UNIT III

ORGANIZING
DEFINITION
According to Koontz and O'Donnell, "Organization involves the grouping of activities necessary
to accomplish goals and plans, the assignment of these activities to appropriate departments and the
provision of authority, delegation and co-ordination."

Organization involves division of work among people whose efforts must be co-ordinated to
achieve specific objectives and to implement pre-determined strategies.

NATURE OR CHARACTERISTICS OF ORGANIZING

 Division of Work: Under division of work the entire work of business is divided into many
departments. The work of every department is further sub-divided into sub-works. In this way each
individual has to do the work repeatedly which gradually makes that person an expert.
 Coordination: Organization ensures that the work of all the persons depends on each other‘s work
even though it happens to be different. The work of one person starts from where the work of another
person ends. It is thus, clear that it is in the nature of an organization to establish coordination among
differentworks, departments and posts in the enterprise.
 Plurality of Persons: Organization is a group of many persons who assemble to fulfil acommon
purpose. A single individual cannot create an organization.
 Common Objectives: There are various parts of an organization with different functions to
perform but all move in the direction of achieving a general objective.
 Well-defined Authority and Responsibility: Every individual working in the organization is
given some authority for the efficient work performance and it is also decided simultaneously as to
what will be the responsibility of that individual in case of unsatisfactory work performance.
 Organization is a Structure of Relationship: Relationship between persons working on different
posts in the organization is decided. In other words, it is decided as to who will be the superior and
who will be the subordinate. Leaving the top level post and the lowest level post everybody is
somebody's superior and somebody's subordinate.
 Organization is a Machine of Management: In the absence of organization no function can be
performed in a planned manner. It is appropriate to call organization a machine of management from
another point of view. It is that machine in which no part can afford tube ill-fitting or non-functional.
In other words, if the division of work is not done properly or posts are not created correctly the
whole system of management collapses.
 Organization is a Universal Process: Organization is needed both in business and non-business
organizations. Not only this, organization will be needed where two or mom than two people work
jointly. Therefore, organization has the quality of universality.
 Organization is a Dynamic Process: Organization is related to people and the knowledge and
experience of the people undergo a change. The impact of this change affects the various functions of
the organizations. Thus, organization is not a process that can be decided for all times to come but it
undergoes changes according to the needs. The example in this case can be the creation or abolition
of a new post according to the need.

IMPORTANCE OR ADVANTAGES OF ORGANIZING

(1) Increase in Managerial Efficiency: A good and balanced organization helps the managers to
increase their efficiency. Managers, through the medium of organization, make a proper distribution
of the whole work among different people according to their ability.
(2) Proper Utilization of Resources: Through the medium of organization optimum utilizationof all
the available human and material resources of an enterprise becomes possible. Work is allotted to
every individual according to his ability and capacity and conditions ant created to enable him to
utilize his ability to the maximum extent. For example, if an employee possesses the knowledge of
modem machinery but the modern machinery is not available in the organization, in that case, efforts
are made to make available the modem machinery.

(3) Sound Communication Possible: Communication is essential for taking the right decisionat the
right time. However, the establishment of a good communication system is possible only through an
organization. In an organization the time of communication is decided so that all the useful
information reaches the officers concerned which. in turn, helps the decision-making.

(4) Facilitates Coordination: In order to attain successfully the objectives of the

organization,coordination among various activities in the organization is essential. Organization is
the only medium which makes coordination possible. Under organization the division of work is
made in such a manner as to make all the activities complementary to each other increasing their
inter-dependence. Inter-dependence gives rise to the establishment of relations which, in turn,
increases coordination.

(5) Increase in Specialization: Under organization the whole work is divided into differentparts.
Competent persons are appointed to handle all the sub-works and by handling a particular work
repeatedly they become specialists. This enables them to have maximum work performance in the
minimum time while the organization gets the benefit of specialization.

(6) Helpful in Expansion: A good organization helps the enterprise in facing competition. When an
enterprise starts making available good quality product at cheap rates, it increases the demand for its
products. In order to meet the increasing demand for its products an organization has to expand its
business. On the other hand, a good organization has an element of flexibilitywhich
farfromimpedingthe expansionworkencouragesit.

ORGANIZING PROCESS
Organization is the process of establishing relationship among the members of the enterprise. The
relationships are created in terms of authority and responsibility. To organize is to harmonize,
coordinate or arrange in a logical and orderly manner. Each member in the organization is assigned a
specific responsibility or duty to perform and is granted the corresponding authority to perform his
duty. The managerial function of organizing consists in making a rational division of work into
groups of activities and tying together the positions representing grouping of activities so as to
achieve a rational, well-coordinated and orderly structure for the accomplishment of work.
According to Louis A Allen, "Organizing involves identification and grouping the activities to be
performed and dividing them among the individuals and creating authority and responsibility
relationships among them for the accomplishment of organizational objectives." The various steps
involved in this process are:
a) Determination of Objectives:It is the first step in building up an organization. Organization is
always related to certain objectives. Therefore, it is essential for the management to identify the
objectives before starting any activity. Organization structure is built on the basis of the objectives of
the enterprise. That means, the structure of the organization can be determined by the management
only after knowing the objectives to be accomplished through the organization. This step helps the
management not only in framing the organization structure but also in achieving the enterprise
objectives with minimum cost and efforts. Determination of objectives will consist in deciding as to
why the proposed organization is to be set up and, therefore, what will be the nature of
theworktobeaccomplishedthroughtheorganization.
b) Enumeration of Objectives:If the members of the group are to pool their efforts effectively, there
must be proper division of the major activities. The first step in organizing group effort is the
division of the total job into essential activities. Each job should be properly classified and grouped.
This will enable the people to know what is expected of them as members of the group and will help
in avoiding duplication of efforts. For example, the work of an industrial concern may be divided
into the following major functions – production, financing, personnel, sales, purchase, etc.
c) Classification of Activities:The next step will be to classify activities according to similarities and
common purposes and functions and taking the human and material resources into account. Then,
closely related and similar activities are grouped into divisions and departments and the departmental
activities are further divided into sections.
d) Assignment of Duties:Here, specific job assignments are made to different subordinates for
ensuring a certainty of work performance. Each individual should be given a specific job to do
according to his ability and made responsible for that. He should also be given the adequate authority
to do the job assigned to him. In the words of Kimball and Kimball - "Organization embraces the
duties of designating the departments and the personnel that are to carry on the work, defining their
functions and specifying the relations that are to exist between department and individuals."
e) Delegation of Authority:Since so many individuals work in the same organization, it is the
responsibility of management to lay down structure of relationship in the organization. Authority
without responsibility is a dangerous thing and similarly responsibility without authority is an empty
vessel. Everybody should clearly know to whom he is accountable; corresponding to the
responsibility authority is delegated to the subordinates for enabling them to show work
performance. This will help in the smooth working of the enterprise by facilitating delegation
ofresponsibilityandauthority.
ORGANIZATION STRUCTURE
An organization structure is a framework that allots a particular space for a particular department or
an individual and shows its relationship to the other. An organization structure shows the authority
and responsibility relationships between the various positions in the organization by showing who
reports to whom. It is an established pattern of relationship among the components of the
organization.
Significance of Organization Structure
• Properly designed organization can help improve teamwork and productivity by providing a
framework within which the people can work together most effectively.
• Organization structure determines the location of decision-making in the organization.
• Sound organization structure stimulates creative thinking and initiative among organizational
members by providing well defined patterns of authority.
• A sound organization structure facilitates growth of enterprise by increasing its capacity to handle
increased level of authority.
• Organization structure provides the pattern of communication and coordination.
• The organization structure helps a member to know what his role is and how it relates to other roles.

PRINCIPLES OF ORGANIZATION STRUCTURE

Modern organizational structures have evolved from several organizational theories, which have
identified certain principles as basic to any organization structure.
a) Line and Staff Relationships:Line authority refers to the scalar chain, or to the superior-
subordinate linkages, that extend throughout the hierarchy (Koontz, O'Donnell and Weihrich). Line
employees are responsible for achieving the basic or strategic objectives of the organization, while
staff plays a supporting role to line employees and provides services. The relationship between line
and staffis crucial in organizational structure,design and efficiency. It is also an important aid to
information processing and coordination.
b) Departmentalization:Departmentalization is a process of horizontal clustering of different types
of functions and activities on any one level of the hierarchy. Departmentalization is conventionally
based on purpose, product, process, function, personal things and place.
c) Span of Control:This refers to the number of specialized activities or individuals supervised by
one person. Deciding the span of control is important for coordinating different types of activities
effectively.
d) De-centralization and Centralization:De-centralization refers to decision making at lower levels
in the hierarchy of authority. In contrast, decision making in a centralized type of organizational
structure is at higher levels. The degree of centralization and de-centralization depends on the
number of levels of hierarchy, degree of coordination, specialization and span of control.
TYPES OF ORGANISATION STRUCTURE
LINE ORGANISATION STRUCTURE
It is also known as scalar, military, or vertical organisation and perhaps is the oldest form. In this
form of organization managers have direct responsibility for the results; line organisation can be
designed in two ways.
1. PURE LINE ORGANISATION:Under this form, similar activities are performed at a particular
level. Each group of activities is self – contained unit and is able to perform the assigned activities
without the assistance of others
2. DEPARTMENTAL LINE ORGANISATION:Under this form, entire activities are divided into
different departments on the basis of similarity of activities. The basic objective of this form is to
have uniform control, authority and responsibility.
Merits Demerits

1) It is simple to understand 1) Lack of specialization

2) Easy supervision & control 2) Low – Morale
3) Quick decisions 3) Autocratic approach
4) It sets clearly the direct lines of 4) Overburden to manager
authority and responsibility of a line
manager
LINE AND STAFF ORGANISATION:It refers to a pattern in which staff specialists advise line
managers to perform their duties. When the work of an executive increases its performance requires
the services of specialists which he himself cannot provide because of his limited capabilities on
these matters. Such advice is provided to line managers by staff personal who are generally
specialists in their fields. The staff people have the right to recommend, but have no authority to
enforce their preference on other departments.
FEATURES:-
 This origin structure clearly distinguishes between two aspects of administration viz., planning and
execution.
 Staff officers provide advice only to the line officers; they do not have any power of command
over them.
 The staff supplements the line members.
MERITS
 1. It enhances the quality of decision
2. Greater scope for advancement
3. It relieves the line managers.
4. Reduction of burden.

DEMERITS
1. It may create more friction or
Conflict between line and staff
2. It is expensive
3. It creates confusion

FUNCTIONAL ORGANISATION STRUCTURE: It is the most widely used organization

structure in the medium and large scale organizations having limited number of products. This
structure emerges from the idea that the organization must perform certain functions in order to carry
on its [Link] structure is created by grouping the activities on the basis of functions
required for the achievement of organizational objectives. For this purpose, all the functions required
are classified into basic, secondary and supporting functions according to their nature & importance.
FEATURES:
1) The whole activities of an organisation are divided into various functions
2) Each functional area is put under the charge of one executive
3) For any decision, one has to consult the functional specialist
MERITS DEMERITS

1) Planned specialization 1) calls for more coordination

2) Facilitates large scale production 2) no clear line of authority
3) Disciplinary controls are well 3) slow decision making
defined 4) lack of responsibility
4) Offers clear career paths

COMMITTEE ORGANISATION: A committee does not represent a separate type of organization

like line and staff, or functional. It is rather a device which is used as supplementary to or in addition
to any of the above types of organizations. A committee may be defined as a group of people
performing some aspects of Managerial functions. Thus, a committee is a body of persons appointed
or elected for the Consideration of specific matters brought before it.

MERITS DEMERITS
1. Group Deliberation and Judgement: 1. High Cost in Time and Money
2. Fear of Authority 2. Indecisive Action
3. Representation of interested Group 3. Compromising Attitude
4. Coordination of Functions 4. Dominance of a Few
5. Transmission of Information 6. Splitting of Responsibilities

MATRIX ORGANISATION: It is also called project organization. It is a combination of all

relationships in the organization, vertical, horizontal and diagonal. It is a mostly used in complex
projects. The main objective of Matrix organisation is to secure a higher degree of co-ordination than
what is possible from the conventional, organizational structures such as line and [Link] matrix
organization structure, a project manager is appointed to co-ordinate the activities of the project.
Under this system a subordinate will get instructions from two or more bosses, Viz., administrative
head and his project manager.
Merits
1. It offers operational freedom & flexibility
2. It focuses on end results.
3. It maintenance professional Identity.
4. It holds an employee responsible for management of resources.

Demerits:-
1. It calls for greater degree of coordination,
2. It violates unity of command.
3. Difficult to define authority & responsibility.
4. Employee may be de motivated.

Project C
Manager
General Manager
Production
Personnel
Finance
Marketing
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Project B
Manager
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W
W
W
W
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Project B
Manager
FORMAL ORGANIZATION
Chester I Bernard defines formal organization as -"a system of consciously coordinated activities or
forces of two or more persons. It refers to the structure of well-defined jobs, each bearing a definite
measure of authority, responsibility and accountability." The essence of formal organization is
conscious common purpose and comes into being when persons–
 Are able to communicate with each other
 Are willing to act and Share a purpose.

The formal organization is built around four key pillars. They are:
• Division of labour
• Scalar and functional processes
• Structure and
• Span of control
Thus, a formal organization is one resulting from planning where the pattern of structure has already
been determined by the top management.
Characteristic Features of formal organization
• Formal organization structure is laid down by the top management to achieve organizational goals.
• Formal organization prescribes the relationships amongst the people working in the organization.
• A formal organization is bound by rules, regulations and procedures.
• In formal organization, position, authority, responsibility & accountability of each level clearly
defined.
• Organization structure is based on division of labor and specialization to achieve efficiency in
operations.
• In a formal organization, coordination proceeds according to the prescribed pattern.

Advantages of formal organization

• The formal organization structure concentrates on the jobs to be performed. It, therefore, makes
everybody responsible for a given task.
• A formal organization is bound by rules, regulations and procedures. It thus ensures law and order
in the organization.
• The organization structure enables the people of the organization to work together for
accomplishing the common objectives of the enterprise

Disadvantages or criticisms of formal organization

• The formal organization does not take into consideration the sentiments of organizational members.
• The formal organization does not consider the goals of the individuals. It is designed to achieve the
goals of the organization only.
• The formal organization is bound by rigid rules, regulations and procedures. This makes the
achievement of goals difficult.

INFORMAL ORGANIZATION
Informal organization refers to the relationship between people in the organization based on personal
attitudes, emotions, prejudices, likes, dislikes etc. an informal organization is an organization which
is not established by any formal authority, but arises from the personal and social relations of the
people. These relations are not developed according to procedures and regulations laid down in the
formal organization structure; generally large formal groups give rise to small informal or social
groups. These groups may be based on same taste, language, culture or some other factor. These
groups are not pre-planned, but they develop
automaticallywithintheorganizationaccordingtoitsenvironment.
Characteristics features of informal organization
• Informal organization is not established by any formal authority. It is unplanned and arises
spontaneously.
• Informal organizations reflect human relationships. It arises from the personal and social relations
amongst the people working in the organization.
• Formation of informal organizations is a natural process. It is not based on rules, regulations and
procedures.
• The inter-relations amongst people in an informal organization cannot be shown in an organization
chart.
Benefits of Informal organization
• It blends with the formal organization to make it more effective.
• The presence of informal organization in an enterprise makes the managers plan and act more
carefully.
• An informal organization has a powerful influence on productivity and job satisfaction.
• Informal organization helps the group members to attain specific personal objectives.

DIFFERENCES BETWEEN FORMAL AND INFORMAL ORGANIZATION

DEPARTMENTATION BY DIFFERENT STRATEGIES

DEPARTMENTATION refers to the process of grouping activities into departments.

Departmentation is the process of grouping of work activities into departments, divisions, and other
homogenous units.
Key Factors in Departmentation
• It should facilitate control.
• It should ensure proper coordination.
• It should take into consideration the benefits of specialization.
• It should not result in excess cost.
• It should give due consideration to Human Aspects.

Departmentation takes place in various patterns like departmentation by functions, products,

customers, geographic location, process, and its combinations.

a) FUNCTIONAL DEPARTMENTATION
Functional departmentation is the process of grouping activities by functions performed. Activities
can be grouped according to function (work being done) to pursue economies of scale by placing
employees with shared skills and knowledge into departments for example human resources, finance,
production, and marketing. Functional departmentation can be used in all types of organizations.
Advantages:
• Advantage of specialization
• Easy control over functions
• Pinpointing training needs of manager
• It is very simple process of grouping activities.
Disadvantages:
• Lack of responsibility for the end result
• Overspecialization or lack of general management
• It leads to increase conflicts and coordination problems among departments.

b) PRODUCT DEPARTMENTATION

Product departmentation is the process of grouping activities by product line. Tasks can also be
grouped according to a specific product or service, thus placing all activities related to the product or
the service under one manager. Each major product area in the corporation is under the authority of a
senior manager who is specialist in, and is responsible for, everything related to the product line.
Dabur India Limited is the India‘s largest Ayurvedic medicine manufacturer is an example of
company that uses product departmentation. Its structure is based on its varied product lines which
include Home care, Health care, Personal care and Foods.
Advantages
• It ensures better customer service
• Unprofitable products may be easily determined
• It assists in development of all around managerial talent
• Makes control effective
• It is flexible and new product line can be added easily.

Disadvantages
• It is expensive as duplication of service functions occurs in various product divisions
• Customers and dealers have to deal with different persons for complaint and information of
different products.

c) CUSTOMER DEPARTMENTATION

Customerdepartmentation is the process of grouping activities on the basis of common customers or

types of customers. Jobs may be grouped according to the type of customer served by the
organization. The assumption is that customers in each department have a common set of problems
and needs that can best be met by specialists. UCO is the one of the largest commercial banks of
India is an example of company that uses customer departmentation. Its structure is based on various
services which includes Home loans, Business loans, Vehicle loans and Educational loans.
Advantages
• It focused on customers who are ultimate suppliers of money
• Better service to customer having different needs and tastes
• Development in general managerial skills

Disadvantages
• Sales being the exclusive field of its application, co-ordination may appear difficult between sales
function and other enterprise functions.
• Specialized sales staff may become idle with the downward movement of sales to any specified
group of customers.

d) GEOGRAPHIC DEPARTMENTATION
Geographic departmentation is the process of grouping activities on the basis of territory. If an
organization's customers are geographically dispersed, it can group jobs based on geography. For
example, the organization structure of Coca-Cola Ltd has reflected the company‘s operation in
various geographic areas such as Central North American group, Western North American group,
Eastern North American group and European group
Advantages
• Help to cater to the needs of local people more satisfactorily.
• It facilitates effective control
• Assists in development of all-round managerial skills

Disadvantages
• Communication problem between head office and regional office due to lack of means of
communication at some location
• Coordination between various divisions may become difficult.
• Distance between policy framers and executors
• It leads to duplication of activities which may cost higher.
e) PROCESS DEPARTMENTATION
Geographic departmentation is the process of grouping activities on the basis of product or service or
customer flow. Because each process requires different skills, process departmentation allows
homogenous activities to be categorized. For example, Bowater Thunder Bay, a Canadian company
that harvests trees and processes wood into newsprint and pulp. Bowater has three divisions namely
tree cutting, chemical processing, and finishing (which makes newsprint).
Advantages
• Oriented towards end result.
• Professional identification is maintained.
• Pinpoints product-profit responsibility.

Disadvantage
• Conflict in organization authority exists.
• Possibility of disunity of command.
• Requires managers effective in human relation

f) MARTIX DEPARTMENTATION

In actual practice, no single pattern of grouping activities is applied in the organization structure with
all its levels. Different bases are used in different segments of the enterprise. Composite or hybrid
method forms the common basis for classifying activities rather than one particular method. One of
the mixed forms of organization is referred to as matrix or grid organization‘s According to the
situations, the patterns of Organizing varies from case to case. The form of structure must reflect the
tasks, goals and technology if the originations the type of people employed and the environmental
conditions that it faces. It is not unusual to see firms that utilize the function and project organization
combination. The same is true for process and project as well as other combinations. For instance, a
large hospital could have an accounting department, surgery department, marketing department, and
a satellite centre project team that make up its organizational structure.
Advantages
• Efficiently manage large, complex tasks
• Effectively carry out large, complex tasks
Disadvantages
• Requires high levels of coordination
• Conflict between bosses
• Requires high levels of management skills
SPAN OF CONTROL
Span of Control means the number of subordinates that can be managed efficiently and effectively by
a superior in an organization. It suggests how the relations are designed between a superior and a
subordinate in an organization.
It determines the complexity of individual manager job.
It determines the shape or configuration of the organisation.

The classical writers suggest that between 3 to 8 subordinates as ideal depending up on the level of
management.
[Link] a French management consultant has suggested a mathematical formula to fix the
number of [Link] classified superior and subordinate relationship into the following:
 Direct single relationship: - Direct single relationships arise from the direct individual contacts of
the superior with his subordinates. Ex: - A, B,C are subordinates to X. Here three single
relationships.
 Direct group relationships:-Direct group relationships arise between the superior and
subordinates in all possible combinations. Thus the superior may consult his subordinates with one or
more [Link]:-A with B, B with C, A with C, etc..
 Cross relationships:- Cross relationships arise because of mutual interaction of subordinates
working under the common superior , such as A and B,B and C,A and C,C and A etc.. The
relationship is quite different between A and B than B and A from management point of view
because the type of interaction will be different in both cases.
Factors effecting span of management:-
1. Capacity of superior
2. Capacity of subordinate
3. Nature of work
4. Degree of decentralization
5. Degree of planning
6. Communication technique
7. Use of staff assistance
8. Supervision from others

Span of control is of two types:

1. Narrow span of control: Narrow Span of control means a single manager or supervisor oversees
few subordinates. This gives rise to a tall organizationalstructure.

Advantages:
• Close supervision
• Close control of subordinates
• Fast communication

Disadvantages:
• Too much control
• Many levels of management
• High costs
• Excessive distance between lowest level and highest level

2. Wide span of control: W ide span of control means a single manager or supervisor overseesa
large number of subordinates. This gives rise to a flat organizational structure.

Advantages:
• More Delegation of Authority
• Development of Managers
• Clear policies

Disadvantages:
• Overloaded supervisors
• Danger of superiors loss of control
• Requirement of highly trained managerial personnel
• Block in decision making
CENTRALIZATION
It is the process of transferring and assigning decision-making authority to higher levels of an
organizational hierarchy. The span of control of top managers is relatively broad, and there are
relatively many tiers in the organization.
Characteristics
• Philosophy / emphasis on: top-down control, leadership, vision, strategy.
• Decision-making: strong, authoritarian, visionary, charismatic.
• Organizational change: shaped by top, vision of leader.
• Execution: decisive, fast, coordinated. Able to respond quickly to major issues and changes.
• Uniformity. Low risk of dissent or conflicts between parts of the organization.

Advantages of Centralization
• Provide Power and prestige for manager
• Promote uniformity of policies, practices and decisions
• Minimal extensive controlling procedures and practices
• Minimize duplication of function

Disadvantages of Centralization
• Neglected functions for mid. Level, and less motivated beside personnel.
• Nursing supervisor functions as a link officer between nursing director and first-line management.

DECENTRALIZATION:
It is the process of transferring and assigning decision-making authority to lower levels of an
organizational hierarchy. The span of control of top managers is relatively small, and there are
relatively few tears in the organization, because there is more autonomy in the lower ranks.
Characteristics
• Philosophy / emphasis on: bottom-up, political, cultural and learning dynamics.
• Decision-making: democratic, participative, detailed.
• Organizational change: emerging from interactions, organizational dynamics.
• Execution: evolutionary, emergent. Flexible to adapt to minor issues and changes.
• Participation, accountability. Low risk of not-invented-here behaviour.

Three Forms of decentralization

• De-concentration. The weakest form of decentralization. Decision making authority is
redistributed to lower or regional levels of the same central organization.
• Delegation. A more extensive form of decentralization. Through delegation the responsibility for
decision-making are transferred to semi-autonomous organizations not wholly controlled by the
central organization, but ultimately accountable to it.
• Devolution. A third type of decentralization is devolution. The authority for decision-making is
transferred completely to autonomous organizational units.

Advantages of Decentralization
• Raise morale and promote interpersonal relationships
• Relieve from the daily administration
• Bring decision-making close to action
• Develop Second-line managers
• Promote employee‘s enthusiasm and coordination
• Facilitate actions by lower-level managers

Disadvantages of Decentralization
• Top-level administration may feel it would decrease their status
• Managers may not permit full and maximum utilization of highly qualified personnel
• Increased costs. It requires more managers and large staff
• It may lead to overlapping and duplication of effort

DELEGATION OF AUTHORITY
A manager alone cannot perform all the tasks assigned to him. In order to meet the targets, the
manager should delegate authority. Delegation of Authority means division of authority and powers
downwards to the subordinate. Delegation is about entrusting someone else to do parts of your job.
Delegation of authority can be defined as subdivision and sub-allocation of powers to the
subordinates in order to achieve effective results. Elements of Delegation
1. Authority - in context of a business organization, authority can be defined as the power and right
of a person to use and allocate the resources efficiently, to take decisions and to give orders so as to
achieve the organizational objectives. Authority must be well- defined. All people who have the
authority should know what is the scope of their authority is and they shouldn‘t mutualize it.
Authority is the right to give commands, orders and get the things done. The top level management
has greatest authority. Authority always flows from top to bottom. It explains how a superior gets
work done from his subordinate by clearly explaining what is expected of him and how he should go
about it. Authority should be accompanied with an equal amount of responsibility. Delegating the
authority to someone else doesn‘t imply escaping from accountability. Accountability still rest with
the person having the utmost authority.

2. Responsibility - is the duty of the person to complete the task assigned to him. A person who is
given the responsibility should ensure that he accomplishes the tasks assigned to him. If the tasks for
which he was held responsible are not completed, then he should not give explanations or excuses.
Responsibility without adequate authority leads to discontent and dissatisfaction among the person.
Responsibility flows from bottom to top. The middle level and lower level management holds more
responsibility. The person held responsible for a job is answerable for it. If he performs the tasks
assigned as expected, he is bound for praises. While if he doesn‘t accomplish tasks assigned as
expected, then also he is answerable for that.

3. Accountability - means giving explanations for any variance in the actual performance from the
expectations set. Accountability cannot be delegated. For example, if ‘A‘ is given a task with
sufficient authority, and ‘A‘ delegates this task to B and asks him to ensure that task is done well,
responsibility rest with ‘B‘, but accountability still rest with ‘A‘. The top level management is most
accountable. Being accountable means being innovative as the person will think beyond his scope of
job. Accountability ,in short, means being answerable for the end result. Accountability can‘t be
escaped. It arises from responsibility.
DELEGATION PROCESS
The steps involved in delegation are given below
1. Allocation of duties – The delegator first tries to define the task and duties to the subordinate. He
also has to define the result expected from the subordinates. Clarity of duty as well as result expected
has to be the first step in delegation.
2. Granting of authority – Subdivision of authority takes place when a superior divides and shares
his authority with the subordinate. It is for this reason; every subordinate should be given enough
independence to carry the task given to him by his superiors. The managers at all levels delegate
authority and power which is attached to their job positions. The subdivision of powers is very
important to get effective results.
3. Assigning of Responsibility and Accountability – The delegation process does not end once
powers are granted to the subordinates. They at the same time have to be obligatory towards the
duties assigned to them. Responsibility is said to be the factor or obligation of an individual to carry
out his duties in best of his ability as per the directions of superior. Therefore, it is that which gives
effectiveness to authority. At the same time, Responsibility is absolute and cannot be shifted.
4. Creation of accountability – Accountability, on the others hand, is the obligation of the
individual to carry out his duties as per the standards of performance. Therefore, it is said that
authority is delegated, responsibility is created and accountability is imposed. Accountability arises
out of responsibility and responsibility arises out of authority. Therefore, it becomes important that
with every authority position an equal and opposite responsibility should be attached.

Therefore every manager, i.e., the delegator has to follow a system to finish up the delegation
process. Equally important is the delegate’s role which means his responsibility and accountability is
attached with the authority over to here.
STAFFING
Staffing involves filling the positions needed in the organization structure by appointing competent
and qualified persons for the job.
STAFFING/HRM Process
a) a) Manpower requirements: Manpower Planning which is also called as Human Resource
Planning consists of putting right number of people, right kind of people at the right place, right time,
doing the right things for which they are suited for the achievement of goals of the organization. The
primary function of man power planning is to analyze and evaluate the human resources available in
the organization, and to determine how to obtain the kinds of personnel needed to staff positions
ranging from assembly line workers to chief executives.
b) Recruitment: Recruitment is the process of finding and attempting to attract job candidates who
are capable of effectively filling job vacancies. Job descriptions and job specifications are
important in the recruiting process because they specify the nature of the job and the qualifications
required of job candidates.
c) Selection: Selecting a suitable candidate can be the biggest challenge for any organization. The
success of an organization largely depends on its staff. Selection of the right candidate builds the
foundation of any organization's success and helps in reducing turnovers.
d) Training and Development: Training and Development is a planned effort to facilitate employee
learning of job-related behaviour’s in order to improve employee performance. Experts sometimes
distinguish between the terms ―training‖ and ―development‖; ―training‖ denotes efforts to increase
employee skills on present jobs, while ―development‖ refers to efforts oriented toward
improvements relevant to future jobs. In practice, though, the distinction is often blurred (mainly
because upgrading skills in present jobs usually improves performance in future jobs).
RECRUITMENT PROCESS
Recruitment is the process of finding and attempting to attract job candidates who are capable of
effectively filling job vacancies. The recruitment process consists of the following steps
a) Identification of vacancy
b) Preparation of job description and job specification
c) Selection of sources
d) Advertising the vacancy
e) Managing the response

a) Identification of vacancy:The recruitment process begins with the human resource department
receiving requisitions for recruitment from any department of the company. These contain:
• Posts to be filled
• Number of persons
• Duties to be performed
• Qualifications required

b) Preparation of job description and job specification:

A job description is a list of the general tasks, or functions, and responsibilities of a position. It may
often include to whom the position reports, specifications such as the qualifications or skills needed
by the person in the job, or a salary range. A job specification describes theknowledge, skills,
education, experience, and abilities you believe are essential to performing a particular job.
c) Selection of sources:Every organization has the option of choosing the candidates for its
recruitment processes from two kinds of sources: internal and external sources. The sources within
the organization itself (like transfer of employees from one department to other, promotions) to fill a
position are known as the internal sources of recruitment. Recruitment candidates from all the other
sources (like outsourcing agencies etc.) are known as the external sources of the recruitment.
d) Advertising the vacancy:After choosing the appropriate sources, the vacancy is communicated to
the candidates by means of a suitable media such as television, radio, newspaper, internet, direct mail
etc.
e) Managing the response:After receiving an adequate number of responses from job seekers, the
sieving process of the resumes begins. This is a very essential step of the recruitment selection
process, because selecting the correct resumes that match the job profile, is very important.
Naturally, it has to be done rather competently by a person who understands all the responsibilities
associated with the designation in its entirety. Candidates with the given skill set are then chosen and
further called for interview. Also, the applications of candidates that do not match the present nature
of the position but may be considered for future requirements are filed separately and [Link]
recruitment process is immediately followed by the selection process.
Sources of recruitment
Internal sources of recruitment involve motivating the employees of the organization to apply for
the openings within the organization
1. Transfers: The employees of the organization are transferred to the similar jobs of other
departments. It may not involve a change in salary, responsibility, and position of the job. Transfers
help in reducing the boredom and monotony of the employees or it may be used to fill the vacancies
with suitable internal candidates.
2. Promotions: Promotions involve vacancies of the organization are filled by promoting the skilled
employees to the suitable jobs and it can motivate the employees by giving higher position, increased
salary, status, and responsibility. Promotions can help in reducing employee turnover by creating the
hope of getting higher positions.
3. Demotions: Depending on the performance of the employees of the organizations, sometimes
managers have to take decisions regarding lowering the positions of few employees of the
organization. These employees can act as a source of recruitment to the lower positions.
4. Employees of the organization: Employees of the organization communicate or inform about the
vacant positions of the organization to their friends and relatives. In many organizations, they
allowed referring potential candidates for the suitable vacancies.
5. Retired employees: If the organizations do not find the right persons to fulfil the key managerial
positions then they call back the retired employees for achieving the objectives.
External sources of recruitment involve motivating the skilled and more efficient candidates
external to the organization to apply for the vacant positions in the organization.
1. Advertisements: To find the skilled and more efficient manpower giving advertisement for the
vacant job position is the better way. Advertisements help in attracting the right candidates and in
maximizing brand image. Advertisements may be given in print media or electronic media, it gives
better results and it is cheaper than approaching third parties.
2. Job portals: With the growing technology and internet usage, job portals are playing a major role
in finding right candidates for right jobs. Job portals can inform up to date job alerts to the candidates
and offer attractive benefits and packages to the employers. The tools and techniques used by the job
portals highly reduce the efforts in finding the skilled candidates.
3. Company’s websites: With the increase in business operations and globalization, the need for
human resources is also increasing day by day. To face a severe competition and to reduce the cost
during the long run, many companies are setting up their own websites for finding and attracting
candidates with competitive skills.
4. Social networking sites: Communicating about vacant positions of the organization through
social networking sites help in motivation and attracting the highly skilled and more efficient
candidates to apply for the jobs.
5. Placement agencies: Approaching placement agencies reduces the time and efforts to find the
right candidates from the pool of skilled candidates. They use various tools and techniques to filter
the resumes and they send it to the companies for further processing. The main drawback of this
method is commission basis on hiring the candidates.
6. Job fairs and walk in interviews: Walk in interviews and job fairs are declared and conducted by
companies to find the skilled candidates. Following this method highly reduces efforts in finding
more efficient human resources for the bulk requirement.
7. Campus interviews: This is an easy and economical method helps in finding eligible candidates,
through this method organization can find energetic and more competitive candidates for suitable
vacancies, this method is beneficial for both the candidates and companies.
JOB ANALYSIS
Job Analysis is the process of describing and recording aspects of jobs and specifying the skills and
other requirements necessary to perform the job.
The outputs of job analysis are
a) Job description
b) Job specification

Job Description: A job description (JD) is a written statement of what the job holder does how it is
done, under what conditions it is done and why it is done. It describes what the job is all about,
throwing light on job content, environment and conditions of employment. It is descriptive in nature
and defines the purpose and scope of a job. The main purpose of writing a job description is to
differentiate the job from other jobs and state its outer limits.
Contents
A job description usually covers the following information:
§ Job title: Tells about the job title, code number and the department where it is done.
§ Job summary: A brief write-up about what the job is all about.
§ Job activities: A description of the tasks done, facilities used, extent of supervisory help, etc.
§ Working conditions: The physical environment of job in terms of heat, light, noise and other
hazards.
§ Social environment: Size of work group and interpersonal interactions required to do the job.

Job Specification: Job specification summarizes the human characteristics needed for satisfactory
job completion. It tries to describe the key qualifications someone needs to perform the job
successfully. It spells out the important attributes of a person in terms of education, experience,
skills, knowledge and abilities (SKAs) to perform a particular job. The job specification is a logical
outgrowth of a job description. For each job description, it is desirable to have a job specification.
This helps the organization to find what kinds of persons are needed to take up specific jobs.
Contents
A job specification usually covers the following information:
• Education
• Experience
• Skill, Knowledge, Abilities
• Work Orientation Factors
• Age

SELECTION PROCESS
Selecting a suitable candidate can be the biggest challenge for any organisation. The success of an
organization largely depends on its staff. Selection of the right candidate builds the foundation of any
organization's success and helps in reducing turnovers.
Though there is no fool proof selection procedure that will ensure low turnover and high profits, the
following steps generally make up the selection process-
a) Initial Screening: This is generally the starting point of any employee selection process. Initial
Screening eliminates unqualified applicants and helps save time. Applications received from various
sources are scrutinized and irrelevant ones are discarded.
b) Preliminary Interview: It is used to eliminate those candidates who do not meet the minimum
eligibility criteria laid down by the organization. The skills, academic and family background,
competencies and interests of the candidate are examined during preliminary interview. Preliminary
interviews are less formalized and planned than the final interviews. The candidates are given a brief
up about the company and the job profile; and it is also examined how much the candidate knows
about the company. Preliminary interviews are also called screening interviews.
c) Filling Application Form: An candidate who passes the preliminary interview and is found to be
eligible for the job is asked to fill in a formal application form. Such a form is designed in a way that
it records the personal as well professional details of the candidates such as age, qualifications,
reason for leaving previous job, experience, etc.
d) Personal Interview: Most employers believe that the personal interview is very important. It
helps them in obtaining more information about the prospective employee. It also helps them in
interacting with the candidate and judging his communication abilities, his ease of handling pressure
etc. In some Companies, the selection process comprises only of the Interview.
e) References check: Most application forms include a section that requires prospective candidates
to put down names of a few references. References can be classified into - former employer, former
customers, business references, reputable persons. Such references are contacted to get a feedback on
the person in question including his behaviour, skills, conduct etc.
f) Background Verification: A background check is a review of a person's commercial, criminal
and (occasionally) financial records. Employers often perform background checks on employers or
candidates for employment to confirm information given in a job application, verify a person's
identity, or ensure that the individual does not have a history of criminal activity, etc., that could be
an issue upon employment.
g) Final Interview: Final interview is a process in which a potential employee is evaluated by an
employer for prospective employment in their organization. During this process, the employer hopes
todetermine whether or not the applicant is suitable for the job. Different types of tests are conducted
to evaluate the capabilities of an applicant, his behaviour, special qualities etc. Separate tests are
conducted for various types of jobs.
h) Physical Examination: If all goes well, then at this stage, a physical examination is conducted to
make sure that the candidate has sound health and does not suffer from any serious ailment.
i) Job Offer: A candidate who clears all the steps is finally considered right for a particular job and
is presented with the job offer. An applicant can be dropped at any given stage if considered unfit for
the job.
EMPLOYEE INDUCTION/ORIENTATION
Orientation or induction is the process of introducing new employees to an organization, to their
specific jobs & departments, and in some instances, to their community.
Purposes of Orientation
Orientation isn't a nicety! It is used for the following purposes:
1. To Reduce Start-up-Costs:Proper orientation can help the employee get "up to speed" much
more quickly, thereby reducing the costs associated with learning the job.
2. To Reduce Anxiety:Any employee, when put into a new, strange situation, will experience
anxiety that can impede his or her ability to learn to do the job. Proper orientation helps to reduce
anxiety that results from entering into an unknown situation, and helps provide guidelines for
behaviour and conduct, so the employee doesn't have to experience the stress of guessing.
3. To Reduce Employee Turnover:Employee turnover increases as employees feel they are not
valued, or are put in positions where they can't possibly do their jobs. Orientation shows that the
organization values the employee, and helps provide tools necessary for succeeding in the job.
4. To Save Time for Supervisor & Co-Workers:Simply put, the better the initial orientation, the
less likely supervisors and co-workers will have to spend time teaching the employee.
5. To Develop Realistic Job Expectations, Positive Attitudes and Job Satisfaction:It is important
that employees learn early on what is expected of them, and what to expect from others, in addition
to learning about the values and attitudes of the organization. While people can learn from
experience, they will make many mistakes that are unnecessary and potentially damaging.
An orientation program principally conveys 3 types of information, namely:
a) General information about the daily work routine to be followed
b) A review of the organization‘s history, founders, objectives, operations & products or services, as
well as how the employee‘s job contributes to the organization‘s needs.
c) A detailed presentation of the organization‘s policies, work rules & employee benefits.

Two Kinds of Orientation

There are two related kinds of orientation. The first we will call Overview Orientation, and deals
with the basic information an employee will need to understand the broader system he or she works
in.
Overview Orientation includes helping employees understand:
• Management in general
• Department and the branch
• Important policies
• General procedures (non-job specific)
• Information about compensation
• Accident prevention measures
• Employee and union issues (rights, responsibilities)
• Physical facilities

Often, Overview Orientation can be conducted by the personnel department with a little help from
the branch manager or immediate supervisor, since much of the content is generic in nature.
The second kind of orientation is called Job-Specific Orientation, and is the process that is used to
help employees understand:
• Function of the organization,
• Responsibilities,
• Expectations,
• Duties
• Policies, procedures, rules and regulations
• Layout of workplace
• Introduction to co-workers and other people in the broader organization.

Job specific orientation is best conducted by the immediate supervisor, and/or manager, since much
of the content will be specific to the individual. Often the orientation process will be ongoing, with
supervisors and co-workers supplying coaching.
CARRER DEVELOPMENT
Career development not only improves job performance but also brings about the growth of the
personality. Individuals not only mature regarding their potential capacities but also become better
individuals.
Purpose of development
Management development attempts to improve managerial performance by imparting
• Knowledge
• Changing attitudes
• Increasing skills
The major objective of development is managerial effectiveness through a planned and a deliberate
process of learning. This provides for a planned growth of managers to meet the future organizational
needs.
Development Process: The development process consists of the following steps
1. Setting Development Objectives:It develops a framework from which executive need can be
determined.
2. Ascertaining Development Needs:It aims at organizational planning & forecast the present and
future growth.
3. Determining Development Needs: This consists of
• Appraisal of present management talent
• Management Manpower Inventory

The above two processes will determine the skill deficiencies that are relative to the future needs of
the organization.
4. Conducting Development Programs:It is carried out on the basis of needs of different
individuals, differences in their attitudes and behaviour, also their physical, intellectual and
emotional qualities. Thus a comprehensive and well-conceived program is prepared depending on the
organizational needs and the time & cost involved.
5. Program Evaluation:It is an attempt to assess the value of training in order to achieve
organizational objectives.
TRAINING
Training is a process of learning a sequence of programmed behaviour. It improves the employee's
performance on the current job and prepares them for an intended job.
Purpose of Training:
 To improve Productivity: Training leads to increased operational productivity and increased
company profit.
 To improve Quality: Better trained workers are less likely to make operational mistakes.
 To improve Organizational Climate: Training leads to improved production and product quality
which enhances financial incentives. This in turn increases the overall morale of the organization.
 To increase Health and Safety: Proper training prevents industrial accidents.
 Personal Growth: Training gives employees a wider awareness, an enlarged skill base and that
leads to enhanced personal growth.

Steps in Training Process:

1) Identifying Training needs: A training program is designed to assist in providing solutions for
specific operational problems or to improve performance of a trainee.
• Organizational determination and Analysis: Allocation of resources that relate to organizational
goal.
• Operational Analysis: Determination of a specific employee behaviour required for a particular
task.
• Man Analysis: Knowledge, attitude and skill one must possess for attainment of organizational
objectives.
2) Getting ready for the job: The trainer has to be prepared for the job. And also who needs to be
trained - the newcomer or the existing employee or the supervisory staff.

Preparation of the learner:

• Putting the learner at ease
• Stating the importance and ingredients of the job
• Creating interest
• Placing the learner as close to his normal working position
• Familiarizing him with the equipment, materials and trade terms
3) Presentation of Operation and Knowledge: The trainer should clearly tell, show, illustrate and
question in order to convey the new knowledge and operations. The trainee should be encouraged to
ask questions in order to indicate that he really knows and understands the job.

4) Performance Try out: The trainee is asked to go through the job several times. This gradually
builds up his skill, speed and confidence.

5) Follow-up: This evaluates the effectiveness of the entire training effort

TRAINING METHODS
Training methods can be broadly classified as on-the-job training and off-the-job training
a) On-the-job training: On the job training occurs when workers pick up skills whilst working
alongside experienced workers at their place of work. For example this could be the actual assembly
line or offices where the employee works. New workers may simply “shadow” or observe fellow
employees to begin with and are often given instruction manuals or interactive training programmes
to work through.
1. Coaching: Coaching is a one-to-one training. It helps in quickly identifying the weak areas and
tries to focus on them. It also offers the benefit of transferring theory learning to practice. The biggest
problem is that it perpetrates the existing practices and styles. In India most of the scooter mechanics
are trained only through this method.
2. Mentoring: The focus in this training is on the development of attitude. It is used for managerial
employees. Mentoring is always done by a senior inside person. It is also one-to- one interaction, like
coaching.
3. Job Rotation: It is the process of training employees by rotating them through a series of related
jobs. Rotation not only makes a person well acquainted with different jobs, but it also alleviates
boredom and allows to develop rapport with a number of people. Rotation must be logical.
4. Job Instruction: This method is also known as training through step by step. Under this method,
trainer explains the trainee the way of doing the jobs, job knowledge and skills and allows him to do
the job. The trainer appraises the performance of the trainee, provides feedback information and
corrects the trainee.
5. Committee Assignments: Under the committee assignment, group of trainees are given and asked
to solve an actual organisational problem. The trainees solve the problem jointly. It develops team
work.
6. Apprenticeship: Apprenticeship is a formalized method of training curriculum program that
combines classroom education with on-the-job work under close supervision. The training
curriculum is planned in advance and conducted in careful steps from day to day. Most trade
apprenticeship programs have a duration of three to four years before an apprentice is considered
completely accomplished in that trade or profession. This method is appropriate for training in crafts,
trades and technical areas, especially when proficiency in a job is the result of a relatively long
training or apprenticeship period, e.g., job of a craftsman, a machinist, a printer, a tool maker, a
pattern designer, a mechanic, etc.

7. Understudy: In this method, a superior gives training to a subordinate as his understudy like an
assistant to a manager or director (in a film). The subordinate learns through experience and
observation by participating in handling day to day problems. Basic purpose is to prepare subordinate
for assuming the full responsibilities and duties.
Advantages of On-the-Job Training:
1. It is directly in the context of job
2. It is often informal
3. It is most effective because it is learning by experience
4. It is least expensive
5. Trainees are highly motivated
6. It is free from artificial classroom situations

Disadvantages of On-the-Job Training:

1. Trainer may not be experienced enough to train or he may not be so inclined.
2. It is not systematically organized
3. Poorly conducted programs may create safety hazards.

b) Off-the-job training: This occurs when workers are taken away from their place of work to be
trained. This may take place at training agency or local college, although many larger firms also have
their own training centres. Training can take the form of lectures or self-study and can be used to
develop more general skills and knowledge that can be used in a variety of situations. The various
types of off-the-job training are
1. Instructor presentation: The trainer orally presents new information to the trainees, usually
through lecture. Instructor presentation may include classroom lecture, seminar, and workshop.
2. Group discussion: The trainer leads the group of trainees in discussing a topic.
3. Demonstration: The trainer shows the correct steps for completing a task, or shows an example of
a correctly completed task.
4. Assigned reading: The trainer gives the trainees reading assignments that provide new
information.
5. Exercise: The trainer assigns problems to be solved either on paper or in real situations related to
the topic of the training activity.
6. Case study: The trainer gives the trainees information about a situation and directs them to come
to a decision or solve a problem concerning the situation.
7. Role play: Trainees act out a real-life situation in an instructional setting.
8. Field visit and study tour: Trainees are given the opportunity to observe and interact with the
problem being solved or skill being learned.

Advantages of Off-the-Job Training

 Trainers are usually experienced enough to train
 It is systematically organized
 Efficiently created programs may add lot of value

Disadvantages of Off-the-Job Training:

 It is not directly in the context of job
 It is often formal
 It may not be based on experience.
 It is expensive.
 Trainees may not be much motivated
 It is artificial in nature.

CAREER STAGES
What people want from their careers also varies according to the stage of one's career. What may
have been important in an early stage may not be important in a later one. Five distinct career stages
have been identified: trial, establishment/advancement, mid-career, and late career. Each stage
represents different career needs and interests of the individual
a) Trial stage: The trial stage begins with an individual's exploration of career-related matters and
ends usually at about age 25 with a commitment on the part of the individual to a particular
occupation. Until the decision is made to settle down, the individual may try a number of jobs and a
number of organizations. Unfortunately for many organizations, this trial and exploration stage
results in high level of turnover among new employees. Employees in this stage need opportunities
for self-exploration and a variety of job activities or assignments.
b) Establishment Stage: The establishment/advancement stage tends to occur between ages 25 and
44. In this stage, the individual has made his or her career choice and is concerned with achievement,
performance, and advancement. This stage is marked by high employee productivity and career
growth, as the individual is motivated to succeed in the organization and in his or her chosen
occupation. Opportunities for job challenge and use of special competencies are desired in this stage.
The employee strives for creativity and innovationthrough new job assignments. Employees also
need a certain degree of autonomy in this stage so that they can experience feelings of individual
achievement and personal success.

c) Mid Career Crisis Sub Stage: The period occurring between the mid-thirties and mid-forties
during which people often make a major reassessment of their progress relative to their original
career ambitions and goals.

d) Maintenance stage: The mid-career stage, which occurs roughly between the ages 45 and64, has
also been referred to as the maintenance stage. This stage is typified by a continuation of established
patterns of work behavior. The person is no longer trying to establish a place for him or herself in the
organization, but seeks to maintain his or her position. This stage is viewed as a mid-career plateau in
which little new ground is broken. The individual in this stage may need some technical updating in
his or her field. The employee should be encouraged to develop new job skills in order to avoid early
stagnation and decline.

e) Late-career stage: In this stage the career lessens in importance and the employee plans for
retirement and seeks to develop a sense of identity outside the work environment.

PERFORMANCE APPRAISAL
Performance appraisal is the process of obtaining, analyzing and recording information about the
relative worth of an employee. The focus of the performance appraisal is measuring and improving
the actual performance of the employee and also the future potential of the employee. Its aim is to
measure what an employee does.
Objectives of Performance appraisal:
• To review the performance of the employees over a given period of time.
• To judge the gap between the actual and the desired performance.
• To help the management in exercising organizational control.
• To provide feedback to the employees regarding their past performance.
• Provide information to assist in the other personal decisions in the organization.
• To judge the effectiveness of the other human resource functions of the organization such as
recruitment, selection, training and development.
• To reduce the grievances of the employees.

Process of performance appraisal:

a) Establishing performance standards:The first step in the process of performance appraisal is
the setting up of the standards which will be used to as the base to compare the actual performance of
the employees. This step requires setting the criteria to judge the performance of the employees as
successful or unsuccessful and the degrees of their contribution to the organizational goals and
objectives. Thestandards set should be clear, easily understandable and in measurable [Link] case
the performance of the employee cannot be measured, great care should be taken to describe the
standards.
b) Communicating the standards:After establishing the standards, it is the responsibility of the
management to communicate the standards to all the employees of the [Link] employees
should be informed and the standards should be clearly explained to them. This will help them to
understand their roles and to know what exactly is expected from them. The standards should also be
communicated to the appraisers or the evaluators and if required, the standards can also be modified
at this stage itself according to the relevant feedback from the employees or the evaluators.
c) Measuring the actual performance:The most difficult part of the Performance appraisal process
is measuring the actual performance of the employees that is the work done by the employees during
the specified period of time. It is a continuous process which involves monitoring the performance
throughout the year. This stage requires the careful selection of the appropriate techniques of
measurement, taking care that personal bias does not affect the outcome of the process and providing
assistance rather than interfering in an employees work.
d) Comparing the actual with the desired performance:The actual performance is compared with
the desired or the standard performance. The comparison tells the deviations in the performance of
the employees from the standards set. The result can show the actual performance being more than
the desired performance or, the actual performance being less than the desired performance depicting
a negative deviation in the organizational performance. It includes recalling, evaluating and analysis
of data related to the employees’ performance.
e) Discussing results: The result of the appraisal is communicated and discussed with the
employees on one-to-one basis. The focus of this discussion is on communication and listening. The
results, the problems and the possible solutions are discussed with the aim of problem solving and
reaching consensus. The feedback should be given with a positive attitude as this can have aneffect
on the employees’future performance. The purpose of the meeting should be to solve the problems
faced and motivate the employees to perform better.
f) Decision making: The last step of the process is to take decisions which can be taken either to
improve the performance of the employees, take the required corrective actions, or the related HR
decisions like rewards, promotions, demotions, transfers etc.
METHODS OF PERFORMANCE APPRAISALS
PAST ORIENTED METHODS
1. Rating Scales: Rating scales consists of several numerical scales representing job related
performance criterions such as dependability, initiative, output, attendance, attitude etc. Each scales
ranges from excellent to poor. The total numerical scores are computed and final conclusions are
derived. Advantages – Adaptability, easy to use, low cost, every type of job can be evaluated, large
number of employees covered, no formal training required. Disadvantages – Rater’s biases
2. Checklist: Under this method, checklist of statements of traits of employee in the form of Yes or
No based questions is prepared. Here the rater only does the reporting or checking and HR
department does the actual evaluation. Advantages – economy, ease of administration, limited
training required, standardization. Disadvantages – Raters biases, use of improper weighs by HR,
does not allow rater to give relative ratings
3. Forced Choice Method: The series of statements arranged in the blocks of two or more are given
and the rater indicates which statement is true or false. The rater is forced to make a choice. HR
department does actual assessment. Advantages – Absence of personal biases because of forced
choice. Disadvantages – Statements may be wrongly framed.

4. Forced Distribution Method: here employees are clustered around a high point on a rating scale.
Rater is compelled to distribute the employees on all points on the scale. It is assumed that the
performance is conformed to normal distribution. Advantages – Eliminates Disadvantages –
Assumption of normal distribution, unrealistic, errors of central tendency.

5. Critical Incidents Method: The approach is focused on certain critical behaviors of employee
that makes all the difference in the performance. Supervisors as and when they occur record such
incidents. Advantages – Evaluations are based on actual job behaviors, ratings are supported by
descriptions, feedback is easy, reduces recency biases, chances of subordinate improvement are high.
Disadvantages – Negative incidents can be prioritized, forgetting incidents, overly close supervision;
feedback may be too much and may appear to be punishment.

6. Behaviorally Anchored Rating Scales (BARS): statements of effective and ineffective behaviors
determine the points. They are said to be behaviorally anchored. The rater is supposed to say, which
behavior describes the employee performance. Advantages – helps overcome rating errors.
Disadvantages – Suffers from distortions inherent in most rating techniques.

7. Field Review Method: This is an appraisal done by someone outside employees’ own department
usually from corporate or HR department. Advantages – Useful for managerial level promotions,
when comparable information is needed, Disadvantages – Outsider is generally not familiar with
employees work environment, Observation of actual behaviors not possible.

8. Performance Tests & Observations: This is based on the test of knowledge or skills. The tests
may be written or an actual presentation of skills. Tests must be reliable and validated to be useful.
Advantage – Tests may be apt to measure potential more than actual performance. Disadvantages –
Tests may suffer if costs of test development or administration are high.

9. Confidential Records: Mostly used by government departments, however its application in

industry is not ruled out. Here the report is given in the form of Annual Confidentiality Report
(ACR) and may record ratings with respect to following items; attendance, self-expression, team
work, leadership, initiative, technical ability, reasoning ability, originality and resourcefulness etc.
The system is highly secretive and confidential. Feedback to the assessee is given only in case of an
adverse entry. Disadvantage is that it is highly subjective and ratings can be manipulated because the
evaluations are linked to HR actions like promotions etc.

10. Essay Method: In this method the rater writes down the employee description in detail within a
number of broad categories like, overall impression of performance, promoteability of employee,
existing capabilities and qualifications of performing jobs, strengths and weaknesses and training
needs of the employee. Advantage – It is extremely useful in filing information gaps about the
employees that often occur in a better-structured checklist. Disadvantages – It its highly dependent
upon the writing skills of rater and most of them are not good writers. They may get confused
success depends on the memory power of raters.

11. Comparative Evaluation Method (Ranking & Paired Comparisons): These are collection of
different methods that compare performance with that of other co-workers. The usual techniques
used may be ranking methods and paired comparison method.
a. Ranking Methods: Superior ranks his worker based on merit, from best to worst. However how best
and why best are not elaborated in this method. It is easy to administer and explanation.
b. Paired Comparison Methods: In this method each employee is rated with another employee in the
form of pairs. The number of comparisons may be calculated with the help of a formula as under.

Future Oriented Methods

1. Management By Objectives: It means management by objectives and the performance is rated
against the achievement of objectives stated by the management. Advantage – It is more useful for
managerial positions. Disadvantages – Not applicable to all jobs, allocation of merit pay may result
in setting short-term goals rather than important and long-term goals etc.

2. Psychological Appraisals: These appraisals are more directed to assess employees potential for
future performance rather than the past one. It is done in the form of in-depth interviews,
psychological tests, and discussion with supervisors and review of other evaluations. It is more
focused on employees emotional, intellectual, and motivational and other personal characteristics
affecting his performance. This approach is slow and costly and may be useful for bright young
members who may have considerable potential. However quality of these appraisals largely depend
upon the skills of psychologists who perform the evaluation.

3. Assessment Centers: An assessment center is a central location where managers may come
together to have their participation in job related exercises evaluated by trained observers. It is more
focused on observation of behaviors across a series of select exercises or work samples. Assesses are
requested to participate in in-basket exercises, work groups, computer simulations, role playing and
other similar activities which require same attributes for successful performance in actual job. The
characteristics assessed in assessment center can be assertiveness, persuasive ability, communicating
ability, planning and organizational ability, self-confidence, resistance to stress, energy level,
decision making, sensitivity to feelings, administrative ability, creativity and mental alertness etc.
Disadvantages – Costs of employees traveling and lodging, psychologists, ratings strongly influenced
by assesses inter-personal skills. Solid performers may feel suffocated in simulated situations. Those
who are not selected for this also may get affected.

4. 360-Degree Feedback: It is a technique which is systematic collection of performance data on an

individual group, derived from a number of stakeholders like immediate supervisors, team members,
customers, peers and self. In fact anyone who has useful information on how an employee does a job
may be one of the appraisers. This technique is highly useful in terms of broader perspective, greater
self-development and multi-source feedback is useful. 360-degree appraisals are useful to measure
inter-personal skills, customer satisfaction and team building skills. However on the negative side,
receiving feedback from multiple sources can be intimidating, threatening etc. Multiple raters may be
less adept at providing balanced and objective feedback.

PLANNING TOOLS AND TECHNIQUES FOR STRATEGIC MANAGEMENT

BCG GROWTH-SHARE MATRIX:
Companies that are large enough to be organized into strategic business units face the challenge of
allocating resources among those units. In the early 1970's the Boston Consulting Group developed a
model for managing a portfolio of different business units (or major product lines). The BCG
growth-share matrix displays the various business units on a graph of the market growth rate vs.
market share relative to competitors: Resources are allocated to business units according to where
they are situated on the grid as follows:
 Cash Cow - a business unit that has a large market share in a mature, slow growing industry. Cash
cows require little investment and generate cash that can be used to invest in other business units.
 Star - a business unit that has a large market share in a fast growing industry. Stars may generate
cash, but because the market is growing rapidly they require investment to maintain their lead. If
successful, a star will become a cash cow when its industry matures.
 Question Mark (or Problem Child) - a business unit that has a small market share in a high
growth market. These business units require resources to grow market share, but whether they will
succeed and become stars is unknown.
 Dog - a business unit that has a small market share in a mature industry. A dog may not require
substantial cash, but it ties up capital that could better be deployed elsewhere. Unless a dog has some
other strategic purpose, it should be liquidated if there is little prospect for it to gain market share.

SWOT ANALYSIS
A scan of the internal and external environment is an important part of the strategic planning process.
Environmental factors internal to the firm usually can be classified as strengths (S) or weaknesses
(W), and those external to the firm can be classified as opportunities (O) or threats (T). Such an
analysis of the strategic environment is referred to as a SWOT analysis.
Strengths
A firm's strengths are its resources and capabilities that can be used as a basis for developing a
competitive advantage. Examples of such strengths include:
 patents
 strong brand names
 good reputation among customers
 cost advantages from proprietary know-how
 exclusive access to high grade natural resources
 favourable access to distribution networks

Weaknesses
The absence of certain strengths may be viewed as a weakness. For example, each of the following
may be considered weaknesses:
 lack of patent protection
 a weak brand name
 poor reputation among customers
 high cost structure
 lack of access to the best natural resources
 lack of access to key distribution channels

In some cases, a weakness may be the flip side of a strength. Take the case in which a firm has a
large amount of manufacturing capacity. While this capacity may be considered a strength that
competitors do not share, it also may be a considered a weakness if the large investment in
manufacturing capacity prevents the firm from reacting quickly to changes in the strategic
environment.
Opportunities
The external environmental analysis may reveal certain new opportunities for profit and growth.
Some examples of such opportunities include:
 an unfulfilled customer need
 arrival of new technologies
 loosening of regulations
 removal of international trade barriers

Threats
Changes in the external environmental also may present threats to the firm. Some examples of such
threats include:
 shifts in consumer tastes away from the firm's products
 emergence of substitute products
 new regulations
 increased trade barriers

The SWOT Matrix

A firm should not necessarily pursue the more lucrative opportunities. Rather, it may have a better
chance at developing a competitive advantage by identifying a fit between the firm's strengths and
upcoming opportunities. In some cases, the firm can overcome a weakness in order to prepare itself
to pursue a compelling [Link] develop strategies that take into account the SWOT profile, a
matrix of these factors can be constructed. The SWOT matrix (also known as a TOWS Matrix) is
shown below:

 S-O strategies pursue opportunities that are a good fit to the company's strengths.
 W-O strategies overcome weaknesses to pursue opportunities.
 S-T strategies identify ways that the firm can use its strengths to reduce its vulnerability to external
 threats.
 W-T strategies establish a defensive plan to prevent the firm's weaknesses from making it highly
 susceptible to external threats.
 PORTER’S FIVE FORCES OF COMPETITIVE POSITION ANALYSIS
Porter's Five Forces of Competitive Position Analysis were developed in 1979 by Michael E Porter of
Harvard Business School as a simple framework for assessing and evaluating the competitive strength
and position of a business organization.
This theory is based on the concept that there are five forces that determine the competitive intensity
and attractiveness of a market. Porter’s five forces help to identify where power lies in a business situation.
This is useful both in understanding the strength of an organization’s current competitive position,
and the strength of a position that an organization may look to move [Link] five forces are:

 Supplier power. An assessment of how easy it is for suppliers to drive up prices. This is driven by the:
number of suppliers of each essential input; uniqueness of their product or service; relative size and
strength of the supplier; and cost of switching from one supplier to another.
 Buyer power. An assessment of how easy it is for buyers to drive prices down. This is driven by the:
number of buyers in the market; importance of each individual buyer to the organization; and cost to the
buyer of switching from one supplier to another. If a business has just a few
powerful buyers, they are often able to dictate terms.
 Competitive rivalry. The main driver is the number and capability of competitors in the market.
Many competitors, offering undifferentiated products and services, will reduce market attractiveness.
 Threat of substitution. Where close substitute products exist in a market, it increases the likelihood of customer
the power of suppliers and the attractiveness of the market.
 Threat of new entry. Profitable markets attract new entrants, which erodes profitability.
Unless incumbents have strong and durable barriers to entry, for example, patents, economies of scale,
capital requirements or government policies, then profitability will decline to a competitive rate.