NORTHERN TECHNICAL COLLEGE

OPEN DISTANCE AND FLEXIBLE LEARNING PROGRAMME

Programme: All Diploma programmes

Subject: Management and Organisation

Module Title: Applying Management Concepts

Module No.:

Copyright: No part of this module can be used or reproduced without the permission of
NORTEC

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FOREWORD
Introduction

Dear Student,

Welcome to the diploma Technician Class. Management and Organisation is one of the subjects
in this course. The Management and Organisation has several modules.

This module is the first in the series. In this module, you will learn the definition of management,
the nature of management, the types of organizations and classical management perspective.

You will discover that some of the concepts in this module are similar to those you learnt at
another level.

The contents of this module will equip you with knowledge, skills and attitudes to enable you
apply management and organization concepts in your operations. You are required to read the
contents of each unit thoroughly to understand.

You should ensure that the given assignments are done within the time frame that has been
allocated for each. Do the exercise at the end of the module.

Laurence S. Chilambwe (2023)

(Lecturer: Management Studies).

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MODULE OBJECTIVES:

After studying this module, you will be able to

1. Examine the nature of management

2. Examine organisations in management
3. Identify the purpose and nature of control
4. Examine responsibility of management

UNIT 1: APPLYING MANAGEMENT CONCEPTS

Welcome to unit one of your curriculum studies module. This module deals with applying
management concepts. You will find this unit interesting in that it discusses the meaning of
management, the nature of management and the various types of business organizations.

Let us now start by looking at the definition of management.

What is Management?

According to Harold Koontz, ‘Management is an art of getting things done through and with the
people in formally organized groups. It is an art of creating an environment in which people can
perform and individuals and can co-operate towards attainment of group goals.’

According to F.W. Taylor, ‘Management is an art of knowing what to do, when to do and see that
it is done in the best and cheapest way.’

According to Henri Fayol, ‘to manage is to plan and forecast, to organize, to command and to
control.’

Management can also be defined in detail in the following categories;

➢ As a process
➢ As an activity
➢ As a discipline
➢ As a group
➢ As a science
➢ As an art
➢ As both science and art

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 ➢ As a profession

Management as a Process

As a process, management refers to a series of inter-related functions. It is the process by which

management creates, operates and directs purposive organization through systematic,
coordinated and co-operated human efforts. According to George R. Terry, “Management is a
distinct process consisting of planning, organizing, directing and controlling, performed to
determine and accomplish stated objective by the use of human beings and other resources”.

Management as an Activity

Like various other activities performed by human beings such as writing, playing, eating, cooking
etc, management is also an activity because a manager is one who accomplishes the objectives
by directing the efforts of others. According to Koontz, “Management is what a manager does”.
Management as an activity includes: Informational activities; Decisional activities and;
interpersonal activities.

Management as a Discipline

Management as a discipline refers to that branch of knowledge which is connected to study of

principles and practices of basic administration. It specifies certain code of conduct to be
followed by the manager and also various methods for managing resources efficiently.

Management is a course of study which is now formally being taught in the institutes and
universities. After completing a prescribed course or by obtaining degree or diploma in
management, a person can get employment as a manager.

Any branch of knowledge that fulfils the following two requirements is known as a discipline:

1. There must be scholars & thinkers who communicate relevant knowledge through
research and publications.
2. The knowledge should be formally imparted by education and training programmes.

Management as a Group

Management as a group refers to all those persons who perform the task of managing an
enterprise. When we say that management of ABC & Co. is good, we are referring to a group of
people who are managing it. Thus as a group technically speaking, management will include all
managers from chief executive to the first - line managers (although in some cases it can only
refer to top management).

Management as a Science

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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

➢ Experimentation & Observation
➢ Cause & Effect Relationship
➢ Test of Validity & Predictability
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.

Management as an Art

Art implies application of knowledge and 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
➢ Personal Skill
➢ Creativity:
➢ Perfection through practice
➢ Goal-Oriented
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 moulding the attitude and behavior of
people at work towards desired goals.

Management as both Science and Art

Management is both an art and a science. The above mentioned points clearly reveal that
management combines features of both science as well as art. It is considered as a science
because it has an organized body of knowledge which contains certain universal truth. It is called
an art because managing requires certain skills which are personal possessions of managers.
Simply put, science teaches to ’know’ and art teaches to ’do’.

Management as a Profession

Over a large few decades, factors such as growing size of business unit, separation of ownership
from management, growing competition etc have led to an increased demand for professionally
qualified managers. The task of manager has been quite specialized. As a result of these
developments the management has reached a stage where everything is to be managed
professionally.

A profession may be defined as an occupation that requires specialized knowledge and intensive
academic preparations to which entry is regulated by a representative body. The essentials of a
profession are:
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 ➢ Specialized Knowledge
➢ Formal Education & Training
➢ Social Obligations
➢ Code of Conduct
➢ Representative Association

Why is Management Important?

1. It helps in Achieving Group Goals - It arranges the factors of production, assembles

and organizes the resources, integrates the resources in effective manner to achieve
organizational goals. It directs group efforts towards achievement of pre-determined
goals. By defining objective of organization clearly there would be no wastage of time,
money and effort.
2. Optimum Utilization of Resources - Management provides maximum utilization of
scarce resources by selecting its best possible alternate use in industry from out of
various uses. It makes use of experts, professional and these services leads to use of
their skills, knowledge, and proper utilization and avoids wastage.

3. Reduces Costs - Management uses physical, human and financial resources in such a
manner which results in best combination. This helps in cost reduction.
4. Establishes Sound Organization - it establishes effective authority & responsibility
relationship i.e. who is accountable to whom, who can give instructions to whom, who
are superiors and who are subordinates.
5. Establishes Equilibrium - It enables the organization to survive in changing
environment. It keeps in touch with the changing environment. With the change in
external environment, the initial co-ordination of organization must be changed. So it
adapts organization to changing demand of market / changing needs of societies. It is
responsible for growth and survival of organization.
6. Essentials for Prosperity of Society - It improves standard of living. It increases the
profit which is beneficial to business and society will get maximum output at minimum
cost by creating employment opportunities which generate income in hands.

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 UNIT 2: FUNCTIONS OF MANAGEMENT

Managers just don't go out and haphazardly perform their responsibilities. Good managers
discover how to master five basic functions: planning, organizing, staffing, leading, and
controlling.

• Planning: This step involves mapping out exactly how to achieve a particular goal. Say,
for example, that the organization's goal is to improve company sales. The manager first
needs to decide which steps are necessary to accomplish that goal. These steps may
include increasing advertising, inventory, and sales staff. These necessary steps are
developed into a plan. When the plan is in place, the manager can follow it to accomplish
the goal of improving company sales.
• Organizing: After a plan is in place, a manager needs to organize her team and
materials according to her plan. Assigning work and granting authority are two important
elements of organizing.
• Staffing: After a manager discerns his area's needs, he may decide to beef up his
staffing by recruiting, selecting, training, and developing employees. A manager in a large
organization often works with the company's human resources department to accomplish
this goal.
• Leading: A manager needs to do more than just plan, organize, and staff her team to
achieve a goal. She must also lead. Leading involves motivating, communicating, guiding,
and encouraging. It requires the manager to coach, assist, and problem solve with
employees.
• Controlling: After the other elements are in place, a manager's job is not finished. He
needs to continuously check results against goals and take any corrective actions
necessary to make sure that his area's plans remain on track.

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For theoretical purposes, it may be convenient to separate the function of management but
practically these functions are overlapping in nature i.e. they are highly inseparable. Each
function blends into the other & each affects the performance of others.

We will now look at each of the functions of management in detail

PLANNING

It is the basic function of management. It deals with chalking out a future course of action and
deciding in advance the most appropriate course of actions for achievement of pre-determined
goals. According to KOONTZ, “Planning is deciding in advance - what to do, when to do and how
to do. It bridges the gap from where we are and where we want to be”.

Steps in Planning Function

Planning function of management involves following steps:-

1. Establishment of objectives: Planning starts with the setting of goals and

objectives to be achieved and these provide a rationale for undertaking various
activities as well as indicate direction of efforts. As far as possible, objectives
should be stated in quantitative terms.
2. Establishment of Planning Premises: Planning premises are the assumptions
about the lively shape of events in future and aims to find out what obstacles are
there in the way of business during the course of operations.
3. Choice of alternative course of action: each and every alternative will be
evaluated by weighing its pros and cons in the light of resources available and
requirements of the organization.
4. Formulation of derivative plans: Derivative plans are the sub plans or
secondary plans which help in the achievement of main plan. These detail plans
include policies, procedures, rules, programmes, budgets, schedules, etc
5. Securing Co-operation: After the plans have been determined, it is necessary
rather advisable to take subordinates or those who have to implement these plans
into confidence.

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 6. Follow up/Appraisal of plans: After the selected plan is implemented, it is
important to appraise its effectiveness and this can be done on the basis of
feedback or information received from departments or persons concerned.

Characteristics of planning

1. Planning is goal-oriented i.e. planning is made to achieve desired objective of

business
2. Planning is looking ahead i.e. planning is done for future.
3. Planning is an intellectual process i.e. planning is a mental exercise involving
creative thinking, sound judgment and imagination.
4. Planning involves choice & decision making. Planning essentially involves
choice among various alternatives; therefore, decision making is an integral part
of planning.
5. Planning is the primary function of management. It serves as a guide for
organizing, staffing, directing and controlling
6. Planning is a Continuous Process i.e. planning is a never ending function due
to the dynamic business environment.
7. Planning is all Pervasive; it is required at all levels of management and in all
departments of enterprise. Of course, the scope of planning may differ from one
level to another.
8. Planning is designed for efficiency i.e. planning leads to accomplishment of
objectives at the minimum possible cost
9. Planning is Flexible; since future is unpredictable, planning must provide
enough room to cope with the changes in customer’s demand, competition,
government policies etc.
Advantages of Planning

1. Planning facilitates management by objectives i.e. It helps in focusing

the attention of employees on the objectives or goals of enterprise.
2. Planning minimizes uncertainties; it helps in reducing uncertainties of
future as it involves anticipation of future events.
3. Planning facilitates co-ordination; it avoids duplication of efforts. In other
words, it leads to better co-ordination
4. Planning improves employee’s morale; Employees know in advance what is
expected of them and therefore conformity can be achieved easily.
5. Planning encourages innovations; In the process of planning, managers
have the opportunities of suggesting ways and means of improving
performance.
Disadvantages of planning

Internal Limitations of planning

1. Rigidity ; Planning implies prior determination of policies, procedures and

programmes and a strict adherence to them in all circumstances.
2. Misdirected Planning; planning may be used to serve individual interests
rather than the interest of the enterprise.
3. Time consuming; planning is a time consuming process because it involves
collection of information, it’s analysis and interpretation thereof
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 4. False sense of security; elaborate planning may create a false sense of
security to the effect that everything is taken for granted.
5. Expensive; collection, analysis and evaluation of different information, facts
and alternatives involves a lot of expense in terms of time, effort and money
External Limitations of Planning

1. Political Climate- Change of government from one political party to other, etc.
2. Labour Union- Strikes, lockouts, agitations.
3. Technological changes- Modern techniques and equipments, computerization.
4. Policies of competitors- Eg. Policies of Coca Cola and Pepsi.
5. Changes in demand and prices- Change in fashion, change in tastes, change in income
level, demand falls, price falls, etc.

ORGANISING

It is the process of bringing together physical, financial and human resources and developing
productive relationship amongst them for achievement of organizational goals. According to
Henry Fayol, “To organize a business is to provide it with everything useful or its functioning i.e.
raw material, tools, capital and personnel’s”. To organize a business involves determining &
providing human and non-human resources to the organizational structure. Organizing as a
process involves:

• Identification of activities.
• Classification and grouping of activities.
• Assignment of duties.
• Delegation of authority and creation of responsibility.
• Coordinating authority and responsibility relationships.

(* For further reading about organising, go to UNIT 3)

STAFFING

It is the function of manning the organization structure and keeping it manned. Staffing has
assumed greater importance in the recent years due to advancement of technology, increase in
size of business, complexity of human behavior etc. The main purpose of staffing is to put right
man on right job i.e. square pegs in square holes and round pegs in round holes. According to
Kootz&O’Donell, “Managerial function of staffing involves manning the organization structure
through proper and effective selection, appraisal & development of personnel to fill the roles
designed in the structure”. Staffing can be explained as a process.

Staffing process

1. 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 concern.
2. Recruitment- Once the requirements are notified, the concern invites and solicits

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 applications according to the invitations made to the desirable candidates.
3. 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.
4. Orientation and Placement- Once screening takes place, the appointed candidates are
made familiar to the work units and work environment through the orientation
programmes. Placement takes place by putting right man on the right job.

5. Training and Development- Training is a part of incentives given to the workers in

order to develop and grow them within the concern. 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 analyse their performances.
6. Remuneration- It is a kind of compensation provided monetarily to the employees for
their work performances. This is given according to the nature of job- skilled or unskilled,
physical or mental, etc. Remuneration forms an important monetary incentive for the
employees.
7. Performance Evaluation- In order to keep a track or record of the behaviour, 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 concern.
8. Promotion and transfer- Promotion is said to be a non- monetary incentive in which
the worker is shifted from a higher job demanding bigger responsibilities as well as
shifting the workers and transferring them to different work units and branches of the
same organization.

DIRECTING/LEADING

It is that part of managerial function which actuates the organizational methods to work
efficiently for achievement of organizational purposes. It is considered life-spark of the enterprise
which sets it 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, motivating sub-ordinate for the
achievement of organizational goals. Directing has the following elements:

• Supervision
• Motivation
• Leadership
• Communication

Supervision- implies overseeing the work of subordinates by their superiors. It is the act of
watching and directing work and workers.

Motivation- means inspiring, stimulating or encouraging the sub-ordinates with zeal to work.
Positive, negative, monetary, non-monetary incentives may be used for this purpose.

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Leadership- may be defined as a process by which manager guides and influences the work of
subordinates in desired direction.

Communications- is the process of passing information, experience, opinion etc from one
person to another. It is a bridge of understanding. (For more details on this topic see the section
on communication below)

CONTROLLING

Controlling is the process of checking whether or not proper progress is being made towards the
objectives and goals and acting if necessary, to correct any deviation. According to Koontz &
O’Donell,“Controlling is the measurement & correction of performance activities of subordinates
in order to make sure that the enterprise objectives and plans desired to obtain them as being
accomplished”.

Steps in the Controlling Process

The following are the steps involved in the control process:

1. Establishing standards and methods or ways to measure performance
2. Measuring actual performance
3. Determining if the performance matches with the standard
4. Taking corrective action and re-evaluating the standard

Planning and Controlling

Planning and controlling are two separate functions of management, yet they are closely related.
The scope of activities in both is overlapping to each other. Without the basis of planning,
controlling activities becomes baseless and without controlling, planning becomes a meaningless
exercise. Therefore, planning and controlling reinforce each other. Relationship between the two
can be summarized in the following points

1. Planning preceeds controlling and controlling succeeds planning.

2. Planning and controlling are inseparable functions of management.
3. Activities are put on rails by planning and they are kept at right place through controlling.
4. The process of planning and controlling works on Systems Approach which is as follows

Planning → Results → Corrective Action

Planning and controlling are integral parts of an organization as both are important for
smooth running of an enterprise.

Coordination of Functions

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Coordination is the unification, integration, synchronization of efforts of group members so as to
provide unity of action in the pursuit of common goals. It is a hidden force which binds all the
other functions of management.

Management seeks to achieve co-ordination through its basic function of planning, organizing,
staffing, directing and controlling. That is why co-ordination is not a separate function of
management because achieving of harmony between individual efforts towards achievement of
group goals is a key to success of management. Co-ordination is the essence of management
and is implicit and inherent in all functions of management.

Co-ordination is an integral element or ingredient of all managerial functions as discussed

below:-

a. Co-ordination through Planning- Planning facilitates co-ordination by integrating the

various plans through mutual discussion, exchange of ideas .e.g. co-ordination between
finance budget and purchases budget.
b. Co-ordination through Organizing – Mooney considers co-ordination as the very
essence of organizing. In fact when a manger groups and assigns various activities to
subordinates, and when he creates departments, co-ordination is uppermost in his mind.
c. Co-ordination through Staffing- A manager should bear in mind that the right
number of personnel in various positions with the right type of education and skills are
taken which will ensure right men on the right job.
d. Co-ordination through Directing- The purpose of giving orders, instructions &
guidance to the subordinates is served only when there is harmony between the
superiors & subordinates.
e. Co-ordination through Controlling- Managers ensures that there should be co-
ordination between actual performance & standard performance to achieve organizational
goals.

UNIT 3: CONCEPT OF ORGANISATION

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The term “Organisation” is used in two different senses. In the first sense, it is used to denote
the process of organising (as defined earlier). In the second sense, it is used to denote the result
of that process, namely the organisation structure.

In the process of organising, management creates organisation structure which is defined as the
formal reporting relationship such as span of control and lines of authority and responsibility
through hierarchical levels.

Importance of Organisation

a. Leads to specialisation
b. Facilitates administration
c. Facilitates growth and diversification
d. Facilitates the effective use of manpower
e. Stimulates creativity
f. Optimum use of resources
g. Eliminates confusion, inefficiency, corruption etc.
h. Facilitates training and development

Formal and Informal Organisations

Formal organisations means the intentional (official) structure of roles while, informal
organisation is a network of personal and social relation arising spontaneously as people interact
with each other. Thus, the informal organisation is appearing in the organisational chart. The
informal organisations include the lunch time group, the chess team, and the football team etc.

The Process of Organisation

The important steps involved in the process of organisation are as follows

Step 1: Determination of Objectives i.e. deciding as to why the proposed organisation be set up
and what will be the nature of work to be accomplished through the organisation

Step 2: Deciding various activities i.e. identifying various functions, sub-functions and further
sub-functions to be performed by an individual.

Step 3: Grouping of activities i.e. functions of similar nature (or closely related) are put under
departments, sections, or divisions.

Step 4: Assignment of responsibilities to definite persons i.e. specific job assignments are made
to persons for ensuring a certainty of work performance.

Step 5: Determining the span of management i.e. determining the number of subordinates who
would report directly to each executive.

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Step 6: Providing physical facilities and proper environment i.e. proper machinery and tools,
lighting, ventilation, reasonable hours of work, rest intervals, job security, job satisfaction etc.

Principles of Organising

The organizing process can be done efficiently if the managers have certain guidelines so that
they can take decisions and can act. To organize in an effective manner, the following principles
of organization can be used by a manager.

1. Principle of Specialization: the whole work of a concern should be divided amongst

the subordinates on the basis of qualifications, abilities and skills.
2. Principle of Functional Definition: all the functions in a concern should be completely
and clearly defined to the managers and subordinates. This can be done by clearly
defining the duties, responsibilities, authority and relationships of people towards each
other.
3. Principles of Span of Control/Supervision: 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.
4. Principle of Scalar Chain: it is a chain of command or authority which flows from top
to bottom
5. Principle of Unity of Command: It implies one subordinate-one superior relationship.
Every subordinate is answerable and accountable to one boss at one time.
6. Principle of Exception: the managers at the higher level have limited time, and only
exceptionally complex problems should be handled by them and they should delegate
routine, structured programmed decisions to their subordinates.
7. Principle of delegation: the superior should delegate proper authority to the
subordinates at the lower level.
8. Principle of balance: there should be a reasonable balance in the size of various
departments between centralization and decentralization.
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 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 - it 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.
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. Responsibility without adequate authority leads to discontent and
dissatisfaction among the person.
3. Accountability - means giving explanations for any variance in the actual performance
from the expectations set. Accountability cannot be delegated.

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Types of Organisation

They are five main types of organisations (forms);

1. Line Organisation
In this type of organisation, a superior makes decisions and tells them to them
subordinate , who in turn makes decision s and conveys them to his subordinate in turn
and so on. This forms a line from the very top to the bottom most level of the
organisation.
2. Staff Organisation
The “Staff” refers to those elements in the organisation which provide advice and service
the line managers. Examples include personnel, accounting, research and development
etc.
3. Line and Staff Organisation
This is when both line and staff authorities are included in an organisation. The individual
who constitute the staff in an industrial organisation are experts who have no line of
authority but whose function is largely advisory. Their authority arises because of their
superior knowledge of a particular function of the enterprise and the acceptance of their
instructions and advice by those with whom they come into contact.
4. Functional Organisation
The tasks of an organisation are divided according to their specialisation. A specialist is
placed in charge of each function of small group of related functions. The specialist has
control over the functions in his charge, no matter where these functions are performed.
5. Committee Organisation
This is a group of people who have been formally assigned some tasks, some problem for
their decision and/or implementation. The committee is appointed by an authority with
some delegated powers and it brings into decision making the experience and expertise
of two or more persons
6. Matrix Organisation
Employees have dual reporting relationships - generally to both a functional manager and
another manager e.g. project or product manager. The authority of a functional manager
flows vertically downwards, and the authority of the project manager flows sideways.
Since these authorities flow downward and sideways, this structure is called a matrix
organization structure.

Centralisation and Decentralization

Centralisation means the majority of the decisions regarding the work are not made by those
doing the work but at a point higher up in the organisation. It means concentration of
managerial authority at the top.

Decentralization refers to the systematic offer to delegate to the lowest levels all authority except
that which can be exercised at the central point.

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 UNIT 4: TYPES AND PURPOSE OF CONTROLS

Control techniques provide managers with the type and amount of information they need to
measure and monitor performance. The information from various controls must be tailored to a
specific management level, department, unit, or operation. In this unit the following control
techniques are going to be discussed;
A. Budgetary control
B. Stock control
C. Quality control
D. Break even analysis
E. Network analysis
F. Management information system
G. Ratio analysis

A. Budgetary Control

This is the technique of management control in which all operations are planned in advance in
the form of budgets and actual results are compared with budgetary standards. This comparison
helps to identify the actual deviations and the necessary actions to be taken so that
organisational objectives are achieved. At the same time, it is a source of motivation to the
employers, as they know clearly the standards against which their performance is appraised

B. Stock Control

Stock Control (or Inventory Control) is a planned approach of determining what to order,
when to order and how much to order and how much to stock so that costs associated with
buying and storing are optimal without interrupting production and sales.

The overall objective of inventory control is to minimize, in total, the costs associated with stock.
These costs can be categorized into three groups:

• Holding or carrying costs i.e. cost associated with keeping stock

• Ordering costs i.e. costs of obtaining stock
• Stock-out costs i.e. costs of being without stock

Methods of Stock Control

Basically there are two methods of stock control: Two-bin System and the Constant Cycle
system.

a. Two-Bin System

Two-bin inventory control is a system used to determine when items or materials used in
production should be replenished. When items in the first bin have been depleted, an
order is placed to refill or replace them. The second bin is then supposed to have
enough items to last until the order for the first bin arrives. In short, the first bin has a
minimum of working stock, and the second bin keeps reserve stock or remaining
material.
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 b. One-bin system (Periodic Review System)
A one-bin inventory system is a simple inventory control system which depends on
replenishing supply at fixed time intervals and not at a minimum stock level. These time
intervals must be set in accordance to bin size, demand and lead time for the bin to be
replenished up to its maximum limit no matter the rate of consumption.

c. Just in Time (JIT) systems

Just-in-time, or JIT, is an inventory control method in which goods are received from
suppliers only as they are needed. The main objective of this method is to reduce
inventory holding costs and increase inventory turnover.

C. Quality Control

QC is concerned with checking and reviewing work that has been done.

Quality Assurance

QA is any systematic process of checking to see whether a product or service being developed is
meeting specified requirements.

QC and QA though used interchangeably are different. The difference is that QA

is process oriented and QC is product oriented.

• Quality Assurance makes sure you are doing the right things, the right way.
• Quality Control makes sure the results of what you've done are what you expected.

Costs Associated with Quality

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The cost of quality is the price you pay for doing things wrong the first time around. This means
all costs attributable to producing a product that is not 100% perfect. At least four major
categories of costs associated with quality can be identified; namely,

i. Prevention costs; These are costs associated with activities involved in reducing the
potential of producing defective products. They include the cost of training workers to
improve capabilities and the cost of managing quality improvement programmes. A skill
upgrading course for workers to enhance their ability to make products that comply with
set standards is an example.
ii. Appraisal cost: These are all costs related to monitoring and evaluation of production
processes to ensure that the production system is operating within set standards and
include the cost of testing and payment of inspectors. Appraisal costs also include the
cost of independent verification to get certification from National Standards Bureaus.
iii. Internal failure; These are costs that result from actual production of defective
products. Internal failure costs can include the cost of scrap resulting from defective
pieces and the actual cost of rework and cost of down time when the next operation
cannot take place because the inputs are defective.
Example
When producing protective overalls, if the sleeves have been cut too short, then that
material becomes scrap as it cannot be used on the same overalls and production of
overalls has to be halted become there is no sleeve inputs.
iv. External costs; These are costs relating to delivering poor quality to the customer.
External costs are the most expensive costs to a company. They include cost of redoing
the job, e.g. reinstalling a kitchen unit because the first job was wrongly done, scrap and
overtime; the cost of transporting goods that have been recalled.

[Link]-Even Analysis
Break-even analysis helps in identifying that volume of sales at which a company is neither
earning any profit nor is incurring any loss, i.e., the level at which revenue exactly equals the
total cost. This is called as break-even point. Break-even analysis helps management in
establishing a relationship between sales, costs and revenues.
With break-even analysis, an organisation would be able to determine the probable profit at
different levels of sales. It enables the management to identify that level of production beyond
which it will start fetching profit or that level below which it will incur losses. Thus, it helps in
deciding the appropriate level of production.
A break-even point is depicted in the following diagram:

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From the above diagram, it can be observed that the company will have a break-even point at
60,000 units.
With the help of this information, a company can control and decide upon the following aspects:
i. Ensure that production is sufficient to meet the profit target.
ii. Keep an eye on the production so that it should not fall below 60,000 so that company
starts incurring losses.
iii. Can exercise cost control at various level of sales.

[Link] Techniques (PERT and CPM):

Network techniques are widely used as control methods in project management. A project may
be defined as a big venture which comprises of many interconnected, interdependent and
sequential activities. For the purpose of ensuring timely and successful completion of the project,
a network analysis is carried out. Thus, a network analysis aims at planning, organising and
controlling of various activities so as to complete the project in an effective and efficient manner.
The projects, in general, have the following objectives to be fulfilled:
i. Should be completed without delay,
ii. Optimisation of resources,
iii. Completion at least possible cost.

Network analysis attempts to attain all the above three objectives of projects through drawing
and analysing the networks. Network may be defined as a symbolic presentation of combination
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of interrelated activities which must be executed in a certain order in least possible time.
Following diagram is a specimen of a network diagram:

Most Commonly Used Network Techniques are CPM and PERT;

i. Critical Path Method (CPM):
Critical path method is a deterministic step by step technique for project management
that defines critical and non-critical activities so as to enable the project completion in
minimum possible time and to prevent the operational problems and process bottlenecks.
ii. Programme Evaluation Review Technique (PERT):
PERT is a probabilistic technique of project management. Like CPM, PERT defines critical
and non-critical activities so as to enable the project completion in minimum possible time
and to prevent the operational problems and process bottlenecks. Unlike CPM, in PERT,
time duration of each activity is no longer a single-time estimate which is precisely known
with certainty. Time is a random variable characterised by a probability distribution and
three time estimates are given which are:
• Optimistic time estimate (t0)
• Pessimistic time estimate (tp)
• Most likely time estimate (tm)
Based on these three time estimates, expected or average time for each activity is calculated
with the help of the following formula:

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[Link] Information System (MIS):
MIS is a computer-based information system of collecting, storing and disseminating data in the
form of information needed by supervisors at various levels. It helps the managers to discharge
their functions of management efficiently and effectively. MIS is a mechanism which ensures up-
to-date information transfer at the right time and at the right pace so that it can be used by the
managers to take decisions.
MIS is instrumental in generation of various kinds of reports indicating about the performance of
men, materials, machinery, money and management. MIS is helpful in controlling costs by giving
information about idle time, labour turnover, wastages and losses and surplus capacity

[Link] Analysis as Control Technique:

Ratios are the indicators of actual performance for the year for which they are calculated. These
can be compared with the ratios of the previous years of the same firm or with some standard
ratios set for the industry or in general. As an outcome of comparison, the ratios may reveal the
current financial health of the company aiding the company to take relevant remedial actions.

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 UNIT 5: MANAGERIAL LEVELS, ROLES AND SKILLS

LEVELS OF MANAGEMENT

The term “Levels of Management’ refers to a line of demarcation between various managerial
positions in an organization. The number of levels in management increases when the size of the
business and work force increases and vice versa. The level of management determines a chain
of command, the amount of authority & status enjoyed by any managerial position. The levels of
management can be classified in three broad categories:

1. Top level / Administrative level

2. Middle level / Executory
3. Low level / Supervisory / Operative / First-line managers

Managers at all these levels perform different functions. The role of managers at all the three
levels is discussed below:

1. Top Level of Management

It consists of board of directors, chief executive or managing director. The top

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

The role of the top management can be summarized as follows -

a. Top management lays down the objectives and broad policies of the enterprise.
b. It issues necessary instructions for preparation of department budgets,
procedures, schedules etc.
c. It prepares strategic plans & policies for the enterprise.
d. It appoints the executive for middle level i.e. departmental managers.
e. It controls & coordinates the activities of all the departments.
f. It is also responsible for maintaining a contact with the outside world.

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 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 roles can be emphasized as -

a. They execute the plans of the organization in accordance with the policies and
directives of the top management.
b. They make plans for the sub-units of the organization.
c. They participate in employment & training of lower level management.
d. They interpret and explain policies from top level management to lower level.
e. They are responsible for coordinating the activities within the division or
department.
f. They evaluate performance of junior managers.

3. Lower Level of Management

Lower level is also known as supervisory / operative level of management. It consists of

supervisors, foreman, section officers, superintendent etc. They are concerned with
direction and controlling function of management. Their activities include -

a. Assigning of jobs and tasks to various workers.

b. They guide and instruct workers for day to day activities.
c. They are responsible for the quality as well as quantity of production.
d. They communicate workers problems, suggestions, and recommendatory appeals
etc to the higher level and higher level goals and objectives to the workers.
e. They supervise & guide the subordinates.
f. They arrange necessary materials, machines, tools etc for getting the things done.
g. They prepare periodical reports about the performance of the workers.

MANAGERIAL ROLES

As a manager, you probably fulfill many different roles every day.

For instance, as well as leading your team, you might find yourself resolving a conflict,
negotiating new contracts, representing your department at a board meeting, or approving a
request for a new computer system.

Put simply, you're constantly switching roles as tasks, situations, and expectations change.

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Management expert and professor, Henry Mintzberg, recognized this. According to Mintzberg,
these roles, or expectations for a manager’s behavior, fall into three categories: informational
(managing by information), interpersonal (managing through people), and decisional (managing
through action).

Mintzberg published his Ten Management Roles in his book, "Mintzberg on Management: Inside
our Strange World of Organizations," in 1990.

The ten roles are:

1. Figurehead.
2. Leader.
3. Liaison.
4. Monitor.
5. Disseminator.
6. Spokesperson.
7. Entrepreneur.
8. Disturbance Handler.
9. Resource Allocator.
10. Negotiator.

The 10 roles are then divided up into three categories, as follows:

Category Roles
Figurehead
Interpersonal Leader
Liaison
Monitor
Informational Disseminator
Spokesperson
Entrepreneur
Disturbance Handler
Decisional
Resource Allocator
Negotiator

Let's look at each of the ten roles in greater detail.

Interpersonal Category

The roles in this category involve providing information and ideas.

1. Figurehead – As a manager, you have social, ceremonial and legal responsibilities.

You're expected to be a source of inspiration. People look up to you as a person with
authority, and as a figurehead.

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 2. Leader – This is where you provide leadership for your team, your department or
perhaps your entire organization; and it's where you manage the performance and
responsibilities of everyone in the group.
3. Liaison – Managers must communicate with internal and external contacts. You need to
be able to network effectively on behalf of your organization.

Informational Category

The roles in this category involve processing information.

4. Monitor – In this role, you regularly seek out information related to your organization
and industry, looking for relevant changes in the environment. You also monitor your
team, in terms of both their productivity, and their well-being.
5. Disseminator – This is where you communicate potentially useful information to your
colleagues and your team.
6. Spokesperson – Managers represent and speak for their organization. In this role you're
responsible for transmitting information about your organization and its goals to the
people outside it.

Decisional Category

The roles in this category involve using information.

7. Entrepreneur – As a manager, you create and control change within the organization.
This means solving problems, generating new ideas, and implementing them.
8. Disturbance Handler – When an organization or team hits an unexpected roadblock,
it's the manager who must take charge. You also need to help mediate disputes within it.
9. Resource Allocator – You'll also need to determine where organizational resources are
best applied. This involves allocating funding, as well as assigning staff and other
organizational resources.
10. Negotiator – You may be needed to take part in, and direct, important negotiations
within your team, department, or organization.

MANAGERIAL SKILLS

Managerial Skill can be defined as the ability to make business decisions and lead subordinates
within a company. The three most common skills include: 1) human skills - the ability to interact
and motivate; 2) technical skills – the knowledge and proficiency in the trade; and 3) conceptual
skills - the ability to understand concepts, develop ideas and implement strategies.

1. Technical skills – involve process or technique knowledge and proficiency in a certain

specialized field, such as engineering, computers, accounting, or manufacturing. These skills are
more important at lower levels of management since these managers are dealing with employees
doing the organization’s work.
The technical skill involves the manager’s understanding of the nature of job that people under
him have to perform. It refers to a person’s knowledge and proficiency in any type of process or
technique.

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2. Human Relations Skill – involve the ability to interact effectively with people. It refers to
the ability of a person to work effectively with others and build cooperative work groups to
achieve organisational goals. The following skills are part of human relations

- Communication skills – is the ability to pass information to others.

- Motivating skills – is the ability to inspire others to do what the manager wants them to
do. The manager can use positive or negative motivational methods. Positive motivational
method include reward, praise, recognition, etc, whereas negative motivational methods
include punishment, reprimand, threat etc.
- Leadership skills – is the ability to change the behavior of other towards the achievement
of organisational goals

3. Conceptual Skills- it is the ability to see the organisation as a whole, to recognize inter-
relationships among different functions of the business and external forces and to guide
effectively the organisational efforts. Conceptual skill is critical in top executive whereas technical
skill is essential for lower level management. It is easier to learn technical skill than the
conceptual skill. The following are part of the conceptual skills;

- Decisional making skills – is the ability of a person to take timely and accurate decisions.
This requires mental ability and presence of the mind.
- Organisational skills – help select and fix different people at different work. This means
placing right people for right job.

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 UNIT 6: CLASSICAL MANAGEMENT THEORIES

The theories that emerged under the classical evolution of management thought are:

• Administrative Management
Henry Fayol, a French mining engineer, laid down five functions and 14 principles of
management under the theory of Fayolism. This gave way to the school of
administrative management. He believed that these functions and principles can guide
managers to fulfill their responsibilities effectively and they should have the liberty to
determine how to use them. (see the notes below)

• Scientific Management
Fredrick Winslow Taylor, an engineer, proposed and developed the Scientific
Management Theory. He is also known as the Father of Scientific Management and his
school of thought came to be known as Taylorism. He introduced a scientific approach
to productivity, which meant that an increase in efficiency can lead to higher
productivity and profits. He believed that research-backed and standardized
procedures were necessary for effective management. (see the notes below)

Administrative/Organisational Perspective

The primary contributors to this organisational theory were – Henry Fayol (1841 – 1925), Lyndall
Urwick (1891 – 1983), Max Weber (1864 – 1920) and Chester Barnard (1886 – 1961). Henry
Fayol was the first person to advocate the functional process approach to the process of
management. Drawing on his managerial experience, he attempted to systematize the practice
of management to provide guidance and direction to other managers.

Fayol divided the activities of the organisation into the following

➢ Technical (production)
➢ Commercial (buying, selling and exchange)
➢ Financial (optimum use of capital and sources)
➢ Security (protection to property and person)
➢ Accounting (recording of financial transactions)
➢ Managerial (planning, organising, leading and controlling)

Henri Fayol’s 14 Principles of Management

1. Division of work: Work should be divided among individuals and groups to ensure that
effort and attention are focused on special portions of the task. Fayol presented work
specialization as the best way to use the human resources of the organization.

2. Authority and Responsibility: The concepts of Authority and responsibility are closely
related. Authority was defined by Fayol as the right to give orders and the power to exact
obedience. Responsibility involves being accountable, and is therefore naturally
associated with authority. Whoever assumes authority also assumes responsibility.

28
 3. Discipline: A successful organization requires the common effort of workers. Penalties
should be applied judiciously to encourage this common effort.

4. Unity of Command: Workers should receive orders from only one manager.

5. Unity of Direction: The entire organization should be moving towards a common

objective in a common direction.

6. Subordination of Individual Interests to the General Interests: The interests of

one person should not take priority over the interests of the organization as a whole.

7. Remuneration: Compensation for work-done should be fair to both employees and

employers. Many variables, such as cost of living, supply of qualified personnel, general
business conditions, and success of the business, should be considered in determining a
worker’s rate of pay.
8. Centralization/Decentralization: Fayol defined centralization as lowering the
importance of the subordinate role. Decentralization is increasing the importance of
subordinate role. The degree to which centralization or decentralization should be
adopted depends on the specific organization in which the manager is working.

9. Scalar Chain: Managers in hierarchies are part of a chain like authority scale. Each
manager, from the first line supervisor to the president, possesses certain amounts of
authority. The President possesses the most authority; the first line supervisor the least.
Lower level managers should always keep upper level managers informed of their work
activities. The existence of a scalar chain and adherence to it are necessary if the
organization is to be successful.

10. Order: This principle is concerned with systematic arrangement of men, machine,
material etc. there should be specific place for every employee in organization
11. Equity: All employees should be treated as equally as possible.

12. Stability of Tenure of Personnel: Retaining productive employees should always be a

high priority of management. Recruitment and selection costs, as well as increased
product-reject rates are usually associated with hiring new workers.

13. Initiative: Management should take steps to encourage worker initiative, which is
defined as new or additional work activity undertaken through self direction.

14. Espirit de corps: Management should encourage harmony and general good feelings
among employees.

Contribution of the Organisational Perspective to Modern Management

The classical organisational perspective theory provided the modern manager with the
foundations for the study and practice of managerial functions of planning, organising, leading
and controlling.

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Limitations of the Organisational Perspective

The basic limitation of this theory is that ideas were developed in stable organisations in
relatively unchanging environment. Thus they have limited application in the ever-changing
dynamics of modern management.

Importance of the Fayol’s Management Principles

Following are the main importance of the Principles of Management.

1. Improves Understanding - From the knowledge of principles managers get indication

on how to manage an organization. The principles enable managers to decide what
should be done to accomplish given tasks and to handle situations which may arise in
management. These principles make managers more efficient.
2. Direction for Training of Managers - Principles of management provide
understanding of management process what managers would do to accomplish what.
Thus, these are helpful in identifying the areas of management in which existing & future
managers should be trained.
3. Role of Management - Management principles makes the role of managers concrete.
Therefore these principles act as ready reference to the managers to check whether their
decisions are appropriate. Besides these principles define managerial activities in practical
terms. They tell what a manager is expected to do in specific situation.
4. Guide to Research in Management - The body of management principles indicate
lines along which research should be undertaken to make management practical and
more effective. The principles guide managers in decision making and action. The
researchers can examine whether the guidelines are useful or not. Anything which makes
management research more exact & pointed will help improve management practice.

Scientific Management by Taylor

Fredrick Winslow Taylor ( March 20, 1856 - March 21, 1915) commonly known as ’Father of
Scientific Management’ started his career as an operator and rose to the position of chief
engineer. He conducted various experiments during this process which forms the basis of
scientific management. It implies application of scientific principles for studying & identifying
management problems.

According to Taylor, “Scientific Management is an art of knowing exactly what you want your
men to do and seeing that they do it in the best and cheapest way”. In Taylors view, if a work
is analysed scientifically it will be possible to find one best way to do it.

Hence scientific management is a thoughtful, organized, dual approach towards the job of
management against hit or miss or Rule of Thumb.

According to Drucker, “The cost of scientific management is the organized study of work, the
analysis of work into simplest element & systematic management of worker’s performance of
each element”.

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Principles of Scientific Management

1. Development of Science for each part of men’s job (replacement of rule of thumb)

This rule focuses on increasing the efficiency of an organisation through scientific analysis
of work and not with the ‘Rule of Thumb’ method. Taylor believed that even a small
activity like loading paper sheets into boxcars can be planned scientifically. This will save
time and also human energy. This decision should be based on scientific analysis and
cause and effect relationships rather than ‘Rule of Thumb’ where the decision is taken
according to the manager’s personal judgment.

2. Scientific Selection, Training & Development of Workers

There should be scientifically designed procedure for the selection of workers. Physical,
mental & other requirement should be specified for each and every job. Workers should
be selected & trained to make them fit for the job.

3. Co-operation between Management & workers or Harmony not discord

Taylor indicated and believed that the relationship between the workers and management
should be cordial and completely harmonious. Difference between the two will never be
beneficial to either side. Management and workers should acknowledge and understand
each other’s importance.

4. Division of Responsibility

There must be equal division of responsibility between the managers and the workers.
The management should be responsible for planning and organising the work, whereas
the workers should be responsible for the execution of work as per instructions of
management.

5. Mental Revolution

This technique involves a shift of attitude of management and workers towards each
other. Both should understand the value of each other and work with full participation
and cooperation. The aim of both should be to improve and boost the profits of the
organisation. Mental Revolution demands a complete change in the outlook of both the
workers and management; both should have a sense of togetherness.

6. Maximum Prosperity for Employer & Employees

The aim of scientific management is to see maximum prosperity for employer and
employees. Maximum output & optimum utilization of resources will bring higher profits
for the employer & better wages for the workers. There should be maximum output in
place of restricted output.

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Criticism of Scientific Management

Although it is accepted that the scientific management enables the management to put resources
to its best possible use and manner, yet it has not been spared of severe criticism.

Workers Viewpoint

1. Unemployment - Workers feel that management reduces employment opportunities

from them through replacement of men by machines and by increasing human
productivity less workers are needed to do work leading to chucking out from their jobs.
2. Exploitation - Workers feel they are exploited as they are not given due share in
increasing profits which is due to their increased productivity. Wages do not rise in
proportion as rise in production. Wage payment creates uncertainty & insecurity (beyond
a standard output, there is no increase in wage rate).
3. Monotony - Due to excessive specialization the workers are not able to take initiative on
their own. Their status is reduced to being mere cogs in wheel. Jobs become dull.
Workers loose interest in jobs and derive little pleasure from work.
4. Weakening of Trade Union - To everything is fixed & predetermined by management.
So it leaves no room for trade unions to bargain as everything is standardized, standard
output, standard working conditions, standard time etc. This further weakens trade
unions, creates a rift between efficient & in efficient workers according to their wages.
5. Over speeding - the scientific management lays standard output, time so they have to
rush up and finish the work in time. These have adverse effect on health of workers. The
workers speed up to that standard output, so scientific management drives the workers
to rush towards output and finish work in standard time.

Employer’s Viewpoint

1. Expensive - Scientific management is a costly system and a huge investment is required

in establishment of planning dept., standardization, work study, training of workers. It
may be beyond reach of small firms. Heavy food investment leads to increase in
overhead costs.
2. Time Consuming - Scientific management requires mental revision and complete
reorganizing of organization. A lot of time is required for work, study, standardization &
specialization. During this overhauling of organization, the work suffers.
3. Deterioration of Quality

Psychologists View Point

According to Psychologists, Taylor's study had following drawbacks: -

1. Ignores human factors - Considers them as machines. Ignores human requirements,

want and aspirations.
2. Separation of Planning and Doing.
3. Dissatisfaction - Comparing performance with others.
4. No best way i.e. there is no any single best way for solving problems.

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Works of Fayol and Taylor Compared

They both differ from each other in following aspects: -

1. Taylor looked at management from supervisory viewpoint & tried to improve efficiency at
operating level. He moved upwards while formulating theory. On the other hand, Fayol
analyzed management from level of top management downward. Thus, Fayol could
afford a broader vision than Taylor.
2. Taylor called his philosophy “Scientific Management” while Fayol described his approach
as “A general theory of administration”.
3. The main aim for Taylor was to improve labour productivity and eliminate all types of
waste through standardisation of work and tools. Whereas, Fayol attempted to develop a
universal theory of management and stressed upon the need for teaching the theory of
management.
4. Taylor focused his attention on fact by management and his principles are applicable on
shop floor. But Fayol concentrated on function of managers and on general principles of
management which could be equally applied in all.

Similarity - Both emphasized mutual co-operation between employment and employees.

Spheres of Human Activity

Fayol’s theory is more widely applicable than that of Taylor, although Taylor’s philosophy has
undergone a big change Under influence of modern development, but Fayol’s principles of
management have stood the test of time and are still being accepted as the core of management
theory.

Basis Taylor Fayol

Human aspect Taylor disregards human Fayol pays due regards on human
elements and there is more element. E.g. Principle of initiative,
stress on improving men, Espirit De’ Corps and Equity recognizes a
materials and methods need for human relations

Status Father of scientific management Father of management principles

Efficiency & Stressed on efficiency Stressed on general administration

administration

Approach It has micro-approach because It has macro-approach and discuses

33
 it is restricted to factory only general principles of management which
are applicable in every field of
management.

Scope of These principles are restricted These are applicable in all kinds of
principles to production activities organization regarding their
management affairs

Achievement Scientific management Administrative management

Sample Examination Questions

1. Define Management (5 marks)

2. Discuss
i. Management as a Science
ii. Management as an Art
iii. Management as a Process (15 marks)
3. Differentiate Management as a Discipline from Management as a Profession (10 marks)
4. Explain Co-ordination as an integral function of management (10 marks)
5. Outline the three levels of management (15 marks)
6. Discuss the barriers to effective communication (15 marks)

34
More Sample questions

1. Define Management. What are the functions managers perform to attain the set goals?
2. What are different types of Plans? Explain a). Mission or purpose b). Goals and Objectives
c).Strategies d). Policies, procedures, rules e) Programmes and projects f). Budget.
3. 3. What is planning? Explain the steps involved in Planning
4. Discuss in detail the "Selection Process"
5. Explain the concept of functional authority. How do you delegate it?
6. Discuss the merits and demerits of centralization and decentralization
7. Discuss 14 principles of management
8. Explain the concept of Formal and informal organization
9. What is Selection? What are the different selection tests?
10. What are the different types of Communication? Discuss in detail all the above methods?
11. What is departmentation? What are the different bases of departmentation?
12. What is the purpose of planning?
13. What are the external Sources of recruitment?
14. Define Communication
15. What is the nature of planning?
16. What is delegation of authority?
17. Distinguish between Power and authority

35