift from ownership towards joint stock companies. As an
answer to the problems like insufficient system, inefficiency of lab our & discrepancy in
wage payment, management has been recognized as a separate & important fie d of study.
Subsequently, management has evolved as a specific discipline of study & practice. The
evolution of management can be divided in to two parts early management approach &
modem management approach.

Evolution of the management can be studies as

a) Early classical approaches represented by
a) scientific management
b) administrative management
c) bureaucracy
b) Neoclassical approaches represented by
a) human relations movement
b) behavioural approach
c) Modern approaches represented by
a) quantitativeapproach
b) systems approach
c) contingency approach

Early Management Approaches

Scientific Management: Fredric Winslow Taylor(1856-1915) started his career as an
apprentice in a steel company in USA and finally became Chief Engineer. Taylor along with
his associates made the first systematic study in management. He launched a new
movement in 1910 which is known as scientific management. Taylor is known as father

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of scientific management and has laid down the following principles of scientific
management.

1. Time and motion study: started time and motion study under which each motion of job
was timed out with the help of stop watch of doing job was found and shorter and
fewer motions were developed and amongst these the best job was found which
replaced the old rule of thumb knowledge of the workman.
2. Differential payment: new payment plan called the differential piece work was
introduced which was linked incentives with production. under this plan a worker
received low piece rate if he produced the standard number of pieces and high rate if
he surpassed the standard which would motivate the workers to increase production.
3. Drastic reorganization and supervision: introduced two new concepts separation of
planning and doing and functional foremanship. Taylor suggested that the work
should be planned by the foreman and not by the worker and there should be as
foreman as there are special functions involved in doing a job and each of these
foreman should give orders to the worker on his specialty.
4. Scientific recruitment and training: Taylor emphasized the need for scientific selection and
development of the worker. He says that management should develop and train every
worker to bring out his best facilities and enable him to do a higher, more interesting
and more profitable class of work than he has done in past.
5. Intimate and friendly cooperation between the management and the workers: Taylor argued
that both the management and the workers both should try to increase production
rather than quarrel over profits which would increase the profits to such an extent
that labour and management would no longer have to competefor them and should
sow common interest in increasing productivity.

Contributions and limitations of scientific management:

Contributions:
1. Time and motion studies have made us aware that the tools and physical
movements involved in a task can be made more efficient and rationale. 2. Scientific
selection of workers has made us recognize that without ability and training a
person cannot be expected to do job properly.
3. The scientific management have to work design encouraged the mangers to do
one best way of doing the job.
Limitations:
1. Taylor‘s belief that economic incentives are strong enough to motivate workers for
increased production proved wrong as there are other needs such as security, social
needs, or egoistic needs rather than financial needs.
2. Taylor‘s time and motion study is not accepted as entirely scientific as there is no best
way of doing the same job by two individuals as they may not have same rhythm,
attention and learning speed.
3. Separation of planning and doing the greater specialization inherent in the system
tends to reduce the need for skill and greater monotony of work.
4. Advances in methods and better tools and machines eliminated some workers who
 found it difficult to get other jobs and caused resentment among them.

Administrative Management:
Henry Fayol is considered as the father of administrative principles. Was a French
mining engineer turned a leading industrialist and a successful manager. Provided a
broad analytical framework of the process of administration.

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Fayol’s 14 principles of management as general guides to the management process

and management practice.
1) Division of work: In the management process produces more and better work with the
same effort as the various functions of management like planning, organizing, directing
and controlling cannot be performed efficiently by a single proprietor or by a group of
directors which must be entrusted to specialists in related fields.
2) Authority and responsibility: Implies that the manager should have the right to give
orders and power to exact obedience and the manager also may exercise formal
authority and also personal power. Formal authority is derived from the official
position and personal power is the result of Intelligence, experience, moral worth,
ability to lead, past service etc. Responsibility is closely related to authority and an
individual who is willing to exercise authority must also be prepared to bear
responsibility to perforators etc. the work in the manner desired.
3) Discipline: Absolutely essential for smooth running of the business and discipline
means the obedience of authority, observance of rules of rules of service and norms
of performance, respect for agreements, sincere efforts of completing the given job,
respect for superiors. Best means of maintaining discipline are (a)good supervisors
at levels (b)clear and fair agreements between the employees and the Employer.
4) Unity of command: This principle requires that each employee should receive
instructions about a particular work from one superior only if reported to more than
one superior would result in confusion and conflict of instructions.
5) Unity of direction: Means that there should be complete identity between individual
and organizational goals on the one hand and between the departmental goals on
the other hand and both should not pull in different directions.
6) Subordination of individual interest to general interest: In a business concern, an
individual is always interested in maximizing his own satisfaction through more
money, recognition, status etc. which is against the general interest which lies in
maximizing production and hence there is a need to subordinate the individual
interest to the general interest.
7) Remuneration: Remuneration paid to the personnel of the firm should be fair and
should be based on general business conditions such as cost of living, productivity of
the concerned employees and the capacity of the firm to pay and the fair
remuneration increases workers efficiency and morale and fosters good relations
between them and management.
8) Centralization: The degree of centralization or decentralization of authority must be
decided on the basis of nature of the circumstances, size of the undertaking, the type
of activities and the nature of organizational structure.
9) Scalar chain: Scalar chain means the hierarchy of authority from the highest executive
to the lowest ones for the purpose of communication and states superior subordinate
relationship and the authority of superiors in relation to subordinates at various
levels and the orders or the communications should pass through the proper
channels of authority along the scalar chain.
10) Order: Putting things in order needs effort and the management should obtain
 orderliness in work through suitable organization of men and materials and the
principle of right place for everything and for every man should be observed by the
management which requires the need for scientific selection of competent
personnel, correct assignment of duties to personnel and good organization.
11) Equity: Means equality of fair treatment which results from a combination of
kindness and justice and employees expect management to be equally just to

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everybody which requires managers to be free from all prejudices, personal likes or
dislikes.
12) Stability of tenure of personnel: Is necessary to motivate workers to do more and better
work and they should be assured security of job by management which if not
provided they have fear of insecurity of job, their morale will be low and they cannot
give more and better work.
13) Initiative: Means freedom to think out and execute a plan which when provided to
the employees leads to innovation which is the landmark of technological progress.
Initiative is one of the keenest satisfactions for an intelligent man to experience and
hence mangers are required to give sufficient scope to show their initiative.
14) Esprit de corps: Means team spirit which should be created b y the management
among the employees and is possible only when all the employees pull together as a
team and there is scope for realizing the objectives of the concern and there should
be harmony and unity among the staff which is a great source of strength to the
undertaking which could be achieved through avoiding divide and rule motto and
use of verbal communication and written communication to remove
misunderstandings.

Contributions and limitations of administrative management:

Contributions:
1. Fayols principles met with wide spread acceptance among writers on management
and among managers and managers themselves.
2. Drawing inspiration from Fayol a new school of thought known as the Management
Process School came into existence.
Limitations:
1. Fayols principle of specialization lead to the following dysfunctional consequences:
a) Leads to the formation of small work groups with norms and goals with each
individual carrying out his own assigned part without bothering about the
overall purpose of the organization as a whole.
b) Results in the dissatisfaction amongst workers as it does not provide them the
opportunity to use all their abilities.
c) Results in the dissatisfaction amongst workers as it does not provide them the
opportunity to use all their abilities.
2. One of the findings un Fayols principles is that there is nothing in Fayols writings to
indicate which is the proper one to apply like for example the principle of unity of
command and the principle of unity of specialization or division of labour cannot
be followed simultaneously. In this way many of these principles are full of
contradictions and dilemmas.
3. Fayols principles are based on a few case studies only and have not been tested
empirically and whenever tested have fallen like autumn leaves.
4. These principles are often stated as unconditional statements of what should be
done in all circumstances when what is needed are conditional principles of
management.
5. The principles of Fayol such as the principles specialization, chain of command,
unity of direction and span of control result in the mechanistic organizational
structures which are insensitive to employees Social and psychological needs.
6. These principles are based on the assumption that the organization are closed
systems but in reality organizations are open systems and hence the rigid

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structures so created do not work well under stable conditions.

Bureaucracy
German scientist Max Weber is considered to be the father of Bureaucracy. Made a
study on various business and government organizations and distinguished three
types of administration on amongst them. Leader oriented tradition oriented and
bureaucratic.
a. Leader oriented: Administration is one in which there is no delegation of
management functions and all employees serve as loyal subjects of a leader. b.
Tradition oriented: all managerial positions are handed down from generation to
generation and who are you rather than what you can do becomes the primary
function.
c. Bureaucratic oriented: is based on the persons demonstrated ability to hold the
position and no person can claim particular position either because of his loyalty
to the leader or because the position has been traditionally held by members of h
family and the people earn positions because they are presumed to be best capab
of filling them.

Important features of Bureaucratic Administration:

1. Insistence on following standard rules: There should not governed by the personnel
preferences of the employer but it should be governed by the standard rules which
provides equality in the treatment of subordinates and continuity and predictability
of action.
2. Systematic division of work: increases production by improving efficiency and
saving time in changing over from one job to another.
3. Principle of hierarchy followed: each lower officer is under the control and
supervision of a higher one.
4. Not necessary for the individual to have knowledge of and training in the
application of rules: These form the basis on which legitimacy is granted to his
authority.
5. Administrative acts, decisions and rules are recorded in writing: makes the
organization independent of people besides making peoples understanding more
accurate.
6. There is rational personnel administration: people are selected on the basis ofthei
credentials and merit and are paid according to their option in their hierarchy,
promotions are made systematically and there is on winning peoples loyalty and
commitment.

Contributions and limitations of bureaucracy:

Contributions:
Bureaucracy can be viewed as the logical extension of management when it becomes
impossible for one person to fulfil all managerial functions which has enabled most
modern large scale organizations which require functionally specialized staff to train and
control the people with heterogeneous backgrounds and to delegate specific
responsibilities and functions to them.
 Limitations:
1. Over conformity ofrules: Employees observe stick to rule policy because they follow
stick to the rule policy because they fear of being penalized of the violation of these
rules and therefore follow the letter of law without going into its spirit. Example: a
doctor in the emergency spends precious time in filling various forms before helping
the accident victim.

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2. Buck passing: In situations where there are no rules, employees are afraid of taking
decisions independently and may be punished for wrong decisions and therefore
either shift decisions to there or postpone them which results in the increase of
office work and leads to Parkinson‘s disease.
3. Categorization of queries: Probable queries coming from outside are generally classified
in advance into a few broad categories and answer for each category are prepared in
advance. On receiving the query the employees job is to simply determine its
category and tick the reply applicable to that category
4. Displacement of goals: Very common phenomena in bureaucratic organization and
takes place when an organization substitutes for its legitimate goals some other goal
which it was not created, for which resources were not allocated to it and which it is
not known to serve.
5. No right of appeal: The clients the bureaucratic organization feel dissatisfied
because they have no right of appeal
6. Neglect of informal groups: Forms informal groups which play an important role in the
organization which has lead to the development of group dynamics which are
ignored by the bureaucratic organization.
7. Rigid structure: precise description of roles and over conformity of rules make
bureaucratic structures rigid which work well in stable environments but do not
work well in today‘s organizational flexible structures which require constant
mentoring, collection of information and changing of job descriptions and roles of
the employees.
8. Inability to satisfy the needs of the mature individuals: A mature individual wants
independence, initiative, self-control, opportunity to use his all skills and
information to plan his future which is not provided as the hierarchy and control
features work against this organization.

Planning

―Planning is deciding in advance what to do, how to do it, when to do it and who is to do
it. It bridges the gap from where we are and to where we want to go. It is in essence the
exercise of foresight‖.

―Planning is that function of the manager in which he decides in advance what he will
do. It is a decision making process of a special kind. It is an intellectual process in which
creative mind and imagination are essential‖.

Nature of Planning

1) Planning is the beginning of the process of management: A manager must plan before he
can possibly organize, staff, direct or control. Planning sets all other function into
action. Planning is the most basic function of management. Planning is a rational
approach for defining where one stands, where one wants to go in future and how to
 reach there.
2) Planning is an intellectual process: Planning requires manager to think before acting. It is
thinking in advance. It is planning by planning managers of organization decides
what is to be done, when it is to be one, how it is to be done, and how has to do it.
Decision making is an integral part of planning. It is the process of choosing among
alternatives. Obviously, decision making will occur at many points in the planning
process.

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3) Planning is continuous process: Planning is a continuous process like a navigator

constantly checks where his ship in going in the vast ocean. A manger must
constantly watch the progress of planning. He must constantly monitor the
conditions, both within and outside the organization to determine if changes are
required in his plans. Planning is called principle of navigational change.
4) A plan must beflexible: By flexibility of a plan is meant its ability to change direction to
adapt to changing situations without undue cost. The plans must be flexible to adapt
to changes in technology, market, finance, personal and organizational factors.
Flexibility in technology means the mechanical ability of a company to change and
vary its product-mix according to changing needs of its customers. Flexibility in
market means the company‘s ability to obtain additional funds on favorable terms
whenever there is need for them. Flexibility in personnel means the company‘s ability
o shift individuals from one job to another. Flexibility in organization means the
company‘s ability t shift individuals from one job to another. Flexibility in
organization means the company‘s ability to change the organization structure.
However flexibility is possible only within limits, because it involves extra cost.
Sometimes the benefit of flexibility may not be worth the cost.
5) Planning is an all pervasive function: Planning is pervasive and it extends throughout the
organization. Planning is the fundamental management function and every manager
irrespective of level, has a planning function to perform within his particular area of
activities. Top management is responsible for overall objectives and action of the
organization. Therefore it must plan what these objectives should be and how to
achieve them. Similarly a departmental head has to devise the objectives of his
department within the organizational objectives and also the methods to achieve
them.
Importance of Planning

Without planning, business decisions would become random, ad hoc choices. Planning is
important because of the following reasons.

1) Minimizes risk and uncertainty: By providing a more rational, fact-based procedure for
making decisions, planning allows managers and organizations to minimize risk and
uncertainty. Planning does not deal with future decisions, but in futurity of present
decisions. If a manager does not make any provision for the replacement of plant and
machinery, the problems he will have to face after ten years can well be imagined. The
manager has a feeling of being in control if he has anticipated some of the possible
consequences and has planned for them. It is like going out with an umbrella in cloudy
 weather. It is through planning that the manger relates the uncertainties and
possibilities of tomorrow to the facts of today and yesterday.
2) Leads to success: Planning does not guarantee success but studies have shown that, often
things being equal, companies which plan not only outperform the non planners but
also their past results. This may be because when a businessman‘s actions are not
random arising as mere reaction to the market place Planning leads to success by
doing beyond mere adaption to market fluctuations. With the help of a sound plan,
management can act proactively and not simply react. It involves to

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attempt to shape the environment on the belief that business is not just the creation of
environment but its creator as well.
3) Focus attention on the organizations goals: Planning helps the manger to focus attention
on the organizations goals and activities. This makes it easier to apply and coordinate
the resources of the organization more economically. The whole organization is forced
to embrace identical goals and collaborate in achieving them. It enables the manager
to chalk out in advance an orderly sequence of steps for the realization of
organizations goals and to avoid needless overlapping of activities.
4) Facilitates control: In planning, the manager sets goals and develops plans and to
accomplish these goals. These goals and plans then become standards against which
performance can be measured. The function of control is to ensure that activities
conform to the plans. Thus control can be exercised only if there are plans.
5) Trains executives: Planning is also an excellent means for training executives. They
become involved in the activities of the organization and the plans arouse their
interest in the multifarious aspects of planning.
Types of Plans
Planning can take many forms and styles in practice. Planning can be comprehensive or
limited in scope. There are organizations that plan to the last detail. Others rest content,
simply broad targets for the next financial period.

∙ Strategic plan: Strategic planning sets future directions of the organization in which it
wants to proceed in future. It involves deciding what the major goals of the entire
organization will be and what policies will guide the organization in its pursuit of
these goals. Strategic planning involves a time horizon of more than one year and for
most of the organization it ranges between 5 and 10 years. Examples of strategic
planning may be diversification of business into new lines, planned grown rate in sales
etc.
∙ Tactical plan: Tactical planning involves deciding specifically how the resources of the
organization will be used to help the organization achieve these strategic goals. for
example if the organization has prepared a ten-year strategic plan which envisages a
profit rate of 25% on capital employed in the tenth year, it also necessary to prepare a
more detailed tactical plan for the next year, with a specific target of 10% on the
capital employed.

Distinction between strategic planning and tactical planning:

 Strategic planning Tactical planning

1 Decides the major goals and policies Decides the detail use of resources
of allocation of resources to achieve for achieving these goals.
these goals.

2 Done at higher levels of management. Is done at lower levels of management

Middle Managers sometimes not even
aware that strategic planning being
considered.

3 It is long term It is short term

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4 Is generally based on long term Is generally based on the past
forecasts about technology, political performance of the organization and is
environment and is more uncertain. less uncertainly

5 Is less detailed because it is not Is more detailed because it is

involved with the day to day involved with the day-to-day
operations of the organization operations of the organization

∙ Contingency Plan: A contingency plan is a course of action designed to help an

organization respond effectively to a significant future event or situation that may or
may not happen. Contingency planning is a process through which businesses develop
a strategy to deal with unanticipated events that would impede daily activities or
normal operations. Time spent in contingency planning equals time saved when a
disaster occurs. Effective contingency planning should lead to timely and effective
disaster-relief operations.

∙ Operational Plan: Plans aimed at supporting the implementation of tactical plans and
achievement of operational goals. Such plans clearly specify the things needed to be
done in the short run, in order to achieve the operational goals. These plans are
developed by lower level managers after consulting the middle managers. The time
period of operational plans is less than one year, such as few months, weeks or even
days. The success of strategic and tactical plans depends upon the achievement of
operational goals.

∙ Directional Plans versus Specific Plans:

Directional plans: It refer to the flexible plans the set out general guidelines. Such
plans are preferable in dynamic environment where management must be flexible
in order to respond to unexpected changes. Manger use the directional plans to
remain focused and do not lock themselves into specific goals or course of action.

Specific plans: Those plans which are clearly defined and leave no room for
interpretation are called specific plans. Such plans require specific stated objective
and do not contain ambiguity. Specific plans require clarity and a sense of
 predictability that often do not exist therefore they are not preferable.

∙ Hierarchy of Plans:
Plans are arranged in a hierarchy within the organization as shown in the figure
below:

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At the top of this hierarchy stand objectives. Objectives are the broad ends of the
organization which are achieved by means of strategies. Strategies in their turn are
carried out by means of the two major groups of plans: single use plans and standing
plans. Single use plans are developed to achieve a specific end and when the end is
reached the plan is dissolved. The two major types of plans are single use plans are
programmers and budgets. Standing plans on the other hand are designed for
situations that recur often to justify the standardized approach. For example, it would
be inefficient for a bank to develop a single use plan for processing a loan application
for each new client. Instead it uses one standing plan that anticipates in advance
whether to approve or turn down the request based on the information furnished,
credit rating, etc. the major types of plans are policies, procedures methods and rules.
Each type of plan is described in detail as follows.

Objectives: Objectives are the goals of the organization which the management wishes
the organization to achieve. These are the end points or pole-star towards which all
business activities like organizing, staffing, directing and controlling are directed. Only
after having defined these end points the can determine the kind of organization the kind
of personnel and their qualifications, the kind of motivation, supervision and direction
and the control techniques which he must employ to reach these points. Objectives are
the specific targets to be reached by an organization. They are the translation of the
organization‘s mission into concrete terms against which the results can be measured.
Example: University decision to admit a certain number of students or the hospitals
decision to admit a certain number of indoor patients.

Characteristics of the objectives: Some of the important characteristics of the objectives

are:

1) Objectives are multiple in numbers: Implies that every business enterprise has a package
of objectives set out in various key areas. There are eight key areas in which objectives
of performance and results are set which are (i) market standing (ii) innovation (iii)
productivity (iv) physical and financial resources (v) profitability (vi) Manager
 performance and development (vii) worker performance (viii) attitude and public
responsibility.
2) Objectives are either tangible or intangible: for some objectives such as in the areas of
market standing, productivity, and physical and financial resources there are
quantifiable values available. Other areas of objectives are not readily quantifiable and
are intangible, such as manager‘s performance, workers morale, public responsibility
etc.
3) Objectives have priority: Implies that at one particular given point of time, the
accomplishment of one objective is relatively more important than others. Priority of
goals also says something about the relative importance of certain goals regardless of
time. For example, the survival of organization is necessary condition for the
realization of other goals. The establishment of priorities is extremely important in
that resources of any organization must be allocated by rational means.

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4) Objectives are generally arranged in a hierarchy: This means that we have corporate
objectives of the total enterprise at the top, followed by divisional or departmental
objectives, then each section and finally individual objectives. Objectives at all levels
serve as an end and as a means.
5) Objectives sometimes clash with each other: The process of breaking down the enterprise
into units requires that objectives be assigned to each unit. Each unit is given the
responsibility of attaining an assigned objective. The process of allocating objectives
among various units creates the problem of potential goal conflict and sub
optimization on; where in achieving the goals of one unit may put in risk of achieving
the goals of the other.
Requirements of sound objectives:

1. Objectives must be clear and acceptable: The objectives must be clear and
understandable amongst people which could be achieved by unambiguous
communication, should be compatible with their individual goals.
2. Objectives must support one another: Objectives could interlock or interfere with one
another which require the need for coordination and balancing the activities of the
entire organization, otherwise its members may pursue different paths
making it difficult for the manager to achieve the company‘s overall objectives. 3.
Objectives must be precise and measurable: An objective must be spelled out in precise,
measurable terms the reasons for which being
∙ The more precise and measurable the goal, the easier it is to decide the way of
achieving it.
∙ Precise and measurable goals are better motivators of people than general goals. ∙
Precise and general goals make it easier for lower level managers to develop their
own plans for actually achieving these goals.
∙ It is easier for managers to ascertain whether they are succeeding or failing if
their goals are precise and measurable.
4. Objectives should always remain valid: Means that the manager should constantly
review, reassess and adjust them according to the changed conditions. Advantages
of objectives: The following are the benefits of objectives

1) They provide a basis for planning and for developing other type of plans such as
policies, budgets and procedures.
2) They act as motivators for individuals and departments of an enterprise imbuing
their activities with a sense of purpose.
3) They eliminate haphazard action which may result in undesirable consequences. 4)
Facilitate coordinated behavior of various groups which otherwise may pull in
different directions.
5) Function as a basis for managerial control by serving as standards against which
actual performance can be measured.
6) They facilitate better management of the enterprise by providing a basis for leading,
guiding, directing and controlling the activities of people of various departments. 7)
Lessen misunderstanding and other conflict and facilitate communication among people
by minimizing jurisdictional disputes.

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8) Provide legitimacy to organizations activities.

Strategies: A corporate strategy is a plan which takes these factors into account and
provides optimal match between the firm and the environment. Two important activities
are involved in strategy formulation (i) environmental appraisal(ii) corporate appraisal.

Environmental appraisal: An analysis of the relevant environment results in the

identification of threats and opportunities. Key environment factors which need to b e
studied are

1) Political and legal factors:

a) Stability of the government and its political philosophy.
b) Taxation and industrial licensing laws
c) Monitory and fiscal policies
d) Restrictions on capital movement, repatriation of capital, state trading etc. 2)
Economic factors:
a) Level of economic development and distribution of income
b) Trend in prices, exchange rates, balance of payments.
c) Supply of labor, raw, material, capital etc.
3) Competitive factors:
a) Identification of principle competitors
Analysis of their performance and programmers in major areas
b) Antimonopoly laws and rules of competition
c) Protection of patents, trademarks, brand names and other industrial property
rights
4) Social and cultural factors:
a) Literacy levels of population
b) Religious and social characteristics
c) Extent and rate urbanization
d) Rate of social change
 Corporate appraisal: Involves the analysis of company‘s strengths and weaknesses. A
company‘s strength may lie in outstanding leadership, excellent product design, low cost
manufacturing skill, efficient distribution, efficient customer service, personal
relationship with customers, efficient transportation and logistics, effective sales
promotion, high turnover of inventories and capital etc. The company must plan to exploit
these strengths to the maximum. Similarly it may suffer from a number of weaknesses.

Standing plans:

Policies: A policy is a general guideline for decision making which sets up boundaries
around decisions including those that cannot be made and shutting out those that cannot.
A policy can be considered as a verbal, written or implied overall guide setting up
boundaries that supply the general limits and the direction in which, managerial action
takes place Policies suggest how to do the work. They do not dictate terms to subordinates
and provide only a framework within which the decisions must be made

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by the management in different spheres. Example: 1) Recruitment policy of a company is

to recruit meritorious people through the employment exchange 2) Distribution policy of
a fertilizer company is farmer oriented. Policies and objectives guide thinking and action,
but with a difference. Objectives are end points of planning while policies channelize
decisions to these ends.

Advantages of policies:

1) Policies ensure uniformity of action in respect of matters at various organizational

points which make actions more predictable.
2) Policies speed up decisions at lower levels because subordinates need not consult their
superiors frequently.
3) Makes it easier for
the superior to
delegate more
and more authority to
the his subordinates
without being
unduly concerned
because he knows
that whatever
decision the
subordinates
make will be
within the
boundaries of the
policies.
4) Policies give a
practical shape to
the objectives by
 elaborating and directing the way in which the predetermined objectives are to be
attained.
Types of policies: Can be classified on the basis of sources, functions or organizational
levels

1) Classification on the basis of sources: three types originated, appealed, implied and
imposed policies
a) Originated policies: Are usually established formally and deliberately by top
managers for the purpose of guiding of actions of their subordinates and also their
own. These policies are set out in print and embodied in manual.
b) Appealed policies: Are those which arise from the appeal made by a subordinate to
his superior regarding the manner of handling a given situation and comes into
existence because of the appeal made by the subordinate to the supervisor.
c) Implied policies: are also policies which are stated neither in writing nor verbally.
Such policies are called implied policies. Only by watching the actual behavior of
the various superiors in specific situations can the presence of implied policy is
ascertained.
d) Externally imposed policies: are the policies which are imposed on thebusiness by
external agencies such as government trade associations, and trade unions.
Example: policy dictated by the government law.
2) Classification on the basis of functions: on the basis of business functions, policies may be
classified into production, sales, finance, and personnel policies. Every one of these
functions has number of policies. For example: Sales function may have policies
relating to market.
a) Production function: may policies relating to the method of production, output,
inventory, research.
b) Finance function: may have policies relating to capital structure, working capital,
internal financing etc.

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c) Personal function: may have policies relating to recruitment, training, working

activities, welfare activities etc.
3) Classification on the basis of organizational level: on this basis range from major
company policies through major departmental policies to minor or derivative
polices applicable to the smallest element of organization.
Guidelines for effective policy making: Policies should be

1) As far as possible should be stated in writing and should be clearly understood by

those who are supposed to implement them.
2) Should reflect the objectives of the organization, define appropriate methods and
action.
3) The top managers and the subordinates should participate in the formulation of
policies for
successful
 implementation of the policies.
4) Should strike a reasonable balance between the stability and flexibility. Conditions
change and policies must change accordingly. The degree of stability should also
prevail to achieve the sense of direction.
5) Different policies should not pull in different directions and s one should support one
another and they must be internally consistent.
6) Should not detrimental to the interest of the society and must confirm to the canons of
ethical behavior which prevail in society.
7) Must be comprehensive to cover as many contingencies as possible 8) Should be
periodically reviewed in order to see whether they are to be modified, changed or
completely abandoned and new ones put in their place. Procedures: Policies are carried
out by means of more detailed guidelines called procedures. A procedure provides a
detailed set of instructions for performing a sequence of actions involved in doing a certain
piece of work. The same steps are followed each time that activity is performed.

For example: the procedure for purchasing raw material may be

a. The requisition from the storekeeper to the purchasing department. b.

Calling tenders for purchase of materials.
c. Placing orders with the suppliers who are selected
d. Inspecting the materials purchased by the inspecting department. e. Making
payment to the supplier of materials by the accounts department. Similarly, the
procedure for the recruitment of personnel may be

a. Inviting applications through advertisement

b. Screening the applications
c. Conducting written test
d. Conducting interview for those who have passed the written test and e.
Medical examination of those who are selected for the posts.
Procedures may also exist for conducting the meetings of directors and shareholders,
granting loans to employees, issuing raw materials from the stores department, granting
sick leaves to the employees, passing bills by the accounts department.

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Difference between the policy and the procedure

policy procedure

1 Are the general guidelines to Are the guidelines to action only

both thinking and action of usually for the people at the lower
people at higher levels levels

2 Help in fulfilling the objectives Show us the way to implement policies

of the enterprise

3 Are generally broad and allow Are specific and do not show latitude.
some latitude in decision making
 4 Are often established without Are always established after
any study or analysis thorough study and analysis of work

Advantages and
limitations of procedures:

Advantages:

1. They indicate a
standard way
of performing a
task which
ensures a high level of
uniformity in
performance
in the enterprise.
2. They result in work
simplification
and elimination of
unnecessary
steps and
overlapping.
3. They facilitate the
executive
control over
performance
b y laying down the sequence and timing of each task, executive‘s dependence on the
personal attributes of his subordinates is reduced.
4. They enable employees to improve their efficiency by providing them with knowledge
about their entire range of work.
Limitations:

1. By prescribing one standard way of performing a task, they limit the scope for
innovation or improvement of work performance.
2. By cutting across department lines and extending into various other departments, they
sometimes result in duplication, overlapping and conflict.
These limitations can be overcome if the management reviews and appraises the
procedures periodically with an intention to improve them.

Methods: A method is a prescribed way of in which one step of a procedure is performed.

For example the specified technique to be used in screening the applications or conducting
a written test is a method where as the sequence of steps involved in the recruitment of
personnel consists of a procedure. Methods help in increasing the effectiveness and
usefulness of the procedure. By improving the methods reduced fatigue better productivity
and lower costs can be achieved. Methods can be improved in a number of ways. Manual
methods of performing a task can be replaced by the mechanical means, or the existing
mechanized process may be improved and unproductive methods improved by conducting
motion study.

Rules: Are detailed and recorded instructions that a specific action must or must not be
performed a given situation. In sanctioning overtime to workmen, in regulating travelling
allowances, in sanctioning entertainment bills and in other similar matters a

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uniform way of handling them or dealing with case has to be followed which are all covered
by the rules of the enterprise. They make sure that the job is done in the same manner
every time bringing uniformity in efforts and results.

Single use plans:

Programmes: Programmes are precise plans or definite steps in proper sequence which
need to be taken to discharge a given task. Programmes are drawn in conformity with the
objectives and are made up of policies, procedures, budgets etc. The essential ingredients
of every programme are time phasing and budgeting. This means that the specific dates
should be laid down for the completion of the each successive stage of a
programme. A provision should also be made in the budget for financing the programme.
Often a single step in
a programme is
set up as a project.

Budgets: A budget is a
financial and/or
quantitative statement
prepared prior to a
definite period of
time, of the policy
perceived during that
period, for the purpose of
obtaining a given
objective. Budgets are
plans for a future period
of time containing the
statements of the
expected results in
numerical terms that is
rupees, man hours
Product units and so
forth. The important
budgets are sales budget, revenue budgets, cash budget and expense budget.
Advantages:

1. Budgets are useful for the enterprise and are expressed in numerical terms, facilitate
comparison of the actual results with the planned ones and thus serve as control
device for measuring performance.
2. They help in identifying and removing the dead heads of expenditure.
Steps in planning:

The various steps involved in planning are as follows:

1. Establishing verifiable goals or set of goals to be achieved: The first step in planning is to
determine the enterprise objectives which are often set up by the upper level or top
managers, usually after number of possible objectives have been carefully considered.
There are many types of objectives managers may select: desired sales volume or
growth rate, the development of a new product or service or even a more abstract goal
such as becoming more active in the community. The type of goal selected will depend
on a number of factors: the basic mission of the organization, the value its mangers
hold and the actual and the potential abilities of the organization.
2. Establishing planning premises: It is the second step in planning to establish planning
premises which is vital to the success of planning as they supply pertinent facts and
information relating to the future such as population trends, general economic
conditions, production costs and prices, probable competitive behavior, capital and
material availability and government control and so on.
Planning preemies can be variously classified as under
a. internal and external premises
b. tangible and intangible premises

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c. controllable and non controllable premises

Internal and external premises: Premises may exist within and outside company. Internal
premises include sales forecasts, policies and programmes of the organization, capital
investment in plant and equipment, competence of management, skill of labor, etc.
External premises can be classified into three different groups business environment,
factors which influence the demand for the product, and the factors which affect the
resources available to the enterprise.

Tangible and non-tangible premises:

Tangible premises: those which can be quantitatively measured while Intangible premises
are those which being qualitative in character and cannot be measured. Tangible
examples: population growth, industry demand, capital and resources invested in the
organization
are all tangible.
Intangible: political
stability, sociological
factors, business and
economic environment
are all tangible.

Controllable and non

controllable premises:
Some of the planning
premises are
controllable and some are non-controllable and because of the non-controllable factors
there is need for the organization to revise the plans periodically in accordance with the
current development. Examples of uncontrollable factors: strikes, wars, natural
calamities, emergency, and legislation etc. Examples of controllable factors: company‘s
advertising agency, competence of management member‘s skill of the labor force,
availability of resources in terms of capital and labor, attitude and behavior of the owner‘s
of the organization.

3. Deciding the planning period: It is the next task once the upper level managers have
selected the basic long term goals and the planning premises. Business plans are made
in some instances once for a year and plans are made for decades based on some logic
and future thinking. The factors which affect the choice of period are:
∙ Lead time in development and commercialization of new product: Example: Heavy
engineering manufacturing company wanting to start a new project should have a
planning period of five years.
∙ Time required to recover capital investments or the pay-back period: It is the number of years
over which the investment outlay will be recovered or paid back. Example: machine
investment Rs.10 lakhs cash inflow Rs.2 lakhs/year then the payback period is 5 years
∙ Length of commitments already made: plan period should be as long as possible to enable
the fulfillment of commitments already made.
4. Finding alternate courses of action: The fourth step of planning is to find the alternate
courses of action. Example: securing the technical knowhow by engaging a foreign
technician or by training staff abroad.
5. Evaluating and selecting the alternate courses of action: After selecting the alternate
courses selection the best course or course of action with the help of quantitative
techniques and operations research.
6. Developing the derivative plans: Once plan formulated, its broad goals must be
translated on day to day operations of organization Middle level managers must

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draw up the appropriate plans, programmes and budgets for their sub-units which
are described as derivative plans.
7. Measuring and controlling the process: Plan cannot be run without monitoring its
progress. The managers must check the progress of their plans.

Decision making
Decision is a choice made between available alternatives. Decision Making is the process
of developing and analyzing alternatives and choosing from among them. The
decision-making has the following factors.
∙ Decision-making implies that there are various alternatives and the most desirable
alternative is chosen to solve the problem.
∙ Existence of alternatives suggests thatthe decision-maker has freedom to choose an
alternative of his
liking.
∙ Decision-making
like any other
 managerial process is goal oriented. It implies that the decision maker attempts to
achieve some results through decision making.

Steps in Rational Decision Making

Organizing
An organization can be defined as a social unit or human grouping deliberately
structured for the purpose of attaining specific goals. An organization can also be defined
as the process of identifying and grouping of the work to be performed, defining and
delegating responsibility and authority and establishing relationships for the purpose of
enabling people to work most effectively together in the accomplishment of their
objectives.

Nature of Organization

1. People: An organization basically consists of group of people who form the dynamic
human element of the organization i.e. an identifiable group of people contributing
their efforts towards the attainment of goals.

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2. Common purpose: Organization helps in identifying the various tasks to be performed

which are assigned to the individuals to perform to achieve the common objectives or
common purpose of the organization.

3. Co-ordination: It ensures to achieve coordination amongst the people working in

various departments of the organization And ensures integrated efforts to achieve
organizational objectives or goals.

4. Authority: It delegates authority to the managers with commensurate responsibility

and accountability for the discharge of their duties and also amongst different
hierarchical levels in an organization.

5. Environment:
Organizations are
 part of the larger environment and hence they are influenced by the external
environment.

6. Division of work: The total work of an organization is divided into smaller activities in
the form of different functions & sub [Link] helps in nurturing and growing
special skills and talents by the virtue of division of labour

7. Communication: it facilities seamless communication

8. It also aides in achieving financial, physical material and human resources. 9.

Organization helps in the realization of the plans made by the managers

Purpose of Organization

1. To facilitate pattern of communication: By grouping activities and people, structure

(organization) facilitates communication between people centered on their job
activities.

2. To allocate authority and responsibility: It specifies who is to direct whom and who is
accountable for what results. The structure helps the organization members to know
what his role is and how it relates to others role.

3. To locate decision centers: Organization structure determines the location of decision

making in the organization. For example, a departmental store may leave pricing
decision to the lower level manager while in oil refinery pricing decision is at top level.

4. To create proper balance: Organization structure creates the proper balance and
emphasis of activities. People responsible for the enterprise success might be placed
higher in the organization.

5. To stimulate creativity: Organization stimulates independent, creative thinking and

initiative by providing well-defined areas of work with broad attitude of the
development of new and improved ways of doing things.

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6. To encourage growth: The organization structure provide framework within which an

enterprise functions. If the organization structure is flexible, it will help in meeting
challenges and creating opportunities for growth.

7. To make use of technological improvements: A sound organization structure which is

adoptable to changes can make the best possible use of latest technology.

Types of Organization

There are several ways of categorizing the organization.

Based on profitability organization can be categorized into

1. Business
organization: are
those
organizations
which are formed
with the purpose of
earning profits
the sole purpose
being to earn
surplus in the
form of profitswithout
which they
cannot survive
and grow. Example:
Firms engaged in
manufacturing,
trading, services
etc
2. For non-profit
organization: The
purpose the
objective would
be to serve the
members of the
committee in a
productive manner profits but to serve the people of the specific community or a
segment of a society. Example: Rotary club, Lions club, Orphanages, Charitable
hospitals etc.

Based on structure organization can be categorized into

1. Formal organizations: are officially formed with definite structure which describes
authority and responsibility, relationship and behaviour of organizational
members.
2. Informal organization: do not have any official recognition and they are formed due to
the social interaction needs of the people resulting in different types of social
networks. Found in all formal organizations where people come together and form
social groups for various reasons like common interests, friendship or affiliation,
satisfaction of emotional needs.

Differences between Formal & Informal Organization

 Item Formal Organization Informal Organization

Origin Official and started with Unofficial & developed

definite purpose naturally, based on individual &
group goals

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Structure Definite structure with clearly No formal structure
defined authority &
responsibility relationship

Control Formal rules & regulation Group norms

Communication Formal & official channels Grapevine

of communication

Size Can grow to very large size Generally very small

The following common types of organization find a place in the structure of internal
organization.
1. Line organization
It is the basic framework for the whole organization. It represents a direct vertical
relationship this which authority flows. This is the simplest & oldest turn as chain of
command or
scalar principle.
This is a vertical
structure one
person delegate‘s
authority to his
subordinate &
who in turn delegates
to his subordinate &
so on. This form of
organization is
followed in
military
establishments.
The modern
organizations do
not entirely rely on
line organization.
The advantages of line
organization are
1. Simplicity
2. Quick decision
and speed of action.
3. Unity of control.
4. Clear division of
authority and responsibility.
5. Discipline and better coordination
 6. Direct communication.
The disadvantages of line organization are
1. The organization is rigid and inflexible
2. Being an autocratic system, managers may become dictators and not leaders. 3.
There is scope of favour-ism and nepotism.
4. Red-tape and bureaucracy.
5. Lack of specialization.

2. Functional Organization
In functional organization the specialists are made available in the top positions
throughout the enterprise. It confers upon the holder of a functional position, a limited
power of command over the people of various departments concerning their function.
Functional authority remains confined to

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functional guidance of different department. Under functional organization, various

activities of the enterprise are classified according to certain functions like production,
marketing, finance, personnel etc., and are put under the charge of functional specialists.
A functional in charge directs the subordinates throughout the organization in his
particular area of business operation. That means that subordinates receives orders and
instructions not from one superior but from several functional specialists.
The advantages of functional organization
1. Specialization.
2. Reduces the burden on the top executives.
3. Offers greater scope for expansion.
4. A functional manager is required to have expertise in one function only. This 5.
Makes it easy for executive development.
The disadvantages of functional organization
1. Violates principles of unity of command.
2. The operation of
functional
organization is too
complicated.
3. It develops
specialists rather
than generalists.
4. Lack of
 coordination among functional executives which delays decision making.

3. Line and Staff Organization

In order to reap the advantages of both line organization and functional organization, a
new type of organization is developed i.e., line and staff organization. In line and staff
organization, the line authority remains the same as it does in the line organization.
Authority flows from top to bottom. In addition, the specialists are attached to line
managers to advice them on important matters. These specialists stand ready with their
speciality to serve line men as and when their services are called for to collect
information and to give help which will enable the line officials to carryout their activity
better. The staff officials do not have any power of command in the organization as they
are employed to provide expert advice to the line manager. In most of the organization,
staff investigates and supplies information and recommendations to managers who takes
decision.
The advantages of line and staff organization:
1. Specialized knowledge
2. Reduction of burden on line managers.
3. Better decisions, as staff specialists help the line managers
4. Unity of command

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5. Flexible when compared to functional organization.

The disadvantages of line and staff organization:

1. Allocation of duties between line and staff is not clear.
2. There is generally conflict between line and staff executives.
3. Since staffs are not accountable, they may not be performing well. 4. Difference
between orientations of line and staff. Line executive‘s deals with in problem in a more
practical manner while staff, tend to be more theoretical.
 4. Committees
/ Committees organization
A committee is a group of people who have been formally assigned some task or some
problem for their decision and implementation. A number of persons may come together
to take a decision, decide a course of action, advise on matters then it is called committee.
Sometimes there is a need for opinion of other persons for taking important decisions.
The thinking of varied persons pooled together their deliberations & discussions &
common decisions are reached. Because of collective information & analysis committees
are more likely to come up with solutions to complex problems. Need for committees
1. Exchange of ideas among organization members.
2. Proper discussion on present problems & efforts are made of find solutions. 3. The
committees may also need in establishing & developing organizational policies.
Classification of committees: be broadly classified into advisory committees and
executive committees.
Advisory committees:
∙ Committees are vested with staff authority.
∙ Only have a recommendation role and cannot enforce implementation of their
advice or recommendation.
∙ Examples of advisory committees formed in business enterprises: works committees,
sales committees, finance committees etc.
Executive committees:
∙ Vested with the line of authority
∙ Not only take decisions but also enforce decisions and thus perform a double role of
taking a decision and ordering its execution.
∙ Example: Board of directors is an example of an executive committee.
Are also classified as standing committees or ad-hoc task forces
Standing committees: Are formed to deal with current organizational problem. Example:
finance committee in a company, loan approval committee in a bank etc. Members of this
committee are chosen because of their title or position, instead of individual
qualifications or skills.
Ad-hoc committees: Have a short duration, dissolved after the task is over, or the
problem is solved and their members are chosen for their skills and experience.

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Advantages:
1. People get an opportunity to better understand each other‘s problems and move
towards organizational goals.
2. Provide a forum for the pooling of knowledge and experience of many persons of
different skills, ages and backgrounds which helps in improving the quality of
decisions.
3. Provide an opportunity to many persons to participate decision-makingprocess. 4. Are
excellent means of transmitting information and ideas, both upward and downward
5. Contribute indirectly to their training and viewpoints.
6. Are impersonal inaction and hence their decisions are generally unbiased and are
based on facts and there is no fear of single individual taking a decision. Weaknesses:
1. Committees keep up minutes and waste hours by setting up a committee which takes
a longer time to get
action than from an
individual manager. 2.
If wrong decision
taken, no member can
be individually
blamed which
encourages

irresponsibility among members of the committee.

3. Can be expensive form of administration where huge amount is spent on convening
meetings and giving allowances to the members.
4. Members of the coordinating committees feel appointed to protect their interests of the
departments rather than finding appropriate solution to the problem. 5. Have a tendency to
perpetuate themselves and difficult to dissolve them. 6. Decisions are generally based on
some compromise among members which are not best decisions which results in log
rolling.
7. Consists of large number of persons, difficult to maintain secrecy. 8. Chairman often
changes, influence accumulates in the hands of some other person which may result in
domination and may bring about resistance from others.

How to make Committee effective?

1. The number of members in a committee should not be very large. 2.
A committee authority should be carefully spelled out.
3. The members of committee should be approximately of equal status. 4. The members
should be prepared in advance on issues to be discussed in meetings. 5. The chairman of
the committee should plan and conduct the meeting with firmness and fairness.

Centralization: Centralization refers to systematic reservation of authority at central

points within the organization. Centralization means concentration of managerial
authority in few key managerial positions at the centre of an organization i.e., at the top
level. Everything that goes to reduce the subordinate‘s role in decision making is
centralization.
Span of Control

The term ―Span of Management‖ is also referred to as ―Span of Control, Span of

Supervision, Span of Authority, Span of Responsibility.‖ This indicates the Number of
Subordinates who report directly to a Manager. There are two types of span of control.

A Narrow Span of Control results in a ―Tall‖ Organization‖ with many Levels of

Supervision between Top Level Management & Lowest Organizational Level This creates
Ineffective Communication Problems & also increases the Financial Burden on the
Organization. There is also a Burden of finding suitable experienced personnel at

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different levels. On the other hand, a Wide Span of Control for the same number of
Employees, means a ―Flat Organization‖ with fewer Management Levels between Top &
Bottom Levels.

Relationships between Span of Control & Organizational Levels :

In the
figure shown above, the Relationships between Span of Control & Organization Levels are
shown. A Wide Span of Control is associated with Few Organization Levels; a Narrow
Span contains Many Levels.

MBO and MBE

Management by objectives(MBO): MBO is a process whereby subordinate and superiors of

an organization jointly define common goals, define each individual major areas of
responsibility in terms of results expected of him and use these measures as guides for
operating the unit and assessing contribution of each of its members.

Advantages of MBO
1) Integration of individual and organizational goals.
2) Results in development and utilization of human resources,
3) Improvement in productivity
4) Improved communication between superiors and subordinates. 5)
Motivates subordinates at lower levels as they are also part of goal setting 6)
Increases commitment towards goals
7) Helps in performance appraisal
8) Helps to achieve clarity of goals.

The weaknesses of MBO

1) Tends to falter without strong, continual commitment from top management. 2)
Necessitates considerable training of managers.
3) Can be misused as a punitive device.
4) May cause overemphasis of quantitative goals.

Management by exception (MBE) :Management by Exception is a management style

wherein managers intervene only when their employees fail to meet their performance
standards. If the employees are performing as excepted, the manager will take no action.
It is an organizational system where in which managers delegate as much

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responsibility as possible to those who below them stepping in only when it is absolutely
[Link] policy focuses on those issues or events in which there is a deviation from
the established standard. Management spends its valuable time on important strategic
issues. Attention is given only when there is a deviation.

Benefits of MBE
• This approach reduces the frequency of decision making by top management. •
Top management can concentrate on important things.
• It allows lower manager to take decisions.
• It is necessary in big organizations.

Staffing
The function of staffing is defined as Filling and keeping filled various positions in the
organization structure. This includes identifying work force requirements, inventorying
the people available, recruiting, selecting, placing, training, promoting, apprising etc…

Nature and Importance of Staffing

The staffing function has assumed greater significance these days because of various
factors. Staffing is also a pervasive function. Through separate department exist for this
yet every manager is engaged in performing the staffing function, when they participate
in selection, training and evaluating their subordinates. The various reasons which have
increased the significance of staffing functions are discussed below:
1. Increasing size of organization: Advancement in science and technology has given rise to
large scale companies employing thousands of employees. The performance of the
company depends on the quality and character of the people. This has increased the
importance of staffing.
2. Advancement of technology: In order to make use of latest technology, the
appointment of right type of persons is necessary.
3. Long-range needs of manpower: In some industries, labour turn-over is high. The
management is required to determine the manpower requirement well in advance.
Management has also to develop the existing personal for future promotion. The role
of staffing has also increased because of shortage of good managerial talents.
4. Recognition of human relations: The behaviour of individuals has become very
complicated and hence human aspect of organization has become very important.
Employees are to be motivated by financial and non-financial incentives. Right kind of
atmosphere should also be created to contribute to the achievement of organizational
objectives. By performing the staffing function, management can show the
significance it attaches to the man power working in the enterprise.
Advantages of proper and efficient staffing
1) It helps in discovering talented and competent workers and developing them to
move up the corporate ladder.
2) Ensures greater production by putting the right man in the right job. 3) It helps to avoid
a sudden disruption of an enterprises production run by indicating shortages of personal
if any in advance.
4) Helps to prevent underutilization of personnel through over manning and the
resultant high labour cost and low profit margins.
5) Provides information to management for the internal succession of managerial
personnel in the event of unanticipated turnover.

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Recruitment:

It is defined as the process of identifying the sources for prospective candidates and to
stimulate them to apply for the jobs or the generating of the applications or applicants for
specific positions or the process of attracting potential employees to the company. The
management should have a proper plan of recruitment regarding the quantity and quality
of personnel required and the time when it is needed. . It is a linking activity that brings
together those offering jobs and those seeking jobs. Recruitment refers to the attempt of
getting interested applicants and providing a pool of prospective employees so that the
management can select the right person for the right job from this pool. The various
sources of recruitment are divided into two categories:
∙ Internal Sources.
∙ External Sources.

Internal sources: involve transfer and promotion. Transfer involves the shifting of an
employee from one job to another. Many companies follow the practice of filling higher
jobs by promoting employees who are considered fit for such positions. Filling higher
positions by promotion motivates employees, boots employee‘s morale.

External sources

1) Direct recruitment: An important source of recruitment is direct recruitment by placing a

notice on the notice board of the enterprise by specifying the details of the jobs
available. This is also known as recruitment at factory gate.
2) Unsolicited applications: Many qualified persons apply for employment to reputed
companies on their own initiative. Such applications are known as unsolicited
applications.
3) Advertising: Large enterprises particularly when the vacancy is for higher post or there
are large number of applications use this source where advertisements are made in
local and national level newspapers. This helps in informing the candidates spread over
different parts of the country. The advertisement contains information about the
company, job description, and job specialization etc.
4) Employment agencies: This is the good source of recruitment for unskilled and
semiskilled jobs. In some cases, compulsory notification of vacancies of employment
exchange is required by the law. The employment exchanges bring job givers in
contact with job seekers.
5) Educational institutions: Many jobs in business and industries have become increasingly
varied and complex which need a degree in that particular area. That is why many big
 organizations maintain a close liaison with the colleges, vocational institutes and
management institutions for recruitment of various jobs.
6) Labor contractor: Often unskilled and semiskilled workers are recruited through
labor contractors.
7) Recommendations: Applicants introduced by friends, relatives and employees of the
organization may prove to be a good source of recruitment. Many employers prefer to
take such persons because something about their background is known.

Selection

The process of selection leads to employment of persons having the ability and
qualifications to perform the jobs which have fallen vacant in an organization. It divides
the candidates into two categories; those will be offered employment and those who will
not be. The basic purpose of the selection process is choosing right type of

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candidates to man various positions in the organization. In order to achieve this purpose,
a well, organized selection procedure involves many steps and at each step more and
more information is obtained about the candidates.

Steps in the selection procedure

In order to be able to determine the qualifications needed to meet the requirements of

jobs, the company has first of all to analyze the jobs, write job descriptions and prepare job
specification.

1. Job analysis: Is the process by means of which a description is developed of the

present methods and procedures of doing a job, physical conditions in which the job is
done, relation of the job to other jobs and other conditions of employment.
2. Job description: The results of the job analysis are set down in job descriptions for
production workers, clerical people and the first-line supervisors and managers also.
3. Job specification: A job specification is a statement of the minimum acceptable
human qualities necessary to perform a job satisfactorily.

Commonly used selection procedure steps:

1) Application bank: Filling the application blank by the candidate is the first step in
which the applicant gives relevant personal data such as qualification, experience,
firms in which he has worked.
2) Initial interview: Selected personnel based on the particulars furnished in the
application blank are called for the initial interview by the company Which is the most
important means of evaluating the poise or appearance of the candidate.
3) Employment tests: Are used for the further assessment of the candidate of his
nature and abilities certain tests are conducted by the company.
These are:
i. Aptitude test: is used in finding out whether a candidate is suitable for clerical
or a mechanical job which helps in assessing before training as how well the
candidate will perform the job.
ii. Interest test: is used to find out the type of work in which the candidate has an
interest.
iii. Intelligent test: used to find out the candidates intelligence and candidates
mental alertness, reasoning ability, poor of understanding are judged. iv. Trade or
performance achievement test: this test is used to measure the
 candidate‘s level of knowledge and skill in the particular trade or occupation
in which all he will be appointed, in case he is finally selected. in this test the
candidate is asked to do a simple operation of the proposed job. Example: A
candidate for a driver may be asked to drive to test his driving proficiency, a
typist may be asked to type out some letters to find out his speed and
efficiency.
v. Personality test: is used to measure those characteristics of a candidate which
constitute his personality. e.g self
confidence,temperant,initiative,judgement,dominance,integrity,originality.
personlaity tests are very important in the selection process.
4) Checking references: used to know about the important personal details about the
candidate, his character, past history his background verified from the people
mentioned in the application after selection and found satisfactory at the interview.

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5) Physical or medical examination: is another step in selection procedure. The

objectives of this examination are
i. To check the physical fitness of the applicant for the job applied for ii. To protect the
company against the unwarranted claims for
compensation under certain legislative enactments.
6) Final interview: This interview is conducted for those who are ultimately selected
for employment and the selected candidates are given an idea about their future
projects within the organization.
7) Appointment order: appointment orders are given to finally selected candidates,
giving the position offered, scale of pay and other benefits and terms and conditions of
employment.
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