STAGE THREE

MANAGEMENT

DCG JAN 2021 & DPRS JAN 2021

STAGE 3 TERM 1

1. Introduction and Theories of Management

Management consists of functions for accomplishing an organizations objective by bringing together factors of production
hence enabling better societies and an increase in the supply of goods and services.

1.1 Management Concepts

1.1.1 Definitions of Management
McFarland: management is a process through which managers create, direct, maintain and operate purposive
organizations through systematic coordinated and cooperative human efforts
L. Londy: management is principally the task of palling, coordinating, motivating and controlling the effort of others
towards specific objectives
George R Terry: management is a distinct process consisting of activities of planning, organizing and actuating,
performed on the efforts of group members in order to utilize available resources of the group human efforts, materials,
machines and methods in order to attain organization goals
Mary Parker Follet: Management is defined as the art of getting things done through people

1.1.2 Concepts of Management

There are three basic concepts of Management

Management as a Discipline: Discipline refers to a field of study having well-defined concepts and principles.
management is a discipline, as it includes various relevant concepts and principles, the knowledge of which aids in
managing.

Management as a Group of People: as it includes all those personnel who perform managerial functions in organizations
including those persons who are responsible for managerial functions and non-managerial personnel.

Management as a process: A process is a systematic method of handling activities. the management process is a complex
one which is referred to as an identifiable flow of information through interrelated stages of analysis directed towards the
achievement of an objective or set of objectives. It is a concept of dynamic rather than static existence in which events and
relationships must be seen as dynamic, continuous, and flexible, and as such, must be considered as a whole. Thus,
management as a process includes various activities and sub activities.

1.1.3 Purpose and importance of management

a) It helps Achieving Group Goals: Management converts disorganized resources of men, machines, money
b) etc. into useful enterprise. It arranges, assembles, organizes and integrates the factors of production. These
c) resources are coordinated, directed and controlled in such a manner that enterprise work towards attainment of goals.
d) Optimum Utilization of Resources: Management utilizes all the physical and human resources productively.
Management provides maximum utilization of scarce resources by selecting its best possible alternate use in industry
from out of various uses. This leads to optimum utilization of resources and avoid wastage.
e) Reduces Costs: It gets maximum results through minimum input by proper planning and by using minimum input
and getting maximum output. Management uses physical, human and financial resources in such a manner which
results in best combination. This helps in cost reduction.
f) Establishes Sound Organization: To establish sound organizational structure is one of the objective of management
which is in tune with objective of organization and for fulfillment of this, it establishes effective authority and
 responsibility relationship i.e. who is accountable to whom, who can give instructions to whom, who are superiors and
who are subordinates.
g) Establishes Equilibrium: It enables the organization to survive in changing environment. It adapts organization to
changing demand of market / changing needs of societies. It is responsible for growth and survival of organization.
h) Essentials for Prosperity of Society: Efficient management leads to better economical production which helps in
turn to increase the welfare of people. It improves standard of living, increases the profit which is beneficial to
business and society will get maximum output at minimum cost by creating employment opportunities which generate
income
i) it encourages initiative. Which is doing the right thing at the right time without being told or influenced by the
superior. The employees should be encouraged to make their own plans and also to implement these plans. Initiative
gives satisfaction to employees and success to organization.
j) it Encourages Innovation which brings new ideas, new technology, new methods, new products, new services, etc.
This makes the organization more competitive and efficient.
k) Improves Life of Workers by providing a good working environment and conditions, and gives the workers many
financial and non-financial incentives which leads to improved quality of life for the workers,
l) reduces Absenteeism and Labour Turnover using different techniques which increase the cost of business and
causes many problems in the smooth functioning of the organization.
m) Encourages Team Work Management encourages employees to work as a team by developing team spirit which
brings success to the organization.

1.1.4 Characteristics/nature of Management

Management has the following features:
a) Management is a process of getting things done by working with people
b) Management is goal oriented thus aims at achieving organizational goals or objectives
c) Management is a group activity and is concerned with group efforts – not individual efforts
d) Management is an economic resource that aims are reaping rich results in economic terms
e) Principles of management have universal application and apply in every situation
f) Management is a system of authority with managers at different levels having varying degree of authority
g) Management is integrative with its essence being to integrate human and other resources to achieve desired results
h) Management is both science and an art. It has an organized body of knowledge consisting of well-defined concepts,
principles and technique that have a wide application and thus a science. The application of this concepts and
techniques require skills thus management is also considered as an art.

1.1.5 Management as an Art, Science or Profession

Management is both an art as well as a science. Essentially, managing is the art of doing and management is the body of
knowledge which underlies the art. For a manager to be successful in his profession one must acquire the knowledge of
science & the art of applying it. Science teaches to ‘know ‘and art teaches to ‘do ‘. E.g. a person cannot become a good
singer unless he has knowledge about various ragas & he also applies his personal skill in the art of singing. Same way it
is not sufficient for manager to first know the principles but he must also apply them in solving various managerial
problems that is why, science and art are not mutually exclusive but they are complementary to each other (like tea and
biscuit, bread and butter etc.)

a) Management as a science.
Science is a systematic body of knowledge pertaining to a specific field of study that contains general facts which explains
a phenomenon. It establishes cause and effect relationship between two or more variables and underlines the principles
governing their relationship. These principles are developed through scientific method of observation and verification
through testing. Science is characterized by following main features:
Universally acceptance principles: Scientific principles represents basic truth about a particular field of enquiry. These
principles may be applied in all situations, at all time & at all places. E.g. law of gravitation which can be applied in all
countries irrespective of the time. Management also contains some fundamental principles which can be applied
universally like the Principle of Unity of Command i.e. one man, one boss. This principle is applicable to all type of
organization business or non-business.
Experimentation & Observation: Scientific principles are derived through scientific investigation & researching i.e.
they are based on logic. E.g. the principle that earth goes round the sun has been scientifically proved. Management
principles are also based on scientific enquiry & observation and not only on the opinion of Henry Fayol. They have been
developed through experiments & practical experiences of large no. of managers. E.g. it is observed that fair remuneration
to personal helps in creating a satisfied work force.
Cause & Effect Relationship: Principles of science lay down cause and effect relationship between various variables.
E.g. when metals are heated, they are expanded. The cause is heating & result is expansion. The same is true for
management; therefore, it also establishes cause and effect relationship. E.g. lack of parity (balance) between authority &
responsibility will lead to ineffectiveness. If you know the cause i.e. lack of balance, the effect can be ascertained easily
i.e. in effectiveness. Similarly, if workers are given bonuses, fair wages they will work hard but when not treated in fair
and just manner, reduces productivity of organization.
Test of Validity & Predictability: Validity of scientific principles can be tested at any time or any number of times i.e.
they stand the test of time. Each time these tests will give same result. Moreover, future events can be predicted with
reasonable accuracy by using scientific principles. E.g. H2 & O2 will always give H2O. Principles of management can
also be tested for validity. E.g. principle of unity of command can be tested by comparing two persons – one having single
boss and one having 2 bosses. The performance of 1st person will be better than 2nd.

It cannot be denied that management has a systematic body of knowledge but it is not as exact as that of other physical
sciences like biology, physics, and chemistry etc. The main reason for the inexactness of science of management is that it
deals with human beings and it is very difficult to predict their behavior accurately. Since it is a social process, therefore it
falls in the area of social sciences. It is a flexible science & that is why its theories and principles may produce different
results at different times and therefore it is a behavior science. Ernest Dale has called it as a Soft Science.

b) Management as an art
Art implies application of knowledge & skill to trying about desired results. An art may be defined as personalized
application of general theoretical principles for achieving best possible results. Art has the following characters;
Practical Knowledge: Every art requires practical knowledge therefore learning of theory is not sufficient. It is very
important to know practical application of theoretical principles. E.g. to become a good painter, the person may not only
be knowing different color and brushes but different designs, dimensions, situations etc. to use them appropriately. A
manager can never be successful just by obtaining degree or diploma in management; he must have also known how to
apply various principles in real situations by functioning in capacity of manager.
Personal Skill: Although theoretical base may be same for every artist, but each one has his own style and approach
towards his job. That is why the level of success and quality of performance differs from one person to another. E.g. there
are several qualified painters but M.F. Hussain is recognized for his style. Similarly, management as an art is also
personalized. Every manager has his own way of managing things based on his knowledge, experience and personality,
that is why some managers are known as good managers whereas others as bad.
Creativity: Every artist has an element of creativity in line. That is why he aims at producing something that has never
existed before which requires combination of intelligence & imagination. Management is also creative in nature like any
other art. It combines human and non-human resources in useful way so as to achieve desired results. It tries to produce
sweet music by combining chords in an efficient manner.
Perfection through practice: Practice makes a man perfect. Every artist becomes more and more proficient through
constant practice. Similarly, managers learn through an art of trial and error initially but application of management
principles over the years makes them perfect in the job of managing.
Goal-Oriented: Every art is result oriented as it seeks to achieve concrete results. In the same manner, management is
also directed towards accomplishment of pre-determined goals. managers use various resources like men, money,
material, machinery & methods to promote growth of an organization. Thus, we can say that management is an art
therefore it requires application of certain principles rather it is an art of highest order because it deals with molding
the attitude and behavior of people at work towards desired goals.

c) Management as a profession
A profession is a field where training is intellectual in nature, it is a field which one enters for the sake of others and in
which financial reward is not considered as a measure of success. A profession is a field which is supposed to possess a
well-defined body of knowledge, one which is intellectual and organized, one with entry restricted examination or
education and one which is concerned primarily with service of others above self-reward. Management is a profession
since it meets
Specialized knowledge: a profession must have a systematic body of knowledge that can be used for the development of
professionals. A manager must have devotion and involvement to acquire expertise.
Formal education and training: an individual enters a profession after acquiring specific knowledge and skill. In
management also, an individual has to acquire appropriate knowledge and training
Social obligations: professionals are motivated in desire to serve society, social norms and values. A manager is
responsible not only for his superiors but also to society.
Code of conduct: members of a profession have to abide by the code of conduct which contains certain rules and
regulations.
Representative association: for the regulation of a profession, there is an existence of a representative body. e.g.
institution of surveyors of Kenya

1.1.6 Principles of Management

The principles of management lay down guidelines for improving management practice. they are diagnostic guides as
each business situation is unique and must be analyzed on its own merit hence, the application of the principles depends
on an organizations social economic political and cultural factors.

Need for Principles of Management

a) To increase efficiency: it enables a manager to take a more realistic view of organizational problems and their
solutions hence avoiding the need for trial and error methods
b) To crystalize the nature of management job: it helps in analyzing the management job and in defining the exact
scope of management process
c) To improve research in management: it serves as a focal point for useful research in group dynamics bot to
ascertain their validity and to improve their applicability
d) To attain social goals: it enables more efficient utilization of human and material resources hence improving the
quality of life

Nature of Management Principles

a) Universality of principles: they can be applied in different types of organizations e.g. business, government,
educational, military
b) Dynamism: management principles are flexible guides rather than hard and fast rules or dynamic rather than
static because two management situations are seldom alike in all aspects and therefore management principles
have to be modified with changes in the environment
c) Human limitation: management is an inexact social science because it deals with human behavior which is very
complex and unpredictable
d) Relativity: management principles are relative rather than absolute hence, should be applied according to the need
of the organization and demands of the situation

1.2 Theories of Management

1.1.7 Early/Pre-classical/Pre-scientific management period
The origin of management can be traced back to the days when man started living in groups. History reveals that strong
men organized the masses into groups according to their intelligence, physical and mental capabilities. Evidence of the
use of the well-recognized principles of management is to be found in the organization of public life in ancient Greece, the
organization of the Roman Catholic Church and the organization of military forces. Thus management in some form or
the other has been practiced in the
various parts of the world since the dawn of civilization. With the onset of Industrial Revolution, however, the position
underwent a radical change. The structure of industry became extremely complex. At this stage, the development of a
formal theory of management became absolutely necessary. It was against this background that the pioneers of modern
management thought laid the foundations of modern management theory and practice.

1.1.8 Classical Theories of Management

[Link] Introduction to classical management theories
The classical school of management / traditional school of management arose mainly from efforts between 1900 and 1940
to provide a rational and scientific basis for the management of organizations. The Industrial Revolution saw people
working together in factories which was a contrast to the handicraft system whereby people worked separately in small
shops or in their own homes. industrialization created a need for the effective management of people and other resources
in the emerging organizations as it created a need for efficient planning, organizing, influencing, and controlling of work
activities. The last decade of the 19th century included proponents like F.W. Taylor, H.L. Gantt, Emerson, Frank and
Lillian Gilberth etc., who laid the foundation of management, which in due course, came to be known as scientific
management. This era saw the challenging of traditional ways of managing, past management experience was
scientifically systematized and principles of management were distilled and propagated. F.W. Taylor and Henry Fayol are
generally regarded as the founders of scientific management and administrative management and both provided the bases
for science and art of management

Features of Management in the Classical Period:

a) It was closely associated with the industrial revolution and the rise of large-scale enterprise.
b) Classical organization and management theory is based on contributions from scientific management, Administrative
management theory, bureaucratic model, and micro-economics and public administration.
c) Management thought focused on job content, division of labour, standardization, simplification and specialization and
scientific approach towards organization.

The primary contributions of the classical school of management include

a) Application of science to the practice of management.
b) Development of the basic management functions: planning, organizing, influencing, and controlling.
c) Articulation and application of specific principles of management

[Link] Types of classical theories of management

[Link].1 Scientific management (F W Taylor – father of scientific management)
Taylor started his career as an apprentice in Philadelphia in 1875, then as a laborer, supervisor, then became the chief
engineer in 1884. He had observed the work performance of managers and workers and noted that they followed
traditional methods of work and did not have concept of systematic performance at task. He observed that greater output
was possible through systematization and standardization of methods of doing work. He devoted attention to finding the
exact nature of work to be done and the best way of doing it hence identified Techniques of management through trial and
error. Many of his ideas brought system, order and logic to areas such as Production planning, analysis of cost, systems of
payment etc. where rule of thumb had prevailed.

Taylor defined scientific management as “Substitution of exact scientific investigations and knowledge for old judgment
or opinion in all matters of work done”.
According to Taylor, the objective of management should be:
Maximum prosperity for the employer: lower costs and high returns
Maximum prosperity for each employee: fair as well as higher wages

Taylors Scientific Management consists the philosophy of:

a) Scientific selection and training of right workers for the right job
b) Providing adequate working conditions such as lighting, ventilation, drinking water, canteen, sanitation, rest rooms,
rest periods.
c) Providing a system of monetary incentives to efficient workers
d) Assumption of responsibilities by managers and supervisors

Principles of scientific management:

a) Science-not rule of thumb which includes:
 Replacement of old method by doing work scientifically
 Fair work to each worker
 Standardization in work
 Differential piece rate of payment system
b) Harmony in group action not discord/disharmony that relates to peace and friendship where dissatisfaction to be
avoided
c) Cooperation between management and workers and vice versa not individualism
d) Maximum output in place of restricted output through division of work and by assumption of responsibility jointly by
management and workers
e) Improvement of workers to their greatest efficiency and prosperity through scientific selection of workers i.e.
finding out physical, educational and psychological requirements of each job and find suitable persons for each job
and providing workers are provided with job training.

Features of scientific management:

a) Separation of planning from executive function: Before Taylor’s period, both planning and executive function were
performed by one and the same worker. Then this worker did the job under the supervision of a supervisor. It resulted
in disagreement on many issues between workers and supervisors. So, Taylor separated the planning function from
the executive function.
b) Scientific task setting: It means allotment of work to each worker on the basis of capacity of an average worker
functioning in normal working conditions. He should be able to complete the work in a working day.
c) Rate setting: Fair wages to workers. Differential piece rate wage system which can act as incentive to lazy workers.
d) Standardization may be introduced in respect of the following.
f) Tools and equipment: By standardization is meant the process of bringing about uniformity. The management must
select and store standard tools and implements which will be nearly the best or the best of their kind.
g) Speed: There is usually an optimum speed for every machine. If it is exceeded, it is likely to result in damage to
machinery.
h) Conditions of Work: To attain standard performance, the maintenance of standard conditions of ventilation, heating,
cooling, humidity, floor space, safety etc., is very essential.
i) Materials: The efficiency of a worker depends on the quality of materials and the method of handling materials
j) Scientific selection and training: The workers should be selected scientifically. The appointment should be given to
each worker according to the nature of job requirement and his qualifications.
k) Functional foremanship: This is based on specialization of functions performed at supervision level where the two
functions of 'planning' and 'doing' are separated.
Taylor suggested eight functional foremen under his scheme of functional foremanship as follows:
 planning,
 route clerk - To lay down the sequence of operations and instruct the workers concerned about it
 instruction card clerk - To prepare detailed instructions regarding different aspects of work
 time and cost clerk - To send all information relating to their pay to the workers and to secure proper returns
of work from them
 shop disciplinarian - To deal with cases of breach of discipline and absenteeism
 executive function
 speed boss - To ensure that machines are run at their best speeds and proper tools are used by the workers
 inspector - To show to the worker how to do the work
 maintenance foreman/repair boss - To ensure that each worker keeps his machine in good order and
maintains cleanliness around him and his machines
 gang boss - To assemble and set up tools and machines and to teach the workers to make all their personal
motions in the quickest and best way
l) Work study: Systematic critical assessment of efficiency required to do the job.
 Methods study: Entire process of production is studied. Efforts are made to reduce the distance passed by
materials and bring about improvement in handling, transportation, inspection, storage of raw materials and
finished goods.
 Motion study: Unnecessary movements are eliminated.
 Time study: Act of measuring the time required to perform a particular job. The standard time is fixed. All the
work is performed in fixed time.
 Fatigue study: A study relating to the fixing of working hours with rest periods to enable the workers to recoup
the energy lost while performing the job.
m) Financial incentives: Increase in efficiency should result in increase in wages.
n) Mental revolution: refers to change in thinking both on the part of management and workers. The success of
scientific management rests primarily on the fundamental change in the attitude of management and workers both as
to their duty to cooperate in producing largest possible surplus. Necessity for substituting exact scientific knowledge
for opinions, or old rule of thumb.
o) Economy: The available resources are used to the fullest possible maximum extent to eliminate wastage.
Management to get economy in production and for maximizing profits.

Contributions of F.W. Taylor:

a) He Applied principles of scientific management for solving the problems of management
b) He Pointed out that it was duty of management to tell the employees what management expected from them and
specify the way through which the job is to be completed.
c) He supported mental revolution on the part of employer as well as employee.
d) He first conducted Time study and motion study.
e) He separated planning function from executive function.
f) He invented the Functional foreman concept

Criticism of scientific management by Worker's

a) Speeding up of workers: Scientific Management is only a device to speed up the workers without much regard for
their health and well-being.
b) Loss of individual worker's initiative: Scientific Management reduces workers to automatic machine by taking
away from them the function of thinking.
c) Problem of monotony: By separating the function of planning and thinking from that of doing, Scientific
Management reduces work to mere routine.
d) Reduction of Employment: Scientific Management creates unemployment and hits the workers hard.
e) Weakening of Trade Unions: Under Scientific Management, the important issues of wages and working conditions
are decided by the management through scientific investigation and the trade unions may have little say in the matter.
f) Exploitation of workers: Scientific Management improves productivity through the agency of workers and yet they
are given a very small share of the benefit of such improvement.

Criticism of scientific management by employers

a) Heavy Investment: It requires heavy investment as the employer has to meet the extra cost of the planning
department though the foreman in this department does not work in the workshop and directly contribute towards
higher production.
b) Loss due to re-organization: The introduction of Scientific Management requires a virtual reorganization of the
whole set-up of the industrial unit. Work may have to be suspended to complete such re-organization.
c) Unsuitable for small scale firms: various measures like the establishment of a separate personnel department and the
conducting of time and motion studies are too expensive for a small or modest size industrial unit.

Benefits of scientific management

a) Replacement of traditional rule of thumb method by scientific techniques.
b) Proper selection and training of workers.
c) Development of incentive plans of wage payment based on systematic study of work
d) Elimination of wastes and rationalization of system of control.
e) Standardization of tools, equipment, materials and work methods.
f) Detailed instructions and constant guidance of the workers.
g) Establishment of harmonious relationship between the workers.
h) Better utilization of various resources.
i) Satisfaction of the needs of the customers by providing higher quality products at lower prices
j) Focus on the need for better methods of industrial work through systematic study and research.
k) Emphasis on planning and control of production.
l) Development of Cost Accounting.
m) Focus on need for a separate Personnel Department.
n) Focus on the problem of fatigue and rest in industrial work.

Taylor was the pioneer in introducing scientific reasoning to the discipline of management. Many of the objections raised
were later remedied by the other contributors to scientific management like Henry L Gantt, Frank and Lillian Gilbreth and
Harrington Emerson.
Henry Lawrence Gantt (USA, 1861 - 1819):
Gantt worked as a draftsman in an iron foundry. he later joined the Midvale Steel Company where, he became an assistant
to F.W Taylor. He did much consulting work on scientific selection of workers and the development of incentive bonus
systems. He emphasized the need for developing a mutuality of interest between management and labour. Gantt's
contributions to management which were more refinements made scientific management more humanized and
meaningful to devotees of Taylor as follows:
 Gantt chart to compare actual to planned performance. Gantt chart was a daily chart which graphically presented
the process of work by showing machine operations, man hour performance, deliveries, effected and the work in
arrears. This chart was intended to facilitate day-to-day production planning
 Task-and-bonus plan for remunerating workers indicating a more humanitarian approach. This plan was aimed at
providing extra wages for extra work besides guarantee of minimum wages. Under this system of wage payment, if a
worker completes the work laid out for him, he is paid a definite bonus in addition to his daily minimum wages. On
the other hand, if a worker does not complete his work, he is paid only his daily minimum wages. There was a
provision for giving bonus to supervisors, if workers under him were able to earn such bonus by extra work.
 Psychology of employee relations indicating management responsibility to teach and train workers.
 emphasis on leadership. He considered management as leadership function and laid stress on the importance of
acceptable leadership as the primary element in the success of any business.

[Link].2 Administrative Management (Henry Fayol)

He was a French industrialist who started as an engineer in a mining company in 1860 then become the Chief MD of the
company because of his outstanding abilities. He concentrated on top management who play a very important part in all
undertakings, large or small, be it industrial, commercial, political, religious or any other. The management functions
include planning, organizing, staffing, directing and controlling which are different from Organizational functions that
include purchase, sales, production and accounting.
Fayol classified all the business activities into six functions:
 Technical activities relating to production
 Commercial activities relating to purchase of basic raw materials and other resources, selling of products and
exchange
 Financial activities relating to identification and utilization of available funds
 Security activities relating to the steps taken to protect the property of enterprise and persons
 Accounting activities relating to the recording and maintaining accounts, stock taking, and preparation of cost sheets,
balance sheets and statistical data
 Managerial activities relating to planning, organizing, commanding, coordinating and controlling

Fayol identified qualities of a manager as follows:

 Physical (health, vigor and address)
 Mental (ability to understand and learn, judgment, mental vigor, adaptability)
 Moral (energy, firmness, willingness to accept responsibility, initiative, loyalty, tact and dignity)
 General education (acquaintance with matters not belonging exclusively to the function performed)
 Special knowledge peculiar to the function, be it technical, commercial, financial, managerial etc.
 Experience

Principles of Management set forth by Henri Fayol:

Division of work: It helps to specialize in an activity which increases output with perfection.
Authority and responsibility: The right to give order is called authority. The obligation to accomplish is called
responsibility. Authority and Responsibility are the two sides of the management coin. They exist together. They are
complementary and mutually interdependent.
Discipline: The objectives, rules and regulations, the policies and procedures must be honored by each member of an
organization. There must be clear and fair agreement on the rules and objectives, on the policies and procedures. There
must be penalties (punishment) for non-obedience or indiscipline. No organization can work smoothly without discipline -
preferably voluntary discipline.
Unity of command: Each subordinate is responsible to only one superior.
Unity of direction: All members of an organization must work together to accomplish common objectives.
Subordination of individual interest to group interest: In no way, the individual interest should dominate the group
interest. This is also called principle of co-operation. Each shall work for all and all for each. General or common interest
must be supreme in any joint enterprise
Remuneration of personnel: Employees should be given fair and reliable remuneration.
Centralization or decentralization of authority There must be a good balance between centralization and
decentralization of authority and power. Extreme centralization and decentralization must be avoided
Scalar chain: It is the chain of superiors ranging from the ultimate authority to the lowest ranks. The unity of command
brings about a chain or hierarchy of command linking all members of the organization from the top to the bottom.
Order: The principle of right place for everything and for everyone should be followed by management. Order or system
alone can create a sound organization and efficient management
Equity: It refers to combination of fairness, kindness and justice. It requires goodness and experience of managers and
loyalty and devotion from subordinates.
Stability of tenure of personnel: Security of job is an essential factor. A person needs time to adjust himself with the
new work and demonstrate efficiency in due course. Hence, employees and managers must have job security. Security of
income and employment is a pre-requisite of sound organization and management
Initiative: A manager should have conceiving and executing initiative. Creative thinking and capacity to take initiative
can give us sound managerial planning and execution of predetermined plans.
Esprit de corps: All the employees of the organization are put together as a team in order to achieve the objectives of the
organization. Union is strength. But unity demands co-operation. Pride, loyalty and sense of belonging are responsible for
good performance

[Link].3 Bureaucratic Model (Max Weber)

Max Weber, a German Sociologist developed the bureaucratic model. His model of bureaucracy includes
 Hierarchy of authority.
 Division of labour based upon functional specialization.
 A system of rules.
 Impersonality of interpersonal relationships.
 A system of work procedures.
 Placement of employees based upon technical competence.
 Legal authority and power.
Bureaucracy provides a rigid model of an organization. and does not account for important human elements. The features
of Bureaucracy are: -
 Rigidity, impersonality and higher cost of controls.
 Anxiety due to pressure of conformity to rules and procedure.
 Dependence on superior.
 Tendency to forget ultimate goals of the organization.
Bureaucratic Model is preferred where change is not anticipated or where rate of change can be predicated. It is followed
in government departments and in large business organizations.

1.1.9 Behavioral Management Theories/ Neo-Classical Management Theory

[Link] Introduction to behavioral management theories
As management research continued in the 20th century, questions began to come up regarding the interactions and
motivations of the individual within organizations. Management principles developed during the classical period were
simply not useful in dealing with many management situations and could not explain the behavior of individual
employees. In short, classical theory ignored employee motivation and behavior. As a result, the behavioral school was a
natural outgrowth of this revolutionary management experiment.
The behavioral management theory is often called the human relations movement because it addresses the human
dimension of work. Behavioral theorists believed that a better understanding of human behavior at work, such as
motivation, conflict, expectations, and group dynamics, improved productivity. The theorists who contributed to this
school viewed employees as individuals, resources, and assets to be developed and worked with — not as machines, as in
the past.
Behavioral Management Theory can be broken unto two major theories:
a) Human Relations Theory
b) Behavioral Science Theory

[Link] Types of behavioral management theories

[Link].4 Human Relations Theory
Introduction to human relations theory
 Human Relations Theory focuses specifically on the individuals needs and resultant behaviors of individuals and
groups. It takes an interpersonal approach to managing human beings.
 It presents the organization as made up of formal and informal elements. The formal elements of an organization are
its structure. The informal aspects of the organization include the interactions between individuals. In this way, the
organization is a type of social system.
 This system should be managed to create individual job satisfaction and the resultant motivation of the individual.
Notably, much emphasis is placed on how individuals interact within groups and the resulting group behavior and
performance.

Elements of Human Relations Theory

At the core of human relations theory are these six basic propositions:
a) A focus on people, rather than upon machines or economics
b) The organizational environment is not an organized social context
c) Human relations are important in motivating people
d) Motivation depends upon teamwork, requiring co-ordination and cooperation of individuals involved.
e) Human relations within teams must fulfill both individual and organizational objectives simultaneously
f) Individuals and organizations desire efficiency by achieving maximum results with minimum inputs
g) Also, central to the understanding of Human Relations theory is the concept of individual motivation. The drawback
of this theory is that it requires the acceptance of numerous assumptions about human behavior.

Contributors to Human Relations Theory

The primary contributors to Human Relations Theory are:
a) Elton Mayo - Mayo is best known for his contribution to human relationships management through the Hawthorne
experiments.
b) Mary Parker Follet - Follet employed psychological tools to understand the efficient use of people. She introduced
the concept of de-personalized authority and responsibility. The also advocated for the integration of decision making
through communication channels.
a) Elton Mayo
Hawthorne Experiment: Professor Elton Mayo is known as the Father of the Human Relations Approach to
Management Theory. From 1924 - 1932, he, along with Fritz Roethlisberger, T.N. Whitehead and William Dickson,
conducted the Hawthorne studies (so named for the location of the studies - the Hawthorne Plan of Western Electric
Company). In these experiments, Mayo evaluated the attitudes and psychological reactions of workers in on-the-job
situations. It began by examining the impact of illumination levels on worker productivity. Eventually, the study was
extended through the early 1930s and addressed a broader range of workplace conditions. The results, however, identified
a unique identifier of group performance - attention. The control and experimental groups' performance improved
irrespective of the environmental conditions.
The theory became known as the Hawthorne Effect - individuals perform better when given special attention.
The study also addresses other major concerns, such as: individual vs group job performance, worker motivation, and
production standards.

Findings of Hawthorne Experiments:

a) Group dynamics (Social Factors) are important determinants of job performance and output.
b) Groups have their own norms and beliefs, independent of the individual members.
c) Individuals are not solely motivated by compensation. Perceived meaning and importance of one’s work are the
primary determinants of output.
d) Employees prefer a cooperative attitude from superiors, rather than command and control.
e) Communication between management and employees is essential to understand employee issues.
f) Workplace culture sets production standards - despite standards set by managers.

The work of Mayo, through the Hawthorne studies, was instrumental in understanding the roles of group behavior and
individual psychology in management practice.

Contributions of the Hawthorne Experiment:

 A business organization is basically a social system. It is not just a techno-economic system.
 The employer can be motivated by psychological and social wants because his behaviour is also influenced by
feelings, emotions and attitudes. Thus economic incentives are not the only method to motivate people.
 Management must learn to develop co-operative attitudes and not rely merely on command.
 Participation becomes an important instrument in human relations movement. In order to achieve participation,
effective two-way communication network is essential.
 Productivity is linked with employee satisfaction in any business organization. Therefore, management must take
greater interest in employee satisfaction.
 Group psychology plays an important role in any business organization. We must therefore rely more on informal
group effort.
 The neo-classical theory emphasizes that man is a living machine and he is far more important than the inanimate
machine. Hence, the key to higher productivity lies in employee morale. High morale results in higher output.

Limitations of Human Relations Approach:

 The human relationists drew conclusions from Hawthorne studies. These conclusions are based on clinical insight
rather than on scientific evidence.
 The study tends to overemphasize the psychological aspects at the cost of the structural and technical aspects.
 It is assumed that all organizational problems are amenable to solutions through human relations. This assumption
does not hold good in practice
 The human relationists saw only the human variables as critical and ignored other variables.
 The human relationists overemphasize the group and group decision-making. But in practice, groups may create
problems and collective decision-making may not be possible

[Link].5 Behavioral Science Theory

Introduction to behavioral science theory
 Behavioral Science Theory combines elements of psychology, sociology, and anthropology to provide a scientific
basis for understanding employee behavior.
 It examines why employees are motivated by specific factors, such as social needs, conflicts, and self-actualization. It
recognizes individuality and the need for managers to be sociable.
 The behavioral science approach is unique from the human relations theory in that it emphasizes leadership as a
determining factor in management success.
 It presents an increased focus on group relationships and group behavior in organizational effectiveness.
 The objective of behavioral science is the ability to predict future employee behaviors.

Elements of behavioral science approach can be summarized as under.

a) An organization is a socio-technical system
b) The interpersonal or group behavior of people in the organization is influenced by a wide range of factors.
c) The goals of the organization are to be harmonized with an understanding of the human needs
d) Multitude of attitudes, perceptions, and values are prevalent amongst employees and these characterize their behavior
and influence their performance
e) As a result, some degree of conflict is inevitable in the organization and not necessarily undesirable.

Contributors to behavioral science theory

The early contributors to Behavioral Theory in the area of human relations were Professor Elton Mayo and Professor
Mary Parker Follet. Building upon the work of these scholars, several sociologists and psychologists contributed early on
to the development of behavioral science approach to Behavior Management Theory.
a) Need Hierarchy Theory by Abraham Maslow
Abraham Maslow, a practicing psychologist, developed one of the most widely recognized need theories, a theory of
motivation based upon a consideration of human needs. Maslow's hierarchy of needs theory helped managers visualize
employee motivation. His theory of human needs had three assumptions:
a) Human needs are never completely satisfied.
b) Human behavior is purposeful and is motivated by the need for satisfaction.
c) Needs can be classified according to a hierarchical structure of importance, from the lowest to highest.

Maslow broke down the needs hierarchy into five specific areas:
a) Physiological needs. Maslow grouped all physical needs necessary for maintaining basic human well‐being, such as
food and drink, into this category. After the need is satisfied, however, it is no longer is a motivator.
b) Safety needs. These needs include the need for basic security, stability, protection, and freedom from fear. A normal
state exists for an individual to have all these needs generally satisfied. Otherwise, they become primary motivators.
c) Belonging and love needs. After the physical and safety needs are satisfied and are no longer motivators, the need for
belonging and love emerges as a primary motivator. The individual strives to establish meaningful relationships with
significant others.
d) Esteem needs. An individual must develop self‐confidence and wants to achieve status, reputation, fame, and glory.
e) Self‐actualization needs. Assuming that all the previous needs in the hierarchy are satisfied, an individual feels a
need to find himself.

b) Theory X and Theory Y by Douglas McGregor

Douglas McGregor was heavily influenced by both the Hawthorne studies and Maslow. An important aspect of
McGregor's idea was his belief that Theory X and Theory Y managers can create self‐fulfilling prophecies — that through
their behavior, these managers create situations where subordinates act in ways that confirm the manager's original
expectations. The two kinds of managers are as follows:
a) Theory X manager, has a negative view of employees and assumes that they are lazy, untrustworthy, and incapable
of assuming responsibility.
b) Theory Y manager assumes that employees are not only trustworthy and capable of assuming responsibility, but also
have high levels of motivation.

1.1.10 Modern Management Theory

Modern theory considers an organization as an adaptive system which has to adjust to changes in its environment. An
organization is now defined as a structured process in which individuals interact for attaining objectives.

[Link].6 Systems Approach

The word system is derived from the Greek word meaning to bring together or to combine. A system is a set of
interconnected and inter-related elements or component parts to achieve certain goals. A system has three significant
parts:
a) Every system is goal-oriented and it must have a purpose or objective to be attained.
b) In designing the system, we must establish the necessary arrangement of components.
c) Inputs of information, material and energy are allocated for processing as per plan so that the outputs can achieve the
objective of the system.

Systems Approach Applied to an Organization: When systems approach is applied to organization, the following are
the features of an organization as an open adaptive system:
a) It is a sub-system of its broader environment.
b) It is a goal-oriented – people with a purpose.
c) It is a technical subsystem – using knowledge, techniques, equipment and facilities.
d) It is a structural subsystem – people working together on interrelated activities.
e) It is a psychosocial system – people in social relationships.
f) It is coordinated by a managerial sub system, creating, planning, organizing, motivating, communicating and
controlling the overall efforts directed towards set goals

Characteristics of Modern Management Thought:

a) The Systems Approach: An organization as a system has five basic parts - (1) Input (2) Process (3) Output (4)
Feedback and (5) Environment. It draws upon the environment for inputs to produce certain desirable outputs. The
success of these outputs can be judged by means of feedback.
b) Dynamic: there is a dynamic process of interaction occurring within the structure of an organization. The equilibrium
of an organization and its structure is itself dynamic or changing.
c) Multilevel and Multidimensional: Systems approach points out complex multilevel and multidimensional character.
There is both a micro and macro approach. A company is micro within a business system. It is macro with respect to
its own internal units including (1) Production subsystem (2) Finance subsystem (3) Marketing subsystem (4)
Personnel subsystem. All parts or components are interrelated, are equally important and at all levels, organizations
interact in many ways.
d) Multi-motivated: Systems approach recognizes that there may be several motivations behind peoples’ actions and
behavior. Management has to compromise these multiple objectives e.g.: - economic objectives and social objectives.
e) Multidisciplinary: Systems approach integrates and uses profit ideas emerging from different schools of thought.
Management freely draws concepts and techniques from many fields of study such as psychology, social psychology,
sociology, ecology, economics, mathematics, etc.
f) Multivariable: It is assumed that there is no simple cause-effect phenomenon. An event may be the result of so many
factors which themselves are interrelated and interdependent. Some factors are controllable, some uncontrollable.
Intelligent planning and control are necessary to face these variable factors.
g) Adaptive: The survival and growth of an organization in a dynamic environment demands an adaptive system which
can continuously adjust to changing conditions. An organization is an open system adapting itself through the process
of feedback.
h) Probabilistic: Management principles point out only probability and never the certainty of performance and the
consequent results due to the many variables occurring simultaneously. Therefore, intelligent forecasting and planning
can reduce the degree of uncertainty to a considerable extent.

[Link].7 Contingency Approach

Contingency approach analyzes and understands sub- systems of an organization along with the super system of
environment so that managerial actions can be adjusted to demands of specific situations or circumstances. Thus the
contingency approach enables us to evolve practical answers to problems demanding solutions. Organization design and
managerial actions most appropriate to specific situations will have to be adopted to achieve the best possible result under
the given situation. There is no one best way to organize and manage. Thus, Contingency Approach to management
emphasizes the fact that management is a highly practice-oriented discipline. It is the basic function of managers to
analyze and understand the environments in which they function before adopting their techniques, processes and practices.
The application of management principles and practices should therefore be contingent upon the existing circumstances.
Contingency approach guides the manager to be adaptive to environment, be pragmatic and open minded. The
contingency approach examines the relationships between sub-systems of the organization, and the relationship between
the organization and its environment.
Limitations of contingency approach
 It does not recognize the influence of management concepts and techniques on environment.
 Literature on contingency management is yet not adequate.

2. Functions of Management
Management is a process which refers to various functions which a manager performs in an organization. Various
management scholars study different organizations at different times and identified separate
functions of management. Henry Fayol classified management functions into five categories they are as given under:
Planning, Organizing, Staffing, Direction and Leadership, Coordinating, Controlling, Motivation

2.1 Planning Function

2.1.1 Definition of planning
A plan is a predetermined course of action for achieving objectives. It’s a framework that details the methods and tasks
that are to be implemented in order to achieve organizational goals. Plans may be tailored to a specific project or they
may be established as a standing plan for future activities or actions

Planning
 It is the process of selection and sequential ordering of tasks that are required to achieve organizational goals.
 It is the process of identifying the task to be achieved, methods to be used and time lines for implementation of tasks.
 Planning precedes action and requires systematic thought.
 It is deciding in the present what will be done in the future.
 It involves setting objectives and the means for achieving them
 It is a process of developing plans

2.1.2 Characteristics of planning

a) Planning is goal oriented – planning is a means towards accomplishing an objective
b) Planning is forward looking or futuristic – it requires looking ahead and preparing for the future
c) Planning involves making choices among alternative courses of actions or alternatives by evaluating each of them to
select the best option
d) Planning is an intellection and imaginative process
e) Planning is a continuous process that requires reviewing old plans in light of planning assumptions so as to replace or
modify those that are no longer valid or needed
f) Planning is an integrated process that incorporates long term, medium term and short term goals to achieve overall
organizational objectives
g) Planning is pervasive or affects the whole organization
h) Planning precedes the execution of all other managerial functions
i) Planning is directed at efficiency and economic achievement of objectives

2.1.3 Importance of planning

a) Planning provides direction for the organization as people know what to do
b) Planning reduces uncertainty and risks guided by predictions into the future that helps prepare well for any eventuality
c) Planning guides decision making
d) Planning facilitates control as the activities and actual performance will be measured against the plans and objectives
therein
e) Planning facilitates coordination hence division of labour and allocation of resources for harmony between different
parts of the organization
f) Planning focuses attention on objectives hence facilitates achievement of organizational goals
g) Planning enhances efficiency in operations and minimizes wastage
h) Planning facilitates optimal allocation of resources by assigning them to competing needs for the maximum benefit of
the organization
i) Planning facilitates decentralization/delegation as it guides the decisions on delegated authority
j) Planning precedes the execution of other activities and functions of management

2.1.4 Need for planning

a) It increases chances of success by focusing on results and not activities
b) It forces analytical thinking
c) It establishes a framework for decision making
d) It orients people to action instead of reaction
e) It modifies the style of management from day to day to future based managing
f) It aids with crisis management and provides decision making flexibility
g) It provides a basis for measuring performance
h) It increases employee involvement and improves communication

2.1.5 Types of plans

a) Strategic plans
These are broad plans developed by top-level managers covering an entire organization and giving the general direction of
the organization. They are long range in nature and provide the direction of the organization in 5 to 10 years. Strategic
plans are developed by scanning the environment, determining the opportunities and threats and developing a strategic fit
for the organization. They are concerned with the allocation of corporate resources. Strategic plans position the
organization within the environment.
b) Tactical plans/Business plans/Competitive plans
Tactical plans have a moderate scope and relate to various units in an organization e.g. marketing, finance, operations,
human resource etc. they are derived from the strategic plans and are medium term in nature. They are developed by the
tactical or middle level managers
c) Operational plans
Operational plans are those with narrowest focus and shortest time-frame. They could be standing plans or single use
plans
Standing plans – are developed to handle routine/recurring situations e.g. procedures, rules, policies etc.
Single use plans – are set up to handle events that happen only once e.g. budgets, programs and projects

d) Contingency plans
Contingency plans involve identifying alternative courses of action in advance of implementation in order to overcome
possible changes in environmental conditions which may affect goal achievement. They add flexibility that assists
managers in the anticipation of chances that may suddenly occur.

Planning Time frame

a) Short-range – refers to plans developed for implementation within the one year and are mostly made by line
managers and employees. They focus on day to day activities and help achieve annual objectives.
b) Medium-term/intermediate planning – these have perspective of 1-5 years and are designed to implement activities
among middle and divisional level managers of an organization
c) Long term planning – these include activities to be performed over an extended period of 5 years and above and may
not have very specific activities. They help an organization remain focused to achieve its vision.

2.1.6 Elements of planning

Planning requires managers to make decisions on the following key elements:
a) Objectives
Objectives specify the needs or expectations to be achieved and the respective targets to be attained e.g. 15% market share
in 2 years. Objectives are concrete, specific and must be SMART (Specific, Measurable, Attainable, Realistic and Time
Bound)
Actions are the preferred means or strategies to achieve the set objectives which depends on a company’s internal
resource capability and available opportunities in the environment
b) Resources
These are the physical assets, raw materials, financial and human resources, time, technology and information within a
company. Managers need to identify required resources, their potential source and the allocation of resources to the
planned activities.
c) Implementation
Implementation involves the assignment and direction of employees to carry out planned activities. It requires effective
communication to employees for effective implementation. Plans can be implemented using policies, procedures,
programs and rules.
 Policies - a policy is a statement that describes the inter-related courses of actions. They serve as guidelines that
channel actions and decisions of managers towards achievement of organizational goals. Organizational policies
have the following purposes:
 Facilitate accomplishment of organizational goals
 Provide guidelines for managerial decision making
 Guide decision making by managers
 To check or restrain managers and subordinates from performing undesirable actions or making decisions that
may affect achievement of organizational goals
 Procedures – these are plans that set out the required method of undertaking organizational activities by detailing
the exact manner in which an activity needs to be done. They are a chronological sequence of the required
methodology for achieving objectives.
 Programs – a program represents activities developed to carry out policies and require action at all levels of the
organization. programs embrace a set of related actions and activities around the plan in order to achieve
objectives.
  Rules – these are statements that precisely describe what should or should not be done without permitted
deviation. rules therefore spell out required action or non-action without discretion to managers.

d) Evaluation
Evaluation refers to the monitoring that is required to ensure that necessary measures are taken for effective
implementation of plans and strategies to achieve organizational goals.

2.1.7 Planning process

a) Identify opportunities
b) Setting objectives – guided by where the organization wants to go, how and when to get there. Objectives for the
organizations are established then distributed to each unit. Objectives provide a rationale for undertaking various
activities as well as indicate direction of efforts. Moreover, objectives focus the attention of managers on the end
results to be achieved. Objectives should be stated in a clear, precise and unambiguous language otherwise the
activities undertaken are bound to be ineffective. As far as possible, objectives should practical, acceptable, workable
and achievable.
c) Determining planning premises – this refers to the planning assumptions about a situation and the environment that
affects the execution and results of the plan. They serve as a basis of planning. Establishment of planning premises is
concerned with finding out what obstacles are there in the way of business during the course of operations and taking
steps that avoids these obstacles to a great extent. Planning premises may be internal which includes capital
investment policy, management labour relations, philosophy of management, etc. or external which includes socio-
economic, political and economic changes. Internal premises are controllable whereas external are non- controllable.
d) Developing alternatives – When forecast is available and premises are established, a number of alternative course of
actions have to be considered. For this purpose, each and every alternative will be evaluated by weighing its pros and
cons in the light of resources available and requirements of the organization. The merits, demerits as well as the
consequences of each alternative must be examined before the choice is being made. After objective and scientific
evaluation, the best alternative is chosen. The planners should take help of various quantitative techniques to judge the
stability of an alternative.
Evaluating the various courses of actions and then selecting the best based on:
Suitability – consider if the course of action is consistent with the organizations situation e.g. vision, mission
Feasibility – consider the practicability of the course of action in terms of resource availability, the costs benefit
analysis and the risks
Acceptability – consider if it is acceptable to the stakeholders
e) Formulating derivative plans. Derivative plans are the sub plans or secondary plans which help in the achievement
of main plan. b. Secondary plans will flow from the basic plan. These are meant to support and expedite the
achievement of basic plans. These detail plans include policies, procedures, rules, programs, budgets, schedules, etc.
For example, if profit maximization is the main aim of the enterprise, derivative plans will include sales
maximization, production maximization, and cost minimization. Derivative plans indicate time schedule and sequence
of accomplishing various tasks.
f) Securing cooperation and participation. After the plans have been determined, it is necessary and advisable to take
subordinates or those who have to implement these plans into confidence. The purposes behind taking them into
confidence are:
 Subordinates may feel motivated since they are involved in decision making process.
 The organization may be able to get valuable suggestions and improvement in formulation as well as
implementation of plans.
 Also the employees will be more interested in the execution of these plans.
g) Follow-up –After choosing a particular course of action, it is put into action. After the selected plan is implemented, it
is important to appraise its effectiveness. This is done on the basis of feedback or information received from
departments or persons concerned which enables the management to correct deviations or modify the plan. This step
establishes a link between planning and controlling function. The follow up must go side by side the implementation
of plans so that in the light of observations made, future plans can be made more realistic.

2.1.8 Approaches to planning

a) Top-down approach - Authority and responsibility is centralized at the top where top management defines the
mission and lays down strategies and plans of action required to achieve stated goals without those at lower levels
participating in the process. The blueprint of the plan is passed on the those at lower levels. Success of this approach
depends upon the qualification, experience and capabilities of top management.
b) Bottom-up approach - Lower level managers are responsible for preparation and implementation of functional plans
which are approved by top management
c) Composite approach – the lower and middle level management are responsible for drafting out plans in accordance
with guidelines and boundaries stated by top management. Every plan is up for discussion and debate and a middle
path is chosen to facilitate smooth implementation of plans
d) Team approach – a team of managers having relevant experience and skills in various functional areas are assigned
the job of planning. The plans are then approved by top management.

2.1.9 Barriers/limitations to planning

a) Lack of planning skills by management
b) Planning is based on forecasts and things may change
c) Planning process is time consuming and expensive
d) Planning may be impacted by resistance to change if required as employees may want to retain status quo
e) The managers who do the planning are usually not the implementers which may lead to misunderstandings by those
who implement if issues are not expressly indicated
f) Powerful people with vested interests may frustrate planning and planners leading to sub-optimal adoption of plans
g) Government interference may affect implementation of plans by setting restricting business policies
h) Lack of resources as planning is expensive
i) Managers may be reluctant to establish goals which may hinder planning which is a process that begins with goal
setting
j) Planning leads to rigidity

2.1.10 Solutions to limitations to planning

a) Have contingency/alternative plans in event that the original plans fail
b) Involve all stakeholder in planning to get more realistic plans that are understood by all
c) Align long term, medium term and short term plans
d) Perform research to obtain adequate information for determining the goals and planning premises
e) Force planning as it will not occur
f) Avail sufficient resources for planning
g) Perform an environmental analysis before documenting the plans
h) Communicate on the planning process
i) Planning should be driven and begin at the top of the organization

2.1.11 Planning tools

2.1.11.1Forecasting as a planning tool
Forecasting is the systematic development of predictions about the future. Managers should estimate how future internal
and external environment conditions will affect their organizations hence adapt quickly to such changes that might affect
their planning activities and other operations. Areas of forecasting include:
a) Revenue forecasting – carried out to determine what future revenue will be
b) Marketing and sales forecast – concerned with demand forecasting of a company’s goods and services
c) Human resource forecast – based on needs of human resources in the future
d) General economic conditions – concerned with past GDP trends, consumer price index, private investment
expenditure, interest rates, foreign exchange etc.
e) Social environment – concerned with trends in societal values
f) Political environment changes
g) Technological changes

Methods of forecasting
a) Qualitative methods – involves judgmental estimates of the future. The methods include
 Brainstorming – which uses a group of individuals with common knowledge in a specific problem area.
Brainstorming allows free flow of creative comments from participants where expert opinion is sought and
refined. Independent experts are consulted to give their opinions which are evaluated and accepted when the
opinions are in agreement.
 Scenarios development – this is an approach used for handling the lack of precision in forecasting. It involves
the development of several scenarios providing different sets of assumptions about future events. The scenarios
describe a logical sequence of events that might occur in future.
 Derived forecast – refers to deriving forecasts from those done by government agencies or other experts which is
closely associated with variables to be predicted
b) Quantitative methods – involve the use of mathematical models to predict the future. The actual data is used in
forecasting e.g. time series analysis, ratio analysis, modeling etc.
Difficulties when forecasting experienced by managers
a) Rapid fluctuation in the external environmental conditions may affect results of forecasting
b) Lack of training on effective use of forecasting tools
c) Cost of forecasting e.g. surveys are very expensive
d) Lack of appreciation by managers of the importance of forecasting or planning and other management decisions
e) Inaccurate data in forecasting hence poor results and decisions
f) Inaccurate judgement estimates e.g. in brain storming sessions

2.1.11.2Budgeting a planning tool

A budget is a description of spending and financing plans of an individual, business or government that enables managers
to plan for the financial implications of the principal activities to be implemented in an organization.

Importance of budgeting to managers

a) It serves as a planning and control tool by setting predetermined criteria against which managers can compare actual
results of their performance
b) Serves as a tool of coordinating the activities of various functions and operating segments of the organization
c) Provides managers with the basis for allocating resources
d) Information from budgets enables managers to estimate and anticipate financial results or future commitments

2.2 Organizing Function

2.2.1 Meaning of organizing
It is the process of bringing together physical, financial and human resources and developing productive relationship
amongst them for achievement of organizational goals. To organize a business involves determining & providing human
and non-human resources to the organizational structure. Human resources include the personnel that make up the
organization’s membership. For a corporation this means the paid employees. Financial resources equate to the access
to capital a firm has. Physical resources are the tangible assets that allow an organization to create a product or service.
This includes the office space, working space, and the materials the organization uses to create a product. Informational
resources include the knowledge that organization creates and retains regarding its operation and mission. This
information includes copyrights, intellectual property, as well as internal processes that give an organization a competitive
advantage. Other organizational resources include
 the goodwill an organization creates through philanthropy, reputation in how they conduct their business, and the
external relationships they have with outside stakeholders that they can leverage to pursue their goals.
 the rapport they have with customers, government agencies and suppliers
 Authority which is defined as the ability to make decisions. This entails all of the decisions to make decisions from
the top level of the organization regarding direction to the choices that individuals make regarding how they spend
their time throughout the day

2.2.2 Organization as a process and structure

Organizing can be understood as a process or a structure:

Organizing as a process
It refers to the way in which the work of a group is arranged and distributed among members to efficiently achieve the
objectives. It creates a relationship of one job to another and lays down the scope of authority and responsibility. The
duties are fixed in such a manner so that the work is performed with speed, accuracy and economy.

Organizing as a structure
An Organization Structure shows the authority-responsibility relationship between the various positions in the
organization by showing who reports whom, it lays down the pattern of communication and coordination in the enterprise.
It facilitates growth of the enterprise by increasing capacity to handle diversified situations. Structure provides a means of
balancing two conflicting forces
 Need for the division of tasks into meaningful groupings
 Need to integrate the groupings for efficiency & effectiveness

2.2.3 Elements of organizing

Element 1: Division of Work: It means dividing the work into specific tasks with deadlines to their completion. Once
the work is divided, the tasks are distributed to different functional areas of the organization as production, marketing,
finance and personnel.
Element 2: Grouping of Activities: The tasks are grouped into different departments on the basis of similarity of their
features. This is called departmentation. The common forms of departmentation are as follows:
 Functional Departmentation (Grouping Activities by Functions Performed): Activities can be grouped
according to functions (work being done) to pursue economies of scale by placing employees with shared skills
and knowledge into departments, e.g., human resources, IT, accounting, manufacturing, logistics, and
engineering. Functional departmentalization can be used in all types of organizations.
 Product Departmentation (Grouping Activities by Product Line): Tasks are grouped according to a specific
product or service. All activities related to the product or the service are placed under one manager. Each major
product area in the company is under the authority of a senior manager who is specialist in, and is responsible for
everything related to the product line. For a shoe company, the structure could be based on product lines like
women’s footwear, children’s footwear and men’s footwear.
 Customer Departmentation (Grouping Activities on the Basis of Common Customers or Types of Customers):
Jobs are grouped according to the type of customers served by the organization assuming that customers in each
department have a common set of problems and needs that can best be met by specialists. For example, the sales
activities in the organization can be broken down into three departments that serve retail, wholesale and
government accounts.
 Geographic Departmentation (Grouping Activities on the Basis of Territory): If the customers are
geographically dispersed, jobs can be grouped on the basis of geographical locations. For example, the
organization structure of a company can reflect its operations in two broad geographic areas – the national sector
and the international sector. The national sector could further be divided into north zone, south zone, east zone
and west zone.
 Process Departmentation (Grouping Activities on the Basis of Product or Service or Customer Flow): Process
departmentalization allows homogenous activities to be categorized in one department because each process
requires different skills. For example, the applicants might need to go through several departments namely
validation, licensing and treasury, before receiving the driver’s license. Each department looks after specific
sequence of the process which increases the speed and efficiency of that process.
Element 3. Distribution of Authority: Once the departments are created, members are given authority to perform the
tasks assigned. Authority specifies the discretion of employee over his work. In a formally designed organization
structure, employees’ behavior is bound by rules, regulations and policies but in a comparatively less formal organization
structure, they have a great deal of freedom in deciding how they perform their work. “Authority is the legitimate power
of the supervisor to direct subordinates to take action within the scope of the supervisor’s positions.”
Element 4. Coordination: When people perform tasks assigned to them at different levels in different departments, it has
to be ensured that the tasks are related to each other and aim at unified goals. This requires coordination amongst the tasks
of all the organizational members. Coordination is the act of organizing, making different people or things work together
for a goal or effort to fulfil desired goals in the organizations. It is a managerial function that aims to adjust and interlink
activities of the business.

2.2.4 Importance of organizing

a) Specialization - Organizational structure is a network of relationships in which the work is divided into units and
departments. This division of work helps in bringing specialization in various activities of concern.
b) Well defined jobs - Organizational structure helps in putting right people on right job which can be done by selecting
people for various departments according to their qualifications, skill and experience. This is done by defining the
jobs properly which clarifies the role of every person.
c) Clarifies authority - Organizational structure helps in clarifying the role positions to every manager (status quo).
This can be done by clarifying the powers to every manager and the way they have to exercise those powers should be
clarified so that misuse of powers does not take place. Well defined jobs and responsibilities attached helps in
bringing efficiency into managers work hence increasing productivity
d) Co-ordination - Organization is a means of creating co-ordination among different departments of the enterprise. It
creates clear cut relationships among positions and ensures mutual co-operation among individuals. Harmony of work
is achieved when higher level managers exercising their authority over interconnected activities of lower level
manager. Authority and responsibility relationships can be fruitful only when there is a formal relationship between
the two. For smooth running of an organization, the co-ordination between authority and responsibility is very
important.
e) Effective administration - The organization structure is helpful in defining the jobs positions and roles to be
performed by different managers are clarified. Specialization is achieved through division of work which leads to
efficient and effective administration
f) Growth and diversification - A company’s growth is totally dependent on how efficiently and smoothly a concern
works. Efficiency can be brought about by clarifying the role positions to the managers, co-ordination between
 authority and responsibility and concentrating on specialization. In addition to this, a company can diversify if its
potential grow. This is possible only when the organization structure is well- defined through a set of formal structure
g) Sense of security - Organizational structure clarifies the job positions and the roles assigned to every manager is clear
hence enabling co-ordination. Therefore, clarity of powers helps automatically in increasing mental satisfaction and
thereby a sense of security which is very important for job satisfaction.
h) Scope for new changes - Where the roles and activities to be performed are clear and every person gets independence
in his working, this provides enough space to a manager to develop his talents and flourish his knowledge. A manager
gets ready for taking independent decisions which can be a road or path to adoption of new techniques of production.
This scope for bringing new changes into the running of an enterprise is possible only through a set of organizational
structure.

2.2.5 Principles of organizing

a) Principle of Consideration of Unity of Objectives: The objective of a business influences the organization structure.
The organization is a mechanism to achieve the goals which must be clearly laid down including the method of
achieving in detail and in precise terms so that the organizers may know the type of organization that is needed.
There must be unity of objectives so that all efforts can be concentrated on the set-goals.
b) Principle of Specialization: Effective organization must include specialization because optimum output can be
obtained when each person concentrates on doing the thing for which he/she is best qualified. Precise division of work
facilitates specialization though each area of specialization must be interrelated to the total integrated system by
means of co-ordination in all departments and activities.
c) Principle of Co-Ordination: Co-ordination express the principles of organization as a whole and is the orderly
arrangement of group effort to provide unity of action in the pursuit of common purpose. Organization involves
division of work among people whose efforts must be co-ordinated to achieve common goals high efficiency and
effectiveness.
d) Principles of Scaler Chain: It points out clear and unbroken line of authority. The chain of authority/command must
be clearly defined for sound organizational purposes. The line of authority flows from the highest executive to the
lowest managerial level and the chain of command should not be broken. It should be short i.e. it should have few
levels of management. Every subordinate must know who is their supervisor and to whom policy matters beyond their
own authority must be referred to, for decision.
e) Principle of Commensurate Authority and Responsibility: According to this principle when an individual is
responsible for a certain task, they should be given the authority to carry out that task. Without commensurate
authority and responsibility, they cannot be held accountable for the unsuccessful completion of the task as they have
very little control over the situation. Authority should be equal to responsibility i.e. each manager should have enough
authority to accomplish the task.
f) Principle of Ultimate Responsibility: The responsibility of higher authority for the acts of a manager’s subordinates
is absolute. Responsibility to perform a task, is given to a subordinate by the supervisor and if the subordinate
commits mistake, in such situation the supervisor is answerable to his superiors. They cannot escape responsibility by
saying that mistake was committed by a particular worker.
g) Principle of Efficiency: The organization structure should enable the enterprise to attain objectives with the lowest
possible cost. An efficient organization structure operates without wasting its scarce resources and permits maximum
use of its human resources and their talents.
h) Principle of Delegation: The chief executive, for obvious limitations, cannot do the whole work of the organization
themselves and hence takes assistance from others to accomplish the objectives. Work is divided into a number of
activities and groups on the basis of their similarity and this creates a number of departments. Delegation is the
process through which departments are tied together by establishing relationship between them for co-operative and
integrated action. Delegations may be vertical or horizontal. If delegation of authority is not carefully done, the very
existence of the organization is in danger and chaos and confusion may be raised. Authority and responsibility should
be delegated as far down in the organization as possible i.e. to the lowest level of the organization at which the
particular responsibility can be efficiently discharged.
i) Principle of Unity of Command: The core of this principle is that an individual can serve only one boss. It means
that instructions and directions to a subordinate must come from one person only. Each subordinates must have one
superior, to whom he should be answerable. This helps in avoiding conflict in command and in fixing responsibility.
It clarifies authority – responsibility and relationship.
j) Principles of Span of Control/Supervision According to this principle, span of control is a span of supervision
which depicts the number of employees that can be handled and controlled effectively by a single manager. This
decision can be taken by choosing either from a wide or narrow span.
k) Principle of Balance: There should be reasonable balance in the size of various departments, between
standardization of procedures and flexibility between centralization and decentralization. Similarly, there should be
balance between the principle of span of control and the short chain of command.
l) Principle of Communication: A good communication network is essential for smooth flow of information and
understanding and for effective business performance. The line of authority offers a standing channel for downward
and upward communication.
m) Principle of Personal Ability: People constitute an organization. Proper selection, placement and training need not
be over emphasized. Organization structure must encourage management development program and ensure optimum
use of human resources.
n) Principle of Exception: Under the exception principle recurring decisions should be handled in a routine manner by
the lower level manager, whereas problems involving unusual matters should be referred to the higher level. The
executives at the higher level of an organization have limited time and capacity. They should not be bothered by
routine problems which can as well be managed by subordinates.
o) Principle of Flexibility: The structure of an organization must be flexible so that adjustments necessitated by
changed circumstances may be planned and incorporated in it. The organization is expected to provide built-in
devices to facilitate growth and expansion without dislocation. It should be adaptable to changing circumstances not
rigid or inelastic.
p) Principle of Departmentation: It enables the division of activities into specialized groups to attain organizational
objectives. A good organization involves precise and systematic distribution of work and responsibilities between
managerial group and administrative group. Departmentation maintains balance and harmony in the working of the
organization.
q) Principle of Division of Work: Specialization in organizational functions is necessary for the most effective
attainment of objectives. Specialization depends on division of work. Total activities of an enterprise should be
divided and grouped into departmental, sectional and individual activities to facilitate division of work.
r) Principle of Definiteness: Each activity must contribute to the primary or basic goals of an enterprise with minimum
of effort and maximum efficiency on the part of the employees. This contribution should be well defined and definite.
s) Principle of Discipline: Discipline is vitally important in all types of organizations. In its absence, it is difficult to
achieve success.
t) Principle of Simplicity: The organization should be kept as simple as possible so that there should not be any
confusion and misunderstanding among the superiors and subordinates.
u) Principle of Separation of Line and Staff Function: Line function should be separated from the staff functions.
v) Principle of Continuity of Operations: The form of an organization should be such that it facilitates the continuous
performance of all the activities necessary for the continuance and growth of the enterprise.
w) Principle of Leadership: Organization structure should create a favorable environment or situation in which the
manager can most effectively lead and motivate his subordinates.
x) Principle of Definition: The duties responsibilities, authority and relations of everyone in the organizational
structure should be clearly and completely defined preferably in writing. An individual will accomplish a task in a
given period only when the responsibility for that task is fixed upon him.
y) Principle of Work Assignment: The work assignment for each individual in the organization should take into
consideration the special strength and talents of the individual. This means that an individual should be given an
assignment commensurate with his or her ability and interest.
z) Principle of Employee Participation: Employees should be encouraged to participate, as much as possible, in the
decision making process. Employees are given recognition and are motivated to work harder by encouraging their
participation. But, in spite of participation by employees in the decision making process, the ultimate responsibility
for the decision must rest with the manager or supervisor.

2.2.6 Process of organizing

a) Determination of objectives - The purpose of the organization must be identified. Objectives determine resources
and various activities which should be done to achieve the organizational goals.
b) Identification and grouping of activities - If group members are to pool their efforts successfully, there must be
proper division of the major activities. Each job should be accurately classified and grouped. This will avoid
duplication of work.
c) Assignment of duties - After grouping the activities into various jobs, as per the nature of work, similar activities
should be placed under one department. Each individual should be given a particular task according to his ability and
skills.
d) Establishing relationship among individuals and group - The activities which are performed by persons holding
different positions must be related. Every person in the organization should know about his responsibility, authority
 and accountability so that there is coordination, among individuals and departments. The organizing process results in
an organization structure with precisely defines authority and responsibilities.

2.3 Staffing
2.3.1 Meaning of staffing
Staffing is the managerial function of manning the organizational structure through systematic and effective selection,
appraisal, development, compensation and retaining of competent individuals to fill the roles assigned to the
employers/workforce, and charging them with the associated responsibilities. More capable persons are appointed on
more important posts and comparative less competent persons can be appointed on less important posts. The scope of the
meaning of staffing includes all of those members of the organization whose function it is to get things done through the
effort of other individuals. This definition includes all levels of management because those who will occupy positions in
the top two or three levels of management fifteen or twenty years from now are likely to be found in the lower levels
today. In most of the large, scale organizations there is a separate human resource department which performs staffing
function but in small organizations the line managers only perform all the functions.

2.3.2 Nature of Staffing

a) People Centered: Staffing is people centered and is relevant in all types of organizations. It is concerned with all
categories of personnel from top to bottom of the organization. The broad classification of personnel may be as
follows:
 Blue collar workers (i.e., those working on the 'shop floor', machines and engaged in loading, unloading etc.) and
white collar workers (i.e., clerical employees).
 Managerial and non-managerial personnel.
 Professionals (such as Chartered Accountant, Company Secretary, Lawyer, etc.).
b) Responsibility of Every Manager: Staffing is a basic function of management where every manager is continuously
engaged in performing the staffing function. The manager is actively associated with recruitment, selection, training
and appraisal of their subordinates. In many enterprises a human resource department is created to perform these
activities. But it does not mean that the managers at different levels are relieved of the responsibility concerned with
staffing. The human resource department is established to provide assistance to the managers in performing their
staffing function. Thus, every manager has to share the responsibility of staffing.
c) Human Skills: Staffing function is concerned with training and development of human resources. Every manager
should use human relations skill in providing guidance and training to the subordinates. Human relations skills are
also required in performance appraisal, transfer and promotion of subordinates. If the staffing function is performed
properly, the human relations in the organization will be cordial.
d) Continuous Function: Staffing function is to be performed continuously. It is equally important in the established
organizations and the new organizations. In a new organization, there has to be recruitment, selection and training of
personnel. In a running organization, every manager is engaged in various staffing activities. He is to guide and train
the workers and also evaluate their performance on a continuous basis.

Staffing involves:
a) Manpower Planning (estimating man power in terms of searching, choose the person and giving the right place)
b) Recruitment, Selection & Placement
c) Training & Development
d) Remuneration
e) Performance Appraisal
f) Promotions & Transfer

2.3.3 Importance of staffing

Staffing is people centered. Success in dealing with people will depend upon the degree to which they are perceived as
making realistic contribution to the solution of management’s problems. It should be remembered that every manager is
expected to perform this function because he is engaged in getting things done through and with the help of people. There
are various benefits of proper and efficient staffing.
a) Helps in finding efficient worker - Staffing helps in discovering talented and competent workers and develops them
to work more efficiently for achievement of organizational goals.
b) Increased Productivity – Staffing ensures greater production by putting right person at the right job. People
constitute the organization at all levels and are regarded as the only dynamic factor of production. It is not very
difficult to handle material resources, but, without the efficient use of human resources, management can never
accomplish the end objectives of the undertaking
c) Optimum utilization of human resources- Staffing helps in proper utilization of the available personnel.
Organizations spend money on recruitment, selection, training and development of employees. In order to get the
optimum output from the personnel, the staffing function should be performed in an efficient manner
d) Survival and Growth - Efficient Performance of All Functions: Staffing is the key to the efficient performance of
other functions of management. If an organization does not have competent personnel, it can’t perform planning,
organization and control functions properly. By appointing efficient staff, staffing ensures continuous survival and
growth of the enterprise.
e) Effective Use of Technology and Other Resources: It is the human factor that is instrumental in the effective
utilization of latest technology, capital, material, etc. the management can ensure right kinds of personnel by
performing the staffing function.
f) Development of Human Capital: The management is required to determine the manpower requirements well in
advance. It has also to train and develop the existing personnel for career advancement. This will meet the
requirements of the company in future.
g) Competitive edge: Two competing organizations can have the same physical and financial resources but what helps
organization to have an edge over the other is efficient staff.
h) Motivation of Human Resources: The behaviour of individuals is shaped by many factors such as education level,
needs, socio-cultural factors, etc. that is why, the human aspect of organization has become very important. The
workers can be motivated through financial and non-financial incentives.
i) Building Higher Morale: Right type of climate should be created for the workers to contribute to the achievement of
the organizational objectives. By performing the staffing function effectively, management can show the significance
it attaches to the personnel working in the enterprise. This will increase the morale of the employees and their job
satisfaction.
j) Maintains Harmony - Staffing maintains harmony in the organization. Through proper staffing, individuals are not
just recruited and selected but their performance is regularly appraised and promotions are done. This gives everyone
an equal opportunity for getting better compensation which finally results in peace and harmony.

2.3.4 Staffing process

1. Baseline Information
Information regarding employees, the job description, the age and the designation, the years of work etc. needs to be
maintained within the organization. An up to date inventory is very much crucial for carrying out the planning of the man
power.
2. Estimating Manpower requirements
The very first step in staffing is to plan the manpower inventory required by a concern in order to match them with the job
requirements and demands. Therefore, it involves forecasting and determining the future manpower needs of the business
with regards to the number and type of employees needed. The type of people includes qualification, educational
background etc. Estimating manpower requirement, can be done through the following steps
 Workload Analysis: This requires finding number and type of employees required to perform various jobs designed
in organizational structure.
 Workforce Analysis: It means analyzing existing workforce or employees already occupying positions and how
many of them are overburdened or underworked.
 Comparison: After performing work load analysis and workforce analysis, the manager determines if there is an
excess of work load over workforce, indicated under staffing. Excess of workforce over work load indicates over
staffing should result in redeployment or transfer, or in the extreme case, retrenchment. Both overstaffing as well as
understaffing are undesirable.

3. Recruitment
Recruitment is a positive process of searching for prospective employees and stimulating them to apply for the jobs in the
organization. When more persons apply for jobs then there will be better scope for recruiting better persons. Recruitment
is a linkage activity bringing together those with jobs and those seeking jobs. The scientific recruitment process leads to
higher productivity, better wages, high morale, reduction in labour turnover and enhanced reputation. Recruitment is
concerned with reaching out, attracting, and ensuring a supply of qualified personnel. It is then followed by selection and
placement. The process is as follows:
a) Position Announcement
 Involves advertising, informing Recruiting Agencies, approaching the Employment Exchange, Education
Institutions for Campus Interviews, Personnel or Manpower Consultants, Labour Contractors, considering
recommendations etc. It can also be announced within the company itself.

Major steps that are or can be performed during the position announcement can be summarized as follows:
 • Advertising with the media – details of job description is advertised and details of candidates’ qualification,
knowledge, skills, abilities, interest and experience are invited in the form of an application.
• Deciding the selection criteria.
• Deciding the ways for carrying out the interviews
 The management of the organization has a choice to consider either internal or external recruitment
The advantages of internal recruitment are:
• Economic: Considerable savings can be made. Individuals with inside knowledge of how a business operates
will need shorter periods of training and time for 'fitting in'.
• Familiarity: The organization is unlikely to be greatly 'disrupted' by someone who is used to working with
others in the organization.
• Motivational Value: Internal promotion acts as motivation and an incentive to all staff to work harder within
the organization.
• Reducing Risk: From the firm's point of view, the strengths and weaknesses of an insider will have been
assessed. There is always a risk attached to employing an outsider who may only be a success 'on paper'.

The disadvantages of internal recruitment are:

• You will have to replace the person who has been promoted
• Promotion of one person in a company may upset someone else. May cause resentment amongst internal
candidates not appointed.
• Reduced choices as it limits the number of potential applicants.
• No new ideas can be introduced from inside. Also, an insider may be less likely to make the essential criticisms
required to get the company working more effectively.
• Creates another vacancy which needs to be filled

The advantages of external recruitment are:

• Outside people bring in new ideas
• Larger pool of workers from which to find the best candidate
• People have a wider range of experience
• The competition from external sources can motivate internal efficiencies at work.

The disadvantages of external recruitment are:

• Longer, more expensive process due to advertising and interviews required. The costs generally incurred in a
recruitment process include - Salary of recruiters, cost of time spent for preparing job analysis, advertisement,
Administrative expenses, cost of outsourcing or overtime while vacancies remain unfilled, cost incurred in
recruiting unsuitable candidates.
• Selection process may not be effective enough to reveal the best candidate.
• Frustration amongst internal resources who have reduced chances of promotions.

b) Screening and Short listing

Listing Suitability for a job is typically assessed by looking for skills, e.g. professional skills, communication skills,
typing skills, computer skills. Evidence for these skills required for a job may be ascertained in the following ways:
 Primary level interviews
 Resume or Curriculum Vitae - qualifications (educational or professional), experience in a job requiring the
relevant skills.
 Testimony of references.
 Computerized tests
 Preliminary written tests
As the limit of the period within which the company is supposed to receive applications ends, the applications are sorted
out. Applications are screened against the qualification, knowledge, skills, abilities, interest and experience mentioned in
the job specification. Accordingly, candidates are 'short-listed', to be selected through interviews and other selection
methods. Those with incomplete applications and applicants with un-matching job specifications get rejected.
4. Selection
This is the screening step of staffing in which the solicited applications are screened out and suitable candidates are
appointed as per the requirements. A scientific and logical selection procedure leads to scientific selection of candidates.
Activities undertaken during selection may include:
a) Written tests: the written test is conducted for understanding the technical knowledge, attitude and interest of the
candidates and is a useful process when the number of applicants is large.
 b) Psychological tests: are conducted individually and they help for finding out the individual quality and skill of a
person. The types of psychological tests are aptitude test, intelligence test, synthetic test and personality test
c) Personal interview: The interviewers may be individual or a panel. The candidates are asked several questions
about their experience on another job, their family background, their interests, etc. They are supposed to describe
their expectations from the said job. Their strengths and weaknesses are identified and noted by the interviewers
which help them to take the final decision of selection.
d) Reference check: Generally, at least two references are asked for by the company from the candidate. Reference
check is a type of crosscheck for the information provided by the candidate through their application form and
during the interviews.
e) Medical examination: Physical strength and fitness of a candidate is must before they take up the job. In-spite of
good performance in tests and interviews, candidates can be rejected on the basis of their ill health.
5. Final selection: At this step, the candidate is given the appointment letter to join the organization on a particular date.
The appointment letter specifies the post, title, salary and terms of employment. Generally, initial appointment is on
probation and after specific time period it becomes permanent.
6. Communication - • It is very necessary to communicate the results of an interview immediately as far as possible as a
part of the business etiquette. • Those who are selected should be given the appointment letter. • Those who are not
selected should be informed immediately as with the help of this, the anxiety in these persons can be decreased. • A
confirmation about the candidates who are joining must be obtained.
7. Placement - Placement refers to occupying of post by the candidate for which he is selected. After selection, the
employee is given an appointment letter and is asked to occupy the vacant job position. A suitable job is allocated to
the appointed candidate so that they can get the whole idea about the nature of the job. They can get adjusted to the
job and perform well in future with all capacities and strengths.
8. Induction - Induction is an orientation process and refers to introduction of new employees to the existing employees.
Some organizations arrange for orientation programs to familiarize the new employees with the existing. This is
sometimes done by the superior who takes the new employees round and introduces them to the existing employees.
For properly utilizing the potential of the new employee, it is very necessary that the new person assimilates the work
ethos and the culture and should be made comfortable and familiar to the day to day activities. The work manual that
includes the rules and regulations of an organization is also given to the new person together with an identity card.
9. Training and Development - Training is a part of incentives given to the workers in order to develop and grow them
within the business. Training is generally given according to the nature of activities and scope of expansion in it.
Along with it, the workers are developed by providing them extra benefits of in-depth knowledge of their functional
areas. Development also includes giving them key and important jobs as a test or examination in order to analyze their
performances.
10. Performance Evaluation - In order to keep a track or record of the behavior, attitudes as well as opinions of the
workers towards their jobs. For this regular assessment is done to evaluate and supervise different work units in a
concern. It is basically concerning to know the development cycle and growth patterns of the employees in a business.
11. Promotion and transfer - Promotion is said to be a non-monetary incentive in which the worker is shifted to a higher
job demanding bigger responsibilities. Transfers relate to shifting the workers to different work units and branches of
the same organization

2.4 Directing
2.4.1 Meaning of directing
Is said to be a process in which the managers instruct, guide and oversee the performance of the workers to achieve
predetermined goals. It is considered life-spark of the enterprise which sets in motion the action of people because
planning, organizing and staffing are the mere preparations for doing the work. Direction is that inert-personnel aspect of
management which deals directly with influencing, guiding, supervising and motivating sub-ordinates for the achievement
of organizational goals.

2.4.2 Characteristics/features of directing

a) Directing Initiates Action: Other functions prepare a base or setting for action. Directing initiates action and it is
from here actual work starts. By giving directions or instructions the managers get the work started in the
organization. Direction function helps in converting plans into performance. Without this function, people become
inactive and physical resources are meaningless.
b) Continuing Function: Directing is a continuous process. A manager cannot just rest after issuing orders and
instructions. He has to continuously guide, supervise and motivate his subordinates. He must continuously take steps
to make sure that orders and instructions are carried out in accordance of plan. Direction is a continuous activity as it
is continuous throughout the life of an organization.
c) Directing takes place at every level: Directing is a pervasive function as it is performed by managers at all levels and
in all locations. Every manager has to supervise, guide, motivate and communicate with his subordinate to get things
done. However, the time spent in directing is comparatively more at operational level of management. Directing takes
place wherever superior subordinate relation exists.
d) Directing flows from Top to Bottom: Directions are given by managers to their subordinates. Every manager can
direct his immediate subordinate and take directions from his immediate boss. Directing starts from top level and
flows to lower levels of management.
e) Performance Oriented: Directing is a performance oriented function. The main motive of directing is bringing
efficiency in performance. Directing converts plans into performance. Performance is the essence of directing.
Directing functions direct the performance of individuals towards achievement of organizational goal.
f) Human Element: The directing function is related to subordinates and therefore there is a human element to it. Since
human factor is complex and behaviour is unpredictable, the direction function is a delicate one. Directing function
involves study and molding of human behaviour. It improves interpersonal and intergroup relationship. It motivates
employees to work with their best ability.

2.4.3 Techniques of direction

a) Consultative Direction: Here a superior will have consultation with the subordinates before issuing orders.
Consultation is carried out in order to know the feasibility, enforceability and nature of problem. Ultimately, the
superior has the right to take any decision and give appropriate directions.
b) Free rein direction: Here subordinates are encouraged to solve the problem independently. Only highly educated,
intelligent, experienced and sincere subordinates are given the opportunity to work in an environment relatively free
of supervision.
c) Autocratic direction: This is the opposite of free rein direction. The superior commands his subordinates and
exercises close supervision. There is no scope for the subordinates to show initiative.

2.4.4 Elements of directing

[Link] Supervision
It refers to a more hands-on monitoring of progress made in the routine work of one’s subordinates while guiding them
properly. Supervision has an important feature that face-to-face contact between the supervisor and his subordinate is a
must. It also refers to an art of transferring facts, ideas, feeling, etc. from one person to another and making him
understand them. Supervision is the overseeing, monitoring and regulating of: 1. processes, 2. delegated activities, 3.
responsibilities, 4. or tasks of a person or group

A supervisor is a manager at the lower level in the organization, who directly supervises non-managerial employees of the
company. As managers, the supervisors perform the same type of work as any other managers in the company. This
includes the four basic functions of planning, organizing, directing and control. However, their work requires less of
planning and organizing responsibilities as compared to directing/leading and control activities.

Roles of a Supervisor
a) Planner - A supervisor has to plan the daily work schedules and to divide the work between various workers
according to their abilities.
b) Manager - A supervisor is a part of the management team of an enterprise
c) Guide and Leader – A supervisor leads and inspires the workers by guiding them in the performance of their daily
tasks.
d) Mediator - A Supervisor is called a linking pin between management and workers. He is the spokesperson of
management as well as the employee.
e) Inspector - A supervisor enforces discipline which includes checking progress of work against the time schedule,
recording the work performances at regular intervals and reporting the deviations if any from those. He can also frame
rules and regulations which have to be followed by workers during their work.
f) Counselor - A supervisor plays the role of a counselor to the worker’s problem. He has to perform this role in order
to build good relations and co-operation from workers. This can be done not only by listening to the grievances but
also handling the grievances and satisfying the workers.

[Link] Motivation
It refers to that process which induces, inspires or excites people to work for attainment of the desired objective.
Motivation is literally the desire to do things. Motivation is a state of mind. High motivation leads to high morale and
greater production. A motivated employee gives his best to the organization. He stays loyal and committed to the
organization. It is the internal and external factors that stimulate desire and energy in people to be continually interested
and committed to a job, role or subject, or to make an effort to attain a goal.

There are three inter-related terms:

Motive - It is an emotion, desire, physiological need, or similar impulse that acts as an incitement to action. Motivation –
It is a process that stimulates people to act in order to achieve the predetermined goals. Motivators – Tools and
mechanisms used to motivate people in an organization.

Characteristics of Motivation
a) Motivation is an Internal Feeling: Motivation is a psychological concept and has to come from within each
individual. Needs appear in the mind of an individual which affect his behaviour. He wants to do some work in order
to satisfy those needs. There are two desire based factors in motivation –
(a) Fundamental needs, such as food, clothes and shelter and
(b) Ego-satisfaction including self-esteem, recognition from others, opportunities for achievements, self-
development and self-actualization which act as powerful though unconscious, motivator of behaviour. Inner
motivation can be more decisive for behaviour than any external influence.
b) Motivation Produces Goal-directed Behaviour: Motivation is a power which leads the employees to the
achievement of their goal. The behaviour of the motivated employees clearly shows that they are inclined towards the
achievement of their goal. For example, promotion is a technique of motivation. The employees who desire to be
promoted definitely improve their work performance.
c) Motivation can be either Positive or Negative: There are two types of employees from the point of view of
motivation – those who are diligent as well as shirkers. Those employees who are diligent in the true sense of the
word are encouraged with some awards. This is called positive motivation. On the other hand, those workers who are
by nature shirkers are encouraged to work with the threat of demotion, suspension or termination. Such people start
working because of the fear factor. This is an example of negative motivation.
d) Motivation is a Complex Process: All the people working in an organization are different in nature. All have
different needs. Therefore, everybody cannot be motivated with only one motivator. Keeping in mind the needs of the
person concerned, monetary and non-monetary techniques are used. Therefore, it is a complex process.
e) Motivation is an Unending Process: a human being is a social animal with numerous wants which induce him to
work. If one basic need is adequately satisfied for a given individual, it loses power as a motivator but at the same
time others needs continue to emerge. Wants are innumerable and cannot be satisfied at one time. It is an unending
process so the process of motivation is also unending to induce the person to satisfy his innumerable wants. The
importance of motivation is to keep it alive and not to let it dwindle.

Monetary and Non-Monetary Factors of Motivation The motivational factors that motivate a person to work and
which can be used to enhance their performance can be classified into two categories—monetary factors and non-
monetary factors.
a) Monetary Factors: Monetary factors are extrinsic to work, such as the following:
 Salary or wages: This is one of the most important motivational factors in an organization. Salaries and wages
should be fixed reasonably and paid on time.
 Bonus: Bonus is an extra payment over and above salary, and it acts as an incentive to perform better. It is linked
to the profitability and productivity of the organization.
 Financial incentives: The organization provides additional incentives to their employees such as medical
allowance, travelling allowance, house rent allowance, hard duty allowance and children educational allowance.
 Promotion (monetary part): Promotion is attached with increase in pay, and this motivates the employee to
perform better.
 Profit sharing: This is an arrangement by which organizations distribute compensation based on some
established formula designed around the company’s profitability.
 Stock option: This is a system by which the employee receives shares on a preferential basis which results in
financial benefits to the employees.
b) Non-monetary Factors: Non-monetary factors are rewards intrinsic to work, such as the following:
 Status: An employee is motivated by better status and designation. Organizations should offer job titles that
convey the importance of the position.
 Appreciation and recognition: Employees must be appreciated and reasonably compensated for all their
achievements and contributions.
 Work-life balance: Employees should be in a position to balance the two important segments of their life—work
and life. This balance makes them ensure the quality of work and life. A balanced employee is a motivated
employee.
  Delegation: Delegation of authority promotes dedication and commitment among employees. Employees are
satisfied that their employer has faith in them and this motivates them to perform better.
 Working conditions: Healthy working conditions such as proper ventilation, proper lighting and proper
sanitation improve the work performance of employees.
 Job enrichment: This provides employees more challenging tasks and responsibilities. The job of the employee
becomes more meaningful and satisfying.
 Job security: This promotes employee involvement and better performance. An employee should not be kept on
a temporary basis for a long period.

Importance of Motivation
Motivation is a very important for an organization because of the following benefits it provides:
a) Puts human resources into action - Every concern requires physical, financial and human resources to accomplish
its goals. It is through motivation that the human resources can be utilized optimally. This can be done by building
willingness in employees to work. This will help the enterprise in securing best possible utilization of resources.
b) Improves level of efficiency of employees - The level of an employee does not only depend upon his qualifications
and abilities. For getting the best employee work performance, the gap between ability and willingness has to be filled
which helps in improving the level of performance of subordinates. This will result into-
• Reducing absenteeism
• Reducing employee turnover
• Increase in productivity
• Reducing cost of operations, and
• Improving overall efficiency.
c) Leads to achievement of organizational goals - The goals of an enterprise can be achieved only when the following
factors take place: -
• There is best possible utilization of resources,
• There is a co-operative work environment,
• The employees are goal-directed and they act in a purposive manner,
• Goals can be achieved if co-ordination and co-operation takes place simultaneously through effective
motivation.
d) Builds friendly relationship - Motivation is an important factor which brings employees satisfaction. This can be
done by framing an incentive plan for the benefit of the employees. This could initiate the following things:
• Monetary and non-monetary incentives,
• Promotion opportunities for employees,
• Disincentives for inefficient employees. In order to build a cordial, friendly atmosphere in a concern, the above
steps should be taken by a manager. This would help in the following ways:
• Effective co-operation which brings stability,
• Industrial dispute and unrest in employees will reduce,
• The employees will be adaptable and there will be less resistance to any change,
• This will help in providing a smooth and sound concern in which individual interests will coincide with the
organizational interests,
• This will result in profit maximization through increased productivity.
e) Leads to stability of work force - Stability of workforce and reduction in turnover of employees is very important
from the point of view of productivity, reputation and goodwill of a concern. The employees can remain loyal to the
enterprise only when they have a feeling of participation in the management. The skills and efficiency of employees
will always be of advantage to employees as well as employees. This will lead to a good public image in the market
which will attract competent and qualified people into a concern.

[Link] Leadership
Leadership is the ability of a manager to persuade and motivate others to work in a desired manner in order to achieve a
predetermined goal. Leadership is a process by which an executive can direct, guide and influence the behavior and work
of others towards accomplishment of specific goals in a given situation. Leadership is the ability of a manager to induce
the subordinates to willingly work with enthusiasm and confidence. Leadership is the potential to influence behaviour of
others. It is also defined as the capacity to influence a group towards the realization of a goal. Leaders are required to
develop future visions, and to motivate the organizational members to want to achieve the visions.

Qualities of a Leader
a) Physical appearance - A leader must have a pleasing appearance. Physique and health are very important for a good
leader.
b) Vision and foresight - A leader cannot maintain influence unless he exhibits that he is forward looking. He has to
visualize situations and thereby has to frame logical programs.
c) Intelligence - A leader should be intelligent enough to examine problems and difficult situations. He should be
analytical who weighs pros and cons and then summarizes the situation. Therefore, a positive bent of mind and mature
outlook is very important.
d) Communication skills - A leader must be able to communicate the policies and procedures clearly, precisely and
effectively. This can be helpful in persuasion and stimulation.
e) Objectivity - A leader has to be having a fair outlook which is free from bias and which does not reflect his
willingness towards a particular individual. He should develop his own opinion and should base his judgement on
facts and logic.
f) Knowledge of work - A leader should be very precisely knowing the nature of work of his subordinates because it is
then he can win the trust and confidence of his subordinates.
g) Sense of responsibility and integrity - Responsibility and accountability towards an individual’s work is very
important to bring a sense of influence. A leader must have a sense of responsibility towards organizational goals
because only then he can get maximum of capabilities exploited in a real sense. For this, he has to motivate himself
and invoke the best of his abilities. He needs to lead by example and display integrity. Only then he can motivate the
subordinates to the best.
h) Self-confidence and will-power - Confidence in himself is important to earn the confidence of the subordinates. He
should be trustworthy and should handle the situations with full will power.
i) Decisiveness - Based on his knowledge and experience, a leader should be able to make timely, firm and informed
decisions.
j) Social Skills – Effective leaders need to be able to socialize with others. In this way, social skills are very much like
effective networking skills in a work setting. It's important to take an interest and listen when employees talk about
their families or loved ones because they play an important role in their lives. It's important to be able to develop and
guide others, and using the rapport developed through social skills.
k) Humanist - This trait to be present in a leader is essential because he deals with human beings and is in personal
contact with them. He has to handle the personal problems of his subordinates with great care and attention.
Therefore, treating the human beings on humanitarian grounds is essential for building a congenial environment.
l) Empathy - Empathy is the leader's ability to understand the other person's point of view. This is very important
because fair judgement and objectivity comes only then. A leader should understand the problems and complaints of
employees and should also have a complete view of the needs and aspirations of the employees. It's the ability to
understand the impact that change can have on someone else, and taking their feelings into consideration before
making a change.

Importance of Leadership
a) Initiates action - Leader is a person who starts the work by communicating the policies and plans to the subordinates
from where the work actually starts.
b) Motivation - A leader motivates the employees with economic and non-economic rewards and thereby gets the work
done from the subordinates.
c) Providing guidance - A leader has to not only supervise but also play a guiding role for the subordinates. Guidance
here means instructing the subordinates the way they have to perform their work effectively and efficiently.
d) Creating confidence - Confidence is an important factor which can be achieved through expressing the work efforts
to the subordinates, explaining them clearly their role and giving them guidelines to achieve the goals effectively. It is
also important to hear the employees with regards to their complaints and problems.
e) Building morale - Morale denotes willing co-operation of the employees towards their work and getting them into
confidence and winning their trust. A leader can be a morale booster by achieving full co-operation so that they
perform with best of their abilities as they work to achieve goals.
f) Builds work environment - Management is getting things done from people. An efficient work environment helps in
sound and stable growth. Therefore, human relations should be kept into mind by a leader. He should have personal
contacts with employees and should listen to their problems and solve them. He should treat employees on
humanitarian terms.
g) Co-ordination - Co-ordination can be achieved through reconciling personal interests with organizational goals. This
synchronization can be achieved through proper and effective co-ordination which should be primary motive of a
leader.

Characteristics and Features of Leadership

a) Interpersonal Relations between Leader and Followers: The chief requirement of leadership is the presence of
followers. One cannot think of leadership without followers. Without followers a leader has no existence. In order to
 make leadership meaningful, it is imperative to have followers (or employees) to work with him. Therefore,
leadership indicates interpersonal relations between the leader and the followers.
b) Influencing Process: Leadership takes the form of an influencing process. Here influencing means bringing others
under one’s own influence. A leader behaves with his followers in such a way that they automatically come under his
influence. They start working as they are told by their leader. It is said that the exercise of influence is the essence of
leadership.
c) Behaviour-changing Process: Leadership has the power to change the behaviour of their followers. A manager who
has this ability gets a better work performance from his subordinates.
d) Achieves Common Goals: A prominent feature of leadership is the achievement of common goals. It means it
achieves not only the objectives of the organization but also individual goals.
e) Continuous Process: A manager has to use his leadership ability continuously. It means that it is needed not only at
any particular occasion but is needed all the time.

[Link] Communication
Communication is the two-way process of reaching mutual understanding, in which participants not only exchange
(encode-decode) information, news, ideas and feelings but also create and share meaning. In general, communication is a
means of connecting people or places. In business, it is a key function of management; an organization cannot operate
without communication between levels, departments and employees.

Objectives of Communication
Communications fall into two main contexts: Internal communications - within the organization and Outgoing &
Incoming communications - information flow with stakeholders

Internal communications
a) To Promote Managerial Efficiency and Leadership – Both forms of functioning require communications to be
effective in their work.
b) Education & Training - To develop information and understanding among all workers, in order that orders and
instructions to employees are understood that they may perform their jobs efficiently. A proper understanding
c) To Motivate Employees – communication is used to foster an attitude which is necessary for motivation, cooperation
and job satisfaction. Maintaining good communication throughout the business builds allegiance to the company
among employees, enabling managers to transmit corporate goals to staff. Staff in turn can provide feedback and
innovations that facilitate effective management and contribute new products for customers.
d) To Create Teamwork – Communication is required as a binding force to foster teamwork amongst the employees
and management.
e) To Carry out Change - To prepare workers for a change in methods or environment by giving them the necessary
information in advance.
f) To Secure Feedback - To encourage subordinates to provide ideas and suggestions for improving the product,
service or work environment, and taking these suggestions seriously. Feedback in the form of complaints also need to
be taken.
g) To Improve Relations - To improve labour-management relations by keeping all communication channels open. To
encourage social relations among workers by encouraging communication between them.

Outgoing & Incoming communications

a) Generate Awareness – An organization cannot exist for long if no one knows about it. Business communication
broadcasts what and where you are, in a way that embeds itself in a customer's memory through innovative
advertising.
b) Compare Products - Once you’ve captured the market’s attention, consumers may need to compare your products
and services with other companies they’re familiar with. Business communications help customers understand the
value you bring, improving your market position against competitors and minimizing the chances that those customers
view your offerings as just another commodity.
c) Encourage Sales - As consumers become familiar with your products and services, use business communications to
drive traffic to your company by demonstrating how you understand their needs, establishing a desire to purchase,
offering incentives to try your products or introducing new products that meet customer needs or wants.
d) Build Relationships - As customers become more comfortable shopping for and purchasing products from your
company, business communications should involve fostering relationships with your company and brand. Use
business announcements to develop or change opinions, particularly with opinion leaders, who in turn can influence
other consumers to try your company brand.
e) Manage Brand Equity - Connecting and interacting with customers establishes and cultivates trust and loyalty by
developing consistent, positive connections between your most loyal customers and your brand. You can even control
negative incidents with a strong message that addresses not only the problem but the solution and how you intend to
implement it.

2.4.5 Importance of directing

Directing or Direction function is said to be the heart of management of process and therefore, is the central point around
which accomplishment of goals take place. A few philosophers call Direction as “Life spark of an enterprise”. It is also
called as on actuating function of management because it is through direction that the operation of an enterprise actually
starts. Being the central character of enterprise, it provides many benefits to a concern which are as follows: -
a) It Initiates Actions - Direction is the function which is the starting point of the work performance of subordinates. It
is from this function the action takes place, subordinates understand their jobs and do according to the instructions
laid.
b) It integrates Efforts - Through direction, the superiors are able to guide, inspire and instruct the subordinates to
work. For this, efforts of every individual towards accomplishment of goals are required. It is through direction the
efforts of every department can be related and integrated with others. This can be done through persuasive leadership
and effective communication. Integration of efforts bring effectiveness and stability in a business.
c) Means of Motivation - Direction function helps in achievement of goals. A manager makes use of the element of
motivation here to improve the performances of subordinates. This can be done by providing incentives or
compensation, whether monetary or non - monetary, which serves as a “Morale booster” to the subordinates
Motivation is also helpful for the subordinates to give the best of their abilities which ultimately helps in growth.
d) It Provides Stability - Stability and balance in concern becomes very important for long term survival in the market.
This can be brought upon by the managers with the help of four tools or elements of direction function - judicious
blend of persuasive leadership, effective communication, strict supervision and efficient motivation. Stability is very
important since that is an index of growth of an enterprise. Therefore, a manager can use of all the four traits in him so
that performance standards can be maintained.
e) Coping up with the changes - It is a human behaviour that human beings show resistance to change. Adaptability
with changing environment helps in sustaining planned growth and becoming a market leader. It is directing function
which is of use to meet with changes in environment, both internal as external. Effective communication helps in
coping up with the changes. It is the role of manager here to communicate the nature and contents of changes very
clearly to the subordinates. This helps in clarifications, easy adaptions and smooth running of an enterprise.
f) Efficient Utilization of Resources - Direction finance helps in clarifying the role of every subordinate towards his
work. The resources can be utilized properly only when less of wastages, duplication of efforts, overlapping of
performances, etc. doesn’t take place. Through direction, the role of subordinates become clear as manager makes use
of his supervisory, the guidance, the instructions and motivation skill to inspire the subordinates. This helps in
maximum possible utilization of resources of men, machine, materials and money which helps in reducing costs and
increasing profits.

2.4.6 Principles of directing

a) Principle of Maximum Individual Contribution According to this principle, management should adopt that
directing policy through which the employees get motivated and give their maximum individual contribution for the
achievement of organizational objective.
b) Principle of Harmony of Objectives According to this principle, there must be full coordination between
organizational and individual objectives. Employees work in an organization with an objective to get better
remuneration, promotion, etc. On the other hand, organizational goal can be to earn more profits and to increase
market share. Sometimes it is seen that there is a conflict between the objectives of both the parties, e.g., organization
wants that it should get a major share of profit whereas employees perceive that as they work directly on the job, more
profit must be shared among them in the form of bonus. Management here must establish coordination between the
objectives of both the parties/factors by adopting suitable methods of direction.
c) Principle of Unity of Command According to this principle, a subordinate should get directions from one manager at
a time. If the subordinate gets directions from more than one officer, the subordinate will be unable to prioritize his
work. As a result, a situation of confusion and conflict is created. By following 'Unity of Command', effective
direction takes place.
d) Principle of Appropriateness of Direction Technique According to this principle, appropriate techniques of
direction should be used, e.g., to supervise effectively, to provide able leadership, to adopt free communication and to
motivate through right medium.
e) Principle of Managerial Communication According to this principle, management should monitor whether proper
communication has occurred in that the subordinates get the same meaning as what has been said. This simplifies the
job of the subordinates and they need not go to the managers repeatedly for clarification.
f) Principle of Use of Informal Organization According to this principle, there must be a free flow of information
between the seniors and their subordinates. The success of direction depends upon effective exchange of information
to a great extent. Information should flow both through formal and informal mediums. Special attention should be
given to the informal organization. This strengthens the formal organization.
g) Principle of Leadership According to this principle, while giving directions to the subordinates, good leadership
must be provided by the managers. By this, subordinates get influenced by the managers. In this situation,
subordinates act according to the requirements of the managers.
h) Principle of Follow Through According to this principle, it must be monitored by management as to what extent the
policies framed and issued directions have been enforced. Thus, it must be seen whether the employees are following
the management or not. As per this principle, the job of managers is not to sit idle after framing policies or issuing
directions but to continuously take feedback. The advantage of this will be that if there is any problem in
implementing a policy or a direction it can be addressed immediately.

2.5 Controlling
2.5.1 Meaning of controlling
Controlling is a systematic exercise of checking actual performance against the standards or plans with a view to ensure
adequate progress. It also includes recording gained experience as a contribution to possible future needs. Controlling
consists of verifying whether everything occurs in conformity with the plans adopted, instructions issued and principles
established. Controlling ensures that there is effective and efficient utilization of organizational resources so as to achieve
the planned goals. Controlling measures the deviation of actual performance from the standard performance, discovers the
causes of such deviations and helps in taking corrective actions. Controlling serves the purpose of facilitating
coordination and helping in planning.

Requirements for control include

a) Reflecting Organizational Needs; all control systems and techniques should reflect the jobs they are to perform.
b) Forward Looking: Control should be forward looking. Though many of the controls are instant, they must focus
attention as to how future actions can be conformed with plans.
c) Promptness in Reporting Deviations The success of a thermostat lies in the fact that it points the deviation promptly
and takes corrective actions immediately.
d) Pointing out Exceptions at Critical points: Control should point exception at critical points and suggest whether
action is to be taken for deviations or not.
e) Objectives: The control should be objective, definite and determinable in a clear and positive way.
f) Flexible Control system should be flexible so that it remains workable in the case of changed plans, unforeseen
circumstances or failures.
g) Economical Control should be economical and must be worth its costs. Economy is relative since the benefits vary
with the importance of the activity, the size of the operation the expense that might be incurred in the absence of
control and the contribution the control system can make.
h) Simple Control system must be understandable so that all managers can use it effectively.
i) Motivating: Control system should motivate both controller and controlled.
j) Reflecting Organizational Pattern: The control should reflect organizational pattern by focusing attention on
positions in organization structure through which deviations are corrected

2.5.2 Features/characteristics of Controlling Function

a) Controlling is an end function - A function which comes once the performances are made in conformity with plans.
b) Controlling is a pervasive function - which means it is performed by managers at all levels and in all type of
businesses.
c) Controlling is forward looking - because effective control is not possible without past being controlled. Controlling
always look to future so that follow-up can be made whenever required.
d) Controlling is a dynamic process- since controlling requires taking review methods, changes have to be made
wherever possible.
e) Controlling is related with planning- Planning and Controlling are two inseparable functions of management.
Without planning, controlling is a meaningless exercise and without controlling, planning is useless. Planning
presupposes controlling and controlling succeeds planning.
2.5.3 Importance of control
a) Basis of future action - Control provides the basis for future actions. It will reduce the chances of mistakes being
repeated in future by suggesting preventive steps.
b) Facilitates decision making - The process of control is complete only when corrective measures have been taken.
This requires taking a right decision as to what type of follow up action is to be taken.
c) Facilitates discipline and order – The existence of control system has a positive impact on the behavior of the
employees. They are cautious while performing their duties as they know they are being observed by their superiors.
d) Facilitates Coordination - Control helps in Coordination of the activities of various departments of the enterprise. It
provides them unity of direction.
e) Facilitates motivation – A control system is most effective when it motivates people to high performance. Since
most people respond to a challenge, successfully meeting a tough standard may provide a greater sense of
accomplishment.
f) Effective plan Implementation-Controlling and planning are interdependent. Control is the only means to ensure
that the plans are being implemented control points out short comings of not only planning but also other functions of
management. Comparison can be done through various Performance report, Personal Observation.

2.5.4 Process of Controlling

a) Establishment of standards
Standards are the plans or the targets which have to be achieved in the course of business function. They can also be
called as the criterions for judging the performance. Controlling becomes easy through establishment of these
standards because controlling is exercised on the basis of these standards. Standards generally are classified into two.
 Measurable or tangible - Those standards which can be measured and expressed are called as measurable
standards. They can be in form of cost, output, expenditure, time, profit, etc.
 Non-measurable or intangible- There are standards which cannot be measured monetarily. For example-
performance of a manager, deviation of workers, their attitudes towards a concern. These are called as intangible
standards.
b) Measurement of performance
Finding out deviations becomes easy through measuring the actual performance. Performance levels are sometimes
easy to measure and sometimes difficult. Measurement of tangible standards is easy as it can be expressed in units,
cost, money terms, etc. Performance of a manager cannot be measured in quantities. It can be measured only by:
 Attitude of the workers,
 Their morale to work,
 The development in the attitudes regarding the physical environment,
 Their communication with the superiors.
 It is also sometimes done through various reports like weekly, monthly, quarterly, yearly reports.
c) Comparison of actual and standard performance
Comparison of actual performance with the planned targets is very important. Deviation can be defined as the gap
between actual performance and the planned targets. Measurement of performance and comparison to a standard
happens simultaneously in an automated environment, both forming part of the MIS reports. Comparisons are
presented in many ways, the more common ones being:
 Budget – financial variance – (capital and expenditure, sales).
 Control Charts – production parameters and quality attributes.
 Standard Costing and Variance Analysis – for material, labour, overhead costs
The manager has to find out two things:
 Extent of deviation means that the manager has to find out whether the deviation is positive or negative or
whether the actual performance is in conformity with the planned performance. The managers have to exercise
control by exception. He has to find out those deviations which are critical and important for business. Minor
deviations have to be ignored. Major deviations like replacement of machinery, appointment of workers, quality
of raw material, rate of profits, etc. should be looked upon consciously.
 Cause of deviation - Once the deviation is identified, a manager has to think about various causes which have led
to deviation. The causes can be erroneous planning, loos co-ordination, defective implementation of plans or
ineffective supervision and communication etc.

In the analysis of deviations, the following are studied:

 Is standard being attained
  Is deviation acceptable – deviations are examining in the light of pre-determined 'tolerance limits'. Deviations
within the limits will need to be avoided or minimized. Beyond limits, will require reporting and corrective
action.
 Is the standard acceptable – if the standard is acceptable, the cause for the deviation will be determined.
 Revising the standard – if the standard is found to be wrong or outdated, it needs to be re-defined and the
process is continued.
d) Taking remedial actions
Once the causes and extent of deviations are known, the manager has to detect those errors and take remedial measures for
it. Managers can take corrective measures for deviations which have occurred or revise the targets. Follow up is an
important step because it is only through taking corrective measures, that a manager can exercise control.

2.5.5 Types of control

a) Direct or preventive controls - The people here are experts at their job and there are very few chances for the
deviations to take place. It aims at the saving on the cost of production, aiming at zero defects from the start. For the
proper functioning of the direct controls, assistance of indirect controls is needed. With time these controls get
outdated, and new more relevant controls need to be put in place. Emphasis is also simultaneously given to reducing
direct controls through better systems, procedures, culture, discipline, automation etc.
b) Feedforward controls - Whenever a process is performed, two factors are very critical namely the inputs and the
outputs. In feed forward controls, we take into account the various deficiencies of a process well in advance, so that
these can be cured or controlled at the initial stages. Feedforward control focuses on the regulation of inputs (human,
material, and financial resources that flow into a process or the organization) to ensure that they meet the standards
necessary for the transformation process. Feedforward controls are desirable because they allow management to
prevent problems rather than having to cure them later based on feedback controls. Feedforward control also is
sometimes called preliminary control, pre-control, and preventive control. It is advised by the various experts to have
the both feed forward and the feed backward controls on the process. Helps in the establishment of a right direction
and control right from the beginning.
c) Feedback controls here the controls are placed at the output end as the deviations that occur are not known to us till
the moment of the output. Relatively heavier costs are involved as rectification if necessary is after the fact
(completed output). Could result in customer dissatisfaction.
d) Concurrent controls - takes place while an activity is in progress, but at predefined discrete intervals. It involves the
regulation of ongoing activities that are part of transformation process to ensure that they conform to organizational
standards. Concurrent control is designed to ensure that employee work activities produce the correct results.
Concurrent control sometimes is called screening or yes-no control, because it often involves checkpoints at which
determinations are made about whether to continue progress, take corrective action, or stop work altogether on
products or services.
e) Real time controls Involve the instantaneous feedback almost in real time, (real time can be defined as the time when
both the creation of data/information and its transmission is done almost simultaneously, for e.g. the fax or the
telephone.
f) Automation in the controls a. Here, mainly for the efficient development and accurate working of the control
systems involving less human power, building of automated/electronic instrumentation is introduced. b. Computers
are used for the feedback systems and for the automatic corrections.

2.5.6 Tools for measuring performance

It is important for managers to measure and control organizational performance because it leads to better asset
management, an increased ability to provide customer value, and improved measures of organizational knowledge. The
measures of organizational performance include:
a) Organizational Productivity: productivity is the overall output of goods or services produced divided by the inputs
needed to generate that output. Organizations strive to be productive and want the most goods and services produced
using the least amount of inputs. Output is measured by the sales revenue an organization receives when those goods
and services are sold. Input is measured by the costs of acquiring and transforming the organizational resources into
the outputs.
b) Organizational Effectiveness which refers to managerial effectiveness as goal attainment. It is a measure of how
appropriate organizational goals are and how well an organization is achieving those goals. It's a common
performance measure used by managers. Organizational effectiveness proposes that effectiveness is measured by the
organization's ability to exploit its environment in acquiring scarce and valued resources. The process model
emphasizes the transformation processes of the organization and how well the organization converts inputs into
desired outputs.
c) Industry rankings: The rankings for each list are determined by specific performance measures
Managers need appropriate tools for monitoring and measuring organizational performance including the following:
a) Financial controls:
One of the primary purposes of every business firm is to earn a profit. In pursuit of this objective, managers need financial
controls which may include traditional financial measures like budget analysis and ratio analysis. Ratio analysis may
include the following ratios- The liquidity ratios measure an organization's ability to meet its current debt obligations.
Leverage ratios examine the organization's use of debt to finance its assets and whether it's able to meet the interest
payments on the debt. The activity ratios measure how efficiently the firm is using its assets. profitability ratios measure
how efficiently and effectively the firm is using its assets to generate profits
b) Information controls
Managers need the right information at the right time and in the right amount. Inaccurate, incomplete, excessive, or
delayed information will seriously impede performance. Management information systems (MIS), provide management
with needed information on a regular basis for decision making. They need information about what the standards are in
order to be able to compare actual performance with the standards; they need information to help them determine
acceptable ranges of variation within these comparisons; and they rely on information to help them develop appropriate
courses of action if there are significant deviations between actual and standard.
c) Balanced scorecard approach
The balanced scorecard is a performance measurement tool that looks at four areas—financial, customer, internal
processes, and people/innovation/growth assets—that contribute to a company's performance. According to this approach,
managers should develop goals in each of the four areas and measures to determine if these goals are being met
d) Benchmarking best practices approach
Benchmarking is the search for the best practices among competitors or non-competitors that lead to their superior
performance. At its most fundamental level, benchmarking means learning from others. As a tool for monitoring and
measuring organizational performance, benchmarking can be used to help identify specific performance gaps and
potential areas of improvement. managers should look at external organizations for best practices and also look for
internal best practices that can be shared

2.5.7 Principles of controlling

a) Principle of Reflection – control systems need to be communicated and explained clearly to all involved if it needs to
succeed.
b) Principle of Prevention - Corrective action before an adverse event should be the aim of control systems as it is cost
effective. In this principle, the look forward approach is always applicable.
c) Exception Principle - Management attention must be focused on exceptional or major deviations, while looking at
minor deviations should be delegated to subordinates.
d) Principle of Criticality – issues need to be prioritized so commensurate or proportional attention can be paid to them
accordingly.
e) Principle of feedback – A strong system of feedback is the backbone of a good control system.

3. LEVELS OF MANAGEMENT
Managers, on the other hand, are individuals in an organization who direct and oversee the activities of
other people in the organization. Level of management refers to the categories or layers of managerial positions in an
organization. The level of management determines the amount of authority and status of the person occupying the position
at that level.

3.1 Top-level management

a) Require an extensive knowledge of management roles and skills.
b) They have to be very aware of external factors such as markets.
c) Their decisions are generally of a long-term nature
d) Their decisions are made using analytic, directive, conceptual and/or behavioral/participative processes
e) They are responsible for strategic decisions.
f) They have to define the plan and see that plan may be effective in the future.
g) They are executive in nature.
These includes board of Directors, CEO ‘s. they comprise small groups but are responsible for overall management, they
formulate plans, decide objectives & communicate to middle level management.

3.2 Middle Level of Management

The branch managers and departmental managers constitute middle level. They are responsible to the top management for
the functioning of their department. They devote more time to organizational and directional functions. In small
organization, there is only one layer of middle level of management but in big enterprises, there may be senior and junior
middle level management.

Their role can be emphasized as –

a) executing the plans of the organization in accordance with the policies and directives of the top management.
b) making plans for the sub-units of the organization.
c) participating in employment & training of lower level management.
d) interpreting and explaining policies from top level management to lower level.
e) responsible for coordinating the activities within the division or department.
f) sending important reports and other important data to top level management.
g) evaluating performance of junior managers.
h) responsible for inspiring lower level managers towards better performance.

3.3 Lower Level of Management

also known as supervisory / operative level of management. It consists of supervisors, foreman, section officers,
superintendent etc. Supervisory management refers to those executives whose work has to be largely with personal
oversight and direction of operative employees. they are concerned with direction and controlling function of
management. Their activities include –
a) Assigning of jobs and tasks to various workers.
b) guiding and instructing workers on day to day activities.
c) They are responsible for the quality as well as quantity of production.
d) They are entrusted with the responsibility of maintaining good relation in the organization.
e) They communicate workers’ problems, suggestions, and recommendatory appeals etc. to the higher level and higher
level goals and objectives to the workers.
f) They help to solve the grievances of the workers.
g) They supervise & guide the sub-ordinates.
h) They are responsible for providing training to the workers.
i) They arrange necessary materials, machines, tools etc. for getting the things done.
j) They prepare periodical reports about the performance of the workers.
k) They ensure discipline in the enterprise.
l) They motivate workers.
m) They are the image builders of the enterprise because they are in direct contact with the workers.

3.4 Management Roles

Interpersonal Roles
Interpersonal roles involve people (subordinates and persons outside the organization) and other duties that are ceremonial
and symbolic in nature. The three interpersonal roles:
a) Figurehead - Symbolic head; obliged to perform a number of routine duties of a legal or social nature. E.g. Greeting
visitors; signing legal document
b) Leader - Responsible for the motivation of subordinates responsible for staffing, training, and associated duties e.g.
Performing virtually all activities that involve subordinates
c) Liaison - Maintains self-developed network of outside contacts and informers who provide favors and information
e.g. Acknowledging mail; doing external board work; performing other activities that involve outsiders

Informational Roles
a) Monitor - Seeks and receives wide variety of internal and external information to develop thorough understanding of
organization and environment e.g. Reading periodicals and reports; maintaining personal contacts
b) Disseminator - Transmits information received from outsiders or from subordinates to members of the organization
e.g. Holding informational meetings; making phone calls to relay information
c) Spokesperson - Transmits information to outsiders on organization's plans, policies, actions, results, etc. e.g. Holding
board meetings; giving information to the media

Decisional Roles
a) Entrepreneur - Searches organization and its environment for opportunities and initiates "improvement projects" to
bring about changes e.g. Organizing strategy and review sessions to develop new programs
b) Disturbance handler - Responsible for corrective action when organization faces important, unexpected disturbances
e.g. Organizing strategy and review sessions that involve disturbances and crises
c) Resource allocator - Responsible for the allocation of organizational resources of all kinds - making or approving all
significant organizational decisions e.g. Scheduling; requesting authorization; performing any activity that involves
budgeting and the programming of subordinates' work
d) Negotiator - Responsible for representing the organization at major negotiations e.g. Participating in union contract
negotiations

3.5 Management skills

a) Conceptual skills are the skills managers use to analyze and diagnose complex situations. They help managers see
how things fit together and facilitate making good decisions.
b) Interpersonal/human skills are those skills involved with working well with other people both individually and in
groups. Because managers get things done with and through other people, they must have good interpersonal skills to
communicate, motivate, mentor, and delegate. Managers with good human skills are able to get the best out of their
people. They know how to communicate, motivate, lead, and inspire enthusiasm and trust. These skills are equally
important at all levels of management
c) Technical skills are the job-specific knowledge and techniques needed to perform work tasks. These abilities are
based on specialized knowledge or expertise. These skills are more important at lower levels of management since
these managers are dealing directly with employees doing the organization's work
 For top-level managers, these abilities tend to be related to knowledge of the industry and a general
understanding of the organization’s processes and products.
 For middle- and lower-level managers, these abilities are related to the specialized knowledge required in the
areas where they work—finance, human resources, marketing, computer systems, manufacturing, information
technology, and so forth.
d) Political skills to build a power base and establish the right connections. Organizations are political arenas in which
people compete for resources. Managers who have and know how to use political skills tend to be better at getting
resources for their groups

3.6 Qualities of an effective manager

A manager should ensure effective utilization of human and other resources to achieve organizational objectives. A
manager sets the goals and directs the group activities toward effective utilization of resources so as to achieve
organizational goals. The manager oversees work, subordinates and other managers and materials. The qualities for an
effective manager include:
a) Education – should possess both general education and professional/specific education in business management or
administration
b) Technical knowledge – should possess specific knowledge in the business
c) Intelligence – should be able to think critically and analyze problems
d) Leadership – should be able to inspire and channel the efforts of others toward attainment of organizational goals
e) Foresight – should be able to foresee problems that might affect the business and take necessary measures
f) Maturity – should be emotionally mature and have a balanced temperament.
g) Human relations – should be able to maintain good working relationships with others and know how to treat the
workers
h) Self-confidence – should have the confidence to take initiative and make decisions without fear

3.7 Difference between management and administration

a) Nature of work – management puts the policies & plans into action while administration is concerned with the
determination of objective & and major policies of an organization
b) Type of function – management is a doing or executive function while administration is a thinking or determinative
function
c) Level of authority – management is middle level while administration is top level activity
d) Decision making - management is a ‘doing’ or executive function while in administration decisions are generally
influenced by public opinion, thinking or determinative function
e) Main function of management is motivation and controlling while for administration is planning and organizing
f) Administrative & technical ability – management requires technical ability more than administrative ability while in
administration, administrative rather than technical ability is required
g) Coordination and control – management uses organization for achievement of the targets fixed by administration.
Administration co-ordinates finance, production and distribution. organization structure & exercises control over the
enterprise.
4. Management Approaches/Techniques
4.1.1 Management by Objectives (MBO)
Meaning and concept of MBO
Management by objectives is a planning approach developed by Peter F Drucker in 1954. It is a
collaborative/participative approach to planning. MBO begins with goal setting and continues through performance
review. It actively involves staff members at every organizational level. It helps to overcome many barriers to planning
by linking planning and controlling functions. As a collaborative approach, MBO enables managers and subordinates set
goals jointly and decide what resources are needed to achieve them. They then review the performance or goal
achievement jointly.

Objectives of MBO
a) To identify problems and opportunities in business
b) To convert identified opportunities into clear goals
c) To set up a system to convert these goals into achievements
d) To review the organization in view of the objectives
e) To establish the objectives of each job and unit
f) To clarify the policies and systems to accomplish the objectives
g) To set up a review system

Process of MBO
a) Top level goal setting: MBO begins with defining the overall organizational goals done by top level managers. They
may set goals by consulting with other members in the organization e.g. divisional or departmental managers
b) Collaborative goal setting across the organization ensures that each person’s responsibility is clearly defined in
terms of measurable objectives. Managers consult with departmental members to set objectives.
c) Periodic review of performance - The objectives set are used by management and employees to review performance
or monitor the actual implementation of plans/activities/objectives from time to time
d) Final evaluation and feedback – performance appraisals are finally conducted to determine the achievement of goals
and objectives.

Merits of MBO
a) It motivates the workers as they are involved in decision making
b) It helps managers to review employee performance by implementing the planning controlling functions together
c) There is commitment to attainment of organizational goals
d) It reduces resistance to change
e) There is higher productivity through efficiency
f) The periodic reviews in the MBO process ensure that problems are identified and resolved on time
g) There is improved communication between employees and management
h) It leads to self-discipline for the workers
i) It clarifies the specific roles, responsibilities and authority of all individuals
j) It enables participative/democratic management
k) It provides an opportunity for career development
l) It saves time for top management who can focus on other things of strategic importance

Demerits of MBO
a) Time consuming during implementation
b) Some employees may not be good at goal setting
c) It may lack top management support as they may feel they are being replaced
d) It over emphasizes on short term as opposed to long term goals
e) It may lead to inflexibility as employees only focus on the set objectives
f) Managers may forget that there is more to management than goal setting
g) It may be resisted by employees if they do not know how to set goals
h) MBO may not work at all times as conditions in the environment change frequently

4.1.2 Management by Walking Around (MBWA)

Managing by walking around was popularized by Tom Peters and Robert Waterman in the early 1980s because it was
(already then) felt that managers were becoming isolated from their subordinates. At Hewlett-Packard, where the
approach was practiced from 1973, executives were encouraged to know their people, understand their work, and make
themselves more visible and accessible. Bill Hewlett and Dave Packard's business philosophy, centered on deep respect
for people and acknowledgment of their built-in desire to do a good job, had evolved into informal, decentralized
management and relaxed, collegial communication styles.

Approach of MBWA
Managing by walking around requires personal involvement, good listening skills, and the recognition that most people in
an organization want to contribute to its success. It should not be forced. It works if the manager displays sincerity and
civility and is genuinely interested in staff and their work. A manager should:
 Wander about as often as you can, but recurrently and preferably daily.
 Relax as you make your rounds.
 Share and invite good news.
 Talk about family, hobbies, vacations, and sports.
 Watch and listen without judgment.
 Invite ideas and opinions to improve operations, products, services, etc.
 Be responsive to problems and concerns.
 Look out for staff doing something right, and give them public recognition.
 Project the image of a coach and mentor, not that an inspector.
 Give people on-the-spot help.
 Use the opportunity to transmit the organization’s values.
 Swap value and legacy stories.
 Share your dreams.
 Have fun.

Why some managers fail

 They lack purpose and walk around the business with no specific goal in mind other than walking around the business
 They do not have a plan, just stopping by the usual people to greet them
 They are reluctant to be repetitive in their actions and such are unwilling to adopt the required leader behavior
 They get put off by early disappointments
 Talk too much and do not listen enough

Impact of MBWA
a) Knowledge of the business – managers understand better how the business is structured which helps them make
better decisions
b) Trust – informal encounters are opportunities to build rapport and earn trust, making it easier to share information
c) Morale – having managers who listen and who take visible interest in a project is an important factor in team
enthusiasm and individual team member job satisfaction
d) Productivity – frequent interaction helps agreements to be respected and project stages to be completed on time
e) Progress – informal encounters can generate many ideas for improvement and encourage people to discuss and
suggest such ideas

Benefits of MBWA
a) Managing by walking around does cuts through vertical lines of communication.
b) Builds trust and relationships.
c) Motivates staff by suggesting that management takes an active interest in people.
d) Encourages staff to achieve individual and collective goals.
e) Strengthens ability to drive cultural change for higher organizational performance.
f) Refreshes organizational values.
g) Makes work less formal.
h) Creates a healthy organization.

Limitations of MBWA
a) It requires managers to be physically on-site – because it relies on contact between managers and employees and a
positive and sufficiently deep relationship being established. This means that face-to-face presence is optimal while
methods like phone conversations and online communication are suboptimal, lack spontaneity or depth of
relationship. This results in managers becoming less efficient and productive in terms of results achieved compared to
total time spent.
b) It is time consuming and labour intensive – managers must portion out time to be spent on MBWA as it can
become ineffective
c) Managers to not have time to interact with every person – depending on the structure of the company managers
may not have sufficient time to meet all employees and therefore some employees may not experience MBWA. Not
apply MBWA evenly to the whole company means that the direct benefit will not be experienced by all and some may
deem this as unjust exclusion and discrimination
d) There is no system to record and measure this process – based on the random nature of MBWA

4.1.3 Management by Exception (MBE)

Management by exception is an information and control technique that provides management with signals that tell when a
condition or operation is within its prescribed standard and when it is not.

Characteristics of Management by Exception

a) Management by exception is a system under which only those matters and problems are brought to the notice of high
level managers which are of great importance.
b) Matters of routine nature or problems related to day to day working are resolved by subordinates on their own.
c) It emphasizes on decentralization of authority. Management officials trust their subordinates and they delegate
authority to them.
d) It lays stress on improving skills and working capabilities of the subordinates.
e) High level managers concentrate their attention only on important matters in system
f) Effective communication is arranged and stress is laid on development of cordial relations.

Principles of MBE
a) Delegation - Management by exception works through the delegation of lower-priority tasks. Because this business
practice doesn't require managers to be involved in all aspects of a company's daily operations, employees handle
more routine tasks and help monitor productivity. Managers are responsible for larger tasks, such as making financial
decisions for the company and implementing workplace policies.
b) Organization - In order for a company to practice management by exception efficiently, professionals use
organizational skills to observe any deviations from the company norms. Then, the professionals consider the
organization of leadership within their company in order to decide who to alert about the deviation.
c) Professional improvement - By setting a standard for company productivity and allowing professionals to address
minor problems independent of supervision, management by exception encourages professional growth. The standard
of productivity may also allow employees who are performing below this standard to understand and visualize how to
increase their work potential.
d) Productivity - Businesses that practice management by exception aim to foster an efficient and productive workplace.
Management by exception helps companies achieve this by ensuring upper-level professionals focus on the company's
development, while other professionals help achieve the daily operation goals.
e) Common goals - When deciding on a standard of workplace production norms, companies also establish company
goals. This is because the standard a company sets for employees likely reflects what needs to be accomplished in
order for the company to be successful. Each employee in the company then works to achieve these goals by
upholding the company standards.
f) Analysis - Managers and employees use analysis principles and skills to monitor company activity. This allows
professionals to ensure company standards and notice any issue that may arise. Managers also use analysis to create
solutions for these problems.

Steps of MBE
a) Setting the objectives and defining what the norm should be.
b) Assessing performance to see whether performance is on track.
c) Analyzing work or records to determine where performance deviates from objectives.
d) Investigating and solving the exceptions to the norm.

Advantages of MBE
a) It conserves the time effort and talent of subordinates as well as superiors.
b) It provides freedom to subordinates in their routine jobs and they may easily concentrate on their job without any
interference.
c) Superiors can pay more attention on exceptional matters. They may concentrate on long-range strategic planning and
control in key areas.
d) It focuses the proper use of standards for doing the things and evaluating performance.
e) It can limit or reduce the deviations in performance.
f) Subordinates have better opportunities of using their knowledge and expertise in performing their jobs.
g) It helps in installing effective control systems
h) It helps in separating important information from unimportant information

Limitations of MBE
a) It requires a comprehensive observing and reporting system
b) The system is silent till the problem becomes critical
c) Sometimes, it becomes very difficult to measure performance accurately. Therefore, the principle cannot be
effectively applied e.g. some important factors, like human behaviour, are difficult to measure
d) It requires establishment of clear and broad standards of performance. But it is very difficult to do so.
e) It requires detailed reporting system, which is also not so easy.
f) It is not easy for the subordinates to measure and evaluate the performance and find out deviations.
g) It requires delegation of authority which many managers do not want to do so.
h) It requires too much paper work which renders it a costly and time consuming practice

4.1.4 Management by Crisis

Reactive method of administration whereby strategies are formulated as events occur –. It is a shortsighted policy often
leading to organizational confusion.

Characteristics of management by crisis

a) There is no time to think, no time to plan, just respond to fire after fire as they arise
b) When managing by crisis, one is so overwhelmed with what is happening in the moment that it is impossible to
foresee what might be coming down the road. One operates in fight or flight mode which makes it impossible to use
higher-order thinking to plan and solve problems.
c) When you manage by crisis, there is no time for planning.
d) When you manage by crisis, there is never enough time to effectively communicate what is happening and what needs
to be done in response

How to manage during a crisis

a) Decide with speed over precision - quickly process available information, rapidly determine what matters most, and
make decisions with conviction. During a crisis, cognitive overload looms; information is incomplete, interests and
priorities may clash, and emotions and anxieties run high. Analysis paralysis can easily result, exacerbated by the
natural tendency of matrixed organizations to build consensus. Leaders must break through the inertia to keep the
organization trained on business continuity today while increasing the odds of mid- to long-term success by focusing
on the few things that matter most. A simple, scalable framework for rapid decision-making is critical. Leaders
should:
 Define priorities - Identify and communicate the three to five most important priorities e.g. employee safety and
care, financial liquidity, customer care, and operational continuity. Document the issues identified, ensure that
leadership is fully aligned with them, and make course corrections as events unfold.
 Make smart trade-offs - What conflicts might arise among the priorities you have outlined? Between the urgent
and the important? Between survival today and success tomorrow? Instead of thinking about all possibilities, the
best leaders use their priorities as a scoring mechanism to force trade-offs.
 Name the decision makers - In your central command “war room,” establish who owns what. Empower the front
line to make decisions where possible, and clearly state what needs to be escalated, by when, and to whom. Your
default should be to push decisions downward, not up.
 Embrace action, and don’t punish mistakes - Missteps will happen, but our research indicates that failing to act
is much worse.
b) Adapt boldly - Get ahead of changing circumstances by seeking input and information from diverse sources. Admit
what you don’t know, and bring in outside expertise when needed. Leaders should:
 Decide what not to do - Put a hold on large initiatives and expenses, and ruthlessly prioritize. Publicize your
“what not to do” choices.
 Develop new plans of action – This is because the actions that previously drove results may no longer be
relevant hence the need to adjust quickly and develop new plans.
 Strengthen (or build) direct connections to the front line - have an accurate, current picture of what is
happening on the ground and get situational assessments early. Create a network of local leaders and influencers
who can speak with deep knowledge about the impact of the crisis and the sentiments of customers, suppliers,
employees, and other stakeholders. Effective leaders extend their antennae across all the ecosystems in which they
operate.
c) Reliably deliver - Take personal ownership in a crisis, even though many challenges and factors lie outside your
control. Align team focus, establish new metrics to monitor performance, and create a culture of accountability.
Leaders should:
 Stay alert to and aligned on a daily dashboard of priorities. Leaders should succinctly document their top five
priorities (on half a page or less) and ensure that those above them are in accord. Review performance against
those items frequently — if not daily, perhaps weekly — and make sure that leaders share this information with
direct reports. Review and update your list at the end of each day or week.
 Set KPIs and other metrics to measure performance. Choose three to five metrics that matter most for the
week, and have leaders regularly report back on each.
 Keep mind and body in fighting shape. To reliably deliver, leaders must maintain their self-control and
composure even when others are losing their heads. Establish a routine of self-care: a healthy diet, exercise,
meditation, or whatever works best for you. Stock up on energy, emotional reserves, and coping mechanisms.
d) Engage for impact - In times of crisis, it is important to take care of the team. Effective leaders are understanding of
their team’s circumstances and distractions, but they find ways to engage and motivate, clearly and thoroughly
communicating important new goals and information. Leaders need to reiterate new priorities frequently to ensure
continued alignment in time of constant and stressful change. Leaders should:
 Connect with individual team members - Reach out and relate on a personal level first, and then focus on work.
 Dig deep to engage your teams - When communication breaks down and leaders act without team input, as can
more easily happen when work is remote, they get subpar results.
 Ask for help as needed - The best leaders know they can’t do everything themselves. Identify team structures
and assign individuals to support key efforts.
 Ensure a focus on both customers and employees - To support customers: Reach out, track and document intel
across your customer base. To support employees: Lead with empathy and a focus on safety and health.
Compassion goes a long way during turbulent times.
 Collect and amplify positive messages (successes, acts of kindness, obstacles that have been overcome) -
celebrate your daily (often unsung) heroes.

5. Organization Structure
5.1 Formal and informal organizations
5.1.1 Formal organization
Formal organization refers to a structure which is consciously designed to enable people of the organization to the work
together in accomplishing the common objectives. It is predetermined by top management to facilitate smooth functioning
of the organization. The authority responsibility relationship created by the organization structure are to be followed by all
the employees in the organization. It is created as result of Company’s rules and policies.

Advantages of formal organization

a) Reduces confusion
b) Ensures specialization
c) Fixing of responsibility
d) Help in achievement of objectives
e) Provide stability to the firm
f) Increase organizational efficiency

Disadvantages of formal organization

a) Reduced Initiatives
b) Lack of match between objectives
c) Delay in work due to rules & regulations
d) Disturbance in relations
e) Problem due to informal relations

5.1.2 Informal Organization

Informal Organization refers to the relationship between the people in the organization based on personal likes, dislikes,
emotions, attitude etc. These relationships are not in terms of procedure and regulation laid down in the formal
organization. These groups are not preplanned; they develop automatically within the organization. The membership in
informal organization is voluntary and is as a result of social interaction.
The importance of informal organization
a) It serves as a very useful channel of communication in the organization,
b) It is very fast
c) It gives support to the formal organization
d) It gives psychological satisfaction of the members as they get a platform to express their feelings

Advantages of informal organization

a) Cooperation
b) Sense of Belongingness (Stress free)
c) Fast communication
d) Aid (Help or assist) on the job

Disadvantages of informal organization

a) Resistance to change (sometimes management are not accepted)
b) Clash (fight) in interest
c) It is very much affected by the rumors
d) Disturbance in relations
e) Problem due to informal relations

5.2 Organizational structure

5.2.1 Meaning of organizational structure
Organizational structure formal framework by which job tasks are divided, grouped, and coordinated. The criteria for
structuring is as follows:
a) Objectives and Strategy - Objectives and strategy determine whether an organization will be structured based on
functions or along product lines.
b) Distribution of Authority - The distribution of authority (decision making and execution) among jobs within
functions is to be considered.
c) Group Size - Grouping of individual jobs and appropriate size of each group

5.2.2 Types of organizational structure

1. Simple structure
A simple structure is an organizational design with low departmentalization, wide spans of control, authority centralized
in a single person, and little formalization. This structure is most commonly used by small businesses in which the owner
and manager are one and the same.

2. Functional structure/staff organization/horizontal organization

 Functional Management is the structuring of an organization into departments or units on the basis of type of work
performed. The entire organizational activities are divided into specific functions such as operations, finance,
marketing and personal relations
 It has a highly hierarchical structure.
 Consists of three authorities: Line, staff and function.
 Each functional area is put under the charge of functional specialists and he has got the authority to give all decisions
regarding the function whenever the function is performed throughout the enterprise.
 Principle of unity of command does not apply to such organization unlike in line organization.
 Functional management is more technical oriented and less product or business oriented, and are skilled in taking
decisions in their functional areas.
 Functional management is weak in the areas of product business plans, market study and product release management.
 Suited to organizations with small/medium size or few products.
 Stable External Environment: Functional units are effective when the organization has routine technologies and there
is less probability of emergence of competitive technology that is radically different.
Advantages of Functional Organization
a) Specialization - Better division of labour takes place which results in specialization of function. This promotes career
development of individuals aspiring to be technical specialists of their field in large organizations.
b) Effective Control - Management control is simplified as the mental functions are separated from manual functions.
All required knowledge, skills & infrastructure required for a particular functional activity are consolidated in a single
sub-organization; this facilitates sharing of valuable expertise by superiors with their subordinates.
c) Efficiency - Greater efficiency is achieved because of every function performing a limited number of functions.
d) Economy - Specialization combined with standardization facilitates maximum production and economical costs.
e) Expansion - Expert knowledge of functional manager facilitates better control and supervision, and therefore
possibilities to expand based on these strengths.

Disadvantages of Functional Organization

a) Confusion- The functional system is quite complicated to put into operation, especially when it is carried out at low
levels. Therefore, co-ordination becomes difficult.
b) Lack of Co-ordination- Disciplinary control becomes weak as a worker is commanded by many people hence there
is no unity of command.
c) Difficulty in fixing responsibility- Because of multiple authority, it is difficult to fix responsibility.
d) Conflicts- There may be conflicts among the supervisory staff of equal ranks who may not agree on certain issues.
e) Costly- Maintenance of specialist’s staff of the highest order is expensive.
f) Communication - Communication between the functional groups may not be effective which may affect ability to
achieve organizational objectives
g) Restrictive Organizational View- Each functional unit has expertise in its own field, but lacks broader awareness
about the organizations objectives or even the products. The responsibility of successfully integrating the organization
lies with few top level executives.
h) Slow Response- Functional units cannot respond to fast changes in customer demands or the product since only the
top level management has broad knowledge and the decision making authority.

3. Divisional Structure
The divisional structure is an organizational structure made up of separate units or divisions.
 Each unit or division has relatively limited autonomy.
 A division manager is responsible for performance and has strategic and operational authority over their unit.
 In divisional structures, the parent corporation acts as an external overseer to coordinate and control the various
divisions, and it often provides support services such as financial and legal.
 Most effective conditions for divisional structure is very large corporations that have multiple products that are poorly
interrelated or competitive environments due to the ability to respond rapidly to the external changes
Advantages of divisional structure
a) Clear Accountability: Structuring along the product lines provides clear correlation between the expense and profit
of the individual divisions. The business objectives of the division can be formulated more objectively and the
expectations can be better agreed.
b) Departmental Coordination: An objective accountability leads to better cohesion within the boundaries of the
department; it creates a win-win situation where teams have mutual benefit in collaborating with each other.
c) Broader skills development: Active collaborations between different specializations provide employees with
opportunities for learning new skills beyond their own area of expertise. It is easier to comprehend the dynamics of a
product and therefore is best suited for nurturing general managers in an organization.
d) Suited to Unstable Environments: Since each division is product based and self-reliant, it can respond much quickly
to changes in the external environment.

Disadvantages of divisional structure

a) Resource Duplication: In order to make each division independent, some of the resources which could have been
shared are rather duplicated. Specialists with particular domain knowledge cannot be shared across divisional
boundaries.
b) Inhibits career growth of Specialists: While divisional structures are good for nurturing top level managers, they are
bad for technical specialists. Technical people feel alienated from their peers in other divisions and have poor
exposure to the developments across the organizations.
c) Divisional Affiliations: The employees feel more affiliated towards their own department and would still lack the
sense of being part of a larger organization, they might know their own purpose but might not understand how they
might relate to organization’s objectives.
d) Difficult Product Integration: When an organization produces multiple products which might be used together or
are part of a larger product, the integration task becomes challenging since there is little coordination between the
divisions. The product management task across different division requires regular sync-ups but the structure
inherently provides little motivation for the product managers to seek this larger goal. Each divisional manager is
more concerned about delivering his product and would view the integration as not part of his job or the problem.

4. Matrix structure
 The matrix structure blends the functional and divisional structures gaining advantages of both. An individual
employee belongs to a functional department e.g. operations, production marketing etc. reporting to a manager but
also answers to a project team manager. The project team benefits from the functional expertise of members while the
functional structure exerts a measure of control and accountability for business activities.
 Employees in a matrix organization have two managers (dual chain of command): their functional department
manager and their product or project manager, who share authority. The project managers have authority over the
functional members who are part of their project team in areas relative to the project's goals. However, decisions such
as promotions, salary recommendations, and annual reviews remain the functional manager's responsibility. To work
effectively, project and functional managers have to communicate regularly, coordinate work demands on employees,
and resolve conflicts together.

Advantages of matrix structures

a) Improved communication - Communication between departments is easy because departmental “walls” are torn
down and employees move freely between units, sharing valuable knowledge along the way. The ease of
communication often leads to more collaboration, which typically results in better, stronger organizations
b) Resource sharing - Matrix organizational structures remove these silos and let company talent benefit whichever
department or initiative is in need.
c) Employee development - help foster employee development due to exposure to multiple project types and ways of
thinking. They’ll gain valuable experience by working outside their traditional boundaries and grow their professional
 skill sets. Not only does this make employees much more valuable to their organizations, it will also increase their job
satisfaction.
d) Team members and managers keep their functional roles - Projects will always come to an end, but project team
members and managers may keep their functional roles throughout the project. When a project ends, both managers
and team members can avoid misconceptions about their job security or searching for new projects as a contractor, as
they may simply assume their functional roles. Additionally, team members may also participate in future projects.

Disadvantages of matrix structures

a) Reporting Confusion - When employees have two bosses to report to, details can easily become jumbled.
Additionally, the question of who’s really in charge becomes less clear and sparks may fly between department and
project managers if their purposes conflict.
b) Team roles may not be clearly defined - team members’ roles are not clearly defined in the project or the division of
responsibilities between employees’ functional roles and project roles is not clear.
c) Heavy Workloads - It’s possible, in matrix organizational structures, for employees to experience extremely heavy
workloads which can lead to low job satisfaction, burnout, and higher levels of employee churn. This happens because
team members are often tasked with extra duties in addition to their regular workload.
d) The decision-making process can be slowed down - Because of the nature of the matrix involving more than one
manager, decisions that may be required to pass through both managers can sometimes take longer to process than in
a traditional structure. Furthermore, with the integration of multiple managers and team members, decisions that
require multiple steps, can be slowed down when guided by the matrix.
e) Additional expenses -, matrix organizational structures often represent an additional and sometimes significant
expense. In order to retain more managers — the department heads, plus the project managers — company payroll
balloons, which obviously has an impact on the business’ bottom line. Furthermore, an organization may find that it’s
forced to keep and pay talent it doesn’t use consistently. If it doesn’t, it risks losing sought-after skill sets to a
competitor.
f) Measuring employee performance might become difficult - Oftentimes, when implementing a matrix structure, it
may be difficult to gauge employee performance when working on a project. This is in part because team members
may be essentially performing more than one role, both functionally and the tasks within the project.

5. Team based structure

In a team-based structure, the entire organization is made up of work groups or teams that perform the organization's
work.
 Employee empowerment is crucial because there is no line of managerial authority from top to bottom.
 Employee teams are free to design work in the way they think is best.
 Teams are held responsible for all work activity and performance results in their respective areas

Advantages of team based structures

a) Better Communication - Because there are usually no managers or only one manager supervising multiple teams,
communication between employees is much more free-flowing and effective. Team-based organizations lack the
multiple layers that employees would otherwise have to go through before making a suggestion or receiving the go-
ahead to implement a new idea.
b) Teams Resolve Problems Quicker - This improved communication also means that companies can resolve work
issues quicker because employees can share information at a faster rate, which speeds up responsiveness
c) Flexible and Empowered Workforce - Another advantage is that team-based organizations are more flexible than
organizations that are traditionally structured. As a business owner, you can shift employees from one team to another
to maximize their skills and talent and to also keep them motivated with new challenges. Employees that work in
teams are also more likely to understand their specific roles in the organization and are also more likely to feel
validated and empowered
d) Higher efficiency and productivity - Since communication flows faster inside organizations there is higher
efficiency because teams are able to collaborate with each other and cross functional collaboration is also generally
much easier inside such organizations. It leads to faster completion of projects, a faster flow of ideas among teams,
growth in productivity, sales and customer satisfaction.
e) Higher accountability, flexibility and learning – there is higher flexibility in various terms and the level of
individual accountability among team members is generally higher. People from different backgrounds and different
skillsets come together and learn from each other which improves employee satisfaction.
f) Build a sense of community among employees - it allows businesses to foster a sense of community among its
people and has a positive impact on the company culture. People should understand that they are working towards a
common goal and that being a part of the team, everyone’s contribution to the goal matters. It helps bring higher
 equity at an organizational level and also improves employee-employer relationships when people understand how
their success and the company’s success are interrelated. When people working inside the same organization are
bound by a feeling of community, there is higher accountability in team members.

Disadvantages of team based structures

a) Potential for Conflict - personality conflicts within the team can negatively impact efficiency and group harmony.
b) Less contact with other functions - Self-contained teams stay focus on their tasks which limits contact and exposure
to other functions. Individual teams may develop ideas and products in isolation without realizing the impact on other
company employees, customers, products or services. This leads to less organizational collaboration and sharing best
practices, which could result in higher costs, increased waste and decreased customer satisfaction.
c) More change and instability - Because a team-based organization enables teams to make decisions quickly, teams
undergo constant change. This instability may result in confusion and chaos if team leadership does not step in to
communicate effectively with team members, sponsors and stakeholders.
d) Less organizational consistency - Each team functions independently without ensuring alignment with each other.
While teams can act in an entrepreneurial spirit that fosters innovation and creativity, the lack of bureaucracy does not
ensure a more-cooperative workforce. Lateral team-based organizations need to establish liaison roles, task forces and
other project management structures to increase the company’s ability to process information in an interdependent,
complex environment. Without these mechanisms, miscommunication, stress, absenteeism and poor performance tend
to result
e) Decision process – decisions need input from several people which can prolong the decision-making process and
complicate making even the simplest decisions. The organization should train teams and their leaders to make timely
decisions. In addition, when making decisions, consensus can become part of the team’s culture. This can stifle
creativity and innovation within the organization.
f) Some people are not team players - not all employees are suited to teamwork. Some employees work more
efficiently on their own, and being part of a group may not maximize their skill set
g) Under-performing employees hide behind the team - Another drawback is that some employees in a team setting
may rely on other employees to make up for their own lack of effort.

6. Boundary-less structure
In a boundary-less organization, the design is not defined by, or limited to, the horizontal, vertical, or external boundaries
imposed by a predefined structure.
 By removing vertical boundaries through such structural approaches as cross-hierarchical teams and participative
decision making, the hierarchy is flattened.
 Managers can remove horizontal boundaries by using cross-functional teams and organizing work activities around
work processes instead of around functional departments.
 And external boundaries can be minimized or eliminated by using strategic alliances with suppliers, or value chain
management customer-organization linkages.
 Technology remains at the heart of such organizations, and they are trusted to ensure the effective and smooth
functioning of such an organization. The use of technology is so much that employees have very little personal
communication. Employees communicate primarily through text, email, social media, and other communication
methods.
 Employees of these organizations do not usually show up to work in a specific location. They work on the project
with video conferencing and other collaboration software. In this way, these organizations eliminate geographical
barriers and problems.
 Employees of these organizations have flexible working hours. Thus, employees can achieve a work-life balance in
their own way and according to their needs and preferences.
 All employees have some sort of authority and the freedom to make a decision within the given framework. This also
carries a certain responsibility and therefore, employees are held accountable for their decision and their tasks.
 The employees have very little or no supervision hence, constant and deliberate intrusion is not there. Nor will there
be anyone there all the time to tell them what to do and what not to do. Of course, there is a very limited type of
leadership and supervision by very few.
 In these organizations, employees act both as managers and as coordinators of their tasks.

Types of boundary-less organizations include:

a) Network Organizations - This focus is on who can do a task in the most efficient and cost-effective way, rather than
leaving the decision on the organizational chart. Moreover, all the resources needed to accomplish the task are
available throughout the network rather than with one firm.
b) Virtual/dynamic Organizations - This creates a collaboration of independent companies that share their expertise,
network, and costs. Every independent company in the network contributes to its field of expertise. Flexibility and
adaptability are the main advantages of this type of organization
c) Modular Organizations - Such a company focuses only on its core activities and outsource all non-core activities to
a company that specializes in these activities. Such organizations are able to save costs as well as develop new
products more quickly because the organization is able to concentrate and use all resources for key
objectives/products/services without distraction. And the supporting and secondary activities are managed through
outsourcing.
d) Learning Organizations - these organizations develop the ability to adapt to change because all members actively
come together to identify and solve problems. Employees regularly update and share new information and participate
actively in decision-making. Members work together across companies and at different organizational levels and
specialist areas which gives employees and management maximum flexibility to focus and make optimal use of all
available resources. Employees have the freedom to work and contribute in a way they think is better. Teams play a
crucial role because collaboration is at the heart of such an organization. Employees in a learning organization have
full freedom, can communicate, learn, share or experiment without fear, and others also try to get and support what is
good for the organization.

Advantages of boundary-less structure

a) Natural diversity among their employees - diversity increases the creativity of employees and organizations overall.
This creativity extends to both the team's home location and internationally in the case of large global organizations
b) Reliability of its employees - since these organizations give their employees more responsibility and independence,
they can achieve better results
c) Elimination of geographical barriers by using technology
d) Improved responsibility and accountability among employees for their own work
e) Flexible working hours
f) Strategic partnerships and organization-customer-supplier connections have become an essential source of
sustainable competitive advantage in the current period of globalization.
g) This method has also been aided by low-cost yet effective information technological innovation.

Disadvantages of boundary-less structures

a) Communication issues between all of the separate and globally distanced parts of the company.
b) Coordination and a lack of control. Virtual meetings and digital communication is the primary source of
collaboration which can cause a lack of cohesion among the participants. When each group member focuses only on
their part of the product or task, they may not prioritize coordination with others in the group
c) Information security – communication systems are exposed to cyber security and risk of information attack from
malware, internet hackers, etc.

5.3 Organizational design

Organizational design occurs when managers develop or change an organization's structure.
 An organizational design helps a company achieve goals, make the best use of people’s experiences, knowledge,
skills, and expertise, etc., provide a smooth communication channel, reduce uncertainty and encourage cooperation
 Organizational design involves decisions about six key elements: work specialization, departmentalization, chain of
command, span of control, centralization and decentralization, and formalization.

5.3.1 Work specialization

Work specialization describes the degree to which tasks in an organization are divided into separate jobs. The essence of
work specialization is that an entire job is not done by one individual but instead is broken down into steps, and each step
is completed by a different person.
 Individual employees specialize in doing part of an activity rather than the entire activity.
 Job specialization is particularly necessary for larger organization where the manufacturing sector would require a
different category of work in individual production unit to be done by the workers.
 If the job gets complicated, then it needs to be broken down to simpler process so that each task can be handled by
people expert in that work.
 Division of labour is an inescapable component of the advanced industrial system

Advantages of work specialization

a) Risk Reduction: An employee who performs the same task repeatedly by specializing in it is less likely to make a
mistake as they are familiar with the pitfalls and issues that a non-specialist performing that task would not know.
b) Solidarity: employees feel a certain camaraderie/relationship with others in their department or skill set. It allows for
a feeling of “we’re all in this together!” that bolsters morale and, in turn, improves performance. Even if an employee
is a lone specialist in what they do, it still brings a feeling of immense pride.
c) Saves Money: Training one person to do a particular job saves money and time in training. Transferring or moving
employees from a task they are skilled in to a task they are not means potentially wasting a lot of resources. When a
portion of the job is being handled by one person then he/she concentrates on executing those tasks without error.
Thereby the quality control costs are cut down.
d) Accurate Time Management: Training multiple people to do many tasks can result in all of them being at least okay
at doing it, whereas a few people specializing in the task means it will be done more quickly and with greater ease.
e) Defined skill set: When we say advantages it is seen that it can be visualized during the early stages of one’s career.
When one is in search of a job, having a specific skill set could help one to land a job. As jobs are nowadays
becoming more specific having that specialized skill set, it helps one to acquire those skills through training or
through experience.
f) Upward growth: Having a specific skill or being specialized in that work would also bring growth in that division.
They get chances to move up the ladder and gain more expertise in that specialization. Each specialization has its own
uniqueness depending on the weightage and the depth of knowledge.
g) Increases productivity: It is generally found that allowing work to be done by people who are expert in that field
would have fewer errors.

Disadvantages of work specialization

a) Complacency: Repetitive routine runs the risk of monotony, and boredom often leads to complacency, so much so
that mistakes can happen. New tasks and routines engage the brain and body, forcing a concentrated focus. The
disadvantage of specialization means taking the chance that complacency could lead to missteps, which can cost the
company money and compromise safety.
b) Isolation: When employees specialize in just one aspect of the company’s goal they may not feel connected to the
whole process, to say nothing of feeling disconnected to coworkers. An innate satisfaction comes from understanding
an entire procedure. Specialization can lead to a feeling of isolation, of being divided from the whole. A decline in
work ethic is the danger here.
c) Inflexibility: If an employee who specializes in a task or procedure is not available when it must be done as soon as
possible, then someone who is not as adept at it must take over. A non-specialist performing a specialist’s job can lead
to problems.

5.3.2 Departmentalization
Departmentation is the process which is used to group activities into units for purpose of administration at all levels. By
this process, the personnel and functions of an enterprise are departmentalized by division into separate units.
 Once the various activities have been identified, it is necessary to group them together on some logical basis. This
process of grouping is known as departmentation.
 The administrative units so created may be called as divisions, units, branches or by some other name.
 Each department or division is a distinct area of activities over which a manager will be given authority and for which
he is responsible.
 The departments are agencies of management and simplify the tasks of the management within a workable span
 Basic methods for dividing responsibilities within an organization can be on the following basis of: functional basis,
territorial basis, process basis, product basis, customer basis time basis and number basis.

Advantages of departmentalization
a) Specialization: In departmentalization, each department performs a different function. For example, Finance
department looks after finance, Marketing department looks after sales, etc. This results in specialization.
Specialization leads to speed, accuracy, efficiency and improvement in quality and quantity of work.
b) Growth and expansion: There are many different departments in the organization. Therefore, the organization can
easily grow and expand.
c) Fixing responsibility: Departmentalization helps to fix the responsibility of a specific job on a particular department.
d) Better customer service: Departmentalization results in a better customer service where the customers get quick and
efficient service.
e) Performance appraisal: A specific job is given to a particular person or department. Therefore, it is very easy to do
the performance appraisals and measure the performance of a person or department
f) Management development: Departmentalization facilitates management development because the junior or trainee
managers can be sent to different departments to get On-the-Job-training, take part in planning, decision making,
implementation of strategies, etc. This results in management development
g) Optimum utilization of resources: Departmentalization facilitates optimum utilization of resources. The men,
money, materials, machines, methods and markets are put to maximum use.
h) Facilitates better control: In departmentalization, the organization is divided into small manageable departments
which can be easily supervised and controlled. Hence, departmentalization also facilitates a better control.

Disadvantages of departmentalization
a) Functional departmentation can result in both a narrow focus on department goals and a lack of interaction and
communication with other groups.
b) Team members may become too narrowly focused on their product and can miss the bigger picture of how their
product fits into corporate strategy and the target customer environment, especially when other company
offerings are involved
c) Product departments also mean hiring more functional experts, because these employees are not shared across
groups
d) Location departmentalization can come with a higher overhead costs, as functional experts need to be hired for each
location.
e) Since regional departments can be away from headquarters and one another, teams are more likely to focus on
department goals only, sometimes to the detriment of the company.

5.3.3 Chain of command

The chain of command is the continuous line of authority that extends from upper organizational levels to the lowest
levels and clarifies who reports to whom.
 It helps employees answer questions such as "Who do I go to if I have a problem?" or "To whom am I responsible?"
 Chain of command is discussed with three other concepts: authority, responsibility, and unity of command.

1. Authority
Authority is the power to manage the sub-ordinates, control them and to instruct them according to the rules norms and
standards of the organization. To facilitate decision making and coordination, an organization's managers are part of the
chain of command and are granted a certain degree of authority to meet their responsibilities. Three main types of
authority can exist within an organization: Line Authority, Staff Authority and Functional Authority
a) Line Authority – it reflects existing superior-subordinate relationships. It consists of the right to make decisions and
to give order concerning the production, sales or finance related behaviour of subordinates leading to attainment of
objectives. People directly responsible for these areas within the organization are delegated line authority to assist
them in performing their obligatory activities.
b) Staff Authority - Staff authority consists of the right to advise or assist those who possess line authority as well as
other staff personnel. Staff authority enables those responsible for improving the effectiveness of line personnel to
perform their required tasks.
c) Functional Authority - Functional authority consists of the right to give orders within a segment of the organization
in which this right is normally nonexistent. This authority is usually assigned to individuals to complement the line or
staff authority they already possess. Functional Authority generally covers only specific task areas and is operational
only for designated amounts of time. It is given to individuals who, in order to meet responsibilities in their own
areas, must be able to exercise some control over organization members in other areas.

The features of authority include:

a) Authority is positional
b) Authority can be delegated
c) Authority has only one source
d) It must be accepted by subjects
e) Authority flows from up going downwards in the hierarchy
f) Authority is granted in order to achieve organizational goals

2. Responsibility
As managers coordinate and integrate the work of employees, those employees assume an obligation to perform any
assigned duties. This obligation or expectation to perform is known as responsibility. A person given authority and
responsibility must recognize that the manager will judge the quality of their performance.
3. Power
Power is the ability to exert influence or the ability to change attitude or behavior of individuals or groups. It is the ability
to influence beliefs or behaviour.
The features of power are:
a) It is personal
b) It can be both formal or informal
c) It has several sources
d) It is not mandatory except for the formal authority
e) Some power cannot be delegated
f) The owner of power uses it as they see fit
g) Power can never be balanced

The sources of power include:

a) Legitimate power – This is a type of formal power that you receive when you occupy a certain position in your
organization.
b) Reward power – means having the capacity to offer rewards or benefits in exchange for carrying out a task or
achieving a result.
c) Coercive power – It involves using threats to force people to do your will. They might not agree with what they have
to do, but they do it out of fear of repercussions such as losing their jobs
d) Referent power – based on the qualities that inspire trust and respect in others which include honesty and integrity
e) Expert power - comes from having both deep technical knowledge and extensive experience in your field of
expertise

5.3.4 Span of control

Span of control in management is a span of supervision which depicts the number of employees that can
be handled and controlled effectively by a single manager.

Types of span of control: -

a) Wide span of control - It is one in which a manager can supervise and control effectively a large group of persons at
one time. The features of wide span of control are: -
 Less overhead cost of supervision
 Prompt response from the employees
 Better communication
 Better supervision
 Better co-ordination
 Suitable for repetitive jobs

b) Narrow span of control - According to this span, the work and authority is divided amongst many subordinates and a
manager does not supervise and control a very big group of people. The manager according to a narrow span
supervises a selected number of employees at one time. The features of narrow span of control are:
 Work which requires tight control and supervision like craftsmanship e.g. handicrafts, ivory work
 Co-ordination is difficult to be achieved.
 Communication gaps can come.
 Messages can be distorted.
 Specialization work can be achieved.

Factors Affecting Span of Control

a) Managerial abilities- In the concerns where managers are capable, qualified and experienced, wide span of control is
preferred.
b) Competence of subordinates- Where the subordinates are capable and competent and their understanding levels are
proper, the subordinates tend to very frequently visit the superiors for solving their problems. In such cases, the
manager can handle large number of employees. Hence wide span is suitable.
c) Nature of work- If the work is of repetitive nature, wide span of supervision is more helpful. On the other hand, if
work requires mental skill, specialization and craftsmanship, tight control and supervision is required in which narrow
span is more helpful.
d) Delegation of authority- When the work is delegated to lower levels in an efficient and proper way, confusions are
less and congeniality of the environment can be maintained. In such cases, wide span of control is suitable and the
supervisors can manage and control large number of subordinates at one time.
e) Degree of decentralization- Decentralization is done in order to achieve specialization in which authority is shared
by many people and managers at different levels. In such cases, a tall structure is helpful. There are certain concerns
where decentralization is done in a very effective way which results in direct and personal communication between
 superiors and sub-ordinates and there the superiors can manage large number of subordinates very easily. In such
cases, wide span again helps.
f) Planning required by the supervisor: As the importance, complexity and time required of the manager in
performing his planning function increases, it will be more prudent to reduce the number of subordinates reporting to
him.
g) Use of objective standards: Supervising the subordinates requires that management must know how far plans are
being followed and to what extent their performance tends to deviate from plans. He can know the deviations either
by personal observation or through use of objective standards. If objective standards are in place, manager is saved of
many time-consuming interventions and can concentrate on points of strategic importance thus widening his span of
control.
h) Territorial contiguity of functions supervised: Where functions are geographically separated, supervision of
components and personnel becomes more difficult and time consuming. The manager must spend considerable time in
visiting the separate units and frequently make use of more time consuming formal means of communication.
Geographic contiguity of functions supervised by the manager, therefore, operates to reduce his span of control.

5.3.5 Centralization and decentralization

[Link] Centralization
Centralization is the tendency to concentrate decision making at the top level of an organization. a centralized
organization has the main are of authority handled by few senior managers at the head office. Managerial functions of
planning, research and development, personnel and finance are delegated with enough authority. There’s little diffusion
of appropriate authority because senior managers at the center do not delegate more work to their subordinates.

Advantages of centralization
a) A clear chain of command: A centralized organization benefits from a clear chain of command because every
person within the organization knows who to report to. Junior employees know who to approach whenever they have
concerns about the organization while senior executives follow a clear plan of delegating authority to employees who
excel in specific functions. A clear chain of command is beneficial when the organization needs to execute decisions
quickly and in a unified manner.
b) Focused vision: When an organization follows a centralized management structure, it can focus on the fulfillment of
its vision with ease. There are clear lines of communication and the senior executive can communicate the
organization’s vision to employees and guide them toward the achievement of the vision.
c) Reduced costs: A centralized organization adheres to standard procedures and methods that guide the organization,
which helps reduce office and administrative costs. The main decision-makers are housed at the company’s head
office or headquarters, and therefore, there is no need for deploying more departments and equipment to other
branches. Also, the organization does not need to incur extra costs to hire specialists for its branches since critical
decisions are made at the head office and then communicated to the branches. The clear chain of command reduces
the duplication of responsibilities that may result in additional costs to the organization.
d) Quick implementation of decisions: In a centralized organization, decisions are made by a small group of people
and then communicated to the lower-level managers. The involvement of only a few people makes the decision-
making process more efficient since they can discuss the details of each decision in one meeting.
e) Improved quality of work: The standardized procedures and better supervision result in improved quality of work.
There are supervisors in each department who ensure that the outputs are uniform and of high quality. The use of
advanced equipment reduces potential wastage from manual work and also helps guarantee high-quality work.
Standardization of work also reduces the replication of tasks that may result in high labor costs.

Disadvantages of centralization
a) Bureaucratic leadership: Centralized management resembles a dictatorial form of leadership where employees are
only expected to deliver results according to what the top executives assign them. Employees are unable to contribute
to the decision-making process of the organization, and they are merely implementers of decisions made at a higher
level. When the employees face difficulties in implementing some of the decisions, the executives will not
understand because they are only decision-makers and not implementers of the decisions. The result of such actions is
a decline in performance because the employees lack the motivation to implement decisions taken by top-level
managers without the input of lower-level employees
b) Remote control: The organization’s executives are under tremendous pressure to formulate decisions for the
organization, and they lack control over the implementation process. The failure of executives to decentralize the
decision-making process adds a lot of work to their desks. he executives suffer from a lack of time to supervise the
implementation of the decisions. Therefore, the executives may end up making too many decisions that are either
poorly implemented or ignored by the employees.
c) Delays in work: Centralization results in delays in work as records are sent to and from the head office. Employees
rely on the information communicated to them from the top, and there will be a loss in man-hours if there are delays
in relaying the records. This means that the employees will be less productive if they need to wait long periods to get
guidance on their next projects.
d) Lack of employee loyalty: Employees become loyal to an organization when they are allowed personal initiatives in
the work they do. They can introduce their creativity and suggest ways of performing certain tasks. However, in
centralization, there is no initiative in work because employees perform tasks conceptualized by top executives. This
limits their creativity and loyalty to the organization due to the rigidity of the work.

[Link] Decentralization
Decentralization refers to a specific form of organizational structure where the top management delegates decision-
making responsibilities and daily operations to middle and lower subordinates. The top management can thus concentrate
on taking major decisions with greater time abundance.
 Power and control are systematically delegated to lower levels in the organization.
 Decentralization is pursued when the environment is complex and uncertain, when lower level managers are talented
and when decisions being made are minor.
 Decentralization involves the following:
 Determining what authority to push down to subordinates
 Developing policies and procedures to give to subordinates on how to use authority
 Controlling the use of this authority
 Geographical relocation of the activity

Advantages of Decentralization
a) Motivation of subordinates: Decentralization improves the level of job satisfaction as well as employee morale,
especially amongst the lower level managers. Furthermore, it strives to satisfy the varying requirements for
participation, independence, and status. Decentralization also promotes a spirit of group cohesiveness and spirit.
b) Growth and diversification: Every single product division attains sufficient autonomy to exercise their creative
ability hence creating healthy competition amongst different divisions. It aids subordinates in exercising their own
judgment, develop managerial skills and help in solving the succession problem which ultimately ensures the growth
and continuity of an organization.
c) Quick decision making: decisions are taken and executed by authorized personnel resulting in faster and accurate
decisions which are well aware of the real scenario.
d) Efficient communication: The wider span of management under decentralization leads to fewer hierarchical level
which makes the communication system more efficient as intimate relationships develop between superiors and
subordinates.
e) Ease of expansion: Decentralization unleashes the fullest potential of the organization and can react easily to area-
specific requirements which might lead to opening of new business units in varying geographical locations
f) Better supervision and control: lower level managers can alter production schedules and work assignments with
adequate authority. They can even take disciplinary actions and recommend the promotion of their peers. This, in
turn, leads to greater efficiency in supervision. Performance evaluation of each decentralized unit helps in exercising
adequate control.
g) Satisfaction of human needs: Decentralization serves as an important tool for satisfying our basic need of
independence, power, prestige, and status. A cadre of satisfied manager is build up by this satisfaction as they feel
responsible towards the company’s betterment.
h) Relief to top executives: Top executives can focus more on the executive level work like planning and decision
making if the lower level employees take all the responsibilities on their own. This relieves their workload which
eventually is for the greater good of the organization.

Disadvantages of Decentralization
a) Difficult to co-ordinate: the substantial autonomy enjoyed by every single division makes it difficult to coordinate
the overall activity.
b) External factors: The trade union movement, market uncertainties, and government intervention might make it
impossible to benefit the most out of decentralization.
c) Narrow Product Lines: Decentralized product lines need to be adequately broad so that autonomous units can
flourish within the same. Lower levels in the organization also lack competent managers thus adding to the difficulty
quotient
d) Expensive: In decentralization, every employee takes responsibility for the better of the organization so they work
harder to achieve all the organizational objective. In return, they have to be paid more which sometimes proves to be
very expensive for the company.

Factors that determine the Degree of Centralization and Decentralization

a) Cost factors: The overriding factor determining the extent of decentralization is the criterion of costliness. If the
decision involves heavy cost or investment, decision-making should not be delegated recklessly because if anything
goes wrong, the enterprise has to incur financial losses.
b) Uniformity of policy: When there is no need for uniformity of policy, high degree of decentralization is possible. On
the other hand, if the company desires to obtain uniform policy, centralized authority is the easiest road to attain it.
c) History of the enterprise: The way in which the business has been built is another factor which determines the
degree of decentralization. If it has developed a set of departments first and other departments or divisions are
established later, authority tends to be centralized.
d) Management philosophy: The character and philosophy of the executive also influence the extent of
decentralization. If the persons in the helm of affairs believe and have faith in decentralization, then decentralization
will prevail. If they are inclined to centralized authority due to various reasons, centralization will prevail.
e) Desire for independence: The desire of the top management to develop the group executives at lower level so as to
motivate them shall also pave way for decentralization.
f) Availability of managers: Availability of competent managers also limits the extent of decentralization. When there
is a scarcity of good managers, greater is the tendency for centralization. On the other hand, if they are available in
adequate number, decentralization is practicable.
g) Control techniques: If there are sufficient control techniques, decentralization is possible, because the performance
of the subordinate can be measured and corrective action can be taken. In the absence of sufficient control, the
tendency shall be towards centralization.
h) Decentralized performance: If the activities of the enterprise are conducted at different places, authority is likely to
be decentralized. However, it does not mean that when the performance is centralized, authority is centralized as well.
i) Business dynamics: The dynamic character also vitally affects the degree to which authority may be decentralized. If
the business is growing fast, decentralization becomes necessary. However, this factor also depends upon the
availability of competent managers.

5.4 Delegation
5.4.1 Meaning of delegation of authority
Delegation of Authority means division of authority and powers downwards to the subordinate in order to achieve
effective results. Delegation is about entrusting someone else to do parts of your job.

5.4.2 Features of delegation

a) Delegation occurs when a manager grants some rights to a subordinate
b) A manager cannot delegate the authority he does not possess
c) A manager cannot delegate all his authority
d) Delegation does not imply reduction in the status of a manager
e) Delegation does not mean abdication of responsibility

5.4.3 Benefits/importance of delegation

a) Sharing of Workload: Through delegation, a manager is able to divide the work and allocate it to the subordinates.
This helps in reducing his work load so that he can work on important areas and critical issues of concern. This way
he is able to bring effectiveness in his work as well in the work unit.
b) Scalar Chain - Delegation of authority is the ground on which the superior-subordinate relationship stands. An
organization functions as the authority flows from top level to bottom. This in fact shows that through delegation, the
superior-subordinate relationship become meaningful and is a way of achieving results.
c) Specialization – Delegation allows specialization with specialists performing functions using their expertise.
d) Quick Decisions: Delegation creates centers of decision making all along the line of command due to authority and
responsibility working within the hierarchy.
e) Motivation for Subordinates - Delegation of authority in a way gives enough room and space to the subordinates to
hone their abilities and skill. They get motivated to work and this motivation provides appropriate results to a concern.
Job satisfaction is an important criterion to bring stability and soundness in the relationship between superior and
subordinates. Delegation also helps in breaking the monotony of the subordinates so that they can be more creative
and efficient.
f) Executive Development - Delegation of authority also helps the managers to develop their talents and skills. Since
the manager get enough time through delegation to concentrate on important issues, their decision-making gets strong.
Through granting powers and getting the work done, helps the manager improve communication skills, supervision
and guidance, effective motivation and leadership traits.
g) Growth and Diversification: Delegation of authority is help to both superior and subordinates. This, in a way, gives
stability to a concern’s working. With effective results, an organization can think of expanding capacity by creating
more departments and divisions. This will require creation of more managers which can be fulfilled by shifting the
experienced, skilled managers to these positions.

5.4.4 Problems of delegation

a) Over Confidence of Superior: The feeling in a superior that only he can do certain work effectively than others.
When a manager is of the opinion that his subordinates will not be able to make proper decisions then he will
concentrate all powers with him and will not like to delegate his authority.
b) Lack of manager ability to direct: Lack of ability of the executive to identify and communicate the essential
features of his plans, creates obstacles for effective delegation
c) Lack of confidence in subordinates: Delegation implies a mutual trust and confidence between the manager and the
subordinate. Lack of confidence in the ability, capacity and dependability of the subordinate obstructs the boss to
delegate authority. If a manager has no confidence in the subordinates, he will not delegate authority to give them any
chance to make mistakes and learn how to take correct decisions
d) Lack of Control: While delegating authority the manager must find means of assuring himself that the authority is
being used to complete the given tasks. Where manager does not establish adequate controls nor has no means of
knowing the use of authority, he may hesitate to delegate the authority
e) Cautious temperament and conservative attitude: the conservative attitude of manager and his cautious
temperament generally act as obstacle in the delegation of authority, as the process of delegation involves risk which a
manager with cautious temperament would not like to undertake.
f) Fear of competition from subordinates: In delegation of authority, subordinates learn to take decisions. The
managers may develop a feeling of fear of competition from subordinates. Due to this, he may be unwilling to
delegate authority to subordinates. This obstacle is usually unexpressed and may be unconscious.
g) Dependence on the boss: If a subordinate finds it easier to ask the boss for taking decisions while tackling problems,
he may avoid accepting authority even though the boss may be prepared to delegate it
h) Fear of criticism: If a subordinate has fear that he will be criticized even for a small mistake, he will avoid accepting
authority.
i) Lack of self-confidence and fear of failure: A subordinate lacking in self- confidence will generally try to avoid
responsibility even though the superior is prepared to delegate.
j) Lack of information and resources: Inadequacy of information and lack of resources are other bottlenecks that act
as a hindrance in the way of accepting authority by the subordinates.
k) lack of positive incentives: A subordinate may be unwilling to accept more work (delegated to him by boss) if he
does not get adequate positive incentives in the form of pay increase, opportunity for promotion, personal recognition
or approval by the boss.
l) Overburdened with work: If a subordinate is already overburdened with work, he may not accept authority. This is
a legitimate reason for such refusal.
m) Vague organization structure and non-clarity of authority and responsibility relationships.
n) Inadequate planning and policy formulation.
o) Infringement of the principle of unity of command.
p) Lack of effective control mechanism.
STAGE 3 TERM 2
6. HUMAN RESOURCE MANAGEMENT
6.1 Meaning of HRM and personnel management
Human resource management is defined as a strategic and coherent approach to the management of
an organization’s most valued assets. These are the people who work and contribute individually and collectively to the
achievement of company objectives. According to Storey (1989) HRM can be regarded as a ‘set of interrelated policies
with an ideological and philosophical underpinning’. The four aspects that constitute the meaningful version of HRM
which are:
a) A particular group of beliefs and assumptions;
b) A strategic thrust informing decisions about people management;
c) The central involvement of line managers;
d) A reliance upon a set of ‘levers’ to shape the employment relationship

6.2 Aims of HRM

The overall purpose of human resource management is to ensure that the organization is able to achieve
success through people. Specifically, HRM is concerned with achieving objectives in the following areas.
a) Organizational effectiveness:
HRM strategies aim to support programmes for improving organizational effectiveness by developing policies in
such areas as knowledge management, talent management and generally creating ‘a great place to work’. HR strategies
can be concerned with the development of continuous improvement and customer relations policies.
b) Human capital management
Human capital can be regarded as the prime asset of an organization and businesses need to invest in that
asset to ensure their survival and growth. HRM aims to ensure that the organization obtains and retains the
skilled, committed and well-motivated workforce it needs by:
 assess and satisfy future people needs and to enhance and develop the inherent capacities of people (their
contributions, potential and employability);
 providing learning and continuous development opportunities. It involves the operation of ‘rigorous recruitment and
selection procedures, performance - dependent incentive compensation systems, and management development and
training activities linked to the needs of the businesses.
 It also means engaging in talent management – the process of acquiring and nurturing talent, wherever it is and
wherever it is needed, by using a number of interdependent
c) Knowledge management
Knowledge management is ‘any process or practice of creating, acquiring, capturing, sharing and using
knowledge, to enhance learning and performance in organizations’. HRM aims to support
the development of firm-specific knowledge and skills that are the result of organizational learning processes
d) Reward management
HRM aims to enhance motivation, job engagement and commitment by introducing policies and processes that ensure that
people are valued and rewarded for what they do and achieve and for the levels of skill and competence they reach.
e) Employee relations
The aim is to create a climate in which productive and harmonious relationships can be maintained through partnerships
between management and employees and their trade unions.
f) Meeting diverse needs
HRM aims to develop and implement policies that balance and adapt to the needs of its stakeholders and provide for the
management of a diverse workforce, taking into account individual and group differences in employment, personal needs,
work style and aspirations and the provision of equal opportunities for all.
g) Bridging the gap between rhetoric and reality
Managements may start with good intentions to do good things but the realization of them is often very difficult. This
arises because of contextual and process problems: other business priorities, short-termism, limited support from line
managers, an inadequate infrastructure of supporting processes, lack of resources, resistance to change and lack of trust.
An overarching aim of HRM is to bridge this gap by making every attempt to ensure that aspirations are translated into
sustained and effective action

6.3 Similarities and differences between personnel management and HRM

Similarities
a) Both personnel management strategies, and HRM strategies, flow from the business fit and integration.
b) Both personnel management, and HRM, recognizes that line managers are responsible for managing people. The
personnel function provides the necessary advice and support services to enable managers to carry out their
responsibilities
c) The values of personnel management and at least the ‘soft’ version of HRM are identical with regard to ‘respect for
the individual, balancing organizational and individual needs, and developing people to achieve their maximum level
of competence both for their own satisfaction and to facilitate the achievement of organizational objectives.
d) Both personnel management and HRM recognize that one of their most essential functions is that of matching people
to ever changing organizational requirements i.e. placing and developing the right people in or for the right jobs.
e) The same range of selection, competence, analysis, performance management, training, management development,
and reward management techniques are used.
f) Personnel management, like the ‘soft’ version of HRM, attaches importance to the processes of communication and
participation within an employee relations system.

Differences
a) HRM places more emphasis on strategic fit and integration
b) HRM is based on a management and business orientated philosophy.
c) HRM attaches more importance to the management of culture and the achievement of commitment (mutuality).
d) HRM places greater emphasis on the role of line managers as the implementers of HR policies.
e) HRM is a holistic approach concerned with the total interests of the business; the interests of members of the
organization are recognized but subordinated to those of the enterprise.
f) HR specialists are expected to be business partners rather than personnel administrators 7
g) HRM treats employees as assets not costs

6.4 Features of HRM

a) It is a diverse field
There is a distinction between the ‘hard’ and ‘soft’ versions of HRM. The hard version of HRM emphasizes that people
are important resources through which organizations achieve competitive advantage. These resources have therefore to be
acquired, developed and deployed in ways that will benefit the organization. The focus is on the quantitative, calculative
and business-strategic aspects of managing human resources as any other economic factor in order to respond to an
external threat from increasing competition. The soft version of HRM emphasizes communication, motivation and
leadership with a key role of organizational culture. It involves ‘treating employees as valued assets, a source of
competitive advantage through their commitment, adaptability and high quality (of skills, performance and so on)’.
b) It’s strategic in nature
HRM is attached to strategic integration, which flows from top management’s vision and leadership, and which requires
the full commitment of people to it. it is concerned with the ability of the organization to integrate HRM issues into its
strategic plans, to ensure that the various aspects of HRM are included and to encourage line managers to incorporate an
HRM perspective into their decision-making.
c) HRM is commitment-oriented
HRM model is composed of policies that promote mutuality – mutual goals, mutual influence, mutual respect, mutual
rewards, and mutual responsibility. Policies of mutuality elicit commitment, which in turn yields better economic
performance and greater human development.
d) People are regarded as ‘human capital’
People and their collective skills, abilities and experience, coupled with their ability to deploy these in the interests of the
organization, are recognized as making a significant contribution to organizational success and as constituting a
significant source of competitive advantage.
e) Applies unitary philosophy
The HRM approach to employee relations is unitary as it believes that employees share the same interests as employers.
f) It is Individualistic
HRM is individualistic in that it emphasizes the importance of maintaining links between the organization and individual
employees in preference to operating through group and representative systems.
g) HRM is a management-driven activity
HRM can be described as a central, senior management-driven strategic activity. It is developed, owned and delivered by
management as a whole to promote the interests of the organization that they serve. HRM policies and practices are
applied within a firm and are often associated with words such as commitment, competence, empowerment, flexibility,
culture, performance, assessment, reward, teamwork, involvement, cooperation, harmonization, quality and learning.
h) Focus on business values
The concept of HRM is largely based on a management and business-oriented philosophy. It is concerned with the
interests of the members of the organization are recognized but in relation to those of the enterprise. It attaches importance
to strategic integration and strong cultures, which flow from top management’s vision and leadership, and which require
people who will be committed to the strategy

6.5 Functions of human resource function in an organization

The general HR functions include
a) Human resource or manpower planning.
b) Recruitment, selection and placement of personnel.
c) Training and development of employees.
d) Appraisal of performance of employees.
e) Taking corrective steps such as transfer from one job to another.
f) Remuneration of employees.
g) Social security and welfare of employees.
h) Setting general and specific management policy for organizational relationship.
i) Collective bargaining, contract negotiation and grievance handling.
j) Staffing the organization.
k) Aiding in the self-development of employees at all levels.
l) Developing and maintaining motivation for workers by providing incentives.
m) Reviewing and auditing manpower management in the organization
n) Potential Appraisal. Feedback Counseling.
o) Role Analysis for job occupants.
p) Job Rotation.
q) Quality Circle, Organization development and Quality of Working Life.

6.6 Role of HR practitioner in an organization

a) Service provision
HR specialists provide services to internal customers with the aim of providing effective services that meet the needs of
the business, its management and its employees and to administer them efficiently. The services may be general, covering
all aspects of HRM: human resource planning, recruitment and selection, employee development, employee reward,
employee relations, health and safety management and welfare. Alternatively, services may only be provided in one or
two of these areas by specialists. The focus may be on the requirements of management (e.g., resourcing), or it may
extend to all employees (e.g., health and safety).
b) Guidance and advice
HR practitioners provide guidance and advice to management. At the highest level, this will include recommendations on
HR strategies that have been developed by processes of analysis and diagnosis to address strategic issues arising from
business needs and human, organizational or environmental factors. They also provide advice on issues concerning culture
change and approaches to the improvement of process capability – the ability of the organization to get things done
through people. Guidance is given to managers to ensure that consistent decisions are made on such matters as
performance ratings, pay increases and disciplinary actions, HR policies and procedures and the implications of
employment legislation to ensure that legal requirements are met.
c) The business partner role
HR practitioners as business partners share responsibility with their line management colleagues for the success of the
enterprise and get involved with them in running the business. They must have the capacity to identify business
opportunities, to see the broad picture and to understand how their HR role can help to achieve the company’s business
objectives. HR professionals integrate their activities closely with management and ensure that they serve a long-term
strategic purpose.
d) The strategist role
As strategists, HR professionals address major long-term organizational issues concerning the management and
development of people and the employment relationship. They are guided by the business plans of the organization but
they also contribute to the formulation of those business plans. This is achieved by ensuring that top managers focus on
the human resource implications of the plans. HR strategists persuade top managers that they must develop business
strategies that make the best use of the core competences of the organization’s human resources. They emphasize, that
people are a strategic resource for the achievement of competitive advantage.
e) The innovation and change agent role
HR practitioners are well placed to observe and analyze what is happening in and to their organizations as it affects the
employment of people, and intervene accordingly. Following this analysis, they produce diagnoses that identify
opportunities, threats, the causes of problems and they propose innovations that may be concerned with organizational
processes such as interaction between departments and people, teamwork, structural change and the impact of new
technology and methods of working, or HR processes such as resourcing, employee development or reward. As
innovators they have to be experts in change management.
f) The internal consultancy role
HR practitioners function like external management consultants, working alongside their colleagues in analyzing
problems, diagnosing issues and proposing solutions. They will be involved in the development of HR processes or
systems and in process consulting such as organization, team building and objective setting.
g) The monitoring role
HR practitioners act as monitors of the application of HR policies and procedures and the extent to which the
organization’s values relating to people management are upheld. This role can mean that HR specialists can act as
‘regulators’ who are involved in formulating and monitoring employment rules and ensuring that policies and procedures
comply with the legislation and that they are implemented correctly by line managers.
h) The guardian of values role
HR practitioners may act as the guardians of the organization’s values concerning people. They point out when behaviour
conflicts with those values or where proposed actions would be inconsistent with them. In a sense, their roles require them
to act as the ‘conscience’ of management – a necessary role but not an easy one to play.

6.7 Competencies/skills of a HR practitioner

a) Personal drive and effectiveness; The existence of a positive ‘can do’ mentality, anxious to find ways round
obstacles and willing to exploit all the available resources to accomplish objectives
b) People management and leadership; The motivation of others towards the achievement of shared goals, by personal
role modeling, the establishment of professional credibility, and the creation of reciprocal trust.
c) Professional competence. Possession of the professional skills and technical capabilities associated with successful
achievement in personnel and development.
d) Adding value through people. A desire to concentrate on tasks, select meaningful outputs, eliminate/reduce the
existence of performance inhibitors and complying with all legal and ethical considerations which will produce
added-value outcomes for the organization.
e) Continuing learning. Commitment to continuous improvement and change by the application of self-managed
learning techniques, supplemented where appropriate by deliberate planned exposure to external learning sources
(mentoring, coaching, etc.).
f) ‘Customer’ focused. Concern for the perceptions of personnel’s customers, including the central directorate of the
organization, a willingness to solicit and act upon ‘customer’ feedback as one of the foundations for performance
improvement.
g) Strategic capability. The capacity to create an achievable vision for the future, to foresee longer-term developments,
to envisage options and their probable consequences, to select sound courses of action, to rise above the day-to-day
detail, to challenge the status quo.
h) Influencing and interpersonal skills. The ability to transmit information to others, especially in written form
persuasively; display of listening, comprehension and understanding skills, plus sensitivity to the emotional,
attitudinal and political aspects of corporate life

6.8 Recruitment in organizations

Recruitment is the process of searching for candidates for employment and interesting them to apply for jobs in the
organization. Recruitment is the activity that links the employers and the job seekers.
Other definitions of recruitment are:
 A process of finding and attracting capable applicants for employment. The process begins when new recruits are
sought and ends when their applications are submitted. The result is a pool of applications from which new employees
are selected.
 It is the process to discover sources of manpower to meet the requirement of staffing schedule and to employ effective
measures for attracting that manpower in adequate numbers to facilitate effective selection of an efficient working
force

6.8.1 Goals of recruitment

To attract qualified applicants: Recruiting process is used to create the pool of qualified applicants. This is those
applicants who are having abilities that are a perfect match with the job requirements.
To discourage non-qualified applicants: recruitment avoids nonqualified applicants. When recruiting is based upon
careful designing of the job description and job specification most of the applicants having irrelevant qualifications are
eliminated from the list of potential applicants which makes recruiting process more effective and easier.
6.8.2 Recruitment needs
 Planned needs arising from changes in organization and retirement policy
 Anticipated needs which are those movements in personnel that an organization can predict by studying trends in
internal and external environment
 Unexpected which include resignation, deaths, accidents, illness give rise to unexpected needs

6.8.3 Factors affecting recruitment policy

 Organizational objectives and image
 HR policies of the organization and its competitors.
 Government policies on reservations.
 Preferred sources of recruitment.
 Need of the organization.
 Recruitment costs and implications.

6.8.4 Importance of recruitment

 Attract and encourage more candidates to apply in the organization.
 Create a talent pool of candidates to enable the selection of best candidates for the organization.
 Determine present and future requirements of the organization in conjunction with its HR planning and job analysis
activities.
 Links the employers with the employees.
 Increase the pool of job candidates at minimum cost.
 Help increase the success rate of selection process by decreasing number of visibly under qualified or overqualified
job applicants.
 Help reduce the probability that job applicants once recruited and selected will leave the organization only after a
short period of time.
 Ensures the organizations legal and social obligations regarding the composition of its workforce.
 Is the first step in identifying and preparing potential job applicants who will be appropriate candidates
 Increase organization and individual effectiveness of various recruiting techniques and sources for all types of job
applicants.

6.8.5 Recruitment process

A recruitment process is an organization-specific model of how the sourcing of new employees is undertaken. Typically,
the ownership of the recruitment process resides within the Human Resources function, although again this may differ
depending on the specific organizational structure.

A recruitment process can be broken as follows:

a) Identification of a vacancy through job analysis.
Job analysis is a defined data collection and analysis procedure through which information about job tasks and job
requirements are obtained. It determines the duties and skill requirements of a job and the kind of person who should
be hired for it. In selecting an applicant for a job, the selectors need to know:
 what the job involves including the key tasks, objectives and responsibilities (Job Description)
 the attributes (abilities, experience, personality, etc.) required for successful performance (Person
Specification)
b) Sourcing - This is the use of one or more strategies to attract or identify candidates to fill job vacancies. It may
involve internal and/or external advertising, eg in the media, recruitment consultancies/agencies.

Internal Recruiting Sources: When job vacancies exist, the first place to look for placement is within a company. An
organization’s present employees generally feel that they deserve opportunities to be promoted to higher level
positions because of their service and commitment to organization. More over organizations have opportunities to
examine the track records of its present employees and to estimate which of them would be successful. Also recruiting
among present employees is less expensive than recruiting from outside the organization. The major forms of the
internal recruiting include:
 Promotion from within: Promoting entry level employees to more responsible positions is one of the best ways
to fill job vacancies.
 Contacts and Referrals: Employees may actively solicit applications from their friends and associates. Before
going outside to recruit employees, many organizations ask present employees to encourage friends or relatives to
 apply for the job openings. Contacts and referrals from the present employees are valuable sources of recruits.
Employee referrals are relatively inexpensive and usually produce quick responses.
 Job posting: In the job posting system the organization notifies its present employees about job openings through
the use of bulletin boards, company publications, or personal letters. An effective job posting system involves the
following guidelines:
 Job posting should be prominent.
 Clear job specification should be communicated so that applicants assess themselves and their eligibility
 Once the decision is made, all applicants should be informed about the decision.
 Job posting systems generally work quite well.

Advantages of Internal Recruitment:

1. Provides greater motivation for good performance.
2. Provides greater opportunities for present employees
3. Provides better opportunity to assess abilities
4. Improves morale and organizational loyalty
5. Enables employees to perform the new job with little lost time

Disadvantages of Internal Recruitment:

1. Creates a narrowing thinking and stale ideas
2. Creates pressure to compete
3. Creates a homogeneous workforce
4. Chances to miss good outside talent

External Recruiting Sources: An organization should carefully assess the kinds of positions it wants to fill and select
the recruiting methods that are likely to produce the best results. There are some employee needs that a firm must fill
through external recruitment. Among them are: Filling entry-level jobs, acquiring skills not possessed by current
employees, and obtaining employees with different backgrounds to provide new ideas.
 High Schools and Vocational Schools: Organizations concerned with recruiting clerical and entry-level
operative employees often depend on high schools and vocational schools.
 Community Colleges: A number of community colleges are sensitive to the specific employment needs in their
local labor market and graduate highly sought-after students with marketable skills.
 Colleges and Universities: Colleges and universities represent a major source of recruitment for many
organizations. Potential professional, technical, and management employees are typically found in these
institutions. Different institutes use to publish booklets having information about the graduates that can be
communicated to organization who are in search of applicants.
 Competitors and other Firms: Competitors and other firms in the industry or geographic area may be the most
important source of recruits for positions in which recent experience is highly desired.
 Unemployed: Individuals, who are unemployed, regardless of the reason, often provide a valuable source of
recruitment.
 Older Individuals: Older workers, including those retired, may also comprise a valuable source of employees.
Military Personnel: Using this source may make sense to many employers because these individuals typically
have a proven work history, and are flexible, motivated, and drug free.
 Employed Workers: These individuals may provide a source of applicants to fill any number of jobs requiring
technical, professional, administrative, or entrepreneurial expertise.

Advantages of External Recruitment:

1. Provides new ideas and new insights.
2. Provides greater diversity and makes affirmative action easy.
3. Provides opportunities to handle rapid growth of the organization.
4. Opportunities to get people with up-to-date knowledge education and training.

Disadvantages of External Recruitment:

1. It is more expensive and time consuming
2. Destroys incentives of present employees to strive for promotion
3. More chances to commit hiring mistakes due to difficult applicant assessment that will lead to wastage of resources.

External recruitment methods

 Recruitment methods are the specific means through which potential employees are attracted to the firm and include
the following:
Advertising: A way of communicating the employment needs within the firm to the public through media eg radio,
newspaper, television, industry publications, and the Internet, blind advertisement.
Employment Agencies: An organization that helps firms’ recruit employees and, at the same time, aids individuals in
their attempt to locate jobs. They charge a fee for the coordination between the organizations and applicants who are
searching for jobs.
Recruiters: The most common use of recruiters is with technical and vocational schools, community colleges,
colleges, and universities.
Special Events: It is a recruiting method that involves an effort on the part of an to attract a large number of
applicants for interviews.
Internships: A special form of recruiting that involves placing a student in a temporary job. There is no obligation on
the part of the company to permanently hire the student and no obligation on the part of the student to accept a
permanent position with the firm. However, organizations that sponsor internship programs have found that such
programs represent an excellent means of recruiting outstanding employees.
Executive Search Firms: Executive search firms sometimes called head hunters are specialized form of private
employment agencies that place top level executives and experienced professionals.
Professional Associations: Associations in many business professions provide recruitment and placement services for
their members. Most professional organizations have newsletters, annual meetings and trade publications that
advertise job openings. The annual meetings of these organizations are good occasion for professionals to learn about
available job openings and for employers to interview potential applicants.
Unsolicited Walk-In Applicants: If an organization has the reputation of being a good place to work, it may be able
to attract good prospective employees without extensive recruitment efforts.
Open Houses: Firms pair potential hires and managers in a warm, causal environment that encourages on-the-spot job
offers
Event Recruiting: Attend the events that the people you are seeking go to.
Virtual Job Fairs: Individuals meet recruiters face-to-face in interviews conducted over the internet.
Cyber Recruiting: Organizations can also use web sites and internet sources to recruit people application submission
test and interview and other recruitment and selection activities can be performed online.

6.8.6 Selection process

Selection is the process of choosing from a group of applicants those individuals best suited for a particular position. This
process involves making a judgment about the fit between the applicant and the job by considering knowledge, skills and
abilities and other characteristics required to perform the job.

Aims of selection process

 Gather as much relevant information as possible
 Organize and evaluate the information
 Assess each candidate in order to:
 Forecast performance on the job,
 Give information to applicants, so that they can judge whether or not they wish to accept an offer of employment

Types of selection devices

Managers can use a number of selection devices to reduce accept and reject errors using the following devices:
a) The Application Form
Strengths: Relevant biographical data and facts that can be verified have been shown to be valid performance
measures for some jobs. When items on the form have been weighted to reflect job relatedness, this device has proved
to be a valid predictor for diverse groups.
Weaknesses: Usually only a couple of items on the form prove to be valid predictors of job performance and then
only for a specific job. Weighted-item applications are difficult and expensive to create and maintain.
b) Written Tests
Strengths: Tests of intellectual ability, spatial and mechanical ability, perceptual accuracy, and motor ability are
moderately valid predictors for many semiskilled and unskilled lower-level jobs in industrial organizations.
Intelligence tests are reasonably good predictors for supervisory positions.
Weaknesses: Intelligence and other tested characteristics can be somewhat removed from actual job performance,
thus reducing their validity.
c) Performance-Simulation Tests
 Strengths: Based on job analysis data and easily meet the requirement of job relatedness. Have proven to be valid
predictors of job performance.
Weaknesses: Expensive to create and administer.
d) The Interview
Strengths: Must be structured and well organized to be effective predictors. Interviewers must use common
questioning to be effective predictors.
Weaknesses: Interviewers must be aware of legality of certain questions. Subject to potential biases, especially if
interviews are not well structured and standardized.
e) Background Investigations
Strengths: Verifications of background data are valuable sources of information.
Weaknesses: Reference checks are essentially worthless as a selection tool.
f) Physical Examination
Strengths: Has some validity for jobs with certain physical requirements. Done primarily for insurance purposes.
Weaknesses: Must be sure that physical requirements are job related and do not discriminate.

Selection process includes the following

a) Screening and shortlisting – to verify suitability for a job by looking for relevant skills, knowledge, aptitude,
qualifications and educational or job related experience by screening resumes /CVs. Those involved in the selection
process should avoid unfair discrimination and the potential risk to the organization’s reputation should a candidate
make a legal claim. Electronic techniques are also being used to slim down the number of potential candidates.
b) Selection Tests: Many organizations hold different kinds of selection tests to know more about the candidates or to
reject the candidates who cannot be called for interview, etc. Selection tests normally supplement the information
provided in application forms to give information about their aptitude, interest, personality etc, which cannot be
known by application forms.
Types of selection tests include:
 Achievement Test - also called performance test or trade test is concerned with what one has accomplished and is
conducted to measure a candidate’s knowledge through his answers to certain questions or his performance at a
practical test
 Intelligence Test - tries to measure the level of intelligence of a candidate. This test generally includes verbal
comprehension, word fluency, memory, inductive, reasoning, number facility, speed of perception, spatial,
visualization etc
 Personality Test - is administered to predict performance success for jobs that require dealing with people, or
jobs that are essentially supervisory or managerial in character. Dimensions of personality such as interpersonal
competence, dominance-submission, extroversion introversion, self-confidence, leadership ability, patience, and
ambition can be measured through personality tests
 Aptitude test is used for measuring human performance characteristics related to the possible development of
proficiency on specific jobs. Aptitude test measures the potential characteristics to do something provided proper
environment and training is provided to the individuals
 Interest Test - is designed to discover a person’s area of interest, and to identify the kind of jobs that will satisfy
him

c) Interview - it is a formal, in-depth and controlled conversation with the applicant specifically set to obtain specific
information from the job candidate. Interviews can be One-to-One, Panel Interview, or Sequential Interviews. Besides
there can be Structured and Unstructured interviews, Behavioral Interviews, Stress Interviews.
Importance of interviews
 They provide additional information about the applicant that cannot be given in an application letter, CV or other
documents,
 They help in judging the suitability of a candidate,
 They are used to explore candidate’s aptitudes and capability
 Providing a candidate with an opportunity to ask questions about the organization and the job.
The limitations of interview are;
 They involve a lot of expenditure in terms of money and time,
 They normally test the personality of a person not the skills and abilities for the job,
 They are subject to personal judgments and bias of the interviewer.
 When interviewers are not experts they may fail to get all the relevant information from the interviewee
d) Reference & Background Checks: are conducted to verify the information provided by the candidates. Reference is
a brief statement about a candidate made by a third party usually the immediate supervisor. Reference checks are
 conducted to provide factual information about the candidate’s period of employment and gather opinions regarding
candidate’s personal attributes such as honesty creativity etc. These are therefore important in that they encourage the
candidate to tell the truth in the application forms and provides a backup in case of genuine attempt by a candidate to
mislead prospective employers. Their disadvantages are that most of the referees are biased, applicants provide
referees who are likely to favor them and it is costly in terms of time and money. Reference checks can be through
formal letters, telephone conversations.
e) Selection Decision: After obtaining all the information, a final decision has to be made out of applicants who have
passed preliminary interviews, tests, final interviews and reference checks. The views of line managers are considered
generally because it is the line manager who is responsible for the performance of the new employee.
f) Physical / Medical Examination: Physical examination is carried out to ascertain the physical standards and fitness
of prospective employees. A job offer is often contingent upon the candidate passing the physical examination.
g) Job Offer: Approval by appropriate Authority is sought for suitable candidates and a job offer to successful
applicants is made by way of letter of appointment.

6.8.7 Placement and induction

Placement
After a candidate has been selected, he should be placed on a suitable job. Placement is the actual posting of an employee
to a specific job; it involves assigning a specific rank and responsibility to an employee. The placement decisions are
taken by the line manager after matching the requirements of the job with the qualifications of a candidate. Most
organizations put new recruits on probation for a given period of time after which their services are confirmed. During
this period, the performance of the probation is closely monitored.

Principles of placement
 A person should be placed on the job according to the requirements of the job. The job should not be adjusted
according to the qualifications or requirements of the man.
 The job should be offered to the person according to his qualification. This should neither be higher nor the lower
than the qualification.
 The employee should be made conversant with the working conditions prevailing in the organization and all things
relating to the job as well as penalties if a wrong is committed.
 While introducing the job to the new employees, an effort should be made to develop a sense of loyalty and
cooperation in him so that he may realize his responsibility towards the job and the organization.
 The placement should be ready before the joining date of the newly selected person
 The placement in the initial period may be temporary as changes are likely after the completion of training. The
employee may be later transferred to the job where he can do better.

Importance of Appropriate Employee Placement

 It improves employees’ morale since they do what they are skilled at.
 It reduces labour turnover because the employee is likely to be satisfied with the job.
 It reduces the rate of accidents and absenteeism
 Helps to improve quality of work since the worker is placed at the right job.
 An employee is able to show good results on the job, get along with people easily, keep his spirits high, report for
duty regularly, avoid mistakes and accidents.

The main problem of placement arises when

 Recruiters look at the individuals rather than the job because, often, the individual does not work independent of the
others.
 Employees are not properly placed, it may result to high labour turnover, lack of morale among employees,
absenteeism of employees, poor performance and quality of work, decrease in output and accidents especially for
workers dealing with machines if they are not well skilled.

Induction
Induction is the task of introducing the new employees to the organization and its policies, procedures and rules. The new
employee is provided with information about the company - its history, current position, the benefits for which he is
eligible, leave rules, rest periods etc. Also covered are the more routine things a newcomer must learn, such as the
location of the rest rooms, break rooms, parking spaces cafeteria etc. In some organizations all this is done informally by
attaching new employees to their seniors who provide guidance on the above matters. Lectures, handbooks, films, group
seminars, are also provided to new employees so that they can settle down quickly and resume the work.
Importance of Employee an Induction
a) Induction can assist in cultural change - new employees can be ‘shaped’ accordingly resulting in a cultural change
b) Induction can assist with knowledge transfer - An induction programme is part of an organization’s knowledge
management process and is intended to enables a new employee to become a useful, integrated member of the team,
rather than being “thrown in at the deep end” without understanding how to do their job, or how their role fits in with
the rest of the company.
c) Induction helps build social networks - induction can be useful for introducing new staff to the key people within
the company who will likely be of most use.
d) All business units should be involved Induction should be a collective effort involving all relevant business units to
ensure that new staff receive a complete picture of the organization and also promote relations between staff working
in different departments.
e) Reduces labour turnover - the employee feels welcome into the organization, respected and is made to feel more
comfortable in the workplace which makes it easier to integrate into the workplace, and confirms that they made the
right decision to join that organization; a good induction programme builds the new employee’s self-esteem, morale
and sense of motivation; and assists him to establish good communication between the supervisor and the new
employee from the very beginning.

Steps in Induction Process

a) Create an induction checklist - to include:
 an introduction to other staff
 introduction to the workplace, including a tour of the premises and its facilities
 an introduction to the tasks and responsibilities of the job working conditions such as dress code, uniforms,
policies and procedures
 instruction in internal communications procedures
 security procedures
 occupational health and safety information
 Introduction to other staff and the team leader, supervisor or manager.
b) Organize a schedule and venue - the induction programme should be planned in advance detailing the induction
activities for a set period of time including a named member of staff who will be responsible for each activity. This
plan should be circulated to everyone involved in the induction process, including the new starter. It should identify
what training needs to be done and when. It should indicate where each activity will take place and who will be
responsible for conducting that part of the induction.

6.9 Employee training and development

Training is defined as a process for developing individual skills and effectiveness. Individual effectiveness, in terms of
skills, knowledge and attitude, is an essential building block towards achievement of the wider goal of improved
organizational efficiency and effectiveness.
Training is also defined as a systematic process or changing the behavior, knowledge and motivation of present
employees to improve the match between employee characteristics and employment requirements.
Training is often interpreted as the activity when an expert and learner work together to effectively transfer information
from the expert to the learner (to enhance a learner’s knowledge, attitudes or skills) so the learner can better perform a
current task or job.

Development is often viewed as a broad, ongoing set of activities to bring someone up to another threshold of
performance. This development often includes a wide variety of methods, e.g., orienting about a role, training in a wide
variety of areas, ongoing training on the job, coaching, mentoring and forms of self-development. Some view
development as a life-long goal and experience.

6.9.1 Reasons for employee training and development

a) When a performance appraisal indicates performance improvement is needed
b) To “benchmark” the status of improvement so far in a performance improvement effort
c) As part of an overall professional development program
d) As part of succession planning to help an employee be eligible for a planned change in role in the organization
e) To “pilot”, or test, the operation of a new performance management system
f) To train about a specific topic.
6.9.2 Benefits of training and development
a) To the organization
 Optimum Utilization of Human Resources: It helps an organization in optimizing the utilization of human
resource that further helps the employee to achieve the organizational goals as well as their individual goals.
 Development of Human Resources: it helps to provide an opportunity and broad structure for the development
of employees’ technical and behavioral skills in an organization.
 Increased Productivity and quality: Training and Development helps in increasing the productivity of the
employees that helps the organization further to achieve its long-term goal as well as improving upon the quality
of work and work-life.
 Develop Organization Culture and improve Organization Climate: It helps in creating the learning culture,
building the positive perception and feeling about the organization.
 Health and Safety: Training and Development helps in improving the health and safety of the organization thus
preventing obsolescence and accidents.
 Helps in creating a better corporate image.
 Aids in organizational development i.e. Organization gets more effective decision making and problem solving.
It helps in understanding and carrying out organizational policies as well as developing leadership skills,
motivation, loyalty, better attitudes, and other aspects that successful workers and managers usually display
b) To the Individual
 Increased job satisfaction and morale among employees.
 Increased employee motivation.
 Increased efficiencies in processes, resulting in financial gain.
 Increased capacity to adopt new technologies and methods.
 Increased innovation in strategies and production

6.9.3 Methods of staff training

The methods can be broadly be divided into two categories namely on-the-job training and off-the –job training
1. On the Job (in house) Training Methods
On the job training refers to training given to personnel inside the company. There are different methods of on the job
training:
a) Job rotation - Job rotation enables training employees on various jobs within a department starting from the lowest
level job to the highest level job. It may also involve transfer of an employee to different equipment for a fixed
amount of time until he is comfortable with all the equipment
b) Planned progression - juniors are assigned a certain job of their senior in addition to their own job which allows the
them to slowly learn the job so that when he is promoted to the senior job it becomes very easy for him to adjust to the
new situation. It also provides a chance to learn higher level jobs.
c) Coaching and counseling - Coaching refers to actually teaching a job to a junior by a senior person on how the work
must be handled and how decisions must be taken, the different techniques that can be used on the job, how to handle
pressure. Counseling refers to advising the junior employee as and when he faces problems by a superior who plays
an advisory role and does not actively teach employees.
d) Apprenticeship training is a method in which both theory and practical session are conducted mainly in technical
fields or in factories. The theory sessions give theoretical information about the plant layout, the different machines,
their parts and safety measures etc. The practical sessions give practical training in handling the equipment.
e) Under study - a junior is deputed to work under a senior. He takes orders from the senior, observes the senior, attends
meetings with him, learns about decision making and handling of day to day problems. The method is used when the
senior is on the verge of retirement and the job will be taken over by the junior.
f) Junior board is a method where a group of junior level managers are identified and they work together in a group
called junior board. They function just like the board of directors.

Advantages of In-house training

a) Saving on training cost - because cost per delegate is lower than public scheduled courses because the training
company only sends a trainer rather than setting up a training environment
b) Saving on travel and accommodation costs
c) More focused training - in-house training course for a single client allows more focused training on the specific
subjects and skills that are relevant to the organization
d) Use of real work examples because trainees are able to work on current work or examples of work which relates to
their roles not a generic example
e) Ability to work around people’s schedules - In-House training courses makes a lot easier to manage logistical issues
and attendees can be easily reached in case something arises that needs to be addressed quickly;
f) Participation from different departments - having a room full of delegates from different departments and levels
can encourage team work, social learning and sharing ideas. leading to increased awareness and understanding of each
other’s roles as well as staff morale.

Disadvantages of In-House Training include:

a) Incurring extra administration costs related to training room, parking for the trainer, equipment such as projectors,
laptops and tablets amongst other things which need to be sorted out and in advance to ensure the training works;
b) Interruptions in training - Delegates staying onsite could be pulled out of the classroom in order to help with other
activities making it hard to get a candidate through an entire session without interruption;
c) Lack of seriousness - when training is not moved outside the organization, the employee may not view it as a
d) serious event, some may even skip it as it is easier to duck in and out the training.
e) Lack of innovation since the employees are used to the equipment and the environment hence there is a danger of the
training course going stale.
f) Limits networking - This type of training also limits networking because staff will not meet anyone from other
companies.

2. Off the job training

Off the job training refers to method of training given outside the organization. The different methods
adopted in off the job training are:
a) Classroom method is used when a group of employees have to be trained in theoretical aspects. The training involves
using lectures, audio visuals, case study, role play method, group discussions etc. The method is interactive and
provides very good results.
b) Simulation involves creating atmosphere which is very similar to the original work environment. The method helps
to train handling stress and pressure on the job, taking immediate decisions, etc.
c) Business games method involves providing a market situation to the trainee and asking him to provide solutions. If
there are many people to be trained they can be divided into groups and each group becomes a separate team and play
against each other.
d) Committee refers to a group of people who are officially appointed to look into a problem and provide solution.
Trainees are put in the committee to identify how they study a problem and what they learn from it.
e) Readings involve encouraging the trainee to increase his reading related to his subject and then ask him to make a
presentation on what he has learned.

6.10 Employees performance appraisal

Performance appraisal/review/evaluation refers to a systematic description and review of an individual’s job performance.
Performance management refers to the total system of gathering information, the review and feedback to the individual,
and storing information to improve organization effectiveness.

6.10.1 Importance of performance appraisal

a) Compensation - performance management helps in determining pay increases, bonuses and other pay related issues
b) Performance improvement - companies use appraisal systems to link performance improvement with pay.
c) Inter appraisal - Performance appraisal information is used in performance decisions, to determine promotions,
transfers, or in the case of downsizing, do identify possible layoffs.
d) Evaluation - performance appraisal information is used to evaluate the effectiveness of the recruitment process, to
validate selection criteria or other predictors of job performance.
e) Internet feedback - This is a feedback system where employees send feedback to assist managers in assessing and
develop their leadership skills
f) Development tool - Performance appraisal may also be used as a development tool for the individual employee,
providing an opportunity for feedback, recognition, and reinforcement.

6.10.2 Performance appraisal methods

a) Behavioral rating: Employees are rated based on traits exhibited in the organization and points allocated accordingly
eg punctuality, honesty, courtesy etc.
b) Work standards approach: Employees are rated based on their performances at work. Their performance should be
within the acceptable limits.
c) Management by Objectives (MBO): Employees are rated based on their abilities to attain their own individual goals
and objectives.
d) Essay Approach: The assessor writes a brief essay providing an assessment of the strengths, weaknesses and
potential of a person. It is necessary that the assessor knows the person well and should have interacted with them.
e) Ranking Method: jobs are ranked to determine the relative worth of a job in the organization
f) Graphic rating scale – it assesses a person on the quality of their work based on a rating scale (average; above
average; outstanding; or unsatisfactory)
g) 360-degree (multi-rater) assessment process - is employee development feedback that comes from colleagues,
peers, managers in the organization, as well as self-assessment. 360-degree feedback allows the individual to
understand how his or her effectiveness as an employee, manager, or coworker is viewed by others

6.10.3 Challenges of performance appraisal

a) Determining the evaluation criteria: The performance data to be considered for evaluation should be carefully
selected and should be in quantifiable or measurable terms.
b) Create a rating instrument: The purpose of the Performance appraisal process is to judge the performance of the
employees rather than the employee. The focus of the system should be on the development of the employees of the
organization.
c) Lack of competence: Top management should choose the raters or the evaluators carefully. They should have the
required expertise and the knowledge to decide the criteria accurately. They should have the experience and the
necessary training to carry out the appraisal process objectively.
d) Errors in rating and evaluation: Many errors based on the personal bias like stereotyping, halo effect (i.e. one trait
influencing the evaluator’s rating for all other traits) etc. may creep in the appraisal process. Therefore, the rater
should exercise objectivity and fairness in evaluating and rating the performance of the employees.
e) Resistance: The appraisal process may face resistance from the employees and the trade unions for the fear of
negative ratings. Therefore, the employees should be communicated and clearly explained the purpose as well the
process of appraisal. The standards should be clearly communicated and every employee should be made aware that
what exactly is expected from him/her.

6.10.4 Managing challenges to performance appraisal

a) Training that involves creating an awareness and acceptance in the evaluators of the wide range in difference of skills
and abilities among those being evaluated
b) Providing feedback to raters - managers should be provided with feedback, including information on ratings from
other managers to reduce leniency errors.
c) Subordinate Participation in the evaluation process should be encouraged, with employee-supervisor reciprocity in
the discussion for any discrepancies between self-ratings and supervisor ratings, thus, increasing job satisfaction and
motivation.

6.11 Employee remuneration

Remuneration is the compensation that one receives in exchange for the work or services performed.
It can also be defined as Reward for employment in the form of pay, salary, or wage, including allowances, benefits (such
as company car, medical plan, pension plan), bonuses, cash incentives, and monetary value of the noncash incentives.

The remuneration package includes; wages/salary, incentives, fringe benefits, and non-monetary benefits.
 Wage is the payment given to employee by the employer based on an hourly-rate of pay.
 Salary refers to monthly rate of pay which includes allowances and annual increment. Salary payment is not uniform
to all employees and depends upon nature of job, responsibilities, merits available, status, and seniority of the
employee.
 Incentives are addition to regular wage payment and depend on productivity, sales, profit, cost reduction efforts etc.
The purpose behind incentives is to encourage/motivate employees to take more interest in the work and according to
the results get the incentives.
 Fringe benefits are monetary benefits provided to employees and includes; provident fund, gratuity, medical care,
hospitalization payment, provision of uniforms to employees etc.

6.11.1 Importance of compensation

a) Attract employees who are qualified, experienced and interested in the assignments at hand;
b) Provide a consistent and reasonable relationship between the pay levels of employees at different levels;
c) Reward people according to organizational values and for the value they create
d) Develop a performance culture
e) Motivate people and obtain their commitment and engagement
f) Create total reward processes that recognize the importance of both financial and nonfinancial rewards;
g) Transparency - employees understand how reward processes operate and how they are affected by them;
h) Organizational development since high productivity enables the organization to achieve its short and long term goals
leading to continuity and sustainability.

6.11.2 Types of remuneration systems

1. Time rates
Payment of an agreed amount is made for agreed period of working time eg a day, a week or a month. Time rates are
mainly used when output cannot be directly related to the wage or labour cost, or when the emphasis is on the quality of
work to be performed rather than on quantity alone. Additional working hours may lead to extra pay for at an `overtime
rate.

The advantages of time rates:

a) Is simple to understand and administer;
b) Provides a basis for regular payment of employees;
c) Is reliable since pay time is known;
d) Leads to harmonious relationship in the work place since it is based on remuneration policies which determine wage
differentials among employees;
e) Makes it easy to budget and track down the amount of money spent on employees’ compensation
f) It is the most useful when paying employees who provide services that are not easily measureable and whose
performance is not tangible.
g) It is useful in paying employees where the employee has no control over the quantity of output as well as rewarding
collective responsibilities such as where tasks have been achieved by a team.

The disadvantages of time rates:

a) It lacks a basis for rewarding high performers which de-motivates employees
b) It requires close supervision of employees by their superiors which may lead to tension;
c) It is slow when implementing new salary scales

2. Piece work rates

Payment is made according to the output: that is, the quantity of an acceptable quality of an item produced or based on the
amount of work completed by an individual within a given period of time. Every unit of output is assigned a particular
amount of money and the employees are paid depending on number of units produced.

Advantage of piece work rate

a) There is a direct relationship between effort and reward which makes it possible to motivate high performers by
providing them with higher earnings.
b) requires less supervision because employees have self-drive and want to maximize on their earnings.
c) It is fair and reduces employee resistance to change especially if the change introduced will help enhance
performance.
d) It helps the management to distinguish between high and low performers which makes it easy to decide who deserves
promotions or bonuses.
e) It reduces the costs of production because employees want to reduce the amount of wastage of materials and time in
order to maximize production.

Disadvantage of piece work rate

a) Uncertainties in the earnings of employees since it is based on quantity produced;
b) It creates frustration in the workforce if work is delayed by factors beyond the control of the employee such as power
failure, machine breakdown, delayed supply of raw materials etc;
c) Quality of the products may be compromised because employees are more interested in quantity;
d) It discourages team work and makes the employees adapt an attitude of every one for himself.

3. Team Based Pay

This is the provision of rewards to groups/ teams of employees who have carried out tasks that are linked to the team
performance. It is suitable where: teams are well established, the work carried out is interrelated, when standards and
targets of performance are agreeable amongst team mates

Advantages of team based pay

This system encourages effective team effort and cooperation;
leads to collective responsibility;
encourages team members to multi-skills and multi-task
encourages less effective team members to improve individual performance for the sake of the group.

Disadvantages of team based pay

a) It can only work if the group is very mature and cohesive,
b) High performers may resent it
c) It may result to undesirable behavior and attitudes as a result of peer pressure.

4. Bonus
Bonus is a reward for output or achievement above previously agreed levels and is usually paid at the end of the work
year. Commissions or target bonuses generally applies to sales people, and is based on the values of sales achieved above
a certain pre-determined ‘target.

5. Incentives
They are usually given to employees for a variety of factors such as good timekeeping, increased productivity, reducing
operational costs or wastage, or involving in innovative activities.

6. Allowances
Depending on the nature of their work, some employees might be paid allowances, for example: Cost of transport; Cost of
expenses incurred on entertaining existing or potential customers or clients; Cost of buying and maintaining clothing and
accessories; Travel allowances etc

6.11.3 Factors influencing remuneration

Factors influencing the remuneration can be categorized into: External and Internal factors.

1. External Factors
External factors are those beyond the control of the organization and include:
a) Labour market – wage and salary determination is influenced by demand for and supply of labor. Also, the Going
rate of pay and technological changes affect employee remuneration.
b) Cost of living – wage fixation is affected by the rising and falling of prices as well as Inflation which is the increase
in the prices of commodities and decrease in value of the money also affects wage rates.
c) Labor unions - attempt to work and influence the wages primarily by regulating or affecting the supply of labour
through collective bargaining with the representatives of the management or calling for strikes and other methods
where by the supply of labour is restricted.
d) Government legislations - The laws and labour policies formed by the Government influence wages and salaries
which cannot be fixed below the level prescribed by the government.
e) Society - remuneration paid to employees is reflected in the prices fixed by an organization for its goods and services
which makes the consuming public interested in remuneration decisions. Whether wage is adequate and equitable
depends upon the perceptions and the views of the recipients of the wage.
f) Economy – the state of the economy affects remuneration decisions. e.g., a depressed economy will probably increase
the labour supply which will lower the going wage rate.

2. Internal factors
Internal factors are those that the organization can control and include:
a) Ability to pay – a prosperous and successful company has the ability to pay more than the competitive rate hence, it
can attract a superior caliber of personnel.
b) Employee related factors eg performance, experience, seniority and potential - High performance is always
rewarded with pay increase which motivates the workers to do better in future. Experience makes a person perfect by
providing valuable insights and thus rewarded also. Employers presume that experienced candidate posses’ leadership
skills which influence their behavior and performance.
c) Job requirement - physical and mental requirement may influence jobs eg those that demand more skill,
responsibility, efforts and are of hazardous in nature, will carry high wage tag with them.
d) Job evaluation establishes a consistent and systematic relationship among base compensation rates for all jobs.
e) The organization’s strategy regarding wages influences employee compensation eg rapid growth strategy requires
higher wages than competitors.
6.11.4 Principles of wage and salary administration
External Equity - The principle acknowledges that factors/variables external to organization influence levels of
compensation because if not considered, the salaries may be insufficient to attract and retain employees. It ensures that
jobs are fairly compensated in comparison to similar jobs in the labour market.
Internal Equity - Internal equity recognized that various jobs are relative in value term and an ideal compensation system
should establish and maintain appropriate differentials based on relative values of jobs i.e., the compensation system
should ensure that more difficult jobs should be paid more.
Individual Worth - an individual should be paid as per his/her performance. This principle ensures that each individual’s
pay is fair in comparison to others doing the same/similar jobs, i.e., ‘equal pay for equal work’.

6.12 Employee motivation

Motivation is derived from motive which means a drive or impulse within an individual that prompts him into action. It is
a complex force that inspires a person at a work to willingly use his capacity for the accomplishment of certain objectives.

There are two main kinds of motivation:

Extrinsic motivation is external. It occurs when external factors compel the person to do something eg circumstances,
situations, rewards or punishment, both tangible and intangible that participation in, results in an external benefit.
Intrinsic motivation is internal. It occurs when people are compelled to do something out of pleasure, importance, or
desire. eg involvement in behavioral pattern, thought process, action, activity or reaction for its own sake and without an
obvious external incentive for doing so

6.12.1 Types of motivation

a) Achievement Motivation - It is the drive to pursue and attain goals for its own sake and not for the rewards that
accompany it.
b) Affiliation Motivation - It is a drive to relate to people on a social basis.
c) Competence Motivation - It is the drive to be good at something to perform high quality work.
d) Power Motivation - It is the drive to influence people and change situations in order to create an impact.
e) Attitude Motivation - It is one’s self-confidence, belief in themselves, their attitude to life. It is how they feel about
the future and how they react to the past.
f) Incentive Motivation - It is based on a reward for an activity.
g) Fear Motivation – based on coercion for a person to act against will.

6.12.2 Importance of motivation

1. Motivation for an organization
a) Puts human resources into action - motivation enables human resources to be utilized by building willingness in
employees to work.
b) Improves level of efficiency of employees - The level of an employee depends on filling the gap between ability and
willingness in improving their performance.
c) Leads to achievement of organizational goals - Goals can be achieved if co-ordination and co-operation takes place
simultaneously through motivation.
d) Builds friendly relationship - Motivation brings employees satisfaction by developing an incentive plan for the
benefit of the employees.
e) Leads to stability of work force - The employees can remain loyal to the enterprise only when they have a feeling of
participation in the management.

Motivation is important to an individual as:

a) Motivation will help him achieve his personal goals.
b) If an individual is motivated, he will have job satisfaction.
c) Motivation will help in self-development of individual.
d) An individual would always gain by working with a dynamic team.

Motivation is important to a business as:

a) A motivated employee leads to an empowered team.
b) Team work and individual employee contribution leads to a more profitable and successful is the business.
c) Adaptability and creativity during period change in the organization.
d) Motivation will lead to an optimistic and challenging attitude at work place
6.12.3 Motivational techniques
a) Positive imagery - Posting motivational themes and messages, in the form of slogans or quotes, can help to positively
b) empower a team and they are more likely to be able to imagine similar success for themselves thus motivating them to
improve their performance.
c) Team-building activities - encourages people to work together, healthy competition and give each employee the
opportunity to be on the winning team resulting in increased productivity and morale
d) Training – training can lead to people being more motivated and less intimidated by their job roles.
e) Enhanced communication - Communication means talking to and listening to the team which ensures their
understanding of company objectives and their individual job roles
f) Targets, rewards and incentives – having targets to work towards improves performance, morale and self-
confidence leading to reward not only with financial incentives but perhaps with the offer of increased responsibility
or even promotion.

6.13 Employee discipline

6.13.1 Meaning of employee discipline
Discipline refers to a condition in the organization when employers conduct themselves in accordance with the
organization’s rules and standards of acceptable behaviour. However, not all employees will accept the responsibility of
self-discipline. Such employees therefore will require some degree of extrinsic disciplinary action.

6.13.2 Types of Discipline Problems

a) Attendance: Absenteeism, tiredness, abuse of sick leave etc. due to:
 failure to align workers’ goals with those of the organization.
 A changing attitude towards employment where work is not a central life interest to some people and hence the
desire to be in their jobs regularly is not of primary importance.
 Increased difficulty in firing employees especially those union members protected by collective bargaining
agreement
b) On the Job-Behaviour – violations of an organization acceptable standards of behaviour e.g. insubordination,
fighting, carelessness, abuse of alcohol and drugs etc.
c) Dishonesty eg theft, falsified information (lies).
d) Outside behaviour - These are activities that employees engage outside of their work which affect their on-the job
performance. eg unauthorized strike activity, outside criminal activities.

6.13.3 Disciplinary Actions

Disciplinary generally follows a typical sequence of four steps:
a) Oral warning - this is the mildest form of discipline and is best achieved if completed in a private and informal
environment.
 The manager should begin by clearly informing the employee of the rule that has been violated and the problem
the it has caused.
 The employee should be given a change to respond giving emphasis to; is she aware of the problem? Are there
extenuating circumstances that justify her behaviour?
 The Manager must determine if the employee has proposed an adequate solution to the problem. If this hasn’t
been done, then the Manager will need to consider direct the discussion toward helping the subordinate figure out
ways to prevent the trouble from recurring.
 Once a solution has been agreed upon the Manager should ensure that the employee understands any follow-up
action will be taken if the problem recurs.
 If the oral warning is effective, further official disciplinary action can be avoided but if the employee fails to
improve, the manager will need to consider more severe action.
 A temporary record of the oral warning should be documented and placed it in the employee file. It should state
the purpose, date and outcome of the interview with the employee. Once the employee has demonstrated that she
has corrected the problem the record of the oral reprimand can be removed from the file.
b) Written Warning
 It is the first formal stage of discipline procedure since written warning becomes part of the employees official
file.
 The warning is given to the employee, and a copy to the HR department to be inserted in the employee’s
permanent record.
 The employee is advised of the violation, its effect and potential consequences of future violations. The only
difference with the oral warning procedure is that the discussion concludes with the employee being told that
 written warning will be issued. Then the manager writes up the warning stating the problem the rule that has been
violated, any acknowledgement by employee to correct her behaviour and the consequence from a recurrence of
the deviant behaviour.
c) Suspension
 Suspension is taken if the prior steps have been implemented without the desired outcome.
 There are exceptions where suspension is given without any prior written warning e.g. if the problem is of a
serious nature.
 A suspension may be for one day or several weeks. A short lay off, without pay has the potential to be a rude
awakening to problem employees. It may convince them that management is serious and shock them back to
accepting responsibility for following the organization’s rules.
d) Demotion
A demotion is used where: the employee clearly has the ability to perform her job or where management is legally or
ethically constrained from firing the employee. The objective is to awaken the employee to shape up radically if they
want their old job back and that management has no intention of letting them get away with chronic abuses of the
organization’s rules
e) Paycut This approach usually has a demoralizing effect on the employee. If the problem employee alters her
behaviour, then pay cut can always be reinstated.
f) Dismissal Dismissal should be used only for the most serious offences that interfere with a department or the
organization’s operation. Being fired from a job is an emotional trauma. Thus, the management should consider the
possibility that a dismissed employee will take legal action to fight the decision.

6.14 Employee separation

Employee Separation is the process of managing the termination of employment, whether involuntary (such as discharge,
layoff, plant closure, disability or death) or voluntary (such as resignation, job abandonment or retirement). It ensures that
an employee who leaves the company is exited in a structured and orderly manner.

6.14.1 Separation Methods

Employee separation methods could be voluntary or involuntary and get most of the benefits and perks due to them.
Voluntary separation is when the employee leaves the company on his or her own accord and get most of the benefits and
perks e.g. resignation, job abandonment or retirement. Involuntary separation is where the employee is asked to leave by
the employer and might get a separation package e.g. discharge, layoff, plant closure, disability or death. In instances
where disciplinary or performance related exits take place, the employee might not get anything at all.

6.14.2 Steps in Separation

a) Steps in Voluntary Terminations
 An employee informs the manager of their resignation by providing. a written resignation letter.
 The Employee is requested to provide a minimum notice outlined in his employment contract of their intention to
separate from the company to allow a reasonable amount of time to transfer ongoing workload.
 The manager notifies HR department by sending a copy of the resignation letter or notification to HR and any
other pertinent information (e.g. employee’s reason for leaving, last day of work).
 HR coordinates the employee’s out-processing. This process will include: The employee’s returning all company
property (e.g. keys, ID cards, parking passes); a review of the employee’s post-termination benefits status; and the
employee’s completion of an exit interview
 Once a company learns about a voluntary separation, it should give the employee a list of tasks to complete to tie
up any loose ends, monitor or restrict the employee’s emails and seize the employee’s virtual and physical files
before she can delete or take them.
 The employee should receive her final paycheck on her last day of work.
 When an employee absconds, he quits without notice or reason. In such an event, an organization should attempt
to call the employee to learn more about the situation. If managers cannot contact the employee, they should mail
three separate letters in an attempt to communicate, immediately confiscate the items in his work station, begin to
analyze his emails and stop his pay. If the employee possesses items that belong to the company, it may need to
seek the help of the police and lawyers to recover them.
b) Steps in involuntary Terminations
 An involuntary termination of employment is a management-initiated dismissal due to inability of an employee to
perform the essential functions, or on legal reasons, e.g., misconduct, tardiness, absenteeism, unsatisfactory
performance or inability to perform.
  Before any action is taken to discharge an employee, the employee’s manager must request a review by the
termination review board, which consists of HR department and the employee’s department head for reviewing
the situation and determining if discharge is warranted.
 If the board recommends discharge, the employee’s manager and an HR representative will notify the employee.
 Before discharging an employee, a company must take care to document the incidents or events that led to the
decision to terminate the worker.
 When the appropriate managers notify the employee of their decision, they should immediately confiscate the
company items in employee’s possession, including ID cards, access cards, business cards, company files,
uniforms and computers.
 Upon notification of this decision, the employee should receive a termination letter that clearly states the reasons
for the termination, along with a final paycheck.
 In the event of layoffs or downsizing, it is important to let an employee know if the separation is with or without
prejudice to indicate if there is a possibility that she can have her job back if it becomes available.
 Employers should also not use manipulative tactics to make an employee quit in lieu of having to fire her. The
employee may perceive such actions as harassment, discrimination or retaliation, and the actions may be illegal

6.14.3 Factors That Lead To Employee Separation

a) Retrenchment: occurs due to
 Poor business performance owing to decline in market share,
 Competitive pressure from competitors,
 Poor management and inadequate planning,
 Business mergers, takeovers and divestments,
 Introduction of high performance work systems which may entail employment of multi skilled personnel capable
of increasing productivity and responding to change.
 Introduction of new method of production
 Introduction of organization structures designed to enable quick decisions fast responses and empowered
employees.

On retrenchment, the employer should:

a) Give reasonable grounds.
b) Inform the ministry of labour and /or union
c) Apply the principle of last in first out

b) Resignation
This is when an employee leaves his job and employment with his employer to pursue better opportunities. So, an
employee resigns for:
 Better compensation and benefits;
 Higher position / level;
 Challenging role;
 To move from an unknown or lowly branded company to a highly branded and reputed company
 For foreign or international assignments
c) Termination
In termination, an employer uses his right to terminate the contract of an employment. There can be many reasons for
an employer to terminate the contract of employment but some of the common reasons are: Non-Performance,
Indiscipline, Misconduct, Insubordination, and theft etc.

Legal criteria employers should follow before termination

a) There must be reasonable grounds for the same.
b) Reasonable notice or compensation in lieu.
c) Specify the offence.
d) Notify union or labour office.
e) Pay legal entitlements i.e. leave days, certificate of service

Invalid termination of a contract

a) Union membership/ activities.
b) Absence during maternity.
c) Discrimination on grounds of race, colour, sex, marital status, family responsibility
 d) Illness or injury.

d) Absconding
This is one of the most unethical, unexpected and unprofessional way to terminate the contract of an employment.
Employees can abscond duty for the following reasons:
 After stealing the confidential information or documents or database from the company
 If there is a work-pressure and stress and the individual is not able to cope-up with it
 If the employee intendeds to commit a crime at work or has committed any crime outside the office and after
working hours (such as murder or getting involved in terrorist activities or theft or any other civil crime)
 When priorities are different e.g. Employee has asked for leave due to some urgency at his home (or might be he
is trying to escape from his work responsibilities) and at the same time his team also needs him in the office and
his leaves are not approved.
 If he has got some exceptionally good opportunity that requires him to join immediately and he feels that the
process of separation is complicated.
NOTE: Employees that abscond have different personalities. They are low in confidence. They are too weak to face
the reality and challenges of life. They feel that running away from the problem is as good as solving the problem.
They are cowards to take the problems head-on.

7. OFFICE PRACTICE AND RECORDS MANAGEMENT

7.1 Office practice
7.1.1 Meaning and functions of an office
The office may be defined as any place set aside for work of a clerical administrative or communicative nature. The office
may consist of a room or a building. Its purpose is to serve as an administrative center of an organization comprising of
departments offices responsible for their respective functions.

[Link] Functions of an office

a) Basic functions - The regular activities of collecting and distributing information
 Receiving and collection of information - It sources Internal information from different units of the business and
from external sources which are agencies and institution who collect and distribute information.
 Recording information - from a different source in ‘inward book’ and ‘dispatch book’. That information which
is available from outside the organization is recorded in inward books eg letters, bill, order etc. The information
provided by the organization to outside people are recorded in the dispatch book. This system of recording
information helps to organize record and message of business.
 Analyzing: concerned with studying of the raw and unprocessed collected information from different sources in
detail to find the necessity of information for a future purpose.
 Storing Information: The recorded information should be protected for future purpose. The degree of necessity
information will determine how long the information should be protected. According to the importance of
information, an office will store information in a separate file.
 Distribution of Information: The collected information is distributed to different people and department in
order to help them in decision making and other activities.
b) Administrative functions - management of a business organization. It is the high-level function and non-routine in
nature
 Managerial function: Top level people of the organization carry out managerial activates from office e.g.
planning, leading, controlling, directing.
 Human resource function: It is the responsibility of the office to determine the requirement of differently
skilled people and place them in the right position after selecting an appropriate candidate. The office will make a
record of employee performance provide the rewards and benefits in the future.
 Purchase and control function: The office will involve identifying different assets and resource requirement for
business. It is the basic function of an office to purchase an appropriate asset at a reasonable price. The office
develops the systematic mechanism to purchase an asset and other resource required for business at minimum
possible cost.
 Public relation: The relationship with a mass of public like a shareholder, creditor, supplier, media person, social
group, customer, community etc is called public relation. It is the responsibility of the office to maintain a close
relationship with the people who are directly or indirectly related to business. The office maintains a close
relationship with the public by regular distributing information and organizing different activities.
 Safeguarding properties: The office should protect the properties and assets of an organization. It maintains a
record of assets and provides updated information about this situation. It is the responsibility of the office to
 protect the asset from theft and damage like fire, accident, flood, water, etc. The office should provide regular
maintenance of its resource.
 Forms design and control: The office should design forms to bring uniformity in office operation. It helps to
simplify the operation and brings a system in performance. The office needs a different kind of forms such as
bills, inquiry form, voucher, letter pad, purchase order etc. Therefore, an office should design a separate form for
each kind of activity.
 Development of office system and procedure: System and procedure are required to successfully accomplish
different activities. Office uses to develop different procedure and systems required to complete a specific task. It
helps to bring simplicity into office work. Therefore, an office must have a developed system and procedure to
carry out each job.

[Link] Importance of Office

a) Information center: The office collects information and protects them in safe mode on the basis of their importance.
Information is available from a different source such as invoice, letter, memos, agreement, voucher etc.
b) Proof of existence: The office is the evidence for existence and survival for business. If the office is regular, then the
business is running.
c) Channel of communication: between different peoples and the department of business.
d) Co-ordination of work: The office is a coordinator to maintain the relationship between departments. It develops
productivity relationship with different department to achieve a co-operative objective.
e) Center for the formulation of plan and policies: managers formulate plans and policies from office to attain
business objectives. These plan and policies are communicated to the related persons through the office. Therefore,
the office is a center for the formulation of plans and policies.
f) Managerial control: The office helps in controlling the activities of different people and department of business. The
office ensures that activities performed in business are accurate.
g) Memory center: Office protects important information about the past in a safe manner. It provides information
storage facilities in files and devices on the basis of their importance for the future. The department and people who
need information are available from the office. Therefore, the office is a memory center.
h) Service center: The office works as a service center for different units and department of business. It provides
clerical services like mailing, filing, typing, printing, supplying resource etc. to concern department. It provides
assistant facility to all people as well as units in business.

7.1.2 Types of offices

[Link] Open plan/layout
This is a large room where all staff work, but are grouped according to the type of work they do e.g. in banks. Every
section or department is allotted a separate space within the hall and sometimes counter-high filing cabinets and shelves
are used to demarcate (indicate boundaries or limits). However, some offices are to be provided for the top managerial
personnel and also for work requiring privacy and concentration.

Advantages of open office layout

a) Ease of supervision, since all the workers are in one office and employees can be viewed from one point. This tends to
stop workers from slackening or indulging in unofficial activities
b) It is cheaper since one large room is constructed and there is no portioning which is expensive. It is less costly to
install lighting and heating
c) There is saving of floor space, since it is shared by many people
d) Ease of locating a worker, since they are all in one office
e) It facilitates more efficient use of machines and equipment as they can be easily shared
f) Less movement by workers, hence less distraction and less time wastage
g) It discourages absenteeism and lateness since one is easily discovered
h) It enhances interpersonal relationships since all workers are in one office
i) There is better communication among the workers as there are no restricting partitions or doors to open and close
j) It minimizes corrupt practices since no confidential discussions can take place
k) It is flexible as it is easier to reorganize the office when there is need
l) More smooth flow of work as documents can pass more easily from one desk to another rather than from office to
office

Disadvantages of open office layout

a) There may be constant distractions from colleagues, for example, noise making
b) It may be difficult to handle confidential matters
c) There may be no privacy in the work that one is doing
d) Machines in such an office may distract people from their work eg the ringing of telephones
e) There is a low level of security in such an office since it is shared by many people
f) A shared office may easily be neglected since no particular worker can be held responsible unlike an office used by
only one person
g) It may be difficult to provide a good working environment to all the workers since each of them may have a different
view in relation to the amount of lighting, heating and ventilation
h) It may be easy for infectious diseases to spread when many workers are put in the same office

[Link] Enclosed /closed office

This office is normally occupied by one person or two usually having their names and designation pinned on the door.
Closed offices are made use of under the following conditions:
a) For reasons of prestige to top executives
b) Work of confidential nature that requires private rooms, for example, certain meetings of the board where policy
matters, work on important plans and strategies concerning legal and investment aspects of business are discussed
c) Work requiring absence of noise can be done properly in private rooms, eg, accounting and statistical work

Advantages of enclosed office

a) There is less noise
b) Conducive working environment
c) Confer status and prestige to executives
d) Easier to maintain than open office.
e) There is privacy for confidential discussion
f) There is less disruptions of colleagues, visitors or machines used by others
g) There is more security for documents and other assets held in the office since access is restricted
h) It is easier to maintain such an office because there is less furniture in terms of cleaning
i) One is able to give a personal touch like portraits, flowers, painting with any color, curtains, carpets and any type of
furniture appealing to clients thus designing such an office is easier since they may not be conflicting ideas
j) Ensures that workers can be served easily as the job titles on the door show who is in the office

Disadvantages of Closed Plan Office

a) There may be wastage of space, since only one or a few officers occupy the office
b) Supervision is more difficult since the supervisor may not be in view of workers at all times
c) There is little interpersonal relationship since the workers meet rarely
d) The level of communication between the workers is low since they are in different offices
e) The cost of partitioning the offices is very high
f) There may be bottle-necks in the flow of work since one may have to move from one office to another to get
something done
g) There are high percentage/chances of absenteeism due to difficulty in supervision
h) They may lead to idleness or doing personal work during the working hours since it may not be easy to monitor them
closely
i) There is wastage of time as officers are forced to move from one office to the others to get information or document
j) It may enhance corrupt practices since confidential discussions can take place
k) It is inflexible as it is not easy to redesign the office when changes arise

[Link] Landscaped Office

A landscaped office is similar to an open plan office but it has special features not found in open plan offices.
Landscaping also refers to an interior design concept focused on creating aesthetically pleasing internal office
arrangement for organizations.

Features of a Landscaped Office

a) The distribution of indoor plants usually against walls.
b) The floor is carpeted and the entire office air-conditioned and soft lighting.
c) Working desks and chairs are arranged in clusters each facing a different direction.
d) There is arrangement of screens both for acoustic/sound purposes and to give privacy.
e) There is a rest area where the employees can relax and have refreshments.
f) There are provisions of workspace for all members of staff up to most senior managers including even the Managing
Director.
g) Some natural sceneries can be painted on the walls of office.

Benefits of Landscaped Office

a) The office wears a smarter look and to that extent it provides as an advertisement for the organization itself at no
additional cost.
b) Landscaping of office influences the prestige of the organization. Outsiders view the organizations with a feeling of
confidence and trust. They form a positive impression on the organization.
c) It enhances the morale of the workers. It influences the attitude of the workers towards fellow workers, and the
organization. Workers become more interested in their work.
d) It creates a pleasing work atmosphere which is conducive to work and thus improving efficiency levels of workers.
e) It influences the health of the workers eg through use of soft lighting which removes eyestrain and fatigue, Air
conditioning insures flow of fresh air which reduces tension and other effects

Disadvantages of Landscaped Office

a) As large areas are involved, air conditioning is essential because ventilation through windows cannot be relied upon
for the whole office area.
b) Artificial lighting is required in the office particularly for the people working in the centre of the office as the light
from the windows would not be enough.
c) Sound insulation that is achieved by fitting thick carpeting on the floor and applying sound absorbing materials on the
walls and other surfaces are expensive to install.

7.2 Records Management

7.2.1 Filing
Filing is the systematic arrangement of business correspondence and records so that they may be obtained quickly
when needed for reference.

[Link] Purpose of Filing

a) To preserve records for future reference
b) To gather related documents together in one suitable file
c) To protect records against damage from fire, water, etc in order to keep them secure and in good condition
d) To provide evidence in case of any dispute in a court of law
e) To help find documents quickly when needed for reference
f) To keep information away from unauthorized people
g) To keep the office tidy
h) To comply to the law that requires certain documents to be stored for a given period of time

[Link] Essential qualities/characteristics of a good filing system

a) Simplicity – the system should be simple to understand and operate
b) Accessibility – the cabinets must be conveniently situated and the files within the cabinets easy to locate
c) Elasticity – capable of expansion, if required to suit the changing needs of business
d) Compactness – should occupy the minimum of space because modern office space is costly
e) Economy – it must not be costly. There should be minimum cost of its installation and operation
f) Capable of safeguarding documents against damage by fire, water, dust and maintaining confidentiality of the
information
g) Classification – it must employ the most appropriate method of classification
h) Cross-reference – this is needed so that a document that may be found under different headings can be easily located
i) Out-guides – an ‘out-guide’ system should be incorporated. It indicates the documents which have been withdrawn
and the person or department withdrawing them.
j) Retention – the system should allow records to be retained or discarded on the basis of their usefulness

[Link] Types of filing equipment systems

a) Filing Equipment for Paper Storage - Conventional storage is used where paper is the primary medium using the
following systems
 File cabinets
 Stationary shelving units
 Automated filing system
  High density mobile storage
 Powered systems
 Mechanically assisted or manual
 Lateral mobile storage
 Open faced shelving
b) Equipment for Microforms Preparation and Storage - Special equipment is needed to prepare microforms for a
micrographics system and to view the microforms once they have been developed. Microform technology enables
retrieved documents to be viewed if a reader-printer is available. They are stored using:
 Microform cameras
 Processors
 Reader-printer
 Microfilm reader
c) Equipment for Optical Disc Preparation and Storage - Special equipment is needed to transfer images and
computer to optical disc storage. The entire text of the document is available and indexed by key content words. They
are stored using:
 Optical character recognition (OCR scanners
 Discs
 Storage equipment called “jukeboxes”
 Computer
d) Equipment for Digital Storage
 Computers
 Office systems software
 Optical character recognition (OCR)
 Optical disc technology

7.2.2 Methods of filing

[Link] Vertical filing method
This is a method of storing files by placing them on their spines one behind the other in drawers of vertical filing cabinets.
The identification titles are place at the top edge of the files which are normally visible.

Advantages of vertical filing method

a) Economical – the folders are cheap and many folders can be accommodated by a single filing cabinet. Hence there is
saving in terms of money as well as space.
b) Ready reference – it is easy to locate a file by reading the identification titles on the files.
c) Elasticity – filing cabinets drawers can accommodate a large number of folders.
d) Safety and security – cabinets offer protection of files against damage by fire, water or dust and they can be locked
to provide security to confidential documents.
e) Universal application –useful in preserving all types of papers/documents with great ease and preserved without
difficulty e.g. orders, invoices, letters, quotations, tenders, etc. can be filed.
f) Adaptability – it can be easily adapted to all types of classification. The folders can be arranged alphabetically,
numerically, geographically, subject-wise or on some other basis according to the needs of an individual office.

Disadvantages of vertical
a) It causes fatigue since the filing clerk has to keep on pulling out the drawers.
b) Cabinets must be place in a spacious room to allow for the drawers to be opened and give room for the filing clerk.
c) Only one person has access to the cabinet.
d) A folder can quite easily become hidden at the bottom of the drawer underneath the other folder.

[Link] Horizontal filing method

This is a method of storing files in a horizontal or flat position, one top of another on shelves or in drawers. Used for
storing maps, photographs, drawings and charts too large to be stored in the standard filing cabinet.

Advantages of horizontal filing method

a) It takes less space than vertical method
b) It is ideal for large documents such as maps, plans, drawings, photographs, charts, etc

Disadvantages of horizontal filing method

a) It is difficult to extract files if the file needed is at the center or bottom of the pile
b) It is difficult to replace files in their correct position
c) It is more tiresome since the clerk has to keep on removing and replacing both the wanted and unwanted file

[Link] Suspension filing method

In this method a drawer is fitted with metal rods from which filing pockets are suspended vertically and folders are place
inside the pockets. Each pocket displays a card showing the name of the folder in that particular pocket.

Advantages of suspension filing

a) It prevents files from wear and tear
b) It ensures that files are kept upright thus making reference easier
c) No files can collect underneath other files
d) More filing pockets can be added for the insertion of new files
e) It is easy to replace files in correct pockets as the pockets are overlapped to give a flat top which carries a title strip
protected by a plastic cover.

Disadvantages suspension filing

a) The suspended filing system is more costly.

[Link] Lateral filing method

This is a method whereby files are placed side by side on a shelf or cupboards.

Advantages of lateral filing

a) Saves floor space as shelves may be built up to ceiling height if necessary
b) Causes less fatigue as there is no pulling of drawers
c) A large number of files can be viewed at one time which saves time in location of folder
d) The method is highly elastic and offers an almost unlimited scope for expansion
e) Saving in equipment costs when compared to vertical and suspension filing

Disadvantages lateral filing

a) It is difficult to read identification on folders compared to vertical filling
b) Files may become dusty because of the large opening
c) Location of files from a height can be a hazard

7.3 Office communication

7.3.1 Methods used in office communication

7.3.2 Oral communication

 Oral communication is communicating with spoken words. It's a verbal form of communication where you
communicate your thoughts, present ideas and share information. Examples of oral communication are conversations
with friends, family or colleagues, presentations and speeches.
 Oral communication implies communication through mouth. It includes individuals conversing with each other, be it
direct conversation or telephonic conversation.
 Oral communication is the process of verbally transmitting information and ideas from one individual or group to
another.

Oral communication can be either formal or informal.

 Examples of informal oral communication include: - Face-to-face conversations, Telephone conversations.
 Formal types of oral communication include: Presentations at business meetings, Commencement speeches given at a
graduation ceremony.

[Link] Advantages of oral communication
a) Immediate Feedback. The biggest advantage of oral communication is that it provides immediate feedback to both
the sender and the receiver. Each can therefore ask for clarification and elaboration on the spot.
b) Time Saving. Oral communication is very fast. It saves the time involved in writing the message and delivering it
through a channel like the postal or courier services.
c) Personal Touch. Oral communication builds up a healthy climate in the organization by bringing superiors and
subordinates closer. It is also an effective tool for persuasion.
d) There is high level of understanding and transparency in oral communication as it is interpersonal.
e) Flexibility. Oral communication provides an opportunity to the speaker to correct himself and make himself clear by
changing his voice, pitch, tone, etc. A number of other factors like context, body language, etc. can be used to
reinforce and modify what is spoken through the words.
f) Oral communication is best in case of problem resolution. The conflicts, disputes and many issues/differences can
be put to an end by talking them over.
g) Oral communication is an essential for teamwork and group energy.
h) Oral communication promotes a receptive and encouraging morale among organizational employees.
i) Oral communication can be best used to transfer private and confidential information/matter.

[Link] Disadvantages of oral communication

a) Poor Retention. The listener cannot retain oral messages in his memory for a long time. The speaker himself may not
recall what he actually said.
b) No Record. Oral communication does not provide any record for future reference. In the absence of a record, oral
messages have no legal validity.
c) Time Consuming. Oral communication may not always be time saving. Precisely because there is no binding
medium like a page or a book, this form of communication is virtually endless. Sometimes meetings continue for a
long time without arriving at any satisfactory conclusion.
d) Misunderstanding. Oral communications are likely to be misunderstood due to poor expression and noise. The
speaker may not be able to make himself quite clear or the listener may be inattentive. This is likely to be truer when
the two individuals are not on good terms with each other.
e) Lengthy Messages. Oral communication is not suitable for transmitting lengthy messages. Some parts of vital
importance may not receive adequate attention.
f) Lack of Responsibility. Oral messages are not recorded. Therefore, it becomes difficult to hold persons responsible
for mistakes, inaccuracy or falsity in oral communication.
g) Imprecise. People usually take less care when speaking than when writing. Therefore, spoken words tend to be less
precise than written words. Often the exact point the speaker is trying to make is lost in a mass of words.

7.3.3 Written communication

Written communication refers to the process of conveying a message through the written symbols. It is the process of
exchanging messages between sender and receiver by making use of written word. Hence any message exchanged
between two or more persons that make use of written word is called written communication.

[Link] Advantages of written communication

a) Accuracy: Since written information is easy to verify, the message tends to be more accurate and precise than verbal
communication in an organization.
b) Permanent Record: Written communication helps track and record any type of information for future reference or as
proof. It could be assigned responsibilities, orders, or different types of reports used in business.
c) Easy to Understand: Written information is often clear and easy to understand. It allows the receiver to refer to the
written word multiple times to understand it better.
d) Wide Range: One of the benefits of written communication is that it allows a piece of information to reach a wide
number of people at different places, at a time. This ultimately saves time in the organization.
e) Legal Validity: A written form of communication is legally accepted and works as evidence in many matters of an
organization.
f) Eases Complicated Messages: Written communication makes it easy to send complicated or lengthy pieces of
information within an organization.
g) Fixing of Responsibility: It is quicker to fix the responsibilities of individuals in an organization on the basis of
written reports and documents rather than communicating verbally.
h) Authenticity: Communicating in written form develops a sense of authenticity and genuineness in the messages,
ultimately enhancing the goodwill of an organization.
i) Easy Verification: One of the pros of written communication is that it helps easily verify messages and information.
There are lesser chances of a message being tweaked for one’s personal advantage.
j) Enough Time Allowance: When communicating in written modes, the sender gets enough time to frame the message
and the receiver also gets enough time to draft the feedback.
k) Sense of Security: Any message, when delivered in written mode, gives a sense of security to the receiver, especially
when the receiver is a subordinate in an organization.
l) Efficiency in Upward Communication: Written communication makes it easier for subordinates to reach out to their
superiors through the upward channel of communication with any complaints or suggestions. Such communication
also facilitates the support of images, facts, or figures.
m) Maintenance of Formal Relations: Written communication helps maintain a formal relationship between employees
and chief-level executives in an organization, which may otherwise vanish when using verbal communication.

[Link] Disadvantages of written communication

a) Time-Consuming: Longer time in execution, sending messages, and receiving feedback on the same are one of the
biggest limitations of written communication.
b) No Confidentiality: Information loses confidentiality when communicated through written modes in an organization.
The name, position, or department of the sender are the common aspects that become known.
c) Difficulty in Framing: Some messages or information may be difficult to frame the right way when writing and face-
to-face communication is considered better for such messages.
d) Risk of Early Disclosure: One of the drawbacks of written communication is that it has the risk of information
getting leaked out in an organization before time.
e) Uncertainty of Comprehension: Since it is non-verbal communication, there is always a risk of the reader not
understanding or misinterpreting the message as per his/her individual understanding- even if it is clearly written.
f) Rigidity: Communication in written form is often very rigid. Hence, the messages need to be drafted very carefully
because it may not be efficient to reframe them repeatedly.
g) Costly Means: One of the cons of written communication is that it costs more in monetary terms as compared to other
modes of communication.
h) Too much Paper Work: Since written communication is executed on paper, it may lead to too much paperwork and
create chaos in an organization.
i) Storage Issues: Whether printed or digital, all written forms of communication need to be stored and this arises the
problem of storage.
j) Lack of Friendliness: Since written communication mostly follows a formal tone in organizations, words lack
friendly warmth. This may sometimes corrupt informal relations.
k) Lack of Writers: One weakness of written communication in business is that it often requires professional writers to
execute chief-level formal writing. It may be difficult to execute such communication without a writer.
l) Affected by Literacy Rate: The ability to read and write are prerequisites of written communication. Hence, written
communication might not work for an illiterate individual or a group of people.
m) Easily Destroyable: The record of written communication needs to be handled carefully. If not handled properly, it
could be destroyed or erased in no time.

7.3.4 Formal communication

7.3.5 Informal communication

[Link] Meaning of informal communication
Informal communication is the casual and unofficial form of communication Wherein the information is exchanged
spontaneously between two or more persons without conforming to the prescribed official rules, processes, systems,
formalities and chain of Command.

The informal communications are based on the personal and informal relationships such as, friends, peers, family, club
members and so forth. This form of communication does not take into consideration the organizational conventional rules
and Other formalities

[Link] Types of Informal Communication

The types of informal communication network are, single strand network, gossip chain network, probability chain
network and cluster chain network.
Gossip chain network, the individual imparts information to all the other individuals in the network in a direct manner.
This individual is regarded as the main person, who performs the job duty of transmitting information that he has
obtained. In this Case, every person in the network communicates with each other in an informal manner. This
Network is made use in most cases, when the subject matter is not related to the nature of the Job.
Probability Chain Network - In this form of communication network, information passes randomly from one individual
to another. In this case, there is an individual, who acts as the source of message. He selects any person randomly in the
network to communicate the message. The second Person will make a selection of another person on a random basis and
passes the information to him. Hence, communication flows to different individuals, who have been selected on a random
basis. In this case, the source of information for each member of the network is different. This communication network is
made use of in the case of information, which is interesting. But the information is not significant.
Cluster Chain Network - In the cluster chain network, there is an individual, who acts as the source of the message. He
performs the job of transmitting information to the pre-selected group of individuals, out of whom, few individuals
convey the same message to the other selected group of individuals. In this manner, the chain continues and the message
reaches to all the Individuals in the communication network. This pattern is similar to the telephone tree. In which one
person calls two other persons, these two persons call three other persons and again these three persons call three other
persons. In this manner, the information gets transmitted to all the persons, connected in the telephone network. This is
regarded as one of the common forms of informal communication network.

[Link] Advantages of Informal Communication

Interpretation – When the superiors send messages or impart knowledge in terms of various factors to their subordinates,
they will be able to understand them well, when they are explanatory in nature. Hence, informal system of communication
is regarded as effectual in interpreting the information in an appropriate manner. In some cases, through formal system,
The message may not be easily understandable to the employees. Therefore, in order to ensure that employees are able to
interpret the messages well, the supervisors, managers and employers impart information through informal systems.
Therefore, interpretation is regarded as one of the advantages that is facilitated through informal communication.
Redressing Grievances – Within the organizations, the members at various positions experience problems and
difficulties as well. These are regarded as major impediments within The course of implementation of their job duties.
Hence, it is vital to solve problems and grievances. These are necessary not only in achieving professional goals, but also
in augmenting the overall structure of the organization. Through the system of informal communication, the individuals
are able to redress their grievances to their superiors and seek solutions. They can be done online or through oral
communication. Therefore, acquiring opportunities to redress grievances are regarded as one of the advantages of
informal communication
Increasing Efficiency – In the case of informal communication, the employees are provided with the opportunities to
express their ideas and viewpoints. If they are experiencing any problems in the performance of their job duties, they are
able to obtain help and support from others without any hesitance. In other words, they do not experience
apprehensiveness in communicating with others. The employees will be able to freely express their ideas and viewpoints,
when they will be able to promote cordial and sociable working environment and overcome apprehensiveness and
vulnerability. In addition, they will also be able to increase efficiency. Therefore, increasing efficiency is regarded as one
of the important advantages of Informal communication.
Improving Relations – Through informal communication, the individuals will be able to bring about improvements in
terms and relationships with each other. It is not only important for the individuals to generate information in terms of
performance of job duties, but to retain their jobs and enhance the structure of the organization, it is of utmost significance
to focus upon improving relations. In order to achieve organizational goals, it is Vital for the members to work in co-
ordination and integration with each other. Hence, in order to promote mutual understanding, informal communication is
indispensable. Therefore, improving relations is regarded as one of the important advantages of informal communication.
Providing Recommendations – In order to carry out one’s job duties well, the subordinates, superiors and colleagues
communicate with each other in terms of ideas, suggestions, processes, methods, materials and so forth. Through informal
communication, the members of the organization provide recommendations, which would be assisting in the
implementation of one’s job duties and in generating the desired outcomes. recommendations can be provided in a verbal
as well as in a written form. When they are brief, they can be imparted orally, whereas, when they are lengthy, they are
given in writing. Therefore, it can be stated, providing recommendations is regarded as one of the essential advantages of
informal communication.
Providing Emotional Relief – In some cases, within the working environment, the Individuals experience the
psychological problems of stress, anxiety and pressure. When they get engaged in informal communication, they are able
to acquire emotional relief in providing solutions to their problems. Within the course of implementation of one’s job
duties, it is vital for the individuals to overcome all types of impediments. When they get engaged in informal
communication with other individuals, they are able to find relief from their problems.
Providing Solutions to Problems – It is comprehensively understood that individuals need to take into account and pay
attention to number of factors. In other words, they have numerous tasks and responsibilities, these include, home, family,
jobs and so forth. When they get engage in informal communication, they are able to generate awareness in terms of
development of time management skills. These skills enable them to assign priorities to tasks and activities and provide
solutions to various types of problems that may arise. Therefore, it can be stated, providing emotional relief is regarded as
one of the important advantages of informal communication.
Increasing Job Satisfaction – The implementation of informal communication leads to an increase in the feeling of job
satisfaction. The individuals feel pleasurable, contented and motivated within the working environment. These factors are
not only necessary in leading to effective implementation of job duties, but also in retaining one’s jobs. In order to lead to
an instance, before initiating modern and innovative methods, it is necessary to measure the reaction of the employees.
Therefore, it can be stated, measuring reaction is regarded as one of the crucial advantages that is facilitated through
informal communication.

[Link] Disadvantages of Informal Communication

Misinterpretation – When information is imparted through informal communication, in some cases, it is likely to get
misinterpreted. In other words, the employees experience problems in acquiring its efficient understanding. Particularly,
when the information is in a written form and the words are not clearly understood, this causes misinterpretation among
Employees. Furthermore, it has unfavorable influences upon the job performance of the individuals. Therefore,
misinterpretation is regarded as one of the major limitations of Informal communication.
Distort Meaning – Informal communication networks do not follow any set of rules, guidelines or approaches. Hence,
transmission of information takes place without any hesitance or fear. In some cases, the individuals may not depict
kindness and courtesy, while communicating. The information may lead to incorrect meaning, which may prove to be
Unfavorable to the e employees as well as other members. Therefore, distort meaning is regarded as one of the major
limitations of informal communication.
Spread Rumor – In most cases, informal communication devises some type of information, which may not be factual and
have unfavorable effects upon the performance of the employees and the overall functioning of the organization. The
employees are likely to take this information seriously and it imposes detrimental effects upon their job performance.
Therefore, spreading of rumor through this form of communication is regarded as one of the Major limitations of informal
communication.
Lack of Confidentiality – In this form of communication, the individuals interact with each other without any rules and
laws. The information, which needs to be kept confidential is also likely to be communicated and this has detrimental
effects upon the performance of job duties of the members as well as the overall functioning of the organization. :
Incomplete Information – In some cases, the information that is communicated with
Through this form of communication is not complete. In order to perform one’s job duties satisfactorily and attain the
desired outcomes, it is vital for the members to acquire complete information. When the information is not complete, they
experience problems in the effective implementation of their job duties and in generation of desired outcomes. Therefore,
Providing incomplete information is regarded as one of the limitations of informal communication.
Committing Errors – The members of the organization are more likely to commit errors, when they are communicating
through informal channels. The reason being, they are not following any rules or procedures. Hence, it is not possible for
the individuals to vommunicate the information without committing errors. Therefore, when individuals are not able to
receive information in a systematic and methodical manner, they are likely to commit rrrors in the implementation of job
duties and in achievement of goals and objectives. Therefore, committing errors is one of the limitations of informal
communication.
Generation of Undesired Outcomes – When the members of the organization are unable to receive factual information,
and information which is not easily understandable to the individuals, they experience problems within the course of
generation of desired outcomes. In order to generate the desired outcomes, the communication needs to take place
In a methodical and systematic manner. Hence, when communication does not take place in a methodical and systematic
manner, the individuals experience problems in performing their job duties well. Therefore, generation of undesired
outcomes is one of the limitations of informal communication.
Development of Perplexity – Through informal communication channels, the information is not easily understandable. In
some cases, the individuals are unable to acquire Its efficient understanding. This is apparent that when the information
will not be clearly Understandable to the members, they will experience problems within the course of Performance of
their job duties in a satisfactory manner. Lack of rules, regulations, strategies, Guidelines and procedures are the major
causes that would lead to development of perplexity. When the individuals develop perplexity, they are likely to get
engaged in conflicting Situations and disagreements as well. Therefore, development of perplexity is regarded as one
Of the major limitations of informal communication.
Non-co-operation – When the information that is imparted to the employees is not Easily understandable to the members,
they are unable to promote collaboration and Integration. When they will not obtain support and assistance, they will
experience problems Within the course of performance of their job duties in a well-organized manner and in Achievement
of organizational goals. In this manner, there is development of non-co-Operation among members. As a result of non-co-
operation, the members are likely to remain In seclusion and do not tend to interact with others much. Therefore, it can be
stated, non-co-Operation is one of the crucial limitations of informal communication.
Lack of Control – When the informal communication gains prevalence within the Organizations, the members are unable
to control it. In other words, the individuals are unable to put into operation the measures and approaches and prevent it
from assuming a major Form. In accordance to the research studies, informal communication is regarded as Important, but
it needs to be controlled. The reason being, in this case, lack of rules and Procedures enables it to cause detrimental effects
upon the job performance of the members And overall functioning of the organizations. Due to this factor, the members
are unable to Exercise control. Therefore, lack of control is one of the major limitations of informal Communication.

7.3.6 Modern methods of office communication

7.3.7 Barriers to effective communication

7.3.8 Conducting meetings

7.3.9 Preparation for meeting

7.3.10 Types of meetings in an organization

7.3.11 Characteristics of an effective meeting

7.3.12 Roles of chairperson, secretary and members in a meeting

8. FINANCE, PURCHASING AND STORES MANAGEMENT

8.1 FINANCE
8.1.1 Functions of finance department

8.1.2 Roles of accounts clerks, cashier and accountant

8.1.3 Books used to maintain business records

8.1.4 Interpretation of final accounts (book keeping equation, simple balance sheet and trading profit and loss
account)

8.2 PURCHASING
Purchasing can be defined as the process of acquiring goods, services and works in return for a price.

8.2.1 Objectives of purchasing

a) General objectives (managerial level)
 acquiring materials of:
 The right quality
 From the right supplier
 In the right quantity
 At the right time
 At the right place
b) Functional objectives (operational level)
 To support the company operations with uninterrupted flow of materials and services
 To buy competitively keeping abreast of the forces of supply and demand
 To buy wisely by continually searching for better values of quality, service, price relative to the buyer’s needs
  To keep stock of investment and losses at a practical minimum
 To develop effective and reliable sources of supply
 To develop good relationships with the supplier community and good continued relationship with active suppliers
 To achieve maximum integration with other departments of the firm
 To handle the purchasing function proactively in a professional and cost effective manner.

8.2.2 Functions of purchasing department

a) Sourcing: It is concerned with matching purchasing requirements with sources of supply, ensuring continuity of
supply, exploring alternatives sources of supply and validating the supplier compliance necessary to meet or exceed
buyer criteria for quality, delivery, quantity, and price. The purpose of sourcing is to find right suppliers that improve
the overall supply chain
b) Value Analysis: concerned with increasing the value added elements of the purchasing process. Value analysis can
consist of such components as price for quality received, financing, and delivery. An example would be identifying
less expensive goods and services that could be used as substitutes at comparable quality and value.
c) Contracting: Critical functions in this area are the development and analysis of request for quotation (RFQ);
negotiating on pricing, volume, length of contract, specifications, supplier selection and monitoring of performance
measurements.
d) Supplier development: today’s environment calls for increasing collaboration with suppliers for doing business.
Pursuing capabilities that promote supplier partnering require buyers to be knowledgeable of supplier’s capacities,
resources, product lines, and delivery and information system capabilities. A key component in the strengthening of
this partnership is the development of pricing, technology, and information-sharing agreements that link supplier and
buyer together and provide for a continuous win-win environment.
e) Internal Integration: Purchasing needs to be closely integrated with other business areas such as marketing, sales,
inventory planning, transportation, and quality management. By providing key information and streamlining the
acquisition process, the purchasing function can assist the enterprise to synchronize replenishment requirements with
the overall capacities of the supply network.
f) Research: Purchasing department should conduct market research to gather diligence on purchasing and supplie eg
sources of supply, prevailing market prices, value analysis, economic and market studies, special cost analysis,
sourcing and system research.
g) Supplier scheduling: sharing the time phased schedule of demand, which provides detailed visibility of future
requirement to the supplier, who in turn can plan the necessary material and capacity resources to support the
schedule.
h) Purchasing and Receiving: These includes day to day purchasing activities associated with order preparation, order
entry, order transmission, status reporting, receiving, quantity checking and stock put away, invoice and discount
review and order close out.
i) Cost management: the continuous search for ways to reduce administrative costs, purchasing prices, and inventory
carrying costs while increasing value. Improvement activities include purchasing costs reduction programs, price
change management Programs, volume and stockless purchasing contracts, cash-flow forecasting and strategic
planning.
j) Performance measurement: Monitoring the quality and delivery performance of suppliers. This is usually done in
supplier evaluation and vendor rating. It is important to measure supplier performance since it is essential when
evaluating the capabilities of competing suppliers and ensuring that costs, delivery and collaborative targets are being
attained.

8.2.3 Purchasing procedure

a) Need or problem recognition
The user department identifies/recognizes the need to be fulfilled. User department refers to any department within the
organization that is need of goods or services to be purchased.
b) Need description
The specification of the goods and services are drawn up detailing the quality, quantity and the duration of the contract.
This stage involves a number of departments eg purchasing, design/engineering, and finance department.
c) Request for proposal or quotations (RFP/RFQ)
The RFQ is sent out to various suppliers asking them to quote appropriately within a period of time.
d) Analysis of the proposal
When the suppliers respond, the quotations are analyzed against the set out criteria by an evaluation committee. The
results of analysis are given to the appropriate committee for further action.
e) Award of contract
The contract to supply the goods or services is awarded to the supplier whose bid is the most responsive to the user’s
needs in form of a Local Purchase Order (LPO) or Local Service Order (LSO).
f) Expediting
Through the purchasing department, the buyer follows up to ensure that supplier performances the contract on time.
g) Receipt of goods
The goods and services requested from the supplier are received together with the invoice for processing the payment.
h) Payment
The purchasing department processes the invoice and submits it to the finance department for payment.

8.2.4 Types of tenders

1. Open Tendering
Open tendering or competitive bidding allows companies to bid on goods in an open competition or
open solicitation manner. Open tendering requirements call for the company to:
a) Advertise locally
b) Have unbiased and coherent technical specifications
c) Have objective evaluation measures
d) Be open to all qualified bidders
e) Be granted to the least cost provider

Open tendering method encourages effective competition to obtain goods with an emphasis on the value for money.

Disadvantages of open tendering:

a) Not very suitable for large or complex acquisitions/complex requirements
b) Complications in defining the exact needs of the requirement by the procuring company
c) Lengthy timeframe for completion of the procurement action,
d) Requires strict adherence to procedures,
e) Assumes existing internal capacity for the completion of clear and precise specifications,
f) Restricts suppliers’ participation in determining the technical specifications,
g) Limits the possibility of building long-term relationship with suppliers,
h) Focuses only on a least-cost solution
i) Excessive formalism may limit supplier participation in the tendering process.

2. Restricted Tendering
 Restricted tendering only places a limit on the amount of request for tenders that can be sent by a supplier.
 Restricted tendering is considered a competitive procurement method, however, the competition is limited to agencies
that are invited by the procuring team.
 The procuring entity should establish a set of guidelines to use when selecting the suppliers that will be on the
invitation list.
 Restricted tendering is a selective method of finding the best-suited and most qualified suppliers
 Restricted tendering helps the procuring team to save time and money during the selection process.

3. Request for Proposals (RFP)

 This is a document stating why the business is the best fit for a type of project
 RFP is used when suppliers are proposing their good or service to a procurement team for review. Suppliers should
submit a two-envelope proposal to procurement one with the proposal and one with the financial proposal. This
allows the procurers to review the proposal without knowing the financial component. The financial proposal should
be opened after the content of the first-envelope proposal is approved or rejected to eliminate any persuasion by cost.

4. Two Stage Tendering

There are two procedures that are used under the two stage tendering method.

The first procedure is similar to the RFP method. The procurement team receives a proposal with two envelopes – one
with the proposal itself and one with the associated financial information. The difference is the bidder is required to
submit a technical proposal that highlights their solutions to fulfilling the requirements as specified by the procuring
department. This proposal is scored according to the relevance of the solution to the needs of the procurer. The highest
scored technical proposal is invited for further discussion in an attempt to reach an agreement. After the final agreement
the bidder is invited to submit their financial proposal and then further discussions ensue to negotiate a contract.
The second procedure is much like the above, however, instead of the bidder submitting a fully-completed technical
proposal, a partial proposal is submitted. This allows room for even more customization and discussion. Once the highest
qualified bidder is selected, they will be invited to submit a thorough technical proposal along with a financial proposal.
The technical proposal will be evaluated and only then will the financial proposal be opened. The combined score of both
the technical proposal and the financial proposal are the grounds on which a bidder is contracted.

5. Request for Quotations (RFQ)

This procurement method is used for small-valued goods or services. It is the least complex and fastest
procurement method. The procurement entity selects a minimum of three suppliers that they wish to get quotes from. A
comparison of quotes is analyzed and the best selection determined by requirement compliance is chosen.

6. Single-Source
Single source procurement is a non-competitive method that should only be used under specific circumstances.
Single source procurement occurs when the procuring entity intends to acquire goods or services from a sole provider and
should undergo a strict approval process from management before being used. The circumstances which call for this
method are:
a) Emergencies
b) If only one supplier is available and qualified to fulfill the requirements
c) If the advantages of using a certain supplier are abundantly clear
d) If the procurer requires a certain product or service that is only available from one supplier
e) For the continuation of work that cannot be reproduced by another supplier

8.2.5 Tendering process

1. Invitation to Tender
The procuring entity/firm shall prepare an invitation to tender that sets out the following:
a) The name and address of the procuring entity;
b) The tender number assigned to the procurement proceedings by the procuring entity;
c) A brief description of the goods, works or services being procured including the time limit for delivery or completion;
d) An explanation of how to obtain the tender documents, including the amount of any fee;
e) An explanation of where and when tenders must be submitted and where and when the tenders will be opened;
f) A statement that those submitting tenders or their representatives may attend the opening of tenders.
2. Advertisement of Tender
The procuring entity shall take steps reasonable to bring the invitation to tender to the attention of those who may wish to
submit tenders.
3. Provision of Tender Documents
The procuring entity shall provide copies of the tender documents in accord with the invitation to tender. The procuring
entity may charge such fees may be prescribed for copies of the tender documents
4. Opening of Tenders
 Immediately after the deadline for submitting tenders, the tender opening committee shall open all tenders
 received before that deadline.
 Those submitting tenders or their representatives may attend the opening of tenders.
 The tender opening committee shall assign an identification number to each tender.
 If the procuring entity determines that none of the submitted tenders is responsive, the procuring entity shall notify
 each person who submitted a tender.
5. Evaluation of tenders
The procuring entity shall evaluate and compare the responsive tenders using the procedures and criteria set out in the
tender documents. The procuring entity shall prepare an evaluation report containing a summary of the evaluation and
comparison of tenders.
6. Notification of Award of Contract.
 The procuring entity shall notify the person submitting the successful tender that his tender has been accepted.
 The procuring entity shall also notify all other persons submitting tenders that their tenders were not successful.
7. Creation of Contract
The person submitting the successful tender and the procuring entity shall enter into a written contract based on
the tender documents
8. Debriefing
It involves explaining to unsuccessful suppliers why they lost their bids. Benefits of debriefing
a) It establishes a reputation of being fair, honest, and ethical.
b) The information provided can help the unsuccessful suppliers to improve in future.
c) It provides them with some benefits from time and money spent on preparing their tender.

8.3 STORES MANAGEMENT

Storekeeping is that aspect of material control concerned with the physical storage of goods. It relates to art of preserving
raw materials, work-in-progress and finished goods in the stores

8.3.1 Types of organization stores

a) Centralized stores - means a single store for the whole organization.
Advantages of centralized storage:
a) economical use of storage space,
b) Saving in storage costs and appointment of experts for handling storage problems.
c) Effective and better supervision and control
d) Reduced personnel requirement, thus involving less related costs
e) Better and efficient layout of stores
f) Better inventory checks
g) Maintenance of optimum stores
h) Fewer redundant and obsolete items
i) Provision of better security arrangements possible
Disadvantages of centralized stores
a) It leads to higher cost of materials handling,
b) Leads to delay in issue of materials to respective departments,
c) Exposure of materials to risks of fire and accident losses

b) Decentralized - means independent small stores attached to various departments.

Advantage of decentralized stores
a) Reduced material handling and associated work.
b) Convenient for every department to draw materials
c) Less risk of loss by fire etc.
d) Less chances of production stoppages owing to easy and prompt availability of materials
Disadvantage of decentralized stores
a) Uniformity in storage policy of goods cannot be achieved
b) more staff is needed
c) Experts may not be appointed for handling storage problems

8.3.2 Functions of a store

a) Receipt: Receiving and accounting of raw-materials, bought out parts, spares, tools, equipment and other items.
b) Storage: Provision of right and adequate storage and preservations to ensure that the stocks do not suffer from
damage, pilferage or deterioration.
c) Retrieval: Facilitating easy location and retrieval of materials keeping optimum space utilization.
d) Issue: Fulfilling the demand of consumer departments by proper issue of items on the receipt of authorized purchase
requisitions.
e) Records: To maintain proper records and update receipt and issue of materials.
f) Housekeeping: Keeping the stores clean and in good order so that the handling, preservation, stocking, receipt and
issue can be done satisfactorily.
g) Control: Keeping a vigil on the discrepancies, abnormal consumptions, accumulation of stocks etc., and enforcing
control measures.
h) Surplus Management: Minimization of scrap, surplus and obsolescence through proper inventory control, and
effective disposal of surplus and obsolete items.
i) Verification: Verifying the bin card balances with the physical quantities in the bins and initiating the purchasing
cycle at appropriate time so as to avoid the out of stock situations.
j) Coordination and cooperation: To coordinate and cooperate with the interfacing departments such as purchasing,
manufacturing, production planning and control, inspection, etc

8.3.3 Inventory control

Inventory is a stock or store of goods, commodities, or other resources that are stored in an organization at any given
period of time, for future production.
Inventory control is a process of ensuring that a business maintains the adequate quantity of stock to meet the forecasted
demand with minimum holding cost.
[Link] Inventory types
a) Raw materials - The reason for holding raw materials is to reap the price advantage available on purchase of bulk or
on any seasonal raw materials which can be procured only during the harvest seasons.
b) Work-in-progress inventory - The reason is to balance the production flow.
c) Ready-made inventory - the company may hold stock of those readymade inventories which are required in the
production of the final product
d) Finished goods - A company stocks the finished goods during the waiting period until it finds its customer. In some
cases, more stocks are held to create demand for the product and get a high price for the product.

[Link] Advantages of inventory control

a) Maintaining an optimum level of inventories
b) Helps in laying the procurement process considering the wait-time, lead-time etc.
c) Periodical inspection of inventories
d) Guides on storing and issuance of inventories from godowns.
e) A systematic record of movement of materials.
f) It helps to lay out plans for physical verification of inventories.

[Link] Steps in inventory control

a) Deciding on the minimum levels of inventories - deciding on the levels of inventory i.e. maximum-minimum limits
of inventory.
b) To decide on the re-order level - decide as to when you will be re-stocking the raw materials which will be used in
the production of the final product.
c) Choosing a sound inventory control method - the techniques should assist knowing the minimum quantity of stock,
point in time at which the stock should be re-ordered and right quantity that should be ordered.

[Link] Inventory Control Methods

a) ABC analysis
Stock is divided into three sections namely A, B and C.
 A section consists of inventories that are high in value with low sales frequency or consumption and requires to be
controlled closely.
 Category B consists of stocks that are of moderate value and with decent sales frequency.
 Category C, has inventories with low value having high sales frequency requiring minimum inventory control.
b) Just in time (JIT)
The company maintains an inventory level that is required during production. There is no excess inventory beyond the
production requirements and it helps get rid of the cost involved in storing excess stock. The order of stock is placed
when old stock is close to zero and this puts production in risk, even if there are small delays.
c) Economic order quantity (EOQ)
The company will get to know how much quantity of inventory to order at any point of time and when should they place
the order considering the minimum level of inventory.
d) Fast, slow, and non-moving (FSN)
The inventories are classified based on the movement. All the inventories are categorized as fast-moving, slow-moving,
and non-moving. Based on the movement across the categories, the order is placed.

8.3.4 Stock taking

Stock Taking is the process of physical counting of the stock items as well as verification of the same with the company’s
electronic records, which is generally done at the end of the year as it forms part of the company’s annual audit and it
might be done in the presence of external auditors of the company.

[Link] Importance of stock taking

a) To verify the inventory at the end of the year to present the true and fair view in the financial statements of the
organization.
b) To comply with the regulations governed by law as the law requires to physically count the Stock at the year-end
before the external auditors.
c) To keep track of physical Stock and verify the internal controls by cross-checking the Stock with the financial
records.
d) To point out the Stock discrepancies with financial records and accounting records.
e) To impose inventory control measures.
8.3.5 Methods of stock taking
a) Periodic stock taking: done at regular intervals, which is mainly the accounting period of a business.
b) Annual stock taking: conducted once every year. This is normally the last month of a financial year.
c) Spot or line checks: This kind of verification is either planned or unplanned. It is done while the stocks are still
within the premises to ensure that the digital records and manual verification tally and has no discrepancy.
d) Stock out validation: preferred when a business suspects a mismatch in the stock counting done electronically and
manually.
e) Perpetual stock taking: Such checks are continuously conducted, which means the verification is done multiple
times a year.

9. MARKETING PUBLIC RELATIONS AND QUALITY CONTROL

9.1 MARKETING
9.1.1 Meaning of marketing management
Marketing is the management process responsible for identifying, anticipating and satisfying consumer needs profitably.
It is also the performance of business activities that direct the flow of goods and services from producer or seller to the
consumer/buyer. It is also a social and managerial process by which individuals and groups obtain what they need and
want through creating and exchanging products of value with the others.

Marketing management refers to the overall process of planning, implementing, controlling the marketing program
(strategy) and individual marketing functions; appraising the risks and benefits in decision making and focusing on total
quality.

9.1.2 Importance of marketing

a) Creates utility - this is the ability to satisfy a need
 Form utility - occurs mainly when there is have a change in state.
 place utility - occurs in transportation.
 time utility - arises in all retail outlets
 possession utility arises when we have ownership of goods.
b) Employment creation – eg in advertising communications etc.
c) Creates revenue to the government due to the taxes that are levied to the marketers.
d) Earns a country foreign exchange mainly through international marketing
e) Entertains consumers e.g. some tv adverts.
f) Informs consumers about products that are prevailing in the market
g) Widens the markets mainly through advertisements, sales promotion and distribution hence also taking goods and
services into the trading blocs thereby increasing sales e.g. PTA, COMESA and European markets.
h) Helps to develop brand loyalty - due to the repeat purchase by existing customers and others.
i) Helps to introduce new products in the market therefore raising the standard of living for most people e.g.
shopping at internet
j) It generates consumers’ enthusiasm (become interested in something eagerly) for goods and services.
k) Has a strong impact on beliefs and lifestyles of people
l) Helps to improve the quality of life and preservation of the environment – by encouraging firms to make safer
products i.e. low-tar cigarettes, create public messages on energy conservation, cure diseases (e.g. usage of Dettol),
driver safety i.e. don’t drink and drive, abuse alcohol and other topics

9.1.3 Marketing concepts (production, product, selling and marketing)

Marketing concept - refers to the ways of business thinking that have evolved over time and they include;
a) Production concept - Organizations produced in large quantities in the belief being that consumers will favor
products that are either available or affordable. Manufacturers therefore focused on improving production and
distribution efficiency.
b) Product concept – this is a belief that consumers will favour products that offer the most quality (design),
performance and features to them. If a product is designed in a way that looks attractive, consumers will have to buy
the product.
c) Selling and sales concept - also referred to as hard sell concept. It prescribes that consumers will not buy enough of
organizations products unless it undertakes a lot of selling and promotional effort. Organizations must therefore
advertise their products and employ sales persons to communicate with consumers with the aim of convincing them to
 buy the products. This theory is applicable for unsought goods and it aims at informing, communicating and
promoting a company’s product e.g. insurance.
d) Marketing concept - the philosophy holds that achievement of business goals depends on determining the needs of
customers and delivering the desired level of satisfaction to consumers more effectively and efficiently than the
competitors. The marketing concept stands on the following pillars/highlights/considerations.
 Market focus/targeting - the firm must concentrate on one or a few key segments of the market and satisfy their
needs.
 Customer orientation -the firm must carefully define customer needs from the customers’ point of view. This is
important because a satisfied customer: Will buy the product again, talk favorably to others about the firms’
product, pay less attention to competing brands in the market and are likely to buy other products that the
company may add to its line.
 Integrated marketing - this means that the various marketing functions must pull together in order to satisfy the
customer e.g. well trained and motivated employees, good and efficient suppliers etc.
 Profitability - the job of a marketer is to satisfy consumer needs at a profit.
e) Societal marketing concept/human orientation concept/social responsibility concept/survival stage/holistic. This
concept is based on determining the needs and wants of consumers and delivering superior value in a way that
maintains or improves consumers and societies well-being.

9.1.4 Marketing mix (4Ps of marketing)

Marketing mix denotes a combination of the various elements which make up a marketing system i.e. the product, the
price, the placement and the promotion.
a) Product
The product element involves the planning, designing and developing the right type of the product or service to meet the
customer satisfaction. It strives to establish the following:
 Product policy - This is a principal of operation on the production process of a given product adopted by the
management to guide those who carry out the action. It sets out the objectives to be achieved and the limits within
which the management has to operate. The main functions of a product policy are to guide the activities of the firm
towards its common goals which include:
 Considerations of the product mix
 Considerations of the rate nature and direction in changes in demand
 Product elimination and new product development
The product policies engage in product planning development, production marketing, volume of production, timing
etc.
 Product strategies - defines the high-level plan for developing and marketing a product, how the product supports the
business strategy and goals, and is brought to life through product roadmaps
 Product mix - A product mix lists all products offered for sale by a company which details three dimensions of a
product – namely;
 The product breadth it is measured by the number of variety of products manufactured by a single firm e.g.
Samsung making TVs, fridges phone etc.
 The product depth - refers to the assortment of size, color and models with each line e.g. the Toyota car models
 Consistency- refers to the close relationship of different product line to their end distribution channel e.g. the
Toyota Company – produces those goods which fall under motor vehicles, unlike unilever.

b) Price
Price is the value or sum of money which is charged by the supplier of a product or service from the buyer. The financial
price is the measurement of value and has the following importance: -
 Economic value - because it relates to the generation of product revenue.
 Profits – through price profit cost and revenue elements are measurable.
 Product quality – price gives indication of the product quality.
 The psychological element - price has a psychological influence in the market i.e high prices co-relate to superiority.
 Corporate goals- are achievable through pricing decisions especially in formulating marking strategies
 Meeting consumer expectations is measurable through price.

Pricing strategies:
 Price skimming: setting a high price for the product and then gradually reducing the price over time.
 Competition-based pricing: evaluating the prices set by market competitors and placing your price either slightly
higher or lower than the competition.
 Economy pricing: setting prices that target buyers who seek a low price or bargain.
 Premium pricing: setting a high price tag on your items. This strategy requires ensuring that the product or service
itself is of high quality before you give it a ‘luxury’ label.
 Value-based pricing: setting a price based on what a customer is willing to pay - what they believe your brand and
your product is worth.
 Cost-plus pricing: this method is solely based on what the cost of producing your product is and then adding a
markup so that you aren’t selling at a loss.

c) Placement
Also known as distribution of goods physically. It is concerned with linking the seller and the buyer. It involves the
following elements:
 The channels of distribution
 The transport means
 The warehousing
 The routing of the product.

Distribution of products and services

The place mix consists of Channels of Distribution and Physical Movement of Goods.

Channels of distribution are direct and indirect. Direct channel is a distribution level through which an organization
directly sells its products to the customers. When a middleman or intermediary is involved in the distribution process, it
means the organization is using Indirect Channels of Distribution

The components of physical distribution include order processing, transportation, warehousing, and inventory.

Factors determining choice of a distribution channel

Product Related Factors
The selection of distribution channel is affected by the products manufactured by a company with related factors as
follows:
 Industrial/ Consumer Product: As industrial products are usually technical, expensive, bulky and purchased by few
buyers, direct or short channels should be used. In the case of consumer goods, long or indirect channels are used
because such goods are standardized, less expensive, less bulky, non-technical and frequently bought products.
 Perishability: Perishable products like fruits, vegetables, milk, etc., must be sold through short channels, whereas for
non-perishable items like toothpaste, soap, etc., long channels are preferred.
 Unit value of Product: for high unit value for a product as in the case of expensive products, direct or short channels
should be used, whereas, for products with low unit value, long channels should be used.
 Degree of Complexity: complex products which require technical advice or guidance, direct channels should be used,
but for simple and non-technical products, long channels should be used.
 Standardization: Products of standard size and quality usually take longer time by adopting longer channel of
distribution. For example, machine tools and automobile products which are of standard size reach the consumer
through the wholesalers and retailers. Un-standardized articles take lesser time and pass through shorter channels of
distribution.

Company Characteristics
Some of the most important factors which influence the choice of channels are:

 Financial Strength: If a company is financially strong, then it can easily opt for direct channels. But if a company is
not financially strong, then indirect channels should be used.
 Degree of Control Desired: Short or direct channels are used if a company wants to exercise full control over
distribution. But, if a company does not want to exercise control over the distribution, then indirect channels should
be preferred.
 Experience and expertise: if a company possess necessary experience, expertise and staff it can manage selling
activities by its own. When a company lacks such experience and skills, it has to involve middlemen, and prefers
indirect channels.
 Facilities and staff: sufficient facilities and capable staff are essential for effective distribution. If a company
manages for needed facilities and staff, direct channels are used, otherwise, indirect channels are used.
Competitive Factors
The choice of channel also depends on the channel selected by the competitors. Competition related factors include:
 Intensity of competition: where there exists severe competition in the market, a company must consider competitors
distribution strategies and practices while selecting marketing strategies. In case of less competition, a company
choice will be independent of the competition
 Response and reactions of competitors: reactions and response of close competitors must be taken into account
while deciding on distribution channel. A company must select channels that can help in creating competitive
advantage
 Company’s competitive position in market: a leader company can design its own distribution network. It can
select specific channels of distribution as it requires. However, a follower company has to follow the market leader
and their choice depends on the leader’s practice

Middlemen
Companies consider several middlemen related factors while deciding on channels including:
 Creditworthiness of middlemen: if middlemen have a good reputation and creditworthiness a company can
multiply its gain and involve them in their distribution activities.
 Attitudes of middlemen: positive attitudes of middlemen make companies involve them in distribution activities.
 Services rendered to middlemen: Channel decisions depend on the number and quality of services that middlemen
offer customers. When middlemen do not provide the useful services to customers, companies prefer direct channels.
 Financial capacity of middlemen: strong financial capacity of middlemen attracts manufacturers.
 Terms and conditions: when terms and conditions laid down by middlemen are not favorable, the manufacturers do
not like to involve them in distribution activities. They prefer direct distribution channels.

Market Factors
The choice of the channel also depends upon the market. Some of the prominent factors are:
 Size of Market: It is economical to use more intermediaries if the size of the market is large with numerous
customers. Direct or short channels are preferred if the market size is small with a limited number of customers.
 Geographical Concentration: It is better to go with direct or short channels of distribution if buyers are concentrated
in a small geographical area. But if buyers are scattered over a wide geographical area, then companies should opt for
indirect channels.
 Quantity Purchased: If the average size of the order is small, then longer channels should be preferred, but if the size
of the order is large, then direct channels should be used.
 Buying habits of customers: This includes tastes, preferences, likes and dislikes of customers. Customers also
expect certain services like credit and personal attention and after sales services etc. All these factors greatly influence
the choice of distribution channel.
 Current market trend: a company’s distribution system must be compatible with the recent market trend which
includes a number of variables e.g. policies and practices of giant national and multinational companies, functioning
of departmental stores and corporate retailers, cyber marketing, network marketing, business partnering, customer
awareness etc.

Environmental Factors
The choice of channel is also affected by environmental factors, like economic condition, government policy, statutory
provisions, technological development. Environmental factors affecting channel decision include:
 Economic condition of the country: a country’s economic condition affects its operations. In poor economy
countries, short or direct channels are used to sell products at low prices. In developing and developed countries,
normally indirect channels are used to distribute products.
 Phases of trade cycle: phases of trade cycle e.g. recession, recovery, prosperity etc. indicate a country’s economic
condition. Normally in prosperity stage, long and indirect channels are used due to the need for mass distribution and
peoples’ willingness to pay high prices for the product. When the economy is in recession, direct and short channels
are more suitable with the prices being low.
 Legal provision: government policies and legal provision have direct and indirect implication on a firm’s distribution
activities. Managers must identify provisions affecting distribution activities and select appropriate channels e.g.
taxes, charges, administrative procedures, restrictions etc.
 Availability of facilities: availability, costs, and quality necessary facilities play decisive role in channel selection.
transportation, communication, warehousing, banking etc. and national and international level, harmony among
country’s affect a company’s decision on channels.
d) Promotions
A product promotion is the act of providing information about a product to its prospective users in order to persuade them
to buy, enjoy or choose the product. Product promotional messages usually includes information which shows;
 That the product exists
 That the product has ability to satisfy a particular want
 The physical location where the product can be obtained or enjoyed
 The qualities that the product can be obtained or enjoyed
 The quantities that the product can be obtained
 The times when the product can be obtained
 The price of the product.

Factors that influence a product promotion.

 The nature of the market - where competition prevails, producers strive to make their products sell
 The nature of the consumers - the level of information the consumers are accessible to creates awareness.
 The effect of modern technology.

The importance of product promotion

 To inform potential customers about the existing qualities and other important details regarding a product.
 To convince or persuade existing customers to continue buying the product and potential customers to choose it.
 To establish a business image or goodwill among the existing and prospective customers
 To facilitate more sales revenue.

Methods of Product Promotion

a) Advertising
Refers to drawing attention to or describing a product in a public medium in order to give value for its purpose e.g.
newspapers, radio, television etc. It should contain a media presentation, payment for the advert, an identifiable sponsor
who pays for the advert. Note: Any communication without costs to the sponsor is publicity and not advertisement.

Reasons for Advertising

 To introduce new products
 To stimulate desire for more quantities of the product
 To persuade the public to buy the product
 To explain new uses of a product
 To remind customers of the existing product
 To explain new uses of a product
 To create recognition of a particular brand of products
 To maintain the products name or slogan in public
 To prepare a way for sales persons in selling
 To remove any bias that customers may have developed about the product.
 To inform customers of new prices, packaging changes or any other changes
 To supplement the efforts of salesmen
 To reach out for few markets.

Types of Advertising
 Product advertising – which basically promotes the sale of a particular brand of a product
 Institutional advertising – focuses on creating a positive attitude on the business producing or providing the
product/service emphasis on the institution.
 Primary demand advertising – targets demand stimulation for a range of products without mentioning a specific
brand or manufacturer e.g. Adidas products.
 Celebrity advertising – the advert uses a famous personality with the aim to attract attention and to endorse the use
of a given product
 Corrective advertisement – seeks to correct errors or misleading claims made in an earlier advertisement.

Advertising Media
An advertising media is the means through which an advertised message is conveyed to the members of the public who
are consumers e.g. The press (newspapers) Posters, Billboards, Brochures, Shopping news, Radio Television Neon signs
etc.

Factors which determine choice of an advertising medium

 The intended target group - The nature of the target group in terms of habits, customers age, etc. will determine choice
of the right medium.
 The physical characteristics - The mediums’ physical characteristics i.e. visual aspects, color, movement’s etc.
 Media circulation - Where an advertiser aims to reach countrywide clients, choice of a nationwide media is necessary.
 Cost of advertising - Should be affordable and reasonable compared to the returns.
 Urgency of the advertisement - Urgent and quick adverts may require mediums such as Radio, TV etc.

Advantages of advertising - To the advertiser (or business enterprise)

 It provides a business enterprise with opportunity to inform the public on what they offer.
 It stimulates demand for a product thereby increasing sales and the sellers’ profits.
 Acts as a reminder to customers of the existing products.
 Helps sustain brand loyalty
 It quickens brand recognition
 Enables quick access and purchasing of the product after knowledge of placement and quantities.

Disadvantages of advertising - To the advertiser

 A costly method of promoting products
 Offensive or erroneous advertisements may be negative
 One can be sued where advert is misleading.
 Competitive advertising may cause a seller to be pushed out of business.
 Difficulty due to existence of several media.

Advantages of advertising - To the customer

 It increases customers’ awareness of a new product
 Helps indicate the variety of products available in the market hence, facilitating choice
 Leads to better quality products due to competition
 Leads to increased qualities being produced.

Disadvantages of advertising - To the customer

 Advertising costs are normally borne by the consumer
 Might be misleading especially where there is consumer ignorance
 Encourage impulse or irrational buying
 Some adverts are irritating, anti-cultural and offensive

b) Personal selling
This is the method of promoting:
 availability of adequate resources for the sales force
 easy accessible and concentrated markets
 high unit value for the product
 products whose use needs demonstration
 Suitability of a product to individual need as opposed to general use.
 Introduction of new products in the market.

Forms of personal Selling include: field sales, showroom selling, shows, trade fairs and exhibitions

Advantages of Personal Selling

 Presents an opportunity to show the existing and potential customers what is available
 Offers the prospective buyers an opportunity to see, examine taste and ask questions about a product – and chance of
comparing
 The questions from prospective buyers are immediately answered
 Immediate contacts are made between sellers and buyers for follow up
 It is complementary advertising from other mediums e.g. advertising
 Seller has opportunity to obtain information about the competing products and promotional strategies

Disadvantages of Personal Selling

 It is an expensive promotional method – especially where a wide coverage and oversees exhibitions are involved.
 Energy and time are consumed on talks convincing and demonstrations
 Requires cost controls of sales persons
 Has limited coverage as it targets a limited group.

c) Sales promotion
Sales promotion refers to the strategies and incentives which are aimed at promoting the purchase of a given product. The
sales promotion strategies are divided into two namely.
 strategies aimed at the customer directly e.g. cards, postcards, gifts and other premiums
 strategies aimed at the sales force eg commissions, push money to facilitate movement of the salesmen training,
provision of point of sale displays

Advantages of Sales Promotion

 Promotion activities persuade and convince potential customers
 Expand the market scope
 Discounts reduce prices for consumers and credits stimulate a greater turn over
 Attracts customers through use of price leaders
 Good will is built by after sales services and sample giving.
 Training and demonstrations remove fear of using a product

Disadvantages of Sales Promotion

 The sales promotional incentives are expensive i.e free sample
 Bad debts may arise from credit facilities
 Time and money consuming especially for sales services
 After sale services ties customers to one seller

d) Publicity
Refers to the free advertising whereby the desire for a product is created or boosted by unpaid for features or presentation
in the mass-media (e.g. a feature in press). These features may be solicited for or unsolicited for but remain entirely
unpaid for by the business.

Advantages of publicity
 Builds the sellers goodwill and image among existing and prospective customers
 It involves no costs on the side of the seller
 Has a large and widespread reach since it conveyed through media.
 Has a high creditability as it is reported independently

Disadvantages of publicity
 Unfavorable information may be released unknowingly to the public
 Information released is to the discretion of the media house
 It is irregular and short – lived hence my not be effective

e) Public relations
The term public relations (PR) when used in product promotion refers to the process of communicating information of an
organization’s products, policies and actions to specific consumer groups or the public at large. This is with the view of
creating awareness and a positive attitude towards the organization and the product. It could also be done to correct mis-
information or rehabilitate a spoilt image in order to get a satisfied client. It aims at creating a favorable attitude towards
the organization in order to promote acceptance.

Strategies of Public Relations

 Market research - The process of gathering recording and analysis of information about a market with the view of
coming up with the best strategies of selling products in that particular market.
 Consumer research - Where activities are concentrated on knowing more about the consumer with the aim being to
identify which products have the highest value to the consumer
 Market segmentation - refers to the process of subdividing the market into sections to scope various interests of
various consumer groups.
 Product difference
 Branding
 Packaging.

Advantages of Public Relations

 Effective in presenting information about the product and policies of an organization
 Addresses the desired target audience
 Effective in correcting any mis-information

Disadvantages of Public Relations

 Expansive and therefore requires careful planning in both time and funds
 Takes time hence is a long term.
 Its impact is difficult to gauge.

9.1.5 Other Ps in marketing

a) People: This refers to the individuals who work for your business and who deal with the customers, either directly or
indirectly. A company’s people are at the forefront when interacting with customers, taking and processing their
enquiries, orders and complaints in person, through online chat, on social media, or via the call center. People with the
right training, empowerment and motivation can represent an opportunity to differentiate an offering in a crowded
market and to build valuable relationships with customers
b) Process: How you will deliver the product to clients and provide them with the finest experience possible. An
effective process helps the business to achieve repeatable and consistent customer service levels as well as save time
and money by increasing your operational efficiency.
c) Physical evidence: This refers to all existing and potential features customers see when engaging with a business.
Physical evidence is the tangible proof that establishes credibility eg the look and feel of the business branding.
Physical evidence may be: a retail store, interior design, a business website, online ratings and reviews, the uniforms
and behaviour of employees etc.

9.2 PUBLIC RELATIONS

Public relations (PR) is a form of communication that involve creating understanding through knowledge and effecting
change in commercial, noncommercial, private and public sector.
Public relations (PR) refer to all forms of planned communication within and outside the organization for the purpose of
achieving specific objectives and common understanding

9.2.1 Types of organization publics

Publics are those group of people within and outside the organization whom the organization communicate with
depending on their activities including:
a) The community -They are the neighbors’ near where the organization is located who contribute to either success or
failure of organization. Possible ways an organization can promote good relation with its community include:
participating in community construction programs; employing local community members depending on their
qualifications.
b) Employees-refer to workers within the organization.
c) Distributors – refer to everyone concerned with bulk breaking, transferring the products near the customers
d) Suppliers – Refer to one of publics that delivers necessary tools and equipment needed for organizations operation at
a cost.
e) Customers – refer to the end-beneficiary of organization products and services. organization should relate well with
its customers so as to retain them, attract new ones, satisfy their desires and build good corporate identity
f) Government – the government can either be represented by local government, county government or national
government. Oganizations or individuals should ensure healthy relationship with the government through complying
with the legal requirements e.g. offering quality services, paying the tax, paying business permits etc.
g) Financial institutions - are institutions dealing with receiving deposits from their customers and issuing the loans.
Customers should maintain good relationships with the bank through paying the loans on time
h) Trade unions - refer to employee associations/movements formed to fight for the rights of its workers. They exert a
powerful influence on commercial, industrial and political bodies in order to fight for better services for its workers.
i) Investors – Are people who mobilize savings and put money into working capital in relation to organization
activities.

9.2.2 Roles of public relations officer

a) Press Relations: Creating and placing newsworthy information in the media to attract a person, product, or service.
b) Product Publicity: Publicizing specific products.
c) Public Affairs: Building and maintaining national or local community relations.
d) Lobbying: Building and maintaining relations with legislators and government officials to influence legislation and
regulation.
e) Investor Relations: Maintaining relationships with shareholders and others in the financial community.
f) Development: Public relations with donors or members of nonprofit organizations to gain financial or volunteer
support.

9.2.3 Benefits of good PR to an organization

a) Brand Image - A good PR strategy help the brand builds up its image in the way it wants to and target customers get
to know about it.
b) It’s Opportunistic - PR strategies make the brand capitalize on the opportunities and attract many influencers to
share the brand story to their followers.
c) Brand Values - PR is used to send out positive messages which are in line with the brand’s value and its image hence
builds the brand’s reputation.
d) Strengthen Community Relations - PR strategies are used to convey that the brand is as much part of society as the
target audience which builds up a strong relationship of the brand with the public.

9.2.4 Tools used in public relations

a) Press Releases: The press release is the basic building block of a publicity program concerned with story placement.
b) Fact Sheets: Fact sheets include more detailed information on the product, its origins, and its particular features.
c) Press Kits: The press kit pulls together all the press releases, fact sheets, and accompanying photographs about the
product into one neat package.
d) Video News Releases: The Video News Release (VNR) is the video equivalent of a press release.
e) Employee/Member Relation Program: Corporate public relations people often spend a great deal of time
developing employee communication programs, including regular newsletters, informational bulletin boards, and
internet postings.
f) Community Relations Program: Many companies actively encourage their employees to take part in community
organizations, and local corporations are often major sponsors of community events and activities
g) Financial Relations Programs: Financial relations people are responsible for establishing and maintaining
relationships with the investment community, including industry analyzers, stockbrokers, and journalists specializing
in financial reporting.
h) Industry Relations Programs: The primary public that industry relations specialists deal with is other businesses
operating within the same industry, as well as trade associations.
i) Development/Fund-Raising Program: This is a particularly important area for not-for-profit organizations
j) Special Events: Event marketing which links brands to existing targets.
k) House Ads: A company uses various media like newspapers, magazines and broadcast stations to prepare
advertisements for the internal public. Public relations program manages these house advertisements.
l) Public Service Announcements: These are ads for charitable and civic organizations that run free of cost on
television or radio or in the print media.
m) Corporate Advertising promotes corporate image or corporate viewpoints but does not talk about products and
services.
n) Publications: Companies publish various publications in the form of pamphlets, booklets, annual reports, books,
bulletins, newsletters, inserts and enclosures and position papers.
o) Speakers, Photos and Films: Many companies use speaker bureaus to communicate with people about topics of
public’s interest using news media, pictures and video films.
p) Displays, Exhibits, Events and Tours: Exhibits, displays, tours and events are used as displays and as point of
purchase for image building.
9.3 QUALITY
9.3.1 Definitions
Quality - The totality of features and characteristics of a product or service that allows its ability to satisfy stated or
implied needs. It can also be defined as the absence of defects in a product.

Dimensions of quality:
a) Performance – primary/basic product characteristics eg a cars fuel usage
b) Features – secondary/extra characteristics eg car radio
c) Conformance degree to which a product meets pre–established standards
d) Reliability - consistency of performance over time, average time of the unit to fail
e) Durability - how long product lasts before replacement
f) Service - ease of getting repairs, speed of repairs, courtesy and competence of repair person
g) Response - human – to – human interface, such as the courtesy of the dealer
h) Aesthetics - sensory characteristics i.e. how a product looks, feels, sounds, smells, or tastes
i) Safety - assurance that the customer will not suffer injury or harm from a product
j) Perception - subjective perceptions of reputation based on brand name, advertising

Fundamental Factors Affecting Quality (9 M’s)

a) Market: This is driven by technology advancement, and the customer wants which are changing dynamically. So, it is
the role of companies to identify needs and then meet it with existing technologies or by developing new
technologies.
b) Money: The increased global competition necessitates huge expenditure for new equipment and process. This should
be rewarded by improved productivity which is possible by minimizing quality costs associated with the maintenance
and improvements of quality level.
c) Management: Quality related responsibilities lie with persons at different levels in the organization because of the
increased complex structure of business organization.
d) Men: The rapid growth in technical knowledge leads to development of human resource with different specialization.
e) Motivation: If we fix the responsibility of achieving quality with each individual in the organization with proper
motivation techniques, there will not be any problem in producing the designed quality products.
f) Materials: Selection of proper materials to meet the desired quality
g) Machines and mechanization: use advanced machines and mechanize various operations in order to have quality
products which will lead to higher productivity of any organization,
h) Modern information methods: The modern information methods help in storing and retrieving needed data for
manufacturing, marketing and servicing.
i) Mounting product requirements: companies should plan adequate system to tackle product diversification to meet
customers taste

Quality management
Quality management involves planning and controlling activities to ensure the product or service is fit for purpose, meets
design specifications and meets the needs of customers. Quality management should lead to improvements in performance

Quality management components

Quality Planning
 It is a strategic activity that involves identifying the customer and their needs
 It identifies the standards and how to satisfy those them.
 It lays out the roles and responsibilities, resources, procedures, and processes to be utilized for quality control and
quality assurance
Quality Assurance
 It is the set of activities that ensures quality levels of products/services are properly maintained and that the supplier
and customer quality issues are properly resolved. Quality system documentation includes policies, procedures work
instructions and specifications, and records
 It is the review to ensure aligning with the quality standards.
 Provide the confidence that the standards will be met
Quality Control
 Involves the set of activities used to ensure that the products/service meet requirements and are improved on a
continuous basis.
 It addresses the assessment conducted during Quality Assurance for corrective actions
 Measure specific results to determine that they match the standards
9.3.2 Barriers to quality
a) Not Knowing the definition of quality: Organizations must define what quality means for their product or service eg
fewer defects, meeting client specification, delivering a good product on time.
b) Lack of leadership - leadership needs to have a long-term commitment to the organization's success as their
interested in the quality will lead to quality improvement.
c) Lack of data - All the decisions that organizations make need to be based on facts and data rather than opinions.
d) Lack of qualified improvement professionals - In addition to the above, organizations must have the right qualified
people to lead the improvement process

9.3.3 Costs of ignoring quality in production

a) Customer Related Consequences:
 Inferior quality products or services can lead to dissatisfied customers, resulting in lost revenue and decreased
customer loyalty.
 Poor quality can cause customers to take their business elsewhere, leading to job losses and a decrease in
company productivity.
 Poor quality also has an impact on employee productivity. Employees working on products or services of poor
quality may be less productive and may experience stress due to the lack of quality assurance
b) Operation Related Consequences: The operational related consequences of poor quality can include lost time,
wasted resources, and decreased efficiency. These could lead to increased production costs and also will lead to a
higher cost of repairing.
c) Society Related Consequences: Poor quality can have several adverse effects on society through decreased
efficiency, increased cost and harm to people
d) Business related consequences: The most common are lost customers, lower productivity, and increased costs.
Some other consequences of poor quality include:
 Legal action against the manufacturer or supplier.
 Increased insurance premiums
 Increased legal fees
 Decreased reputation
 Loss of goodwill
 Increased product liability claims
 Increased product recalls
 Increased warranty costs

9.3.4 Quality circles

 A quality circle is an informal group of people that consists of operators, supervisors, managers, who get together to
improve ways to make a product or deliver a service. It assumes that productivity will improve through an uplift of
morale and motivations which are in turn achieved through consultation and discussion in informal groups
 The concept behind quality circles is that in most cases the persons who are closest to an operation are in a better
position to contribute ideas that will lead to an improvement in it.
 A quality circle can be an effective productivity improvement tool because it generates new ideas and implements
them
 It is a participative style of management where the group members are actively involved in the decision-making
process and therefore develop a positive attitude toward creating a better product or service. They identify with the
idea of improvement and no longer feel that they are outsiders or that only management may dictate how things are
done
 Quality circles pursue two types of problems, those concerned with the personal well-being of the worker and those
concerned with the well-being of company.

[Link] Benefits of Quality Circle

The most important benefit of quality circles is their effect on people’s attitudes fall into three categories:
a) Quality Circles Effect on Individual Characteristics
 Quality circles enable the individual to improve personal capabilities—group participation and learning specific
problem-solving tools.
 Quality circles increase the individual’s self-respect.
 Quality circles help worker change certain personality characteristics—shy person become as active.
b) Quality Circles Effect on Individuals Relations with Other
  Quality circles increase the respect of the supervisor for the worker.
 Quality circles increase workers understanding of the difficulties faced by supervisors— problem selection,
solving and implementations.
 Quality circle increase management’s respect for worker.
c) Quality Circles Effect on Workers and Their Attributes
 Quality circles change some worker’s negative attitudes.
 Quality circle reduces conflict stemming from the working environment.
 Quality circles help workers to understand better the reasons for decisions while many problems are solved
quickly.

[Link] Quality circles, as a management tool, are based on the following basic principles of people:
a) People want to do a good job.
b) People want to be recognized as intelligent, interested employees and to participate in decisions affecting their work.
c) People want information to better understand goals and problems of their organization and make informed decisions.
d) Employees want recognition and responsibility and a feeling of self-esteem.
e) Management support, technical knowledge, and statistical procedures are essential

9.3.5 Total Quality Management (TQM)

 TQM is the continual process of detecting and reducing or eliminating errors, streamlining supply chain management,
improving the customer experience, and ensuring that employees are up to speed with training.
 The focus of the process is to improve the quality of an organization's outputs, including goods and services, through
the continual improvement of internal practices.
 TQM aims to assist organizations in understanding that quality assurance is everybody’s responsibility.
 Its main aim is to develop quality products and services, retain customers in the competitive market, increase sales
revenue and boost profitability

[Link] Principles of TQM

a) Customer Focus - It means the end product must meet the demands and needs of the customers
b) Employee Involvement - organizations need to create an environment where their employees will feel empowered
and are responsible for assessing the quality of the products and services at their levels.
c) Integrated System - incorporating quality standards could help produce quality products and services and lead to
meeting or exceeding consumer expectations as well.
d) Process-Centric Approach – implementing a process that assesses products at each production level and not only at
the final stage.
e) Systematic Flow - considering a systemic flow would ensure the products and services are passing through every
stage in the quality production process
f) Continual Efforts - Quality improvement should be a continuous process where people at every level need to be alert
in being regular with quality checking.
g) Factual Decision-Making - Analyzing the organizational performance using performance data, such as sales, profit,
and customer retention could result in more accurate decision-making.
h) Relationship Management - A well-maintained relation with stakeholders like customers and employees will ensure
proper quality control procedures and honest feedback.

[Link] Elements TQM Process

To be successful in implementing TQM an organization needs to adhere to the following:
a) Commitment and leadership of senior management – there needs to be total commitment of the Company
management for change to be effective and permanent. It is important that they show leadership, provide direction –
simply take charge personally.
b) Planning and Organization – this include:
 Integrate the TQM approach into the business strategy process,
 Build TQM quality into the key processes
 Develop and make widely known prevention-based methodologies
 Have a systematic approach on how quality should be managed in policies, procedures, techniques
 Develop an infrastructure how continuous improvement actions can take place eg a committee responsible for the
coordination and facilitation of improvements
 Pursue standardization, the systematization and the simplification of work instructions, procedures and systems.
c) Using quality management tools and techniques – implement tools for prevention, problem-solving, concept
mapping and train the people in these methods
d) Education and Training – have a holistic approach to education and training on the tools and techniques and on
TQM. There should be a common understanding of what the approach is and how your company wants to use it to
greatest effect
e) Involvement - promote and facilitate employee participation and contribution to the continuous improvement process.
f) Teamwork - Teamwork will enable commitment and participation of people throughout the company. Recognize
openly positive contributions and achievements. Celebrate and reward success.
g) Measurement and Feedback - Measurement of the key results on both internal and external performance indicators
to assess whether the activities or your approach is meeting its strategic goals. This should lead to action plans to
improve the meeting of objectives.
h) Working Co-operatively - Everyone in the organization must be made feel responsible for their own processes, be
enabled to inspect their own work and must feel responsible for their customer with the aim to satisfy their
requirements. Mistakes should be viewed as an opportunity to improve. External suppliers and customers must be
integrated into the continuous improvement process.

[Link] Benefits of TQM:

a) Error prevention and elimination
b) Guaranteed customer retention
c) Reduced service costs and increased profits
d) Feedback from all stakeholders
e) Involvement and empowerment of employees at every production level
f) Improved market image
g) Customers becoming the main focus
h) Meeting consumer expectations leads to increased customer satisfaction
i) Improved organizational culture
j) Enhanced stakeholder relationships
k) Boost in employee morale
l) Continuous efforts to meet the quality standards
m) Increased stakeholder value
n) Innovative strategies and creative ideas